TMI Tax Updates - e-Newsletter
September 19, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise

Articles

1. 'Bogus Purchases': Understanding Its Implications In The Income Tax Regime

   By: Tejaswini Kaushal

2. Bank Accountholders undertaking specified transactions to be alert as PMLA Act becomes more stringent for Banking/NBFC/Financial and other Entities

   By: Vivek Jalan

3. RECTIFICATION OF MISTAKE UNDER GST LAW

   By: Dr. Sanjiv Agarwal

4. State Tax Officer does not have jurisdiction to issue notice for ‘Provisional attachment’ under Section 83 of MGST Act

   By: Bimal jain

News

1. Ministry of Finance approves welfare measures for LIC agents and employees

2. Gross Direct Tax collections for Financial Year 2023-24 (as on 16.09.2023) register a growth of 18.29%

3. SFIO arrests Chartered Accountant in Hyderabad for role during demonetisation

4. Raipur in Chhattisgarh to host 4th meeting of the G20 Framework Working Group from September 18-19 2023

5. PM dedicates to the nation Yashobhoomi, Phase 1 of India International Convention and Expo Centre at Dwarka, launches PM Vishwakarma Yojna for artisans

Circulars / Instructions / Orders

Customs

1. PUBLIC NOTICE No. 32/2023 - dated 8-9-2023

Standard Operating Procedures (SOP) regarding monitoring of Export obligation fulfilment under EPCG and Advance authorization scheme-Reg.

2. PUBLIC NOTICE No. 29/2023 - dated 28-8-2023

Additional Documents for Warehousing of liquor to safeguard revenue-reg.

Highlights / Catch Notes

GST

• High Court Orders New GST Notice Due to Lack of Specific Allegations in Initial Suspension Case.

  Case-Laws - HC : Suspension of GST registration of petitioner - A bare perusal of the show cause notice shows that no specific contraventions of GST Act or the Rules made thereunder have been alleged. The show cause notice is vague and it would be difficult for any noticee to submit a categorical reply, if contraventions are not clearly alleged. - Revenue directed to issue fresh SCN with specific allegation - HC
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• Court Restores IGST Refund Case Due to Ex-Parte Order Issued Without Proper Hearing Opportunity; Procedural Rules Overlooked.

  Case-Laws - HC : Refund of IGST - exparte order - opportunity of a hearing not provided - the respondent No.3 needs to follow the procedure which has been set out in the rules - it is found that such a procedure was not followed in the present case by respondent No.3 passing the ex-parte order. - Matter restored back - HC
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• Petitioner Challenges Vehicle Detention Due to Delayed Response from Respondent; Order Expected by July 31, 2023.

  Case-Laws - HC : Seeking release of vehicle detained with goods - It is seen that the respondent intercepted the consignment on 24.07.2023 and issued a detention order on 24.07.2023, the petitioner had filed a reply on 27.07.2023. But till 31.07.2023 the respondent had not passed any order, the respondent ought to have passed an order on or before 31.07.2023. Even the respondent had not passed any order when this order is passed today. - HC
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• Treated Water Classified Under GST Heading 2201 After Processing Effluent Water for Sale.

  Case-Laws - AAR : Classification of goods - treated water that would be sold by the Applicant, after carrying out various treatment process on the effluent water purchased by them - The classification of treated water to be sold by the applicant is correctly classifiable under heading 2201 - AAR
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Income Tax

• Dispute Over Property Value: AO's Decision Upheld u/s 56(2)(vii)(b)(ii) of Income Tax Act for Tax Valuation.

  Case-Laws - AT : Addition u/s 56(2)(vii)(b)(ii) - difference in the value that was adopted by the stamp valuation authority for payment of stamp duty as against the value for which the sale transaction was executed - AO rightly declined the request for reference by the A.O to the Valuation Cell for determining the fair market value (FMV) of the said property - AT
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• Exemption for Long-Term Capital Gains Allowed: Authorities Delete Additions u/s 68, Upholding Assessee's Claim.

  Case-Laws - AT : Addition u/s 68 - disallowance of exemption of long-term capital gains claimed u/s 10(38) - it was specifically submitted that the assessee has never invested through preferential allotment and also disclosed the name and address of the broker, i.e. HDFC Securities Ltd. - Additions deleted - AT
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• No Penalty Imposed: Taxpayer Not Guilty of Deliberate Non-Compliance with Notice u/s 142(1) Due to Miscommunication.

  Case-Laws - AT : Penalty u/s 272A(1)(d) - non-compliance of notice issued u/s 142(1) - The inaction of the AO on the various letters filed by the assessee which enable the assessee to believe that the time to comply with the extension of time as prayed was granted - it cannot be said that assessee is guilty of contumacious or apparent conduct to comply with the notice u/s 142(1) - No penalty - AT
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• Defective Notice u/s 274 Voids Penalty; A.O. Fails to Provide Clear Charge, Impacting Taxpayer Rights.

  Case-Laws - AT : Penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case. - AT
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• Section 80P Deduction Denied Due to Unverifiable "Other Income" from NPAs; Addition Confirmed.

  Case-Laws - AT : Deduction under Sec. 80P - Claim of NPA - Recovery from accounts classified as “Non-Performing Assets” (NPA) - claim of deduction was declined by them for the reason that as the assessee had failed to give specific details as regards the income classified as “other income”, therefore, the same was not open for verification - Addition confirmed - AT
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• Advance Rent from Government Agencies Taxed in Relevant Assessment Year, Not Current Year.

  Case-Laws - AT : Taxability of Advance Rent received - the assessee received advance rent from the Government Agencies which is not accrued to the assessee and the same has to be taxed in the assessment year for which the same is related. Therefore, it cannot be taxed in the hands of the assessee in the year under consideration. - AT
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Customs

• Customs Valuation Case Remanded for Fresh Review; SVB Findings Not Binding Without Proper Examination of Documents.

  Case-Laws - AT : Valuation - Validity of findings of SVB - Matter remanded back to original authority for fresh adjudication - Non-examination of documents properly - The findings of the Special Valuation Branch (SVB) are not binding on ‘proper officer’ exercising such statutory powers and no action, unless initiated under the cited provisions, can be detrimental to the appellant herein - there are no prejudice thereby as appellant has not brought on record that any particular import to be assessed, provisionally or finally, will be impacted by mere ascertainment of the details furnished by the importer and, that too, only by reference to their own record. - AT
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• Authorities Question Rough Diamond Valuation Without Verifying Certification Validity; Legal Compliance of Re-determination in Focus.

  Case-Laws - AT : Valuation of imported goods - rough diamonds - rejection of declared value - If the certification was suspected to be faulty or not pertinent to the impugned goods, necessary verification should have been initiated with issuing authorities and taken to its logical conclusion. No such exercise was undertaken and thus the denial is to be tested solely on conformity of the re-determination with law. - AT
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• Petitioner Wins: Drawback Claim Granted with Interest Despite No Basic Customs Duty Paid, Only Additional Duty (CVD) Paid.

  Case-Laws - HC : Drawback claim - The respondents / Department have neither passed a formal order rejecting the claim - Entitlement of claim wehre the petitioner did not pay any Basic Customs Duty [BCD] on the imported articles and merely paid the additional duty (CVD) - Claim allowed to be processing with Interest - HC
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• Court Orders Release of Petitioner's Gold Chain Under Customs Act Section 110(2); Revenue's Actions Deemed Unjust and Illegal.

  Case-Laws - HC : Direction to the respondent to release his gold chain in terms of Section 110(2) of the Customs Act, as amended upto date - Baggage Rule - Revenue has dealt with the entire matter patently in an arbitrary, unjust and illegal manner. - the gold chain had since been deposited in the Government Mint, Mumbai on 26 June 2018 without any notice to the petitioner - Revenue directed to refund the amount equal to value of gold items as on 26-6-2018 - HC
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• Court Overturns Customs Broker License Revocation; Confirms Penalty for Breach of Obligations Despite No Misdeclaration Impact.

  Case-Laws - AT : Revocation of Customs Broker License - forfeiture of security deposit - the appellant had not interacted with the proprietor of the importing entity is on record; consequently, it would not be wrong to conclude that the several documents of identity and location had not been verified. Though that, of itself, may not be taken as having contributed to misdeclaration, it is, nonetheless, a breach of obligation. - Order of revocation set aside - However, levy of penalty confirmed - AT
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Service Tax

• Separate Contracts for C&F and GTA Services Not a Bifurcation; Assessed u/ss 65(25) & 65(105) of Finance Act.

  Case-Laws - AT : Clubbing of clearances - rules of classification - Providing C & F service and GTA service - two separate contracts - when one and the same person is providing service of clearing as well as forwarding irrespective under two separate contracts, it shall not amount to be the bifurcation of C&F Service. The agent has to be assessed for rendering C&F Service 65(25) and 65(105) of the Finance Act. - AT
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Central Excise

• Factory Closure and New Registration u/r 16 Entitles Entity to Refund of Excess Duty Paid.

  Case-Laws - AT : Refund of excess Duty paid - closure of factory - It’s very obvious that when one entity closed it’s production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became non-existent and it’s closure of production is clearly falls under the term ‘permanently’. Accordingly, the present case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled for the refund of duty. - AT
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Case Laws:

• GST

• 2023 (9) TMI 791
  Suspension of GST registration of petitioner - non-compliance of the provisions of GST Act/Rules - no decision has been taken by the adjudicating authority till date - HELD THAT:- The writ petition is being disposed of at this stage without calling for Counter Affidavit of the respondents for the reason that no decision has yet been taken at the level of the respondent No.3 on the show cause notice dated 08.02.2023. A bare perusal of the show cause notice shows that no specific contraventions of GST Act or the Rules made thereunder have been alleged. The show cause notice is vague and it would be difficult for any noticee to submit a categorical reply, if contraventions are not clearly alleged. Meanwhile, petitioner s business continues to suffer because of suspension of the GST registration since February, 2023. It is deemed proper to direct the respondent No. 3 to issue a fresh show cause notice alleging the specific contraventions of the TGST Act and the Rules made thereunder within a period of 1(one) week from today giving 1(one) week s time to the petitioner to offer his specific replies with supporting documents - petition disposed off.

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• 2023 (9) TMI 790
  Input tax credit - denial of credit on the ground that no goods have been supplied to the petitioner - HELD THAT:- Considering that the petitioner has full opportunity to respond to the Show Cause Notice, it is not considered apposite to interfere at this stage. The issues are required to be considered by the Adjudication authority in the first instance. However, it is directed that in the event the petitioner responds to the Show Cause Notice, the concerned officer shall consider the said response. If the concerned officer proposes to pass an adverse order, he shall afford the petitioner full opportunity to be heard and shall pass a speaking order dealing with contentions as advanced by the petitioner. Petition disposed off.

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• 2023 (9) TMI 789
  Refund of IGST - exparte order - opportunity of a hearing not provided to the petitioner - violation of principles of natural justice - HELD THAT:- The present proceeding would stand covered by the decision of the Division Bench of this Court in the petitioners own case M/s. Knowledge Capital Pvt. Ltd. Vs. Union of India [ 2023 (4) TMI 752 - BOMBAY HIGH COURT] had set aside the order impugned therein which was similar to the order as impugned in the present proceedings, with a direction that the refund application be restored to the file of the authority to be processed as per the procedure as applicable and as discussed in the said judgment. For the reasons as recorded in such judgment, it is opined that the respondent No.3 needs to follow the procedure which has been set out in the rules - it is found that such a procedure was not followed in the present case by respondent No.3 passing the ex-parte order. The impugned order dated 25 July 2022 is quashed and set aside - petition allowed.

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• 2023 (9) TMI 788
  Seeking defreezing of petitioner s bank account - freezing not to be operative beyond a period of one year - Jurisdiction to pass such order - order not issued by the Commissioner, but by an officer of a lower rank - HELD THAT:- In terms of Section 83 of the CGST Act, no order of provisional attachment could be issued by any officer other than the Commissioner, and third, that the conditions as stipulated under Section 83 of the CGST Act, that is, if the Commissioner is satisfied, that it is necessary in the interest of the Revenue to issue such an order is not reflected in the impugned attachment order. Revenue on advance notice states, at the outset, that a communication is being issued to the concerned bank to clarify that the order is no longer operative. He also states that the officers of the GST Department have been sensitised on the nature of such an order and their jurisdiction to issue the same. It is considered apposite to direct that the concerned bank (Bandhan Bank) will not interdict the operations of the petitioner s bank account on the basis of the impugned order dated 27.04.2022 - petition disposed off.

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• 2023 (9) TMI 787
  Seeking release of vehicle detained with goods - delay in passing the order - typographical error or not - certain errors made while preapring invoices - HELD THAT:- On perusing the Tax Invoice, it is seen that in the Billed To column, the said M/s.Rashmi has correctly mentioned Tvl.T.M. Steel with correct address of Tvl.T M Steel and has also mentioned its GST number. However, in the Shipped To column, instead of mentioning Tvl.T.Balaji, it has mentioned as Tvl.TM Steel. But in address column, it has been clearly mentioned Tvl.T.Balaji address as Devapuram Road, Thoothukudi. Therefore, it can be considered as typographical error only. Moreover, it is not the mistake of Tvl.TM Steel, it is the mistake committed by M/s.Rashmi. Moreover, as rightly pointed out by the Learned Counsel appearing for the petitioner that the respondent has not passed order with 7 days from the date of service of such notice. It is seen that the respondent intercepted the consignment on 24.07.2023 and issued a detention order on 24.07.2023, the petitioner had filed a reply on 27.07.2023. But till 31.07.2023 the respondent had not passed any order, the respondent ought to have passed an order on or before 31.07.2023. Even the respondent had not passed any order when this order is passed today. Under Section 129(3) of the Act, the order ought to be passed within 7 days from the date of serve of such notice. Since there is clear violation of the provisions of the Act and hence the detention of goods is against the provisions. The petitioner is directed to pay Rs. 5,000/- (Rupees Five Thousand only) as penalty to the respondent. On such payment, the respondent shall release the goods - petition allowed.

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• 2023 (9) TMI 786
  Refund claim - commercial production not commenced - It was submitted that the mere fact that the appellant had not commenced production or manufacturing activities would not detract from the issue of refund being accorded a closure as contemplated under the Second Proviso to Section 142(3) of the Central Goods and Services Tax Act, 2017. HELD THAT:- Matter requires consideration - List again on 08.09.2023.

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• 2023 (9) TMI 785
  Seeking direction to de-freeze/allow the operation of bank account - order of provisional attachment under Section 83 of the Central Goods and Services Tax Act, 2017 not received by petitioner - violation of principles of natural justice - HELD THAT:- Admittedly, in terms of Section 83(2) of the CGST Act, an order passed under Section 83 of the CGST Act would cease to be operative after an expiry of a period of one year from the date of the order. Thus, even assuming that any order under Section 83 of the CGST Act was passed by the respondents, which had triggered the communication dated 07.03.2022; the said order would not be operative. It is not necessary for this Court to examine the various other contentions raised in the present petition. The Bank is directed not to further interdict the operation of the petitioner s bank account on the basis of the communication dated 07.03.2023, which has ceased to be operative - Petition allowed.

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• 2023 (9) TMI 784
  Maintainability of petition - availability of alternate remedy - Validity of impugned adjudication order - appealable order - HELD THAT:- This writ petition is not entertained on the ground of alternative remedy by way of appeal without going into the merits of the impugned adjudication order and to grant any relief in this matter except granting liberty to the petitioner to file the appeal against the impugned adjudication order and the Appellate Authority, if the appeal filed by the petitioner subject to the fulfilment of all other formalities of appeal it shall be considered and disposed of in accordance with law by passing a reasoned and speaking order. Petition dismissed.

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• 2023 (9) TMI 783
  Maintainability of petition - non-constitution of appellate forum - petitioner has already deposited 10% of the demanded tax amount before the first appellate authority - condonation of delay in preferring appeal - HLED THAT:- Since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of fifteen days from today, the rest of the demand shall remain stayed during the pendency of the writ petition. List this matter along with W.P.(C) No.6684 of 2023 on the date fixed therein.

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• 2023 (9) TMI 782
  Seeking release of goods alongwith conveyance - exercise of powers under Section 129 and thereafter switching over to Section 130 and passing order thereunder without availing the petitioner the benefits of release of the goods under Section 129 - HELD THAT:- In the facts and circumstances of the case, by way of interim relief, it is directed that the goods of the petitioner as well as vehicle bearing registration MH-09CU-0099, shall be released provided the petitioner complies with the conditions imposed. Petition allowed.

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• 2023 (9) TMI 781
  Maintainability of appeal - appeal dismissed on the ground that the appeal was not accompanied by the certified copy of the impugned order as per Rule 108(3) of the Haryana Goods and Service Tax Rules, 2017 - appeal not in accordance with Section 107 of the Haryana Goods and Service Tax Rules, 2017 - HELD THAT:- This issue has already been taken into consideration by this Court in KPMG INDIA PVT. LTD. VERSUS JOINT COMMISSIONER OF STATE TAX (APPEALS) FARIDABAD AND OTHERS [ 2023 (5) TMI 642 - PUNJAB AND HARYANA HIGH COURT] . The said writ petition was allowed keeping in view that the impugned orders were already uploaded on common portal and were already part of the appeal and it would amount to substantial compliance of Rule 108 of the HGST Rules, 2017. Hence, the appeals filed by the petitioner could not be dismissed on the ground that the petitioner had not submitted certified copies of the impugned orders. The order dated 14.12.2022 passed by the Appellate Authority (Annexure P-1) is set aside and the matter is remanded back to the competent authority to pass fresh orders on merits without going into question of filing certified copies of the impugned orders - Petition allowed.

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• 2023 (9) TMI 780
  Classification of goods - treated water that would be sold by the Applicant, after carrying out various treatment process on the effluent water purchased by them - rate of GST applicable on the said treated water which would be sold by the Applicant - HELD THAT:- Upon going through the processes effected by the Applicant, the effluent water is subjected to micro-filtration and sand filtration process to remove suspended impurities. They have then used a series of RO units for removing minerals. In spite of the RO treatment, the TDS of the treated water is higher, which can be seen from the test report. As per the report furnished by The South India Textile Research Association (SITRA) Textile Testing and Service Centre, test report No. V2300305 dated 09.08.2023 of Sample given for testing, in the case of the Applicant, it is seen that the recovered water contains chlorides, sulphates, Bicarbonates, etc. The TDS levels of the treated water as per the test report is 444 mg/1, which clearly shows the treated water is not demineralized as per the standard norms. From the above, it is clear that treated water cannot be construed as de-mineralized water. The treated water will not fit into Sl.No. 24 of Notification No. 01/2017-CT (Rate) dated 28.06.2017. Also treated water is not demineralized water as claimed by them but water, without any special characters as indicated in the tariff entries. Thus, water recovered out of the effluent treatment process nothing but an ordinary water which is suitable for reuse by the dyeing and bleaching units as a solvent and as a washing, rinsing medium. Thus, it aptly fits into SI. No. 99 of Notification No. 02/2017, CT (Rate), dt. 28.06.2017 under the heading 2201 rather than SI. No. 24 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 under the same heading 2201. The ultimate intention behind the effluent treatment process is to treat the effluent water discharged by textile units to recover water, salt and other chemicals consumed during the course of dyeing and bleaching to the maximum extent possible so as to reuse the same without getting it discharged to pollute water bodies. Moreover, ZLD has been mandated by the TNPCB for all the highly polluting industries including Textile Dyeing and Bleaching industries in order to prevent pollution of River water and ground water. Therefore, it is evident that the common effluent treatment plant has been set up in order to comply with the legislative and environment regulations thereby conserving water through recovery and reuse and not to manufacture water or chemicals. The effluent treated water is eligible for exemption as per Notification No. 2/2017- Central Tax Rate as amended vide notification No. 7/2022- Central Tax (Rate), dated the 13th July, 2022.

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• Income Tax

• 2023 (9) TMI 799
  Levy of penalty u/s 271B - assessee failed to get accounts audited as per provisions of section 44AB - non maintenance of books of accounts by assessee - appellant was under the misbelief that if the income declare is above 8% of gross profit, then he is not required to get its accounted audited - HELD THAT:- As apparent from the records that assessee because of her bonafide belief may be wrong has not maintained any books of account and, therefore, it was impossible to get the accounts audited which were not even ever prepared/maintained. The ratio of law as interpreted in the case of CIT vs. Bisauli Tractors ( 2007 (5) TMI 181 - ALLAHABAD HIGH COURT ) on which the assessee placed reliance wherein the Hon ble High Court has concluded that the penalty u/s 271B of the Income Tax Act is not attracted in case where no account has been maintained instead recourse u/s 271A can be taken. Since, the Ld. AO appreciated the fact that assessee has not maintained any books of account but have not initiated any penalty proceedings u/s 271A for non - maintaining to books, instead the Ld. AO proposed to initiate the penalty proceedings u/s 271B of the Act for not getting the books audited which is very impractical thinking of the AO when the books of accounts are not available, how the audit of the same can be conducted. Thus penalty u/s 271B for not getting the books of account audited is impossible to be imposed when it is an evident fact that there was no books of account maintained by the assessee. Appeal of the assessee is allowed.

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• 2023 (9) TMI 798
  Addition u/s 56(2)(vii)(b)(ii) - difference in the value that was adopted by the stamp valuation authority for payment of stamp duty as against the value for which the sale transaction was executed - declining reference by the A.O to the Valuation Cell for determining the fair market value (FMV) of the said property - HELD THAT:- A conjoint reading of Section 56(2)(vii) r.w.s. 50C(2)(b), therein reveals that such right is available only where the value so adopted or assessed or assessable by the stamp valuation authority for the purpose of payment of stamp duty in respect of the transfer transaction had, inter alia, not been disputed by the assessee in any appeal or revision and no reference has been made before any other authority, court or the High Court. As in the present case, the assessee had disputed the stamp value of the property in question that was adopted by the stamp valuation authority, i.e. Collector of Stamp, Bastar (C.G.) at Rs. 5,43,68,144/-, and he had refixed/reduced the market value to Rs. 4,34,94,500/- as against the aforesaid market value of Rs. 5,43,68,100/-, therefore, as per the aforesaid mandate of law, the assessee was precluded from seeking any reference by the A.O for valuation of the property by the valuation cell. We consider that as no infirmity emerges from the declining of the assessee s request for making a reference by the A.O. for the valuation of the property by the valuation cell u/s. 56(2)(vii)(b)(ii) r.w.s. 50C(2) of the Act; therefore, the order passed by the CIT(Appeals) is upheld. Decided against assessee.

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• 2023 (9) TMI 797
  Addition u/s 56(2)(viib) - difference between the financial projections and actual projections submitted by the assessee - recognized method of valuation rejected - CIT(A) deleted addition concluding that DCF Method is the correct method for valuation of shares - HELD THAT:- There is no dispute that the valuation of the assessee is supported by valuation report from a technical expert who has adopted DCF method, which is one of the recognized methods u/r 11UA of the Rules. Therefore, AO erred in rejecting the method. On a perusal of the relevant sections read with the Rules, we are of the view that the action of the AO in substituting the method of valuation is beyond jurisdiction. DCF Method is based on projections which are based on factors like growth of the company, economic/market conditions, business conditions, expected demand and supply, cost of capital and host of other factors. These factors are considered based on some reasonable approach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after a certain period of time. Valuation of an unquoted equity share, in terms of Rule 11UA of the Rules can, at the option of the assessee, be determined as per either NAV Method or as per DCF Method, which means that the option is given to the assessee and once the assessee has exercised an option, the AO is bound to follow the same unless by bringing cogent material on record, the AO establishes perversity in the method adopted by the assessee. As decided in M/S. CINESTAAN ENTERTAINMENT PVT. LTD [ 2021 (3) TMI 239 - DELHI HIGH COURT] Assessee adopted a recognized method of valuation and Appellant-Revenue is unable to show that the assessee adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process. - Decided against revenue.

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• 2023 (9) TMI 796
  Rectification u/s 154 - main grievance of the assessee is that it has earned long term capital gain from the sale of shares which has been brought to tax by the AO, and as per assessee, the same ought not to have been taxed because the said income is exempt u/s 10(38) - dismissal of appeal against order passed u/s 154 as appellant has not accepted the assessment order and filed an appeal against the order sought to be rectified, therefore he cannot ask for rectification of assessment order - HELD THAT:- We are of the considered view that this matter need to go back to the file of AO for fresh consideration of the matter, and assessee is directed to produce all the relevant records/evidences to prove that the assessee is entitled for exemption from tax on long term capital gains earned on the sale of shares as is stipulated u/s 10(38). Thus, without commenting on the merits of the issue, the matter is restored back to the file of AO for fresh consideration of the entire matter, after giving proper opportunity of hearing to the assessee. Section 10(38) clearly lays down conditions for exemption, and if the assessee fulfills all the conditions, then the assessee is entitled for exemption on submission of relevant evidences, and it does not requires long drawn reasoning, and hence it could not be said that the issue cannot be adjudicated u/s 154. Thus, the appeal of the assessee is allowed for statistical purposes.

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• 2023 (9) TMI 795
  Addition u/s 68 - disallowance of exemption of long-term capital gains claimed u/s 10(38) - AO placing reliance upon the investigation carried out by the Directorate of Investigation, Kolkata in relation to 84 penny stocks, the financial position of the Companies in whose shares assessee has transacted and fluctuation in the share rates in a short span of time - HELD THAT:- We find that the AO without commenting on any of the evidence submitted by the assessee placed reliance upon the report of the Investigation Wing, Kolkata, and the price fluctuation of shares of the entities in which the assessee has transacted. The findings of the Investigation Wing, appears to be mere general findings of the investigation without any adverse observation regarding the assessee or the scrips in which the assessee has transacted. Revenue has failed to prove as to how the said findings have any relevance to the present case. The price fluctuation of shares of the entities in which the assessee has transacted also does not support the case of the Revenue, as no material has been brought on record to show that the assessee was involved in such price manipulation even after purchasing and selling the shares on the stock exchange through a SEBI registered stock-broker. As in the statement recorded of the Authorised Representative of the assessee during the assessment proceedings, it was specifically submitted that the assessee has never invested through preferential allotment and also disclosed the name and address of the broker, i.e. HDFC Securities Ltd. However, the AO without finding any fault with the evidence submitted by the assessee proceeded to treat the transaction as non-genuine and the long-term capital gains earned by the assessee as bogus - Decided in favour of assessee.

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• 2023 (9) TMI 794
  Addition u/s 56(2)(vii) - shares of the company were purchased for a consideration which is less than the fair market value of the shares - year of purchases of the shares - facade to convert unaccounted money by way of shell companies and putting them into a series of transactions to give a legitimate colour of converting of unaccounted cash available with the individuals - HELD THAT:- Appellant had nowhere contested the applicability of the provisions of sec.56(2)(vii)(b) of the Act to the transactions Challenge for year of transaction was rightly dislodged by the Ld. CIT(A) as well as the Assessing Officer by bringing the cogent material on record to show that the assessee-appellant had purchased the shares during the year under consideration. The assessee also had failed to controvert the findings of the lower authorities that it is a device adopted to bring into books the unaccounted money of the assessee-appellant. Thus, we do not see any reason to interfere with the orders of the lower authorities. Decided against assessee.

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• 2023 (9) TMI 793
  Penalty u/s 272A(1)(d) - non-compliance of notice issued u/s 142(1) - HELD THAT:- Assessee has filed a manual letter dated 31.10.2019 requesting for some time to get details and then reply. However, the AO passed the assessment order on 23.11.2019 without disposing of the assessee s letter dated 31.10.2019 either rejecting the said application or granting time. We also found that ultimately assessment was completed by AO u/s 144 making addition which is cash deposit in various bank accounts. In our opinion, it is the duty of the AO to dispose of any communication/letters filed by the assessee before him at the time of assessment or giving finding about those letters in his order. Being so, the inaction of the AO on the various letters filed by the assessee which enable the assessee to believe that the time to comply with the extension of time as prayed was granted. Therefore, in the circumstances, we are of the opinion that it cannot be said that assessee is guilty of contumacious or apparent conduct to comply with the notice u/s 142(1) of the Act. Thus, it is not a fit case for levy of penalty u/s 272A(1)(d) - Decided in favour of assessee.

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• 2023 (9) TMI 779
  Penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - valid assumption of jurisdiction by the A.O or not? - HELD THAT:- We are of a firm conviction that the very purpose of affording a reasonable opportunity of being heard to an assessee as per the mandate of Sec. 274(1) of the Act would not only be frustrated but would be rendered redundant if he is not conveyed in clear terms the specific default for which penalty under the said statutory provision was sought to be imposed. In our considered view, the indispensable requirement on the part of the A.O to put the assessee to notice as regards the specific charge contemplated under the aforesaid statutory provision, viz. concealment of income or furnishing of inaccurate particulars of income or both of the said defaults is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law. When as per the settled position of law the two defaults, viz. concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults, therefore, it was incumbent on the part of the A.O to have clearly specified his said intention in the Show cause notice which we find he had failed to do in the case before us. The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case. Ashok Sahahakari Sakhar Karkhana Ltd. [ 2017 (11) TMI 1048 - ITAT PUNE] had held that where in a notice issued u/s 274 of the Act the AO had used conjunction or to mention both limbs, i.e, concealment of income or furnishing inaccurate particulars of income and charge for levy of penalty was not explicitly clear from notice, then, the same was to be held as bad in law and penalty was liable to be set aside. Decided in favour of assessee.

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• 2023 (9) TMI 778
  Revision u/s 263 - assessment is taken up for limited scrutiny - payment to contractors and tax deducted thereon - HELD THAT:- From the assessment order we note that the case was selected under Limited Scrutiny to examine the expenses earned by the assessee for earning exempt income . In the assessment order, AO observed that the assessee has submitted its reply on the above issue for which assessment was opened and no addition was made on this issue. Accordingly, the AO being satisfied with the reply/clarification filed by the assessee, accepted the returned income of the assessee and no additions were made in the assessment order. In the recent case of Sahita Construction Company [ 2022 (2) TMI 1298 - ITAT INDORE ] the Tribunal held that when the assessment is taken up for limited scrutiny, Ld. Pr. CIT cannot hold the assessment order as erroneous and prejudicial to the interest of revenue in respect of issue which was not a reason for selection of the case for limited scrutiny . Since the assessee s case was selected for limited scrutiny on certain issues and Ld. AO has examined these issues and framed the assessments and the issue of examination of payment to contractors was not a part of the limited scrutiny reasons, in our considered view, Ld. Pr. CIT erred in assuming jurisdiction under Section 263 of the Act and also erred in holding that assessment order is erroneous and prejudicial to the interest of revenue CIT has erred in assuming revisionary powers u/s 263 of the Act in the instant facts. The impugned order of Ld. Pr. CIT is accordingly quashed. Appeal of assessee allowed.

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• 2023 (9) TMI 777
  Deduction under Sec. 80P - a primary agricultural cooperative society engaged in the business of banking, paddy procurement, sale of fertilizer, seeds, manures and pesticides as well as sale of controlled items under the Public Distribution System (PDS) - HELD THAT:- Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors [ 2022 (3) TMI 75 - ITAT RAIPUR ] had after necessary deliberations on the issue in hand remanded the matter to the file of the A.O, with a specific direction i.e, to restrict its claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses. Thus restore the matter to the file of the AO, with a direction to restrict the assessee s claim for deduction as regards its profit from PDS only to the extent of its net profit i.e., after considering the proportionate expenses. Declining claim for deduction of the dividend income received on the shares of Jila Sahakari Bank, for the reason that as the latter was not a co-operative society, hence, the dividend income received therefrom would not be eligible for deduction u/s 80P(2)(d) - Admittedly, in the case of Gramin Sewa Sahakari Samiti Maryadit Ors. [ 2022 (3) TMI 75 - ITAT RAIPUR ] had observed, that the dividend income received by a co-operative society on the shares of a co-operative bank held by it would be eligible for deduction under Sec. 80P(2)(d) of the Act. Thus vacate the disallowance of the assessee s claim for deduction. Other income which comprises of recovery from NPA accounts and receipts against paddy procurement as ineligible for deduction u/s. 80P(2) - Tribunal while disposing off the appeal in the case of Gramin Sewa Sahakari Samiti Maryadit Ors. [ 2022 (3) TMI 75 - ITAT RAIPUR ] while dealing with the assessee s claim for deduction of its income from paddy procurement business u/s. 80P(2)(a)(iii) of the Act had remanded the issue to the file of the A.O. Though concur with the claim of the assessee that the assessee society is entitled for deduction of its income from paddy procurement business u/s. 80P(2)(a)(iii), but restore the matter to the file of the A.O for the limited purpose of restricting the said claim of deduction to the extent of the profit relatable to the marketing of the agricultural produce of the members of the assessee society. In the course of the set-aside proceedings the AO shall re-adjudicate the assessee s claim for deduction u/s 80P(2)(a)(iii) i.e. after determining as to what extent the assessee society had facilitated the marketing of the agricultural produce grown by its members, and thus, restrict it s claim for deduction u/s. 80P(2)(a)(iii) only to the extent of the profit relatable thereto. Recovery from accounts classified as Non-Performing Assets (NPA) - claim of deduction was declined by them for the reason that as the assessee had failed to give specific details as regards the income classified as other income , therefore, the same was not open for verification - We find that the assessee except for harping on its entitlement for deduction u/s. 80P qua the recovery from the loan accounts classified as NPA in preceding years, had failed to place on record the requisite details. No justifiable reason to dislodge the view taken by the lower authorities who in absence of requisite details had declined the assessee s claim for deduction u/s. 80P w.r.t. such part of its other income . Accordingly, the view taken by the CIT(Appeals) to the said extent is upheld.

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• 2023 (9) TMI 776
  Disallowance of advance excise and deposit u/s 43B - HELD THAT:- As decided in assessee own case [ 2013 (9) TMI 1239 - ITAT DELHI] for the purpose of claiming benefit of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant and is only to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty, etc., has no relevance and cannot be linked with the matter of giving benefit of deduction u/s 43B. Ins this view of the matter, the appeal deserves to be allowed. Prior period expenses disallowance - HELD THAT:- The issue of allowability of prior period expenses involved in the above ground of appeals of the Revenue is no more Res-integra, the jurisdictional High Court in the case of CIT vs. Jagjit Industries Ltd. [ 2010 (9) TMI 58 - DELHI HIGH COURT] true profit and gain of a previous year are required to be computed for the purpose of determining tax liability. The basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material crystallizing the expenditure is not in existence in respect of which such income or expenses relates, the mercantile system does not call for an adjustment in the books of account on estimate basis. It is actually known income or expenses, right to receive or liability to pay which has come to be crystallized is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as contingency item but not as an accrued income or liability of that year. Dilii Haat Rental Income - correct head of income - HELD THAT:- As decided in [ 2018 (4) TMI 699 - ITAT DELHI] rental income from craftsmen as `Business income on the first principles, we do not consider it expedient to discuss other issues raised by both the sides in support of their respective claims as to whether or not the assessee was owner of Dilli Haat , which is a mandatory condition for computing income under the head Income from house property and rule of consistency etc. Thus we direct the A.O. to allow necessary deductions against these incomes as per law, after allowing opportunity of being heard to the Assessee. Disallowance of net loss to Delhi Institute of Tourism and Travel Management (DITTM) - HELD THAT:- The similar issue of allowability of loss in respect of Institute of DITTM has been decided by the Coordinate bench of the Tribunal for the Assessment Year 2007-08 [ 2018 (4) TMI 699 - ITAT DELHI] as held loss of IITTM Delhi has been incorporated in the assessee s profit and loss account for the A.Y. 2012- 13, what transpired on 1.4.2009, in so far as a running of IITTM-D is concerned, is relevant. Necessary details about the changes made from 1.4.2009 are not readily available with leaned AR. We, therefore, set aside the impugned order on this issue and send the matter back to the file of the Assessing Officer for examining the assessee s contention about the change taking place from 1.4.2009 and then deciding the impact of such change on the income of the assessee before and after this change. Tourism Promotion and Tent Expenses - disallowance made as assessee has not furnished details/documentary evidences in relation to the expenses which were sought in the questionnaire - AO deleted 50% of the expenses - CIT(A) deleted addition - HELD THAT:- The expenses claimed by the assessee has been made through cheques and the assessee had incurred the expenses on tourism promotion and hiring of tent and all the expenses are accounted for in the books of accounts. Assessee being corporation which is a Government undertaking requires to maintain proper account and also require to be audited by qualified CA/CAG, despite of the same, the CIT(A) has taken very reasonable view on this issue, since the Assessee is not in appeal before us, we are constrained to confirm the order of the CIT(A). Accordingly, we find no merit in ground of the Revenue. Deduction u/s 80-IA denied - assessee did not file Form No.10CCB along with the return of income on or before the due date prescribed u/s 139 (1) - HELD THAT:- Although the assessee did not file Form No.10CCB along with the return of income on or before the due date prescribed u/s 139 (1) of the Act, but the Audit Report in Form No. 10CCB was made available before the A.O. before he completes the assessment u/s 143(3) of the Act, therefore, we are of the view that the A.O. ought to have considered the said Audit Report filed by the assessee and allow the deduction claimed by the Assessee u/s 80IA of the Act. This view of ours is fortified by the judgment of M/S G. M. Knitting Industries Ltd. [ 2015 (11) TMI 397 - SC ORDER] wherein held that even though necessary certificate in Form No. 10CCB along with the return of income had not been filed but the same was made available to the A.O. before passing of final assessment order, the assessee is entitled to claim the deduction u/s 80IA of the Act, in view of the above ratio, we do not find any infirmity in granting 80IA deduction. Interest earned around on mobilization advance given to sub contractor - denial of deduction and treating the same as income from other sources - Mobilization advance is having direct proximate relationship with business of the assessee - it is integral and directly related to the business of the assessee which emerged from the business activities of the assessee and the same has to be considered as business income of the assessee and not otherwise. Accordingly, the assessee is entitled for deduction u/s 80IA of the Act. The other interest for which details are not furnished by the assessee, the assessee is not entitled for deduction u/s 80IA of the Act, on the said interest income. A.O. has to verify the records and grant the deduction accordingly. Disallowance u/s 40A(3) on account of cash reimbursement made by the assessee to its employees towards LTC and Children Tuition Fees - HELD THAT:- As CIT(A) found that the reimbursed tuition fees Rs. 1,000/- per month for two children on aggregate basis and also reimbursement medical expenses at Rs. 800/- per month at aggregate basis, thus, cash payment of each employees exceeds Rs. 20,000/-. The assessee has not brought on record any evidence which proves that the case of the assessee is covered as per the proviso of Rule 6DD (j) of the Rules, apart from the same, in the auditor report, the auditor has qualified that the said amount falls u/s 40A(3) of the Act as the cash payment exceeds Rs. 20,000/- made to a person and therefore, the assessee is not entitled to claim deduction on account of such expenditure. No error or infirmity in the order of the CIT(A) in confirming the disallowance u/s 40A(3) of the Act. TDS Credit - Whether CIT(A) committed error in remanding the issue to the file of the A.O. to verify the claim of TDS Credit? - HELD THAT:- Since, the CIT(A) has remanded the issue to the file of the A.O. for allowing the claim of TDS to the Assessee after verifying the records as per law, which requires no interference as we find no error in the direction given the CIT(A). Disallowance on account of reversal damage charges - CIT(A) deleted the addition - HELD THAT:- The entire revenue booked for damage charges for F.Y 2011-12 and 2012-13 has been reversed in the Annual Accounts for the F.Y 2013-14 being found contrary to the AS-9 applicable to Assessee Corporation. The Company has been following mercantile system of accounting with compliance of mandatory AS as announced by ICAI from time to time. The AS-9 titled revenue recognization does not warrant he accounting of this abnormal revenue reorganization. But it was accounted for inadvertently due to mistake of conception of accounting standards. Also there has been litigation is also pending in the High Court, Delhi wherein in the interim order passed by Court on dated 23/09/2013 directs the licensee i.e. M/s ITE India (P) Ltd. to continue to pay license fees and other dues regularly. Considering the fact that since the said income of the assessee has been duly certified by the audited accounts and covered by the Clauses of the agreement, we are of the opinion that the CIT(A) has committed error in deleting the addition, accordingly, we deem it fit to remand the issue to the file of the A.O. to decide the same on the basis of final outcome of the decision of the Hon ble High Court, which was pending for final order at the state of first Appellate Authority. Disallowance on account of writing off the liability - CIT(A) has deleted the addition - HELD THAT:- The assessee had written back the said liability in the subsequent financial year without furnishing any explanation on the query why this should not written back in the previous year. As per the audited accounts, the said liability has ceased to exist in this year as such the same was required to be added to the income in the previous year, rather than postponing it to the subsequent years. Thus, in our opinion, the CIT(A) has committed error in deleting the said addition. Disallowance of unspent Revenue grant made by the A.O - CIT(A) deleted the addition - HELD THAT:- It is found that the assessee had received grants from Government Agencies for carrying out day to day operations of the assessee which is in revenue field. In the course of carrying out of the business activities of the assessee, the amount received through grant from the Government Agencies, a certain portion was unspent and the same cannot lead to taxing the unspent balance, the assessee being an ongoing concern and following mercantile system of accounting and the activities for which the grant has been received has not been over and there was an obligation on the part of the assessee to spent the amount in whole for the purpose of which it has been received. Taxing of the said unspent revenue grant amounts to penalizing the assessee which cannot be permitted. Accordingly, we find no error or infirmity in the order of the CIT(A) in deleting the addition. Capital Reserve-Advance Rent received from Ministry of External Affairs and Ministry of Tourism - HELD THAT:- The assessee in the present case following mercantile system of accounting and there is no dispute on the said fact. Being so, the income accrued and received relating to the year under consideration has to be taxed. In the present case, the assessee received advance rent from the Government Agencies which is not accrued to the assessee and the same has to be taxed in the assessment year for which the same is related. Therefore, it cannot be taxed in the hands of the assessee in the year under consideration. The said advance rent is subject to taxation in the subsequent Assessment Year, being so, the same cannot be taxed in the year under consideration.

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• 2023 (9) TMI 775
  Revision u/s. 263 - As per CIT AO has wrongly estimated profit rate @ 8% on the differential cash deposit - HELD THAT:- AO while framing assessment has categorically noted that there is a difference between the cash sales and cash deposits into the bank and the explanation of the assessee before AO was that the difference between cash sales and cash deposits into his bank account was due to cash deposited out of collection from debtors being credit sales being executed, other collections etc. Hence, it was stated that the difference between cash deposit in the bank account is on account of cash sales or recovery from earlier year and hence, AO has taken a possible view and estimated the net profit on the differential cash deposit treating the same as sales. AO has taken one of the possible views and hence, we find no infirmity in the assessment order and we find no error or prejudice in the order of the AO. Therefore, the order of PCIT is set aside and restore the order of the AO. Appeal filed by the assessee is allowed.

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• Customs

• 2023 (9) TMI 792
  Valuation - Validity of findings of SVB - Matter remanded back to original authority for fresh adjudication - Non-examination of documents properly - unexplained variances found - necessity to examine balance sheet - HELD THAT:- It is evident that facts would have to be ascertained and the only available options for the first appellate authority were to call for the balance sheet and ascertain veracity of the elements or to have such exercise undertaken. That the latter was preferred is not without jurisdictional competence and setting aside of order is pre-requisite for such re-consideration - this remand is not found to be contrary to the decisions in re DJ Malpani [ 2007 (10) TMI 410 - BOMBAY HIGH COURT] or in re Dell International Services India (P) Ltd [ 2016 (5) TMI 114 - KARNATAKA HIGH COURT] and the only issue for consideration here is only prejudice the appellant herein arising from remand. The communication that started the dispute was not rendered within the framework of a show cause notice and any action to the detriment of an importer must comply with section 17 or section 18 of Customs Act, 1962; likewise, any recovery will take recourse to section 28 of Customs Act, 1962 with show cause notice as pre-requisite. The findings of the Special Valuation Branch (SVB) are not binding on proper officer exercising such statutory powers and no action, unless initiated under the cited provisions, can be detrimental to the appellant herein - there are no prejudice thereby as appellant has not brought on record that any particular import to be assessed, provisionally or finally, will be impacted by mere ascertainment of the details furnished by the importer and, that too, only by reference to their own record. The order of first appellate authority need not be interfered - appeal dismissed.

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• 2023 (9) TMI 774
  Drawback claim - The respondents / Department have neither passed a formal order rejecting the claim nor have they released the same in terms of the application in terms of Rule 12(1) of the Customs, Central Excise Duties Drawback Rules, 1995 - Entitlement of claim where the petitioner did not pay any Basic Customs Duty [BCD] on the imported articles and merely paid the additional duty as imposed in terms of Section 3 of the Customs Tariff Act, 1975 - HELD THAT:- The provision of section 3 to the Tariff Act obliges an importer to pay an additional duty equivalent to the excise duty for the time being leviable on a like article if produced or manufactured in India. It becomes pertinent to note that while the additional duty which comes to be levied in terms of Section 3 of the Tariff Act is to be computed bearing in mind the excise duty which would be leviable on a like article, it remains a duty which gets attracted at the time of import. The mere fact that the said additional duty is equated to a duty of excise which is leviable does not essentially change the character of that duty as being one other than that which is imposed on import of articles into India. Since in the present case, an AI Rate had been prescribed, there was no corresponding obligation placed upon the petitioner to independently prove the payment of customs or central excise duty or for that matter service tax. In any case, the scope of Condition No. 6 has been duly explained in Combitic Global and since undisputedly, it was the AI Rate which applied, the submissions urged by the respondents on this score are clearly rendered untenable. Undisputedly, the free shipping bills were duly amended on 27 February 2015 whereafter the petitioner applied for release of drawback benefits on 06 May 2015. In terms of Section 75A of the Customs Act, interest becomes payable upon the expiry of a period of one month from the date of making of an application seeking drawback till such time as the payment is ultimately affected. In the facts of the present case, therefore, the respondents are also liable to pay interest which would commence upon the expiry of the period of one month from 06 May 2015 and would run till such time as the amount is ultimately paid. The respondents are hereby commanded to attend to the claim of the petitioner for disbursement of drawback benefits as claimed and release the same with due expedition - Petition allowed.

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• 2023 (9) TMI 773
  Direction to the respondent to release his gold chain in terms of Section 110(2) of the Customs Act, as amended upto date - restricted item - Baggage Rule - unlawful seizure or not - HELD THAT:- There are no hesitation in holding that the respondent has dealt with the entire matter patently in an arbitrary, unjust and illegal manner. Although, this Court in NIDHI KAPOOR, SUPRIYA, SUDHA MURTHY, MR. JASMEET SINGH CHADHA AND MS. SHANAZ MALIK VERSUS PRINCIPAL COMMISSIONER AND ADDITIONAL SECRETARY TO THE GOVERNMENT OF INDIA ORS., JT COMMISSIONER OF CUSTOMS, IGI AIRPORT T-3 DELHI, COMMISSIONER OF CUSTOMS, IGI AIRPORT, NEW DELHI, UNION OF INDIA [ 2023 (8) TMI 1008 - DELHI HIGH COURT] has already laid down the proposition of law that gold is a restricted item and if the importation of gold is in the nature of smuggling within the meaning of Section 2(39) of the Act, the adjudicating authority can exercise the discretion under Section 125 of the Act to absolutely confiscate the gold items and levy not only duty but also impose fine/penalty apart from declining to redeem/release the goods. However, decision in the aforesaid case decided by this Court does not come in the way of the petitioner for grant of appropriate relief in law since, firstly, it is evident that the respondent has not followed the procedure prescribed in the Act. Reference can also be invited to a decision of our own High Court in the case of JATINDER KUMAR SACHDEVA VERSUS THE UNION OF INDIA AND ORS. [ 2016 (12) TMI 523 - DELHI HIGH COURT] wherein a gold kara (bracelet) seized from the petitioner on arrival in India and detained for more than a year without any notice was held to be unsustainable in law and the gold item was ordered to be released to the petitioner. It is relevant to indicate that the procedure for sale of goods and application of sale proceeds is governed by section 150(1) of the Act, which provides that where any goods not being confiscated goods are to be sold or disposed of under any provision of the Act in terms of section 110(1A), a notice must be issued to the owner. At the cost of repetition, the gold chain had since been deposited in the Government Mint, Mumbai on 26 June 2018 without any notice to the petitioner, which fact was brought on the record during the hearing on 27 May 2019. The Writ Petition allowed by thereby directing the respondent to do the necessary assessment/ evaluation as to the value of gold item as on 26 June 2018 based on the tariff value of gold applicable on that day, as per prescribed RBI parameters including the notification referred to hereinabove, and pay a sum equivalent thereto to the petitioner.

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• 2023 (9) TMI 772
  Valuation of imported goods - rough diamonds - rejection of declared value - prohibited goods or not - discrepancy in value - absolute confiscation - penalty - redeption denied on the ground that the certificate submitted was not in conformity with other supporting documents - HELD THAT:- On perusal of invoice and airway bill, both of which have declared the weight and value of the rough diamonds and the cavil on the lack of segregation in accordance with lots comprising the consignment appears to be more procedural than substantive; indeed, there is no finding of variation in total quantity to cast doubts on the certificate. Thus, the only discrepancy that the lower authorities could fall back on was the value of the goods and, that too, by ascertainment in accordance with a procedure peculiar to the diamond industry. If the certification was suspected to be faulty or not pertinent to the impugned goods, necessary verification should have been initiated with issuing authorities and taken to its logical conclusion. No such exercise was undertaken and thus the denial is to be tested solely on conformity of the re-determination with law. On the issue of valuation adopted for the diamond industry, the Tribunal did have cause to consider it in depth on cross-appeals of Revenue - The order of the Tribunal in COMMISSIONER OF CUSTOMS AIR SPECIAL CARGO AWAS CORPORATE POINT, MAKWANA LANE, MUMBAI VERSUS KIRAN GEMS PVT LTD AND KIRAN GEMS PVT LTD VERSUS COMMISSIONER OF CUSTOMS, VALLABHBHAI S PATEL VERSUS COMMISSIONER OF CUSTOMS, MAVBJIBHAI S PATEL VERSUS COMMISSIONER OF CUSTOMS, RAVIRAJ ANIL KUMAR VERSUS COMMISSIONER OF CUSTOMS, KUSHAL KAMLES PATEL VERSUS COMMISSIONER OF CUSTOMS [ 2023 (6) TMI 1015 - CESTAT MUMBAI] held that It is also not the case of the lower authorities that any other law, requiring declaration of value in bill of entry for any purpose other than assessment to duty, has been breached insofar as the present dispute in concerned. In such circumstances, section 14 of Customs Act, 1962, or any Rules framed thereunder, is not of relevance to the impugned goods. Consequently, the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 cannot be brought to bear on the impugned goods. In the light of the decision of the Tribunal, it is not just the legality of the re-valuation that is relevant in the present dispute but even the legality of considering the certification, based on declaration of supplier in country of export to appropriate authorities there, as liable to be discarded on the basis of a finding, such as it is, of re-valuation undertaken by customs authorities, empowered restrictedly and in a context, for purpose so limited as not to extend to verification of one detail in a certificate prescribed by law for furnishing at the time of import. The impugned order is set aside and appeals allowed.

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• 2023 (9) TMI 771
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - misdeclared imports - documentation for entitling import by M/s Twister Enterprises had been secured in the name of one Atul Dilip Baviskar who claimed to be a helper in a construction venture and denied any knowledge of, or wherewithal for, undertaking imports - inquiry was completed after more than eleven months of the notice and report - HELD THAT:- The impugned goods were found to be offending for having been misdeclared. There is no allegation that the appellant was either a party to it or was aware of any transaction between shipper and client in furtherance of such intent. A case can hardly be made out that a customs broker would, in normal course of business, be privy to misdeclaration and may, thereby, have not given proper advice or correct information to the client. It is, therefore, to be presumed, unless established to the contrary, that proper advice has been rendered to a client and that correct information has been imparted; it cannot, contrarily, be presumed upon subsequent examination of goods and hindsight that advice had not been properly rendered and that information imparted had not been verified for correctness. A tendency to be less than meticulous in drafting of charges is evident here and proceedings do acquire the characteristic of trivializing the institution of custom broker ; if they are to perform the vital role expected of them, resort to Custom Broker Licencing Regulations, 2018 has to be deliberated upon by licencing authorities in the context of each incident of breach of obligation. Disciplining of customs broker is not be entered into lightly nor receded from hastily. That the appellant had not interacted with the proprietor of the importing entity is on record; consequently, it would not be wrong to conclude that the several documents of identity and location had not been verified. Though that, of itself, may not be taken as having contributed to misdeclaration, it is, nonetheless, a breach of obligation. It would be appropriate to modify the consequential detriment to bear proportion to the established breach. Accordingly, the revocation of licence and forfeiture of security deposit is set aside - the penalty of Rs. 50,000/- sustained - Appeal allowed in part.

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• Service Tax

• 2023 (9) TMI 770
  Clubbing of clearances - rules of classification - C F service - clearing and transporting the goods under two separate contracts and bills have also been raised separately - HELD THAT:- C F Agent Service includes two kinds of service providers i.e. the freight forwarders and the clearing agent. When the C F himself is providing both the services to the principle, he is liable to tax under Section 65(25) of the Finance Act. However, when C F agent is engaging a GTA or another agency who are freight forwarders than the levy cannot be raised against the C F agent for providing C F agent service. This Tribunal in the case of MEDPRO PHARMA PVT. LTD. VERSUS COMMISSIONER OF C. EX., CHENNAI [ 2006 (6) TMI 2 - CESTAT, NEW DELHI] had held that even isolated activity of freight forwarding is covered under C F operations and is taxable as C F Agent Service. It was held by the Tribunal that segregation of holistic concept of clearing and forwarding into divisible activities is not possible due to presence of word and in between clearing and forwarding - however the said findings have been overturned by the High Court of Punjab and Haryana while deciding the appeal of Revenue in the case of COMMISSIONER OF CENTRAL EXCISE, PANCHKULA VERSUS M/S KULCIP MEDICINES (P) LTD. [ 2009 (2) TMI 89 - PUNJAB AND HARYANA HIGH COURT] , where while interpreting the definition of Clearing and Forwarding Agent Service it was held that taxable service has been defined to mean any service provided or to be provided to a client by a clearing and forwarding agent in relation to clearing and forwarding operations in any manner . If the clearing operations are separated from forwarding operation, the levy of tax would not be attracted as it only involves one of the two activities. This decision though has taken a contrary view than decision in Medpro Pharma Pvt. Ltd. in the sense that clearing forwarding can be segregated. However, the rationale of the Kulcip Medicines (P) Ltd. decision still is that if clearing forwarding both the operations are undertaken by only one person, the activity shall be clearing forwarding agent service only. The outcome of this decision therefore is that if one person has rendered service as forwarding agent and also the service as clearing agent then he be deemed to have rendered both services would amount to replacing the conjunctive and by a disjunctive which is not possible. The conclusion which stands finalized to understanding is that for the service of clearing and forwarding agent to be taxable, the activities of clearing as well as forwarding shall be performed by one and the same agent - the service provider for the forwarding activity since is a person different from C F agent that the value of freight forwarding shall not be included in the value of taxable C F Agent Service. If fact, service cannot be taxed as C F Agent Service. Reverting to the facts of the present case, it is observed that irrespective there are two separate agreements between the principle and the agent, one for transportation and another for clearing. In addition, the consideration received is also in two different modes with respect to the invoices of respondent s clearing activity, he is receiving the consideration as commission. Whereas for the invoices about providing forwarding services, he is receiving the contractual payment. But the forwarding activity has been provided by the C F agent i.e. the assessee and he, himself is clearing the product of his principle. The bifurcation of both the services, there is no doubt, permissible as per the decision in Kulcip Medicines (P) Ltd. - even if respondent is rendering transportation service under a separate contract but said service rendered by him cannot be called as Goods Transport Service. Thus, when one and the same person is providing service of clearing as well as forwarding irrespective under two separate contracts, it shall not amount to be the bifurcation of C F Service. The agent has to be assessed for rendering C F Service 65(25) and 65(105) of the Finance Act. The question framed is answered in negative that two separate contracts bifurcating the activity of clearing and forwarding will not discharge the C F Agent from his liability of C F Service taxable under Section 65(105)(i) of the Finance Act. It is for the sole reason that under two separate contracts, the respondent himself is the service provider. We hold that such an arrangement is to camouflage the C F Agent s liability for providing clearing Forwarding Agent Service. The impugned order of Commissioner (Appeals) set aside - appeal of Revenue allowed.

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• 2023 (9) TMI 769
  CENVAT Credit - input services - Renting of Immovable Property Services - denial on the ground that the service being the right to use service, hence credit availed on various input services are not admissible - non-payment of service tax on sale of space or time for advertisement service. CENVAT Credit - HELD THAT:- Admissibility of CENVAT Credit which was proposed to denied on the basis of Circular No. 98/1/2008-ST dated 04.01.2008 has been considered by this Tribunal in various judgments. This Bench in the case of GOLFLINKS SOFTWARE PARK PVT LTD VERSUS C.C.E C.S.T. -BANGALORE [ 2018 (8) TMI 331 - CESTAT BANGALORE] has observed that From the definition of input service, it is clear that the input service is not limited to the services for providing output service but it also includes the services for setting up the premises of provider of output service - thus there are no reason not to accept the aforesaid findings of the Tribunal on the aforesaid issue as the said judgment has been approved by the Hon ble Karnataka High Court in COMMISSIONER OF SERVICE TAX VERSUS M/S. GOLFLINKS SOFTWARE PARK PVT LTD. [ 2022 (12) TMI 472 - KARNATAKA HIGH COURT] - Accordingly, the impugned order denying CENVAT Credit on the various input services used in providing Renting of Immovable Property Services is hereby set aside and the credit on this account is to be admissible. Demand against sale of space or time for advertisement - HELD THAT:- The learned Commissioner has not recorded any findings on the said issue even though the appellants pleaded before him that levy of Service Tax on the said alleged service is unsustainable. In this circumstance, it is prudent to remand the matter to the adjudicating authority to examine the said issue. The matter is remanded to the adjudicating authority only to the extent of examining the issue of levy of service tax on sale of space or time for advertisement service relating to Show Cause Notice No. 61/2010 dated 12.04.2010 - Other part of demand set aside - appeal allowed in part and part matter on remand.

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• Central Excise

• 2023 (9) TMI 768
  Refund of Excess duty paid - capacity based duty - closure of factory - change in constitution of business - permanent cessation of work or not - HELD THAT:- On 25-06-2011, the respondent closed down their factory. The intimation given by the respondent to the Assistant Commissioner of Central Excise by letter dated 22.06.2011 would show that the respondent permanently ceases to work in respect of all the machines installed in the factory and it would be followed for surrender of registration due to the change of constitution of name. In such a peculiar facts and circumstances of the case, in our considered view, the refund claim filed by the respondent would come within the purview of Rule16 of Rules 2008. The contention of the revenue that the respondent had not permanently ceased to work in as much as they had only changed the constitution of their firm and therefore, it cannot be treated as permanently ceases to work . It is difficult to accept the contention of the learned Authorised Representative for the Revenue, as after the change of constitution new company came into existence and respondent firm (Partnership firm) has been treated as permanently ceases to works. There is no provision in Rules 2008 that after declaring permanently ceases to work , the manufacturer would not be entitled to reopen his factory with new name. Rule16 would cover the situation, where a manufacturer filed an intimation to the Deputy/ Assistant Commissioner of Central Excise intimating permanently ceases to work for surrender of registration. There is no bar on reopening of the factory with new registration in Rules, 2008, which is a subsequent event. In the undisputed facts of this case one important aspect needs to be kept in mind that the revenue gravely erred in contending that the factory was not permanently ceased to work as the changed Pvt. Ltd. Company restarted the production. On this, we are very clear in our mind that there is clear distinction in the ownership of partnership firm and a Private Limited Company. Therefore even if a partnership firm ceased their operation and in place of the same a Private Limited Company started operation, both being separate legal entities, it cannot be said that the partnership firm has not ceased it s production permanently. It s very obvious that when one entity closed it s production and surrendered the registration and a new entity obtained a fresh registration with a new PAN, the former entity became non-existent and it s closure of production is clearly falls under the term permanently . Accordingly, the present case is clearly covered under Rule 16 of the Rules and consequently the respondent is legally entitled for the refund of duty. There is no infirmity in the impugned order - Appeal filed by Revenue is dismissed.

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