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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter September 20, 2016 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles Transitional Provisions under Goods and Service Tax REGISTERED VALUER UNDER WEALTH TAX ACT, 1957 – PART I News Directorate of Revenue Intelligence (DRI) busts a major gold smuggling racket involving smuggling of around 7000 Kilograms of gold worth more than ₹ 2000 crore in last two and half years; Probably, the single biggest case of detection of gold smuggling by any agency in India; Value of gold seizures by DRI in the current financial year (2016-17) up to 18th September, 2016 alone is about ₹ 91 crore RBI Reference Rate for US $ New Import policy for Marble and Travertine Blocks Notifications Income Tax 83/2016 - dated 16-9-2016 - IT Central Government notifies M/s. India Infradebt Limited as an infrastructure debt fund for the assessment year 2013-14 14 and subsequent assessment years Circulars / Instructions / Orders Income Tax 8/2016 - dated 15-9-2016 The Income Declaration Scheme, 2016 – reg. Highlights / Catch Notes Income Tax Reopening of assessment - deduction under section 80IB(10) - whether retrospective amendment cannot be a ground for reopening assessment beyond a period of four years? - Held No - HC Visit to Get Source Section 88E of the Act does not envisage any distinction between total income computable under the normal provisions of the Act and that computable under Section 115JB of the Act so far as it relates to the granting of rebate against the amount of income-tax payable. - AT Visit to Get Source Addition u/s 40A - disallowance being the 50% of salary paid to Director - she pays tax at the maximum marginal rates and hence there is no diversion of taxable income. - AT Visit to Get Source Depreciation on electrical installation - rate of depreciation - electrical installation is integral to the plant and machinery used for manufacturing steel - CIT(A) has rightly directed the AO to allow depreciation on electrical installations @ 15% i.e. the rate applicable to 'plant & machinery'. - AT Visit to Get Source If the assessee or the deductee felt that no TDS or lower TDS was deductible for any reason, they should have approached the payee to grant a certificate for no deduction of TDS or low deduction of TDS and since this was not done by the assessee or the payee, this contention is not acceptable that no TDS was deductible by the assessee company. - AT Visit to Get Source Payment of expenditure in cash in excess of ₹ 20,000/- - Provisions of section 40A(3) are not applicable to capital expenditure. - AT Visit to Get Source Since the penalty is levied by HPCL for non-fulfillment of some dealership condition falls within the purview of business expenditure, hence the same is allowable expenditure u/s 37 of the Income-tax Act, 1961 - AT Visit to Get Source Customs The benefit of the Notification No. 12/2012-Cus is available to NSOP (Non Schedule Operator’s Permit) holder for the specified categories of revenue flights( with published tariff) proposed to be undertaken - AAR Visit to Get Source Cancellation of DEPB licence - The goods imported and cleared under DEPB licence much before the issue of show-cause notices, therefore at the time of import of the goods and clearance thereof, the DEPB licences were valid in the hands of the appellants-importers - the duty demand against the appellant not sustainable - AT Visit to Get Source Rejection of refund claim - SAD - ground of limitation - Revenue cannot first refuse to accept the refund claim on the ground of provisional assessment and then to reject the same, when filed after finalization on the ground of limitation. - AT Visit to Get Source Service Tax Refund claim - the protest was lodged within reasonable time of the appellant becoming aware that the amounts were not recoverable as Service Tax. That is sufficient to attract proviso to Section 11B(1) - period of limitation not applicable - refund allowed - HC Visit to Get Source Refund claim - evidence of payment of service tax to the builder - applicant is a purchaser of an apartment/flat/residence from a builder or a developer - Period of limitation - original authority directed to decide the refund claim - AT Visit to Get Source Central Excise Valuation - CNG - inclusion of services charges paid to private parties (PP) in the transaction valuation - whether price charged for sale of CNG to OMCs can be considered as transaction value for the purpose of payment of duty under Section 4(1)(a) of CEA - Held Yes - AT Visit to Get Source Input Service Distributor (ISD) - appellant cannot be considered as a manufacturing unit of input service distributor, M/s PPPL, for the purpose of availing CENVAT Credit on input invoices issued by M/s PPPL. - AT Visit to Get Source 100% EOU - Classification - whether epoxy resin should be treated as consumables as per appellant or as a raw material as per Department which forms part of the final product - the said Epoxy resin cannot be considered as raw material - AT Visit to Get Source Case Laws: Income Tax 2016 (9) TMI 764 Reopening of assessment - deduction under section 80IB(10) - whether retrospective amendment cannot be a ground for reopening assessment beyond a period of four years? - Held that:- In the original assessment, the Assessing Officer had occasion to examine the petitioner's claim for deduction under section 80IB(10) of the Act. In fact, this was the principle claim of the assessee, since bulk of its income was derived from housing projects, with respect to which, the assessee had claimed deduction under section 80IB(10) of the Act. The Assessing Officer raised multiple queries under a letter dated 03.08.2006, one of them calling upon the assessee to substantiate the claim under section 80IB(10) of the Act, amounting to ₹ 10.12 crores alongwith necessary documentary evidence. In reply to such query, the assessee under communication dated 15.09.2006, gave a detailed reply and produced number of documents. These documents contained the development permission and construction permission granted by the authorities and such other documents. It was only after such scrutiny, the Assessing Officer in the order of assessment, made no disallowance on the assessee's claim of deduction under section 80IB(10) of the Act, except for limiting it to the extent of profit. Thus, the entire claim of deduction came up for consideration at the hands of the Assessing Officer in the original assessment. The claim was minutely examined and only thereafter accepted. It would therefore not be permissible to the Assessing Officer to disturb such claim in exercise of powers under section 147 of the Act that by issuing the notice beyond the period of four years beyond the period of relevant assessment year. Here again, the Assessing Officer had not recorded, in what manner the assessee failed in its duty to disclose truly and fully all material facts. In fact, the thirst of the contention of the Assessing Officer appears to be that the assessee had not developed housing project, but was acting as a contractor. In this respect, the Assessing Officer has placed reliance on the retrospective explanation added to section 80IB(10) of the Act. It is well settled by the series of judgments of this Court that retrospective amendment in statute would not enable the Assessing Officer to reopen an assessment beyond a period of four years. - Decided in favour of assessee. 2016 (9) TMI 763 Reopening of assessment - allowing rebate for Securities Transaction Tax (STT) under section 88E in a case where an assessee is also exigible to tax under section 115JB of the Act - Held that:- The CIT(A) has clearly brought out the error on the part of the Assessing Officer while forming a belief about the escapement of income. Section 88E of the Act provides for a rebate in respect of STT paid. Ostensibly, such rebate is available against the income-tax payable by an assessee subject to other conditions specified in the section. If we read the relevant provisions, it is quite clear that Section 88E of the Act does not envisage any distinction between total income computable under the normal provisions of the Act and that computable under Section 115JB of the Act so far as it relates to the granting of rebate against the amount of income-tax payable. Therefore, in our view, it would not be wrong to conclude that the interpretation sought to be placed by the Assessing Officer even at the time of formation of belief for issuance of notice under section 147/148 of the Act was not borne out of the bare provisions of the Act. Of course, the stand of the Assessing Officer is also contrary to the judgment of the Hon’ble Karnataka High Court in the case of M/s. Horizon Capital Ltd. (2011 (10) TMI 489 - KARNATAKA HIGH COURT ), but that decision is of a date later than the date on which the Assessing Officer initiated the proceedings under section 147/148 of the Act. Be that as it may, in our view, the CIT(A) has succinctly brought out that the interpretation made by the Assessing Officer to form the belief about escapement of income is not supported by the bare provisions of the Act also, which we hereby affirm. As a consequence, we affirm the action of CIT(A) in treating the initiation of proceedings under section 147/148 of the Act as invalid. Thus, on this aspect also Revenue fails. - Decided in favour of assessee 2016 (9) TMI 762 Addition u/s 40A - disallowance being the 50% of salary paid to Director - Held that:- Assessing Officer (A.O.) in this case has not brought out any comparables before disallowing 50% of remuneration paid to Smt.Kiran Qureshi on adhoc basic u/s 40A(2)(b) of the Income Tax Act, 1961 (the Act). The assessee justified the payment by demonstrating that, Smt.Kiran Qureshi is having more than two decades of experience in the job and she is well education and widely travelled. It was further pointed out that she has wide exposure to different aspects of import, export and aviation business and is a Promoter Director of the assessee company and that she is also on the Board of Directors of M/s Hind Industries Ltd. and M/s Hind Agro Industries Ltd. It was further submitted that Smt.Kiran Qureshi pays tax at the maximum marginal rates and hence there is no diversion of taxable income. In this case there is no evasion of tax. - Decided in favour of assessee. 2016 (9) TMI 761 Depreciation on electrical installation - rate of depreciation applicable - Held that:- The electrical installations formed an integral part of the assessee's plant, therefore, depreciation was allowable at the rate applicable to plant and machinery. We are also of the considered view that electrical installation is integral to the plant and machinery used for manufacturing steel and as the Assessing Officer has not controverted the contentions of the assessee company hence, Ld. CIT(A) has rightly directed the AO to allow depreciation on electrical installations @ 15% i.e. the rate applicable to 'plant & machinery'. We further note that Ld. CIT(A) was justified in holding that as a natural corollary, additional depreciation amounting to ₹ 1,02,12,533/- is also required to be allowed as the Assessing Officer disallowed the same considering electrical installations as part of furniture and fixture, which does not need any interference. - Decided against revenue 2016 (9) TMI 760 TDS liability -period of limitation - CIT(A) held that instead of fixing the liability of TDS on 21% to be charged by the KIADB from the assessee for various services, the liability should be restricted to 4% as per the revision order passed by the Government of Karnataka - Held that:- It is seen that the AO himself has passed order u/s 201(1A) only in respect of first four years i.e. assessment years 2006-07 and 2008-09 to 2010-11. Hence it is seen that for financial years ending on or before 31-03-2010, no order has been passed by the AO u/s 201(1) of the IT Act and for these years, he has passed orders u/s 201(1A) only. Now, we have to decide as to whether these orders u/s 201(1A) are time barred or not because these were passed after expiry of 4 years from the end of the relevant assessment years. In the judgment in the case of CIT Vs Bharat Hotels Limited (2015 (12) TMI 1469 - KARNATAKA HIGH COURT ), it was held that the order passed u/s 201(1) and 201(1A) of the Act on 28.01.2008 for the AY: 2002-03 is barred by limitation as the period of limitation would be four years from the end of the financial year in question. Respectfully following this judgment, we hold that in the present case also, the orders passed after the end of the financial year in question is time barred and hence the same is quashed. Such time barred orders are four i.e AY: 2006-07, 2008-09, 2009-10 and 2010-11. Remaining three orders for AY: 2011-12 to 2013-14 are not time barred even as per this judgment as these orders are passed in the month of March & April 2014.i.e before expiry of four years from the end of the financial year in question. Accordingly, we quash these four orders as time barred for AY: 2006-07, 2008-09, 2009-10 and 2010-11. Regarding the second contention that no income has accrued to the deductee, we are of the considered opinion that the payment was made by the assessee to KIADB and since the payment of ₹ 1,225.00 Crores to KIADB is not specified to be on account of land acquisition only, it has to be held that such payment by the assessee to KIADB is a combined payment and it also included service charges and in that situation, whether the income is accounted for by the payee i.e. KIADB is not relevant because it is settled principle of law by now that book entry is not decisive and since even now, 4% service charges is payable and payment was made by the assessee company to KIADB for an amount in an excess of that 4 %, the assessee was required to deduct TDS and if the assessee or the deductee felt that no TDS or lower TDS was deductible for any reason, they should have approached the payee i.e. KIADB to grant a certificate for no deduction of TDS or low deduction of TDS and since this was not done by the assessee or the payee, this contention is not acceptable that no TDS was deductible by the assessee company. Considering all these facts and in view of our above discussion, we find no reason to interfere with the order of the ld. CIT(A) in any of the years out of his order for three years being AY: 2011-12 to 2013- 14 2016 (9) TMI 759 Unexplained investment - reference to DVO - Held that:- We do not find any reason as to why the entire undisclosed income should not be allowed as being available to the assessee to meet the cost of investment towards the farm house/bungalow. There is no material at the disposal of the revenue that the additional income disclosed has been utilised otherwise. Under these circumstances and considering the totality of the facts of the case and considering the fact that the assessee has declared additional income of ₹ 3,43,24,198/- during the period from A.Y. 2006-07 to 2010-11 in his returns filed in response to notice u/s.153A the same in our opinion should be available to the assessee for investing in the bungalow. We, therefore, direct the AO to give set off of ₹ 3,43,24,198/- as against ₹ 1,81,21,667/- allowed by the Ld.CIT(A). So far as the contention of the assessee that the DVO has considered the 1992 rates as against 2007 and 2009 rates which were available in public domain is concerned, we also find some force in the above. Admittedly, the construction of the building has started during the period from 2006-07 which continued till 2010-11 and thereafter. Therefore, adoption of 1992 schedule of rates and multiplying the same by cost inflation index as against the available rate of 2007 or 2009 will give a distorted figure. The Ld. Counsel for the assessee filed a chart showing that because of these faulty method adopted by the DVO, the difference comes to ₹ 1,82,41,436/-. However, since the assessee has not maintained any books of account on day-to-day basis towards the investment in the bungalow, therefore, the property has to be valued by following the method of valuation/guidelines issued by various agencies. It is also a fact that the CPWD rates are higher than the local PWD rates. Further, we find some force in the submission of the Ld. Counsel for the assessee that instead of adopting 1992 rates and multiplying the same by cost inflation index the DVO could have adopted the current schedule of rates prescribed by CPWD and brought it down or made suitable adjustments. Since the assessee during the course of search in his statement recorded u/s.132(4) has also made a statement that the investment in the bungalow is about ₹ 12 crores, therefore, the valuation report filed by him from a registered valuer under the facts and circumstances of the case cannot be accepted. In view of the various lacunae pointed out by the Ld. Counsel for the assessee due to non adoption of the current schedule of rate and due to some calculation error the report filed by the DVO also cannot be accepted. In our opinion the investment in the property should be computed by reducing the various arithmetical inaccuracies in the report of the DVO and further adjusting the same to the 2007 indices or 2009 schedule of rates as against the 1992 rate adopted by the DVO. The obvious arithmetical errors as pointed by the Ld. Counsel for the assessee, the details of which are already reproduced at Para 27 comes to ₹ 1,30,01,048.81. Similarly, the difference due to adoption of 1992 rates as against 2009 guidelines gives a difference of ₹ 1,29,31,475/-. Thus, according to the Ld. Counsel for the assessee the differences comes to ₹ 2,59,32,523.81 (i.e. ₹ 1,30,01,048.81 +1,29,31,475. Since the investment in the property has been estimated in absence of maintenance of proper books of account, therefore, there is bound to be some difference in the estimation. The amount calculated by the Ld. Counsel for the assessee at ₹ 2.59 crores cannot be accepted in toto. However, it also cannot be rejected because of certain obvious calculation mistakes and adoption of 1992 schedule of rates. Considering the totality of the facts of the case a further reduction of 20% from the value adopted by the DVO may be allowed to meet the ends of justice. This comes to ₹ 2,41,35,800/- as against ₹ 2,59,32,523/- calculated by the Ld. Counsel for the assessee. This in our opinion will meet the ends of justice. We hold and direct accordingly. Addition made by the AO u/s.40A(3) - Held that:- We have also considered the various decisions cited before us. We find the assessee before completion of the assessment on 28-03-2013 vide his letter dated 18-03-2013 had submitted before the AO that undisclosed income disclosed by him for the A.Yrs. 2005-06 to 2009-10 amounting to ₹ 2,06,99,420/- has been invested by him in the Khanapur bungalow. According to the AO, since the stand has been taken by the assessee for the first time at the fag end of the assessment proceedings and since no credible evidence in support of this claim has been given, he rejected the claim of the assessee that no disallowance u/s.40A(3) can be made. It is the submission of the Ld. Counsel for the assessee that the amount involved in question has been invested in the construction of the farm house which is a capital expenditure and therefore provisions of section 40A(3) are not applicable. We find merit in the above submission of the Ld. Counsel for the assessee. In the preceding paragraphs, we have already held that the additional income disclosed by the assessee is available to him for investment in farm house/bungalow. Thus, the expenditure is capital in nature. It has been held in various judicial decisions that provisions of section 40A(3) are not applicable to capital expenditure. Therefore, we hold that the CIT(A) was not justified in confirming the disallowance made by the AO u/s.40A(3) of the I.T. Act. We accordingly set aside the order of the CIT(A) and the grounds raised by the assessee for A.Yrs. 2006-07, 2008-09 and 2010-11 on this issue are allowed. Rejection of relief on account of excess disclosure in gold - Held that:- A perusal of the Panchanama shows that the list/inventory of jewellery shows jewellery/gold ornaments valued at ₹ 19,50,000/- in the name of Sweta V. Bire, daughter of the assessee. Further in our opinion some relief should have been granted to the assessee on account of jewellery belonging to different family members in the light of the CBDT Instruction No.1916 dated 11-05-1994. Merely because the assessee has made the claim towards the fag end of the assessment proceedings, the same cannot be a ground to reject the plea of the assessee for giving appropriate relief. The Hon’ble Bombay High Court in the case of Balmukund Acharya Vs. DCIT reported in [2008 (12) TMI 88 - BOMBAY HIGH COURT ] has held that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconception or on not being properly instructed is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. In view of the above discussion, we restore the issue to the file of the AO with a direction to decide the issue afresh in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground by the assessee is accordingly allowed for statistical purposes 2016 (9) TMI 758 Addition made on account of investment in FDRs and interest thereupon - Held that:- We find that the ld. CIT(A) has verified the claim of the assessee and found that the FDRs disclosed by the family members and as found during the course of survey were not matching. As the numbers as well amount mentioned in the FDRs were different, nor the assessee was able to get verified the same with documentary evidence during the course of appellate proceedings before the ld. CIT(A). Before us also, the ld. Authorized Representative of the assessee could not controvert the findings recorded by the lower authorities. It is also seen from the submission of the assessee that the name of the assessee is also appearing as second and third beneficiaries in respect of these FDRs. The assessee is only active and effective member of his family. In view of these facts and circumstances, we do not find any infirmity in the order of the lower authorities. - Decided against assessee. Penalty levied for non-fulfillment some dealership condition - allowable expenditure u/s 37 - Held that:- Since the penalty is levied by HPCL for non-fulfillment of some dealership condition falls within the purview of business expenditure, hence the same is allowable expenditure u/s 37 of the Income-tax Act, 1961. The ld. Authorized Representative of the assessee has also placed reliance in this regard in the case of Gold Crest Capital Markets Limited vs. ITO, (2009 (1) TMI 553 - ITAT, MUMBAI) wherein the Mumbai Tribunal has decided that fine or penalty imposed by NSE to its members is regulated by their in house laws and could not be termed as violation of statutory laws and hence, cannot be disallowed. Respectfully following the above findings of Mumbai, I.T.A.T., we delete the levy of penalty - Decided in favour of assessee. 2016 (9) TMI 757 Terminal date for charging interest under Section 234B - Held that:- Hon'ble Supreme Court in Brij Lal and Ors. Vs. Commissioner of Income Tax reported in (2010 (10) TMI 8 - SUPREME COURT ) held that the terminal date for charging interest will be the date on which the order under Section 245D (1) is passed i.e., the date on which the Settlement Commission entertains the application for settlement. By applying the said decision to the instant case, the appropriate date for charging interest would be 04.07.1997. Accordingly, the writ petition is allowed and the impugned order dated 03.02.2004 is set aside and it is ordered that the interest under Section 234A shall be charged upto the date of order under Section 245D (1) i.e., 04.07.1997 in stead of 28.10.2002 i.e, order under Section 245D (4) of the Act. The fourth respondent is directed to pass the consequential order pursuant to the above direction. No costs. Consequently, the connected miscellaneous petition is closed. 2016 (9) TMI 756 Compounding of offenses - Held that:- In the instant case, the matter has been pending since 1999, and there has been no progress. The respondent/Department stated that the petitioner/Firm was an accused. Furthermore, the Principal Sessions Court, while granting permission to the respondent to consider the petitioner's Application for compounding the offence, in its order, dated 28.04.2015, observed that the offences are compoundable in nature, therefore, leave is granted to the competent Authority to compound the offence. Thus, this Court is of the view that the respondent can examine the matter afresh without being, in any manner, influenced merely because of the conviction passed against the petitioner by the Criminal Court. In the result, the Writ Petition is allowed, and the impugned order is set aside, and the matter is remanded to the respondent for fresh consideration, in terms of the observations made in the preceding paras 2016 (9) TMI 755 Addition made on the basis of the statement of the assessee recorded during the course of survey u/s.133A. - Held that:- On appraisal of the finding of the CIT(A), it is quite clear that the assessee declared his approximate income for the A.Y.2007-08 to the tune of ₹ 50,00,000/-. The P & L Account of the assessee speaks about the profit to the tune of ₹ 54,83,851/- which is quite near to the assessment assessed by the assessee while making his statement. No discrepancies of any kind was found in the account maintained by the assessee either during the survey action u/s.133A of the Act and during the assessment proceedings. The submission made by the assessee vide his letter dated 15.01.2007 was found correct. The addition made by the Assessing Officer is based on surmises and conjectures and is not based upon any cogent and convincing evidence on record. No distinguishable facts of any kind have been placed on record before us. Therefore in view of the said circumstances we of the view that the CIT(A) has passed the order in question correctly and judiciously which does not require to be interfere with at this appellate stage. - Decided against revenue. 2016 (9) TMI 754 Undisclosed cash deposits - Held that:- We find that the claim of the assessee that the deposits in this undisclosed bank account are nothing but sale proceeds and that the withdrawals from these undisclosed bank accounts, were purchases, is not supported by any documentary evidence whatsoever. The assessee has failed to prove its claim. Thus the First Appellate Authority was right in coming to a conclusion that the assessee has failed to discharge the primary onus to prove the source of cash deposits by relying on the decision of Hon’ble Delhi High Court in the case of Indus Valley Promoters vs. CIT [2008 (4) TMI 1 - DELHI HIGH COURT ] and other case laws. Thus we uphold this finding. On the alternative plea of the assessee that, only the peak credit in this account has to be added, we are of the considered opinion that this plea is justified. Consistent with the view taken therein, we set aside the matter to the file of the A.O. with a specific direction that only the peak credit in this bank account should be brought to tax. 2016 (9) TMI 753 Addition u/s.145A - inclusion of unutilized CENVAT credit and other taxes to the closing stock. - assessee submitted that it follows exclusive method of accounting and does not debit the CENVAT and other taxes to the Profit & Loss Account (P&L A/c.) - Held that:- It is an undisputed fact that assessee is following exclusive method of accounting whereby it does not debits the taxes paid to the purchases, consumption of stock and the aforesaid method of accounting of taxes has been consistently followed by the assessee in earlier and succeeding years and is also stated to have been accepted by Revenue. We find that the Hon’ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co.Ltd. reported at (2003 (1) TMI 8 - SUPREME Court ) has observed that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. Decided in favour of assessee Disallowance of sales commission - assessee has failed to prove the nature of services rendered by the respective parties to the assessee - Held that:- Even before us, assessee has not placed any material on record by which it could be demonstrated the nature of services rendered by those parties to the assessee. However, as far as payment of sales commission to Devkalpi Dyes & Intermediates is concerned, we find from the chart of commission that has been placed by assessee in the paper-book that assessee had paid ₹ 47,775/- in AY 2008-09, ₹ 78,975/- in AY 2009- 10 and ₹ 1,14,338/- in AY 2010-11. The commission payments to this party has not been disallowed while framing the assessment u/s.143(3) of the Act; meaning thereby that the nature of services, as far as this party is concerned, is not doubted by the Revenue in subsequent years. Before us, Revenue has also not placed any material on record to demonstrate that no services were rendered by it to the assessee. In view of the aforesaid facts, out of the total disallowance of ₹ 7,15,111/-, we direct the deletion of ₹ 47,302/- being the amount of commission paid to Devkalpi Dyes & Intermediates and uphold the balance addition(s) of commission made to other parties. - Decided partly in favour of assessee 2016 (9) TMI 752 Admissible deduction u/s 80IC - AO has reduced the deduction on the ground that out of the 3 exempted and 3 non-exempted units owned by the assessee in different states the maximum N.P. rate for a taxable unit was 6.90% while that for an exempted unit the minimum NP rate was 13.4% - WHETHER the gap between the profits of the taxable units and non exempted units "appears" to be unrealistic? - Held that:- The assessee has produced all the books of accounts and vouchers before the AO during the assessment proceedings. In fact, no show cause query was issued by the AO on this account during the assessment proceedings. The AO has not considered the fact that the units in exempted zones are mainly engaged in manufacturing on job work basis where there is either negligible or no input cost of raw material involved. It was noted that if the sales were made using their own raw material, there would be substantial difference in the GP rate insofar as, if the cost of raw material was excluded, the GP rate in all the units would remain the same. The fact that the exempted unit at Haridwar has shown a loss has not been referred to by the AO. Therefore, it is clear that no profit has been diverted to this unit. It was further noted that there has been no investigation or specific exercise to show that the amount claimed as deduction u/s 80-IC was wrong. We find considerable cogency in the finding of the Ld. CIT(A) that there is no ground for disallowing claim for job work expenses for the eligibility u/s 80-IC as the same is allowable as per the decision of his Predecessor for the AY 2009-10. Therefore, the Ld. CIT(A) has rightly deleted the addition 10,04,37,872/- - Decided against revenue 2016 (9) TMI 751 Disallowance of business loss - assessee has not carried out any business activity during the year under consideration - Held that:- The facts and circumstances prevailing over the disputed year, as emerged from the record before us, are that during this year, the assessee has not shown any business income but has declared business loss; that during this year, the assessee has not shown any business of Vyaj Badla; that during this year, the AO has noticed that the assessee has not carried out any business activity and that the interest income earned by assessee is declared on own funds. Besides this, schedule -5 of the balance sheet of assessee as at 31st March, 2006 filed before us shows that the assessee has shown a sum of ₹ 17,94,28,895/- under the head ‘Investments’. The balance sheet further shows that as per schedule-6, under the current assets, loans and advances, three items are appearing. It is, however, not clear from the balance sheet and profit and loss account filed before us, as to from which heads of above current assets, the assessee has earned interest income so as to decide the correct nature of interest income. So, proper examination is required on this count at the stage of Assessing Officer. If the impugned interest is found to have been earned by assessee from investments as per schedule-5 of the balance sheet, such interest income cannot be treated as business income as per Generally accepted Accounting Principles (GAAP) and if it is found that the said interest income was earned by assessee out of their current assets, loans and advances as per schedule 6 of the balance sheet then the Assessing Officer has to examine whether such loans and advances were the part of prominent/auxiliary nature of business. If the same are found to be the part of prominent/auxiliary nature of business, the interest income earned therefrom, shall be qualified to be treated as business income, irrespective of the fact that the assessee has not done any business of Vyaj Badla during the disputed year. It is also to note that in case all the facts and circumstances emerged during the investigation by AO, are found prevailing over the previous and subsequent years, as contended by assessee, the assessee’s claim will be eligible for allowance by applying the rule of consistency and if found otherwise, or if there is any change in the circumstances, the issue shall be decided in accordance with law whether the interest income earned by the assessee should be treated as business income or not. - Decided in favour of assessee for statistical purposes 2016 (9) TMI 750 Addition on account of Bogus Expenditure - Expenditure disallowed based on the investigations done by EOW - Held that:- Assessee has claimed the expenditure as it has shown and cheques were issued in the name of Eureka corporation against services rendered by it. Irrespective of the fact that same has not reached destination in spite of their usual mode of payment through banking channel. Moreover, the said amount was paid after deducting TDS. It shows that bonafide of payment in this regard. In this situation, expenditure in question should not be disallowed on the basis of statements of somebody in proceedings before EOW. Moreover, there is nothing on record that the proceedings of EOW were confronted to the assessee in this regard in any manner. Sequence of the facts show that assessee made payment to Eureka Corporation, which was fraudulently cornered by Shri Piyush Chheda and other. As stated above, for the same, Dilip Mehta of M/s. Eureka Corporation filed a complaint for recovery of the amount in question. It shows that Dilip Mehta of M/s. Eureka Corporation has no grievances against assessee. So, the expenditure in question should not be disallowed in the hands of assessee, irrespective of the fact that same has been fraudulently cornered by somebody, for which, separate legal proceeding claimed to be subjudice. Accordingly, this amount in question should not be disallowed. Regarding other amounts, payments had been made of ₹ 1,19,755/- to Piyush Chheda and ₹ 1,01,390/- to Dhaval Naik. Those payments to Piyush Chheda and Dhaval Naik should not be disallowed on the analogy of Eureka Corporation as same have been paid to respective parties against their services rendered to assessee. The facts of Eureka Corporation are different from the payments made to Piyush Chheda and Dhaval Naik. These have been incurred by assessee for the business purpose. So, same should not be disallowed for reasons discussed above. Accordingly, these amounts in question are directed to be allowed. - Decided in favour of assessee 2016 (9) TMI 749 Capital gain on the transfer of plot - year of assessment - Held that:- The issue shall have to be determined on the anvil and touch stone of section 2(47)(v) of the Act r/w s. 53A of the Transfer of the Property Act, 1882. The assessee having returned capital gains (for the current year) despite having not received her share even during the current year is thus aware that the income by way of capital gains is assessable on accrual basis, stating resolution of the legal dispute during the current year as the reason for considering the same as having accrued/arisen thereat. If not during the current year, when did the same get resolved and, further, what is the basis or the evidence to consider it as so? No details with regard thereto stand furnished at any stage; the assessee ‘changing’ her stand to claim that no gain in fact arose during the current year. The complete details need to be brought forth, and its’ impact considered in light and in the context of the provisions of law, while there is nothing on record toward the same, with, rather, even most of the ‘facts’ stated by the ld. counsel being not borne out by the record. Then there is the question of whether the transferee has performed or was willing to perform his part of the contract (sec. 53A of the TP Act). If so, why is it that the payment was withheld, and for years, or given, as stated, to the assessee’s brother-in-law, and when? Answers to these and other related questions would decide whether the capital gain had indeed arisen to the assessee during the relevant previous year and, if not, when. The matter is accordingly restored to the file of the assessing authority for fresh adjudication with regard to whether any part of the capital gains on transfer of plot no. 99 arise to the assessee during the relevant year. The AO shall decide issuing definite findings of fact. 2016 (9) TMI 748 Disallowance under the provisions of Section 14A - benefit of deduction u/s 10A - Held that:- It is an admitted fact that the AO while making the disallowance invoked the provisions contained in Section 14A of the Act r.w.r. 8D of the Income Tax Rules, 1962, the provisions contained in Rule 8D are applicable w.e.f assessment year 2008-09. In other words, the provisions of Rules 8D are not applicable to the year under consideration which is the assessment year 2007-08. It is also noticed that neither the assessee gave the details of the expenses incurred for earning the dividend income nor the AO worked out the expenses directly related to earn the said income. We, therefore, deem it appropriate to set aside this issue back to the file of the AO for adjudicating the same denovo by keeping in view this fact that the Provisions of Rule 8D are not applicable for the year under consideration and only disallowance can be made for the expenses which are directly related to earn the exempt income during the year relevant to the assessment year under consideration i.e. assessment year 2007-08, if there is any increase in the business profit after making the disallowance then the benefit of deduction u/s 10A of the Act if available in accordance with law to the assessee is to be given. - Decided in favour of assessee for statistical purposes. 2016 (9) TMI 747 Assessment order u/s 153A - Held that:- AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record. Hence, the addition in the case is deleted . See CIT Central-III vs Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT), we allow the CO of the assessee and quash the assessment order passed u/s 143(3)/153A. - Decided in favour of assessee. 2016 (9) TMI 746 Validity of the assessment - notice u/s. 143(2) not served within the prescribed time - Held that:- The Tribunal has taken a view in a number of cases that if notice u/s. 143(2) is not served within the prescribed period, the assessment framed consequent thereto is bad in law and deserves to be quashed, following the various judgments of different High Courts. We therefore, following the judgment of the Hon’ble Allahabad High Court in ACIT v. Greater Noida Industrial Development Authorit [2015 (8) TMI 620 - ALLAHABAD HIGH COURT] to hold that the notice u/s. 143(2) was not served within the prescribed period, therefore assessment framed consequent thereto is quashed. Accordingly, we set aside the order of the CIT(Appeals) as well as the assessment order. Since we have quashed the assessment order, we find no justification to deal on the merits of the case. - Decided in favour of assessee. 2016 (9) TMI 745 Assessment u/s 153A - Addition u/s 68 - Held that:- Respectfully following the binding precedents of the Hon’ble Jurisdictional High Court in CIT vs. Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT) and in Principal Commissioner of Income Tax v/s. Kurele Paper Mills P. Ltd. (2015 (9) TMI 115 - DELHI HIGH COURT ) we dismiss appeal of Revenue, as the addition u/s. 68 of the I.T. Act, 1961 as unexplained investment in the share application money was not made, based on any incriminating material found or seized during the course of search; and the additions are beyond the scope of provisions of Section 153A of the Act. Hence, the impugned order does not require any interference on our part - Decided in favour of assessee 2016 (8) TMI 1125 Deduction u/s 80P (2) (a) (iii) - Assessee is a co-operative society engaged in marketing the agricultural produces grown by its members - ITAT allowed the claim - Held that:- The Income Tax Appellate Tribunal has clearly perceived that the assessee is not a co-operative bank and that the activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee, but is confined to its members only and that too in a particular geographical area. Therefore, the respondent Society is eligible for deduction under Section 80P (2) (a) (i) of the Act. The contention of the appellant that the members of the assessee society are not entitled to receive any dividend or having any voting right or no right to participate in the general administration or to attend any meeting etc., because they are admitted as associate members for availing loan only and was also charging a higher rate of interest, is not a ground to deny the exemption granted under Section 80P (2)(a) (i) of the Act. - Decided against revenue Customs 2016 (9) TMI 779 Benefit of the Notification No. 12/2012-Cus - import of aircraft for providing charter service - benefit of notification available subject to the Condition No. 77 prescribed in the Notification - Whether the benefit of the Notification No. 12/2012-Cus is available to NSOP holder for the following categories of revenue flights proposed to be undertaken; a) Use by the permit holder’s employees/directors/investors and their family/friends, not necessarily for business purposes. b) Charter the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes c) Lease the aircraft to group companies for use by their employees/directors/investors and their family/friends, not necessarily for business purposes? Held that: - the conditions prescribed in the notification, make it clear that approval of competent authority is required for import of aircraft for providing non-scheduled (passenger) services or non-scheduled (charter) services and importer is required to furnish undertaking to the Deputy/assistant Commissioner of Customs at the time of import to the effect that the aircraft shall be used only for providing non-scheduled (passenger) services or non-scheduled (charter) services, as the case may be. The conditions have to be read in conjunction with Explanation 2 to the notification, which clarifies that the use of such imported aircraft by a non-scheduled (passenger) operator for non-scheduled (charter) services or by a non-scheduled (charter) operator for non-scheduled (passenger) services, shall not be construed to be a violation of the conditions of import at concessional rate of duty. It is noticed from the application filed by the applicant at Annexure I that the applicant is proposing to import aircraft for providing non-scheduled (charter) services - applicant may use the aircraft imported for providing non-scheduled (passenger) services or non-scheduled (charter) services. Non-scheduled (charter) services are explained under Explanation 1 and one of the ingredients of non-scheduled (charter) services is that it should conform to CAR, which is issued under Rule 133A of the Aircraft Rules, 1937. Rule 133A of the Aircraft Rules, 1937 authorizes the Director General to issue special directions through notices etc including CAR relating to operation, use, possession, maintenance or navigation of aircraft flying over India or aircraft registered in India. Paragraph 2.5 of CAR inter-alia also allows non-scheduled operator to operate revenue charter flights for a company within its group companies, subsidiary companies, sister concern, associated companies, own employees, including Chairman and members of the Board of Directors of the company and their family members, provided it is operated for remuneration. It is to be observed that CAR does not extend this facility to investors and friends. In view of the above, paragraph 2.5 of CAR issued in pursuance of Rule 133A of the Aircraft Rules, 1937 is regarding operation and use of aircraft and same is part of Explanation I (c) to Notification No. 12/2012-Cus. It also noticed that the subject notification as well as contents of CAR does not debar the use of said aircraft for other than business purposes - aircraft can be used for other than business purposes The intended purpose of the aircraft to be imported in the nature of personal use or public use - Held that: - exemption notification does not cover such conditions; that public interest is always a guiding factor in exemption notification and applicant does not fall within the scope of the notification. The benefit of the Notification No. 12/2012-Cus is available to NSOP (Non Schedule Operator’s Permit) holder for the following categories of revenue flights( with published tariff) proposed to be undertaken; a) Use by the permit holder’s employees/directors and their family, not necessarily for business purposes. b) Charter the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes. c) Lease the aircraft to group companies for use by their employees/directors and their family, not necessarily for business purposes. 2016 (9) TMI 778 Calculation of differential duty demanded - BCD - CVD - SAD - Section 3A(5) of the Customs Tariff Act, 1975 - Central Excise Notification No.14 of 2002, dated 01.03.2002 - whether SAD will apply to the goods chargeable to additional duties levied under Section 3(1) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957? - Held that: - the additional duty leviable and the power to levy the Additional Duty of Excise is traceable to sub-section (5) of Section 3 of the Customs Tariff Act, 1975, which gives power to the Government to levy such additional duty as would counter balance the sales tax on a like article on its sale in India. The goods which were imported by the petitioner were meant to be used for manufacture and the petitioners availed the benefit of the exemption notification. This condition having been violated and the goods having been cleared to the domestic area and the petitioner having accepted their mistake, the additional duty of excise is leviable in terms of sub-section (5) of Section 3 of the Customs Tariff Act. The exemption which is sought to be granted by the Budget Notification pertains to the duty leviable under sub-section (1) of Section 3 of the Customs Tariff Act and there is no reference to the additional duty of excise leviable in terms of sub-section (5). The petitioner already accepted before the Settlement Commission regarding the leviability of the additional duty of excise at 8% - the petitioner has not made out any case for interfering with the order passed by the Settlement Commission. Petition disposed off - decided in favor of petitioner. 2016 (9) TMI 777 Denial of benefit of duty free import - saffron - duty free import authorisation - Assorted Confectionery and Biscuits - proceedings from the Court's judgment and order, copy of which is Annexure-M dated 15th February, 2016, are pending in the Hon'ble Supreme Court of India - cross-examination of such officials of the department who have endorsed the bills of entry at the relevant time. Held that: - no opinion expressed on the rival contentions nor on the respective stands taken by the parties. writ petition disposed off on this aspect alone - no opinion expressed on the rival contentions about the principle of law. 2016 (9) TMI 776 Cancellation of DEPB license - Section 9(4) of the 1992 Act - imposition of penalty under Section 11(2) of the Foreign Trade (Development and Regulation) Act, 1992 - export of consigmnent of hand tools - Bank Certificate of Export Realization - licence as defined in Section 2 (g) - issue, suspension and cancellation of licence - Section 9 - Chapter 7 of the Export and Import Policy, 1997-2002 - Notification No. 1(RE-99)/1997-2202 dated 31-3-2000 - validity of DEPB licence - Held that: - the DEPB shall be valid for a period of 12 months from the date of issue. The DEPB was issued on 25.8.2000. Thus, it remained valid only till 24.8.2001. The show cause notice for imposition of penalty u/s 11(2) of the 1992 Act was issued on 20.10.2003. Thereafter another show cause notice- cum-corrigendum was issued on 5.7.2004 proposing to cancel the DEPB ab initio. It was thereafter that the order dated 30.11.2004 was passed cancelling the DEPB imposing penalty of ₹ 2,00,000/- on the petitioner. All these actions are after the expiry of the period of validity of the DEPB. Once the period of validity of the DEPB has expired no action to cancel or withdraw it can be taken because then there is no ‘DEPB' in existence to be cancelled and on which the cancellation order can operate. Cancellation of DEPB in such a situation is a meaningless order and can have no consequence. Section 9(4) enables the Director General or officer authorised by him to cancel or suspend the licence - in Section 9(4) there is no power to cancel or suspend the licence retrospectively. The order of cancellation of the DEPB being illegal and without jurisdiction the penalty imposed being a consequence thereof also cannot sustain - petition allowed - decided in favor of petitioner. 2016 (9) TMI 775 Valuation - Linkage between royalty paid for transfer of know-how and sale of capital goods - agreement for know-how licence and technical assistance agreement - sale and purchase agreement - holding-subsidiary relationship - is there any direct link between the two agreements linking the royalty paid to sale of capital goods? - Held that: - there is no direct link between the two agreements although both the agreements have executed on the same day. A perusal of both the agreements show that there is nothing to link the two agreements. Nowhere in the agreement it can be seen that there is any link between the two. Under these circumstances, it cannot be said that the sale and purchase agreement has been executed subject to the execution of know-how licence and technical assistance agreement. In these circumstances it cannot be said that the royalty paid for transfer of know-how is linked to the sale of capital goods. The decision of the case Commissioner Of Customs Versus M/s. Essar Steel Ltd [2015 (4) TMI 486 - SUPREME COURT] would apply as the activities covered under the know-how agreement are of post importation activities. Appeal allowed - decided in favor of appellant. 2016 (9) TMI 774 Recovery of duty foregone in DEPB licence - Cancellation of DEPB licence - DEPB licence obtained fraudulently against submitting fake/forged documents - denial of exemption provided by DEPB licence - goods cleared after verification of the DEPB licence - much after import of the goods the DRI started the investigation and found that all the DEPB licences purchased by the appellants were obtained by various persons fraudulently against submitting the fake/forged documents to the DGFT - is the demand of duty justified in the view that the licence was valid at the time of import and clearance of the goods? - Held that: - the appellants-importers cannot be made responsible for any fraud committed by some other person for obtaining the DEPB licence from DGFT. On this issue much water has flown. The Division Bench of this Tribunal consistently held that the duty cannot be demanded from the importer who is the bonafide buyer of the DEPB licence even though the licence obtained fraudulently by some other persons. Similar issue has been decided in any cases. The case of Sumit Wool Processors & Others Vs. Commissioner of Customs, Nhavasheva - [2015 (10) TMI 329 - CESTAT MUMBAI] can be referred. The goods imported and cleared under DEPB licence much before the issue of show-cause notices, therefore at the time of import of the goods and clearance thereof, the DEPB licences were valid in the hands of the appellants-importers - the duty demand against the appellant not sustainable - appeal allowed - decided in favor of appellant. 2016 (9) TMI 773 Rejection of refund claim - SAD - ground of limitation - notification number 102/2007-CUS date 14.09.2007. The notification provides a period of one year for claiming the refund by treating the relevant date as date of payment of duty - provisional assessment - refund claim filed rejected on the ground that they should be filed after finalization of assessment - Held that: - Revenue cannot first refuse to accept the refund claim on the ground of provisional assessment and then to reject the same, when filed after finalization on the ground of limitation. In respect of earlier bill of entries refund claim filed by appellant was rejected by the Revenue on the ground that it is to be filed after finalization of assessment. It is not clear as to whether any refund claim in respect of the present disputed bill of entries were also filed by the assessee during the provisional assessment or not - matter remanded to original authority for factual verification - appeal disposed off. Corporate Laws 2016 (9) TMI 767 Guilty of violating the ICDR Regulations and PFUTP Regulations - Held that:- Basic charge held against the appellants is that by suppressing material facts from the investors in the IPO, the appellants have violated Securities And Exchange Board Of India (Issue Of Capital And Disclosure Requirements) Regulations, 2009 (“ICDR Regulations” for short) and by misutilizing the IPO proceeds, the appellants have violated the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (“PFUTP” Regulations” for short). It is relevant to note that based on the aforesaid violations, the AO of SEBI by his order dated 06.08.2014 had inter alia imposed penalty of ₹ 2 crore on the directors of RDB. Challenging the said order passed by the AO, the directors of RDB had filed appeals before this Tribunal. In our order passed today in those appeals we have upheld the decision of the AO of SEBI that the directors or RDB are guilty of violating ICDR Regulations and PFUTP Regulations and accordingly upheld the penalty of ₹ 2 crore imposed on the appellants. However, going into the question as to whether the WTM of SEBI was justified in upholding the two additional charges would now be futile, because the appellants have already undergone the debarment imposed under the impugned order and as such the appeals have become infructuous. Accordingly, in view of our decision that the appellants are guilty of violating the ICDR Regulations and PFUTP Regulations and the appellants have already undergone the debarment imposed under the impugned order, without going into the question as to whether the WTM of SEBI was justified in upholding the two additional charges, we dispose of all these appeals as infructuous. Service Tax 2016 (9) TMI 793 Imposition of penalty - Section 78 of the Finance Act, 1994 - invokation of revisionary powers of the Commissioner - non-discharge of service tax liability on GTA services - Held that:- it is the case of the Department that as in the earlier SCN dated 28.02.2007 there was allegation of suppression of facts and because in the earlier Order-in-Original there was imposition of penalty under Section 78, the Commissioner in the impugned order ought to have imposed penalty under Section 78 also. I cannot agree with this submission of the department. On issuance of notice under Section 84 invoking revisionary powers of the Commissioner the earlier order passed by the adjudicating authority dated 18.03.2008 has been merged in the revisionary powers exercised by the Commissioner. Further, in the SCN issued under Section 84 invoking the revisionary powers, there is no allegation of suppression of facts. It is also settled law that penalty under Section 76 and 78 cannot be imposed simultaneously. - Decided against the Revenue 2016 (9) TMI 792 Recovery of interest and benefit of reduced penalty - interest calculated as averaged month-wise as the month-wise break-up was not available - Held that:- this case needs to be remanded and I accordingly remand the case to the Additional Commissioner with a direction to redo the calculation of interest on the actual amount due month-wise instead of averaged amount. It is directed that the learned Additional Commissioner before redoing the calculation will give an opportunity to the appellants to produce all the documentary evidence in support of their case as to when they received the Order-in-Original; when they paid the duty, interest and penalty; and further whether appellant is entitled to the benefit of reduced penalty and thereafter decide the case in accordance with law by passing a reasoned order. - Appeal allowed by way of remand 2016 (9) TMI 791 Refund claim - evidence of payment of service tax to the builder - applicant is a purchaser of an apartment/flat/residence from a builder or a developer - Period of limitation - Held that:- in view of the findings of the Tribunal in the case of Josh P John and others Vs. CST, Bangalore and others [2014 (9) TMI 597 - CESTAT BANGALORE], this case is remanded back to the original authority who will decide the refund claim. The original authority will issue the notice before disposing of the case and after following the principles of natural justice, will pass a reasoned order. - Appeal allowed by way of remand 2016 (9) TMI 790 Refund claim - Did the Tribunal fall into error in holding that the refund claim made by the appellant was not maintainable - construction activity - appellant deposited Service tax under protest - Held that:- the CESTAT clearly fell into error of law. The proviso to Section 11B clearly indicates that if the amounts are paid under protest, the limitation prescribed by the main portion, i.e. Section 11B(1) would not apply. Even otherwise, once it is admitted that the levy itself came into force with effect from 01.07.2010 per se, amounts collected without authority of law fall beyond the imprint of expression or expropriation under pretence of authority of law. Therefore, the fundamental question of the appellant or any other assessee seeking recourse being restricted by the period of limitation under the statute authorising levy and its recovery should not arise. Furthermore, even if that reasoning were to be perused, the fact remains that the protest was lodged within reasonable time of the appellant becoming aware that the amounts were not recoverable as Service Tax. That is sufficient to attract proviso to Section 11B(1). - Decided in favour of appellant 2016 (9) TMI 789 Pre-deposit - Seeking grant of one more opportunity to present the case - proceedings have been completed ex-parte - Held that:- as the appeal filed by appellant to the Tribunal is time barred, the petitioner cannot at this point of time approach to the Tribunal for re-considering the amount payable by the petitioner, for being entitled to for a fresh opportunity. The petitioner should abide by the condition to be imposed by this Court. Therefore, the petitioner is directed to pay 15% of the Service Tax demanded, viz., 15% of ₹ 45,70,803/-, within a period of three weeks from the date of receipt of a copy of this order and if the petitioner remits the same, he will be entitled to treat the impugned proceedings as a show cause notice and submit their objections within a period of two weeks thereafter and on receipt of the objections, the 1st respondent shall afford an opportunity of personal hearing to the petitioner or his authorised representative and re-do the assessment in accordance with law. - Petition disposed of 2016 (9) TMI 788 Whether the writ petitioner, can challenge the order dated 31st December, 2012 passed by the Additional Commissioner in the writ jurisdiction on the ground of patent illegality and want of jurisdiction after expiry of the period of limitation prescribed in Section 85(3A) of the Finance Act, 1994 - High Court held that the provision stipulating the period of limitation under Section 85(3A) has to be strictly construed as any other interpretation would defeat the very object of enacting the said provision. - Apex Court dismissed the appeal Central Excise 2016 (9) TMI 787 Entitlement for interest - refund became due to petitioner after the matter was decided by Tribunal on 14.01.2000 - application submitted by petitioner on 08.03.2000 but for one or other reason, incorrect and illegal orders were passed by Revenue authority and could not defeat in even up to this Court - amount refunded only in 20.01.2006 - Held that:- respondents have retained huge money of petitioner without any authority of law and for their own fault are penalising the petitioner by denying due interest on the amount refundable to petitioner. Application for refund was filed by petitioner on 08.03.2000. Under Section 11 BB it is provided that if the authority is satisfied that an amount is to be refunded to Assessee but the same has not been refunded within three months from the date of filing of application, Assessee would be entitled for interest. Order passed by Revenue authority under Section 11B(2) for refund is not relevant for the purpose of attracting interest under Section 11BB but what is said that once refund is found admissible, Assessee if has not been refunded the amount within three months from the date of receipt of application under sub Section (1), he shall be paid interest. Meaning that there is no time limit prescribed for taking a decision about refund but that law makes it very clear that amount if not refunded within three months from the date of receipt of application, interest shall be payable. Even if an order has been passed much later on, for the purpose of interest it will relate back and Assessee would be entitled for interest after three months from the date he has filed application under Section 11B. - Decided partly in favour of petitioner 2016 (9) TMI 786 Condonation of delay - in presentation of Memorandum of Review - 267 days - maintainability of review - Held that:- Law is set at rest that review is entertainable under Order 47 Rule 1 and clauses mentioned thereunder. From Bar effort was to convince that there was mistake on the part of the Counsel due to not pointing out the amended Section 35-F. But we hold that there is hardly any scope to equate the alleged mistake of Counsel in not pointing out any law with the “mistake” or “error” as meant within the provision under Order 47 Rule 1 of the Code. Moreover, the Court rightly applied the law as it was prevalent when the appeal was filed and considered the same. Therefore, the subsequent amendment would not be applicable as the order impugned was based on consent of the petitioner that their clients were ready and willing to deposit 50% of the duty i.e. to the tune of ₹ 35 lakhs within a period of eight weeks from date. Moreover, on concession though opportunity to deposit ₹ 35 lakhs only was obtained on September 4, 2015, instead of its deposit, rather causing loss of revenue, has been utilising the said amount as their own under the garb of this application. Therefore, we fail to look eye to eye with the submission of appellant to accept his contention that there was any mistake or error apparent on the face of record, to entertain the review application, since the provision of amended Section 35-F was not placed. Rather since the penaltimate portion of the order under review had given opportunity of preferring appeal in lieu deposit of a portion of the sum of penalty to the tune of ₹ 35 lakhs on the basis of concession, the review application has got no merit. The impugned judgment therefore is held as beyond the scope of review. Though the period of limitation has been explained by the applicant in their own manner but had there been meritorious grounds to entertain the review, in that event the Court could have thought otherwise for consideration of said application proposing condonation of such inordinate delay. In view of taking note of having no merit in the review application and since the judgment under review is found as beyond the scope of review for the reasons recorded above, the application for condonation of delay stands rejected. As a consequence thereof, the application for review also stands dismissed. - Decided against the appellant 2016 (9) TMI 785 Validity of order of tribunal in remanding back the case to Superintendent - According to the appellant (revenue), the Tribunal, while remanding the matter, failed to consider the fact that the Superintendent was not the proper authority to finalise provisional assessment, under Rule 9(B) of the erstwhile Central Excise Rules, 1944 and that the Tribunal has not addressed the question, as to whether, an appeal against the Superintendent's letter is maintainable or not, in the absence of any challenge to the Assistant Commissioner's order. Held that:- Legislature in the statutes has used the expression, 'personal hearing', 'opportunity of being heard', or 'consider the representation' etc. Right if any under an Act to be decided, by the competent authority, may or may not, require an opportunity of being heard. It depends upon the nature of the right. Infringement and consequence thereof, may require the court to interpret a provision and to arrive at a conclusion as to whether an opportunity of being heard or personal hearing, should be provided and read into a provision. Reading of Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975, in our considered view does not mandate the Jurisdictional Superintendent, Central Excise to provide an opportunity of hearing, for computation of duty to be paid by an assessee. In the light of the discussion and various decisions, we are of the considered view that the directions of the Tribunal, to the Jurisdictional Range officer to provide an opportunity of hearing, is not in accordance with the scheme of the Act and the rules framed thereunder, and hence the directions are liable to be set aside and accordingly set aside. Whether the directions issued by the Tribunal to the Jurisdictional Superintendent to consider the submission of the assessee, in the light of the decision in Dai Ichi Karkaria Ltd. vs. Collector of Central Excise, Pune, reported in [1996 (1) TMI 179 - CEGAT, NEW DELHI] has to be followed or not - Held that:- in the case on hand, provisional assessment has been directed to be finalised as per the order-in-original dated 22.05.1998 passed by the Assistant Commissioner of Central Excise, Central Excise Division, Cuddalore. Dai Ichi Karkaria's case has been decided on 11.08.1999. Perusal of the order-in-original dated 22.05.1998 does not indicate, any reference to the above said judgment. As observed earlier, there was no challenge to the order-in-original and therefore, when the appeal was filed against the letter of the Superintendent of Central Excise, Range 1, Cuddalore directing the respondent/assessee to pay the differential duty of ₹ 1,14,29,086/-, the appellate authority has rejected the same, stating that the assessment had attained finality. The Appellate authority has passed the order on 12.06.2013, by which time, the Hon'ble court in Collector of Central Excise, Pune vs. Dai Ichi Karkaria Ltd reported in [1999 (8) TMI 920 - SUPREME COURT OF INDIA] has approved the decision of the Tribunal. Therefore, the range jurisdictional officer is bound to take note of the decision of the Hon'ble Apex Court and compute the value of excisable goods under assessment. We make it clear that while doing so, the jurisdictional officer is under no obligation in law to provide an opportunity of hearing to the assessee. He is required to only compute the value and the differential duty, as per the rule and decision of the Hon'ble Apex Court. Whether the appeal filed against the Superintendent's letter O.C.No.1251/98 dated 20.11.1998 issued in pursuance of and in execution of the Assistant Commissioner's Order-in-Original No.30/1998 dated 22.5.1998 is maintainable in view of the Hon'ble Supreme Court judgments in the case of Flock India Pvt. Ltd. reported in [2000 (8) TMI 88 - SUPREME COURT OF INDIA] and Priya Blue Industries Ltd., reported in [2004 (9) TMI 105 - SUPREME COURT OF INDIA] - Held that:- it is the decision of the Range Jurisdictional Superintendent, in arriving at the value of the excisable goods, under assessment and differential duty, if any, paid by the assessee, which is put to challenge, by way of an appeal. Adjudicating authority has directed the Superintendent to report compliance. But even before the Adjudicating authority could pass a final order, the assessee has filed the appeal, against the letter of the Superintendent. Valuation has to be done, only in accordance with Rule 6(2) of the Central Excise Valuation Rules, 2004 and the judgment of the Hon'ble Apex Court Dai Ichi Karkaria's case (supra). Whether it is in the form of a letter or an order of the competent authority, which is put to challenge on the facts and circumstances of the case, what is required to be considered is whether, it affects the interests of the assessee. It cannot be said that the assessee would not be prejudiced, if valuation is not done as per the decision of the Hon'ble Apex Court. Admittedly, the judgment of the Hon'ble Supreme Court, was not placed before the authorities. Adjudicating authority has directed the Superintendent to finalise the RTI2 assessment and report compliance. Perusal of the letter dated 20.11.1998, also shows that after computation, the Superintendent has marked a copy of the same to the adjudicating authority. In ordinary circumstances, this court would hold that an appeal against the letter of the Superintendent is not maintainable, in the light of Flock India Pvt Ltd.'s case (supra) But inasmuch the assessment has been directed to be finalised as per the directions of the adjudicating authority, we are not inclined to accept the contentions of the appellant, on the third question of law. We make it clear that this judgment shall not be treated as a precedent. - Appeal disposed of 2016 (9) TMI 784 Invocation of extended period of limitation - Valuation - inclusion of concession of sales tax retained by the assessee - the judgment of Hon'ble the Supreme Court in case of Maruti Suzuki India Ltd. vs. CCE Delhi,[2014 (9) TMI 229 - SUPREME COURT] is referred to - Held that: - CBEC Circular dated 30.06.2000 provides that any amount of concession on sales tax retained by the respondent is not required to be added in the assessable value. The decision in the case of Life Long India Pvt. Ltd. vs. CCE Delhi, [2012 (3) TMI 349 - CESTAT NEW DELHI] is relied upon. Assessee cannot be said to be at fault. No substantial question of law arises - extended period of limitation was not available - appeal dismissed - decided against appellant. 2016 (9) TMI 783 Invokation of extended period of limitation - sustained by the Commissioner - appellant had admitted before the Commissioner that the items were not at all its inputs but on record the same were declared as inputs - mala fide intention when took the credit - products in question and impugned items were both exported under Bond - Held that:- the order of the Tribunal dated 4.10.2002 clearly records that the claim of the appellant that they took the stand that they did in the reply to the notice, as a result of coercion of the departmental authorities is patently absurd. The said order also records that it is impossible to believe that the appellant's reply, was drafted by an advocate and dictated by any officer of the department. It is found that the defence of the appellant is largely based on the fact that there was no revenue loss as the goods were exported and the fact that even if the credit was taken on spares, it was possible to export the same and avail refund of the duty paid in terms of Rule 57F of the Modvat Credit Rules. It can be seen that in the scheme of the Modvat, there is an intention to neutralize the tax suffered on the inputs cleared as such for export. Thus, with respect to goods exported by the appellant, it can be stated that the intention of the Government was to allow the credit of such inputs. Moreover the export sealing of these goods was done by Revenue and therefore they cannot say that they were not aware of it. Thus, suppression cannot be alleged in these circumstances. Therefore, the extended period cannot be invoked in these circumstances. - Decided in favour of appellant 2016 (9) TMI 782 Valuation - CNG - inclusion of services charges paid to private parties (PP) in the transaction valuation - whether price charged for sale of CNG to OMCs can be considered as transaction value for the purpose of payment of duty under Section 4(1)(a) of CEA - manufacture of Compressed Natural Gas from Natural Gas and distribution thereof and have integrated infrastructure for the same - all parameters like ownership of equipment, manner of production, product, RSP, etc. remaining the same - Held that:- the Appellants are paying VAT on its sales price to OMCs and OMCs are also paying VAT on their sales price to their customers. This clearly evidences that the AR's arguments that sale is not taking place between Appellants and OMCs and also it is a paper transaction is incorrect and not supported by any evidence on record. Hence, the transaction between them is sale/purchase transaction and VAT/sales tax has been paid at both ends the same cannot be considered as service contracts. The Appellants’ contention that OMCs, being bulk buyers, have been given higher discount also needs to be accepted in the absence of any allegation/ substantiation of mutuality of interest between Appellants and OMCs, as both are independent entities. We also find that there is a distinct difference in the transactions of the Appellants with PPs, wherein MGL supply CNG through the outlets owned and operated by PPs and CNG is directly supplied by PPs to the ultimate consumers/vehicles users from their outlets for and on behalf of MGL, under the invoices/bills/cash memos of MGL and the price charged in those bills/invoices/cash memos are the retail sales price or maximum recommended price determined by MGL, from time to time. In a true sense, the customers/ vehicle users at the outlets of PPs are buying CNG from MGL, through the PPs. The privity of contract is between MGL and those buyers and those sales are directly recorded in the Books of Account of MGL and not in the Books of PPs, as there is no sale and purchase of CNG by PPs and PPs act only as an agent of MGL on commission basis. The entire sales proceeds are remitted by PPs to MGL on daily basis. The contracts between MGL and PPs are that of “principal” and “agent” as the PPs are merely service providers and not buyers of CNG from MGL. Their obligation under the contracts is merely to provide assistance for supply/sale of CNG to the vehicles by MGL. For acting as an agent of MGL, PPs get specified service charges on “per kg” basis of the CNG sold by them on behalf MGL. Since the PPs are acting as agents of MGL for supply of CNG, PPs consider their activity as Business Auxiliary Service and pay service tax on the commission received from MGL. We find that sale of CNG by the Appellants to OMCs is on principal to principal basis, which is clear from various terms/covenants of the agreements between MGL and OMCs and MGL shall not be liable for any of the acts of omission/commission of OMCs. It is also found that when CNG is supplied by MGL through PPs, there is no sale between MGL and PPs, as the sale takes place between MGL and the ultimate customers/vehicle users and the PPs act as agents of MGL; that the PPs were/are issuing cash memos/invoices/bills of MGL, when they supply CNG to customers/vehicle owners; that the PPs are acting as agents of MGL, for which they get specified service charges and the PPs are paying service tax on such amount; that, in contrast, as far as OMCs are concerned, sale of CNG takes place between MGL and OMCs at OMCs outlets and OMCs issue their cash memos/bills/invoices to their customers/vehicle owners and MGL do not have any role to play in such transactions; that commission paid to PPs was ₹ 1.20/kg, ₹ 1.74/kg, ₹ 1.90/kg and ₹ 2.45/kg during different periods, whereas discount given to OMCs was ₹ 1.20/kg, ₹ 1.40/kg, ₹ 2.42/kg, ₹ 2.62/kg and ₹ 2.74/kg during different periods. Therefore, we are of the view that the Appellants’ case is squarely covered under new Section 4(1)(a) of CEA which essentially permit different transaction values, unlike normal sales price existed prior to 1.7.2000, which has also been explained by CBEC, vide its Circular No.354/81/2000-TRU dated 30.06.2000. Therefore, since the Appellants have a strong case on merits itself and are allowing the appeals on merits, we are not discussing the alternate propositions like non-applicability of extended period, etc. The penalties imposed on the Appellants are also not sustainable. - Decided in favour of appellant 2016 (9) TMI 781 Cenvat credit - invoices issued by M/s PPPL as Input Service Distributor (ISD) - appellants are engaged in manufacture of “PARLE” brand sugar boiled confectionary and were clearing their entire production to M/s PPPL - Held that:- the Rule 7 of CCR, 2004 clearly states that the input service distributor may distribute the CENVAT Credit in respect of service tax paid on the input service to its manufacturing units or units providing output service. The question is whether the appellant can be considered as a manufacturing unit of M/s PPPL. The crux of the first submission put forward by appellant is that the appellant would fall under the category of manufacturing unit of M/s PPPL as provided in Rule 7, CCR, 2004. It is the case of the appellant that as the appellant is manufacturing on behalf of M/s PPPL and under the scheme provided in notification no. 36/2001-CE (NT) dated 26.06.2001 the appellant has to be considered as manufacturing unit of M/s PPPL. However, this issue stands settled against the appellant in the case of Sunbell Alloys Com of India Ltd, Machsons Pvt Ltd., Vs CCE & C, Belapur [2014 (2) TMI 297 - CESTAT MUMBAI]. By following the same, I am able to conclude that appellant cannot be considered as a manufacturing unit of input service distributor, M/s PPPL, for the purpose of availing CENVAT Credit on input invoices issued by M/s PPPL. The second contention raised by the appellant is that the amendment brought forth to Rule 7 with effect from 01.04.2016 being a ‘substitution’ has to be applied retrospectively. At the outset, it has to be stated that there is nothing in the amendment which says that the amendment is to apply retrospectively. The amendment does not appear to be clarificatory or for correcting any obvious mistake or for removing any discrimination between same class. Therefore, the judgments cited by the learned counsel for appellant in my view does not assist the appellant. As already stated since the amendment brought forth with effect from 01.04.2016 does not state that it is to apply retrospectively, I am able to conclude without any hesitation that the amendment is to apply prospectively only. From the foregoing I hold that the appellants are not eligible to avail CENVAT Credit on the input invoices distributed by ISD, M/s PPPL. Invokation of extended period of limitation - Imposition of penalty - appellant contended that the SCN dated 21.02.2012 for the period August, 2005 to June, 2011 is time barred. So also in Appeal No. 27022/2013, some part in the period involved (July 2001 to May 2012) would fall beyond the normal period - Held that:- it is seen from the document/authorization filed by the appellant before the Jurisdictional Superintendent that the appellant had disclosed their intention to avail CENVAT Credit of central excise duty and service tax distributed by M/s PPPL. Further, it is seen that the relied upon documents for issue of the SCNs are nothing but the ER-1 returns, the letters issued by appellant to the department and authorization letter dated 15.09.2001. In such circumstances it cannot be said that the appellant has suppressed facts with intention to evade payment of duty. The department has failed to establish that there is willfull suppression with intent to evade payment of duty. Moreover, the issue has seen agitated before the Tribunal in many cases and therefore is an interpretational one. On such score I am of the view that the extended period is not invokable and that there is no ground for imposing penalty. - Decided partly in favour of appellant 2016 (9) TMI 780 100% EOU - the goods should have produced or manufactured in 100% EOU wholly form the raw materials produced or manufactured in India - Classification - whether epoxy resin should be treated as consumables as per appellant or as a raw material as per Department which forms part of the final product - Held that:- the imported Epoxy resin only adds gloss and smoothness and fills up on the surface orifices. It is not disputed that the granite slabs is complete and ready for its intended use even without the use of Epoxy resin and that the latter only facilitates better visual appearance. Therefore, the said Epoxy resin cannot be considered as raw material in the facts of the instant case followed by the various decisions of Tribunal. - Decided against the Revenue CST, VAT & Sales Tax 2016 (9) TMI 772 Validity of order of assessment - Tamil Nadu Value Added Tax Act 2006 - Central Sales Tax Act, 1956 – entitlement of input tax credit - purchase of yarn from local registered dealer – carrying of dyeing process in their factory – local sales - certain quantity of Yarn sent to factory in Kerala to carry on dyeing process and is again brought back to Tamil Nadu for sale – inspection by Enforcement Wing Officials – pre-assessment notice – sought time to file objections – principles of natural justice – Held that: - The need for affording an opportunity of personal hearing was emphasized by the Court in the case of SRC Projects Pvt Ltd., Vs. The Commissioner of Commercial Taxes and another [2008 (9) TMI 914 - MADRAS HIGH COURT]. The impugned Assessment Orders have been passed solely based upon the report submitted by the Enforcement Wing Officials. It is settled legal position that the Assessing Officer, is an independent authority under the Act and he is bound to complete the assessment, taking into consideration the objections raised by the dealer. Therefore, the respondent would not be justified in merely adopting the report as such. However, the respondent cannot be fully faulted because the petitioner did not submit their objections in spite of sufficient time being granted. The respondent shall afford an opportunity of personal hearing to the petitioner and independently complete the assessment and not solely be guided by the report of the Enforcement Wing Officials. The petitioner had already paid 25% of the disputed tax for all the Assessment Years, no further coercive action shall be initiated against the petitioner till fresh orders are passed – petition allowed – decided in favor of petitioner. 2016 (9) TMI 771 Recovery of dues - Wrong calculation of balance loan amount - ignorance of subsequent payments made by the petitioner - defferal loan of ₹ 1,70,25,455/- availed - payment of ₹ 1,45,17,406/- constituting 85% of the total amount made so far - petitioner liable to pay only a sum of ₹ 25,08,049/- - demand of ₹ 59,82,269/- made from petitioner towards balance loan amount - two demand drafts brought by petitioner to show his bonafides - opportunity of personal hearing - Held that: - the amount taken by the petitioner by way of Demand Drafts if deposited with the respondent, the respondent will consider the representation of the petitioner after giving due notice. The respondents are directed to re-consider the case of the petitioner on the basis of the representation by providing personal hearing only after considering the case of the petitioner afresh, a fresh order may be passed. The impugned order shall be kept in abeyance - petition disposed off - decided in favor of petitioner. 2016 (9) TMI 770 Release of consignment of betel nut - seizure - detention - error in details of the purchasers to whom the goods would be sold outside the State - the goods in transit outside the State as claimed by the petitioner and at the same time, the State revenue not to suffer if ultimately it is found that the petitioner's assertions were not correct - whether once the goods travel outside the State, the State VAT authorities would have any further locus to ascertain the further movement of the goods? - Held that: - the prime focus of the State VAT authorities should be to ensure that the goods are not sold within the State without payment of local taxes. Therefore, if the goods are declared to be meant for inter-state sale, but are either sold or meant for sale within the State, the question of applying taxing and penal provisions, depending on facts of the case may arise. Release of the goods allowed on fulfillment of certain conditions - application disposed off - decided in favor of applicant. 2016 (9) TMI 769 Validity of revised assessment orders - Section 27(1)(a) of the Act - TNVAT Act, 2006 - registered dealer - inspection of the place of business of petitioner by the enforcement wing - rejection of petitioner's return - principles of natural justice - Held that: - opportunity granted to petitioner subject to conditions. The petitioner is directed to pay 15% of the disputed tax, for each of the three assessment years, within a period of three weeks from the date of receipt of a copy of this order. If the payment is made within the time permitted, the petitioner will be entitled to treat the impugned assessment orders, as show cause notices, and submit their objections, within a period of two weeks, thereafter. On receipt of the objections, the respondent shall afford an opportunity of personal hearing to the petitioner, peruse the books of accounts, ledgers, records, etc., and thereafter, re-do the assessment in accordance with law - petition disposed off - decided partly in favor of petitioner. 2016 (9) TMI 768 Validity of assessment order - mis-conception of facts - tender for supply and delivery of de-silting machines for sewer maintenance - levy of tax at 14.5% - tax at 5% as per a Government Order in G.O.Ms.No.77 dated 11.7.2011 issued by the Government of Tamil Nadu granting reduced rate of tax at 5% on the supply of any goods - pre-assessent notice or the assessment year 2013-14 and for the assessment year 2014-15 - failure to file objections for the year 2014-15 - death of partner who presented all evidences and documents and attended the personal hearing - grounds of mis-match in the pre-assessment notice - Held that: - if the Authority has missed out certain vital factual information, there is sufficient power for the Authority to revise and rectify his orders in terms of Section 84 of the State Act. The petitioner should go before the Assessing Officer, file a petition under Section 84 of the State Act, point out all these factual inconsistencies and explain the scope of the contract. If that is done, then the first respondent shall re-consider the matter and examine as to whether there are any factual errors, which have crept in, while completing the assessment - writ petition disposed off - decided in favor of petitioner. Indian Laws 2016 (9) TMI 766 Dishonoring of cheque - Committing an offence under Section 138 of the Negotiable Instruments Act, 1881 - Held that:-When the cheque was bounced, on account of closure of account by the petitioner, the respondent had served a legal notice upon him before filing the present complaint, but the petitioner did not reply to the said notice. In order to invoke Section 138 of the act, the three ingredients which need to be fulfilled are (i) that there is a legal enforceable debt; (ii) that the cheque was drawn from the account of the bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt and (iii) that the cheque so issued had been returned due to insufficiency of funds. The proviso appended to the said Section provides for compliance of legal requirements before a complaint can be acted upon by the Court of law. Section 138 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. Rather, it merely raises a presumption in favour of the holder of the cheque that the same has been issued for discharge of any debt or liability. Thus, ingredients of Section 138 of the Act have duly been met, as the accused was unable to rebut the statutory presumption under Section 139 of the Act. Even otherwise, the petitioner has himself suffered a statement before the lower Appellate Court that a compromise has been effected between the petitioner, according to which, the petitioner agreed to make payment of ₹ 1,30,000/- on that date itself i.e. 16.5.2015 and to make the remaining payment within on month thereafter. But the petitioner did not honour the said statement. The plea of the petitioner that he is a patient of multiple substance abuse disorder with psychotic disorder with recent memory and judgment, is of no help to him, when the same was never agitated before the Courts below. This plea is altogether a new plea and the same is not admissible at this stage. Once the petitioner has made a statement that he will make the payment within a specified period and has failed to honour the same, he is estopped from raising altogether a new plea at this stage. 2016 (9) TMI 765 Termination of lease - override of provisions of the SARFAESI Act - Held that:- Unable to agree with the submission of Mr Kamdar that in the facts of the present case, the provisions of the SARFAESI Act override the provisions of the PP Act, and consequently the 4th Respondent (the Estate Officer) had no jurisdiction to issue impugned show cause notices. No hesitation in holding that the provisions of the SARFAESI Act cannot destroy the rights of the 1st Respondent (landlord in the present case) who has admittedly not mortgaged its ownership rights in favour of the Petitioner (the secured creditor). In other words, if the 1st Respondent (landlord) has a right to terminate the lease, that right cannot be destroyed and remains unaffected by any action taken by the Petitioner (the secured creditor) for selling the leasehold interest in said property and which was mortgaged in its favour. In the facts of the present case, it is this very right that the 1st Respondent has sought to exercise by terminating the lease granted in favour of Respondent No.2. Merely because Respondent No.2 has mortgaged its leasehold rights in favour of the Petitioner, cannot take away the right of the landlord (the 1st Respondent herein) to terminate the lease, if Respondent No.2 has breached the terms thereof. At the cost of repetition, we must state that whether this termination is valid or otherwise will be the subject matter of the proceedings under the PP Act. We have not opined one way or the other, as to whether the said termination is valid or otherwise and consequently rendering the occupation of the said property unauthorized. That is an issue that will be inquired into by the Estate Officer after hearing all the parties concerned and after allowing the parties to lead their respective evidence. To our mind, in the facts of the present case, there being no conflict between the provisions of the SARFAESI Act and the PP Act, there is no question of the provisions of the SARFAESI Act overriding the provisions of the PP Act. We, therefore, have no hesitation in holding that Respondent No.4 (the Estate Officer) was well within his jurisdiction to issue the impugned SCNs. A mere SCN does not give rise to any cause of action, because it does not amount to an adverse order which affects the right of any party, unless the same has been issued by a person having no jurisdiction to do so. It is quite possible that after considering the reply to the SCN or after holding an inquiry, the authority concerned may drop the proceedings and/or hold that the charges are not established. It is well settled that a writ petition lies when some right of any party is infringed. A mere SCN does not infringe the right of any one. It is only when a final order imposing some punishment or penalty adversely affecting a party is passed, that the said party is said to be having some grievance. This being the clear enunciation of the law, we have no hesitation in holding that the present Petition is clearly premature as it merely challenges the SCNs issued by the 4th Respondent (the Estate Officer).
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