Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 24, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Companies Law
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G.S.R. 583(E) - dated
20-9-2024
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Co. Law
Companies (Prospectus and Allotment of Securities) Amendment Rules, 2024.
GST - States
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38/1/2017-Fin(R&C) (277)/26610 - dated
19-9-2024
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Goa SGST
Government of Goa, appointment Technical Member (State) in the State Benches of Goods and Services Tax Appellate Tribunal
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16/2024-State Tax - dated
20-9-2024
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Gujarat SGST
Seeks to bring in force provisions of Gujarat Goods and Services Tax (Amendment) Act, 2024
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15/2024-State Tax - dated
7-9-2024
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Himachal Pradesh SGST
Amendment in Notification No. 52/2018-State Tax, dated the 22nd September, 2018
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14/2024-State Tax - dated
7-9-2024
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Himachal Pradesh SGST
Exempt the registered person whose aggregate turnover in FY 2023-24 is upto Rs. two crores, from filing annual return for the said financial year
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(06/2024) FD 07 CSL 2024 - dated
2-9-2024
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Karnataka SGST
Seeks to bring in force provisions of Karnataka Goods and Services Tax (Amendment) Act, 2024
SEZ
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S.O. 4015(E) - dated
18-9-2024
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SEZ
Central Government de-notifies an area of 1.22 hectares, thereby making resultant area as 1.715 hectares at KPM Nagar, Rathinam Software Park, Kurichi Village, Eachanari, Coimbatore District in the State of Tamil Nadu
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S.O. 4014(E) - dated
18-9-2024
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SEZ
Amendment in Notification No. S.O. 1161(E) dated 15.03.2022
Highlights / Catch Notes
GST
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Forgery, fake GST firms, economic crimes - court denies bail amid evidence, delays.
This case deals with the issue of granting bail in a case involving forgery, creation of fake GST firms, and related economic offenses. The key points are: The court held that the present case is one of forgery and not related to GST, hence the accused cannot claim the benefit of bail granted in other GST cases. The court analyzed the concepts of inquiry, investigation, and trial under the Criminal Procedure Code, concluding that the arguments raised by the accused regarding jurisdiction have no merit. The court examined the applicability of Section 27 of the Indian Evidence Act, 1872, which deals with the relevancy of information received from an accused person in police custody. It held that the confessional statements made by the accused leading to the discovery of laptops, mobiles, SIM cards, and fake invoices are admissible as evidence under this section. The court emphasized that economic offenses like fraud, money laundering, and corruption are viewed seriously as they affect the economic fabric of society. In this case, involving crores of rupees and registration of fake firms using forged Aadhaar and PAN cards, the court found grounds to deny bail. The accused were avoiding court proceedings and causing deliberate delays, indicating interference with the judicial process, which further justified the denial of bail. The court also rejected the jurisdictional arguments raised by the accused, stating that the genuineness of the.
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Jurisdiction upheld for State GST Officer to issue SCN concerning company's dealings in other States.
The Court rejected the petitioner's challenge to the show cause notice (SCN) issued u/s 74 of the CGST Act on jurisdictional grounds. The petitioner failed to submit a reply to the SCN, which emanated from a GST audit report after examining records for specific periods. The objection regarding the officer's lack of jurisdiction over the petitioner's business in other States was misconceived. The Court held that officers appointed u/ss 4, 5, and 6 of the CGST Act have the same powers, and a State GST Officer is authorized as a proper officer under the Act. Once an SCN is issued by a State GST Officer, no other officer from another State can initiate proceedings regarding tax evasion, wrongful input tax credit, or other issues u/s 74. The Chandigarh authority had the power to issue the SCN concerning the company's dealings in other States, and there was no jurisdictional error. The petitioner is free to raise objections and arguments in its reply to the SCN's contents. The petition was dismissed.
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Tax registration cancellation based on unrecorded neighborhood queries defective when physical presence established.
The High Court held that the respondents' conclusion of the petitioner's principal place of business being non-existent at the time of physical verification was ex facie erroneous. The conclusion was based solely on purported enquiries from nearby shop owners, without mentioning their names or details in the Field Report. Cancelling a taxpayer's registration solely on the basis of general queries from random persons, without any record, is difficult to countenance. The petitioner's premises were found to exist, with a signboard bearing the GSTIN, and a photograph in the Field Report established possession at the material time. The petitioner contended that the shop was closed and reopened a few days before inspection due to suspension of GST registration. The Court directed the petitioner to file a response to the impugned Show Cause Notice with documents establishing the existence of the principal place of business since registration. The proper officer shall consider the reply and take an informed decision.
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Tax appeal rejection quashed for certified copy technicality after GST Rules amendment.
In light of the amended Rules 108 and 109 of the GST Rules effective from 26th December 2022, the High Court held that when an appealed order is issued or uploaded on the common portal and can be viewed by the appellate authority, submitting a certified copy of such uploaded order for authenticity becomes insignificant. Therefore, the appellate authority could not have rejected the appeal on the technical ground of non-supply of a certified copy, particularly when the statute does not mandate it. Consequently, the impugned order dated 28th February 2023 passed by the respondent rejecting the appeal was quashed and set aside, and the matter was remanded to the appellate authority to pass a fresh de novo order on merits after providing an opportunity of hearing to the petitioner.
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Refund of IGST from e-cash register allowed despite non-compliance with Section 49(6); appellate order binding.
Rejection of refund of IGST lying in electronic cash register on grounds of non-compliance with Section 49(6) of CGST Act, 2017 was held untenable. The appellate authority's order directing refund issuance cannot be withheld by respondents without challenging it in higher forum. Respondents directed to process refund claim per appellate order along with applicable interest in accordance with law. Petition allowed.
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Apex court strikes down GST circular on ITC refund for inverted tax structure, orders fresh adjudication.
The High Court held that Circular No. 135/15/2020-GST, which dealt with the refund of Input Tax Credit (ITC) accumulated due to the Inverted Tax Structure, was in conflict with Section 54(3)(ii) of the Act. The Appellate Authority had allowed the appeal solely relying on this Circular, which did not withstand judicial scrutiny. Consequently, the impugned order was set aside, and the matter was remitted back to the Appellate Authority to decide the appeal afresh in accordance with the law. The petition was allowed by way of remand.
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Tax laws upheld: Delayed challenge of GST cancellation dismissed due to non-compliance with statutory provisions.
The petitioner failed to challenge the matter within statutory provisions and raised the constitutional validity of Section 29(2) under CGST and BGST Acts. The court found the decision in Rohit Enterprises persuasive but not binding. While the facts differed, the hardship was similar to a previous case where the constitutional guarantee to carry out trade and commerce was upheld. No valid ground was raised against the delay in filing an appeal, as Section 30 allows revocation of cancellation within 30 days. The court found no reason to exercise discretionary power or entertain the writ petition testing Section 29(2)'s constitutional validity, as the orders were within statutory boundaries. Consequently, the writ petition was dismissed.
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Petition review dismissed - no error evident; order passed sans objection.
The review petition filed u/s 114 read with Order XLVII Rule 1 of the Code of Civil Procedure, 1908 was dismissed as the petitioner failed to establish any mistake or error apparent on the face of the record. The impugned order was passed in the presence of the learned counsels without objection, and being an appealable order, the High Court did not find any grounds for review. The review petition lacked merit and was consequently dismissed.
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Imported ship parts not classifiable under Chapter 89; taxable as per BoE.
The applicant sought clarification on the applicability of GST rate under notification No. 1/2017-Central Tax (Rate) for imported goods/spares supplied on ships. The applicant claimed these goods are essential parts of the ship to make it seaworthy. However, the HSN explanatory notes of Chapter 89, under which the applicant wants the goods classified after import, exclude separately presented parts and accessories of vessels from this chapter. They are classified under appropriate headings elsewhere in the nomenclature. The CESTAT order cited by the applicant pertained to a different issue and is not tenable in the present dispute. The classification of the goods when supplied by the applicant after importation would remain the same as mentioned in the bill of entry filed before Customs, under the same chapter, heading, sub-heading, and tariff item on which IGST was discharged during import.
Income Tax
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Notice for reassessment of deceased assessee invalid; legal heirs not liable for undisclosed income.
The High Court held that issuing a notice u/s 148 in the name of a deceased assessee is invalid and a prerequisite for acquiring jurisdiction. The legal heirs are not obligated to inform the Income Tax Department about the assessee's death. In case of salary income, the employer is responsible for TDS payments, and the assessee cannot be reassessed for the amount already deducted as TDS. Even if the employer fails to deposit the TDS, the demand cannot be raised against the assessee or legal representatives. Consequently, the impugned notices and orders u/ss 148 and 148A(b) and (d) were set aside, and the assessee's appeal was allowed.
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Unsubstantiated addition of bogus share premium u/s 68 overturned due to credible evidence.
The addition made u/s 68 for bogus share application money receipts was solely based on the statement of an unrelated third party, Shri Pravin Kumar Jain, recorded during a search conducted at his premises. This statement was later retracted. The assessee submitted necessary evidence regarding the receipt of share application money, including share application forms, board resolutions, PAN cards, bank statements, income tax returns, master data, and confirmations and affidavits from the investor companies' directors. This evidence proved the identity, creditworthiness, and genuineness of the transactions. However, the Assessing Officer and CIT(A) made the addition without considering the evidence and the provisions of law applicable for the relevant year. The addition u/s 68 can only be made if the assessee does not offer an explanation or if the explanation is unsatisfactory to the Assessing Officer, which was not the case here. The ITAT relied on the Supreme Court's decision in CIT v. Lovely Exports Pvt. Ltd. and the Chhattisgarh High Court's decision in Venkateshwar Ispat (P) Ltd., allowing the assessee's appeal.
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Educational trust's excess payment disallowed, honorarium allowed. Loan to sister trust for college construction permitted.
Section 11 exemption - Violation of Section 13(1)(d) regarding excess payment to sister trust disallowed. Honorarium paid to Ms. Meenakshi Sundaraja allowed based on Memorandum of Association and Tribunal's earlier decision. Payment of loan to M/s. Ganapathy Educational Trust (GET) for construction of college building, a sister concern with similar objects, allowed as it does not violate Section 13(1)(c). Assessee provided details of loan repayment to GET and payments made to contractors as directed by High Court. Payments made as loan to other charitable trusts do not violate Section 13(1)(c).
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Reassessment Notices Quashed: Competent Authority Approval Lapses Under Income Tax Act.
The High Court examined the validity of reassessment notices issued u/s 148 of the Income Tax Act, considering the sanction requirement u/s 151 and the impact of the Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (TOLA). The key points are: TOLA was a remedial measure to enable authorities to take action within extended timelines during the nationwide lockdown, but it did not alter the distribution of powers or hierarchy u/s 151. The authority competent to grant approval for reassessment depends on the time elapsed since the end of the relevant assessment year, as prescribed in Section 151. TOLA merely extended the period for initiating reassessment but did not amend the approval structure u/s 151. If reassessment was proposed after four years from the end of the assessment year, approval should have been granted by the Principal Chief Commissioner/Chief Commissioner, not the Joint Commissioner. The use of "sanction" in TOLA does not impact this analysis as the Income Tax Act does not prescribe a time limit for granting sanction. Consequently, the reassessment notices based on sanction from the Joint Commissioner were quashed as invalid.
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Jurisdictional officer's income tax reassessment notice invalid due to breach of faceless assessment regime.
The High Court held that the Jurisdictional Assessing Officer was not permitted to issue a notice u/s 148 of the Income Tax Act, as it would amount to a breach of the provisions of Section 151A, which mandates a faceless assessment regime. Relying on the recent decisions in Nainraj Enterprises Pvt. Ltd. and Hexaware Technology Ltd., the Court ruled that the Revenue had not complied with the Scheme notified by the Central Government pursuant to Section 151A(2) of the Act. Consequently, the manner in which the reassessment proceedings were initiated was vitiated. The sanction granted by the authority was rendered invalid since it was not issued by the authorities specified in Section 151(ii) for reassessment proceedings. The Court decided in favor of the assessee, holding that the proceedings initiated u/s 148 would not be sustainable in light of the Hexaware judgment.
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Valuation of Leasehold Rights for Capital Gains: Court Overrules Revenue, Accepts Valuer's Methodology.
Determination of fair market value of leasehold land as on 01.04.1981 for computing long-term capital gains. The Tribunal, considering the valuation report, valued the leasehold rights at Rs. 800/- per square yard instead of Rs. 1,200/- considered by the valuer. The High Court held that the Tribunal erred in estimating the value at Rs. 800/- per square yard, as the registered valuer had already deducted the capitalized value of lease rent from the total fair market value to arrive at Rs. 57,75,000/- as the valuation after considering the leasehold rights. The Court ruled that Section 55(2)(a)(ii) would not apply, and the cost of acquisition should be determined u/s 48 as on 01.04.1981, considering the leasehold rights. The decision went against the revenue authorities.
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High Court quashes reassessment notice, cites lack of fresh material.
The High Court held that the reassessment proceedings initiated by the revenue authorities were invalid as there was no new tangible material or information suggesting escapement of income. The reopening was based solely on the material already available on record, which amounts to a mere change of opinion, impermissible under law. The revenue authorities had already considered the allowability of deductions u/ss 54B and 54F during the original assessment proceedings. Reopening the assessment on the ground that the Assessing Officer did not properly inquire or adopted a casual approach is not a valid reason to believe. The issuance of a notice u/s 148 must have a direct nexus with new information or tangible material that came to the knowledge of the authorities, which was lacking in this case. The court decided in favor of the assessee.
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Genuine share transaction, long-term capital gains exempt; Revenue failed to prove bogus penny stock deal.
The assessee had demonstrated the genuineness of the share transaction resulting in long-term capital gains, which were claimed as exempt u/s 10(38). The Revenue contended that the transaction was a bogus penny stock transaction to infuse unaccounted income. The ITAT held that the assessee had discharged the onus of proving the genuineness of the transaction, and the Revenue failed to establish that it was a bogus transaction. The ITAT observed that the Revenue relied solely on an investigation report without providing details or establishing how the assessee's case fitted the modus operandi of the alleged entry operator. The ITAT noted the long gap between purchase and sale of shares at varying prices, dematerialized nature of shares, transactions through a prominent broker, and other scrips traded by the assessee, concluding that the Revenue failed to demonstrate premeditation. The ITAT decided in favor of the assessee.
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Improper recording of satisfaction by AO to initiate proceedings u/s 153C renders assessment void.
The assessment u/s 153C mandates the recording of satisfaction by the Assessing Officer (AO) upon discovery of material likely to "have a bearing on the determination of the total income." Proceedings u/s 153C can be initiated only upon the AO's satisfaction of the other person on receipt of the seized material from the AO of the searched person. The AO shall then proceed against such other person, issue notice, and assess or reassess the income in accordance with Section 153A, if satisfied that the seized books of account, documents, or assets have a bearing on the determination of the total income for six assessment years immediately preceding the search/requisition year. However, the AO failed to record how the seized documents have a bearing on the determination of the total income for the six preceding assessment years, indicating non-compliance with Section 153C. Relying on the Saksham Commodities Ltd case, the AO failed to record satisfaction as per the Act and assess the potential impact on undeclared income and its effect on the total income for the six preceding assessment years. Consequently, the non-recording of proper satisfaction to initiate proceedings u/s 153C renders the proceedings without proper jurisdiction, allowing the assessee's ground.
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Cash deposits during demonetization period were business receipts, not unexplained income.
Unexplained investments in the form of Specified Bank Notes (SBNs) deposited during demonetization period were questioned. The assessee claimed the deposits were trade receipts from milk and milk product sales, offering to provide customer details. The CBDT circular mandates analyzing the assessee's business model, books, and sales. No significant change in cash deposits during demonetization indicates the explained source cannot be disregarded solely for accepting demonetized currency. The assessee maintained audited books proving the cash/SBNs were part of the taxed turnover. Making a separate addition would lead to double taxation. Hence, the decision favored the assessee, as the amount deposited was already offered for taxation as part of turnover.
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Belated return filing allowed for tax exemption to trust under Income Tax Act.
The assessee, a trust registered u/s 12AA, filed its return of income belatedly u/s 139(4) of the Income Tax Act. The issue was whether the trust could avail exemption u/s 11, given that the return was filed beyond the time limit prescribed u/s 139(1). The ITAT held that the Central Board of Direct Taxes (CBDT) had clarified that returns filed u/s 139(4) should be accepted for granting exemption u/s 11. This implies that the scope of Section 139 includes Section 139(4), and the trust is entitled to exemption if the return is filed within the time allowed under any provision of Section 139. Consequently, the assessee's appeal was allowed, and the trust was eligible for exemption u/s 11 despite filing the return belatedly u/s 139(4).
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Tax issues: Merger of intimation u/s 143(1) and scrutiny assessment u/s 143(3) not applicable, different disallowances.
The Income Tax Appellate Tribunal (ITAT) examined the issue of merger of intimation u/s 143(1) and scrutiny assessment u/s 143(3) of the Income Tax Act. The case involved an assessment u/s 143(3) where additions were made and refund was determined, subsequent to the issuance of notice u/s 143(2). However, the assessee's revised return was processed u/s 143(1) on the same day as the assessment order u/s 143(3). The ITAT held that the principle of merger is not applicable as the disallowances made u/s 143(1) and Section 143(3) were different. The ITAT analyzed the provisions of Section 143(1D) and Section 241A, concluding that once a notice u/s 143(2) is issued, the Assessing Officer shall not process the return u/s 143(1). Consequently, the ITAT ruled that the intimation passed u/s 143(1)(a) was bad in law and allowed the assessee's appeal.
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Multinational's transfer pricing dispute: Inconsistent TPO approach on MAM, benchmarking, TSS, BSS, royalty ALP.
Transfer pricing adjustments, selection of the most appropriate method (MAM), benchmarking approach (aggregation or segregation), factual rendering of services, arm's length pricing (ALP) determination for various transactions like Technical Support Services (TSS), Business Support Services (BSS), and royalty payments. It highlights the inconsistencies in the approach adopted by the Transfer Pricing Officer (TPO) and the Dispute Resolution Panel (DRP) compared to previous years, lack of proper consideration of evidence and contentions raised by the assessee, and the need for remitting the matter back to the TPO for a fresh determination considering all relevant factors, including landed cost of imported components for comparables in the case of royalty transactions.
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Income Tax addition overturned due to lack of evidence from assessee's side for alleged cash receipts.
Addition made u/s 69C of the Income Tax Act for alleged cash payments based on a WhatsApp message and statement of a third party. The key points are: The WhatsApp message stating "Received 80@Dubai" was not found on the assessee's mobile but on an independent third party's mobile with no connection to the assessee. The statement of the third party did not implicate the assessee or suggest any payment was made on behalf of the assessee. There was a mismatch in the time period between the WhatsApp message and the statement. The assessee categorically denied any knowledge or business relationship with the parties involved. No corroborative evidence or material was found during the search at the assessee's premises. The addition was made solely based on secondary evidence from a third party's mobile and statement, without any evidence from the assessee's possession. The revenue's case lacked proper inquiry and failed to establish the assessee's involvement in the alleged transaction. The ITAT held that the addition was unjustified and decided against the revenue.
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Unexplained Cash Credits Added Due to Inadequate Justification for Abnormally High Share Premium.
Unexplained cash credits u/s 68 were added due to assessee's failure to discharge onus regarding bogus share capital including premium receipts. Despite filing confirmations and income tax details, the assessee could not justify abnormally high share premiums given its minimal commercial activity and poor financial health evident from profit and loss account. Four out of eleven share applicants were untraceable, one did not respond, and documents filed by remaining applicants were insufficient to prove genuineness of transactions. Considering case laws, assessee's financial condition, and inadequate onus discharge, Section 68 addition was confirmed, and assessee's appeal was dismissed.
Customs
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Classification dispute over silver jewelry imports: Freely importable or restricted?
Imported goods classification disputed - whether silver jewellery freely importable or restricted category under ITC (HS) Code 71069210. Court found respondent's examination report unreliable, lacking credible basis. Seizure memo declared value Rs. 7,70,80,299.47, 50% rounded to Rs. 1,40,00,000/-. Petitioner permitted provisional clearance upon furnishing bank guarantee of Rs. 1,40,00,000/- from nationalized bank. Petition disposed.
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Customs broker's refund claim revived despite procedural lapse, enabling duty exemption entitlement.
Time limitation rejected as appellant filed protest through letter despite not endorsing 'Under Protest' on Bills of Entry and TR-6 Challans. Appellant, a Customs Broker, filed Bills of Entry availing CVD exemption later denied by department who recovered duty with interest after one year. Appellant protested through letter seeking refund if decided in favor. Supreme Court allowed CVD exemption to importers of final products. Appellant filed refund claim which was rejected as time-barred by authorities. Tribunal held appellant's letter amounted to protest despite not mentioning 'Under Protest' as no format prescribed. No show cause notice or adjudication occurred. Amount deposited on department's insistence, not voluntarily. Refund denial as time-barred unsustainable. Impugned order set aside, appellant entitled to refund with interest. Appeal allowed.
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Importer's misdeclaration doesn't make Customs Agent vicariously liable for penalty; active illegal act required.
The key points are: misdeclaration of goods by the importer cannot render the Customs House Agent (CHA) vicariously liable for penalty u/s 112(a) of the Customs Act 1962. To impose penalty, there must be a positive act or omission by the CHA rendering the goods liable for confiscation. Mere abetment by the CHA's employees is insufficient without evidence of illegal acts. The Tribunal's decision in Rajesh Maikhuri's case supports this view. Consequently, the penalty imposed on the appellant CHA is unsustainable and set aside.
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Time Limit for Refund Claims: Clarity from High Court.
The High Court upheld the CESTAT's ruling that the time limit of one year for filing a refund claim should be calculated from the date of final assessment, not from the date of payment of provisional duty, as per Section 27(1B)(C) of the Customs Act. The court relied on the Delhi High Court's decision in Pioneer India Electronics Pvt Ltd case and CESTAT's ruling in Suzuki Motorcycle India P. Ltd case, which held that refund claims filed within the statutory period cannot be rejected on grounds of limitation. The court rejected the Revenue's reliance on Notification No. 93/2008, which contradicted the statutory provisions. Consequently, the court dismissed the appeal, finding no substantial question of law arising from the CESTAT's order.
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Misdeclared branded goods as 'unbranded' to evade customs duty - manipulated invoices, undervalued imports.
Misdeclaration of goods regarding value and quantity - goods declared as 'unbranded', but branded caps of various brands like Puma, Nike, Adidas etc. found - infringement of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. Reliability of electronic evidence retrieved from appellant's email discussed. Extended period of limitation applicable. Appellant suppressed/underdeclared value of goods based on excel sheets retrieved from email showing higher values than declared in Bills of Entry. Differential duty demand confirmed based on redetermined value. Electronic evidence admissible without certificate u/s 65B of Evidence Act as per Supreme Court's decision. Appellant manipulated invoices and misdeclared value in Bills of Entry with intent to evade duty, violating Sections 17(1) and 46 of Customs Act, 1962. Extended period of five years for duty demand u/s 28(4) invokable due to suppression of facts and misstatement. Appellant liable for differential duty and interest. Contention of Bills of Entry once assessed cannot be reassessed rejected, as duty short paid can be demanded u/s 28 within limitation period. Data from appellant's mobile admissible, certificate u/s 138C not required. No infirmity in redetermining value and quantum. Appeal dismissed.
Corporate Law
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Minority shareholder's exit route paved by company's share buyback order.
The Tribunal has the authority to order the purchase of shares by the company from any member u/s 242(2)(b) of the Companies Act, 2013, in cases of oppression and mismanagement. The Supreme Court has held that even without finding oppression, the court may grant relief to achieve substantial justice between parties. Though reasons were not explicitly stated, the Tribunal considered submissions and cited case laws before passing the order u/s 242(2)(b). As the respondent cannot sell shares in the open market, being a private company, the Tribunal's order to purchase shares is not prejudicial and aids smooth company operations. The NCLAT dismissed the appeal, finding no illegality in the Tribunal's order.
IBC
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Corporate Dispute: Quality Issues Nullify Debt Claim Before Insolvency Demand.
The appeal was dismissed by the NCLAT as the Adjudicating Authority correctly dismissed the Section 9 application due to the existence of a pre-existing dispute between the parties regarding the quality of goods supplied by the Operational Creditor, prior to the issuance of the demand notice. The Respondent had filed a civil suit before the demand notice and contested the defective goods supplied, establishing a real, substantial, and bona fide dispute as per the Supreme Court's ruling in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. The Appellant's claim for outstanding payments was also refuted by the Respondent's bank statements and ledgers, indicating no outstanding dues. The impugned order was upheld, and the appeal was dismissed.
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Unsecured financial creditors take precedence over operational creditors in liquidation asset distribution.
Section 53(1) of the Insolvency and Bankruptcy Code (IBC) provides for the order of priority in the distribution of liquidation assets. Financial debts owed to unsecured creditors rank higher at clause (d) than operational debts which fall under clause (f). The appellant, an operational creditor, cannot claim priority over the respondent, an unsecured financial creditor, even if the respondent is a related party. The definition of 'financial debt' u/s 5(8) does not exclude debts from related parties. While related parties may face restrictions u/ss 21 and 29A, their financial debts retain priority over operational debts in liquidation distribution as per Section 53(1). The Supreme Court's judgment upheld the intelligible differentia between financial and operational debts, and the BLRC Report highlighted the importance of unsecured financial creditors' dues. The NCLAT correctly dismissed the appellant's application seeking priority over the unsecured financial creditor.
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Modified resolution plan deleting non-compliant clauses as per IBC Section 30(2)(e) upheld by appellate tribunal.
The jurisdiction of the Adjudicating Authority and the Appellate Tribunal to interfere with the Resolution Plan approved by the Committee of Creditors (CoC) is limited to examining whether the Resolution Plan complies with Section 30(2)(e) of the Insolvency and Bankruptcy Code (IBC). If the Resolution Plan is not in conformity with statutory requirements, the Appellate Tribunal can either set aside the Resolution Plan or delete the clauses that are not in accordance with the law to make the Resolution Plan compliant. In this case, the Appellate Tribunal partially modified the Resolution Plan by deleting the clauses contrary to Section 30(2)(e) of the IBC, without interfering with the other approved parts of the Resolution Plan. The application was disposed of accordingly.
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NCLAT upholds denial of payment to operational creditors when liquidation amount is nil.
The NCLAT held that the statutory protection granted to operational creditors u/s 30(2)(b) of the IBC is that they shall not receive less than the specified amounts. The appellant's case did not fall u/s 30(2)(b), as the issue raised was covered by a recent NCLAT judgment in Rajat Metaal Polychem Pvt. Ltd. vs. Mr. Neeraj Bhatia and Anr. The Tribunal ruled that operational creditors are denied payment when the liquidation amount is nil, and until the legislature amends the scheme, courts cannot take any other view. Consequently, the appeal was dismissed.
Indian Laws
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Arbitral award upholds public policy; Gita Power jointly liable with OPG; Limitation period extended by acknowledgment.
Arbitral award does not conflict with public policy of India or vitiate by patent illegality. Gita Power justifiably subjected to arbitration and jointly liable with OPG. Enexio's claim indivisible, limitation governed by Article 55 not Articles 14, 18 and 113. Claim matured on 19 March 2016, limitation extended by acknowledgment on 19 April 2018 u/s 18. Counterclaims except gear boxes/fan modules within limitation. Rejection of prayer to declare debit notes invalid had no adverse impact. No palpable error in award to term 'patently illegal' or in conflict with public policy. Division Bench rightly set aside Single Judge order restoring arbitral award. Appeal dismissed.
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Non-signatory party's referral to arbitration depends on evidence of intent to be bound.
The Court addressed whether a non-signatory party should be referred to arbitration along with the signatory parties. It held that the referral court must prima facie determine the existence of an arbitration agreement and whether the non-signatory is a party to it. However, the arbitral tribunal is better equipped to conclusively decide if the non-signatory intended to be bound by the arbitration agreement based on evidence and legal doctrines. Factors like mutual intent, relationship with signatories, commonality of subject matter, and performance of the contract indicate the non-signatory's intention to be bound. Considering the complexity, the Court appointed a sole arbitrator to determine if the non-signatory group should be included in the arbitration after examining evidence and applying legal principles outlined in Cox and Kings.
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Director not liable for dishonored cheque issued before appointment, no allegations of involvement.
The petition challenged the criminal complaint filed against the petitioner u/s 138 read with Section 141 of the Negotiable Instruments Act for dishonor of cheque. The petitioner was impleaded as an accused in the capacity of Director of the company. However, the documents revealed that the petitioner was appointed as an Additional Independent Non-Executive Director after the loan was taken and had resigned before the cheque was dishonored. The complaint lacked specific allegations regarding the petitioner's involvement in the day-to-day affairs and conduct of the company's business. The Annual Report showed the petitioner did not attend any Board Meetings or the Annual General Meeting, indicating non-involvement. The High Court, following Supreme Court precedents, held that the petitioner cannot be made vicariously liable as an Additional Independent Non-Executive Director without specific allegations of involvement. Continuing the criminal complaint against the petitioner would be an abuse of the process of law. Consequently, the High Court quashed the criminal complaint against the petitioner.
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Prosecution Quashed for Non-Partners Under Negotiable Instruments Act.
This case pertains to the dishonor of cheques and the liability of the petitioners u/s 138 of the Negotiable Instruments Act. The High Court held that since the petitioners were neither partners of the partnership firm nor signatories to the instruments in question, initiating proceedings against them u/s 138 amounted to an abuse of the court process. The court emphasized that when a cheque is signed by an authorized signatory of a partnership firm, prosecution u/s 138 can only be instituted against those in charge and responsible for the firm's business conduct at the relevant time. Consequently, the High Court quashed the proceedings against the petitioners in the lower court.
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Accused convicted for misusing signed cheque despite complainant's lapses.
In a case involving dishonor of a cheque, the prosecution successfully discharged its burden u/s 138 of the Negotiable Instruments Act. The sole respondent admitted to misusing signed cheques, but no evidence was presented to substantiate this claim. Consequently, the presumption favored the complainant that the cheque was issued by the accused for payment of existing dues. The trial court erroneously relied on lapses by the complainant to disbelieve the cheque's validity u/s 138 and wrongly concluded that the accused discharged the burden u/s 139 due to these lapses. The High Court overturned the acquittal, convicted the sole respondent u/s 138, and imposed a two-month simple imprisonment sentence along with a fine equal to the cheque amount plus 30% as compensation, payable within a month, failing which the amount would be recoverable according to prescribed law.
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Company Director not liable for bounced cheque unless actively involved in transaction.
Non-executive director's vicarious liability in a company u/s 138 of the Negotiable Instruments Act examined. For making a non-executive director liable, there must be specific averments showing their responsibility for company's conduct. Mere designation as director without involvement in transaction is insufficient. Complaint lacking such averments against petitioner non-executive director cannot continue. Petition disposed of.
PMLA
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Money Laundering Bail: Elderly Inmate's Rights Upheld Over Statutory Restrictions.
Bail application for money laundering offense granted considering long incarceration exceeding substantial part of prescribed sentence, applicant's advanced age and health condition, no flight risk, and right to speedy trial under Article 21 despite statutory restrictions. Court relied on Supreme Court's ruling on applicability of Section 436A CrPC over rigors of Section 45 PMLA, allowing bail to protect fundamental rights when trial unlikely to conclude within reasonable time. Bail granted subject to conditions, with applicant to reside outside district and report to designated police station.
Service Tax
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Remanded for fresh decision after CESTAT's cryptic order violated natural justice.
Cryptic and non-speaking order by CESTAT violated principles of natural justice. After examining the judgment in Commissioner Customs and Central Excise v. M/s. JP. Transformers, the court found it inapplicable to all aspects/issues of the present case, yet CESTAT concluded the appeals by simply applying the same. The impugned order is set aside, and the matter is remanded back to CESTAT for a fresh decision after affording due opportunity to the parties concerned. The appeal is disposed of by way of remand.
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Tour operators liable for service tax on domestic operations despite inclusion of overseas travel.
Service tax liability on tour operators providing services within taxable territory of India, even if tours involve non-taxable territory - Planning, scheduling, organizing activities undertaken in taxable territory attract service tax - No intent to evade duty as interpretation of 'tour operator' contested - Extended period of limitation not invokable - Matter remanded to determine duty liability within normal limitation period.
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Sale of manufactured goods including installation services treated as sale; no service tax payable if excise duty paid.
No service tax is payable when the entire value of the contract is towards sale of manufactured goods, including incidental activities like erection, commissioning and installation, and the sale value has already suffered excise duty. If the sale invoice covers all elements without separate consideration for services, there is no available amount to charge service tax. The Tribunal relied on its previous decisions holding that in such cases involving manufacturing, sale of goods at a particular price, and incidental services, no service tax can be demanded once the entire value is towards sale and has suffered excise duty. The demand was held unsustainable, and the appeal was dismissed.
Central Excise
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Clandestine goods removal attracts penalty on MD despite no confiscation order.
Clandestine removal of excisable goods - Penalty u/r 26 of Central Excise Rules, 2002 imposed on Managing Director. Appellant challenged Order upholding penalty without specifying applicable clause of Rule 26. Held: Rule 26 penalty can be levied on any person concerned in removing excisable goods liable for confiscation, without confiscation proposal or order. Appellant's statement admitted involvement. Adjudicating authority not required to specify sub-rule as sub-rule (2) inapplicable. Appellant put on notice regarding nature of contravention. Co-operative principle not violated. Concurrent findings of fact by lower authorities. No substantial question of law arises. Appeals dismissed.
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Fly-ash usage for excise duty exemption: Bonafide belief vs. alleged suppression.
Central excise duty exemption notification dated 01.03.2002 was denied, leading to recovery of duty, interest, and penalty. The extended period of limitation was invoked. However, the appellant had maintained records, provided intimation in Form D-3, and claimed exemption based on fly-ash usage above 25%. Audits conducted did not find discrepancies. The appellant did not suppress facts regarding fly-ash usage. The show cause notice alleged manipulation of fly-ash receipt records, but no reasons were provided to establish suppression of facts with intent to evade duty. The Supreme Court has held that for invoking extended limitation, duty non-payment should be due to fraud, collusion, willful misstatement, or suppression of facts. Mere failure to pay duty is insufficient. Suppression of facts should be deliberate to escape duty payment. If an assessee bona-fide believes in correct duty discharge, even if ultimately found wrong, it does not render the belief mala-fide. In self-assessment, the assessee must determine liability correctly based on judgment and bona-fide manner. In this case, the appellant did not suppress facts, let alone with intent to evade duty. Hence, the extended limitation could not be invoked. The Commissioner's order demanding duty, interest, and penalty was set aside by the Appellate Tribunal.
Case Laws:
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GST
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2024 (9) TMI 1298
Levy of interest and penalty - evasion of tax - challenge to SCN on the ground of jurisdiction - HELD THAT:- The petitioner has not submitted any reply to the notice issued under Section 74 of the CGST Act which is a show cause notice. The petitioner has directly approached this Court challenging the said show cause notice on the ground of jurisdiction. It is also noticed that the show cause notice has emanated on the basis of GST audit report after the record for the period 2017-18, 2018-19, 2019-20 was examined by the internal Audit Team of Cirlce-1, Audit Commissionerate CGST, Chandigarh in terms of Section 65 of the CGST Act. The petitioner s objection that the officer having no jurisdiction to issue notice to it on the assumption of having its business in other States is noticed and to be rejected as misconceived. There is no jurisdictional error on the part of the respondents in issuing show cause notice under Section 74 of the CGST Act. The powers of the officers who have been appointed under Sections 4, 5 of the CGST Act and those appointed under Section 6 of the CGST Act are the same. A person is appointed by the State is authorized to be a proper officer for the purpose of this Act - once notice has been issued to the petitioner under Section 74 (1) of the CGST Act by the State GST Officer of Punjab, no other officer from any other State would be authorized to initiate proceedings and the question regarding evading of tax or availing of wrongful input tax credit or other issues in terms of Section 74 will be examined by the same officer alone. The authority at Chandigarh would have the power to issue notice under Section 74 of the CGST Act even with regard to dealings of the company in other States, and therefore, there is no jurisdiction error. No findings given relating to the challenge made by the petitioner regarding the contents of the notice under Section 74 of the CGST Act and the petitioner is left open to take up all arguments and objections in its reply. Petition dismissed.
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2024 (9) TMI 1297
Under declaration of output tax - Excess claim of ITC - mismatch of GSTR-01 with GSTR-09 - technical glitch in the GST portal functionality - HELD THAT:- The adjudicating authority has examined the issue in some detail and in terms of an order dated 25.08.2024, the adjudicating authority has accepted the petitioner s contention that there is technical glitch, whereby the advance amount has been added instead of being reduced. Accordingly, the proposed demand on similar grounds has been dropped. The petitioner, thus, prays that the impugned order be set aside and the adjudicating authority be directed to decide afresh. Although, the petitioner has a statutory remedy of an appeal, but considering the controversy is in a narrow compass and it appears that the adjudicating authority has already examined the issue for the subsequent period, we consider it apposite to remand the matter to the adjudicating authority to consider afresh. The matter remanded to the adjudicating authority, to pass a fresh order after affording an opportunity of personal hearing to the petitioner - petition disposed off by way of remand.
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2024 (9) TMI 1296
Refund of IGST which was lying in the electronic cash register - rejection on the ground that provisions of Sub-section (6) of Section 49 of the Central Goods and Services Tax Act, 2017 were not complied with - HELD THAT:- The respondents cannot withhold the refund, which has been directed to be issued by the appellate authority. The Order in Appeal dated 21.01.2024 is required to be implemented unless the same is otherwise stayed by a superior forum. Concededly, in the present case, the respondents have not preferred any appeal or any proceedings to challenge the Order in Appeal dated 21.01.2024. It is impermissible for the respondents to simply ignore the said order. The respondents are directed to forthwith process the claim for refund in terms of the Order in Appeal dated 21.01.2024 along with applicable interest in accordance with law - Petition allowed.
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2024 (9) TMI 1295
Cancellation of petitioner s GST registration with retrospective effect - vague SCN - violation of principles of natural justice - HELD THAT:- The impugned SCN did not propose to cancel the petitioner s GST registration with retrospective effect. However, a letter dated 11.11.2022 sent by the Deputy Commissioner (Anti Evasion), CGST West Commissionerate to the Assistant Commissioner, Janakpuri Division, CGST West was projected on the GST portal. The said letter indicates that during the physical verification conducted at the premises of the petitioner s principal place of business the firm was found non-existent. In terms of the said letter, the proper officer was directed to initiate the cancellation proceedings from the date of the registration. The impugned order cancelling the petitioner s GST registration does not indicate any reason for cancelling the petitioner s GST registration except referring to the impugned SCN. The petitioner is essentially aggrieved by the cancellation of GST registration with retrospective effect - the petitioner s contention that it has not been afforded the sufficient opportunity to respond to any proposed action for cancellation of his GST registration with retrospective effect, is accepted. It is considered apposite to set aside the impugned order cancelling the petitioner s GST registration with retrospective effect and permit the petitioner to file a response to the impugned SCN assuming that the same proposed to cancel the petitioner s GST registration with retrospective effect - petition disposed off.
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2024 (9) TMI 1294
Cancellation of petitioner s GST registration with retrospective effect - seeking modification in the order to the limited extent that the same be made operative from March, 2022 - violation of principles of natural justice - HELD THAT:- The reason for which the petitioner s GST registration was cancelled was not reflected in the SCN. Although, the petitioner claims that it did not receive the SCN, it is apparent that even if it had, the same provided it no opportunity to respond to the reasons as set out in the impugned order cancelling its GST registration. The petitioner is not aggrieved by the cancellation of its GST registration as it had closed down its business. The petitioner is, essentially, aggrieved by cancelling of its GST registration with retrospective effect. The present petition is disposed of with the direction that the petitioner s GST registration stands cancelled with effect from 24.05.2022 (being the date on which it was suspended) and not with retrospective effect from 11.09.2017.
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2024 (9) TMI 1293
Cancellation of petitioner s GST registration with retrospective effect - petitioner has had no opportunity to respond to the allegations - Violation of principles of natuarl justice - HELD THAT:- The impugned order, which has been passed, cancelling the petitioner s GST registration, falls foul of the principles of the natural justice. Concededly, the petitioner has had no opportunity to respond to the allegations on the basis of which the said action was premised. Neither the SCN nor the impugned order reflect any reasons for cancelling the petitioner s GST registration. The impugned order is set aside. The petitioner s GST registration is directed to be restored forthwith - Petition disposed off.
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2024 (9) TMI 1292
Violation of principles of natural justice - non-service of SCN - SCN were placed under the tab Additional Notices and Orders , not readily accessible - HELD THAT:- The SCN were placed under the tab Additional Notices and Orders and were not readily accessible. This Court is informed that the said issue has since been remedied and the GST portal has been redesigned to place the notices as well as additional notices and orders under the menu item View Notices and Orders . Thus, now a user can view both tabs Notices and Orders and Additional Notices and Orders on the same page. However, it is not disputed that at the material time of issuance of the SCN, the tab Additional Notices and Orders was not placed in a position which would invite the taxpayer s attention to the said tab. The impugned order is set aside - Petition allowed.
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2024 (9) TMI 1291
Challenge to SCN cancelling registration of petitioner - petitioner s principal place of business was found to be non-existent at the time of physical verification - It is the petitioner s case that the impugned SCN has been issued on an ex-facie erroneous conclusion that the petitioner s principal place of business was found to be non-existent. HELD THAT:- There are merit in the petitioner s contention that his premises were in existence at the time of physical verification and the respondents conclusion that petitioner s principal place of business was non-existent at the time of physical verification is ex facie erroneous. The respondents conclusion is premised solely on the basis of purported enquiries made from the nearby shop owners . However, the Field Report does not mention the name of the said shop owners or any other details. It is difficult to countenance that a taxpayer s registration can be cancelled solely on the basis of some general queries/enquiries from random persons, of which there is no record. In this case the petitioner s premises are found to be in existence and the sign board outside the premises also bears the petitioner s GSTIN. The Field Report also encloses a photograph of a person in front of the premises of the petitioner - the same establishes that the petitioner was in possession of the premises in question at the material time. The proper officer entertains an apprehension that the petitioner was non-existent at the principal place of business three or four days prior to the date of the physical inspection. It is the petitioner s contention that the shop in question was lying closed and was opened four or five days before the date of the physical inspection as, prior to that, the petitioner s GST registration was suspended. It is considered apposite to direct the petitioner to file a response to the impugned SCN along with all documents relied upon by him so as to establish that his principal place of business is in existence since the date of its registration. The proper officer shall consider the reply of the petitioner and shall take an informed decision thereon - petition disposed off.
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2024 (9) TMI 1290
Restoration of Goods and Services Tax Identification Number (GSTIN) - cancellation of GST registration - Change of principal place of business address - HELD THAT:- The issue whether the petitioner was in existence is required to be addressed by considering the petitioner s document of being in existence at its principal place of business prior to shifting to the new address. As far as the petitioner s current address is concerned, the petitioner has provided the documents to substantiate that he is in existence including the photograph of the premises bearing the sign board of D K Freight Carrier as well as indicating his name and mobile phone number. The appellate authority has rejected the petitioner s appeal on the ground that he had not provided sufficient documents as to his principal place of business. Insofar as documents relating to the current address of the petitioner is concerned, the petitioner has provided the same. It is considered apposite to remand the matter to the appellate authority to consider the matter afresh. The petitioner may file all documents on which it seeks to rely upon to show that he was carrying on the business from the declared principal place of business till he shifted to the current address - petition allowed by way of remand.
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2024 (9) TMI 1289
Seeking grant of bail - forgery - territorial jurisdiction - creation of fake forms - Admissibility of confessional statements - HELD THAT:- This Court is of the opinion that the present case is of a forgery and not related to GST, therefore, no benefit of bail granted in the aforesaid case can be given in the present case. The inquiry has been defined under Section 2(g) of Cr.P.C. to mean every inquiry, other than trial, conducted by a Magistrate or a Court. It would also be appropriate to understand the meaning of investigation which has been defined under Section 2(h) Cr.P.C. as all the proceedings for collection of evidence conducted by a police officer - Trial has not been defined under the Code of Criminal Procedure, 1973. Lexicologically, trial means a judicial examination of a case in accordance with law. Hence, for an inquiry or trial, it is the court which is the focal point, whereas for an investigation, it is the police officer. Thus, in the present case, the arguments as placed by learned counsel for the applicants, on the point of jurisdiction, have no legs to stand. Section 27 of the Indian Evidence Act, 1872 deals with the relevancy of information received from a person accused of any offence while in the custody of the police officer. The Section provides an exception to the general rule that confessions made to the police officers are inadmissible in evidence. From the aforesaid, the scope of Section 27 of the Act, 1872 is that it applies to any information given by the person accused of an offence, which leads to the discovery of a fact - The condition for applicability of the aforesaid Section is that the person giving the information must be an accused in police custody. The information provided must lead directly to the discovery of the material fact and only that portion of information which directly leads to the discovery is admissible. For example, if an accused, while in custody, reveals the location of a weapon used in the crime and upon searching that location, the weapon is indeed found, the part of statement where accused described the location of weapon is admissible in courts as evidence. In the present case, after registration of the FIR when forgery had been done by using the Aadhaar Card and PAN Card of the informant, fake GST firms were registered, Investigating Officer proceeded on the information as provided by a secret informer and arrested two accused who disclosed about the office where work of the firm was being done. On the aforesaid information of the arrested accused persons, the Investigating Officer reached the office premises, wherein he found other persons working for the firm of the arrested accused persons. Laptops, mobiles, SIM Cards, fake invoices were recovered, thus, discovering such fact which connected them with the main accused who had got registered the fake firms and the consequential forgery or theft of GST was found. Thus, that part of the discovery of fact is admissible as per Section 27 of the Act. Therefore, argument as placed by learned counsel for the applicants regarding the fact that confessional statements can be taken as a piece of evidence, has no legs to stand. The present case relates to economic offences, such as large scale fraud, money laundering and corruption, are often viewed seriously because they affect the economic fabric of the society. The Courts may deny bail in such cases especially if the accused holds a position of influence or power. In the present case, money trail of crores, which affects the society at large scale, is involved which started from registration of fake firms by using Aadhaar and PAN Cards of the informant who had not applied for such registration. In the present case from the report of the concerned District Judge/ Chief Judicial Magistrate, it is clear that the accused have avoided coming to the court and discharge application of one of the accused has been rejected. One or the other grounds are being taken by the accused persons in getting the matter adjourned so that the charge is not framed, therefore, they are trying to cause deliberate delay so that the charges may not be framed, hence, interfering in judicial process, thus, giving ample reason of not enlarging them on bail. As assisted by the State that backbone of Goods Services Tax regime and Input Tax Credit, is that under the GST Regime ITC follows supply chain not only in intra-state but also interstate supply. Thus, on the ground of jurisdiction as argued by learned counsel for the applicant this Court is of the view that though registration of fake firms were at Punjab and Maharasthra, the complainant is resident of New Delhi and the FIR has been lodged at Gautam Buddh Nagar, the genuineness of complaint questioning the territorial jurisdiction cannot be raised on the basis of occurrence as the same cannot be said to be at one place where the GST firm was registered but its connections with other fake firms are also required to be seen. This is not a fit case for granting bail - bail applications are rejected.
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2024 (9) TMI 1288
Cancellation of registration and the dismissal of an appeal filed - time limitation - Constitutional validity of Section 29(2) of the CGST Act and BGST Act - applicability of Article 19(1)(g) and Article 21 of the Constitution of India - HELD THAT:- The petitioner admittedly did not agitate the cause within the four walls of the statute and hence has raised the question of constitutional validity of Section 29 (2) under both the enactments. The decision in Rohit Enterprises [ 2023 (2) TMI 759 - BOMBAY HIGH COURT ] which only has a persuasive effect, which also does not have any declaration of law and has only exercised discretion under Article 226 of the Constitution of India on the facts which came out therein. The facts though not identical, the hardship projected is almost similar to that in CWJC 11874 of 2024 and the Division Bench of the High Court found that the constitutional guarantee to carry out trade and commerce is unconditional and unequivocal and it must be enforced regardless of shortcomings in the scheme of the GST enactment. There is no ground validly raised against the delay in filing an appeal - Section 30 which provides for revocation of cancellation of registration if applied for within thirty days. There arev absolutely no reason to exercise our discretionary power to interfere with the orders passed; clearly within the boundaries of the statute - there are no reason to entertain the writ petition on the ground of testing the constitutional validity of Section 29 (2) - The writ petition is dismissed.
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2024 (9) TMI 1287
Appeal rejected on the ground of non-supply of certified copy - direction sought to restore the appeal - whether the certified copy of the order appealed is required to be submitted in view of amended Rules 108 and 109 of the GST Rules with effect from 26th December 2022? HELD THAT:- When an order which is appealed against is issued or uploaded on the common portal and the same can be viewed by the appellate authority, requirement of submitting certified copy of such uploaded order for its authenticity would be insignificance. Thus, the appellate authority could not have rejected the appeal on such a technical ground more particularly when the statute does not provide the same. The impugned order dated 28th February 2023 passed by the respondent No. 3 is hereby quashed and set aside and the matter is remanded back to the appellant authority to pass a fresh de novo order on merits after giving an opportunity of hearing to the petitioner - Petition disposed off.
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2024 (9) TMI 1286
Freezing of the financial assets/demat accounts of the Petitioner - five demat accounts of petitioner have been attached without even issuing a notice let alone giving an opportunity to present petitioner s case - Violation of principles of natural justice - HELD THAT:- The petitioner ought to have been given notice before the impugned attachment orders were issued to the depository participants and/or to NSDL. The depository participants, viz., Kotak Mahindra Bank Limited, Geojit Financial Services Limited, HDFC Bank Limited, Religare Broking Limited are hereby informed that the attachment orders have been quashed and set aside. Petition disposed off.
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2024 (9) TMI 1285
Review petition under Section 114 read with Order XLVII Rule 1 of the Code of Civil Procedure, 1908 - mistake apparent on the face of record or not - HELD THAT:- The petitioner has sought for review of the impugned order in this review petition mainly on the ground of some mistake or error apparent on the face of record, but it is claimed by the review-petitioner that the issue involved is not covered by the judgment passed in M/S. LAXMI CONSTRUCTION VERSUS STATE TAX OFFICER, CT GST CIRCLE, BARBIL. [ 2024 (5) TMI 1214 - ORISSA HIGH COURT] . It is hardly disputed by the learned counsel for the parties that the impugned order was passed by this Court in presence of the present learned arguing counsels, but no objection was ever raised when such order was passed by this Court which is reflected in the rival submissions as recorded in the impugned order passed in the writ petition and, therefore, the impugned order, which was passed clearly demonstrates and reflects that the impugned order has been passed in their presence, but subsequently, the petitioner has come up before this Court seeking review of the impugned order on the ground that there is mistake or error apparent on the face of record. Since the order sought to be reviewed has been passed in the presence of the learned counsel for the parties without any objection and the order impugned in the writ petition being appealable one, this Court does not see any reason to hold that there is mistake or error apparent on the face of the record so as to make the impugned order liable for review. Thus, no grounds for review of the impugned order having made out by the petitioner, the present Review Petition lacks merit and is liable to be dismissed - the review petition being devoid of merit stands dismissed.
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2024 (9) TMI 1284
Refund of the Input Tax Credit (ITC) accumulated due to Inverted Tax Structure - Circular No.135/15/2020-GST - HELD THAT:- The Division Bench of this court in the case of BAKER HUGHES ASIA PACIFIC LIMITED VERSUS UNION OF INDIA, THE STATE OF RAJASTHAN, THE DEPUTY COMMISSIONER, STATE TAX, CIRCLE BARMER, RAJASTHAN, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS [ 2022 (7) TMI 73 - RAJASTHAN HIGH COURT] , while dealing with the challenge of the Circular No.135/15/2020-GST held it to be in conflict with Section 54 (3)(ii) of the Act. It was also considered that claim of refund of ITC was prior to date of issuance of the Circular. The additional reason given shall not nullify the fact that the Circular had not stood the judicial scrutiny. The Appellate Authority has allowed the appeal solely relying upon the Circular No.135/15/2020-GST. Consequently, the impugned order is set aside. The matter is remitted back to the Appellate Authority to decide the appeal afresh in accordance with law - petition allowed by way of remand.
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2024 (9) TMI 1283
Change in classification of imported goods supplied on ships - Applicability of GST rate under notification No. 1/2017-Central Tax (Rate) - HELD THAT:- The applicant states that the goods/spares which consequent to its imports are supplied on ships are mostly essential part of ship to make it sea worthy. As far as this claim goes, the HSN explanatory notes of chapter 89 under which the applicant wants his goods to be classified after the imports are made under various tariff items, which states that contrary to the provisions relating to the transport equipment falling in other Chapters of Section XVII, this Chapter excludes all separately presented parts (other than hulls) and accessories of vessels or floating structures even if they are clearly identifiable as such. Such parts and accessories are classified in the appropriate headings elsewhere in the nomenclature. The Hon ble CESTAT in its order dated 10.3.2005 [ 2005 (3) TMI 627 - CESTAT, CHENNAI] , had framed the question to be decided as to whether the subject equipment s which were declared as ship spares for repairs of ocean going vessels are covered by the description of goods under SI. No. 227 of table annexed to notification No 23/1998-Cus. As is evident, the facts of the case the question raised being different, the reliance placed by the applicant is not tenable, as far as the present dispute is concerned. Thus, as far as classification of the goods when supplied by the applicant as is mentioned in Annexure l-A is concerned, it would not change i.e. the classification would remain same as mentioned in the bill of entry filed before Customs. The goods when supplied by the applicant, post importation would be classified under the same chapter, heading, sub heading and tariff item under which it was classified by Customs and on which IGST was discharged during the course of import of the said goods.
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Income Tax
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2024 (9) TMI 1314
Validity of notice u/s 148 issued to a deceased assessee - salary income received by the deceased assessee - Responsibility of employer for TDS payments and affect of tax deduction at source on reassessment - HELD THAT:- While dealing with an identical question, this Court in the case of Savita Kapila [ 2020 (7) TMI 441 - DELHI HIGH COURT ] held that the pre-requisite for issuing a notice in the name of the correct person and not in the name of a dead person is sine qua none for acquiring the jurisdiction and initiating action under Section 148 of the Act. In the present case, the proceedings were not initiated against the assessee when he was alive and after his death, his legal heirs did not step into the shoes of the deceased assessee. The Gujarat High Court in Chandresh Jayantibhai Patel [ 2019 (1) TMI 353 - GUJARAT HIGH COURT ] took the view that there is no statutory provision which casts a duty upon the legal representatives to intimate the factum of death of an assessee to the Income Tax Department. The Court also took note that there may be cases where the legal representatives are estranged from the deceased assessee or the deceased assessee may have bequeathed his entire wealth to a charity. Action under Section 147 of the Act cannot be initiated as the impugned notices were issued in the name of a dead person. As per Section 204 (i) of the Act, in the case of payments of income chargeable under the head Salaries , the employer is the person responsible for making payment of tax and Section 205 of the Act provides that where the tax is deductable at the source, assessee shall not be called upon to pay the tax himself to the extent to which the tax has been deducted from that income. Since the tax has already been deducted on the salary income, as is evident from Form-16, the reassessment action leading to demand of tax cannot be initiated against the assessee or even his legal representatives. Even on account of non-deposit of TDS by the employer, we had in the case of Shantanu Awasthi [ 2014 (5) TMI 1237 - DELHI HIGH COURT] while relying upon the Office Memorandum of the Central Board of Direct Taxes concluded that there was no justification for the demand being shown as outstanding against the writ petitioner. The impugned notice u/s 148-A(b), order u/s 148-A(d) and notice u/s 148, both even dated 21.03.2024 cannot be sustained and are set aside. Assessee appeal allowed.
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2024 (9) TMI 1313
Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - HELD THAT:- As decided in latest case recent decision of this Court in Nainraj Enterprises Pvt. Ltd. [ 2024 (7) TMI 511 - BOMBAY HIGH COURT ] relying on Hexaware Technology Ltd. [ 2024 (5) TMI 302 - BOMBAY HIGH COURT ] provisions of Section 151A of the IT Act had clearly brought a regime of faceless assessment. The Court held that it was not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A of the IT Act. Decided in favour of assessee.
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2024 (9) TMI 1312
Addition u/s 68 - bogus share application receipts money in the hands of the assessee - assessment solely on the basis of statements of Accomodation entry proviser/sh. Pravin Kumar Jain (a third party, not related to assessee in any manner) recorded during the course of search conducted at his premises HELD THAT:- As is evident from the record that case of the assessee was reopened solely based on statement of unrelated party which was also later on retracted. Therefore, as such there is no specific information, which could prove that transactions undertaken by the assessee are of the nature of accommodation entries. It is further submitted that during the course of assessment proceedings as well as appellate proceedings assessee submitted necessary evidence regarding receipts of share application money from the above parties before the AO as well as CIT(A). The documents so submitted for all these investor companies consists of Copy of Share Application form, Copy of Board Resolution, Copy of investor company s PAN Card, Copy of Bank statement showing the payment by an account payee cheque, Income Tax return of the investor company for the year under consideration and of the previous year, copy of companies master data dated 31.03.2009 and 31.03.2015 as to show that the company are active and copy of confirmation and affidavit of the director of the investor company at the time of reassessment proceeding so as to confirm the investment made by the investor company. All this evidence so filed before the ld. AO has not been controverted including the affidavit of the director of the investor company. These evidences so filed proves the identity, credit worthiness and genuineness of the transaction. Here it is worthwhile to note that First Proviso to Section 68 wherein addition on account of Share Application Money / Share Capital can be made, stood inserted to the statue book, by Finance Act 2012, w.e.f. 01.04.2013 and therefore that addition made by ld. AO on account of Share Application Money u/s 68 for the year under consideration is not in accordance with law and it is made without considering the provision of law stood related to the year under consideration. Thus, for the year under consideration from the perusal of section 68, it is evident that assessing officer can make addition u/s 68 only under two circumstances, i.e.: (iii) Appellant does not offer any explanation about nature and source of such credit or (iv) Explanation offered by Appellant is not upto the satisfaction of Ld. AO. Here in this case as we note that the assessee provided the explanation and when the assessee provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by the assessee is not acceptable. CIT(A) has merely based on the statement of Shri Praveen Kumar Jain confirmed the addition. Without dealing with the provision of law and evidences provided by the assessee. Addition made by the ld. AO and sustained by the ld. CIT(A) is without appreciating the provision of law prevailing and the evidence placed on record by the assessee. We get support of our view from the decision of apex court in the case of M/s Lovely Exports Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER ] Assessee has not only given the names and addresses of the shareholders but has also given their PANs. Further assessee to prove genuineness of the transaction also submitted the Share Application form, Board Resolution, ITR s, Confirmation and Affidavit from investors. On the above facts, the decision of the Hon ble Apex Court in the case of CIT V/s. Lovely Exports (P) Ltd. [ 2008 (1) TMI 575 - SC ORDER ] as well as Venkateshwar Ispat (P) Ltd. [ 2009 (5) TMI 290 - CHHATTISGARH HIGH COURT ] are squarely applicable as the assessee has filed the necessary confirmation and other particulars of shareholders and incidentally all the subscribers are Private Limited Companies and the appellant had received the application money through banking channel. Appeal of the assessee is allowed.
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2024 (9) TMI 1311
Revision u/s 263 - as per CIT AO's orders were erroneous and prejudicial to the interests of the revenue due to the alleged failure to properly inquire into the credit entries in the bank accounts - HELD THAT:- As demonstrated in the proceedings, the AO had already addressed these concerns during the reassessment and therefore he had duly considered all the relevant facts such as explanation of credit entries in the bank account, while framing the assessment order. Thus, there is no material evidence or substantial grounds to suggest that the assessment order was either erroneous or prejudicial to the interest of the Revenue. As a settled law that for an order to be revised u/s 263, it must be demonstrated that the assessment order suffers from a legal infirmity or factual error leading to a loss of revenue. In the present case, the AO has made a detailed inquiry into all the issues as specifically pointed out by PCIT, and the conclusions drawn by the AO are supported by evidence. Therefore, the assessment order cannot be said to be erroneous in so far as it is prejudicial to the interests of the Revenue. Consequently, the revisionary powers u/s 263 are not required to be exercised in the instant case. Appeals filed by assessee are allowed.
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2024 (9) TMI 1310
Exemption u/s 11 - Violation of Section 13(1)(d) regarding excess payment to sister trust - Disallowance of honorarium paid to Ms. Meenakshi Sundaraja - HELD THAT:- As noted that the Trust has been formed on 01.02.1961 which is before the commencement of the Income Tax Act, 1961. As per clause 36 to 41 of the Memorandum of Association of the assessee trust, Ms.Meenakshi Sundararajan is entitled for honorarium in rendering services to the benefits of the assessee society. According to the Ld. AR the payment paid was towards medical expenses of the spouse of the Trustee, who was also employee of the organization until his death. This issue of payment of honorarium has already been allowed in favour of the assessee in the Tribunal in its decision in [ 2018 (8) TMI 643 - ITAT CHENNAI] , which has not been further challenged by the Revenue. Respectfully following the decision of this tribunal, we do not find any infirmity in the order of the Ld.CIT(A) and hence the ground of the Revenue is dismissed. Payment of loan to M/s.Ganapathy Educational Trust(GET) - As noted that the recipient Trust is also into charitable and education Trust. According the ld.AR the payment of loan of Rs. 70,25,780/- has not been claimed by the assessee as application of fund of the income of the society. Assessee Trust has paid this loan amount for the purpose of construction of the college building by the sister concern which is also carrying on the similar objects. As noted that loan amount has been paid by the assessee Trust during the Financial years 2003 2005 towards construction of the college building. It is pertinent to note that the sister concern had given loan to the assessee Trust to the tune of Rs. 3.12 crores as on 31/03/2004 and later on the assessee trust repaid the same along with excess amount which has been shown as loan receivable in the audited financials of the Trust. The assessee Trust has furnished all the details invoices, payments particulars for amounts paid to the contractors M/s.L T, who built the college building of the sister concern M/s.GET, before the AO for verification, in pursuance of the directions of the Honourable High Court of Madras. Payments made to other charitable trust as loan does not violate the provisions of Section 13(1)(c) - Decided in favour of assessee.
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2024 (9) TMI 1309
Revision u/s 263 - VAT on sale of liquor is levied exclusively on the assessee and provisions under section 40(a)(iib) of the Act is violated - HELD THAT:- The facts and circumstances of the case are similar to AY 2014-15 [ 2022 (11) TMI 990 - ITAT CHENNAI] and 2015-16 [ 2024 (1) TMI 1316 - ITAT CHENNAI] in assessee s own case, wherein, it was held that VAT payment would not attract the provisions of section 40(a)(iib) - Thus, following the same, we hold that the order of the ld. PCIT in setting aside the assessment order u/s 143(3) r.w.s. 143(3A) 143(3B) is erroneous and prejudicial to the interest of Revenue, is not justified. Therefore, the grounds raised by the assessee in seeking to quash the order passed by the ld. PCIT under section 263 of the Act are allowed. Assessee appeal allowed.
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2024 (9) TMI 1308
Rejection of application for grant of registration u/s 10(23C)(vi) on unaudited accounts - As argued as per the applicable statutes, the audited clause applied on the assessee university only after three years of existence - HELD THAT:- As in the present case as the assessee was unable to furnish necessary information or explanation before the CIT(E). The order of rejection passed by CIT(E), wherein elaborate discussion was made regarding the failure of the assessee in submitting the information and supporting documents towards the response of various queries. Before us also AR has submitted that the accounts of the assessee university are not required to be audited as per applicable statute, the audit clause applied only after 3 years of existence, however, such contention have not been established with any supporting evidence. Even the audit clause no. 48(1) of the relevant statute does not state that the audit should be done after 3 years of the existence. It is also the contention of the AR that audit for FY 2020-21 was not carried out for the reason that the assessee institution was notified under the audit list on 13.12.2022 by whereas on perusal of records, it is revealed that the books of the assessee for completed FY 2021-22 were got audited on 30.09.2022 i.e., before the date of aforesaid notification dated 13.12.2022, however, the audit of FY 2020-21 was not carried out, therefore, such contention that the audit was not conducted on account of assessee s non-inclusion in the audit list is found to be untenable and incomprehensible. Regarding vehicle expenses also no plausible explanation or supporting evidence could be furnished before us, rather the vouchers shown to us which were debited under the said head are found to be irrelevant for which Ld. AR had tried to explain that there was a mistake in booking the said expenses under proper head of account and genuineness of such expenses should not be doubted. For examination expenses AR contention that these are confidential expenses and relevant information was shown to the ITO-Exemption, Bilaspur at the time of physical verification was found to be bereft of any supporting evidence, thus, the observations of CIT(E), that the assessee failed to provide relevant detailed and explanations on the above-mentioned points could not be reasonably refuted. Further, no corroborative evidence such as any letter / request showing purpose from the donee qua the donation offered by various teachers and professors for the purpose of honouring gold medallist students could be furnished before the Ld. CIT(E) and so before us. Respectfully following the principle of law laid down in the case of New Noble Education Society [ 2022 (10) TMI 855 - SUPREME COURT] we do not find any infirmity in the order of Ld. CIT(E), so as to interfere with the same - Decided against assessee.
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2024 (9) TMI 1307
Validity of assessment order passed without issue of notice u/s 143(2) - HELD THAT:- As perused the assessment order and we do not find any mention of the issue of notice u/s 143(2) - It is also proved that if the fact of issue of notice under Section u/s 143(2) is not mentioned in the assessment order it cannot be said that no notices has been issued u/s 143(2) of the Act. Therefore, as this was also the argument of the learned Departmental Representative, we granted time for 7 day to submit whether any such notice is issued or not. However till to date no such communication is received. Thus, we do not have any option but to hold that notices u/s 143 (2) of the Act is not issued. Still, later on if it is found that such notices were issued in time, necessary application of recall of this order , may be made in time. Thus, if no notice u/s 143(2) of the Act is issued in reassessment proceedings, the reassessment order cannot be sustained. Appeal filed by the assessee is allowed.
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2024 (9) TMI 1282
Validity of reassessments - violation of the provisions contained in Section 151 - sanction obtained from the JCIT - Scope of unamended Section 151 - as argued in the absence of sanction being accorded by the competent authority, the entire action for reassessment is liable to be set at nought on this ground alone - effect of Taxation and Other Laws (Relaxation Amendment of Certain Provisions) Act, 2020 (TOLA) HELD THAT:- Tested on the principles which were enunciated in Suman Jeet Agarwal [ 2022 (9) TMI 1384 - DELHI HIGH COURT ] the petitioners would appear to be correct in their submission of the date liable to be ascribed to the impugned notices and those being viewed as having been issued and dispatched after 01 April 2021. However, and in our considered opinion, the same would be of little relevance or significance when one bears in mind the indubitable fact that all the notices were approved by the JCIT and which was an authority recognised under the unamended Section 151. The answer to the argument based on the provisions of TOLA would also largely remain unimpacted by our finding on this score as would become evident from the discussion which ensues. We thus proceed on the demurrer that it was the unamended Section 151 which would be applicable to the impugned proceedings. However, and before proceeding ahead, it would be appropriate to briefly notice the provisions of TOLA and on which the defence of the respondents is founded. TOLA, being Act No. 38 of 2020, came to be promulgated on 29 September 2020. On a fundamental plane, it was a remedial measure aimed at overcoming a position of irretrievable and irreversible consequences which were likely to befall during the nationwide lockdown. It was principally aimed at enabling authorities to take and commence action within the extended timelines that TOLA introduced. However, it neither altered nor modified or amended the distribution of functions, the command structure or the distribution of powers under a specified Act. It was in that light that we had spoken of the carving or conferral of a new or altered jurisdiction. It would therefore be wholly incorrect to read TOLA as intending to amend the distribution of power or the categorisation envisaged and prescribed by Section 151. The additional time that the said statute provided to an authority cannot possibly be construed as altering or modifying the hierarchy or the structure set up by Section 151 of the Act. The issue of approval would still be liable to be answered based on whether the reassessment was commenced after or within a period of four years from the end of the relevant AY or as per the amended regime dependent upon whether action was being proposed within three years of the end of the relevant AY or thereafter. The bifurcation of those powers would continue unaltered and unaffected by TOLA. Section 151 distributed the powers of approval amongst a set of specified authorities based upon the lapse of time between the end of the relevant AY and the date when reassessment was proposed. Thus even if the reassessment was proposed to be initiated with the aid of TOLA after the expiry of four years from the end of the relevant AY, the authority statutorily empowered to confer approval would be the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner. It would only be in a case where the reassessment was proposed to be initiated before the expiry of four years from the end of the relevant AY that approval could have been accorded by the JCIT. Similar would be the position which would emerge if the actions were tested on the basis of the amended Section 151 and which divides the power of sanction amongst two sets of authorities based on whether reassessment is commenced within three years or thereafter. What we seek to emphasise is that the TOLA authorisation merely enables the competent authority to take action within the extended time period and irrespective of the closure which would have ordinarily come about by virtue of the provisions contained in the Act. It does not alter or amend the structure for approval and sanction which stands erected by virtue of Section 151. TOLA merely extended the period within which action could have been initiated and which would have otherwise and ordinarily been governed and regulated by Sections 148 and 149 of the Act. If the contention of the respondents were to be accepted it would amount to us virtually ignoring the date when reassessment is proposed to be initiated and the same being indelibly tied to the end of the relevant AY. Once it is conceded that the notice came to be issued four or three years after the end of the relevant assessment year, the approval granted by the JCIT would not be compliant with the scheme of Section 151. We thus find ourselves unable to sustain the grant of approval by the JCIT. The respondents had feebly sought to urge that the use of the expression sanction in Section 3 of TOLA also merits due consideration and is liable to be read as supportive of the contentions that were addressed on their behalf. The argument is however clearly meritless when one bears in consideration the indisputable fact that the set of provisions with which we are concerned nowhere prescribe a timeframe within which sanction is liable to be accorded. Sanction when used in Section 3 of TOLA caters to those contingencies where a specified Act may have prescribed a particular time limit within which an action may be approved. That is clearly not the position which obtains here. We thus find ourselves unable to sustain the impugned action of reassessment. The impugned notices which rest on a sanction obtained from the JCIT would thus be liable to be quashed. The impugned notices issued under Section 148 of the Act dated 31 March 2024 are hereby quashed.
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2024 (9) TMI 1281
Validity of reassessment proceedings - period of limitation - Time limit for notice u/s 149 - relevant period u/s 153C is liable to be reckoned - computation of the relevant assessment year from the date of the impugned Section 148 notice - HELD THAT:- As is evident from a reading of that provision any action for reassessment pertaining to an AY prior to 01 April 2021 can be sustained only if it be compliant with the timeframes specified under Section 149 (1) (b), Section 153A or Section 153C as the case may be and on the anvil of those provisions as they existed prior to the commencement of Finance Act 2021. Viewed in that light, it is manifest that the assessment for AYs 2012-13 and 2013-14 could not have been reopened. The record would reflect that pursuant to a search and seizure operation conducted in respect of a third party on 09 February 2022, the petitioner was served with the notices under Section 148 on 30 March 2023. Undisputedly and for the purposes of reopening, bearing in mind the Proviso to Section 149 (1), action could have been initiated only up to AY 2014-15. As ex facie evident that AYs 2012-13 and 2013-14 falls beyond the ten-year block period as set out under Section 153C read with Section 153A of the Act. Consequently, the impugned notices are rendered unsustainable. Thus, we allow the instant writ petitions and quash the notice referable to Section 148 - Assessee appeal allowed.
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2024 (9) TMI 1280
Reopening of assessment u/s 147 - reasons to believe - review v/s reassess - as argued petitioner was selected for scrutiny assessment and the issue on hand was examined by the then AO in threadbare - whether the impugned notice under Section 148 of the Act can be said to be legal and justified? - Revenue Authority has sought to reopen broadly on the ground that petitioner was not entitled for claiming deduction under Section 54F and the details with regard to sale of immovable property and purchase of new property are concerned, the same was without any supporting evidence. HELD THAT:- The assessee-petitioner at the time of filing the original return and thereafter in the scrutiny, has already furnished the requisite details about the transaction of sale and purchase of immovable property and the working of capital gain along with all the necessary evidence. Thus, in our view, AO forming his opinion on the material already available on record and/or the material which were already considered by the then AO, is nothing but a change of opinion. It is not the case of the AO that new information and/or any tangible material has come into possession. Thus, in our view, forming any opinion based on same facts and circumstances which were then available with the AO at the time of scrutiny is said to be change of opinion and thereby the same is not permissible. See M/S. KELVINATOR OF INDIA LIMITED [ 2010 (1) TMI 11 - SUPREME COURT] wherein held schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re- opening the assessment, review would take place - Decided in favour of assessee.
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2024 (9) TMI 1279
Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A - HELD THAT:- As decided in recenet case recent decision of this Court in Nainraj Enterprises Pvt. Ltd. [ 2024 (7) TMI 511 - BOMBAY HIGH COURT ] relying on Hexaware Technology Ltd. [ 2024 (5) TMI 302 - BOMBAY HIGH COURT ] provisions of Section 151A of the IT Act had clearly brought a regime of faceless assessment. The Court held that it was not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A of the IT Act. In the present case, it is apparent that the Respondent-Revenue has not complied with the Scheme notified by the Central Government pursuant to Section 151A (2) of the Act. The Scheme has also been tabled before the Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act. In view of the explicit declaration of the law in Hexaware, the grievance of the Petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings. Learned Counsel for both the parties agree that the proceedings initiated under Section 148 of the Act would not be sustainable in view of the judgment rendered in Hexaware [supra] - Thus, the sanction granted by the authority would be rendered invalid since it is not issued by the authorities specified in Section 151 (ii) in the event reassessment proceedings - Decided in favour of assessee.
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2024 (9) TMI 1278
Deduction u/s 80P(2)(a) - profits and gains of business attributable to its activity of providing credit facilities to its members - HELD THAT:- The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Co-operative Societies Act, or permitted by Section 64 of the said Act. In other words, it dealt with the surplus profit in a manner envisaged under the regulatory Statute that regulated, and thereby legitimized, its business of providing credit facilities to its members - if the assessee managed to earn some additional income by way of interest on the deposits made, it could only be seen as an enhancement of the profits and gains that it made from its principal activity of providing credit facilities to its members. The nature and character of the principal income [profits earned by the assessee from its lending activity] does not change merely because the assessee acted in a prudent manner by depositing that income in a bank, instead of keeping it in hand. The provisions of the I.T. Act cannot be seen as intended to discourage prudent financial conduct on the part of an assessee. We also find force in the submission of the learned Senior counsel, distinguishing the decision of the Supreme Court in M/s. The Totgars' Cooperative Sale Society Limited [ 2010 (2) TMI 3 - SUPREME COURT] on the ground that the Court in that case had found that the Society concerned had appropriated amounts forming part of surplus receipts which were due to its members, and invested the same to earn interest during the period when the surplus receipts were in its hands. The facts in the instant cases are entirely different and the investment concerned was of amounts that had already attained the character of surplus profits in the hands of the assessee. On this issue, therefore, we find ourselves in agreement with the view taken in The Vavveru Co-operative Rural Bank Ltd. [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] and Tumkur Merchants Souharda Credit Co-operative Limited [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] . As for the argument of Revenue, with reference to the provisions of Section 80P(2)(d) of the I.T. Act, we might only observe that, while it may be a fact that interest income of the nature specified therein is specifically allowed as a deduction in the case of Co-operative Societies in general, in the light of our discussion above as regards the nature of the interest income earned by the assessee Society in the instant cases, it would follow that the interest income dealt with by us in the instant cases is not akin to the one contemplated u/s 80P(2)(d). We are of the view that the latter provision deals with interest income other than what can be attributable to the main business of the Society. Decided in favour of the assessee.
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2024 (9) TMI 1277
Capital gain - Valuation of the land - determining the Fair Market Value as on 01.04.1981 - estimating the value of the lease hold rights of the appellant - as argued Tribunal after taking into consideration the valuation report has suitably valued the lease hold rights of the appellant-assessee at Rs. 800/- as on 01.04.1981 instead of Rs. 1,200/- considered by the valuer in the valuation report - Tribunal after considering the provision of Section 55 (2) (a) of the Act held that as the land is not forming part of the assets mentioned therein, provision of Section 55 (2) (a) (ii) of the Act would not apply for the cost of acquisition of the land for the purpose of computation of long term capital gains of the assessee has to be determined as on 01.04.1981 under Section 48 HELD THAT:- On perusal of the reasoning given by the Tribunal to determine the cost, the Tribunal has not ignored the valuation report placed on record. Observation of the Tribunal are thus contrary to what is stated in the valuation report which is placed on record, wherein the registered valuer has taken into consideration the value of lease hold rights and reduced the same from the total value of the land. Therefore the contentions raised on behalf of the Revenue that the valuation of the land is required to be arrived at from the perspective of the lessee and not from the lessor is without any basis as the valuation of the land is to be considered after taking into consideration the lease hold rights existing on such land as on 01.04.1981. The registered valuer has after considering such value of the lease hold right and reducing the same from the Fair Market Value as on 01.04.1981 has rightly arrived at the valuation of Rs. 57,75,000/-. Therefore there was no need for the Tribunal to estimate the value of the land as on 01.04.1981 after making suitable deduction on account of the assessee not being the full owner of the land. On perusal of the valuation report, the registered valuer has already made a suitable deduction on the capitalized value of the lease rent from the total Fair Market Value of the land as on 01.04.1981 and thereafter arrived at the valuation of Rs. 57,75,000/-. Thus, we are of the opinion that the Tribunal has committed an error in determining the Fair Market Value of Rs. 800/- per square yard as on 01.04.1981 by ignoring the valuation report of the registered approved valuer determined as on 01.04.1981. - Decided against revenue.
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2024 (9) TMI 1276
Validity of reassessment proceedings - reason to believe - scope of change of opinion - whether the impugned notice u/s 148 based on reasons recorded can be said to be the change of opinion? - petitioner has not fulfilled the conditions prescribed for claiming deduction u/s 54B and 54F - HELD THAT:- It cannot be said that the respondent authorities have come into possession of any information and/or any tangible material which suggests escapement of income. On the contrary, the reopening sought by the revenue authorities broadly based on the material already available on record and thereby, it cannot be said that the petitioner failed to disclose fully and truly all the material in respect to his assessment. Thus, the reopening based on the material already on record, is nothing but, in our considered, a mere change of opinion. The same is, therefore, not permissible in eye of law. The revenue authorities at the time of framing assessment order under Section 143 (3) of the Act has already considered the aspect of allowability of claim of deduction under Sections 54B and 54F of the Act. Thus, the respondent authorities cannot reopen the reassessment on the ground that the then Assessing Officer has not inquired properly and/or adopted casual approach. In our view, issuance of notice under Section 148 of the Act should be based on the reasons to believe which should have direct nexus with any new information and/ or tangible material which has come to the knowledge of the respondent authorities based on assessment proceedings. The revenue authorities, cannot under the guise of reasons to believe permit to reopen the case on the ground that the then AO has not properly inquired in the proceedings. Decided in favour of assessee.
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2024 (9) TMI 1275
Bogus LTCG - unexplained credit u/s 68 - onus to prove - transaction as penny stock transaction/mere accommodation entry taken by the assessee to infuse its own unaccounted income - Assessee argued that it was a genuine transaction of sale of shares resulting in long term capital gains returned as exempt from tax in terms of provisions of section 10(38) - HELD THAT:- We find merit in the contention of the ld.counsel of the assessee that the assessee had discharged its onus of proving genuineness of the transaction and the Department has failed to make out a case of the transaction being bogus. We are not in agreement with the contentions of the DR, because the assessee having demonstrated to have carried out the transaction as admitted by the DR, the Revenue in its part has failed to point out why the transaction was not genuine. As is evident from the order of the authorities below, the entire case of the Revenue rests on merely the report of the investigation carried out by the Department on Naresh Jain and his associates. Neither the details of the report are part of the orders, nor appear to have been shared with the assessee. There is no mention of the manner in which Naresh Jain and his associates carried out/provided accommodation entries to the beneficiaries in the impugned orders, nor there is any finding as to how the assessee s case, therefore, fitted the bill of the modus operandi of Shri Naresh Jain. The assessee had demonstrated the transactions to have been taken place, which even the ld.DR agreed to. The assessee also demonstrated a gap of five to six years in the purchase and sale of shares with the shares being sold at varying rates. We agree with the ld.dcounsel for the assessee that there could not be any premediated transaction presumed to have taken place in such a long time gap of five to six years, that too at varying prices. It was the duty and onus of the Revenue to prove how the impugned transaction was pre-mediated. Merely stating and reiterating that it was a premediated transaction is not sufficient. The said fact has to be demonstrated with evidences, which the Revenue has miserably failed in the present case, relying only on the investigation report, the contents of which have also not been brought on record. Not to be missed is also the fact, demonstrated by the assessee, that the scrips so dealt with was de-mated and dealt through a prominent broker, Sharekhan Ltd. and was not the only scrip the assessee has traded in, but there were numerous other scrips in which the assessee traded during the year. Decided in favour of assessee.
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2024 (9) TMI 1274
Assessment u/s 153C - mandation of recording satisfaction - discovery of material which is likely to have a bearing on the determination of the total income HELD THAT:- Proceedings u/s 153C can be initiated only upon recording of satisfaction by the AO of the other person on receipt of the seized material from the AO of the searched person and then AO shall proceed against such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that AO is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. We observe that the satisfaction note recorded by the AO of the assessee, he has not recorded how the documents seized have a bearing on the determination of the total income of the assessee for six assessment years immediately preceding the assessment year. It clearly shows that the satisfaction note recorded are not as per the provisions of section 153C. As relying on Saksham Commodities Ltd [ 2024 (4) TMI 461 - DELHI HIGH COURT] we observe from the satisfaction recorded in this case, the AO failed to record the satisfaction as per the provisions of the Act and failed to record the assessment of the potential impact on the income not declared by the assessee earlier and the impact that may have on the total income for the six AYs immediately preceding the AY, in this case AY 2021-22. Therefore, non recording of proper satisfaction to initiate the proceedings u/s 153C of the Act, the proceeding initiated in the present case is without proper jurisdiction. Accordingly, the ground raised by the assessee is allowed.
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2024 (9) TMI 1273
Addition u/s. 69 - Unexplained investments - Specified Bank Notes ( SBNs ) deposited during the demonetization period - assessee replied that the nature of the deposits/SBNs was trade receipts i.e. sale consideration of milk milk products, and source of the same was from customers to whom milk/milk products were sold and expressed his willingness to furnish the names of his distributors/customers - HELD THAT:- From the Circular issued by the CBDT, it is very clear that, while making additions towards cash deposits in demonetized currency, the AO needs to analyze the business model of the assessee, its books of account and analysis of sales etc. In this case, we have gone through the analysis furnished by the assessee in respect of total sales, cash sales realization from debtors and cash deposits during Financial Years 2015-16 2016-17, there is no significant change in cash deposits during demonetization period - when there is no significant change in cash deposits during demonetization period, then, merely for the reason that the assessee has accepted Specified Bank Notes in violation of Circular/Notification issued by Government of India and RBI, the source explained for cash deposits can t be countenanced . Assessee had filed the books of accounts and relevant documents to prove the nature and source of cash/SBNs deposited during demonetization; and asserted that it was trade receipt and had been part of the turnover, which has been offered to tax. However, the AO without finding any infirmity in the books regularly maintained by the assessee and which has been audited, has added. Amount deposited in bank-account was part of the total turnover of the assessee and has been offered for taxation. Therefore, making a separate addition would tantamount to double addition - Decided in favour of assessee.
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2024 (9) TMI 1272
Denial of exemption u/s. 11 - return of income filed by the assessee is beyond the time limit prescribed u/s. 139(1) - effect of return filled belated u/s 139(4) - assessee argued that the return was filed within the time allowed under Section 139(4) - HELD THAT:- Trust registered u/s. 12AA of the Act, in order to avail the benefit of exemption u/s. 11 of the Act shall inter-alia files its return of income within the time allowed u/s. 139(1) of the Act. The CBDT has categorically directed the AO and this clarification was issued to the Pr.DGIT(Systems), New Delhi that the orders issued u/s. 143(1A) in the case where already disallowance were carried out, those may be rectified. Hence, the CBDT itself accepted the position that even returns filed u/s. 139 is to be accepted. It means that it has enlarged its scope of section 139 of the Act, which includes provisions of section 139(4) also. Provision of section 139(4) w.e.f. 01.04.2017 lays down that any person who has not furnished return of income within the time allowed u/s. 139(1) of the Act, may furnish the return for any previous year at any time before the end of the relevant financial year or before the completion of assessment whichever is earlier. As in term of section 139(4) of the Act, a return filed at a belated stage but upon complying with the requirement of such provision, has to be treated as return of income. In the present case, the CBDT has already clarified vide F.No.173/193/2019-ITA-I dated 23.04.2019, which that the assessee is entitled for exemption u/s. 11 of the Act, if such return of income is filed within the time allowed u/s. 139 of the Act. It means that it covers all the provisions of section 139 of the Act and it is not limited to section 139(1) - Appeal filed by the assessee is allowed.
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2024 (9) TMI 1271
Scrutiny assessment - Assessment u/s 143(3) concluded by making additions and determining refund due - Merger of intimation u/s 143(1) and scrutiny assessment under Section 143(3) - intimation u/s. 143(1)(a) when notice u/s. 143(2) was issued to the assessee subsequent to which, the assessment order was passed u/s. 143(3) - assessee trying to reconcile the refund/income, with the returns filed, and on perusing the Income tax portal it was noticed that the revised return of income was processed u/s 143(1) on the same day when the assessment order u/s 143(3) of the Act was passed. It is submitted that the intimation passed u/s 143(1) was not served at all and the assessee became aware of the intimation only on 26/02/2024 - HELD THAT:- AR though argued on Principle of merger being applicable to the present facts of the case, we do not agree with this preposition. The reason being that, the disallowance made in the intimation under section 143(1)(a) is different from the disallowance made in the assessment order passed under section 143(3).Accordingly, the same is dismissed. Intimation passed u/s 143(1)(a) deserves to be considered on the first principles of law - Under the new sub-section (1D) the legislature provides that, notwithstanding anything contained in sub-section (1), the processing of return would not be necessary where a notice has been issued to an assessee under sub section (2). Meaning thereby, once notice under section 143(2) has been issued, the assessing officer shall not process the return under section 143(1). The original proviso to sub-section (1D) also stands substituted by the new proviso, under which, it is clarified that the new proviso under the new sub-section (1D) shall not apply to any return furnished for the assessment year commencing on or after 01.04.2017. As relevant to note that, upto 01/06/2001, section 241 of the Act enabled the Ld.AO to withhold any refund under certain circumstances. Section 241, was subsequently withdrawn w.e.f. 01/06/2001. Now on comparing the newly inserted provision under (1D) of section 143 with newly inserted section 241A, it would be further clear that, the legislature provided that, notwithstanding anything contained in sub-section(1), the processing of the return would not be necessary where a notice has been issued to assessee under sub-section(2). This would in effect mean that, once the notice u/s. 143(2) is issued, the assessing officer shall not process the return u/s. 143(1). We therefore find no reason to uphold the intimation passed u/s. 143(1)(a) dated 29/06/2021 do not have any legs to stand in the eyes of law. In any event, the assessee is in appeal against the assessment order before the CIT(A) as has been informed by the Ld.AR. We thus hold the intimation u/s. 143(1)(a) dated 29/06/2021 to be bad in law. Appeal of assessee allowed.
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2024 (9) TMI 1270
TP Adjustment - selection of MAM - in first round CUP method was adopted by the TPO, but in the second round, TNM method has been adopted - Whether it is a case of benchmarking as per Aggregation or Segregation approach? - HELD THAT:- The assessee established actual rendering of services as per agreements arrived. Having regard to the services availed of, it can safely be said that same were necessary for proper functioning of day to day business operations beneficial to the assessee. In the given facts and circumstances, as regards TSS and BSS, Learned TPO was not justified in arriving at the conclusion that in this matter the assessee was not getting any real service and that it would not have paid anything if it were not controlled by the payee. Consequently, TPO erred in opining that holding the arm s length price of TSS and BSS services to be NIL. It is noteworthy that in the first round of litigation, the Appellate Tribunal also noticed that certain additional evidence was submitted on behalf of the assessee before Ld. DRP, but there was no finding recorded by Ld. DRP to suggest if said additional evidence was or was not considered. Appellate Tribunal also observed that in the given facts and circumstances and in the interest of justice, it was necessary that the issue with respect to determination of ALP of the international transaction of Business Support Services and Technical Support Services fee be remitted back to the file of Ld. TPO for determination of their ALP. At the same, the assessee was also directed to produce relevant details with respect to rendition of services with credible and contemporaneous evidence for impugned assessment year and also to demonstrate as to how said transactions were required to be aggregated. DRP has not discussed that any of the objections raised by the assessee, what to say of any giving any reason for confirming the views expressed and observations made by Learned TPO. From the order passed by Learned DRP, it transpires that one of the objections or contentions raised there on behalf of the assessee was that TPO had been unable to provide sufficient data of comparability in the case of TSS and BSS.DRP simply observed in the order that the same was well taken, but, surprisingly, at the same time opted to direct the TPO to consider said contention raised by the assessee. Firstly, Ld. DRP itself was to deal with and decide said contention raised by the assessee. The Panel had no jurisdiction to issue direction to the TPO to consider said contention. Secondly, by simply mentioning that the panel had taken the contention well, it cannot be said that said contention was discussed or dealt with. When there were specific directions from the Appellate Tribunal to consider said contention in addition to the additional evidence, Learned DRP was required to consider and discuss the additional evidence. But, as noticed above, learned DRP nowhere discussed any of the objections pertaining to TSS or BSS or even the contention that the TPO had not been able to provide sufficient data of comparability in the case of TSS and BSS. Adoption of approach by the Revenue as regards the assessee, in the Previous years - It is settled law that the principles of res judicata have no application to income-tax assessment proceedings. It is significant to note that when the matter came up before Co-ordinate Bench of ITAT in the first round, it was observed that with respect to the transaction by transaction approach v. aggregation of the transaction for subsequent year as well as in the earlier year, Learned TPO had accepted the aggregation approach adopted by the assessee. Learned Co-ordinate Bench also observed that it was not disputed that for AY 2011-12 and 2013-14, Learned TPO had accepted the aggregation approach; and further that following the principle of consistency, where there is no change in the facts and circumstances of the case for this year, Learned TPO should have followed the same approach; and even further that if for any reason, Learned TPO wanted to deviate from the same, he should also give a detailed reason as to why he was deviating, but in the order passed by Ld. TPO, the Co-ordinate Bench did not find any such discussion. TPO was of the view that the three type of transactions are to be benchmarked at segregate level. The main ground for arriving at this view was that the assessee had failed to prove factum of rendering of services. The factum of rendering of said services stands proved. Therefore, there is merit in the contention raised on behalf of the assessee that TPO has passed orders ignoring the earlier orders pertaining to AYs 2011-12 and 2012-13, passed by the TPOs in the case of the assessee itself as regards payments of TSS, BSS and Royalty, and that the principle of consistency stands violated in this matter. ALP as regards Royalty transactions - Notably, one of the contentions on behalf of the assessee is that Ld. TPO incorrectly computed ALP as regards royalty, without taking into consideration landed cost of imported components in the case of comparables. In the first round of litigation, same argument was put forth on behalf of the assessee before the Appellate Tribunal, and noticing this infirmity and others as pointed out by the assessee, the matter was remitted. In those proceedings, in the first round, it was submitted that assessee had paid royalty in terms of the agreement where royalty was payable @ 5% of the net sales of licensed products in India, and @ 8% of net sales of licensed products outside India. There, it was also submitted that in case of comparables, Ld. TPO had taken the rate of comparable @ 0.63 for both transaction. The assessee also stated that rate of 0.63% in case of comparables was incorrect calculation without considering the landed costs of imported components. However, record does not reveal, nor any has been pointed out, to suggest that landed cost of imported components in the case of comparables was also taken into consideration in the 2nd round. Even Ld. DRP did not consider this aspect. Therefore, there is merit in the contention raised on behalf of the assessee even on this point.
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2024 (9) TMI 1269
Unexplained cash deposits u/s 69A - assessee has deposited cash in the Bank of India, which the assessee converted it into two fixed deposits - HELD THAT:- From the above, it is clearly evident that the assessee has fulfilled the requirement of the Assessing Officer and there was no basis of making any addition by the AO u/s 69A of the Act, which was confirmed by the learned CIT(A). The assessee has offered explanation about the nature and source of acquisition of the cash which was deposited in his bank account. There cannot be any addition u/s 69A of the Act in respect of cash deposits made by the assessee into his bank account as unexplained income in the hands of the assessee. Consequently, we set aside the impugned order passed by the learned CIT(A) and direct the AO to delete the addition made under section 69A. Thus, all the grounds raised by the assessee are allowed. Penalty u/s 271(1)(c) on quantum addition - Since the quantum addition is deleted, penalty levied on such quantum addition has no legs to stand. Accordingly, the ground of appeal raised by the assessee is allowed.
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2024 (9) TMI 1268
Deduction u/s. 80P(2)(d) - interest income earned by cooperative society on deposits made out of surplus funds with cooperative bank - HELD THAT:-Admittedly the interest income was earned on deposits made with a Cooperative Bank. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein after referring to the decision of Totgar s Co-operative Sale Society Ltd [ 2010 (2) TMI 3 - SUPREME COURT] held that the ratio of decision of the Hon ble Supreme Court is not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. Thus interest income earned by cooperative society on deposits made out of surplus funds with cooperative bank qualifies for deduction under the provisions of section 80P(2)(d) - Decided in favour of assessee.
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2024 (9) TMI 1267
Denial of Credit for Foreign Tax paid u/s. 90 r/w Article 25 of India-USA Tax Treaty (DTAA) - Form No.67 was not filed within prescribed time - HELD THAT:- Admittedly, in the present case, Form No.67 was not filed within the due date for filing of the return of income under the provisions of section 139(1), but Form No.67 was filed on 30.03.2021. The CPC, Bangalore had processed the return of income as on 24.12.2021, which means that Form No.67 was very much available with the CPC, Bangalore. Therefore, the CPC, Bangalore cannot deny the claim for credit for foreign tax paid merely because Form No.67 was not filed within the due date specified for filing the return of income under the provisions of section 139(1) of the Act, as it is merely a directory. We direct the CPC, Bangalore to amend the Intimation u/s 143(1) of the Act by taking into consideration the Form No.67 filed by the appellant. Accordingly, the grounds of appeal filed by the assessee stands partly allowed.
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2024 (9) TMI 1266
Denial of Credit for Foreign Tax paid u/s. 90 r/w Article 25 of India-USA Tax Treaty (DTAA) - Form No.67 was not filed within prescribed time - HELD THAT:- Admittedly, in the present case, Form No.67 was not filed within the due date for filing of the return of income under the provisions of section 139(1), but was filed on 21.04.2022. The CPC, Bangalore had processed the return of income on 22.03.2022 which means that Form No.67 was not available with the CPC, Bangalore. Therefore, the CPC, Bangalore was justified in denying the claim for credit for Foreign Tax paid as because Form No.67 was not filed within the due date specified for filing the return of income under the provisions of section 139(1) of the Act, nor was available at the time of processing the return of income by CPC - Decided against assessee.
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2024 (9) TMI 1265
Addition u/s. 69C - cash payment made by assessee to Shri Shailendra Rathi - addition based on third party statements and documents - Addition made as there was a WhatsApp message in the mobile of Shri Nilesh Toshniwal prior to 07/10/2019 by Shri Shailendra Rathi stating as Received80@Dubai and reason given by ld. AO is the statement of Shri Shailendra Rathi - HELD THAT:- First of all so called What sAPP message stating received 80@Dubai is not found from the mobile of the assessee. Albeit, from an independent third person who is a professional and no connection with assessee. Another important point is that, the message has not been sent by the assessee from his mobile but was found mobile phone of Shri Shailendra Rathi sent by someone else. None of these two persons are either connected with the assessee for any kind of business nor there is any common interest nor has any corroborative evidence been found from the assessee to correlate the alleged transaction. On perusal of the statement of Shri Shailendra Rathi, nowhere he has suggested that these payments relate to any transactions relating to the assessee on or behalf of the assessee or received on or behalf of the assessee. There is a complete mismatch of time period between What sApp message and the date mentioned in the statement. When assessee was confronted with the statement of Shri Shailendra Rathi, he has categorically stated that he is neither aware of such transaction nor does he have any business relation with Shri Ashok Lunia. No enquiry whatsoever has been conducted by the ld. AO as to what was the connection between assessee and Shri Ahok Lunia and what the transaction was for and what is the business relationship with Shri Shailendra Rathi and how this transaction pertains to assessee. During the search at Assessee s place no corroborative evidence or material has been found. Nowhere Shri Shailendra Rathi has implicated the assessee that he has paid or received cash of Rs. 80,00,000/- on behalf of the assessee. Addition has been made and secondary evidence of electronic record being What sApp conversation from a mobile and statement of a person and from the statement nowhere the name of the assessee figures. If the message and the information has not been retrieved or recovered from the assessee, there cannot be any presumption against the assessee. The onus was on the persons who have given the statement or from whose mobile What sApp chat had been found. Nowhere it has been brought on record whether Shri Nilesh Toshniwal has stated anything about the assessee or any enquiry was done from him. If the ld. AO is trying to use the What sApp chat relating to some third person against the assessee, then its mandatory requirement u/s 65 B of the Evidence Act to comply with the procedures given therein. As stated above, there is no material from the possession of the assessee which can remotely suggest that assessee had entered into alleged transaction. Even if it is accepted that What sApp message can be treated as evidence then, here the transaction took place between Shri Shailendra Rathi and Shri Ahok Lunia and the message appeared in the mobile phone of Shri Nilesh Toshniwal and Shailendra Rathi and there is no whisper about the assessee s name. Ld. AO has also denied the opportunity to cross examine Shri Shailendra Rathi whether this transaction at all pertains to the assessee, because nowhere he has even taken the name of the assessee that this transaction pertain to assessee. The entire edifice of addition made by the ld. AO is reliance on the statement of third party and material found during the course of search of the third party. - Decided against revenue.
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2024 (9) TMI 1264
Unexplained cash credit u/s 68 - onus not discharged - bogus share capital including premium receipts - HELD THAT:- Once proceedings u/s 263 of the Act were initiated then the assessee was put on notice regarding his duty to prove the transactions which involved very substantial amounts as share premium. It is not understood how a closely held company which has minimal commercial activity as is evidenced by the profit and loss account filed with the paper book could attract abnormally high share premiums. Mere filing of confirmations and the income tax details etc. are not enough to justify payment of monies as share premium when the financial aspects of the recipient company would not merit such investments under any kind of prudent consideration. In the present case while 4 out of 11 share applicants were not traceable on given addresses and one more did not respond to the summons, it is evident that even those share applicants who did file certain documents, were not sufficient in the eyes of law to discharge the burden cast on the assessee regarding proving the genuineness of the transaction. The profit and loss account statement extracted would normally paint a grim picture to any prudent investor, however, in this case it seems to have encouraged 11 entities to transfer huge sums of money by way of share premium. Considering the case laws cited the financial health of the assessee and the inadequate discharge of onus, we hold this case to be a fit case for application of Section 68 of the Act and thereby confirm the impugned addition. Appeal filed by the assessee is dismissed.
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Customs
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2024 (9) TMI 1306
Surrender before the trial Court - HELD THAT:- It is not required to interfere with the impugned order passed by the High Court. SLP dismissed.
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2024 (9) TMI 1263
Restoration of appeal allowed after the respondent (appellant therein) has complied with the condition of pre-deposit - HELD THAT:- The company was declared as a sick company under the SICA, and therefore its account could not have been operated upon. The earlier order passed by this Court did not take into account the said aspects. It is also found that the delay in filing application for restoration of an appeal after 07 years by the company was maintainable before the Tribunal as the company was earlier sick and restored only later. It also did not take into account that the appeals of the Directors could not have been dismissed on the ground of non-compliance of section 35F of the Act as appeal of Harbhajan Singh was to be heard on merits as pre-deposit had been exempted, and the appeal of Vinod Garg could not have been dismissed as the pre-deposit amount had already been deposited. Be that as it may, even after the pre-deposit was made, the appeal of Vinod Garg was not taken up and would be treated to be pending. Since the appeal of respondent-Royal Industries Ltd. has been dismissed on the ground of non-payment which they have made now and also the same as having been accepted by the appellant, the Revenue cannot be allowed to turn around and challenge the restoration. The order passed by the CESTAT, Chandigarh dated 03.01.2022, whereby it restored the original appeal for hearing on merits after condition under section 35F of the Act was complied with, does not warrant any interference of this Court, and the same is upheld. Appeal dismissed with direction to the appellate authority to decide the appeal on merits.
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2024 (9) TMI 1262
Classification of imported goods - whether the goods imported fall under category of silver jewellery which is freely importable or under restricted category of ITC (HS) Code 71069210? - HELD THAT:- Respondent rely upon an examination report dated 5th June 2024 to suggest that the goods are crude rounded structure made of embossed silver strips which are joined together to make it look like a bangle. It is noted that the author of the report has even put a disclaimer in the report because the author says as per our best knowledge Therefore, prima facie this report is not reliable because it has been prepared on the basis of visual examination and if it is based on visual examination, the author could not have used the expression as per our best knowledge. Moreover, he does not even explain from where so called knowledge was generated. Hence prima facie, this is not satisfying. Seizure memo, a copy whereof at Exhibit-H to the petition being Seizure Memo No. 06/2024-25 dated 7th May 2024 states that the declared value is Rs. 7,70,80,299.47. Mr. Shah states 50% of that would be Rs. 3,85,40,149.73. We shall round it off to Rs. 1,40,00,000/-. Upon petitioner giving a bank guarantee of a nationalised bank for Rs. 1,40,00,000/-, respondent shall permit petitioner to provisionally clear the goods. Petition disposed off.
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2024 (9) TMI 1261
Imposition of a condition of furnishing bank guarantee to the extent of 10% of the value of Platinum Ingots imported by petitioner - HELD THAT:- The respondents do not seem to have any objection insofar as description of the goods is concerned. Respondents also do not seem to have any issue so far as it relates to change at CTH level in the final product. According to respondents, the goods imported meets the CTH criteria. The problem seems to be only as regards 3% value addition for non-originating goods. It is respondents case that the value addition of 3% shown to have been achieved appears to be very high and therefore, to check the genuinity of the value addition claim, department has decided to call for verification of the details claimed in the country of origin certificate. Upon furnishing the bank guarantee, respondents shall forthwith permit re-export of the Platinum Ingots to the extent of value of bank guarantee given covered under 19 bills of entry filed by petitioner - Respondents are directed to complete the verification/ investigation at the earliest on or before 31st October 2024. Petition disposed off.
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2024 (9) TMI 1260
Refund claim - time limit of one year from the date of payment of duty prescribed under N/N. 102/2007-Custom dated 14.09.2007 read with N/N. 93/2008-Customs dated 01.08.2008 - HELD THAT:- The CESTAT by considering the provisions of Section 27 (1B) (C) of the Act has rightly come to the conclusion that what is the date of payment to be taken when the provisional assessment has been resorted to as prescribed in the aforesaid provisions and relevant Notification has no clause providing otherwise and the CESTAT has therefore rightly interpreted the same as harmoniously with the statutory provisions and came to the conclusion that the Board Circular has ignored this fact. The Tribunal has also relied upon the decision of the Delhi High Court in case of Pioneer India Electronics Pvt Ltd Vs. Union of India [ 2013 (9) TMI 705 - DELHI HIGH COURT ] which was followed by the Tribunal in case of SUZUKI MOTORCYCLE INDIA P. LTD VS C.C., NEW DELHI (IMPORT GENERAL) [ 2017 (1) TMI 526 - CESTAT NEW DELHI ] where it was held that ' Since the petitioner has filed the claims within the period stipulated by section 27 of the Act, in view of the construction given by us, the same could not have been rejected on the ground of limitation.' Thus, the date of making the refund application would be required to be considered from the date of final assessment and not from the date of payment of provisional duty as per the provisions of Section 27 (1B) (C) of the Act and the reliance placed by the Revenue on the interpretations of the impugned Notification No. 93/2008 cannot be applied contrary to the statutory provisions. Thus, no questions of law, much less any substantial question of law arises from the impugned order of the Tribunal and the Appeal therefore, being devoid of any merit is accordingly dismissed.
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2024 (9) TMI 1259
Rejection of refund claim on the ground of time limitation - Bills of Entry and TR-6 Challans were not endorsed as Under Protest - HELD THAT:- It is an undisputed fact that the appellant is a Custom Broker and filed Bills of Entry during October 2012 to April 2013 on behalf of the importers M/s Jute Pack India and M/s Haryana Trading Company and availed the benefit of exemption of CVD under Notification No. 30/2004-CE dated 09.07.2004. After the expiry of more than one year, the department took a view that benefit of exemption from payment of CVD under the said notification was not available and recovered the same from the appellant along with interest. In the meantime, the appellant lodged the protest in the form of a letter dated 06.06.2014 stating that they are not liable to pay the duty and in case, the matter is decided in favour of the Assessee, the refund should be granted to the appellant. Thereafter, the Hon ble Apex Court in the case of M/S SRF LTD., M/S ITC LTD VERSUS COMMISSIONER OF CUSTOMS, CHENNAI, COMMISSIONER OF CUSTOMS (IMPORT AND GENERAL) , NEW DELHI [ 2015 (4) TMI 561 - SUPREME COURT] held that the benefit of CVD exemption is available to the importer of final product and after the decision of Hon ble Apex Court, the appellant filed refund claim on 07.01.2016, which was rejected by both the authorities below as time barred. It is found that the appellant vide letter dated 06.06.2014 have lodged protest, though the word Under Protest was not specifically written in the said letter, but the spirit of the contents of the letter shows that it was the protest because in the Customs Act as well as in the Central Excise Act, no format is prescribed for lodging the protest. In the present case, no show cause notice was issued and no adjudication took place. It is also found that the amount was deposited by the appellant on the insistence of the department and not voluntarily and it was not the duty, it was merely a deposit. Therefore, the appellant is entitled to get the refund of the amount deposited under protest and denial of refund as time-bar is not sustainable. The judgments relied upon by the learned AR are not applicable in the facts and circumstances of the present case and are distinguishable on facts. The impugned order is not sustainable in law and therefore, set aside - the appellant is entitled to refund of the amount deposited along with interest on delayed refund as per rules - appeal allowed.
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2024 (9) TMI 1258
Imposition of penalty under section 112 (a) of the Customs Act 1962 - misdeclaration of the goods - Vicarious responsibility - HELD THAT:- For imposing penalty under Section 112(a) of the Customs Act, there must be a positive act or omission on the part of the appellant which should render the goods liable for confiscation. In the present case, it is found that the misdeclaration of the goods is mainly due to the offence committed by the importer for which the CHA cannot be held responsible. Accordingly, the vicarious responsibility cannot be cast on the appellant and hence the penalty imposed on the appellant on this ground is not sustainable. The decision of the Tribunal in the case of RAJESH MAIKHURI, CUSTOM BROKER, RAJESH KUMAR TIWARI, EMPLOYEE VERSUS CC, NEW DELHI [ 2017 (9) TMI 1015 - CESTAT NEW DELHI] supports the above view where it was held that ' In the present case, the appellants, being authorized employees of the CHA, are apparently penalized for their act of abetting such violations by the importer. As already noted, we find that the evidences available in this case do not indicate to any such illegal act on the part of the CHA.' The penalty imposed on the appellant is not sustainable and accordingly, the penalty imposed is set aside - Appeal allowed.
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2024 (9) TMI 1257
Misdeclaration of goods in respect of value and quantity - goods though were declared as unbranded , however branded caps of different non-popular as well as reputed brands like Puma, Nike, Adidas etc. were found - infringement of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - reliability of electronic evidence retrieved from the appellant s e-mail - extended period of limitation - HELD THAT:- This provision is arising out of Section 65B of the Indian Evidence Act (the model provision for the admissibility of electronic evidence in judicial proceedings). This section has been dealt with by Hon ble Apex Court in a recent decision in the case of Arjun Panditrao Khotkar v. Kailash Kishanrao Goratyal [ 2020 (7) TMI 740 - SUPREME COURT] . The Hon ble Supreme Court has clarified that the interpretation of Section 65B - Under Section 65B(1), any information contained in an electronic record, which has been stored, recorded or copied as a computer output, shall also be deemed as a document and shall be admissible as evidence without further proof or production of the originals, if the conditions mentioned are satisfied. Section 65B(2) lays down the criteria that must be satisfied for the information to be categorized as a computer output. In the present case, the original electronic record would be the computer of the Election Commission in which the video footage is first stored. The CDs where the content of the video recording is copied shall constitute the secondary copies of the electronic record. It was held that a certificate under Section 65B(4) shall have to be obtained only when the secondary copies of the electronic record are produced before the Court. Production of a certificate shall not be necessary when the original electronic record is produced. The original electronic record can be adduced directly as evidence if the owner of the computer/tablet/mobile phone steps into the witness box and establishes that the device where the information is first stored is owned/operated by him. If the computer where the electronic record was first stored happens to be part of a computer network or computer system (as defined under the Information Technology Act, 2000), and it is not possible to bring such a network/system physically to the Court, then secondary copies can be produced along with the certificate stipulated by Section 65B(4). The allegations against the appellant as made out in the show cause notice is that the importer had suppressed/under declared the value of the goods pertaining to 22 past Bill of Entry and the basis of the said allegation is retrieval of some excel sheets from the email of the appellant through his mobile phone. The said excel sheets have been alleged as parallel invoices showing much higher value of the imported goods than what has been declared by the appellant in the Bills of Entry filed during the period from 16.09.2013 to 27.09.2017. Differential duty demand has been confirmed based on re-determinate of value by the department. This entire investigation got initiated based on the live consignment of Bills of Entry No. 3819893 dated 31.10.2017 being intercepted by SIIB and 1009 examined noticing undervaluation, mis-declaratiion and even violation of Intellectual Property Rights (IPR). Though a separate Show Cause Notice was issued about said Bills of Entry. There are no proof from appellant to falsify invoices retrieved showing item details, deposits adjusted and also the actual cartons loaded compared with cartons shown in BL and to prove that there invoices have no relation to the invoices filed by the appellant-importer with Bills of Entry. It has already been observed as admitted fact that details of both set of invoices (retrieved and those filed with Bills of Entry) have absolute similarity vis- -vis all details of the impugned imported goods except the values have been reduced and goods are declared as unbranded - the excel sheets/invoices retrieved to not need certificate of authenticity. Hence the argument of appellant for setting aside the demand for want of said certificate is not sustainable. It is also found that it cannot be a mere coincidence that the invoice number, date, container number, description of goods, number of carton and quantity of goods mentioned in the invoices/documents recovered through e-mail matches with the invoices attached by the importer with Bills of Entry filed for customs clearance. Hence, there is sufficient evidence against appellant that the actual invoices have been altered by the appellant to undervalue and mis-declared the imported goods. The act amounts to committing fraud and fraud vitiates everything. Resultantly there is no infirmity in the findings to this effect in order under challenge. Invocation of extended period of limitation - HELD THAT:- It is established that the importer has manipulated the invoice presented for clearance of goods and mis declared the value in the Bill of entry by suppressing the actual invoice, which could only be unearthed during investigation. The mis-declaration of value of imported goods is thus apparent and has been done with clear intent to evade customs duty. The importer has violated provisions of Section 17(1) and Section 46 of the Customs Act, 1962 by not filing truthful declarations in Bills of Entry and proper self-assessment. Therefore, for the aforesaid acts of suppression of facts and mis- statement, the extended period of five years for demand of customs duty under sub-section 4 of Section 28 of the Customs Act, 1962 is invokable in this case. The importer is liable to pay differential duty of Rs.2,54,09,167/- under Section 28(4) along with applicable interest under section 28AA of the Customs Act, 1962. The contention of importer that BEs once assessed cannot be re- assessed is not tenable as demand of duty short paid can always be made under section 28 within the period of limitation prescribed therein. The data retrieved from the appellant s proprietor s own mobile is the document admissible into evidence. The requirement of certificate under Section 138C, as is impressed upon by the appellant, is held not applicable - No infirmity has been found in the manner of redetermining the value and the quantum thereof. Appeal dismissed.
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Corporate Laws
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2024 (9) TMI 1256
Oppression and mismanagement - Tribunal's authority to order the purchase of shares under Section 242(2)(b) of the Companies Act, 2013 - Section 421 of the Companies Act, 2013 - HELD THAT:- Under Section 242(2)(b) of the Act, the Tribunal has a power to direct the purchase of shares of any member by the Company and per impugned order the Tribunal has exercised such power. In MSDC RADHARAMANAN VERSUS M. SD CHANDRASEKARA RAJA [ 2008 (3) TMI 471 - SUPREME COURT] , the Hon ble Supreme Court referred to Samgramsinh P. Gaekwad vs. Shantadevi P. Gaekwad [ 2005 (1) TMI 409 - SUPREME COURT ], wherein the Hon ble Supreme Court held in a given case the court despite holding that no case of oppression has been made out may grant such relief so as to do substantial justice between parties. Though the appellant has contended the Impugned Judgement does not give reasons for passing the order but a perusal of the Impugned Judgement would reveal the submissions of both the parties and the case law(s) cited by them were considered by the Ld. NCLT and only thereafter the impugned order was passed under Section 242(2)(b) of the Act. Admittedly the respondent cannot sell his shares in open market, it being a private company and not a listed one, hence the path chosen by the Ld. NCLT to end controversy amongst directors/shareholders is not prejudicial to anyone and would rather be helpful for smooth running of the company. There are no illegality in the impugned order and accordingly appeal is dismissed.
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Insolvency & Bankruptcy
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2024 (9) TMI 1305
Maintainability of application u/s 9 of the IBC - initiation of CIRP - pre-existing dispute between the parties - whether there existed a pre-existing dispute at the time of filing the Section 9 Application, thereby rendering the dismissal of the Application by the Adjudicating Authority proper and valid? - whether the Appeal is maintainable on any other ground? - HELD THAT:- The Appellant had provided the particulars of operational debt for five invoices only for the year 2019 but while producing records of outstanding it has produced ledgers starting from 2016. The Respondent has contested the Appellant s Application of the FIFO method for adjusting payments, and there is no evidence to suggest that this method was mutually agreed upon. Moreover, the claim in the Section 9 Application concerns five invoices only and not for past invoices. In fact for establishing the payment made, the Respondent has filed the statement of account from the Federal Bank for each of the five invoices from @329 to @379 in the APB, which clearly establish that payment was made without any doubt. The ledger of Operational Creditor/Tamra Dhatu also is very clear from @382 to @384 and establishes that instead Operational Creditor has to pay Rs 75,627/- to the Corporate Debtor. There is no question of any outstanding to be paid by the Corporate Debtor. This is a case wherein there is a clear case of pre-existing disputes with respect to the quality of goods which was supplied by the Operational Creditor. Therefore, we cannot find any infirmity in the Order of the Adjudicating Authority. Under Section 9 (5) (ii) (d) of the IBC, an Application for initiation of CIRP by an Operational Creditor must be rejected if a pre-existing dispute is shown to exist prior to the issuance of the demand notice. The Hon ble Supreme Court in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. [ 2017 (9) TMI 1270 - SUPREME COURT] held that the dispute need not be a meritorious one but must be real, substantial, and bona fide, and it must predate the demand notice. The Adjudicating Authority correctly dismissed the Section 9 Application. The Respondent has demonstrated the existence of a pre-existing dispute, as evidenced by the civil suit filed before the demand notice and the ongoing contentions regarding defective goods. The impugned order is upheld - appeal dismissed.
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2024 (9) TMI 1304
Rejection of application filed by the Appellant - Appellant who is an Operational Creditor can be given any preference over the debt of the unsecured financial creditor or not - difference between unsecured financial creditor and related party unsecured financial creditor u/s Section 53 of IBC - whether Appellant who is an operational creditor has priority in payment in distribution of the liquidation estate of the corporate debtor over the Respondent No.2 who was financial unsecured creditor? HED THAT:- Section 53(1) provides that liquidation assets shall be distributed in the order of priority as enumerated therein. In the order of priority, financial debts owed to unsecured creditors are at Clause (d). Clause (f) deals with any remaining debts and dues. The operational debt of the Appellant falls under clause (f). Thus, on plain reading of Section 53(1), it is clear that financial debts owed to unsecured creditors ranked higher than debt of operational creditor. The submission which has been advanced by the Counsel for the Appellant to support the appeal is that the Respondent No.2 being related party, he need not be treated under sub-clause (d) rather he has to fall under sub-clause (h) as equity shareholder. The submission of the Appellant is that admittedly Respondent No.2 was ex-director and being related party of the corporate debtor, he cannot claim any preference over the operational creditor who have given services to the corporate debtor and who are entitled for priority in payment. The Hon ble Supreme Court in Swiss Ribbon [ 2019 (1) TMI 1508 - SUPREME COURT ] held that there is intelligible differentia between the financial debts and operational debts. The reason for differentiating between financial debt and operational debt was noticed and differentiation was upheld. The BLRC Report has also been quoted by the Hon ble Supreme Court in paragraph 118 of the judgment. The BLRC Report also highlighted the importance of financial debt and dues of unsecured financial creditor were kept higher than the remaining debts within which operational debt now formed. Definition of financial debt as contained in Section 5(8) does not indicate any exclusion of financial debt which is reflected by any transaction with the corporate debtor by related party. When a financial debt is extended by related party the consequence for such creditor is captured in Section 21. As per Section 21(2), a financial creditor if it is related party of the corporate debtor shall not have any right of representation, participation or voting in a meeting of the CoC. Further by virtue of Section 29A, related party may incur any of the disqualifications under Section 29A. The judgment in M.K. Rajagopalan vs. Dr. Periasamy Palani Gounder and Anr [ 2023 (5) TMI 344 - SUPREME COURT ] was rendered in context of Section 21 of the IBC which mandates that the related party of corporate debtor is prohibited to be part of CoC. The Hon ble Supreme Court further held that so long as the provisions of the Code and the CIRP Regulations are met, any proposition of differential payment to different class of creditors in a resolution plan is, ultimately, subject to the commercial wisdom of CoC and no fault can be attached to the resolution plan merely for not making the provisions for related party. Those observations made by the Hon ble Supreme Court were in context of approval of the Resolution Plan by the CoC in its commercial wisdom and in the said case also, the Hon ble Supreme Court has not laid down any ratio with respect to distribution under Section 53 in reference to operational creditor and unsecured financial creditor. The Adjudicating Authority has not committed any error rejecting the application filed by the Appellant. Appellant cannot claim any priority in distribution of assets of the corporate debtor as compared to unsecured financial creditor - Appeal is dismissed.
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2024 (9) TMI 1255
Approval of the Resolution Plan - Section 30(6) and Section 31 of the IBC - HELD THAT:- The statutory protection granted to the operational creditor in Section 30(2)(b) is that they shall not be paid any amount less than as mentioned in (i) and (ii). Appellant case in the Appeal is not that the Appellant was entitled for any payment as per Section 30(2)(b) which has been denied in the Resolution Plan. The issue raised by the Appellant is fully covered by the recent judgment of this Tribunal in Rajat Metaal Polychem Pvt. Ltd. vs. Mr. Neeraj Bhatia and Anr. [ 2024 (9) TMI 411 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI - LB ] where this Tribunal while dealing with the similar claim of the operational creditors has laid down that ' It is true that Operational Creditors as the law stands now are denied any payment when the amount payable to them in the event of Liquidation is NIL, but till the Legislature comes to the aid of the claim of Operational Creditor by amending the Legislative Scheme hands of the Courts are tied to take any other view in the matter.' Appeal dismissed.
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2024 (9) TMI 1254
Approval of Resolution Plan - HELD THAT:- The jurisdiction of Adjudicating Authority and the Appellate Tribunal to interfere with the Resolution Plan approved by the CoC, in exercise of its commercial wisdom, are well settled. The limited jurisdiction as has been recognized by the precedents of the Hon ble Supreme Court is when the Resolution Plan is in not conformity with statutory requirements of Section 30, sub-section (2) of the IBC. Thus, the jurisdiction with NCLT and Appellate Tribunal is limited to examine as to whether the Resolution Plan is in compliance with Section 30, sub-section (2), sub-clause (e) of the IBC. The part of the Resolution Plan being not in accordance with law, which has been approved by the Adjudicating Authority, the course open for this Tribunal is to either set aside the Resolution Plan or to delete the clauses, which are not in accordance with law to make the Resolution Plan compliant. The second course need to be adopted, by deleting the clauses in the Resolution Plan, which are contrary to the law, as per Section 30, sub-section (2), sub-clause (e), so as not to interfere with the other part of the Resolution Plan, which have been approved. The resolution plan modified partially. Application disposed off.
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PMLA
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2024 (9) TMI 1303
Seeking grant of Regular bail - Money Laundering - scheduled offence - Long incarceration - completion of 3 years and 6 months i. e. half of the punishment - right to speedy trial under Article 21 of the Constitution - HELD THAT:- It is required to be noted that the Supreme Court in the case of Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ] considered the applicability of Section 436A of the Cr. P. C. which is concerning the maximum punishment for which an under trial prisoner can be detained. It has been held that Section 436A of the Cr. P .C. has come into effect on 23.06.2006 and the said provision is the subsequent law enacted by the Parliament and the same will prevail and will apply in spite of rigors of Section 45 of the PMLA Act. As per the settled legal position whereas at commencement of proceedings, the courts are expected to appreciate the legislative policy against grant of bail as enacted under Section 45 of the PMLA Act but the rigours of such provisions will melt down where there is no likelihood of trial being completed within a reasonable time and the period of incarceration already undergone has exceeded a substantial part of the prescribed sentence - inspite of restrictive statutory provisions like Section 45 of the PMLA Act, the right of the accused undertrial under Article 21 of the Constitution of India cannot be allowed to be infringed. In such a situation, statutory restrictions will not come in the way of the Court to grant bail to protect the fundamental right of the accused under Article 21 of the Constitution of India. It is also required to be noted that the Applicant is 72 years old and is suffering from cancer. The Applicant states that as several witnesses are residing in the same locality as that of the Applicant, the Applicant will therefore not reside within District - Pune and that the Applicant will reside at the residence of Mr. Shivajirao Patil, R/o. Vikram Bungalow, Chintamani Nagar, Madhavnagar Road, Sangli 416 416 and will attend the Sanjay Nagar Police Station, Sangli - The Applicant does not appear to be at risk of flight. The Applicant can be enlarged on bail subject to fulfilment of conditions imposed - bail application allowed.
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Service Tax
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2024 (9) TMI 1302
Sanction of rebate (by way of refund) of CENVAT credit of Service Tax paid on input services - N/N. 41 of 2012 ST dated 29.06.2012 - HELD THAT:- The reading of Section 142 (4) of the CGST Act is clearly reflective of the fact that refund of the tax paid on input or input services under the existing law pertaining to export of goods and services prior to appointed day would be covered by the provision of existing law. It is also noted that the concerned question of law is no more resintegra and is squarely covered and had come to be considered in Vinod Kumar Diamond India Pvt Ltd [ 2023 (5) TMI 762 - CESTAT MUMBAI] . Further, in the case of Fine Automotive and Industrial Radiators Pvt Ltd. vs. Commissioner of GST and Central Excise [ 2019 (11) TMI 1408 - CESTAT CHENNAI] , permitted the refund of service tax in similar circumstances. The appellant is entitled to the refund of the service tax paid in the present case. The impugned order is set aside - appeal allowed.
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2024 (9) TMI 1253
Violation of principles of natural justice - cryptic and non-speaking order - HELD THAT:- After perusing the judgment passed in COMMISSIONER CUSTOMS AND CENTRAL EXCISE VERSUS M/S. JP. TRANSFORMERS [ 2014 (9) TMI 307 - ALLAHABAD HIGH COURT] , and having noticed the basic facts of the present case it is found that the judgment in J.P. Transformers may not be applicable in all aspects/issues, yet the CESTAT has concluded the appeals by simply applying the same. The impugned order is set aside - matter remanded back to CESTAT for a fresh decision after affording due opportunity to the parties concerned - appeal disposed off by way of remand.
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2024 (9) TMI 1252
Taxability of services provided by the appellant in Jammu Kashmir - non-inclusion of cost of planning, scheduling etc which happens prior the customers approaching the appellant - place of provision of services outside India - time limitation. HELD THAT:- In the instance case, it is seen that the service provider is located in the taxable territory. The service recipient is also located in the taxable territory. It is the claim of the appellant that the service is performed partly within India but partly in territory excluded from the jurisdiction of Finance Act, 1994 by virtue of Section 64. According to the appellant place of the performance of Service is relevant. The learned Counsel has heavily relied on the decision of Larger Bench in the case of M/S COX KINGS LIMITED (FORMERLY KNOWN AS COX AND KINGS (INDIA) LIMITED) VERSUS COMMISSIONER (TAR) -MUMBAI [ 2023 (10) TMI 1388 - CESTAT MUMBAI - LB] - The decision of Larger Bench related to outbound tours to locations outside India. In the instant case, the issue relates to conducting of tours within territory India. The decision in the case of M/s. Cox Kings India Ltd. related to service provided in respect of clients who would travel outside India. Thus, the ratio of this decision is not relevant for the instant case where the destination of tours is within India. In the said decision great reliance has been placed on the provision in Export of Services Rules, 2005. The said Rules relate to the services where either the client or the location of performance or immovable property is located outside India. In the instance Case, the entire services are provided within the territory of India and therefore, the provisions of the Export of Services Rules, cannot be applied to the instant case. The claim of the appellants that in case of Pre-Planned Package Tours activities of Planning, Scheduling, Organizing and Arranging are already completed before the customer approaches the appellants. In that sense, the only an offer is prepared before the customer approaches and all activities of Planning, Scheduling, Organizing and Arranging happen after the approach of customer. These, facts are however no evidence is available on record to show that the appellant complete the activity of Planning, Scheduling, Organizing and Arranging prior to customer approaching and therefore the said claim remains unsubstantiated and not tenable. The entire activity of PLANNING, Scheduling, Organizing And Arranging is undertaken in the taxable territory in the instant case. The taxable service is activity of Planning, Scheduling, Organizing and Arranging. In these circumstances, even if the client tours a non taxable territory, while the service of Planning, Scheduling, Organizing and Arranging is provided in taxable territory, the service will remain taxable as provided in taxable territory. The tax has therefore been rightly demanded. Time Limitation - HELD THAT:- The issue involved in the instant case, Section 64 of the Finance Act, 1994 which specifically excludes the State of Jammu and Kashmir from levy of Service Tax provision. The definition of tour operator and tour itself was a contested issue which was considered in detail by the Larger Bench in the case of M/S COX KINGS LIMITED (FORMERLY KNOWN AS COX AND KINGS (INDIA) LIMITED) VERSUS COMMISSIONER (TAR) -MUMBAI [ 2023 (10) TMI 1388 - CESTAT MUMBAI - LB] . In these circumstances, it is opined that they may not have been any intent to evade payment of duty as a person might hold bonafide belief in the instant case that he is not liable to levy of service tax. No specific act of mis-declaration or suppression has been pointed out in the earlier proceedings. Consequently, the extended period of limitation cannot be invoked for recovery of taxes. The appeal is therefore allowed partly in so far as the issue of limitation is concerned - The matter is remanded to the original adjudicating authority for determination of duty liability if any within the period of limitation.
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2024 (9) TMI 1251
Taxability of erection, commissioning and installation activity of the machine - Inclusion of service charges within the sale value - HELD THAT:- The appellant have manufactured and supplied the textile machines as per the contract and sale invoice issued to the customers. The appellant is supposed to undertake the supply and also the erection, commissioning and installation of the machine at the customer s site. The sale value includes all the elements and there is no separate consideration received by the appellant on account of the service related to erection, commissioning and installation. In such case there is no amount available for charging service tax. The issue has been considered by this Tribunal in the case of C.C.E S.T. -SILVASA VERSUS AALIDHRA TEXTOOL ENGINEERS PVT LTD [ 2022 (12) TMI 11 - CESTAT AHMEDABAD] wherein this Tribunal has 'In such position the entire value of the goods has to be taken as sale value, consequently, no service value is involved separately. In the identical set of transaction, this tribunal has consistently taken a view that when there is a manufacturing and sale of the goods on a particular sale price which involves incidental service such as in the present case, no service tax can be demanded once the entire value is towards sale and has suffered the central excise duty.' From the above decision which has relied upon other decisions of the Tribunal, it is observed that the facts in the aforesaid decision and facts of the present case are identical. Therefore, the ratio of the above judgment is directly applicable. The demand in the present case is not sustainable. Accordingly the impugned order is upheld - appeal dismissed.
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2024 (9) TMI 1250
CENVAT Credit - input services or not - services availed for proposed expansion of port infrastructure and additional berths - deletion of the phrase setting up from the definition of input service with effect from 01.04.2011 - HELD THAT:- The case is no longer res integra and relied upon the CESTAT decision in the case of KAKINADA SEAPORTS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, SERVICE TAX AND CUSTOMS VISAKHAPATNAM-II [ 2015 (11) TMI 51 - CESTAT BANGALORE] . The Tribunal has inter-alia held that 'If 7th berth does not become operational, naturally the issue as to whether Cenvat credit is admissible when the project is dropped would arise.' There are no reason to hold a different view taken in the impugned order - The appeal filed by the Revenue is accordingly dismissed.
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2024 (9) TMI 1249
Short-payment of service tax - failure to declare the gross amount received as per the invoices - period from 16.06.2005 to 31.03.2007 - Whether reimbursement expenses incurred by the appellant viz. basic salary, advance, overtime allowance, PF administration and other charges, ESIS, HRA, ex-gratia, medical etc. paid to the employees and recovered from the customers, be includable in the gross taxable value under Section 67 of the Finance Act, 1994 read with Service Tax Valuation Rules in providing Manpower Recruitment and Supply Agency Services during the period 16.06.2005 to 31.03.2012? HELD THAT:- The said issue is no more res integra and covered by the judgement of the Tribunal in the case of M.P Security Force Vs. CCE ST [ 2019 (8) TMI 211 - CESTAT NEW DELHI ]. In the said case, the appellant M.P. Security Force provided security services and manpower supply service during the relevant period. The question before the Tribunal was whether the component of salary, EPF, ESI and uniform allowances etc. be included in the gross amount charged to their clients. Following the judgment of the Hon ble Supreme in UOI Vs. Intercontinental Consultants and Technocrats Ltd. s case [ 2018 (3) TMI 357 - SUPREME COURT ] interpreting the expression such services under Section 67(1) of the Finance Act, 1994, the Tribunal held ' the appellant is entitled for the abatement towards the payment made on account of contribution towards ESI, EPF and PF and also towards wages and salaries while computing the assessable value in terms of Section 67 of the Act for the payment of service tax.' Thus, the administrative charges collected in providing Manpower Recruitment and Supply Agency Service, is only to be part of the gross taxable value and all reimbursable expenses, salary, bonus, etc. paid to the employee by the appellant and collected from their clients cannot be included within the scope of gross taxable value under Section 67(1)(i) of the Finance Act, 1994 during the relevant period from October 2007 to March 2012. The impugned order is set aside - Appeal allowed.
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2024 (9) TMI 1248
CENVAT Credit - exempt service or not - Requirment to pay service tax under Rule 6(3) of Cenvat Credit Rules, 2004 - non-maintenance of cenvat credit account for inputs and input services used for providing exempted output services - investment of surplus cash in mutual funds - trading of securities - HELD THAT:- Considering the fact that the similar issue came up before this Tribunal in the case of M/S. COGNIZANT TECHNOLOGY SOLUTIONS INDIA PRIVATE LIMITED VERSUS THE COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2024 (9) TMI 922 - CESTAT CHENNAI] decided in favour of the appellant wherein it has been held ' the authorities below have grossly erred in demanding the tax on the investment made, by treating the same as service although exempted.' As this Tribunal in the case of Cognizant Technology Solutions India Pvt.Ltd has dealt with investment of surplus cash in mutual fund which does not amount to trading activity, there are no merit found in the impugned order and the same is set aside - appeal allowed.
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Central Excise
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2024 (9) TMI 1301
Clandestine removal - Penalty u/r 26 of the Central Excise Rules, 2002 - Appellant was the in-charge Managing Director - error in law in upholding the Order in Original and confirming the penalty under Rule 26 of the Central Excise Rules, 2002, without specifying which particular clause of Rule 26 - penalty under Rule 26 can be imposed without there being any proposal and order for the confiscation of the goods in question or not - reliance placed upon the statement partly - mens rea. HELD THAT:- On bare perusal of the Rule 26, it is clear that any person who is in any way concerned in removing the excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the Rules shall be liable to a penalty. Admittedly, in the facts of the case, the appellants were concerned with the removal of the goods by the Company and from the statement of Mr. Narendrabhai Solanki which was recorded during the course of investigation, there is a clear admission on his part. It cannot be said that the Adjudicating Authority or Tribunal has committed any error in invoking Rule 26 of the Rules for levy of the penalty. The contention raised on behalf of the appellants that the adjudicating authority has failed to point out which of the Sub-rule is applicable in the facts of the case is without any basis inasmuch as on perusal of Rule 26 of the Rules, it is clear that the Sub-rule (2) would never be applicable to the facts of the case as it pertains to the person who issues invoices or any other documents. The reliance placed on the decision of the Hon ble Apex Court in case of the Amrit Foods [ 2005 (10) TMI 96 - SUPREME COURT ] would not be applicable in the facts of the case as the appellants were put to notice as to the exact nature of contravention for which the appellants were made liable for penalty under Rule 26 of the Rules. As the show-cause notice and the Order-in-Original have explained in detail about the nature of the offence for which the penalty is levied, it cannot be said that there is a breach of any of the requirement for levy of penalty by the respondent-authority. With regard to the contention raised on behalf of the two appellants namely, Devendra Ambalal Thakkar and Jaykant Ambalal Patel, it is required to be noted that both of them have abstained from investigation and have not co-operated for recording their statements and in spite of that the respondent-authority is not supposed to make further inquiries when the facts are not in dispute to the effect that both of them were holding the charge of the President and the Vice-President who having knowledge of the affairs of the Company. Considering the concurrent findings of fact arrived at by the both the authorities below, we are of the opinion that no question of law, much less any substantial question of law arises from the impugned orders passed by the CESTAT. The appeals therefore being devoid of any merit, are accordingly dismissed.
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2024 (9) TMI 1247
Applicability of the N/N. 33/99-CE dated 08.07.1999 as amended - DIC certificate issued dated 10.05.1993 could form the basis for determination of installed capacity during pre-expansion period or not - cut off date was to be treated on or after 24.12.1997 or not - HELD THAT:- The show cause notice, in relation to the period running from July, 1999 to May, 2002, was issued on 03.10.2002, whereas the show cause notice relevant for the present appeal was issued on 05.09.2003, which was in relation to the period July, 1999 to November, 2002. Admittedly, the subsequent show cause notice dated 05.09.2003 includes the period July, 1999 to May, 2002, for which the CESTAT has already passed an order in favour of the respondent, which has attained finality and, therefore, it is not open for the Revenue to again -agitate the said issue by way of issuing a fresh show cause notice. The action on the part of the Revenue of not challenging the decision of the CESTAT in relation to the period July, 1999 to May, 2002, which is included in the subsequent show cause notice dated 05.09.2003, disentitles it from challenging the same. The Hon ble Supreme Court has disallowed the Revenue to take different stand in the same situation in BIRLA CORPORATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2005 (7) TMI 104 - SUPREME COURT ] . The Hon ble Supreme Court has observed 'assessee is held to be entitled to MODVAT Credit'. Taking into consideration the fact that the issue regarding availment of benefit by the respondent of the Notification dated 08.07.1999 has already been settled in favour of it by CESTAT, vide order dated 20.01.2005, in relation to the period running from July, 1999 to May, 2002 and the same has attained finality because the Revenue has accepted the said decision and has not challenged it further in appeal or other proceedings, there are no case for interference. The present Central Excise Appeal is dismissed.
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2024 (9) TMI 1246
Entitlement to interest on excess duty paid during provisional assessment period - whether the appellant is entitled to interest of Rs.1,15,23,115/- on finalisation of provisional assessment for the period 2002-03 to 2009-10 on the amount of excess duty paid by the appellant? - HELD THAT:- It is found that pursuant to the finalisation of provisional assessment, after adjustment of the duty paid, the liability has been calculated in the respective orders. However, since the method for calculation of interest i.e. whether interest be calculated after expiry of one month from the due date of payment of duty or the date on finalisation of the provisional assessment of the duty liability be taken into consideration, was in dispute and pending before the honourable High Court of Karnataka in COMMISSIONER OF C. EX., MYSORE-I VERSUS JK. INDUSTRIES LIMITED [ 2011 (3) TMI 373 - KARNATAKA HIGH COURT] , the quantum of interest on the excess duty paid by the appellant and also interest due on the duty short paid could not be calculated and kept pending. On finalisation of the pending issue by the aforesaid judgement, the applicant approached the Department informing the amount of interest on the excess duty paid during the period 2002-03 to 2009-10 applying the said formula is Rs.1,15,84,533/- and the interest payable to the Government on duty short paid is Rs.63,71,217/-. The appellant requested to adjust the interest due to the Government against interest payable to the appellant, and to refund balance amount after adjustment. The authorities below had rejected the said claim on the ground that the final order computing the duty has not been challenged and therefore the interest cannot be released to them after the order of the Hon ble High Court. Since the appellant had paid the interest due to the Government amounting to Rs.63,71,217/- for the said period in absence of any demand notice to them, there is no valid reason not to release/refund the interest amount of Rs.1,15,84,553/-to the appellant on the excess duty paid during the period in question when the issue of relevant date for computing interest amount on finalisation of provisional assessment settled by the Hon ble Karnataka High Court. The impugned order is set aside and appeal is allowed.
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2024 (9) TMI 1245
Liability of appellant, principal manufacturer, to pay Excise Duty on waste and scrap arising at the job worker s factory and cleared by the job 2 worker without payment of duty for the disputed period - raw materials sent to job workers for conversion in terms of N/N. 214/86--CE dated 25.03.1986 - HELD THAT:- The Tribunal in M/S. GREAVES COTTON LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI [ 2024 (6) TMI 1398 - CESTAT CHENNAI] had considered the very same issue in the appellant s own case, where it was held that ' The said issue stands decided by the Tribunal in the appellant s own case in M/S. GREAVES COTTON LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI [ 2024 (5) TMI 1470 - CESTAT CHENNAI] has held that 'the appellant is not the manufacturer of the waste and scrap and therefore, there is no liability on the appellant to pay the duty on the waste and scrap manufactured at the job worker s end. Further, the provision of Rule 4(5)(a) of the CENVAT Credit Rules, 2004 nowhere states that the waste and scrap generated at the job worker s end makes the principal manufacturer liable to payment of duty on such waste and scrap.' The impugned order cannot sustain. The same is set aside. The appeal is allowed.
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2024 (9) TMI 1244
Denial of benefit of exemption notification dated 01.03.2002, as amended - recovery of central excise duty in terms of the proviso to sub-section (1) of section 11A of the Central Excise Act, 1944 - demand of interest and penalty - invocation of extended period of limitation. Extended period of Limitation - whether the appellant had suppressed facts from the department with an intent to evade payment of central excise duty? - HELD THAT:- When the records were duly maintained by the appellant and intimation was also given in form D-3 to the jurisdictional division and range offices, it was for the Officers to put the appellant to notice if there was any discrepancy in the information contained in these forms. There is, however, nothing on the record to indicate that the appellant was ever put to notice about any discrepancy. This apart, audits were regularly conducted for the period from December 2003 to March 2006 and April 2003 to April 2004, but no discrepancy was noticed by the officers conducting the audit. The appellant had also maintained a register for fly-ash stock on monthly basis for use of fly-ash above 25% by weight and the appellant had claimed exemption from payment of central excise duty under the notification dated 01.03.2002 since fly-ash of over 25% by weight was used in the manufacture of AC Pressure Pipes. The appellant had not suppressed facts relating to use of fly-ash by more than 25% by weight in the manufacture of AC Pressure Pipes. This is for the reason that information as contemplated under the Trade Notice was provided by the appellant to the department, and most importantly information contained in Form D-3 relating to receipt of fly-ash. The show cause notice nor the impugned order have denied the providing of such information by the appellant to the department. The show cause notice merely alleges that subsequent investigation revealed that the appellant had manipulated the records regarding the actual receipts of fly-ash - There is no reason given in the show cause notice to conclude that the appellant had suppressed facts with an intent to evade payment of central excise duty nor the impugned order passed by the Commissioner gives any reason as to why the appellant had suppressed facts with an intent to evade payment of central excise duty. In fact, the order passed by the Commissioner states that suppression means failure to disclose full information with intent to evade payment of duty. It is not so. The department has to establish that not only the assessee suppressed facts but also that such suppression was with an intent to evade payment of duty. The provisions of section 11A (4) of the Central Excise Act, which are as similar to the provisions of section 11A (1) of the Central Excise Act, came up for interpretation before the Supreme Court in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [ 1995 (3) TMI 100 - SUPREME COURT] . The Supreme Court observed that section 11A (4) empowers the Department to reopen the proceedings if levy has been short levied or not levied within six months from the relevant date but the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. In EASLAND COMBINES VERSUS COLLECTOR OF C. EX., COIMBATORE [ 2003 (1) TMI 107 - SUPREME COURT] the Supreme Court observed that for invoking the extended period of limitation, duty should not have been paid because of fraud, collusion, wilful statement, suppression of fact or contravention of any provision. These ingredients postulate a positive act and, therefore, mere failure to pay duty which is not due to fraud, collusion or wilful misstatement or suppression of facts is not sufficient to attract the extended period of limitation. It is, therefore, clear that the suppression of facts should be deliberate and in taxation laws it can have only one meaning, namely that the correct information was not disclosed deliberately to escape payment of duty. In THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS AND ANOTHER VERSUS M/S RELIANCE INDUSTRIES LTD. AND COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S RELIANCE INDUSTRIES LTD. [ 2023 (7) TMI 196 - SUPREME COURT] the Supreme Court held that if an assessee bona-fide believes that it was correctly discharging duty, then merely because the belief is ultimately found to be wrong by a judgment would not render such a belief of the assessee to be mala fide. If a dispute relates to interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation. The Supreme Court further held that in any scheme of self-assessment, it is the responsibility of the assessee to determine the liability correctly and this determination is required to be made on the basis of his own judgment and in a bona-fide manner. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and an assessee. An assessee may genuinely believe that duty is not leviable, while the department may believe that duty is leviable. The assessee may, therefore, not pay duty in the self-assessment carried out by the assessee, but this would not mean that the assessee has wilfully suppressed facts. To invoke the extended period of limitation, atleast one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self-assessment. In the present case, the appellant had not suppressed any facts from the department, much less with an intent to evade payment of central excise duty. The extended period of limitation could not, in view of the aforesaid decisions, have been invoked in the present case even if the returns were self-assessed. Thus, as the extended period of limitation contemplated under the proviso to section 11A (1) of the Central Excise Act could not have been invoked, the impugned order dated 31.03.2021 passed by the Commissioner deserves to be set aside as the entire demand is covered under the extended period of limitation. The impugned order dated 31.03.2021 passed by the Commissioner is, accordingly, set aside - Appeal allowed.
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Indian Laws
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2024 (9) TMI 1300
Whether the arbitral award is in conflict with the public policy of India, or/ and is vitiated by patent illegality appearing on the face of the award? Gita Power (R-2) could have been subjected to arbitration and made jointly and severally liable along with OPG for the award or not - time limitation of Enexio's claim for the outstanding principal amount - counterclaim in respect of the cost of repair/replacement of gearboxes and fan modules could be treated as barred by time or not - preservity of arbitral award for payment of the outstanding principal amount with interest - adoption of different yardstick for adjudging the counterclaim than what was adopted for adjudging the claim. HELD THAT:- It is concluded as follows: (i) Though the ACC Unit /project was of OPG, Gita Power, as the holding company of OPG, had actively participated in the formation of the contract for the project. Not only did it place purchase order(s) on Enexio but made advance payment(s) thereunder to Enexio, which were subsequently affirmed by OPG. The two, therefore, not only acted as a single economic entity but as agents of each other. Hence, the arbitral tribunal was justified in holding that Gita Power was bound by the arbitration agreement and jointly and severally liable along with OPG to pay the awarded amount. (ii) The claim of Enexio was an indivisible claim for compensation in lieu of goods supplied, and work done, based on breach of the contract, therefore limitation for the claim was governed by Article 55, and not by Articles 14, 18 and 113, of the Schedule to the 1963 Act. (iii) The claimant s claim for the outstanding principal amount matured on 19 March 2016. Therefore, limitation started to run from that date. However, even if we count limitation from 21 September 2015 (as found by the Tribunal) it will have no material bearing on the award for the reason indicated below. (iv) The limitation for the claim as well as counterclaim(s), other than those relating to cost of repair/replacement of gear boxes and fan modules, stood extended, under Section 18 of the 1963 Act, on the basis of acknowledgement made in the minutes of meeting dated 19 April 2018, and, therefore, those were within limitation as on the date of : (a) commencement of arbitration (i.e. 2 May 2019); and (b) the date of filing counterclaim (i.e. 15 July 2019) and were rightly considered on merit. (v) The counterclaims qua cost of repair /replacement of gear boxes and fan modules were rightly held barred by time as in respect thereof there was no recital in the minutes of meeting dated 19 April 2018. (vi) Rejection of prayer to declare debit notes invalid, on ground of limitation, had no adverse impact on the claimant s claim for compensation, which was well within the extended period of limitation. Thus, there is no palpable error in the arbitral award as to be termed patently illegal / perverse , or in conflict with public policy of India. Therefore, the Division Bench of the High Court was justified in setting aside the judgment and order of the Single Judge and restoring the arbitral award. Appeal dismissed.
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2024 (9) TMI 1299
Seeking appointment of a Sole Arbitrator to adjudicate the disputes between the Petitioners - Section 11(6) read with Section 11(9) of the Arbitration and Conciliation Act, 1996 - whether the SRG Group, being a non-signatory to the FAA, should also be referred to arbitration along with the AMP and JRS Groups? - HELD THAT:- The issues in the first category have to be mandatorily decided by the Chief Justice or his designate under Section 11 of the Act, 1996. This included the question whether there is an arbitration agreement and whether the party that has applied under Section 11 is also a party to such an agreement. The crucial question that arose for consideration by this Court in Duro Felguera S.A. v. Gangavaram Port Limited [ 2017 (10) TMI 1304 - SUPREME COURT] was the effect of the change introduced by the 2015 Amendment to the Act, 1996 which inserted Section 11(6A). The Court held that all that needs to be looked into is whether the agreement contained a Clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement i.e., the existence of the arbitration agreement, nothing more, nothing less. A two Judge-Bench of this Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions Engineering Ltd. [ 2019 (4) TMI 716 - SUPREME COURT] considered the effect of Section 11(6A) which confined the jurisdiction of the Court to examine the existence of an arbitration agreement on an arbitration agreement contained in an unstamped document or contract. The Court was of the opinion that its enquiry as to whether a compulsorily stampable document, which contains the arbitration clause, is duly stamped or not, is only an enquiry into whether such an arbitration agreement exists in law and this does not in any manner amount to deciding preliminary question(s) that arise between the parties. The recent Constitution Bench decision of this Court in Cox and Kings Limited v. SAP India Private Limited and Another [ 2023 (12) TMI 427 - SUPREME COURT (LB)] , specifically dealt with the question of impleading a non-signatory as a party in the arbitration proceedings and the corresponding scope of enquiry at the referral stage. It was held therein that Section 16 is an inclusive provision which comprehends all preliminary issues touching upon the jurisdiction of the arbitral tribunal and the issue of determining parties to an arbitration agreement goes to the very root of the jurisdictional competence of the arbitral tribunal. This Court took the view that the referral court is required to prima facie rule on the existence of the arbitration agreement and whether the non-signatory party is a veritable party to the arbitration agreement. However, recognising the complexity of such a determination, the arbitral tribunal was considered the proper forum since it can decide whether the non-signatory is a party to the arbitration agreement on the basis of factual evidence and application of legal doctrine. The fact that a non-signatory did not put pen to paper may be an indicator of its intention to not assume any rights, responsibilities or obligations under the arbitration agreement. However, the courts and tribunals should not adopt a conservative approach to exclude all persons or entities who intended to be bound by the underlying contract containing the arbitration agreement through their conduct and their relationship with the signatory parties. The mutual intent of the parties, relationship of a non-signatory with a signatory, commonality of the subject matter, composite nature of the transactions and performance of the contract are all factors that signify the intention of the non-signatory to be bound by the arbitration agreement. Considering the complexity involved in the determination of the question whether the SRG Group is a veritable party to the arbitration agreement or not, it would be appropriate for the arbitral tribunal to take a call on the question after taking into consideration the evidence that may be adduced by the parties before it and the application of the legal doctrine as elaborated in the decision in Cox and Kings [ 2023 (12) TMI 427 - SUPREME COURT (LB)] . Mr. Akil Kureshi (Former Chief Justice, High Court of Rajasthan) is appointed to act as the sole arbitrator. The fees of the arbitrator including other modalities shall be fixed in consultation with the parties - petition allowed.
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2024 (9) TMI 1243
Payment of illegal gratification - Conspiracy - offences punishable under Section 120 B of the Indian Penal Code and Sections 7,12 and 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 - HELD THAT:- A perusal of the charge sheet shows that the allegation is about payment of illegal gratification of Rs.58,000/-, Rs.3,50,000/- and Rs.1,50,000/- respectively, on behalf of the said company to officials of the customs department to procure benefits to its customers. As regards the allegation regarding the payment of Rs.58,000/-, the case is that accused no.1- Mehul Jhaveri paid the said amount to another accused, Chandubhai Kalal. The charge sheet contains no allegation against the respondent to connect him with the payment. The allegations of being part of a criminal conspiracy are made against the respondent. As regards payment of illegal gratification of Rs.3,50,000/- and Rs.1,50,000/- respectively paid to Anand Singh Mall, in the charge sheet, the allegation against the respondent is that the respondent in conspiracy with Mehul Jhaveri abetted the offence of bribery and arranged for payment of illegal gratification of Rs.3,50,000/- to Anand Singh Mall at Delhi through one Kishan Rajwar, who happens to be the respondent's nephew. Further allegation is that Mehul Jhaveri, in conspiracy with the respondent and one Dushyant Mulani, arranged to deliver illegal gratification of Rs.1,50,000/- to Anand Singh Mall in Mumbai. The prosecution is not relying upon any telephonic conversation between the respondent and any of the coaccused or the person to whom illegal gratification was allegedly paid. The High Court has examined the statements of the witnesses and documents which were a part of the charge sheet. The High Court has observed that in the diary entries made by accused no.1, the word Dilipbhai has been mentioned at the top. Against the entries of the amounts of Rs.3,50,000/- and Rs.1,50,000/-, the letters DM have been mentioned. However, no witness stated that the letters DM meant the respondent, not Dushyant Mulani. As pointed out earlier, in reply to the discharge application, the appellant admitted that letters DM refer to Dushyant Mulani and not the respondent. Therefore, except for the bald allegation of participation in the alleged conspiracy without giving any details of the conspiracy, the respondent has been roped in the charge sheet. His name did not appear in the First Information Report. Taking the material forming part of the charge sheet as true, it cannot be said that a prima facie case of involvement of the respondent was made out. In the circumstances, we find no error in the view taken by the High Court when it discharged the respondent. Appeal dismissed.
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2024 (9) TMI 1242
Dishonour of Cheque - petitioner was not the Director of the Company when the loan was taken - vicarious liability of the petitioner - HELD THAT:- The criminal complaint has been filed under Section 138 read with Section 141 of the NI Act. The petitioner has been impleaded in the capacity of Director of the accused company. The present petition is accompanied by Form No. DIR-11 and DIR-12. The said documents i.e. DIR-11 and DIR-12 indicate that the petitioner was appointed as an Additional Independent Non-Executive Director on 26.02.2020 and that he resigned on 08.12.2021. The issue whether requisite allegations are to be made against Directors and more particularly against the Directors who are Additional Independent Non-Executive, has come up before the Supreme Court in a catena of decisions. In POOJA RAVINDER DEVIDASANI VERSUS STATE OF MAHARASHTRA ANOTHER [ 2014 (12) TMI 1070 - SUPREME COURT] the Supreme Court, while following the ratio of the decision in NATIONAL SMALL INDUSTRIES CORPN. LTD. VERSUS HARMEET SINGH PAINTAL [ 2010 (2) TMI 590 - SUPREME COURT] made the observations with regard to fastening vicarious liability on Directors who are not in charge of day-to-day affairs of the company. Coming to the facts of the present case, a reading of the complaint would show that the same is bereft of any specific allegations as to how being an Additional Independent Non-Executive Director, the petitioner (arrayed as accused No.4 in the complaint) was incharge of day-to-day affairs and conduct of the business of the accused company. The complaint itself is accompanied by the Master Data of the company, which did not reflect the name of the petitioner as a Director. Even if the Annual Report for the Financial Year 2020-21 of respondent No. 3 is to be considered, it brings to the notice the fact that during all the Nine (9) Board Meetings held during the Financial Year 2020-21 and of the Annual General Meeting held on 31.12.2020, none of it were attended by the petitioner which goes to show that he was not involved in day-to-day affairs of the accused Company. Thus, it is the conceded case of the complainant that the petitioner was not the Director on the relevant date. The case of the petitioner squarely falls in the ratio of the aforenoted binding precedents. In the totality of the facts and circumstances, the petitioner cannot be made responsible for the dishonour of cheques, and the continuation of the criminal complaint against him would be nothing but an abuse of the process of law. The criminal complaint filed against the petitioner is quashed - Petition allowed.
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2024 (9) TMI 1241
Dishonour of Cheque - liability of petitioner and legality of proceedings against him - HELD THAT:- Admittedly the petitioners are neither the partners of the partnership firm nor the signatories of the instruments in question and therefore proceedings initiated under Section 138 of the Negotiable Instruments Act against the petitioners are nothing but sheer abuse of process of the Court and while passing the order of issuance of process against the petitioners, the learned Court concerned has committed an error, which warrants interference by this Court. It is also pertinent to note that respondent No.2 and his wife have also filed one suit before the concerned Court against the present petitioners and others and in the said suit original accused Nos. 1 to 8 are not impleaded as party and no relief is sought against them. It is not in dispute that original accused No.6 is the authorized signatory of accused No.1 - partnership firm i.e. Shri Siddhivinayak Associates and accused nos. 2 to 8 are the partners of the said partnership firm. If the allegations levelled against the petitioners in the complaints filed under Section 138 of the Negotiable Instruments Act are taken at its face value and accepted in their entirety, they do not constitute the offence alleged, insofar as the present petitioners are concerned. It is well settled that when the instrument is signed by the authorized signatory of a partnership firm, the prosecution under Section 138 of the Negotiable Instruments Act can be instituted against the persons, who were in-charge and responsible for the conduct of the business of the partnership firm at the relevant time when the offence was committed - without going into the further details of the matter, only on the ground that petitioners are neither the partners of the partnership firm nor the signatories of the instruments in question, the present petitions are required to be allowed. The proceedings pending in the Court of Additional Chief Judicial Magistrate, Ahmedabad (Rural) are quashed qua the petitioners - Petition allowed.
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2024 (9) TMI 1240
Dishonour of Cheque - security cheques - seeking quashing of the Summoning Order - HELD THAT:- From the bare perusal of the Complaint under Section 138 of NI Act, 1881 and the submissions made by the petitioner in the present petition, it is evident that admittedly the aforementioned two cheques were given by the petitioner, which on presentation got dishonoured for insufficiency of funds. It is the defence of the petitioner that the said two cheques were given as a security cheques which were to be encashed only if the pledged goods were not delivered. However, the pledged goods i.e., Sarso Seeds got stolen and the FIR bearing No. 710/2018 under Section 188 of the Indian Penal Code, 1860. It is further the defence of the petitioner that the ledger accounts on which the respondent No. 2-complainant has relied, are not correct. It is quite evident from the submissions made that there is no denial to the issuance of the cheques and its subsequent dishonour on the ground of insufficiency of funds - All the contentions raised by way of present petition are, in fact, the defence of the petitioner which are required to be proved during the trial. There is no infirmity in the impugned Summoning Order dated 29.11.2018 passed by the learned Metropolitan Magistrate - Petition dismissed.
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2024 (9) TMI 1239
Dishonour of Cheque - Vicarious liability of non-executive director in a company - HELD THAT:- It is not disputed that the Petitioner herein is a Non-Executive Director of ATT. While dealing with the nature of averments that are required against a Non-Executive Director while filing a complaint under Section 138 NI Act, the Apex Court in POOJA RAVINDER DEVIDASANI VERSUS STATE OF MAHARASHTRA ANOTHER [ 2014 (12) TMI 1070 - SUPREME COURT] has observed ' the law laid down by this Court is that for making a Director of a company liable for the offences committed by the company under Section 141 of the NI Act, there must be specific averments against the Director showing as to how and in what manner the Director was responsible for the conduct of the business of the company.' The Coordinate Bench of this Court while dealing with the case of Ms. Poonam Singh, who is accused No. 4 in the complaint filed by the Respondent, has not seen as to whether Ms. Poonam Singh is a Non-Executive Director or a regular Director. There is no discussion in the judgment of the Coordinate Bench regarding this aspect - In the present case it was specifically pleaded that the Petitioner is a non-executive Director and is not responsible for the day-to-day affairs of the company. Form DIR-12, which has been placed and the veracity of which has not been denied, shows that the Petitioner is a non-executive director. In the entire complaint there is no averment as to whether the Petitioner herein was involved in the loan transaction or not and as to whether the Complainant has dealt with the Petitioner at any point of time or not. This Court is of the opinion that the case of the Petitioner herein is distinguishable from that of Ms. Poonam Singh inasmuch as the Petitioner herein is a Non-Executive Director and without any specific averment against the Petitioner herein in the complaint filed by the Respondent herein as to whether the Petitioner herein is involved in the loan transaction or not and as to whether the Complainant has dealt with the Petitioner at any point of time or not, the complaint against the Petitioner herein cannot be permitted to continue. Petition disposed off.
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2024 (9) TMI 1238
Dishonour of Cheque - acquittal of the sole respondent - discharge of burden under Section 139 of the Negotiable Instruments Act - HELD THAT:- Evidently, in the case on hand, the prosecution discharged its burden to prove the requirement of Section 138 of the Negotiable Instruments Act. The sole respondent admitted that his signed cheques were misused. However, no evidence was led to prove this fact, therefore, presumption would be there in favour of the complainant that the cheque was issued by the accused for payment of the existing dues. The trial court has wrongly relied on some of the lapses on the part of the complainant to disbelieve that the complainant proved the cheque under Section 138 of the Negotiable Instruments Act and wrongly held that the accused has already discharged its burden under Section 139 of the Negotiable Instruments Act only for certain lapses of the complainant. This case is squarely covered by the dictum in RAJESH JAIN VERSUS AJAY SINGH [ 2023 (10) TMI 418 - SUPREME COURT] . Hence, judgment relied upon by the learned counsel for the respondent is not applicable in the facts and circumstances of this case. The judgment of acquittal dated 24.8.2022 passed in Criminal Case No. 258/2016 by learned Special Metropolitan Magistrate, NI Act, Jodhpur stands hereby set aside and the sole respondent is convicted for the offence under Section 138 of the Negotiable Instruments Act - Considering the mitigating and aggravating circumstances appearing in this case as well as the fact that no previous conviction is there against the sole respondent, 2 months simple imprisonment is awarded alongwith fine of the cheque amount plus 30% of the same as compensation to be payable within a month, failing which, the said amount would be recoverable according to law prescribed for recovery of fine. Criminal appeal allowed.
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