TMI Tax Updates - e-Newsletter
September 4, 2024

Case Laws in this Newsletter:

GST Income Tax Customs FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. CROSS EMPOWERMENT UNDER GST: DISCORDANT INTERPRETATIONS

   By: Vinay Goyal

2. FOREIGN EXCHANGE MANAGEMENT (GUARANTEES) REGULATIONS, 2000 – AN OVERVIEW

   By: DR.MARIAPPAN GOVINDARAJAN

3. Assessee should be granted opportunity of personal hearing

   By: Bimal jain

4. ASSESSMENT MADE EVEN BEFORE THE SHOW CAUSE NOTICE TIME – VIOLATION OF PRINCIPLES OF NATURAL JUSTICE

   By: DR.MARIAPPAN GOVINDARAJAN

5. ITC can be claimed on contract staffing services for providing Information Technology Enabled Services

   By: Bimal jain

News

1. Invoice Management System

2. Financing India’s Aspirations (Keynote Address delivered by Michael Debabrata Patra, Deputy Governor, Reserve Bank of India - September 3, 2024 - at the Financing 3.0 Summit: Preparing for Viksit Bharat organised by the Confederation of Indian Industries (CII) at Mumbai, India)

3. DGFT updates the SCOMET List with recent policy changes and updates in the multilateral export control regimes

4. ONDC receives Gold Award for "Application of Emerging Technologies for Providing Citizen-Centric Services" at 27th National Conference on e-Governance

Notifications

Central Excise

1. 24/2024 - dated 2-9-2024 - CE

Seeks to amend No. 10/2022-Central Excise, dated the 30th June , 2022 to exempt export of Petrol and Diesel from the RIC when exported to Bhutan.

2. 23/2024 - dated 2-9-2024 - CE

Seeks to amend No. 04/2022-Central Excise, dated the 30th June, 2022 to exempt export of Petrol and Diesel from the Special Additional Excise Duty when exported to Bhutan.

3. 22/2024 - dated 2-9-2024 - CE

Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to exempt export of ATF from the Special Additional Excise Duty when exported to Bhutan.

DGFT

4. 26/2024-2025 - dated 3-9-2024 - FTP

Export of Red Sanders wood by Forest, Environment & Climate Change Department, Government of Odisha - Extension of time regarding

5. 25/2024 - dated 2-9-2024 - FTP

SCOMET Updates 2024 - Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items, 2018.

GST - States

6. 03/2024-State Tax (Rate) - dated 6-8-2024 - Himachal Pradesh SGST

Amendment in Notification No. 2/2017-State Tax (Rate), dated the 30th June, 2017

Circulars / Instructions / Orders

DGFT

1. 22/2024-2025 - dated 3-9-2024

Allocation of 8606 Metric Tonnes Raw Value (MTRV) of raw cane sugar to USA under TRQ scheme for US fiscal year 2025

Highlights / Catch Notes

GST

• Authorities canceled petitioner's registration without due process, Court intervenes.

  Case-Laws - HC : The High Court found that the authorities had violated the principles of natural justice by cancelling the petitioner's registration without providing an opportunity for a hearing or assigning reasons. Despite a previous judgment directing the authorities to issue show cause notices and orders with necessary details in physical form, they issued cryptic notices and orders for cancellation without following the guidelines. The court remanded the matter back to the Assessing Officer at the show cause notice stage, with the petitioner's registration remaining suspended until the show cause notice is decided as per the directions. The petition was disposed of accordingly.
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• Deficient show cause notice lacking factual details set aside for violating natural justice principles.

  Case-Laws - HC : Show cause notice lacking essential factual details and merely reproducing statutory provision violates principles of natural justice, depriving assessee of opportunity to file effective reply. Impugned show cause notice set aside as it fails to disclose minimum factual basis for invoking power u/s 29 of Central Goods and Services Tax Act, 2017. Mere reproduction of offending clause cannot validate a deficient show cause notice lacking minimum essential details.
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• Interim relief granted for reversing ITC availed in late GSTR-3B filing, subject to deposit of Rs. 25 lakhs.

  Case-Laws - HC : Petition challenging adjudication order u/s 73(9) of CGST/WBGST Act, 2017 for reversing ITC availed in GSTR-3B filed after prescribed time limit u/s 16(4). Court noted Rs. 63,28,114/- was found reversible as per show cause notice. Considering proposed amendment in Finance Bill 2024 allowing ITC for returns filed till 30.11.2021 for FY 2017-18 to 2020-21, and petitioner having filed GSTR-3B for 2018-19 before 30.11.2021, interim order granted subject to deposit of Rs. 25 lakhs. Deposit to be invested in interest-bearing FD till further orders to avoid multiplicity of proceedings. Petition disposed.
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Income Tax

• Invalid Notice Issued by Assessing Officer Violates Income Tax Act's Faceless Assessment Rules, Court Rules.

  Case-Laws - HC : This case deals with the validity of a notice issued u/s 148 of the Income Tax Act by the Jurisdictional Assessing Officer (JAO) in light of the provisions of Section 151A, which introduced the regime of faceless assessment. The court held that, as per recent decisions, it is not permissible for the JAO to issue a notice u/s 148, as it would amount to a breach of Section 151A. The court emphasized that there is no concurrent jurisdiction between the JAO and the Faceless Assessment Officer (FAO) for issuing notices u/s 148 or passing assessment/reassessment orders. When specific jurisdiction has been assigned to either the JAO or the FAO, it is to the exclusion of the other. Accepting the Revenue's argument would lead to chaos and render the faceless proceedings redundant. The court further stated that when an authority acts contrary to law, the said act is required to be quashed and set aside as invalid, and the assessee is not required to establish prejudice. An act done contrary to the statute itself causes prejudice to the assessee, as all assessees are entitled to be assessed as per law and by following the prescribed procedure.
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• Tax appeal revived, eligible for amnesty despite initial dismissal.

  Case-Laws - HC : The petitioner's Miscellaneous Application was not pending as on 31st January 2020, the specified date for eligibility under the VSV Scheme. However, the Tribunal subsequently recalled its order dismissing the petitioner's appeal filed in 2015, effectively restoring the appeal to a pending status as of 31st January 2020. Consequently, the petitioner qualifies as an appellant eligible to file a declaration u/ss 3 and 4 of the VSV Act on the specified date. The respondent authority's rejection of the petitioner's declaration is untenable and quashed. The authority is directed to consider and process the petitioner's declaration within 12 weeks.
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• Income Tax reassessment upheld due to non-disclosure of material facts by assessee.

  Case-Laws - HC : Reassessment proceedings were initiated based on the belief that the assessee failed to disclose all material facts necessary for completing the assessment u/s 143(3) of the Income Tax Act, 1961. The Appellate Tribunal, being the ultimate fact-finding authority, upheld the Assessing Officer's decision to reopen the assessment, concluding that the assessee did not furnish the required information. The High Court held that no substantial question of law arises for consideration, as the Appellate Tribunal's factual findings cannot be disturbed u/s 260A, which is limited to substantial questions of law. The Appellate Tribunal's role as the ultimate fact-finding authority was affirmed.
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• Tax Tribunal Overturns Profit Addition After Evidence Supports Genuine Transactions; Department's Claims Dismissed.

  Case-Laws - AT : The assessee had made purchases from M/s. HJM Fuels Pvt. Ltd., which the Department treated as bogus and added a profit element. The assessee pointed out discrepancies in the incriminating material found from the accommodation entry provider, M/s. HJM Fuels Pvt. Ltd., during the survey. The assessee filed a detailed reply, providing evidence of the genuineness of the transactions, including copies of purchase bills, VAT returns, Form No. 26AS, and quantitative tally of purchases and sales. The Director of M/s. HJM Fuels Pvt. Ltd. submitted an affidavit admitting to the transactions with the assessee, which the Assessing Officer acknowledged. However, the Assessing Officer relied on the incriminating material without providing reasons for disregarding the assessee's evidence. The Tribunal held that the incriminating material lacked credibility and evidentiary value, and the Department failed to controvert the assessee's contentions. Consequently, the addition of the profit element on the purchases was not sustainable, and the assessee's appeal was allowed.
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• Interest Income on NPAs: ITAT Aligns 'Credited' with RBI Guidelines, Favors Bank's Appeal on Assessment Years 2016-18.

  Case-Laws - AT : Section 43D is a non-obstante and special provision regarding income by way of interest on bad or doubtful debts. It states that such interest income shall be chargeable to tax in the previous year in which it is credited to the profit and loss account or actually received, whichever is earlier. The assessee bank appropriated and recognized interest income of Rs. 1,20,87,000/- on 13/05/2015 (A.Y. 2016-17) and 31/03/2017 (A.Y. 2017-18) from recovery of NPAs after prolonged litigation. The ITAT held that the word 'credited' in Section 43D should be understood in the context of recognition and appropriation as per RBI guidelines and the Indian Contract Act, 1872. Since the assessee appropriately recognized the interest income in the relevant assessment years after clearing litigation clouds, the provisions of Section 43D were complied with. Accordingly, the CIT(A)'s order was set aside, and the assessee's appeal was allowed.
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• Tribunal Upholds Reassessment, Validates Factory Sale Valuation, and Disallows Capital Loss on Shares Due to Lack of Evidence.

  Case-Laws - AT : Three key issues: validity of reopening assessment, treatment of short-term capital gain on sale of factory building, and disallowance of short-term capital loss on share transactions. Regarding reopening, the assessee failed to provide evidence challenging the reassessment proceedings initiated u/s 148. On the factory building sale, the Tribunal upheld adopting the market value as on the conveyance deed date rather than the earlier business transfer agreement date. Concerning the share transactions, the Tribunal upheld the disallowance of claimed capital loss due to lack of evidence justifying the wide fluctuation in share values within a short period and absence of supporting documents like valuation reports, bank statements, and confirmations from counterparties. The Tribunal found no infirmity in the CIT(A)'s order on these issues.
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• Stock Broker's Claimed Loss Denied for Manipulative Trading in Penny Stocks; Tribunal Confirms Fraudulent Intent.

  Case-Laws - AT : The assessee, a professional stock broker, claimed loss on trading of shares which was disallowed by the Assessing Officer (AO) on the grounds that the trades were not genuine business transactions, but part of accommodation entries to manipulate share prices. The Tribunal upheld the disallowance, observing that the assessee invested in shares of three companies with no financial standing, deliberately sold those shares incurring losses, and failed to provide any explanation for such transactions. The modus operandi unearthed by tax authorities, the assessee's knowledge as a stock broker, and involvement of penny stock companies pointed towards systematic booking of bogus losses. Relying on a precedent case, the Tribunal held that the assessee failed to prove genuineness of transactions, and the losses were arranged to convert unaccounted money. Regarding shares of Gujarat Meditech Ltd, the Tribunal noted limited trading and sellers, further substantiating the bogus nature of shares and disallowance of loss. Consequently, the assessee's appeal was dismissed.
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• Tax Tribunal Overturns Unjustified Agricultural Land Gain Addition Due to Procedural Lapses and Lack of Evidence.

  Case-Laws - AT : Legality of the addition made by the Assessing Officer (AO) regarding the gain on sale of agricultural land, based on the alleged understatement of consideration paid. The key points are: The AO failed to follow proper cross-examination procedures under the Evidence Act, relying solely on statements without allowing cross-examination. The Supreme Court has held that while the Evidence Act does not strictly apply to income tax proceedings, its principles can be applied. The registered sale deed carries a presumption of genuineness, and the AO did not rebut this with concrete evidence. The AO did not examine other relevant witnesses or consider circle rates or comparable land values. The AO also failed to refer the matter to the District Valuation Officer for value ascertainment. Based on these lapses, the addition made solely on unsubstantiated statements was unjustified, and the Tribunal allowed the assessee's appeal, deleting the addition.
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• Tribunal Orders New Assessment Due to Undeclared Gains and Losses in Penny Stocks; Original Assessment Lacked Proper Inquiry.

  Case-Laws - AT : Assessee failed to declare Long Term Capital Loss (LTCL) on sale of shares of ECL and Long Term Capital Gain (LTCG) on sale of shares of Saya in the return of income. ECL and Saya appear to be penny stock companies. Assessee seemingly dealt in shares of these companies but did not reflect profits/losses correctly in the return. Assessing Officer (AO) failed to inquire into this aspect during assessment proceedings. Principal Commissioner of Income Tax (PCIT) erred in directing AO to assess income u/s 69A read with Section 115BBE, binding AO without independent application of mind. Assessment order is erroneous and prejudicial to Revenue's interest as AO did not examine treatment of LTCL and LTCG. AO directed to carry out de-novo assessment as per law after giving assessee opportunity of hearing. Decided against assessee by Income Tax Appellate Tribunal (ITAT).
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• Housing Cooperative Wins: Interest & Rental Income Offset Maintenance, Qualifies for Tax Deduction u/s 80P.

  Case-Laws - AT : Income earned by a housing cooperative society from interest on fixed deposits and rental income is eligible for set-off against maintenance expenses. The interest income is directly linked to the activity of maintaining the residential premises, reducing the maintenance contribution burden on members. The society rightly set off the interest income against its income. The addition made by the authorities on this ground is liable to be deleted. Furthermore, as the society has shown a net surplus after netting out maintenance expenses, it is eligible for deduction u/s 80P(2)(c)(ii) of the Act, which the assessing officer is directed to allow. The grounds raised by the assessee regarding set-off of interest and rental income against maintenance expenses and granting of standard deduction are allowed in favor of the assessee.
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• Tribunal Upholds CIT's Income Estimate Amid Assessee's Non-Compliance, Dismisses Revenue's Appeal on Unexplained Deposits.

  Case-Laws - AT : The assessee failed to file income tax returns and produce books of accounts. The Commissioner of Income Tax (Appeals) passed a detailed order computing income after obtaining inputs from the assessee, cross-verifying with suppliers, and verifying findings by the Assessing Officer. Although based on assumptions and estimates due to the assessee's lack of transparency, the computation cannot be faulted as the assessee conceded it before the CIT(Appeals). The Income Tax Appellate Tribunal held that the assessee cannot argue against the computation after conceding it, and decided against the assessee regarding the unexplained deposit u/s 69A. Regarding the estimation of net profit on cash deposits, the Tribunal dismissed the Revenue's appeal, upholding the CIT(Appeals)'s correct estimation of taxable net profit instead of considering the entire cash deposit as income.
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• Late tax return filing results in penalty appeal & delay condonation for fair hearing.

  Case-Laws - AT : Penalty imposed u/s 271B for delay in filing the return. The key points are: The assessee failed to get accounts audited as per Section 44AB. The penalty order u/s 271B was passed on 05.07.2021, and the assessee filed an appeal before the CIT(A)/NFAC on 22.01.2022, resulting in a delay of 171 days. Following the Tribunal's order in the assessee's quantum proceedings for the same assessment year, the issue was restored to the CIT(A)/NFAC to condone the delay in filing the appeal and decide the matter on merits after providing an opportunity of being heard to the assessee. The grounds raised by the assessee were allowed for statistical purposes.
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• Reopening of Tax Assessment Overturned; ITAT Rules Against Misclassification of Derivative Gains as Unexplained Cash Credits.

  Case-Laws - AT : The case pertains to the validity of reopening of assessment and addition made u/s 68 as unexplained cash credit. The key points are: The assessee had duly recorded the derivative gain from M/s. Latin Manharlal Securities Pvt. Ltd. in the financial statements, rendering the basis for reopening factually incorrect. The assessment proceedings revolved around alleged parties claiming losses and evading taxes, whereas the assessee earned derivative gains. The Assessing Officer (AO) erroneously treated the profit as unexplained cash credit u/s 68, despite the assessee including it in the profit and loss account. Even if the income is deemed illegal, it cannot be added u/s 68 as unexplained cash credit. The AO should have reduced the amount from the income side. If considered illegal, reducing the amount would result in a loss, and if added u/s 68, the assessee would be eligible for set-off, making the exercise tax-neutral. The CBDT Circular No. 11 of 2019 clarified that up to AY 2016-17, losses can be set-off against additions u/s 68. Consequently, the ITAT directed the AO to delete the impugned addition, deciding in favor of the assessee.
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• Dispute Over Employee Reimbursements in India-Japan Tax Treaty Resolved: Payments Deemed Salary, Not Fees for Services.

  Case-Laws - AT : Taxability of employee cost reimbursements as Fee for Technical Services (FTS) under the India-Japan tax treaty. The assessee, a Japanese company, seconded employees (expats) to its Indian associated enterprises (AEs). The Revenue contended that the expats rendered managerial/technical services, and the reimbursements received were taxable as FTS. However, the assessee argued that the expats worked as employees of the Indian AEs, and the payments were pure salary reimbursements. The Tribunal examined the terms of the secondment agreements and memorandums of understanding, which indicated that the expats worked under the direct control and supervision of the Indian AEs. The Tribunal held that no evidence was provided to substantiate the Revenue's claim of managerial/consultancy services rendered. The reimbursements were mere cross-charges of salary costs, taxable as salary income in the hands of the expat employees, not as FTS in the hands of the assessee. Consequently, the addition of FTS was deleted.
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Customs

• Customs broker cleared of penalty for vicarious liability without substantive violation.

  Case-Laws - HC : The CESTAT erred in holding the appellant vicariously liable despite finding no contravention of Regulations 10(a), (d), (e), (m), and (n) of the Customs Broker Licensing Regulations (CBLR) 2018. Once the CESTAT concluded that the charges against the appellant under these regulations were without merit, the question of vicarious liability should not have arisen. The High Court ruled in favor of the appellant, setting aside the imposition of penalty based on vicarious liability when no substantive violation was established.
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• Clarification on procedures for IGM amendment due to consignee change, with indemnity bond requirement.

  Case-Laws - HC : The court held that for amendment of Import General Manifest (IGM) due to change in consignee, the procedure prescribed in paragraph 3(c) and (e) of Customs Circular No. 14/2017-Customs dated 11th April 2017 must be complied with. The court relied on a previous decision in ETG AGRI INDIA PVT. LTD. VERSUS UNION OF INDIA AND OTHERS, where it was directed that the concerned authority empowered to consider the application for amendment in IGM should decide the application, subject to the condition of the petitioner executing an indemnity bond in favor of the authorities, indemnifying them against claims and protests raised by private parties regarding the subject goods. Accordingly, the petition was disposed of.
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• Textile company faces consequences for illicit yarn diversion into domestic market.

  Case-Laws - HC : The appellant company, part of a group, was involved in clandestine removal of imported partially oriented yarn (PFY) into the local market, breaching Notification No. 59 of 1998 for manufacture of export goods. This diversion occurred in connivance with brokers and buyers to obtain cash sale proceeds. Consequently, the demand for customs duties on seized yarns from Jay Krishna Sizers and Carewell Rayons Pvt. Ltd., and the imposition of penalty on the appellant, were upheld. The High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's order.
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• Merger doctrine renders Tribunal order subsumed into Supreme Court judgment on appeal. No further review on penalty levy.

  Case-Laws - HC : Doctrine of merger applied to impugned order of Appellate Tribunal imposing penalty on appellant. Held that since Supreme Court's judgment on appeal against Tribunal's order, doctrine of merger renders Tribunal's order subsumed into apex court's judgment. Consequently, no question of law arises from Tribunal's order for consideration regarding perversity, jurisdiction to levy penalty or discretion exercised. Application dismissed as Tribunal's order has merged into Supreme Court's judgment under Article 136.
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• Court Overturns Denial of SEZ Benefits; Restores 2009 Guidelines for Operation and Maintenance from April 2015 to May 2016.

  Case-Laws - HC : The High Court examined the issue of denial of operation and maintenance benefits u/s 26 of the SEZ Act for the intervening period from 01.04.2015 to 08.05.2016. It considered a similar case before the Delhi High Court in Moser Baer India Ltd. vs. Union of India, where the directions in the covering letter dated 06.04.2015 for re-demarcation of the processing area into a non-processing area were found contrary to the letter circulated under the same cover. The first letter dated 06.04.2015 restored the 2009 Guidelines, allowing power plants only in non-processing areas with fiscal benefits limited to initial setup. The second letter dated 06.04.2015 was held repugnant to the first. The impugned communication dated 06.04.2015, which demarcated captive power plants in processing areas as non-processing areas and denied operation and maintenance benefits earlier, was found arbitrary and invalid. Consequently, the impugned order was set aside, and the petition was allowed.
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• CESTAT Overrules Export Value Rejection; Declared Values Accepted, Penalties Dismissed Under EPCG Scheme.

  Case-Laws - AT : The CESTAT examined the overvaluation of goods case involving rejection of declared export value, re-determination of value, confiscation of goods, and penalties. The key points are: The EPCG Scheme allows importers to import capital goods at nil/concessional duty rates, subject to fulfilling export obligations based on the duty forgone. The export obligation is determined by the FOB value of exports, which should align with the buyer-seller agreement and remittances received. The transaction value is generally the assessable value, but exceptions exist u/s 14 and Valuation Rules. The Customs officer can reject the transaction value if reasonable doubts exist. In this case, the sole basis for rejecting the declared value and re-determining it based on the Chartered Engineer's certificate was flawed. The exporter received remittances as per declared values, and no evidence suggested fund flow back to the buyer. Cost of manufacture could be lower than export price. No reasonable doubt existed regarding the transaction value's truth or accuracy. Therefore, the CESTAT held that the transaction value declared in shipping bills deserves acceptance, rendering confiscation, fines, and penalties immaterial. The impugned order was set aside, and the appeal was allowed.
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FEMA

• Exporters diverted tea shipment, obtained proceeds through false claims; accessory appellants aided contravention.

  Case-Laws - AT : Violation of RBI Scheme and FERA provisions. Four containers of Indian Black Tea intended for Moscow were shipped to Dubai instead. Appellants issued Bills of Lading aware of diversion to Dubai, facilitating exporter's violation. Exporter claimed delivery to Moscow via Dubai and Bandarabbas, but failed to provide evidence of buyer receiving cargo. Sale proceeds drawn against letter of credit despite non-delivery. Dispute arose after department's inquiry. Appellants connived with exporter, actively participating and abetting contravention. Impugned order upheld, appeal dismissed.
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• Insufficient Evidence Leads to Overturning Penalty in Alleged FERA Violation Over UK Property Purchase.

  Case-Laws - AT : This case pertains to penalties imposed for alleged violation of the Foreign Exchange Regulation Act (FERA), 1973. The respondent claimed the appellant transferred 70,000 pounds to purchase a house in the UK, contravening FERA provisions. The appellant retracted his initial statement implicating the transfer, attributing it to a dispute with his sister and brother-in-law. The key points are: the respondent failed to substantiate the transfer of 70,000 pounds; the retraction was prompt; the brother-in-law's statement lacked specificity; no documentary evidence of property transfer existed; the brother-in-law's affidavit claimed ownership of the house; and the appellant's father's statement was hearsay. Consequently, the Appellate Tribunal held that the respondent failed to prove the FERA violation, and the penalty imposition was unjustified due to lack of evidence regarding the alleged foreign exchange contravention.
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• Violation of FERA: Confiscation of Interest Due to Unverified Foreign Income and Cash Deposits Under Appellant's Name.

  Case-Laws - AT : Contravention of Section 8(1) of the Foreign Exchange Regulation Act (FERA) and the confiscation of accrued interest to the Government of India's account u/s 63. The Adjudicating Authority analyzed evidence and concluded that the Appellant did not own the funds in the Indian bank accounts. The Malaysian Inland Revenue Board's report indicated the Appellant and her husband failed to report income from Singapore, UAE, or remittances to India. The proceedings before the Income Tax authorities were to determine the tax liability of a resident abroad and did not impact the acquisition of funds by a resident in India in the Appellant's name. Statements u/s 40 of FERA revealed cash deposits in the bank. The evidence did not corroborate the Appellant's contention about the source of funds. The funds mobilized in R. Susila's name benefited N. Sasikala. The discharge in the prosecution proceedings is independent from the adjudication proceedings, as held by the Supreme Court. The Appellate Tribunal unable to persuade that the prosecution proceedings should have a binding effect on the present adjudication proceedings.
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Indian Laws

• Supreme Court Quashes Charges Due to Lack of Criminal Intent in Coal Disposal Case, Citing Civil Dispute Nature.

  Case-Laws - SC : The summary covers the key aspects of the Supreme Court's judgment, including the Court's findings on the following critical issues: The CBI primarily relied on the CAG's Audit Report as the starting point for initiating prosecution against the appellants, which cannot be accepted as decisive without parliamentary approval. The Karnataka High Court's judgment clarifying no criminality can be attributed to KECML based on the same facts is persuasive. The denial of sanctions by sanctioning authorities to prosecute senior KPCL officers involved in the same matter weakens the case against the appellants. The absence of a national policy for disposal of coal rejects and the agreements allowing KECML to dispose them safely without accounting to KPCL negate any criminal intent. KECML's decision to outsource coal washing was driven by compelling circumstances with KPCL's concurrence. The coal rejects lacked useful calorific value as per government laboratory reports. The High Court rightly exercised its inherent powers u/s 482 CrPC to prevent abuse of process. The Supreme Court's extraordinary powers under Article 136 allow it to correct errors, safeguard rights, and dispense justice, warranting interference in this case. The charges framed against the appellants stem from a predominantly civil dispute lacking criminal elements, leading the Court to quash the impugned orders.
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• Cheque dishonor settlement binding, court to initiate recovery upon breach.

  Case-Laws - HC : Settlement in a cheque dishonor case u/s 138 NI Act recorded by the court after satisfying its voluntariness is legally binding. Upon breach, the court must initiate recovery proceedings u/s 421 read with Section 431 CrPC, treating the settlement amount as a fine. Referring the matter to mediation is not mandatory for court-recorded settlement. The impugned order setting aside the settlement was incorrect as the settlement was voluntary and received court's approval. The High Court directed the trial court to proceed with recovery of the settlement amount upon the accused's default.
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PMLA

• Laundered money led to attachment of properties despite acquired before offense. Family's crime proceeds share justified action.

  Case-Laws - AT : Money laundering case involving attachment of properties. Appellant argued property was acquired prior to offense, hence cannot be attached. Court rejected contention, relying on Supreme Court precedent allowing attachment of other assets when direct proceeds unavailable. Appellant received share from crime proceeds along with family members. Adjudicating authority rightly confirmed attachment in absence of direct proceeds. Appeal dismissed being devoid of merits, upholding attachment order due to legal position on attaching other assets when crime proceeds unavailable.
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• Sole proprietor liable for VAT fraud proceeds laundering. Accounts with Rs. 2.4L rightly attached as tainted funds.

  Case-Laws - AT : Proprietorship concerns lack legal personhood; proprietor deemed necessary party. Proceeds of crime from VAT fraud laundered through multiple entities. Appellant's accounts containing Rs. 1,25,000/- and Rs. 1,15,000/- rightly attached as tainted funds. Appeal against provisional attachment dismissed, upholding adjudicating authority's order confirming attachment.
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Service Tax

• Tax liability dispute over services rendered under Finance Act.

  Case-Laws - HC : Challenge to service tax liability demand under Finance Act, 1994. Court directed constitution of team of competent officers to pass orders without territorial jurisdiction within three months, considering: petitioners' qualification u/s 65B(44), services covered under negative/exemption lists, liability u/r 2(1)(d), limitation period. Petitions challenging show-cause notices relegated to officers. Petition disposed.
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Central Excise

• Utilization of CENVAT credit of basic excise duty for payment of National Calamity Contingent Duty permissible.

  Case-Laws - AT : The Tribunal held that the utilization of CENVAT credit of basic excise duty for payment of National Calamity Contingent Duty (NCCD) is permissible u/r 3 of the CENVAT Credit Rules, 2004. This issue is settled by various judgments, including the Tribunal's own decision in the case of C.C.E. & S.T. -SILVASA AND C.C.E. & S.T. -DAMAN VERSUS WELSPUN SYNTEX LTD AND M/S. WELLKNOWN POLYESTER LIMITED. The Tribunal distinguished the judgment in M/s. Unicorn Industries vs. UOI, which dealt with the nature of NCCD as a surcharge or excise duty, and held it to be irrelevant to the present issue. Consequently, the Tribunal upheld the respondent's utilization of CENVAT credit of basic excise duty for payment of NCCD and dismissed the Revenue's appeal.
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Case Laws:

• GST

• 2024 (9) TMI 99
  Cancellation of registration of petitioner - cancellation challenged on the ground of not providing an opportunity of hearing as well as such order was passed without assigning any reason for cancellation of the registration of the petitioner - violation of principles of natural justice - HELD THAT:- The Coordinate Bench of this Court in case of AGGARWAL DYEING AND PRINTING WORKS VERSUS STATE OF GUJARAT 2 OTHER (S) [ 2022 (4) TMI 864 - GUJARAT HIGH COURT] has issued the guidelines to the respondent-authorities holding that Until the Department is able to develop and upload an appropriate software in the portal which would enable the Department to feed all the necessary information and material particulars in the show cause notice as well as in the final order of cancellation of registration that may be passed, the authority concerned shall issue an appropriate show cause notice containing all the necessary details and information in a physical form and forward the same to the dealer by RPAD. In the same manner, when it comes to passing the final order, the same shall also be passed in a physical form containing all the necessary information and particulars and shall be forwarded to the dealer by RPAD. The aforesaid judgement was rendered in the year 2022. However, in spite of the above direction issued by this Court, the respondent-authorities without following such directions are issuing cryptic notice and order for cancellation of registration number of the petitioner. In the present matter, order of cancellation of registration is passed without giving any reason by the respondent authorities, and appeals filed by the petitioners under Section 107 of the GST Act are also dismissed. The matter is remanded back to the Assessing Officer at the show cause notice stage. However, the registration of the petitioner shall remain suspended till the show-cause notice is decided by the Assessing Officer as per the directions imposed - This petition is accordingly disposed of.

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• 2024 (9) TMI 98
  Challenge to SCN - SCN does not contain necessary factual details and is only reproduction of Section 29(2)(e) of Central Goods and Services Tax Act, 2017 - Violation of principles of natural justice - HELD THAT:- There are substance in the argument of learned counsel for the petitioner that such a notice runs contrary to principles of natural justice and deprives the assessee to file an effective reply to the show cause notice. The impugned SCN is liable to be interfered with because it does not disclose minimum/elementary factual details on the basis of which power under Section 29 of the Act is invoked. Mere reproduction of offending clause or enabling provision cannot be a reason to give stamp of approval to a show cause notice which lacks minimum essential details. The impugned show cause notice dated 24.05.2024 is set aside - Petition allowed.

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• 2024 (9) TMI 97
  Challenge to adjudication order passed under Section 73(9) of the CGST/WBGST Act, 2017 dated 29th April, 2024 issued in Form GST/DRC 07 - ITC, availed in GSTR-3B was filed after the last date prescribed u/s 16 (4) of the said Act - HELD THAT:- Taking note that a sum of Rs. 63,28,114/- was found to be reversible, as would appear from the show cause notice, for reasons of the petitioners having availed ITC by filing GSTR-3B after the last date and since, from the Finance Bill No.02, being Bill No. 55 of 2024, it would appear that in Clause 114, amendment of Section 16 of the said Act has been proposed thereby making a provision to give benefit to those registered tax payers who are entitled to Input Tax Credit and have filed a return under Section 39 of the said Act up to 30th November, 2021, in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial years 2017-18, 2018-19, 2019-20 and 2020-21, and since the petitioner had filed Form 3B for the Tax period 2018-2019, belatedly but before 30th November, 2021, the petitioners at this stage is entitled to an interim order, as the finance bill no.2 of 2024 takes care of a major part of the determination made under Section 73 of the said Act for the Financial Year 2018-19. Such interim order is necessary to avoid multiplicity of judicial proceedings. The petitioners are directed to make a deposit with the learned Registrar General a sum of Rs. 25 lakhs within a period of 3 weeks from date. If the aforesaid amount is deposited with the learned Registrar General, the same shall be invested in any interest bearing fixed deposit account with any Nationalized Bank of his / her choice and the same shall be kept renewed until further order of this Court. Petition disposed off.

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• Income Tax

• 2024 (9) TMI 96
  Income Tax Department hiring the building on rent/lease for its office premises - Application praying for setting aside the notice whereby the petitioner was declared not qualified on the evaluation of technical bid submitted by the bidders including the petitioner - As decided by HC [ 2024 (7) TMI 1518 - PATNA HIGH COURT] the suitability etc. of the premises of the bidders having been evaluated not only on the basis of technical bid submitted but also by visit of the members of the Building Hiring Committee to the premises in question, the Court finds no merit in the contention raised by the petitioner HELD THAT:- We are not inclined to entertain the Special Leave Petition under Article 136 of the Constitution of India. Special Leave Petition is accordingly dismissed.

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• 2024 (9) TMI 95
  Applicability of provision of DTAA overriding against to provisions of section 206AA - delay filling SLP - Whether Tribunal and CIT(A) are right in holding that provisions of DTAA will override provisions of the Act when the same is against to provisions of section 206AA of the Act? As decided by HC as submitted that the issue involved in this appeal is covered by the decision of this Court in the case of M/s. Wipro Ltd. [ 2023 (1) TMI 173 - KARNATAKA HIGH COURT] The said submission is not disputed by Shri. M. Dilip for the appellants, in his usual fairness. Decided in favour of assessee HELD THAT:- There is gross delay of 402 days in filing this Special Leave Petition. On perusal of the application seeking condonation of delay, neither are we satisfied with the reasons assigned for the same and nor are they sufficient in law to be condoned. Hence, the application seeking condonation of delay is dismissed. Consequently, the Special Leave Petition also stands dismissed. However, the question of law, if any, is kept open.

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• 2024 (9) TMI 94
  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 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. There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148. When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Decided in favour of assessee.

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• 2024 (9) TMI 93
  Eligibility for the benefit of VSV Scheme - Miscellaneous Application filed by the petitioner was not pending as on 31st January, 2020 - HELD THAT:- As per provisions of the VSV Act, it emerges that the petitioner has to be an appellant so as to be eligible on the specified date i.e. 31st January, 2020 to file declaration under Sections 3 and 4 of the VSV Act. Admittedly, the appeal filed by the petitioner in the year 2015 was not pending as on 31st January, 2020. In view of order dated 03rd September, 2020 passed by the Tribunal recalling its order dated 26th March, 2019 whereby appeal filed by the petitioner was dismissed, the appeal was restored to its file i.e. Appeal filed in the year 2015. Therefore, the appeal of the petitioner has to be considered as pending as on 31st January, 2020 which is the specified date as per the VSV Act. When the petitioner has filed declaration under the VSV Act to claim the benefit of the Scheme, the Tribunal had already recalled the order dated 26 th March, 2019 and therefore, the appeal preferred by the petitioner before the Tribunal was pending as on 31st January, 2020. It cannot be said that no appeal was pending as on 31st January, 2020 when the petitioner filed the application/declaration under the provisions of the Scheme in view of order dated 03rd September, 2020 passed by the Tribunal in Miscellaneous Application No. 75/Ahd/2020 preferred by the petitioner to recall order dated 26th March, 2019 whereby appeal of the petitioner was dismissed for non-prosecution. Thus the impugned action of the respondent authority of rejecting the declaration filed by the petitioner is not tenable and accordingly, the same is quashed and set aside. The respondent authority is directed to consider and process the declaration filed by the petitioner under the provisions of the VSV Act within a period of 12 weeks from the date of receipt of copy of this order.

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• 2024 (9) TMI 92
  Validity of reassessment proceedings - reasons to believe - substantial question of law or facts - failure on the part of the appellant to make true and full disclosure of all materials facts necessary - HELD THAT:- The Appellate Tribunal is the ultimate fact finding authority and has given a finding that the appellant/assessee has not furnished the information s required for completing the assessment under Section 143(3) of the Income Tax Act, 1961 and has thus, justified the decision of the Assessing Officer for reopening the assessment. No substantial question of law arises for consideration in this appeal. The finding given by the Appellate Tribunal cannot be disturbed in an appeal under Section 260A of the Income Tax Act, 1961 as the scope of Section 260A of the Income Tax Act, 1961 is confined only to substantial questions of law. Further, the Appellate Tribunal is the ultimate fact finding authority.

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• 2024 (9) TMI 91
  Bogus purchases - addition made of profit element embedded in the purchases made by the assessee held to be bogus - assessee had pointed out discrepancy in the incriminating material found from accommodation entry provider [M/s. HJM Fuels Pvt. Ltd] during the survey which formed the basis with the Department for holding the entire purchase made by the assessee to be bogus - formal acceptance of the Assessee s books of accounts u/s 145(3) - onus of proving the genuineness of the transactions HELD THAT:- Since the Department has been unable to controvert the contentions made by the assessee that the incriminating material lack credibility and in fact the AO agreed with the factual contentions of the assessee which questioned the credibility of the incriminating material, we agree with assessee that the said incriminating material was therefore wrongly relied upon by the AO for making addition in the hands of the assessee, treating the purchases to be bogus. Assessee filed a detailed reply pointing out that they had communicated with the Director of M/s. HJM Fuels Pvt. Ltd. for appearing before the AO who had submitted his inability to do so because of his health condition, but at the same time had stated that all necessary documents evidencing the genuineness of the transactions had been filed by him along with his affidavit in this regard in response to summons issued to him by the AO u/s 132(1) - these facts have also remained uncontroverted by the AO and in fact he has admitted to the Director of M/s. HJM Fuels Pvt. Ltd. having filed an affidavit admitting to having undertaken transactions of sales to the tune of Rs. 2.47 crores with the assessee. Thus the assessee had established with evidence the factum of having made purchases from M/s. HJM Fuels Pvt. Ltd. having furnished copies of bills of purchases and the mode of purchases made, Copy of VAT returns reflecting the said sales to the assessee and the copy of the Form No.26AS reflecting the said purchases on which the TCS was collected and the credits of the same were claimed by the assessee was filed. The assessee had also submitted the quantitative tally of the purchases made by it during the entire year substantiated with Purchase Bills and Register and the sales made by it during the year substantiated by the Sales Register. Thus, in effect, on merits, the assessee had duly established the genuineness of the transactions of purchases undertaken. The Director of M/s. HJM Fuels Pvt. Ltd. had submitted by way of affidavit of having entered into the transactions of sale of coal to the assessee, which has also been admitted by the Assessing Officer and no infirmity in the said affidavit pointed out by the Assessing Officer - AO given no reason for accepting the incriminating material despite the assessee pointing out defects in the same. Thus, the incriminating material relied upon by the Revenue for making addition, we find was established to be not credible and having no evidentiary value. Thus no case /basis with the Department for treating the purchases made by the assessee from party as bogus. The addition, therefore, made of the profit element embedded is clearly, therefore, not sustainable - Assessee appeal allowed.

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• 2024 (9) TMI 90
  Enhancement of income by CIT(A) - Addition made on account of income under one time settlement scheme (OTS) and income enhanced by erstwhile CIT(A) on account of recovery of NPA - adjudication and adjudgment is how to treat the income in which assessment year - CIT(A) enhanced the income of the assessee holding that since the amount has been received during the A.Y. 2013-14 the same is taxable under the year under consideration as per the provisions of Section 43D - HELD THAT:- Section 43D is NON OBSTANTE IN NATURE BESIDES BEING SPECIAL PROVISION. The words used are the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the RBI in relation to such debts shall be chargeable to tax in the previous year in which it is credited to its profit and loss account for that year or as the case may be in which it is actually received by that institution or bank or corporation or corporate, whichever is earlier. Law has used two words credited or received whichever is earlier. In light of above express, non obstante and special provision of law we notice as ledger account maintained by the assessee society as bankers that an amount as appropriated / recognised as interest income on 13/05/2015 which falls under A.Y. 2016-17. Similarly the assessee has appropriated / recognised sum on 31/03/2017 as interest income for A.Y. 2017-18. Thus we hold that in aggregate sum of Rs. 1,20,87,000/- as duly appropriated and accounted as and by way of interest income basis ledger statement of assessee society / bank for A.Y. 2016- 17 and A.Y. 2017-18. We hold that we have also perused carefully all the paper and proceeding filed in several paper books and basis that we hold that with great difficulty assessee bank could recover bad loans which had become NPA s. Civil proceedings though initiated in year 2012 finally yielded result for bank in form of recovery while it is true that the assessee bank had to go through the rigours of civil litigation which is highly time consuming in India the assessee bank received the amounts(supra) and finally appropriated, recognised and accounted the same as aforesaid. Accordingly we hold that provisions of Section 43D of Income Tax Act, 1961 stands complied in overall facts and circumstances of the case as the word credited or received as used in Section 43D (supra) is required to be understood in the context of recognition and appropriation of payment by virtue of RBI guidelines (supra) and the Indian Contract Act, 1872 and so also by noting and appreciating the fact that recoveries were appropriated and recognised after the clouds of litigation got cleared. In the result the impugned order of Ld. CIT(A) is set aside and appeal of the assessee is allowed.

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• 2024 (9) TMI 89
  Validity of reopening of assessment - reasons to believe - HELD THAT:- CIT(A) considering the statement of facts given in Form 35 and written submissions, held no evidence whatsoever brought on record in support of the claim in contending the reassessment being invalid under law. Before us, no evidence whatsoever filed in support of ground Nos. 1 2 challenging the action of the ld. CIT(A) in confirming the reassessment proceedings initiated by issuing notice u/s 148 and completing the assessment u/s 143(3) r.w.s. 147 is invalid, thus, ground Nos. 1 2 as raised by the assessee are dismissed. STCG - Difference between the sale price and market value of the factory building - whether the value of factory land and building sold by the assessee is to be adopted as on the date of business transfer agreement executed during October, 2011 or as on the date of conveyance deed in the month of December, 2011 when the transfer deed was registered and stamp duty paid by the assessee? - HELD THAT:- We note that the assessee adopted the market value of the factory land and building as on the date of business transfer agreement executed during October, 2011, but, however, the AO considered the market value of the factory land and building as on the date of conveyance deed executed in the month of December, 2011 when the transfer deed was registered and stamp duty paid by the assessee. CIT(A) observed that the transfer of any immovable property gets effected by virtue of the registration of the transfer agreement and not on any other date prior to such date. We note that the ld. CIT(A) confirmed the market value of the factory land and building being adopted by the AO as on the date of conveyance deed executed in the month of December, 2011. Hence, we find no infirmity in the order passed by the ld. CIT(A) and the same is justified. Thus, the ground No. 3 raised by the assessee is dismissed. Disallowing short term capital loss - no reason for fall of intrinsic value of shares within a short period of time - assessee claimed sale price of 20,00,000 shares at face value of Rs..10/- per share with premium of Rs..35/- from four entities and as the said transfer did not materialize and decided to resale the said shares to the same above said 4 entities at a face value of Rs..10/- per share only - HELD THAT:- assessee failed to produce any valuation report or genuineness of the circumstances and other conditions, which compelled the assessee company to purchase the shares at Rs..45/-. We also noted that the assessee failed to produce share transaction statement, bank account statements for Rs..45/- being paid for each share and Rs..10/- received on resale, confirmations by way of financials from the four entities with whom the whole gamut of purchase and sales of shares took place. Thus, the Assessing Officer disallowed the entire loss of Rs..7,00,00,000/- claimed by the assessee. After considering the facts and circumstances of the case along with statement of facts and written submissions, the ld. CIT(A) found the submissions of the assessee are not acceptable in the absence of any documentary evidence and passed a detailed order. nothing was brought on record to show why the assessee within a short period of time sold the above said shares to the same 4 entities without charging premium and moreover, the assessee could not produce any details of share transaction statement, bank account statements for Rs..45/- being paid for each share and Rs..10/- received on resale, confirmations by way of financials from the four entities with whom the whole transaction was undertaken. Therefore, we find no infirmity in the order of the ld. CIT(A) and the same is justified.

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• 2024 (9) TMI 88
  Addition u/s 68 - disallowance of loss in trading of shares - Manipulation of share prices - AO held that the trades were not genuine business transactions, but a part of accommodation entries, thus the loss was disallowed - HELD THAT:- Looking into the facts of the assessee s case, the detailed the modus operandi unearthed by the tax authorities, there is no explanation as to why the assessee during the impugned years under consideration invested in shares of three companies having no financial standing, the assessee has not furnished any reason as to why under what circumstances the assessee deliberately sold shares of these companies and incurred losses on the stock exchange, the assessee is a professional stock broker and is deemed to have knowledge about financials of a company and assessee involved issues in not one but three penny stock companies all point to the fact that the assessee has deliberately and systematically booked bogus losses, during the impugned year under consideration. In the case of Satish Kishore v. ITO [ 2019 (11) TMI 402 - ITAT DELHI] the assessee, an individual, filed return of income claiming long-term capital gain on sale of shares as exempt under section 10(38). AO held that it was found that assessee failed to justify manifold increase in prices of shares despite weak financials of companies. Further, investigation carried out by Department had brought facts on record that share prices had been manipulated artificially, purchased by a set of accommodation entry provider companies controlled by cartel of brokers, entry operator, etc. Moreover, fact that prices of all shares purchased by assessee went up, that too without any corresponding profit or prospects of company, and not even in single case price of share came down, was against human probabilities and impugned year was an isolated year of such profits with no such profits made in earlier or subsequent years. In such circumstances, the Tribunal held that assessee failed to prove genuineness of transaction and long-term capital gain on sale of shares by assessee was an arranged affair to convert its own unaccounted money and thus, exemption claimed under section 10(38) on sale of shares had rightly been disallowed. Thus, we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and in law in confirming the addition made in respect of bogus claimed by the assessee in the instant facts. With regard to the shares of Gujarat Meditech Ltd, the assessing officer observed that the shares were sold by only 3 entities Jhaveri trading and investment private limited, Vicki Rajesh Jhaveri and Shailesh Jhaveri and a total of only 96,000 shares of this company were traded on BSE. In view of the above observations for this entity as well, we observe that CIT has not erred in facts and in law in holding that shares of Gujarat Meditech Ltd. are bogus shares and therefore, lossmade by the assessee is liable to be added to the income of the assessee. Assessee appeal dismissed.

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• 2024 (9) TMI 87
  Revision u/s 263 - Disallowance u/s 14A - HELD THAT:- PCIT brought to the notice of the assessee, Explanation to section 14A of the Act through Finance Act, 2022 vide notice under section 263 and in response to the hearing notice, the assessee filed written submission dated 15.03.2024, which was reproduced in the impugned order at page 13 of the paper book, wherein, it was clearly contended that there was no dividend exempt income received in the year under consideration and the amendment made in section 14A by Finance Act, 2022 is prospective in nature. Therefore, we find that the AO examined the issue in detail during the course of original assessment proceedings and by applying the relevant statutory provision as it stood then, made no disallowance u/s 14A of the Act. Regarding the insertion of Explanation to section 14A of the Act by way of Finance Act, 2022, we find that while taking into consideration the said amendment, case of PCIT v. Era Infrastructure (India) Ltd[ 2022 (7) TMI 1093 - DELHI HIGH COURT] held that it is settled law that the assessment has to be made with reference to the law, which is in existence at the relevant time. Thus we find the facts and circumstances before the Hon ble High Court are similar to the facts on hand, since the year under consideration before us is 2017-18 and has no applicability of Explanation inserted to section 14A of the Act. Therefore, we hold that exercise of jurisdiction by the ld. PCIT under section 263 of the Act is not justified and accordingly the revision order passed under section 263 of the Act is set aside. Thus, grounds raised by the assessee are allowed.

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• 2024 (9) TMI 86
  Gain on sale of agricultural land - real owner - on the basis of the cross examination of the appellant and witness AO held that the assessee was not able to prove that the amount actual paid to the seller - assessee argued rules of cross examination has been flouted by the AO and addition cannot be made only on the basis of statement of Sri S. Dhanabal (son of deceased seller) - non reference the matter to DVO for ascertainment of value. HELD THAT:- There is no documentary evidence unearthed by the AO which could show that the assessee had paid huge amount over and above the sale consideration mentioned in both sale deeds dated 09.02.2010. Market value of the property fixed by the Sub-Registrar office is Rs. 9,99,000/- for the both are find mentioned in last page of each sale deeds. On first principles and on general law, the principles of evidence Act has not been applied by the AO in this case. In this case, questions were asked by the AO and had been simultaneously, replied by the witness and assessee. It is settled practice that after chief examination of witness the other party is entitled to cross examination as per provisions of evidence Act which has not been done in this case. Evidence of a witness through examination or cross-examination is required to be done as per Sections 137 to 154 of the Indian Evidence Act. In this case, we observe that there was no separate examination or cross examination done. The Hon ble supreme court in the case of Chuharmal [ 1988 (5) TMI 1 - SUPREME COURT] held that the Evidence Act does not apply to proceedings under the Income-tax Act. The Supreme Court pointed out that the rigours of rule of evidence contained in the Evidence Act were not applicable to the Income-tax Act, but on first principles and on general law, the principles of Evidence Act can be applied to proceedings under the Income-tax Act. Nothing concrete found against the assessee during so called cross examination and both parties contradicts veracity of statement of each other. Other two sons of deceased seller were not examined. If we accept the version of sons of deceased seller then why they had not filed their respective return of income despite receipwhich were taxable income. Therefore, we reject the contention of buying LIC policies from the unaccounted receipt. Further, if we accept the version of AO then why no action had been taken by the AO against those persons who had receipt of Rs. 25,00,000/- each and had not filed their respective return of income. Apex Court in Damodhar Narayan Sawale (D) through LRs. Vs. Shri Tejrao Bajirao Mhaske Ors [ 2023 (5) TMI 1276 - SUPREME COURT] held that provisions of TOPA along with the provisions of Registration Act and further emphasized that a Sale Deed, when registered and executed in due compliance, shall confer a valid and legitimate title to the receiver. In supra case it was noted that, the execution and registration of Sale Deed was not in dispute however, the dispute was only for nature of the transaction. It was noted that registered Sale Deed having recitals for transfer of right, title and interest in favour of recipient along with recitals of sale considerations shall give a presumption of valid title. Therefore, it is entirely upon the Defendants to establish otherwise and to prove that it did not reflect the true nature of transaction. In Vimal Chand Ghevarchand Jain v. Ramakant Eknath Jajoo,[ 2009 (3) TMI 997 - SUPREME COURT] it is held that the registered deed carries a presumption that the transaction was a genuine one; Sec. 114 of the Evidence Act allows the Court to presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. No inquiry had been been done by the AO regarding circle rate. No comparable had been taken by the AO of the adjacent agricultural land. AO miserably had failed to refer the matter to DVO for ascertainment of value. Thus, if the testimony of one witness is discredited, there was no material with the Department on the basis of which it could justify its action, as the unsubstantiated statement of the witness was the only basis of making addition. Hence, we allow the appeal of the assessee and delete the addition. Decided in favour of assessee.

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• 2024 (9) TMI 85
  Reopening of assessment u/s 147 - reason to believe - non independent application of mind - addition u/s 56(2)(vii)(c) towards benefit derived by the appellant for buy back of shares - live link or close nexus between fresh tangible material and formation of belief of escapement by the AO or not? - HELD THAT:- We find that there is no live link or close nexus between fresh tangible material and formation of belief of escapement by the AO which is discernible from the reasons recorded by the AO where the AO stated that income chargeable to tax had escaped the assessment on account of purchase of 4,17,535 shares, whereas in the assessment order passed u/s 147 AO concluded that the assessee has received 2,22,222 shares instead of 4,17,535 shares and finally assessed the income escaped the assessment at Rs. 2,75,37,750/-. From the above, it is undisputedly clear that the AO issued re-assessment notice u/s 148 of the act without any independent verification and application of mind, but simply proceeded to initiate proceedings on the basis of information received from AO of Bharat Biotech International Ltd which is nothing but a classic case of borrowed satisfaction and thus, in our considered view, the reopening of the assessment based on borrowed satisfaction is invalid and liable to be quashed. Thus, we quash notice u/s 148 of the Act and consequent assessment order passed u/s 143(3) r.w.s. 147. Assessee has challenged the addition made by the AO towards benefit received on account of purchase of 2,22,222 shares of M/s. Bharat Biotech International Ltd from M/s. Mindtree Trading Co (P) Ltd and argued that said transaction cannot be considered as purchase of shares in light of share purchase agreement dated 30.09.2015 and subsequent cancellation agreement dated 29.04.2013. Although the appellant has made various arguments, but we do not wish to consider the issue on merit because the assessment order passed by the AO u/s 143(3) r.w.s. 147 has been held to be invalid on account of incorrect assumption of jurisdiction u/s 147 - Assessee appeal allowed.

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• 2024 (9) TMI 84
  Disallowance of deduction claimed u/s 80P - interest earned on deposits with sponsor Bank - assessee society, being a cooperative society, make deposits in its regular course of business and accordingly the deposits were made in the sponsor bank viz., Andhra Bank in compliance with the statutory regulation of AP Cooperative Societies Act. - HELD THAT:- Referring to Tribunal s order [ 2024 (3) TMI 203 - ITAT VISAKHAPATNAM] relied on by the Ld. AR in the assessee s own case for the AY 2020-21 Tribunal has elaborately discussed the identical issue under the similar set of facts and circumstances of the case and concluded that, the assessee is eligible for deduction u/s 80P of the Act. Therefore, respectfully following the decision of this Bench in the assessee s own case for the AY 2020-21 (supra) as well as based on the principle of consistency, no hesitation to come to a conclusion that the orders passed by the Ld. Revenue Authorities are unsustainable in law - Decided in favour of assessee.

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• 2024 (9) TMI 83
  Revision u/s 263 - treatment of LTCL on sale of shares of ECL and LTCG on sale of shares of Saya - HELD THAT:- On perusal of return of income filed by the assessee such Long Term Capital Loss on sale of shares of ECL has not been declared by the assessee. We are of the considered view that ostensibly, ECL is a penny stock company (which was also delisted from stock exchange) and the shares of such company had also been delisted on the stock exchange subsequently. Further, another notable aspect which we have observed is that the assessee had also sold shares of Saya on which LTCG had been gained by the assessee. However, in the return of income, such LTCG has also not been declared by the assessee. Therefore, evidently, from the facts placed on record we observe that the assessee apparently has dealt in shares relating to penny stock companies and further, the assessee has filed the correct return of income in which the assessee has neither declared Long Term Capital Losses on sale of shares of ECL and neither has assessee declared LTCG on sale of shares of Saya. Therefore, clearly the assessee has not filed it s return of income correctly, wherein both Long Term Capital Losses as well as Long Term Capital Gains on sale of shares with respect to ECL and Saya have not been declared by the assessee in it s return of income. It is not clear as to why such sale of shares these companies for substantial sums of money had not been reflected by the assessee in it s return of income. There seems to have no justifiable reason as to why the assessee had not declared details regarding profit / loss on sale of shares of Saya and ECL respectively in the returns of income filed by the assessee for the impugned assessment year under consideration before us. From the facts placed on record it is not coming out clearly whether the assessee had effectively set off the Long Term Capital Losses on sale of shares of ECL against Long Term Capital Gains on sale of shares of Saya and therefore, did not declare the details of sale of shares of these two alleged penny stocks in it s return of income. Therefore, on perusal of the case records, evidently, the assessee has not filed the correct return of income and has only declared part details regarding sale of shares in it s return of income and hence the return filed by the assessee for the impugned year under consideration lacks for certain apparent inaccuracies. AO, in our considered view, has failed to inquire into this essential aspects during the course of assessment proceedings, which could be for the simple reason that both the details regarding sale of shares of Saya (on which the assessee had earned LTCG) and details of sale of ECL (on which the assessee had earned LTCL) had not been declared by the assessee in it s return of income and therefore, the Assessing Officer failed to analyze whether such LTCG on sale of shares of Saya had been set off against LTCG on sale of shares of ECL. We also concur with the argument of the assessee that Ld. PCIT has erred in giving a specific direction to the Ld. AO to assess the income u/s 69A r.w.s. 115BBE of the Act, since then the A.O. would be bound to assess income in a manner, as directed by the Ld. PCIT, without independent application of mind. Accordingly, we are of the considered view that in the assessment order the AO has failed to enquire into these important aspects regarding treatment of LTCL on sale of shares of ECL and LTCG on sale of shares of Saya which were both not reflecting in the return of income, and therefore, the assessment order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue. AO is, therefore, directed to carry out a de-novo assessment in accordance with law, after giving due opportunity of hearing to the assessee. Decided against assessee.

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• 2024 (9) TMI 82
  Assessment of income applying principles of real income theory - treatment to interest income earned from fixed deposits as assessee shown the Bank interest income under other sources - denial of set off interest income earned on fixed deposits from Banks and rental income earned by the Society against maintenance expenses HELD THAT:- As per Profit and Loss account for the year under consideration, income earned by way of interest on bank Fixed Deposits as well as Rent Receipt charges on Community Hall Charges, Festival Charges Income, Other Misc. Income have been applied for the maintenance of the property namely Electrical Expenses, House Keeping Charges, Repair Maintenance of Bore well, Lift Maintenance, Road Repairing Expenses, Repairing and Maintenance of Plumbing works, Security Charges, Water Tank Cleaning expenses, etc. for the residential property of Venus Parkland . Thus the net surplus shown by the assessee is Rs. 4,64,486/-. Thus the income earned from various sources have been spent for the maintenance and up-keepment of the residential premises of Venus Parkland . Thus the interest income earned from fixed deposits is directly linked with the activity of maintenance of the Society. Further this interest income certainly reducing the burden of contribution for maintenance by the Member of the Society. Therefore, no justification by the Lower Authorities denying the benefit to the assessee simply on the ground that the assessee shown the Bank interest income under other sources . Therefore the assessee Society has rightly set off the interest income against the income of the assessee Society. Thus the addition made on this account is liable to be deleted. Thus addition on account of interest income earned on fixed deposits from Banks and rental income earned by the Society are eligible to set off of maintenance expenses. Ground allowed in favour of assessee. Non granting standard deduction u/s. 80P(2)(c)(ii) - Since the assessee being a housing co-operative society shown net surplus of Rs. 4,64,486/- in its Profit and Loss account after netting out all the maintenance expenses, the assessee is eligible for deduction u/s. 80P(2)(c)(ii) of the Act and the Ld. A.O. is directed to allow the same. Thus this Ground No. 3 is allowed in favour of the assessee.

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• 2024 (9) TMI 81
  Non maintainability of appeal before the CIT(A) - Non-compliance of Section 249(4)(b) alleging the non-payment of advances tax liability - as contended on behalf of assessee that there will be no advance tax liability on the salary income and therefore, there is no breach of provisions of section 249(4)(b) and remaining income assessed towards sale of property in the hands of the assessee is on account of gross misconception of facts by the AO wrongly treating purchase of the property as sale thereof - HELD THAT:- The plea of the assessee for non workability of impediment u/s 249(4)(b) of the Act appears quite convincing in the facts of the case. In this circumstances, narrated on behalf of the assessee appeal of the assessee is found to be maintainable before the CIT(A). Revenue has wrongly proceeded on misappreciation of facts of substantive nature. The purchase of property has been construed as sale of property leading to such exorbitant additions and protracted litigation. The verification was put in motion by the AO on such footing. However, in the absence of any reply from the assessee before the AO or before the CIT(A), the correct facts did not surface for consideration of Revenue. Hence in the fitness of things, the matter needs to be remanded back to the file of the AO for determination of the issue involved afresh in accordance with law. It shall be open to the assessee to adduce all evidences and furnish explanations on the correct state of affairs before the AO without any demur. The AO shall pass a speaking order after taking into account the evidences as may be placed and explanation thereon - Appeal of assessee is allowed for statistical purposes.

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• 2024 (9) TMI 80
  Unexplained deposit u/s 69A - difference between bank deposit less inter branch transfer with the total sales - HELD THAT:- The assessee never care to file any return of income and not produced any books of account. As before CIT(A), proceedings took a long period of 3 years for adjudication, remand reports were filed on three occasions and appropriate rebuttals were made by the AO, hence, we find no merit in the request of AR. that there was lake of any opportunity. We are also not aggreable to his proposition of suggesting upon remand as he could not adduce any sort of evidence before the Bench to canvas his arguments. CIT(A) has passed a detailed and meticulous order and has strenuously arrived at the computation of the income after getting inputs from the assessee, cross verification from the suppliers, verification by the AO the findings are of course based on a certain assumption and estimate, which cannot be faulted with because the assessee has not been frank enough its true state of affairs. Once the assessee has himself conceded before CIT(A) about the computation of income, he simply cannot turn around and argue against the same before us. Decided against assessee. Estimation of NP on cash deposits - Revenue argued CIT(A) should have confirmed the entire deposit of cash in bank account as done by the AO - As they have not denied the business modal of the assessee. CIT(A) has correctly estimated the net profit which can only be brought into tax. Accordingly, all the grounds raised by the Revenue in its appeal for A.Y. 2009 10 and 2011 12 are dismissed.

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• 2024 (9) TMI 79
  Penalty u/s. 271B - delay of 171 days in filing of the appeal by the assessee - assessee has failed to get its accounts audited as per the provisions of section 44AB - HELD THAT:- Since in the instant case the order u/s. 271B was passed on 05.07.2021 and the assessee filed the appeal before the CIT(A) / NFAC on 22.01.2022, therefore, respectfully following the order of the Tribunal in assessee s own case in quantum proceedings [ 2024 (5) TMI 1462 - ITAT PUNE] for assessment year 2017-18, we restore the issue to the file of the CIT(A) / NFAC with a direction to condone the delay in filing of the appeal and decide the issue on merit after giving one opportunity of being heard to the assessee. The grounds raised by the assessee are accordingly allowed for statistical purposes.

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• 2024 (9) TMI 78
  Validity of reopening of assessment - addition u/s 68 as unexplained cash credit - HELD THAT:- From the details given, it can be seen that the derivative gain from M/s. Latin Manharlal Securities Pvt., Ltd., is duly recorded in the financial statements returned for the year under consideration. Therefore, the very basis for the reopening of the assessment is found to be factually incorrect. A close perusal of the notice and the observations of the AO show that the entire proceedings revolve around the fact that the alleged parties have claimed losses and accordingly evaded taxes. Whereas the facts discussed hereinabove show that the assessee has earned derivative gains from M/s. Latin Manharlal Securities Pvt., Ltd. Therefore, the entire observations / basis of the assessment is factually incorrect. Since the assessment has been reopened on the wrong facts the impugned assessment order deserves to be quashed. The assessee has included the profit in its profit and loss account for the year under consideration, however, while concluding the assessment order the Assessing Officer has again made addition by holding as It is held that the assessee has routed back its own undisclosed money in the guise of profit from alleged share transaction and the same is added to the income of the assessee under section 68 of the Income-tax Act. Thus, even if the income is not genuine may be even illegal, then also in our understanding of the law the same cannot be added under section 68 of the Act as unexplained cash credit. Assessing Officer ought to have reduced the amount of Rs..1,27,27,019/- from the income side and then proceeded further. The assessee has shown revenue from operations which includes cash credit amount. If the Assessing Officer is of the opinion that this amount is illegal earned from non-genuine transaction then reducing the same will result into the loss and if it is added under section 68 of the Act then the assessee is eligible for set-off of which will make the entire exercise tax neutral. Since the amendment has been brought in the statute from A.Y. 2017-18 and as clarified by the CBDT Circular No. 11 of 2019 wherein it has been clarified that upto A.Y. 2016-17 the losses can be set-off from the additions made under section 68 of the Act. Thus AO is directed to delete the impugned addition. Decided in favour of assesseee.

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• 2024 (9) TMI 77
  Taxability of employee cost reimbursements as Fee for Technical Services ( FTS) - assessee is a Japanese company engaged in the business of engineering, manufacturing and sale of brake system and components of automobile companies - AR submitted that the assessee is on the payroll of the Indian AEs for the period of transfer and seconded employees/ expats worked in India as employees of the respective Indian AEs which can be corroborated from the employment visa s of the expats - HELD THAT:- It is the case of the Revenue that the expats were seconded to the AEs for rendering managerial/ technical services and hence the payments made are in the nature of FTS. According to Revenue the expats are employees of the assessee and not of the Indian AEs and hence this was contract for service and salary reimbursement cost is taxable as FTS. It is, however, a fact corroborated with evidence that the expats were employees of Indian AEs during the term of their transfer and were paid salaries by AEs after due deduction of tax on the entire amounts either disbursed in India or in Japan. AO/ DRP has observed that services in the nature of managerial and technical nature were provided by the assessee to the Indian AEs through the expats and accordingly the impugned receipts in the nature of reimbursement towards salary cost of expats are FTS. Although there is no specific reference in TTA/ MOU, it has always been the case of the assessee that the expats were seconded to the AEs to carry on routine business activities of Indian AEs as their employees. No material/ evidence have been brought on record by the Revenue to substantiate its claim that the assessee rendered any managerial/ consultancy/ technical services to the Indian AEs through the expats in furtherance of its business in India. Further, the payment made by the Indian AEs is a pure reimbursement of salary costs of expats which has been cross charged by raising debit notes on the Indian AEs. It cannot be, in our view, regarded as FTS in the hands of the assessee as the same is taxable as salary in the hands of the expatriate employees. From the perusal of the TTA along with their respective MOUs, it can be inferred that the expats worked under the direct control and supervision of the Indian AEs and that during the entire period of secondment, the AE are the real and economic employer of these expats. Article 2 of the respective MOU entered into with both the Indian AEs which is reproduced below clearly states that the expats would work as per the instructions and orders of the Indian AEs The impugned receipts are in the nature of employee salary reimbursement cost not having any element of income and not taxable in India as FTS under the provisions of the India-Japan DTAA. Consequently, the addition on account of cross charge by the assessee from its Indian AEs is deleted.

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• 2024 (9) TMI 55
  Exemption u/s 11 - income towards loans given as scholarship to various students for higher education abroad - According to the AO income should have been applied for charitable purpose on education within Indian territories and not outside India - as submitted mere fact that persons to whom payments have been made for charitable purpose is Indian and payment has been made in Indian territory is not sufficient but the activity related to charitable purpose for which payment is made, should also happen within Indian territory - HELD THAT:- As decided in Jamsetji Tata Trust [ 2014 (5) TMI 890 - ITAT MUMBAI ] disbursal of loan scholarship to students in India for study overseas as application of income for charitable purposes in India. As the facts and circumstances of the instant case are identical to the facts of decisions relied upon by the Ld. CIT(A) therefore, we uphold the order of the CIT(A) on the issue in dispute. The grounds of appeal of the Revenue are accordingly dismissed.

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• Customs

• 2024 (9) TMI 76
  Levy of penalty on the Appellant despite holding that the Appellant had not contravened Regulations 10 (a), (d), (e), (m) and (n) of the Customs Broker Licensing Regulations (CBLR) 2018 - Vicarious liability of appellant - HELD THAT:- The CESTAT instead of stopping at this finding has proceeded by saying that even if it holds that appellant is guilty of the charges levelled against them then also the license cannot be revoked for the reasons in the circumstances of the case. The CESTAT went on to say further that it was of the opinion that the enquiry officer has more reasonably concluded in the matter but still goes on to state that appellant at the most can be held guilty of contravention of Regulation 10 (n) of the CBLR. It also says that they do not find appellant was in any way responsible for any act of misconduct but was vicariously responsible for the acts of the employees. Once the CESTAT has come to a factual finding in Paragraph No.4.12 that the findings recorded by the Commissioner in respect of the charges framed against appellant under Regulation 10 (a), 10 (d), 10 (e), 10 (m) and 10 (n) of the CBLR has no merits, the question of appellant also being vicariously held responsible would not arise. The question is answered in negative in favour of appellant.

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• 2024 (9) TMI 75
  Amendment of Import General Manifest (IGM) due to change in consignee - complaince with the procedure prescribed in paragraph 3(c) and (e) of Customs Circular No. 14/2017-Customs dated 11th April 2017 - HELD THAT:- A similar matter had come up before a Coordinate Bench of this Court in ETG AGRI INDIA PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [ 2017 (10) TMI 1658 - BOMBAY HIGH COURT] , where it was held that We direct the concerned Authority empowered to consider the application made by the petitioner for amendment in IGM to decide the application made by the petitioner for amendment or substitution to the IGM subject to condition of the petitioner executing indemnity bond in favour of the Authorities indemnifying them of the claims and protests raised by the private parties regarding subject goods . Petition disposed off.

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• 2024 (9) TMI 74
  100% EOU - Demand of Customs duties from the appellant on yarns seized from Jay Krishna Sizers and Carewell Rayons Pvt. Ltd. and imposing penalty on the appellant - HELD THAT:- It is not in dispute that the appellant company, which is part of the concerned group of company was involved in clandestine removal of imported PFY in the local market and as such there is a clear breach of Notification No. 59 of 1998 for manufacture of export goods by diverting the same in connivance with the brokers and the buyers and to obtain the sale proceeds in cash. Thus, no question of law, much less any substantial questions of law arise from the impugned order of the Tribunal. The Appeal therefore is accordingly dismissed.

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• 2024 (9) TMI 73
  Doctrine of merger - Imposition of penalty on the appellant by the Appellate Tribunal - whether any question of law arises from the impugned order as provided under sub-section (4) of section 130A the Act as this is not an appeal under section 130 of the Act? - HELD THAT:- Considering the Judgement passed by the Hon ble Apex Court in COMMISSIONER OF CUSTOMS (ADJUDICATION) , MUMBAI VERSUS M/S R.K. INTERNATIONAL AND OTHERS [ 2017 (8) TMI 348 - SUPREME COURT] , the question left with to consider is whether the impugned order of the CESTAT dated 25.06.2003 which was Challenged before the Hon ble Supreme Court can be said to have merged in the said Judgement and Order or not? - The Hon ble Apex Court in case of KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER [ 2000 (7) TMI 67 - SUPREME COURT (LB)] has considered the issue of doctrine of merger regarding the decision of the Kerala High Court in Special Leave to Appeal under Article 136 of the Constitution of India holding that Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. Thus, the impugned order of the CESTAT has merged into the order of Judgement and Order passed by the Apex Court under Article 136 of the Constitution of India. In view of the applicability of doctrine of merger, it is not required to consider the impugned order of the CESTAT on merits vis-a-vis contention raised by learned advocate for the applicant on the ground of perversity of the impugned order or the jurisdiction of the CESTAT to levy the penalty under section 112 or the legitimacy of discretion exercised by the CESTAT for levy of penalty of Rs. 50 lakh upon applicant. No question of law arises from the impugned order of the CESTAT and therefore the application stands dismissed.

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• 2024 (9) TMI 72
  Denial of operation and maintenance benefits as envisaged under section 26 of the SEZ Act - Non-grant of relief for the intervening period from 01.04.2015 until 08.05.2016 - HELD THAT:- In a similar issue that arose for consideration before the High Court of Delhi, it was observed in the case of Moser Baer India Ltd. -vs- Union of India [ 2021 (10) TMI 1090 - DELHI HIGH COURT] , that the directions contained in the covering letter dated 6.4.2015 for re-demarcation of processing area into a non-processing area, runs contrary and repugnant to aforesaid letter which was circulated under the said covering letter. Perusal of the first letter dated 6.4.2015 indicated that the Guidelines of 2009 are hereby restored and will henceforth be the basis for relevant policy and operational decisions, and in effect, as per the revised guidelines, power plants can be set up by developer/co-developer in an SEZ only in the non-processing area of SEZ and will be entitled to fiscal benefits only for its initial setting up and no fiscal benefit would be admissible for its operation and maintenance in terms of Rule 27 (3) of the SEZ Rules. The second letter dated 6.4.2015 (Annexure-B) referred to the first letter dated 6.4.2015, it was stated that henceforth setting up of power plants shall be allowed only in the non-processing area of SEZs. On perusal of the second letter dated 6.4.2015 was held to be repugnant. Therefore, the impugned communication dated 6.4.2015 which stated that those captive power plants, situated in processing areas of SEZs would be demarcated as non-processing areas and the operation and maintenance benefits will were denied earlier shall thereupon be available for such power plants, is held to be arbitrary and hence, invalid. The impugned order set aside - petition allowed.

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• 2024 (9) TMI 71
  Overvaluation of goods - Rejection of declared export value - re-determination of value - Confiscation of goods u/s 113 (h) (i) of CA - penalty u/s 114 and 114AA - restriction on fulfillment of export obligations to the extent of re-assessed value - sole basis for the rejection and re-determination of value was the report by the Chartered Engineer - HELD THAT:- The EPCG Scheme allows exporters to import capital goods on nil/concessional rate of duty subject to the condition that using that machinery then exporter manufactures and exports goods for several times the value of the duty forgone on the capital goods. The export obligation to be fulfilled is indicated in the licence by the DGFT. The duty forgone on the capital goods is the amount of duty assessed by the customs officers as payable, but for the licence - the export obligation has to be fulfilled by exporting goods of value (Free on Board FOB) of a number of times of the duty forgone as indicated in the licence. What the officer decides is the assessable value of the goods under the Customs Act. In the normal course, the transaction value is the assessable value. However, there are exceptions under section 14 read with the Valuation Rules. The Valuation Rules indicate conditions under which the proper officer can doubt the transaction value and reject it. If the transaction value is rejected as the assessable value, then it has to be determined under any of the other methods provided in the Valuation Rules. If the obligation under the Foreign Trade Policy is with reference to FOB value, it can only mean the FOB value as per the agreement between the buyer and the seller which remittance the exporter is also mandated to bring into India as per the FEMA. Whether the Additional Commissioner was correct in rejecting the declared value and re-determining the value under the Customs Valuation Rules based on the Chartered Engineer s certificate? - HELD THAT:- The only basis for alleged over-valuation is the statement of Shri Santosh Kumar Sinha. Even in his statement, he asserted that remittances have been received as per the value declared in the shipping bills in the past in the account of the exporter - The cost of manufacture of the goods could be much lower than the export price. What needs to be checked is that the values are consistent on the values of goods like, kind and quality exported to other buyers. There is no information about export to other buyers and the appellant s own exports in the past are also said to be over valued. This also on record that remittances in respect of the past shipping bills were received and there is no evidence of flow back to the buyer in UAE. There was no reasonable doubt regarding truth or accuracy of the transaction value in this matter. The transaction value, therefore, was wrongly rejected under Rule 8 and re-determined based on the cost of manufacture of like articles in India as per the Chartered Engineer s certificate. The value declared in the shipping bills deserves to be accepted. The question of confiscation, fine, penalty etc., therefore, become immaterial. The impugned order deserves to be set aside. Appeal allowed.

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• FEMA

• 2024 (9) TMI 70
  Not shipping the Indian Black Tea to the destination as per the Bills of Lading - violation of the RBI Scheme and contravention of the provisions of FERA - Four containers of Indian Black Tea were shipped to Moscow but the importer along with the shipping company designed it to ship the containers of Indian Black Tea to Dubai instead of Moscow HELD THAT:- Right from issuing the Bills of Lading, the appellants were well aware of the facts that the containers were to be shipped for Dubai and thereby the appellant company facilitated M/s Century International to carry out transactions in violation of the provisions of the Act of 1973 and RBI guidelines. It is necessary to add that Shri Sanjay Agarwal in his statement denied any instructions to the shipping company to divert the consignment Shipping agent claims that the cargo was diverted at the request of the exporter, while the exporter claimed that the cargo were ultimately delivered to Moscow via Dubai and Bandarabbas and the shipping agent, to evade Income Tax to the Government of India, furnished documents showing disposal of the cargo at Dubai The exporter failed to furnish any documentary evidence to show that the buyer in Moscow received the cargo. However, in spite of non-delivery of the goods the sale proceeds were drawn against the letter of credit from Rupee Credit fund. There appears to be no action by the buyer in Moscow against the exporter or the shipping agent. The dispute between the exporter and shipping agent arose after initiation of enquiry by the Department. The detailed facts mentioned above shows role of the appellant in shipping the consignment to a destination different than mentioned in the Bills of Lading and other documents. It was in connivance of the exporter and the appellant not only actively participated in the contravention but abetted it and, therefore, we find no reason to cause interference in the impugned order. Accordingly, appeal would fail and is dismissed.

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• 2024 (9) TMI 69
  Penalties imposed for contravention of different provisions of FERA - reliance on retracted statement - case made out by the respondent is that the appellant had transferred a sum of 70000 pounds to purchase a house in UK which was purchased in his name and transfer of money and purchase of the house outside India was in contravention of different provisions of the Act of 1973 - appellant submits that the alleged contravention of different provisions of the Act of 1973 is nothing but an outcome of the information given by his brother-in-law and it was due to dispute with his wife (appellant s sister) and ongoing court litigation in UK. - HELD THAT:- In the instant case, retraction of the statement was made on the next date of the statement itself thus was without delay. The respondent, however, failed to produce any material to prove transfer of 70000 pounds. It could not have been in reference to the person with whom there was ongoing litigation with the appellant s sister. The respondent heavily relied upon the statement of the appellant to explain the documents of 4 pages recorded at the time of search to indicate that it was for the purchase of one house property at London from his sister and brother-in-law for 70000 pounds. The impugned order, however, does not disclose as to what was written on the document seized and explained. It is more so when the appellant had retracted from his statement on the next date. In any case, it was necessary to prove the transfer of the amount which respondent utterly failed because bare statement of brother-in-law for receipt of the amount cannot be taken as a proof when their relations were not cordial. When the statement of brother-in-law was not specific because he said to have received the amount on few occasions through other parties without naming any one herein. The purchase and even transfer of the property cannot be without execution of documents. The appellant never visited UK thus how transfer of property took place. Even otherwise, the execution of power of attorney for its use in UK was required to be notarized as per the British Law which does not exist in the present matter. It could have been even in India but for its use required through the Embassy which does not exist. The currency of a sum of Rs.36000/- cannot be taken to be a clinching evidence to prove the case. The respondent have even ignored the document executed by the brother-in-law showing the house to be his own property. The document aforesaid was submitted in the High Court of Justice Family Division Princely registered in UK in the case of Ms. Mariam Vs. Mohd. Ibrahim Achhala. The affidavit given by the informant specifically makes a reference of the immovable property to be belonging to him and not of the brother-in-law i.e. appellant. The statement of appellant s father has also been relied on though it is not so specific, rather based on hearsay information but it cannot be read as against the affidavit filed by appellant s brother-in-law. The respondent failed to prove case for contravention of the provisions of the Act of 1973. The penalty could not have been imposed without proof to show contravention of the provisions of the Act. The Special Director failed to appreciate that respondent could not prove transfer of 70000 pounds to U.K and produce valid document to prove purchase of a house by the appellant. Appeal allowed.

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• 2024 (9) TMI 68
  Contravention of Section 8(1) of FERA - Accrued interest as confiscated to the credit of Government of India Account u/s 63 of the Foreign Exchange Regulation Act, 1973 (FERA) - Adjudicating Authority has meticulously analysed the evidence as to hold that the Appellant did not own the funds in the bank accounts in India - report from the Inland Revenue Board, Malaysia clearly shows that the Appellant and her husband failed to report either any income from Singapore and UAE or any remittance made to India - HELD THAT:- The proceedings before the Income Tax authorities were for the purpose of determination of tax liability of a resident abroad, who is the Appellant herein. In no manner such determination can impact the question of acquisition of funds by a resident in India in the name of the Appellant who was resident abroad. There are statements on record u/s 40 of FERA which clearly bring out the deposits being made in the bank in cash. The evidence on which the Appellant chose to rely upon do not corroborate her contention that the source of such fundswere traceable to her. The paragraphs cited afore bring out that the funds mobilized in the name of R. Susila were for namesake and for the benefit of Smt. N. Sasikala. The discharge which Smt. N. Sasikala got in the prosecution proceedings are independent from the adjudication proceedingsas held by the Hon ble Supreme Court in the cases of Standard Chartered Bank Ors. V.s Directorate of Enforcement Ors [ 2006 (2) TMI 272 - SUPREME COURT ] and Radheshyam Kejriwal vs. State of West Bengal Anr., [ 2011 (2) TMI 154 - SUPREME COURT ]. The scheme of FERA makes it clear that the adjudication by the concerned authorities and the prosecution are distinct and separate. The Hon ble Court has held that the two proceedings are independent of each other and the finding on the adjudication is not conclusive on the prosecution under the Act. In view of the ratios in the two judgements supra coupled with the fact that presently the impugned order which is under challenge has arisen out of the adjudication proceedings, we are unable to persuade ourselves that the outcome of the prosecution proceedings should have a binding effect on the present proceedings.

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• PMLA

• 2024 (9) TMI 67
  Money Laundering - attachment of the properties - appellant has raised only one ground to press the appeal that the property was acquired in 1998 i.e., much prior to the date of commission of offence, cannot be attached - HELD THAT:- The contention of appellant in this regard cannot be agreed upon - The Hon ble Supreme Court of India in case of VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] held that the other assets of the culprit can be attached, as value thereof, in absence of non- availability of direct proceeds of crime. The property of appellant is rightly confirmed for attachment by the Ld. Adjudicating Authority vide the impugned order, in absence of any direct proceeds of crime in possession of the appellant, as she received the share from the proceeds of crime along with her other family members as mentioned in the flow chart at page 41 of the impugned order. Therefore, in view of the said legal position the present appeal needs to be dismissed being devoid of any merits. Appeal dismissed.

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• 2024 (9) TMI 66
  Money Laundering - Provisional Attachment of property - proceeds of crime - impleaded of proprietor as the necessary party - HELD THAT:- The bank accounts of proprietorship concerns, namely, M/s Garg Wollen Mills and M/s B L Yarn in Axis Bank containing sum of Rs. 1,25,000/- and Rs. 1,15,000/- are rightly attached by respondent ED which are confirmed by Ld. Adjudicating Authority, in view of the fact that sum of Rs. 2,84,982/- were received by appellant Jagmohan Garg in his bank account through M/s JaldharaCotspin Pvt Ltd. As per the case of respondent ED, Ramesh Mehan, Prop. of proprietorship concern M/s Yourke International, committed the fraud of VAT refund to the tune of Rs. 74,36,067/-, on the basis of forged documents. Out of the said proceeds of crime, M/s Shreya International received the proceeds of crime to the extent of Rs. 70,50,000/-. Thereafter, out of the said share of proceeds of crime M/s Shreyas International transferred sum of Rs. 44,00,056/-,to M/s JaldharaCotspin Pvt Ltd. Ludhiana. Thereafter, the said company from the said share of proceeds of crime transferred sum of Rs. 2,84,982/- in the account of the present appellant and the remaining amount into the accounts of other defendants. The second contention of the Ld. Counsel for the respondent is also devoid of any merits as proprietorship concern is not a legal person in the eyes of law and hence, Jagmohan Garg being proprietor is rightly impleaded as the necessary party in the Original Complaint No. 922/2018. Therefore, the present appeal needs to be dismissed being devoid of any merits. The present appeal is hereby dismissed being devoid of any merits and thereby the impugned order dated 13.09.2018 confirming PAO No. 02/2018 is hereby upheld - Appeal Dismissed.

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• Service Tax

• 2024 (9) TMI 65
  Challenge to Show-Cause Notices and Orders-in-Original - the proceedings by way of show cause notice under the Finance Act for Service Tax liability have been initiated on the basis of inputs received from the Central Board of Direct Taxes (CBDT) on the basis of Form 26AS/income tax returns filed - HELD THAT:- The writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the Officers to be designated in terms of the observations made in para-8 above, at the same stage. Accordingly, such of the writ petitions relating to challenge to show-cause notice are disposed off. Insofar as Writ Petitions relating to challenge to Orders-in-Original, in light of the discussion made hereinabove, the Orders-in-Original stand set aside and the matters are relegated to the Officers to be designated to be reconsidered from the stage of show-cause notice. The Writ Petitions relating to challenge to the Orders-in-Original are disposed off.

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• 2024 (9) TMI 64
  Challenge to action of the respondent Department in issuing show-cause notice or having passed the orders-in-original relating to demand sought to be raised under the provisions of the Finance Act, 1994 relating to service tax liability - HELD THAT:- Upon suggestion of the court, learned Additional Solicitor General has responded positively and has stated that a team of Officers who are competent to pass orders without reference to the territorial jurisdiction would be constituted and from amongst such team of officers designation would be made and cases allotted in order to pass necessary orders from the stage of post show-cause notice which would be done within a period of three months. The officers while disposing off the petitions to keep in mind the following: 1) Whether petitioners do not qualify under Section 65B (44) of the Finance Act, 1994 ? 2) Whether services are covered under negative list ? 3) Whether services are covered under the exemption list under the Notification No.25/2012-ST dated 28.06.2012 or under any other applicable Notifications ? 4) Whether the person is liable to remit service tax in terms of Rule 2 (1) (d) read with applicable notification? 5) Whether claims are barred by limitation in terms of the law laid down by the Apex Court ? he writ petitions relating to challenge to show-cause notice, such matters will stand relegated to the officers - Petition disposed off.

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• 2024 (9) TMI 63
  Extended period of limitation - Liability of appellant to pay service tax under the category of GTA even though the transportation service had been provided by the truck owner and /or by transport operator and did not issue the consignment notes - suppression of facts or not - HELD THAT:- The demand was raised for the period 2010-11 to 2013-14 for an amount of Rs. 2,86,279/- and the date of show cause notice is 30.07.2015. Thus, the show cause notice has invoked the extended period. It is found that the issue involved is based on the interpretation of taxability under GTA service. In various judgments it has been held that where the consignment note has not been issued, the service cannot be categorized under GTA. Therefore, the appellant had entertained bona fide belief that the receipt of transportation service is not taxable at the end of the appellant. Moreover, the case was made out on the basis of appellant s record during the audit by the Central Excise Officers, therefore, it cannot be said that there is suppression of fact on the part of the appellant. Accordingly, the demand for the extended period is not sustainable - the demand set aside only on the ground of time bar without giving conclusive finding on merit. Appeal allowed.

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• Central Excise

• 2024 (9) TMI 62
  Appellant was paying the Excise duty on the Assessable Value which is undervalued - Revenue took the stand that Excise duty is payable on the cost construction method and not as per the price being charged on the buyers of the principal manufacturer - extended period of limitation. HELD THAT:- There is no dispute that the Appellants are carrying on job work which amounted to manufacture in terms of Section 2(f) of the CEA, 1944. They were also paying Excise duty for the goods cleared at their end. For such clearances, they were adopting the price given by the principal manufacturer for clearance to the ultimate buyers. There is nothing to indicate in the entire proceedings that the Appellant had any role to play in fixing up of this price. There is also no allegation that the buyers of sponge iron were in any way related to the Appellant or to the principal manufacturer. Therefore, in such case, the assessable value has to be determined based on the transaction value only. The transaction value concept can be ignored only if it comes to light that the Appellant has received any further consideration from the buyer. The Revenue s argument that this is an additional consideration is wholly erroneous. The consideration is required to flow from the buyer and not from any other third party. Therefore, the entire proceedings have been taken up on a wrong notion that the Appellant is barred from relying upon transaction value for their clearances. On this count itself, the confirmed demand is required to be set aside. So far as the Department s contention that the cost construction method adopted by them would result in higher assessable value, it is also questionable. Apparently, if the price for the finished goods is fixed by the principal manufacturer, he would have taken into account all his costs plus the cost of conversion for the job work and cost of the consideration on account of scrap being given free of cost to the Appellant plus his own profit margin to arrive at the total price. That being so, even hypothetically the cost construction method at the end of the job worker cannot be presumed to be higher than the ultimate sale price (transaction value) adopted by the principal manufacturer unless the Department brings in any evidence towards additional consideration flowing back from the buyer. The confirmed demand on merits set aside. Extended period of limitation - HELD THAT:- There are considerable force in the Appellant s argument that the SCN issued on 30.09.2010 is time barred. The Appellant has produced copy of the letter submitted by them on 31.08.2005 clearly specifying the procedure being adopted by them for the sponge iron being cleared to the buyers of the principal manufacturer by adopting the price given by him. Apart from this, audit queries have been raised in February, 2009 for which the Appellant has filed reply on 18.03.2009 - the confirmed demand for the extended period is also liable to be set aside on account of time bar. The Appeal stands allowed both on account of merits and on account of limitation.

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• 2024 (9) TMI 61
  Utilization of Cenvat credit of basic excise duty for payment of National Calamity Contingent Duty (NCCD) - HELD THAT:- The issue is no longer res- integra and the same is settled in various judgments as cited by the learned counsel. In the case of C.C.E. S.T. -SILVASA AND C.C.E. S.T. -DAMAN VERSUS WELSPUN SYNTEX LTD AND M/S. WELLKNOWN POLYESTER LIMITED [ 2019 (11) TMI 1268 - CESTAT AHMEDABAD] , this tribunal held that while Cenvat Credit of NCCD can be utilized under the Cenvat Credit Rules only towards payment of such NCC Duty, Cenvat Credit obtained from other sources can be utilized for payment of NCC Duty on the final product. - From the above decisions of this tribunal it can be seen that the utilization of basic excise duty for the payment of NCCD has been allowed considering the provisions of Rule 3 of Cenvat Credit Rules, 2004. As regard the heavy reliance placed by the revenue in the case of M/s. Unicorn Industries vs. UOI [ 2012 (5) TMI 621 - SIKKIM HIGH COURT] , in that case the issue was different that whether the NCCD is an excise duty or surcharge. Even though as per the said judgment the NCCD is not an excise duty but a surcharge, rule 3 permits the utilization of basic excise duty for payment of NCCD. Therefore, judgment in the case of M/s. Unicorn Industries vs. UOI is not relevant on the issue and facts of the present case. The respondent is correct in utilizing the credit of basic excise duty for payment of NCCD. Therefore, the impugned orders are legal and correct and the same deserve to be sustained. The impugned order is upheld - appeal of Revenue dismissed.

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• 2024 (9) TMI 60
  Clearance of by product namely Ammonium Sulphate - Benefit of N/N. 12/2012-CE whereby the rate of duty is 1 %, denied - case of the department is that since the appellant have availed Cenvat credit on the inputs, they are not eligible for Notification No.12/2012-CE whereby the rate of duty is 1% - HELD THAT:- Even though the appellant have availed the Cenvat credit on the inputs where final product is potassium Cyanide and Sodium Cyanide which are cleared at normal rate of duty without availing benefit of exemption Notification No. 12/2012-CE . It is only in respect of by-product i.e. Ammonium Sulphate, the appellant have availed the exemption notification. Since the ammonium sulphate is admittedly a by-product no duty @ of 6% can be made. Therefore, the demand is not sustainable. In the appellant s own case HINDUSTAN CHEMICALS COMPANY VERSUS COMMISSIONER OF C.E. S.T. -SURAT-II [ 2024 (5) TMI 459 - CESTAT AHMEDABAD ], this Tribunal held that We find that on the very same issue in the appellant s own case, it has been decided that the Ammonium Sulphate being a by-product arising out of manufacture of final product namely, Potassium Cyanide and Sodium Cyanide, the same will not be liable for payment of an amount in terms of Rule 6(3) of Cenvat Credit Rules, 2004. Considering the above judgment in the appellant own case, the issue is no longer res-integra. Accordingly, the impugned order is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (9) TMI 59
  Jurisdiction of order passed u/s 34 (8A) of the VAT Act for the year 2013-14 - whether the order u/s 34 (8A) of the VAT Act can be passed in absence of any proceedings pending under the VAT Act? - HELD THAT:- The assessment order for the year 2013-14 was passed on 31.3.2018 and the said order attained its finality as neither the petitioner has challenged the same nor any reassessment or revision is contemplated within the statutory period of limitation. Meaning thereby, there was no proceedings pending under the VAT Act at the time when the impugned order under Section 34 (8A) of the VAT Act was passed. The authorities could not have exercised its power pursuant to Section 34 (8A) of the VAT Act when the condition precedent for exercising power has not been satisfied, namely, pendency of any proceedings under the VAT Act. Thus, the assessment proceedings under Section 34 (8A) of the VAT Act cannot be justified. Learned Assistant Government Pleader could not even point out about pendency of any proceedings under the VAT Act. Since the basic condition of Section 34 (8A) of the VAT Act, namely, during the course of any proceeding under the Act is not satisfied and no proceedings under the Act are pending, the present petition deserves to be allowed. Petition allowed.

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• 2024 (9) TMI 58
  Taxability - tax-free transactions entered into by the appellant - disallowance of entire purchase/ sale transaction and levying tax at a higher rate on the same - failure to take into consideration and take proper cognizance of the various documentary evidences placed - failure in not considering, adjudicating and dealing with the arguments and submissions made by the appellant - failure to take cognizance of the fact that even on merits of the appellant s case no amount of tax and interest is required to be paid by the appellant in the facts and the circumstances of the case - non-deletion of penalty levied by the adjudicating authority. HELD THAT:- The appellant has referred to ledger accounts of supplier of the goods from the books of accounts which are supported by purchase invoices. However, on perusal of the ledger account, it appears that payment is made by the appellant by passing journal entries in name of the persons to whom goods have been sold. Thus, there is no banking transaction involved in transaction of purchase and sales by the appellant. It is true that such an issue has never been considered by any of the authority however on perusal of ledger account, it is clear that there is no banking transaction reflected in the ledger account which shows that appellant had not entered into a genuine purchase and sale transaction and merely by passing journal entries it appears that the appellant has obtained the purchase invoices and issued the sale invoices or transfer invoices to its branch at Rajasthan to show transactions of Agro commodity which are exempted from VAT. It also appears that the appellant has shown that search was carried out for four years from 2008-2009 to 2011-2012 however no details are available with regard to the subsequent years of purchases and sales as the same are not placed on record or even pleaded before any of the authority so as to distinguish the facts of the year under consideration. Thus, on perusal of the impugned order of the Tribunal and the order passed by the First Appellate authority there are concurrent findings of fact and we find no perversity in either of the orders which are based upon the evidence placed on record and therefore, it is opined that no question of law much-less any substantial question of law arises from the impugned orders. Appeal dismissed.

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• Indian Laws

• 2024 (9) TMI 57
  Rejection of application moved for seeking discharge in the matter and proceeding to frame charges for having entered into a criminal conspiracy with an object to facilitate illegal sale of coal rejects by GCWL that were generated during washing of coal and to have gained undue pecuniary advantage therefrom - challenge to allocation of coal blocks to Private Companies for the period between 1993 and 2011 - violation of principles of trusteeship of natural resources by giving away precious resources as largesse without complying with the mandatory provisions of the MMDR Act and 1973 Coal Act. Did CBI primarily rely on the Audit Report of the CAG? - HELD THAT:- The respondent CBI made the Audit Report of the CAG submitted in 2013, a launching pad for initiating the prosecution of the appellants in respect of the allegations levelled in the present case and subsequently sought to substantiate them by delving into the records maintained by KPCL, KECML and GCWL. In other words, there was no move within the Department to investigate KPCL or KECML before 2015. The PE s registered in the year 2012 did not inculpate the appellants in any manner. The entire focus of the said PE s was on the larger issue of irregularities in the allocation of coal blocks through the Government dispensation route. In this background, the respondent CBI cannot be heard to state that CBI was independently investigating the matter at hand well before 2015 or the Audit Report of the CAG of 2013 was not the trigger point for commencing the investigation. Could the Audit Report of the CAG fasten any liability on KECML? - HELD THAT:- This Court having already dismissed the appeal filed by KPCL against the judgment of the Karnataka High Court, having held in clear terms that the CAG Report could not form the basis for launching proceedings against the appellants and further, having upheld the findings returned by the Karnataka High Court that the CAG Report appears to have been the starting point for the entire disputes between the parties who till then, were smoothly discharging their obligations under various agreements, there is no reason to take a different view only on the ground that the respondent CBI was not a party in the aforesaid proceedings. The chronology of the events speak for themselves and need no further elaboration. Import of the Judgment of the Karnataka High Court in EMTA COAL LIMITED AND ORS. VERSUS KARNATAKA POWER CORPORATION LIMITED [ 2016 (3) TMI 1423 - KARNATAKA HIGH COURT] - HELD THAT:- If there was any breach of contract or default on the part of KECML, KPCL was well empowered to determine the lease. However, KPCL did not do so. Instead, on being confronted with the Audit Objections taken by CAG, it raised a demand on KECML for the value of the coal rejects. This demand was quashed and set aside by the Karnataka High Court and this Court - this Court cannot turn a blind eye to the view taken in the judgement dated 24th March, 2016 passed by the Division Bench of the High Court of Karnataka in a dispute directly arising between KPCL and KECML pertaining to the very same cause of action based on the obligations cast on both the parties under various agreements executed for the development of captive coal blocks and for supply of coal, which was finally upheld by this Court in KARNATAKA POWER CORPORATION LIMITED VERSUS EMTA COAL LIMITED AND ORS. [ 2022 (5) TMI 1648 - SUPREME COURT (LB)] . The said judgments have cleared KECML of any blame. On the same set of facts and logic, no criminality can be attributed to the appellants. Sanctity of an Audit Report in Law - HELD THAT:- In the instant case, admittedly the aforesaid procedure has not been followed. As noticed above, the CAG Report is subject to scrutiny by the Parliament and the Government can always offer its views on the said report. Merely because the CAG is an independent constitutional functionary does not mean that after receiving a report from it and on the PAC scrutinizing the same and submitting its report, the Parliament will automatically accept the said report. The Parliament may agree or disagree with the Report. It may accept it as it is or in part. It is not in dispute that the Audit Report of the CAG has not been tabled before the Parliament for soliciting any comments from the PAC or the respective Ministries - the views taken by the CAG to the effect that tremendous loss had been caused to the public exchequer on account of the coal rejects being disposed of by the KPCL and KECML remains a view point but cannot be accepted as decisive. The respondent CBI has largely relied on the findings and the conclusions drawn in the Audit Report of the CAG to launch the prosecution against the appellants on an assumption that the said Report has the seal of approval of the Parliament and has attained finality, which is not the case. Denial of Sanctions by the Sanctioning Authorities and the effect on the Appellants - HELD THAT:- After Sanctioning Authority had scrutinized all the relevant documents and the depositions as many as of 67 witnesses submitted by the respondent-CBI, it observed that there was no evidence to show that any rejects generated by washing of coal had been sold or that KPCL had suffered an unlawful loss during the process. As a result, the Board of KPCL refused to grant sanction to the respondent-CBI to prosecute Mr. R. Nagaraja for offences alleged to have been committed by him. It is noteworthy that no appeal has been filed by the respondent CBI against denial of sanction. The respondent-CBI having accepted the decision taken by the Sanctioning Authority in respect of Mr. R. Nagaraja and the decision of the Competent Authority in the Central Government in respect of Mr. Yogendra Tripathi, both senior most serving officers of KPCL and were also on the Board of KECML, cannot be permitted to argue that these were merely administrative decisions and even if permission to prosecute the aforesaid officers has been denied, the Department can still proceed against the appellants based on the very same set of material/documents/evidence etc. that have been minutely scrutinized by different authorities at the highest level and they have independently arrived at an identical conclusion of refusing to grant sanction to prosecute senior functionaries of KPCL. Simply because the said senior functionaries of KPCL were public servants, does not detract from the fact that the respondent-CBI has described them as co-accused in a criminal conspiracy and attributed similar motives to them as the appellants herein. If they have been let off the hook and the respondent-CBI has not challenged the said decisions, there is no reason to proceed against the appellants herein on the basis of the very same set of facts and material gathered during the course of investigation. Effect of the absence of any strategy in the Mining plan to dispose off the coal rejects - HELD THAT:- The Central Government had not come out with any specific plan to dispose off the coal rejects is validated by the reply furnished by the Minister of State, MoC, in the Lok Sabha in response to an unstarred question seeking an answer from the Government of India as to whether it had framed any National Policy for exploitation of the coal rejects. The reply given was that the Government had not framed any National Policy for exploitation of coal rejects and the same was still under consideration. That being the position, it was left to KPCL and KECML to devise a satisfactory and safe method to dispose off the coal rejects. This was done in terms of Article 5(2)(b) of the JVA that required KECML to dispose off the rejects in a manner that would ensure that there was no threat to the environment. We do not find any irregularity in the route adopted to dispose off the coal rejects. Was KECML required to account for the coal rejects? - HELD THAT:- The agreement governing the parties required KECML to dispose off the rejects safely. KECML was not required to account for the coal rejects to KPCL. KPCL itself understood the clauses in the JVA and the FSA to mean the same and it was satisfied with the manner in which KECML was discharging its obligations under the agreements till Audit Objections were raised by the CAG in October, 2013. That s when KPCL did a complete flip flop and for the first time, raised a demand on KECML seeking reimbursement towards the value of the coal rejects, a decision that was successfully assailed by the appellants in the High Court and the challenge laid by KPCL to the said judgement was repelled by this Court. Can KECML be blamed for not setting up the coal washery at the pithead? - HELD THAT:- The decision of KECML to enter into a MoU with GCWL for washing of coal was actuated by compelling circumstance faced by it and KPCL had taken a calibrated decision in its commercial wisdom to duly concur with the said decision knowing very well that non-supply of a specified grade of washed coal by KECML would have serious consequences of stoppage of generation of power at BTPS and a cascading effect of resulting in a power crisis in the State of Karnataka - It is not proposed to Labour much on the contention of the respondent-CBI that allocation of the coal block was in favour of KPCL and not in favour of KECML as stands adequately explained on a perusal of the Notification dated 16th July, 2024 which shows that the Central Government did recognize the fact that it was KECML who was required to supply coal from the coal mines allocated to KPCL and end use of the said coal was specified for generation of Thermal Power Station at Bellary, Karnataka. Having regard to the aforesaid notification, nothing much turns on the submission made by the respondent-CBI that the coal block allocation was only in favour of KPCL and it ought to have a right over the rejects to the exclusion of KECML and others. Did the coal rejects have any useful calorific value making it a saleable commodity? - HELD THAT:- The Detailed Washability Report of the Government Laboratory namely, CIMFR, Nagpur has been ignored by the respondent-CBI. It was the said Report that formed the basis of the information furnished by KECML with respect to production, stock, despatch of coal to the washery etc., as was demanded by the office of the Coal Controller, a department that falls under the MoC. The said Report stated in so many words that the rejects did not contain any useful c.v. Reliance placed by the respondent-CBI on the revised Mining Plan submitted by the appellants to the MoC in 2010, that mentions a new technology for utilization of rejects for its carbon value, namely FBC is of no consequence as the said technology had not even been introduced when MoC approved the original Mining Plan, submitted by KECML in the year 2004. Even otherwise, it is not in dispute that for applying the said technology, a plant was required to be established after obtaining necessary approvals from several agencies. The plant could not be established by KECML for the reason that the revised Mining Plan submitted by it was approved by the MoC only on 24th August, 2011. Consequent steps that were required to be taken by KECML for obtaining necessary approvals from the MoEF CC and other govt. agencies came to a grinding halt when an order was passed by this Court in the year 2014, deallocating all captive coal blocks, including those allocated to KPCL. Therefore, any reference by the respondent-CBI to the revised Mining Plan is of no consequence. Persuasive Value of the case KARNATAKA POWER CORPORATION LIMITED VERSUS ARYAN ENERGY PRIVATE LIMITED AND ORS. [ 2021 (7) TMI 1459 - KARNATAKA HIGH COURT] - HELD THAT:- On going through the agreements executed between KPCL and Aryan Energy, the High Court had shot down the plea of KPCL that it was entitled to the coal rejects. Though KPCL assailed the said decision before this Court, it settled its dispute with Aryan Energy and the appeals preferred by it were disposed of as compromised. The contention of the respondent-CBI that the order of the High Court of Karnataka is not relevant for the present case since there was no criminal case registered therein, cannot be a distinguishing feature when the terms and conditions of the contract between KPCL and Aryan Energy on the aspect of disposal of the coal rejects is pari materia. It is opined that the judgment in the case of Aryan Energy does have persuasive value. Inherent Jurisdiction of the High Court under Section 482, Cr.P.C - HELD THAT:- Section 482 Cr.P.C recognizes the inherent powers of the High Court to quash initiation of prosecution against the accused to pass such orders as may be considered necessary to give effect to any order under the Cr.P.C or to prevent abuse of the process of any court or otherwise to secure the ends of justice. It is a statutory power vested in the High Court to quash such criminal proceedings that would dislodge the charges levelled against the accused and based on the material produced, lead to a firm opinion that the assertions contained in the charges levelled by the prosecution deserve to be overruled. While exercising the powers vested in the High Court under Section 482, Cr.P.C, whether at the stage of issuing process or at the stage of committal or even at the stage of framing of charges, which are all stages that are prior to commencement of the actual trial, the test to be applied is that the Court must be fully satisfied that the material produced by the accused would lead to a conclusion that their defence is based on sound, reasonable and indubitable facts. The material relied on by the accused should also be such that would persuade a reasonable person to dismiss the accusations levelled against them as false. Extraordinary powers of the Supreme Court under Article 136 of the Constitution of India - HELD THAT:- Article 136 can be invoked by a party in a petition for special leave to appeal from any judgement, decree, determination, sentence or order in any cause or matter passed or made by a Court or Tribunal within the territory of India. The reach of the extraordinary powers vested in this Court under Article 136 of the Constitution of India is boundless. Such unbridled powers have been vested in Court, not just to prevent the abuse of the process of any court or to secure the ends of justice as contemplated in Section 482, Cr.P.C, but to ensure dispensation of justice, correct errors of law, safeguard fundamental rights, exercise judicial review, resolve conflicting decisions, inject consistency in the legal system by settling precedents and for myriad other to undo injustice, wherever noticed and promote the cause of justice at every level. The fetters on this power are self imposed and carefully tampered with sound judicial discretion. Given the broad amplitude of the extraordinary powers of this Court under Article 136 of the Constitution of India, the respondent-CBI cannot be heard to urge that since a Chargesheet has already been filed against the appellants and charges framed, the appellants should be left to take all the pleas available to them before the learned Special Judge, CBI during the course of the trial and that no interference is called for by this Court at this stage. Such an approach does not commend itself to this Court in the facts and circumstances of this case. Application of mind at the stage of Section 227, CrPC - HELD THAT:- There is no quarrel with the broad proposition canvassed by learned counsel for the respondent- CBI that at the stage of Section 227, Cr.P.C., the Special Judge, CBI had to sift the evidence to find out whether there was sufficient ground for proceedings against the appellants. That exercise would include taking a prima facie view on the nature of the evidence recorded by the CBI and the documents placed before the court so as to frame any charge. At the same time, one must be mindful of the language used in Section 227 of the Cr.P.C - As observed in Prafulla Kumar Samal [ 1978 (11) TMI 151 - SUPREME COURT ] the expression not sufficient ground for proceeding against the accused clearly shows that the Judge is not a mere post office to frame the charge at the behest of the prosecution. The Judge must exercise the judicial mind to the facts of the case in order to determine whether a case for trial has been made out by the prosecution - the CBI at the time of considering the records/documents submitted by the respondent-CBI and the material produced by the appellants. Conclusion - Though multiple arguments have been advanced by learned counsel for the appellants to assail the impugned orders passed by the learned Special Judge, CBI, including a plea that no offence is made out under Section 13(1)(d) of the P.C. Act for various reasons, this Court has consciously elected to confine itself only to those aspects that in our opinion, would be sufficient to arrive at a prima facie view that the allegations levelled against the appellants have pre-dominant contours of a dispute of a civil nature, does not have the makings of a criminal offence and on an overall conspectus of the case, would persuade any reasonable person to dismiss the accusations levelled. Therefore, this court declines to go into the nitty gritties of the documents/evidence, or the contrasting data produced by the parties to test their probative value. The respondent CBI embarked on a roving and fishing inquiry on the strength of the Audit Report of the CAG and then started working backwards to sniff out criminal intent against the appellants. The underpinnings of what was a civil dispute premised on a contract between the parties, breach whereof could at best lead to determination of the contract or even the underlying lease deed, has been painted with the brush of criminality without any justification - the impugned orders deserve interference in exercise of the powers vested in this court under Article 136 of the Constitution of India. The order on charge dated 24th December, 2021 and the order framing charges dated 3rd March, 2022 passed by the learned Special Judge, CBI qua the appellants before this Court are unsustainable and accordingly quashed and set aside - Appeal allowed.

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• 2024 (9) TMI 56
  Dishonour of Cheque - seeking issuance of warrant of attachment and initiating contempt proceedings against the respondent/accused for willful default and breach of settlement order and undertaking - amicable settlement through mediation - Section 421 read with Section 431 Cr.P.C. - HELD THAT:- In Dayawati vs Yogesh Kumar Gosain [ 2017 (10) TMI 1063 - DELHI HIGH COURT ], the issue regarding legal permissibility of referring a complaint case under Section 138 NI Act for amicable settlement through mediation, procedure to be followed upon settlement and the legal implications of breach of mediation settlement were considered - it was observed in Dayawati vs Yogesh Kumar Gosain that the Court would record the statement of the parties or their authorized agents on oath affirming the settlement, its voluntariness and undertaking to abide by it, followed by an appropriate order accepting the agreement. Further, the Court taking on record the settlement stands empowered to make consequential directions, if required. There is no bar that unless the matter is forwarded to mediation for settlement, the same cannot be entered before the Court itself. The Court only needs to be satisfied that the settlement is lawful and consent of the parties is voluntary and not obtained under coercion or undue influence - Even when the Court permits the compounding of an offence, which is permissible under NI Act, there is no bar that the Court cannot compound the offence without forwarding the matter to mediation. When the matter is not forwarded to mediation but the Court records the settlement or compounds the offence, it is obvious that the proposal receives imprimatur or authoritative approval of Court. In the facts and circumstances, there does not appear to be any reason to presume that the settlement was not voluntary or under any force, pressure or coercion. The fact that the respondent had come with a DD dated 06.11.2020, which was handed over to the petitioner/complainant on 09.11.2020 reflects that he had already made up his mind to settle the issues. Once the said settlement was accepted by the petitioner and also received imprimatur of the Court, there does not appear to be any reason for the Court to arrive at a contrary conclusion vide impugned order dated 19.12.2020 that there was no effective settlement bringing criminal proceedings to an end. The settlement was legal and voluntary without any force, pressure or coercion. The proceedings after settlement between the parties vide order dated 09.11.2020 were only for the purpose of ensuring the compliance of settlement by the parties. This Court is of the considered opinion that once a valid settlement stood recorded, the consequences of the same are bound to ensue and as such, on default or non-compliance or breach of settlement, learned MM is bound to pass an order under Section 421 read with Section 431 Cr.P.C. to recover the amount agreed to be paid by the respondent/accused in the same manner, as a fine would be recovered as held in Dayawati vs Yogesh Kumar Gosain. The impugned order dated 19.12.2020 passed by learned MM is set aside. The settlement between the parties in terms of order dated 09.11.2020 is binding. Accordingly, application under Section 421 read with Section 431 Cr.P.C. shall be considered by the learned Trial Court in accordance with law - petition disposed off.

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