Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
September 7, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Cancellation of registration of the petitioner - Rule 25 - physical verification was carried out by the respondents/revenue, albeit, without having the petitioner’s authorized representative remain present; although, concededly, insofar as the second part of the rule is concerned, which required uploading of the verification report and other documents including photographs, it was informed that the same was done. - The petitioner will file an application for revocation of order of cancellation within the next 15 days - HC
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Classification of goods - rate of GST - Flavoured Milk - flavoured milk is not the natural form of milk but obtained after application of specific processes on the milk - NDDB being a nodal agency in the Dairy products and the ‘Flavoured Milk’ is categorized as Beverage as can be seen above. Further, Beverage as per the Oxford dictionary definition is ‘any type of drink except water’. Thus, it becomes evident that the product in hand is a Beverage. - AAAR
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Profiteering - purchase of a Flat - since there was no reduction in the rate of tax nor there was increased additional benefit on account of ETC. Hence, the provisions of Section 171 of CGST Act, 2017 are not liable to be invoked in this case - case does not fall under the ambit of Anti-Profiteering provisions - NAPA
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Profiteering - any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction due to another recipient or customer. Hence, this methodology of 'netting off' cannot be applied in the present case as the customers have to be considered as individual beneficiaries and they cannot be compared with netted off. - NAPA
Income Tax
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Recovery proceedings of tax dues - preferential right - secured creditors - Income Tax Department’s preferential right to recovery of debts over other creditors is confined only to ordinary or unsecured creditors. It would not extend to secured creditors. - The lien in favour of the plaintiff makes the plaintiff a secured creditor and therefore, the right of the plaintiff would prevail over that of the Income Tax Department. - HC
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Nature of Sales tax incentive received - Revenue receipt OR capital receipt - notwithstanding that the assessee has treated such incentive as revenue receipt in past, the same cannot be deterrent for making a correct claim in the subsequent assessment year. - AT
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Undisclosed income - Assessee cannot be slapped with tax liability based upon the information contained in the document which could not be produced before the Bench despite the specific direction. We note that the search team has not found any cash, money and not other assets corroborating the said addition in the hands of the assesse. Therefore presumption of section 292CA of the Act cannot be applied in this case - AT
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Employee Stock Options (ESOP) expenditure - Disallowance u/s 37 - difference between the grant price and the market price on the shares as on the date of grant of options - the discount on ESOP being a general expense, is an allowable deduction u/s 37(1) of the Act during the years of vesting on basis of percentage of vesting during such period subject to upward or downward adjustment at the time of exercise of option - Claim allowed - AT
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Deemed income from house property - farm house - whether land was used for the agriculture/horticulture business and hence, it shall be treated as an exempted income u/s 10(1)? - It is not the case that the assessee has carried out agricultural activity and for earning income from agriculture some expenses have been incurred rather situation is inverse. The expenses incurred are much higher and does not match with the agricultural activity. - Additions confirmed - AT
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Bogus purchases - assessee has shown purchases from ‘A’ but actually procured the material from ‘B’. In this exercise, the assessee might have saved Excise Duty etc. - If that factor has been proved demonstrating the complete details of purchases as well as sales, then 100% of the purchases by terming it as bogus could not be added. In the absence of these details, additions confirmed - AT
Customs
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Violation of judicial discipline - The Additional Director of DRI and the adjudicating authority effectively said that the Tribunal was not correct. If it be their opinion, it was open for them to assail the order of the Tribunal before a higher judicial forum. Instead, the Additional Director DRI and the Assistant Commissioner have arrogated to themselves the role of a superior authority over the Tribunal and ignored the judicial precedent which is not only highly irregular, but is also in violation of judicial discipline. - AT
Indian Laws
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Dishonor of Cheque - condonation of delay in filing complaint - The impugned judgment and order of the Single Judge of the High Court of Chhattisgarh dated 28 November 2018 shall stand set aside - The respondent would be at liberty to institute a fresh complaint and since the earlier complaint could not be presented within the time prescribed by Section 142(b) of the NI Act, the respondent would be at liberty to seek the benefit of the proviso by satisfying the trial court of sufficient cause for the delay in instituting the complaint. - SC
IBC
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Seeking direction to RP to disclose item wise insolvency resolution process costs - The Appellant asked Resolution Professional to disclose item wise insolvency resolution process costs in such manner as required by the Board (IBBI). Question of cost and its approval lays in the domain of the CoC. The CoC may ratify, modify or set aside the cost claimed. - AT
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Condonation of delay in filing appeal - power to condone delay - This Tribunal pertinently points out that Section 61 of the Insolvency & Bankruptcy Code, 2016 is a Hard Taskmaster. The time limit and the procedural wrangle cannot be allowed to be shaked or shackled with by a Litigant. - AT
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CIRP - It is well settled that although settlement between the parties to be encouraged but the Court/this Tribunal cannot direct the Bank to accept the OTS as claimed for by the Corporate Debtors. - AT
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Initiation of CIRP - NCLT admitted the application - pre-existence of debt and dispute or not - There was clear contract between ‘CD’ and ‘OC’ as well as ‘CD’ and ‘Akshaya’ and it is squarely responsibility of CD towards its obligation to OC. Correspondence between ‘CD’ and ‘OC’ as produced by both ‘CD’ and ‘OC’ do not establish any pre-existing dispute. Hence, AA rightly taken decision in this regard and there are no error in the ‘impugned order’ for this issue. - AT
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Defect in the appeal - Condonation of delay - The limitation prescribed in filing an appeal under Section 61 of the Code or Section 421 of the Companies Act, 2013 shall not govern the period taken in an appeal for removal of the defects in refiling/re-presentation. Even if, there is a delay in refiling/re-presentation which is more than the period of limitation prescribed for filing an appeal under Section 61 of the Code and Section 421 of Companies Act, 2013, the same can be condoned on sufficient justification. - AT
Service Tax
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Refund of the service tax - construction of individual/independent residential houses - the definition of a “residential complex” leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of “residential complex”. - AT
Central Excise
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CENVAT Credit - Additional Duty of Customs (CVD) paid on imported coal paid at concessional rate of 1% - there is no bar for availment of CENVAT Credit in terms of the Rule 3(7) where duty paid under Notification No. 12/2012-Cus and CENVAT Credit cannot be denied. - HC
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Valuation - inclusion of paper cess in the calculation of Education Cess and Secondary and Higher Education Cess - They obviously lost sight of the Circular No. 978/2/2014-CX, dated 7-1-2014 where it has been clarified that the Education Cess and the Secondary and Higher Education Cess are not to be calculated on cesses which are levied under Acts administered by Department/Ministries other than Ministry of Finance (Department of Revenue), but rather only collected by the Department of Revenue in terms of those Acts. - AT
Case Laws:
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GST
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2022 (9) TMI 263
Provisional attachment order of immovable property - HELD THAT:- A plain reading of the impugned attachment order dated 20.07.2022 would show, that Hy-Link Overseas Pvt. Ltd. is the registered taxable person under the provisions of the Central Goods and Services Tax Act, 2017 - That the subject property is not an asset of M/s Hy-Link Overseas Pvt. Ltd. List the matter on 26.09.2022.
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2022 (9) TMI 262
Seizure of goods alongwith vehicle - address on the E-way bill was mentioned at registered office of the consignee at Indore, instead of Bhopal - inadvertent error or not - HELD THAT:- The mistake in question being bonafide, this Court invoking the principle of parity, directs that the impugned orders dated 05.09.2019 (Annexure P/6) and 27.05.2019 (Annexure P/4) passed by respondent Nos. 2, Joint Commissioner State Tax, (Appellate Authority) Bhopal Division, Bhopal and 3, State Tax Officer, Anti Evasion Bureau, Bhopal respectively, are quashed. It is further directed that the respondents will be at liberty to consider the case of the petitioner for imposition of a minor penalty, while treating the mistake in question, to be a clerical mistake as per Circular dated 14.09.2018 bearing No.CBEC/20/16/03/2017-GST, issued by Ministry of Finance, Government of India. Petition allowed.
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2022 (9) TMI 261
Seeking grant of Anticipatory bail - allegation is that the accused had lured the first informant to invest an amount of Rs. 90 lakhs in the business venture of the accused and whereas the accused have neither returned the principal nor returned the proposed profit/ interest amount to the first informant - HELD THAT:- The present applicant had received some money from the first informant and whereas it also appears that the dispute between the parties, was civil in nature insofar as the said aspect is concerned - This Court has also considered the submission made by learned Advocate Mr. Popat that the present applicant would be without prejudice, willing to deposit half of the amount i.e. Rs. 45 lakhs with the learned Trial Court. This Court has also considered the submissions that allegations with regard to the possible offences under the Goods and Service Tax Act, would require to be investigated into by the officers of the Goods and Service Tax department, more particularly, as per chapter 14 of the Goods and Service Tax Act. It also requires to be mentioned that the said proposition is also not disputed by the learned APP Mr. Dabhi - It also appears that no notice has been received by the applicant from the Goods and Service Tax department with regard to the said allegations. The present application is allowed by directing that in the event of applicant herein being arrested registered with D. C. B. Police Station, Surat City, District Surat City, the applicant shall be released on bail on furnishing a personal bond of Rs. 1 lakh with one surety of like amount, subject to conditions imposed. Application allowed.
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2022 (9) TMI 260
Reopening of portal for filing of form TRAN-1 - transitional credit - HELD THAT:- In the case of UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] , the apex Court in an attempt to resolve the piquant situation prevailing around the nation where assessees were deprived due to technical glitche to avail filing of forms for availing Transitional Credit through TRAN-1 and TRAN-2, directed for opening of the portal from 01.09.2022 to 31.10.2022. The fact that the counsel for the Central GST as well as State GST does not dispute the applicability of the above order of Apex Court to the issue involved herein, this Court directs that the petitioner can avail the said remedy made available by the apex Court between 01.09.2022 to 31.10.2022 - Petition disposed off.
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2022 (9) TMI 259
Cancellation of registration of the petitioner - Rule 25 of the Central Goods and Service Tax Rules, 2017 - HELD THAT:- A perusal of the record clearly demonstrates that neither was the letter dated 06.04.2022 furnished to the petitioner, nor was the petitioner given any notice of inspection. A careful perusal of the rule shows that, if after the grant of registration, the proper officer is satisfied that physical verification of the place of business of the concerned person is required, the proper officer may get such verification of the business place carried out, albeit, in the presence of the said person, and thereafter, have the verification report along with other documents including photographs uploaded in Form GST REG-30 on the common portal within 15 working days following the date of such verification. In the instant case, what is not in dispute is that physical verification was carried out by the respondents/revenue, albeit, without having the petitioner s authorized representative remain present; although, concededly, insofar as the second part of the rule is concerned, which required uploading of the verification report and other documents including photographs, it was informed that the same was done. What thus emerges is that the letter dated 06.04.2022 has not been furnished to the petitioner, which, forms the basis of the show cause notice and the impugned order - Besides this, the proper officer opted to have the petitioner s business premises inspected, albeit, without the presence of its authorized representative. As noted, had notice/intimation been given, the glitch could have been overcome. The petitioner will file an application for revocation of order of cancellation within the next 15 days - Petition disposed off.
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2022 (9) TMI 258
Reopening of common portal to file/rectify TRAN-1 and TRAN-2 - Distribution and/or utilization and/or eligibility of Input Service Distributor (ISD) credit of Service Tax/excise duty - Section 140 of the CGST Act 2017 - HELD THAT:- In view of the provisions of CGST Act, the ISD credit ought to have been distributed by the said ISD to its different units/offices before 1.07.2017 and thereafter the transferee unit/offices ought to have filed TRAN-1 to transition the said credit distributed to it by ISD, into their respective ECL. The Hon ble Apex Court, to aid the assessees to overcome the procedural/technical hurdles, by the order UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] directed the GST Network to open the common portal to file/rectify TRAN-1 and TRAN-2 for a period of two months, i.e., with effect from 1st September, 2022 to 31st October, 2022 to enable the different private parties to avail Transitional Credit. All Petitioners, through their respective units/offices registered under CGST Act and/or State Acts, as the case may be, can avail this window and file GST TRAN-1/revised GST TRAN-1 at the units/offices between 01.09.2022 to 31.10.2022 - petition disposed off.
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2022 (9) TMI 257
Seeking reopening of common portal for filing forms for availing transitional credit through Tran 1 and Tran 2 - HELD THAT:- Apex Court in the case of UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] had directed opening of common portal for filing forms for availing transitional credit through Tran 1 and Tran 2. The petitioner is directed to avail the remedy of filing forms availing transitional credit through Tran-1 and Tran-2 during the window opened by the Apex Court from 1.9.2022 to 31.10.2022. The petition is disposed off.
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2022 (9) TMI 256
Direction to open common portal for filing concerned forms for availing transitional credit through TRAN-1 TRAN-2 - HELD THAT:- Apex Court in UNION OF INDIA ANR. VERSUS FILCO TRADE CENTRE PVT. LTD. ANR. [ 2022 (7) TMI 1232 - SC ORDER] has disposed of all the SLPs directions directing the Goods and Service Tax Network (GSTN) to open common portal for filing concerned forms for availing transitional credit through TRAN-1 TRAN-2 for two months i.e. w.e.f. 01.09.2022 to 31.10.2022, therefore, in view of the above, this petition is liable to be disposed of with liberty to the petitioner to avail said benefit. The present petition is disposed of in the light of the order passed by the Apex Court with liberty to the petitioner to avail the said benefit during the above period.
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2022 (9) TMI 255
Classification of goods - Flavoured Milk sold under trade name of Power Sip - classifiable under Chapter 0402 or under Chapter 2202? - HELD THAT:- In the present case, as per the product labels submitted by appellant, the Milk constituent is Double Toned Milk which are not Full Cream Milk or Skimmed Milk as per above definitions and Chapter Note 1 explaining the scope of Heading 0402 and therefore are undoubtedly excluded from the purview of Tariff Heading 0402. Therefore, irrespective of the contentions that the product remains Milk even with added flavours, it is clearly established that the Milk referred to in this Tariff heading and the products of the appellant are not the same and on this ground alone the products in hand are not covered under Tariff Heading 0402. NDDB is a nodal agency in the Dairy products and the Flavoured Milk is categorized as Beverage as can be seen above. Further, Beverage as per the Oxford dictionary definition is any type of drink except water . Thus, it becomes evident that the product in hand is a Beverage containing milk, classifiable under tariff item 2202 99 30. In similar facts in the case of M/s. Britannia Industries Ltd. [ 2021 (8) TMI 193 - APPELLATE AUTHORITY ADVANCE RULING, TAMILNADU ], it was held that flavoured milk is not classifiable under Tariff Heading 0402/0404 but classifiable under CTH 2202 99 30. Appeal dismissed.
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2022 (9) TMI 254
Classification of goods - rate of GST - Flavoured Milk - classifiable under Chapter 0402 or under Chapter 2202? - HELD THAT:- The Customs Tariff adopted for the purposes of GST is aligned to HSN and the arrangement of the products in the Tariff has been done in a schematic manner. The initial Sections/Chapters contain live animals, not processed goods and the later Chapters contain the processed goods. i.e., Section I covers Live Animals and Animal Produce in which Chapter 4 covers Dairy produce; birds eggs; natural honey; edible products of animal origin, not elsewhere specified or included and Section IV covers Prepared Foodstuffs, Beverages, Spirits And Vinegar, Tobacco And Manufactured Tobacco Substitutes in which Chapter 22 covers Beverages, spirits and vinegar . From the classification scheme adopted in the Tariff, it can be seen that products in their natural state are classified in the initial chapters and when such products undergoes certain process, they are classified in the later chapters. In the present case, flavoured milk is not the natural form of milk but obtained after application of specific processes on the milk - NDDB being a nodal agency in the Dairy products and the Flavoured Milk is categorized as Beverage as can be seen above. Further, Beverage as per the Oxford dictionary definition is any type of drink except water . Thus, it becomes evident that the product in hand is a Beverage. In similar facts of case the Appellate Authority for Advance Ruling, Tamil Nadu, in the case of IN RE: M/S. BRITANNIA INDUSTRIES LIMITED [ 2021 (8) TMI 193 - APPELLATE AUTHORITY ADVANCE RULING, TAMILNADU] , held that flavoured milk is not classifiable under Tariff Heading 0402/0404 but classifiable under CTH 2202 99 30. The appeal filed by appellant M/s. Gujarat Co-operative Milk Marketing Federation Ltd is rejected.
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2022 (9) TMI 253
Profiteering - purchase of a Flat - allegation is that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in the price - contravention of provisions of Section 171 (1) of the CGST Act, 2017 - HELD THAT:- It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations: - one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, It is apparent from the DGAP's Report that there has been no reduction in the rate of tax in the post GST period. Hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue, the DGAP In his Report, has stated that ITC as a percentage of the turnover which was available to the Respondent during the pre-GST period (April-2015 to June-2017) was 1.03% and during the post-GST period (July-2017 to March-2019), it was 0.63%. On this basis, the DGAP has concluded his Report with the findings that the Respondent had neither been benefited from additional If nor there had been a reduction in the tax rate in the post-GST period for the Project Garden Avenue K-4 . The Authority has no reason to differ from the Report of DGAP and we therefore agree with his findings since there was no reduction in the rate of tax nor there was increased additional benefit on account of ETC. Hence, the provisions of Section 171 of CGST Act, 2017 are not liable to be invoked in this case. The Authority concludes that the instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the Respondent has neither been benefited from additional ITC nor has there been a reduction in the tax rate in the post-GST period. The application filed by the Applicant No. 1 requesting action against the Respondent for alleged violation of the provisions of the Section 171 of the CGST Act is not maintainable and hence the same is dismissed.
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2022 (9) TMI 252
Profiteering - supply of three products - Juvederm Voluma with Licodaine - Juvederm Ultra Plus XC - Juvederm Ultra - benefit of reduction in the GST rate from 28% to 18% was not passed on to the recipients, by way of commensurate reduction in the price - contravention of section 171 of CGST Act - HELD THAT:- Every recipient of goods or services is entitled to the benefit of tax rate reduction by way of reduced prices and Section 171 does not offer the Respondent to suo-moto decide on any other modality to pass on the benefit of reduction in the rate of tax to his recipients. Therefore, any benefit of tax rate reduction passed on to a particular recipient or customer cannot be appropriated or adjusted against the benefit of tax rate reduction due to another recipient or customer. Hence, this methodology of 'netting off' cannot be applied in the present case as the customers have to be considered as individual beneficiaries and they cannot be compared with netted off. This Authority has also clarified in its various orders that the benefit cannot be computed at the product, service or the entity level as the benefit has to be passed on each supply of goods and services. This Authority determines that the amount profiteered by the Respondent No. 1 and No. 2 is Rs. 61,54,833/- and Rs. 28,50,72,358/- respectively. The amount profiteered by the Respondent No. 2 is inclusive of the amount profiteered by the Respondent No. 1. Hence, the Respondent No. 2 is liable to pass on the profiteered amount of Rs. 61,54,833/- to the Respondent No. 1 and thus, the Respondent No. 1 is liable to pass on this benefit of rate reduction due to the Applicant No. 1 and the remaining amount in the Central and concerned State Consumer Welfare Fund. Further, since the recipients (other than the Respondent No. 1) of the benefit of rate reduction are not identifiable, the Respondent No. 2 is directed to deposit the remaining profiteered amount of Rs. 27,89,17,525/- in two equal parts in the Central Consumer Welfare Fund and the concerned State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules 2017, along with interest payable @ 18% to be calculated from the dates on which the above amount was realized by the Respondent No. 2 from his recipients till the date of its deposit as prescribed and in accordance with the provisions of Rule 133 (3)(b) of the CGST Rules, 2017. The above amount of Rs. 27,89,17,525/- shall be deposited, within a period of 3 months from the date of passing of this order failing which it shall be recovered by the concerned CGST/SGST Commissioners. Penalty - HELD THAT:- It is evident from the narration of facts that the Respondents have denied the benefit of tax reduction to the customers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, they have, committed an offence under section 171 (3A) of the CGST Act, 2017 and therefore, they are liable to penal action under the provisions of the above Section. However, since the provisions of Section 171 (3A) come have come into force w.e.f. 01.01.2020, whereas, the period during which violation has occurred is w.e.f 01.07.2017 to 30.09.2019, hence the penalty prescribed under the above Section cannot be imposed on the Respondents retrospectively. This Order having been passed today falls within the limitation prescribed under Rule 133(1) of the CGST Rules, 2017.
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Income Tax
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2022 (9) TMI 251
Recovery proceedings of tax dues - preferential right - secured creditors - Income Tax Department s preferential right to recovery of debts over other creditors - whether the plaintiff or the defendant no.3 has a preferred lien in respect of the amount deposited in the said FDR lying with the defendant no.1 Bank? - HELD THAT:- Income Tax Department s preferential right to recovery of debts over other creditors is confined only to ordinary or unsecured creditors. It would not extend to secured creditors. The ratio of the aforesaid judgment is fully applicable to the facts and circumstances of the present case. In the present case, the FDR in question was created on 27th March, 2012 payable to the plaintiff and the lien was confirmed by the defendant no. 1 bank in favour of the plaintiff on the said date. This was much before the notice dated 5th February, 2013 issued on behalf of the Income Tax Department to the defendant no.1 Bank. The lien in favour of the plaintiff makes the plaintiff a secured creditor and therefore, the right of the plaintiff would prevail over that of the Income Tax Department. Consequently, the plaintiff company would be entitled to the amounts under the said FDR. The only surviving issue as noted in the order dated 6th May, 2019, is decided in favour of the plaintiff and against the defendants. The suit is decreed in the aforesaid terms. Defendant no.1 Bank states that the original amount has throughout been kept in an interest bearing fixed deposit. The defendant no.1 Bank is directed to release the aforesaid amount along with accrued interest in favour of the plaintiff company within six weeks from today. If the aforesaid amount is not released within six weeks, the defendant no.1 bank would be liable to pay interest @ 8% per annum on the said amount after the expiry of the aforesaid period of six weeks.
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2022 (9) TMI 250
Ex-parte order - Bogus share capital and share premium received - unexplained cash credits u/s 68 - CIT(A) noted that even after expiry of two years of filing of the appeal, the assessee has failed to provide any details or written submissions and despite service of notice, no one appeared and, therefore, the ld. CIT(A) held that the assessee/appellant was diligently and willfully avoiding the appellate proceedings and decided the appeal on merits and uphold the assessment order. HELD THAT:- As noted above, despite service of notices no one has put up in appearance on behalf of the assessee. After going through the assessment order as well as the impugned order of the ld. CIT(A), we do not find any justification to interfere with orders of the lower authorities. The impugned orders of the lower authorities are, therefore, upheld and appeal of the assessee is hereby dismissed.
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2022 (9) TMI 249
Assessment u/s 153A - Disallowance u/s 14A - HELD THAT:- The assessee has responded to the show cause notice. The Assessing Officer has made elaborate discussion on the issue and has resorted to the disallowance u/s 14A of the Act. Noticeably, the assessment was framed u/s 153A where requisite information/accounts of the assessee were called for. Needless to say, the satisfaction of the AO is the assent of his mind. AO has inquired on the issue having regard to the details/information filed by the Assessee. The text and tenor of the assessment order shows that the Assessing Officer has objectively looked into the issue having regard to the details/accounts of the assessee and thus the contention of arriving at contemplated satisfaction is fulfilled. More so, opportunity was duly granted and availed by the Assessee. The facts and circumstances imply presence of satisfaction contemplated under Section 14A(2) of the Act. Noticeably, it is not a case where the assessee has offered any disallowance under Section 14A which is sought to be displaced by the Assessing Officer. Hence, Ground No. 1 of the Cross Objection of the assessee in this regard is not tenable. Disallowance under Section 14A cannot exceed the exempt income by way of dividend - The issue has been discussed by the Co-ordinate Bench in ACIT vs. Hindustan EPC Company Ltd., [ 2022 (8) TMI 904 - ITAT DELHI] and thus no longer res integra. The CIT(A) shall accordingly restrict the disallowance to the extent of exempt income while making denovo adjudication. Hence, Ground No.2 of the Cross Objection is allowed. Disallowance under Rule 8D(2)(iii) - Since the issue has been restored to the file of the CIT(A), the assessee shall be at liberty to place such arguments and adduce such evidence as may be considered expedient in the course of fresh adjudication by the CIT(A). Hence, Ground No.3 of the Cross Objection is thus allowed for statistical purposes. Adjustment made in the book profit under Section 115JB of the Act towards disallowance under Section 14A - We find merit in the contention of the assessee that estimated disallowances computed under Rule 8D cannot be adopted for the purposes of Section 115JB of the Act. This aspect is also restored to the file of the CIT(A) for determining the book profit/loss having regard to decision of the Special Bench in ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] and in accordance with law. Hence, Ground No.4 of the Cross Objection is allowed for statistical purposes.
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2022 (9) TMI 248
Penalty u/s 271B - Assessee s turnover had exceeded the prescribed limit u/s 44AB of the Act and he had failed to carry out audit u/s 44AB - HELD THAT:- Pune Tribunal in the case of Banwari Sitaram Pasari HUF [ 2013 (1) TMI 234 - ITAT PUNE] held that where assessee was engaged in online buying and selling of commodities through a commodity exchange, as a speculative activity, wherein no physical delivery was taken or given, total transactions booked with such commodity exchange could not be considered as 'turnover' for purposes of considering liability of assessee to get accounts audited under section 44AB. In the present case, in absence of the assessee causing appearance before the Revenue Authorities, either at this stage of assessment proceedings nor at the stage of penalty proceedings u/s 271B and neither at the appellate proceedings before Ld. CIT(Appeals) (It has been observed that the matter has been fixed twice before CIT(Appeals), once against the original penalty order and then subsequently again pursuant to directions of orders of ITAT and on both occasions, the assessee did not cause appearance before CIT(Appeals), and therefore, the Department did not get any opportunity to ascertain the true nature of transaction carried out by the assessee and also whether there was requirement to maintain books of accounts. Accordingly, by way of final opportunity, matter is being restored to the file of AO to decide the nature of transaction and whether the assessee was required to maintain books of accounts. The assessee is also directed to cooperate in the matter. In case of further non-cooperation on part of the assessee, AO may kindly proceed on the basis of materials available on record. Appeal of the assessee is allowed for statistical purposes.
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2022 (9) TMI 247
Nature of Sales tax incentive received - Revenue receipt OR capital receipt - HELD THAT:- As subsidy was principally aimed to cover the capital outlay of the assessee for undertaking modernization industries in Rajasthan and thus subsidy in the form of sales tax waiver deferment was not meant to give any benefit on day to day functioning of the business or to make it more profitable per se. Hence, such sales tax incentive is clearly capital in nature as claimed by the assessee. CIT(A) has followed the judgment rendered by the Hon ble Delhi High Court in the case of CIT vs. Bhushan Steels and Strips Ltd. [ 2017 (7) TMI 501 - DELHI HIGH COURT] against the assessee, the operation of the aforesaid judgment rendered by the Hon ble Delhi High Court has been found to be stayed by the Hon ble Supreme Court [ 2017 (12) TMI 477 - SC ORDER] The subsidy in the instant case though computed in terms of sales tax deferment/waiver, it was essentially meant for capital outlay expanded by the assessee for set up of unit in case of new industrial unit and for expansion and diversification of existing unit. The entitlement was also stated to be related to percentage of fixed capital investment. No hesitation to accept the plea of the assessee. While doing so, we do not see any merit in the plea of the Revenue that necessary facts are not placed on record. It is nowhere spelt out what additional facts were exactly required to appreciate the factual matrix. We also observe that notwithstanding that the assessee has treated such incentive as revenue receipt in past, the same cannot be deterrent for making a correct claim in the subsequent assessment year. No merit in the adverse observation made by the CIT(A) with reference to the amendment brought out by Finance Act, 2015 by insertion of clause (xviii) to Section 24 whereby such subsidy has been included in the definition of income. Such inclusion is to be regarded as prospective in operation in the light of the judgment in CIT vs. Vatika Township Pvt. Ltd. [ 2014 (9) TMI 576 - SUPREME COURT] - Appeal of the assessee is allowed.
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2022 (9) TMI 246
Reopening of assessment u/s 147 - Unexplained cash deposits - HELD THAT:- As recorded by the AO that various opportunities were given to the assessee. There is no dispute with regard to the fact that the lower authorities have made addition on the basis that the assessee could not explain the source of cash deposits. It was stated before the lower authorities that the account was jointly held with wife of the assessee hence, the entire amount could not have been attributed. Assessee ought to have been given a proper hearing by the lower authorities to explain the source of cash deposits. It was stated by the assessee that the bank account in which the cash was deposited was jointly held with wife of the assessee. Admittedly the AO did not issue any notice to other joint holder of the account i.e. spouse of the assessee. Assessment was re-opened without application of mind. Moreover, Ld.CIT(A) also did not verify the correctness of the claim of the assessee. Under these facts, the impugned addition made by re-opening of the assessment, is not justified. Hence, the impugned addition is hereby, deleted. Thus, grounds raised by the assessee in this appeal are allowed.
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2022 (9) TMI 245
Levy of interest u/s.234D - interest was levied in the order u/s.143(3) r.w.s. 147 and not in the order U/s.154 - HELD THAT:- In the order U/s.143(3) r.w.s 147 of the act, the AO has levied interest under the provisions of 234D of the act. AO then issued a notice U/s.154 proposing recompute the interest U/s.234B(3). In response to proposal u/s.154 of the act issued by the Assessing Officer the assessee filed an objection vide letter dated 22.07.2021 for the enhancement of interest U/s.234B(3) of the act. Apart from this the assessee requested for rectification of interest levied U/s.234D of the act and also disallowance under the provisions of section 14A of the act. The Assessing Officer without considering the objection filed has passed an order U/s.154 of the act stating that, however, the assessee chose not to file any objection on or before the specified date. In view of the above, it is presumed that the assessee has no objection to the said proposal. Accordingly the order u/s.143(3) r.w.s 153D was rectified. AR at the outset submitted that the original quantum addition made by the Ld.AO u/s. 143(3) order is pending before the Ld.CIT(A). As submitted that in the meanwhile by way of the 154 order, the Ld.AO has enhanced the addition. He prayed that this appeal may also be remanded to the Ld.CIT(A) to be considered together. DR did not object for the issue to be remanded to the Ld.CIT(A). Accordingly, we remand this issue back to the Ld.CIT(A). It is directed that the Ld.CIT(A) is directed to consider the claim raised by assessee in this appeal along with the quantum appeal which is said to be pending adjudication. Grounds raised by assessee stands allowed for statistical purposes.
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2022 (9) TMI 244
Net profit estimation - Addition in respect of Jamshedpur Branch - assessee has shown lower GP rate by inflating expenditure and lowering income from job charges - AO has applied net profit @5.8% to the turnover of the head office thereby making an addition on the ground that the assessee has not maintained quantitative/qualitative details of stocks and also that unverifiable sales of 704.330 M.T to parties which were not identifiable - HELD THAT:- While deleting the addition the ld CIT(A) recorded a finding a fact that the AO has not found any discrepancy/defects in the books of accounts and observed that the sales and purchases were made in cash. CIT(A) also noted that there were no finding of the AO as to the fact that the sales were bogus and non genuine . CIT(A) has noted that the similarly in respect of Pune Branch which was dealing in iron and steel scrap with local companies whereas head office was engaged in dealing with trading in Iron scrap purchased from third parties and selling it to Tata Motors, Jamshedpur and thus rejected the observations of the AO that the assessee has not mentioned the job and scrap thereof and also the application of NP of 6% in the Pune Branch thereby making an addition - We observe the ld CIT(A) has passed a very reasoned and speaking order while deleted the addition and therefore we do not find any infirmity in the order of Ld. CIT(A) and accordingly upheld the same. Decided against revenue.
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2022 (9) TMI 243
Undisclosed income surrendered by the assessee at the time of search - ad hoc disclosure under coercion, threat and undue pressure - presumption u/s 292C - the document belonged to the assessee - Reliance on the statement made by the key person of the group after approximately two months from the date of search - HELD THAT:- A joint inspection was carried out on 28.12.2021 but the said document could not be found in the assessment folder and this was duly admitted by the D.R. during the course of hearing before us. So we are unable to comment on the contents of BSA/1 the document which was seized during the course of search and was stated to the belonging to the assessee but the undisputed position is that no addition can be made on the basis of ad hoc disclosure made during the course of search or post search when there is no corroborating evidence. In the present case only BSA/1 was seized during the search which was denied by the assessee in the assessment proceedings. Assessee cannot be slapped with tax liability based upon the information contained in the document which could not be produced before the Bench despite the specific direction. We note that the search team has not found any cash, money and not other assets corroborating the said addition in the hands of the assesse. Therefore presumption of section 292CA of the Act cannot be applied in this case. So far as the another plea of the income tax authorities is concerned that the retraction was made only in the return of income, we are not satisfied with the said plea as the assessee has retracted the disclosure in the return of income itself and the case is supported by the decision of Co-ordinate Bench in the case of Shri Lalji Khimjibhai Patel [ 2019 (10) TMI 998 - ITAT RAJKOT] - Appeal of assessee Allowed.
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2022 (9) TMI 242
TP Adjustment - selection of MAM - TNMM or CUP - benchmarking the profits, the assessee has considered TNMM as the most appropriate method and the PLI of the assessee is higher than that of the comparable companies - HELD THAT:- In the case of Durr India (P) Ltd [ 2017 (2) TMI 901 - ITAT CHENNAI] the coordinate Bench of Tribunal has held that allocation of cost partly on the basis of turnover and net profit cannot be considered as a factor to propose transfer pricing adjustment. Further, it was held that where the PLI of the assessee under TNMM is at arm s length and it is not possible on the part of the department to identify a comparable, which is rendering similar services, the question of considering CUP method would not arise at all. Since the assessee has stated that all the relevant evidences were already available with the AO/TPO and on that basis; it is required to be verified with regard to availing actual services and its allocation of cost to the assessee. Accordingly, this ground relating to Management fees is remitted to the file of the AO for fresh consideration and the AO after going through the evidences filed by the assessee decide the issue fresh as indicated above. This ground of appeal of the assessee is allowed for statistical purposes. Deduction u/s 10AA - exclusion of freight charges incurred in foreign currency from export turnover - HELD THAT:- The case of the assessee is that the Assessing Officer has apportioned freight charges and other expenditure incurred in foreign currency in SEZ and non-SEZ units and recomputed 10AA deduction. It was the explanation of the assessee that freight charges and other expenditure incurred in foreign currency is for non-SEZ units only. It was further submission that the assessee has been maintained separate books of account. Thus, the facts are contradictory. Therefore, we remit the issue back to the AO to examine the claim of the assessee and to compute the 10AA deduction in accordance with law after affording an opportunity of being heard to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2022 (9) TMI 241
Unexplained cash credit u/s 68 - Estimation of income - C ommission income earned for arranging such short term loans - HELD THAT:- Details filed by the assessee in the form of proof of identity, bank statements, nature of transactions carried out during the year, confirmation of amounts received, and copies of Income Tax Returns, we intend to hold that in the instant case, there can only can be an element of commission income which the assessee might have earned for arranging such short term loans for M/s. Pragati Managment and without holding the assessee to be an accommodation entry provider. Thus, to end the dispute and without setting any precedence for the alleged transactions, we estimate income of the assessee @ 3% of the total loans advanced i.e., 3% of Rs.1,00,00,000/- which comes to Rs.3,00,000/- and direct the Assessing Officer to sustain the said addition and the remaining addition of Rs.97,00,000/- stands deleted - Appeal of assessee partly allowed.
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2022 (9) TMI 240
Capital gain on sale of land and bungalow - FMV determination - power to refer the matter to the valuation officer - HELD THAT:- Value claimed by the assessee is at variance with the fair market value. Indeed the AO can refer the matter to the valuation officer if registered valuer value the property as on 1st April 1981 which is at variance with the fair market value. However such amendment is prospective in nature and therefore the same cannot be applied to the earlier years. In this regard, we find support and guidance from the judgment in the case of CIT Vs. Gauranginiben S. Shodhan Indl [ 2014 (2) TMI 78 - GUJARAT HIGH COURT] . The relevant extract of the judgment has already been extracted in the preceding paragraphs. As the dispute before us relates to the year prior to the amended provisions of section 55A of the Act which is applicable prospectively. Therefore such amended provisions cannot be applied to the case on hand. Thus we are inclined to reverse the order of the CIT-A, and accordingly we direct the AO to work out the capital gain on sale of land and bungalow after taking the value as on 1st April 1981 as declared by the assessee. Hence the ground of appeal of the assessee is allowed. Exemption u/s 54F - As we have allowed the main ground of the assessee with regard to value of the property as on 1st April 1981 which will result into long term capital loss in the hand of the assessee. Therefore, the issue of allowance of exemption under section 54F of the Act become redundant. Hence the ground of appeal of the assessee is hereby dismissed being infructuous. Addition u/s 68 on account of loans or gifts - cash deposit in the bank of the creditors - HELD THAT:- The provision of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. The assessee in order to prove the identity and credit worthiness of creditor and genuineness of transaction has furnished the details such as copy of ITR, copy of ledger account confirmation, bank statements, etc. The authorities below also not doubted the identity of the creditor and genuineness of the transaction. The addition was made only for the reason that the AO was not satisfied with the credit worthiness of the creditors. The view of the AO was based on fact that there were cash deposit in the bank of the creditors. It is well settled position of law that the assessee is only required to prove to sources of credit in his/her/it books of accounts not the sources of source. In our considered view the credit worthiness of the creditors cannot be doubted merely on the basis that there were cash deposit in their bank account unless some adverse material brought on record - if AO has any reservation with regard to the credit worthiness, the AO should have conducted independent enquiry from the parties or brought contrary materials on record - we are of the view that the assessee has discharged primary onus cast under section 68 and onus shifted on the AO to bring contrary material by making independent inquiries but the AO failed to do so. Hence, we hereby set aside the order of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. Addition of deposit of cash in the bank account - onus to prove - HELD THAT:- The onus lies upon the assessee to justify the cash deposit in the bank account represents the agriculture income. But the assessee has failed to submit any documentary evidence before the lower authorities. At the time of hearing before us, a question was also put up to the learned AR for the assessee why the agriculture income was not included in the total income of the assessee for the purpose of calculating the tax. The learned AR could not make any satisfactory reply. Thus in the absence of sufficient documentary evidence, we do not find any merit in the argument advanced by the learned AR appearing on behalf of the assessee. Accordingly the ground raised by the assessee is hereby dismissed.
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2022 (9) TMI 239
Employee Stock Options (ESOP) expenditure - Disallowance u/s 37 - difference between the grant price and the market price on the shares as on the date of grant of options - HELD THAT:- Special Bench Bangalore in the case of Biocon Ltd [ 2013 (8) TMI 629 - ITAT BANGALORE] on the issue have held the discount on ESOP being a general expense, is an allowable deduction u/s 37(1) of the Act during the years of vesting on basis of percentage of vesting during such period subject to upward or downward adjustment at the time of exercise of option. When this issue was decided in favour of the assessee, the department took up this matter before the Hon ble Karnataka High Court in the case of CIT LTU vs. Biocon Ltd [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] wherein permitted the deduction of ESOP expenses. We find that Ranbaxy Laboratories [ 2009 (6) TMI 126 - ITAT DELHI-I] judgment which has been referred to by the department was also considered in the aforesaid judicial pronouncement. The decision of the Special Bench Bangalore has been upheld by the Hon ble Karnataka High court (supra) and it has been categorically held that the expenditure on ESOP entitles the assessee for deduction u/s 37(1) - Decided in favour of assessee.
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2022 (9) TMI 238
Reversal of lease rent and higher purchase interest - assessee company is essentially a non-banking finance company and one of the major source of income is from lease rentals - HELD THAT:- This ground was not pressed by the assessee on the condition that the same would not result in to double addition in the year in which the income was already offered by the assessee. Therefore, naturally the claim of the assessee is that that the ground in this year may not be pressed, if the same is directed to be excluded in the assessment of the year in which it has been offered as income. As similar direction has been given by the coordinate bench in the earlier year, respectfully following the decision of the coordinate bench, we also give the similar direction as contained in paragraph number 12 of the order of the ITAT - Accordingly, this ground of appeal with respect to the addition is dismissed. Disallowance of claim of right in respect of interest on securities offered for tax in the earlier year on the ground that the genuineness of transactions remain to be proved - HELD THAT:- The claim of the assessee that the purchases were accepted in the earlier years and the income was offered for taxation in the earlier year and therefore it should have been accepted, this ground also deserves to be rejected for the reason that assessee has failed to produce any evidence with respect to the sale of the securities. Accordingly, all the grounds with respect to the disallowance are dismissed. Disallowance of bad debts - HELD THAT:- Assessee is engaged in the business of money lending, it is also proved that the above amount could not be recovered, therefore according to us it satisfies all the conditions of allowability of bad debt in case of finance business. Merely certain deficiencies in the documents cannot be used to deny the claim of bad debt. In view of this we direct the learned assessing officer to delete the disallowance of amount of bad debt claim - We also direct the learned AO to look into the amount which is been claimed by the assessee, disallowed by the learned AO, raised in grounds of appeal before the learned CIT A and amount of written by CIT A in his order. Therefore, the correct amount deserves to be identified and to be allowed. These grounds of appeal with respect to the bad debts are allowed. Disallowance of depreciation - ground raised by the assessee challenges the direction of the learned CIT A of confirming the disallowance of depreciation for the only reason that in the earlier year the disallowance was made but in this year it was confirmed without independently examining allowability of depreciation for this year - HELD THAT:- Order the orders for assessment year 1992 1993 and 93 94 one referred to and the matters were restored back to the file of the AO to decide it in accordance with the decision of ITAT. For assessment year 1998 99, the coordinate bench directed the AO to allow the depreciation. We find that the direction of the coordinate bench, which followed the decision of the other assessment years where the issue was set aside to the file of the AO, is not in conformity with those orders of ITAT. Accordingly we set-aside this issue back to the file of the learned assessing officer with a direction to decide the issue afresh in the light of orders of the ITAT. This ground of appeal is allowed accordingly to that extent. Rejection of change in the method of accounting - HELD THAT:- The coordinate bench for assessment year 1998 1999 held that assessee has been following method of accounting of revenue as per reserve bank of India Prudential norms on actual realization basis, or when there was a reasonable certainty of realization of such income. Therefore, the above decision judicially binds us. Accordingly, we allow these grounds of appeal of the assessee with respect to the change in method of accounting and direct the learned AO deleted the addition Disallowance of reversal of lease rent made on the basis of Prudential norms issued by the reserve bank of India - This issue has been decided by us in assessment year 1990 2000 by following the order of the coordinate bench in assessment year 98 99 - Therefore respectfully following the same, ground number 1(a) to 1(d) are dismissed with a direction to the assessee to exclude and not to tax these incomes in the year and which assessee has offered them. Disallowance from two different parties where the borrowers have defaulted in payment towards the bill discounting and lease charges and further the information with the assessee was that these companies have closed their operation - HELD THAT:- AO disallowed the same is no details of steps taken to recover the above amount were shown. The facts clearly show that this amount has been written off by the assessee in its books of account and claimed as bad debt. The undisputed facts also show that assessee in the business of loans and advances and financing of assets through hire purchase. Identical issue arose in the case of the assessee for assessment year 99 2000 wherein we have allowed the claim of such bad debts as per ground number 5. Therefore, we allow the claim of that that the assessee reversing the orders of the lower authorities. Disallowance of depreciation - HELD THAT:- We have dealt with this issue in the appeal of the assessee for assessment year 99 2000 wherein we have set-aside the whole issue back to the file of the learned assessing officer in accordance with the order of the coordinate bench in earlier years in assessee s own case. Therefore, according to that ground number 4 is restored back to the file of the learned assessing officer. Rejection of method of accounting followed by the assessee - HELD THAT:- We find that the method of accounting change by the assessee frequently is the main reason for not accepting the same by the revenue authorities. However for assessment year 1998-1999 the coordinate bench has taken a view that the method of accounting adopted by the assessee in this year is bona fide and in accordance with the reserve bank of India norms. Therefore respectfully following the decision of the coordinate bench in assessee s own case for assessment year 1998 1999 we also reject the orders of the lower authorities rejecting the change in the method of accounting and hence the addition is deleted. Accordingly, ground number five of the appeal of the assessee is allowed. Disallowance of interest in respect of advances given to sift court travel private limited - HELD THAT:- The fact shows that there is no such addition made by the learned assessing officer with respect to the advances given to CIFCO travel private limited. Therefore, ground number 1 of the appeal is not arising out of the order of the learned CIT A hence dismissed. Disallowance of amount as written off by the assessee - HELD THAT:- We find that in the current present case and a sum of ₹ 519,222/ is interest and brokerage income already offered in earlier years and now written off. Further, a sum of ₹ 1,503,135 is the hire purchase installment of lease charges receivable from the various parties, which could not be recovered, and draft. With respect to these two items, we direct the learned assessing officer to delete the disallowance. With respect to other items, there are no evidences available and therefore the disallowance of the balance sum is confirmed. Accordingly, the assessee gets relief with respect to the sum of ₹ 1,503,135/ being outstanding hire charges receivable and a sum of ₹ 519,222/ being interest and brokerage income already offered for taxation in the earlier years. The ground number 4 of the appeal is partly allowed. Penalty u/s 271 (1) (C) - inaccurate particulars of income with respect to claim of bad debts - HELD THAT:- No doubt the claim of the bad debt could not be explained by the assessee, however such explanation cannot be said to be inaccurate. It is not the case of the revenue authorities that the facts stated by the assessee are incorrect. The claim could have been allowed to the assessee with respect to the provisions of Section 29 of the act. However, assessee failed to substantiate the same either u/s 36 or u/s 28-29 in absence of adequate details. Therefore, it cannot be said that claim of the assessee is inaccurate. Order passed by the Learned AO u/s 271 (1) (C) of the act levied the penalty for the reason that assessee has furnished inaccurate particulars of income with respect to claim of bad debts - CIT-A on appeal also confirmed the same. On carefully looking at the facts of the case we find that merely because, the addition has been confirmed by the appellate authorities, it cannot be said that the assessee has furnished inaccurate particulars of income. On the merits, the claim of the assessee is rejected. Merely because of the same, when the claim is not found to be unsustainable in law, the penalty deserves to be deleted. Accordingly, we direct the learned assessing officer to delete the penalty. Disallowance of interest - assessee has advanced interest free loan to 1 of its entities wherein the AO disallowed interest - HELD THAT:- Identical issue arose in the case of the assessee in earlier years wherein we have held that this amount is pertaining to outstanding interest receivable from that party. It is not the advance which is been given out of interest-bearing funds available with the assessee. The interest receivable has already been offered for taxation in the earlier years. There is no provision in the agreement either oral or written to charge interest on outstanding interest. In nutshell, the assessee has not advanced interest-bearing funds to that party i.e. Arcadia investment Ltd. Accordingly, for the reason given by us in earlier years, the interest disallowance Deserves to be deleted, accordingly reversing the orders of the lower authorities, ground number 1 of the appeal is allowed. Reopening of assessment u/s 147 - accrual of interest on lease and hire purchase - HELD THAT:- Change in method of accounting made by the assessee and thereafter making substantial addition on that account in the original assessment. However, he did not made addition with respect to the accrued income. There is no tangible material available with the assessing officer to reopen the assessment except the same set of facts on which he has already applied his mind. Further, there is no failure on part of the assessee to disclose any material facts necessary for computation of its income. Further the objections raised by the assessee were not disposed of separately but in the assessment order itself that also makes the reassessment not sustainable. In view of this, the first ground of appeal raised by assessee against the validity of reopening is allowed. Therefore, we quash the reassessment order passed by the learned AO. Allowance of claim of the assessee u/s 36 (1) holding that same is bad debt arising in the course of the leasing and hire purchase business of the assessee. Claim not made in ROI - rejection of claim of the assessee that the amount written back relating to waiver of capital amount due to the state bank of India was not taxable on the ground that no such claim was made in the return of income - HELD THAT:- As no fresh claim was made before the appellate authorities either by letter or by any other mode. Therefore in fact there is no claim before the learned CIT A. The only issue before the CIT appeal was that AO has erred; we find that there is no error in the part of the AO. Therefore, ground number 5 of the appeal is dismissed.
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2022 (9) TMI 237
Deemed income from house property - farm house - whether land was used for the agriculture/horticulture business and hence, it shall be treated as an exempted income u/s 10(1)? - HELD THAT:- For year under appeal is concerned against NIL income from horticulture is incurred, which includes electricity expenses, Municipal Tax, Horticultural expenses, Repairs and depreciation on plant machinery. The details of the expenses incurred at the said farm house and the horticulture income, which is NIL for the year under appeal, it prima facie suggests that the primary activity of the said farm house is not of the nature of agricultural activity, rather it seems to be a place used as farm house and the expenses incurred are for the maintenance of the said farm house. It is not the case that the assessee has carried out agricultural activity and for earning income from agriculture some expenses have been incurred rather situation is inverse. The expenses incurred are much higher and does not match with the agricultural activity. All the grounds raised by the assessee are dismissed.
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2022 (9) TMI 236
Bogus purchases - assessee has shown purchases from A but actually procured the material from B . In this exercise, the assessee might have saved Excise Duty etc. - HELD THAT:- As observed that if an assessee is maintaining complete details of the traded items, then total amount of purchases should not be disallowed. It can be explained by way of example, namely an assessee is trading iron rods, gudder patty, etc. It has been maintaining the complete details of purchases and sales on some investigation, it can be revealed that the assessee has shown purchases from A but actually procured the material from B . In this exercise, the assessee might have saved Excise Duty etc. Sale figure could not be achieved, if the material was not sourced from any other concern, but no such details are available before us. The assessee has neither produced these details before the AO that in the accounts it might have debited the purchases qua M/s. Vijaypath Vincom Pvt. Limited but actually procured the material from X , Y , Z concern. If that factor has been proved demonstrating the complete details of purchases as well as sales, then 100% of the purchases by terming it as bogus could not be added. In the absence of these details, we do not have any option except to confirm the orders of the revenue authorities. Accordingly, we dismiss the appeal of the assessee.
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2022 (9) TMI 235
Loss from share market and commodity market - loss is contingent in nature as the assessee has not admitted its liability - HELD THAT:- The assessee has claimed the loss on the reason that the assessee has incurred said loss on account of unauthorized trading carried out in recognized exchanges. CIT(A) deleted the addition on the ground that the said loss is not a contingent loss and more so the assessee claim has already rejected by the Tribunal and the Appellate Tribunal as per the admission of the assessee. As found that the assessee herein has suffered an arbitration award dated 06/05/2015, which has been challenged by the assessee before the City Civil Court, Bangalore, has been transferred to the Commercial Court Bengaluru and renumbered - The dispute between the assessee and Religare Securities Ltd. are still pending for adjudication before the Court of Law. Therefore, in the interest of justice we inclined to remit the issue to the file of A.O. to decide the same on the basis of the final outcome of the pending dispute before the Commercial Court at Bengaluru. Accordingly, the Ground No. 1 of the Revenue is allowed for statistical purpose. Addition made u/s. 41(1) on account of cessation of liability from three creditors - HELD THAT:- On the ground that creditors were lying static for more than three years and that resulted in cessation of liability. It is admitted fact that the said amount has been by the assessee as the creditor in the books of accounts and also reflected in the balance sheet. The balance sheet has been signed by the statutory auditor and also by the assessee which is nothing but acknowledgment of the debt. Being so invocation of Section 41(1) is erroneous by the A.O. Thus, we do not find any infirmity in the order of Ld. CIT(A) in deleting the addition made by the A.O. u/s. 41(1) - Ground No. 2 of the assessee is allowed. Addition on account of receipt of payment of rendering service - said amount as appearing in the service tax return filed by the assessee, but not reflected in the P L Account - assessee has not produced the books of account and reconciled the said figure with the P L Account figure of sales - HELD THAT:- It is specific case of the Revenue is that the assesses has failed to produced books of accounts before the authorities. There is nothing comes out of the order of the Ld. CIT(A) regarding production of books of account even before the CIT(A). In our opinion, it is an appropriate to remit the issue to the file of A.O. with a direction to produce all the materials whatever produced before the CIT(A) including the books of accounts of the assessee in respect of issue in hand. Accordingly, the issue in question is remitted to the file of the A.O. for Denovo consideration. Accordingly, we allow Ground No. 3 for statistical purpose.
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2022 (9) TMI 234
Unexplained cash credit u/s 68 - Whether assessee proved identity and creditworthiness of the investors and genuineness of the transaction? - CIT-A deleted the addition as observed that AO could not find any document or material acceptable or which could not be explained and assessee had discharged its onus to prove the identity, creditworthiness of all the investors and genuineness of the transaction - HELD THAT:- AO himself noted that the assessee had produced all the details and evidences before him as were called upon by him and even the director of the assessee company and that of investors personally appeared before him who were subjected to examination/cross-examination. AO without pointing out any discrepancy in the evidences furnished by the assessee simply made a one line observation that the assessee had failed to justify the primary source etc. of capital raised. In view of the above discussion, we do not find any infirmity in the order of the CIT(A). This grounds of appeal of the Revenue is hereby dismissed. Revenue contended that as per the provisions of section 68 any explanation offered by the assessee company shall be deemed to be not satisfactory, unless such explanation in the opinion of the AO has been found to be satisfactory - The above ground of the appeal of the Revenue does not have any basis. There is no such legal provision u/s 68 of the Act. In view of this, we do not find any infirmity in the order of the CIT(A) and the same is upheld. The appeal of the Revenue is hereby dismissed.
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2022 (9) TMI 233
Addition of cash found during the course of search - unexplained money u/s 69A - As per assessee the said cash was part of the families regular cash savings and balance kept in the locker - HELD THAT:- It is to be noted that the amount found during the search action was a small amount which the assessee has claimed that the same has been saved out of past savings during long time by him and his wife. Though the aforesaid amount has not been reflected as cash in hand in the balance sheet of the assessee, however, considering the smallness of the amount and that too was found from the locker of the assessee which was placed along with jewellery of the family and that the amount was out of past savings of the assessee family and hence, we are of the view that the addition of the aforesaid amount was not warranted in this case. The same is accordingly ordered to be deleted. Addition of the value of jewellery seized during the course of search as unexplained u/s 69A - said jewellery belonged to the assessee and his family members on record of the department covered by the VDIS 1997 - HELD THAT:- In this case, as submitted by the counsel of the assessee, if the entire jewellery found in the locker is considered, still the same is less by 700 gms which a normal middle-class family was supposed to possess out of the past savings, gifts etc. Therefore, in the light of the above observation of the Hon ble Gujarat High Court in RATANLAL VYAPARILAL JAIN [ 2010 (7) TMI 769 - GUJARAT HIGH COURT] the aforesaid jewellery found from the locker of the assessee being less than the minimum quantity as instructed by the CBDT which a normal family under normal circumstances is supposed to possess, we do not find any justification on the part of the lower authorities to treat the same as unexplained. Also the above found jewellery is even otherwise less than the value of the jewellery already declared by the assessee in the valuation report from 1997 to 2006. In view of the above, the addition made by the lower authorities is ordered to be deleted. Assessee appeal allowed.
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2022 (9) TMI 232
Unexplained cash credits - addition of peak credit - Assessee stated that the alleged deposits were made out of the sale proceeds of rice and paddy and also loans from friends and relatives received from time to time but could not produce any evidence or proof in support of this claim - HELD THAT:- Though the assessee was required to file complete details of such friends and relatives and also the details of sales but the same has not been done at any stage. The only way out left is to sustain the addition only to the extent of peak credit in such bank account. There is no specific detail of the calculation of peak credit from either of the sides and neither it is a case of cash deposits and cash withdrawals for which peak credits theory is perfectly applicable. But keeping in view that the alleged credits in the bank account in the form of cash and cheque have only been utilized for making payment to Techno Shares Stocks Pvt. Ltd. and the assessee having incurred loss on such trading of shares is evidenced by the financial ledger appearing under the PAN number of the assessee on Form No. 10BB and also accepting the fact that the said cash deposit possibly contains the element of short term loans taken from friends and relatives, past savings, sale proceeds of the trading business and also looking to the fact that the peak credit in the bank account - Appeal filed by the assessee is partly allowed.
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2022 (9) TMI 231
Revision u/s 263 by CIT - unexplained cash credit u/s 68 - HELD THAT:- The assessee during the assessment proceeding has given all the details and further clarified that the refund from the Government of EPCG claim was received in subsequent years. AO has specifically asked the assessee during assessment proceeding to explain with supporting documents regarding EPCG claim of receivable in assessee s assets and its treatment given by assessee in its income expenditure/Profit Loss account. It is on record that the assessee has given the details related to this claim as the said claim is in respect of government incentive and assessee already offered said income for taxation. It is pertinent to note that the analogy given by PCIT while directing the Assessing Officer, the PCIT has failed to appreciate that the treatment given by the Assessing Officer to EPCG claim in the present assessment year depends on the refund which is actually received in subsequent year. Thus, this clearly amounts to change of opinion which is not permissible under the provisions of Section 263. PCIT cannot say that the Assessing Officer has not verified this claim and thus this amounts to prejudice to the interest of Revenue. The appeal of the assessee allowed.
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Customs
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2022 (9) TMI 229
Refund claim - the only glitch is that the application for refund has not been preferred before the concerned authority i.e., the Principal Commissioner of Customs (Preventive), New Customs House, IGI Airport, New Delhi i.e., respondent no.1 - HELD THAT:- Having regard to the amount involved and given the fact that respondent no.1 is a party, the instant writ petition can be treated as an application and appropriate orders can be passed qua the same, by respondent no.1. The amount indicated therein i.e., Rs. 7,30,913/-, which was deposited towards differential duty, includes the amount appropriated i.e., Rs 4,16,755/- by virtue of order-in-original dated 28.05.2019. Respondent no.1 will treat the writ petition as the petitioner s application for refund and pass appropriate orders for a refund of the aforementioned amount - writ petition disposed off.
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2022 (9) TMI 228
Violation of judicial discipline - Denial of benefit of the Duty Free Import Authorization [DFIA] licence - Classification of imported Melamine - DRI received information that the appellant had mis-represented Melamine as Syntan and wrongly availed the benefit of exemption notification under the DFIA licence - whether the Melamine is a Syntan or otherwise? - HELD THAT:- According to the literature provided by the learned Counsel for the appellant including a patent and extracts of chemical dictionaries, melamine can be used for tanning leather without making a condensate first. It is clear that Melamine and formaldehyde can be simultaneously used on the leather for tanning instead of making a condensate first. Since the expert opinion is contrary to the published literature the appellant sought cross-examination of the expert. The Adjudicating Authority issued letters but the expert did not appear. The Adjudicating Authority could have issued summons to him to force his appearance, but he did not do so - On cross-examination, perhaps, there would be better clarity as to how the expert held a view contrary to other technical literature. Therefore, it is found that the reliance on the expert opinion of CRCL not correct in this factual matrix. It is also found that prior to the issue of show cause notice there was an order of the Tribunal holding that Melamine qualifies as Syntan. The Additional Director of DRI and the adjudicating authority effectively said that the Tribunal was not correct. If it be their opinion, it was open for them to assail the order of the Tribunal before a higher judicial forum. Instead, the Additional Director DRI and the Assistant Commissioner have arrogated to themselves the role of a superior authority over the Tribunal and ignored the judicial precedent which is not only highly irregular, but is also in violation of judicial discipline. The lower authorities have confirmed the demand ignoring the order of this Tribunal in COMMISSIONER OF CUSTOMS, NHAVA SHEVA VERSUS DIMPLE OVERSEAS LTD. [ 2002 (3) TMI 636 - CEGAT, MUMBAI] , ignoring all the technical literature which state that Melamine can be used directly for tanning leather, relying on the opinion of CLRI contrary to the published literature and without even allowing cross-examination of that expert, on the ground that Melamine was not used in the export products contrary to the DGFT s clarification that actual use does not matter and on the ground that the HSN codes of Syntan and Melamine were different although there is no stipulation of HSN in the licence and even contrary to the law laid down by Supreme Court in COMMISSIONER OF CUSTOMS, CALCUTTA VERSUS GC. JAIN ANR. [ 2011 (7) TMI 11 - SUPREME COURT] that goods which are used even after same processing and not directly can be imported under the licence. The appeal is allowed.
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2022 (9) TMI 227
Non-imposition of penalty under section 112 of CA - bogus firms used for sending advance remittances to counter-balance undervalued imports in the name of other firms - it is alleged that IEC holders and persons who helped in obtaining multiple IECs for use by others were not made parties to show cause notice despite being directly involved and being the beneficiaries - enhancement of value of goods - legality of Voluntary deposit - duty demand from appellants, valid or not - evidence on record to establish that K R Express, Shri Joginder Kumar and Shri Surinder Singh had prior knowledge that the impugned goods were undervalued or not - Confiscation - penalty - HELD THAT:- During the relevant period there was no concept of beneficial owner as there was only one importer in respect to the goods. Admittedly in this case, the bill of entry was filed with M/s Samay International as the importer. The bills of lading, IGM etc., were in the name of M/s Samay International and the duty was assessed in the name of M/s Samay International and it was paid in the name of M/s Samay International. However, subsequent statements of Shri Pradeep Kumar, Shri Surinder Kumar, Shri Joginder Kumar and the owner of M/s Samay International show that duty was paid in cash by Shri Pradeep Kumar to K R Express who deposited it through TR-6 challans in the name of M/s Samay International. Shri Anil Kumar the proprietor of M/s Samay International claimed that he had no knowledge of the imports. It is not found that either Shri Surinder Kumar or Shri Joginder Kumar or K R Express have held themselves to being the importers . Shri Anil Kumar, the IEC holder, has consistently maintained that he had nothing to do with the imports. Thus, in this case, according to all the documents such as Bill of Entry, Bill of Lading, invoice, IGM, the importer is M/s Samay International. According to statement of Shri Pradeep Kumar, he was the importer. Further, according to another statement of Shri Pradeep Kumar, Shri Joginder Kumar and Shri Surinder Kumar are also the importers being equal beneficiaries in the imports - Commissioner has not followed the required process and hence the statements are not relevant, let alone admissible in this case. This becomes even more important in this case because of the contradictions between the statements of Shri Pradeep Kumar on the one hand and Shri Joginder Kumar and Shri Surinder Kumar on the other. Since the statements are not relevant, the importer is the one which all the documents state to be the importer viz, M/s Samay International. Demand of differential duty - HELD THAT:- It can be recovered if duty is not levied, short levied or erroneously refunded, from the person chargeable to duty. In this case the goods were in the name of M/s Samay International which is the importer according to all the documents. Therefore, differential duty, if any, can be demanded from it only. The duty was originally also paid in the name of M/s Samay International - It is evident from the order that the goods have been confiscated under Section 111 (d) and section 111(m) by the Commissioner but since the goods were not available fine in view of confiscation was not imposed. As may be seen duties of customs are charged on the goods imported into or exported to India and this charge will apply to all goods belonging to Government as they apply to all goods not belonging to Government. This applies not only where goods were imported by the Government but also to cases where title of the goods gets transferred to the Government for any reason - It is a matter of practice when the goods which were confiscated are subsequently auctioned or sold by the Government the sale proceeds of such goods are taken as cum-duty price and the amount of duty is calculated backwards and to that extent it is credited to the consolidated fund of India as customs duties and the rest as sale proceeds of the goods. The differential duty has been demanded in this case from the customs broker, KR Express and Shri Pradeep Kumar along with interest - As per the documents, M/s Samay International is the importer. The statements made before the officer by various persons have not been subjected to Section 138 B and hence are not relevant. Redemption of the value itself - HELD THAT:- It is true that if there is a reason to doubt the transaction values, they can be rejected and then valuation has to be done sequentially as per the Valuation Rules. In this case rule 9 of the Valuation Rules has been adopted ignoring the previous rules and without discussing the as to why the previous rules are not applicable. Further, the statements of Shri Pradeep Kumar, based on which the value was re- determined, is not relevant as the procedure under Section 138 B was not followed. The values indicated in the show cause notice were lowest values of the similar goods imported at that time. It is also found that NIDB data was equally available to the assessing officers at that time. The goods, having been assessed and cleared during the period by the assessing officer, there are no sufficient reason to enhance the value as per impugned order. At any rate, since it is found that the importer, as per the documents was M/s Samay International and the statements before officer to the contrary were not relevant in view of section 138 B, the demand of duty under section 28, if any, has to be made on the importer. The importer is not a noticee in this case. The enhancement of value and determination of duty is not sustainable. Consequently the penalties imposed upon the appellants are also not sustainable - As per all the relevant documents, M/s Samay International is the importer and the statements contradicting this are not relevant in view of section 138B - Differential duty can only be demanded from the importer and not from others - the term beneficial owner has been defined in the Customs Act and the term importer was enlarged to include beneficial owner only from 2017 and not during the relevant period. If the goods are confiscated and are either not allowed to be redeemed or are not redeemed despite an offer, the goods vest in the Central Government and the duty liability similarly vests in the Central Government. However, in this case, even the confiscation itself is not sustainable as the allegation of under-valuation itself is not sustainable - penalties imposed on all are not sustainable and need to be set aside - Commissioner is correct in refraining from imposition of penalties under section 112 of the Customs Act on Shri Joginder Kumar and Shri Surinder Kumar. Appeal disposed off.
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2022 (9) TMI 226
Maintainability of appeal - deposit of the mandatory amount under section 129E of the Customs Act, 1962, not complied with - HELD THAT:- From a bare perusal of section 35F of the Customs Act that after August 06, 2014 neither the Tribunal nor the Commissioner (Appeals) have the power to waive the requirement of pre-deposit, unlike the situation which existed prior to the amendment made in section 35F on August 06, 2014 when the Tribunal, if it was of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship, could dispense the said deposit on such conditions as it deemed fit to impose so as to safeguard the interest of the Revenue. The Supreme Court in Narayan Chandra Ghosh vs. UCO Bank and Others [ 2011 (3) TMI 1478 - SUPREME COURT] , examined the provisions contained in section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 relating to pre deposit in order to avail the remedy of appeal. The provisions are similar to the provisions of section 129E of the Customs Act. The Supreme Court emphasised that when a Statue confers a right to appeal, conditions can be imposed for exercising of such a right and unless the condition precedent for filing appeal is fulfilled, the appeal cannot be entertained. The Supreme Court, therefore, held that deposit under the second proviso to section 18(1) of the Act, being a condition precedent for preferring an appeal, the Appellate Tribunal erred in law in entertaining the appeal. A Division Bench of Delhi High Court in M/S. VISH WIND INFRASTRUCTURE LLP, M/S. J.N. INVESTMENT TRADING CO. PVT. LTD. VERSUS ADDITIONAL DIRECTOR GENERAL (ADJUDICATION) , NEW DELHI [ 2019 (8) TMI 1809 - DELHI HIGH COURT] examined the provisions of section 35F of the Central Excise Act, 1944 and held that every appeal filed before the Tribunal after the amendment made in section 35F of the Excise Act and section 129E of the Customs Act on 06.08.2014 would be maintainable only if the mandatory pre-deposit was made. The appellant has not made the pre-deposit. In view of the aforesaid decisions, it is not possible to permit the appellant to maintain the appeal without making the required pre-deposit - Appeal dismissed.
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Corporate Laws
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2022 (9) TMI 225
Correction of error in furnishing PAN - list of shareholders - Seeking directions to ROC to strike out the PAN details of the Applicant mentioned against one H.L. Vaishnav from the list of subscribers - HELD THAT:- On perusal of the documents on record, it is seen that the same PAN of the Applicant is used in Form-I of the Respondent Company, but the entry against the Name , Father's Name and DOB is different from that Applicant PAN Card submitted by the Applicant at Annexure P-2. On Comparing these documents, a doubt is raised as to the veracity of the documents/details that are entered in the Company's Form-I (i.e. Application and Declaration of incorporation of the Company). Also, Form-I is not submitted by any practising Professional rather by one member of the Company namely Anil Kumar Sharma has submitted it. List the matter on 08.09.2022 before the Regular Bench.
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Insolvency & Bankruptcy
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2022 (9) TMI 224
Seeking direction to Resolution Professional to disclose item wise insolvency resolution process costs - calling for entire records of the Resolution Professional maintained with respect to the present petition - direction to Resolution Professional to follow the steps needed under Section 18 and Section 20(2)(a) of the IBC including Forensic Audit Report before proposing liquidation of Corporate Debtor - HELD THAT:- In the present case, the CIRP had commenced on 19.12.2019 and after more than two years, resolution was passed on 28.06.2022 for liquidation. The Application which was filed by the Appellant on the very next day of passing of the resolution was indirectly for challenging the liquidation. The Appellant who is a minority shareholder in the CoC cannot resist the passing of the resolution. The Adjudicating Authority has rightly rejected the application filed under Section 18 of Code and Regulation 34A, which was not to be entertained. The Appellant asked Resolution Professional to disclose item wise insolvency resolution process costs in such manner as required by the Board (IBBI). Question of cost and its approval lays in the domain of the CoC. The CoC may ratify, modify or set aside the cost claimed. These issued may be decided in the meeting of the CoC and are not to be examined by the Adjudicating Authority even before the CoC takes a decision. It shall be always open for the appellant to raise issue regarding the cost in the meeting of the Committee of Creditors. Appeal dismissed.
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2022 (9) TMI 223
Condonation of delay in filing appeal - power to condone delay - contention of the Learned Counsel for the Applicant / Appellant is that this Appellate Tribunal has the requisite power to condone the delay of 1027 days in preferring the instant appeal before this Tribunal - HELD THAT:- This Appellate Tribunal takes note of the primordial fact that the ingredients of Section 61 (1) of the Insolvency Bankruptcy Code, 2016 enjoins that every Appeal as per Section 61 (1) of the Insolvency Bankruptcy Code, 2016 shall be filed within 30 days before the National Company Appellate Tribunal and thereafter the Appellate Tribunal may allow an Appeal to be preferred after the expiry of 30 days, only after if it was substantially satisfied, if sufficient cause for not filing the plea in subject period, shall not exceed 45 days. This Tribunal pertinently points out that Section 61 of the Insolvency Bankruptcy Code, 2016 is a Hard Taskmaster. The time limit and the procedural wrangle cannot be allowed to be shaked or shackled with by a Litigant. No doubt, the Appellate Tribunal at the time of dealing with the Condone Delay Application is not required to go into the merits of the case, and in short, merits of the case should not an issue in an Application filed by the concerned Applicant for condoning the delay in preferring such Application. Admittedly, in the instant case, the present Comp App is preferred beyond 45 days (30 + 15) period, prescribed under the Insolvency Bankruptcy Code, 2016. In reality, there has occasioned a delay of 1027 days in preferring the instant Comp App (AT)(CH)(Ins) No.209/2022, which in the considered opinion of this Tribunal is not to be condoned, as there is no power enjoined upon the Appellate Authority (National Company Law Appellate Tribunal) to condone the delay beyond the prescribed period, enunciated under the Insolvency Bankruptcy Code, 2016. Appeal dismissed.
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2022 (9) TMI 222
Application for CIRP admitted - One Time Settlement - Corporate Debtor failed to comply with the terms and conditions of OTS Proposal - HELD THAT:- There is no dispute between the parties that offer of 60 Crores made by the Appellants in regard to the dues of all the three Companies was accepted by the Bank and deposit of Rs. 3 Crore was also noticed by the Bank. Under the OTS, Appellants were to deposit Rs. 1.5 Crore each month. The OTS Proposal has been cancelled on 31st July, 2019. The Adjudicating Authority in paragraph 3 of the Order has noticed that Corporate Debtor has failed to comply with the terms and conditions of OTS Proposal. The Adjudicating Authority held that the Corporate Debtor defaulted in making payment towards the liability of the Bank, Company Petitions deserve to be admitted. It is well settled that although settlement between the parties to be encouraged but the Court/this Tribunal cannot direct the Bank to accept the OTS as claimed for by the Corporate Debtors. Principle of Judicial Discipline is to be adhered to by all to ensure hierarchical discipline and for proper dispensation of justice but as noticed above in the present case, there is no breach of any judicial discipline by the NCLT as claimed by the Appellants. There was no Interim Order of the High Court restraining the NCLT to proceed with the concerned applications or not to pronounce any Judgment when the matter was heard and reserved for order even prior to passing of the Interim Order of the High Court. Further the Interim Order of the High Court directed to maintain status quo by both the parties i.e. Bank and the Corporate Debtors that cannot be read as any restraint to the NCLT. No error has been committed by the Adjudicating Authority in admitting Section 7 Applications against the Corporate Debtors - Appeal dismissed.
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2022 (9) TMI 221
Initiation of CIRP - NCLT admitted the application - pre-existence of debt and dispute or not - Service of demand notice - Whether there was a debt due of which default was committed by the Corporate Debtor entitling the Operational Creditor to file an Application under Section 9 of the IBC? - HELD THAT:- The contact was entered directly between OC CD and it was responsibility of CD to make payment to OC. At this stage, CD cannot take shelter of MoU entered into between CD Akshaya, which in any case, was an independent MoU or agreement. Admittedly, OC was not a direct party to said MoU. Merely fact that CD in turn had supplied 66,000 STBs to Akshaya as an agent, does not absolve him of his liability to make the payments as per contract in form of purchase order. The receipt of quantity i.e 66,000 STBs, quality or agreed upon rates were never any point of dispute between OC and CD. The debt existed which were due to be paid and default took place. We also observe that proper demand notice in Form 3 was issued fulfilling the requirement as stipulated in IBC - there are no error in the Impugned Order on this issue. Whether there was a pre-existing dispute between the parties prior to issuance of Demand Notice under Section 8 of the IBC dated 23.08.2021? - HELD THAT:- There are two distinct contracts entered by CD i.e. one with OC, whereby, CD was to receive 66,000 STBs from OC and Second Contract with Akshaya to whom such STBs were to be supplied admittedly at 3% commission. Since, both are separate commercial transactions, the rights and liabilities are distinct of both contract and cannot be intermingled. We observed that at one hand CD has initiated Section 9 Application against Akshaya and later based on compromise memo was filed before the AA and claimed outstanding dues from Akshaya. Admittedly he has received certain consideration for supply of STBs to Akshaya but has raised. There was clear contract between CD and OC as well as CD and Akshaya and it is squarely responsibility of CD towards its obligation to OC. Correspondence between CD and OC as produced by both CD and OC do not establish any pre-existing dispute. Hence, AA rightly taken decision in this regard and there are no error in the impugned order for this issue. This Tribunal is of the considered view that no ground is made out for any interference by this Tribunal with the impugned order - Petition dismissed.
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2022 (9) TMI 220
Liquidation of Corporate Debtor - Section 59 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- A bare perusal of the material available on record shows that the Board of Directors of the Company has taken a conscious decision for closing down the company, because it is no longer viable to carry on the business of the company. Thus, the Board of Directors of the company have unanimously proposed to liquidate the company by invoking the provisions of voluntary liquidation under Section 59 of the Code. It has been mentioned in the petition that the liquidator has not received any claims, therefore, no prejudice and loss will be caused to anyone, if the company is dissolved. In support of the same, the company has duly passed the requisite Special Resolution in its Annual General Meeting on 27.09.2019 by confirming the decision of its Board of Directors and proposing for its Voluntary Liquidation - Since there is no objection received from any angle opposing the proposed voluntary liquidation/dissolution of the company either from the side of the shareholders or from creditors, nor any adverse comment have been received from the public at large against such liquidation/dissolution, despite there being a public announcement by the liquidator and also updation of the same in the website of the Insolvency and Bankruptcy Board of India (IBBI). The present application deserves to be allowed for the proposed Liquidation/Dissolution of the Corporate Person - Application allowed.
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2022 (9) TMI 219
Defect in the appeal - defect in appeal is cured and the Appeal is refiled before the Appellate Tribunal beyond seven days - date of re-presentation of the Appeal shall be treated as a fresh Appeal or not - limitation prescribed for filing an Appeal before this Appellate Tribunal under Section 61 of Insolvency and Bankruptcy Code, 2016 or Section 421 of the Companies Act, 2013 - period under which a defect in the Appeal is to be cured and this Appellate Tribunal shall have no jurisdiction to condone the delay in refiling/re-presentation if it is beyond the limitation prescribed in Section 61 of the IBC or Section 421 of the Companies Act, 2013. HELD THAT:- The filing of appeal (presentation) and refiling (re-presentation) are two different concepts and have been separately dealt with in the Rules. Rule 22 deals with the presentation of the appeal whereas Rule 26 envisages the re-presentation of the appeal after removal of the defects notified to the Appellant. Section 61(2) of the Code provides that appeal under Section 61(1) shall be filed within 30 days before the NCLAT. The expression filing as occurring in Section 61(2) is for filing of the appeal/presentation of the appeal. Hon ble Supreme Court in INDIAN STATISTICAL INSTITUTE VERSUS M/S ASSOCIATED BUILDERS AND ORS. [ 1977 (12) TMI 142 - SUPREME COURT ] laid down that condonation of delay as prescribed in an appeal is different from petition for excusing the delay in re-presentation. It is well accepted principle of statutory interpretation that if the meaning of words is plain effect must be given to it. The statute at best declare intent of Legislature. If the Legislature or Rule making Authority intended provision of limitation for re-presentation/refiling the same could have been done in unambiguous words - the limitation prescribed for filing an appeal under Section 61 and Section 421 of Companies Act cannot be imported while considering condonation of delay in refiling/ representation. The law laid down by this Tribunal in MR. JITENDRA VIRMANI VERSUS MRO-TEK REALTY LTD. ORS. [ 2017 (5) TMI 1791 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, BANGLORE] and three Member Bench Judgment in ARUL MUTHU KUMAARA SAMY VERSUS REGISTRAR OF COMPANIES, CHENNAI [ 2020 (9) TMI 1268 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] that when the defects in appeal are cured after seven days and the same is refiled, it shall be treated as a fresh Appeal, does not lay down a correct law. The re-presentation of appeal after expiry of a period of 7 days or after extended period shall not be a fresh filing and shall only be refiling/representation. The limitation prescribed in filing an appeal under Section 61 of the Code or Section 421 of the Companies Act, 2013 shall not govern the period taken in an appeal for removal of the defects in refiling/re-presentation. Even if, there is a delay in refiling/re-presentation which is more than the period of limitation prescribed for filing an appeal under Section 61 of the Code and Section 421 of Companies Act, 2013, the same can be condoned on sufficient justification. Let the Appeals be listed for consideration of condonation of delay in refiling/re-presentation in accordance with law. List the Appeals on 01 st September, 2022 - The reference is answered accordingly.
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PMLA
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2022 (9) TMI 218
Seeking grant of regular bail - Smuggling - Opium - country made pistol - magazine having 5 live rounds - spare magazine having six live rounds - HELD THAT:- The FIR in the present case was registered on 31.05.2022 under Sections 3 and 4 of PMLA, Section 25 of Arms Act and under Section 18 of NDPS Act. As per the reply submitted on behalf of the State, offences punishable under Sections 3 and 4 of PMLA have been deleted upon the verification by Surender Singh, HPS, ACP-III, Panchkula. So, now the FIR in question is with regard to Section 25 of Arms Act and Section 18 of NDPS Act. As per the allegations appearing on record 432 grams of opium was recovered from the possession of petitioner Anju Bhalla while 265 grams of opium was recovered from the petitioner Anjali Bhalla. The aforesaid quantity of opium comes under non-commercial quantity of contraband and thus the embargo provided in Section 37 of the NDPS Act is not applicable to the instant case. All the recoveries have already been effected in this case and after completion of investigation police has presented the challan but charges are yet to be framed - It will take considerable time for the trial to conclude, after the framing of charges. Coaccused Gaurav Pahwa who was apprehended at the spot along with both the petitioners and from whom cash worth Rs.1.75 crores was recovered, has been granted concession of regular bail by the Court of Additional Sessions Judge, Panchkula vide order dated 13.06.2022. This Court is of the view that no purpose is going to be served by prolonging the judicial incarceration of both the petitioners for any further period. Consequently, both the petitions are allowed and the petitioners namely Anju Bhalla and Anjali Bhalla are ordered to be released on regular bail on their furnishing bail bonds and surety bonds to the satisfaction of Chief Judicial Magistrate/ Duty Magistrate concerned - Application disposed off.
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Service Tax
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2022 (9) TMI 217
Refund of the service tax - construction of individual/independent residential houses - refund is hit by the principles of unjust enrichment or not - reverse charge mechanism - HELD THAT:- It is seen that a residential complex has been defined to mean any complex comprising of a building or buildings, having more than twelve residential units; and a residential unit has also been defined in Explanation (b) to mean a single house or a single apartment intended for use as a place of residence - the definition of a residential complex leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of residential complex . A Division Bench of the Tribunal in AS SIKARWAR VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2012 (11) TMI 1000 - CESTAT, NEW DELHI] also observed that service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units. It is true that w.e.f July 01, 2012 construction of complex is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted - the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification. Principles of unjust enrichment - HELD THAT:- The Allahabad High Court in COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX VERSUS M/S. INDIAN FARMERS FERTILIZERS COOPERATIVE LTD. [ 2014 (7) TMI 891 - ALLAHABAD HIGH COURT] held that a refund can be claimed by a person who has borne the incidence of tax. Even in accordance with the Exemption Notification dated June 20, 2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant. The Commissioner (Appeals) was, therefore, not justified in rejecting the refund claim of the appellant on the ground of unjust enrichment. The order dated June 25, 2018 passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside. The appellant would be entitled to refund in accordance with law - Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 216
Refund claim - inability to carry forward the balance under CENVAT Credit Rules, 2004 into the substitute tax scheme under the transitional provisions of the new statute - HELD THAT:- It would appear that the lower authorities had attempted to dispose off the claim without the benefit of decisions of the Tribunal or the constitutional courts. It is, therefore, appropriate that the matter be decided afresh by the original authority. The matter remanded back to the original authority. The appellant shall be granted opportunity to make their submissions following which the claim may be disposed off expeditiously - appeal allowed by way of remand.
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Central Excise
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2022 (9) TMI 230
CENVAT Credit - Additional Duty of Customs (CVD) paid on imported coal - applicability of N/N. 12/2012-cus dated 17.03.2012 and 12/2013-Cus dated 01.03.2013 - the fact that no credit of excise duty at the concessional rate of 1% is available under the proviso to Rule 3(1)(i) of the Cenvat Credit Rules, was not appreciated - restriction on credit of CVD at the rate of 1%/2% - restriction of duty of excise in the Notification No. 1/2011 CE dated 01.03.2011 and in Notification No. 12/2012 CE dated 17.03.2012 read with Rule 3 of the Cenvat Credit Rules, 2004 is applicable to the countervailing duty, or not? HELD THAT:- Identical issue has been decided in favour of the assessee by the tribunal in M/S HINDALCO INDUSTRIES LTD. APPELLANT VERSUS GST, BHOPAL RESPONDENT [ 2018 (3) TMI 1124 - CESTAT, NEW DELHI] , holding that taking into consideration Notification No. 12/2012-Cus there is no bar for availment of CENVAT Credit in terms of the Rule 3(7) where duty paid under Notification No. 12/2012-Cus and CENVAT Credit cannot be denied. The tribunal rightly granted relief in favour of the respondent assessee and the order does not suffer from any error warranting interference - the appeal fails and is dismissed and the substantial questions of law are answered against the revenue.
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2022 (9) TMI 215
Valuation - inclusion of paper cess in the calculation of Education Cess and Secondary and Higher Education Cess - Department took a stand that Education Cess is levied on the excise duty and Cess on paper is also a duty of excise, therefore, it should be included - applicability of Board Circular No.978/2/20214-CX (F.No.262/2/2008-CX.8) dated 07.01.2014 - HELD THAT:- In the present case even though the Cess on Paper is a duty of excise, it is not levied by the Department of Revenue, Ministry of Finance. It is levied under a different enactment namely Industries (Development Regulation) Act, 1951, though it is collected by the Department of Revenue. Paper Cess is not levied by the Department of Revenue, it is levied by the Industrial Development, Ministry of Commerce and Industry. No doubt it is collected by the Department of Revenue, but not levied by it. Hence Paper Cess is not includible. It is noted that the lower authorities were proceeding on an erroneous premise when they considered the Paper Cess as a levy by the Central Government in the Ministry of Finance, Department of Revenue. They obviously lost sight of the Circular No. 978/2/2014-CX, dated 7-1-2014 where it has been clarified that the Education Cess and the Secondary and Higher Education Cess are not to be calculated on cesses which are levied under Acts administered by Department/Ministries other than Ministry of Finance (Department of Revenue), but rather only collected by the Department of Revenue in terms of those Acts. Hon ble Gujarat High Court in the case of Joshi Technologies International v. Union of India [ 2016 (6) TMI 773 - GUJARAT HIGH COURT] is squarely applicable to the facts of the present case, where it was held that Crude Oil Cess is not in the nature of excise duty and consequently, the Education Cess and Secondary and Higher Secondary Education Cess computed thereon, also does not bear the character of a duty of excise, but is merely an amount paid under a mistake of law. As a necessary corollary, it follows that the provisions of the Central Excise Act, 1944 would not be applicable for refund of such amount paid by mistake. Moreover, since there was no liability to pay Education Cess and Secondary and Higher Secondary Education Cess, the provisions of the Central Excise Act as incorporated in the OIC Act would also not apply to the amount paid by mistake. T he Hon ble High Court after considering the decision of the Hon ble Supreme Court in the case of Mafatlal Industries Ltd. [ 1996 (12) TMI 50 - SUPREME COURT] , allowed the refund claims in an identical situation. Accordingly, in view of the judgement passed by the Hon ble Gujarat High Court, since Cess on Paper is not a duty of excise, the provisions of Section 11B of the Central Excise Act would not apply. Appeal allowed - decided in favor of appellant.
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2022 (9) TMI 214
Levy of Central Excise Duty on Compounded basis - Classification of Packing Machines used for manufacture of chewing tobacco - Pedal Filler and Heat Sealer machine - Filler machine - Filler machine - rate of duty applicable to certain machines used by the appellants - packing machine in terms of N/N. 10/2010-CE (N.T.) dated 27.02.2010 or not - suppression of facts on the part of the Appellant to evade duty so as to invoke extended period of limitation or not? - HELD THAT:- The scheme of the compounded levy is such that for each packing machine the deemed production is determined in terms of the Capacity Determination Rules. The total deemed production of each machine is measured in terms of Capacity Determination Rules . For an assessee total duty amount is based on the number of machines installed/used in the factory and the MRP of the pouches manufactured on such machines. Duty is levied on the number of machines installed/used (subject to some conditions prescribed in Capacity Determination Rules and notifications issued from time to time). The actual physical production becomes irrelevant in such circumstances. The sole criterion for the determination of total duty payable is the number of Packing machines installed/used and the MRP of the pouches manufactured on respective machines. It is obvious that the description Hand operated fillers or spoons or a similar manually operated device is cited in the circular as an example and not as an exhaustive list of equipment that do not qualify as Packing Machines . There can be many machines, other than those listed in circular, which may not qualify as Packing machine .It is seen that this question posed before the expert is defective. The question which needs to be answered is if the disputed machines can be called packing machines in terms of Capacity Determination Rules, 2010 or not. This question can only be answered by Revenue Officers and not by technical experts from YMCA University of Science and Technology or IIT Delhi. Such expert organization can only be used to get facts regarding the machines and its functions. In the instance case there is no dispute regarding the process undertaken with these machines. The expert reports are useful only to the extent that they describe this process and also describe the fact that electrical energy or compressed air is used in the process of filling and sealing. In view of the description of the functioning of machine by the experts can be accepted as evidence but the opinions of experts on law points are of no use to the revenue.Moreover the appellants were refused an opportunity to cross examine these experts. While there is no significant difference on facts regarding the manner of functioning of these machines, but if revenue wished to rely of the opinion of experts the opportunity of cross should have been allowed. Pedal Filler and Heat Sealer machine - Filler machine - Filler machine - HELD THAT:- It is seen that all 3 machines require significant human effort. In all the machines the pouches are obtained preformed from outside and the pouches are not made within the machine or factory.In all three machines the pouches are held manually by the operator for the purpose of filling. The machines use, either gravity or pneumatic power, to fill the approximate quantity of tobacco in the pouches. Thereafter, the weight of the tobacco in the pouches is adjusted manually by adding or removing same quality. Thereafter, the pouches are sealed either on a sealer attached to the same machine (in case of Paddle Filler and Heat Sealer) or on a separate sealing machine. The operation may require two or more persons on each machine/line. If the process undertaken on this machine can be called packing at all? - HELD THAT:- Each and every machine used in the process of packing of tobacco does not qualify as a packing machine though the same is used for one of the processes involved in packing. Only the machines which fit in the definition of packing machine provided in the said notification qualify as a packing machine . In the instance case the packing is done not only with the aid of the filler machine but also with the aid of a separate sealer machine in case of 500gm and 1 kg pack. There is no doubt that sealing is also one of the processes involved in packing of goods. In the instance case the goods cannot leave the premises without sealing and cannot be bought and sold in the market without sealing. The argument of Revenue is that sealing is not an essential component of the packing process and therefore, if a machine only fills chewing tobacco in the preformed pouches, it is sufficient to qualify as packing machine . We find that this argument is misplaced. For packing of any goods it is necessary that it should make it suitable for safe transport, and in the case of chewing tobacco in pouches, also fit for sale in the market. Learned Counsel for the revenue has relied on the Circular No. 341/24/2010-TRU, dated 05.03.2010 to assert that only if the goods are packed with the help of hand operated fillers or spoons or a similar manually operated device and sealed with heat Sealers/band sealers/candles/hot iron and the like the same would not qualify for the compounded levy. This circular of the revenue does not say what Learned Counsel is asserting - The law is that duty on compounding basis cannot be levied on notified goods not manufactured with the aid of packing machine . The description of hand operated fillers or spoons or similar manual operated devices/sealers is just an example cited in the circular and does not necessarily cover all machines which may be outside the ambit of the term packing machine . In view of the above reliance on the circular to say that if these machines do not fall in the category of hand operated fillers or spoons or similar manual operated devices/sealers , the same need to be assessed on compounding basis is incorrect. All these machines operate with manual intervention. The duty rates are fixed on the basis of capacity of machines to manufacture the pouches. The capacity of the machines was originally prescribed in table form in thenotification 11/2010 CE (NT) dated 27.2.2010. It is seen from the tables reproduced in para 5.9 above that the lowest number of pouches manufactured per month prescribed in this notification is 17,97,120, and duty has been fixed on that basis. That quantity works out to manufacturing capacity of 41 pouches per minute nonstop 24 hrs a day seven days a week - It is apparent that these machines are not of the same kind or speed that are specifically mentioned in the definition of Packing Machine . This is another reason to reject the revenue allegations. Time limitation - HELD THAT:- In the instant case, it is found that the revenue has strongly relied on the apparent misdeclaration in the description or source of procurement of various machines. Revenue has sought to invoke extended period of limitation on the grounds that the appellants had mis-declared the names of machines or obtained machines from dubious sources. Even if it is assumed that the allegations are correct, for the reasons that it is found that the machines found in their premises do not qualify as Packing Machine such allegations, even if true, become irrelevant. It is apparent that the appellants believed that they are not liable to be assessed under Compounded levy in respect of such machines and their behaviour is according to that belief.Revenue has admitted that in letter dated 25.05.2010 the appellants again gave note on the working two machines which was earlier also informed vide their letter dated 15.03.2010 but this time they mentioned about the use of electricity in both the machines and also described the machines as manual filling and manual sealing device for zipper pouch - No specific action was taken by Deputy Commissioners against the impugned machines by way of demanding duty under Compound Levy Scheme (CLS) or otherwise.It appears that the appellants had a bonafide belief that they are not covered under compounded levy scheme in respect of the disputed machines. The Deputy Commissioners also was aware of the facts. Admission of liability before Settlement Commission - HELD THAT:- There is no case of revenue on merits it does not matter if appellants have admitted any liability before the Settlement Commission or not. There are no merit in the impugned order either on Merit as well as on limitation - appeal allowed - decided in favor of appellant.
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Indian Laws
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2022 (9) TMI 213
Dishonor of Cheque - condonation of delay in filing complaint - acquittal of accused - time limitation - Section 142 of the NI Act - HELD THAT:- In the present case, while the notice was received by the appellant on 8 November 2005, the complaint was filed before the period of fifteen days was complete. The complaint could have been filed only after 23 November 2005, but was filed on 22 November 2005. In view of the legal bar which is created by Section 142 of the NI Act, taking of cognizance by the Court was contrary to the law and the complaint was not maintainable before the expiry of the period of fifteen days from the date of its receipt by the appellant. The impugned judgment and order of the Single Judge of the High Court of Chhattisgarh dated 28 November 2018 shall stand set aside - The respondent would be at liberty to institute a fresh complaint and since the earlier complaint could not be presented within the time prescribed by Section 142(b) of the NI Act, the respondent would be at liberty to seek the benefit of the proviso by satisfying the trial court of sufficient cause for the delay in instituting the complaint. Appeal allowed.
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2022 (9) TMI 212
Dishonor of Cheque - calculation of period of limitation for filing complaint - Last date being public holiday - section 138 of NI Act - HELD THAT:- The complaint can be filed within one month of the cause of action. In this case, the notice was received on 12.02.1997 and the payment was to be made within 15 days i.e. by 28.02.1997. As the date for receipt of notice was 12.02.1997, is to be excluded - And cause of action arose on 01.09.1997 (12.02.1997 and 28.02.1997 to be excluded). The month of February 1997 had 28 days. So from 01.09.1997, once month (30 days) shall be within 30.03.1997. Admittedly, 28.03.1997 was a holiday being Good Friday and the case was filed on 29.03.1997 i.e. within the statutory period as laid down under Section 138 of the N.I. Act and considering the materials and evidence on record convicted the accused/respondent accordingly. Admittedly, the accused received notice on 12.02.1997. The period of 15 days for making the payment of the amount of dishonoured cheque has to be calculated from 13.02.1997 and ends on 28.02.1997 and cause of action arose on 01.03.1997 (February 1997 has 28 days) and thus the compliant had time till 30.03.1997. The complaint has been filed on 29.03.1997. Learned Magistrate rightly held that 28.03.1997 was a holiday on the ground of Good Friday and as such the law provides that the next day has to be taken as the date for computation. Accordingly, it is seen that the complaint filed before the Court was within the statutory period as provided under Section 142(b) of the N.I. Act. In view of the aforesaid findings, the judgment/order of the learned Sessions Judge, 10th Bench, City Sessions Court, passed on 30.01.2002 is erroneous and is accordingly set aside - Appeal allowed.
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