More details are visible to the Paid members. i.e:-
Party Name, Court Name, Date of Decision, Full Text of Headnote and Decision etc.
AI TextQuick Glance (AI)Headnote
Imported automotive electronic parts classified under CTH 9032 8910, not industrial PLCs under CTH 8537 1000
Imported automotive electronic parts classified under CTH 9032 8910, not industrial PLCs under CTH 8537 1000
The CESTAT Chennai upheld classification of the imported automotive electronic components under CTH 9032 8910 rather than CTH 8537 1000. The tribunal found the goods to be multifunctional monitoring and control devices specific to automotive body electronics, distinct from industrial programmable logic controllers used in automation. The components automatically monitor and regulate parameters without human interface or pre-determined operations, unlike PLCs. Reliance was placed on Board Order No. 49/3/97-CX differentiating automatic regulating instruments under heading 90.32 from programmable controllers under heading 85.37. The appeal challenging the classification was dismissed for lack of merit.
Classification of imported goods - Unit Assy BCM (Body Control Module) and Unit Assy IBU (Integrated Body Unit) - to be classified under CTH 9032 8910 or under CTH 8537 1000? - benefit of N/N. 152/2009 (Sl. No. 858) - HELD THAT:- The functional description clearly states that the impugned goods are multi-faceted electronic components that supports multiple functions, the foremost being the monitoring, controlling and regulating a gamut of automotive body electronics. In a contrast Programmable Controller or Programmable Logic Controller of Heading 85.37 is generally seen in industrial automation, responsible for processing inputs, executing logic-based control programs, and generating outputs to control machinery and systems. From the examples of case study at para 9 of the impugned order it is seen that the impugned goods contains a measuring device which measure desired parameters with actuals and when found deficient it activates a warning on the dashboard or activate an appropriate response to set right the deficiency noticed. They are more than merely a communication device. They do not control any machines nor do their operations depends on set of pre- determined operations or by a human interface. They automatically monitor and maintain the desired variable at pre-determined levels.
Board has issued Order No. 49/3/97-CX dated 09.05.1997 under section 37B of Central Excise Act, differentiating both Programmable Logic Controller and Programmable Process Controller holding that 'The automatic regulating or controlling instruments and apparatus under heading No. 90.32: They may be considered as industrial process control systems satisfying criteria mentioned in No. 90.32. These are primarily used for controlling/maintaining the flow, level, pressure or variables of liquids or gases or for automatically controlling temperature of a process (may be refinery, steel, chemical industry) at the present level. They can perform functions both sequence logic and different control strategies like Proportional- integral differential (PID) control and other forms of control.'
There are no merit in the appeal and the same is rejected - appeal disposed off.
AI TextQuick Glance (AI)Headnote
ITAT Rules 30% GP Rate for Stock Shortage Based on Average Past Years and Declared Rate
ITAT Rules 30% GP Rate for Stock Shortage Based on Average Past Years and Declared Rate
The ITAT Patna held that the GP rate for shortage of stock should be determined at 30%, based on an average of prior years' GP rates and the assessee's declared rate. The AO was directed to recalculate the addition applying the 30% GP rate. The assessee's appeal was partly allowed.
Addition in respect of GP rate on the shortage of stock - HELD THAT:- A perusal of the order of the CIT(A), more specifically at page 4, shows that the GP rate of the earlier four years being AY 2015-16, 2016-17, 2017-18 & 2018-19 were submitted before the ld. CIT(A).
The average of the GP rate for all the earlier four years shows that the same comes to nearly 26%. For the impugned assessment year, the assessee has shown GP rate @28.34%.
This being so, in the interest of justice, GP rate of the assessee in respect of shortage of stock should be determined at 30%. AO is directed to redo the addition in respect of GP rate on the shortage of stock by applying GP rate @30%. Appeal of the assessee is partly allowed.
AI TextQuick Glance (AI)Headnote
Interest Income Deduction Allowed Under Section 80P(2)(d) for Co-Op Bank Investments Confirmed
Interest Income Deduction Allowed Under Section 80P(2)(d) for Co-Op Bank Investments Confirmed
The ITAT Mumbai held that the deduction of interest income from investments in co-operative banks under section 80P(2)(d) is allowable, consistent with prior judicial decisions including the HC ruling in favor of the assessee. The AO's allowance of the deduction was a valid view, and the PCIT's contrary opinion did not render the assessment order erroneous or prejudicial to Revenue. Relying on the SC precedent in Malabar Industrial Co. Ltd., the tribunal set aside the revision order passed under section 263. The assessee's appeal was allowed.
Revision u/s 263 - Interest income claimed as deductible u/s 80P - HELD THAT:- It is pertinent to note that the issue relating to deduction of interest income from investments made in co-operative banks under section 80P(2)(d) has been consistently decided in favour of the assessee by various judicial forums, including the case of PCIT v. Ashwinkumar Arban Cooperative Society Ltd.[2024 (11) TMI 971 - GUJARAT HIGH COURT]
AO had consciously taken a view to allow the deduction under section 80P. On the other hand, the Ld. PCIT has taken a different view on the same issue.
It is clear that a mere difference of opinion between the Ld. AO and the Ld. PCIT cannot render the assessment order erroneous and prejudicial to the interests of the Revenue. We, therefore, respectfully rely on the ratio laid down by the Hon’ble Supreme Court in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT]
Accordingly, the revisionary order passed by the Ld. PCIT under section 263 of the Act is set aside. Assessee appeal allowed.
AI TextQuick Glance (AI)Headnote
Section 115BAA Companies Can Claim Section 80G Deductions for CSR Expenses for AY 2020-21
Section 115BAA Companies Can Claim Section 80G Deductions for CSR Expenses for AY 2020-21
The ITAT Ahmedabad held that for AY 2020-21, a company opting for taxation under section 115BAA at a concessional rate was not barred from claiming deductions under section 80G, as the restriction on Chapter VI-A deductions was introduced only from AY 2021-22. The Tribunal further ruled that CSR expenditures, although statutory under the Companies Act, do not lose their eligibility for deduction under section 80G if all conditions are met, consistent with prior decisions. The AO's acceptance of the deduction was upheld, as there was no material to show arbitrariness or lack of application of mind. The PCIT's revision direction was set aside, and the assessee's appeal was allowed, affirming the deduction claim under section 80G for CSR expenses for the relevant year.
Revision u/s 263 - PCIT directed the AO to frame a fresh assessment after disallowing the deduction claimed u/s 80G for the CSR expenditure - Assessee opted for taxation u/s 115BAA
Whether once the assessee has opted for being taxed u/s 115BAA of the Act (concessional rate of taxation @22%), then whether the assessee could also claim benefit of deduction u/s 80G of the Act for the Impugned year under consideration? - HELD THAT:- Deduction u/s 80G being claimed despite the assessee opting for taxation u/s 115BAA, we note that the relevant provision of section 115BAA as introduced by the Taxation Laws (Amendment) Act, 2019, was applicable for AY 2020–21 and did not bar deductions under Chapter VI-A in its entirety. The restriction, as originally enacted, applied only to deductions under Chapter VI-A “under the heading C-Deductions in respect of certain incomes” and not to Chapter VI-A as a whole. Section 80G falls under Part B-“Deductions in respect of certain payments”- and thus did not fall within the scope of prohibited deductions as per the then prevailing version of section 115BAA for the relevant year. It was only by way of an amendment introduced through the Finance Act, 2020 with effect from AY 2021–22 that all deductions under Chapter VI-A, except sections 80JJAA and 80M of the Act, were barred for a Company opting for the concessional rate under section 115BAA of the Act. The present assessment year being AY 2020–21, the restriction on deduction u/s 80G was not applicable
Whether the CSR activities can be claimed as a deduction u/s 80G of the Act and the nature of donations relating to CSR expenditure did not fall into any of the exceptions provided u/s 80G? - Several judicial authorities have categorically held that statutory CSR contributions, if otherwise fulfilling the conditions prescribed under section 80G of the Act do not lose their nature as donations merely because they are mandated under section 135 of the Companies Act.
As in AIA Engineering Ltd. [2024 (10) TMI 1694 - ITAT AHMEDABAD], Interglobe Technology Quotient Ltd [2024 (6) TMI 8 - ITAT DELHI], Alubond Dacs India P Ltd. [2024 (7) TMI 636 - ITAT MUMBAI] and Societe General Securities India P Ltd [2023 (11) TMI 1257 - ITAT MUMBAI] and JMS Mining (P.) Ltd. [2021 (7) TMI 907 - ITAT KOLKATA] have consistently held that CSR expenses, though statutory in nature, do not ipso facto disentitle the assessee from availing deduction under section 80G of the Act, provided all other statutory requirements under that section are met. These decisions have clarified that Explanation 2 to section 37(1), which bars CSR expenses as deductible business expenditure, does not extend to disallowance under section 80G of the Act, and that such donations still retain their voluntary and philanthropic character in the eyes of section 80G of the Act.
We observe that the AO, during the original assessment proceedings, had examined the return and submissions made by the assessee and accepted the claim. There is no material on record to suggest that the AO acted arbitrarily or without application of mind.
The assessment order was passed after due notice and reply under sections 143(2) and 142(1) of the Act, and the assessee had furnished all necessary details and disclosures. Merely because the PCIT holds a different legal view on the interpretation of section 80G of the Act in the context of CSR contributions, it does not render the assessment order erroneous.
AO's view allowing the deduction u/s 80G of the Act cannot be said to be patently erroneous given the legal position applicable to the relevant assessment year and the plausible view taken by various coordinate benches of the Tribunal. Assessee appeal allowed.
AI TextQuick Glance (AI)Headnote
Approval under Section 153D Valid; Additions Under Sections 153A and 69C Upheld in Tax Assessment Appeal
Approval under Section 153D Valid; Additions Under Sections 153A and 69C Upheld in Tax Assessment Appeal
The ITAT upheld the validity of approval under section 153D, finding no evidence that the JCIT granted approval mechanically or without application of mind. The appellant failed to prove otherwise, and the AO's assessment order, made after obtaining JCIT's approval, was presumed lawful. Additions under section 153A were sustained based on incriminating seized material admitted by the assessee during recording of statement under section 132(4). The claim for deduction of expenditure related to unexplained income was rejected under the proviso to section 69C. The appeal was dismissed, affirming the assessments and additions made by the AO.
Validity of approval u/sec. 153D - allegation of non application of mind by JCIT - whether the JCIT had accorded mechanical approval u/s 153D of the Act or not? - HELD THAT:- It is settled position of law that the approval of the superior officer should not be done mechanically, without application of mind. Where the approval is granted mechanically, it would vitiate the assessment order itself.
The issue whether the JCIT had accorded the approval mechanically or not has to be judged based on the material on the basis of which the JCIT formed the opinion and accorded the approval. In the present case, no material was produced before us to show that JCIT had accorded approval u/sec. 153D mechanically.
Communication received by the AO from JCIT is nothing but a covering letter forwarding approval from JCIT to AO. It is not copy of actual approval accorded by JCIT. Based on this material, it is difficult for us to judge whether the JCIT had accorded approval mechanically or not. Thus, the appellant had failed to adduce any evidence to show that the approval was mechanical. No relief can be granted based on the bald submissions.
The findings of the learned CIT(A) that the impugned assessments were jointly monitored by the JCIT, remains uncontroverted by the assessee, merely because, the AO and JCIT were located at different places would not mean that there had been non-application of mind, especially when there was a time of 10 days between the last date of hearing by the AO and the date of assessment orders. Therefore, the ratio of Chhagan Chandrakant Bhujbal [2021 (12) TMI 769 - BOMBAY HIGH COURT] is squarely applicable in the present appeal.
in the present case, the assessment orders the AO clearly mentioned that the assessment order is after getting approval as per section 153D of the Act from JCIT, Central Range, Kochi. In the absence of any material to the contrary, it is presumed that the statutory authorities have acted bonafide and lawfully.
In the present case, the assessment orders the AO clearly mentioned that the assessment order is after getting approval as per section 153D of the Act from JCIT, Central Range, Kochi. In the absence of any material to the contrary, it is presumed that the statutory authorities have acted bonafide and lawfully.
Addition made u/s 153A in the absence of any incriminating material - Contention of the assessee that no addition can be made in the assessment made pursuant to notice u/s 153A, based on the statement of third party placing reliance on the judgment of Anand Kumar Jain, this contention cannot be accepted in view of the judgment of Abhisar Builwell P. Ltd [2023 (4) TMI 1056 - SUPREME COURT] wherein it was held that once the AO assumes jurisdiction u/s. 153A, in case any incriminating material is found/unearthed, even in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the “total income” taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns of income.
On merits of the addition, on mere perusal of the assessment order, it is evident that the AO made the addition based on the contents of the seized material. When the seized material was confronted to the assessee, the same was admitted by the assessee during the course of recording statement u/s. 132(4) of the Act. Thus, the AO brought a clinching evidence on record to show that the assessee is deriving income from sale of liquor, food etc.
As regards the allowance of expenditure incurred to earn the income, the same cannot be allowed in view of the proviso inserted to section 69C of the Act which expressly prohibits the allowance of expenditure as a deduction in case of addition made on account of unexplained expenditure. Thus, we do not find any merit in these grounds of appeal raised by the assessee and accordingly appeal is dismissed.
AI TextQuick Glance (AI)Headnote
No Deduction Under Section 80P(2)(d) for Interest from Bank of Baroda FDs, Allowed for Cooperative Bank FDs
No Deduction Under Section 80P(2)(d) for Interest from Bank of Baroda FDs, Allowed for Cooperative Bank FDs
The ITAT Ahmedabad held that the assessee is not entitled to deduction under section 80P(2)(d) on interest income earned from fixed deposits with Bank of Baroda. However, the assessee is eligible for deduction on interest income from fixed deposits with Ahmedabad District Cooperative Bank, a cooperative society. Relying on judicial precedents, including a recent Gujarat HC decision, the tribunal allowed deduction for interest earned from investments in cooperative banks. The appeal was partly allowed accordingly.
Disallowance of deduction u/s 80P(2)(d) - sum earned by the assessee as interest income on fixed deposits kept with Bank of Baroda and balance amount on which interest was earned on fixed deposits kept with Ahmedabad District Cooperative Bank, which is a cooperative society - HELD THAT:- We note that the assessee placed on record the income and expenditure statement for the impugned assessment year and from which it is evident that the assessee had earned interest from fixed deposits kept with Bank of Baroda and so far as this amount is concerned, we hold that the assessee is not eligible for claim of deduction under section 80P of the Act.
With respect to the balance amount, in view of various judicial precedents on the subject we are of the considered view that the assessee is eligible to claim deduction under section 80P of the Act on interest income earned from fixed deposits with Ahmedabad District Cooperative Bank.
In the case of Ashwinkumar Arban Co Operative Society Ltd. [2024 (11) TMI 971 - GUJARAT HIGH COURT] held that deduction under section 80P(2)(d) is available to cooperative societies on income earned as interest on investment made with cooperative bank which in turn, is a cooperative society itself.
Appeal of the assessee is partly allowed.
AI TextQuick Glance (AI)Headnote
ITAT rules to reconsider income exemption under sections 10(25), 10(38) after procedural validation under 143(1)
ITAT rules to reconsider income exemption under sections 10(25), 10(38) after procedural validation under 143(1)
The ITAT Ahmedabad held that while the CIT(A) correctly upheld the procedural validity of the adjustment under section 143(1), it erred in not considering whether the income disallowed under section 10(23AAA) could be exempt under other provisions. The matter was set aside and remanded to the JAO to examine the assessee's alternate exemption claims under sections 10(25) or 10(38) read with section 2(38), allowing the assessee a fair opportunity to present evidence. The appeal was allowed for statistical purposes.
Adjustment made u/s 143(1) - CIT(A) charging “Gross Income” instead of “Net Income” while processing return u/s. 143(1) - adjustment was made on account of the disallowance of exemption claimed u/s 10(23AAA) - such claims were not made in the return of income - HELD THAT:- CIT(Appeals), while upholding the procedural legality of the adjustment made u/s 143(1) of the Act, in our view ought to have examined whether the income which was brought to tax by way of disallowance of Section 10(23AAA) exemption, could nonetheless be excluded from the total income under any other applicable provision of the Act, as claimed by the assessee during appellate proceedings.
In view of the above, and in the interest of justice, we deem it appropriate to set aside the order passed by the CIT(Appeals) and restore the matter to the file of the Jurisdictional Assessing Officer (JAO). The JAO shall examine the alternate claim of exemption under Sections 10(25) or 10(38) read with Section 2(38) of the Act, after giving the assessee an adequate opportunity of being heard and to furnish the necessary evidence in support of such claim. Appeal of the assessee is allowed for statistical purposes.
AI TextQuick Glance (AI)Headnote
ITAT Upholds Addition of Undisclosed Cash for Land, Allows Setoff Under IDS 2016, Rejects Natural Justice Claim
ITAT Upholds Addition of Undisclosed Cash for Land, Allows Setoff Under IDS 2016, Rejects Natural Justice Claim
The ITAT upheld the CIT(A)'s decision confirming the addition of undisclosed cash payments for land purchase not recorded in the assessee's books, supported by corroborative cheque entries and seized electronic records. The assessee's claim that the ledger was a third-party educational document was rejected due to lack of credible evidence. The plea of violation of natural justice for denial of cross-examination was dismissed, as the assessee had full access to the seized material and opportunity to rebut, with no demonstrated prejudice. However, the CIT(A) rightly deleted the addition by allowing the cash payments to be set off against undisclosed income declared under IDS, 2016, as the IDS declaration formed part of official records and prevented double taxation. The Revenue's appeal was dismissed for lack of merit.
Reopening of assessment u/s 147 - Addition u/s 69 - cash payments towards purchase of land which were not recorded in the books of accounts - assessee’s plea that the data was uncorroborated, and its request for cross-examination of the person who prepared the ledger, were also denied - AO rejected the assessee’s explanation that the ledger was a third-party document not maintained by it and was allegedly prepared for educational purposes - assessee argued addition on ground of violation of principles of natural justice on account of denial of opportunity to cross-examine the searched person.
HELD THAT:- CIT(A)’s findings, are based on a sound appreciation of facts and settled law. The ledger was corroborated by admitted cheque entries and it was coming from the record that the corresponding cash entries were also related to the land transaction.
The explanation that it was prepared for educational use is wholly unconvincing. The burden of proof shifted to the assessee to prove that the corresponding entries relating to cash transactions did not belong to the assessee, which the assessee failed to rebut with credible evidence.
The credible material both physical and digital recovered during search action, duly corroborated with the books of accounts of the assessee as well as bank statements, which established that the transaction recorded in the seized material was relating to the purchase of land by the assessee and that the said transaction covered both cheque and cash payments.
We, therefore, do not find any infirmity in the order of the CIT(A) in upholding that the assessee made cash payments towards purchase of land which were not recorded in the books of accounts.
Cross-objection of the assessee regarding violation of principles of natural justice by denial of opportunity to cross-examine the concerned CFO of Sambhaav-Nila Group from whose possession the alleged seized material was recovered - It is pertinent to mention here that the assessee was duly supplied with the seized material and was confronted with the specific entries, which included the cheque and alleged cash payments. The assessee was given due opportunity to rebut the aforesaid entries before both the lower authorities. The cheque entries mentioned in the seized documents as well as tally data duly matched with the accounts of the assessee as well as bank statement of the assessee.
The ledger was not a testimonial statement but a contemporaneous electronic record retrieved from the system of a person associated with the transaction. The AO did not rely upon any confessional statement or affidavit in isolation. The assessee has not demonstrated, either before the AO, CIT(A), or this Tribunal, as to how the absence of cross-examination of the CFO or author of the ledger caused any prejudice to its defence.
There is no specific factual claim or inference of prejudice, other than a bald plea that cross-examination was denied.
As decided in Swati Bajaj [2022 (6) TMI 670 - CALCUTTA HIGH COURT] has extensively dealt with the issue of whether denial of cross-examination per se renders the assessment invalid.
After reviewing multiple precedents including State Bank of Patiala v. S.K. Sharma [1996 (3) TMI 526 - SUPREME COURT], SBI vs. M.J. James [2021 (11) TMI 1078 - SUPREME COURT] and State of U.P. vs. Sudhir Kumar Singh [2020 (10) TMI 746 - SUPREME COURT] the Hon’ble High Court held that natural justice is not a rigid, inflexible rule, that and a breach of the audi alteram partem principle does not automatically render an order invalid unless prejudice is demonstrated as a matter of fact. That if the assessee has been given access to the material relied upon and has been given an opportunity to explain or rebut it—either orally or in writing—then the requirement of fair hearing stands satisfied, especially where the burden to prove the transaction lies on the assessee.
Action of the CIT(A) in deleting the impugned addition by accepting the alternate plea of the assessee for telescoping the cash payments against the undisclosed income declared under IDS, 2016 - There is no asset recorded in the books of accounts of the assessee which represent the aforesaid income declared by the assessee in the IDS-2016. The CIT(A) is a higher officer and an Appellate Authority over the AO. It has been time and again held that the powers of the Appellate Commissioner are co-terminous with that of the AO. The documents relied upon by the CIT(A) in the shape of IDS declaration Form and acknowledgement are not such type of documents, which require any further or deep investigation by the Assessing Officer. The said documents are, in fact, a part of the official record of the Income Tax Department. Therefore, the plea of the Department that the AO was not given opportunity to rebut of the same, is misconceived. The principle of avoiding double taxation of the same amount is firmly embedded in the scheme of IDS and supported by binding CBDT circulars. Therefore, the CIT(A) was justified in deleting the addition on this ground. We, therefore, do not find any merit in the appeal of the Revenue and the same is, accordingly, dismissed.
AI TextQuick Glance (AI)Headnote
Petition to Enforce Bank Guarantee Dismissed for Delay Beyond Validity Period Under Contract Terms
Petition to Enforce Bank Guarantee Dismissed for Delay Beyond Validity Period Under Contract Terms
The HC dismissed the petition seeking enforcement of a bank guarantee nearly seven years after its expiry and renewal period. The petitioner failed to lodge any claim within the validity period, rendering the belated enforcement attempt invalid. The court held that the guarantee clauses, read in full, do not support a continuing guarantee beyond the stipulated period. The petition was found meritless, and no writ petition is ordinarily entertained for such delayed enforcement.
Continuation of bank guarantee despite the resolution plan being finalised under the Insolvency and Bankruptcy Code, 2016 - continuing guarantee or not - enforcement of bank guarantee after about 10 years from their expiry - HELD THAT:- Admittedly, no claim, whether in writing or otherwise, was lodged by the petitioner on or before 31 May 2011. Such a claim was lodged only in 2018, i.e., almost 7 years after the expiry of the Bank Guarantee and its renewal up to 2013. In the absence of any written claim within the validity period of the bank guarantee, the Petitioner cannot now belatedly seek the enforcement of the guarantee by instituting this petition.
The clauses for the guarantee must be interpreted in their entirety. Therefore, by merely emphasising the first quoted clause and the reference to the expression “continuing guarantee” within it, the relief sought belatedly cannot be granted. The argument overlooks the other parts of that very clause and the subsequent clause, which begins with a non-obstante clause.
It is satisfied that the petitioner is seeking to belatedly enforce a contract of Bank Guarantee. Ordinarily, no writ petitions are entertained for such purposes.
There are no merits in the petition - petition dismissed.
AI TextQuick Glance (AI)Headnote
Statements under Customs Act Section 108 inadmissible; penalties under Sections 114A and 114AA quashed; DFIA benefits upheld
Statements under Customs Act Section 108 inadmissible; penalties under Sections 114A and 114AA quashed; DFIA benefits upheld
The CESTAT New Delhi held that statements under section 108 of the Customs Act were inadmissible as the procedure under section 138B was not followed. Penalty under section 114A was quashed since no duty short payment was found. The Tribunal found no valid basis to reject the declared retail sale price or re-determine it under rule 6 of the 2008 Rules, as no machinery exists for CVD valuation when retail sale price is undeclared and the department's reliance on MRP lists was improper. Penalty under section 114AA was set aside due to lack of evidence of intentional mis-declaration or misuse of DFIA scrips. Duty demands related to Annexure A-2 and A-4 were also unsustainable as the appellant was entitled to DFIA benefits. The Principal Commissioner's order dated 24.09.2019 was set aside and the appeal allowed.
Determination of retail sale price - mis-utilisation of DFIA scrips - suppression of facts - extended period of limitation - Levy of penalty u/s 114AA of the Customs Act, 1962 - HELD THAT:- This issue was examined by a Division Bench of this Tribunal in M/s. Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur [2025 (4) TMI 441 - CESTAT NEW DELHI]. The Tribunal examined the provisions of sections 108 and 138B of the Customs Act as also the provisions of sections 14 and 9D of the Central Excise Act and observed that 'What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain.' - the statements made under section 108 of the Customs Act would not be relevant as the procedure contemplated under section 138B of the Custom Act was not followed in the present case.
The order passed by the Principal Commissioner also imposes penalty upon the appellant under section 114A of the Customs Act. As it has been found that duty was not short paid, penalty under section 114A of the Customs Act could not have been imposed upon the appellant.
Determination of the retail sale price - HELD THAT:- There is no dispute that goods imported by the appellant were classifiable under CTH 3208 which is covered under the Notification dated 24.12.2008 issued under section 4A(1) of the Central Excise Act with abatement of 33% of retail sale price. Such goods are, therefore, assessable to CVD on the basis of retail sale price in terms of the first proviso to section 3(2) of the Tariff Act - In the present case, the Commissioner has accepted the proposal in the show cause notice to reject the retail sale price declared on the imported goods and to re-determine it by applying rule 6 of the 2008 Rules.
The Tribunal in ABB Ltd vs CC, Bangalore [2010 (12) TMI 1027 - CESTAT, BANGALORE] held that though the Central Excise (Determination of RSP of Excisable Goods) Rues 2008 prescribes the manner of ascertaining the retail sale price of excisable goods but, so far as CVD under Serial No. 3 of the Tariff Act is concerned, the Government has yet to prescribe the manner to ascertain retail sale price when the importer does not declare the retail sale price on the packages imported. Thus, in the absence of a machinery to determine the relevant retail sale price, no demand of differential CVD could have been validly raised.
This apart there is nothing on the record to show that the retail sale price declared on the imported goods was found to be incorrect. The two MRP Lists w.e.f. 05.09.2013 and 01.01.2015 found by the department during the course of investigation have been made the basis of re-determining the retail sale price for the entire period covered by the show cause notice - It was also observed that some products imported by the appellant were not mentioned in the MRP Lists. This cannot be the basis for having a doubt about the truth or accuracy of the value declared in relation to imported goods for rejecting the declared value in terms of rule 12 of the 2007 Rules - retail sale price could not have been re-determined.
Levy of penalty u/s 114AA of the Customs Act - HELD THAT:- The Principal Commissioner has found that he was responsible for import, purchases, sales and marketing of all the products imported by the appellant but he did not intentionally declare the actual retail sale price and got the goods cleared by mis- declaring the retail sale price. The Principal Commissioner has also noted that Suveet Kalra had mis-utilised the DFIA scrips. It has been found as a fact that neither had Suveet Kalra mis-declared the actual retail sale price nor he had mis-utilised the DFIA scripts. In such a situation, penalty under section 114AA of the Customs Act could not have been imposed upon him - Insofar a duty demands pertaining to Annexure A-2 and A-4 are concerned, the same cannot be sustained as the appellant is entitled to avail the benefit of duty free imports of Lacquers under the DFIAs.
The order dated 24.09.2019 passed by the Principal Commissioner cannot, therefore, be sustained and is set aside - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Appeal Dismissed for Suspended Directors Failing to Cooperate and Provide Statutory Records under Insolvency Rules
Appeal Dismissed for Suspended Directors Failing to Cooperate and Provide Statutory Records under Insolvency Rules
The NCLAT held that the appeal was not maintainable as the appellants, suspended directors of the corporate debtor, were duly served via email and post using addresses from the MCA database. The tribunal's findings that the appellants did not cooperate with the IRP/RP/Liquidator and failed to provide statutory records were upheld. The court noted that the appellants appeared before the criminal court following prosecution initiated on the RP's complaint, indicating the appeal was primarily a defensive tactic. There was no reason to disturb the tribunal's observations justifying the corporate debtor's dissolution. Consequently, the appeal was dismissed with no interference in the impugned judgment or its observations.
Maintainability of appeal - Appellant may be classified as aggrieved person or not - Suspended Board of Directors of the CD have not been cooperating with the IRP/RP - HELD THAT:- The record would sufficiently demonstrate that IRP/RP/Liquidator have sent processes of the Tribunal to the Appellants and other Suspended Directors of the CD on their email addresses and postal addresses, provided in the MCA data base by themselves, as the Directors of the CD - It is also evident that when IRP/RP/Liquidator has sent various communications to the Appellants and other Suspended Directors of the CD, and in pursuance of the same Promoters Directors of the CD namely Gagan Kumar Shukla and Ms Kalyani Shukla have appeared before the Tribunal and also in the meeting of the CoC, thus when process has been sent on the official email of the appellants which was available on the MCA Data and two directors have appeared on account of such service, it could not be believed that appellant were not served by these processes. Moreover, Appellant No. 2 and 3 have also been served through process sent via post.
What is transpired from the record is that on a complaint made by RP to the IBBI criminal prosecution has been launched against the Appellants, and they are appearing before the criminal court and the instant appeal appears to have been filed only for the purpose of taking a defence therein, otherwise there appears no reason for the appellants to have felt aggrieved by impugned observations made by tribunal in para 7(ii) as only facts have been reiterated by the Tribunal, in order to justify dissolution of the CD.
The learned Adjudicating Authority has done nothing wrong in observing that Suspended Board of Directors of the Corporate Debtor were not cooperating with the IRP/RP/Liquidator and did not provide any statutory books and accounts and also in observing that despite issuing private notice, summon and warrants appellant did not appear and provided requisite details pertaining to the CD. It is also worth noticing that in the same breath learned Tribunal has also recorded that on the basis of a complaint lodged by the RP with the IBBI the prosecution against all the members on the Board of the CD has been initiated and the same is pending for adjudication in District and Session Court South West Dwarika, New Delhi.
There are no good ground to interfere either in the impugned judgment or in the observations made by learned Tribunal in para 7 (ii) of the same, resultantly - appeal dismissed.
AI TextQuick Glance (AI)Headnote
Service tax demand set aside on technician studio construction under Notification 25/2012-ST, Sl. 12(a) and 12(c)(iii) exemption
Service tax demand set aside on technician studio construction under Notification 25/2012-ST, Sl. 12(a) and 12(c)(iii) exemption
The CESTAT Kolkata set aside the service tax demand of Rs. 28,19,194/- on the construction of a technician studio for the State PWD, holding that the studio's use for promoting state art and culture qualifies it for exemption under Notification 25/2012-ST, Sl. Nos. 12(a) and 12(c)(iii). The extended period of limitation and penalty were denied as the appellant did not suppress information. Additionally, the demand of Rs. 52,99,258/- on construction of the Exploration Hall in Science City was upheld as exempt under the same notification and relevant circulars, given the educational and cultural nature of the project. The Revenue's appeal was rejected and the appellant's appeal allowed.
Levy of service tax - construction of technician studio for PWD - extended period of limitation - construction of Exploration Hall in Science City.
Demand of Service Tax of Rs. 28,19,194/- confirmed on the construction of technician studio for PWD - HELD THAT:- The activities of the Studio cannot be looked in isolation. The Information and Cultural Affairs Department of the State Government conducts various programs such as Kolkata International Film Festival, Tele Samman Award Ceremony, Mahanayak Uttam Kumar Award Ceremony. It is also entrusted with the task of providing Medical Benefit Scheme for the Cine and Television Artistes/ Technicians /Workers. It conducts Film Appreciation Courses. It organises Digitization and restoration of Cinematograph Films (Celluloid) of State Film Archive - the money generated by the Studio by letting it out for commercial consideration are used for promotion of culture of the state. Thus, the Technicians Studio can be considered as a structure predominantly used for promotion of art and culture of the state of West Bengal. Accordingly, the activities undertaken by the appellant-assessee are covered within the scope and ambit of the exemption as provided under Sl. No.12 (a) and 12(c)(iii) of the Notification 25/2012- S.T. - the exemption as provided under Sl. No.12(a) and 12(c)(iii) of the Notification 25/2012-S.T. dated 20.06.2012 cannot be denied to the appellant-assessee on the ground that the said Studio has been used for commercial purposes also.
The construction work of Technician Studio provided by the appellant-assessee to the PWD department of the West Bengal Govt. is exempted from Service Tax as per Sl. Nos. 12(a) and (c)(iii) of Notification No. 25/2012-ST dated. 20/06/2012 - the demand of service tax of Rs. 28,19,194/- confirmed on the construction of Technician Studio for the State PWD department set aside.
Invocation of extended period of limitation - levy of penalty - HELD THAT:- The entire demand has been made on the basis of difference between 26AS, Information available in the Balance Sheet, Profit and loss Account, ST-3 and the Income Tax Returns filed by the appellant- assessee themselves. Thus, the submission of the appellant-assessee is agreed that they have not suppressed any information from the department. Accordingly, the extended period of limitation cannot be invoked in this case to demand service tax. For the same reason, no penalty is imposable on the appellant- assessee.
Demand dropped on the construction of Exploration Hall in Science City - HELD THAT:- The Science City is an autonomous scientific organization explicitly falling under Ministry of Culture, Govt. of India and the construction carried out by the appellant-assessee is towards educational enhancement and it is exempted from service tax in terms of Circular No. B2/8/2004 dt. 10.09.2004 and Notification No. 25/2012-ST dt. 20.06.2012. Accordingly, the Ld. Commissioner (Appeals) has rightly extended benefit of the exemptions as provided under Sl. No. 12(a) & 12(c) of Notification No. 25/2012-ST dt. 20.06.2012 - there are no infirmity in the dropping of the demand of Rs. 52,99,258/- on this issue, by the Ld. Commissioner (Appeals). Hence, there are no merit in the appeal filed by the Revenue and accordingly, the same is rejected.
Appeal allowed.
AI TextQuick Glance (AI)Headnote
Service Tax Applies to Exported Fish; Exemptions Limited Under Section 66D(iii) and Notification 18/2009-ST
Service Tax Applies to Exported Fish; Exemptions Limited Under Section 66D(iii) and Notification 18/2009-ST
The CESTAT AHMEDABAD upheld the demand of service tax on fish procured from fishermen and exported without rearing, ruling that such fish do not qualify as agricultural produce exempt under Section 66D(iii). Service tax on GTA services for transporting fish and on sales commission paid to overseas agents was confirmed, with exemption limited to 1% of FOB value per Notification 18/2009-ST. The appellant failed to comply with procedural requirements for claiming exemptions and suppressed facts by not filing ST-3 returns, justifying invocation of extended limitation and imposition of penalties under Sections 78 and 70 read with Rule 7C. The order of the Commissioner and the first Adjudicating Authority was affirmed, and the appeal was dismissed.
Non-payment of service tax - fish procured from fishermen and exported without rearing or breeding - agricultural produce or not - transportation of goods by road as well as on sales commission and brokerage paid to foreign agents - Business Auxiliary Service - sales commission paid to overseas commission agent by the appellant in the year 2010-11 and 2013- 14 is exempted from service tax or not - GTA Service - applicability of N/N. 18/2009-ST dated 07.07.2009, as amended vide N/N. 31/2012 - Extended period of limitation - penalty - suppression of facts or not.
Fish procured from fishermen and exported without rearing or breeding - agricultural produce or not - HELD THAT:- Section 66D(iii) says that services relating to agriculture or agricultural produce by way of processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, graving, cooling or bulk packaging and such like operations, which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market, are exempted from Service Tax. The argument of the appellant is that the appellant is buying fish, does the processing on the same to make it marketable. More particularly the processing is more as preservation of the fish and then selling the fish thus, it does not alter the basic characteristics of the product fish and therefore, for all purposes it will be considered as agricultural produce.
There are force in the submission made by the learned counsel for the appellant as he failed to show that they are involved in pisciculture. They are not breeding and rearing the fishes in the pond rather purchasing the fish from the fisherman outright and after processing it, they exported it. Therefore, in these circumstances, the fish exported by the appellant cannot be considered as agricultural produce and they are not entitled to get the benefit of Sr. No. 21 (a) of Notification 25/2012-ST and services provided by the GTA by way of transport of fish in a goods carriage are not exempted because it is not agricultural produce and consequently, service tax on the same is required to be paid subject to the provisions of relevant Notification.
Whether the sales commission paid to overseas commission agent by the appellant in the year 2010-11 and 2013- 14 is exempted from service tax? - HELD THAT:- In the present case, the appellant has paid export sales commission to overseas commission agent in 2010-11 and 2014-15 on overseas sales. This issue is covered by Notification No. 18/2009-ST dated 07.07.2009. This Notification provides for exemption from payment of service tax on taxable service under Section 65(105) (zzb) which is received by an exporter of goods and used for export of goods subject to 1% of the FOB value and subject to conditions as laid down in the Notification mentioned above. In the context of refund of Service Tax paid on foreign agency commission, this Notification says that exemption shall be limited to 1% of the free on board value of export goods for which the said service has been used. Thus, the amount of service tax paid, which can be refunded to the exporter, is restricted to 1% of the FOB value of export goods in relation to which the taxable service of the foreign agent was used. Thus, from the provision of the Notification No. 18/2009- ST, it is clear that, the person who paid export sales commission to overseas commission agent on overseas sales is required to pay service tax first and then can claim refund of the service tax paid by him by following the mechanism enumerated in the said notification.
GTA Service - applicability of N/N. 18/2009-ST dated 07.07.2009, as amended vide N/N. 31/2012 - HED THAT:- It is not a case of denial of export benefits for non-fulfilment of conditions of Notifications as the learned Commissioner has observed in the impugned order. On the contrary, the appellant have got the benefits for exporting goods. The issue in this case is pertaining to demand of Service Tax on GTA service and Business Auxiliary Service which was not paid by the appellant and failed to follow the procedure as laid down under Notification No. 18/2009, 31/2012 and 42/2012 respectively. Thus, what the appellants did was not a procedural lapse but gross violation of Notifications governing exemption from payment of Service Tax.
Extended period of limitation - penalty - suppression of facts or not - HELD THAT:- From the data received from Income Tax Department, it has come to the notice of the department that appellant, despite having income, failed to file S.T.-3 returns since April-2006. The jurisdictional Superintendent has issued letters dated 1st September 2015, 12th October 2015, 9th November 2015, 2nd December 2015, 9th December 2015, 11th December 2015, 30th December 2015, 12th January 2016, 28th January 2016 and called for the information for the years 2010-11 to 2014- 15 from the appellant. The appellant replied vide letter dated 9th September, 2015 that they are engaged in fish export business and no Service Tax is leviable on fish export and provided copy of Form 26AS for the year 2013-14. Therefore, the appellant has suppressed the material facts from the department till September-2015 by non-filing of ST-3 returns and the same was noticed only during verification of third party data. Therefore, the department has rightly invoked extended period and penalty was rightly imposed on the appellant under Section 78 and Section 70 of the Act read with Rule 7C of the Rules.
The learned Commissioner has rightly upheld the order passed by the first Adjudicating Authority. Therefore, the impugned order passed by the learned Commissioner is liable to be confirmed whereas the appeal is liable to be rejected - Appeal dismissed.
AI TextQuick Glance (AI)Headnote
Appellant's genuine belief in service tax exemption upheld; extended limitation under Section 73(1) FA not applicable
Appellant's genuine belief in service tax exemption upheld; extended limitation under Section 73(1) FA not applicable
The CESTAT held that the appellant's belief in exemption from service tax was bona fide, supported by the agreement and conduct of the Indian Railways and their Chartered Accountant. There was no suppression of facts or intent to evade tax, rendering the extended limitation period under Section 73(1) FA inapplicable. The invocation of Section 73A was not made by the department and thus could not validate the order. Additionally, the tribunal noted the absence of provisions allowing recovery of service tax from one government agency by the revenue. Consequently, the impugned order demanding service tax was set aside and the appeal allowed.
Exemption from service tax - invocation of the extended period of limitation under Section 73(1) of FA - suppression of facts or not - appellant argued that the Railway Authorities clearly informed the Appellant that the activity was exempt from service tax and, therefore, no provision was made for payment of service tax to the contractor - HELD THAT:- From a perusal of Clause 42 of the agreement dated 15.12.2015, it is evident that the agreement itself created a genuine doubt in the mind of the Appellant regarding the taxability of the services rendered to the Indian Railways. The belief that such services were exempt under the applicable notification was not ill-founded, especially when the same was supported by the conduct of the Railways and Chartered Accountant.
In such circumstances, it cannot be held that there was any suppression of facts with an intent to evade payment of tax. In line with the binding precedents of the Hon’ble Supreme Court and Tribunal, the appellant was under a bona fide belief that its services were exempt. Accordingly, the invocation of the extended period under the proviso to Section 73(1) of the Finance Act, 1994 is unsustainable.
The Learned Departmental Authorized Representative fairly agreed that there is no time limitation for invoking Section 73A, but that provision not having been invoked, cannot support the impugned order. The revenue has sought to recover Service Tax from the Appellant where the service recipient is Indian Railways, which is part of Government of India, therefore, a question arises whether Revenue can collect tax from other Government Organization. There are no provision to support that Revenue can collect Service Tax from other Government Agencies.
The impugned order is not sustainable in law. The same is accordingly set aside. The appeal is allowed.
AI TextQuick Glance (AI)Headnote
No Service Tax on Mining Activities; Section 78 Penalty Quashed Due to Lack of Fraud Evidence
No Service Tax on Mining Activities; Section 78 Penalty Quashed Due to Lack of Fraud Evidence
The CESTAT Hyderabad held that no service tax was payable on mining activities as these fell under the negative list, referencing a prior decision involving the sub-contractor. The demand of Rs.4.67 crore on this ground was set aside. Regarding irregular Cenvat credit of over Rs.10 crore, the tribunal found the credit inadmissible since it was claimed based on non-prescribed documents and invoices from a related party that had not paid service tax. However, the extended period for limitation was not invokable as there was no evidence of fraud or willful suppression. Consequently, the entire service tax demand and penalty under section 78 were quashed. The appeal was allowed, and the impugned order was set aside.
Non-payment of service tax - Irregular availment of Cenvat Credit - invocation of extended period of limitation - penalty.
Non-payment of service tax - HELD THAT:- Insofar as the issue of non-payment of service tax on the mining activity is concerned, it is found that this issue has already been examined in detail in relation to the appeal filed by the sub-contractor VIJAY MINING & INFRA CORP PVT LTD AND CH. VIJAY SEKHAR REDDY VERSUS COMMISSIONER OF CENTRAL TAX HYDERABAD - GST (VICE-VERSA) [2025 (6) TMI 1811 - CESTAT HYDERABAD], wherein, inter alia, it was held that no service tax is liable to be paid by them on this activity as the said activity was amounting to production of ore, which was falling under the negative list - Further, in this case, it is obvious that whatever activities were being carried out by the sub-contractor, he was raising bill for the said activity on the appellant, who, in turn, was further raising bill to M/s APMDC for the said activity itself. Therefore, the activity for which demand had been raised on the sub-contractor remains the same as the activity provided by the appellant to APMDC. In view of the decision in the case of M/s VMICPL, vide final order dt.20.06.2025, the demand of service tax of Rs.4,67,78,603/- therefore cannot sustain and therefore, to that extent, the impugned order is liable to be set aside on this ground itself.
Irregular availment of Cenvat credit - HELD THAT:- The adjudicating authority has held that the appellants have availed and utilized the credit of service tax amounting to Rs.10,20,63,591/- during the period April, 2012 to September, 2013 on the strength of Cenvat ledger, which is not a prescribed document under Rule 9(1) of CCR, 2004 and also observed that even if the invoices produced by the appellant were raised by M/s VMICPL on the appellant, the same would be considered as irregular, as Shri Ch. Vijay Sekhar Reddy, Authorized Signatory of the appellant, who was also a Director of M/s VMICPL, has clearly admitted that VMICPL had not paid the service tax on the mining activity during the said period to the Government.
The adjudicating authority felt that credit cannot be allowed based on Cenvat ledger maintained by them, which is not a prescribed document and also held that the appellant did not produce these invoices raised by M/s VMICPL to the investigating agency, whereas, it is only after investigation and during the course of adjudication proceedings, the appellants have produced the said invoices raised by M/s VMICPL on them, wherein, the service tax component has been shown separately - the invoices of M/s VMICPL produced by the appellant as invalid/ineligible document prescribed under CCR, 2004 is rejected.
Time limitation - HELD THAT:- There is no tangible and positive ground for invoking extended period in respect of taking credit except that Shri Vijay Shekar Reddy was aware of the fact that VMICPL has not paid service tax. Department has not categorically brought out that it was on account of any fraud or willful misstatement or suppression with an intent to evade service tax - It is also obvious that department has relied on the documents furnished by appellants themselves and no separate investigation was done to unearth so called irregular taking of credit. It is also noted that there was no provision to show invoice wise details in ST3, where only consolidated credit and debit entries were shown. Thus, in the facts of the case, invocation of extended period is not tenable.
Since the entire demand is not sustainable on merit and also extended period is not invokable, penalty under section 78 would also not sustain.
The demand of service tax on account of mining services, as also demand for recovery of irregularly availed Cenvat Credit, would not sustain on merit as well as on limitation - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Penalty under Section 78 set aside as no fraud or willful suppression proved in service tax short payment case
Penalty under Section 78 set aside as no fraud or willful suppression proved in service tax short payment case
The CESTAT Chennai held that although the extended period of limitation was invoked for short payment of service tax from April 2005 to December 2009, the Revenue failed to prove suppression with intent to evade tax. The appellant admitted short payment but contested the penalty, denying any fraud or suppression. The tribunal found that penalty under Section 78 could only be imposed if the extended period invocation is justified by fraud, collusion, or willful suppression, which was not established here. Consequently, the penalty was set aside, and the appeal was disposed of.
Invocation of extended period of limitation - levy of penalty - short paid of service tax for the period April 2005 to December 2009 - HELD THAT:- There is no denial by the Revenue as to fact that Appellant had not collected the service tax, the service tax was paid in full after the receipt of the SCN but before completion of the adjudication. The fact of suppression has been alleged because of the findings of the Audit party but however, all the facts and figures were culled out from the statutory documents maintained by the Appellant. In view of the above, we are satisfied that the demands along with penalty have been raised by invoking the extended period of limitation. However, the Revenue has failed to establish “suppression with an intent to evade payment of tax” since, admittedly, the Appellant was alleged to have short paid the service tax. It is the case of the Appellant that they are not challenging the levy but however, they are questioning the penalty since there is no suppression or fraud alleged against them.
Levy of penalty u/s 78 - HELD THAT:- From a perusal of Section 78, it is noted that Section 78 could be pressed into service only when any service tax has not been levied, or has been short- paid, or erroneously refunded, by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under the proviso to Section 73 (1). Here in the case on hand, it is found that very invocation of extended period of limitation does not stand the test and hence, just because proviso to Section 73 (1) is invoked despite lack of merit, does not automatically lead to the imposition of penalty under Section 78. Going by the wordings of Section 78, wherever invocation of extended period of limitation stands justified only in such cases could the Revenue perhaps impose penalty under Section 78.
Appeal disposed off.
AI TextQuick Glance (AI)Headnote
Penalties Set Aside Due to Lack of Evidence and No Proven Mens Rea Under Rule 29 Central Excise Rules 2017
Penalties Set Aside Due to Lack of Evidence and No Proven Mens Rea Under Rule 29 Central Excise Rules 2017
The CESTAT held that the Department failed to prove clandestine removal of goods, as allegations were based on assumptions without concrete evidence such as money trail, raw material procurement, or reliable documentary proof. Statements under Section 70 lacked corroboration, and dispatch slips had no evidentiary value due to unidentified authorship. The transport company was not liable for penalty under Rule 29 of the Central Excise Rules, 2017, as mens rea was not established, and no conscious involvement in duty evasion was proven. Consequently, penalties imposed were set aside, and the appeal was allowed.
Clandestine removal - charges on the basis of records maintained by third party - onus to prove - demand based on assumptions and presumptions - levy of penalties - HELD THAT:- It is found that the Appellant has vigorously raised the issue of money trail which was said to have been received through cash from the recipients of clandestinely removed goods. As per the allegation, huge amount to the tune of Rs.100 crores was taken in cash by the Appellants but the Department could not prove as to where such amount had gone. Such huge amount of cash cannot be hidden by anyone. It is an important factor which was required to be investigated but was not done at all. In case, the goods are sold by way of evading duty, it is logical that amount equal to duty which was to go to the Government exchequer was retained by the seller. To avoid the disclosure of clandestinely removed goods, payment is always received in cash. So, non-recovery of cash received from such alleged sale of clandestinely removed goods indicate that allegation of clandestine removal is based on assumption and presumption only. Evasion of duty cannot be established.
The allegation of clandestine removal is principally based on the recovery of 12 dispatch slips recovered during search of the factory. Such slips were placed in a file after their recovery and shown to have been resumed at Sl. No.27 of the Resumption Memo and was made RUD-14 to the SCN. On the slips name of ‘Ajai Ji’, ‘Udai Ji’, ‘Manoj Ji’ was mentioned. It was found that statement of only Ajay Kumar Saha was recorded on 18.01.2021 who denied to be author of the said slips - onus lies on the Department to prove clandestine removal. Entries in such loose sheets have no evidentiary value to prove clandestine removal when preparer of such slips could not be ascertained. Only on the basis of statements of some truck- drivers, clandestine removal of finished goods cannot be established particularly when drivers were not aware as to what kind of goods were being transported by them.
There is no investigation in regard to procurement of raw material and packing material used in the manufacture of finished goods. For manufacturing huge quantity of goods alleged to be cleared clandestinely, a huge quantity of raw material, extra man power for manufacturing, additional electricity & packing materials were required but there is no evidence regarding procurement of raw material or packaging material. It shows that the Department could not prove clandestine procurement of raw material and packaging material. Packing material used by the Appellant has printing of name of the brand, factory along with address and other particulars. It means packing materials are tailor made items. Such packaging materials must have been manufactured by a factory on specific order of the Appellant but no enquiry was made as to how such packing materials were clandestinely procured. Thus, charges of clandestine removal are based on only assumption and presumption and as such not sustainable.
It is a settled law that statements recorded under Section 70 have no evidentiary value if they are not corroborated with documentary evidences. In the case of UOI Vs. Kisan Ratan Singh [2020 (1) TMI 510 - BOMBAY HIGH COURT], Hon’ble High Court has held that Various Courts have kept all these things in mind and come to a conclusion that in the absence of any corroboration by an independent and reliable witness, a statement recorded under Section 108 in isolation could not be relied upon - no penalty is imposable on Sanjiv Kumar under Rule 29 of the Central Excise Rules, 2017.
As regards penalty on M/s MFC under Rule 29 of the Central Excise Rules, 2017, it is found that the said company was engaged in transportation of goods without having any knowledge that the said goods are liable to confiscation. In the SCN, nowhere it was proved that the said transport company was aware of the fact that goods which were transported by them were liable to confiscation. Mensrea is an important factor which is required to be proved for imposition of penalty under Rule 29. From the investigation and statements of the representative, it could not be proved that the said company was aware of the confiscability of said goods. Therefore, the penal provision of Rule 29 of Central Excise Rules, 2017 cannot be invoked against the person without proving his conscious involvement in evasion duty. Penal provision can’t be invoked unless the specific allegations are made to justify the same.
In the instant case, it is a fact that M/s MFC had not dealt the impugned goods physically or in any other manner knowingly that they were liable to confiscation. Hence not liable to penalty under Rule 29. It has been held by various Appellate Authorities that where there is no allegation in SCN regarding particular commission or omission on part of a person which shows that there was intention to evade the duty, the personal penalty is not imposable - In the case of Woodmen Industries vs. CCE, Patna [2003 (9) TMI 228 - CESTAT, KOLKATA] wherein it was held that Rule 26 is applicable only on persons and not on the firms constituted under the law.
The impugned order is set aside - appeal allowed.
AI TextQuick Glance (AI)Headnote
Validity of Section 2(b) Proviso Upheld for Convenience Fees in Online Ticket Booking under Maharashtra Entertainments Duty Act
Validity of Section 2(b) Proviso Upheld for Convenience Fees in Online Ticket Booking under Maharashtra Entertainments Duty Act
The HC upheld the validity of the seventh proviso inserted in Section 2(b) of the Maharashtra Entertainments Duty Act by Maharashtra Act XLII of 2014, ruling it intra vires and not violative of Articles 14 or 19. The court held that convenience fees charged on online ticket bookings constitute part of the "payment of admission" for entertainment and thus fall within the State's taxation domain under Entry 62, List II. The State's levy does not encroach upon the Union's power to tax services, as the service tax on online booking and the entertainment duty are distinct. The proviso excluding convenience fees up to Rs. 10 from the definition was also upheld. Consequently, the challenge to the proviso and related circulars was dismissed, affirming the State's legislative competence to impose the entertainment duty inclusive of convenience fees beyond Rs. 10.
Competency of State of Levy Tax when Service Tax (Union List) is levied - Challenge to insertion of the seventh proviso in Section 2(b) of the Maharashtra Entertainments Duty Act (MED) by the Maharashtra Act No. XLII of 2014 - service tax on the convenience fees charged on online ticket booking - applicability of principle of pith and substance - Legislative competence and the alleged infringement of Articles 14 and 19 of the Constitution.
HELD THAT:- Section 3(1) of the MED Act, which is the charging section, contains the phrase “payment for admission” and the same read with Section 2(b)(iv) which defines “payment of admission” would mean not only the actual payment made by a person for entertainment but also what he pays to the proprietor for admission to entertainment. Entertainment duty is levied on what is paid by the person entertained for providing entertainment by the proprietor. Therefore, even from this perspective, convenience fees squarely fall within Section 2(b)(iv) read with Section 2(a) and Section 3(1) of the MED Act.
Legislative competence and the alleged infringement of Articles 14 and 19 of the Constitution - HELD THAT:- The rendering of online ticket booking is regarded as a service and is taxed under the Finance Act, 1994 by the Union. Conversely, the act of entertainment involving films or movies is taxed by the State. When calculating the duty under the MED Act, the convenience fees paid are considered as part of “payment of admission” as defined under Section 2(b)(iv), which serves as the measure of tax on which the rate of duty is levied under Section 3 of the MED Act. The Union taxes services, while the State taxes entertainment. A key element in determining the entertainment duty is the charges levied for online ticket booking, but the State does not treat the act of online booking itself as entertainment. Merely because charges for online booking are included in the tax measure does not imply that the State has encroached upon the Union List. Therefore, there is no transgression by the State regarding the Union List, and both authorities are separate entities with the power to tax under their respective lists.
The petitioners are not justified in claiming that the activity of online ticket booking is a separate activity intended to be taxed under Entry 62 of List II of the Seventh Schedule to the Constitution, and since this activity is already subject to service tax by the Union of India, the impugned proviso is ultra vires. First, what the impugned proviso seeks to do is to exclude convenience fee charges up to Rs. 10/- from the definition of payment of admission, while any amount charged above Rs. 10/- is to be regarded as payment of admission - the State has the authority to enact the impugned proviso under Entry 62, List II of the Seventh Schedule to the Constitution.
The convenience fees paid for online ticket booking for entertainment purposes have a direct and immediate connection with the subject of the levy, which is entertainment. What is being taxed is not the activity of online ticket booking—on which the petitioners have already paid service tax under the Finance Act, 1994—but rather the act of entertainment itself, with the duty amount determined by considering measures of tax, including convenience fees. Therefore, in our view, the State does not encroach upon the Union List so as to render the impugned proviso ultra vires - the State has the legislative competency to enact the impugned proviso under Entry 62 of List II of the Seventh Schedule to the Constitution of India.
The impugned proviso inserted by Maharashtra Act XLII of 2014 amending the Maharashtra Entertainment Duty Act is held to be intra vires and not unconstitutional or beyond the State’s legislative competence - Prayer for quashing of Circulars dated 31 January 2015 (Exhibit ‘G’) and 27 February 2015 (Exhibit ‘H’) is rejected.
Petition dismissed.
AI TextQuick Glance (AI)Headnote
Customs Cannot Deny EPCG Scheme Benefits Without DGFT Adjudication Under Section 108 Customs Act
Customs Cannot Deny EPCG Scheme Benefits Without DGFT Adjudication Under Section 108 Customs Act
The CESTAT held that customs authorities cannot deny exemption benefits under the EPCG Scheme without prior adjudication or cancellation of the export obligation discharge certificate (EODC) by the DGFT. Following Supreme Court and Delhi HC precedents, the tribunal ruled that customs lack jurisdiction to question the validity of certificates issued under the FTDR Act. The demand and penalty imposed based on statements under section 108 of the Customs Act were unjustified. The order by the Commissioner (Preventive) denying exemption and imposing penalties was set aside, and the appeal was allowed.
Denial of benefit of exemption on import of two BMW cars though two Bills of Entry - imports made under the EPCG Scheme though a EPCG License - denial of benefit on the ground that Export Obligation has not been fulfilled as the cars have not been used for the intended purpose - HELD THAT:- In Titan Medical Systems [2002 (11) TMI 108 - SUPREME COURT] the Supreme Court observed that once a licence was issued and it was not questioned by the licencing authority, the customs authorities cannot refuse exemption on an allegation that there was mis-representation. The Supreme Court further observed that if there was any mis-representation, it was for the licencing authority to examine and take steps.
The aforesaid decision of the Supreme Court in Titan Medical Systems [2002 (11) TMI 108 - SUPREME COURT] was followed by the Delhi High Court in Design Company [2024 (11) TMI 1150 - DELHI HIGH COURT]. The Delhi High Court held that it would be wholly impermissible for the customs authorities to ignore the MIES certificate or deprive holder of the said certificate of the benefits that can be claimed in the scheme, absent any adjudication or declaration of invalidity by the DGFT. The Delhi High Court further held that there cannot be a parallel or a contemporaneous power inhering in two separate sets of authorities with respect to the same subject. If an instrument owes its origin to the FTDR Act, than it is the DGFT which will have to inquire and any action for recovery of benefits claimed and availed would have to necessarily be preceded by the component authority and under the FTDR Act. The Delhi High Court further held that Customs authorities would not have the jurisdiction to question the validity of a certificate referable to the FTDR Act.
The customs authority could not have confirmed the demand in the absence of any adjudication by the DGFT cancelling the EODC certificate earlier issued by it certifying that the export obligation had been fulfilled by the appellant. The Customs department would, therefore, not have any jurisdiction to sit in judgment over the EODC issued by the DGFT - the findings that the condition of the Notification has not been fulfilled are based on the statements made by various persons under section 108 of the Customs Act.
The Commissioner (Preventive) was not justified in considering the statements made under section 108 of the Customs Act as relevant for coming to a conclusion that the provisions of the Notification had been violated - Penalty under section 112(a) of the Customs Act could also, therefore, not have been imposed upon the appellant or the two Directors.
The order dated 10.01.2013 passed by the Commissioner (Preventive) cannot, therefore, be sustained and is set aside - appeal allowed.
AI TextQuick Glance (AI)Headnote
Suit barred under Section 80 CPC for no prior notice but not under Section 34 SARFAESI Act; concurrent jurisdiction upheld
Suit barred under Section 80 CPC for no prior notice but not under Section 34 SARFAESI Act; concurrent jurisdiction upheld
The HC held the suit barred under Section 80 CPC for non-compliance of the mandatory two months' prior notice to a Public Officer, with no leave sought under Section 80(2). However, the suit was not barred under Section 34 SARFAESI Act, as the Civil Court's jurisdiction to award damages is wider than the limited scope of the Tribunal. The pendency of winding-up proceedings did not bar the suit, as Civil Courts retain concurrent jurisdiction alongside Company Courts under the 1956 Act. The plaint could not be partially rejected due to alleged lack of authority of one plaintiff's representative; such issues are to be addressed at final adjudication. The effect of CIRP and resolution plan was not a ground before the Trial Court and could not be raised on appeal. The rejection of plaint on Section 80 grounds does not bar filing a fresh suit on the same cause of action under Order VII Rule 13 CPC.
Suit for damages/compensation - rejection of plaint primarily on the grounds that the suit was barred under Section 80 of the Code of Civil Procedure and Section 34 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
Whether the suit was barred under Section 80 of the Code of Civil Procedure? - HELD THAT:- Section 80 mandates two months’ prior notice to a Public Officer in the event a suit is filed against such an officer. The Section is couched in negative language, debarring any suit from being filed without such compliance, unless leave to file without such notice is granted specifically under Section 80(2) of the Code of Civil Procedure. It is nobody’s case that leave under Section 80(2) was taken by the plaintiffs prior to filing the suit, nor has it been pleaded in the plaint that a prior notice was issued under Section 80 of the Code. Thus, the suit was definitely barred by Section 80 of the Code of Civil Procedure and was not maintainable in law for non-compliance of the said provision.
In V. Rajendran and another v. Annasamy Pandian (dead) through Legal Representatives Karthyayani Natchiar, [2017 (1) TMI 1753 - SUPREME COURT], the Supreme Court observed that ‘formal defects’ or ‘sufficient grounds’ under Order XXIII Rule 1 of the Code of Civil Procedure include want of notice under Section 80 of the Code. Thus, the plaintiffs were entitled to seek withdrawal of the suit with liberty to sue afresh within the contemplation of Order XXIII Rules 1 and 3 of the Code in view of want of notice under Section 80 being a ‘formal defect’ within the contemplation of the said provision.
In any event, Order VII Rule 13 of the Code of Civil Procedure provides that a fresh suit on the same cause of action is not barred per se due to rejection of the plaint, which applies all the more in case of a formal defect - although the suit was not maintainable due to non-compliance of Section 80 of the Code of Civil Procedure, such bar does not, by itself, prevent the appellants from preferring a fresh suit on the same cause of action.
Bar under Section 34 of the SARFAESI Act - HELD THAT:- The jurisdiction of the Tribunal under the SARFAESI Act is of a limited nature, to consider only whether the measures under Section 13 (4) are in consonance with the provisions of the said Act. The bar under Section 34 relates to suits which seek to usurp such limited jurisdiction of the Tribunal. However, the powers of a Civil Court to adjudicate a claim for damages/compensation for loss/deterioration of property are much wider than such restricted jurisdiction of the Tribunal.
It is trite law that in applications under Order VII Rule 11 of the Code, the principal relief is the determinant of whether a suit is barred by any law. Permanent injunction, being a consequential relief, could not be held to be an indicator of the maintainability of the suit, since it was not a stand-alone or principal relief but only an ancillary remedy - It is well-settled that a plaint cannot be segregated for the purpose of considering a prayer for rejection of plaint and there cannot be any partial rejection of plaint - the suit was not barred under Section 34 of the SARFAESI Act.
Whether the pendency of the winding up proceeding operates as a bar to the suit? - HELD THAT:- The introduction of Section 430 in the 2013 Act highlights by contrast that such a total bar of jurisdiction of Civil Courts in respect of matters which can be dealt with by the Company Court was absent in the 1956 Act. Hence, the powers of the Company Court/Tribunal under the 1956 Act were parallel to that of the Civil Court and did not exclude the powers of the Civil Court. Even if there was an overlap between the jurisdictions of the two, the powers of the Company Court were over and above and in addition to those of the Civil court in their respective spheres - the argument that the Civil Court was denuded of jurisdiction to entertain or try the present suit due to pendency of the winding up proceeding under the 1956 Act before the Company Court and as the latter was in seisin of the matter, is not tenable in the eye of law and is hereby turned down.
Whether the suit was maintainable at the instance of one Sandeep Khandelwal, the alleged authorised representative of the plaintiffs, who affirmed the verification and affidavit of the plaint? - HELD THAT:- It is well-settled that there cannot be a partial rejection of plaint and/or the reliefs claimed in the suit cannot be segregated for the purpose of rejection of plaint. A plaint has to be rejected either as a whole or not at all. Even if the suit was not maintainable vis-a-vis the Company at the behest of Sandeep Khandelwal, since he did not have the authority at the relevant time (that is, April, 2016) to represent the plaintiff no. 1-Company since the winding up proceeding had already commenced, it would at best be open to the Trial Court, at the time of final adjudication of the suit, to refuse the reliefs to the plaintiff no. 1-Company on such ground, by holding that the reliefs claimed in the suit were not maintainable at the behest of the Company.
Thus, for the purpose of rejection of plaint, the incompetence of the signatory to the plaint to represent the plaintiff no. 1-Company pales into insignificant, since the signatory could very well represent the other two plaintiffs/present appellants. In any event, the court could, at the final hearing of the suit, always refuse the reliefs to the plaintiff no. 1 on such ground and/or transpose the plaintiff no. 1 to the category of defendants/proforma defendants. However, the plaint could not be partially rejected at least insofar as the plaintiff nos. 2 and 3 are concerned, on such ground.
Effect of the CIRP and Resolution Plan on the maintainability of the suit before the Civil Court - HELD THAT:- The scope of an appeal against the rejection of a plaint is limited only to the plaint pleadings and whether such pleadings reveal any bar of law or are otherwise tainted by non-disclosure of cause of action or vitiated by any of the other clauses of Order VII Rule 11. The consideration is confined to the parameters of Order VII Rule 11 of the Code and the Appellate Court cannot delve into questions beyond those taken in the Trial Court for the purpose of rejection of the plaint. Not only did the Trial Court reject the plaint in the present case only on the grounds of Section 80 of the Code and Section 34 of the SARFAESI Act and did not adjudicate specifically on the other grounds taken, it is also to be noted that the bar under the IBC was never pleaded, argued or mentioned in the applications for rejection of plaint by any of the parties to the suit before the Trial Court.
Thus, the Appellate Court cannot, for the first time, permit a new ground of rejection of plaint to be taken, which was not taken before the Court of first instance. Although a Trial Court can even suo moto reject a plaint if it so feels, the Appellate Court cannot arrogate to itself the powers of a Trial Court, thus, usurping the jurisdiction of the Court of first instance, inasmuch as the scope of hearing of an application under Order VII Rule 11 of the Code is concerned. Hence, the CIRP ground now sought to be taken by the RP cannot even be gone into within the limited scope of this appeal.
Thus, the suit is not barred by any law other than Section 80 of the Code of Civil Procedure - Order VII Rule 13 of the Code, in any event, permits a fresh suit to be filed on the self-same cause of action and does not debar the same merely due to rejection of the plaint on a technical ground - the appellants’ application under Order XXIII Rule 1 of the Code of Civil Procedure filed in M.S. Case No. 49 of 2017 stands disposed of.