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2024 (3) TMI 1065
Unexplained opening balance of cash - unaccounted business receipts - Addition based on seized documents - assessee did not submit such details and failed to substantiate it claim with any supporting documents during the assessment proceedings - HELD THAT:- Admittedly, the documents seized are not showing that the opening balance of ₹ 8.28 lakhs belongs to the beginning of the year, the documents seized is for part of the year. Therefore, the opening balance is result of the transaction of the year. Evident from the statement recorded of various persons and the document seized. The opening balance is stated to be a cash balance lying with the office of the 3/10/2020 at Mahape.
The non-production of the documents for the full year cannot disentitle the assessee of the result of the transactions during the year. It is not the claim of the AO opening balance shown by the assessee on 3/10/2020 is higher than the amount of disclosure made or such balance as on 3/10/2020 is not available with the assessee from accounted source as well as from disclosure taken together.Assessee has already offered ₹ 27.74 crores, which is not denied. Therefore, assessee cannot be denied capitalization of such disclosure already made. Naturally, income will have the acquisition of the asset in the form of advances, cash on hand, and other assets.
Statement recorded u/s 132 (4) of the staff, the director of the company and investigation/examination of the details during assessment proceedings categorically shown that the above sum is standing as opening balance in the seized documents as on 3/10/2020.
On the issue of telescoping, honourable Supreme Court in S. NELLIAPPAN [1967 (5) TMI 6 - SUPREME COURT] has categorically held that telescoping is a question of fact. Therefore, it is for the revenue to prove that the fund flow statement shown by the assessee is factually incorrect. It is for revenue to show that the telescoping is not available because amount of income earned by the assessee have already been invested in other assets. Such fact is not demonstrated before us.No infirmity in the order of the learned CIT – A in granting the benefit of telescoping.
Thus, taking into consideration all the factors of disclosure made by the assessee for which telescoping has been granted, fund flow statement of additional income offered consistent statement of director, staff, and submissions before the investigation Wing and the assessing officer, clearly establishes that the addition is correctly deleted. Decided in favour of assesee.
Internal transfer of cash - Addition on account of internal transfers - HELD THAT:- It is not shown that there is a change in the facts and circumstances of the case or any of the entries shown as internal transfer has not been recorded in one branch and other connected branch. Over and above the assessee has produced row wise and column wise transfer and receipt of fund between various entities that remains undisputed by the AO, it cannot be said that there is any income contained in the above transfer entries. In view of this, it is apparent that at least to the extent of Rs. 73,84,000/- with respect to the internal movement of funds pertaining to financial year 2020 – 21 relevant to impugned assessment year 2020 – 22, does not contain any income element. This fact has been categorically verified by the learned CIT – A at least for this year Addition to be deleted.
Addition on the ground that it pertains to the transaction of other concerns of the assessee group - HELD THAT:- We find that only the disallowance of expenses was made and there is no separate addition further of any income. M/s. Ganadhish GNP is also assessed by The Deputy Commissioner of Income Tax, Central Circle – 6 (1), Mumbai i.e., the same assessing officer who is assessing the assessee. Further, the above sum is offered by the group concerns as 'on money' received. That sister concern has in fact offered ₹ 13.65 crore 'on money' income from construction activity. Further, the claim of the assessee that sum of ₹ 3,50,000 has also been similarly assessed in the hands of M/s Roshani Enterprises, another group concern. In view of these facts, we do not find any infirmity in the order of the learned CIT – A in deleting the addition of the income contained in the WhatsApp message which is already offered by the other group concern as per income, subject to verification by the ld. AO, therefore same cannot be added once again in the hands of the assessee. Accordingly, ground number 4 of the appeal is dismissed.
Addition of opening cash balance - AO submits that assessee has failed to substantiate its claim with any documentary evidence that the opening balance and the receipts were out of the unaccounted income disclosed by the assessee - HELD THAT:- It is fact that in search no such cash statements for other days of the year were found. Therefore, it is not an unusual presumption that those statement did not exist on the date of search. It is apparent that only the cash statement of 26/8/2020 was found. It may be possible that assessee must be maintaining all these statements for eachday, and which would be reported to the director of the company. However, that cannot go against the assessee that why cash statements of other days are not found. It is also the fact that for assessment year 2018 – 19 in assessment order dated 31/3/2023, AO has accepted that there are internal transfers of cash from one branch of the assessee to the other branch of the group. It is also the claim of the AO that no cash was seized of that magnitude during search.
We find that search took place on 23/9/2021 and this Statement was found for the day 26/8/2020. Time of more than 11 months elapsed between the date of cash statement and the date of search. Naturally, such a magnitude of cash, which was recorded on 26/8/2020, could not have been found on the date of search on 23/9/2021. The reasons given by the learned CIT – A in paragraph number 12 of his order is also sustainable. In view of this, we confirm the order of the learned CIT – A in deleting the addition made by the learned assessing officer based on the cash statement pertaining to 26/8/2020. Accordingly, ground number 5 of the appeal stands dismissed.
Addition u/s 69C - AO has made addition of the opening balance as well as the receipt as undisclosed income of the assessee and in the same document there are references of the expenditure, he further added such expenditure u/s 69C - HELD THAT:- When there is an addition under section 69C of the act such unexplained expenditure, which is deemed the income of the assessee, should not be allowed as a deduction under any head of income. In the present case, assessee has incurred certain expenditure, which is found during search in the seized documents, the seized documents also show the amount of undisclosed income and the amount of expenditure incurred for earning such income. In those circumstances, the disclosure of undisclosed income shows the source of such expenditure. Therefore, naturally net income in the seized document can be assessed as income. If the approach of the ld. AO is accepted then in such case, Income and its application both are taxable as income. This is not correct. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the addition.
Addition based on seized document - During search WhatsApp image was found from the mobile phone which is an excel sheet where the name of various brokers, the rate of the land, number of cases handled by each of the broker and amount receivable for the transaction and total amount received until date along with the outstanding balance is mentioned - HELD THAT:- The explanation of the assessee before the AO was same, such statement was also confirmed by the broker, the land transferred to the various parties did not belong to the assessee therefore naturally the sale consideration of that land could not be the income of the assessee. As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee
As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee. The assessee has shown that this is the amount payable by these unit acquired to the MIDC, and sample cheques details is provided. Therefore, as the land is transferred by MIDC to the respective unit holders through all these brokers for which the assessee has received consultancy fees of ₹ 100,000/- for each unit, the whole of the sale transaction of the land cannot be taxed in the hands of the assessee. Merely because the assessee failed to provide the documentary evidence of payment of cheque by the unit acquired to the MIDC, the whole income cannot be taxed in the hands of the assessee when assessee is not shown to be the owner of such land. In the hands of the assessee, a sum of Rs. 2.81 crores have already been taxed on basis of this document. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the total addition in the hands of the assessee.
Allowance of expenses @ 30% out of unaccounted business receipts offered - HELD THAT:- CIT – A has categorically noted that assessee has incurred expenditure in its regular business at the rate of 28% to 62% and average net profit for all the years' amounts to 53% of the gross receipts. Further in the seized documents, unaccounted receipts were found of ₹ 23.67 crores and unaccounted expenditure was found at ₹ 7.19 crores which is almost 30.03% of the unaccounted receipts and therefore the claim of the assessee is reasonable and can be accepted that the gross receipts 30% of deduction should be allowed for the expenditure incurred by the assessee. Accordingly, we do not find any infirmity in the order of the learned CIT – A which is based on the financial statements of the assessee for past year as well as based on evidence found during search in the seized material. Accordingly, ground number 10 of the appeal of the AO is dismissed.
Addition on transaction not materialized - HELD THAT:- Whether the transaction has materialized or not would be evident if Mr. Umang Jain has paid cheque of ₹ 5 lakhs and ₹ 135,000/- for the above land purchase. If such cheques were paid, it would be known for what land the above transaction has happened, and the addition in the hands of the assessee to the extent of ₹ 380,000 would be justified. However, such taxation would only happen if the transaction has materialized. Therefore, this issue needs an examination. In view of this, we restore this addition back to the file of the learned assessing officer with a direction to the assessee to substantiate its stand that the transaction has not materialized.
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2024 (3) TMI 1064
TP adjustment - ALP of Contract Software Development (CSD Segment) - Comparable selection - HELD THAT:- Infobeans Technologies Ltd had declared that it was engaged in providing custom development services to offshore and was engaged in software engineering services in different fields. No segmentals were available. In such facts and circumstances, we find no merit in inclusion of the said concern in the final list of comparables. We direct its exclusion.
Exilant Technologies Pvt. Ltd derived substantial revenue from software development services. Thus, in our view, the company is functionally similar to the assessee. The impact of amalgamation on profitability needs to be examined. Since, both the sides have not brought any material on record to establish the impact or otherwise of amalgamation on profitability, we restore the issue to the AO for examining this aspect and thereafter decide whether it can be treated as a comparable.
Cybage Software Pvt. Ltd. design and overall guidance relating to the specific software is provided by the AEs. The assessee only has to do the coding and testing as per the design provided by the AE. Thus, not only the assessee doesn’t bear any risk but the work executed is limited in its scope. Whereas, from the annual report of the comparable, it is observed that it has incurred sales promotion and marketing expenses and also owns plant, equipment and other intangible assets which presupposes that it is a full risk bearing entity unlike the assessee which is more or less a no risk-entity. Therefore, in our considered opinion, the company cannot be selected as a comparable.
Rheal Software Pvt. Ltd. excluded as it is a persistent loss making company - The company has made profit in financial year 2015-16. Thus, in our view, applying the filter of persistent loss making company of the TPO, the company cannot be rejected. Accordingly, we direct the Assessing Officer to include this company.
DCIS Dot Com Solutions India Pvt. Ltd - As per the annual report of the company, it has only one segment of software development and the revenue earned during the year is from software development charges. Therefore, in our view, the company being functionally similar to the assessee has to be treated as comparable.
Adjustment of notional interest on overdue receivables from AEs - HELD THAT:- From the facts discussed by the TPO, it is observed that the assessee has entered into international transaction only with its AE. It is further observed, invoice-wise delay worked out by the TPO varies from 27 days to 365 days. Thus, by allowing AEs to retain the money beyond credit period of 30 days and in some instances for a year, certainly amounts to extending benefit to the AE in utilizing the money without paying interest to the assessee. The question one needs to ask is whether the assessee would have extended such benefit to an unrelated party? In our view, the answer would be in negative.
Prima facie, it appears that there was delay in receivables in the immediately preceding assessment year as well. However, TPO needs to examine the statistics of at least three-four assessment years to discern a pattern which would indicate that the assessee has benefited the AEs through the receivables. We may also observe that in some of the decisions cited by learned Departmental Representative, the co-ordinate Benches have held that the invoices raised within the financial year and payment made within the financial year but with delay may not have an impact on the opening and closing balance of outstanding receivables. Therefore, it could not have been factored by the assessee in working capital adjustment.
Though, we are conscious of the fact that in assessment year 2017-18, the co-ordinate Bench has decided the issue in favour of the assessee, however, we are of the view that in the impugned assessment year, the issue has not been examined in the context of principles laid down in case of Kusum Healthcare Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT]. However, in all fairness, it must be said that there is delay in trade payable to AEs. Therefore, some benefit on account of delayed payables must have percolated to the assessee. Thus, it needs to be examined whether and to what extent the benefit received by the assessee on account of trade payables can be set off against the purported benefit given to the AEs on account of trade receivables.
We are inclined to restore the issue to the Assessing Officer for de novo adjudication keeping in view the observations made by us (supra) and applying the ratio laid down by the Hon'ble jurisdictional High Court in case of Kusum Healthcare Pvt. Ltd. The assessee must be provided reasonable opportunity of being heard before deciding the issue. Ground is allowed for statistical purposes.
Difference in the income as per the books and as reflected in Form 26AS - HELD THAT:- We are of the view that the issue needs re-examination at the end of the AO as facts brought on record by the assessee have not been properly examined. It goes without saying, if a particular item of income has already been offered to tax, either in the preceding assessment years or in subsequent assessment years, the same income cannot be added in the impugned assessment year again as it amounts to double addition of the same income. If the assessee has not been given credit of TDS corresponding to such income due to the fact that income was recognized in a different assessment year but TDS was in the impugned assessment year, the credit for such TDS has to be given. With the aforesaid observations, issue is restored back to the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee.
Short credit of tax collected at source - Assessee has submitted before us that an application for rectification filed u/s 154 of the Act before the Assessing Officer on the issue has been dismissed - HELD THAT:- Considering the fact that assessee has already availed a remedy by way of section 154 proceedings, it cannot be permitted to continue parallel proceedings on the same issue. The ground is dismissed.
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2024 (3) TMI 1063
TDS u/s 195 - liability u/s 201 and 201(1A) - non deduction of TDS payment in the nature of FTS to the NDS Ltd. UK - royalty receipts or not? - CIT(A) quashing the order of the AO relying on case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] HELD THAT:- We are of the opinion that similar issue came for consideration in assessee’s own case [2023 (12) TMI 1300 - ITAT BANGALORE] held that a copyright is an exclusive right that restricts others from doing certain acts. Computer programs are categorised as literary work under the Copyright Act. Section 14 of the Copyright Act states that a copyright is an exclusive right to do or authorise the doing of certain acts in respect of a work, including literary work.
Term ‘copyright’ has to be understood in the context of the Copyright Act. The court said that by virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for "the use of, or the right to use, any copyright "of a literary work includes a computer program or software. As held that the regarding the expression "use of or the right to use", the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty.
The terms of the licence in the present case does not grant any proprietory interest on the licencee and there is no parting of any copy right in favour of the licencee. It is non-exclusive non-tranferrable licence merely enabling the use of the copy righted product and does not create any interest in copy right and therefore the payment for such licence would not be in the nature of royalty as defined in DTAA. We therefore hold that the sum in question cannot be brought to tax as royalty - Decided against revenue.
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2024 (3) TMI 1062
Income deemed to accrue or arise in India - payment made for providing interconnect services - consideration paid towards IUC charges treated under the ambit of “royalty” - benefit under DTAA - requirement of direct control or physical possession over a right or property or information - whether the IUC charges received by the assessee is in the nature of royalty under the Act and India-Sri Lanka DTAA? - assessee’s contention that the interconnect service does not permit the use of or transfer of right to use any of assessee’s patent, model, design, secret formula or process or trade mark, etc. which are exclusively in possession or control of the assessee, also there is also no use of equipment of the assessee by VSL and does not involve any ancillary services pertaining to the use or transfer of right to use of a process/equipment
HELD THAT:- It is pertinent to note that the Hon’ble Karantaka High Court in the case of Vodafone South Ltd. [2016 (8) TMI 422 - KARNATAKA HIGH COURT] to whom the assessee has received the IUC charges has held that the assessee is entitled to take benefit under DTAA and that the amendment to provision of section 9(1)(vi) inserting the Explanation cannot be read into the provisions of DTAA by relying on the decision of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT].
It is also pertinent to point out that the lower authorities have relied on the decision of the Tribunal in the case of Vodafone South Ltd [2015 (1) TMI 1018 - ITAT BANGALORE] which has now been reversed by the Hon'ble High Court [2016 (8) TMI 422 - KARNATAKA HIGH COURT] thereby holding that the order of the lower authorities to be perversed.
We would also place reliance on the decision relied upon by the assessee in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] whereas held that the provision of the DTAA cannot be altered unless by way of amendment through bilateral renegotiation after duly considering the decision of Hon’ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. [2013 (11) TMI 1058 - MADRAS HIGH COURT] relied upon by the Revenue. It has also held that the amendment or change in a domestic law cannot result in change in the provision of DTAA unless specific amendment is brought about in DTAA.
Apart from the grounds of applicability of amendment to section 9(1)(via) and the DTAA between India-Sri Lanka It is observed that the Delhi Tribunal in the case of Bharti Airtel Ltd [2016 (3) TMI 680 - ITAT DELHI] and Bharat Sanchar Nigam Ltd [2017 (10) TMI 1093 - ITAT DELHI] has held that the payment made towards interconnect usage charges to foreign telecom operators does not accrue or arise in India and in the absence of any permanent establishment in India could not be brought to tax in India under Article 7 of DTAA. - Decided in favour of assessee.
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2024 (3) TMI 1061
TDS u/s 195 - payment received for interconnect usage charges - transaction with non-treaty country - whether it is liable to be taxed as “royalty” u/s 9(1)(vi) of the Act? - AO/DRP had brought the amount to tax in the hands of the assessee company solely relying on the orders passed u/s 201 and 201A - HELD THAT:- The order of the co-ordinate Bench of the Tribunal in the case of PCCW Global Ltd [2023 (11) TMI 1239 - ITAT BANGALORE] is directly applicable to the facts of the assessee since the said case also relates to Hong Kong – non-treaty country. In light of the aforesaid judicial pronouncements, we hold that the amount received by assessee company from the Indian telecom operator for interconnect usage is not chargeable to tax as “royalty”. Assessee ground of appeal allowed.
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2024 (3) TMI 1060
Benami transaction - petitioner has called in show cause notice issued u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 and Provisional Attachment Order issued u/s 24(3) of Act of 1988 - petitioners submits that the show cause notice and provisional attachment order are called in question mainly on the ground that the alleged benami transaction has taken place prior to 01/11/2016, the date when Act of 1988 stood amended - HELD THAT:- The ‘provisional assessment order’ as name suggests, is ‘provisional’ in nature . The ‘adjudicating authority’ is best suited to decide the question of Benami nature of the property. We find substance in the argument of learned ASG that show cause notice is a detailed notice running in several pages containing several factual basis and it is within the province of ‘adjudicating authority’ to decide whether property is ‘Benami’ in nature and whether petitioners are liable for any action under the Act of 1988.
The Division Bench declined interference against show cause notice and PAO and permitted the petitioner to raise all relevant aspects before adjudicating authority under Section 26 of the Act of 1988. We deem it proper to follow the same course. The petitioners can avail the remedies under the Act of 1988 and take all possible factual and legal grounds before the ‘adjudicating authority’.
Needless to mention that judgment of Advance Infra Developers (P) Ltd [2023 (12) TMI 620 - MADRAS HIGH COURT] and other judgments can be relied upon by the petitioners before the ‘adjudicating and appellate authority’ (if required) to impress upon it to take a different view than the view taken by Appellate Authority in M/s. Prism Scan [2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI] We have no doubt that if relevant grounds are taken and judgments are cited, the said authorities will consider and decide the matter on its own merits in accordance with law.
We find no reason to entertain these petitions despite availability of statutory alternative remedies. The petitioners may avail the said remedy.
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2024 (3) TMI 1059
Direction to respondent to decide the stay application which was moved along with Appeal preferred under Section 137 of Maharashtra Prohibition Act, 1949 - cancellation of FL-III licence in exercise of powers under Section 54(1)(e) of the Act - it was held by CESTAT that The licence, if obtained by fraud or misrepresentation and that too by use of a doctored document, frustrates the very claim for grant of equitable relief as the fraud vitiates the proceedings.
HELD THAT:- There are no reason to interfere with the impugned order passed by the High Court - SLP dismissed.
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2024 (3) TMI 1058
Maintainability of appeal - monetary limit involved in the appeal - Smuggling - Gold Bars - HELD THAT:- While the confiscated gold was valued at more than Rs. 1 crore at the same time that was apportioned amongst three assessees namely Ms. Disha Tulsiani, Sri Nirmal Tulsiani and Sri Ashok Kumar Talhani.
Thus individual dispute in each of the appeals is far below the monetary limit of 1 crore. On the earlier dates, we allowed learned counsel for the revenue to file supplementary affidavit to bring on record the revenue effect involved in each of the appeals. While an affidavit has been filed by the revenue on 18.11.2023, it does not bring on record the revenue effect involved in each of the appeals.
Clearly despite time granted, no disclosure has been made by the revenue to establish that the revenue implication in each or any of the appeals exceeds the monetary limit of 1 crore - Since the order passed by the Tribunal is clearly in favour of the assessee and there is no cross appeal filed by revenue, no justification or occasion survives for this Court to allow the revenue the luxury of maintaining the present litigation against its own stated litigation policy.
The present appeal and the connected appeals are dismissed being below monetary limit.
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2024 (3) TMI 1057
Revocation of courier registration of appellant - forfeiture of security deposit - imposition of penalty under Regulation 14 of Courier Import Export Regulation (CIER), 2010 - mis-declaration of goods by the appellants as courier agents - violation of Regulation 12 (1) (i) (iii) (iv) (vii) and (x) and CIER, 2010 - HELD THAT:- There is sufficient evidence on record to prove the under valuation as being committed by the appellant with respect to the impugned import consignments.
The Courier company not only processes the clearance of the goods through the customs but actually receives the goods from the overseas exporter, transports them to India, clears them through the customs and further delivers them to the consignee in India at his address. The Regulations regulating this process provide for licensing of couriers who only can handle this work. In such imports, after the goods are brought into the country the courier has to obtain Know Your Customer (KYC) documents from the consignees and their authorization and thereafter has to file courier bills of entry (CBEs) in respect of each of the consignments. After the goods are assessed by customs, the courier pays the customs duty and clears the goods and takes them to the premises of the importer and delivers them and collects the customs duty which was paid by the courier while clearing the goods.
The appellant’s main contention is the inquiry report dated 13.01.2021 is in favour of appellant. It has been held that the appellant has abided by all the provisions of the act and CIER Regulations. Alleged violation of Regulation 12 CIER has been ruled out. However the said report and the said order-in-original has been ignored by the order under challenge. It is observed that order dated 05.02.2021 has been discussed in the order under challenge. It has been observed therein that despite an investigation was under process with SIIB and status thereof was demand but was not produced till the time of said inquiry report dated 13.01.2021 and the said order-in-original dated 05.02.2021.
Thus moot question of authenticity of authorizations and invoices especially the manipulation of dates was not before the adjudicating authority at the time of order dated 05.02.2021. the order of setting aside alleged violation of CIER by appellant was thus passed due to lack of evidence at that time. Hence, in the light of subsequent evidence against appellant, there are no reason to different from the findings in the impugned order under challenge (order-in-original dated 18.08.2023).
Thus, the appellant has violated Regulation 12 and the respective sub-regulations of CIER 2010 - the findings arrived at in the order under challenge w.r.t. each sub-clause of Regulation 12 of CIER affirmed - appeal dismissed.
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2024 (3) TMI 1056
Conversion of shipping bills - conversion from Draw Back Scheme to Advance License Scheme - limitation period of three months for seeking conversion of shipping bills from one scheme to another - HELD THAT:- It is seen from the findings of the learned Commissioner that he has given detailed findings while refusing conversion from Draw Back Scheme to Advance License Scheme at such belated stage even after same was availed by the appellants sometime after the exports was done. The order clearly discusses the scheme and legal provisions related thereto and how freely done conversion from one scheme to another after availing benefit can jeopardize revenue interest as both have their own procedural encompass and how conversion from less rigorous to more rigorous examination scheme was not permitted by the Circular No. 36/2010. This court also finds that Hon’ble High Court in THE PRINCIPAL COMMISSIONER OF CUSTOMS, MUNDRA VERSUS M/S LYKIS LIMITED [2021 (2) TMI 261 - GUJARAT HIGH COURT] after having a look at Circular No. 36/2010 dated 23.09.2010 struck down only the para 3(a) which had prescribed of three months limitation from the date of export order.
This court finds validity of condition 3(e) of Circular No. 36/2010 dated 23.09.2010 survives and therefore holds that once a benefit under which shipping bill was filed has been availed, the conversion to any other scheme cannot be allowed. It is thus clear that the same has a bigger objective of atleast giving finality to some extent to decisions earlier taken while exporting, as is the case of the appellants in this matter. This court therefore, finds that once draw back benefit was availed then there was no scope for seeking conversion to any other scheme “And” in relation to mis-declaration clause in 3(e) above being disjunctive as in case later proposition of mis-declaration, manipulation etc., coming into play, the exporter even if has been precluded from availment can still be denied conversion.
This court finds that matter falls within the ambit of para 3(e) of the above Circular and the conversion request after having enjoyed the benefit of draw back scheme, and after availing the same, cannot be allowed.
Appeal dismissed.
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2024 (3) TMI 1055
Rejection of refund claim - amount deposited after pre-notice consultation - interpretation of section 28 of the Customs Act, 1962 - Non issuance of Show Cause Notice - HELD THAT:- A close look at section 28 indicates that a pre-notice consultation is necessary before issuing notice i.e. Show Cause Notice. The purpose of the same as understood, is obviously to indicate the ‘recovery of duties not levied or not-paid or short-levied or short-paid’. Here in the case on hand, a pre-notice consultation dated 9.10.2017 was issued in terms of proviso to section 28(1)(a) ibid to the ‘person chargeable with duty or interest’ and apparently, the appellant responded positively without any demur by paying the duty and interest as indicated. What was indicated / proposed to be demanded was a differential duty and hence nothing more needs to be said about the ‘characteristic’ of the demand since when proposed to be demanded, the payment was made religiously.
Much emphasis has been laid on the non-issuance of letter / communication in writing as specified under sec. 28(2) and it is the case of the appellant that it having not issued any such communication in writing, the payment made by it loses the characteristic of duty - it is found that a positive act followed the pre-notice consultation and hence, nothing can be looked beyond for anything. If the pleas urged is to be considered, then there should have been a communication to the least, indicating as to why payment as proposed / demanded was made, but no such things appear in the file. The appellant having acquiesced, no further action was felt necessary.
It appears that the differential duty arose on account of mis-match with regard to the classification of the product imported. It is the case of the appellant that the correct classification was 8480.60. But there was no request made for rectification / re-assessment, since it is the settled position of law that since acceptance of Bill of Entry is considered as self-assessment per se, the importer if aggrieved by the same, has to seek for modification / rectification / re-assessment as held by the Hon'ble Supreme Court in the case of ITC Ltd. Vs. CCE, Kolkata [2019 (9) TMI 802 - SUPREME COURT].
Rather, the appellant chose to seek only the refund which has rightly been rejected by the original authority.
There are no merit in the case of the appellant - appeal dismissed.
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2024 (3) TMI 1054
Refund of export duty paid in excess consequent to the issuance of duty reduction Notification No.62/2007 dated 03.05.2007 - conclusive evidence to discharge the burden of unjust enrichment - whether the incidence of duty has been passed on to the buyer? - HELD THAT:- Clause 4 of the Contract dated 26.04.2007 between the buyer and the seller clearly stated that all Indian taxes on cargo will be borne by the seller is not under dispute. The Bank Realization Certificate, invoice, the bill amount in foreign exchange and dispatch amount due to the exporter was less than the FOB value shown in the shipping bill, are also facts that are not disputed. The learned Commissioner (Appeals) in the impugned order relies on the financial records to state that it is not shown as ‘receivables’ and relying on the Board Circular dated 28.05.2008, without disputing the above facts rejects the refund claim without any justification for rejection. The fact that all the documents have been placed by the appellant justify that the export duty paid by them has not been passed on to the buyer brushing them aside without any reasoning is not sustainable.
The seller has borne the incidence of duty. The undertaking by the buyer also is on record which states that the incidence of export duty for the impugned shipment was not passed on to them. In view of the above documents, there are no reason to sustain the impugned order.
Appeal allowed.
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2024 (3) TMI 1053
Undervaluation of imported goods - Patchouli Oil - insured value of the goods was higher than the invoice value declared for clearance of the goods - ascertainment of value of contemporaneous imports of Patchouli Oil of Singapore origin - assessable value declared by the appellant in the said two Bills of Entry were rejected on the ground that the insured value of the product was higher than the value declared in the invoice - period from 2005-06 - HELD THAT:- It is observed that the value declared by the appellant for insurance purpose has no relevance for the purpose of assessment of customs duty. There is no evidence on record produced by the investigating officers to the effect that the appellant had actually paid the insured value for the purpose of importation of the impugned goods. Thus, there was no basis for rejection of the declared value by the Department.
The quality of Patchouli Oil depends on different chemical factors including alcohol contents. The imports imported by the appellant has been assessed and customs duty has been demanded at the time of importation of the goods. The assessments have not been challenged and they became final. Subsequent to its clearance, factors such as higher value adopted for insurance cannot be a reason for rejection of the assessable value declared - After rejecting the declared assessable value, the Department has adopted the price of contemporaneous import of similar goods to enhance the value declared, without adducing any evidence to the effect that the goods are comparable. There is no evidence available on record to indicate that the Patchouli Oil imported by the appellant and the contemporaneous imports whose price has been adopted by the Department are similar in all respects.
The demand of differential duty along with interest confirmed in the impugned order is not sustainable and accordingly, we set aside the same. Since, the demand of duty is not sustainable, the question of imposing penalty on the appellant importer does not arise.
Imposition of personal penalty on Shri Subhas K Naik - HELD THAT:- There is no finding in the impugned order regarding the role played by the appellant in the alleged under valuation. It has been alleged that Shri Subhash Khandubhai Naik has visited the supplier and fixed the price over telephone and accordingly, the lower price was fixed due to his personal influence. In view of the discussions, the allegation of under valuation is not substantiated. Accordingly, penalty imposed against the Director of the appellant-importer cannot be sustained and the same is accordingly set aside.
The rejection of assessable value under the above two Bills-of-Entry is legally not sustainable. Accordingly, the differential duty along with interest and penalty confirmed in the impugned order set aside - the penalty imposed on the Director of the appellant-company set aside.
Appeal allowed.
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2024 (3) TMI 1052
Smuggling - seizure of three cut pieces foreign origin gold totally weighing 1000 gms - Validity of Show cause notice issued - limitation - burden of prove - Confiscation - Penalty - HELD THAT:- Admittedly, it is the case of town seizure as the appellant was intercepted in the domestic terminal at Hyderabad. The only evidence brought on record by Revenue as to the smuggled nature of goods is firstly, that the three pieces of gold have got markings indicated their foreign origin and secondly, the statement of the appellant that he is aware that he has purchased gold at Hyderabad, which is of smuggled in nature and the same has been purchased without any invoice/bill/receipt.
From the tenor of the statement recorded from the appellant, its voluntary nature is doubtful as no person of ordinary prudence will state that the gold he is possessing is of smuggled in nature. I further find that it has been held by the Hon’ble Supreme Court in Vinod Solanki vs UOI [2008 (12) TMI 31 - SUPREME COURT] that where the accused/noticee disputes the voluntary nature of his statement, the onus is on Revenue to prove the voluntary nature of the statement recorded. Thus, the statement as recorded of the appellant on 01.02.2020 is not voluntary in nature.
The SCN is bad and hit by limitation as the same has been issued after more than six months from the date of seizure as required u/s 110(2) of the Act. In this view of the matter, the appeal is allowed and the impugned order is set aside.
Accordingly, the gold in question shall be released to the appellant forthwith, and if already sold, to return the sale proceeds, with interest as per Rules. The appeal is allowed in the aforementioned terms.
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2024 (3) TMI 1051
Levy of penalty u/s 112(a) and Section 114AA of CA on Chartered Engineer - Issuance of Certificate under EPCG scheme without verification - issuance of Certificate based on documents so submitted for installation and use of such imported embroidery machine under EPCG without first verifying whether the machine in question were installed or not by Chartered Engineer - HELD THAT:- There is no dispute as regards the fact that the Appellant had issued such Certificate for installation and use of machinery which is a mandatory requirement under the EPCG Scheme without verifying the installation of machine in the premises of the factory of the importer. The purpose of such certificate issued by a Chartered Engineer is not only to facilitate installation of machinery as imported under the EPCG Scheme but the installed machine also acts as a precursor for the importer to avail benefit of EPCG exemption therefore to fulfill purpose of installation it is imperative that the presence of machinery on the premises be verified. To issue such Certificate without verification of the fact that machines are installed in the factory, the appellant has facilitated to evade custom duty by the importer which under the application of law is construed to be a serious offence on the part of the Appellant.
The Appellant is liable for penalty under Section 112(a) and Section 114 AA. However, considering the fact that the Appellant under bonafide belief relied on the documents to issue certificate due to which his registration was cancelled and his business suffered for three years, the Appellant deserves leniency as regards the quantum of penalty imposed.
The penalty under section 112(a) from Rs.1,00,000/- reduced to Rs. 50,000/- and that under section 114AA from Rs.10,000/- to Rs. 5,000/- - appeal allowed in part.
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2024 (3) TMI 1050
Refund of SAD - time limitation - rejection on the ground that the claim was filed after more than one year from the date of payment of CVD - HELD THAT:- The Delhi High Court judgments in SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS [2014 (4) TMI 870 - DELHI HIGH COURT] and COMMISSIONER OF CUSTOMS (IMPORT) VERSUS GULATI SALES CORPORATION [2017 (11) TMI 1300 - DELHI HIGH COURT] are in respect of refund claims filed prior to the amendment carried out vide Notification No. 93/2008-Cus dated 1.8.2008.
On the other hand, in the case of TRANASIA BIO-MEDICALS LTD. VERSUS COMMISSIONER OF CUS. (SEA) , CHENNAI [2019 (9) TMI 1563 - CESTAT CHENNAI] the period involved is December 2015 to April, 2016. Further, in this case the Tribunal has extensively cited the order of the Hon'ble Bombay High Court in the case of M/S. CMS INFO SYSTEMS LIMITED VERSUS THE UNION OF INDIA & OTHERS [2017 (1) TMI 786 - BOMBAY HIGH COURT].
The Tribunal has also considered the judgment of Hon'ble Supreme Court in the case of COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY & ORS. [2018 (7) TMI 1826 - SUPREME COURT], wherein it has been held that if the assessee wishes to avail any exemption Notification, all the conditions set therein have to be fully complied with. In the present case, both the Bombay High Court judgment and Supreme Court judgment in the case of Dilip Kumar would be squarely applicable. If the appellant wishes to claim the refund of CVD, he is required to fulfill the condition of filing the refund claim within one year which is a mandatory condition under Notification No. 93/2008.
Therefore, following the ratio of Tranasia Bio-Medicals Ltd. Case law, the appeal filed by the Appellant is dismissed.
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2024 (3) TMI 1049
Condonation of delay in filing appeal - time limitation - Power of Commissioner (Appeals) to condone the delay - appeal dismissed for the sole reason that not only was the appeal not filed within 60 days from the date of communication of the order to the appellant but was filed even beyond the extended period of 30 days, which period alone could have been condoned by the Commissioner (Appeals) - HELD THAT:- This issue was examined at length by the Supreme Court in SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [2007 (12) TMI 11 - SUPREME COURT]. Though the decision is in the context of section 35 of the Central Excise Act, 1944, but the provisions of section 128 of the Customs Act are pari materia with the provisions of section 35 of the Excise Act, as section 35 of the Central Excise Act also provides that an appeal can be filed before the Commissioner (Appeals) within 60 days from the date of communication of the decision or order, but the Commissioner (Appeals) can condone the delay of 30 days after the expiry of the period of 60 days, if he is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the stipulated period of 60 days. The Supreme Court held that as the period upto which the prayer for condonation can be accepted is statutorily provided, the contention that section 5 of the Limitation Act, 1963 could be invoked to condone further delay after the expiry of 30 days cannot be accepted. The Supreme Court also observed that the appellate authority had no power to allow the appeal to be presented beyond the period of 30 days as was clear from the provisions of section 35 of the Central Excise Act.
The period of limitation for filing the appeal before the Commissioner (Appeals) has to begin from 30.12.2018, on which date the appellant received the order dated 14.12.2018 passed by the Joint Commissioner. Though the letter dated 21.01.2019 said to have been sent by the Joint Commissioner to the learned counsel for the appellant has not been brought on record by the appellant, but what has been stated by the learned counsel for the appellant is that the said letter informed the learned counsel that any communication from the appellant received after 14.12.2018, on which date the Joint Commissioner passed the order, could not have been considered in the impugned order.
In any view of the matter, it is the order dated 14.12.2018 that was required to be assailed by the appellant before the Commissioner (Appeals) and indeed it was this order that was assailed. Exchange of communications between the learned counsel and the Joint Commissioner after the passing of the order cannot enure to the benefit of the appellant to claim that the period of limitation would commence from 22.02.2019, on which date the learned counsel for the appellant choose to file a reply to the letter dated 21.01.2019 sent by the Joint Commissioner - The appellant was clearly aware of the fact that it was the order dated 14.12.2018 that was required to be assailed before the Commissioner (Appeals) and this fact has also been stated by the appellant in the Memo of Appeal.
Thus, in view of the undisputed position that the appeal was filed by the appellant before the Commissioner (Appeals) on 22.04.2019, beyond the period contemplated under section 128(1) of the Customs Act, the Commissioner (Appeals) committed no illegality in dismissing the appeal as the appeal was filed before the Commissioner (Appeals) not only beyond the period of 60 days from the date the appellant received the order passed by the Joint Commissioner on 30.12.2018, but even beyond the extended period of 30 days, which period alone could have been condoned by the Commissioner (Appeals).
This appeal which has been filed to assail the order dated 09.01.2020 passed by the Commissioner (Appeals) is, therefore, without any merit. It is, accordingly, dismissed.
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2024 (3) TMI 1048
Attachment of current account - seeking recall of the sanctioned resolution plan - Section 31 of the IBC - HELD THAT:- Once the resolution plan has been approved/sanctioned by the NCLT, it is binding on all the stakeholders.
Under Section 32 of the IBC, any appeal from an order approving the resolution plan by the NCLT, can be made in the manner and on the grounds laid down under Section 61 (3) of the IBC and such an appeal can be filed within 30 days before the National Company Law Appellate Tribunal (NCLAT). The NCLAT can allow further extension of time for sufficient cause but not beyond a period of 15 days. As on date and as also recorded by the NCLT order dated 16th January, 2024, no appeal has been filed by the Respondent and the period for filing the same has also long expired.
The Hon’ble Supreme Court in the case of Ghanshyam Mishra and sons private limited through the GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR & ORS. [2021 (4) TMI 613 - SUPREME COURT] has observed that it is trite law that the resolution applicant cannot be fastened with the liabilities in relation to the period upto the date of the resolution plan in case the resolution plan is approved under Section 31 of the IBC.
There is no dispute that the resolution plan approved vide order dated 12th December, 2017 has attained finality and accordingly the claim of the creditors or statutory authorities has to be dealt with in accordance with the approved resolution plan. The principle of clean slate as propounded by the said decision requires that the corporate debtor viz. the Applicant herein cannot be fastened with any liability for a period upto the date of the approval viz. 12th December, 2017, even if such liability crystallizes after this date. That all liabilities payable to any creditor shall stand satisfied and discharged upon approval of the resolution plan, provided those sums are set aside against which all such liabilities are paid.
The warrant of attachment on the said current account be set aside - application disposed off.
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2024 (3) TMI 1047
Non-admission of full claim by RP - Appellant’s case is that although possession were offered, but the Appellant did not take possession since Units were not complete - HELD THAT:- It is relevant to notice that the Resolution Plan of the SRA has already been approved by the Adjudicating Authority vide order dated 20.11.2023 and under the Resolution Plan, the SRA has provided to give 40% of the admitted claim as well as the Units, to which the Appellant is entitled as per the Plan. There is no dispute that Unit Nos. 1GF and 5GF with basement were allotted to the Appellant and the possession was offered on 30.09.2020, which was not taken by the Appellant. Partial Completion Certificate dated 14.10.2016, issued by the competent Authority has already been brought on the record. The Appellant although had not accepted possession on 30.09.2020, but allotment having not been disputed, the Appellant is entitled for the Units as well as the amount as per the Resolution Plan, which has been approved on 20.11.2023.
The Adjudicating Authority has noticed that claim of the Appellant having already been revised, there was no ground made out to interfere with the decision of the RP. The RP has applied his mind and passed a detailed and reasoned email regarding the claim, hence, no interference is called for. The Adjudicating Authority having taken a decision, not to interfere with the admission of the claim of the Appellant, there are no reason to interfere with the impugned order passed by the Adjudicating Authority rejecting the IA Nos.4229 and 4089 of 2023.
The Resolution Plan of the Corporate Debtor has already been approved on 20.11.2023, under which the SRA has undertaken to pay 40% of the amount admitted, i.e., 40% of the assured return - It is noted that although, possession of the Units offered to the Appellant on 30.09.2020, but the same was not taken by the Appellant. The Appellant having not taken possession of the Units and the Units having already been allotted to the Appellant, the Appellant is entitled for the Units.
The SRA is directed to execute the Conveyance Deed for Units 1GF (with basement) and 5GF (with basement) and handover the possession of the Units to the Appellant - appeal disposed off.
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2024 (3) TMI 1046
Dismissal of Section 9 petition - initiation of CIRP - It is contended that the Appellant remained an employee of the Corporate Debtor all through until his resignation and hence the Corporate Debtor was liable to clear the operational dues - HELD THAT:- The Adjudicating Authority in the impugned order after noticing the full and final settlement document has observed that the same was executed between the Appellant and MNT and not between the Appellant and the Corporate Debtor. The Adjudicating Authority has thereafter concluded while passing the impugned order that the settlement agreement clearly shows that the Appellant rendered services to MNT which was a separate company from the Corporate Debtor. The Adjudicating Authority has further gone a step ahead to examine whether in such circumstances the Corporate Debtor can be said to owe any liability to the Appellant in the backdrop of their contention that the Corporate Debtor and the MNT shared the same the management.
The Adjudicating Authority after referring to the decision of the Hon’ble Supreme Court in the matter of VODAFONE INTERNATIONAL HOLDINGS BV. VERSUS UNION OF INDIA & ANR. [2012 (1) TMI 52 - SUPREME COURT] has relied thereon to hold that the holding company and subsidiary company are to be considered as separate legal entities and merely because their management was the same, raising of claims by the Appellant against the Corporate Debtor was not tenable.
The reliance placed upon the Vodafone judgment supra by the Adjudicating Authority in the present facts of the case does not suffer from any infirmity and is very much in order. In this judgement the Hon’ble Supreme Court has carved out the basic legal principle with regard to relationship between subsidiary company and holding company by holding that the legal relationship between a holding company and its subsidiary is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary. The business of a subsidiary cannot therefore ordinarily be treated to be the business of the holding company.
A subsidiary is a separate legal entity for tax and liability purposes. A subsidiary being a distinct legal personality is also allowed to have decentralised management. Mere ownership, parental control, management of a subsidiary by the holding company therefore does not constitute sufficient and adequate ground to justify piercing the status of their relationship as has been urged by the Appellant in the present case. Further, wherever public interest necessitates lifting of the corporate veil in the interests of justice, there always has to be some specific proof and evidence of fraud, wilful breach of trust, or some sham at play leading to avoidance or limiting the liabilities of the subsidiary company - However, to hold the parent company liable, there is need of specific and detailed information, but no such credible information has been provided by the Appellant. In the present case, there are no sustainable grounds placed on record for holding the Corporate Debtor company liable for the acts of its subsidiary and hence we affirm the findings recorded by the Adjudicating Authority in the impugned order.
The present is not a case where there is an undisputed debt for which Corporate Debtor can be brought under the rigors of CIRP. Therefore, in the attendant circumstances, the ratio of the judgement of the Hon’ble Supreme Court in the case of Mobilox [2017 (9) TMI 1270 - SUPREME COURT] squarely applies to the facts of this case. When any Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out from the present factual matrix.
The Adjudicating Authority did not commit any error in rejecting the Section 9 application. There are no reasons to disagree with the findings of the Adjudicating Authority - There is no merit in the Appeal - Appeal is dismissed.
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