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2025 (1) TMI 1457
Invocation of extended period of limitation under section 28(4) of the Customs Act, 1962 - classiication of imported goods - benefit of reduced Basic Customs Duty under N/N. 24/20058 dated 01.03.2005 and N/N. 12/2012 dated 17.03.2012.
Whether the Commissioner (Appeals) is justified in holding that the extended period of limitation could not have been invoked in the facts and circumstance of the case? - HELD THAT:- On record is the examination report dated 03.01.2019 which shows that the medical equipment was as per the invoice and the Bills of Entry. Once, the respondent had declared the goods in the Bills of Entry under a particular Tariff Item, nothing prevented the officers from verifying the same and in the present case, as noted above, the verification was also done after which the goods were cleared. It is subsequently that the department believed that the goods deserved classification under a different Tariff Item declared by the respondent. The invocation of the extended period of limitation was, therefore, for goods reasons set-aside by the Commissioner (Appeals) as the respondent had not suppressed facts, and in any case it cannot be said that the facts were suppressed with an intent to avoid payment of duty.
Whether the Commissioner (Appeals) was justified in remanding the matter to the adjudicating authority for a fresh determination of classification of the imported goods for the normal period? - HELD THAT:- In view of the findings recorded by the Commissioner (Appeals) that the notices could not be served because of change of address, the respondent was prevented from filing a reply to the show cause notice or appearing before the Commissioner (Appeals). The Commissioner (Appeals) has granted an opportunity to the respondent to file a reply to the show cause notice and also appear before final hearing - It is also not possible to accept the contention advanced by the learned counsel for the respondent that the Commissioner (Appeals) should have himself determined the correct classification of the imported goods instead of remanding the matter. The matter can only be examined after the respondent files a reply to the show cause notice and this is precisely what has been done by the Commissioner (Appeals). There is, therefore, no infirmity in this part of the order of the Commissioner (Appeals).
The appeal filed by the department deserves to be dismissed and is dismissed.
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2025 (1) TMI 1456
Classification of imported goods - Multimedia Speakers/Computer Speakers - to be classified under Customs Tariff Heading (CTH) 8518 or under CTH 8519/8527? - HELD THAT:- The subject issue is no more res integra. There are a catena of decisions holding the classification of the impugned goods under heading under CTH –8518. In the case of LOGIC INDIA TRADING CO VERSUS COMMISSIONER OF CUSTOMS [2016 (3) TMI 5 - CESTAT BANGALORE], while dealing with similar set of facts, the courts have held the classification of the said goods under CTH 8518.
The aforesaid decision has been subsequently followed in a series of cases of similar nature. Thus, in the case of Global Enterprises vs Commissioner of Central Excise, Delhi-II [2017 (8) TMI 1267 - CESTAT NEW DELHI], identical question of law was considered. The Tribunal held the classification of the said goods under CTH 8518.
Conclusion - The imported multimedia speakers were correctly classifiable under CTH 8518.
Appeal allowed.
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2025 (1) TMI 1455
Refund of excess amount of Additional Fees charged from the Petitioner Companies on account of delay in filing Financial Statements along with interest - HELD THAT:- It emerges that the AGM of a Company has to be held by the 30th September of the given year which can be extended maximum by three months by the ROC. It is a Statutory Provision and the date of holding of AGM cannot be modified or changed by any Office Order.
In the present case, the Petitioners in consonance with the provisions of the Companies Act, held their AGM on 29.10.2019 i.e. within the statutory period. Having so done and the financial statements having been approved in the AGM, they were bound to submit the said statements to the ROC within thirty days of the AGM as has been provided in Section 137 of the Companies Act. There is no circumstance in which Section 137 can be modified or the period of submitting the Financial Statements extended beyond the 30 days from the date of holding the AGM.
From this Section 403 also, it is evident that whatever are the timeframes provided under the Act for filing of the documents, statement etc., if not done within the given time, then the same shall be accepted on payment of the penalty as described therein i.e. not less than Rs.100/- per day. This Section also does not give any discretion to extend the time of taking the Statements u/s 92 or 137 of the Companies Act or of reducing/waiving the fines - From the bare perusal of Circular dated 29.10.2019, it is abundantly clear that it provided a window for filing the Financial Statements by the Companies latest by 30.11.2019. It was only to deal with the situation where any Company had failed to submit their Financial Statements within the prescribed time period, they permitted to be filed within the relaxation period extended vide Circular dated 29.10.2017, i.e. by 30.11.2019. This situation would have arisen for Companies which may have sought extension of time from ROC to conduct their AGM beyond 30th of September.
This Circular cannot be interpreted to read that the date of holding the AGM as provided under S. 97 or of consequent submission of Financial Statements within 30 days thereafter as provided under S. 137 of Companies Act, was modified or extended. To interpret the Circular as extending the time of filing the Financial Statements beyond 30 days of AGM, would tantamount to amendment of the Provisions of the Act, which no Administrative Circular can do - the Petitioners are not correct in their Claim that the Financial Statements could have been filed by 30.11.2019.
Conclusion - The Petitioners were liable to submit their Financial Statements by 29.10.2019 which they have failed to do in accordance with Section 137 of the Companies Act. Therefore, the penalty has been rightly imposed by the Respondents w.e.f. 30.10.2019.
Petition dismissed.
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2025 (1) TMI 1454
SEBI orders against non-executive Chairman and Managing Director & Chief Executive Officer - Appellant as the Non-Executive Chairman failed in his duties by not acceding to the requests of Independent Directors for legal advice and not providing necessary documentation regarding the appointment of Mr. Ratnesh -
Non acceding to request for legal advice in relation to appointment of Mr. Ratnesh etc. - HELD THAT:- Appellant was appointed as the Non-Executive Chairman of PFC on November 8, 2021. The allegation is, not acceding to the request made by the independent directors for obtaining external legal advice and not providing information about appointment and joining of Mr. Ratnesh, which was the most contentious issue leading to differences between the Management and the independent directors. The first email from the independent directors to the Noticee No. 1 seeking independent legal advice from a lawyer of their choice is dated December 7, 2021. The appellant had informed the Independent Directors that the management was in the process of submitting a comprehensive report and therefore a separate legal consultation was pre-mature. On December 15, 2021 the independent directors conveyed to Noticee No. 1 that they were going ahead with the appointment of an Advocate and did so. The expenses incurred in that behalf were also informed to Noticee No. 1 on April 5, 2022.
With regard to not calling meeting of NRC, it was urged that the Appellant was not a member of NRC and had no role to play. The RoC had addressed this issue and did not hold the Appellant responsible. It was also urged that the Management attempted to reconstitute the NRC through a resolution dated December 31, 2021, however the independent directors did not approve the same.
It is relevant to record that firstly the independent directors had made their request to the Noticee No. 1 and not to the Appellant. Secondly, the independent directors went ahead and decided to appoint an Advocate themselves and obtain legal advice. The gap between their initial request and their decision to appoint an Advocate is about 8 days which cannot be considered as undue delay. Thirdly, the appellant had instructed the HR department of PTC to give the information sought by the independent directors. Fourthly, Ms. Renu Narang was withdrawn by NTPC. Fifthly, RoC had addressed the issue with regard to conducting meeting of NRC and not held the appellant responsible. In view of the undisputed facts recorded hereinabove, we find that the above three charges in Issue No.1 made against the Appellant are not substantiated.
Providing no information or limited / incomplete information to the Board - Appellant submitted that the WTM has noted in the impugned order that Mr. Ratnesh had rejoined NTPC on December 6, 2021. Therefore, he could not have been invited for the Board meeting scheduled on January 22, 2022. He is right in his contention. Therefore, the allegation of not inviting Mr. Ratnesh and the meeting becoming invalid is untenable
It is the duty of the Company Secretary to provide guidance with regard to proper conduct of meetings. Independent Directors while raising certain issues in their emails sent during 2021 never sought for those issues to be discussed in the board meetings. Thus, there is no doubt that there was lack of clear communication between the Independent Directors and the management, however, we may note that the Independent Directors themselves had graded the flow of information between the management and the board as excellent in the meeting held on October 5, 2021. No substance in the allegation contained in Issue No. 2.
Reconstitution of Audit Committee prior to submission of FAR 2022 - As noted in the Impugned Order, Section 177 of the Companies Act, 2013 provides that the Audit Committee shall be constituted by the Board. The Board had constituted the Audit Committee. SEBI’s direction was not to change the composition of the Board. Therefore, SEBI contention that SEBI’s instructions also included not making any change in the audit committee also, is without any merit and liable to be rejected. Hence, we hold that the charge in Issue No.3 is also baseless.
Functioning of the Audit Committee - It is true that the Chairman of the Audit Committee had flagged the issues in functioning of the Audit Committee with respect to Noticee No. 1. The Respondent’s charge is not that the Appellant was responsible but that he was aware of the shortcomings pointed out and yet, did not take remedial steps. In our view, once the respondent holds that appellant is not responsible, nothing further survives for consideration. Hence charge in issue No.4 is also baseless.
On a careful perusal of the allegations leveled against the appellant and the contentions urged on both sides, for reasons recorded hereinabove, we are of the view that all the allegations against the appellant in Issues Nos. 1 to 4 are baseless. Therefore, the directions contained in paragraph No: 253 of the impugned order qua the appellant are unsustainable and liable to be quashed. The appellant, has suffered the order for about 6 months for no fault.
Appeal allowed. Orde passed by the WTM, SEBI qua the appellant is quashed.
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2025 (1) TMI 1453
Distribution of liquidation proceeds - waterfall mechanism - distribution to be made based on the security interest of secured creditors or in proportion to their admitted claims as per Section 53(1) of the Insolvency and Bankruptcy Code, 2016? - No Resolution Plan having been approved in the CIRP - HELD THAT:- This Tribunal in the matter of Oriental Bank of Commerce Vs. Anil Anchalia & Anr. [2022 (5) TMI 1367 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] had occasion to consider distribution of sale proceeds in the Liquidation as per Section 53 of the Code, in which proceeding, an IA was filed by Oriental Bank of Commerce seeking a direction to distribute the entire sale proceeds to the Punjab National Bank who has exclusive charge over the property of the Corporate Debtor. The Application was rejected by the Adjudicating Authority against which the Appeal was filed. The Appeal was heard and by the Judgment of this Tribunal dated 26.05.2022, the Appeal was dismissed.
Coming to the undertaking which is relied by the Appellant, the undertaking submitted before the Adjudicating Authority was to the effect that excess money received as per distribution shall be returned, when Order is passed by Tribunal or Hon’ble Supreme Court the undertaking given by stakeholders was in terms of Regulation 43 of the Insolvency and Bankruptcy Board of India, Liquidation Process Regulations 2016, which undertaking has to be given while accepting any distribution of the sale proceeds in the Liquidation, which undertaking was for the benefit of the Secured Creditors, who is ultimately found to have larger share of sale proceeds in the Liquidation. Thus, undertaking given by the Parties in no manner can come in the way of Adjudicating Authority in issuing direction for re-distribution in accordance with law.
Conclusion - The Adjudicating Authority has not committed any error in directing distribution of sale proceeds as per the admitted claim of the Financial Creditor pro-rata basis.
Appeal dismissed.
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2025 (1) TMI 1452
Appointment of the Resolution Professional (RP) in accordance with Section 97, sub-section (3) of the Insolvency and Bankruptcy Code, 2016 (IBC) - submission of the Appellant is that the Adjudicating Authority ought to have directed the IBBI to nominate the RP for the insolvency resolution process, which was not done and the Adjudicating Authority relied on a Circular issued by the IBBI - HELD THAT:- There is no dispute with regard to interpretation of Section 60, sub-section (2), which provides that where a CIRP or liquidation proceedings of a Corporate Debtor is pending before a NCLT, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, shall be filed before such NCLT. The question to be answered is as to whether when no CIRP or liquidation proceedings of a Corporate Debtor is pending before the NCLT, whether an Application for personal insolvency against a Personal Guarantor has to be filed before the NCLT. Sub-section (2) of Section 60 begins with the expression “Without prejudice to sub-section (1)”. Thus, the provision of sub-section (2) are without prejudice to provisions of sub-section (1) of Section 60. The expression “without prejudice”, came for consideration before the Hon’ble Supreme Court in large number of cases.
Reference made to judgment of the Hon’ble Supreme Court in Shri Shiv Kripal Singh vs. Shri V.V. Giri [1970 (9) TMI 127 - SUPREME COURT], where the Hon’ble Supreme Court held that the expression “without prejudice is to the generality of the provisions of sub-section (i)”. It is well settled that when this expression is used anything contained in the provisions following this expression is not intended to cut down the generality of the meaning of provision.
Two judgments have been relied by learned Counsel for the Respondent, which need to be noticed. The first judgment, which has been relied by learned Counsel for Respondent is State Bank of India vs. Mahendra Kumar Jajodia [2022 (1) TMI 1294 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI], in which case, an Application under Section 95 was filed by the State Bank of India before NCLT, Kolkata Bench, seeking initiation of CIRP against Personal Guarantor, which Application came to be rejected by the Adjudicating Authority as premature relying on Section 60, sub-section (2) and holding that for an insolvency resolution process to be initiated against the guarantor there must be CIRP or liquidation process pending against the principal borrower/ Corporate Debtor.
The above Notification dated 15.11.2019 came to be challenged before the Hon’ble Supreme Court in Lalit Kumar Jain vs. Union of India & Ors. [2021 (5) TMI 743 - SUPREME COURT]. One of the grounds to challenge the notification was whether provisions of IBC against Personal Guarantors have been enforced, which is discriminatory and is violative of Article 14 of the Constitution of India. In reference to challenge to the aforesaid Notification, the Hon’ble Supreme Court had occasion to consider the Scheme of IBC. The Hon’ble Supreme Court noticed the 2018 amendment and the Report of the Insolvency Law Committee - The above judgment of the Hon’ble Supreme Court also clearly emphasized that Personal Guarantor of the Corporate Debtor has been treated as a separate species of individuals. Hence, provision regarding Personal Guarantor of the Corporate Debtor have been enforced and when we read Section 60, sub-sections (1) and (2), the conclusion is inescapable that for insolvency resolution process of personal guarantor, the jurisdiction is with the NCLT.
This Tribunal in its judgment in Mahendra Kumar Agarwal has noticed the judgment of the Delhi High Court in Axis Trustee Services Ltd. vs. Brij Bhushan Singal [2022 (11) TMI 297 - DELHI HIGH COURT], where the Delhi High Court had occasion to consider Section 60 of the IBC. After considering Section 60 and 179 of the IBC, the Delhi High Court held that NCLT will be the Adjudicating Authority in respect of insolvency proceedings against Personal Guarantors.
Conclusion - The NCLT is the appropriate adjudicating authority for insolvency proceedings against personal guarantors of corporate debtors, as per Section 60(1) of the IBC. Section 60(2) does not restrict the filing of applications against personal guarantors to situations where proceedings against the corporate debtor are pending.
It is not required to accept the submissions of the Appellant that NCLT Delhi has no jurisdiction to entertain Section 95 Application filed by the Financial Creditor against the Personal Guarantor for initiating insolvency resolution process - there is no merit in the appeal - appeal dismissed.
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2025 (1) TMI 1451
Validity of order of the Additional Director of Enforcement dropping charges under the Foreign Exchange Management Act, 1999 (FEMA) - case against the appellants under FEMA, 1999 was initiated based on a Show-Cause Notice issued by the DRI under the Customs Act, 1962 - in SCN, it was alleged that both the respondent companies had evaded Customs Duty by suppressing and mis-stating the actual transaction value of the export goods -
HELD THAT:- We find force in the argument of the respondents that the allegations against the appellants in this case drew sustenance primarily from the allegations contained in the SCN issued by the DRI under the Customs Act, 1962 which now stands entirely nullified.
Also find considerable substance in the contention of the appellant that the Fe content declared was based on the report of the government accredited lab (GAL). Indeed, it is acknowledged by the appellant Directorate itself in the appeal memo, that the price of the iron ore exported was raised by the appellants based on the certificate of Quality Services and Solutions, Goa, a government-accredited lab. Further, the detailed procedure for valuation has been explained in para- 61 of the order of the Ld. Commissioner of Customs.
Once the prescribed procedure for independent certification by Govt. Lab and samples being drawn in the presence of Customs and being sent to Govt. lab for sample testing has been followed, do not see how the charge of manipulation of Fe content can be sustained unless the findings of the labs are challenged as perverse.
In this regard, we have also taken note of the judgment of Reliance Cellulose Products Ltd. [1997 (7) TMI 652 - SUPREME COURT] cited by the appellants wherein it was held that unless a government lab report is challenged and demonstrated as being palpably wrong, the same cannot be brushed aside.
Even from the Income-tax point of view, the variation in price at which export was made by the appellants and the arm's length price assessed was found to be within the tolerance range.
It is not considered necessary to go into other issues such as cherry picking of few transactions out of many (2 out of 7 in case of Appellant No.1 and 5 out of 42 in case of Respondent No.2); existence of instances where Fe content declared by the Indian companies was more than that declared by the foreign entity on further sale; day to day fluctuations in international iron ore prices, the difference arising out the transactions being expressed in wet or dry metric tons; difference in of method of drawal of samples, testing technology and methodology; the legal tenability of challenging the impugned order before this Appellate Tribunal when the customs's Case, which formed the sole basis of the case under FEMA stands quashed etc, are not gone into on the merits.
We do not find any reason to interfere with the order of the learned adjudicating authority which has been impugned in the present appeals filed by the Directorate. Accordingly, all the three appeals are hereby dismissed.
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2025 (1) TMI 1450
Seeking grant of regular bail - Money Laundering - reasons to believe - compliance with the statutory requirements under Section 19 of the PMLA - whether the applicant’s arrest was carried out in adherence to the statutory requirements under Section 19 of the PMLA which mandates that the authorized officer must have ‘reason to believe’ based on material evidence before arresting an individual accused of money laundering? - HELD THAT:- This Court is satisfied that the investigating authority followed due process and substantiated the 'reason to believe' with concrete evidence rather than mere suspicion. Accordingly, the challenge to the legality of the arrest is without merit, and no relief is warranted to the applicant on this ground.
The investigating authority did not rely solely on the statement of any one co-accused, rather it relied upon the statement of the applicant as well as other co-accused persons namely Neeraj Chauhan, Tushar Chauhan and Viphil Jain along with the documentary evidence including the Whatsapp chats etc. which shows the financial trail of the proceeds of crime in the instant matter. The same goes to show that the respondent ED has corroborating evidence on its record to justify the implication of the applicant herein - This Court is satisfied that the respondent ED has considered independent material, including financial records, digital evidence, and the applicant’s own communications, which substantiate the applicant’s involvement in the alleged offence.
Whether the statements recorded under this provision are admissible as evidence and to what extent they can be relied upon to justify the applicant’s arrest and continued detention? - HELD THAT:- The statements recorded under Section 50 of the PMLA hold evidentiary value and are admissible in legal proceedings. The Hon’ble Supreme Court in Rohit Tandon v. Directorate of Enforcement [2017 (11) TMI 779 - SUPREME COURT], while emphasizing the legal sanctity of such statements, observed that they constitute valid material upon which reliance can be placed to sustain allegations under the PMLA - this Court is of the considered view that statements recorded under Section 50 of the PMLA are admissible in evidence and can be relied upon to establish culpability in money laundering cases.
It is observed by this Court that the respondent had sufficient material in its possession, including financial records, digital evidence, and the applicant’s communications, to establish a valid 'reason to believe' that the applicant was guilty of the offence of money laundering. The procedural safeguards under the Act were duly followed, and the challenge to the legality of the arrest is without any merit - the contention that the applicant’s arrest was solely based on the statement of co-accused persons under Section 50 of the PMLA is unfounded.
Compliance with the twin conditions of bail under Section 45 of the PMLA or not - HELD HAT:- Having considered the legislative intent behind Section 45 of the PMLA and the judicial precedents interpreting its application, this Court shall now proceed to apply the established principles to the facts of the present case to assess whether the applicant has successfully satisfied this Court that he falls under the proviso to Section 45 of the PMLA and if not, whether he has discharged the burden of proving that he is not guilty of the alleged offence and is unlikely to commit any offence while on bail - The material on record demonstrates that the accused persons operated in a highly coordinated and systematic manner, with clear understanding and collaboration among them to facilitate the offence.
The applicant has failed to discharge the burden placed upon him under Section 45(1)(ii) of the PMLA which requires him to that there are reasonable grounds for believing that he is not guilty of the offence. The material produced by the respondent, including financial transactions linked to the proceeds of crime and the applicant’s own admissions, points to his direct and active involvement in the offence. Mere assertions that the applicant was a passive investor and was unaware of the illegality of the transactions do not satisfy the threshold required to overcome the presumption under the PMLA - Further, the second limb of Section 45(1)(ii) of the PMLA, which mandates that the applicant must satisfy the Court that he is not likely to commit any offence while on bail, is also not met.
This Court finds that the twin conditions prescribed under Section 45 of the PMLA have not been satisfied. The evidence on record, the ongoing nature of the investigation, and the applicant’s alleged role in the broader financial and selling of spurious medicines syndicate indicate that the rigors of Section 45 of the PMLA continue to apply.
This Court is of the view that considering the filing of the first supplementary prosecution complaint and the ongoing nature of the investigation, it is not satisfied that the applicant has fulfilled the twin conditions under Section 45 of the PMLA. The respondent has presented sufficient material to warrant further investigation, including financial records, electronic evidence, and statements of co-accused implicating the applicant. These materials suggest an active involvement in laundering proceeds of crime and a pattern of financial transactions that need further investigation.
Conclusion - i) The applicant's arrest complied with the statutory requirements under Section 19 of the PMLA, supported by concrete evidence rather than mere suspicion. ii) Statements recorded under Section 50 of the PMLA are admissible as evidence and can be relied upon to establish culpability in money laundering cases. iii) The applicant was not exempt from the twin conditions of bail under Section 45 of the PMLA, given the organized nature of the offence and the broader context of the criminal conspiracy. iv) The applicant failed to satisfy the twin conditions for bail under Section 45 of the PMLA, as well as the general considerations for bail under Section 439 of the CrPC. v) The Court emphasized the importance of maintaining the integrity of the ongoing investigation and preventing potential misuse of the judicial process.
This Court is not inclined to release the applicant on bail and the instant application, is, hereby, dismissed.
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2025 (1) TMI 1449
Seeking grant of regular bail - Money Laundering - proceeds of crime - reasons to believe - illegal procurement of empty vials and raw materials of anti-cancer drugs such as Keytruda and Opdyta - reasons to believe - whether the applicant’s arrest was carried out in adherence to the statutory requirements under Section 19 of the PMLA which mandates that the authorized officer must have ‘reason to believe’ based on material evidence before arresting an individual accused of money laundering?
HELD THAT:- After thorough examination of the grounds of arrest, it becomes evident that the investigating agency has outlined specific details highlighting the applicant’s involvement in the alleged offence. It is observed that the applicant was duly informed about his firm’s involvement and that the applicant was a partner is M/s Delhi Medicine Hub along with co-accused Akshay Kumar and both mutually took financial and business decisions regarding the procurement and sale of spurious anti-cancer medicines, which is clearly evident from the grounds of arrest - The investigating authority has also relied on statements recorded under Section 50 of the PMLA, which reveal that the applicant was directly involved in sourcing counterfeit medicines without invoices, demanding sealed and unsealed Keytruda injections, and receiving payments through both formal banking channels and illegal hawala transactions.
The financial records cited hereinabove indicate substantial money transfers from M/s Delhi Medicine Hub to the accounts of known associates involved in the counterfeit medicine syndicate. These transactions, along with the applicant’s control over the business operations, substantiate the claim that he was engaged in money laundering activities - This Court is satisfied that the investigating authority followed due process and substantiated the 'reason to believe' with concrete evidence rather than mere suspicion. Accordingly, the challenge to the legality of the arrest is without merit, and no relief is warranted to the applicant on this ground.
A careful reading of the provision reveals that the authorities empowered under Section 50 of the PMLA possess the authority to enforce discovery and inspection, compel the attendance of individuals, examine them on oath, require the production of records, receive evidence through affidavits, and issue commissions for the examination of witnesses and documents - The provision further clarifies that any person summoned under sub-section (2) is legally bound to comply, state the truth regarding matters under inquiry, and produce the requisite documents as directed by the authorities. It is pertinent to note that such proceedings are deemed to be judicial proceedings under Sections 193 and 228 of the IPC.
Whether the statements recorded under this provision are admissible as evidence and to what extent they can be relied upon to justify the applicant’s arrest and continued detention? - HELD THAT:- The Hon’ble Supreme Court in Rohit Tandon v. Directorate of Enforcement, [2017 (11) TMI 779 - SUPREME COURT] made the following observations regarding the admissibility of statements recorded under Section 50 of the PMLA - it is evident that statements recorded under Section 50 of the PMLA hold evidentiary value and are admissible in legal proceedings. The Hon’ble Supreme Court, while emphasizing the legal sanctity of such statements, observed that they constitute valid material upon which reliance can be placed to sustain allegations under the PMLA.
Hon’ble Supreme Court also reaffirmed the admissibility of Section 50 of the PMLA distinguishing them from statements recorded under the CrPC. The Court underscored that such statements, being recorded during an inquiry rather than an investigation, are not subject to the restrictions under Article 20(3) and Article 21 of the Constitution. Instead, they are deemed to be judicial proceedings under Section 50 (4) of the PMLA and, therefore, admissible as evidence in proceedings under the PMLA. The Hon’ble Court further clarified that the provisions of Section 50 of the PMLA having an overriding effect by virtue of Sections 65 and 71 of the PMLA prevail over the procedural safeguards under the CrPC. - this Court is of the considered view that statements recorded under Section 50 of the PMLA are admissible in evidence and can be relied upon to establish culpability in money laundering cases.
In the present case, the investigating agency has relied not only on the statement of co-accused under Section 50 of the PMLA but also on financial records, WhatsApp communications, and transactional data, which indicate the applicant's active role in the alleged money laundering activities - By virtue of Section 24 of the PMLA, the respondent is not required to conclusively establish the applicant's guilt at the pre-trial stage, rather, the applicant must demonstrate that the proceeds of crime attributed to him are not linked to money laundering. In the absence of any rebuttal by the applicant, the presumption under Section 24 of the PMLA stands in favor of the respondent, thereby, justifying his continued detention.
In light of the principles enunciated by the Hon’ble Supreme Court in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT (LB)] and reiterated in Prem Prakash [2024 (8) TMI 1412 - SUPREME COURT] this Court must determine whether the foundational facts necessary to invoke the presumption under Section 24 of the PMLA have been established by the respondent. The Hon’ble Supreme Court has categorically held that the prosecution must satisfy three essential ingredients. First, the commission of a scheduled offence must be established. Second, the property in question must be shown to have been derived or obtained, directly or indirectly, as a result of such criminal activity and third, the accused must be linked, directly or indirectly, to any process or activity connected with the proceeds of crime.
It is observed by this Court that the respondent has presented corroborative material, including financial transactions and records, linking the applicant to the proceeds of crime. Considering the presumption under Section 24 of the PMLA, the burden shifted to the applicant to disprove his involvement in the alleged offence. However, the applicant has failed to provide any credible evidence to rebut the statutory presumption - this Court finds that the applicant’s arrest was conducted in compliance with the statutory mandate of Section 19 of the PMLA.
It is pertinent to mention here that the word used in the proviso to Section 45 of the PMLA is ‘may’ which indicates that it is the discretion of the Court concerned and it is not a mandate. As observed by the Hon’ble Supreme Court in a catena of judgments, it is the discretion of the Court and all the other relevant factors are needed to be weighed in while adjudicating the bail application. The relevant factors include the gravity of the offence, likelihood of reoccurrence, criminal antecedents etc. - this Court holds that the applicant cannot claim the benefit of the monetary threshold exemption under the proviso to Section 45 of the PMLA.
Conclusion - This Court is of the view that considering the filing of the first supplementary prosecution complaint and the ongoing nature of the investigation, this Court is not satisfied that the applicant has fulfilled the twin conditions under Section 45 of PMLA. The respondent has presented sufficient material to warrant further investigation, including financial records, electronic evidence, and statements of co-accused implicating the applicant. These materials suggest an active involvement in laundering proceeds of crime and a pattern of financial transactions that need further investigation.
The applicant has been unable to put forth any propositions before this Court that are sufficient for grant of bail and thus, the same are rejected. In view of the same, this Court is not inclined to release the applicant on bail and the instant application, is, hereby, dismissed along with the pending applications, if any - Bail application dismissed.
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2025 (1) TMI 1448
Seeking grant of bail - Money laundering - alleged illegal extortion on Coal Transportation, payments collected by the applicant and his associates - twin conditions of Section 45 of the PMLA, 2002 fulfilled or not - HELD THAT:- It is quite vivid that the applicant is unable to fulfill twin conditions for grant of bail as per Section 45 of the PMLA, 2002 and also considering the submission that the applicant has not prima facie reversed the burden of proof and dislodged the prosecution case which is mandatory requirement to get bail.
Hon'ble the Supreme Court in case of DIRECTORATE OF ENFORCEMENT VERSUS ADITYA TRIPATHI [2023 (5) TMI 527 - SUPREME COURT] has held that 'the High Court has neither considered the rigour of Section 45 of the PML Act, 2002 nor has considered the seriousness of the offences alleged against accused for the scheduled offences under the PML Act, 2002 and the High Court has not at all considered the fact that the investigation by the Enforcement Directorate for the scheduled offences under the PML Act, 2002 is still going on and therefore, the impugned orders passed by the High Court enlarging respective respondent No. 1 on bail are unsustainable and the matters are required to be remitted back to the High Court for afresh decision on the bail applications after taking into consideration the observations made hereinabove.'
Considering the ECIR and other material placed on record, which prima facie shows involvement of the applicant in crime in question and also considering the law laid down by Hon’ble the Supreme Court, it is quite vivid that the applicant is unable to fulfill the twin conditions for grant of bail as provided under Section 45 of the PMLA, 2002. Thus, the Point is answered against the applicant.
Conclusion - Applicant is unable to fulfill twin conditions for grant of bail as per Section 45 of the PMLA, 2002. The bail application filed under Section 483 of the Bhartiya Nagrik Suraksha Sanhita, 2023 is liable to be and is hereby rejected.
Bail application rejected.
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2025 (1) TMI 1447
Maintainability of proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) in the absence of a scheduled offence - applicant's arrest and subsequent detention - lack of necessary sanction and procedural irregularities - Sufficiency of statements under Section 50 of the PMLA to establish a prima facie case of money laundering against the applicant - HELD THAT:- The crux of the allegation against the applicant is that he was involved in running an extortion racket by way of Rs. 20+20=Rs. 40/- per quintal of custom milled rice out of the special incentive price of Rs. 120/- payable by the State of Chhattisgarh to the custom rice millers. Hence the offence under Section 383/384 of the IPC has been levelled against the applicant. Similarly, the allegation of cheating under Section 420 IPC has been made against the applicant. Though it has been submitted by the counsel for the applicant that there is no direct or specific evidence against the applicant to suggest that he was involved in any of the offence as alleged in the subject ECIR or the prosecution complaint.
From the investigation of the ED, it has been revealed that the applicant was one of the key conspirator and main beneficiary of the POC extorted from the rice millers. It has also been revealed that the rice milers were forced for payment of the same under threat that their incentive bills would not be cleared from the MARKFED. As per Section 50(4) of the PML Act, the statements recorded under Section 50 of the PMLA has evidentiary value as the proceedings under Section 50(2) and (3) are deemed to be a judicial proceeding within the meaning of Section 193 and 228 of the IPC, 1860.
The applicant is closely connected with POC as he had deputed some persons at certain place and the cash was not physically taken by him but it was initially demanded by the applicant and payment, he conveyed it to the rice millers over phone. It has come in the statements of some of the rice millers who have personally handed over the extortion amount as demanded by the applicant - the application for bail of the Appellant should be seen at this stage while the Appellant is involved in the economic offence, in general, and for the offence punishable Under Section 4 of the PMLA, in particular.
In the present case, it is not acceptable that the applicant was not involved in the offence of money laundering. In fact, the applicant was assisting the co-accused Roshan Chandrakar in running an alleged extortion racket wherein an amount of Rs. 40/- (Rs. 20+20/-) per quintal was extorted from the custom milled rice out of the special incentive price of Rs. 120/- payable by the State Government to the custom rice millers Denial by the applicant itself is not sufficient to consider prima facie that there is no mens rea of the applicant in the said offences. Although the statements of the witnesses are required to be tested at the time of trial, but for the purpose of consideration of bail application, the statements of the witnesses are relevant for consideration of bail application of the applicant.
It cannot be said that there is no involvement of the applicant in the offence in question. The Court after examining the entire documents found substantial material indicating a strong nexus between the applicant and the other accused persons in the commission of the crime. There were documents and evidences that reflected the involvement of the applicant and he is the key conspirator and beneficiary from the said scam. The investigation have revealed that the applicant was involved in the extortion of money from the rice millers which was allegedly used for constituting proceeds of crime.
The applicant’s medical record indicates manageable conditions and it has been found that there is no compelling medical reason for granting bail to the applicant. The Court has found substantial material indicating a strong nexus between the applicant and the crime, thereby failing to satisfy the conditions of bail under Section 45 of the PMLA.
The guilt of the accused in the offence of money laundering has been gathered and since, the allegations against the applicant were extremely serious and taking into account, the nature and gravity of the offence and from perusal of the record and in view of the fact that looking to the special and stringent provision under Section 45(1) of the PMLA for grant of bail, in the considered opinion of this Court, prima facie the money trail has been established by the prosecution and therefore, it is not proper to order release of present applicant on regular bail for the reasons.
Conclusion - Considering the role of the applicant in obtaining the money through illegal source, which is the proceeds of crime and that there is sufficient evidence collected by the ED to prima facie show the involvement of the applicant in the alleged offences. It is an organized crime having various facets of its complexion, therefore, further considering the nature of offence and material collected during the investigation, this Court is satisfied that there is prima facie evidence for believing that the applicant is involved in the offence, therefore, it is not required to release the applicant on bail.
The prayer for bail made by the applicant under Section 483 of the Bhartiya Nagrik Suraksha Sanhita, 2023 (BNSS) read with Section 45 of the PMLA, 2002 for the offences under Section 3 & 4 of the PMLA, 2002, deserves to be and is hereby rejected.
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2025 (1) TMI 1446
Applicability of Service Tax on certain services provided by the appellant - classification and exemption of services under the categories of Construction of Complex Service (CCS) and Management, Maintenance or Repair Service (MMRS) - HELD THAT:- It is obvious that in the course of adjudication, they were able to exclude certain activities not covered within the MMRS to building, etc., for which the feasibility under the exemption notification 45/2010-ST was also examined. It is also obvious that while examining the same, the Adjudicating Authority felt that they will fall either in the category of transmission or distribution of electricity and by considering that ‘in relation to’ is an expression which includes varied nature of activities and therefore, granted them the benefit of exemption notification in relation to such activities, which were not covered by virtue of section 98 of the Finance Act, 2012.
In respect of non-commercial MMRS to buildings, after the amendment in Finance Act, 2012, vide section 98, no demand will survive. For the MMRS to others, the exemption notification 45/2010-ST needs to be examined and we have examined the same. It is found that there was Notification No. 11/2010-ST dt.27.02.2010, which exempted the services provided for transmission of electricity. Similarly, in terms of Notification No. 32/2010-ST dt.22.06.2010, the services provided for distribution of electricity were exempt - the Adjudicating Authority has considered this notification 45/2010-ST to cover that entire activity of MMRS as falling in the category of transmission and distribution of electricity.
N/N. 45/2010-ST does not provide for such expression and it merely covers services in relation to transmission and distribution of electricity. The Adjudicating Authority has clearly brought out these facts in the impugned order and has categorically held that these activities are squarely covered within the ambit of transmission or distribution of electricity. In view of the same, we find that there is nothing wrong in the order of the Commissioner extending the benefit of notification 45/2010-ST for MMRS provided in relation to transmission and distribution of electricity to defence establishments.
Conclusion - i) The demand for Service Tax under CCS for the period prior to 01.07.2010 is unsustainable. ii) The MMRS provided to non-commercial government buildings, specifically defense establishments, are exempt from Service Tax for the period covered by the SCN, as per the amendment in the Finance Act, 2012, section 98. iii) The application of Notification No. 45/2010-ST to MMRS related to transmission and distribution of electricity is appropriate, and the exemption is applicable to the appellant's services.
Appeal allowed.
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2025 (1) TMI 1445
Leviability of tax on actual performance of management activities - Management Consultancy Services - services rendered by the appellants to clients located outside India qualify as "Export of Services" - exemption from service tax - service tax on out-of-pocket expenses (OPE) - extended period of limitation.
Leviability of tax on actual performance of management activities - HELD THAT:- The Tribunal in the case of appellant’s themselves [2014 (8) TMI 227 - CESTAT NEW DELHI] finds that 'Though the definition at Section 65(65) includes any service in connection with management of any organization, the scope of the definition gets restricted to services in relation to consultancy as is evident from the name given to the service and commercial understanding of the expression “Management or Business Consultancy.” - CESTAT has been consistently holding that actual performance of the activities do not fall under Management Consultancy Service. Therefore, the issue stands decided in favour of the appellants.
Export of services - HELD THAT:- Tribunal Ahmedabad Bench in the case of B A Research India Ltd. [2009 (11) TMI 213 - CESTAT, AHMEDABAD] held that 'The performance of testing and analysing has no value unless and until it is delivered to its client and the service is to be complete when such report is delivered to its client. Thus, delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respondent satisfied the conditions of Rule 3(2) and accordingly the respondents are eligible for the exemption under Notification No. 11/2007-S.T. dated 1-3-2007.' - thus the Export of Services claimed by the appellants is in order and the impugned order cannot be sustained on this count.
Levy of service tax on the Out-of-Pocket Expenses - HELD THAT:- The dispute has been laid to rest by the decision in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. [2012 (12) TMI 150 - DELHI HIGH COURT]. The learned Commissioner did not have the benefit of the said judgment while passing the impugned order. This Bench in the case of Smt. Ritu Arora [2023 (11) TMI 1130 - CESTAT CHANDIGARH] has followed the above decision. In view of the same, this issue also stands settled in favour of the appellants.
Appeal allowed.
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2025 (1) TMI 1444
Service or not - reimbursement of fixed costs by the appellant to refrain from utilizing their plant and machinery for other parties - levy of service tax - HELD THAT:- Learned Commissioner (Appeal) while adjudicating the matter has not considered various legal pronouncements on this issue.
The matter is no longer res-integra, as the matter has already been decided by this Tribunal in case of the appellant in case of Commissioner of Central Excise & Service Tax, Anand Vs. Standard Pesticides Pvt. Limited [2024 (3) TMI 1043 - CESTAT AHMEDABAD] where it was held that 'The fact that appellant (earlier known as PMSL) was charging two components towards job-charges separated as fixed cost and variable cost cannot alter this situation so long as goods were manufactured. In a situation where goods were not manufactured but charges were collected under the fixed component it could have been considered as a service. While working out cost of any manufactured product costing is done by splitting cost elements into fixed cost and variable cost and that cannot change the nature of the activity. What could have changed the nature of the activity is a situation where no manufacturing activity took place and still the appellant collected their charges.'
There is no merit in the impugned order-in-appeal - Appeal allowed.
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2025 (1) TMI 1443
Addition of TDS on the gross amount to arrive at the taxable value - Service Tax demand on exempted services - denial of Abatement under N/N.1/2006 - liability of sub-contractors to pay service tax.
Addition of TDS on the gross amount to arrive at the taxable value - HELD THAT:- It is found from Annexure-II attached to the show cause notice that in order to arrive at the taxable value, TDS amount is added to the Gross amount of the contract value, whereas in the Form 16A enclosed with the appeal, it is found that the TDS amount is deducted from the amount paid to the appellant and hence, the amount paid is itself the gross amount. Therefore, adding TDS amount once again has resulted in arriving at the inflated taxable value. TDS is always deducted from the amount payable and it is not any other consideration. Therefore, the demand on this score cannot sustain and hence, the impugned order to this extent is set aside.
Service Tax demand on exempted services - denial of Abatement under N/N.1/2006 - HELD THAT:- Construction of (a) Toilets at TNEB office (b) Construction of Security Protection wall (i) in and around LMHEP Barrage unit (ii) right side of Dam Power House, (iii) in and around of central stores and raising of compound wall of the central stores are exempt in terms of Letter F. No. B2/8/2004 TRU dt.10.09.2004 - Similarly, Laying of underground power cable at Lower Mettur Hydro Electric Projects at Chekkanur Barrage, Nerinjipettai Barrage, and Kuthiraikkalmedu Barrage are exempt from tax in terms of Board’s Clarification in C. No. 123/5/2010-TRU dt. 24.05.2010 (F. No. 332/5/2010 - TRU) and Circular No. 62/11/2003 – ST - dated 21.8.2003 (F. No. B3/7/2003-TRU) - Wiring and rewiring at quarters/town quarters and LMHEP quarters at Kuthiraikkalmedu is also exempt from service tax vide Board’s Circular No. 62/11/2003-S.T., dated 21-8-2003 F. No. B3/7/2003-TRU - Providing WBM and Black topping over existing path in Thokkanampatti camp area and inside barrage -II at Nerinjipettai is exempt from service tax as per Section 65(25b) of the Finance Act, 1994, in terms of Para 2(i) of Board’s Circular No.123/5/2010 TRU dated 24.05.2010 in F.No.332/5/2010-TRU.
The demand made in the impugned order on this score also cannot sustain and hence, the impugned order to this extent stands set aside.
Liability of sub-contractors to pay service tax - HELD THAT:- The Larger Bench in the case of COMMR. OF S.T., NEW DELHI vs MELANGE DEVELOPERS PRIVATE LIMITED [2019 (6) TMI 518 - CESTAT NEW DELHI-LB] held that 'in the scheme of Service Tax, the concept of Cenvat credit enables every service provider in a supply chain to take input credit of the tax paid by him which can be utilized for the purpose of discharge of taxes on his output service. The conditions for allowing Cenvat credit have been provided for in Rule 4. The mechanism under the Cenvat Credit Rules also ensures that there is no scope for double taxation‘.'
Suppression of facts - penalty - HELD THAT:- The suppression cannot be alleged and hence, consequent penalty is not imposable.
Conclusion - i) The demand of service tax confirmed in the impugned order except sub-contractors, are set aside. ii) The demand of service tax on sub-contractors is sustained only for normal period and the other demand confirmed in the OIO by invoking extended period is set-aside. iii) The matter is remanded for the limited purpose of determining of tax liability for the normal period, along with applicable interest, but however, there shall be no penalty on such determination of tax and interest.
Appeal allowed by way of remand.
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2025 (1) TMI 1442
Refund of amount which the appellant had deposited in compliance to the Stay Order dated 11.11.2013 by the Tribunal - rejection of refund claim on the ground of time limitation - non-submission of the re-conciliation statement of the service tax paid on “Renting of Immovable Property Services”.
Whether the amount of Rs.16,14,167/- deposited by the appellant on 19.12.2013 has to be treated towards the service tax liability or as pre-deposit in terms of Section 35F? - HELD THAT:- The Tribunal has granted waiver of pre-deposit and stayed the proceedings in terms of the impugned order, subject to the condition that the appellant shall remit the requisite amount along with interest within a period of 6 weeks. The order passed is simple and clear that the appellant was required to make the pre-deposit for consideration or appeal and also to avail the benefit of the Stay Order as otherwise, they would have suffered the dismissal of appeal. The amount in the form of pre-deposit is also towards the liability of tax to avail the remedy of statutory appeal. Learned counsel for the appellant submitted that Section 35F before substitution by the Act 25 of 2014 (w.e.f. 06.08.2014) required the assessee to deposit the duty demanded or the penalty levied for challenging the impugned order and the appellant was required to make an application for dispensing with the pre-deposit of duty demanded or penalty levied.
The appeal under the provisions of Section 35F is a statutory appeal and it is a settled principle of law that a statutory appeal is maintainable subject to the compliance of the conditions laid down in the statue providing the remedy of appeal. Section 35F, in unequivocal terms says person desirous of appealing the order demanding the duty is required to deposit the duty/ penalty demanded, pending the appeal. in terms thereof, the Tribunal directed the appellant to deposit part of the duty amount involved and appellant paid the same in compliance thereof.
The interest on delayed refund has been held to be payable to the assessee from the date of deposit in the case of Executive Engineer (Workshop) M. P. Power Transmission Co. Ltd., vs. Commissioner (Appeals) Central Excise Customs & CGST [2025 (1) TMI 1254 - CESTAT NEW DELHI] till the date of its refund. In similar circumstances where refund was directed to be paid to the assessee, we had also granted interest @ 12% per annum.
Conclusion - i) The amount deposited by the appellant was a pre-deposit under Section 35F and not a service tax liability. ii) Section 11B's limitation period does not apply to refunds of pre-deposits made under Section 35F. iii) The appellant is entitled to a refund of the pre-deposit amount along with interest at 12% per annum from the date of deposit.
The impugned order is unsustainable and is hereby set aside - Appeal allowed.
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2025 (1) TMI 1441
Recovery of service tax with interest and penalty - it is alleged that for the period 2011-2012, it had shown less income, thereby, made short payment of service tax - invocation of extended period of limitation.
Invocation of Extended period of limitation - HELD THAT:- It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice.
The proviso to section 73(1) of the Finance Act stipulates that where any service tax has not been levied or paid by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of the Chapter or the Rules made there under with intent to evade payment of service tax, by the person chargeable with the service tax, the provisions of the said section shall have effect as if, for the word “one year”, the word “five years” has been substituted - the demand for the period from April, 2011 to September, 2011 is hit by limitation as it is even beyond the period of five years.
Whether the extended period of limitation could have been invoked in the facts and circumstances of the case for the period from October, 2011 to March, 2012? - HELD THAT:- It is correct that section 73 (1) of the Finance Act does not mention that suppression of facts has to be “wilful‟ since “wilful‟ precedes only misstatement. It has, therefore, to be seen whether even in the absence of the expression “wilful” before “suppression of facts” under section 73(1) of the Finance Act, suppression of facts has still to be willful and with an intent to evade payment of service tax. The Supreme Court and the Delhi High Court have held that suppression of facts has to be “wilful‟ and there should also be an intent to evade payment of service tax.
In PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY [1995 (3) TMI 100 - SUPREME COURT], the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Excise Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was suppression of facts. It is in this context that the Supreme Court observed that since “suppression of facts‟ has been used in the company of strong words such as fraud, collusion, or wilful default, suppression of facts must be deliberate and with an intent to escape payment of duty.
The extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax.
Conclusion - The service tax demand for the period from April, 2011 to September, 2011 is beyond the period of five years and the service tax demand from October, 2011 to March, 2012 could not have been confirmed and the extended period of limitation could not have been invoked.
Appeal allowed.
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2025 (1) TMI 1440
Failure to discharge proper service tax - Storage and Warehousing Services (SWS) - Goods Transport Agency service (GTA) - Renting of Immovable Property Service (RIS) - whether in the facts of the case, the demand levied on the appellant under section 73 under different categories viz., SWS, GTA and RIS as also under section 73A are sustainable or otherwise?
Storage and Warehousing Services (SWS) - HELD THAT:- The rates have been prescribed for various activities covered within the ambit of rake handling contract and it was agreed that the appellant will pay wharfage and demurrage charges, if any, in time to Railways and inform the company for reimbursement. Therefore, the perusal of these documents, which clearly show that it was agreed upon that initially the appellants would pay to railways the wharfage and demurrage charges and thereafter, claim the same on actual basis from cement companies. These documents support the submission of the appellant that they were merely paying on behalf of the cement companies and it was on reimbursement basis. The Adjudicating Authority has denied the exclusion of these charges primarily on the grounds that there is no evidence to suggest that this was being reimbursed on actual basis by the cement companies to the appellant, which, however, is not correct, in view of the representative documents submitted by the appellant. In any case, the department’s stand is that in terms of Rule 5 of the Service Tax (Determination of Value) Rules, 2006, any amount received as reimbursement needs to be included in the gross value. However, in view of the judgment of Hon’ble High Court of Delhi, subsequently, upheld by Hon’ble Supreme Court, in the case of Intercontinental Consultants & Technocrats Pvt Ltd [2018 (3) TMI 357 - SUPREME COURT], Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 was held ultravires. It was only after amendment in Section 67 by the Finance Act, 2015, the reimbursement expenditure or costs were required to be included for determination of gross value. Therefore, in view of this decision, any amount proposed to be included in the gross value on SWS, which has been received on reimbursement basis would not sustain and on this ground also, demand to the extent of non-inclusion of income on account of reimbursable wharfage and demurrage charges would not sustain.
Goods Transport Agency service (GTA) - HELD THAT:- In the facts of the case, the Service Tax liability has to be made good by the cement companies on RCM basis and not by them, whereas, the department is also admitting that this amount of transportation charges from the railway station to their godown is not taken into account for the purpose of calculating gross value and short payment and only ex-godown has been taken into consideration. The other issue is whether department has relied on the income shown as local transportation charges, which has been subsequently reimbursed at agreed rate, as also any other charges, which could be on account of their having paid initially for transportation of goods from railway station or godown directly to the distributor premises and later recovered by them. Since these aspects are not clear from the facts of the case, this needs to be ascertained.
Applicaility of Section 73A - HELD THAT:- There is enough evidence to suggest that certain amount collected has already been paid and therefore, entire amount cannot be considered as recoverable. There is some dispute about actual amount of Service Tax paid from the amount collected, which has to be corroborated with the evidence. Therefore, this also needs to be ascertained.
Imposition of penalty on RIS - HELD THAT:- The penalty under Section 76, 77 & 78 would not survive if the payment including interest has already been made prior to 2012 itself. This also needs to be re-ascertained and reconciled before imposing penalty for balance amount of Service Tax collected but not paid before 2012.
Time limitation - HELD THAT:- The demand is based on P&L account and ST3 returns and it is an admitted position that this P&L account breakup and other things were not reflected in ST3 returns and in fact, they have taken various grounds in defence of denying leviability of Service Tax on income reflected in P&L account including their being pure agent, etc. In the facts of the case, we find that ground of limitation has been rightly invoked. However, it is subject to demand getting sustained on merit itself in the denovo proceedings.
Conclusion - i) The demand for including wharfage and demurrage charges in the gross value for SWS is unsustainable, and this portion of the demand is set aside. ii) The issue of GTA service liability is remanded for determination of who is liable to pay the Service Tax and whether the cement companies have discharged the liability. iii) The amount of Service Tax collected and paid under Section 73A needs to be redetermined, and penalties should be reassessed accordingly. iv) Penalties under Sections 76 and 78 cannot be imposed simultaneously, and reassessment is required based on the sustainable demand. v) The issue of the correct penalty rate under Section 76 is remanded for determination based on the actual cut-off date and statutory provisions.
Appeal allowed in part by way of remand.
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2025 (1) TMI 1439
CENVAT Credit - electricity generated by the respondent's captive power plant and subsequently cleared to the Haryana State Electricity Board (HSEB) was used in the manufacture of final products within the factory - suppression of facts or not - extended period of limitation - HELD THAT:- The dispute in the present case is that the electricity generated in captive plant was not used in or relation to manufacture of final products within the factory of production but was sold to HSEB whereas learned Tribunal did not decide this dispute and held that there is no dispute with regard to the appellant receiving same quantity of electricity which was cleared to the Electricity Board, therefore, the issue in dispute was never decided by the learned Tribunal.
The matter was remanded for reconsideration of whether the electricity was used in manufacturing within the factory, as required for credit eligibility.
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2025 (1) TMI 1438
CENVAT Credit - whether the appellant is entitled to the benefit of CENVAT Credit under the CENVAT Credit Rules, 2004, despite having claimed depreciation on the same capital goods under Section 32 of the Income Tax Act, 1961? - violation of Rule 4(4) of the CENVAT Credit Rules, 2004 - HELD THAT:- The admitted fact on record is that the appellant availed CENVAT Credit on capital goods to the tune of Rs. 6,36,381 in the year 2001-02 and Rs. 2,25,141/- during the year 2002-03. During the course of audit of the financial and excise records of the appellant conducted by Central Excise audit team, it was observed by the audit party that the assessee had simultaneously claimed the benefit of depreciation on the capital goods in their financial accounts as well as Income Tax returns for the relevant years. And admittedly, it was only when it was pointed out to the appellant that they had availed two benefits, the appellant revised their Income Tax return for the year 2003-04 on 31.05.2005 whereas the period in dispute was 2001-02 and 2002-03.The net result is that during the financial years 2001-02 and 2002-03, the appellant had availed and utilized CENVAT Credit on the capital goods and simultaneously claimed benefit of depreciation on these capital goods under Section 32 of the Income Tax Act, 1961 in their Income Tax returns for the assessment years 2002-03 and 2003-04 and the benefit of said depreciation was never surrendered by them as they had neither filed the revised Income Tax returns for the assessment years 2002-03 and 2003-04 nor they had discharged the liability of additional income tax, which would have accrued on account of surrender of benefit of depreciation, so claimed, during the above assessment years.
As per the legal provisions, the CENVAT Credit was not allowable to the appellant on the capital goods since they claimed depreciation on these goods in their books of accounts and Income Tax returns for the year 2001-02 and 2002-03 and as per Rule 4 (4) of CENVAT Credit Rules, 2002/2004, the appellant did not fulfil the condition for allowing the CENVAT Credit, therefore, became liable for recovery of CENVAT Credit wrongly taken or erroneously refunded under Rule 14 of the CENVAT Credit Rules, 2004.
There are no infirmity in the impugned order dated 25.01.2011 passed by the learned Customs, Excise and Service Tax Appellate Tribunal - appeal dismissed.
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