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2025 (4) TMI 1204
Withdrawal of the exercised option u/s 115BAC - assessee had decided to opt for the new regime of taxation u/s 115BAC of the Act as applicable for assessment year 2022-23 and accordingly had filed Form No.10-IE but assessee filed his return of income under the old regime of taxation - HELD THAT:- It is an admitted fact that although the assessee had originally exercised the option for taxation u/s 115BAC by filing the Form No.10-IE on 18.07.2022, however, the assessee has filed the return of income on 20.07.2022 declaring total income under the old regime of taxation.
It is also an admitted fact that the return was processed on 07.08.2023 which is much after the date of filing of the return. It is not a case that the assessee has filed Form 10-IE and also filed the return under the new tax regime and thereafter filed a revised return withdrawing the option which according to us is not permissible in the said previous year and the assessee can change the option only in the next year.
However, in the instant case, the assessee after filing the Form 10-IE has opted for the old regime of taxation in the return filed. Therefore, we are of the opinion that the assessee cannot be forced to adopt for the new regime. We, therefore, find merit in the arguments of assessee that the Ld. Addl./JCIT(A) was not justified in upholding the action of the CPC in processing the return of income determining the total income under the new regime of taxation. Accordingly, the order of the Ld. Addl./JCIT(A) is set aside and the grounds raised by the assessee are allowed.
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2025 (4) TMI 1203
Special Audit - Direction of AO to get the accounts audited u/s 142(2A) at the fag end of the assessment proceedings - HELD THAT:- We find that the assessee vide its reply dated 24/12/2019 though agreed that the examination of money trail is a complex investigation, however submitted that there are no complexities in its accounts which will require Special Audit. The assessee further submitted that it has provided various details to the Department during the ongoing assessment proceedings and has been fully co- operating with the Department.
Accordingly, vide its reply the assessee prayed that no Special Auditor should be appointed. We find that after taking note of the assessee's submission, AO passed the necessary directions on 27/12/2019 for audit of the accounts of the assessee u/s 142(2A).
From the careful perusal of the aforesaid documents, forming part of the paper book, we find no merits in the submission of the assessee that the direction to get the accounts audited u/s 142(2A) is mere tactics to extend the period of limitation and we find the same to be necessary due to multiplicity of transactions and complexities involved in assessee's accounts. Accordingly, ground no.2 raised in assessee's appeal is dismissed.
Addition u/s 68 - cash deposits and credit transactions - HELD THAT:- As undoubtedly there may have been discrepancies in maintaining KYC documentation, account opening form, and violation of society bye-laws, however, the same does not substantiate any addition in the hands of the assessee under the Act, and for the same the remedial action needs to be taken in some other statute/regulations. Accordingly, in absence of any material to show that the cash deposited in the accounts of the members, maintained with the assessee society, belongs to the assessee, we do not find any basis in sustaining any addition in the hands of the assessee u/s 68. Accordingly, the addition made u/s 68 and also the commission income estimated by learned CIT(A) are directed to be deleted.
Disallowance of provision for standard assets - HELD THAT:- As undisputed that the assessee is a co-operative credit society and is a registered Multi-State Co-operative Urban Credit Society established under the Multi-State Co-operative Societies Act, 2002 and is involved in the facility of providing credits and other banking facilities to its members. Therefore, assessee does not fall within the meaning of any category of assessee considered u/s 36(1)(viia). Accordingly, we find no infirmity in the findings of the CIT(A) in upholding the disallowance of provision for standard assets. As a result, ground raised in assessee's appeal is dismissed.
Disallowance of prior period expenses - HELD THAT:- We find that it is a settled proposition that expenditure shall be allowable in the year of crystallisation of its liability, even though the said expenditure was related to an earlier period. The said expenditure is treated as current year's expenditure in the year of crystallisation and accordingly allowable as deduction in that year.
In the present case, we find that the details of prior period expenses have not been examined in order to find out the year of crystallization of the liability. Accordingly, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo adjudication and to determine the allowability of expenses by applying principles as discussed above. With the above directions, ground raised in assessee's appeal is allowed for statistical purposes.
Disallowance u/s 40A(3) - assessee has paid rental expenses to the parties, in excess of the prescribed limit - HELD THAT:- There cannot be any dispute regarding the identity of payee, i.e. the landlord members. Further, it is also not disputed that the payment was made on account of rent as per the rent agreement. There is also no allegation that the assessee has not deducted applicable TDS while crediting the rental payment to the account of the landlord members. Considering the fact that the activities of the assessee are akin to banking activities; and the landlords have opened savings/current accounts with the assessee, we are of the considered view that the rent payments so credited to the accounts of the landlords do not violate the objective of introducing section 40A(3) - Therefore, the disallowance of rental payment u/s 40A(3) of the Act is directed to be deleted.
Disallowance of deduction u/s 80P - HELD THAT:- In the present case, it is evident from the record that the lower authorities also alleged that the assessee has earned income from providing services to non-members, i.e. by issue of "at par cheques" in lieu of cash. However, it is pertinent to note that the demand draft or at par cheques are also issued at the instructions of the member and the amount is debited/credited from/to the member's account. Therefore, it was a transaction which was carried out at the behest of the member in the accounts of the member maintained with the assessee society. Thus, we are of the view that the same cannot be treated as providing services to non-members.
We find that the assessee has exclusively made the transactions in the accounts of its members, i.e. ordinary members and nominal members, and the issuance of "at par cheques" in lieu of cash was also at the behest of the members of the society. Hence the assessee society, herein, is eligible for deduction u/s 80P.
Disallowance of provision for gratuity - HELD THAT:- As in the present case, there is no material available on record to show that the provision was made by the assessee for payment of a sum by way of contribution towards "approved gratuity fund". Therefore, section 40A(7)(b) of the Act is not applicable and under section 40A(7)(a) of the Act no deduction is allowable in respect of any provision made by the assessee for payment of gratuity. Further, under section 43B of the Act, the sum payable by the assessee as an employer by way of contribution to gratuity fund is allowable upon actual payment, therefore, even under section 43B of the Act the provision is not allowable. However, we direct that the gratuity payment be allowed in the year of payment. As a result, ground raised in assessee's appeal is dismissed.
Addition u/s 68 - amount receivable from banks where appellant-society has maintained their bank accounts - HELD THAT:- It is not understandable as to how the assessee has credited "Reserve account". It is also not clear as to whether the assessee has claimed any deduction of the amount so illegally embezzled from the bank account. If that be the case, the recovery of part or whole of the amount would be taxable. On the contrary, if the assessee has not claimed any such deduction, then the recovery of part of whole of the amount is not taxable. However, we notice that the assessee has not clearly explained the nature of journal entries passed by it in the books of account, whether it has claimed any deduction of such embezzled amount etc. In the absence of any such details, we are also unable to express any concrete view on this matter.
Accordingly as noted in the foregoing paragraph, we deem it appropriate to restore this issue to the file of the jurisdictional AO for de novo adjudication, as per law and in terms of legal principles explained above, after examination of the details filed by the assessee. The assessee shall be at liberty to furnish further documents in support of its claim. The AO is also directed to call for any other information for complete adjudication of this issue.
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2025 (4) TMI 1202
Addition u/s 68 - unexplained capital and unexplained cash creditors - assessee failed to prove the identity and capacity of the depositors and the genuineness of the transaction with conclusive evidences - CIT(A) deleted addition - HELD THAT:- All the evidences were confronted to the AO who, CIT(A) noted, did not dispute the veracity or the authenticity of the evidence, and therefore on a holistic consideration of the issue, CIT(A) deleted the addition made u/s 68. We have noted that the facts and circumstances relating to the impugned addition are identical to that in AY 2004-05 in the case of the assessee.
DR has been unable to point out any distinction in facts or even on law on this aspect before us. We, therefore, concur with the assessee that the issue stands squarely covered by the order of the ITAT in the case of the assessee for AY 2004-05, following which we hold that the additions made u/s 68 pertaining to unexplained capital and pertaining to unexplained cash credits have been rightly deleted by the ld. CIT(A) after appreciating all evidences filed by the assessee.
Addition made of unexplained investment in jewellery of 496 gms found at the residence of the assessee which was attributed as belonging to the maid servants of the assessee and the jewellery attributed as belonging to the family over and above that allowed by the AO - CIT(A) deleted addition - HELD THAT:- CIT(A) has found the explanation to be plausible. We do not find any infirmity in this finding of the ld. CIT(A). We agree with the CIT(A) that it is not unusual for the ladies of the house to be generally aware of the status of the jewellery and being in the habit of safe keeping the jewellery of others and the men being generally unaware in respect of these matters. Also pertinent is the fact noted by the CIT(A) that the spouse of the assessee identified all the items of the jewellery belonging to the maid servants even at the time of search, which was indicated from the relevant panchnama. In view of the same, we see no reason to interfere in the order of the ld. CIT(A) treating the jewellery of 496 gms, valued at Rs.2.57 lakhs, as duly explained. The order of the ld. CIT(A) deleting the addition, therefore, of Rs.2.57 lakhs is confirmed.
As for the deletion of part of addition of jewellery found in the locker amounting to Rs.2,52,824/-attributing it as belonging to the family in line with the Board’s guidelines and judicial decisions in this regard considering the status, community, customs of the assessee/family.
DR was unable to controvert the applicability of Board’s guidelines and judicial decisions to the jewellery found in the locker to the tune of 574.3 gms. The order of CIT(A), therefore, deleting the addition of unexplained jewellery found in the locker to the tune of Rs.2,52,824/- is, therefore, confirmed. Ground of Appeal No.3 of the Revenue is accordingly dismissed.
Disallowance of interest for non business use of borrowed funds without considering the fact that borrowed funds were used for non business purposes - CIT(A) deleted addition - HELD THAT:- The relevant portion of the order was pointed out to us wherein the ITAT had noted the fact of sufficiency of own funds for making the impugned advance and the proposition of law settled in this regard that no disallowance is called for where sufficient own interest free funds are available for making interest free advances, as laid down in the case of CIT Vs. Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT] DR was unable to distinguish the decision of the ITAT in AY 2004-05 – both the facts and on law. In view of the same, we concur with the ld. Counsel for the assessee that the issue stands squarely covered by the order of the ITAT in the assessee’s own case for AY 2004-05, following which we hold that the disallowance made by the AO of interest expenses amounting to Rs.4,48,988/- has been rightly deleted by the CIT(A) after appreciating all evidences filed by the assessee.
Undisclosed income from construction business of Sahjanand complex - proper profit on work in progress was not disclosed by the assessee particularly when the stock register for consumption of the material was not maintained - CIT(A) held that the AO was not justified in rejecting the audited books of accounts of the assessee since he had failed to point out specific deficiencies which were fatal in deducing the profits correctly - HELD THAT:- We find that the ITAT noted the basis with the ld. CIT(A) for finding anomaly in the books of accounts of the assessee to be entirely baseless and confirmed the order of the ld. CIT(A) noting that not a single anomaly was noted by the AO in the financial figures reported. DR was unable to distinguish the decision of the ITAT in AY 2004-05 both the facts and on law and, therefore, the issue raised in Ground No. 5 by the Revenue stands covered by the order of the ITAT in AY 2004-05, following which we uphold the order of the ld. CIT(A) deleting the addition made by the Assessing Officer on account of undisclosed income from construction business of Sahjanand complex.
Suppression of receipts - HELD THAT:- Before the CIT(A), the assessee, however, demonstrated that the amounts were received from the members over a period of three years and even filed confirmation from some members with regard to the same. The ld. CIT(A) has gone through all these details and given a finding of fact that the assessee has in fact recorded more receipts as compared to that noted in the documents seized during survey. DR was unable to refute the factual finding of the CIT(A). We have no hesitation, therefore, in agreeing with the ld. CIT(A) that the Assessing Officer’s findings of suppressed sales by the assessee to the tune of Rs.2.08 crores was based on incomplete appreciation of facts. The order of the ld. CIT(A) deleting the addition made is, therefore, upheld.
Unexplained investment in purchase of land - entries recorded on seized document as well as the statement of Shri Vikas A. Shah who was one of the parties to the impugned transaction - CIT(A) deleted addition - CIT(A) deleted the addition noting that the Assessing Officer has made these additions based on statement of Shri Vikas Shah and documents found from him which were never confronted to the assessee - HELD THAT:- DR has been unable to point out any distinction in facts or even on law on this aspect before us. We, therefore, concur with the assessee that the issue stands squarely covered by the order of the ITAT in the case of the assessee for AY 2004-05, following which we hold that the addition made by the Assessing Officer on account of unexplained investment in purchase of land from Shri Vikas Shah has been rightly deleted by the ld. CIT(A) after appreciating all evidences/submissions filed by the assessee. Ground No.7 raised by the Revenue is, therefore, found to be devoid of any merit and is accordingly dismissed.
Unexplained investment - HELD THAT:- We concur with the ld. Counsel for the assessee that the issue stands squarely covered by the order of the ITAT in the assessee’s own case for AY 2004-05, following which we uphold the order of the ld. CIT(A) restricting the addition of Rs.17,23,126/- to Rs.14,90,312/- and Rs.8,44,032/- to Rs.5,61,655/- in respect of unexplained investment in Swaminarayan Residence and Hotel Nilkanth respectively. Accordingly, ground raised by the Revenue is dismissed.
Addition made on the basis of a seized document considering the entries on the document as well as the findings of the AO - CIT(A) deleted addition - HELD THAT:- DR has been unable to controvert the fact noted by the ld. CIT(A) that the confirmation filed by Jasubhai who acknowledged the document as pertaining to him for work carried out in his flat by his society and having nothing to do with the assessee, was not refuted by the AO in the remand report. In view of the same, we see no reason to interfere in the order of the ld. CIT(A) deleting the addition made to the income of the assessee as there was nothing in the document attributing it to the assessee in any way and this fact was even confirmed by the party whose name found mentioned in the document, i.e. Mr. Jesubhai Barot. AO having not refuted the contents of the confirmation filed by Mr. Jesubhai, we are of the view that his challenge the deletion of addition made by the ld. CIT(A) is not sustainable. Ground of appeal No.9 raised by the Revenue is, therefore, dismissed.
Anticipation of receipts in future - CIT(A) deleted addition - HELD THAT:- With regard to amounts so found recorded in the books of the assessee, the Revenue, we find, has no case with the Assessing Officer having accepted the fact that the same were duly recorded in the books of assessee by way of banking entries. With respect to the amount of Rs.25 lakhs, it is not disputed that there was no description or narration of any sort against this figure while against the rest of the figures, there were name mentioned of different enterprises of the assessee and name of persons to whom the amounts were attributed. Therefore, the contention of the assessee was that this was a dumb figure accepted by the CIT(A), we hold, is correct and his explanation thereof that the figure may have been noted in anticipation of receipts in future appears to be plausible. The order of the ld. CIT(A), therefore, deleting the entire addition on account of notings is upheld.
Suppressed of receipts of hotel business - HELD THAT:- Document revealed data only for two months pertaining to the impugned year i.e. April and May 2004, and even for the sake of argument,though it has been found to be incorrect by the ld. CIT(A), the figures noted in the seized document are taken to be correct, the Assessing Officer cannot resort to extrapolation of this data for the entire year in the absence of any material found during search pertaining to the rest of the months of the year. The addition, in any case, could have been made only with respect to the data found for the months in the document, i.e. April and May 2004, the exercise of extrapolation of this data by the AO for the rest of the year, in any case, is not tenable. In view of same, we uphold the order of the ld. CIT(A).
Depreciation @ 25% on electrical installation and fittings installed in hotel buildings, while the authorities below had held the applicable rate of depreciation on the same to be 15% - HELD THAT:- DR was unable to distinguish the said decision before us. In view of the same, we agree with the ld. Counsel for the assessee that the disallowance of depreciation on electrical installations and fittings in hotel buildings of the assessee by applying rate of 15% as against 25% applied by the assessee treating it as plant and machinery was contrary to law. The issue, we agree with assessee, is squarely covered in favour of the assessee by the Express Resorts & Hotels Ltd. [2014 (12) TMI 1256 - GUJARAT HIGH COURT] Disallowance made of depreciation is directed to be deleted.
Addition made noting that the reference made to the DVO for valuation of the property was not in accordance with the law having been made without rejecting the books of accounts of the assessee - HELD THAT:- DR was unable to point out any distinction either on facts or on law on the issue before us. In view of the same, we agree with the assessee that the issue of addition made on account of unexplained investment in Swaminarayan Farm Residence and Hotel Neelkanth, stands covered in favour of the assessee by the decision of the ITAT in the case of the assessee itself in the immediately preceding year i.e. AY 2004-05. The addition, therefore, is directed to be deleted.
Unexplained investment in jewellery found from the locker and residence - HELD THAT:- The explanation of the assessee with regard to this jewellery which was found in the locker of the assessee was that it was purchased from one Mahendra & Co., sourced out of withdrawals reflected in the books of accounts. The Assessing Officer, on inquiry made in this regard, found that the said person was not in existence on the date of the supposed sale. CIT(A), based on this finding of the AO which remained uncontroverted, confirmed the addition to the extent of Rs.5.99 lakhs. The assessee was unable to convince us in any manner about the genuineness of the alleged purchases made of the jewellery from Mahendra & Co. He was unable to controvert the findings of the inquiry of the Assessing Officer that the said party was not in existence when the sale of the jewellery purportedly was made. In view of the same, we see no reason to interfere in the order of the ld. CIT(A) confirming the addition of unexplained investment in jewellery.
Undisclosed investment in valuables - HELD THAT:- There were many items which were categorically found not disclosed in the books of the assessee. The fact situation, therefore, calls for addition to be made on account of unexplained investment in these assets and the CIT(A) has been fair enough in scaling down the valuation of the assets made by the AO, and further giving the benefit of telescoping against the same. Assessee was unable to point out any perversity in the valuation attributed by the CIT(A) to these items at Rs.30 lakhs. The decision relied by the ld. Counsel for the assessee before us in the case of Balbir Singh Sekhon [2011 (9) TMI 1144 - ITAT CHANDIGARH] we find, is of no assistance since the findings of the ITAT of the said case was to the effect that where no reasons have been assigned to valuation of household expenses at higher amount, the addition is not sustainable. In the present case, however, there are valid reasons for making addition on account of unexplained investment. The articles found at the residence of the assessee being far more than that recorded in the books of the assessee. Therefore, in view of the above, the addition confirmed by the ld. CIT(A) as undisclosed investment in valuables is, therefore, upheld.
Sales proceeds of the godown sales not disclosed in the books of account - No infirmity in the order of the ld. CIT(A) holding that a nexus of the data contained in the document seized with the assessee was clearly established and, as rightly pointed out by the ld. CIT(A), in the absence of any credible explanation given by the assessee for the said document there is no other recourse left but to confirm the addition made on account of the difference in the receipts as per the seized document and that reflected in the books of the assessee on account of sale of godowns.
Non granting benefit of telescoping and not granting set off of alleged unaccounted income against alleged unexplained investment in various assets found during the course of search proceedings - Assessing Officer is directed to grant the benefit of telescoping of the unaccounted income of the assessee against unaccounted investment in various assets as possible on facts and in law.
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2025 (4) TMI 1201
Jurisdiction - proper officers or not - officers of DRI - jurisdiction of Directorate of Revenue Intelligence (DRI) to issue SCN under Section 28 of the Customs Act, 1962 - HELD THAT:- The question as to jurisdiction of DRI officials now stands resolved in the Canon II [2022 (2) TMI 1480 - SC ORDER] decision of the Supreme Court where it was held that 'Applications seeking exemption from filing affidavits are allowed'.
Since the said issue now no longer remains res integra, CESTAT would have to decide the appeals of the Customs Department on merits, in terms of the orders passed in similar matters. Accordingly, Customs Appeal No. C/52942/2015 in CUSAA 62/2025 and Customs Appeal No. C/52578/2015 in CUSAA 63/2025 respectively, are restored before the CESTAT.
Appeal disposed off.
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2025 (4) TMI 1200
Confiscation of the seized vehicle - redemption fine - penalty - main ground of challenge is that appellant had no prior knowledge about the smuggled nature of the goods - HELD THAT:- The knowledge and mensrea can be ground for challenging the penalties imposed, but cannot be the ground for challenging the confiscation of vehicle. Undisputedly the goods found in the vehicle of were of foreign origin and were illicitly imported in the contravention of the provision of the Custom Act, 1962, hence were smuggled goods. Further the Appellant or the driver of the vehicle on demand was not in position to produce any documents with regards to the licit importation of the said goods - there are no merits in the submission that Appellant or his agent i.e. the driver was not aware of the illicit nature of the goods.
There are no merits in the appeal filed by the Appellant challenging the order of confiscation of vehicle under Section 115 of the Customs Act, 1962. However taking note of the fact that total seizure value of the smuggled goods was about Rs 3,43,000/- and the same have been disposed for Rs 2,24,800/-, the redemption fine imposed for the release of confiscated vehicle to be on higher side and reduce the same to Rs 50,000/-.
Conclusion - i) Confiscation of conveyances used in smuggling is mandatory unless the owner proves lack of knowledge or connivance. ii) Mere lack of knowledge or mens rea may absolve penalty liability but does not affect confiscation liability. iii) Redemption fine must be proportionate and not exceed the market value of smuggled goods.
Appeal partly allowed by reducing the redemption fine to Rs 50,000/-.
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2025 (4) TMI 1199
Mis-declaration of the quantity of imported goods - violation of provisions of Section 40(4) of the Customs Act, 1962 read with the provisions of Section 111(m) of the Customs Act, 1962 - HELD THAT:- The filing of an appeal itself can be taken as a protest thereby uprooting the consented value which might have been given at the time for taking clearance of goods. Of course, this will be with the caveat that the value which has been consented is contested further, as per law, before the higher Judicial fora.
On the other issue regarding the effect of declaring units and therefore the variation in weight being detected and its consequences, it is found that the decision in the case of NILKAMAL LTD. VERSUS COMMR. OF CUS. (IMPORT), NHAVA SHEVA [2018 (11) TMI 1767 - CESTAT MUMBAI], held that when the goods are in excess for items which are assessable as units and not by weight and excess weight, noticed at the time of physical verification of import by Customs authorities, could not be considered as requiring change in the transaction value disclosed in invoices.
Further, it is also found that Grasim Industries Ltd Vs. Commissioner of Central Excise, Rajkot [2007 (5) TMI 468 - CESTAT, NEW DELHI] have clearly brought out that weight cannot be considered to be influencing the transaction value. When purchase order was given on per piece basis.
It is also agreed that there is nothing on record to show that there was any excess remittance made for the excess weight which was found at the time of examination in impugned goods which were Proof Machined Low Alloy Steel Shell Belt, Carbon Steel Forged Hemi, Machined Carbon Steel Forged Test Plate. The very nature of the goods indicate that they are sold in the market by units and not by weight.
Conclusion - In the absence of evidence showing remittance above invoice value, the declared transaction value must be accepted. The declared transaction value and quantity as per units should be accepted for customs duty assessment.
Appeal allowed.
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2025 (4) TMI 1198
Classifictaion of imported goods - software license in paper form imported along with the Distributed Control System (DCS) hardware - to be classified under Customs Tariff Heading (CTH) 8538 9000 or not - applicability and interpretation of Note 2 to Section XVI of the Customs Tariff Act, 1975 - HELD THAT:- The admitted facts are Distributive Control Unit AC460 BOT system and the software imported are embedded in the hardware. It is also not in dispute that the software license in paper form is also received along with this hardware. The impugned Order-in-Appeal No.21/2011-Cus dated 31.03.2011 is a common order against Order-in-Original 284/2009 dated 12.10.2009 and No.417/2009 dated 26.12.2009. Both these Order-in-Originals have been considered by Commissioner (Appeals) in Order No.33/2009 dated 30.03.2009 wherein it was held that “the software and the license fees goes hand-in-hand and are classifiable together, the software to be classified along with the hardware and the claim of the appellant under CTH 4907 or 8523 was rejected”. Accordingly, the impugned order confirmed the classification of the software paper license as part of hardware under 8538 9000.
The decision relied upon by the Original Authorities based on which the Commissioner (Appeals) also confirmed the demands was set aside by this Tribunal in [2019 (9) TMI 80 - CESTAT BANGALORE]. The case before the Tribunal was regarding classification of software under CTH 49 or 8524 which attracted ‘Nil’ rate of duty are to be classified under CTH 8471 and it was held that 'the CBEC has also clarified vide Circular 15/2011 that documents conveying the right to use software do not merit classification under CTH 8523 8020 but merits classification under CTH 4907.'
Conclusion - There are no reason to uphold the classification of the software license in paper form under CTH 8538 9000.
Appeal allowed.
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2025 (4) TMI 1197
Levy of Custom duty - appellant have cleared the imported goods under Release order issued against DEPB Scrips by the DGFT - HELD THAT:- The entire argument of the Learned Counsel is that since the DEPB Scrips and/or Release Advice has not been cancelled by the DGFT the same stand valid and import thereunder cannot be questioned. In these circumstances, it is found that the case of the department is that the DEPB Scrips was obtained fraudulently therefore any import made on that basis cannot be extended the benefit of duty free clearance under DEPB Scheme. However, despite the direction from this Tribunal, the Revenue could not produce the status report of the DEPB license/release advice issued there under.
Therefore, the matter needs to be remanded to the adjudicating authority for ascertaining status of DEPB License/release advice issued by DGFT and thereafter to pass a fresh order on all the issues.
Appeal allowed by way of remand.
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2025 (4) TMI 1196
Admission of Section 7 application filed by the Central Bank of India against the Corporate Debtor - application barred by time limitation - whether between 28.01.2014 where corporate debtor has acknowledged and 22.11.2018 which is also another OTS submitted by corporate debtor, there are any material to indicate that there is any acknowledgment within three years from the first acknowledgment? - HELD THAT:- Acknowledgment has to be treated on 28.01.2014 as well as 07.05.2014 and we have to find out whether after 07.05.2014 within three years there are any other acknowledgment because the acknowledgment dated 22.11.2018 is beyond period of three years.
The written statement of the Defendant as noticed by the Court is clear acknowledgment of the dues of the bank. OTS amount of Rs.5.78 Crores was noted to be payable with overdue interest at PLR on reducing balance. Defendant further stated that interveners are duty bound to pay the balance amount with overdue interest. The order of the DRT, thus, clearly records the acknowledgment of the corporate debtor about the dues of the bank. The above is also clear acknowledgment of the corporate debtor recorded by the Court on 15.06.2016/ 20.01.2017. Thus, after 07.05.2014 there is acknowledgment within three years. Thus, from the above, it is clear that there are innumerable acknowledgments by the corporate debtor on the record capable of extending the period of limitation and the application which was filed on 13.11.2019 (24.01.2020 as noted by the Adjudicating Authority) is well within the time and cannot be thrown out on this ground.
The case of the appellant is that no payment has been made by the appellant after 30.06.2015. Payments made by the appellant are also reflected in the bank statement brought on the record. The entire OTS amount was not paid within time as allowed by the OTS letter dated 07.05.2014. OTS has come to an end. It is also relevant to notice that after receiving OTS letter dated 07.05.2014, as noted above, the corporate debtor has written letter to the bank on 16.05.2019 where the corporate debtor has requested the bank to restore possession to the corporate debtor so it can arrange to pay the OTS amount may be at a time.
Appellant is illegally continuing in the possession of the assets of the corporate debtor being not paid any payment after 30.06.2015 i.e. for the last 10 years. It is enjoying possession of cold storage and as noted above, Resolution Professional has filed application for taking possession before the Adjudicating Authority where Adjudicating Authority has directed the Resolution Professional to take possession which could not be taken in view of the interim order passed by this Tribunal. Resolution Professional has also filed an application seeking recovery for amount on account of illegal gains obtained by the appellant by utilising and running the valuable assets of the corporate debtor.
The order passed by the Adjudicating Authority admitting Section 7 application against the corporate debtor is upheld. The interim order passed in this appeal on 29.08.2022 is vacated. Resolution Professional to proceed with the CIRP in accordance with law - The period from 29.08.2022 till date is excluded from CIRP period.
Conclusion - i) The Adjudicating Authority's order admitting Section 7 application is not liable to be set aside merely on the ground of limitation if the debtor has acknowledged the debt within the limitation period. ii) The Resolution Professional is entitled to take possession of the corporate debtor's assets to carry out the CIRP, and the Court can direct forcible possession if the appellant refuses to hand over possession.
Appeal disposed off.
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2025 (4) TMI 1195
Admission of claims for the reimbursement of the property tax paid, based on an unregistered agreement for sale relating to immovable commercial property - HELD THAT:- The claim for the reimbursement of the property tax paid by the Appellant (claim No. 2) for the alleged temporary office accommodation said to have been provided by the Corporate Debtor for the office purpose of the Appellant, no right would accrue in favor of the Appellant, for the reason being that if the unregistered agreement for sale, which has been placed on record and relied by the Ld. Counsel for the Appellant, before this Appellate Tribunal, as well as before the Ld. Adjudicating Authority is taken into consideration and scrutinized, Ld. Adjudicating Authority did not find any reference to any specific observation which has been made in the said agreement towards parting over the rights over any of the area for the purpose of being utilized, as the office of the appellant society. In the absence of there being any specific observation made in the said agreement for providing space for the office of the appellant society, there arises no legal liability to reimburse the amount paid by the Appellant towards GHMC property tax for the temporary office accommodation.
Apart from it, nothing on record has been brought by the appellant to establish that a right was created in favor of the Appellant society by execution of a sale deed for the alleged office space for Appellant society. In fact, the Appellant had attempted to make a plea for the purposes of the remittance of the balance claims, by referring to the unregistered agreement for sale, as though it is a registered document. The agreement for sale, dated 05.08.2010, which is placed on record is not a document which has been registered in the eyes of the law, so as to make it to be read in evidence; for determining of a claim or any right arising from it.
The claim raised by the Appellant in the application thus preferred for a sum of Rs. 4,47,161/- payable towards the reimbursement of the property tax as alleged to have been paid by the Applicant based on the unregistered agreement for sale dated 05.10.2010 would not be sustainable, and that when creation of right and handing of possession is not proved, there cannot be any tax liability.
The contention raised by the Appellant in the instant appeal, that the said aspect was not taken into consideration while rejecting its claims by the impugned order, is not sustainable owing to the findings, which have been recorded by the Ld. Adjudicating Authority. In order to appreciate further, the arguments which had been extended by the Ld. Counsel for the Appellant, in fact, the Burden of proof to collate the claim by virtue of evidence is a responsibility, which is cast upon the claimant itself who submits Form-F before the Resolution Professional for the verification of the claim by receiving all the claims submitted by the creditors, which is supported by the documents, which are to be submitted in compliance with the provisions contained under Section 18 (b) of I & B Code, 2016 - What is relevant herein is to point out that, the entire basis of the claim did not satisfy the parameters as prescribed under Regulation 7(1) to be read with Regulation 7(2), as they were contrary to the records, which were made available before the Resolution Professional. Hence, the Appellants were not entitled to any amount for which they could claim as defined under Section 3 (6) of the Regulations, where accrual of the right of payment is only subject to when the amount is fixed, undisputed, and legally established to equitable secured debt.
As per claim No. 7 the Appellant themselves have prayed for that an appropriate direction may be issued for the purposes of execution of the sale deed, which is an admission of fact, that there is no sale deed so far, conferring any right over an immovable property. Thus, it becomes a tacit admission made by the Appellant society that, there was no validly executed sale deed in favor of the society and its members. If that be the situation, the other preceding claims except for the claim of corpus fund cannot be admitted, as grant of those claims would have arisen only when there was a valid sale deed executed, without which the debt due cannot be established.
Conclusion - i) The unregistered agreement for sale, which is mandatorily required to be registered under Section 17 of the Registration Act, 1908, being unregistered, cannot be received as evidence to create or confer any right, title or interest in immovable property under Section 49 of the Registration Act, 1908. ii) The claims raised by the Appellant based on such unregistered agreement for sale, including reimbursement of property tax, costs of integrated building management system, maintenance expenses, and other related claims, are not legally tenable and cannot be admitted as debt due under the Insolvency and Bankruptcy Code, 2016.
Appeal dismissed.
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2025 (4) TMI 1194
Non-service of the demand notice - delivery of Recall Notice, Invocation Notice and Demand Notice - various discrepancies in the report filed by the RP u/s 99 of the Code - acknowlegdement of liability to pay the debt - statutory requirements under Sections 95 and 99 of the Insolvency and Bankruptcy Code (IBC) - HELD THAT:- The Respondents had sent the Loan Recall Notice, Invocation Notice, and Demand Notice to the Given Address recorded in the Guarantee Deed. Appellant contends that the notices were either not served or not adequately proven to be served. Clause 22 of the Guarantee Deed explicitly states that all communications, including a Notice of Demand, sent to the address provided in the Guarantee Deed or the last known address shall be considered sufficient service.
In another case the Hon'ble High Court of Delhi in Ajay Ahuja v. Subhiksha Trading Services Ltd. [2010 (12) TMI 1369 - DELHI HIGH COURT] provides us guidance. Even though this was a case of Transfer of Property Act, 1882 - being similar to Rule 3(g) of the PG Application Rules. Herein, while examining Section 106(4) of the Transfer of Property Act, 1882, viz. the requirement of affixing the notice in case the same was not served, held that by sending the notice on the correct address, which was returned back with remarks "shifted", and "left without instructions" the requirement of Section 106 of the Transfer of Property Act, 1882 was met.
The claim of the Appellant that the Since the invocation notice and the demand notice were issued in accordance with the provisions of the Guarantee Deed and which constitutes a separate contract between the parties; therefore, the claim of the Appellant-PG is not maintainable - the grounds raised by the Appellant- PG on validity of service are without merits and are not acceptable and doesn’t provide any support to the Appeal. Accordingly, the arguments of the Appellant that service of various notices have not been done cannot be accepted.
Despite multiple attempts to engage with the Appellant, they remained unresponsive and only raised objections later which appear more to cause delays rather participating in resolution process. Respondent No. 2- RP ensured the Appellant- PG was given an opportunity to present their case, but no response was received. The Appellant has not disputed the debt, the guarantee, or the last known address but only alleged non-delivery of the demand notice, which is unfounded. Only claim of lack of acknowledgment of notices etc is legally untenable and unacceptable. As noted earlier it was the duty of the Appellant to notify any change in their address, if any. Regarding the Appellant’s claim that Section 95 requirements were not met, Respondent No. 2 reviewed all documents, including those submitted via email on January 3, 2024 - the issuance of the Recall Notice, Invocation Notice, and Demand Notice to the Given Address constitutes valid service in accordance with the Guarantee Deed. Consequently, the Respondent’s objections regarding non- service of the notices are found to be contradict the terms of the Guarantee Deed, and cannot be accepted.
The Resolution Professional’s report, prepared under Section 99 of the IBC, substantiates that the procedural requirements under Section 95—specifically the issuance and service of the Demand Notice in the prescribed manner—have been met. The evidence of service, including speed post receipts and email transmissions, supports the contention that the statutory process was duly followed. The Appellant’s argument that the non-receipt of the notices undermines the proceedings is not borne out by the documentary record - the contentions of the Appellant-PG for non- compliance of statutory requirements are devoid of merits and are rejected.
Invocation of the Guarantee and Liability of the Appellant - HELD THAT:- The Guarantee Deed provides that liability arises upon the occurrence of default by the borrower, and the subsequent actions taken by the financial institution were in line with the contractual obligations. It is claimed that the guarantee becomes a debt once the said guarantee is invoked, wherein after the guarantor becomes liable. The Appellant has placed reliance upon Edelweiss Asset Reconstruction Company v Orissa Manganese and Minerals Limited and others [2019 (6) TMI 639 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] wherein it has been held that 'A contract of guarantee matures in to a binding obligation only upon its invocation. Contract of Guarantee is an autonomous contract and the admission of the principal debtor to CIRP does not mean that the debt stands proved as against the Guarantor in a Section 7 proceeding against the Corporate Guarantor automatically. The guarantee has to be invoked and the debt and default proved separately in the proceeding against the Guarantor.'
The Appellant does not get any support from Edelweiss Asset Reconstruction Co. v. Orissa Manganese and Minerals Ltd. [2019 (6) TMI 639 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI], as the existence of a Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor does not preclude the initiation or continuation of proceedings against the Personal Guarantor. This principle has been upheld in decisions such as Lalit Kumar Jain v. Union of India [2021 (5) TMI 743 - SUPREME COURT] by the Hon’ble Apex Court, wherein it was held that even if the resolution plan is approved, the same does not discharge the personal guarantor.
Further, this Tribunal in the matter of Mohan Kumar Garg vs. Omkara Assets Reconstruction Pvt. Ltd. & Anr [2023 (8) TMI 1636 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI], had held that the simultaneous proceedings in respect of the guarantor as well as the borrower can be proceeded with.
It is a settled position of law that simultaneous proceedings can be initiated against the borrower as well as the guarantor. As the Respondent No1- Omkara has not received the outstanding amount, either in part or in full, hence, the contention of that since borrower is already undergoing CIRP, wherein resolution plan is being considered by the members of the COC, the Petition ought not be proceeded with, is bereft of any justification and needs to be rejected.
Facts and materials on record reveal that, the Appellant-PG has not denied executing the Guarantee Deed, which binds him with joint and severe responsibility of repayment, in case of non-payment by the Borrower and Co- Borrower. Clause 1 of the Guarantee Deed clearly states that in the event of default by the Borrower or Co-Borrower, the Appellant-PG shall be liable to pay the defaulted amount - It had sufficient opportunity to submit the repayment plan, but it did not file any Repayment plan. Respondent No.2-RP was, therefore, constrained to file I.A No. 283 of 2025 under Section 114(1) read with Sections 115(2) and 106 of the Code, before the Adjudicating Authority, seeking the closure of the Insolvency Resolution Process of the Appellant, liberty for creditors to file a bankruptcy application under Chapter IV of the Code, and discharge from duties as there was absence of a viable repayment plan under Section 105 of the Code from the Appellant tantamount to rejection of repayment plan under Section 114(1) of the Code.
Conclusion - i) The notices in question were sent to the last known address as stipulated in the Guarantee Deed, and such service is deemed valid under established legal principles. ii) The Resolution Professional has satisfactorily demonstrated compliance with the requirements of Sections 95 and 99 of the IBC. iii) The Appellant’s contentions regarding non-service and the alleged deficiencies in the report are without merit, as the burden of updating one’s address lies with the Appellant. iv) The simultaneous CIRP against the Corporate Debtor does not interfere with the obligations of the Personal Guarantor under the Guarantee Deed.
There are no infirmity in the orders of the Adjudicating Authority - the appeal is dismissed.
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2025 (4) TMI 1193
Money laundering - predicate offence - possession of proceeds of crime - attachment of shares - HELD THAT:- The description of the litigation taken by the appellant has been given with operative paras as otherwise the appellant has also summarized certain parts of the order in the written argument but it is only after extracting small part of the para suitable to the appellant leaving other parts and it is without referring to the operative part of the orders. The earlier litigation resulted in the order based on facts available then and otherwise the involvement of appellants in commission of crime was revealed even in further investigation and therefore prosecution complaint (PC) has been filed against the appellant. The fact otherwise reveals receipt of the amount and purchase of shares was designed for transfer of bribe money out of the deal of Agusta Westland, UK.
Paras 77 and 83 of judgment have also been referred to indicate that the shares were acquired in the year 2003 which is prior to the allegation of any scheduled offence and as a result of alleged kickbacks paid by AgustaWestland and thereby the Deputy Director of Enforcement Directorate had no authority to freeze the shares which were delivered in settlement to the purchaser and there was no allegation against the purchaser.
It is necessary to clarify that in the aforesaid judgment, cognizance of the freezing of shares under section 17(1) of the Act of 2002 was taken along with the appeal preferred by the appellant against the freezing order with appropriate liberty to pursue the appeal. If final conclusion would have been drawn by High Court of Delhi in favour of the appellant, there was no reason to allow the appellant to pursue the appeal. It is, further, necessary to clarify that the main allegation against the appellant is routing the bribe money for which ledger entry was referred and thereupon money was transferred and used for purchase of shares. The case of money-laundering is to be taken when it is revealed that proceeds of crime has been channelized. In reference to this, we may cite the judgment of Karnataka High Court in Mr. Dyani Antony Paul versus Union of India [2020 (12) TMI 1296 - KARNATAKA HIGH COURT] and Telangana High Court in Vem Krishna Keerthan versus Directorate of Enforcement [2024 (12) TMI 1557 - TELANGANA HIGH COURT] where it was held that the relevant time to look into the crime would be the date when it comes to the notice of Enforcement Directorate that a crime of money-laundering has taken place and not the date of predicate offence.
Part of paras 92 and 93 of the judgment of the High Court of Delhi [2019 (1) TMI 515 - DELHI HIGH COURT] have been quoted without indicating the reason of making observation by the High Court of Delhi in regard to the transaction of sale of equity shares of KRBL. In fact, the Writ Petition was filed when the respondent restrained the appellant to transact in the shares and it was addressed by the High Court of Delhi as to whether action is legally sustainable or not. Subsequently those shares were frozen and against which appellant filed the appeal and was noted by the High Court of Delhi. No interference in the freezing order was caused.
It is necessary to further add that the High Court of Delhi had disposed of the appeal and operative part of the said order has been quoted. It was not entirely favourable to the appellant, rather, Writ Petition was disposed with certain observations. Had it been a case to hold action of the respondent to be illegal and the appellant is not the recipient of the proceeds of crime, there was no reason for the High Court of Delhi to dispose of the petition in reference to the appeal preferred by the appellant against the order of seizure of the shares.
Conclusion - The appellants are involved in money laundering activities. The attachment of shares is lawful and justified under the PMLA.
Appeal dismissed.
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2025 (4) TMI 1192
Recovery of service tax with interest and penalty - exempted services under Entry Serial No. 12 (e) of the notification - adequate opportunities of personal hearing provided to petitioner as per Central Board of Excise & Customs (C.B.E.&C.) Circular No. 1053/02/2017-CX dated 10.03.2017 or not - violation of principles of natural justice - HELD THAT:- This writ application is fit to be allowed on the very first ground taken by learned counsel for the petitioner i.e., the ground of violation of principles of natural justice, the other issues raised by learned counsel for the petitioner are not required to be discussed and adjudicated upon for the present in this writ application.
On the point of violation of principles of natural justice, this Court finds that the petitioner has made out a case. The facts reveal that the show cause notice was issued on 13.10.2021, no defence reply was filed but then for two and half years nothing happened in the proceeding. For the first time, a date was fixed on 11.01.2024 for personal hearing. On this date, the petitioner submitted a letter requesting a deferment which was accepted by Respondent No. 3 and a date of hearing was fixed on 14.02.2024. Admittedly, on 14.02.2024, the representative of the petitioner appeared - The impugned order (Annexure-P4) nowhere records that the Respondent No. 3 fixed a further date giving an opportunity to the petitioner company to appear with the documents and make its submissions. All that is stated in the impugned order in paragraph ‘3.2’ is that the representative of the petitioner was explicitly asked to provide substantiating documentation supporting the assertions made by the noticee. However, as of the present moment, even after 15 days, the noticee has failed to submit any documents in support of his claim. Thus, it appears that when the hearing took place on 14.02.2024, no specific date was fixed by Respondent No. 3 giving an occasion to the petitioner company to know the actual date of the next hearing.
Paragraph ‘14.4’ of the master circular mandates that the adjudicating authority must maintain a record of personal hearing and written submission made during the personal hearing. Evidence of personal hearing and written submission on record, would be very important while adjudicating the case. A combined reading of paragraph ‘14.3’ and ‘14.4’ of the master circular leaves no room to contest that Respondent No. 3 may deviate from these provisions of the master circular but in the present case, we find that Respondent No. 3 has not followed the mandate of granting at least three opportunities of personal hearing to the petitioner company.
Conclusion - The statutory requirement as envisaged under Section 33A of the Central Excise Act, 1944 read with paragraph ‘14.3’ of the master circular has not been complied with.
The impugned order is liable to be set aside - The matter is remitted to the Respondent No. 3 for fixing a date of hearing giving at least four weeks’ time to the petitioner to produce the documents and submit a written submission in support of its contention - application allowed.
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2025 (4) TMI 1191
Valid proof of payment under Section 127(5) of the Finance Act, 2019 read with Rule 7 of the Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 - payment made by the petitioner - direction to issue manual discharge certification in Form SVLDRS-4 in accordance with provision of section 127(8) of Finance Act, 2019 read with Rule 9 of Sabka vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 - HELD THAT:- Perusal of the material on record would indicate that the amount payable by the petitioner under the SVLDR Scheme was paid by him under a different head in a manual form as a result of which same was not reckoned towards the scheme despite the petitioner having actually paid the said amount.
In the light of the undisputed fact that the amount as quantified and estimated by the respondent No.1 in SVLDRS-Form 3 had already been paid by the petitioner much prior to the cut off date, the respondents ought to have issued the SLVDRS- Form 4 certificate to the petitioner and the same having not been issued to the petitioner till date, the petition deserves to be allowed.
Petition allowed.
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2025 (4) TMI 1190
Wrongful availment of CENVAT Credit - scope of SCN - impugned order passed beyond the allegation in the SCN - HELD THAT:- At the time of issuance of show cause notice, the appellant could not produced all the documents to satisfy that they have correctly availed the Cenvat Credit on the capital goods, but while filing the reply to show cause notice, the appellant produced all relevant valid documents on which credit was availed under Rule 9(1)(f) of the Credit Rules and the original authority, after fully satisfied with the documents provided by the appellant, dropped the proceedings initiated in the show cause notice and allowed the Cenvat Credit.
It is pertinent to note that the original authority has observed that the appellant has submitted all the relevant/prescribed documents i.e. concerned bills of entry, invoices vide letter dated 04.10.2021 alongwith complete documents as Annexure 'A’ at the time of adjudicating process. Excess Cenvat Credit so availed at the time of audit was examined in terms of Rule 9 of Credit Rules and found relevant. The original authority has also observed that the bills of entry are in the name of Nando’s Bangalore and not in the name of the appellant, but the credit has been availed, apparently, on the basis of bills of entry and not on the basis of exporter’s invoice.
The substantial benefit cannot be denied merely on procedural infirmities as held by the Tribunal in the case of M/s Bharat Sanchar Nigam Limited [2008 (10) TMI 141 - CESTAT CHENNAI], wherein it has been held that a substantive benefit cannot be denied on a procedural or technical ground where the beneficiary has satisfied the substantive conditions for benefits.
It is also found that the appellant has produced the Chartered Accountant Certificate certifying that the head office at Bangalore has not availed Cenvat Credit on the import of goods and the same is also proved from the ST-3 returns filed by the appellant on record.
Conclusion - The denial on the sole ground of invoices being in the name of head office, is not justified.
The impugned order is not sustainable in law - Appeal allowed.
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2025 (4) TMI 1189
Availment of Cenvat credit on Service Tax paid on rent for a business premises (Himalaya Crown Apartment) that was not included in the appellant's ST-2 registration certificate - input services or not - HELD THAT:- On carefully going through the decision of this Tribunal in the case of 24/7 Customer Pvt. Ltd. [2013 (12) TMI 257 - CESTAT BANGALORE], it is understood that this Tribunal had allowed Cenvat credit of Service Tax paid to said appellants for Gurgaon office for the period for which Gurgaon office was not registered. Following the said precedent decision, the appellant is entitled for disputed Cenvat credit of Rs. 2,35,500/-.
Conclusion - The appellant is entitled to the disputed Cenvat credit on rent paid for the unregistered premises.
The impugned order is set aside - appeal allowed.
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2025 (4) TMI 1188
Classification of service - Renting of Immovable Property Service or not - transaction of transferring leasehold rights for a period of 99 years by the appellant to sub-lessees - levy of service tax under the category of Business Auxiliary Service (BAS), given the nature of the receipts involved - time limitation.
Classification of service - Renting of Immovable Property Service or not - transaction of transferring leasehold rights for a period of 99 years by the appellant to sub-lessees - HELD THAT:- The one time Premium received by the Appellant cannot be equated with rent payable on regular intervals for continuous use of the property. The difference between the Premium or Salami and the lease rent as envisaged in Section 105 of the Transfer of Property Act, 1882, has been dealt in the decision of the Hon’ble High Court in the case of AR KRISHNAMURTHY AND AR RAJAGOPALAN VERSUS COMMISSIONER OF INCOME-TAX, MADRAS [1980 (12) TMI 33 - MADRAS HIGH COURT]. From the decision, it is observed that the price paid for transfer of possession or the right to enjoy the property is called the ‘Premium or Salami’ and the periodical payments made for continuous use of the property under lease is called ‘rent’. The Applicant has received only a one-time payment as Premium and hence by relying on the above decision it becomes clear that the Premium received by the Appellant cannot be called as ‘rent’.
The difference between the ‘Premium’ and ‘Rent’ has been highlighted in the Judgment of the Hon’ble Supreme Court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd., [1965 (4) TMI 19 - SUPREME COURT]. From the aforesaid judgement, it is observed that consideration, i.e. one-time payment, in the form of Premium or Salami and consideration in the form of ‘rent’ connotes two different types of consideration.
In the instant case, the Applicant has not received any ‘rent’ from the sub-lessees. Accordingly, the premium or salami paid to the Applicant for transfer of right in the property, should not be exigible to the service tax.
The one time Premium/ Salami received by the appellant from the sub- lessee is not a consideration towards the taxable service of 'Renting of Immovable Property'.
Levy of service tax under the category of Business Auxiliary Service (BAS), given the nature of the receipts involved - HELD THAT:- The impugned Order does not specify under which clause of "BAS" the aforesaid charges would fall. Accordingly, it is held that demand of service tax confirmed under the category of 'BAS' is not sustainable without specifying the particular Clause under the definition of 'BAS'. Accordingly, the demand confirmed under the category of 'BAS' in the impugned order is not sustainable.
Time Limitation - HELD THAT:- In this case, the Show Cause Notice was issued after a period of 18 months. We also observe that the taxability on this issue has been subject matter of dispute at various forums. Also, it is a fact on record that the demand has been calculated from the audited financial statements. Thus, there is no suppression of fact with intention to evade the tax established in this case. Accordingly, the demand is also barred by limitation.
Since, the demand of service tax is not sustainable, the question of demanding interest and imposing penalty does not arise.
Conclusion - i) The one time Premium/ Salami received by the appellant from the sub- lessee is not a consideration towards the taxable service of 'Renting of Immovable Property'. ii) Demand of service tax confirmed under the category of 'BAS' is not sustainable without specifying the particular Clause under the definition of 'BAS'. iii) There is no suppression of fact with intention to evade the tax established in this case, the demand is also barred by limitation. iv) Since, the demand of service tax is not sustainable, the question of demanding interest and imposing penalty does not arise.
Appeal allowed.
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2025 (4) TMI 1187
Classification of services - management, maintenance or repair service or Commercial or Industrial Construction Service? - classification of services rendered post 01.07.2012 as 'works contract service' by the appellant - scope of SCN - extended period fo limitation.
Whether the services provided by the appellant during the period prior to 30.06.2012 are correctly classifiable as 'management, maintenance or repair service' or as 'Commercial or Industrial Construction Service' (CICS) for the purpose of service tax levy and abatement? - HELD THAT:- With effect from 01.07.2012, the Appellant classified the services in question as ‘Works Contract ’ Service and accordingly was discharging service tax. For the period post 01.07.2012, it has been alleged that the classification of the subject transaction as ‘works contract’ is incorrect inasmuch as the Appellant failed to submit any documentary evidence to substantiate discharge of VAT on the value of goods involved in the execution of goods. For the period post July 2012, even when the adjudicating authority accepted that the underlying agreements qualifies as ‘works contract services’, he has held that the valuation adopted by the Appellant in terms of Rule 2(A)(ii) of Service Tax Valuation Rules is incorrect since the Appellant is able to determine the value of VAT payable. Accordingly, it was held that the Appellant ought to have adopted Rule 2(A)(i), for determination of value of services.
Whether the classification of services rendered post 01.07.2012 as 'works contract service' by the appellant is correct? - HELD THAT:- Reliance placed on the decision in the case of Gainwell Commosales Pvt. Ltd. v. CCE & ST, Ranchi [2023 (6) TMI 1308 - CESTAT KOLKATA], wherein this Tribunal has held that if a contract involves supply of goods as well services prior to 01.07.2012, then such composite contract cannot be classified under management maintenance or repair ’service. It has been held that such contracts would more appropriately be classifiable under works contact service and thus, demand under management maintenance or repair ’service was set aside.
The demand of service tax confirmed in the impugned order for the period prior to 30.06.2012 under the category of ‘management maintenance or repair’ service is not sustainable. Accordingly, the appellant has rightly classified the said service under the category of ‘Commercial or Industrial Construction Service’ (CICS) and claimed abatement in terms of Sl. No. 10 of Notification No. 01/2006-ST dated 01.03.2006.
Scope of SCN - Demand of service tax confirmed for the period from period from July 2012 to September 2014 - HELD THAT:- The Ld. Commissioner has travelled beyond the scope of the Show Cause Notice and confirmed the demand on a ground which is not raised in the Notice. It is observed that nowhere in the Show Cause Notice was there any allegation or proposal with respect to the valuation of such services under Rule 2(A) of the Service Tax Valuation Rules. Once the allegation in the Show Cause Notice regarding the classification of the services in question has been decided, the Ld. Commissioner cannot travel beyond the proposals in the Show Cause Notice and confirm the demand. It is a settled principle of law and has been held in a number of decisions that when an order goes beyond the allegations mentioned in the Show Cause Notice, such order is violative of the principles of natural justice. Accordingly, the demand confirmed post June 2012, up to September 2014, is liable to be set aside on this ground alone.
Valuation of works contract under Rule 2A(ii)(c) of the Valuation Rules - HELD THAT:- Regarding the method of valuation adopted by the Appellant, we observe that as per the agreement between the Appellant and TSL, the Appellant is required to raise its invoice for the composite service at the beginning of each month based on agreed contract value. Hence, material requirements and details of such procurement is not known to the Appellant at the time of raising of invoice. Consequently, it is impractical to compute service portion of the contract in terms of Rule 2(A)(i) of the Valuation Rules since value of goods used toward rendering of services is not known at the time raising the invoice. In view of the above, the valuation cannot be done as per Rule 2A(i) of the Valuation Rules.
Rule 2A provides two methods of valuing the works contract service and entails a right upon the assessee to choose any method of valuation of works contract. Thus, it is at the discretion of the Appellant to choose the method of valuation as per their contract and convenience. Since the Appellant had not entered into the contract with intention of valuing the service and material elements separately, hence, the Appellant chose to determine value of goods under Rule 2(A)(ii), as it provides for a simplified and specific method of computation - the method of valuation adopted by the appellant as per rule 2(A)(ii) is in order. Accordingly, the demand confirmed in the impugned order on account of valuation of works contract by adopting Rule 2(A(i) of the Valuation Rules, is not sustainable.
Since the demand itself is not sustainable, the question of demanding interest and imposing penalties in the impugned orders does not arise.
Extended period of limitation - HELD THAT:- The present demands have been raised based on the information obtained from ST-3 returns and other documents submitted by the Appellant. In this case, the Department has failed to bring in any evidence to allege suppression of fact with intention to evade the tax. In the absence of any suppression of facts on the part of the appellant, the extended period of limitation is not invokable. Accordingly, the demand confirmed for the extended period is liable to be set aside on the ground of limitation.
Conclusion - i) The demand of service tax confirmed under the category of management, maintenance or repair Service’ for the period prior to 30.06.2012, is not sustainable. The services rendered by the appellant for the period from 2009-10 up to 30.06.2012 is rightly classifiable under the category of ‘Commercial or Industrial Construction Service’ (CICS), as classified by the appellant and the appellant are eligible for the abatement in terms of Sl. No. 10 of Notification No. 01/2006-ST dated 01.03.2006. ii) For the period post 01.07.2012, the service rendered by the appellant is rightly classifiable as ‘works contract service’. The demand of service tax confirmed in the impugned order by adopting Rule 2(A)(i) of the Valuation Rules is not sustainable and hence we set aside the same. The appellant has correctly opted for Rule 2(A)(ii) of Valuation Rules to discharge service tax on the works contract services rendered by them. iii) The demand confirmed by invoking the extended period of limitation is not sustainable. iv) No penalty is imposable on the appellant in the facts and circumstances of the case.
Appeal allowed.
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2025 (4) TMI 1186
Interest on an asserted delay in disbursal of refund - it was held by CESTAT that 'Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned.' - HELD THAT:- There are no reason to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed.
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2025 (4) TMI 1185
Reversal of CENVAT Credit as per Rule 6(3) of the Cenvat Credit Rules, 2004 - inputs used in manufacture of dutiable as well as exempted final products - appellant had not maintained the separate accounts with regard to the dutiable goods as well as the exempted goods - invocation fo extended period of limitation - interest and penalty - HELD THAT:- This issue is no more res integra and Rule 6(3) of Cenvat Credit Rules was amended vide Notification No. 10/2008-CE(NT) dated 01.03.2008, wherein sub-rule (3A) was incorporated with effect from 01.04.2008.
The appellant has reversed the proportionate amount of Cenvat Credit amounting to Rs.14,683.70 on 18.08.2008, availed in respect of services attributable to exempt goods as per the procedure prescribed under Rule 6(3A) of the Cenvat Credit Rules. The appellant also paid the interest and the same was not disputed in the impugned order.
Vide Section 73 of the Finance Act, 2010, Rule 6 of the Cenvat Credit Rules was amended retrospectively to provide for reversal of credit on proportionate basis alongwith interest and in the present case, the appellant has reversed the credit alongwith interest and therefore, the appellant is entitled to the benefit of the retrospective amendment in Rule 6 ibid as held in the cases relied upon by the appellant - it is a settled law that reversal of credit amounts to non-availment of credit.
Extended period of limitation - HELD THAT:- The learned Commissioner confirmed the demand by invoking the extended period, but the department had not established anything on record to show that the appellant has suppressed the material facts with intent to evade the payment of duty. Further, we find that the appellant made the proportionate reversal of Cenvat Credit even before the objection was raised by the department in the audit proceedings and the same is not disputed by the department. Also, the issue involves interpretation and hence, extended period of limitation cannot be invoked.
Interest and penalty - HELD THAT:- Since the demand itself is not sustainable, therefore, the question of interest and penalty does not arise.
Conclusion - i) The appellant's reversal of Cenvat Credit under Rule 6(3A) satisfies the legal requirement for reversal of credit attributable to exempted goods, despite non-maintenance of separate accounts. ii) The extended period of limitation cannot be invoked as there was no suppression or fraud, and the appellant disclosed and reversed the credit before audit objections. iii) The demand of Rs.1,79,25,988/- along with interest and penalty is unsustainable and is set aside.
Appeal allowed.
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