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2024 (4) TMI 925
Validity of Assessment order as time barred - delay dispatching assessment order - as submitted assessment order was required to be passed on or before 31/12/2016 i.e. within 21 months of the end of Assessment Year in which the income was first assessable - HELD THAT:- Though in the body of the assessment order, the date of passing of the order has been mentioned as 28/12/2016, the assessment order has been dispatched only on 02/01/2017 as per the postal track consignment produced. Thus, keeping in view of the order of the coordinate bench of the Tribunal in the case of Pankaj Sharma (2019 (2) TMI 789 - ITAT DELHI] we are of the considered opinion that the assessment in dispute is time barred and accordingly we set aside the assessment order by allowing the Ground No. 1 of the assessee.
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2024 (4) TMI 924
Addition in assessment u/s 153C - Addition u/s 69 - addition on basis of loose papers on which name of the appellant was mentioned along with some other parties - HELD THAT:- The appellant agreed to purchase plot having size of 300 sq. meters for a total consideration of Rs. 27,00,000/-. Out of the total consideration of Rs. 27,00,000, a payment of Rs. 24,30,000 was already made by the appellant.
Annexure LP-2 is a sheet which mentioned name of those farmers who have sold the land/plots to certain individuals (including the appellant) along with the plot size purchased. This page also has information of amount but there is no evidence to show what is the context for mentioning these amounts. In the impugned assessment order, the addition is made by the assessing officer solely based on this loose sheet. The AO had inferred that amount of Rs. 9,00,000 mentioned against the name of Sh. Vipul Gupta actually represents 10% of the total consideration i.e. Rs. 90,00,000/-.
Against the said alleged value, the assessing officer held that amount of Rs. 27 lacs has been paid by the appellant through banking channel and the balance amount was alleged to have been paid in cash merely on the basis of surmises and conjectures and but same is mere work of speculation.
As observed in the case of Sh. Rishi Aggarwal [2023 (12) TMI 1304 - ITAT DELHI] there is no corroborative evidence. AO did not consider the need to summon the seller or the person searched, or to record the statement of the author/searched person/seller by giving an opportunity to assessee to cross examine the said person.
AO has not even made any enquiry about the value of the property purchased by the assessee. Since the document relied as incriminating material to make addition in assessment u/s 153C of the Act, is not one which is kept in ordinary course of business, and the author of the document is not identified and disclosed to the assessee and the transaction is not verified by any enquiry, then only on the content of the documents the addition is not justified. Thus after taking into consideration, the decision of Sh. Rishi Aggarwal (supra) as such nothing is required to be determined on first principle basis. Thus, the grounds raised by the assessee are sustained. The appeal of the assessee is allowed.
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2024 (4) TMI 923
Nature of receipts - interest earned on FDs during the year was prior to commencement of business of the assessee-company - Objection of the Department is that the assessee had not shown any nexus between the funds borrowed and the specific investment made by it, is not found relevant as such nexus has to be examined in the year in which the investments were made for the first time - HELD THAT:- In the present case, the investments were made in the earlier years that is continuing in the current year and the assessee-company is deriving interest income on the Fixed Deposits made by it in the earlier years.
Respectfully following the decision of the Co-ordinate Bench in the AYs 2013-14 & 2014-15 [2020 (3) TMI 1194 - ITAT AHMEDABAD] we hold that the interest income earned on Fixed Deposits pertaining to the prior period commencement of business was in the nature of “capital receipt”. As held in that year the preoperative expenses of the assessee has to be adjusted with this “capital receipt” and only the balance expense, if any, need to be amortized as per provisions of Section 35D of the Act. Accordingly, the CIT(A) had rightly allowed the claim of the assessee. Appeal filed by the Department is dismissed.
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2024 (4) TMI 922
Gain on sale of land - real owner - arising of real income or not? - whether Respondent had facilitated the purchase and sale of lands on behalf of the Assessee - rightful purchaser and owner of the agricultural land - as alleged Assessee, a company, has purchased the lands and transferred the lands to the individual as local law precludes a company from purchasing lands - whether T Nadakrishna held the land for Assessee's benefit? - taxation on Facilitator of transaction - only reason for taxing the alleged income in the hands of present assessee was that assessee has lent money to T. Nadakrishna to purchase the immovable property but the real owner is assessee company
Substantive assessment only when it is clear as to in whose hands the income is to be taxed - AO's approach of taxing the Assessee as the lender of the funds - income taxed both substantively and protectively - whether Assessee is neither the legal nor economic owner? - as argued by assessee cannot be held to be the owner of the land, that is agricultural, given the provisions of the Karnataka Land Reforms Act, 1974 which explicitly prohibit a company from acquiring agricultural land.
AO held that since the lands are converted, the surplus arising on transfer of such converted lands is brought to tax as 'Short Term Capital Gains' and since the Assessee had funded part of the transaction by way of a loan to the Respondent, the short term capital gains earned were taxed in the hands of the Assessee - Additions of income earned from transactions carried in the hands of present assessee holding as acted as a conduit of the present assessee -
HELD THAT:- Providing source of funds to Mr. T. Nadakrishna to purchase the property cannot be only reason to treat the transaction as carried out by the present assessee. The assessee is just the lender of the funds to facilitate the transaction of purchase of impugned property. As rightly pointed out by the ld. A.R., assessee is only a financier, who provided the finance to Mr. T. Nadakrishna to purchase the property just like a banker and these transactions are duly reflected in the hands of T. Nadakrishna and immovable property being owned by T. Nadakrishna and subsequently, he himself only transferred the property in his name to M/s. SPR Developers Pvt. Ltd. who is a different legal entity.
The burden of proving the transaction as carried out by T. Nadakrishna on behalf of the present assessee and the apparent purchaser T. Nadakrishna is not the real owner always rests on the person asserting it to be so. This burden has to be strictly discharged by adducing legal evidence of a definite character, which is neither directly proved by the lower authorities directly nor established by indirectly and no inference could be drawn to hold it so. While considering the particular transaction as colourable device, the intention of the person, who contributed the purchase money is determinative of the nature of transaction. The intention of the person, who contributed the purchase cost has to be decided on the basis of surrounding circumstances, the relationship of the parties, the motives governing their action in bringing about the transaction and their subsequent conduct.
The revenue authorities failed to prove anything otherwise by adducing cogent evidence. There was no intention of the present assessee to purchase the property in the name of T. Nadakrishna and the intention was only to advance money to T. Nadakrishna to purchase the property by himself. The payment part of the sale consideration provided by present assessee could not be the sole criterion to infer that the sale deed in favour of T. Nadakrishna as a transaction for and on behalf of the present assessee. For this purpose, we place reliance on the judgement in the case of Mangathai Ammal (Decd.) through LRS and Others Vs. Rajeshwari & Ors. [2019 (5) TMI 1086 - SUPREME COURT] - Accordingly, we are of the opinion that if any income arise out of this impugned transaction to be considered in the hands of T. Nadakrishna only.
Any transaction in which the professed intention and the intention gathered from the documentation are the same, must be considered to be genuine transaction and not colourable device adopted to evade tax by assessee. In the present case, the parties involved herein entered into a transaction according to their free will and that choice has always been protected, the only rider being that both the professed intention and real intention should be the same. The departmental authorities have no right to vary the terms of contract are result of the transaction between the parties merely because the agreed terms are not to their liking in the sense that they do not add to the collection of the taxes. In our opinion, in the present case, the transaction have to be given effect as they are executed on bona fide belief though it was resulted in reduction of tax liability since these transactions are genuine, bona fide and not colourable transactions. Further, the impugned transaction undertaken by T. Nadakrishna was right from the inception conceived and controlled by himself not by the present assessee M/s. SPR Spirits Pvt. Ltd.
To sum up as held by Hon’ble Supreme Court, Binapani Paul [2007 (4) TMI 752 - SUPREME COURT] that the source of money had never been the sole consideration. It is merely one of the relevant considerations but not determinative in character. Accordingly, this ground of appeal of the assessee is allowed.
Protective additions made by ld. AO in the hands of T. Nadakrishna - As we have deleted the substantive addition made in the hands of M/s. SPR Spirits Pvt. Ltd., the protective addition required to be examined afresh in the light of our above observation. Accordingly, the issue in dispute is remitted back to the file of ld. CIT(A) for fresh adjudication.
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2024 (4) TMI 921
Addition u/s 69 r.w.s. 115BBE - amount surrendered during survey on account of difference in stock and excess cash difference - contention of the Assessee is that when the income / investment is already surrendered during the survey and also offered for taxes while filing return of income, the same cannot be treated as unexplained investment - HELD THAT:- The statement of the Assessee has to be read as a whole and not in piecemeal especially where the Revenue is relying on the same statement and in such circumstances, the defence available to the Assessee in terms of part of the statement not been considered by the Revenue cannot be ignored. The mere fact that survey/search proceedings have been initiated at the business premises of the Assessee doesn’t mandate the AO to automatically invoke the deeming provisions and before invoking the deeming provisions, he has to call for the explanation of the Assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions.
In the instant case, we find that the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income.
Following the said decision of DCIT Vs. Shri Ram Narayan Birla [2016 (9) TMI 1354 - ITAT JAIPUR] has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the Assessee. The surrender on account of advances were relating to the business being carried on by the Assessee. CIT(A) has also returned a finding that the advances were admitted as being related to business activity of the Assessee. Where the same has been found unrecorded in the books of account, the same has to be brought to tax under the head “business income”.
Thus, the income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 and 69A of the Act and the same has been rightly offered to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration. Decided in favour of assessee.
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2024 (4) TMI 920
Rectification u/s 154 - disallowance u/s 36(1)(va) for delay in depositing employee contribution of PF/ESI - Rectification was made relating to the additions u/s 36(1) by giving reason that addition was missed by the assessing officer while passing order u/s 143(3) - Doctrine of merger of intimation u/s 143(1) and the assessment order u/s 143(3) -
If intimation u/s 143(1) of the Act got merged with assessment order u/s 143(3) and consequently AO was not justified to make addition by way of rectification u/s 154 on the basis of facts which have been considered during assessment - HELD THAT:- While exercising power u/s 154 r.w.s. 143(3) AO has not gone back to reconsider the issues examined u/s 143(3) and make an addition thereupon. It is not a case where rectification power was exercised consequent to any change of law or applying a different proposition of law than one considered while framing assessment u/s 143(3) of the Act. The rectification order as reproduced above makes it apparent that the income determined vide intimation u/s 143(1) was taken as income for making further additions u/s 143(3) assessment.
Certainly that was a mistake apparent from record as the intimation u/s 139(1) stood final after withdrawal of the appeal by the assessee. Accordingly, the difference between the returned income and the assessed income u/s 143(1) was erroneously ignored while passing order u/s 143(3). Therefore we are of view AO had committed no error in exercising the rectification powers u/s 154.
As with regard to applicability of the doctrine of merger of intimation u/s 143(1) and the assessment order u/s 143(3) the proposition of law in case Title M/s. Areca Trust [2024 (3) TMI 707 - ITAT BANGALORE] where the additions made under intimidation u/s 143(1) and !43(3) are on different issues and heads and intimation u/s 143(1) of the Act stood final after withdrawal of appeal by assessee, on what so ever erroneous belief, there was no merger of two orders.
Whether addition could be made by learned AO by exercising powers u/s 154 of the Act where learned AO had accepted the return filed u/s 139 of the Act vide intimation u/s 143(1) of the Act? - There in the question of delay in deposit of the employees’ contribution was very much in the assessment records upon which the intimation u/s 143(1) was served upon the assessee and no disallowance was made. However, here in the case in hand the addition was made in intimation u/s 143(1) of the Act with regard to disallowances on account of delayed contribution of PF and ESI and the house property income, in intimation u/s 143(1) of the Act. In scrutiny assessment these issues were not under examination so as to say that while exercising powers rectification the Ld. AO has made rectification due to any change in opinion of law or fact.
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2024 (4) TMI 919
Detention Order under COFEPOSA - legal heirs of detenu - Smuggling - diesel oil of foreign origin - seeking to impugn detention order dated 02.05.2005 on the ground that proceedings under SAFEMA have been initiated (action against detenu was initiated under SAFEMA during his lifetime) - HELD THAT:- As per investigation conducted by DRI, detenu was found to be the person who was directly involved in the smuggling and for organizing the finances as well as logistic and, therefore, detention order passed under Section 3(1)(i) of COFEPOSA was fully justified. It is also reiterated that detenu, when he was alive, could have easily prayed this Court for disposal of his writ petition on merit but he himself submitted that it be dismissed as withdrawn with liberty to raise all the issues in case of initiation of any proceedings under SAFEMA. Petitioner is not justified in asserting that the earlier writ petition was withdrawn on 16.08.2007, with liberty as sought for, as it could not reach for final hearing. The orders available on website rather indicate that at one earlier point of time the final arguments were heard on merits and the matter was even reserved for judgment.
Be that as it may, there is nothing to infer that the detenu had withdrawn the petition as it could not reach final hearing. On the contrary, he himself had sought withdrawal, albeit, with liberty, as aforesaid.
After the demise of detenu, fresh summons and Notice in connection with proceedings under SAFEMA have been issued to his legal heirs. We have seen such communication dated 15.02.2019 and 08.12.2021. In later communication, detenu has been referred as affected person no. 1 (AP-1) and his wife as affected person no. 2 (AP-2) and according to such notice, there are two immovable properties in possession of AP-2 and she has, merely, been called upon to indicate the source of income or the means through which said two properties had been acquired. In case, affected person is in a position to satisfactorily explain about the manner in which the properties were acquired, naturally, there might not be any adverse action of any kind under SAFEMA. Thus, the petitioner can always respond to such notice appropriately - coming back to the instant petition, there is nothing here which may compel to quash the detention order.
Contentions made by the petitioner are found to be without any substance. There is nothing to indicate that detenu did not know English and it is also quite obvious that detenu was evading service and execution of the ‘detention order’ and since the repeated visits at his premises did not yield any result, eventually, publication had to be carried out in newspaper - There is also nothing which may portray that the time lapse, between detention order and its execution, is such as would lead to the inference that the live-link between the prejudicial activity of the detenu and the object of detention, namely, to prevent him from indulging in such prejudicial activity, stood snapped.
The petitioner herein is always at liberty to agitate all contentions in such proceedings under SAFEMA and she would also be at liberty to agitate about the delay in initiation of such proceedings - there are no merit in the writ petition.
The writ petition is dismissed.
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2024 (4) TMI 918
Levy of penalty - mis-declaration of goods - unflavoured boiled supari - reduction of the penalty under section 112 by the Commissioner (Appeals) - according to Revenue reduction was very high and unwarranted and according to the respondent it was fair and proper - what does the expression ‘shall be liable to‘, in section 112 (and 111, 113, 114, etc.) signify? Does it mean that a penalty shall be imposed or that a penalty can be imposed? - HELD THAT:- A common misunderstanding of this expression is that the adjudicating authority has to only see if the goods fall under one of the clauses of Section 111 or 113 and if so, confiscate them and to see if the persons fall under section 112 or 114 and impose penalty. However, the expression is not ‘shall be confiscated‘ but it is ‘shall be liable to confiscation‘. Similarly section 112 says “shall be liable to penalty” and NOT “penalty shall be imposed”. Liable to be means ‘likely to be‘ and not ‘shall be‘. After finding if the goods fall under one of the clauses of the section, the adjudicating authority can exercise his discretion and decide not to confiscate them. If the violation is, for instance, a technical violation or a minor violation, the adjudicating authority has the discretion to NOT confiscate the goods although they are liable to confiscation.
The High Court of Delhi has, in JAIN EXPORTS (P) LTD. VERSUS UNION OF INDIA [1988 (5) TMI 50 - SUPREME COURT] held that not only does the adjudicating authority have the discretion to decide whether or not to confiscate but he has to exercise this discretion judicially and not arbitrarily.
However, since the penalty under section 112 is based on the actions which rendered the goods liable to confiscation under section 111, it would be necessary to see how serious were these actions by the respondent. The Commissioner (Appeals) recorded that there was a reasonable cause for the respondent to classify the goods under CTI 2106 9030. He recorded that there were rulings by the Advance Ruling Authority that boiled areca nut does not fall under CTH 0802 at all - Merely because the importer‘s classification of the goods is different from that of the officer, the importer cannot be penalised. The Commissioner (Appeals) is fully agreed upon that the respondent had a reason to believe that the goods were classifiable under CTI 2106 9030 and this classification cannot be held against the respondent.
Misdeclaration of nature of the goods - HELD THAT:- The CRCL test report does not say what the imported goods were nor does it deny that the goods were ‘unflavoured boiled supari‘. Secondly, it comments on the classification of the goods as per supplementary notes- Note 2 to Chapter 21‘. Classification of the goods under Customs Tariff is the responsibility of the importer or the proper officer or any further appellate authority. The chemical examiner in CRCL has no role to play in the classification because classification is a part of assessment which is a quasi-judicial and appealable order. All that the chemical examiner should say is what the goods are, what is the purity, etc. It is thus found that the allegation of mis-declaration of the nature of goods is not very serious especially since it is based on a somewhat ambiguous test report of CRCL.
There are no reason to interfere with the order of the Commissioner (Appeals) insofar as the reduction of penalty under section 112 is concerned - the impugned order is upheld - appeal dismissed.
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2024 (4) TMI 917
Suspension of license of public bonded warehouse - bonded goods were stored in non-bonded tanks - appellants pleaded that the disputed goods cannot be confiscated, when subsequent permission for bonding of tanks was given by the department - Sub-section (2) of Section 58B of the Customs Act, 1962 - HELD THAT:- It is an admitted fact on record that the appellants have obtained the public bonded warehousing license from the competent authorities for carrying out the activities therein. Whenever the imported goods were required to be stored in the warehouse, the appellants have taken necessary permission from the competent authority for movement of goods from the customs station for the purpose of depositing in the warehouse. The activities of removal of goods from one warehouse to the other were always within the knowledge of the department and such activities were undertaken by the appellants with due permission from the department.
Reading of the above statutory provisions vis-à-vis the activities undertaken by the appellants as the warehouse licensee, it is found that none of the said provisions have been contravened or violated by the appellants inasmuch as in respect of all the B/Es listed above, the activities were carried out with the approval and necessary permission given by the department as well as under supervision of Customs.
In view of the statutory provisions regarding the warehoused goods and the instructions issued by the CBEC, it is amply clear that movement of goods within the bonded warehouse is permissible, subject to the condition that such activities should be within the knowledge of the department and necessary approval for such activities should be obtained by the warehouse licensee - the appellants have complied with such statutory provisions in carrying out the activities within the warehousing station(s). Therefore, it cannot be said that the goods dealt with by the appellants are liable for confiscation and accordingly, the appellants cannot be exposed to penal consequences provided under the statute.
The impugned order dated 08.01.2024 has invoked the provisions of Section 111(h) and 111(j) ibid for confiscation of the goods and for imposition of the redemption fine on the appellants. The provisions of Section 111(h) ibid are attracted for confiscation in the eventuality, when any dutiable or prohibited goods unloaded or attempted to be unloaded in contravention of the provisions of Section 33 ibid or Section 34 ibid. It is not the case of Revenue that the appellants had not obtained the permission from the department for carrying out the activities within the bonded area - It is a fact on record that the bulk liquid cargo dealt with by the appellants are not prohibited for importation and that the appellants had obtained due permission from the customs department for carrying out the activities within the warehousing premises, which is evident from the above tables, mentioning the date of permissions issued by the department including the specific tank numbers for which such permissions were being issued by them - the provisions of Section 111(j) ibid are not attracted for confiscation of goods in the circumstances of the present case.
Since there is no improper importation of goods and more specifically, the goods are not liable for confiscation as per the provisions under Section 111 ibid, the provisions of Section 112 ibid shall not be attracted for imposition of penalty on the appellants. Further, the provisions of Section 114AA ibid cannot also be invoked in the present case, inasmuch as there is no mis-declaration, nor any forged documents were presented by the appellants with the intent to evade payment of customs duty - There is nothing on record in the form of any evidence to show that proper accounting for receipt, transfer or removal of the goods in the warehouse was not maintained by the appellants in terms of extant Regulations dealing with warehousing of goods - Furthermore, all the activities were under the direct supervisions and control of the customs officers posted in the warehouse. Similarly, the penalty clause contained in Section 117 ibid cannot also be attracted in the case in hand, inasmuch as no licensing conditions were violated by the appellants.
There are no merits in the impugned order dated 08.01.2024, insofar as it has ordered for confiscation of goods, imposed redemption fine and penalties on the appellants. Since there are no substance in confirmation of the adjudged demands towards fine and penalties, the impugned order passed for revocation of suspension of warehousing operation shall also not be sustained - the impugned order is set aside - appeal allowed in favour of appellants.
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2024 (4) TMI 916
Classification of imported goods - Navigation System - Multifunctional Devices or not - classifiable under CTH 8527 2900 or under Chapter Heading 8526 9190? - penalty u/s 114A of the Customs Act, 1962 - Extended period of Limitation - HELD THAT:- The Bills of Entry placed on record is seen, where the description of the products was mentioned as ‘Navigation System’. However, on investigation, after verifying the catalogue and the instructions manuals, it was found that the goods were actually described as ‘infotainment system’. The importer is an accredited client where certain privileges are extended to them and the Bill of Entry was cleared under RMS, the lapse was noticed only after SIIB investigation and therefore, the Commissioner (Appeals) was right in invoking suppression/mis-declaration, since the goods were mis-declared by the appellant knowing very well as per the catalogue and the manual that they were multifunctional devices. The appellant’s only defence is that though the catalogue/technical literature is only for the purpose of marketing to show that it is a one stop solution to all the features required in the car cannot absolve them from the responsibility from making a true and correct declaration of the description of the product so as to decide its appropriate classification by the assessing authorities. Also, this itself proves that the appellant was well aware of all the features but still decided to declare them only as a ‘navigation equipment’ thus wilfully mis-declaring the products.
Penalty under Section 114A of the Customs Act, 1962 - HELD THAT:- The appellant’s only defence is that though the catalogue/technical literature is only for the purpose of marketing to show that it is a one stop solution to all the features required in the car cannot absolve them from the responsibility from making a true and correct declaration of the description of the product so as to decide its appropriate classification by the assessing authorities. Also, this itself proves that the appellant was well aware of all the features but still decided to declare them only as a ‘navigation equipment’ thus wilfully mis-declaring the products. Therefore, the Commissioner (A) was justified in invoking the suppression on the ground that the facilities provided to the appellant being an ‘Accredited client’ was misused by mis-declaring the facts. Accordingly, the differential duty with interest is upheld along with mandatory penalty under Section 114A of the Customs Act, 1962.
Extended period of limitation - HELD THAT:- The Hon’ble Supreme Court in the case of Commissioner of Central Excise Ahmedabad Versus M/s. Urmin Products P. Ltd. And Others [2023 (10) TMI 1112 - SUPREME COURT] observed Thus, in the event of mis-description, wrong description or erroneous description or intentional improper classification of the product manufactured, would not tie the hands of the Competent Authority from piercing the corporate veil to ascertain the true nature of the product and reclassify the same, necessarily after affording an opportunity of hearing which would be in compliance of the doctrine of natural justice. In view of the above, it is found that the Commissioner was justified in invoking the extended period of limitation.
The impugned order is upheld - the appeal is rejected.
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2024 (4) TMI 915
Refund of SAD - denial of refund claim on the ground of failure to submit necessary documents - HELD THAT:- As per the Order-in-Original, the respondent produced documents and when objection was made, the representative of the respondent appeared for personal hearing and produced VAT Challan and Chartered Accountant’s Certificate. However, VAT Challan does not show the Bill of Entry and for that reason it is concluded that the respondent failed to comply with the conditions stipulated in the notification. In appeal, while allowing the appeal, the Appellate Authority has given a very detailed order - Only objection is that said VAT Challan could not be correlated with the imported goods as per the Bill of Entry. There is no requirement for mentioning Bill of Entry number in the Sale Tax/VAT Authority on the sale of goods and certificate of Chartered Accountant with details linking each of the sale invoices with the corresponding Bill of Entry alone is sufficient for said correlation.
There are no reason to interfere with the order passed by the Appellate Authority - appeal dismissed.
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2024 (4) TMI 914
Offences triable by Special Court - Offenses under the IBC - offences other than the Companies Act cannot be tried by the Special Court consisting of Sessions Judge or Additional Sessions Judge or not - Whether the Special Court under the Code would be as provided under Section 435 of the Companies Act as it existed at the time when the Code came into effect, or it would be as provided under Section 435 of the Companies Act after the 2018 Amendment?
HELD THAT:- This Court has held that once a finding is recorded that an Act is a self-contained code, then the application of either of the doctrines i.e. “legislation by reference” or “legislation by incorporation” would lose their significance particularly when the two Acts can coexist and operate without conflict.
This Court further held that, in case of general reference in the Act in question to an earlier Act but there being no specific mention of the provisions of the former Act, then it would clearly be considered as ‘legislation by reference’. In such a case, the amending laws of the former Act would become applicable to the later Act. However, when the provisions of an Act are specifically referred and incorporated in the later statute, then those provisions alone are applicable and the amending provisions of the former Act would not become part of the later Act.
This Court in the case of Girnar Traders [2011 (1) TMI 1343 - SUPREME COURT] held that, if the legislature intended to apply the provisions of the Land Acquisition Act generally and wanted to make a general reference, it could have said that the provisions of the Land Acquisition Act would be applicable to the MRTP Act, 1966. This Court observed that such expression was conspicuous by its very absence. This Court held that both these Acts i.e. Land Acquisition Act and the MRTP Act, 1966 are self-contained codes within themselves. This Court observed that the State Legislature while enacting the MRTP Act, 1966 has referred to the specific sections of the Land Acquisition Act in the provisions of the State Act. This Court further observed that none of the sections require application of the provisions of the Land Acquisition Act generally or mutatis mutandis.
The provisions of Section 236(1) of the Code. Under Section 236(1) of the Code, reference is “offences under this Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act, 2013” - It can thus be seen that the reference is not general but specific. The reference is only to the fact that the offences under the Code shall be tried by the Special Court established under Chapter XXVIII of the Companies Act.
The provision of Section 435 of the Companies Act, 2013 with regard to Special Court would become a part of Section 236(1) of the Code as on the date of its enactment. If that be so, any amendment to Section 435 of the Companies Act, 2013, after the date on which the Code came into effect would not have any effect on the provisions of Section 236(1) of the Code. The Special Court at that point of time only consists of a person who was qualified to be a Sessions Judge or an Additional Sessions Judge.
The impugned judgment and order dated 14th February 2022, passed by the learned Single Judge of the High Court of Judicature at Bombay in Writ Petition No.2592 of 2021 is quashed and set aside - Appeal allowed.
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2024 (4) TMI 913
Condonation of delay of 181 days in filing appeal - HELD THAT:- The delay of 181 days is beyond the maximum period which can be condoned under Section 62 of the Insolvency and Bankruptcy Code 2016.
The Civil Appeal is accordingly dismissed on the ground of limitation.
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2024 (4) TMI 912
Recovery of service tax alongwith interest and penalty - works contract service provided by the petitioner between 01.10.2016 to 30.06.2017 - HELD THAT:- The issue is now covered by the decision of the Division Bench of the Principal Seat in M/S. RAJU CONSTRUCTION, REP. BY ITS MANAGING PARTNER, R. SURESH BABU, M/S. VENKATESWARA ENGINEERING CONSTRUCTIONS, REP. BY ITS MANAGING DIRECTOR, MADESAN SIVAPRAKASAM, M. VEDIAPPAN, V. VENGAN VERSUS THE GOVERNMENT OF INDIA, REPRESENTED BY ITS SECRETARY, MINISTRY OF FINANCE, NEW DELHI, THE SENIOR INTELLIGENCE OFFICER, O/O. DIRECTORATE GENERAL OF GST INTELLIGENCE, TRICHY REGIONAL UNIT, THE GOVERNMENT OF TAMIL NADU, REPRESENTED BY ITS FINANCE SECRETARY, FORT ST. GEORGE, CHENNAI [2022 (12) TMI 1336 - MADRAS HIGH COURT] where it was held that The prayer for a direction to refund of tax already paid by the petitioner also cannot be countenanced as these petitioners are liable to tax. Therefore, wherever the Orders-in-Original have been passed, the respective petitioners are given liberty to file statutory appeal before the Appellate Authority subject to the compliance of the other requirements of pre-deposit the amount as is contemplated under Section 35F of the Central Excise Act, 1944 as made applicable to the Finance Act, 1994, within a period of thirty (30) days from the date of receipt of a copy of this order.
The Writ Petition is dismissed with liberty to the petitioner to file a statutory appeal before the appellate Commissioner under Section 85 of the Finance Act, 1994 within a period of 30 days from the date of receipt of a copy of this order.
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2024 (4) TMI 911
Seeking refund of accumulated Cenvat credit - input services or not - Judicial Discipline - The department had not accepted the judgement in the case of Paul Merchants and filed a Civil Appeal before the Supreme Court - HELD THAT:- The question of judicial discipline was examined by a three member bench of the Supreme Court in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [1991 (9) TMI 72 - SUPREME COURT]. The Assistant Collectors in that case flouted the orders of the Appellate Collector on the ground that the order of the Appellate Collector were not acceptable to the department. The assessee filed a Writ Petition before the Bombay High Court which passed strictures against the Assistant Collectors. Union of India filed an appeal before the Supreme Court which upheld the strictures passed by the Bombay High Court.
Evidently, in this case, the Commissioner (Appeals) has refused to follow judicial discipline on the ground that the order of this Tribunal on the ground that it has not been accepted by the department. The very statement that a judicial decision is ‘not acceptable’ is an objectionable phrase as held by in Kamlakshi Finance and the Commissioner (Appeals) was bound to have followed the order of this Tribunal since it was not stayed, suspended or set aside by a higher court. By displaying gross judicial indiscipline, the Commissioner (Appeals) has caused considerable harassment to the appellant without any benefit to the Revenue. It is to curb this tendency that the Supreme Court had dealt with the issue at length in Kamalakshi Finance.
The impugned order is set aside - Appeal allowed.
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2024 (4) TMI 910
Levy of service tax - Works Contract Service - availment of Composition Scheme - GTA service - CENVAT Credit in terms of Rule 6(3) of CCR, 2004 - works Contract executed on or after 01.07.2012 under ‘other works contract’ - Credit denied on the ground that the documents prescribed under Rule 9(1) of the CCR were not submitted - suppression of facts or not - extended period of limitation.
Works Contract Service - availment of Composition Scheme on 25.01.2008 - HELD THAT:- W.e.f. 01.06.2007, the appellant has been discharging service tax liability on the said service under the “Composition Scheme”. In the absence of any laid down procedure under the law specifying the time limit, we observe that the payment of service tax itself should be construed as exercise of the option by the Appellant when such option was continued by the Appellant till the related works contracts were completed - this issue is squarely covered by the decision of the Tribunal, Delhi in the case of MEHTA PLAST CORPORATION VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2014 (5) TMI 1131 - CESTAT NEW DELHI] wherein it was held that “the option to be exercised is not required to be exercised in writing and the very fact of payment of duty under the composition scheme reflects upon the option of the assessee - the appellant is eligible for availment of Composition Scheme for payment of service tax and hence the demand confirmed in the impugned order by denying the benefit is not sustainable - demand set aside.
GTA service - HELD THAT:- The demand has been mechanically confirmed without verifying the documents submitted the appellant. The documents submitted by the appellant needs to be verified. The demand confirmed without verifying the documents is not sustainable. Accordingly, the demand confirmed in the impugned order on this count is set aside and the matter remanded to the adjudicating authority to verify the documents submitted by the appellant and determine the service tax liability, if any, after giving an opportunity to the appellant to explain their case. The appellant should also cooperate with the department and furnish all the documents for verification.
CENVAT Credit in terms of Rule 6(3) of CCR, 2004 - providing construction service to Airports Authority of India in Jammu & Kashmir and to Unitech Hi-Tech Structure Limited, an SEZ unit which are exempted services - HELD THAT:- The main objective of the Rule 6(1) is to ensure that the assessee should not avail the CENVAT Credit in respect of input or input services which are used in or in relation to provision of exempted services - In the present case, since the appellant has reversed the credit attributable to exempted services along with interest, the demand of an amount equivalent to 6/8% of the value of exempted services confirmed in the impugned order is not sustainable - the demand of reversal of CENVAT credit of Rs.37,91,781/- in the impugned order is set aside.
Works Contract executed on or after 01.07.2012 under ‘other works contract’ - HELD THAT:- The appellant is liable to pay service tax as ‘Original Works’ on the 40% value of such works contract as prescribed in Rule 2A(ii)A of the Valuation Rules. It is observed that the department has not brought in any evidence to substantiate the allegation that the contracts executed by the appellant were in the nature of completion and finishing service to demand service tax under ‘Other Works’ on the 60% value of such works contract as prescribed in the said Rules. Accordingly, the demand of service tax of Rs. 19,32,135/- (including Cess confirmed in the impugned order on this count is not sustainable and hence the same is set aside.
Credit denied on the ground that the documents prescribed under Rule 9(1) of the CCR were not submitted - HELD THAT:- The invoices were not checked by the audit team on the pretext that the documents are voluminous and will take lot of time and they have to conclude the audit within three days. The audit has concluded that the entire cenvat credit availed and utilised by the Appellant during the period 2009 – 10 to 2012 – 13 as irregular and the same has been confirmed in the impugned order. It is observed that the demand has been mechanically confirmed without verifying the documents submitted the appellant. The documents submitted by the appellant needs to be verified. The demand confirmed without verifying the documents is not sustainable - the demand confirmed in the impugned order on this count is set aside - the matter remanded to the adjudicating authority to verify the documents submitted by the appellant and determine the eligibility of Cenvat credit after giving an opportunity to the appellant to explain their case.
Suppression of facts or not - extended period of limitation - penalty - HELD THAT:- It is a settled position of law that when the matter involves interpretation of statutory provisions and the assessee acted on a bona fide belief, extended period of limitation cannot be invoked. We observe that there is no evidence available on record to invoke the extended period of limitation. Accordingly, the demand is not sustainable on the ground of limitation also. For the same reason, no penalty imposable on the appellant.
Appeal disposed off.
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2024 (4) TMI 909
Liability of appellant to pay service tax - vague SCN - SCN does not mention the category of service under which the demand has been proposed by the Department - HELD THAT:- On perusal of the Show Cause Notice as well as the order passed by the Adjudicating Authority and the Commissioner (Appeals), it is not found as to what is the category of service alleged to be rendered by the appellant. Merely because, the appellant received some amounts from M/s. Neyveli Lignite Corporation, it cannot be said that they have rendered service. In the Show Cause Notice, it is stated that the appellant rendered the activity of AMC of North Dump Yard, Afforestation and watching and up keeping of community halls. It is not clear what is the category of these services. The Department has not stated whether the activity falls within the definition of a particular category of service.
The Tribunal in similar set of facts had set aside the demand observing that when the category of service has not been mentioned in the Show Cause Notice, the demand cannot be sustained. In NPS CONSTRUCTION VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE, PONDICHERRY [2024 (4) TMI 532 - CESTAT CHENNAI], the Tribunal followed the decision of the Hon’ble Supreme Court in the case of COMMISSIONER OF C. EX., BANGALORE VERSUS BRINDAVAN BEVERAGES (P) LTD. [2007 (6) TMI 4 - SUPREME COURT] wherein it was held that when the Show Cause Notice does not mention the specific category of service so as to inform the assessee about the allegations raised against them, the demand cannot sustain.
The impugned order is set aside - Appeal is allowed.
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2024 (4) TMI 908
Recovery of service tax alongwith interest and penalty - non-payment of service tax by suppressing the value of taxable service.
Demand confirmed for the reason that the appellant had accepted their liability for payment of service tax, and they had disputed the demand only on the account of quantification, in respect of which both the authorities have concluded that the appellant had failed to substantiate their claim by producing the relevant records for verification.
HELD THAT:- The appellant has during the period prior to 16.06.2005, issuing invoices, claiming the service tax from their service recipient. On Invoice No 13-18/2005-06 dated 26.05.05 Service Tax of Rs 6377.00/- has been charged as per the above chart on a taxable value of Rs 189439/- and on invoice No 19/05-06 dated 26-May-05 a service tax of Rs 23,795/- has been collected. During the period prior to 16.06.2005 appellant as per his own submission has collected service tax of Rs 30,172/- on the taxable value of Rs 462239.00. As appellant was himself charging and collecting the service tax, even prior to 16.06.2005, the claim for deduction made by the appellant for deducting this value from the taxable value cannot be acceded to.
Thus the gross value of taxable service on which the demand of service tax is made, after allowing the deductions in respect of PF, Bonus and Service Tax paid by M/s Hindalco, as per the chart submitted by the appellant comes to Rs 63,90,554.77/- (Rs 1,77,87,709.00 - Rs 15,16,602.00 – Rs 10,45,027.23 - Rs 88,35,525). The demand has been made by taking table value of Rs 64,41,735/-. There are not much difference in the taxable value determined by the department for making the demand and the taxable value that can be determined on the basis of the chart submitted by the appellant.
In case of COMMISSIONER OF C. EX., MADRAS VERSUS SYSTEMS & COMPONENTS PVT. LTD. [2004 (2) TMI 65 - SUPREME COURT] Hon’ble Supreme Court has held Once it is an admitted position by the party itself, that these are parts of a Chilling Plant and the concerned party does not even dispute that they have no independent use there is no need for the Department to prove the same. It is a basic and settled law that what is admitted need not be proved.
There are no merits in the appeal - appeal dismissed.
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2024 (4) TMI 907
Non-payment of service tax - suppression of value of taxable service provided - demand confirmed for the reason that the appellant had accepted their liability for payment of service tax, and they had disputed the demand only on the account of quantification, in respect of which both the authorities have concluded that the appellant had failed to substantiate their claim by producing the relevant records for verification.
HELD THAT:- The major deduction which has been claimed by the appellant from the gross value of taxable services is on the account of services provided by them before the same became taxable, specifically the services under the category of Supply of Tangible Good services. These service became taxable with effect from 16.05.2008. Appellant have claimed that the value of the taxable services provided by them under this category for the period prior to levy of service tax. Was about Rs 84,17,327.67. If the claim of the appellant is admitted the gross value of taxable service will be reduce substantially. Appellants had made this claim before the adjudicating authority and the first appellate authority and had submitted a chart duly certified by a Chartered Accountant, showing that the during the entire period of dispute the invoices issued by the appellant were in respect “Truck, Tractor, Dumper Hiring Charges” on some of the invoices even the registration number of vehicle was also mentioned.
The coverage of the services under the category of taxable service was gradually widened, every year. Appellants have claimed that the major chunk of the services provided by them were within this category and specified as taxable service only from 16.05.2008. As no finding has been rendered by the adjudicating authority or the first appellate authority on this aspect, while adjudicating the case, the matter needs to be remanded back to the original authority for recording specific findings on this issue.
The matter remanded back to the original authority for reconsideration of the issue to the extent of allowing deduction of Rs. 84,17,327.67/- which appellant claim were received by them against the services of “Supply of Tangible Goods service” prior to 16.05.2008, the date from which the service was made taxable - Appeal is partly allowed to the extent of remanding the matter to original authority.
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2024 (4) TMI 906
Liability of sub-contractor to pay service tax - main contractor discharges tax on the gross value - Extended period of limitation - suppression of facts or not - penalties - HELD THAT:- After issue of the Circular No. 96/7/2007-S.T. dated 23.08.2007, there is no ambiguity regarding the liability of a sub-contractor to pay Service Tax even in cases where the main contractor pays Service Tax on the gross value. The demand involved in this Notice pertains to the period from 2007-08 to 2011-12 i.e., after the issue of the Circular mentioned hereinabove. Thus, the submission of the appellant that they were not aware of the liability to Service Tax as a sub-contractor, is not agreed upon.
The Larger Bench of the Tribunal in the case of Commissioner of Service Tax v. M/s. Melange Developers Pvt. Ltd. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB] has decided that even when the main contractor has discharged Service Tax, the sub-contractor is required to pay Service.
In view of the decision of the Larger Bench and by relying on the Board Circular, it is held that the sub-contractor is liable to pay Service Tax even if the main contractor pays Service Tax on the gross value of the services.
Extended period of limitation - suppression of facts or not - penalties - HELD THAT:- The appellant has been filing their returns regularly, thereby intimating the liability to Service Tax. Thus, no suppression of facts with intention to evade payment of tax exists in this case - the extended period of limitation cannot be invoked against the appellant. For the same reason, the penalties imposed on the appellant are set aside.
Appeal disposed off.
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