TMI Tax Updates - e-Newsletter
January 16, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise Indian Laws

TMI Short Notes

1. Challenges in corporate insolvency, particularly when dealing with contract terminations and arbitration proceedings

  IBC:

2. Analyzing the Legal Dispute in Customs regarding provisional assessment: A Case of Procedural Lapses and Penalty Implications

  Customs:

3. Deduction u/s 80P: Navigating the Legal Labyrinth - Co-operative Societies Vis-a-vis Co-operative bank

  Income Tax:

4. Transition to the GST regime. Legal challenges posed by the GST regime on existing government contracts.

  GST:

5. Navigating Legal Complexities - Assessment in case of third parties post search and seizure - The period for which the assessee requires to file the return.

  Income Tax:

6. Scope of compliance of the Document Identification Number (DIN) in tax communications​​.

  Income Tax:

7. Supreme Court's Scrutiny of ED's Conduct: Upholding Legal Standards in Arrest and Remand Procedures

  PMLA:

8. GST: transportation of goods, the role of e-way bills, and the implications of their cancellation - Navigating Legal Complexities

  GST:

9. Legality of Value Enhancement for the import of goods on the basis of allegation of Under-invoicing - Navigating Legal Nuances

  Customs:

10. Equality in Financial Creditor Status: The Supreme Court's Ruling in regarding the status of home buyers in CIRP proceedings under IBC

  IBC:

11. Navigating the Nuances of Capital vs Revenue Expenditure: The Asian Hotels Ltd. Case Analysis

  Income Tax:

12. Demand based on Form-26AS information from the Income Tax Department, without pre-show cause notice consultations, invoking extended period of limitation.

  Central Excise:

13. Importance of transparency in corporate governance and the rights of minority shareholders

  SEBI:

14. The case of Manish Sisodia versus CBI and DoE is not just a legal battle but also a matter of significant public interest.

  PMLA:

15. Tax Credit Entitlement - Credit of TDS if deductor failed to deposit the TDS to the Government

  Income Tax:

16. A Landmark Judgment on Tax Credit Entitlement - Credit of TDS if deductor failed to deposit the TDS to the Government

  Income Tax:

17. A Case of Coerced Input Tax Credit Reversal - GST recovery during search and seizure proceedings.

  GST:

18. Manner of compliance of conditions of pre-deposit - Debit of amount from electronic credit ledger (ECRL) is sufficient or Debit from electronic cash ledger (ECL) is must?

  GST:

19. The need for clarity and concrete reasons in the cancellation of GST registrations.

  GST:

Articles

1. SEBI INTERMEDIARIES - UNDERWRITERS

   By: DR.MARIAPPAN GOVINDARAJAN

2. Proceedings are to be re-adjudicated when no detailed order is uploaded by Revenue Department

   By: Bimal jain

3. Anticipatory Bail should be granted in case of serious economic offences

   By: Bimal jain

Notifications

GST - States

1. S.O. 98/P.A.5/2017/S.11/2023 - dated 22-12-2023 - Punjab SGST

Amendment in Notification No. S.O.20/P.A.5/2017/S.11/2019, dated the 28th February, 2019

Highlights / Catch Notes

GST

• Ensuring Fairness: Importance of Clear Reasons for Cancelling GST Registrations to Protect Taxpayer Rights.

  Notes : The need for clarity and concrete reasons in the cancellation of GST registrations.
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• Determining Compliance for GST Pre-Deposit: Is ECRL Debit Enough or Must It Be From ECL?

  Notes : Manner of compliance of conditions of pre-deposit - Debit of amount from electronic credit ledger (ECRL) is sufficient or Debit from electronic cash ledger (ECL) is must?
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• Coerced Reversal of Input Tax Credit Raises Concerns Over Fairness in GST Recovery Process During Search and Seizure.

  Notes : A Case of Coerced Input Tax Credit Reversal - GST recovery during search and seizure proceedings.
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• Taxpayer's GST Registration Can't Be Canceled for Non-Filing If Compliant in Other Periods; Retrospective Action Unjustified.

  Case-Laws - HC : Cancellation of GST registration of petitioner - Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer’s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. - HC
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• Eligibility for Input Tax Credit on Rooftop Solar Systems Confirmed under CGST/GGST Act, Not Blocked by Section 17(5.

  Case-Laws - AAR : Blocked of input tax credit - The applicant is eligible to avail ITC on roof top solar system with installation & commissioning under the CGST/GGST Act - The roof top solar system with installation and commissioning constitute plant and machinery of the applicant and hence is not blocked ITC under section 17(5) of the CGST/GGST Act. - AAR
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Income Tax

• Landmark ruling: Taxpayers can claim TDS credit even if the deductor fails to deposit with government, protecting taxpayer rights.

  Notes : A Landmark Judgment on Tax Credit Entitlement - Credit of TDS if deductor failed to deposit the TDS to the Government
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• Taxpayers can claim TDS credit even if deductor fails to deposit; emphasizes deductor's responsibility to comply.

  Notes : Tax Credit Entitlement - Credit of TDS if deductor failed to deposit the TDS to the Government
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• Reopening Tax Assessment Requires Direct Evidence of Unreported Income, Not Speculative Data.

  Notes : Validity of reopening of assessment - need for a direct link between the portal's information and the income allegedly escaping assessment
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• Tax authorities should align expense disallowances with real business practices for fair and accurate tax assessments.

  Notes : Disallowance of expenses - need for tax authorities to have a practical understanding of the nature of business operations
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• Tax Authority Disallows Sugarcane Purchase Expenses, Labels Extra Payments as Profit Appropriation, Not Deductible.

  Notes : Disallowance of the assessee's business expenditure claims related to the purchase of sugarcane from member farmers, as well as the treatment of additional sugarcane price paid to growers as an appropriation of profits.
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• Taxpayer Assessed for Unexplained Investments and Interest Income Despite Lack of Direct Incriminating Evidence.

  Notes : Additions made u/s 69 and Section 56 in the absence of direct incriminating evidence linking the assessee to the alleged unexplained investments and interest income. - Assessment of search and seizure
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• Taxpayer's Ineligible Deduction u/s 80IB(11) Not Correctable Post-Assessment via Section 154.

  Case-Laws - AT : Revision u/s 263 - AO has totally overlooked that the assessee is not eligible for deduction u/s. 80IB(11) - The contention of the ld. A.R. that this is a mistake and it should have been rectified u/s. 154 will also not come in picture because the assessee has claimed deduction under the section which is not applicable to the assessee and has not pointed out this mistake at the assessment proceedings or after the assessment order passed. - AT
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• Funds for Public Toilets Under Swach Bharat Not Considered Taxable Income Due to Fiduciary Capacity.

  Case-Laws - AT : Assessment of trust - construction of Public Toilets under the Central Government Scheme “Swach Bharat Abhiyan' - Swach Bharat Fund directly transferred to the Balance sheet without taking it into Income & expenditure account of the assessee - the assessee is not the owner of the funds but holding the same in fiduciary capacity, hence, no addition is called for on this account - AT
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• Taxpayer Benefits from Article 13 for Pre-2017 Shares; Order Deemed Correct and Non-Prejudicial to Revenue.

  Case-Laws - AT : Revision u/s 263 - the assessment order passed by AO granting benefit of Article 13 to the assessee on shares acquired prior to 1st April 2017, is after making due enquires and further same is also made in accordance with the press release of Central Board of Direct Taxes , hence, cannot be considered to be erroneous insofar as it is prejudicial to the interest of the Revenue - AT
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• Challenge to Disallowance u/s 14A for Mutual Fund Consolidation with No Exempt Income Trigger.

  Case-Laws - AT : Disallowance u/s 14A - expenditure incurred on earning exempt income - In the given case the transaction of the consolidation of mutual funds is not considered as a transfer under section 47(xviii) and therefore it does not result in any income within the definition of section 2(24). Therefore we see merit in the contention that the assessee has not earned any income that is exempt under the Act in order invoke section 14A. - AT
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• Section 68 Addition for Cash Loans Challenged Due to Lack of Unexplained Sources; Household Savings Considered.

  Case-Laws - AT : Addition u/s 68 - Cash loan and interest income earned on such cash loan unexplained - It is not understandable as how the cash loan are unexplained, when the AO has not indicated any source of cash accumulation as from undisclosed sources, thus, even otherwise extending of such cash loans out of accumulated cash balance (presumably out of cash saved by way not showing full household withdrawal) does not justify for addition u/s 68. - AT
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• TPO's aggregation of SWD and ITeS segments deemed unjustifiable; case remanded for further review.

  Case-Laws - AT : TP Adjustment - the Ld.TPO has observed that the services rendered by the assessee are under two segments, but still holds the services of the assessee under SWD segment to be similar to that of the functions performed by the assessee under ITeS segment. We also note that the reasoning by the assessee Ld.TPO to aggregate both these segments are not justifiable and therefore cannot be upheld. - Matter restored back for reconsideration - AT
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Customs

• Dispute Over Imported Apple Valuation Highlights Customs Procedures and Tax Assessment Challenges.

  Notes : Provisional release of imported goods (apples) - The dispute centers on the valuation of the imported apples.
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• Duty-Free Shop Must Pay Customs Duty on Excess Liquor Sales Beyond Limit, Violating Duty-Free Regulations.

  Notes : Liability for payment of customs duty on sale of excess liquor from the duty-free shop
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• Change in Goods Classification Spurs Late Customs Duty Demand, Raises Questions on Timeliness and Validity Under Regulations.

  Notes : Demand of customs duty beyond normal period of limitation on the ground of change in classification of goods
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• Debate on Fairness of Imposing Additional Penalties After Full Duty and Penalty Paid Pre-Notice.

  Notes : Whether penalty is to be imposed when the appellant has accepted the classification and paid the entire duty along with penalty much before the issuance of the show cause notice?
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• Export Ban on Non-Basmati Rice Upheld; Doctrine of Substantial Compliance Does Not Apply to Petitioner's Case.

  Case-Laws - HC : Permission to export non-basmati white rice for which shipping bills had been filed by the Petitioner and the rotation number had also been generated - The doctrine of substantial compliance and intended use would not come in aid of the Petitioner because the purport of the Notification is to immediately put a ban on the export of Non-basmati rice - HC
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• Customs House Agent Firm's License Revoked for Violations; Compensation Made, License Not Permanently Revoked.

  Case-Laws - AT : Revocation of license of CHA firm - It has been brought to notice that at least in 8 cases, any revenue loss caused to the department, was made good and the vehicles cleared upon payment of necessary dues. Though there is no denying the fact that the appellant had committed grave error in law, and we find them to have contravened the legal stipulations. - The licence cannot be allowed to remain revoked in perpetuity - AT
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• Customs Broker's License Revoked Unfairly, Impacting Livelihood Despite Being Cleared in Enquiry Report.

  Case-Laws - AT : Revocation of Customs Broker License - Though enquiry report has absolved the Customs Broker from all the charges levelled against him, the reasons were not accepted, the enquiry report was not communicated to the appellant, violating the principles of natural justice. - The revocation of Customs Brokers License is too harsh a punishment which is bound to affect the livelihood of the Customs Broker and his employees - AT
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Corporate Law

• Auditors' Role Vital for Financial Integrity: Upholding Standards Ensures Transparency and Trust in Financial Reporting.

  Notes : Stringent approach towards ensuring compliance with auditing standards - importance of auditors' responsibilities in maintaining the integrity and reliability of financial reporting
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Benami Property

• Benami Transactions Amendment 2016: Non-Retrospective Application Ensures Fairness in Punitive Measures for Property Deals.

  Notes : Application of provisions of section 5 of the Benami Transactions (Prohibition) Amendment Act, 2016 - non-retrospective application of punitive legal provisions.
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• Understanding the Impact of the Benami Transactions (Prohibition) Amendment Act, 2016 on Property Ownership Regulations.

  Notes : Applicability of the Benami Transactions (Prohibition) Amendment Act, 2016
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Indian Laws

• Petitioner challenges 20% deposit requirement in cheque dishonor case; High Court remands for reassessment of exceptions.

  Case-Laws - HC : Dishonour of Cheque - Seeking waiver of deposit of 20% amount of compensation - whether there exist exceptional circumstances to exempt the petitioner from depositing the 20% of the fine - the present case be remanded back to the learned Sessions Court/Appellate Court for deciding afresh, as to whether the three exceptional circumstances being raised by the petitioner herein fall within the category of exceptional circumstances - HC
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PMLA

• High-Profile Case Examines Money Laundering Allegations Against Prominent Agencies, Drawing Public Interest.

  Notes : The case of Manish Sisodia versus CBI and DoE is not just a legal battle but also a matter of significant public interest.
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SEBI

• Transparency in Corporate Governance: Protecting Minority Shareholders' Rights Through Clear Communication and Accountability.

  Notes : Importance of transparency in corporate governance and the rights of minority shareholders
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Service Tax

• Extended Limitation Period Unjustified: Appellant's Transparency and Regular Audits Highlighted.

  Case-Laws - AT : Extended period of Limitation - Keeping in view the fact that the position of law was not clear during the relevant time, invocation of extended period of limitation is not justified because the appellant has not suppressed any material fact from the department and was subject to regular audit and has been regularly filing monthly service tax returns with the department. - AT
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• Training by HICA Exempt from Service Tax; Demands for "Commercial Training" and "Airport Services" Unsustainable.

  Case-Laws - AT : Exemption from Service Tax - The training imparted by the HICA is not exigible to service tax. Accordingly, the demands raised on “Commercial Training and Coaching Centre Services” rendered by the appellants are not sustainable. The demand on “Airport Services” is within the exemption limit. - AT
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• Debate Over Service Tax on Royalty Payments Under Reverse Charge Mechanism; Exemption Notification in Question.

  Case-Laws - AT : Levy of service tax - Royalty paid by appellant to Government - RCM - The department does not have a case, that the activity falls within lease and that the royalty paid is rent. This is because, if so, the liability to discharge service tax would be on the government (being the service provider). The demand raised is indeed on the basis of Sl.No.61 of the exemption notification. Para 15 of the SCN also would show that the demand has been raised on the basis that the royalty which is paid periodically is not exempted from service tax. - AT
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• Service Tax Refund Appeal Abated Due to Lack of Jurisdiction Post-Resolution Plan in Insolvency Proceedings.

  Case-Laws - AT : Refund of Service Tax - CIRP proceedings against the appellant - In the Resolution Plan, there has not been any provision made with regard to the pendency of this case. - Once the Resolution Plan has been approved by the NCLT, thereafter, the present appeal stands abated as the CESTAT has become functus officio in the matter relating to the present appeal. - AT
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Central Excise

• Tax Demand Issued Without Pre-Show Cause Notice Sparks Concerns Over Procedural Fairness and Extended Limitation Period.

  Notes : Demand based on Form-26AS information from the Income Tax Department, without pre-show cause notice consultations, invoking extended period of limitation.
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• Refund Claim Not Subject to Time Limits as Amount Was Not Tax Under Central Excise Act Section 11B(1.

  Case-Laws - AT : Refund of the amount deposited under-protest - Applicability of bar of limitation under Section 11B (1) of Central Excise Act - the statutory limitation period prescribed under Section 11B is not applicable to the refund claimed by the Appellant since the amount paid by the Appellant is not a tax. - AT
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• CENVAT Credit Reversal Not Required: Capital Goods Not Exclusively Used for Exempt Product Manufacturing.

  Case-Laws - AT : Reversal of the cenvat credit on capital goods when the final product manufactured by use of such capital goods became exempted subsequently - the capital goods were not used exclusively for the manufacture of exempted of final product. Hence, the allegation of the show cause notice that the capital goods were used exclusively for manufacture of exempted final product is not correct. - AT
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• CENVAT Credit Time Limit Inapplicable to Pre-11.07.2014 Invoices; Claims Allowed Without Six-Month Restriction.

  Case-Laws - AT : Denial of CENVAT Credit - the time limit of six months prescribed under Notification No.21/2014 dated 11.07.2014 is applicable only in respect of the invoices issued after 11.07.2014. As the invoices in this case were issued prior to this date , the time limit of six months is not applicable. - AT
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Case Laws:

• GST

• 2024 (1) TMI 662
  Cancellation of GST registration of petitioner with retrospective effect - petitioner failed to furnish returns for a continuous period of six months - HELD THAT:- In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. Merely, because a taxpayer has not filed the returns for some period does not mean that the taxpayer s registration is required to be cancelled with retrospective date also covering the period when the returns were filed and the taxpayer was compliant. It is important to note that, according to the respondent, one of the consequences for cancelling a tax payer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in this regard is correct, it would follow that the proper officer is also required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer s registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. The Show Cause Notice as well as the Impugned Order are set aside - Petition disposed off.

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• 2024 (1) TMI 661
  Blocking of petitioner s Input Tax Credit (ITC) under Rule 86-A of the TNGST / CGST Rules, 2017 - reasonable opportunity was not provided to the petitioner to submit relevant documents and to explain the facts and circumstances - violation of principles of natural justice - HELD THAT:- As a consequence of the impugned order, the petitioner has been directed to reverse ITC of a substantial value. Such action has been taken pursuant to a show cause notice dated 09.10.2023, which the petitioner asserts was received on the date of hearing. These facts reveal that a reasonable opportunity was not provided to the petitioner to submit necessary documents and provide an explanation to the respondent. On this limited ground, albeit without expressing any opinion on the merits in the matter, the impugned order calls for interference. The petition is allowed by quashing the impugned order dated 30.10.2023 and remanding the matter for re-consideration. The respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and dispose of the matter by a reasoned order - petition is allowed by way of remand.

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• 2024 (1) TMI 660
  Rejection of appeal being not maintainable - appeal presented in a manner by filing it offline (manual) on 31.08.2020 against the order dated 04.06.2020 - Reliance has been placed upon Rule 108 of the Haryana Goods Service Tax Rules, 2017 (in short the Rules ) which provide that the appeal can be filed either electronically or otherwise, as may be notified by the Commissioner. HELD THAT:- It has been brought to our notice that the said Rule was amended on 04.08.2023 and the appeals have been filed earlier. It has also been further brought to our notice that a co-ordinate Bench in GO DADDY INDIA DOMAINS AND HOSTING SERVICES PVT. LTD. VERSUS STATE OF HARYANA AND OTHERS [ 2023 (4) TMI 1283 - PUNJAB AND HARYANA HIGH COURT] came to the conclusion that it is a highly technical ground for dismissing the appeal and set aside the said order and issued directions to hear the appeal on merits after giving opportunity of hearing to both the parties. A perusal of the said judgment would also go on to show that the wording of the Rule had been taken into consideration since it is provided electronically or otherwise and, therefore, the manual filing as such has also been accepted. There are no tangible reason to pass a different order. Accordingly, the order dated 01.03.2023 (Annexure P-1) is quashed. The appeal is restored on the Board of the Appellate Authority, which shall proceed to decide the appeal on merits. Petition disposed off.

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• 2024 (1) TMI 659
  Input tax credit - blocking of input tax credit - inputs/capital goods or input services on the purchased rooftop solar system with installation commissioning - rooftop solar system with installation and commissioning constitute plant and machinery of the applicant which are used in the business of manufacturing welding wires - sections 16 17 of the CGST/GGST/IGST Act - HELD THAT:- The roof solar plant, affixed on the root of the building is not embedded to earth. Accordingly it is not an immovable property but a plant and machinery, which is utilized to generate electricity which is further solely and captively used in the manufacture of welding wires. The applicant is engaged in the business of supply of welding wires on payment of GST at the applicable rates. The applicant has further stated that they have capitalized the roof solar plant in their books of accounts. The Roof Solar Plant, as is evident is not permanently fastened to the building. Thus, it qualifies as a plant and machinery and is not an immovable property, hence, it is not covered under blocked credit as mentioned in 17(5)(d) of the CGST Act, 2017. Therefore the applicant is eligible for input tax on roof solar plant. The applicant is eligible to avail ITC on roof top solar system with installation commissioning under the CGST/GGST Act - The roof top solar system with installation and commissioning constitute plant and machinery of the applicant and hence is not blocked ITC under section 17(5) of the CGST/GGST Act.

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• Income Tax

• 2024 (1) TMI 658
  Revision u/s 263 - Deduction u/s. 80IB(11) - CIT observed that the assessee had claimed and allowed deduction u/s. 80IB(11) of the Act, the undertaking is eligible for such said deduction subject to fulfillment of condition that it begins to operate such facility on or before first day of April, 1999, but before the first day of April, 2004. However, in this case, as per Form No. 10CCB, the date of commencement of operation/activity by the assessee was 01-04-2016 hence the assessee is not eligible for deduction u/s. 80IB(11) - as per CIT AO while completing the assessment has not examined the conditions stipulated in section 80IB(11A) as the assessee is having business of processing, observation and packaging of fruits and vegetables and whether he is eligible for the same deduction or not? - HELD THAT:- It is pertinent to note that in the questionnaire asked by the AO, he has totally overlooked that the assessee is not eligible for deduction u/s. 80IB(11). Thus, AO has committed error which amounts to erroneous assessment order without looking into the proper/correct section that of section 80IB(11A) of the Act under which the assessee should have opted for deduction. Thus, this amounts to erroneous order as well as prejudicial to the interest of Revenue. The contention of the ld. A.R. that this is a mistake and it should have been rectified u/s. 154 will also not come in picture because the assessee has claimed deduction under the section which is not applicable to the assessee and has not pointed out this mistake at the assessment proceedings or after the assessment order passed. Once, the invocation of 263 has been done by the Pr. CIT, the assessee cannot state that the same is a mistake and can be rectified u/s. 154 of the Act. This revisionary power was rightly invoked by the PCIT u/s. 263 of the Act and therefore the appeal of the assessee is dismissed.

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• 2024 (1) TMI 657
  LTCG - Exemption u/s. 54F - piece of land was treated by the assessee as stock-in-trade - motive to acquire land - Co-ownership in land - HELD THAT:- AO after detailed verification found that the assessee and seven co-owners in their respective shares formed a new partnership firm with the same ratio of the land holding as their partnership shares. The above land was purchased by the co-owners on 02-01-2006 for a consideration of Rs. 6 lakhs and assessee s share is 18%. All the co-owners entered into a development agreement dated 30-11-2011 with their own partnership firm Ashirwad Infrastructure to develop the land into 18 bungalows in the prime location at Thaltej. Assessee bought another parcel of land along with seven other co-owners and constituted another partnership firm namely Sudarshan Developers on 06-05-2014 with the very same set of co-owners as the partners and engaged in the business of land development. This clearly establishes the motive, intention and interest of the assessee in doing the real estate business. Thus the motive to acquire land was to earn profit through activity of development of the land through his own partnership firm as builder, contractors of the partnership firm also not paid taxes. If the assessee would have done this construction project in his individual capacity, he should have been liable for higher tax and will not have been eligible for claiming exemption u/s. 54F of the Act. Thus the above transaction of the assessee is clearly to evade legitimate taxes due on the profit of the sale of the property. Thus the profit earned by the assessee on sale of land is correctly treated as business income by the Lower Authorities. It is further evident in other co-owner cases, similar reopening of assessments were done and one of the co-owner as against the reassessment order settled the issue under Vivad Se Vishwas Scheme. Decided against assessee.

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• 2024 (1) TMI 656
  Deduction of Employees Stock Option Plan (ESOP) cost - claim made by the assessee in the revised return - HELD THAT:- The assessee furnished the Copy of invoice raised by ITC Ltd. towards ESOP expenses and period wise breakup thereof; Copy of relevant extracts of bank statement and RTGS details of the assessee company showing the payment made to ITC Ltd.; Relevant extract of audited financial statements of the assessee company for the year under 31/03/2017 i.e., immediately succeeding year to the year under consideration with comparative financial statements for financial year 2015-16 and Copy of ITC Employees Stock Option Scheme-2010 policy. We further find that as per the ESOP Scheme, such expenses had been duly taxed in the hands of the employees as perquisites and included in Form-16 of the employees and due deduction of tax at source were indeed made by the assessee treating them as salary. CIT(A) had confirmed the disallowance of the AO on the ground that assessee had not rebutted the findings of the Ld. AO. This is factually incorrect as the CIT(A) himself has reproduced the various rebuttal made by the assessee on the findings of the Ld. AO and the same are duly reproduced - CIT(A) having recorded the rebuttal of the assessee on the findings of the AO in his appellate order ought to have at least given a preliminary finding as to how the rebuttal given by the assessee does not advance the case of the assessee. Without doing the preliminary work, and by ignoring the various judicial precedents available on the impugned issue, where it had been categorically held that ESOP expenditure is allowable expenditure in the hands of the company, the Ld. CIT(A) grossly erred in confirming the disallowance. See NEW DELHI TELEVISION LTD. [ 2017 (2) TMI 1399 - DELHI HIGH COURT] , M/S. BIOCON LTD. [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] and LEMON TREE HOTELS LTD [ 2015 (11) TMI 404 - DELHI HIGH COURT] and M/S. PVP VENTURES LIMITED [ 2012 (7) TMI 696 - MADRAS HIGH COURT] Thus claim of deduction of ESOP expenditure was made by the assessee in the revised return filed on 31/03/2019 which is well within the time limit prescribed u/s 139(5) of the Act. Hence, we have no hesitation to hold that assessee s claim of deduction is squarely allowable as deduction.

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• 2024 (1) TMI 655
  Assessment of trust - construction of Public Toilets under the Central Government Scheme Swach Bharat Abhiyan - Additions against the Swach Bharat Fund directly transferred to the Balance sheet without taking it into Income expenditure account of the assessee - HELD THAT:- As correctly decided by CIT(A) this fund is for the society to be used for its aims and objectives. The amount that the society receives from the various PSUs and departments for the rebuilding of the State of Uttarakhand are not part of its aim and objectives and merely holder of the funds. Returning to the issue of Rs. 1,50,00,000/- of Swachh Bharat Abhiyan Fund, as examined the accounts of the assessee. This is even submitted to the AO. There is no doubt that this sum has been routed through the income expenditure account, therefore, this point made by the AO does not have any legs to stand on. The AO has not pointed out any other deficiency and therefore, this addition must be deleted. R R Disaster Relief - The assessee is CSR arm of THDCIL and holds these funds as liability. It cannot use these funds for its own aims and objectives. The ld. CIT(A) held that the AO does not appear to have appreciated this point and made this addition stating that these funds should have been transferred to the income expenditure account and accounts should have been maintained separately. Since, the assessee is not allowed to use these funds for its own aims and objectives, it is not reasonable to expect it to route through its income expenditure account. This is a peculiar fact which needs to be appreciated in the context in which the assessee has handled these funds. Therefore, the assessee s action of taking this amount directly to its balance sheet is correct. CIT(A) further held that the assessee has to return these funds to the agency/PSU/Department who have contributed to the funds. The letters from the Chairman DVC and minutes of meetings for implementing reconstruction and rehabilitation (R R) efforts by PSUs that shows clearly that the assessee merely holds these funds on behalf of these participating agencies and can spend these funds only as per the mandate provided to it. It was held that the assessee does not even spend these funds on its own but passed it to the designated state agency who will inturn spend these funds. As gone through the various correspondences of the Power Finance Corporation, REC, NDMA, NTPC and the assessee being nominated as the nodal agency to facilitate the implementation of R R projects - we hold that the assessee is not the owner of the funds but holding the same in fiduciary capacity, hence, no addition is called for on this account. The order of the ld. CIT(A) on this issue is affirmed.

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• 2024 (1) TMI 654
  Revision u/s 263 - eligibility of benefit of Article 13 (4) of India Mauritius tax Treaty - as per CIT(A) benefit of Article 13 (4) of India Mauritius tax Treaty to the Mauritius registered assessee company, having Tax Residency certificate, for sale of shares acquired in F Y 2007-08, sold in AY 2018-19 earning capital gain claimed as not chargeable to tax in India , accepted by ld AO, held to be erroneous and Prejudicial to revenue - HELD THAT:- The foreign source income are eligible for foreign tax credit. Thereafter after mentioning the provisions of Mauritius and India jurisdiction on income tax , reconciliation between the accounting profits for tax purposes along with book profit was made. In that assessee has made a provision at the rate of 15% applicable to the assessee company in Mauritius. Therefore, as the assessee has mentioned in that note the CIT has taken a view that the learned Assessing Officer failed to enquire about such taxability as per the provisions of Indian Income Tax and Indo Mauritius Double Taxation Avoidance Agreement. That particular note also says that the protocol would be applicable only if the shares are acquired after 1st April, 2017. Thus, it is not the case of the Revenue that the shares of the Indian entity were acquired by the assessee after 1st April, 2017. Against this, the annual accounts of the assessee clearly states that such shares were acquired in F.Y. 2007-08. It is not the case of the CIT that the tax residency certificate is as a result of fraud or illegal activities. Therefore, The learned CIT also does not doubt that assessee is holding tax residency certificate. It is also not the case of the CIT that tax residency certificate of the assessee is not valid in view of the same other information. The amendment to the Double Taxation Avoidance Agreement limiting the benefit of profit or gains on sale of shares in the hands of the Mauritius entity as per Article 13 (3B) and 27(A) would apply with effect from 1st April, 2017. The press release of Central Board of Direct Taxes dated 29th August, 2016, has expressly provided for grandfathering of investment prior to 1st April, 2017. It specifically says that the protocol provides for source based taxation of capital gain arising from alternation of shares acquired on or after 1st April, 2017 in a company resident in India with effect from F.Y. 2017-18. It further says that simultaneously investment made before 1st April, 2017, have been grandfathered and will not be subject to capital gain tax in India. Thus, claim of exemption granted by AO based on the above information is clearly in accordance with the press release dated 29th August, 2016 issued by the CBDT. CIT has nowhere stated that the assessment order passed by the learned Assessing Officer is not in consonance with the above, Therefore We hold that the assessment order passed by AO granting benefit of Article 13 to the assessee on shares acquired prior to 1st April 2017, is after making due enquires and further same is also made in accordance with the press release of Central Board of Direct Taxes , hence, cannot be considered to be erroneous insofar as it is prejudicial to the interest of the Revenue - Decided in favour of assessee.

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• 2024 (1) TMI 653
  Penalty u/s 271AAB - income has been assessed u/s 143(3) in pursuance of requisition proceedings u/s 132A - matter referred to third member - Whether in the facts and circumstances of this case, penalty is leviable @ 10% u/s 271AAB(1)(a)(iii) or 60% u/s 271AAB(1)(C) of the Act? - HELD THAT:- As decided by third member wherever a search is initiated u/s, 132 of the Act during the period mentioned in the provisions of section 271AAB of the Act, as in the present case of the assessee, search was initiated u/s. 132 of the Act by issuance of Warrant of Authorization in the name of Sunil Kumar Jindal on 01.12.2016 and it means that the assessee is squarely covered by the provisions of section 132 of the Act and consequently, the provisions of section 271AAB of the Act clearly applies to the present case of the assessee. The provisions of section 132A of the Act where requisition of books of accounts etc., are made by the Income Tax Department and noted by Ld. Accountant Member is not emanating from the facts of the case. Because in the present case, the Department has not issued requisition u/s. 132A of the Act, but carried out search after issuance of Warrant u/s. 132 of the Act, we disagree with the view expressed by Ld, Accountant Member in holding the view that the Department has made requisition u/s. 132A of the Act. Accordingly, do not agree with the question framed by Ld. Accountant Member on the given facts and circumstances of the case In the light of the aforesaid decision of the learned Third Member, the majority view is followed.

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• 2024 (1) TMI 652
  Computation of income on presumptive basis u/s 44BBA - whether this service tax component is includible in the gross receipts for computing the deemed taxable income u/s. 44BBA? - assessee is a non-resident engaged in the business of operation of airlines and is subjected to income tax under the Act on presumptive basis in terms of section 44BBA - HELD THAT:- As decided in assessee own case [ 2022 (9) TMI 354 - ITAT KOLKATA] relying on Mitchell Drilling International Pvt. Ltd. [ 2015 (10) TMI 259 - DELHI HIGH COURT] held that for the purpose of computing the presumptive income of the assessee u/s. 44BB, service tax collected by the assessee on the amount paid to it for rendering the services is not to be included in the gross receipts in terms of section 44BB(2) read with section 44BB(1) of the Act. Hon ble High Court also held that service tax is not an amount paid or payable, or received or deemed to be received by the assessee for the services rendered by it, the assessee is only collecting the service tax for passing it on to the Government account. Thus, the question framed was answered in favour of the assessee and against the revenue.

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• 2024 (1) TMI 651
  Determination of date of acquisition for the purpose of ascertaining any income u/s 56 (2) (x) (b) - purchase of immovable property where the purchase value is less than the stamp value determined by authority - whether the date of acquisition of the property should be considered by the letter dated 13/4/2007 wherein the assessee has demonstrated that he has paid a sum of Rs 5 lakhs for booking of the commercial property? - AO has disregarded this argument for the reason that the letter dated 13/4/2007 did not identify the property as well as did not mention the actual consideration agreed between the parties and therefore such allotment letter cannot be considered as the date of acquisition of the property HELD THAT:- It is not the case of the assessee that notices have not been received at that email address or on the ITBA portal. Before us in form number 36 also the assessee has given the same email address. Therefore, non-receipt of the notice cannot be believed. However, it is also the fact that the learned CIT A should have given a detailed reason on the ground of appeal raised by the assessee in terms of provisions of section 250 (6) of the act. CIT appeal without considering the merits of the case has merely upheld the action of the learned assessing officer. Therefore, the order of the learned CIT A is not in accordance with the provisions of section 250 (6) of the act as in the ground of appeal there was a specific ground raised about the addition of Rs. 14,098,500. In view of the above facts and in the interest of natural justice we restore the appeal of the assessee back to the learned CIT With a direction to the assessee that as soon as the window is available for submission of detailed by the learned CIT A, assessee must submit the detail within the prescribed time which may be considered by the learned CIT A and decide issue on the merits of the case. Appeal filed by the assessee is allowed for statistical purposes.

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• 2024 (1) TMI 650
  Powers of the Commissioner (Appeals) u/s 251 - Disallowance of Employees Stock Option Plan (ESOP) expenditure - AR submitted that the ESOP expenditure is an allowable claim u/s 37(1) - HELD THAT:- As we are of the view that the CIT(A) has acted beyond his jurisdiction enhancing the income of the assessee by disallowing the ESOP expenses for the reason that the AO while completing the assessment has not taken into consideration the revised return of income and has not examined the taxability of ESOP expenses which the assessee has claimed in the revised return of income. While holding so we would like to add that the decision is based on the facts unique to the assessee s case. This ground of the assessee is allowed accordingly. Allowability of ESOP expenses - This issue is covered by the decision of Biocon Ltd [ 2020 (11) TMI 779 - KARNATAKA HIGH COURT] where it is held that expenditure on account of ESOP is a revenue expenditure and had to be allowed as deduction while computing income. The Special Bench whose order is affirmed by the Hon ble High Court [ 2013 (8) TMI 629 - ITAT BANGALORE] held that the sole object of issuing shares to employees at a discounted premium is to compensate them for the continuity of their services to the company. By no stretch of imagination, we can describe such discount as either a short capital receipt or a capital expenditure. It is nothing but the employees cost incurred by the company. The substance of this transaction is disbursing compensation to the employees for their services, for which the form of issuing shares at a discounted premium is adopted. We hold that the addition made towards disallowance of ESOP expenses is not tenable on merits also. Ground raised by the assessee in this regard is allowed. Disallowance u/s 14A - expenditure incurred on earning exempt income - AR submitted that the income which is shown by the assessee as exempt is in reality is not an exempt income in order to invoke the provisions of section 14A - HELD THAT:- Section 14A provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. Therefore for invoking section 14A the impugned transaction should first result in an income which as per other provisions of the Act is exempt. In the given case the transaction of the consolidation of mutual funds is not considered as a transfer under section 47(xviii) and therefore it does not result in any income within the definition of section 2(24). Therefore we see merit in the contention that the assessee has not earned any income that is exempt under the Act in order invoke section 14A. As in the case of Era Infrastructure India Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] has held that the explanation to section 14A which is inserted w.e.f. 01.04.2022 is prospective in nature. Therefore for the year under consideration where the assessee has not earned any exempt income, the explanation to section 14A is not applicable. We hold that the AO is not correct in invoking the provisions of section 14A and accordingly the disallowance made in this regard is to be deleted. This ground is allowed in favour of the assessee.

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• 2024 (1) TMI 649
  Addition u/s 68 - Cash loan and interest income earned on such cash loan unexplained - assessee submitted no addition could be made on the basis of the third party evidence unless copy of the same is provided to the assessee - HELD THAT:- As contention of the AO that cash loan would had been extended out of accumulated cash balance by way of showing low house withdrawals, can t withstand. Further, it is not understandable as how the cash loan are unexplained, when the AO has not indicated any source of cash accumulation as from undisclosed sources, thus, even otherwise extending of such cash loans out of accumulated cash balance (presumably out of cash saved by way not showing full household withdrawal) does not justify for addition u/s 68. Thus, in our opinion, there no circumstances evidences, which indicate or establish that the assessee would have extended cash loan to Wadhwa group except the statement of Wadhwa group but no such documents in support of contention have been supplied to the assessee. Therefore, in view of the decision in the case of CIT v. Ashwani Gupta [ 2010 (2) TMI 42 - DELHI HIGH COURT] the action of the AO being in violation of principle of natural justice, the deletion of the addition by the CIT(A) is justified. We do not find any infirmity in the order of the Ld. CIT(A) in deleting the addition. The grounds of the appeal of the Revenue are accordingly dismissed.

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• 2024 (1) TMI 648
  TP Adjustment - international transaction of software development services undertaken by the Appellant with its Associated Enterprises (`AEs ) - Services of the assessee under SWD segment and under ITeS segment - functions performed by the assessee under the software development services segment and ITeS segment - assessee carries out SWD services for its AE and develops, supplies computer software and tests existing programs and also provides technical support services to its AE in China at its request - HELD THAT:- On analysis of the functions performed by the assessee under both segments, it is clear that the assessee has provided services to its AE under SWD segment as well as ITeS segment. It is noted that the Ld.TPO also has observed that the services rendered by the assessee are under two segments, but still holds the services of the assessee under SWD segment to be similar to that of the functions performed by the assessee under ITeS segment. We also note that the reasoning by the assessee Ld.TPO to aggregate both these segments are not justifiable and therefore cannot be upheld. We under such circumstances inclined to remand both these segments back to the Ld.TPO/Assessing Officer to reverify the services rendered by assessee under both the segments vis- -vis the specific functions performed by it. The Ld.AO shall not forget that, the assessee has admittedly made a statement in respect of ITeS services being rendered by the assessee for the first time in the financial year relevant to Assessment Year under consideration. Accordingly, grounds 3 to 5 are remanded back to the Ld.TPO/AO for denovo consideration. AO/TPO is directed to recompute the ALP margin of the assessee under both the segments independently based on respective functions performed by the assessee under each segment in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee.

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• Customs

• 2024 (1) TMI 647
  Invocation of principle of substantial compliance and intended use - Seeking directions to the Respondent to permit the petitioner to export non-basmati white rice for which shipping bills had been filed by the Petitioner and the rotation number had also been generated - HELD THAT:- A perusal of the Notification bearing No. 20/2023 dated 20.07.2023 and the subsequent amendment to the said Notification vide Notification No. 29/2023 dated 29.08.2023 indicates that there are five conditions which are to be fulfilled to get exemption for exporting Non-basmati white rice (semi-milled or wholly milled rice, whether or not polished or glazed: other) which has been prohibited by the Government by the issuing the said Notifications. The Government by the said Notifications decided to prohibit completely the export of Non-basmati rice primarily in view of the rising price of the same in the market as huge quantity of rice was being exported from the country which had led to scarcity of non-basmati rice in the country and a consequent increase in prices for the same. A perusal of the facts of the present case does not indicate that the consignment of Non-basmati rice for remaining 11,000 MT rice was handed over to the customs before 21:57:01 hours on 20.07.2023 and was registered in Customs system or the Non-basmati rice consignment had entered the Customs Station for exportation before the appointed time and has been registered in the electronic systems of the concerned Custodian of the Customs Station with verifiable evidence of date and time stamping of these commodities having entered the Customs Station prior to 21:57:01 hours on 20.07.2023. Admittedly out of 28,000 MT of rice only about 11,000 MT of rice could be stored in the warehouse of the port due to space crunch. Paragraph (iii)(i) of the amended notification dated 29.08.2023 was not fulfilled. The Apex Court in State of West Bengal vs. Subhas Kumar Chatterjee, [ 2010 (8) TMI 1177 - SUPREME COURT] has categorically held that no mandamus lies for issuing directions to a Government to refrain from enforcing a provision of law and no court can issue mandamus directing the authorities to act in contravention of the rules as it would amount to compelling the authorities to violate law and such directions may result in destruction of rule of law. The doctrine of substantial compliance and intended use would not come in aid of the Petitioner because the purport of the Notification is to immediately put a ban on the export of Non-basmati rice, and therefore, the argument raised by the Petitioner that the Petitioner has substantially complied with the Notification and it has shipping bills, vessel call number (VCN) and the customs rotation number which shows the intention of the Petitioner to export rice would not come to its aid. The purpose of the Notification was to immediately put ban on the export of Non-basmati rice in order to meet the internal needs of the country in future. In this light, this Court is not inclined to invoke the principle of substantial compliance and intended use in the facts of the present case. The Writ Petition is dismissed.

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• 2024 (1) TMI 646
  Validity of SCN issued under Section 124 of the Customs Act, 1962 - consignments imported / shipped, which reached Chennai on various dates - show cause notices were issued almost 12 years after the consignments have been imported / shipped - HELD THAT:- Any proceedings initiated or completed after a reasonable period would suffer from the vice of arbitrariness thereby falling foul of Article 14 of the Constitution of India - though the limitation prescribed under Section 110 of the Act may not be applicable to proceedings under Section 124 of the Act. Nevertheless, the proceedings under Section 124 of the Act ought to be initiated within a reasonable period. Now on gleaning through the provisions of the Act, the largest period for taking action is provided under Section 28 of the Act for recovery of duty in case of fraud, suppression or wilful misstatement. Keeping the scheme of the Act in mind it appears to me that impugned proceedings under Section 124 of the Act, 12 years after the date of the subject import cannot stand the scrutiny of reasonableness/arbitrariness. Thus, it leaves no room for any doubt in my mind that the impugned proceedings under Section 124 of the Act, 12 years after the import is liable to be set aside on the ground of unreasonable delay. Thus the impugned proceedings are set aside - petition disposed off.

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• 2024 (1) TMI 645
  Revocation of license of CHA firm - forfeiture of security deposit - levy of penalty - certain Mumbai based operators imported high end cars/SUVs in the name of third parties by resorting to fraudulent means in breach of the provisions of Foreign Trade Policy and the Customs Act - alleging violation of Regulation 12, 13(a), 13(b), 13(d), 13(e) and 19(8) of the said Regulations (CHALR 2004) - HELD THAT:- It has been brought to notice that at least in 8 cases, any revenue loss caused to the department, was made good and the vehicles cleared upon payment of necessary dues. Though there is no denying the fact that the appellant had committed grave error in law, and we find them to have contravened the legal stipulations. It is also noted that the licence has now been revoked for nearly 10 years and more. This in itself, effecting the livelihood of the appellant, is considerable punishment and beyond what ought to have been imposed upon the appellant for various breaches. It is thus noted that the appellant have undergone grave hardship. The consequences of the aforesaid violation have been significantly harsh vis- -vis, the infringement in law made through Manish Chatwani by the appellant by way of lending out their licence for financial considerations. The licence cannot be allowed to remain revoked in perpetuity - the ends of justice shall be met in this case by maintaining the order of the Ld. Commissioner in so far as forfeiture of the Security Deposit of Rs.50,000/- is concerned with. Appeal disposed off.

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• 2024 (1) TMI 644
  Revocation of Customs Broker License - forfeiture of security interest - levy of penalty - Smuggling of Cigarettes - contraband Cigarettes were found concealed behind the declared goods - violation of provisions of Regulations 10 (b), 10(d), 10(e) and 10(n) of the CBLR, 2018 - enquiry report was not communicated to the appellant - violation of principles of natural justice - HELD THAT:- On going through the enquiry report and the impugned order and also various statements recorded from the persons connected including Shri K.V. Prabhakaran, proprietor of the Customs Broker - Though enquiry report has absolved the Customs Broker from all the charges levelled against him, the reasons were not accepted, the enquiry report was not communicated to the appellant, violating the principles of natural justice. The Hon ble High Court of Delhi in the case of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [ 2017 (3) TMI 1494 - DELHI HIGH COURT ] has held that Customs House Agents are only processing agent of documents for clearance of goods through Customs House. They are not inspectors to weigh genuineness of transaction, and there is no obligation to look into information from exporter/importer. It is onerous to expect CHA to inquire into and verify genuineness of IE Code given by client for each import/export transaction. When such code is mentioned, there is a presumption that appropriate background check in this regard would have been done by Customs authorities. In absence of knowledge that goods mentioned in shipping bills did not reflect truth of consignment sought to be exported, CHA or its proprietor cannot be attributed with mens rea - If goods did not corroborate with declaration in shipping bills, it cannot be deemed to be the mis-declaration by CHA. In the case of M/S. ASHIANA CARGO SERVICES VERSUS COMMISSIONER OF CUSTOMS (I G) [ 2014 (3) TMI 562 - DELHI HIGH COURT] , the Hon ble High Court of Delhi has held that revocation of CHA license is justified only in cases of aggravating factors that allow infraction to be labelled as grave. Though it is not possible to make exhaustive list of such aggravating factors, precedent cases show that revocation of licence has been upheld where there was an element of active facilitation of infraction, i.e., a finding of mens rea, or a gross and flagrant violation of CHA Regulations. The Customs Broker license was suspended vide F.No. R-498/CHA dated 15.07.2019, thus, more than four years passed since the time of suspension. In the case of KS. SAWANT CO. VERSUS COMMISSIONER OF CUSTOMS (GENERAL), MUMBAI [ 2013 (12) TMI 119 - CESTAT, MUMBAI ], it was held that mere signing of documents by a CHA would not prove that the clearances were undertaken by the CHA and punishment for the same could not be revocation of license of the CHA as that would be extreme and harsh. The revocation of Customs Brokers License is too harsh a punishment which is bound to affect the livelihood of the Customs Broker and his employees and by taking into consideration that the Customs Broker License was suspended on 15.07.2019 and thus more than four years time elapsed since, thus, the revocation is set aside - the Customs authority are directed to issue / revive the Customs Brokers License as the Broker was out of Business for more than four years which is enough punishment for the lapses on his part. As the security deposit was confiscated, ordering for its confiscation again cannot be sustained. However, imposition of a penalty of Rs.50,000/- under Regulation 18(1) of CBLR, 2018 cannot be termed as excessive. As such, the penalty of Rs.50,000/- imposed is upheld. Appeal allowed in part.

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• Service Tax

• 2024 (1) TMI 643
  CENVAT Credit of service tax paid - import of services under reverse charge mechanism for the period prior to 18.04.2006 - invocation of Extended period of Limitation - HELD THAT:- This issue is no more res-integra and has been considered by various benches of the Tribunal and it has been consistently held by the Tribunal that the assessee is entitled to cenvat credit of service tax paid under reverse charge mechanism on the services received from Foreign Service provider prior to 18.04.2006. This issue was finally settled by the Hon ble Supreme Court [ 2022 (11) TMI 48 - SUPREME COURT ] wherein it has been held that if the services are provided by a non-resident and are received outside India, the service would be taxable from 18.04.2006. Invocation of extended period of limitation - HELD THAT:- Keeping in view the fact that the position of law was not clear during the relevant time, invocation of extended period of limitation is not justified because the appellant has not suppressed any material fact from the department and was subject to regular audit and has been regularly filing monthly service tax returns with the department. Therefore, the invocation of extended period is not justified in the facts and circumstances of this case. The impugned order is bad in law on merits as well as on limitation - Appeal allowed.

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• 2024 (1) TMI 642
  Exemption from Service Tax - Commercial Training and Coaching Centre Services and Airport Service - providing training for flying aircraft to the pilot trainees - providing Landing and Parking Services to the other aircrafts which land in the premises of the institute - HELD THAT:- The Hon ble High Court of Delhi in the case of M/S INDIAN INSTITUTE OF AIRCRAFT ENGINEERING VERSUS UNION OF INDIA ORS [ 2013 (5) TMI 592 - DELHI HIGH COURT] has held that An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. Thus, the issue is fairly settled in favour of the appellants. Therefore, we hold that the training imparted by the HICA is not exigible to service tax. Accordingly, the demands raised on Commercial Training and Coaching Centre Services rendered by the appellants are not sustainable. The demand on Airport Services is within the exemption limit. The appeal is partly allowed by dropping the demand as far as Commercial Training and Coaching Centre Services is concerned.

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• 2024 (1) TMI 641
  Levy of Service Tax - Business Auxiliary Service - income earned by the appellant on Ocean Freight - HELD THAT:- The logistic companies buy cargo space in shipping lines and thereafter, sell the space to their customers. In various decisions, it has been found that the said activity is purchase and sale of space in Ocean Freight. In identical circumstances, in the case of GREENWICH MERIDIAN LOGISTICS (INDIA) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX MUMBAI [ 2016 (4) TMI 547 - CESTAT MUMBAI] observed that The notional surplus earned thereby arises from purchases and sale of space and not by acting for a client who has space or slot on a vessel. Section 65 (19) of Finance Act, 1994 will not address theses independent principal-to-principal transactions of the appellant and, with the space so purchases being allocable only by the appellant, the shipping line fails in description as client whose services are promoted or marketed. There are no merit in the impugned order the same is set aside - the appeal is allowed.

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• 2024 (1) TMI 640
  Levy of service tax - Royalty paid by appellant to Government - Demand under reverse charge mechanism Correctness of decision of the Hon ble Supreme Court in the case of India Cements [ 1989 (10) TMI 53 - SUPREME COURT] wherein it was held that royalty is a tax was delivered by a seven member bench, whereas, Kesoram Industries judgement [ 2004 (1) TMI 71 - SUPREME COURT] was given by a five member bench and that the judgement of seven member bench is to be followed by five member bench. The five member bench of the Hon ble Supreme Court in the case of State of West Bengal vs. Kesoram Industries Limited and Others, has clearly held that there was an error in the judgement which is attributable either to a stenographer s devil or to sheer inadvertence. Whether Royalty is in the nature of tax and is not a consideration for services? - HELD THAT:- The issue as to whether royalty is a tax, was considered by the Hon ble Supreme Court in the case of India Cement Ltd vs. State of Tamil Nadu [ 1989 (10) TMI 53 - SUPREME COURT] and held that royalty is a tax. The said decision is rendered by seven judges bench of the Hon ble Supreme Court. Later, in the case of State of West Bengal vs Kesoram Industries Ltd Ors. (decided on 15.1.2004) [ 2004 (1) TMI 71 - SUPREME COURT ] the decision rendered in the case of India Cement Ltd was doubted. The Ld. Special Counsel appearing for department has relied on this judgment rendered by five judges bench decision to argue that royalty is not a tax - It is brought to our notice that the issue whether royalty by itself is a tax has now been referred to nine judges bench in the case of Mineral Area Development [ 2011 (3) TMI 1554 - SUPREME COURT] . In a recent decision, the Hon ble Apex Court in the case of RAJNISH KUMAR RAI VERSUS UNION OF INDIA ORS. [ 2023 (9) TMI 1421 - SUPREME COURT] , held that judicial proprietary does not allow to ignore the decision laid by the Court even though referred to larger bench. The royalty , in the present case, even if in the nature of regulatory fee or license fee contain a part which is compensatory nature. It thus acquires a hybrid nature. When regulatory part of the fee can be kept outside the purview of consideration , the compensatory part of the fee would have an element of quid pro quo, so as to fall within the purview of consideration for service. The question then is how to carve out the element of compensatory part from the royalty paid. The Finance Act, 1994 does not provide for a mechanism to levy service tax on an amount which has the characters of both regulatory fee, as well as compensatory fee. Whether the dominant part is regulatory or compensatory in nature? - HELD THAT:- The amount of Royalty to be paid is determined on the basis of the well head prices. The royalty to be paid differs periodically. In order to collect royalty, a method is provided by the Act. The payment on the basis of well head prices is a measure for collection of the royalty. The provisions contained in the ORD Act, 1948 read with P NG Rules, 1959 enables us to draw a strong inference that royalty is more of a regulatory fee than compensatory. The amount of royalty to be paid though differs periodically, in our view the payment of royalty is a regulation of checking the over exploitation of the resources of our mother earth. Being dominantly in the nature of regulatory fee, royalty does not fit into the definition of consideration for services provided, as under the service tax law. The document is in the nature of Lease and not assignment of right to use . Further, Rule 17 prohibits transfer of assignment. The said Rule would bring out that the underlying nature of the document issued by the Government to appellant is lease and not assignment . A right created under a lease agreement is different from an assignment of right to use . Sl.No.61 of the Mega Exemption notification uses the words assignment of right to use - there are no reason to hold that it is an assignment of right to use of oil/natural gas. The activity impugned in the SCN is the assignment of right to use which is not so as per the document issued by Government of Tamil Nadu to the appellant. The department does not have a case, that the activity falls within lease and that the royalty paid is rent. This is because, if so, the liability to discharge service tax would be on the government (being the service provider). The demand raised is indeed on the basis of Sl.No.61 of the exemption notification. Para 15 of the SCN also would show that the demand has been raised on the basis that the royalty which is paid periodically is not exempted from service tax. The argument put forward by the Ld. Counsel that the liability is derived on the basis of an exemption notification and not charging provision is not without substance. The demand of service tax cannot sustain and requires to be set aside - Appeal allowed.

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• 2024 (1) TMI 639
  Recovery of short paid service tax alongwith interest and penalty - construction of slaughter house for Kolkata Municipal Corporation - Rule 21 of CESTAT Procedure Rules, 1982 - HELD THAT:- The slaughter house was established for Kolkata Municipal Corporation in terms of Article 243W read with Schedule 12th of the Constitution of India. Nothing as observed by the Commissioner (Appeals) has been placed on record to show that the said slaughter house was for commerce and industry. On the contrary in terms of Article 243W this was the responsibility of the municipal corporation. That being so, Appellant is entitled to benefit of Sr. No.12(a) of Mega Exemption Notification No.25/2012-ST dated 20.06.2012. There are no merits in this appeal and the Revenue appeal is dismissed.

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• 2024 (1) TMI 638
  Refund of Service Tax - CIRP proceedings against the appellant - In the Resolution Plan, there has not been any provision made with regard to the pendency of this case. - tax paid on the services of Transport of Goods by Road for the period 16.11.1997 to 02.06.2008 - HELD THAT:- The identical matter has been considered by two coordinate benches of the Tribunal in the case of M/s Jet Airways (India) Limited vs. Commissioner of Service Tax-IV, [ 2023 (5) TMI 767 - CESTAT MUMBAI ] and ICOMM TELE LTD. VERSUS COMMISSIONER OF CENTRAL TAX PUDUCHERRY - GST, ANDHRA PRADESH [ 2023 (10) TMI 1344 - CESTAT HYDERABAD] . It is pertinent to refer the findings of the CESTAT, Mumbai Bench in the case of M/s Jet Airways Limited which was disposed of and it was ordered that the appeals stand abated once the Resolution Plan has been approved by NCLT and the CESTAT has become functus officio in the matters relating to this appeal. Once the Resolution Plan has been approved by the NCLT, thereafter, the present appeal stands abated as the CESTAT has become functus officio in the matter relating to the present appeal. Appeal disposed off.

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• 2024 (1) TMI 637
  Non- payment of service tax - goods transport agency service under reverse charge mechanism for the goods exported - time limitation - HELD THAT:- This Tribunal in the case of M/S. N.M. ZACKRIAH CO. VERSUS COMMISSIONER OF SERVICE TAX CHENNAI-III COMMISSIONERATE [ 2023 (9) TMI 80 - CESTAT CHENNAI] has recently decided that in such a situation under Notification No. 18/2009 ibid cannot be entitled to the appellant. Therefore, on merit, the appellant is not entitled to take the benefit of Notification No. 18/2009 dated 07.07.2009. Time Limitation - HELD THAT:- It is a case of revenue neutral situation where whatever service tax is to be paid by the appellant, the same is entitled as Cenvat credit or refund under Rule 5 of Cenvat Credit Rules, 2004, as the appellant being exporter. In that circumstances, the mala fide intentions of the appellant are missing. In that circumstances, extended period of limitation is not invokable as held by this Tribunal in the case of M/S. SATYAM ENTERPRISES VERSUS CCE ST, JAIPUR. [ 2017 (8) TMI 1718 - CESTAT NEW DELHI] - thus, the extended period of limitation is not invokable. The impugned order set aside - appeal allowed.

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• Central Excise

• 2024 (1) TMI 636
  Refund of the amount deposited under-protest - Applicability of bar of limitation under Section 11B (1) of Central Excise Act - HELD THAT:- The jurisdictional High Court after referring to a catena of judgments has categorically held that the amount deposited during pendency of adjudication proceedings or investigation is in the nature of deposit made under-protest or pre-deposit and therefore principles of unjust enrichment would not be attracted. The jurisdictional High Court also categorically held that such an amount cannot be retained by revenue, as it has no authority to retain such amount and it must be refunded along with interest. In the present case, when admittedly the Appellant is not required to pay any amount, then the Appellant was clearly entitled to refund of the amount deposited under-protest and consequently the revenue has no authority to retain such amount as it would be in violation of Article 265 of the Constitution. The Hon ble High Courts of Bombay, Madras, Telangana and Calcutta have similarly held that refunds of amounts paid under mistake of law would not be hit by the statutory limitation periods. Thus, it is concluded that the statutory limitation period prescribed under Section 11B is not applicable to the refund claimed by the Appellant since the amount paid by the Appellant is not a tax. The present appeal is allowed.

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• 2024 (1) TMI 635
  CENVAT Credit - demand of 10% of the clearance value of exempted product under Rule 6 (3) of CCR - credit availed on capital goods allegedly used exclusively in manufacture of exempted product and lying in balance as on 07.12.2008. Whether the fact that the show cause notice proposed the demand of 10% under Rule (3) of Cenvat Credit Rules and the order confirming the demand under Rule 11(3) of Cenvat Credit Rules, 2004 is beyond the charges made in the show cause notice and whether on that ground demand is sustainable or otherwise? - HELD THAT:- It is an admitted fact that the show cause notice has demanded 10% under Rule 6(3) of Cenvat Credit Rules on the ground that appellant has availed cenvat credit on common input service which were used in the exempted and dutiable final product. However, in the adjudication order the demand of Rs, 1,20,80,589/- was confirmed on the ground that the said amount was lying in the balance as on 07.12.2008 when the appellant have opted for the exemption and according to Rule 11 (3) of Cenvat Credit Rules, 2004, as the said amount has lapsed. Thus the adjudication order has clearly travelled beyond the scope of show cause notice. It is a settled law in various judgments that when with regard to any charge/allegation the noticee is not put to notice that issue cannot be decided in the adjudication order - it is a settled law that then adjudication order cannot travel beyond the scope of show cause notice, therefore, the demand is not sustainable on the ground that the adjudication order is beyond the scope of show cause notice. Whether the demand of 10% under Rule 6 (3) of Cenvat Credit Rules in the fact that the entire credit attributed to the common input services used in the exempted goods has been reversed, is correct or otherwise? - HELD THAT:- The demand of 10% of value of exempted goods wherein the common cenvatable input services were used in the exempted as well as dutiable goods. In the present case, earlier a show cause notice dated 29.08.2013 was issued wherein the cenvat credit of Rs. 35,82,694 attributed to input and input services used in the exempted product was proposed - Since the appellant had already reversed the amount final confirmed of Rs. 9,48,034/-, accordingly, the entire cenvat credit attributed to the input and input services used in exempted goods was reversed and the same attained finality. Therefore, the entire basis for demanding 10% of the value of exempted goods under Rule 6 (3) (b) does not exist. Accordingly, the demand of 10% of the value of exempted goods which was proposed in the show cause notice is also not sustainable. Whether the demand of cenvat credit in respect of balance credit lying as on 07.12.2008 under Rule 11(3) of Cenvat Credit Rules, 2004 being lapsed is recoverable or otherwise? - HELD THAT:- The provision for lapsing of balance credit as on the date when the assessee opt for exemption is not applicable when the assessee manufacture and clear dutiable as well as exempted goods. In the present case there is no dispute that the appellant was manufacturing dutiable goods viz. other than 100% cotton as well as exempted final product (articles of 100% cotton) hence, the credit balance available as on 07.12.2008 was available for utilization for payment of duty on dutiable products - the appellant is not liable to reverse or pay back credit balance lying as on 07.12.2008. Hence, the demand on this count is also not sustainable. Whether the appellant is liable to reverse the cenvat credit on capital goods when the final product manufactured by use of such capital goods became exempted subsequently? - HELD THAT:- As per the admitted fact, before the final product became exempted, on the same capital goods the same exempted product was earlier manufactured when it was dutiable therefore, the capital goods were not used by the appellant exclusively for manufacture of exempted final product. The appellant cleared the goods under Notification No. 29/2004 before it got exempted and it was subject to duty at the rate of 4%. Therefore, the capital goods were not used exclusively for the manufacture of exempted of final product. Hence, the allegation of the show cause notice that the capital goods were used exclusively for manufacture of exempted final product is not correct. Therefore, the demand on this count is also not sustainable. The demands proposed in the show cause notice is not sustainable on multiple counts - the impugned order is set aside - Appeal allowed.

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• 2024 (1) TMI 634
  Denial of CENVAT Credit - credit availed by the appellant beyond the period of six months prescribed under N/N. 21/2014 dated 11.07.2014 - whether the appellant is eligible to avail the Cenvat Credit in December 2014, on the basis of the invoices issued in the month of March and April 2013? HELD THAT:- The issue id no longer res integra, as the same issue has already been decided by the Tribunal in the case of M/S. VOSS EXOTECH AUTOMOTIVE PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [ 2018 (3) TMI 1048 - CESTAT MUMBAI] where it was held that Notification No. 21/2014-S.T. (N.T.), dated 11- 7-2014 should be applicable to those cases wherein the invoices were issued on or after 11-7-2014 for the reason that notification was not applicable to the invoices issued prior to the date of notification therefore at the time of issuance of the invoices no time limit was prescribed. Therefore in respect of those invoices the limitation of six months cannot be made applicable. Thus, the time limit of six months prescribed under Notification No.21/2014 dated 11.07.2014 is applicable only in respect of the invoices issued after 11.07.2014. As the invoices in this case were issued prior to this date , the time limit of six months is not applicable. Accordingly, the appellant is eligible for the Cenvat Credit availed based on the invoices issued in the month of March and April 2013, which is beyond a period of six months prescribed under Notification No. 21 / 2014 dated 11.07.2014. The impugned order set aside - appeal allowed.

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• 2024 (1) TMI 633
  Clandestine removal - demand based on the statement of Shri Amit Gupta and on the basis of documents recovered during the searches conducted in the various premises pertaining to said Amit Gupta - HELD THAT:- It is observed from the record of both these appeals that except the documents recovered from the various premises of Shri Amit Gupta, there is no other evidence. Most of those documents have been retrieved from the electronic gadget. No such certificate as is required under section 36B of Central Excise Act is placed on record to prove the authenticity and admissibility of those documents into evidence. In view of the said provision, the documents are not admissible. Shri Amit Gupta in his cross examination has even denied having any share holding in the business activity of any of the registered dealer companies as tabulated in the impugned show cause notice with the allegation that those registered dealer companies. Apparently, there is no search and recovery from the premises of the present appellants except that the statement of Shri Anil Goel, the appellant, was recorded. On perusal of the statement of said Shri Anil Goel, it is clear that he has outrightly denied receiving any cenvatable invoice without getting physical delivery of the goods. It is also observed that RG-23 Part I register has been placed on record by the appellants wherein all purchases of metal scrap/rods from M/s.Unanti Alloys were specifically recorded by the appellants. The department has failed to produce any document to falsify the contents of the said register. The register being documentary evidence should have precedence over the statement relied upon by the department. There has been no such recovery of document from premises of the appellant, it will not be out of place to hold that the department has proceeded based on the third party evidence to confirm the demand against the appellants. There has been catena of decisions wherein it has been held that third party evidence has no evidentiary value and that the same is not at all admissible in law. Thus, there is no evidence to prove that the appellants have availed cenvat credit on fake invoices without getting physical delivery of the goods - there are no reason for confirming the recovery of the said cenvat credit availed by the appellant - there is no question for imposition of penalty upon the appellant. Appeal allowed.

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• 2024 (1) TMI 632
  CENVAT Credit - input services - goods transport agency - denial on the ground of ineligibility of tax paid on utilization of goods transportation agency service for outward movement of manufactured goods, is the determination of scope of input service in relation to domestic clearances up to March 2008 and on goods cleared for export for the period thereafter. HELD THAT:- It is evident from the decision of the Hon ble High Court of Karnataka in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, BANGALORE VERSUS M/S ABB LTD. AND OTHERS [ 2011 (3) TMI 248 - KARNATAKA HIGH COURT] , which was affirmed by the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] , that, for the period prior to April 2008, that coverage of outward transportation within the definition of input service in rule 2 (l) of CENVAT Credit Rules, 2004 is beyond dispute. It is also evident from the records that the first appellate authority deliberately preferred resort to interpretation afforded by decisions of the Tribunal over the ruling of the Hon ble High Court. The reversal of the order of the original authority, dropping proceedings for the period prior to April 2008, by the first appellate authority is contrary to law and is, therefore, set aside. The eligibility of credit on outward transportation in relation to export goods has not been examined by the first appellate authority who has restricted the findings to the applicability of the decision in re ABB Ltd which, for the period upto March 2008, has attained finality. Thus, it is constrained in examining the legality and propriety of the conformation of demand by the first appellate authority for the period after March 2008. This needs rectification and, for that limited purpose, the matter remanded back to the first appellate authority for rendering a finding in accordance with law as settled. The appeal is allowed by setting aside the impugned order in full for the period prior to April 2008 and for remaining by remand to the first appellate authority.

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• 2024 (1) TMI 631
  Utilisation of CENVAT Credit - cenvat credit availed on molasses not admissible to be utilized for payment of central excise duty on sugar - denial on the ground that molasses were not input for manufacture of sugar - HELD THAT:- The very issue has been settled by Hon ble Bombay High Court Bench at Aurangabad in COMMISSIONER OF CENTRAL EXCISE AURANGABAD VERSUS M/S TERNA SSK LTD [ 2017 (9) TMI 2020 - BOMBAY HIGH COURT] where it was held that The substantial question of law framed on 18th February, 2015 is accordingly answered in the negative, in favour of the assessee and against the revenue. By following the ruling of Hon ble Bombay High Court, it is held that the impugned order-in-appeal is not sustainable. Appeal allowed.

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• 2024 (1) TMI 630
  CENVAT Credit - Service Tax paid on the bank charges - duty paying documents - certificate issued by the bank is an eligible document for availing credit or not - such bank charges have nexus with the manufacturing of final product or not - HELD THAT:- On perusal of the definition under Rule 2(l) of the CENVAT Credit Rules, 2004, it is clear that banking services are included in the said definition. Further, such activities fall within the definition as per the phrase activities relating to business - The period is prior to 01.04.2011, before the amendment of the definition of input service . The disallowance of credit is without any basis - the impugned order is set aside - Appeal allowed.

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• 2024 (1) TMI 629
  Area Based exemption - exemption on substantial expansion - appellants were paying duty on the cement manufactured by them but were availing exemption for the intermediate product, Clinker - HELD THAT:- The Hon ble Apex Court in AMBUJA CEMENT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [ 2015 (11) TMI 1413 - SUPREME COURT] has put to rest a long ongoing dispute, that the cement companies i.e. M/s Ambuja Cements, M/s ACC and the appellants, had with the Department - Hon ble Apex Court held that The basis adopted by the CESTAT that the same final product should be partly dutiable and partly exempt, is neither a requirement of clause (vi) nor a requirement of Rule 6. The issue is no longer res integra having been settled by the Hon ble Apex Court - there is no infirmity in the availment of Notification No.67/1995 on clinker manufactured and captively consumed, while availing Notification No.50/2003 on the cement manufactured by the appellants - the impugned order cannot be sustained and therefore, set aside. The appeal is allowed.

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• Indian Laws

• 2024 (1) TMI 628
  Dishonour of Cheque - Seeking waiver of deposit of 20% amount of compensation - whether there exist exceptional circumstances to exempt the petitioner from depositing the 20% of the fine, as directed by the learned Trial Court by way of order on sentence, during the pendency of Criminal Appeal filed by the petitioner against his conviction under Section 138 of NI Act? - HELD THAT:- This Court notes that in the application filed before the learned Sessions Court by the petitioner under Section 148 of NI Act seeking waiver of deposit of 20% of fine amount, only two circumstances were raised before the learned Sessions Court, which were claimed as exceptional in nature. The first exceptional circumstance was the pendency of petition filed by the petitioner under the Provincial Insolvency Act, and the second exceptional circumstance was the medical condition of the petitioner. Before this Court, one additional circumstance has been claimed as exceptional i.e. the pendency of consumer complaints filed by the complainant before the NCDRC against the insurance company, allegedly seeking the same amount as the amount in question in the present case. This Court also notes that in the impugned order dated 20.01.2020, though the learned Sessions Court has dealt with the argument regarding pendency of insolvency petition, it has not given any finding on the second exceptional circumstance i.e. the medical condition of the petitioner. However, it also appears from the perusal of impugned order that the arguments in this regard were not addressed before the learned Sessions Court by the counsel for petitioner, though this ground was mentioned in the application filed under Section 148 of NI Act. This Court is of the opinion that the present case be remanded back to the learned Sessions Court/Appellate Court for deciding afresh, as to whether the three exceptional circumstances being raised by the petitioner herein fall within the category of exceptional circumstances so as to warrant waiver of condition to deposit 20% of fine amount during the pendency of appeal against conviction under Section 138 of NI Act. The petitioner shall also be at liberty to bring any other exceptional circumstance to the notice of the learned Sessions Court. The present petition alongwith pending application is disposed of.

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