TMI Tax Updates - e-Newsletter
January 20, 2023

Case Laws in this Newsletter:

Customs

Articles

1. INVOCATION OF EXTENDED PERIOD OF LIMTIATION UNDER CUSTOMS ACT, 1962

   By: DR.MARIAPPAN GOVINDARAJAN

2. Opportunity of hearing to be provided to the assessee in case of variation in demand order

   By: Bimal jain

3. Right to use of parking space with sale of apartments is not a composite supply

   By: Bimal jain

News

1. Auction for Sale (issue) of (i) ‘NEW GOI SGrB 2028’, (ii) ‘NEW GOI SGrB 2033’

2. DFS holds review meeting with heads of Public Sector Banks

3. 41st session of the Network Planning Group (NPG) held in New Delhi 

4. India reiterates its position as a resilient economy with a strong leadership providing stable policy to the global investors at the World Economic Forum (WEF)

Notifications

GST - States

1. 04/GST-2 - dated 12-1-2023 - Haryana SGST

Amendment of Notification No. 47/GST-2, dated 30.06.2017 under the HGST Act, 2017

2. 03/GST-2 - dated 12-1-2023 - Haryana SGST

Amendment of Notification No. 38/GST-2, dated 30.06.2017 under the HGST Act, 2017

3. F.12(15)FD/Tax/2022-86 - dated 30-12-2022 - Rajasthan SGST

Seeks to make (Fifth Amendment) Rules, 2022 to the RGST Rules, 2017

4. 15/2022-State Tax (Rate) - dated 10-1-2023 - Tripura SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated the 29th June 2017

5. 14/2022-State Tax (Rate) - dated 10-1-2023 - Tripura SGST

Amendment in Notification No. 4/2017- State Tax (Rate). dated the 29th June, 2017

SEBI

6. SEBI/LAD-NRO/GN/2023/117 - dated 17-1-2023 - SEBI

Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2023

Highlights / Catch Notes

GST

• High Court Orders Reconsideration of IGST Refund Denial for Late Application Under Circular No. 125/44/2019.

  Case-Laws - HC : Refund of IGST paid - zero rated supply - non-compliance of the provisions of Circular No. 125/44/2019 -GST dated 18.11.2019 - rejection of refund solely on the ground that the refund application has been filed after two years from the relevant date - Matter restored back for consideration of refund application on merit - HC
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• High Court Quashes GST Registration Cancellation Due to Non-Speaking Order, Violating Natural Justice Principles.

  Case-Laws - HC : Cancellation of GST registration of the petitioner - non-speaking order - Not only the order is non-speaking, but cryptic in nature and the reason of cancellation not decipherable therefrom. Principles of natural justice stand violated and the order needs to be quashed as it entails penal and pecuniary consequences. - Registration directed to be restored - HC
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• Court Orders Release of Goods Detained Over GST Number Omission; Rule 46 "Bill To-Ship To" Misunderstood.

  Case-Laws - HC : Detention of goods alongwith the vehicle - failure to have mentioned the unique Identiy Number/GSTN number of the recipient - Rule 46 has not taken into account the concept of a bill to-ship to consignment. - It would have been an entirely different matter, had the respondents suspected the transaction as being a method to avoid tax. However, what has transpired is that the respondents have simply lost sight of the bill to – ship to mode of doing business. - Order of detention set aside - Goods to be released forthwith - HC
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• GST Rate on Transformers and Services for Solar Power Plant Setup: Classification and Compliance Under GST Rules.

  Case-Laws - AAAR : Classification of supply - rate of GST - the activities relating to supply of the transformers and the supervision of the erection, testing and commissioning of the transformers supplied by the appellant are inextricable and for the purpose of supply of transformer which would be used in initial setting up of the Solar Power Plant - the supply of goods is made alongwith the supply of services and it therefore fulfills the conditions laid down under the said explanation. - AAAR
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Income Tax

• Court Sets 4% Withholding Tax Rate for Non-Resident Petitioner; Revenue to Issue Certificate u/s 197.

  Case-Laws - HC : Orders/certificates u/s 197 - rate of withholding tax - he petitioner, who is a non-resident and does not have a PE in India, claims that the subject income is “business income.” It is because of these varying stands, that a dispute arose with regard to the rate at which withholding tax had to be pegged. - the rate of withholding tax, for the moment, will be pegged at 4%. The respondents/revenue will issue a certificate u/s 197 as expeditiously as possible - HC
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• High Court Dismisses Petition, Upholds Reopening of Tax Assessment u/s 147 Based on Specific Report Findings.

  Case-Laws - HC : Reopening of asseessment u/s 147 - Reason to believe - When specific report has unearthed the modus operadi, the authority found it necessary to reopen the assessment and as such the proposition which has been canvassed by the learned advocate that it is borrowed satisfaction or the order passed is without application of mind are not worthy of acceptance. - petition stands dismissed. - HC
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• Deemed dividends u/s 2(22)(e) taxed on individual shareholders, not entities or non-shareholder directors. No remand needed.

  Case-Laws - HC : Deemed dividend addition u/s 2(22)(e) - Liability of firm or individual directors - Since the plain reading of Section 2(22)(e) of the Act makes it clear that the deemed dividend is to be taxed in the hands of individual shareholder and not an entity which does not hold shares in OSL, the question of remanding the matter to the CIT(A) did not arise. - HC
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• Court Rules Year-End Provisions Don't Automatically Disallow Deductions Without TDS; Focus on Assessee's Substantive Rights.

  Case-Laws - HC : TDS obligation on year end provision - disallowance of the provision for legal and professional charges - the existence or absence of entries in the books of accounts is not decisive or conclusive factor in deciding the right of the assessee claiming deduction. - HC
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• Court Quashes Assessment Order for Violating Natural Justice Due to Uncommunicated Hearing Date u/s 144B.

  Case-Laws - HC : Assessment u/s 144B - The order sheet of the officer concerned shows that he has granted the time up to 10/05/2021 but, the same was never communicated to the petitioner. - The fact remains that the assessee would be totally in dark of the next date of hearing and therefore, if that has resulted into finalization of the assessment against the assessee, there is a clear violation of principles of natural justice and therefore, this Court needs to interfere by quashing and setting aside the order of assessment. - HC
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• PCIT's revision u/s 263 challenged due to differing reasons and lack of opportunity for assessee to explain.

  Case-Laws - AT : Revision u/s 263 - AO did not disallow the depreciation only on technical know-how but the building and plant and machinery completely. Even otherwise, the reason for the show cause notice was different then the conclusion arrived at by the learned PCIT. There is no notice/show cause/opportunity to the assessee to explain the depreciation on technical know-how. - the order of the learned assessing officer passed after due enquiry about such claim, cannot be held to be erroneous. - AT
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• Section 68 Addition Confirmed: Investors' Identity and Creditworthiness Questioned, Non-filing of Tax Returns Key Factor.

  Case-Laws - AT : Addition u/s. 68 - satisfaction regarding the identity and creditworthiness of the 13 investors who have invested in the share capital of the assessee company and the genuineness of the transaction - none of the investors has filed his/her return of income which would have alerted the ld.CIT(A) before taking the decision by deleting the addition made by the AO u/s. 68. - Additions confirmed - AT
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• Section 41(1) Justifies Deemed Cessation of Unpaid Creditors; Assessee's Appeal Dismissed After Decade of Non-Payment.

  Case-Laws - AT : Addition u/s. 41(1) - deeemed cessations of creditors - The conduct of both the parties clearly demonstrates the remission of the amounts. The amounts which were hitherto remained unpaid for more than a decade cannot be treated as an existing liability. Hence, the action of the revenue authorities subjecting that amount u/s. 41(1) cannot be faulted with. The appeal of the assessee on this ground is dismissed. - AT
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• Jewellery Purchase Bills Not Required: AO Can't Demand for Accumulated Assets; Wealth Tax Returns Not Filed Due to Limits.

  Case-Laws - AT : Unexplained jewellery - No doubt, the appellant could not furnish necessary bills, but fact remains that when the appellant claims that jewellery was purchased for many years, the AO cannot insist bills for purchase of jewellery. Further, the family members claimed that they did not file wealth tax returns because taxable wealth in their hands for all these assessment years is below taxable limit. - Additions deleted - AT
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• Assessing Officer Missteps in Property Valuation u/s 50C: Incorrect Circle Rate Application for Commercial Property.

  Case-Laws - AT : Long Term Capital Gains - valuation u/s 50C - commercial property or residential property - the Assessing officer at most, can have referred the matter to the District Valuation Officer but the Assessing officer himself did not have any authority to apply the value of the Circle rate of commercial property, especially when the Stamp Duty Authority / Registering Authority had accepted this sale deed as per the Circle rate meant for residential property. - AT
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• Approval Revoked: Assessee Failed to Maintain Separate Books for Business and Charity Activities u/s 10(23C)(iv.

  Case-Laws - AT : Approval granted u/s 10(23C)(iv) revoked - assessee has not maintained separate books of account for its business and charitable activities - the revenue must bring on record cogent material to demonstrate that the assessee has deviated from the core objects based on which approval under section 10(23C)(iv) was initially granted to the assessee. It is also a fact on record that the activities of the assessee are in the category of medical relief to the poor. Thus, if we interpret the provisions of section 2(15) of the Act strictly, the proviso would not apply.- AT
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• Section 56 Clarified: Share Allotment vs. Receipt; Transactions with Relatives Exempt from "Other Income" Taxation.

  Case-Laws - AT : Addition u/s 56 - allotment of shares cannot be equated with receipt of shares - receipt of share there should be shares in existence and a person holding such share transferring it to another person.There is no dispute that existing shareholders prior to fresh allotment was the assessee and his relatives and the provisionsof section 56(2)(viii)(c)(ii) shall not apply in case of money or any property received from any close relative - The transaction between the close relatives is not taxable under the head 'income from other sources u/s 56(2) of the Act. - Addition deleted - AT
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• Section 2(22)(e) Deemed Dividend Exemption: Security Deposits from Public Interest Company Not Considered Deemed Dividends.

  Case-Laws - AT : Deemed dividend addition u/s 2(22)(e) - based on the set of facts it is clear that since, the security deposits received by the assessee from a company wherein the public are substantially interested even though not considered as commercial transaction then even based on the above findings the provisions of section 2(22)(e) is not applicable - AT
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Customs

• Advance Rulings in Customs: Questions Not Pending Until Formally Presented for Contestation by Assessee.

  Case-Laws - HC : Scope of the Advance Ruling - Whether the matter (case) was pending - Merely because an officer of customs contemplates that a question may arise, does not mean that the question is pending consideration. For a question to be stated to be pending, the concerned officer must formally set forth the same for the assessee to contest the same. Any preliminary exercise done by an officer of customs, to consider whether any question for consideration arises, would not preclude the CAAR from giving its advance ruling on that question - HC
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• Goods Confiscation Overturned: PSI Certificate Non-Compliance Doesn't Breach Section 111(d); Redemption Fine Demand Invalidated.

  Case-Laws - AT : Confiscation of goods - Violation of provisions of Import Policy since the Pre-Shipment Inspection (PSI) Certificate furnished was not as per Appendix-28 of the Foreign Trade Policy - the import is subject to fulfilment of stipulated condition, failing which the only consequence prescribed is the 100% inspection of the entire consignment. This, ipso facto, therefore, would not tantamount to improper import of goods within the meaning of Section 111(d) of the Act. - Demand of redemption fine is not proper / set aside - AT
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• Court Orders Release of Seized Chinese Mobile Phones Due to Lack of Evidence from Customs Department.

  Case-Laws - AT : Smuggling - Seizure of mobile handsets of Chinese origin - In view of admitted town seizure, it was the onus on the Customs Department to lead evidence in support of allegation as to the smuggled nature of goods. It is also found from the record that no evidence has been brought on record in support of its allegation. - The respondent –Revenue is directed to release the goods forthwith to the appellant - AT
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IBC

• NCLT's Section 9 CIRP Admission Overturned Due to Lack of Undisputed Debt and Incomplete Fact Consideration.

  Case-Laws - AT : Initiation of CIRP - existence of debt and dispute or not - Operational Creditors - NCLT admitted the application - The present is not a case where there is an undisputed debt for which insolvency can be initiated against the Corporate Debtor. The Adjudicating Authority having heard the matter ex-parte has failed to appreciate the facts of the case in its entirety and therefore committed an error in admitting the Section 9 application and we therefore hold that the impugned order passed is unsustainable. - AT
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• CIRP Application Denied: Toll Tax Dispute with SDMC Not Operational Debt Due to Ongoing Legal Challenges.

  Case-Laws - AT : Initiation of CIRP - Operational Debt or not - amount claimed by SDMC in connection with Toll Tax and ECC Agreement - Though the debt claimed by SDMC is an ‘operational debt’, there are clearly ‘pre-existing disputes’ raised by MEP Infrastructure regarding which litigations/dispute resolution mechanism have been pursued by both the parties in Hon’ble High Court and the internal forum of SDMC - Section 9 application has correctly been disallowed by the Adjudicating Authority. - AT
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Service Tax

• High Court Rules Delayed Adjudication of 2009 Notice Unreasonable, Dismisses Due to Prejudicial Delay.

  Case-Laws - HC : Validity of adjudication of SCN after much delay - grant of centralized service tax registration - even after the Petitioner informed of the same on 8 May 2013, without any satisfactory explanation for this delay, adjudication of the Show Cause cum Demand Notice No.59 of 2009 dated 12 October 2009, which ought to have been culminated within a reasonable time has not been done and adjudicating the same now after an inordinate and unreasonable lapse of time would be detrimental and cause severe prejudice to the Petitioner. - SCN dated 12 October 2009 cannot be carried forward after such an inordinate delay - HC
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• Cenvat Credit Valid on Pre-Registration Invoices; Commissioner Misapplies Rule 9(2) of Cenvat Credit Rules, 2004.

  Case-Laws - AT : ENVAT Credit - credit availed prior taking the registration - the invoices of pre-registration phase shall also be considered for availment of Cenvat credit by the appellant - Commissioner (Appeals) has wrongly stuck to Rule 9(2) of Cenvat Credit Rules, 2004, the proviso thereof has wrongly been ignored by Commissioner (Appeals). Resultantly, the invoices issued from unregistered address and the invoice of pre-registration time have wrongly been held to be invalid documents while ordering denial of Cenvat credit to the appellant. - AT
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Central Excise

• Court Rules CENVAT Credit Valid for Services Used in Removal of Fly Ash from Captive Power Plant.

  Case-Laws - AT : Irregular availment of CENVAT Credit - input services - transport service of Fly Ash - The removal of coal Fly Ash is one of the necessity for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run, in which case, the power won’t be generated and the appellant would not be in a position to manufacture their final product - the appellants are entitled to service tax paid on the services used by them for removal of coal fly ash from the captive power plant. - AT
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• Cenvat Credit Eligibility on Rent-a-Cab Services Upheld; Exclusion Clause in Rule 2(l) Not Applicable.

  Case-Laws - AT : CENVAT Credit - since the Motor Vehicle was held to be a capital goods, the eligibility of Cenvat credit on Rent-a-Cab service shall not be hit by the exclusion clause provided under Rules 2(l) of Cenvat Credit Rules, 2004 - In the present case also the vehicle taken on rent is defined as capital goods in terms of Rule 2(a) of the Cenvat Credit Rules, 2004, therefore, the exclusion clause is not applicable in the present case. - AT
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VAT

• Court Rules Insufficient Basis for Penalty Due to Lack of Evidence on Goods Entering Mathura from Outside Uttar Pradesh.

  Case-Laws - HC : Levy of penalty - levy based on on conjectures and surmises - This Court further finds that the Tribunal itself has recorded a finding that it could not be ascertained whether the truck was unloaded at Mathura or not. Once the department has not shown whether the goods were being brought at Mathura from outside the State of U.P. no question of penalty proceedings can arise. - HC
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• Secured Creditors Hold Priority Over Revenue Claims in Debt Recovery u/s 26E of SARFAESI Act 2002.

  Case-Laws - HC : Recovery of dues (secured debt) - secured creditor has priority over the right claimed by the Revenue over secured debt or not - It is quite clear and evident from Section 26E of the SARFAESI Act 2002 that it creates only a priority in favour of the financial institutions in the matter of payment over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or the State Government or local authority. But the priority in payment is in no manner in conflict with the first charge created over the properties as per the provisions of the KGST Act, 1963, and the KVAT Act, 2003. - HC
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Case Laws:

• Customs

• 2023 (1) TMI 1457
  Classification of goods - Fire TV sticks - Benefit of Serial No. 20 of Notification No. 57/2017-Customs dated 30.06.2017 - applicability of time limitation - Section 28KA of the Customs Act - HELD THAT:- Section 28KA of the Customs Act was inserted by the Finance Act, 2018, to provide an appeal in respect of any ruling. The Customs Act is a special Act and Chapter-VB of the Customs Act, which contains provisions relating to advance rulings, provides a special scheme for the stated purpose. The time for appealing any order/ruling made by the CAAR was restricted to a period of sixty days from the communication of the ruling or order. However, the court can extend the same by a further period of thirty days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the stipulated period of sixty days - The period of limitation, as prescribed under Section 28KA of the Customs Act, is not the period as prescribed under the Limitation Act, 1963. Thus, in terms of Section 29(2) of the Limitation Act, the provisions of Section 4 to 24 of the said Act shall apply only to the extent not expressly excluded by such special law. The proviso to Section 28KA(1) of the Customs Act empowers the High Court to extend the period for filing an appeal by a further period of thirty days, subject to the condition that the court is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the specified period of sixty days. It is clear from the plain language that the court s power to extend time is restricted to a period of thirty days. It would have no power to extend the time for filing the appeal beyond the said period even if it is satisfied that the appellant was prevented by sufficient cause from filing the said appeal within the stipulated period - It is also well settled that the right to appeal is not an inherent right but one conferred by a statute. It follows that the statute may restrict or truncate the said right. In the present case, this appeal was filed on 14.07.2022. The learned counsel appearing for the appellant submits that the impugned ruling was communicated to the concerned appellant on 22.03.2022. He states that although the copy of the ruling was received by the concerned Commissionerate in Mumbai on 09.12.2021, it was received by the Commissionerate in Delhi much later on 22.03.2022. He states that the Commissionerate of Delhi was also a party to the application filed by the respondent; therefore, for the purpose of limitation, the date of receipt of the impugned ruling must be reckoned as 22.03.2022. Thus, it is apparent that even if the appellant s contention is accepted that the date of communication of the impugned ruling is 22.03.2022 and not 09.12.2021, the present appeal is beyond the period of ninety days from the said date. It was also feebly suggested by the learned counsel appearing for the appellant that the month of June be excluded from the period of limitation since, the period of thirty days, beyond the stipulated period of sixty days for filing the appeal, expired on 20.06.2022. At the material time, this Court was closed for vacations. The said contention is ex facie erroneous. The period, which can be extended in terms of the proviso to Section 28KA(1) of the Customs Act, cannot exceed thirty days. The appeal is dismissed as barred by limitation.

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