TMI Tax Updates - e-Newsletter
January 16, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

• GST:

  Hiring of vehicle to another GTA - there is no provision in the law barring person being a GTA from renting the vehicle to another GTA - the services provided as a GTA are different from the services provided by way of giving vehicles on hire basis to another GTA & hence are independent Of each other so far as tax treatment is concerned.
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• GST:

  Pure Agent - Activity of receiving the amounts from foreign client and passing on the local Reseach Institutions - In the instant case the applicant is not incurring any expenditure but disbursing / paying the charges to the investigator / institution on the basis of the work progress assessed by the applicant and approved by the AKPA, USA. - The applicant qualifies to be a Pure Agent.
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• GST:

  Filing of Form “TRAN-I” - It is conveyed that the date for filing annual returns has been extended from 31.12.2019 to 31.1.2020 - In view of above, present petition is allowed with permission/modification to file the said Statutory Form TRAN-I by 31.01.2020.
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• GST:

  Provisional attachment of bank account - The mandate of Section 83 is to attach amount lying in an account in the form of FDR or saving and it cannot be intention or purport of Section 83 to attach an account having debit balance. - The power of attachment of bank account cannot be exercised as per whims and caprices of the Authority.
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• Income Tax:

  Reopening of assessment u/s 147 - 'reason to believe' or 'reason to suspect' - objections of the petitioner were rejected by a non-speaking and cryptic order - information already available on record - merely because there is a change in opinion, reopening could not have been done
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• Income Tax:

  Reopening of assessment u/s 147 - there was a specific note in the accounts and schedule 28 to the accounts was quite clear. If the accounts were before the assessing officer and several queries were raised pertaining even to the royalty and matters connected therewith, it is difficult to accept that the additional income representing the excess of the amount earmarked as provision and the amount actually paid out would not have been noticed. - Notice u/s 148 stayed.
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• Income Tax:

  Rectification of mistake u/s 254 - in the guise of rectification, the Revenue is seeking review of the order of Tribunal, which is beyond the scope of powers as envisaged u/s. 254(2) of the Act.
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• Income Tax:

  Carry forward and set-off of unabsorbed depreciation of proprietary concern against partnership firm - as per the provisions of the section 78(2) assessee is entitled to set-off business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm.
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• Income Tax:

  Exemption u/s 11 - undisclosed income - the assessee society had received contribution towards development fund from the students, apart from the tuition fees, with the clear understanding that it shall be solely used for creation of capital asset necessary for achieving the educational objects of the assessee society and therefore formed part of the corpus and therefore, not in the nature of revenue receipts
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• Income Tax:

  Reopening of assessment - the proceeding u/s 153C was initiated against the assessee and on the same day the proceeding was dropped and notice u/s 148 was issued which was unjustifiable. Assessment order is not liable to be sustainable in the eyes of law, hence, we set aside the same
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• Income Tax:

  TP Adjustment - application for early hearing and stay application was rejected by the ITAT - Matter restored before the ITAT - Till then, no coercive steps be taken against the appellant, for recovery of the tax demand.
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• Income Tax:

  Addition u/s 69 - unexplained investment made in purchase of land - no asset came into existence in the name of the assessee, which requires to be shown in the books of accounts. The ld.AO has simply assumed certain facts, and assumed existence of unexplained asset which requires to be added u/s 69 - Additions were rightly deleted.
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• Income Tax:

  Validity of reopening of assessment u/s 147 - The information given by another Income Tax Officer, based on appraisal report of Badalia Group cases, can only be a basis to ignite/trigger “reason to suspect” for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment.
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• Income Tax:

  Revision u/s 263 - AO failed to apply his mind to the case in all perspective in terms of conditions contemplated in provisions u/s. 54F - He accepted the claim of assessee in the absence of any inquiry - Revision order sustained.
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• FEMA:

  Contravention of FEMA - Investment in three step-down subsidiaries through Wholly Owned Subsidiary (WOS) without the permission of the RBI - the Adjudicating Authority has taken a lenient view and has imposed penalty lessor than the proportionate penalty - Order confirmed.
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• Indian Laws:

  Dishonor of cheque - No doubt, the Court can draw presumption, but in order to draw presumption, the complainant has to discharge his burden to prove the transaction between himself and the accused. When such being the case and when specific contention was taken by the accused that the cheque was taken as a security and the same has been misused, the complainant ought to have explained the same and the same has not been done
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• Indian Laws:

  Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - All the important facts emanating from evidence, have not all been dealt and to me, it appears that the courts below have remained under an erroneous impression that the presumption has to be rebutted by the accused only by leading evidence from his side
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• Service Tax:

  Classification of services - Cargo Handling Services or not - the activity of hiring of pay loader for loading of coal into railway wagon at railway siding for outward transportation is taxable under the category of Cargo Handling Service.
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• Service Tax:

  Imposition of penalty - non/short payment of service tax - The penalty imposed U/s 78 of the Act is set aside noticing that the Appellant has already filed returns, though belatedly, and disclosed their service tax liability, hence, there is no suppression of facts etc involved in the instant case
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• Central Excise:

  Rebate of duty - overvaluation of export of goods - allegation that appellant had tried to claim excess duty rebate - the Appellant has not overvalued the exported goods at their end and the impugned order is, therefore, not sustainable.
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• Central Excise:

  According to the SCN and impugned order themselves there was no manufacture of the subject goods, there can be no levy and hence no requirement to make payment of any duty of central excise payable in respect of subject machineries under the Act. Consequently, the question of any recovery of “duties of excise” not levied or not paid or short levied or short paid or erroneously refunded in terms of Section 11A(1) of the Act also does not arise.
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• Central Excise:

  Area Based Exemption - substantial exemption - The procedure requires the manufacturer to submit a statement of duty paid etc. on a monthly basis to the Assistant/Deputy Commissioner, who is required to verify the same and refund the amount. Admittedly the appellant had not done so - Benefit of exemption cannot be extended.
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• Central Excise:

  Denial of rebate by the appellant as merchant exporter - The appellant has not taken anything other than the duty paid at the time of procurement of raw-material as cenvat credit, which after processing has been exported by a value addition at the end of appellant. Therefore, the appellant is rightly entitled to claim the rebate of the central excise duty paid at the time of their procurement from supplier/manufacturer
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• Central Excise:

  CENVAT credit - duty paying documents - allegation of fake duty paying document fraudulently prepared and supplied by a number of registered dealers without actually supplying the corresponding input materials - The department has also accepted the payment of duty on the goods sold by these dealers and hence it cannot deny the availment of modvat credit by the buyer of these goods, if put to use in the manufacturing
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• Central Excise:

  Reversal of proportionate cenvat credit in respect of the common input used in the manufacture of exempted goods is an option duly permitted under Rule 6(3)(ii) of the CCR itself. Non-compliance with the procedure prescribed under Rule 6(3A) of the CCR does not result in the manufacturer losing his substantive right to avail the option of reversing proportionate credit, as such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified.
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Articles

• Validity of the direct recovery of Interest under GST?

Notifications

• Customs

• 04/2020 - dated 15-1-2020 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seed, Areca nut, Gold & Silver

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• 03/2020 - dated 15-1-2020 - Cus (NT)
  Notification of Ghasuapara LCS for imports also by amendment of Notification No. 63/1994-Customs dated 21st November 1994

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• GST - States

• 74/2018- State Tax - dated 19-12-2019 - Delhi SGST
  Delhi Goods and Services Tax (Fourteenth Amendment) Rules, 2018

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• 75/2019–State Tax - dated 6-1-2020 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Ninth Amendment) Rules, 2019

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• . D.C. (A&R)-2/GST/PWR/JC/Sections/2017-18/ADM-8 - dated 6-1-2020 - Maharashtra SGST
  Designate the certain Joint Commissioner as ‘Empowered Officer’ for implementation of E-way Bill.

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• 71/2019-State Tax - dated 1-1-2020 - Maharashtra SGST
  State Tax Notify provisions of Rule 46 of MGST Rules, 2017. (Six proviso was inserted)

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• 68/2019–State Tax - dated 1-1-2020 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Eighth Amendment) Rules, 2019

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• 56/2019 – State Tax - dated 1-1-2020 - Maharashtra SGST
  Maharashtra Goods and Services Tax (Seventh Amendment) Rules, 2019

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• 45/2019-State Tax - dated 1-1-2020 - Maharashtra SGST
  Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the quarters from October, 2019 to March, 2020

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• Money Laundering

• 01/2020 - dated 14-1-2020 - PMLA
  Central Government, notify officer as a member of Inter-Ministerial Co-ordination Committee (IMCC)

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Circulars / Instructions / Orders

• GST - States - Circular No.06/2020 (State) - dated 10-1-2020
  Standard Operating Procedure to be followed in case of non-filers of returns
• GST - States - Circular No.05/2020 (State) - dated 10-1-2020
  Withdrawal of Circular No. 29/2019/GST, issued in CCTs Ref.in CCW/GST/74/2015, Dated 30.7.2019, dt. 30.07.2019
• GST - States - Circular No.02/2020 (State) - dated 10-1-2020
  Clarification regarding optional filing of annual return under notification issued in the G.O.Ms.No.469, Revenue (Commercial Taxes-II) Department, Dated 21.11.2019 (Notification No. 47/2019- Central Tax dated 9th October, 2019)
• GST - States - Circular No.04/2020 (State) - dated 10-1-2020
  Clarification on scope of the notification entry at item (id), related to job work, under heading 9988 of Notification issued in the G.O.Ms.No. 259, Revenue (Commercial Taxes-II) Department, Dated 29.06.2017 (Notification No11/2017-Central Tax (Rate), Dated 28.06.2017)
• FEMA - 16 - dated 15-1-2020
  Hedging of Commodity Price Risk and Freight Risk in Overseas Markets (Reserve Bank) Directions, 2018 - Amendment

News

• India’s Foreign Trade: December 2019

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• No Imports in ‘Others’ Category Without HSN Code; New ERA of Quality Production Being Established in India; Government to Support Industry to Establish International Quality Standards– Piyush Goyal

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Case Laws:

• GST

• 2020 (1) TMI 572
  Hiring of vehicle to another GTA - Applicant is a registered GTA, as per the Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 - whether applicant can hire vehicles to another GTA? - HELD THAT:- The services of providing vehicles on hire basis to another GTA is covered under entry no. 22 of Notification No. 12/2017 - Central Tax (Rate) dated 28.06.2017 and this entry exempts the services by way of giving on hire a means of transportation of goods to a goods transport agency - Therefore the services provided as a GTA are different from the services provided by way of giving vehicles on hire basis to another GTA hence are independent Of each other so far as tax treatment is concerned. Further there is no provision in the law barring person being a GTA from renting the vehicle to another GTA. However, the tax treatment of these transactions would be as explained earlier. The registered person can be a Goods Transport Agency and also a supplier of goods vehicles to another GTA on hire basis at the same time subject to the appropriate tax treatments as notified in N/N. 11/2017-Central Tax (Rate) dated 28.06.2017, Notification No. 12/2017- Central Tax (Rate) dated 28-06.2017 and N/N. 13/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time.

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• 2020 (1) TMI 571
  Services provided to foreign client - export of services - zero-rated or not - pure services or not - amounts received from the foreign clients and passing it on to the Local Research Institutions - scope of advance ruling authority - HELD THAT:- The Applicant is providing service to AKAP, USA in the instant case. The location of the recipient of the service is outside India. The Applicant is supplying service in respect of the goods i.e. new drugs, which are physically made available to the investigator / institution who conducts the clinical trials on behalf of the applicant, in order to provide the service - In order to decide whether the said services amount to export or not, place of supply of service need to be determined. Section 97 (2) of the CGST Act, 2017 empowers the Authority to give a Ruling on time and value of Supply. However it does not empower the Authority to examine the place of supply. In the absence of this provision the Authority is constrained to answer whether the activity undertaken by the applicant amounts to export or not. Whether the applicant acts as a Pure Agent while receiving the amounts from foreign client and passing on the local Reseach Institutions or not? - HELD THAT:- The Applicant is the licence holder for conducting clinical trial through any of the approved Investigator of an institution and also mandatorily obtain a licence to import the goods i.e new drugs meant for clinical trial in India, Therefore the applicant is the responsible person for the said clinical trial, being carried out through the investigator. The total contract value is paid to the Applicant on the basis of progress in the work i.e. clinical trial and the applicant pays the relevant amounts to the investigator / institute on the basis of completed work assessed by the applicant and approved by the AKAP, USA. In the instant case, at clause 3.2 of the Master Service Agreement it is clearly mentioned that in no sense the Applicant shall be considered as an employee or agent of AKPA, USA. Therefore it seems that the first condition only is not fulfilled and hence the applicant is not liable to be considered as a pure agent of the recipient of the service i.e AKPA, USA - A pure agent actually incurs the expenditure under the contractual agreement and then gets the reimbursement of the same. In the instant case the applicant is not incurring any expenditure but disbursing / paying the charges to the investigator / institution on the basis of the work progress assessed by the applicant and approved by the AKPA, USA. It is evident that the Principal Investigators and the Institutions are selected by the applicant and they are ratified by the Sponsor. What follows is the agreement between the Sponsor, Principal Investigator, Institution and the applicant and there is a contract for provision of service by the Principal Investigator and Institution to the Sponsor. The payment for the services is made by the Sponsor to the Principal Investigator and the Institution through the applicant. The applicant is only a pass through for the sponsor to make payments to the Principal Investigator and Institution as per the agreement - In case of the services of clinical trial, the applicant is holding the money of the sponsor as advance and money is paid as per the milestones on the strength of invoices issued by the Principal Investigators and Institutions. The applicant issues invoices against the sponsor and collects the money and maintains a required balance project wise and makes the payments out of this fund as a pass-through, after approval of the sponsor. On examination of the agreement of Clinical Trial Services since the applicant satisfies all the conditions laid down in the Explanation to Rule 33, the applicant qualifies as pure agent of the recipient of service, i.e. the Sponsor. He also satisfies all the conditions prescribed in rule 33 of the CGST Rules and hence the value of invoice raised by the applicant on the sponsor for making payment to the principal investigator and the institution would be excluded from the value of supply, However this ruling has a caveat that this ruling is not a ruling on the nature of the supply of services by the principal investigator and the institution to the sponsor. The first question whether the services provided by the applicant to the foreign client amount to export of service cannot be answered as Section 97 of the CGST Act, 2017 does not empower the Authority to give Ruling on the Place of Supply of Goods or Services In respect of question 2 it is Ruled that the applicant qualifies to be a Pure Agent in receiving amounts from the foreign clients and passing it on to the Local Research Institutions, as provided in the agreements placed before the Authority.

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• 2020 (1) TMI 570
  Filing of Form TRAN-I - Grievance of the petitioner is that it could not upload the details of un-utilized ITC as per the accounts books to the electronically generated statutory Form TRAN-I which was the requirement under the GST regime for availing the benefit of the previous un-utilized ITC accrued under the Taxing Statutes. HELD THAT:- The issue raised in the present petition is squarely covered by the judgment in ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT ], therefore, the present petition is liable to be disposed of in terms of the said case. It is conveyed that the date for filing annual returns has been extended from 31.12.2019 to 31.1.2020 - In view of above, present petition is allowed with permission/modification to file the said Statutory Form TRAN-I by 31.01.2020.

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• 2020 (1) TMI 569
  Provisional attachment of bank account of petitioner - restraint on respondent from taking coercive steps against the Petitioner and its Directors/employees - only grievance of Petitioner is that their OCC account has been attached which amounts to closure of their business - HELD THAT:- The Respondent has power to attach property and bank account of any taxable person to protect interest of revenue. Person aggrieved may make representation against attachment of property or bank account and Commissioner after affording opportunity of hearing is bound to decide representation in one or another way. On perusal of Section 83 of CGST Act and Rule 159 of CGST Rules, it is found that during the pendency of any proceedings under Section 62 (assessment of non-filers of returns) or Section 63 (assessment of unregistered persons) or Section 64 (summary assessment) or Section 67 (inspection, search and seizure) or Section 73 (determination of tax not paid otherwise than fraud) or Section 74 (determination of tax not paid on account of fraud), the Commissioner may provisionally attach any property including bank account. The power of attachment is not absolute. In the present case attached account is Over Cash Credit account and Petitioner had debit balance of ₹ 6.42 Crore, thus question arises that whether continuation of attachment would protect interest of revenue or not. The Petitioner is running unit and more than 100 families are dependent upon Petitioner. Till date no proceedings under Section 74 of CGST Act are pending which would start as soon as show cause notice is issued. The Respondent has seized record of the Petitioner who has further supplied various documents as well put personal appearance through Directors and employees - The mandate of Section 83 is to attach amount lying in an account in the form of FDR or saving and it cannot be intention or purport of Section 83 to attach an account having debit balance. No purpose leaving aside securing interest of revenue is going to be achieved except closure of business which cannot be permitted unless and until running of business itself is prohibited by law - The contention of Respondent that they have power to attach bank account irrespective of nature of account cannot be countenanced. Respondent can attach an account only if there is some balance in the form of FDR or savings. The power of attachment of bank account cannot be exercised as per whims and caprices of the Authority. The Commissioner is bound to ensure that by attachment of property or bank account, interest of revenue is going to be protected - attachment of current account having debit balance does not protect interest of revenue, instead merely ruins the business of a dealer. Such an action of attachment of over cash credit account for the sake of recovery of confirmed demand, may in some peculiar case, may be still permitted but not at the stage of pending investigation. Petition allowed - decided in favor of petitioner.

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• 2020 (1) TMI 568
  Credit of ITC - transitional credit under GST - Pray for extension of date for acceptance of TRAN-1 Return manually - Section 140 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The issue is covered in the case of ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT] where it was held that The Respondents are directed to permit the Petitioners to file or revise where already filed incorrect TRAN-1 either electronically or manually statutory Form(s) TRAN-1 on or before 30th November 2019. The date of filing of the manual returns has been extended upto 30.12.2019 - Present petition is allowed in terms of case mentioned.

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• Income Tax

• 2020 (1) TMI 567
  Maintainability of appeal - authority upon the elected Secretary of the writ petitioner to file the instant writ petition - assessee, however, has not filed the instant writ petition through its President. Instead, one Dinesh Kumar, who claims to be its elected Secretary, has instituted the writ petition - HELD THAT:- The bye-laws of the Society conferring authority upon the elected Secretary of the writ petitioner to file the instant writ petition or for that matter, the person claiming to be its elected Secretary have not been brought on record. Manner or resolution by which authority was vested in Dinesh Kumar who has pledged his oath before this Court to file this writ petition on behalf of the Society while claiming to be its elected Secretary has also not been stated in the writ petition. In these circumstances, we find that Dinesh Kumar, claiming to be the elected Secretary of the Society, does not have any locus standi to file the instant writ petition. This issue has particular relevance in this case since, admittedly, there is a dispute within the Society. The main dispute of the Society is not a subject matter of adjudication in the writ proceeding. However, the consequential affect of any order that may be passed in this writ petition is likely to effect the rights of one of the warring / rival party / parties of the Society. The warring / rival parties who are likely to be affected have not been impleaded in this writ petition. In their absence, the writ petition is not maintainable.

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• 2020 (1) TMI 566
  Bogus purchases u/s 69C - Disallowance of depreciation - HELD THAT:- On a perusal of the order of the Ld.CIT(A) we find that Ld. CIT(A) held that the genuineness of the purchases is not proved. However, entire purchases cannot be disallowed and only depreciation is to be disallowed as the assessee has capitalised the purchases in its books of accounts and claimed only depreciation. On a perusal of the order of the Ld.CIT(A) we do not see any valid reason to interfere in the decision of the Ld. CIT(A), since the genuineness of the purchases could not be verified as the suppliers were not traceable in the addresses given as reported by the Inspector on his physical inspection, Ld. CIT(A) has rightly disallowed only to the extent to the deprecation on such purchases and deleting the rest of the disallowance of purchases. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the assessee. Reopening of assessment - HELD THAT:- Since no arguments have been advanced by the Ld. Counsel for the assessee thus, this ground is not adjudicated. Bogus purchases - assessee has obtained accommodation entries from dealer namely M/s.Raj Traders which is listed in the Sales Tax Department website and declared as hawala entry provider by the Sales Tax Department and provided accommodation entries without delivery of goods - HELD THAT:- Addition was made solely based on the information from the Sales Tax Department and its website showing the dealer namely M/s. Raj Traders as accommodation entry provider. There is nothing on record to suggest that the purchases made by the assessee from M/s. Raj Traders is non-genuine except relying on the Sales Tax Department website showing M/s. Raj Traders as hawala dealer. Neither the Assessing Officer nor the Ld. CIT(A) made enquires with the dealer to prove that the purchases made by the assessee are not genuine. AO did not issue notice u/s. 133(6) of the Act to the dealer to verify the genuineness of the transactions. It has been noticed earlier in the A.Y. 2009-10 the Assessing Officer deputed the Inspector to verify the genuineness of the transactions with the dealers. However, in the year under consideration no such efforts have been made by the Assessing Officer. He simply relied on the Sales Tax Department website wherein M/s. Raj Traders was said to have been shown as hawala dealer. Without making any enquires, without proving that the evidences furnished by the assessee in the form of purchases orders, invoices, bank statements, ledger copies, etc., are not genuine the addition could not have been made solely based on the Sales Tax Department website, especially when the sales were accepted by the Assessing Officer and without there being any purchases there cannot be any sales. Thus, we direct the Assessing Officer to delete the addition made towards purchases from M/s. Raj Traders.

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• 2020 (1) TMI 565
  Benefit of Section 11 and 12 to the appellant cricket associations - Charitable activities u/s 2(15) - income of the Associations from the sale of tickets etc .- HELD THAT:- It is an admitted position that the controversy involved in the present case stands concluded by a judgment in the case of Commissioner of Income Tax (Exemption) v. Gujarat Cricket Association [2019 (11) TMI 35 - GUJARAT HIGH COURT] to be decided in favour of assessee.

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• 2020 (1) TMI 564
  Condonation of delay filing an appeal before ITAT - Stay petition - petitioner for recovery of the amounts confirmed by rectification order - Deduction / Exemption u/s 80P - HELD THAT:- On a consideration of the facts and circumstances of the case as also the submissions made across the Bar and taking note of the fact that in similar matters, this Court has directed the Appellate Authority to consider and pass orders in the appeal and stayed the recovery of disputed amounts pending disposal of the appeal. Taking note of the fact that delay occassioned in filing the appeal before the 3rd respondent is only 20 days, deem it appropriate to condone the delay, and dispose this Writ petition with a direction to the 3rd respondent to consider and pass orders on Ext.P4 appeal within an outer time limit of six months from the date of receipt of a copy of this judgment. Recovery steps for recovery of amounts confirmed against the petitioner by Ext.P3 rectification order shall be kept in abeyance till such time as orders are passed by the 3rd respondent as directed above and communicated to the petitioner. The petitioner shall produce a copy of the writ petition together with a copy of this judgment, before the 3rd respondent, for further action.

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• 2020 (1) TMI 563
  Reopening of assessment u/s 147 - 'reason to believe' or 'reason to suspect' - objections of the petitioner were rejected by a non-speaking and cryptic order - information already available on record - HELD THAT:- Provisions of Section 147 confers the power upon the Assessing Officer to reopen an assessment and the said power has to be exercised only if there are reasons to believe that any income chargeable to tax has escaped assessment, meaning thereby, existence of the reasons and formation of the believe on the basis of such reasons, is an essential condition for invoking provisions of Section 147. The reasons to believe is not the same thing as the reasons to suspect as has been held in the case of Das Friends Builder Private Limited v/s DCIT [ 2005 (8) TMI 38 - ALLAHABAD HIGH COURT] . A similar view has been taken by the Delhi High Court in the case of Ashok Kumar Singh v/s CIT [ 1980 (7) TMI 41 - DELHI HIGH COURT] and in the case of CIT v/s Kelvinator India Limited [ 2002 (4) TMI 37 - DELHI HIGH COURT] . In the present case, there was no suppression on the part of the assessee and merely because there is a change in opinion, reopening could not have been done in the manner and method it has been done in the present case. There was no additional material for formation of the believe as contemplated under Section 147 - Decided in favour of assessee.

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• 2020 (1) TMI 562
  Reopening of assessment u/s 147 - contention of the assessee is that the matters were plain and obvious and adequate information was available to the assessing officer at the time of the initial order u/s 143 and the impugned notice here and the accompanying reasons would tantamount to a change of opinion rather than the new discovery of material that could not have been reasonably noticed at the time of the scrutiny - HELD THAT:- The accounts are somewhat convoluted as regards royalty. While it is possible that it may be difficult for the assessee to immediately discover the persons entitled to receive the royalty on account of the licence fees earned by the assessee or the quantum of royalty payable to such persons, it is evident that the provision made to carry forward a certain amount during a financial year almost invariably substantially exceeds the pay-out during the following year. Indeed, the provision must necessarily be in excess of the pay-out; but the difference between the quantum of provision and the extent of pay-out may be of some consequence. The notice does not pertain to such aspect of the matter and the recorded reasons reveal that the assessing officer may have mixed up between the royalties paid or payable by the assessee for its sound recordings and the royalty paid or payable by the assessee in respect of the licence fees earned. As to the provision part of the accounts pertaining to royalty in respect of licence fees, there was a specific note in the accounts and schedule 28 to the accounts was quite clear. If the accounts were before the assessing officer and several queries were raised pertaining even to the royalty and matters connected therewith, it is difficult to accept that the additional income representing the excess of the amount earmarked as provision and the amount actually paid out would not have been noticed. If such matter had been noticed, as it ought to have been, and disregarded, the issuance of the impugned notice would amount to a change of opinion and not discovery of any new material revealing income escaping assessment. Prima facie, that appears to be the position from the reasons recorded in support of the decision to reopen the assessment for the relevant financial year. As a consequence, the impugned notice dated March 28, 2019 will remain stayed pending disposal of the petition before the court of the first instance. The order impugned is modified accordingly.

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• 2020 (1) TMI 561
  Rectification of mistake u/s 254 - rectification of mistake apparent from record OR rectification in error of judgment - Tribunal has relied on the decision of the Hon‟ble Supreme Court of India which is with respect to Central Excise Act Rules and ignoring the decision of the Hon‟ble Supreme Court which deals directly with Income Tax Act, 1961 - HELD THAT:- There are series of decisions by the Hon'ble Supreme Court as well as Hon'ble High Court expounding scope of exercising powers under section 254(2) of the Act. We do not deem it necessary to recite and recapitulate all of them, but suffice to say that core of all these authoritative pronouncements is that power for rectification under section 254(2) of the Act can be exercised only when mistake, which is sought to be rectified, is an obvious and patent mistake, which is apparent from the record and not a mistake, which is required to be established by arguments and long drawn process of reasoning on points, on which there may conceivably be two opinions. The Hon'ble Jurisdictional High Court in the case of CIT Vs. Ramesh Electric Trading Company reported [ 1992 (11) TMI 32 - BOMBAY HIGH COURT] has held that the scope of section 254(2) is limited to rectification of mistake apparent from record itself and not rectification in error of judgment. We are of considered view that in the guise of rectification, the Revenue is seeking review of the order of Tribunal, which is beyond the scope of powers as envisaged u/s. 254(2) of the Act. As per the Miscellaneous Application filed before us, we do not find any mistake, much less any apparent mistake that warrants rectification in the order of Tribunal.

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• 2020 (1) TMI 560
  Carry forward and set-off of unabsorbed depreciation of proprietary concern against partnership firm - claim denied by AO on the ground that the firm cannot claim set-off of unabsorbed depreciation of the proprietary concern - CIT(A) following the decision in the case of the CIT v. Madhukant M. Mehta [ 1997 (4) TMI 73 - SUPREME COURT ] allowed the claim of the assessee since there was a succession by the partnership firm from the proprietary concern and the provisions of the section 78(2) provides for set off of unabsorbed loss/depreciation in cases of inheritance - HELD THAT:- We hold that since the proprietary concern was succeeded by the legal heirs and the proprietary business was carried on by the legal heirs of the deceased by converting the same into partnership firm there is an inheritance of business and therefore, as per the provisions of the section 78(2) assessee is entitled to set-off business loss/unabsorbed depreciation of the proprietary concern against income of the successor partnership firm. Thus, we sustain the order of the CIT(A) and reject the grounds raised by the revenue. Additional ground in respect of expenses/debts which were not claimed in the return of income - HELD THAT:- On hearing both the sides and respectfully following the decision of the Hon'ble Bombay High Court in the case of the CIT v. PRUTHVI Brokers Shareholders Pvt. Ltd [ 2012 (7) TMI 158 - BOMBAY HIGH COURT ] we restore the claim of the assessee in respect of expenses/debts, to the file of the Ld. CIT(A) who shall decide on merits after providing adequate opportunity of being heard to the assessee. Disallowance @10% of loading and unloading expenses, hawali charges incurred by the assessee - As observing that cash component and element of personal use in the aforesaid expenses cannot be ruled out keeping in view the nature of business of the assessee firm that is transportation, the Ld. CIT(A) sustained the disallowance to the extent of 5% of the expenses as against 10% disallowed by the Assessing Officer. Similarly, for the A.Y. 2014-15 the CIT(A) restricted the disallowance to ₹.2,00,000/- as against 10% disallowed by the AO. We direct the Assessing Officer to restrict the disallowance to ₹.2,00,000/- for both the assessment years i.e. 2013-14 and 2014-15 to meet the ends of justice.

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• 2020 (1) TMI 559
  Exemption u/s 11 - AO treated the receipt of development fees as undisclosed income - case was selected for scrutiny vide CASS - HELD THAT:- No material brought on record by the lower authorities or before us by the Ld. DR to substantiate that the contribution towards development fund was not voluntary or that it was in exchange for the services provided by the assessee society to the payers. In this regard we may gainfully refer to the decision of Hon'ble Delhi High Court in case of DIT (Exemption) v. National Association of Software Services Co's. [2012 (5) TMI 204 - DELHI HIGH COURT] wherein the Hon'ble High Court has held that onetime fee paid by members who are aware that it could be spent by assessee only towards capital purposes was in the nature of corpus donation and not taxable as income. The Court also took note of the fact that apart from the one time fees, the association was collecting fees separately for the services rendered to the members and therefore the one-time fee could not be linked with the services rendered to the members. For the reasons set out above, we therefore hold that the assessee society had received contribution towards development fund from the students, apart from the tuition fees, with the clear understanding that it shall be solely used for creation of capital asset necessary for achieving the educational objects of the assessee society and therefore formed part of the corpus and therefore, not in the nature of revenue receipts. The AO is accordingly directed to re-compute the income of the assessee society after excluding the development fees from the purview of Section 11. Disallowing the claim of depreciation by way of application of income of the assessee society - HELD THAT:- We do not countenance the action of Ld. CIT(A) on the simple ground that the claim made by the assessee for depreciation for the year under consideration is no longer resintegra since the Hon'ble Supreme Court in the decision in CIT Vs. Rajasthan Gujarati Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT] upheld the action of the Hon'ble High court, which in turn upheld the action of Tribunal, allowing the depreciation claimed by the assessee on the assets acquired/expenditure made, which has been allowed as application of income as well. In the said judgment, the Hon'ble Supreme Court had also taken specific note of the amendment brought in by the Legislature in section 11(6) of the Act by Finance Act (No. 2) of 2014 and held that the amendment is prospective and is therefore effective from AY 2015-16 and onwards. We direct the AO to allow the depreciation as claimed by the assessee society.

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• 2020 (1) TMI 558
  Reopening of assessment - Validity of notice u/s 148 - proceeding u/s 153C initiated against the Assessee has been ordered to be dropped - HELD THAT:- We noticed that there was no new material with the AO to initiate the proceeding u/s 148. When the proceeding u/s 153C has been initiated and subsequently dropped, thereafter on the similar grounds the provisions u/s 147/148 is not liable to be invoked. Assessee took the alternate plea that the notice u/s 147/148 was issued after the expiry of 4 years and no sanction was taken, therefore, the order is not liable to be sustainable in the eyes of law. There is no need to go to the alternate ground because it is a matter of record that the proceeding u/s 153C of the Act was initiated against the assessee and on the same day the proceeding was dropped and notice u/s 148 was issued which was unjustifiable. Assessment order is not liable to be sustainable in the eyes of law, hence, we set aside the same. - Decided in favour of the assessee.

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• 2020 (1) TMI 552
  TP Adjustment - application for early hearing and stay application was rejected by the ITAT - assessee is aggrieved by the Nil arm s length pricing fixed by the Transfer Pricing Officer (TPO) in respect of its transaction with its associated enterprise - HELD THAT:- In the light of the aforesaid submissions, the questions of law framed above are answered in favour of the appellant. We, therefore, dispose of this appeal by directing the Tribunal to hear the appeal of the appellant, pending before it. List on 28.01.2020 before the Tribunal. Till then, no coercive steps be taken against the appellant, for recovery of the tax demand.

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• 2020 (1) TMI 548
  Revision u/s 263 - lack of enquiry on claim made u/s. 54F as Investment in two residential units seen and showing purchase price of said property at 1346% above market price - HELD THAT:- We find that the assessee made investments in two residential units along with two IT unit for a total consideration of ₹ 70,00,000/- which is evident from internal page 8 of Agreement to Assign at main page thereby, we find the AO assumed incorrect facts to satisfy the requirement u/s. 54F of the Act which supports the finding in showcasing of the Pr. CIT in its impugned order at page No. 1 that the assessee have shown investment in two residential units and the said residential units were purchased on 16-03-2010 which was beyond the allowed period of one year before sale of capital asset. Therefore, we find force in the arguments of ld. DR that it is a lack of enquiry by the AO in terms of claim made u/s. 54F of the Act. To the second query about substantial increase of sale price shown by the assessee vis- -vis the value of price ascertained by Stamp Valuation Authority, it is observed from the impugned order i.e. page No. 8, the AO said to have been referred to the Assistant Valuation Officer for valuation of land and for the cost of acquisition as on 01-04-1981, it appears by the time of framing of assessment, the said reply from the Assistant Valuation Officer has not been received by the AO and without considering the same he completed assessment and allowed the claim of assessee u/s. 54F of the Act without referring and recording the same in the assessment order. In our opinion, in the present case having no report from the Valuation Officer, the AO allowed the claim of assessee establishes that the AO failed to examine the claim of assessee in terms of law contemplated therein. AO failed to apply his mind to the case in all perspective in terms of conditions contemplated in provisions u/s. 54F of the Act. He accepted the claim of assessee in the absence of any inquiry, in our opinion, the Pr. CIT rightly held its jurisdiction u/s. 263 - Decided against assessee.

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• 2020 (1) TMI 547
  Validity of reopening of assessment u/s 147 - 'reason to believe' or 'reason to suspect' - reasons recorded which warrant holding a belief that income chargeable to tax has escaped assessment - HELD THAT:- From the reasons already set out above and from the gist of the reasons recorded by the AO, we understand that the AO received information from ITO, Wd. 6(3), Kolkata. We note that reasons recorded by AO are only on the basis of appraisal report. These reasons are merely to conduct further inquiry, which is evident from the second para of the reasons recorded by AO. Reasons recorded by the AO that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or to conduct further enquiry or to examine certain particulars furnished by the assessee in the return of income.Therefore, it is abundantly clear from the reasons recorded that these are based on appraisal report to conduct further inquiry only.Therefore, it is clear that there is no independent application of mind by AO. If the AO decides to reopen the assessment, he has to satisfy the condition precedent to assume jurisdiction. In the assessee`s case the information was received by ITO ward 6(3), and even if the information given by theITO ward 6(3), is adverse against the assessee, at the most it may trigger reason to suspect ; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. Reasons recorded by the Assessing Officer are only reason to suspect and the AO has acted based on the information received by him from another Income Tax Officer which is for the purpose to conduct further inquiry only. The reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed while adjudicating the legal issue of AO s usurpation of jurisdiction u/s. 147. The information given by another Income Tax Officer, based on appraisal report of Badalia Group cases, can only be a basis to ignite/trigger reason to suspect for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. No quantification of income escaping assessment has been spelt out by the AO in the reasons recorded for justifying reopening u/s. 147 - Decided in favour of assessee.

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• 2020 (1) TMI 546
  Deduction u/s 80IA - whether loss of non-eligible units should be first adjusted with the profit of the eligible unit and deduction should be allowed in respect of net profit under the head profit and gain of the business/profession of the assessee? - whether any loss of non-eligible unit should be adjusted with the profit of the eligible unit for determining profit eligible for deduction under section 80IA? - HELD THAT:- For computing deduction u/s 80IA profit of the eligible units have only to be considered subject to the upper limit of Gross total income. In view of the decision of SONA KOYO STEERING SYSTEMS LTD. [ 2010 (2) TMI 83 - DELHI HIGH COURT ] we set aside finding of the CIT(A) in the instant case to set off the loss of the other non-eligible unit against the profit of the eligible unit for computation of the deduction eligible under section 80-IA of the Act. I n the instant case, on perusal of Certificate No.10CCB in view of the facts appearing in the form No.10CCB, it needs verification, whether the loss making unit was also eligible for deduction under section 80-IA of the Act and if so the claim of deduction under section 80-IA of the Act has to be computed for both eligible units. CIT(A) has not adjudicated on the addition made by the AO in respect of the interest income which was not derived from the business of the eligible undertaking. In view of the complete financial information in respect of the two units of the assessee not available before us, in interest of the Justice, we feel it appropriate to set aside the order of the CIT(A) and restore the issue back to him for deciding afresh in accordance with law, after verification of financial statements of both the units of the assessee. It is needless to mention that both the parties, i.e., the assessee as well as the Assessee Officer shall be afforded adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes.

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• 2020 (1) TMI 545
  Addition u/s 69 - unexplained investment made in purchase of land - whether the AO was able to lay his hand on the evidence exhibiting the fact that the assessee has made investment which are not recorded in the books of accounts, and failed to explain the source of such investment? - HELD THAT:- If the AO was able to lay his hand on any evidence exhibiting the fact that in the financial year immediately preceding the assessment year, the assessee has made investment, which are not recorded in the books of accounts, if any, maintained by him for any source of income, and the assessee failed to give any explanation or such explanation was not to the satisfaction of the AO, then the value of the investment may be deemed to be the income of the assessee of such financial year. CIT(A) has recorded a finding that in this year no payment was made by the assessee, and after looking into the chain of evidence flowing from different agreements, civil suits and ultimate resolution of the dispute, we are of the view that in this year, no asset came into existence in the name of the assessee, which requires to be shown in the books of accounts. The ld.AO has simply assumed certain facts, and assumed existence of unexplained asset which requires to be added under section 69 of the Act. After considering elaborate finding of the ld.CIT(A) on this issue, we do not find any hesitation in concurring with finding of the ld.CIT(A). Therefore, we do not find any merit in this appeal. - Decided against revenue.

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• Customs

• 2020 (1) TMI 554
  Release the goods seized by the Customs Department from the Railway Brake-Van at Hajipur - shoes of foreign origin - writ petition has been structured on the ground that no notice was sent to the petitioners or even if it was sent, it was not served upon them and therefore if there has not been any sequel action within six months of the seizure - HELD THAT:- What has been harped upon by the counsel for the Customs Department is that now the matter is before the adjudicating authority which had issued summons to the petitioners about which the petitioners are aware of - After the aforesaid points were noted, learned counsel for the petitioners deemed it prudent to seek liberty to move before the adjudicating authority for release of goods. In case the petitioners approach the Customs authorities and satisfy them that they are the rightful claimants of the seized goods and produce documents in support of their claim, the same shall be considered by the Custom authorities and a reasoned order shall be passed within a period of four weeks of the receipt of such representation to be filed by the petitioner within a period of one week of the passing of this order - Petition disposed off.

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• 2020 (1) TMI 549
  Smuggling goods to Nepal - Release of seized goods - seizure of misc. cloth items - violation of the provisions of Sections 7,11, and 50 of the Customs Act, 1962 - allegation that the occupants of the vehicles failed to produce any documentary evidence for legal possession of the goods - HELD THAT:- Since the impugned seized goods are not notified under Section 123 of Customs Act, 1962, the burden of proof is on the department - In the instant case, the department appears to have failed to provide the circumstantial evidence to prove the attempt of illegal export. The Adjudicating Authority appears to have rightly cited the cases of Hon ble Patna High Court in the case of Commissioner of Customs, Patna Vs. Manish Kakrania [2012 (5) TMI 722 - PATNA HIGH COURT] wherein the Hon ble High Court has held that in cases of smuggling the burden of proof to a demonstrable degree lies on the Department. Such burden would be shifted to other person only if circumstances such as place and condition of goods, manner of packing, labeling, transportation, prima facie indicate smuggled nature of goods - In absence of such circumstances and further absence of any other evidence, confiscation of goods and penalties is not sustainable. In the present case, because of inconsistencies in the process of seizure, as is evident from the records of seizure memo and panchnama, even the place of seizure and process of attempt to export illegally cannot be made out with credibility. Thus it appears that the department failed to justify the seizures. Appeal allowed - decided in favor of appellant.

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• Securities / SEBI

• 2020 (1) TMI 524
  Mis-utilised public issue proceeds contrary to the stated intent of investment in the company's subsidiary and augmenting the company's working capital - violating the provisions of Regulation 57 (1), Clause (XV10)(2) of Part A of Schedule VIII and regulation 60(4) of SEBI (Issuance of Capital Disclosure Requirements) Regulations 2009 ( ICDR Regulations ) read with Section 12A(a), (b) and (c) of the SEBI Act, 1992 and; regulations 3(b)(c)(d), regulations 4(1) and 4(2)(f), (k) and (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations 2003 ( PFUTP Regulations ) - Whether IGSL made false statements in its RHP and prospectus with respect to raising bridge loans? - Whether IGSL failed to disclose acceptance of deposits under Section 58A of the Companies Act, 1956, thereby violating regulation 57(1) of the ICDR Regulations? - HELD THAT:- Referring to submissions of Mr. Modi that the Company was entitled to withdraw the earlier investment made in IFPL cannot be disputed. WTM in the impugned order at page no.25 at table no.7 had taken efforts to show that IFPL continues to reduce advancing loans against shares but increasing the same against unsecured loans, however, what would be the market constraint for the subsequent period cannot be gauged and the same are not part of the present enquiry. In the circumstances, in our view, this charge of making a wrong/false disclosure in the ICDR of funding ₹ 30 crores to IFPL for advancing loan against shares holds no water. Undisclosed Bridge loan - In financial world, bridge loan is understood as a short term accommodation availed by an entity awaiting the permanent financial resources. In the present case, as per the Company itself short term accommodation was sought from KRSPL and the same was repaid on 3rd August, 2011 i.e. post receipt of IPO money. These facts itself clarify that the bridge loan was raised by the Company. However, in the prospectus it was positively declared that the Company has not raised any bridge loan. Thus on this count it can clearly be declared that a false/wrong declaration was made in the prospectus in violation of ICDR Regulations. Security Deposits - WTM held that though the issue of security deposit in view of the provisions of Section 55A of the Companies Act, the jurisdiction would lie with the Central Government, for the purposes of disclosure of the deposit under ICDR Regulations the SEBI would have jurisdiction - In our view, the finding of the WTM cannot be faulted with. During investigation the Company emphatically came with a case that all these transactions were security deposits. It is clear that ₹ 21.61 crores was repaid post IPO. Only when the show cause notice was issued the Company came with a case that it was not a security deposit but an amount kept in an account for adjustment towards the debit balance of the related accounts. It is, however, a fact that the amount was repaid after the IPO proceeds were received. As found, the deposits were more than 25% of the IPO proceeds and was therefore material information under the ICDR Regulations. The decision of the WTM that the Company failed to disclose the deposits in the prospectus and, therefore, violated the Regulation therefore needs no interference. To conclude, the charge that the Company has misulitised part of the fund by failing to appropriate the necessary amount towards money advanced by its subsidiaries specifically cannot be sustained. The charge of bridge loan is proved to the extent of the aspect of raising the same from KRSPL. The next charge of non disclosure of security deposit in the prospectus also stands proved. Disclosures by independent directors - As urged that the appellants being independent director had no knowledge of the relevant non disclosures - Appellant therein were independent directors and were not involved in the day to day management and control of the Company. In the circumstances, the argument of the respondent SEBI that they had put their signatures in the prospectus were taken into consideration. It was finally concluded that disclosures could not be attributed to them as they were independent director and they were not associated in the day to day management or control over the Company. In the circumstances, the appeal was allowed.

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• 2020 (1) TMI 523
  Ex-parte ad-interim order passed by the Whole Time Member ( WTM ) of SEBI - HELD THAT:- SEBI has power to pass ex-parte ad-interim order pending investigation under Sections 11 11B of the SEBI Act. What has been disputed is, that considering the facts and circumstances in the instant case, there was no urgency to pass an ex-parte ad-interim order. There is no doubt that an ex-parte ad-interim order can be passed only when there is an urgency. In Liberty Oil Mills v. Union of India [1984 (5) TMI 236 - SUPREME COURT ] , the Supreme Court held that the urgency must be infused by a host of circumstances and further held that the regulatory agency must move quickly in order to curb further mischief and take action immediately in order to instill and restore confidence in the capital market. There is no doubt that only under emergent circumstances and spelling out a case of urgency that an ad-interim ex-parte orders can be passed. Such exercise of regulatory measures in the form of ad-interim ex-parte orders can only be done upon the existence of circumstances warranting such a drastic measure. Applying the aforesaid test, we find that considering the allegations spelled out in the ex-parte ad-interim order which we need not refer on merits at this stage, we find that upon the examination of the evidence, a prima facie opinion was correctly arrived at by the WTM based on objective facts indicating diversion of funds from a listed Company which was not in the interest of its shareholders. It was thus extremely necessary that an action on urgent basis was required to stop further defalcation/ diversion/ siphoning of the funds of the Company and to protect the interest of the investors and its shareholders and to instill confidence in the securities market. Such measures if not taken while the iron was hot would defeat the regulatory measures that has been provided to SEBI under the SEBI Act. We are of the opinion that, in the instant case, there was ample evidence to show urgency and, considering the material that has been brought on record, the matter being serious, warranted an inference by the regulator. Whether such transactions indicated in the ex-parte ad-interim order was dully authorized or not by the RAC or whether such transactions were approved by a resolution of the Board of Directors is a matter to be considered on merit by the appropriate authority and it is not appropriate for this Tribunal to consider such documents at this stage as consideration of these documents may prejudice not only the investigation but also the parties. We are of the opinion that the contention of the appellants that no case was made out for grant of an ad-interim ex-parte order is misconceived and cannot be accepted. Appellants are entitled for supply of documents from the Company so that they may file an appropriate reply before SEBI. Denial of such documents by the Company or by SEBI would be in violation of principles of natural justice as embodied in Article 14 of the Constitution of India. Without going into the controversy as to whether requisite documents were supplied or not, we are of the opinion that, if any, document is requested by the appellants either from the Company or from SEBI the same would be supplied in accordance with law. Order - The appellants shall file a reply before the WTM of SEBI on or before October 15, 2019. In the event the appellants want further time then appropriate application will be filed before the WTM of SEBI which will be considered and appropriate orders would be passed. In the event any document is required by the appellants either from Company or from SEBI a formal request to that effect shall be made by the appellants which document(s) shall be supplied in accordance with law within three working days.

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• FEMA

• 2020 (1) TMI 544
  Contravention of FEMA - Investment in three step-down subsidiaries through Wholly Owned Subsidiary (WOS) without the permission of the RBI - Penalty imposed - HELD THAT:- As provided that if any person contravened any provision of this act or contravened any rules, regulation, notification, direction or order issued in exercise of the powers under this Act be liable to penalty upto thrice the sum involved in such contravention where such amount is quantifiable. In the present case the sum involved are quantifiable. During the course of argument the learned counsel for the appellants submitted, on query by the Bench, submitted that more than six crores of INR were invested in the step-down subsidiaries. If it is so the imposition of ₹ 70 lakhs on the appellant company and ₹ 20 lakhs on the Managing Director is not disproportionate. In my view the Adjudicating Authority has taken a lenient view and has imposed penalty lessor than the proportionate penalty. In the present fact and circumstances of the case the judgments stated by the appellant is not helpful to the case of the appellant. There is no illegality in the impugned order passed by the Special Director, (Appeals).There are contravention of the provisions of section 6(3)(a) of the FEMA and Regulations 5, 6 13. The Adjudicating Authority has also rightly held that Mr. Taurani has violated the aforesaid provisions in terms of Section 42(1) of FEMA.

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• PMLA

• 2020 (1) TMI 557
  Cancellation of granted Bail - offences punishable u/s 120-B r/w 420 of IPC and Sections 7,8,9,12, 13(2) r/w 13(l)(d) of Prevention of Corruption Act, 1988 - scheduled offences - proceeds of crime - the learned Additional Solicitor General argued that investigation in the present case is still going on - HELD THAT:- It is settled that once bail granted should not be cancelled in a mechanical manner without considering any supervening circumstances which is not conducive to fair trial. It cannot be cancelled on a request from the side of the complainant/investigating agency unless and until it is established that the same is being misused and it is no longer conducive in the interest of justice to allow the accused any further to remain on bail. No doubt, the bail can be cancelled only in those discerning few cases where it is established that a person to whom the concession of bail has been granted is misusing the same. However, all those facts are missing in the present case. It is also not in dispute that in the present case out of 46 accused, only 5 accused have been arrested and four accused are on bail. Only accused 35 Christian Michel James is in judicial custody who was extradited from abroad - It is pertinent to mention here that learned Solicitor General during arguments handed over some documents, however, not in the sealed cover and without furnishing the same to the counsel for the respondent. Since these documents are not in sealed cover and not furnished to the counsel for the respondent, therefore, this Court has not perused the same and not relied upon. There is no ground made in the present petition to interfere with the impugned order whereby learned Special Judge has granted bail to the respondent - petition dismissed.

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• 2020 (1) TMI 522
  Offence under PMLA - Provisional attachment - Attachment of properties which are attached - HELD THAT:- If the mortgage properties are not the proceeds of crime, the said properties cannot be attached in lieu of value thereof as banks are the secure creditors, but ED, no doubt, after investigation, is welcome to attach the properties in lieu of value thereof only in the cases where it was virtually not possible to trace out the properties which were purchased from proceeds of crime, but other than the mortgage properties which were not acquired from proceeds of crime. Borrowers mortgage properties can not secure in safe heaven if they failed to return back the loan amount otherwise public will suffer. No doubt, this tribunal is clear in its mind that if the property was acquired from proceeds of crime and at the time of mortgage, the bank is aware and still the loan is sanctioned, then said property can be attached even in lieu of value thereof if the borrowers has concealed or is concealing the proceeds of crime, but under those circumstances, there must be material or prima facie evidence on record before passing the provisional attachment orders. This order is being passed in relation to mortgage properties in favour of banks which are not purchased from proceeds of crime. The same were purchased and mortgage with the banks prior to the of crime period. ED is not precluded to attach other private properties and all other assets of the alleged accused. It is clarified that this order shall have no bearing in any proceedings initiated against the alleged accused including extradition proceedings pending or proposed to be initiated in any part of the world. Those are to be considered as per law and without any influence of this order which is being passed in the interest of public as bank money is a public money. Most of the banks are public sector banks. Their valid and legal recovery can not be blocked for years without valid reasons. Therefore, the issue in hand is being decided only for limited purposes The impugned order is set-aside with regard to the attachment of properties which are mortgaged with the appellant or its assignor. The appeal is allowed. The provisional attachment order dated 14.06.2018 is quashed with regard to the appellant.

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• Service Tax

• 2020 (1) TMI 535
  Imposition of penalty - non/short payment of service tax - demand of tax alongwith interest and penalty - HELD THAT:- As per the reports dated 25-02-2011 and dated 18- 12-2013, the Appellant has already filed ST-3 returns for the entire period under dispute and have also paid service tax of ₹ 12,99,634/- with returns and the balance amount of ₹ 70,34,271/- is paid as per stay order passed by this tribunal aggregating to ₹ 83,33,905/-, hence, the entire tax demand as per the impugned Order stood paid, which is upheld. With respect to payment of interest, the learned Authorized Representative submits that the Appellant is liable to pay interest on the delayed payment of service tax. We agree with the contentions of the learned Authorized Representative and hold that the Appellant would be liable to payment of interest in accordance with law, if not paid. We further uphold penalty of ₹ 5,000/- under Section 77 of the Finance Act, 1994 for delayed filing of returns by the Appellant. The penalty imposed U/s 78 of the Act is set aside noticing that the Appellant has already filed returns, though belatedly, and disclosed their service tax liability, hence, there is no suppression of facts etc involved in the instant case. Appeal allowed in part.

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• 2020 (1) TMI 534
  Classification of services - Cargo Handling Services or not - Appellant provided transportation of Coal including incidental loading/unloading to various sites of ECL - loading of Coal into Tippers for transportation within the mines and further provided loading of coal into Railway Wagon for outward transportation - time limitation - HELD THAT:- The Service Tax demand of ₹ 2,47,60,534/- on contracts for transportation of Coal from CHP Stock Yard to Railway Siding upto 06-07 K.M. and loading the Coal into Railway Wagon are essentially for transportation of Coal which is evident from the intention of the parties as found from the Work Orders. The work orders are awarded for transportation of coal - the Service Tax demand of ₹ 2,47,60,534/- on activities of transportation with incidental loading and unloading including wagon loading is principally and dominantly for transportation of coal within the mines and hence, cannot be taxed under the category of Cargo Handling Service - demand set aside. Service tax demand of ₹ 27,99,603/- on loading activities - HELD THAT:- The activities of hiring of pay loaders for loading of coal at pit head within the mines for internal transportation cannot be classified under the category of Cargo Handling Service - demand set aside. The Service Tax demand on the activity of hiring of pay loader for loading of coal into railway wagon at railway siding for outward transportation is taxable under the category of Cargo Handling Service - in respect of work orders for hiring of pay loaders for loading of coal at railway siding for outward transportation, the tax demand on merit is upheld but such levy to the normal time limit is restricted and the penalties set aside. Appeal allowed in part.

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• 2020 (1) TMI 528
  Scope of SCN - Activity done by the sub-contractor - demand of service tax from the main contractor (appellant) - Erection, Commissioning or Installation services to Assam State Electricity Board - Non-payment of Service tax - allegation that the sub-contractors appointed by the appellant did not include or pay service tax on services provided to the appellant - HELD THAT:- On detailed examination of the case proceedings, the Ld. Commissioner in the impugned order has travelled beyond the scope of the SCN and further, that the directions given by the Tribunal have not been followed by the Ld. Commissioner in the remand proceedings. The Ld. Commissioner has negligently adjudicated the matter in remand proceedings without complying with the directions given by the Tribunal. No observation whatsoever has been made whether he has examined the subject contract entered by the appellant with the State Electricity Boards, the nature of services actually rendered by the appellant, nature or part of the services undertaken by the sub-contractors or the sardars, conditions of payment agreed by the Electricity Board, etc. - No discussion has been made as to whether he has examined the bank records / books and relevant ledgers or the difference in income amount and the collection amount, neither has he recorded anywhere in the order that the assessee has not submitted the documents desired by him for examination purpose. Even though the SCN proposed to raise demand of service tax on the amount paid by the assessee as a main contractor to the sub contractor for the services rendered by them, we fail to understand under which provision of law the assessee can be said to be legally liable to pay service tax as a service recipient during the period in dispute. The SCN as well as the adjudication order impugned herein merely holds that the assessee has contravened the provisions of Section 66, 67 and 68 of the Finance Act, 1994, by not depositing the service tax on services provided by sub-contractors - On perusal of the said provisions, it is found that it is only the service provider who is liable to pay service tax for provision of service in the category of erection, commissioning and installation services. The impugned denovo order passed by the Ld. Commissioner is wholly illegal and cannot be sustained and the same is set aside - appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 527
  CENVAT Credit - Erection, Commissioning or Installation Services - irregular availment of CENVAT credit of central excise duty paid on said materials which were not legally eligible - extended period of limitation - HELD THAT:- In the present case, since the credit amount is legally not eligible, the appellant is not contesting the demand on merits but only on limitation. The appellant has submitted that credit has been availed wrongly without any intent to evade payment of service tax - in the course of adjudication, the appellant specifically submitted the plea that they disclosed details of availment of credit in the ST-3 returns and that there is no evidence to the contrary to prove that credit has been willfully availed to defraud the Revenue - In the instant case, the SCN has not shown any positive evidence to prove wilful fraud or suppression to justify invocation of extended period of limitation. The appellant s case succeeds on limitation - Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 525
  Refund of service tax - transportation of petroleum products - benefit of N/N. 25/2012 -ST dated 20.06.2012 - principles of unjust enrichment - HELD THAT:- The fact that the recipient of the service is also entitled to file a claim for refund is no longer res-integra. The issue stands decided by the Constitution Bench s decision in MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT] where it was held that Where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can legitimately claim its refund. The appellant s eligibility for refund of service tax is prima facie sustainable on legal grounds - Ministry of Railway Circular No. TCR/1078/2011/2 dated 26.09.2012 also states that the refund claim is to be obtained from the concerned tax authority on the basis of monthly consolidated (STTG) certificate issued by Railways. The appellant s refund claim is also not hit by the doctrine of unjust enrichment as per CA certificate produced before the bench. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (1) TMI 555
  Maintainability of appeal - monetary amount involved in the appeal - monitory limit of the subject matter of this appeal is less than Rupees One Crore - instructions issued by the Ministry of Finance, Department of Revenue dated 22nd August 2019 - HELD THAT:- Having regard to the monitory limit, as prescribed in the instructions, this appeal is not pressed and the same is disposed of accordingly without expressing any opinion on the merits of the case.

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• 2020 (1) TMI 543
  CENVAT credit - duty paying documents - allegation of fake duty paying document fraudulently prepared and supplied by a number of registered dealers without actually supplying the corresponding input materials mentioned in the said duty paying documents - HELD THAT:- It is apparent from the impugned order that the Learned Adjudicating Authority, in respect of specific direction from this Tribunal, failed to adhere to the remand direction regarding consideration of submission made by the appellant and also the legal provisions - this Tribunal in case of M/s. Vindhya Steel, who happened to be one of the supplier of the input material, has set aside the order. An appeal against that order was also sustained by Hon ble High Court of Kolkata. In the circumstances, we find that no charge against the appellant would sustain and the impugned order is bad in law. Time Limitation - HELD THAT:- The appellant had been submitting the document such as RG23A part (1) and RG23 part (2) alongwith the invoices on which modvat credits had been taken alongwith monthly RT-12 reports. The duty paying documents has also been defaced by the departmental officers while assessing RT-12 return of the appellant unit. In such a circumstance there is no scope of invocation of extended period of limitation, which has been done in this case. The show cause notice has been issued on 02.05.2000 for the period 01.04.1995 to 28.01.1996 - The demand is therefore time bared and not sustainable at all. Retraction of statements - The department is alleging that there is no technical feasibility, infrastructural facilities available with the appellant for use of such input material also taking into the consideration of economic validity of use of such goods - HELD THAT:- . This type of investigation is purely on the basis of imagination and without any legal basis. It is up to the manufacturer to use the goods as input or raw material in the process of manufacture and the department cannot force them to use a particular kind of input / raw material for the manufacture of finished product considering their economic viability, technical feasibility and infrastructural requirement. The department has also accepted the payment of duty on the goods sold by these dealers and hence it cannot deny the availment of modvat credit by the buyer of these goods, if put to use in the manufacturing. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 542
  Clandestine removal - allegation that the appellant had received huge amount of inputs i.e. aluminium wire rods, on which they have availed Modvat credit but, however, they have not accounted the final products which could be manufactured from the said inputs - corroborative evidences or not - HELD THAT:- In the entire proceedings, no evidence, much less corroborative evidence, has been adduced to show that input goods have been procured to manufacture goods for clandestine clearance. No evidence for extra production or unaccounted cash or statement of buyers or transporters has been obtained. It is a settled legal position that charge of clandestine clearance is a serious charge and the onus to prove the same is on the Revenue by adducing some evidence - The Tribunal has taken consistent view that in absence of corroborative evidence, the charge of clandestine clearance cannot be levelled against the assessee. The whole basis of applying the input output ratio of 1:1 to arrive at the quantity of final products alleged to be clandestinely cleared by the appellant is solely based on the production pattern of other assessee in the same Commissionerate - the learned Commissioner made a fundamental error in making such assumption to raise demand on the allegation of clandestine clearance. In the instant case, no shortages of goods were ever found which fact is on record and not in dispute. In any case, since the whole basis of allegation of clandestine removal is the production pattern of other assessees, which has no legal or scientific basis, the impugned duty demand cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 541
  Clandestine removal - shortage of stock - denial of CENVAT Credit - Non-inclusion of sales tax collected under deferment scheme - HELD THAT:- This issue has been clarified by the CBEC Circular No.378/II/98-CX dated 12.03.1998 wherein it has been clarified that in respect of deferred payment of sales tax for a particular period and the grant of incentive equivalent to sales tax payable by the unit. Thus the sale tax paid has been clarified to be excluded from the assessable value of the goods. The stock verification report was not conducted by the visiting officer, but simply the statement was asked to be prepared by one of the employee of the appellant namely, Shri Suman Kumar Mishra, Excise Clerk along with Shri Manoj Kumar Pandey and Shri Uday Kumar, all employee of the main appellant (BRIL). As the stock verification report was not done on the physical weighment basis and even not verified by the Central Excise officer as is evident from the stock verification report, its evidentiary value looses its significance, especially in view of the fact that the RG-1 Register and Form-IV Register were incomplete after 31.08.2006. The appellant has taken Cenvat Credit on the basis of prescribed document as per Cenvat Credit Rules and therefore the impugned order is not correct in denying the same. Reliance placed on the various statements of the different persons, which were recorded during the course of investigation - HELD THAT:- The Commissioner has not examined the maker of the statements and not permitted the cross-examination of those persons by the main appellant in spite of being specifically requested for. This is in clear violation of statutory provisions as contained in section 9D of Central Excise Act - lot of reliance has been placed on the record of transporter M/s.Rush Cargo Movers. However, this is third party evidence, which cannot be relied without corroborative evidence. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 540
  Eligibility of exporting the goods of their 100% Export Oriented Units on payment of duty - Rebate claim - HELD THAT:- It is on record that the appellant has withdrawn their refund claim and made a request in writing to the Departmental officer to permit the re-credit of cenvat credit availed for the discharge of central excise duty while exporting the goods. This request was turned down by the Department as is evident from the letter dated 27.07.2009. There is no dispute regarding viability of duty free export by 100% EOU in terms of Notification No. 24/2003. As the appellant has paid the duty, which ought to have not been paid, there is no reason that the refund thereof byway of recredit in cenvat account can be stopped by the Department. Denial of rebate by the appellant as merchant exporter - HELD THAT:- The export goods have been purchased on payment of duty to the supplier of the goods, and therefore, the appellant is legally permitted to avail rebate on the export product to the extent of Central Excise Duty paid. The violation at the end of supplier of the goods is not within control of the appellant. The Department has not objected the payment of duty at the time of their clearance from the supplier s factory. In fact has suffer central excise duty at the declared value - The appellant has not taken anything other than the duty paid at the time of procurement of raw-material as cenvat credit, which after processing has been exported by a value addition at the end of appellant. Therefore, the appellant is rightly entitled to claim the rebate of the central excise duty paid at the time of their procurement from supplier/manufacturer - Also, customs department has not objected to the value declared by the appellant under the provisions of Customs Act at the time of export under Export Valuation Rule, 2007. The appellant is entitled for recredit/ refund of cenvat credit duty availed while exporting the goods through its 100% EOU and also the rebate as per declared violation for export made as merchant exporter - Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 539
  CENVAT Credit - capital goods - ingot moulds - period April 2000 to March 2002 and May to June 2002 - Circular of CBEC dated May 5, 2000 - HELD THAT:- There is no restriction that in the event a particular goods is a capital goods , they cannot be components or spares or accessories of the goods specified in subclause (i) of Rule 57AA(a)/Rule 2(b) of the 1944 Rules and the Cenvat Credit Rules respectively. In the absence of any such restriction in the statutory provisions, the conclusion would be that either as components or accessories of goods falling under clause (i) of the aforesaid Rules or independently under clause (ii) thereof, moulds, dies, tubes and fittings would be treated as capital goods for the purpose of availment of cenvat credit - It therefore follows that when such moulds, dies, tubes and pipes are used as components and accessories of goods specified under clause (i) of the said Rules, the exception as provided in Rule 4(2)(b) of the Cenvat Credit Rules, 2001/Rule 57AC(2)(b) of the 1944 Rules from the said goods being required to be in possession and use of the manufacturer of final products in the subsequent year, would be available and cenvat credit of the duty paid thereon can be availed even without satisfying such requirement. The capital goods as defined in Rule 57AA(a)(ii) of 1944 Rules/Rule 2(b)(ii) of the Cenvat Credit Rules, 2001 can be both used in an independent manner by itself as well as an accessory of another capital goods covered under clause (i) of both the said Rules and that the ingot moulds, in the instant case, on an application of the principles laid down in various decisions, is an accessory of the LD Converter, which undisputedly is capital goods under clause (i) of the said Rules - reliance can be placed in the case of BANCO PRODUCTS (INDIA) LTD. VERSUS COMMISSIONER OF C. EX., VADODARA-I [ 2009 (2) TMI 101 - CESTAT AHMEDABAD] and PRECISION RUBBER INDUSTRIES VERSUS COLLECTOR OF CENTRAL EXCISE [ 1990 (3) TMI 76 - HIGH COURT OF JUDICATURE AT BOMBAY] . The TSL had correctly availed cenvat credit of the balance 50% of the duty paid on the ingot moulds in the subsequent years - demand in respect of cenvat credit on ingot moulds are therefore unsustainable - also, TSL had correctly availed cenvat credit on the said welding wires and rods amounting to ₹ 2.48 lakhs. Demand set aside - penalty set aside - appeal disposed off.

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• 2020 (1) TMI 538
  Area Based Exemption - substantial exemption - appellant increased their overall installed capacity by 37% during the period 01.01.1998 to 01.07.1999 - benefit of N/N. 33/99-CE dated 08.07.1999 - case of Revenue is that the appellant has submitted their application after about nine years from the date of completion of expansion or the date of the said Notification. HELD THAT:- The exemption Notification in question is a conditional exemption Notification available by way of refund. Para 2 of that exemption Notification prescribes the procedure for claiming it. This procedure requires the manufacturer to submit a statement of duty paid etc. on a monthly basis to the Assistant/Deputy Commissioner, who is required to verify the same and refund the amount. Admittedly the appellant had not done so. There is nothing in the returns to show that they had intended to claim the benefit of exemption Notification No.33/99-CE or actually claimed in any of their returns whatsoever - this cannot be equated with fulfilling the conditions required under para 2 of the exemption Notification. Thus, the appellant is not entitled to the benefit of the refund claim - appeal dismissed - decided against appellant.

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• 2020 (1) TMI 537
  Area based exemption - Benefit under exemption Notification No. 32/99-CE dated July 8, 1999 - correctness or otherwise of availment of cenvat credit - HELD THAT:- Notification No. 32/99-CE dated July 8, 1999 exempted from excise duty and additional excise duty goods, cleared from a unit located in the places specified in the notification situated in the specified States of North East India, from so much of such duties leviable thereon under, inter alia, the Central Excise Act, as is equivalent to the amount of duty paid by the manufacturer, other than the amount paid by utilisation of cenvat credit under the Cenvat Credit Rules. As per the impugned order Ishaan, by a letter dated 04.07.2002 informed the jurisdictional Assistant Commissioner, the prescribed authority under Notification No. 32/99-CE, that their factory located in the specified area and had started commercial production with effect from 22.03.2002 and requested sanction of eligibility certificate and that the Assistant Commissioner by an order dated 27.09.2002 held that Ishaan is eligible for exemption under the said notification by way of refund of duty paid from account current on the products allowed to be manufactured and cleared; accordingly an amount of ₹ 10,21,26,696/- was refunded to Ishaan during the period from October 2002 to December 2004 for clearances claimed to have been during March 2002 to November 2004 - By the impugned order the Revenue has sought to recover an amount of ₹ 8,92,62,243/- out of the said refunded amount in terms of Section 11A(2) of the Act, pursuant to a show cause notice issued under the Proviso to Section 11A of the Act, as amount wrongly refunded under the said Notification No. 32/99-CE. A further sum of ₹ 53,05,582/- has also been confirmed against Ishaan as wrong cenvat credit availed and utilised in terms of Rule 12/14 of the Cenvat Credit Rules 2002/2004 read with Section 11A of the Act. In the present case, since according to the show cause notice and the impugned order themselves there was no manufacture of the subject goods, there can be no levy and hence no requirement to make payment of any duty of central excise payable in respect of subject machineries under the Act. Consequently, the question of any recovery of duties of excise not levied or not paid or short levied or short paid or erroneously refunded in terms of Section 11A(1) of the Act also does not arise. Appeal disposed off.

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• 2020 (1) TMI 536
  SSI exemption - valuation - allegation that break-up submitted by the Respondent did not reveal any separation between different jobs and loose furniture for the relevant period - HELD THAT:- The Respondent manufactures furniture, which are leviable to Central Excise duty and other non-excisable goods; fixed wood work (interior decoration), export, trading of imported goods etc. It appears from the impugned order that the demand has been made without segregation of the dutiable and non-dutiable invoices. On the other hand, the Respondent had produced the statement of clearance of job-work items, dutiable items within exempted limits. The adjudicating authority has observed that the report of Anti-Evasion Wing does not dispute this inasmuch as they have not come with a segregated calculation of duty liability. It appears that the Respondent had produced the Chartered Accountant Certificates of each year, certifying that it was prepared on the basis of the books of accounts, records and documents produced for their verification - the Chartered Accountant Certificate cannot be brushed aside, unless there is any proof of material in support of the contention made by the Revenue. The other aspect of this matter is that the Respondent had claimed S.S.I. Exemption and the accounts were maintained for other purposes like Sales Tax, Service Tax etc., which were audited by the Chartered Accountant as per the statutory provisions. Hence, there is no force in the grounds of appeal filed by the Revenue. There are no substance in the appeal filed by the Revenue - appeal dismissed - decided against Revenue.

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• 2020 (1) TMI 533
  Clandestine manufacture and removal - Pan Masala containing Tobacco - manufacture and removal even after the surrender of registration in May, 2007 without declaring these machines as required under Rule 6 of Pan Masala Packing Machines (Capacity Determination Collection of Duty) Rules, 2008 - HELD THAT:- The investigations carried out by DGCEI do not bring home the charge of manufacture and removal of Pan Masala Containing Tobacco and that of clandestine removal against the Appellant. We find that the test reports of samples of residues collected by the officers of DGCEI indicate the presence of tobacco only. Even the other test reports of other material sent for testing to the Chemical Examiner, Central Excise, Kolkata as referred by Ld. Authorized Representative also does not report the presence of Betel Nuts. Ld. Advocate for the Appellants has also disputed the manner and method of collection of samples of residues from alleged 11 Packing Machines and has disputed the test reports. Also, Betel Nuts are essential ingredients to classify any goods as Pan Masala containing Tobacco and that generally it contains more than 90% of Betel Nuts. Also, the officers did not find any Betel nuts in the factory of M/s. Paras Pan Products Pvt. Ltd. at the time of search. There is no evidence of any use of Betel Nuts in the factory of the Appellant or any evidence of purchase and use of Betel Nuts by the Appellant. Thus the revenue has failed to prove the manufacture and removal of Pan Masala containing Tobacco . It is the case of the Revenue that the department has made enquiry from 2 of the 3 suppliers of packaging material who have confirmed the supply of packaging material to the Appellant during April, 2008 to June, 2008 which was used by the Appellant for packing of Pan Masala containing Tobacco in their factory - in this regard that the documents relied upon by the Revenue nowhere mention the name of the Appellant in Challans being relied upon by the Revenue - the clandestine manufacture of goods cannot be alleged on the basis that the Appellant has procured unaccounted packing material and in turn used for manufacture of goods removed clandestinely. It is mere packing material. The Show Cause Notice has not shown any unaccounted receipt or consumption of main raw materials i.e. Supari, Katha, Kimam, Perfume, Menthol or Tobacco which are main raw material for manufacture of Pan Masala containing Tobacco . The packing material would come into picture only once raw materials are consumed and finished goods are produced. Reliability of statements - HELD THAT:- The admissibility of evidence without following the procedure established under Section 9(D) (i) of the Act, is not admissible as an evidence in the investigation proceedings. The persons giving the statements have not been examined, cross examined by the adjudicating Authority/Appellant - thus, the statements recorded from the various persons have no evidentiary value. It is now well settled that charge of clandestine removal is a serious charge and must be proved by adducing tangible, cogent and affirmative evidence which are completely lacking in the instant case. The demands and penalties ordered by the Adjudicating Authority is not sustainable - Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 532
  Clandestine removal - corroborative evidences or not - relied upon documents - entire demand has been raised on the basis of a pen drive/print outs record obtained from the premises of the third party and also the private records of the third party which were compared with the Appellant s statutory records - whether the charge of clandestine removal can be made against the Appellant on the basis of documents obtained during the search conducted at the two other companies for which Shri Bharat Bhushan Sachdeva is common Director? HELD THAT:- During the search the pen drive was recovered which allegedly contained the data regarding the clandestine removal of the goods without any search being conducted on the Appellant s premises. The data retrieved from the pen drive was compared with data contained regarding the manufacture production and clearance of the goods. It is on record that the Department has solely relied upon the data in the pen drive without any further corroboration by the independent investigation conducted for the activity by the Appellant - Although the statement of Shri Sachdeva dated 26.09.2009 was retracted and the existence of data in the pen drive from where the various files were extracted is not disputed. But any data contained in the pen drive/printouts has to be as per the provisions of Section 36B of the Act which has definitely not been followed by the Adjudicating Authority. The issue has been elaborately dealt in case of M/S POPULAR PAINTS AND CHEMICALS REFERRED AS, SHRI MANSOOR ZAFFAR, SHRI HUSSAIN ZAFFAR VERSUS COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS RAIPUR [ 2018 (8) TMI 473 - CESTAT NEW DELHI] , wherein it is held that following the mandatory requirement as contained under Section 36B of the Act the reliance cannot be placed on the data contained in the electrical device. Thus, there cannot be any reliance on the data contained in the pen drive, which has been taken as gospel truth in the case at hand. Reliability on statement of Shri Bharat Bhushan Sachdeva - HELD THAT:- The statement of Shri Bharat Bhushan Sachdeva can also not be relied upon for not following the prescription under Section 9D of the Act. Shri Sachdeva has not been examined by the Adjudicating Authority and also not cross examined by the Appellant. In the circumstances even the statement which has not been retracted cannot be taken as an admissible piece of evidence - the demand has been passed on the third party documents recovered from the premises of the Union and SEWPL which cannot be relied upon As the appeal main appellant SSWP is not sustainable there is no question of imposition of any penalty on the Director of the company, Shri Bharat Bhushan Sachdeva - Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 531
  Rebate of duty - export of goods - allegation that appellant had tried to claim excess duty rebate in respect of export goods, the purchase price of which was highly inflated by the manufacturer - Rule 18 of CER - whether the Appellant has claimed any extra amount of rebate by over valuing their export product while exporting the same? - HELD THAT:- The Appellant is merchant exporter, who has obtained the export goods from manufacturer/supplier at payment of duty as per the rate specified in ARE-1 and also in the excise invoice. The Department was paid central excise duty on the price declared by the manufacturer/supplier and the Appellant has taken credit of the same and exported the product under the provisions of Rule 18 of Central Excise Rules. In the circumstances it will not be appropriate to ask the Appellant not to avail the rebate of the duty paid by it under the provisions of Rule 18 of the Central Excise Rules - also, the assessment has been completed by the Departmental officer at the manufacturers/suppliers end which cannot be changed by the jurisdictional officer of the Appellant unit in terms of Rule 3 of Cenvat Credit Rules 2004. Hon ble Supreme Court in case of OMKAR OVERSEAS LTD. VERSUS UNION OF INDIA [ 2003 (8) TMI 45 - SUPREME COURT ] has held that if there is any short payment, the benefit of rebate cannot be denied unless and until the same is by reason of fraud, collusion or wilful statement or suppression of fact. It has been not been brought on record in the impugned order that the Appellant has committed any fraud while obtaining the export goods from their supplier on payment of Central Excise duty in terms of Section 4 A of the Act. Rule 18 of the Central Excise Rules has been made to neutralise the duty incidence for export goods and ensure that the product remains expected in competitive foreign market. The purpose of said rule is to return the amount of duty that was paid by the exporter while exporting the goods outside India - the Appellant has not overvalued the exported goods at their end and the impugned order is, therefore, not sustainable. The appellant is entitled for the rebate at the declared price for the export made by it. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 530
  CENVAT Credit - manufacture of dutiable final product and electricity wheeled out to the State grid - non-maintenance of separate records - assessee claims to have maintained separate records in respect of the inputs consumed in its Power Division and Carbon Black Division, having no common inputs - whether the assessee is required to pay 5%/6% of the sale value of electricity wheeled out to the state grid, under Rule 6(3)(i) of the CCR? HELD THAT:- Lex non cogit ad impossibilia is a well settled legal principle and we see merit in the contentions of the assessee that separate records in respect of common inputs could be maintained only when two final products are manufactured. Within the power division it was not possible to segregate the inputs at the stage of receipt itself, based on the ultimate use of the power post its production/generation. It is undisputed that the assessee had been making reversal of the proportionate cenvat credit attributable to inputs consumed in the power division to the extent power was sold to the State grid, at the end of each month and the same is also evident from the annexure to the notices - the reversal of such proportionate cenvat credit in respect of inputs used within the power division at the end of each month is sufficient compliance with the provisions of Rule 6(2) of the CCR in letter and spirit. Reversal of proportionate cenvat credit in respect of the common input used in the manufacture of exempted goods is an option duly permitted under Rule 6(3)(ii) of the CCR itself. Non-compliance with the procedure prescribed under Rule 6(3A) of the CCR does not result in the manufacturer losing his substantive right to avail the option of reversing proportionate credit, as such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Appeal allowed.

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• 2020 (1) TMI 529
  CENVAT credit - waste/by-product - exempt goods - waste gas , also known as tail gas / off gas , is generated as by-product / waste which being poisonous in nature cannot be flared into the open air for pollution reasons - whether appellant is liable to pay the amount calculated @ 6% of the sale value of electricity sold outside the factory when admittedly the appellant has reversed the proportionate credit of inputs and input services attributable to sale of electricity? HELD THAT:- Hon ble Allahabad High Court as relied upon by the appellant in the case of GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS [ 2013 (7) TMI 159 - ALLAHABAD HIGH COURT] in which case, the electricity was generated from bagasse which is a waste product. It has been held by the Hon ble High Court to be not classifiable under chapter 27 of the Central Excise Tariff - The Hon ble High Court has clearly held that since electrical energy generated from waste i.e. bagasse is not excisable, the same cannot be said to be exempted goods. The waste / tail gas used in generation of electricity also cannot be said to be classifiable under chapter 27 and therefore, since the same is not excisable, the question of being exempt also does not arise - for the purpose of reversal of CENVAT credit, non excisable goods would be considered to be exempted goods and the assessee will be liable to reverse the proportionate credit w.e.f. 1st March, 2015 onwards and not for the prior period - Since admittedly, the reversal has been made by the appellant in adjudication stage, they cannot be penalised by way of demanding the prescribed percentage of sale value of electricity merely because the procedure has not been followed under Rule 6 of the Credit Rules. Time Limitation - HELD THAT:- The Tribunal in the case of M/S COMPARK E SERVICES P. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE S.T., GHAZIABAD [2019 (5) TMI 1230 - CESTAT ALLAHABAD] has observed that when the assessee is subject to compliance and monitoring with other statutory bodies and the transactions have been disclosed in the financial statements, it cannot be said that there was any suppression. The interpretation that since the return has not been filed or tax has not been paid would be only for reasons of fraud or suppression will render the provisions relating to limitation otiose and infructuous. In the present case, there are no ingredient to show that the appellant has wilfully suppressed any information from the department. Mere fact that they have not followed the procedure under Rule 6 of the Credit Rules to reverse the proportionate credit, that too only w.e.f. 1st March, 2015, cannot lead to the conclusion that they have wilfully suppressed any material information from the department - Moreover, in the instant case, the appellant is not manufacturing any exempted goods but is generating electricity from the waste received during carbon black manufacturing process which is a statutory requirement under the pollution laws. Therefore, in the facts of the case, extended period of limitation is not available to the Department. Since the appellant has already reversed the proportionate credit attributable to sale of electricity for 2015-16 which fact is not in dispute as would be seen from the findings made by the Ld. Commissioner in para no. 4.4 and 4.25 of the impugned order, the appellant cannot be made liable to pay the amount @ 6% of the sale value of electricity under Rule 6(3), which in any case will be highly dis-proportionate to the credit amount actually availed, which is legally not permissible. Appeal allowed - decided in favor of appellant.

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• 2020 (1) TMI 526
  CENVAT Credit - capital goods - Welding Electrodes used for repair and maintenance of machinery in the factory - period from July 2007 to December 2011 - HELD THAT:- The issue is no more res integra. The Tribunal in appellant s own case in ULTRATECH CEMENT LTD VERSUS CCCE ST, GUNTUR, CCE ST, TIRUPATI (VICE-VERSA) [ 2019 (2) TMI 405 - CESTAT HYDERABAD] has allowed the assessee s appeal by relying upon the decision of the Hon ble Apex Court in the case of RAMALA SAHKARI CHINI MILLS LTD. VERSUS COMMISSIONER CENTRAL EXCISE, MEERUT-I [ 2016 (2) TMI 902 - SUPREME COURT] . It was held that the welding electrodes used in the maintenance of machines are eligible for CENVAT credit. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (1) TMI 556
  Levy of purchase tax - sale of new papers purchased by the revisionists from unregistered dealers - Section 3-AAAA of the U.P. Trade Tax Act, 1948 - HELD THAT:- Perusal of Section 3-AAAA of the U.P. Trade Tax Act, 1948, clearly indicates that in case the revisionist satisfies the authorities that he is a dealer who resells such goods within the State or in the course of inter-State Trade or commerce or exports out of the territory of India, in the same form and condition in which he had purchased them. The person to whom goods have been sold shall be liable to pay tax on the said transaction and the revisionist would not have any liability to pay tax in light of the aforesaid provision. That before giving any benefit to this provision in the case of revisionist the Assessing Authority has come to a finding that the applicability of Section 3-AAAA and also to the fact that revisionist has sold the goods in the same form and condition in which he has purchased them. This specification can be arrived only after reappreciating the facts, the very fact that Tribunal has considered the provisions of Section 3-AAAA, but have not considered the correct import and effect of the said statutory provisions. The present revision deserves to be remanded to the Tribunal for fresh consideration only with regard to the applicability of Proviso III to Section 3-AAAA. Appeal allowed by way of remand.

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• 2020 (1) TMI 550
  Classification of goods - Bitumen Emulsion - whether classifiable as a product under S.No. 18 of Part (B) of the First Schedule to the Tamil Nadu Value Added Tax Act, 2006 or under residuary heading at S.No. 69 of Part (C) of the First Schedule under the TANVAT Act attracting 14% of Value Added Tax. HELD THAT:- Bitumen Emulsion is a processed Bitumen , but the process does not change its composition, commercial identity or its use. The Court further held that the Bitumen Emulsion is regarded and performs the same function as Bitumen and as a result of processing, neither the primary character nor the composition is lost - Thus Bitumen Emulsion is to be classified as Bitumen falling under Serial 18 of Part B of the First Schedule to the TNVAT Act, 2006 and is liable to be taxed at the rate prescribed therein for Bitumen . Hon'ble Supreme Court in the case of COMMISSIONER OF COMMERCIAL TAX, U.P. VERSUS M/S. A.R. THERMOSETS (PVT.) LTD. [2016 (9) TMI 410 - SUPREME COURT] has held that the processes result in improvement of the quality of bitumen and there is no change in the characteristics or identity of bitumen so as to transform bitumen into a new product having an identity, characteristic and use. Petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2020 (1) TMI 553
  Dishonor of Cheque - insufficiency of funds - rebuttal of presumption - section 138 of the N.I. Act - trial court on the basis of the evidence on record has drawn the presumption under section 139 of the N.I. Act that the accused had issued the said cheque in favour of the complainant for discharge of his debt and liability - whether the accused has been able to rebut the presumption as available under section 139 of the N.I. Act in respect of issuance of the cheque in question? HELD THAT:-All the important facts emanating from evidence, have not all been dealt and to me, it appears that the courts below have remained under an erroneous impression that the presumption has to be rebutted by the accused only by leading evidence from his side. The view taken that the accused having not responding in that light, right from the time of demand for payment made by the complainant till lodging of the complaint stands as a circumstance against his case favouring the case of the complainant appears to be a patent error - Therefore, the finding returned by the courts below based on which the conviction has been recorded against the accused suffers from the vice of perversity, particularly, for non-consideration of the evidence on record as pointed out above which pushes the existence of the debt or subsistence of liability owning to the complainant to the tune of ₹ 5.50 lakh and standing to be discharged by the accused into thick clouds of doubt. The courts below are thus found to have committed manifest error by going to hold the accused guilty for commission of offence under section 138 of the N.I. Act in convicting him thereunder followed by imposition of sentence and award of compensation as aforestated. Revision allowed.

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• 2020 (1) TMI 551
  Dishonor of cheque - the notice was issued against the accused and he did not plead guilty and claimed trial - grounds urged in the appeal are that the learned Magistrate failed to consider both oral and documentary evidence on record - Drawing of presumption - principles of natural justice - Whether the Court below has committed an error in dismissing the complaint in coming to the conclusion that the transaction was not proved by the complainant? - HELD THAT:- The learned counsel appearing for the complainant relied upon the document Ex.P5 and also bank statement produced by the complainant which shows the address as shop No.5, Raghu buildings behind Bharat Motors, Banaswadi, Bengaluru. But the question before this Court is that when the VAT certificate produced as Ex.D4 discloses the commencement of business and the business address, the complainant has to discharge his burden to prove that notice was served on the accused. The same has not been done - even the complainant did not get the endorsement from the postal department to confirm that the legal notice was served on the accused and hence, first of all for having served the notice on the accused, there is no material before the Court. The second contention of the complainant is that in respect of the material supplied in terms of Exs.P9 to P29, the accused did not put any amount - HELD THAT:- In order to show that supply of cement bags was made by the complainant to the accused, there must be an acknowledgment on the part of the accused for having received the said bags. No such material is placed before the Court. In order to prove the same, the complainant has also not placed any document to show that 9040 cement bags were supplied to the accused. The claim is to the extent of ₹ 24,20,250/- and only invoices of Exs.P9 to P29 are relied upon with regard to the supply of cement bags and when such being the case, the Court below after considering the oral and documentary evidence, has rightly come to the conclusion that the complainant has not proved the very supply of cement bags to the accused - there are no error committed by the Court below in dismissing the complaint. The burden is on the complainant to prove that cement bags were supplied to the accused and the same has not been discharged by him by placing the material before the Court. Drawing of presumption - HELD THAT:- No doubt, the Court can draw presumption, but in order to draw presumption, the complainant has to discharge his burden to prove the transaction between himself and the accused. When such being the case and when specific contention was taken by the accused that the cheque was taken as a security and the same has been misused, the complainant ought to have explained the same and the same has not been done - Hence, the question of drawing presumption under section 139 of the Act also does not arise. Appeal dismissed.

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