TMI Tax Updates - e-Newsletter
October 20, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
PMLA
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Penalty order u/s 129(3) - non-filling up of Part B of e-way bill - Stock transfer - Since the goods in question were stock transfer from one Unit to another within the State of Uttar Pradesh (Agra to Mathura) and in absence of any provision being pointed out by the learned ACSC or any authority below that the goods (stock transfer) in transit were liable for payment of tax, no evasion of tax could be attributed to the goods in question. - HC
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GST:
Transfer of TDS from Pre-GST era to Post-GST era - This Court feels that issuing the impugned show cause notice by denying the transfer of TDS from the pre-GST era to post-GST era is illegal and the same is contrary to the law laid down by this Court. - Show Cause Notice (SCN) quashed - HC
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GST:
Input Tax Credit (ITC) - Period of limitation u/s 16(4) - After the decision of Supreme Court in the case of Northern Opertaing Systems, the Petitioner discharged IGST on the payments made to seconded employees/ related entities and availed input tax credit of the IGST paid. The Tax Department sought to deny the input tax credit by applying the time limit under Section 16(4) of the CGST Act, besides demanding interest and penalty. - High Court stayed the SCN for adjudication - HC
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GST:
Jurisdiction - proper officer to issue summons and conduct inquiry - Investigation / Enquiry proceedings initiation by different authorities of state and central GST - The proceedings as initiated against Annexure-1 dated 04.02.2022 by the State Tax Authority, is at the notice stage and with respect to one of the years on which the Central Tax Authority has already initiated proceedings. Annexure-1, hence, shall be kept in abeyance. - HC
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GST:
Validity of GST registration certificate granted w.e.f 1.6.2018 instead of with retrospective effect i.e. 1.7.2017 - Whereas GST liability confirmed w.e.f. 1.7.2017 - Condition (no 4) of foregoing the benefit of Input Tax Credit (ITC) for the period prior to 1.6.2018 - Condition no. 4 of the order quashed - HC
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Income Tax:
Exemption u/s 11 - application for registration u/s. 12AB rejected - It is absolutely incomprehensible and a matter of serious concern as to how two sets of audit reports, which, as observed by the CIT(Exemption), revealed a glaring mismatch in the total income and expenditure, had been filed by the assessee society in the course of the proceedings before him. - CIT(Exemption) rightly declined the application filed by the assessee society for grant of registration u/s. 12AB - AT
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Income Tax:
Rectification u/s 154 - Determination of turnover - charging of tax rate at 30% on the total income of the appellant - Assessee’s claim cannot be considered to be an apparent error on record to exercise the rectification powers u/s 154 of the Act because in the present case to exercise such powers, it would be required to recompute the turnover of the appellant assessee by disproving the turnover shown in column no. 4 of the copy of form 3CA and form 3CD for AY 2018-19. - AT
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Income Tax:
TP Adjustment - payment of technical knowhow fees - benchmarking of the transaction - Intragroup services or for that matter any international transaction is required to be benchmarked each year based on the facts and circumstances prevailing in that year considering the economic conditions. Therefore, the findings of the previous year will have only persuasive value, if any, while deciding the transfer pricing adjustment for any year. - AT
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Income Tax:
Estimation of Profit/Section 40A(2)(b) - JV entered - sub-contracting - AO had formed a view that the assessee JV had suppressed its profit by making excessive payment to TPPL - the section 40A(2)(b) has no application to income aspect of the assessee JV in the facts of the instant case. The AO has not brought any comparable figures to disallow the expenditure, moreover with the structuring of the JV provisions of Section 40A(2)(b) are not attracted in the given facts and circumstances of the instant case. - Additions deleted - AT
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Income Tax:
Income from house property - consider the Ambey Valley property as self-occupied property - determination of annual value - CIT(A) has upheld that the 7% of cost of property as annual value taxable u/s 23, against the assessee and therefore only others ground are which are allowed by him. There is no reason given by him. Therefore, we restore ground back to the file of Ld. CIT(A) to give clear cut reason and finding that whether the claim of the assessee of considering Ambey Valley property as self-occupied property u/s 23(2) of the Act is allowable or not. - AT
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Income Tax:
Exemption u/s 11 - applicability of the principle of mutuality - holding of exhibitions and organising of seminars - As per the assessee, the income from members is non-taxable not u/s 11 of the Act but the same is not taxable as per the principle of mutuality. An activity between persons associated together does not give rise to profit which is chargeable to tax, as the members cannot trade with themselves. No person or body of persons can earn profit out of himself or themselves jointly. - AO denied the exemption on the basis of wrong assumption - AT
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Income Tax:
Levy of penalty u/s 271D - violation of the provisions of section 269SS - cash loan received from director - transactions between appellant company and director are in the nature of current account transactions, which does not come under the purview of loan and deposit as per section 269SS of the Act. - No penalty - AT
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Income Tax:
Unexplained expenditure u/s 69C - AO in the course of assessment had made enquiries from the vendors u/s 133(6) and since none of them responded to the same doubted genuineness of the transactions - the AO/DDIT had erred in sending notices / conducting field enquiry at their erstwhile site office at Bangalore, which had since been shut down after completion of the hotel project. - Additions made by the AO is unsustainable - AT
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Income Tax:
Income taxable in India - royalty income - sale of hardware along with software packages - the assessee procures hardware and software packages from other vendors and sells them to third party customers. Therefore, the ownership over copyright lies with the manufacturer and original supplier of software packages and not with the assessee. - CIT(A) rightly deleted the penalty - AT
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Income Tax:
Revision u/s 263 - The principal of the law emanating that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263. In this case the AO has taken one of the possible Legal View. Hence, the Assessment Order is not erroneous and prejudicial to the interest of the revenue. - AT
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Income Tax:
Penalty u/s 271(1)(c) - addition of capital gain u/s 50C - the amount remain to be added [after deducting the initial exemption and consideration] is the only amount added on account of the difference in the stamp duty valuation and the levy of the penalty on that amount is not legal based on the finding of the Bombay High Court we vacate the levy of the penalty - AT
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Customs:
Revocation of Customs Broker License - It is not the case of the department that the documents which were produced by the respondent/customs broker were false and fabricated documents and there is nothing on record to even remotely suggest such an allegation. The Tribunal has rightly held that the obligation of the customs broker under regulation 10(n) does not include keeping a continued surveillance on the client to ensure that he continues to operate from that address and has not changed its operations - HC
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Customs:
The impact of imposing penalty and purpose of reduced penalty not fulfilled - deterring the appellant from repeating the offence - Continued violation of policy conditions - The Tribunal in the earlier cases had reduced the redemption fine and personal penalty by 90%. - It is noticed from the pattern of continuing violation that the redemption fine and penalty imposed earlier are not discouraging the repeat of offence. It is seen that the appellants continue to violate the import policy in respect of Minimum Import Price with impunity. - AT
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Customs:
Classification of goods cleared from SEZ - plastic stickers - restricted goods or not - In the present case the CIPET report clearly states that the goods i.e. Plastic Stickers are not hazardous in the nature. This also strengthen the case of the appellant that the goods is neither restricted nor prohibited. Hence, the entire case of the department fails. - AT
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Customs:
Confiscation of Gold bar with an option to pay redemption fine - absolute confiscation of currency - the Department has not shown any proof that the seized cash was sale proceeds of smuggled gold and thus confiscation under Section 121 Customs Act is unsustainable, more so since the appellant’s Books of Accounts clearly reflect that this was part of his Cash in Hand and had been received from legitimate sources. - AT
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Customs:
Levy of penalty on CHA and Clearing and forwarding agents - Role restricted to filing of the documents -The contention of the Appellants agreed upon that they cannot be held responsible for over invoicing if any, done by the exporter for the purpose of getting excess drawback. - AT
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Customs:
Demand of Customs Duty foregone - Non-fulfilment of export obligation - non-submission of bank realization certificate to the Appellant - It is a settled position in law that a new condition which does not form part of the Notification cannot be introduced through a Circular. Accordingly they contended that the demand of duty from them is against the conditions of the notification. - AT
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Customs:
Import of old and used parts of plate leveler machines - requirement of possession of valid licence for import - The goods are admittedly of ‘1942 vintage’ and it is seen that paragraph 2.31 of the Foreign Trade Policy restricts ‘second hand goods other than capital goods’ and, as it is not the case of customs authorities that these are not ‘capital goods’, the impugned goods would be freely importable. Consequently, confiscation under section 111(d) of Customs Act, 1962 lacks authority of law. - AT
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PMLA:
Money Laundering - power to arrest - The department, after issuance of summons, in such a case, could not have arrested the respondent unless warrants were issued by the learned Special Court on requisite grounds. The exercise of power of arrest by the department was totally unjustifiable. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2023 (10) TMI 863
Penalty order u/s 129(3) - Stock transfer - non-filling up of Part B of e-way bill - Bonafide intention - HELD THAT:- The specific point was raised before the authority also, but the authority failed to consider the same. Since the respondents have utterly failed to show any intention to evade payment of tax in the present case, the impugned order cannot be justified. Since the goods in question were stock transfer from one Unit to another within the State of Uttar Pradesh (Agra to Mathura) and in absence of any provision being pointed out by the learned ACSC or any authority below that the goods (stock transfer) in transit were liable for payment of tax, no evasion of tax could be attributed to the goods in question. Once there was no intention to evade payment of tax, the entire proceedings initiated against the petitioner are vitiated and are liable to be set aside. The order passed by the Additional Commissioner, Grade 2 (Appeal), State Tax, Mathura as well as the order passed by the Assistant Commissioner, State Tax, Mobile Squad, Unit 4, Mathura cannot be sustained in law and the same are hereby quashed - Petition allowed.
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2023 (10) TMI 862
Transfer of TDS from Pre-GST era to Post-GST era - HELD THAT:- The present issue is with regard to the transfer of TDS from Pre-GST era to Post-GST era has been settled by virtue of an order passed by this Court in a batch of writ petition in M/S. DMR CONSTRUCTIONS VERSUS THE ASSISTANT COMMISSIONER, COMMERCIAL TAX DEPARTMENT, RASIPURAM, NAMAKKAL DISTRICT. [ 2021 (4) TMI 261 - MADRAS HIGH COURT ], wherein, it has been categorically held that the Assessee is entitled for transfer of TDS from Pre-GST era to Post-GST era. This Court feels that issuing the impugned show cause notice by denying the transfer of TDS from the pre-GST era to post-GST era is illegal and the same is contrary to the law laid down by this Court. This Court is inclined to quash the impugned show cause notice dated 29.09.2023 and accordingly, the said show cause notice is quashed - Petition allowed.
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2023 (10) TMI 861
Blocking of petitioner s input tax credit (ITC) - blocking on the ground that the petitioner had availed such input tax credit fraudulently during the period from 2021-22 and 2022-23 and the same was apparent from the records - HELD THAT:- On a cumulative reading of the statutory scheme as brought about by these provisions and rules, such provisions as conferring powers on the State Officers under the CGST Act are required to be read harmoniously. It cannot be conceived that the intention in framing Rule 86-A of the CGST Rules would be to denude the powers which are conferred on the State Tax Officer to exercise powers under Rule 86A as permitted by Section 5 of the MGST Act read with a clear authorization under Section 6 of the CGST Act. The State tax officer have the jurisdiction to pass the impugned order invoking Rule 86-A of the CGST Rules. The order as passed by the State Tax Officer is neither in consonance with the observations as made by the very officer in the impugned order providing for an opportunity to the petitioner to make out a case against such blocking of input tax credit, as also the same would be contrary to the provisions of Rule 86-A (2) of the CGST / MGST Rules, which itself provides that the Commissioner or the Officer authorized by him under sub-rule (1) may, upon being satisfied that conditions for disallowing debit of electronic credit ledger, no longer exist, allow such debit - Sub-rule (2) of Rule 86-A therefore certainly provides for a window or an opportunity available to the assessee to make out a case against the action of the department to disallow the benefit of credit to the assessee. The order dated 10 April, 2023 passed by the State Tax officer, being roznama order, rejecting the petitioner s objection is quashed and set aside - Petition disposed off.
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2023 (10) TMI 860
Refund claim - rejection on the ground that they were barred by limitation - HELD THAT:- The impugned order was passed without considering the aforesaid order passed by the Hon ble Supreme Court as well as the notification dated 05.07.2022 issued by the Department, wherein it has been stated the period from 01.03.2020 to 28.02.2022 shall be excluded for computation of period of limitation for the purpose of filing refund application under Section 54 of the Act. This Court is inclined to set aside the impugned order passed by the first respondent and further, the second respondent is directed to process the revised refund applications filed by the petitioner and pass appropriate orders by taking into consideration of the order passed by the Supreme Court and the aforesaid notification issued by the Department, within a period of 30 days from the date of receipt of copy of this order after providing the opportunity to the petitioner. Petition disposed off.
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2023 (10) TMI 859
Input Tax Credit (ITC) - Period of limitation u/s 16(4) - The Petitioner has filed writ petition challenging the show cause notices in DRC-01s issued by both Central tax and State tax authorities for denial of input tax credit availed on reverse charge basis by relying on Section 16(4) of the CGST Act. After the decision of Supreme Court in the case of Northern Opertaing Systems, the Petitioner discharged IGST on the payments made to seconded employees/ related entities and availed input tax credit of the IGST paid. The Tax Department sought to deny the input tax credit by applying the time limit under Section 16(4) of the CGST Act, besides demanding interest and penalty. The Department also sought to demand interest for delayed payment of IGST. The Petitioner inter alia contested the applicability of Section 16(4) of the CGST Act to reverse charge payments made by recepient of taxable supply. The Hon ble High Court has in the attached Order granted stay of adjudication of the show cause notices in DRC-01s issued by the Central tax and State tax authorities.
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2023 (10) TMI 858
Attachment of petitioner's Bank Account - discrepancies in the ITC availed under the returns - opportunity of being heard not provided to petitioner - violation of principles of natural justice - HELD THAT:- This petition is disposed of by binding down the respondents to the statement made on its behalf that is the appeal preferred by the petitioner would be taken up on 19.10.2023 and petitioner s bank account (A/c no. 26090200007725) maintained with the Bank of Baroda will be defreezed. It is accordingly, directed that the concerned bank (Bank of Baroda) shall not interdict the operation of the bank accounts on the basis of the freezing order dated 23.06.2023 passed under Section 83 of the GST Act. Petition disposed off.
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2023 (10) TMI 857
Extension of attachment of bank accounts of petitioner - no attachment order, currently operative - whether the respondents can, by issuing the repeated orders under Section 83(1) of the CGST Act, extend the provisional attachment of the assets of the tax payer indefinitely? HELD THAT:- It is not considered necessary to examine the said question since the third order (order dated 08.08.2022) passed under Section 83 of the CGST Act is also no longer operative. The learned counsel for the respondents state that there is no order for provisional attachment of the petitioner s bank account, which is currently operative - Thus, the petitioner s grievance regarding the provisional attachment of his bank accounts does not survive. The present petition is disposed of by directing that the concerned bank shall not interdict the operation of the petitioner s bank accounts [Account no. 04821000052381, 4821100050746 and 4821100050709] on the basis of the order dated 08.08.2022 or any other order passed by the GST Authorities prior to the said date.
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2023 (10) TMI 856
Jurisdiction - proper officer to issue summons and conduct inquiry - Seeking direction for inquiry to be proceeded with and summons issued by the other, directed to be stayed till the conclusion of the first of such initiated proceedings - inquiry conducted by a 'Proper Officer' as authorized under the Act, who is entitled to proceed under both the State and Central Goods and Services Tax enactments - Revenue seeks for continuation of the proceedings initiated by the various authorities. HELD THAT:- In the present case, there are, at present, proceedings initiated by the State Tax Authorities and the Central Tax Authorities and as we noticed, the first of such proceedings was initiated by the Central Tax Authority, having issued summons under Section 70 of the CGST Act. The proceeding issued by the Central Tax Authority is for the assessment years 2017-18 to 2021-22 while the State Tax Authority has initiated audit for the year 2017-18. In the present case, however, the proceedings are with respect to the same assessee and the proceedings initiated under the SGST Act is for a financial year for which proceedings have already been initiated by the 'Proper Officer' under the CGST Act. In such circumstances, going by Section 6, it is only proper that the State Tax Authority does not continue the proceeding and keep it in abeyance till the Central Tax Authority completes the proceedings, first initiated - hence it is directed that the proceedings to be continued as seen from Annexure-2 and 3, which was initiated by a summons under Section 70 of the CGST Act, 2017, as early as on 07.07.2021. The proceedings as initiated against Annexure-1 dated 04.02.2022 by the State Tax Authority, is at the notice stage and with respect to one of the years on which the Central Tax Authority has already initiated proceedings. Annexure-1, hence, shall be kept in abeyance. Petition allowed.
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2023 (10) TMI 855
Time limitation for filing Petition - petition filed beyond statutory period of limitation - HELD THAT:- The Hon'ble Supreme Court in Assistant Commissioner (CT) LTU, Kakinada and others Vs. Glaxo Smith Kline Consumer Health Care Limited, [ 2020 (5) TMI 149 - SUPREME COURT] has held that High Courts cannot entertain the writ petition against assessment orders beyond the period of statutory period - As per the decision of the Hon'ble Supreme Court in Glaxo Smith Kline Consumer Health Care Limited, a writ petition beyond the statutory period of limitation is not maintainable and is liable to be dismissed. Since these writ petitions have been filed beyond the statutory period of limitation prescribed under Section 107 of the Respective GST Act Enactment of 2017 for filing statutory appeal they are liable to be dismissed. Reading of the impugned orders also indicates that the tax liability determined is the net liability after adjustment of ITC in GSTR- 2A. Therefore, even on this count there is no case made out for interfering with the Impugned Assessment Orders. Petition dismissed.
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2023 (10) TMI 854
Levy of interest - Utilisation of amount of Rs. 21,13,354/- from the excess Input Tax Credit (ITC) taken - imposition of equal penalty. Whether the petitioner was proved to have utilized an amount of Rs. 21,13,354/- out of the amount which was entered out of the excess ITC amount to the tune of Rs. 12,65,20,827/- in its electronic credit ledger as observed by respondent No. 4? HELD THAT:- From a purposeful reading of the provisions underlying Section 50 of the CGST Act, the legislation intent that stands reflected is that where an ITC/cenvat credit is wrongfully reflected in electronic ledger, the same itself is not sufficient to draw penal proceedings until the same or any part of such ITC is put to use so as to become recoverable and if such cenvat credit is reversed before utilization, then even the demand of interest and penalty cannot be said to be tenable. In this regard, we place reliance upon Jagatjit Industries Ltd. s case [ 2010 (12) TMI 765 - PUNJAB HARYANA HIGH COURT] , wherein a Bench of this Court had held that where the cenvat credit was wrongly availed and was reversed before utilizing the same, there was no justification for demand of interest and upon Grasim Bhiwani Textile Ltd. s case [ 2018 (6) TMI 43 - PUNJAB AND HARYANA HIGH COURT] , wherein a Coordinate Bench of this Court was dealing with a similar question in a case under Central Excise Act, 1944. The assessee had been availing credit of service tax paid on input service. On a perusal of Annexure P-5 which is extract of electronic credit ledger during the period from August 2017 till December 2018, it is revealed that an amount of Rs. 14,05,78,663/- was entered as amount of ITC accrued through inputs as in August 2017. As on that date, an amount of Rs. 81,95,564/- was already lying as balance ITC. It is also revealed that during the month of August 2017, the petitioner had central tax liability of Rs. 1,61,71,190/- which it discharged using its ITC and thereafter a balance of Rs. 13,26,03,037/- was reflected as balance ITC during the month of August 2017. Meaning thereby that the petitioner did not utilize the excess ITC of Rs. 12,65,20,827/- during the month of August 2017. Similarly, till August 2018, the balance of ITC available in the electronic credit ledger of the petitioner was never below the sum of Rs. 12,65,20,827/- which shows that till August 2018 when the petitioner reversed the excess ITC amount, it had never utilized the same. Once it was proved that the amount of excess ITC though entered in the ledger in excess, was never utilized by the petitioner and since it was reversed prior to utilizing, therefore, in view of the ratio of law as laid down in Jagatjit Industries Ltd. s case, Grasim Bhiwani Textile Ltd. s case, the demand of interest as well as penalty was not at all tenable and the petitioner could not be burdened with the same. The impugned order dated 29.04.2022 is set aside and it is held that the petitioner was not liable to pay the amount of interest or penalty on the excess ITC wrongly entered by it in its electronic credit ledger for the relevant period - Appeal allowed.
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2023 (10) TMI 853
Validity of GST registration certificate granted w.e.f 1.6.2018 instead of with retrospective effect i.e. 1.7.2017 - Whereas GST liability confirmed w.e.f. 1.7.2017 - Condition (no 4) of foregoing the benefit of Input Tax Credit (ITC) for the period prior to 1.6.2018 - HELD THAT:- The petitioner is ready and willing to comply with the conditions in the impugned notice. However, the petitioner expressed his difficulty to comply with the 4th condition to forgo the Input Tax Credit. The reason stated in the impugned order is that the validity is being granted retrospectively, then the petitioner ought to forgo. It is seen that the petitioner is already as assessee under VAT. The petitioner is seeking to migrate from VAT to GST. Input Tax Credit is available in VAT regime also. In such circumstances the petitioner would have the details and evidence to substantiate his claim of Input Tax Credit and there cannot be difficulty to avail Input Tax credit for the said period. Therefore, the impugned order directing to forego Input Tax Credit is unreasonable and cannot be sustained and the same is liable to be quashed. The impugned order is hereby quashed as far as the 4th condition is concerned. The petitioner shall furnish the details as stated in other conditions and thereafter the respondents shall consider the application for migration. The Input Tax Credit shall be granted based on the details and evidence that would be submitted by the petitioner. Petition allowed.
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Income Tax
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2023 (10) TMI 852
Deduction u/s 80IB - some of the flats constructed in Tower A of its housing project had exceeded the area of 1000 sq.ft. - structural changes noticed in the building as on the date of survey - as decided by HC [ 2022 (11) TMI 1303 - BOMBAY HIGH COURT] conclusions drawn by the CIT (Appeals) based on the material on record goes to show that the view expressed and subsequently upheld by the Tribunal cannot be in any way said to be a view or a conclusion which is perverse. The question essentially involved in the case, which had to be established beyond any doubt by the Revenue, ought to have been that the respondent had not only built but also sold the residential units, in respect of which the benefit of 100% deduction was claimed with an area of more than 1000 sq.ft., which only then could have justified the action of the Revenue in denying the benefit of 100% deduction under the said provision, but in the present case, however, the revenue has failed to establish that fact. HELD THAT:- SLP dismissed.
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2023 (10) TMI 851
Exemption u/s 10(23C)(iv)/11/12 - whether activities of the respondent/assessee do not qualify for charitable purpose in view of the Proviso to Sec 2(15)? - as decided by HC [ 2022 (1) TMI 544 - DELHI HIGH COURT] mandamus is issued to the respondent to grant approval to the petitioner u/s 10(23C)(iv) -- HELD THAT:- Special leave petition is dismissed on the ground of delay.
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2023 (10) TMI 850
Validity of scrutiny assessment - timeline within which the assessment has to be concluded - disallowance of bad debts/advances written off and under Section 14A - claims for refund - HELD THAT:- ITAT has directed the AO to consider the question of disallowance for bad debts/advances being written off and u/s 14A of the IT Act permitting the petitioner to produce further documents, and directing the AO to extend an opportunity of hearing to the petitioner and decide on the afore in the light of the judicial pronouncements. This order is common to all the three subject assessment years, and in fact, it is in view of the ITAT s similar order for the previous assessment years. This Court, in view of the above, can only conclude that it is indubitable that the ITAT s common order do not set aside or cancel the subject assessment orders requiring a fresh assessment. The first question is answered accordingly. As apparent that the respondents have issued the impugned notices after the petitioner s applications dated 29.10.2020 as they were of the opinion that they could give effect to the ITAT s orders dated 31.03.2015, but the respondents, consequent to this Court s conclusion that the time for the AO to consider the question of disallowance of the claims of bad debts/ advances written off and under Section 14A of the IT Act stand lapsed as of 31.03.2017, must consider the petitioner s representation dated 29.11.2020 for refund. ORDER [A] The petitions are allowed in part and the impugned notices dated 05.11.2020 and 06.11.2020 are quashed on the ground that they are issued after 31.03.2017 which would be impermissible because of the provisions of Section 153[7] of the Income Tax Act, 1961 as amended by the Finance Act 2016. [B] The respondents are directed to consider the petitioner s representations for refund along with interest in the light of the decision of Shelly Products [ 2003 (5) TMI 4 - SUPREME COURT] The respondents shall so consider the representations within a period of 3 [three] months from the date of receipt of a certified copy of this order.
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2023 (10) TMI 849
Revision u/s 263 - gain / loss on sale of property - Correct head of income - treatment of income from Capital Gain as Income from Business by PCIT - HELD THAT:- The assessee has sub-divided the land into parts to fetch a higher market price on the sale of the same and at the same time the Revenue also could not bring on record any evidence to prove that the assessee held the capital asset as stock in trade and the purchase and sale of property was with a view to earn profits through trading transactions. AO after making necessary enquiries and thorough examination / verification of the documents and the computation statement submitted by the assessee accepted the net long term capital gains offered by the assessee in his revised return of income. Further, it is noted that the Ld. Pr. CIT ought to change the character of the income i.e., from capital gains to business income As in the case of CIT vs. Kasturi Estates (P) Ltd [ 1965 (10) TMI 7 - MADRAS HIGH COURT] has clearly held that when the asset is held as a capital asset by the assessee, where the intention of the assessee is to derive higher profits by dividing it into plots cannot alter the nature of income earned by the assessee. Also relying on the case of A. Mohammed Mohideen [ 1988 (11) TMI 95 - MADRAS HIGH COURT] and also SNF (India) Pvt Ltd [ 2023 (6) TMI 219 - ITAT VISAKHAPATNAM] we are of the considered opinion that the direction given by the Ld. Pr. CIT to the Ld. AO to re-do the assessment by invoking the provisions of section 263 of the Act is not in sustainable in law. As assessee is not engaged in systematic series of transactions of purchase and sale of land but, however has divided the land into plots only to derive higher profits in the nature of capital gains and has offered the same while filing the revised return of income which was also not disputed by the Ld. AO. Appeal of the assessee is allowed.
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2023 (10) TMI 848
Exemption u/s 11 - application for registration u/s. 12AB rejected - assessee society was maintaining two types of audit reports for each year - HELD THAT:- It is a matter of fact borne from the record that the assessee society on being queried about the expenses incurred in relation to the activities which were claimed to have been carried out by it, had come forth with two audit reports of the assessee society for F.Y 2019-20 to F.Y 2021-22. It is absolutely incomprehensible and a matter of serious concern as to how two sets of audit reports, which, as observed by the CIT(Exemption), revealed a glaring mismatch in the total income and expenditure, had been filed by the assessee society in the course of the proceedings before him. We are of a strong conviction that as the genuineness of the activities of the assessee society has not been substantiated, no infirmity emerges from the order of the CIT(Exemption), Bhopal, who had rightly declined its application for grant of registration u/s. 12AB - CIT(Exemption) rightly declined the application filed by the assessee society for grant of registration u/s. 12AB - Decided against assessee.
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2023 (10) TMI 847
Rectification u/s 154 - charging of tax rate at 30% on the total income of the appellant - HELD THAT:- As turnover of the appellant assessee during the previous year which is more than 50 crores, therefore CIT(A) was justified in confirming the applicable tax rate in respect of the appellant assessee @ 30% for the relevant assessment year 2018-19. Assessee s claim cannot be considered to be an apparent error on record to exercise the rectification powers u/s 154 of the Act because in the present case to exercise such powers, it would be required to recompute the turnover of the appellant assessee by disproving the turnover shown in column no. 4 of the copy of form 3CA and form 3CD for AY 2018-19. No infirmity and perversity in the order of the ld. CIT(A) to the facts on record in confirming the rectification order passed u/s 154 by the Assessing Officer, in rejecting the claim of the appellant. Decided against assessee.
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2023 (10) TMI 846
Revision u/s 263 - Addition u/s 68 - As per CIT AO passed a cryptic order accepting the returned income as nil as per declaration of assessee - as alleged no enquiries whatsoever had been found to have been made in respect of the identity, creditworthiness and genuineness of the loans and advances - HELD THAT:- AO has passed a very brief and cryptic order. However, in the body of the order he has mentioned that specific query were raised regarding two issues viz. (i) large increase of unsecured loan during the year and low income in compression to high amounts of loan, advances and investment in shares and noted that in response to notices AR of assessee attending proceedings and after taking on record necessary details, explanation and evidences returned income at Nil was accepted. We are unable to see any endeavour exercise by the AO regarding verification, examination and adjudication of both the issues were picked up for scrutiny assessment proceedings even from the statement of facts we are unable to see details of any notice either u/s. 142(1) or any other provisions of the Act except notices dated 19.09.2017 u/s. 133(6) of the Act to sister concerns (2) of assessee. Even despite service of notice the assessee is not representing and perusing his case before this Tribunal. AO accepted returned income of assessee without any verification and examination of both the issues therefore it is a clear case of inadequate and insufficient enquiry. PCIT was quite justified and correct in alleging the assessment order as erroneous and prejudicial to the interest of revenue by following the preposition rendered in the case of Shri Amitabh Bachhan [ 2016 (5) TMI 493 - SUPREME COURT] . Decided against assessee.
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2023 (10) TMI 845
TP Adjustment - payment of technical knowhow fees - benchmarking of the transaction - HELD THAT:- As assessee substantiated that for carrying out business of the assessee, and as assessee is part of MNE, which is providing such services worldwide, to remain in sync with that, the assessee would have needed the identical platform, structure. The services provided by the associated enterprises are supported with the agreement wherein the identified obligations and rights of the parties are crystallized along with the remuneration structure. As the intra-group services availed by the assessee is intertwined in each of the activities of the assessee, apparently, the assessee has received those services. Had these intragroup services not availed by the assessee, the assessee has shown that it would not have received the financial benefit and operational benefit that it has received. Further, when the assessee was not earning profit, even after provision of these services, no amount was charged by the associated enterprises. Benchmarking of the transaction - The assessee has benchmarked using the transactional net margin method computed is not rocket margin at 9.47%, which is found to be, higher than the arithmetic mean of net profit margin of comparable companies. Against this, the learned transfer-pricing officer has adopted the other method and computed the arm s-length price of this international transaction at nil. Further, when the issue reached before the learned dispute resolution panel, the learned dispute resolution panel abdicated its duty to benchmark the international transaction and merely followed its own direction in earlier years. As the intra-group services utilized by the assessee are supporting the core activities of the assessee, we do not find any infirmity in the assessee adopting transactional net margin method as the most appropriate method. In view of this, we do not find any reason to sustain the transfer pricing adjustment made by the lower authorities. Also perused the orders of the coordinate bench of earlier years wherein the transfer pricing adjustment has been deleted for the single reason that the learned transfer-pricing officer has failed to adopt any of the method as the most appropriate method. However, for this year TPO has adopted the other method as the most appropriate method therefore all those decisions does not have any relevance for deciding the issue for this year. Intragroup services or for that matter any international transaction is required to be benchmarked each year based on the facts and circumstances prevailing in that year considering the economic conditions. Therefore, the findings of the previous year will have only persuasive value, if any, while deciding the transfer pricing adjustment for any year. Incorrect computation of the markup of 3.34% on recovery of expenses by the appellant from its associated enterprises - Assessee has made payment to 3rd parties on behalf of its associated enterprises which are in the nature of airline payments, export facilitation et cetera. The assessee did not benchmark the impugned transaction as it was claimed that it is on cost-to-cost basis - TPO stated that no independent party would have made such payment on behalf of any person and therefore the assessee should have benchmarked this transaction with the margin - HELD THAT:- We find that repeatedly for several assessment years, the coordinate benches have deleted the addition with respect to the markup on reimbursement of expenditure. Naturally, it needs to be tested whether independent party would have incurred these expenditure or not. Because of the concurrent finding by the coordinate benches in assessee s own case for earlier years, we are constrained to take the similar view. In view of this, respectfully following the decision of the coordinate bench, we also direct the learned TPO to delete the above adjustment. Though, the arguments led by the learned departmental representative have some force in that, however even if the alternative argument is accepted of benchmarking this transaction in the transactional net margin method, even then no adjustment could have been made as the assessee has better margins compared to the comparable companies. Interest on dividend distribution liability - DR vehemently stated that the assessee has wrongly mentioned the assessment year therefore, there is no fault on the part of AO in not granting credit of dividend distribution tax paid and accordingly the interest is correctly charged - HELD THAT:- In fact the assessing officer should have passed the draft of the assessment order complete involve respect wherein even the computation of tax should have been made, if that is not made therefore such issue has arisen. However, in the present case it has happened due to the mentioning of the wrong assessment year by the assessee. In view of this we set-aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to 1st get the assessment year corrected in the challan and then learned assessing officer should grant credit of the same. There is no claim with respect to the interest under section 234C though mentioned in ground number 5. Accordingly, ground number 5 of the appeal of the assessee with respect to dividend distribution tax is allowed with above direction. Short grant of tax deducted at source - As this issue was not before the learned assessing officer at the time of passing of the draft assessment order, we restore this issue back to the file of the learned assessing officer with a direction to the assessee to reconcile form number 26AS with the tax return, the learned assessing officer after verification may grant the due credit to the assessee of tax deduction at source
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2023 (10) TMI 844
Reopening of assessment u/s 147 - Addition u/s 68 - unexplained gifts - HELD THAT:- Reasons recorded for reopening of the assessee s case are insufficient, vague, un-corroborative to form a belief that the income had escaped assessment as there was no link between the tangible materials and the formation of belief of the Assessing Officer that the income had escaped assessment. Thus, the reassessment made u/s 143(3) read with section 147 of the Act based on such reasons is bad in law and accordingly, the reassessment is quashed. Unexplained gifts - As observed that in the course of reassessment proceedings the AO recorded statement of both father in law and mother in law who have also confirmed the gifts given to the assessee who is the husband of their only daughter. However, this was disbelieved by the AO as there were some discrepancies in the gift deeds for which the assessee filed affidavits from the donors before the CIT(A) which were totally ignored by him. AO never denied that the father in law and mother in law of the assessee were not in possession of agricultural land of 6.5 acres - since the donors of the gifts are closely related to the assessee being father in law and mother in law and the sources were also explained the gifts cannot be disbelieved. Appeal of assessee allowed.
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2023 (10) TMI 843
Estimation of Profit/Section 40A(2)(b) - JV entered - AO had made disallowance by opining that the assessee JV should have earned income from sub-contracting - AO had formed a view that the assessee JV had suppressed its profit by making excessive payment to TPPL - to work out the amount to be disallowed u/s 40A(2)(b), the AO had applied the net profit rate of 8% on the Sub-Contract Expenses (net) - CIT(A) had observed that the net profit in the case of TPPL was 3.78% and formed a view that profit in the hands of the assessee JV should also be calculated by applying such rate of 3.78% - HELD THAT:- We find that the section 40A(2)(b) has no application to income aspect of the assessee JV in the facts of the instant case. The AO has not brought any comparable figures to disallow the expenditure, moreover with the structuring of the JV provisions of Section 40A(2)(b) are not attracted in the given facts and circumstances of the instant case. Reliance as placed on the judgment of Oriental Structural Engineers [ 2015 (3) TMI 102 - DELHI HIGH COURT] wherein it was held dismissing the appeals, that the concurrent findings were that the joint venture was formed only to secure the contract, in terms of which the scope of each joint venture partner's task was distinctly outlined. Further, the entire work was split between the two joint venture partners, they completed the task through sub-contracts and were responsible for the satisfaction of the National Highways Authority of India. Therefore, the Tribunal did not fall into error of law, in holding that the joint venture was not an association of persons liable to be taxed on that basis. Hence, we hold that the AO has fallen into error in determining the profit @ 8% and also invoking the provisions of Section 40A(2)(b) and the ld. CIT(A) has also erred in determining the profit of the assessee @ 3.78% equal to the profit of one of the parties to the JV. Penalty u/s 271G - AO held that the assessee has failed to maintain the required documents as per the provisions of Section 92B with Rule 10 of the I.T. Rules, 1962 - HELD THAT:- Since neither the AO (during the course of assessment proceedings) nor the ld. CIT (A) during the course of appellate proceedings had required the assessee to furnish any specific information or document in terms of section 92D(3), there was reasonable cause for the said failure, if at all any, inadvertently occurred on the part of the assessee. Hence keeping into consideration, the provisions of section 273B and the judgments of Leroy Somer and Controls (India) Pvt. Ltd [ 2013 (9) TMI 761 - DELHI HIGH COURT] and Hindustan Steel Ltd. Vs. State of Orissa [ 1969 (8) TMI 31 - SUPREME COURT] we hold that the penalty imposed u/s 271G be deleted. Appeals of the assessee are allowed.
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2023 (10) TMI 842
Income from house property - consider the Ambey Valley property as self-occupied property - AO rejected claim as it was not made in the original return of income - CIT(A) denied the claim as the claim was made during the assessment proceedings and not part of the return of income - HELD THAT:- We find that during the course of assessment proceedings the assessee has revised computation of income where by the claim of the assessee was changed by withdrawing the amount offered under the income of house property and claiming Ambey Valley property as self-occupied property. AO held that as there was no claim by filling revised income, it was not entertained. On appeal before ld. CIT (A) the issue arose about allowbility of same claim but CIT(A) has held that the ground no. 1 of the appeal of the assessee is partly allowed. Ground no. 1.1 and 1.2 are with respect to considering Ambey Valley property as self occupied property and ground no. 1.3 is determining deemed annual value of the house property at the rate of 7%. CIT(A) has upheld that the 7% of cost of property as annual value taxable u/s 23, against the assessee and therefore only others ground are which are allowed by him. There is no reason given by him. Therefore, we restore ground back to the file of Ld. CIT(A) to give clear cut reason and finding that whether the claim of the assessee of considering Ambey Valley property as self-occupied property u/s 23(2) of the Act is allowable or not. Addition u/s 68 - claim of the assessee is that in the original return of income sale consideration was wrongly shown of ₹150,40,800/- whereas it is claimed by the assessee that property is sold at ₹ 78 lacs only, the market value of the property was stated to be ₹ 94,43,000/- - HELD THAT:- As the sale agreement produced before us along with the revised computation shows that the sale consideration of the flat as Rs. 78 lacs whereas market value of flat is Rs. 94,43,000/-. We set aside this issue to the file of the Ld. CIT(A) also where the assessee is directed to substantiate that actual sale consideration received in his books of account is only ₹ 78 lacs and there is no credit of ₹ 1,15,00,000/- as mentioned in the computation of total income filed with original return of income and thus there cannot be any addition u/s 68 of the Act as above sum was not mentioned in books of account. Accordingly, the ground no.3 of the appeal is allowed with above direction. Appeal filed by the assessee is partly allowed for statistical purposes
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2023 (10) TMI 841
Assessment order u/s 153C without mentioning DIN - Whether curable defect? - HELD THAT:- Assessment order without DIN number and without any mention regarding non generation of DIN number in the body of assessment order is not a curable defect which can be removed or rectified by way of subsequent generation of DIN number on 14.01.2022. Therefore respectfully following case of PCIT vs. M/s. Tata Medical Centre Trust [ 2022 (7) TMI 1334 - ITAT KOLKATA] and Abhimanyu Chaturvedi [ 2023 (8) TMI 378 - ITAT DELHI] we hold that the impugned assessment order is non-est in the eyes of law being passed without complying with the binding circular of CBDT dated 14.08.2019 - Assessee appeal allowed.
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2023 (10) TMI 840
Exemption u/s 11 - income from holding of exhibitions and organising of seminars arising from participation by non-members - applicability of the principle of mutuality in respect of income from members - differential treatment of income from non-members and members by the assessee - HELD THAT:- As there is no dispute as regards the income from non-members, letting out of exhibitions centre, and the income derived from investments, which have already been offered to tax by the assessee. AO only disagreed with the contention of the assessee that income from members in respect of holding exhibitions and organising seminars is not taxable on the principle of mutuality. As per the AO, complete identity between the contributor and participators ceases to exist when the same type of services are provided to members and non-members. As per the assessee, since it is an association to protect the machine tool industry engaged in the manufacture and trade in machine tools, small tools, cutting tools, etc., therefore number of persons combine together and contribute to a common fund for a common venture or the object. The surplus from activities by those persons cannot be regarded in any sense as profit. As per the assessee, the income from members is non-taxable not u/s 11 of the Act but the same is not taxable as per the principle of mutuality. An activity between persons associated together does not give rise to profit which is chargeable to tax, as the members cannot trade with themselves. No person or body of persons can earn profit out of himself or themselves jointly. We find from the Memorandum of Association that it was also resolved that upon winding up or dissolution of the assessee if any property whatsoever remains then the same shall not be distributed amongst the members of the assessee but shall be given or transferred to such other association having similar objects. On the basis of the principle of mutuality, the income earned from members in respect of holding seminars, exhibitions, and other activities is not taxable. Accordingly, the plea of the assessee regarding the non-taxability of receipts from members is upheld on the basis of the principle of maturity. Since the AO on the erroneous assumption that the assessee has claimed exemption under section 11 of the Act treated the income from members to be of the same category as income from non-members and taxed the same and the details as provided on page 26 of the paper book regarding bifurcations of income and expenditure amongst members and non-members were not examined during the assessment proceedings, therefore we direct the AO to examine the allocation of income and expenditure amongst members and non-members as submitted by the assessee and grant the relief to the assessee to the extent the income is earned from the members in light of the principle of mutuality. As a result, the grounds raised by the Revenue are partly allowed for statistical purposes. As we have accepted the plea of the assessee regarding the applicability of the principle of mutuality with respect to income earned from members, we deem it appropriate to restore the issues raised in assessee s appeal to the file of AO for de novo adjudication, since the assessee has been found to not have claimed exemption under section 11 of the Act
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2023 (10) TMI 839
Levy of penalty u/s 271D - violation of the provisions of section 269SS - Cash loan received from director - assessee had received loans in cash in excess of Rs. 20,000/- otherwise than by Account payee Cheque/Bank Draft - HELD THAT:- It is not a loan from public, but amount received from director to meet the business exigencies. We are of the considered view that transactions between appellant company and director are in the nature of current account transactions, which does not come under the purview of loan and deposit as per section 269SS of the Act. Therefore, we are of the considered view that the Assessing Officer is erred in levying penalty u/s. 271D - Appeal filed by the assessee is allowed.
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2023 (10) TMI 838
Assessment u/s 153A - bogus purchases - group has routed its own unaccounted money in the books through bogus profits shown in the unit at Jammu and claimed 100% deduction on such profits u/s 80-IB - whether during the search any incriminating material was seized and which has been relied at the time of assessment but which has been wrongly left out of consideration by CIT(Appeals)? Whether the AO was able to establish that there was no manufacturing activity in the units of the assessee companies? - HELD THAT:- It comes up from the order of AO that primarily he relied on the Central Excise Department s Investigation and findings, which were made basis to conclude that assessee companies were involved in booking bogus purchases through various persons/parties which were found to be non-existing. However, what is material is that the order of learned AO is dated 31.03.2016 and on 5.12.2018 the CESTAT in its order has accepted the claim of the assessee companies that they were engaged into genuine purchases and manufacturing activities by holding that the allegations are based only on assumptions and presumptions and it cannot be held that appellants had not manufactured the goods during the impugned period. There is no force in the contention of learned DR that the subsequent inquiries made during assessment proceedings can be considered falling in category of seized or incriminating material found during search, so as to validate the assessment u/s 153A . The subsequent proceedings are only of corroborative nature and may be considered relevant to be one for the purpose of ascertaining the extent of evasion. However, the preliminary piece of evidence would be the one allegedly found during the search which in the case of the appellants was only the statement of Manoj Jain and Sanjiv Jain, which too stood retracted. The Bench is of the considered view that the subsequent finding of the CESTAT were fatal to the case made by Ld. AO. The order of ld. CIT(A) requires no interference. Decided against Revenue.
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2023 (10) TMI 837
Unexplained expenditure u/s 69C - AO in the course of assessment had made enquiries from the vendors u/s 133(6) and since none of them responded to the same doubted genuineness of the transactions - whether the documents/evidences furnished by the assessee/vendor were sufficient to substantiate the genuineness of the payments? - HELD THAT:- There were no immediate cash withdrawals from the bank account, which would otherwise raise suspicion. As far as non-compliance of summons is concerned, we note that, the documents furnished by the vendor clearly showed that their registered office was at Delhi and that they did not have any corporate/branch office in Bangalore. We thus find force in the Ld. AR s contention that the AO/DDIT had erred in sending notices / conducting field enquiry at their erstwhile site office at Bangalore, which had since been shut down after completion of the hotel project. On these given facts therefore, we find that the reasons for non-service of notice issued to the vendor s Bangalore site office stood explained. For the reasons as discussed in the foregoing, we accordingly hold that the lower authorities were unjustified in doubting the genuineness of the payments so made by the assessee. We hold that the payments made by the assessee to the six (6) vendors in question were genuine and the disallowances u/s 69C made by the AO in this regard is held to be unsustainable. Disallowance u/s 14A r/with Rule 8D both while computing income under normal provisions and book profit u/s 115JB - HELD THAT:- As relying own case [ 2021 (1) TMI 1134 - ITAT MUMBAI] since the assessee did not earn any exempt income during the relevant year, we do not see any infirmity in the action of the Ld. CIT(A) in having deleted the disallowance made under Section 14A read with Rule 8D(2). Thus as the assessee did not earn any exempt income during the relevant year, we uphold the action of Ld. CIT(A) deleting the disallowance made by the AO u/s 14A of the Act, both while computing income under normal provisions and book profit u/s 115JB of the Act. Deemed rental income - taxed by the AO under the head Income from House Property in relation to the unsold units held - HELD THAT:- AO is noted to have estimated the notional income by relying on the decision of the CIT vs Ansal Housing Finance and Leasing Company Limited [ 2012 (11) TMI 323 - DELHI HIGH COURT] We note that the coordinate Bench in the case of DCIT v. M/s. Inorbit Malls Pvt. Ltd. [ 2022 (10) TMI 1150 - ITAT MUMBAI] has recently examined this particular issue and after considering the jurisprudence available on this subject [which was also relied upon by the Ld. CIT(A) and the assessee before us], has departed from the earlier position and answered the same in favour of the Revenue. Thus we uphold the action of the AO seeking to tax the notional rental income in relation to the vacant unsold units lying as stock-in-trade with the assessee at the end of the relevant AY. Hence, the order of the Ld. CIT(A) to that extent is reversed. Manner of computation of ALV for arriving at the notional rental income assessable u/s 22 23 - HELD THAT:- We agree with the Ld. AR that the economics of real-estate sector, demography, people s lifestyle, infrastructure in urban areas, overall economic scenario was vastly different and hence the estimation exercise undertaken in these decisions cannot be considered as a comparable barometer for the years in question before us. Instead, having regard to the research / survey reports cited by the AR, we find force in the assessee s plea that the rental yield of 8.5% estimated by the AO on the value of the vacant inventory was excessive in today s scenario. As noted from these market research reports, the rental yield of immovable properties in metro cities are generally in the range of 2-3% of the value of investment. We note that, this Tribunal in the case of DCIT Vs Rustomjee Evershine Joint Venture [ 2023 (7) TMI 1305 - ITAT MUMBAI] has also countenanced the Revenue s action of estimating rental yield at 2% of the value of unsold inventory. Having regard to the comparative details of a luxuriously furnished flat, fully furnished flat and bare-shell flat (unsold inventory), we find sufficient force in the Ld. AR s plea that the fair rental rate of the unsold inventories, which were bare-shell accommodation, would indeed be lower than the rental rate of a fully furnished flat i.e. Rs. 147 per sq ft. We find it fit to allow further discount of 40% to the comparative rental rate of a fully furnished flat. According to us, therefore, the fair annual lettable value of the unsold properties for FY 2017-18 would work out to Rs. 88.20 per sq ft [147 X 60%]. We agree with the Ld. AR that this rate has to be further adjusted for inflation/escalation. AO is thus directed to re-compute and assess the gross annual lettable value of the unsold inventory as laid down in the table above. Needless to say, the same shall be further subjected to standard deduction u/s 24(b) of the Act. With these directions, this ground of appeal stands disposed. Revised claim made by the assessee in the return filed u/s 153A - HELD THAT:- Fresh/modified claim in the returns filed u/s 153A of the Act in relation to the abated assessment years Allowed. See ACIT Vs Gigaplex Estate Pvt Ltd [ 2023 (1) TMI 1301 - ITAT MUMBAI] - We uphold the order of the Ld. CIT(A) allowing the revised/modified claim raised by the assessee regarding claim for set-off of brought forward correct losses from AY 2016-17. Coming to the issue of quantification of the brought forward short term capital loss of AY 2016-17 eligible for set-off in AY 2017-18, the AO is directed to re-compute and allow the loss, as finally quantified and allowed to be carried forward in AY 2016-17 upon giving effect to the appellate order/s, in accordance with law.
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2023 (10) TMI 836
Income taxable in India - taxability of amounts received from Indian customers towards sale of hardware along with software packages as royalty income - HELD THAT:- It is a fact on record that the assessee procures the hardware and software packages from non-resident vendors and re-sells them to Indian customers without any value addition, along with, warranty packages. The facts on record clearly reveal that what the assessee has sold to Indian customers is copyrighted articles and not use or right to use of any copyright. This is so because, the assessee procures hardware and software packages from other vendors and sells them to third party customers. Therefore, the ownership over copyright lies with the manufacturer and original supplier of software packages and not with the assessee. Therefore, the ratio laid down in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] will squarely apply to assessee s case.Therefore, we uphold the deletion of additions made on account of royalty income. Receipts from Technical services/service charges received - whether taxable as Fees for Technical Services u/s 9(1)(vii) and Article 12(4) of India- Singpore DTAA ? - assessee is a non-resident corporate entity and a tax resident of Singapore - Undisputedly, though, the AO has not expressed in so many words, however, his observations clearly reveal that he has treated the receipts as FTS by applying Article 12(4)(a) of India-Singapore DTAA, which treats fee received for services which are ancillary and subsidiary to the royalty income as FTS. Once, it is held that the receipts from sale of hardware and software packages are not in the nature of royalty either under the provisions of the Act or under Treaty provisions, the case of the Assessing Officer in treating the service charges as FTS under Article 12(4)(a) of the treaty is bound to fail. Therefore, we uphold the decision of learned first appellate authority in deleting the additions made on account of FTS. Though, learned first appellate authority has recorded his conclusive findings on applicability of Article 12(4)(b) and 12(4)(c) of India-Singapore DTAA to the service charges received by the assessee, however, since the AO has not examined these aspects in the respective assessment orders, we desist from dealing with these issues. However, the issues relating to applicability of Articles 12(4)(b) and 12(4)(c) of India- Singapore DTAA to the service charges are kept open for deliberation if they arise in future in appeals relating to any other assessment years. Revenue appeal dismissed.
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2023 (10) TMI 835
Revision u/s 263 - CIT has opined that AO has also failed to verify assessee s claim of royalty expenses - HELD THAT:- The principal of the law emanating that when two views are legally possible and AO adopts one view the Assessment Order cannot be said to be erroneous for the CIT to invoke jurisdiction u/s 263. In this case the AO has taken one of the possible Legal View. Hence, the Assessment Order is not erroneous and prejudicial to the interest of the revenue. In this case, the ld.Pr.CIT though has discussed in the order u/s. 263 of the Act, the Order of the ITAT for earlier years in the case of the assessee on the impugned issues, errored in taking a divergent view. CIT is a quasi- judicial authority, and hence the ld.Pr.CIT is duty bound to follow the Judicial Precedence. Merely, because the Department has filed an appeal before the Hon ble High Court does not give an authority to the ld.Pr.CIT to take a divergent view. See Union Of India And Others Vs Kamlakshi Finance Corporation [ 1991 (9) TMI 72 - SUPREME COURT] Thus we are of the opinion that the order u/s 263 is not sustainable in law, hence it is set aside. Accordingly, grounds of appeal raised by the assessee are allowed.
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2023 (10) TMI 834
Disallowance u/s 14A r.w.r. 8D - salary of three employees and other overhead expenses estimated by the management to be related to earning of exempt dividend income on units of Mutual Fund - HELD THAT:- The Hon ble Supreme Court has, in the case of South India Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] held that in case own funds of the Assessee are sufficient for making investments, no disallowance is warranted under Section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Since the own funds were sufficient to cover the amount of investments, no disallowance of interest was warranted under Section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Accordingly, disallowance made by the AO u/R 8D(2)(ii) of the Rules is deleted. For the purpose of computing amount of disallowance under Rule 8D(2)(iii) only the investments yielding exempt income should be considered as per the decision of the Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] AO is directed to verify the same and computed the amount of disallowance u/s14A read with Rule 8D(2)(iii) of the Rules after taking into accounts only investments yielding exempt dividend income during the relevant previous year. As rightly contended by Assessee, disallowance under Section 14A of the Act cannot, in any case, exceed the amount of exempt income earned by the Assessee during the relevant previous year as per the judgment of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] . Accordingly, it is clarified that the aggregate amount of disallowance under Section 14A of the Act read with Rule 8D of the Rules shall not exceed the amount of exempt income. Short deduction of investment allowance u/s 32AC - investment allowance pertaining to addition to plant and machinery transferred from capital-work-in progress disallowed - HELD THAT:- As we find that substantial part of the Plant Machinery was acquired and erected after 31.03.2013 but before 01.04.2015. The dispute before us pertains to 2.6% of the total addition to plant and machinery only. Further, the stand taken by the Assessee is supported by the decision of UltraTech Cement Ltd [ 2022 (1) TMI 923 - ITAT MUMBAI] wherein in identical facts and circumstances the deduction for investment allowance was allowed. Therefore, we direct the Assessing Officer to allow investment allowance - Ground raised by the Assessee is allowed. Deduction u/s 80IA(4) - Railway Siding Unit was treated as infrastructure facility by the Assessee - AO concluded that the railway sidings were being used by the Assessee as a private facility and therefore, the same was not in the nature of infrastructure facility of public utility - HELD THAT:- No infirmity in the order passed by the CIT(A) to the extent the CIT(A) holds that the Assessee eligible to claim deduction u/s 80IA(4) in respect of Railway Siding Unit utilised for captive use as per the terms of agreement with Indian Railways, a statutory body designated under the Indian Railways Act, by following the decision of Ultratech Cement Ltd. [ 2017 (12) TMI 1134 - ITAT MUMBAI] As regards the computation of quantum of deduction, we note that the Revenue had contended that the profits of the Railway Siding Units were very high. Since the AO had rejected the claim of the Assessee under Section 80IA of the Act, the issue of computation of deduction was not examined. Accordingly we direct the AO to verify the computation of deduction claimed by the Assessee keeping in view the applicability or otherwise of the provisions of Section 80IA(8)/(10) before allowing claim of deduction u/s 80IA(4) - ground raised by the Revenue are disposed off as partly allowed. Nature of receipts - sale of carbon credits - revenue or capital receipts - AO treated the receipts as revenue receipts and brought the same to tax - HELD THAT:- Both the sides agreed that identical issue was decided in favour of the Assessee by the Tribunal in appeal in the case of the Assessee for the Assessment Year 2015-16 [ 2022 (7) TMI 620 - ITAT MUMBAI] as held sale of Renewable Energy Certificate (Carbon Credit) of income received by the assessee is a capital receipt and could not be business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. Disallowance of common expenses while claiming deduction u/s 80IA - CIT(A) directed the Assessing Officer not to disturb the allocation of travelling and conveyance expenses being convinced that the same have been properly allocated to respective undertakings - HELD THAT:- As identical facts and circumstances, the Kolkata Bench of the Tribunal has, in Assessee s own case for the Assessment Year 2009-10 [ 2018 (8) TMI 2133 - ITAT KOLKATA] as find that legal and profession expenses as well as travelling and conveyance expenses incurred by these undertakings were debited to the stand alone account of these eligible undertakings and hence, no further allocation on account of these items of expenses to the eligible undertakings was warranted. DR was unable to controvert this fact which is evident from the documents on record. We, accordingly, uphold the order of the Ld. CIT(A) on this score.
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2023 (10) TMI 833
Penalty u/s 271(1)(c) - addition of capital gain - addition so made is of the amount being the amount considered for the stamp duty u/s. 50C - HELD THAT:- AO considered the consideration as per stamp duty and that too without considering the fact that the assessee has already received a sum of Rs. 1,20,000 and ld. AO has not considered the cost of acquisition. If reduced the consideration of Rs. 1,20,000/- the balance amount is the difference between the consideration and stamp duty value as per provision of section 50C of the act. Thus, as not disputed by the ld. DR representing the revenue that the amount after reducing the consideration the sustained amount is on account of the stamp duty valuation and there are various decision of the co-ordinate bench of the tribunal holding the there cannot be levy of penalty on the amount sustained on account of the provision of section 50C this view of the tribunal is also confirmed in the case of Fortune Hotels and Estates (P.) Ltd [ 2014 (10) TMI 783 - BOMBAY HIGH COURT] Thus in this case we note the amount remain to be added [after deducting the initial exemption and consideration] is the only amount added on account of the difference in the stamp duty valuation and the levy of the penalty on that amount is not legal based on the finding of the Bombay High Court we vacate the levy of the penalty in the case and thus, the assessee grounds of appeals are allowed.
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2023 (10) TMI 796
Prosecution proceeding u/s 276CC - Economic Offences - not filing returns of income without giving any reasonable cause and noncompliance of the notices of the AO - liability of directors for such economic offence as alleged - HELD THAT:- As in view of the subsequent orders passed by the competent authority under the said Act, it appears that no additional tax liability was fastened upon the assessing company. Tax was already deposited and thereafter, the prosecution has been initiated. This is not a case that after initiation of the prosecution the tax has been deposited. Further, in view of the subsequent orders passed by the competent authority, there is no tax liability against the petitioners who happened to be Directors of M/s Santpuria Alloys Private Limited. Looking into the averments made in the complaint petition, there is no disclosure of the fact as to how these two petitioners were looking into the day to day affairs of the company and section 278B of the said Act speaks of offences by the company whereas the liability has been fastened upon the person who is looking to day to day affairs of the company. Even the petitioners have not been made accused in the complaint case, however, by way of the information provided along with the letter, learned court has added these petitioners as accused in the complaint and the role how these petitioners are looking into the day to day affairs of the company is not disclosed and the requirement of disclosing the role with regard to day to day affairs of the company is one of the mandatory requirement, in view of the judgment of Sushil Sethi and Another v. State of Arunachal Pradesh and Others [ 2020 (1) TMI 1445 - SUPREME COURT] If the penalty has been struck off, whether a criminal case can survive or not ? - As this aspect of the matter was considered in the case of K.C. Builders and Another [ 2004 (1) TMI 7 - SUPREME COURT] The case of the petitioners is fully covered as against the petitioners there is no penalty or assessment further in view of the subsequent orders passed by the competent authority in the said statute. There is no doubt that the willful failure occur in section 276 CC can attract if the willfulness brings in the element of guilt and thus, the requirement of mens-rea will come into force. In the case in hand, the petitioners have already deposited the tax and thereafter the said prosecution has been initiated. Looking into clause(ii)(b) of section 276 CC, it is crystal clear that if the tax payable determined on regular assessment is reduced by advance tax paid and the tax deducted at source does not exceed Rs.3,000/- such an assessee shall not be prosecuted for not furnishing the return under section 139(1) of the said Act. In the case in hand, in view of subsequent orders passed by the concerned authority under the statute, there is no assessment against the petitioners. Thus, the tax liability is not there even to the tune of Rs.3,000/- in view of the said proviso - There is no doubt that the penal provision is required to be dealt with as it is, and the court is not required to shift the language of penal provision, however, in the case in hand, the facts are otherwise. Thus entire criminal proceeding including order taking cognizance passed by learned Special Judge, Economic Offences hereby cognizance has been taken u/s 276 of CC of the Income Tax Act, 1961 is quashed.
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Customs
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2023 (10) TMI 832
Denial of exemption from payment of customs duty - non-fulfilment of export obligation - sale outside the DTA - HELD THAT:- The Court is of the opinion that for the purpose of calculating duty and interest, the respondent-assessee should be given the benefit to the extent of valuation based upon the exports already made (i.e. Rs. 3,89,87,054/)-. The export commitments were fulfilled to this extent is not in dispute. The impugned order is modified. Instead of the depreciated value, a proportion may be duly worked out taking into account the export commitment actually fulfilled by the respondent - assessee while working out the duty liability component payable as well as its liability, towards interest. Appeal allowed in part.
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2023 (10) TMI 831
Revocation of Customs Broker License - forfeiture of security deposit - it is alleged that the report has been drawn excluding vital evidence and the report is not legal - HELD THAT:- Admittedly, no action has been initiated under the provisions of the Customs Act against the exporter nor any show cause notice was issued under Section 124 of the Customs Act against the exporters or the respondent customs broker. After having found that the exporters are not traceable, there appears to be a feeble attempt made by the Department to confer upon Customs broker by proposing to examine as to whether the Customs broker has done proper verification in terms of the obligation under Regulation 10(n) of the CBLR. It is not the case of the department that the documents which were produced by the respondent/customs broker were false and fabricated documents and there is nothing on record to even remotely suggest such an allegation. The Tribunal has rightly held that the obligation of the customs broker under regulation 10(n) does not include keeping a continued surveillance on the client to ensure that he continues to operate from that address and has not changed its operations - The stand taken by the respondent even at the time of enquiry that all set of documents which were produced clearly would satisfy the mandate under regulation 10(n) of the Act - the learned Tribunal has rightly explained the scope and obligation under regulation 10(n) and the finding would not call for any interference. The substantial questions of law are answered against the revenue - Appeal dismissed.
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2023 (10) TMI 830
The impact of imposing penalty and purpose of reduced penalty not fulfilled - deterring the appellant from repeating the offence - Continued violation of policy conditions - Reduction of redemption fine and penalty imposed on the respondents - import of Prime hot rolled steel plates shotblasted/ coated with Zinc Silicate - revision of assessable value on account of Minimum Import Price fixed by DGFT - HELD THAT:- In respect of the said items Notification No. 38/2015-20 dated 05.02.2016 places restriction in nature of the prescribed Minimum Import Price. The notification prohibits imports at price less than USD 643/MT for the impugned item by placing the minimum import price as condition of import. The appellants have imported the goods at USD 398/MT, practically half the price prescribed by DGFT by the aforesaid notification. The goods were, therefore, confiscated and offered for release on payment of redemption fine and penalty to the respondents. Initially the assessable value was also revised by the original adjudicating authority to the Minimum Import Price prescribed by the DGFT. However, in appeal the valuation at the declared import price was accepted by Commissioner (Appeals) and no appeal on that ground has been filed by revenue. The appellant has been regularly importing by violating the Minimum Import Price (MIP) condition prescribed by the DGFT. It is noticed that the original authorities have been imposing redemption fine roughly equal to the amount of differential duty demanded. However, the Tribunal in the earlier cases had reduced the redemption fine and personal penalty by 90%. The impugned order in the instance case has followed the earlier order of Tribunal and reduced the redemption fine and personal penalty by 90% relying on the Tribunal order in appellant s own case. It is noticed from the pattern of continuing violation that the redemption fine and penalty imposed earlier are not discouraging the repeat of offence. It is seen that the appellants continue to violate the import policy in respect of Minimum Import Price with impunity. The redemption fine imposed earlier has not deterred the appellant from violating the policy. The impugned order is set aside and the matter is remanded to the original adjudicating authority to go into the facts of the case and come up with proper quantification of fine and penalty which is adequate to deter the appellant from repeating the offence - Appeal allowed by way of remand.
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2023 (10) TMI 829
Classification of goods cleared from SEZ - plastic stickers - restricted goods or not - classifiable under 39 19 as declared by the appellant or classifiable under Customs Tariff Heading 39 15 as plastic waste and scrap claimed by the Revenue? - enhancement of the value by the Customs Authority. Classification of goods - HELD THAT:- From the test report, it is clear that the institute has clearly accepted the description declared as plastic stickers in the test result in Sr.No. 1(a) and also described the goods as cut pieces of clear film with paper sticker as per the said result since the goods was found as stickers, the goods should be classified in the form it was found i.e. sticker, which is correctly classifiable under 39 19 9010. In view of the Hon ble Gujarat High Court judgment in the case of UNION OF INDIA VERSUS OSWAL AGRICOMM PVT. LTD. [ 2010 (7) TMI 712 - GUJARAT HIGH COURT] as well as the clear observation of the Tribunal in the earlier remand order now the entire reliance can be made on the CIPET report only and no reliance can be made on customs laboratory report. Therefore, in view the above clear report of the CIPET the goods cleared from appellant s SEZ is a plastic sticker and correctly classifiable under Customs Tariff Heading 39 19 9010. Whether the goods are undervalued or otherwise? - HELD THAT:- There is no evidence was found to established that the appellant have undervalued the goods. Accordingly, the value declared by the appellant are correct being a transaction value and no addition can be made. The whole purpose of restriction is to avoid clearance of Plastic Waste and Scrap in the DTA as per the policy is that the hazardous goods should not be supplied in the DTA - In the present case the CIPET report clearly states that the goods i.e. Plastic Stickers are not hazardous in the nature. This also strengthen the case of the appellant that the goods is neither restricted nor prohibited. Hence, the entire case of the department fails. In view of the foregoing discussion and findings, the goods in question are held to be plastic stickers and there is no undervaluation in respect of such goods. The impugned order is not sustainable. Hence, the same is set aside, appeals are allowed.
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2023 (10) TMI 828
Condonation of delay of 8 days in passing the review order - HELD THAT:- It is seen that even after much efforts, the Commissioner (Appeals) could not get details from the department as to the date of receipt of the Order in Original by the Review Cell. If the Department had knowledge about the date of receipt of the Order in Original by the Review Cell as being 11.3.2010, they ought to have furnished such evidence before the Commissioner (Appeals) itself. The Tribunal in similar matters in COMMISSIONER OF CUSTOMS (EXPORTS) , CHENNAI VERSUS M/S. VCR TIMBER ENTERPRISES AND M/S. MEHNDIPUR BALAJI IMPEX (P) LTD. [ 2023 (3) TMI 1082 - CESTAT CHENNAI] held that the strong inference that can be drawn is that there was no evidence available to establish as to the date on which the order-in-original was received by the Review Cell and apparently there was a delay in passing the review order. Thus, the appeal filed by the department is without merits - impugned order is sustained - appeal is dismissed.
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2023 (10) TMI 827
Confiscation of Gold bar with an option to pay redemption fine - absolute confiscation of currency - levy of penalty under Section 112(b) Customs Act - misuse of EOU Scheme by mis-declaring export jewellery in terms of purity of the gold - burden to prove - HELD THAT:- There are force in the contention of the learned Counsel for the Appellant that the entire case is built on assumptions and presumptions against the appellant. In the very first instance on the next day after DRIs search and seizure of gold bar and cash, the Appellant gave documentary evidence like Purchase Invoice of M/s Somya Bullion Jewellers, Cash Ledger, Stock Ledger, Balance Sheet and Trial Balance showing legal acquisition and ownership of the gold and cash. The Appellant s Stock Ledger clearly showed that he had 1218.255 grams of gold on 19.12.2016 from which DRI seized 1kg gold bar. There are force in the arguments of the learned Counsel for the Appellant that the marking on the gold bar seized from the appellant s premises matches neither with the gold imported by M/s Mahalaxmi Jewel Exports by Bs/E No 8974 dated 2.10.2016 and 10240 dated 1.12.2016, nor the gold recovered from the residential and factory premises of Shri Prem Sagar Arora. This also points to the fact that the gold bar seized from the appellant is not diverted duty free gold by M/s Mahalaxmi Jewel Exports - also no link has been found between the gold imported by M/s Mahalaxmi Jewel Exports and the 1kg gold bar seized by DRI from the appellant s shop. Since documentary evidence has been presented in favour of the gold showing the Appellant s legal ownership and acquisition, it is held that tenets of Section 123 Customs Act are satisfied and the Appellant has discharged the burden of proof. The Appellant s statement also reiterates the same - the appellant s submission agreed upon that the Department has not shown any proof that the seized cash was sale proceeds of smuggled gold and thus confiscation under Section 121 Customs Act is unsustainable, more so since the appellant s Books of Accounts clearly reflect that this was part of his Cash in Hand and had been received from legitimate sources. There can be no confiscation of the seized gold bar and currency under the Customs Act, 1962 and it is accordingly quashed. Imposition of penalty on the Appellant is also untenable and is set aside. Since the impugned order qua the Appellant cannot be sustained, it is set aside - Appeal allowed.
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2023 (10) TMI 826
Levy of penalty on CHA and Clearing and forwarding agents - Role restricted to filing of the documents - HELD THAT:- There is no allegation in the impugned order that they have violated any of the provisions of the CHA Regulations - the contention of the Appellants agreed upon that they cannot be held responsible for over invoicing if any, done by the exporter for the purpose of getting excess drawback. It is found that this Tribunal has already decided similar issue in M/S. UNITED CUSTOM HOUSE AGENCY, SHRI RAJ KUMAR SHAW, PROPRIETOR, M/S. SUNDARY FASHION, AND SHRI PRAKASH GHOSH, PROPRIETOR, M/S. OVERSEAS SHIPPING AGENCY, PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS (PREVENTIVE) , KOLKATA [ 2022 (9) TMI 862 - CESTAT KOLKATA ], wherein the orders passed by the Lower Authorities were set aside. Following the ratio of the said decisions, no penalty is imposable on the Appellants, as they have no role in the alleged offence - the penalties imposed on the Appellants in the impugned order set aside - appeal allowed.
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2023 (10) TMI 825
Demand of Customs Duty foregone - Non-fulfilment of export obligation - non-submission of bank realization certificate to the Appellant - HELD THAT:- It is a settled position in law that a new condition which does not form part of the Notification cannot be introduced through a Circular. Accordingly they contended that the demand of duty from them is against the conditions of the notification. The issue is no longer res integra as the CESTAT, Bangalore in Appellant's own case BANK OF NOVA SCOTIA VERSUS COMMISSIONER OF C. EX. (ADJ.), BANGALORE [ 2008 (7) TMI 246 - CESTAT BANGALORE] categorically held that the provisions of the Exemption Notification 57/2000 read with erstwhile Circular No. 24/98- Cus dated 24.04.1998 nowhere states that non-realization of sales proceeds by Exporters will result in demand of Customs duty foregone from the Nominated Agency. Accordingly, the Tribunal has held that no duty can be demanded from them. We observe that the ratio of this decision is squarely applicable in this case. In respect of Circulars specifying the conditions which are not there in the Notification, it is found that the Hon ble Supreme Court has decided in the case of M/S. SANDUR MICRO CIRCUITS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BELGAUM [ 2008 (8) TMI 3 - SUPREME COURT] where it was held that it was held that by issuing a circular a new condition thereby restricting the scope of the exemption or restricting or whittling it down cannot be imposed. By following the decision of the Hon ble Supreme Court and the Tribunal the demand of customs duty from the Appellant is not sustainable - the demand of duty confirmed in the impugned order set aside. Non imposition of redemption fine and penalty under Section 112(a) and 114A of the Customs Act, 1962 - HELD THAT:- Since the demand of duty itself is not sustainable, the question of demanding redemption fine and imposing penalty does not arise. Accordingly, the department's appeals are rejected. Appeal filed by appellant allowed.
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2023 (10) TMI 824
Import of old and used parts of plate leveler machines - requirement of possession of valid licence for import - Valuation of imported goods - redetermination of value by recourse to rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation - penalty. Description of the goods - HELD THAT:- The appellant has chosen to describe the goods as plate leveller in the bill of entry and, in accordance with section 17 and section 47 of Customs Act, 1962, there is no reason to expect a different classification to be substituted. Even now, it is not their claim that goods are scrap but merely that it is not intended to be erected as machinery and the goods, in disassembled form, have not been claimed to fit any other classification with declaration disowned as in error. Usage after import is not a criterion for classification. Therefore, the goods merit assessment in accordance with the declaration. The goods are admittedly of 1942 vintage and it is seen that paragraph 2.31 of the Foreign Trade Policy restricts second hand goods other than capital goods and, as it is not the case of customs authorities that these are not capital goods , the impugned goods would be freely importable. Consequently, confiscation under section 111(d) of Customs Act, 1962 lacks authority of law. Value for assessment - HELD THAT:- The system for valuation in Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 for operation of section 14 of Customs Act, 1962 has neither been followed by the adjudicating authority nor such departure taken note of in the impugned order. The law exists for a purpose and that purpose must be served. Appeal allowed.
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PMLA
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2023 (10) TMI 823
Money Laundering - seeking arrest of respondent - issuance of non-bailable warrants which were never cancelled. It was submitted that it is the case of the department that the said non-bailable warrants remained in force and, therefore, the execution of the same by arresting the present respondent was within permissible parameters of the procedure. HELD THAT:- Admittedly, in the present case, the non-bailable warrants issued on 12.01.2018 remained on the file of the investigating agency and no steps were taken to execute them. A copy of the said non-bailable warrants has been placed on record as Annexure P-5 to the present petition. A perusal of the said non-bailable warrants reflects that the columns provided to enumerate the steps taken in furtherance of the said warrants are blank except that there is an endorsement that the warrants were executed and the respondent was arrested on 14.02.2023 at 2100 Hours. Normally, warrants are issued by the concerned Court during the course of investigation when an accused person is not available despite efforts or after filing of the chargesheet when the person who has been summoned by the concerned Trial Court does not appear to face trial. Another possible situation can be where warrants issued against a person during the course of investigation could not be executed and a chargesheet/complaint is filed with respect to the other accused persons and the person against whom warrants have been issued is shown as absconding. In the present case, open ended nonbailable warrants remained unexecuted till the complaint was filed and cognizance was taken by the learned Special Court. It is also relevant to note that the said non-bailable warrants were never returned to the learned Special Court. In the present complaint, the respondent is not being shown as an absconder. There is no mention of NBWs being issued, during the course of investigation, in the complaint. In the instant case, admittedly, upon completion of investigation, the complaint had been filed, in pursuance of which summons had been issued to the present respondent. If the unexecuted non-bailable warrants issued prior to filing of the complaint had been duly returned to the Court, could the department have arrested the respondent when only summons for appearance had been issued? The department, after issuance of summons, in such a case, could not have arrested the respondent unless warrants were issued by the learned Special Court on requisite grounds. The exercise of power of arrest by the department was totally unjustifiable. This Court finds no reason to interfere with the impugned order dated 16.02.2023 - Petition dismissed.
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2023 (10) TMI 822
Money Laundering - predicate offence - matter amicably settled between the petitioner and the complainant and No Dues Certificate was issued in favor of the petitioner - embezzlement and misappropriation of loan amount which had been disbursed by Yes Bank towards the development of a hospital in Gurugram - non-payment of salaries - reduction of equity shareholding of the complainant - falsification of accounts. HELD THAT:- The Telangana High Court in Manturi Shashi Kumar [ 2023 (4) TMI 1199 - TELANGANA HIGH COURT] has also quashed a complaint under Section 3 of the PMLA on the grounds of the accused being discharged/acquitted of the scheduled offence. In view of the aforesaid legal position, the present complaint filed by the ED and the proceedings arising therefrom cannot survive. Considering that the FIR has been quashed by this court and that it has not been challenged till date, there can be no offence of money laundering under section 3 of the PMLA against the petitioners. Petition allowed.
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2023 (10) TMI 797
Withdrawal of SLP - Money Laundering - predicate offence - HELD THAT:- The special leave petition is dismissed as withdrawn as having become infurctuous.
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Service Tax
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2023 (10) TMI 821
Violation of principles of natural justice - opportunity of a hearing was not accorded to the petitioner before passing of the impugned order - demand of service tax as well as penalty order on practicing advocate registered with Bar Council of Maharashtra and Goa. HELD THAT:- The respondent no. 1 needs to hear the petitioner on all the contentions on the issues urged in the present proceedings and pass a fresh order in accordance with law. The proceedings are remanded to respondent no. 1/the Assistant Commissioner, for a fresh order to be passed on the notice dated 30th December 2020, after hearing the petitioner on all the contentions the petitioner intends to raise - petition disposed off by way of remand.
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2023 (10) TMI 820
Non-service of SCN - petitioner was directly called upon to appear for a personal hearing - SCN time barred in view of the limitation prescribed under Section 73(6)(i)(b) of the Finance Act, 1994 - HELD THAT:- The limitation for issuing Show Cause Notice expired during the period when the country was under lock down mode due to out break of Covid-19 Pandemic - Taking note of the unprecedented situation, the Central Government had also issued ordinance namely the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020. There is no scope for setting aside the impugned order on the ground of limitation. However, since the order has been passed without following the principle of natural justice and without giving an opportunity to the petitioner to reply to the Show Cause Notice No.10/2021 (ST) dated 28.04.202, Court is inclined to set aside the impugned order and remits the case back to the respondent to pass a fresh order on merits in accordance with law within a period of six months from the date of receipt of a copy of this order. Petition disposed off.
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2023 (10) TMI 819
Rejection of declaration of the petitioner under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Appellant is a co-noticee - HELD THAT:- It is not in dispute that in the case of a main noticee M/S Sunshine Corporation, Special Civil Application No.23250 of 2019 was filed wherein this Court by an order dated 01.02.2022 in M/S. SUNSHINE CORPORATION VERSUS UNION OF INDIA [ 2022 (2) TMI 1322 - GUJARAT HIGH COURT ], the petition has been allowed with certain directions. Since the petitioner is a co-noticee thereof the benefit of the judgment of this Court and the directions issued therein shall apply to the case of the petitioner. The orders dated 05.12.2019 and 17.01.2020 therefore are quashed and set aside. Petition allowed.
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2023 (10) TMI 818
Burden to prove - eligibility for CENVAT Credit - possibility of having provided exempted excise duty activities from the premises in issue cannot be ruled out - appellant failed to discharge burden to prove under Rule 9(6) of CENVAT Credit Rules, 2004 - Extended period of limitation - scope of SCN crossed - HELD THAT:- SCN is the foundation on which the department has to build up its case and the allegations in the show cause notice have to be specific as oppose to vague or lacking details. The CENVAT credit has been denied by the learned Commissioner merely on the basis of assumption and presumption which is arbitrary and not as per law. While deciding the issue raised in the show cause notice about nexus and non-registration of premises at Delhi , in favour of the appellant the said 1st appellate authority denied the CENVAT credit to the appellant by taking recourse to the provision of Rule 9(6) ibid merely on the basis of assumption and presumption by recording the finding that the possibility of having provided exempted Excise duty activities only from the said cannot be ruled out and therefore in such situation, the impugned credit would be ineligible to the appellant which, is not sufficient to deny the credit to the appellant. There is no mention about rule 9(6) ibid anywhere in the show cause notice. Rule 9(5) ibid mandates maintaining of proper records for the receipt, disposal, consumption and inventory of the input and capital goods whereas Rule 9(6) ibid talks about maintaining of proper records for the receipt and consumption of input services [emphasis supplied]. Rule 9(5) is about the input/capital goods whereas rule 9(6) is regarding input service and both are independent of each other. Time and again it has been laid down through various decisions that show cause notice is the foundation and judicial principles do not permit the adjudicating authority or the 1st appellate authority, as the case may be, to travel beyond the show cause notice. Since the impugned order has travelled beyond the show cause notice and has been passed on a new ground, the same is not sustainable and is liable to be set aside. In such circumstances it would not be necessary to examine the other issues viz. suppression or invocation of extended period. The appeal filed by the appellant is allowed.
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2023 (10) TMI 817
Scope of subsequent SCN - same person as Commissioner has passed these three orders and they paraphrased each other - installation and commissioning and works contract services - HELD THAT:- The sole basis of conformation of demand made in these three appeals was that in the de novo proceeding the demand in its entity was conformed with interest and penalties but having regard to the fact that the said de novo adjudication order has been set aside by this Tribunal and the subsequent demands raised through Section 73(1A) as well as its conformation having based on the previous conformation orders, the same is liable to be set aside. Therefore, in order to maintain consistency and predictability of the order of this Tribunal and in obedience to judicial precedent set by it, the orders passed by the Commissionerate of CGST CX are hereby set aside. Appeal allowed.
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2023 (10) TMI 816
Invoking proviso to sub-section (1) of Section 73 of Finance Act, 1994 for extended period - Levy of service tax - composite supply - photography service - inclusion of VAT in the value of photography service for the purpose of imposition of service tax - HELD THAT:- During the period before 14.05.2016, normal period of limitation was 18 months. The show cause notice dated 12.03.2014 was issued for the period from 01.10.2008 to 31.03.2013. Therefore, the normal period that can cover the issue in the present case is only from 01.10.2012 to 31.03.2013. However, there is no show cause issued to the appellant under main clause of sub-section (1) of Section 73 of Finance Act, 1994 and also that the entire information was disclosed by the appellant through ST-3 return. Therefore, there was no suppression on the part of the appellant. The extended period of limitation was not invokable in the present case. Had Revenue scrutinized ST-3 return in time, they could have issued demand during the relevant period under normal period of limitation and once the normal period of limitation is over after filing of ST-3 return, then the self-assessed assessment is finalized and was not open for raising demand. Thus the subject show cause notice is hit by limitation - the merit of the case not examined. Appeal allowed.
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2023 (10) TMI 815
Rebate/refund claim of SBC KKC - export of Basic Grade Pig Iron to Rayang/Thailand under cover of Shipping Bill - export of Non-Alloy Pig Iron from Paradeep Port in terms of Notification No.41/2012-ST dated 29.06.2012 - denial on the ground that there is no specific provision in the subject Notification No.41/2012-ST dated 29.06.2012 for granting refund of the said SBC KKC. HELD THAT:- Notification No.41/2012-ST is clearly stating grant of refund of service tax paid on services used for export of goods and sub-section (2) of section 119 of Finance Act, 2015 and sub-section (2) of section 161 of the Finance Act, 2016 clearly stipulate SBC and KKC as service tax respectively; that sub-section (5) of section 119 of the Finance Act, 2015, and subsection (5) of the section 161 of the Finance Act, 2016 also stipulate that all provisions relates to refund of service tax under Finance Act, 1994 shall be applicable to refund of SBC KKC. Therefore, the said provisions were not taken into consideration by the authorities below. SBC has been levied as Service Tax only as has been stated to in Section 119(2) of the Finance Act, 2015 and the rate of SBC @ 2% of value of taxable services proposed under the Finance Act, 2015 has been reduced to @ 0.5% of value of taxable services vide Notification issued under Section 93(1) of the Finance Act, 1994 which enables Central Government to grant exemption from Service Tax. Therefore, SBC has been given status of Service Tax levied under the Finance Act, 1994 for the purpose of refund/rebate. Notification No.12/2013-ST dated 01.07.2013 also had specifically provided refund of service tax leviable under Section 66B of the Finance Act, 1994 whereas SBC KKC have been levied under section 119 of the Act inserted vide Finance Act, 2015 and Section 161 of the Act inserted vide Finance Act, 2016, respectively, hence there was legal requirement to amend NotificationNo.12/2013-ST vide Notification No.2/2016-ST and Notification NO.30/2016-ST dated 26.05.2016 to include SBC KKC for refund under Notification No.12/2013-ST as SBC KKC are not leviable under Section 66B of the Finance Act, 1994; whereas Notification No.41/2012-ST dated 29.06.2016 has allowed refund of service tax without specifying whether leviable under Section 66 or Section 66B of the Finance Act, 1994 and hence, no amendment in Notification No.41/2012-ST was/is legally required to be undertaken. The impugned orders set aside - appeal allowed.
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2023 (10) TMI 814
Point of taxation Rules - Liability to pay interest on the delayed remittance of Service Tax on the advances received for the period April 2009 to September 2013. It is submitted that mobilisation advances should have been paid from the due date of the advances received instead of paying at the time of completion of the project. HELD THAT:- The demand of interest is for two projects undertaken by the appellant. One of them is BHEL and from the work order of this unit at Clause 12.1 mobilisation advance is shown as interest-bearing mobilisation advance of 5% of the contract price in stages is admissible in the following manner. Rate of interest shall be 2% above PLR of State Bank of India applicable at the time of drawing the advance - Records are produced to show that these mobilisation advances are shown as liabilities in their financial records. Therefore, the question of paying Service Tax at the time of receipt of these advances does not arise since they are only to be taken as loans and it became part of the consideration as and when the invoices were raised. The question here was whether the unadjusted amount received as mobilization advance during the Service Tax regime was liable to GST after the introduction of GST - In the present case, the liability of tax on mobilization advance is not in dispute, the only dispute is the time of payment of tax. Even as per The Point of Taxation Rules , the liability to pay taxes in the projects undertaken by the appellant arises as per clause b (i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service. In the instant case, the appellant has paid the tax on completion of the service on the invoice value which includes the mobilisation advances received by him. It is not the case of the department that invoices were raised in piecemeal without payment of tax as and when the advances were received - there are no merit in demanding interest assuming that the date of payment of tax arose based on the advances received. The impugned order is set aside - appeal allowed.
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2023 (10) TMI 813
Levy of Service Tax - Appellant is an authorized dealer of Tata Motors - Sales and other incentives - Hire purchase commission - Repossession charges received by the Appellant credited under 'other charges' in the profit loss account - Job work charges - Freight received from customers/Tata Motors. Sales and other incentives - HELD THAT:- The incentive or discount or commission received from the banks and institutions does not lead to the conclusion that the Appellant provided service to them. At the most, it may be in the nature of business support service which is not the case made out in the SCN. Accordingly, Service Tax is not payable on commission received from bank/financial institution. Hire purchase commission - HELD THAT:- Such charges are being received from the buyers of vehicles for assisting in registration/insurance etc. of the vehicles which is an essential requirement under the Motor Vehicle Act and the said receipts are not chargeable to Service Tax. Repossession charges received by the Appellant credited under 'other charges' in the profit loss account - HELD THAT:- Demand not tenable as they are received from the owners of the vehicle, whose vehicles are repossessed by the financiers and for safekeeping are entrusted to the Appellant. For such service or parking, the Appellant received an amount from the vehicle owners which is not taxable under BAS. Further, these receipts are on principle to principle basis and on that score also are not liable to Service Tax. Job work charges - HELD THAT:- The learned Commissioner has himself held that the same is not taxable under BAS but under Authorized Service Station charge, which was not the case made out in SCN and as such the demand of service tax on these charges is not tenable. Further, the receipt for service of commercial vehicle is not taxable under the category of 'Authorized Service Station'. Freight received from customers/Tata Motors - HELD THAT:- The essential ingredient of GTA, (that issuance of consignment notes was not done by the Appellant) thus, the same cannot be made liable to Service Tax as a GTA. Accordingly, no Service Tax is payable on this score also. The impugned order set aside - appeal allowed.
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2023 (10) TMI 812
Liability of service tax - commission received against the sale of SIM card on MRP - in such MRP the commission is already included and on that MRP the principal i.e. the mobile company has discharged the service tax - whether the appellant being a commission agent is liable to pay service tax on the commission received by them from the mobile Company in the present case, M/s. Vodafone Essar Gujarat Limited.? HELD THAT:- Since the mobile companies admittedly paid the the service tax on gross MRP out of that only commission is paid, demand on service tax is double demand on the same amount. This issue has been considered in various judgments - reliance can be placed in COMMISSIONER OF CENTRAL EXCISE, MEERUT VERSUS MORADABAD GAS SERVICE [ 2014 (1) TMI 199 - CESTAT NEW DELHI] where it was held that Inasmuch as there is no dispute about the fact of payment of entire service tax by BSNL on the full value of SIM cards/recharge coupons, we are of the view that Commissioner (Appeals) has rightly set aside the confirmation of demand. The demand on commission for sale of SIM cards is not sustainable, hence the impugned order is set-aside - appeal allowed.
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2023 (10) TMI 811
Recovery of short paid service tax - whether the allegation contained in the show cause notice that there was a shortfall in payment of service tax is correct or not? - HELD THAT:- The show cause notice accepted the statement made in the calculation sheet regarding the figures and the only dispute was as to whether the amount of 13,93,06,059/- was in JPY or Rupees. The Commissioner does not doubt that this amount was in JPY and indeed he could not have in view of categorical statement in the calculation sheet that the amount was in JPY. The Commissioner however, went on to record findings on issues which were not even the subject matter of the show cause notice. The appellant was not required to explain as to how the said figures were in JPY, nor was the conversion rate in dispute. In view of the categorical reply submitted by the appellant and from a perusal of the calculation sheet and the submission advanced by the learned Counsel for the appellant, it cannot be doubted that the amount was in JPY which was converted into Indian Rupees. There would, therefore be no shortfall. The finding to the contrary recorded by the Commissioner, therefore, be sustained. Though detailed submissions have been advanced by learned counsel for the appellant for contending that service tax was not leviable and by the learned authorized representative appearing for the department that service tax would be leviable, it will not be appropriate to examine this issue in the first instance. This issue should be first examined by the Adjudicating Authority. As the records indicate, the appellant had not contested this matter. It would, therefore, be appropriate to provide an opportunity to the appellant to submit submissions regarding this issue to the adjudicating authority and the department should also be provided an opportunity to respond to the same. It is after the examination of the submissions made by the appellant and the department that the Adjudicating Authority should take a considered decision on this aspect. The matter is remitted to the Principal Commissioner to decide the issue relating to leviability of service tax on the amount received towards tickets booked from abroad for journey starting from India with effect from 01.05.2006 by Japan Airlines as expeditiously as possible - Appeal allowed by way of remand.
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2023 (10) TMI 810
Non-payment of service tax - business auxiliary service - receipt of sales commission in the guise of dealer incentives - agreement was on a principal to principal basis or not - HELD THAT:- For both the pre-negative period and the post negative period the issue stands decided in favour of the appellant by decision of the Tribunal in Rohan Motors [ 2020 (12) TMI 1014 - CESTAT NEW DELHI] - the appellant cannot be termed as an agent of the company. The Commissioner was, therefore, not justified in holding that the appellant had received commission which would be subject to the levy of service tax. Thus, the incentives received by the appellant from the company cannot be termed as commission. The impugned order dated 05.01.2015 passed by the Commissioner would, therefore, have to be set aside and is set aside - appeal allowed.
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2023 (10) TMI 809
Doctrine of mutuality of interest - Manpower Supply service - appellant is an association of the persons/firms providing stevedore services in Visakhapatnam Port to its members - Invocation of extended period of limitation - HELD THAT:- The Association has been formed for the mutual benefit of its member, who are stevedores operating in the Visakhapatnam Port Area and therefore the service provided by the Association to its member cannot be treated as transaction between two different persons in order to attract levy of Service tax, during the material period. This issue is no longer res integra as per the decision of the Hon ble Supreme court in the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. [ 2019 (10) TMI 160 - SUPREME COURT] , wherein in paras 71 to 73, it was held It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, we accept the argument on behalf of the respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the Service Tax net. Admittedly the Appellant Association has been formed by the persons engaged in stevedoring and dock activities. In the very aims and objects, it is mentioned that as the members have been facing difficulties due to renting, behaviour of the labourers and collective bargaining as well as illegal strikes which each individual person engaged in stevedoring is unable to handle at its individual level. Accordingly, feeling the need for a collective concern to deal with workmen or labourers, the people engaged in stevedoring business formed this Association and registered themselves under the Societies Registration Act, 1860 - There is element of mutuality between the Appellant Association and its Members who have formed the Association and subscribed to its capital and also pay annual subscription charges for administrative expenses. Though the Appellant Association is providing the services of Manpower Supply to its members, the same is not taxable on the ground of mutuality. Invocation of extended period of limitation - HELD THAT:- The ground of limitation is left open. The demand under Club or Association service is not tenable and thereby set aside - Appeal allowed.
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2023 (10) TMI 808
Levy of service tax - mark-up earned over and above by the freight amount by the appellant in view of the sale of cargo space to the exporters - HELD THAT:- Reliance upon one such decision in M/S. TIGER LOGISTICS (INDIA) LTD. VERSUS COMMISSIONER OF SERVICE TAX-II, DELHI [ 2022 (2) TMI 455 - CESTAT NEW DELHI ] where it was held that Any amount received must be for the service and it cannot be for some other purpose. For instance, if any amount is received towards any compensation, such amount cannot be taxed. In view of the decision of the Tribunal, it has to be held that the appellant was not liable to pay service tax as no service was provided by the appellant. Appeal allowed.
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Central Excise
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2023 (10) TMI 807
Refund of duty paid on inputs for executing the export obligations under Rule 18 of CER read with notification No. 41/2001-CE (NT) dated 26 June 2001 - Misconstruction of Clause 4 (c) of the Notification dated 26 June 2001 which permitted removal of waste on payment of duty if such waste was manufactured or processed out of the factory of the applicant seeking rebate. HELD THAT:- There is no gainsaying that the fixation of input output norms is done to enable the manufacturer exporters to seek rebate for the inputs used in the export of the manufactured product. Admittedly, the goods had been duly exported presumably meeting with all the relevant regulatory norms between the period September, 2003 to January, 2004. It is pertinent to indicate that two rebate claims were filed on 07 January 2004 and third one on 01 March 2004, whereas, the rest of the three were filed after the aforesaid communication dated 18 March 2004. However, the petitioner has not placed on the record a copy of its letter dated 08 January 2004 and it is not clear if the said letter pertained to any request about fixation of input-output norms with regards to export obligations already undertaken or to be taken in future. Applicability of central excise duty on removal of waste/scraps generated during the course of the manufacture of S.S. Utensils etc. - HELD THAT:- A careful perusal of the notification No. 41/2001 dated 26 June 2001 would show that the exporter has to furnish a declaration that CENVAT credit has not been availed and the notification clearly spells out that any waste arising during the manufacture of export goods may be removed on payment of duty as if such waste has been manufactured in the factory of the manufacture - the removal of waste, or sale thereof in home or domestic market, does not prohibit or bar a claim for rebate under the said Rule or notification. Paragraph 4(c) does refer to payment of duty but the said clause applies when there is removal of material or the same is partially processed at a location different from or outside the factory of the applicant. Since presumably the export obligations had been met, the Revisionary Authority took a hyper technical view of the matter. It is evident that in terms of the notification No. 10/2003 dated 01 March 2003, the description of the goods in question was covered vide item No. 28 viz. HSM 7323.90, which is code for S.S. Utensils, read with item No. 51, where the rate of duty is spelt out to be NIL . Meaning thereby that no duty was payable on such waste and scrap arising during the course of manufacture of the same goods. This is exemplified from the clarification letter issued by the Office of Commissioner of Central Excise, Delhi dated 26 July 2005 placed on the record, and therefore, the impugned order dated 27 September 2019 holding that pre-conditions provided by the Notification No. 41/2001 dated 26 June 2001 were not met by the petitioner, is perverse and cannot be sustained in law. The impugned order dated 27 September 2019 is hereby set aside and the matter is remanded back to the Adjudicating Authority to decide the rebate claims of the petitioner after affording a fresh opportunity for hearing in accordance with law - Petition disposed off by way of remand.
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2023 (10) TMI 806
Principles of unjust enrichment - refund was granted but the same credited to the Consumer Welfare fund - refund claim was for duty paid under protest - HELD THAT:- The learned Commissioner while passing the impugned order observed the Chartered Accountant s certificate did not mention that the excise duty for the past period have not been included in the commercial invoices and was borne by the appellant themselves but he failed to appreciate that as per common trade practice commercial invoices are issued when no duty is charged and once the duty is charged then excise invoice are to be issued. In this matter for the past period the appellant had paid the duty under protest so naturally only commercial invoices had been issued to their customers and this fact had also been recorded by this Tribunal in its order while remanding the matter to the learned Commissioner. The learned Commissioner had only to see whether the Chartered Accountant s certificate endorses the claim of the appellant that they have not charged the duty from their customers to whom they have already issued commercial invoices. It is found that the said certificate explicitly supported the stand of the appellant as it mentioned by stating that HCCBL has not received any amount over and above the amount mentioned in the respective Commercial invoices issued by them during the period February, 2000 to November 12, 2001. Since the Chartered Accountant s certificate has certified that the appellant has not recovered the duty amount of Rs.6,02,000/- from their customers, the same is not hit by the bar of unjust enrichment. The appellant is therefore entitled for refund claimed. Appeal allowed.
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2023 (10) TMI 805
Clandestine manufacture and clearance of excisable goods - unmanufactured tobacco - actual manufacturer of the unmanufactured tobacco - levy of penalty u/r 26 on Shri Suresh Prasad Sah, Appellant 2 - HELD THAT:- From the documents available, it is clearly established that the lease agreement was a bogus one. Shri Suresh Prasad has impersonated another person and introduced him as Shri Mahesh Prasad before the Notary. Mahesh Prasad is non existent. There is no evidence that Shri. Gautam Kushwaha was in any way connected with the manufacturing activity. Thus, it is found that the department has considered Appellant 1, the owner of the premises as the manufacturer of the goods found in the said premises. Evidence available on record to implicate Shri Krishna Kumar as the manufacturer - HELD THAT:- Appellant 1 has made a genuine lease agreement and leased out the property on a monthly rent of Rs.6000/. The department has verified the genuineness of the lease agreement from the Notary and found that the lease agreement executed by him was genuine - there is no material evidence available on record to establish that he is directly involved in the manufacturing activities. There is no evidence that the machines were purchased in his name. There is no evidence that he has purchased raw materials from the market using cash. The goods has not been physically cleared to any customers. In the absence of any such evidence, we hold that Appellant 1 cannot be held as the manufacturer of the goods found in the premises rented out by him. Levy of penalty under section 26 of the Central Excise Rules 2002 on Shri Suresh Prasad Sah, Appellant 2 - HELD THAT:- It is observed that his involvement in the clandestine manufacture and clearance is very well established by his own admission. He is also involved in introducing a non-existence person Shri Mahesh Prasad before the Notary for executing the lease agreement. Accordingly, he is liable for penalty under section 26 of the Central Excise Rules 2002. Accordingly, the penalty imposed on Shri Suresh Prasad Sah is upheld. Appeal disposed off.
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2023 (10) TMI 804
Clandestine removal - Ferro Silico Manganese - reliability on Pen drive printouts - can be admitted into evidence or not - period from 2005 to November, 2007 - high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture or not - absence of any evidence of procurement of the major raw materials for manufacture of Silico Manganese - penalty on the Appellant company and it's Directors. Demand confirmed on the basis of computerized data maintained by the Computer Operator of the Applicant Shri Ajay Behera which has been retrieved from a Pen drive recovered from one of the office table drawer of Shri Behera. Whether evidences available on record substantiate that the data retrieved from the pen drive and other computers belonged to the Appellant's company and the data can be relied upon as evidence to demand duty? - Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? - HELD THAT:- The entire case has been buit up on the basis of the data retrieved from the pen drive and the subsequent statements recorded from the responsible persons. Thus, authenticity of the data is very essential to substantiate the allegations. The pen drive has been recovered from Shri. Ajat Kr. Behera and hence his statement is very crucial regarding the data available in the pen drive. It is a fact on record that Shri Ajay Kr. Behara has been employed only 4-5 months earlier to the date of recovery of the said data. Hence, the evidentiary value of his statement with respect to the data for the earlier period does not carry any weight. Pen drive is a floating device and unless the computer from which the electronic record was produced is identified, the data recovered from the pen drive cannot be admitted as evidence. In the instant case the data recovered from the pen drive pertains to the period 2005-06, 2006-07 and 2007-08. Shri Ajay Kumar Behera, Computer Operator has joined in the company only on 12.04.2007. His statemnt has been relied on to validate the data available in the pen drive for the period 2005-06 and 2006- 07 also. No effort has been made to identify the person who has entered the data for the period prior to 12.04.2007. In the present case the author of entry of data has not been identified only for the period prior to 12.04.2007. For the period after 12.04.2007 also, the data available in the pen drive has not been accepted by the Accountant Shri. Sujit Pruseth who is responsible for the data or the Directors - the questions are answered in the negative. Whether the procedure as set out in Section 9D of the Central Excise Act, !944 was followed in this case or not? - If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty? - HELD THAT:- It is observed that the statement of Shri. Behera cannot be taken as voluntary. Further, the adjudicating authority has not permitted the cross examination of Shri. Behera to bring out the truth. In his statement dated 23.11.2007, the Director Shri. Sitaram Agarwal has denied his involvement in the activity of clandestine clearance. But, in the Notice it has been alleged that he has accepted clandestine removal of finished goods - Had the adjudicating authority followed the provisions of Section 9D and examined the witnesses who have given the statements, the truth in this statement could have come out - the statements recorded in this case has lost its evidentiary value by not following the provisions of Section 9D - Procedure set out in Section 9D has not been followed in this case. Question is answered in negative. Whether the allegations of clandestine clearance of finished goods by the Appellants are substantiated with corroborative evidence? - HELD THAT:- No inquiries were conducted with regard to the alleged clandestine removal on the basis of the aforementioned records recovered. The sales records shows cash receipts of Rs. 7 crores, which the Revenue alleges that sales proceeds of clandestinely cleared silico manganese in cash. However, no verification was done to ascertain this - The Appellants cited many judgments wherein it has been categorically laid down that when the names of the buyers were available in the seized records it would be incumbent on the investigation to make inquiries from the buyers for establishing clandestine removal. In the instant case, the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal - the investigation has failed to establish the alleged clandestine clearance of goods by the Appellants and hence the demands confirmed in the impugned order are not sustainable. Accordingly, question answered in the negative. Whether high consumption of electricity during the years 2005-06 and 2006-07 can be relied upon to allege clandestine manufacture and clearance to demand duty during the relevant period? - HELD THAT:- It is observed from the Project Report of the Appellant that electricity required for production of 1 MT of Silico Manganese is 3800 units. As against this, the Appellant has consumed 7900 and 5564 units per MT during the years 2005-06 and 2006-07 respectively. It is observed that there was widespread variation in consumption of electricity between months. For Example in the month of April 2006, the electricity consumption per month comes to 28000 to 31000 units per MT - the excess electricity consumption alone cannot be an evidence to substantiate the allegation of clandestine clearance - question answered in negative. Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable, without verification at the buyer's end? - Also, in the absence of any evidence of procurement of the major raw materials for manufacture of silico Manganese, without invoices, whether demand is sustainable? - HELD THAT:- The revenue has failed to corroborate unaccounted clearance available in the data retrieved from the pen drive by verification at the customer's end. Since it is already held that the data recovered from the pen drive does not have any evidentiary value, the conclusion arrived at by the investigation with one verification cannot be considered as corroborative evidence for the clandestine clearance of entire 3474.950 MT of Silico Manganese alleged to have been cleared through cash transaction. Hence, question answered in negative. Whether penalty is imposable on the Appellant company and it's Director, on the basis of the evidences available on record? - HELD THAT:- It is found that no evidence has been brought on record to establish that the Directors are involved in clandestine manufacture and clearance of the goods. As the evidence available on record does not establish the clandestine manufacture and clearance, the penalty imposed on the Directors is not sustainable. Accordingly, the same is set aside - question answered in the negative. The impugned order set aside - appeal allowed.
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2023 (10) TMI 803
CENVAT Credit - inputs and input services that have gone into the manufacture of prototype cars, manufactured and exported by the appellants for testing - duty not paid on the final goods exported - prototype motor vehicles manufactured and exported by the appellants are excisable goods or not - extended period of limitation. Whether credit availed on inputs and input services that have gone into the manufacture of prototype cars, manufactured and exported by the appellants for testing, for the reason that duty has not been paid on the final goods exported? - HELD THAT:- The CENVAT credit is admissible to a manufacturer or producer of final products and the provider of taxable service when such inputs are received in the factory; CENVAT credit is not admissible on such quantity of inputs used in or in relation to the manufacture of exempted goods subject to some exceptions. One such exception is that there is no bar on availment of CENVAT credit when the goods are exported under bond.In the instant case, the Department attempts to argue that the motor vehicles sent abroad by the appellants for testing are not suffering any duty; no export proceeds are realized and hence, CENVAT credit is not applicable - the contention of the Department has no legal basis. As per the provisions of CENVAT credit under CCR, 2004, there is no such bar on availment of CENVAT credit when the goods are exported. A conjoint reading of Rule 19 of CER and definition of final products would make it clear that the argument that the export goods are not final products is not acceptable. Further, there is nothing in Rule 19 to say that in case of breach of conditions of the bond, CENVAT credit attributable to the export goods shall be disallowed. The Department was within its right to take whatever action on the appellants for not adhering to the conditions of the bond. It is not on record whether any such action has been initiated by the Department - for the reason that export proceeds are not realized, CENVAT credit,which is otherwise admissible, cannot be denied. There is no provision under the Central Excise Rules or CENVAT Credit Rules to deny CENVAT credit just because the final products are destroyed during testing and for the reason that no export proceeds have been realized for such exports of prototypes - Hon ble Supreme Court and the Tribunal has been consistent in holding that testing is integral to the activity of manufacture and CENVAT credit attributable to the inputs that have gone into the manufacture of said final products cannot be denied to the appellants. Whether in the facts and circumstances of the case, extended period is invocable? - HELD THAT:- There is considerable force in the arguments of the appellants. Moreover, the Department themselves have decided the issue in favour of the appellants for the year 2014-15. Notwithstanding the fact that the said order has been appealed against, it goes to prove that the issue was not free of doubt and the appellants had reasons to entertain the view they had on the issue. As the issue involves interpretation of legal provisions, suppression etc. cannot be alleged and extended period cannot be invoked. Both the appeals are allowed.
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2023 (10) TMI 802
Disallowance of CENVAT Credit - input services - GTA Services - place of removal - HELD THAT:- The issue in dispute is no longer res integra. The final decision on the entitlement of the CENVAT credit for the period prior to the amendment of rule 2(l) of CENVAT Credit Rules, 2004 has been set out by the Hon ble Supreme Court in re Vasavadatta Cements Ltd, [ 2018 (3) TMI 993 - SUPREME COURT] though first decided by the Tribunal in ABB Ltd [ 2009 (5) TMI 48 - CESTAT, BANGALORE] and approved thereafter by the Hon ble High Court of Karnataka in disposing off appeal of Revenue in [ 2011 (3) TMI 248 - KARNATAKA HIGH COURT] , did not appear to have been followed by the adjudicating authority and probably on the premise that the matter was before the Hon ble Supreme Court. With the finality accorded by the Hon ble Supreme Court, the demand for the disputed period does not sustain. Appeal allowed.
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2023 (10) TMI 801
Classification of goods - ARH-C Crude Oil (Residue Oil obtained from distillation of Water in the Raw material Comingled Crude Oil purchased by the Appellant) - to be classified under heading CETH 27090000 or under CETH 27101990? - HELD THAT:- The product ARH C Oil obtained from similar processing (Decantation Dehydration/Distillation) by the Appellant from the bottom residue of 3 to 5% of their raw material comingled or condensate crude oil is not any new product identically, but crude oil only which merits classification under CETA Ch 27090000. At this stage the Test reports and the Explanatory notes (HSN) to CETA 27 are noted. It is found that the 1st test report issued by the Regional Laboratory of Central Excise Customs, Vadodara dated 3-10-2006 as issued by Chemical Examiner Mr G P Sharma reports that the sample is in the form of free flowing liquid. It is a mixture of mineral hydrocarbon oil, having flash point below 25 Degree Centigrade. It is obtained from bitumen mineral crude. Thereafter the test report obtained by the DGCEI on their simultaneous investigation dated 28-9-2007 issued by the same laboratory but through its Senior Chemical Examiner (Grade I) Dr T A Sreenivasa Rao states that the sample is in the form of dark coloured free flowing liquid. It is composed of crude mineral hydrocarbon oil. - both the test reports obtained by the DGCEI as compared by them categorized the product ARH C Oil in the category of crude oil. We therefore find that the DGCEI in their file noting found the product to be composed of crude mineral hydrocarbon oil. Accordingly all the above 3 test reports i.e. 2 from the Central Excise Laboratory Vadodara and 1 from Caleb Brett found the samples to be clearly of Crude oil and not other petroleum product. On detailed analysis, it is found that not only the explanatory note to Ch 2709 covers the appellant s residue bottom oil to be same as crude oil but the Note to Ch 2710 only covers within its ambit products and preparations which by weight have more than 70 % of petroleum oil or oils from bituminous minerals. And in fact there is a clear exclusion to products below 70% of such weight content. The product ARH C Oil (Residue bottom Oil) obtained by such processing of the comingled/condensate crude oil is nothing but Crude oil itself and not any new product which accordingly merits classification under Chapter 27090000 as classified by the Appellant and not under Chapter 27101990 as done by the Revenue. The impugned order set aside - Appeal allowed.
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Indian Laws
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2023 (10) TMI 800
Levy of Advertisement Tax - sign boards displaying the name and products of the business establishment - violation of Article 19(1)(a) and 19(1)(g) of the Constitution of India - HELD THAT:- A perusal of Section 132(6)(1) of the Municipal Corporation Act, would indicate that a tax on advertisement other than the advertisement published in newspapers, can be imposed. Sub-section (1) of Section 133 of the Act provides that Corporation may, by a special meeting bring forward a resolution to propose imposition of any tax under Section 132 defining classes of persons or description of property proposed to be taxed, amount or rate of tax to be imposed and system of assessment to be adopted. By virtue of power vested under Section 427 of the Act, respondent Corporation has made the Municipal Corporation (advertisement) bye-laws, 1976 which came to be approved by the State Government under Section 430 of the Act and it was duly published in the official gazette on 18.08.1978 as required under Section 429 and 431 of the Act of 1956. The respondent-Corporation is tracing its source of power to levy and collect advertisement tax under clause 4, 5 and 6 of the bye-laws of 1976. Whether the display boards or sign boards or name boards as displayed by the appellants would partake the character of advertisement so as to attract Section 132 of the Act and thereby the demand is to be sustained? - HELD THAT:- This Court in the case of ICICI BANK ANR, VERSUS MUNICIPAL CORPORATION OF GREATER BOMBAY ORS. [ 2005 (8) TMI 666 - SUPREME COURT ] has held that advertisement should have some commercial exposition or the soliciting customers to the product or service prominently shown in the advertisement. By mere mentioning the name of the product in which the business establishment is being run would not partake the character of the advertisement until and unless by such display customers are solicited. In the absence of the display of the name board or sign board either by a business establishment or any other establishment including public offices and professionals or schools or colleges etc. it would drive the potential customer to such a situation where it would be neigh impossible to identify the business establishment from which the potential customer proposes to buy. In the instant case, on the demand being raised both the appellants objected to the same and even before the ink on the objections so raised could dry or in other words even before it came to be considered they approached the High Court invoking the extra ordinary jurisdiction of the High court which was in due haste as such the dismissal of the petition though for a different reason which we have not subscribed our approval, yet the end result requires to be sustained and at the same breadth it is held that impugned notices are required to be adjudicated by the first respondent afresh in the light of objections filed to the said notices. Appeal disposed off.
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2023 (10) TMI 799
Dishonour of Cheque - discharge of existing debt and liability or not - actual role of the petitioner in the issuance of alleged cheques - complainant/company alleged that the accused persons had knowledge and were fully aware of the insufficient amount in its bank account in order to honor the said cheques - vicarious liability of accused - HELD THAT:- In view of provision of Section 141(1) and proviso thereto it appears that at the threshold of the case liability is on the complainant to make averment in the complaint regarding responsibility of the accused and accused can also furnish some sterling incontrovertible material or acceptable circumstances to substantiate the contention that alleged offence was committed without his knowledge. In fact, the actual role of the petitioner in the company, in my opinion, cannot be said to be in special knowledge of the complainant whereas role of the petitioner/accused in the company is surely within the special knowledge of the petitioner/accused himself, and that could have been substantiated by any sterling material. According to Section 141 of the NI Act, complainant is only supposed to have knowledge of the person in charge of the company as it is special knowledge of the petitioner/accused. In this case, petitioner/accused could not show any sterling material that he was not really concerned with the issuance of cheque in order to persuade this Court to quash the proceeding. The instant revision application is liable to be dismissed - Application dismissed.
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2023 (10) TMI 798
Dishonour of Cheque - vicarious liability of Director and Additional Director - specific averments against the petitioners herein that they were responsible and in-charge of the day-to-day affairs of the accused company, being its director and additional director - HELD THAT:- In the present case, the cheque was issued by the accused company in favour of complainant, towards the repayment of dues in the normal course of business transactions. The said cheque was handed over to the AR of complainant company by both the petitioners upon assurance that the same would get encashed, and the cheque was signed by the petitioner Ramji Sharma. The cheque upon presentation was dishonoured on 19.05.2018, whereas the application under Section 7 of IBC, 2016 was allowed by the Hon ble NCLT on 08.06.2018, i.e. subsequent to dishonor of cheque. Thus, in view of the ratio of Hon ble Supreme Court in P. MOHANRAJ ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. [ 2021 (3) TMI 94 - SUPREME COURT] , reiterated in M/S. NAG LEATHERS PVT. LTD. VERSUS M/S. DYNAMIC MARKETING AND ANOTHER [ 2022 (4) TMI 1153 - SUPREME COURT] and NARINDER GARG AND ORS. VERSUS KOTAK MAHINDRA BANK LTD. AND ORS. [ 2022 (3) TMI 1534 - SUPREME COURT] , the proceedings under Section 138/141 of NI Act can continue against the directors and persons responsible and incharge of accused company, i.e. the petitioners herein even after moratorium period under Section 14 of IBC, 2016 has commenced. This Court notes that Section 210 deals with the procedure to be followed by a Magistrate when there is a complaint case and police investigation in progress, in respect of the same offence , and provides that in such a case, the Magistrate shall stay the proceedings before it. In the case at hand, while the offence alleged in the FIR registered in Noida, Uttar Pradesh on the complaint of petitioner Ramji Sharma relates to forgery, cheating, breach of trust committed by some other persons in relation to some cheques, the present complaint case pertains to offence under Section 138/141 of NI Act for dishonor of cheque in question - the arguments regarding applicability of Section 210 of Cr.P.C. are bereft of any merit. However, it is also clarified that if pursuant to conduct of investigation in the said FIR and trial if any, any crucial fact qua the financial capacity or the balance in bank accounts of the accused company emerges, the petitioners shall be at liberty to bring the same to the knowledge of the learned Trial Court during the course of trial/arguments and the Court shall consider the same as per law. This Court finds no reasons to quash the present proceedings under Section 138/141 of NI Act - Petition dismissed.
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