TMI Tax Updates - e-Newsletter
December 12, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. REGISTRATION OF REAL ESTATE INVESTMENT TRUST (REIT)

   By: DR.MARIAPPAN GOVINDARAJAN

2. No E-way bill required for the period February 2018 to March 2018 under the UPGST Act

   By: Bimal jain

News

1. RBI Cautions against unauthorised campaigns on Loan waiver

2. India to host 27th WAIPA World Investment Conference in New Delhi

Notifications

GST - States

1. 18/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 2/2017-State Tax (Rate), dated the 30th June, 2017

2. 17/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 1/2017-State Tax (Rate), dated the 30th June, 2017

3. 16/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 17/2017-State Tax (Rate), dated the 30th June, 2017

4. 15/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 15/2017-State Tax (Rate), dated the 30th June, 2017

5. 14/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 13/2017-State Tax (Rate), dated the 30th June, 2017

6. 13/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated the 30th June, 2017

7. 12/2023-State Tax (Rate) - dated 25-11-2023 - Himachal Pradesh SGST

Amendment in Notification No. 11/2017-State Tax (Rate), dated the 30th June, 2017

8. S.R.O. No. 1315/2023 - dated 7-12-2023 - Kerala SGST

Kerala Goods and Services Tax (Fifth Amendment) Rules, 2023

Highlights / Catch Notes

GST

• New Rule: Pay 20% of 12.5% GST from Cash Ledger; Remaining 10% Allowed via Credit Ledger.

  Case-Laws - HC : Requirement of deposit - Can be paid through Input Tax Credit (ITC) or in cash only - In the said Notification issued by the Central Government on the recommendation of the GST Council, it has been specifically stated that at least 20 per cent of the 12.5 per cent remaining due and payable should be paid from the Electronic Cash Ledger. Hence, even the GST Council understood the ten per cent to be enabled for payment through the Electronic Credit Ledger. - HC
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• GST Registration Cancellation Effective from May 18, 2020, Aligns with Lack of Business Activity Claim.

  Case-Laws - HC : Cancellation of GST registration with retrospective effect - It is considered apposite to direct that the order cancelling the registration shall take effect from 18.05.2020, the date of the Show-Cause notice. This is because it is the petitioner’s case that no business was conducted thereafter - HC
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• Petitioner Must Respond to Summons, Submit Documents, and Choose to Pay Penalty or Contest Order in Appropriate Forum.

  Case-Laws - HC : Validity of summons - The petitioner is duty bound by law to answer the summons issued by the respondents and to produce the documents. At the same time, the petitioner is at liberty either to make good the penalty or to challenge the said order before the appropriate forum - it is deemed appropriate to dispose of the petition. - HC
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Income Tax

• Petition Filed Over Denial of Lower 22% Tax Rate Due to Late Form 10-IC Filing; Directed to Seek CBDT Condonation.

  Case-Laws - HC : Denial of benefit of lower rate of tax @ of 22% u/s 115BAA - failure to file Form 10-IC - Petition directed to approach CBDT for condonation of delay - HC
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• Transfer Pricing Order Revised: Lack of Inquiries on Export/Import Transactions Deemed Harmful to Revenue Interests.

  Case-Laws - AT : Revision u/s 263 - it is correctly held by CIT that the TPO has passed the order without taking any cognizance of making any inquiries with respect to transaction of export and import. Therefore, such an order is erroneous and prejudicial to the interest of revenue. - AT
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• Receipts from Coordination Membership Agreement not taxable in India; no technical services rendered under DTAA Article 12.

  Case-Laws - AT : Income taxable in India - Addition of receipts from Industrial Liaison program (ILP) - the Appellant is only providing administrative support to the members and not rendering any technical services. It cannot be said that the Appellant is making available any technical know-how, experience, etc., or technical plan/design to the members as enumerated in Article 12 of the DTAA - Receipt from Coordination Membership Agreement do not qualify as ‘Fee for Included Services’ - AT
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• Compensation Paid for Unfulfilled Contractual Obligation Misclassified as Disallowed Expense Under Tax Law.

  Case-Laws - AT : Disallowance of expenditure - compensation paid to principal for non-fulfilment of contractual obligation - The principal would have to replace them that would lead to some expenditure as well as bad name in the market, so the compensation given by the assessee was on account of these commercial transactions. Therefore, both the authorities are incorrect in categorizing the expenditure as hit by Explanation 1 to Section 37. - AT
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Customs

• Tribunal Excludes Remnant Aviation Turbine Fuel Transport Costs from Customs Duty Valuation on International Flights.

  Case-Laws - AT : Aircraft pertaining to international flights - excess ATF on board - Inclusion of cost of transportation of remnant ATF in the IOCL price, on which the Customs duty has been discharged - Rule 10 (2) of the Valuation Rules, 2007 - As the issue has already been settled by the Larger Bench of this Tribunal in the assessee’s own case, therefore, the transportation cost is not to be included in the value of remnant ATF for determining the assessable value in this case. - AT
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FEMA

• Investigation of Foreign Investments Under FEMA Proceeds; Court Deems Applicability of Sections Premature.

  Case-Laws - HC : Validity of enquiry / investigation proceedings - Investment in foreign companies - violation of Sec.4 of FEMA - The permissibility of reading Sec.3 into Sec.4 requires to be considered independently, and the present stage is too premature for considering it. At any rate it cannot be considered in this proceedings, for, it was held in Raj Kumar Shivhare case [supra] FEMA is a complete Code, and it must be allowed its free space to work itself. - HC
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Indian Laws

• Warehouse Fire Sparks Debate Over Insurance, Customs Duty Reimbursement, and Unjust Enrichment Claims.

  Case-Laws - SC : Warehouse insured or not - fire incident - Loss of customs duty - Reimbursement of Customs Duty and unjust enrichment - To avoid any confusion, the customs duty component of the claim should, in the given event, be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants - SC
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• Cheque Dishonor Conviction Overturned Due to Lack of Notice to Company, Highlighting Procedural Flaws in Vicarious Liability Case.

  Case-Laws - HC : Dishonour of Cheque - conviction of accused - vicarious liability - In the present case ‘Notice’ under Section 138 of the Act of 1881 was never issued to the company - The company was not made a party to the proceedings under Section 138/141 of the Act of 1881 which itself makes the proceedings non-maintainable. - HC
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• Evaluating 'Group of Companies' Doctrine in Indian Arbitration: Balancing Corporate Law and Non-Signatory Binding Principles.

  Case-Laws - SC : Validity of the ‘Group of Companies’ doctrine in the jurisprudence of Indian arbitration - whether there can be a reconciliation between the group of companies doctrine and well settled legal principles of corporate law and contract law? - doctrine of competence-competence. - Any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement. - SC
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• Disciplinary Authority Reviews Misconduct Allegations Against Tax Commissioner in Quasi-Judicial Role.

  Case-Laws - HC : Allegation of Misconduct against the petitioner acting as Commissioner of Income Tax (Appeals) / CIT(A) - officials exercising quasi-judicial functions - exemption from disciplinary proceedings - If the disciplinary authority agrees with the pleas of Dr. Kothari/petitioner, then it shall close the proceedings. But if the disciplinary authority is of the view that the Charge Memorandum has been rightly issued, the disciplinary authority shall pass a reasoned order in the manner directed by us in that regard, so also on the Inquiry report. - HC
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Case Laws:

• GST

• 2023 (12) TMI 469
  Maintainability of appeal - requirement of deposit - whether on filing an appeal the ten per cent of the due amounts are to be paid from the Electronic Cash Ledger or the Electronic Credit Ledger? - HELD THAT:- It is noticed from Notification No. 53/2023 dated 02.11.2023 issued by the Ministry of Finance, Department of Revenue (Central Board of Indirect Taxes and Customs), which permitted filing of delayed appeals even beyond the period provided under Section 107 of the GST Act, that the stipulation was of paying an amount of 12.5 per cent of the amounts pending and due to be paid to the Department as against the 10 per cent prescribed by the statute. In the said Notification issued by the Central Government on the recommendation of the GST Council, it has been specifically stated that at least 20 per cent of the 12.5 per cent remaining due and payable should be paid from the Electronic Cash Ledger. Hence, even the GST Council understood the ten per cent to be enabled for payment through the Electronic Credit Ledger. It is pointed out that in the present case, already ten per cent of the amount remaining due and payable is remitted from the Electronic Credit Ledger which would make the appeal maintainable and the Appellate Authority shall consider it on merits. Petition allowed.

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• 2023 (12) TMI 468
  Cancellation of GST registration with retrospective effect - impugned order does not indicate any reasons for cancelling the registration - Violation of principles of natural justice - HELD THAT:- It is apparent that the impugned order, which is bereft of any reasons, cannot be sustained. However, the petitioner is not aggrieved by the cancellation of late Shri Khurana s registration, as according to him the business was closed down. He is aggrieved by the cancellation to the extent that it is effected retrospectively, from the date the registration was granted. It is considered apposite to direct that the order cancelling the registration shall take effect from 18.05.2020, the date of the Show-Cause notice. This is because it is the petitioner s case that no business was conducted thereafter - petition disposed off.

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• 2023 (12) TMI 467
  Confiscation of goods alongwith vehicle - Petitioner submitted that the petitioner is willing to furnish bond and sureties against the demand of tax, penalty etc. - HELD THAT:- Considering the said statement, the present writ petition is disposed of with liberty to the petitioner to approach the 1 st respondent for release of the vehicle and the 1st respondent will take a decision for release of the vehicle on furnishing bond and sureties, in accordance with the law. Petition disposed off.

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• 2023 (12) TMI 466
  Seeking release of goods alongwith vehicle - Validity of summons and the endorsement issued by respondent No. 2 - petitioner is ready and willing to pay the penalty, if there are any excess goods carried in the vehicle, but he does not admit excess goods having been carried and any violation having been committed - HELD THAT:- It is in the interest of the petitioner that he would participate in the physical verification and inquiry on the basis of the summons issued for physical verification of the goods, cooperate with the inquiry that would be conducted by the respondents and comply with the requirements as sought for by the respondents in production of documents as sought. The petitioner is duty bound by law to answer the summons issued by the respondents and to produce the documents. At the same time, the petitioner is at liberty either to make good the penalty or to challenge the said order before the appropriate forum - it is deemed appropriate to dispose of the petition. The petitioner shall approach respondent No. 3 and participate in the inquiry on the basis of the summons issued at Annexure G - petition disposed off.

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• 2023 (12) TMI 425
  Maintainability of appeal - appeal rejected as being defective for non-payment of the pre-deposit - HELD THAT:- Issue notice to the respondents. Pending disposal of this matter, the observations in the impugned order shall remain stayed.

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• Income Tax

• 2023 (12) TMI 465
  Validity of reopening of assessment - assumption of jurisdiction for reassessment - Period of limitation - Scope of extended period of six years - reassessment even after the expiry of four years from the end of the relevant assessment year, but, within six years from the relevant assessment year - delay of 340 days in filing the special leave petition - As decided by HC [ 2022 (8) TMI 1340 - MADRAS HIGH COURT] failure on the part of the assessee to fully and truly disclose all material particulars in our view would constitute the jurisdictional fact for invoking extended period of limitation and failure to record the existence of the above jurisditional fact while invoking the extended period under the proviso to Section 147 of the Act, would vitiate the entire proceedings - failure to render a finding as to the existence of the above circumstance warranting invocation of the extended period in terms of the proviso to Section 147 of the Act would vitiate the entire proceedings. Thus the initiation of reassessment proceedings is in excess of jurisdiction HELD THAT:- SLP dismissed both on the ground of delay as well as on merits.

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• 2023 (12) TMI 464
  Assessment u/s 153C and 153A - mandate of satisfaction recorded by the assessing officer of the searched person (153A) - date with reference to which the proceedings for assessment or reassessment of any assessment year - as decided by HC [ 2023 (4) TMI 1055 - KARNATAKA HIGH COURT] no satisfaction was recorded by the AO of the searched person because it is seen that the so-called satisfaction note prepared by the Assessing Officer in his capacity as Assessing Officer of the searched person, it could not be shown by the Revenue that any satisfaction note was prepared by him as the AO of the searched person. HELD THAT:- As petitioner(s) submitted that the issues which arise in this special leave petition are covered by the judgment of this Court in the case of Commissioner of Income Tax 14 v/s. Jasjit Singh [ 2023 (10) TMI 572 - SUPREME COURT] Following the aforesaid judgment, the Special Leave Petition is dismissed.

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• 2023 (12) TMI 463
  Income taxable in India - granting rights to the customers under EULA to use the software - taxable Royalty receipts both u/s 9(1)(vi) of the Act and under Article 12 of India-USA DTAA - sale of the End User Licence and Annual Maintenance Charges (AMC) - Whether amount received towards annual maintenance charges of the software are not ancillary or subsidiary to enjoyment of right to use software and thus not taxable as FTS/FIS? - HELD THAT:- Tribunal has returned a finding of fact that End User Licences issued by the respondent/assessee to its customers were non-exclusive and non-transferable and that the users were not given access to the source code. As regards the amount which the AO treated as FTS is concerned, the Tribunal concluded that Fee for Included Services (FIS) under the said Article would only mean payment made in consideration for rendering technical or consultancy services, if such services were ancillary and subsidiary to the enjoyment of right in the property. It was the Tribunal s view that since it had concluded that no right in the property had been transferred, Article 12(4)(a) of the DTAA had no applicability. Tribunal had also examined the applicability of Article 12(4)(b) of the DTAA. Tribunal concluded that the respondent/assessee had not made available any technical knowledge, experience, skill, know-how etc, to the recipients of such services. A finding of fact was returned in that behalf. We find that the first issue is covered by the judgment of the Supreme Court rendered in Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] and the second issue, in any case, is connected, as rightly held by the Tribunal, with the first issue.

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• 2023 (12) TMI 462
  Denial of benefit of lower rate of tax @ of 22% u/s 115BAA - failure to file Form 10-IC - Petitioner placed before the court Circular No.19/2023 dated 23.10.2023 issued by the Central Board of Direct Taxes (CBDT) which, in effect, condones the delay in filing Form 10-IC - HELD THAT:- We are informed by petitioner that in terms of the said circular, a fresh Form 10-IC has been filed, albeit, electronically. Accordingly, petiotioner says that the petitioner fulfills the conditions referred to in paragraph 3 of the said circular. In these circumstances, the writ petition is disposed of, with a direction to the CBDT to process the petitioner s request contained in Form 10-IC. CBDT will process the aforementioned prescribed form within eight (8) weeks from the date of receipt of the order passed today. The interim order which was made absolute on 19.05.2023, shall continue to operate pending the aforementioned exercise, and for further three (3) weeks, in case the result is adverse to the interest of the petitioner.

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• 2023 (12) TMI 461
  Addition as per Draft Assessment order u/s 144C - not allowing indexed cost of improvement to the property while computing the capital gains - assessee furnished reply which was rejected by the AO on the ground that assessee has failed to provide details of name, address and PAN of party to whom payment was made, did not furnish invoices, bank statements, reflecting the entries for the payment - whether cash withdrawal amounts were precisely used for the renovation work? - HELD THAT:- The submissions of the assessee that being an NRI he has issued cheques to Alok Lal for withdrawal of cash from his bank account for the purpose of utilizing the same for renovation of kitchen, cupboards, etc. cannot be ruled out. The explanation of the assessee is a plausible explanation. The observation of the AO that there is no written agreement to establish the relation between the assessee and the Fourth Dimension and its proprietor Alok Lal cannot be a ground for disbelieving the payments for utilizing the renovation work. In any case, there is no dispute about carrying out of the renovation work and the amount spent was only of Rs. 9,50,000/- for kitchen cup boards, etc.. Therefore, taking the totality of facts and circumstances into consideration, we accept the submissions of the assessee and the explanation as genuine and, therefore, direct the AO to allow the assessee the cost of improvement with indexation and re-compute the capital gains. Appeal of the assessee is allowed.

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• 2023 (12) TMI 460
  Deduction u/s 80-IC - Adjustment u/s 143(1) - claim for eligible unit in Rudrapur, Uttarakhand (8th year of claim) - Claim denied as Appellant did not file the Audit Report in Form 10CCB in respect its Rudrapur unit before the due date of filing the return of income - Determination of due date of filing the Return of Income - HELD THAT:- For a case to fall under clause (aa) of Explanation-2 to section 139(1) of the Act, the assessee is only required to furnish the report referred to in section 92E of the Act and there is no requirement under the aforesaid clause that the assessee has furnished the report referred to in section 92E of the Act. Therefore, we find no basis in the conclusion of the learned CIT(A) that since the assessee has failed to comply with the provisions of section 92E of the Act, the due date for filing the return of income was 31/10/2015. Vide Form 10CCB, filed by the assessee on 29/11/2015, the assessee disclosed the name of the related concerns in India, the nature of the transactions undertaken, and the transaction amount. Thus, from the said details not only the nature of specified domestic transactions undertaken by the Rudrapur unit of the assessee is evident but it is also evident that the aggregate of such transactions entered into by the assessee in the previous year exceeded a sum of Rs. 5,00,00,000. Therefore, we find no basis in the finding of the CIT(A) that there was no information before the AO while processing the return under section 143(1) of the Act, whether the assessee had, inter-alia, specified domestic transactions for which it was required to comply with the provisions of section 92E - Details of international transactions and specified domestic transactions provided in Form 3CEB filed on 18/03/2017 also support the claim of the assessee that the assessee was required to furnish the report referred to in section 92E of the Act. Accordingly, we are of the considered view that the due date for filing the return of income for the year under consideration in the case of the assessee is 30/11/2015 as per clause (aa) of Explanation-2 to section 139(1) of the Act, and thus, the original return filed by the assessee on 29/11/2015 is a valid return of income under section 139(1) of the Act. Revised return filed by the assessee on 29/03/2017 , it is pertinent to note that vide intimation dated 26/11/2016 issued under section 143(1) of the Act, the original return filed by the assessee on 29/11/2015 was processed and thus the revised return, which was filed subsequently, was not under consideration. Accordingly, we are of the considered view that the revised return filed by the assessee on 29/03/2017 was not the subject matter of appeal before the learned CIT(A) and thus the finding vide impugned order that the AO is justified in not accepting the return filed later on 29/03/2017 has no basis. As the return of income filed by the assessee on 29/11/2015 has been found to have been filed on or before the due date specified under section 139(1) of the Act, therefore the applicability of provisions of section 80-AC for denial of deduction under section 80-IC of the Act is also ruled out in the present case. AO has made the necessary adjustment while computing the total income as per section 143(1) of the Act by denying the claim of deduction under section 80-IC , as the assessee failed to comply with the provisions laid down in section 80-IC(7) read with section 80-IA(7) of the Act - As evident from the record that the assessee filed Form 10CCB in respect of its claim of deduction under section 80-IC of the Act on 29/11/2015, i.e. on the date of filing the original return of income. CIT(A) also recorded this fact . Therefore, the claim of deduction u/s 80-IC in its return of income was duly supported with Form 10CCB filed on 29/11/2015. Accordingly, we are of the considered view that the case of the assessee does not fall within the meaning of section 143(1)(a)(ii) read with Explanation (a)(ii). Insofar as the issue whether Form 10CCB filed by the assessee on 29/11/2015 was in terms of provisions of section 80-IC(7) read with section 80-IA(7) of the Act and Rule 18BBB is concerned, we are of the considered view that such an examination is not permissible under the limited scope of section 143(1) as under the said section during the assessment year 2015-16 only prima facie adjustments were permissible. Accordingly, we find no merits in the aforesaid findings of the learned CIT(A) to support the conclusion of denial of deduction under section 80-IC vide intimation issued under section 143(1) - Impugned order upholding the intimation issued under section 143(1) of the Act is set aside. Accordingly, grounds in assessee s appeal are allowed.

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• 2023 (12) TMI 459
  TP Adjustment - draft assessment order without making a reference to the Ld. TPO u/s 92 CA(3) and relying upon the findings of the TP Order issued in relation to different assessee [merged with the assessee pursuant to a scheme of merger] - HELD THAT:- Upon careful consideration, we note that assessee was incorporated on 9th March, 2017 i.e. during FY 2016-17. It has not undertaken any business operation during the year. There was no reference to TPO in this case. AO took the TPO s order in the case of Boeing Corporation India Ltd. (BCIL) and made an identical addition in this regard in the hands of the assessee. Thus, it is amply clear that there was no reference to TPO in the case of the assessee and the TPO in this case relates to BCIL. The BCIL merged with the assessee pursuant to a scheme of merger on appointed date of 1st April 2017. Thus, since BCIL merged with the assessee in AY 2018-19, it was an independent entity until March 31, 2017. Hence, any adjustment in the case of BCIL has nothing to do with the assessment of the assessee. The assessee s submissions has sufficient cogency that impugned international transaction referred to in TP order has not been entered by the assessee for the subject year and thus, does not pertain to the assessee. The said TPO s order which has been referred in the assessment order is in the case of BCIL, thus, the TP order pertains to BCIL rather than the assessee. In this factual background, when the assessee has not entered said transaction and there was no TPO reference in the case of assessee and the transaction of BCIL, which has merged with the assessee company on 01.04.2017, has been taken as assessee s transaction, the assessment order in this case is liable to be quashed. Ld. DR for the Revenue could not refute any submission of the assessee. Hence, we set aside the orders of the authorities below and direct that the transfer pricing adjustment is deleted. Appeal of the assessee is allowed.

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• 2023 (12) TMI 458
  Unexplained Sundry Creditors - Cessation of liability in respect of some creditors - HELD THAT:- The assessee filed primary details before the AO. Subsequently, the AO issued notices u/s 133(6) to creditors to confirm transactions with documentary evidence through e-mail ID. The notices were issued through ITBA Portal. The confirmation/reply were not received from all the parties regarding outstanding balances as on 31.03.2016. It was submitted that the AO had not issued any show cause notice before making any addition or intimation to the assessee for non-reply from the various parties and made addition without confronting the assessee about the non-receipt of the replies by the Assessing Officer. Absence of reply from the creditors do not entitle the Assessing Officer to treat the creditors as bogus without bringing any evidence on record to prove the payable are not indeed not required to be paid. Thus considering applicability of provisions of section 41(1) and the judgments in CIT v. Vardhman Overseas Ltd [ 2011 (12) TMI 77 - DELHI HIGH COURT] referring to the judgment in the case of Jay Engineering Works Ltd.[ 2007 (9) TMI 263 - DELHI HIGH COURT] and applying the ratio laid down the case of CIT v. T. V. Sundaram Iyengar Sons Ltd[ 1996 (9) TMI 1 - SUPREME COURT] under sec. 28 of the IT Act, considered the applicability of clause (a) of subsection (1) of section 41 as to what constitute remissions or cessation of trading liability, we decline to interfere with the order of the ld. CIT(A). Appeal of the Revenue is dismissed.

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• 2023 (12) TMI 457
  Registration u/s. 80G denied - belated filing of Form no. 10AB u/s. 80G(5) - Assessee argued as Provisional Registration granted u/s. 80G(5) on 01-10-2021 is the sufficient registration and not aware of the Final Registration which is required to be applied within six months of the provisional registration or six months of the commencement of the activities of the Trust - HELD THAT:- As time is extended up till 30-09-2023, whereas the assessee filed belated application on 28-02-2023. The above circular also clarified that even in case, where the application in Form No. 10AB was rejected by the CIT(E) on or before issuance of this circular dated 24-05- 2023, the assessee trust can make fresh application in Form 10AB on or before 30-09-2023. CIT(E) has not considered the clause 7 of the Circular no. 6 of 2023 thereby rejected the application which is in our considered view is against the circular issued by the CBDT. Therefore, we hereby set aside the impugned order passed by CIT(E) with a direction to reconsider the From No.10AB for final registration u/s. 80G of the Act by giving proper opportunity of being heard to the assessee trust. Needless to say the assessee trust should co-operate by furnishing all the required details as mandated under the law for granting final registration u/s. 80G of the Act. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (12) TMI 456
  Reopening of assessment u/s 147 - deduction u/s 10A disallowed - reason to believe that issue of escapement is established in the A.Y 2009-10 - As argued software development expenses including cost incurred outside India were fully disclosed and the computation of deduction u/s.10A was one of the subject matter of scrutiny before the AO who after analysing the details has even made disallowance out of claim of such deduction - HELD THAT:- The case of the AO is that, the issue of escapement is established in the A.Y 2009-10 when the fact came to light that the assessee is not eligible for deduction u/s 10A to the extent and in view of the same it was found that the assessee has been allowed excess deduction for the A.Y. 2006-07. There is no whisper that any material or information has come on record that assessee was not incurring expenditure for software development outside India, but doing body shopping by deputing the personnel for the outside clients, albeit, from same set of facts a different view has been taken in A.Y. 2009-10 that revenue generated from such employees and branches cannot be considered as export services from India and derived from STPI located in India, which inference of the AO on same fact ultimately has been found to be incorrect by Tribunal. Consequently the whole premise of reopening gets vitiated. Thus, reopening has been done merely on the basis of inference drawn by the AO on same facts and is not based on any material coming on record which can prove that there was failure on part of the assessee in so far as disclosure of correct facts are concerned. A different view taken on same set of facts which was part of the record in subsequent years does not tantamount to failure on part of the assessee. Accordingly, we hold that, there is no failure on the part of the assessee to disclose truly and fully material facts required for the assessment and the reopening has been done simply on the basis of a different view taken by the Assessing Officer in A.Y. 2009-10 and there is nothing tangible material which has been found in A.Y. 2009-10 pertaining to A.Y. 2006-07 or 2007-08. Otherwise, on merits also, the Tribunal has reversed finding of the DRP/AO in A.Y. 2009-10 which is the entire basis of reopening and addition in these years. This itself goes to show that there was no failure on the part of the assessee albeit, the claim of the assessee itself was allowable - Decided in favour of assessee.

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• 2023 (12) TMI 455
  Revision u/s 263 - Validity of order passed under section 92CA (3) of the act by the transfer pricing officer question - as per CIT AO failed to examine the arm s-length price of international transaction of export sales - As argued revision u/s 263 for TP Adjustment can be taken only with effect from 1/4/2022 - HELD THAT:- As per provisions of section 263 of the income tax act several authorities are authorized to call for and examine the record of any proceedings under the income tax act and if they consider that any order passed therein by the respective authorities including the learned transfer pricing officer is erroneous insofar as it is prejudicial to the interest of the revenue, such authority may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as deems necessary, passed such order thereon as the circumstances of the case justify. In this case as per the order of the learned transfer pricing officer under section 92CA (3) of the act dated 27/1/2021 says that reference u/s 92C (1) was received from the learned assessing officer on 31/12/2019 - Thereafter the learned transfer-pricing officer noted that assessee has not submitted form number 3CEB for the year under consideration. There was no reference that how transactions of export sales, import were benchmarked by the assessee by adopting which method, and how ALP of such transactions was determined. Thus, it is correctly held by CIT that the TPO has passed the order without taking any cognizance of making any inquiries with respect to transaction of export and import. Therefore, such an order is erroneous and prejudicial to the interest of revenue. It is also the fact that the CIT (TP) did not invoke the provisions of explanation 2 of section 263 of The Income Tax Act because of the reason that the order passed is without making any enquiry and therefore such an order is erroneous and prejudicial to the interest of revenue as there was no case to consider it under the deeming fiction of explanation 2 of that section. It is a case complete absence of inquiry in any manner. Therefore, it is erroneous and prejudicial to the interest of revenue u/s 263(1) itself. The income tax act authorizes the authority to revise the order if at the time of examination, such orders are on record. Thus, the date of passing of the order, which is subject to revision, is irrelevant but what is relevant is the date of examination of such record. If on the date of examination of such record. The revisionary authority is vested with powers to revise such orders [i.e. after 1/4/2022] the date on which such order subject to revision is passed is immaterial. Further if we take a view as canvassed by the learned authorized representative that any order passed by the learned transfer pricing officer on or after 1/4/2022 only can be revised, perhaps it will tantamount to putting the powers given to the revisionary authority in abeyance till that time. If we agree to such a view than, we are putting the powers of the revisionary authority in abeyance for further, at least 11 months. Therefore, such a view deserves to be rejected at threshold. No hesitation in holding that the learned PCIT (TP) is correct in holding that the order of the learned transfer pricing officer passed on 27/1/2021 is erroneous and prejudicial to the interest of the revenue as it was made without making any enquiry with respect to the export sales and import purchases from associated enterprises qua their arm s-length price. Decided Against assessee.

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• 2023 (12) TMI 454
  Leave encashment u/s 10(10AA) - Benefit of full exemption - assessee joined the Department of Telecom in the year 1981 which was corporatized by the Govt.of India in the year 2000 - Presidential Order thereby absorbing the assessee permanently into BSNL with effect from 01.10.2000 was passed and the leave at the credit of the assessee was transferred to BSNL on the date of absorption as provided for under Sub Rule 24(b) of Rule 37-A of the CCS(Pension) Rules - HELD THAT:- As per provisions of section 10(10AA(i)) of the Act, the assessee is entitled for exemption on the amount of leave encashment of 280 days leave earned during the period before absorption into BSNL to the tune of Rs. 8,60,776/- and 20 days of leave to the tune of Rs. 61,484/- as per provisions of sub section 2 of section (10AA) - Coordinate Bench of the Ahmedabad Tribunal on similar facts and circumstances allowed the appeal of the assessee in the case of Pradipkumar Bhogilal Modi Vs. ADIT(CPC) Bengaluru [ 2023 (7) TMI 1328 - ITAT AHMEDABAD] - Appeal of assessee allowed.

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• 2023 (12) TMI 453
  Income taxable in India - Addition of receipts from Industrial Liaison program (ILP) - Fees for Included Service (FIS), under Article 12 of the Double Taxation Avoidance Agreement between India and USA ( Treaty ) - Appellant is a non-resident company and tax resident in United States of America, educational institution incorporated as a non-profit organization under the laws of the State of Massachusetts imparting knowledge and educate students in science, technology and related areas of scholarships - HELD THAT:- Tribunal has in identical facts and circumstances in the case of Massachusetts Institute of Technology Ne Versus Deputy Commissioner Of Income Tax Intl Tax Circle 3 (2) (1) Mumbai [ 2023 (10) TMI 1186 - ITAT MUMBAI ] held that receipts from Industrial Liaison Program and receipt from Coordination Membership Agreement are not liable to tax in India in terms of Article 12 of DTAA as the same are not in the nature of Fee for Included Services . Whereas the Tribunal has confirmed the addition of receipts from Sponsorship Assignments holding the same to be Fee for Included Services taxable in India in terms of Article 12 of DTAA. Receipts from Industrial Liaison Program - As examining the scope of services provided by the Appellant under Industrial Liaison Program concluded that the Appellant provides factual information related to the research projects and the same does not involve rendering of any technical services or making available any technical knowledge or experience or skill. Therefore, the receipts from Industrial Liaison Program are not liable to tax in India in terms of Article 12 of the DTAA. Facts and circumstances being identical, respectfully following the above decision of the Tribunal in the case of the Appellant for the immediately preceding Assessment Year 2018-19, we hold that receipt from Industrial Liaison Program do not qualify as Fee for Included Services in terms of Article 12 of the DTAA and are, therefore, not taxable in India. Receipt from Sponsorship Assignment qualify as Fee for Included Services in terms of Article 12 of the DTAA and are, therefore, taxable in India. Receipts from Coordination Membership Agreements - The Appellant does not undertake any research nor does it describe any method or process involved in carrying out such research. Appellant merely provides help for accessing and dissemination of the consortium research to its members. The role of the Appellant is that of a coordinator between all the consortium members. Thus, the Appellant is only providing administrative support to the members and not rendering any technical services. It cannot be said that the Appellant is making available any technical know-how, experience, etc., or technical plan/design to the members as enumerated in Article 12 of the DTAA. Both the sides agreed that there is no change in the facts and circumstances of the case. Therefore, respectfully following the above decision of the Tribunal in the case of the Assessee for the immediately preceding Assessment Year 2018-19, we hold that receipt from Coordination Membership Agreement do not qualify as Fee for Included Services in terms of Article 12 of the DTAA and are not taxable in India. Denial of credit of TDS - We direct the Assessing Officer to verify the records and grant credit of tax deducted at source to the Appellant as per law.

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• 2023 (12) TMI 452
  Disallowance of expenditure - compensation paid to principal for non-fulfilment of contractual obligation - allowable business expenditure or not? - according to the assessee, the amount of rubber required to be used for production of one item was short and, therefore, the factory was shut down - how a business expenditure incurred by an assessee would be categorised as penal in nature with the application of Explanation 1 to Section 37? - HELD THAT:- In the present case, the assessee entered into with an agreement with M/s. JK Tyre Industries Limited for carrying out the manufacturing activity of J.K. Tyres on job work basis. It failed to produce the end product qualitatively according to the parameters of J.K. Tyres and dispute arose between the parties. In order to resolve the dispute, the assessee has to pay something to M/s. JK Tyre Industries Limited so that it can continue to work on behalf of M/s. JK Tyre Industries Limited for job work basis. Therefore, the expenditure was not incurred for any infringement of law rather, it is a by- product of commercial activity. For example, the assessee was required to manufacture a tyre by using 10Kg. of rubber, but it had used 11 Kg. or 9 Kg., tyre will not be to the specification of the principal and that would spoil the market of the principal and users will raise complaint. The principal would have to replace them that would lead to some expenditure as well as bad name in the market, so the compensation given by the assessee was on account of these commercial transactions. Therefore, both the authorities are incorrect in categorizing the expenditure as hit by Explanation 1 to Section 37. We delete the addition and allow the appeal of the assessee.

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• Customs

• 2023 (12) TMI 451
  Smuggling - Gold - suppression of bill for the purchase of gold despite its seizure from his bag - retraction of statement given under section 108 of Customs Act - reliability of the statements - accused admitted the commission of offence or not - validity of judgment of acquittal of the accused. Has the accused retracted his statement given under section 108 of the Customs Act as per Ext. D1? - HELD THAT:- In the instant case, Ext. D1 was produced from the Official custody, pursuant to summons. The contents of Ext. D1 have not been spoken to by anyone. The person who signed the document or, who received the document, or in whose custody it was kept, has not been examined. The only circumstance that stands proved is that a written document was handed over to the prison authorities while the accused was in custody. When a document, admissible in evidence, is marked, for it to be relied upon by the courts, its contents will have to be proved. For the contents of a document to have a probative value, the person who wrote the contents or is aware of the contents and its veracity must be invited to give evidence about it. It is thereafter the last stage, apply i.e., evaluation, which is a judicial exercise. Unless all these stages are carried out, a court of law cannot rely upon any document produced or marked before it - For the contents of a document to have a probative value, the person who wrote the contents or is aware of the contents and its veracity must be invited to give evidence about it. It is thereafter the last stage, apply i.e., evaluation, which is a judicial exercise. Unless all these stages are carried out, a court of law cannot rely upon any document produced or marked before it. Viewed in the above perspective, the contents of Ext. D1 cannot be said to have been proved. Hence, Ext. D1 cannot be treated as a retraction of the statement given under section 108 of the Act. Can the statement given by the accused under section 108 of the Act, produced as Ext. P8, Ext. P8(a) and Ext. P8(b) be relied upon? - HELD THAT:- The initial burden to prove that a statement given under section 108 of the Act was voluntary is on the prosecution. Even if such a statement has not been retracted, the prosecution still has the burden to prove that the accused made the statement voluntarily - As per section 3 of the Indian Evidence Act, 1872, a fact is proved only when the Court believes its existence so probable that a prudent man ought, under the circumstances of the particular case, act upon the supposition that it exists. In the nature of the circumstances referred to above, this Court does not believe that the statements Ext. P8, Ext. P8(a) and Ext. P8(b) purported to have been made under section 108 of the Act were voluntarily made by the accused. Therefore, no reliance can be placed upon those statements. Has the accused admitted to the commission of the offence in the statement under section 313 Cr.P.C? - HELD THAT:- The accused is alleged to have admitted in his statement under section 313 Cr.P.C to the act of smuggling. This Court could not identify any specific admission of commission of the offence. Even if it is assumed that there is any admission in the statement under section 313 Cr.P.C, the same cannot be relied upon as the sole material to convict the accused. Legally, a statement given under section 313 of Cr.P.C is not given under oath and hence cannot replace evidence. If the evidence of the prosecution leaves out an essential ingredient of the offence, that gap cannot be filled up by the statement under section 313 Cr.P.C. - The evidence of the prosecution witnesses indicates various inconsistencies and contradictions between them. Though few of the inconsistencies are inconsequential, some are substantial. Smuggling takes place when the Customs area is crossed without paying duty. Though the prosecution denied the existence of any place for storing goods, it is evident from section 42(2) read with section 12(3)(g) of the Airport Authority of India Act, 1994 that there are provisions for setting up warehouses to store goods brought by passengers. Similarly, there is absolutely no evidence regarding any previous smuggling of goods by the accused. The prosecution had not examined any witness or produced any document to show such previous conduct by the accused, and on the other hand, the evidence of DW1 indicates that the accused had been coming down to Kerala for business purposes, which evidence could not be dented by the prosecution during cross-examination. Therefore, the impugned judgment cannot be said to be perverse or impossible. The judgment of acquittal of the accused on the files of the Additional Chief Judicial Magistrate (EO), Ernakulam, needs no interference - Appeal dismissed.

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• 2023 (12) TMI 450
  Maintainability of appeal before Supreme Court in terms of Section 130E (b) of the Customs Act - recovery of erroneous drawback - HELD THAT:- Going by the 1st proviso to Section 129A(1) therefore, an appeal cannot be maintained before the Appellate Tribunal, and the said Tribunal does not have jurisdiction to decide such an appeal if the order of the Commissioner (Appeals) under Section 128A relates to payment of drawback as provided in Chapter X and the Rules made thereunder. It is therefore not clear as to how the Appellate Tribunal could have passed the impugned order in favour of the respondents herein. However, as that is not an issue that can be considered in these appeals, which themselves are not maintainable before us in view of the valuation of goods being an issue that was considered by the Appellate Tribunal, it is refrained from expressing any opinion on the said aspect. This aspect is best left to be considered by the Supreme Court in the appeal preferred by the revenue against the order of the Appellate Tribunal.

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• 2023 (12) TMI 449
  Change in classification - suppression of facts - Import of parts of mobile phones - Section 28(1) of the Customs Act, 1962 - HELD THAT:- As would be manifest from the report of the Expert, the parts imported constituted an incomplete mobile handset. It also noted that various other steps would be required to be completed including addition of essential components before the imported article could function as a mobile phone. We also bear in mind the stand of the petitioner which had consistently taken the position that it was importing parts of mobile handsets. Presently, the respondents have failed to draw our attention to any material which may prima facie sustain an allegation of suppression or misdeclaration so as to justify invocation of Section 28(4). The matter requires consideration. Till the next date of listing, the respondents shall stand restrained from taking further steps pursuant to the impugned SCN dated 01 September 2023. This order however, shall not preclude the respondents from proceeding further in terms of the SCN dated 25 July 2023.

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• 2023 (12) TMI 448
  Refund of Customs Duty paid under protest - classification of imported goods - fibre optic cable (DWSM OPGW) - refund claim of the respondent denied on the ground that the claimant has failed to satisfy the test of unjust enrichment - HELD THAT:- It is a fact on record that the assessee could only indicate the amount shown as receivables, as informed to them by the Department, the respondent has also indicated the same in the accounts as receivables, once they were informed of the test results and for which reasons they had paid the duty at the first instance only under protest. Once certain about the leviability of the imported goods at nil rate of duty, as informed to them by the Department, the respondent has also indicated the same in their books of account. Since the refund amount was contingent upon the outcome of the test report, it is very obvious that the said amount could not be reflected as receivables then and there. It is also noted that in case of M/S. SAVITA OIL TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [ 2016 (12) TMI 1222 - CESTAT MUMBAI] wherein the co- ordinate bench of this Tribunal had held that when the amount actually paid does not lead to obvious conclusion that the burden of duty has been passed on, the date of recording of the said amount in the Books of Accounts is irrelevant. Even otherwise, mere accounting is not conclusive proof that the burden of duty has been passed on and has to be empirically justified. There is no infirmity in the order-in-appeal passed by the ld.Commissioner (Appeals). Accordingly, the appeal filed by the Department is without merit - Appeal dismissed.

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• 2023 (12) TMI 447
  Classification of imported goods - Mi Web Camera - to be classified under Chapter Heading 8473 3099 as parts and accessories of Automatic Data Processing (ADP) Machines or under Chapter heading 8525 8010? - HELD THAT:- The impugned order does not dispute the fact that this Web Cameras satisfies the condition laid down under Chapter Note 5(C) and to be excluded from Chapter 8471, it needs to fall under one of the exclusions as specified under Chapter Note 5(D) - The Web Camera cannot be considered as television camera or digital camera or a video camera recorder. Hence, it definitely falls under Chapter Heading 8471. As per Chapter Note 5(C) and 5(D), the items are rightly classifiable under Chapter Heading 8471 as long as they satisfy the conditions laid therein and there is no dispute that these conditions have not been satisfied, the item has been excluded from Chapter 8471 only on the ground that Chapter Note 5(D) excludes television camera, digital cameras and video camera recorders. Moreover, the imported items web cameras are used principally with the ADP machines is not under dispute - The imported item under question is a web camera and as has been already decided in the case of HI-TECH COMPUTERS VERSUS COMMISSIONER OF CUSTOMS, BANGALORE [ 2004 (9) TMI 262 - CESTAT, BANGALORE] , the Tribunal has clearly distinguished that the web cameras are not digital camera nor it can be considered as a television camera. Therefore, the web cameras are rightly classifiable under Chapter Heading 8473 as claimed by the appellant and not under Chapter Heading 8525 as classified by the Department. Thus, Mi Web Cameras are rightly classifiable under Chapter Heading 8473 - the impugned order set aside - appeal allowed.

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• 2023 (12) TMI 446
  Aircraft pertaining to international flights - excess ATF on board - Determination of cost of transportation - Inclusion of cost of transportation of remnant ATF in the IOCL price, on which the Customs duty has been discharged - Rule 10 (2) of the Valuation Rules, 2007 - Confiscation of goods - levy of redemption fine and penalty - HELD THAT:- The issue which is to be decided by us is whether the transportation charges in terms of Rule 10 (b) of the Valuation Rules, 2007, are to be includable in the assessable value or not. The said issue has been examined by the Larger Bench of this Tribunal in the assessee s own case M/S JET AIRWAYS (INDIA) LIMITED VERSUS COMMISSIONER OF CUSTOMS (I) (AIRPORT) , MUMBAI [ 2021 (5) TMI 908 - CESTAT MUMBAI (LB)] , wherein this Tribunal has held ATF which is filled in the fuel tank of the aircraft is actually required to fly the aircraft and is a consumable for the airlines. It cannot, in such circumstances, be urged that ATF is being transported through the aircraft. A different situation would, however, arise if an oil company specifically imports ATF in large containers/tanker as goods or as cargo, for the purpose of selling the same to airlines. There can be no doubt that in such a situation the cost of transportation for import of ATF would have to be included in the transaction value for the purpose of determining the customs duty liability. As the issue has already been settled by the Larger Bench of this Tribunal in the assessee s own case, therefore, the transportation cost is not to be included in the value of remnant ATF for determining the assessable value in this case. The demand of duty confirmed against the assessee is set aside - As no demand is sustainable, consequently, no penalty is imposable on the assessee - appeal filed by assessee is allowed.

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• Insolvency & Bankruptcy

• 2023 (12) TMI 444
  Refund of amount which was received from Respondent towards fee of Liquidator and cost - Appellant challenging the impugned order submits that the Appellant charged fee for the period from 15.03.2022 to 17.02.2023 as per the provisions of Regulation 4(2)(a) read with Proviso to Regulation 2B(3) of the Liquidation Regulations, 2016. HELD THAT:- Sub-clause (3) of Regulation 2B specifically provides that any cost incurred by the Liquidator in relation to compromise or arrangement shall be borne by the Corporate Debtor, where such compromise or arrangement is sanctioned by the Tribunal under sub-section (6) of Section 230 and whereas such cost shall be borne by the parties who proposed compromise or arrangement, where such compromise or arrangement is not sanctioned by the Tribunal under sub-section (6) of Section 230. Whether the Scheme Proponent, who has submitted scheme for compromise and arrangement is liable to pay any liquidation fee, since in the present case, Liquidator is claiming a liquidation fee of Rs.23,01,000/- from the Scheme Proponent? - HELD THAT:- The provision of Section 34, sub-sections (8) and (9) is perused, which deals with fee of Liquidator for conduct of liquidation proceedings. The payment of fee, thus, has to be as per the statutory provisions under Section 34 sub-sections (8) and (9). Regulation 2B, which deals with compromise or arrangement specifically provide for payment of cost incurred by the Liquidator in relation to compromise and arrangement - The sub-regulation (3) of Regulation 2B, makes it clear that Liquidator is entitled to receive the cost incurred by the Liquidator in reference to comprise and arrangement from the Corporate Debtor and from the Proponent of the Scheme. In case the compromise is sanctioned, the cost shall be borne by the Corporate Debtor and in case compromise is not sanctioned the cost shall be borne by the parties, who proposed compromise or arrangement. The statutory provision is, thus, clear that Liquidator can only claim cost incurred from the parties who proposed the compromise or arrangement. A Scheme Proponent, who according to the Appellant is non-serious can be saddled with the cost, which may be a deterrent factor for any non-serious Scheme Proponent to submit a Scheme - the submission of the Appellant that Scheme Proponent should be saddled with liquidation fee is clearly contrary to the statutory scheme. Further, the definition of liquidation cost as contained in Regulation 2(ea) clearly provides that cost incurred by the Liquidator in relation to compromise or arrangement under Section 230 of the Companies Act, if any, shall not form part of liquidation cost. The said provision when read with Regulation 2B, clearly makes it clear that cost incurred with regard to compromise or arrangement has to be borne by the Corporate Debtor or Scheme Proponent. However, the said provision does not indicate that the Liquidator is not entitled to claim his fee during the period compromise or arrangement is under consideration. Since the Liquidator is entitled for his fee as per the provision of Section 34, subsections (8) and (9) and Regulation 4, it cannot be said that Liquidator is left high and dry with regard to his fee during the period compromise or arrangement is under consideration. However, whether Liquidator is entitled to fee beyond the period of 90 days for completion of compromise or arrangement is a different question, which need no answer in the present Appeal. The Adjudicating Authority committed no error in directing the Liquidator to refund fee, which was wrongly realized from the Respondent. The Appellant himself has brought on record various emails and reminders sent by the Liquidator to Respondent where Liquidator has asked Respondent No.1 to make various payments and the payments were made. The Liquidator was not entitled to claim any liquidation fee from Respondent for the period during which compromise and arrangement scheme was under consideration. As noted above in paragraph 14 of the reply, the Liquidator has claimed a fee of Rs.23,01,000/-, which is clearly unsustainable. Liquidator in paragraph 14 has given the details of all expenses and fee payable totaling to Rs.24,12,172. At the highest, the Liquidator was entitled to expenses. Thus, even if we allow all expenses claimed in paragraph 14 of the reply of the Liquidator, he was not entitled to a fee of Rs.23,01,000/- and after deducting the amount of Rs.23,01,000/- in total amount, the Liquidator at best is entitled for amount of Rs.1,11,172/- towards all expenses claimed by the Liquidator. The Adjudicating Authority has rightly directed the Liquidator to refund of the amount. As observed above, the Liquidator at best is entitled to expenses as claimed by him in the liquidation process and if the amount of all expenses claimed by the Liquidator are deducted, still the Liquidator is liable to refund the amount of Rs.22,77,108/-, as per his own calculation - the direction to refund the amount of Rs.23,88,280/- be modified for refund of the amount of Rs.22,77,108/-. From the facts which have been noticed and the manner in which the Liquidator has conducted the liquidation process, raises question on understanding of the liquidation process, liquidation regulations and the manner in which the Liquidator has demanded liquidation fee from the Scheme Proponent - appeal dismissed.

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• 2023 (12) TMI 443
  Exclusion of the time spent by the Appellant in the earlier litigation - invocation of Section 14 of IBC Act - HELD THAT:- Section 14(1) of the Act deals with the suit, Section 14(2) deals with the application and Section 14(3) is in respect of filing a fresh suit instituted upon permission granted by the Court. In Section 14(1) (2) the terms which are to be noticed and highlighted are prosecuting with due diligence and prosecuting in good faith . It has also been held that due diligence and caution are essential prerequisites for attracting Section 14 but due diligence cannot be measured by any absolute standards rather it is measured with prudence or activity expected from and ordinarily exercised by a reasonable and prudent person under the particular circumstances and in respect of good faith it has been observed that nothing shall be deemed to be done in good faith which is not done with due care and attention. It is further held that Section 14 will not help a party who is guilty of negligence, lapse or inaction. It cannot be said that the order passed by the Adjudicating Authority was without jurisdiction. The Adjudicating Authority had the jurisdiction to pass the order on an application filed under Section 60(5) of the Code. In the present case, the Applicant/Respondent invoked not only Regulation 31A(6) of the Regulations but also Section 60(5) of the Code - The Tribunal has recorded the reasons while disposing of the application which cannot be said to be an order having been passed without jurisdiction and the contention of the Appellant in this regard is totally incorrect. The order of the Adjudicating Authority may be, in the opinion of the Appellant, illegal but for that matter the Appellant has to prefer an appeal and not the writ petition and then a special leave petition before the Hon ble Supreme Court even against the order of the Hon ble High court by which the Appellant was relegated to avail his remedy of appeal and also granted stay till the appeal is filed. If this procedure is allowed to be followed then there would be no end to the filing of the writ petitions against the order of the Adjudicating Authority of the NCLT before the Hon ble High Courts and thereafter the orders of the Hon ble High Courts would be challenged before the Hon ble Supreme Court. There are no merit in the submission of the Appellant for excluding the period under Section 14 of the Act and since the appeal has been filed after the period of 53 days from the date of passing of the impugned order - appeal dismissed.

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• FEMA

• 2023 (12) TMI 442
  Validity of enquiry / investigation proceedings - taking cognizance of the complaint - Investment in foreign companies - violation of Sec.4 of FEMA - Competent Authority passed orders not to seize the assets of the petitioners - as alleged assessee subscribed to 70.0 lakhs shares in certain M/s. Silver Park, a Singapore based company, registered as per the laws of Singapore, and that he had later transferred those shares to his wife and two children outside India. Adjudicatory Authority in his show cause notice has indicated that they would be proceeded against u/s 13(2) and enquiry into this is underway - Adjudicating Authority had issued a corrigendum dated 13.03.2023, altering the provision from Sec.13(2) to Sec.13(1A) - Competent Authority constituted under the Act had vide his proceedings dated 03.02.2021, had decided not to seize the assets of the petitioners on a finding that these petitioners did not violate Sec.4 of the Act. HELD THAT:- Sec. 13 of the Act merely spells out the consequence of the violation of any of the provision of the Act, which includes Sec.4 embargo on a resident Indian, which mandates that no one who is resident in India shall hold foreign exchange or foreign securities outside India. The accusation which the petitioners herein now face is that they, as citizens and residents of India, are holding shares of a foreign company, and thus they have over stepped the line of prohibition under Sec.4. If the scheme of the statute is observed, Sec.13 comes into play only in the eventuality of the Adjudicating Authority entering a finding that the petitioners are guilty of the accusation which is now under enquiry. Set in the context, the corrigendum does not introduce any new set of allegations midway through an enquiry, but only put the petitioners on notice, that in the eventuality of they being found guilty of violating Sec.4, that the Adjudicating Authority might proceed against them under Sec.13(1A) consequence. Therefore, any alteration of provision regarding the consequence that may visit the petitioners will not, and cannot, prejudice the petitioners visa- vis the nature of accusation that they are now facing. Secondly, a close analysis of Sec.13 shows, it only provides a buffet of options to the Adjudicating Authority to choose from, on the course of action that the Authority may adopt when the stage is set for deciding the penal consequence of entering a finding of guilt. This situation is more akin to a Criminal Court altering a charge under Sec.216 Cr.P.C, without altering the facts constituting the accusation. The basic elements of principles of natural justice requires that the petitioners are put on notice on the possible course of action in the contemplation of the Adjudicatory Authority, if the petitioners are found guilty of the violation of Sec.4 On facts, the petitioners have entered appearance for a hearing on the notice of corrigendum, and that they have began participating in the proceedings. They are now given an opportunity to raise their objection before the Adjudicatory Authority. In a circumstance such as this what is the prejudice that has visited the petitioners which warrants an interference by this court? None. Here it is significant to note that in Raj Kumar Shivhare [ 2010 (4) TMI 432 - SUPREME COURT] has held that FEMA is a self-contained code and remedial fora, the Act as created should not be bye-passed. Its now time to consider the merit of the arguments of the petitioners counsel on the effect of the order of the Competent Authority passed under Sec.37-A of Act, releasing the properties of the petitioners from seizure. The reason which has formed the ground for the decision of the Competent Authority is that there are no materials to suggest that any money or foreign exchange has flown out of India to support the purchase of the shares in the Singapore based company. The fact that the Statute has created two independent authorities, one for adjudicating on the accusation under Sec.16 read with Sec.13, and the other for deciding on the seizure of assets of those who face the accusation, does not enable telescoping the effect of the what latter may do into the power vested in the former. What if the statute had vested both the powers in the same authority? Then the power of seizure will be construed as an interim arrangement in aid of final adjudication. And, the law is settled that the reasoning of an interim order will have zero potency to impact the reasoning for a final decision. The fact, that both these powers are vested in different Authorities, does not make the order passed by the Competent Authority vis-a-vis the seizure of assets any superior as to interfere with the power of adjudication of the Adjudicatory Authority. It is plainly a question on jurisdiction, and it cannot be expanded interpretatively. Secondly, if the reasoning of the Competent Authority in refusing to seize the property is considered, it focuses essentially on whether payment has been made by the petitioners for the purchase of shares in the Singapore based company, which is forbidden under Sec.3(b) of the Act. . The way statute has presented Sec.3 and Sec.4, it appears to create independent class of prohibitions. Now, if the reasoning of the Competent Authority is required to be transmitted into the adjudicatory process contemplated under Sec.16, as was canvassed by the petitioners, then it may involve a need to read Sec.3 into Sec.4. The permissibility of reading Sec.3 into Sec.4 requires to be considered independently, and the present stage is too premature for considering it. At any rate it cannot be considered in this proceedings, for, it was held in Raj Kumar Shivhare case [supra] FEMA is a complete Code, and it must be allowed its free space to work itself. The foregoing discussion leads this Court to the only conclusion: That these petitions are not entertainable. Now it is time to resume the enquiry by the Adjudicating Authority. The petitioners will be entitled to take all such defences which they are entitled to take under law.

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• PMLA

• 2023 (12) TMI 441
  Money Laundering - predicate offence - proceeds of crime - specific contention raised by the learned Senior Counsel appearing for the petitioners is that consequent to the acceptance of the refer report submitted by the police, the predicate offences based on which the proceedings under the PMLA were initiated are no longer in existence - whether the continuation of the proceedings under the PMLA in this case is legally sustainable? HELD THAT:- It is now well settled that one of the basic requirements for initiating proceedings under the PMLA is the commission of an act or indulgence in any process of activity connected with the proceeds of crime by the accused persons - The Hon ble Supreme Court in Vijay Madanlal Choudhary s case [ 2022 (7) TMI 1316 - SUPREME COURT ], after elaborately discussing the statutory provisions as well as the object and reasons behind the enactment of the PMLA, came to a specific conclusion that in the absence of a predicate offence, the proceedings initiated under the PMLA cannot be continued. Thus, the position of law in this regard is well settled. The existence of a predicate offence is a pre-requisite for initiating or continuing the proceedings under the PMLA. Therefore, the question to be considered in this case is whether the predicate offences exist. While considering the said question, the crucial document to be considered is Exhibit P18 refer report submitted by the Crime Branch in which, it is reported that the offences were not found out and the case was referred as a mistake of fact. On going through Exhibit P18 refer report, it can be seen that, the allegations raised by the respondents 3 and 4 were investigated into and found to be not correct. Whether the acceptance of the final report/refer report by the jurisdictional court will have any impact on proceedings under the PMLA? - HELD THAT:- The learned Magistrate cannot refuse to take the refer report into the file, unless any defects or incompleteness in the said report are noted. In this case, no such defects or incompleteness are noted, and instead, the report as such was accepted. The term refer accepted , therefore, can only indicate that the conclusion arrived at by the Crime Branch in the refer report as such was accepted by the learned Magistrate, and the defacto complainant was granted an opportunity to pursue the protest complaint. What would be the consequence of the protest complaint, which is now pending consideration before the learned Magistrate, in relation to the proceedings initiated under the provisions of the PMLA? - HELD THAT:- It is true that, the offence under Section 120B is included in the schedule. However, as far as the said offence is concerned, unless the criminal conspiracy relates to the commission of the offences coming within the schedule of PMLA, such conspiracy cannot be treated as a predicate offence. As far as the offence under Section 120B is concerned, which is criminal conspiracy, the character and punishment depend upon the offences, for the commission of which, the criminal conspiracy was entered into. Therefore, the criminal conspiracy has no independent existence as it will always depend upon the offence for which the conspiracy was entered - even if cognizance is to be taken for the offences referred to above, the same would not justify the initiation or continuation of the proceedings under PMLA as it cannot be held that those are predicate offences which would enable the 2nd respondent to continue the proceedings. The only irresistible conclusion possible is that, the predicate offences, based on which proceedings were initiated under the PMLA, are no longer in existence - the present proceedings are without any legal sanction, and therefore, interference is required - Petition allowed.

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• 2023 (12) TMI 440
  Seeking grant of Regular bail - Enforcement Directorate officials have adopted illegal methods during investigation - violation of the twin requirements reason to believe - HELD THAT:- The petitioners have been complaining about the misuse of the powers of the Enforcement Directorate and the mode adopted was abuse of power and authority. Having the alleged information about the involvement of the petitioners, the ED authorities have resorted to keeping the petitioners under their control restricting the movements and statements allegedly recorded under Section 50 of the PML Act, 2002 and immediately arrested them. The Ed officials have acted arbitrarily. There is nothing new which was found during the examination of these petitioners, which was not known earlier to the Agency through A2. The evidence collected is circumstantial. Even without a statement under section 50 of the Act, case can be proved against an accused. In Satender Kumar Antil v. Central Bureau of Investigation [ 2022 (8) TMI 152 - SUPREME COURT] , the Honourable Supreme Court held that arrest is not mandatory in every case. Before arrest is made, curtailing the personal liberty on the basis of the relevant facts should be considered. All the transactions are of the year 2011 and it appears that all the transactions are to the knowledge of the Investigating Agency. The transactions are borne by record and the evidence is circumstantial in nature. Complicity or otherwise of the petitioners can be inferred from the transactions during trial, which is unlikely in the near future. Detention cannot be by way of punishment at the stage of investigation. The apprehension of the learned Assistant Solicitor General that the petitioners are at flight risk can be dealt with by imposing conditions. This Court deems it appropriate to grant the relief of Regular Bail to the petitioners-A1 A3 subject to the fulfilment of conditions imposed - petition allowed.

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• Service Tax

• 2023 (12) TMI 445
  Levy of service tax - Renting of Immovable Property Services or not - Appellant has been giving the premises situated at Krishi Pradarshini, Aligarh on rent to different vendors/persons for carrying out business from that premises - registration not taken - non-payment of service tax - non-filing of statutory ST-3 returns as prescribed - demand alongwith interest and penalty - extended period of limitation - HELD THAT:- The taxable service under the category of renting of immovable movable property with effect from 01.07.2012 has been made declared service as per Section 66E of the amended Finance Act, 1994. Also all the expansions in the definition as it existed prior to this date have been deleted. Thus all cases of renting of immovable property has been declared as taxable service and made liable to service tax, without any exception for those specified under the negative list - it is not found that appellant falls under any of the category as specified by the negative list. From the plain reading of Notification No.25/2012 it is evidence that this entry exempts the services of charitable nature of fake registered society/trust registered under Section 12AA of the Income Tax Act. It does not say that the trust/society registered under Section 12AA of the Income Tax Act is exempt from payment of service tax. The activities undertaken by the appellant are in nature of commercial activities or a consideration for providing certain income - there are no merits in the arguments advanced by the appellant to affect that for the reason that they are registered under Section 12AA of Income Tax Act, this exemption should be allowed to them. In our view this exemption Notification is not available to the appellant. Section 78 is pari material with Section 11AC of the Central Excise Act, 1944. Since it is held that extended period has been rightly invoked under Section 73 of the Finance Act, 1994, penalty under Section 78 cannot be faulted with - there are no irregularity in respect of penalties imposed. Further, penalty under Section 77 has been imposed for the reason that appellant was not filing the ST-3 returns during the said period and also the penalty imposed seems to be reasonable, the penalty for non-submission of ST-3 return upheld. Late fee also imposed under Section 70 of the Act read with Rule 7C of the Act seems reasonable. Interest - HELD THAT:- As the appellant has failed to pay the service tax by the due date, the demand of interest under section 75 of the Finance Act, 1994 is upheld. Extended period of Limitation - HELD THAT:- Having known that service tax was leviable under this category appellant should have taken registration and started paying the service tax. They deliberately did not took registration and did not paid the service tax during the period of demand. Hence the benefit of bonafide belief cannot be extended in the present case to the appellant. Also it is on record that appellant were not filing any returns etc during the period and have never declared the services provided to the department, despite being aware that the services provided by them were taxable - Extended period rightly invoked. There are no merits in the appeal - appeal dismissed.

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• 2023 (12) TMI 439
  Maintainability of the writ petition on the ground that an alternate remedy is available - Correctness of Instruction dated 11.05.2011 issued by the Director, Service Tax under the Ministry of Finance through its Department of Revenue - declaration that Course Certificate being issued by Flying Training Institutes cannot be held as recognized in law for the purposes of exemption from paying service tax - time limitation - HELD THAT:- On perusing the judgment of the Delhi High Court in Indian Institute Aircraft Engineering [ 2013 (5) TMI 592 - DELHI HIGH COURT ] it is found that Instruction dated 11.05.2011 that is impugned in the present writ petition was also the subject matter of consideration therein. The Division Bench after considering various provisions of the Act of 1994 including Section 65(27) alongwith Rule 133-B of the Rules of 1937 has held in clear terms that the certificate/training qualification offered by the Institute approved by the DGCA have been conferred some value in the eyes of law. A distinction has been made under the relevant Statutes and the Rules framed thereunder between an approved institute and an un-approved one. Since a successful candidate from an approved institute is entitled to enforce the right conferred on him by Statute, the inference drawn was that the Course Completion Certificate offered by such Institute was recognized by law. The learned counsel for the respondents is justified in contending that in view of low tax effect, the guidance under Instruction dated 22.08.2019 issued by the Department of Revenue was followed. He submits that since Instruction dated 11.05.2011 had not been held to be illegal or ultra vires, the withdrawal of the proceedings on the basis of earlier Instruction dated 17.08.2011 was justified. Maintainability of the writ petition on the ground that an alternate remedy is available - HELD THAT:- It is found that the present writ petition was filed on 10.09.2014 raising a challenge to Instruction dated 11.05.2011 and the show cause notice dated 18/21.10.2013. Since Instruction dated 11.05.2011 was also the subject matter of consideration by the Delhi High Court vide its decision in Indian Institute of Aircraft Engineering [ 2013 (5) TMI 592 - DELHI HIGH COURT ] that was decided on 21.05.2013, the writ petition was entertained. It was informed however that the judgment of the Delhi High Court was subjected to challenge before the Hon ble Supreme Court. The hearing of the writ petition was therefore deferred till the time the proceedings were decided by the Hon ble Supreme Court. In the interregnum, the show cause notice issued to the petitioner was adjudicated. Time Limitation - limitation of period of eighteen months as prescribed by Section 73(1) - HELD THAT:- It is seen from the show cause notice dated 18/21.10.2013 that it does not refer to any fraud, collusion, wilful mis-statement or suppression of facts at the behest of the petitioner to invoke the larger period of limitation of five years. For this reason the provisions of Section 73(1) would be attracted and the period beyond eighteen months would not be liable to be taken into consideration. Thus the period of demand from August-2008 to April-2012 being beyond eighteen months from issuance of the show cause notice dated 18/21.10.2013 is liable to be excluded. The petitioner has made out a case for grant of relief. Accordingly it is held that Instruction dated 11.05.2011 cannot be made applicable to the facts of the present case. Hence the show cause notice dated 18/21.10.2013 and the order dated 24.12.2014 passed on that basis are set aside - petitioner would be entitled to refund of the amounts of service tax as paid under protest pursuant to the show cause notice dated 18/21.10.2013 in accordance with law. Petition allowed.

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• 2023 (12) TMI 438
  Benefit of the exemption notification no. 32/2004- ST dated 3.12.2004 - Denial of benefit on the ground that he had produced only the photo copy of the declaration of three service providers on their letter head for which the authenticity of the documents could not be verified - HELD THAT:- The appellant herein while submitting the photo copies of the declaration had sufficiently complied with the conditions of the notification to state that they have not taken the credit of duty paid on inputs or capital goods and did not avail the benefit under the notification no. 12/2003-ST dated 20th June, 2003. During the course of hearing, the learned Counsel for the appellant had produced the original copies of the said declaration, and an opportunity was granted to the learned Authorised Representative for the Revenue to examine the same and on perusal thereof, he did not find any infirmity in the photocopy in comparing the same with the original certificate. There are similar declarations by other GTA s on record. There is, therefore, no reason to deny the benefit of the exemption notification to the appellant - it is also found that Circular No.B/16/2005 TRU dated 27.7.2005, has clarified that in cases where liability for tax payment is on the consignor or consignee, a declaration by the goods transport agency in the consignment note issued, to the effect that neither credit on inputs or capital goods used for provision of service has been taken nor the benefit of notification no. 12/2003 Service Tax has been taken by them may suffice for the purpose of availment of abatement by the person liable to pay service tax. The issue decided in favour of the appellant on merits, the issue of levying interest or penalty does not survive - The invocation of the extended period is also not sustainable. The impugned order deserves to be set aside - The appeal stands allowed with consequential benefit.

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• 2023 (12) TMI 437
  Advance payment received in terms of the Notification No. 36/2010 ST dated 28.06.2010 to avail the benefit of the exemption - Date of receipt of consideration of services in case where cheques were received on or before 30.06.2010 but were honoured on or after 01.07.2010 - suppression of facts or not - extended period of limitation - HELD THAT:- It is not a case of suppression or mis- statement of facts as no specific allegations have been made in the show cause notice. She is right in saying that the issue involved interpretation of the notification so as to be entitle to claim the exemption therein. There can always be two opinion as to whether it is the date of the cheque on which it is being presented or the date when the said cheque is encashed which has to be taken into account. The appellant was under a bonafide belief that since they had received the advance payment by way of cheque prior to the appointed date, they were entitle to the exemption under the notification and therefore did not pay the service tax. In such circumstances, the invocation of the extended period of limitation has been held in series of decisions to be untenable and therefore the demand shall not be maintainable. In the decision of this Tribunal in M/S. GANNON DUNKERLEY CO. LTD. VERSUS COMMISSIONER (ADJUDICATION) OF SERVICE TAX, NEW DELHI [ 2020 (12) TMI 1096 - CESTAT NEW DELHI] , it has been observed that where the appellant is regularly filing the returns, the department cannot take a stand that it is only during the audit that it can examine the factual position and therefore it cannot be urged by the department that if the officers of the audit team had not conducted the audit, non-payment of service tax would not have been unearthed and therefore the extended period of limitation could not have been invoked as it was not a case of suppression of facts by the appellant. In the present case also, it is the submission of the appellant that they are duly filing ST-3 returns, which has not been disputed by the learned authorised representative for the revenue and therefore in the light of the principles laid down by the Principal Bench, the extended period of limitation cannot be invoked by the department. The penalty and the interest shall also not be levied - Appeal allowed.

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• 2023 (12) TMI 436
  Valuation of service - requirement to include amount towards expenses like conveyance, courier charges, miscellaneous expenses, stationery charges and travelling expenses etc. in the assessable value or not - invocation of provisions of the Rule 5 of the Service Tax (Determination of Value) Rules, 2006 read with Section 67 of Chapter 5 of Finance Act 1994, as also the Rule 5(2) of Service Tax (Determination of Value) Rules, 2006 - recovery of interst and penalty. HELD THAT:- The issue regarding leviability of service tax on the reimbursed amount came up before Delhi High Court in the Writ Petition filed by UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] , where after going through the Statutory Provisions under the Finance Act 1994 and Rules made there under, the Hon ble Court declared Rule 5 to be ultra vires of the provision of Section 66 67 of Finance Act 1994. The Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT] examined the correctness of the judgment of the Delhi High Court upheld the decision of Hon ble Delhi High Court. The Hon ble Supreme Court also took note in para 29, that Legislature amended Finance Act in 2015, with effect from 14.05.2015, amending the definition of consideration to include reimbursable expenditure / cost incurred by the service provider and therefore observed that with effect from 14.05.2015, by virtue of provisions of Section 67 itself, such reimbursable cost or expenditure would also form part of the valuation of taxable service for charging service tax and also held this amendment has to be prospective in nature. Hon ble Supreme Court finally dismissed the appeal filed by the Union of India, thereby upholding the decision of the Delhi High Court which had struck Rule 5 as unconstitutional as well as ultra vires. There is nothing on record in the Show Cause Notice to the effect that the expenses incurred by the Appellants were not being reimbursed on the actual basis by the client. On the contrary, the Appellants have submitted that these were being reimbursed by the clients on the actual basis for which they were issuing debit notes, and not invoice. Therefore, the nature of the expenses / cost is nothing but reimbursable expense / cost. The provision under which such expense / costs were proposed to be included i.e. Rule 5 has been held to be ultra virus, and as such no longer applicable and therefore such reimbursable expenses cannot be included in the gross value charged even by invoking Section 67, keeping in view of the judgment cited supra. It is only after the amendment in the definition of consideration in 2015, such reimbursement can be included in the gross value charged. The demand cannot be sustained and therefore the Order of the Commissioner (Appeals) is liable to be set aside - Appeal allowed.

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• 2023 (12) TMI 435
  CENVAT Credit - input service or not - Insurance Premium paid to Deposit Insurance Credit Guarantee Corporation (DICGC) - HELD THAT:- The issue is no longer res-integra and the same have been adjudicated by the Hon ble Kerala High Court in THE PRINCIPAL COMMISSIONER OF CENTRAL TAX CENTRAL EXCISE, COCHIN VERSUS M/S SOUTH INDIAN BANK AND M/S CATHOLIC SYRIAN BANK LTD [ 2022 (12) TMI 1479 - KERALA HIGH COURT] the High Court relying on the ruling of Larger Bench of this Tribunal in South Indian Bank being Final Order No. 20691-30708/2020 dated 23.09.2020 [ 2020 (11) TMI 120 - CESTAT BANGALORE] , have held that similarly situated assessee like banks are entitled to take Cenvat Credit on the premium paid to DICGC for the insurance services rendered by DICGC to the banks. Hon ble High Court observed that without accepting deposits the bank cannot extend loans which is necessary to earn profit and the banks are under Statutory obligations to ensure the deposits received are issued for conducting the banking business. Further, the commercial banks face the risk of being dilicensed by the RBI if they did not insure the deposits with the DICGC (subsidiary of RBI). The impugned order is set aside - Appeal allowed.

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• Central Excise

• 2023 (12) TMI 434
  Incorrect availment of CENVAT Credit - inputs - SS Patta/Patti, SS Circle, SS Flat, SS sheet etc. - denial of credit on the ground that Appellant melts its inputs and produces SS Billets/Wires/rods/bars etc. and there is no proof that the Appellant uses SS Patta/Patti, SS Circle, SS Flat, SS Sheet (assuming it to be virgin material) - HELD THAT:- In the facts and circumstances of the present case, it must be held that the Appellant had in fact received SS waste and scrap supplied to them through dealers, on documents, which otherwise show that it was seconds/defective etc. and had correctly availed Cenvat Credit thereon, in absence of any cogent evidence regarding either diversion of such goods by suppliers or replacement thereof by the Appellant from any other local source - Also, when it comes to the issue of availing Cenvat Credit on MS scrap, the allegation is that the domestic scrap was received by the Appellant Company on which no Central Excise duty would have been paid, whereas the credit was availed on basis of invoices raised by the dealers. There revenue department has doubted the factum of dealers themselves receiving duty paid MS scrap. The cross examination of various witnesses was granted to the Appellant, wherein it transpires that most witnesses have either stated that they do not remember the details of the transaction or that the statements did not correctly bring out the factual matrix involved, leading to the evidentiary value of the oral evidences to be diminished. In certain occasions, the contradicting stand taken by some witnesses in first retracting their statements and then during the course of later proceedings stating that they mistakenly retracted it, leading to strong suspicion on the genuineness of the manner in which the statements were recording and entire investigation was done. Even in case of MS scrap, there is no allegation or proof of flow back of amounts by anyone to the Appellant as well. There is no evidence of procurement of domestic scrap in cash from open market as well. There is no evidence of sale of duty paid scrap by Dealers in question, to any third party in cash as well. The factum of duty paid goods being cleared by manufacturers and receipt of proper invoice by the Appellant are not in dispute as well - The 9078 MT of MS scrap was procured by the dealers and as involved in the present case, if domestic scrap was procured locally to substitute this, not a single supplier for domestic scrap (which presumably was sent to the Appellant) is identified by revenue. Such huge quantity of MS scrap if was sold to other buyers by the Dealers, again it is not shown to whom it was sold as well. There is no proof of receipt or payment for domestic scrap by any person to any other person as well. The revenue has not been able to substantiate its case, except raising allegations based on mere conjectures and surmises, that the Appellant had not received MS and SS scrap through the dealers. There is no other corroborative evidence to substantiate such serious charges and the demand on this count as such must be quashed and set aside. The impugned orders are set aside - Appeal allowed.

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• 2023 (12) TMI 433
  Refund claim - Substantial expansion of installed capacity and availed benefit of N/N. 50/2003-CE dated 10.06.2003 - denial of refund claim on the ground that the appellants have violated conditions of Notification No.49-50/2003-CE dated 10.06.2003 and SSI Exemption No.08/2003 dated 01.03.2003 and also for the reason of unjust enrichment. The appellants argue that the new unit started by them has no connection with the existing manufacture and has to be treated as a new unit for the purpose of the notification. HELD THAT:- This issue has been considered by the Bench at New Delhi in the case of Tirupati LPG Industries Ltd. [ 2015 (10) TMI 622 - CESTAT NEW DELHI] ; whereas the appellant in the impugned case was manufacturing V.P. Rings and has established a unit to manufacture/ fabricate machinery, in the case of Tirupati LPG Industries Ltd. [ 2015 (10) TMI 622 - CESTAT NEW DELHI] , they were manufacturing LPG Cylinders and have started a unit for manufacture of ACSR Conductors and claimed the exemption under Notification No.50/2003; the facts of both the cases are identical. The machinery manufactured by the appellants by establishing a separate unit which started production after 07.01.2003, is eligible for benefit of Notification No.50/2003 - the contention of the learned Counsel for the appellant that there is no condition, whatsoever, in the said notification, so as to restrict benefit to only those units which are permitted by the District Industries Centre or any other authority, is agreed. Principles of unjust enrichment - HELD THAT:- The appellants have submitted a certificate issued by a professional Charted Accountant, which has not been negated with evidence and therefore, it is found that there is no reason as to why the certificate should be disbelieved. Moreover, the bona fides of the appellant are established by the fact that an amount of Rs.93,120/- was not claimed by them for the reason that the same has been recovered from the customers; the same has been confirmed by the report of the Revenue Officer also - the claim of the appellant that in respect of an amount of Rs.32,206/-, cum-duty value must be considered, not agreed; it is found that the moot point is not about the cum-duty value but is about the fact whether the appellants have recovered the amount representing as duty from the customers. Therefore, the appellants are not eligible for this portion of the refund. The appeal is partly allowed.

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• 2023 (12) TMI 432
  Violation of principles of unjust enrichment - Denial of access to eligible refund of duties of central excise, arising from finalization of provisional assessment for clearances effected from April 2011 to June 2011 - HELD THAT:- It is seen that several orders of the Tribunal have held that such refunds cannot be withheld on the ground of unjust enrichment. Furthermore, these were not only accepted but also those in which first appellate authority followed the decision of the Tribunal. Reliance can be placed in M/S. SAVITA OIL TECHNOLOGIES LTD. VERSUS COMMISSIONER OF CGST CE, BELAPUR [ 2023 (2) TMI 1225 - CESTAT MUMBAI] where it was held that In case of N G Thakkar [ 2012 (3) TMI 248 - BOMBAY HIGH COURT ] it has been held that the decisions of the lower appellate authorities that the duty element has not been passed on to the customers is based on verification of the evidence adduced by the assessee. There are no merit in the impugned order which is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (12) TMI 431
  Levy of tax on 25% of chemicals used as consumables in the process of job work of dyeing of fabric by assuming that property in the goods has passed on to the principals - levy of tax on the entire value of dyes used by the appellant in the job work process of dyeing of fabric ignoring the quantity of dyes which are wasted during the process in which property is not transferred to the principals - dyes and chemicals is transferred to the principals in the job work of dyeing the fabric - HELD THAT:- The issue having already been decided against the State and the matter being covered by the judgment of the Apex Court in THE STATE OF HARYANA ANR. VERSUS M/S. A.P. PROCESSORS [ 2023 (7) TMI 942 - SC ORDER] , order passed by the Tribunal and the Authorities below are not sustainable. The matter is remanded to the Assessing Officer to conduct the factual enquiry by giving liberty to the parties to take all the pleas in support of their respective case as observed in M/s. A.P. Processors case. Appeal allowed by way of remand.

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• Indian Laws

• 2023 (12) TMI 430
  Warehouse insured or not - cause of fire incident that occurred - introduction of additional reasoning to justify the repudiation - Alteration to insured premises and risk increase - Cause of fire and negligence - multiple reports - Value of a surveyor s report - Extent of liability when cause of fire indeterminable - Reimbursement of Customs Duty and unjust enrichment. Appellants contended that the cause of the fire was negligence on the part of the insured. Introduction of additional reasoning to justify the repudiation - HELD THAT:- In earlier cases like Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd. Anr. [ 2016 (7) TMI 1603 - SUPREME COURT] and SAURASHTRA CHEMICALS LTD VERSUS NATIONAL INSURANCE CO LTD [ 2019 (12) TMI 1664 - SUPREME COURT] , it was declared that new grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter - thus it is held that the insurer cannot introduce additional reasoning beyond those detailed in their letter, to justify the repudiation. Location of fire if covered under the policy or not - HELD THAT:- Looking at the policy documents, the Leave License Agreement and various communications received from the customs, police, fire electricity departments, it is reasonable to conclude that the insured premises was the one that was identified and insured at Survey No. 9/3, by the insurance company. Needless to say, there is nothing to conclude that the area where the fire occurred on 14.03.2018 was not covered by the said insurance policy. Alteration to insured premises and risk increase - HELD THAT:- Clause 3(a) indicates that the insurance policy would cease to be applicable or cover the insured premises in certain cases where there is an increased risk of loss or damage to the insured premises or goods within it. In this case, the insured had undertaken repairs on the rooftop to prevent water leakage to the warehouse. Such essential repair work on the rooftop by itself, cannot be reasonably construed to be an alteration that would increase the risk of loss or damage, as has been urged by the insurance company. In present assessment, the said repair work would not fall in the category of an alteration which would increase the risk insured for the warehouse premises. Therefore, no infirmity is seen with the view taken by the NCDRC on the same. Cause of fire and negligence - multiple reports - HELD THAT:- The repudiation as noted is based on two reports (i) the forensic report of Screen Facts Service Pvt. Ltd. and of (ii) M/s Bhansali Co. The first one notably was inconclusive. The other reports suggest short-circuit as the likely cause, not negligence. The significant time gap that exists between the welding work and the fire at 16:30 has no logical explanation. The basis of the repudiation accordingly appears to be un-reasonable and is not acceptable. Value of a surveyor s report - HELD THAT:- The surveyor s report, although comprehensive otherwise, is inconclusive on the aspect identifying the actual cause of fire. Given that the surveyor s report only relies on the Forensic Examiner, i.e., M/s Screen Facts Services Pvt. Ltd. s findings, it would be unsafe in this Court s opinion to rely on the said report. Extent of liability when cause of fire indeterminable - HELD THAT:- It was unequivocally declared that the precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company s obligation to the insured is of much greater import. The NCDRC s judicious application of this binding precedent appears to be well-merited. Reimbursement of Customs Duty and unjust enrichment - HELD THAT:- The reports suggesting electrical short circuit as the trigger for the warehouse fire, is found to fit in with the attendant circumstances. As a corollary, the fire at the warehouse cannot be attributable to any negligent act of the insured. Moreover, the fire is found to have occurred within the insured warehouse and the appellant s plea to the contrary, is not believable. Therefore, it is a case of wrongful repudiation by the appellants. No legal infirmity is thus seen with the impugned decision favouring the respondent s insurance claim. The appeal of the Insurance Company deserves to be dismissed. But even while dismissing the appeal, to avoid any confusion, the customs duty component of the claim should, in the given event, be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants - the appeal stands dismissed favouring the insured.

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• 2023 (12) TMI 429
  Dishonour of Cheque - matter settled between the parties - compounding of offence under Section 138 N.I. Act - HELD THAT:- This Court in Vatsa Electronics Vs. Pala Ram Anr. [ 2022 (4) TMI 353 - PUNJAB AND HARYANA HIGH COURT ] has also held that once a settlement is being effected, then in terms of Section 147 of the Negotiable Instruments Act and Section 320 Cr.P.C., the accused ought to be acquitted as the offence stands compounded. Since, the parties have voluntarily settled the disputes between themselves, it is a fit case for allowing them to compound the offence. The order dated dated 19.09.2023 passed by the Additional Sessions Judge, Jalandhar, as well as the judgment of conviction and order of sentence dated 12.03.2018 passed by the Judicial Magistrate 1st Class, Jalandhar, are hereby set aside - revision petition is allowed.

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• 2023 (12) TMI 428
  Dishonour of Cheque - conviction of accused - vicarious liability - company has not been made an accused nor was any notice served upon the company - petitioner has been made an accused as the Director of the company - HELD THAT:- Admittedly only the petitioner who was the director of the company has been made a party in the complaint case. The company M/s Bhavyaa Global Limited is not an accused in this case. The Hon ble Apex Court similarly in ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. [ 2012 (5) TMI 83 - SUPREME COURT] , has laid down that in view of our aforesaid analysis, it is concluded that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. In the present case Notice under Section 138 of the Act of 1881 was never issued to the company - The company was not made a party to the proceedings under Section 138/141 of the Act of 1881 which itself makes the proceedings non-maintainable. In the absence of the company being arraigned as an accused, a complaint against the petitioner is not maintainable - application allowed.

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• 2023 (12) TMI 427
  Validity of the Group of Companies doctrine in the jurisprudence of Indian arbitration - whether there can be a reconciliation between the group of companies doctrine and well settled legal principles of corporate law and contract law? - doctrine of competence-competence. As per Dr. Dhananjaya Y Chandrachud, CJI HELD THAT:- The questions of law referred to this Constitution Bench answered as follows: a. The definition of parties under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties; b. Conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement; c. The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties; d. Under the Arbitration Act, the concept of a party is distinct and different from the concept of persons claiming through or under a party to the arbitration agreement; e. The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the nonsignatory party to the arbitration agreement; f. The principle of alter ego or piercing the corporate veil cannot be the basis for the application of the group of companies doctrine; g. The group of companies doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act; h. To apply the group of companies doctrine, the courts or tribunals, as the case may be, have to consider all the cumulative factors laid down in OIL AND NATURAL GAS CORPORATION LTD. VERSUS M/S DISCOVERY ENTERPRISES PVT. LTD. ANR. [ 2022 (4) TMI 1350 - SUPREME COURT] . Resultantly, the principle of single economic unit cannot be the sole basis for invoking the group of companies doctrine; i. The persons claiming through or under can only assert a right in a derivative capacity; j. The approach of this Court in CHLORO CONTROLS (I) P. LTD. VERSUS SEVERN TRENT WATER PURIFICATION INC. ORS. [ 2014 (1) TMI 830 - SUPREME COURT] to the extent that it traced the group of companies doctrine to the phrase claiming through or under is erroneous and against the well-established principles of contract law and corporate law; k. The group of companies doctrine should be retained in the Indian arbitration jurisprudence considering its utility in determining the intention of the parties in the context of complex transactions involving multiple parties and multiple agreements; l. At the referral stage, the referral court should leave it for the arbitral tribunal to decide whether the non-signatory is bound by the arbitration agreement; and m. In the course of this judgment, any authoritative determination given by this Court pertaining to the group of companies doctrine should not be interpreted to exclude the application of other doctrines and principles for binding non-signatories to the arbitration agreement. The Registry shall place the matters before the Regular Bench for disposal after obtaining the directions of the Chief Justice of India on the administrative side. As per PAMIDIGHANTAM SRI NARASIMHA, J. While concurring with the judgment of the learned Chief Justice, following conclusions arrived at: I. An agreement to refer disputes to arbitration must be in a written form, as against an oral agreement, but need not be signed by the parties. Under Section 7(4)(b), a court or arbitral tribunal will determine whether a non-signatory is a party to an arbitration agreement by interpreting the express language employed by the parties in the record of agreement, coupled with surrounding circumstances of the formation, performance, and discharge of the contract. While interpreting and constructing the contract, courts or tribunals may adopt well-established principles, which aid and assist proper adjudication and determination. The Group of Companies doctrine is one such principle. II. The Group of Companies doctrine, As delineated in para 40 of Discovery Enterprises is also premised on ascertaining the intention of the non-signatory to be party to an arbitration agreement. The doctrine requires the intention to be gathered from additional factors such as direct relationship with the signatory parties, commonality of subject-matter, composite nature of the transaction, and performance of the contract. III. Since the purpose of inquiry by a court or arbitral tribunal under Section 7(4)(b) and the Group of Companies doctrine is the same, the doctrine can be subsumed within Section 7(4)(b) to enable a court or arbitral tribunal to determine the true intention and consent of the non-signatory parties to refer the matter to arbitration. The doctrine is subsumed within the statutory regime of Section 7(4)(b) for the purpose of certainty and systematic development of law. IV. The expression claiming through or under in Sections 8 and 45 is intended to provide a derivative right; and it does not enable a non-signatory to become a party to the arbitration agreement. The decision in Chloro Control tracing the Group of Companies doctrine through the phrase claiming through or under in Sections 8 and 45 is erroneous. The expression party in Section 2(1)(h) and Section 7 is distinct from persons claiming through or under them . This answers the remaining questions referred to the Constitution Bench.

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• 2023 (12) TMI 426
  Allegation of Misconduct against the petitioner acting as Commissioner of Income Tax (Appeals) / CIT(A) - officials exercising quasi-judicial functions - exemption from disciplinary proceedings - exercise of power of judicial review akin to adjudicating an appeal arising out of an impugned decision - disciplinary proceedings are at the final stage - HELD THAT:- In ZUNJARRAO BHIKAJI NAGARKAR VERSUS UNION OF INDIA [ 1999 (8) TMI 142 - SUPREME COURT] , the Supreme Court was concerned with a case wherein the appellant while working as a Collector of Central Excise, Nagpur was issued a memorandum with allegations that he favoured the assessee therein, by not imposing penalty on it under Rule 173Q of the Central Excise Rules 1944, when he passed the order in Original No. 20/95 on March 2, 1995, despite holding that the assessee had clandestinely manufactured and cleared the excisable goods wilfully and evaded the excise duty and had ordered confiscation of the goods. After considering UNION OF INDIA AND OTHERS VERSUS KK. DHAWAN [ 1993 (1) TMI 255 - SUPREME COURT] and various other judgments, the Supreme Court was of the view that merely because the penalty imposable was not imposed, it cannot be said that by not levying penalty, the appellant has favoured the assessee or shown undue favour to him. It was also held that if every error of law were to constitute a charge of misconduct, it would impinge upon the independent functioning of quasi-judicial officer like the appellant therein. It further held that to maintain a charge-sheet against a quasi-judicial authority, something more has to be alleged than a mere mistake of law, e.g., in the nature of some extraneous consideration influencing the quasi judicial order. Since nothing of that sort was alleged against the appellant therein, the impugned chargesheet was rendered illegal / quashed. The Supreme Court in the case of Zunjarrao Bhikaji Nagarkar has held that the negligence in case of quasi-judicial adjudication is not perceived as carelessness, inadvertence or omission, but as culpable negligence. In other words, if the view of the competent authority, is that the impugned order passed by an officer reveals culpable negligence while discharging quasi-judicial function, then such a conduct can be made subject matter of disciplinary proceedings. But, whether culpable negligence shall sustain, is a matter of evidence to be produced and considered by the disciplinary authority. The UPSC advice has also come. The petitioner has been given a copy of the UPSC advice and Inquiry Report. She has also submitted her representation on the Inquiry Report. If that be so, the proceedings are at the final stage. Unfortunately, neither the copy of the report of the inquiry officer nor the UPSC advice and the representation made by the petitioner, have been placed on the record of this Court for the reasons best known. Surely, the petitioner in her representation may have taken the jurisdictional pleas as urged by Dr. Kothari in this petition on the Charge Memorandum - this Court instead of deciding the pleas itself, the disciplinary authority should first consider the same by keeping in view, the law laid down by the Supreme Court, this Court and other High Courts, along with criteria laid down by CVC vide its Circular dated October 24, 2016, without being influenced by any conclusion drawn by us in this judgment and pass a final order. If the disciplinary authority agrees with the pleas of Dr. Kothari/petitioner, then it shall close the proceedings. But if the disciplinary authority is of the view that the Charge Memorandum has been rightly issued, the disciplinary authority shall pass a reasoned order in the manner directed by us in that regard, so also on the Inquiry report. By not interfering with the impugned judgment of the Tribunal, the writ petition is disposed off.

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