TMI Tax Updates - e-Newsletter
June 7, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
GST
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Seeking direction to accept appeals filed within time limit. Non-production of hard copy a technical defect. Appeals to be processed.
The petitioner sought direction for acceptance of appeals u/s 18.06.2021. HC held non-production of hard copy of impugned order is a technical defect. Citing PKV Agencies, appeals filed within time limit are to be processed. Refund rejection orders issued on 19.03.2021, appeals lodged on 18.06.2021. HC directed first respondent to process appeals without rejection based on physical copy filing date of 02.02.2024. Petition disposed of.
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Initiation of proceedings u/s 129 of CGST Act - Penalty imposed for minor discrepancy in Delivery Challan quashed. Gold not meant for sale.
The High Court considered a case u/s 129 of CGST Act regarding penalty imposition for a minor discrepancy in a Delivery Challan. The issue was whether non-disclosure of Kundan stones justified penalty imposition. The Court found compliance with Rule 55 of CGST Rules except for the mentioned discrepancy. It noted the error in presuming the purpose of transporting gold and held that the goods were for sampling, not sale. The Court quashed the penalty of Rs. 14,50,560 and allowed the petition, directing refund and granting liberty to proceed for the discrepancy.
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Initiating tax assessment against a dissolved company is a jurisdictional defect. Tax authorities lack jurisdiction to assess a non-existing entity.
The High Court held that initiating tax assessment u/s CGST Act against a dissolved company is a jurisdictional defect, not a procedural one. Once a company is dissolved u/s IBC Act, tax assessment cannot be initiated against it. In this case, the company was dissolved as per NCLT order, making it non-existent for any liability imposition. Show cause notice issued post-dissolution is invalid as there was no company to determine tax liability. Directors cannot be held liable u/s 88(3) CGST Act. After dissolution u/s IBC, the company ceases to exist, making post-dissolution adjudication impermissible u/s 88(3) CGST Act. Petition allowed.
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Deduction of nominal amount from employees' salaries for food not a supply under CGST Act. ITC available on canteen services.
The Advance Ruling Authority (AAR) considered whether deducting a nominal amount from employees' salaries for food provided in a factory constitutes a 'supply' u/s 7 of the CGST Act, 2017. It was held that this deduction does not qualify as a supply. The ruling on GST applicability on the deducted amount was deemed irrelevant due to the previous determination. Regarding Input Tax Credit (ITC) on GST charged by the canteen service provider, ITC will be available only up to the cost borne by the applicant, as canteen facilities are mandatory u/s Factories Act, 1948. The AAR clarified that the ITC will be limited to the appellant's expenses for food and beverages for employees in the factory.
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AAR ruled no GST on amount recovered for canteen facility for permanent employees. Input tax credit allowed for canteen and transportation.
The Advance Ruling Authority (AAR) addressed the issue of GST liability on amounts recovered from employees for canteen and transportation facilities. Regarding canteen charges, it was held that deductions made by the applicant are not considered a taxable supply. Input Tax Credit (ITC) is available for canteen services as mandated by the Factories Act, with ITC on GST restricted to the applicant's cost. The applicant can avail ITC on GST charged by the canteen service provider for employee facilities, as per Circular No. 172/04/2022-GST. Transportation deductions for bus services are also not considered a taxable supply.
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Advance Ruling application on GST deductions from employees' salaries remanded for fresh consideration.
The Appellate Authority for Advance Ruling (AAAR) considered the maintainability of an Advance Ruling application regarding the deduction made by the Appellant from employees' salaries for food facilities u/s 7 of CGST Act and Rajasthan GST Act. The issue was the applicability of GST on these deductions and on amounts deducted from a Manpower supply contractor for contractual employees. The Input Tax Credit (ITC) of GST charged by the Canteen Service Provider was also questioned. The AAAR found the application maintainable as the AAR did not consider the relevant contract provided by the Appellant. The AAAR set aside the AAR's ruling and remanded the matter for reconsideration, instructing the AAR to decide the application afresh on its merits.
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Selling residential units in Saviour Park Phase IV without Completion Certificate is taxable, not exempt from GST.
The case involves the Advance Ruling Authority determining the GST liability on selling residential units in a project after 'deemed completion' or 'first occupation' in Phase IV. The Ghaziabad Development Authority (GDA) denied the completion certificate, making it not deemed completed. Projects registered under RERA as separate are distinct. Occupancy without certificates violates bye-laws. Possession letters don't equal occupation. Since GDA denied the completion certificate, 'first occupation' didn't occur, making sales taxable, not exempt.
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Advance Ruling application questioned on GST applicability for deductions from employees' salaries. AAR Rajasthan to reconsider application for clarity.
The Appellate Authority for Advance Ruling (AAAR) considered the maintainability of an Advance Ruling application regarding the deduction made by the Appellant from employees availing food facility u/s 7 of CGST Act and Rajasthan GST Act. The issue was the applicability of GST on the nominal deduction from employee salaries and from a manpower supply contractor for contractual employees. The AAAR found that the AAR Rajasthan did not consider a relevant contract provided by the Appellant. The AAAR set aside the AAR's ruling and remanded the matter for reconsideration, directing the AAR to review the application in its entirety and address all questions posed by the Appellant.
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Classification of goods - Milk food for babies and Milk for babies under Momylac - fall under HSN 19011090 for GST at 18%.
The Advance Ruling Authority (AAR) addressed the issue of classifying "Milk food for babies" and "Milk for babies" under HSN codes 04021020 and 04022920, respectively, for GST purposes. After examining the manufacturing process, it was determined that the products should be classified under HSN 19011090 as infant milk formula, given that milk is a constituent and the dominant item in the final product. Therefore, the GST rate applicable is 18% as per Notification No.01/2017 (Central Rate) for the supply of these products.
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Classification of Mix Mukhwas - Roasted Til & Ajwain clarified by AAR as CTH 12074090. GST rate set at 2.5% CGST and 2.5% SGST.
The Advance Ruling Authority (AAR) addressed the issue of the classification of goods "Mix Mukhwas - Roasted Til & Ajwain" under the HSN code 12074090 and the applicable GST rate. The AAR determined that the products, primarily consisting of sesamum seeds, fall under chapter 12 of the Customs Tariff Heading, specifically CTH 12074090. The AAR rejected the applicant's reliance on a circular and case laws related to coriander seeds, stating that the products in question are not covered by those references. The AAR concluded that both products are subject to a GST rate of 2.5% CGST and 2.5% SGST as per entry no. 70 of Schedule I of Notification No. 1/2017-Central Tax (Rate).
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Extension of time granted for adjudication of GST Cases - "Force majeure" in legislative context upheld. COVID-19 impact considered. Legislative action not prejudicial.
The High Court considered the challenge to notifications u/s 168A of CGST Act and U.P. GST Act extending time for adjudication orders for F.Y. 2017-18. - Adjudication / issuance of show cause notice (SCN) u/s 73 - It held that extension of limitation is a legislative function, not administrative. The Court noted the impact of COVID-19 and Supreme Court's order on limitation. The Council's discussions on delays due to pandemic were considered relevant. The Court emphasized that legislative decisions on "force majeure" are not subject to judicial review. It rejected claims of prejudice to taxpayers, stating limitation is statutory and not a vested right. The writ petitions challenging the notifications were dismissed, allowing pending adjudication proceedings to resume and appeals to be filed within 45 days.
Income Tax
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Income from Other Sources u/s 56(viib) - Assessing Officer rejects DCF valuation, but CIT(A) deletes addition. No consideration received for shares. DCF method valid.
The High Court considered a case involving income from Other Sources u/s 56 (viib). The Assessing Officer rejected the valuation report provided by the assessee-company, claiming the Discounted Cash Flow (DCF) method used was invalid. The CIT(A) overturned the addition, stating no consideration was received for the shares issued. The High Court upheld this decision, noting Section 56 (2) (viib) does not apply without consideration. It also ruled the AO cannot impose the Net Asset Value method over DCF, as the latter is permissible u/s Rule 11UA (2)(d). The Revenue's appeal was dismissed.
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Exemption u/s 11 allowed for belated return filed u/s 139(4) - CBDT Circular clarifies - ITAT decision supports assessee
The case involved denial of exemption u/s 11 due to late filing of return. The department argued return must be filed u/s 139(1) to claim exemption u/s 11. An amendment clarified return should be filed within time u/s 139. ITAT held the amendment excluded updated returns u/s 139(8) and all other returns were eligible. Assessee filed within time u/s 139(4), so exemption u/s 11 should not be denied. Circular clarified return must be filed within time u/s 139. ITAT relied on precedent that if return is filed before due date u/s 139(4), exemption u/s 11 cannot be denied. Department was directed to allow exemption u/s 11.
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Faceless assessment of income escaping assessment - department must issue notices in a faceless manner as mandated u/s 151A. No fundamental right for manual notices.
The High Court addressed the issue of faceless assessment of income escaping assessment u/s 151A scheme. It held that notices must be issued in a faceless manner as mandated, without physical interface. The scheme allows for automated allocation and issuance of notices u/s 148 in a faceless manner. The statute aims to prevent prejudice and bias by automated allocation through risk management strategy. The Court cited judgments supporting automated issuance of notices without any interface. The Court clarified that there is no fundamental right for an assessee to demand manual issuance of notices. The Department must adhere to the scheme for assessment, re-assessment, and issuance of notices. If the Department withdraws notices, fresh notices may be issued following the scheme and u/s 151A, allowing the petitioner to respond under Section 148.
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ITAT dismissed revenue appeal, holding no tax deduction required for royalty payment on technical documentation prepared in Russia.
The High Court addressed the issue of royalty payment in a case where the ITAT partly allowed the appeal, ruling that the assessee was not required to deduct tax at 20% for certain payments. The court held that expenses incurred in Russia for technical purposes did not constitute royalty as the information gathered was not conveyed to the assessee. The court noted that possession and control of rights, property, or information by the payer were essential for royalty, which was not the case here. The technical documentation prepared in Russia was to be handed over to Russia, not the assessee, making it ineligible for royalty classification. The court concluded that the ITAT's decision was lawful and correctly interpreted the law.
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Legal & professional expenses for investment decision held as revenue expenditure. Interest expenses on loan against property allowed for business purposes.
The ITAT held that legal and professional expenses incurred for deciding on an investment are revenue expenditure, not capital. The AO erred in treating them as capital expenditure. The Tribunal emphasized assessing actual actions, not motives. Citing relevant case law, it allowed the expenses. Regarding interest expenses on a loan against property, the ITAT found them allowable as they were used for trading securities, a business purpose. The tax authorities erred in disallowing them. The ITAT allowed this ground in favor of the assessee.
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Survey revealed undisclosed income admitted as 'Business Income'. Tribunal held income from money lending business as 'Business Income'.
The case involves determining the correct head of income u/s 69 and 115BB for an assessee family engaged in money lending business. The ITAT held that the undisclosed income from sundry debtors should be treated as 'business income' due to the nature of the money lending business. The lack of proper accounting records was considered, and the undisclosed income was deemed to be ploughed back into the business. The ITAT directed the AO to re-compute the income accordingly. Additionally, a dispute u/s 56(2)(vii)(b) regarding property purchase was raised, and the ITAT directed the CIT(A) to consider the issue on merits.
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Proportionate disallowance of interest expenditure upheld, investments in group companies justified. Disallowances on land acquisition & capital loss restored for fresh adjudication.
The ITAT held that interest disallowance was not justified as borrowed funds were invested in equity shares, not loans. Disallowance of land acquisition cost was remanded to AO for proper verification of documents. Long-term capital loss disallowance was set aside for reevaluation of additional evidence. Disallowance of capital loss on shares was remanded for lack of proper evaluation of documentary evidence. Taxability of interest on tax refund was to be reexamined by AO. Disallowance of travel expenses was deleted due to lack of clarity in AO's reasoning. Prior period expenses were allowed as they accrued in the relevant assessment year. Sales promotion expenses disallowance was overturned as AO failed to prove they were not for business purposes.
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ITAT interpreted "business of construction" u/s 115WE(3) r.w.s 115WG - Ship building included. Fringe benefits @ 5% valid.
The Appellate Tribunal interpreted the term "business of construction" u/s 115WE(3) r.w.s 115WG to determine fringe benefit tax value. The issue was whether ship building falls under "construction" and if the assessee correctly admitted 5% fringe benefits on conveyance, tour & travel instead of 20% by Revenue. Tribunal held ship building is construction, citing Circular No.8/2005. English language meaning supports ship building as construction. Assessee engaged in ship construction qualifies for 5% fringe benefit tax rate u/s 115WC(2)(b), not 20% by Revenue. Addition by AO deleted, all grounds allowed.
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Assessee's explanation supported by affidavits not properly considered, addition u/s 69A not sustainable. AO directed to delete addition.
The ITAT held that the addition under section 69A for cash deposits during demonetization was not justified. The AO and CIT(A) failed to conduct proper verification of the affidavits provided by the assessee's parents, which explained the source of the deposits. The burden of proof is on the revenue to establish the deposits as the assessee's income. The authorities did not fulfill their duty to investigate thoroughly. The absence of proof of agricultural income was not addressed adequately. The ITAT directed the AO to delete the addition under section 69A in favor of the assessee.
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Assessment u/s 153A or 153C - Addition u/s 69A - credits in saving accounts and undisclosed profit - ITAT quashes assessment order.
The case involved an appeal regarding assessment under sections 153A or 153C of the Act, focusing on additions under section 69A related to credits in saving accounts and undisclosed profit calculated at 8% on gross receipts in the CC Account. The ITAT decision referenced a previous case where it was held that using a statement from a search of a third party for making additions in the assessee's case was not valid under Section 153C. The ITAT found that the assessment should have been initiated under Section 153C, not 153A, as the mandatory procedure was not followed and the assessee had no opportunity to cross-examine the witness. Consequently, the assessment order under Section 153A was deemed without jurisdiction and quashed, with the appeal by the assessee allowed.
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Reopening of assessment without disposal of objections by AO deemed invalid. Assessee's objections must be considered before final assessment.
The Appellate Tribunal (ITAT) considered the validity of reopening an assessment where the assessee's objections were not addressed. The power to reopen assessment lies solely with the Assessing Officer (AO) who must genuinely believe income has escaped assessment. If objections are raised, the AO must decide on them before finalizing the assessment. While the CIT(A) can enhance assessments, only the AO can reopen them. Failure to address objections renders the assessment invalid. Consequently, additions made in such assessments are unsustainable. The decision favored the assessee due to the flawed assessment process.
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Validity of reopening of assessment u/s 147 upheld. Addition u/s 69A rejected. Assessee's explanations deemed sufficient.
The Appellate Tribunal addressed the validity of reopening assessment under section 147 and addition under section 69A. The Tribunal held that the AO had sufficient information from DDIT indicating unexplained bank deposits, justifying the belief of income escapement. The assessee's claim of lack of AO's consideration was unsubstantiated and rejected. The Tribunal also dismissed the limitation argument due to the extension granted by TOLA. Regarding the addition under section 69A for cash deposits, the Tribunal found the assessee's explanations and submitted documents credible, highlighting that the books were audited and no discrepancies were reported. As the revenue failed to challenge the evidence, the Tribunal ruled in favor of the assessee, deeming the addition by the AO as unsustainable.
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Time limit for TP Order u/s 92CA(3A) - Order passed beyond limitation period - Transfer pricing adjustment non-est.
The Appellate Tribunal considered the issue of time limit for issuance of Transfer Pricing (TP) Order u/s 92CA(3A). Referring to a case law, it was held that the TP order passed on 01.11.2019 was barred by limitation. The TP adjustment became non-est due to the time limitation, making the assessee ineligible u/s 144C(15)(b). Consequently, Section 144C machinery provisions did not apply. The assessment should have been completed within 33 months from the end of the assessment year. Any order passed beyond the statutory time limit was deemed invalid. As a result, corporate additions in the assessment order were not sustainable, leading to the appeal being allowed on legal grounds.
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CIT(A) deleted additions without following Rule 46A. Deletion on forfeited amount & various expenses upheld. Disallowance u/s 14A restricted.
The ITAT held that the CIT (A) erred in admitting additional evidence without following Rule 46A. Deletion of additions on forfeited amount and various expenses was justified. The Delhi High Court precedent supported treating forfeited advance as business expenditure. The CIT (A) deleted disallowance of various expenses due to lack of AO's remand report. The ITAT upheld the deletion of disallowance u/s 14A. The case was remanded to CIT (A) for compliance with Rule 46A and fresh decision on specified grounds.
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Revision u/s 263 initiated on ICDS grounds deemed unsustainable. AO's acceptance of assessee's explanation upheld.
The Appellate Tribunal addressed a case involving revision u/s 263 by PCIT questioning the recognition of liabilities 'Nardana Claim-1' and 'Nardana Claim-2' under ICDS. The Tribunal found that AO adequately investigated the issues through queries and responses from the assessee, rejecting PCIT's claim of lack of investigation. The Tribunal upheld the assessee's explanation that the liabilities were not recognized as income due to pending court disputes, following a court decision on income accrual. Citing Malabar Industries Co. Ltd., the Tribunal held that AO's view favoring the assessee was valid. PCIT's revision based on ICDS violations was deemed unsustainable, leading to the quashing of the revision order and restoration of the AO's assessment order. Assessee's appeal was allowed.
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Disallowance u/s. 14A r.w. Rule 8D(ii) not warranted as interest-free funds sufficient for exempt income investment. Labor expenses disallowed, vehicle running expenses upheld.
The Appellate Tribunal considered various issues. Firstly, on disallowance u/s. 14A r.w. Rule 8D(ii), it was held that no disallowance of interest expenditure was warranted as the company had sufficient interest-free funds to source its investments in exempt income-yielding shares. The Tribunal referred to relevant case law to support this decision. Secondly, on addition towards various expenses, the Tribunal upheld the CIT(Appeals) decision to allow deduction under section 37 of the Act as the Assessing Officer failed to provide justifiable reasons for disallowance. Lastly, on addition u/s 68 for unexplained loan transaction, the Tribunal concurred with the CIT(Appeals) that the loan raised from a lender company was not unexplained cash credit as the identity of the lender was proven. The Tribunal dismissed the revenue's appeals on all grounds.
Customs
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Panel of Approved Valuers/Assayers appointed for valuing Gold, Silver, Jewelry, and more. Annual performance reports due by April 30.
The Government of India, Ministry of Finance, Department of Revenue, Chennai Customs Commissionerate has appointed a panel of approved Valuers/Assayers for valuing Gold, Silver, Jewellery, Precious Stones, and Valuable Articles. The appointed individuals are required to submit an Annual Performance Report by April 30th each year. They are appointed for a 2-year term with an interim review at the end of the first year. Service fees are regulated based on the assessed value, with GST applicable. The appointed Valuers/Assayers must make themselves available as needed. The appointment does not imply endorsement by the Customs department, and any issues in implementation should be reported to the office.
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CESTAT held demand of duty under Section 28(4) not sustainable for import of inputs used in exempted final products.
The case involved a dispute regarding the demand of duty on imported inputs used for final products exempted from duty u/s 3 of N/N. 52/2003-Cus. The Tribunal held that demand u/s 28(4) of Customs Act, 1962 with extended period was not sustainable. The appellant's belief in eligibility for Cenvat credit and favorable Tribunal decisions supported the conclusion. The demand for the extended period was set aside, and only duty for the normal period was upheld. The imposition of penalty u/s 114A was deemed legally unsustainable. The appeal was allowed in favor of the appellant.
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Petitioners seeking return of Malaysian Passport after smuggling gold bars. Lenient view taken on 2nd petitioner. Court allows return with conditions.
The High Court considered a case involving smuggling of gold under Sections 135(1)(a) and 135(1)(b) of The Customs Act, 1962. The petitioners were found in possession of 4.200 kgs of gold valued at Rs. 2,25,54,000 without permission, admitted to smuggling, and were intercepted while passing through the green channel. The gold was seized and confiscated. The 2nd petitioner, an unsuspecting traveler, was granted a lenient view as she was unaware of the smuggling plan and lacked knowledge of Indian laws. She deposited Rs. 10,00,000 and has a son receiving medical treatment in Malaysia. Due to an Extradition Treaty, the Court allowed the return of the 2nd petitioner's Malaysian passport with conditions, while confirming the decision against the 1st petitioner. The criminal revision case was partially allowed.
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Permission granted for re-export of Organic Cashew Kernel SWP after dry heating process. Confiscation order set aside.
The case involves a dispute over re-exporting 4536 kgs of Organic Cashew Kernel SWP. The appellant sought permission for re-export after the goods did not meet safety standards. FSSAI denied NOC, leading to confiscation and penalty. The appellant requested re-export after dry heating. The Tribunal held that the goods, though not conforming to standards, were not unfit for consumption. The decision to deny re-export lacked legal basis. The orders for confiscation and penalty were set aside, allowing re-export after dry heating within a month. The appeal was disposed of in favor of the appellant.
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Stay petition against Order-in-Appeal setting aside late filing fine for Bill of Entry upheld due to technical glitches.
The case involved a Stay petition against a fine for late filing of Bill of Entry. The Appellant faced technical glitches while filing through ICEGATE, leading to delay and automatic imposition of a fine. The Commissioner (Appeals) found the Appellant's efforts to file on time, acknowledged technical issues, and referenced relevant case law supporting the Appellant's position. The Tribunal upheld the Commissioner's decision, dismissing the Revenue's Appeal. The decision was based on factual evidence and legal precedents, concluding no interference was warranted.
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Stay petition against Order-in-Appeal setting aside fine for late filing of Bill of Entry dismissed. Appellant faced technical glitches.
The case involved a Stay petition u/s Order-in-Appeal setting aside a fine for late filing of Bill of Entry. Appellant faced technical glitches while filing through ICEGATE, leading to automatic imposition of fine. Despite efforts to file on time, technical issues prevented timely submission. Commissioner (Appeals) considered documentary evidence and relied on precedent (M/S. BLUELEAF TRADING COMPANY case) to conclude no mala fide intent. The Tribunal found no reason to interfere with the Commissioner's decision, dismissing the Revenue's appeal.
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Former director not liable for penalty imposed on company. Directors not substituted for company. Petitioner resigned before penalty. Order quashed.
The High Court held that the penalty imposed on a company cannot be recovered from its former director u/s the Companies Act. The director cannot be held personally liable as there is no provision for such recovery. The director had resigned and filed necessary documents with the Registrar of Companies. The court quashed the order imposing penalty on the director and directed implementation against others, excluding the petitioner. Petition allowed.
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Levy of penalty u/s 112(a) of Customs Act on appellant for smuggling cigarettes upheld. Sufficient opportunity given.
The case involves the levy of penalty u/s 112(a) of the Customs Act, 1962 on the appellant for smuggling foreign origin cigarettes. The appellant, a freight forwarder, facilitated the clearance of smuggled goods without proper verification. The penalty of Rs. 5,00,000/- was upheld due to deliberate actions to conceal the smuggling. The appellant was given sufficient opportunity for personal hearing, meeting the principles of natural justice. The Tribunal's decision in a similar case supported the penalty imposition. The penalty on the appellant, a Proprietor in a Freight Forwarding firm, was upheld, and the appeal was dismissed.
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Classification of imported goods disputed in CESTAT. Mis-declaration of country of origin. Anti-dumping duty and penalties imposed. Appeal allowed for reevaluation.
The case involved the classification of imported goods as Pre-Sensitized Positive Offset Aluminum Plates for levy of anti-dumping duty. The country of origin was mis-declared as Taiwan instead of China. The tribunal held that both Pre-Sensitized and Digital offset plates fall under the same classification. The revenue failed to prove the goods were digital offset plates, entitling the appellant to benefit from a specific customs notification. Penalties u/s 114A, 114AA, and 112A of the Customs Act were upheld, but revised due to the appellant's disclosure during investigation. The appeal was allowed for remand to the original adjudicating authority.
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Remission of duty on goods lost in fire in SEZ deemed foreign territory - CESTAT allows appeal, rejects duty demand.
The case involves a dispute u/s Customs Act regarding remission of duty for goods lost in a fire in an SEZ. The tribunal held that loss of goods in fire does not constitute non-utilization for authorized operations. Citing a similar case, it concluded that goods destroyed in a foreign territory are not subject to customs duty. The tribunal rejected the application of remission citing incorrect application of Customs Act provisions to SEZ Act. It found the demand for duty on entire stock post-fire unjustified, as evidence showed not all goods were destroyed. The impugned order was set aside, and the appeal was allowed.
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CESTAT ruled on valuation of imported goods, admissibility of statements u/s 108, documentary evidence, computer printouts, undervaluation, extended limitation period, confiscation, and penalties.
The case involved valuation of imported goods, undervaluation, admissibility of appellant's statement u/s 108, documentary evidence, computer printouts u/s 138C, recovery of customs duty and penalties u/s 114A, 114AA, 112(a)(ii), and 112(b)(ii) of Customs Act. The appellant's statement was held voluntary, supported by documents. Computer printouts were admissible. Undervaluation was proven. Extended limitation period applied due to intent to evade duty. Confiscation upheld due to misdeclaration. Penalties u/s 112, 114A, 114AA imposed for willful suppression. Past imports valuation not upheld. Appeal partially allowed.
DGFT
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Revision in guidelines simplifies process for deemed exports under Handbook of Procedures 2023. Compliance burden reduced.
The Public Notice No. 09/2024 issued by the Directorate General of Foreign Trade announces a revision in Para 2 (b) of the 'Guidelines For Applicants' under ANF-4F of Handbook of Procedures 2023. The revision simplifies the procedure and reduces compliance burden for applying Export Obligation Discharge Certificate (EODC) for deemed exports. The amendment requires submission of system-generated GST e-invoices and e-way bills, along with alternative documentation if system-generated ones are unavailable. Additionally, it mandates providing specific documentation for supply of products by intermediate suppliers to the port for export by the ultimate exporter. The revision aims to streamline the process and facilitate deemed export transactions.
FEMA
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Validity of Order u/s 17 of FEMA challenged for lack of hearing opportunity. Writ petition allowed due to delay and violation of natural justice.
The High Court examined the validity of an order issued u/s 17 of FEMA, where petitioners claimed lack of hearing opportunity. The court ruled that availability of statutory appeal doesn't bar writ petition u/s Article 226 if fundamental rights or natural justice principles are violated. Lack of opportunity to challenge information gathered unfairly breached natural justice. Delayed penalty imposition for non-realization of export proceeds was unfair, as petitioners were not given a chance to defend against alleged contraventions. The first petitioner, no longer operational, faced unjustified delay in notice issuance after over a decade, leading to quashing of the order and demand notice in favor of the petitioners.
Corporate Law
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Writ petition dismissed due to lack of territorial jurisdiction. High Court clarifies criteria for invoking Doctrine of Forum Conveniens.
The High Court considered the maintainability of a petition involving cheating, misappropriation of funds, and defrauding investors. The Court applied the Doctrine of Forum Conveniens and clarified that it can issue a writ under Article 226 when the cause of action arises within its territorial jurisdiction. Jurisdiction of High Courts is limited to the State(s) they cover. The Court noted that the respondent's main office being in Delhi does not confer jurisdiction. It highlighted that the petitioner could seek relief from the Karnataka High Court, where the respondent has a Regional Office. The Court cited a Supreme Court decision to support its decision to dismiss the petition due to lack of territorial jurisdiction.
Indian Laws
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Appellate court must provide a reason for imposing conditions u/s 148 of the Negotiable Instruments Act. Blanket orders not acceptable.
The High Court addressed a case involving the dishonour of a cheque and the imposition of a condition to deposit a specific amount u/s 148 of the Negotiable Instruments Act. Referring to a Supreme Court decision, it was emphasized that the appellate court must provide reasons for imposing such conditions and cannot issue a blanket order for all cases. The court highlighted the need for a speaking order when ordering a deposit, which can vary from the minimum prescribed amount. The High Court found the lower court's order unsustainable as it lacked proper reasoning and did not require the appellant to execute a bond. Consequently, the direction to deposit 20% of the compensation amount was set aside, and the criminal case was allowed.
PMLA
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Money laundering case: Without scheduled offence, PMLA charges can't stand. Acquittal of accused in all FIRs removes basis for attachment order.
The Appellate Tribunal ruled on the validity of proceedings u/s Prevention of Money Laundering Act, 2002 without a scheduled offence. It held that without a scheduled offence, charges of money laundering cannot be sustained. The appellant was acquitted of all scheduled offences, removing the basis for the money laundering charge. The provisional attachment order and confirming order were deemed invalid. Without a scheduled offence, there can be no "proceeds of crime." The appeal was disposed of in favor of the appellants.
SEBI
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New rules for financial penalties on market institutions for surveillance lapses to ensure market integrity.
SEBI issued a circular on "Financial Disincentives for Surveillance Related Lapses" at Market Infrastructure Institutions (MIIs). MIIs play a crucial role in market integrity. SEBI can take action u/s SEBI Act, 1992 for contraventions. Surveillance is a core function of MIIs to detect market abuse. The framework introduces financial disincentives for Surveillance Related Lapses based on MII revenue and instances of lapses. SEBI will provide an opportunity for submissions before imposing disincentives. MIIs must credit the disincentives to SEBI-IPEF. Disclosure requirements are specified. The framework excludes matters with market-wide impact or affecting market integrity. It does not apply to minor procedural lapses. Effective from July 1, 2024, the framework does not limit SEBI's other enforcement actions.
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SEBI's Master Circular for Custodians consolidates all requirements in one place. Custodians must also comply with additional SEBI requirements.
The Master Circular for Custodians consolidates SEBI's circulars for custodians, effective from the date of issue. Custodians must comply with SEBI's requirements for market intermediaries. Any prior actions under rescinded circulars are deemed under the new Circular. This Circular is u/s 11(1) of SEBI Act to protect investors and regulate the securities market.
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SEBI introduces new rules for Foreign Portfolio Investors (FPIs) to manage their securities after registration expires.
SEBI has issued a circular to provide flexibility to Foreign Portfolio Investors (FPIs) in dealing with their securities post-expiry of their registration. Amendments to the SEBI (FPI) Regulations, 2019, effective June 3, 2024, allow FPIs to continue registration by paying fees and updating information. FPIs failing to renew within the validity period can reactivate within 30 days with a late fee, subject to KYC and AML/CFT compliance. FPIs can dispose of securities within 180 days post-expiry. Securities unsold after this period will be written off. The framework includes financial disincentives and mandates custodians to transfer written-off securities to an escrow account for sale, with proceeds going to the Investor Protection and Education Fund (IPEF). The circular is issued u/s 11(1) of the SEBI Act, 1992.
Service Tax
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CESTAT held in favor of the Appellant on various issues including service tax exemptions, royalty payments, works contract services, and input service credits.
The case involved various issues related to Service Tax, including demand on reverse charge basis for services from Indian Railways, royalty payment to State Government for natural resource extraction, works contract service, Swachh Bharat Cess (SBC), Krishi Kalyan Cess (KKC), and input service credit. The Tribunal held that the benefit of exemption for construction of railway sidings applies regardless of public or private use. It also ruled that service tax on royalty payments prior to April 2016 is not applicable. The appellant was liable for service tax on works contract service but no penalty was imposed. Short payment of SBC and KKC was not sustainable due to lack of intention to evade tax. Input service credit availed on valid documents was allowed. The appeal was disposed of in favor of the appellant.
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Appeal allowed for refund of service tax paid erroneously. Export of services qualified as not exigible to service tax. Intermediary services not applicable.
The case involves a dispute u/s refund of service tax paid erroneously and the classification of services provided by the appellant. The CESTAT held that a refund of service tax is maintainable even without challenging the assessment. The services provided to JDSU USA qualified as export of service, not subject to service tax. The appellant's services did not fall under the definition of an intermediary as per the applicable law during the disputed period. The impugned order was set aside as it incorrectly classified the services provided by the appellant. The appeal was allowed.
Central Excise
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Abatement of appeal due to non-prosecution beyond three adjournments. Upheld based on Ishwar lal Mali Rathod case.
The CESTAT, an Appellate Tribunal, dismissed an appeal due to abatement caused by non-prosecution of the case. The Tribunal held that adjourning a matter beyond three times, as seen in a Supreme Court case, is unjustified. The Supreme Court condemned the practice of mechanical adjournments. In this case, despite multiple adjournments and warnings, the appellant did not avail of the opportunities granted. The appeal was dismissed for non-prosecution, in line with Rule 20 of CESTAT Procedure Rules, 1982.
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Cash refund u/s 142(6)(a) of CGST Act allowed by CESTAT. Cenvat Credit refund granted for CVD & SAD.
The case involved a dispute regarding cash refund u/s 142(6)(a) of the CGST Act, 2017 and denial of Cenvat Credit u/s Rule 3(1) of Cenvat Credit Rules, 2004. CESTAT allowed refund of Cenvat Credit of CVD & SAD based on precedents like SRI CHAKRA POLY PLAST INDIA PVT LTD case. The appellant was granted refund of CVD Rs.23,72,607/- and SAD Rs.10,21,081/-, excluding interest on delayed duty payment. The decision followed rulings in M/S MITHILA DRUGS PVT. LTD. and other cases. Appeal partially allowed.
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Appellant eligible for refund of CVD under Section 142(3) of CGST Act, 2017. Tribunal holds appeal valid.
The case involves a dispute over the refund of Additional Duties of Customs (CVD) paid on re-import of goods u/s 142(3) of the CGST Act, 2017. The Tribunal, following a precedent set by a larger bench, held that it has jurisdiction to decide appeals related to refunds u/s 142(3). The appellant paid CVD post-GST introduction and sought credit under Cenvat Credit Rules, 2004. The Commissioner denied the refund citing Section 140(5) and deemed Section 142(3) inapplicable. The Tribunal found grounds to grant the refund, deeming the impugned order unsustainable. The appeal was allowed.
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Extended period of limitation not justified for denial of CENVAT Credit u/r 2(l). Tribunal rejects suppression of facts.
CESTAT, an Appellate Tribunal, addressed issues regarding the invocation of the extended period of limitation due to suppression of facts leading to denial of CENVAT Credit under Rule 2(l) related to manufacturing and clearance of final products. Referring to precedents, it was held that for the extended period to be invoked, the Revenue must establish fraud, collusion, wilful misstatement, suppression of facts, or contravention of laws with intent to evade duty. Since no new tangible evidence was presented, the extended period could not be invoked. Therefore, the demand for duty was found to be beyond the permissible time limit, rendering the impugned order unsustainable. The denial of CENVAT Credit was not discussed on merits due to the limitation issue. Consequently, the appeal was allowed.
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CESTAT held that 'Liv 52 Protec' misclassified as Animal Feed Supplement. Proper classification under Chapter 30. Extended period not justified. Penalties dropped.
The case involved the classification of the product "Liv 52 Protec" as either an 'Animal Feed Supplement' or an 'Ayurvedic Medicament' under Central Excise Tariff Act. The Tribunal held that the product should be classified under Chapter Heading 3004 as an Ayurvedic medicament, not as an animal feed supplement under Chapter Heading 2309. The product's ingredients and properties supported its classification as an Ayurvedic medicament. The extended period for duty demand was deemed inapplicable as the appellant had disclosed all relevant information. Penalties under Section 11AC and Rule 25 of Central Excise Rules were dropped due to the classification issue. The appeal was disposed of partly in favor of the appellant.
VAT
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Refund denied for excess tax paid on entry of packing materials in Assam. Petitioner directed to apply u/s 50 within 1 month.
The High Court held that the petitioner Company, which paid entry tax on packing materials in Assam, may be entitled to a refund as per Rule 29(1) of Assam Value Added Tax Rules, 2005. The Court noted a detailed refund mechanism under the law and referenced a previous case where no entry tax was leviable on packing materials. The Court ruled that the petitioner must first exhaust the statutory remedy by applying for a refund under Section 50 of the Act within one month. The time spent from filing the writ petition will be excluded in calculating the deadline for the refund application. The petition was disposed of accordingly.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (6) TMI 237
Seeking direction to the first respondent to accept the respective appeals by treating the date of filing the appeal as 18.06.2021 - appeals were not processed on account of the petitioner not filing the physical copy of the impugned orders - HELD THAT:- In PKV Agencies [ 2023 (2) TMI 932 - MADRAS HIGH COURT] , this Court followed the judgment of the Orissa High Court in M/S. ATLAS PVC PIPES LIMITED VERSUS STATE OF ODISHA OTHERS [ 2022 (7) TMI 130 - ORISSA HIGH COURT ]. In effect, the Court concluded that the non-production of the hard copy of the impugned order is only a technical defect and that the appeal is required to be processed provided the appeal was filed within time. In the cases at hand, the refund rejection orders were issued on 19.03.2021 and the appeals were lodged on 18.06.2021. As such, the appeals were filed within time limit prescribed by statute. In those circumstances, the ratio of PKV Agencies is applicable. Therefore, these writ petitions are disposed of by directing the first respondent to process the respective appeals by not rejecting the same on the ground that the physical copy of the impugned orders were filed on 02.02.2024. Petition disposed off.
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2024 (6) TMI 233
Extension of time granted to the Adjudicating Authorities to pass adjudication orders with reference to proceedings for the F.Y. 2017-18 - Challenge to N/N. 09/2023-Central Tax (CGST) dated 31.3.2023 issued by the Government of India and N/N. 515/XI-2-23-9 (47)/17-T.C.215-U.P.Act-1-2017-Order-(273)-2023 dated 24.4.2023 issued by the State Government under Section 168A of the Central Goods and Service Tax Act, 2017 and the U.P. Goods and Service Tax Act, 2017 - Interpretation of force majeure in the context of legislative action. The submission advanced by learned Senior counsel and other counsel for the petitioners that since adjudication notices were not issued, the period of limitation never started running and that there was no requirement to conduct scrutiny or audit/before issuance of those and therefore, the revenue authorities were not disabled from conducting that exercise, requires serious consideration. HELD THAT:- The powers under Section 168A of the Act is legislative and not an administrative power. While submissions have been advanced by some of learned counsel for the petitioners suggesting, the power under Section 168A of the Act was an administrative or executive power, at the same time, as submitted by Sri Mahajan, there can be no doubt as to the true nature of that power. Prescription of limitation to perform an action is a pure legislative function. In absence of any doubt thereto, the extension of limitation prescribed by law also remains legislative. The power to condone delay may be granted both to the executive and the judicial bodies, at the same time, the prescription in law, as to limitation remains exclusively, a legislative function. The discretion existed with the principal legislature to prescribe such limitation as it may have considered proper. In fact, it is the submission advanced by some of the learned counsel for the petitioners that if the prescription of limitation is provided by the impugned notification had been made by the principal legislature, there may not have arisen any valid challenge thereto. Occurrence of the pandemic COVID-19 - HELD THAT:- The occurrence of the pandemic COVID-19 is an admitted fact. Further, arising therefrom, Re:Cognizance for Extension of Limitation [ 2022 (1) TMI 385 - SC ORDER] , the Supreme Court took cognizance of that occurrence and relaxed the period of limitation (in all), beginning 15.03.2020 to 28.02.2022. Besides, consideration of the same also exists in the minutes of meeting of the Council at its 47th meeting dated 28-29.06.2022 and at its 49th meeting dated 18.02.2023. The agenda item at those meeting has also been relied by all learned counsel. In the minutes of the 47th meeting of the Council, it had been clearly noted that the scrutiny and audit of Annual Returns for F.Ys. 2017-18, 2018-19 and 2019-20 was delayed because of COVID-19 pandemic . Once it is that issuance of the time extension application was a legislative function and there existed material and due deliberation/ consideration over/of to that material, before the legislative function was performed, the first condition of existence of circumstances for exercise of the said power described as conditional legislation, stood fulfilled - By way of principle it may not be doubted that the recommendations of the Council remained persuasive. The Central Government and the State Government were not duty bound to conform thereto. However, in absence of any fact shown to exist, the Central Government and the State Government have exercised their conditional legislative function in accordance with law. No palpable illegality or arbitrariness has been shown to exist as may warrant any deeper examination by the Court. Thus, the consideration offered by the Council in its 47th and 49th meetings, as has been extracted and discussed above was relevant to the exercise of power under Section 168A of the Central Act and the State Act. Neither the existence of material on which the discussion had arisen nor the discussion itself may be described as extraneous or irrelevant to the statutory requirement of Section 168A of the Act. Interpretation of force majeure in the context of legislative action - HELD THAT:- The legislative wisdom must remain insulated from that judicial query. Under the Constitutional scheme of division of powers, Courts may never be enthusiastic and may remain disinclined to test the subjective satisfaction of legislatures in enacting laws. In fact, the Courts are neither equipped nor they are expected to undertake that exercise - By its very nature of force majeure circumstance as advanced by learned Senior Counsel for the petitioners and other learned counsel for the petitioners, remains unpredictable. Both as to its occurrence, duration of its continuance and the impact that it may leave, a force majeure event remains a mystery or atleast unpredictable to the human mind and perception, in real time. Only hindsight wisdom, that is so unique to a humans may give rise to a discussion or discourse as to what may have been done and what could have been done and what should have been done in the past. In the context of enacted laws, neither the petitioners nor the Courts may have a say. It would remain a subject best preserved to the legislature, to deal with in real time. The submission that the issuance of the impugned notifications are pre-judicial to the rights and interest of the tax payers does not find our acceptance in the context of the discussion made above. A legislative action cannot be complained of as being prejudicial on account of extension of limitation. Limitation, though statutory, is not a pre-existing vested right of any party. It gets created and extinguished in accordance with the statutory law. Insofar as the statutory law prescribes a limitation, no argument may arise against such prescription made. Further, in the case of conditional legislation, the submission that it is not peripheral but substantive also looses its relevance in face of conditions seen fulfilled. Once the conditions for exercise of delegated legislative function stood fulfilled, no further test or scrutiny may arise, in that regard. The writ petitions challenging the issuance of the impugned notifications must fail. Hearing of all cases where adjudication proceedings are pending may recommence and be concluded, after excluding the duration of stay of the extended limitation to frame the adjudication order. Wherever adjudication orders have been passed and recovery stayed by this Court, the petitioners shall have 45 days from today to file appropriate appeals. The writ petition is dismissed.
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2024 (6) TMI 232
Detention of goods alongwith vehicle - procedure of detention under Section 129 of CGST Act, 2017 not followed - Section 130 of CGST Act, 2017 invoked directly and the confiscation of the goods ordered - auction of confiscated goods - HELD THAT:- When it is the case of the petitioner that he bona fidely purchased the goods from an unregistered dealer for valuable consideration under authenticated documents, it is his duty to establish the same. As he claims to have purchased the iron scrap from an unregistered dealer at Nellore, owes a responsibility to prove the genuineness of the sale transaction. As rightly argued, the authorities can initiate proceedings under Section 129 of CGST Act, 2017 against the petitioner and conduct enquiry by giving opportunity to establish their case. Section 129 of CGST Act, 2017 speaks about the detention, seizure, and release of goods and conveyances in transit, whereas, Section 130 of CGST Act, 2017 deals with the confiscation of goods and levy of tax, penalty and fine thereof. The harmonious reading of Sections 129 and 130 of CGST Act, 2017, keeping in mind the object and purpose, would construe that they are independent of each other. Section 130 of CGST Act, 2017 is not dependent to Section 129 of CGST Act, 2017. They are mutually exclusive. This Writ Petition is disposed of giving liberty to the Respondent Nos. 1 and 2 to initiate proceedings against the Petitioner under Section 129 of CGST/APGST Act, 2017 within two weeks from the date of receipt of a copy of this order and conduct enquiry by giving an opportunity of hearing to the Petitioner and pass appropriate orders in accordance with governing law and rules. In view of the same, the auction notice impugned in the writ petition is set aside.
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2024 (6) TMI 231
Violation of principles of natural justice - no opportunity of hearing had been offered to the petitioner prior to passing of the order - order issued u/s 73 of the CGST Act, 2017/WBGST Act, 2017 - HELD THAT:- Admittedly, in this case a show cause notice dated 31st January, 2023 had been issued. As would appear from Rule 142(3) of the Central Goods and Services Tax Rules, 2017 since, time to make payment of tax and interest under sub-section (8) of Section 73 is 30 days from the date of service of notice, no order under Section 73(9) of the said Act can be passed before expiry of the period of 30 days. As such ordinarily the assessee is provided with a 30 days window to file its response to the notice under Section 73(1) of the said Act. In this case, it would appear from the show cause notice dated 31st January, 2023, that 30 days window had been provided to the petitioner as the date for filing of the response was fixed on 2nd April, 2023. It is true, that the petitioner did not file its response to the aforesaid show cause nor did the petitioner make any application praying for personal hearing. From the show cause notice dated 31st January, 2023 it appears that the petitioner was offered opportunity of hearing on 20th February, 2023, could not have satisfied the requirements of being afforded with a reasonable opportunity of hearing under the provisions of Section 75(4) of the said Act - the order dated 4th August, 2023 stands vitiated on the ground of failure of natural justice. The petitioner is remanded back to the proper officer in respect of the show cause notice dated 31st January, 2023, with a further direction upon the proper officer to afford the petitioner an opportunity of hearing and to consider the documents to be produced by the petitioner in course of the hearing and to dispose of the proceeding under Section 73(1) of the said Act, by taking the same to a logical conclusion within a period of four weeks from the date of communication of this order. Petition disposed off by way of remand.
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2024 (6) TMI 230
Challenge to impugned order - impugned order is not signed but was uploaded by the competent authority - applicability of Section 160 and 169 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- In M/S. SRK ENTERPRISES, VERSUS ASSISTANT COMMISSIONER (ST) , BHEEMILI CIRCLE, VISAKHAPATNAM [ 2023 (12) TMI 156 - ANDHRA PRADESH HIGH COURT] , this Court referred to the previous order of the Co-ordinate Bench in the case of AV BHANOJI ROW VERSUS ASSISTANT COMMISSIONER ST VISAKHAPATNAM [ 2023 (2) TMI 1224 - ANDHRA PRADESH HIGH COURT] and held that the signatures cannot be dispensed with and the provisions of Section 160 169 of the CGST Act, 2017 would not come to the rescue. The proceedings/order issued by respondent No.1 dated 10.11.2020 set aside - The respondent authorities shall pass fresh orders in accordance with law, expeditiously and preferably within a period of three (03) weeks from the date of receipt of a copy of the order - petition allowed.
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2024 (6) TMI 229
Challenge to impugned order u/s 73(9) of C.G.S.T. Act 2017 and show cause notice u/s 73(1) - time limitation for assessment year 2017-18 - HELD THAT:- As the ground of challenge is that initiation of the proceedings is beyond the period of limitation as also extended period as the show cause notice was not issued inconsonance in the provisions of Section 73(2) and as such the order is within the jurisdiction and no tax would be levied. No cause is made out at this stage for direction to the petitioner to make any deposit. List on 22.04.2024.
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2024 (6) TMI 228
Initaition of proceedings u/s 129 of CGST Act - Levy of penalty - violation of Rule 55 of CGST Rules - whether minor discrepancy of not mentioning existence of Kundan stones in the Delivery Challan could not have been made the basis to impose the penalty? - mismatch between the goods and discrepancy shown in the Delivery Challan - HELD THAT:- A perusal of the material on record including the impugned order and the Delivery Challan will indicate that except for non-disclosure of Kundan stones in the Delivery Challan, all other requirements of Rule 55 of the CGST Rules have been complied with by the petitioner as can be seen from the Delivery Challan itself. A perusal of the impugned order will also indicate that both authorities have committed an error in proceeding on the erroneous presumption / assumption that the gold was not being sent for sample purpose but was being transported for the purpose of sale and since the names of the prospective purchaser were not mentioned in the Delivery Challan, petitioner would be liable to pay penalty as directed in the impugned order. However, the said reasoning of the Authorities and findings recorded by it is clearly contrary to the material on record, which establishes that there is no basis to come to the conclusion that gold ornaments were meant for sale in favour of the prospective purchasers and not for sample as indicated in the Delivery Challan. The order passed by the Original Authority at Annexure H dated 15.07.2022 as well as the impugned order passed by the Appellate Authority at Annexure M dated 15.12.2022 deserve to be quashed and penalty of Rs. 14,50,560/- deserves to be refunded back to the petitioner and to grant liberty in favour of the respondents to proceed against the petitioner for alleged mismatch/discrepancy of the Kundan stones, which are not shown in the Delivery Challan. Petition allowed.
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2024 (6) TMI 227
Initiation of tax assessment proceedings under the provisions of CGST Act against a company which is dissolved under Section 59 (8) of the IBC Act - HELD THAT:- The Hon ble Division Bench in SPICE ENFOTAINMENT LTD. VERSUS COMMISSIONER OF INCOME TAX [PRINTED AS: SPICE ENTERTAINMENT LTD. VERSUS COMMISSIONER OF SERVICE TAX] [ 2011 (8) TMI 544 - DELHI HIGH COURT] held that initiating assessment against a non-existing / dead person is not merely a procedural defect which can be cured but a jurisdictional defect. In other words, the Tax authorities do not have the jurisdiction to initiate tax assessment against a non-existing entity. Thus, a company would cease to exist after an amalgamation has occurred and tax assessment cannot be initiated against a non-existent company. Similarly, a company would cease to exist after the voluntary winding up proceedings have occurred and is finally dissolved under Section 59 (8) of the IBC Act. In the instant case, the order passed by the NCLT, Bangalore, dated 15.02.2023 is sufficient to come to the unmistakable conclusion that the petitioner company had stood dissolved completely in terms of Section 59 (8) of the IBC. Consequently, the petitioner company who is presently represented by the official liquidator for the limited purpose of the present petition ceased to exist for all other purpose including imposing or fastening any liability upon the petitioner-dissolved company. Under these circumstances, the impugned show cause notice and adjudication order are consequently without jurisdiction or authority of law and the same deserves to be quashed. In the instant case, the show cause notice undisputedly issued subsequently to dissolution and there was no determination of the tax liability of the company which was never in existence at the time of issuance of the show cause notice. In other words, at the time of adjudication order, there was no company in existence for the purpose of determination of the tax, interest or penalty and consequently, the question of invoking Section 88 (3) of the CGST Act as against the Directors would not arise in the facts of the instant case. A plain reading of sub-rule (1) would indicate that from the date of commencement of liquidation, the corporate person shall cease to carry on its business except as far as required for the beneficial winding up of its business; sub-rule (2) contemplates that the corporate person continues to exist until it is dissolved under Section 59 (8) of the IBC - after dissolution under Section 59 (8) of the IBC, the said corporate person would have ceased to exist and as such, the question of any adjudication after dissolution being per se impermissible under Section 88 (3) of the CGST Act and evidently would have no application on this ground also. Petition allowed.
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2024 (6) TMI 226
Maintainability of Advance Ruling application - Supply of not - subsidized deduction made by the Appellant from the Employees who are availing food facility in the factory under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Rajasthan Goods and Service Tax Act, 2017 - applicability of GST on the nominal amount deducted from the salaries of their employees - Applicability of GST on nominal amount deducted from the Manpower supply contractor in case of contractual employees - Input Tax Credit (ITC) of the GST charged by the Canteen Service Provider. Maintainability of Advance Ruling application - whether or not the application dated 11.03.2022 filed by the Appellant for seeking advance ruling on various questions is maintainable? - HELD THAT:- AAR Rajasthan have not taken note of the above contract furnished by the appellant for the period from 16.01.20022 to 16.01.2024, which was valid during the period when Ruling was pronounced. It will be in the fitness of things if the Authority for Advance Ruling re-consider whole application dated 11.03.2022 filed by the appellant before the Authority for Advance Ruling. Rajasthan on merits. The Ruling of AAR, Rajasthan dated 18.10.2022 is set aside and the matter is remanded back to the AAR to decide the application afresh on merits after considering all the questions posed by the appellant in their application dated 11.03.2022.
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2024 (6) TMI 225
Maintainability of Advance Ruling application - Supply of not - subsidized deduction made by the Appellant from the Employees who are availing food facility in the factory under the provisions of Section 7 of Central Goods and Service Tax Act, 2017 and Rajasthan Goods and Service Tax Act, 2017 - applicability of GST on the nominal amount deducted from the salaries of their employees - Applicability of GST on nominal amount deducted from the Manpower supply contractor in case of contractual employees - Input Tax Credit (ITC) of the GST charged by the Canteen Service Provider. Maintainability of Advance Ruling application - whether or not the application dated 11.03.2022 filed by the Appellant for seeking advance ruling on various questions is maintainable? - HELD THAT:- AAR Rajasthan have not taken note of the contract furnished by the appellant for the period from 01.04.2021 to 31.03.2022. which was valid during the period when Ruling was pronounced. It will be in the fitness of things if the Authority for Advance Ruling re-consider whole application dated 11.03.2022 filed by the appellant before the Authority for Advance Ruling, Rajasthan on merits. The Ruling of AAR, Rajasthan dated 18.10.2022 is set aside and the matter is remanded back, to the AAR to decide the application afresh on merits after considering all the questions posed by the appellant in their application dated 11.03.2022.
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2024 (6) TMI 224
Levy of GST - portion of the amount recovered by the Applicant from its employees towards the canteen facility provided to the employees - transportation facility provided by Applicant to its employees - input tax credit of the GST charged by the canteen service provider for the canteen facility provided to its employees. Whether GST is liable to be discharged on the portion of the amount recovered by the Applicant from its employees towards the canteen facility provided to the employees? - HELD THAT:- The applicant is on record that the canteen facility is being provided to supervised contract employees and third party employees apart from the permanent employees. However, during the course of personal hearing, on being specifically asked, the authorized representative stated that the ruling being sought is specifically in respect of permanent employees only. In terms of Circular No. 172/04/2022-GST, it is clarified that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. The deduction made by the applicant from the employees who arc availing food in the factory would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. Whether GST is liable to be discharged on the transportation facility provided by Applicant to its employees? - HELD THAT:- Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees other than contract employees is concerned. It is further held that the ITC on GST charged by the CSP will be restricted to the extent of cost borne by the applicant only. - Input Tax Credit will be available to the applicant in respect of canteen facility which is obligatory under the Factories Act, 1948, read with Gujarat Factories Rules, 1963. Whether the Applicant is eligible to avail input tax credit of the GST charged by the canteen service provider for the canteen facility provided to its employees? - HELD THAT:- In terms of Circular No. 172/04/2022-GST, it is clarified that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same is provided in terms of the contract between the employer and employee. It is found that factually there is no dispute as far as the applicant has provided transport facility in terms of their transport policy - the deduction for bus transportation facility would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017.
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2024 (6) TMI 223
Classification of goods - Mix Mukhwas - Roasted Til Ajwain - covered by HSN code 12074090 or not - covered by entry no. 70 of Schedule I of Notification No. 1/2017-Central Tax (Rate) and taxed at the rate of 2.5% CGST and 2.5%% SGST or 5% IGST or not - HELD THAT:- Both the products, mainly comprises of sesamum seeds 60% in respect of the first product and 97% in respect of the second product; that the process undertaken on the said seeds of cleaning, mixed with salt and citric acid solution for slating purpose, roasting adding turmeric powder does not take away the product from the ambit of chapter 12 in terms of either the chapter note or the HSN notes. Further, reliance also placed on Rule 3 (b) of the GRI supra which clearly states that owing to the mixture when the goods are classifiable under two or more heading, the product shall be classified as if they consisted of the material or component which gives them their essential character, in so far as this criterion is applicable. Thus, the product is classifiable under chapter 12 of the Customs Tariff Heading, specifically CTH 12074090. The applicant has heavily relied upon circular no. 197/31/96-CX dated 15.4.1996 and three case laws. The reliance of the applicant to the said circular and the case law is not tenable owing to the fact that the circular is in respect of coriander seeds and the circular concludes that the same is covered under chapter 9, specifically 09.09 of HSN. Rate of GST - HELD THAT:- It is found that both the products classified under tariff item 12074090 and would be leviable to GST @ 2.5% CGST and 2.5% SGST in terms of entry no. 70 of schedule to notification No. 1/2017-CT (Rate).
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2024 (6) TMI 222
Supply of service or not - deduction of a nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises - applicability of GST on the nominal amount to be deducted from the salaries of employees - ITC to the extent of cost borne by the applicant is available to the applicant on GST charged by the canteen service provider for providing catering services. Whether the deduction of a nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory would be considered as a supply of services by the applicant under the provisions of section 7 of the CGST Act, 2017? - HELD THAT:- In terms of Section 7 of the CGST Act, 2017, supply means all forms of supply of goods/services or both such as sale, transfer barter, exchange, licence, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. the exception being Schedule-I, which includes the activities made or agreed to be made without a consideration and Schedule-III, which includes activities which shall be treated neither as a supply of goods or services - The applicant s primary role is that he provided a demarcated space and that the amount is paid by him to the CSP [a part of which is collected from the employees] on behalf of the employees. In terms of circular No. 172/04/2022-GST, it is clarified that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. Thus, the deduction of nominal amount made by the applicant from the salary of the employees who are availing the facility of food provided in the factory premises would not be considered as a supply under the provisions of section 7 of the CGST Act, 2017. Whether GST is applicable on the nominal amount to be deducted from the salaries of employees? - HELD THAT:- Since the answer to the above is not in the affirmative, the ruling sought in respect of this question is rendered infructuous. Whether ITC to the extent of cost borne by the applicant is available to the applicant on GST charged by the canteen service provider for providing catering services? - HELD THAT:- Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service employees working at the factory is concerned. It is further held that the ITC on GST charged by the canteen service provider will be restricted to the extent of cost borne by the appellant only - Input Tax Credit will be available to the appellant in respect of food and beverages as canteen facility is obligatorily to be provided under the Factories Act, 1948, read with Gujarat Factories Rules, 1963 as far as provision of canteen service for employees in factory is concerned.
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2024 (6) TMI 221
Classification of goods - Milk food for babies and Milk for babies under the trade name of Momylac - fall under the HSN 04021020 and 04022920, respectively, or not - rate of GST - HELD THAT:- Consequent upon the examination of manufacturing process of product manufactured by the applicant, we find that under chapter 19 it is described that milk product is one of the constituent of the final product whereas Chapter 4 deals with the milk product only. The Principle/dominant item of the applicant is manufacturing of infant milk formula containing cereals, protein supplement etc. which is a substitute to mother's milk for the infants. Therefore, it is more appropriate to classify the manufactured product by the applicant under HSN 19011090. Since, it is established that the final product manufactured by the applicant is classifiable under 19011090, the rate of GST payable by them in term of Notification No.01/2017 (Central Rate) dated 28.06.2017 - Applicant is required to pay GST 18% under HSN 19011090 for supply of Milk food for babies and Milk for babies .
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2024 (6) TMI 220
Levy of GST or exemption from GST - selling of residential units in the project Saviour Park after deemed completion or first occupation in that phase (Phase IV) of the project - unit sold after which date shall be treated as exempt from GST. Whether selling of residential units in the project Saviour Park after deemed completion or first occupation in that phase (Phase IV) of the project is taxable or exempt Supply? - HELD THAT:- It is not the case that GDA has not given completion certificate within a specified time and thus it may be treated as deemed completion. On the other hand the GDA vide letter dt. 27.04.2023, received on 02.05.2023, denied to issue the completion certificate. Thus, with respect to 113 units of the project, it cannot be considered as deemed completion - in a single building if projects are registered under RERA as separate projects, those shall be treated as distinct projects. The applicant was engaged in the building of 1150 units in aggregate. The said project was divided in 4 phases. The first three phases have already been completed and delivered to the customers. The 4th phase was completed in two parts-169 units in one part and 113 units in second part. Any occupancy in the Phase IV the project without Completion Certificate/Occupancy Certificate is in contravention of Bye-laws of Ghaziabad Development Authority. The letter of possessions cannot be substitute the occupation certificate. Thus, having letter of possessions or sale deed does not necessarily imply that first occupation has taken place. If answer to the above is affirmative, unit sold after which date shall be treated as exempt from GST - HELD THAT:- The Completion Certificate was denied to the applicant by GDA. Once, GDA denied Completion Certificate to the applicant. Hence, Completion Certificate cannot be said to be deemed approved. The first occupation cannot be said to be taken either. Thus, the sale of residential units in Phase IV of the project by the applicant is not sale of immovable property but sale of services and thus GST is leviable.
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Income Tax
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2024 (6) TMI 238
Dismissal of appeal due to non-payment of advance tax u/s 249(4)(b) - assessee had neither filed his return of income u/s. 139 of the Act nor in compliance to notice issued to him u/s. 142(1) of the Act - sustainability of the view taken by the CIT(Appeals) that the appeal of the assessee who had not filed his return of income for the subject year was not maintainable for the reason that he had failed to satisfy the conditions contemplated in Section 249(4) - HELD THAT:- Admittedly, as per section 249(4)(b) of the Act, in a case where no return of income has been filed by the assessee, then his appeal shall be maintainable before the CIT(Appeals) only if he had paid an amount equal to the amount of advance tax which was payable by him. At the same time, the legislature had carved out an exception to the applicability of the aforesaid statutory requirement by way of a proviso to Section 249(4) of the Act, as per which, on an application made by the appellant, the CIT(A) may, for any good and sufficient reason to be recorded in writing exempt him from the operation of the aforesaid statutory provision. The statutory requirement contemplated in Clause (b) of sub-section (4) of Section 249 of the Act would stand triggered only where any obligation was cast upon the assessee to pay advance tax . As stated by the Ld. AR, and rightly so, in absence of any taxable income for the year under consideration [as was stated by him in the SOF filed before the CIT(Appeals)] no obligation was cast upon him to compute and pay any advance tax u/ss. 208 209 of the Act. Considering the fact that as no obligation was cast upon the assessee to compute/deposit any amount towards advance tax for the subject year, we are unable to concur with the view taken by the CIT(Appeals) who had dismissed the appeal as not maintainable for the reason of non-compliance of the mandatory condition contemplated in Clause (b) of sub-section (4) of Section 249 As in the present case, the assessee had not only before ITAT but had also in the Statement of facts stated before the CIT(Appeals) that he had no taxable income, therefore, in absence of any obligation cast upon the assessee to compute/pay advance tax u/ss. 208 and 209 of the Act for the subject year, the first appellate authority could not have held that he had failed to comply with the statutory conditions contemplated in Sec. 249(4)(b) of the Act. Thus set aside the order of the CIT(Appeals) and restore the same to his file with a direction to dispose off the appeal after considering the merits of the case.
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2024 (6) TMI 236
Income from Other Sources u/s 56 (viib) - excess amount per share paid as premium - valuation report furnished by the assessee-company was rejected by the Assessing Officer (AO), holding that the Discounted Cash Flow (DCF) valuation used by the assessee, is bogus and has no connection with the real figures - CIT(A) deleted addition - Appellate Authority held that since no money/consideration was received by the assessee on issue of shares and the shares are allotted merely on account of conversion of outstanding loans received in earlier years and source whereof was accepted to be satisfactorily explained into share capital, Section 56 (2) (viib) in absence of receipt of consideration, is not applicable - also held that the valuation is done by the assessee as per DCF method, which is an internationally accepted method of valuation of shares, and is a permissible methodology as per Rule 11UA (2)(d) of the Rules HELD THAT:- We are of the opinion that the orders passed by the Income Tax Appellate Tribunal as well as the CIT(Appeals), are fairly comprehensive. Both of them have concurrently found that no consideration was received by the assessee-firm for allotment of the shares, therefore Section 56 (2) (viib) of the Act would not apply, and that it would have applied only if consideration was received for such a transaction. Also, both the Tribunal and the CIT (Appeals) have held that the Assessing Officer had no jurisdiction to substitute the NAV method of assessing the valuation of shares, once the assessee had exercised option of a DCF valuation method as per Rule 11UA (2) of the Income Tax Rules. Revenue appeal dismissed.
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2024 (6) TMI 235
Denial of exemption u/s 11 where return of income is not furnished within time - return of income within the time limit of section 139(4) - contention of the department is that in order to claim exemption u/s. 11 or 12 of the Act, the return of income has to be filed within the time limit as per Section 139(1) of the Act - provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as within the time allowed under sub-section (1) of sub-section (4) of that section - contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s. 139(4) of the Act also gets this benefit HELD THAT:- The amendment was introduced to exclude the category of updated returns of income u/s. 139(8) of the Act . The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act.There is no dispute to the fact that the assessee has filed its return of income for this year within the time limit of section 139(4) of the Act. Therefore, the department was not correct in denying the exemption u/s. 11 of the Act while processing the return. The Circular F No. 173/193/2019 ITA-1, dated 23.04.2019 issued by the CBDT and relied upon by the assessee refers to Memorandum to the Finance Bill, 2017 and gives clarification in respect of amendment to section 12A of the Act, that a person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed u/s. 139 of the Act. As per this clarification, the return of income was required to be filed within the time allowed u/s. 139 of the Act Exemption u/s. 11 of the Act was available in respect of the return of income filed u/s. 139 of the Act. This Circular does not mandate that the return has to be filed only within the time limit available u/s. 139(1) of the Act and rather directs to rectify the unjust demand raised u/s. 143(1)(a) of the Act. As the assessee had filed its return of income within the time limit of section 139(4) of the Act, it was eligible for benefit of exemption u/s. 11 of the Act. It has been held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, [ 2023 (3) TMI 765 - ITAT RAJKOT] which has been relied upon by the assessee, that if the assessee had filed return of income after due date of filing of return u/s. 139(1) of the Act but before due date prescribed u/s. 139(4) of the Act, benefit of exemption u/s. 11 of the Act can t be denied to the assessee by invoking the provisions of Section 12A(1)(ba) of the Act. Thus the clarificatory Circular of the CBDT as well as the judicial pronouncement, we are of the considered opinion that the department was not correct in disallowing exemption u/s. 11 of the Act while processing the return, as the return of income was filed by the assessee within the due date as per the provisions of the Act. Accordingly, findings of the Ld. JCIT(A) is reversed and the department is directed to allow the exemption u/s. 11 of the Act as claimed by the assessee. Decided in favour of assessee.
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2024 (6) TMI 219
Faceless assessment of income escaping assessment - adherence to procedure prescribed under the Scheme framed under 151A or not? - department is required to issue notices in a faceless manner as mandated - respondent contended that the notices were issued online without physical interface, and the petitioner did not raise this issue before the departmental authorities - HELD THAT:- A careful perusal of the scheme reveals that the scope of the scheme is for the purpose of the assessment, re-assessment, re-computation under section 158 of the Act and issuance of notices u/s 148 of the Act and the same shall be by a process through automated allocation in accordance with the risk management strategy formulated by the Court as referred to u/s 148 of the Act for issuance of the notice and in a faceless manner and to the extent provided u/s 144 B of the Act with reference to make the assessment, re-assessment of total income or loss of the assessee. Perusal of the Section 151A along with the scheme reveals that the statute in order to obviate prejudice and bias has resorted to issuance of notices by the automated allocation through the risk management strategy. The Judgments referred to by the learned counsel for the petitioner supports the contention raised by the writ petition and hold that the notices are required to be issued in an automated manner without there being any interface between the department and the assessee. Whether there is any vested or any fundamental right in respect of the assessee remand for automated issuances of notice ? - The Delhi high Court [ 2023 (5) TMI 1118 - DELHI HIGH COURT] has categorically held that there is no fundamental right or legal right available to an assessee to demand that the notices though automated digital allocation should be issued. The question of whether the petitioner has the fundamental right or not may not be required to be answered to the present proceedings inasmuch as Mr. Keyal has fairly submitted that in terms of the provisions under Section 151A, the Department has already framed a scheme and the same is notified by notification dated 29.03.2022. As discussed above, the scope of the scheme is for the purposes of the assessment, re-assessment, computation under Section 147 and for issuances of notices under 148 and which shall be done through automated allocations by the department. If that be so then the department is required to follow the procedure prescribed in terms of the scheme and accordingly the department will withdraw the notices and thereafter issue fresh notices if permissible under law as per the scheme read with Section 151A. In the event the department proceeds to issue fresh notices then the petitioner shall also be granted liberty to file their appropriate reply under the provision of Section 148.
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2024 (6) TMI 218
Royalty payment - ITAT partly allowed the appeal preferred by the assessee holding that the assessee was not required to deduct tax at the rate of 20% for the payments and further directed the AO to grant refund to the assessee on the tax recovered from the assessee @ 20% - whether expenditure incurred in Russia for preparation of technical documentation, working drawings testing models of equipments and other technical purposes, has been wrongfully assesssed by the assessing officer as well as CIT (A) to be as a Royalty and 20 per cent tax deductable on the same has been wrongly imposed - HELD THAT:- The contention of learned counsel for the appellant that as the Royalty means consideration to be paid for imparting of any information concerning technical industrial commercial or scientific knowledge, experience or skill, we have to understand that the said imparting of any information has to be conveyed to the assessee. Since, the information which was gathered by the TPE at Russia was to be handed over to Russia alone and was not to be handed over to the assessee, we do not find the said consideration to come within the ambit of Royalty . Even as per explanation 5, it is clarified that royalty includes the possession and control of such rights, property or information with the payer. We find that factually the same is not available in the present facts because the documentation conducted by the said TPE was to be handed over to Russia and would, therefore, not remain in its possessoin and control. In fact there is no knowledge available to the assessee with regard to the second part of the preparation of technical documentation in Russia. In these circumstances, we are unable to accede to the submission of learned counsel for the appellant that the consideration would fall within the ambit of Royalty. It is the final product which the assessee received, therefore, the said product would only come within the four corners of the capital assets. In view thereof, the order passed by ITAT does not suffer from any illegality or misinterpretation of law.
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2024 (6) TMI 217
Nature of expenses - Professional Fee Disallowance - HELD THAT:- Tax authorities have failed to appreciate the nature of expenditure under the head legal and professional expenses which were made as a preliminary step to make a conclusive decision as to perspective investment in the said company, should be made or not. In the present case, the actual action on the part of assessee was to purchase 2700 shares but to arrive at a decision, if any, expenditure is made, same would be revenue expenditure. AO had fallen in error to hold that these legal and professional expenses have been solely undertaken to solicit help for acquiring capital assets and to treat it as capital expenditure. The reliance placed by learned AR on the judgment of Om Prakash Behl [ 1979 (9) TMI 16 - PUNJAB AND HARYANA HIGH COURT] is relevant wherein held that whether the claim in question is permissible under the provisions of Section 37 of the Act, we have to take the facts as they are. It is not open in law to investigate the motive of the assessee. We are concerned with the actual action on the part of the assessee and not the action which the assessee should have taken under the circumstances. It is not permissible in law, as the Tribunal has done, to bring in suppositions and then to find out whether the claim is allowable or not. As in the case of CIT vs. Karnataka State Industrial Investment Development Corporation [ 1986 (2) TMI 16 - KARNATAKA HIGH COURT] held that expenditure in preparation of the object and feasibility report is revenue expenditure. Similar is the view of Sintex Industrial Ltd. [ 2017 (6) TMI 601 - GUJARAT HIGH COURT] - Thus, we are inclined to allow this ground. Disallowing interest expenses on loan against property - HELD THAT:- We are of the considered view that learned tax authorities had fallen in error in not taking into account the fact that investment of securities was one of the objects of the incorporation of the company. The rental income during the year was 3.09 crores, and the income from trading in securities was Rs. 100.36 crores. The loan taken against the mortgaged properties was used for the business purposes of the assessee for the purpose of trading securities. The same was allowable expense in the P L account. Learned tax authorities had fallen in error and disallowed the same so ground no.2.1 is allowed in favour of the assessee.
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2024 (6) TMI 216
Time limit for issuance of TP Order as per Section 92CA(3A) - appellant argued that the assessment order is barred by limitation - HELD THAT:- The undisputed fact that emerges is that for AY 2016-17, the order has been passed by Ld. TPO u/s 92CA (3) on 01.11.2019. As per the decision of M/s Pfizer Healthcare India Pvt. Ltd. ors. [ 2021 (2) TMI 1152 - MADRAS HIGH COURT] this order would be barred by limitation. In this decision, bunch of assessee invoked writ jurisdiction of Hon ble Court on the ground that the order passed u/s 92CA(3) was barred by limitation by one day. It was noted that in terms of Sec.92CA(3A), an order has to be passed by TPO before 60 days prior to the last day on which the period of limitation referred to in Sec.153 for making assessment expires. The assessment is to be completed within 21 months from end of assessment year in which the income was first assessable. Therefore, counting from 31.03.2017, the assessment was to be framed on or before 31.12.2019. The period of 60 days prior thereto would run till 01.11.2019 and any date prior thereto would mean 31st of October or before. Since the order was passed on 01.11.2019, the same would be barred by limitation. Since Transfer Pricing proceedings were barred by limitation of time, the transfer pricing adjustment would be non-est. Consequently, the assessee would cease to be an eligible assessee as defined u/s 144C(15)(b) of the Act and therefore, the machinery provisions of Section 144C of the Act would not get triggered in the assessee s case. In such a scenario, the assessment in the case of the assessee ought to have been completed within 33 months from the end of the Assessment year as per Sec. 153(1) read with Section 153(4) of the Act, i.e., on or before 31-12-2019. The argument of Ld. CIT-DRP that it was not possible for Ld. AO to predict that fate of Ld. TPO s order do not appeal to us since any order passed beyond prescribed statutory time limit, for whatever reasons, could not be held to be a valid order. In the result, the corporate additions made in the assessment order would not survive. The appeal stand allowed on legal grounds.
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2024 (6) TMI 215
Correct head on income - income admitted in survey proceedings - business income or unexplained investments - assessee family was subjected to survey u/s 133A wherein assessee admitted certain income which was also offered in the return of income as Business Income - as per AO in the absence of any identifiable and verifiable sources, the income would be assessable as undisclosed investments u/s 69 which would be subjected to rate of tax as specified u/s 115BB - assessee and his family is engaged in money lending business for past more than 20 years HELD THAT:- We are of the considered opinion that sundry debtors would keep on changing continuously in view of the fact that certain advances would be given and certain advances would be received back by the assessee at any given point of time. Nevertheless, the assessee family has already offered the differential of debtors between two dates as his undisclosed income. We also find that these debtors arise out of money lending business being carried by the assessee family. Any discrepancy in debtors, in such a case, would be part and parcel of assessee s money lending business and it could very well be said that the discrepancy has arisen out of unaccounted income earned by the assessee from this business only and therefore, the same would be taxable as business income only. There is nothing on record that the assessee family has any other sources of income. The assessee is stated to be doing same business for last more than 20 years. All these facts support the case of the assessee. We also find that during the course of survey, a statement was recorded from the assessee s son. In reply as stated that the family was not maintaining proper books of accounts for finance business and record the transactions on rough sheets - balances would be updated on fortnightly basis. The complete list of outstanding balances was also furnished wherein outstanding amounts was shown as Rs. 12.31 Crores. As on 31-03-2016, the assessee s family reflected debtors to the tune of Rs. 7.41 Crores in their respective returns of income. In reply to question no.11, the assessee merely stated that differential in advances are out of undisclosed income. In our opinion, the same would arise out of business only since the assessee does not have any other substantial source of income. It could be said that difference in debtors was accumulated out of income from business and the undisclosed business income, if any, was ploughed back into business to lend more money. In such a case, the excess debtors could be said to have arisen out of normal business activity only and therefore, the same would be assessable as business income - See M/S. MOOKAMBIKA IMPEX VERSUS DCIT CENTRAL CIRCLE-3 (4) , CHENNAI. [ 2023 (7) TMI 1159 - ITAT CHENNAI] Thus we would hold that the assessee has correctly offered the additional income as Business Income only. The provisions of Sec.69 r.w.s. 115BBE would have no application. The Ld. AO is directed to re-compute the income and demand payable by the assessee. The corresponding grounds stand allowed. Addition u/s 56(2)(vii)(b) - difference in stamp duty value and document value with respect to one property which have been purchased by the assessee during the year - assessee raised an additional ground during first appellate proceedings - CIT(A) did not admit the additional ground against which the assessee is in further appeal before us - AR has pleaded for adjudication on merits - HELD THAT:- We are of the opinion that since all the facts were available before first appellate authority, this ground should not have been rejected on technical grounds. Nevertheless, we direct Ld. CIT(A) to adjudicate this issue on merits. The grounds thus raised stand allowed for statistical purposes.
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2024 (6) TMI 214
Disallowance u/s. 14A r.w. Rule 8D(ii) - expenditure incurred on earning exempt income - as argued assessee company as per its balance sheet had sufficient interest-free funds, i.e, share capital/reserves which would sufficiently explain the investment in the exempt income yielding shares therefore, no part of the interest expenditure was liable to be disallowed u/s.14A - HELD THAT:- As the interest-free funds available with the assessee company were more than sufficient to source its investment in exempt income-yielding shares, therefore, we concur with the view taken by the CIT(Appeals) that no disallowance of any part of the interest expenditure could have been made by the A.O by attributing the same to earning of the exempt income u/s. 14A r.w.r. 8D(2)(ii) of the Act. At this stage, we may herein observe that it is neither the case of the department nor a fact discernible from the record that the assessee company is found to have invested in the exempt income-yielding shares out of its interest-bearing funds. Also, we may herein observe that controversy as to whether disallowance of any part of the interest expenditure can be made in a case where the assessee has mixed funds, i.e. both interest-free funds and interest-bearing funds, in the absence of any supporting material which would establish that the exempt income yielding investment was sourced out of the interest-free funds, is no more res-integra in view of the judgment in the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] had held that if investment in exempt income yielding shares is made out of common funds, and the assessee had available non-interest bearing funds larger than the investments made in tax-free securities then in such cases, no disallowance u/s. 14A would be called for. Also, we find that a similar view is taken in the case of CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] wherein as observed that where the assessee has more interest-free funds than tax-free investments, then a presumption would arise that tax-free investments would be out of the interest-free funds. We, thus, in terms of our aforesaid observations, concur with the view taken by the CIT(Appeals) that as the assessee company had sufficient interest-free funds, i.e. capital, reserves surplus to source the investment in the exempt income-yielding shares, therefore, no part of the interest expenditure claimed by it could have been attributed to earning of the exempt income. Accordingly, the disallowance made by the A.O u/s. 14A r.w.r. 8D(2)(ii) is not warranted. Thus, the Ground of appeal No. 1 raised by the revenue is dismissed in terms of our aforesaid observations. Addition towards labor expenses, conveyance and vehicle running expenses, printing, and stationery expenses, etc.,- expenses booked under the aforesaid heads were incurred in cash and were merely supported by self-made vouchers and, thus, were not verifiable - CIT(Appeals) sustained the disallowance concerning the vehicle running expenses, for the reason that personal usage of vehicles could not be ruled out, but vacated the balance amount of addition/disallowance - HELD THAT:- As there is neither any justifiable reason given by the A.O for disallowing the assessee's claim for deduction of the aforementioned expenses u/s. 37 of the Act, therefore, finding no infirmity in the view taken by the CIT(Appeals), we uphold the same. Thus, the Ground of appeal No. 3 raised by the revenue is dismissed in terms of our aforesaid observations. Addition u/s 68 - Unexplained loan transaction - HELD THAT:- As ratio of the judgment of Lovely Exports Pvt. Ltd. [ 2008 (1) TMI 575 - SC ORDER] as been held that no addition can be made under section 68 of the Act where the assessee had furnished before the AO evidence proving the identity of the investors, thus, applied to the subject loan transaction as the assessee company had proved to the hilt the identity of the lender company, which, in fact had confirmed of having advanced the subject loan to the assessee company. Accordingly, if the A.O had any doubt as regards the creditworthiness of the aforementioned lender who had duly confirmed the loan transaction, then the proper recourse available to him was to proceed against the said lender company and not make any addition in the hands of the assessee company. We, thus, concur with the view taken by the CIT(Appeals) that the loan raised by the assessee company from the aforementioned lender company, viz. M/s. Hillview Agencies Pvt. Ltd., Kolkata could not have been held as unexplained cash credit u/s. 68 of the Act. Thus, the Ground of appeal raised by the revenue is dismissed.
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2024 (6) TMI 213
Proportionate disallowance of interest expenditure - borrowed funds have been utilized in making interest free advances to the group companies - HELD THAT:- Facts on record reveal that the so called investments are not in the nature of loans and advances, but are investments in equity and preference shares of group companies. Therefore, the allegation of the departmental authorities that the assessee has diverted borrowed funds to group companies without charging any interest are factually incorrect. AO himself has recorded a factual finding that the assessee had sufficient interest free funds available with it. That being the factual position on record, as per the settled legal principle, it has to be presumed that interest free funds available with the assessee have been invested in acquisition of shares of group companies. In any case of the matter, it is observed that identical disallowances were made by the AO in assessment years 2002-03, 2003-04 and 2005-06. While deciding the issue, learned first appellate authority deleted the disallowances. While deciding the appeals filed by the Revenue [ 2019 (3) TMI 693 - ITAT DELHI] upheld the decision of learned first appellate authority. On going through the aforesaid order of the Tribunal, we find parity of facts between the impugned assessment year and the appeals for other assessment years decided by the Tribunal. That being the factual position on record, we delete the disallowance made u/s 36(1)(iii) of the Act. This ground is allowed. Disallowance towards cost of acquisition of land - assessee could not furnish the bills/vouchers pertaining to the aforesaid cost - as alleging that the assessee furnished the photocopy of letter issued by MTDC and no original was furnished, FAA sustained the disallowance - HELD THAT:- As could be seen, learned first appellate authority has rejected the additional evidence on the ground that it is only a photocopy and no original document was furnished. From the facts on record, it is observed that additional evidence furnished by the assessee is a letter from MIDC, which is a State Government organization. If learned first appellate authority had any doubt regarding the authenticity of such document, he could have conducted necessary inquiry himself or through the Assessing Officer to verify the authenticity of the document. Without conducting any such inquiry, he could not have rejected the additional evidences. We restore the issue to the AO to verify assessee s claim by properly examining the documentary evidences furnished by the assessee by way of additional evidences. In case, any inquiry is required to be conducted with reference to such evidences, it is open to the Assessing Officer to do so. Ground is allowed for statistical purposes. Disallowance of long term capital loss on sale of shares - HELD THAT:- Facts on record reveal that in course of hearing before the first appellate authority the assessee had furnished certain additional evidences, however, rejecting such additional evidences, learned first appellate authority has sustained the disallowance. In our view, the additional evidences furnished by the assessee will have a crucial bearing for deciding the issue. Therefore, such evidences should not be rejected without verifying their authenticity. We restore the issue to the AO for deciding afresh after considering all the evidences, including the additional evidences filed by the assessee before learned first appellate authority. Needless to mention, the AOmust provide due and reasonable opportunity of being heard to the assessee before deciding the issue. Ground is allowed for statistical purposes. Disallowance of long term capital loss - HELD THAT:- It is the case of the assessee that the shares of INAPEX Ltd. were acquired by the assessee by way of buy-back offer in the financial year 1995-96. It is observed, to justify its claim, the assessee had submitted copy of buy-back acceptance letter of the company and also a copy of cheque received from the company towards buy-back. While the AO has disallowed assessee s claim without assigning any reason, learned first appellate authority has sustained the disallowance alleging lack of complete information. Considering the fact that documentary evidences furnished by the assessee have not been properly evaluated by the departmental authorities, we are inclined to restore this issue to the file of Assessing Officer for de novo adjudication after providing due and reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purposes. Taxability being interest on income tax refund - HELD THAT:- While deciding assessee s appeal, learned first appellate authority granted relief to the assessee. While giving effect to the order of learned Commissioner (Appeals), the AO determined interest on income tax refund, which according to the assessee, was offered to tax. Thus, it is the case of the assessee before us that once the interest on income tax refund is withdrawn, the addition made deserves to be deleted. Having considered rival submissions, we are of the view that assessee s claim needs to be factually verified by the AO having regard to the facts and evidences brought on record. Therefore, we restore this issue to the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purposes. Disallowance of foreign as well as domestic travel expenses - HELD THAT:- The observation of the AO while disallowing the expenses is too ambiguous and general in nature. He has not doubted the fact that the expenses, indeed, were incurred. The only reason for disallowing foreign travel expenses is, the assessee has no business interest in the cities/countries, in respect of which, foreign travel expenses have been incurred. What he means by business interest is not clear. There is absolutely no observation by the AO that the foreign travel expenses were not related to assessee s business or were personal in nature. Similarly, he has disallowed the domestic travel expenses by observing that the concerned person has no business connection to the assessee. On what basis the AO has come to such conclusion is not forthcoming from the assessment order. In the aforesaid scenario, we do not find any infirmity in the decision of learned first appellate authority in deleting the disallowances. Ground is dismissed. Disallowance of prior period expenses - HELD THAT:- While deciding the issue in appeal, learned first appellate authority found that the major part of the expenses pertained to sales incentives payable to dealers of assessee s tractor division for the financial year 2002-03. He has further given a factual finding that the claim of incentives has to be based on aggregate performance for the year, hence, it is not possible for the assessee to verify the claim of incentives by the dealers on closure of account on 31.03.2003. However, it was factually found that the sales promotion expenses actually crystallized/finalized on 30.06.2003 falling in financial year 2003-04 corresponding to assessment year 2004-05. Thus, the liability to pay the expenditure accrued in the assessment year under dispute. That being the case, it cannot be treated as prior period expenses. It is worth mentioning that identical issue has been decided in assessee s own case by the Tribunal in earlier assessment year. While deleting the disallowance, learned first appellate authority has also taken cognizance of the decision of Tribunal. In aforesaid view of the matter, we do not find any infirmity in the decision of the first appellate authority in deleting the disallowance. Disallowance on account of sales promotion expenses - Addition on the ground that such expenses relate to payment of bills of various hotels and observing that such expenses are not incurred for the purpose of business, the AO disallowed it - FAA deleted addition on the reasoning that AO has not established on record that such expenses are not incurred for the purpose of business - HELD THAT:- Having perused the observation of the Assessing Officer, we find that the reason given for disallowance of expenditure is very much general and vague. He has not stated on what basis he has come to the conclusion that such expenses are not for the purpose of business. Undisputedly, the Assessing Officer has not doubted the fact that expenses were incurred. No infirmity in the decision of learned first appellate authority in deleting the disallowance. This ground is dismissed.
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2024 (6) TMI 212
Assessment u/s. 115WE(3) r.w.s 115WG - Interpretation of Term business of construction - determining the value of fringe benefits which includes an addition towards fringe benefits @ 20% on conveyance, tour travel as against 5% admitted by the assessee - as argued that all the activities involving construction including ship building / construction would be covered within the scope of the term business of construction referred to in section 115WC(2) - AR pleaded that since the assessee-company is engaged in the business of construction of ships which falls under the category of construction business and hence the assessee is eligible for computation of fringe benefit tax value @ 5% as per the provisions of section 115WC Whether the activity of building / construction of ships is covered under the word construction or not and whether the assessee is right in admitting 5% of fringe benefits on conveyance, tour travel as against 20% adopted by the Revenue? - HELD THAT:- In the present case there is no dispute that the assessee is engaged in the business of execution of works contracts for building / construction of ships and offshore platforms. While filing the fringe benefit statement along with the audit report in Form-3CD for the year under consideration the assessee had admitted the fringe benefits @ 5% under the head Conveyance, Tour Travel . The contention of the Revenue is that since the assessee s business is ship building / construction and not construction business per se, therefore the assessee is required to compute its fringe benefits @ 20% instead of 5% as was done by the assessee. Circular No.8/2005, dated 29/08/2005 wherein vide answer to Q. No. 106 of the Frequently Asked Questions at Item No. 11 explained the term business of construction clarified that the term business of construction must be understood by giving the ordinary English language meaning to it. In the instant case, there is no dispute on the fact that the assessee is involved in ship building / construction and therefore it is within the definition of the term business of construction . English language meaning of the words construct and construction is extracted from Webster s Comprehensive Dictionary of the English Language meaning of the word construct or construction , one can safely conclude that the meaning includes build . In the present case, the assessee is engaged in the activity of construction including ship building / construction and therefore in our considered view it is covered by the above definition. In the present case, the assessee-company is engaged in the business of construction of ships which falls under the category of construction of business as discussed above. Therefore, as per the provisions of section 115WC(2)(b) the assessee is eligible for computation of fringe benefit tax value at the rate of 5% instead of 20% computed by the Revenue. Therefore, no hesitation to delete the additio made by the Ld. AO and confirmed by the Ld.CIT(A)-NFAC towards fringe benefits on conveyance, tours and travel. Thus, all the grounds raised by the assessee are allowed.
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2024 (6) TMI 211
Addition u/s 69A - cash deposits during demonetization period - Assessee claimed deposits were from parents' savings and agricultural income for house renovation - HELD THAT:- As noted that the AO did not conduct any independent verification or enquiry into the claims made in the affidavits.AO has simply dismissed the affidavits without assigning any cogent reasons. CIT(A), too, has upheld the AO s order without addressing the merits of the affidavits and the explanation provided by the assessee. In the case of CIT v. P.K. Noorjahan [ 1997 (1) TMI 6 - SUPREME COURT] held that the burden of proof is on the revenue to show that the amount in question is income of the assessee. In the instant case, the affidavits provided by the assessee's parents, explaining the source of cash deposits, were disregarded without any substantial counter evidence. Also when the assessee provides a plausible explanation supported by affidavits, it is the duty of the revenue to conduct proper verification before making any adverse conclusion. In the present case, neither the AO nor the CIT(A) conducted any verification of the affidavits, or the claims made therein. We find that the addition made u/s 69A is not sustainable. AO and CIT(A) have failed to discharge their duty of conducting a thorough and fair investigation into the source of the cash deposits. The affidavits provided by the assessee s parents should have been subjected to verification, and the explanation provided should have been considered in a judicious manner. As stated that there is no any proof of agricultural income. However, neither AO nor CIT(A) have asked assessee to produce any proof for the agricultural income of father. Therefore direct the AO to delete the addition u/s 69A - Decided in favour of assessee.
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2024 (6) TMI 210
Admission of Additional Evidence by CIT (A) without Following Rule 46A - as argued CIT(A) deleted the addition without calling for the remand report - Deletion of Addition on Account of Forfeited Amount, Addition on Account of Various Expenses and Disallowance u/s 14A - HELD THAT:- In the statement of facts, the assessee wrote only one line that due to unavoidable circumstances beyond control, the representative of the assessee could not attend before the AO. Before the CIT (A) seven hearings took place. In paragraph no.6, the learned CIT (A) has mentioned that the assessee furnished some additional evidences Admittedly, CIT(A) did not follow the provisions of Rule 46A of the income tax Rules 1962. Therefore an order passed in violation of Rule 46A deserves to be set aside and more so for the reason that ld CIT (A) has not even cared to mention satisfaction of any of the conditions which entitles the assessee for admission of additional evidence. Deletion of Addition on Account of Forfeited Amount the issue in dispute is no longer res-integra. Hon ble Delhi High Court in the case Frontier Land Development Pvt. Ltd. [ 2019 (12) TMI 1261 - DELHI HIGH COURT] held that object of business of assessee-company was development of real estate and advance to HDIL was given in ordinary course of business forfeiture of advance could not be categorised as capital expenditure but would be allowed as business expenditure. Deletion of Addition on Account of Various Expenses as during appellate proceedings, the appellant submitted the copy of Profit and Loss Account audited u/s. 44AB of the Act. The reason mentioned in the assessment order is that correctness and genuineness can t be established in absence of details. The relevant details submitted by the appellant are forwarded to AO to submit his comments. However, the AO didn t submit the remand report. Therefore, the details submitted by the appellant on account of expenses claimed under the head Miscellaneous Expenditure, Tour Travel Expenditure, Sale Promotion, Labour Charges and Vehicle Expenses are verified and found in order. In view of the above, the disallowance of 40% made in the assessment order is unreasonable and hereby deleted. So far as the above two issues are concerned, we are of the opinion that the learned CIT (A) has deleted the disallowance without following the rule 46A of the Income Tax Rules. Addition u/s 14A against the exempt income earned - We find no infirmity in the order of the learned CIT (A) as he restricted the disallowance following the judicial precedents laid down by the Hon'ble High Court that disallowance under Section 14A of the Act of expenditure incurred for the earning of exemption incurred in relation to exempt income cannot exceed the exempt income. Therefore, with respect to the deletion of this disallowance, we do not find any infirmity in the order of the learned CIT (A). Thus we restore the ground no. A,B,C,E,F,G to the file do the learned CIT (A) to comply with the provisions of Rule 46A of the Rules and decide the issue afresh.
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2024 (6) TMI 209
Assessment u/s 153A or 153C - Addition u/s 69A - credits in saving accounts and difference in undisclosed profit calculated @ 8% on the gross receipts in the CC Account - HELD THAT:- In the case of ANAND KUMAR JAIN (HUF), SATISH DEV JAIN, SAJAN KUMAR JAIN [ 2021 (3) TMI 8 - DELHI HIGH COURT] held that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the Act by handing over the same to the AO who has jurisdiction over such person. Here, the assessment has been framed u/s 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure u/s 153C has not been followed. No perversity in the view taken by the ITAT. In the present case, assessment proceedings must be initiated u/s 153C rather than Section 153A of the Act, only after the satisfaction was being arrived in the assessment proceedings of M/S Golden Tulip Hospitality Pvt. that the material found and seized during search pertain to appellant. We hold that the assessment order passed u/s 153A is without jurisdiction and as such, quashed. Appeal filed by the assessee is allowed.
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2024 (6) TMI 208
Validity of reopening of assessment - Non disposal of objections of the assessee - assessee was reported to have received the accommodation entries - HELD THAT:- The power of reopening of assessment is specifically vested with the AO only. It is the AO who has to form the belief that the income of the assessee has escaped assessment. The reopening of the assessment has to be bona fide. It cannot be a mere pretence of the AO. If the assessee files objections against the reopening of the assessment order, the AO is supposed to decide the objections. If the same are decided against the assessee, the Assessing Officer is supposed not to pass the final assessment order for a period of four weeks from the date of disposal of objections. Though the ld. CIT(A) has been given the power of enhancement and can look into the other issues by giving notice to the assessee during appellate proceedings, however, the power to reopen the assessment exclusively vests with the AO only. It is the AO who has to form the belief of escapement of income of the assessee and it is the Assessing Officer who has to decide the objections against the reopening of the assessment and further to give opportunity to the assessee to seek his legal remedy, if the objections are decided against the assessee and not to pass an assessment order for a period of four weeks from the rejection of objections. Therefore, the assessment framed by the AO without disposal of objections of the assessee cannot be held to be a valid assessment. Thus as the assessment framed by the AO held to be bad in law and therefore, the consequential additions made by the AO in the reopened assessment are not sustainable. Decided in favour of assessee.
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2024 (6) TMI 207
Validity of reopening of assessment u/s 147 - addition u/s 69A - HELD THAT:- In the present case, the AO has received information from DDIT indicating that the assessee could not explain sources of deposit in bank a/c, this information duly considered by AO could be sufficient to form a belief that there was escapement of income. The assessee is neither having copy of exact reasons recorded by AO nor able to demonstrate in any manner that the AO did not give his own thought to the information received from DDIT, Ujjain before or at the time of recording reasons. The assessee is merely speculating the absence of AO s consideration. Therefore, we do not find any worth in the claim of assessee, the same remains unsubstantiated and hence rejected. We may further add here that although in ground No. 1, the assessee has also mentioned that the AO s action was time-barred but during hearing, both sides were ad idem that the time-limitation was extended by Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31.03.2020 [ TOLA ]. Therefore, limitation point is also rejected. Decided against assessee. Addition u/s 69A - cash deposits in bank accounts - The assessee s stand is such that the HDFC Bank A/c and all entries of deposits therein are already recorded in regular books of account maintained by him; those books of account have been duly audited by auditors and the auditors have not reported any infirmity; that the year-end balance also tallies with bank statement; and that the AO has also not rejected assessee s books u/s 145(3) which means there is nothing incorrect in assessee s books. We find sufficient strength in these submissions. AR has also shown by referring to Paper-Book that the assessee has submitted relevant details/ documents in the shape of bank book, cash book, audited accounts and a/c statements of banks to AO and yet again made a sincere effort to explain the source of deposits to CIT(A). The revenue is not able to rebut, controvert or dispute the details and documents submitted by assessee before lower authorities. Looking into all these aspects, we are of the considered view that in the present case, the addition made by AO is not sustainable - Decided in favour of assessee.
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2024 (6) TMI 206
Revision u/s 263 - PCIT has initiated revisionary action on the reasoning that the liability of Nardana Claim-1 and Nardana Claim-2 cannot be recognized as per ICDS (Income Computation and Disclosure Standards) - whether the AO s approach in accepting the explanation furnished by assessee to him, could be said to be an unsustainable view? - HELD THAT:- We find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issues contemplated by PCIT and the assessee made detailed replies/submissions. It is on record that vide statutory notice dated 13.01.2021 issued u/s 142(1), AO made specific queries qua Nardana Claim-1 and Nardana Claim-2 to assessee and in response, assessee filed a cogent reply dated 19.01.2021. Then, vide notice dated 05.02.2021 issued again u/s 142(1), AO referred assessee s previous reply dated 19.01.2021 and raised follow-up queries qua not only the present status of Nardana Claim-1 and Nardana Claim-2 but also how the assessee has taken income incidence in his regular books of account. Assessee filed a vehement and detailed reply dated 09.02.2021. Therefore, there can hardly be any dispute or controversy by revenue that the AO has not investigated the issues of Nardana Claim-1 and Nardana Claim-2 . The follow-up query by AO itself negates the revenue s stand that the AO has merely kept assessee s reply in departmental file and not applied any mind. Even if the AO has not discussed the issues in assessment-order it cannot be said that the AO has not examined the assessee. PCIT is wrong in terming AO s order as erroneous-cum-prejudicial on the basis that the AO has not made investigation. Whether the AO s approach in accepting the explanation furnished by assessee to him, could be said to be an unsustainable view? - We find that the assessee has given substantial evidences to prove that the impugned liabilities of Nardana Claim-1 and Nardana Claim-2 could not have been recognized as income in AY 2018-19 under consideration because of the reason that the matters were disputed and pending for adjudication before courts. But as soon as the matters attained finality by court orders, the assessee transferred those liabilities to P L A/c by passing necessary reversal entries and offered them as income. The decision by Hon ble Court is a clearly pointer to hold the proposition that as long as there remains a dispute/litigation, the income cannot be said to have accrued or arisen to assessee. Therefore, we do not find any fallacy in the approach adopted by assessee. That apart, even assuming that there could be two views with regard to the taxability year of the impugned amounts, if the AO has followed a view which is favourable to assessee, the order of AO cannot be termed as erroneous-cum-prejudicial to the interest of revenue as held by Hon ble Apex Court in Malabar Industries Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT ] We also find a substance in the submission of Ld. AR that the PCIT has basically made revision on the basis that there was violation of ICDS-VII and ICDS-X whereas the case of assessee concerns with recognition of revenue and how the ICDSs referred by PCIT were violated? During hearing, we questioned Ld. DR about this aspect but the Ld. DR could not give any reply except dutifully relying on the observation made by Ld. PCIT. The revision-order passed by PCIT in the present case is not sustainable. Hence we are inclined to quash the revision order passed by PCIT and restore the assessment-order passed by AO. Assessee appeal allowed.
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Customs
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2024 (6) TMI 234
Extended period of limitation - Demand of duty on import of inputs used for final products which are exempted from payment of duty in terms of proviso to paragraph 3 of the N/N. 52/2003-Cus. dated 31.03.2003 - Section 28(4) of the Customs Act, 1962 - penalty - HELD THAT:- A plain reading of the proviso clause to paragraph 3 of the above Notification, indicate that there is a restriction in availing the duty exemption, when the imported inputs are intended for use in the finished goods, which are non-excisable or exempted or attracting NIL rate of duty. In this case, it is not clear that whether the appellant was aware that the imported inputs may be used in the lifesaving drugs which are exempted from payment of duty. Further, the Department had not produced any evidence or the fact that the appellant had taken the exemption with an intention to evade duty. In the above factual matrix of the case, demand of duty under Section 28(4) of the Customs Act, 1962 invoking extended period is not sustainable. The above issue for consideration is no more open to debate as the issue has been discussed at length and was decided by the Co-ordinate Bench of the Tribunal in the appellant s own case [ 2023 (6) TMI 458 - CESTAT HYDERABAD ] where it was held that ' we can assume that the Appellant could be holding bonafide belief that they are eligible to utilize Cenvat credit for only clearances. Further as there are Tribunal decisions in their favour during the period under dispute, the issue would be that of interpretation only. Taking all these facts into account, we feel that the Department cannot allege any suppression on part of the Appellant. Therefore, we hold that the demand pertaining to the extended period is liable to be set aside in all the Appeals, wherever the demand has been confirmed for the extended period.' Thus, in terms of the Order of the Tribunal in the appellant s very own case having determined that the demand normal period alone is sustainable and that too in respect of duty involved on imported inputs for which the amount of customs duty foregone is required to be paid in cash and not to debit entry in PLA account. Accordingly, the impugned order dated 19.11.2019 in upholding the original order demanding customs duty under Section 28(4) ibid and imposition of penalty under Section 114A ibid is not legally sustainable. Appeal allowed.
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2024 (6) TMI 205
Seeking return of Malaysian Passport - offence under Sections 135(1)(a) and 135(1)(b) of The Customs Act, 1962 - smuggling of Gold - HELD THAT:- It is seen that the petitioners arrested and detained by the respondent on 29.04.2022 since they were found in possession of yellow metal/gold bars to the tune of 4.200 kgs valued around Rs. 2,25,54,000/- without any permission or license. The petitioners admitted smuggling of gold, not declaring to the customs authorities and they were intercepted while passing green channel. The petitioners arrested, gold bars seized and now confiscated. The petitioners were later granted bail by this Court with a direction to deposit Rs. 10,00,000/- each apart from other conditions. In the confiscation proceedings/appeal, as regards 2nd petitioner is concerned, lenient view taken since her intention was to come to India, visit Temple and she had no idea about gold being smuggled by the 1st petitioner or about his plan of smuggling in collusion with one V.Girinath. The 2nd petitioner found to be an unsuspecting traveller who trusted the 1st petitioner who was taking three women on a tour to India for temple visits. It is observed in the adjudication proceedings order, the packet containing gold was kept in the handbag of the 2nd petitioner who lacks intelligence and common sense to refuse the same. Added to it, the 2nd petitioner being a foreign national, she might not be aware of Indian law of bringing gold as bar and to what extent it is permissible - The finding is that the evidence pointed towards the innocence of the 2nd petitioner and her mistake seems to be accompanied the 1st petitioner and allowed him to keep the gold bar in her bag. It is seen that the 2nd petitioner already deposited Rs. 10,00,000/- as per the order of this Court - The 2nd petitioner's son Sheveendra aged 10 years, is taking treatment as inpatient in Loh Guan Lye Specialists Centre, Malaysia. The medical certificate and photograph of her son taking treatment produced, but not seriously disputed. It is to be noted that there is Extradition Treaty between the Government of the Republic of India and the Government of Malaysia - this Court is inclined to grant return of Malaysian passport to the 2nd petitioner alone, subject to conditions imposed. The impugned order confirmed as regards 1st petitioner. This criminal revision case stands allowed in part.
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2024 (6) TMI 204
Recovery of penalty imposed on company, from the former director - liability of former Director - HELD THAT:- The Directors of the company cannot be substituted of the company in their individual capacity. There is no provision of the Act for recovery of the penalty imposed from its Directors even the said penalty cannot be recovered from the company. Therefore, penalty imposed against the petitioner cannot be enforced as against the petitioner. That apart, the petitioner had already resigned from his Directorship as early as on 01.09.2011 and the same was also accepted and Form 32 was also filled and filed with the Registrar of Companies in accordance with the provisions of the Companies Act, 1956. The impugned order passed by the 2nd respondent dated 24.12.2021 cannot be sustained and liable to be quashed. The respondents are directed to implement the order dated 24.12.2021 as against others except this petitioner in the manner known to law. Petition allowed.
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2024 (6) TMI 203
Remission of duty - demand of Customs duty on the goods lost in fire accident - SEZ, deemed to be a foreign territory - value of goods lost in fire. Remission of duty - HELD THAT:- There is no dispute that there was a fire in the factory of the appellant. There is no dispute that certain quantity of goods were lost in the fire. There is a dispute regarding the quantum of goods lost in the fire. Consequently, there is a dispute on the amount of remission required. The impugned order holds that the goods procured in the SEZ have to be disposed of in terms of the prescription under Rule 22 of SEZ Rules 2006 which prescribes the terms and condition for availing exemption, draw back and concession for the foreign operations. The impugned order holds that the only way to avail exemption is to use the goods for authorized operations and follow the procedure prescribed under Rule 22 (2) and Rule 34 of the SEZ Rules 2006. He is of clear opinion that loss of goods by fire cannot be deemed as accountal of goods and should be treated as non-utilization of goods for authorized operations. It is seen that the issue regarding remission of duty arising on account of loss of goods due to fire has been examined in the case of SATGURU POLYFAB PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, KANDLA [ 2011 (2) TMI 403 - CESTAT, AHMEDABAD] . In the said case, there was a fire in three units located close to each other and consequently there was a loss of goods. In the said case also the units were located in SEZ and the demand was raised on the ground that the goods lost in fire were not utilized for the purpose of authorized operations. The facts in the instant case are similar to the facts in the case of Satguru Polyfab Private Limited - it is concluded that the goods have been destroyed in foreign territory and no customs duty can be demanded on the said goods. Another reason for rejection of the application of remission is that section 23 of the Customs Act is not applicable as the goods in the instant case have been ordered to be deposited in a warehouse under Section 60 of the Customs Act, 1962 which are entitled to be utilized in the manufacture under bond under Section 65 of the Customs Act, 1962 - HELD THAT:- It is not understood as to how the provisions of Section 58 and Section 60 of Customs Act 1962 are applicable to the SEZ Act. SEZ Act is a separate legislation and does not specifically import section 58 of 60 as there are other parallel provisions within the SEZ Act which allow import storage and manufacture of goods without paying import duty. It is found that duty has been demanded on entire stock of good at the time of fire. The Revenue had visited and made a punchnama after the fire. The insurance authorities have also estimated the loss and paid insurance accordingly. There is no evidence on record to suggest entire stock of raw material, in process goods and finished goods was destroyed. In these circumstances demand of entire stock is without any basis. There are no merit in the impugned order and the same is set aside - appeal allowed.
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2024 (6) TMI 202
Valuation of imported goods - polyester filament for paint brushes - suppression of transaction value/undervaluation - Rejection of declared value - re-determination of value - admissibility of statement of appellant recorded u/s 108 of CA - admissibility of documentary evidence - Admissibility of Computer Printouts u/s 138C of the Customs Act - recovery of differential customs duty and penalty under Section 114A, 114AA and 112(a)(ii) and 112(b)(ii) of the Customs Act, 1962 - invocation of extended period of limitation including GST - past imports. Whether the statement of the appellant recorded under Section 108 was voluntary in nature or the same was hit by threat, pressure or coercion by the Department? - HELD THAT:- On going through the statements of Shri T. N. Malhotra made on three occasions, it is found that he has admitted the modus-operandi and details of the transaction inextenso. Further, he has given the details, which were exclusively in his knowledge, that in the last four years, they have imported goods and filed around hundred bills of entry mainly relating to polyester filament for manufacturing paint brushes and gave the details of the overseas supplier. He also disclosed that he used to send email to them and after getting confirmation on pricing, it was finalised. All the statements have been duly signed and pursuant thereto, the appellant has deposited the differential duty amount with interest and penalty voluntarily. There is no mention in the challans that duty deposited is under protest . Infact in the subsequent statement dated 16.04.2018, he reiterated that whatever he has admitted in his earlier statement is correct. Shri T.N. Malhotra had given the statements voluntarily and he has deposited the duty freely and not under protest . None of the statements have been retracted by Shri T. N. Malhotra at any stage and the submission that he was not allowed to retract his statements is unsustainable, for the simple reason that when Shri Malhotra had requested for another date in terms of summons dated 27.02.2018, the same was allowed by the Department. Consequently, the statement of Shri Malhotra is admissible as substantive evidence. Admissibility of documentary evidence - HELD THAT:- The statements of Shri T.N. Malhotra is duly supported by documents and hence the same can be relied on - In Surjeet Singh Chhabra Vs. Union of India [ 1996 (10) TMI 106 - SUPREME COURT ] the Apex court held that the confession made by a party even if it is retracted, binds him as it is an admission since custom officials are not police officers. The learned Authorised Representative has also referred to the decision in Naresh J. Sukhawani Vs. Union of India [ 1995 (11) TMI 106 - SUPREME COURT ] where the Apex Court relied on the statement of the co-accused and upheld the conviction of the petitioner for contravention of illegal export of foreign exchange as the statement clearly inculpates not only the co-accused, but also the petitioner. Admissibility of Computer Printouts u/s 138C of the Customs Act - HELD THAT:- In the facts and circumstances of this case, where the appellant had duly admitted the documents, which he recovered from his own email and we-chat after getting the OTP on his own mobile phone, the objection raised by the appellant is unsustainable. The issue is answered, accordingly, against the appellant and in favour of the Revenue. Undervaluation - HELD THAT:- It is concluded that in view of the documents retrieved by the appellant himself and his admissions made in the statement recorded under Section 108 proves the allegations of undervaluation beyond any doubt. The rejection of the declared value under Rule 12 has been rightly adhered to and following the sequential order as per the Valuation Rules, the valuation determined on the basis of parallel invoices is correct in view of the judicial pronouncements in similar circumstances. The contention that Revenue has not relied on the NIDB or EDW data has no merits in the facts of the present case. Invocation of extended period of limitation including GST - HELD THAT:- It is evident that the appellant had mis-declared the value of the goods and suppressed the correct value of the goods, which was much higher than what was declared to the custom authorities with intent to evade the customs duty to be levied on the correct value. The entire modus-operandi was disclosed only when the documentary evidence was unearthed whereby parallel invoices were traced showing much higher value of imports and which has been admitted by Shri T. N. Malhotra, the master mind of this fraud. It is a clear case of suppressing the actual transaction value of the goods and wilfull undervaluation of the imported goods - on account of mis-declaration, suppression of true value of the imported goods with intent to evade payment of requisite customs duty, the extended period of limitation is applicable and the same would apply in the case of short payment of IGST. Confiscation - HELD THAT:- According to the appellant, the goods have been correctly declared, finally assessed by the Department and cleared on payment of appropriate customs duty and therefore, the Department could not have re-assessed the goods alleging mis-declaration. Having concluded that the goods have been imported by declaring incorrect value, which have been admitted by the appellant, no further evidence was required and hence the same are liable for confiscation under Section 111 (m) of the Act. Penalty u/s 112, 114A 114AA of CA - HELD THAT:- Penalty has been imposed on the appellant company and Shri T.N. Malhotra under Section 114A of the Act for willful suppression and mi29 statement of actual value by filing wrong declaration and hence no interference is called for. Penalty under Section 112(a)(ii) and 112(b)(ii) of the Act has been imposed on Shri T.N. Malhotra being the only active Director of the company, who was solely looking after the entire affairs of the company and the master mind behind the evasion of customs duty - Under Section 114AA, penalty has been imposed both on the appellant company and Shri T.N. Malhotra, as the importer had intentionally made incorrect declaration of the value in the B/E by manipulating the invoices - penalty under Section 112 has been rightly imposed as the goods have been held to be mis-declared by the appellant and were liable for confiscation under Section 111(m) of the Act. Similarly, there are no reason to interfere with the penalty imposed under Section 114A and Section 114AA of the Act. Past imports - HELD THAT:- The Adjudicating Authority took a contradictory view that the importer must have undervalued in respect of other bills of entry filed since the goods imposed are similar/identical goods from same source. Such findings are not agreed as the same seems to be based on conjectures and surmises. Hence, the valuation arrived at in respect of five live consignments cannot be loaded in respect of the past consignments in the absence of requisite documents - the impugned order in respect of past consignments are set aside. Appeal allowed in part.
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2024 (6) TMI 201
Seeking permission for reexport 4536 kgs. of Organic Cashew Kernel SWP imported - prayer for re-export of consignments after subjecting the concerned goods to dry heating - NOC has been denied by FSSAI - amendment claiming benefit of N/N.158/1995-Cus. dated 14.11.1995 - HELD THAT:- The appellant had earlier exported the total consignment of 400 cartons which were returned by the overseas buyer and when the re-imported, they filed Bill of Entry to take the goods for home consumption, by claiming the benefit of Notification No.45/2017. The test report for 200 cartons by FSSAI disclosed that it is not conforming to the safety standards prescribed under the Food Safety Standards (Food Product Standards Food Additives) Regulation, 2011. The appellant consequently requested to allow them to re-export the goods after minor processing viz. dry heating in the Customs premises to an overseas buyer. The Adjudicating Officer rejected the same observing that the appellant had contravened the provisions of Foreign Trade Policy and therefore goods are liable for confiscation and consequently confiscated the said goods and directed its destruction and imposed penalty. There are no substance in the finding of authorities below which rests on the reasoning that the appellant initially claimed the benefit of Notification No.45/2017, later when it was found that out of 400 cartons, 200 cartons do not conform the FSSAI standards and hence cannot be cleared for home consumption, requested amendment to Bill of Entry seeking benefit of Notification No.158/95. Cus dated 14.11.1995 for re-export of the goods after making necessary re-processing like dry heating - the goods lying in the Customs warehouse cannot be said to be unfit for human consumption and since the appellant intend to reexport the said goods to overseas buyer; therefore there is no justification in not acceding to such request in absence of any specific violations of the Foreign Trade Policy and provisions of law for such re-export. The impugned orders directing confiscation and destruction of goods and penalty are set aside and the Department is directed to allow the appellant to carry out the process of dry heating in the premises of the Customs and re-export the goods at the earliest, but not later than a month from the date of receipt of this order. Appeal disposed off.
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2024 (6) TMI 200
Classification of goods imported by the appellant - Pre-Sensitized Positive Offset Aluminum plates (plate thickness 0.28 mm, plate coating UV-CTCP:PINK, size 441 x 501 mm) - demand of anti-dumping duty - country of origin was mis-declared as Taiwan when the goods were imported from China - imposition of penalty under Section 114A of the Customs Act, 114AA of the Customs Act and Section 112A of the Customs Act - confiscation and imposition of redemption fine under Section 125 of the Customs Act. Classification of goods - HELD THAT:- Admittedly, the goods were described as Pre-Sensitized Positive Offset Aluminum Plates in the import documents. The Onus of establishing that the said goods are mis-declared was on revenue. If the goods are indeed Pre-Sensitized Positive Offset Aluminum Plates then they would be covered by the anti-dumping duty Notification no. 25/2014 and if the same are Digital offset printing plates then they would be covered under Notification no.51/2012. But if the both the cases anti-dumping duty is leviable however at different ways. It is apparent that lithography plates are plain plates which are capable of transferring images from its surface as a printing material. The distinction made out in the two anti-dumping Notification is dependent on the ability to make the images on the plate by Digital means and otherwise. Both the digital and Pre-Sensitized plates are lithographic plates. Thus, the classification of both the plates remains the same. In these circumstances merely coming to the conclusion that Digital plates are classifiable under heading 8442.5020 is not sufficient or hold that the goods are digital offset printing plates because even Pre-Sensitized Offset Plates are also classifiable under the same sub heading 8442.5020 Levy of anti-dumping duty - confiscation - redemption fine - HELD THAT:- The revenue has failed to establish that the goods are in the nature of digital offset printing plates as nothing in para 23.1 of the order in original, relied by the Commissioner (Appeals) in his order, talks about any digital means of creating image. In these circumstances, the appellant should be entitled to the benefit of notification no. 25/2014-Customs (ADD) dated 09.06.2014. The anti-dumping duty demanded and the penalties levied may therefore be revised accordingly, the goods are liable to confiscation as the country of origin was mis-declared and therefore confiscation and imposition of redemption fine is upheld the demand of duty and penalty may be revised by allowing benefit of Notification no. 25/2014. Imposition of penalties u/s 114A, 114AA, and 112A of the Customs Act - HELD THAT:- The penalty under Section 114A is clearly leviable. The appellants have stated that the appellant had himself come forward to convey all facts to the department that the goods are of Chinese origin therefore penalty under Section 114AA of the Customs Act should not be leviable. The appellant had not voluntarily come forward but came to declare the correct position only after the investigation started. Thus, penalty under Section 114AA is also leviable. However, considered the facts that the appellants are entitled to benefit of Notification no. 25/2014-Customs (ADD) dated 09.06.2014 the duty and the quantum of penalty may be revised accordingly. Consequently, the penalties imposed on Shri Dhirubhai Patel was also be revised. Appeal is therefore allowed by way of remand to the original adjudicating authority.
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2024 (6) TMI 199
Stay petition against the Order-in-Appeal setting aside fine for late filing of Bill of Entry - HELD THAT:- It is seen that the Appellant had filed the Bills of Entry alongwith all the documents on time through ICEGATE site but the same was not getting uploaded and was reflected due to technical glitches. The Appellant also has brought to the notice of the Revenue official about the difficulty faced by them in this regard. Subsequently, the Bill of Entry was filed with the delay and system has automatically imposed a fine on the Appellant. Since the Appellant was in urgent requirement of the imported goods, they opted to pay the fine and cleared goods. After this, they filed an Appeal before Commissioner (Appeals). The Commissioner (Appeals) has gone through documentary evidence produced by the Respondent showing that the Respondents have made all efforts to file the Bill of Entry along with relevant documents on time but were prevented to file online due to the technical glitches in the ICEGATE site. The Commissioner (Appeals) has recorded these facts and has relied on the case law of M/S. BLUELEAF TRADING COMPANY VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE [ 2019 (5) TMI 672 - CESTAT CHENNAI] , wherein the Tribunal has held ' Appellant is clearly not the first importer, there is request for amendment in IGM on record, allowed by the Revenue after collecting requisite fees and these are clearly post-import developments. The subsequent developments, as observed supra, were perhaps necessitated because of the goods being perishable. Clearly, no mala fide is found in the above developments by the Revenue and therefore, it can be safely assumed that the Revenue was otherwise satisfied with sufficient cause .' Reliance placed on the case law of M/S. ECOM GILL COFFEE TRADING PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS TUTICORIN [ 2019 (10) TMI 62 - CESTAT CHENNAI] , wherein on similar issue, the Tribunal has set aside the late fee imposed on the importer. It is found that the Commissioner (Appeals) has gone through the factual details and the documentary evidence produced by the Respondent herein and has correctly relied on the cited Tribunal decisions. Therefore, there are no reason to interfere with the considered decision taken by the Commissioner (Appeals). The Appeal filed by the Revenue is dismissed.
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2024 (6) TMI 198
Levy of penalty u/s 112(a) of the Customs Act, 1962 on the appellant - smuggling of foreign origin cigarettes - sufficient opportunity for personal hearing was not given - principles of natural justice. Levy of penalty u/s 112(a) of the Customs Act, 1962 on the appellant - smuggling of foreign origin cigarettes - sufficient opportunity for personal hearing was not given - HELD THAT:- From plain reading of the legal provisions under Section 112(a) of the Customs Act, 1962, it is clear that it is in relation to goods which are liable to confiscation under Section 111 ibid, and that such penalty is liable to be imposed on any person . It also transpires that the provision under Section 112(a) ibid is attracted under the following situations viz. (a) when any person does or omits to do any act which act or omission would render such goods liable to confiscation, or (b) when any person abets the doing or omission of such an act. The factual matrix of the case also clearly provide that the appellant acting as the freight forwarder, undertook the task of collecting/ receiving various import documents, act of preparing the checklist for filing the bill of entry, and as their entity not being a CHA/customs broker, had forwarded such documents to the CHA/CB M/s P.N. Shipping Agency, for filing the bill of entry to enable clearance of such smuggled goods. Further, no proper verification of the importer, existence of the importer, the authenticity of authorisation to handle such documents received from unknown or unconnected person having no authority, was done by the appellant - in terms of legal provisions under Section 112(a) ibid, this case fits in the four corners of the situations mentioned in such provision where the proper authority could impose penalty. Further, the value of smuggled foreign origin cigarettes at Rs.3,32,62,160/- which were attempted to be cleared by various persons involved in the offence including the appellant is very high and significant. Thus, it is found that the above acts done by the appellant clearly prove that it is a planned action on their part to conceal the smuggled foreign origin cigarettes, right from the stage of preparation of documents for filing bill of entry, filing the declarations including B/E, manner of payment of customs duties and other dues etc. so that the act of smuggling is not detected by customs authorities - The penalty imposed for Rs.5,00,000/- is upheld. Violation of principles of natural justice - HELD THAT:- It is not the case of appellant that sufficient opportunity for personal hearing was not given to them to explain their position and to defend their stand. It is found that the Original authority has given personal hearing to all the noticees on 01.03.2016 02.03.2016, and again on 16.08.2016, 17.08.2016 18.08.2016. In respect of the appellant, one Advocate Shri Ashwini Jadhav had appeared to explain their stand before the Original authority on 01.03.2016 and Shri Mukhtar Ismail Shaikh, himself also appeared on 17.08.2016 before the original authority explaining their case. Further, the appellant had also appeared before the Commissioner of Customs (Appeals) for personal hearing on 05.10.2017 and had reiterated the grounds of appeal filed against the original order - thus, sufficient opportunity for personal hearing has been given to the appellant, both at the original stage of adjudication of the appellant s case and at the first appeal stage, therefore the impugned order fulfils the requirement of adhering the principles of natural justice in arriving at a decision and passing a speaking order on the disputed issue. It is found that in a similar case of smuggling of foreign origin cigarettes in SHRI ASHOK T SADARANGANI VERSUS COMMISSIONER OF CUSTOMS (PREV) , MUMBAI. [ 2024 (2) TMI 1387 - CESTAT MUMBAI] , the Tribunal had passed an order upholding the imposition of penalty under Section 112(a) of the Customs Act, 1962. The provisions of Section 112(a) ibid does apply to the present case of the appellant conoticee who is a Proprietor in a Freight Forwarding firm - the imposition of penalty under Section 112(a) ibid can be upheld in the present case of the appellant. The impugned order dated 28.02.2018, to the limited extent of imposition of penalty of Rs. 5,00,000/- on Shri Mukhtar Shaikh, Proprietor of M/s Fast Forward Logistics Solutions under Section 112(a) of the Customs Act, 1962 - appeal dismissed.
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2024 (6) TMI 197
Stay petition against the Order-in-Appeal setting aside fine for late filing of Bill of Entry - HELD THAT:- It is seen that the Appellant had filed the Bills of Entry alongwith all the documents on time through ICEGATE site but the same was not getting uploaded and was reflected due to technical glitches. The Appellant also has brought to the notice of the Revenue official about the difficulty faced by them in this regard. Subsequently, the Bill of Entry was filed with the delay and system has automatically imposed a fine on the Appellant. Since the Appellant was in urgent requirement of the imported goods, they opted to pay the fine and cleared goods. After this, they filed an Appeal before Commissioner (Appeals). The Commissioner (Appeals) has gone through documentary evidence produced by the Respondent showing that the Respondents have made all efforts to file the Bill of Entry along with relevant documents on time but were prevented to file online due to the technical glitches in the ICEGATE site. The Commissioner (Appeals) has recorded these facts and has relied on the case law of M/S. BLUELEAF TRADING COMPANY VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE [ 2019 (5) TMI 672 - CESTAT CHENNAI] , wherein the Tribunal has held ' Appellant is clearly not the first importer, there is request for amendment in IGM on record, allowed by the Revenue after collecting requisite fees and these are clearly post-import developments. The subsequent developments, as observed supra, were perhaps necessitated because of the goods being perishable. Clearly, no mala fide is found in the above developments by the Revenue and therefore, it can be safely assumed that the Revenue was otherwise satisfied with sufficient cause .' It is found that the Commissioner (Appeals) has gone through the factual details and the documentary evidence produced by the Respondent herein and has correctly relied on the cited Tribunal decisions. Therefore, there are no reason to interfere with the considered decision taken by the Commissioner (Appeals). The Appeal filed by the Revenue is dismissed.
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Corporate Laws
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2024 (6) TMI 196
Maintainability of petition - lack of territorial jurisdiction - invocation of Doctrine of Forum Conveniens - cheating - misappropriation of funds - defrauding of the investors - siphoning of the funds - HELD THAT:- A plain reading of Clause (2) to Article 226 of the Constitution of India makes it clear that the High Court could issue a writ when the person or the authority against whom the writ is issued is located outside its territorial jurisdiction, provided the cause of action wholly or partially arises within the Court s territorial jurisdiction. Needless to state that the expression cause of action for exercising powers under Article 226 (2) of the Constitution of India is to be assigned the same meaning as assigned to such an expression under Section 20 (c) of the CPC. Further, merely because the seat or the main head office of the respondent is located in Delhi would not be sufficient to confer jurisdiction upon this Court. Reference in this regard can be invited to a decision by the Supreme Court in the case of UNION OF INDIA (UOI) AND ORS. VERSUS R. THIYAGARAJAN [ 2020 (4) TMI 915 - SUPREME COURT] wherein it is reiterated that unlike the Supreme Court, which can exercise jurisdiction over the entire country, the jurisdiction of the High Courts is limited to the territorial jurisdiction of the State (s) of which it is the High Court; and that such orders may be passed if it impacts the people within its territorial jurisdiction and the High Courts have no pan-India jurisdiction. Further, there is no averment that any person or authority within the territorial jurisdiction of this Court is substantially affected by the affairs of the company in question i.e. VSPL. There is no gainsaying that the respondent has its Regional Office with necessary paraphernalia in the State of Karnataka and the petitioner has appropriate efficacious remedy to approach the Karnataka High Court in order to seek appropriate reliefs. In a case like the present one, this Court can refuse to exercise its discretionary jurisdiction by invoking the Doctrine of Forum Conveniens. Reference made to a decision by the Supreme Court in the case of U.P. RASHTRIYA CHINI MILL ADHIKARI PARISHAD LUCKNOW VERSUS STATE OF U.P. [ 1995 (7) TMI 423 - SUPREME COURT ] wherein it was held that the situs of office of the Parliament, Legislature of a State or Authorities empowered to make subordinate legislation, would not by itself, constitute any cause of action or cases arising . Likewise, mere fact that the respondent-Ministry of Corporate Affairs can appoint or entrust the investigation to the SFIO from Delhi would not by itself be sufficient to invoke the territorial jurisdiction of this Court. The present Writ Petition is dismissed for not being maintainable before this Court for lack of territorial jurisdiction.
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FEMA
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2024 (6) TMI 195
Validity of Order passed u/s 17 of FEMA - specific ground raised by the petitioners is that the petitioners were not given opportunity of hearing after receipt of the letter from the respective banks Whether the writ petition is maintainable or not when the statutory alternative remedy is available? - HELD THAT:- As against the order passed by the adjudicating authority i.e. the respondent, there is statutory appeal for any person aggrieved by the order passed by the adjudicating authority u/s 17 of the FEMA, 1999. But the existence of the alternative remedy is not an absolute bar to the maintainability of this writ petition under Article 226 of the Constitution of India. It can be entertained where there is a breach of fundamental rights, where there is violation of the principles of natural justice, where there is an excess of jurisdiction or where challenge to the vires of the statute or delegated legislation. No materials gathered behind one's back can be relied on without giving opportunity to the said person to challenge the correctness and accuracy of the said information. That not having been done in the present case and as such, it is clear violation of principles of natural justice. Further, there is huge delay for imposing of penalty for contravention of Section 7(1)(a) of FEMA, 1999 r/w Regulations 9(1) and 13 of Regulations, 2000. Therefore, the writ petition is very much maintainable without exhausting the alternative remedy as provided u/s 17 of FEMA, 1999. Failure to realize export proceeds from Brazil during 2004-2005 - The first petitioner is the indigenous manufacturer of various telecommunication and networking product. On complaint, the respondent alleged that the petitioners had realised export proceeds made by it to Brazil during the period between the years 2004 to 2005 valued at 10 million US dollars. Therefore, investigation was initiated against the first petitioner. During the investigation, letters were sent to the petitioners' bankers i.e. Axis Bank, Mylapore, Chennai, Canara Bank, Chennai and City Bank, Chennai. The Manager of the first petitioner was served with notice and statement was recorded under Section 37 of FEMA, 1999 on 09.01.2008 and 19.07.2013. During the period March 2003 to June 2008 by raising 39 bills had exported telecommunication and other allied products to various overseas importer to an extent of 10792473 US dollars equivalent to Rs. 46,77,54,277.44/- and failed to realise the export proceeds and thereby contravened Section 7(1)(a) of FEMA r/w Regulations 9(1) and 13 of Regulation, 2000. After filing of complaint, the petitioners were issued show cause notice dated 14.10.2015, and on receipt of the same, the petitioners had sent their reply dated 16.12.2015. The issue is non recovery of portion of the exports done to multiple customers with whom the petitioners had ongoing export businesses then and permission sought for from the dealers for writing off a portion of the bills which were non commodity engineering technical exports in the interest of further export business. Their request for write off was neither rejected nor acceded to and after more than 12 years, the petitioners were served notices for such transactions. Therefore, the long delay of more than 10 years with regard to the transactions is unfair and deprived of the petitioners a reasonable opportunity to defend themselves in respect of the alleged contraventions. Further, the entire information received from the dealers / banks had been behind the petitioners' back and without an opportunity to the petitioners, it was adjudicated. Therefore the petitioners are not guilty of any non declaration in terms of Section 7(1)(a) of FEMA r/w Regulation 9(1) and 13 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2000. First petitioner is no longer in operation for more than a decade. The second petitioner is employed in other company. The first petitioner has no operation, no revenues and no staff or employees and it is facing liquidation proceedings. There is absolutely no explanation for the delay in issuance of notice, that too after period of 10 years. Therefore, the impugned order cannot be sustained and the same is liable to be quashed. Accordingly, the impugned order and the demand notice are quashed and this writ petition is allowed.
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PMLA
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2024 (6) TMI 194
Money Laundering - provisional attachment order - scheduled offences - Validity of the proceedings under the Prevention of Money Laundering Act, 2002 (PMLA) in the absence of a scheduled offence - HELD THAT:- It is a settled position of law by now that in the absence of a scheduled offence, the charges of money laundering under the PMLA, 2002 cannot be sustained and if the person in question has been finally discharged or acquitted of the scheduled/predicate offence, there can be no charge of money laundering against the said person. In the present case, the respondents are not in a position to dispute fact that the appellant Shri Makhru Singh @ Anil Singh now stands acquitted in all the seven FIRs filed against him in offences which constitute scheduled offences under PMLA, 2002. The other appellant, namely, Mrs. Pammi Devi, is the wife of Shri Makhru Singh and did not stand accused of any scheduled offence as per the filings and submissions from either side. Thus, the acquittal of Shri Makhru Singh @ Anil Singh in the scheduled offences has removed the bedrock upon which the edifice of the PMLA case leading to the attachment of the properties in question in these cases was built. The Provisional Attachment Order passed by the respondent Directorate and the impugned order passed by the Ld. AA confirming the same, have no legs to stand on. In the absence of any scheduled offence, there cannot be any proceeds of crime , i.e., property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property . Appeal disposed off.
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Service Tax
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2024 (6) TMI 193
Refund claim - part refund rejected on the ground that refund under Notification No. 4/2004-ST has no linkage with refund under Notification No. 9-2009-ST - whether refund under Notification No. 4/2004-ST ought to be treated as fresh application? HELD THAT:- As per Notification No. 9/2009-ST dated 03.03.2009, the Appellant filed two refund claims of service tax paid to the works contract service providers of Rs. 45,06,130/- (Appeal No. 1) and Rs. 1,00,33,793/- (Appeal No. 2) in respect of such input services received for authorized operations of SEZ unit from 03.03.2009 to 19.05.2009. The Ld. adjudicating authority passed the Order-in- Original No. (R)2 3/Refund/S.Tax/SBP-I/2010 dated 21.04.2010, sanctioning part of the refund claims and rejected refund pertaining to 2 days viz. 01.03.2009 and 02.03.2009, prior to issuance of Notification No. 9/2009-ST, since such service providers had issued invoices for the entire month of March 2009. The appellant has not challenged this Order-in-Original and hence this order has attained finality. If the appellant is aggrieved against the order for rejecting the refund for the two days, they would have filed appeal against the order dated 24.04.2010. Instead, the appellant has chosen another route and filed a fresh refund claim for the same period, which has already been rejected by the Order dated 21.04.2010. Since no appeal has been filed against the order-in-original dated 21.04.2010, it attained finality. The appellant themselves claimed that they have paid the consideration after 03.03.2009 i.e., from 14.04.2009 to 10.06.2009 and 24.04.2010 to 25.06.2010. Thus, in their own admission, the invoices were not issued during the period when Notification 4/2004-ST was in operation. The finding of the adjudicating authority in the impugned order dated 21.04.2010 cannot be a reason for them to state that the services were rendered when Notification 4/2004-ST was in operation. If the findings of the adjudicating authority is wrong or not acceptable to them, the only recourse available to them was to file appeal against the order dated 21.04.2010, which they have not done. The adjudicating authority has rightly rejected the fresh refund claim, which has already been rejected vide order dated 21.04.2010 and the rejection has attained finality - there are no infirmity in the impugned order. Appeal dismissed.
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2024 (6) TMI 192
Demand of Service Tax on reverse charge basis on services received from the Indian Railways for the construction of Railway Sidings by denying the benefit of exemption - Demand of Service Tax on reverse charge basis on the royalty amount paid to the State Government on natural resource (limestone) extraction - Demand of Service Tax on reverse charge basis on works contract service received by the Appellant - Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) - Input Service Credit availed on the basis of ineligible documents. Demand of Service Tax on reverse charge basis on services received from the Indian Railways for the construction of Railway Sidings by denying the benefit of exemption - HELD THAT:- The impugned order has relied upon the definition of railways as given in the Railway Act, 1989 to hold that the benefit of the aforesaid exemption notification shall not be available to the Appellant because the sidings constructed by the Railways for the Appellant was for private use and the same was not used for public carriage of passenger or goods - it is observed that the term railways has not been defined under the Finance Act, 1994. Accordingly, no distinction has been made out between public and private railways in the said Act. The Department cannot fall back on the definition of railways in another statute for the purpose of creating an artificial distinction between the two. The issue with respect to availability of the benefit of exemption on services of construction of railway siding is no more res-integra in view of the judgements rendered by the Tribunals in M/S. TRIVENI ENGICONS PRIVATE LIMITED VERSUS COMMISSIONER OF C.G.S.T. AND CENTRAL EXCISE, JAMSHEDPUR [ 2024 (3) TMI 917 - CESTAT KOLKATA] where it was held that The issue has already been settled by this Tribunal and it has been categorically held that there is no distinction between public railways and private railways. In these circumstances, following the decision of this Tribunal in the case of M/S HARI CONSTRUCTION ASSOCIATES PRIVATE LIMITED VERSUS COMMISSIONER OF CGST EXCISE, PATNA II [ 2023 (9) TMI 454 - CESTAT KOLKATA] , it is held that the appellant is entitled to the benefit of exemption vide Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012, as claimed. The demand confirmed in the impugned order is not sustainable. Demand of Service Tax on reverse charge basis on the royalty amount paid to the State Government on natural resource (limestone) extraction - HELD THAT:- The services by way of grant of natural resources by the Government became taxable only with effect from 01 April 2016. In the present case, the agreements were executed prior to 01 April 2016 and therefore the provisions of service tax, as applicable prior to the said date would be applicable to determine the leviability of service tax on the royalty payments. It has been settled by a number of decisions of the Tribunals that when the assignment of right to use natural resources was made before 01 April 2016, service tax liability cannot be fastened upon the Appellant even if the consideration for the same is paid after the introduction of the levy with effect from the said date. Accordingly, we hold that the demand of service tax confirmed in the impugned order is not sustainable. Demand of Service Tax on reverse charge basis on works contract service received by the Appellant - HELD THAT:- This issue has been clarified by Board vide Circular dated 23.08.2007, wherein it has been clarified that the 'sub-contractor' is liable to pay service tax even if the main contractor pays service tax on the full value. In the present case, for the works contract service rendered, the appellant was required to pay service tax on reverse charge basis at the rate of 50 percent. Accordingly, we hold that the appellant is liable to pay service tax of 1,46,250/-, along with interest as demanded in the impugned order. However, no penalty imposable on this service tax confirmed as the intention to evade payment of service tax does not exist in this case. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) - HELD THAT:- The demand pertains to the period November 2015 to December 2015 and June 2016 to August 2016 respectively and the impugned notice was issued only on 02 June 2020, by invoking extended period of limitation. It is observed that the fact of nonpayment of the cesses by the appellant was well within the knowledge of the department in view of the Audit conducted. Accordingly, the intention to evade payment of service tax does not exist in this case. Thus, the demand confirmed on this count is not sustainable. Input Service Credit availed on the basis of ineligible documents - HELD THAT:- The appellant has obtained the STTG certificates as required under the said notification and submitted the same before the Ld. Adjudicating Authority during the course of personal hearing - the STTG Certificates were in the prescribed format as contained in the aforesaid Notification. Also the said certificates contain all the particulars available in the Railway receipts, as required to avail the credit. Accordingly, the STTG certificates are valid documents to avail the credit and hence the credit availed cannot be denied. Appeal disposed off.
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2024 (6) TMI 191
Exemption form service tax - services rendered in respect of railways and construction of road - piping work under railway line - boulder pitching for construction of road - invocation of extended period of limitation - HELD THAT:- The appellant has executed two work orders to their client namely, M/s. Vedanta Aluminium Ltd., Jharsuguda. The work order dated 31.07.2007 is meant for piping work in respect of railway lines. A perusal of the said work order shows that the works have been rendered to the railways and during the relevant period, services rendered to the railways were exempted from Service Tax. Further, from the Work Orders, it is observed that the services rendered are rightly classifiable under the category of works contract service as they involve transfer of property in goods. It is observed that the client has registered the aforesaid contracts under the Odisha Value Added Tax Act, 2004 and paid Works Contract Tax to the Government, but, in the Notice, no demand has been made under 'Work Contract Service'. Thus, it is observed that the demand confirmed under 'Commercial or Industrial Construction Service' is not sustainable and hence the same is set aside. Invocation of extended period of limitation - HELD THAT:- There is no suppression with intention to evade payment of Service Tax established in the present case. Hence, the Show Cause Notice demanding Service Tax for the period 2007-08 issued on 20.10.2010 is barred by limitation. Accordingly, the demands confirmed in the impugned order are liable to be set aside on the ground of limitation also. The impugned order is set aside - appeal allowed.
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2024 (6) TMI 190
Demand of service tax confirmed by invoking extended period of limitation - Penalty - HELD THAT:- As per the Audit report, the appellant has paid the service tax as demanded. In that circumstances, the demand for the period up to March, 2016, is not sustainable against the appellant. Further, as per the impugned order, the demand has been raised up to June, 2017, which is not included in the year 2016-2017. The said demand has been raised on the basis of Form 26AS. In this regard, the Works Contracts is perused - As per the Works Order, it is clear that the appellant was engaged in the activity of construction of road, which is exempted from payment of service tax. Penalty - HELD THAT:- The demand of service tax is not sustainable against the appellant. As the demand is not sustainable, consequently, penalty is also not imposable on the appellant. The impugned order is set aside - appeal allowed.
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2024 (6) TMI 189
Demand of service tax - services received by these permanent establishments of the appellant abroad - reverse charge mechansim - disallowance of CENVAT Credit - appellant produced photo copies of the invoices before the adjudicating authority at the time of personal hearing - penalty imposition u/s 77 of Finance Act, 1994, and Rule 7(c) of Service Tax Rules, 1944. Demand of service tax - services received by these permanent establishments of the appellant abroad - reverse charge mechansim - HELD THAT:- The appellant has been working through a network of branch offices located abroad. These branch offices are permanent establishments and not mere representative offices. They provide services to their clients in their own rights, raise invoices, incur expenditure, avail bank facilities, have its own technical and human resources and operate as independent units. They do not claim any reimbursement of expenditure from the Corporate Office. Section 66A(2) of the Finance Act, 1994 reproduced above clearly lays down that permanent establishments in different countries shall be treated as separate persons. Therefore, the services received by these permanent establishments of the appellant abroad cannot be considered as services received by the appellant in India, on reverse charge basis. Thus, the demand of service tax from the appellant is not sustainable and accordingly, we set aside the demand confirmed in the impugned order on this count. Disallowance of CENVAT Credit - appellant produced photo copies of the invoices before the adjudicating authority at the time of personal hearing - HELD THAT:- The appellant produced photo copies of the invoices before the adjudicating authority at the time of personal hearing. However, the adjudicating authority rejected those invoices on the ground that they were not authenticated and the invoices were not legible. The appellant now submits that they have the original copies of all the invoices and they can submit the same before the concerned authorities for verification. For the purpose of verification, the matter needs to be remanded back to the adjudicating authority. Interest - Penalty imposition u/s 77 of Finance Act, 1994, and Rule 7(c) of Service Tax Rules, 1944 - HELD THAT:- Since the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. As the demand is not sustainable, no penalty imposable under Section 77 of the Finance Act, 1994 and Rule 7(c) of the Service Tax Rules, 1944. Appeal disposed off.
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2024 (6) TMI 188
Maintainability of appeal - appeal rejected for failure to make mandatory pre-deposit in terms of Section 35F of the Central Excise Act, 1944, as made applicable to service tax cases vide Section 83 of Finance Act, 1994 - HELD THAT:- Hon ble High Court in the case of SODEXO INDIA SERVICES PVT. LTD. VERSUS THE UNION OF INDIA AND ORS. [ 2022 (10) TMI 264 - BOMBAY HIGH COURT] held that ' it does appear that the confusion seems to be due to there being no proper legal provision to accept payment of pre-deposit under Section 35F of the Central Excise Act, 1944 through DRC-03. Some appellants are filing appeals after making pre-deposit payments through DRC-30/GSTR-3B. In our view, this has very wide ramifications and certainly requires the CBI C to step in and issue suitable clarifications/guidelines/ answers to the FAQs.' The learned Commissioner (Appeals) could have granted the refund of amount of pre-deposit wrongly made by DRC-03 to the Appellant and given an opportunity to deposit the said amount on its Integrated Portal instead of dismissing the appeal in limine. Because dismissing the appeal filed by the Appellant, even after making the pre-deposit, merely on the ground that it has not been deposited in the prescribed manner or by the prescribed Form, amounts to denial of substantial justice and the Commissioner (Appeals) has erred in shirking from its responsibility of deciding the appeal on merits - From perusal of paragraph 3 of the Instruction dated 28.10.22, it is evident that the tax under the existing law (Service Tax) shall be recovered as an arrear of tax under the CGST Act and the pre-deposit is neither in the nature of duty nor can be treated as arrears under the Service Tax law. Thus, when the service tax could be recovered as an arrear of Service Tax under CGST Act, after commencement of the CGST Act, then pre-deposit made through DRC-03 prior to 28.10.22 has to be treated as sufficient compliance, in view of the subsequent Instruction dated 18.4.23. It is found appropriate to remand the matter to the learned Commissioner (Appeals) to decide the appeal on merits without further visiting the aspect of pre-deposit - appeal allowed by way of remand.
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2024 (6) TMI 187
Maintainability of appeal - Refund of service tax paid erroneously - absence of challenge to assessment or self-assessment in appeal - export of services or not - intermediary services or not. Maintainability of appeal - HELD THAT:- The Larger Bench in the appellant s own case M/S SHREE BALAJI WAREHOUSE, M/S SATYA WAREHOUSE, M/S OM SHREE SAI RAM, M/S VIAVI SOLUTIONS INDIA PVT. LTD VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, PANCHKULA [ 2023 (9) TMI 1478 - CESTAT CHANDIGARH (LB)] has categorically held that refund of service tax is maintainable even in the absence of any challenge to assessment or self-assessment in an appeal. The Larger Bench has considered the decision of Hon ble Apex Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] and has distinguished the same by holding that the same is not applicable in the facts and circumstances of the present case. Moreover, after the Larger Bench order, this case has been listed before this Division Bench to decide the issue of refund on merits. Therefore, the present appeal is very much maintainable and its maintainability cannot be questioned at this stage. Accordingly, the objections raised by the Department on maintainability are hereby overruled. Whether the services by the appellant to JDSU USA qualified as export of service and hence not exigible to service tax? - HELD THAT:- The place of provision of business promotion service shall be the location of the recipient of service which is outside India and such services shall qualify as export of service and hence not subject to service tax and this view has been taken by the Tribunal in various decisions stated/ relied upon by the appellant. Intermediary services or not - HELD THAT:- From the perusal of the definition of the Intermediary during the period prior to 01.10.2014, it only pertained to facilitation of provision of service but facilitation of supply of service was inserted only w.e.f. 01.10.2014. Here it is pertinent to note that the period of dispute in the present case is from October 2013 to March 2014 and the definition of Intermediary during that time is applicable wherein the learned Commissioner (Appeals) in the impugned order in Para 7 8 has wrongly observed that the appellant is involved in the business promotion of selling of goods, providing of warranties of goods and hence covered under Rule 4 of POPS Rules, 2012 and further held that service provided by the appellant cannot be treated as export of service. In this regard, it is to be seen that both the authorities have wrongly applied amended definition of Intermediary which was made applicable from 01.10.2014 whereas the period of dispute in this case is from October 2013 to March 2014 and therefore the amended definition of Intermediary service cannot be applied in the present case - the services of business promotion / support and marketing service do not qualify as intermediary service. It is also found that in the impugned order both the authorities below have wrongly observed that the appellant is providing technical services whereas, in fact, the appellant has provided promotional/ marketing services and not provided technical services viz. Repair Service, Erection Commissioning and Installation Service to JDSU USA; the said observation in the impugned order is factually erroneous. The impugned order is not sustainable in law and is set aside - Appeal allowed.
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2024 (6) TMI 186
CENVAT Credit - input and input services for construction of immovable property - denial of credit on the ground of non-payment of service tax or excise duty on the property - HELD THAT:- This issue is no more res integra in as much as the jurisdictional Karnataka High Court in the case of COMMISSIONER OF SERVICE TAX VERSUS M/S. GOLFLINKS SOFTWARE PARK PVT LTD. [ 2022 (12) TMI 472 - KARNATAKA HIGH COURT ] in a similar set of facts has held that 'While constructing the immovable properties, assessee would have availed various services and paid input tax. The said building is used by the assessee in its business. Therefore, assessee must be entitled to avail the input services to discharge services on various out services.' There are no merit in the impugned order and accordingly, the appeal is allowed.
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Central Excise
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2024 (6) TMI 185
Exception to the requirement of pre-deposit as contained in Section 35F of the Central Excise Act, 1944 which is applicable to Service Tax also - petitioner's contention is that in his bank accounts, a paltry sum is lying and therefore, he is not in a position to fulfill the requirements of Section 35F of the Act - HELD THAT:- Since the provision contained in Section 35F as is effective from 06.08.2014, makes only two exceptions namely that the extent of pre-deposit shall not exceed rupees ten crores and that the provisions of this Section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act, 2014, no third exception can be carved out on the basis of repealed provisions of the said Act, therefore, the request of the petitioner to waive requirement of pre-deposit and for permission to file an application for waiver before the Appellate Tribunal, fails and is dismissed. In view of the amended provisions contained in Section 35F of the Central Excise Act, 1944, it is held that amended provision being not parimateria to earlier provisions as were existing prior to 06.08.2014 will not have any application to the cases originating from the proceedings after 06.08.2014. Accordingly, the petition fails and is dismissed.
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2024 (6) TMI 184
Recovery of excise duty - benefit of exemption under notification dated 28.02.1993 denied - levy of penalty as well - demand u/s 11A of the Central Excise Act - HELD THAT:- As per the notification providing for full exemption on concessional rate of duty, it has been provided that the said notification shall apply on the aggregate value of clearance of all the excisable goods for whom consumption only in circumstances other than where a manufacturer has one or more factories and from any factory by one or more manufacturer, exceeds Rs. 200 lacs in preceding financial year, the same was increased w.e.f. 01.04.1995 to Rs. 300 lacs vide notification dated 16.03.1995 - the notification would only be granting exemption in the cases where the manufacturers have cleared overall amount less than Rs. 200 lacs/300 lacs as the case may be. If the production from different factories and clearance is altogether more than the said amount, the exemption cannot be allowed. Both the Appellate Authorities are agreed upon to conclude that infact the Jaybee Industries consisting of N. K. Aggarwal and Pardeep Aggarwal as partners was a single partnership firm having two factories one at Bathinda and another at Panchkula and, therefore, they were required to include the factories of goods from both the units and the exemption could not have been claimed on the said basis and the recovery of non-payment of duty for the period from July 1994 to May, 1995 is found to be correct and in order. Applicability of Section 11 A - HELD THAT:- The same has not been raised at the stage of appeal below and the same could not be taken up in appeal at present. Appeal dismissed.
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2024 (6) TMI 183
Recovery of CENVAT Credit - dropping of proposal for recovery of credit under CENVAT Credit Rules, 2004 on procurement of duty-paid goods for export under advance license scheme of FTP. The adjudicating authority held that credit was not to be denied merely for not having taken recourse to the privilege of using inputs that were not burdened with duties of central excise and that duty paid on clearance of diethylene glycol could be taken as credit under rule 3 of CENVAT Credit Rules, 2004. HELD THAT:- That the impugned goods are excisable is not in dispute and yet the reviewing authority avers that these are exempted from duties of central excise and, therefore, bereft of option to pay duty on clearance. Doubtlessly, export promotion schemes in the Foreign Trade Policy (FTP) envisage exemption from duties on procurement and the advance licence/authorization scheme , too, is no exception though such exemption is limited to imported goods only and under Customs Act, 1962. There are no authority that empowers central excise formations to enforce notifications issued under Customs Act, 1962 in furtherance of such schemes. The flexibility afforded to holders of advance licence/authorization for import substitution, with substantially the same exemptions, does not flow from a parallel notification actual or deemed in relation to duties of central excise but from a general facilitation for all exports under schemes or otherwise to detax export price in rule 19 of Central Excise Rules, 2001. The reviewing authority did misconstrue the source of exemption from duties of central excise as a notification to which said proviso is attached for mandatory availment that a notification under rule 19 of Central Excise Rules, 2001 does not. With the twin pillars on which the appeal of Commissioner of Central Excise, Belapur, at the instance of Committee of Chief Commissioners, rested having been broken, the relief sought in this appeal does not have any legal basis. Appeal dismissed.
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2024 (6) TMI 182
Levy under Central Excise Act, 1944 - Process amounting to manufacture or not - re-packing and labelling of unmanufactured tobacco - HELD THAT:- A key element in fastening recovery of duty is determination of the appropriate tariff item in the Schedule to Central Excise Tariff Act, 1985; from the contents of the impugned order, we are unable to ascertain the reason for inferring that the impugned goods are covered by tariff item 4707 9000 of Schedule to Central Excise Tariff Act, 1985 in accord with the General Rules for Interpretation of the Tariff. There is also no finding as to the impact of the definition of manufacture on section 3 of Central Excise Act, 1944 and its applicability to the process undertaken by the appellant de hors the amendment to excisable goods which has no bearing on taxability but only on the rate of duty. In the absence of these critical evaluations, the impugned order cannot be adjudged as being legal and proper. That must be rectified and to enable that, it is necessary to set aside the impugned orders - appeals of the assessee restored before Commissioner of Central Excise Customs (Appeals), Aurangabad for a fresh hearing and decision - appeal allowed by way of remand.
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2024 (6) TMI 181
Cenvat Credit - scrapped/raw material which has not been used in the manufacturing process - time limitation. Merits of the case - HELD THAT:- The entire case was built on the basis of entry in the ledger and there was no inquiry/investigation into the matter; no statement was recorded. The appellant has maintained proper records which is verified by the drug authorities from time to time and moreover, Chartered account certificate has also been placed on record which clearly certified that there is no write off input and moreover, the variance is only 0.28% which is normally accepted in the industry. Reference made to the decision of the Tata Motors Ltd. Vs. Commissioner of Central Excise, Pune-I [ 2021 (11) TMI 830 - CESTAT MUMBAI ] wherein the Division Bench of the Tribunal has considered various decisions on this issue and has observed that ' the CENVAT Credit cannot be denied to the appellant on a theoretical variance in the inputs.' Time limitation - HELD THAT:- The show cause notice in the present case has been issued only on the basis of audit and no further inquiry/investigation was done. Further, the appellant has been regularly filing returns and was subjected to audit from time to time and has not suppressed any material with intention to evade payment of duty. In view of these facts, the entire demand in the present case is barred by limitation. The impugned order is not sustainable in law and is set aside - appeal allowed.
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2024 (6) TMI 180
Cash refund in terms of transitional provision under Section 142(6)(a) of the CGST Act, 2017 - denial of benefit of Cenvat Credit in terms of Rule 3(1) of Cenvat Credit Rules, 2004 - HELD THAT:- After considering the provisions of Section 142(6)(a) of the CGST Act, 2017, Section 11B(2) of the Central Excise Act, 1944 and Rule 3(1) of the Cenvat Credit Rules, 2004, the Tribunal in various decisions has allowed the refund of Cenvat Credit of CVD SAD paid through various challans produced on record. It is also found that the Tribunal in the case of SRI CHAKRA POLY PLAST INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL TAX MEDCHAL GST [ 2024 (1) TMI 927 - CESTAT HYDERABAD] has considered the earlier judgments in the cases of M/S MITHILA DRUGS PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, UDAIPUR (RAJASTHAN) [ 2022 (3) TMI 58 - CESTAT NEW DELHI] , M/S MITHILA DRUGS PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, UDAIPUR (RAJASTHAN) [ 2022 (3) TMI 58 - CESTAT NEW DELHI] , M/S. ITCO INDUSTRIES LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, SALEM [ 2022 (6) TMI 1040 - CESTAT CHENNAI] and FLEXI CAPS AND POLYMERS PVT LTD VERSUS COMMISSIONER, CGST CENTRAL EXCISE-INDORE [ 2021 (9) TMI 917 - CESTAT NEW DELHI] ], and by following these case-laws on this issue, has allowed the refund of CVD SAD. The appellant is entitled to refund of Cenvat Credit of CVD amounting to Rs.23,72,607/- and SAD amounting to Rs.10,21,081/-; and not the interest paid on delayed payment of duties as claimed by the appellant - Appeal allowed in part.
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2024 (6) TMI 179
Recovery of short paid duty - Jurisdictional Authority's Power to Issue Provisional Assessment Orders Suo Motu - revision for ascertainment of additional duty liability - Compliance with Rule 7 of Central Excise Rules, 2002 - HELD THAT:- The impugned order has set out the issue in dispute correctly but has gone on to find that the lack of exercise of option by an assessee in such situations enables the jurisdictional central excise authorities to do so in the interests of revenue. This is not a sustainable proposition as rule 7 of Central Excise Rules, 2002 is unambiguous in vesting the option only in the assessee to decide upon the finality of assessment which is relevant only for the purposes of filing of monthly returns - in reporting discharge of duty liability for each month - Non-exercise of the option implies that the assessment is final and any duty not paid or short-paid is liable to be recovered by recourse to section 11A of Central Excise Act, 1944. The Tribunal, in FINOLEX CABLES LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE I [ 2023 (12) TMI 169 - CESTAT MUMBAI] of Commissioner of Central Excise (Appeals), Pune I for the immediately preceding period, has held that ' in the absence of exercise of option by the assessee for provisional assessment , it is not open to central excise authorities to deem the clearances to have been provisional and to proceed with final assessment for each year.' The impugned order flies in the face of the law and is set aside to allow the appeal of M/s Finolex Cables Ltd. For the same reason the appeal of Commissioner of Central Excise, Pune I is dismissed.
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2024 (6) TMI 178
Refund of CVD paid under the existing statute, Central Excise Act, 1944 - whether the appellant is eligible to claim refund of Additional Duties of Customs (CVD) paid on re-import of goods under the provisions of Section 142(3) of the CGST Act, 2017? - HELD THAT:- It is found that the larger bench in M/S. BOSCH ELECTRICAL DRIVE INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL TAX, CHENNAI [ 2023 (12) TMI 1145 - CESTAT CHENNAI-LB] has examined the issue regarding whether this Tribunal is the appropriate authority to decide the issue in appeal against the order passed in respect of the matter relating to refund under Section 142(3) of the CGST Act, 2017 and has held that an appeal against such order would lie with this Tribunal. By perusal of the above order of the Larger Bench of the Tribunal, it is found that it has been made clear that the issue of deciding an appeal against the order relating to the refund decided under the provisions of Section 142 of CGST Act, 2017 is required to be dealt by this Tribunal. In the present case, as the CVD was paid subsequent to the appointed date (01.07.2017) for introduction of GST, i.e., on 18.07.2017, the appellant was unable to take credit of the same as Cenvat credit. Learned Commissioner (Appeals) had accordingly gave a finding that the appellant is eligible to avail credit of CVD paid on inputs under the Cenvat Credit Rules, 2004; however, he did not agree to the contention of the appellant stating that the provisions of Section 140(5) of CGST Act, 2017 provide for allowing credit of eligible duties. Further, learned Commissioner (Appeals) had held that the provisions of Section 142(3) ibid is not applicable to the present case and hence no refund can be claimed by the appellant under this provision. Thus, there are strong grounds to consider refund of CVD paid on re-imported Metformin HCL BP under B/E No. 9247561 dated 10.04.2017 and under Challan dated 18.07.2017 for an amount of Rs.1,50,147/- for which the appellant had filed the refund claim in the prescribed format under the provision of Section 142(3) CGST Act, 2017. Accordingly, the impugned order dated 07.01.2020 is not legally sustainable. Appeal allowed.
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2024 (6) TMI 177
Abatement of appeal - non-prosecution of the case - adjournment of matter beyond three times - HELD THAT:- In case of Ishwar lal Mali Rathod [ 2021 (9) TMI 1301 - SUPREME COURT ] condemning the practice of adjournments sought mechanically and allowed by the Courts/Tribunal s Hon ble Supreme Court has observed ' Considering the fact that in the present case ten times adjournments were given between 2015 to 2019 and twice the orders were passed granting time for cross examination as a last chance and that too at one point of time even a cost was also imposed and even thereafter also when lastly the High Court passed an order with extending the time it was specifically mentioned that no further time shall be extended and/or granted still the petitioner defendant never availed of the liberty and the grace shown.' There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided - Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2024 (6) TMI 176
Invocation of extended period of limitation - suppression of fact - denial of CENVAT Credit under Rule 2(l) which are taken in relation to manufacturing clearance of final products. Invocation of extended period of limitation - suppression of facts - HELD THAT:- In the case of Surya Vistacom Pvt. Ltd. [ 2021 (11) TMI 339 - CESTAT KOLKATA] Tribunal has held that ' the details have been culled out by the adjudicating authority from the available records and there is no new or fresh tangible materials available in the hands of the adjudicating authority to make out a case of wilful misstatement or wilful suppression. Therefore, the Tribunal was fully justified in holding that the extended period of limitation could not have been invoked.' In case of Meghmani Dyes Intermediates Ltd. [ 2013 (6) TMI 141 - GUJARAT HIGH COURT] it was held that To make the demand for duty sustainable beyond the period of six months and upto a period of five years in view of the proviso to Section 11A of the Act, the Revenue is obliged to establish by cogent evidence that the duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded by reasons of either fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules made thereunder, with intent to evade payment of duty. As the demand has been made invoking extended period of limitation and it is not found that the same is available to Revenue for making this demand. The impugned order cannot be sustained on this ground itself. Denial of CENVAT Credit - HELD THAT:- As the demand is barred by limitation, the question of admissibility of credits on merits not discussed. Appeal allowed.
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2024 (6) TMI 175
CENVAT Credit - exempted Biscuits having retail price less than Rs.100/- - requirement to pay 10% of the value of the exempted Biscuits - appellant already reversed proportionate cenvat credit with interest before issuance of Show Cause Notice, availed on common inputs/input services but used in the manufacture of exempted Biscuits - HELD THAT:- Since the appellant has reversed the credit with interest availed on inputs and input services attributable to exempted products, accordingly in view of the series of judgments referred to by the learned advocate for the appellant and also in view of the retrospective amendment to the relevant Cenvat Credit Rules, 2004 vide Section 72 and 73 of Finance Act, 2010 and Notification No. 13/2016-CE(NT) dated 01.03.2016, the demand of 10% of the value of the exempted goods confirmed by the learned Commissioner in the impugned order cannot be sustained. Reliance can be placed in M/S. SHEELA FOAM PVT. LTD. VERSUS COMMR. OF CENTRAL EXCISE, KOLKATA-IV AND MR SATISH AGARWAL M/S. SHEELA FOAM PVT. LTD. EXECUTIVE ACCOUNTANT VERSUS COMMR. OF CENTRAL EXCISE, KOLKATA-IV [ 2024 (2) TMI 957 - CESTAT KOLKATA] where on similar issue demand was set aside. The impugned order is set aside - appeal is allowed.
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2024 (6) TMI 174
Classification of goods - LIV 52 Protec - goods misclassified as Animal Feed Supplement under Central Excise Tariff Heading 230990/23099010 of Central Excise Tariff Act, 1985 - whether the polyherbal preparation Liv 52 Protec manufactured by the appellant is classifiable under CETH 2302/230990/23099010 as Animal Feed Supplement as classified by the appellant or under CETH 300339/30049011 as Ayurvedic Medicaments as adjudged by the revenue? - Extended period of limitation - Penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002. Classification of goods - HELD THAT:- It is found that Tariff item Heading 23099010 under Chapter Heading 2309, Preparation of a kind used in animal feeding , under others reads as Compounded animal feed . The Tariff Heading 30049011 under Chapter Heading 3004, Medicaments (excluding goods of heading 3002, 3005 or 3006) consisting of mixed or unmixed products for therapeutic or prophylactic uses put up in measure doses (including those in the form of transdermal administration systems) or in forms or packages for retail sale , under others, Ayurvedic, Unani, Siddha, Homeopathic or Biochemic systems medicaments, put up for retail sale reads as of Ayurvedic systems . The major herbs in Liv 52 Protec are Andrographis paniculata (Yavtika) enhances the body s resistance against common infections by stimulating the production of antibodies. It also acts as a hepato-protective that helps prevent liver damage. Phyllanthus amarus (Bhumyaamalaki) is a rich antioxidant, which is effective in the treatment of infective hepatitis. It contains wedelolactone and dimethyl wedelolactone and stimulates the secretion of digestive enzymes. It eliminates toxins and aids in the regeneration of hepatopancreas. The herbal ingredients in the impugned product also have similar hepatoprotective properties - Liv 52 Protec liquid stabilizes the hepatic cell membrane and promotes regeneration of the liver and also protects the liver from toxins, drugs and chemicals. Liv 52 Protec, is an appetite stimulant that increases and restores appetite in animal. In this case, the appellant is manufacturing a similar product Liv 52 Vet and classifying the same under Chapter Heading 30 as an Ayurvedic medicament and paying the appropriate duty. However, Liv 52 Protec is branded and marketed as animal feed supplement. Animal feed supplements are mixtures that are added either to animal feed or fed directly to animals to provide extra nutrients such as vitamins and minerals. The impugned product Liv 52 Protec does not have vitamins or minerals, which would supplement the animal feed. Further the tariff heading item 2309 9010 reads as Compounded animal feed and not as animal feed supplement. - the classification of the impugned product as animal feed supplement is not proper under chapter heading 23 and it should be classified under Chapter 30. The product Liv 52 Protec is rightly classifiable under Chapter Sub-heading 300339 for the period upto February 2005 and under Chapter subheading 30049011 from March 2005 onwards - the Liv 52 Protec Liquid in bulk is exported under the Chapter Heading 30039011. Invocation of the extended period - HELD THAT:- The appellant has been submitting ER-1 showing the details of the goods manufactured and cleared by them. The details of goods cleared inter alia include Liv52 Protec as well as Liv 52 Vet Liquid . Further the Department has also conducted an audit for the period under dispute and no audit point was raised to indicate that there is suppression of facts and the Department is fully aware of the facts and issues and the goods were cleared in accordance with the approved classification list. Therefore, the invocation of extended period for confirmation of demand of duty for the period May 2002 to April, 2007 is not legally sustainable. Penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002 - HELD THAT:- In the facts and circumstances of the case and as the issue involved is classification, the penalties imposed under Section 11AC and Rule 25 of Central Excise Rules, 2002 are not legally sustainable, hence they are dropped. Appeal disposed off.
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CST, VAT & Sales Tax
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2024 (6) TMI 173
Dismissal of petitioner s stay application during pendency of the petitioner s appeal before the Andhra Pradesh Value Added Tax Appellate Tribunal at Visakhapatnam - petitioner filed petition seeking stay of collection of balance amount before 4th respondent of which stay petition was rejected by the impugned order - HELD THAT:- Indisputably, the petitioner has filed the appeal which is pending for consideration before the Tribunal, Visakhapatnam. It is also not disputed that the petitioner complied with the statutory deposit for filing appeal. Once the statutory appeal is pending before the Appellate authority for adjudication, ordinarily the recovery of the balance amount deserves stay unless for special reasons, to be recorded in the order, recovery of the balance amount deserves not to be stayed or the balance amount has to be recovered even during pendency of the appeal, which is a statutory and valuable right. The stay may be the subject to imposing some conditions, which is also contemplated by Section 33 (b) of APVAT Act, 2005 - The impugned order does not record any cogent reasons to reject the stay petition. It was provided that the Appellate authority shall make endeavour to decide the appeal within a specific period. The order of rejection of the stay was passed with the conditions. In that case, in addition to the statutory deposit of 25%, the petitioner therein had deposited in total 50% inclusive of 25% of the statutory deposit under the orders of the Court passed in Writ Petition No. 10 of 2023 and considering that total 50% deposit, the stay was granted during pendency of the appeal before the Appellate Tribunal. The respondent No. 4 is not justified in rejecting the petitioner s stay application. The impugned order, therefore, is set-aside - Petition allowed in part.
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2024 (6) TMI 172
Refund of excess tax - Collection of entry tax from the petitioner Company on entry of packing materials into the State of Assam for packing of goods for sale - HELD THAT:- A bare reading of Rule 29(1) of the Assam Value Added Tax Rules, 2005 indicates that a time frame is prescribed for making the application for refund in the prescribed Form, i.e, Form 37. Further, power is also given to the prescribed authority to condone the delay for filing the application within the prescribed period, if sufficient cause is shown. What transpires from the above is that there is a detailed mechanism prescribed under the provisions of law for claiming refund. It appears from the decision of this Court in TATA TEA LTD. AND ANR. VERSUS THE STATE OF ASSAM AND ORS [ 2015 (3) TMI 1438 - GAUHATI HIGH COURT] , that there is no entry tax leviable on the packing materials. In such situation, it appears that the petitioner has paid tax in excess of what was due to him. Be that as it may, as the Act and Rules provides a mechanism for filing application for refund in such situation, this Court is of the view that the petitioner has approached this Hon ble Court by not exhausting the remedy provided under the law and hence, is not entitled for any relief from this Court. As such, there is no justification for keeping this matter pending any longer. This Court directs that the petitioner be at liberty to make an application under Section 50 of the Act by submitting all the details in the prescribed form within a period of 1(one) month from today and if such application is made, the authorities in calculating the prescribed time shall exclude the time spent from filing the writ petition till submission of the application as directed and thereafter, consider the application for refund on its merit. The petition is disposed off.
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