TMI Tax Updates - e-Newsletter
February 17, 2022

Case Laws in this Newsletter:

Articles

1. Jurisprudence on Blocking of Electronic Credit Ledger

   By: Rachit Agarwal

2. Complaints made to the ICAI shall be enquired with an unbiased behaviour and by following the established principles of law

   By: Bimal jain

News

1. Continuation of Capacity Development Scheme, a Central Sector Scheme of Ministry of Statistics and Programme Implementation (MOSPI) Till 31.03.2026.

2. More than 29.8 lakh major Tax Audit Reports (TARs) filed on the e-Filing portal of the Income Tax Department

Notifications

Customs

1. 09/2022 - dated 15-2-2022 - Cus (NT)

Fixation of Traiff Values - Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver etc, (including Crude Palm Oil, RBD Palm Oil, Others)

GST - States

2. G.O. (Ms) No. 184 - dated 31-12-2021 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Tenth Amendment) Rules, 2021.

3. 22/2021– State Tax (Rate) - dated 7-1-2022 - Tripura SGST

Amendment in Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017

4. 21/2021– State Tax (Rate) - dated 7-1-2022 - Tripura SGST

Amendment in Notification No. 01/2017- State Tax (Rate), dated the 29th June, 2017

5. 20/2021-State Tax (Rate) - dated 4-1-2022 - Tripura SGST

Amendment in Notification No. 21/2018, State Tax (Rate), dated the 26th July, 20l8

Circulars / Instructions / Orders

Companies Law

1. 01/2022 - dated 14-2-2022

Relaxation on levy of additional fees in filing of e-forms AOC-4, AOC-4 (CES), AOC-4 XBRL AOC-4 Non-XBRL and MGT-7/MGT-7A for the financial year ended on 31.03.2021 under the Companies Act, 2013

Highlights / Catch Notes

GST

• Court Excludes Limitation Period for Refund Claims Due to Exceptional Circumstances: March 15, 2020 - October 2, 2021.

  Case-Laws - HC : Period of limitation for refund claim - Constitutional Validity of Rule 90(3) - The period of limitation thus falling between 15th March, 2020 to 2nd October, 2021 is required to be excluded. If the said period between 15th March, 2020 and 2nd October, 2021 is excluded, the third refund application filed by the petitioner was within the period of limitation prescribed under the said circular dated 19th November, 2029 read with 54(1) of the Central Goods and Services Tax Rules, 2017. - HC
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• Court Grants Bail to Petitioner Supplying Packaging to Fraudulent Firms After Considering Case Facts, Without Judging Merits.

  Case-Laws - HC : Seeking grant of Bail - Supply of packaging material to the seven firms which are fake - Taking into account the facts and circumstances of the case and without expressing any opinion on the merits of the case, this court deems it just and proper to enlarge the petitioner on bail. - HC
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• Appellant's ITC Claim Denied for Invoice Issued After Financial Year 2017-18 as per Section 16(4) Limitations.

  Case-Laws - AAAR : Time Limitation for claiming ITC - tax invoice dated 01.04.2020 issued by the supplier of service for the rental service supplied for the period 01.04.2018 to 31.03.2019 - Even the proviso to section 16 (4) reiterates that the registered person is entitled to take ITC in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18. This proviso absolutely necessitates or rather endorses the invoices relating to supplies made during the financial year 2017-18 only, for the registered dealer to claim entitlement of ITC in the succeeding financial year. - The appellant is not eligible to claim Input Tax Credit on the disputed invoice - AAAR
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• Submarine Fired Decoy System reclassified under Chapter 8906, now subject to 5% GST, not 'arms and ammunition' category.

  Case-Laws - AAAR : Classification of goods - Submarine Fired Decoy System (SFDS) - following the spirit of the advance rulings pronounced by various Advance Ruling Authorities (on which the appellant placed reliance), we differ with the ruling of the lower Authority that, SFDS is not a part of 'Submarine', but an additional feature that falls under the category of 'arms and ammunition' - The SFDS is classifiable as 'parts of Submarine' falling under Chapter 8906 and consequently attract a GST rate of five (5) percent - AAAR
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Income Tax

• Tribunal Confirms Assessee Proved Investment Creditworthiness, No Additions Made u/s 68 of Income Tax Act.

  Case-Laws - HC : Addition u/s 68 - the tribunal was satisfied that the credit worthiness and the genuinity of the investments have been sufficiently established by the assessee not only before the CIT(A), but also before the assessing officer on the matter being sent back to the assessing officer pursuant to the order passed by the CIT(A) - No additions - HC
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• Compounding Offences in Income Tax Act: Clarifying Board's Authority u/s 279 Without Undermining Assessee's Rights.

  Case-Laws - HC : Compounding of offence - Criminal case u/s 276C(1) read with Section 277 and 278B - The authority to issue instructions or directions by the Board stems from the second Explanation appended to Section 279 of the Act, 1961. It is well settled that the Explanation merely explains the main section and is not meant to carve out a particular exception to the contents of the main section. - Such instructions or directions that are prescribed by the Explanation cannot take away a statutory right with which an assessee has been clothed, or set at naught the working of the provision of compounding of offences. - HC
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• Assessee Eligible for Deduction on Provisions from Employee Fraud-Induced Loss in Leasing Company.

  Case-Laws - AT : Deduction of provisions made - Ascertained expenditure - the assessee is entitled to deduction being the provision created on account of fraud committed by one of its employees which caused loss to the leasing company. - AT
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• Assessee Granted Section 11 Exemption Despite Late Form 10AA Filing; No Defects Found in Accounts by Assessing Officer.

  Case-Laws - AT : Exemption u/s 11 - Donation receipt from foreign donors - belated filing of Form No.10AA - Assessee has filed Form No.FC-III-FCRA-2010 which has been duly assessed with the Ministry of Home Affairs, Government of India. Under these circumstances and considering the fact that since the assessee, during the course of assessment proceedings, has produced the relevant details and produced the books of account which have been gone through by the AO and no other defects were pointed out - Benefit of exemption allowed - AT
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• Amendment to Income Tax Act Section 263: Orders without enquiry are erroneous, impacting PCIT's revision power and exemption claims.

  Case-Laws - AT : Revision u/s 263 by CIT - it appropriate to quote that the legislative amendment made in section 263 by way of insertion of Explanation 2 in Finance Act, 2015 w.e.f. 01.06.2015 that an assessment order passed without making enquiry or verification is deemed to be an erroneous one in so far as it is prejudicial to the interest of Revenue. We thus uphold the learned PCIT's revision jurisdiction direction herein in principle. It shall however be open to the assessee to raise all factual as well as legal arguments before the Assessing Officer in support of her impugned exemption claim as per law; if so advised in consequential proceedings. - AT
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Customs

• Supreme Court overturns High Court's decision, stresses need to exhaust alternative remedies before filing writ petitions under Article 226.

  Case-Laws - SC : Maintainability of petition before the High Court - availability of alternative remedy of statutory appeal - total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O or not - As such it cannot be said that there was total lack of jurisdiction on the part of the Assessing Officer in passing the O-I-O. Despite the above the High Court has entertained the writ petition under Article 226 of the Constitution of India and has entered into the merits of the case though the original writ petitioner did not avail the alternative statutory remedy of appeal against the order of O-I-O. - The impugned judgment and order passed by the High Court is hereby quashed and set aside - SC
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• Authority to Amend Shipping Bills Lies with Commissioner of Customs Before DGFT Involvement; Reasons for Denial Unclear.

  Case-Laws - HC : MEIS scheme - amendment in the shipping bills - whether to permit the necessary amendments in the shipping bills would be within the purview of the Commissioner of Customs himself and not the DGFT. It is only if the Commissioner of Customs permits such amendments in the shipping bills, then the DGFT would come into picture. It is also not clear from the impugned communications as to why such amendments have been declined. No reason has been assigned. - HC
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• Authorities' Adoption of Rule 4 for Import Valuation Lacks Justification, Violates Natural Justice by Withholding NIDB Data.

  Case-Laws - AT : Valuation of imported goods - The authorities have nowhere given any acceptable reasons as to why they jumped to adopt Rule 4 ibid. and the valuation prescribed thereunder, instead of following the Rules sequentially. From the records, nowhere it is seen that the appellant was furnished with the NIDB data or whatsoever that was relied upon for enhancement of the value, for rebuttal, which is clearly in violation of the principles of natural justice. - AT
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• Duty Collection Violates Notification No. 62/2007-Cus; Non-speaking Order by Customs Deputy Commissioner Deemed Unjustified and Unsustainable.

  Case-Laws - AT : Finalization of provisional assessment - The authorities below have erred in collecting the Duty at ₹ 300/- per M.T., which is clearly illegal and in violation of Notification No. 62/2007-Cus. ibid.; and secondly, the order of the Deputy Commissioner of Customs, which is treated as the Order-in-Original is clearly a non-speaking order and the same cannot be sustained. The collection of Duty, therefore, is clearly without the authority of law. Consequently, the impugned order, which has sustained the non-speaking order of the Deputy Commissioner, cannot also be sustained. - AT
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• Supari Goods Classified Under Heading 0802 of Customs Tariff, Not Heading 2106 as Proposed by Applicant.

  Case-Laws - AAR : Classification of goods - goods namely, API supari, chikni supari, unflavoured supari, and flavoured supari - even flavoured supari merits classification under Heading 0802 of the Customs Tariff and not under Heading 2106 as argued by the applicant. Therefore, in respect of the products API supari, chikni supari, unflavoured supari, and flavoured supari, it is held that their correct classification is Heading 0802 of the First Schedule to the Customs Tariff Act, 1975 - AAR
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• Imported Betel Nut Products Not Classified as "Preparations"; General Rules of Interpretation Deemed Irrelevant by Authorities.

  Case-Laws - AAR : Classification of imported goods - preparation/product of betel nut commonly known as ‘Supari’ - API supari, Chikni supari, unflavoured supari, boiled supari and cutting supari - the goods covered by the application are clearly not “preparations of betel nuts”, the submission of the applicant for recourse to General Rules of Interpretation in the event of two sub-headings being equally applicable is not relevant. - AAR
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Indian Laws

• High Court Criticizes ICAI for Inadequate Inquiry, Demands Detailed Findings and Clear Reasons in Disciplinary Complaint.

  Case-Laws - HC : Disciplinary complaint / proceedings against the member of ICAI - it has to be construed that the complaint filed by the petitioner was not enquired into properly and by following the established principles of law. The nature of the allegations set out in the complaint by the petitioner, the evidence submitted as well as the statement made are not elaborately adjudicated or any findings are given by the Director Discipline in his enquiry report - reasons and the findings in respect of each issue or allegations made are necessary to form an opinion that the enquiry was conducted in a proper manner. - HC
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IBC

• Resolution Plan Rejected: Offer of Rs. 6.5 Crores Against Rs. 50 Crores Debt Deemed Inadequate by Creditors Committee.

  Case-Laws - AT : Approval of resolution plan - The learned Counsel for the RP has submitted before us that Appellant itself has submitted twice the Resolution Plan, which could not be approved - There being debt of more that ₹ 50 crores, the Resolution Plan, which was submitted by the Appellant was only for ₹ 6.5 crores, which did not find favour with the Committee of Creditors. In the facts, which have been brought on record, there are no substance in the submission of learned Counsel for the Appellant that Application under Section 9 by the Operational Creditor was not maintainable. - AT
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• Regulation 47 guides corporate debtor property auctions in liquidation, offering a flexible Model Timeline for efficient completion.

  Case-Laws - AT : Liquidation proceedings - Period of limitation - Auction of property of the corporate debtor - It is pertinent to mention that Liquidation Process Regulation 47 deals with the Model Timeline for Liquidation Process. Model Timeline is only a directory in nature. It cannot be considered a deadline. It is provided under Regulation as a guiding factor to complete the liquidation process in a time-bound manner. In exceptional circumstances, such a time limit can be extended. - AT
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Central Excise

• Court Rules Nail Enamel Production Qualifies for Area-Based Exemption Under Central Excise Act, Section 2(f)(iii.

  Case-Laws - AT : Area Based Exemption - manufacture taking place or not - A conjoint reading of the definition of manufacture in section 2(f) (iii) of the Excise Act and Chapter Note 5 of Chapter 33 of the First Schedule to the Excise Act and the aforesaid treatment adopted on the goods (colour solution) by the appellant would render the product marketable to the consumer as nail enamel and, therefore, the appellant would be covered by the exemption notification dated 10.06.2003 since the appellant has adopted such a treatment to the goods that rendered them marketable to the consumer. - AT
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• CENVAT Credit Dispute: Commissioner (Appeals) Decision Overturned; Respondent Benefited from Fake Transactions Despite No Active Role.

  Case-Laws - AT : CENVAT Credit - It is also difficult to accept the finding of the Commissioner (Appeals) that the respondent was not a party to the fake transactions. It is only the respondent who was to gain by adoption of such a mode and, therefore, the conclusion that even though only invoices were received by the respondent without the goods, the respondent had no role to play is perverse. - AT
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VAT

• Court Justifies Best Judgment Assessment Due to Flawed Accounting and Electricity Use in Jelly Production Case.

  Case-Laws - HC : Best judgement assessment - There appears to be divergents views insofar as the question as to whether the consumption of electricity can constitute the sole basis for making a best judgment assessment. However, in the present case, the best judgment assessment was not only necessitated by the survey report/case study on electricity consumption vis-a-vis production of jelly, but also the fact that the books of accounts maintained by the petitioner suffered from defects - Any best Judgment assessment is likely to be an over-estimate or an under-estimate, but that itself does not supply a reason or ground for interfering with the same. - HC
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