TMI Tax Updates - e-Newsletter
February 3, 2022
Case Laws in this Newsletter:
GST
Income Tax
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Jurisdiction - power of State authority to issue summons - violation of principle of separation of powers - It is not found that such powers are in any manner beyond the competence of legislature or opposed to any of the fundamental rights or other provisions of the Constitution of India. It is also recalled that Section 14C of the Central Excise Act and Section 108 of the Customs Act contain similar provisions authorizing the appropriate officer with the power to summon attendance of a witness for recording statement or for production of documents. The vires of the said section must be upheld. - HC
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GST:
Levy of GST - membership fee collected from members at the time of giving membership - annual subscription and annual games fee collected from members of club - principles of mutuality - the question whether profit motive is ousted or not, does not arise in this case at all - Both are liable to tax under CGST/SGST Act - AAR
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Income Tax:
Reopening of assessment u/s 147 - Unexplained bank account with Indusind bank - Revenue made a valiant attempt to justify the reasons and issuance of notice, but when he was confronted with these irrefutable facts, Mr. Walve had no option but to throw in the towel. - Notice quashed - HC
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Income Tax:
Rectification of mistake u/s 154 - Disallowance of provision for ex-gratia - CIT(A) has provided an opportunity to the assessing officer to examine the mistake committed by the DCIT, CPC Bangalore (Assessing Officer), hence there is no violation of provisions of Rule 46A of the Income Tax Rules. Besides, it should also be noted that powers of the CIT(A) are coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. - The assessee can object the arithmetical adjustments made by the assessing officer under section 143(1) of the Act by filing an appeal before ld CIT(A). - Revenue appeal dismissed - AT
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Income Tax:
Nature of income - Since the assessee admittedly offered the income in his return pursuant to notice u/s 148 of the Act, which has been accepted by the AO as such, in my considered opinion, the ld. CIT(A) was not justified in countenancing the action of AO in treating additional income as unexplained cash credit or unexplained investment attracting sections 68 or 69 of the Act and consequently charging higher rate of taxation. - AT
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Income Tax:
TDS u/s 195 - Disallowance of expenses u/s 40 (a) (ia) - as per DTAA with UAE business profits are taxable in the country of origin i.e. UAE as services were provided by the Company registered in UAE and no independent professional has provided services. Even otherwise tax involved was much low as per section 44RR on non-resident engaged in the business of providing services or facilities to be used in exploration of mineral oil only 10% income is taxable and tax thereon would be only 4% applicable on foreign companies. However, after obtaining certificate from Revenue authorities/CA no tax was payable due to DTAA and foreign payments were made only thereafter. - AT
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Income Tax:
Levy of penalty u/s 271(1)(c) - The assessee clearly had a bonafide explanation for not adding the unpaid tax liabilities to its income since it was contesting the very levy of the same before the concerned department. It may be a fit case of making addition of the unpaid liabilities to the income of the assessee. But as far as the levy of penalty is concerned the explanation for not adding back the unpaid liabilities to its income cannot be outrightly rejected as not being bonafide. - No penalty - AT
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Customs:
SWS on goods exempted from basic and other customs duties/cesses - the amount of Social Welfare Surcharge payable would be ‘Nil’ in cases where the aggregate of customs duties (which form the base for computation of SWS) is zero even though SWS has not been exempted. - Circular
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Bill:
Budget 2022-23 - AMENDMENTS IN THE FIRST SCHEDULE TO THE CUSTOMS TARIFF ACT, 1975
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Bill:
Budget 2022-23 - PRUNING AND REVIEW OF CUSTOMS DUTY CONCESSIONS/ EXEMPTIONS - A detailed statement
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Bill:
Budget 2022-23 - PROPOSALS INVOLVING CHANGES IN EFFECTIVE BASIC CUSTOMS DUTY RATES IN RESPECT OF PHASED MANUFACTURING PROGRAM [PMP] WITH RESPECT TO SPECIFIC ELECTRONIC GOODS
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Indian Laws:
Dishonor of Cheque - account classified as NPA - merely there is a dispute with regard to the payment of interest and immovable properties have already been mortgaged and proceedings under the SARFAESI Act has also been initiated, those proceedings is no way relevant to quash the proceedings under section 138 of the Negotiable Instruments Act and this petition filed to quash the proceedings is liable to be dismissed. - HC
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IBC:
Initiation of CIRP - It is also an admitted fact that there are no documents/records to prove that the Appellant is a Financial Creditor. The Appellant stated that the Audited Balance Sheets and other documents mentioned in para 8 of Part-V of the Application prove beyond doubt that two ingredients of IBC Application i.e. Debt and Default are fully stratified. Meaning thereby, there was no Financial Debt defined under Section 5(8) of IBC - the audited Balance Sheets also do not prove the existence of financial debt and default defined under Section 3(12) of IBC. - Application was rightly rejected by the NCLT - AT
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IBC:
Liquidation of Corporate Debtor - Section 33 of IBC - RP was deliberately keeping the relevant information away from the Appellant and wanted Liquidation order to be passed without even bringing into the notice of the CoC or the Adjudicating Authority about the claim of the Appellant. We are thus, satisfied that material irregularity was committed in the entire process leading to Liquidation, which is sufficient to set aside the Liquidation order. - AT
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IBC:
Liquidation of Corporate Debtor - No records reflects that the Appellant has challenged his cancellation of DIN with any appropriate Authority. No board meeting in which he has participated since cessation of his vacation of office after DIN cancellation were produced before us. Hence, the Appellant is not part of the Suspended Board of Directors and he cannot challenge the decision of the CoC as Hon’ble Apex Court has made amply clear that the Commercial Wisdom of the CoC is non- justiciable. - AT
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IBC:
Seeking withdrawal of main Insolvency and Bankruptcy Application - In the instant case on hand, the Committee of Creditors had voted under Section 12A of the Code without even getting a single sum from the promoter of the Corporate Debtor, in respect of the withdrawal of the CIRP pertaining to the Corporate Debtor. As a matter of fact, the Adjudicating Authority had in the impugned order had categorically observed that the ‘Settlement Proposal’ is not a Settlement Simpliciter but it is a business restructuring plan. - based on ambiguity of the terms of the settlement NCLT cannot order for withdrawal of CIRP - AT
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PMLA:
Money Laundering - Seeking grant of anticipatory bail - Hawala transactions - the detailed investigation is required to be conducted to know about the officials of the Revenue Department and other persons who had helped the petitioner in disposing of the said properties and that the custodial interrogation of the petitioner would be required for the proper investigation of the present case. - The petitioner does not deserve the relief of anticipatory bail and the petition in hand, being sans any merit, deserves dismissal - HC
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Service Tax:
Levy of Service tax - Auctioneers’ Service - The assistance rendered by the appellants to their member farmers in auctioning their agricultural produce does not tantamount to rendering any service classifiable under Auctioneers’ Service. - AT
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Central Excise:
CENVAT Credit - capital goods - the appellants were paying duty @ 4% on the goods manufactured by using the very same capital goods. There is no room for doubt that the capital goods were not exclusively used for manufacture of exempted goods. - The disallowance of credit cannot be justified - AT
TMI Short Notes
Articles
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (2) TMI 82
Levy of GST - membership fee collected from members at the time of giving membership - annual subscription and annual games fee collected from members of club - principles of mutuality - HELD THAT:- In view of the amended Section 7 of the CGST Act, 2017, it is found that the applicant club and its members are distinct persons and the fees received by the applicant, from its members are nothing but consideration received for supply of goods/services as a separate entity. The principles of mutuality, which has been cited by the applicant to support its contention that it is not rendering any supply to its members and GST is not leviable on the fees collected from its members, is not applicable in view of the amended Section 7 of the CGST Act, 2017 and therefore, the applicant has to pay GST on the said amounts received from its members.
The words 'the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration' cover all types of activities/transactions of the present applicant. There is no list or limit or any restriction prescribed in this respect in this amendment. The fees, collected by the applicant, is nothing but the “consideration” for “supply of services/goods” and is covered by the scope of the term “business”. The club and the member are two distinct persons. The principle of mutuality has no application after this amendment. All the other case laws relied upon, also do not provide any guidance on the legal situation, particularly after the amendment - undertaking of a commercial activity, whether or not the same is for pecuniary benefit (used in clause (a) above), implies that whether or not such activity yields the benefit which can be quantifiable in monetary terms or not. Hence the intent behind the said clause (a) is to even cover the commercial transactions which are in the nature of barter or exchange wherein the benefit is in non-monetary terms.
Thus, the interpretation of the applicant that 'pecuniary benefit' means 'profit' is not correct. Further, Sub-clause (e) is a specific clause made for associations, clubs and societies and the same does not talk about any profit motive to be attributed to any club for the activities to be considered as 'business'. The said clause only speaks of Provision by a club, association, society, or any such body of the facilities or benefits to its members for a subscription or any other consideration. Therefore the question whether profit motive is ousted or not, does not arise in this case at all.
Notification No. 39/2021-Central Tax dated: 21st December, 2021 has been issued whereby the Central Government has appointed the 1st day of January, 2022, as the date on which the provisions of sections 108, 109 and 113 to 122 of the said Act shall come into force - the relevant amendment has been notified by the Central Government.
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2022 (2) TMI 84
Jurisdiction - power of State authority to issue summons - violation of principle of separation of powers - constitutionality of Section 70 of the CGST Act - HELD THAT:- As is well known, merging several taxing statutes the Central as well as State legislatures have framed GST laws. Like other taxing statues these Acts also have charging provisions, the machinery provisions as well as provisions for tax collection and provisions for arresting tax evasions. Chapter XIV contained in the RGST Act pertains to inspection, search, seizure and arrest. Section 67 contained in the said chapter gives power of inspection and search and seizure to the proper officer not below the rank of joint Commissioner who under certain circumstances can exercise such powers.
The provision of section 70, thus while empowering the proper officer to summon a person to give evidence or to produce documents, controls such exercise of powers by providing that the summons may be issued where a proper officer considers it necessary that such person is required to give evidence or to produce certain documents. These powers are not thus unguided or uncanalised. Further, such powers are to be exercised in the same manner as would be exercisable by a civil court under the Code of Civil Procedure. Order 5 of Code of Civil Procedure pertains to issue and service of summons under the C.P.C. - powers under sub-Section (1) of Section 70 thus would be exercisable in the manner provided therein. In order to ensure that the information that a person so summoned provides, carries a certain sanctity, Sub-section (2) of Section 70 provides that every such enquiry under sub-Section (1) would be deemed to be judicial proceeding within the meaning of Section 193 and 228 of IPC.
It is not found that such powers are in any manner beyond the competence of legislature or opposed to any of the fundamental rights or other provisions of the Constitution of India. It is also recalled that Section 14C of the Central Excise Act and Section 108 of the Customs Act contain similar provisions authorizing the appropriate officer with the power to summon attendance of a witness for recording statement or for production of documents. The vires of the said section must be upheld.
Petition dismissed.
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2022 (2) TMI 83
Maintainability of petition - availability of alternate remedy - exparte order - fair opportunity of hearing not provided - violation of principles of natural justice - time limitation - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences.
Petition disposed off.
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Income Tax
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2022 (2) TMI 80
Rectification of mistake u/s 154 - Disallowance of provision for ex-gratia - increased the income under the head “income from Other Sources” by the same amount - CIT deleted the addition - HELD THAT:- We noticed that CIT(A) has provided an opportunity to the assessing officer to examine the mistake committed by the DCIT, CPC Bangalore (Assessing Officer), hence there is no violation of provisions of Rule 46A of the Income Tax Rules. Besides, it should also be noted that powers of the CIT(A) are coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do.
Hence, we do not agree with ld DR to the effect that there is violation of provisions of Rule 46A of the Income Tax Rules. The second contention raised by the ld DR is that such type of typographical error can be rectified under section 154 of the Act. We note that clause (a) of section 246(1) provides that assessee can file appeal against the order passed by assessing officer under section 143(1) of the Act before CIT(A). The assessee can object the arithmetical adjustments made by the assessing officer under section 143(1) of the Act by filing an appeal before ld CIT(A).
Based on this factual position, as narrated above, we do not find any infirmity in the order of ld. CIT(A). - Decided against revenue.
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2022 (2) TMI 79
Nature of income - Cash deposit - income was declared in the return in response to notice u/s 147/148 - addition u/s 68 AND unexplained investment u/s 69 - Assessee filled return pursuant to notice u/s 148 and suo motu offered additional income - HELD THAT:- The assessee earlier filed revised return, which was declared as non est. Thereafter, the assessee again filed a return pursuant to notice u/s 148 and suo motu offered additional income. Once the income was offered in the return, the same could not have been treated as cash credit u/s 68 or unexplained investment u/s 69 - The position would have been different if the assessee had not offered additional income in his return and the AO had made the addition. That case would have justified roping in of sections 68 or 69 etc.
Since the assessee admittedly offered the income in his return pursuant to notice u/s 148 of the Act, which has been accepted by the AO as such, in my considered opinion, the ld. CIT(A) was not justified in countenancing the action of AO in treating additional income as unexplained cash credit or unexplained investment attracting sections 68 or 69 of the Act and consequently charging higher rate of taxation. Therefore, set aside the impugned order and order to delete the addition. - Decided in favour of assessee.
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2022 (2) TMI 78
Validity of order u/s 201(1)/201(1A) - period of limitation - HELD THAT:- We consider that the order u/s 201(1) of the Act ought to have been passed by 31st March, 2014 i.e within 2 years from the end of the financial year in which the statement was filed however, the impuged order has been passed to 26th March, 2018, therefore, the limitation period as per the pre-amended provision had already expired, therefore, we do not find any infirmity in the decision of the ld. CIT(A). Accordingly, the appeal of the revenue stand dismissed.
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2022 (2) TMI 77
Addition representing cash deposit in bank account - unexplained investment u/s 69 - HELD THAT- Assessee filed certain books of accounts. It is worth mentioning that the assessee filed his return of income by offering income u/s 44AD and contending that no books were maintained. The entries in Cash Book prepared and submitted by the assessee were found by the AO to be incorrect for the detailed reasons given in the assessment order. AR could not improve the case of assessee before the Tribunal and candidly accepted that there was no further evidence. Under these circumstances, addition has been rightly sustained in the first appeal.
Addition of unexplained credits - assessee could not justify creditworthiness of the alleged loan purportedly taken from his wife, despite repeated opportunities given to explain the sources of her income - HELD THAT:- Having heard the rival submissions in Virtual Court and gone through the relevant material on record, it is seen that the assessee recorded credit of ₹ 19 lakhs in the name of his wife but failed to substantiate creditworthiness of loan creditor before the AO. What to talk of creditworthiness, even no source of income was shown. The position remains the same before the Tribunal as well. Under these circumstances, we are satisfied with the findings of the CIT(A) in sustaining the addition. The impugned order is, ergo, upheld.
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2022 (2) TMI 76
Disallowance of the employee’s contribution to the Employee Provident Fund and Employee State Insurance Fund on account of its delayed deposit with the prescribed authority u/s. 36(1)(va) - HELD THAT:- The view expressed by the Tribunal is in fact in agreement with that projected by the Board per its Circular (No. 22/2015, dtd. 17/12/2015), as also that canvassed per the impugned order with reference to the cited decisions, both explaining, as did the Explanatory Notes on the insertion of s. 36(1)(va) on the statute, the object of the said provision. It is this view, which in fact, as also noticed by the Tribunal, represented the uniform view across all the Hon’ble Courts prior to the deletion of the second proviso to s. 43B by Finance Act, 2003, w.e.f. 01/4/2004, which the Explanations to ss. 36(1)(va) and 43B by Finance Act, 2021 seek to statutorily clarify in view of the conflict of judicial opinion, passing thus the test of retrospectivity, even as unequivocally expressed per the unambiguous language thereof. The Explanations under reference were therefore clarificatory and, thus, retrospective.
The said Explanations, the Tribunal continued, had however been, as clear from a reference to the Notes on the Clauses to, and the Memorandum explaining the Provisions of, the Finance Bill, 2021, reproducing the same, proposed as prospective amendments. The amendments by way of Explanation 5 to s. 43B and Explanation 2 to s. 36(1)(va), it concluded, are to therefore take effect only from AY 2021-22, and which view is unmistakable on a plain reading of the said documents.
The impugned order is completely silent on, and there is no reference therein either to the said Explanations or if the same are retrospective, concerning itself only with the merits of the impugned additions, impermissible u/s. 143(1) in view of the conflict of judicial opinion and the absence of any decision by the Hon’ble jurisdictional High Court; none being brought to my notice by the parties, or otherwise found. No counter in this regard was also raised by Sh. Halder before me.
There is, in view of the foregoing, no question of the said Explanations being read as retrospective, so as to apply for the relevant year, sustaining the impugned additions, which therefore fail. This is, however, subject to any decision/s by the Hon’ble jurisdictional High Court, which would, where so, hold, even justifying a rectification u/s. 154/254(2), even where rendered after the date of the order sought to be rectified (Asst. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008 (9) TMI 11 - SUPREME COURT]; CIT v. Aruna Luthra [2001 (8) TMI 84 - PUNJAB AND HARYANA HIGH COURT] No such decision has been found, or otherwise pointed out by the parties, as was the case before the Tribunal in Nikhil Mohine [2021 (11) TMI 927 - ITAT JABALPUR] Any such decision, even if discovered later, may operate to amend this order, or the order giving appeal effect thereto, to bring it in conformity or agreement with the said decision/s, of course, after allowing a fair opportunity of hearing to the assessee. - Decided in favour of assessee.
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2022 (2) TMI 75
Late deposit of ESI & PF - disallowance u/s 36(1)(va) - AR has pointed to the statement of the deposits made during the year and from that table he has pointed out that though there has been delay in deposit of the PF/ESIC Contributions, but, all the amounts have been deposited with the appropriate authorities before filing of return of income by the assessee - HELD THAT:- We find that the various Benches of the Tribunal at Delhi and other Tribunal have held that the delayed deposits of PF & ESIC before the date of filing of return of income is an allowable expenditure and for which reliance was placed on the decision of Hon’ble Delhi High Court in the case of AIMIL Ltd [2009 (12) TMI 38 - DELHI HIGH COURT]
As far as reliance by Learned DR on the amendment brought out by Finance Act 2021 is concerned, “notes on clauses” to the Finance Bill 2021 clearly states that the amendment will take effect from 1st April 2021 and will apply in relation to the assessment year 2021-22 and subsequent assessment year. In such a situation, we are of the view that since the assessment year under consideration is A.Y. 2018-19, the amendment does not apply to the assessment year under consideration - no disallowance was warranted in the present case. We, therefore direct the AO to delete the addition. Thus the assessee’s ground is allowed.
Claim of Education Cess as an allowable expenditure - HELD THAT:- As respectfully following the decision of the Coordinate Bench of the Tribunal in the case of EXL Services.com India Pvt. Ltd., New Delhi vs., ACIT, Large Taxpayer Unit, Circle – 1, New Delhi (2021 (9) TMI 361 - ITAT DELHI), direct the AO to allow the claim of deduction. Thus the ground of assessee is allowed.
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2022 (2) TMI 74
Disallowance on account of interest free loans to its subsidiary companies - CIT-A delete the addition - HELD THAT:- As decided in own case [2018 (8) TMI 1136 - ITAT DELHI] findings given by the learned CIT (Appeals) that the interest free funds available with the company were sufficient to advance interest free advance could not be controverted by the learned Departmental Representative.if the interest free funds are sufficient to make the investment the presumption would arise that investment would be out of interest free funds generated or available with the company if the funds are both interest free and interest bearing funds. It is also an admitted fact that the assessee company had already advanced ₹ 21,17,41,988.5 prior to taking loan for purchase of vessels and assessee company has advanced interest free loan of ₹ 5,21,27,291/- during the year whereas it has earned profit of ₹ 38,97,52,337/- during the year - Therefore no infirmity in the order of the Ld. CIT(A) in deleting the disallowance of notional interest - Decided in favour of assessee.
Depreciation claimed being 40% on Aircraft which was not in use - HELD THAT:- As decided in own case [2018 (5) TMI 1761 - ITAT DELHI] allowing depreciation on the aircraft which is ready for use, but has not earned any income during the year. The ground raised by the Revenue is accordingly dismissed - Decided in favour of assessee.
Disallowance of unpaid operational charges to ONGC - HELD THAT:- As decided in own case [2018 (8) TMI 1136 - ITAT DELHI] CIT(A) in the instant case while deleting the addition has followed his order for the A.Y. 2011-12 and the Tribunal has restored the issue to the file of the A.O. for adjudication of the issue afresh. Therefore, we deem it proper to restore this issue to the file of the A.O. with a direction to adjudicate the issue in the light of direction of the Tribunal in assessee’s own case for the A.Y. 2011-12. Grounds of appeal number.5 raised by the Revenue is accordingly allowed for statistical purposes.
TDS u/s 195 - Disallowance of expenses u/s 40 (a) (ia) - assessee has not deducted TDS on payment made to M/s. Noble Denton Middle East as per the provisions of Section 9(1)(vii) - CIT-A deleted the addition - HELD THAT:- We find merit in the submissions of the Learned Counsel for the Assessee that as per DTAA with UAE business profits are taxable in the country of origin i.e. UAE as services were provided by the Company registered in UAE and no independent professional has provided services. Even otherwise tax involved was much low as per section 44RR on non-resident engaged in the business of providing services or facilities to be used in exploration of mineral oil only 10% income is taxable and tax thereon would be only 4% applicable on foreign companies. However, after obtaining certificate from Revenue authorities/CA no tax was payable due to DTAA and foreign payments were made only thereafter.
CIT(A) while deleting the addition has followed his order for the A.Y. 2011-12 and no appeal has been filed by the Revenue on this issue before the Tribunal although Revenue had filed an appeal against other issues where the Ld. CIT(A) had given relief to the assessee. Under these circumstances and in view of the detailed discussion made by the Ld. CIT(A) on this issue, we do not find any infirmity in his order and the same is, therefore, upheld. Grounds of appeal number.6 raised by the Revenue is dismissed.
Disallowing the claim of exemption in tonnage tax system - HELD THAT:- As decided in own case [2018 (5) TMI 1761 - ITAT DELHI] we do not find any infirmity in the order of the Ld. CIT(A) in deleting the disallowance made by the A.O. by disallowing the claim of exemption under tonnage tax system. Grounds of Revenue on this issue is accordingly dismissed.
Disallowance in computation of income under section 115JB - HELD THAT:- Since we have already upheld the order of the Ld. CIT(A) in deleting the disallowance made by the A.O. and since the provisions of Section 115JB of the I.T. Act, 1961 clearly provides that the profit derived by the tonnage tax company shall be excluded from the book profits of the company for the purpose of Section 115JB of the I.T. Act, 1961, therefore, we do not find any infirmity in the order of the Ld. CIT(A) in directing the A.O. to exclude the income derived from shipping activities from the computation of book profits. Accordingly, grounds of appeal raised by the Revenue on this issue is dismissed.
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2022 (2) TMI 73
Deduction u/s 54F denied - CIT-A deleted the addition - maintainability of appeal - AO was of the view that the assessee did not fulfill the condition as laid down for allowance of exemption under section 54F of the Act. As per the AO, the assessee had received full consideration from NDTV ltd. on 21.10.2011 and till date the assessee had not constructed or taken possession of the new property which is beyond 3 years - HELD THAT:- We find that tax effect involved is lower than ₹ 50 Lacs as prescribed by CBDT Circular No.17/2019 dated 08.08.2019.. Therefore, the appeal deserves to be dismissed being not maintainable.
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2022 (2) TMI 72
Additions on account of employees contribution to PF u/s 36(1)(va) - HELD THAT:- Admittedly the issue has been decided against the assessee by the Hon’ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT]
We do not find any reason which could lead us to pass a conditional order depending on the situation would arise out of the disposal in the matter of GSRTC (supra) pending before the Hon’ble Apex Court. According to us such liberty of making an application is not required to be given by us for the particular reason that at the present moment the issue has already been decided by the Jurisdictional High Court against the assessee - Decided against assessee.
Addition on deferred revenue expenditure - AO was of the opinion that the assessee has not given any justification for such claim of the expenses under Section 35D of the Act and therefore, the same was not allowable - HELD THAT:- As relying on assessee’s own case for A.Y. 2010-11 [2021 (8) TMI 365 - ITAT AHMEDABAD] we allow this ground of appeal by directing the Ld. AO to verify the same in the light of the decision given by the Coordinate Bench in the A.Y. 2010-11and to allow the claim accordingly upon giving a reasonable opportunity of being heard to the assessee. This ground of appeal is, therefore, allowed for statistical purposes.
TDS u/s 195 - Addition in respect of the assessee’s foreign Commission payment - HELD THAT:- In the absence of any changed facts and circumstances of the matter in assessee’s own case for A.Y. 2010-11 [2021 (8) TMI 365 - ITAT AHMEDABAD] we set-aside the issue to the file of the Ld. AO to verify the details of services obtained from the commission agents by the assessee and to pass order accordingly upon giving an opportunity of being heard to the assessee and upon considering the evidence which the assessee may choose to file at the time of hearing of the matter. Thus, this ground of appeal is allowed for statistical purposes.
Addition u/s 14A - Disallowing applied Rule 8D being interest and administrative expenditure @ 0.5% of the average investments - CIT-A deleted the addition - HELD THAT:- Factually the assessee has not claimed for exemption of any income for the payment of tax and of his own made disallowance. Hence, further disallowance is not justified which has rightly been taken care by the Ld. CIT(A) without any ambiguity so as to warrant interference. Hence, the ground of appeal filed by the Revenue is found to be devoid of any merit and, thus, dismissed.
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2022 (2) TMI 71
Suppression of income - unpaid service tax liability u/s 43B - information received from Central Excise and Service Tax Dept - HELD THAT:- CIT(A) noted that the notice issued in the name of the assessee company by the Central Excise and Customs and Service Tax Department dt.20/11/2009 , which was the basis of reopening the case and making the impugned additions was also issued to Mr. Keshav Alwa, director of the assessee company and proprietor of the concern going by the same name as the assessee. He also noted from the same that the amount of service tax stated to be paid therein by the assessee company, was actually paid in the proprietorship concern. Copies of Form No.36, reflecting the said payment in the proprietorship concern, were filed before and perused by the Ld.CIT(A). Also the proprietor, Sh Keshav Alwa, had confirmed on oath to the CIT(A) the fact that the turnover of ₹ 5.55 crores, mentioned in the notice issued to the assessee company, pertained to his concern and stood reflected in the books also.
On the basis of the aforestated facts, the Ld. CIT(A) concluded that there was no suppression of sale on the part of the assessee Company and that it actually related to the proprietorship concern and accordingly directed that the issue of addition on account of suppressed sales alongwith that of unpaid service tax liability be examined in the case of the proprietorship concern.
None of the findings of fact by the CIT(A) have been controverted by the Ld. Departmental Representative before us. In view of the same, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition made of profits from suppressed of sales and that on account of unpaid service tax liability u/s 43B.
Levy of penalty u/s 271(1)(c) - It is a fact on record the both the unpaid liabilities had been reflected in the respective columns of the tax audit report. In fact the AO had picked them up from the tax audit report itself for making addition in quantum proceedings, which fact finds mention in the assessment order.
We find that the assessee had stated that the outstanding demand related to a contested liability the appeal against which was pending at higher level. The assessee had stated that the liability had been fixed on the assessee by the Service tax department holding that it was not entitled to 50% abatement on tea and snacks, which the assessee was contesting in appeal. The assessee clearly had a bonafide explanation for not adding the unpaid tax liabilities to its income since it was contesting the very levy of the same before the concerned department. It may be a fit case of making addition of the unpaid liabilities to the income of the assessee. But as far as the levy of penalty is concerned the explanation for not adding back the unpaid liabilities to its income cannot be outrightly rejected as not being bonafide.
What emerges therefore is that all particulars relating to income were disclosed by the assessee, as is evident, in the tax audit report itself reflecting the impugned unpaid tax liabilities. Further Explanation 1 to section 271(1)(c) of the Act deems concealment of income when ,with respect to a fact material to the computation of income, the explanation of the assessee is either false or not bonafide and unsubstantiated. In the present case, we find, the explanation of the assessee for not adding back the unpaid liabilities to its income as bonafide, since they were stated to be contested with the concerned departments. - Decided in favour of assessee.
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2022 (2) TMI 81
Reopening of assessment u/s 147 - Unexplained bank account with Indusind bank - HELD THAT:- As on identical reasons raised for Assessment Year 2012- 13 petitioner’s explanation has been accepted and no addition made, certainly on the same ground, we wonder how an allegation of escapement of income can be made for the subsequent Assessment Years. In our view, the reasons have been recorded without application of mind.
There is another Writ Petition for Assessment Year 2014- 15, in which also the reasons recorded for escapement of income is identical to Assessment Year 2015-16 and Assessment Year 2012-13.
Revenue made a valiant attempt to justify the reasons and issuance of notice, but when he was confronted with these irrefutable facts, Mr. Walve had no option but to throw in the towel. - Decided in favour of assessee.
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2022 (2) TMI 70
Transfer pricing adjustment to CSD and ITes segment - HELD THAT:- Both the parties agreed that there is no change in functional profile of the assessee and nature of transactions in the year under consideration as compared to AY 2013-14, therefore following the finding of the Tribunal [2021 (7) TMI 1308 - ITAT DELHI] we set aside the finding of lower authorities and remit the matter back to the Learned AO/TPO for determining arm’s-length price of international transaction of Contract Software Development services (CSD) and ITes in segregated manner complying the direction of the Tribunal in assessment year 2013-14. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds No. 3 to 3.9 of the appeal are accordingly allowed for statistical purposes.
TP adjustment of interest on receivables - HELD THAT:- The addition in dispute needs to be deleted. However, we find that benchmarking of the main transaction has already been restored to the file of the learned AO/TPO, therefore, we restore this issue of benchmarking of interest on receivables also to the file of the Ld AO/TPO, who shall follow the decision in the case of Kusum Healthcare Private Limited [2015 (4) TMI 180 - ITAT DELHI] and ensure that, if working capital adjustment has been allowed to the assessee, no further addition is required for interest on outstanding receivables. The assessee shall be provided adequate opportunity of being heard on the issue in dispute. The ground Nos. 4 to 4.4 of the appeal are accordingly allowed for statistical purposes.
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Corporate Laws
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2022 (2) TMI 69
Sanction of scheme of Amalgamation - Sections 230-232 of the Companies Act, the Companies (Compromises Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- Various directions with regard to holding, convening and dispensing with various meetings issued - direction with regard to issuance of various notices also issued.
Application allowed - the scheme is approved.
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Insolvency & Bankruptcy
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2022 (2) TMI 68
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - recovery of an amount deposited towards the promoter’s contribution - existence of debt and dispute or not - HELD THAT:- The Appellant has filed incomplete Application without information provided under Clause 3, 5 and 6 of Part I and Clause 5, 6 and 7 of Part V. Further information under Clause 1 of Part IV is wrong as no amount of debt has been granted. Even otherwise as per statement at page No. 59 & 60 of the Appeal, the total amount deposited is stated to be ₹ 3.85 Crores and not ₹ 1.95 Crore which is mentioned at page 43 of the Appeal. No information about workings for computation of amount and days of default in tabular form in Clause 2 of Part IV. No document specified under rule 3(1)(d) of IBC (Application to Adjudicating Authority) Rules, 2016 and Regulation 2A and 8(2) of IBBI Regulations 2016 to prove the existence of financial debt, the amount and date of default.
It is also an admitted fact that no evidence/records have been placed to satisfy the three essential ingredients namely a) Disbursal of loan amount. b) Such disbursal was for a consideration for time value of money. c) A default has arisen either in repayment of whole or in part. No mandatory information/ documents/ evidence required under Clause 3 to 8 of Part-V of Form-1 have been placed. No documents/evidence were placed to prove that the Respondent Company borrowed the alleged unsecured loan from the Appellant.
It is also an admitted fact that there are no documents/records to prove that the Appellant is a Financial Creditor. The Appellant stated that the Audited Balance Sheets and other documents mentioned in para 8 of Part-V of the Application prove beyond doubt that two ingredients of IBC Application i.e. Debt and Default are fully stratified. Meaning thereby, there was no Financial Debt defined under Section 5(8) of IBC - the audited Balance Sheets also do not prove the existence of financial debt and default defined under Section 3(12) of IBC. These Balance Sheets do not prove that the whole loan or its instalment when became due and payable and the same is/are not repaid.
There is no ‘debt’ and ‘default’ proved by the Appellant in the instant Appeal. Thus, there is no illegality committed by the Ld. Adjudicating Authority while passing the impugned order - appeal dismissed.
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2022 (2) TMI 67
Liquidation of Corporate Debtor - Section 33 of IBC - HELD THAT:- The Appeal against order under Section 33 can be entertained only on the grounds of material irregularity or fraud committed in relation to such a liquidation order. The learned Counsel for the Appellant has pressed this Appeal on both the grounds that is ground of material irregularity and fraud. The submission is that entire CIRP was result of collusion between the Corporate Debtor, Financial Creditor as well as IRP/RP.
When RP himself on 17.02.2021 stated that he will file the List of Creditors before NCLT, Mumbai bench, it was his duty to file the said List of Creditors (Version 3.0), which was relevant and material for the process. Admittedly, NCLT reserved the order on 1st January, 2020 and the same was pronounced only on 11th August, 2020. There was sufficient time with RP to inform Adjudicating Authority about the developments - RP was deliberately keeping the relevant information away from the Appellant and wanted Liquidation order to be passed without even bringing into the notice of the CoC or the Adjudicating Authority about the claim of the Appellant. We are thus, satisfied that material irregularity was committed in the entire process leading to Liquidation, which is sufficient to set aside the Liquidation order.
It is not necessary to record any finding with respect to allegations, which are covered by Sections 65 and 69 of the Code and it is for the Adjudicating Authority to consider such issues and take an appropriate decision and if necessary, take follow-up action.
Sufficient grounds have been made in this Appeal as specified by Section 61, sub-section (4) for allowing this Appeal - Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 66
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - demand notice was not served within time - HELD THAT:- It is very much clear that receipt of demand notice by the CD is a must. In the present case, the demand notice has not received by the CD - There also exists some disputes with respect to poor quality of packing materials supplied by the OC to the CD and the CD has visited the godown for inspection and observed the discrepancies in the inner packing carton and outer packing carton supplied by the OC. CD has even requested to replace the material which has not been done by OC.
In view of the aforesaid facts and circumstances the case, there seems that the OC/Appellant wants to build up a pressure for releasing the payment. However, the provisions of the Code cannot be applied from chasing of payment as held by the Hon’ble Supreme Court in TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED [2018 (10) TMI 1337 - SUPREME COURT] has already held that IBC is not intended to be a substitute to a recovery forum and also laid down that whenever there is existence of real dispute, the IBC provisions cannot be invoked - All these reflect that the delivery of demand notice is a must for any further action under Section 9 of the Code.
There are no infirmity in the impugned order of the Adjudicating authority - appeal dismissed.
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2022 (2) TMI 65
Liquidation of Corporate Debtor - Appellant was disallowed by Resolution Professional (RP), to participate in the Committee of Creditors (CoC) meeting of the Corporate Debtor (CD) - HELD THAT:- The RP has tried twice for initiation of ‘Expression of Interest’ (EOI) process and at the first stage, he received two EOIs from the ‘Prospective Resolution Applicants’ who were only interested in the plant premises of the CD. However, it was not approved by the CoC and CoC decided again in the 6th CoC meeting for fresh EOI and the same were also published in Newspapers. However, no EOIs were received by the RP then the members of the CoC in its 8th meetings of CoC resolved with 100% majority for Liquidation of the CD on 08.03.2021.
As far as Section 24(3)(b) of the Code is concerned, it is very much clear that the RP is to give notice for each meeting to the CoC members of the ‘Suspended Board of Directors’ and so is the case with ‘Chapter-VI of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations 2016’. Here the determining factor is that the Appellant was Director of the CD till 01.11.2016 and same was much prior to initiation of CIRP on 11.09.2020 - The DIN of the Appellant has been disqualified by the Registrar of Companies (ROC) in accordance with provision of Section 164(2) of the Companies Act, 2013 vide order dated 21.06.2017 and hence, the Appellant has already vacated the office of the Director in accordance with section 167 of the Companies Act, 2013. The Appellant was not part of the suspended Board of Directors of the CD.
No records reflects that the Appellant has challenged his cancellation of DIN with any appropriate Authority. No board meeting in which he has participated since cessation of his vacation of office after DIN cancellation were produced before us. Hence, the Appellant is not part of the Suspended Board of Directors and he cannot challenge the decision of the CoC as Hon’ble Apex Court has made amply clear that the Commercial Wisdom of the CoC is non- justiciable.
Appeal dismissed.
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2022 (2) TMI 64
Seeking withdrawal of main Insolvency and Bankruptcy Application - seeking to consider the settlement proposal initially circulated by the Appellant, with the creditor - Section 12A of IBC - HELD THAT:- Considering the fact that the COC was in the last stage of finalising the Resolution Plan of RPIFL, the Committee of Creditors opined that unless the CIRP period was extended (the same would come to an end on 29.02.2020) and that they might not provide them an opportunity to consider and vote on the Resolution Plan of RPIFL. Hence the Committee of Creditors, in its Meeting dated 25.02.2020 adjourned to 26.02.2020, with 98.32% vote had authorised the Resolution Professional to file an Application before the Tribunal seeking exclusion of a period of 30 days in CIRP and that the application was filed on 28.02.2020. The Tribunal through an exclusion order dated 1303.2020 but delivered on 16.03.2020 had excluded a period of 30 days from CIRP time frame of the Corporate Debtor.
Section 12A of the I&B Code applies to an application for Insolvency Resolution which was admitted by the ‘Adjudicating Authority’ and all the more, when there is no challenge to the admission of the petition/application - Section 12A of the Code came into effect on 06.06.2018. Rule 8 of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 is quite relevant for withdrawal of an application under Section 12A of the Code. Besides this, Regulation 30A of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is also relevant for withdrawal of application under Section 12A of the Code.
It is well settled that a Resolution Plan is not an ‘Auction/Sale/Recovery/Liquidation’. A Resolution Applicant as per Section 30 of the Code is to scrutinise the Resolution Plan and to find out whether it fulfils the requirements of Section 30(2) of the Code. If the Plan satisfies the requirements of Law, then the same is to be placed before the Committee of Creditors for its approval as per Section 30(3) of the Code and this can be approved by the Committee of Creditors as per requirement of Section 30(4) of the Code. If the Plan is approved by the Committee of Creditors, the Resolution Plan is to be placed before the ‘Adjudicating Authority’ as per Section 31 of the Code and the said Authority is to apply his thinking judicial mind to the Resolution Plan so furnished, and on being satisfied with the Plan that it fulfils the ingredients or does not meet the ingredients or Section 30 of the Code may either accord approval to the Plan or negative the same - In the instant case on hand, the Committee of Creditors had voted under Section 12A of the Code without even getting a single sum from the promoter of the Corporate Debtor, in respect of the withdrawal of the CIRP pertaining to the Corporate Debtor. As a matter of fact, the Adjudicating Authority had in the impugned order had categorically observed that the ‘Settlement Proposal’ is not a Settlement Simpliciter but it is a business restructuring plan.
This Tribunal comes to the consequent conclusion that the Settlement Proposal, as projected by the Corporate Debtor and the approval of the withdrawal of the CIRP pertaining to the Corporate Debtor by the Committee of Creditors in its 17th Meeting dated 01.04.2021 was not quite in tune with the relevant provisions of the I&B Code, 2016 and to put it precisely, it is out of bounds of the Insolvency & Bankruptcy Code, 2016 - the observations and the conclusion arrived at by the ‘Adjudicating Authority’ to the effect that the projected settlement proposal plan of the promotor of the Corporate Debtor is not a settlement simpliciter as envisaged under Section 12-A of the Code, 2016 rather it is a ‘business restructuring plan’ and further that no finality was reached between the Promotor of the Corporate Debtor and Committee of Creditors as per Clause –2 of Chapter VIII of the Settlement proposal and hence, based on ambiguity of the terms of the settlement it cannot order for withdrawal of CIRP are free from legal infirmities.
Appeal dismissed.
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PMLA
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2022 (2) TMI 63
Money Laundering - complete prohibition against the transposition of the accused from judicial to police custody or not - extension of remand for further 7 days - Section 167 of the Cr.P.C. - HELD THAT:- On applying the doctrine of relating back, for ably facilitating this Court, to test the validity of the impugned order, the running of the spell of 15 days from 11.11.2021, cannot be taken to become halted or paused, only by the making of the impugned order, rather when through a valid interference being made, qua it, by this Court, the broken spell of E.D custody becomes reanimated, and, lasts upto the spell of 15 days, to be reckoned since the date of initial production of the accused before the remanding Court concerned, becoming completed. In consequence, the arguments addressed before this Court, by the learned counsel for the petitioner, are accepted, and, the arguments, addressed before this Court, by the learned counsel for the respondent-accused, are rejected.
A reading of the impugned order, unfolds that even prior to the accused being arrested, he had been repeatedly summoned on 11 occasions, by the Enforcement Directorate, and, it also reveals that during the afore period of time, 88 hours were spent by the officials of the Enforcement Directorate with the respondent-accused. Moreover, a reading of the impugned order also details, that the accused-respondent, had argued before the Court concerned, while making opposition to the demand of the Public Prosecutor, for his being put to E.D. custody, that in the previous 08 days, only 38 questions were put to him, and, that only 1½ hours, per day, became utilized by the officials of the Enforcement Directorate, to interrogate him. The afore echoings borne in the impugned order, coupled with the factum that the learned Court concerned, has also traversed through all the relevant records appertaining to the bank accounts, and, statements of all concerned, rather naturally and tenably led the/remanding Court, to make a valid conclusion, that the claim for police remand, as made by the Special Public Prosecutor concerned, was unmeritworthy.
Petition dismissed.
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2022 (2) TMI 62
Money Laundering - Seeking grant of anticipatory bail - Hawala transactions - defrauding the bona-fide investors while using the NSEL - petitioner has executed the sale deeds in respect of some of the properties attached - siphoning off of funds - HELD THAT:- It becomes quite explicit that these provide two different spells for the validity of the order qua the confirmation of the attachment of any property, on the basis of the stage of the proceedings in respect of any offence under the PMLA by specifying that in case, the investigation is continuing in respect of the commission of any such offence, then, the said order shall remain operative for a period upto 365 days but if the proceedings are pending before the Court, then it shall continue during the pendency of the same.
The subject FIR is an off-shoot of the economic offence pertaining to the scam involving the investments of the genuine/ bona-fide depositors to the tune of ₹ 5600 crore approximately and a sum of ₹ 720 crore, out of the same, has allegedly been swindled away by the petitioner through his Companies. It has specifically been observed by the Apex Court in P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [2019 (9) TMI 286 - SUPREME COURT] that “the economic offences stand as a different class as they affect the economic fabric of the society and the merits of the contentions that Section 8 of the Prevention of Corruption Act, 1988 cannot be the predicate offence qua the appellant and whether it is attracted or not and as to whether the Enforcement Directorate had the threshold to acquire jurisdiction under the PMLA, cannot be considered at the stage when this Court is considering only the prayer for anticipatory bail”. In view of these observations, it is explicit that the afore-said contention cannot be looked into and adjudicated upon while deciding the instant petition qua the prayer of the petitioner for grant of anticipatory bail.
This Court deems it appropriate and necessary to precisely discuss the conduct of the petitioner as the same would also be one of the key factors to adjudicate/ascertain his entitlement for the relief as prayed for in this petition. It has specifically been mentioned in Para 2 (VII) & (VIII) in the Reply, as initially filed by respondent No.2- Directorate, that the petitioner failed to comply with the order Annexure R-2/1 passed by Bombay High Court while granting him the relief of bail - it has also been specifically mentioned in Para 13 of the Reply filed on behalf of respondent No.1-State that the detailed investigation is required to be conducted to know about the officials of the Revenue Department and other persons who had helped the petitioner in disposing of the said properties and that the custodial interrogation of the petitioner would be required for the proper investigation of the present case.
The petitioner does not deserve the relief of anticipatory bail and the petition in hand, being sans any merit, deserves dismissal - petition dismissed.
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Service Tax
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2022 (2) TMI 61
Levy of Service tax - Auctioneers’ Service - assistance rendered in the aunctioneering of the agricultural produce by their member farmers - HELD THAT:- The assistance rendered by the appellants to their member farmers in auctioning their agricultural produce does not tantamount to rendering any service classifiable under Auctioneers’ Service.
The issue is decided in the case of M/S. ATTUR AGRICULTURAL PRODUCERS VERSUS COMMISSIONER OF CENTRAL EXCISE [2019 (8) TMI 262 - CESTAT CHENNAI] where it was held that the appellants are selling goods through tender and NOT through auctions. The Auctioneer’s service does not cover the service of tender.
Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 60
Levy of Service Tax - amount received by the appellant prior to 1.7.2010 as rent for leasing vacant land - period from 5.8.2008 to 20.1.2010 - Department has relied on Notification No. 36/2010-ST to allege that the amount received by them are mere advances and that the said consideration has to be apportioned to future period after 1.7.2010 when the activity of leasing vacant land has become taxable - HELD THAT:- The view taken by the department is entirely erroneous. When the activity of leasing of vacant land has become taxable only with effect from 1.7.2010, the amount received by the appellant for such activity prior to 1.7.2010 cannot be subject to levy of service tax even though the lease may extend after the period 1.7.2010. If the appellant received any amount for such lease after 1.7.2010 it may be taxable. However, in the present case, there is no allegation that the appellant has received any rent / consideration after 1.7.2010. This being so, the demand cannot sustain.
The issue stands covered by the decision of the Hon'ble High Court of Allahabad in the case of COMMISSIONER OF SERVICE TAX, NOIDA VERSUS M/S GREATER NOIDA DEVELOPMENT AUTHORITY, GREATER NOIDA [2015 (10) TMI 296 - ALLAHABAD HIGH COURT] where it was held that Renting of vacant land by way of lease or licence (irrespective of the duration or tenure), for construction of a building or a temporary structure for use at a later stage in furtherance of business or commerce is a taxable service only from 1.7.2010, and not so, earlier to this date.
Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 59
Refund of Service Tax - ocean freight paid for import of goods - rejection of refund on the ground that the refund claim is not filed under Section 11B but under Section 142(3) of CGST Act - HELD THAT:- In exactly identical situation, Division Bench of this Tribunal in the case of COROMANDEL INTERNATIONAL LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, VADODARA [2021 (10) TMI 1289 - CESTAT AHMEDABAD] and in the case of GARDEN SILK MILLS LTD. VERSUS GARDEN SILK MILLS LTD. [2022 (1) TMI 1169 - CESTAT AHMEDABAD] has remanded the matter to the original adjudicating authority to decide the issue afresh in the light of the decision of Hon’ble Gujarat High Court in the case of MESSRS SAL STEEL LTD. & 1 OTHER (S) VERSUS UNION OF INDIA [2019 (9) TMI 1315 - GUJARAT HIGH COURT]. Learned Authorised Representative pointed out that the matter should be kept pending in view of the reference to Larger Bench wherein the jurisdiction of CESTAT in deciding the issues relating to section 142(3) of CGST Act, has been referred to the Larger Bench.
In the present case, the appellant has already filed refund claim prior to the decision of Hon’ble Gujarat High Court. The lower authorities did not get an opportunity to consider the impact of the said decision of Hon’ble Gujarat High Court while deciding the refund claim - it is considered judicious to remand the matter back to the Adjudicating Authority for deciding the issue after considering the decision of Hon’ble Gujarat High Court.
Appeal allowed by way of remand.
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Central Excise
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2022 (2) TMI 58
SSI Exemption - clubbing of clearances - existing manufacturer eligible for excise duty or not - clubbing of their clearances with M/s Pap-Flon Engineering Co.Pvt. Ltd - Show Cause Notice dated 18-10-2010 was issued within permitted time limitation for period from 1-4-2005 to 30-09-2010 or otherwise - whether M/s Pap-Flon Enterprise is existing manufacturer eligible for duty exemption benefits claimed under SSI Notification No. 8/2003-CE or not? - penalty u/r 27 of CER, 2002 - HELD THAT:- In the facts of this case, it is found that M/s Pap Flon Enterprise is an existing manufacturer eligible to avail SSI Exemption of Notification No. 8/2003-CE, having separate factory, machinery, PAN, Sales Tax, IEC, Professional Tax, ESIC Numbers, separate Electricity Meters and separate Bank Accounts - Tribunal’s decision in the case of M/S ALPHA CONVERTING MACHINES PVT. LTD., RAJAN M DAVID VERSUS C.C.E. – AHMEDABAD-I [2018 (9) TMI 271 - CESTAT AHMEDABAD] is on different facts of only dummy units and hence it is not applicable in the facts of this case. The ratio of decisions is that dummy units created to avail ineligible SSI benefits may not get ineligible benefits of SSI Notification, but benefits to existing units can not be denied the SSI Exemption, if available otherwise.
Therefore, clubbing of clearances of M/s Pap Flon Enterprise, who is existing manufacturer and eligible for SSI Exemption, with clearances of M/s Pap Flon Engineering is not justified.
Whether Show Cause Notice to M/s Pap-Flon Enterprise proposing for denial of SSI exemption claimed and proposing clubbing of their clearances with M/s Pap-Flon Engineering Co.Pvt. Ltd was required to be issued or otherwise? - HELD THAT:- M/s Pap-Flon Enterprise is an existing manufacturer who is eligible for duty exemption claimed under SSI Notification No. 8/2003-CE and considering the relied upon decisions, the submissions of Appellants is agreed upon, that Show Cause Notice should have been issued to M/s Pap Flon Enterprise proposing for denial of SSI exemption claimed and proposing for clubbing of their clearances, was required to be issued. Consequently, this question is answered in favour of the Appellants.
Whether demands in Show Cause Notice dt. 18-10-2010 was issued within permitted time limitation for period from 1-4-2005 to 30-09-2010 or otherwise? - HELD THAT:- M/s Pap Flon Enterprise have not suppressed facts of continuing manufacturing activity of manufacture of goods availing SSI exemption since 1993-94. Relevant Copies of declarations filed by M/s Pap Flon Enterprise are on record in these Appeals and synopsis filed. In this context, it is found that the question of invoking extended period of time limitation is a mixed question of facts and the law. In the facts and circumstances of this case and law settled, invocation of extended period of time limitation in this case, is not justified and impugned Order-in-Original dated 13-05-2011 cannot be sustained on time limitation also.
Penalty u/s 27 of CER, 2002 - HELD THAT:- The appellants have made certain procedural lapses in maintaining records for the movement of goods from M/s Pap-Flon Enterprise to M/s Pap-Flon Engineering Co Pvt Ltd and vice-versa, as required for which they are liable for penalty of ₹ 5000/- each under Rule 27 of Central Excise Rules, 2002 on M/s Pap-Flon Engineering Co Pvt Ltd and M/s Pap-Flon Enterprise. All such clearances in open market were with proper Invoices issued under the Central Excise Rules, 2002. However, it is found that since demand of duty with interest & equal penalty is set aside, separate penalty imposed under Rule 26 of Central Excise Rules, 2002 on Shri Mukesh Mistry and Manish Parmar, is not warranted.
Appeal allowed.
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2022 (2) TMI 57
CENVAT Credit - capital goods - input services - credit utilized for payment of duty at 4% on cotton yarn exported by them - capital goods used exclusively for the manufacture of exempted goods - credit denied on capital goods when they have opted to avail benefit of ‘Nil’ rate of duty under the Exemption Notification - simultaneous availing the benefit of Notification 29/2004 as amended by Notification 58/2008 and another Notification 59/2008 - period (07.12.2008 to 06.07.2009) - applicability of Board’s circular dated 26.11.2010 - HELD THAT:- In the present case, the appellants were paying duty @ 4% on the goods manufactured by using the very same capital goods. There is no room for doubt that the capital goods were not exclusively used for manufacture of exempted goods.
The Tribunal in the case of ST. COTTEX EXPORTS (P) LTD. VERSUS COMMISSIONER OF C. EX., LUDHIANA [2010 (1) TMI 1048 - CESTAT NEW DELHI] had occasion to analyse this issue in regard to Notification No.30/2004-CE and Notification No.29/2004-CE. and it was held that Under sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004, capital goods Cenvat credit is inadmissible only in respect of those capital goods which are exclusively used in the manufacture of exempted goods. In present case it cannot be said that the capital goods in question had been used exclusively for the manufacture of fully exempted finished products.
Though it is alleged in the show cause notice that the appellants have availed credit on input services, the Ld. Counsel for appellants has asserted that the issue is with regard to disallowance of credit on capital goods only.
The disallowance of credit cannot be justified - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2022 (2) TMI 56
Liability of the Petitioner to pay Entry Tax - purchase of raw materials from National Aluminium Company Ltd. (NALCO) - Rule 3 (4) of the Orissa Entry Tax Rules, 1999 (OET Rules) - HELD THAT:- For more than two decades now, no reply has been filed by the State of Odisha to the present petition and, therefore, the Court proceeds on the basis that the averments of the Petitioner No.1 remain uncontroverted by the State of Odisha. The assertion of Petitioner No.1 that it has fulfilled the requirements of the Circular dated 25th May, 2000 of the ACCT, and has furnished the requisite undertaking and further its assertion that since its factory is located in the Grampanchayat area, and is exempted from payment of Entry Tax, has remained uncontroverted and in fact accepted by NALCO.
The Court directs that on the strength of the present order, it will be open to the Petitioner No.1 to apply to the Opposite Party-State to seek refund of the aforementioned sum of ₹ 47,969.26, which has been collected from it by NALCO and deposited with the Government of Odisha. Since there is no dispute that the aforementioned sum has in fact been collected from Petitioner No.1, there should be no difficulty in the refund being made to the Petitioner No.1 by the State Government on the strength of the present order - If the application for refund is made by the Petitioner No.1 to the Government of Odisha not later than 14th February, 2022, it will be processed and the aforementioned sum together with whatever interest is due thereon in terms of the OET Act and Rules will be refunded to the Petitioner No.1 by the Government within a period of four weeks thereafter and in any event, not later than 15th March, 2022.
Petition disposed off.
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Indian Laws
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2022 (2) TMI 55
Entitlement of Assistant Enforcement Officer (AEO) to grade pay on third financial upgradation as per the Modified Assured Career Progression (MACP) Scheme - payment of pension with effect from April, 2015 - Scope of grade pay and promotional post - HELD THAT:- The issue involved in the present appeal is as such squarely covered by the decision of this Court in the case of UNION OF INDIA (UOI) AND ORS. VERSUS M.V. MOHANAN NAIR [2020 (3) TMI 1393 - SUPREME COURT]. By detailed judgment and order this Court has interpreted the very MACP Scheme and it is observed and held that under the MACP Scheme employees are entitled to the immediate next higher grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008. It is specifically observed and held by this Court in the aforesaid decision that MACP has nothing to do with the next promotional post and what the employee would be entitled would be the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in the CCS (Revised Pay) Rules, 2008.
On considering the relevant clauses of the MACP Scheme, it appears that the MACP Scheme envisages placement in the immediate next higher grade pay in the hierarchy of the recommended revised pay bands and grade pay as given in Section 1, Part A of the First Schedule of the CCS (Revised Pay) Rules, 2008. Thus, the High Court has committed a grave error in allowing the grade pay of ₹ 6600 the grade pay which was available to the next promotional post as Deputy Director. Respondent Nos.1 & 2 as per PB2 were entitled to the grade pay of ₹ 5400 as PB3 as per clause 8.1.
By the impugned judgment and order and while granting grade pay of ₹ 6600 to respondent Nos.1 & 2 virtually, the High Court has modified the MACP Scheme which has been framed by the Government on the recommendations of the expert body like the pay commission and its recommendations for the MACP Scheme. As observed and held by this Court in the case of M.V. Mohanan Nair the ACP which is now superseded by MACP Scheme is a matter of Government policy and interfering with the recommendations of the expert body like the pay commission and its recommendations for the MACP Scheme would have serious impact on the public exchequer - thus the impugned judgment and order passed by the High Court granting grade pay of ₹ 6600 to respondent Nos.1& 2 is unsustainable and deserves to be quashed and set aside.
The impugned judgment and order passed by the High Court is hereby quashed and set aside and the judgment and order that of the Central Administrative Tribunal is hereby restored. It is observed and held that on implementation of MACP Scheme respondent No.1 and 2 herein shall be entitled to the grade pay of ₹ 5400 and not of ₹ 6600 as claimed by them. Their pensions be refixed accordingly - Appeal allowed.
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2022 (2) TMI 54
Dishonor of Cheque - legally enforceable debt or not - excessive amount is shown in the possession notice - account classified as NPA - main contention of petitioner is that the cheque given as a security has been filled for excess amount and such cheque cannot be enforced in the eye of law - HELD THAT:- In the judgment in Angu Parameswari Textile [P] Ltd. v. Sri Rajam [2001 (1) TMI 1012 - MADRAS HIGH COURT] this Court has held that where any cheque was drawn for payment of any amount of money for the discharge in whole or any part of any debt or other liability and if the cheque is more than the amount of the debt due, Section 138 of the Negotiable Instruments Act cannot be attracted. In the judgment in M/s.Pawan Enterprises Vs. Satish H.Verma [2003 (1) TMI 757 - BOMBAY HIGH COURT], it has been held that the cheque issued for security purpose cannot be enforced.
Whether or not, the cheque has been presented for excess liability is a matter of evidence. This Court while exercising the power under section 482 Cr.P.C. cannot make a roving enquiry into the disputed facts. Therefore, the contention of the learned Counsel for the petitioner that the cheque in question was filled for excess amount other than the liability cannot be gone into at this stage and the same cannot be a ground to quash the proceedings.
Considering the judgments of the Apex Court and the fact that the liability is also admitted in one of the letter, whether or not cheque amount exceeds the liability are the disputed facts and the same can be gone into only during the trial and not in a petition filed under section 482 of Cr.P.C. In such view of this matter, merely there is a dispute with regard to the payment of interest and immovable properties have already been mortgaged and proceedings under the SARFAESI Act has also been initiated, those proceedings is no way relevant to quash the proceedings under section 138 of the Negotiable Instruments Act and this petition filed to quash the proceedings is liable to be dismissed.
The trial Court is directed to expedite trial and dispose of the case in C.C.No.18 of 2014 within a period of four months from the date of receipt of a copy of this Order - petition dismissed.
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