TMI Tax Updates - e-Newsletter
February 8, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Seeking release of detained goods alongwith the vehicle - In the present case, the goods and conveyance in transit were accompanied with the documents as prescribed under Rule 138A, i.e. the invoice and the e-way bill. No discrepancy has been pointed out in the said documents even in the reply filed by the respondents - from the pleadings on record, it is clear that there is no allegation that the petitioner has contravened any provision of the Act or the rules framed thereunder much less with an intent to evade payment of tax. - The goods/conveyance cannot be detained without passing appropriate orders in accordance with law. - HC
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GST:
Levy of GST - minerals on which already royalty has been paid - the very issue as to whether GST would be chargeable on minerals on which already royalty has been paid is actively under consideration before a Nine Judges Bench of the Hon’ble Supreme Court, in the present matter, the petitioner has made out a case for interim order. - there shall be stay of the notice - HC
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GST:
Levy of tax/ GST - Transferable Development Rights pursuant to the Joint Development Agreement-cum-General Power of Attorney - It needs a detailed examination of the elements in the taxing proposal and all the points raised by the petitioner herein can be considered by the appellate authority. This Court finds no glaring illegality in the assessment order, which requires indulgence of this Court by exercising its jurisdiction under Article 226 of the Constitution of India, at this stage. - HC
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Income Tax:
Addition towards capital gains u/s 45(3) - transfer of land as Capital contribution in the Partnership firm - Tribunal agreed with CIT(A) that after conversion of inventory into fixed asset the firm revalued the developed land including construction thereon in order to bring it in line with the current market value to justify the business assistance secured by the firm from the banks to extent of nearly ₹ 250 crores. Therefore, on facts the tribunal concluded that the revaluation was not a colourable device. - There was no withdrawal by the partners from capital accounts and therefore there cannot be any income liable to tax in their hands. - HC
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Income Tax:
Disallowance on account of write off of obsolete inventory - the condition for invoking AS-4 is that there should exist a contingency as on the Balance Sheet date and the result of contingency, if known before the finalization of balance sheet, then the loss arising there from should be accounted for. In the instant case, it is not shown that the write off was related to the contingency that existed as on 31.3.2002. On the contrary, in the facts of the present case, there cannot be any contingency with regard to the raw material or finished goods. - Claim not allowed - AT
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Income Tax:
Transfer of property and accrual of capital gain - Year of transfer of capital asset - Agreement to sell - It is not the case of the AO that the provisions of sec. 53A of the Transfer of Property Act would apply to the impugned transaction. In fact, it is the submission of the assessee that the possession was never given to Buyer - the question of assessing any capital gain in AY 2008-09 does not arise. - AT
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Income Tax:
Claim of deduction of Provisions made - Basis of creating the provision - uncertain liability or not - The above facts would substantiate that the provision has been made for material cost and/or compensation for cancellation/suspension of contracts which is incurred under contracts with its vendors entered pursuant to pre-existing commitments against supply contracts with customers, the latter having been subsequently cancelled/suspended. Hence, we hold that the provision is an allowable deduction. - AT
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Income Tax:
Addition on account of sale of sale of jeera bag - CIT(A) deleted the additions by holding that the assessee only earned commission income in such sale - in the commission offered to tax by the assessee, as such no any enquiry carried out from the parties to assessee claimed to have sold goods on commission basis. Therefore, in the absence of contrary finding and since the assessee has filed the reconciliation of the entries with that the name of the parties, we inclined to agree with the categorical finding given by the CIT(A). - AT
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Income Tax:
Assessment u/s 153A - unexplained expenditure on account of cash payment made towards land - the addition made by the A.O. and upheld by the ld. CIT(A) on the basis of seized document is without any basis or foundation more particularly when no specific facts by virtue of documents have been placed on record and have not rebutted by the Revenue, thus, in this eventuality, no addition was warranted. - AT
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Income Tax:
Unexplained unsecured loans - the assessee in reply had submitted that the contract can be either verbal or written and simply non availability of a written contract would not make the loan non-genuine and in private arrangement of loan between known persons, no practice of entering into a loan agreement is followed. - the lenders are regular tax assessees and have given the loan through account payee cheques and have confirmed the transaction then the liability of the assessee of explaining the genuineness of the transaction stands discharged - Additions deleted - AT
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Customs:
Provisional release of goods - Jurisdiction - Power to deal with the EIC of the petitioner - The respondents are directed to permit the petitioner to export the goods which are subject matter of the impugned order upon the petitioner submitting PR Bond equivalent to declared value of goods within three days from today and upon furnishing of bank guarantee to the extent of 20% of the duty drawback payable within one week from today. - HC
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Customs:
Extension of period of levy of anti-dumping duty - the Special Bench of the Tribunal are expected to take up the appeals for hearing and dispose them of in accordance with law before the period of six weeks comes to an end. A litigant should not suffer because the Special Bench of the Tribunal is not available. The Tribunal has to make the necessary arrangement for urgent hearing of the appeals one filed by the Association. - Notification dated 24-1-2022 stayed from its operation for a period six weeks - HC
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Customs:
Seeking provisional release of goods - Classification of imported goods - Naphtha - the respondent No.1 is permitted to proceed with the re-export of the goods on the respondent No.1 furnishing a bank guarantee of ₹ 15 Crore - The respondent No.1 be permitted to re-export the goods by using the nomenclature “Naphtha” and it is observed that using of the said nomenclature would not bind the Department (DRI) and would not entitle the respondent No.1 to raise a plea of estoppel in the proceeding that may be initiated by the DRI against the respondent No.1. - HC
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Customs:
Classification of imported goods - High Speed Diesel or goods just in the form of base oil - The Bio-Diesel shown to have been manufactured was cleared under the invoices for use as Bio-Diesel B100. The Bio-Diesel is a product of vegetable origin and no known literature ascribe the Base Oil as an input for the manufacture of the same. The Bio-Diesel is used as fuel. The modus operandi adopted thus appears to be that High Speed Diesel imported under the guise of Base Oil SN 50 is being diverted as fuel by routing such goods through the purported manufacturers who claim to manufacture Bio-Diesel B100. - decided in favor of Revenue.- HC
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Customs:
Exemption from Customs Duty as per South Asia Free Trade Agreement (SAFTA) - The denial of the exemption certificate for the entire quantity of goods when the bulk of the goods are already covered by the SAFTA Certificate is not supported by any legal provision. Therefore the demands need to be set aside. The amount of redemption fine imposed by the impugned order as well as the penalties imposed upon the Appellants need to be proportionately reduced. - AT
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Customs:
Classification of imported goods - Mayil Mark Raw Honey - glass bottles having specific measurement of 45 ml, 80 ml, 180 ml, 380 ml and 730 ml - The classification adopted by the appellant is correct. Consequently, the anti-dumping duty collected alleging classification of the goods to be 7013 cannot sustain. - AT
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Customs:
Penalty u/s 112(a) of the Customs Act, 1962 - The admitted act of the importer amounts to a clear omission, for which penalty under Section 112(a) ibid. appears to be correct. This is also for the reason that similar penalty was imposed on the other co-noticees, who appear to have accepted the same without agitating further. - AT
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Customs:
Classification of goods - The appellants have successfully demonstrated that the import documents describe the product to be ‘Hooks and eye’ for the Brassieres; other importers are also claiming the classification under the same heading. Such overwhelming evidence cannot be overlooked - the impugned goods are rightly classifiable CTH 83081010. - AT
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Customs:
Classification of imported goods - From the documents it is established that raw material i.e. Petroleum Hydrocarbon Solvent imported by the appellant is their raw material which is used in the manufacture of their final product such as industrial solvent, thinner etc. This fact also strengthen the case of the appellant that the goods imported by them is not Superior Kerosene Oil. - The declaration of the goods and classification made by the appellant in the bill of entry is correct and the department’s claim of classification as Superior kerosene Oil could not be established - AT
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Indian Laws:
Dishonor of Cheque - demand of interim compensation not exceeding 20% of cheque amount - The trial court was required to consider only the facts and circumstances of the case which concerns the applicant wherein non-bailable warrant was issued - Taking into consideration the said provisions of Section 143A of the Negotiable Instruments Act, the order of Revision Court directing the applicant to pay 20% of the cheque amount is against the provisions of law; hence the same deserves to be quashed and set aside - HC
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IBC:
Initiation of CIRP - Period of limitation - A final letter was addressed by the appellant to the Proprietary Concern on 27 February 2017, demanding the payment on or before 4 March 2017. The Proprietary Concern replied to this letter on 2 March 2017, finally refusing to make re-payment to the appellant. Consequently, the application under Section 9 will not be barred by limitation. - SC
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IBC:
Initiation of CIRP - Evidentiary value of respondent’s MOA as amended - Section 13 of CA 2013 provides for the procedure which has to be followed when the MOA is to be amended. In cases where the object clause is amended, it requires the Registrar to register the Special Resolution filed by the company. However, the respondent has provided no proof that: (i) the purported resolution dated 1 September 2014 was a Special Resolution; (ii) it was filed before the Registrar; and (iii) that the Registrar ultimately did register it. Thus, in terms of Section 13(10) of CA 2013, the purported amendment to the MOA would not have any legal effect. - SC
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IBC:
Refusal of the Bank to invoke the Bank Guarantee - Adjudicating Authority has taken the view that since CIRP proceedings were continuing the Bank Guarantee cannot be invoked - The Appellant was clearly entitled for invocation of Bank Guarantee, hence, we remit the matter back to the Adjudicating Authority to pass appropriate orders with regard to claim of the Appellant to the amount as included in the Bank Guarantee. - AT
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IBC:
Jurisdiction of NCLT to levy fine u/s 235A of IBC - When the allegation of Resolution Professional was that Appellant has contravened the Moratorium there was allegation of commission of an offences on which punishment could have been awarded after following the procedure under Section 236. An act which is termed as offence within specific provision of Chapter VII of Part-II could not have been indirectly dealt with by the Adjudicating Authority by imposing a fine - AT
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Service Tax:
SVLDRS - unfair classification of the case of the petitioner under “litigation” category, instead of “arrears” category - Once a case travels from the category of show cause notice (“litigation category”) under clauses (a) and (c) to the category under clause (b) which is of a “an amount in arrears” (arrears category) and the declaration is made under the category listed in clause (b) of rule 3(2), it would have to be treated as one single case for the purpose of Rules, 2019, no matter the show cause notice contained two demands of taxes, one under Finance Act, 1994 and the other under Cenvat Credit Rules, 2019. - HC
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Service Tax:
Rejection of refund claim - residential complex services - Section 102 of Finance Act, 1994 - In the instant case, the refund claim was not filed within a period of six months as provided in sub Section (3) of Section 102 of Finance Act, 1994. The Finance Bill was granted assent on 14.05.2016. Refund claim has been filed on 05.09.2017. - The exemption was revived by notification dated 01/03/2016. But since it was prospective in effect, the appellant was not entitled for any exemption, which the appellant was aware of and with open mind and eyes deposited the service tax due with interest. - AT
Articles
Notifications
GST - States-
AE-I/DT&T/2021-22/35 - dated
1-2-2022
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Delhi SGST
Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer
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AE-I/DT&T/2021-22/33 - dated
1-2-2022
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Delhi SGST
Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer
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AE-I/DT&T/2021-22/26 - dated
27-1-2022
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Delhi SGST
Commissioner, State Tax confer powers under section 69, section 70, section 71, section 73 & section 74 of the DGST Act 2017, Jurisdictional Officer
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ERTS (T) 65/2017/Pt. III/67 - dated
31-12-2021
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Meghalaya SGST
Seeks to supersede notification no. 15/2021 — State Tax (Rate). dated the 18th November. 2021 and amend Notification No. .ERTS (T) 65/2017/11. dated 29th June. 2017
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ERTS (T) 65/2017/Pt. III/66 - dated
31-12-2021
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Meghalaya SGST
Amendment in Notification No. ERTS (T) 65/2017/1, dated 29th June, 2017
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ERTS (T) 65/2017/Pt. III/62 - dated
29-12-2021
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Meghalaya SGST
Meghalaya Goods and Services Tax (Tenth Amendment) Rules, 2021.
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2022 (2) TMI 296
Maintainability of petition - Seeking release of detained goods alongwith the vehicle - availability / production of all the required statutory documents or not - no order was passed within fourteen (14) days as per the procedure provided under Section 129(6) of the Punjab / Central Goods and Services Tax Act, 2017 - validity of proceedings under Section 130 of the 2017 Act - HELD THAT:- Where the goods in transit in contravention of the provisions of the Act invites detention under Section 129, to invoke Section 130, the supply should not only be in contravention of the provisions of the Act, but such contravention should be with an intent to evade payment of tax. Thus, where there is a contravention of the provisions of the Act or the rules made thereunder and is punctuated with an intent to evade payment of tax, Section 130 can be invoked - A person can be attributed intent to evade payment of tax only if the contravention of the provisions of the Act or the rules made thereunder has some direct nexus with his action. He cannot be held liable under Section 130 for contravention of the provision of law by other person in the supply chain. Wrongful claim of input tax credit may be result of a bonafide claim as well and does not necessarily involve intent to evade payment of tax. Moreover, wrongful claim of input tax credit is not one of the conditions enumerated under Section 130(1) of the 2017 Act that could entail confiscation of the goods. Section 130 being penal in nature has to be construed strictly.
The investigation report relied upon by the respondents to initiate proceedings under Section 130 against the petitioner lacks sting. Under the 2017 Act, a trader is either a 'supplier' qua 'outward supply' or is a 'recipient' of 'inward supply'. The alleged 'intent to evade tax' must have a direct nexus with the activity of trader. The opinion formed by the authorities must reflect such nexus before proceeding under Section 130 of 2017 Act. A trader cannot be accused of having intention to evade payment of tax for act or omission on part of a person not immediately linked to his activity.
It is virtually impossible for a trader to ascertain as to whether input tax has been paid by his predecessors or not and it is for this reason also that the claim to input tax credit has been made subject to scrutiny and assessment. It is the fundamental legal principle embedded in legal maxim “LEX NON COGIT AD IMPOSSIBILIA”-That the law does not compel a man to do that which he cannot possibly perform”. Once a person cannot be compelled to do something not possible, definitely he cannot be penalized for not doing so.
In the present case, the goods and conveyance in transit were accompanied with the documents as prescribed under Rule 138A, i.e. the invoice and the e-way bill. No discrepancy has been pointed out in the said documents even in the reply filed by the respondents - from the pleadings on record, it is clear that there is no allegation that the petitioner has contravened any provision of the Act or the rules framed thereunder much less with an intent to evade payment of tax. It is also not the case of the State that the petitioner did not account for any goods on which he is liable to pay tax under the Act or that he supplied any goods liable to tax under the Act without having applied for registration or that he supplied or received any goods in contravention of any of the provisions of the Act. From the perusal of show cause notice issued to the petitioner under Section 130, the case alleged against the petitioner is that of wrongful claim of input tax credit.
The authorities are well within their power to check the goods in transit. In case goods in transit are being transported in contravention of any provision of the Act or the rules framed thereunder, the goods are liable to be seized and detained as per provision of Section 129 of the Act. However, in case the goods in transit are accompanied with the documents as prescribed under the Act, authorities need not proceed under Section 129 of the 2017 Act. The provisions prescribing time limit to conclude inspection in circular dated 13.04.2018 are mandatory. The goods/conveyance cannot be detained without passing appropriate orders in accordance with law. In case, the authorities find that action of the person falls within four corners of Section 130(1), the authorities have right to proceed under Section 130 of the Act.
Respondent No.4 is directed to release conveyance and goods in question forthwith - Application allowed.
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2022 (2) TMI 295
Maintainability of petition - availability of alternative remedy of appeal - Cancellation of registration of petitioner - no opportunity of any kind was afforded and the order of cancellation of registration was never served on petitioner - HELD THAT:- The contention that impugned order was not served on the petitioner cannot be gone into in a writ petition since it involves disputed questions of fact specially in the face of unavailed remedy under Section 30 which enables a person aggrieved by an order of cancellation of registration to apply for revocation within 30 days and also confers jurisdiction on the competent authority under Section 30 to condone the delay if sufficient cause is shown.
It would be appropriate that the petitioner first avails the statutory remedy under Section 30 and therefore, this Court is inclined to dispose of this petition with the directions imposed - petitioner is directed to prefer an appropriate application for revocation under Section 30 (1) of the Act, 2017 within a period of 15 working days from today along with the copy of this order and also along with an application for condonation of delay showing the cause for coming late - petition disposed off.
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2022 (2) TMI 294
Levy of GST - minerals on which already royalty has been paid - HELD THAT:- Since the very issue as to whether GST would be chargeable on minerals on which already royalty has been paid is actively under consideration before a Nine Judges Bench of the Hon’ble Supreme Court, in M/S. LAKHWINDER SINGH VERSUS UNION OF INDIA & ORS. [2021 (11) TMI 336 - SC ORDER] in the present matter, the petitioner has made out a case for interim order - it was held in the said case that Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.
The matter be listed after disposal of Writ Petition in M/S. LAKHWINDER SINGH VERSUS UNION OF INDIA & ORS. [2021 (11) TMI 336 - SC ORDER] - In the meantime, there shall be stay of the notice dated 02.12.2021 issued to the petitioner, which is impugned in the present writ petition.
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2022 (2) TMI 293
Short payment of tax - seeking direction to respondents not to insist petitioner to pay the CGST & SGST amounts till the release of finalize amounts including GST from the respondents 4 to 7 - HELD THAT:- The Court finds that in the interest of justice, if the petitioner pays the amount within four weeks, the ends of justice would be served.
The writ petition stands disposed of with a direction that the petitioner, as per his own representation, should pay the entire remaining outstanding balance amount due as per the impugned notice, dated 15.02.2021 till the date of final payment, within four weeks from today. In the meantime, no coercive action shall be taken by the authorities for recovery of the same till four weeks. If the petitioner defaults in making payment of the entire amount within four weeks, it shall be open to the authorities concerned to take recourse to recovery in accordance with law.
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2022 (2) TMI 292
Levy of tax/ GST - Maintainability of petition - availability of alternative remedy of appeal - Violation of Principles of Natural Justice - Transferable Development Rights pursuant to the Joint Development Agreement-cum-General Power of Attorney entered into by the petitioner with the land owners - non-application of mind - non-consideration of any of the objections filed by the petitioner - HELD THAT:- As the petitioner could not satisfy any of the circumstances, under which a party can move before High Court, when alternative remedy is available and there is an effective alternative remedy before the appellate authority, this Court feels that the matter does not require any interference.
Further, in the present case, it needs a detailed examination of the elements in the taxing proposal and all the points raised by the petitioner herein can be considered by the appellate authority. This Court finds no glaring illegality in the assessment order, which requires indulgence of this Court by exercising its jurisdiction under Article 226 of the Constitution of India, at this stage.
Petition disposed off.
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Income Tax
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2022 (2) TMI 284
Disallowance on account of write off of obsolete inventory - appellant has consistently followed the method of valuation of stock at cost or net realizable value whichever is lower as prescribed under “Accounting Standard 2 – Valuation of inventories” prescribed by the institute of Chartered Accountants of India - whether the impugned materials have become obsolete as on 31.3.2002 or not? - HELD THAT:- As rightly observed by the AO, these authorization obtained from parent company may enable the assessee to write off the materials in the books of account, but it will not prove that the quality of the raw materials and finished goods have fully deteriorated as on 31.3.2002, particularly in view of the fact that there was a time gap of more than six months between the closure of the accounting year and the authorization. Further, the assessee itself has submitted before Ld CIT(A), some of the products were re-processed and exported in the succeeding year. This submission, in fact, would support the case of the revenue. Hence, we are of the view that the assessee has failed to bring any material to show that these materials got deteriorated by 31.3.2002 itself.
The condition for invoking AS-4 is that there should exist a contingency as on the Balance Sheet date and the result of contingency, if known before the finalization of balance sheet, then the loss arising there from should be accounted for. In the instant case, it is not shown that the write off was related to the contingency that existed as on 31.3.2002. On the contrary, in the facts of the present case, there cannot be any contingency with regard to the raw material or finished goods. We therefore, based on our discussions made above, are in agreement with the stand taken by the CIT(A) in disallowing the claim of inventory in the assessment year 2002-03.
Foreign exchange fluctuation loss disallowance - HELD THAT:- In the written submissions made before Ld CIT(A), the assessee has stated that the exchange difference does not pertain to any capital items. This fact was not disputed before us. Hence the loss arising on restatement of outstanding liabilities is on revenue items and the same is allowable as deduction as per the decision rendered by the co-ordinate bench in the assessee’s own case in an earlier year - Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the loss arising on account of restatement of liabilities of revenue items.
Claim towards Advance written off – excise duty on exports - additional ground urged by the assessee - HELD THAT:- Since the assessee is making a new claim in respect of excise duty paid by it for the first time before us, we are of the view that this issue requires examination at the end of AO. Accordingly, we restore this issue to the file of the AO for examining the same afresh. After affording adequate opportunity of being heard, the AO may take appropriate decision in accordance with law.
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2022 (2) TMI 291
Refund recovered in excess of 20% of the total disputed tax demand - HELD THAT:- As admitted that the relief sought in the present writ petition is covered by the judgment of this Court in the case of Skyline Engineering Contracts (India) Pvt. Ltd.[2021 (8) TMI 1051 - DELHI HIGH COURT] - Thus this Court is of the opinion that the petitioner is entitled to refund of adjustments made in excess of 20% of the disputed tax demands.
Consequently, this Court directs the respondents to verify the facts stated in the writ petition and if it finds them to be true and correct then refund the amount adjusted in excess of 20% of the disputed tax demands for the Assessment Year 2017-18 to the petitioner within four weeks.
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2022 (2) TMI 290
Unexplained cash credit under Section 68 - ITAT deleted the addition - HELD THAT:- Discussion made by the Tribunal in the impugned order sustained the order passed by the Commissioner of Income Tax (Appeal) by which a limited relief was granted to the assessee, after noting the factual position, more particularly, the remand report submitted by the assessing officer wherein the assessing officer has accepted the factual position. Therefore, we find there is no question of law, much less substantial question of law, arising out for consideration as suggested in question no. 1.
Whether Tribunal has erred in law in interpreting section 68 by holding that credited to the account of M/s V.K. Minerals on 31.03.2007 did not represent cash credit as the said amount was credited on account of transfer entry, but, failed to appreciate that M/s V.K. Minerals is a non existing entity? - HELD THAT:- Tribunal has remanded the matter to the assessing officer to decide the same afresh. In fact, the assessee also agreed that the matter may be restored to the file of the assessing officer to decide the issue afresh. Thus, we find the second question also does not arise for consideration. Hence, the appeal fails and is dismissed with the observation that no substantial question of law arises for consideration.
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2022 (2) TMI 289
Validity of assessment u/s 147 - scope of section 148A - petitioners aggrieved by the issuance of impugned notices u/s 148 as same are barred by limitation and Income Tax Authority before issuing the impugned notices have not observed the statutory formalities u/s 148 A as prescribed by the Finance Act, 2021 which are applicable with effect from 1st April, 2021 before issuance of notices under Section 148 of the Act on or after 1st April, 2021 - HELD THAT:- The issues involved in these Writ Petitions are covered by the decision of the Division Bench of the Allahabad High Court in the case of 'Ashok Kumar Agarwal -vs- Union of India [2021 (10) TMI 517 - ALLAHABAD HIGH COURT] decided in favour of assessees. Also BPIP INFRA PRIVATE LIMITED AND OTHERS VERSUS INCOME TAX OFFICER, WARD 4 (1) , JAIPUR AND OTHERS [2021 (12) TMI 207 - RAJASTHAN HIGH COURT] and MON MOHAN KOHLI VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ANR. [2021 (12) TMI 664 - DELHI HIGH COURT]
Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re- assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law.
In addition, the impugned notice under Section 148 is also dismissed on the ground that the same has been issued in the name of non-existing company and the noticee has been amalgamated long before issuance of the impugned notice and this fact was officially intimated to the respondent Income Tax Authorities which is part of record and the learned Advocate appearing for the respondent Income Tax Authorities does not deny this fact. - Decided in favour of assessee.
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2022 (2) TMI 288
Deduction u/s 80IB in respect of "common expenses" of its Units at Pandicharry, Goa and Jammu - ITAT allowed the deduction - HELD THAT:- Issue decided in favour of assessee as relying on own case [2021 (12) TMI 728 - CALCUTTA HIGH COURT] as allowed the deduction as claimed under Section 80IB of the Act - Decided against revenue.
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2022 (2) TMI 283
Transfer of property and accrual of capital gain - Year of transfer of capital asset - whether the “Agreement to sell” entered by the assessee with Shri Ramaiah Reddy to sell 80% of undivided share in the land having an extent of 2 acres and 15 guntas would result in transfer of asset or not? - as per AO transaction entered between the assessee and Shri Ramaiah Reddy is akin to “extinguishment of rights” in the capital asset as per the definition of the term “transfer” given in sec.2(47) - As per assessee mere entering of “Agreement to Sell” will not result in transfer of asset - HELD THAT:- We notice that issue whether the “Agreement to sell” would result in transfer of asset or not was examined by Hon’ble Gujarat High Court in the case of Ushaben Jayantilal Sodhan [2018 (5) TMI 1275 - GUJARAT HIGH COURT]
It is not the case of the AO that the provisions of sec. 53A of the Transfer of Property Act would apply to the impugned transaction. In fact, it is the submission of the assessee that the possession was never given to Shri Ramaiah Reddy. Hence, what was entered by the assessee with the above said person was mere “Agreement to sell”. In the above said decision, the Hon’ble Gujarat High Court has held that the agreement to sell will not result in transfer of asset. In that case, there is no question of any extinguishment of right, as held by the AO and confirmed by Ld CIT(A). Hence the question of assessing any capital gain in AY 2008-09 does not arise. In that view of the matter, we are unable to approve the computation of capital gain made by the AO in AY 2011-12 also. Accordingly, the computation of capital gain made by the assessee in AY 2011-12 is upheld. - Decided in favour of assessee.
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2022 (2) TMI 282
Late remittance of employees’ contribution to PF and ESI - As submitted assessee had paid the employees’ contribution prior to the due date of filing of the return u/s 139(1) - Scope of amendment to section 36(1)(va) and 43B - HELD THAT:- As in Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company [2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down in the case of Essae Teraoka Pvt. Ltd Vs. DCIT [2014 (3) TMI 386 - KARNATAKA HIGH COURT] held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) - Also further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory.
Therefore, the amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction - Decided in favour of assessee.
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2022 (2) TMI 287
Addition towards capital gains u/s 45(3) - Land in question in the instant case was acquired with intent to transfer it as Capital contribution in the Partnership firm - whether it is beyond the scope of Section 45(3) ? - HELD THAT:-VIt is not disputed before us that the substantial questions of law which have been raised in this appeal by the revenue have been held to be not substantial questions of law in the assessee’s own case for subsequent assessment year [2022 (2) TMI 186 - CALCUTTA HIGH COURT] as held Section 45(3) seeks to determine the capital gains with reference to the value of the asset recorded in the books of account of the firm. The value so recorded is statutorily deemed to be the full value of consideration received or accruing to the partner as a result of the transfer of the capital asset to the firm. Thus, Section 45(3) does not seek to substitute by any other figure the value agreed between the partners at which the asset is transferred by a partner to the firm.
Tribunal agreed with CIT(A) that after conversion of inventory into fixed asset the firm revalued the developed land including construction thereon in order to bring it in line with the current market value to justify the business assistance secured by the firm from the banks to extent of nearly ₹ 250 crores. Therefore, on facts the tribunal concluded that the revaluation was not a colourable device.
There was no withdrawal by the partners from capital accounts and therefore there cannot be any income liable to tax in their hands. - Decided in favour of assessee.
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2022 (2) TMI 281
Unexplained cash credit u/s. 68 - disallowance of brokerage expenses and interest expenses paid for raising the aforesaid deposits - assessee submits that assessee is an accommodation entry provider - HELD THAT:- Co-ordinate bench of this Tribunal in assessee's own case [2017 (2) TMI 1419 - ITAT AHMEDABAD], wherein the co-ordinate Bench has allowed the addition @ 3% of the accommodation entry, as the income for the assessee. During the current year, the assessee is also carrying the same activity, therefore his case is squarely covered by the order of this co-ordinate bench (supra)
We note that assessee has been carrying on same business and engaged in the same business activity. Therefore we are of the view that assessee's matter is squarely covered by the order of this Co-ordinate Bench of the Tribunal (supra) for AY 1995-96, wherein the issue in question has been decided on merits by treating assessee as an accommodation entry provider. We see no reason to take any other view of the matter than the view so taken by the Co-ordinate Bench of this Tribunal in assessee's own case - Thus we direct the Assessing Officer to treat @ 3% of accommodation entry, as the income of assessee.
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2022 (2) TMI 280
Validity of assessment against name of amalgamating company and not the name of amalgamated company - HELD THAT:- We hold that assessment order passed by the assessing officer in the name of a non existing company, despite having prior information provided by the assessee and such facts recorded in the assessment order, suffers from jurisdictional defect and, therefore, same deserves to quashed.
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2022 (2) TMI 279
Disallowance of Foreign Tax Credit (FTC) - assessee did not comply with Rule 128 of filing the necessary evidence in Form 67 along with original return of income - As Before us ITAT the assessee has submitted that all the details necessary to consider the claim is available - HELD THAT:- Now that assessee has filed all the details, we deem it fit and proper in the interest of justice to remit this issue to the Ld. CIT(A) to examine the same and to consider the claim of assessee in accordance with law. The Ld. CIT(A) is directed to pass detailed order on merits. Appeal filed by assessee stands allowed for statistical purposes.
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2022 (2) TMI 278
Unaccounted Purchases u/s. 69C - HELD THAT:- Assuming unaccounted purchases for the year at ₹. 20 lacs (say), a 30 day sum would be at ₹.1,64,384 (i.e., 20 lacs * 30/365). It is this sum that gets rolled over again and again, i.e., for each subsequent purchase, on being realized through sale, so that it is this sum (₹.1.64 lacs, going by the example) that would therefore stand to be added u/s. 69C. Each sale would though generate profit, and which would stand to be separately added u/s. 28.
Reference in this context may also be made to the discussion at para 5.5 (infra). A similar computation would stand to be made for AY 2004-05, even as it is only the additional sum (or capital involved) that would stand to be added. As such, if the capital involved for AY 2004-05 works to ₹.2.50 lacs (say), it is the additional sum of ₹.0.86 lacs (2.50 – 1.64), that would stand to be added u/s. 69C for that year. The immediate source of this accretion to capital would normally be the gross profit, against which, therefore, the same would warrant being set-off. Reference in this regard be made to para 7 (infra) of the order.
Unaccounted Sales (u/s. 28) - addition for sale out-of-books could only be to the extent of gross profit thereon - HELD THAT:- The gross profit on unaccounted sales shall be taken as per the gross profit rates disclosed per the assessee’s regular accounts for the relevant years. Even as the sales outside books also fetches saving on sales-tax (or VAT), there is nothing on record to indicate the extent of that benefit, which may also have been shared with the customer, who is generally explained by a retailer to be visited with the said levy if he ‘wants’ a sale bill. The amount of sales for each of the years under reference would be computed on the basis of unaccounted purchases, as found; or unaccounted sales, as found, taking the higher of the two.
The reason is simple. Unaccounted purchases could only be sold out-of-books, with the carry-over stock neutralizing the impact of the time lag between a purchase and sale, i.e., the period, on an average, after which a good purchased is sold. That is, though a good purchased is understandably not sold immediately, but only, on an average, with a time lag, this would be rendered of little consequence in view of the stock-in-trade, in almost the same sum, both at the time of purchase and sale.
The addition for unaccounted gross profit for both the first (AY 2003-2004) and the second year (AY 2004-2005) shall be worked out accordingly, which, representing the source of profit, would be available for being set off against additions representing the application of profit.
Unexplained Investment (u/s. 69/69A) - HELD THAT:- Assessee being unable to make out any case in respect of admitted payment for Furniture, which appears to have been fabricated, so that payments presumably would also have been made for labour, for which no specifics though have been brought on record by the Revenue, nor indeed for the payments made for Furniture during the following year.
Unaccounted Expenditure u/s. 69C - HELD THAT:- No addition for the same shall survive in view of, as afore-explained, addition of gross profit, which subsumes indirect expenditure.
The unaccounted/unexplained capital involved in unaccounted purchases would, accordingly, be also in the same ratio. This amount/s may though not be equal to the amount/s worked as per the method as the same is taken at an average of the opening and closing capital, which is thus without doubt superior, and the approximate working stated here is only to clarify the point being sought to be emphasized. The argument though is valid in principle, and would become applicable, as where, for example, addition is being made for unaccounted stock as found on stock-taking during survey, which would be u/s. 69/69A. The argument of the corresponding purchases having been made on credit would, in such a case, not be available to the assessee, i.e., without establishing the source of such credit.
Unexplained investment - HELD THAT:- The payment of ₹ 9.75 lacs, ostensibly toward the balance cost of the purchase of shop, i.e., the assessee’s business premises at Dulari Haat, Jawaharganj, Jabalpur, shown to carry a premium, i.e., over and above the stated consideration, which Sh. Agrawal – to whom it is stated as paid, at least in most part, has been shown to be collecting, has not been explained as to its nature and source, much less satisfactorily and, therefore, stands rightly brought to tax by the Revenue. The same is, accordingly, confirmed
Telescoping/Set-off - HELD THAT:- This telescoping (of additions), which represents the set-off of the source of profit and its application, so that addition/s for both cannot obtain, and is necessarily to be only at the higher of the two, can, however, only be in respect of the profit realized and, concomitantly, qua application/s of profit subsequent to its realisation. The set off afore-referred cannot therefore be extended to the gross profit for AY 2004-05 as the dates of unaccounted sales corresponding to the unaccounted purchases for the relevant year cannot be ascertained. In fact, the earliest such purchase is in end-April, 2003 (at ₹.43,490), so that even qua this purchase, applying an average stock period of six months that obtains for this year, would imply the corresponding sale as in end-October, 2003, well past the payment of on-money. In fact, the withdrawal of ₹.80,000 – which forms part of the on-money of ₹.9.75 lacs, from bank on 18/7/2003, itself shows lack of sufficient unaccounted liquid funds with the assessee for payment. No case for telescoping the gross profit for AY 2004-2005 is thus made out. As regards the issue of telescoping per se, the law in the matter is well-settled, even as reference may be made to the decisions in CIT v. Manick Sons [1969 (2) TMI 14 - SUPREME COURT]; Anantharam Veerasinghaiah & Co. [1980 (4) TMI 2 - SUPREME COURT] to cite two, which come readily to mind.
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2022 (2) TMI 286
Disallowance u/s 14A read with Rule 8D - no satisfaction had been recorded by AO to the effect that the disallowance proposed by the appellant was incorrect - HELD THAT:- It is well settled in law that assessing officer has to record reasons for disagreeing with the claim of the assessee that it had incurred no expenditure for earning such exempt income. Even Rule 8D(1) requires the assessing officer to mandatorily record his satisfaction that the claim made by the assessee that no expenditure has been incurred in earning the exempt income is incorrect. [See:'GODREJ & BOYCE MANUFACTURING COMPANY LTD.[2017 (5) TMI 403 - SUPREME COURT]
From the perusal of the order passed by the assessing officer it is evident that the assessing officer has failed to record its satisfaction with regard to the claim of the assessee that it had incurred any expenses in earning the exempt income except a sum of ₹ 1,61,035/-. Therefore, in the absence of any satisfaction recorded by the assessing officer, the substantial question of law has to be answered in the negative.
As fairly stated by learned Senior counsel that disallowance to the extent of ₹ 1,61,035/- which was proposed by the assessee itself has to be upheld. Therefore, the disallowance under Section 14A of the Act read with Rule 8D of the Rules is confined to the extent of ₹ 1,61,035/-. To the aforesaid extent, the orders passed by the Income Tax Appellate Tribunal, Commissioner of Income Tax (Appeals and the Assessing Officer are modified. The Assessing Officer is directed to disallow a sum of ₹ 1,61,035/- under Section 14A of the Act read with Rule 8D of the Rules.
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2022 (2) TMI 277
Disallowance of deduction on account of provision for liquidated damages - provision was made without any scientific or rational basis - CIT-A deleted addition - HELD THAT:- Since, the provision for liquidated damages has been made regularly and allowed in P&L account and since the unutilized portion has been reversed at a regular intervals from year to year, since, the ITAT for AY 2008-09, AY 2010-11, AY 2011-12, AY 2012-13 & AY 2013-14 has allowed provision for liquidated damages, the provision made during AY 2009-10 is on same basis as in all the years is hereby allowed.
Provision for Warranty - assessee contended that the issue of warranty is a recurring provision made in the past several years and that in all the year from 2009-10 onwards by the various judicial authorities - HELD THAT:- Since, the provision for warranties has been made @ 3% and the unutilized portion has been reversed at a regular intervals from year to year, the appellant has been consistently following the policy of making provision for warranty as per the terms of the contract, the ITAT for AY 2008-09, AY 2010-11, AY 2011-12, AY 2012-13 & AY 2013-14 has allowed provision for warranty, the provision made during the instant year is on same basis as in all the years is hereby allowed.
Advances and Deposits Written Off - assessee recognized amount of DEPB license and DEPB receivable at the time of export of certain items and the same was also credited as income in the P&L A/c of earlier years - AO held that the assessee has claimed DEPB license and DEPB receivable written off by debiting the P&L A/c during AY 2009-10 u/s. 36(1)(vii)/36(2) - assessee has claimed such deduction as business loss u/s. 28 - HELD THAT:- It is generally accepted principle that losses, other than capital losses, which arise out of and are incidental to the business of assessee must be necessarily deducted in the ascertainment of profits of the business u/s. 28 of the Act.
The basis of various judgments of the Hon'ble Courts, in order that an item of loss can be taken into account in computing the profits of the business, it should fulfill the following conditions that it should be a real loss, not notional or fictitious, a loss on revenue account and not on capital account, it must have actually arisen and been incurred, not merely anticipated as certain to occur in future, it should be one that is incidental to the carrying on of the business and must arise or spring directly from or be incidental to the carrying out of an operation of the business; and there should be no prohibition in the Act, express or implied, against the deductibility thereof.
Keeping in view, the facts and circumstances, provisions of the Act, the judgments of the various Courts, precedence narrated above, we hereby hold that the addition is liable to be deleted.
Loss on Suspended Contracts - As per AO assessee had accounted for revenue from contracts to the tune of ₹ 32,83,80,000/- and on that basis AO concluded that provision, of ₹ 41,64,92,017/- is excessive - HELD THAT:- The reasoning given for disallowing ₹ 8,81,12,017/- is apparently not correct as the loss in respect of contracts with vendors cannot be restricted to the compensation received from customers on cancellation of contracts. The liability incurred towards vendors on cancellation of contracts and purchases made which after providing for scrap value has to be written off is allowable as business expenditure.
Basis of creating the provision - assessee has claimed provision during the subject year since there was cancellation/suspension of some contracts by customers who are unable to obtain financing for those contracts - HELD THAT:- The assessee has enclosed details of cost in respect of material fully/partly processed/delivered by vendor after adjusting material cost already recognized in books of accounts and reducing realizable value of material. Such details include project code, vendor name PO no., item description, PO value and WIP value of items. This represents the net cost incurred by the assessee for materials in respect of which delivery has been taken by assessee from vendors.
The above facts would substantiate that the provision has been made for material cost and/or compensation for cancellation/suspension of contracts which is incurred under contracts with its vendors entered pursuant to pre-existing commitments against supply contracts with customers, the latter having been subsequently cancelled/suspended. Hence, we hold that the provision is an allowable deduction.
Appeal of revenue dismissed.
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2022 (2) TMI 276
Addition on account of sale of sale of jeera bag - CIT(A) deleted the additions by holding that the assessee only earned commission income in such sale - HELD THAT:- AR furnished detail of the party to whom sales were made along with detail of quantity, commission income earned and their reconciliation. It is also not disputed that the assessee is also engaged in the business of selling the goods on commission basis and the assessee has offered the commission income received on sale of 434 bags of jeera.
Before us nothing has been brought on record by the ld. DR to conclusively establish that the assessee has sold Jeera on his own account and not on commission basis. No any defect pointed out in the submission and records such as reconciliation sheet made available by the appellant, and in the commission offered to tax by the assessee, as such no any enquiry carried out from the parties to assessee claimed to have sold goods on commission basis. Therefore, in the absence of contrary finding and since the assessee has filed the reconciliation of the entries with that the name of the parties, we inclined to agree with the categorical finding given by the CIT(A).
The contention of the ld. DR that instead of commission income the entire sale proceeds is to be added fails on merits and in law. Hence the ground of appeal of the Revenue is dismissed.
Unaccounted sale by holding that there was no sale of 506 bags of Isabgu - As per AO assessee has sold 506 bags of Isabgul without recording the sales proceeds of this commodity - HELD THAT:- We concur with the finding of the CIT(A) on this aspect and dismiss this ground of appeal of revenue on the basis of the reasoning that before CIT(C) -II the assessee has reconciled the quantity, given the details of the farmer whose goods are lying, the stock is duly reconciled in the paper book filed before us and the balance stock as argued before us are covering the adat commission disclosed in respect of the quantity of goods that alleged to have been sold as sale made on behalf of farms and the quantity of the goods lying with the assessee even on the date of search thus, the fact that the assessee is engaged in the business of adat commission and vachyati sale the sale computed by the assessing officer without any reference to the seized material and therefore, we find no merits in respect of this addition made the ground of appeal of the department dismissed.
Unaccounted sale of jeera for 23320 kg as admitted on oath by the accountant of the assessee - HELD THAT:- DR has not brought anything on record except what is contended in the assessment order, argued that the addition is based on the statement of an accountant considering the same as unaccounted sale as evidence from the statement of the accountant. The department has not contradicted the fact being already on record from the the affidavit is filed, nothing discussed against about the facts filed in affidavit or in the quantity of the jeera reconciled in the paper book. The same is not found faulty or wrong at this stage too and thus the addition based merely on admission in statement which is not reliable no addition survives and thus we concur the finding given by the CIT(A). Not only that the grievance of the department that this sale is not accounted is also addressed as the appellant has already accepted that they have disclosed the income earned. Not only that the appellant has reconciled the total quantity of 567875 kg of jeera found during the search. Thus, the entries found at Annexure A041 is of the goods on vachyati goods and the commission income has already been disclosed as unaccounted income and therefore, we confirm the views of the CIT(A) so far as this addition is concern, hence ground of appeal of the Revenue is dismissed.
Addition being the purchase price of 567875 kg of jeera not entered in the regular books of accounts as unexplained investment in purchase of jeera u/s. 69 - purchase price of 5,67,875 kg of jeera are not entered in the regular books of accounts - HELD THAT:- The income being vachayati sales commission on those bags of jeera also covered under discloser of unaccounted income made by the assessee and assessee groups. Before us, the ld. DR has not brought any new evidence or arguments to controvert and the reference to remand report u/s 264 against that no independent enquiry is also conducted during the assessment proceeding and thus, the finding of the CIT(A) is also based on this facts has not been questioned before us by filling any fresh evidence or error of fact in a detailed reconciliation with that of the seized material placed on record. Therefore, considering the reconciliation chart placed before us with the seized records and entries passed in the books and the amount of the commission disclosed in the return of income as undisclosed income. We do not find any force in the arguments of the ld. DR and inclined to accept the views of the CIT(A). We do not find any infirmity with the finding of the CIT(A) while deleting this addition and therefore, the ground of the Revenue appeal is failed and dismissed.
Unrecorded purchase and thereby unexplained investment in 2436 bags of Isabgul - HELD THAT:-. The absence of the enquiry and reconciliation of statement coupled with the overall disclosure made by the assessee we are of the considered view that the addition deleted by CIT(A) has no error of facts. We have considered the rival submission and in the absence of the department brought any contrary material on record we concurred the view of the CIT(A) and the ground of the department that the assessee has unaccounted purchases of 2436 bags out of the book fails on facts in absence of any evidence and the against the finding and the same is dismissed.
Excess stock of 6 bags of Isabgul found which has been deleted by the CIT(A) - HELD THAT:- Since, we have considered the detailed reconciliation of the stock of the commodity Isabgul and relied upon the finding of CIT(C)-II recorded at para 9 and at point no. 14 and 15 above we do not find any force in the argument of the department. Before us there is no contrary facts presented by the department and even the CIT(A) has given a detailed finding about the quantity of this commodity and considering the reconciliation of stock statement and other evidence placed on record by the assessee before us we do not find any merits in the grounds of appeal filed by the revenue and the same is dismissed.
Excess stock of Tarbuj required to be taxed under section 69 - HELD THAT:- This ground of appeal that the tarbuj seeds stock is excess stock of the assessee, raised before us is fails on merits and the department has already accepted the fact that the assessee is engaged in the sale of goods on commission, we hold the decision of the CIT(A) is on finding of facts and we do not wish to consider the grounds of the department in absence of any contrary evidence and DR has merely relied upon finding given in the assessment order. In the light of the stated facts this ground of appeal of the department fails on merit and thus the same is dismissed.
Suspended and protective addition made on account of the unexplained and hidden stock of jeera of the assessee, where in the police investigation is yet to be finalized - HELD THAT:- Even the stock found in search were duly reconciled and the commission on the sale of Vachyati Goods is already offered and that amount is accepted by the department making any adjustment that figure too and there is no contrary finding placed on record in the assessment order and thus based on our finding on the various additions made on account of item jeera we find no force that the assessee is still having unexplained and hidden stock of jeera to the extent of ₹ 1,41,90,841/-, therefore, we find force in the finding of the CIT(A) on this point and looking to the arguments and evidence we also confirm the views of the CIT(A) on this issue and dismiss the ground raised by the department failing on merits.
Suspended and protective addition made on account of the unexplained and hidden stock of jeera of 3,20,814 kg found during the search - HELD THAT:- As regards the FIR made, we have not been updated the current status of that investigation but looking to the finding of the fact that the forensic report clearly establishes that the there is no tempering of the seal and the statement made by the assessee and their relative and staff with that of the quantity mentioned is not exactly matching. In fact, the quantity found in the questioned godown much more than mentioned the quantity mentioned in the statement. Had it been the case of the department than the quantity given in the statement may be matching exactly or in shortage whereas, the quantity found is much more than what is mentioned in the statement. Thus, looking to these two aspects and as quantity of the item jeera is already reconciled and for the reasoned mentioned the same is dealt with the other grounds in this appeal and thus, we do not find merit in the grounds placed before us that the CIT(A) has erred in deleting the suspended and protective addition made on account of unexplained stock of jeera of 3,20,814 kg found during the search fails and the same is dismissed.
Suspended and protective addition - additions made under section 68 and 69C and assessed in the assessment order u/s 158BB - CIT-A deleted addition - HELD THAT:- We considered the findings of the CIT(A) is the finding of the facts and in law and DR has not pointed out any single defects in the findings of the CIT(A). Considering the arguments of both the side we find force in the arguments placed by the AR of the assessee and finding of the CIT(A) and thus looking to the overall arguments of the both the sides we inclined to accept the findings of the CIT(A) and dismissed both the grounds of appeal of the department on facts and in law. Thus, Grounds No. 10 & 11 both are dismissed on the reasons stated here in above
Substantial addition be apportioned equally between the three assessee’s irrespective of the fact that the purchases had been effected in the case of the assessee only - HELD THAT:- The departmental representative has simply relied upon the finding in the assessment order and the office note where in the AO has considered that the assessee is key person and hence the addition of the unexplained sales and purchase is made in his case only. There is no other finding of the facts or any further evidence has been placed before us. Therefore, we find there is no force in respect of these two grounds raised that the same is be treated as assessee’s income alone we feel that the finding of the CIT(A) that the addition be apportioned in respect of all the three assessee is after taking into account the over all aspect of facts explained, reconciliation of the commodities and its stock were considered to of all the three concerns together and accepted by AO, reconciliation of stock found and recorded in books were considered of all the concerns, we do not find any error of facts in the finding of the CIT(A) and thus, the ground of the department fails on facts and in law and the same is dismissed.
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2022 (2) TMI 275
Delayed Employees’ contribution to PF & ESI - Whether amount was not paid before the due date as provided u/s 36(1)(va)? - HELD THAT:- If the assessee has paid the PF and ESI payments before the due date of filing of return income u/s 139(1) of the Act, no disallowance is warranted as held by the coordinate bench in case in case of Value Momentum Software Services Private Limited [2021 (5) TMI 989 - ITAT HYDERABAD].
In the present case as gone through the Tax Audit Report i.e. Form No. 3CD for both the years at Sl.No. 20(b) and found that the assessee has paid the entire PF/ESI due before filing of the return of income u/s 139(1)We direct the AO to delete the addition made towards employees PF & ESI contribution and confirmed by the CIT (A) and accordingly, the grounds raised by the assessee on this issue are allowed.
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2022 (2) TMI 274
Reopening of assessment u/s 147 - Period of limitation - Notice beyond the period of four years from the end of the relevant assessment as barred by limitation - HELD THAT:- As notice issued is time-barred - on a proper construction of sec 297(2)(d)(ii) of the new Act, the ITO cannot issue a notice under s. 148 in order to reopen the assessment of an assessee in a case where the right to reopen the assessment was barred under the old Act at the date when the new Act came into force - thus we find that the notice issued in the case of the assessee is time-barred and same is not valid. Therefore we don't find any infirmity in the decision of learned CIT(A) and accordingly the appeal of the Revenue stand dismissed.
Income already offered made protective again in the case of the assessee - HELD THAT:- As interest income from the bank account which has already been shown by the son of Shri Ravichandra V. Mehta to whom the account belonged cannot be added in the income of Shri Ravichandra V. Mehta.
Addition of interest income of the foreign bank on estimated bases at the rate of 10% on protective basis and substantive addition was made in the hand of father of the assessee Shiri Ravichandra V. Mehta - HELD THAT:- AO has not given any basis to compute the interest income on estimated bases at the rate of 10% is without disproving the facts and material furnished by the assessee, therefore the action of the learned CIT(A) is not justified which is also demonstrated from the dissatisfaction of the learned CIT(A) shown on the action of the assessing officer as elaborated above in this order. Therefore this appeal of the assessee is allowed.
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2022 (2) TMI 273
Determination of income - Accrual of income - profits & gains of the assessee's cold storage business keeping of the accounts of the said business by it on mercantile basis - whether income in the nature of interest, rent, etc., i.e., period income, which is principally a function of time and, thus, inures with it, would accrue to the service provider with the lapse of time or only in terms of the underlying contract? - HELD THAT:- Context of cold storage charges, which are essentially charges for storing goods (agriculture produce) under defined (controlled) conditions, as to temperature, etc., the contours of the contract, largely oral, as well as the conduct of the parties, which were in agreement, were examined to find that the right to receive the charges, and thus the accrual of income in its respect, is only on the cold storage fully performing its' part of the contract, i.e., where it delivers, or is in a position to deliver the agriculture produce (potatoes) stored to the farmer in a good, marketable condition at the end of the period for which it is contracted to be stored. Of course, it stands clarified that this does not give rise to any general proposition, being essentially a question of fact as to the accrual or the vesting of the right to receive in the given, undisputed facts and circumstances, and it was well open to the parties to, independent of the time set for the payment of charges, agree differently on the terms of the accrual or the vesting of the right to receive. It stands accordingly held that in the given facts and circumstances of the case no part of the cold storage charges for the business cycle Feb. - Nov. accrues on the part performance of the contract by the cold storage upto March-end.
That being the case, the direct, input cost on the said part performance of the contract for the months of February & March shall be set aside as 'closing stock' for being adjusted on the accrual of the corresponding income, with a similar adjustment being made for the opening stock, and for the same reason, altering thus the returned income to the extent of a difference between the two. Not so doing, it is explained, would result in the profit of one period being transferred to another; that being the premise of stock accounting for a going concern.
There had been no statement of the general principle/s of law nor indeed of the issue or the legal problem arising, with even the relevant facts, material to the decision, being not as presented before the Tribunal - which can only decide on the basis of the facts brought forth based on the material on record, on the earlier occasions, which orders were thus sub silentio the relevant aspects/issues. Why, even in the instant appeals, the appellant's case, as presented, was not with reference to the accrual or otherwise of rental income in the given facts and circumstances of the case, i.e., as presently discerned by the Tribunal, resulting, consequently, in the statement of a different issue or legal problem arising for adjudication, i.e., from that presented before it. In fact, as found, the issue arises; the law being well-settled, only in view of the income under reference being a period income. - Decided in favour of assessee.
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2022 (2) TMI 272
Assessment u/s 153A - unexplained expenditure on account of cash payment made towards land - search and seizure operations U/s 132 wherein loose papers found and seized - HELD THAT:- In the case before us, except the said seized papers, no other corroborative evidence has been brought on record by the AO. Whereas the assessee has proved beyond doubt the fact that the said property is still in dispute. The seller also has denied of getting any further payment from the assessee before the AO. Hence we agree with the arguments of AR that no prudent businessman will give full money to the seller, if the property being purchased is in dispute. Considering the above mentioned facts and circumstances of the case, we are of the view that the addition made by the A.O. and upheld by the ld. CIT(A) on the basis of seized document is without any basis or foundation more particularly when no specific facts by virtue of documents have been placed on record and have not rebutted by the Revenue, thus, in this eventuality, no addition was warranted. Accordingly, we direct to delete the addition made by the A.O. and confirmed by the ld. CIT(A). - Decided in favour of assessee.
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2022 (2) TMI 271
Delayed employees’ share of contribution to ESI - amount not paid on or before the due date as mentioned in Sec 36(1)(va) - scope of amendment to the provisions to section 43B and 36(1)(va) - HELD THAT:- The Hon’ble Karnataka High Court in the case of Essae Teraoka Pvt. Ltd.[2018 (2) TMI 115 - SUPREME COURT] has taken the view that employee’s contribution under section 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction.
In this case there is no dispute that the assessee made payment of the Employees share of PF/ESI on or before the due date for filing returnof income for AY 2017-18 u/s.139(1) of the Act. The next aspect to be considered is whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also. On this aspect, we find that the explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so. In the decisions referred to by us in the earlier paragraph of this order on identical issue the tribunal has taken a view that the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act, deserves to be deleted. - Decided in favour of assessee.
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2022 (2) TMI 270
Assessment u/s 153A - assumption of jurisdiction u/s 153C the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened - Bogus share capital and Unaccounted commission - HELD THAT:- It is seen that in this case, CIT(A) has held that there is no description or reference of any incriminating documents related to the assessee found or seized during the course of the search from the premises of the group concerns and all the transactions as specified in the documents on the basis of which satisfaction note had been recorded have duly been recorded in the books of accounts of the appellant company.
Accordingly, by an order dated 4.10.2021, DR was directed to furnish a paper book sought to be relied by the Revenue consisting of documents which formed the basis for recording satisfaction by the AO. DR was directed to identify the documents which are incriminating and found or seized at the time of search and pertained to assessee. The case was accordingly adjourned to 22.11.2021 for final arguments on the matter.
On the next & final hearing on 22.11.2021, DR placed on record before us the paper book. Upon perusal thereof, it has been observed that all these documents are forming part of assessment records before the AO and have already been considered during the appellate proceedings before the Ld. CIT(A).
After carefully considering the entirety of facts and principles of law enshrined by various courts including jurisdictional Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] and Index Securities Pvt. Ltd [2017 (9) TMI 585 - DELHI HIGH COURT] and Apex Court in the case of CIT v. Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] we are inclined to agree with the view of the Ld. CIT(A)that since the assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search as such, the additions made by the Assessing Officer in the absence of any incriminating material found during the course of search belonging to the assessee for the assessment year under consideration is legally unsustainable.
Revenue has not been able to rebut the findings recorded by the ld CIT(A). Hence, we uphold the order of the Ld. CIT(A) on various legal issues raised by the assessee. Revenue has not even challenged the finding of the CIT(A) of his appellate order fact that “no incriminating documents has been seized”. We find absolutely no justification for the AO to initiate proceedings against the assessee and as such the finding of the Ld CIT(A) cannot be held to be erroneous either on facts or in law. Thus, for the reasons stated above and as has been upheld by the Ld CIT(A) in his order which we fully agree, we do not find any merit in the appeal by the Revenue, which is hence dismissed.
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2022 (2) TMI 269
Addition on basis of this statement recorded u/s 132(4) - additional income surrendered by the assessee u/s 132(4) - HELD THAT:- As common statement of Shri Rajkumar Khilwani was recorded during the course of the search in which he offered the various undisclosed incomes in various concerns of Signature Group. On the basis of this statement recorded u/s 132(4), the ld. A.O. made the additions in the cases of Ultimate Builders, Signature Builders and Signature Infrastructure and these additions have been deleted by the Tribunal in the respective cases holding that without finding any incriminating material, no additions can be made merely on the declaration u/s 132(4). We find that on the basis of the same statement and with the same reasoning, the additions have been made by the Ld. A.O. in the present case and the same have been deleted by the ld. CIT(A) - in view of above discussion, we hold that the ld. CIT(A) rightly deleted the addition made by the Assessing Officer on account of additional income surrendered by the assessee u/s 132(4) of the I.T. Act. Thus, ground no.1 raised by the Revenue for the assessment year 2014-15 is dismissed.
Unexplained unsecured loans - A.O. made the additions on the ground that in absence of the bank statement and the income tax returns, the genuineness and the credit worthiness of the parties are not established - HELD THAT:- The assessee has furnished all details such as documents relating to identity, and creditworthiness of the lenders and genuineness of the transactions except in AY 2012-13. Thus, prima facie liability of the assessee to prove the genuineness of the transaction and to establish the identity and credit worthiness of the lender stands discharged. We also note that the Assessing Officer in the remand report has raised a doubt about the genuineness of the transaction which is mainly based on non availability of any written agreement and non repayment of the loan. However, we find that the assessee in reply had submitted that the contract can be either verbal or written and simply non availability of a written contract would not make the loan non-genuine and in private arrangement of loan between known persons, no practice of entering into a loan agreement is followed. We find that that the lenders are regular tax assessees and have given the loan through account payee cheques and have confirmed the transaction then the liability of the assessee of explaining the genuineness of the transaction stands discharged and the addition cannot be made on mere suspicion. Further, the Assessing Officer also failed to appreciate the fact that the assessee had paid interest on unsecured loans and had repaid the loan which is unjustified in view of the decision of Ayachi Chandrashekhar Narsangji [2013 (12) TMI 372 - GUJARAT HIGH COURT].
Thus, we find that loan party furnished the loan confirmation, copy of bank account and proof of filing of the return. By filing the above documents the assessee established the Identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Thus, the assessee had satisfied all the three conditions required for genuineness of the transaction. - Decided in favour of assessee.
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2022 (2) TMI 268
Additional evidences admitted by the ld. CIT(A) - Additional evidences were admitted by the ld. CIT(A) in contravention to Rule 46An of the Income Tax Rules - HELD THAT:- We find that the additional evidences were filed before the ld. CIT(A). All these evidences were forwarded to the ld. AO and remand report was called for. Ld. DR has himself submitted the copy of remand report dated 07.01.2015 wherein for each of the issues raised before the ld. CIT(A) remand report has been furnished. We, therefore, find no merit in this ground raised by the revenue and the same is dismissed.
Undisclosed investment - amount pertains to purchase consideration paid by partnership firm M/s Anil Enterprises for purchase of land and all the payments have been made through account payee cheque - HELD THAT:- On perusal of the purchase deed we find that this purchase was made by a partnership firm M/s. Anil Enterprises and in the purchase deed name of two partners are mentioned namely Shri Satish Chandra Gupta and assessee Shri Rajkumar Shanbhudayal Agrawal. Though the PAN No. of both the partners is mentioned but the documents clearly shows that purchase has been made in the name of M/s Anil Enterprises. Before us Ld. DR failed to controvert this fact. We, therefore, find no inconsistency in the finding of Ld. CIT(A) deleting the impugned addition by observing that the alleged sum is a purchase consideration paid by separate entity to purchase immovable property in its name for which no addition was called for in the hands of assessee. Accordingly, ground no.2 raised by the revenue stands dismissed.
Undisclosed investment in the purchase of agricultural land in the hands of assessee - HELD THAT:- There was transaction of purchase of agricultural land by three persons. Assessee is one of the co-owners and he has paid the purchase consideration by cheque and the source of this investment is though banking channel in the bank account placed on record supporting this fact. We, therefore, find no reason to interfere in the finding of Ld. CIT(A) giving relief . We, thus dismiss revenue’s ground.
Addition towards registry expenses - CIT - A deleted the addition - HELD THAT:- CIT(A) was justified in deleting the addition since it pertains to the purchase of land by a separate entity i.e. partnership firm M/s Anil Enterprises and similarly for the remaining sum also the addition is rightly deleted as the assessee is only 1/3rd owner of the agricultural land purchased and the sum is a total amount of expenses of which assessee’s shar and the source of this amount has been duly explained by the assessee which is from the business of JCB and others. Income is disclosed in the return of income. We, therefore, find no reason to interfere in the finding of Ld. CIT(A). Ground no.4 of the revenue’s appeal stands dismissed.
Transaction of sale of agricultural land purchased by the assessee - HELD THAT:- We find that agricultural land purchased in the co-ownership of three persons including the assessee was sold during the year. Assessee is liable to pay tax only on his share of income. CIT(A) gave a relief observing that this amount has already been taxed in the return of income. Out of the balance amount Ld. CIT(A) confirmed the addition of ₹ 2,50,110/- in the hands of assessee. We note that assessee had already offered Short Term Capital Gain of ₹ 9,00,000/- in its return of income being 1/3rd share of the property sold during the year. Ld. CIT(A) has rightly confirmed the addition of ₹ 2,50,110/- in the hands of assessee. Ld. DR did not raise any objection to this contention that ₹ 9,00,000/- has been offered by the assessee in the return of income. We, therefore, find no inconsistency in the finding of Ld. CIT(A) and accordingly confirm the same. Thus ground no.5 raised by the revenue is dismissed.
Addition of cash deposited in bank Account - HELD THAT:- We find that submission made by the assessee contained certain mistakes and the submission in itself are not sufficient enough to explain the source of cash deposit in bank. In the submission firstly it is stated that JCB machine was sold to Shri Ram Singh for consideration of ₹ 11,00,000/-. Thereafter during the proceedings before Ld. CIT(A) assessee has claimed to have filed a sale letter towards sale of JCB machine against a consideration of ₹ 16,00,000/-. Both submission of the assessee are contradictory. The instant appeal relates to A.Y. 2011-12 and almost 10 years have passed since then. We, therefore, under the given facts and circumstances of the case and to put an end to the litigation, being fair to both the parties and in the interest of justice, are of the considered view that against the alleged cash deposit of ₹ 18,00,000/-, we accept the source of alleged cash deposit to the extent of ₹ 11,00,000/- as explained towards the sale consideration received in cash from sale of JCB machine and ₹ 3,00,000/- being accumulated cash saving from earning of JCB machine and other income and accordingly hold that the assessee has successfully explained the source of cash to the extent of ₹ 14,00,000/- as against the addition made at ₹ 18,00,000/- and therefore addition of ₹ 4,00,000/- is sustained in the hands of assessee. - Decided partly in favour of assessee.
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2022 (2) TMI 285
Assessment u/s 143(3) read with Section 144B - Request of adjournment rejected - no fair opportunity to the petitioner to file reply - HELD THAT:- As notice under Section 142(1) of the Income Tax Act, 1961 has been issued to the erstwhile defunct firm, namely, Anand Cine Services, it is based on the PAN, no serious objections can be raised as far as the issue of notice in the name of erstwhile defunct firm is concerned inasmuch as the assets and liabilities of the said defunct firm were taken over by the petitioner.
As the copy of the documents to assess the income would require for the detailed consideration by the Assessing Authority, reply ought to have been filed by the petitioner in response to the Show Cause Notice dated 21.09.2021 by 24.09.2021. Since the time granted for reply by 24.09.2021 has expired, the impugned order has been passed.
Assessment Order was passed without giving a fair opportunity to the petitioner to file reply, the impugned Assessment Order dated 27.09.2021 is liable to be quashed and the case is liable to be remitted back to the first respondent for passing a fresh order, within a period of sixty (60) days from the date of receipt of a copy of this order. Needless to state, before passing such order, the petitioner shall be heard through Video Conferencing.
Liberty is therefore given to the petitioner to file reply within a period of thirty (30) days from the date of receipt of a copy of this order. The petitioner is also entitled to file suitable applications / representations along with the relevant documents which may be considered by the respondent in accordance with provisions of the Income Tax Act, 1961 and the Income Tax Rules, 1962 before passing order.
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Customs
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2022 (2) TMI 267
Provisional release of goods - seeking declaration that the respondents do have the jurisdiction to put on hold and/or put on alert and deal with the IEC of the petitioner - HELD THAT:- In view of the description of the goods in the bill of shippings, since the investigation is directed to be completed within a period of four months from today, interest of justice would be met with if the order of provisional release is modified by permitting the petitioner to export goods in question on submission of bond equivalent to declared value of goods and submission of bank guarantee to the extent of 20% of the duty drawback payable.
The impugned order is modified by issuing such directions. Learned counsel for the petitioner agrees to submit PR Bond within a period of three days from today and the bank guarantee to the extent of 20% of the duty drawback payable within one week from today.
Issue of detention charges - issuance of detention certificate - HELD THAT:- The petitioner is at liberty to make a representation to the respondents for waiver. If any such application is made within one week from today, the respondents shall pass an appropriate order on such represent within two weeks thereafter, in accordance with law. The order that would be passed by the respondents shall be communicated to the petitioner within one week from the date of passing of such order. If the petitioner is aggrieved by the said order, the petitioner would be at liberty to file appropriate proceedings.
The respondents are directed to permit the petitioner to export the goods which are subject matter of the impugned order upon the petitioner submitting PR Bond equivalent to declared value of goods within three days from today and upon furnishing of bank guarantee to the extent of 20% of the duty drawback payable within one week from today. It is made clear that the goods shall be permitted to be released only after the petitioner complying with the aforesaid two conditions - The impugned order of provisional release dated 4th January, 2022 is modified - petition disposed off.
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2022 (2) TMI 262
Exemption from Customs Duty as per South Asia Free Trade Agreement (SAFTA) by Notification No.40/2017 dated 30.06.2017 - goods imported in excess of what was declared in the Bill of Entry and other documents - confiscation of vehicle - levy of penalty - HELD THAT:- A plain reading of Customs Section 111(e) and (l) shows that these apply to such goods only which have been concealed and have not been declared and not the entire quantity of goods. In fact the Section 111(l) is very categorical that it applies to goods found in excess of what has been declared. Therefore, it is found that the excess goods are liable for confiscation and not the entire consignment imported by the Appellant - the confiscation of the remaining goods is not as per the law and accordingly needs to be set aside.
The denial of the exemption certificate for the entire quantity of goods when the bulk of the goods are already covered by the SAFTA Certificate is not supported by any legal provision. Therefore the demands need to be set aside. The amount of redemption fine imposed by the impugned order as well as the penalties imposed upon the Appellants need to be proportionately reduced.
Appeal of Shri Dilip Sarkar is partly upheld by upholding the confiscation of the excess quantity of goods found in the consignment over and above what was declared and duty on such quantity of pieces, remaining part of the demand and the confiscation of the remaining goods is set aside. Consequently the redemption fine as well as penalty upon the said Appellant needs to be reduced in proportion to the value of the excess goods to the total value of goods.
Imposition of penalty on the Authorized Representative of the Customs Broker - HELD THAT:- There is no evidence on record that the Customs Broker was aware of the alleged irregularity. As there is no material available on record against him, the imposition of penalty on Shri Biswajit Mirdha is not justified and accordingly the same is set aside.
Vehicle being confiscated and penalty imposed upon the owner Shri Uttam Biswas - HELD THAT:- It is an admitted fact that the seized vehicle had been utilized for the purpose of importation of the mis-declared goods and it is amply clear that the loading of the goods has been done in presence of the transporter, although the owner of the vehicle was not present. The owner had simply let out his vehicle to M/s. New Transport Agency, as reflected in his statement, however, no investigation has been caused with regard to the involvement of the said transporter or the driver of the vehicle. From the statement of the owner of the vehicle, it is abundantly clear that although his vehicle has been used for carrying of mis-declared goods, however, he had no personal knowledge in regard to loading of the goods. Accordingly, the penalty imposed upon the owner of the vehicle under Section 112(b) is set aside. The redemption fine of ₹ 4.00 Lakhs imposed for redemption of the vehicle is reduced to ₹ 1.50 Lakhs.
Appeal allowed in part.
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2022 (2) TMI 261
Anti-dumping duty - Classification of imported goods - Mayil Mark Raw Honey - glass bottles having specific measurement of 45 ml, 80 ml, 180 ml, 380 ml and 730 ml - goods to be classified under CTH 70109000 whereas classified under 70139900 to demand anti-dumping duty? - HELD THAT:- The description of the goods falling under CTH 7013 shows that only glassware used as tableware or kitchenware fall under the said Heading. Further, HSN Note of 7010 specifically states that the said Heading covers all glass containers of the kind commonly used commercially for the conveyance or packing of liquids or solid products (powder, granules etc). - From the bare reading of the Chapter Heading, it is evident that the impugned goods fall under CTH 7010 and does not fall under 7013. The classification adopted by the appellant is correct. Consequently, the anti-dumping duty collected alleging classification of the goods to be 7013 cannot sustain.
Thus, the impugned goods are classifiable under 70109000.
The appeal is allowed.
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2022 (2) TMI 260
Penalty u/s 112(a) of the Customs Act, 1962 - Smuggling - specific case of the Revenue was that there was a mismatch in as much as certain items were missing, the quantity declared was much less than the actual quantity and the undervaluation, which clearly amounts to giving the incorrect figure - HELD THAT:- When he has admitted to having received invoice and packing list, nothing prevented the appellant from cross-verifying before sending the same for Customs clearance, which was the minimum that was expected of the appellant, which act amounts to a clear omission, for which penalty under Section 112(a) ibid. appears to be correct. This is also for the reason that similar penalty was imposed on the other co-noticees, who appear to have accepted the same without agitating further.
In the case of RAM LAL KATARIA VERSUS COLLECTOR OF CENTRAL EXCISE [1990 (10) TMI 190 - CEGAT, CALCUTTA], it is held that the confession of the co-accused cannot be the sole criterion, but here it is not just the confession, but statement of each person is the link to the whole chain - The same view is taken in CHANDRA SHEKHAR R. SHUKLA VERSUS COMMISSIONER OF CUSTOMS, (IMPORTS) [2019 (6) TMI 277 - CESTAT MUMBAI] and hence, factually, the case on hand stands on a different footing. But however, considering the above facts and circumstances, the quantum of penalty which is normally levied as a deterrent, is very high and hence, the same is directed to be reduced to ₹ 10,000/-.
There are no reasons to interfere with the findings of the First Appellate Authority, except that the amount of penalty which is ordered to be reduced to ₹ 10,000/- - appeal allowed in part.
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2022 (2) TMI 259
Classification of goods - hook and eye for brassieres - whether classified under CTH 83081010 as claimed by the appellant or under CTH 62129090 as part of brassieres as arrived at by the assessing officer? - HELD THAT:- HSN 8308 clarifies that articles referred to in (A), i.e., hooks, eyes and eyelets may also contain parts of leather, textiles, plastics wood, horn; bone, ebonite, mother of pearl, ivory, imitation precious stones, etc., provided they retain the essential character of articles of base metal; They may also be ornamented by working of the metal. Having seen the sample of the article and having gone in to the notes of HSN, it is found that the impugned goods should fall under the specific heading i.e. CTH 83081010.
The Tribunal, in the case of M/s Ajay Kumar [2019 (1) TMI 919 - CESTAT NEW DELHI], has gone in to the case in detail and held the classification under CTH 83081010 to be correct. Tribunal has considered the Chapter notes, HSN notes and international nomenclature and have held that the Hooks and eye do not lose the essential character of being articles of base metal even when attached to the piece of cloth and in terms of HSN explanatory notes it is rightly classifiable under CTH 83081010.
Apex Court, high Courts and this tribunal held in a plethora of cases that HSN and the explanatory notes have a persuasive effect. Also, the international classification becomes relevant to know the trade practice of classification and to know as to how the impugned product is known in the commercial or common man’s parlance. The appellants have successfully demonstrated that the import documents describe the product to be ‘Hooks and eye’ for the Brassieres; other importers are also claiming the classification under the same heading. Such overwhelming evidence cannot be overlooked - the impugned goods are rightly classifiable CTH 83081010.
Appeal allowed - decided in favor of appellant.
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2022 (2) TMI 258
Classification of imported goods - Petroleum Hydrocarbon Solvent - Superior Kerosene Oil or not - discharge of burden to prove - the department has challenged the classification only on the basis of one test report of the goods in question which was issued by CRCL Kandla - lack of judicial discipline - appellant submits that the impugned order in appeal was passed without considering facts and the submission and settled law in the present case - HELD THAT:- As per the IS specification for Kerosene i.e. 1459:1974 total eight parameters need to be tested. However, in the test report of CRCL Kandla all the parameters were not admittedly tested - From the communication of the department, it is clear that the IIP Dehradun could not test the parameters of Kerosene. In this fact the test of parameters of Kerosene could not be done conclusively. Therefore, the department did not discharge the burden to prove their case of classification.
There are force in the argument of the appellant that the goods imported by them are used as raw material in the manufacture of their final product i.e. solvent. In this regard the appellant post hearing submitted certain documents such as certificate issued by the appellant, invoices copies of their final product and the process flow diagram.
From the documents it is established that raw material i.e. Petroleum Hydrocarbon Solvent imported by the appellant is their raw material which is used in the manufacture of their final product such as industrial solvent, thinner etc. This fact also strengthen the case of the appellant that the goods imported by them is not Superior Kerosene Oil.
The declaration of the goods and classification made by the appellant in the bill of entry is correct and the department’s claim of classification as Superior kerosene Oil could not be established - appeal allowed - decided in favor of appellant.
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2022 (2) TMI 266
Extension of period of levy of anti-dumping duty under customs Notification No.38/2021 dated June 30, 2021 - the stance of the respondent No.1 is that this Court should not stay the Notification No.3/2022-Customs(ADD) dated 24th January 2022 or extend the anti-dumping duty beyond 31st January 2022 - HELD THAT:- The stay of the operation of the Notification dated 24th January 2022 is stayed till a further period of six weeks, and at the same time, also order that the Notification dated 8th August 2016, as extended by the Notification dated 30th June 2021, shall remain in operation for a period of six weeks. During this interregnum period of six weeks, the Special Bench of the Tribunal are expected to take up the appeals for hearing and dispose them of in accordance with law before the period of six weeks comes to an end. A litigant should not suffer because the Special Bench of the Tribunal is not available. The Tribunal has to make the necessary arrangement for urgent hearing of the appeals one filed by the Association.
This writ application is disposed off with a direction that the Notification dated 24th January 2022 shall remain stayed from its operation for a period six weeks from today, and at the same time, the operation of the Notification dated 8th August 2016, as extended by the Notification dated 30th June 2021, shall continue for a period of six weeks.
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2022 (2) TMI 265
Seeking provisional release of goods - Classification of imported goods - Naphtha - classified under the CTH 27101229 or not - seeking that the goods be released having regard to the fresh test report of the Indian Institute of Petroleum - Section 110A of the Customs Act, 1962 - HELD THAT:- At this point of time without entering into any other controversy, we must pass an appropriate interim order that may protect the interest of both, the respondent No.1 also and at the same time the writ applicant DRI. It is very clear that even if the respondent No.1 is permitted to re-export the goods as ordered by the Tribunal, it is always open for the Department to initiate appropriate proceedings for the purpose of confiscation of the goods by issue of a show cause notice. All larger issues involved in this litigation shall be looked into and decided.
The respondent No.1 is permitted to re-export the goods on the condition that the respondent No.1 shall furnish a running Bank Guarantee of an amount of ₹ 15 Crore of any Nationalized Bank in favour of the respondent No.2, Commissioner of Customs, Kandla. This would definitely protect the interest of the Revenue to some extent - The respondent No.1 be permitted to re-export the goods by using the nomenclature “Naphtha” and it is observed that using of the said nomenclature would not bind the Department (DRI) and would not entitle the respondent No.1 to raise a plea of estoppel in the proceeding that may be initiated by the DRI against the respondent No.1.
Let Notice be issued to the respondents returnable on 17.02.2022. No notice now be issued to the respondent No.1 as Mr. Modh, the learned counsel already entered his appearance. Notice be issued respondent No.2 shall be served by Email. Direct service is permitted.
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2022 (2) TMI 264
Classification of imported goods - High Speed Diesel or goods just in the form of base oil - product classified under the CTH 27101960 or not - discharge of onus to establish the cargo as High-Speed Diesel or not - determination of any question having a relation to the rate of duty of Customs or to the value of goods for purposes of assessment so as to make the present appeals maintainable before this Court under Section 130 of the Act - confiscation - penalty - whether the applicant herein had correctly described the goods imported by it?
HELD THAT:- From the findings recorded by the Tribunal, it is clear that none of the findings touch any issue relating to the determination of the rate of duty or value of goods for the purposes of assessment. The entire controversy relates only to the description of the goods in the IGM in connection with the question as to whether such goods are liable to confiscation. None of the issues decided by the Tribunal are in the context of determination of the rate of duty or the value of goods for the purposes of assessment. In such circumstances, the appeal squarely falls within the ambit of section 130 of the Act and has, therefore, rightly been filed before this Court - the assessees have sought to create a ghost that the matter relates to the determination of the rate of duty and value of goods for the purposes of assessment by advancing specious arguments, even when the basic requirements for taking the appeal out of the ambit of section 130 of the Act are not satisfied - According to the Tribunal, although the 14 tests undertaken by the three laboratories might have revealed that the sample is High Speed Diesel, yet the tests cannot be said to be conclusive as regards the nature of the subject goods.
In the first blush, it would appear that what has been decided by the Tribunal could be termed as a question of fact. Whether the subject goods fall within one category or the other would essentially be a question of fact. However, even while deciding the same, if the Tribunal overlooks certain basic principles of law applicable to the case on hand and records a finding which could be termed as perverse, then definitely, such decision of the Tribunal would give rise to a question of law - Although the expression “substantial question of law” has not been defined in any Act or in any of the statutes where this expression appears, yet the true meaning and connotation of this expression is now well settled by various judicial pronouncements.
It is a settled position of law that the burden of showing the correct classification lies only on the Revenue. It is not in dispute before us, as it cannot be, that the onus of establishing that the sample meets with the specification IS 1460 : 2005 lay upon the Revenue. The burden of proof is on the Taxing Authority to show that the particular goods or item in question is taxable in the manner claimed by them. Mere assertion in that regard is of no avail. There should be material to enter appropriate findings in that regard and the material may be either oral or documentary. It is for the Taxing Authority to lay evidence in that behalf even before the first adjudicating authority - The Tribunal has ignored the fact that all the 14 tests carried out in three different laboratories revealed only one thing that the sample showed the characteristics of the High Speed Diesel. If the department is able to lead evidence to this extent, the onus would thereafter shift upon the assessees to establish that these 14 tests cannot be said to be conclusive of the fact that the subject goods is High Speed Diesel. No such attempts have been made by the assessees.
The import of the High Speed Diesel in any form has been prohibited vide the Notification dated 17th January 2017. It appears from the materials on record that the investigation was also extended to the major buyers claiming to have imported Base Oil SN 50 in the past and the same has been clearly demonstrated in the Show Cause Notice. The inquiry in the instant case has revealed that the major buyers of such Base Oil were facilitating by issuing only invoices, even without physical receipt of the goods at the behest of the importer, thus evidencing that such imported goods were being clandestinely removed for use as Diesel and only fake invoices were generated to cover the goods - The Bio-Diesel thus shown to have been manufactured was cleared under the invoices for use as Bio-Diesel B100. The Bio-Diesel is a product of vegetable origin and no known literature ascribe the Base Oil as an input for the manufacture of the same. The Bio-Diesel is used as fuel. The modus operandi adopted thus appears to be that High Speed Diesel imported under the guise of Base Oil SN 50 is being diverted as fuel by routing such goods through the purported manufacturers who claim to manufacture Bio-Diesel B100.
The substantial questions of law are answered in favour of the Revenue and against the assessees - appeal allowed - decided in favor of Revenue.
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2022 (2) TMI 263
Value of the goods for purpose of assessment - appellant had at the outset argued before the Tribunal has committed an error in accepting the valuation as suggested by the Department based only on the so called admission by one of the partners of the appellant firm - Section 130 of the Customs Act, 1962 - HELD THAT:- As per sub-section (1) of Section 130 of the Customs Act, 1962, an appeal lies to the High Court on substantial question of law from every order passed by the Appellate Tribunal except an order relating among other things to the determination of any question having relation to rate of duty of customs or to the value of goods for the purpose of assessment. As per clause (b) of Section 130-E of the Act, an appeal shall lie to the Supreme Court against an order passed by the Appellate Tribunal which relates among other things to the determination of any question having relation to rate of duty of customs or to the value of goods for the purpose of assessment.
In terms of Sections 130 and 130-E of the Act, thus these appeals are not maintainable to the High Court - Appeal dismissed as not maintainable.
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Corporate Laws
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2022 (2) TMI 256
Seeking this Tribunal to direct for an Extraordinary General Meeting (EGM) of the Respondent Company - HELD THAT:- Under Section 98 of the Companies Act, 2013, the Tribunal can either suo-motu or on the application of any director or member of the Respondent Company who would be entitled to vote at the meeting, can order to call for the meeting.
The counsel relies on the proviso to contend that the Applicant can be held as sufficient to form a quorum. Hence considering that the Applicant is the majority shareholder, the Application is allowed - The Applicant shall hold an Extra-Ordinary General Meeting (EGM) of the Respondent Company by issuing notices to all the shareholders of the Respondent Company and implement the orders of this Tribunal. For the purpose of quorum, the Applicant who has 60.08% of shareholding can be counted upon.
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2022 (2) TMI 255
Seeking calling, holding and conducting Extraordinary General Meeting of the members of the Respondent-Company - Section 169 of the Companies Act, 2013 - seeking direction to Board of the Respondent-Company on receipt of a valid requisition from its members to fix the date, time, and venue of the Extraordinary General Meeting and to comply with the statutory requirements in respect of the notice of the meeting as per Section 101 and special notice under Section 115 of the Act - HELD THAT:- As per Section 100 of the Companies Act, 2013 in order to call an EoGM, it is prescribed that the Board of Directors may call an EoGM; whenever deemed fit. As per Section 100(1) and as per Section 100(2) of the Act when a "Requisition" is made by Members, the Board shall call an Extra Ordinary General Meeting.
In the case on hand, 49 shareholders requisitioned to convene an EoGM of the Company claiming an aggregate 9800 shares representing 13.82% of the paid-up equity share capital of the Company. Respondent Company countered that all the submissions made by the Petitioners are admitted since the non-compliance of statutory requirements were not made due to inadvertent omission, which they undertakes to correct when the next Extra Ordinary General Meeting is held. It is also stated that the requisitionists sought an amendment of their requisition dated 14.01.2020. However, the company denied the request and refused to conduct the EoGM. Hence, the Extra Ordinary General Meeting slated on 28.02.2020 did not take place.
Section 98 provides that if for any reason it is "impracticable" to call a statutory meeting or an Extra Ordinary General Meeting according to the provisions of the Act or the articles, the Company Law Board (now NCLT) may, either on its own motion or on the application of any director of the company, or any member thereof who would be entitled to vote at the meeting, direct the calling of a meeting and give necessary directions therefor. Hence, either a director or a member of the company entitled to vote at the meeting can file an application under Section 98 - there is no dispute as to whether the applicants are shareholders of the company in view of the fact that the respondents have not refuted the argument that they are shareholders.
Whether it was "impracticable" to call an Extra Ordinary General Meeting of the company? - HELD THAT:- A careful scrutiny of the requisitions dated 14.01.2020 reveal that the 49 shareholders of the company requested under Section 169 of the Act to convene an Extra Ordinary General Meeting to transact the business such as removal of Directors as contemplated under Section 169(1) of the Companies Act, 2013 and for appointment of Directors under Section 169(5) of the Companies Act, 2013.
Even though on the basis of the requisition from 49 shareholders, the Company decided to hold an EoGM on 28.2.2020 finding certain defects and omission on the part of the requisitionists while submitting the requisition, the company cancelled the meeting slated on 28.02.2020 and they stated that they are ready to conduct an EoGM following the procedures/rules in the Companies Act - the respondents are directed to conduct the EoGM of the Company if a valid requisition from the shareholders is received, strictly following the relevant rules/provisions of the Companies Act, 2013. On receipt of the requisition from the shareholders, the Board shall call an EoGM immediately after following all the prescribed procedures.
Petition disposed off.
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2022 (2) TMI 257
Seeking grant of Regular Bail - siphoning-off the funds - commitment of fraud by swindling away the hard-earned money of the members/depositors of ACCSL, mainly belonging to the low and middle income groups - HELD THAT:- The co-accused of the petitioner, i.e Vijay Shukla, has also been granted the interim protection only and that too, in the circumstances when this Court had specifically noted in the impugned judgment that he was not accused of having committed the offence under Section 447 of the Act of 2013 and was only a signatory to the financials of the Company whereas the petitioner was one of the Directors in ACCSL as well as in some of the Companies comprised in AGC&L and she has categorically been alleged to have committed the offence under Section 447 of the Act of 2013. Again, mere custody of the petitioner since the said date, in itself, does not suffice at all to extend the relief of bail to her in the eventuality when Section 212(6) of the Act of 2013 is applicable to the present case.
The observations made by Hon’ble Supreme Court in Union of India [2021 (2) TMI 1212 - SUPREME COURT], Shri Gurbaksh Singh Sibbia and Others [1980 (4) TMI 295 - SUPREME COURT] and Sanjay Chandra [2011 (11) TMI 537 - SUPREME COURT] also do not come to the rescue of the petitioner to seek her release on bail because the facts and circumstances of the case in hand are distinguishable from those of the cited above. In Union of India [2021 (2) TMI 1212 - SUPREME COURT], the Apex Court was dealing with the issue of “cancellation of bail” in a matter involving Section 43-D(5) of the UAP Act and had, rather, observed that there was a vivid distinction between the parameters to be applied while considering the bail application vis-à-vis those, applicable while deciding a petition for its cancellation and moreover, the respondent-accused had been in custody in the said case for more than five years whereas the petitioner has moved this petition with a prayer for “grant of bail” and she is in custody for the last about 2½ years.
The petitioner does not deserve the relief of regular bail and the petition in hand, being sans any merit, deserves dismissal - Petition dismissed.
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Insolvency & Bankruptcy
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2022 (2) TMI 254
Initiation of CIRP - NCLT admitted the application - NCLAT allowing the appeal dismiss the application and relieased the respondent from ongoing CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - appellant is an operational creditor under the IBC even though it was a ‘purchaser’ or not - respondent took over the debt from the Proprietary Concern or not - application under Section 9 of the IBC is barred by limitation or not.
Whether the appellant is an operational creditor? - HELD THAT:- Operational creditors are those whose debt arises from operational transactions, i.e., transactions which are undertaken in relation to the operation of an enterprise. As the examples in the BLRC Report suggest, these generally include transactions involving goods or services which are considered necessary for the operational functioning of an entity - another point of difference between financial and operational creditors would be in the nature of their role in the Committee of Creditors, “CoC”, because it is assumed the operational creditors will be unwilling to take the risk of restructuring their debts in order to make the corporate debtor a going concern. Thus, their debt is not seen as a long-term investment in the going concern status of the corporate debtor, which would incentivize them to restructure it, but merely as a one-off transaction with the corporate debtor for certain goods or services.
As such, the presence of an invoice (for having supplied goods or services) is not a sine qua non, since a demand notice can also be issued on the basis of other documents which prove the existence of the debt. This is made even more clear by Regulation 7(2)(b)(i) and (ii) of the CIRP Regulations 2016 which provides an operational creditor, seeking to claim an operational debt in a CIRP, an option between relying on a contract for the supply of goods and services with the corporate debtor or an invoice demanding payment for the goods and services supplied to the corporate debtor - a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.
In the present case, the phrase “in respect of” in Section 5(21) has to be interpreted in a broad and purposive manner in order to include all those who provide or receive operational services from the corporate debtor, which ultimately lead to an operational debt. In the present case, the appellant clearly sought an operational service from the Proprietary Concern when it contracted with them for the supply of light fittings. Further, when the contract was terminated but the Proprietary Concern nonetheless encashed the cheque for advance payment, it gave rise to an operational debt in favor of the appellant, which now remains unpaid. Hence, the appellant is an operational creditor under Section 5(20) of the IBC.
Evidentiary value of respondent’s MOA as amended - Whether the debt owed to the appellant can actually be realized from the respondent? - HELD THAT:- The object clause in an MOA is considered to be representative of the purpose of a company and it is expected that the company will fulfill/attempt to fulfill the objects it has laid out in its MOA. - the MOA of the respondent unequivocally states that one of its main objects is to take over the Proprietary Concern. However, the respondent has produced a resolution dated 1 September 2014 passed by its Board of Directors, purportedly resolving to not take over the Proprietary Concern.
Section 13 of CA 2013 provides for the procedure which has to be followed when the MOA is to be amended. In cases where the object clause is amended, it requires the Registrar to register the Special Resolution filed by the company. However, the respondent has provided no proof that: (i) the purported resolution dated 1 September 2014 was a Special Resolution; (ii) it was filed before the Registrar; and (iii) that the Registrar ultimately did register it. Thus, in terms of Section 13(10) of CA 2013, the purported amendment to the MOA would not have any legal effect.
Whether the application under Section 9 is barred by limitation? - HELD THAT:- In the present case, CMRL issued the cheque of ₹ 50,00,000 to the Proprietary Concern on 7 November 2013. However, at that time, it was issued as an advance payment for the purchase order of the appellant. It was only on 2 January 2014 that CMRL terminated its project with the appellant, and it was after this that the Proprietary Concern encashed the cheque. Subsequently, correspondence was exchanged between the appellant and the Proprietary Concern in July 2016 in relation to the re-payment of the amount. Thereafter, a joint meeting was also held on 4 August 2016. Till this point in time, both the parties were in negotiation in relation to the re-payment and the minutes of meeting show that the Proprietary Concern was willing to make the re-payment if CMRL issued a letter stating that they will not pursue a claim in the future or if the appellant provided a bank guarantee for the amount.
A final letter was addressed by the appellant to the Proprietary Concern on 27 February 2017, demanding the payment on or before 4 March 2017. The Proprietary Concern replied to this letter on 2 March 2017, finally refusing to make re-payment to the appellant. Consequently, the application under Section 9 will not be barred by limitation.
Appeal allowed.
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2022 (2) TMI 253
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - pre-existing disputes between the parties or not - HELD THAT:- The notice under Section 8 was issued on 02.01.2019 and immediately thereafter Legal Notice dated 07.01.2019 was issued by the Corporate Debtor giving details of shortcoming at different places and making serious allegations against the Appellant. There is pre-existing dispute between the parties. Serious allegations have been made against the Appellant by the Corporate Debtor and the Adjudicating Authority did not commit any error in rejecting the Application under Section 9.
There is no merit in this Appeal - appeal dismissed.
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2022 (2) TMI 252
Refusal of the Bank to invoke the Bank Guarantee - Adjudicating Authority has taken the view that since CIRP proceedings were continuing the Bank Guarantee cannot be invoked - HELD THAT:- The Appellant was clearly entitled for invocation of Bank Guarantee, hence, we remit the matter back to the Adjudicating Authority to pass appropriate orders with regard to claim of the Appellant to the amount to ₹ 19 Lakhs as included in the Bank Guarantee. Appropriate orders be passed by the Adjudicating Authority in accordance with law.
Appeal allowed.
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2022 (2) TMI 251
Exaggeration of claim by suitably manipulating their records - wrongful gains - imposing heavy costs on the Respondent No. 1/Operational Creditor with an amount, at least equal to the value of the CIRP Costs - HELD THAT:- As per the audited account as on 31st March, 2019 the dues payable to the Respondent No. 1 (Operational Creditor) is ₹ 91,05,994/- and this fact was admitted by the applicant stating that the audited accounts have been finalized even before the admission of the Corporate Debtor under CIRP. This Tribunal also while admitting the aforesaid Application relied on the Audited Accounts and based on the same it was held that the amount payable to Respondent No. 1 (Operational Creditor) is more than the threshold limit of one lakh rupees. The amount of ₹ 91,05,994/- was noted at that point of time, and admitted the Corporate Debtor for CIRP. The RP, has not admitted any amount claimed to be apportioned by the 1st Respondent against the dues of a foreign entity i.e., Matheel Al-Nujoom Group of Industries wherein the applicant Mr. Shameel E.P is a Common Director, since the amount has been remitted by the Corporate Debtor against import through proper banking channel in compliance with the RBI Regulations.
The Corporate Debtor has not raised any of the points raised in this application, as the applicant was silent waiving the Corporate Debtor right to file an appeal, if the Corporate Debtor was really aggrieved by the aforesaid admission of the matter - application dismissed.
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2022 (2) TMI 250
Jurisdiction of NCLT to levy fine u/s 235A of IBC - seeking for a declaration that the Respondent is not entitled to any payments in terms of the Agreement towards record management services and record retrieval services after commencement of CIRP of the Corporate Debtor - Refusal of Moratorium in refusing the record management services which were critical services within the meaning of Section 14(2A).
Whether the Adjudicating Authority in exercise of jurisdiction under Section 235A can impose a fine of ₹ 20 Lakh as has been imposed by the impugned judgment on the Appellant? - HELD THAT:- Section 235A is a provision for awarding a punishment of fine and the provision is for punishment of an offence. The trial of such offence has to be as per Section 236 on taking cognizance by Special Court by complaint made by the Board or Central Government for punishment of a person. For any offence law prescribe a procedure which broadly requires framing of charges and opportunity to answer the same. In event, it is accepted that power under Section 235A can be exercised by the Adjudicating Authority while passing orders on an I.A filed for different reliefs pertaining to CIRP, the person punished with fine may be deprived of his right to answer charge of an offence. The present case is an example which fully supports the interpretation which we have put on Section 235A.
When the allegation of Resolution Professional was that Appellant has contravened the Moratorium there was allegation of commission of an offences on which punishment could have been awarded after following the procedure under Section 236. An act which is termed as offence within specific provision of Chapter VII of Part-II could not have been indirectly dealt with by the Adjudicating Authority by imposing a fine - the fine imposed by the Adjudicating Authority of ₹ 20 Lakh on the Appellant in exercise of powers under Section 235A was beyond jurisdiction and direction insofar as in para 15(c) is to be set aside.
Whether Record Management Services are critical services within the meaning of Section 14(2A) which should not be terminated during the period of Moratorium and the Adjudicating Authority is right in issuing direction to Appellant to continue to provide Record Management Services during CIRP period? - HELD THAT:- In the facts of the present case, Resolution Professional was of the opinion that services of record management services are critical services for Corporate Debtor and it should be provided during period of Moratorium. In the facts of the present case, the record management services can fall within the definition of ‘critical services’ as referred to in sub-section (2A) of Section 14. The Appellant in this Appeal has categorically stated that they have continued to provide record management services during CIRP proceedings, there are no error in the direction issued by the Adjudicating Authority in paragraph 15(A) to continue providing its services to the Corporate Debtor. Hence, direction issued in paragraph 15(A) is affirmed - In the Rejoinder filed by the Appellants an order dated 06.12.2021 has been brought on record by which order Adjudicating Authority has directed for liquidation of the Corporate Debtor. The CIRP thus has come to an end w.e.f. 16.12.2021.
Whether Adjudicating Authority has rightly issued direction to the Appellant to refund the amount received from the Resolution Professional after initiation of CIRP? - HELD THAT:- It is on the record that Appellant has issued invoices for payment for the services provided during CIRP and part payment was made during the period. The prayer of the Resolution Professional in his second Application i.e. I.A. 484 of 2021, the direction be issued to the Appellants that they are not entitled to receive any payment for services during CIRP period could not have been granted. There was no occasion for the Adjudicating Authority to issue any direction to refund the amount which has already been paid by the Resolution Professional for the services provided during the CIRP. Thus, direction issued also cannot be sustained.
The Appeal partly by setting aside the direction in para 15(B) and 15(C) - directions issued in paragraph 15(A) are affirmed.
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Service Tax
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2022 (2) TMI 249
SVLDRS - unfair classification of the case of the petitioner under “litigation” category, instead of “arrears” category - Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 - time limitation - Cenvat Credit - dues on account of improperly availed of Cenvat credit - HELD THAT:- Once the distinction between “litigation” category and “arrears” category is understood, no difficulty would arise in comprehending the category under which the case of the petitioner would fall. The petitioner was issued show cause notice on 24.4.2019 well before the cut-off date of 30th June, 2019 but, the show cause notice was adjudicated upon by an order passed on 29.12.2019. On the date on which the adjudication order was passed, the Scheme, 2019 was operational. Against this adjudication order, the petitioner could have filed an appeal as the limitation period of 90 days was available. But, the petitioner did not file any appeal and chose to file declaration in form SVLDRS-1 as the Scheme, 2019 was operational. The intention was obvious. It was to off-load the baggage; it was to settle the dispute arising from it’s past legacy of defaults, once and for all, so that it could make a new beginning under new GST regime.
Adjudication of the show cause notice during the validity period of the Scheme, 2019 in this case is what transformed it into a case under “arrears” category which otherwise would have continued to be in “litigation” category. It would have been a different thing if show cause notice dated 24.4.2019 was not adjudicated upon during the validity period of the Scheme, 2019 - the action of the respondent in treating declaration filed by the petitioner as falling under “litigation” category instead of “arrears” category is contrary to the provisions of the Scheme and hence not permissible in law. On this count, the action of the department needs to be quashed and set aside.
A separate case must be filed in respect of each of the four categories listed in clauses (a), (b), (c) and (d) of rule 3(2). It would also be clear that when a case is filed under any one of these categories, within that category the case is required to be considered and dealt with as if it is a single case and there cannot be any further breaking of the case on the basis of several demands made in the show cause notice. Once a case travels from the category of show cause notice (“litigation category”) under clauses (a) and (c) to the category under clause (b) which is of a “an amount in arrears” (arrears category) and the declaration is made under the category listed in clause (b) of rule 3(2), it would have to be treated as one single case for the purpose of Rules, 2019, no matter the show cause notice contained two demands of taxes, one under Finance Act, 1994 and the other under Cenvat Credit Rules, 2019.
The respondent has fallen in error in not treating the declaration filed by the petitioner as constituting one single case in the category of “amount in arrears” and by considering two demands in the show cause notice, one relating to service tax dues and the other in relation to recovery of disallowed Cenvat credit, separately and individually, something not permitted under Rules, 2019.
The respondent is directed to reconsider the case of the petitioner in the light of the observations made herein-above and in accordance with law as expeditiously as possible - petition allowed.
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2022 (2) TMI 248
Rejection of refund claim - residential complex services - Section 102 of Finance Act, 1994 - HELD THAT:- In the instant case, the refund claim was not filed within a period of six months as provided in sub Section (3) of Section 102 of Finance Act, 1994. The Finance Bill was granted assent on 14.05.2016. Refund claim has been filed on 05.09.2017.
The issue has been settled by the decision of Hon’ble Madhya Pradesh High Court in the case of M/S MDP INFRA (INDIA) PVT. LTD. VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE & CGST [2019 (2) TMI 208 - MADHYA PRADESH HIGH COURT], which was approved by the Hon’ble Apex Court in MDP INFRA (INDIA) PVT. LTD. VERSUS COMMISSIONER [2021 (7) TMI 1261 - SC ORDER] where it was held that the notification No. 12/2012 & 25/2012 ceased to exist w.e.f. 01/04/2015. The exemption was revived by notification dated 01/03/2016. But since it was prospective in effect, the appellant was not entitled for any exemption, which the appellant was aware of and with open mind and eyes deposited the service tax due with interest.
The appeal is dismissed.
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Central Excise
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2022 (2) TMI 247
CENVAT Credit - inputs - input service - capital goods - Furnace Oil / fuel used in the generation of electricity, part of which cleared to other unit and residential colony - denial on the ground that the part of electricity was used by the appellant’s DTY division and also on the ground that the electricity to this extent was used in the residential quarters - period 2004-05 to 2007-08 - HELD THAT:- Even though both POY unit and DTY unit are two division but both belongs to one single entity i.e. M/s Modern Syntex (I) Ltd., moreover both the units are located in the same premises, merely because both the units have separate central excise registration, it cannot be treated two separate entities, therefore, the cenvat credit on this ground cannot be denied. However the lower authorities have denied the Cenvat Credit relying on the Hon’ble Supreme Court judgment in the case of M/S. MARUTI SUZUKI LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III [2009 (8) TMI 14 - SUPREME COURT] which was subsequently referred to the Larger Bench in the case of COMMISSIONER OF CENTRAL EXCISE, VADODARA VERSUS GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD. [2012 (12) TMI 437 - SUPREME COURT]. Both sides have not brought on record regarding the outcome of the Larger Bench of the Supreme Court as on date.
The matter needs to be re-considered on the basis of the outcome of the Larger Bench of the Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, VADODARA VERSUS GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD. [2012 (12) TMI 437 - SUPREME COURT]. We also find that the appellant has made out a strong Prima facie case on limitation which also needs to be re-considered by the adjudicating authority.
Appeal allowed by way of remand.
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2022 (2) TMI 246
Refund of unutilized Cenvat credit of Education Cess, Secondary and Higher Education Cess, lying unutilized (credit balance) as on 30th June 2017 - Lead and Zinc Concentrates which are dutiable - HELD THAT:- The Division Bench of this Tribunal in the case of M/S BHARAT HEAVY ELECTRICALS LTD. (EXCISE & TAXATION DIVISION) VERSUS COMMISSIONER CENTRAL GOODS SERVICE TAX, CENTRAL EXCISE & CUSTOMS, BHOPAL (MADHYA PRADESH) [2019 (4) TMI 1896 - CESTAT NEW DELHI] has held that the assesee is eligible for the cash refund of the cessess lying as cenvat credit balance as on 30/06/2017 in their accounts.
The Adjudicating authority is directed to disburse the refund with applicable interest, as per Rules, within a period of 60 days from the date of service/receipt of this order - appeal allowed - decided in favor of assessee.
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Indian Laws
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2022 (2) TMI 245
Dishonor of Cheque - demand of interim compensation not exceeding 20% of cheque amount - whether the provisions of Section 148 of the Negotiable Instruments Act can be given the retrospective effect? - HELD THAT:- Section 143A of the Negotiable Instruments Act grants the authority only to the trial court to pass such an order directing interim compensation to the complainant when the drawer of the cheque pleads not guilty to the accusation made in the complaint and in any other case upon framing of charge. The authority so granted to the trial court is of directing the payment of interim compensation not exceeding 20% of the amount of cheque. Section 143A of the Negotiable Instruments Act lays down the consequences in case of acquittal. The trial is still in progress; the result of the trial has yet not declared. The applicant was before the Revision Court only praying for the bail and the Revision Court was pleased to grant the bail to the applicant taking into consideration the facts and circumstances of the case.
The trial court was required to consider only the facts and circumstances of the case which concerns the applicant wherein non-bailable warrant was issued, wherein that case, as per the submissions of the learned advocate for the applicant, no such order of paying 20% of the cheque amount was directed. Further that could not be consideration for the Revision Court when the law does not lays down any such mandate for granting the bail. It is only for the trial court concerned under the provisions of Section 143A of the Negotiable Instruments Act who become entitle as per the mandate to pass any such order - Sub-sec.(5) of Section 143A lays down in case the drawer of the cheque fails to pay interim compensation payable under this section it would be recovered as if it were a fine under Section 421 of the Cr.P.C., and as laid down under Sub-sec.(6) of Section 143A the amount of fine imposed under Section 138 or the amount of compensation awarded under Section 357 of the Cr.P.C. shall be reduced by the amount paid or recovered as interim compensation under the said section.
Taking into consideration the said provisions of Section 143A of the Negotiable Instruments Act, the order of Revision Court directing the applicant to pay 20% of the cheque amount is against the provisions of law; hence the same deserves to be quashed and set aside - Application allowed.
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2022 (2) TMI 244
Dishonor of cheque - seeking opportunity and sufficient time to re-examine the witness - violation of principles of natural justice - HELD THAT:- In this case, petitioner wanted re-examination of witness on the ground that earlier counsel did not ask material questions and he appointed new counsel for his defence therefore, he was permitted to re-examine the witness.
The learned trial court dismissed the application of the petitioner on this ground that appointing a new counsel is not a ground of re-examination of the witness. The ground of dismissal of the application by the court below is not as per the standard of law as prescribed under Section 311 of Cr.P.C. This Court deems it appropriate that the present petition be allowed and the trial court be directed to permit the petitioner to re-examine the witness - the trial Court is directed to give one effective opportunity to the petitioner to get to re-examine the witness and petitioner/accused shall bear the cost of witness which would be fixed by the learned trial court & the trial court is free to impose condition as it thinks fit.
Petition allowed.
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2022 (2) TMI 243
Appointment of administrator of properties - withdrawal of notice of attachment issue to any tenant of any property - HELD THAT:- It is admitted fact that the property in question does not belong to the government. Not only it appears fom the record that the property is of private property of late Mahant Atmaram but also the government has assessed the property as unclaimed property. It appears that initially the order of handing over the moveable and immoveable property including the cash amount was passed by the earlier government and the cheque was also issued in favour of the original petitioner no.1, who had died during the pendency of the petition.
It is pertinent to note that the deceased petitioner was declared to be a “Chela” or heir of Guru Ranchhoddas by his Will dated 12.2.1978. The petitioner approached the Court of learned Civil Judge for Succession Certificate by filing Succession Application No.34 of 1995. Pending that application, decision to hand over the movable and immovable property in favour of the petitioner was taken by the then State Government and proceeding of entrustment of properties to the petitioner was initiated. In that view of the matter, the petitioner withdrew said Succession Application No.34 of 1995 for issuance of succession certificate due to decision of earlier State Government of handing over movable and immovable property to the petitioner. Thus, the petitioner has relinquished his right to get succession certificate.
It also appears that the next government had stayed the proceedings and intimated the Collector to keep inabayance of the order and granting the properties in favour of the deceased petitioner. Upon considering the averments made in the affidavit in reply it clearly appears that at no point of time any opportunity was given to the petitioner. It is tried law that any order affecting any legal rights of any person, an opportunity of being heard needs to be granted especially when there is one order passed in his favour in respect of moveable or immovable property and the same order has partly implemented - the respondents are hereby directed to give appropriate opportunity to the petitioners of being heard for cancellation of the order of granting moveable and immovable property in favour of deceased petitioner no.1.
The petition stands disposed of.
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