TMI Tax Updates - e-Newsletter
March 22, 2024

Case Laws in this Newsletter:

TMI Short Notes

1. Supreme Court Clarifies Jurisdictional Objections in Tax Assessments: A Landmark Order

  Income Tax:

2. Invalid Notices and the Importance of Proper Jurisdiction: Lessons from a High-Profile Tax Case

  Income Tax:

3. Upholding Precedent: Supreme Court's Stance on Taxation of Cross-Border Software Payments (Royalty)

  Income Tax:

4. The Cross-Border Software Purchase Conundrum: Supreme Court's Clarification on TDS for Non-Resident Software Transactions as Royalty

  Income Tax:

Articles

1. 20 Point GST & Income Tax: DO’s & DON’Ts checklist for FY 23–24 year end for Trade & Industry

   By: Vivek Jalan

2. Time spent in filing an appeal before the wrong authority is to be excluded while computing the limitation period

   By: Bimal jain

3. PRE LITIGATION MEDIATION UNDER SECTION 12A OF COMMERCIAL COURT IS MANDATORY

   By: DR.MARIAPPAN GOVINDARAJAN

4. Perquisites provided by the employer to the employee under the contractual agreement would not be considered as Supply under GST

   By: Bimal jain

News

1. Safe banking practices – protecting the young (Speech by Shri Swaminathan J, Deputy Governor, Reserve Bank of India - March 18, 2024 - at the Global Money Week 2024 in Paris, France)

2. 4th Shanghai Cooperation Organisation Startup Forum organized in New Delhi

3. All Agency Banks to remain open for public on March 31, 2024 (Sunday)

Notifications

GST - States

1. 48/2023 – State Tax - dated 29-2-2024 - Jharkhand SGST

Seeks to bring in force provisions of Jharkhand Goods and Services Tax (Amendment) Act, 2023

2. 47/2023 – State Tax - dated 29-2-2024 - Jharkhand SGST

Amendment in Notification No. 30/2023-State Tax, dated the 12th December, 2023

3. 45/2023 – State Tax - dated 29-2-2024 - Jharkhand SGST

Jharkhand Goods and Services Tax (Third Amendment) Rules, 2023.

4. CT/8/0003/2024-Sec-1-05(CT)(08) - dated 13-3-2024 - Madhya Pradesh SGST

Notify “Public Tech Platform for Frictionless Credit” as the system with which information may be shared by the common portal based on consent under sub-section (2) of Section 158A of the Madhya Pradesh Goods and Services Tax Act, 2017

5. G.O.Ms.No. 170 - dated 30-12-2023 - Telangana SGST

Seeks to extend dates of specified compliances in exercise of powers under section 168A of Telangana Goods and Services Tax Act, 2017

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/20 - dated 21-3-2024

Introduction of Beta version of T+0 rolling settlement cycle on optional basis in addition to the existing T+1 settlement cycle in Equity Cash Markets

Income Tax

2. 05/2024 - dated 15-3-2024

Circular u/s 268A of the Income-tax Act, 1961 for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court - measures for reducing litigation

Highlights / Catch Notes

GST

• Court Rules Oral Hearing Essential in Tax Dispute; Nullifies Order for Reconsideration Under Natural Justice Principles.

  Case-Laws - HC : Determination of tax u/s 73(9) of the CGST/SGST Act - petitioner submits that the order is passed merely on the representation of the petitioner without giving any opportunity of oral hearing to the petitioner - violation of principles of natural justice - Citing legal precedents and principles of natural justice, the court emphasized the importance of personal hearing in tax matters. Despite objections raised by the respondent, the court ruled in favor of the petitioner, setting aside the impugned order and remanding the matter for fresh consideration with an opportunity for oral hearing.
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• High Court Grants Bail in GST Fraud Case Despite Strong Evidence and Serious Allegations Against Accused.

  Case-Laws - HC : Seeking grant of bail - fraudulent availment and passing of input tax credit of G.S.T - The High court noted the significant amount of incriminating evidence collected against the accused, including documents, electronic devices, and statements that suggested a large-scale operation involving fake firms and fraudulent tax credit claims. - Considering the advanced stage of the investigation and the nature of the allegations, the court found no compelling reason for the continued detention of the accused. The court highlighted the importance of balancing the rights of the accused with the seriousness of the offense. - The court granted bail to the accused, subject to several conditions.
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• Court Confirms ITC Reversal on Car, Quashes Order for Wrongful Claim; Case Remanded for Reconsideration and Further Submissions.

  Case-Laws - HC : Reversal of ITC - wrongful availment of Input Tax Credit (ITC) on Car - The petitioner contended that despite reversing the ITC in the GSTR 3B return, the impugned order was issued on the premise that the ITC was not reversed. However, upon examination of the documents provided by the petitioner, including the GSTR 3B return, the court found that the ITC was indeed reversed as claimed. Therefore, the court quashed the impugned order and remanded the matter for reconsideration, allowing the petitioner to file a reply and submit relevant documents.
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• High Court Orders Reconsideration of ITC Fraud Case Due to Assessing Officer's Failure to Review Key Evidence.

  Case-Laws - HC : Validity of assessment order - fraudulent availment of Input Tax Credit (ITC) - The High court noted that documents provided by the petitioner were disregarded, and the assessing officer relied solely on the statements from the show cause notice, indicating a lack of application of mind. - It was observed that the petitioner had submitted documents such as invoices, transporter's invoice, and bank statements, which were not considered in the assessment order. - The court emphasized that the assessing officer failed to apply discretion and disregarded crucial evidence submitted by the petitioner. - Matter restored back.
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• Cash Logistics Firm Wins GST Dispute Over 2017-2018 Returns; Court Emphasizes Fairness in Tax Assessments.

  Case-Laws - HC : Validity of assessment order - alleged discrepancies in returns filed by the petitioner - The case involved a challenge to an assessment order by a petitioner in the cash logistics business, registered under GST, regarding alleged discrepancies in returns for the assessment year 2017-2018. Despite the petitioner's response and an earlier order dropping proceedings, an assessment order was issued, leading to legal contention. - the High court ruled in favor of the petitioner, emphasizing procedural fairness and consistency in tax assessment proceedings.
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• Court Quashes ITC Disallowance Due to Supplier's Incorrect GSTIN; Orders Reconsideration of Assessment.

  Case-Laws - HC : Denial of Input Tax Credit - The case revolved around the disallowance of Input Tax Credit (ITC) claimed by the petitioner due to discrepancies in their return and the GSTR-2A return. The petitioner explained that the discrepancy arose from an invoice issued by their supplier, which contained an incorrect GSTIN. Despite the respondent's suggestion to pursue rectification proceedings, the court intervened, noting the potential injustice faced by the petitioner. Upon verification of records, the court found merit in the petitioner's claim and quashed the assessment order. The matter was remanded to the assessing officer for fresh consideration.
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Income Tax

• New Circular Sets Monetary Limits for Tax Appeals to Reduce Litigation and Focus on Merits Over Tax Effect.

  Circulars : Circular No. 05/2024, issued by the Central Board of Direct Taxes (CBDT) under section 268A of the Income-tax Act, 1961, introduces measures to reduce litigation in income tax matters. It specifies monetary limits and conditions for filing departmental appeals before Income Tax Appellate Tribunals (ITATs), High Courts (HCs), and Special Leave Petitions (SLPs) or appeals before the Supreme Court (SC). - The circular emphasizes filing appeals based on merits rather than solely on tax effect and outlines exceptions where appeals should be filed regardless of monetary limits.
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• CBDT Updates CIT(J) Work Allocation for Better Coordination in Faceless Assessment and Appeals Schemes.

  Circulars : The Instruction issued by CBDT outlines significant changes in the allocation of work to Commissioners of Income-tax (Judicial) (CIT(J)) in light of the implementation of faceless assessment and appeals schemes. - CIT(J) will serve as the nodal office for all matters related to the jurisdictional High Court and coordinate with counterparts for other High Courts. Their primary responsibility is to ensure uniform enforcement of the Income-tax Act, 1961 within the jurisdiction of the respective Principal Chief Commissioners of Income-tax (Pr. CCIT).
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• Assessment Order Revision Valid if Inquiry Lapses on Shell Company Loans, Protecting Revenue Interests.

  Case-Laws - HC : Validity of Revision u/s 263 - An order which is prejudicial to revenue even if no Tax Loss - The High Court found that the AO's assessment did not adequately address the genuineness and creditworthiness of the loan transactions from certain entities, identified in a DDIT investigation report as shell companies operated by an entry operator. This oversight was deemed a significant inquiry lapse, rendering the assessment order both erroneous and prejudicial to the Revenue's interests. - The Court underscored the principle that an order could be deemed erroneous if it was prejudicial to the Revenue, even if it did not result in immediate tax loss, reflecting a broader interpretation aimed at preserving the Revenue's interests.
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• Income Tax Settlement Commission Orders Are Final, Can't Reopen Assessments Without Fraud Evidence.

  Case-Laws - HC : Validity of reopening of assessment - An order u/s 245D(4) already been passed by the Income Tax Settlement Commission (ITSC) - Scope of harmonious construction - The Delhi High Court, in this judgment, reinforced the binding and conclusive nature of orders passed by the Income Tax Settlement Commission, underscoring that once an assessment year's matters have been settled by ITSC, they cannot be reopened by the Income Tax Department under Section 147/148, except under specific circumstances of fraud or misrepresentation. This decision highlights the judiciary's commitment to uphold the finality and sanctity of ITSC's settlements, aiming to prevent administrative uncertainty and protect the interests of assessees who opt for settlement proceedings.
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• Court Quashes CBDT Order for Procedural Errors; Mandates Reconsideration of 15% Tax Rate Application Delay.

  Case-Laws - HC : Application u/s 119(2)(b) for condoning delay, if any, in filing Form 10-ID to avail the beneficial rate of tax of 15% u/s 115BAB - Validity of order of CBDT rejecting the application u/s 119(2)(b) - FDI investment approval from China - Beneficial rate of tax of 15% u/s 115BAB - The High court identified procedural irregularities, including the absence of the Member's signature and non-disclosure of field reports, which undermined the validity of the order. Consequently, the court quashed the order and directed the CBDT to provide all relevant documents to the petitioner for reconsideration.
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• Court Quashes Assessment Orders Citing Limitation Period Violations in Search Proceedings u/s 153C.

  Case-Laws - HC : Validity of assessment u/s 153C - Period of limitation - Assessment of income of any other person in search proceedings - The proviso in Section 153C(1) includes not only the question of abatement but also determines the date from which the six-year limitation period should be calculated. - The High court analyzed the relevant legal provisions and case law, emphasizing the need to prevent prejudice to affected parties due to delayed proceedings. It concluded that the assessment orders were indeed barred by limitation, highlighting the unjustified delay in recording satisfaction. Considering the statutory limitation period and lapse of time for completing the assessment, the court quashed the assessment orders.
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• Court Annuls Reopening of Tax Assessment Due to Lack of Evidence; Warns Against Fishing Expeditions in Tax Probes.

  Case-Laws - HC : Reopening of assessment u/s 147 - Reason to believe - The notice was based on alleged undisclosed cash deposits made by the trust during a specific financial year. The trust objected to the reopening, arguing that all income was duly recorded and offered for taxation. The High court found that the reasons provided for reopening were unsubstantiated and lacked a rational connection to establish income escapement. It emphasized the impermissibility of fishing expeditions without concrete evidence. Consequently, the court set aside the notice of reopening.
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• Court Quashes Notice Due to Insufficient Evidence and Lack of Rational Connection in Mutual Fund Fraud Case.

  Case-Laws - HC : Reopening of assessment u/s 147 - notice issued u/s 148A(b) - fictitious short-term capital loss - wrongdoing by the mutual fund - The High court noted discrepancies in the department's actions, including lack of clear information provided to the petitioner and reliance on incomplete data. - It observed that the petitioner, being a minor investor, was not a key player in the alleged fraudulent activities of the mutual fund. - The court emphasized the importance of a rational connection between reasons for reopening assessment and actual evidence, which was lacking in this case. - Decision: The court quashed the show cause notice, order for reopening assessment, and related notices issued by the department.
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• High Court Upholds ITAT Decision, Rejects Revenue's Challenge on Managerial Remuneration to Related Party.

  Case-Laws - HC : TP Adjustment - Excessive managerial remuneration to a related party - The High Court noted that the remuneration paid to the director had not been disputed by the Revenue previously. It found that the comparison with remuneration paid by another company was improper. The ITAT's decision to disallow the addition on account of managerial remuneration was upheld.
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• High Court Confirms ITAT Ruling on Deduction Disallowance for Electricity Market Value Under Income Tax Law.

  Case-Laws - HC : Disallowance of deduction u/s 80-IA(8) - computation of the market value or electricity - The High Court referred to a previous judgment and concluded that the market value of electricity supplied by the State Electricity Board to industrial consumers should be considered for computing the deduction under Section 80-IA of the Act. The ITAT's decision was upheld.
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• Court Dismisses Revenue Appeal, Highlights Inconsistencies in ITAT Order on Rectification vs. Review Applications.

  Case-Laws - HC : Validity of order of ITAT allowing Applications filed u/s 254(2) - Rectification versus Review of order - TP Adjustment - The High court observed that the ITAT had rendered incompatible and inconsistent findings in its original order. - The court noted a contradiction between paragraphs 12 and 21 of the original order. - It was deemed necessary for the ITAT to recall its previous order and correct the error to avoid leaving the TPO and Assessing Officer in a quandary. - The court found that the issue of comparability regarding one company was left open for the ITAT's consideration, while another company's matter was remitted to the TPO. - Ultimately, the court determined that the appeal of Revenue did not raise any substantial question of law and dismissed it accordingly.
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• Court Orders Refund of Deposits with Interest Due to Missed Tax Assessment Deadline by Assessing Officer.

  Case-Laws - HC : Refund of the amount as deposited by the assesse towards part payment of demand raised - Time limit for completion of assessment, reassessment and recomputation - The High court referred to Section 153(5) and (7) of the Income Tax Act, 1961. It noted that since the remit ordered by the ITAT was prior to June 1, 2016, it was the AO's duty to frame final assessment orders by March 31, 2017. - Given the AO's failure to meet the statutory deadline for framing assessment orders, the court found no justification for the respondents to retain the deposited amounts. - The court allowed the petition and directed the respondents to refund the amounts along with applicable interest.
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• High Court Orders Reassessment of Comparables in Transfer Pricing Dispute, Emphasizing Product and Turnover Differences.

  Case-Laws - HC : TP Adjustment - Comparable selection - determination of arm’s length prices (ALP) - The High Court observed that the dissimilarity in products sold and their respective turnovers could significantly impact the profitability of an entity. Despite acknowledging significant differences and accepting the appellant's arguments, the ITAT failed to entirely exclude Modicare. The Court considered this a vital infirmity and directed the ITAT to re-examine the appropriateness of including Modicare and the functional difference in marketing strategy between the entities.
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• ITAT clarifies Section 269SS: No penalty on cash received as final payment during property registration, not advance.

  Case-Laws - AT : Penalty u/s 271D - Sale of property in cash - meaning of the term “specified sum” - The ITAT examined the definition of "specified sum" under Explanation (iv) to Section 269SS, which pertains to any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property. It relied on a previous decision by the Co-ordinate Bench of the Tribunal, which held that the provision applies only to advance payments and not to transactions where the final payment is made at the time of registration before the sub-registrar. - The Tribunal noted that the cash received by the assessee was not treated as an advance but as the final payment during the registration of the sale deed. Therefore, it concluded that there was no violation of Section 269SS in the given facts and circumstances.
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• Tribunal Rules Transfer-Related Expenses Are Allowable for Capital Gain Computation u/s 48(i.

  Case-Laws - AT : Capital gain computation - Allowability of transfer expenses [brokerage, air tickets, hotel accommodation receipts, postal charges receipts, conveyance charges, lawyer fees, photocopying expenses] u/s Section 48(i) - Considering the specific circumstances of the case, where the assessee was a non-resident individual, the Tribunal found that the expenses incurred for obtaining special power of attorney from the Indian Consulate in the USA, air tickets, hotel accommodation, postal charges, conveyance charges, lawyer fees, and photocopying expenses were essential for effecting the transfer of the property. - The ITAT concluded that the claimed expenses were indeed allowable u/s 48(i)
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• Tribunal Rejects Income Tax Officer's Claims; No Evidence Found Against Company's Financial Records During Demonetization.

  Case-Laws - AT : Rejection of the books of account of the assessee company u/s. 145(3) - Estimation of income - The ITAT found the rejection of books of accounts by the AO unjustified as there was no evidence of incorrectness or incompleteness. - The AO's reliance on media clippings and reports without concrete proof was deemed insufficient to reject the books. - On the issue of cash deposits during demonetization, the Tribunal noted that the Assessing Officer's presumption of antedating sales and earning super profits lacked substantiation and relied heavily on speculation. - The Tribunal rejected the AO's presumption of a 25% profit margin on sales and found no basis for the addition.
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• Tribunal Upholds AO's Order, Rejects PCIT's Revision Request Due to Lack of Independent Justification and Evidence.

  Case-Laws - AT : Revision u/s 263 - revision based on the audit objection - borrowed satisfaction - The ITAT noted that the AO had called for details and evidence from the appellant and had taken a plausible view based on the information provided. - Despite the PCIT's disagreement with the AO's assessment, the Tribunal held that the order passed by the AO after examination of the issues cannot be deemed erroneous or prejudicial to the revenue's interest. - Additionally, the ITAT found that the PCIT did not establish how the AO's view was incorrect or prejudicial to revenue. The PCIT's order lacked independent justification and was based on borrowed information without adequate satisfaction.
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• Tribunal Grants Tax Exemptions for Charitable Activities, Overturns Previous Decision on Depreciation and Deductions.

  Case-Laws - AT : Exemption u/s 11 - Charitable activity u/s 2(15) - Assessee has derived income by way of contributions from the head office, membership fee, income from publication of Indian Foundry journal , other grants and donations etc. besides receiving interest on fixed deposits. - Gross receipt was more than Rs. 10 lakhs - The tribunal set aside the order of the CIT(A) and directed the AO to allow exemptions u/s 11 for the year under consideration, recognizing the assessee's activities as being for general public utility without commercial intent. It allowed the appeal in favor of the assessee on all counts, including the issues of delay in appeal, depreciation claims, treatment of sale proceeds from the fixed asset, and the calculation method for deduction u/s 11(1)(a).
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• ITAT Rules Favorably on Corporate Guarantee and Brand Royalty in Transfer Pricing Dispute.

  Case-Laws - AT : TP Adjustment - assessee has issued the corporate guarantee on behalf of AE’s - interest saved approach - The ITAT decided in favor of the assessee, directing the AO to restrict the addition by splitting the interest benefit on a 50:50 basis between the guarantor and the borrower. It was noted that earlier years' tribunals had accepted a splitting of the interest savings as a reasonable approach. - With regard to Royalty, the ITAT allowed the assessee's grounds concerning TP adjustments related to the charge of brand royalty, following earlier tribunal decisions that set specific rates for such royalties.
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• ITAT Orders Reassessment of Income Considering Bilateral APA, Validates Pre-Agreed Transaction Methodology.

  Case-Laws - AT : TP Adjustment - bilateral Advance Pricing Agreement (APA) between India and the USA - modified return of income - The ITAT found merit in the assessee's argument regarding the APA between India and the USA, agreeing that the methodology used for the transactions had been agreed upon. It directed the Assessing Officer to consider the modified return of income in light of the APA and decide the issue afresh after affording reasonable opportunity to the assessee. The court allowed this ground for statistical purposes.
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• Tribunal Clarifies Renewal vs. Fresh Registration u/s 80G(5)(iii) of Income Tax Act; Validates Appellant's Application.

  Case-Laws - AT : Approval u/s 80G(5)(iii) - time limit - The ITAT highlighted the distinction between applications for renewal and fresh registration, as well as the prescribed time limits for each. - The Tribunal concluded that the appellant's application for final approval was valid, despite having commenced activities before provisional registration. It clarified that the application could not be rejected solely on the grounds of the appellant's prior commencement of activities, as long as provisional registration had been granted. - It emphasized that the appellant's choice to apply for fresh provisional registration did not preclude them from subsequently applying for final approval.
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• Tribunal Rules No Penalty for Assessee Due to Lack of Income Variation or Concealment Evidence in Tax Case.

  Case-Laws - AT : Levy of Penalty u/s. 271(1)(c) - The ITAT ruled that since there was no variation between the returned and assessed income, there was no concealment of income by the assessee. - Referring to legal precedents, the ITAT highlighted that the penalty under Section 271(1)(c) can only be levied if there is concealment or furnishing of inaccurate particulars, which must be determined with reference to the returned income. - As there was no discrepancy between the returned and assessed income, the tribunal instructed the A.O. to delete the penalty imposed under Section 271(1)(c).
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• Penalty u/s 271B Not Applicable for Unmaintained Accounts, Only Section 271A Applies, Rules Tribunal.

  Case-Laws - AT : Levy of Penalty u/s. 271B for failure to get accounts audited u/s 44AB - The ITAT held that once a penalty has been levied under Section 271A for non-maintenance of books of accounts, no penalty under Section 271B can be levied. - Citing precedents and relevant case law, the Tribunal emphasized that Section 271B is not applicable when no accounts have been maintained, and recourse to Section 271A should be taken instead.
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Customs

• Tribunal Dismisses Request for Rectification Due to Jurisdiction Issues; Submissions Presumed as Appellant's Instructions.

  Case-Laws - AT : Seeking rectification of an alleged mistake - question of jurisdiction of this tribunal - error apparent on the face of record or not - The Tribunal rejected the appellant's claim, stating that it had considered the jurisdiction issue in light of previous judgments and amendments. Since both parties chose not to argue the jurisdiction issue during the hearing, the Tribunal proceeded to decide the case on its merits. - The Tribunal emphasized that when a counsel makes submissions, it is presumed to be on the instructions of the appellant. Hiring a new counsel post-judgment to raise new grounds or find fault with the previous counsel's submissions is not a valid approach.
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• Tribunal Rules on Duty Recovery for Unmet Export Obligations and Non-Installation of Capital Goods.

  Case-Laws - AT : Recovery of duty foregone - non-fulfillment of export obligation - non-installation of the capital goods and consequent non-fulfilment of post-importation condition - The Tribunal observed that the imported goods were not installed as they were stored pending land acquisition for setting up a manufacturing facility. The appellant claimed to have fulfilled the export obligation within the extended time frame but failed to provide evidence of exports after installation. It was noted that the extension of time for installation did not automatically extend the deadline for fulfilling the export obligation. - The Tribunal deemed the confirmation of duty liability reasonable due to non-fulfillment of the export obligation within the prescribed period. - However matter remanded back for a fresh decision considering all relevant factors, including evidence of exports and entitlement to depreciation based on export performance.
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• Tribunal Reclassifies Imported Supplements, Reduces IGST Rate from 28% to 18%, Overturns Previous Order.

  Case-Laws - AT : Classification of goods - Import of Nutrition/Dietary Supplements - Levy of IGST @18% or 28% on Import - The tribunal noted that the Revenue argued for the classification of the goods under Serial No. 9 of Schedule IV, which attracted an IGST rate of 28%. - After a detailed analysis, the tribunal concluded that the goods in question did not fall under Serial No. 9 of Schedule IV. Instead, they determined that the correct classification was under Serial No. 453 and/or 23 of Schedule III, which attracted an IGST rate of 18%. - Therefore, the tribunal set aside the impugned order and allowed the appeal, granting consequential relief as per law.
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• Tribunal Criticizes Authority for Ignoring FSSAI Standards in Defatted Coconut Classification Dispute.

  Case-Laws - AT : Classification of imported goods - defatted coconut - to be classified under CTH 08011990 or under CTH 23065020? - The Tribunal considered various test reports and ultimately criticized the adjudicating authority for disregarding the FSSAI standards and relying solely on Codex standards. Additionally, the CESTAT noted the importation of similar goods through another port, reinforcing the validity of the respondent's classification.
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• Tribunal Overturns Ship Valuation, Rejects Extra Duty for Unjustified Costs in Cement Carrier Import.

  Case-Laws - AT : Valuation of imported goods - Cement Carrier ship - The Tribunal accepted the value assessed by the Chartered Engineer at Rs. 27 Crores, overturning the adjudicating authority's re-determined value. The court found the inclusion of transportation, insurance, and handling charges unjustifiable, citing legal precedents and the absence of evidence to support such costs for vessel imports. - Consequently, the additional duty demanded based on these charges was set aside.
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• Importer's Zinc Valuation Upheld; Tribunal Rejects Department's Classification Claim Due to Lack of Evidence.

  Case-Laws - AT : Valuation of imported goods - Unwrought / Unrefined Zinc - enhancement of value - rejection of transaction value - The importer declared the goods as "Unwrought/Unrefined Zinc" but the test report revealed that the imported goods were actually "Zinc Dross." - The Commissioner (Appeals) ruled in favor of the importer, holding that the assessing officer lacked valid reasons to reject transaction values and had not followed proper procedures. - The Appellate Tribunal found no evidence to support the Department's claim that the zinc content exceeded 92%, necessary to classify the goods as "Zinc Dross."
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• Betel Nuts Not Notified Under Customs Act; CESTAT Rules Revenue Must Prove Smuggling, Overturns Confiscation and Penalties.

  Case-Laws - AT : Smuggling - Betel Nuts - foreign origin goods - town seizure - notified item or not - onus to prove - The CESTAT recognized that betel nuts were not notified items under the Customs Act and therefore, the burden of proving smuggling rested with the Revenue. The appellants produced documents during interception to prove legal procurement of the betel nuts, shifting the burden of proof to the Revenue. - Since the Revenue failed to prove that the intercepted betel nuts were smuggled, the Tribunal set aside the confiscation of the goods and waived any penalties on the appellants.
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DGFT

• Interest Equalization Scheme Amended: Rs. 2.50 Crore Cap Per IEC Effective Until June 2024 for Exporters and Importers.

  Circulars : The Directorate General of Foreign Trade (DGFT) issued Trade Notice, highlighting amendments to the Interest Equalization Scheme (IES) in line with the extension announced by the Reserve Bank of India (RBI). The notice introduces a cap of Rs. 2.50 Cr per Importer-Exporter Code (IEC) until June 30, 2024, impacting exporters and importers alike.
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State GST

• Delhi SGST Clarifies: Shares in Subsidiary Not Goods or Services, Exempt from GST Transactions.

  Circulars : Clarification on taxability of shares held in a subsidiary company by the holding company - Delhi SGST - The circular provides a clear-cut clarification, stating that securities, including shares, are neither considered goods nor services as per the definitions provided under the Delhi / Central Goods and Services Tax Act, 2017. This classification or rather, the lack thereof, directly implies that transactions involving the purchase or sale of shares are not deemed as a supply of goods or services. Therefore, such transactions fall outside the scope of GST.
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• E-Invoicing Required for Suppliers Exceeding Threshold to Govt Bodies Registered for Tax Deduction Under GST.

  Circulars : Clarification on issue pertaining to e-invoice - Delhi SGST - The Circular clarifies that government departments, agencies, local authorities, and PSUs, which are registered for the sole purpose of tax deduction at source, are considered registered persons under GST law as per clause (94) of Section 2 of the DGST Act / CGST Act. Therefore, suppliers whose turnover exceeds the prescribed e-invoicing threshold must issue e-invoices for supplies made to these entities.
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• GST Taxability for Inter-State Office Services: HO Must Choose ISD or Tax Invoice Method for ITC Distribution to BOs.

  Circulars : Clarification regarding taxability of services provided by an office of an organisation in one State to the office of that organisation in another State, both being distinct persons - Delhi SGST - It is clarified that the HO has the option to distribute ITC in respect of such common input services by following the Input Service Distributor (ISD) mechanism or issue tax invoices u/s 31 to the BOs for these services. The HO is required to get itself registered as an ISD if it opts for the ISD mechanism for distribution of ITC. - The value of supply of services made by a registered person to a distinct person needs to be determined as per rule 28 r.w.s 15(4).
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• Guidance on GST and ITC for Warranty Services in Assam: Clarity for Manufacturers and Distributors.

  Circulars : Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period - Assam SGST - The circular aims to clarify the GST implications on the warranty replacement of parts and repair services that are provided without any separate consideration (payment) from the customer. - For manufacturers and distributors, the circular offers guidance on handling ITC and GST for warranty services, reducing the risk of litigation and compliance issues.
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Indian Laws

• Cheque Dishonor Case: Court Rules Insufficient Grounds for Directors' Vicarious Liability, Dismisses Prosecution.

  Case-Laws - HC : Dishonour of Cheque - vicarious liability of directors - After considering the submissions of both parties, the court found that the impugned orders suffered from non-application of mind and lacked sufficient averments to justify the prosecution of the petitioners. It emphasized that liability under Section 141 is not based solely on designation but on the actual role played in the company's affairs. As the complaints failed to provide specific allegations against the petitioners regarding their involvement or negligence, the court held that prosecuting them would amount to an abuse of process.
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• Arbitration Clause Requires Clear Intent: Court Rules General Reference Insufficient for Arbitration Agreement.

  Case-Laws - SC : Appointment of Sole Arbitrator to adjudicate the dispute between the parties to the present lis - interpretation of the terms of the contract between the parties - The Supreme court examined various clauses of the contract, noting that while there was a general reference to terms of another document, there was no specific mention of the arbitration clause. - It was established that mere general references to another contract were insufficient to incorporate an arbitration clause. Specific mention or intention was required for such incorporation. - The court emphasized Clause 7.0 of the contract, which explicitly stated that disputes must be resolved through civil courts in Delhi.
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• Supreme Court: Income Tax Findings Don't Affect Criminal Proceedings in Corruption Cases.

  Case-Laws - SC : Framing of charges - Owning of assets disproportionate to known sources of income - Prevention of Corruption Act, 1988 - Case against the Additional Chief Architect in New Delhi Municipal Corporation - The Supreme Court held that findings in income tax proceedings, including those by the ITAT, do not have a direct bearing on criminal proceedings under the Prevention of Corruption Act. It stressed that the two processes serve different legal purposes and operate under distinct standards of proof. - The Court clarified that exoneration in a civil adjudication (like income tax proceedings) does not automatically negate the possibility of criminal liability under different statutes, emphasizing the independent nature of criminal proceedings concerning the alleged acquisition of disproportionate assets.
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• Court Rules No Need to Summon Bank Officials in Cheque Dishonor Case; 'Payment Stopped by Drawer' Confirmed by Both Parties.

  Case-Laws - HC : Dishonour of Cheque - seeking leave of the Court to summon bank officials - The court found that the reason for dishonor of the cheques was 'payment stopped by the drawer' and not due to insufficient funds or exceeding arrangement. Both parties admitted to this fact. Therefore, the court concluded that there was no requirement to summon bank witnesses to prove this fact.
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• Court Orders on Amalgamation and Restructuring Subject to Stamp Duty; New Calculation Method Partially Invalidated.

  Case-Laws - HC : Levy of stamp duty on schemes of amalgamation or restructuring - The High court found that orders of the court sanctioning amalgamation/restructuring, along with the schemes appended to them, are instruments of conveyance under the existing legal framework, thus liable for stamp duty. - The court upheld the circular clarifying the levy of stamp duty on amalgamation schemes but partially invalidated a government order that introduced a new mode of computation for stamp duty based on share value, stating it required legislative action. - The court affirmed the validity of the retrospective application of reduced stamp duty rates, provided by a government order, as beneficial and within the state's power.
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IBC

• Investor in Debentures Deemed Financial Institution, Must Contribute to Liquidation Costs, Tribunal Rules.

  Case-Laws - AT : Liability to contribute towards Liquidation Process Costs - scope of Financial Institution - The Tribunal found that the appellant, having invested a significant sum by subscribing to redeemable secured non-convertible debentures, falls within the ambit of a "financial institution" as defined by the Reserve Bank of India Act. - The Tribunal upheld the adjudicating authority's order requiring the appellant and other respondents to contribute to the liquidation process costs. - The decision reaffirms the principle that secured financial creditors, even if opting out of the liquidation estate to realize their security interest, must contribute to the liquidation process costs.
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• Tribunal Upholds Rejection of Transfer Request in Financial Creditor Case; No Fault Found in Adjudicating Authority's Actions.

  Case-Laws - AT : Rejection of transfer application - proceedings were initiated by the Financial Creditor under Section 7 which proceedings were initially admitted and the application to recall the said order was rejected - The Tribunal noted that the Adjudicating Authority had already heard both parties on merits as well as limitation. Despite the insistence of the Appellant for the restoration of IA No. 4676 of 2023, the Adjudicating Authority granted an adjournment for the Appellant to move an appropriate application for restoration. The Tribunal found no prejudice in the manner in which the issue was handled. - NCLAT upheld the rejection of the transfer application and found no fault in the actions of the Adjudicating Authority.
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• Auction Purchaser's Exclusion Breaches Justice; New E-Auction Order Overturned Due to Procedural Irregularities.

  Case-Laws - AT : Seeking impleadment of Successful Auction Purchaser/Appellant as one of the Respondents - The NCLAT found that non-impleadment of the successful auction purchaser was deemed crucial and prejudicial to the proceedings. Despite directions from the adjudicating authority, necessary applications for impleadment were not filed. - The failure to include the successful auction purchaser as a respondent deprived them of the opportunity to present objections or responses, violating principles of natural justice. - The direction for a fresh e-auction process was set aside due to the aforementioned procedural irregularities and lack of fairness.
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• Dispute Over Secured Creditor Status Dismissed; High Court Upholds NCLT's Order on Share Inclusion in Liquidation Estate.

  Case-Laws - HC : Validity of declaring of the respondent as a Secured Creditor - retention of shares held as security - The primary grievance of the petitioner was that the National Company Law Tribunal (NCLT) should have decided the Liquidator’s application under Section 25 of the Insolvency and Bankruptcy Code (IBC), 2016 prior to deciding the application under Regulation 21-A of the IBBI (Liquidation Process) Regulations, 2016. - The High court emphasized that the order under Regulation 21-A did not affect the petitioner's position adversely, as the shares became part of the liquidation estate, ensuring the interests of all secured creditors. - The High Court dismissed the writ petition filed by the petitioner challenging the order of the NCLT, which directed the sale of shares held by the respondent.
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• Real Estate Allottees Recognized as Financial Creditors, Allowed to Initiate Insolvency Process for Construction Default.

  Case-Laws - AT : Admission of section 7 application - financial debt owed by the Corporate Debtor or not - Home Buyers - The application was filed by respondents, who were allottees in a real estate project, claiming default on part of the Corporate Debtor. - NCLAT ruled that the allottees were indeed financial creditors, as their investments were made with the expectation of receiving residential units in return. - The NCLAT upheld the admission of the Section 7 application by the NCLT, affirming that the allottees had the right to initiate the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to the default in completing the construction project.
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PMLA

• Court Quashes Money Laundering Case Due to Lack of Intent Against Petitioner; Proceedings Deemed Legal Abuse.

  Case-Laws - HC : Money Laundering - scheduled offences - cognizance of offence - The High court concluded that the allegations did not meet the necessary elements to constitute an offence under Section 3 of the PMLA. There was no prima facie evidence to suggest the petitioner knowingly facilitated the transfer of proceeds of the crime. The court emphasized that intent is crucial for constituting an offence under the PMLA, and such intent was not established against the petitioner. - The court quashed the proceedings against the petitioner, accused No. 7, stating that continuing the criminal proceedings would be an abuse of the process of law.
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RBI

• RBI Extends Interest Equalization Scheme for Export Credit to June 2024 with Revised Rates and New Restrictions.

  Circulars : The Reserve Bank of India (RBI) issued Circular, addressing Scheduled Commercial Banks, Primary (Urban) Cooperative Banks, State Cooperative Banks, and Exim Bank regarding the Interest Equalization Scheme (IES) on Pre and Post Shipment Rupee Export Credit. The circular extends the Scheme until June 30, 2024, with revised interest rates. Notably, the Scheme now offers 2% interest equalization for Manufacturers and Merchant Exporters and 3% for MSME manufacturers. However, certain modifications have been advised, including restrictions on banks with an average interest rate higher than Repo Rate + 4% and a cap on the subvention amount.
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SEBI

• SEBI Updates FPI Disclosure Rules: Exemptions for FPIs with Over 50% AUM in Corporate Groups, New Monitoring Guidelines.

  Circulars : The SEBI issued a circular, addressing amendments to the disclosure requirements for Foreign Portfolio Investors (FPIs). - In addition to the criteria outlined in the previous circular, an FPI with over 50% of its Indian equity Assets Under Management (AUM) within a corporate group is exempt from additional disclosure requirements subject to certain conditions. - Custodians and depositories are tasked with tracking the utilization of the 3% limit for apex companies without identified promoters on a daily basis. Public disclosure of breaches or meeting this limit is required before the start of trading the next day. - See the circular for further conditions and instructions.
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• SEBI Issues Circular to Protect Investors from Fraud in Demat Account Transfers, Emphasizes Secure Handling of DIS.

  Circulars : The Securities and Exchange Board of India (SEBI) recently issued a circular, addressing concerns regarding the transfer of securities in dematerialized mode. This circular, aimed at safeguarding investors' interests, introduces several measures to prevent fraud and misappropriation related to inoperative demat accounts. - Depositories are instructed to prioritize investor education, particularly regarding the careful preservation of Delivery Instruction Slips (DIS) by Beneficial Owners (BOs). BOs are advised against leaving blank or signed DIS with Depository Participants (DPs) or any other entity.
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Service Tax

• Court Clarifies SVLDRS Eligibility: Rectification Not an Appeal, Affects Tax Arrears Calculation for Settlement Approval.

  Case-Laws - HC : SVLDRS - Recovery of arrears of tax in terms of Section 124(1)(c) of the Sabka Vishwas (Legacy Dispute Resolution Scheme Rules, 2019 in the Finance Act, 2019 - jurisdiction under Section 74 of the Finance Act, 1994 was invoked to rectify the mistake - The High court found that initiating a rectification proceeding under Section 74 cannot be equated with filing an appeal under Section 86 of the Finance Act, 1994. Therefore, the petitioner’s case could not be considered under the appeal category for SVLDRS relief, which necessitates a different calculation of the dues. - The court allowed the settlement under SVLDRS upon payment of the due amount and interest.
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• Tribunal Supports Appellant in CENVAT Credit Refund Case, Citing Transitional Challenges from Service Tax to GST.

  Case-Laws - AT : Refund of CENVAT credit - The Tribunal observed that the refund claims were filed within the specified time frame after the introduction of the GST regime. It noted the appellant's efforts to claim the entire CENVAT credit lying in its books and transfer it to its Bangalore unit. The Tribunal found that the rejection of the refund claim solely based on not debiting the claim from the CENVAT credit account was unjustified, considering the transitional challenges from the Service Tax regime to the GST regime. - The Tribunal accepted the appellant's argument regarding the practical difficulties in debiting the refund amount at the time of filing due to the change in regimes. - Refund allowed.
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Central Excise

• Refund Claim Denied for Reverse Charge Payment Under GST: CESTAT Upholds Recovery as Department Enforcement Action.

  Case-Laws - AT : Refund claim - amount was paid in GST era under Reverse Charge Mechanism - The Tribunal relied on Section 142(8)(a) of the CGST Act, 2017, which states that if any amount becomes recoverable from a person as a result of assessment or adjudication proceedings under the existing law, and unless recovered under the existing law, it shall be recovered as an arrear of tax under the GST Act. - The CESTAT upheld the decision of the lower authorities that the payment made by the appellant was part of a recovery action under the enforcement done by the department. Therefore, the duty, interest, and penalty were paid for an extended period and the refund claim was not admissible.
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