TMI Tax Updates - e-Newsletter
March 26, 2024
Case Laws in this Newsletter:
GST
Income Tax
Benami Property
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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GST:
Levy of penalty - goods were unloaded at a place that was not registered in the registration certificate - unloading goods at a location not specified in the e-way bill - The petitioner argues that the unloading occurred at their own registered godown, with no intent to evade tax. The court underscores the importance of establishing mens rea for penalty imposition, citing precedents. It distinguishes minor errors from major lapses and concludes that the minor typographical error in the e-way bill, coupled with the absence of intent to evade tax, renders the penalty unwarranted.
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GST:
Validity of demand with penalty u/s 73 of CGST Act - Petitioner argued that their detailed replies were not adequately considered, and they were not given an opportunity to clarify or provide further documents. The court found merit in these contentions, criticizing the proper officer for dismissing the petitioner's reply without proper assessment and for not providing opportunities for clarification. Consequently, the High court set aside the impugned order and directed the matter to be remitted for re-adjudication, emphasizing the importance of following principles of natural justice and affording parties due process.
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GST:
Maintainability of appeal - appeal dismissed on the ground of time limitation - non-submission of the certified copy. - Despite discrepancies raised by the respondent regarding the existence of the appeal in the online portal, the court found merit in the petitioner's submissions, affirming the timely filing of the appeal. Moreover, the court dismissed the notion that the appeal was time-barred due to the petitioner's failure to submit a certified copy of the original order, as evidence suggested otherwise. Consequently, the court set aside the impugned order and remitted the matter to the Appellate Authority for consideration on its merits in accordance with the law.
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GST:
Seeking grant of bail - irregular availment of Input Tax Credit - creation and operation of fake GST firms and issuing fake GST invoices from these firms - The High court examines evidence gathered during searches and the confessions of the accused. Despite the defense's claims of innocence and coercion by a third party, the court finds sufficient evidence to reject the bail applications. It emphasizes the seriousness of economic offences and the potential for harm to the economy. The decision highlights the need for a different approach to bail in such cases, considering their significant impact.
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GST:
Validity of summons issued u/s 70 - Proper officer - The High court examined Section 6(2)(b) of the CGST Act and determined that its scope differed from that of Section 70. While Section 6(2)(b) deals with the initiation of proceedings on a subject matter, Section 70 empowers the issuance of summons for inquiry purposes. The court held that the two provisions should not be conflated, and the power to issue summons under Section 70 was not barred by Section 6(2)(b). Consequently, the court dismissed the petitioner's writ petition, ruling it to be devoid of merit.
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GST:
Validity of determination of tax under best judgment assessment - The petitioner challenged an ex-parte assessment order arguing that their statutory return in Form GSTR-3B for March 2023 was valid and should take precedence over the assessment order. They also contended that financial constraints prevented timely filing of the return, leading to a best judgment assessment. However, the petitioner failed to avail themselves of the statutory remedy of filing an appeal against the assessment within the prescribed period. The court, citing precedent, concluded that the writ petition was not maintainable due to the petitioner's failure to exhaust the statutory remedy of appeal. As a result, the court dismissed the petition.
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GST:
Seeking grant of Bail u/s 437 - tax evasion - The court examined the charges against the accused and found that they were detained for alleged offenses under the CGST Act. However, it emphasized the necessity for clear communication of charges in the arrest memo, as directed by legal precedents. - The court acknowledged procedural irregularities but noted that the accused had been in custody since their arrest. It highlighted the accused's cooperation with the investigation and concluded that there was no need for further detention. - Bail granted subject to conditions.
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Income Tax:
Estimation of profit - AO applying a profit rate of 20% on the contract receipt against the rate of profit declared by the appellant at 8.13% - CIT(A) directing the AO to apply a profit rate of 14.5% - The ITAT partially upheld the additions but granted relief to the assessee by adjusting the net profit rate to 11% and reducing the additions for provisions based on evidence provided during appellate proceedings. Overall, the tribunal's decision aimed to balance the interests of both parties while ensuring compliance with tax regulations.
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Income Tax:
Penalty u/s 270A - misreporting of the income - disallowances of 40A(3) on account of interest income in the other sources and has also disallowed the claim of the assessee u/s 32 disputing the period use of the asset of the assessee - The Tribunal emphasized the distinction between assessment and penalty proceedings and noted that the mere addition in assessment did not automatically imply concealment. The ITAT also highlighted the appellant's compliance with depositing the demand within the stipulated time frame, albeit the procedural lapse in filing Form No. 68. Ultimately, the Tribunal ruled in favor of the appellant, directing the deletion of the penalty levied under section 270A of the Act.
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Income Tax:
Reopening of assessment - reason to believe or reason to suspect - The ITAT examined the "reasons recorded" by the AO for reopening the assessment. It noted that the AO relied on the information provided by the SEBI order, which alleged manipulative trading practices by certain entities, including the director of the assessee company. However, the court observed that the name of the assessee company itself was not listed among the entities restrained by SEBI. - The Tribunal emphasized that for the reopening of an assessment, the AO must have "reasons to believe" that income has escaped assessment, not merely "reasons to suspect." It found that the information provided by the SEBI order could only trigger "reasons to suspect" and did not meet the legal requirement for reopening.
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Income Tax:
Addition u/s 69 - addition based on the estimation of the cost of acquisition of the property - The ITAT observed that the AO had relied heavily on statements obtained during the survey proceedings, particularly regarding the payment of on-money for the property purchase. However, the Tribunal emphasized that such statements, which were later retracted, could not constitute valid evidence for making additions to the appellant's income. Furthermore, the Tribunal noted that the AO had not provided any supporting material apart from these statements to justify the addition. Considering these factors, the Tribunal held that the AO's decision to estimate the property acquisition cost at a higher value lacked sufficient basis and was not supported by credible evidence.
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Income Tax:
Transfer Pricing Adjustment - arm's length price (ALP) of international transactions- MAM - “other method” - The Tribunal analyzed the transfer pricing methods applied and found fault with the TPO's approach. It determined that the comparables used were not suitable, considering the functional dissimilarity with the assessee. Moreover, the rejection of the "other method" used by the assessee was deemed unjustified. Consequently, the Tribunal directed the deletion of the adjustment made by the TPO.
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Income Tax:
Validity of reopening of assessment - notice u/s 148 against petitioner company after the approval of the resolution plan for a period prior to closing - liability of previous management - Citing legal precedents and provisions of the Insolvency and Bankruptcy Code, the High court concluded that once a resolution plan is approved, all dues including statutory dues stand extinguished, and proceedings in respect of such dues cannot be continued. - The court clarified that Section 148 of the Income-tax Act pertains to the assessment of escaped income and cannot be used for purposes beyond its scope, such as collecting evidence against third parties.
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Income Tax:
Validity of reopening of assessment u/s 147 r.w.s. 148A(b) - Petitioner claimed that despite certain transactions being booked under the PAN of erstwhile company (amalgamated company) due to an error, they had correctly considered all transactions in their return. - The court found merit in the petitioner's contention regarding the lack of proper application of mind in granting approval under Section 151. They observed discrepancies in the approval process, indicating a failure to review the request and draft order adequately. Consequently, the court deemed it appropriate to quash the order under Section 148A(d) of the Act and the consequent notice issued under Section 148.
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Income Tax:
Release of the Amount Seized along with interest u/s 132B(4) read with Rule 119A - Scope of the term 'shall release' - The High court held that the petitioner is entitled to interest if the assessing authority, upon examination, finds that the seized amount was duly explained and not required for satisfying any existing or likely tax demand. - The court interpreted the statutory provisions as directory, not mandatory, stating that the assessing authority's failure to decide within 120 days does not automatically entitle the petitioner to the release of the seized amount. - The writ petition was disposed of without granting the writ of Mandamus as prayed for by the petitioner. Instead, the court directed the Assessing Authority to decide on the petitioner's application within two weeks, ensuring a reasoned and speaking order after hearing the petitioner.
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Income Tax:
Reopening of assessment u/s 147 consequent to revision proceedings u/s 263 pending - notice u/s 148 issued during the pendency of the assessment proceedings following the directions given by the PCIT - The High Court held that such a notice could not be issued as long as assessment proceedings were ongoing, as income cannot be considered to have escaped assessment until these proceedings are completed. Additionally, the court found the sanction granted under Section 151 of the Act to be invalid based on a previous ruling. Consequently, the petition was disposed of in favor of the petitioner.
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Income Tax:
Deduction u/s. 32AB - rental income - The court analyzes the definition of "eligible business or profession" under Section 32AB(2)(i) and determines that it encompasses a wide range of activities beyond manufacturing or production. The inclusion of rental income within this definition is justified. - The court emphasizes that eligible business includes all income except that specifically excluded. Rental income, being part of the appellant's business income, is thus eligible for deduction under Section 32AB. - Consequently, the court rules in favor of the appellant, stating that the rental income assessed under the head "Income from house property" qualifies for deduction under Section 32AB of the Act.
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Income Tax:
Validity of reopening of assessment u/s 147 - Reason to believe - The court scrutinized the purported tangible material for reopening, which consisted of audit objections received after the original assessment. However, it noted that the objections had been duly explained by the petitioner during the original assessment proceedings, and the assessing officer had found the explanations satisfactory. Therefore, the court concluded that there was no fresh tangible material justifying the reopening of the assessment.
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Income Tax:
Levy of penalty u/s. 271(1)(c) - The appellant contended that the addition made by the Assessing Officer was based solely on estimations, making it ineligible for penalty imposition. The ITAT upheld this argument, citing legal precedents to support its decision. Additionally, the court noted the defective nature of the penalty notice issued by the Assessing Officer, further bolstering the appellant's case. - Consequently, the Tribunal set aside the impugned order and allowed the appellant's appeal, directing the deletion of the penalty.
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Income Tax:
Penalty proceedings u/s 271(1)(c) - Failure of the assessee to explain the source of cash deposit in the bank account - burden of proof - The ITAT acknowledged the difference in the burden of proof between penalty proceedings and assessment proceedings. Mere disallowance or addition in quantum proceedings does not automatically warrant penalty imposition under Section 271(1)(c) of the Act. - Considering the mitigating circumstances, including the deceased status of the appellant and the difficulty in independently proving circumstantial facts, the tribunal concluded that the penalty imposition was not justified and directed its reversal and deletion.
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Income Tax:
Accrual of income in India - Royalty receipts - taxation of revenue from online database of text journal and books as royalty income u/Article 12 of India US DTAA - The Tribunal concluded that since there was no transfer of legal title in the copyrighted article, and the users did not acquire any right to exploit the underlying copyright, the revenue derived from granting access to the database did not constitute royalty under Article 12 of the agreement.
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Income Tax:
Deduction of interest expenditure incurred on borrowed funds u/s 57 - Interest incurred on borrowed funds utilized for making investment in shares in company of Singapore - The ITAT considered the purpose of the investment, emphasizing that the investment was made to earn future income. It referred to a similar case decided by the Calcutta High Court, which held that expenditure on interest could be allowable under Section 57 even if the investment was not solely for earning dividends. The Tribunal concluded that since the investment was made to generate income, the interest expenditure should be allowed as a deduction.
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Income Tax:
Taxability of income in India - Taxability as Royalty or FTS - The tribunal systematically addressed the taxability of each type of service. It concluded that the services provided did not qualify as royalty or FTS under the India-Netherlands tax treaty because they did not make any technology, knowledge, experience, or skills "available" to the Indian group companies in such a manner that would enable them to perform these services independently in the future. The tribunal relied heavily on judicial precedents and the specific provisions of the India-Netherlands tax treaty, notably the "make available" clause.
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Income Tax:
TP adjustment - ALP of Contract Software Development (CSD Segment) - Comparable selection - The Tribunal upheld the exclusion of certain comparables based on functional dissimilarity with the assessee. However, it directed the Assessing Officer to re-examine the inclusion/exclusion criteria and the impact of amalgamation on profitability for certain comparables. - Regarding the issue of Adjustment of notional interest on overdue receivables from AEs: The Tribunal observed a pattern of intentional delays in payments to AEs, potentially benefiting them. However, it noted that the issue required further examination concerning the impact on working capital adjustment and the application of principles laid down by the jurisdictional High Court.
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Income Tax:
TDS u/s 195 - liability u/s 201 and 201(1A) - Fees for Technical Services (FTS) or not - Distribution Agreement between the assessee and the foreign company - The Tribunal examined the terms of the agreements between the parties and concluded that the payments made were not in the nature of FTS. It highlighted that the agreements primarily involved the sale of integrated systems (including hardware and software) rather than the transfer of technical knowledge or expertise. - The ITAT noted that while some technical support was provided, it did not constitute the transfer of technical know-how or expertise. - The Tribunal upheld the applicability of the DTAA between India and the UK.
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Income Tax:
Income deemed to accrue or arise in India - payment made for providing interconnect services - The Tribunal found that the IUC charges do not fall under the definition of 'royalty' as per the DTAA between India and Sri Lanka. It noted that the services provided by the assessee do not permit use or right to use any intellectual property or process owned by the assessee. Moreover, the Tribunal observed that amendments to the Income Tax Act expanding the definition of 'royalty' cannot be read into the DTAA unless specifically amended. - The Tribunal allowed the appeal in favor of the assessee, ruling that the IUC charges received by the assessee are not taxable in India either under the Act or the DTAA provisions.
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Income Tax:
TDS u/s 195 - payment received for interconnect usage charges - transaction with non-treaty country - The assessee contested the taxability of these payments as "royalty" and argued for the consideration of DTAA provisions. The Tribunal following the decision of the High Court's judgment, clarified that DTAA can indeed be considered in such proceedings and that amendments to the Income Tax Act do not automatically amend DTAA provisions. The ITAT further held that payments made to non-resident telecom operators for interconnect services are not taxable as royalty. Additionally, it affirmed that Income Tax Authorities lack jurisdiction to tax income arising from extraterritorial sources.
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Customs:
Maintainability of appeal - monetary limit involved in the appeal - Smuggling - Gold Bars - The case involved the confiscation of 3.5 kg of gold bars by the Custom Authority, which was later contested by the respondents in legal proceedings. The respondents claimed that the gold was possessed as per the terms of a Will executed by one of their grandmothers. The Tribunal found the Will to be valid and accepted that the gold was legally obtained through the legacy mentioned in the Will. Consequently, the Tribunal ruled that the gold did not constitute smuggled items under the Customs Act. As a result, the imposition of penalties by the revenue was deemed unjustified, and the appeals were allowed in favor of the respondents. The High court dismissed the appeals below the monetary limit, as per the litigation policy, with no order as to costs.
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Customs:
Revocation of courier registration of appellant - The tribunal observed misdeclaration of the quantity and misclassification of goods. - This judgment underscores the legal obligations of courier agencies in the import-export process, highlighting the need for strict adherence to customs regulations and due diligence in the verification of goods and documentation. The tribunal meticulously dissected the allegations of misdeclaration, misclassification, and evasion of customs duties, providing a detailed analysis of each issue. - The tribunal upheld the order-in-original, which revoked the appellant's courier registration, forfeited the security deposit, and imposed a penalty.
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Customs:
Conversion of shipping bills - conversion from Draw Back Scheme to Advance License Scheme - The Tribunal examined the provisions of Circular No. 36/2010 and concluded that while conversion from more rigorous to less rigorous examination schemes was permitted, the reverse was not allowed. Since the appellants sought conversion to a scheme involving more rigorous examination after availing benefits under the Drawback Scheme, their request was denied. The CESTAT upheld the validity of condition 3(e) of the circular, which precluded conversion after availing benefits under a particular scheme. Consequently, the appeal was dismissed, affirming the decision of the lower authority.
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Customs:
Rejection of refund claim - The Tribunal observed that a pre-notice consultation was issued to the appellant, who responded by paying the demanded duty and interest. As the payment was made in response to the consultation, the court found no grounds for further action by the revenue. - The CESTAT rejected the appellant's argument that they had no further responsibility after making the payment. It held that both the revenue and the appellant are bound by Section 28, and the appellant's acceptance of the proposal in the consultation precluded the need for a show cause notice.
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Customs:
Refund of export duty paid in excess - conclusive evidence to discharge the burden of unjust enrichment - The CESTAT observed that the contract between the buyer and seller explicitly stated that all Indian taxes on cargo would be borne by the seller. - The Tribunal emphasized that invoices serve as primary evidence of whether the duty burden has been passed on. Since the invoices did not show any element of duty being recovered from the customers, the burden of duty could not be deemed to have been passed on unless proven otherwise by the department.
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Customs:
Undervaluation of imported goods - Patchouli Oil - The CESTAT found that the rejection of the declared value lacked legal basis and was unsupported by evidence. The Tribunal emphasized the importance of comparability in valuation and noted the lack of evidence in this regard. Additionally, the court clarified that the insurance value should not influence customs valuation. Finally, the penalty imposed on the director of the appellant company was set aside due to the lack of evidence of deliberate violation of customs laws. As a result, the appeals filed by the appellants were allowed.
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Customs:
The appellant's gold was seized at the airport based on suspicions of smuggling. However, procedural irregularities, doubts about the voluntariness of the appellant's statement regarding the gold's origin, and the invalidity of the seizure notice led the Tribunal to rule in favor of the appellant. The CESTAT found insufficient evidence to support the allegations of smuggling and deemed the confiscation unjustified. Consequently, the court ordered the release of the gold to the appellant and overturned the penalties imposed.
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Customs:
Levy of penalty u/s 112(a) and Section 114AA of CA on Chartered Engineer - Issuance of Certificate under EPCG scheme without verification - The case involved the issuance of a Chartered Engineer Certificate for the installation and use of imported machinery under the EPCG scheme without verifying whether the machines were actually installed. The Department imposed penalties for non-compliance with verification requirements. The appellant argued good faith reliance on submitted documents and emphasized their limited role in verifying installation. However, the Tribunal held them liable for penalties, considering the seriousness of the offense.
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Customs:
Condonation of delay in filing appeal before Commissioner (Appeals) - time limitation - The appellant received the order on 30.12.2018, making the appeal filed on 22.04.2019 beyond the prescribed period. The contention that the limitation should commence from 22.02.2019, based on subsequent correspondence, was rejected as the order's date remained 14.12.2018, and communication after the order's issuance couldn't alter the appeal timeline. - Consequently, the tribunal dismissed the appeal of the assessee.
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Benami Property:
Benami transaction - The petitioner argues that the transactions in question occurred before the amendment of the Act in 2016, making the notice and order invalid. They rely on Supreme Court judgments and decisions of appellate tribunals and other High Courts to support their position. - The High Court, however, finds that the show cause notice and provisional attachment order are provisional in nature and subject to judicial review by the adjudicating authority. It declines to entertain the petitions at this stage, emphasizing the availability of statutory alternative remedies.
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IBC:
Non-admission of full claim by RP - The NCLAT observes that the RP admitted the appellant's claim based on assured returns, which were revised in accordance with directions from the Adjudicating Authority. The court finds no grounds to interfere with the RP's decision and upholds the rejection of the appellant's plea for further enhancement of the claim.
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IBC:
Dismissal of Section 9 petition - initiation of CIRP - Dues of employees - The NCLAT examined the employment tenure of the appellant and found evidence supporting continuous employment with the corporate debtor until resignation. It rejected the respondent's argument regarding employment with another entity. - NCLAT found that the respondent had disputed the appellant's claims prior to the section 9 application, indicating a pre-existing dispute. Thus, the court deemed the application inadmissible based on the principles established in the Mobilox judgment.
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Service Tax:
Declared Service or not - Nature of amount received - falling under the categories of service “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”, or not - Upon reviewing the agreement between the parties and considering the submissions, the Tribunal finds that the charges were integral to the job work agreement and primarily for manufacturing activities. There is no evidence to suggest that the charges were for refraining from manufacturing for other parties. Therefore, the charges do not fall under the declared service category and are not subject to service tax.
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Central Excise:
CENVAT Credit - input service availed by the appellant at the depot level - The case involved the admissibility of Cenvat Credit on service tax paid for clearing and forwarding services received by the appellant at the depot. The tribunal upheld the appellant's claim, stating that since the ownership of goods remained with them until sold from the depot or consignment agent premises, all input services availed up to that point were eligible for Cenvat Credit. The tribunal interpreted the definition of "place of removal" under the Central Excise Act, 1944, to include the depot of the consignment agent as the place of removal, making services provided up to that point admissible for credit.
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VAT:
Review Petition - The High court found no error apparent on the record to warrant entertaining the Review Petition. The grounds raised were deemed untenable and showed disregard for the court's orders. It emphasized the importance of maintaining the sanctity of court decisions and deprecated the practice of engaging new advocates for review proceedings without the consent of the original advocate.
Articles
Notifications
DGFT-
81/2023 - dated
22-3-2024
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FTP
Amendment in export policy of Onions
GST - States-
3/2024 – State Tax - dated
21-3-2024
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Jharkhand SGST
Rescind the Notification No. 30/2023-State Tax, dated the 12th December, 2023
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1/2024 – State Tax (Rate) - dated
21-3-2024
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Jharkhand SGST
Amendment in Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017
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20/2023 – State Tax (Rate) - dated
5-3-2024
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Jharkhand SGST
Amendment in Notification No. 5/2017- State Tax (Rate), dated the 29th June, 2017
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19/2023 – State Tax (Rate) - dated
5-3-2024
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Jharkhand SGST
Amendment in Notification No. 4/2017- State Tax (Rate), dated the 29th June, 2017
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18/2023 – State Tax (Rate) - dated
5-3-2024
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Jharkhand SGST
Amendment in Notification No. 2/2017-State Tax (Rate), dated the 29th June, 2017
Income Tax-
35/2024 - dated
22-3-2024
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IT
Disclosure of information respecting assessees U/s 138(1) of IT Act 1961 - Central Government specifies Principal Secretary, Planning Department, Government of Uttar Pradesh
Case Laws:
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GST
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2024 (3) TMI 1096
Levy of penalty - goods were unloaded at a place that was not registered in the registration certificate - shifting of burden of proof on the assessee to show that there was no intention to evade tax (onus to prove) - HELD THAT:- The intention to evade tax is sine qua non for imposition of penalty. The facts in the present clearly indicate that the place where the goods were unloaded is the godown belonging to the petitioner and not to any third party. It is not in dispute that this particular godown was registered as place of business of the petitioner in the erstwhile Value Added Tax regime. There is no intention to evade tax whatsoever. The imposition of penalty in such circumstances is not warranted. The judgement of the Madurai Bench of Madras High Court in Algae Labs Pvt. Ltd. [ 2022 (4) TMI 466 - MADRAS HIGH COURT ] also supports the case of the petitioner that unloading of goods at a different place by itself would not lead to imposition of penalty. The impugned order dated July 28, 2022 is quashed and set aside. The writ petition is allowed.
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2024 (3) TMI 1095
Retrospective cancellation of GST registration of the petitioner - SCN does not specify any cogent reason - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons - In view of the fact that the Petitioner does not seek to carry on business or continue the registration, the impugned order dated 25.08.2023 is modified to the limited extent that registration shall now be treated as cancelled with effect from 08.11.2022 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.
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2024 (3) TMI 1094
Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order - demand including penalty u/s 73 of CGST Act - HELD THAT:- The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply filed by the Petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was incomplete. He merely held that the reply is incomplete and lacks supporting documents which ex-facie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner - Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details. The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 30.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Petition disposed off.
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2024 (3) TMI 1093
Challenged the order cancelling the registration - barred by limitation - non-application of mind - HELD THAT:- Admittedly from the perusal of the order dated 20.01.2022. it transpires that no reason has been assigned for cancellation of the registration of the petitioner. In absence of the same the order cannot be justified in the eye of law. Further since the appeal of the petitioner was dismissed on the ground of delay, this Court finds that the doctrine of merger will have no application considering the facts and circumstances of the present case. Thus, the order dated 20.01.2022 passed by the Assistant Commissioner, respondent no.3 is hereby quashed - The writ petition succeeds and is allowed.
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2024 (3) TMI 1092
Cancellation of GST registration of petitioner - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are also bereft of any details. Accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention in required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons - In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 29.11.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 01.10.2019 i.e., the date when Petitioner applied for cancellation of GST registration. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.
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2024 (3) TMI 1091
Retrospective cancellation of GST registration of the petitioner - petitioner had no opportunity to even object to the retrospective cancellation of the registration - violation of principles of natural justice - HELD THAT:- The Show Cause Notice and the impugned order are bereft of any details accordingly the same cannot be sustained and neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such period. Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons - In view of the fact that Petitioner does not seek to carry on business or continue the registration, the impugned order dated 01.12.2020 is modified to the limited extent that registration shall now be treated as cancelled with effect from 19.11.2020 i.e., the date when the Show Cause Notice was issued. Petitioner shall make the necessary compliances as required by Section 29 of the Central Goods and Services Tax Act, 2017. Petition disposed off.
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2024 (3) TMI 1090
Violation of principles of natural justice - impugned order does not take into consideration the replies submitted by the Petitioner and is a cryptic order - demand with penalty u/s 73 of CGST Act - HELD THAT:- The observation in the impugned order dated 30.12.2023 is not sustainable for the reasons that the reply filed by the Petitioner is a detailed reply. Proper Officer had to at least consider the reply on merits and then form an opinion whether the reply was devoid of merits. He merely held that the reply is devoid of merits which exfacie shows that Proper Officer has not applied his mind to the reply submitted by the petitioner - Further, if the Proper Officer was of the view that further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details. The order cannot be sustained, and the matter is liable to be remitted to the Proper Officer for re-adjudication. Accordingly, the impugned order dated 29.12.2023 is set aside. The matter is remitted to the Proper Officer for re-adjudication. Petition disposed off.
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2024 (3) TMI 1089
Cancellation of GST registration of petitioner - order for cancellation of registration has been passed without any application of mind whatsoever - violation of principles of natural justice - HELD THAT:- In the present case, the facts are similar to one in Surendra Bahadur Singh's case [ 2023 (8) TMI 1262 - ALLAHABAD HIGH COURT] , wherein the appeal was barred by time under Section 107 of the Act. However, the Division Bench in Surendra Bahadur Singh's case took into consideration the original order and set aside the same being non-reasoned and allowed the petitioner therein to file reply to the show cause notice. The orders impugned herein are liable to be set aside. Accordingly, the order in original dated March 25, 2023 and the appellate order dated December 29, 2023 are quashed and set aside - Petition allowed.
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2024 (3) TMI 1088
Maintainability of appeal - appeal dismissed on the ground of time limitation - HELD THAT:- There is no material on record to disbelieve the contention of the petitioner that the copy of the original order in appeal was annexed with the appeal paper book at the time of the online submissions. The impugned order set aside - matter is remitted to the Appellate Authority to consider the appeal of the petitioner on merits in accordance with law - petition disposed off.
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2024 (3) TMI 1087
Seeking grant of bail - irregular availment of Input Tax Credit - creation and operation of fake GST firms and issuing fake GST invoices from these firms - involved in the passing of fake ITC from 102 non-existent firms to the tune of Rs. 274.89 Cr. by way of issuing invoices without any actual supply of goods - HELD THAT:- It reveals from the perusal of the record that by blaming Naveen Aggarwal the accused persons want to escape from liability whereas there is sufficient and ample evidence to the effect that they themselves were managing the affairs of illegal activities and fake ITC (Income Tax Credit) was availed by them and they were engaged in a number of illegal financial transactions and in such circumstances if they are granted bail, as rightly held by the learned Sessions Judge while rejecting their bail applications, there is a strong possibility of applicants fleeing from justice and also they may tamper with the crucial evidence or make influence to the witnesses. This Court is also of the view that the present matter relates to serious economic offence, which may affect the economy of the country. The applicants have committed gross violation of the provisions of the GST Act. Wrongful availment / utilization of input tax credit amounting to Rs. 315 Cr. has been made by them and this amount will increase a lot with the advancement of the investigation. The Court genuinely feels that at this stage there is no possibility of false implication of the applicants. The maximum period of imprisonment provided for such offence under the GST Act, which is five years, causes no hindrance in rejection of bail applications in such type of cases relating to economic offences. Considering the entire facts and circumstances of the case and keeping in view the nature and gravity of offence, which is an economic offence in nature, complicity of accused, role of the applicants and without expressing any opinion on the merits of the case, the Court is of the view that the applicants have not made out a case for bail. The bail applications are liable to be rejected and the same are accordingly rejected.
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2024 (3) TMI 1086
Validity of summons issued u/s 70 - Proper officer - Whether issuance of summons u/s 70 of the CGST Act is hit by Section 6(2)(b) of the CGST Act ? - HELD THAT:- It is evident that against the issuance of notice by the State Authorities, petitioner had preferred writ petition before the High Court and had not put in appearance before the State Authorities. In the judgments referred to by counsel for the respondents, it is held that scope of Section 6(2)(b) and Section 70 of the CGST Act is different and distinct, as the former deals with any proceedings on subject matter, whereas the latter deals with power to issue summon in an inquiry and therefore, the words proceedings and inquiry cannot be mixed up to read as if there is a bar for the respondents to invoke the power u/s 70 of the CGST Act. Madras High Court in Kuppan Gounder P.G. Natarajan vs. Directorate General of GST Intelligence, [ 2021 (9) TMI 713 - MADRAS HIGH COURT] , wherein, Court has also held that in issuance of summons for conducting an inquiry and to obtain a statement from the appellant cannot be construed to be bar u/s 6(2)(b) of the CGST Act. Thus, we are of the considered view that issuance of summons u/s 70 of the CGST Act is not hit by Section 6(2)(b) of the CGST Act and the present Civil Writ petition being devoid of merits is accordingly dismissed. Stay application stands disposed.
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2024 (3) TMI 1085
Power of High Court to entertain writ petition - statutory remedy of appeal - barred by limitation including extended period of limitation - challenged the determination of tax under best judgment assessment - return filed belatedly u/s 39 in Form GSTR-3B - Prayer to de-attach the bank account - violation of principles of natural justice - HELD THAT:- Present is a case where the petitioner did not even file the appeal and allowed the order passed in assessment to become final and then filed writ petition seeking to challenge the determination through best judgment assessment, mainly on the basis of incorrect determination of tax liability in the light of return belatedly filed by the petitioner. Present is not a case where from the date of notice, return was either filed within the prescribed period, or even within the extended period under notice given to the petitioner. Even best judgment assessment was not challenged by filing an appeal and period of filing of appeal was allowed to expire. It was only thereafter that the writ petition was filed. Having not preferred an appeal, the petition in the present case, in view of the decision of Hon'ble Supreme Court in the case of Glaxo Smith Kline Consumer Health Care Limited [ 2020 (5) TMI 149 - SUPREME COURT] , is not maintainable. When the petitioner failed to file his return, even a notice was issued to him to file return within 15 days. When no return was filed and the petitioner remained persistent defaulter, the Assessing Authority was left with no other option but to proceed to make best judgment assessment u/s 62 of the RGST Act, 2017. Therefore, the petitioner cannot complain of violation of principles of natural justice. The challenge to the determination under best judgment assessment, based mainly on factual aspects to the extent of tax liability, is not sustainable in view of the figure stated in the return which was filed by the assessee. All these grounds, though available to be raised by availing the remedy of appeal including extended period of limitation seeking condonation of delay, the petitioner, for reasons best known to him, did not avail the remedy. Therefore, present petition is liable to be dismissed and is accordingly dismissed.
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2024 (3) TMI 1084
Seeking grant of Bail u/s 437 - tax evasion - Offence specified in clause (a) or clause (b) or clause (c) or clause (d) of subsection (1) of 132 of Central Goods and Service Tax 2017 ( the act ) - HELD THAT:- The accused had given password of his official laptop to the prosecution. Thus, it reveals that investigation officer was permitted to record the statement of the accused into the Judicial custody and accordingly I.O. had recorded detailed statement of accused. Moreover, it is seen that accused has co-operated to the investigation officer, as there is no any whisper of non co-operation by I.O. during custody. Hence, the contention raised by the complainant regarding the non co-operation and abscondence of the accused is washed away. Further, it appeared that accused is taken into Judicial custody. No purpose will serve by detention of the accused behind the bar as accused is in custody since 02/03/2024. It is also observed that, investigation officer has seized official laptop, bank data and phones by panchanama. Hence there are no chances of tampering the evidence. Therefore, in view of constitutional rights and directions given in Arnesh Kumar s [ 2014 (7) TMI 1143 - SUPREME COURT] ), it is needless to mention that, personal liberty of accused cannot be curtailed for recovery of tax or for securing presence of accused another accused. Hence, no prejudice will be caused to the complainant, if the accused is released on imposing certain strict conditions. Moreover, if the accused has not obey his undertakings, then in that case the complainant has right to move an application for cancellation of bail for disobeying the undertaking as well as conditions. Hence, no prejudice will be caused to the complainant, if the accused person is enlarged on imposing conditions. The apprehension raised by the prosecution can be safeguarded by imposing stringent conditions. Thus, the gravity of offence leveled against the accused and other mitigating circumstances along with medical condition of present accused, the apprehension of prosecution in respect of absconding or tampering of evidence, imposing conditions will suffice purpose. Hence, accused Prateek Patel be released on bail on terms and conditions.
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Income Tax
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2024 (3) TMI 1083
Validity of reopening of assessment - notice u/s 148 against petitioner company after the approval of the resolution plan for a period prior to closing - liability of previous management - as argued proceedings for assessment year 2013-14, being a period prior to the closing date are non-est and could not have been initiated by the Income-tax Department in view of the resolution plan approved by the NCLT - HELD THAT:- Section 148 read with Section 147 of the Act only deals with a situation where any income chargeable to tax has escaped assessment for any assessment year. We are unable to fathom as to how the provisions of Section 148 of the Act can be applied for collection of evidences of third party, ex-promoters etc., and we say this because there are separate provisions under Section 133(6) of the Act in which, such evidences can be collected. We are also unable to understand how the provisions of Section 148 of the Act can be used when the proceedings are not for recovery of tax. During the course of submission, the Learned ASG stated that in view of the legal position as it stands under the Code, once resolution plan has attained finality, new management and company can get the benefit of clean slate principle. While the department does not dispute that such benefit has to go to new management, the Learned ASG further submitted that while department would not go to the new management, this cannot, however, result into direct benefit to the erstwhile Directors to make them go scot-free from their evasions and misdeeds. Therefore, some assessment and fact-finding process is required to be carried out, where erstwhile Directors role is given a closer scrutiny. Even then, in our view, for reasons recorded above, Section 148 read with Section 147 of the Act cannot be applied against the company and the present management. Thus issue of notice under section 148 of the Act to petitioner company after the approval of the resolution plan for a period prior to closing is invalid and bad in law, having been issued contrary to the provisions of the Code and the Resolution Plan. Section 31 of the Code provides that the resolution plan which is approved under the Code is binding on the Corporate Debtor, its employees, members, creditors including the Central Government, State Government and any local authority to whom a debt or a statutory due is owned. Decided in favour of assessee.
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2024 (3) TMI 1082
Validity of reopening of assessment u/s 147 - Default in sanction/approval u/s 151 as obtained and granted without application of mind - Petitioner claimed that despite certain transactions being booked under the PAN of erstwhile company (amalgamated company) due to an error, they had correctly considered all transactions in their return. - HELD THAT:- The draft of the order u/s 148A(d) states that income has escaped assessment within the meaning of provision of Section 147 of the Act and the same is required to be examined. If the AO who had sought the approval, the Additional/Joint CIT, who had recommended grant of approval and the PCIT, who granted the approval had only bothered to read the request for approval along with draft of the order under Section 148A(d) of the Act, they would have certainly noticed the discrepancies. It is, therefore, clear that none of these officers have even bothered to read the request for approval or draft of the order. In the affidavit in reply, it is mentioned as a typographical error. We are not inclined to accept this explanation because a typographical error could have been committed by the AO, who was seeking the approval, but if only the Additional/Joint CIT or the PCIT had read the approval application and the draft of the order to be issued under Section 148A(d) of the Act, they would have certainly noticed the discrepancy and they should have either refused approval or sent the application back to the AO for filing correct form for approval. We hereby quash and set aside the order under Clause (d) of Section 148A - Decided in favour of assessee.
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2024 (3) TMI 1081
Release of the Amount Seized along with interest u/s 132B(4) read with Rule 119A - Scope of the term 'shall release' - Application of seized or requisitioned assets u/s 132B - Seeking direction to quash the seizure effected u/s 132B(1)(i) - The petitioner contended that during the course of that investigation, petitioner had produced regular books of accounts and details of his income tax returns filed for the past Assessment Years to establish that the seized cash was duly accounted for/tax paid money - HELD TH AT:- The only consequence of non-compliance of Section 132 B (1) (i) of the Act is by way of payment of interest at the highest rate provided by the legislature i.e. @ of 18 % per annum. The period for which such interest may become payable has also been specified under that provision. By imposing the levy of interest on the revenue, a plain reading of sub section (4) of Section 132 B (1) (i) of the Act, the legislature itself contemplated cases where orders may remain to be passed by the Assessing Authority within the timeline provided u/s 132 B (1) (i) of the Act. Payability of interest may arise only in a case where the order may have remained to be passed within a time stipulation provided under the second proviso to Section 132 B (1) (i) of the Act. If, the nature and source of acquisition of a seized asset is wholly explained and it may not be required for recovery of any outstanding demand or demand of tax that may arise under the assessment proposed to be made consequent to the search giving rise to the seizure itself, the same may be released. The provisions does not stipulate any consequence of automatic release. It would first have to be invoked by the assessee by filing a proper application. Then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non-imperative basis. In the event of delay in making the decision the revenue has been saddled with interest liability @ 18 % per annum. On the contrary under Section 132 (8) of the Act [as considered in Cowasjee Nusserwanji Dinshaw [ 1987 (3) TMI 106 - GUJARAT HIGH COURT ], a statutory duty was cast on the seizing authority to itself record reasons to detain seized documents beyond 180 days and the consequence of its nonadherence was also provided by way of release of the same. Therefore, in absence of statutory intent shown to exist, it may not be inferred through the process of legal reasoning-that if no order is passed within a time of 120 days, seized assets must be released notwithstanding its impact on the recovery of existing and likely demands. As similar stipulations of time provided under different enactments have been interpreted to be directory and not mandatory. Therefore, we are unable to pursue ourselves to subscribe to the reasoning that has found its acceptance in the case of Mitaben R. Shah [ 2010 (2) TMI 684 - GUJARAT HIGH COURT ], Ashish Jayantilal Sanghavi [ 2022 (4) TMI 1285 - GUJARAT HIGH COURT ],Nadim Dilip Bhai Panjvani [ 2016 (1) TMI 811 - GUJARAT HIGH COURT ] and Mul Chand Malu (HUF) [ 2016 (5) TMI 550 - GAUHATI HIGH COURT ] As petitioner has invoked the principle-if an Act is required to be done in a particular way, it may be done in that way or not at all, we find the same to be inapplicable to the present law. In our opinion, the provision in question [Section 132 B (1) (i)] being directory, the jurisdiction of the Assessing Authority to deal with the petitioner's application dated 15.09.2022 did not lapse or abate upon expiry of the period of 120 days. Since that stipulation of law is only directory, it survives to the Assessing Authority to deal with the application, even today. We may also observe at this stage, if on due application of mind, the Assessing Authority reaches a conclusion that the nature and source of Rs. 36,12,000/- seized from Om Prakash Bind was duly explained and if assessing officer is adequately satisfied that that amount was neither required for satisfaction of any outstanding demand or satisfaction of demand that may arise pursuant to the assessment proposed to be made, such refundable amount would attract liability of interest under Section 132 B (4) of the Act read with Rule 119 A of the Rules. We decline to issue the writ of Mandamus as prayed. Instead, we dispose of the writ petition with a direction on the Assessing Authority/respondent No.2 to proceed to deal with and decide the application of the petitioner dated 15.09.2022 within two weeks from today
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2024 (3) TMI 1080
Reopening of assessment u/s 147 consequent to revision proceedings u/s 263 pending - notice u/s 148 issued during the pendency of the assessment proceedings following the directions given by the PCIT - HELD THAT:- Such a reopening notice, in our view, could not have been issued, more particularly, because the notice involved matters which were the subject matter of revision u/s 263 - when the order of assessment u/s 143(3) of the Act has been remanded to the AO to enquire into and make a fresh assessment, the question of entertaining reasonable belief that the income chargeable to tax has escaped assessment does not arise, much less the assessment when the assessment proceedings are still pending. The concept of reason to believe comes in picture if the income chargeable to tax has escaped assessment. So long as the assessment is pending, the assessing authority cannot have any such reason to believe that income chargeable to tax for the assessment year in question has escaped assessment. Income cannot be said to have escaped assessment within the meaning of this section if the assessment proceedings in respect of that income and/or issue are still pending and have not culminated into a final order. The underlying principle is how can an escapement of income from an assessment be predicted before an assessment is complete. Thus, it was not open for the AO to invoke powers u/s 147 and 148 - In our view, so long as the assessment proceeding in respect of certain income subsists, income cannot be said to have escaped assessment. Such proceedings, if initiated, will have to be held as invalid, ab-initio, void and illegal. We find support for this view in Ador Technopack Ltd. v. Dr. Zakir Hussein, Deputy Commissioner [ 2004 (3) TMI 22 - BOMBAY HIGH COURT] Also sanction granted u/s 151 as held by this Court in J M Financial and Investment Consultancy Services Private Limited [ 2022 (4) TMI 1446 - BOMBAY HIGH COURT] is invalid. Decided in favour of assessee.
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2024 (3) TMI 1079
Deduction u/s. 32AB - rental income earned by the Appellant and assessed under the head Income from house property not qualify for deduction u/s. 32AB as per ITAT - whether appellant is entitled to deduction on the entire income which would include income from house property or it should be restricted only to the income chargeable to tax under the head profits and gains of business or profession ? - HELD THAT:- The activity of income from house property has to be construed as forming part of the same business as there is one account for the printing business and for income from house property and the business is conducted under a common management. There is one profit and loss account and one balance sheet. It is the perception of the activities from the point of view of businessman that is material. As such perception that is recognised in Part II and Part III of the Sixth Schedule to the Companies Act, 1956. In Section 32AB(3) or Section 32AB (1)(ii) the expression chargeable to profits and gains of business is conspicuous by its absence. Hence, the dichotomy as between the income from printing and rental income from house property is not warranted in terms of Section 32AB(3) of the Act. In our view, all eligible business or profession shall include every income except that which is excluded specifically in the definition of eligible business or profession. We find support for this view in Apollo Tyres Ltd. [ 1998 (8) TMI 68 - KERALA HIGH COURT] of Kerala High Court and [ 2002 (5) TMI 5 - SUPREME COURT] Hon ble Apex Court. It is not the case of the Revenue or the findings of the ITAT that appellant has in its account not shown rental income as part of the business income. Infact as per the assessment order, these charges have been considered as part of business income but the AO has excluded it for the purpose of profits to arrive at the eligible business income for the purpose of Section 32AB of the Act. Therefore, so long as the rental income is part of the business income, it will be included in the term of eligible business because the rental income is not excluded in the definition of eligible business. The question of law, as framed, is answered in negative. The rental income earned by appellant and assessed under the head Income from house property will qualify for deduction u/s 32AB of the Act.
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2024 (3) TMI 1078
Validity of reopening of assessment u/s 147 - Reason to believe - tangible material to initiate reassessment proceedings or not? - HELD THAT:- There was no failure on the part of Petitioner to disclose fully and truly the material facts, nor there was any tangible material with the AO, which could have otherwise justified the reopening of assessment by issuing the notice impugned. In the present case, the notice to reopen assessment does not even remotely make any mention of any tangible material has come to the notice of the AO after passing original assessment order to conclude that there was an escapement of assessment. AO has failed to aver what material fact that Petitioner has failed to disclose fully and truly. It is clearly the very information which was before the AO as provided by Petitioner on the basis of which, a different view is being taken. In the present case, there is a full and true disclosure by Petitioner, and information on those transactions have been accepted under the heads claimed by Petitioner. Appeal allowed.
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2024 (3) TMI 1077
Estimation of profit - AO applying a profit rate of 20% on the contract receipt against the rate of profit declared by the appellant at 8.13% - CIT(A) directing the AO to apply a profit rate of 14.5% - HELD THAT:-Assessee fairly admitted instead of 14% estimated by the Ld. CIT(A) if the estimation of 11% be made so as to give justice to the assessee as against the 8 % disclosed by the assessee and the same is generally also considered by the provision of section 44AD @ 8 % but considering the overall fact he prayed in the open court that if the profit is estimated @ 11 % which will end the justice. We deem it fit to estimate the profit @ 11 % in the interest of justice to the parties. Based on this observations ground no. 2 raised by the assessee is partly allowed. Addition of Unexplained creditors - HELD THAT:- Considering the facts of the case that when the books of account of the assessee are rejected and the profit is estimated a separate addition arising out of that books of account cannot be made in the hands of the assessee.
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2024 (3) TMI 1076
Penalty u/s 270A - misreporting of the income - disallowances of 40A(3) on account of interest income in the other sources and has also disallowed the claim of the assessee u/s 32 disputing the period use of the asset of the assessee - HELD THAT:- We find force in the arguments of assessee that the additions/disallowance made by the Assessing Officer are not in the nature of misreporting of the income of the assessee to drive home to this contention, the assessee relied upon the decision of the jurisdictional high court in the case of G. R. Infraprojects Ltd.[ 2024 (1) TMI 163 - RAJASTHAN HIGH COURT] wherein held that the case of levy penalty without specifying the limb of under reported or misreported the income the levy of penalty is not correct. Here in this case the claim of assessee denied though assessee did not challenge it on merits. The bench noted that the CIT(A) has treated assessment and penalty proceedings at par. While it is settled that penalty proceeding are different from assessment proceeding and that mere addition in assessment could not automatically lead to concealment. Addition made in assessment is not conclusive in the penalty proceeding in which the assessee is free to place further material to substantiate the claim that there was no concealment. Merely non-filing of appeal by the assessee against addition made in assessment cannot be a ground to conclude that assessee accepted the concealment. Therefore in these facts the CIT Appeal has wrongly upheld the penalty imposed by the Assessing Officer. Immunity from imposition of penalty for underreporting of income if assessee has deposited the demand created by the Assessing Officer within 30 days from receipt of demand notice and intimated to him under rule 129 in Form No. 68 - In this case assessee duly deposited the demand created against her within 30 days but she failed to file Form No. 68 within the prescribed time before the Assessing Officer but while responding to the penalty proceeding subsequently the assessee filed Form No. 68 before the Assessing Officer but he did not consider it. CIT(Appeal) has also did not consider the filing of Form No. 68 belatedly. The delay in filing the Form is only a procedural lapse on the part of the assessee not the substantive failure. In substance the assessee deposited the demand within 30 days, which is the part of substantive law and merely filing the Form No. 68 is only a technical or venial breach of procedural law. Therefore benefit of substantive law is required to be given to the assessee. CIT(Appeal) has also not considered this aspect. Penalty @200% on account of misreporting of income on depreciation of fixed assets claimed by the assessee for full year as against half year since the asset was put to use for less than 180 days - Assessee due to inadvertence claimed the depreciation for full year this is certainly not the misreporting of income. The misreporting of income is something in which mensrea on the part of assessee is required to be present. The willful default constitutes misreporting of income which is not the case. The assessee has made inadvertent wrong claim but has disclosed the facts fully and truly therefore old law in this regard hold good and the penalty imposition is not warranted. Please refer to CIT vs. Reliance Petrol Products Private Limited (2010) [ 2010 (3) TMI 80 - SUPREME COURT] and Dilip Shroff [ 2007 (5) TMI 198 - SUPREME COURT] - Considering the fact that the nature of addition/disallowance are not in the nature of misreporting or misreporting income of the assessee and the assessee has paid the demand within 30 days and filed the required form no. 68 since that form being procedural nature we condone that aspect of the matter and direct the ld. AO to delete the penalty levied u/s. 270A - Decided in favour of assessee.
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2024 (3) TMI 1075
Reopening of assessment - reason to believe or reason to suspect - ex-parte ad interim order passed by the SEBI relied upon against director of assesee company - SEBI had restrained fifty four (54) persons/entities including the director of the assessee company from trading in security market/stock exchange stating that those persons/entities have misused the stock exchange system to generate fictitious profits/losses for the purpose of tax evasion/facilitating tax evasion - HELD THAT:- As rightly pointed out by the assessee the interim ex-parte order of the SEBI against director, which could have triggered Reasons to Suspect and not Reasons to believe escapement of income which doesn t satisfy the requirement of law to successfully usurp the jurisdiction to re-open the assessment of the assessee-company, which is a separate legal entity. Therefore, having carefully perused the material on the basis of which AO re-opened the assessment i.e, SEBI ex-parte interim order, we are of the considered opinion that at best it is an adverse information against director of assessee company [Shri Nikil Jalan]; and AO after receiving the same, ought to have conducted preliminary enquiry [since at that stage there was only Reason to suspect escapement of income in his hands and collected material and if it was found that it is not the director of assessee company who has misused the stock exchange, instead it was the assessee company which actually misused the stock exchange, in such an event, the AO should have recorded his own reason warrant holding the belief that income chargeable to tax has escaped assessment, which essential requirement of law has not been met in the reasons recorded by AO in the instant case to successfully re-open the assessment of assessee company - Decided in favour of assessee.
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2024 (3) TMI 1074
Estimation of income - Bogus purchases - CIT(A) in restricting the disallowance to 12.5% of the purchases instead of addition made by the ld. AO for the entire purchases - HELD THAT:- We find that AO has made addition on account of entire purchases which is wholly unjustified, because once the source of purchases have been debited in the books of accounts and corresponding quantity of material purchased had been recorded in the books and corresponding quantity of sales has also been accepted then, it cannot be held that purchases are outside books. At the most, it could be the case of purchases made from hawala dealers for inflating the cost and suppressing GP rate. If parties have not confirmed the transaction then in such a case the principle laid down in the case of PCIT vs. Vishwashakti construction [ 2023 (5) TMI 278 - BOMBAY HIGH COURT] wherein GP rate of 12.5% has been held to be reasonable in such cases, is applied in the present case also, then CIT (A) is justified. Decided against revenue.
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2024 (3) TMI 1073
Levy of penalty u/s. 271(1)(c) - Defective notice u/s 274 - non striking of irrelevant clauses - Estimation of income on bogus purchases - HELD THAT:- A perusal of the notice reveals that it is in a pre-drafted Performa and mentions both limbs of section 271(1)(c) of the Act as. 'have Concealed the particulars of your income or Furnished inaccurate particulars of such income.' The Assessing Officer has not struck off irrelevant clauses in the notice. As decided in Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] held that where AO clearly records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, non-striking of irrelevant matter would render the notice defective and such defective notice vitiate the penalty proceedings. In the present case, we find that in assessment order the AOhad initiated penalty proceedings for furnishing inaccurate particulars of income only. Since, both limbs i.e. concealed particulars of income and furnished inaccurate particulars of income are recorded in the notice, the notice is defective. The penalty levied u/s. 271(1)(c) is liable to be deleted on the ground of defective notice as well. Decided in favour of assessee.
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2024 (3) TMI 1072
Revision u/s 263 - CIT held AO had fallen in error by accepting the source of cash investment - l imited scrutiny concluded against assessee - AR has primarily came up with the plea that the return was filed on the presumptive income and the scrutiny proceedings were for a limited purpose which was duly examined by the ld. AO - HELD THAT:- It comes up that the notice u/s 143(2) of the Act for limited scrutiny was issued on 29.09.2017 where the primary query under consideration was whether the investment and income relating to security transactions are duly disclosed . The copy of return of income shows that the assessee had filed presumptive income return. The aforesaid leaves no doubt in the mind of this Bench to conclude that the finding of the ld. PCIT that the AO had not been diligent enough and had not conducted worthwhile inquiries during the scrutiny assessment is erroneous. It appears that the ld. PCIT had questioned the prudence of the assessee for investing the sale proceeds of the business in security investment and transactions. We are of the considered view that such observations cannot be the foundation to hold that the order is erroneous so far as prejudicial to the interests of the Revenue. Rather, without pointing out anything specific during the revision proceedings, the ld.PCIT has merely substituted his own view to the matter examined by the ld. AO during assessment proceedings. Thus, the grounds raised are sustained in favour of assessee.
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2024 (3) TMI 1071
Reopening of assessment u/s 147 - AO initiated reassessment proceedings based on the information received from Investigation Wing that the Assessee was involved in making cash payment - HELD THAT:- Information on basis of which AO had initiated proceedings u/s 147 of the Act was certain and it could be construed to be sufficient and relevant material on basis of which a reasonable person could have formed a belief that income had escaped assessment. Thus, there was reason to believe that income of the assessee company to the extent of Rs. 6.61 Crores had escaped assessment on account of failure on the part of the assessee to disclose fully and truly all the material facts/particulars of its income necessary for its assessment. Therefore, the reassessment proceedings initiated by the Assessing Officer were within jurisdiction and valid in the eyes of law in as much as reasons recorded by the Assessing Officer satisfied the requirement of section 147 It is well settled law that, for an assessment to be re-opened what is required that the AO should have reason to believe that the income of assessee had escaped assessment and the said belief should be an honest and reasonable person based on reasonable grounds. The correctness of the materials/reason to believe is not a matter to be looked into at the initial state. Therefore, we find no merit in the ground No.1 of the assessee. Ground No.1 of the assessee is dismissed. Addition u/s 69 - addition based on the estimation of the cost of acquisition of the property - cash component of Rs. 5.41 Crores was paid over and above the registered value - addition based on statement of witness - HELD THAT:- In the present case, the addition has been made by the AO ignoring the documentary evidence in the form of registered sale deed which being a best evidence for finding the actual sale value and in the absence of any other material to show the transactions involved in cash outside the sale consideration mentioned in the sale deed and in the absence of any corroborative documentary or credible oral evidence, the AO should not have made addition. The entire addition made by the AO based on the statements of the witnesses which have been retracted thereafter and no opportunity of cross examination was granted by the AO and in the absence of any corroborative material on record, the AO could not have made any addition and the Ld. CIT(A) should have deleted the addition. Thus, in our considered opinion the CIT(A) committed error in upholding the addition made by the AO - Ground No. 2 of the Assessee allowed.
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2024 (3) TMI 1070
Penalty proceedings u/s 271(1)(c) - failure of the assessee to explain the source of cash deposit in the bank account - burden of proof - HELD THAT:- Burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty u/s 271(1)(c) - On facts, we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives. Assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not, in our view, warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se. We are inclined to agree with the contention on behalf of the assessee that discretion vested with the AO u/s 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty u/s 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so. Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased, it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus, a soft instance deserves in the present case. Appeal of the assessee is allowed.
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2024 (3) TMI 1069
Accrual of income in India - Royalty receipts - taxation of revenue from online database of text journal and books as royalty income u/Article 12 of India US DTAA - HELD THAT:- Perusal of the order of the Tribunal shows that identical issue came up for consideration in assessment years 2013-14 and 2014-15 [ 2022 (3) TMI 1019 - ITAT DELHI] in respect of taxation of revenue from online database of text journal and books as royalty income under Article 12 of India US Double Taxation Avoidance Agreement (DTAA) amounts paid by resident Indian end users/ distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195. Decided against revenue.
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2024 (3) TMI 1068
TP Adjustment - MAM - other method used by the assessee for carrying out the arms length analysis for purchase of traded goods rejected - TPO proceeded by applying TNMM as the most appropriate method for bench marking assessee s international transactions by doing fresh search for comparables - assessee is engaged in trading of edible oils whereas all the comparables mentioned here in above are in manufacturing of edible/ non edible oils. HELD THAT:- Since the market quotes were available on corresponding dates and when corresponding dates data was not available on the date of contract entered between the assessee and its AE, therefore, in our considered view the other method has been rightly applied by the assessee. As given a thoughtful consideration to the orders of the TPO we are of the considered view that the TPO has failed to analyze the TP documentation prepared by the assessee. We find that the assessee has appropriately compared the prices of third party brokerage houses / associations/ exchanges where ever available during the time of preparation of the TP documentation. Assessee has considered all the market quotations available while maintaining the transfer pricing report and considering the contemporaneous nature of documentation process as provided under the relevant provision of the Act. Thus if any third party rate is not considered for a particular date of contract due to non availability of the data would not give right to the TPO to reject the method adopted by the assessee. We find that the assessee has considered the rates based on the average of available third party market quotations of Murgi Meghan, Sunvin Group, Malaysian Palm Oil and Solvent Extractors and not specifically to any single broker rate. The objective of applying of any transfer pricing method is to determine the arm s length price for a given transaction and not to justify any transfer price at which the transaction may have been under taken - If there is a difference between arm s length price determined by a particular method and the transfer price adopted by the assessee, it may warrant the transfer pricing adjustment, in case such variation is not within the permissible tolerance range specified in the Act. However, such variations cannot be the basis of questioning appropriateness of the method. A perusal of the order of the TPO show that he has mentioned a difference of Rs. 97,36,699/- and rejected the applicability of other method . In our humble opinion this difference is miniscule when considered with the total value of international transaction of Rs. 729 crores. - Decided in favour of assessee. Enhancing the income of the Appellant pertaining to the purchase of traded goods that allegedly do not satisfy the arm's length principle envisaged under the Act - HELD THAT:- Documentation of arm s length price by the assessee by adopting quotations from various brokerage houses/ associations/ exchanges cannot be faulted with and, therefore, all the decisions relied upon by the DR are distinguishable on facts. Decided in favour of assessee.
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2024 (3) TMI 1067
Deduction of interest expenditure incurred on borrowed funds u/s 57 - Interest incurred on borrowed funds utilized for making investment in shares in company of Singapore - expenditure allowable u/s. 57 or not? - HELD THAT:- As not disputed that the assessee s investment in M/s. Dolphin Overseas Private Limited, Singapore is for the purpose of earning income in the future periods. Revenue Authorities also did not bring on record that the investment was made by the assessee otherwise than for the purpose of making an income. We observed that section 57(iii) is clear and has to be construed according to its natural meaning. It should not be given a narrowed meaning and the interpretation of section 57(iii) cannot be held to be conditional upon making or earning of the income. As relying on SRI SAYTASAI PROPERTIES INVESTMENT PVT. LTD. case [ 2014 (2) TMI 796 - CALCUTTA HIGH COURT] we are of the considered view that the assessee is eligible to claim deduction of interest expenditure incurred on borrowed funds utilized for making investment in shares of M/s. Dolphin Overseas Private Limited, Singapore as per the provisions of u/s. 57 of the Act. Appeal filed by the assessee is allowed.
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2024 (3) TMI 1066
Taxability of income in India - assessee is a company based out of the Netherlands which provided various services to its group companies based in India - Taxability as royalty/fee for technical services - revenues received from rendering certain services were claimed by the assessee as non-taxable in India - AO held that the services were taxable as royalty/fee for technical services under the income tax act, read with the India-Netherlands tax treaty - HELD THAT:- The payments do not qualify as royalty for several reasons. Firstly, the Department in the subsequent years (Assessment Years 2018-19, 2020-21 and 2021-2022) has itself not tax the aforesaid payments as royalty. Secondly, we observe that the Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] has effectively overturned all the decisions, on which reliance was placed by the tax authorities to hold that the payments qualify as royalty. Tribunal in the case of mirror transaction, while dealing with the issue of non-deduction of tax at source with respect to the aforesaid payments made by the Indian group companies to the assessee, held that since the payments qualify as royalty under the Act, read with the Tax Treaty, and therefore, held that the Indian companies were not liable to deduct tax at source on such payments under Section 195 of the Act We are of the considered view that payments for providing HR Shell People Support Services do not qualify as Royalty under the Act, read with the Treaty - ground number 1 of the assessee s appeal is allowed. CHR Recruitment Fees, External Information Services (license for online databases) and IT Migration Support Services qualify as fee for technical services u/s 9(1)(vii) of the Act read with Article 12 of Tax Treaty - Scope of make available clause - HELD THAT:- Given the wide interpretation to the term technical having been taken by the Courts, and looking into the nature of services which have been rendered by the assessee, we are of the considered view that the services involve extensive use of technology, and the same are technical in nature. We also observe that in the instant facts, the India- Netherlands Tax Treaty, contains a specific restriction in the form of make available clause, which restricts the definition of fee for technical services under the Treaty Law to only those cases where services have been rendered in a manner that the technology have been made available to the recipient of services, meaning thereby, the necessary information/knowledge has been imparted to the recipient of services in such manner, so that in the future, they have been enabled/ empowered to perform the services themselves, without any necessity of recourse to future services being provided by the assessee. The scope of the term make available came up for consideration recently before in the case of Star Rays [ 2023 (8) TMI 296 - GUJARAT HIGH COURT] where the Assessee, a partnership firm, was engaged in business of cutting and polishing diamonds and export of diamonds. It had made remittances qua diamond testing service for certification of diamonds to GIA USA which set up a laboratory at Hong Kong as GIA Hong Kong and claimed that said sum was not tax deductible at source. AO held that assessee had made payment to GIA Hong Kong Laboratory and not GIA USA and, therefore, could not claim treaty benefit between India-USA and, that assessee was liable to deduct TDS from said remittance. Invoices for payment of fees were issued by GIA USA and accounts reflected that payment was received in offshore bank account of GIA USA. The High Court held that the assessee's case was protected under India- USA DTAA as mere rendering of services could not be roped into FTS when person utilizing services was unable to make use of technical knowledge etc. Looking into the nature of services, there is nothing on record to establish that during the course of rendering of services, the technology was made available to the recipient of services, in such a manner that the recipient of services were enabled to perform the services in the future, by itself, without any requirement of recourse/further assistance from the assessee company. From the contents of the nature of services, we observe that neither has technology be made available to the recipient of services, nor there is any such intention to render services in a manner that the recipient of services is enabled to perform the services itself without recourse to the assessee. Accordingly, we are of the considered view that the services have not made available technology to the recipient of services, so as to fall within the definition of FTS under the India-Netherlands tax treaty. Levy of interest u/s 234B in respect of non- residents - HELD THAT:- As in light of the aforesaid decision by the Hon ble Supreme Court in Mitsubishi Corporation [ 2021 (9) TMI 875 - SUPREME COURT] Ground No. 7 of the assessee s appeal is allowed. We must also add that recently, in the case of Shell Global Solutions International BV [ 2023 (10) TMI 1286 - GUJARAT HIGH COURT] held that where during relevant Assessment Year assessee was a non-resident, entire tax was liable to be deducted at source on payment made by payer to the assessee u/s 195 and there was no question of advance tax payment by assessee and thus, no interest under Section 234B could be levied upon assessee. Payment received from affiliates - license to use the database maintained by EIG and such payment is treated as royalty - HELD THAT:- Grant of right to access the online database would not amount to transfer of right to use the copyright, as alleged by the Assessing Officer - payments for grant of access to software database would not take the case of the assessee within the definition of royalty, as defined under the India-Netherlands tax Treaty. In the instant facts, access to the software has been granted to the Indian entities and there is no transfer of copyright, so as to fall within the definition of royalty under the India- Netherlands Tax Treaty. Taxability of Real Estate And Corporate Travel Services as fees for technical services under Section 9(1)(vii) of the Act read with article 12 of Tax Treaty - AO was of the view that under the Real Estate and Corporate Travel Services, the assessee provides consultancy and assists the regional team of the affiliates in managing real estate transactions and leveraging of global relationships and contract management with key suppliers and real estate information technology tool - HELD THAT:- In respect of the aforesaid services, the condition of make available is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was made available to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty. International Tax Administration - as observed that under the international tax administration services, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of tax administration work performed by the Shell group companies is highly technical in nature - HELD THAT:- We are of the considered view that in respect of the aforesaid services, the condition of make available is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was made available to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty. Levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the Treaty provisions.
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2024 (3) TMI 1065
Unexplained opening balance of cash - unaccounted business receipts - Addition based on seized documents - assessee did not submit such details and failed to substantiate it claim with any supporting documents during the assessment proceedings - HELD THAT:- Admittedly, the documents seized are not showing that the opening balance of ₹ 8.28 lakhs belongs to the beginning of the year, the documents seized is for part of the year. Therefore, the opening balance is result of the transaction of the year. Evident from the statement recorded of various persons and the document seized. The opening balance is stated to be a cash balance lying with the office of the 3/10/2020 at Mahape. The non-production of the documents for the full year cannot disentitle the assessee of the result of the transactions during the year. It is not the claim of the AO opening balance shown by the assessee on 3/10/2020 is higher than the amount of disclosure made or such balance as on 3/10/2020 is not available with the assessee from accounted source as well as from disclosure taken together.Assessee has already offered ₹ 27.74 crores, which is not denied. Therefore, assessee cannot be denied capitalization of such disclosure already made. Naturally, income will have the acquisition of the asset in the form of advances, cash on hand, and other assets. Statement recorded u/s 132 (4) of the staff, the director of the company and investigation/examination of the details during assessment proceedings categorically shown that the above sum is standing as opening balance in the seized documents as on 3/10/2020. On the issue of telescoping, honourable Supreme Court in S. NELLIAPPAN [ 1967 (5) TMI 6 - SUPREME COURT] has categorically held that telescoping is a question of fact. Therefore, it is for the revenue to prove that the fund flow statement shown by the assessee is factually incorrect. It is for revenue to show that the telescoping is not available because amount of income earned by the assessee have already been invested in other assets. Such fact is not demonstrated before us.No infirmity in the order of the learned CIT A in granting the benefit of telescoping. Thus, taking into consideration all the factors of disclosure made by the assessee for which telescoping has been granted, fund flow statement of additional income offered consistent statement of director, staff, and submissions before the investigation Wing and the assessing officer, clearly establishes that the addition is correctly deleted. Decided in favour of assesee. Internal transfer of cash - Addition on account of internal transfers - HELD THAT:- It is not shown that there is a change in the facts and circumstances of the case or any of the entries shown as internal transfer has not been recorded in one branch and other connected branch. Over and above the assessee has produced row wise and column wise transfer and receipt of fund between various entities that remains undisputed by the AO, it cannot be said that there is any income contained in the above transfer entries. In view of this, it is apparent that at least to the extent of Rs. 73,84,000/- with respect to the internal movement of funds pertaining to financial year 2020 21 relevant to impugned assessment year 2020 22, does not contain any income element. This fact has been categorically verified by the learned CIT A at least for this year Addition to be deleted. Addition on the ground that it pertains to the transaction of other concerns of the assessee group - HELD THAT:- We find that only the disallowance of expenses was made and there is no separate addition further of any income. M/s. Ganadhish GNP is also assessed by The Deputy Commissioner of Income Tax, Central Circle 6 (1), Mumbai i.e., the same assessing officer who is assessing the assessee. Further, the above sum is offered by the group concerns as 'on money' received. That sister concern has in fact offered ₹ 13.65 crore 'on money' income from construction activity. Further, the claim of the assessee that sum of ₹ 3,50,000 has also been similarly assessed in the hands of M/s Roshani Enterprises, another group concern. In view of these facts, we do not find any infirmity in the order of the learned CIT A in deleting the addition of the income contained in the WhatsApp message which is already offered by the other group concern as per income, subject to verification by the ld. AO, therefore same cannot be added once again in the hands of the assessee. Accordingly, ground number 4 of the appeal is dismissed. Addition of opening cash balance - AO submits that assessee has failed to substantiate its claim with any documentary evidence that the opening balance and the receipts were out of the unaccounted income disclosed by the assessee - HELD THAT:- It is fact that in search no such cash statements for other days of the year were found. Therefore, it is not an unusual presumption that those statement did not exist on the date of search. It is apparent that only the cash statement of 26/8/2020 was found. It may be possible that assessee must be maintaining all these statements for eachday, and which would be reported to the director of the company. However, that cannot go against the assessee that why cash statements of other days are not found. It is also the fact that for assessment year 2018 19 in assessment order dated 31/3/2023, AO has accepted that there are internal transfers of cash from one branch of the assessee to the other branch of the group. It is also the claim of the AO that no cash was seized of that magnitude during search. We find that search took place on 23/9/2021 and this Statement was found for the day 26/8/2020. Time of more than 11 months elapsed between the date of cash statement and the date of search. Naturally, such a magnitude of cash, which was recorded on 26/8/2020, could not have been found on the date of search on 23/9/2021. The reasons given by the learned CIT A in paragraph number 12 of his order is also sustainable. In view of this, we confirm the order of the learned CIT A in deleting the addition made by the learned assessing officer based on the cash statement pertaining to 26/8/2020. Accordingly, ground number 5 of the appeal stands dismissed. Addition u/s 69C - AO has made addition of the opening balance as well as the receipt as undisclosed income of the assessee and in the same document there are references of the expenditure, he further added such expenditure u/s 69C - HELD THAT:- When there is an addition under section 69C of the act such unexplained expenditure, which is deemed the income of the assessee, should not be allowed as a deduction under any head of income. In the present case, assessee has incurred certain expenditure, which is found during search in the seized documents, the seized documents also show the amount of undisclosed income and the amount of expenditure incurred for earning such income. In those circumstances, the disclosure of undisclosed income shows the source of such expenditure. Therefore, naturally net income in the seized document can be assessed as income. If the approach of the ld. AO is accepted then in such case, Income and its application both are taxable as income. This is not correct. In view of this we do not find any infirmity in the order of the learned CIT A in deleting the addition. Addition based on seized document - During search WhatsApp image was found from the mobile phone which is an excel sheet where the name of various brokers, the rate of the land, number of cases handled by each of the broker and amount receivable for the transaction and total amount received until date along with the outstanding balance is mentioned - HELD THAT:- The explanation of the assessee before the AO was same, such statement was also confirmed by the broker, the land transferred to the various parties did not belong to the assessee therefore naturally the sale consideration of that land could not be the income of the assessee. As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee. The assessee has shown that this is the amount payable by these unit acquired to the MIDC, and sample cheques details is provided. Therefore, as the land is transferred by MIDC to the respective unit holders through all these brokers for which the assessee has received consultancy fees of ₹ 100,000/- for each unit, the whole of the sale transaction of the land cannot be taxed in the hands of the assessee. Merely because the assessee failed to provide the documentary evidence of payment of cheque by the unit acquired to the MIDC, the whole income cannot be taxed in the hands of the assessee when assessee is not shown to be the owner of such land. In the hands of the assessee, a sum of Rs. 2.81 crores have already been taxed on basis of this document. In view of this we do not find any infirmity in the order of the learned CIT A in deleting the total addition in the hands of the assessee. Allowance of expenses @ 30% out of unaccounted business receipts offered - HELD THAT:- CIT A has categorically noted that assessee has incurred expenditure in its regular business at the rate of 28% to 62% and average net profit for all the years' amounts to 53% of the gross receipts. Further in the seized documents, unaccounted receipts were found of ₹ 23.67 crores and unaccounted expenditure was found at ₹ 7.19 crores which is almost 30.03% of the unaccounted receipts and therefore the claim of the assessee is reasonable and can be accepted that the gross receipts 30% of deduction should be allowed for the expenditure incurred by the assessee. Accordingly, we do not find any infirmity in the order of the learned CIT A which is based on the financial statements of the assessee for past year as well as based on evidence found during search in the seized material. Accordingly, ground number 10 of the appeal of the AO is dismissed. Addition on transaction not materialized - HELD THAT:- Whether the transaction has materialized or not would be evident if Mr. Umang Jain has paid cheque of ₹ 5 lakhs and ₹ 135,000/- for the above land purchase. If such cheques were paid, it would be known for what land the above transaction has happened, and the addition in the hands of the assessee to the extent of ₹ 380,000 would be justified. However, such taxation would only happen if the transaction has materialized. Therefore, this issue needs an examination. In view of this, we restore this addition back to the file of the learned assessing officer with a direction to the assessee to substantiate its stand that the transaction has not materialized.
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2024 (3) TMI 1064
TP adjustment - ALP of Contract Software Development (CSD Segment) - Comparable selection - HELD THAT:- Infobeans Technologies Ltd had declared that it was engaged in providing custom development services to offshore and was engaged in software engineering services in different fields. No segmentals were available. In such facts and circumstances, we find no merit in inclusion of the said concern in the final list of comparables. We direct its exclusion. Exilant Technologies Pvt. Ltd derived substantial revenue from software development services. Thus, in our view, the company is functionally similar to the assessee. The impact of amalgamation on profitability needs to be examined. Since, both the sides have not brought any material on record to establish the impact or otherwise of amalgamation on profitability, we restore the issue to the AO for examining this aspect and thereafter decide whether it can be treated as a comparable. Cybage Software Pvt. Ltd. design and overall guidance relating to the specific software is provided by the AEs. The assessee only has to do the coding and testing as per the design provided by the AE. Thus, not only the assessee doesn t bear any risk but the work executed is limited in its scope. Whereas, from the annual report of the comparable, it is observed that it has incurred sales promotion and marketing expenses and also owns plant, equipment and other intangible assets which presupposes that it is a full risk bearing entity unlike the assessee which is more or less a no risk-entity. Therefore, in our considered opinion, the company cannot be selected as a comparable. Rheal Software Pvt. Ltd. excluded as it is a persistent loss making company - The company has made profit in financial year 2015-16. Thus, in our view, applying the filter of persistent loss making company of the TPO, the company cannot be rejected. Accordingly, we direct the Assessing Officer to include this company. DCIS Dot Com Solutions India Pvt. Ltd - As per the annual report of the company, it has only one segment of software development and the revenue earned during the year is from software development charges. Therefore, in our view, the company being functionally similar to the assessee has to be treated as comparable. Adjustment of notional interest on overdue receivables from AEs - HELD THAT:- From the facts discussed by the TPO, it is observed that the assessee has entered into international transaction only with its AE. It is further observed, invoice-wise delay worked out by the TPO varies from 27 days to 365 days. Thus, by allowing AEs to retain the money beyond credit period of 30 days and in some instances for a year, certainly amounts to extending benefit to the AE in utilizing the money without paying interest to the assessee. The question one needs to ask is whether the assessee would have extended such benefit to an unrelated party? In our view, the answer would be in negative. Prima facie, it appears that there was delay in receivables in the immediately preceding assessment year as well. However, TPO needs to examine the statistics of at least three-four assessment years to discern a pattern which would indicate that the assessee has benefited the AEs through the receivables. We may also observe that in some of the decisions cited by learned Departmental Representative, the co-ordinate Benches have held that the invoices raised within the financial year and payment made within the financial year but with delay may not have an impact on the opening and closing balance of outstanding receivables. Therefore, it could not have been factored by the assessee in working capital adjustment. Though, we are conscious of the fact that in assessment year 2017-18, the co-ordinate Bench has decided the issue in favour of the assessee, however, we are of the view that in the impugned assessment year, the issue has not been examined in the context of principles laid down in case of Kusum Healthcare Pvt. Ltd. [ 2017 (4) TMI 1254 - DELHI HIGH COURT] . However, in all fairness, it must be said that there is delay in trade payable to AEs. Therefore, some benefit on account of delayed payables must have percolated to the assessee. Thus, it needs to be examined whether and to what extent the benefit received by the assessee on account of trade payables can be set off against the purported benefit given to the AEs on account of trade receivables. We are inclined to restore the issue to the Assessing Officer for de novo adjudication keeping in view the observations made by us (supra) and applying the ratio laid down by the Hon'ble jurisdictional High Court in case of Kusum Healthcare Pvt. Ltd. The assessee must be provided reasonable opportunity of being heard before deciding the issue. Ground is allowed for statistical purposes. Difference in the income as per the books and as reflected in Form 26AS - HELD THAT:- We are of the view that the issue needs re-examination at the end of the AO as facts brought on record by the assessee have not been properly examined. It goes without saying, if a particular item of income has already been offered to tax, either in the preceding assessment years or in subsequent assessment years, the same income cannot be added in the impugned assessment year again as it amounts to double addition of the same income. If the assessee has not been given credit of TDS corresponding to such income due to the fact that income was recognized in a different assessment year but TDS was in the impugned assessment year, the credit for such TDS has to be given. With the aforesaid observations, issue is restored back to the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee. Short credit of tax collected at source - Assessee has submitted before us that an application for rectification filed u/s 154 of the Act before the Assessing Officer on the issue has been dismissed - HELD THAT:- Considering the fact that assessee has already availed a remedy by way of section 154 proceedings, it cannot be permitted to continue parallel proceedings on the same issue. The ground is dismissed.
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2024 (3) TMI 1063
TDS u/s 195 - liability u/s 201 and 201(1A) - non deduction of TDS payment in the nature of FTS to the NDS Ltd. UK - royalty receipts or not? - CIT(A) quashing the order of the AO relying on case of Engineering Analysis Centre of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] HELD THAT:- We are of the opinion that similar issue came for consideration in assessee s own case [ 2023 (12) TMI 1300 - ITAT BANGALORE] held that a copyright is an exclusive right that restricts others from doing certain acts. Computer programs are categorised as literary work under the Copyright Act. Section 14 of the Copyright Act states that a copyright is an exclusive right to do or authorise the doing of certain acts in respect of a work, including literary work. Term copyright has to be understood in the context of the Copyright Act. The court said that by virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for the use of, or the right to use, any copyright of a literary work includes a computer program or software. As held that the regarding the expression use of or the right to use , the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty. The terms of the licence in the present case does not grant any proprietory interest on the licencee and there is no parting of any copy right in favour of the licencee. It is non-exclusive non-tranferrable licence merely enabling the use of the copy righted product and does not create any interest in copy right and therefore the payment for such licence would not be in the nature of royalty as defined in DTAA. We therefore hold that the sum in question cannot be brought to tax as royalty - Decided against revenue.
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2024 (3) TMI 1062
Income deemed to accrue or arise in India - payment made for providing interconnect services - consideration paid towards IUC charges treated under the ambit of royalty - benefit under DTAA - requirement of direct control or physical possession over a right or property or information - whether the IUC charges received by the assessee is in the nature of royalty under the Act and India-Sri Lanka DTAA? - assessee s contention that the interconnect service does not permit the use of or transfer of right to use any of assessee s patent, model, design, secret formula or process or trade mark, etc. which are exclusively in possession or control of the assessee, also there is also no use of equipment of the assessee by VSL and does not involve any ancillary services pertaining to the use or transfer of right to use of a process/equipment HELD THAT:- It is pertinent to note that the Hon ble Karantaka High Court in the case of Vodafone South Ltd. [ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] to whom the assessee has received the IUC charges has held that the assessee is entitled to take benefit under DTAA and that the amendment to provision of section 9(1)(vi) inserting the Explanation cannot be read into the provisions of DTAA by relying on the decision of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] . It is also pertinent to point out that the lower authorities have relied on the decision of the Tribunal in the case of Vodafone South Ltd [ 2015 (1) TMI 1018 - ITAT BANGALORE] which has now been reversed by the Hon'ble High Court [ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] thereby holding that the order of the lower authorities to be perversed. We would also place reliance on the decision relied upon by the assessee in the case of New Skies Satellite BV [ 2016 (2) TMI 415 - DELHI HIGH COURT] whereas held that the provision of the DTAA cannot be altered unless by way of amendment through bilateral renegotiation after duly considering the decision of Hon ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. [ 2013 (11) TMI 1058 - MADRAS HIGH COURT] relied upon by the Revenue. It has also held that the amendment or change in a domestic law cannot result in change in the provision of DTAA unless specific amendment is brought about in DTAA. Apart from the grounds of applicability of amendment to section 9(1)(via) and the DTAA between India-Sri Lanka It is observed that the Delhi Tribunal in the case of Bharti Airtel Ltd [ 2016 (3) TMI 680 - ITAT DELHI] and Bharat Sanchar Nigam Ltd [ 2017 (10) TMI 1093 - ITAT DELHI] has held that the payment made towards interconnect usage charges to foreign telecom operators does not accrue or arise in India and in the absence of any permanent establishment in India could not be brought to tax in India under Article 7 of DTAA. - Decided in favour of assessee.
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2024 (3) TMI 1061
TDS u/s 195 - payment received for interconnect usage charges - transaction with non-treaty country - whether it is liable to be taxed as royalty u/s 9(1)(vi) of the Act? - AO/DRP had brought the amount to tax in the hands of the assessee company solely relying on the orders passed u/s 201 and 201A - HELD THAT:- The order of the co-ordinate Bench of the Tribunal in the case of PCCW Global Ltd [ 2023 (11) TMI 1239 - ITAT BANGALORE] is directly applicable to the facts of the assessee since the said case also relates to Hong Kong non-treaty country. In light of the aforesaid judicial pronouncements, we hold that the amount received by assessee company from the Indian telecom operator for interconnect usage is not chargeable to tax as royalty . Assessee ground of appeal allowed.
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Benami Property
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2024 (3) TMI 1060
Benami transaction - petitioner has called in show cause notice issued u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 and Provisional Attachment Order issued u/s 24(3) of Act of 1988 - petitioners submits that the show cause notice and provisional attachment order are called in question mainly on the ground that the alleged benami transaction has taken place prior to 01/11/2016, the date when Act of 1988 stood amended - HELD THAT:- The provisional assessment order as name suggests, is provisional in nature . The adjudicating authority is best suited to decide the question of Benami nature of the property. We find substance in the argument of learned ASG that show cause notice is a detailed notice running in several pages containing several factual basis and it is within the province of adjudicating authority to decide whether property is Benami in nature and whether petitioners are liable for any action under the Act of 1988. The Division Bench declined interference against show cause notice and PAO and permitted the petitioner to raise all relevant aspects before adjudicating authority under Section 26 of the Act of 1988. We deem it proper to follow the same course. The petitioners can avail the remedies under the Act of 1988 and take all possible factual and legal grounds before the adjudicating authority . Needless to mention that judgment of Advance Infra Developers (P) Ltd [ 2023 (12) TMI 620 - MADRAS HIGH COURT] and other judgments can be relied upon by the petitioners before the adjudicating and appellate authority (if required) to impress upon it to take a different view than the view taken by Appellate Authority in M/s. Prism Scan [ 2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI] We have no doubt that if relevant grounds are taken and judgments are cited, the said authorities will consider and decide the matter on its own merits in accordance with law. We find no reason to entertain these petitions despite availability of statutory alternative remedies. The petitioners may avail the said remedy.
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Customs
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2024 (3) TMI 1059
Direction to respondent to decide the stay application which was moved along with Appeal preferred under Section 137 of Maharashtra Prohibition Act, 1949 - cancellation of FL-III licence in exercise of powers under Section 54(1)(e) of the Act - it was held by CESTAT that The licence, if obtained by fraud or misrepresentation and that too by use of a doctored document, frustrates the very claim for grant of equitable relief as the fraud vitiates the proceedings. HELD THAT:- There are no reason to interfere with the impugned order passed by the High Court - SLP dismissed.
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2024 (3) TMI 1058
Maintainability of appeal - monetary limit involved in the appeal - Smuggling - Gold Bars - HELD THAT:- While the confiscated gold was valued at more than Rs. 1 crore at the same time that was apportioned amongst three assessees namely Ms. Disha Tulsiani, Sri Nirmal Tulsiani and Sri Ashok Kumar Talhani. Thus individual dispute in each of the appeals is far below the monetary limit of 1 crore. On the earlier dates, we allowed learned counsel for the revenue to file supplementary affidavit to bring on record the revenue effect involved in each of the appeals. While an affidavit has been filed by the revenue on 18.11.2023, it does not bring on record the revenue effect involved in each of the appeals. Clearly despite time granted, no disclosure has been made by the revenue to establish that the revenue implication in each or any of the appeals exceeds the monetary limit of 1 crore - Since the order passed by the Tribunal is clearly in favour of the assessee and there is no cross appeal filed by revenue, no justification or occasion survives for this Court to allow the revenue the luxury of maintaining the present litigation against its own stated litigation policy. The present appeal and the connected appeals are dismissed being below monetary limit.
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2024 (3) TMI 1057
Revocation of courier registration of appellant - forfeiture of security deposit - imposition of penalty under Regulation 14 of Courier Import Export Regulation (CIER), 2010 - mis-declaration of goods by the appellants as courier agents - violation of Regulation 12 (1) (i) (iii) (iv) (vii) and (x) and CIER, 2010 - HELD THAT:- There is sufficient evidence on record to prove the under valuation as being committed by the appellant with respect to the impugned import consignments. The Courier company not only processes the clearance of the goods through the customs but actually receives the goods from the overseas exporter, transports them to India, clears them through the customs and further delivers them to the consignee in India at his address. The Regulations regulating this process provide for licensing of couriers who only can handle this work. In such imports, after the goods are brought into the country the courier has to obtain Know Your Customer (KYC) documents from the consignees and their authorization and thereafter has to file courier bills of entry (CBEs) in respect of each of the consignments. After the goods are assessed by customs, the courier pays the customs duty and clears the goods and takes them to the premises of the importer and delivers them and collects the customs duty which was paid by the courier while clearing the goods. The appellant s main contention is the inquiry report dated 13.01.2021 is in favour of appellant. It has been held that the appellant has abided by all the provisions of the act and CIER Regulations. Alleged violation of Regulation 12 CIER has been ruled out. However the said report and the said order-in-original has been ignored by the order under challenge. It is observed that order dated 05.02.2021 has been discussed in the order under challenge. It has been observed therein that despite an investigation was under process with SIIB and status thereof was demand but was not produced till the time of said inquiry report dated 13.01.2021 and the said order-in-original dated 05.02.2021. Thus moot question of authenticity of authorizations and invoices especially the manipulation of dates was not before the adjudicating authority at the time of order dated 05.02.2021. the order of setting aside alleged violation of CIER by appellant was thus passed due to lack of evidence at that time. Hence, in the light of subsequent evidence against appellant, there are no reason to different from the findings in the impugned order under challenge (order-in-original dated 18.08.2023). Thus, the appellant has violated Regulation 12 and the respective sub-regulations of CIER 2010 - the findings arrived at in the order under challenge w.r.t. each sub-clause of Regulation 12 of CIER affirmed - appeal dismissed.
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2024 (3) TMI 1056
Conversion of shipping bills - conversion from Draw Back Scheme to Advance License Scheme - limitation period of three months for seeking conversion of shipping bills from one scheme to another - HELD THAT:- It is seen from the findings of the learned Commissioner that he has given detailed findings while refusing conversion from Draw Back Scheme to Advance License Scheme at such belated stage even after same was availed by the appellants sometime after the exports was done. The order clearly discusses the scheme and legal provisions related thereto and how freely done conversion from one scheme to another after availing benefit can jeopardize revenue interest as both have their own procedural encompass and how conversion from less rigorous to more rigorous examination scheme was not permitted by the Circular No. 36/2010. This court also finds that Hon ble High Court in THE PRINCIPAL COMMISSIONER OF CUSTOMS, MUNDRA VERSUS M/S LYKIS LIMITED [ 2021 (2) TMI 261 - GUJARAT HIGH COURT] after having a look at Circular No. 36/2010 dated 23.09.2010 struck down only the para 3(a) which had prescribed of three months limitation from the date of export order. This court finds validity of condition 3(e) of Circular No. 36/2010 dated 23.09.2010 survives and therefore holds that once a benefit under which shipping bill was filed has been availed, the conversion to any other scheme cannot be allowed. It is thus clear that the same has a bigger objective of atleast giving finality to some extent to decisions earlier taken while exporting, as is the case of the appellants in this matter. This court therefore, finds that once draw back benefit was availed then there was no scope for seeking conversion to any other scheme And in relation to mis-declaration clause in 3(e) above being disjunctive as in case later proposition of mis-declaration, manipulation etc., coming into play, the exporter even if has been precluded from availment can still be denied conversion. This court finds that matter falls within the ambit of para 3(e) of the above Circular and the conversion request after having enjoyed the benefit of draw back scheme, and after availing the same, cannot be allowed. Appeal dismissed.
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2024 (3) TMI 1055
Rejection of refund claim - amount deposited after pre-notice consultation - interpretation of section 28 of the Customs Act, 1962 - Non issuance of Show Cause Notice - HELD THAT:- A close look at section 28 indicates that a pre-notice consultation is necessary before issuing notice i.e. Show Cause Notice. The purpose of the same as understood, is obviously to indicate the recovery of duties not levied or not-paid or short-levied or short-paid . Here in the case on hand, a pre-notice consultation dated 9.10.2017 was issued in terms of proviso to section 28(1)(a) ibid to the person chargeable with duty or interest and apparently, the appellant responded positively without any demur by paying the duty and interest as indicated. What was indicated / proposed to be demanded was a differential duty and hence nothing more needs to be said about the characteristic of the demand since when proposed to be demanded, the payment was made religiously. Much emphasis has been laid on the non-issuance of letter / communication in writing as specified under sec. 28(2) and it is the case of the appellant that it having not issued any such communication in writing, the payment made by it loses the characteristic of duty - it is found that a positive act followed the pre-notice consultation and hence, nothing can be looked beyond for anything. If the pleas urged is to be considered, then there should have been a communication to the least, indicating as to why payment as proposed / demanded was made, but no such things appear in the file. The appellant having acquiesced, no further action was felt necessary. It appears that the differential duty arose on account of mis-match with regard to the classification of the product imported. It is the case of the appellant that the correct classification was 8480.60. But there was no request made for rectification / re-assessment, since it is the settled position of law that since acceptance of Bill of Entry is considered as self-assessment per se, the importer if aggrieved by the same, has to seek for modification / rectification / re-assessment as held by the Hon'ble Supreme Court in the case of ITC Ltd. Vs. CCE, Kolkata [ 2019 (9) TMI 802 - SUPREME COURT ]. Rather, the appellant chose to seek only the refund which has rightly been rejected by the original authority. There are no merit in the case of the appellant - appeal dismissed.
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2024 (3) TMI 1054
Refund of export duty paid in excess consequent to the issuance of duty reduction Notification No.62/2007 dated 03.05.2007 - conclusive evidence to discharge the burden of unjust enrichment - whether the incidence of duty has been passed on to the buyer? - HELD THAT:- Clause 4 of the Contract dated 26.04.2007 between the buyer and the seller clearly stated that all Indian taxes on cargo will be borne by the seller is not under dispute. The Bank Realization Certificate, invoice, the bill amount in foreign exchange and dispatch amount due to the exporter was less than the FOB value shown in the shipping bill, are also facts that are not disputed. The learned Commissioner (Appeals) in the impugned order relies on the financial records to state that it is not shown as receivables and relying on the Board Circular dated 28.05.2008, without disputing the above facts rejects the refund claim without any justification for rejection. The fact that all the documents have been placed by the appellant justify that the export duty paid by them has not been passed on to the buyer brushing them aside without any reasoning is not sustainable. The seller has borne the incidence of duty. The undertaking by the buyer also is on record which states that the incidence of export duty for the impugned shipment was not passed on to them. In view of the above documents, there are no reason to sustain the impugned order. Appeal allowed.
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2024 (3) TMI 1053
Undervaluation of imported goods - Patchouli Oil - insured value of the goods was higher than the invoice value declared for clearance of the goods - ascertainment of value of contemporaneous imports of Patchouli Oil of Singapore origin - assessable value declared by the appellant in the said two Bills of Entry were rejected on the ground that the insured value of the product was higher than the value declared in the invoice - period from 2005-06 - HELD THAT:- It is observed that the value declared by the appellant for insurance purpose has no relevance for the purpose of assessment of customs duty. There is no evidence on record produced by the investigating officers to the effect that the appellant had actually paid the insured value for the purpose of importation of the impugned goods. Thus, there was no basis for rejection of the declared value by the Department. The quality of Patchouli Oil depends on different chemical factors including alcohol contents. The imports imported by the appellant has been assessed and customs duty has been demanded at the time of importation of the goods. The assessments have not been challenged and they became final. Subsequent to its clearance, factors such as higher value adopted for insurance cannot be a reason for rejection of the assessable value declared - After rejecting the declared assessable value, the Department has adopted the price of contemporaneous import of similar goods to enhance the value declared, without adducing any evidence to the effect that the goods are comparable. There is no evidence available on record to indicate that the Patchouli Oil imported by the appellant and the contemporaneous imports whose price has been adopted by the Department are similar in all respects. The demand of differential duty along with interest confirmed in the impugned order is not sustainable and accordingly, we set aside the same. Since, the demand of duty is not sustainable, the question of imposing penalty on the appellant importer does not arise. Imposition of personal penalty on Shri Subhas K Naik - HELD THAT:- There is no finding in the impugned order regarding the role played by the appellant in the alleged under valuation. It has been alleged that Shri Subhash Khandubhai Naik has visited the supplier and fixed the price over telephone and accordingly, the lower price was fixed due to his personal influence. In view of the discussions, the allegation of under valuation is not substantiated. Accordingly, penalty imposed against the Director of the appellant-importer cannot be sustained and the same is accordingly set aside. The rejection of assessable value under the above two Bills-of-Entry is legally not sustainable. Accordingly, the differential duty along with interest and penalty confirmed in the impugned order set aside - the penalty imposed on the Director of the appellant-company set aside. Appeal allowed.
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2024 (3) TMI 1052
Smuggling - seizure of three cut pieces foreign origin gold totally weighing 1000 gms - Validity of Show cause notice issued - limitation - burden of prove - Confiscation - Penalty - HELD THAT:- Admittedly, it is the case of town seizure as the appellant was intercepted in the domestic terminal at Hyderabad. The only evidence brought on record by Revenue as to the smuggled nature of goods is firstly, that the three pieces of gold have got markings indicated their foreign origin and secondly, the statement of the appellant that he is aware that he has purchased gold at Hyderabad, which is of smuggled in nature and the same has been purchased without any invoice/bill/receipt. From the tenor of the statement recorded from the appellant, its voluntary nature is doubtful as no person of ordinary prudence will state that the gold he is possessing is of smuggled in nature. I further find that it has been held by the Hon ble Supreme Court in Vinod Solanki vs UOI [ 2008 (12) TMI 31 - SUPREME COURT] that where the accused/noticee disputes the voluntary nature of his statement, the onus is on Revenue to prove the voluntary nature of the statement recorded. Thus, the statement as recorded of the appellant on 01.02.2020 is not voluntary in nature. The SCN is bad and hit by limitation as the same has been issued after more than six months from the date of seizure as required u/s 110(2) of the Act. In this view of the matter, the appeal is allowed and the impugned order is set aside. Accordingly, the gold in question shall be released to the appellant forthwith, and if already sold, to return the sale proceeds, with interest as per Rules. The appeal is allowed in the aforementioned terms.
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2024 (3) TMI 1051
Levy of penalty u/s 112(a) and Section 114AA of CA on Chartered Engineer - Issuance of Certificate under EPCG scheme without verification - issuance of Certificate based on documents so submitted for installation and use of such imported embroidery machine under EPCG without first verifying whether the machine in question were installed or not by Chartered Engineer - HELD THAT:- There is no dispute as regards the fact that the Appellant had issued such Certificate for installation and use of machinery which is a mandatory requirement under the EPCG Scheme without verifying the installation of machine in the premises of the factory of the importer. The purpose of such certificate issued by a Chartered Engineer is not only to facilitate installation of machinery as imported under the EPCG Scheme but the installed machine also acts as a precursor for the importer to avail benefit of EPCG exemption therefore to fulfill purpose of installation it is imperative that the presence of machinery on the premises be verified. To issue such Certificate without verification of the fact that machines are installed in the factory, the appellant has facilitated to evade custom duty by the importer which under the application of law is construed to be a serious offence on the part of the Appellant. The Appellant is liable for penalty under Section 112(a) and Section 114 AA. However, considering the fact that the Appellant under bonafide belief relied on the documents to issue certificate due to which his registration was cancelled and his business suffered for three years, the Appellant deserves leniency as regards the quantum of penalty imposed. The penalty under section 112(a) from Rs.1,00,000/- reduced to Rs. 50,000/- and that under section 114AA from Rs.10,000/- to Rs. 5,000/- - appeal allowed in part.
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2024 (3) TMI 1050
Refund of SAD - time limitation - rejection on the ground that the claim was filed after more than one year from the date of payment of CVD - HELD THAT:- The Delhi High Court judgments in SONY INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS [ 2014 (4) TMI 870 - DELHI HIGH COURT] and COMMISSIONER OF CUSTOMS (IMPORT) VERSUS GULATI SALES CORPORATION [ 2017 (11) TMI 1300 - DELHI HIGH COURT] are in respect of refund claims filed prior to the amendment carried out vide Notification No. 93/2008-Cus dated 1.8.2008. On the other hand, in the case of TRANASIA BIO-MEDICALS LTD. VERSUS COMMISSIONER OF CUS. (SEA) , CHENNAI [ 2019 (9) TMI 1563 - CESTAT CHENNAI] the period involved is December 2015 to April, 2016. Further, in this case the Tribunal has extensively cited the order of the Hon'ble Bombay High Court in the case of M/S. CMS INFO SYSTEMS LIMITED VERSUS THE UNION OF INDIA OTHERS [ 2017 (1) TMI 786 - BOMBAY HIGH COURT] . The Tribunal has also considered the judgment of Hon'ble Supreme Court in the case of COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] , wherein it has been held that if the assessee wishes to avail any exemption Notification, all the conditions set therein have to be fully complied with. In the present case, both the Bombay High Court judgment and Supreme Court judgment in the case of Dilip Kumar would be squarely applicable. If the appellant wishes to claim the refund of CVD, he is required to fulfill the condition of filing the refund claim within one year which is a mandatory condition under Notification No. 93/2008. Therefore, following the ratio of Tranasia Bio-Medicals Ltd. Case law, the appeal filed by the Appellant is dismissed.
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2024 (3) TMI 1049
Condonation of delay in filing appeal - time limitation - Power of Commissioner (Appeals) to condone the delay - appeal dismissed for the sole reason that not only was the appeal not filed within 60 days from the date of communication of the order to the appellant but was filed even beyond the extended period of 30 days, which period alone could have been condoned by the Commissioner (Appeals) - HELD THAT:- This issue was examined at length by the Supreme Court in SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT ] . Though the decision is in the context of section 35 of the Central Excise Act, 1944, but the provisions of section 128 of the Customs Act are pari materia with the provisions of section 35 of the Excise Act, as section 35 of the Central Excise Act also provides that an appeal can be filed before the Commissioner (Appeals) within 60 days from the date of communication of the decision or order, but the Commissioner (Appeals) can condone the delay of 30 days after the expiry of the period of 60 days, if he is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the stipulated period of 60 days. The Supreme Court held that as the period upto which the prayer for condonation can be accepted is statutorily provided, the contention that section 5 of the Limitation Act, 1963 could be invoked to condone further delay after the expiry of 30 days cannot be accepted. The Supreme Court also observed that the appellate authority had no power to allow the appeal to be presented beyond the period of 30 days as was clear from the provisions of section 35 of the Central Excise Act. The period of limitation for filing the appeal before the Commissioner (Appeals) has to begin from 30.12.2018, on which date the appellant received the order dated 14.12.2018 passed by the Joint Commissioner. Though the letter dated 21.01.2019 said to have been sent by the Joint Commissioner to the learned counsel for the appellant has not been brought on record by the appellant, but what has been stated by the learned counsel for the appellant is that the said letter informed the learned counsel that any communication from the appellant received after 14.12.2018, on which date the Joint Commissioner passed the order, could not have been considered in the impugned order. In any view of the matter, it is the order dated 14.12.2018 that was required to be assailed by the appellant before the Commissioner (Appeals) and indeed it was this order that was assailed. Exchange of communications between the learned counsel and the Joint Commissioner after the passing of the order cannot enure to the benefit of the appellant to claim that the period of limitation would commence from 22.02.2019, on which date the learned counsel for the appellant choose to file a reply to the letter dated 21.01.2019 sent by the Joint Commissioner - The appellant was clearly aware of the fact that it was the order dated 14.12.2018 that was required to be assailed before the Commissioner (Appeals) and this fact has also been stated by the appellant in the Memo of Appeal. Thus, in view of the undisputed position that the appeal was filed by the appellant before the Commissioner (Appeals) on 22.04.2019, beyond the period contemplated under section 128(1) of the Customs Act, the Commissioner (Appeals) committed no illegality in dismissing the appeal as the appeal was filed before the Commissioner (Appeals) not only beyond the period of 60 days from the date the appellant received the order passed by the Joint Commissioner on 30.12.2018, but even beyond the extended period of 30 days, which period alone could have been condoned by the Commissioner (Appeals). This appeal which has been filed to assail the order dated 09.01.2020 passed by the Commissioner (Appeals) is, therefore, without any merit. It is, accordingly, dismissed.
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Insolvency & Bankruptcy
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2024 (3) TMI 1048
Attachment of current account - seeking recall of the sanctioned resolution plan - Section 31 of the IBC - HELD THAT:- Once the resolution plan has been approved/sanctioned by the NCLT, it is binding on all the stakeholders. Under Section 32 of the IBC, any appeal from an order approving the resolution plan by the NCLT, can be made in the manner and on the grounds laid down under Section 61 (3) of the IBC and such an appeal can be filed within 30 days before the National Company Law Appellate Tribunal (NCLAT). The NCLAT can allow further extension of time for sufficient cause but not beyond a period of 15 days. As on date and as also recorded by the NCLT order dated 16th January, 2024, no appeal has been filed by the Respondent and the period for filing the same has also long expired. The Hon ble Supreme Court in the case of Ghanshyam Mishra and sons private limited through the GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT ] has observed that it is trite law that the resolution applicant cannot be fastened with the liabilities in relation to the period upto the date of the resolution plan in case the resolution plan is approved under Section 31 of the IBC. There is no dispute that the resolution plan approved vide order dated 12th December, 2017 has attained finality and accordingly the claim of the creditors or statutory authorities has to be dealt with in accordance with the approved resolution plan. The principle of clean slate as propounded by the said decision requires that the corporate debtor viz. the Applicant herein cannot be fastened with any liability for a period upto the date of the approval viz. 12th December, 2017, even if such liability crystallizes after this date. That all liabilities payable to any creditor shall stand satisfied and discharged upon approval of the resolution plan, provided those sums are set aside against which all such liabilities are paid. The warrant of attachment on the said current account be set aside - application disposed off.
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2024 (3) TMI 1047
Non-admission of full claim by RP - Appellant s case is that although possession were offered, but the Appellant did not take possession since Units were not complete - HELD THAT:- It is relevant to notice that the Resolution Plan of the SRA has already been approved by the Adjudicating Authority vide order dated 20.11.2023 and under the Resolution Plan, the SRA has provided to give 40% of the admitted claim as well as the Units, to which the Appellant is entitled as per the Plan. There is no dispute that Unit Nos. 1GF and 5GF with basement were allotted to the Appellant and the possession was offered on 30.09.2020, which was not taken by the Appellant. Partial Completion Certificate dated 14.10.2016, issued by the competent Authority has already been brought on the record. The Appellant although had not accepted possession on 30.09.2020, but allotment having not been disputed, the Appellant is entitled for the Units as well as the amount as per the Resolution Plan, which has been approved on 20.11.2023. The Adjudicating Authority has noticed that claim of the Appellant having already been revised, there was no ground made out to interfere with the decision of the RP. The RP has applied his mind and passed a detailed and reasoned email regarding the claim, hence, no interference is called for. The Adjudicating Authority having taken a decision, not to interfere with the admission of the claim of the Appellant, there are no reason to interfere with the impugned order passed by the Adjudicating Authority rejecting the IA Nos.4229 and 4089 of 2023. The Resolution Plan of the Corporate Debtor has already been approved on 20.11.2023, under which the SRA has undertaken to pay 40% of the amount admitted, i.e., 40% of the assured return - It is noted that although, possession of the Units offered to the Appellant on 30.09.2020, but the same was not taken by the Appellant. The Appellant having not taken possession of the Units and the Units having already been allotted to the Appellant, the Appellant is entitled for the Units. The SRA is directed to execute the Conveyance Deed for Units 1GF (with basement) and 5GF (with basement) and handover the possession of the Units to the Appellant - appeal disposed off.
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2024 (3) TMI 1046
Dismissal of Section 9 petition - initiation of CIRP - It is contended that the Appellant remained an employee of the Corporate Debtor all through until his resignation and hence the Corporate Debtor was liable to clear the operational dues - HELD THAT:- The Adjudicating Authority in the impugned order after noticing the full and final settlement document has observed that the same was executed between the Appellant and MNT and not between the Appellant and the Corporate Debtor. The Adjudicating Authority has thereafter concluded while passing the impugned order that the settlement agreement clearly shows that the Appellant rendered services to MNT which was a separate company from the Corporate Debtor. The Adjudicating Authority has further gone a step ahead to examine whether in such circumstances the Corporate Debtor can be said to owe any liability to the Appellant in the backdrop of their contention that the Corporate Debtor and the MNT shared the same the management. The Adjudicating Authority after referring to the decision of the Hon ble Supreme Court in the matter of VODAFONE INTERNATIONAL HOLDINGS BV. VERSUS UNION OF INDIA ANR. [ 2012 (1) TMI 52 - SUPREME COURT ] has relied thereon to hold that the holding company and subsidiary company are to be considered as separate legal entities and merely because their management was the same, raising of claims by the Appellant against the Corporate Debtor was not tenable. The reliance placed upon the Vodafone judgment supra by the Adjudicating Authority in the present facts of the case does not suffer from any infirmity and is very much in order. In this judgement the Hon ble Supreme Court has carved out the basic legal principle with regard to relationship between subsidiary company and holding company by holding that the legal relationship between a holding company and its subsidiary is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary. The business of a subsidiary cannot therefore ordinarily be treated to be the business of the holding company. A subsidiary is a separate legal entity for tax and liability purposes. A subsidiary being a distinct legal personality is also allowed to have decentralised management. Mere ownership, parental control, management of a subsidiary by the holding company therefore does not constitute sufficient and adequate ground to justify piercing the status of their relationship as has been urged by the Appellant in the present case. Further, wherever public interest necessitates lifting of the corporate veil in the interests of justice, there always has to be some specific proof and evidence of fraud, wilful breach of trust, or some sham at play leading to avoidance or limiting the liabilities of the subsidiary company - However, to hold the parent company liable, there is need of specific and detailed information, but no such credible information has been provided by the Appellant. In the present case, there are no sustainable grounds placed on record for holding the Corporate Debtor company liable for the acts of its subsidiary and hence we affirm the findings recorded by the Adjudicating Authority in the impugned order. The present is not a case where there is an undisputed debt for which Corporate Debtor can be brought under the rigors of CIRP. Therefore, in the attendant circumstances, the ratio of the judgement of the Hon ble Supreme Court in the case of Mobilox [ 2017 (9) TMI 1270 - SUPREME COURT ] squarely applies to the facts of this case. When any Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out from the present factual matrix. The Adjudicating Authority did not commit any error in rejecting the Section 9 application. There are no reasons to disagree with the findings of the Adjudicating Authority - There is no merit in the Appeal - Appeal is dismissed.
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Service Tax
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2024 (3) TMI 1045
Classification of service - Business Auxiliary Service - Business Support Service - Intermediary - it was held by CESTAT that The appellant does not satisfy the conditions to be an intermediary for his services and as such, the impugned order 08.07.2019 cannot sustain and is required to be set aside - HELD THAT:- The respondent-Company does not fall within the scope and ambit of any of the aforesaid definitions. This is having regard to the scope of its mandate to act on behalf of the principal namely primark. Appeal dismissed.
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2024 (3) TMI 1044
Classification of services - Clearing and Forwarding Agents or not - testing the quality of silk received from the reelers and stock it for being sold in open auction to various agencies like the appellant, Handloom Silk Weavers Cooperative Societies and Twisters - HELD THAT:- The facts of the present case are more or less akin to the facts of THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. THE SALEM STARCH MANUFACTURERS SERVICE INDUSTRIAL CO-OPERATIVE SOCIETY LIMITED [ 2013 (8) TMI 296 - MADRAS HIGH COURT] , wherein also the Hon'ble High Court has held that there is no question of clearing and forwarding agents service involved and consequently there was no liability to service tax under the said category. The demand of service tax on the appellant under the category of Clearing and Forwarding Agents Service is not sustainable, for which reason, the impugned order cannot sustain - the impugned order set aside - appeal allowed.
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2024 (3) TMI 1043
Declared Service or not - agreement entered by the respondent-assessee with M/s. Syngenta India Limited for job work and were entitled to receive a variable costs and a fixed cost from M/s. Syngenta India Limited - falling under the categories of service agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act , or not - clause (e) of Section 66E of the Finance Act, 1994 - HELD THAT:- On perusal of record as well as the agreement for job work, it is found that the agreement is primarily for undertaking job work for manufacturing various pesticides and the payment schedule for both, fixed as well as variable payment for manufacture of pesticides. It can be seen from the schedule produced that payment for the job work for manufacturing of various kinds of pesticides has two components, firstly fixed charges per month of Rs. 16 Lacs and fixed charges up to 1500MT of per kg. basis at the rate of Rs. 5.7 per kg. for formulation and secondly for manufacturing of pesticides of above 1500MT variable rates has been given as provided - It can be seen that the agreement is primarily for manufacturing of pesticides by respondent-assessee on job work basis. The first category of the fixed charges which is at the rate of Rs. 16 Lacs per month is an integral part of the job work manufacturing charges i.e. primarily for the purpose of keeping the confidentiality of the formulation of the M/s. Syngenta India Limited and same cannot be considered separately from the job work agreement. The fixed cost which are being paid to the respondent-assessee do not fall under Declared Service category as mentioned under Section 66E(e) and the amount which is paid to the respondent-assessee is primarily for manufacturing cost undertaken by them on job work basis. It is an accepted legal position that the agreement has to be considered in its entirety for the purpose of levy of service tax since the agreement is primarily for undertaking job work for manufacturing various kinds of pesticides and therefore, even if the payment for the job work is made in two types namely one as fixed and another is at variable cost, this fact will not change the nature of the agreement and same is to be considered as job work manufacturing agreement - the department s stand that fixed component of the payment for the job work category under the declared service under Section 66E is not sustainable. The impugned order-in-original is legally sustainable - appeal is dismissed.
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2024 (3) TMI 1042
Rejection of refund claim on the ground of unjust enrichment - amount has been rightly credited to the Consumer Welfare Fund or not - Section 11 B of the Central Excise Act, 1944 - HELD THAT:- The reasons for rejecting is that in terms of Section 11B of the Act, 1944, the appellant was required to submit such documentary or other evidences so as to establish that the amount of duty and interest, if any, and the incidence of such duty had not been passed on by him to any other person - Both, the Adjudicating Authority and the Appellate Authority had specifically noted that either the appellant had not produced the documents or had only submitted the photocopies of the Ledger Account and invoices. The refund claim filed by the appellant includes the amount of Rs.7,24,463/- excess paid under the category of Management, Maintenance Repair Services . As the refund claim is found to be hit by unjust enrichment clause for want of requisite documents, an opportunity may be granted to the appellant to produce the documents and other evidences proving that the incidence of duty has not been passed on either directly or indirectly to the service receiver. The matter is remanded to the Adjudicating Authority, granting liberty to the appellant to substantiate that the claim is not hit by unjust enrichment in the light of the documents produced - Appeal allowed by way of remand.
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2024 (3) TMI 1041
Liability of service tax on the alleged differential amount - It appeared to Revenue that Appellant have declared income of Rs.1,07,38,534/- in the income tax return for the financial year 2015 16 whereas they have declared gross receipt of Rs.50,27,482/- in their half yearly service tax return - whether the Commissioner (Appeals) have rightly set aside the Adjudication Order by which the Adjudicating Authority have dropped the proposal of service tax in the show cause notice? - HELD THAT:- The grounds of appeal before the Commissioner (Appeals) raised by Revenue are wholly vague. No exact Rule is pointed out of the POPS Rules which have been violated - it is found that the allegation that the Adjudicating Authority did not examine the services provided to the other 3 foreign companies other than Mavensoft Technology as their names are not mentioned in the Adjudication Order in contrary to the finding of the Original Authority. The Commissioner (Appeals) have just raised some doubts and without any categorical adverse finding, have been pleased to set aside the Adjudication order. It is found that the impugned order is cryptic and nonspeaking. The impugned Order-in-Appeal is set aside - the Order-in-Original is restored - appeal allowed.
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Central Excise
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2024 (3) TMI 1040
CENVAT Credit - trading was exempted service - common input services used by the appellant towards manufacture of the goods, providing taxable service and also providing trading - HELD THAT:- It can be seen that mention of trading as exempted service appeared in Chapter V of Finance Act, 1994 for the first time with effect from 01.04.2011. The present demand is for the period prior to 01.04.2011. Therefore, the definition of exempted services with effect from 01.04.2011 is not applicable to the period of the present show cause notice. During the period of present show cause notice, there was no whisper of trading in Chapter V of Finance Act, 1994 which deals with the provisions of law related to levy of service tax. There was no provision of law for disallowance of cenvat credit availed on service tax paid on input services which also were utilized for trading activity during the relevant period - part of the impugned order through which cenvat credit of Rs.1,97,62,992/- was disallowed is set aside. Once the said cenvat credit is held to be admissible, then there is no question of short payment of service tax as held in the impugned order. The impugned order set aside - appeal allowed.
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2024 (3) TMI 1039
CENVAT Credit - input service availed by the appellant at the depot level - nexus with the manufacture of the excisable goods either directly or indirectly in or in relation to the manufacture of the final product and clearance of the final product up to the place of removal - Rule 2 (L) of Cenvat Credit Rule, 2004 - time limitation - HELD THAT:- The appellant has appointed C F agents for receiving the consignment of the goods manufactured by them and they were storing the goods on behalf of the appellant at various depots. The goods were further sold/distributed to their ultimate buyers as per the orders received by such C F agent from the appellant - the contention made by the appellants that the ownership of the goods which were cleared from the factory has remained with them up to depot or the warehouse of the consignment agent (who was working on their behalf ) and actual sale of the goods have taken place from such depos, agreed upon. It can be seen from the definition of the place of removal that if the goods are actually sold to an independent buyer from depot of the consignment agent, the place of removal of the excisable goods will be such premises of the consignment agent or depot of the manufacturer. Since all the cost incurred up to the place of removal will be integral part of the price and therefore, all the input and input services which are received up to the place of removal of the manufactured goods, the assesse becomes entitled for credit of the same as per the provisions of the CENVAT Credit Rules. Thus, the appellant are entitled for input, input service credited up to the place of removal which is in this case is the depot or consignment agent premises. Time Limitation - HELD THAT:- For the period July, 2010 to May, 2013 the impugned show cause notice has been issued on 20 July, 2015 invoking extended time proviso under Section 11A of Central Excise 1944 read with Rule 2014 of CENVAT Credit Rule, 2004. The fact that CENVAT Credit of Service Tax was availed by the appellant on the strength of proper duty paying documents and all the transaction have been mentioned in the statutory books of account maintained by the appellant, also noted. The Cenvat Credit of input services are reflected in the monthly return in the form of ER-1 of the appellant. In that circumstances there are no ground on the part of the department to allege suppression of facts or willful mis-statement and therefore the demand beyond normal period of limitation is certainly time barred. The impugned order set aside - appeal allowed.
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2024 (3) TMI 1038
CENVAT Credit - input services - Construction Service - Rent a cab Service - Outdoor Catering (Canteen) Service - Services used by the Head Office (ISD) - C F and Cargo Handling Service - applicability of Notification No. 3/2011-CE dated 01.03.2011 - invocation of extended period of limitation. Construction Service - Denial on account of lack of nexus between the construction services and manufacturing of the goods - HELD THAT:- The construction relates to the setting up of the factory which in turn, is directly used for manufacturing and is directly covers under the inclusive part of the definition of input service . Moreover, during the relevant period, construction service was included in the definition of input service and it is only after 01.04.2011 that it has been specifically excluded from it - the construction service, during the relevant time, was within the definition of input service and therefore, the appellant is entitled to Cenvat Credit of the same. Rent a cab Service - Credit denied only on the ground that this service is not used in relation to the manufacture of the product and the cost of the same has been recovered from the employees - HELD THAT:- Rent a cab service has been mainly used for official purposes and the same relates to the business of the appellant. Here it is noted that a part of the cost of this service is recovered from the employees and as per the appellant, only 20% of it, is recovered from the employees and the same has been reversed along with interest and 80% is absorbed in the manufacturing cost. Accordingly, the appellant is entitled to avail 80% of the cost of this service and the Original Authority is directed to verify the quantum of Cenvat Credit reversed by the appellant as claimed by them. On principle, the appellant is entitled to avail Cenvat Credit on this service. Outdoor Catering (Canteen) Service - credit denied on account of the fact that it is not related to the manufacture of the product and the same is recovered from the employees - HELD THAT:- It is a statutory requirement to provide this facility to the employees as required under the Factories Act and moreover, it enhances the productivity of the employees, which is indirectly related to the manufacture of the final products - As regards the submissions of the appellant that they have only recovered 30% of its cost from the employees and the same has been reversed along with interest, this fact of reversal needs to be verified by the Original Authority and for this purpose, the case is remanded back to the Adjudicating Authority to verify the same. Services used by the Head Office (ISD) - HELD THAT:- Cenvat Credit in respect of courier service, mandap keeper service, event management, cargo handling and C F service has been denied on the ground that the same is not in relation to manufacturing activities of the appellant and hence, the same is not admissible - the Tribunal in the case of M/S. ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE C.R. BANGALORE [ 2016 (8) TMI 8 - CESTAT BANGALORE] after following the decision of the Hon ble Karnataka High Court in COMMISSIONER OF C. EX., BANGALORE-I VERSUS ECOF INDUSTRIES PVT. LTD. [ 2011 (2) TMI 1130 - KARNATAKA HIGH COURT] , has held that the assessee is entitled to Cenvat Credit of service tax as distributed by the ISD - the appellant is entitled to Cenvat Credit with regard to these services. C F and Cargo Handling Service - HELD THAT:- The definition of place of removal as provided under Section 4(3)(c) of the Act inter alia includes depot, premises of a consignment agent or any other place or premises from where the excisable goods are to be sold after their clearance from the factory. Further, C F and Cargo services are used for the purpose of unloading, storing, accounting and thereafter dispatch of the goods to the specified dealers on FOR basis. In this regard, the learned Counsel for the appellant also referred to certain invoices issued by the appellant to prove that all the goods were supplied FOR upto the place of buyer s premises, entire risk is borne by the appellant and therefore, all the expenses incurred by the C F agent, on which service tax is charged, will fall within the definition of input service - the appellant is entitled to Cenvat Credit of service tax regarding C F expenses. Invocation of extended period of limitation - HELD THAT:- The Revenue has not brought anything on record to satisfy the ingredient for invoking the extended period of limitation as the appellant was subjected to regular audit and the Department was aware of the fact that the appellant is availing Cenvat Credit of tax paid on input service and therefore, substantial demand in this case is barred by limitation. The impugned order is not sustainable in law and therefore, the same is set aside - with regard to the services of Rent a cab service and Outdoor catering service the Original Authority will verify the quantum of reversal made by the appellant; and for this limited purpose, the matter is remanded back to the Original Authority - appeal allowed in part and part matter on remand.
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2024 (3) TMI 1037
Clandestine manufacture and removal - 47658 M.T. of Pig Iron - demand worked out based on the details available in the computer print-out recovered from the premises of the Appellants office and premises associated with them and the statements recorded from the concerned persons - evidentiary value of the computer print-outs - admissible evidences or not - procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not - reliability of statements recorded under Section 14 of the Central Excise Act, 1944 - penalty on the Appellant companies and it's Director, on the basis of the evidences available on record. Whether the computer printouts taken from the pen drives recovered during the search can be relied upon as evidence to demand duty? - Whether the conditions mentioned in Section 36B has been followed in this case or not, to rely upon the computer printouts as evidence? - HELD THAT:- The procedure prescribed in Section 36B must be followed to rely on the computer sheets as evidence. It is observed that the department has not followed the procedure prescribed in Section 36B. The author of the entries made in the computer has not been identified. The certificate as prescribed under Section 36B(4) has not been obtained. Hence, the computer sheets recovered from the pen drives cannot be relied upon to arrive at clandestine clearance - As the department has not followed the mandate under section 36B, the data recovered from the print outs available in the computer sheets cannot be relied upon to work out the duty liability on the allegation of clandestine removal. Accordingly, the answer to the question are in the negative. Whether the procedure as set out in Section 9D of the Central Excise Act, 1944 was followed in this case or not? - If not followed, then whether the statements recorded under Section 14 of the Central Excise Act, 1944 can be relied upon to demand duty? - HELD THAT:- The adjudicating authority has not followed the procedure prescribed under Section 9D, accordingly, the statements cannot be relied upon to confirm the demands. Thus, the answer to question is in the negative. Whether the demands confirmed in the impugned order on clandestine clearance of finished goods is sustainable in the absence of any evidence of procurement of the major raw materials or sale of the finished goods clandestinely? - HELD THAT:- There is no evidence of clandestine removal, purchase and consumption of unaccounted raw materials, discrepancy between recorded stock and physical stock, seizure of any goods, consumption of excess electricity, actual clandestine removal of finished goods without payment of duty, mode of removal, evidence of transporters and buyers of the clandestinely removed goods and flow back of funds pertaining to clandestine removals have been brought on record in this case. Without having any such tangible evidence, clandestine manufacture and clearance of goods cannot be sustained on the basis of mere assumptions and presumptions. Accordingly, the demand confirmed in the impugned order is not sustainable. Thus, the answer to question is in the negative. Whether penalty is imposable on the Appellant company and it's Director, on the basis of the evidences available on record? - HELD THAT:- The allegation of clandestine removal against the appellant-company is not sustainable. Accordingly, the role of Director of the appellant-company in the alleged clandestine clearance is not established. It is also observed that no benefit of the alleged illegal activities have accrued to the Director. Therefore, the penalty imposed on the Director of the appellant under Rule 26 of the Central Excise Rules, 2002 is not sustainable and the same is set aside. Thus, the answer is in the negative. The demand of duty confirmed in the impugned order is not sustainable. The demand of interest and penalty imposed on the Appellants are also not sustainable - Appeal allowed.
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2024 (3) TMI 1036
Time Limitation - classification of goods - Bio-fertilizers - Single Micronutrients - Multi-micronutrients/ Micronutrient mixtures and Plant Growth Regulators (PGR) - HELD THAT:- Having regard to the observations and submissions of the learned AR, as also the arguments made by the learned Advocate for the appellants, in the interest of justice, the issue of classification needs to be remanded back where the Original Authority will give them full opportunity to explain their case and also take into account the statutory provisions as well as the case laws cited by the appellant. The dispute of classification with respect to all the four products to the Original Adjudicating Authority is remanded to reconsider the same. The Adjudicating Authority shall also provide crossexamination of the Chemical Examiner, if prayed by the Appellants. Further, after hearing the appellants and examining the evidences produced, the Adjudicating Authority shall pass a reasoned order in accordance with law for the normal period. Penalties et aside - the Appeal is allowed in part and remanded in part.
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2024 (3) TMI 1035
CENVAT Credit - exempt goods or not - zinc dross which emerged during the manufacture of final product of the appellant, due to the galvanizing process involved in the said manufacturing process - HELD THAT:- The issue is no more res-integra. It was initially taken up by High Court of Mumbai in the case of HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE [ 2014 (12) TMI 657 - BOMBAY HIGH COURT] wherein it was held that the dross and skimming of aluminium, zinc or other non-ferrous metals since emerges as waste, that the zinc dross and zinc ash cannot be treated as excisable commodities. Subsequent to the said decision, the Hon ble Supreme Court had again took up the issue in the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] holding that the waste products (Baggasse in the said case) emerging during the manufacturing process of the final product are not the outcome of any process which can be termed as manufacture. Thus, such waste products cannot be categorized as exempted goods. Hence question of applicability of Cenvat Credit Rules does not at all arise. Commissioner (Appeals) in the present case is observed to still have followed the said rescinded Circular dated 25.04.2016. The said act of the adjudicating authority not merely amounts to mis-interpretation of the provision, but it amounts to the violation of statutory principles, the circular dated 07.07.2022 being binding upon him. The ignorance of law laid down by the Hon ble Supreme Court is a condemnable act of judicial indiscipline. The order passed by the Commissioner (Appeals) is held not sustainable and the same is hereby set aside - Appeal allowed.
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2024 (3) TMI 1034
Exemption under N/N. 214/1986-CE dated 25.03.1986 - manufacture of Metallic Canisters falling under Tariff Heading No. 84799090 on job work basis - HELD THAT:- The principle of judicial discipline requires a lower judicial/ quasi-judicial authority to follow the ratio of the decision by a higher judicial/quasi-judicial authority. The Commissioner (Appeals) has just done that. This principle was explained at length in Supreme Court decision in UNION OF INDIA VERSUS KAMLAKSHI FINANCE CORPORATION LTD. [ 1991 (9) TMI 72 - SUPREME COURT] where it was held that In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. It is found that this appeal has been filed by the Revenue on the basis of an order passed by the Committee of Commissioners contrary to the principles of judicial discipline as laid down by the Supreme Court in Kamlakshi Finance Corporation Ltd. The appeal is dismissed.
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CST, VAT & Sales Tax
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2024 (3) TMI 1033
Rate of the State sales tax on silk fabrics - taxable at 4% or 12%? - demand made for the period between 15th January 2000 and 31st March 2000 - HELD THAT:- During the said period, silk fabric was a part of Schedule I of the DST Act, on which sales tax was leviable at the rate of 12%. Sections 14 and 15 of the Central Sales Tax Act were deleted by Act No. 18 of 2017. Section 14, before its deletion, declared certain goods specified therein as of special importance in inter-state trade or commerce. Until 11th May 1968, item (xi) was incorporated in Section 14, which covered the item of silk sarees . However, with effect from 11th May 1968, the said item was deleted by Act No. 19 of 1968. Section 15(1) of the CST Act, as existed during the period for which the impugned assessment was made, provided that the local sales tax rate on declared goods should not exceed 4% of the sale or purchase price of such goods. So long as the silk fabric was a part of the list of declared goods under Section 14 of the CST Act, the sales tax levy under the DST Act could not have exceeded 4% in view of Section 15(1) of the CST Act. However, silk fabric was deleted from the list contained in Section 14 of the CST Act, effective 11 May 1968. Therefore, during the relevant period for which the impugned assessment order was issued, as silk fabric was not a part of the list under Section 14, there was no embargo on levying sales tax on silk fabric at a rate exceeding 4%. Therefore, the argument based on Section 15(1) of the CST Act will not help the appellant. The second Schedule of the ADE Act provides that during each financial year, each State shall be paid a certain percentage of net proceeds of the additional duties levied and collected during the financial year in respect of the goods described in column (3) of Schedule I. However, no additional duty was made payable on silk fabric under the ADE Act. The proviso makes it clear that notwithstanding the ADE Act, there is no bar on the States levying sales tax - the argument that as silk fabric formed a part of Schedule I of the ADE Act, it disentitled the State Government from levying sales tax is fallacious and cannot be accepted. The High Court has noted that its Co-ordinate Bench in the case of MR. TOBACCO PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [ 2006 (1) TMI 567 - DELHI HIGH COURT] upheld the validity of notification dated 31st March 2000 issued under the DST Act. There are no error in the view taken by the Delhi High Court in the impugned judgment - Accordingly, the appeal is dismissed.
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2024 (3) TMI 1032
Settlement of dues - determination of tax liability under the M.P. Sales Tax Act, M.P. Vat Tax Act, Central Sales Tax Act and Entry Tax Act - HELD THAT:- It is informed that proceedings under the SICA Act were concluded by the order passed by the Board for Industrial and Financial Reconstruction (BIFR) on 28.01.2024. A copy of the order dated 28.01.2014 is placed and it evidences that the issue relating to the tax claim by the State of Madhya Pradesh has attained finality. In view of the representation of the Government of Madhya Pradesh in the above referred order of BIFR that the Company had settled their dues, followed by the final direction of the BIFR, that Government need not attend further hearings, nothing remains for consideration in these appeals. Appeal disposed off.
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2024 (3) TMI 1031
Review petition - Issuance of sales certificate with regard to the sales tax dues - Registration of a Sale Certificate issued in favor of one party for a property purchased in an auction held by another party under the SARFAESI Act. - HELD THAT:- Reliance placed on the decision of the Supreme Court in Tamil Nadu Electricity Board and Another v/s. N Raju Reddiar and Another [ 1996 (12) TMI 348 - SUPREME COURT] wherein the Supreme Court has deprecated the practice of litigants engaging a fresh set of Advocates to file and also argue matters in Review proceedings, without obtaining the consent of the Advocate who had appeared at the original stage. In the above case, the Supreme Court dismissed the Review Petition with exemplary costs - the present case is not different and would completely fall in the nature of the proceedings which have been deprecated by the Supreme Court in the above judgement. The Review Petition is accordingly dismissed with costs of Rs. 50,000/- to be deposited by the Petitioner, within a period of four weeks from today, with the Maharashtra Legal Services Authority. In the event, if such costs are not deposited, the Maharashtra Legal Services Authority shall take further steps to recover the said costs as arrears of land revenue.
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