TMI Tax Updates - e-Newsletter
March 27, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Highlights / Catch Notes
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GST:
Refund claim - rejection on the ground of time limitation - The High Court noted the applicability of the Notification dated 05.07.2022, which explicitly excluded the relevant period for the computation of the limitation period. As the petitioner's case fell within this excluded period, the rejection of the refund applications solely on the ground of limitation was deemed unsustainable. - The HC restored the refund applications to the record of the Assessing Authority.
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GST:
Validity of demand of GST including penalty - Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the petitioner and is a cryptic order - Given the shortcomings in the adjudication process, the High Court remitted the matter to the Proper Officer for re-adjudication. The Proper Officer was directed to intimate the petitioner regarding any required details/documents and allow them an opportunity to furnish explanations and additional documents, if necessary.
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GST:
Police Custody Petition - creating false GST accounts and claiming irregular Input Tax Credit - conspiracy with the companies with a common intention of misappropriating funds - Despite the prosecution's arguments emphasizing the severity of the offense and the accused's alleged involvement, the magistrate rejected the petition, citing insufficient grounds. The High Court, upon review, upheld the magistrate's decision, noting the absence of strong justification for custodial interrogation. Additionally, the court considered the findings of the DGGI investigation and a committee report, which cast doubt on the need for further police custody. Consequently, the High Court dismissed the criminal revision case.
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Income Tax:
Validity of Reopening of assessment u/s 147 - validity sanction u/s 151 - as argued approval has been applied for and granted mechanically - The High Court agreed with the petitioner, highlighting the casual manner in which approvals were granted, without proper verification or consideration of the material on record. Emphasizing the importance of exercising the power to reopen assessments with due diligence, the High Court quashed the impugned order and the consequent notice.
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Income Tax:
Penalty u/s 271(1)(c) - loss on sale of machinery - The Assessee contested the penalty, arguing that the omission of adding the loss on the sale of machinery to the total income was a bona fide mistake. The Tribunal observed a contradictory stand between the financial statement and the computation of income, indicating inadvertent errors. Considering the Assessee's participation in penalty proceedings and the submission of relevant documents, the Tribunal concluded that the penalty imposition was not justified.
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Income Tax:
Disallowance u/s 80P - claim disallowed u/sec. 143(1)(a)(ii) by way of “processing” as an instance of “incorrect claim if such incorrect claim is there from any information in the return” - ITAT noted that this provision was applicable prospectively from April 1, 2021, while the assessment year in question was 2019-2020. Thus, the Tribunal concluded that this provision could not be applied retroactively to disallow the assessee’s deduction claim. - Relying on the principle of stricter interpretation as established in Commissioner vs. Dilip Kumar And Co. & Ors., the Tribunal concluded that the disallowance of the deduction claim by the lower authorities was not justified.
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Income Tax:
Nature of loss - Speculative loss or normal business loss - Marked to market loss on hedging of the transaction - The Appellate Tribunal held that speculative transactions are defined as those settled without the actual delivery or transfer of the commodity. The assessee, engaged in the purchase and sale of bullion and manufacturing of gold ornaments, entered into future contracts with suppliers to mitigate potential losses from price fluctuations. The ITAT, after considering precedents and the nature of the assessee's business, concluded that the hedging transactions were essential to its regular business operations and allowed the deduction of the incurred loss u/s 37(1)
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Income Tax:
Penalty u/s 271(1)(c) - bogus claim u/s 80C - The Tribunal found that there was a discrepancy in the application of penalties by the lower authorities. - While the Assessing Officer concluded it as a case of furnishing inaccurate particulars of income, the subsequent discussion by the National Faceless Appeal Centre deemed it as concealment of taxable income. - Citing a relevant high court decision, the Tribunal deemed this deviation unsustainable in law. - Consequently, the penalty was deemed inappropriate and was deleted.
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Income Tax:
Assessment u/s 153C - inordinate delay in commencement of proceedings - The High court rejected the argument that the proceedings for AYs 2014-15 to 2016-17 were barred by limitation. It clarified that Section 153C, read with Section 153A, allows for assessment or reassessment for six years preceding the search year and for relevant assessment years beyond that, thus encompassing the years in question. - The court found that a consolidated Satisfaction Note suffices the requirements of Section 153C, provided it contains particulars of the incriminating material relevant to the block of AYs. It was determined that the respondents had collated substantial evidence warranting further scrutiny under the Act.
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Income Tax:
Entitlement to benefits of treaty exemption - India-Singapore DTAA - Application of Section 172 - Taxation of shipping companies - The tribunal concluded that the arguments regarding the denial of tax treaty benefits and the condition of remittance required a re-evaluation of the evidence, particularly the letter from IRAS. Given the discrepancies and the need for further clarification, the tribunal remanded the matter to the Assessing Officer for detailed verification of the IRAS certificate and its implications on the assessee's tax liability under the India-Singapore DTAA.
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Income Tax:
Jurisdiction powers to issue Reopening notice in metro city - It was established that the notice under Section 148 of the Act was issued by an Income Tax Officer (ITO), whereas the jurisdiction allegedly lay with the Assistant Commissioner or Deputy Commissioner of Income Tax. The Tribunal referred to relevant instructions indicating the appropriate jurisdiction based on income levels. Relying on the decision of the Hon'ble Bombay High Court in a similar case, the Tribunal held that the notice issued by the ITO was without jurisdiction and thus rendered the assessment order invalid.
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Income Tax:
LTCG - Disallowance u/s 54 - construction of new house begun before the sale of the old house - The Tribunal emphasized that section 54 does not mandate the utilization of sale proceeds from the original asset for the purchase or construction of the new asset. - Referring to decisions from various High Courts, the Tribunal held that exemption under section 54F is applicable even if the investment is made from borrowed funds, as long as it meets the stipulated timeline. - Regarding the timeline for construction and possession, the Tribunal reiterated that the relevant date should be determined based on when the builder offered possession or cleared the balance dues, rather than earlier stages of construction.
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Income Tax:
Disallowance of VAT expenses - Disallowance as "fee" or "charge" u/s40(a)(iib) - The Assessee, a state government-owned company engaged in the wholesale business of foreign liquor in Chhattisgarh, contested the disallowance. - Referring to the judgment of the Hon’ble Supreme Court in the case of Kerala State Beverages Manufacturing & Marketing Corporation Ltd., the Tribunal held that surcharge on sales tax, including VAT, does not fall within the scope of disallowance under Section 40(a)(iib) of the Income-tax Act, 1961.
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Income Tax:
Transfer Pricing Adjustment - Arm's Length Adjustment to Income from Guarantee Commission - Income from Interest on Loans Advanced to Associated Enterprise - The Tribunal emphasized the need for proper benchmarking in determining the arm's length price for these transactions, directing remands to the Assessing Officer and Commissioner for reevaluation. Overall, the appeals were allowed for statistical purposes, with the Tribunal providing detailed instructions for reassessment based on appropriate benchmarks.
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Income Tax:
Bogus purchases - Burden of proof - The Tribunal found that the assessee had adequately demonstrated the genuineness of purchases through detailed documentation and accounting records. The purchases were correlated with corresponding sales, further validating their authenticity. - The Tribunal noted the absence of an opportunity for cross-examination regarding the supplier's statement, emphasizing the importance of procedural fairness. Without proper validation, the statement lacked evidentiary weight. - The absence of incriminating evidence during the search further bolstered the assessee's case. - Ultimately, the ITAT dismissed the Revenue's appeal.
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Customs:
Adjustment of Penalties from Refund amount - After an appellate order allowed redemption of the seized currency upon payment of fines and penalties, the appellant filed a refund claim for the amounts paid. - The case involved the illegal smuggling of foreign currency, confiscation, and penalty imposition by the original authority, followed by appeals and refund claims. - The original authority deducted penalties imposed on co-noticees from the refund amount sanctioned to the appellant. - The Appellate Tribunal found that the deductions made from the appellant's refund amount were not justified. Section 142 of the Customs Act does not allow recovery of personal penalties from a refund. - Relying on legal precedents, the Tribunal concluded that personal penalties cannot be recovered from a refund granted to the appellant.
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Customs:
Refund claim - Payment of duty in terms of Notification No. 84/2017-Cus instead of availing full exemption under Notification No. 93/2017-Cus. - The Tribunal rejected the Revenue's argument that the refund claim was not maintainable. It held that the respondent's request for re-assessment under Section 149 constituted an appeal before the authorities. Furthermore, it noted that the respondent was entitled to choose the more beneficial provision for duty payment. - The Tribunal affirmed that when two beneficial notifications are applicable, the assessee has the right to opt for the one more advantageous to them. - Consequently, the Tribunal upheld the respondent's entitlement to the refund, dismissing the Revenue's appeal.
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Customs:
Classification of Goods - Imported one consignment of ‘Bed sheet’, declared as Polyester Bed sheet - The Tribunal noted that although the goods were made of synthetic filament yarn, they retained their identity as bedspreads or bedsheets, falling under CTH 6304. It disagreed with the Revenue's attempt to classify them under CTH 5407, which deals with woven fabrics. Therefore, the Tribunal classified the goods under CTH 6304, agreeing with the respondent's classification. - The Tribunal dismissed the appeal filed by the Revenue, affirming that no penalty under section 114A of the Customs Act, 1962, was warranted.
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Customs:
Seeking to recover the refund of SAD already sanctioned - imported timber log and paid SAD - The Tribunal upheld the appellant's contention that they were entitled to the refund despite selling cut and sawn timber logs. Citing legal precedents and the purpose of the exemption notification, the Tribunal ruled that the conversion of logs did not disqualify the appellant from the refund. - The Tribunal agreed with the appellant that as they were not registered dealers, the requirement for endorsement on invoices did not apply to them.
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IBC:
CIRP - Seeking a direction to admit the claim of the Appellant as Financial Creditor - The Tribunal found that the possession of the units had indeed been handed over to the appellant on a specified date, as evidenced by a letter signed by the appellant themselves, albeit under protest. This fact was crucial in determining the validity of the appellant's claim. - Despite the appellant's arguments regarding the absence of an occupancy certificate, the Tribunal noted that partial completion certificates had been issued, indicating progress in the completion of the commercial complex. - The NCLAT upheld the decision of the adjudicating authority to reject the appellant's application seeking direction to admit their claim.
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Service Tax:
Recovery of CENVAT Credit erroneously refunded alongwith interest - penalty for ineligible availment of CENVAT Credit - The High Court emphasized that the refund and interest were paid to the petitioner based on these orders, and there was no basis for recovery. - The High Court noted that the Show Cause Notice erroneously mentioned the filing of an SLP, although it was yet to be filed. It held that the Revenue cannot unilaterally declare the refund as erroneous, especially after being unsuccessful in previous legal proceedings. - The High Court acknowledged the Revenue's right to approach the Supreme Court but emphasized that until the Revenue succeeds there or obtains interim orders, the refund cannot be deemed erroneous.
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Service Tax:
Levy of service tax - The appellate tribunal addressed various issues raised by the appellant concerning service tax demands and CENVAT credit disallowances. They found that certain activities, such as transportation services, were wrongly classified under "Mining Services" and "Business Auxiliary Services" and should instead fall under "Goods Transport Agency Services." Consequently, they set aside the service tax demands related to these activities. Regarding CENVAT credit disallowances, the tribunal upheld the denial on tippers but remanded the matter of MS channel and angle usage for further examination.
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Service Tax:
Non-payment of service tax - The Appellate Tribunal held that the demand was not sustainable due to being beyond the limitation period, as the department was aware of the appellant's activities. - It ruled that the appellant's activities did not qualify as Business Support Service, as they were primarily in the public interest, not for promoting private business. - However, the Tribunal found the appellant liable to pay service tax under the category of Renting of Immovable Property Service, as the properties were rented out for commercial purposes. - The demand under Sale of Space and Time for Advertisement Service was deemed not sustainable due to being beyond the limitation period.
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Service Tax:
Recovery of service tax alongwith interest and penalties - Sundry Debtors/ amounts realizable appearing in Balance Sheet The Tribunal agreed with the appellant that sundry debtors should not be considered as taxable income until realized, as per accounting norms and legal precedents. - It concluded that the demand for service tax based on unrealized receivables was unfounded.
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Service Tax:
Service Tax Demand - On "Business Support Service": The Tribunal found that the uplinking services provided to broadcasters fall within the ambit of "Business Support Service" as they constitute an essential service for broadcasters to air their programs, thereby supporting the business of broadcasting. - On "Supply of Tangible Goods Service": The Tribunal concluded that providing DSNG Vans and equipment on rent falls under the "Supply of Tangible Goods Service" category, as the possession and control of these goods remain with the appellant, and the services were rendered in such a manner that did not transfer the right of possession and effective control to the customers.
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Service Tax:
CENVAT Credit - input service - non-payment of service tax on Ocean Freight - non-payment of service tax on Government Fees under RCM - The Appellate Tribunal considered various issues related to the eligibility of CENVAT credit and payment of service tax. It found in favor of the appellant on several counts, allowing credit on input services, RCM liability, education cess, goods used for maintenance, and ruling against the levy of service tax on ocean freight and government fees under RCM. However, excess credit allocation to one unit was disallowed, as it violated Rule 7 of the CENVAT Credit Rules.
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Central Excise:
Levy of penalty u/r 25 of CER - Penalty on Registered Dealers, Unregistered Dealers and Transporters - Availment of fraudulent credit - issuance of Cenvatable invoices without actual dispatch of goods - The Tribunal held that penalties could indeed be imposed on registered dealers under Rule 25 for issuing Cenvatable invoices without actual movement of goods. The Tribunal found that the dealers had contravened the rules with the intent to evade payment of duty. - The Tribunal held that penalties were warranted for unregistered dealers and transporters who facilitated fraudulent activities, despite their claims that the goods did not reach the intended destination. The Tribunal emphasized the liability of all involved parties in facilitating fraudulent activities.
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Central Excise:
Benefit of Nil Rate of duty - MS Pipes - Notification No.6/2002 - The Tribunal observed that the appellant failed to produce certificates from the District Collector for some clearances, leading to confirmation of duty along with interest. However, where certificates were produced, the Tribunal held that the benefit of the exemption should not be denied solely based on format discrepancies in the certificates. The Tribunal emphasized that the essence of the certificates aligned with the purpose outlined in the notification, warranting the appellant's eligibility for the Nil rate of duty.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (3) TMI 1132
Refund claim - rejection on the ground of time limitation - HELD THAT:- Clearly, the case of the petitioner is covered by the Notification dated 05.07.2022, which excludes the aforesaid period for computation of period of limitation. Accordingly, rejection of the claim for refund of the petitioner solely on the ground of limitation is not sustainable. Impugned orders both dated 11.01.2022 for the respective tax period are set aside. Refund applications are restored on the record of the Assessing Authority, who is directed to decide the applications in accordance with law and pass appropriate orders within a period of four weeks from today. Petition allowed.
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2024 (3) TMI 1131
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 - 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, not duly supported by adequate documents and unsatisfactory. He merely held that the reply is not clear and unsatisfactory 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 the reply is incomplete, not duly supported by adequate documents and unsatisfactory, if further any 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 impugned order records that petitioner s reply is not clear, unsatisfactory, incomplete and not duly supported by adequate documents. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. 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.
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2024 (3) TMI 1130
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. Neither the show cause notice, nor the order spell out the reasons for retrospective cancellation. In terms of Section 29(2) of the Central Goods and Services Tax Act, 2017, 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. The 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 this regard is correct, it would follow that the proper officer is also 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. The order dated 18.02.2022 and Show Cause Notice dated 04.01.2022 cannot be sustained and are accordingly set aside. The GST registration of the petitioner is restored. The petitioner shall, however, make all necessary compliances and file the requisite returns and information inter alia in terms of Rule 23 of the Central Goods and Services Tax Rules, 2017 - petition disposed off.
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2024 (3) TMI 1129
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 - 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, not duly supported by adequate documents and unsatisfactory. He merely held that the reply is not clear and unsatisfactory 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 the reply is incomplete, not duly supported by adequate documents and unsatisfactory, if further any 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 impugned order records that petitioner s reply is not clear, unsatisfactory, incomplete and not duly supported by adequate documents. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. 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.
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2024 (3) TMI 1128
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 - 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, not duly supported by adequate documents and unsatisfactory. He merely held that the reply is not clear and unsatisfactory 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 the reply is incomplete, not duly supported by adequate documents and unsatisfactory, if further any 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 impugned order records that petitioner s reply is not clear, unsatisfactory, incomplete and not duly supported by adequate documents. Proper Officer is directed to intimate to the petitioner details/documents, as maybe required to be furnished by the petitioner. Pursuant to the intimation being given, petitioner shall furnish the requisite explanation and documents. Thereafter, the Proper Officer shall re-adjudicate the show cause notice after giving an opportunity of personal hearing and shall pass a fresh speaking order in accordance with law within the period prescribed under Section 75(3) of the Act. 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.
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2024 (3) TMI 1127
Seeking an order granting Police custody of A.1 for ten days - creating false GST accounts and claiming irregular Input Tax Credit - conspiracy with the companies with a common intention of misappropriating funds - HELD THAT:- There is no dispute that the Respondent/A.1 served as an Additional Director at Messrs. Avexa Corporation Private Limited for 67 days, specifically from 09.12.2019 to 14.02.2020. In the impugned Order, the learned Magistrate noted that the alleged forged invoices, submitted by the Accused company's Directors to claim the input tax credit, and Annexure-9A, consisting of purported fake bills from the shell company Tanisha Infra Zone Private Limited, as referenced on pages 15, 16, and 17, were relied upon by the Prosecution. Notably, these bills were raised on 18.03.2019, 22.03.2019, and 26.02.2019, respectively, when A.1 was not serving as an Additional Director at M/s. Avexa Corporation Private Limited. The learned Magistrate arrived at this conclusion based on the documents presented by the Prosecution, considering it as one of the reasons for denying the Order for police custody. The learned Magistrate has additionally considered the remarks provided in the remand report, which highlight that the Directorate General of Goods and Services Tax Intelligence (DGGI) had previously investigated the submission of counterfeit invoice bills by the shell companies associated with the firm. These entities purportedly claimed to be engaged in development activities in the Amaravati region, although no actual work transpired. Consequently, the DGGI recommended a penalty of Rs. 16 crores against A.1's company under the Central Goods and Services Tax Act, 2017. This indicates that the DGGI, Hyderabad, has already undertaken a significant portion of the investigation. It is also observed in the report that after verifying all the existing records available with ADCL, the payment was released to the extent of work done after following the due procedure of the Department and per the terms and conditions of the agreement and after due certification by PMC M/s. LEA Associates South Asia Private Limited, at every stage, as mentioned in Para No. 6(A), to ensure that the requisite quality quantity checks are done both by the PMC in the presence of the Department the Principal Contractor. Having not disputed the detailed report of the committee, it is now somewhat difficult to appreciate the contention of the Petitioner/Complainant that the diversion of Government funds by Avexa through the shell companies has to be investigated - Upon considering the entire material on record, this Court finds no illegality in the Order passed by the learned Magistrate, and it needs not be interfered with. The Criminal Revision Case is dismissed.
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Income Tax
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2024 (3) TMI 1126
Assessment u/s 153C - Requirement of satisfaction note - inordinate delay in commencement of proceedings - HELD THAT:- While the Section 153C notice was issued on 07 March 2023, the Satisfaction Note appears to have been provided to the petitioner on 28 and 30 June 2023. These writ petitions came to be preferred long thereafter on 19 March 2024. We take note of the statutory timeframes stipulated under Section 153B of the Act for completion of assessment proceedings and more particularly the Second and Third Proviso s which mandate assessment itself being completed within twelve months from the time when the books of account or material is handed over to the AO of the non-searched person. This would mean that in the present case and taking the date of handing over or recordal of satisfaction as constituting the date from which that period is liable to be reckoned, the assessment is liable to be completed by 31 March 2024. Writ petitioner has thus chosen to approach this Court only a few days before the time for completion of assessment would expire and at the proverbial fag end of the proceedings. We consequently find no justification to interdict the assessment proceedings at this belated stage by invoking our jurisdiction under Article 226 of the Constitution. However and whether the asserted delay in commencement of proceedings would be fatal to the assessment itself is a question that we leave open to be urged at an appropriate juncture.
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2024 (3) TMI 1125
Validity of Reopening of assessment u/s 147 - validity sanction u/s 151 - as argued approval has been applied for and granted mechanically - HELD THAT:- As stated that in the notice the transaction value was taken gross and subsequently it was seen that there were duplicate entries which were corrected while passing the order dated 19th April 2023. The notice issued does not contain any duplicate entries. If there were duplicate entries, the AO was duty bound to issue clarification in the order and also give details of what were those duplicate entries. AO should have come clean on the error made. Therefore, if only the PCCIT or the other officers had bothered to see the records and had really applied their mind to the same, these errors would not have crept in. This displays total non-application of mind by all those persons who have endorsed their approval for issuance of notice u/s 148 of the Act. With great regret, we have to mention that these approvals are being granted mechanically and without application of mind and this is not the only matter. Innumerable orders passed u/s 148A(d) of the Act are being set aside in view of the approval being granted without application of mind. Officer should realize that this is also delaying assessment/ reassessment proceedings and is also affecting the revenue of the nation. We find that the approval has been granted in a most casual manner. The power vested in the Authorities u/s 151 to grant or not to grant approval to the AO to reopen the assessment is coupled with a duty. The Authorities were duty bound to apply their mind to the proposal put up for approval in the light of material relied upon by the AO. That power cannot be exercised casually on a routine perfunctory manner. The important safeguards provided in Section 147 and 151 were treated lightly by the officers. While recommending and granting approval it was obligatory on the part of the officers to verify whether there was any genuine material to suggest escapement of income. It was obligatory on all the Authorities and PCCIT in particular to consider whether or not power to reopen is being invoked properly. We are of the opinion that if only the Authorities had read the record carefully, they would never have come to the conclusion that this is a fit case for issuance of notice u/s 148 of the Act. They would have either told the AO to correct the figures in Column 7 or would have sent the papers back for reconsideration. These officers have substituted the form for substance. We, therefore, quash and set aside the impugned order passed u/s 148A(d) of the Act. The consequent notice issued u/s 148 of the Act also is also quashed and set aside.
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2024 (3) TMI 1124
Penalty u/s 271(1)(c) - loss on sale of machinery which was not eligible for deduction in the profit and loss account - assessee has made adjustment on the sale of plant and machinery in the block of asset which evidences that the assessee has not claimed any excessive depreciation therein, such loss on the sale of machinery was inadvertently not added back in the computation of income - HELD THAT:- We note that the assessee has made necessary adjustments in the block of assets of the plant and machinery which was also not doubted by the authorities below. From the above, it is transpired that the assessee on one hand has adjusted the gross block of asset but on the other hand omitted to make the addition on the loss of sale of machinery to the total income of the assessee. Thus, we find there is a contradictory stand taken by the assessee as evident from the financial statement and computation of income. This contradictory stand of the assessee gives reason to believe that such mistakes has been committed by the assessee due to oversight and inadvertently, therefore we are of the view that the assessee should not made to suffer if such bona-fide mistake is committed by the assessee. Decided in favour of assessee.
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2024 (3) TMI 1123
Disallowance u/s 80P - claim disallowed u/sec. 143(1)(a)(ii) by way of processing as an instance of incorrect claim if such incorrect claim is there from any information in the return - HELD THAT:- Legislature has introduced such a disallowance provision in sec. 143(1)(a)(v) dealing with deduction claim(s) provided in Chapter-VI-A of the Act by way of Finance Act, 2021 w.e.f. 01.04.2021 with prospective effect whereas the assessment year herein is 2017-2018 only. So far as the Revenue s case quoting sec. 80AC is concerned, it would be very much relevant to observe that once the legislature itself has made the impugned provision in sec. 143(1)(a)(v); the same could not have led to the assessee s 80P deduction disallowance in summary processing . As in Veerappampalayam Primary Agricultural Cooperative Credit Society [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] is also found to be distinguishable on facts as their lordships had dealt with assessment year 2018-2019 vide judgment dated 07.04.2021 thereby not having benefit of the amendment made in the Finance Act, 2021 in foregoing terms. That being the clinching fact that sec. 143(1)(a)(v) itself is not applicable in assessee s case specifically dealing with filing of a sec. 139(1) return, sub-clause(ii) could not be pressed in action being in the nature of a general provision only. We adopt principles of stricter interpretation as per Dilip Kumar And Co. Ors. [ 2018 (7) TMI 1826 - SUPREME COURT] to conclude that both the learned lower authorities action disallowing the assessee s sec. 80P deduction(s) claim(s) by way of sec. 143(1)(a)(ii) or 143(1)(a)(v) processing has to be reversed. Assessee appeal allowed.
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2024 (3) TMI 1122
Nature of loss - Marked to market loss on hedging of the transaction - treated as speculative loss or normal business loss - HELD THAT:- The issue is squarely covered by the various decisions in the case of CIT vs. Soorajmull Nagarmull [ 1980 (9) TMI 69 - CALCUTTA HIGH COURT] and in the case of CIT v. Badridas Gauridu (P.) Ltd. [ 2003 (1) TMI 61 - BOMBAY HIGH COURT] . The similar view has taken in the case of Shankara Infrastructure Materials Ltd. [ 2021 (7) TMI 306 - KARNATAKA HIGH COURT ] wherein, it has been held that the loss incurred by the assessee on account of hedging the transaction to avoid higher loss on account of foreign exchange fluctuation was to be allowed as deduction u/s 37(1) of the Act. Appeal of the assessee stands allowed.
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2024 (3) TMI 1121
Penalty u/s 271(1)(c) - bogus claim u/s 80C deduction(s) is an instance of furnishing inaccurate particulars of income - HELD THAT:- It as a fit case for confirming the impugned penalty after having found the assessee having concealed his taxable income. A deviation regarding applicability of the statutory twin limbs of concealment of taxable income vis- -vis furnishing of inaccurate particulars thereof is not sustainable in law in light of hon ble jurisdictional high court s decision in Mohd. Farhan A. Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] - The impugned penalty is deleted in very terms. Penalty u/s 270A(8) - non specification of corresponding limb(s) of under-reporting of income in consequence of any mis-reporting - HELD THAT:- Revenue could not dispute the clinching fact that although the learned lower authorities have levied 200% penalty(ies) in assessee s case going by sec. 270A(8) on one hand; whereas they nowhere specify the corresponding limb(s) of under-reporting of income in consequence of any mis-reporting thereof; as prescribed sub-sec.( 9) containing (a) to (f) clauses. Faced with this situation, we adopt stricter interpretation as Dilip Kumar And Co. Ors. [ 2018 (7) TMI 1826 - SUPREME COURT] and conclude that these twin penalties also deserve to be deleted.
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2024 (3) TMI 1120
Entitlement to benefits of treaty exemption - India-Singapore DTAA - Taxation of shipping companies - funds which have been received in Singapore or not? - assessee's first condition for Article 24 of India-Singapore Treaty to be applicable is that income from sources in a Contracting State shall be exempt from tax or taxed at a reduced rate in that Contracting State - HELD THAT:- Notably, even OECD commentary speaks of exemption from source taxation especially when discussing about permanent establishment being exempted from tax in the source country . Therefore, on a harmonious interpretation, Article 24 of the DTAA speaks of those incomes, which are exempted from source taxation , as well. This is for the reason that profits derived from operation of ships in international traffic, should be normally subject to tax in the country of residence under Article 8. However, this is subject to the limitation in Article 24 that such profits are remitted to Singapore, which follows a territorial system of taxation wherein offshore income is taxed in Singapore on part that only which has been received or remitted in Singapore. Accordingly, in our considered view Article 8 of India- Singapore Tax Treaty exempts income earned by an enterprise from operation of ships in international traffic from source taxation , subject to such profits being remitted / or received in Singapore which alone are taxable in Singapore. Therefore, in our considered view, looking into the instant facts, the argument of assessee that condition one has not been satisfied in the instant facts cannot be accepted, for this would lead to Article 24 of the India-Singapore DTAA as being redundant / otiose and the non-resident taxpayer getting benefit of double non-taxation of India sourced income, which is clearly not intended under the India-Singapore Tax Treaty. Accordingly, this argument of assessee is hereby rejected for the aforesaid reasons cited above. Article 24 is not applicable to the instant facts because under the laws in force in Singapore, the said income is subject to tax on accrual basis and not by reference to the amount which is remitted to or received in Singapore - As the letter issued by IRAS does not refer to any statutory provisions under the Singapore Tax Laws and is more in the form of a unilateral opinion / declaration that since the income has been earned by the assessee on accrual basis , Article 24 of the DTAA (Limitation of Relief Clause) will have no applicability to the assessee s set of facts. Since the entire case of the assessee for various assessment years under consideration hinges on the statement issued by the Singapore Tax Authority and as noted by the Gujarat High Court, the certificate is merely in the form of an opinion, in our considered view, it is a fit case where the basis of issuance of this certificate needs to be looked into in more detail, especially in the absence of any statutory provisions being cited in the aforesaid certificate of as to how the assessee is taxable in Singapore on accrual basis (especially when Singapore follows a territorial tax system where offshore income is taxable on receipts / deemed remittance basis) and on what basis the Singapore Tax Authority has come to the unequivocal conclusion that income has been derived from business carried on in Singapore by the assessee. In the result, the matter is restored to the file of AO to verify the contents of the aforesaid certificate and in case, the Department is unable to obtain any specific material to rebut the contents of the certificate issued by Singapore Tax Authorities, then respectfully following the decision of Gujarat High Court in the assessee s own case [ 2016 (9) TMI 19 - GUJARAT HIGH COURT ] relief may be granted to the assessee, in accordance with law. Appeal of the assessee is allowed for statistical purposes.
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2024 (3) TMI 1119
Jurisdiction powers to issue Reopening notice in metro city - notice u/s 148 issued by an officer who had no jurisdiction over the Petitioner - accommodation entries of long term capital gain in penny stock - as alleged the return of income filed by the assessee is more than ₹ 30 lacs and as assessee is resident of Mumbai, the jurisdiction of the assessee lies with Astt. Commissioner of Income Tax or Dy. Commissioner of Income Tax and not with the Income Tax Officer - HELD THAT:- The instruction no.1 of 2011, dated 31st January, 2011, clearly provided that assessee being a corporate resident of metro city, having filed return of income at a loss of ₹2.73 crores, will have a jurisdiction of the Dy. Commissioner or Asst. Commissioner of Income Tax only. As decided in case of Ashok Devi Chand Jain [ 2022 (3) TMI 1466 - BOMBAY HIGH COURT] considering the above instruction has categorically held that the notice issued in that case by the ITO, where the income of the assessee was ₹64.34 lacs is correctly without jurisdiction. The Hon'ble High Court also held that notice under Section 148 of the Act is jurisdictional notice and any defect therein is not curable. - Decided in favour of assessee.
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2024 (3) TMI 1118
LTCG - Disallowance u/s 54 - construction of new house begun before the sale of the old house - construction with the amount borrowed instead of actual sales proceeds - relevant date for taking possession of the property - as per AO two properties sold by the assessee during the assessment year under consideration when the assessee has taken possession of the constructed property after the date of sale of the two properties - HELD THAT:- Identical issue came up in the case of C. Aryama Sundaram [ 2018 (8) TMI 864 - MADRAS HIGH COURT] It is not a requisite of Section 54 that construction could not have commenced prior to the date of transfer of the asset resulting in capital gain. If the amount of capital gain is greater than the cost of the new house, the difference between the amount of capital gain and the cost of the new asset is to be charged under Section 45 as the income of the previous year. If the amount of capital gain is equal to or less than the cost of the new residential house, including the land on which the residential house is constructed, the capital gain is not to be charged u/s 45. We further observed that in the case of CIT Vs. Kapil Kumar Aggarwal [ 2015 (12) TMI 1075 - PUNJAB AND HARYANA HIGH COURT] that section 54F of the Act, nowhere envisages that sale consideration obtained by the assessee from original capital asset is mandatorily required to be utilized for purposes of meeting cost of new asset. It was, therefore, held that where investment made by the assessee although not entirely sourced from capital gains but was within stipulated time and if more than capital gain earned by assessee, the assessee is entitled to exempt u/s 54F. Hon ble Allahabad High Court in the case of CIT Vs. H.K. Kapoor [ 1997 (8) TMI 44 - ALLAHABAD HIGH COURT] held that exemption on capital gains u/s 54 of the Act could be allowed notwithstanding the fact that the construction of new house had begun before the sale of the old house. Thus direct the AO to allow deduction u/s 54 of the Act as claimed by the assessee. Decided in favour of assessee.
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2024 (3) TMI 1117
Disallowance of VAT expenses - Disallowance as fee or charge u/s40(a)(iib) - assessee is a state government owned company which is engaged in wholesale business of foreign liquor in Chhattisgarh - CIT(A) deleted the additions / disallowance - HELD THAT:- Identical issue has been dealt with by the Co-ordinate Bench of the Tribunal, Raipur in assessee's own case for the A.Ys.2015-16, 2016-17 and 2017-18 [ 2022 (12) TMI 1498 - ITAT RAIPUR] relying upon the law laid down in the case of Kerala State Beverages Manufacturing Marketing Corporation Ltd. [ 2022 (1) TMI 184 - SUPREME COURT] wherein as approved the view taken by the Hon ble High Court of Kerala that as surcharge on sales tax is a tax , and Section 40(a)(iib) does not contemplate tax , and surcharge on sales tax is not a fee or a charge , therefore, no disallowance under the said statutory provision was called for in the hands of the assessee. Accordingly, finding no infirmity in the view taken by the CIT(Appeals), we uphold the same and the addition is vacated. Decided in favour of assesse.
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2024 (3) TMI 1116
TP Adjustment - corporate guarantee transaction given by the assessee on behalf of AE to a bank - HELD THAT:- We are of the considered opinion that there is no change in facts of this present appeal, this issue is to be remitted back to the file of the ld. A.O. with the direction to determine the arm's length price ('ALP' for short) on corporate guarantee commission on the basis of the interest saving approach of the international transactions by respectfully following the above said decision in assessee own case [ 2023 (12) TMI 1299 - ITAT MUMBAI] Addition on account of arm s length adjustment to income on interest from loans advance to AE - Neither the assessee nor the lower authorities have bench marked the transaction of the assessee lending money to its AE - A.O./TPO has considered 10.68% to be a reasonable estimation on the notional interest to be levied by the assessee on the basis of the crisil bonds and made an adjustment for the loan advanced by the assessee - TPO/A.O. has also without prejudice considered the safe Harbour Rules notified on 18.09.2013 for the loan transaction upto Rs. 50 crores where the interest rate to be applied has to be the base rate of State Bank of India as on 30th June which is 12.28% + 150 basis point during the year under consideration and held that 10.68% to be at arm s length rate would be reasonable - HELD THAT:- CIT(A) has also not bench marked the said transaction and had merely restricted the rate of interest to be 5% keeping in view the earlier interest rate charged by the assessee and by stating that 5% would be a reasonable rate had the assessee advanced loan within India. The assessee, on the other hand, has also not bench marked the said transaction and had charged 2% notional interest on the loan advanced to its AE. It is evidenced that to determine the arm s length price of any international transaction, there has to be a reasonable bench marking conducted by both the sides. Here the assessee and the Revenue in the present case has not carried out the same. In the absence of such bench marking, we are not justified in upholding either the interest rate considered by the assessee nor by the ld. A.O./TPO and the ld. CIT(A). For this purpose, we deem it fit to remand this issue back to the file of the ld. CIT(A) for the purpose of bench marking the said transaction. Hence, ground allowed for statistical purpose. Addition u/s. 14A read with Rule 8D - assessee had interest free fund more than the borrowed fund during the year under consideration - HELD THAT:- As there are various judicial precedence on the proposition that when there are mixed funds, then the presumption would be that the assessee has made investment out of the own funds and not borrowed fund for the purpose of investment which has yielded exempt income. It is also pertinent to point out that the decision relied upon by the assessee in the case of Vireet Investment Pvt. Ltd. ( 2017 (6) TMI 1124 - ITAT DELHI] has held that while computing the average value of investments only those investments which has yielded income are to be considered and not the investments which has not earned exempt income during the year. Hence, we deem it fit to remand the issue back to the file of the ld. A.O. for restricting the disallowance to the extent of the investment which has yielded the exempt income during the year under consideration and also to verify that the assessee had sufficient interest free funds during the relevant year where the assessee has made investment which had yielded the exempt income.
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2024 (3) TMI 1115
TP Adjustment - adjustment to the value of international transaction as against adjustment made by the TPO with reference to entire turnover of the assessee - HELD THAT:- TP adjustment cannot be made with reference to entire turnover of the assessee and ought to be restricted to the value of international transactions. We draw support from the decision of Hindustan Unilever [ 2018 (10) TMI 1611 - SC ORDER] Keihin Panalfa Ltd [ 2016 (5) TMI 203 - DELHI HIGH COURT] and Tara Jewel Exports [P] Ltd [ 2015 (12) TMI 1130 - BOMBAY HIGH COURT] . Respectfully following [supra], TP adjustment made by the TPO and sustained by the ld. CIT(A) cannot be sustained and is liable to be deleted as difference between operating profit margin of the assessee at 3.85% and that of comparable companies at 6.19% is 2.34%, no TP adjustment is warranted in terms of Proviso 92C(2) and if we look at the list of comparables exhibited elsewhere, we find that except for Hindustan Motors Limited, all other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. - Decided against revenue. Deduction u/s 43B - disallowance of amount of Excise Duty actually paid on purchase inputs and included in RG 23A Part II - HELD THAT:- A similar issue was considered by this Tribunal in [ 2018 (10) TMI 1398 - ITAT DELHI] and Hon'ble High Court of Delhi in assessee s own case [ 2017 (12) TMI 590 - DELHI HIGH COURT] . The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove to verify the claim and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes. Excess consumption of raw materials and components to be deleted placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon ble Apex Court in M/s Maruti Suzuki India Ltd [ 2015 (8) TMI 493 - SUPREME COURT] and that the Tribunal has taken similar view in the assessee s own case in the earlier assessment years including the immediately preceding year. Disallowance u/s 14A - excess of own funds - HELD THAT:- As the assessee had surplus funds and that no disallowance of interest was called for u/s 14A of the Act. Disallowance u/s 35DDA - HELD THAT:- Similar as per assessee s own case [ 2017 (11) TMI 1632 - ITAT DELHI] A.Y 2008-09 we follow the decisions above and direct the Assessing Officer to allow the deduction under section 35DDA being 1 /5th of the total expenditure incurred by the appellant company, in respect of payment made to its employees under the voluntary retirement scheme. TDS u/s 195 - Disallowance of payments made outside India u/s 40(a)(ia) - HELD THAT:- The co-ordinate bench in A.Y 2001-02 [ 2009 (5) TMI 1013 - ITAT DELHI] commission has been paid to the agents for the sale of the vehicles and re- imbursement of advertisement expenses incurred outside India. Obviously, these expenditures incurred outside India does not make them taxable in India under the Act and the non-resident itself is not taxable in India. Thus provisions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made. Nature of receipt - Sales Tax Subsidy - revenue or capital receipt - HELD THAT:- Hon'ble High Court of Delhi in [ 2017 (12) TMI 474 - DELHI HIGH COURT] answered the said issue in favour of the Assessee and against the Revenue to be treated as revenue receipt. Not allowing set off of brought forward depreciation - Scope of amendment brought in provisions of section 32(2) of the Act by the Finance Act, 2001 w.e.f 01.04.2002 wherein it has been provided that unabsorbed depreciation could be used to set off against any head of income except salary - HELD THAT:- The claim was denied by the Assessing Officer placing reliance on pre-amended provision of section 32 of the Act.We are of the considered view that the Assessing Officer should consider the set off as per the amended provisions of the Act. We order accordingly and direct the Assessing Officer to consider the same as per relevant provisions of law. This ground is allowed for statistical purposes. Excise Duty paid under protest - HELD THAT:- As decided in own case AY 2006-07 while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same - While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Thus this Ground is allowed for statistical purposes. Disallowing liabilities on account of increased prices - HELD THAT:- There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this ITAT for the AY 2007-08 [ 2016 (5) TMI 1469 - ITAT DELHI] set aside the matter to the file of the AO with direction to decide the issue afresh after affording opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04. Under valuation of stock - HELD THAT:- CIT(A) was convinced that the assessee has maintained complete records, matching of returned vehicles with sales returned report, finished goods stock report and finished goods stock valuation report. CIT(A) gave a factual finding that the vehicles which have been returned during the year and have remained unsold have been included in the closing stock of finished goods and have been accounted in the books of account. No factual error has been pointed out in the findings of the ld. CIT(A). We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is dismissed. Disallowance of long term capital loss as speculative loss - HELD THAT:- The co-ordinate bench in A.Y 2001-02 [ 2009 (5) TMI 1013 - ITAT DELHI] held that redemption of the preference shares cannot be held to be the sale of the shares and as there is no sale of the shares, there is no question of this being treated a speculative loss on the sale. It is further noticed that the revenue has not raised any specific ground that such shares were not held as stock-intrade and it is noticed that the shares are held by the assessee as investment. In the circumstances, we are of the view that this loss on the redemption of the preference shares cannot be treated as speculative loss. Expenses incurred on club membership - HELD THAT:- As decided in own case A.Y 2009-10, [ 2018 (10) TMI 1398 - ITAT DELHI] such expenditure is allowed as business expenditure.
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2024 (3) TMI 1114
Bogus purchases - Burden of proof - purchase of pulses made by the assessee from one supplier as bogus on the basis of information received from the Income Tax Investigation Wing, New Delhi - CIT(A) deleted the additions - HELD THAT:- We find that the assessee in the instant case had duly discharged its burden by furnishing all the necessary documents to prove the veracity of the purchases from Supplier/Kamal Kishore Mukesh Kumar - goods purchased had been duly reflected in the stock registers maintained by the assessee and the same were sold by the assessee to two parties by making due reduction in the stock register to the extent of sales. Hence the purchases and corresponding sales were duly matched by the assessee in the instant case. Sales made by the assessee is not doubted by the revenue and naturally the purchase made by the assessee cannot be doubted. The purchase made by the assessee from the said supplier had been duly reflected in the books of accounts and payments made for the same through account payee cheques out of disclosed sources of income. Also ledger account of Supplier as appearing in the books of the assessee company for the period 1.4.2011 to 31.3.2012, wherein it could be seen that total purchases made during the year by the assessee from the said supplier was Rs 2,62,54,071.60 , out of this, the ld. AO is disputing the purchase made from this very same supplier only for the sum of Rs 2,16,83,820/-. How can the said supplier be genuine for the remaining supplies and be ingenuine only for the disputed supplies of Rs 2,16,83,820/-. Hence the entire case of the revenue falls flat - Decided in favour of assessee.
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2024 (3) TMI 1097
Penalty u/sec. 270A - defective notice u/s 274 - non specifying the relevant limb at the time of initiation of penalty - HELD THAT:- It has duly come on record in light of the AO s corresponding twin identical show cause notices that he had not specified the corresponding limb u/sec. 270A(8) read with sub-section(9) thereof as was held in various judicial pronouncements G.R. Infraprojects Ltd. [ 2024 (1) TMI 163 - RAJASTHAN HIGH COURT] , Schneider Electric South East Asia (HQ) PTE Ltd. [ 2022 (3) TMI 1295 - DELHI HIGH COURT] and Prem Brothers Infrastructure LLP vs. NFAC [ 2022 (6) TMI 130 - DELHI HIGH COURT] We further wish to draw support from hon ble jurisdictional high court s decision in Mohd. Farhan A. Shaikh vs. DCIT [ 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] that such a failure on AO s part in not specifying the relevant limb at the time of initiation of penalty itself vitiates the entire proceedings being in the nature of an incurable defect. Faced with the situation, we delete the impugned penalties imposed - Decided in favour of assessee.
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Customs
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2024 (3) TMI 1113
Adjustment of Penalties from Refund amount - Smuggling - foreign currencies - On appeal by the appellant, absolute confiscation was set aside by the Commissioner (Appeals) on payment of redemption fine and penalty and directed the respondents to release the confiscated foreign currency to the appellant on payment of the above dues. Accordingly, refund claim was filed by the appellant after payment of the redemption fine and the penalty as per the above order which was accepted by the Revenue. HELD THAT:- Section 142 allows to recover the amounts that is due from the appellant from any money that is payable to him provided he is a defaulter but in the present case, the personal penalties of the co-noticees are being recovered as dues deeming the appellant as a defaulter which is beyond the scope of Section 142 of the customs Act 1962 - the penalties being penalty in personam against the individuals, same cannot be adjusted against the refund sanctioned to the appellant. The Hon ble High Court of Kerala in the case E. Abdul Rahiman Versus Union of India [ 2007 (12) TMI 232 - HIGH COURT OF KERALA AT ERNAKULAM] observed The penalty so levied being personal cannot be recovered from the importer or any other person. Therefore, the petitioner is not personally liable for the penalty levied on Shri Yahoo and the amount also cannot be recovered from the petitioner. It is undoubtedly clear that personal penalty levied on the co-noticees cannot be recovered from the amount to be refunded to the appellant - the impugned order set aside - appeal allowed.
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2024 (3) TMI 1112
Refund claim - Payment of duty in terms of Notification No. 84/2017-Cus instead of availing full exemption under Notification No. 93/2017-Cus. - order of assessment in appeal not challenged - HELD THAT:- We find that on identical facts, this Tribunal has taken a matter for consideration in the case of M/s. Uma Export Ltd.[ 2023 (10) TMI 1176 - CESTAT KOLKATA] . As the issue has already been dealt by the Tribunal, we hold that when two beneficial Notifications are applicable to an assessee, it is the choice of the assessee to take the benefit of the Notification which is more beneficial to the assessee. Further, in this case, the respondent had initially filed an application u/s 149 of the Customs Act, 1962 for amendment in the Bill-of-Entry which was pending before the ld. adjudicating authority. Thereafter, the respondent filed their refund claim. In these circumstances, it cannot be said that the decision in the case of M/s. ITC Ltd.[ 2019 (9) TMI 802 - SUPREME COURT] is applicable to the facts of this case as before filing the refund claim, the respondent had sought amendment in the Bill-of-Entry. Thus, we do not find any infirmity in the impugned order. Accordingly, the same is upheld - In the result, the appeal filed by the Revenue is dismissed.
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2024 (3) TMI 1111
Demand of duty - Classification of Goods - Imported one consignment of Bed sheet , declared as Polyester Bed sheet - willfully mis-declaration of the goods - classifiable under CTH 5407 Or under CTH 6304 - confiscation - penalty - HELD THAT:- We find that a similar issue has been examined by this Tribunal in the case Commissioner of Customs (Port) vs. M/s. Silpha Finvest P. Limited [ 2024 (3) TMI 246 - CESTAT KOLKATA] and it was held that merit classification of impugned goods is under CTH 6304 whereas the Revenue wants to classify the same under CTH 5407. As the classification adopted by the adjudicating authority is not sustainable, therefore, we do not find any merits in the impugned order. Consequently, no penalty u/s 114A of the Customs Act, 1962 is warranted against the respondent. Therefore, we dismiss the appeal filed by the Revenue.
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2024 (3) TMI 1110
Seeking to recover the refund already sanctioned - imported timber log and paid SAD - Sold timber after cutting and sawing - non-endorsement of the declaration - violations of Notification 102/2007-Cus - non-mention of Bills of Entry number on the invoice and mismatch of description - HELD THAT:- We find that the primary objection raised in the instant case is that the appellant have sold timber after cutting and sawing. This issue is specifically covered by the decision of Hon ble Apex Court in the case of V ariety Lumbers[ 2018 (6) TMI 1499 - SUPREME COURT] , it has been held that the refund cannot be denied even if the imported logs were cut and sawn before sale. Non-endorsement of the declaration in terms of para 2(b) of Notification 102/2007-Cus. The said para 2(b) requires the importer to mention on the invoices that no credit of additional duty of customs levied under sub section (5) of Section 3 of the Customs Tariff Act 1975 shall be admissible. We find that since the appellant is not a registered dealer, therefore the question of taking credit on the invoices issued by them does not arise. Non-mention of Bills of Entry number on the invoice and mismatch of description and number of pieces on the invoices and bills of entry. In grounds of appeal it has been clearly indicated that stock requests duty certified by Chartered Accountant was produced at the time of filing refund. Following the case Overseas Polymers [ 2021 (1) TMI 1212 - CESTAT CHENNAI] . It is clear that minor discrepancies cannot be the reason for recovery of refund when the appellant had submitted Chartered Accountant certified stock report. Thus, we do not filed any merit in the order, the same is set aside and appeals are allowed. The appeal of the Naresh Aggarwal, Director is also consequently allowed.
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Insolvency & Bankruptcy
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2024 (3) TMI 1109
CIRP - Seeking a direction to admit the claim of the Appellant as Financial Creditor - HELD THAT:- The Application filed by the Corporate Debtor to stay the proceedings of suit in view of the moratorium imposed with effect from 07.04.2021, was allowed and proceedings in suit was stayed. However, the Appellant s suit against the Agent, through whom the Units were booked was allowed to proceed. The possession letter dated 24.09.2014, which has been extracted above, clearly indicate that possession letter was accepted by the Appellant, though under protest. The possession of Unit was thus, handed over to the Appellant on 24.09.2014, thus, the RP did not commit any error in not accepting the claim of the Appellant, for the possession of the Units, which have already been handed over - there are no error in the impugned order passed by the Adjudicating Authority in rejecting IA No.1531 of 2023 filed by the Appellant seeking direction to accept the claim. However, as undertaken by the SRA, the Resolution Plan having been approved on 20.11.2023, the SRA now has undertaken to execute of the Conveyance Deed for both the Units. The order impugned dated 16.06.2023, rejecting IA No.1531 of 2023 is upheld - SRA namely Singla Builders and Promoters Limited shall execute the Conveyance Deed in favour of the Appellant for Units CB-5 and CB-6. Appeal disposed off.
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Service Tax
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2024 (3) TMI 1108
Recovery of CENVAT Credit erroneously refunded alongwith interest - penalty for ineligible availment of CENVAT Credit - HELD THAT:- It is not in dispute that petitioner has been refunded the said amount after the petitioner was found eligible by the Tribunal for refund and further by this Court towards interest for delayed refund of the CENVAT Credit. Accordingly, there is no ground to demand the same from the petitioner. Since the Revenue is approaching the Supreme Court impugning the order of the Tribunal as well as the order in appeal passed by this Court holding petitioner entitled to refund of the CENVAT Credit, it would be open to the Revenue to seek interim orders of protection from the Supreme Court. The Revenue cannot after being unsuccessful before this Court, on its own, declare the refund of the CENVAT Credit as well as interest on delayed payment to be erroneous refund. Unless the Revenue is successful before the Supreme Court or the Supreme Court so warrants, there is no question of any refund of the CENVAT Credit or refund of the interest paid to the petitioner. The impugned Show Cause Notice cannot be sustained. The same is accordingly quashed.
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2024 (3) TMI 1107
CENVAT Credit - input service - nexus with manufacturing of final product or not - Reverse Charge Mechanism (RCM) - Excess availed cenvat credit of service tax - contravention of Rule 7 of CCR. 2004 - Cenvat credit of Education Cess and Secondary Higher Education Cess - violation of Notification No. 12/2015-CE (NT) dated 29.10.2015 - non-payment of service tax on Ocean Freight - non-payment of service tax on Government Fees under RCM. Wrong availment of CENVAT Credit of Rs. 6,86,000/- on the services received from M/s Satnam Construction Co. Fabrication Unit, Delhi - HELD THAT:- The appellant has exported PET plant from Neemrana in India to Jamaica, a place outside India with the services to install the same in Jamaica as received from M/s. Satnam Construction Co. Ltd. The later company only has given services to appellant for dismantling the said PET plant clearing, painting and repacking it for being exported. Hence the services received from M/s. Satnam were services exported. The activity done in India by said M/s. Satnam is definitely a service used by the provider of output service for providing output service. Hence, it is well covered in the definition of input services - Cenvat Credit on services received from M/s. Satnam Construction Co. for Rs.6,86,000/- is held admissible to the appellant. Hence the order of the Commissioner (Appeals) is not sustainable qua this issue. Wrong availment of CENVAT Credit of Rs. 5,15,579/- on 30.06.2017 on challan in respect of RCM liability for the month of June-17 paid in July-2017 in contravention of Rule 4(7) of CCR, 2004 - HELD THAT:- Section 140(5) of the CGST Act, 2017 provides for entitlement to registered person for taking credit of eligible duties and taxes in respect of inputs and input services received on after the appointed date i.e. 30.06.2017 subject to the condition that the invoice or any other duty or tax paying document of the same was recorded in the books of account of such person within a period of thirty days from the appointed day then denying the credit to the appellant when the input services were received prior to 30.06.2017 and tax was paid under RCM before the due date prescribed under the Finance Act, 1994 would be unjustified and cause undue hardship to the appellant when there is no legislative intent to do so - appellant is held entitled for cenvat credit of Rs. 5, 15,579/-. Excess availment of CENVAT Credit of service tax amounting to Rs. 2,41,451/- in excess on the services which were attributable to appellant as well as other manufacturing unit i.e. Gandhidham, Gujarat in contravention of Rule 7 of Cenvat Credit Rules, 2004 - HELD THAT:- It was mandatory for the appellant to distribute credit as per the directions of said Rule 7. Apparently and admittedly Rule 7 has not been followed while distributing credit. Hence it is held that the phagi unit is rightly held to have been allocated with excess credit. Wrong availment of CENVAT Credit total amounting to Rs.1,31,219/- of Education Cess SHE Cess in violation of Notification No. 12/2015-CE(NT) dated 30.04.2015 and 22/2015-CE (NT) dated 29.10.2015 - HELD THAT:- Hon'ble Madras High Court in SUTHERLAND GLOBAL SERVICES PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER CGST AND CENTRAL EXCISE, COMMISSIONER OF CGST AND CENTRAL EXCISE, GOVERNMENT OF TAMIL NADU, UNION OF INDIA, CENTRAL BOARD OF EXCISE AND CUSTOMS, THE CHAIRMAN, GSTN [ 2019 (11) TMI 278 - MADRAS HIGH COURT] has clearly held that accumulated credit of Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess - Credit continues to be available till such time it is expressly stated to have lapsed No notification/circular/instruction expressly provided that credit accumulated would lapse Authorities cannot now take stand that such credit unavailable for use. It is held that available credit as on date of transition was available to an assessee for set off - Availment of credit on this account is therefore held to be wrongly denied. Wrong availment of CENVAT Credit of Rs. 82,720/- on M.S. Bar, Channel, H.R. Coil etc. in violation of Rule 2(a) 2(k) of Cenvat Credit Rules, 2004 used for support of capital goods - HELD THAT:- The items on which cenvat credit had been taken were used in the manufacture of capital goods or repair and maintenance of capital goods. The basic idea is that cenvat credit is admissible so long as the inputs are used in or in relation to the manufacture of final product and whether directly or indirectly. The allegation of the department that the goods on which cenvat credit was availed did not satisfy the definition of the capital goods was considered by the larger bench of the Tribunal in the case of BALLARPUR INDUSTRIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BELGAUM [ 1999 (12) TMI 88 - CEGAT, NEW DELHI] wherein the theory of direct participation of the goods eligible for modvat credit had been specifically rejected in the light of its earlier larger bench decision rendered in the case of JAWAHAR MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE [ 1999 (4) TMI 153 - CEGAT, NEW DELHI] - the findings in Order-in-Appeal on this issue are not sustainable. Non-payment of Service Tax amounting to Rs. 6,64,172/- on Ocean Freight in accordance with the Notification 16/2017- ST dated 13.04.17 - HELD THAT:- Hon'ble Supreme Court has held that the levy of IGST on the amount of Ocean Freight as unconstitutional in the case of UNION OF INDIA ANR. VERSUS M/S MOHIT MINERALS PVT. LTD. THROUGH DIRECTOR [ 2022 (5) TMI 968 - SUPREME COURT] . The adjudicating authority had not considered said judgement on the ground that the same has been passed in GST regime. These findings are therefore liable to be set aside Non-payment of Service Tax of Rs. 1,07,393/- on the Government Fees under RCM in accordance with provisions of Notification No. 22/2016-ST - HELD THAT:- Tax liability on the amount in question under this issue arises only when any service is provided or agreed to be provided by the government or local authority. In the case of appellant no service has been provided by the DGFT and Transport department. The payment of fees to these departments is for the purpose of procuring Advance License from DGFT for duty free import of raw material for manufacture of final product which is then exported and for obtaining permit respectively. Demand on this issue is also held to be wrongly confirmed. Appeal allowed in part.
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2024 (3) TMI 1106
Levy of service tax - Mining Services - execution of contracts for transportation of Coal/Over Burden within the mines and also outside the mines - demand under Business Auxiliary Service reported as Handling Charges - CENVAT Credit disallowed on Tippers (CH.87) used for providing Cargo Handling Service - denial of credit on M.S. Channel and M.S. Angle used for repairing Body/Dallas of the Tippers/Dumper has been disallowed on the ground that the same was not input for the repair of the Tippers/Dumpers - denial of credit availed on the strength of invoices which are in the names of third parties (contractors) - demand of CENVAT Credit against availment of CENVAT Credit prior to payment. Mining services - HELD THAT:- The activity of transportation is most appropriately classifiable under Goods Transport Agency Services and the liability to pay Service Tax on the transportation service lies on the service receiver under the reverse charge mechanism. Accordingly, the transport services provided by the Appellant cannot be classified under the category of Mining Services . It is observed that this view has been taken by the Hon'ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS [ 2017 (7) TMI 494 - SUPREME COURT] . Relying on the said decision, this tribunal has taken the same view in the case of M/S MAA KALIKA TRANSPORT PRIVATE LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, ROURKELA, ROURKELA [ 2023 (7) TMI 435 - CESTAT KOLKATA] wherein it has been held that transportation of coal within the mines is liable for service tax under the category of Goods Transport Agency Services and therefore the liability to pay service tax under the reverse charge mechanism lies on the service receivers - the transportation service rendered by the Appellant within the mines and outside the mines are not chargeable to service tax under the category of 'Mining Services'. Similarly, the activities of Shifting and Feeding of Coal into the Hoppers has been carried out in the Power Plants and hence the same cannot be categorized as 'Mining Service'. Accordingly, the demand of service tax confirmed in the impugned order on this count is set aside. Demand of service tax on diesel supplied free of cost by the client under the category of Mining Service - HELD THAT:- Under the composite contract dated 27/08/2010 awarded by Calcutta Industrial Supply Corporation (CISC) for mining, it was agreed upon that the said client would supply the Diesel (HSD) free of cost for running of Tippers, Excavators, HEMM etc. for providing the Mining Services . It is observed that during the relevant period, there is no provision in the valuation rules to include the value of free supply material in the assessable value for the purpose of levy of service tax. Accordingly, we hold that the cost of HSD valued Rs.3,97,69,281/- supplied free of cost by the client cannot be included in the assessable value during 2011-12 for the purpose of demanding service tax under the category of Mining Services . Accordingly, the demand of service tax in the impugned order on this count is not sustainable - the demand of service tax of Rs.18,76,33,250/- confirmed in the impugned order along with interest and penalty, under the category of 'Mining Services' is not sustainable and accordingly the same is set aside. Handling charges - HELD THAT:- The discount amount received has been credited in the books of accounts under the head of Handling Charges. It is observed that the Department has considered these receipts as taxable value received and demanded service tax under the category of Business Auxiliary Service . A perusal of the journals, invoices and CA Certificates submitted by the Appellant reveals that the Handling Charges of Rs.75,60,332/- received them was towards 'Discounts' only and not for providing any taxable services. Merely because the amount is accounted for under the Account Head Handling Charges , it would not make it taxable under category of Business Auxiliary Services . Accordingly, the service tax confirmed in the impugned order on this count is not sustainable. CENVAT Credit of Rs.37,13,615/- disallowed on Tippers (CH.87) used for providing Cargo Handling Service - HELD THAT:- The CENVAT Credit in the instant case was claimed in the year 2008, when the Appellant was not rendering 'Cargo handling service'. The Appellant took registration of the vehicle under the Motor Vehicles Act on 12-10-2010. This date has no relevance for availing the credit on the Tippers as 'Capital goods'. As the Tippers were not used for providing Cargo Handling Service for which they are eligible as 'Capital Goods', at the time of receipt of the goods in the year 2008, we hold that the credit availed by the Appellant on this count has been rightly denied in the impugned order. The Appellant has not intimated the availment of capital goods credit on the Tippers. Hence, extended period has been rightly invoked to disallow the credit. For the same reason, the appellant is also liable for penalty. Accordingly, the demand of service tax along with interest upheld. As the irregular credit availed by the Appellant has been established, the Appellant is liable for interest and penalty under Rule 15(2) of the CENVAT Credit Rules 2004. Denial of CENVAT Credit of Rs.8,64,278/- on the 217 MT of M.S.Channel and M.S.Angle used for repairing Body/Dallas of the Tippers/Dumper - HELD THAT:- During the period from April 2012 to November, 2012, the Appellant purchased 217 MT of M.S. Channel and M.S.Angle and claimed that they have used the same for repairing Body/Dallas of the Tippers/Dumper which were in turn used for providing taxable services under the category of Cargo Handling Services . This fact needs to be verified. In the impugned order, the adjudicating authority observed that a 'Dumping Truck' normally weighs 4-6 MT. The claim of consuming 217 MT angle/Channel for repairing work in one year for making 'Body/Dallas' appears nothing but a sham - the adjudicating authority has not given any finding as to whether the Tippers/Dumpers for which the 217 MT of MS Angle and MS Channel were said to have been used qualify as capital goods first. The Appellant has also not submitted any evidence to support their claim that the 217 MT of MS angle and MS Channel has been used in repairing the Tippers. Accordingly, this matter needs to be remanded back to the adjudicating authority to examine the eligibility of this credit, on the basis of the above observations. Denial of CENVAT Credit of Rs.6,14,095/- availed on the strength of invoices which are in the names of third parties (contractors) - HELD THAT:- The Appellant had already reversed the CENVAT Credit of Rs.4,81,313/- and Rs.1,32,782/- vide Challan dated 27-04-2013 and Challan dated 29-07-2013 aggregating to Rs.6,14,095/- along with interest of Rs.1,36,728/-. However, it is found that the Impugned Order has only considered the payment of Rs.4,81,313/- and appropriated the same. Since the Appellant has already reversed the entire credit of Rs.6,14,095/- the same is appropriated. Appeal disposed off.
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2024 (3) TMI 1105
Non-payment of service tax - Business Support Service - Renting of Immovable Property Service - Sale of space and Time for Advertisement Service - invocation of Extended period of Limitation - penalty - HELD THAT:- SCN has already been issued to the appellant on the same issue of implementation of Private Owned Buss Scheme, 2001 and a demand has already been raised under the category of 'Business Auxiliary Service' . Thus, the department is well aware of the activities of acquiring buses by the appellant from private operators for carrying passengers. Now, Notice has been again issued for the same activity under various categories of taxable service such as Business Support Service, Renting on immovable properties and providing time space for Advertisement service, by invoking the extended period. It is observed that the appellant has been filing returns regularly and the activities of appellant is well within the knowledge of the department. Accordingly, the department at this stage cannot claim wilful suppression of fact intending evade payment of service tax on the part of the appellant and raise the demand again by invoking extended period, as held by the Hon'ble Apex Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT] . Accordingly, the impugned Order is not sustainable on the grounds of limitation. Business Support Service - HELD THAT:- The appellant corporation has acquired the passenger vehicles having road worthiness to meet their requirement for the efficient, adequate and economic passenger transport services, in public interest, The appellant, being a statutory Corporation, has no authority to permit other persons to run their vehicles on their own, on payment of some amount to the Corporation. From the plain reading of the definition of Sec.65(104c) of the Finance Act, 1994, it is observed that the activity of providing parking and receipt of entry fee is not covered under the clauses mentioned under the definition of Business Support Service. Accordingly, the activity undertaken by the appellant cannot be considered as 'Business Support Services' promoting the business of the private transport operators. Hence, the demand confirmed in the impugned order under the category of 'Business Support Services' is not sustainable. Renting of Immovable Property service - HELD THAT:- The appellant has rented out immovable property for a consideration. In their submissions, the appellant contended that they are not a commercial concern. They are a non-profit making statutory body. They have provided the spaces to stall owners at various places for the benefit of the passengers to arrange their necessity during the journey. Whatever, amount collected by them cannot be considered as 'rent' and used the same has been used towards providing amenities for the passengers in the public interest. Hence, the amount received towards rentals or lease/license fees cannot be considered as 'consideration' received for taxable services - the appellant is liable to pay service tax under the category of 'Renting of Immovable property service' - there is no suppression of fact involved in this case. Accordingly, the demand, if any, under this category of service is restricted to normal period of limitation only. Time Space for Advertisement Services - HELD THAT:- The appellant is not an advertisement agency. Further, we observe that 'Sale of Space and time for advertisement' has been brought under the ambit of service tax net only w.e.f. 01.05.2006. In the present case, the demand under this category has been raised for the period 2007-08 to 2011-12. As per the table mentioned in para 16.8 of the Show Cause Notice, we observe that the entire demand is confined to the period 2007-08 to 2009-10. There was no receipt under this category during the financial years 2010-11 and 2011-12. Accordingly, the entire demand under this category is barred by limitation. Hence, no demand confirmed in the impugned order survives under this category. Penalty - HELD THAT:- There is no evidence of wilful suppression of fact intending evasion of payment of service tax in this case. Accordingly, the penalty imposed on the appellant is not sustainable and hence the same is set aside. Appeal disposed off.
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2024 (3) TMI 1104
Non-payment of service tax - commercial training and coaching center providing vocational training to the students - Department considered the services rendered by the appellant are taxable services and the exemption provided under N/N. 24/2004-ST dated 10.09.2004 is not applicable to them - HELD THAT:- N/N. 24/2004-ST 10.09.2004, exempts vocational training provided by a Coaching Centre. The appellant considered the services rendered by them are exempted from payment of service tax as per this Notification. It is observed that there is no specific finding in the impugned order to the effect that the coaching offered by the appellant are not vocational training. A perusal of the Brochures submitted by the appellant clearly reveal that most of the courses offered by the appellant are vocational training. Accordingly, the appellant are eligible for the benefit of Notification No. 24/2004-ST 10.09.2004. The legal status of respective universities is not in dispute. The syllabus for these courses are prescribed by the universities in consultation with the appellant institute and examinations are also conducted by the universities which thereafter issues certificate/degree/diploma to successful candidates. Therefore, the appellant institute provided educational qualification recognized by the law and are accordingly outside the ambit of 'commercial training or coaching services. Hence, there is no service tax liability on these services. The demand of service tax confirmed in the impugned order is not sustainable. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. The impugned order set aside - appeal allowed.
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2024 (3) TMI 1103
Recovery of service tax alongwith interest and penalties - Sundry Debtors/ amounts realizable appearing in Balance Sheet - reverse charge mechanism - extended period of limitation - HELD THAT:- The proposed demand of Service Tax of Rs. 1,64,78,600/- has been reduced by Commissioner (Appeals) to an amount of Rs. 1,37,96,613/-, which has been confirmed alleging it to be the non-released receivables (sundry) from various Government debtors and private debtors (sundry debtors). Sundry debtors has been defined under Finance Act, 1994. As per normal terms sundry debtors refer to businesses, individuals or companies receiving services or products from another company or business without making the payment immediately. The payment occurs on a credit basis, where the debtors are liable to pay the money in future, i.e. the money lent to the sundry debtors is expected to return in the business financials within a short period of time. Payments on some future date to the sundry accounts are considered as fixed assets in the business. The show cause notice is based upon the scrutiny of profit and loss account for the financial year 2014-15, wherein the amounts were found recorded to be recoverable from the Government as well as from the private debtors - the amounts mentioned in the balance sheet as profit and loss amounts as unrealized receivable from the sundry debtors cannot be considered as value of service. Apparently, there is no provision in the Act or the Rules to be disclosed as sundry debtors in the ST 3 Returns. Hence, demand cannot be confirmed by merely appreciating the difference between the profit and loss account / balance sheet and ST 3 returns. The other ground for confirming demands is that the appellants had shown certain amounts du from the parties in their Income Tax returns and Revenue has proceeded to demand Service Tax on this amount shown in the Balance Sheet - HELD THAT:- In the present case, it is observed that the Show Cause Notice as well as orders of the adjudicating authority have just appreciated the difference noticed between the amount mentioned in the profit and loss account and are mentioned in ST 3 returns of the appellant. Without appreciating the amount out of the impugned invoices to have been actually received by the appellant and without verifying as to whether the requisite services were finally being provided. Resultantly, order confirming such a demand is not sustainable. Invocation of the extended period - HELD THAT:- It is already observed that the matter has originated based upon the latest audit of the appellants own record. The order merely state that had audit not been conducted the liability as confirmed qua the appellant could not have been ascertained, cannot be the ground for invoking the extended period of limitation. The primary responsibility for ensuring that the credit amount of service tax is paid, rests on the officers even in the regime of self-assessment as clarified by the CBEC in its manual for scrutiny of ST return - There is no evidence found on record proving such intent / mens rea with the appellant to evade payment of service tax. The appellant have already been held not liable to pay the amount confirmed. Resultantly the department has wrongly invoked the extended period of limitation while issuing Show Cause Notice. The impugned order is set aside - appeal allowed.
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2024 (3) TMI 1102
CENVAT Credit - activity of trading as well as erection, commissioning and installation services - non-maintenance of separate account for their input/input services used for providing taxable services as well as exempted services - violation of the provisions of Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT:- As held by the Hon ble Telengana High Court in M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] that if the appellant has taken Cenvat Credit wrongly, Rule 14 of the Cenvat Credit Rules, 2004 empowers the authorities to recover such credit availed by the assessee wrongly. Admittedly in this case, no demand has been raised against the appellant under Rule 14 of the Cenvat Credit Rules, 2004. Therefore, relying on the decision of the Hon ble Telengana High Court in the case of Tiara Advertising vs. UOI, it s held that the demands are not sustainable against the appellant, therefore, the impugned order is set aside - appeal allowed.
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2024 (3) TMI 1101
Levy of service tax - Business Support Service - service of providing up-linking facility - classification of service - services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service or not - time limitation - demand of interest - levy of penalties u/s 77 78 of FA. Whether the service of providing up-linking facility will be taxable under the category of Business Support Service? - HELD THAT:- On examination of the terms of the contract between the appellant and their client it is clearly evident that appellant have provided the services which support the business activities of their client, by providing the uplinking facility from their teleport. Thus on merits these service would be classifiable under the category of business support services. Whether the services of supply of DSNG Van to its clients can be classified and subjected to service tax under the category of Supply of Tangible Goods Service? - HELD THAT:- The agreement between the appellant and their customer is from the day one i.e. the day when it was entered into, was an agreement to provide these vehicles on rent to the appellant without transferring the effective control and possession of the vehicle to the customers - Hon ble Supreme Court has in case of Adani Gases Ltd. [ 2020 (8) TMI 789 - SUPREME COURT ] held that the supply of the pipelines and the measurement equipment (SKID equipment) by the respondent, was of use to the customers and is taxable under Section 65 (105) (zzzzj) of the Finance Act 1994 - there are no merits in the submissions made by the appellant in this respect and hold that the appellant has in fact provided the service under the taxable category of the Supply of Tangible Goods Services. Whether the demand is barred by limitation? - HELD THAT:- The issue involved is purely of interpretation of the terms of agreement vis a vis the provisions of the Act. On going through the terms of agreement, the appellant were entertaining a bona fide belief that these service would not be classifiable under any of the taxable categories. There is nothing in the agreement to show that appellant could not have entertained such a belief. Also it is found that there has been dispute in respect of interpretation of the term infrastructural support facility used in the definition of Business Support Services. There are decisions which have held that the this term was restricted only to infrastructural support facilities, vis a vis the office maintenance facilities which have been out sourced. Thus it cannot be said that appellants could not have entertained such a belief - thus, extended period of limitation could not have been invoked for making this demand. As the service tax is payable is under this category thus the demand will be restricted only to the extent it has been made within the normal period of limitation. To re-determine the same the matter needs to remanded back to the original authority. Whether the penalties imposed under Section 77 78 can be justified? - HELD THAT:- As it is held invocation of extended period of limitation in respect of the demand made under the category of Business Support Services, the penalty imposed under Section in respect of this demand cannot be sustained. However in respect of the demand under category of Supply of Tangible Goods Services by invoking extended period of limitation as per proviso to Section 73 (1), which is upheld the penalty under Section 78 to that extent is upheld. Interest - HELD THAT:- The demand for interest also upheld in respect of demands upheld. Appeal allowed in part.
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Central Excise
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2024 (3) TMI 1100
Valuation - computation done at 110% of the cost of production of goods at the second unit received through inter-plant transfer - Rule 8 of the Central Excise Valuation Rules, 2000 - Revenue Neutrality - HELD THAT:- In UNION CARBIDE INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, CALCUTTA [ 2003 (9) TMI 89 - SUPREME COURT ], Hon'ble Supreme Court had laid down ratio that for the purpose of computing the cost of production, Rule 6 of the Valuation Rules is squarely applicable to the cases of inter-plant transfer for determination of cost of production under Rule 8, where goods are not sold but are captively consumed by the Appellant and the interpretation made to distinguish cost and price in the case of CHALLAPALLI SUGARS LIMITED HINDUSTAN PETROLEUM CORPORATION LTD. VERSUS COMMISSIONER OF INCOME-TAX, AP COMMISSIONER OF INCOME-TAX (CENTRAL) , CALCUTTA [ 1974 (10) TMI 3 - SUPREME COURT] by the Hon'ble Supreme Court was also considered to arrive at the conclusion that cost of raw material at Jamshedpur would also remain as cost of material consumed at Tarapur, by removing the notional profit. It is however worth mentioning, here that no finding is available in those two judgments that Rule 6 of Valuation Rules, as existing then was similar to Rule 8 of the Valuation Rules, 2000. It would not be a breach of judicial propriety to give a finding that Appellant is liable to pay the duty, interest and penalty as demanded in the Show-cause notice that was also confirmed by this Tribunal - Appeal dismissed.
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2024 (3) TMI 1099
Levy of penalty u/r 25 of CER - Availment of fraudulent credit - issuance of Cenvatable invoices without actual dispatch of goods - Penalty on Registered Dealers - Penalty on Unregistered Dealers and Transporters - HELD THAT:- The adjudicating authority finds that the charge levelled against the respondents was that they have facilitated and abetted M/s AIPL in availing fraudulent credit; a careful consideration of type of offences indicates that that the circumstances covered fall under Rule 26(2) of Central Excise Rules, 2004 introduced w.e.f. 01.03.2007 and therefore, penalty cannot be imposed under Rule 25 of Central Excise Rules, 2004. Only for the reason that the offence relating to imposition of penalty for issuing Cenvatable invoices without supply of goods is made an offence specifically from 01.03.2007, it cannot be concluded that there was no provision in the rules for imposition of penalty for such offence before 01.03.2007. It is found that a bare reading of the provisions gives a clear understanding that even before the amendment Rule 26 provided for imposition of penalty in the cases where the dealer did not account for the excisable goods or in cases of contravention of provisions of the Act and the Rules. It cannot be said that the dealers have accounted for the rules in a proper manner and did not contravene any provisions of law - The very fact that they have issued invoices in the name of M/s AIPL facilitating them to avail Cenvat credit while they have removed the goods elsewhere is a proof in itself that they did not account for the excisable goods properly and have violated the provisions of Rule 9 of Central Excise Rules, 2004. Now, the question that comes is as to whether such non-accountal and contravention of provisions is with an intent to evade payment of duty. It is on record that the dealers are registered. They are aware of the provisions of law relating to issuance of invoices. Even then, they have issued Cenvatable invoices in the name of M/s AIPL without ensuring that the goods are also consigned to M/s AIPL. A positive act evidencing the intent to evade payment of duty is in the form of issuing Cenvatable invoices. Therefore, the dealers had contravene the provisions of rules with intent to evade payment of duty and they have rendered themselves liable to pay penalty under Rule 25 even before the insertion of sub-Section (2) under Rule 26. Coming to the case of the transporters, they have not only confirmed the fact that the goods consign to M/s AIPL were transported upto Delhi and in no case were transported to M/s AIPL. Moreover, they have issued transport document evidencing procurement of goods by M/s AIPL - the transporters have also rendered themselves liable to pay penalty under Rule 26 ibid. Even before insertion of sub-Rule 2 under Rule 26 of Cenvat credit Rules 2004, provisions existed for imposition of penalty under Rule 25 for the offence of issuing Cenvatable invoices without movement of goods. Similarly, there is a provision to impose penalty and for confirming a non-existent transportation goods under Rule 26 of Cenvat Credit Rules, 2004 - Revenue has a strong case in their favour and the impugned order cannot be sustained as far as dropping of penalty on respondent dealers/transporters - such penalty leviable on different dealers/transporters should be commensurate with the offence committed and to wipe of the benefit that has accrued to them while working as a deterrent against any such future repetition of the same. The impugned order is modified to the extent of non-imposition of penalty on the respondents - Appeal disposed off.
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2024 (3) TMI 1098
Benefit of Nil Rate of duty - CENVAT Credit - MS Pipes - common inputs used in manufacture of dutiable as well as exempted final products without maintaining the separate accounts - fulfilment of the requirements of N/N. 6/2002-CE as amended by N/N. 47/2002 - HELD THAT:- The pipes are meant for intended use mentioned in Notification no. 47/2002/CE dated 06-09- 02 of Department of Revenue Ministry of Finance and Company Affairs, GOI, Issued under condition 47A of the above Notification. Thus, these certificates are found to specifically mention that the pipes are for being used for transferring water from source to the treatment plant and from there to the storage facility. The Certificates are issued by the Competent Government Authority. Hence, we do not find any reason to reject these certificates. Non-availability of these certificates at the time of clearance is nothing but a mere procedural lapse. Substantial benefit of Nil rate of duty arising out of a notification cannot be denied to the appellant on the said ground. The appellant has otherwise duly complied with the requirement/ condition of the notification. Hence, it is held that the appellant cannot be held liable for duty demand with respect to such clearances for which certificates have been produced on record. Adjudicating authorities are held to have misinterpreted the certificates. It is merely a difference of language and the difference in the format of those certificates. The gist of the certificates is about the same purpose as is mentioned in Notification No.6/2002 as amended vide Notification No.47/2002 to claim the Nil Duty benefit. Thus the appellant is held not liable to pay any excise duty. The order under challenge is not sustainable. The same is hereby set aside. Appeal stands allowed.
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