TMI Tax Updates - e-Newsletter
March 28, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Seeking grant of Regular Bail - availment of illegal input tax credit - fictitious entities - fake purchases from 24 fictitious entities - seriousness of charge is not the only relevant factor to be considered while dealing with bail applications. - Considering the statutory limit provided under the GGST Act & CGST Act for filing complaint as also the facts and circumstances of the case and without discussing the evidence in detail, this Court is inclined to grant regular bail to the applicant, subject to conditions imposed - bail application allowed. - HC
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GST:
Classification of supply - supply of EPABX system along with its installation and commissioning to Railways - The EPABX works like an exchange - The subject supplies of EPABX system for Railways is covered by the Notification No. 11/2017-CT (R) dated 28-6-17, as amended, and liable to 12% GST. - AAR
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GST:
Levy of GST - time of supply - Mobilization Advance received - On reading the Receipt voucher no RTGS 223033 dated 8-2-21, the recipient deducted TDS under Section 51 CGST Act on the said advance which denotes that advance is not in the nature of deposit as submitted by SPSC, but rather is against the value of supply agreed to be made - The scope of work as per contract is works contract service, and it is held that all three advances are advances received by SSPC under the Service Supply Contract. - AAR
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GST:
Classification of supply - composite supply of services or mixed supply - services for a “Single consolidated Rate” as a package - services like Transportation and Logistics services, Clearing and Forwarding services and Other allied services for import & export of cargo and for coastal movements. - Such supply would be treated as ‘mixed supply’ - GST Rate for such ‘mixed supply’ would be the highest rate of the constituent supplies, which is presently 18%. - AAAR
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GST:
Exemption form GST - healthcare services - the major portion of the total hospital charges is towards payment to Consultant / Technician. Even the remaining minor portion of the hospital charges retained by the hospital is for providing ancillary services such as nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. - In the present case, the appellant does not fall under the definition of ‘clinical establishment’ as already discussed and the major portion of the package offered by the appellant is towards accommodation. - AAAR
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GST:
Classification of goods - Indian railways - The write up provided by the applicant is incomplete and have no potential to prove 'the subject goods' as essential parts of Railway or tramway locomotives or otherwise. Simply protection of the wires and inner machinery of railways cannot categories the subject goods as part of `railway or tramway locomotives, rolling stock and parts thereof or otherwise - AAR
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Income Tax:
Prosecution against the Director u/s 276B - Principal officer of the Accused Company - Compliance u/s 2(35) - Punishable offence for non deduction of TDS - The mandatory requirement is not complied with and the very contention is also that the notice given in terms of Ex.P2 is not in compliance of Section 2(35) - The order passed by the Trial Court discharging the respondent No.2 sustained - HC
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Income Tax:
Addition on account of under valuation of stock - there will not be any impact on the income declared by the assessee except the increase in the amount of income in one year and decrease in the amount of income in the subsequent year. On this reasoning as well, we are also not convinced with the findings of the AO - AT
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Income Tax:
Addition u/s 40A(3) - cash purchases of petrol - Assessee was in the habit of purchasing petrol regularly - Assessee has not produced any documentary evidences to substantiate that these payments were required to be made in order of the business expediency or emergencies or that of an exceptional circumstance as provided in Rule 6DD of the Income Tax Rules, 1962 is rebuttal to the findings of the learned CIT(A) towards the disputed purchases being added to the income of the Assessee by invoking the provision of Section 40A(3) - Additions confirmed - AT
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Customs:
Levy of penalty u/s 117 of Customs Act - mis-declaration of quantity and description of goods in the Bills of lading - The goods were lying in the port after unloading by the shipping line for about three months, and neither the Appellant had filed any Bill of Entry nor had given any intimation of his decision to abandon the goods. It was only when physical examination was taken by opening the seal of container on 05.08.2014, the Customs department found regarding the misdeclaration, both as regards quantity and description. - The penalty under Section 117 of the Act is upheld - AT
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Indian Laws:
Dishonor of Cheque - grant of interim compensation - It is the discretion conferred, as the word used is “may”. - it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. he language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, becomes an arbitrary action. - HC
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Indian Laws:
Power of state authority to impose cess - the State had no authority to impose any tax or cess on the manufacture or production of cement, whether by the said Act or by any other disingenuous device; and, in all fairness, no further attempt is made on behalf of the State to justify the legislative illegality except to suggest that after the GST regime has been put in place, the impugned Act of 2010 has been repealed and the same is no longer relevant. - HC
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SEBI:
SEBI Circular applicability - We have already held that the SEBI Circular cannot be applied to defaults committed prior to 13th October, 2020. This being so, the subsequent incorporation of the SEBI Circular to the DTDs by virtue of the Supplementary Debenture Trust Deed(s) executed on 11th March, 2021 could only logically apply the SEBI Circular to defaults occurring post such incorporation or at best, to defaults post 13th October, 2020. - HC
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Service Tax:
Levy of service tax - works contract - demand based on TDS form 26AS - The liability to pay a service tax is not upon a presumption nor can it be based upon a state of indeterminateness on the part of the authorities. The liability to pay a tax has to be conclusively determined that for the given transaction for which the tax is imposed the noticee is liable to pay such tax and such taxes are not being paid. - Matter restored back - HC
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Service Tax:
Refund of service tax - Business Auxiliary services - export of service or not - non-production of Foreign inward remittance certificate - the appellant’s service would qualify as export service, ARVs are heavy vehicles and hence, are not covered under Section 65(9) ibid. and hence the ST paid under RCM was by mistake as claimed by the appellant, which qualifies for refund. - AT
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Service Tax:
Refund of services tax / Cenvat Credit - tax deposited under reverse charge mechanism, pursuant to audit objection - revenue neutrality - Post GST regime - From a conjoint reading of sub-section (3), (5) and (8)(a) of the CGST Act, it is evident that an assessee is entitled to claim refund of service tax under RCM paid after the appointed day under the existing law and such claim has to be disposed of according to the provisions of the existing law. As the appellant was entitled to cenvat credit of the said amount, which is now no longer available due to GST regime, they are entitled to refund of the said amount. - AT
Articles
News
Case Laws:
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GST
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2022 (3) TMI 1156
Violation of principles of natural justice - opportunity of hearing provided or not - ex-parte order - reversal of input tax credit - HELD THAT:- This Court, notwithstanding the statutory remedy, is not precluded from interfering where, ex facie, it is opined that the order is bad in law. This is for two reasons- (a) violation of principles of natural justice, i.e. Fair opportunity of hearing. No sufficient time was afforded to the petitioner to represent his case; (b) order passed ex parte in nature, does not assign any sufficient reasons even decipherable from the record, as to how the officer could determine the amount due and payable by the assessee. The order, ex parte in nature, passed in violation of the principles of natural justice, entails civil consequences.
Petition disposed off.
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2022 (3) TMI 1155
Seeking grant of Regular Bail - availment of illegal input tax credit - fictitious entities - fake purchases from 24 fictitious entities - allegation against the applicant is of committing offence under section 132(1)(c) of the GGST Act & CGST Act - HELD THAT:- The applicant is alleged to have fraudulently claimed input tax credit to the tune of ₹ 31.02 Crores by showing fake purchases from 24 fictitious entities to the tune of ₹ 172.36 Crores. In pursuance of the summons issued by the respondent tax authority in December 2021, the applicant appears to have supplied documentary evidence to the complainant-tax authority relating to the consignment of goods as also the vehicles used for transporting the goods. It is the say of the respondent-tax authority that it is seized with a list of fictitious firms from whom the applicant’s firm is said to have made fake purchase transactions - in this petition filed under Section 439 of Cr.P.C., this Court is not required to go into the veracity of the claims made by either side. Whether or not the applicant has availed input tax credit by showing fake purchases from fictitious firms would be a matter of trial.
The offence alleged against the applicant is economic offence, which has resulted in loss to the State exchequer. Of course, economic offences are grave in nature, being a class apart, which arises out of deep-rooted conspiracies and therefore, the effect on the community as a whole is to be kept in view while consideration for bail is made. But, at the same time, seriousness of charge is not the only relevant factor to be considered while dealing with bail applications.
Considering the statutory limit provided under the GGST Act & CGST Act for filing complaint as also the facts and circumstances of the case and without discussing the evidence in detail, this Court is inclined to grant regular bail to the applicant, subject to conditions imposed - bail application allowed.
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2022 (3) TMI 1154
Validity of assessment order - non-speaking order - HELD THAT:- This writ application is disposed off by quashing and setting aside the orders in Form GST-DRC – 07 dated 18.12.2021 and 27.12.2021 respectively (Annexure – F), passed by the Assistant Commissioner of State Taxes, Division – 3, Gandhinagar, and remit the matter to the Assistant Commissioner of State Tax, Division – 3, Gandhinagar, for fresh hearing of the matter. The impugned orders are accordingly quashed and set aside.
The Assistant Commissioner of State Tax, Division – 3, Gandhinagar, shall hear the writ applicants once again. This time, the Assistant Commissioner of State Tax, Division – 3, Gandhinagar, shall ensure that a reasoned order is passed dealing with each and every submission that may be raised on behalf of the writ applicants - Let this entire exercise be undertaken at the earliest and completed within a period of three months from today.
Application disposed off.
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2022 (3) TMI 1153
Restriction on Input Tax Credit (ITC) - Constitutional validity of Section 17(5)(d) of the Central Goods and Services Tax Act, 2017 - vires of Articles 14, 19(1)(g), 300A and 265 respectively of the Constitution of India or not - HELD THAT:- It appears on plain reading of the provision in question that the input tax credit has not been made available in respect of the goods or services or both received by a taxable person for construction of an immovable property [other than plant or machinery] on his own account including when such goods or services or both are used in the course or furtherance of business - Sub-section (5)(d) of Section-17 has provided an explanation. According to the explanation, the expression “construction” would include re-construction, renovation, additions or alterations or repairs, to the extent of capitalization of the said immovable property.
It has been brought to our notice that the very same provision of the Act, 2017 was made a subject matter of challenge before the High Court of Orissa in the case of M/S. SAFARI RETREATS PRIVATE LIMITED AND ANOTHER VERSUS CHIEF COMMISSIONER OF CENTRAL GOODS & SERVICE TAX & OTHERS [2019 (5) TMI 1278 - ORISSA HIGH COURT] wherein, the High Court declined to declare Section-17(5)(d) of the Act as ultravires, but thought fit to read it down.
Let Notice be issued to the respondents, returnable on 06.04.2022. Notice shall also be issued to the learned Attorney General of India. Notice to the respondents nos.1, 2 and 3 respectively shall be served by E-mail.
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2022 (3) TMI 1152
Statutory interest on refund from the date of shipping bills uptill the date on which the amount of refund is paid to the petitioner herein - seeking to grant an ex-parte ad interim order in favour of the petitioner - HELD THAT:- The issue as regards payment of interest is no longer res integra after the judgment of this High Court in the case of M/S AMIT COTTON INDUSTRIES THROUGH PARTNER, VELJIBHAI VIRJIBHAI RANIPA VERSUS PRINCIPAL COMMISSIONER OF CUSTOMS [2019 (7) TMI 472 - GUJARAT HIGH COURT]. In such circumstances, the respondents are directed to calculate the interest on the principal amount at the rate of 7% and make the necessary payment to the writ applicant within a period of six weeks from today.
Application disposed off.
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2022 (3) TMI 1150
Classification of supply - supply of EPABX system along with its installation and commissioning to Railways - The EPABX works like an exchange - taxable at 12% rate of Goods and Services Tax or not - applicability of Entry no. 3(v) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 - HELD THAT:- The EPABX system comes into existence by assembly and connection of various goods/components, wherein transfer of property of such goods is involved in the execution of said contracts. It is noted that EPABX system once installed cannot be taken to market in as such condition. It would be required to be dismantled and disassembled in parts and components. In the process of dismantling, some parts of the EPABX system such as cables, connectors may even be damaged/ may not be usable again. Thus, an installed and commissioned EAPBX system becomes an immovable property and thereby its supply with installation and commissioning is Works Contract Service supply.
It is apt to refer to CBEC Order No. 58/1/2002-Cx dated 15-1-2002 issued for the purpose of uniformity in connection with classification of goods erected and installed at site. This said CBEC order was issued in wake of plethora of judgments appear to have created some confusion with the assessing officers, the matter was examined by the Board (CBEC) in consultation with the Solicitor General of India and the matter was clarified vide said Order and the relevant extract is reproduced and it is held that its rationale and concept are relevant under GST scheme of law also.
The subject supply pertains to Railways as it is for supply in railway office. As per Section 2(31)(d) Railways Act, 1989, railway includes all offices and any other works constructed for the purpose of, or in connection with, railway - The subject supplies of EPABX system for Railways is covered at entry No. 3 (v) of Notification No. 11/2017-CT (R) dated 28-6-17, as amended, and liable to 12% GST.
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2022 (3) TMI 1149
Levy of GST - Job-Work or not - activity of providing service of re-gasification of LNG owned by its customers (who are registered under the CGST Act) to convert to RLNG, from its re-gasification terminal at Hazira Port, Gujarat - classifiable under Entry (id) of Heading No. 9988 of Sl. No. 26 of Notification No.11/2017-CT (Rate) dated 28.06.2017 as amended vide Notification No. 20/2019-CT (Rate) dated 30.09.2019 or not - taxable at the rate of 12% or not?
HELD THAT:- The subject activity of re-gasification of LNG into RLNG is undertaken by M/s. Shell Energy on LNG belonging to another GST Registered person. It is noted that LNG is goods classified at HSN 2711. Thereby, it is held that subject activity merits to be covered at entry (‘id’) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended.
Further, Government Circular 126/45/2019-GST dated 22-11-19 has clarified this issue crystal clear.
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2022 (3) TMI 1148
Classification of goods - Tamarind Kernal Powder (TKP) - treated (modified) tamarind kernel powder - plain (unmodified) tamarind kernel powder - classifiable under Chapter 13 of the CTA or not - HELD THAT:- TKP merits classification in the third group as a Thickener (modified/ un- modified) derived from vegetable products - TKP falls under third group ‘other’ as it is neither Agar-agar nor a thickener derived from locust beans/ locust bean seeds/ guar seeds.
Modified/ Un-modified TKP is classified at Tariff 1302 39 00.
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2022 (3) TMI 1147
Levy of GST - amount representing the employees’ portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider by company at Factory - amount representing the employee’s portion of canteen charges, which is collected by the applicant and paid to the Canteen service provider by company at HO - input tax credit (ITC) available charged by service provider on canteen facility provided to employees working in factory/HO - restriction of ITC to the extent of cost borne, by the company.
HELD THAT:- Astral has arranged a canteen for its employees, which is run by a Canteen Service Provider. As per their arrangement, part of the Canteen charges is borne by Astral whereas the remaining part is borne by its employees. The said employees’ portion canteen charges is collected by Astral and paid to the Canteen Service Provider. Astral submitted that it does not retain with itself any profit margin in this activity.
GST, at the hands of Astral, is not leviable on the amount representing the employees portion of canteen charges, which is collected by Astral and paid to the Canteen service provider.
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2022 (3) TMI 1146
Levy of GST - time of supply - Mobilization Advance received by it for construction services provided by it - CGST Act, 2017 - SGST Act, 2017 - HELD THAT:- There are no ambiguity that Time of Supply of Service on advances received is date of its receipt - there are no merit in SPSC submission to defer the payment of Tax on Advances till the stage of issue of invoice. This leads to delayed payment of Tax on advance received. Time of Supply envisaged in the Section 13(2) CGST Act has addressed this issue.
On reading the Receipt voucher no RTGS 223033 dated 8-2-21, the recipient deducted TDS under Section 51 CGST Act on the said advance which denotes that advance is not in the nature of deposit as submitted by SPSC, but rather is against the value of supply agreed to be made - The scope of work as per contract is works contract service, and it is held that all three advances are advances received by SSPC under the Service Supply Contract.
Thus, Time of Supply, on said Advances received by SPSC for Supply of its Service, is the date of receipt of said advance.
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2022 (3) TMI 1151
Maintainability of application - Section 98 (2) of the CGST/GGST Act, 2017 - Exemption from GST - Works Contract - Supply made by M/s INI Studio as Service in relation to any functions entrusted to a municipality under article 243W of the Constitution - Pure services or not - exemption under Entry No. 3 of the Notification No. 12/2017-CT - recipient of services or not - HELD THAT:- As per Section 95 of the CGST Act, 2017, the term “Advance Ruling” means a decision provided by the authority or appellate authority to an applicant on matters or questions specified in subsection 2 of Section 97 or subsection 1 of Section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. From the submission of appellant it is amply clear that the service i.e. “Design and Comprehensive Consultancy” is to be provided by M/s INI Design Studio Pvt Ltd to the Appellant - appellant is the recipient of service in the subject case.
The impugned transaction are not in relation to the supply of goods or services or both undertaken or proposed to be undertaken by the appellant and therefore, we are of the view, that it is outside the purview of mandate given to the Advance Ruling Authority/ Appellate Authority on Advance Ruling. The provisions of Section 103 states that the ruling pronounced is binding only on the applicant. It is amply clears that if a recipient of supply obtains a ruling on the taxability of his inward supply of goods or services or both, the supplier of such goods or services or both is not bound by that ruling and he is free to assess the supply according to his own determination/understanding of law and hence ruling loses its relevance and applicability - Any provision of law has to be interpreted in a constructive and harmonious way keeping in mind the object of the purpose of the provision. Any interpretation, if it defeats the vary purpose of the provision of law is not only incorrect but also improper and bad in law.
The present appeal is non-maintainable.
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2022 (3) TMI 1145
Classification of supply - composite supply of services or mixed supply - services for a “Single consolidated Rate” as a package - naturally bundled services or not - applicable HSN code and corresponding GST Rate for such bundle of services - eligibility of Input Tax Credit - GST paid on Commercial vehicles and Repair & maintenance cost of such vehicles used for transportation of goods/containers - ITC on inward supply from CFS/Port/Labour contractor etc. related to such packaged outward supply - refund of GST on outward supply invoices.
Whether the bundle of services to be provided by the appellant for a single consolidated price would amount to provision of ‘Composite Supply’ or ‘Mixed Supply’ under the provisions of the CGST Act, 2017 and GGST Act, 2017? - HELD THAT:- The appellant intends to provide bundle of services in conjunction with each other for a single rate i.e. per container rate. The rate would vary depending upon the locations and price of diesel. However, it is not the case that the appellant would charge separately for different constituent services included in the bundle - It can be seen that the services provided by a Goods Transport Agency (GTA) by way of transport of Rice in goods carriage attracts Nil rate of GST; whereas, all other services like Clearing & Forwarding, Labour Supply for loading & unloading, obtaining Customs related certificates and allied/support services attract 18% GST. As the appellant intends to supply all these services as a bundle for a single consolidated rate, supply of such bundled services would be either ‘composite supply’ or ‘mixed supply’, as defined under the provisions of Section 2(30) and Section 2(74), respectively, of the CGST Act, 2017.
To consider any supply of service as mixed supply, there should be two or more individual supplies or any combination thereof, made in conjunction with each other for a single price where such supply does not constitute a composite supply. It is found that all the requirements of ‘mixed supply’ fulfil in this case. It is clear that there is two or more individual supply of services in this case, which can be supplied separately, but the appellant intends to make such supplies as a combination or in conjunction with each other for a single price. This supply does not constitute a composite supply - thus, the proposed supply of bundled services for a single price would be treated as ‘mixed supply’ under the provisions of CGST/GGST Acts.
Rate of GST on such mixed supply - HELD THAT:- It is very clear that such mixed supply would be treated as supply of that particular supply which attracts the highest rate of tax and thus, would attract the highest rate on the value i.e. single price of the entire bundle of mixed supply. In the present case, the highest rate attracted is 18% IGST or 9% CGST & 9% SGST for all services other than the service of transportation of Rice by a Goods Transport Agency, which attracts Nil rate of GST. Therefore, we are of the view that the entire bundle of services provided as a mixed supply would attract 18% rate. The appellant is also of the view that the entire bundle of services would be taxed at 18%.
Classification / HSN of the mixed supply - HELD THAT:- In view of provisions of Section 8(b), the mixed supply would be treated as supply of that particular supply which attracts the highest rate of tax. In this case, there is no single supply which attracts the highest rate of 18%; but there are more than one supplies which attract the highest rate of 18%. In order to determine a particular supply for the purpose of classification of mixed supply in present case, we felt that the predominant supply among the supplies attracting the highest rate can be considered - the mixed supply intended to be provided by the appellant would be classifiable under HSN / Service Code (Tariff) 996719 with description as ‘Other cargo and baggage handling services’, which attracts 18% rate.
Whether the appellant would be able to avail Input Tax Credit (ITC)? - HELD THAT:- In this case, the appellant has chosen to provide various services in conjunction of each other for a single price and such services are to be treated as mixed supply, as held by us. The single price to be charged by the appellant attracts the highest rate of 18% and the said single price includes the value of transportation of rice. So, there should be no question of denying ITC merely on the ground that one of the constituent service of mixed supply attracts Nil rate of tax, if provided separately.
Whether the exporter client would be eligible to claim refund of GST paid by appellant on their outward supply? - HELD THAT:- This question is not related to appellant, but it is related to the exporter, who has not filed the application for Advance Ruling before GAAR or appeal. The appellant is not entitled to raise this question as to whether their exporter client shall be eligible to claim refund of GST paid by them or not.
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2022 (3) TMI 1144
Exemption form GST - healthcare services - benefit of entry No.74 of exemption Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 - composite supply of services or not - whether the appellant is providing services by way of health care services by a clinical establishment? - HELD THAT:- The services being provided by the appellant does not appear to fall within the ambit of Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate) and the appellant has not been able to establish that its case squarely falls within the said entry of exemption notification claimed by it.
The services being supplied by the appellant cannot be termed as services by way of health care services by a clinical establishment, an authorised medical practitioner or paramedics. As such, the services of the appellant cannot be held to be covered under 12 Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and Notification No. 12/2017-State Tax (Rate) dated 30.06.2017.
It is observed that in the clarification given at Point 5(2) of the aforesaid Circular No. 32/06/2018-GST, the issue being examined is in respect of retention money of ₹ 2,500/- out of total hospital charges of ₹ 10,000/- (out of which Consultant / Technician is paid ₹ 7,500/-). Thus, the major portion of the total hospital charges is towards payment to Consultant / Technician. Even the remaining minor portion of the hospital charges retained by the hospital is for providing ancillary services such as nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. - In the present case, the appellant does not fall under the definition of ‘clinical establishment’ as already discussed and the major portion of the package offered by the appellant is towards accommodation. Therefore, this clarification is not applicable in the facts of the present case.
Applicant is not eligible to get the benefit of Sr. No. 74 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 and corresponding Notification No. 12/2017-State Tax (Rate) dated 30.06.2017.
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2022 (3) TMI 1143
Levy of GST - recovery of Notice Pay from the employees who are leaving the company without completing the notice period as specified in the Appointment Letter issued as per the contract entered between Employer and the Employee - applicability of Section 101 (3) of CGST Act, 2017 - difference of opinion.
Findings as per Seema Arora:
HELD THAT:- Schedule III of the GST Acts covers various activities or transactions, which shall be treated neither as a supply of goods nor a supply of services. Para 1 of the said Schedule III covers ‘services by an employee to the employer in the course of or in relation to his employment’. However, the present case is not covered by the said Para 1 of Schedule III inasmuch as the service of tolerating of the act of breach of the contract is on the part of the employer. Neither the employee is providing the service, nor it is in the course of or in relation to his employment - the said service by way of tolerating non-performance or breach of contract for which consideration in the form of liquidated damages is payable to the appellant is neither exempted under Notification nor covered under para 1 of Schedule III of the GST Acts.
The appellant M/s. Amneal Pharmaceuticals Private Limited is liable to pay Goods and Services Tax at applicable rate on the amount of notice pay (liquidated damages) received from the employees leaving the job of the appellant without completing the notice period as specified in the contract entered into (Appointment Letter) between the appellant and its employees, and reject the appeal filed by M/s. Amneal Pharmaceuticals Private Limited.
Findings as per Milind Torawane:
HELD THAT:- Transaction or activity is not in the course and furtherance of business: As stated above, the contract of employment between the employer and an employee, where the employee promises to provide employment services to an employer in return for a consideration (i.e. “salary”) is the transaction in the course and furtherance of business. The employee at his own choice decides to serve during the period of notice pay or not to serve during the said period along with compensating the damages for injury caused by him to the employer. There is no discretion on the part of the employer i.e. so called service provider. No benefit is accrued to the employer from the sudden exit of the employee - the act of notice pay recovery is only an extinguishment of the obligation of the employee which does not constitute an independent/voluntary activity by the employer.
As per sub-clause (iii) of clause (a) in the explanation to section 15 of the Act, employer and employee are deemed to be considered as related persons. Therefore, supply of goods or services between employer and employee, when made in the course or furtherance of business, may be considered as supply - In the instant case, though employer and employee are deemed to be considered as related persons, there is no supply of either goods or services. In addition, as the act is not made in the course or furtherance of business, it is not covered under Schedule I of the Act.
The appellant, in the given case, does not provide any service in the form of “tolerance of an act” but facilitates the employee for sudden exit from the employment services. The termination clause of the “Appointment Letter” provides simply cessation of employment services and to compensate loss to either of the parties due to sudden termination. The appellant and its employee enter into contract to receive and supply employment services and not to tolerate an act of each other - the termination of the employment services does not result in supply of any other service. Therefore, the transaction of the appellant in the form of notice pay recovery does not fall within the scope of “supply” as provided in section 7 of the GST Acts, and where the activity or transaction does not amount to supply, the amount received by the employer has no relevance for levying tax under the GST Acts.
The appellant is not liable to pay Goods and Services Tax on recovery of notice pay from employees who leave the company without completing the notice period as specified in the Appointment Letter issued as per the contract entered between employer and employees.
Also, as the members of appellate authority are differing, Section 101 (3) of CGST Act, 2017 shall apply.
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2022 (3) TMI 1142
Classification of goods - Indian railways - to be classified as “parts of railway or tramway locomotives or rolling stock; such as Bogies, bissel-bogies, axles and wheels and parts thereof (Viz under Heading 8607) or not - Section 9(1) of Central Goods and Services Act 2017 read with notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 as amended by notification No.14/2019-Central Tax (Rate) dated 30.09.2019 - HELD THAT:- The constitution and functionality of the subject goods neither it reveals that these goods are specifically used only for railway or tramway locomotives nor it constitute the part of 'railway or tramway locomotives, rolling stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds'. Thus, in absence of detail technical specifications /constitution/ properties, we are not in position to classify the goods whether it falls under chapter 86 or otherwise.
Section XVII of the Customs Tariff Act, 1975(CTA) deals with `Vehicles, Aircraft, Vessels and Associated Transport Equipment. Chapter 86 falls within the ambit of the said Section and deals with 'railway or tramway locomotives, rolling stock and parts thereof; railway or tramway track fixtures and fittings and parts thereof; mechanical (including electro-mechanical) traffic signaling equipment of all kinds'. But, in absence of technical details /constitution/ properties, we are not in position to classify the goods whether it falls, under chapter 86 or otherwise.
The write up provided by the applicant is incomplete and have no potential to prove 'the subject goods' as essential parts of Railway or tramway locomotives or otherwise. Simply protection of the wires and inner machinery of railways cannot categories the subject goods as part of `railway or tramway locomotives, rolling stock and parts thereof or otherwise - with the limited material fact submitted by the applicant, with no keen technical specification / properties / constitution etc. of 'the subject goods it is found prudent to refrain from pronouncing a Ruling - no ruling is extended on the clarifications sought by applicant.
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Income Tax
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2022 (3) TMI 1141
Stay of demand - Proceedings initiated under Section 201(1)/201(1A) - HELD THAT:- This Court is of the view that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases. The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.
In fact the Supreme Court in the case of PCIT vs. M/s LG Electronics India Pvt. Ltd. [2018 (7) TMI 1905 - SC ORDER] has held that tax authorities are eligible to grant stay on deposit of amounts lesser than twenty percent of the disputed demand in the facts and circumstances of a case.
In the present case, the impugned orders are non-reasoned orders. Neither the Assessing Officer nor the CIT have considered three basic principles i.e. the prima facie case, balance of convenience and irreparable injury while deciding the stay applications.
The impugned orders and notices are set aside and the matter is remanded back to the Commissioner of Income Tax for fresh adjudication in the application for stay. However, before deciding the stay application, the Commissioner of Income Tax shall grant a personal hearing to the authorised representative of the Petitioner.
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2022 (3) TMI 1138
Addition on account of under valuation of stock - addition made by the AO by increasing the cost of closing stock - the sale price declared by the assessee was determined after considering the DEPB effect whereas the assessee has not considered the DEPB effect while calculating the closing stock - AO made the addition which was subsequently deleted by the CIT(A), on the reasoning that there was no nexus between the valuation of closing stock vis-à-vis the benefit received by the assessee in the DEPB - HELD THAT:- It is the established practice that the closing stock of one year becomes the opening stock of the subsequent year. Accordingly if the AO increases the value of closing stock for the year under consideration then it is the duty to give the corresponding effect in the opening value of the closing stock. Thus there will not be any impact on the income declared by the assessee except the increase in the amount of income in one year and decrease in the amount of income in the subsequent year. On this reasoning as well, we are also not convinced with the findings of the AO - we are not inclined to interfere in the order of the Ld.CIT(A). Hence the ground of appeal of the Revenue is dismissed.
Addition on account of lower gross profit - HELD THAT:- AO has increased the amount of gross profit by 0.15% on the reasoning that the assessee was not maintaining the record with respect to the wastage generated in the processing of materials. The gross profit depends on various facts such as sales price, cost of purchase and other direct expenses. In the given case the AO has not doubted either on the sales price or the purchases vis-à-vis stock maintained by the assessee. Therefore, in our considered view the amount of gross profit cannot be disturbed merely on the reasoning that there was a decline in the gross profit ratio in the year under consideration in comparison to the earlier year. Accordingly, we do not find any infirmity in the order passed by the Ld. CIT(A) and we, therefore, confirm the same. Hence, the ground of appeal of the Revenue is hereby dismissed.
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2022 (3) TMI 1137
Unexplained cash credit u/s.68 - assessee company has obtained accommodation entry in the form of loans and advances from M/s Basant Marketing P. Ltd - HELD THAT:- The provisions of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders/investor/creditor, establish the genuineness of the transactions and creditworthiness of the parties. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc
Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. As such the same should also be proven by circumstantial surrounding evidences as held by the Hon’ble supreme court in case of Durga Prasad More [1971 (8) TMI 17 - SUPREME COURT]
With respect to the identity of the party, we find that the assessee has furnished the details such as copy of bank statements, ITR and audited financial statement of the lender party. We also note there was assessment framed in case of lender parties which was challenged before the first appellate authority. Thus, from the above, there remains no doubt with regard to the identity of the party, as it has been proved beyond doubt.
With respect to the genuineness of transaction and creditworthiness, we note that the assessee has submitted the copy of own bank statement as well as bank statement of party showing the transaction carried out through banking channel, audited balance sheet and copy of ITR. The assessee has also furnished affidavit of the director of the lander company. However the AO without pointing any defect in all these document or without bringing any cogent material on record in nutshell and without conducting independent enquiry disbelieved genuineness of transaction merely on the basis of statement given by one Shri Arun Dalimia before CBI. Therefore, in the given facts and circumstances, the genuineness of the transaction and the creditworthiness of the party cannot be doubted.
Assessee is not the beneficiary in the loan transaction with M/s Basant Marketing Pvt. Ltd. Thus we can assume that the impugned transaction of loan received by the assessee which was subsequently repayable.
We are of the opinion that, the transactions of the loan received by the assessee in the given facts and circumstances has been explained fully. Therefore, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.
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2022 (3) TMI 1136
Denial of deduction u/s. 80P on the interest income earned by the assessee from Nationalized Bank - quantum of benefit of claim of expenses to be allowed to the assessee against the interest income earned by it from Nationalized Bank for the purposes of subjecting the balance to tax u/s. 56 - HELD THAT:- Out of total income reflected by the assessee the majority expense relate to fixed deposit interest expenditure which accounts for 73% of the total income. What exactly is the nature of the fixed deposit interest expenditure, there is no clarity, whether this has any relation with the earning of interest income from Nationalized Bank.
Since the benefit of the Balance sheet and Profit and Loss account of the assessee was not there before the Ld. CIT(A) who therefore made an adhoc estimate of allowable expenses and in view of the fact as stated above by us, noting that majority expenses have been incurred on fixed deposit interest alone, We consider it fit to restore this issue back to the Ld. CIT(A) to adjudicate the issue of expenses to be allowed against the interest income earned from Nationalized Bank to be adjudicated afresh after considering the facts of the case and in accordance with law in this regard. Assessee appeal allowed for statistical purposes.
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2022 (3) TMI 1135
Disallowance for prior period expenditure - HELD THAT:- Assessee is following mercantile system of accounting and as and when the expenditure are approved then the same are said to be incurred and for that year those claim are allowable. Naturally, though the expenses may relate to period of earlier year but when the liability to pay such sum is acknowledged during the year, the same is allowable. In the present case, ₹ 44,563/- is with respect to rent, ₹ 37,124/- is also of water charges and electricity and expenditure of ₹ 1,112/- of different branches are also disallowed for the same reason. With respect to the sum of ₹ 1 lac that was given, as advance in earlier years but accounted for expenditure during the current year on completion of the work. Therefore, it cannot be said to be an expenditure pertaining to earlier year because the event of completion of work falls in this year. Therefore, respectfully following the decision of coordinate Bench in assessee’s own case for earlier years we direct the learned Assessing Officer to delete the disallowance which is expenses pertaining to earlier year but incurred during the year. Ground No.1 of the appeal is allowed.
Disallowance being 1/5th expenditure on stamp duty for increasing the authorized share capital of the assessee - HELD THAT:- Hon'ble Karnataka High Court in the case of CIT s. Buhler India Ltd. [2011 (9) TMI 797 - KARNATAKA HIGH COURT], in case of Dhanalakshmi Bank Ltd. [2018 (12) TMI 836 - KERALA HIGH COURT]and CIT vs. Nuchem Ltd. [2015 (5) TMI 259 - PUNJAB & HARYANA HIGH COURT], has held that assessee bank extending financial services would be entitled to amortization of preliminary expenses for public subscription. The Hon'ble Punjab and Haryana High Court has also held that fees of ROC, for enhancement of authorized capital is deductible over a period of ten years under section 35D(2) of the Act. Further, this is the second year of amortization period expenses challenged before us. In the first year, co-ordinate bench has decided the above issue in favour of the assessee, respectfully following the decision of co-ordinate Bench in assessee’s own case; we also allow the ground No.2 of the appeal.
Disallowance under section 14A - HELD THAT:- In the present case, we find that the interest free funds available with the assessee are far important in excess of investment of the assessee in tax free income generating instruments, therefore, there cannot be any disallowance on account of interest under section 14A of the Act. The learned Assessing Officer has not held that any other expenditure other than the interest income is also disallowable under section 14A - Assessing Officer is directed to delete the disallowance under section 14A.
Disallowance on account of bad debts - HELD THAT:- According to the provisions of section 36(1)(viia) banking companies are entitled to claim bad debts to the extent of the actual bad debts exceeds amount of balance in the provision made under section 36(1)(viia) of the Act. The actual bad debts written off for the bank was ₹ 83,01,10,149/- whereas the balance in the provision account was ₹ 22,69,44,299/- thus, the claim of bad debts of ₹ 60,31,65,850/- was made. The assessee has also claimed deduction of ₹ 15,43,09,093/- under section 36(1) (viia) of the Act. The Hon'ble Supreme Court in the case of Catholic Syrian Bank Ltd.[2012 (2) TMI 262 - SUPREME COURT] as well as the in the case of UTI Bank Ltd. [2013 (1) TMI 209 - GUJARAT HIGH COURT] held that where there is a claim by the bank under section 36(1)(vii) and 36(1)(viia) are different and under both these section the deduction is allowable. Therefore we direct the learned Assessing Officer to delete the disallowance.
Disallowance of penalty levied by Reserve Bank of India - AO held that penalty is not a deductible expenditure under section 37(1) - HELD THAT:- Any payment in violation of the RBI directions is not allowable as deduction under section 37. Explanation to section 37(1) makes it clear beyond doubt that any expenditure prohibited by law cannot be allowed as deduction under section 37. We find that Hon'ble Supreme Court in ICCI Bank Vs. official liquidator [2010 (9) TMI 236 - SUPREME COURT] has also held that guideline issued by Reserve Bank of India in exercise of various powers conferred under the banking Regulation Act and they have force of law. Therefore we do not find that violation of the above provisions of the banking Regulation Act is merely technical or venial in nature. In view of this, we confirm the action of the learned lower authorities in disallowing the above sum of ₹ 5 lacs under section 37(1) of the Act. Ground no 5 of the appeal is dismissed.
Reopening of assessment u/s 147 - Disallowance of any loss claimed - HELD THAT:- No doubt, the treatment of similar sum in earlier year is a tangible material coming in to the possession of the assessee. In the present case, it was not shown that whether above issue was at all examined or even looked at by the learned Assessing Officer. The facts shows that the Assessing Officer has applied his mind on this issue while making an assessment for Assessment Year 2001- 02, wherein it is found that the above sum was not allowable as deduction to the assessee , identical sum was also claimed y assessee in this year. Therefore, we find that there is a fresh material available before the Assessing Officer to take a prima facie view that income of the assessee had escaped assessment and it definitely forms a tangible material to invoke provision under section 147 - CIT (A) also considered the fact that as per the note mentioned in the financial statements there was no mention of claim of the provision made in the earlier year. Had there been such a reference, the LD Assessing Officer would not have allowed claim, as he has already disallowed this sum in Assessment Year 2001-02. In view of all facts, we do not find any infirmity in the action of the learned Assessing Officer in reopening of the above assessment. Therefore, ground no. 1 of the appeal is dismissed.
Penalty u/s 271 (1)(c) - addition on account of loss of sale of shares claim as bad debts per order under section 143(3) read with section 147 - HELD THAT:- As the issue of disallowance on which penalty has been levied has been restored back to the file of learned Assessing Officer, issue of levy of penalty thereon is also set aside to the file of the learned Assessing Officer to decide it afresh after deciding about allowability of loss.
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2022 (3) TMI 1134
Levy of penalty u/s 271(1)(c) - Assessee's explanation of it being a Government company, which cannot, therefore, be attributed with the intent of concealing income, and that it had in fact incurred a loss for the• relevant year, was not found satisfactory by the Assessing Officer - CIT-A partly allowing the assessee's appeal - HELD THAT:- Where the expenditure is in terms of the relevant contract, its non-approval, being a matter internal to the assessee, may not be of any consequence for determining the accrual of the said expenditure. Further, even so, in case of a doubt or dispute, of which there is no whisper, a provision for expenditure, on the basis of the information available as at the date of the closure of accounts, i.e., as to the conditions as at the end of the relevant year, is to be made under the mercantile system of accounting, which the assessee is admittedly following. The booking of expenditure, adjusting the provision made, would be made in accounts on the resolution of the conflict. The assessee's case is sans any factual basis. That being the case, i.e., as to the facts and law, even an allowance of the prior period expenses for the preceding years may not be of much consequence, as it does not alter the settled law, only on the basis of which an assessment is to be made and, besides, on facts, the assessee may have been able to prove the facts for those years, while for the current year, as afore-stated, there is no case made out at any stage.
The assessee has in fact suo motu disallowed prior period expenditure for AY 2007-08 while the position is not clear for AY 2009-10 the AO having (as for AY 2007-08) accepted the assessee's computation, stating so in the assessment order, albeit without mentioning the computation details in the body of the order, as is the case for AY 2007-08. The assessee's contention of the Revenue acting inconsistent for the current year is thus incorrect; rather, it is it, the assessee, who is doing so.
The law presumes the nexus, so that the conditions required for such reduction in or evasion of tax to materialize, which may only be in future, are regarded as satisfied. It is this rational nexus that gets lost or compromised where tax, though payable under the regular provisions, being lower than that payable under MAT, gets paid under the latter. Tax payable under either set of provisions being in a positive sum, the increased tax (due to the relevant income) on the income under the normal provisions, gets jettisoned or subsumed in the tax payable under the MAT which, having not witnessed any change, would be in any case levied/paid.
It cannot therefore be said, and neither is there any basis for a presumption that any tax has been evaded by the increased income under the regular provisions. That is, there is a breakdown in the said nexus, which is a prerequisite for, and therefore must exist for a valid levy of penalty. It is this breakdown, so that the very basis for the levy of penalty, i.e., the tax sought to be evaded by reason of non-returning the relevant income, is absent, that was responsible in Nalwa Sons Investment Ltd. [2012 (5) TMI 150 - SC ORDER] holding that no penalty could be levied in a case where the adjustment to the returned income is made under the regular provisions, while the tax gets finally paid under the MAT provisions.
It is well-settled that all the parts of a statute are to be construed together (Prakash Nath Khanna v. CIT [2004 (2) TMI 3 - SUPREME COURT]. To say that the income is not 'acted upon', as held in Nalwa Sons Investment Ltd., would thus be valid only in case of an assessed positive income inasmuch as tax, though chargeable thereon, is yet not payable, so that there is tax mitigation - the basis of the said decision - to that extent. And not in a case of assessed loss, which stands to be carried forward for set off against future income and, thus, bears a potential reduction in tax liability (due to non-returning of the relevant income).
Assessee's case is thus squarely covered by Explanation 4(a) to s. 271(1)(c) as it stood prior to its amendment by Finance Act, 2015. That the said provision may not apply in the other case is no reason for regarding it as not applicable where it actually is. It may not be out of place here to mention that the Hon'ble Gujarat High Court in Gold Coin Health Foods (P.) Ltd [2008 (8) TMI 5 - SUPREME COURT] disapproved of penalty in case of reduction in loss in assessment and not where the returned loss stands converted into a positive income, in which case tax becomes, therefore, payable.
Board, construing the decision in Nalwa Sons Investment Ltd. (supra) in a broad manner, has issued a Circular (# 25/2015, dated 31/12/2015), instructing its' officers not to levy penalty in cases where the tax payable under the regular provisions is lower than that under the MAT provisions, and, where so, desist from filing appeals or pressing the same. The said Circular, as afore-noted, covers the instant case as it does not carve out any exception for a case of assessed loss under the normal provisions of the Act even as tax becomes payable under the deeming provision of s.115JB(1).
Board Circular, not binding on the appellate authorities, is so on the income tax authorities, where favorable to the taxpayer. The Revenue's instant appeal is thus not maintainable. Rather, it is this non-binding character (on the appellate authorities) that forms the basis of our expressing our view, which is, as apparent, based on the plain language of the provision and, further, as explained by the Apex Court in Gold Coin Health Foods (supra). Revenue's appeal is dismissed as not maintainable.
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2022 (3) TMI 1140
Assessment u/s 153A - Period of limitation - HELD THAT:- The limitation for passing the assessment order was 30th September, 2021 and it was in view of the said circumstance the Court had directed that the assessment proceeding be carried on and, in the event, an order is passed, the same would not be given, effect to, during the pendency of the writ petition.
This Court is of the view that the order dated 9th April, 2021 is clear, categorical and cogent. It admits of no ambiguity. The Assessing Officer’s interpretation that assessment proceeding was not to be completed during the pendency of the writ petition is untenable in law.
This Court is of the view that proceedings against petitioner no.1 under Section 153A of the Act have become time barred. Accordingly, the same are quashed.
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2022 (3) TMI 1133
TP Adjustment - comparability - HELD THAT:- Companies functionally dissimilar with that of assessee funnctions need to be deslected.
MAT computation u/s 115JB - HELD THAT:- Provision for bonus as well as provision for long term service are both ascertained liability and cannot be added to book profit under section 115JB.
Determination of ALP in respect of international transaction of textile machinery manufacturing segment and auto components manufacturing segment - HELD THAT:- The reasoning of the CIT(A) for considering the entire sales in manufactured finished goods segment for determination of ALP is that certain components and raw materials used in manufacture of finished goods are also sourced from AE and there is a possibility of the cost of such component having been bargained at a price which is not at arm’s length. This presumption of the CIT(Appeals) is without any basis. He has not demonstrated with actual figures as to how there would be impact on profit margin on sale of finished products to AE because of purchases of some components from AE. He has given examples which are imaginary figures. Apart from this, the TPO has accepted that purchase of raw material and components by the assessee from its AE is at arm’s length. Therefore, the basis on which the CIT(A) proceeded to apply the ALP test for transactions with non-AE is neither correct on facts nor permissible in law. As rightly contended by the assessee, section 92 of the Act can be applied only in respect of international transactions i.e., transactions with AE.
Transfer pricing provisions and various judicial precedents, we hold that the transfer pricing adjustment should be restricted only to the AE related transactions of the assessee.
Adoption of PLI - HELD THAT:- We direct the TPO to adopt PLI as OP/Sales. The TPO is directed to compute the ALP in accordance with the directions contained in this order, after affording opportunity of being heard to the assessee.
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2022 (3) TMI 1132
Exemption u/s 11 - grant of registration u/s. 12AA denied - assessee has failed to provide required documents which are necessary for granting registration - HELD THAT:- An application in Form No. 10A seeking registration u/s.12AA of the Act was filed by the assessee on 17.12.2019. A notice dated 16.03.2020 was issued to the assessee requiring to submit certain documents/explanations by 08.04.2020 alongwith original Trust Deed/MOA for verification. However, one more opportunity was provided to the assessee through which date of hearing was fixed on 17.06.2010 and when nobody appeared then dismissed the application of the assessee.
From perusal of the record that sufficient opportunity of being heard was not provided to the assessee. When the documents was called from the assessee by the Ld. CIT(E) in the month of April 2020 to June, 2020, there was panic situation due to Covid-19 pandemic. Considering the totality of facts and circumstances of the case, one more opportunity should be granted to the assessee, therefore, we restore the matter back to the Ld. CIT(E) for passing the order afresh after providing due and reasonable opportunity of being heard as per law. The assessee is also directed to cooperate with the Ld. CIT(E) in disposing of the matter - Appeal of the assessee is allowed for statistical purposes only.
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2022 (3) TMI 1131
Disallowance u/s 36(1)(vii) in respect of non rural debts written off - assessee has also written off debts relating to its rural branches and the same was adjusted against the provision allowed u/s 36(1)(viia) and reduced the same from the deduction claimed u/s 36(1)(vii) - HELD THAT:- As decided in own case [2022 (1) TMI 1220 - ITAT BANGALORE] explanation to section 36(1)(vii) would indicate that nowhere it suggests that the proviso to section 36(1)(vii) would apply in respect of bad debt written off relating to non-rural advances. In the aforesaid view of the matter, we hold that assessee would be eligible to avail deduction of an amount representing actual write off in the books of account of bad debts relating to non-rural/urban advances in terms with section 36(1)(vii), as proviso to the said section would not apply to non-rural advances. Accordingly, we delete the addition made by AO and confirmed by ld. CIT(A).
Depreciation @ 60% on ATM’s by treating the same as the block relating to computer - HELD THAT:- As per M/S NCR CORPORATION PVT LTD [2020 (6) TMI 439 - KARNATAKA HIGH COURT] we hold that the depreciation on ATM should be allowed at the high rate of 60%. The assessee’s appeal on this ground is allowed.
Disallowance of CENVAT Credit on capital goods - HELD THAT:- The law does not restrict the duty paid, for which no credit is allowed, as per the Central Excise Rules from being added to the cost of the asset but mandates that any credit availed should be reduced from the capitalized cost of the asset. In the given case assessee has paid an amount of ₹ 1,28,01,784 being 50% of the CENVAT credit which not eligible to claim credit as per the Rule 63B of CENVAT credit Rules 2004 (₹ 20 in our example above). Hence the amount so paid and not eligible for credit should be added to the cost of the asset. Hence, we uphold the order of the CIT(A) in restricting the disallowance to the amount debited to the P&L account as said amount needs to be capitalized and not claimed as an expenditure as per the provisions of Explanation 9 to sec.43 of the Act.
Penalty paid to RBI - HELD THAT:-We notice that the Mumbai Tribunal in IDBI Bank Ltd.[2021 (2) TMI 608 - ITAT MUMBAI]while considering a similar penalty payment to RBI has held that the amount paid by the assessee is not in the nature of penalty - As observed by the CIT(A) in the order, the assessee has not furnished the full details of the nature of payment made to RBI. We are of the considered view that the provisions under which these payments are done need to be looked into in detail and it will not be correct to conclude without analyzing the same. We therefore remand the case back to the AO to look into the details of payments made to RBI to see if these are routine payments for a procedural non-compliance or whether they are punitive. We allow the appeal of the assessee for statistical purposes.
Prior Period Expenditure - AO disallowed the claim on the ground that no income relating to such transaction was offered to tax during the current asst. year - HELD THAT:- The very basis for allowing the expenditure is the crystallization of the expenditure and in the interest of justice this issue needs to be decided based on evidences and facts. The assessee has not produced and additional evidence before us to substantiate the claim that the expenditure got crystallized during the relevant asst. year. We, therefore, remit the issue back to the AO to look into the details afresh and allow the claim in the relevant asst. year based on the facts. It is needless to say that reasonable opportunity of being heard should be given to the assessee before deciding the case. In the result, the assessee’s appeal is allowed for statistical purposes.
Applicability of provisions of section 115JB - HELD THAT:- As relying on assessee own case [2022 (1) TMI 1220 - ITAT BANGALORE] we set aside order of the CIT(A) and restore the same to his file for deciding the case afresh in accordance with law.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As decided in own case it is mandatory for the AO to record dissatisfaction over the claim of the assessee before invoking the provisions of Rule 8D. Accordingly, the Ld CIT(A) deleted the disallowance holding that the AO has not recorded dissatisfaction.We respectfully follow the decision of the coordinate bench of the Tribunal, we set aside the order passed by the CIT(A) on this issue and restore the file to the AO for fresh examination. This ground is allowed in favour of the revenue for statistical purposes.
Deduction for Bad and doubtful debts (PBDD) - HELD THAT:- AO removed 79 branches from rural branches list on the ground that population of many of the rural branches already exceeded 10,000 and they are situated in urban agglomeration by relying of the assessment order for AY 2014-15.AO merely quoted the Lord Krishna Bank decision of Kerala High Court but not followed it up to the logical end to bring out the relvant data as to why a particular branch is not a rural branch - The list of such branches given as part of the assessment order does not have the population figures and also the specific reason why they are not rural branches.AO has not pointed out any mistakes in the classification of rural branches made by the RBI
AO calculated the AAA by considering only incremental advances made during the year instead of outstanding balances The CIT (A) also observed that this issue is covered by the various Tribual decisions including the decision of the coordinate bench of the Tribunal and deleted the addition made by the AO correctly.
Adjustment to Book Profits - Addition on Disallowance u/s.14A and amount debited under provisions & contingencies for NPA - HELD THAT:- Since the issue regarding applicability or otherwise of sec.115JB is restored to the file of Ld CIT(A), this issue is also restored to the file of Ld CIT(A) for examining it afresh. The appeal of the revenue is allowed for statistical purposes.
Depreciation on HTM Securities - HELD THAT:- As relying on case of Vijaya Bank [2018 (1) TMI 1575 - ITAT BANGALORE] CIT(A) has allowed the appeal in favour of the assessee following the decisions of jurisdictional High Court and the decision of coordinate bench of the Tribunal, we see no reason to interfere with the decision of the CIT(A) and hence the ground raised by the Revenue is dismissed.
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2022 (3) TMI 1130
Deduction u/s 80G(5)(vi) - appellant had withdrawn its application filed in form No. 10A - HELD THAT:- CIT(E) has rejected the application of the assessee moved U/s 80G(5)(vi) of the Act in limini on an erroneous premise that the said application was withdrawn by the assessee/applicant. Whereas the fact of the matter is that the assessee had moved an application for seeking withdrawal of the application u/s 12A.
As submitted that appropriate exemption u/s 80G was also granted vie order dated 31/03/2012 which was renewed from time to time and remained renewed up to 31/03/2021 - AR has also drawn our attention to the fact that approval U/s 80G(5)(vi) of the Act has already been accorded to the assessee i.e. M/s Balaji Charitable Trust for subsequent years w.e.f. A.Y. 2022-23 to 2026-27 vide order of approval dated 24/09/2021. The same has already been placed on record therefore, considering the totality of the facts and circumstances of the case, we quash and set aside the impugned order passed by the ld. CIT(E) and restore back the matter to the file of ld. CIT(E) with a direction to pass a fresh order on an application filed by the assessee U/s 80G(5)(vi) of the Act while taking into consideration the above discussed documents - Appeal of the assessee is allowed for statistical purpose.
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2022 (3) TMI 1129
Late payment of ESI/PF - employees' contribution to ESI and PF had been deposited well before the due date of filing of return of income u/s. 139(1) - scope of amendment - HELD THAT:- CIT(A) has referred to the amendment brought in by the Finance Act, 2021 wherein an explanation has been introduced to Sections 36(1)(va) and u/s.43B of the Income Tax Act. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2018-19, the said amendment cannot be applied in the instant case.
Addition made by way of adjustment while processing the return of income u/s. 143(1) so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the return of income u/s.139(1) - Decided in favour of assessee.
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2022 (3) TMI 1128
Belated remittance of employees share of ESIC and PF u/s. 43B r.w.s. 36(1) - Assessee submitted that payment made within due date of filing the return of income u/s 139(1) of the Act for the year under consideration - HELD THAT:- As decided in the case of M/s. Jana Urban Services For Transformation Pvt. Ltd. [2021 (10) TMI 842 - ITAT BANGALORE] no merit in the argument of the ld. DR since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only. In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. - Decided in favour of assessee.
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2022 (3) TMI 1127
Belated remittance of employees share of ESIC and PF u/s. 43B r.w.s. 36(1)(va) - HELD THAT:- As decided in M/S JANA URBAN SERVICES FOR TRANSFORMATION PVT. LTD. [2021 (10) TMI 842 - ITAT BANGALORE] since the explanation as provided in Finance Act 2021 prescribes that the amendment in both sec.36(va) as well as 43B by inserting corresponding explanation that although impugned PF comes in the form of provision and the same is applicable from 1/4/2021 onwards only.
In the present case we are concerned with the asst. year 2017-18 and the amended provision could not be applied retrospectively as it is only applicable w.e.f 1/4/2021. Being so no disallowance could be made by the AO in respect of PF/ESI paid within the due date of filing return of income. Though, it was beyond the date mentioned in the respective Act. This view of ours is supported by various judgment relied on by the ld.AR. Accordingly the appeal of the assessee is allowed.
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2022 (3) TMI 1126
Addition u/s 40A(3) - cash purchases of petrol - HELD THAT:- It is an admitted fact that the Assessee had made a payment of ₹ 76,50,000/- in cash against the purchase of petrol through two different dealers. The learned CIT(A) has discussed that there was no extraordinary circumstances that forced the Assessee to make payment in cash. He also discussed that the case-law relied upon by the Assessee was not relevant to the facts of this case. The learned CIT(A) also mentioned that these two dealers were regular vendors of the Assessee and that the Assessee was having a running account with each one of them.
The learned CIT(A) has further observed that the Assessee was in the habit of purchasing petrol regularly and was subsequently making lumpsum payments in cash periodically and accordingly the transactions were entered in the account books.
Assessee has not produced any documentary evidences to substantiate that these payments were required to be made in order of the business expediency or emergencies or that of an exceptional circumstance as provided in Rule 6DD of the Income Tax Rules, 1962 is rebuttal to the findings of the learned CIT(A) towards the disputed purchases being added to the income of the Assessee by invoking the provision of Section 40A(3)
We do not find any merit in the submissions of the learned Counsel for the Assessee on the issue of addition made u/s. 40A(3) of the Act, on account of the cash purchases by the Assessee. Accordingly, the order of the CIT(A) on this issue is confirmed.
Addition on account of business promotion - HELD THAT:- CIT(A) has categorically held that this expenditure was disallowed for the reason that no documentary evidences was submitted during the appeal proceedings, before him - AR has failed to submit any documentary evidences before us, except stating that the same has been incurred as cheque and through credit card. Since, the Authorized Representative has failed to explain the reason for incurring the disputed business promotion expenses and also the nature of the disputed business promotion activity, we hold that the learned CIT(A) was justified in confirming the said addition claimed to be incurred towards business promotion expenses, so claimed.This ground of appeal pertaining to the addition incurred towards business promotion expenses is rejected accordingly.
Appeal of the Assessee is dismissed.
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2022 (3) TMI 1139
Prosecution against the Director u/s 276B - Principal officer of the Accused Company - Compliance u/s 2(35) - Punishable offence for non deduction of TDS - Trial Court discharged the Director (Accused no 2) - as accused No.2 is not the Managing Director of accused No.1 but he is only the Director of accused No.1 and hence, falls under the charge of Section 2(35)(b) of the Act, which requires a notice to treat him as the Principal Officer of accused No.1 and mandatory requirement is not complied; hence, accused No.2 cannot be treated as Principal Officer of accused No.1 - HELD THAT:- No doubt, in terms of Ex.P2 notice the averment is made that it is seen from the records that the respondent No.2 had deducted tax and not remitted the same to the Central Government account within the time and hence in paragraph 3 of Ex.P2 also stated with regard to the punishment provided and also asked to show cause for non-payment of the amount. First of all, the very contention of the respondent No.2 before the Trial Court is that he is not the Managing Director of accused No.1 and he is only a Director of accused No.1 and hence, as per Section 2(35) of the Act, which requires a notice to him as Principal Officer of accused No.1.
The mandatory requirement is not complied with and the very contention is also that the notice given in terms of Ex.P2 is not in compliance of Section 2(35) - The Trial Court also taken note of the judgments referred supra while coming to such a conclusion and in paragraph 17 the Trial Court categorically held that Ex.P2 notice cannot be considered as the notice under Section 2(35).
This Court also directed the petitioner counsel to place the said document to see whether the said notice is in compliance of Section 2(35) of the Act or not and on perusal of the said document dated 21.10.2018, we do not find any error committed by the Trial Court in coming to the conclusion that Ex.P2 is not in compliance with Section 2(35) and the very reasoning given by the Trial Court is not suffers from any perversity or illegality and the scope of the revision is if the order passed by the Trial Court is not in pursuance of the provisions and suffers from any illegality and correctness, then only the Court can invoke the revisional jurisdiction. The reasons assigned by the Trial Court, while coming to the conclusion that Ex.P2 is not in consonance with Section 2(35) of the Act, is not suffers from any illegality and correctness. Hence, I do not find any grounds to entertain the revision petition and set aside the order of the Trial Court.
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2022 (3) TMI 1125
Difference between gross contract receipts as per Form 26AS and the gross contract receipts shown in the return of income - AR submitted that only real income in the hands of the assessee can be brought to tax and though the assessee couldn't submit the reconciliation as sought before the lower authorities, all the documents and ledger accounts are on record and the assessee is in position to reconcile the difference - HELD THAT:- Assessee deserves one more opportunity to reconcile the difference between the contract receipts as shown in the return of income and as per Form No. 26AS taking into consideration the fact that the Ld. AR has stated at the Bar that the assessee is in position to reconcile the difference and in fact, there are no differences in the contract receipts which have been offered in the return of income as contractually accrued to him and receipts as per Form 26AS which the assessee can demonstrate through his books of accounts and supporting documentation once an opportunity is provided to the assessee.
Taking into consideration the undertaking so given by the Ld. AR and with the understanding that the assessee shall cooperate and shall not abuse the opportunity so provided, the matter is set aside to the file of the AO to verify the differences after providing reasonable opportunity of hearing to the assessee. The assessee is also directed to cooperate in the timely completion of the proceedings, as so directed by the AO. In the event the assessee fails to avail of this opportunity and/or fails to offer necessary explanation to reconcile the differences to the satisfaction of the AO, the AO is at liberty to decide the matter as per law. Appeal of the assessee is allowed for statistical purposes.
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2022 (3) TMI 1124
Delayed employees' contribution towards ESI and PF - though with the delay of few days from the due date mentioned in the respective Statutes, however, the same was deposited well before the due date of filing of return of income u/s. 139(1) - HELD THAT:- CIT(A) has referred to the amendment brought in by the Finance Act, 2021 wherein an explanation has been introduced to Sections 36(1)(va) and u/s. 43B of the Income Tax Act. It is a consistent position across various Benches of the Tribunal including Chandigarh Benches [2021 (11) TMI 1017 - ITAT CHANDIGARH] that the amendment which has been brought in by the Finance Act, 2021 shall apply w.e.f. assessment year 2021-22 and subsequent assessment years and the impugned assessment year being assessment year 2018-19, the said amendment cannot be applied in the instant case.
The addition made by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of employees' contribution towards ESI and PF paid before the due date of filing of the return of income u/s.139(1) of the Act, is hereby directed to be deleted - Decided in favour of assessee.
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2022 (3) TMI 1123
Reopening of assessment u/s 147 - received information regarding the sale of property from DDIT (Inv.)-III, Surat, through ITO, Ward-1 as the assessee was identified as non-filer in the ITD system - HELD THAT:- We have considered the submission of ld. Sr. DR for the Revenue, the order of lower authorities and the statement of fact mentioned in Form 35 filed before ld. CIT(A). AO that made addition of long term capital gain on the basis of valuation report of DVO and held that the assessee has earned long term capital gain.
CIT(A) confirmed the action of the Assessing Officer by taking view that DVO is a technical person and valued the property after taking considering various facts and circumstances of the case. Before us neither the assessee has come forward nor filed any submissions or any documentary evidence to substantiate the various grounds of appeal. In absence of any evidence we are unable to deviate from the order of lower authorities which we affirm. Appeal of the Assessee is dismissed.
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2022 (3) TMI 1122
Latte payments towards EPF and ESI under section 36(1)(va) - payment before furnishing the return of income under section 139(1) - HELD THAT:- It is not in dispute that the assessee deposited the contribution of PF & ESI belatedly in terms of section 36(1)(va) of the Act. However, the said deposits were made prior to filing of return of income u/s. 139(1) of the Act. It is noticed that an identical issue having similar facts has already been adjudicated in RAJA RAM [2021 (11) TMI 370 - ITAT CHANDIGARH] wherein addition on account of deposits of employees contribution of ESI & PF prior to filing of the return of income u/s. 139(1) of the Act, in both the years under consideration prior to the amendment made by the Finance Act, 2021 w.e.f. 1.4.2021 vide Explanation 5, are deleted. - Decided in favour of assessee.
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2022 (3) TMI 1121
Disallowance u/s 14A read with Rule 8D - Sufficiency of own funds - HELD THAT:- As is evident from the balance-sheet of the assessee as on 31.03.2014, the assessee had sufficient interest free funds in the form of own capital and unsecured loans available in the year under consideration; and, since the same were sufficient to make investments in mutual funds and shares, there was no utilization of interest bearing borrowed funds by the assessee in mutual funds and shares. On the other hand, the interest bearing borrowed funds were utilized by the assessee for making investment in M/s. Varsha Fashion LLP in the form of partner’s capital; and, since there was no exempt income received by the assessee during the year under consideration as share of profit from the said firm which was exempt from tax and the interest earned by the assessee from the said firm was offered for tax after deducting the interest paid, it was a case where the assessee had actually earned net interest income.
As pointed out for the assessee from the income and expenditure account of the assessee for the year under consideration, no deduction on account of any other expenditure was claimed by the assessee - we are of the view that the disallowance made by the Assessing Officer under Section 14A read with Rule 8D, as sustained by the learned CIT(A), is not justified and deleting the same, we allow this appeal of the assessee.
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2022 (3) TMI 1120
Addition u/s 14A - As argued that the disallowance under Rule 8D for the purpose of Section 14A should not exceed the dividend income - HELD THAT:- In the present case, we find that the assessee earned only ₹ 100/- as dividend income and the AO made disallowance of ₹ 3,16,488/- which is evidentay exceeds the dividend income. Therefore, the order of CIT(A) is not justified in confirming the disallowance made by the AO exceeding the dividend income. In the light of the decision of Hon’ble High Court of Bombay in the case of M/s. Nirved Traders Pvt. Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] we deem it proper to hold the disallowance as confirmed by the CIT(A) is not maintainable and it is not justified. Therefore, we direct the AO to restrict the disallowance for the purpose of Section 14A of the Act to the dividend income earned and the said disallowance shall not exceed the dividend income. Thus, the grounds raised by the assessee are allowed.
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2022 (3) TMI 1119
Penalty levied u/s 271(1)(c) - deduction u/s 80P(2)(a)(i) - AO disregarded the contention of the assessee by observing that the explanation 1 to section 271(1) the Act is a deeming provisions which cast duty on the assessee to offer an explanation to the effect that it has not furnished inaccurate particulars of income - whether the assessee has furnished inaccurate particulars of income with respect to the interest income from the nationalized bank by claiming the deduction under section 80P(2)(a)(i)? - HELD THAT:- Assessee under the bona fides believe has claimed the deduction under section 80P(2)(a)(i) of the Act with respect to the interest income as discussed above. It is also pertinent to note that the assessee has claimed before the learned CIT (A) that it was allowed deduction under section 80P(2)(a)(i) of the Act with respect to the interest income from the nationalized bank with respect to the assessment years up-to 2011-12.
Claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the furnishing inaccurate particulars of income. It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent.
As regards the explanation 1 to section 271(1)(c) of the Act, there was no iota of evidence suggesting that the explanation offered by the assessee was false. Thus the claim of the assessee cannot be said amounting to concealment of particulars of income. Likewise, there was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides with respect to material facts relating to the computation of total income. Thus in our considered view the provisions of explanation 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed.
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2022 (3) TMI 1118
Revision u/s 263 - case of the assessee was selected for scrutiny through CASS - Allowability of loss of penny stock - HELD THAT:- Perusal of records produced before us that the AO has specifically called for details of purchase and sale of shares during the original assessment proceedings and the assessee has furnished the details of sale and purchase of shares, proofs payment of STT, copy of DMat statement, copy of bank statement evidencing the payment for purchase of shares and receipt of sale consideration into the assessee’s bank account through banking channels. We note that the AO has framed the assessment only after taking into account the above aforesaid details.
Therefore, simply because the order does not speak or discuss about the loss on sale of shares should not be taken to mean that AO has not examined the details by the assessee or has not applied his mind to the details and there was complete lack of enquiry. In opinion the AO has take a possible view after taking into account the evidences filed by the assessee which are part of records and therefore the Ld. PCIT has no power to revise the assessment on the ground of lack of enquiry. In our considered view this is not a case of wrong assumption of facts or incorrect application of law and therefore the revisionary powers have been invalidly exercised.
PCIT cannot exercise the jurisdiction u/s 263 of the Act where the AO has taken a plausible view on the basis evidences filed by the assessee which is not contrary to law and facts. - Decided in favour of assessee.
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2022 (3) TMI 1117
Disallowance of deduction claimed u/s 80JJA on account of late filing of Form 10DA - revised Form 10DA was notified and made available on e-filing portal of Income Tax Department after due date for filing income tax return - HELD THAT:- In this case, the disallowance of deduction has been made because of the technical reason of non-furnishing of Form 10DA along with return of income. Assessee has duly explained that it was not due to any fault on the part of the assessee, rather, the same was due to technical glitches and non-availability of the revised Form 10DA by the Income Tax Department as the same was notified after the date of filing of return by the assessee.
The assessee subsequently uploaded Form 10DA when it became available and cured the defect. In view of the aforesaid explanation, in our view, the action of the lower authorities in denying deduction to the assessee on the technical reason, compliance of which was not possible at the time of filing of the return, as explained above, cannot be held to be justified.
The impugned order of the CIT(A) is set aside and it is directed to allow the claim of deduct ion u/s 80 JJA to the assessee. Appeal of assessee allowed.
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Customs
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2022 (3) TMI 1116
Levy of penalty u/s 117 of Customs Act - mis-declaration of quantity and description of goods in the Bills of lading - branded shoes - counterfeit goods or not - violation of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - HELD THAT:- Admittedly the Appellant had not filed any Bill of Entry and thus he is not the importer, as defined in Section 2 (26) of the Customs Act. Thus, the Appellant cannot be said to have violated any provision of Section 111 of the Customs Act, and thus not reliable to any penalty under the provisions of Section 112, as he has not done or committed any act which would render the goods reliable to confiscation.
The conduct of the Appellant is also dubious, and not clean. In spite of having knowledge that the goods dispatched by the Shipper vide aforementioned Bill of Lading, being not as per order and containing counterfeit goods, being a regular importer it was his duty to cooperate with Customs and inform suo moto regarding the nature of the goods dispatched by the Shipper, and also of his intention of having abandoned the same goods. The goods were lying in the port after unloading by the shipping line for about three months, and neither the Appellant had filed any Bill of Entry nor had given any intimation of his decision to abandon the goods. It was only when physical examination was taken by opening the seal of container on 05.08.2014, the Customs department found regarding the misdeclaration, both as regards quantity and description.
The penalty under Section 117 of the Act is upheld - the quantum of penalty is reduced from ₹ 50,000/- to ₹ 20,000/- - appeal allowed in part.
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2022 (3) TMI 1115
Refund claim of Special Additional Duty (SAD) - rejection on the ground of unjust enrichment - N/N. 102/2007-Cus. dated 14.09.2007 - HELD THAT:- It is evident that it is the appellant – importer who has borne the incidence of special additional duty (SAD) and has not passed on the same to the buyer of the goods.
The learned Commissioner (Appeals) have erred in holding that the refund claim was hit under the doctrine of unjust enrichment - appellant is held entitled to refund of the amount of SAD ₹ 5,43,443/- - Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 1114
Maintainability of appeal - Appropriate forum - importation/seizure from personal baggage - Proviso to Section 129A(1) of the Customs Act, 1962 - HELD THAT:- Proviso to Section 129A(1) of the Customs Act, 1962 states that appeal against an order passed by the Commissioner (Appeals) which relates to any goods imported or exported as baggage, shall not lie to the Tribunal.
These appeals are not maintainable before this Tribunal and are accordingly dismissed.
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Securities / SEBI
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2022 (3) TMI 1113
SEBI Circular applicability - whether or not SEBI would qualify as “Any person aggrieved”? - Retrospective applicability of circular - Standardisation of procedure to be followed by Debenture Trustee(s) in case of ‘Default’ by Issuers of listed debt securities” - Plaint came to be amended now seeking an injunction restraining RCFL and BoB from acting upon, implementing or taking any steps for diluting, extinguishing or creating third party rights in respect of the security provided under the DTD - HELD THAT:- In our view, if SEBI has a statutory right to file an Appeal, such right cannot be divested by virtue of certain remarks passed by the Ld. Single Judge in the Impugned Orders to the effect that the order would not constitute a precedent against SEBI.
There is no mention whatsoever in the SEBI Circular suggesting its retrospective applicability, we are unable to rule that the SEBI Circular would also apply to defaults committed prior to 13th October, 2020. As a consequence, it follows that the SEBI Circular cannot be applied retrospectively to the present case in view of the admitted fact that RCFL committed defaults prior to 13th October, 2020 and the ICA was executed on 6th July, 2019 which are dates prior to the coming into force of the SEBI Circular and prior to the Supplementary DTD incorporating reference to the SEBI Circular.
Having held that the SEBI Circular cannot be applied retrospectively on settled principles of statutory interpretation, we are unable to appreciate SEBI’s submission that the SEBI Circular being beneficial in nature ought to be applied nonetheless. We cannot also accept the submission that it must also apply in view of the fact that the SEBI Circular does not take away or impair the voting rights of debenture holders. We are therefore unable to apply the SEBI Circular to the defaults and DTDs which admittedly predate the SEBI Circular.
We are also guided by the overall structure of the SEBI Circular. Chapter A thereof provides for an Event of Default, Chapter B provides for seeking consent of investors for (i) enforcement of security; and (ii) signing an Inter-Creditor Agreement and lastly; Chapter C provides for the conditions for signing of the Inter-Creditor Agreement by Debenture Trustee(s) on behalf of investors. The structure itself puts in place a chronological mechanism starting with the event of default and consequences thereafter. We fail to understand how this structure can be applied in a piecemeal manner to prior defaults and Inter-Creditor Agreements entered into post such defaults and prior to the SEBI Circular having come into force or even prior to the Supplementary DTD being executed.
We cannot accept SEBI’s submission that the most recent of its resolutions / circulars must govern meetings irrespective of the original contract between the parties. SEBI argues that the SEBI Circular is incorporated into the DTDs by virtue of the Supplementary Debenture Trust Deed(s) executed on 11th March, 2021. In order to deal with this submission, we note that the DTDs were executed on 3rd May, 2017, 23rd May, 2017 and February 5, 2018. As stated hereinabove, defaults were committed prior to, 13th October, 2020 and the ICA was executed on, 6th July, 2019. We have already held that the SEBI Circular cannot be applied to defaults committed prior to 13th October, 2020. This being so, the subsequent incorporation of the SEBI Circular to the DTDs by virtue of the Supplementary Debenture Trust Deed(s) executed on 11th March, 2021 could only logically apply the SEBI Circular to defaults occurring post such incorporation or at best, to defaults post 13th October, 2020.
We are informed that in so far as the Debenture Trust Deed dated May 23, 2017 is concerned, YBL has no voting share. Therefore, unless the 32 Debenture Holders under the Debenture Trust Deed dated May 23, 2017, approve the settlement / compromise, the settlement / compromise cannot go through. This is irrespective and independent of YBL, considering that YBL does not have any voting rights under this Debenture Trust Deed dated May 23, 2017. In so far as the Debenture Trust Deed dated May 3, 2017 is concerned, YBL holds 68% of the Debentures in value. The majority required to approve the Resolution Plan under the DTDs is 75%. Therefore, YBL would still require an additional 7% positive vote for approval of the Resolution Plan. Therefore, we do not see how YBL can in fact single handedly determine the faith of the vote.
We do not see how the interest of retail investors is not protected should voting be carried out in terms of the DTDs. Under this procedure, the decision making power still vests with each individual Debenture Holder. Every Debenture Holder will have the right to vote and the faith of the vote shall be decided by a majority of 3/4th after taking into consideration the votes cast by the Debenture Holders. This mechanism, is in our opinion, fair, just, equitable and in keeping with the interest of all stakeholders.
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Insolvency & Bankruptcy
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2022 (3) TMI 1112
Approval of the Resolution Plan - HELD THAT:- The present is the case where Order of the Adjudicating Authority approving the Resolution Plan is under challenge. In so far as the claim of the Appellant regarding non-consideration of his plan is concerned, suffice it to say that the Appellant was himself present in the fourth Meeting of the CoC.
The grievance of the Appellant that his plan was never considered does not appear to be correct. No formal resolution plan was submitted by the Appellant although the COC has permitted the Appellant to submit his plan provided he is eligible as per the eligibility criteria approved by the CoC. Thus, grievance of the Appellant that his offer was never considered has no merit. Appellant can not make any complaint on the aforesaid account.
From the facts, which has been brought on record it does appear that the Resolution Professional after the 2nd CoC meeting has visited the Hospital and obtained the permission of CMO and met Dr. Mall who was at that point of time running the hospital. The present is the case of running of a hospital, the Resolution Professional is not supposed to take physical possession of the hospital for running the hospital in the facts of the present case. The visiting of the Resolution Professional and all steps taken by the RP has duly been noted and considered by the CoC in 04th Meeting and subsequent meeting which indicate that what was expected by the RP was duly performed.
No grounds have been made out to interfere with the Impugned Order in exercise of Appellate Jurisdiction - Appeal dismissed.
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2022 (3) TMI 1111
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - invocation of multiple remedies by filing claims of the same amount in some other Corporate Insolvency Resolution Processes (CIRP) going on against other companies of the Ninex Group - Whether the claim of Respondent No. 1 which is being considered in the CIRP of the Corporate Debtor/Abloom Infotech Pvt. Ltd. does not preclude him from filing an application for initiating CIRP against the personal guarantor? - time limitation - HELD THAT:- The Appellant has raised an issue that part of the Loan Facility was used for ever-greening and therefore it cannot be termed as a loan given for time value of money - Admittedly, the default has taken place in accordance with the Event of Default as defined in the Loan Agreement in Article 8 and further Ninex Developers Pvt. Ltd. and Red Topaz Real Estate Pvt. Ltd. who are co-borrowers in the said Loan Agreement dated 27.04.2016 are already under CIRP due to their inability to repay the loan amounts. Furthermore, statutory demand notice under Section 25 of the Payment and Settlement Systems Act, 2007 r/w Negotiable Instruments Act, 1881 dated 19.03.2019 and legal notice dated 2.06.2019 issued on behalf of the Financial Creditor to the Corporate Debtor also establish the Event of Default. This default has first taken place on 15.09.2019 and hence, the section 7 application is under limitation.
The ‘Agreement to Sell’ is done with the purpose of repayment of Loan Facility and can hardly be called a collusive action by the Financial Creditor alongwith Pardos Realtors Pvt. Ltd. against the Corporate Debtor - It has also asked for return of the refundable security deposit of ₹ 10,88,73,790/- together with interest at the rate of 30% per annum compound monthly as stated in Paragraph 4 of termination letter. Be that as it may, the termination of the agreement to sell has no bar on the adjudication of section 7 application.
Therefore, when the liabilities of the principal borrower and surety are co-extensive under an agreement, it stands to reason that the liabilities of co-borrowers who have equal and similar liabilities under a loan agreement will also be there and CIRPs against them can run simultaneously. Moreover, till the financial creditor is able to get payment of his claim, he can file claim in all the CIRPs and also have voting rights in the respective CoCs based on the quantum of his financial debt. Thus, the liabilities of the corporate debtor and the co-borrower companies are joint and co-extensive in nature and that claims of similar amounts could be submitted by the financial creditor in all the CIRPs.
In the matter of Lalit Kumar Jain Vs. Union of India & Ors. [2021 (5) TMI 743 - SUPREME COURT], the Hon’ble Supreme Court has held the validity of notification authorising the Central Government and the Insolvency and Bankruptcy Board of India to frame Rules and Regulations on how to allow actions against a Personal Guarantor to a Corporate Debtor before the Adjudicating Authority.
Thus, it is clear that simultaneous proceedings are possible against the Corporate Debtor and the Personal Guarantor who has stood surety through a valid deed of guarantee. In the present case, Mr. RM Garg and Mr. Sandeep Garg have stood guarantee of the Loan Facility advanced by the Financial Creditor to the Corporate Debtor vide Loan Agreement dated 27.04.2016 and through the deed of guarantee dated 27.04.2016 and hence can be moved against under the IBC while CIRP proceedings are going on against the Corporate Debtor.
A loan amounting to ₹ 13,35,00,000/- was disbursed by the Financial Creditor/DMI Finance Pvt. Limited to the Corporate Debtor/Abloom Infotech Pvt. Ltd. in accordance with Loan Agreement dated 27.04.2016 whose repayments were in default and a Section 7 application was moved against the Corporate Debtor by the Financial Creditor consequently. Ingredients of section 7 application are satisfied and the Adjudicating Authority has correctly admitted the section 7 application, thereby initiating CIRP against the Corporate Debtor - there are no reason to interfere with the impugned order dated 11.03.2021 and hold it as correct.
The Appeal is thus disposed off.
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2022 (3) TMI 1110
Rejection of Claim by Liquidator due to delay in filing of the same - HELD THAT:- It is not in dispute that the last date for submission of the Claims was 28.08.2020 which was specified in the Public Announcement by Liquidation in compliance with Section 38 of the Code read with Regulation 12 of the Liquidation Process Regulations, 2016. Regulation 12(2)(b) provides that ‘the last date for submission or updation of claims, shall be 30 days from the liquidation commencement date’. In the instant case, admittedly the Appellant had preferred their claim on 31.10.2020, after a delay of 64 days. It is the case of the Appellant that the delay was on account of the pandemic situation during which period the Appellant being a Senior Citizen could not contact his counsel and collate the data, apart from not having knowledge of the Liquidation Proceedings.
This Tribunal is of the earnest view that the delay in filing the Claim before the Liquidator be condoned as this Tribunal is satisfied that the cause ascribed is reasonable and construes ‘sufficient cause’. Without delving into the merits of the Claim, this Tribunal is of the considered opinion that the Appellant be given an opportunity to present his Claim before the Liquidator within a week from the date of this Order - Appeal allowed.
Rejection of Claim of liquidator due to delay in filing of the same - HELD THAT:- The Adjudicating Authority has rejected the prayer on the ground that the Appellant has filed the Appeal against the decision of the Liquidator with a delay of 42 days. Having regard to the reasons cited in Company Appeal (AT) (Insolvency) No. 34 of 2022 and in the Affidavit filed before the Adjudicating Authority, this Tribunal is satisfied that the grounds raised construe ‘sufficient cause’, to condone the delay in filing of the Appeal before the ‘Adjudicating Authority’ - this is a fit case to grant an opportunity to the Appellant herein to file their Claim before the Liquidator within a week from today and the Liquidator shall decide the Admission/Rejection of the Claim on merits, within a week from receipt of the Claim, in accordance with Law.
Appeal allowed.
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2022 (3) TMI 1109
Maintainability of application - initiation of CIRP - Coporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- Mere plain reading of the provision under section 7 of IBC shows that in order to initiate CIRP under Section 7 the applicant is required to establish that there is a financial debt and that a default has been committed in respect of that financial debt.
The documents submitted by the Financial Creditor clearly substantiate the Financial Creditor's claim that the Corporate Debtor has indebted and defaulted the repayment of loan amount.
It is thus seen that the requirement of sub-section 5 (a) of Section 7 of the code stands satisfied as default has occurred, the present application filed under Section 7 is complete, and as no disciplinary proceeding against the proposed IRP is pending - It is pertinent to mention here that the Code requires the adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the credit facilities and has committed default in repayment of the outstanding loan amount.
The present application is complete in all respects and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been default in payment of the financial debt - Application admitted - moratorium declared.
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2022 (3) TMI 1108
Seeking to declare the acts of the Resolution Professional (RP) in not paying the salaries of the Applicants for the period 15.05.2020 to November, 2020 - seeking direction to RP to pay the total amount due to the Applicants towards the salaries for their services rendered - HELD THAT:- It is an admitted fact that the present Applicants are not signatories to the no work & no pay agreement. It is also not disputed that the amount that is due towards salaries is ₹ 76,56,448/-. The Counsel for the Applicant points out the judgment in CP (IB) No. 187/7/AMR/2019 wherein, it is observed that as per the Successful Resolution Plan INR 4,47,28,219 is proposed to be earmarked for payment of the Insolvency Resolution Process cost. Any increase in CIRP costs up to INR 6,00,00,000/- shall be borne by the Resolution Applicant in addition to any payments undertaken to be made under Plan. In case there is an increase in CIRP cost on account of workmen and employees and in case the total CIRP costs becomes more than ₹ 6,00,00,000/- then, the incremental amount beyond ₹ 6,00,00,000/- shall be adjusted from the workmen and employee settlement amount, except the fixed amount of INR 1,22,23,019 to be paid to the workmen. In case there is an increase in CIRP cost on any account other than the workmen and employees such that total CIRP cost becomes more than INR 6,00,00,000 then the incremental amount up to INR 2,00,00,000 shall be adjusted from the amount payable to all the creditors in the same proportion as proposed by the Resolution Applicant in the financial proposal for the Creditors.
On the basis of the approved Resolution Plan and the provision made for the CIRP costs the Counsel contends that the RP has to pay the salaries of the Applicants which amounts ₹ 76,56,448/- and that it would not be an extra burden, since the same is provided for under the CIRP costs. He submits that even if the claim amount is paid it would not go beyond INR 6,00,00,000/- since, the estimated CIRP costs at that time were INR 4,47,28,219 only. Even if the CIRP costs go beyond INR 6,00,00,000/- a provision is made under the resolution plan. Hence, since the claim amount pertains to the workmen's salaries who have not signed on no work & no pay agreement and who continued to be on the roles and since provision is made for their salaries in the CIRP costs.
Petition allowed.
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2022 (3) TMI 1107
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT:- The Applicant Bank has filed the entire set of documents. Furthermore, debt and default has been proved. The Respondent has executed a letter of renewal dated 28.02.2018 and the documents executed by the Respondent in favour of the Applicant Bank which are also enclosed along with the Application.
There is no dispute about debt and default. The Application is complete in all aspects. The Applicant Bank has also taken proceedings under Section 13(2) of SARFAESI Act, 2002 for recovery of entire amount due and payable by the Respondent and hence the debt and default is proved. Under the said circumstances, this Tribunal is left with no other option than to proceed with the present case and initiate the Corporate Insolvency Resolution Process in relation to the Corporate Debtor, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed.
Application admitted - moratorium declared.
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2022 (3) TMI 1106
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - Existence of debt and dispute or not - HELD THAT:- It is seen that the Respondent/Corporate Debtor filed a Memo vide diary no. 1700 dated 12.03.2020 admitting the debt and its inability to pay the same to the Petitioner. In view of the same, the C.P. is liable to be admitted.
The present petition being complete and having established the default in payment of the financial debt and for the default amount being above ₹ 1,00,00,000/-, the petition is admitted in terms of Section 7 of the IBC, 2016 - petition admitted - moratorium declared.
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Service Tax
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2022 (3) TMI 1105
Levy of service tax - Business Auxiliary Service (BAS) or Works Contract Service (WCS) - activity of providing powder coating and anodising of aluminium goods supplied by their client on job work basis - HELD THAT:- The appellant has admittedly carried out the job work of powder coating and anodizing on the aluminium goods supplied by their client. The appellant is doing the job work against the job work charges mutually decided by the appellant and the client. The activity of powder coating and anodizing is clearly an activity of production or processing on behalf of the client since the same is carried out on the basis of job work.
This Tribunal has considered the issue in similar facts in various judgments and came to conclusion that the similar activity is classifiable as ‘production or processing of goods on behalf of the client’ under the main head of service viz. BAS and accordingly the same is liable to service tax.
From the judgment in M/S MR & SONS VERSUS C.C. - AHMEDABAD [2018 (8) TMI 32 - CESTAT AHMEDABAD], it can be seen that out of various activities, one activity was of painting on job work basis, which is akin to powder coating and anodizing - Following the said judgment, in the present case also being the similar activity, the process of Powder Coating and Anodizing being production on behalf of client clearly falls under BAS and hence the same is liable for service tax.
The appellant’s main plea is the activity of job work since with material such as chemicals will fall under the “Works Contract Service” on the ground that on the said activity the appellant has discharged the VAT - the activity of the job work in the present case does not fall under Explanation clause (ii). As regard the clause (i), the necessary limb of the definition is the property in the goods must be transferred. In this case, claim of the appellant is that the property in the chemicals used for the job work stand transferred to the service recipient. Undisputedly the chemicals used for Powder Coating and anodizing is part of the service as the same gets consumed during the job work and lost its existence. Moreover the main aluminium goods is supplied by the client and it’s property remains with the client before and after the job work. The cost of chemicals gets subsumed in the job work charges. For this reason also, it cannot be said that there is any transfer of property in goods from the hands of the appellant to his client.
Appeal dismissed.
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2022 (3) TMI 1157
Levy of service tax - works contract - demand based on TDS form 26AS - petitioner takes a stand that in respect of the contract works they had undertaken for which the service tax had been imposed, they are exempted under the law from payment of service tax in respect of some of such contractual works - HELD THAT:- The liability to pay a service tax is not upon a presumption nor can it be based upon a state of indeterminateness on the part of the authorities. The liability to pay a tax has to be conclusively determined that for the given transaction for which the tax is imposed the noticee is liable to pay such tax and such taxes are not being paid.
After making a conclusive determination, any reasoned order or any further demand notice as may be called for may be issued by the authorities. On the other hand, if the conclusion arrived at that the petitioner is not liable to pay service tax, appropriate reasoned order be also passed. In order to substantiate the claim of the petitioners assessee that they are not liable to pay the service tax, any other ground or reason as may be desirable be also allowed to be raised by the petitioners.
Petition disposed off.
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2022 (3) TMI 1104
Validity of SCN issued - Waiver of interest under Section 75 and penalty under Section 78 of the Finance Act, 1994 - HELD THAT:- The show-cause notice dt. 15/10/2018 itself had taken note of the tax paid along with interest as applicable and from the proposals itself, it is noted that the show-cause notice had proposed the appropriation of the payments made towards demands proposed to be raised.
There being no due, the show-cause notice itself was not required to be issued as held by the Hon’ble jurisdictional High Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD [2011 (9) TMI 114 - KARNATAKA HIGH COURT].
Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 1103
Refund of service tax - Business Auxiliary services - export of service or not - non-production of Foreign inward remittance certificate - HELD THAT:- The Commissioner (A) had held that it was only an inadvertent error, which finding has also been accepted by the revenue. Although de-novo order was dutifully paused, but none of the findings, observations and directions contained in the order of the Commissioner (A) has been adhered to or given effect to or followed by, the adjudicating authority.
The impugned order cannot be sustained since the same is contrary to the accepted OIA, and also because, there being an order of an appellate authority containing factual findings in the first round which has attained finality, the same is binding on the revenue. The only course therefore available to the revenue is to follow the directions and findings contained in the said OIA and pass a consequential order. Instead, the authorities have proceeded tangentially as though the said findings of the Commissioner (A) are non-est., which is not the correct approach which amounts to judicial impropriety and hence, contrary to the prevalent judicial hierarchical structure.
The impugned order cannot be sustained, and is set aside. In view of this, it is held that the appellant’s service would qualify as export service, ARVs are heavy vehicles and hence, are not covered under Section 65(9) ibid. and hence the ST paid under RCM was by mistake as claimed by the appellant, which qualifies for refund.
The authorities below have also denied the refund holding that the appellant had acted as a middleman/agent, but even that may not stand since, in the first place, they have not denied the receipt in foreign currency; and secondly, there is no independent verification whether the services of appellant falling within the ambit of BAS would qualify as export of service or not.
The appeal is allowed - decided in favor of appellant.
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2022 (3) TMI 1100
Refund of services tax / Cenvat Credit - tax deposited under reverse charge mechanism, pursuant to audit objection - revenue neutrality - Post GST regime - HELD THAT:- The payment of service tax including the cess relating to the period prior to 30.06.2017, paid in the year 2018 during the GST regime, amounts to payment in accordance with law as the same has been paid on the insistence by the Department – audit objection. Further, it is found that the demand pursuant to audit is also bad as the appellant was entitled to cenvat credit being a manufacturer of dutiable items, and as such the situation is revenue neutral. Further, the appellant under the erstwhile Cenvat Credit Rules was entitled to cenvat credit of the said amount - Further, in view of the provisions of Section 142(3) of CGST Act, provides that every claim for refund filed by any person before, on or after the appointed day, for refund of any amount of cenvat credit, duty, tax, interest or any other amount paid under the existing law, shall be disposed of in accordance with the provisions of existing law and any amount eventually accruing to him shall be paid in cash, notwithstanding anything to the contrary contained under the provisions of existing law other than the provisions of sub-section (2) of Section 11B of the Central Excise Act, 1944 (unjust enrichment).
From a conjoint reading of sub-section (3), (5) and (8)(a) of the CGST Act, it is evident that an assessee is entitled to claim refund of service tax under RCM paid after the appointed day under the existing law and such claim has to be disposed of according to the provisions of the existing law. As the appellant was entitled to cenvat credit of the said amount of ₹ 9,85,827/-, which is now no longer available due to GST regime, they are entitled to refund of the said amount.
The Adjudicating Authority is directed to grant refund of the said amount to the appellant within a period of 45 days from the date of receipt of copy of this order alongwith interest as specified under Section 11BB of the Central Excise Act - appeal allowed - decided in favor of appellant.
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Central Excise
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2022 (3) TMI 1102
CENVAT Credit - input services - outdoor catering services - period from March 2016 to June 2017 - time limitation - HELD THAT:- The issue stands covered by the decision of Larger Bench of the Tribunal in M/S. WIPRO LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE BANGALORE-III. [2018 (4) TMI 149 - CESTAT BANGALORE] where it was held that The "outdoor catering service" is not eligible for input service credit post amendment dated 1.4.2011 vide N/N. 3/2011 dated 18.3.2011.
Time limitation - HELD THAT:- As seen from the narration of the submissions made by the Ld. Counsel for appellant, it is clear that the issue is interpretational in nature and there were conflicting decisions of different Benches of the Tribunal after which the matter was referred to Larger Bench. Taking these aspects into consideration, it cannot be said that appellant has wilfully suppressed facts with intention to evade payment of duty so as to invoke the extended period. The entire demand is raised by invoking extended period - invocation of extended period cannot sustain and the demand is time-barred.
The appeal is allowed on limitation.
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2022 (3) TMI 1101
Valuation - ball and roller bearing - related party transactions or not - entire goods are sold through SKF India Limited - benefit of N/N. 6/2006-CE dated 01.03.2006 - HELD THAT:- On careful consideration of the submissions made by learned Authorised Representative, although the order of this Tribunal has been challenged before the Hon’ble Apex Court but no stay has been granted by the Hon’ble Apex Court till date. Moreover, the matter has come before the Hon’ble Apex Court on four occasions in the past. In these circumstances, without obtaining stay of operation of the order of this Tribunal, we decline the request of keeping the matter pending, made by learned Authorised Representative. Therefore, the issue is proceeded to be decided.
The appellant and SKF India Limited cannot be treated as related parties. Therefore, the transaction value between the appellants and SKF India Limited is the correct value for the purpose of assessment. Further, the appellant is entitled for the benefit of exemption Notification No. 6/2006-CE dated 01.03.2006 as claimed for the clearances made for generating electricity for wind mills.
Appeal allowed - decided in favor of appellant.
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2022 (3) TMI 1099
CENVAT Credit - input services or not - staff insurance services being availed by the appellant for its employees - Rule 2 (l) of Cenvat Credit Rules, 2004 - HELD THAT:- The bare perusal of rule 2 (l) of CCR, 2004, shows that no doubt the insurance services as taken by the appellant in the present case have specifically been excluded but the said exclusion applies if and only if the insurance service is used primarily for personal use or consumption of an employee. The Commissioner (Appeals) order is miserably silent about any finding for the impugned services to specifically be for the personal use of the employee/ employees of the appellant.
The issue is otherwise no more res integra. This Tribunal in M/S HYDUS TECHNOLOGIES INDIA PVT LTD. VERSUS CCE, C & ST, HYDERABAD-II [2017 (2) TMI 538 - CESTAT HYDERABAD] has specifically held that unless there is some document to establish that the insurance services are availed for personal use or personal consumption of the employee, the services shall be eligible input service as those are the part of provident fund Scheme and provides maximum payments to the insured persons nominated beneficiary in the event of death due to natural cause accident or illness.
Department has not produced anything on record to show that the services of Provident Fund were availed for the personal benefit of employees whereas what is apparent from the documents and contentions of the appellant that the life insurance services were availed by appellant for all of its employees under statutory mandate and not for the individual and personal consumption.
Commissioner (Appeals) has failed to appreciate the statutory mandate of the appellant being the employer to get insured its employees - appeal allowed - decided in favor of appellant.
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2022 (3) TMI 1098
Recovery of CENVAT Credit alongwith interest and penalty - distribution of CENVAT Credit - allegation in the SCN is that the ISD was distributing service tax credit on monthly basis whereas the pro rata turn over unit for distribution was taken for previous year - Rule 7 of CCR, 2004 - issuance of two SCN for same period - input services or not - admissibility of credit if the address of the service provider and amount of credit distributed is not mentioned in the Challan - distribution of credit on the basis of pro-rata turnover of previous year instead of on the basis of monthly turnover - recovery of amount alongwith interest and penalty.
Issue of two show cause notices for the same Period - HELD THAT:- Demand of duty is a matter of assessment. If duty is short paid it can be recovered under Section 11A after issuing a notice. The show cause notice which culminated in the present appeal has nothing to do with duty. It deals with a different issue of Cenvat credit. Irregularly availed Cenvat credit is recoverable under Rule 14 of CCR, 2004. There is no detailed mechanism laid down for recovery under Rule 14 of CCR, 2004 and for this purpose the provisions of Section 11A have been made applicable mutatis mutandis for Rule 14 also. Nevertheless, any recovery of irregularly availed Cenvat credit under Rule 14 is not demand of duty at all. Section 11A deals with the duty which the assessee has to pay on final products. Rule 14 deals with the credit of duty on inputs which someone else had paid which the assessee has taken credit of. Any denial of Cenvat taken will not affect the duty liability. Similarly, any demand of duty will not affect the Cenvat credit. If Cenvat credit is wrongly availed, a penalty can be imposed under Rule 15 of CCR, 2004. If duty is short paid, penalty can be imposed under Section 11AC - there are no illegality in the Revenue issuing two show cause notices; one for recovery of irregular availed Cenvat credit (which is subject matter of the present appeal) and another show cause notice for recovery of duty short paid. It does not amount to two assessments for the same period in this case.
Distribution of input service credit only to the appellant - HELD THAT:- From the impugned order, it is not clear how the Commissioner has come to the conclusion that the entire credit has been distributed to only Bhiwadi unit up to September 2015 and excess credit has been distributed to the appellant i.e. Bhiwadi unit from October 2015 to December, 2015 based on his examination of two or three challans - the appellant has submitted Company Secretary’s calculation sheet showing Cenvat credit taken by company on the basis of ISD challan and the distribution of Cenvat credit to different unit by the ISD which was enclosed as Annexure-9 to the reply to the show cause notice filed before the Commissioner. There is no discussion and the impugned order that the Company Secretary certificate was not correct and the Cenvat credit has been wrongly distributed - the charge of the ISD distributed the entire credit to the appellant is not sustainable and needs to be rejected.
Address of the service provider and amount credit distributed not being mentioned in the ISD challans - HELD THAT:- Appellant submits that the details were provided in the Annexures to the challans issued by the ISD. The ISD challans must contain details mentioned in Rule 4A of the Service Tax Rules to qualify as Cenvatable documents. We find that these details require a thorough examination of each of the documents on which Cenvat credit is taken. Therefore, this is a fit case to remit the matter to the adjudicating authority for conducting the necessary verification and decide as to which ISD challans, coupled with the Annexures contain all the essential details to be eligible for Cenvat credit.
Whether the Commissioner could have denied Cenvat credit on the ground that certain input services do not qualify under Rule 2(l) of CCR, 2004? - HELD THAT:- The show cause notice did not raise this ground and the Commissioner cannot confirm the demand on a new ground.
Whether the ISD had distributed the credit incorrectly as held by the Commissioner in the impugned order or has done it correctly as per Rule 7 read with Explanation 3, as applicable during the relevant period? - HELD THAT:- This issue also needs thorough examination by the Commissioner.
The impugned order is not vitiated on the ground that another show cause notice demanding short paid duty of excise was issued to the appellant during the same period. The Commissioner was not correct in denying Cenvat credit on the ground that the input service do not qualify under Rule 2(l) of the CCR, 2004 because the appellant was not put to notice on this ground. It is apparent from the records produced by the learned Counsel that the headquarters of the appellant had distributed the Cenvat credit to the appellant as well as to other units - the matter needs to be remitted to the adjudicating authority for determining the above two facts and re-computing the liability of Cenvat credit, if any.
The appeal is allowed by way of remand to the adjudicating authority.
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CST, VAT & Sales Tax
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2022 (3) TMI 1097
Condonation of delay of 1217 days in filing appeal - Re-assessment order - input tax credit - time limitation - tax periods April 2005 to March 2008 and April 2008 to March 2009 - HELD THAT:- The period prescribed under Section 5 of the Limitation Act, 1963 though may not be applicable to the tax matters, since the same is prescribed under the statute but the parameters set down for condonation of delay cannot stand on different footing.
It is significant to observe that the controversy may not be relating to the collection of tax but the claim of input tax credit would certainly has some effect on the revenue. It cannot be construed as ‘’No revenue loss” as canvassed by the learned counsel for the appellant. Compared to the Government, Private litigant stands on a better pedestal in taking a decision and filing the appeal before the Court. Merely for the reason that in the appeal filed by the Government delay is condoned, the same yardstick cannot be applied blindly but requires to be examined having regard to the facts and circumstances of the case. No doubt, delay of 1754 days has been condoned - It is the discretionary power vested with the Court, to be exercised judiciously having regard to the facts and circumstances of the case.
The inordinate delay of 1217 days in the background of the facts cannot be condoned with the liberal approach accepting the cause - no ground is found to condone the inordinate delay of 1217 days in filing the appeal - Appeal dismissed.
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Indian Laws
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2022 (3) TMI 1096
Dishonor of Cheque - discharge of legally enforceable debt or not - rebuttal of presumption - misuse of cheque - forgery - HELD THAT:- It is trite law that once issuance of a cheque and signature hereon are admitted, presumption of a legally enforceable debt in favour of the holder of the cheque arises. It is for the accused to rebut the said presumption, though accused need not adduce his own evidence and can rely upon the material submitted by the complainant, however, mere statement of the accused may not be sufficient to rebut the said presumption.
While imposing sentence on the accused after his conviction, it is to be kept in mind that the sentence for offence under Section 138 of NI Act should be of such nature as to give proper effect to the object of legislation and no drawer of the cheque can be allowed to take dishonour of cheque issued by him light heartedly. The Magistrate can alleviate the grievance of the complainant by making resort to Section 357(3) Cr.P.C. wherein no limit of compensation to be awarded by the Magistrate has been mentioned and, thus, the Magistrate is empowered to impose a reasonable amount of compensation payable to complainant - In the instant case, the revisionist has taken different stands with regard to the cheque in question. It was stated that the cheque in question was lost and a complaint in this regard was also lodged in the year 2014 but the original complaint has not been placed on record by the revisionist. The revisionist neither informed the concerned bank about the cheque in question, which got stolen nor requested the bank to get the payment stopped against the said cheque, which shows his malafides. The revisionist has also taken the plea that the cheque in question was handed over to one Pankaj Bhalla and the same got stolen.
As far as the contention of the revisionist that he is a stranger to the respondent No. 2 and that he has no legal liability towards him, is concerned, the revisionist has failed to rebut the presumption in favour of the complainant and the mere statement by the revisionist in itself is insufficient to raise suspicion with regards to the entire case of prosecution.
There are no infirmity in the impugned Judgment - revision petition dismissed.
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2022 (3) TMI 1095
Dishonor of Cheque - grant of interim compensation - whether the Criminal Court hearing could have passed the order directing payment of 20% without recording any reason for grant of such interim compensation? - Section 143A of the Negotiable Instruments Act, 1881 - HELD THAT:- This amendment has come into force with effect from 1.9.2018 on its publication in the official gazette. The purport of the amendment is that the Court may in certain circumstances award interim compensation which shall not exceed 20% of the amount of the cheque and such interim compensation can be permitted to be withdrawn in terms of the said amendment. It is invoking the afore-quoted provision of law an application was filed by the complainant seeking interim compensation of 20% of the amount involved.
Section 143A is completely misread that once the accused does not plead guilty, the complainant becomes automatically entitled to 20% of the cheque amount as interim compensation. Sub-section (1) of Section 143A reads that notwithstanding anything contained in the Cr.P.C. the Court trying an offence under Section 138 may order drawer to pay interim compensation to the complainant. If an order is passed for payment of interim compensation, it shall be paid within 60 days from the date of the order.
The Legislature has cautiously worded sub-section (1) of Section 143A not to make it mandatory in all cases where clauses (a) and (b) of sub-section (1) would empower the learned Magistrate before whom proceedings are pending consideration to award interim compensation. It is the discretion conferred, as the word used is “may”. If the order is passed, then the payment is mandatory - it is not that 20% has to be the interim compensation in every case. Here again the discretion is required to be exercised by the learned Magistrate as the interim compensation can vary from 1% to 20% but shall not exceed 20%. he language of Section 143A being couched with such discretion, the discretion if not exercised in a manner known to law, becomes an arbitrary action.
In the case at hand, there is not even a semblance of application of mind on the part of the learned Magistrate as the learned Magistrate misconstrues the provision that in the event the accused does not plead guilty he becomes liable to pay 20% as interim compensation. This is not the purport of the Act. But, that does not preclude the learned Magistrate to pass appropriate orders of grant of compensation in a given case - Petition allowed.
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2022 (3) TMI 1094
Jurisdiction - Power of state authority to impose cess on Manufacturing or Production of Cement - petitioners submit that when a tax is imposed by a State or the Union in accordance with law, a further levy may be added thereto by way of a cess, where the quantum realised by way of the cess is earmarked for a special public beneficial purpose - HELD THAT:- It is evident that since cement was not included as one of the excepted products in Entry 84 of List I, no impost could have been levied by any State on the manufacture of cement notwithstanding such process of manufacture being within the geographical limits of the State. And, for the same reason that the State had no authority to impose any tax or the like on the manufacture of cement in the State, it did not possess any authority to levy cess on such manufacture. There appears to be little room for the State to try and justify its authority in enacting the said Act of 2010 or the levy imposed thereby. Though the State has relied on Entry 54 of the State List, it does not appear that such entry authorises the State to impose a kind of excise duty with a different name.
It is not necessary to even refer to Entry 92A of the Union List to ascertain the exact authority available to a State under Entry 54 of the State List as it stood at the time that the impugned Act was brought into force. At the relevant point of time, the field covered by the entry authorised the levy of the tax on the sale or purchase of goods. In other words, the levy would be on the sale or purchase and be confined only to such sale or purchase - the State had no authority to impose any tax or cess on the manufacture or production of cement, whether by the said Act or by any other disingenuous device; and, in all fairness, no further attempt is made on behalf of the State to justify the legislative illegality except to suggest that after the GST regime has been put in place, the impugned Act of 2010 has been repealed and the same is no longer relevant.
There is no doubt that there is no available mechanism to assess the quantum of the levy that may have been passed on to the customer or may have been absorbed by the manufacturers. It is possible that a part of it had been passed on and a part absorbed by reducing the profit element. It is equally possible that the entirety of the impost had been passed on to the customers - In such sense, the manufacturers and producers of cement in the State may have taken a hit as a direct consequence of the illegal impost, for which they ought to be compensated.
So that the deterrent is effective, it is necessary that 30 percent of the total realisation on account of the cess collected under the impugned Act of 2010, which the government was not entitled to receive and cannot be permitted to appropriate, is earmarked for a public project. For such purpose, the Chief Secretary of the State will affirm an affidavit to be filed within eight weeks from date and indicate the quantum of the cess that was collected under the impugned Act of 2010. Thirty percent of the amount so ascertained and indicated in the Chief Secretary’s affidavit will have to be earmarked by the State for purchasing advanced medical equipment at the additional cancer wing which has been set up in the Government General Hospital in Shillong.
The State had no authority to impose cess in terms of the impugned Act of 2010 and by annulling the Act as ultra vires the Constitution and requiring the State to refund 20 percent of the amount realized on such count from the individual petitioners to such petitioners and investing 30 percent of the total amount of cess realised under bogus legislation for the purpose of procuring the equipment for the cancer wing of the Government General Hospital in Shillong as aforesaid.
Petition disposed off.
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