TMI Tax Updates - e-Newsletter
May 11, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Levy of penalty - non filling up of Part 'B' of the e-Way Bill - existence of mens rea or not The High Court referenced a specific case and highlighted that the issue of non-filling up of Part 'B' of the e-Way Bill was addressed in previous judgments. It emphasized that mere technical errors without intent to evade tax should not lead to penalties. It was reiterated that there was no evidence of mens rea or intent to evade tax on the petitioner's part. Thus, the imposition of penalty under Section 129(3) of the Act was deemed unjustified.
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GST:
Violation of principles of natural justice - The court observed that while the show-cause notice provided details for a personal hearing, including the date, time, and venue, the abbreviation 'N.A.' indicated that no such hearing was actually scheduled. The court referred to Section 75(4) of the said Act, emphasizing that an opportunity of hearing must be provided before reaching a decision under Section 73. It noted that since an adverse decision was anticipated against the petitioners, the proper officer was duty-bound to grant them a hearing, regardless of the absence of a written request.
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GST:
Rejection of the petitioner’s claim for budgetary support - Violation of principles of natural justice - The court emphasized that the Budgetary Support Scheme mandated quarterly claims, which the petitioner failed to adhere to by submitting separate claims for July and August 2017. Regarding the interpretation of circulars, the court determined that they were consistent with the scheme and aimed to facilitate the verification process. However, the petitioner's failure to comply with the prescribed procedure led to the rejection of their claim. Additionally, the court affirmed that the correct method of calculating budgetary support required quarterly claims, and the petitioner's attempt to claim support separately for July and August 2017 resulted in a flawed calculation.
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GST:
Validity of determination of GST liability (demand) u/s 73(1) - Rejection of the compounding application - Eligibility for composition scheme u/s 10(2)(a) - The High Court found merit in the petitioner's argument regarding procedural irregularity. It noted that the show cause notice for determining tax liability was issued before the eligibility for the composition scheme was even considered, let alone rejected. This violated the statutory scheme outlined in the Act. The Court emphasized that the proper sequence of procedures should have been followed, starting with determining the petitioner's eligibility for the composition scheme. Only after an order rejecting the composition application should a notice under Section 73(1) be issued to determine tax liability.
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GST:
Blocking the input tax credit against the petitioners - The High Court emphasizes that Rule 86(A) allows restricting debit from the electronic credit ledger for an amount equivalent to fraudulently availed credit. Rule 86(A) doesn't authorize negative balance insertion in the ledger; it only permits blocking of the credit available. The Court rules that blocking ITC effectively deprives the petitioner of the right to discharge liabilities. The respondents should have initiated recovery proceedings under Section 73 or Section 74 if the petitioner had fraudulently availed ITC. The action of the respondents is deemed unsustainable as it violates Rule 86(A) and previous court decisions. Consequently, the impugned order is set aside, and the respondents are directed to recall the order of blockage immediately.
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Income Tax:
Faceless Assessment Center u/s 144-B - territorial jurisdiction - The Court opines that the petitioner's PAN registration within U.P. establishes territorial jurisdiction in favor of the Allahabad High Court. Despite filing the return from another state, the petitioner's jurisdictional assessing authority remains within U.P. The Court emphasizes that in faceless assessments, the geographical location of the assessing authority becomes less relevant. Therefore, the objection based on territorial jurisdiction is dismissed.
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Income Tax:
Non-jurisdictional AO proceeding with the assessment - decentralization of a case after centralization of case - absence of any order of transfer u/s 127 - The court noted the absence of a traceable transfer order u/s 127 despite claims of its existence on the ITBA system. The court emphasized that jurisdiction cannot be assumed without a formal transfer order, which aligns with the intent of Section 127 to facilitate administrative convenience and uphold the public interest. The High Court set aside the assessment orders passed by ITO Ward 21(1) due to the jurisdictional error, underscoring that no valid transfer u/s 127 had been documented.
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Income Tax:
Deduction u/s 80-O - brandishing newspaper cuttings as proof to show 'information concerning commercial knowledge and experience' - The High Court noted that the information consisted primarily of newspaper cuttings, which do not inherently constitute commercial knowledge as required u/s 80-O. - The Court determined that the approval granted by the CCIT for prior assessment years did not extend unconditionally to subsequent years. It was subject to verification by the Assessing Officer (AO) regarding the actual nature of services provided and their compliance with the stipulations of section 80-O.
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Income Tax:
Condonation of delay in filing of revised return of income - CBDT rejecting petitioner’s application u/s 119 - Acceptance of Recast Financials - The High Court criticized the CBDT for its refusal to accept the recast financial statements, noting that the non-acceptance was contrary to the principles of genuine hardship. The court highlighted that the petitioner's hardships were genuine and disregarded by the CBDT without substantial justification. - The court affirmed that the recasting of books under the Companies Act, mandated by the NCLT, should influence tax proceedings, contradicting the CBDT's stance that these are separate realms. - The HC directed the tax authorities to allow the filing of revised returns based on the recast financial statements and proceed accordingly.
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Income Tax:
Assessment completed u/s 144C against a petitioner/Non-Resident Indian - The High Court held that Section 144C is a procedural provision introduced for the benefit of assesses, including NRIs, effective from April 1, 2020. The petitioner's objection to being assessed under Section 144C was deemed meritless as the provision is beneficial and procedural, not substantive. The Court emphasized that the petitioner failed to raise this objection before the assessing authority, rendering it invalid. - Further on the issue of limitation: The High Court noted the provided timeline demonstrated compliance with statutory procedures and extensions granted under TOLA. It concluded that the assessment order was passed within the prescribed time limit, as per the provisions of Section 144C, rendering the petitioner's objection baseless.
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Income Tax:
Exemption u/s 10(23C)(iiiad) - Threshold limit of Rs. 1 Crore - The Appellate Tribunal found that the appellant's gross receipts, when considering certain fee receipts from the previous financial year separately, did not exceed the threshold limit of Rs. 1 crore. Citing a precedent and interpreting the relevant provisions, the Tribunal held that each educational institution operated by the appellant should be treated as a separate entity for the purpose of determining eligibility for exemption. Therefore, the Tribunal concluded that the appellant was entitled to exemption under section 10(23C)(iiiad) of the Act.
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Income Tax:
Denial of deduction claimed under Chapter VI-A i.e. Section 80G/ 80GGA read with Section 35AC - The Appellate Tribunal noted that the appellant had not claimed the benefit of Sections 11 and 12 of the Act, as reflected in the AO's intimation order under Section 143(1) of the Act. Therefore, the appellant was entitled to deduction under Section 80GGA of the Act. Considering the appellant's consistent claims for deduction under Section 80GGA since Assessment Year 1993-94, and the absence of contrary evidence presented by the Revenue, the Tribunal upheld the appellant's entitlement to the deduction.
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Income Tax:
Levy of penalties under various sections - The Appellate Tribunal, in a consolidated order, addressed several appeals concerning penalties imposed under various sections of the Income Tax Act. The Revenue's appeals were dismissed concerning penalties u/ss 271(1)(c) and 271D, as the Tribunal found no concealment or furnishing of inaccurate particulars and lacked justification for penalties imposed. The Assessee's appeals were allowed concerning penalties under Sections 271D and 271E, as explanations provided were accepted by the Tribunal, indicating no violations.
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Income Tax:
Application seeking approval u/s 80G(5)(vi) rejected - Assessee is predominantly engaged in charitable activities - Some of the objects of the applicant/assessee are religious in nature - The Tribunal considered a CBDT Circular from 1999, which clarified the intent behind amending section 80G and emphasized that trusts primarily engaged in charitable activities could still benefit from section 80G despite incidental religious expenditures. Highlighting the absence of a show cause notice, the Tribunal underscored its significance in maintaining procedural fairness in tax proceedings, noting judicial precedents reinforcing the importance of such notices. - The Tribunal concluded that the rejection of the application by the CIT(E) was erroneous. It directed the granting of approval under section 80G(5) to the appellant trust.
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Income Tax:
Revision u/s 263 - Bogus LTCG/Share transaction - as per CIT AO failed to make necessary enquiries to ascertain the actual strength of the company, investment profile of the assessee - The Tribunal upheld the jurisdiction of the PCIT under section 263, emphasizing the lack of adequate examination of facts in the AO's assessment order. It concurred with the PCIT's finding that the AO failed to conduct necessary inquiries, leading to an erroneous assessment order. However, the Tribunal dismissed the allegation of violation of principles of natural justice, noting that the assessee was provided with opportunities to be heard.
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Income Tax:
Addition u/sec. 56(2)(vii) - Difference in value of agricultural land purchased from value of property for stamp duty purpose - The Tribunal examined the discrepancy in valuation and noted that it was within the statutory tolerance margin of 10%. Referring to relevant case law, the Tribunal held that the tolerance margin applied retrospectively, thereby deleting the additions made under section 56(2)(vii).
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Income Tax:
Denial of 80P(2)(a)(i) deduction - interest income - The Tribunal acknowledged the appellant's argument that the interest earned on deposits from a reserve fund constituted business income derived from providing credit facilities to members, thus qualifying for deductions u/s80P(2)(a)(i). - However, following precedent set by the Hon'ble Karnataka High Court and various other rulings, the Tribunal ruled that interest income from deposits held in banks does not change its nature as income from other sources, regardless of the entity type from which the interest is received. The Tribunal also directed the assessing officer to consider the proportionate costs and administrative expenses incurred in generating the interest income, thereby allowing a partial relief to the assessee.
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Income Tax:
Validity of Revision u/s 263 - The Pr. CIT had argued that the original assessments were inadequate and missed critical checks, which purportedly rendered the assessments erroneous and adverse to revenue interests. However, the tribunal found that the assessee had provided sufficient documentation and explanations initially and during the re-assessment proceedings, which were conducted thoroughly by the assessing officer. The tribunal, therefore, set aside the revisional order issued by the Pr. CIT, reinstating the original assessment.
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Income Tax:
Income deemed to accrue or arise in India - Supply of software - ‘royalty’ - Shrink wrap software or customized software - Drawing parallels with that decision and the unchanged facts and circumstances of the current assessment year, the Tribunal held that the incomes from software licensing and maintenance services should not be taxed as royalty. The argument was that the licenses provided were non-exclusive and did not transfer any copyright rights, aligning with the precedents set by higher judicial authorities that distinguished between "copyright right" and "copyrighted article". The Tribunal allowed the appeal of the assessee, setting aside the orders of the CIT(A) and the AO.
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Income Tax:
TP Adjustment - The main contention was whether forex losses should be considered as non-operating or operating for the purpose of computing the Profit Level Indicator (PLI). The taxpayers argued that such losses are non-operating, supported by the Safe Harbor Rules and previous judicial decisions. However, the tribunal, aligning with the CIT(A) and TPO, concluded that forex losses related to business activities should be considered operating.
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Income Tax:
Disallowance u/s 80IB - additional income earned by means of ‘on-money’ - The ITAT found that the project "Rushikesh" fulfilled all conditions for the deduction under section 80IB for the relevant AYs. The Tribunal noted that the additional income disclosed during the search was based on actual profit and loss accounts and should be considered for deduction under section 80IB. The Tribunal upheld the CIT(A)'s decision to delete the addition.
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Income Tax:
Transfer / Centralization order u/s 127 - The High court found that the centralization was within the legal bounds provided by Section 127, which allows for case transfers for administrative efficiency and coordinated investigation. The need for centralization was substantiated by the discovery of incriminating material linking the assessee to other parties involved in the investigation. - Regarding compliance with Section 127: The court noted that the procedural requirements were met, including providing a reasonable opportunity for the assessee to be heard and adequately addressing and recording reasons for the transfer, which aligns with the legislative intent of Section 127. - The Delhi High Court dismissed the writ petitions.
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Customs:
Warehousing of imported capital goods used in the generation of solar power - Cancellation of license of warehousing as granted in terms of the MOOWR Regulations - Validity of a Central Board of Indirect Taxes and Customs [CBIC] Instruction - The Court ruled that the impugned instruction misinterpreted the statutory provisions, particularly the scope of Sections 61 and 65 of the Customs Act. The justices found that solar power generation could indeed be classified under operations permissible in a bonded warehouse. - The Court held that the instruction was ultra vires, meaning beyond the powers granted under the Customs Act. It was deemed contrary to the provisions of Section 151A, which prevents the issuance of directions that interfere with the discretion of customs officers. - The Court recognized the rights of the petitioners under the MOOWR Regulations to continue their operations.
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Customs:
Re-determination of value - Misdeclaration - reclassifying of the impugned goods - Revenue Appeal - The appeal before the Appellate Tribunal revolved around the failure to confiscate goods and impose penalties under the Customs Act, 1962. The appellant contended that the respondent had misdeclared the goods and claimed improper exemptions, while the respondent maintained that there was no misdeclaration and that procedural requirements had not been met. The Tribunal found no merit in the appellant's arguments and upheld the impugned order, emphasizing the lack of evidence of misdeclaration or evasion of duty. It also noted the absence of a show cause notice before confiscation, leading to the dismissal of the appeal.
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Customs:
Methodologies for re-determination of CVD payable on imports on MRP basis - Imports of notebook / laptop computers - The tribunal found that there was no statutory mechanism under the Customs Tariff Act, 1975, to redetermine MRP for imported goods once declared. The methodology adopted by the customs authority to redetermine the MRP by subtracting the locally procured laptop bag's cost from the total price was deemed inappropriate. The tribunal stated that this method was not supported by the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008, nor was it consistent with principles laid down under the Central Excise Act. - The tribunal set aside the impugned order due to the lack of statutory provisions for MRP redetermination under the cited acts and rules, the inappropriate methodology used, and the unjust invocation of the extended period of limitation.
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Customs:
Seeking Provisional release of four gold bars - seizure - The appellant demonstrated through invoices, packing lists, and challans a prima facie correlation between the seized gold bars and those purchased from the bank. The Tribunal found that the appellant had provided sufficient evidence to establish the connection between the purchased gold bars and the seized ones, thus warranting provisional release.
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Customs:
Levy of Anti-Dumping Duty - Mis-declaration of the country of origin in bills of entry - import of PVC Sheeting Flex Banner (in rolls) of Malaysian origin - customs authority’s failure to conduct a mandatory retroactive check under Rule 9 - The tribunal noted a failure by the customs authority to perform the necessary checks with the issuing authority in Malaysia, which is a mandatory step when the authenticity of a certificate of origin is in question. - The tribunal set aside the impugned order, allowing the appeal, and invalidated the penalties and duties imposed on the appellant based on the flawed process of authenticity determination.
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Customs:
Import of Construction equipment - Violation of post-importation conditions of deployment - Benefit of N/N. 21/2002-Cus - recovery of duty - Despite non-utilization of the goods for the intended project due to contract termination and civil disturbances, the Tribunal ruled that non-utilization does not automatically invalidate eligibility. The premature seizure of goods during dispute resolution was deemed unjustified, leading the Tribunal to set aside the recovery of duty and confiscation, restoring the goods to the appellant for compliance with post-importation conditions.
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Customs:
Smuggling of the gold bars - bona fide baggage - The Tribunal found that the appellant knowingly avoided declaring the gold bars upon arrival, thus violating customs regulations. The failure to declare the goods at the Red Channel constituted a breach of customs laws and regulations. It concluded that the appellant had smuggled gold bars into the country as part of a larger scheme orchestrated by another individual. The Tribunal upheld the lower authorities' decision to confiscate the gold bars and impose penalties on the appellant.
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Customs:
100% EOUs - delay in fulfilment of export obligations - Customs Warehousing Licence for warehousing, manufacturing and export of software - Upon review, the Tribunal found that the appellant applied for an extension, which was ultimately granted by the Development Commissioner with retrospective effect, providing an additional five years to fulfill export obligations starting from May 2008. Critically, the Tribunal concluded that the impugned order was premature, as it was passed before the final decision on the extension request. Given the retrospective approval, the demands raised in the order were deemed unsustainable.
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Customs:
Classification of Goods - Imports goods in the nature of e-rickshaw in CKD condition - The Tribunal examines the essential components of the imported goods and determines that they do not constitute fully finished e-rickshaws. Despite having essential parts, the goods lack a battery, crucial for propulsion. Therefore, the Tribunal upholds the classification of the goods as spare parts of electric tricycles rather than complete e-rickshaws. - The Tribunal scrutinizes the interpretation of Rule 2(a) of General Rules for the Interpretation of the Harmonized System (GIR) and concludes that the lower authority's reliance on it was flawed. It emphasizes that statutory interpretation should align with the Customs Tariff Act and be purposive rather than strictly literal.
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Customs:
Smuggling of betel nut and black pepper of foreign origin - The Appellate Tribunal observed that while the ARDF report suggested the goods might be of Indonesian origin, it was not conclusively proven. As there was no definitive evidence establishing the goods as smuggled or foreign in origin beyond the ARDF report, the Tribunal held that the Revenue failed to discharge the onus to prove the goods' nature. Consequently, the Tribunal set aside the penalties imposed on the appellants, ruling in their favor.
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Indian Laws:
Recovery of time-barred debt - The Supreme Court reiterated that the Limitation Act only bars the remedy but does not extinguish the debt, aligning with precedents set in earlier Supreme Court judgments. - The judgment highlighted that specific recovery statutes are designed to operate independently of the Limitation Act, providing an alternative recovery mechanism that does not conform to the standard limitations period. - The Court seeks an authoritative pronouncement on these matters to ensure uniformity and clarity in the application of these laws, recognizing that such decisions could have wide-reaching effects on the legal and financial systems. - Matter placed before the Chief Justice to constitute an appropriate three-judge bench.
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Indian Laws:
Dishonour of Cheque - vicarious liability - resident Indian Director - The High Court observed that by virtue of being an Executive Director, the petitioner was presumed to be in charge and responsible for the company's operations under the NI Act and Companies Act. The court referenced several Supreme Court decisions to assert that the role of an Executive Director is distinctly accountable for the company's business conduct. The judgments clarified that persons holding managerial or directorial positions could be held accountable for corporate offenses unless they unequivocally demonstrate their non-involvement or exercise of due diligence. - Ultimately, the court dismissed the petitions, reaffirming the summons issued by the Trial Court.
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IBC:
Claim of appellant rejected on the ground that Resolution Plan has been approved by the CoC - right to claim consideration of claim again in third round - NOIDA’s status and claims - The Appellate Tribunal found that with the Resolution Plan's resubmission, previously rejected claims should be considered anew, especially since they are no longer barred by an approved plan. - NCLAT issued the directions as: The Adjudicating Authority must dispose of pending applications before the resubmission of the Resolution Plan. The SRA must incorporate any directions resulting from these applications into the revised plan. The CoC is to reconsider the revised plan only after these inclusions.
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IBC:
CIRP - Admissibility of Section 95 Applications against Personal Guarantors - discharge the liabilities of Personal Guarantors on approval of Resolution Plan - The Appellate Tribunal noted that the approval of a Resolution Plan does not automatically discharge the liabilities of personal guarantors, as established by the Supreme Court's judgment in Lalit Kumar Jain. - The Tribunal emphasized that even after the approval of a Resolution Plan, recourse against third parties, including personal guarantors, can still be pursued by Financial Creditors. - Regarding the effect of the Resolution Plan on personal guarantees, the Tribunal observed that the plan explicitly excluded guarantees from assignment and allowed the Financial Creditor to retain them. Therefore, the Adjudicating Authority rightly admitted the Section 95 Applications based on the provisions of the Resolution Plan.
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PMLA:
Money laundering - scheduled offences or not - proceeds of crime - offences under various sections of the Income-tax Act, 1961, in conjunction with sections of the Indian Penal Code, 1860 (IPC) - The Supreme Court reiterated that the existence of a scheduled offence is a prerequisite for establishing proceeds of crime under the PMLA. Since the offences alleged in the complaint did not qualify as scheduled offences, the Court ruled out the presence of proceeds of crime and consequently, the applicability of Section 3 of the PMLA.
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Service Tax:
Exemption from service tax - Legal services - Notary services - The court affirms that legal services provided by individual advocates or firms of advocates are exempt from service tax under specific circumstances. Additionally, if these services do not qualify for exemption, the liability shifts to the recipient under the reverse charge mechanism (RCM). - Senior advocates are also exempt from paying service tax, and the responsibility lies with the recipient of their services. - The court sets aside various orders, show-cause notices, and recovery notices issued by the tax department, as they are deemed to be without jurisdiction.
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Service Tax:
Valuation - C&F agent service - inclusion of reimbursement of expenses - charges collected for activities like loading, unloading, etc are includable in the assessable value or not - The Appellate Tribunal held that the charges received by the appellant, including reimbursable expenses, were part of the C&F agent service and thus subject to service tax. - The Tribunal observed that the expenses reimbursed to the appellant were not on an actual basis but were fixed on a lump sum per month. Therefore, it was held that these expenses were towards rendering C&F services and should be included in the assessable value for service tax purposes.
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Central Excise:
Reward to informers - Finalization of Case Against Assessee - While acknowledging the communication confirming the finalization of the case against the assessee, the court emphasized that the reward disbursement was subject to the closure of proceedings. The court observed that the demand for payment of Central Excise Tax by the assessee-company had not been resolved conclusively, as indicated by the pending writ petition. - The court reiterated that the final reward disbursement was subject to the closure of proceedings against the assessee. Even though the assessee had not disputed its liability towards duty payment, the court held that the reward could only be released after the finalization of proceedings.
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Central Excise:
Process amounting to manufacture or not - Process of separating foot oil, pressed wax, and paraffin wax from slack wax and residue wax - tilting, separating and pressing with hydraulic press - The Tribunal analyzed the process undertaken by the respondent, involving manual turning of drums, pouring contents onto gunny cloth for natural pressure, and using a hydraulic press for expediting the straining process. They observed that no machinery was used for separation, and the process did not result in new products. - They noted that the separated products retained the same characteristics as the original wax, as per technical literature and legal precedents. Therefore, the Tribunal held that the activities did not meet the definition of "manufacture" under the Central Excise Act, 1944.
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (5) TMI 515
Violation of principles of natural justice - opportunity of hearing to not provided to the petitioner by mentioning NA against column description Date of personal hearing - HELD THAT:- Once it has been laid down by way of a principle of law that a person/assessee is not required to request for opportunity of personal hearing and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order, the fact that the petitioner may have signified 'No' in the column meant to mark the assessee's choice to avail personal hearing, would bear no legal consequence. Even otherwise in the context of an assessment order creating heavy civil liability, observing such minimal opportunity of hearing is a must. Principle of natural justice would commend to this Court to bind the authorities to always ensure to provide such opportunity of hearing. It has to be ensured that such opportunity is granted in real terms. Here, we note, the impugned order itself has been passed on 05.11.2022, while reply to the show-cause-notice had been entertained on 06.09.2022. The stand of the assessee may remain unclear unless minimal opportunity of hearing is first granted. Only thereafter, the explanation furnished may be rejected and demand created - Not only such opportunity would ensure observance of rules of natural of justice but it would allow the authority to pass appropriate and reasoned order as may serve the interest of justice and allow a better appreciation to arise at the next/appeal stage, if required. The matter is remitted to the respondent no.2/Assistant Commissioner, State Tax, Sector-5, Mirzapur to issue a fresh notice to the petitioner within a period of two weeks from today - Petition allowed by way of remand.
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2024 (5) TMI 514
Levy of penalty - non filling up of Part 'B' of the e-Way Bill - existence of mens rea or not - HELD THAT:- In the present case, the facts are quite similar to one in M/S CITYKART RETAIL PVT. LTD. THRU. AUTHORIZD REPRESENTATIVE VERSUS THE COMMISSIONER COMMERCIAL TAX U.P. GOMTI NAGAR LKO. AND ANR. [ 2022 (9) TMI 374 - ALLAHABAD HIGH COURT] and there are no reason why this Court should take a different view of the matter, as the invoice itself contained the details of the truck and the error committed by the petitioner was of a technical nature only and without any intention to evade tax. Once this fact has been substantiated, there was no requirement to levy penalty under Section 129(3) of the Act. It is further noted that the respondents have not been able to indicate any mens rea on the part of the petitioner for evasion of tax. Such being the case, it is clear that penalty under Section 129(3) of the Act cannot be sustained. Petition allowed.
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2024 (5) TMI 513
Maintainability of petition - availability of alternative remedy - cancellation of the registration of the selling dealer with retrospective effect - Opportunity of cross-examine not provided - violation of principles of natural justice - HELD THAT:- It is no doubt true that the appellant has an effective alternate remedy by way of an appeal before the statutory appellate authority for which the appellant has to pre-deposit 10% of the disputed tax. However, in the facts and circumstances of the case, the appellant has not been given an effective opportunity to rebut the allegations, which have been made against the supplier and the transporter from whom statement/declaration has been obtained by the authority - Admittedly, the appellant has not been furnished with copies of the same nor has been afforded an opportunity of cross-examination, though such a request was specifically made by the appellant in his reply dated 18th December, 2023. Considering the fact that the appellant had no opportunity to cross-examine Mr. Shyam Sundar Tiwari or Mr. Ashoke Kumar Saha and the statement recorded from them were not furnished to the appellant, this is a fit case, where the matter should be remanded to the adjudicating authority for a fresh decision after affording an opportunity to the appellant - The appellant is bound to prove by proper evidence to establish the movement of goods (purchase/sales). Appeal disposed off.
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2024 (5) TMI 512
Violation of principles of natural justice - opportunity of personal hearing not provided - HELD THAT:- The SCN provides for details to be provided in connection with personal hearing inter alia, including the date, time and venue, apart from the date for providing reply no other particulars had been provided. Insofar as the column provided for the date, time and venue of personal hearing is concerned the same is filled up with the abbreviation N.A. . Admittedly, in this case, no personal hearing had been afforded to the petitioners. It is well-settled that before taking a decision under Section 73 of the said Act, the proper officer is obliged in terms of Section 75 (4) of the said Act to afford opportunity of hearing whether or not any request in writing has been received from the person. Such fact would corroborate from a plain reading of Section 75 (4) of the said Act, wherein it has been provided that an opportunity of hearing shall be granted where either a request is received in writing from the person chargeable with tax and penalty or where any adverse decision is contemplated against such person. The order passed by the proper officer under Section 73 of the said Act dated 29th December, 2023, cannot be sustained and the same is accordingly set aside - the proper officer is directed to dispose of the proceeding initiated under Section 73 of the said Act by affording the petitioners an opportunity of hearing. The entire proceeding under Section 73 of the said Act, should be disposed of by the proper officer not later than six weeks from the date of communication of this order on the basis of the observation made herein. The petition is disposed off.
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2024 (5) TMI 511
Rejection of the petitioner s claim for budgetary support - Violation of principles of natural justice - opportunity of personal hearing not provided to the petitioner - whether the budgetary support claimed by the petitioner for the month of July 2017 and August 2017 separately in their initial applications ought to have been favourably considered by the Assistant Commissioner, Central Goods Service Tax (respondent no. 3) although as per the respondent no. 3 the Budgetary Support Scheme envisaged working it out on a quarterly basis on claims to be filed on quarterly basis? HELD THAT:- The Budgetary Support Scheme clearly mandated that it should be worked out on quarterly basis for which claims shall be filed on a quarterly basis. Although the Circular dated 27.11.2017 permitted manual application for budgetary support for the quarter ending September, 2017 it did not digress from the mandate of paragraph 5.4 of the Budgetary Support Scheme requiring the filing of the claim on quarterly basis and working the same out also on quarterly basis. The Circular dated 10.01.2019 permitted the assessee to provide month wise details in the table annexed to the refund application to enable speedier and accurate verification of the refunds claims - The petitioner however, admittedly did not follow the budgetary scheme or the instructions of the two Circulars dated 27.11.2017 and 10.01.2019 and file the claim application on a quarterly basis. Instead the petitioner filed separate claims for the month of July 2017 and August 2017 under one covering letter. By this process the petitioner claimed budgetary support of Rs. 16,88,693/- for July 2017 and Rs. 1,54,00,360/- for August, 2017. No claim for budgetary support was made for September 2017. The budgetary support under the Budgetary Support Scheme is in the nature of grant and not refund of duty under taxation law. It was incumbent upon the petitioner to satisfy the requirements of the Budgetary Support Scheme and follow the procedure prescribed. When a procedure is prescribed, the petitioner while seeking the grant of budgetary support, is required to follow that procedure and not work out a different procedure for the authorities to follow. The fact that budgetary support was given to the petitioner for the other three quarters, it is evident that there was no malice on the part of the authorities while rejecting the claim for budgetary support for the quarter July 2017 to September 2017. It is to be noted that the petitioner makes no grievance about the applications filed by them for the other quarters for which budgetary support as sought for were granted. The Budgetary Support Scheme had envisaged the grant of budgetary support to be worked out quarterly on a claim made for the quarter and not for separate months. Therefore, when the petitioner was required by the authorities to modify their initial applications to a quarterly basis as required under the law they had no choice but to reflect the balance of ITC of CGST for the month of September 2017 as well. This led the petitioner to calculate their own budgetary support in the negative correctly as done in the application mentioned by the petitioner in the writ petition but filed by the respondent in the counter affidavit. This Court is of the view that the petitioner is not entitled to any relief as sought for in the present writ petition which is accordingly dismissed.
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2024 (5) TMI 510
Validity of determination of GST liability (demand) u/s 73(1) - Rejection of the compounding application - Eligibility for composition scheme u/s 10(2)(a) - notice for hearing the petitioner for determining the tax liability under Section 61 (3) of CGST/SGST Act, 2017 not issued - HELD THAT:- There has been violation of the statutory scheme in the present case by the second respondent. He ought to have first determined the eligibility of the petitioner for the compounding scheme and the order should have been passed for proceeding further in determining Tax liability under Section 73 of the Act. Without there being an order rejecting the application of the petitioner, notice under Section 73 has been issued. This is a complete violation of the Scheme of the Act and therefore, it is opined that the impugned order is unsustainable and it is hereby set aside. The matter is remitted back to the second respondent, first to determine the eligibility of the petitioner to the compounding scheme. The petitioner is directed to file reply to the show cause notice for rejection of the application under the composition scheme within a period of ten days from today. Petition disposed off by way of remand.
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2024 (5) TMI 509
Blocking the input tax credit against the petitioners - blocking in contravention to the provisions of Rule 86 (A) of the CGST Rules 2017 - SCN was not issued - violation of principles of natural justice - HELD THAT:- The plain perusal of the impugned order under challenge in this writ petition would show that the respondents have made an negative credit of Rs. 50,06,000/- in the electronic credit ledger of the petitioner which otherwise is not permissible and what is permissible is only blocking the availing of the input tax credit to whatever is in credit of the petitioner. Taking into consideration the decision of the Division Bench of Gujarat High Court in SAMAY ALLOYS INDIA PVT. LTD. VERSUS STATE OF GUJARAT [ 2022 (2) TMI 843 - GUJARAT HIGH COURT] which has also been relied upon by this High Court and by this very Bench in yet another writ petition M/S. SRI KRISHNA ENTERPRISES VERSUS THE SUPERINTENDENT OF CENTRAL TAX [ 2023 (11) TMI 957 - TELANGANA HIGH COURT] , it is found that the action on the part of the respondents in passing an order of negative credit to be contrary to Rule 86(A). In the event, if no input tax credit was available in the credit ledger, the rules does not provide for insertion of negative balance in the ledger and therefore what was permissible was only to the block the electronic credit ledger and under no circumstances could there had been an order for insertion of negative balance in the ledger. There are no hesitation in holding that the action on the part of the respondents also is in contravention to Rule 86(A) and also is in violation of the decisions rendered by the Gujarat High Court in the case of Samay Alloys India Pvt.Ltd. vs. State of Gujarat and also the decision of this Bench in SRI KRISHNA ENTERPRISES. The action on the part of the respondents is also not sustainable for the reason that blocking of the input tax credit effectively deprived the petitioner of his valuable right to discharge his liability and realize the value in monitory terms. In the event of the petitioner having wrongly availed input tax credit or have fraudulently availed the input tax credit, the right of the respondents were always open to initiate appropriate recovery proceedings under Section 73 or also under Section 74 rather than invoking Rule 86(A) when there was no input tax credit available in the credit ledger of the petitioner. As a consequence, the impugned order is set aside/quashed - petition allowed.
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2024 (5) TMI 508
Blocking of ITC of the petitioner challenged almost four months after such order (order of blocking) - HELD THAT:- It appears from record that against such impugned action petitioner has made a representation on 2nd January, 2024 before the authority concerned and just after nine days of making such representation petitioner has rushed to this writ Court without giving the authority sufficient time to consider such representation. Considering the facts and circumstances of this case this writ petition is disposed of by directing the respondent authority concerned to consider the aforesaid representation of the petitioner dated 2nd January, 2024 in accordance with law and by passing a reasoned and speaking order after giving an opportunity of hearing to the petitioner or its authorised representatives within two weeks from the date of communication of this order.
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Income Tax
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2024 (5) TMI 507
Faceless Assessment Center u/s 144-B - territorial jurisdiction - Determination of geographical location of the assessing authority - petitioner's PAN is mapped to ITO Ward 4(1)(1), Aligarh i.e. the jurisdictional assessing authority of the assessee - objection raised by revenue that the present petition may not be entertained by this Court as the assessee filed its return from outside the State of U.P. and the assessment order has been passed by the Faceless Assessment Center, is misconceived - HELD THAT:- In the scheme faceless assessment being implemented by the revenue under the Act, the concept of geographical location of the assessing authority has been rendered largely irrelevant for the purpose of determining the territorial jurisdiction of the High Court to which such assessing authority may abide. Faceless Assessment Center located at place 'A' may therefore remain simultaneously amenable to the writ jurisdiction of different High Courts exercising their territorial jurisdiction over different assessees residing within the territories of different States, whose assessment case may be handled by such Faceless Assessment Center. To determine the issue of territorial jurisdiction, the residence of an assessee in the PAN registration details may remain vital and decisive. Once it is not disputed to the revenue that the petitioner-assessee continues to be registered inside the State of U.P. on its PAN registration, the preliminary objection being raised as to territorial jurisdiction cannot be accepted. Vital part of the cause of action has arisen to the petitioner inside the U.P. upon service of assessment order etc. On merits, the petitioner would submit, the assessment order dated 27.03.2024 exceeds and thus departs from the show cause notice preceding the order, being notice dated 15.03.2024. The additions proposed in the notice dated 15.03.2024 do not match with the additions made. In fact, the additions exceed the enhancement proposed. In view of the above, we find, inadvertent mistake crept in the assessment order as may not allow the impugned order dated 27.03.2024 to be sustained. Accordingly, no useful purpose may be served in keeping the present petition pending or relegating the petitioner to the forum of alternative remedy, as submitted by revenue. Once the mistake cannot be disputed and it goes to the root of the matter, no fruitful purpose may ever arise in remitting such a matter to the forum of alternative remedy wherein in any case, power to remand to the assessing authority has been done away by virtue of the amendment made to Section 251 of the Act. Accordingly, the second preliminary objection as to availability of alternative remedy is also rejected.
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2024 (5) TMI 506
Non-jurisdictional AO proceeding with the assessment - absence of any order of transfer u/s 127 - whether, in the absence of any decentralization order or transfer order made under Section 127 of the Act, the case of the assessee can be transferred from the board of one AO to another? - HELD THAT:- As legislative mandate enshrined under Sections 120, 124 and 127 of the Act and the judicial pronouncements mentioned above, it is clear that Section 124 of the Act deals with the jurisdiction of the assessing officers, whereby, the AO has been vested with the jurisdiction over any person carrying on business or profession over any prescribed territorial limit or where the principal place of business of persons is within such area and any person residing within such prescribed territorial limits. However, in cases where the case was transferred from one AO having jurisdiction over the assessee to another AO who otherwise did not have jurisdiction in terms of the direction of the Board under Section 120 and 124 of the Act, then transfer order under Section 127 is mandatory, without which the jurisdiction of the AO cannot be conferred to pass any assessment order. It is imperative to point out that the underlying objective of such a statutory procedure is to avoid chaos and to ease the administrative convenience on the part of the Revenue for coordinated investigation. The word case includes the umbrella or class of all cases related to the assessee, wherein, the order has been passed under Sections 120 and 127 of the Act. Section 127 of the Act is a machinery provision and it must be construed in a manner to finally effectuate a charging section and for the purpose of effective collection of tax. Considering the case in hand, vide order of centralization dated 16.07.2008, the case of the assessee was transferred from the jurisdictional AO to the DCIT, Central Circle-16, New Delhi. It be noted that since AY 2008-09 to AY 2015-16, the assessee was being assessed by the office of DCIT, Central Circle-16/20, New Delhi. Furthermore, as the record would reflect that the case of the assessee was transferred to ITO Ward 21(1), New Delhi without any transfer order passed under Section 127 of the Act, which is a pre-requisite before transferring the case. As noted that till date no decentralization order has been placed before us which may evidence a legitimate transfer of the assessee s case from DCIT, Central Circle-16/20, New Delhi to ITO Ward 21(1), New Delhi. Furthermore, we find no merit in the contention of the Revenue that by virtue of an order dated 15.11.2014 passed under Section 120 of the Act under the pen of ACIT read with CBDT notification dated 22.10.2014, the office of ITO Ward 21(1), New Delhi has inherent jurisdiction over the assessee. Such a position if accepted would lead to confusion and chaos as it would lead to a position where at one point, one or more assessing officers not only will have jurisdiction over the assessee but also can proceed with the assessment proceedings simultaneously. Such a situation cannot be countenanced in the law. Once the case of the assessee is centralized, then the transfer of the case of the assessee to another AO would not be permissible without a decentralization order or transfer order under Section 127 of the Act as contrary to such a position dehors the underlying objective which the Act seeks to achieve by virtue of powers enshrined under Section 127 of the Act. We accordingly set aside the impugned orders Writ petition is allowed.
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2024 (5) TMI 505
Validity of assessment u/s 153C - alternate efficacious remedy exists - whether before passing the impugned order, an opportunity of hearing was given to the assessee and if the answer is in the affirmative, then whether the AO has duly considered the assessee s reply? - HELD THAT:- This Court can exercise the writ jurisdiction, in the presence of an alternate efficacious remedy, on the quartet of exigencies namely where: (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of legislation is challenged. However, it is crystal clear that the present is not the case where the principles of natural justice have not been met or the AO has not duly applied his mind before passing the impugned order. Therefore, there is no occasion for this Court to exercise the extraordinary powers enshrined under Article 226 of the Constitution as none of the exigencies noted above have been met in the instant case. Therefore, we find ourselves unable to invoke writ jurisdiction to set aside the impugned order. Writ petition is dismissed and disposed of, along with pending applications, if any.
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2024 (5) TMI 504
Reopening of assessment - two simultaneous assessments proceedings initiated against the same transaction amount - penalty notice u/s 271 AAC issued on an uncertain Assessment Order - as submitted by petitioner that in case of search of premises/offices of Omaxe Group, some papers have been discovered by the authorities then Section 153A and 153C would apply and not Section 147 and 148 - HELD THAT:- This Court is of the opinion that the impugned notice for AY 2019-20 u/s 148(A) (d) and the Final Order passed u/s 148(A) (d) on 27.03.2023 for AY 2019-20 can both be looked into in appeal that is pending before the Commissioner of Income Tax. The protective Assessment Order that has been issued u/s 147 read with Section 144 B, has also been challenged in an appeal before the CIT. A show cause notice issued for imposing penalty for AY 2019-20 which has been challenged could not have been issued unless the Assessment Order for the AY 2019-20 had been finalised in appeal. We have come to this conclusion on the basis of observations made in Bhailal [ 2014 (10) TMI 621 - GUJARAT HIGH COURT ] The show cause notice does indeed say that in case the petitioner has filed an appeal or has filed objections, copy of such appeal/objections be submitted along with the answers by the Assessee but the time limit for such submission has already expired. The petitioner has not submitted any reply to the show cause notice for imposing penalty as the petitioner had challenged the jurisdiction of the Assessing Officer in issuance of such show cause notice only on the basis of a protective Assessment Order. We have not been shown any document to say that even after time limit i.e. 25.04.2024 has expired, any final penalty has been imposed u/s 271AAC therefore, this Court is of the opinion that no such final orders imposing penalty should be passed till the appeal of the petitioner is decided by the CIT - Petitioner is at liberty to approach the AO and file a detailed reply along with documents to the notice issued u/s 271 AAC (1).
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2024 (5) TMI 503
Levy of interest u/s 234B - HELD THAT:- In view of the decision of Manasarovar Commercial (P) Ltd. v. CIT ( 2023 (4) TMI 419 - SUPREME COURT ) the first question is answered in favour of the Revenue and is not pressed by Appellant. Deduction u/s 80-O - brandishing newspaper cuttings as proof to show 'information concerning commercial knowledge and experience '- Appellant was obliged to provide information to Arianespace regarding current regulations and market conditions in India - Deduction denied as information provided by Appellant pursuant to the said agreement comprised only of newspaper cuttings freely available and hence, cannot be treated as 'information concerning commercial knowledge and experience', there were no written reports of any analysis, Appellant had no experience in Satellite business and there was nothing to indicate that the information was utilized outside India - HELD THAT:- It is clear that approval was accorded by the CCIT on the basis of specific statements made by Appellant that information to be shared pursuant to the agreement was that collected and collated from User Departments and analysis and assessments were to be done during quarterly meetings. Newspaper cuttings are not precluded from being shared as information but by themselves they do not constitute any commercial expertise. AO is well within his rights to request Appellant to furnish proof of sharing the information with Arianespace for which approval was granted by the CCIT. From the replies of Appellant to the AO, it is quite clear that Appellant has not provided material to Arianespace as represented by it before the CCIT while seeking approval as newspaper cuttings are not information collected or collated from User Departments. The application form for approval specifies providing commercial assistance to Arianespace as contemplated under Section 80-O of the Act based on which approval was procured. Thus, we have no hesitation in accepting the decision of the AO in rejecting this claim of Appellant. AO is well within his jurisdiction to verify whether the information shared is attributable to the information or service contemplated by the provision. The AO is in fact required to make such an enquiry and for that purpose the assessee is required to place on record requisite material supporting its claim for deduction and on the basis of which approval was procured from the CCIT. The present case displays an obvious attempt on the part of Appellant in creating an illusion of acting in aid of the agreement, on the basis of the approval granted by the CCIT, while at the same time refusing to produce any evidence in respect of which relief is being sought. Merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Act. Decided against assessee.
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2024 (5) TMI 502
Condonation of delay in filing of revised return of income - CBDT rejecting petitioner s application u/s 119 - delay in filing the returns of Income based on the recasted accounts - Resignation by the statutory auditors happened before completing their term and reference made to unauthorised and undisclosed transactions - order passed by which the NCLT was pleased to grant permission to applicant, i.e., MCA for reopening of the books of account and recasting of financial statements of Respondent No. 1, i.e., petitioner herein and its subsidiary companies for past five years HELD THAT:- By a letter dated 2nd December 2022 the PCCIT strangely advised that the condonation of delay application be rejected. This appears to have been made on the prompting made by the Board because by a letter dated 30th November 2022 the Board called upon the PCCIT to submit once again the specific comments/recommendations on the merits of petitioner s application with reference to Board Circular No. 9 of 2015 dated 9th June 2015 governing condonation of delay under Section 119 (2) (b) of the Act. There is no explanation whatsoever why there was a change in the stand taken from what was taken earlier. We fail to understand when the order under Section 130 (2) of the Companies Act has been passed by the NCLT to recast the accounts on an application filed by the MCA, Government of India and the accounts have been recasted and accepted by the NCLT and also filed with the RoC under the Ministry of Corporate affairs, how could the Income Tax Department raise such frivolous objections that the delay in filing the returns of Income based on the recasted accounts should not be even condoned. This Hon'ble Court pleased to issue a writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under article 226 of the Constitution of India directing the Respondent Nos. 1 to 5 to allow the Petitioner to file revised returns of income and revised computations of income prepared in accordance with/based on the re-casted/revised books of account and financial statements for assessment years 2015-16 to 2020-21 and to assess the Petitioner's income chargeable to tax based on the same. Petitioner shall file physical returns of income based on books of account, revised/recasted under Section 130 (2) of the Companies Act, 2013, as taken on record by the NCLT for A.Y. 2015-16 to A.Y. 2020-21 before the JAO within 30 days from the date this order is uploaded.
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2024 (5) TMI 501
Bogus LTCG - bogus penny stock script purchases - exemption u/s 10(38) denied - I TAT deleted addition - HELD THAT:- The shares of Sunrise Asian Ltd. are listed on Bombay Stock Exchange, shares have been purchased through D-mat Account and payment have been received through Banking Channel and Security Transaction Tax has been paid by Stock Exchange. Thus, all the conditions for availing exemption have been fulfilled. As truly contended that under Income Tax Act there is no provision which requires the Assessing Officer to investigate the genuiness of the shares because these share are listed, issued by the Company and records are maintained with the Register of Companies. Thus, these shares cannot be said to be bogus shares as have been issues and subscribed under the Companies Act. The revenue has failed to appreciate that how these shares can be termed as Bogus Shares, when these shares have been issued by the Company incorporated under the Companies Act by following the provisions and procedures prescribed under the Companies Act, 1956 Thus it is incorrect notion of the Revenue that these shares are bogus shares, on the contrary these shares are genuine and lawfully issued share by the company by following the law and procedure in this regard. The Assessing Officer has heavily relied upon report of Investigation Wing of Income Tax Department which was conducted in Kolkata in case of some of the Companies including M/s. Sunrise Asian Limited. This report has never been provided to the respondent at any stage of the proceedings nor filed by the department before ITAT or before this Court. It is settled law that no material can be used against the assessee without providing the assessee to examine it and, if required, to cross examine. Thus, there was violation of principles of natural justice. That on similar set of facts and in respect of the same share script of M/s Sunrise Asian Ltd. the Mumbai Bench of ITAT in case of (1) Narayan Ramchandra Rathi[ 2019 (8) TMI 1520 - ITAT MUMBAI] (2) Dipesh Ranmeshchandra Vardhan [ 2020 (8) TMI 405 - ITAT MUMBAI] and, (3) Anraj Hiralal Shah[ 2019 (9) TMI 719 - ITAT MUMBAI] has dealt with the identical issue and decided in favour of the assessees. Thus no substantial question of law arises from the order of the ITAT requiring consideration by this Court.
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2024 (5) TMI 500
Assessment completed u/s 144C against a petitioner/Non-Resident Indian - definition of an eligible assessee - HELD THAT:- Section 144 C is not a substantive provision. It is machinery provision which has been incorporated for the benefit of the assessees including the eligible assessee. The NRI has been included in the definition of eligible assessee under Section 144C (15) (b) (ii) w.e.f. 01.04.2020 and, therefore, the assessment proceedings in respect of an NRI undertaken after the said date are to be governed under the provisions of Section 144C. The objection of the petitioner that the petitioner ought not to have been proceeded under Section 144 C does not have merit. The assessment proceedings have been finalised u/s 144 C which is a machinery provision and in fact beneficial to the assessee. Therefore, find no substance in the 1st objection raised by the petitioner. Question of limitation - timeline has been given in the statement which would clearly state that the final order of assessment has been passed strictly in accordance with the provisions of Section 144C and the general provision of Section 153 or 153B would not be applicable in the present case . Therefore, the 2nd objection also does not have merit and substance. Further, the petitioner has never raised objection in respect of the petitioner not being covered within the provisions of Section 144C before the assessing authority, which is evident from the assessment order itself. WP dismissed.
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2024 (5) TMI 499
Stay petition - interim order staying the enforcement of the demand pursuant to the respective demand notices in the light of the submission that 20% of the demand has been deposited - HELD THAT:- The net effect of the submissions is that the petitioner s appeals as against the relevant assessment orders will have to be considered by the Commissioner of Income Tax [Appeals]-12 in the light of the Division Bench s order in [ 2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and there cannot be precipitation for recovery of the demand especially with the petitioner having deposited 20% thereof. It would not be out of place to record that where the assessment orders have been called in question by the assessees in the writ petitions on the ground of jurisdiction, those writ petitions are being disposed of in the light of the Division Bench s order [supra] but with liberty to the concerned assessees to seek revival of the petitions in the event the Revenue succeeds in the proceedings commenced before the Hon ble Supreme Court as against the Division Bench s order. This liberty is reserved wherever, apart from the ground of jurisdiction, the ground such as violation of principle of natural justice and other grounds are urged. As it would be just to reserve liberty to the petitioner to seek early disposal of the pending appeals before the Commissioner of Income Tax [Appeals]-12. If the reason for the assessment and the present petition is the demand notices for recovery of 100% demand based on the impugned assessment orders, and if 20% of the demand is already deposited, it cannot be gainsaid that with the Division Bench s order there cannot be further precipitation
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2024 (5) TMI 498
Exemption u/s 10(23C)(iiiad) - Threshold limit of Rs. 1 Crore - denial of exemption as gross receipts of the assessee exceed the stipulated limit of Rs. 1 crore - DR argued that the assessee society is running educational institutions with single PAN, therefore, the gross receipts of the assessee required to be considered for the purpose of section 10(23C)(iiiad) and assessee neither has registration u/s 12A nor any approval u/s 10(23C)(vi) of the Act to claim exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of the assessee exceeded Rs. 1 crore - HELD THAT:- The gross receipts of the society from Degree college was Rs. 84,81,714/- and the junior college was Rs. 18,66,811/-, which has not exceeded the threshold limit of Rs. 1 crore individually or even put together, if the receipts pertaining to F.Y.2015- 16 amounting to Rs. 10,82,585/- were excluded from the gross receipts of Rs. 1,03,48,525 and the balance comes to Rs. 92,65,940/-. Thus as the gross receipts of the assessee society did not exceed the threshold limit of Rs. 1 crore. Hence, respectfully following the decision of St.Mary s English Medium School Society [ 2020 (2) TMI 1139 - ITAT VISAKHAPATNAM ] we hold that the assessee is entitled for exemption u/s 10(23C)(iiiad) of the Act - Decided in favour of assessee.
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2024 (5) TMI 497
Denial of deduction claimed under Chapter VI-A i.e. Section 80G/80GGA read with Section 35AC - donations paid to the eligible institutions - as argued appellant right since AY 1993-94, was computed in the status of AOP and deduction u/s 80GGA r.w.s. 35 AC was granted year after year - HELD THAT:- We find that admittedly the assessee has not claimed the benefit of Section 11 and 12 of the Act as it is reflecting the AO, CPC s intimation order issued u/s 143 (1) of the Act. If that be so, then we find that the assessee is entitled to deduction u/s VI-A/80G/80GGA r.w.s. 35 AC of the Act. We also note that the assessee has been granted relief as claimed for since 1993-94 and even also in the scrutiny assessment for Assessment Year 2013-14 which is also on record. In fact, such claim of the assessee has not been able to be controverted by DR by producing any evidence contrary to the same at the time of hearing of the instant appeal. As considered the order passed by the coordinate bench on the identical facts and circumstances of the case wherein the said assessee trust has been granted relief u/s 80GGA r.w.s. 35AC of the Act. Paper book filed before us contains the details of donations made by the assessee to Janki Bajaj Gram Vikas Sansthan along with other donations made by the assessee to the other trusts. Veracity of the donations made by the assessee on which the claim u/s 80GGA r.w.s. 35AC of the Act has been made, has not been done by the authorities below. We are disposing of this appeal with the direction upon the Ld. AO to verify the details of donations made by the assessee and grant relief to the assessee in the light of the observations made hereinabove.
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2024 (5) TMI 496
Penalty u/s 271(1)(c) - unexplained expenditure u/s 69C and unaccounted cash receipt - HELD THAT:- Tribunal s finding vide order [ 2022 (1) TMI 1328 - ITAT AHMEDABAD] clearly reveals that the assessee has disclosed all the relevant material before the AO during the assessment proceedings and, therefore, the element of concealment of income or furnishing of inaccurate particulars of income will not arise in the present scenario. In respect of disallowance of interest incurred on unsecured loan, the assessee has not prayed this ground and, therefore, the addition was sustained. Thus, this cannot be stated as concealment of income or furnishing of inaccurate particulars of income. Thus, CIT(A) has rightly granted partial relief to the assessee and there is no need to interfere with the same. Appeal filed by the Revenue is dismissed. Penalty u/s 271D - Directors of the Company given cash loans in order to enable the Company to incur various expenses including the investment in land - CIT(A) confirmed the penalty u/s 271D of the Act and deleted the remaining amount relatable to share application/investment - HELD THAT:- The very objection of the CIT(A) appears to be contradictory when documents shown by the assessee and the findings given by the Tribunal [ 2022 (1) TMI 1328 - ITAT AHMEDABAD] . Since the addition itself was deleted by the Tribunal and the Assessing Officer has taken partial penalty proceedings u/s 271(1)(c) and 271D, AO has not segregated the findings independently and has not pointed out how the violation of Section 269SS has taken place in the present 271D proceedings. Thus, appeal of the assessee is allowed. Penalty u/s 271E - It is pertinent to note that the assessee has given explanation before the AO as to how the loan was repaid and that explanation in fact was accepted by the Tribunal vide order dated 13.01.2022. Thus, the very finding given by the Tribunal confirms that the assessee has categorically given the explanation related to the repayment of loans which was paid through directors/Preet Patel and Pravin Patel. In fact, Ghanshyam Gandhi also have repaid the loan. Thus, the imposition of penalty u/s 271E of the Act will not sustain.
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2024 (5) TMI 495
Application seeking approval u/s 80G(5)(vi) rejected - assessee trust was granted provisional registration u/s 80G in Form 10AC - application for regular registration was rejected stating that some of the objects of the applicant/assessee are religious in nature - HELD THAT:- It is evident that the assessee trust is granted registration u/s 12A by the CIT(E) with the same objectives as enlisted in the trust deed. Though the assessee trust is established with some of the objectives involved in certain religious activities, on perusal of the audited financial statements, more particularly from the Income Expenditure account for the periods, submitted as a part of paper book and also as submitted to Ld. CIT(E), it is not emanating that the assessee trust had incurred any expenditure on religious activities. No show cause notice was issued to the assessee before rejecting the application u/s 80G by Ld. CIT(E). The show cause notice holds immense significance in income tax proceedings, ensuring procedural fairness and safeguarding the rights of taxpayers. There are many judicial pronouncements which have reinforced the indispensability of this notice, emphasizing that orders issued without its adherence may be deemed invalid. On perusal of financials, facts, and circumstances of the present case, after thoughtful deliberations, we are of the opinion that the order passed by CIT(E) is bad at law. We are of the considered view that the assessee trust having not spent any money on religious purposes, is eligible for grant of approval u/s 80G(5) of the Act - Appeal of the assessee is allowed.
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2024 (5) TMI 494
Disallowance of employees' contribution to provident fund u/s. 43B - HELD THAT:- Issue decided against assessee in the light of decision of Hon ble Apex Court in the case of Checkmate Services (P.) Ltd [ 2022 (10) TMI 617 - SUPREME COURT] Disallowance u/s. 35D - AR submitted that the CIT(A) has not at all considered the alternative plea of the assessee while deciding the issue/ground and in fact has given his dismissal for which the Ld. AR requested that the matter may be remanded back to the file of the CIT(A) for proper adjudication of the issues - HELD THAT:- It is pertinent to note that in fact while deciding this issue, the CIT(A) has not given any independent finding and in fact has not considered or adjudicated the assessee s alternative plea. Therefore, it is appropriate to remand back this entire issue to the file of the CIT(A) for proper adjudication of the same in consonance with the assessee s plea before the CIT(A) and the issue be decided as per the Income Tax Statute. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. Ground no.1 is partly allowed for statistical purpose. TP Adjustment - Selection of MAM - CIT(A) affirming TPO s action of rejecting most appropriate method (MAM) adopted by the assessee - AR submitted that the rejection of CUP method for benchmarking purchase transaction was not justified on the part of the TPO as the TPO himself has accepted CUP as most appropriate method for the same set of transactions carried with the Associated Enterprise (AE) in preceding years - HELD THAT:- CIT(A) has totally failed to take into account profit margins as well as how the comparables which were selected by the TPO are not as per the filters given by the TPO himself. The product is manufactured by the assessee as per the specification and quality needed by the AE for which necessary technical assistance for setting up, commissioning and running of plants and training of the Indian Technicians was provided by the AE. All the functions of manufacturing are performed by the assessee according to the needs of the AE and in case the AE is unable to purchase the product, the AE will be liable to pay the entire amount equivalent to interest and instalment to the Bankers of the assessee. The risk factor was upon the AE and, therefore, the assessee while calculating the gross profit margin of the comparable has taken into consideration only the cost incurred in manufacturing process. All these aspects including that of adjustments and other comparables in respect of actual rate of cost along with capacity utilisation adjustment were much below to that of assessee s units. The TPO has not looked into these aspects along with the appropriate method taking into consideration the assessee s manufacturing activities and its sale transactions. The assessee is 100% export unit (98%). Thus, the TPO as well as the CIT(A), both the Authorities have failed to take cognisance of the same and was not right in rejecting the contentions of the assessee. Therefore, the TPO is directed to look into the same. Matter is remanded back to the file of the TPO for proper adjudication. Appeal of the assessee is partly allowed for statistical purpose.
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2024 (5) TMI 493
Revision u/s 263 - Bogus LTCG/Share transaction - as per CIT AO failed to make necessary enquiries to ascertain the actual strength of the company, investment profile of the assessee - assessee entered into transaction of only scrip (Suchak Trading Ltd) and the examination and inquiry of five entities, who purchased the shares sold by assessee, were left open without appropriate conclusion - as argued PCIT has not initiated this review on his own and therefore he was not right in assuming the jurisdiction - HELD THAT:- DR, in reply, explained that the review proposal sent by AO to PCIT is part of their internal procedure and Ld. PCIT has carried independent inquiry of the subject matter of review. It is also clear from the material available on records that the AO in his proposal itself has stated that the assessment order is passed without proper examination of the facts. We also take into consideration the fact that LD. PCIT, in his order, has distinguished the judicial pronouncements on which the assessee relied on. Clause (a) of the Explanation 2 to section 263 empowers PCIT to invoke section 263. Clause (a) talks about the inquiry or investigation having not been made by the A.O., which should have been made . The phrase should have been done as provided in this clause means the verification/ enquiry which ought to have been done. Considering this provision coupled with the observations recorded by the Ld. PCIT as mentioned in the facts of the case above, we are of the opinion that the Ld. PCIT has exercised his discretion reasonably. Ld. PCIT has applied his mind to the record his reasons for assuming the jurisdiction - no infirmity in the order of the Ld. PCIT in directing the AO to pass a fresh assessment order after allowing adequate opportunities of being heard to the assessee. Appeal filed by assessee is dismissed.
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2024 (5) TMI 492
MAT provision applicability on banking company u/s 115JB - HELD THAT:- Whether the provision of Section 115JB of the Act is applicable to a banking company has already been decided in case of Union Bank of India [ 2019 (5) TMI 355 - BOMBAY HIGH COURT] wherein it has been held that prior to its amendment by Finance Act, 2012, the provision of the computation of book profit tax u/s 115JB of the Act would not be applicable to banking company governed by the provision of Banking Regulation of 1949. It is not in dispute that assessee is a banking company. Accordingly, we do not find any infirmity in the order of the learned CIT (A), who relied upon the decision of the Hon'ble Bombay High Court and also the decision of the co-ordinate Bench in assessee s own case. Accordingly, as such impugned assessment year i.e. A.Y. 2005-06, we do not find any reason to hold that provision of Section 115JB of the Act applies to the assessee company prior to 1st April, 2013. Accordingly, ground Nos., 1 and 2 of the appeal are dismissed. Allowability of interest u/s 244A(1A) - HELD THAT:- Admittedly, in this case, the co-ordinate Bench has passed the order on 30th March, 2016. The order giving effect of such order was passed by the learned Assessing Officer on 19th March, 2021. This order was served to the assessee on 3rd September, 2021, therefore, apparently the assessee is entitled to interest from the date of receipt of the order by PCIT till the order is received by the assessee. Therefore, the assessee is held to be eligible for interest from 1st January, 2017 to 3rd September, 2021. The appeal effect order is passed after the introduction of this section and therefore, despite the assessment year being 2005-06, the assessee is eligible for the above interest because of the reason that when appeal effect order was passed, such provision was there on the statute book. - Decided against AO.
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2024 (5) TMI 491
Disallowance u/s 14A - Mandation to record satisfaction - assessee has computed a suo moto disallowance of administrative cost and Demat charges - HELD THAT:- According to Section 14A (2) of the Act, it is the duty of the AO to first record his satisfaction that why the claim of the assessee is not correct according to him on verification of the accounts of the assessee. There is no whisper in the assessment order about examination of claim of the assessee, holding such claim as not correct on examination of accounts of the assessee. Thus, The AO has failed to record his satisfaction as provided under that section. Thus without recording of the satisfaction about the correctness of the claim of the assessee, the learned Assessing Officer does not have any authority to compute the disallowance by application of Rule 8D. The learned CIT (A) is also incorrect in holding that the learned Assessing Officer has recorded any satisfaction as provided under Section 14A (2) of the Act. Decided in favour of assessee. Charging of interest u/s 234D - HELD THAT:- We direct the AO to verify whether the provision of Section 234D is applicable or not in this case and, if no such interest is chargeable, delete the demand of interest to that extent.
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2024 (5) TMI 490
Addition u/sec. 56(2)(vii) - Difference in value of agricultural land purchased from value of property for stamp duty purpose - HELD THAT:- DR failed to rebut the clinching fact that the foregoing differential amount nowhere 10% of the actual sale price as per sec. 56(2)(vii)(b) 3rd proviso adopting the tolerance margin given in sec. 50C(1) 3rd proviso mutatis mutandis . As argued that the tolerance margin of 10% in sec. 50C(1) 3rd proviso substituting 5% by the Finance Act, 2020 is applicable w.e.f. 01.04.2021 whereas the impugned assessment year herein is 2014-2015. No merit in the Revenue s instant arguments in light of C. Maria Fernandes vs. ITO [ 2021 (1) TMI 620 - ITAT MUMBAI] holding the foregoing tolerance margin as carrying retrospective effect. We delete the impugned addition made u/sec. 56(2)(vii) in very terms since falling within the statutory tolerance margin of 10% - Assessee s appeal is allowed.
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2024 (5) TMI 489
Denial of 80P(2)(a)(i) deduction - interest income earned on its investments amount made with SBI out of internal fund (Share Capital plus other Funds) constituting its income from the business of providing credit facilities to the members - allowing the proportionate interest paid to the members of the society as well as administrative expenses u/s. 57(iii) - HELD THAT:- As relying on Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd [ 2022 (1) TMI 1309 - GUJARAT HIGH COURT] interest received on such investments by assessee is not eligible for deduction u/s. 80P(2)(a)(i)/80P(2)(d) on such interest received from State Bank of India (SBI). Since the interest income received on such investments from State Bank of India is not attributable to main business of the appellant, hence needs to be assessed as income from other sources . Since the interest income received by the appellant was not attributable to the main business of the appellant the same should not be allowed as deduction u/s 80P of the Act. We further note that the revenue authorities have treated the entire income as income from other sources. The entire interest income cannot be taxed if the assessee has incurred expenses towards earning of such income. We further note from the financial statement as on 31.03.2016 that FD with SBI is Rs. 4,36,328,811, however the internal fund is Rs. 5,17,72,069/- which is more than investments made with SBI, it shows that the assessee has not utilized external funds for investment with SBI. Therefore, relying on the judgment of Totgars Co-operative Sales Society Ltd [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT] the assessee is eligible for claim of its expenditure towards earning of such interest income. Accordingly, the assessee is directed to provide the details of expenditure for earning interest income before the assessing officer. Therefore for allowing expenditure, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income. Appeals of the assessee are partly allowed for statistical purposes.
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2024 (5) TMI 488
Revision u/s 263 - setting aside assessment order passed u/s 147 of the Act for de-novo assessment - HELD THAT:- We note that for reopening of the assessment u/s 147 r.w.s. 148 of the Act, the Assessing Officer must have reasons to believe that the income of the assessee for the relevant assessment year has escaped assessment. The said reasons to believe could be based on any tangible material or information received by the Assessing Officer. In this case, the letter written by the assessee to the AO was nothing else, but an information received by the Assessing Officer of escapement of income of the assessee for the year under consideration. However, merely because the information of escapement of income was received from the assessee itself that itself did not give any jurisdiction to the AO to surpass the mandate of the statutory provisions as provided u/s 151 of the Act to get the necessary approval from the competent authority before issuing notice u/s 148 of the Act. Therefore, the reopening of the assessment u/s 147 r.w.s. 148 of the Act in this was bad in law for want of jurisdiction of the Assessing officer to reopen the assessment without approval of competent authority u/s 151 of the Act. Thus since the base order passed u/s 147 r.w.s. 148 of the Act was bad in law being without jurisdiction for want of approval of the competent authority, therefore, the subsequent proceedings/orders which were on the basis of the said order passed u/s 147 of the Act are also held as bad in law. In view of the above discussion, the assessee succeeds on the legal ground. PCIT exercised his revision jurisdiction in respect of order passed u/s 147 wherein the issue of share subscriptions was not the subject matter of reassessment - As assessment was reopened on a particular issue of the escapement of income earned by the assessee as profit on share dealing. The Assessing Officer examined that particular issue and made addition in respect of the said profits earned by the assessee. The issue relating to any other transaction i.e. share application money received by the assessee, was not the subject matter of the reassessment proceedings. Since, the issue of share application money on which the ld. PCIT has sought to revise the order was not the subject matter of the reassessment order, therefore, in the light of the decision of Alagendran Finance Ltd [ 2007 (7) TMI 304 - SUPREME COURT] it cannot be said that the reassessment order passed by the Assessing Officer was erroneous, therefore, the revision jurisdiction exercised by the ld. PCIT, in this case, cannot be held to be justified. In view of the discussion, since, the revision order passed by the Ld. PCIT u/s 263 of the Act was without jurisdiction, therefore the consequential assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 263 of the Act was also not sustainable. Addition u/s 68 - assessee had failed to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction - Assessing Officer to get the identity and creditworthiness of the said share subscribers verified, had issued notices u/s 133(6) of the Act, which were duly complied with by all the share subscribers during the remand proceedings and they furnished the necessary details. Not only this, the Assessing Officer also issued summons u/s 131 of the Act and all the directors of the share subscribing companies personally appeared and their statements were recorded. Copies of the bank accounts of all the share subscribers were also furnished and all the share subscribers duly confirmed that they had made share subscription in the assessee company. The ld. CIT(A) has also noted that the Assessing Officer, himself, has admitted that the directors of the share applicant companies and source of such investor companies belonged to the same family and he produced the family tree to prove that funds were coming from the same companies with common family members. The ld. CIT(A) observed that this fact, itself, establishes that the share subscribers were interested parties for promotion of the assessee company and therefore, justification of premium was also proved. CIT(A) had discussed the creditworthiness and financials of each of the 9 shareholders and has also observed only a part of their net worth was invested by the share subscribers into assessee company. The ld. CIT(A) has also relied various case laws including that of Sagun Commercial P Ltd. [ 2011 (2) TMI 1555 - CALCUTTA HIGH COURT] CIT(A), thereafter, impugned order has concluded that the identity, creditworthiness and genuineness of the transactions were duly established in this case. Decided in favour of assessee.
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2024 (5) TMI 487
Validity of Revision u/s 263 - assessment order passed u/s 147 r.w.s 143(3) set aside - as per CIT order AO passed u/s 147 r.w.s. 143(3) was erroneous and prejudicial to the interest of revenue because there was a report of the investigation wing that the assessee had received accommodation entry and that It was, therefore, unaccounted income of the assessee - HELD THAT:- A perusal of the revision order passed by the ld. Pr. CIT shows that the ld. Pr. CIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr. CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the AO. Pr. CIT, taking shelter in Explanation 2 to Section 263(1) of the Act, held that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue on the ground of lack of enquiry, which, in our view, is a general observation and no specific observation has been made in respect of any of the details or evidence furnished by the assessee and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assesse As decided in Usha Polychem India (P) Ltd [ 2023 (5) TMI 419 - CALCUTTA HIGH COURT] where Principal Commissioner involved revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified - Decided in favour of assessee.
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2024 (5) TMI 486
Income deemed to accrue or arise in India - Revenue earned from supply of software - royalty u/A 13 of DTAA between India and United Kingdom - software is Shrink wrap software or customized software? - assessee was incorporated under the laws of United Kingdom (UK) with the primary objective of carrying on the business of specialist, engineers and dealers in computer system - HELD THAT:- As decided in assessee own case [ 2022 (8) TMI 1497 - ITAT DELHI] the software catered to by the assessee is a customized software and not a shrink wrap one as it is exclusively developed for the organization to suit its business requirement and that it is very expensive which is a logical corollary to the customized software. The issue of royalty or not on software has been examined by the Hon ble High Court in case of Nokia Networks OY [ 2012 (9) TMI 409 - DELHI HIGH COURT] Where in it was held that supply of software is not royalty despite the amendments made by Finance Act 2012 to section 9(1)(vi) of the Act. It has been observed that though Explanation 4 was added to section 9(1)(vi) by the Finance Act 2012 with retrospective effect to provide that all consideration for user of software shall be assessable as royalty , the definition in the DTAA has been left unchanged. Following the decision in case of Siemens AG [ 2008 (11) TMI 74 - BOMBAY HIGH COURT] it was held that amendments cannot be read into the treaty. Once assessee has opted to be assessed by the DTAA, the consideration cannot be assessed as royalty despite the retrospective amendments to the Act. The right to reproduce and the right to use computer software are distinct and separate rights, the former amounting to parting with copyright and the latter, in the context of nonexclusive EULAs, not being so. At this juncture, we have examined the written submission of the ld. DR and find that it would not make any material difference to the fact that the buyer of the software in the instant case also has the user right only. The buyer has no right to re-sale the product and it still remained a copyrighted article which the buyer cannot alter modified, reproduced i.e. own will unless authorized. And such authorization has been given to re-supply to BSNL for their use, at the same time, keeping the all other rights with the assessee. Holding thus, the Hon ble Supreme Court [ 2021 (3) TMI 138 - SUPREME COURT] decided the issue in favour of the taxpayer and laid down that the payments made by resident Indian end-users/distributors to non-resident computer software manufacture/suppliers as consideration for use/resale of shrink-wrapped software does not amount to payment for royalty for the use of copyright in the computer software considering the definition of royalty under the DTAAs. Hence, keeping in view the judgment of Hon ble Apex Court, we hereby allow the appeal of the assessee on merits. Appeal of the assessee is allowed.
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2024 (5) TMI 485
Disallowance of various expenses debited in the P L account, either in full or on ad hoc basis by the learned CIT(A) - non rejection of books of accounts - HELD THAT:- When the books of account and the book results had not been rejected by the Revenue, by pointing out specific defects therein, there is no scope for making disallowance of expenses on ad hoc basis or in full. In the instant case, the books of account have been duly subjected to audit by a Chartered Accountant and the audited books of account together with audited financial statements, were also duly placed on record before the learned AO. It is not the case of the Revenue that the said expenditures were not incurred by the assessee wholly and exclusively for the purpose of business. These expenses were subjected to disallowance only on flimsy grounds that on the vouchers, revenue stamps are not affixed. In this case, it is pertinent to note that the turnover of the assessee is Rs. 160.46 crores and the total administrative expenses debited by the assessee is hardly Rs. 58.64 lakhs. Hence, we have no hesitation to delete the entire disallowance of expenses debited in the P L A/c. - Decided in favour of assessee. Disallowance of interest paid on unsecured loans - HELD THAT:- No addition has been made by the learned AO for the receipt of unsecured loans - unsecured loans received by the assessee have been accepted as genuine by the learned AO. Assessee had duly furnished the confirmations from the unsecured loan creditors, which fact is also confirmed by the CIT(A) in his order. It is not the case of the Revenue that the said loans were not utilized by the assessee for the purpose of his business. Absent such findings, interest paid on unsecured loans which were considered as genuine, cannot be subjected to any disallowance. Hence, we direct the Ld. AO to grant deduction for interest - ground raised by the assessee is allowed. Disallowance on account of difference in purchases debited by the assessee vis a vis corresponding value shown by the suppliers in their response to notice issued u/s 133(6) - HELD THAT:- Though there are certain differences in terms of accounting policies/ deficiencies carried out by the suppliers in their respective books, still the closing balance outstanding as on 31.03.2010 reflected by the said supplier duly matches in both the parties books. This clearly goes to prove that the reconciliation submitted by the assessee hereinabove is factually correct and no adverse inference could be drawn thereon. Hence, the disallowance made by the Ld. CIT(A) based on the remand report of the Ld. AO with regard to Thiru Arooran Sugar Ltd. deserves to be deleted and is hereby deleted. With regard to difference in balance in the case of Dwarikesh Sugar Industries Ltd., we find that the assessee had duly explained the same by way of proper reconciliation that the purchases has been duly accounted by the assessee after 01.04.2009 on the date on which the goods were actually received by him, whereas the supplier had shown it as sales in the month of March 2009 itself. This had admittedly led to the difference. We find, the assessee had clearly explained the difference in the value and hence no addition is required to be made. Appeal of the assessee is partly allowed.
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2024 (5) TMI 484
TP Adjustment - addition on account of corporate guarantee - international transaction or not? - HELD THAT:- This issue is decided against assessee by the Coordinate Bench in earlier assessment year [ 2020 (9) TMI 1101 - ITAT MUMBAI ] for the A.Y.2012-13 the arguments that the said transactions could not be considered to be international transaction do not convince us and therefore, we hold that the same was to be benchmarked on ALP principles.As assessee s risk in such a case would be very low since both the AEs were assessee s subsidiaries only. Therefore, considering the fact that it was a corporate guarantee for which no fees was paid by the assessee we estimate the TP adjustments against both the transactions @0.20% - Decided against assessee. Short credit for the taxes paid in Kenya u/s 90 - HELD THAT:- During the course of the assessment proceedings the assessee submitted proof of tax paid in the foreign countries based on which corresponding Double Taxation Avoidance Relief was allowed to the assessee. The assessee also claimed relief in respect of tax paid at Kenya but the same was denied invoking Rule 128 of the I.T. Rules wherein it has been provided that the tax paid in foreign countries on such income will be allowed only on furnishing of Form No. 67 for availing tax credit. We find that Rule 128 of I.T. Rules has been inserted by income tax 18th Amendment Rules, 2016 and has made applicable w.e.f 01.04.2017. We fail to understand how the Rule which came into effect from 01.04.2017 be made applicable to the return filed on 27.11.2015. Thus set-aside this issue to the file of the AO as directed to allow the credit of tax paid in Kenya after due verification. Short credit of TDS credit arising on account of payment made by Madhya Pradesh Government to KEC TNR Infra JV - tax credit has been denied to the assessee on finding that the impugned income has not been shown as its income by the assessee - It is the say of the counsel that the impugned income belongs to KEC TNR Infra JV and the TDS has been deducted in the name of KEC TNR Infra JV - HELD THAT:- We have given a thoughtful consideration to the orders of the authorities below, in the interest of justice and fair play, we deem it fit to set-aside this issue to the file of the AO. AO is directed to verify in whose hands the income has been shown and allow the credit of Tax Deducted at Source as per the relevant provisions of the law. This ground is allowed for statistical purpose. Disallowance u/s 14A while computing the book profits u/s 115JB - HELD THAT:- As decided by this Tribunal in assessee s own case in A.Y. 2014-15 [ 2023 (12) TMI 1312 - ITAT MUMBAI] we find that this issue is squarely covered in favour of the assessee by the decision of special bench in case of Vreet investments private limited [ 2017 (6) TMI 1124 - ITAT DELHI ] Even otherwise it is stated that assessee has not received any exempt income during the year and therefore there is no question of making any disallowance under section 14 A of the income tax act even in the normal computation of total income and therefore the same also cannot be imputed while computing the book profit under section 115JB - Decided in favour of assessee. TP adjustment in respect of business advances given to EJP KEC Joint Venture, South Africa - HELD THAT:- As decided in own case A.Y. 2013-14 [ 2023 (5) TMI 1324 - ITAT MUMBAI] advances were more in the nature of capital contribution and by advancing the same, the assessee had protected its own business interest which is evident from the financial statements of JV. The advances were towards fulfilment of the assessee s obligation of being a JV partner as any financial incapacitation of JV would adversely affect the continuation of the project and ultimately jeopardize the interest of the assessee. Therefore, the said advances could not be put in the category of loans as done by the lower authorities. Further, it could not be said that JV entity derived / gained certain benefits out of such advances but rather it was the assessee who would ultimately gain by continuing with the projects and taste the fruits of the success of project. Hence, not convinced with impugned adjustments. Decided in favour of assessee. Restricting guarantee commission in respect of guarantee given to ICICI Bank, U.K. in favour of U.S. subsidiaries at 0.2% of the guarantee - HELD THAT:- Respectfully following the latest decision of the Coordinate Bench [ 2023 (9) TMI 1466 - ITAT MUMBAI] for the A.Y. 2018-19 we direct the Assessing Officer to apply corporate guarantee rate @0.6%. This ground is partly allowed.
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2024 (5) TMI 483
Assessment u/s 153A/153C - Addition u/s 68 - unexplained unsecured loan - assessee had not discharged his onus - additions made are in reference to material found and seized from the premises of the third persons in their respective search operations - CIT(A) deleted addition - HELD THAT:- It will be important to note that section 292C of the Act provides for a presumption that the documents, assets, books of account, etc found at the time of search in the premises of a person is always presumed to be belonging to him/them unless proved otherwise. The presumption derived under this section is a rebuttable presumption. Thus, the person on whom such a presumption is drawn, has got every right to state that the said document does not belong to him/them. AO, if he is satisfied with such explanation, has got recourse to proceed on such a person in terms of section 153C of the Act. In the present case, the seized documents used by the AO for making the additions u/s 153A while making assessment of the assessee were found and seized from the third persons as noted above. Thus, the only legal recourse available to the Revenue is to proceed on the assessee in terms of section 153C of the Act. Whether the addition can be made u/s 153A in an unabated year, in absence of incriminating material found and seized in the course of search conducted on the assessee, for the additions made by the AO? - We take note of the recent decision of Abhisar Buildwell Private Limited [ 2023 (4) TMI 1056 - SUPREME COURT ] wherein the assessment framed u/s. 153A of the Act are liable to be quashed where additions have been made without reference to any incriminating material found in the course of search relating to the addition so made. There is no reference to any incriminating material found and seized during the course of search from the premises of the assessee in his search, in respect of the additions made. It is also undisputed that the year under consideration is an unabated year, considering the date of conduct of search within the meaning of section 153A of the Act. Admittedly, no incriminating material has been referred which was found in the course of search of the assessee for the impugned assessment year, thus no addition could be made. Decided in favour of assessee.
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2024 (5) TMI 482
TP Adjustment - computation of PLI - exclusion of forex loss/forex gains as non-operating for the purpose of computation of operating margin - cherry picking of definition provided in Safe Harbor Rules - CIT(A) rejected the arguments of the assessee s on the ground that, forex loss/forex gains relating to revenue items is operating in nature because it has direct and inextricable link to business activities of the assessee s - TPO/CIT(A) also rejected the arguments of the assessee s for applying Safe Harbor Rules on the ground that said rules should be applied as a whole and not with specific reference to forex loss or gains - HELD THAT:- Forex loss/gain is derived on account of trading account/revenue account, then such forex loss/gain should be treated as revenue in nature and also operating in nature - loss arisen on account of fluctuation in foreign currency for payment made to suppliers of materials or receipts from buyer of assessee product is also arisen out of main business activity of the assessee and thus, same cannot be considered as non- operating in nature. In so far as Safe Harbor Rules is concerned, Rule 10TA has notified Safe Harbor Rules for international transactions and as per said Rules, operating expenses and operating income has been defined, which excludes loss arising on account of foreign currency fluctuations and said Rules has been notified w.e.f. assessment year 2013-14. In the present case, the assessee could not furnish any evidences to prove that it has opted for Safe Harbor Rules for determining ALP of international transactions. Unless, the assessee opts for Safe Harbor Rules for international transactions, the cherry picking of definition provided in Safe Harbor Rules cannot be considered to determine forex loss/gain as operating in nature or not. Since, the appellant itself has treated forex loss/gain as operating in nature for earlier years and also the Tribunal has considered in assessee s own case and held that forex loss is operating in nature, in our considered view there is no merit in grounds taken by the assessee challenging exclusion of forex loss/gain from operating expenditure or operating income. Same issue has been decided in the case of M/s. Hyundai Motor India Ltd [ 2021 (9) TMI 1013 - ITAT CHENNAI] where one of us is also signatory and held that forex loss/gains is revenue is nature and operating expenditure/income. Therefore, we are of the considered view, that there is no error in the reasons given by the TPO/CIT(A) to include forex loss/forex gains as operating in nature, for the purpose of computing PLI or operating margin of the assessee. Decided against assessee. Denial of working capital adjustment - assessee submitted that, TPO/CIT(A) both are erred in not providing working capital adjustment even though the assessee demonstrate with evidences that the working capital position of the assessee when compared to comparable companies is different and suitable adjustments needs to be provided on par with working capital level of comparable companies - HELD THAT:- In the present case, the assessee claims that it has filed working explaining working capital position of comparable companies vis-a-vis the working capital position of assessee company and suitable adjustment is required to be provided. But, the TPO and CIT(A) rejected the claim of the assessee. The assessee has filed computation explaining working capital adjustment which needs to be considered by the lower authorities. Therefore, we are of the considered view that this issue needs to go back to the file of the AO/TPO to verify the claim of the assessee with reference to computation, if any, along with other supporting evidences to be filed by the assessee for providing working capital adjustments. Thus, we set aside the order of the ld. CIT(A) on this issue and direct the AO/TPO to re-examine the claim of the assessee with regard to working capital adjustments and decide the issue in accordance with law in all cases. Entity level adjustments - assessee argued assessee that, as per section 92 of the Act and Rule 10B(1)(e) of IT Rules, 1962, any income arising from international transactions shall be computed having regard to Arm s Length Price - HELD THAT:- From a plain reading of section 92 of the Act and Rule 10B(1) of IT Rules, 1962, it is very clear that any income arising from an international transaction shall be computed having regard to arm s length price alone, which means, very purpose of said provision is to establish arm s length nature of the international transactions only. The transactions with Non- AE have to be presumed to be at arm s length price because, there is no relationship which is likely to influence pricing. See case of High Court of Madras in the case of M/s. Hyundai Motor India Ltd [ 2021 (9) TMI 1013 - ITAT CHENNAI] - Thus TPO/CIT(A) erred in making downward adjustment on entity level including transactions with non-AE. We direct the AO/TPO to make adjustment to international transactions of the assessee alone in all cases. TDS u/s 195 - disallowance u/s. 40(a)(i) of the Act for non-deduction of tax on interest payable to foreign company on delayed payment of import payables - whether said interest is taxable on accrual basis or receipt basis? - HELD THAT:- As per the provisions of section 195 of the Act, any person responsible for paying to a non-resident, shall at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier, deduct income-tax thereon at the rates in force. Since, the DTAA is silent on taxability of interest income i.e., whether on accrual basis or receipt basis, in our considered view, as per provisions of section 195 of the Act, the payee is responsible for deducting tax at the time of credit or payment, whichever is earlier - case law relied upon by assessee M/s. Pramerica ASPF II Cyprus Holding Limited [ 2019 (3) TMI 1668 - BOMBAY HIGH COURT] as clearly held that, royalty and fees for technical services should be taxed on receipt basis, but not on accrual basis. Since, the case law relied upon by the assessee is applicability of DTAA between India and Cyprus and also on payment of royalty and fee for technical services, in our considered view, this issue once again needs to be examined by the Assessing Officer, in light of the decision of Hon ble Bombay High Court and also DTAA between India and Korea. Thus, we set aside the issue to the file of the AO and direct the AO to examine the issue in light of our discussions given herein above. Re-computation of book profit with reference to downward TP adjustment - HELD THAT:- ITAT Mumbai in the case of GTS e- Services Private Ltd [ 2019 (7) TMI 296 - ITAT MUMBAI] following the decision of Apollo Tyres [ 2002 (5) TMI 5 - SUPREME COURT] held that, no adjustment can be made to book profit with reference to TP adjustment because there is no such provision under law that permits the AO to make adjustment on account of transfer pricing adjustment to the amount of profit shown by the assessee in its profit and loss account for the purpose of computation of book profit u/s. 115JB - Thus we direct the AO to delete additions made towards book profit on account of downward adjustment made under TP Provisions. Exclusion of creditors write off for the purpose of computation of operating margin - AO has excluded creditors write off from other income for the purpose of computing operating margin on the ground that writing back of creditors depends upon the wisdom of the businessman with regard to timing of its identification and showing it as income - HELD THAT:- Write off of creditors should relates to operating activity of the assessee or any creditor if any, on account of capital account cannot be considered as operating in nature. Further writing back of creditors depends upon wisdom of business enterprises with regard to timing of its identification etc. The very nature of credits written back is such that it is not peculiar to all the business transactions and so it cannot be considered as normal and direct income. Therefore, in our considered view while working out operating margin, only items of receipts and expenditure, which have direct relation for determining the operating profit have to be taken into account. Since, the assessee could not provide any details with regard to nature of credits write off, in our considered view merely because the assessee has treated it as other income, said write off of creditors cannot be treated as operating in nature, for the purpose of computing operating margin. Therefore, we are of the considered view that there is no error in the reasons given by the Ld. TPO/DRP to exclude creditors write off for the purpose of computation of operating margin - Decided against assessee. Disallowing set off of brought forward losses - as argued assessee has filed necessary evidences to prove that it has satisfied conditions prescribed for set off of brought forward losses - HELD THAT:- We set aside the issue to the file of the AO and direct the AO to verify the claim of the assessee with reference to necessary evidence, if any that may be filed by the assessee and decide the issue in accordance with law.
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2024 (5) TMI 481
Disallowance u/s 80IB - additional income earned by means of on-money - no evidence whatsoever, at least, to indicate that the amounts, admittedly received by the assessee, are received from only and only from the flat owners in lieu of the purchase of flats - HELD THAT:- The assessee does not have any other business other than real estate development and in the impugned assessment year, the assessee had income being generated from the project Rushikesh . Hence, the income is earned from the said eligible business. The seized material found during the course of search showed that the additional income earned by means of on-money was from Rushikesh project, which was eligible for deduction u/s 80IB of the Act. Therefore, based on these facts and circumstances, the ld CIT(A) held that assessee is eligible for deduction u/s 80IB of the Act, and hence ld CIT(A) allowed the deduction correctly. Dismiss ground No.1 raised by the Revenue. Unexplained cash credit u/s 68 - During the course of search and later verification proceedings u/s 131 Loose Paper file was found and seized from partner of assessee firm related to cash amount received from various persons in the financial year 2008-09 for purchase of land - HELD THAT:- We find merit in the submission of ld Counsel to the effect that the disputed land was brought into the books of the assessee - firm during the assessment year 2009-10 and not in the impugned assessment year, 2008-09. We note that the term 'Person' has been defined in clause 31 of section 2, to include seven categories of persons, all of which are independent and distinct from each other. A literal interpretation of the above provisions leads to the conclusion that only a right person as per the Act, is liable to pay tax on his income and no option is available to tax income in the hands of the person other than the one in whose hands it is taxable. The Hon'ble Supreme Court in case of ITO vs. Ch. Atchaiah [ 1995 (12) TMI 1 - SUPREME COURT] has held that the assessing officer must tax the right person and right income, alone. Thus, the transaction in respect of disputed land, if any, may be taxable in the assessment year 2009-10 and not in the impugned assessment year, 2008-09. Thus, on this legal issue, we find that order passed by ld CIT(A) is correct. Loose papers on the basis of which this addition has been made was found in the residential premises of Shri Rajesh Vaghani, the partners of the Assessee firm - The loose papers showed receipt over a period of 3 assessment years namely 2008-09, 2009-10 and 2010-11. Out of the said amount, the two partners namely have admitted the undisclosed investment and offered the same in their returns, for AY 2009-10. The AO added the balance amount in the hands of the assessee- firm. In fact, as seen from the 'seized material, the amount ought to have been taxed in the impugned assessment year was Rs. 1,12,00,000/- as this amount was shown as received in AY 2008-09 and Rs. 3,60,60,000/- in AY 2009-10 and Rs. 92,90,000/- in AY 2010-11 as per the said seized loose sheets. However, the AO added the entire amount in the assessment year 2008-09. Thus such addition need to be deleted - Decided against revenue.
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2024 (5) TMI 456
Transfer / Centralization order u/s 127 - cases of the assessees are centralized to the board of Deputy Commissioner of Income Tax [ DCIT ], Central Circle, Karnal, Haryana - link between the assessee and the searched party - HELD THAT:- Order passed under Section 127 of the Act should duly reflect the application of mind while disposing of the objections filed by the assessee - convenience of parties shall be considered by the Revenue while exercising the powers u/s 127 of the Act, however, in view of the administrative nature of such an order, the administrative convenience of the Revenue and the need for coordinated investigation would take precedence over the logistical difficulties faced by the assessee. It is also fundamental to point out that despite being a machinery provision, the reasons recorded in the order of transfer should not be capricious or mala fide and such order shall not run contrary to the bona fide objectives of the Act. As it is evident from an ex facie reading of the impugned order that an opportunity of hearing was given to the assessee and the Revenue has considered the objections raised by the assessee before passing the impugned order, and moreover, the case of the assessee was centralized on the grounds of coordinated enquiries, investigations and administrative convenience , therefore, the contention of the assessee that the impugned order reflects no application of mind and the Revenue had not considered the objections raised by the assessee holds no merit. Also the notice points out that due to the search conducted in the cases of Mr. Anil Chaudhary, Mr. Jitender Singh (alias Rakesh), Mr. Bharti Sehgal and Mr. Dheeraj Bakshi on 11 April 2023, the assessee was called upon to furnish the details - contention of the assessee that he was nowhere related to the abovementioned individuals and thus there was no need to centralize the cases of the assessee is not justified in that contention as the details furnished by the assessee in response to the notice dated 26 April 2023 would indicate that certain transactions pertaining to the unsecured loans exist between the assessee and the searched persons. Revenue before passing the impugned order has provided the opportunity of hearing to the assessee [Mark Gulati] and considered the assessee s [Mark Gulati] objections, thus, the order would reflect that the Revenue had duly applied its mind and powers under Section 127 was invoked on the grounds of administrative convenience and meaningful assessment. Powers of Section 127 of the Act can be invoked for public interest and administrative convenience. Furthermore, the ground of coordinated investigation is a good ground of transfer as upheld by various decisions quoted above. Thus we are hereby not inclined to interfere with the orders passed under Section 127 of the Act.
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2024 (5) TMI 455
Jurisdiction transfer through Centralization order - as argued case of the petitioner would clearly fall within the jurisdiction of the prescribed Deputy Commissioner of Income Tax as per the extracts of the notification dated 22 October 2014 and the subsequent notification promulgated under the pen of the Additional Commissioner of Income Tax dated 15 November 2014 - whether the notification dated 15 November 2014 would have the effect of reversing centralization? - HELD THAT:- We are faced with a case where the petitioner s assessment is stated to have been centralized and pursuant to which assessments right from Assessment Years 2008-09 to 2015-16 were being made by the AO posted in the Central Circle-16. Question whether the notification dated 15 November 2014 would have the effect of reversing centralization have to be examined, bearing in mind the Explanation appended to Section 127 of the Income Tax Act, 1961 [ Act ] as well as the Note set out in the notification of 22 October 2014 which says that 'Income-tax authorities referred to in column (2) of the schedule annexed to this notification shall not exercise powers and perform functions, which have specifically been assigned through separate notification(s), to an Income-tax authority having designation other than those mentioned in column (2) below.' Let the matters be called again on 03.04.2024.
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2024 (5) TMI 454
Exemption u/s 11 - Claim denied on account of delay in filing of the audit report in Form 10B - HELD THAT:- Considering CBDT firstly came up with a Notification dt. 03/01/2020 authorising the Commissioners to admit applications of condonation of delay in filing Form No. 10B for AY 2018-19 and subsequent AY, where there is a delay of up to 365 days. Subsequently on 19/07/2022 i.e., after the end of the Covid Pandemic restrictions again a Circular 16/2022 was issued where the delays in filing of Form 10B beyond 365 days but upto three years were also directed to be considered for admitting the application for condonation of delay. This Circular in itself shows that the Income-tax Department was aware about the technical glitches and the problems faced by the tax-payers in furnishing various types of Forms including Form No. 10B is with regard to the furnishing of audit report in case of Trusts and Societies. In the instant case since, delay is merely 28 days, we find that the said delay deserves to be ignored in larger interest of justice. The assessee is thus entitled to claim exemption u/s 11 of the Act made in the Income-tax return e-filed by it. We further fund support from the decisions of Bangarh Educational Welfare Trust [ 2022 (1) TMI 1321 - ITAT KOLKATA] wherein also similar issue was raised for AY 2018-19 and the return was filed within time limit prescribed u/s 139(1) of the Act but there was a delay in furnishing of the audit report on Form 10B and this Tribunal after considering the facts of the case as well as judicial precedents allowed the benefit of Section 11 12 of the Act to the assessee. We allow the benefit of Section 11 to the assessee as claimed in the income tax return. Accordingly, the effective grounds raised by the assessee are allowed.
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Customs
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2024 (5) TMI 480
Validity of a Central Board of Indirect Taxes and Customs [CBIC] Instruction dated 09 July 2022 - impugned Instruction invalid or ultra vires Section 151A of the Act - Warehousing of imported capital goods used in the generation of solar power - Cancellation of license of warehousing as granted in terms of the MOOWR Regulations - Whether solar power generation could be said to be an operation or activity permissible u/s 65 of the Act - Principle of purposive interpretation - HELD THAT:- The impugned Instruction, as would be manifest from a plain reading thereof, appears to place the licensing authorities under a clear mandate to proceed on the basis that generation of electricity as a subject per se falls outside the ambit of the MOOWR Regulations. The Instruction proceeds further to hold that all licenses granted as well as applications which may be made thereafter would be guided by the view expressed by the Board. This clearly appears thus to travel far beyond the advisory and clarificatory function which stands placed in the Board by virtue of Section 151A of the Act. We find ourselves unable to uphold the validity of the impugned Instruction bearing in mind the well settled precepts of administrative law and which abhor abdication of an independent decision making power as well as a quasi-judicial authority being compelled to act under the dictates of a superior authority. Undisputedly, the power to consider whether a license is liable to be cancelled under Section 58B of the Act would place the licensing authority under the obligation to examine whether a licensee had either acted in violation of the Act or contravened a statutory provision or command. In light of the impugned Instruction, the petitioners now face the inevitable specter of the license being cancelled consequent to the peremptory directions as contained in the communication of the Board. Since the directive of the Board binds the licensing authorities, the exercise of calling upon the petitioners to show cause is essentially rendered otiose and a mere formality. This, more so when the Board has already come to the definitive conclusion that solar power generation is an activity which would fall outside the ambit of Section 65 of the Act as well as the MOOWR Regulations. The Instruction thus clearly amounts to a dictate binding the licensing authority to cancel all subsisting licenses and thus falling foul of the principles noticed. The SCN is clear evidence of the licensing authority having understood the Instruction as requiring it to cancel the existing license. THE INTERPLAY BETWEEN SECTIONS 61 AND 65 - We are of the considered opinion that the mere fact that input-output ratio norms may not apply in the case of generation of electricity would not be determinative of the controversy which stands raised. This, since those norms are prescribed to take care of contingencies where a part of the imported goods get consumed in the process of manufacture. They would similarly also not be attracted in the case of manufacture of textiles or automotive parts as discussed hereinabove. The inapplicability of those factors in the case of generation of electricity, thus is neither an oddity nor can it be said to be a legislative oversight. In our considered opinion, Section 65 clearly stops short of making an exception or excluding a certain category of manufacturing activities from its ambit. It also fails to exclude from its application the manufacture of intangible goods in explicit terms. Section 61 clearly envisages both capital and non-capital goods being imported and housed in a warehouse for the purposes of manufacturing activity being undertaken in terms of permissions granted under Section 65 of the Act. The statute enables capital goods being housed in the warehouse till such time as they may be cleared for home consumption. While Section 61, prior to the 2016 amendments envisaged the maximum retention period to be five years, post amendment, that stipulation came to be substituted with the Legislature permitting the retention of those goods without any maximum time frame operating. The clear and unambiguous scheme which thus emerges from a reading of Sections 61 and 65 is of the importer being enabled to bring into the country capital goods which may be utilized in connection with manufacture or other operations in a licensed warehouse and the resultant goods alone being subjected to tax. MOOWR REGULATIONS AND THE CONTEMPORANEOUS MATERIAL - T he principal argument of the respondents was that the MOOWR Regulations were never intended to extend to a situation where imported capital goods do not get subsumed in the final product which may emerge out of a licensed warehouse and that Section 65 was meant to apply only to manufacturing operations being undertaken on the imported capital goods itself. We have in the preceding parts of this decision already found that neither Section 61 nor Section 65 would warrant such a meaning being ascribed to those statutory provisions. This, in light of the plain text of the provisions neither impliedly nor in explicit terms excluding any particular category of manufacture or basing the extent of the applicability of those provisions dependent upon the nature of the resultant goods which may be obtained at the end of a manufacturing process. From observation it is clearly establishes that the MOOWR Scheme was concerned with both imported goods which may be used in the course of manufacture or as inputs for further processing. This clearly demolishes the contention of the respondents that the expression in relation to necessitates the capital goods themselves being worked upon. As evident, the respondents clearly held out that both raw materials and capital goods could be imported and that in both contingencies, the import duty would stand deferred. The duty element and the time when the same would get attracted was explained to be when finished goods are cleared for the domestic market, and in which case, import duty would stand attracted on the imported raw materials used in production of the finished goods. It was further clarified that import duty on capital goods would be payable only when they are cleared to the domestic market. This too is indicative of the underlying imperatives of input-output ratio declarations being made and those being principally concerned with imported raw materials. The Invest India portal also spoke of the unlimited period of warehousing which would be applicable in the case of capital as well as non-capital goods and non-capital goods being described to include raw materials, components, etc. It is thus manifest that the contemporaneous material and literature gave no indication of an avowed intent of the MOOWR Regulations being inapplicable to a manufacturing process which may have continued without any prescription of a maximum period for which capital goods could have been warehoused. The promotional material, the FAQs, as well as the 01 October 2019 Circular issued by the Board also did not speak of an exclusion of any particular genre of manufacturing activity or the nature of the resultant goods which may be produced with the aid of capital goods housed in a licensed warehouse. We come to the firm conclusion that neither Section 61 nor Section 65 can be justifiably construed as incorporating an inherent or implied exclusion of solar power generation. The material that was placed for our consideration cannot possibly be interpreted as indicative of an intent of a particular type of self-consuming capital goods alone being intended for import. Neither the statutory provisions nor the contemporaneous material embodies an underlying policy intent for capital goods themselves being worked upon in the warehouse and constituting a part of the resultant goods. In fact, and to the contrary as we have found, the primary objective of the scheme was to give a fillip to domestic manufacturing albeit with the aid of imported capital goods. On an overall conspectus of the above, we find ourselves unable to accede to the submissions addressed by the learned ASG. DISTORTION OF THE LEVEL PLAYING FIELD - The learned ASG had vehemently contended that the activity of solar power generation has led to the creation of inequalities between domestic manufacturers and those like the petitioner who have claimed undue benefit of the MOOWR Regulations. It was in the aforesaid context that the respondents had sought to urge that we must interpret Section 65 in a manner which would subserve the larger policy objectives and the impetus sought to be accorded to domestic generation of solar power. While we have no reason to doubt the salutary purpose and objective underlying the framing of those measures, as a Court, we cannot be unmindful of our primary function being confined to interpret the statutory provisions in accordance with well-defined precepts of interpretation. The construction of a statute cannot be guided or influenced by the subsequent experience of the executive or of discerned inequitable results. As we have found hereinabove, the statutory scheme underlying the MOOWR Regulations cannot be construed as seeking to exclude solar power generation in terms of permissions granted u/s 65. The contemporaneous literature also fails to lend credence to the submission of the respondents. In fact, it clearly tends to be indicative of a contrary position and the absence of an intent to exclude any particular activity of manufacture. It is this which leads us to doubt whether even the principles of purposive interpretation could be justifiably deployed. APPLICABILITY OF PURPOSIVE INTERPRETATION PRINCIPLES - The principle of purposive interpretation is one which Courts resort to in order to overcome anomalies and to avoid resultant absurdities. GP Singh, in his seminal work on Principles of Statutory Interpretation succinctly explained the rule of purposive construction as being liable to be resorted to in order to avoid absurdity, repugnancy, or inconsistency. However, and as the learned author explained in the said treatise, the aforesaid principle is liable to be adopted in situations where the language of the statute itself is capable of bearing more than one construction or a plain grammatical construction leads to an apparent contradiction of the underlying object of the statute. The language in which Sections 61 and 65 are couched does not give rise to any ambiguities. This is also not a case where a plain grammatical construction leads to an apparent contradiction or a position of irreconcilability between two provisions present in the same enactment. Our conclusions are based on a harmonious construction of Sections 61 and 65 along with the contemporaneous material which accompanied the promulgation of the MOOWR scheme. While we have dilated on the aspect of purposive interpretation, one cannot possibly lose sight of the fact that the arguments addressed by the respondents with respect to the illegality of the activities undertaken by the petitioners were not based on an asserted statutory anomaly, absurdity or irreconcilability, principles which are often spoken of in the context of statutory interpretation. The learned ASG also did not argue that the statutory provisions suffered from ambiguity. The entire plank of the argument against solar power generation being permissible u/s 65 was based on the inequitable impact that such activity was likely to have on domestic industry and local generators. That, however, and as was observed by us in the preceding parts of this decision, is an aspect pertaining to policy and which cannot constitute a legitimate basis for the Court to reconstruct a statutory provision. The respondents essentially bid us to introduce a condition of ineligibility in the garb of statutory interpretation. It would be wholly incorrect for us to recreate or reassemble Section 65 so as to exclude a particular category of activity based upon the experience of its working or its perceived negative impact on domestic industry. While and hypothetically, it may be open for the respondents to adopt appropriate remedial measures if they be of the opinion that solar power generation by virtue of permissions granted u/s 65 is negatively impacting local generators or distorts the level playing field , this Court would clearly not be justified in deploying principles of purposive interpretation to correct that projected and asserted anomaly. FINAL DETERMINATION - Accordingly, we allow the present writ petitions. The impugned Instruction of the Board dated 09 July 2022 insofar as it mandates review of existing licences and taking of follow-up action is hereby quashed. For reasons aforenoted, we also quash the SCNs dated 13 July 2022. As noted above, we allow W.P.(C) and quash the impugned order dated 19 July 2022 for reasons aforenoted. W.P.(C) shall stand disposed of.
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2024 (5) TMI 479
Re-determination of value - Misdeclaration - reclassifying of the impugned goods - chargeable to duty - confiscation - Penalty - Consequent upon first check , the goods were not waste and scrap but alloy steel powder meriting re-classification thereon and consequent re-valuation - HELD THAT:- The demand for imposition of fine in lieu of confiscation and of penalty without issue of notice, or waiver of notice in the full knowledge of such intent on the part of customs authorities, is in excess of law and not admissible in the context set out in the grounds of appeal. The grounds of appeal have not established that respondent had been placed on oral notice and, at his request, for that to suffice as proposal to confiscate the goods and impose penalty. The grounds of appeal have not essayed upon incorrectness of exercise of mind by the adjudicating authority and in the stated circumstances, on the declaration before him, that no offence u/s 111(m) of Customs Act, 1962 was evident. It is not their case in the grounds of appeal that every revision of classification and valuation is statutorily to be followed by invoking of section 111(m) of Customs Act, 1962 and section 112 of Customs Act, 1962. Thus, there is no merit in the appeal which is dismissed.
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2024 (5) TMI 478
Methodologies for re-determination of CVD payable on imports on MRP basis - Imports of notebook / laptop computers - free distribution to students - suppressing the actual sale price by mis-declaring the MRP to evade Customs duty (CVD) - limitation - Valuation - Confiscation of goods - interest - demand - penalty and redemption fine - Whether the rejection of MRP declared on the laptops imported by appellant and redetermination of the MRP is legal and sustainable - HELD THAT:- The facts reveal that the appellant had entered into contract with ELCOT to supply laptop with carry bag. Admittedly, appellant has not imported the carry bags. While supplying the goods to ELCOT, the appellant has altered the MRP and affixed stickers showing higher MRP on the composite supply of laptop and bag. This is the genesis of the dispute. According to appellant, as they were clearing the imported laptop with locally purchased carry bag and inclusive of its VAT, the MRP had to be altered and had affixed the higher MRP on the goods while supplying to ELCOT. The appellant has purchased backpack locally. In such circumstances the appellant, no doubt, is entitled to add this value while supplying to ELCOT. It is not a case where only the imported laptop computer is supplied to ELCOT. According to appellant, they procured the backpack which has market price of Rs.2500/- at a negotiated price of Rs.225/-. The appellant has affixed the new increased MRP on the basis of purchase price agreed with ELCOT. This purchase price includes the price of laptop computer, backpack, the booklet, instruction guide etc. It can be seen that even though a methodology to ascertain the RSP is laid down, the same will apply only in situations of (a) and (b) of subsection (4) of Section 4A. On examining the facts, the appellant has adopted a new RSP for the combined goods of laptop computer + carry bag + booklet + Instruction guide. The department has redetermined the RSP of the imported laptop computer alleging misdeclaration of MRP. As there is no methodology or machinery for redetermining the MRP of goods imported for the purpose of payment of CVD, we hold that such re-determination of MRP is against the provisions of law. Moreover, in the present case, though the adjudicating authority has stated that Rule 6 of 2008 is applied to redetermine RSP, it can be seen that the method of arriving at the redetermined MRP is not within the principles or provisions of Section 4A of the Central Excise Act Rules. The methodology adopted by adjudicating authority is to deduct the negotiated price of the backpack (Rs.225/-) from the Purchase order price. The Purchase order Price or bid price is inclusive of items which are not imported. Further, the department has no case that such backpack can be obtained at Rs.225/- from market. All these factors would lead to the conclusion that the redetermined MRP cannot be sustained. Consequently, the demand of differential duty also cannot be sustained and require to be set aside. Ordered accordingly. The Ld. Counsel has put forward arguments on the grounds of limitation also. The show cause notice is dated 08.08.2017. the imports are made during the period 09.05.2012 to 09.06.2014. The facts reveal that the officers have visited the warehouse on 2.7.2013 and 16331 numbers of laptops were seized. The Department was thus aware of the entire situation in 2013 itself. The statements were also recorded in 2013. Thereafter, show cause notice has been issued after 4 years alleging suppression of facts with intent to evade payment of Customs duty invoking the extended period. The issue is with respect to redetermination of MRP of the composite supply of laptop and laptop bags. The issue as to whether there is undervaluation of MRP when the goods are in a composite supply form is debatable and is interpretational in nature. Taking all these aspects into consideration, we are of the considered opinion that there are no grounds for invoking the extended period. The show cause notice is time-barred and the demand cannot sustain on the ground of limitation also. The appellant has argued that confiscation of goods, interest demand, penalty and redemption fine imposed cannot be sustained in relation to CVD leviable u/s 3 (1) of Customs Tariff Act, 1975. The Hon ble Bombay High Court in the case of Mahindra Mahindra Ltd. v. Union of India 2022 (10) TMI 212 - BOMBAY HIGH COURT had considered the said issue and held that interest and penalty in relation to CVD cannot be demanded in the absence of specific provisions for levy of interest, penalty in the Customs Tariff Act, 1975. The said decision was upheld by Hon ble Apex Court in 2023 (8) TMI 135 - SC ORDER . Following the same, we hold that the confiscation of goods, interest on CVD, redemption fine and penalties cannot sustain on this ground also. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
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2024 (5) TMI 477
Seeking Provisional release of four gold bars - seizure - Whether the 4 gold bars seized from the employees of the appellant company are the gold bars purchased by the appellant company from M/s. HDFC or not - HELD THAT:- We hold that the appellant has prima facie established the correlation between the 4 kgs. of gold bars purchased by them from M/s. HDFC Bank Ltd. and the gold seized by the Officers on 11.10.2023. The present proceedings are only related to provisional release of the seized gold. The documents submitted by the appellant prima facie establish a correlation between the 4 gold bars purchased by them from M/s. HDFC Bank Ltd and the 4 gold bars seized by the officers. Thus, the 4 gold bars seized can be released provisionally, subject to certain conditions to safeguard the interest of the Revenue. We observe that this Tribunal has already passed an order dated 20.02.2024 for release of the gold with certain conditions as observed at paragraph 2.1. of this order (supra). As the conditions are found to be reasonable, we hold that the appellant should fulfil the same conditions for provisional release of the gold. Since the present proceedings are in connection with provisional release of the gold in question, we refrain from expressing any opinion about the merits or otherwise of the issue, which shall be decided at the time of adjudication by the ld. adjudicating authority. Accordingly, we order for provisional release of the 4 seized gold bars on the condition that the appellant provides a Bond for the full value of the seized gold supported by Bank Guarantee to the extent of 25% of the value of the seized goods. The Department is directed to release the gold on provisional basis to the appellant, subject to fulfilment of the above conditions. The appeal is disposed of on the above terms.
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2024 (5) TMI 476
Levy of Anti-Dumping Duty - Mis- declaration of the country of origin in bills of entry - import of PVC Sheeting Flex Banner (in rolls) of Malaysian origin - Penalty - Certificate of origin showing the goods of Malaysian origin has been proved as fake or not genuine or not - HELD THAT:- The retroactive check by the customs authority needs to be done with the issuing authority of certificate of origin of originating country i.e. Malaysia. However, it is admitted fact that the investigating agency has not complied with the of Customs Tariff (Determination of Origin of Goods under the Preferential Trade agreement between the Government of Republic of India and Malaysia) Rules, 2011. Therefore, merely on the basis of any other material such as various statements and bill of lading, the certificate of origin issued by the Governmental Authority of Malaysia cannot be doubted. The identical issue has been considered by this Tribunal in case of Alfakrina Exports [ 2023 (9) TMI 86 - CESTAT AHMEDABAD] wherein this Tribunal considering the various judgments and Rule 9 of Customs Tariff (Determination of Origin of Goods under the Preferential Trade agreement between the Government of Republic of India and Malaysia) Rules, 2011 held that without compliance of Rule 9, the certificate of origin cannot be discarded. It is settled that without complying the provisions of Rule 9 of Custom Tariff (Determination of Origin of Goods under the Preferential Trade agreement between the Government of Republic of India and Malaysia) Rules, 2011 the certificate of origin issued by Malaysia Government cannot be disputed. Accordingly, the entire proceeding is vitiated. Accordingly, we are of the view that the impugned order is not sustainable. Hence, the same is set aside. Appeal is allowed with consequential relief, if any, in accordance with law.
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2024 (5) TMI 475
Import of Construction equipment - Violation of post-importation conditions of deployment - Benefit of N/N. 21/2002-Cus - recovery of duty - confiscation - Penalty - Import of slip form paver finisher for laying concrete pavement model S600 - Concessional duty - HELD THAT:- In the context of the present dispute, the blossoming of events prior to import and after clearance, save for conditions of import, are irrelevant and reference to such in the adjudication order appears to be proverbial straw clutching of which does little to sanctify the adjudicatory process or promote the credibility of the adjudication order. We are concerned with deployment of goods that, having been procured on high sea sale in a contractually secured transaction, are endorsed as not being for the intended project. Neither has the sale been voided nor has the award of work, and certified as being in favour of the importer by the competent authority, been questioned in the order. The threshold eligibility is, thus, beyond controverting. There is no doubt that the goods were not used for the intended project which, for whatever reason and not relevant in determining the consequences of non-utilization, is certainly cause for triggering duty liability should the notification so warrant. There is also no controverting of the submission of the appellant that the goods were not used on any project let alone on any ineligible road project. The notification stipulates that the goods cannot to be used for any ineligible activity during the lock in period. The goods were, in accordance with the notification, locked in till December 2015 which happened to be truncated with effect from October 2011, barely a year into the lock in period, and by premature action in the part of customs authorities. The hasty conclusion that contract cancellation did trigger the foreclosure of entitlement under the notification is not supported by the terms and conditions of the notification. The seizure and subsequent forced debarment from use, even within the scope of the relaxation extended by amendments, effectively interfered with the free run intended in the notification without even the excuse of goods having been diverted. For this reason, the entire period of inoperative lock in from date of seizure should stand erased for the purposes of administration of the notification. Accordingly, the recovery of duty and the confiscation ordered by the adjudicating authority are set aside, along with the consequential detriments, as also the show cause notice. The impugned goods are restored to the appellant-importer for compliance with the post-importation condition in the notification. Appeals are disposed off on these terms.
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2024 (5) TMI 474
Smuggling of the gold bars - bona fide baggage - Absolute confiscation of the seized gold of foreign marking - Prohibited item or not - Confiscation - Penalty - HELD THAT:- The phrase prohibited goods has been defined in sub-section (33) of Section 2 in the Act of 1962 to mean any goods, the import or export of which is subject to any prohibition under this Act or other law in force. Sub-section (39) of Section 2 has conveyed the meaning of smuggling in relation to any goods as any act or omission, which will render such goods liable for confiscation u/s 111. The law is well settled that violation of any condition or restriction in respect of the imported goods makes those as prohibited goods. In the case of Shri Shankar Lal Goyal vs. Commissioner of Customs [ 2023 (12) TMI 1156 - CESTAT NEW DELHI] , has held that since the conditions of import of gold as per the notification issued by the DGFT and the restrictions imposed by the RBI have been violated, then in such case, the offending gold has to be treated as prohibited goods u/s 2 (33) of the Act of 1962 and consequently, it would fall within the definition of smuggling u/s 2 (39) and would rendered such goods liable for confiscation u/s 111. Therefore, the observations made by both the authorities below that the imported gold bars in this case are liable for absolute confiscation u/s 111(d) of the Act. The records in this case have transpires that the appellant had knowingly concerned himself with goods, which he knew were liable to confiscation and accordingly, he rendered himself liable for penal action provided u/s 112(b) of the Act of 1962. Further by not declaring the gold in the prescribed declaration form before the Customs authorities, he had rendered himself liable to penal action provided u/s 114AA of the Act. Thus, No infirmity in the impugned order dated 11.02.2022 passed by the learned Commissioner of Customs (Appeals). Therefore, the appeal filed by the appellant is dismissed.
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2024 (5) TMI 473
100% EOUs - delay in fulfilment of export obligations - Customs Warehousing Licence for warehousing, manufacturing and export of software - liability to pay duty along with interest - HELD THAT:- The appellant submits that there were circumstances beyond their control for the delay in fulfilment of their export obligation. Accordingly, they applied for extension of the time-limit with the Development Commissioner, STPI, which was considered by the Development Commissioner vide order dated 12.03.2010. The validity of the extension was given retrospectively. Thus, we observe that the appellant was granted time for another period of five years from 5th May, 2008 to fulfil their export obligation. Hence, the impugned order dated 30.04.2010 is premature. The ld. adjudicating authority could have waited for the final decision of the Development Commissioner, STPI, before passing the order. Since the appellant has received extension for another period of five years with retrospective effect, we hold that the demand confirmed in the impugned order is not sustainable. As the confiscation of the goods and the demand of duties are not sustainable, the question of imposition of redemption fine and penalty does not arise. Thus, we set aside the impugned order and allow the appeal filed by the appellant.
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2024 (5) TMI 472
Classification of Goods - Goods declared as Electric Tricycle Spare Parts under CTH No. 8708.99.00 - Imports goods in the nature of e-rickshaw in CKD condition - Validity of enhancement of value - contemporaneous import - Mandate for following the due process as laid down in the Act and CVR-2007 - Violation of the principles of natural justice - HELD THAT:- We observe that the interpretation of the GIR by the adjudicating authority is not proper. The Ld. Commissioner (Appeals) has given a clear finding in the impugned order as to why the imported goods cannot be considered as a fully finished e-rickshaw. As per the reading of descriptions as provided under Import Tariff, Section Notes to Chapter XVII and Explanatory Notes to HSN/CTH 8703 and 8708, the goods imported will have the essential characteristic of e-rickshaw only when the same are assembled to create a T-shaped vehicle mounted on a chassis, whose two rear wheels are independently driven by separate battery-powered electric motors. Also, it is observed that the goods as imported by the Respondent fulfil the description as provide in explanatory notes to CTH 8708 as mentioned at Sl. Nos. (a) to (n). Moreover, the lower authority in its findings has not adduced any evidence that the goods imported by the Respondent are in CKD condition and provides the essential characteristic of e- rickshaw. As per the terminology of CTH 8703 in order to have the essential characteristics of three wheeled vehicle the same has to be powered or there should be propulsion through a battery which provides the power to the motor in order to thrust a vehicle. It is on record that there is no battery available in the goods imported to provide power supply to the e-rickshaw. We agree with the findings of the Ld. Commissioner (Appeals) that the interpretation of statutes should be in line with the Act i.e., the Customs Tariff Act, 1975, and should be purposive in nature and not strictly as a literal interpretation which will not serve the purpose of the Act and the other literal description as provided. Accordingly, we uphold the findings of the ld. appellate authority in the impugned order and hold that the goods imported would not constitute a fully finished e-rickshaw as it did not have all essential components for a fully finished e-rickshaw. Enhancement of value , No evidence was provided to the respondent as to why the value as declared by the respondent was rejected by the lower authority. Accordingly, we hold that the enhancement of value without following the due process as laid down in the Act and CVR, 2007 and in violation of the principles of natural justice is not sustainable. Since the mis-declaration of the description, classification and value as alleged by the Department has not been established, we hold that the goods imported are not liable confiscation. Accordingly, we hold that the Ld. Commissioner (Appeals) has rightly set aside the redemption fine and penalty imposed under the provisions of the Customs Act, 1962. Thus, we uphold the impugned order and reject the appeal filed by the Department.
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2024 (5) TMI 471
Smuggling of betel nut and black pepper of foreign origin - intercepted by trucks - seizure of goods - confiscation - Penalty - HELD THAT:- On going through the records, we find that it is not conclusively held that the goods are of foreign origin, only it is an opinion that the goods might be of Indonesian origin as per the report of ARDF, Mangalore. Thus, we hold that the Revenue has failed to establish that the goods are smuggled in nature and procured by the appellants by illicit means. In fact, the appellants were able to produce the source of procurement of the said goods in question, on which GST has been paid. In that circumstances, the Revenue has failed to establish the discharge the onus to prove the goods are smuggled in nature and are of foreign origin. Therefore, we do not find any merit in the impugned order quo imposing penalties on the appellants. Therefore, we do not find any merit in the impugned order quo imposing penalties on the appellants.
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Insolvency & Bankruptcy
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2024 (5) TMI 470
Claim of appellant rejected on the ground that Resolution Plan has been approved by the CoC - right to claim consideration of claim again in third round - NOIDA s status and claims - HELD THAT:- In view of the pendency of the Applications of the Appellant(s) before the Adjudicating Authority, which are yet to be adjudicated, it is not found necessary at this stage to enter into submission or express any opinion on merits. The approval of Resolution Plan by the CoC on 03.03.2020 being no more in operation and the SRA has to resubmit the Resolution Plan, as per direction of the Adjudicating Authority dated 05.03.2024 and has to include the claim of NOIDA as Secured Creditor with respect to other Applications, which are pending consideration, it is appropriate that resubmission of the Plan by SRA should await the disposal of those Applications. Applications, including Applications for acceptance of the claim, which although are belated claims, it is for the Adjudicating Authority to consider the Applications and take a decision as to whether the said claims have to be included or not. The learned Counsel for the Appellant has also referred and relied on the judgment of this Tribunal in PUNEET KAUR VERSUS KV DEVELOPERS PRIVATE LIMITED, MR. PANKAJ NARANG, COMMITTEE OF CREDITORS, CONSORTIUM OF SUMIT KUMAR KHANNA AND M/S. BRIJ KISHORE TRADING PVT. LTD. [ 2022 (6) TMI 108 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ], where this Tribunal held that even if the homebuyers has not filed the claim within the time, the RP is under obligation to include the claims, which are reflected in the records of the Corporate Debtor. The applications by different Applicants including these two Appellant(s) being pending consideration, at this stage, it is not necessary for this Tribunal to express any opinion on the merits of the Applications, which are pending adjudication before the Adjudicating Authority. As observed, resubmission of the Resolution Plan by the SRA has to await the decision of all other Applications, which was deferred by the Adjudicating Authority for consideration on 30.04.2024, as per order dated 05.03.2024 itself. There is no doubt that claim of the NOIDA has to be considered as per the direction dated 05.03.2024 as Secured Creditor, but since other Applications are still pending, the ends of justice will be served in disposing of these Appeal. The order passed by Adjudicating Authority is not being interfered with - Adjudicating Authority may consider and dispose of the Applications as noted in the order dated 05.03.2024, which were deferred for consideration on 30.04.2024 at an early date - petition disposed off.
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2024 (5) TMI 469
CIRP - Admissibility of Section 95 Applications against Personal Guarantors - discharge the liabilities of Personal Guarantors on approval of Resolution Plan - submission of the Appellant that since the entire debt has been assigned to SPV, personal guarantees against the Appellant could not have been invoked, has been considered and rejected by the Adjudicating Authority by the impugned order - time limitation - HELD THAT:- The judgment of the Hon ble Supreme Court in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. [ 2021 (5) TMI 743 - SUPREME COURT ] has categorically laid down that approval of Resolution Plan does not ipso facto discharge the liabilities of Personal Guarantors. The judgment of this Tribunal in UV Asset Reconstruction Company Limited vs. Electrosteel Castings Limited [ 2024 (3) TMI 804 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ] is considered where one of the questions arose as to whether by approval of Resolution Plan, entire debt of the Corporate Debtor stood extinguished and as a result there will be no default. It was held by this Tribunal that even after approval of Resolution Plan, recourse against third party can be resorted to and the approval of Resolution Plan, does not extinguish the right of Financial Creditor to proceed against third party. The Adjudicating Authority by the impugned order has admitted Section 95 Applications, upholding the initiation of proceeding under Section 95 by the SBI. The Adjudicating Authority has rightly returned a finding that the Resolution Plan of Corporate Debtor was approved and the entire debt of the Corporate Debtor has been taken over by the Successful Resolution Applicant, but the guarantee given by the Promoters has not been assigned to SRA. The Adjudicating Authority also held that Application was filed within limitation. The date of default mentioned in the Application was 23.01.2019 and the petition under Section 95 was filed on 22.05.2021. There are no error in the order of the Adjudicating Authority, admitting Section 95 Applications by the impugned order. There is no merit in any of the submissions of the learned Counsel for the Appellant(s) - appeal dismissed.
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PMLA
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2024 (5) TMI 468
Money laundering - scheduled offences or not - proceeds of crime - offences under various sections of the Income-tax Act, 1961, read with Sections 120B, 191, 199, 200 and 204 of the Indian Penal Code, 1860 - offences are scheduled offences within the meaning of clause (y) of sub-Section (1) of Section 2 of the PMLA or not - HELD THAT:- The offence punishable under Section 120B of the IPC could become a scheduled offence only if the conspiracy alleged is of committing an offence which is specifically included in the Schedule to the PMLA. In this case, admittedly, the offences alleged in the complaint except Section 120-B of IPC are not the scheduled offences. Conspiracy to commit any of the offences included in the Schedule has not been alleged in the complaint. ECIR/RPZO/11/2022, which is the subject matter of the complaint, is based on the offences relied upon in the complaint. As the conspiracy alleged is of the commission of offences which are not the scheduled offences, the offences mentioned in the complaint are not scheduled offences within the meaning of clause (y) of sub-Section (1) of Section 2 of the PMLA. There is no provision in the PMLA which overrides the provisions of Sections 200 to Sections 204 of Cr.PC. Hence, the Special Court will have to apply its mind to the question of whether a prima facie case of a commission of an offence under Section 3 of the PMLA is made out in a complaint under Section 44(1)(b) of the PMLA. If the Special Court is of the view that no prima facie case of an offence under Section 3 of the PMLA is made out, it must exercise the power under Section 203 of the Cr.PC to dismiss the complaint. If a prima facie case is made out, the Special Court can take recourse to Section 204 of the Cr. PC. In this case, no scheduled offence is made out the basis of the complaint as the offences relied upon therein are not scheduled offences. Therefore, there cannot be any proceeds of crime. Hence, there cannot be an offence under Section 3 of the PMLA. Therefore, no purpose will be served by directing the Special Court to apply its mind in accordance with Section 203 read with Section 204 of the Cr.PC. That will only be an empty formality. Petition disposed off.
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Service Tax
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2024 (5) TMI 467
Challenge to Circular dated 27.10.2023 - the circular seeks to take away the adjudicatory powers of the Assessing Authority as well as the Appellate Authority by clarifying provisions in the nature of adjudication - HELD THAT:- Notice of motion for 20.08.2024. Meanwhile, effect and operation of the impugned Circular dated 27.10.2023 (Annexure P-2) relating to Item No. 2 shall remain stayed and the Appellate Authority shall be free to decide the case of the petitioner without being influenced by the Clarification.
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2024 (5) TMI 466
Exemption from service tax - legal services rendered by individual advocates or firm of advocates - HELD THAT:- As per Rule 2 of the Service Tax Rules, where Senior Counsel are engaged, the obligation to pay service tax is on the recipient of such services. If that were to be so, there is no obligation on the Senior Counsel to pay service tax - individual lawyers and Partnership of firm of Advocates, Senior Advocates are exempted from payment of service tax under certain circumstances. Levy of service tax - income from sale of books, apart from income from profession - Section 73 of the Finance Act, 1994 - reverse charge mechanism - HELD THAT:- The services rendered to a business entity with a turn over above rupees ten lakh would fall outside the purview of the exemption, however, in such of those cases also, in terms of Notification 30/2012-ST dated 20.06.2012, the liability is on the recipient by way of reverse charge mechanism - there is no factual adjudication, but on the basis of applicable law, the service rendered by advocates is exempt and even if it falls outside the exemption, the liability is on the recipient of the services and not the legal professional. Clearly in light of such narrow factual context the notices and orders are one without jurisdiction and challenge can be entertained directly irrespective of the alternate legal remedy that is available. As also laid down by the Apex Court in Radha Krishan Industries v. State of Himachal Pradesh and Others [ 2021 (4) TMI 837 - SUPREME COURT] that the High Court can entertain a writ petition despite there being an effective alternative remedy when the orders/proceedings impugned are wholly without jurisdiction. It would be futile exercise in relegating the petitioners to avail of statutory remedy. It is a case which provides for entertainability of the writ petition on the settled legal position and on the ground that the proceedings are one without jurisdiction and hence can be entertained - Hence, the legal position not being in dispute, the contention of learned counsel for the Revenue requires to be rejected. Levy of service tax - income from consultation fee - HELD THAT:- The income from such service by an Advocate is exempt and even if it falls outside the exemption, it is the recipient who has to pay on the basis of reverse charge mechanism and accordingly, the initiation of proceedings are one without jurisdiction insofar as claim of service tax as regards consultation fee - the taxable event of sale of books would fall within the category of sale of goods and is outside the purview of service tax. Levy of service tax - income from profession as well as income from services rendered as a Notary - HELD THAT:- The document furnished by the petitioner would indicate that it is income from profession as well as income from services rendered as a Notary. This is evident from the profit and loss account entry. Memo is filed on 08.02.2024 stating that income is only from legal profession - such income is exempt from service tax and even otherwise, recipient would have to pay on reverse charge mechanism. Accordingly, the order in original is one without jurisdiction. Appeal allowed.
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2024 (5) TMI 465
Valuation - C F agent service - inclusion of reimbursement of expenses - charges collected for activities like loading, unloading, etc are includable in the assessable value or not - expenses incurred and reimbursed on actual basis to be included in assessable value or not - extended period of limitation - penalty. Appellant stated that they were not aware of the Service Tax liability on C F agent service rendered by them, they had no intention to evade payment of Service Tax. HELD THAT:- The appellant has been reimbursed the expenses at a specific pre-determined rate. If the reimbursement is on actual basis, it cannot be a fixed pre-determined amount. It would vary every month - the remuneration claimed by the appellant is not on actual basis, but paid on a lumpsum basis every month. Thus, we hold that the expenses are not reimbursed to the appellant on actual basis as a 'pure agent'. Accordingly, we hold that the expenses received are towards rendering of C F service and the appellant is liable to pay service tax on these reimbursable expenses. The Larger Bench, CESTAT, Bangalore in the case of SRI BHAGAVATHY TRADERS VERSUS COMMISSIONER OF CENTRAL EXCISE, COCHIN [ 2011 (8) TMI 430 - CESTAT, BANGALORE-LB] held that reimbursable expenses received in connection with rendering of service in respect of C F agent services are includable in the assessable value. Thus, these reimbursable expenses collected by the appellant are includable in the gross value for the purpose of charging service tax under the category of C F agent service. Extended period of limitation - HELD THAT:- The appellant have taken registration and paid Service Tax on the commission received by them and accordingly filed returns immediately upon being notified about their liability. The Show Cause Notice has not brought any evidence regarding mens rea on the part of the appellant to evade payment of Service Tax. The allegation of wilful mis-statement and suppression of facts with intent to evade payment of Service Tax needs to be established with positive evidence. However, it is observed that no such evidence is available on record to establish the intention on the part of the appellant to evade the payment of Service Tax - the Service Tax demanded by invoking the extended period of limitation is not sustainable in this case. Accordingly, the demand of Service Tax is restricted to the normal period of limitation. Penalty - HELD THAT:- There is no suppression of fact with intention to evade payment of tax established in this case. Since the demand is confirmed only for the normal period of limitation, no penalty is imposable on the appellant. The demand of Service Tax for the C F agent service rendered by the appellant is confirmed for the normal period of limitation. The appellant is liable to pay Service Tax, if any, for the normal period, along with interest, after adjusting the Service Tax, if any, already paid by them for the normal period of limitation - Penalty set aside - appeal allowed in part.
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2024 (5) TMI 464
Exemption from Service tax - activity of providing services to the Railways - appellant constructed new railway lines/ gauge conversion of MG Lines to BG Lines, an extension work of North Frontier Railway - benefit of Serial No.14 of N/N. 25/2012- ST dated 20.06.2012 - HELD THAT:- On going through the evidence provided by the appellant, certifies that the appellant was engaged in the construction of new railway lines, therefore, the appellant is covered under Serial 14 of Notification No.25/2012-ST dated 20.06.2012. The appellant is entitled for the exemption and not required to pay any service tax on the services provided by them in this case and no service tax is payable by the appellant, further, the penalty is also not imposable. The impugned order is set aside and the appeal is allowed.
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2024 (5) TMI 463
Levy of service tax - gross value of Contract I Contract II i.e. sale of goods/supply and works contract services - composition scheme - extended period of limitation - penalty - HELD THAT:- The issue involved in the matters have been examined by this Tribunal in appellant s own case for the earlier period in M/S TRF LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, PATNA, MR. SUDHIR L. DEORAS, C/O - M/S TRF LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, PATNA AND MR. NANDAN KUMAR SARKAR, C/O - M/S TRF LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, PATNA [ 2024 (3) TMI 231 - CESTAT KOLKATA] , wherein this Tribunal observed 'the contract entered prior to 07.07.2009, the value of cost of free supply will not be includible to determine the gross amount for the purposes of payment of service tax.' As the issue has already been decided in favour of the appellant, therefore, following the analogy of the said order, it is held that the demand against the appellant is not sustainable as the appellant has already discharged their Service Tax liability on gross value of works contract i.e. Contract II and value of Contract I is not to be included in the assessable value of taxable service provided by the appellant. The impugned order set aside. Consequently, no penalty is imposable on the appellant. Accordingly, penalty imposed on all the appellants are also set aside. Appeal allowed.
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2024 (5) TMI 462
Exemption from Service Tax - rendered services to BRO by way of construction of roads and bridges for the use of public - exemption from payment of service tax in terms of Sl. No. 13(a) of Exemption Notification No. 25/2012 ST dated 20-06-2012 - suppression of facts or not - extended period of limitation - HELD THAT:- During the period October 2014 to June 2017, the appellant has rendered services to BRO by way of construction of roads and bridges for the use of public. It is found that these services rendered by the appellant are exempted from payment of service tax in terms of Sl. No. 13(a) of Exemption Notification No. 25/2012 ST dated 20-06-2012. The appellant also carried out these works contracts as a sub-contractor for construction of roads, under an agreement on behalf of the said Contractors NECL and BIPL. These services rendered by the appellant as a sub-contractor are exempted from payment of service tax in terms of Sl. No. 29(h) Notification No. 25 read with Sl. No. 13(a) of Exemption Notification No. 25. The department has sought copies of Income Tax returns, balance sheet, bank statement, Form 26AS, work order/contract/agreement and service tax returns from the appellant vide letter dated 12.08.2016. The Appellant vide its letter dated 14-12-2016 duly submitted all the details. No proceedings were initiated thereafter. Thus, the Department was completely aware of the activities undertaken by the Appellant in 2016 itself and in spite thereof no efforts were taken by the revenue to issue show cause notice in time. It is also observed that the entire demand is based on Form 26AS received from the Income Tax Department and the revenue could have sought the same information within the normal period of limitation. Accordingly, the allegation of suppression is not established in this case and hence the entire demand confirmed in the impugned order is barred by limitation. The demand of service tax against the appellant is not sustainable on merits as well as on limitation - Appeal allowed.
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Central Excise
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2024 (5) TMI 461
Reward to informers - Wilful and deliberate disobedience - Disbursement of reward to the petitioners in terms of the policy of the respondents within a period of two months - The petitioners argued that since the appeal had been concluded and no further appeal was pending, the matter pertaining to the amount payable by the assessee had been finalized, warranting the release of the reward. - HELD THAT:- This Court notes that the assessee-company had voluntarily deposited a sum of ₹ 4,40,00,000/- with the respondents. After the dismissal of the application of the assessee-company under the Resolution Scheme, a further amount of ₹ 4,46,00,000/- was demanded by the GST Department on account of non-payment of redemption by the assessee, which the assessee-company was directed to deposit. Against the aforesaid further demand of ₹ 4,46,00,000/-, the assessee-company has already filed a writ petition being W.P.(C) 9311/2022, which is pending adjudication before the learned Division Bench. Thus, when the demand of the respondent-department with respect to payment of ₹ 9 Crores by the assessee-company still stands and further demand of ₹ 4,46,00,000/- has been raised by the respondents against the assessee-company, and the said issue is still pending adjudication before the learned Division Bench in W.P.(C) 9311/2022, it cannot be said that the proceedings against the assessee-company, have been closed. This Court also takes note of the submissions made by learned counsel for the respondents that the respondents cannot go beyond their Scheme, as no discretion is vested with the respondents to release any amount towards the reward, before finalization of the proceedings against the assessee-company - it is held that there is no willful and deliberate disobedience of the order by the respondents. The petition is disposed off.
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2024 (5) TMI 460
Process amounting to manufacture or not - tilting, separating and pressing with hydraulic press - Revenue submitted that the respondent has manufactured foot oil, pressed wax and paraffin wax by applying hydraulic press and the products are marketable as separate commodities - HELD THAT:- The respondent has imported slack wax and residue wax. Slack wax and residue wax both have oil content varying from 30 to 70% and the respondent only separated those by tilting the drums, where 90% of the oil was emptied and separated. About 10% of the oil was separated by squeezing for which a pressing machine was used by the respondent. It is observed that the separation or emptying the drum and separating the oil from the slack wax and residue wax does not involve any process amounting to manufacture. No machinery or equipment was utilized for the purpose of such separation - the process undertaken by the respondent cannot be considered as a process amounting to manufacture as defined in Section 2(f) of the Central Excise Act, 1944. Thus, no process amounting to manufacture as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent in the process of separation of foot oil, pressed wax and paraffin wax from the slack wax and residue wax imported by them. Thus, the findings of the Ld. Commissioner (Appeals) in the impugned order is agreed with and it is held that no process amounting to manufacture as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent. The respondent also relied upon the decision of the Tribunal in the case of KERALA MINERALS METALS LTD. VERSUS COMMISSIONER OF C. EX., KOCHI [ 2007 (4) TMI 38 - CESTAT, BANGALORE] and the decision of the Tribunal Kolkata in the case of INDIAN RARE EARTHS LTD. VERSUS COMMISSIONER OF C. EX., BBSR-I [ 2001 (9) TMI 167 - CEGAT, KOLKATA] , wherein it has been held that separation of mineral sand by physical and mechanical process does not amount to manufacture. Thus, no process amounting to manufacture as defined under Section 2(f) of the Central Excise Act, 1944 has been undertaken by the respondent - there are no infirmity in the impugned order and hence, the same is upheld. Appeal of Revenue dismissed.
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2024 (5) TMI 459
Reversal of CENVAT Credit - by-product, namely, Ammonium Sulphate arising during the course of manufacture of final product, namely, Potassium Cyanides, Sodium Cyanides - Rule 6(3) of Cenvat Credit Rules - HELD THAT:- On the very same issue in the appellant s own case [ 2024 (4) TMI 323 - CESTAT AHMEDABAD] , it has been decided that the Ammonium Sulphate being a by-product arising out of manufacture of final product namely, Potassium Cyanide and Sodium Cyanide, the same will not be liable for payment of an amount in terms of Rule 6(3) of Cenvat Credit Rules, 2004. In the present case also the impugned orders are not sustainable - The appeals are allowed.
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Indian Laws
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2024 (5) TMI 458
Recovery of time-barred debt - extinguishment of debt or not - Use of the Haryana Public Moneys (Recovery of Dues) Act, 1979, and the State Financial Corporation Act, 1951, for recovering time-barred debts. - HELD THAT:- While the Court focused on the implication of a notification under Section 71 of the Kerala Revenue Recovery Act whereunder the Government could declare the Act applicable to any institution, the attention of the Court in STATE OF KERALA ORS. VERSUS V.R. KALLIYANIKUTTY ANR. [ 1999 (4) TMI 609 - SUPREME COURT] was not drawn to the powers envisaged under the State Financial Corporations Act which were also applicable to the recovery of debts in Kerala. As noticed above, the statement of objects and reasons of the State Financial Corporations Act refers to providing State Financial Corporations with special privileges in the matter of enforcement of claims against borrowers . This Court in V.R. Kallliyanikutty held that the words amounts due occuring in the Kerala Revenue Recovery Act would only include legally recoverable debts i.e. debts which are not time-barred. The Court in K.C. Ninan [ 2023 (5) TMI 1251 - SUPREME COURT] , after a comprehensive analysis of the scheme of the Electricity Act, held that the power to initiate proceedings to recover the electricity dues was independent of the power to disconnect electrical supply. Thereafter, the Court noticed the decision in V.R. Kalliyanikutty and concluded that statute of limitation only barred a remedy, while the right to recover the loan through any other suitable manner provided remains untouched. Having so held, the Court rejected the argument of the auction purchasers and concluded that the bar of limitation under Section 56(2) of the Electricity Act would only restrict the remedy of disconnection under Section 56 of the Electricity Act and that the Electric Utilities were entitled to reocver electricity arrears through civil remedies or in exercise of its statutory power. Thus, for a comprehensive consideration and an authoritative pronouncement after taking into account all aspects, including those dealt with hereinabove, the matter needs to be placed before the Hon ble Chief Justice of India to constitute an appropriate three-judge bench. Let the papers along with this order be placed before Hon ble the Chief Justice of India for seeking appropriate directions from His Lordship, in this regard.
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2024 (5) TMI 457
Dishonour of Cheque - vicarious liability of Executive Director - petitioner (resident Indian Director) was having control of the affairs of the company or not - Validity of summons issued by the Trial Court - HELD THAT:- In KK. AHUJA VERSUS VK. VORA [ 2009 (7) TMI 758 - SUPREME COURT ] the Supreme Court highlighted the difference between the position of a Managing Director of the Company vis- -vis an ordinary Director, as far as Section 141 of the NI Act is concerned, and held that if the accused is the Managing Director of a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company; Law presumes that the Managing Director is in charge of and is responsible to the company for the conduct of its business. In National Small Industries Corporation Limited [ 2010 (2) TMI 590 - SUPREME COURT] the Supreme Court reiterated that if the accused is a Managing Director or Joint Managing Director, then it is not necessary to make specific averments in the complaint and by virtue of their position, they are liable to be proceeded with. The submission of the petitioner that the petitioner has since resigned, also cannot make the petitioner escape his liability under Section 138 read with Section 141 of the NI Act, at this Stage. In S.P. Mani Mohan Diary [ 2022 (9) TMI 846 - SUPREME COURT] , the Supreme Court has held that different persons can be in-charge of the company when each of the series of acts of commission and omission essential to complete the commission of offence by the company were being committed. Therefore, every person who was in charge of and was responsible to the company for the conduct of its business at the time any of the components necessary for the commission of the offence occurred may be proceeded against , but may not be punished if he succeeds in proving that the offence was committed without his knowledge and despite his due diligence; the burden of proving that remaining on him. There are no merit in the present petitions. The same are dismissed.
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