TMI Tax Updates - e-Newsletter
May 10, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

• GST:

  Maintainability of petition - availability of alternative remedy - Violation of principles of natural justice - While the petitioner raised concerns about the blocking of input tax credit affecting business operations, the court's decision did not address this issue specifically. - Despite the petitioner's claim of not receiving relied upon documents, the court held that the petitioner must resort to the alternative efficacious remedy under Section 107 of the GST Act to challenge the impugned order before the appellate authority.
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• GST:

  Violation of principles of natural justice - The High Court found that the Proper Officer had not properly assessed the petitioner's reply and had not provided an opportunity for clarification or further submission of documents. Consequently, the High Court set aside the impugned order and directed the Proper Officer to re-adjudicate the matter, allowing the petitioner to file a further reply and ensuring a personal hearing.
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• GST:

  Retrospective cancellation of GST registration of the petitioner - The High Court found deficiencies in the notice and order, emphasizing the need for specific grounds and objective criteria for retrospective cancellations. It modified the order to cancel registration from the date of the show cause notice issuance, considering the petitioner's business closure and compliance. However, it clarified that recovery actions for dues remain permissible, provided proper procedure is followed.
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• GST:

  Refund of GST paid deposited by the Vendor on advance paid by the appellant since no supply was made - Return/refund of the entire advance amount - The High Court found the order rejecting the refund application to be unreasoned and cryptic, lacking any substantive reasons for the rejection. The Court concluded that the petitioner was entitled to a refund due to the non-supply of goods covered by the agreement and the subsequent recovery of the advance amount. The Court invoked the doctrine of unjust enrichment and restitution, directing the concerned authorities to refund the entire GST amount. - The High Court held that the petitioner's entitlement to a refund was not contingent upon the vendor issuing a credit note. It reasoned that since there was no GST liability on either the petitioner or the vendor, and the GST amount was lying with the authorities, the petitioner should be refunded directly.
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• Income Tax:

  Salary income - Taxability of "fringe benefits" or "amenities" provided to employees - Validity of Section 17(2)(viii) and Rule 3(7)(i) - benefit enjoyed by bank employees from interest-free loans or loans at a concessional rate - The Supreme Court held that the legislative provision does not delegate essential legislative function unduly. It sets clear boundaries and standards for the CBDT to prescribe additional taxable perquisites. This adheres to permissible limits of subordinate legislation. - Both the provisions, i.e. section 17(2)(viii) and Rule 3(7)(i) are upheld as valid. - The appeals challenging their vires are dismissed. The Supreme Court upheld the legislative competence in delegating certain powers to the CBDT and validates the use of SBI's PLR as a benchmark for assessing the taxable value of perquisite.
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• Income Tax:

  Seeking directions to de-freeze the bank accounts - The court carefully examined the relevant provisions of the Income Tax Act and found that the freezing of bank accounts cannot extend beyond sixty days from the date of the order. Despite being given opportunities to justify their actions, the respondents failed to provide sufficient reasons for the continued freeze. Therefore, the court declared the letter freezing the accounts unenforceable beyond the sixty-day period and directed the immediate defreezing of the accounts.
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• Income Tax:

  Reopening of assessment u/s 147 or u/s 153C - validity of proceedings - The High Court emphasized the need for the Assessing Officer to properly apply relevant provisions of the Income Tax Act. It suggested a thorough examination of whether Section 153(C) should have been invoked instead of Sections 147 and 148, especially considering the circumstances of the case. The Court highlighted the importance of procedural fairness and the duty of the Assessing Officer to provide all necessary documents and material to the Assessee. It emphasized the need for compliance with procedural safeguards to ensure a fair assessment process.
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• Income Tax:

  Reopening of assessment u/s 147 - appropriate authority for issuance of the notice - The High Court found merit in the petitioner's argument regarding the lack of jurisdictional authority for issuing the notices. It relied on the decision in Twylight Infrastructure Pvt. Ltd. v. ITO & Ors. and ruled in favor of the petitioner. While the petitioner raised concerns about the reassessment proceedings being based on a change of opinion, the High Court's decision primarily focused on the jurisdictional issue.
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• Income Tax:

  Credit of the tax deducted at source (TDS) as TDS deducted by the employer - mis-match of tax deducted u/s 192 and the amount reflected in Form 26AS - The Court acknowledged the challenge faced by taxpayers when the tax deducted at source by the employer is not fully credited. They noted various reasons for this, including mismatches between the details uploaded by the deductor and those furnished by the assessee. The Court emphasized the statutory provision of Section 205 of the Income Tax Act, which states that the assessee shall not be required to pay tax to the extent it has been deducted at source. - Emphasizing Section 205 of the Income Tax Act and related CBDT circulars, the Court directed the department to grant credit for TDS to the petitioner.
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• Income Tax:

  Rectification u/s 254 - The High Court acknowledges that the Tribunal is the final authority to ascertain facts. However, it must rectify any apparent mistakes in its orders under section 254(2) of the ITA. The High Court scrutinizes the Tribunal's decision and finds that the Tribunal did not dispute the details of loss filed by the petitioner before the AO and the Commissioner. Instead, it focused on whether the petitioner had claimed the loss from the transporters. Considering the above, the High Court sets aside and quashes the impugned order of the Tribunal.
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• Income Tax:

  Deduction u/s. 80P(2)(a)(i) - interest income earned on its investments amount made with District co-operative banks - The Tribunal upheld the decision of the lower authorities, stating that the interest income from investments with KDCC Bank did not qualify as operational income attributable to the main business of the assessee. Relying on precedents and the nature of the income, the Tribunal affirmed the denial of deduction u/s 80P(2)(a)(i) of the Act.
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• Income Tax:

  Taxability of income in India - receipts from services rendered to Indian entities - Fee for Technical Services (FTS) - Despite the assessee's contention that the services were routine and standard, the Tribunal found them to be managerial, technical, or consultancy services falling under the definition of FTS as per the India-Sweden DTAA. - The Tribunal rejected the argument of the rule of consistency, emphasizing that each assessment year is independent, and the Assessing Officer has the prerogative to re-examine the nature of income. It concluded that the receipts were indeed FTS as defined under the treaty, hence taxable.
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• Income Tax:

  Scope of adjustments u/s. 143(1) - Applicability of presumptive provisions of tax u/s. 44ADA - The Tribunal observed that the appellant had not disclosed the income on a presumptive basis u/s. 44ADA but under u/s. 44AD. It was deemed that the Central Processing Centre (CPC) had exceeded its scope of power of adjustment prescribed u/s. 143(1) by invoking the provisions of section 44ADA. Consequently, the adjustment made by the CPC was set aside, and the appeal was allowed.
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• Income Tax:

  TP adjustment - goods Exported to the Associated Enterprises (AE) - The Tribunal sided with the assessee, noting the principle of consistency should apply, as similar methodologies were accepted in previous years. They directed the deletion of the transfer pricing adjustment, emphasizing that the profitability of AEs in initial operational stages in new markets can justifiably be lower.
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• Income Tax:

  Income accrued in India or not - Dependent Agent - PE in India or not? - The Tribunal upheld the assessee's argument that its operations did not constitute a business connection or PE in India, as core activities were conducted outside the country. Previous Tribunal decisions supported the conclusion that the Indian branch's activities were preparatory/auxiliary and did not constitute a PE. The Tribunal directed the assessing officer to allow TDS credit as claimed and dismissed penalty proceedings and interest levy.
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• Income Tax:

  Penalty levied u/s 271B - not getting accounts Audited within the due date specified u/s 44AB - It was established that the appellant did not maintain the books of accounts within the due date specified u/s 139(1) of the Act, which rendered the question of getting them audited u/s 44AB irrelevant. The Tribunal referred to judgments of various High Courts, including the Guwahati High Court and the Allahabad High Court, which held that if the books of accounts were not maintained at all, the provisions of section 44AB of the Act do not get violated, and hence penalty u/s 271B would not apply.
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• Income Tax:

  Disallowance u/s 40(a)(i) as assessee not deducted TDS - The Tribunal agreed with the assessee's argument that there was no failure to deduct TDS, as the amounts payable to financial institutions were nil. - ITAT accepted the justification provided by the assessee concerning the percentage completion method as per Accounting Standard AS-7. - Moreover, it accepted the contention that the interest paid was cumulative and claimed as expenditure upon project completion. As a result, the disallowance under section 40(a)(ia) was deemed unwarranted.
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• Income Tax:

  Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - Emphasizing the principles outlined by the Karnataka High Court, the Tribunal reaffirmed the importance of clear and specific grounds for imposing penalties under Section 271(1)(c) of the Act. It clarified that penalties should only be imposed based on the grounds stated in the notice, and the validity of assessment cannot be a subject matter of penalty proceedings. The Tribunal agreed with the appellant's argument against the applicability of Section 292B to cure the defect in the notice under Section 274, reiterating that the notice did not conform to the intent and purpose of the Act.
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• Income Tax:

  Disallowance of the claim for Bad Debts written off - Disallowance of settlement expenditure - In the case of bad debts, the Appellate Tribunal (ITAT) partially allowed the appeal, permitting the write-off related to business activities while rejecting the claim related to capital expenditures. Regarding the settlement expenditure, the Tribunal allowed the appeal, recognizing the guarantee given by the assessee as essential for business operations and the payment made to settle the liability as a necessary expense for business continuity.
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• Customs:

  Amendment to the List 34A and List 34B in the Appendix to the Table of Notification No. 50/2017-Customs dated 30.06.2017 - The amendments primarily focus on updating the list of authorized banks for handling specified customs transactions and operations, particularly in relation to the exemption of gold or silver imports from IGST.
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• Customs:

  Notification No. 24/2024-Customs issued to amend specified customs tariff notifications to exempt applicable import duty on imports of desi chana (HS 0713 20 20) up to 31.03.2025; to impose export duty of 40% on exports of Onions (HS 0703 10); to extend the specified condition of exemption to imports of Yellow Peas (HS 0713 10 10) to bill of lading issued on or before 31.10.2024.
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• Customs:

  AIRs of Duty Drawback - Customs Notification No. 33/2024 signifies a thoughtful recalibration of All Industry Rates of Duty Drawback of various items. Moreover, by revising the drawbacks related to the export of specific goods, the government appears to be incentivizing the export of goods where India might have a competitive advantage, potentially improving trade balances.
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• Customs:

  Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver - The notification updates the tariff values for commodities like crude palm oil, RBD palm oil, crude palmolein, and brass scrap. - There are significant amendments in the tariff values for gold and silver, possibly to correct or respond to international price changes or economic policies targeting the importation and domestic trading of these metals. The changes are set to take effect from May 1, 2024.
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• Customs:

  Penalty Enhancement - Penalty imposed u/s 112 of the Customs Act, 1962 - The Tribunal ruled that penalty cannot be enhanced in subsequent proceedings without proper notice. As the penalty was enhanced without proper notice and in contradiction to settled law, the Tribunal restricted the penalty to the original amount of ₹15,000.
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• Customs:

  Duty liability - Eligibility for the alternative exemption notification to limit recovery of duty - The Tribunal found that the appeal of Revenue did not dispute the eligibility of the importer to avail the alternative exemption notification. As the Tribunal had previously ordered de novo adjudication to consider this specific claim, and the finding of eligibility was not controverted, the appeal of Revenue was dismissed.
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• Customs:

  Invocation of larger (extended) period of limitation under Section 28(4) of the Customs Act, 1962 - The tribunal found sufficient evidence to support the allegation of willful mis-declaration aimed at evading import duty and compliance requirements. It noted the modus operandi outlined in the show-cause notice, where the importer imported goods in SKD condition to evade duty and compulsory compliance with regulations. Consequently, the tribunal upheld the application of Section 28(4) of the Customs Act, 1962.
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• Customs:

  Classification of imported goods - Applicable rate of Basic Customs Duty (BCD) - Despite the appellant's claim that they were not sold as toys but as imported parts, the tribunal emphasized how the goods were perceived in the market. It cited Rule 2(a) of the General Rules of Interpretation of the Import Tariff, which considers incomplete or unfinished articles to be classified as the complete or finished article if they retain its essential character. The tribunal concluded that the imported goods were indeed parts of plastic toys and should be classified as such, attracting the higher BCD.
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• Customs:

  Seeking amendment in the shipping bills - Period of limitation - The Tribunal deemed the 2010 CBEC circular invalid, citing judgments by the Gujarat High Court and the High Court of Bombay. These judgments declared the circular ultra vires and directed authorities to reconsider amendment applications without imposing time limits. Consequently, the Tribunal set aside the communication denying the appellant's request and instructed reconsideration by the Commissioner of Customs within a specified time frame, ensuring a personal hearing for the appellant.
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• Customs:

  Valuation of imported goods (Float Glass Sheets) - Transaction value - The Tribunal scrutinized the evidence provided by the Department and found it lacking in credibility. The imports cited for comparison were not sufficiently similar to the appellant's imports, both in terms of timing and product specifications. Additionally, the absence of conversion of prices from dollars to rupees further undermined the validity of the comparison. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, if any, as per law.
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• DGFT:

  The DGFT issued Notification No. 12/2024-25, to amend the import policy conditions for yellow peas. This adjustment extends the timeline for free import conditions under the Indian Trade Clarification (ITC) Harmonized System (HS) Code 07131010. - The import of yellow peas remains "Free" without the Minimum Import Price (MIP) condition and without port restrictions. The amendment extends the date from June 30, 2024, to October 31, 2024, for import consignments where the Bill of Lading (Shipped on Board) is issued. - For Bill of Ladings issued after October 31, 2024, the import status will change to "Restricted", reverting to the policy conditions that existed before the initial relaxation introduced in DGFT Notification No. 50/2023.
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• DGFT:

  Export of food commodities through National Cooperative Exports Limited (NCEL). - The notification specifies the export of 14,000 metric tonnes (MT) of Non-Basmati White Rice through the National Cooperative Exports Limited (NCEL) to Mauritius. - Allowing the export of a substantial quantity of rice to Mauritius signifies a strategic move to strengthen bilateral trade ties and ensure food security in the region.
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• DGFT:

  Export policy of Onions - The revised policy allows the free export of onions but imposes a Minimum Export Price (MEP) of USD 550 per Metric Ton (MT). This condition is aimed at ensuring that the domestic markets remain stable and are not affected by the production in the domestic market and fluctuations of the international market.
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• FEMA:

  The Foreign Exchange Management (Margin for Derivatives Contracts) (First Amendment) Regulations, 2024, provide necessary updates to the regulatory framework governing financial derivatives in India. - Regulation 4 has been expanded to allow more comprehensive management of margins for derivative contracts, including the ability to handle such transactions internationally and to manage interest transactions on these margins.
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• FEMA:

  The Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024, issued by the RBI, introduces a new provision to Regulation 7 - This new provision allows authorised dealers in India to enable non-resident individuals to open and maintain interest-bearing accounts in Indian Rupees or foreign currency. - It facilitates smoother financial operations for non-residents engaged in derivatives markets in India, potentially enhancing the attractiveness of India's financial markets for international investors.
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• Corporate Law:

  Suit for recovery of dues - Jurisdictional bar on the civil court in deciding the suit instituted by the original plaintiff by virtue of Section 22(1) of the Sick Industrial Companies Act, 1985 (SICA) - The Supreme Court determined that since the suit was initiated while Fertilizer Corporation was considered a sick company under SICA, the proceedings should have been suspended unless permitted by BIFR (Board for Industrial and Financial Reconstruction). This finding implies that the trial and subsequent proceedings might not have adhered to statutory requirements under SICA, affecting the legitimacy of Coromandel’s claim in the absence of such permission. - The Court evaluated the legitimacy of the 24% compound interest awarded by the lower court in favor of Coromandel.
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• Corporate Law:

  Seeking winding up of the respondent company - failure to pay debt in the normal and ordinary course of its business - The High Court notes the respondent company's consistent default in rent payment and the legal actions initiated against them. However, the court observes that no Provisional Liquidator or Official Liquidator has been appointed in the present petition, rendering it a non-starter. Considering the enactment of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013, during the proceedings, the court deems it appropriate to transfer the case to the National Company Law Tribunal (NCLT) as per Section 434 of the Companies Act, 2013.
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• Corporate Law:

  Refund the amount deposited by the applicant pursuant to the directions/ order of the DRT, Delhi - The High court observes that IFCI failed to demonstrate that the amount deposited by the applicant was remitted to the Official Liquidator. Despite repeated opportunities, IFCI did not provide a satisfactory breakdown of the amounts deposited with the Official Liquidator, leading to uncertainty regarding the inclusion of the applicant's funds. - Given the failure of IFCI to account for the applicant's funds and provide satisfactory documentation, the court directs IFCI to refund the amount of Rs. 57.50 Lacs to the applicant, along with interest at 18% per annum from the date of deposit.
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• Indian Laws:

  Reimbursement of additional expenditure incurred due to an increase in the rates of royalty and associated sales tax on soil, sand and crushed stone aggregates - Arbitration Award - The Supreme Court upheld the Division Bench's decision, stating that any increase in tax through subsequent legislation is akin to the levy of additional royalty. The Court confirmed that the imposition of sales tax was indeed increased, and thus, the claim for reimbursement based on the increase was justified. The Court emphasized that such claims were covered by clause 70.8 of the agreement, and the Arbitral Tribunal's interpretation was consistent with previous legal precedents. Therefore, the appellant's challenge on this issue was dismissed. - The Court upheld the majority opinion of the Arbitral Tribunal regarding the construction of embankment work. It reiterated that the interpretation of contract terms primarily falls within the Arbitral Tribunal's jurisdiction.
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• IBC:

  Initiation of CIRP - Existence of a financial debt - Assignment of debt- The Appellate Tribunal (NCLAT) upheld the Adjudicating Authority’s findings, agreeing that: The evidence did not conclusively prove the existence of a financial debt as defined under the Insolvency and Bankruptcy Code (IBC). The assignment of alleged receivables to the Appellant did not convert them into a financial debt because the transfer was on an “as is where is” basis without warranties of their recoverability or acknowledgment as debt by the Respondent.
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• IBC:

  CIRP - Aggrieved person or not / Locus Standi of minor operational creditor - The Appellate tribunal (NCLAT) found that the appellant, as a minor operational creditor, did not suffer any legal injury or infringement of rights from the auction outcome, given that their stake did not confer significant influence over the liquidation process. The tribunal ruled that the appellant did not qualify as an 'aggrieved person' and thus dismissed the appeals on the grounds of lack of standing.
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• IBC:

  CIRP - It is submitted that the Appellant has 00.54 % share as an operational creditor and would fall much lower in the scale of Section 53 of IBC - The Appellate Tribunal noted that the e-auction was conducted transparently, with adequate publicity and opportunity for bidders. The valuations were based on comprehensive reports by registered valuers and had been accepted by the stakeholder consultation committee. - The tribunal dismissed the operational creditor's challenge, affirming that the e-auction was conducted properly and the asset valuation was appropriately executed.
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• IBC:

  CIRP - Classification of the claim - Claim as contingent due to pending litigation - Citing legal precedent, the Tribunal upheld the classification of the claim at a notional value of Rs. 1. - The Tribunal found that the resolution plan's payout prioritized secured financial creditors, leaving nothing for operational creditors. Considering the waterfall mechanism outlined in Section 53 of the Code, the Tribunal determined that operational creditors would receive NIL payment. The Tribunal noted that the CoC's approval of the resolution plan was based on commercial wisdom, which it couldn't interfere with.
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• IBC:

  Rejection of application filed for extension of time for the purposes of completion of the Insolvency Resolution Process - The Appellate Tribunal (NCLAT) acknowledged the complexity of the insolvency cases and the necessity of extending the time beyond the statutory limit of 330 days prescribed by the IBC. The Tribunal cited the judgment in Essar Steel to support that extensions could be justified under exceptional circumstances to ensure justice and efficiency in the resolution process. - The Tribunal found that the resolution professional had not provided a fair chance for rectifying the alleged defects in the resolution plans submitted. - The Tribunal allowed the appeals, quashing the orders of the Adjudicating Authority.
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• PMLA:

  Seeking grant of bail - Petitioner's severe health condition (duodenal cancer) and his wife’s terminal illness, exacerbating his mental distress - The court found that the applicant’s medical condition met the criteria of 'sick' or 'infirm' under the proviso to Section 45(1) of the PMLA. The severity of his and his spouse’s health conditions justified a more humane consideration under the law. The court granted bail to the applicant for a period of two months, subject to several conditions aimed at ensuring that the applicant does not flee or tamper with evidence. These included staying within the jurisdiction, surrendering his passport, and not contacting co-accused or engaging in similar activities.
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• SEBI:

  The Securities and Exchange Board of India (SEBI) recently issued a notification, amending the existing regulations concerning employees' service within the organization. - The key amendments include enhanced recovery powers for pecuniary losses caused by employees, continuation of proceedings post-employment, procedures for addressing allegations against former employees, and provisions for withholding gratuity during ongoing proceedings.
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• SEBI:

  Regulation 38A as introduced to the existing Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, grants recognized stock exchanges the authority, with the approval of the Board, to administer and supervise specified intermediaries.
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• Service Tax:

  Levy of service tax on services received from foreign bank - The Tribunal determined that the appellant was not receiving any direct services from the foreign banks that warranted taxation. The banks provided services to other banks within India, which then interacted with the appellant. Any fees deducted by foreign banks were seen as inter-bank transactions, not services provided to the appellant. The Tribunal set aside the impugned orders and allowed the appeals of the appellant.
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• Service Tax:

  Import of services - RCM - Business auxiliary services (BAS) / Business support service (BSS) - The tribunal noted that these services were performed entirely outside India. According to Rule 3(ii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, such services qualify as imports of service into India only if they are performed, fully or partly, in India. - The tribunal concluded that the services did not fall under the scope of BSS for charging service tax under RCM as they were neither related to marketing nor sales of the appellants' goods, nor were they performed in India. Hence, the service tax demands under this category were not sustainable.
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• Service Tax:

  Supply of Tangible Goods for Use (STGU) - activity of hiring of rigs on charter basis, by the appellants from GGES - The tribunal held that the service does not qualify as STGU since the possession and effective control of the rigs were transferred to Greatship (India). It was found that despite the lessor having certain rights (like inspecting the rigs), such rights did not negate the effective control transferred to the charterer. The demands of service tax under STGU were set aside.
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• Central Excise:

  Penalty u/r 26(1) of Central Excise Rules, 2002 - charge of abating the evasion of duty by the Main Party - The appellant argued that since the main party's case of duty evasion had been settled under the Sabka Vishwas Scheme, 2019, they should not be penalized. The Tribunal agreed with this argument, citing legal precedents that supported setting aside penalties on co-noticees once the main case is resolved. Consequently, the Tribunal set aside the penalty and allowed the appeal.
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Articles

• DISTINCTION BETWEEN ‘DOCTRINE OF CONSTRUCTIVE NOTICE’ AND ‘DOCTRINE OF INDOOR MANAGEMENT’
• The Benefits of Cloud Accounting for SMEs

Notifications

• DGFT

• 12/2024-25 - dated 8-5-2024 - FTP
  Extension in Import Period for Yellow Peas under ITC (HS) Code 07131010 of Chapter 07 of ITC (HS) 2022, Schedule -I (Import Policy)

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• Income Tax

• 42/2024 - dated 8-5-2024 - IT
  Exemption from specified income U/s 10(46) – ‘Tamil Nadu Electricity Regulatory Commission, notified

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Circulars / Instructions / Orders

• Insolvency and Bankruptcy - IBBI/LAD/72/2024 - dated 9-5-2024
  Uploading of judicial orders related to insolvency proceedings by Insolvency Professionals
• Customs - Public Notice No. 03 / 2024 - dated 3-4-2024
  Export of SEZ parcels through International Courier Terminal by M/s. DHL Express India Private Limited - reg
• Companies Law - 03/2024 - dated 7-5-2024
  Relaxation of additional fees and extension of last date of filing of Form No. LLP BEN-2 and LLP Form No. 4D under the Limited Liability Partnership Act, 2008

Case Laws:

• GST

• 2024 (5) TMI 453
  Maintainability of petition - availability of alternative remedy - Violation of principles of natural justice - respondent authority has not provided the relied upon documents - no opportunity of hearing was provided to the petitioner as contemplated under Section 75(4) of the Goods and Service Tax Act, 2017 - HELD THAT:- On perusal of the impugned order in original passed in Form GST DRC-07, it emerges that the petitioner has been given adequate opportunity of hearing, and, therefore, the contention of the petitioner that the opportunity of hearing not given is not tenable and the petitioner is, therefore, required to be relegated to avail the alternative efficacious remedy under Section 107 of the GST Act, to challenge the impugned order before the appellate authority. The petition is dismissed.

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• 2024 (5) TMI 452
  Violation of principles of natural justice - impugned order does not take into consideration the reply submitted by the Petitioner and is a cryptic order - demand including penalty - HELD THAT:- The observation in the impugned order dated 05.12.2023 is not sustainable for the reasons that the reply dated 11.10.2023 filed by the Petitioner is a detailed reply with supporting documents. Proper Officer had to at least consider the reply on merits and then form an opinion. He merely held that that the reply is not satisfactory and no proper reply justifying the facts of the case along with supporting documents have been submitted nor has the taxpayer appeared for a hearing - Despite the fact that petitioner has filed a reply, the Proper Officer has held that neither he has filed a proper reply nor appeared for a hearing which ex-facie shows that the Proper Officer has not applied his mind to the reply submitted by the petitioner. Further, if the Proper Officer was of the view that any further details were required, the same could have been specifically sought from the Petitioner. However, the record does not reflect that any such opportunity was given to the Petitioner to clarify its reply or furnish further documents/details - the impugned order dated 05.12.2023 cannot be sustained and is set aside. The Show Cause Notice is remitted to the Proper Officer for re-adjudication. Petition disposed off.

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• 2024 (5) TMI 451
  Retrospective cancellation of GST registration of the petitioner - SCN does not put the Petitioner to notice that the registration is liable to be cancelled retrospectively - Petitioner had no opportunity to even object to the retrospective cancellation of the registration - Violation of principles of natural justice - HELD THAT:- SCN and the impugned order are bereft of any details. Neither the Show Cause Notice, nor the order spell out the reasons for retrospective cancellation. Accordingly, the same cannot be sustained. In terms of Section 29(2) of the Act, the proper officer may cancel the GST registration of a person from such date including any retrospective date, as he may deem fit if the circumstances set out in the said sub-section are satisfied. Registration cannot be cancelled with retrospective effect mechanically. It can be cancelled only if the proper officer deems it fit to do so. Such satisfaction cannot be subjective but must be based on some objective criteria. It is important to note that, according to the respondent, one of the consequences for cancelling a taxpayer s registration with retrospective effect is that the taxpayer s customers are denied the input tax credit availed in respect of the supplies made by the tax payer during such period - Although, it is not considered apposite to examine this aspect but assuming that the respondent s contention is required to consider this aspect while passing any order for cancellation of GST registration with retrospective effect. Thus, a taxpayer's registration can be cancelled with retrospective effect only where such consequences are intended and are warranted. It is clear that both the petitioner and the respondent want the GST registration to be cancelled, though for different reasons. In view of the above that the Petitioner does not seek to carry on business or continue the registration, the impugned order dated 17.07.2022 is modified to the limited extent that registration shall now be treated as cancelled with effect from 22.06.2022 i.e., the date when Show Cause Notice was issued - petition disposed off.

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• 2024 (5) TMI 408
  Refund of GST paid deposited by the Vendor on advance paid by the appellant since no supply was made - Return/refund of the entire advance amount - vendor did not supply goods under the contract to the petitioner and the contract was cancelled - order rejecting refund is unreasoned, cryptic, non-speaking order without assigning any reasons as to why the refund application was rejected - violation of principles of natural justice - HELD THAT:- It is relevant to note that respondent No. 1 has come to the conclusion that supplier/vendor was the person ought to have issued credit note and thereafter, it was open for the petitioner to seek refund and without doing so, the petitioner is not entitled to seek refund of the GST. Respondent No. 1 has also come to the conclusion that it is for the vendor to file an appropriate application before the respondents/authorities seeking refund and only thereafter, the grievance of the petitioner can be addressed for the purpose of refund. In the facts and circumstances of the instant case viz., the payment of sum of Rs. 14,08,79,262/- paid by the petitioner to the vendor, payment of Rs. 2,53,58,268/- towards GST by the vendor to respondents and refund of entire amount of Rs. 14,08,79,262/- by encashment of the bank guarantee by the petitioner and other material on record would cumulatively indicate that there was no GST liability either by the petitioner or his vendor were concerned and by applying doctrine/principles of unjust enrichment and restitution and since the aforesaid GST amount is lying with the respondents, who are retaining the same without there being any GST liability either by the petitioner or the vendor, it is deemed just and appropriate to set aside the order dated 06.09.2021 passed by respondent No. 2 as well as impugned order dated 30.09.2023 passed by respondent No. 1/Appellate Authority and direct the concerned respondents to refund entire GST amount of Rs. 2,53,58,268/- back to the petitioner within a stipulated time frame. Refund application filed by petitioner allowed.

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• Income Tax

• 2024 (5) TMI 450
  Salary income - Taxability of fringe benefits or amenities provided to employees - benefit enjoyed by bank employees from interest-free loans or loans at a concessional rate - what is included and taxed as perquisite value of interest - vires of Section 17(2)(viii) of the Income Tax Act, 1961 challanged - Whether free or concessional loans is to be treated as other fringe benefit or amenity for the purpose of Section 17(2)(viii) and, therefore, taxable as a perquisite ? - method of valuation of the interest-free/concessional loan for the purposes of taxation Does Section 17(2)(viii) and/or Rule 3(7)(i) lead to a delegation of the essential legislative function to the CBDT? - HELD THAT:- The subordinate authority s power under Section 17(2)(viii), to prescribe any other fringe benefit or amenity as perquisite is not boundless. It is demarcated by the language of Section 17 of the Act. Anything made taxable by the rule-making authority under Section 17(2)(viii) should be a perquisite in the form of fringe benefits or amenity . In our opinion, the provision clearly reflects the legislative policy and gives express guidance to the rule-making authority. The enactment of subordinate legislation for levying tax on interest free/concessional loans as a fringe benefit is within the rulemaking power under Section 17(2)(viii) of the Act. Section 17(2)(viii) itself, and the enactment of Rule 3(7)(i) is not a case of excessive delegation and falls within the parameters of permissible delegation. Section 17(2) clearly delineates the legislative policy and lays down standards for the rule-making authority. Accordingly, Rule 3(7)(i) is intra vires Section 17(2)(viii) of the Act. Section 17(2)(viii) does not lead to an excessive delegation of the essential legislative function . Is Rule 3(7)(i) arbitrary and violative of Article 14 of the Constitution insofar as it treats the PLR of SBI as the benchmark? - Rule 3(7)(i) posits SBI s rate of interest, that is the PLR, as the benchmark to determine the value of benefit to the assessee in comparison to the rate of interest charged by other individual banks. The fixation of SBI s rate of interest as the benchmark is neither an arbitrary nor unequal exercise of power. The rule-making authority has not treated unequal as equals. The benefit enjoyed by bank employees from interest-free loans or loans at a concessional rate is a unique benefit/advantage enjoyed by them. It is in the nature of a perquisite , and hence is liable to taxation. By fixing a single clear benchmark for computation of the perquisite or fringe benefit, the rule prevents ascertainment of the interest rates being charged by different banks from the customers and, thus, checks unnecessary litigation. Rule 3(7)(i) ensures consistency in application, provides clarity for both the assessee and the revenue department, and provides certainty as to the amount to be taxed. When there is certainty and clarity, there is tax efficiency which is beneficial to both the tax payer and the tax authorities. These are all hallmarks of good tax legislation. Rule 3(7)(i) is based on an uniform approach and yet premised on a fair determining principle which aligns with constitutional values. A complex problem has been solved through a straitjacket formula, meriting judicial acceptance. To hold otherwise, would lead to multiple problems/issues and override the legislative wisdom. The universal test in the present case is pragmatic, fair and just. Therefore, Rule 3(7) is held to be intra vires Article 14 of the Constitution of India. We, accordingly, dismiss the appeals and uphold the impugned judgments of the High Courts of Madras and Madhya Pradesh.

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• 2024 (5) TMI 449
  Seeking directions to de-freeze the bank accounts - Number of days for which order of freezing the bank accounts stays - whether the action of the respondents in freezing the accounts of the petitioners beyond a period of sixty days is sustainable under the provisions of the Act? - HELD THAT:- Undisputedly, a plain reading of sub-section (8-A) to Section 132 would unambiguously signify that in the instant case, the order of freezing the bank accounts could not remain in force for a period exceeding sixty days from the date of the order. Admittedly, the said period of sixty days had already expired before the filing of the present petitions and no subsequent order appears to have been passed for extending the freezing of accounts. Since the order in question was issued on 30.04.2023, the rigour period stood concluded by 30.06.2023, therefore, the perpetuation of freezing of the bank accounts is completely unsustainable and dehors the provisions of the Act. The aforesaid legal position was noticed by us on the very first date of hearing. We, however, directed the Revenue to obtain instructions with respect to the issue under consideration. On the following date of hearing i.e., on 28.02.2024, a further three weeks time was granted to the Revenue to file a reply. As seen that despite being extended reasonable indulgence to explain the tenability of the impugned action, the Revenue has failed to tender any justification, much less a cogent explanation which could sustain such action. Since the letter dated 30.04.2023 has already lived out its life and ceases to have any significance by virtue of operation of law, the same is hereby declared to be unenforceable beyond a period of sixty days from its issuance. Consequently, the writ petitions are allowed with a direction to immediately defreeze the concerned bank accounts of the petitioners.

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• 2024 (5) TMI 448
  Reopening of assessment u/s 147 or u/s 153C - as argued in case of search of premises/offices of Omaxe Group, some papers have been discovered by the authorities then Section 153 A and 153 C would apply and not Section 147 and 148 - It is the case of the respondent no.2 that information received on the basis of search initiated under Section 132 also includes a search on any other person and Section 148(A) requires a show-cause notice to be issued which has been issued under sub-clause (b) thereof to the petitioner and then the impugned order has been passed under sub-clause (d) of Section 148(A). HELD THAT:- As per respondents that all information that is received by the AO shall be provided and has been provided to the Assessee to enable her to make her detailed reply/ objection to such notices and the Assessment has not been completed as yet and, therefore, the writ petition has been filed only on the misapprehension. This Court having considered the arguments raised by the learned counsel for the petitioner and that of the respondent no.2 is of the opinion that the question of jurisdictional error that has been pointed out with regard to invoking Section 147, 148 and 148A and not Section 153C should also be considered by the Assessing Officer and a finding be recorded thereon while passing final orders, which till date have not been passed.

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• 2024 (5) TMI 447
  Reopening of assessment u/s 147 - appropriate authority for issuance of the notice - approval of the specified authority u/s 151 - Proceedings after a lapse of more than three years - HELD THAT:- As per Section 151 of the Act and considering the fact that the reopening of the case is occurring after a lapse of more than three years, the appropriate authority for issuance of the notice under Sections 148 and 148A (b) of the Act should have been either the Principal Chief Commissioner or Principal Director General, or in their absence, the Chief Commissioner or Director General, instead of the Principal Commissioner of Income Tax, Delhi-10, who does not fall within the specified authorities outlined in Section 151 of the Act. See TWYLIGHT INFRASTRUCTURE PVT LTD [ 2024 (1) TMI 759 - DELHI HIGH COURT] Thus we allow the instant writ petition and quash the impugned notices.

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• 2024 (5) TMI 446
  Credit of the tax deducted at source (TDS) as TDS deducted by the employer - mis-match of tax deducted u/s 192 - difference in between the tax deducted by opposite party no.6 and the amount reflected in Form 26AS - what step has been initiated against the employer for non-depositing of the tax collected and deducted at source from the salary of the petitioner? - HELD THAT:- Section 205 of the I.T. Act read with CBDT circular, being statutory one, the said provision has to be adhered to in letter and spirit and to give effect to such provision, CBDT circular was issued on 01.06.2015 and the office memorandum was issued on 11.03.2016. Therefore, for tax credit mismatch cannot be enforced coercively against the petitioner/assessee. Assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income. As in view of the provisions contained in Section 205 of the I.T. Act, which provides that where tax is deductible at the source the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted from that income and its applicability is not depending upon the credit for tax being given under Section 199 of the I.T. Act. Thereby, the department shall not deny the benefit of tax deducted at source by the employer during the relevant financial years to the petitioner. The credit of the tax shall be given to the petitioner and if in the interregnum, any recovery or adjustment is made by the department, the petitioner shall be entitled to the refund, with the statutory interest, within eight weeks from the date of receipt of the copy of this judgment.

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• 2024 (5) TMI 445
  Addition u/s. 68 - unsecured loans / cash credit - net profit addition - ITAT deleted addition as no loans has been taken by the assessee during the year under consideration but it was the opening balance as on 01.04.2013 which was carried forward and thus, the genuineness of cash credits were established by the assessee and assessee has duly furnished all the details to establish the correctness of the books of accounts and while rejecting the books of accounts has not recorded any proper satisfaction/reasons and therefore, the rejection of books of accounts was not justifiable. HELD THAT:- CIT(A) and ITAT concurrently based on available records arrived at a finding of fact that the assessee had duly furnished details to establish the correctness of books of accounts and also furnished ITR, Audit Report, balance sheet etc. Having essentially therefore arrived at such findings based on facts, no substantial question of law, much less any substantial question of law is argued. The appeal is dismissed

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• 2024 (5) TMI 444
  Rectification u/s 254 - Tribunal had made error apparent in its order by saying transportation loss in respect of coal was not accepted - Its opinion was, the assessee must have claimed the same on the responsible transporter, which has not been shown in the case - HELD THAT:- On perusal of the two passages from appellate order made by the Tribunal, we do not find any dispute raised regarding details of loss on account of shortage of coal supplied as were filed before the AO and thereafter also before the Commissioner. Assessee s contention is, the Tribunal opined on it having claimed from the transporter(s). Revenue s contention is there was no loss. This contention was upheld by the Tribunal on a finding that the Commissioner had not observed as to whether the shortage was passed on by the assessee to the transporter(s) and without examining that, the Commissioner deleted the addition. The passage relied upon by assessee is an expression of opinion in support of held omission of the Commissioner to observe as to whether the shortage was passed on to the transporter(s). The Tribunal opined the assessee must have passed it on. There is nothing in impugned order to show that the AO had made an inquiry or verification regarding the coal as not actually lost. A fact can be proved on a positive assertion. The assessee cannot prove existence of coal, when it says it has been lost. The AO in asserting it was not lost, could have demonstrated existence of the coal. We are satisfied that in the fact situation the Commissioner correctly came to the conclusion that proper internal control system for accounting and finances of assessee had resulted in the details filed before the AO and thereafter before the Commissioner. The details explained and accounted for the shortage of coal. This finding was overturned by the Tribunal in revenue s appeal on saying that the Commissioner had not observed whether the shortage had been passed on to the transporter(s). Commissioner could have had no occasion to so observe as the authority was sitting in appeal over the assessment order. Neither in the appellate order of the Tribunal nor in its rectification order there is any reference to the AO having made a finding on passing on the loss to the transporter(s). Tribunal being the last forum to find on facts, purported to find a fact on surmise. It is an error apparent. We therefore set aside and quash impugned order.

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• 2024 (5) TMI 443
  Deduction u/s. 80P(2)(a)(i) and/or u/s. 80P(2)(d) - interest income earned on its investments amount made with District co-operative banks - HELD THAT:- Rule 23 of the Karnataka Co-operative Societies Rules states that reserve fund belongs to the society and is intended to meet the unforeseen losses. Further if the cooperative society wants to invest reserve fund or any portion thereof for any other purpose as prescribed under section 58 (a) to (d) of the Karnataka Co-operative Societies Act permission is to be taken from , the Registrar of Co-operative Societies. Therefore the argument of the assessee that it is operational income is rejected. Even the maintainability of SLR requirement from out of internal fund/external funds invested in KDCC Bank and interest earned thereon will not change the character of the nature of income and it is not attributable to the business of the assessee. The issue regarding the word attributable has been discussed in the case of M/s Totgars Co-operative Sales Society [ 2010 (2) TMI 3 - SUPREME COURT ] where it is held that the deduction u/s 80P is available only to the income which is attributable to the business operation. Since the interest income received by the appellant is not attributable to the main business of the appellant i.e. not operational income, accordingly the interest received by the assessee on investment made with KDCC Bank is not eligible for deduction u/s. 80P(2)(a)(i) of the Act. Deduction u/s 80P(2)(d) - Section 80P(2)(d) describes that if the assessee has derived interest/dividend from its investments with any other co-operative society, then the assessee is eligible for claim of deduction on such interest/dividend derived. In the judgment of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. [ 2023 (9) TMI 761 - SUPREME COURT ] it has been discussed in detail the definition of co-operative banks and cooperative society. If the payer bank falls under the definition of cooperative bank in the light of the judgment of Hon ble Apex Court then the assessee is not eligible to get deduction u/s. 80P(2)(d) on such interest income derived from KDCC Bank. We note that the assessee has received interest from KDCC Bank is a schedule bank which is governed by the Banking Regulation Act of 1949 as observed by the ld. CIT (A) at Para No. 6.11 of his order and this finding has not been denied by the ld. AR of the assessee, accordingly we hold that the assessee is not eligible for deduction u/s 80P(2)(d) on such interest income also. Interest receipts from KDCC Bank on its investments - revenue authorities have considered the entire interest as income from other sources u/s. 56 and no expenses u/s. 57(iii) has been allowed to the assessee for earning of such income - While calculating the income, the net income should be considered as taxable income after reducing the expenditure incurred towards earning of such income. Therefore relying on the judgment of Totgars Cooperative Sales Society Ltd. [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT ] the assessee is eligible for claim of its cost of funds on the interest income received from bank. Reliance is also placed on The West Coast Paper Mill Employees Souharda Credit Co-op. Ltd. [ 2023 (8) TMI 1110 - ITAT BANGALORE ] Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income. Both the appeals are partly allowed for statistical purpose.

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• 2024 (5) TMI 442
  Taxability of income in India - receipts from services rendered to Indian entities - Taxability as Fee for Technical Services (FTS) in terms of Article 12 of India Sweden Double Taxation Avoidance Agreement (DTAA) - assessee is a non-resident corporate entity incorporated in Sweden - HELD THAT:- Under Business Application Related Services, the assessee provides access to the business application softwares, which are used for various purposes, such as, inventory management, sales management, data warehousing applications, product design and modeling, human resource management etc. Under the End User Services and Shared Infrastructure, the assessee provides facilities and various services keeping in view the End User requirement, such as, emails, personal computer environment, voice/telephone. Under the voice support, mobile and fixed voice services are provided to connect people in local and global context. Under the IT support services, the assessee operates service desk for all types of IT related issues from end users. Under the Volvo Corporate Network, assessee provides a secured access to Volvo Network, which is prerequisite for use of any business application other IT services provided by the assessee. The assessee also provides Business Consultancy Services in terms of which it renders consultancy services with respect to IT services provided by it. Though, the assessee has claimed that these are standard and routine services, however, fact remains that the assessee has provided managerial, consultancy and technical services. Copies of invoices placed in the paper-book do not provide the description/details of services provided. In the instant case, the AO has examined the nature of receipts in respect of certain services rendered by the assessee to the Indian entities and found them to be FTS. The aforesaid factual position is not disputed even by the assessee. Therefore, it is established on record that the receipts are in respect of certain services rendered by the assessee. If that is the case, it needs to be examined, whether the receipts in relation to services rendered fall within the definition of FTS. AO has done exactly the same. Therefore, the action of the Assessing Officer in characterizing the receipts as FTS cannot be called into question by advancing the theory of rule of consistency. Thus, in our view, the judicial precedents cited before us by learned Senior Counsel would be of no help to the assessee, as, what is essential to determine is, the nature and character of receipts in the instant assessment year and not, what the Assessing Officer has erroneously held in earlier assessment years. Thus, on overall consideration of facts and materials on record, we hold that the payments received by the assessee for providing certain services to the Indian group entities are in the nature of FTS as defined under Article 12(3)(b) of India Sweden DTAA, hence, taxable. Applicability of MFN clause under the Protocol to India Sweden treaty so as to import the restrictive definition of FTS under India Portugal and India Finland DTAAs, in our view, the issue is no more res-integra in view of the ratio laid down in case of Nestle SA [ 2023 (10) TMI 981 - SUPREME COURT] - Ground decided accordingly.

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• 2024 (5) TMI 441
  Scope of adjustments u/s. 143(1) - Applicability of presumptive provisions of tax u/s. 44ADA - appellant had not disclosed the income on presumptive basis u/s. 44ADA but under the provisions of section 44AD - contention of the appellant that Form No.26AS was wrongly uploaded by the deductor showing the contract receipts as professional receipts - whether the CPC was justified in invoking the provisions of section 44ADA? - HELD THAT:- CPC had travelled beyond the scope of power of adjustment prescribed u/s. 143(1) of the Act. Therefore, the prima-facie adjustment made by the CPC vide intimation u/s. 143(1) is hereby set-aside. Appeal filed by the assessee stands allowed.

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• 2024 (5) TMI 440
  TP adjustment - goods Exported to the Associated Enterprises (AE) located in South Africa and Mexico - TPO did not accept associated enterprises as tested party as financial year of the companies having foreign jurisdiction did not match with the financial year of the assessee herein and Due to use of database which have their own format and non- availability of Balance Sheet, financials containing proper figure of RPT and description of function, data base are not reliable - HELD THAT:- In the facts of the present case, we are of the view that clause (d) of the above said Rule 10B(2) is applicable. As per Rule 10B(2), the factors such as, the market conditions of the concerned regions, their geographical location, size of markets, level of competition etc cannot be ignored. It is stated that the operations of Glenmark, Mexico has been started only during the year under consideration and the operations of Glenmark South Africa are in its initial years. Since both these AEs are in their initial years of operations, their respective profitability will be lower than the comparable companies in their respective region, since the AEs have to incur huge expenditure on marketing of products, while the comparable companies are established players. As noticed by us earlier, so far the assessee herein is concerned and qua the transfer pricing provisions, what is required to be seen is whether the price realized on export of products to their AEs is at arms length or not. The fact the profitability of AEs is lower than the profitability of comparable companies, would also show that the assessee has not under invoiced the sales. In the instant case, the details extracted in the table above matches with the above said criteria. Since the comparable companies selected in the respective Geographical locations are established players, the profit ratio of comparable companies are to required to be considered only to show that the profit ratio of the assessee was lower than their profit ratio. In this view of the matter, the difference in accounting period may not be that much relevant. As noticed that the above said methodology adopted by the assessee has been accepted by the TPO in the earlier years. The table above would show that the profitability of the assessee in exporting products to these two AEs is increasing year after year - there is no reason to ignore transfer pricing study conducted by the assessee should be accepted. Accordingly, we set aside the order passed by CIT(A) and direct the AO to delete the transfer pricing adjustment made in respect of exports made to M/s Glenmark, South Africa and M/s Glenmark, Mexico. Deduction claimed u/s 35(2AB) - exclusion of expenses not approved by DSIR for the purpose of computing deduction u/s 35(2AB) - HELD THAT:- We notice that similar issue has been decided in favour of the assessee in the assessee s own case in AY 2013-14. We also notice that the Rule 6(7A), which requires approval of expenses also by DSIR has been brought into the statute w.e.f. 1.7.2016 and hence the same will not apply to AY 2014-15. With regard to the second issue relating to deduction of contract revenue, we notice that the said issue has also been decided in favour of the assessee in the case of Microlabs Ltd [ 2016 (4) TMI 219 - KARNATAKA HIGH COURT ] and Wokhardt Ltd. [ 2012 (5) TMI 823 - ITAT MUMBAI ] Since the ld CIT(A) has decided both these issues following the above said decisions, we do not find any reason to interfere with his order on both these issues. Verify the R D expenses , it is the contention of the assessee that the AO did not question the nature of expenses at all in the assessment order, i.e., the AO has accepted the nature of expenses as R D expenses. The AO has allowed expenses u/s 37(1) of the Act, but disallowed only weighted deduction due to non-availability of approval from DSIR. Accordingly, it is contended that there was no requirement to restore the issue to the file of AO for examining the expenses. On a perusal of the assessment order, we find the above said contentions of the assessee to be correct. It is not the case of the AO as to whether the R D expenses claimed by the assessee would fall under the category of Research Development expenses or not. Thus, we notice that the Ld CIT(A) has rendered his decision on a non-existing issue. Accordingly, we cancel the above said direction given by Ld CIT(A). Allocation of interest expenses to the units eligible for deduction u/s 80IC/80IE - HELD THAT:- We notice that the assessee has furnished the Balance-sheet of Buddy I unit , Solan unit (Baddi-II) and Sikkim unit. On a Perusal of the balance-sheets of these three units, we notice that they have sufficient Reserves and surplus. Further, they have not taken any amount either from Head office. These units did not borrow money from other persons also. On the contrary, the Balance Sheets would show these units have given money to the Head office. Since these units have not taken money from Head office, the question of allocating interest expenses of the HO to these units will not arise. Hence, the reasoning given by the AO would fail in respect of these three units. Hence there is not necessity to allocate interest expenditure of Head office to the above said two units. Since all the facts are already available on record, there was no necessity for the Ld CIT(A) to restore the issue again for verification of factual aspects. Accordingly we modify the order passed the learned CIT(A) on this issue and direct the AO to delete the allocation of interest expenses made to these three units. Disallowance of Sales Promotion Expenses in the form of freebies to doctors and medical professionals u/s 37(1) - HELD THAT:- We notice that the AO did not examine those break- up details and did not pin point the expenses which can be considered as expenses incurred in violation of MCI guidelines. Instead, the AO has proceeded to disallow 1.32% of the total turnover, as the similar disallowance made out of Sales promotion expenses in AY 2011-12 worked out to same percentage. We notice that, in AY 2011-12, the assessee itself has admitted that it has incurred expenses on freebies to the doctors and the disallowance was on the basis of said admission. In this year, there is no such admission - AO has computed the disallowance on the total turnover, whereas, the issue is related to Sales promotion expenses and disallowance to be made as per the Explanation to sec.37(1) of the Act. We notice that the CIT(A) has adopted a completely different approach, which was not at all the case of the AO, i.e., the AO did not suspect that the sales promotion expenses have not been wholly and exclusively incurred for the purposes of business. In our view, the CIT(A) has taken up a non-existing issue and proceeded to confirm the disallowance. In our view, the approach adopted by both tax authorities is not correct and accordingly set aside the same. There should not be any doubt that actual expenses incurred on freebies are required to be disallowed under section 37(1) of the Act. Accordingly we are of the view that this issue requires fresh examination at the end of the Assessing Officer. Accordingly we set aside the order of the learned CIT(A) passed on this issue and restore the same to the file of the AO. Disallowance u/s 32AC - HELD THAT:- We hold that the actual cost of plant and machinery transferred during the year from Capital work in progress standing as on 01-04-2013 should also be considered for ascertaining the aggregate cost of assets acquired and installed during the year. In the instant case, the aggregate cost of assets transferred from Capital work in progress and the purchased during the year has exceeded the threshold limit of Rs. 100 crores. Hence, the deduction u/s 32AC of the Act claimed by the assessee is allowable. Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to allow the deduction claimed by the assessee u/s 32AC of the Act. TP adjustment made on Corporate Guarantee commission - assessee had provided guarantee in favour of its Swiss subsidiary named Glenmark Holding S.A Switzerland - CIT(A) deleted adjustment made in respect of guarantee commission - HELD THAT:- We notice that the Ld CIT(A) has followed the decisions rendered by the Hon ble jurisdictional Bombay High Court in the assessee s own case [ 2017 (2) TMI 1305 - BOMBAY HIGH COURT ] and the Tribunal passed in the assessee s own case in an identical issue and accordingly deleted the transfer pricing adjustment made in respect of guarantee commission. Hence, we do not find any reason to interfere with the order passed by Ld CIT(A) on this issue. Allocation of R D expenses to the units eligible for deduction u/s 80IC/80IE - HELD THAT:- Tribunal in the assessee s own case in AY 2010-11 [ 2019 (2) TMI 1067 - ITAT MUMBAI ] and accordingly remitted this issue to the file of AO. In our view, no prejudice is caused to the revenue by the decision of CIT(A), since the matter required factual verification. Accordingly, we uphold the order passed by CIT(A) on this issue. Disallowance made u/s 14A r.w.r. 8D - Expenses incurred earning exempt income - HELD THAT:- As decided in Envestor Ventures Ltd. [ 2021 (1) TMI 922 - MADRAS HIGH COURT ] answering question of law in favour of the Assessee and against the Revenue and by holding that the disallowance under rule 8D of the IT Rules read with Section 14A of the Act can never exceed the exempted income earned by the assessee during the particular assessment year.

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• 2024 (5) TMI 439
  Income accrued in India or not - Dependent Agent - PE in India or not? - assessee is a global re-insurance company, is a tax resident of Ireland - key function in re-insurance is the acceptance of the risk that an insurance company transfers (cedes) to a re-insurer - entitlement to benefit of India-Ireland Treaty - assessee has contended that its operation neither constitute business connection in India nor does it has fixed place PE in India nor does it have a dependent agent PE in India - why there is no business connection in terms of Secion 9(1)(1) ? - HELD THAT:- There is no business connection in terms of Secion 9(1)(1) of the Act as RGA Services performs its activities in an independent manner RGA Services render services not only to the assessee but also to other Companies within the RGA Group and hence, it is not economically dependent on the assessee. Assessee remunerates RGA Services on an arm's length basis and RGA Services only acts as interface between Indian Cedents and assessee. Even otherwise this aspect is wholly irrelevant since in a case in which a double taxation avoidance agreement comes into play, such as the present case, the provisions of the Act cannot be pressed into service unless these provisions are more beneficial. RGA Ireland does not conduct any insurance business in India. RGA Ireland does not have any premises or office space for undertaking reinsurance business activity in India. RGA Services does have an office in India, but the Appellant has no control over the said office. No employee of RGA Ireland visited India in the year under appeal. The reinsurance treaties are signed by the Appellant outside India. RGA Services does not negotiate the fee and terms and conditions of the reinsurance treaties. The terms and conditions for the treaties are agreed and concluded between the Appellant and the Indian Cedents. RGA Services does not decide the price to be quoted to the Indian Cedents. Thus RGA services does not constitute a fixed place PE in India as per Clause 5 of the treaty Lastly, RGA services do not constitute DAPE of RGA IRELAND as agreement between RGA services and RGA Ireland is on a principal-to-principal basis where the role performed by RGA Services is different from RGA Ireland RGA Services renders services to other associated enterprises within RGA Group and hence, it is not economically dependent on the Appellant. RGA Services does not conclude the terms of the reinsurance treaties or enter into any contracts with any insurance companies RGA Services does not secure contracts for and on behalf of the assessee. The assessee does not give any detailed instructions or exercise any control on RGA Services with respect to RGA Service's business, and all the contracts are signed by the assessee outside India and by its employees In no circumstances are the contracts signed in India, and RGA Services does not have any authority to conclude any contracts on behalf of the assessee nor does it secure any orders for the assessee. As decided in own case [ 2023 (11) TMI 1045 - ITAT MUMBAI] DRP has referred to the existence of business connection under section 9(1) of the Indian Income Tax Act 1961, but then that aspect of the matter is wholly irrelevant because in a case in which a double taxation avoidance agreement comes into play, as admittedly, in this case, the provisions of the Income Tax Act 1961 cannot be pressed into service unless these provisions are more beneficial to the assessee The DRP has simply observed that since the core business activities are conducted by RGA India, RGA India constitutes the fixed place PE As we we have seen above, unless a particular place is at the disposal of the assessee, that place cannot be said to constitute the PE of the assessee. In any case, the core reinsurance activity is the assumption of risk, and that assumption of risk has been done outside India. There is thus no occasion to attribute reinsurance profit attribution to RGA India Whatever activities are carried out by RGA India have been duly paid for by the asseseee, and the transfer pricing assessment has accepted that position. Once that position is accepted, there cannot be any further profit attribution for services rendered by the RGA. Thus assessee did not have a fixed place permanent establishment in India, that the question of assessee having a dependent agency PE is wholly academic in the sense that, as the law stands now, the existence of the DAPE is wholly tax neutral in India. Accordingly, the business profits eamed by the assessee on account of the reinsurance business have no tax implications in India. - Decided in favour of assessee. Non-application of MLI [Member Lending Institutions (MLIs) - It has been upheld by the ld. AO, we find that said provisions are applicable from 1st April 2020 i.e. F.Y.2020-21 and not for the year under consideration which has been clearly stated in the MIL notification in the following manner:- Unless it is stated otherwise elsewhere in this document, the provisions of the MIL have effect with respect to the Convention. In India - With respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 April 2020; and With respect to all other taxes levied by India, for taxes levied with respect to taxable periods beginning on or after 1 April 2020. Short grant of TDS - We direct the ld. AO to allow TDS credit as claimed in the return of income in the norms stated above.

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• 2024 (5) TMI 438
  Addition made towards undisclosed cash transaction from undisclosed sources - seized excel sheets from third party relied upon - entries pertaining to the assessee firm in the excel sheets found in the electronic devices seized during the course of search in the case of third party - HELD THAT:- As no documentary or other evidences to corroborate the entries of cash receipts and payments in the excel sheets were found to support the findings of the AO that said transactions are unaccounted transactions and are outside the books of accounts of the assessee. We further noted that, the AO neither during the assessment proceedings has made any reference to statements recorded u/s. 132(4) of the Act during the course of search in Christy group of cases or in the case of the assessee with reference to excel sheets found during the course of search to verify the contents recorded therein. Neither the person from whom said documents was found was examined nor the appellant or its partners was confronted with those evidences to verify the contents therein. AO has made additions towards cash transactions u/s. 69A of the Act, without there being any corroborative evidence to strengthen the entries recorded in excel sheet found during the course of search on third party. Therefore, we are of the considered view that no additions can be made u/s. 69A of the Act, on the basis of evidences found in the possession of third party, without examining contents of said documents from the person from whom said documents was found and also from the assessee and its partners. The evidences relied upon by the AO in the form of excel sheets does not constitute adequate evidence to draw adverse inference against the assessee, in the absence of any other corroborative evidence. As decided in case of CIT vs Sant Lal [ 2020 (3) TMI 692 - DELHI HIGH COURT] where it has been clearly held that the assessee cannot be put to any liability on the action of a third person where the material was not found from the premises of the assessee nor was in the handwriting of the assessee, since, the third person may write the name of any person at his sweet will and the revenue did not make any effort to gather or corroborate evidence in this relation. As per AO Since, bank entries in seized excel sheets are matched with books of accounts, cash transactions recorded in excel sheets should be considered as belongs to the assessee - In our considered view, the contention of the department that merely because the notings of bank transactions in the excel sheet have matched with the bank statements it does not mean that the notings of cash transactions are also genuine. The reason is that though bank statements serves as corroborative evidence for proving transfer entries, but there are no corroborative evidence like sale bills, cash receipts and invoices etc in the cash entries in excel sheets. Notings by way of cash transactions are highly suspicious in nature because they are susceptible for embezzlement and also prone to create prejudice to the concerned parties. Therefore, in our considered view, the reasons given by the AO to make additions u/s. 69A of the Act on the basis of entries in excel sheets without any corroborative evidence is incorrect. No efforts were made by the department to establish the nexus of the assessee with the undated and unsigned printout found during the search and to corroborate the contents of the said printout to arrive at a definite conclusion that the assessee derives such alleged income. The Hon ble High Court of Bombay in the case of PCIT vs Umesh Israni [ 2019 (4) TMI 1947 - BOMBAY HIGH COURT] held that, the entries of the loose papers which were seized were not corroborated with any other evidence on record and no enquiry or verification was made and thus, no additions can be made u/s. 69A of the Act. Assessee is in the practice of replacing the invoices not checked by any Government authorities in the accounted Tally - In our considered view the ground taken by the revenue is devoid of merits, because the AO neither considered so called Tally1 and Tally 2, nor made any additions based on said evidences in the assessment order in respect of additions made u/s. 69A of the Act. Therefore, in our considered view the ground of appeal taken by the revenue fails. Appending two zeros to value recorded in alleged excel sheets, the AO has added two zeros to values recorded to excel sheets for assessment year 2018-19 2019-20 only - it is not appropriate to arrive at a conclusion that the amounts noted in the excel sheets have to be understood by adding two zeros at the end without having further evidence apart from the statement of Shri. Harihara Krishnan. We further noted that, the AO himself has not added two zeros to the amounts found noted in two excel sheets namely Appu revised formar.xls sub sheet cash received paid relevant to assessment year 2017-18 and Annex-3-Appu-CFL.xls sub sheet running account relevant to assessment year 2018-19. Further, the ld. CIT(A) has recorded categorical findings that in the remand report the AO did not furnish any explanation regarding selective treatment only to the figures found in one excel sheet out of three excel sheets. In the rejoinder, the appellant explained that the relevant excel sheets contains an entries of payment made to appellant in cash as well as through bank. The appellant pointed out that when the payment through bank shows therein are compared with the corresponding entries found in the relevant bank account statement, it can be seen that the same are matching without the need of adding two zeros. When the bank entries is matching with the books of accounts of the assessee without appending two zeros, the question of appending two zeros to cash entries alone is totally incorrect. If the payments through cash alone are considered by adding two zeros and the payment through bank are considered in the manner in which they appear in the excel sheets, the totals of the payments column and the receipts column will be grossly different from the total mentioned in the excel sheet. It is therefore clearly evident that, all the amounts mentioned in the excel sheets, regardless of whether they are cash transactions or bank transactions are the actual amounts without suppression of two zeros at the end. We are of the considered view that the AO is erred in appending two zeros to the cash transactions appearing in the seized excel sheets and same is untenable. Undisclosed cash transactions - We find that when there are undisclosed cash receipts and cash payments in the seized material, it is not appropriate to aggregate said receipts as well as payments for the purpose of determining the undisclosed income. Since, the cash payments are made out of cash receipts to the extent of the available cash receipts, aggregating the cash receipts as well as cash payments for determining the undisclosed income results in exaggerated amount of such income. As further noted that, when the AO is not able to identify the nature of cash receipts or payments then the best is to net off the cash receipts against the cash payments to arrive at undisclosed income. Therefore, in our considered view, findings of the facts recorded by the ld. CIT(A) with regard to the manner of computing undisclosed income appears to be reasonable and acceptable. Thus we are of the considered view that additions made by the AO u/s. 69A of the Act towards alleged cash transactions recorded in excel sheets found during the course of search proceedings of Christy Group in the premises of employee of third party, without there being any corroborative evidence is unsustainable in law. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the AO. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue

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• 2024 (5) TMI 437
  Penalty levied u/s 271B - not getting accounts Audited within the due date specified u/s 44AB - books of accounts were not written up (maintained) within the due date of filing the return of income, thus as argued there was no possibility of getting the accounts audited u/s 44AB - HELD THAT:- Once it is established that the books of accounts were not written up within the due date of filing the return of income, the question of getting them audited to comply the provision of section 44AB of the Act, does not arise. As such the first default of the assessee on stand-alone basis is non-maintenance of books of account u/s 44AA of the Act which is complete offence. As decided in the case of Surajmal Pursuram todi 1996 (8) TMI 102 - GAUHATI HIGH COURT] Maintenance of accounts is envisaged under section 44AA and on failure to do so the assessee shall be guilty and liable to be penalised under section 271A. Even after maintenance of books of account the obligation of the assessee does not come to an end. He is required to do something more, i.e., by getting the books of account audited by an accountant. But when a person commits an offence by not maintaining the books of account as contemplated by section 44AA the offence is complete. After that there can be no possibility of any offence as contemplated by section 44AB and, therefore, in our opinion, the imposition of penalty under section 271B is erroneous. DR has not brought any concrete evidence justifying that the books of accounts of the assessee were written up before the due date of filing written of income and therefore the assessee has contravened the provisions of section 44AB of the Act. - Decided in favour of assessee.

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• 2024 (5) TMI 436
  Bogus LTCG - Addition u/s 68 - undisclosed share capital and share premium - assessee has failed to establish the genuineness and creditworthiness of the transactions - CIT(A) deleted the addition - HELD THAT:- It is not disputed that the assessee has not received any share application money in the financial year 2011-12 except allotment of shares - We find that the provisions of section 68 of the Act can be invoked or applicable, where the amount is found credited in the books of accounts of the assessee in the F.Y.2011-12 and the assessee fails to offer explanations or explanations are not satisfactory. The assessee has received the share application money along with the share premium in the financial year 2006-07 and not in F.Y.2011-12. We find the CIT(A) has dealt on the facts, provisions of law and judicial decisions. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or information to take different view. CIT(A) has passed a reasoned and conclusive order. - Decided against revenue.

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• 2024 (5) TMI 435
  Disallowance of claim of Bad debts Write Off - CIT deleted addition - HELD THAT:- Considering the fact that the Ld. A.O. while making the above addition, has not applied his mind and copy-pasted the portion of the order of the previous year in the year under consideration, which has been rightly deleted by the CIT(A) after examining the issues on merit as well. Thus, we find no error or infirmity of the approach of the CIT(A), accordingly the Ground No. i, ii iii of the Revenue are dismissed. Disallowance of excess material consumed - CIT(A) deleted addition admitting additional evidence - HELD THAT:- It is the case of the assessee that its project of Kabul Lines ran into trouble with the Army authorities was substantiated by certain documents i.e. copies of invoices disclosing amount claimed and that passed finally, its receipts were TDS was made in Form 26AS details of material purchased and closing stock in Financial Year 2010-11 including its valuation in the audited books of accounts of the assessee. As per the assessee, the reason for high consumption is because of degradation of the raw materials at the work site. The assessee has also provided the evidences of complaint filed by the assessee to Police authorities against theft of materials. Considering the fact that the Ld. CIT(A) being the fact finding authority found that the contention of the assessee that the consumption of material vis- -vis the Revenue earned appeared to be plausible, we find no reason to interfere with the finding of the Ld. CIT(A), accordingly, the Ground of the Revenue is dismissed.

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• 2024 (5) TMI 434
  Validity of reopening of assessment - reasons recorded that the escapement is due to a failure to disclose true and accurate particulars of income - notice after expiry of 4 years - eligibility of reasons to believe - discrepancies were noticed during audit with respect to the return of Income filed by the assessee in respect of non-deduction of TDS on interest payment, non-inclusion of accrued interest on NSC and not following percentage completion method of arriving income/loss as per Accounting Standard AS-7. HELD THAT:- We do not find that there is any finding recorded to the effect that assessee failed to disclose fully and truly all material facts necessary for relevant assessment year. There is no allegation by ld. AO while recording the reason that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, which result in reopening of assessment. Disallowance u/s 40(a)(i) as assessee not deducted TDS - A.R. submitted before us that all these details were made available to the AO at the time of completion of original assessment u/s 143(3) of the Act on 23.12.2009 and after considering all information furnished at the time of original assessment, the ld. AO passed the said original assessment order on 23.12.2009. Now he is relooking the same records with him to issue a notice u/s 148 of the Act. If there is a failure on the part of ld. AO to consider the various documents filed by the assessee at the time of original assessment u/s 143(3) of the Act, he cannot revisit these documents after the expiry of 4 years from the end of relevant assessment years as there was no failure on the part of assessee to disclose all material facts necessary for the purpose of assessment, since there was no allegation by the ld. AO while recording the reasons for reopening of assessment to the effect that the assessee has failed to disclose fully and truly all material facts necessary for its assessment for this assessment year. In such circumstances, we are not in agreement with the ld. D.R. that the assessment is validly reopened vide notice - Accordingly, we quash the reassessment order framed in this case on this primary issue. As such, there should be disallowance u/s 40(a)(i) of the Act. Thus, in our opinion, there was a ground by assessee before ld. CIT(A) with regard to validity of reopening of assessment u/s 148 - NFAC considered all and observed that reopening of the assessment in this case is after 4 years from the end of the relevant assessment year without any allegation that there is a failure on the part of the assessee to disclose all material facts truly and correctly before ld. AO. Hence, ld. NFAC correctly quashed the assessment order. Decided in favour of assessee.

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• 2024 (5) TMI 433
  Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - as argued irrelevant portion of the notice has not been struck off and default not clearly mentioned whether it is concealment of income or furnishing of inaccurate particulars of income - HELD THAT:- As in the show cause notice u/s. 274 of the Act the AO has not struck out the irrelevant part. It is not spelt out as to whether the penalty proceedings are sought to be levied for furnishing inaccurate particulars of income or concealing particulars of such income . As the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT ] we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. Whether Curable defect? - We may also add that the provision of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and only cure the mistake, defect or omission in return of income, assessment, notice or the proceeding is in substance and effect in conformity with or according to intent and purpose of the Act. As decided in Shri K. Prakash Shetty [ 2014 (6) TMI 976 - ITAT BANGALORE ] the provisions of sec.292BB would not come to the rescue of the revenue, when the notice was not in substance and effect in conformity with or according to the intent and purpose of the Act. In our view, the notice issued by the Assessing Officer was not in substance, and effect in conformity with or according to the intent and purpose of the Act, since the Assessing Officer did not specify the charge for which penalty proceedings were initiated and further there was non- application of mind on the part of the Assessing Officer. Decided in favour of assessee.

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• 2024 (5) TMI 432
  Disallowance of the claim for Bad Debts written off - AO disallowed the same on the ground that these parties were not debtors and the conditions of Sec. 36(2) were not fulfilled - HELD THAT:- We find that the said expenditure was in connection with land purchase and therefore, capital in nature. The loss of the same would be capital loss as rightly held by CIT(A). Therefore, the same could not be held to be deductible expenditure. So far as the amount of Rs. 109.42 Lacs is concerned, the same represent write-off of amount due against SICAL. This entity was providing transport facility to the assessee for movement of fertilizers. However, there was stoppage of production and net amount of Rs. 109.42 Lacs was due from this entity. After reconciliation and confirmation, SICAL confirmed that no amount was payable to the assessee and accordingly, the same was written-off and claimed as business expenditure. We are of the opinion that this loss arises in the ordinary course of business and the same would otherwise be allowable as business loss. The remaining balance represent amount due to SMO division by SFCL, Dubai. However, that entity has refused payment of the same and accordingly, the same was debited under the head project. In this year, this amount has been written-off and claimed as business expenditure. It is undisputed fact that the deduction of the same has not been claimed in any other year. This write-off represents business loss for the assessee and accordingly, the same would otherwise be allowed as business loss. The corresponding grounds stands partly allowed. Disallowance of Settlement Expenditure - assessee merely repaid the liability of PSL - assessee failed to prove that PSL offered this liability u/s 41(1) and the liability was on account of loan taken by PSL for acquiring chemical tanker which was a capital asset. Therefore, the loss so suffered by the assessee would be capital loss only - HELD THAT:- The liability has crystallized as well as attained finality. This payment could not be termed as capital expenditure since it is not towards acquisition of any capital asset but towards smooth running of assessee s business operations. The claim represents corporate guarantee obligation incurred by the assessee which sprang out of normal business transactions during the course of and incidental to the business of the assessee. The decision in the case of ACIT vs. W.S. Industries (India) Ltd. [ 2009 (8) TMI 782 - ITAT, CHENNAI] clearly supports the case of the assessee. In this decision it was held that wherein the subsidiary company of the assessee was supplying materials which were important for the assessee's business, the action of the assessee in giving corporate guarantee as well as advances were incidental to the business of the company. When the transaction had been entered into in a commercially expedient manner, the resultant expense / loss would be allowable. Therefore, providing corporate guarantee was in the interest of the assessee-company and, hence, the commercially expedient decision. This decision also considers the decision of Hon ble Supreme Court in the case of CIT vs. Amalgamation Pvt. Ltd. [ 1997 (4) TMI 8 - SUPREME COURT] . We would hold that the assessee would be entitled for full deduction in this year.

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• Customs

• 2024 (5) TMI 431
  Duty liability - Eligibility for the alternative exemption notification to limit recovery of duty - Imports of 'Phased array Doppler system model SSD-630' - exemption of notification no. 64/88-Cus - interest - confiscation - Penalty - HELD THAT:- The order of the Tribunal in the earlier round is not explicit on that aspect and, indeed, could not, in absence of ground canvassed then that bill of entry should stand amended, under the authority of section 149 of Customs Act, 1962, have been. Thus, the direction of the Tribunal was limited to the factual matrix as set out in the show cause notice except for consideration of post-notice please for alternative, and more beneficial, duty liability on the specific plea of the appellant. It is solely on the fact of postassessment notice that the plea against recourse to retrospective jurisdiction u/s 47(2) of Customs Act, 1962 could lie and is allowed now. Consequently, the stand cannot be reversed to press for lack of jurisdiction to invoke section 112 of Customs Act, 1962. It is settled law that penalty cannot be enhanced in subsequent proceedings except in challenge that places importer on notice of intend to do so. That would have been valid premise had appeal of Revenue been preferred for that purpose. The erstwhile adjudication order had limited the penalty to ₹ 15,000/- for not having discharged duty liability of ₹ 15,35,846/- at the time of clearance against claim of condition of eligibility which, uncontestably, had not been complied with. Subsequently, with the duty liability determined at ₹ 5,06,253/- in the fresh proceedings, the enhancement is not only against settled law but also, unquestionably, inequitable. It would, therefore, be appropriate that the penalty be restricted to ₹ 15,000/-. Accordingly, the impugned order is modified to set aside the interest liability and to limit the penalty of ₹ 15,000/-. Appeal of Revenue is dismissed.

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• 2024 (5) TMI 430
  Classification of imported goods - plastic bottle stick toys/plastic bubble stick toys were being imported in Semi Knock Down condition (SKD) - to be classified as plastic toys under CTH 95030030 or not - Waiver of the demurrage / detention charges - wilful mis-declaration of the goods or not - invocation of larger period of limitation under Section 28(4) of the Customs Act, 1962 - HELD THAT:- The specific import policy perhaps restricts the import of plastic toys and therefore, to prevent the import of the same, the duty liability is pegged at 60%. So, just because the goods were imported in semi knock down condition, does not by itself carve out an exception. The point therefore to be considered is the import and not what happens thereafter, that is, whether the parts are sold as it is or in assembled condition. The appellant has heavily relied upon the earlier imports to contend that they were all being in the nature of contemporaneous imports, the assessments of which had become final since the revenue had accepted the declared goods as such. It is a well settled principle that there is no res judicata in tax matters; if that was a mistake on the part of the revenue, then a mistake committed once cannot perpetuate forever, and in any case, it is always open for the department to have a fresh look at each import to assess the goods imported, properly. Waiver of the demurrage / detention charges - HELD THAT:- The same was not an issue before the original authority but was taken up before the High Court in [ 2022 (1) TMI 575 - MADRAS HIGH COURT] . However, there is no order by the Hon ble High Court in this regard. Moreover, this being a case of willful misdeclaration of the imported goods, it is not found proper to interfere with the demurrage/detention charges if any, payable by the appellant, if any. Even otherwise, this ground is not arising out of the impugned order. Extended period of limitation - wilful mis-declaration or not - HELD THAT:- It is a case of mis-declaration obviously to avail the benefit of lesser Basic Customs Duty. Further, in the show-cause notice itself, the original authority recorded the modus operandi and brought out on record that to evade import duty thereby bypass compulsory compliance of Toys (Quality Control Order), 2020 and Policy Condition No.2 to Chapter 95 of ITC(HS) 2017-Schedule 1 (Import Policy), the goods were imported in parts only, in semi knock down condition by the appellant; the importer has evaded duty and compulsory Bureau of Indian Standards (BIS) certification compliance by suppression of facts. From the above observation, it is clear that the mis-declaration was only to evade duty, which is clearly hit by the Section 28(4) ibid. Thus, the demand within the meaning of Section 28(4) is just and proper and hence, the this issue is also answered against the appellant. There are no merit in the appeal - appeal dismissed.

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• 2024 (5) TMI 429
  Seeking amendment in the shipping bills - Whether, there is any time limit prescribed for consideration of the request of the exporter for amendment/conversion of the Shipping Bills under the provisions of Section 149 of the Customs Act, 1962 - HELD THAT:- We find that considering the statutory provision contained in Section 149 ibid vis- -vis the Circular No.36/2010-Customs, in the case of Mahalaxmi Rubtech Ltd. Vs. Union of India, [ 2021 (3) TMI 240 - GUJARAT HIGH COURT] has held that the circular dated 23.09.2010, to the extent it has provided the time limit of three months for making the request for conversion of the shipping bill from the date of Let Export Order is ultra vires to Article 14 and Article 19(1)(g) of the Constitution of India as also ultra vires to the Section 149 of the Customs Act, 1962. Further, in the case of Pinnacle Life Sciences Pvt. Ltd. Vs. Union of India [ 2022 (7) TMI 725 - BOMBAY HIGH COURT] has held that CBEC circular could not prescribe the time limit for making request for amendment or conversion of the shipping bills. Thus, we do not find any substance in the impugned communication dated 09.06.2022, in denying the request made by the appellant for amendment/conversion of shipping bills. Therefore, the impugned communication is set aside and the matter is remanded back to the jurisdictional Commissioner of Customs for consideration of the application(s) filed by the appellant with regard to amendment/conversion of shipping bills from customs scheme from code 19 to 60 . In the result, the appeal is allowed in favour of the appellant.

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• 2024 (5) TMI 428
  Valuation of imported goods (Float Glass Sheets) - Transaction value - Compliance with directions of the Tribunal in Remand Proceedings - Penalty - revision for assessment purpose - Whether the evidence relied upon by the department for upward revision in the declared import price can be accepted as contemporaneous and is in accordance with Rule 5 of the CVR - Prescriptions of the principles of natural justice - HELD THAT:- We note that the appellant has imported more than double the quantity of float glass sheets vide three Bills of Entry against the one offered for comparison with the case at Sl.No.3 ; whereas as regards the other case offered for purpose of comparison, the imported quantity is much less than even 25%. Therefore, it cannot be said that the appellant s imports of float glass sheets were at comparative commercial levels with that of the two impugned Bills of Entry. We also find no exercise of conversion of prices from dollars to rupees, in the order, which is so necessitated for rendering a meaningful comparison as the two tables Sl.No. (ii) (iii) above indicate the rate/sqm in rupees, while that of for the importer, the appellant importer mentions the same in US$. Elsewhere in the adjudication order in Para 3.9 the price for 2 mm, 3mm of clear float glass for imports by Jain International in March, 2007, upon finalization is indicated as 1.15 US$ / sqm. 1.72 US$ per sqm. However, with no quantity indicated, mere mention of the unit price is inconsequential. Therefore, that statistics too is rendered meaningless and offer no valued comparison. Further, it is too well known that the price of float glass sheets would vary as per its dimension and quality (i.e. the level of impurities present). We find no discussion on these aspects in the adjudication order, though the imports indeed as stated earlier have been made directly from a manufacturer-exporter. We also note that the importer has also doubted the department s ascertainment of the price of float glass sheet adopted @ Rs.29 per mm, per sqm, as there is no such float glass in trade of 1 mm thickness and there is no counter thereto from the side of the department. Hence, we are not convinced with the adoption of the revised transaction value based on comparisons as offered, and note that the Department s case cannot be sustained on the basis of evidences as relied upon for the aforesaid reasons and discussions. Thus, we set aside the impugned order of the lower authority under challenge and allow the appeal with consequential relief, if any, as per law.

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• Corporate Laws

• 2024 (5) TMI 427
  Suit for recovery of dues - Jurisdictional bar on the civil court in deciding the suit instituted by the original plaintiff by virtue of Section 22(1) of the 1985 Act - legality validity of the interest rate of 24% per annum awarded by the High Court in the original plaintiff s favour - Levy of deductions towards the liquidated damages and penalty - failure to consider the evidence properly and had wrongly awarded the amounts under different heads to the original plaintiff. Whether the suspension of legal proceedings as envisaged under Section 22(1) of the 1985 Act would extend to a civil suit for recovery of money even if the debt sought to be proved in the plaint has not been admitted by the sick industrial company? If so, whether the decree in favour of the original plaintiff could be said to be coram non-judice? - HELD THAT:- Whether the High Court was correct in granting 24% compound interest on the principal decretal amount in favour of the original plaintiff? - HELD THAT:- It is seen from the plain reading of Section 22(1) of the 1985 Act, for an industrial company to avail the benefit of suspension of legal proceedings, two conditions have to be fulfilled First, one of the four requirements as mentioned in paragraph 64 should be satisfied, that is, the industrial company must be at the prescribed stage of proceedings before the BIFR or the AAIFR. Secondly, the nature of proceedings sought to be suspended should be one which falls within the ambit of proceedings. The Board of Directors of the defendant company, passed a resolution dated 20.04.1992 to the effect that the company had become a sick company for the purposes of the 1985 Act and thus a reference to the BIFR was required to be made. In accordance with the resolution, a reference was accordingly made under Section 15(1) of the 1985 Act - The defendant company continued to remain a sick company under the 1985 Act and proceedings before the BIFR continued and it was only on 27.06.2013, after a detailed consideration of the progress made by the company towards revival, that the BIFR declared the defendant company to have ceased to be a sick industrial company. Consequently, the defendant company was deregistered from BIFR on the said date. The original defendants have strongly relied upon the decision of a two-judge bench of this Court in Bhoruka Textiles [ 2009 (5) TMI 546 - SUPREME COURT] . In the said case, the respondent therein, filed a suit for recovery against the appellant, a sick industrial company. The civil court decreed the suit in favour of the respondent therein with the finding that the transaction referred to took place subsequent to the reference of the appellant company to the BIFR and thus the suspension under Section 22(1) of the 1985 Act would not apply. The civil court also held that in the absence of any final order declaring the appellant company as a sick company by the BIFR, mere reference of the said company to the BIFR would not bring the protection under Section 22(1) of the 1985 Act into effect. In M/s Haryana Steel Alloys Ltd. v. M/s Transport Corporation of India [ 2012 (4) TMI 831 - DELHI HIGH COURT] it was held that the mere contention of the sick company unsubstantiated by any material indicating that the amount forming subject-matter of the recovery suit is covered under the scheme, would not be sufficient to bring the company under the protective ambit of Section 22(1) of the Act. By no stretch of imagination could it be said that the legislature intended to include even the proceedings for the adjudication of the liabilities not admitted by a sick company within the protective ambit of Section 22(1) of the 1985 Act. Such an adjudicatory process only determines the liability of the defendant towards the plaintiff, and does not threaten the assets of the sick company or interfere with the formulation of the scheme unless execution proceedings are initiated pursuant to the completion of such adjudicatory process - there was a vacuum in the legal framework to deal with sick industrial companies and provide ameliorative steps for their revival. The 1985 Act was thus enacted to fill in this vacuum. The mischief which was sought to be dealt with by the enactment of Section 22 was any such legal proceeding which could impact the assets of the sick company and in-turn negatively impact the formulation and implementation of the rehabilitative scheme. In Tata Motors [ 2008 (5) TMI 423 - SUPREME COURT] it was Section 26 and not Section 22 of the 1985 Act which was under consideration. As opposed to Section 26 of the Act, which bars the jurisdiction of the civil courts in respect of those matters for which the BIFR or the AAIFR are empowered, Section 22 only places a temporary embargo on the initiation or continuation of legal proceedings in respect of certain matters mentioned therein. Further, unlike Section 22, where the said suspension can be revoked by seeking express permission of the BIFR or the AAIFR, no such permission can be sought under Section 26 of the 1985 Act. Again, in any view of the matter, the adjudication and determination of a contested liability under a contract is undoubtedly the domain of the civil court or an arbitral tribunal and not that of the BIFR or the AAIFR. Whether the High Court was correct in granting 24% Compound Interest on the Principal Decretal Amount in favour of the original Plaintiff? - HELD THAT:- In the present case, the suit was decreed in favour of the original plaintiff by the trial court vide its judgment dated 19.09.2001. However, while the adjudication of the suit of the original plaintiff could not have been said to be barred under Section 22(1) of the 1985 Act as it was for the mere determination of liability of the parties inter-se, the execution of decree obtained as a result thereof was expressly suspended during the period as mentioned in the said provision, unless the requisite permission from the BIFR or the AAIFR could be obtained - while there is a stay on proceedings in the nature of distress and execution, etc. against the properties of the sick company, to safeguard its assets, awarding interest for that very same period, though not expressly barred under any provision of the Act, could not have been the intention of the legislature. The decree awarded by the trial court was contested by both the parties before the High Court. No material was placed before us to show whether any steps were taken by the original plaintiff to obtain the permission of the BIFR for the execution of the decree of the trial court, or for the inclusion of the said decree in the rehabilitation scheme. At the same time, the original defendants too failed to bring anything on record to show if any steps were taken by them for the inclusion of the dues of the original plaintiff in the rehabilitation scheme. The doctrine of harmonious construction is based on the principle that the legislature would not lightly take away from one hand what it had given with the other. Thus, this doctrine provides, that as far as possible, two seemingly conflicting provisions within a statute, or the seemingly conflicting provisions of one statute vis a vis another, should be construed in a manner so as to iron out any conflict - Section 10 of the 1993 Act provides for an overriding effect to the provisions of the said Act to the extent of inconsistency with any other statute. Similarly, Section 32 of the 1985 Act provides overriding effect to the provisions of the said Act except for the enactments specified therein. Dealing with a case involving the apparent conflict between the two statutes containing overriding provisions. It is deemed fit to exclude the period commencing from the date when FCIL was declared to be a sick company under the 1985 Act going up to the date when it was discharged by the BIFR and declared to be no longer a sick industrial company from the purview of the applicability of the interest provision under the 1993 Act. Thus, while the applicability of the 1993 Act to the dues of the original plaintiff is not disputed, such interest shall not be calculated for the period between 06.11.1992 and 27.06.2013. Thus, in short, it was held as follows: I. The suit instituted by the original plaintiff before the trial court was not hit by the embargo envisaged under Section 22(1) of the 1985 Act. Thus, the decree awarded in favour of the original plaintiff by the trial court and modified by the High Court, cannot be said to be coram nonjudice. II. The High Court committed no error in awarding 24% interest to the original plaintiff on its dues as per the provisions of the 1993 Act. However, the period during which the defendant company was a sick company as per the 1985 Act should be excluded for the purposes of calculation of interest. The impugned judgment and order of the High Court is upheld subject to the modification of the period for which interest may be granted as discussed aforesaid. To clarify, the interest will be calculated at 24% p.a. with monthly compounding - Appeal disposed off.

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• 2024 (5) TMI 426
  Seeking winding up of the respondent company - failure to pay debt in the normal and ordinary course of its business - HELD THAT:- From a perusal of the record, it is borne out that the present company petition is a complete non-starter, in so far then neither a Provisional Liquidator nor an Official Liquidator has yet been appointed in the present petition. In view of the fact that the Insolvency and Bankruptcy Code, 2016 as well as the Companies Act, 2013, have since been enacted during the pendency of these proceedings, it is the opinion of this court that the present petition does not deserve to continue before this Court, and it would be appropriate for the same to be transferred to the National Company Law Tribunal. It would also be expedient to place reliance on the decision of the Supreme Court in the case titled ACTION ISPAT AND POWER PVT. LTD. VERSUS SHYAM METALICS AND ENERGY LTD. [ 2020 (12) TMI 535 - SUPREME COURT] , whereby it was held that those winding up proceedings pending before High Courts, which have not progressed to an advanced stage, ought to be transferred to the NCLT. This above noted decision of the Supreme Court has been relied upon by this court in Citicorp International Limited v. Shiv Vani Oil Gas Exploration Services Limited [ 2023 (7) TMI 1188 - DELHI HIGH COURT] , wherein it was held that winding up proceedings pending before High Courts, which are at a nascent stage and have not progressed to an advanced stage, ought to be transferred to the NCLT. Hence, the instant petition is transferred to the NCLT. In view of the same, the present company petition as well as pending applications, if any, are accordingly disposed of - List before the NCLT on 08.07.2024.

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• 2024 (5) TMI 425
  Direction to refund the amount deposited by the applicant pursuant to the directions/order dated 03.06.2009 by the learned DRT, Delhi along with due interest from the date of deposit - IFCI did not provide a break-up or bifurcation of the amounts received with respect to the properties sold/auctioned under the aegis of the learned DRT - HELD THAT:- ICFI is cutting an extremely sorry figure in demonstrating that the amount of Rs. 57.50 Lacs received from the applicant/third party objector was remitted to the Official Liquidator comprised in the payment made on 26.02.2015/27.02.2015 amounting to Rs. 88,66,077/-. First things first, evidently the amount of Rs. 57.50 Lacs, which was deposited by the applicant/third party objector with the DRT was remitted to the ICFI and received by it on 19.03.2010. The applicant/third party objector was constrained to move the instant application before this Court on 01.05.2017 and the matter has lingered on for want of submission of better particulars on the part of IFCI. Even in Annexure C , filed with the affidavit dated 04.02.2022, the receipt of Rs. 57.50 Lacs from Mr. Sachin Jain i.e. the applicant/third party objector is not accounted for. There is no covering letter accompanied with the remittances that have been made on 26/27.02.2015 so as to suggest that the amount of Rs. 88,66,077/- included the refund of amount of Rs. 57.50 Lacs with interest payable to the applicant/third party objector - Even assuming the deposition in the affidavit dated 28.02.2024 to be correct for the sake of convenience and it is true that the amount, which was refunded to the S.K. Trading with regard to the property at Haldwani, had been refunded, by the same very logic the tabulated statement should have shown the amount which is due to the applicant/third party objector. The IFCI has not duly accounted for the amount payable to the applicant/third party objector. The details of the remittances made by IFCI to the Official Liquidator are yet to be verified and their claims as to the secured creditor are yet to be adjudicated upon by the Official Liquidator, apart from the other secured creditor, which is IDBI. Therefore, unhesitatingly, this Court finds that IFCI remains accountable and liable to make payment of Rs. 57.50 Lacs to the applicant/third party objector and the said amount should be refunded along with interest. The present application moved by Mr. Sachin Jain i.e. applicant/third party objector is allowed.

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• Insolvency & Bankruptcy

• 2024 (5) TMI 424
  Seeking initiation of Corporate Insolvency Resolution Process (CIRP) - proof of existence of financial debt - incidence of default or not - HELD THAT:- For any creditor to become financial creditor under Section 5(7) of IBC, there must be a financial debt which is owed to that person and such a person can either be the principal creditor to whom the financial debt is owed or may be a legal assignee to whom such debt has been transferred. Furthermore, for a debt to become financial debt under the various transactions stated in subclauses (a) to (i) of Section 5(8) of IBC, the basic non-negotiable ingredients are that there has to be a disbursal against the consideration for time value of money - If there is a financial debt, which is more than the prescribed threshold level and there is a default and if the application is complete, the application is required to be admitted by the Adjudicating Authority. It is for the Adjudicating Authority to look into the various documents, records and evidence of default as furnished in Part V of Form 1 of the application filed under Section 7 of IBC. There is no balance confirmation of the alleged unsecured loan coupled with admitted fact that the receivables due from the Corporate Debtor was no longer reflected separately in the balance sheet of IIL from 2017-18 onwards, we are of the view that the Adjudicating Authority has not erred in holding that confirmation letter of 25.05.2014 lacks relevance and cannot be relied upon to establish debt - there are no cogent reasons to differ with the findings of the Adjudicating Authority that debt and default on the part of the Corporate Debtor has not been brought out in clear, precise and specific terms which is the mandate of Section 7 of IBC. Nothing has been placed on record either by the Appellant to substantiate that the disbursement had been made for consideration for time value of money. There are no good reasons to disagree with the findings of the Adjudicating Authority that the facts of the present case are such that the debt qua the Appellant lack the trappings of a financial debt and that it had become due and payable and that there has arisen non-payment of the same beyond the threshold limit. The Adjudicating Authority did not commit any error in rejecting the Section 7 application filed by the Appellant. The impugned order does not warrant any interference - Appeal dismissed.

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• 2024 (5) TMI 423
  Maintainability of appeal - CIRP - Aggrieved person or not / Locus Standi of minor operational creditor - It is submitted that the Appellant has 00.54 % share as an operational creditor and would fall much lower in the scale of Section 53 of IBC - HELD THAT:- The Appellant was represented through GE International Inc. i.e. representative of the operational creditors appointed in terms of Regulation 31A(3) of the Regulations in the SCC of the CD. No objection to the draft report was filed by any of the members of the SCC of the CD and valuation reports were accepted. It is also pertinent to mention that the main stakeholders in the SCC are the financial creditors which includes the banks, LIC etc. having 95% share but they have not raised any objection about the valuation. Moreover, all the bidders were given access to the VDR which contained the entire description of the parcel of land put up for auction, therefore, the Appellant cannot agitate that the number of parcels of the land were not categorically mentioned. There was no objection by the Appellant to the sale which was conducted though first five auction and no effort was made by the Appellant to file any application for intervention even before the Adjudicating Authority when the present two applications were taken up for hearing and decided. By no means, the Appellant can be termed to be a person aggrieved for the purpose of invoking Section 61 of the Code to present these appeals to challenge the impugned order especially when no other member of the SCC has challenged the same. The Appellant has no locus standi to maintain the present appeals and their appeals deserves to be dismissed on this premise only but it is also observed that the sale which has been conducted by Respondent No. 1 is after following due process of law which have been described in the facts mentioned in the earlier part of this order and there is no error in selling the property in the e-auction to the sole bidder. There is hardly any merit in the present two appeals which requires any interference by this Court and the same are hereby dismissed.

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• 2024 (5) TMI 422
  Approval of the resolution plan - Classification of the claim - Claim as contingent due to pending litigation - treatment meted out to the operational creditors in the resolution plan which has been approved by the Adjudicating Authority - HELD THAT:- As per the chart as against the admitted claim of the secured financial creditors of Rs. 120,129,831,567/- the amount provided in the resolution plan is Rs. 2500 Cr. which is only to the extent of 20.098 %, therefore, the claim of the unsecured creditors or operational creditors has rightly been provided as Nil because the amount which has been offered in the resolution plan is to be first appropriated towards the CIRP costs and dues owed to the secured financial creditors and then nothing would come to the kitty of the operational creditors, therefore, even the unsecured creditors have also been given as NIL. As regards admitting the claim of the Appellant as contingent against Rs. 1 is concerned, this is not in dispute that the claim is based upon an order of the statutory authority against which an appeal is pending and it is not crystallised as such so far, thus in view of the decision of the Hon ble Supreme Court in the case of COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] in which it has been held that we therefore hold that this part of the impugned order judgment deserves to be set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of Rs. 1 due to the pendency of disputes with regard to these claims. There are no merit in the present appeal and the same is hereby dismissed.

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• 2024 (5) TMI 421
  Rejection of application filed for extension of time for the purposes of completion of the Insolvency Resolution Process - extension beyond 330 days - unnecessarily the proceedings were adjourned at the behest of the Financial Creditors - Section 12 of I B Code, 2016 - Resolution Plans have been submitted by the Home Buyers or not - approval of Resolution Plan by Committee of Creditors - HELD THAT:- In accordance with the principle, laid down by the Judgment of the Principal Bench of NCLAT in [ 2022 (1) TMI 166 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ], the `Tribunal , was conscious of the fact that in those case too, it was contended that no Resolution Plan was received and the Committee of Creditors, had declined the request of the Resolution Professional to undertake the Projectwise Resolution Process, but, ultimately, based upon the finding recorded as above and particularly from the perspective of the interest of the Stakeholders. Owing to the aforesaid and particularly looking to the vital interest of the Home Buyers, the respective `Company Appeals , would stand `Allowed - The Impugned Order / Judgment dated 26.04.2023, in each of the Company Appeals are hereby quashed - The appeal as preferred iis hereby allowed, consequently further extension for a period of 90 days as prayed for, in the aforesaid Application, is granted to the Resolution Professional, to complete the Insolvency Proceedings - no further extension henceforth would be granted - it is apt to observe that this `Tribunal , is not venturing into the merits of any of the Claims of Home Buyers, which is yet to be independently considered in the voting of the Committee of Creditors exclusively on its own merits, except for the issue of extension of time period, this `Tribunal has not delved with any other action. Appeal allowed.

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• PMLA

• 2024 (5) TMI 420
  Seeking grant of bail on medical grounds - money laundering - Petitioner's severe health condition (duodenal cancer) and his wife s terminal illness, exacerbating his mental distress - invocation of first proviso to Section 45 (1) of PMLA - HELD THAT:- In the light of the medical record and opinions, it would be audacious to hold that the applicant is not sick. The applicant is suffering from cancer. Given the situation in life of the applicant, including his age and other ailments that he is suffering from, as well as the critical condition of the applicant s wife Anita, the applicant has not opted for the preferred treatment, which is also fraught with risk. The applicant claims to be 72 years of age. Advanced age brings in its trail associated ailments and infirmities. The physical ailments, in the instant case, seem to have been compounded by the critical condition of the applicant s wife. The matter cannot be looked at from the perspective as to whether the applicant is getting adequate treatment at the hospital. Undoubtedly, the applicant is getting the treatment at the hospital of his choice. The medical opinions/reports do not indicate that the applicant requires further specialised treatment at even more specialised centre/hospital. However, to evaluate the prayer for bail on the said consideration alone, would be taking a very constricted view of the matter. There is a qualitative difference between the treatment which a person gets as an under trial prisoner and as a citizen under no restraint. The upshot of aforesaid consideration is that the peculiar facts of the case: the age of the applicant, the disease he is suffering from, the treatment recommended for the said disease, other ailments the applicant is suffering from and the situation in life brought about by the life threatening disease the wife of the applicant is suffering from, cumulatively justify exercise of discretion vested in the Court under the proviso to section 45 (1) of PMLA. The applicant can be released on bail for a limited period to avail the treatment for the cancer he is suffering from and attend to his wife, who is also suffering from cancer of an advanced grade. Application allowed in part.

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• Service Tax

• 2024 (5) TMI 419
  Benefit of the amnesty under Sabka Vishwas (Legacy Dispute Resolution) Scheme Rules, 2019 under Chapter V of Finance (No.2) Act, 2019 denied - petitioner could not pay the amount in time - HELD THAT:- In this case, there is no dispute that the petitioner had made an attempt to pay the amount estimated in Form SVLDRS-3 dated 25.02.2020 on 30.06.2020 first by making NEFT transfer and thereafter by RTGS. Though the amount was debited, it was re-credited. It is probably on account of technical glitches in the system - the substantial benefit of amnesty under the aforesaid scheme cannot be denied to the petitioner subject to the petitioner depositing the estimated amount in Form SVLDRS-3 dated 25.02.2020 within a period of 30 days from the date of receipt of a copy of this order together with interest at 9% from 30.06.2020. Subject to the payment of the amount quantified in Form SVLDRS-3 dated 25.02.2020 together with interest payable up to the date of payment at 9%, the impugned order shall stand quashed - Petition allowed.

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• 2024 (5) TMI 418
  Effect of Explanation under Section 65(105) of the Finance Act, 1994, introduced by the Finance Act, 2005 and the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 - prospective or retrospective effect - refund of tax paid pursuant to the said amendment - respondents submits that the petitioner would not be entitled to the refund - HELD THAT:- The petitioner may agitate the same before the authority concerned. As various aspects will have to be considered while entertaining the prayer for refund, the petitioner may apply to the authority concerned. Upon an application being made by the petitioner, the authority concerned shall take decision upon it on its own merits, preferably within six months from the date of receipt of the application. The writ petition is disposed of.

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• 2024 (5) TMI 417
  Levy of service tax - appellant has received payment processing services from M/s Amsco engaged by M/s C A, the foreign buyer to process payments to the appellant or not - appellant has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant - extended period of limitation. Whether the appellant has received payment processing services from M/s Amsco engaged by M/s C A, the foreign buyer to process payments to the appellant? - HELD THAT:- There is no service provider-recipient relationship between the appellant and M/s Amsco and if there is any contract, the same is between M/s C A (buyer) and M/s Amsco, both of whom are out of India and the appellant does not have any contract with M/s Amsco whatsoever - the deduction of 3% from the invoice price was already indicated in the Purchase Order for the goods issued by M/s C A and therefore it was nothing but a trade discount for the appellant. The appellant does not have any legal recourse or any binding contract with M/s Amsco to enforce any of its rights. Further, the email from M/s Amsco is only an information and does not bind M/s Amsco to any contract with the appellant. Whether the appellant has received services from foreign banks that makes the payments of consideration owed by the foreign buyer to the appellant? - HELD THAT:- The contract for service is only between M/s C A, M/s Amsco and the foreign banks; and the appellant in fact is not receiving any services from the foreign banks and there is no service agreement/contract between the foreign banks and M/s Amsco - the service, if any, is received only by the State Bank of India which has received the funds and has separately levied fee on the appellant for the credit to the bank account for which service tax has been charged by Bank. Extended period of limitation and levy of penalties - HELD THAT:- In the present case, there was no intent to evade tax as the appellant had no contractual relation with either M/s Amsco or the foreign banks; and all the transactions such as payment, transmission of funds are the liability of M/s C A and it is up to them to decide the mode of the transfer and payment; and the appellant had no role in this regard. Further, the deduction in respect of M/s Amsco was clearly shown in the shipping bills for export; drawback was also claimed only on the net amount; and further, being an exporter the service tax payable, if any, would anyway be allowable as a rebate to the appellant; and the entire situation would have been revenue neutral. Therefore, there is no question of lack of bonafides on the part of the appellant in the present case. The service of remittance by a foreign bank to Indian bank of the exporter is not liable to service tax at the hands of the exporter - reference made to the decision of Chennai Bench of the Tribunal in the case of M/S. SKM EGG PRODUCTS EXPORT (I) LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE (APPEALS) , ANNAI MEDU SALEM. [ 2023 (3) TMI 1384 - CESTAT CHENNAI] wherein the Tribunal relied upon the decision of M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR [ 2017 (10) TMI 1231 - CESTAT NEW DELHI] . The impugned orders in all the three appeals are not sustainable in law and are set aside - appeal allowed.

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• 2024 (5) TMI 416
  Service tax not discharged correctly - Residential Complex Service, Commercial or Industrial Construction and Works Contract Services - discharged service tax in respect of the land owner share on 33% after availing abatement, whereas department was of the view that the appellant has to discharge service tax on the entire amount in respect of land owner share - levy of service tax on Site Formation, Clearance and Excavating Services - appellant had no intention of providing Site Formation Service - extended period of limitation - suppression of facts or not. Whether the demand raised under Construction of Residential Complex Service / Commercial or Industrial Construction Service / Works Contract Service on the Land Owner Share is subject to levy of service tax or not? - period involved in this appeal is prior to 1.7.2010? - HELD THAT:- The Board vide CBEC Circular No.108/2/2009-ST dated 29.01.2009 has clarified that developer/builder/promoter is not required to pay service tax on these construction services prior to 1.7.2010 - The Tribunal in the case of M/S KRISHNA HOMES VERSUS CCE, BHOPAL AND CCE, BHOPAL VERSUS M/S RAJ HOMES [ 2014 (3) TMI 694 - CESTAT AHMEDABAD] has applied Board s circular and discussed the very same issue after taking note of the Explanation introduced in Section 65 (105) (zzzh) of the Finance Act, 1994. The Board has specifically stated that developer/builder/promoter would be liable to pay service tax only after 1.7.2010. The demand of service tax on the consideration received from land owner (land owner s built up area) are demanded for various residential projects under construction of Residential Complex Services and Works Contract Services. The issue as to whether promoter/builder/developer is liable to pay service tax prior to 1.7.2010 was examined in the case of M/s.Krishna Homes and also followed and elaborately discussed in the case of COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, VISAKHAPATNAM - I VERSUS M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) [ 2019 (9) TMI 792 - CESTAT HYDERABAD] . The Board Circular also clarifies the same. The other demand is under Commercial Construction Service. The Tribunal in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2018 (9) TMI 1149 - CESTAT CHENNAI] had held that the demand cannot be raised under CCS, RCS, of CICS for the period prior to 1.7.2012. This view was followed in M/S. JAIN HOUSING CONSTRUCTION LIMITED VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2023 (2) TMI 1044 - CESTAT CHENNAI] which has been upheld by Hon ble Apex Court in THE COMMISSIONER OF SERVICE TAX VERSUS M/S. JAIN HOUSING AND CONSTRUCTION LTD. [ 2023 (9) TMI 816 - SC ORDER] . The demand of service tax under construction of Residential Complex Services, Commercial Complex Services, or Works Contract Services cannot therefore be sustained and requires to be set aside. Site Formation Service - HELD THAT:- There is no case for the Department that appellant is engaged in Site Formation activities. They have collected developer charges from the customers as part of the JV. When the agreement itself is for JV so as to provide construction of residential complex and construction of commercial complex, the demand cannot be raised under Site Formation service by taking out a small amount received as consideration towards construction activities. On the set of facts, the demand cannot sustain - the developer charges cannot be subject to service tax under Site Formation Service. Extended period of limitation - HELD THAT:- During the relevant period, the issue of demand of service tax on the promoter/builder/developer for various construction activities was pending before various forum. The situation necessitated the Board to issue a Circular to clarify as to whether developer is liable to pay service tax - All these would go to show that the issue was debatable and interpretational in nature. Further the appellant has already discharged service tax on the 33% of the consideration received on the land owner share (flats). All these would establish that there was no suppression of facts with an intent to evade payment of service tax. The demand invoking extended period cannot sustain. The issue on limitation is also answered in favour of the appellant. The impugned order is set aside - Appeal is allowed.

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• 2024 (5) TMI 415
  Levy of service tax - handling and forwarding charges collected by the appellant from their customers - period involved in this case is from 2012-2013 to 2013-2014 - show cause notices were issued on 16.05.2013 12.03.2015 - violation of principles of natural justice - HELD THAT:- This Bench agrees with the reasoning of the AR that the earlier decision was sub-silentio on aspect doctrine of aspect and its applicability. The payment of VAT, when service portion is also involved and contract/invoice is not indivisible cannot deprive, department of its due revenue, specially in the negative list regime. The service tax was payable by the party during the negative list regime on the handling charges paid by them. However, this bench also notes that knowledge about such charges having being recovered was available with the department at the time when impugned show cause notice were issued and earlier litigation on the same point for prior to negative list regime was already underway and was decided in their favour as per the decision in their own case JIVAN JYOT MOTORS PVT LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, SURAT [ 2023 (7) TMI 1178 - CESTAT AHMEDABAD] . The extended period of limitation would not apply and penalty will also need to be reconsidered. Appeal is therefore remanded to the original adjudicating authority to work out the same, by confining to normal period demand and to consider penalty a fresh in the absence of extended period. Appeal is allowed by way of remand.

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• 2024 (5) TMI 414
  Classification of services - service of Supply of Tangible Goods for Use (STGU) - activity of hiring of rigs on charter basis, by the appellants from GGES - Import of services - RCM - Business auxiliary services (BAS) / Business support service (BSS) - various services availed from overseas vendors - reverse charge mechanism - recovery of short paid of service tax along with interest and penalties - extended period of limitation - financial years 2008-2009 to 2013-2014, 2013-2014 and 2014-2015 - Service of Supply of Tangible Goods for Use (STGU) - activity of hiring of rigs on charter basis, by the appellants from GGES - HELD THAT:- The issue has already been decided by the Hon ble Supreme Court in the case of British India Steam Navigation Co. Ltd. Vs. Shanmugha Vilas Cashew Industries 1990 (3) TMI 171 - SUPREME COURT] wherein the meaning of the phrase charter parties by way of demise has been explained in the context of Indian Carriage of Goods by Sea Act, 1925 and it was held that ' During the currency of the charterparty, therefore, the owner is under no liability to third persons whose goods may have been conveyed upon the demised ship or who may have done work or supplied stores for her, and those persons must look only to the charterer who has taken his place.' From the international conventions, BIMCO standard contracts and the provisions of Merchant Shipping Act, it is clear that the arrangement of contract between the ship owner and ship hirer, is a well-accepted commercial arrangement in the maritime trade. Supply of sea crew by the ship hirer on his own or as an agent on behalf of the ship owner is also recognized by the Merchant Shipping Act, 1958. This does not any way restrict the possession and actual control of the rigs by the appellants, as they had engaged the crew and other operational requirements for the activities of using the rigs for mining purpose. The Co-ordinate Bench of this Tribunal had dealt with the similar issue in the case of International Seaport Dredging Ltd., [ 2018 (3) TMI 633 - CESTAT CHENNAI] by holding that the service tax demands confirmed under the category of supply of tangible goods services (STGU) is not legally sustainable as there is a transfer of right of possession and effective control of the vessel/dredger to the appellants. The demand for Service of Supply of Tangible Goods for Use (STGU) is set aside. Import of services - RCM - Business auxiliary services (BAS) / Business support service (BSS) - various services availed from overseas vendors - HELD THAT:- It is an undisputed fact on record that the appellants have made such payments to the aforesaid foreign vendors in relation to the rigs, and that while the rigs are stationed outside India for provision of export of service. Further, the nature of services, received by the appellants are agency services for arranging ship husbandry services, crew change services, etc. - Plain reading of the definition of business support service it transpires that the activities are divided into two parts i.e. the means part and the includes part. The means part covers any service in relation to business or commerce within its sweep. However, the includes part of the definition specifies services such as telemarketing, distribution, logistics etc. Admittedly, the foreign vendors of the appellants have not undertaken any activity of marketing of the goods belonging to the appellants nor have the foreign vendors undertaken any activity for promotion of sale of the goods belonging to the appellants. Therefore, the services rendered by the foreign vendors cannot be brought under the scope of business support service for charging service tax on RCM basis on the appellants. In the present case, admittedly, the aforesaid services are provided and received by the appellants outside India and therefore, the Rule 3(ii) of the Import of Service Rules, 2006 are not attracted. Since the aforesaid services were entirely performed abroad, the same would not qualify as import of service in terms of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - the confirmation of the service tax demands on the above grounds is not legally sustainable. Payments made to Mr. Balbir Singh Negi - appellants have submitted that Shri Balbir Singh Negi was their employee; and his functions included monitoring the progress report of the project, ensure that survey, inspection and test happens on time, ensure that construction is in compliance with the approved drawing - HELD THAT:- It is not in dispute that the services of expert engineer were taken in relation to the rigs, for supervision/monitoring of appellants rigs being constructed at foreign ship yards, either at its construction stage or in ensuring compliance with the requirements of the client i.e., ONGC. Further, collection of income tax on the charges paid for such consulting services as a part of compliance requirement under the Income Tax Act, 1961 does not either enable him as employee by that act alone, or absolve from the requirement of payment of service tax on reverse charge basis. Further, even though the services of consulting engineer would have visited physically abroad at the ship building yard site, the said services were actually consumed by the appellants in India and the monitoring or reporting was directly to the appellants in India. Hence, in this case, the liability of the service tax to be paid under Section 65(105) (g) of the Finance Act, 1994 as confirmed by the learned Commissioner is sustained. The impugned order dated 11.12.2017 with regard to confirmation of adjudged service tax demands on Supply of Goods for Tangible Goods for Use (STGU) services and on Business Support Service (BSS), along with interest and penalties on the above demands are not sustainable - other part of demand upheld - Appeal allowed in part.

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• 2024 (5) TMI 413
  Recovery of CENVAT Credit wrongly availed - construction of Residential Complex Service - non-payment of service tax on the same - Rule 4 (7) of Cenvat Credit Rules, 2004 - HELD THAT:- From the appeal memo itself it is observed that the amount as was retained in the name of security was admittedly not released to M/s. S.S. Infratech. Resultantly, it is very much apparent on record that the appellant has failed to make the full payment against the invoice issued by M/s. S.S. Infratech resulting into the show payment on amount of Rs. Rs.15,00,831.81/- as was found by the department to be outstanding as on 31.03.2017. It was the appellant s burden to prove that the retained amount was not released for want of due certification of the satisfaction by the architect. In absence thereof, the amount retained is rightly held to have been wrongly retained. There are no reason to differ from these findings otherwise also the appellant has opted to remain absent and has opted to not to produce any evidence to prove that the payment has been retained in furtherance of the agreement between the appellant and M/s. S.S. Infratech. The order under challenge is hereby upheld - Appeal dismissed.

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• Central Excise

• 2024 (5) TMI 412
  Penalty u/r 26(1) of Central Excise Rules, 2002 - charge of abating the evasion of duty by M/s. Phenix Construction Technologies - The appellant argued that the case of the main party involved in the duty evasion had been settled under the SVLDRS - HELD THAT:- The appellant has been penalized under Rule 26 (1) in connection with the duty evasion made by M/s. Phenix Construction Technologies and the case of M/s. Phenix Construction Technologies has been settled under SVLDRS-2019 and the appeal was disposed of by this Tribunal vide order dated 10.06.2021, hence, the personal penalty of the appellant is not sustainable in the light of various judgements. Reliance can be placed in SHRI V.K. AGGARWAL AND SHRI J.K. AGGARWAL VERSUS COMMISSIONER OF CENTRAL TAX, CGST AND CENTRAL EXCISE, NEW DELHI [ 2023 (9) TMI 178 - CESTAT NEW DELHI] and M/S. SIEMENS LTD. (FORMERLY KNOWN AS M/S. MORGAN CONSTRUCTION CO. PVT. LTD.) , MR. SUNIL CHELLANI VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III [ 2023 (5) TMI 377 - CESTAT MUMBAI] where it is settled that once the main case of duty evasion is settled under SVLDRS, 2019, the penalty on the Co- Noticee/appellant shall not survive. The penalty is set aside. The Appeal is allowed.

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• 2024 (5) TMI 411
  Levy of service tax - Construction service provided to Government body - commercial or industrial construction services or not - extended period of limitation - HELD THAT:- Though the demand pertains to various service providers and of different services but no bifurcation as per service recipient was provided either in the show cause notice or in the adjudication order. Therefore, before crystalizing the demand, it is necessary that the service recipient vise bifurcation should be made, The levy of service tax depends on the nature of service and the category of the service recipient particularly when the assessee claim exemption on account of service provided to Government. After passing the impugned order various judgments were delivered on the identical issue which was neither before the Adjudicating Authority nor the same was considered. The issue on limitation also needs to be reconsidered properly. Therefore, the matter has to be remanded to the Adjudicating Authority. The impugned orders are set aside. Appeals are allowed by way of remand to the Adjudicating Authority.

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• 2024 (5) TMI 410
  CENVAT Credit - only one tank furnace installed in factory in which dutiable as well as exempted goods were being manufactured - maintaining separate records/ inventory for the inputs/input services - HELD THAT:- Similar issue has been considered by the this bench in case of Geeta Glass Works [ 2018 (1) TMI 968 - CESTAT ALLAHABAD] where it was held that ' the objection adopted by the adjudicating authority cannot be accepted inasmuch as the provisions of Rule 6 (1) of the Cenvat Credit Rules requires as assessee to maintain separate account only in respect of cenvatable inputs and there is no requirement for maintenance of such records in respect of non cenvatable inputs. Further, we also note that there is no requirement of storing both types of inputs separately. Similarly, use of a common furnace would also not be a legal objection.' From the above decision and the amendments made in the provisions of Rule 6 (3) permitting proportionate reversal credit in respect of common inputs used for manufacture of both dutiable and exempted goods which have been held to be retrospective, the demand made, by asking the appellant to pay the amounts @ 8% of value of exempted goods cannot be sustained. In any case this will be relevant only if on verification it is found that appellant was not maintaining separate records for common inputs used in manufacture of both dutiable and exempted goods. It has been the case of the appellant that they were maintaining the separate records, and have referred to Annexure 5 in Volume II of the Paper book. These documents as per which the separate records were claimed to have been maintained have to be reconsidered by the original authority and re-determine the issues involved. These documents cannot be brushed aside for the reasons stated in the impugned order. The impugned order is set aside - matter remanded back to original adjudicating authority for de-novo consideration - appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2024 (5) TMI 409
  Waiver of penalties imposed for late deposit of tax u/s 54(1)(1)(a) of the U.P. V.A.T Act, 2008 - application for waiver were rejected by Revenue - opportunity of hearing not granted - violation of principles of natural justice - HELD THAT:- The orders passed by the revenue authorities appear to be defective. While the petitioner may be allowed to amend the writ petition and formally seek proper relief, it is also noted that the above orders have been passed by the revenue authorities without affording opportunity of hearing to the petitioner. Thus, no useful purpose may be served in keeping the writ petition pending or calling for Counter Affidavit at this stage, especially in view of the order proposed to be passed. Purely in the interest of justice and on prima facie consideration, it appears, the penalty sought to be waived was penalty imposed for late deposit of tax. Therefore, impugned ex parte orders rejecting the petitioner's applications seeking waiver of penalty dated 23.12.2020 are set aside. A direction is issued to the respondent no. 4 to pass a fresh order on the petitioner's application after affording due opportunity of hearing to the petitioner. Such compliance may be made within a period of three months from today. Petition disposed off.

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• Indian Laws

• 2024 (5) TMI 407
  Reimbursement of additional expenditure incurred due to an increase in the rates of royalty and associated sales tax on soil, sand and crushed stone aggregates - Non-payment for executed work of embankment with soil/pond ash for the initial 150 mm depth stripped in accordance with the requirements of the contract - Reimbursement of additional costs incurred due to an increase in the forest transit fee rates - scope of interference in a petition under Section 34 of the Arbitration Act - HELD THAT:- This Court, in the case of UHL POWER COMPANY LTD. VERSUS STATE OF HIMACHAL PRADESH AND STATE OF HIMACHAL PRADESH VERSUS UHL POWER COMPANY LTD. [ 2022 (1) TMI 307 - SUPREME COURT ] held that the jurisdiction of the Court under Section 34 is relatively narrow and the jurisdiction of the Appellate Court under Section 37 of the Arbitration Act is all the more circumscribed. The Division Bench held that the imposition of a tax or upward revision of an already existing tax or levy through subsequent legislation is admittedly akin to the levy of additional royalty. The Division Bench relied upon a decision of the same Court in the case of the NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M/S ITD CEMENTATION INDIA LIMITED [ 2015 (4) TMI 1096 - SUPREME COURT] . The Division Bench in the impugned judgment held that the claim made on account of the increase in royalty, sales tax, forest transit fee, etc., was covered in favour of the respondent by the said decision. Whether the claim for the construction of embankment forms part of the activity of clearing and grubbing and was not payable as embankment work? - HELD THAT:- The Division Bench held that nothing is shown that indicates that the construction of the embankment can be said to have been done in a manner where the lower part of the embankment is made only by carrying out the activity of backfilling. The High Court also noted that the appellant sought to make deductions after initially paying the amounts for the embankment. The Division Bench was right in holding that the majority opinion of technical persons need not be subjected to a relook, especially when the learned Single Judge had also agreed with the view taken by the Arbitral Tribunal. The learned Single Judge and the Division Bench of the High Court have examined the challenge to the award within four corners of limitation imposed by Sections 34 and 37 of the Arbitration Act. The view taken by the Arbitral Tribunal, the learned Single Judge and the Division Bench cannot be found fault with. There are no merits in the appeal - appeal dismissed.

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