TMI Tax Updates - e-Newsletter
May 10, 2023

Case Laws in this Newsletter:

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

TMI Short Notes

1. Role and Responsibilities of Reporting Entities under PMLA

  Money Laundering:

2. Reporting Entity under Prevention of Money Laundering Act, 2002 (PMLA)

  Money Laundering:

News

1. DPIIT Secretary., Asst. Undersecretary for International Trade, Ministry of Economy, UAE  and Ambassador of India to the UAE inaugurate International Jewellery Exposition Centre in Dubai

2. Pradhan Mantri Suraksha Bima Yojana (PMJJBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMSBY) and Atal Pension Yojana (APY) complete 8 years of providing social security cover

3. Path-breaking India-UAE CEPA negotiated in just 88 days: DPIIT Secy.

Notifications

FEMA

1. S.O. 2128 (E) - dated 8-5-2023 - FEMA

Appointment of adjudicating authorities to hold an inquiry for the purpose of adjudication under section 13 of the Foreign Exchange Management Act, 1999

GST - States

2. 16/GST-2 - dated 9-5-2023 - Haryana SGST

Amendment in Notification No.46/ST-2, dated the 30th June, 2017

3. ERTS(T) 65/2017/Pt.III/416 - dated 31-3-2023 - Meghalaya SGST

Amendment in Notification No. ERTS(T) 65/2017/Pt/159, dated the 29th December, 2017

4. ERTS(T) 65/2017/Pt. III/418 - dated 31-3-2023 - Meghalaya SGST

Meghalaya Goods and Services Tax (Amendment) Rules, 2023

Circulars / Instructions / Orders

FEMA

1. 04 - dated 9-5-2023

Levy of charges on forex prepaid cards/store value cards/travel cards, etc.

Highlights / Catch Notes

GST

• Appeal for Refund of Unutilized Input Tax Credit Denied Due to Insufficient Evidence; Case Remanded for Review.

  Case-Laws - HC : Refund of unutilized Input Tax Credit - export of services or not - the Appellate Authority had rejected the petitioner’s appeal against partial rejection of the claim for refund on the ground that the petitioner had not produced any documentary evidence to establish the actual eligible turnover for zero rated supplies - Matter restored back - HC
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Income Tax

• Section 80(P)(4) Exemption Granted: Credit Society Activities Differ from Banks, Eligible for Section 80(P)(2) Benefits.

  Case-Laws - SC : Deduction u/s 80P - The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also. - the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) - SC
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• Supreme Court Sets Aside High Court Decision on Unexplained Expenditure u/s 69C in Block Assessment Case.

  Case-Laws - SC : Unexplained expenditure u/s 69C - ITAT has also noted that the huge addition was made in the case of assessee’s group in the block assessment on the basis of the books so found. Therefore, it was found that the assessee was maintaining the books of accounts outside the regular books. - decision of HC deleting the additions set aside - SC
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• High Court sets aside orders due to improper discretion in stay of demand u/s 220(6) of Income Tax Act.

  Case-Laws - HC : Stay of demand - the discretion to be exercised u/s 220(6) is to be exercised in a fair and judicious manner and in accordance with the principles laid down by us in preceding paragraphs. Admittedly, in the present case, neither the Assessing Authority nor the Reviewing Authority has exercised its discretion in a judicial manner and, hence, orders passed by the said authorities are liable to be set aside. - HC
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• High Court Remands Case to ITAT for Lack of Independent Reasoning on Penalty u/s 271AAB(1)(c) of Income Tax Act.

  Case-Laws - HC : Penalty u/s 271AAB(1)(c) - reasonable cause for the said failure - in the absence of any independent reasoning by the learned Tribunal with regard to the merits of the matter of the respondent/assessee, it will not be possible for us to test the correctness of the order passed by the learned Tribunal, more particularly, when we are to ascertain as to whether any substantial question of law arises for consideration. - Matter restored back to ITAT - HC
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• Ex Parte Order Under Assessment 144 Upheld as Assessee Had No Grievance After Full Hearing by Appellate Authority.

  Case-Laws - AT : Validity of Assessment 144 - There cannot be any grievance to the assessee to the exparte order passed by the Ld.AO, since the assessee has been heard by the appellate authority to its complete satisfaction, after considering all evidences and submissions filed by the assessee. - AT
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• Interest Rates for Loans to Associated Enterprises Should Reflect Repayment Currency, Not Domestic Rates.

  Case-Laws - AT : TP Adjustment - Interest on loans and advances given to the AEs - Interest rates vary and are thus dependent on the foreign currency in which the repayment is to be made and, therefore, domestic interest rate should not be applied for determining the interest rate in case of loans to be re-paid in foreign currency. - the ALP of interest shall be determined with reference to the interest rates applicable to the currency in which the loan has to be repaid. - AT
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• Discussion on Section 271D Penalty and Section 275 Limitation: Extended Period Not Applicable Without Appellate Proceedings.

  Case-Laws - AT : Penalty u/s 271D - period of limitation u/s 275 - It cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue. - AT
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• Excess stock from business operations classified as business income; Sections 69 and 115BBE deemed inapplicable.

  Case-Laws - AT : Undisclosed investment v/s business income - addition u/s. 69 - It is a case of excess stock found during the carrying of the business and stock is generated out of business income and therefore, the provision of section 69 on the facts of the case has no applicability. - consequently, the provision of section 115BBE is not applicable - AT
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• Property Gift to Sister Exempt from Capital Gains Tax u/s 2(47) and Clause (iii) of Section 47.

  Case-Laws - AT : Capital gain - transfer of capital asset u/s 2(47) - gift of property by the assessee to his sister out of natural love and affection - Clause (iii) of section 47 of the Act exempts from the operation of section 45 all transfers under a gift or will or an irrevocable trust. Therefore, the transaction of gift under consideration is not to be regarded as transfer for the purposes of section 45. - AT
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• Disallowance of Excess Interest Due to Fund Diversion for Non-Business Purposes; Assessee Lent at Lower Rate to Director.

  Case-Laws - AT : Disallowance of excess interest paid - diversion of funds for non-business purposes - It is immaterial how the loan was treated by the Director - as far as the assessee is concerned, assessee has borrowed funds @18% without there being any other funds i.e. interest free funds in the business, therefore, it clearly shows that assessee has utilized interest bearing funds to lend the money to one of its Director with a considerable difference of interest rate i.e., 4.5%. - Therefore, there is diversion of funds for non-business purpose. - AT
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• Court Upholds Transfer Pricing Officer's Adjustment on Interest-Free Advances to Associated Enterprise Under Scrutiny.

  Case-Laws - AT : TP Adjustment - Notional interest - interest-free advances extended by the assessee to its AE - In an uncontrolled condition and between persons other than associated enterprises, no prudent person would have given huge loans to a third party and reduce the same by making a provision for bad and doubtful loans and advances. - we confirm the findings of the TPO in making the TP adjustment on interest free loans given to AEs. - AT
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Customs

• Appellate Authority Dismisses Revenue's Appeal Against Customs House Agent, Emphasizing Limits of Administrative Power in Customs Operations.

  Case-Laws - AT : Appellate remedy available to Revenue - Commissioner of Customs to act as Licensing authority and / or administrative exercise of power - Quantum of punishment - Breach of obligation on the part of Customs House Agent (CHA) - Revenue appeal dismissed - AT
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Indian Laws

• Directors' Plea to Quash Cheque Dishonor Case Denied; Trial to Proceed for Comprehensive Examination.

  Case-Laws - HC : Dishonour of Cheque - Funds Insufficient - Signatory of Cheques - vicarious liability of Directors - If the plea of petitioners is accepted that since they were not a part of the accused company at the time when cheques were dishonoured, proceedings against them be quashed at the outset, it would in fact, amount to throttling the trial by snatching away the right of respondent to examine during before the Court, the signatory of the cheques as well as signatory of the loan agreements, board resolutions and other documents in that regard. - HC
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• Court Upholds Summoning Order Against Ex-Director in Cheque Dishonor Case, Citing Insufficient Evidence of Non-Involvement.

  Case-Laws - HC : Dishonour of Cheque - vicarious liability of Director - petitioner had resigned more than a month prior to even issuance of cheque in question - The material placed on record by the petitioner is not sterling incontrovertible material or unimpeachable material to show that petitioner was not involved either in day to day activities of the company or had no role in issuance of cheque in question - this Court does not find it a fit case to quash the summoning order - HC
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• Court Upholds Arbitral Award Validity; No Grounds Found to Challenge Based on Contract Interpretation or Alternative Views.

  Case-Laws - HC : Validity of Arbitral Award - This Court holds that the terms of the contract has been construed in a reasonable manner and the Award passes muster. Just because an alternative view on facts and interpretation of contract exists, that can never be a ground for interfering with an Award - there is no need for this Court to go into the other issue pertaining to the applicability of Section 70 of the Contract Act. - HC
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IBC

• Resolution Plan Rejected: Applicant Ineligibility and Failure to Present Revised Plan to Creditors Before Seeking Approval.

  Case-Laws - SC : Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan -Rejection of Resolution Plan - even while respecting the commercial wisdom of CoC, in the present case, the resolution plan in question could not have been approved by the Adjudicating Authority for two major reasons: one, for the ineligibility of the resolution applicant; and second, for not placing of the revised resolution plan in the CoC before seeking approval from the Adjudicating Authority. - SC
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• Supreme Court overrules NCLT's CIRP initiation; finds claim within limitation period u/s 9, revisiting default date.

  Case-Laws - SC : Initiation of CIRP - period of limitation - date of default - the NCLT ought to have considered the invoices at least for the period preceding three years from the date of the application u/s 9, rather than considering the starting point of limitation as 12.03.2011. Under the circumstances, the order(s) passed by the NCLT and affirmed by the NCLAT are unsustainable - the view taken by the NCLT that the claim is barred by limitation is unsustainable. - SC
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• CIRP Starts with Bank Demand to Corporate Guarantor, NCLT Dismisses Application Based on Default Date Principles.

  Case-Laws - AT : Initiation of CIRP - Period of limitation - The date of default by the Guarantor shall arise only when demand is issued by the Bank to the Corporate Guarantor. The fact that the Corporate Guarantor has given indemnity to the Bank also shall operate only after default is committed by the Guarantor. Indemnity can be enforced against the Corporate Guarantor but it cannot itself change the date of default on part of the Guarantor. - NCLT rightly rejected the application - AT
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PMLA

• Financial Entities Must Uphold PMLA Standards to Combat Money Laundering, Ensure Transparency, and Avoid Legal Penalties.

  Notes : Role and Responsibilities of Reporting Entities under PMLA
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• PMLA 2002 requires banks and financial institutions to report suspicious transactions to combat money laundering. Compliance is crucial.

  Notes : Reporting Entity under Prevention of Money Laundering Act, 2002 (PMLA)
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Service Tax

• DICGC's Deposit Insurance Services Taxed Under "General Insurance Business" Category Per Section 65(105)(d) of Finance Act, 1994.

  Case-Laws - AT : Determination of service tax liability - the deposit insurance activity of DICGC falls within the ambit of section 65(105)(d) of the Finance Act, 1994 and is chargeable to Service Tax under “General Insurance Business” - the appellants DICGC are required to pay service tax on the taxable service of deposit insurance with effect from 20.09.2011. - AT
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• Appeal Challenges Extended Limitation Period; Allegations of Tax Evasion Unfounded as Tax Paid Before Notice Issued.

  Case-Laws - AT : Maintainability of appeal - extended period of limitation - the only allegation in SCN for invocation of extended period of limitation is that the afore-mentioned omissions came to light in the course of audit, but for which tax would have escaped. It is found that such allegations do not stand, as admittedly appellant have deposited the tax and accepted the audit objection, prior to issue of SCN. - AT
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• Amalgamation Does Not Exempt Pre-Approval Tax Liabilities; Assessed Liabilities Remain Final Per Finance Act, 1994.

  Case-Laws - AT : Refund claim - amalgamation of two entities - any transaction that creates liability or generates an asset in the books of the transferor is afforded the privilege of artificial life - tax liability discharged before the actual date of approval of amalgamation under Finance Act, 1994 pertains to existence as separate persons and, therefore, not immunized therefrom. - The assessed liability under Finance Act, 1994, duly discharged and being neither provisional nor tentative, is beyond the scope of re-determination of levy merely because of a scheme of amalgamation. - AT
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Central Excise

• Interest on Excise Refunds Starts from Acknowledgement Date, Not Submission Date, as per Section 11BB.

  Case-Laws - AT : Refund claim - time limitation - relevant date for grant of interest - the relevant date for computing the interest under Section 11BB would be the date of acknowledgement of the application for the refund made under Section 11B (1) and not the date of submission of the documents - AT
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• CENVAT Credit Recovery on Capital Goods by Job Worker: Reversal Pre-Notice Upheld, Demand u/r 14 Invalid.

  Case-Laws - AT : Recovery of CENVAT Credit - job-worker - capital goods utilised by the job worker - The reversal of credit, claimed well before the issue of show cause notice, has not been controverted by tax authorities at any stage till now. Consequently, the demand of the same under rule 14 of CENVAT Credit Rules, 2004 is not tenable. - AT
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• Refund Claims for Deemed Exports Valid from Jan to Sep 2010; Oct-Dec 2009 Claims Barred by Limitation Period.

  Case-Laws - AT : Refund claim - Deemed export - Period of limitation - intermediate goods are cleared to another EOU - The relevant date needs to be considered from the end of the quarter - the refund claims for the quarters January 2010 to March 2010, April 2010 to June 2010 and July 2010 to September 2010 are admissible to the appellant whereas the refund claim for the quarter October 2009 to December 2009 is hit by limitation. - AT
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• Exemption under Notification No. 108/95-CE upheld for supply to contractors; strict interpretation of terms confirmed.

  Case-Laws - AT : Benefit of Exemption - Supply of goods to the contractor or subcontractor of PIA - UN/International Organisations or Projects - N/N. 108/95-CE - It is not in dispute that the goods have been used in the manner as prescribed. By bringing in condition of extension of the said certificate, Commissioner has sought to insert certain conditions in the notification which do not exist. It is settled position in law that exemption notification needs to be interpreted according to the terms of the notification without any addition or deletion in the same. - Benefit of exemption allowed - AT
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VAT

• Supreme Court Affirms State Authority to Impose Sales Tax on Gutka; Constitution Does Not Exempt from VAT.

  Case-Laws - SC : Taxability - gutka/gutkha/guhtka - appellants argued that state legislatures were not empowered to levy sales tax on those articles, in view of the provision in the Constitution enabling the Union to levy additional duties of excise - though “gutkha” fell within the term “pan masala” in Chapter 21 under sub-head 21.06 yet as it is not subjected to additional duty, an essential condition envisaged by the explanation for claiming exemption, is lacking. - Levy of VAT upheld - SC
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Case Laws:

• GST

• 2023 (5) TMI 374
  Refund of unutilized Input Tax Credit - export of services or not - petitioner had claimed refund of ITC on the ground that it related to remuneration for services rendered to overseas entities, in terms of an Advisory Service Agreement - case of Revenue is that services provided by it fell under the category of intermediary services and in terms of Section 13(8) of the Integrated Goods Services Tax Act, 2017 (IGST Act) read with Section 2(6) of the IGST Act, services rendered by the petitioner could not be treated as export of services. Whether the Appellate Authority was correct in holding that the services rendered by the petitioner in terms of the Advisory Services Agreement were in the nature of intermediary services? HELD THAT:- There is merit in the contention that the services relating to market research and developing strategies cannot be classified as intermediary services. However, there is a serious controversy as to the exact nature of services rendered by the petitioner. In the given circumstances, it was contended by the counsels that the matter be remanded to the Adjudicating Authority to decide afresh keeping in view the decision of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr. [ 2023 (3) TMI 1117 - DELHI HIGH COURT] . Insofar as the impugned order dated 23.03.2022 passed by the Appellate Authority is concerned, the Appellate Authority had rejected the petitioner s appeal against partial rejection of the claim for refund on the ground that the petitioner had not produced any documentary evidence to establish the actual eligible turnover for zero rated supplies. The applications filed by the petitioner for refund for the Financial Years 2018-19 and 2019-20 are restored before the Adjudicating Authority for considering afresh in light of the decision of this Court in M/s Ernst Young Ltd. v. Additional Commissioner, CGST Appeals-II, Delhi Anr. - petition disposed off.

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• Income Tax

• 2023 (5) TMI 373
  Assessment u/s 153C - As found by the High Court [ 2018 (5) TMI 2115 - DELHI HIGH COURT] in none of the cases any incriminating material was found during the search either from the Assessee or from third party - HELD THAT:- As no incriminating material was found in case of any of the Assessees either from the Assessee or from the third party and the assessments were under Section 153-C of the Act, the High Court has rightly set aside the Assessment Order(s). Therefore, the impugned judgment and order(s) passed by the High Court do not require any interference by this Court. Hence, all these appeals deserve to the dismissed and are accordingly dismissed. Prayer made on behalf of the Revenue to permit them to initiate the re-assessment proceedings is concerned, it is observed that it will be open for the Revenue to initiate the re-assessment proceedings in accordance with law and if it is permissible under the law.

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• 2023 (5) TMI 372
  Deduction u/s 80P - HC [ 2019 (10) TMI 1557 - BOMBAY HIGH COURT] said Tribunal is justified allowing assessee claim on the ground that the assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) - Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan - HELD THAT:- As required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also. There are concurrent findings recorded by CIT-A, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under Section 80(P)(2) of the Income Tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. On merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act. Decided in favour of assessee.

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• 2023 (5) TMI 371
  Unexplained expenditure u/s 69C - actual consumption of diamonds as mentioned in the audit report and considering the consistent trend on yield which was found to be between 10-18% AO made the additions - High Court [ 2010 (2) TMI 636 - GUJARAT HIGH COURT ] has allowed the said Appeal preferred by the assessee - HELD THAT:- As solely relying upon the statements of the Typist and the Chartered Accountant, the High Court has reversed the findings of the Assessing Officer as well as the ITAT. High Court has also not at all considered the conduct on the part of the assessee, which came to be considered in detail by the ITAT in para 10 of the order passed by the ITAT. As found that there has been search in the case of the assessee and its group concern on 07.01.1999 which was concluded on 23.03.1999 and during the course of the search, duplicate cash book, ledger and other books showing the unaccounted manufacturing and trading arrived at by the assessee in diamonds were found. ITAT has also noted that the huge addition was made in the case of assessee s group in the block assessment on the basis of the books so found. Therefore, it was found that the assessee was maintaining the books of accounts outside the regular books. The aforesaid has not at all been considered by the High Court, while passing the impugned order. Thus, the impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside - Decided in favour of revenue.

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• 2023 (5) TMI 370
  Characterization of receipts - entrance fees received from its member - capital receipts or revenue receipts - whether facilities that are made available to the members are done in normal course of its business as the assessee is engaged in the business of race course? - HC held any sum paid by a member to acquire the rights of a club is a capital receipt - HELD THAT:- We are not inclined to entertain the Special Leave Petition under Article 136 of the Constitution. Special Leave Petition is accordingly dismissed.

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• 2023 (5) TMI 369
  Stay of demand - When tax payable and when assessee deemed in default - discretion to be exercised under Section 220(6) - HELD THAT:- When it comes to discretion, the exercise thereof has to be guided by law; has to be according to the rules of reason and justice; and has to be based on the relevant considerations. The exercise of discretion is essentially the discernment of what is right and proper; and such discernment is the critical and cautious judgment of what is correct and proper by differentiating between shadow and substance as also between equity and pretense. A holder of public office, when exercising discretion conferred by the statute, has to ensure that such exercise is in furtherance of accomplishment of the purpose underlying conferment of such power. The requirements of reasonableness, rationality, impartiality, fairness and equity are inherent in any exercise of discretion; such an exercise can never be according to the private opinion. In the present case at hand, unfortunately, Respondent No. 3 has not considered anything and has just mechanically declined to grant stay by placing reliance upon Office Memorandum by recording, inter alia, that since the assessee has not deposited 20% of disputed demand as stipulated in the said Office Memorandum, stay is liable to be rejected. As noted here that under Section 246 which provides remedy of preferring an Appeal against the Assessment Order, there is no pre-deposit stipulated therein. AO has read the Office Memorandum dated 31st July, 2017, to mean that in each and every case, where an Assessment Order is passed and its appeal is preferred, 20% of pre-deposit is required for granting stay of the balance demand. This understanding is completely contrary to the provisions of Section 220(6) of the Act, itself. Thus the discretion to be exercised under Section 220(6) of the Act is to be exercised in a fair and judicious manner and in accordance with the principles laid down by us in preceding paragraphs. Admittedly, in the present case, neither the Assessing Authority nor the Reviewing Authority has exercised its discretion in a judicial manner and, hence, orders passed by the said authorities are liable to be set aside. Accordingly, the order passed by ACIT, Ranchi (Respondent No. 3) and the order bearing passed by PCIT, Patna, are hereby, quashed and set aside. The matter is remitted back to Respondent No. 3 to pass a fresh order.

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• 2023 (5) TMI 368
  Validity of assessment order u/s 143 (3) read with 144B - notices were issued in the name of a non-existent company - scheme of amalgamation approved - HELD THAT:- The factum of knowledge of amalgamation is not disputed by the Respondents Counsel Mr. Sharma nor is there any denial of information with regard to the amalgamation being received in the Affidavit in Reply dated 28th March 2023 filed by the Jurisdictional Assessment Officer. This Court in the case of CLSA India Private Limited vs DCIT-4(1)(1) [ 2023 (2) TMI 469 - BOMBAY HIGH COURT ] has held that an active PAN of a non-existent company cannot create an exception in favour of the revenue to dilute in any manner the principles enunciated by the following judgments Saraswati Industrial Syndicate Ltd. [ 1990 (9) TMI 1 - SUPREME COURT ], Spice Entertainment Ltd . [ 2011 (8) TMI 544 - DELHI HIGH COURT ] and Maruti Suzuki India Ltd. [ 2019 (7) TMI 1449 - Supreme Cour ] Considering the facts of the present case on the touchstone of the aforestated well settled propositions of law therefore, the Order of assessment u/s 143(3) dated 28th September 2022 and consequential notices u/s 156, 270A, 271AAC(1) issued in the name of a non-existent entity are void.

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• 2023 (5) TMI 367
  Addition u/s 68 - unexplained cash credit - AO treating the sum received by the assessee by way of share application money as the assessee s undisclosed income - HELD THAT:- On going through the order passed by CIT(A) and Tribunal, we find that the assessment was so completed by the assessing officer solely relying upon a statement which was recorded from the assessee on 17th March, 2015. It is not disputed that during the course of search operations, that is, on the last date of authorisation on 21st April, 2015, the assessee had retracted the statement given earlier as well as the affidavit filed by him earlier. That apart, the assessee has also filed another affidavit contending that coercive measures were resorted to and a statement from him was obtained. This retraction was taken note of by the [CIT(A)] and it has been factually recorded that there was very elaborate evidence available before the Assessing Officer to treat the said sum as undisclosed income of the assessee. The learned Tribunal on its part re-appreciated the factual position and has affirmed the order passed by the CIT(A). We find that the entire matter revolves on facts which has been appreciated and re-appreciated by the CIT(A) and the Tribunal respectively and we find that there is no substantial question of law arising for consideration in this appeal.

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• 2023 (5) TMI 366
  Reopening of assessment - challenge to order passed u/s 148A(d) at an intermediate stage - HELD THAT:- This Court has in its order in a batch of writ petitions in Kailash Kedia v. Income Tax Officer [ 2022 (12) TMI 188 - ORISSA HIGH COURT] was a lead matter, declined to interfere relegating the parties to a stage of passing of assessment orders under Section 148 of the Act. In doing so, this Court followed the order of the Supreme Court of India Anshul Jain v. Principal Commissioner of Income Tax [ 2022 (10) TMI 3 - SC ORDER] which in turn affirmed the judgment of Anshul Jain v. Principal Commissioner of Income Tax) [ 2022 (6) TMI 1310 - PUNJAB AND HARYANA HIGH COURT] . Supreme Court of India declined to interfere with the order of the Punjab and Haryana High Court in Red Chilli International Sa les [ 2022 (6) TMI 417 - PUNJAB HARYANA HIGH COURT] matter. Consequently, this Court is not persuaded that it should interfere with the impugned order dated 24th November, 2022 in the present case under Section 148A(d) of the Act.

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• 2023 (5) TMI 365
  Revision u/s 263 - loss of penny stock - as per CIT AO has not done proper verification - Scope of no enquiry - HELD THAT:- As notice u/s 142(1) was issued. In response to this notice, the assessee had submitted a reply along with the details and documents in support of the transaction in shares and such other details which were called for by the Assessing Officer. Thereafter, another notice under Section 142(1) was issued calling for further information and particulars. This was furnished by the assessee by reply. Thereafter, the assessee had submitted an explanation in respect of allowability of the loss and also explained various queries raised by the Assessing Officer on the said issue. The copy of the explanation has been filed in the paper book and we find it is an elaborate explanation not only on facts but also setting out various decisions of the High Courts and that of the Tribunal contending that the loss as reported by the assessee was permissible. After such elaborate discussion of the case with the assessee, the Assessing Officer has completed the assessment. Thus, the learned Tribunal rightly held that it is not a case of no enquiry or no proper verification but a detailed enquiry had been done by the Assessing Officer. The learned Tribunal has noted the factual position as put forth by the assessee before it in paragraph 6 of the order. Thus, we are of the view that the twin conditions which are required to be fulfilled before exercising jurisdiction u/s 263 of the Act have not been fulfilled in the facts and circumstances of the case on hand. Decided against revenue.

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• 2023 (5) TMI 364
  Penalty u/s 271AAB(1)(c) - reasonable cause for the said failure - ITAT held that penalty u/s. 271AAB of the Income Tax Act, 1961 is not mandatory and is discretionary - HELD THAT:- Tribunal had followed the decision of the coordinate Bench of the Tribunal in the case of DCIT vs. A.K. Logistics Pvt. Ltd [ 2019 (3) TMI 209 - ITAT KOLKATA] We are required to examine the matter on merits and render finding as to whether the Tribunal was right in dismissing the revenue s appeal. On going through the order passed by the learned Tribunal, we find no finding has been recorded by the learned Tribunal as to how the decision in AKA Logistics Pvt. Ltd. (supra) would apply to the case on hand and there is no discussion on the factual aspect. That apart, the learned Tribunal has also not given any finding as to how the decision relied on by the revenue in the case of Sandeep Chandak vs. PCIT, Kanpur,[ 2018 (6) TMI 106 - SC ORDER] is not applicable to the case on hand or it is factually distinguishable. Though such may be the factual position, in the absence of any independent reasoning by the learned Tribunal with regard to the merits of the matter of the respondent/assessee, it will not be possible for us to test the correctness of the order passed by the learned Tribunal, more particularly, when we are to ascertain as to whether any substantial question of law arises for consideration. Thus, for such reason alone we are inclined to interfere with the order passed by the learned Tribunal and remand the matter to the Tribunal for a fresh decision on merits. Substantial questions of law are left open.

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• 2023 (5) TMI 363
  Validity of Assessment 144 - as argued AO as violated due procedure of law and passed a non speaking order in the present case - HELD THAT:- As gone through the assessment order, and we find that before making various additions/disallowances, AO had issued show cause notice to the assessee, considered the reply filed by the assessee, and thereafter proceeded to make various additions based on the material evidences and submissions filed whatever by the assessee before him. Assessee was unable to point out any instance of the AO having passed the order in violation of law, without affording any opportunity of hearing to the assessee. We agree with the ld.CIT(A) that there is no infirmity in the action of the AO in passing the assessment order u/s 144 of the Act,. We find that there has been no miscarriage of justice in the present case, because, as is evident from the appellate order of the ld.CIT(A) that whatever additional evidences the assessee sought to present for pleading its case, were all entertained and admitted by the ld.CIT(A) while deciding the assessee s appeal. There cannot be any grievance to the assessee to the exparte order passed by the Ld.AO, since the assessee has been heard by the appellate authority to its complete satisfaction, after considering all evidences and submissions filed by the assessee. No merit in the ground raised by the assessee challenging passing of assessment order under section 144 - Decided against assessee. Disallowance of loss on sale of grey cloth - grey cloth was purchased at a higher rate and sold at a lower rate on the same day, that the transactions taking place between the same parties appeared to be a modus operandi adopted by the assessee to claim fabricated bogus loss - HELD THAT:- As per the list of the parties whom the sales were made, the same were also supplied by the assessee to AO, as is evident from the remand report, and as noted above, no infirmity was pointed out by the AO and the information furnished by the assessee regarding the sale transactions with respect to grey-cloth. Therefore, all in all, as noted except for doubting on account of the fact that goods were purchased and sold on the same day at a loss, the AO had no other material on hand to doubt the genuineness or the veracity of the transactions, which otherwise was suitably established by the assessee with all evidences, which were examined and found to be in order by the AO in his remand report. We hold that there is no basis for disallowing the loss to the assessee and the disallowance so made is therefore directed to be deleted - Decided in favour of assessee. Unreconciled difference in the outstanding balance - Reason for difference in the outstanding balance of the parties as per the assessee s books of accounts and as per the balance of the assessee in the books of accounts of the said parties, was clearly discernible from the ledger accounts filed to the AO and the ld.CIT(A), who we find, have not cared to go through the same before holding that the balances were not reconciled by the assessee. We hold that evidences filed by the assessee clearly brought out the reasons for difference in the outstanding balance, and the Revenue authorities having not been able to see through the evidences and accounts, which were placed before him, have erred in holding that the differences are unreconciled. The addition, therefore, made on this basis and confirmed by the ld.CIT(A), we hold, is not sustainable as per the facts of the case, and we direct the deletion of the addition - Decided in favour of assessee Addition on account of purported cessation of liability of sundry creditors - HELD THAT:- As facts by itself did not establish that any benefit had accrued to the assessee on account of cessation of liability on this count. Firstly the fact that the liability on account of these parties had ceased to exist cannot be established merely by the fact that the balance outstanding had remained unclaimed for last three years, and as long as the assessee reflecting this amount as outstanding for payments, there could be no case for cessation of liability. The issue is squarely covered by the decision of CIT Vs. Bhogilal R. Atara [ 2014 (2) TMI 794 - GUJARAT HIGH COURT] - addition made on account of cessation of liability as per the provisions of section 41(1) is directed to be deleted - Decided in favour of assessee. Addition made on account of bogus sundry creditors - HELD THAT:- As clearly beyond doubt that these sundry creditors balance did not pertain to any transaction during the year, but were all outstanding balances of preceding year. Holding these balances to be bogus, can only mean and as has held by the ld.CIT(A) also that there were in fact no transactions entered with these parties, and transaction if any entered were of sham/bogus. Since the transactions were entered into in the preceding year the addition, if any, could have been made holding them to be bogus in he said year only. There cannot be case of treating the outstanding balance as bogus and making the addition of the same. Set off carry forward of business loss of earlier years - HELD THAT:- No facts have been brought to our notice regarding the brought forward loss of earlier years claimed to be set off by the assessee in the impugned year. Even otherwise, since all the additions have been deleted by us, the assessee is restored back to the returned loss and therefore there remains no case for claiming any set off of brought forward loss. Thus, the ground raised by the assessee is no longer relevant, and dismissed accordingly.

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• 2023 (5) TMI 362
  Receipt of on money on sale of flats - difference between the MM Value and Sale value - AO relied upon the statement given by the partner of the assessee firm and accordingly come to the conclusion that the alleged on money receipts is to be assessed to tax - CIT-A deleted the addition - HELD THAT:- We notice that the AO did not conduct any independent enquiry with the buyers of flats in order to ascertain the cash payments made by them. All these facts cumulatively prove that the AO has made the impugned addition without any basis. Probably, he has given much importance to the Statement given by the partner of the assessee firm. Even if an assessee surrenders any income in the Statement, yet it is possible for him to show that the said surrender was made under misconception. In this case, we notice that the assessee has explained as to why it did not offer the additional income surrendered by its partner. The assessee has, in fact, furnished details before the AO stating that the actual sale consideration has been received equal to or more than the MM Value. We notice that the AO has not verified those details at all - AO has made the impugned addition without any basis. When there is no basis for arriving at the conclusion that the assessee has received any on-money, the addition is not justified as held by Hon ble Supreme Court in the case of PCIT vs. Nishant Construction (P) Ltd [ 2019 (1) TMI 1283 - SC ORDER] AO has not brought on record any material in support of the addition made by him nor he provided any basis for arriving at the basis, particularly when all the 30 flats have not been sold during the year relevant to AY 2017-18. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting this addition. Addition on the basis of a document found at the premises of a Trust - assessee has been linked to the said document, since Shri Hemal Bheda said that this document may/appears to belong to the assessee herein - HELD THAT:- AO should have conducted further enquiries in order to give a finding that the above said document did contain transactions belonging to the assessee only. Hence, we agree with the contentions of the assessee that the AO could not have placed full reliance on the vague statement at all. Even if he had given the reply in an authentic manner, the AO could not have made addition merely on the basis of said statement without corroborating the same with any other material. This document is undated and hence it cannot be said that these transactions are related to the year under consideration, even if it is assumed that the said document belongs to the assessee. We also noticed that the AO did not make any independent enquiry with regard to this document. AO was not justified in making this addition on the basis of a document, which should be classified as a dumb document - Decided in favour of assessee.

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• 2023 (5) TMI 361
  TP Adjustment - Interest on loans and advances given to the AEs - Assessee argued for the loans and advances in foreign currency, the interest should be the market determined rate applicable to the currency concerned in which the loan has to be repaid but not on the basis of the currency or legal tender of the place or country of residence of either of the parties - HELD THAT:- As in the light of the decision in the case of CIT VS. vs M/S Cotton Naturals (I) Pvt. Ltd. [ 2015 (3) TMI 1031 - DELHI HIGH COURT] in that case also, both learned TPO and the DRP referred to the PLR rates only by way of analogy so as to state the prevailing interest rates in India, but while applying CUP method for comparability, they had applied LIBOR rates prevailing and applied a mark-up of 700 points on account of low credit rating of the subsidiary AE and the cost of transaction. Interest rates vary and are thus dependent on the foreign currency in which the repayment is to be made and, therefore, domestic interest rate should not be applied for determining the interest rate in case of loans to be re-paid in foreign currency. Respectfully following the decision of the Hon ble Delhi High Court (supra), we hold that the ALP of interest shall be determined with reference to the interest rates applicable to the currency in which the loan has to be repaid. Since the assessee had already benchmarked the transaction and made a suo motto adjustment at 10.55% which is certainly higher than the LIBOR+400 basic points adopted by various fora, the same can be accepted. Adjustment of corporate guarantee fee - assessee suo motto adjusted at 0.5% towards commission from the AEs - HELD THAT:- Having considered the facts in their entirety, and while respectfully following the view taken by the Hon ble Bombay High Court in the case of GlenmarkPharmaceuticals Ltd.[ 2013 (11) TMI 1583 - ITAT MUMBAI] we deem it just and proper to accept the ALP of corporate guarantee at 0.53%. We accordingly direct the learned Assessing Officer/learned TPO to adopt the same. Rate of interest on the receivables - HELD THAT:- We are of the considered opinion that the ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points. We accordingly direct the AO / TPO to adopt the same. Interest expense stating that the assessee advanced interest free loans to related parties - specific contention of the assessee is that there is business contingency in advancing the moneys to the subsidiaries because of the conditions stipulated by the concessionaire to create the SPVs for execution of the project - HELD THAT:- There is no denial of the fact that the related parties are the wholly owned subsidiaries of the assessee. There is also no specific denial that such subsidiaries were assessed to tax in the same territory and were paying taxes. Revenue failed to contend and establish that because of the assessee not charging any interest on the moneys advanced to the subsidiaries, there is any leakage of revenue on the face of the allegation of the assessee that if the assessee charges interest, such an expense is allowable in the hands of the subsidiaries. Revenue does not dispute the contention of the assessee that at one place or the other, the interest expense has to be allowed. It is a revenue neutral transaction and assessee not charging any interest on the loans and advances made to its subsidiaries does not have any impact on the Government exchequer. With this view of the matter, we allow grounds. Application of markup of 10% on the contract revenue and proposing an adjustment - HELD THAT:- As no information is furnished to contradict the findings of the authorities below. In these circumstances, we do not find anything illegality or irregularity in the authorities adopting the markup at 10% of the sub-contract services amount. Ground is accordingly dismissed.

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• 2023 (5) TMI 360
  Penalty u/s 271D - period of limitation u/s 275 - extended period of limitation of six months - HELD THAT:- It cannot be said that the relevant assessment or other order was subjected to some appellate proceeding. Consequently, the extended period of limitation of 6 months from the availability of the appellate order, will not be available to the revenue. But otherwise also, the computation of the income has no bearing over the imposition or otherwise of the penalty provided u/s 271D and 271E of the Act. The issue involved in the present case is fully covered by the decision of HISSARIA BROTHERS, HANUMANGARH JN [ 2016 (8) TMI 1044 - SC ORDER] - Penalty imposed u/s 271D, under challenge, is barred by limitation u/s 275(1)(c). Hence, the same is hereby quashed. The additional ground of appeal taken by the assessee is therefore, allowed.

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• 2023 (5) TMI 359
  Addition u/s 68 - Unexplained share capital and share premium - HELD THAT:- We find that the assessee has received share capital and share premium, but it did not submit any detail justifying this transaction demonstrating the identity of the applicants as well as their creditworthy and genuineness of the transaction. It has not submitted anything before the ld. CIT(Appeals), therefore, it is very difficult for the Tribunal to discuss the details. There are very limited information available on the record. There is no denial to the fact that fresh capital has been introduced by the assessee and it failed to explain the source of such capital with the plausible evidence. Therefore, we do not have any hesitation in confirming the finding of the revenue authorities - Appeal of the assessee is dismissed.

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• 2023 (5) TMI 358
  Estimation of income - Bogus purchases - HELD THAT:- As noticed earlier that the manufacturing loss declared by the assessee was less than the SION standards prescribed by DGFT. Gross profit rate declared by the assessee was more than the industry average. Hence, in the normal circumstances, no disallowance of purchases is called for. Since some of the suppliers have stated that they have not supplied the materials and since the AO DGCEI has opined that the assessee might have procured materials from others, it is possible that the assessee could have made some profit in such an exercise. Hence, in order to take care of revenue leakages, if any, some addition is called for. We modify the order passed by CIT(A) in all these years and direct the AO to restrict the addition on account of non-genuine purchases to 2% of the value of alleged bogus purchases in both the years., TP adjustment - Commission on Corporate Guarantee given to the Associated Enterprises by the assessee - assessee contended before TPO that the same is a Share holder activity and hence it cannot be considered as an International Transaction - TPO made TPA @ 1.50% of the Guarantee amount given by the assessee - HELD THAT:- We notice that Tribunal has examined an identical issue in the assessee s own case in AY 2010-11 as restricted the rate of commission at 0.50% of the value of loan actually availed by the Associated Enterprises. Tribunal has followed the decision of Everest Canto Cylinders Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT ] Since the decision rendered by Ld CIT(A) on this issue is covered by the decision rendered by the jurisdictional High Court and the Tribunal, we do not find any reason to interfere with the decision so taken by Ld CIT(A) on this issue. Accordingly we uphold the same. Disallowance u/s 37 - assessee has paid salary/professional fees to three persons related to the CFO of the assessee company - HELD THAT:- If the payments made to both Ms Ramita Jain and Mrs Sangitha Jain were considered as part of salary payment to Shri Raman Kumar Jain, then such payments should be considered as having been incurred for the purposes of business only, i.e., all the payments, if clubbed with the salary payable to Shri Raman Kumar Jain, is allowable as business expenditure. Hence, we do not find any necessity to disallow the professional payments booked in the names of Ms Ramita Jain and Mrs Sangitha Jain. Accordingly, we set aside the orders passed by Ld CIT(A) in respect of disallowances of professional fee paid.

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• 2023 (5) TMI 357
  Deduction u/s. 80JJAA - Form no. 10DA is not filed within due date or extended due date for the A. Y. 2021-22. Hence no deduction will be allowed - HELD THAT:- To support the reasons affecting the delay the assessee filed the affidavit of the CA who filed the Form no. 3CD and Form no. 10DA thus it is not disputed that the same CA has certified the claim of the assessee in Form no. 3CD which was submitted in time and Form no. 10DA is not filed on account of the pandemic time wherein everybody life was disturbed for one or the other reasons. In that period it is not unusually that assessee or CA may make mistake and thereby the whole claim of the assessee cannot be denied. As decided in International Tractors Ltd. case [ 2021 (4) TMI 1033 - DELHI HIGH COURT] when the assessee has acted diligently, made the claim which is otherwise eligible cannot be denied merely the delay in filling the procedural form. In terms of these observations the appeal of the assessee is allowed.

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• 2023 (5) TMI 356
  Undisclosed investment v/s business income - addition u/s. 69 - provision of section 115BBE applicable - difference of stock in books and the physical stock found during the survey - HELD THAT:- Assessee is in the business of manufacturing of sweets (Mithai) and the stock which was found was the raw material/ ingredients used for preparation of the sweets. In the course of survey, the assessee in his statement on this issue merely stated that he will provide the reconciliation in some time about the discrepancy. Later on assessee offered the difference for taxation as business income, because the excess stock was said to be purely purchase of material for making sweets during the course of the business. If assessee is carrying on business and has some undisclosed stock then same is taxable as an undisclosed business income. It is cannot be held it is a case of undisclosed investment, albeit it is a case of undeclared business income. Neither during the course of survey nor in the statement it was found nor has assessee ever stated that there is some undisclosed investment representing in the form of undisclosed assets. It is a case of excess stock found during the carrying of the business and stock is generated out of business income and therefore, the provision of section 69 on the facts of the case has no applicability. Assessee has rightly offered it has business income and consequently, the provision of section 115BBE is not applicable - Assessee appeal allowed.

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• 2023 (5) TMI 355
  Exemption u/s 10(10) and section 10(10AA) applicable to a non-State Government employee - whether an employee of the State Government Undertaking can be treated as employee of State Government? - HELD THAT:- The issue is no longer res integra, as the Hon ble Supreme Court in the case of Indian Institute of Science vs. DCIT [ 2022 (10) TMI 242 - SC ORDER] held that though the State Government Undertaking may be considered as a State instrumentality within the definition of article 12 of the Constitution of India, the same cannot be treated as Central or State Government, consequently the employees of such undertakings cannot be treated as a Central or State Government employee. The Hon ble Supreme Court had affirmed the decision of Indian Institute of Science vs. DCIT [ 2021 (7) TMI 1052 - KARNATAKA HIGH COURT] Therefore, in the light of this settled position of law, the action of the Assessing Officer in restricting the exemption u/s 10(10) and section 10(10AA) of the Act to extent applicable to a non-State Government employee is correct in law and, therefore, no merits in the appeal filed by the assessee.

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• 2023 (5) TMI 354
  Capital gain - transfer of capital asset u/s 2(47) - incidence of transfer of immovable property - transfer/ gift deed - HELD THAT:- As per recitals made in the transfer/ gift deed it is crystal clear that the said property was gifted by the assessee to his sister out of natural love and affection and it was in this back drop that the assessee claimed before the CIT(A) that the incidence of transfer of immovable property was not liable to tax in his hands. The claim of the assessee before the Ld. CIT(A) was lawful. Clause (iii) of section 47 of the Act exempts from the operation of section 45 all transfers under a gift or will or an irrevocable trust. Therefore, the transaction of gift under consideration is not to be regarded as transfer for the purposes of section 45. As held in the case of Gillanders Arbuthnot and Co [ 1968 (9) TMI 49 - CALCUTTA HIGH COURT] that the provision of section 47 have to be strictly construed which decision has been affirmed by the Hon ble Supreme Court [ 1972 (9) TMI 13 - SUPREME COURT] . Therefore, the impugned transaction of gift is not exigible to capital gains tax. By no stretch of imagination the impugned gift of immovable property can be brought to tax in the hands of the recipient donee Smt. Manju Garg under section 56(2)(vii)(b). Firstly, the provision of section 56(2)(vii)(b) came into existence w.e.f. 01.10.2009 and therefore will apply for transaction undertaken on or after such date as explained by the CBDT in Circular No. 5 dated 03.06.2010. Proviso under section 56(2)(vii) says that this clause shall not apply to any property received from any relative. The expression relatives under Explanation (e) to section 56(2)(vii) means brother or sister of the individual . Since the impugned transaction of gift of property is between brother and sister it falls outside the ambit of the provision of section 56(2)(vii)(b) of the Act. Therefore, the question of taxability of the impugned gift in the hands of the recipient donee Smt. Manju Garg does not arise at all. Invocation of section 50C to the case of the assessee is irrelevant as the said provision applies where there is under-statement of consideration in acquisition of property. There is nothing like that in the case of the assessee. Thus assessee s case bringing to tax capital gain in the hands of the assessee is not sustainable. Decided in favour of assessee.

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• 2023 (5) TMI 353
  Capital gain computation - Allowability of expenses incurred wholly and exclusively in connection with transfer of asset - disallow the Brokerage expense and Transfer Charges as incurred by the Assessee exclusively for Sale of the Business Premises which was the Depreciable Asset of the Assessee - HELD THAT:- We observe that assessee has transferred the premises (Gala) situated at Niraj Industrial Estate, Andheri (E). We observe that the assessee has incurred certain expenses on such sale. As per the provisions of section 50(2) the Assessing Officer has to consider only the net consideration for determining the capital profit or loss and not the gross consideration. In the given case AO has proceeded to calculate the capital gain by considering the gross sale consideration, overlooking the related expenses incurred by the assessee. The expenses claimed by the assessee are part of such sale like commission and other dues to the society are connected with the transfer. Therefore, we direct the Assessing Officer to allow the claim of the assessee and consider to determine the capital gain or loss by considering the net sale consideration, accordingly, this grounds of appeal is allowed. Disallowance of excess interest paid - diversion of funds for non-business purposes - assessee has advanced funds to one of its Directors and charged interest only @13.5% whereas paid interest to ENNPL at higher rate - HELD THAT:- As observed from the balance sheet submitted before us that the assessee has borrowed huge funds for the purpose of business and paid the interest @18% and at the same time assessee has lent the huge amount of loan to one of its director Mr. Anup Shyam Karnani. There is no other funds available in the business than the borrowed funds and the same were utilized to pay the loan to one of the its Director. It is immaterial how the loan was treated by the Director - as far as the assessee is concerned, assessee has borrowed funds @18% without there being any other funds i.e. interest free funds in the business, therefore, it clearly shows that assessee has utilized interest bearing funds to lend the money to one of its Director with a considerable difference of interest rate i.e., 4.5%. Therefore, there is diversion of funds for non-business purpose. Therefore, we do not find any reason to interfere with the findings of the Ld.CIT(A) and we do not intend to get into the issue of deemed dividend at this stage since the assessee is in the business of money lending. We observe that the issue of deemed dividend is not raised by the revenue authorities. Accordingly, ground raised by the assessee is dismissed.

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• 2023 (5) TMI 352
  Penalty u/s 271(1)(c) - satisfaction as recorded for under-reporting or mis-reporting of the income by the assessee - HELD THAT:- AO in the course of reassessment proceedings has recorded his satisfaction for under reporting / mis-reporting of income and de-facto initiated penalty proceedings u/s 271(1)(c) of Act, this per-se sufficient to demonstrate his non-application of mind while recording satisfaction vis- -vis initiation of penal proceedings. We are of the considered view that the necessity for prima facie satisfaction triggering initiation of penal proceedings continues to be a jurisdictional fact and same should discernible from the body of assessment order, which in the present case a miss, consequently we have no hesitation in holding the very basis of initiation of penal proceedings u/s 271(1)(c) suffers from infirmity hence bad in law and deserves to be quashed in the light of law laid by the Hon ble Apex Court in Dilip N Shroff Vs JCIT [ 2007 (5) TMI 198 - SUPREME COURT] - Appeal of assessee allowed.

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• 2023 (5) TMI 351
  Maintainability of appeal as filled manually - mode of filing appeal - electronically or in physical mode - the assessee being a corporate entity, was required to file return electronically - HELD THAT:- Return form for filing return of income was being a voyage return filed by the agent on behalf of the freight beneficiary, as per the provisions of section 172(3) the filing of the return was to be in form VVR i.e. voyage return, as canvassed by the Ld.Counsel for the assessee both to the Ld.CIT(A) and even before us. Without controverting this fact and finding it to be incorrect the CIT(A) clearly was in error in stating that being a corporate assessee the return should have been filed electronically. Therefore, dismissal by the CIT(A) of the assessee s appeal, we find was based on incorrect appreciation of the facts. Mere mode of filing appeal - electronically or in physical mode ,alone should not take away the assessee s right to appeal, being just a technical/ procedural aspect that too not mandated by statute but by CBDT notification which has no persuasive value and is binding only on its Revenue Officers.. Therefore also the order of the ld.CIT(A) dismissing the assessee s appeal as not admitted is set aside. Levy of penalty u/s 271(1)(c) - assessee, being an agent of freight beneficiary had filed various voyage final returns u/s 172(3) of the Act without paying freight taxes - HELD THAT:- The assessee had claimed DTAA benefit vis a vis Denmark for the said purpose, but the AO held that the assessee had wrongly claimed DTAA benefit and accordingly withdrew the same. Thus, 7.5% of the total freight earned in India by the assessee was treated as its taxable income and penalty levied on the same for having concealed/furnishing inaccurate particulars of income. The ITAT passed order [ 2015 (11) TMI 274 - ITAT RAJKOT ] holding that profits embedded in the freight receipts were not taxable in India and deleted the demand raised on the assessee. Since the quantum addition stands deleted by the ITAT in the above order, there remains no basis for levy of penalty under section 271(1)(c) and therefore the same is directed to be cancelled. The grounds of appeal of the assessee are allowed.

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• 2023 (5) TMI 350
  TP Adjustment - Notional interest imputed on interest-free advances extended by the assessee to its AE - TPO imputed the interest at the rate of 14.86%, i.e., SBI Prima Lending Rate (SBI PLR) has been the alleged ALP by following CUP method - HELD THAT:- In the present case, there is no dispute to the fact that the loans and advances given to AEs are an international transaction. However, the reduction of such loans and advances receivable from the AEs by making provision for doubtful loans and advances in the books of account is an unilateral act of the assessee. It may be true that the provision for doubtful loans and advances was necessitated out of doubtfulness of the recovery of loans given to AEs on account of facts described above. However, the act of making provision for doubtful loans and advances remains a voluntary and unilateral act of the assessee. In the present case, provision for doubtful loans and advances is made in respect of receivables from AEs. In an uncontrolled condition and between persons other than associated enterprises, no prudent person would have given huge loans to a third party and reduce the same by making a provision for bad and doubtful loans and advances. ALP of the same under the comparable uncontrolled price method or other method would be NIL. Thus, even for this reason, we cannot accept the argument that TP adjustment should not be made merely because of reduction of receivables by making provision for doubtful loans and advances. As genuineness of the loans given and the subsequent provision made for the same is under question by the `Project Spirit report . In view of the above, we confirm the findings of the TPO in making the TP adjustment on interest free loans given to AEs. Fee Imputed on corporate guarantee extended to subsidiaries - Tribunal in assessee s own case for assessment year 2013-2014 [ 2022 (4) TMI 1408 - ITAT BANGALORE ] had reduced the rate of corporate guarantee commission to 0.5% of the corporate guarantee given - HELD THAT:- In view of the above order of the Tribunal in assessee s own case, which is identical to the facts of the instant case, we direct the TP addition to be restricted at 0.5% of the corporate guarantee given by the assessee to its subsidiaries. Purchase of raw material from Whyte Mackay - HELD THAT:- Since the facts raised is identical to the facts considered by the Tribunal in assessee s own case for assessment year 2013-2014 [ 2022 (4) TMI 1408 - ITAT BANGALORE ], we restore the impugned TP adjustment to the files of the AO / TPO. The AO / TPO is directed to decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. Disallowance u/s 14A - HELD THAT:- The Tribunal in assessee s own case for assessment year 2013-2014 (supra) by following the order of the Tribunal for assessment year 2012-2013 [ 2020 (6) TMI 135 - ITAT BANGALORE ] had restored the matter to the files of the AO to re-compute the disallowance u/s 14A - Thus we restore the issue of disallowance u/s 14A of the I.T.Act to the files of the AO. Disallowance of interest u/s 36(1)(iii) - as decided in assessee own case for 2013- 2014 [ 2022 (4) TMI 1408 - ITAT BANGALORE ] Tribunal directed the A.O. to examine whether the own funds of the assessee is in excess of the aggregate amount of interest free advances and in such event, the Tribunal held that no disallowance is called for - HELD THAT:- In view of the above order of the Tribunal, we restore the issue raised in ground 5 to the files of the AO. The learned AR has also pointed out that for the relevant assessment year the assessee has been charging interest (as per the amendment to the Companies Act, 2013) at the rate of 13% on advances made to its subsidiaries. This argument raised by the learned AR is also to be examined by the A.O. for the relevant assessment year and if the assessee is charging interest on the advances made during the relevant assessment year, no disallowance is called for u/s 36(1)(iii) of the I.T.Act in respect of the said advances. Disallowance of payments for promotion and advertisement expenses - HELD THAT:- In view of the order of the Tribunal for assessment year 2013-2014 [ 2022 (4) TMI 1408 - ITAT BANGALORE ] and 2012-2013 [ 2020 (6) TMI 135 - ITAT BANGALORE ] we direct the A.O. to grant deduction of sales promotion and advertisement expenses as a revenue expenditure. It is ordered accordingly. Disallowance of payment on Project Spirit Report - HELD THAT:- In the light of the above order of the Tribunal in assessee s own case for assessment year 2013-2014 [ 2020 (6) TMI 135 - ITAT BANGALORE ] which is identical to the facts of the instant case, we restore the matter to the A.O. The A.O. is directed to examine the issue afresh.

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• Benami Property

• 2023 (5) TMI 349
  Benami Transactions - Owner of joint family property and shares of the parties in various properties - validity of gift deed (a sham) - property purchased out of stridhana property - burden of prove - Rule of Succession - HELD THAT:- It is trite law that when a plea of benami is taken burden of proof lies on the person, who asserts so that the property is benami. In JAYDAYAL PODDAR (DECEASED) THROUGH HIS L. RS AND ANOTHER VERSUS MST. BIBI HAZRA AND ORS. [ 1973 (10) TMI 55 - SUPREME COURT ] speaking for the Bench, Justice R. S. Sarkaria succinctly, laid down the principle of law that It is well settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. Reliance also placed on BINAPANI PAUL VERSUS PRATIMA GHOSH AND ORS. [ 2007 (4) TMI 752 - SUPREME COURT ] referring to BHIM SINGH (DEAD) LRS. VERSUS KAN SINGH [ 1979 (12) TMI 158 - SUPREME COURT] as well as the four indicia laid down therein. It was observed by the Supreme Court of India in this case that the four factors should have to be considered cumulatively. The Court in this case considered the relationship of the parties, namely, husband and wife primarily motive of the transaction i.e. security for the wife and seven minor daughters as they were not protected by the prevailing law and the legal position at that material point of time. Coming to the present case it is averred in the original Plaintiff that the properties, namely, premises no. 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta were purchased by his grand-father Nani Gopal Dutt in benami, in the name of Rani Bala Dutt since deceased. Rani Bala Dutt was name lender only but actual ownership was that of Nani Gopal Dutt - Although it is stated by PW 1 that though it is not mentioned in the deed that property was purchased benami but they were aware of the fact that consideration money was paid by Nani Gopal Dutt. It is also stated by him that he was two years infant at the time of execution deed so personal knowledge cannot be put on him on the transaction. In course of cross-examination it is also conceded by him that he heard information from paternal uncle and thought consideration money relating to the documents was paid by Nani Gopal Dutt. Original testimony of PW 1 states that he was two years old at the time of execution of deed in respect of the premises; he has no personal knowledge therefore. He derived his knowledge about execution and payment of consideration money from his paternal uncle. There is no other proof that consideration money was paid by Nani Gopal Dutt. It is specifically stated by PW 1 that Nani Gopal Dutt did not transfer any money to Rani Bala Dutt as they were husband and wife - There is no evidence to show by any cogency the circumstances prevailing at the time of purchase of the properties or any intention of Nani Gopal Dutt to purchase the properties in the name of his wife. In absence of anything more the available evidence adduced on behalf of the original Plaintiff failed to establish, by preponderance of probabilities, that the property was purchased by Nani Gopal Dutt in the name of his wife in benami; that consideration money was paid by Nani Gopal Dutt and that Rani Bala is the only ostensible owner or name lender but the real owner of the Nani Gopal Dutt. Therefore, it is not established that the premises no. 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta were purchased by Nani Gopal Dutt in benami of his wife or that consideration money was provided by Nani Gopal Dutt. In absence of any cogent evidence it cannot be decided that Rani Bala Dutt was a benamdar and the real owner was Nani Gopal Dutt in respect of the two premises namely 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta. Property purchased by a woman with her stridhana - HELD THAT:- Property purchased by a woman with her stridhana and savings of the income of stridhana constitute stridhana according to all schools of Hindu Law, as discussed by Sir D. F. Mulla. It does not make any difference whether the property is immovable or not. There is no presumption that property of a woman who has no income should be actually that of her husband. This is the presumption which impressed too much the plaintiff s witness - it is the conclusion that the two premises namely 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta were owned by Rani Bala Dutt as her stridhana property. Rule of succession - HELD THAT:- There is no authority to suggest that the claim of the sons of a predeceased son is preferred to a son or daughter or are set on the same pedestal in matter of succession of stridhana property of a woman. When a son was living, the rights of the sons of a predeceased son do not come to the foreground or hold their sway. In nutshell, it is the conclusion that in absence of any daughter, it is the son who would inherit the stridhana properties of a woman. Therefore, the original Plaintiffs, being predeceased sons of the son of Rani Bala Dutt had no right, title or interest or right to succeed Rani Bala Dutt s srtidhana properties. These properties namely premises no. 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta do not form part of joint properties as between the original Plaintiffs and the Defendant. The original Plaintiffs are not entitled to any partition in respect of the properties located at premises no. 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta. The original Defendant Paresh Chandra Dutt being the surviving son of Rani Bala Dutt inherited her stridhana properties and the properties located at 26, Sitaram Ghosh Street as well as 31, College Row, Calcutta. Preliminary decree in respect of 8B, Nabin Pal Lane, Calcutta, 16, Beniatola Lane, Calcutta and 17, Beniatola Lane, Calcutta has already been drawn up. Since it is decided hereby that the properties located at premises no. 26, Sitaram Ghosh Street, Calcutta and 31, College Row, Calcutta do not form part of the joint properties as between the original Plaintiffs and the Defendant and that these two later properties should not be subject to the present partition suit, no further preliminary decree need to be drawn up - the suit should be fixed for hearing on the report of the Partition Commissioner and argument for passing final judgment. Fix 10/03/2023 for argument.

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• Customs

• 2023 (5) TMI 348
  Confiscation - gold bangles - gold biscuit - no foreign marking found on the seized gold - competence of officers of DRI to initiate the proceedings under Section 124 of Customs Act 1962 - time limit for issuance of SCN - Denial of right to cross examine the Expert who has given the certificate - Burden of proof - Denial of right to cross examine the Expert who has given the certificate - Retraction of statements of Appellant Rohit Kumar Suri and the Noticee Harshit Gatkhar - Penalty imposed under section 112 of the Customs Act 1962. Jurisdiction - competence of officers of DRI to initiate the proceedings under Section 124 of Customs Act 1962 - HELD THAT:- This issue has been settled by the decision of the Hon ble Madras High Court in the case of M/S. N.C. ALEXENDER VERSUS THE COMMISSIONER OF CUSTOMS, CHENNAI II COMMISSIONERATE, CHENNAI [ 2022 (6) TMI 723 - MADRAS HIGH COURT ] wherein the Hon ble Madras High Court has held that officers of the DRI were competent to issue Show Cause Notice under Customs Act 1962 after the amendments to Section 3 of Customs Act 1962, by Finance Act, 2022 - Thus, there is no substance in the argument of the Appellant and the Notice issued by DRI in this case is valid and legally sustainable. Time Limitation for issuance of SCN - HELD THAT:- Section 110(2) read with Section 124 stipulates that if no Show Cause Notice issued within 6 months of seizure of goods, the goods shall be returned to the person from whose possession the goods were seized. In the present case, the Adjudicating Authority has given a clear findings on this issue in the Order-in-Original. In the said Order, it is stated the investigation could not be completed within six months as it involved analysis of voluminous records related to smuggling of gold. It was not possible to issue the Show Cause Notice as stipulated under Section 110(2) of the Customs Act, 1962 i.e. within a period of six months from the date of seizure of the goods i.e. 90 Gold pieces of foreign origin and silver bar. Therefore, extension of time by another six months was sought from Commissioner, Customs (Preventive), NER, Shillong vide letter dated 09.11.2019 - the Commissioner of Customs (Prev) NER, Shillong has granted extension of time for issue of the Show Cause Notice for a period of six months from 16/11/2019. The Show Cause Notice in this case was issued on 04.09.2020 . Further, in view of COVID-19, Hon ble Supreme Court has allowed exclusion of the period from 15/03/2020 to 02/10/21 for computation of the period of limitation for any proceedings, which is applicable to quasijudicial proceedings like issue of Show Cause Notice also. Thus, the Notice issued on 04/09/2020 was not hit by the limitation. Seizure and subsequent confiscation - no foreign marking found on the seized gold - HELD THAT:- The gold bangles seized from Indigo airlines, does not have any foreign markings. They were claimed by Mr Karan Sehdev of KSTE that they have sent the raw gold for job work to M/S STM, Imphal. The gold was purchased by them from indigenous sources, but DRI Officers have not taken into account the evidences submitted by them about their legal purchase in India. The goods were dispatched along with an Invoice raised by the job worker. All these documents indicate that the raw gold was indeed received by M/S STM, Imphal from M/S KSTE, New Delhi for job work and they were dispatched after completion of the job work by M/S STM, Imphal. There is no evidence available on record to prove that the gold were smuggled from Myanmar. Except the statements of the Co Noticces, which were later retracted, there is no other evidence available to establish the smuggled nature of the gold - the gold jewellery which were dispatched under proper Invoice are not liable for confiscation. Burden of proof - HELD THAT:- As per Section 123 of Customs Act, 1962, the burden of proving that the goods are not smuggled, lies on the person from whose possession the goods were seized - The gold bangles 4960.090 grams sent vide invoice No. J0037 dt. 17.05.2019 to M/S KSTE by M/s. STM was seized by DRI on 17.05.2019. Thus, it reveals that this is not the first time M/S STM are processing the gold and returning the same back to M/S KSTE. On many occasions earlier M/s KSTE have sent gold to M/S STM and received them back after the job work. It cannot be presumed that all the gold jewellery sent after job work on earlier occasions were also made out of smuggled gold. The present consignment covered by Invoice no. J 0037 dated 17/05/2019 was part of the gold received earlier and returned back now after job work. The documents submitted by the Appellants clearly indicate that the gold were purchased from indigenous sources. The provisions of section 123 are not applicable to indigenously procured gold. The Appellants also relied upon the decision in the case of Balanagu Naga Venkata Raghavendra vs CC Vijayawada [ 2021 (2) TMI 612 - CESTAT HYDERABAD ] , where in it has been held that the burden under section 123 will not shift on the Appellants when the seizure of gold without foreign markings are seized from city. Thus, the burden under Section 123 of Customs Act, to prove that the gold is not smuggled one, does not lie on the Appellants, in this case. Denial of right to cross examine the Expert who has given the certificate - HELD THAT:- The purity of silver cannot be the basis to construe that the gold is of foreign origin. The claim of the Appellants is agreed upon. The purity of the gold alone cannot be a determining factor whether the gold is of foreign origin or not. As discussed in para 19 above, the Appellant has produced evidence to the effect that the gold were procured from domestic sources. Hence, we hold that no weightage can be given for the certificate of purity issued by the Expert, to establish its foreign origin. Retraction of statements of Appellant Rohit Kumar Suri and the Noticee Harshit Gatkhar - HELD THAT:- The Impugned Order mainly relied upon the statements of Rohit Kumar Suri and the Harshit Gatkhar to establish the foreign origin nature of the gold. Other than the statements, there is no other evidence available on record to show that the gold were smuggled into the country from Myanmar. The silver bar is of Indian origin. It is incorrect to rely only on the statements of the co-accused without any corroboration, to prove the smuggled nature of the gold. It is a settled law that the statement of the co-accused cannot be relied without any independent corroboration. The Tribunal in the cases of PR. COMMISSIONER OF CUSTOMS (PREV.) DELHI VERSUS SH. AHAMED MUJJABA KHALEEFA [ 2018 (5) TMI 1681 - CESTAT NEW DELHI ] dismissed the appeal of Revenue holding that jewellery not bearing any foreign marking other than statement of passenger no other proof produced by Revenue to substantiate the claim that jewellery were smuggled into India. Thus, the gold and silver bar cannot be confiscated based on the retracted statements alone. Penalty imposed under section 112 of the Customs Act 1962 - HELD THAT:- The Appellants stated that the gold was purchased from indigenous sources against statutory invoices. There is no evidence on record to show that the 90 gold bangles and silver bar were of foreign origin and smuggled into the country. In the absence of any evidence to establish that the gold and silver bar were smuggled ones, no penalty is imposable under Section 112 of the Customs Act 1962. Penalty under section 112(b)(i) of Customs Act, 1962 on various persons - HELD THAT:- Under section 112(b)(i) penalty is imposable when the person is found to be dealing with goods for which prohibition is in force. The gold bangles and the silver bar dealt by the Appellants were established to be of Indian origin and hence not prohibited goods. Rohit Kumar Suri and Harshit Gatkhar are employees of the Appellant STM. They have carried out the job work as directed by their employer Daleep Kumar Verma. The penalty provisions invoked against M/s. KSTE and its proprietor M/s. Karan Sehdev is legally not sustainable, as they have established that the gold sent by them to STM for job work was purchased from indigenous sources. There is no documentary evidence available on record to establish the role of Daleep Kumar Verma - penalty is not imposable on them under section 1129B)(i) of Customs Act, 1962. Since, the violations as alleged in the Show Cause Notice are not established, the confiscation of the above said items are not sustainable - the confiscation of 90 gold strips and silver bar are not sustainable. The confiscation of TVS Scooter, one lap top and some other items as mentioned in Sl. No 34,35 and 36 of the OIO, not sustainable. The penalties imposed on the Appellants as mentioned in Sl No 38, 39,40 and 41 of the OIO, not sustainable. Appeal allowed.

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• 2023 (5) TMI 347
  Refund in the case of seizure/ confiscated to be more than the money proceeds of the sale of the seized goods - proper jurisdiction to decide the matter - HELD THAT:- It is settled principle in law that refund claims filed under Section 27 of Customs Act is not limited to the refund of the customs duty but also provides for refund of the amounts due to the claimant for any reason. Refund of sale of the ceased/confiscated goods is one of such refunds provided by Section 27 of Customs Act, 1962. As per Section 27(2), it is only the Assistant Commissioner who could have consider the appeal for refund and decided. Matter remanded back to Commissioner (Appeal) for a finding on grounds raised in the appeal before him including the payment of interest on the amount refunded. Appeal allowed by way of remand.

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• 2023 (5) TMI 346
  Entitlement to duty-free imports of parts intended to be used in the manufacture of antenna subject to compliance with the procedure prescribed in Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996 - shifting / transfer of facility of manufacture - goods had been utilised in the manufacture of antennas cleared on payment of appropriate duties of central excise, or not - HELD THAT:- There can be no two opinions that the operating Rules have been framed for ensuring that the imported goods are not diverted and are utilised for the purposes of, and committed undertaking to, manufacture excisable goods on which duty liability is discharged appropriately. Deviation from the prescribed procedure carries with it the assumption of illicit deployment of non-duty paid imported goods. The lower authorities, lacking jurisdiction beyond their designated territories and not in any position to retain oversight implicit in the said Rules, are bound by the necessity of strict observance of the mandate therein which may be overlooked only at the cost of proper tax administration. The appellant, doubtlessly, has been derelict in not taking steps sufficiently in advance for compliance with procedure that would place the utilisation of the goods beyond the pale of suspicion. That the appellant had a not too pleasant relationship with the owner of the erstwhile premises does not appear to be an incorrect surmise; that the appellant had, in fact, moved manufacturing operations to another registered premises is also not in dispute - The appellant, also, is not incorrect in pointing out that there was no particular reason to discountenance the certificate issued by the Chartered Accountant. As noted by the original authority, the substantial difference between the facts in the present dispute and that in JCT Electronics Ltd [ 2010 (8) TMI 598 - PUNJAB HARYANA HIGH COURT ] is the approval of the jurisdictional authorities to the shift of manufacturing facility and the decision of the Tribunal, in re FDC Ltd, therefore, placed emphasis on the larger issue of compliance with the intention of law even if, in the process, procedural requirements may not have been faithfully followed. That the appellant had manufactured goods with the imported material and discharged appropriate duties of central excise thereon is not in dispute - There is, no doubt, about jurisdictional barriers that weighed with the lower authorities and understandably so. Matter remanded back to the original authority for a fresh decision after due ascertainment in accordance with the directions and, in acknowledgement of the pendency of this dispute for an overly long time, a time limit of six months is set from the date of receipt of this order for completion of the adjudication process - appeal allowed by way of remand.

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• 2023 (5) TMI 345
  Appellate remedy available to Revenue - Commissioner of Customs to act as Licensing authority and / or administrative exercise of power - Quantum of punishment - Breach of obligation on the part of Customs House Agent (CHA) - Licensing authority decided that the lesser of the two penalties would suffice - Penalty of forfeiture a security deposit of CHA - association with certain operators in the misuse of import export code (IEC) for import of heavily undervalued goods - HELD THAT:- In COMMISSIONER OF CUSTOMS (GENERAL) , MUMBAI VERSUS MUKADAM FREIGHT SYSTEMS PVT LTD [ 2017 (5) TMI 798 - CESTAT MUMBAI] , the Tribunal, on consideration of the special law that section 146 of Customs Act, 1962 is and the legislative intent therein while designating the Central Board of Excise Customs (CBEC) as the authority to frame appropriate Regulations, independent of the general power conferred elsewhere, held that As the sovereign Legislature has specifically empowered a separate appellate structure, the intent to deny the replication of the normal appellate remedy to the disciplinary authority against its own order is emphatic. We cannot countenance reading down the general provisions of review and appeal to apply to dropping of disciplinary proceedings against customs house agents in the face of specific and deliberate non-inclusion of such contingency in Section 146 of Customs Act, 1962 and the Regulations framed thereunder. It cannot be understood that the appellant-Commission is before the Hon ble High Court of Bombay against the order of the Tribunal in re Mukadam Freight Systems Pvt Ltd; however, to suggest that the Learned Authorised Representative argue by relying on what, probably, are grounds of appeal there the proposition that the Tribunal was in error, even as that is pending, is courage of sorts in demonstrating, as well as instigating, lack of judicial discipline. It would also appear that the appellant-Commissioner has also not grasped the essential difference between an adjudicatory and administrative exercise of power. As an adjudicating authority, the Commissioner of Customs weighs the submissions of an assessee vis - vis the interests of the State expressed in legislative enactment; ultimately, it is the detriment to the State that is, statutorily, scrutinized by the reviewing authority and, thus, the empowerment of an authority higher than the adjudicator being designated to pursue appellate remedies that it cannot administratively interfere in - it is inappropriate for the appellant - Commissioner to claim that, despite the ruling on lack of jurisdiction vested in the Committee of Chief Commissioners to direct appeal against orders of the licensing authority, the merit of the present appeal should be considered as though in challenge to an adjudication order under Customs Act, 1962. There are no reason to entertain this appeal - appeal dismissed.

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• Insolvency & Bankruptcy

• 2023 (5) TMI 344
  Rejection of Resolution Plan - while rejecting matter remanded to the committee of creditors with directions to the resolution professional to proceed from the stage of publication of Form G , and invite the expression of interest afresh as per the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - ineligibility in terms of Section 88 of the Indian Trusts Act, 1882. Valuation: Regulations 27 and 35 - HELD THAT:- It is at once clear that the members of CoC were fully satisfied with and endorsed the process of valuation and even re-evaluation as undertaken by the resolution professional. Particularly, the minutes of second, fourth, sixth and seventh CoC meetings stand testimony to the fact that the requirements of Regulation were scrupulously followed and complied with and there had not been any doubt in CoC as regards the process of valuation as also supplying of fair and liquidation value to the members of CoC. The detailed findings of the Adjudicating Authority in this regard (reproduced in paragraph 15.1.1. hereinabove) make it clear that the Adjudicating Authority independently applied its mind to the process of valuation and presentation of the matter to CoC. Rejection of all the objections in that regard by the NCLT, called for no interference. The Appellate Tribunal appears to have unnecessarily and rather unjustifiably presumed that there had been blatant statutory violations and irregularities. Even if certain issues were raised in some of the meetings of CoC as regards the process of valuation, the clarifications from the resolution professional and the steps taken by him for valuation and re-valuation had been to the satisfaction of CoC. It has rightly been contended on behalf of the appellants with reference to the decision in Maharashtra Seamless [ 2020 (1) TMI 903 - SUPREME COURT ] that resolution plan is not required to match the liquidation value as such - The findings of the Appellate Tribunal in regard to the question of valuation and thereby taking the resolution plan to be in contravention of Sections 30(2) and 61(3) of the Code cannot be approved and are required to be set aside. Publication of Form G: Regulation 36-A - HELD THAT:- It has rightly been contended on behalf of the resolution professional that Form G was published in all leading newspapers on 09.08.2020 and then, IBBI was also informed about technical issues in uploading the Form on the website. The Adjudicating Authority has also rightly observed that a statutory provision regulating a matter of practice or procedure would generally be read as directory and in the present case, no prejudice has been shown by anyone as regards technical non-compliance of all the requirements of publication. Even if principles of res judicata are as such not applied, fact of the matter remains that at the given stage, the process as undertaken by the resolution professional had been consistently approved by CoC, Adjudicating Authority and the Appellate Tribunal. Even otherwise, as observed hereinabove, there had not been any such illegality or material irregularity for which the entire process would have been considered vitiated. The findings of the Appellate Tribunal in this regard too, cannot be approved and are required to be set aside. Effect of Section 164(2)(b) Companies Act - HELD THAT:- Even if there had been any possibility of the resolution applicant incurring such a disqualification in terms of Section 164(2)(b) of the Companies Act, because of alleged default of another company, in which he is a director, to refund the share application money, the same would essentially be a matter of consideration of the registrar of companies. Unless a categorical finding was recorded in the competent forum as regards any such default and unless specific order disqualifying the resolution applicant as director because of such default came into existence, it could not have been taken by way of any process of assumption that the appellant-resolution applicant was disqualified to act as a director and thereby, was ineligible to submit a resolution plan. It has rightly been pointed out that when DIN status of the appellant was active compliant , he could not have been treated as ineligible. Again, it has been too far-stretched on the part of the Appellate Tribunal to refer to the Rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 and then to make a declaration as if the resolution applicant was disqualified in terms of Section 164(2)(b) of the Companies Act. Although, we do not agree with the submissions on behalf of appellant that such an issue of eligibility could not have been raised before NCLAT for the first time because the question of eligibility of the resolution applicant goes to the root of the matter but, we do agree with the other part of the submission in this regard that there is no concept of deemed disqualification under Section 164(2)(b) of the Companies Act - the Appellate Tribunal had not been right in holding the resolution applicant ineligible by virtue of Section 164(2)(b) of the Companies Act. Point C1 is answered accordingly. Effect of Section 88 Trusts Act - HELD THAT:- In view of the claim made by the resolution applicant himself, coupled with the fact that in CIRP in question, two resolution plans were submitted by this appellant, one in individual capacity and another as managing director of the said trust, it is difficult to detach him from the said resolution applicant-Sri Balaji Vidyapeeth. Hence, it cannot be said that the Appellate Tribunal committed any error in observing that the appellant was attempting to act as alter ego of the said ineligible applicant (the trust); and the benefit from his own (individual s) resolution plan cannot escape the operation of Section 88 of the Trusts Act. Even if the appellant would assert that his financial capability was independent of trust money, the fact of the matter remains that he projected the overall picture of his own profile while also relying on his status as Managing Trustee of the said trust, Sri Balaji Vidyapeeth. Thus, any pecuniary advantage gained by him under the resolution plan in question would be directly subsumed by operation of Section 88 of the Trusts Act. This would, in all practical purposes, bring about a position that what could not be done directly for the said trust was sought to be done by the appellant by way of this indirect methodology. The Appellate Tribunal has rightly held the resolution plan being in contravention of the provisions of law for the time being in force. Observations and findings of the Appellate Tribunal in paragraphs 106 to 112 of the impugned order dated 17.02.2022 (reproduced hereinabove in paragraph 19.4.2.) deserve to be and are approved. Effect of Section 166(4) Companies Act - HELD THAT:- Section 166(4) of the Companies Act prohibits a director of a company from involving himself in a situation in which he may have a direct or even indirect interest that conflicts, or may possibly conflict, with the interest of the company. Given the status of the resolution applicant as Managing Director of MGM Healthcare Private Limited, his dealing with property of the corporate debtor and converting the same into a hospital cannot be said to be having no impact on the activities of the said MGM Healthcare Private Limited. A direct conflict of interest being writ large on the face of the record, it cannot be said that the prohibition in terms of Section 166(4) does not operate and the resolution plan does not stand in contravention of any of the provisions of law for the time being in force. For this reason too, in our view, the appellant-resolution applicant could not have been accepted as eligible applicant. Revision of resolution plan after approval by CoC - HELD THAT:- Commercial wisdom of CoC is given such a status of primacy that the same is considered rather a matter non-justiciable in any adjudicatory process, be it by the Adjudicating Authority or even by this Court. However, the commercial wisdom of CoC means a considered decision taken by CoC with reference to the commercial interests and the interest of revival of the corporate debtor and maximization of value of its assets. This wisdom is not a matter of rhetoric but is denoting a well-considered decision by the protagonist of CIRP i.e., CoC. These observations read with the observations in Essar Steel [ 2019 (11) TMI 731 - SUPREME COURT ] with reference to the reasons stated in the report of Bankruptcy Law Reforms Committee of November 2015, make it clear that commercial wisdom of CoC is assigned primacy in CIRP for it represents collective business decision, which is arrived at after thorough examination of the proposed resolution plan and assessment made with involvement of experts by the body of persons who are most vitally interested in rapid and efficient decision making. It follows as a necessary corollary that to be worth its name, the commercial wisdom of CoC would come into existence and operation only when all the relevant information is available before it and is duly deliberated upon by all its members, who have direct and substantial interest in the survival of corporate debtor and in the entire CIRP. The requirement of CIRP Regulations, particularly of placing the resolution plan in its final form before the CoC, has to be scrupulously complied with. No alteration or modification in the process could be countenanced. We say so for the specific reason concerning law that if the process as adopted in the present matter is approved, the very scheme of the Code and CIRP regulations would be left open-ended and would be capable of inviting arbitrariness at any level. The minor procedural aspects which we have held to be not of material bearing hereinbefore and this aspect pertaining to approval of financial resolution plan by CoC stand at entirely different footing. The irregularity in the process of approval by CoC and filing before Adjudicating Authority are not the matters of such formal nature that deviation in that regard could be ignored or condoned. As stated above, when commercial wisdom of CoC is assigned primacy, it presupposes a considered decision on the resolution plan in its final form. The disapproval of the resolution plan by the Appellate Tribunal for want of presentation of final resolution plan before CoC remains unexceptionable and calls for no interference. Increase of fees of resolution professional - HELD THAT:- The CoC had precisely deliberated over the question of increase of fees of resolution professional and its decision in that regard could not have been correlated with any shortcoming in the process undertaken, which might have occurred for want of an erroneous assumption on the part of the resolution professional in view of the contents of minutes of ninth CoC meeting dated 22.01.2021 - when the resolution plan was to be revised so as to make provision for dissenting financial creditors, the financial outlay was going to be altered and it ought to have been placed before CoC again but, it is too far-stretched to connect this irregularity with the increase of fees of the resolution professional. The findings and observations of the Appellate Tribunal against resolution professional in this regard deserve to be set aside. The matter concerning related party - HELD THAT:- There are no reason to discuss this matter any further when it is noticed that the promoter and erstwhile director, the contesting respondent before us, has been holding the position of Chairman of the said related party. Suffice it would be to observe for the present purpose that the Appellate Tribunal has erred in applying the principles of non-discrimination and thereby holding against the resolution plan in question for want of provision for related party. NCLAT s findings regarding settlement offer of promoter - HELD THAT:- The proposal in question was forwarded for consideration only at the eleventh hour, i.e., a day before CoC was to vote on the resolution plan in its ninth meeting. The CoC, in the said meeting, indeed, took into consideration the proposition of settlement and application for withdrawal request letter, which was circulated two hours before the meeting. The creditors with significant voting shares such as SBI and Bank of India were clear in their stand that they would stick to the agenda and would not deviate therefrom. The resolution professional had to request the representatives of the corporate debtor to allow the agenda items to go through as per the wishes of the majority of CoC and no further discussions were to be made on the letter sent to CoC. When the substantial majority of CoC was not in favour of such discussion which was proposed to be thrusted on them only a few hours before the meeting, their approach cannot be faulted at - When the creditors with substantial voting share were against any such proposal, any consideration was clearly ruled out and there could not have been any valid application for withdrawal. Thus, the Appellate Tribunal has erred in holding that the settlement offer of the promoter in terms of Section 12-A was not placed for consideration of CoC. Approval of resolution plan in question could not have been reversed on this count. However, as noticed hereinbefore, approval of the resolution plan in question could not have been endorsed by the Appellate Tribunal because of other substantial reasons. Impact and effect of subsequent events - HELD THAT:- When the resolutions plans had been received at the earlier stage, only at the eleventh hour, the settlement proposal came up. This time too, the settlement proposal came up from the promoter only after resolution plans had been received. Prior to it, his proposal had already been rejected. It gets perforce commented that the representative of the corporate debtor being a part of CoC, such proposer is obviously in a position to know about the propositions in the resolution plans when received in response to invitation - when it is found that the settlement proposal of the promoter, after approval of CoC, for invoking the provisions of Section 12-A of the Code, is pending before the Adjudicating Authority, in our view, it shall be in the fitness of things that all the relevant aspects of the matter are left open for consideration of the Adjudicating Authority, including those relating to the justification for invoking Section 12-A after issuance of fresh invitation for EOI and after receiving resolution plans. In other words, we would leave all the relevant aspects open for consideration of the Adjudicating Authority in accordance with law while keeping in view the observations of this Court. Summation Thus, the disapproval of the resolution plan in question by the Appellate Tribunal (NCLAT) in the impugned order dated 17.02.2022 is not to be interfered with but, not for all the reasons which weighed with the Appellate Tribunal. The reasons and findings of the Appellate Tribunal in relation to the valuation process and alleged non-compliance of some of the procedural provisions as also the observations against increase of fees of resolution professional (points A, B and D2) are not to be approved. Similarly, the Appellate Tribunal has not been right in holding the resolution applicant ineligible to submit a resolution plan with reference to Section 164(2)(b) of the Companies Act, 2013 (as held in point C1). The disapproval by the Appellate Tribunal, with reference to the settlement offer of promoter in terms of Section 12-A of the Code, and its purported non-consideration is also not approved by us and such findings of the Appellate Tribunal are required to be set aside (as held in point F). Similarly, the Appellate Tribunal has erred in applying the principles of non-discrimination in relation to the related party (as held in point E). However, the other findings in relation to points C2, C3 and D1 and the consequential order passed by the Appellate Tribunal deserve to be approved. Putting it in different words, we are clearly of the view that even while respecting the commercial wisdom of CoC, in the present case, the resolution plan in question could not have been approved by the Adjudicating Authority for two major reasons: one, for the ineligibility of the resolution applicant; and second, for not placing of the revised resolution plan in the CoC before seeking approval from the Adjudicating Authority. Of course, on the questions relating to the valuation reports, and want of publication of Form G on the website, we are at one with the Adjudicating Authority that these aspects were not of material bearing in the process in question and the resolution professional had taken reasonable steps as permissible in law and feasible in the circumstances. Similarly, we are not inclined to endorse the views of the Appellate Tribunal regarding the treatment of related party in the resolution plan as also regarding the settlement offer of the promotor; and the process in that relation cannot be said to be suffering from any illegality. Appeal disposed off.

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• 2023 (5) TMI 343
  Initiation of CIRP - period of limitation - date of default - application dismissed solely on the ground that the claim was barred by limitation - HELD THAT:- At the outset, it is required to be noted that, in fact, the appellant herein, who claimed to be `Operational Creditor raised 187 different invoices for the Digital Classroom Solution Services provided for the period between 12.03.2011 and 30.06.2017. The amount under different invoices were unpaid, which gave rise to the appellant to initiate the proceedings under Section 9 of the IBC before the NCLT. The NCLT considering the starting point of limitation as 12.03.2011 held that the claim is barred by limitation. However, the NCLT did not take into consideration the subsequent invoices at least preceding three years from the date of filing of Section 9 application, which ought to have been considered. Under the circumstances, the NCLT ought to have considered the invoices at least for the period preceding three years from the date of the application under Section 9, rather than considering the starting point of limitation as 12.03.2011. Under the circumstances, the order(s) passed by the NCLT and affirmed by the NCLAT are unsustainable - the view taken by the NCLT that the claim is barred by limitation is unsustainable. The impugned judgment and order(s) passed by the NCLT and that of the NCLAT dismissing/rejecting application under Section 9 of the IBC on the ground that the claim is barred by limitation are hereby quashed and set aside and now the matter is remitted to the NCLT to consider Section 9 application afresh in accordance with law and on its own merits - Petition allowed.

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• 2023 (5) TMI 342
  Extension of time period provided for CIRP proceedings - whether the period of 180 days should have been further extended for the purpose of accepting/awaiting the proposal made by the Appellant for the purpose of keeping the Corporate Debtor as a going concern? - HELD THAT:- It is found that sufficient time was given to the Appellant for this purpose on their own asking because it has been recorded in the 5th meeting of the CoC The Chairman found that in the previous COC meeting the erstwhile directors of the corporate debtor have informed to the CoC that they will submit revise OTS (One time Settlement) proposal to the financial creditor namely Punjab National Bank till 13.03.2020, and as per information available with Resolution Professional as the said revised one time settlement proposal has not been submitted to the bank till date and the CIRP period will be expiry on 18.03.2020 . The Appellant has miserably failed to make the proposal of the amount of Rs. 7.30 Crore along with upfront of Rs. 80 lakh before 13.03.2020 which was the committed date. Be that as it may, the Corporate Debtor had rather sent an email through Ravi Vaishnav of Mayur Xerox Centre (third party) dated 16.03.2020 with the proposal along with copy of two DD dated 16.03.2020 of Rs. 40 lakh which was not the upfront amount of Rs. 80 lakh, therefore, it was rightly not found to be authentic and sufficient to establish that the Erstwhile Directors were really interested in the resolution of the dispute rather it has been, thereafter, recorded in the 5th CoC meeting that there has been a continuous effort on the part of the Erstwhile Director of the Corporate Debtor to delay and frustrate the proceedings in one manner or the other. There are no bonafide intention on the part of the Appellant - appeal dismissed.

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• 2023 (5) TMI 341
  Rejection of Section 7 application filed by the Financial Creditor - rejection on the ground that application is barred by Section 10A - date of invocation of bank guarantee against the Corporate Debtor - Whether the default on the part of the Corporate Debtor i.e. Corporate Guarantor can be on any date prior to when the guarantee was invoked is the question to be considered? HELD THAT:- The question as to when the default on part of the Guarantor is to considered has been decided by this Tribunal in a recent judgment in POOJA RAMESH SINGH VERSUS STATE BANK OF INDIA, ESSEL INFRAPROJECTS LTD. THROUGH THE RESOLUTION PROFESSIONAL MR. KAIRAV ANIL TRIVEDI [ 2023 (5) TMI 17 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI ], where it has been held that default on the part of the Corporate Guarantor shall be held to have been committed only when guarantee was invoked, when Deed of Guarantee itself mentions issue of demand notice by the Bank. The issues which have been raised in the present appeal are fully covered by the judgment in Pooja Ramesh Singh vs. State Bank of India . The Guarantee Deed contemplates demand by the bank, hence, unless demand is made by the bank to the Corporate Debtor, no default can be said to have been committed by the Corporate Guarantor and in the present case, demands for payment were invoked in the period covered under Section 10A. The date of default by the Guarantor shall arise only when demand is issued by the Bank to the Corporate Guarantor. The fact that the Corporate Guarantor has given indemnity to the Bank also shall operate only after default is committed by the Guarantor. Indemnity can be enforced against the Corporate Guarantor but it cannot itself change the date of default on part of the Guarantor. When the invocation of the bank guarantee is admittedly within the period of 10A, the Application which is based on invocation of guarantee is clearly barred by 10A. One of the submission pressed by learned counsel for the Appellant is that even after 10A period was over, no payments were made and default still continues, hence, the application could not have been rejected - HELD THAT:- When application filed under Section 7 was based only on the default which was committed during the 10A period, the Adjudicating Authority did not commit any error in not entertaining the application. The application was not based on any default which is committed subsequent to 10A period, hence, such question does not arise. There is no good ground to entertain this Appeal - Appeal dismissed.

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• Service Tax

• 2023 (5) TMI 340
  Non-payment of service tax - Commercial or Industrial Construction Service - HELD THAT:- Most of the repair, renovation, construction work undertaken by the appellant is primarily for Vadodara Municipal Seva Sadan, M.S. University and for police department. These organisations are in no way concerned with any Commercial of Industrial activity and therefore, the activity undertaken by the appellant will fall under the exclusion clause of the definition for the Commercial or Industrial Construction Service. The tribunal in the case of KHURANA ENGINEERING LTD. VERSUS COMMR. OF C. EX., AHMEDABAD [ 2010 (11) TMI 81 - CESTAT, AHMEDABAD] where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition Personal Use in the explanation to definition of residential complex service. The service provided by the appellant are to establishments and organizations which are of non commercial or non industrial nature and therefore, the construction, renovation, repair work undertaken by them fall under the exclusion of the definition of Commercial or Industrial Construction Service hence, we hold that the appellants are not liable to pay any service tax on such activity - it is found that they have also done some work for commercial organizations in some of the Financial years however, the value of such work is within the threshold limit of the exemption and therefore, the same also does not fall under the category of the service tax levy and therefore, it is held that no service tax is leviable. The impugned Order-In-Appeals are without any merit - appeal allowed.

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• 2023 (5) TMI 339
  Determination of service tax liability - deposit insurance premium collected by the appellants DICGC - premium amount collected by DICGC has to be necessarily considered as inclusive of service tax element or not - period October, 2011 to March, 2012 and April, 2012 to September, 2012 - determination of interest payable by the appellants DICGC for the delay in payment of service tax on the due date - refunds sanctioned twice, not rectifying the mistake apparent on record. Levy of service tax on the deposit insurance activity undertaken by the appellant DICGC - HELD THAT:- On examination of the provisions of the DICGC Act, 1961, it was clarified by the CBIC vide letter No.354/164/2008-TRU dated 24.02.2009 that DICGC is not taxable under the taxable service of general insurance business ; this view was reiterated by CBIC letter dated 22.04.2009. However, after the re-examination of all the relevant issues, the CBIC by letter dated 20.09.2011 clarified that the deposit insurance activity of DICGC falls within the ambit of section 65(105)(d) of the Finance Act, 1994 and is chargeable to Service Tax under General Insurance Business - the appellants DICGC are required to pay service tax on the taxable service of deposit insurance with effect from 20.09.2011. Whether the insurance premium should be considered as cum-tax-value? - HELD THAT:- The matter is no more res integra in view of the various decisions taken by this Tribunal, which were also upheld by the Apex Court. In particular, it is found that Kolkata Bench of CESTAT in the case of COMMR OF C. EX CUS., PATNA VERSUS ADVANTAGE MEDIA CONSULTANT [ 2008 (3) TMI 59 - CESTAT KOLKATA] has held that Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged. The plea advanced by the department on the issue of cum-tax-value of premium collected for deposit insurance by the appellants DICGC, that such treatment of gross amount of premium collected by appellants DICGC as inclusive of service tax will tantamount to reduction in premium amount which is solely decided by the Reserve Bank of India and the appellants DICGC does not have any unilateral authority to alter the rate of premium to be collected from the insured banks and they have to obtain the prior approval of the RBI, has been found to have been overcome by specific approval of the RBI as follows - appellants DICGC are eligible for the cum tax benefit. In view of this, we do not find any grounds for interfering with the conclusion arrived at in the impugned order passed by the Commissioner of Central Excise (Appeals), LTU, Mumbai that premium amount collected has to be necessarily considered as inclusive of the service tax element . Whether interest payable by the appellants for the delay in payment of service tax on the due date, require determination in terms of service tax legislation; and whether such amount of interest is required to be redetermined? - HELD THAT:- The facts of the case have been shown with respect to the ST-3 returns filed by the appellants DICGC and hence there exist reasonable ground for accepting the arguments advanced by the appellants DICGC. However, there are no other records such as invoice, receipts, online transactions summary, statement of accounts of the appellants DICGC for establishing the dates on which the payments were made by various banks towards deposit insurance premium that was collected by the appellants as gross amount of taxable services. In order to arrive at a conclusion on the correct date on which the service tax is due to be paid as per the provisions of Rule 6 of Service Tax Rules, 1994, with certainty upon confirmation of the facts, the matter should go back to the original Appellate Authority i.e., Commissioner of Central Excise (Appeals), LTU, Mumbai. Whether findings made by the Commissioner of Central Excise (Appeals), LTU, Mumbai in the impugned order, in respect of claims made by the appellants on appropriation of the refunds sanctioned twice, not rectifying the mistake apparent on record, require redetermination by the Commissioner of Central Excise (Appeals), LTU, Mumbai? - HELD THAT:- Considering the legal position in respect of Section 11 of the Central Excise Act, 1944 providing for recovery of sum due to the Government has not been made specifically applicable to service tax matters under Section 83 of the Finance Act, 1994 and the factual position that the show cause notice proceedings has not been concluded and thus there were no confirmed demands on the date of passing of the order by the concerned Assistant/Deputy Commissioner, even to consider under Section 87 of the Finance Act, 1994, the first appellate authority cannot be found fault - The appellants DICGC may be given liberty to raise any issues before the Commissioner of Central Excise (Appeals), LTU, Mumbai, when the matter is remanded for denovo adjudication. Further, while taking up the matter in denovo proceedings for redetermination of the interest payable for actual delay in payment of service tax, the appellants DICGC shall be given reasonable opportunity of being heard in person and for submission of the relevant documents in support of their claim - the matter needs to be sent back to the first appellate authority, to determine the actual amounts of refunds of service tax payable to the appellants DICGC. Appeal disposed off.

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• 2023 (5) TMI 338
  Maintainability of appeal - extended period of limitation - whether the show cause notice (SCN) has been rightly issued invoking the extended period of limitation? - period of dispute is October 2014 to June 2017 - revenue neutrality - HELD THAT:- The issues involved in the SCN are wholly interpretation in nature. Further it is found that out of the demands raised of tax, the major part of demand in respect of GTA service, the situation is revenue neutral as the appellant is entitled to Cenvat credit on payment of service tax in cash. Further, it is found that the only allegation in SCN for invocation of extended period of limitation is that the afore-mentioned omissions came to light in the course of audit, but for which tax would have escaped. It is found that such allegations do not stand, as admittedly appellant have deposited the tax and accepted the audit objection, prior to issue of SCN. The extended period of limitation is not available to Revenue for issue of SCN on 30.04.2020 - appeal allowed.

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• 2023 (5) TMI 337
  Classification of Services - Cargo Handling Services or Goods Transport Agency service - transporting coal in tipping trucks including loading of coal into said trucks and in some cases loading into Contractor s tipping trucks by the contractor s pay loaders - HELD THAT:- Cargo Handling Service has not been defined in the Act but is defined in Circular No. B11/1/2002-TRU, dated 01-08-2002 as the services of transporting coupled with loading, unloading, packing, unpacking can be called as Cargo Handling Service if those are done by the authorities as that of Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations etc. Apparently and admittedly the appellant herein is none of these kinds of companies. Hon ble Supreme Court also while discussing the case of THE DEPUTY COMMISSIONER, CENTRAL EXCISE ANOTHER VERSUS SUSHIL COMPANY [ 2016 (4) TMI 987 - SUPREME COURT ] has appreciated the said circular holding that Well known examples of cargo handing service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. The Hon ble Supreme Court has accepted Hon ble High Court interpretation to the Entry viz. Cargo Handling Service wherein it was observed that there must be a cargo i.e. a packed or unpacked commodity accepted by a transporter or carrier for carrying the same from one destination to another. It is only after the commodity becomes a cargo, its loading and unloading at the freight terminal for being transported by any mode becomes a cargo handling service, if it is provided by an independent agency and the service provider must independently be involved in loading unloading or packing-unpacking of the cargo. The decision of the Hon ble Supreme Court in the case of SINGH TRANSPORTERS VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR [ 2012 (7) TMI 566 - CESTAT, NEW DELHI ] squarely covers this issue - The issue involved therein was whether the coal transported from pitheads of the mines to the railway sidings would fall within the taxable service as defined under Section 65(105)(zzzy). Though the service in question in the said case was whether it was a mining service but the outcome is relevant for the present adjudication wherein it was held that the aforementioned activity is an activity as that of transportation of goods. Larger Bench decision of the Tribunal rendered in the case of ATMA STEELS PVT. LTD. AND OTHERS VERSUS COLLECTOR OF CENTRAL EXCISE, CHANDIGARH AND OTHERS [ 1984 (6) TMI 60 - CEGAT, NEW DELHI ] it was held that once the provisions has been changed, then the existing provisions at the time of issue of show cause notice should be applicable and not the earlier provisions. It is found that in a catena of decisions it has been held the demand can be confirmed only as per the provisions that exist at that time. Hence, the show cause notice issued and adjudicated on the basis of the provisions existing during the period prior to the disputed period, cannot be upheld - appeal allowed.

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• 2023 (5) TMI 336
  Refund claim - time limitation - applicability of section 73A of Finance Act, 1994 - amalgamation of two entities - recipient of some taxable service had, with retrospective effect from 1st April 2013, been subsumed in the provider of some taxable service and, thereby, immunized, as service rendered to itself is, from liability to tax, refund of the amounts discharged was claimed - HELD THAT:- While the inapplicability of section 73A of Finance Act, 1994 is built upon the proposition of erasure of any other person receiving service by deeming of the provider and recipient to be the same through retrospective legislation or, as in the present instance, through retrospective effect of law placing it, thereby, beyond even the pale of that taxation which, by specific deeming in law reverses the flow of commercial engagement, there is an incidental argument of Learned Counsel that appellant had not been placed on notice before the provision was invoked to their detriment - There is no doubt that the observation of the Tribunal therein does seem to suggest as much but, that merely appears to be intended, in a particular context, as exposition for laying the groundwork for the substantive finding that disallowance of the claim for refund therein by discarding the very submissions made by the claimant would overwhelm any representation that procedural infirmity is fatal to the proceedings when such notice is superfluous to the entire exercise. Section 73A of Finance Act, 1994 is a special provision to forestall undue deprivation of recipient of service at the hands of provider of service by contriving of tax measure but, essentially, it places burden of compliance on the person who, vis- -vis the recipient, is proxy for the State and empowers recovery in the event of non-compliance. It is surely not intended as enablement for transforming tax revenue received in the Consolidated Fund of India to that of deposit for disposition in any manner detailed therein - a careful perusal of section 11B of Central Excise Act, 1944 elicits the conclusion that option for rejection of claim for refund of tax that was not payable at all is not contemplated therein; the only substantive alternatives before the competent authority are to credit the Consumer Welfare Fund by default unless, subject to compliance with the specified circumstances, return of the amount to the claimant is justified. Rejection is contingent only upon satisfaction on the part of the statutory authority that tax liability is mandated by law and, that too, preceded by notice of intent not to sanction refund. The appellant sought to impose a date of effect well before the elapse, contemplated in the several decisions supra, to obviate the potential for disruption of the intended timetable. There are no doubt that that amalgamation is effective from 1st April 2013 but, in our view, the retrospective effect will impact only such aspects as are incorporated in the scheme of amalgamation. The scheme involves transfer of undertakings from transferor to the transferee while obliterating the former and the statutory process is envisaged to provide life to the cutting , i.e., the undertaking, while it is yet under graft on another artificial person, viz., transferee. In the process, any aspect of the undertaking that has an existence beyond the date of placement before the jurisdictional High Court is connected to the life support and hence the imperative of retrospective acknowledgement of such. Thus, any transaction that creates liability or generates an asset in the books of the transferor is afforded the privilege of artificial life - tax liability discharged before the actual date of approval of amalgamation under Finance Act, 1994 pertains to existence as separate persons and, therefore, not immunized therefrom. The assessed liability under Finance Act, 1994, duly discharged and being neither provisional nor tentative, is beyond the scope of re-determination of levy merely because of a scheme of amalgamation. Appeal dismissed.

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• 2023 (5) TMI 335
  Refund of CENVAT Credit - Business Auxiliary Service - export of service - denial of benefit of refund, holding that the appellants have not exported the technical service namely, Technical Testing Service, and accordingly, no refund benefit shall be available in respect of the service tax paid on the input services - period of dispute in the present case is prior to June, 2012 - HELD THAT:- An entirely identical issue for the earlier period in appellant s own case came before this Tribunal and Tribunal in M/S PPD PHARMACEUTICAL DEVELOPMENT (I) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI- (VICE-VERSA) [ 2016 (12) TMI 1234 - CESTAT MUMBAI ] had allowed the appeals in favour of the appellants by relying upon the judgement of Hon ble Bombay High Court in the case of COMMISSIONER OF SERVICE TAX, MUMBAI-III VERSUS M/S. SGS INDIA PVT. LTD. [ 2014 (5) TMI 105 - BOMBAY HIGH COURT] . On a query from the Bench as to whether the said order of the Hon ble High Court has been further appealed against by Revenue, learned Authorised Representative submitted that he has no knowledge regarding filing of further appeal before the Hon ble Apex Court. Since the issue arising out of the present dispute is no more open for any debate in view of the judgement THE COMMISSIONER OF SERVICE TAX-V VERSUS M/S. PPD PHARMACEUTICALS DEVELOPMENT (I) PVT. LTD. [ 2018 (8) TMI 1692 - BOMBAY HIGH COURT ] in the case of appellants themselves, where the issue is entirely identical to that of the issue involved in the present case, there is justification to concur the views expressed by the learned Commissioner (Appeals), for a decision contrary to the orders passed by both this Tribunal as well as by the Hon ble Bombay High Court. There are no merits in the impugned orders, insofar as the adjudged demands were confirmed against the appellants - appeal allowed.

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• Central Excise

• 2023 (5) TMI 334
  CENVAT Credit - case of the department is that the GAR-7 challan is not the prescribed challan for availing the cenvat credit in terms of Rule 7 of Cenvat Credit Rules, 2004 - reverse charge mechanism - HELD THAT:- It is found that as per the undisputed fact of the case the service was received by the appellant, the invoices are in favour of the appellant. It is only the head office who paid the service tax under its centralized registration under GAR-7 challan. In this position, when the service was received by the appellant and service tax was undisputedly paid and particularly when the invoices are in favour of the appellant the credit cannot be denied. It is also not the case of the department that the part of the service was used by their other unit therefore, we do not see any reason why the cenvat credit should not be allowed to the appellant. As regard the availment of credit on the basis of GAR-7 challan, the challan is also a prescribed document under Rule 7 of Cenvat Credit Rules, 2004. Moreover, in case of payment of service tax under reverse charge mechanism the assessee pays the service tax on their own under GAR-7 challan therefore, the only document which is available for taking credit in respect of service tax under reverse charge mechanism is the GAR-7 challan only therefore, if the contention of the revenue is accepted then in every case of payment of service tax under Reverse Charge Mechanism, the assessee cannot avail the Cenvat credit which is not the provision under the law. Since the entire service was received by the appellant s unit and their invoice of the same was also issued by the service provider in favour of the appellant s unit the credit cannot be denied only on the basis that the Head Office has not issued the ISD invoice. The significance of ISD invoice is for the purpose that where the input service credit has to be distributed to more than one unit, the input service distributed invoice is required. However, in the present case, since entire service covered under the invoice of service provider was received and used by the appellant, there is no case of distribution of input service credit to any other unit except the appellant unit. Only for this reason also even though the ISD invoice was not issued, the credit cannot be denied. It is found that the adjudicating authority in the adjudication order dropped the demand not only on merit but also on limitation. From the perusal of the revenue s appeal before the Commissioner (Appeals) it is found that the revenue has not uttered a word as regard the dropping of demand on time bar therefore, the revenue has not made out any ground on limitation - the dropping of demand on limitation by the adjudicating authority has attained finality therefore, even if it is assumed that the demand on merit is tenable, the same is not maintainable on limitation. Accordingly, the demand is not sustainable on the ground of time bar also. The impugned order is set aside - Appeal is allowed.

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• 2023 (5) TMI 333
  Refund claim - time limitation - relevant date for grant of interest - interest for the period 2002 to November 2010 - interest for the period 30.11.2010 to October 2017 - HELD THAT:- From the facts as recorded in the order of the Commissioner appeal dated 28.03.2017 it is quite evident that issue before the Commissioner (Appeals) was in respect of the rejection of the refund claim filed by the Appellant assessee on 14.11.2006 consequent to the decision of Hon ble High Court of Bombay in RUBBERWOOD INDIA (P) LTD. VERSUS COMMISSIONER OF CUSTOMS (APPEALS), COCHIN [ 2006 (2) TMI 552 - CESTAT, BANGALORE] . Commissioner (Appeals) has held that the said refund claim is not barred by limitation. Though the appellant assessee had referred to the rejection of the refund claim made by them vide the letter dated 29.07.2002, by the original authority, the arguments made against such rejection did not find any favourable finding from the Commissioner (Appeal). This order is under challenge by the Revenue in appeal No E/86570/2017. Appeal filed by the appellant assessee needs to be adjudged in their favour holding that the relevant date for computing the interest under Section 11BB would be the date of acknowledgement of the application for the refund made under Section 11B (1) and not the date of submission of the documents - the issue involved in the remaining two appeals which are against the order dated 25.08.2020, is adjudged in the favour of appellant assessee and against revenue - appeal filed by the revenue challenging the grant of interest for the period from 30.11.2010 to October 2017 is dismissed.

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• 2023 (5) TMI 332
  Recovery of CENVAT Credit - job-worker - access of job-workers , contrived by payment of tax under Finance Act, 1994 that they are not obliged to, both before, and in, the negative list regime, to CENVAT Credit Rules, 2004 - Benefit of exemption under N/N. 8/2005-ST dated 1st March 2005 and N/N. 25/2012-ST dated 20th June 2012 - Capital goods that were not found in the premises of the principal manufacturers who had availed credit thereon under CENVAT Credit Rules, 2004 - HELD THAT:- The sequence of detriment leading to recovery of credit availed by the three principal manufacturers under rule 14 of CENVAT Credit Rules, 2004 is founded upon the imposition of mandatory acceptance of exemption from tax as provider of business auxiliary service and taxable service over the time span of dispute for which the adjudicating authority has drawn upon the manner in which exemptions under section 5A of Central Excise Act, 1944 are administered. From such determination, it was held that tax, having been collected without authority of law, is transformed as deposit contemplated in section 73A of Finance Act, 1994 and that, with the consequent erasure of documentation evincing supply of service, the principal manufacturers find themselves barred by rule 9 of CENVAT Credit Rules, 2004 from continued retention of credit. Presumption based on inferred inter-connection of job-worker and principal manufacturer cannot be the basis for determination of compliance with condition. Section 73A of Finance Act, 1994 comprises three elements: the requirement of depositing with the government any collection in excess of tax, or collection of tax not leviable, by such person of his own volition, empowerment of Central Excise Officer to place such person on notice and determine the amount so due, and the disposition of such amount so deposited culminating in refund to the person who has borne the incidence of such amount. It is plainly obvious from a bare reading thereof, that the said provision may be invoked only for recovery of such amounts as have not been deposited with the Central Government. It does not envisage such amount to be segregated from tax paid as a deposit in the manner accomplished by the adjudicating authority - The logical conclusion of invoking section 73A of Finance Act, 1994 would be the issue of public notice intimating eligibility of person who has borne the incidence of such amount for refund. The adjudicating authority, as Central Excise Officer contemplated in the provision, has not administered the mandate of law appropriately even if section 73A of Finance Act, 1994 could have been drawn upon. The consequence of such determination in the adjudication order has been the recovery of identical amount from the three principal manufacturers; the entitlement to refund of the amount, under section 73A of Finance Act, 1994, renders the entire exercise of adjudication, insofar as availment of credit of tax collected by the job worker is concerned, to be futile and in a circular loop. That is bizarre, if nothing else! Capital goods that were not found in the premises of the principal manufacturers who had availed credit thereon under CENVAT Credit Rules, 2004 - HELD THAT:- The decision of the Tribunal in ZENITH MACHINE TOOLS PVT. LTD. VERSUS COMMISSIONER OF C. EX., BELGAUM [ 2010 (4) TMI 481 - CESTAT, BANGALORE] has held that there is no dispute that the said capital goods are utilised by the job worker, it would lend support to the argument that there would be a revenue neutrality and the reversal of Cenvat credit would be revenue neutral as the appellant is entitled to take credit on such amount as soon as he receives the capital goods back from the job worker s premises. This being the case, I do not find any reason for reversal of the Cenvat credit on the capital goods which are found in the factory premises the job worker, who is undisputedly one of the group concerns of the appellant. Thus, it is seen that the consequence of non-return of the capital goods within the stipulated time is temporary reversal of the credit, taken initially on procurement, and to be restored upon the return, as and when it takes place, without any other consequence. The notice had been issued to the three principal manufacturers on the basis of physical inspection and, in the context of the limited and temporary deprivation of credit, it would have been inappropriate for the adjudicating authority to determine the deployment prevailing at the time of adjudication - The reversal of credit, claimed well before the issue of show cause notice, has not been controverted by tax authorities at any stage till now. Consequently, the demand of the same under rule 14 of CENVAT Credit Rules, 2004 is not tenable. Denial of credit to the ten job workers and consequent deeming of tax paid under Finance Act, 1994 as deposit in terms of section 73A of Finance Act, 1994 - HELD THAT:- The denial is not maintainable. With the tax having been properly discharged, there is no scope for denial of such amount as credit available under CENVAT Credit Rules, 2004 to the three principal manufacturers. The recovery of Rs. 5,65,95,738 from the three principal manufacturers for the period from April 2010 to March 2015 under rule 14 of CENVAT Credit Rules, 2014 lacks authority of law. The recovery of Rs. 64,76,017 of credit availed on capital goods under rule 14 of CENVAT Credit Rules, 2004, having already been reversed by the principal manufacturers, is redundant. The demand for appropriate interest and imposition of penalties also fails. Appeal allowed.

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• 2023 (5) TMI 331
  Refund claim - intermediate goods are cleared to another EOU for the purpose of use in manufacture of goods which are finally exported - applicability of Rule 5 of Cenvat Credit Rules in case of deemed exports - refund claim is hit by limitation as provided by Section 11B of the Central Excise Act, 1944 or not? - HELD THAT:- The issue whether Rule 5 of Cenvat Credit Rules, 2004 is applicable in the case where the intermediate goods are cleared to another EOU for the purpose of use in manufacture of goods which are finally exported whether Rule 5 of Cenvat Credit Rules is applicable to the case of deemed exports, is no more res integra - In the case of SV. BUSINESS PVT. LTD. VERSUS COMMISSIONER OF C. EX., THANE-I [ 2005 (10) TMI 171 - CESTAT, MUMBAI ], Tribunal has held that There is nothing in the said Rule 5 of Cenvat Credit Rules, 2001 to suggest that the goods must be directly cleared from the factory for export and even if the inputs are used in the manufacture of intermediate products and final products which are ultimately cleared for export, refund of Modvat credit would be admissible - thus, the refund claims filed cold not have been rejected on this count. Time Limitation - HELD THAT:- As per para 6 of N/N. 5/2006-CE(NT) dated 14.03.2006 specifically provides that refund claim has to be filed before the expiry of the period specified in section 11B of the Central Excise Act, 1944 (1 of 1944). As per Section 11B, time limit of one year has been prescribed for filing the refund claim which is evident from reading of Section 11B(1). The issue as to what should be the date from which the period of one year is to be computed has been decided by the Larger Bench of the Tribunal in the case of CCE CST, BENGALURU SERVICE TAX-I VERSUS M/S. SPAN INFOTECH (INDIA) PVT. LTD. [ 2018 (2) TMI 946 - CESTAT BANGALORE ] wherein the Tribunal has held that the period has to be counted from the end of the quarter to which the refund claim pertains. The relevant date needs to be considered from the end of the quarter - It is found that out of four refund claims under consideration, only the first refund claim for the amount of Rs.34,51,586/- for the period October 2009 to December 2009 has been filed beyond the period of one year as prescribed under Section 11B and would be hit by limitation. Other refund claims have been filed within the period of limitation - the refund claims for the quarters January 2010 to March 2010, April 2010 to June 2010 and July 2010 to September 2010 are admissible to the appellant whereas the refund claim for the quarter October 2009 to December 2009 is hit by limitation. The impugned order needs to be set aside in respect of the three quarters for which we have held that refund claims would be admissible - Appeal allowed in part.

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• 2023 (5) TMI 330
  Demand of Interest - amount received in terms of price variation clause for which the appellant has issued supplementary invoices - HELD THAT:- The issue is no longer res integra and has been decided by and is now covered by the decision of the Larger Bench of Hon ble Supreme Court in the case of Steel Authority of India Ltd. [ 2019 (5) TMI 657 - SUPREME COURT ]. Reference was made to the Larger Bench vide order reported at [ 2015 (12) TMI 594 - SUPREME COURT ] doubting the correctness of earlier orders passed in the case of SKF India Ltd. [ 2009 (7) TMI 6 - SUPREME COURT ] and International Auto Ltd. [ 2010 (1) TMI 151 - SUPREME COURT ]. The Larger Bench considered the issue and has held that The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Most significantly, Section 11A and Section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. Since the issue is squarely the same, there is found no justification to allow the appeal filed by the appellant, even though the same has been dismissed without consideration of the issue on merits for the reason that it was filed beyond the prescribed period for which the Commissioner (Appeals) could have condoned the delay. Appeal dismissed.

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• 2023 (5) TMI 329
  Levy of penalty imposed in terms of Rule 25(1)(d) of Central Excise Rules, 2002 - maintainability of appeal - HELD THAT:- After enhancement the total amount of penalty imposed on the respondent would be around Rs.52,98,386/-. Accordingly this preliminary objection not to be overruled. The respondent had deposited the entire duty along with interest on 15.02.2011 prior to issuance of show cause notice i.e. 05.08.2011. In such a situation respondent could not have been subjected to any penalty under Section 11AC as has been held by the Tribunal in the case of CCE C., AURANGABAD VERSUS MATSYODARI STEEL ALLOYS PVT. LTD. [ 2007 (7) TMI 183 - HIGH COURT BOMBAY ]. There are no merit in the appeal filed by the Revenue for imposition of penalty under Section 11AC of the Central Excise Act, 1944 - appeal of Revenue dismissed.

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• 2023 (5) TMI 328
  Method of Valuation - stock transfers made by the appellant to other parts distribution centres - stock is reversed under Rule 3(5) of Cenvat Credit Rules, 2004 - Revenue was of the view that, since appellant has undertaken certain processes amounting to manufacture they were required to pay duty on the value determined in respect of the goods which were cleared to other PDCs on the value as determined under Rule 8 of the Central Excise Valuation Rules - adjustment of the amounts paid by the appellant at the time of clearance of the impugned goods, which as per the revenue was paid under erroneous interpretation of law - demand for interest and penalty. HELD THAT:- It is quite obvious that the impugned goods on the basis of the processes undertaken by the appellant prior to packing, repacking etc., were the same as they were thereafter, for the application of the Section 2 f (iii) of the Central Excise Act, 1944, they would not fall within the definition of manufacture as understood in terms of the various pronouncements made by the Hon ble Supreme Court. Plain reading of Section 2 f (iii), makes it clear that as end result of these processes the goods should be marketable to the consumers. In the instant case, the goods were cleared by the appellant to other PDC on the stock transfer after reversal of the CENVAT Credit taken as per the Rule 3 (5) of the CENVAT Credit Rules, 2004. It is an admitted fact that the goods were not cleared for sale to the consumers on the basis of Retail Sale Price declared. It is only under Third Schedule of the Central Excise Act that Section 2(f)(iii) of the Central Excise Act is applicable declaring these processes undertaken to be the process of manufacture. Admittedly in the present case demand has not been made on the value as determined under Section 4A of the Central Excise Act. The impugned goods are undisputedly notified under Section 4 A (1) of the Central Excise Act, 1944. Since the goods were subjected to valuation under Section 4A they could not have been subjected to valuation in terms of Section 4 (1) (b) which provides for determination of value in the manner prescribed as per the Valuation Rules. Rule 8 under which the impugned order determines duty liability is part of the said Valuation Rules and would determine the value under Section 4 and not under section 4 A. In the present case, treating as the activity undertaken by the appellant did not amount to manufacture, appellant cleared the goods on reversal of the Cenvat credit taken by them in respect of these goods. The fact that the appellant had reversed the Cenvat credit as per Rule 3 (5) is not disputed. Revenue has also admitted the fact of reversal of CENVAT Credit as per Rule 3 (5), as per the report submitted to this Tribunal - the appellant has reversed more amount than the duty that has been sought to be demanded by the impugned order. The demand for duty if was to be made should have been made after adjusting the same against the credit amount reversed as has been held in M/S JINDAL STEEL POWER LIMITED VERSUS CCE, RAIPUR [ 2016 (10) TMI 870 - CESTAT NEW DELHI] . There are no merits in the demand of duty made, the demand for interest and penalty imposed also cannot be upheld - appeal allowed.

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• 2023 (5) TMI 327
  Benefit of Exemption - Supply of goods to UN/International Organisations or Projects - N/N. 108/95-CE dated 28.08.1995 - appellant was not directly selling the goods to Project Implementation Authority but clearing to the contractor or subcontractor of PIA - denial of benefit of notification on the ground that the certificate extending the validity of the certificate as described by the notification has not been signed by the two officers as per the notification, but only signed by the project director - HELD THAT:- There are nothing in the notification which requires the extension of the original certificate issued as per the condition b(ii) above. It is also not in dispute that the goods have been used in the manner as prescribed. By bringing in condition of extension of the said certificate, Commissioner has sought to insert certain conditions in the notification which do not exist. It is settled position in law that exemption notification needs to be interpreted according to the terms of the notification without any addition or deletion in the same. Reliance placed in the case of M/S. UTTAM INDUSTRIES VERSUS COMMNR. OF CENTRAL EXCISE HARYANA [ 2011 (2) TMI 4 - SUPREME COURT ] where it was held that Since the Tribunal and the authorities below have categorically held that the appellant does not satisfy the eligibility criteria on the basis of the evidence on record, therefore, we hold that the said exemption Notification is not applicable to the case of the appellants. Reliance can also be placed in the case of CC (PREVENTIVE), MUMBAI VERSUS M/S M. AMBALAL CO. [ 2010 (12) TMI 16 - SUPREME COURT ] where it was held that A construction which permits one to take advantage of one s own wrong or to impair one s own objections under a Statute should be disregarded. The interpretation should as far as possible be beneficial in the sense that it should suppress the mischief and advance the remedy without doing violence to the language. There are no merits in the impugned order and the same is set aside - appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (5) TMI 326
  Taxability - gutka/gutkha/guhtka - appellants argued that state legislatures were not empowered to levy sales tax on those articles, in view of the provision in the Constitution enabling the Union to levy additional duties of excise, and further that in any case, the rate of state tax cannot exceed the limit prescribed by the Central Sales Tax Act, 1956. HELD THAT:- Entry No. 2 of Part-J in the First Schedule to the ADE Act is similar to sub-heading 2404.49 - as amended from 01.03.2001. As a result, additional excise duty could be imposed on Pan Masala containing tobacco . As far as Kothari Products Limited v. Government of Andhra Pradesh, [[ 1997 (7) TMI 601 - ANDHRA PRADESH HIGH COURT] ] is concerned, a Full Bench of the (undivided) Andhra Pradesh High Court had examined the interface between the APGST Act, and the provisions of the CET Act, in the context of whether gudaku was subjected to sales tax levy, as the dealers had contended that it was tobacco, and therefore, exempt under the local law - The Full Bench ruling considered the local enactments, and sub-headings in Chapters 21 and 24 of the CET Act, and held that although gutkha falls within the term pan masala , since no additional duty of excise is levied on it, yet it could not be held that gutkha was exempt from state sales tax. It was held by the Full Bench of the Andhra Pradesh High Court [[ 1997 (7) TMI 601 - ANDHRA PRADESH HIGH COURT] ] that provisions of explanation of the Fourth Schedule to the APGST Act, with reference to the heads and sub-heads in the CET Act, what was relevant in ascertaining the real import of the expression chewing tobacco and preparations containing chewing tobacco was the breadth of the terms used in the entry, sub-heading or a notification, or statute. From that aspect, the court concluded that gutkha fell within the wide language of the said expression. However sub-heading 2404.40 Chewing tobacco and preparations containing chewing tobacco was a general sub-head. The court concluded that it is a settled rule of interpretation that a specific reference prevails over a general entry. Since the court held that gutkha fell within the meaning of pan masala in the sub-heading 21.06, there could be no doubt that pan masala was a specific sub-head even assuming that it falls within the meaning of chewing tobacco . Therefore, the court concluded that in view of the specific head pan masala in Chapter 21, that item was excluded from the general sub-head 2404.40 Chewing tobacco and preparations containing chewing tobacco . The court also concluded that though gutkha fell within the term pan masala in Chapter 21 under sub-head 21.06 yet as it is not subjected to additional duty, an essential condition envisaged by the explanation for claiming exemption, is lacking. Whether pan masala was an exempted item, being tobacco ? - HELD THAT:- It is noticeable that pan masala was expressly mentioned in Chapter 21 for the first time, in 1995 in the CET Act. Note 3 defined Pan Masala as any preparation containing betel nuts and any one or more of the following ingredients, namely lime, katha (catechu) and tobacco, whether or not containing any other ingredients . However, at the same time, Chapter 24 contained a specific entry tobacco which enumerated tobacco, manufactured tobacco, substitutes etc. The relevant sub-heading at that time was 2404.41 which enumerated chewing tobacco, including preparations commonly known as khara masala, kimam, dokta, zarda, sukha and surti. Thus, the CET Act itself made a distinction between pan masala - whether it contained tobacco, or not, and all forms of tobacco. Right from 1995, the distinction in the CET Act between pan masala (Chapter 21) and tobacco (Chapter 24), had been made. The definition of pan masala also clarified that despite one of its ingredients being tobacco, it would nevertheless be a separate article. On a plain application of the interpretive rules, especially Rule 3(a) it is clear that the heading which provides the most accurate description has to be followed. In the present case, there is no doubt, that before 2001, pan masala and gutkha fell within Chapter 21, as pan masala, regardless of whether they contained tobacco. Goods classifiable under Chapter 24, i.e. tobacco items were more general; also they did not include pan masala. Rate of tax - HELD THAT:- In view of the restrictions under Section 15 CST Act, neither gutkha nor pan masala were declared goods under Section 14 of the CST Act. The amendment to the CET Act did not become part of Section 14(ix). The goods under the relevant sub-headings of the CET Act were absent in the list of declared goods of the CST Act; they were not part of the provisions introduced to the Finance Act, 1988. Therefore, the subsequent changes made introducing 2404.40 in the CET Act do not affect or change the CST Act. Consequently gutkha and pan masala are not covered under sub-heading 2404.40 so far as CST Act is concerned. Resultantly the arguments of the assessees that the rate of local tax, cannot exceed the limit under the CST Act, are rejected as unmerited. The appeals by the assessees have to fail. The revenue s appeals are consequently allowed.

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• 2023 (5) TMI 325
  Levy of penalty u/s 51(7)(b) of the Punjab VAT Act - evasion of tax or not - Designated Officer was of the view that the documents were not genuine and there had been an attempt to evade tax - HELD THAT:- In the impugned order as well, it has been observed that the goods were being brought into Punjab by M/s Mundawala Enterprises of Abohar and goods were meant for trade. Merely on the ground that the information with respect to goods carried in the vehicle has not been given before the Officer Incharge of the check post or ICC, the impugned order could not have been passed. This issue has already been considered by this Court in Shree Ram Panel s case [[ 2011 (8) TMI 1027 - PUNJAB AND HARYANA HIGH COURT] ] where it was held that mere non-reporting at the ICC. Banur and not making declaration in the prescribed form could not lead to conclusion that there was violation of Section 51(4) of the Punjab Value Added Tax Act with a view to do an attempt to evade tax. In the present case, except for giving information to ICC, all other documents shows that the appellant was not attempting to evade tax. Penalty set aside - petition allowed.

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• Indian Laws

• 2023 (5) TMI 324
  Dishonour of Cheque - Funds Insufficient - Signatory of Cheques - vicarious liability of Directors - whether Directors signing the resolution i.e. Vipul Kant Upadhyay and Amit Kumar Gupta shall be fully collectively or individually responsible for repayment of the loan and other dues? - HELD THAT:- As per loan agreement no. 3143 dated 20.09.2016, the accused company through its directors i.e. the aforesaid petitioners had obtained loan to the tune of Rs. 55,00,000/- for a period of 30 months and in lieu thereof, had agreed to issue 29 EMI cheques in favour of complainant. Similarly, as per loan agreement no. 3112 dated 23.04.2016, the accused company through its aforesaid petitioners had obtained loan to the tune of Rs. 35,00,000/- for a period of 24 months and in lieu thereof, had agreed to issue 23 EMI cheques in favour of complainant. The present petitioners i.e. Vipul Kant Upadhyay and Amit Kumar Gupta were the two Borrowers in the loan agreements and the said agreements also bear the signatures of both these petitioners. The Demand Promissory Notes and their Receipts have also been executed and signed by these petitioners. The petitioner Vipul Kant Upadhyay was also one of the guarantors in these loan agreements. Moreover, he was the Managing Director of the accused company at the time of entering into the loan agreements and issuing several cheques. Even if the plea of learned counsel for petitioners that blank signed cheques or post-dated cheques were misused by the complainant is concerned, in this context, it will be relevant to take note of the decision of Hon ble Apex Court in BIR SINGH VERSUS MUKESH KUMAR [ 2019 (2) TMI 547 - SUPREME COURT ] where it was held that If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This in itself would not invalidate the cheque. The onus would still be on the accused to prove that the cheque was not in discharge of a debt or liability by adducing evidence. The material on record also shows clearly that the petitioner Amit Kumar Gupta was a Whole-time Director of the accused company at the time of entering into the transactions with the accused company and it is not the case of petitioner that he was any non-functional or independent director, not concerned with the affairs of the company. As inferred prima facie from the loan agreement, the cheques in question were issued as post-dated duly signed cheques with the knowledge and consent of the said petitioner and he had also executed all the relevant documents for the purpose of obtaining loan from the complainant. Ground that petitioners Vipual Kant Upadhyay and Amit Kumar Gupta had resigned before the date of issuance of cheque - HELD THAT:- Firstly, the copies of Form DIR-12 placed on record are not the certified copies issued by the Ministry of Corporate Affairs. Secondly, as already observed in preceding discussion, the complainant has carved out the specific role of these petitioners in obtaining loans, executing loan agreements as well as in signing and issuing cheques in question. The veracity of the allegations and the genuineness of the documents pertaining to alleged resignation of these petitioners before the dishonor of cheques cannot be tested at this stage before this Court and the same has to be decided on the basis of relevant documents and evidence to be produced at the stage of trial - If the plea of petitioners is accepted that since they were not a part of the accused company at the time when cheques were dishonoured, proceedings against them be quashed at the outset, it would in fact, amount to throttling the trial by snatching away the right of respondent to examine during before the Court, the signatory of the cheques as well as signatory of the loan agreements, board resolutions and other documents in that regard. Considering the overall facts and circumstances of the case, this Court is of the opinion that there was sufficient material on record before the learned Magistrate to issue summons against the petitioners herein. The role of each petitioner in commission of offence, if any, can become clear only during the course of trial, and cannot be examined in detail by this Court while exercising jurisdiction under Section 482 Cr.P.C. - this Court finds no reasons to interfere with the impugned summoning orders passed by learned Magistrate. Petition dismissed.

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• 2023 (5) TMI 323
  Dishonour of Cheque - vicarious liability of the Director of the company - petitioner had resigned more than a month prior to even issuance of cheque in question - issuance of summons to petitioner in such case is valid or not? - HELD THAT:- The issues regarding date of resignation, including as to whether or not or when the resignation letter was actually sent to Board of Directors, or as to when were the details qua resignation updated on the MCA website are all triable issues, especially in view of lack of certain relevant documents as discussed in preceding paras, in the present case. The material placed on record by the petitioner is not sterling incontrovertible material or unimpeachable material to show that petitioner was not involved either in day to day activities of the company or had no role in issuance of cheque in question - this Court does not find it a fit case to quash the summoning order dated 24.04.2018 passed by learned Metropolitan Magistrate at the very threshold. The present petition stands dismissed.

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• 2023 (5) TMI 322
  Validity of Arbitral Award - activity of providing storage godowns to store goods - appellant contended that the Arbitrator after having held that the claim for rental charges is outside the scope of the Agreement, ought to have invoked Section 70 of the Contract Act and ordered for compensation of the appellant for the rental/storage charges - HELD THAT:- The extent of judicial scrutiny under Section 34 of the Act is limited and the scope of interference is narrow. Under Section 37 of the Act, the extent of judicial scrutiny and scope of interference is further narrowed down - An appeal under Section 37 is more or less akin to a second appeal, the first appeal being to the Court by way of objections under Section 34 of the Act. Where there are concurrent findings of facts and law, the Appellate Court would be very cautious and reluctant to interfere into the findings returned in the Award by the Arbitral Tribunal and confirmed by the Court under Section 34 of the Act. The consolidated rate as fixed under the Annexure will not be subject to any escalation and considering the Clauses in the Agreement, there is no scope for the claimant to make any new claim under any head for whatsoever reason. This finding was rendered by the Arbitrator by taking into consideration Clause 2 and Clause 6 of the Agreement. On carefully going through the same, the appellant has been given the absolute responsibility to take delivery of the goods from the nominated godowns of FCI, arrange for the transportation of the goods after weighment, ensure the safety of the goods and accept full responsibility in respect of the goods and indemnify the 1st respondent for any loss or damages to the goods, to protect the consignment from damages during transportation, stocking and loading into the ship at the port, to arrange for the temporary storage of the goods in godown at port before loading into the vessel and to make all arrangements to bring back the goods rejected by the Surveyor to the godown belonging to MMTC. The Arbitrator while dealing with this issue has held that the storage in godown before the goods are loaded in the port, is the responsibility of the appellant and it cannot be called as an additional work as claimed by the appellant. The Arbitrator has also taken into consideration Clause 6 which deals with the rates fixed and payable by the 1st respondent. This Clause makes it clear that there shall be no escalation of the consolidated rates agreed for whatsoever reason. The Arbitrator also took into consideration, the Annexure to the Agreement which provides for item wise rates fixed. The Arbitrator has come to a conclusion that there were deliberations between the parties before the rates were fixed and that is the reason why Clauses 2.15, 6.1 and 6.8 were incorporated in the Agreement and hence, there is no scope for the appellant to claim compensation beyond what has been fixed under the Agreement. The Arbitrator has given a finding to the effect that the claim made by the appellant goes beyond the scope of the Agreement. This finding cannot be read in isolation and it must be read along with the other reasonings given by the Arbitrator - The learned counsel for the appellant was not right in interpreting the same as if the storage charges fell beyond the scope of the Agreement and hence, Section 70 of the Contract Act will apply and consequently, the appellant will be entitled for restitution of the storage charges. In the considered view of this Court, while exercising the jurisdiction under Section 37 of the Act, this Court is only expected to see if the finding rendered by the Arbitrator and as confirmed by the District Judge under Section 34 of the Act, is a possible and plausible interpretation of the terms of Agreement. This Court holds that the terms of the contract has been construed in a reasonable manner and the Award passes muster. Just because an alternative view on facts and interpretation of contract exists, that can never be a ground for interfering with an Award - there is no need for this Court to go into the other issue pertaining to the applicability of Section 70 of the Contract Act. This issue will arise for consideration only if this Court holds that the appellant has done extra work/additional work which is not founded in the Agreement. Hence, the interpretation given to Section 70 of the Contract Act qua the Principle of Quantum Meruit by the Arbitrator, does not require a finding in this appeal. This Court does not find any ground to interfere with the Award passed by the Arbitrator and as confirmed by the District Court under Section 34 of the Act - Appeal dismissed.

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