TMI Tax Updates - e-Newsletter
May 16, 2023

Case Laws in this Newsletter:

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

Articles

1. Practicing CA_CS_CMAs under the scanner with new amendment in PMLA

   By: Vivek Jalan

2. How to handle GST Return Scrutiny Notice-ASMT-10?

   By: Sandeep Saini

3. FILLING THE CASUAL VACANCY OF INDEPENDENT DIRECTOR CAUSED BY REIGNATION OF INDEPENDENT DIRECTOR OF OVER 75 YEARS OF AGE

   By: DR.MARIAPPAN GOVINDARAJAN

4. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

News

1. India’s overall exports in April 2023 estimated at USD 65.02 billion; a positive growth of 2 percent.

2. India and EFTA take further steps towards a new Trade and Partnership Agreement (TEPA)

Notifications

GST - States

1. F.12(11)FD/Tax/2023-Pt-I-17 - dated 13-5-2023 - Rajasthan SGST

Seeks to implement e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 5 Cr.

2. 514/XI-2-23-9(47)/17-T.C.214-U.P.Act-1-2017-Order-(272)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

AMNESTY TO GSTR-10 NON-FILERS

3. 513/XI-2-23-9(47)/17-T.C.213-U.P.Act-1-2017-Order-(271)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

RETIONALISATION OF LATE FEE FOR GSTR-9 AND AMNESTY TO GSTR-9 NON-FILERS

4. 512/XI-2-23-9(47)/17-T.C.212-U.P.Act-1-2017-Order-(270)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

AMNESTY SCHEME FOR DEEMED WITHDRAWAL OF ASSESSMENT ORDERS ISSUED UNDER SECTION 62

5. 511/XI-2-23-9(42)/17-T.C. 66-U.P.GST Rules-2017-Order-(274)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

Uttar Pradesh Goods and Services Tax (Sixtieth Amendment) Rules, 2023

6. 510/XI-2-23-9(47)/17-T.C.211-U.P.Act-1-2017-Order-(269)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

EXTENSION OF TIME LIMIT FOR APPLICATION FOR REVOCATION OF CANCELLATION OF REGISTRATION

7. 509/XI-2-23-9(47)/17-T.C.210-U.P.Act-1-2017-Order-(268)-2023 - dated 24-4-2023 - Uttar Pradesh SGST

AMNESTY TO GSTR-4 NON-FILERS

Highlights / Catch Notes

GST

• Court Dismisses Petition Challenging New Tax Audit Despite Prior Section 74 Proceedings; Insufficient Grounds Presented.

  Case-Laws - HC : Audit by Tax Authorities - petitioner already been subjected to the proceedings of adjudication u/s 74 - nothing has been pleaded as may lead this Court to a conclusion that the audit directed is either not permissible or is not warranted, either in view of earlier proceedings suffered by the petitioner under Section 74 of the Act, or otherwise. Plainly facts pleadings to assail the audit (as directed), are missing. - Petition dismissed - HC
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• Court: GST Refund Valid with Digital Signatures per Rule 26, Physical Signatures Not Mandatory for Approval.

  Case-Laws - HC : Refund of GST - declarations were not signed in physical mode - Though non-submission of refund application along with the declarations as required under the law would certainly be illegal and that may, in appropriate case, entail rejection of the application, however, if declarations, as in the present case, are digitally authenticated in the manner prescribed under Rule 26 of the CGST Rules of 2017, non-submission of physically signed and scanned declarations may only be an irregularity, but not an illegality. - Refund to be allowed - HC
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Income Tax

• High Court Remands Black Money Act Case for Reconsideration Due to Lack of Due Diligence in Section 10 Proceedings.

  Case-Laws - HC : Proceedings initiated u/s 10 of Black Money Act - additions by treating the petitioner as a beneficial owner of Company - Proceedings under BM Act entails serious civil and criminal consequences. The two transactions noted above, show that there is no proper application of mind both at the stage of sending the information by the Income Tax Department and by the Authorities under BM Act before issuing the notice under challenge. - Matter restored back - HC
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• Sale Consideration from Shares Deemed Undisclosed Funds; Tax Levy u/s 115BBE Upheld by Assessment Officer.

  Case-Laws - AT : Undisclosed income - Bogus share transactions - Levy of tax u/s.115BBE - A.O had in clear and unequivocal terms observed that the sale consideration, was infact the routing back of the undisclosed fund of the assessee through the medium of transaction of sale of shares, therefore, it can safely; or in fact inescapably be concluded that the same was the assessee’s unexplained money u/s.69A - Order of AO confirmed - AT
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• Assessee argues for consistent tax treatment on foreign exchange losses, referencing past accepted ECB gains.

  Case-Laws - AT : Addition of foreign exchange loss - for the earlier years, assessee earned income on reinstatement of ECB and the same was duly offered to tax and the same was accepted by the assessing officer during the assessment proceedings. - when the Revenue is accepting the gains, the same treatment should be given to the loss - AT
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• Penalty u/s 271(1)(c) Invalid: Taxpayer Voluntarily Paid Tax and Submitted Income Details Before Notice Issued.

  Case-Laws - AT : Penalty u/s 271(1) (c) - assessee voluntarily deposited the tax along with the computation of income in response to the said notice u/s 133(6) - Since, the assessee participated in the assessment proceeding, has paid the tax, and filed the computation of income before issue of notice u/s. 148 levy of penalty is not sustainable - AT
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• Assessee's Books Rejected for Bogus Sales; No Double Taxation Allowed; Consistent GP Ratio Maintains Deletion of Additions.

  Case-Laws - AT : Rejection of books of accounts u/sec 145(3) - assessee made bogus sales of rice - The assessee cannot be taxed doubly in same amount which was already declared in the return of income. The ld. AO has already calculated the GP ratio @ 11.87% - But there is no separate addition was made. We find the continuity in the GP ratio in the preceding and succeeding years with impugned assessment year of the assessee - Additions deleted - AT
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Customs

• No Penalty Imposed u/s 114 of Customs Act for Godown Owner; Lack of Evidence on Contraband Involvement.

  Case-Laws - AT : Penalty u/s 114 of the Customs Act, 1962 - Penalty on the owner of the godown where goods were reportedly loaded - from the statement of the Appellant herein which nowhere shows that the Appellant was involved in purchase/sale of contraband goods. There is nothing on record to suggest that the Appellant has forged or fabricated documents and/or aided the owner of the goods in illegal export of the said goods. - No penalty - AT
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Indian Laws

• Cheque Dishonor Case Against HG Retail Dismissed Due to No Demand Notice u/s 138 of Negotiable Instruments Act.

  Case-Laws - HC : Dishonour of Cheque - Given the absence of a demand notice served upon the company HG Retail, which constitutes the drawer of the cheque as the principal accused, the mandatory steps outlined in Section 138 of the NI Act have not been duly adhered to. Consequently, the complaint under section 138 NI Act is not maintainable and is bad in law. - HC
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IBC

• NCLT Admits CIRP Application Despite Bank Guarantee Issues; Appellant's Conduct Insufficient for Section 7 Rejection.

  Case-Laws - SC : Initiation of CIRP - NCLT admitted the application - Power of NCLT to refuse the application - Refusal of banks to extend the Bank Guarantees of the Corporate debtor - , there is no finding recorded in the interim order that the Corporate Debtor is not liable to pay the dues. The interim order only prevents coercive action against the Corporate Debtor - Even assuming that NCLT has the power to reject the application under Section 7 if there were good reasons to do so, in the facts of the case, the conduct of the appellant is such that no such good reason existed on the basis of which NCLT could have denied admission of the application u/s 7 - SC
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Central Excise

• Accountant Cleared of Penalty u/r 209 A for Routine Tasks; Not Involved in Yarn Valuation Decisions.

  Case-Laws - AT : Levy of penalty Personal Penalty on accountant - The appellant was only an accountant who was doing normal accountancy work. The issue of valuation of captively consumed yarn is a matter of the interpretation and therefore the penal provision of Rule 209 A of Central Excise Rules, 1944 cannot be invoked against the person who is only involved in maintaining the accounts of the company. - AT
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• Reversal of Cenvat Credit Allowed Despite Non-Filing of Option Letter u/r 6(3A)(a) Before 2016 Amendment.

  Case-Laws - AT : Proportionate reversal of credit in respect of common input service in terms of Rule 6(3A)(a) of Cenvat Credit Rules, 2004 - It is seen that even prior to Rule 6 (3AA) coming into effect from 01/4/2016, they have been taking the view that mere non filing of the option letter should not be used to deprive the assesssee from reversing the proportionate Cenvat Credit. - demand set aside - AT
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Case Laws:

• GST

• 2023 (5) TMI 593
  Levy of GST - grant of mining lease/royalty - petitioner has vehemently urged that the royalty payment is tax and not consideration in the context of the privilege parted by the State allowing the petitioner and others to mine sand - HELD THAT:- Similar controversy is engaging the attention of the Supreme Court in M/s Lakhwinder Singh vs. Union of India Ors. in Writ Petition (Civil) No. 1076 of 2021 [ 2021 (11) TMI 336 - SC ORDER ]. On 04.10.2021, the Supreme Court has held that Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed. Until further orders, payment of GST for grant of mining lease/royalty by the petitioner shall remain stayed.

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• 2023 (5) TMI 592
  Refund of GST - Rejection on the ground of time limitation - Circular bearing No. 162/18/2021-GST dated 25.9.2021 - HELD THAT:- Circular bearing No. 162/18/2021-GST dated 25.9.2021 was issued by the CBIC on the subject/clarification in respect to refund of tax specified in Section 77(i) of the CGST Act and Section 19(i) of the IGST Act. Earlier, vide Notification No. 35/2001-Central Tax dated 24.9.2021, Sub-Rule (1A) of Rule 89 of CGST Rules 2017 has been inserted - the relevant CBIEC had extended a benevolent provision for extension of limitation of refund in case of wrong deposit. Petition allowed.

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• 2023 (5) TMI 591
  Provisional attachment of Bank Accounts - it is alleged that petitioner is a non-existing person and has not cooperated in the investigation - HELD THAT:- It is clear from the plain language of Section 83(2) of the CGST Act that the operation of an order provisionally attaching the bank account would cease to be operative after the expiry of the statutory period of one year. The impugned order dated 13.01.2021 has ceased to be operative. Since the impugned order is no longer operative, no orders are required for setting aside the same - Petition disposed off.

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• 2023 (5) TMI 590
  Seeking concession of regular bail - sale of Resin in cash, without issuing tax invoices - evasion of tax - HELD THAT:- The petitioner is accused for the commission of offences under CGST Act, which are triable by the Magistrate and the maximum punishment prescribed for the alleged offences is upto 5 years, which would be dependent on the quantum of tax evasion. The trial is at the stage of pre-charge evidence, hence, there is no likelihood of the trial concluding in the near future. Therefore, further incarceration of the petitioner in the aforesaid facts and circumstances would serve no useful purpose. Accordingly, the present petition is allowed. The petitioner be admitted to bail to the satisfaction to the trial Court/Duty Magistrate concerned.

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• 2023 (5) TMI 589
  Audit by Tax Authorities - Exercise of jurisdiction under Section 65 of UPGST Act, by way of necessary implication - petitioner already been subjected to the proceedings of adjudication under Section 74 of the U.P.G.S.T Act, 2017 - HELD THAT:- There is no material shown to exist that any earlier audit had been permitted or directed under Section 65 of the Act and insofar as plain reading of the provisions do not suggest any bar in exercise of that power, if the assessee had faced any earlier proceedings under Section 74 of the Act with respect to Input Tax Credit, excess claimed, there is no inherent legal infirmity shown to exist in the audit having been directed, keeping in mind the language of the statute. As to facts, nothing has been pleaded as may lead this Court to a conclusion that the audit directed is either not permissible or is not warranted, either in view of earlier proceedings suffered by the petitioner under Section 74 of the Act, or otherwise. Plainly facts pleadings to assail the audit (as directed), are missing. No good ground is made out to offer any interference in exercise of extra ordinary jurisdiction under article 226 of the Constitution as that jurisdiction may be exercised if a legal injury is shown to exist, that too caused contrary to the provisions of law. Petition disposed off.

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• 2023 (5) TMI 588
  Refund of GST - only reason assigned by the Appellate Authority to declare the sanction for refund as illegal is that declarations were not signed in physical mode before it could be scanned and uploaded through electronic mode - HELD THAT:- A reading of the provisions of Rule 89 of the CGST Rules of 2017 would show that there is no specific requirement that the declaration must necessarily be signed in physical mode. A conjoint reading of the provisions contained in Rule 26 and Rule 89 of the CGST Rules of 2017 leaves no manner of doubt that as far as requirement of law is concerned, it does not mandate that even after having authenticated a document in the manner prescribed under Rule 26 of the CGST Rules of 2017, insofar as declarations (as sought in the present case) are concerned, they are also required to be signed in physical mode before being scanned and uploaded through electronic submission along with the application for refund. It appears that by administrative instructions, i.e. Circular dated 18.11.2019 (Annexure-10), such requirement has been added. Though non-submission of refund application along with the declarations as required under the law would certainly be illegal and that may, in appropriate case, entail rejection of the application, however, if declarations, as in the present case, are digitally authenticated in the manner prescribed under Rule 26 of the CGST Rules of 2017, non-submission of physically signed and scanned declarations may only be an irregularity, but not an illegality. The impugned order passed by the Appellate Authority upsetting the order of refund passed by the Adjudicating Authority is not sustainable in law. Therefore, impugned order rejecting claim of refund and depriving the petitioner of the refund to which it may be entitled, without any authority of law, cannot be allowed to be sustained - Petition allowed.

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• Income Tax

• 2023 (5) TMI 587
  Miscellaneous Application preferred by the Revenue - Reopening of assessment after assessments passed under 153A and 153C dismissed - Hon ble Court may clarify that the waiver of limitation as stipulated in section 150(2) is to be read in respect of the date of issue of notice for reassessment under section 148 (i.e.) if as on the date the assessment under section 153A or section 153C was passed, a notice under section 148 could have been issued as per the law then in force, then fresh proceedings for reassessment of such income not arising from the incriminating material found in search can now be initiated pursuant to the findings of this Hon ble Court in the present appeals/application - even though the appeals of the Revenue are dismissed in respect of assessments passed under 153A and 153C the assessing officers would be entitled to reassess such income in terms of Section 147/148 read with section 150. HELD THAT:- As the prayers sought can be said to be in the form of review which requires detail consideration at length looking into the importance of the matter. Therefore, the present application in the form of clarification is not entertained and we relegate the Revenue to file an appropriate review application for the relief sought in the present application and as and when such review application is filed the same can be heard in the open court. The present application is not entertained and we relegate the Revenue to file an appropriate review application seeking the reliefs which are sought in the present application and as and when such review application is filed the same be heard and decided and disposed of in the open court. We relegate the Revenue to file an appropriate review application.

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• 2023 (5) TMI 586
  TDS u/s 195 - Deduction of tax at source - assessee, a company incorporated in India, was a wholly owned subsidiary of a company incorporated in the Netherlands - HELD THAT:- In view of the fact that it has been specifically found that the assessee in the present case (company in India) is held to be not liable to deduct the tax at source, no interference of this Court is called for against the impugned judgment and order passed by the High Court. However, the question of law, if any, on interpretation of Section 195 is kept open. High Court has observed that as the assessment proceedings in the case of foreign company are reopened and therefore if the final view taken is that the VOAMC is assessable to tax, the assessees herein would also be treated as assessee in default, which would attract the consequences provided under Section 40(a)(i) - Once the assessees herein are held to be not liable to deduct the tax at source at all merely because subsequently the foreign company VOAMC is held liable to be taxed in India, the assessees herein cannot be treated as assessees in default. Even the aforesaid is on surmises and conjectures. Whatever the consequences on the pending proceedings against or initiated by VOAMC pending in the Madras High Court, the necessary consequences shall follow. However, at present the observations made in paragraph 25 of the impugned judgment and order that in case the assessment proceedings in VOAMC which are reopened are held to be against the VOAMC and VOAMC is liable to be taxed in India, the assessees herein would also be treated as assessees in default, the same is hereby quashed and set aside with the above observations. The present appeals preferred by the assessees are hereby allowed to the aforesaid extent. TDS u/s 195 - Deduction of tax at source - HC [ 2010 (8) TMI 1172 - DELHI HIGH COURT] confirmed order of [ 2010 (3) TMI 167 - DELHI HIGH COURT] stating assessee was not liable to deduct tax at source u/s 195(1) in respect of the mobilization and demobilization costs reimbursed by the appellant to VOAMC - HELD THAT:- SLP disposed of.

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• 2023 (5) TMI 585
  Validity of reopening of assessment u/s 147 - reopening beyond period of four years - computation of capital gain - HELD THAT:- We are not inclined to interfere with the impugned judgment for the reason that in this case the reopening is after four years and it is apparent that the assessee had made discloser of payment and deduction of Rs.3.6 crores while computing capital gains in the regular assessment proceedings. SLP dismissed.

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• 2023 (5) TMI 584
  Revision u/s 264 - PCIT rejected the revision on the ground that as the writ petition, filed by the assessee against the order passed initiating reassessment proceedings u/s 143 (3)/147 as pending consideration, in view of the provisions of Section 264 (4) (a) no order can be passed u/s 264 - HELD THAT:- From perusal of Sub-section (4) (a) of sec 264 it is clear that Principal Commissioner or Commissioner shall not revise any order which is under challenge in case where an appeal against the order lies to the Deputy Commissioner (Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal. This Court finds that the order passed by the AO/ITA initiating the reassessment proceedings against assessee was subject to challenge before this Court in which the writ Court had categorically held that the pendency of the writ petition will not cause any embargo or fetter on the part of the concerned authority to proceed in accordance with law. The finding recorded by the respondent no. 1 as to the extent that in view of the provisions of Section 264 (4) (a) of the Act of 1961, if any appeal is pending no order u/s 264 can be passed is a fallacy. The pendency of writ petition before this Court would not amount to pendency of any appeal before any authority. In fact, the writ Court had made it clear that there is no embargo upon the competent authority to proceed in the matter. Once the proceedings were initiated for reassessment by the respondent and the competent authority proceeded to complete the same on 31.12.2019, no occasion arise as to any matter being pending before this Court as the only challenge before the writ Court was for initiation of proceedings under Section 143 (3) read with Section 147 of the Act of 1961. Once the reassessment was made and the proceedings were completed, the writ petition has practically become infructuous. The ground taken by the Principal Commissioner of Income Tax does not hold any ground as the writ petition is not an appeal according to Section 264 (4) (a) of the Act of 1961. The order passed by the Principal Commissioner of Income Tax- I, Agra is unsustainable in the eyes of law and, as such, same is hereby quashed and set-aside. WP allowed.

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• 2023 (5) TMI 583
  Proceedings initiated u/s 10 of Black Money Act - additions by treating the petitioner as a beneficial owner of Romulus Assets Ltd., ( RAL ) - ITAT has set-aside the additions holding inter alia that the Assessing Officer has not discharged the burden cast on him to prove that the petitioner is a beneficial owner of RAL - HELD THAT:- Before issuing notice u/s 10(1) of the BM Act, the Revenue has to determine that assessee is the beneficial owner of undisclosed assets located outside India. Findings recorded with regard to the resolution of RAL s Board meeting show that the authority under the BM Act has placed reliance on at least two distinct transactions, which were subject matter of appeal before the ITAT. This leads to an inference that the Income Tax Authorities had sent information with regard to transactions in respect of which ITAT did not agree with AO s stand. At least two transactions in respect of which assessee/petitioner has been called upon to show cause were subject matter of appeal before the ITAT. Unless the orders passed by the ITAT are reversed or modified in the manner known to law, they cannot be held against the petitioner assessee. It is settled that ordinarily, this Court shall not interfere with a show cause notice in writ proceedings under Article 226 of the Constitution of India except under rare circumstances where the notice is issued without jurisdiction or in such cases where, even if the facts stated in the notices are assumed to be correct, no case is made out against the noticee. Proceedings under BM Act entails serious civil and criminal consequences. The two transactions noted above, show that there is no proper application of mind both at the stage of sending the information by the Income Tax Department and by the Authorities under BM Act before issuing the notice under challenge. This court cannot examine all allegations/transactions in this proceeding. But the two transactions examined by us clearly show that Income-Tax Department has sent information without proper verification and the Authorities under the BM Act have acted mechanically and sent the impugned notice without application of mind. As relevant to note that the search was conducted in 2015. ITAT has decided the appeal on July 30, 2021 and the IT department has sent the information on August 06, 2021 and the impugned notice has been issued on August 11, 2021. These dates lead to an inference that Income-Tax Department sent the information hurriedly, immediately after disposal of appeal by the ITAT and the authority under BM Act has also acted hurridly. In our considered view that atleast a portion of the notice is based on the allegations set aside by the ITAT. Therefore, the impugned notice requires re-examination in the hands of authorities under the BM Act - WP allowed.

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• 2023 (5) TMI 582
  Addition u/s 69A - unexplained cash - CIT-A disbelieved the confirmation of Appellants client having deposited cash with Appellant for his matter in Supreme Court - HELD THAT:- Addition under section 69A could be made if the assessee is found to be the owner of money that is not recorded in the books of account and the assessee is not offering explanation about the source of money. In assessee s case we notice that the assessee has recorded the impugned amount in the books of account and has also offered the same to tax by including the it as professional fees. In view of these discussions and considering the facts of the present case, we are of the view that the amount cannot be treated as unexplained and therefore we delete the addition u/s 69A of the Act. Decided in favour of assessee.

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• 2023 (5) TMI 581
  Undisclosed income - Bogus share transactions - case of the assessee was selected for complete scrutiny under CASS for examination of suspicious sale transactions in shares (Penny Stock tab in ITS) - HELD THAT:- Once the claim of the assessee of having purchased the 3000 shares of CCL International Ltd. on the basis of documents relied upon by it fails, then, the solitary logical view that can be arrived at is that it had not carried out any genuine transaction of purchase/sale of shares, and considering the totality of the facts involved in the case can safely be held to have only obtained an accommodation entry of bogus LTCG. We uphold the addition made by the A.O, on the ground that the same was the undisclosed fund of the assessee that was routed back in the garb of the aforesaid transaction of purchase/sale of shares. Thus, the Grounds of appeal Nos. 1 2 raised by the assessee dismissed. Levy of tax u/s.115BBE - We are unable to concur with the same. As the A.O had in clear and unequivocal terms observed that the sale consideration of 3000 shares of CCL international Ltd. of Rs.5.40 lac, was infact the routing back of the undisclosed fund of the assessee through the medium of transaction of sale of shares, therefore, it can safely; or in fact inescapably be concluded that the same was the assessee s unexplained money u/s.69A of the Act, which it had received back through banking channel in the form of sale consideration of the said shares. Thus, the Ground of appeal raised by the assessee being devoid and bereft of any merit is dismissed in terms of my aforesaid observations.

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• 2023 (5) TMI 580
  Deduction u/s 54F - Denial of deduction as mount of Sale Consideration was not deposited in the Capital Gains Account Scheme and the claim of 54F is not applicable as the construction has not been completed - HELD THAT:- In the instant case, undisputedly, the amounts for purchase of property and the construction thereon, were paid duly within the relevant period, as prescribed under law and that too from the Capital Gains Account. The said fact of the payments being made, has been admitted by the CIT(A), which is evident from the perusal of his order. In such circumstances, the disallowance of the entire exemption only because the construction was not completed is without any basis and/or merit and the said action of the Ld. CIT(A) deserves to be quashed. CIT(A) erred in disallowing the claim by making factually incorrect observations that the assessee had not deposited any amount in the capital gains scheme account whereas the amounts were duly deposited in the capital gains scheme account and duly utilized from the said account only. CIT(A) further erred to even take cognizance of the capital gains account which was placed on record. Owing to availability of sufficient evidences on record, we also hold that the stamp duty registration cost are hereby allowed. Appeal of assessee allowed.

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• 2023 (5) TMI 579
  Scrutiny Assessment - CIT(A) and AO concluded that the assessment on issues and matters which are different from the reasons for limited scrutiny communicated during the assessment proceedings - HELD THAT:- On perusal of the copies of notice u/s 143(2) of the Act, as stated earlier, we do not find anywhere that the case was selected under the limited scrutiny. Assessee stated that the AO has given reason for selection of scrutiny in the assessment order which says as the CASS reasons for selection of scrutiny where there is large difference in the closing stock shown in the balance sheet and profit and loss account for the current year as per the return of income. The Central Board of Direct Taxes had framed certain reasons for selection of scrutiny assessment under which, the case has been selected and reason for selection for scrutiny is assuming the jurisdiction for scrutiny assessment. In view of this, the arguments advanced by the ld.AR of the assessee are rejected. Accordingly, this ground is rejected. Character of land - reclassification/ recharacterizing of land from stock-in-trade to capital asset - disallowance of revenue expenses u/s 37(1) - HELD THAT:- It cannot be said that the assessee had changed its business activity or re- characterized the assets from the current asset into capital asset. The assessee has taken steps in getting land converted and the lands in question have classified as urbanized land in 2007 as per letter dated 03/08/2007 issued by the Member Secretary, Malaphuram Town Local Planning Committee. The lands were already converted and classified for imposing development [commercial and residential] and no further conversion was warranted. The AO noted after expiry of 9 years, the company has not done any activity in this regard. It has been observed that after acquiring land, the assessee approached the Electricity Department for removal of high tension electric wires and paid fee - The high tension wire was eventually shifted from assessee land. Thereafter the assessee has tried to acquire adjacent land in order to give needful access to the road. Therefore, it cannot be said that the assessee is not doing business activity. Lower authorities have taken wrong view that no any business activities have been done after the purchase of the land and the value appearing under the head work-in-progress are capital assets. The expenditure incurred by the assessee are revenue expenditure and allowed as deduction u/s. 37 of the Act. Ground No. 3 is allowed. Nature of income - interest income received - business income or income from other sources - HELD THAT:- Interest received on fixed deposits by the assessee is to be treated as income from other sources, therefore, ground raised by the assessee on this issue is rejected. Nature of expenses - legal and professional charges - revenue of capital expenses - AR submitted that the legal and professional charges has been incurred towards business of the assessee for maintaining the peaceful possession of the land acquired - HELD THAT:- Since we have uphold ground No.3 in favour of the assessee, therefore, these expenditure also would be treated as revenue expenditure Setting off of the loss arising from the business carried on by the assessee during the year under consideration and the interest received on Fixed Deposits as income from other source - HELD THAT:- Since it is held interest received from investment of surplus funds is income from other sources, accordingly the business loss to that extent is eligible for set off from other heads of income as per the provisions of the Income Tax act. In view of this, AO is directed to give benefit for setting - off the business loss from the interest income as per law. Accordingly this issue is partly allowed for statistical purpose.

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• 2023 (5) TMI 578
  Deduction u /s. 80P(2)(a)(i) or 80P(2)(d) - relevancy of source of income - gross total income being business income from providing credit facilities to its members, which includes interest on investments also - AO observed that interest on investments as deposits would fall in the category of income from other sources because the interest was not received from the cooperative society and it is also not business income - as submitted RBI has directed to maintain SLR to the banks and any income received from such activity is treated as business income of the banks and the same principle will also apply here because the Karnataka Co-op. Societies Act mandates for maintenance of 25% to 30% liquid funds against deposits HELD THAT:- The assessee submits that it is operational income because it has to maintain the funds as per Rule 28 of the Karnataka State Co-op. Rules, 1960 which are mandatory for the cooperative society and try to correlate with the RBI norms for maintaining certain percentage of deposits in the form of investments which are applicable for the Banks, therefore, it qualifies for deduction u/s. 80P(2)(a)(i) of the Act., but in this regard the ld. AR of the assessee could not produce any single document for substantiating the claim. The interest received by the assessee cannot be treated as operational income of the assessee because the interest received was not from the credit facilities provided to its members as envisaged in section 80P(2)(a)(i) of the Income Tax Act. This issue has been settled by the Hon ble jurisdictional High Court in the case of PCIT v. Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT ] wherein it is held that the source of funds are irrelevant. Similar issue has been decided against the assessee by this Tribunal in the case of Krishanarajapet Taluk Agri Pro Co-op Marketing Society Ltd. [ 2022 (2) TMI 489 - ITAT BANGALORE ] held that interest income is not income from business but was income chargeable to tax under the head income from other sources and therefore there was no question of allowing deduction u/s.80P(2)(d) - thus the assessee is not eligible for deduction u/s 80P(2)(a)(i) or 80P(2)(d) on the interest received. Decided against assessee. Net interest income should be taxed instead of entire gross interest income earned by the assessee on investments and that assessee will suffer loss under the head business income for which necessary set off has to be provided to the assessee - alternate ground - HELD THAT:- Since the fundamental principle under Income-tax Act being that only net income has to be taxed and not the gross income, this plea of the assessee has to be necessarily accepted, especially in the light of the judgment of Totagars Sale Cooperative Society v. ITO [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT ] Accordingly, the case is restored to the file of the A.O. with a direction to examine whether assessee has incurred any expenditure for earning interest income, which is assessed under the head `income from other sources . If so, the same shall be allowed as deduction u/s 57 of the I.T.Act. Further if the assessee is eligible for setting off of loss suffered from the business carried on by it, the AO is directed to decide the issue as per law. The assessee is directed to co-operate with the department and furnish the necessary evidence for expeditious disposal of the matter. This ground is partly allowed for statistical purpose.

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• 2023 (5) TMI 577
  Disallowance of depreciation - assessee company has made investment in windmill - HELD THAT:- Tribunal has decided the identical issue in assessee s own case in AY 2011-12 [ 2023 (5) TMI 507 - ITAT DELHI] confirm the order of ld. CIT (A) regarding deletion of disallowance of depreciation on investment made on wind mills. Short deduction of TDS - payment for the services provided in the nature of technical and professional services liable for deduction u/s 194J @ 10% OR payment for work as per contract within the section 194C @ 2% - CIT (A) held that AO was not justified and the section does not cover short deduction, thus deleted the addition - HELD THAT:- CIT (A) has taken correct decision which is supported by the case laws - Hence, this deletion of disallowance by the ld. CIT (A) is held to be correct. Disallowance u/s 14A - AO noted that assessee had computed some disallowance by some internal method of its own - HELD THAT:- We accept the proposition that assessee s own fund are more than the investment made, hence no disallowance should be made for interest. This aspect may be verified by the AO. Another plea of the assessee is that only dividend yielding investments should be considered for computing amount of disallowance under Rule 8D (iii). We agree with this proposition also as it has the mandate of ACB INDIA LIMITED (FORMERLY M/S ARYAN COAL BENEFICATIONS (P) LTD. [ 2015 (4) TMI 224 - DELHI HIGH COURT] and case of Vireet Investment (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . Addition of foreign exchange loss - HELD THAT:- As we agree with the submissions of assessee that the decision of Woodward Governor India (P) Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] is applicable. Facts highlighted by the ld. Counsel of the assessee also show that Woodward Governor India (P) Ltd. (supra) extensively discussed the judgment of Indian Molasses Co. P. Ltd. [ 1959 (5) TMI 5 - SUPREME COURT] and duly distinguished the same. Another factor in favour of the assessee is that during AYs 2017-18 2018-19, assessee earned income on reinstatement of ECB and the same was duly offered to tax and the same was accepted by the assessing officer during the assessment proceedings. So, when the Revenue is accepting the gains, the same treatment should be given to the loss and we are convinced by the submissions of the ld. Counsel for the assessee. Hence, we set aside the orders of the authorities below and delete the addition.

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• 2023 (5) TMI 576
  Disallowance of deduction u/s. 80IA and disallowance of deduction u/s. 80IA on Other incomes - HELD THAT:- Following the order of Tribunal in assessee s own case for assessment year 2005-06 [ 2022 (12) TMI 28 - ITAT MUMBAI] the assessee s claim of deduction u/s. 80-IA of the Act was allowed in assessment year 2006-07 and 2007-08 [ 2023 (5) TMI 508 - ITAT MUMBAI] In the impugned assessment year the assessee s claim of deduction u/s. 80IA of the Act was rejected for the reason similar to assessment year 2006-07. Following the decision rendered in assesee s own case for assessment year 2006-07 wherein held that the assessee started telecommunication services after 01/04/1995 and hence, the assessee is eligible to claim deduction u/s. 80-IA(4) - ground of the appeal is allowed. Claim of deduction u/s. 80-IA of the Act on other incomes, viz. interest income and miscellaneous income as relying on assessment year 2005-06 [ 2022 (12) TMI 28 - ITAT MUMBAI] . Disallowance of depreciation on Asset Restoration Cost (ARC) - HELD THAT:- In assessment year 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI] this issue was restored back to the file of Assessing Officer for re-examination - In the impugned assessment year we find that the Assessing Officer has failed to examine the issue in right perspective. We deem it fit to restore the issue to the file of Assessing Officer for fresh adjudication Disallowance u/s. 14A r.w.r 8D - case of assessee is that no exempt income was earned by the assessee during the period relevant to assessment year under appeal - HELD THAT:- This fact has not been rebutted by the Department. The settled legal position is, no disallowance u/s. 14A is to be made where the assessee has not earned any exempt income during the relevant period. Thus, the disallowance u/s. 14A of the Act made by Assessing Officer is deleted and ground of the appeal is allowed. Disallowance of interest expenditure - loans given to subsidiaries - HELD THAT:- As decided in own case [ 2023 (5) TMI 508 - ITAT MUMBAI] 2006-07 where the assessee is having mixed bag of interest free funds and interest bearing funds and the assessee has made investment out of such common pool of funds, the presumption would be that the investments are made out of interest free funds available with the company provided the said funds are sufficient to meet the investments. Thus, disallowance of interest expenditure on loans given to subsidiaries is directed to be deleted. Disallowance of interest on account of capital work-in-progress expenditure - loans have been utilized for substantial extension of the existing business - HELD THAT:- While deciding similar issue in assessment year 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI] the Co-ordinate Bench had explained meaning of extension of business in respect of Telecommunication services. Following the order of Co-ordinate Bench, the disallowance made by the Assessing Officer is directed to be deleted. Disallowance of expenses incurred for raising loans - assessee has incurred expenditure for raising of loans - HELD THAT:- Tribunal in assessment year 2006-07 and 2007-08 [ 2023 (5) TMI 508 - ITAT MUMBAI] deleted the disallowance qua raising of loans held that expenditure on raising of loan is revenue in nature, hence, allowable. The nature of expenditure on raising of loan does not depend upon nature and purpose of loan. Hence, we have no hesitation in holding that the expenditure incurred for raising of the loan is allowable u/s.37(1) Disallowance of roaming charges u/s.40(a)(ia) - HELD THAT:- In assessment year 2006-07 in assessee s own case [ 2023 (5) TMI 508 - ITAT MUMBAI] disallowance u/s. 40(a)(ia) of the Act was directed to be deleted as payment of roaming charges does not fall under the ambit of TDS provision either u/s. 194C or 194J of the Act, hence, addition made u/s. 40(a)(ia) of the Act was deleted - Decided in favour of assessee. Non-reduction of foreign exchange gain of capital nature from profits of business - Since, the claim was not made in the return of income, the AO did not entertain the claim of assessee - contention of the assessee is that in assessment year 2006-07, the assessee had suffered loss on foreign exchange fluctuations. The said loss was held to be on capital account by the AO - HELD THAT:- Purportedly, the assessee had made claim before the AO during assessment proceedings hence, the same was not considered by the Assessing Officer. Thereafter, the assessee raised ground before the DRP in objections. The DRP recorded the ground in Para-8 of the directions, however, the same was not adjudicated. In the back drop of above facts, without delving further on the issue, we deem it appropriate to restore this issue back to the file of Assessing Officer for adjudication on merits after affording reasonable opportunity of hearing/making submissions to the assessee, in accordance with law. Thus, ground of the appeal is allowed for statistical purpose. MAT computation u/s. 115JB - deduction of provision for doubtful debts amounting to Rs.246.00 million for the purpose of computing book profits u/s. 115JB - HELD THAT:- We find that in assessment year 2006-07 [ 2023 (5) TMI 508 - ITAT MUMBAI] held that when the assessee chose to write back the provision for doubtful debts by creating it in its P L Account, which in the present case is Rs.326.79 million, the same would obviously be outside the ambit of provision of section 115JB of the Act. In fact, this is specifically provided in clause (i) of Explantion-1 to section 115JB(2) of the Act under expression as reduced by while computing book profit u/s. 115JB of the Act. TP Adjustment - reimbursement of salary and related costs of seconded employees - contention of the assessee is that the amount disallowed by the DRP was paid towards travel cost/relocation cost of five seconded employees and reimbursement of salary and other allowances were allowed on debit notes, similar treatment can be given to the reimbursement of relocation costs - HELD THAT:- Once it has been accepted that the five employees were seconded to India by overseas AEs, the relocation of those employees to India is a consequent step. There would be cost attached to relocation of such employees. The said cost has either to be borne by the AE or the assessee. This fact can be determined from the terms and conditions of secondment of employees. In case relocation costs/travel costs are borne by the assessee, the same deserves to be allowed if they are reimbursed on cost to cost or are paid directly to the seconded employees - restore this issue back to the file of Assessing Officer for re-examination. Ground allowed for statistical purpose. Non-grant of full credit in respect of TDS - AO is directed to re-examine and grant credit of the TDS on the basis of documents available on record and decision of the Tribunal, in accordance with law.

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• 2023 (5) TMI 575
  Penalty u/s 271(1) (c) - assessee voluntarily deposited the tax along with the computation of income in response to the said notice u/s 133(6) - As per AO assessee has not filed the return of income even though she is supposed to do so and has paid the tax and filed return of income only on the issue of notice by the revenue - HELD THAT:- The assessee on his own after receiving notice u/s 148 voluntarily declared the income in ROI and paid taxes of thereon i.e. even before providing reason recorded for the escapement of income. The aforesaid explanation given by the assessee through ROI was neither rejected nor it was held to be mala fide by the AO and once the AO had failed to take any objection in the matter, the offer so made came from the assessee on its own and was a voluntary offer made i.e. without any detection and this voluntary action of the assessee cannot be considered as equivalent to providing inaccurate particulars of income or concealing the particulars of Income. See Pushpendra Surana [ 2013 (8) TMI 969 - RAJASTHAN HIGH COURT] as held no inference drawn by the authority that it was a deliberate concealment on the part of the assessee and it could not be considered that there was an inaccurate particulars of income that was made the basis for inflicting penalty upon the assessee in exercise of powers conferred u/s 271(1)(c). Since the assessee participated in the assessment proceeding, has paid the tax, and filed the computation of income before issue of notice u/s. 148 levy of penalty is not sustainable - Decided in favour of assessee.

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• 2023 (5) TMI 574
  Expenditure incurred by the assessee towards Club subscription fees and Club services - adjustment made by the CPC u/s 143(1)(a) - Centralized Processing Centre (CPC) has treated that the alleged expenses are personal in nature as the auditor has indicated for the disallowance of such expenditure - HELD THAT:- The details furnished by the auditor in the 3CD report about subscription and club services is a mere information and such type of expenditure may have some personal element but whether expenditure of any personal nature is included in such expenses can be examined only after verification of the bills and vouchers. Such observation of the auditor is similar to the observations made for the payment to the relatives under section 40A(2)(b) which cannot lead to disallowance of all expenses but only if the case of the assessee is scrutinized and such expenditure incurred for which payment has been made to relatives has to be examined by the ld. Assessing Officer as to whether such expenses are excessive or unreasonable having regard to the fair market value of the goods services or facilities, then such excess expenditure claimed by the assessee may be disallowed. Thus for the information regarding subscription and club services prima facie no adjustment was possible under the provisions of section 143(1)(a)(iv) of the Act and the CPC has exceeded its jurisdiction for making alleged disallowances. Going into the merits of the case as to whether of personal in nature was involved in the alleged amount of subscription and club services is not required to be dealt at this stage since the CPC has gone beyond the power provided in section 143(1)(a) of the Act for making the alleged disallowance. Decided in favour of assessee.

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• 2023 (5) TMI 573
  Benefit of section 11 12 - registration u/s 12A denied for year under consideration - HELD THAT:- This Tribunal in second round of litigation [ 2022 (6) TMI 1393 - ITAT INDORE] has specifically held that the registration ought to have been granted from 01.04.1999 and directed the Ld. CIT(E) rectify the order and grant registration w.e.f. 01.04.1999. Accordingly, in the facts and circumstances of the case and in pursuant to the registration granted to the assessee u/s 12A w.e.f. 01.04.1999, the assessee is eligible for exemption u/s 11 12 of the Income Tax Act for year under consideration and consequently, the addition made by the assessee is defected. Since, the benefit of exemption u/s 11 12 of the I.T. Act is granted to the assessee. We accordingly dismissed.

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• 2023 (5) TMI 572
  Rejection of books of accounts u/sec 145(3) - assessee made bogus sales of rice - survey operation was carried out at the premises of the assessee - HELD THAT:- The entire addition is made on the statement recorded from Mr. Rajesh Dhawan prop. M/s. Vasudeva Sales Corp. But the statement recorded in survey u/s. 133 was not served to assessee. The entire gross sales was duly declared in the turnover of the assessee during the filing of return. There are no discrepancies in the purchase or in stock of the assessee. The only discrepancies found in sales on the basis of recorded statement of the party which was finally added back to the total income of the assessee. The books of accounts are rejected u/s. 145(3) of the Act without finding any lacuna in the books of assessee. We respectfully relied on the case of Roopchand Tharani [ 2011 (11) TMI 426 - CHHATTISGARH HIGH COURT] to find that there is no specific discrepancy for rejecting books of accounts by the assessee u/s. 145(3). So, grounds taken by the assessee in this context is fully allowed. Addition on the basis of statement of the party - Assessee was not allowed to cross examination of the party before the addition. We respectfully relied on the order of Sona Builders Andaman Timber Industries [ 2001 (7) TMI 3 - SUPREME COURT] the reasonable opportunity for the assessee was denied without allowing cross verification of the party. The assessee already informed and prayed to the revenue for the said verification of the party who had made the statement against him. AO has totally assumed that the cash was deposited in the bank account of the party belongs to the assessee. So the additions have been made by the AO on the basis of the surmises and conjectures, ignoring the evidence produced before him by the assessee. There is lack of cogent evidence in respect of addition of sales of the assessee, respectfully relied on, Lalchand Bhagat Ambica Ram [ 1959 (5) TMI 12 - SUPREME COURT] The assessee cannot be taxed doubly in same amount which was already declared in the return of income. The ld. AO has already calculated the GP ratio @ 11.87% which is working out at Rs. 2,72,17,362/-. But there is no separate addition was made. We find the continuity in the GP ratio in the preceding and succeeding years with impugned assessment year of the assessee Assessee disclosed the entire sales, payment was received through banking channel. The assessee is not at all beneficial of the said amount. Stock of goods and purchase was duly accepted in the order of assessment and in the subsequent assessment order. The entire submissions were submitted before the revenue authorities by the assessee including stock statement and the details of purchase. Recorded statement of the part had the evidentiary value. But without the cross examination, the statement is itself in nullity , respectfully relied on SMC Share Brokers Ltd, [ 2006 (8) TMI 110 - DELHI HIGH COURT] - The addition cannot be made mere on the basis of doubts or conjecture. We are setting aside the appeal order passed by the ld. CIT(A). Considering the above, the addition is quashed. Appeal of assessee allowed.

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• Customs

• 2023 (5) TMI 571
  Penalty u/s 114 of the Customs Act, 1962 - Penalty on the owner of the godown where goods were reportedly loaded - illegal procurement, sale purchase, fabrication of documents and illegal transportation of Phensedyl Cough Linctus of Indian origin in attempt to export the same illegally - HELD THAT:- The method of concealment and preparation of fake vouchers/invoices no doubt creates suspicion regarding illegal activities being undertaken by the C F Agents. However, there is nothing on record that these activities suggest that the Phensedyl Cough Linctus was meant for export to Bangladesh. The manner of concealment and documentations could also be adopted to overcome the restrictions imposed under the Drugs Cosmetics Act during movements within India. For violation of any of the procedures prescribed under the Drugs Cosmetics Act, a person could be punished under the relevant provisions of Drugs Cosmetics Act but these violations cannot be made as the basis for taking action under the Customs Act, 1962. It is also observed by the adjudicating authority, that Phensedyl Cough Linctus is a specified goods under Section 11-I of the Customs Act, 1962. As per Notification No. 31/2008-CUS. (N.T.), dated 25-3-2008, an area of 50 kms. in width from the land border with Bangladesh is treated as a specified area . In the absence of any documentary evidence, suggesting that seized goods were meant for export to Bangladesh, it cannot be held that the appellant can be visited with penalty under Section 114 of the Customs Act, 1962. Accordingly appeals filed by the appellant is required to be allowed. It is also evident from the records of the present case and from the statement of the Appellant herein which nowhere shows that the Appellant was involved in purchase/sale of contraband goods. There is nothing on record to suggest that the Appellant has forged or fabricated documents and/or aided Shri Pappu Jaiswal in illegal export of the said goods. In absence of any cogent evidence, penalty imposed in terms of Section 114 is uncalled for - No evidence has been adduced against the Appellant to show his prior knowledge with regard to illegal export of the seized goods. In absence of any corroborative proof, the personal penalty imposed on the Appellant cannot be sustained and is therefore set aside. Appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (5) TMI 570
  Initiation of CIRP - NCLT admitted the application - Power of NCLT to refuse the application - Refusal of banks to extend the Bank Guarantees of the Corporate debtor - HELD THAT:- Once NCLT is satisfied that the default has occurred, there is hardly a discretion left with NCLT to refuse admission of the application under Section 7. Even the non-payment of a part of debt when it becomes due and payable will amount to default on the part of a Corporate Debtor . In such a case, an order of admission under Section 7 of the IB Code must follow. If the NCLT finds that there is a debt, but it has not become due and payable, the application under Section 7 can be rejected. Otherwise, there is no ground available to reject the application. A Review Petition was filed by the Axis Bank Limited seeking a review of the decision of Vidarbha Industries [ 2022 (7) TMI 581 - SUPREME COURT] on the ground that the attention of the Court was not invited to the case of E.S. Krishnamurthy [ 2021 (12) TMI 683 - SUPREME COURT] - it was clarified by the order in review that the decision in the case of Vidarbha Industries1 was in the setting of facts of the case before this Court. Hence, the decision in the case of Vidarbha Industries 1 cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innoventive Industries 3 and E.S. Krishnamurthy 2 . The view taken in the case of Innoventive Industries 3 still holds good. A demand notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 dated 29th August 2018 was issued by the first respondent. As the Corporate Debtor did not honour the said notice, the original application for recovery has been filed by the first respondent before the Debt Recovery Tribunal at Hyderabad. Moreover, the Corporate Debtor acknowledged the debt on 5th May 2019 to the extent of Rs. 63,36,61,897.26. Moreover, the Balance Sheet as of 31.03.2019 of the Corporate Debtor reflects the said liability of the Corporate Debtor. It is true that as far as Bank Guarantees are concerned, the Executive Engineer of the Government of Telangana addressed letters to the Bank requesting the Bank to revalidate the Bank Guarantees. On 8th January 2020, the Government addressed a letter to Syndicate Bank to extend the seven Bank Guarantees mentioned therein. The letter mentions that if the action of revalidation or extension of the Bank Guarantees is not taken, the Bank Guarantees be realized and the amount be paid by Demand Drafts to the State Government. Thus, Bank Guarantees were invoked by the State Government - the first respondent called upon the Corporate Debtor to clear the outstanding immediately. Thus, there is no doubt that the Corporate Debtor committed a default within the meaning of Section 3(12) of the IB Code due to non-payment of the amounts due to the Bank. There are a large number of Guarantees issued by the Bank. The interim order of the Telangana High Court does not relate to all Bank Guarantees. Moreover, there is no finding recorded in the interim order that the Corporate Debtor is not liable to pay the dues. The interim order only prevents coercive action against the Corporate Debtor - Even assuming that NCLT has the power to reject the application under Section 7 if there were good reasons to do so, in the facts of the case, the conduct of the appellant is such that no such good reason existed on the basis of which NCLT could have denied admission of the application under Section 7. There is no merit in the appeal, and the same is, accordingly, dismissed.

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• Service Tax

• 2023 (5) TMI 569
  Classification of services - Works Contract Service - vivisectible composite contract or a service contract simplicitor - Revenue re-classified the services rendered from Commercial or Industrial Construction Services to works contract service - CBEC Circular No. 98/2007-ST dated 04.01.2008 - entitlement to avail the composition scheme - HELD THAT:- A plain reading of the contract brings out the fact that a certain amount of material is involved and that the appellant was required to pay VAT etc. on the same and that an advance at the rate of Rs. 2400/per 1000 bricks would be paid to the appellant. It is clear that it talks of the involvement of material and it does not provide for the bifurcation of the material and service portion. Therefore, it has to be concluded that the contract is a composite one and not vivisectible and therefore, qualifies to be works contract. The department s objection that the contract is not dated will not help the cause of revenue. In view of the Hon ble Apex Court judgment in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] reiterated in M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES ORS., YFC PROJECTS PVT. LTD. VERSUS UNION OF INDIA, M/S. G.D. BUILDERS VERSUS UNION OF INDIA ANR., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ANR., M/S. UNITECH LTD. VERSUS UNION OF INDIA ORS., M/S. NATIONAL BUILDING CONSTRUCTION CORPORATION LTD. (NBCC) VERSUS UNION OF INDIA ORS., M/S. LARSEN AND TOUBRO LTD. VERSUS COMMISSIONER OF SERVICE TAX, DELHI, COMMISSIONER OF SERVICE TAX MUMBAI - II VERSUS M/S. IOT INFRASTRUCTURE ENERGY SERVICES LIMITED, M/S. L T HYDROCARBON ENGINEERING LIMITED (PREVIOUSLY KNOWN AS LARSEN TOUBRO LIMITED) VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI [ 2022 (8) TMI 168 - SUPREME COURT] , works contract are chargeable only from 01.06.2007. The appellants having opted to pay duty under the new scheme vide their letter dated 04.06.2007 have made themselves eligible for the composition scheme under works contract service. Despite the fact that the appellants have accepted in the written reply, this being a question of law can be raised at any point of time, and that Substantive benefit given by legislature cannot be nullified by mere averments of the appellant. Appeal allowed.

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• 2023 (5) TMI 568
  Rejection of refund claim - appellant had not produced the copies of the bills raised but had only produced the running bills from which it was not possible to ascertain whether the said payment of tax was in fact relating to the tax paid on exempted services only - HELD THAT:- As regards the claims of refund for the service tax paid towards construction of the Regional Cancer Centre Trivandrum, and the Vadakara Taluk hospital, the appellant has submitted copies of the Agreements executed with the Hospital, and other corroborative documents such as the invoices, VAT returns, 26AS statement, as well as a certificate from the service recipient regarding the services executed by the appellant. A perusal of the invoice raised by the appellant towards the Regional Cancer Centre indicates the quantum of service tax paid at the prevailing rate of 14% during the relevant time. There is no doubt that the appellant had submitted other statutory documents from where verification can be done. In view of the above, the refund claim for services provided to the Regional Cancer Centre, Trivandrum and Vadakara Taluk hospital is admissible. As per definition of Governmental Authority, in order to qualify as governmental authority the body has to be either setup by an Act of Parliament or State Legislature, or established by the Government as per the conditions mentioned - In the instant case, it is clear that the service recipient M/s CAPE is a society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 and is engaged in imparting professional education. As per the details available on the public domain, the Cooperative Academy of Professional Education, Kerala is promoted by the Cooperation Department of the Government of Kerala and is an autonomous society under the same. There is nothing on record to show that the State Government exercises 90% or more by way of control of the trust. There is no reason to interfere in the findings in the impugned order in this regard - Appeal disposed off.

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• 2023 (5) TMI 567
  Non-payment of Service Tax - Business Auxiliary Service - receiving service of foreign agents - section 66 A of the Finance Act, 1994 read with Section 65 (19) of the Finance Act, 1994 and Section 65 (105) (zzb) of the said act - extended period of limitation - Suppression of facts or not - HELD THAT:- The show cause notice should have been issued during the normal period of demand as show cause notice dated 17.03.2008 has already been issued under the provision of Section 73 (1) of the Finance Act, 1994 alleging suppression of facts with intention to evade payment of service tax and invoking larger period of demand. Tribunal in the case of M/S. MARCK BIOSCIENCE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, AHMEDABAD [ 2019 (7) TMI 653 - CESTAT AHMEDABAD] held that in case of sales commission to overseas commission agent under reverse charge mechanism, the extended time proviso is not invokable. With regard to the second show cause notice dated 20.03.2009 where under the adjudicating authority has confirmed the demand of Rs. 10,96,848/- also invoking relevant penal provision. In this regard, that show cause notice has been issued on 20.03.2009 demanding the duty for the period April, 2007 to March, 2008 by invoking larger period of limitation under Section 73 (1) of the Finance Act, 1994. Since the first show cause notice has already been issued on 17.03.2008 invoking a period of five years and therefore, the second show cause notice should have been for normal period of demand and department should not have invoked the extended time period for demanding service tax. The second show cause notice dated 20.03.2009 is beyond normal period of limitation and therefore, the matter is remanded back to the original adjudicating authority to re-adjudicate the matter and confirm the service tax for the normal period of demand as provided under Section 73 (1) of the Finance Act, 1994. Appeal allowed in part.

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• 2023 (5) TMI 566
  Adjustment of service tax already paid with subsequent service tax liability instead of filing refund - cancellation of Air tickets - issuance of Credit Notes towards the cancellation amounts paid to the clients - Point of Taxation Rules, 2011 - whether Service Tax is required to be discharged, the moment the Invoice is made by the Appellant and subsequent issue of Credit Note will not have any impact on the future Service Tax payable? - HELD THAT:- The Delhi Tribunal in the case of JJANTA TRAVELS (P) LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH [ 2007 (8) TMI 72 - CESTAT, NEW DELHI] has held that that The air travel agent in his fortnightly return gives the particulars of tickets cancelled or modified and adjusts the commission accordingly subject to final approval by the airlines. Since the commission is adjusted automatically and the service tax is paid on the net commission received, the question of separately claiming refund of service tax need not arise. The Department has preferred an Appeal before the Punjab Haryana High Court which has held that It was noticed in the circular that cancellation or modification of tickets is a common phenomenon and frequent feature in air travel. Details of cancelled or modified tickets are provided by a travel agent in the fortnightly returns filed and adjustment of the commission is made subject to final approval of the airlines. The commission is ultimately paid by the airlines on the net commission received by a travel agent. Accordingly, no question arises for separate claim of refund of service tax. Since the Appellant has been following the practice as per the Trade Notice No. 6/97-ST dated 1/7/1997 issued by the DOR and issue is also squarely covered by the decision of the Delhi Tribunal duly affirmed by the Hon ble Punjab and Haryana High Court. Appeal allowed.

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• 2023 (5) TMI 565
  Recovery of CENVAT Credit alongwith interest and penalty - denial of CENVAT credit availed on input services used for construction of buildings, from where renting of immovable property service is provided by the appellant for the reason that the same would result in creation of immovable property which is neither goods nor services - period in dispute from 2010-11 to 2013-14 - HELD THAT:- This precise issue was considered by a Division Bench of the Tribunal in Bharti Reality Ltd. [ 2022 (5) TMI 569 - CESTAT NEW DELHI ] for the earlier period and it was held that the appellant would be entitled to avail CENVAT credit. Learned counsel for the appellant has, however, pointed out a relevant fact which has not been taken note of either in the show cause notice or in the impugned order passed by the Commissioner. This concerns the amendment made on 01.04.2011 in rule 2(l) of the 2004 Rules, which rule defines input service - Learned counsel for the appellant pointed out that for commercial or industrial consideration, erection commissioning or installation and works contract service, the appellant availed CENVAT credit of service tax paid on works contract service prior to 01.04.2011 as the services were used for construction of buildings specifically given on rent, but the appellant, in view of the amendment made in rule 2(l) of the 2004 rules on 01.04.2022, did not avail CENVAT credit as these are services covered under the inclusive clause. The Commissioner has placed reliance upon a Larger Bench decision of the Tribunal in VANDANA GLOBAL LTD. VERSUS CCE [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) ], which decision has been set aside by the Chhattisgarh High Court and the decision of the Larger Bench of the Tribunal. The order dated 20.06.2017 passed by the Commissioner deserves to be set aside and is set aside and the appeal is allowed.

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• 2023 (5) TMI 562
  EOU - Import of Capital Goods without payment of Customs Duty in terms of Notification No. 52/2003-CUS - procurement of consumables indigeneously in terms of Central Excise Notification No. 22/2003-CE. - export of services - first proviso Rule 3(ii) of Exports Services Rule, 2005 - Time Limitation - HELD THAT:- As can be seen from the Para 6 of the Show Cause Notice, the allegation of the Department at the Show Cause Notice stage is on the count that services being rendered by the Appellants were not fully rendered within India. The Hon ble CESTAT, Ahmadabad in the case of COMMISSIONER OF SERVICE TAX VERSUS BA RESEARCH INDIA LTD. [ 2009 (11) TMI 213 - CESTAT, AHMEDABAD] was seized of the very same issue and it has held that delivery of the report is an essential part of their service and the service is not complete till they deliver the report. The report is delivered outside India and the same is used outside India. These facts also fortify the views taken hereinabove that the service provided by the appellants was export of service and I am inclined to them such taxable service as export of service and therefore not taxable. The issue of Second Proviso to Rule 3 (ii) was not brought out in the Show Cause Notice or in the Order-in- Original. However without going into the merits as to whether the goods were situated outside at that point of time or not and whether even the sample brought into India for testing can be considered as the goods being present in India, the issue decided only on the ground that no such allegation was made in the Show Cause Notice. Appeal allowed.

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• Central Excise

• 2023 (5) TMI 597
  Recovery of CENVAT Credit alongwith interest and penalty - Process amounting to manufacture or not - processing of steel Tubular Pole - Section 2(f) of the Central Excise Act, 1944 - HELD THAT:- The Appellant purchased and also manufactured in their factory, pipes and tubes of various sizes and lengths and those were converted into Steel Tubular Poles by cutting into required sizes and required lengths. Then they are swaged to feed into their next lower sized pipe. After swaging, welding is done and then a plate is fixed at the time of welding process. The swaged pipes are holed at required places and after that painting etc. are done to make the pole marketable. It is the contention of the Appellants that they used mild steel Black Pipes and MS plates, which are major raw materials. The Ld.Commissioner has wrongly distinguished the judgement of the Hon ble Supreme Court in the case of M/S. PRACHI INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [ 2008 (3) TMI 25 - SUPREME COURT] relied upon by the Appellant. The facts of the present case are squarely covered by the above-mentioned decision of the Hon ble Supreme Court - the Ld.Commissioner has not only misunderstood the judgement of the Hon ble Supreme Court, but has also wrongly interpreted the ratio laid down by the Hon ble Supreme Court in the impugned order. There is no dispute that MS Black Pipes manufactured by the Appellant in their own factory are first subjected to the process of swaging and later welded to make the desired length of pipes. Their Lordships in the judgement of Prachi Industries have distinguished the ratio of HINDUSTAN POLES CORPORATION VERSUS CCE, CALCUTTA [ 2006 (3) TMI 2 - SUPREME COURT ]. The facts in Hindustan Poles case related to mere joining of pipes by the process of welding only and no swaging of pipes was involved. By applying the ratio of the Hon ble Supreme Court in Prachi Industries, the processes of swaging and welding carried out by the Appellant results into manufacture of Tubular Poles and pipes of different lengths within the meaning of Section 2 (f) of Central Excise Act, 1944. The impugned order cannot be sustained and is therefore set aside - Appeal allowed.

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• 2023 (5) TMI 596
  Proportionate reversal of credit in respect of common input service in terms of Rule 6(3A)(a) of Cenvat Credit Rules, 2004 - Trading activity - Trading had been cleared as exempted service with effect from 01.04.2011 vide Notification No.3/2011-Central Excise (N.T.) dated 01.03.2011 - HELD THAT:- Admittedly the Appellant has filed the option letter belated by opting to reverse proportionate Cenvat on common inputs used. During the period under consideration, the Tribunals have been taking a liberal view that on account of the mistake of non-filing of the option letter which is only a procedural condition, the assessee should not be made to suffer by making huge payments in terms of 5%/6% of the value of the exempted services. In the case of M/S. MERCEDES BENZ INDIA (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [ 2015 (8) TMI 24 - CESTAT MUMBAI] has held that the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of Rs. 24,71,93,529/- of the total value of the vehicle amounting to. Rs. 494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. It is seen that even prior to Rule 6 (3AA) coming into effect from 01/4/2016, they have been taking the view that mere non filing of the option letter should not be used to deprive the assesssee from reversing the proportionate Cenvat Credit. The very fact that the Rule 6 (3AA) has been brought into effect from 1/04/2016 wherein the Adjudicating Authority is empowered to allow the assesse to reverse the Cenvat on proportionate basis on being pointed out, shows the legislative intent to allow the assessee to pay proportionate Cenvat Credit as the first option. The demand confirmed for Rs.2,52,853/- in terms of Rule 6(3)(i), i.e. on 5%/6% of value of exempted goods is not sustainable and the same is set aside - appellant has correctly reversed Rs.14,847/- along with interest of Rs.1796/- on proportionate reversal basis, in terms of Rule 6(3A). The interest paid by them is not disputed by the Revenue. Appeal disposed off.

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• 2023 (5) TMI 564
  CENVAT Credit - use of input services in connection with the trading of the goods in addition to the manufacture - wrongful availment of CENVAT credit on trading activity - period April 2004 to March 2011 - levy of penalty under Rule 15(2) of CENVAT Credit Rules, 2004 - HELD THAT:- The issue involved had a chequered history of litigation. Different Benches of Tribunal have decided for or against the Revenue. Hon ble Supreme Court in the case of LALLY AUTOMOBILES PRIVATE LIMITED VERSUS COMMISSIONER [ 2019 (6) TMI 414 - SC ORDER] has set to rest the controversy by deciding that CENVAT credit is not admissible on input services attributable to trading activity. This was affirmation of the Order passed in the same case by the Delhi Bench of Tribunal as well as the Hon ble Delhi High Court. The Tribunal in M/S LALLY AUTOMOBILES PVT LTD VERSUS CST, DELHI [ 2017 (12) TMI 27 - CESTAT NEW DELHI] has held that the appellants should not have availed credit for common input services which are used for taxable output service as well as trading activity, as it is imperative to identify and reverse that amount of credit attributable to the trading activity. We find no infirmity in the findings of the original authority on merit or on quantification. The appellants have claimed that credit attributable to input services used in the manufacture of dutiable goods cleared by them was also sought to be denied. In terms of Rule 2(l), the input services used in the manufacture of dutiable goods cleared by them qualify to be called input services and therefore, credit cannot be denied on the same. Moreover, the appellants submit that the amount actually liable to be reversed is Rs.41,82,096.48/-. This requires to be checked and properly arrived at. For this reason, the case needs to be remanded back to the adjudicating authority. Levy of penalty - HELD THAT:- Tribunal in the case of M/S LALLY AUTOMOBILES PVT LTD VERSUS CST, DELHI [ 2017 (12) TMI 27 - CESTAT NEW DELHI] observed that the appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also; it is not open to the appellant to claim that they were under bona fide belief that the provisions of Rule 6(3) will not apply to this situation; as already noted, there is no ground for such belief - while imposition of equal penalty would be harsh, the omissions by the appellants can be mitigated by imposition of a suitable penalty. Therefore, the penalty reduced to about 10% of the penalties imposed. The appeals are partly allowed by way of remand

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• 2023 (5) TMI 563
  Levy of penalty Personal Penalty on accountant - Rule 209 A of Central Excise Rules, 1944 - valuation of captively consumed yarn - failure to include the expenses such as bonus, gratuity, interest and marketing expenses and in the cost of yarn which has been used captively - no personal hearing was accorded to the appellant - principles of natural justice - HELD THAT:- It can be seen from the plain reading of the Rule 209 A that the person who is to be penalized under this provision needs to have physically dealt with the dutiable goods and have done certain acts which have made the subject goods liable for confiscation. He is consciously in the know of this very fact that by acquiring possession of such goods by transporting such goods and dealing with in other manners, will be render the goods liable for confiscation. The appellant was only an accountant who was doing normal accountancy work. The issue of valuation of captively consumed yarn is a matter of the interpretation and therefore the penal provision of Rule 209 A of Central Excise Rules, 1944 cannot be invoked against the person who is only involved in maintaining the accounts of the company. The Order-In-Original has not followed the principle of natural justice, as no personal hearing was accorded to the appellant. It is also no where mentioned in the Order-in-Original as to what efforts had been made by the department to serve notice of personal hearing to the appellant. Thus the matter was decided against the appellant in gross violation of principle of natural justice. The Order-In-Original concerning the penalizing the appellant under Rule 209 A of the Central Excise Rules, 1944 is concerned, same is without any merit - Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (5) TMI 595
  Doctrine of legitimate expectation - exemption from payment of sales tax - Vested Rights - dissenting / Split judgment - Section 2(17) of the West Bengal Sales Tax Act, 1994 which came to be amended w.e.f. 01.08.2001 vide West Bengal Finance Act, 2001, omitting tea blending from the definition of manufacture . - legitimate expectation was created by the competent authority, which lured the appellants to act in a certain manner As per M. R. SHAH , J. HELD THAT:- In the present case, prior to 2001, as per Section 2(17) of the Act, 1994, the activity of tea blending was included in the definition of manufacture . Therefore, being in the activity of tea blending , the appellants were entitled to the exemption from payment of sales tax as manufacturers. It cannot be disputed that being the manufacturer in the activity of tea blending the appellants would have always been entitled to the exemption from payment of sales tax. Being a manufacturer, being in the activity of tea blending , the appellants were availing the sales tax exemption. However, thereafter, the definition of manufacture as contained in Section 2(17) of the Act, 1994 came to be amended w.e.f. 01.08.2001 vide West Bengal Finance Act, 2001 and the activity of tea blending came to be excluded from the definition of manufacture . Consequently, the appellants ceased to be the manufacturers. Once the appellants ceased to be the manufacturers, the appellants shall not be entitled to the exemption from the payment of sales tax, which was available to the appellants as a manufacturer being in the activity of tea blending . Therefore, on and from 01.08.2001, tea blending activity ceased to be the manufacturing activity and the appellants ceased to be the manufacturers and therefore, on and from 01.08.2001, the appellants shall not be entitled to the exemption from payment of sales tax. The view taken by the learned Tribunal as well as the High Court agreed upon, that on and after 01.08.2001 and in view of the amendment to Section 2(17) of the Act, 1994, by which the definition of manufacture is amended and tea blending is excluded from the definition of manufacture , the appellants shall not be entitled to the exemption from payment of sales tax - appeal dismissed. As per KRISHNA MURARI, J. HELD THAT:- The doctrine of legitimate expectation, in simple terms, is a legal principle that arises when a public authority makes a promise or acts in a manner that leads an individual or a group to expect a particular outcome. This doctrine , which flows from the doctrine of rule of law, is based on the idea of fairness and consistency in the decision-making processes of public authorities - When a legitimate expectation of a specific outcome is created by a public authority, the said public authority is required to take into account such expectation created by it when making a decision that affects the interests of the individual or group concerned. If the public authority fails to do so, the individual or group has a right to challenge the decision and seek a remedy, such as an order to enforce the legitimate expectation, as is the situation in the case at hand. The doctrine of legitimate expectation was elaborated upon in the case of FOOD CORPORATION OF INDIA VERSUS. KAMDHENU CATTLE FEED INDUSTRIES [ 1992 (11) TMI 275 - SUPREME COURT ], wherein, this Court held that the duty of public authorities to act in a reasonable manner, entitles every person to have a legitimate expectation to be treated in such a reasonable manner. This legitimate expectation imposed on public authorities to act in a fair manner, as has been held, is imperative to ensure non-arbitrariness of state action. It was further held by this Court that while such a legitimate expectation might not by itself be an enforceable right, however, the failure to take into account such expectation may deem a decision of the public authority to be arbitrary. The doctrine of legitimate expectation finds its home within the doctrine of rule of law and is a limb of Article 14 that fights against the contamination of arbitrary state action and misuse of power - The doctrine of promissory estoppel and the doctrine of legitimate expectation, while they share a common root and a similar theme, by way of going through the rigours of common law, have developed into two distinct doctrines. The doctrine of promissory estoppel is a remedy in private law; however, the doctrine of legitimate expectation is a remedy in public law, and as stated above, is rooted in Article 14 of the Constitution of India. This legitimate expectation, created by the appropriate and competent authority, was broken when a subsequent amendment was brought in, wherein the words blending of tea was removed from the definition of manufacture . Such an amendment, by removing the said words, snatched away the legitimate expectation of a specific outcome, and ousted the appellants from claiming the tax holiday, to which they were promised by the original amendment. As can be seen, a reasonable legitimate expectation was created by the competent authority, which lured the appellants to act in a certain manner. Such a legitimate expectation was then snatched away, leaving the appellants without remedy, and in losses - In the present case at hand, while perusing through the subsequent amendment, it can be clearly seen that no such appropriate justification has been provided by the government. No appropriate reason for the enactment of the amendment, nor the considerations of the affected party have been discussed. A mere claim of change of policy is not sufficient to discharge the burden of proof vested in the government. The government must precisely show what the change of policy is, and why such a change of law is in furtherance of public policy, and the public good. It can be clearly seen that a legitimate expectation was created by the public authority, and such an expectation, accrued in the favour of the appellants herein, was rescinded by the said authority without any demonstration of public interest. No appropriate explanation has been provided as to why a shift was made in Law, and why such a shift, in spite of the loss which would occur to the appellants and similarly situated persons, was necessary to advance public interest. In such a circumstance, the legitimate expectation created in the minds of the appellants, must be protected, and the benefits given originally must be made applicable to the appellants herein for the period promised by the respondent authority. The Authority must be held accountable to the legitimate expectation created by it, and therefore, a direction is liable to be issued to the respondents herein to extend the benefits of the original amendment to the appellants herein, till the expiry of such a benefit as per the original amendment - Appeal allowed.

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• Indian Laws

• 2023 (5) TMI 594
  Dishonour of Cheque - no demand notice was served to the company M/s HG Retail Solutions Pvt. Ltd and only to the directors of the erstwhile company - complaint is time barred and beyond limitation as prescribed u/s 138 of NI Act or not - HELD THAT:- A meticulous examination of the statutory framework elucidated under sections 138 and 141 of NI Act reflects the intricate interplay of essential elements required to establish an offense thereunder. In essence, the realization of a penal offense under section 138 of the NI Act necessitates the confluence of certain indispensable prerequisites. Firstly, a cheque has to be drawn by the drawer on an account maintained by him in lieu of his discharge of liability towards payment either in whole or part. Secondly, such cheque has to be presented to the bank within a period of six months from the date it was drawn or within the period of its validity, whichever is earlier. Thirdly, such cheque when presented to the bank is returned by the bank unpaid. Fourthly, issuance of a written demand notice by the payee to the drawer of the cheque demanding payment within a period of 30 days from the date of the receipt of the information by the payee from the bank regarding the return of the cheque as unpaid. Fifthly, failure of the drawer to make such payment within a period of 15 days from the date of the receipt of the demand notice. It is noteworthy that noncompliance with any of the aforementioned imperative steps shall vitiate the very substratum of a prosecutorial cause of action , rendering it not maintainable and bad in law. Thus, compliance of the necessary ingredients is mandatory, in order to constitute an offence under section 138 NI Act. In Himanshu v. B. Shivamurthy [ 2019 (3) TMI 294 - SUPREME COURT ] , the Supreme Court while quashing the complaint and order of the High Court held that in the absence of the company being arraigned as an accused, a complaint against the appellant who was a Director of the said company was not maintainable. In the said case, the appellant had signed the cheque as a director of the company and for and on its behalf. It was held that section 141 postulates that if a person committing an offence u/s 138 is a company, then every person who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company will be deemed guilty of the offence - It was held that in the absence of a notice of demand being served on the company and without compliance with the proviso to section 138, the High Court was in error in holding that the company could now be arraigned as an Accused. In the present case, admittedly no demand notice was ever sent to the company i.e. the principal accused. There cannot be a prosecution without prosecuting the principal accused. The demand notice was only sent to the directors of the company. The company was made a party in the complaint u/s 138 NI Act, however the ingredient of section 138 NI Act which postulates that a demand notice be sent to the drawer of the cheque, stands unfulfilled - Even though the company was arrayed as an accused in the complaint under 138, however, without demand notice being served to the company the complaint itself fails and cannot be maintainable in terms of the provisions contained in section 138 NI Act. It is only when the company is prosecuted and proceeded against in compliance of section 138 NI Act, that vicarious liability in terms of section 141 NI Act will extend to its directors or others responsible for the commission of the offence. Given the absence of a demand notice served upon the company HG Retail, which constitutes the drawer of the cheque as the principal accused, the mandatory steps outlined in Section 138 of the NI Act have not been duly adhered to. Consequently, the complaint under section 138 NI Act is not maintainable and is bad in law. Since the complaint itself is held to be bad in law in absence of service of demand notice on the company is liable to fail. Therefore, this Court has not gone into the two remaining questions of limitation and specific averment against Kusum Tanwar. Petition allowed.

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