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Tax Updates - TMI e-Newsletters

Home e-Newsletters Index Year 2024 May Day 23 - Thursday

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TMI Tax Updates - e-Newsletter
May 23, 2024

Case Laws in this Newsletter:

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



Highlights / Catch Notes

    GST

  • Madras High Court examined validity of summons u/s 70 of CGST Act, 2017. Interference with summons justified only in exceptional circumstances. Petition disposed off.

    The Madras High Court examined the validity of summons issued u/s 70 of the Central Goods and Services Tax Act, 2017, following alleged abuse and threat during a premises search. The court emphasized that interference with a summons is warranted only in exceptional circumstances. The petitioner sought intervention based on a prior police complaint against the fifth respondent. However, the court noted that the relevant file had been transferred from the fifth respondent, assuring the petitioner of a different officer handling the matter. Consequently, the court dismissed the petition, finding the petitioner's apprehension unfounded.

  • Allahabad High Court held that penalty u/s 129 of GST Act not applicable for minor discrepancy in e-way bill vehicle number.

    The High Court ruled on a case involving the levy of penalty u/s 129 of the GST Act due to an error in mentioning the vehicle number in the E-way bill during the transit of goods. The court found that the discrepancy in the vehicle registration number did not indicate any intention to evade tax, as it was a genuine sale of goods. The court held that this minor error does not warrant penalty proceedings u/s 129. The court set aside the orders of the detaining authority and the first appellate authority, as there was no evidence of tax evasion beyond the incorrect vehicle number in the E-way bill. The petition was allowed, and the orders were deemed unsustainable in the eyes of the law.

  • Delhi HC held violation of natural justice due to ex-parte demand under CGST Act. Petitioner to respond to Show Cause Notice for ITC claim scrutiny. Impugned order set aside.

    The Delhi High Court addressed a case involving a violation of principles of natural justice due to an ex-parte demand created under section 73 of the CGST Act, 2017. The petitioner failed to respond to a Show Cause Notice regarding excess claim of Input Tax Credit (ITC) and scrutiny of ITC availed. The court held that the impugned order was solely based on the lack of reply to the Show Cause Notice. As there was no Annexure-B provided by the Respondents, the court granted the petitioner an opportunity to respond to the Notice. Consequently, the order dated 12.12.2023 was set aside, and the Show Cause Notice was remitted to the Proper Officer for re-adjudication. The petition was disposed of through remand.

  • Allahabad High Court held violation of natural justice due to non-speaking order, ignoring petitioner's replies, and incorrect tax rate application. Remanded for fresh reasoned order.

    The High Court found a violation of principles of natural justice due to a non-speaking order by the adjudicating authority, which ignored the petitioner's replies and failed to provide reasons for applying a high tax rate. The court emphasized that the adjudicating authority must consider and provide reasons for rejecting explanations submitted by the petitioner. The lack of reasoning in the adjudication order was deemed unfair and inadequate. Additionally, the authority erred in applying the highest tax rate without justification, especially when part of the turnover was exempt. The court noted that the petitioner was not responsible for delays in the proceedings and remitted the matter back to the authority for a fresh, reasoned order within three months. The writ petition was allowed for remand.

  • Bombay High Court held that provisional attachment u/s 83 of MGST Act must strictly follow prescribed conditions. Petition allowed as impugned attachments quashed.

    The Bombay High Court reviewed a case involving a provisional attachment u/s 83 of the MGST Act. The petitioner failed to justify non-payment of liability. Citing M/S Radha Krishan Industries v. State of Himachal Pradesh, the court emphasized that the power to order such attachment is draconian and must adhere strictly to statutory conditions. The court held that the Commissioner must form an opinion that attachment is necessary to protect government revenue. As this condition was not met in the present case, the court quashed the attachments and the order u/s 83. The petition was allowed.

  • The High Court held that the appeal filed u/s 107 of UPGST Act was within the statutory time limit. Errors on record justified writ jurisdiction. Delay allowed for appeal hearing.

    The case involved a challenge to the time limitation for filing an appeal under Section 107 of the UPGST Act. The High Court held that limitation provisions in tax laws serve to ensure timely compliance, discourage delays, and promote equal treatment of taxpayers. The petitioner received the order on July 12, 2022, and filed the appeal on November 10, 2022. The court found errors in the calculation of the time limit by the authorities, warranting the exercise of writ jurisdiction. The court directed the appellate authority to allow the delay in filing the appeal and proceed to hear the appeal on merits promptly, preferably within two months. The application was disposed of accordingly.

  • GST exemption denied for hostel accommodation services provided to students and working women. Registration required. Taxable at 9% CGST + 9% SGST. Food supply taxed as composite supply.

    The case involves a query regarding GST exemption for hostel accommodation provided to students and working women. The Authority for Advance Ruling, Tamil Nadu, determined that the accommodation services, along with ancillary services, constitute a business subject to GST registration. The premises were deemed commercial, not residential, making them taxable. The applicable GST rate for hostel accommodation services was set at 9% CGST + 9% SGST. The supply of in-house food was considered part of a composite supply, with the principal service being accommodation, taxed at 18%.

  • Income Tax

  • Extension of due date for filing Form No. 10A/10AB under Income-tax Act, 1961 extended to 30.06.2024 for genuine hardship cases u/s 119.

    The Central Board of Direct Taxes, u/s 119 of the Income-tax Act, 1961, extended the due date for filing Form No. 10A to 31.08.2021, 31.03.2022, 25.11.2022, and 30.09.2023 through Circulars. Requests for condoning delays were received, leading to an extension for filing Form No. 10A to 30.06.2024. Similarly, the due date for Form No. 10AB was extended to 30.09.2022 and further to 30.09.2023. Pending applications under specific sections were addressed, allowing for valid applications and fresh submissions. Trusts failing to file Form No. 10A for AY 2022-23 can opt for provisional registration and later apply as existing entities by 30.06.2024.

  • Consequences of PAN inoperative u/r 114AAA. Failure to link Aadhaar leads to higher tax deduction/collection. Partial relief if linked before 31.5.2024

    The circular modifies the consequences of a PAN becoming inoperative u/r 114AAA of the Income-tax Rules, 1962. Failure to provide Aadhaar number u/s (section) of the Act will result in the PAN becoming inoperative. Consequences include higher tax deduction and collection rates until the PAN becomes operative again. - For the transactions entered into upto 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax at higher rate.

  • Calcutta High Court upheld PCIT's order u/s 263, rejecting claim for exemption of Long Term Capital Gain from penny stock shares as prima facie erroneous.

    The Calcutta High Court reviewed a case involving a revision u/s 263 regarding the addition u/s 68 for a purportedly bogus claim of exemption of Long Term Capital Gain from the sale of shares of a penny stock. The Principal Commissioner of Income Tax (PCIT) found the assessment to be prima facie erroneous and prejudicial to revenue, leading to the issuance of a show cause notice. The PCIT independently evaluated the assessment records, concluding that the assessing officer should have treated the credit as bogus and disallowed the exemption u/s 10(38). The High Court differentiated this case from a previous ruling involving Sinhotia Metals and Minerals Pvt. Ltd., emphasizing that the PCIT's decision was valid in this context. The Court overturned the Tribunal's decision, reinstating the PCIT's order u/s 263.

  • ITAT Delhi held that TDS not applicable on income/profit component in payments to distributors/franchisees.

    The ITAT Delhi ruled on TDS u/s 194H and 194J regarding income/profit component in payments to distributors/franchisees. The payment cannot be treated as commission or brokerage. Citing Bharti Cellular Ltd. case, it held no legal obligation for TDS on such payments. Section 194-H deemed inapplicable, leading to setting aside of the demand u/s 201(1)/201(1A). Appellant's appeal allowed based on established legal principles.

  • ITAT Bangalore ruled in favor of the assessee, accepting agricultural income as reported, rejecting unexplained money claim u/s 69A during demonetization period.

    The ITAT Bangalore, in a case involving unexplained money u/s. 69A, addressed deposits in a bank account during the demonetisation period. The DR argued that the assessee failed to provide external evidence supporting the agricultural income declared. The tribunal noted the average agricultural income reported by the assessee for the previous three years. It observed that the AO had accepted the agricultural income while computing the total income, which is crucial for raising a demand u/s 156. Consequently, the AO could not treat it as unexplained investment u/s. 69A. The tribunal accepted the assessee's plea, considering the income as agricultural income and applying the normal tax rate. As the assessee had shown agricultural income of Rs. 15,84,000 in the return, with a portion accepted by the ld. CIT (A), the remaining amount was also deemed agricultural income. Therefore, the assessee's appeal was allowed.

  • ITAT Delhi ruled in favor of the appellant trust, allowing expenses on business support services and salary, and justifying payments made for commission and computers.

    The ITAT Delhi assessed a charitable trust's expenses, including payments to a sister entity for business support services and commission to consultants. The AO disallowed expenses under section 13(3) of the Income Tax Act, alleging violation of conditions under section 13(2)(g). However, the trust demonstrated that the expenses were justified and commensurate with market value. Disallowance of faculty salary due to lack of qualifications was unfounded as the trust employed qualified individuals. Payment of commission and expenses on computers to students were deemed reasonable based on evidence provided. The tribunal found the AO's orders unsustainable and not legally sound.

  • ITAT confirmed that assessee is in default for non-deduction of TDS u/s 194IA. Interest u/s 201(1A) and penalty u/s 271(c) also upheld.

    The ITAT Ahmedabad, in proceedings u/s 201(1) and 201(1A), found the assessee-in-default for non-deduction of TDS u/s 194IA on property purchases. The assessee failed to provide evidence to support eligibility for proviso to Section 201(1), leading to dismissal of appeal. Interest u/s 201(1A) upheld till payee's return filing. Penalty u/s 271(c) for non-deduction of TDS u/s 194-IA was deemed justified. The appeal was decided against the assessee.

  • ITAT Jabalpur allowed benefit u/s 43CA for plots booked in FY 2009-10, 2010-11, 2013-14. AO to recompute profits considering sale details for Section 43CA benefit.

    In the case before ITAT Jabalpur, the issue revolved around the addition u/s 43CA concerning the variance between the sale consideration and the market value of a property. The AO contended that an unregistered agreement of sale could not be legally recognized and highlighted discrepancies in parties involved in transactions. However, the Tribunal ruled in favor of the assessee, recognizing entitlement to benefits u/s 43CA (3) for plots booked in specific financial years. The AO was directed to recalculate profits, considering detailed registry information on plot sales annually and granting the benefits of Section 43CA accordingly.

  • Appellant challenges limitation period findings by Single Judge in Delhi High Court. Dispute over TDS deposit date and transaction details. Appeal dismissed.

    The Delhi High Court dismissed the appeal challenging the findings of the Single Judge on the limitation period for a suit. The appellant did not dispute the legal findings that the deposit of TDS triggers a fresh limitation period u/s 19 of the Act of 1963. The appellant raised a factual dispute regarding a transaction reflected in the TDS certificate, claiming it pertained to a separate transaction. The court rejected this claim as it was not raised before the Single Judge. The court held that the Single Judge's conclusion based on the TDS certificate was in line with the evidence and law. The court dismissed the appeal and pending applications, affirming the Single Judge's decision on the limitation issue.

  • ITAT Ahmedabad allowed the exemption u/s 11, stating activities like fee collection for statutory purposes are not commercial in nature.

    The ITAT Ahmedabad considered the eligibility of exemption u/s 11 for an assessee engaged in activities like development planning, town planning schemes, and fee collection. The AO argued the assessee's profit motive disqualifies it from claiming benefits u/s 11 & 12. However, the tribunal referenced the Supreme Court's decision in AUDA case, emphasizing that fees collected for statutory activities are not considered trade or business. Activities like housing development by statutory bodies are not commercial in nature. The nature of the service provided is crucial; essential public services like water or sewage cess are not deemed commercial. Non-statutory bodies engaging in trade promotion or business facilitation may not qualify for charitable status. The tribunal allowed the assessee's appeal based on these principles.

  • Rajasthan High Court held that limitation for passing order u/s 263 starts from original assessment date, not reassessment date. Revision proceedings set aside.

    The Rajasthan High Court examined the validity of revision proceedings u/s 263 concerning the period of limitation. The issue was whether the period of limitation for passing the order u/s 263 should be reckoned from the date of the original assessment order or the date of the reassessment order. The Court referred to the Supreme Court's judgment in the case of Industrial Development Bank of India Ltd. and followed the decision in the case of Chambal Fertilisers and Chemicals Limited. It was held that once the reassessment of the escaped assessment occurred, the revision would have the same limited ambit for the purpose of limitation prescribed in Section 263(2) of the Income Tax Act of 1961, which is two years. The Court noted that the petitioner could have challenged the original assessment order but lost due to the law of limitation. Citing the Supreme Court's ruling, the Court found the revision proceedings to be illegal on the face of it due to limitation issues, set them aside.

  • Allahabad High Court upheld validity of reassessment based on 'reason to believe' from information received, allowing assessment proceedings to continue as per law.

    The case before the Allahabad High Court involved the validity of reassessment proceedings initiated by the assessing authority based on information that the purchaser did not exist. The court held that the decision to initiate reassessment was based on relevant information and the suggestion of income escapement. The non-existence of the purchaser was supported by the purchaser's lack of response to notices and statements from a third party. The court noted that the existence of the purchaser company on the MCA portal was not a mandatory condition for reassessment. The court emphasized that the assessing officer's decision to initiate reassessment was based on the information received and the suggestion of income escapement, rather than a strict "reason to believe" requirement. The court dismissed the writ petition, allowing the assessment proceedings to continue in accordance with the law.

  • ITAT Rajkot held that Notification No. SRO 1800 is superseded by Section 80P of the Act for cooperative societies' tax deductions. Assessee's claim dismissed.

    The case involves a dispute regarding the deduction claim u/s 80P of the Income Tax Act by a cooperative society based on Notification No. SRO 1800 issued under the repealed Act. The Appellate Tribunal held that the introduction of Section 80P specifically for cooperative societies supersedes the previous notification. The Tribunal emphasized that deduction/exemption provisions are similar and that the notification stands withdrawn as per Section 297 of the Act. The Tribunal referred to relevant case law and concluded that the cooperative society is not eligible for the claimed benefit under Section 80P as it does not meet the necessary criteria. The appeal by the assessee was dismissed based on these findings.

  • ITAT Indore held that the reassessment based on invalid reasons is not valid. AO cannot assess independent incomes not part of original reasons u/s 147. Assessee succeeds in appeal.

    The ITAT Indore ruled on the validity of reopening assessment u/s 147 based on information from DDIT (Inv.)-Unit 2(2), Kolkata alleging sham transactions with a shell company. Assessee consistently denied such transactions. Tribunal found no evidence of transactions with the alleged shell company, rendering the reassessment invalid. The AO cannot make new additions unrelated to original reasons u/s 147. The 3rd Proviso restricts AO to reassess only matters not subject to appeal, reference, or revision. Relying on Jet Airways case, the reassessment order was quashed, and the assessee succeeded in the appeal.

  • ITAT Chennai ruled on deduction u/s 80IA for power supply to industrial units. Market value determined by State Electricity Board rate. Assessee's claim upheld.

    The ITAT Chennai ruled on deduction u/s 80IA, focusing on determining the market value of power supplied by the assessee to its industrial units. The AO argued for using rates fixed by Tariff Regulatory Commission, while the assessee supported using the average price of power purchased. The Supreme Court clarified that "market value" refers to the price in a free trade environment. It held that the market value should be based on the rate at which the State Electricity Board supplied power to consumers, not the rate sold to a supplier. The ITAT noted that the AO allowed the deduction for the initial year and subsequent years. The assessee used a price of ₹5.60 per unit based on charges paid to Tamilnadu Electricity Board. Ultimately, the ITAT held that the State Electricity Board's rate should be considered the market value for claiming deduction u/s 80IA, dismissing the Revenue's grounds.

  • Delhi High Court directs reconsideration of stay of demand order, highlighting AO's failure to assess prima facie merits and undue hardship.

    The Delhi High Court addressed a case involving a stay of demand where the petitioner was required to deposit 20% of the outstanding demand as a pre-condition for protection. The court found that the assessing officer (AO) did not consider the prima facie merits of the challenge raised by the petitioner or address the issue of undue hardship. Referring to a previous case, the court emphasized the importance of examining the AO's power under Section 220(6) of the Act and criticized the AO's stance that the application for stay could not be entertained without the pre-deposit. The court concluded that the petition should be remitted to the AO for a fresh consideration of the stay application.

  • Review petition filed seeking reconsideration of order dismissing appeal. Court held no grounds for review as no error apparent on record.

    The case involves a review petition filed in the Madhya Pradesh High Court seeking to recall an order that dismissed an appeal due to the absence of substantial questions of law. The court held that a review application is maintainable for reasons such as the discovery of new evidence, a mistake or error apparent on the face of the record, or any other sufficient reason. The review power is distinct from appellate power and cannot be used to rehash old arguments. The court cited legal precedents to emphasize that a decision can only be reviewed if it contains an error evident on the face of the record, not merely because it is erroneous. Ultimately, the court found no error apparent on the face of the record to justify interfering with the impugned order.

  • ITAT Bangalore examined if microfinancing by assessee qualifies as charitable activity u/s 11. Charging high interest deemed commercial, not charitable. Decision favors revenue.

    The ITAT Bangalore considered whether an organization engaged in microfinancing activities qualified for exemption u/s 11 as a charitable entity or if its activities were commercial in nature. The tribunal emphasized that if an organization's primary activity is trade or business, it must not have a dominant profit motive and should not use charity as a cover for commercial activities. The tribunal noted that charging exorbitant interest rates akin to commercial banks indicated a profit-driven motive, making it ineligible for exemption. The organization's activities did not align with benefiting low-income groups as required for charitable status. The tribunal ruled in favor of the revenue authority, denying the organization's claim for exemption u/s 11.

  • Customs

  • Queries on drawback applicability addressed by Chennai Customs, emphasizing reduced physical interface. Exporters to upload self-declaration for clarity.

    The public notice issued by the Commissioner of Customs, Chennai addresses queries on drawback applicability and aims to reduce physical interface. It highlights that drawback rates do not apply to exports from Export Oriented Units or units in Free Trade Zones/SEZs. To streamline the process, exporters must upload a self-declaration certifying goods were not from these units. This eliminates the need for manual queries and physical visits. The notice responds to concerns raised by the Chennai Custom Brokers' Association and emphasizes the importance of compliance with trade policies.

  • Extension granted for 3 months to Ortho-phosphoric Acid from BIS standard IS 798:2020. Amendment exempts acid used in fertilizer production.

    The Ministry of Chemicals and Fertilizers issued an amendment to the Ortho Phosphoric Acid (Quality Control) Order, 2021, granting a 3-month extension from the applicability of BIS standard IS 798:2020 for Ortho-phosphoric Acid used in fertilizer manufacturing. This extension was implemented through a notification dated 13.04.2024. The amendment exempts Ortho Phosphoric Acid when used in fertilizer production from the BIS standard for 90 days. The Order, effective upon publication, aims to ensure public interest and quality control compliance. Authorities are instructed to sensitize officers and address any arising difficulties. The amendment was made u/s 16 of the Bureau of Indian Standards Act, 2016.

  • CESTAT Bangalore held no mis-declaration in import value. Confiscation and penalty under section 112(a)(ii) set aside for 100% EOU engaged in software services.

    In the case before CESTAT Bangalore, the issue revolved around mis-declaration of import value, duty demand, confiscation of goods, and penalty imposition. The appellant, a 100% EOU providing software development services, imported a semi-conductor fabrication system. The appellant declared the value based on the supplier's proforma invoice, which was later found to be undervalued due to the goods being used. The Chartered Engineer enhanced the value, impacting the export obligation. The tribunal held that there was no intentional mis-declaration or suppression by the appellant, as the declared value was based on the proforma invoice. Consequently, the confiscation order and penalty imposed under section 112(a)(ii) were set aside.

  • CESTAT Kolkata held that no evidence showed Customs Broker's involvement in fraudulent activities. Penalty and forfeiture set aside as no case was made against the broker.

    The CESTAT Kolkata, an Appellate Tribunal, considered a case involving a Customs Broker accused of illegal activities leading to the forfeiture of their security deposit and imposition of a penalty for violating Regulation 19(8) of CHLR, 2004. The Tribunal found that the main noticee was a different entity, not the present Appellant. The allegations of fraudulent activities were not substantiated against the Customs Broker, and no evidence showed their involvement in the specific case. The Tribunal noted that mere possession of an H-Card by another individual associated with the Broker did not implicate the Broker in any wrongdoing. The Enquiry Officer's report also cleared the Customs Broker of any misconduct. Consequently, the Tribunal set aside the penalty and forfeiture, ruling in favor of the Customs Broker and disposing of the appeal.

  • CESTAT Allahabad upheld refund of SAD on goods sold with VAT. Compliance with Notification No.102/2007 and circular No.16/2008-Cus. No unjust enrichment found.

    CESTAT ALLAHABAD held that refund of Special Additional Duty (SAD) on goods sold with VAT charged is permissible u/s Notification No.102 of 2007 Cus. The tribunal found that refund claims met notification and circular requirements, including certification by a chartered accountant to avoid unjust enrichment. Adjudicating authority followed board guidelines in sanctioning refunds. Previous tribunal decisions favored respondents, dismissing revenue appeals. Distinction made from a Supreme Court case not applicable to SAD refund cases.

  • HC quashes proceedings u/s 36(1) Legal Metrology Act, 2009 due to lack of authority. Duty-free shops at an international airport, deemed outside India's territory.

    The Calcutta High Court considered a Revision Application regarding the seizure of goods from duty-free shops at an international airport, deemed outside India's territory. Citing the Supreme Court's precedent, the court quashed the proceedings as the complainant lacked authority to initiate them for offenses outside India's customs frontiers. The court allowed the revision, quashing the proceedings under u/s 36(1) of the Legal Metrology Act, 2009 u/r 32(3) of the Legal Metrology (Packaged Commodities) Rules, 2011.

  • DGFT

  • Discontinuation of Safeguard measures on Isopropyl alcohol import under Chapter 29 of ITC (HS) 2022, effective from 01.04.2024. - DGFT

    The Government of India, Ministry of Commerce & Industry, Department of Commerce, Directorate General of Foreign Trade, has discontinued safeguard measures on the import of Isopropyl alcohol (IPA) under Chapter 29 of ITC (HS) 2022, Schedule-I (Import Policy). This decision was made through DGFT Notification No. 64/2015-20 dated 31.03.2023 and Public Notice No. 04/2015-20 dated 11.04.2023, imposing country-wise Quantitative Restrictions (QR) on IPA imports for the period 2023-24. The restrictions automatically ceased on 31.03.2024 as per the notification. Import of IPA under HS code 29051220 is now "Free" without any Policy Condition effective from 01.04.2024.

  • Clarification on fulfilling export obligation of Advance Authorisation under Customs Notifications, allowing options for physical exports or domestic supplies.

    The Policy Circular No. 01/2024 issued by the Directorate General of Foreign Trade provides clarification on the discharge of export obligations of Advance Authorisation (AA) under specific Customs Notifications. Advance Authorisation holders have the option to fulfill export obligations through physical exports or domestic supplies as per FTP 2015-2020 guidelines. The circular harmonizes Para 4.14 of FTP 2015-2020 with Customs Notification No. 01/2019-Customs, allowing AA holders issued after 10.01.2019 to choose various options for fulfilling export obligations, including supplies to specific entities and capital goods supply against EPCG authorization. Holders of Advance Authorisation for deemed exports under Customs Notification No. 21/2015-Customs can also fulfill obligations through specified supplies or physical exports. The circular is approved by the DGFT and provides clarity on compliance options for AA holders.

  • Amendments made to Appendix-2Y of FTP, 2023, adding Ministry of Mines to the list of exempted QCOs for import of inputs by Advance Authorisation holders, EOU, and SEZ.

    The Directorate General of Foreign Trade, u/s 1.03 and 2.04 of the Foreign Trade Policy (FTP), 2023, has amended Appendix-2Y to exempt certain Ministries/Departments' notifications on mandatory Quality Control Orders (QCOs) for import of inputs by Advance Authorisation holders, EOU, and SEZ. The updated list includes Ministry of Steel, DPIIT, Ministry of Textiles, and now Ministry of Mines. This amendment, effective immediately u/r Notification No. 71/2023, facilitates import of goods for manufacturing export products. Signed by the Director General of Foreign Trade.

  • SION - Correction made to import quantity of Filter Aid in Public Notice No. 01/2024 dated 9th April, 2024 from 3600 Kg to 3.600 Kg by DGFT u/s 1.03 of FTP, 2023.

    The corrigendum issued by the Directorate General of Foreign Trade corrects the import quantity of Filter Aid in relation to SION E-124 for the export item Refined Sunflower Oil (Edible Grade). The correction was made u/s 1.03 of the Foreign Trade Policy, 2023. The import quantity of Filter Aid at S. No. 6 in Public Notice No. 01/2024 dated 9th April, 2024 was amended from 3600 Kg to 3.600 Kg. This correction is in accordance with the powers conferred u/s 1.03 of the Foreign Trade Policy, 2023.

  • FEMA

  • RBI sets investment limits for FPIs in debt and Credit Default Swaps for 2024-25. Revised limits for different categories specified. - FEMA

    The Reserve Bank of India has issued a circular (RBI/2024-25/27) regarding investment limits for Foreign Portfolio Investors (FPIs) in debt instruments and Credit Default Swaps. The circular references various previous directives and sets the investment limits for the financial year 2024-25. The limits for FPI investment in government securities, state government securities, and corporate bonds remain unchanged. The circular also specifies the allocation of incremental changes in limits and sets out revised investment limits for different categories for the year 2024-25. Additionally, the circular sets an aggregate limit for the notional amount of Credit Default Swaps sold by FPIs. Authorized Dealer Category-I banks are instructed to inform their constituents about the circular. The circular is issued u/s 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.

  • Case involves unauthorized foreign exchange transactions u/s 3 of FEMA. Authorities took action against the same.

    The case involves unauthorised foreign exchange transactions conducted in violation of regulations. The individual engaged in these transactions without proper authorization, contravening u/s of the relevant law. The regulatory authorities initiated proceedings u/s to address the unauthorized activities. The individual's actions were found to be in breach of u/r, leading to potential legal consequences. The case underscores the importance of compliance with foreign exchange regulations to avoid legal repercussions.

  • RBI allows resident entities to hedge gold price risk using OTC derivatives in IFSC, in addition to exchanges, as per updated guidelines.

    The Reserve Bank of India (RBI) issued Circular No. 01/2024-25 allowing resident entities to hedge gold price risk in overseas markets using OTC derivatives in addition to exchanges in the International Financial Services Centre (IFSC). This decision aligns with the Master Direction on Foreign Exchange Management. The circular, effective immediately, was issued u/s 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, and does not affect compliance with other laws.

  • Corporate Law

  • The High court uphold the decision that the Regional Director (NR) of ROC acted within the bounds of a quasi-judicial function and that the disciplinary proceedings were unjustified

    The Delhi High Court upheld the order quashing of the disciplinary proceedings against the Regional Director (NR) of ROC, emphasizing the distinction between executive and quasi-judicial functions under the Act. The court held that an authority's act can be quasi-judicial even without two competing parties, considering factors like nature of rights affected. Referring to relevant case law, the court highlighted the need for objective criteria and consideration of objections for a function to be quasi-judicial. The court noted the elaborate procedure under Rule 30 for shifting applications, requiring examination of objections and reports from RoCs. Despite allegations of misconduct, the court found no fault in the respondent's approval of shifting applications, given reliance on information provided and lack of alerts about pending inspections. The court dismissed the petition, emphasizing the respondent's heavy workload and lack of evidence against other officers involved.

  • State GST

  • Circular clarifies treatment of statutory dues under GST law for taxpayers under IBC. Reduction in dues to be intimated for recovery proceedings.

    The circular issued by the Government of Tamil Nadu, Commercial Taxes Department, addresses the treatment of statutory dues under GST law for taxpayers whose proceedings have concluded under the Insolvency and Bankruptcy Code, 2016 (IBC). It clarifies that no coercive action can be taken against corporate debtors for dues prior to the commencement of the Corporate Insolvency Resolution Process (CIRP). The circular emphasizes the treatment of such dues as 'operational debt' and outlines the process for filing claims before the National Company Law Tribunal (NCLT) in accordance with the IBC. The Commissioner, u/s 168 of the Tamil Nadu Goods and Services Tax Act, provides clarity on the continuation and validation of recovery proceedings u/s 84 of the Act. It explains that if government dues are reduced through appeals or other proceedings, the Commissioner must inform the taxpayer and appropriate authority, allowing recovery proceedings to continue for the reduced amount.

  • Indian Laws

  • High Court held that allegations in FIR disclose cognizable offence of misappropriation of money collected for GST and TDS. Petition to quash FIR dismissed.

    The Karnataka High Court examined a case involving misappropriation of money collected from punters for GST and TDS payments. The court held that the allegations in the FIR disclosed a cognizable offense, rejecting the petitioners' argument that the police procedure was contrary to legal principles. The court emphasized that Section 482 of the Criminal Procedure Code should not be used to thwart a legitimate prosecution. The court found that the allegations and evidence collected during the investigation established a prima facie case of a cognizable offense, including serious allegations of misappropriation of funds. Consequently, the petition to quash the FIR was dismissed, allowing the investigation to proceed.

  • IBC

  • Partial modification to IBBI circular on liquidators' fee under IBBI (Liquidation Process) Regulations, 2016. Certain paragraphs withdrawn, compliance deadline extended.

    The circular no. IBBI/LIQ/61/2023 dated 28th September 2023 regarding liquidators' fee under Regulation 4 of IBBI (Liquidation Process) Regulations, 2016 has been partially modified. The Hon'ble Bombay High Court, in a case involving the Insolvency and Bankruptcy Board of India, invalidated Paragraphs 2.1 and 2.5 of the circular. Consequently, these paragraphs are withdrawn. Insolvency Professionals who have not complied with the circular are required to do so by 31st May 2024. This modification is made u/s 196 of the Insolvency and Bankruptcy Code, 2016.

  • Admissibility of second petition u/s 7 of Insolvency and Bankruptcy Code - default on loan instalments - CD's deceptive actions - Appeal dismissed.

    The National Company Law Appellate Tribunal, Principal Bench, New Delhi, addressed the admissibility of a second petition u/s 7 of the Insolvency and Bankruptcy Code, 2016, concerning unpaid instalments and the existence of debt and default. The Corporate Debtor availed a loan from the Financial Creditor but failed to make payments, leading to the first petition being admitted. A settlement was reached, but the Corporate Debtor failed to honor it, resulting in the Financial Creditor filing a second petition for the remaining debt. The Adjudicating Authority rightly admitted the second petition, emphasizing that allowing such tactics by the Corporate Debtor would be detrimental. The Tribunal held that the amount paid during the appeal should be adjusted only if supported by a written agreement; otherwise, the Financial Creditor could adjust it towards interest. The appeal was dismissed, and the deposited amount was ordered to be returned to the Appellant.

  • NCLAT upholds NCLT order u/s 66 of IBC, 2016 for fraudulent transactions reducing liability towards Corporate Debtor. Appeal dismissed.

    The National Company Law Appellate Tribunal in New Delhi addressed the maintainability of proceedings u/s 66 of the Insolvency and Bankruptcy Code, 2016. The Resolution Professional failed to provide a clear opinion as required by Regulation 35A, leading to the filing of the application u/s 66. The Tribunal held that action can be taken against any person involved in fraudulent transactions to recover amounts for the Corporate Debtor. In this case, the appellant was closely linked to the Corporate Debtor, reducing the outstanding amount and causing losses to creditors. Previous cases support the Tribunal's decision to uphold orders u/s 66. The Tribunal found no reason to interfere with the Adjudicating Authority's order, and the appeal was dismissed. The authority to recover from fraudulent transactions was affirmed by the Supreme Court in Phoenix Arc (P) Ltd. vs. Spade Financial Services Ltd.

  • Bombay High Court emphasizes timely compliance with NCLT Rules for CIRP applications u/s 94 and 95 of IBC. Extreme delays in processing and non-compliance addressed.

    The Bombay High Court addressed non-compliance with Rule 28 of the NCLT Rules, 2016 regarding timely registration and disposal of applications u/s 94 and 95 of the Insolvency and Bankruptcy Code, 2016. It noted extreme delays in compliance with objections and in declining matters for non-compliance, leading to unreasonable continuance of interim moratorium against personal guarantors. Applications were declined after significant delays, indicating prolonged moratorium periods. The court emphasized the importance of timely compliance with rules and dismissed the petition, highlighting the need to follow due process for refiled applications.

  • CIRP Application dismissed as Corporate Debtor's name struck off by RoC. Code aims at revival, not debt recovery. CIRP for CD's protection and revival, not adversarial. No error found, appeal dismissed.

    The NCLAT upheld the order of NCLAT dismissing an application for resolution as the Corporate Debtor's name was struck off by the RoC. The application under Section 9 was questioned whether it was for winding up or CIRP initiation. The Tribunal clarified that winding up involves company dissolution and asset liquidation for creditor payment, while CIRP aims at company revival. The Code is not a debt recovery mechanism but a revival tool. CIRP safeguards the Corporate Debtor's interests and aims at maximizing asset value. Section 252(3) provides appeal rights for challenging RoC orders. The Appellate Tribunal found no errors in the Adjudicating Authority's order and dismissed the appeal.

  • SEBI

  • Flexibility granted to Alternative Investment Funds (AIFs) and investors for handling unliquidated investments, detailed under specific categories.

    The circular issued by SEBI, provides flexibility to Alternative Investment Funds (AIFs) and their investors in dealing with unliquidated investments. It outlines the format for reporting such investments u/s specified rules. This information falls under the categories of "Legal framework - Circulars" and "Info for - Alternative Investment Funds."

  • SEBI amends contract note requirements for 'fit and proper' status, easing business procedures. Stock Exchanges to update rules accordingly.

    The circular issued by SEBI on April 24, 2024, addresses the ease of doing business by amending the requirement of publishing 'fit and proper' status on contract notes. The relaxation, u/s 11(1) of the SEBI Act, eliminates the need to include the text of Regulation 19 of the SCR(SECC) Regulations, 2018 on contract notes. Instead, a reference to the applicable regulation must be made by mentioning the URL/weblink. Stock Exchanges must amend bye-laws, rules, and regulations accordingly and inform members about the changes. This action aims to streamline processes and protect investors' interests in the securities market.

  • SEBI allows cross margin benefits for offsetting positions with different expiry dates, subject to specified conditions for stock exchanges and clearing corporations.

    The SEBI circular dated April 23, 2024, extends cross margin benefits for offsetting positions with different expiry dates. Spread margins of 40% for correlated indices and 35% for index and constituents are introduced. The benefit is revoked on the expiry day of the first position to expire. Exchanges must monitor cross margin activities. Effective in three months, the circular is issued u/s 11(1) of the SEBI Act to safeguard investor interests and regulate the securities market.

  • SEBI issues circular mandating AIFs to submit standardized PPM audit reports online for annual compliance, with optional sections. Review and revisions planned.

    The circular mandates Alternative Investment Funds (AIFs) to conduct an annual audit of compliance with the Private Placement Memorandum (PPM) as per SEBI (AIF) Regulations, 2012. A standardized reporting format for PPM Audit Report has been introduced for various AIF categories in consultation with the Standard Setting Forum for AIFs (SFA). AIFs must submit the PPM audit reports to SEBI online through the SEBI Intermediary Portal (SI Portal) within 6 months from the end of the Financial Year. Optional audit sections include 'Risk Factors', 'Legal, Regulatory and Tax Considerations', 'Track Record of First Time Managers', 'Illustration of Fees and Expenses', and 'Glossary and Terms'. The reporting requirements are effective for the Financial Year ending March 31, 2024 onwards. The circular is issued u/s 11(1) of the Securities and Exchange Board of India Act, 1992 to safeguard investor interests and regulate the securities market. The reporting format will be periodically reviewed and

  • Service Tax

  • CESTAT Mumbai held appellant liable for service tax on retained amount from unclaimed goods sale proceeds. Upheld Commissioner's order following precedent.

    The case involves a dispute over service tax liability on the amount retained by the appellant from the sale proceeds of unclaimed imported goods. The appellant, an operator of a container freight station and custodian of goods, paid service tax under protest for the period February 2004 to 17.07.2008. The appellant argued that no service was provided for the auction surplus of abandoned cargo. The tribunal considered the precedent decision in the appellant's own case, which favored the appellant on the same issue for an earlier period. However, changes in the law post-2011 and the distinction between charges for storage and warehousing services and auction proceeds of abandoned goods were noted. The appellant's reliance on a previous tribunal decision regarding CENVAT credit on services used for auction of abandoned goods was also discussed. The tribunal found that the appellant was liable to pay service tax on storage and warehousing services for the disputed period.

  • Central Excise

  • CESTAT allows refund claim on duty paid for outward freight charges in FOR basis sales. Decision based on legal precedents. Majority Decision.

    The CESTAT Chandigarh, in a majority decision, in an appellate tribunal decision, allowed the appeal regarding the rejection of a refund claim for duty paid on outward freight charges. The appellant, clearing goods from their factory gate and selling on a FOR basis, was found entitled to claim a refund of central excise duty paid on freight. The tribunal, following precedents including a Larger Bench ruling and a High Court decision, held that denial of the refund was not legally sustainable. The impugned orders were set aside, allowing all appeals with consequential relief as per law.

  • VAT

  • Andhra Pradesh High Court allowed appeal without depositing 12.5% u/s 31 of AP VAT Act, following precedent to consider appeal without payment.

    The case involves the Admission of appeal for compliance with the deposit requirement of 12.5% u/s 31 of the AP VAT Act. The rejection of endorsement was based on Form-H filing timing post CST assessment. The court held that u/s 31(1) IIIrd proviso, appeal admission requires proof of payment of due amounts and 12.5% difference. As no tax, penalty, or interest was due, the 12.5% deposit was not necessary. Citing M/s. Sri Hari Maharalayam Company case, the court directed appeal consideration without the 12.5% payment. The impugned order was set aside, directing the respondent to admit the appeal without III proviso compliance. The writ petition was allowed.


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