TMI Tax Updates - e-Newsletter
May 24, 2022

Case Laws in this Newsletter:

Articles

1. SC: No IGST on Ocean Freight under RCM for CIF Import

   By: Bimal jain

2. Provisos must also be numbered for easy reading, understanding ,referencing and uniform understanding by all concerned and to avoid confusions and disputes.

   By: DEVKUMAR KOTHARI

News

1. Investment Incentive Agreement between the Government of the United States of America and the Government of India

2. Excise duty cut: Petrol price slashed by Rs 8.69/ltr, diesel by Rs 7.05/ltr

Notifications

Central Excise

1. 02/2022 - dated 21-5-2022 - CE

Seeks to amend Notification No. 04/2019-Central Excise reducing Road and Infratructure Cess (RIC) on Petrol and Diesel.

Customs

2. 29/2022 - dated 21-5-2022 - Cus

Seeks to amend notification No. 27/2011 dated 1st March, 2011 to increase export duty on certain goods.

3. 28/2022 - dated 21-5-2022 - Cus

Seeks to amend Second Schedule of the Customs Tariff Act, 1975 to increase and levy Export duty.

4. 27/2022 - dated 21-5-2022 - Cus

Effective rate of Agriculture Infrastructure and Development Cess for specified goods - Seeks to further amend notification No. 11/2021- Customs dated 1 st February, 2021 to reduce duty on Anthracite/Coking Coal

5. 26/2022 - dated 21-5-2022 - Cus

Effect rate of Customs Duty on import of goods - Seeks to further amend notification No. 50/2017- Customs dated 30th June, 2017.

6. 25/2022 - dated 21-5-2022 - Cus

Seeks to amend Notification No. 18/2019-Customs reducing Road and Infratructure Cess (RIC) on Petrol and Diesel.

DGFT

7. 09/2015-2020 - dated 23-5-2022 - FTP

Amendment in import policy condition under Chapter 29 and 30 of ITC (HS) 2022, Schedule – I (Import Policy)

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DOF2/P/CIR/2022/69 - dated 23-5-2022

Circular on Development of Passive Funds

Highlights / Catch Notes

GST

• E-way Bill Lapse Due to Vehicle Breakdown Not Tax Evasion; High Court Orders Refund, Section 129 Invoked Unjustly.

  Case-Laws - HC : Detention of goods alongwith the vehicle - breakdown of vehicle - non-extension of the validity of the e-way bill - intent to evade tax or not - the explanation offered by the respondent / writ petitioner was an acceptable explanation and a case cannot be made out that there was a deliberate and willful attempt on the part of the respondent / writ petitioner to evade payment of tax so as to justify invocation of the power u/s 129 of the Act. - Refund of amount paid allowed - HC
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• Penalty Rectification u/s 161 Set Aside for Violating Natural Justice; Fresh Notice to be Issued.

  Case-Laws - HC : Rectification of mistake - Levy of penalty - U/s 161 of the Act any rectification, which adversely affects any person is possible only after following the principles of natural justice. Since the order impugned substantially affects the assessee as penalty is sought to be imposed, which demand did not form part of notice dated 13.08.2020, without giving an opportunity of hearing, the orders under challenge are set aside. However, the respondents are permitted to proceed further by issuing a fresh notice and pass orders in accordance with law. - HC
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• State Examination Board's Exam Services Eligible for GST Exemption; Diploma Courses and Departmental Exams Not Covered.

  Case-Laws - AAAR : Benefit of exemption - Educational services - services supplied for the exams - As all criteria are complied with and the State Examination Board being the ‘educational institution’ in so far as it provides services by way of conduct of exams at Sr. No. 1 to 12 in the list given is eligible to avail the benefit of exemption - For the other activities like Diploma courses, applicant failed to submit that these are recognized by law, not eligible for exemption - conducting departmental examination is also not eligible for exemption - AAAR
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Income Tax

• No TDS Deduction Required on US Commission Payments, Disallowance u/s 40(a)(i) Not Applicable, Appeals Dismissed.

  Case-Laws - AT : Claim of deduction u/s 10A / 10AA on Disallowance made u/s 40(a)(ia) due to non deduction of TDS - Business Development Commission paid to its US based Associated Enterprises (AE) - there was no requirement on the part of the assessee to deduct TDS on such payments and accordingly, no disallowance u/s 40(a)(i) would be attracted - Since, the disallowance itself do not survive, the grounds raised in cross-appeal stand dismissed as infructuous. The assessee’s appeal stand dismissed as infructuous. - AT
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• Actuarial Valuation Change Causes TP Adjustment; Full Gratuity Provision Claimed as Deduction, Not Non-Operating Cost.

  Case-Laws - AT : TP Adjustment - Extraordinary one-time cost due to change in assumption for actuarial valuation - Since the actuary determined the amount of the provision to be created at the end of the year, the same became an operating cost without any need for reduction. We, therefore, do not find any force in the submission of the ld. AR that a part of the provision for approved gratuity etc. should be treated as non-operating when the full amount of such provision has been claimed as deduction for the year only. - AT
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• Assessing Officer Violated Section 148A(c) by Ignoring Assessee's Reply in Reopening Assessment u/s 147.

  Case-Laws - HC : Reopening of assessment u/s 147 - Non consideration reply of assessee u/s 148A - Since the impugned order under Section 148A(d) has been passed on 5th April, 2022 i.e. after receipt of the detailed reply of the petitioner dated 4th April, 2022, the Assessing Officer should have considered the same as it was available on record. By not considering the reply of the petitioner dated 4th April, 2022, the mandate of Section 148A(c) has been violated as it casts a duty on the Assessing Officer, by using the expression ‘shall’ to consider the reply of the petitioner/assessee in response to the notice under Section 148A(b) before making an order under Section 148A(d). - HC
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• Faceless Assessment Order u/s 144B Set Aside for Denying Video Conference Hearing; Case Remanded for Reconsideration.

  Case-Laws - HC : Validity of Faceless Assessment Order passed u/s 144B - variation as proposed in the draft assessment order or final draft assessment order or revised draft assessment order - a request for personal hearing through video conference denied - Order set aside - Matter restored back - HC
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• Commissioner (Appeals) Must Independently Assess Stay of Demand Requests, Not Bound by CBDT Circulars, Acting Quasi-Judicially.

  Case-Laws - HC : Stay of demand - 1st respondent as the appellate authority exercises quasi-judicial powers. Power to consider prayer for stay is incidental and ancillary to the power to hear appeals. As a quasi-judicial authority, Commissioner (Appeals) is not bound by the administrative circulars issued by CBDT. He has to apply his own independent mind in the facts and circumstances of each case. - HC
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• Penalty u/s 271(1)(c) of Income Tax Act Not Applicable Due to No Tax Evasion or Additional Liability.

  Case-Laws - AT : Penalty u/s 271(1)(c) - in the present case the result of assessing the income either under the head ‘income from other sources’ or u/s.68 of the Act, the liability to pay any additional tax does not arise and once there is no tax sought to be evaded, penalty u/s.271(1)(c) of the Act cannot be levied. - AT
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• Charitable trust's rental income from events remains tax-exempt u/s 11; no profit motive found.

  Case-Laws - AT : Exemption u/s 11 - Profit motive - commercial activities as hit by the proviso to Sec. 2(15) - The majority of rent received by the assessee include rental from marriage functions and rent earned from other events like cultural, spiritual and educational seminars etc. It is nowhere the findings that the assessee has not adhered to the conditions as applicable to a charitable trust or any of the objects of the assessee are profit-motive. Under these circumstances, it could not be concluded that the assessee carried out separate commercial activities and it was hit by the proviso to Sec. 2(15). - AT
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• Interest u/s 28 of Land Acquisition Act exempt from income tax per Section 10(37) of Income Tax Act.

  Case-Laws - AT : Taxability of a sum received as interest on enhanced compensation - Exemption u/s. 10(37) - Thus interest received under Section 28 of the LA Act by the assessee is part of enhanced compensation and is not liable for Income tax. - AT
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• Assessing Officer Can Invoke Section 147 for Unexplained Cash Credits; Assessee Must Clarify Fund Ownership in Bank Accounts.

  Case-Laws - AT : Addition u/s 68 - unexplained cash credit - AO may invoke the provisions of section 147 against the person who where the owners of the bank accounts where the sum are diverted - If the account is found to be operated by the assessee, the assessee is also duty bound to state whether he is an accommodation entry provider or owner of the money. No doubt, onus lies on the assessee. If the assessee gives names of the beneficiary as mentioned in the bank account, the addition deserves to be made in the hands of the beneficiary.- Tri
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Customs

• India-Japan Trade Rules Amended: New Criteria for Determining Goods Origin Under Economic Partnership Agreement.

  Notifications : Customs Tariff (Determination of Origin of Goods under the Comprehensive Economic Partnership Agreement between the Republic of India and Japan) Amendment Rules, 2022 - Notification
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• Anti-Dumping Duty Imposed on Chinese PU Leather to Protect Domestic Industries from Unfair Pricing Practices.

  Notifications : Anti-dumping duty (ADD) imposed on PU Leather originating in or exported from China PR - Notification
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• Customs Update: Latest Exchange Rates for Import/Export Goods Impacting Taxation and Trade Activities in India.

  Notifications : Rate of exchange of one unit of foreign currency equivalent to Indian rupees - For Import of Goods and Export Goods - Notification
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• Customs Broker's License Revoked for Failing to Verify Client Credentials; Penalty and Security Deposit Forfeiture Imposed.

  Case-Laws - AT : Revocation of Customs Broker License - Forfeiture of security deposit - levy of penalty - It was incumbent on the appellant-Custom Broker that they conduct all possible enquiries through independent reliable sources/ documents to verify the credentials of the clients. No such effort made by the appellant and no such document relied upon have been placed on record. Thus, they have failed to observe due diligence in this regard and thus ended up facilitating fake importers. - AT
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• Penalties Under Customs Act Section 112 Reduced After Retracted Statements in Gold Smuggling Case Fail Cross-Examination.

  Case-Laws - AT : Levy of penalty u/s 112 of CA - Smuggling - Gold - The case of Revenue against these appellants have made out on the basis of their statements recorded at the time of investigation or the statement of the co-accused. All such statements were retracted soon thereafter. Further, these statements have also not stood the test of cross-examination during the adjudication proceedings - Levy of penalty against two persons set aside - Against one person, levy of penalty reduced from Rs. 1 lakh. to Rs. 25,000/-. - AT
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DGFT

• Nag-Vidarbha Chamber of Commerce Authorized to Issue Certificates of Origin per FTP 2015-2020 Appendix 2E.

  Circulars : Enlistment of an Agency and amendment in details of an authorized agency under Appendix 2E of FTP, 2015-2020 - Nag-Vidarbha Chamber of Commerce- authorized to issue Certificate of Origin (Non-preferential) - Public Notice
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Corporate Law

• Companies (Incorporation) Second Amendment Rules, 2022: Streamlining Company Registration with New Form INC-9 for Better Compliance.

  Notifications : Companies (Incorporation) Second Amendment Rules, 2022 - Form INC-9 substituted - Notification
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Indian Laws

• ACJM Oversteps Jurisdiction: Summons Issued for Cheque Dishonor Beyond Legal Limit Without Cognizance or Delay Condonation.

  Case-Laws - HC : Dishonor of Cheque - complaint has been lodged beyond the statutory period of limitation - the instant case learned ACJM has acted beyond his jurisdiction by issuing summons to the petitioner without even taking cognizance of the offence, contrary to the provision laid down in the Act, without having any occasion of being satisfied for condoning the delay. Taking of cognizance on satisfactory condonation of delay are statutory requirements which cannot be presumed on issuance of process to accused. The impugned order is bad in law and is not tenable under such circumstances. - HC
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PMLA

• Petitioners Not Liable for Money Laundering u/s 3 of PMLA in Land Sale Case, Only Witnesses.

  Case-Laws - HC : Nature of transaction - sale and purchase of land or merely investment in the property - there is nothing on record to show that the petitioners were intentionally projecting or claiming any “proceeds of crime” as untainted one. Therefore, in the absence of the same, merely because in the scheduled offence, the CBI investigation suggest that the other accused who had applied for obtaining licence from the department of the State of Haryana in conspiracy with the State functionaries, wherein the petitioners are cited only as witnesses, in the absence of any material, the offence of money laundering under Section 3 of the PMLA is not attracted from the bare perusal of the complaint. - HC
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SEBI

• SEBI Updates Cybersecurity Framework for Stock Exchanges, Clearing Corporations, and Depositories to Strengthen Financial Market Resilience.

  Circulars : Modification in Cyber Security and Cyber Resilience framework of Stock Exchanges, Clearing Corporations and Depositories - Circular
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• SEBI Updates Security Cover Certificate Format to Enhance Transparency and Protect Investors with Revised Timelines.

  Circulars : Revised format of security cover certificate, monitoring and revision in timelines - to protect the interest of investors - Circular
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Central Excise

• Supreme Court Upholds Withdrawal of Area-Based Exemptions; Applications for Special Rate to Be Reviewed on Merits.

  Case-Laws - HC : Area Bases Exemption - fixation of special rate representing the actual value addition - Recovery of refund / reversal of credit received by the petitioner as per the interim order - Later Hon'ble SC has upheld the validity of withdrawal of area based exemption - the Principal Commissioner, the Respondent No. 2 herein directed to decide the applications of the Petitioner on its own merit as regards the claim for fixation of the special rate to actual value addition to the manufactured goods of the given financial years - HC
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• Tax Refund Valid Without Provisional Assessment If Excess Duty Paid; Claim Within One-Year Limit.

  Case-Laws - AT : Refund claim - provisional assessment not opted - It is settled that even though the assessee has not opted for provisional assessment but the duty was paid in excess admittedly the assessee’s claim of refund within stipulated time of one year, the refund is admissible. The refund cannot be rejected only on the ground that assessee has not opted for provisional assessment - AT
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• Importer Wrongly Held Liable for Excise Duty; Cenvat Credit Rules Allow Credit Claim Despite Customs Act, Excise Act Misinterpretation.

  Case-Laws - AT : Recovery of CENVAT Credit - The finding/the reason quoted is apparently wrong as appellant has been an importer and not the manufacturer. Question of any amount of excise duty does not at all arise to ever be the liability of the appellant. Further the silence of any reference to the availment of credit in Section 28B of Customs Act or Section 11D of Central Excise Act is also observed to be an erroneous finding for the reason that irrespective both the sections are silent about the availment of credit but the simultaneous provisions in Rule 3 and Rule 5 of Cenvat Credit Rules entitle the appellant to avail the said credit. Admittedly the same has not been availed. Hence, the collection of amount of said duty from the customers was justified. - AT
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