TMI Tax Updates - e-Newsletter
June 17, 2024

Case Laws in this Newsletter:

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

Highlights / Catch Notes

GST

• Penalty imposed for wrongly availing Input Tax Credit but not utilized is unsustainable. Unjustified penalty waived, token penalty of Rs. 10,000 imposed.

  The High Court examined the legality of penalty imposition u/s 74(1) and 74(5) of the CGST Act, 2017 for wrongly availed but unutilized Input Tax Credit. The petitioner reversed the amount post show cause notice issuance. Relying on a similar case, it was held that penalties u/s 73(1) and 74(1) apply only if the credit is both availed and utilized for tax payment. The court found the penalty unsustainable and suggested applying penalty u/s 122 of TNGST Act, 2017. Given the circumstances, a token penalty of Rs. 10,000 was imposed, and the petition was allowed.
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• Challenge to denial of input tax credit rejected. Appellant must prove movement of goods to establish genuineness. Opportunity granted for verification.

  HC rejected challenge to adjudication order denying ITC. Appellant, purchaser, argued valid tax invoice and taxes paid; if supplier's registration cancelled, ITC denial unfair. Appellant must prove goods movement for transaction genuineness. If proven, authority to verify supplier. Without proof, liability remains. Appellant granted chance to prove goods movement. Order treated as show cause notice, reply with proof required. Appeal disposed of.
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• Violation of privacy & human rights - guidelines for issuing summons clarified. Proceeding closed with direction to follow guidelines

  The High Court addressed the issue of violation of Right to Privacy and Human Rights in the context of guidelines for issuing summons. It emphasized the need for precautions when issuing summons. The Court directed GST officers to adhere to guidelines from the Commissioner (GST-Investigation) and CBIC when summoning individuals u/s 70 of the GST Act, concluding the proceedings.
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• Customs must refund IGST for goods exported. Failure to process claim is unjust. Respondents must act promptly. Petition granted.

  HC held that u/s 54 of CGST Act, 2017, failure to process IGST refund claim for goods exported is impermissible. Shipping Bill serves as refund application. Proper officer must issue order within 60 days of complete application. Circulars fix responsibility on officers and agents, not exporters. Refund must be allowed or rejected with reasons. Respondent directed to process and sanction Rs. 2,44,61,247 IGST refund within 4 weeks. Petition allowed.
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Income Tax

• Notification: Kerala Co-op Deposit Guarantee Fund Board exempt u/s 10(46) for specific income. Conditions apply.

  The Central Government, u/s 10(46) of the Income-tax Act, 1961, has exempted the Kerala Co-operative Deposit Guarantee Fund Board from specified income tax. The Board must receive contributions from the Government of Kerala and defined societies, and interest on bank deposits. Conditions include no commercial activities, unchanged income nature, and filing returns as per section 139(4C). The exemption applies for assessment years 2019-2024, relevant to financial years 2018-2023. The notification ensures no adverse impact on any individual due to retrospective effect.
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• Petitioner's challenge to re-assessment dismissed for not following proper procedures. No grounds for interference found.

  The High Court dismissed the petitioner's challenge to the reopening of assessment u/s 147, citing the petitioner's delayed compliance with notice u/s 148 and failure to challenge the re-assessment notice or reasons for reassessment. The Court held that the petitioner's failure to avail the statutory appeal remedy precluded invoking writ jurisdiction. The Court noted factual issues requiring adjudication beyond Article 226 scope, such as delay in statutory audit and compliance with Co-operative Societies Act. The petitioner's contention on the doctrine of merger was deemed misconceived. The Court refrained from opining on audit merits, urging the petitioner to pursue appellate remedy. The Court dismissed the writ applications, advising the petitioner to challenge the orders before the appellate authority, with the possibility of condoning the limitation period for filing appeals.
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• Urban Cooperative Bank accepted cash in Specified Bank Notes, not covered by RBI Circular. Cash not unexplained income. Grounds allowed.

  The ITAT held that an Urban Cooperative Bank's acceptance of cash in the form of Specified Bank Notes (SBNs) cannot be considered unexplained income u/s 68 due to RBI Circular restricting exchange to District Cooperative Central Banks only. The grounds raised by the assessee were allowed.
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• Land sold not subject to Long-Term Capital Gains tax due to municipal limits expansion. Assessee's appeal allowed.

  The Appellate Tribunal addressed the issue of Long-Term Capital Gains (LTCG) on the sale of agricultural land, focusing on the property's location in relation to municipal limits u/s 2(14). The Tribunal considered the distance of the land from a specific landmark as confirmed by Income-tax Department inspectors and Tehsildar. The assessee argued that the distance should be calculated based on the municipal limits in place before a certain date, emphasizing the lack of subsequent notifications expanding the limits. Consequently, the Tribunal allowed the assessee's appeal, ruling that the land in question did not qualify as a capital asset for tax purposes.
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• PCIT found AO's assessment u/s 143(3) r.w.s. 153C erroneous. PCIT directipn for fresh assessment sustained.

  The ITAT upheld the Revision u/s 263 by PCIT, finding the AO's assessment under section 143(3) r.w.s. 153C erroneous and prejudicial to Revenue. The unsigned assessment order in ITBA portal was deemed immaterial for invoking u/s 263. PCIT's direction for fresh assessment was justified as AO omitted to consider share profits. Proposed addition under u/s 69A was exempted u/s 10(2A) as firm was separately assessed. PCIT's direction on share of profit verification was upheld as no evidence showed it related to earlier years. PCIT's order was not cryptic and PCIT rightly found AO's assessment prejudicial to Revenue. The grounds challenging PCIT's decision were dismissed.
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• ITAT ruled in favor of the assessee in a case involving unexplained investment. Commissioner's actions under section 263 deemed unjustified.

  The Appellate Tribunal considered a case involving a revision u/s 263 regarding the estimation of unexplained investment by the Assessing Officer (AO) based on information from various authorities. The assessee claimed his identity was misused, but no agency confirmed this. The Commissioner's actions were criticized for lack of thorough analysis and failure to verify crucial aspects. The Tribunal emphasized the need for proper investigation before imposing tax liability. The Tribunal quashed the orders u/s 263, stating that the issue of unexplained credit should be addressed by the 1st Appellate Authority, not through revisionary powers. The decision favored the assessee.
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• ITAT ruled that adding premium on shares to holding company not taxable under sec 56(2)(viib). Fair valuation upheld.

  The ITAT held that u/s 56(2)(viib), addition on premium amount in excess of FMV for issuing Optional Convertible Preference Shares to holding company is unsustainable. The NAV method for valuation is valid only for equity shares, not OCPS. FMV based on equity shares for conversion is justified. Allotting shares to 100% holding company benefits existing shareholders, defeating the purpose of deeming provision u/s 56(2)(viib). CIT(A)'s decision is upheld as it aligns with law and facts. Revenue's appeal is dismissed.
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• Revision u/s 263: Tribunal rules in favor of assessee, expenses to subcontractors genuine. AO inquiry thorough. TDS details provided.

  The Appellate Tribunal considered a case involving a revision u/s 263 where the Commissioner held that the expenditure claimed by the assessee for payment to sub-contractors was not genuine. The AO had conducted an inquiry and accepted the claim based on relevant material. The work order served as tangible evidence of the agreement between parties. The Commissioner's doubts were based on suspicion, while the AO's decision was reasonable. The AO's inquiry, even if inadequate, did not render the order erroneous. The Commissioner cannot revise based solely on disagreement. The impugned order was set aside as unsustainable. The assessee's appeal was allowed.
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• ITAT ruled on TP adjustments for software services to AE. L&T Infotech & Persistent Systems Ltd upheld as comparables. Interest on receivables clarified. Employee PF contribution disallowed.

  The ITAT upheld the TP adjustment for software development services to AE. L&T Infotech was considered comparable, rejecting appellant's argument. Persistent Systems Ltd's exclusion request was denied as it was part of the final comparables list. Imputing interest on receivables should use prevailing Indian rates or LIBOR with markup. The case law supports market-determined rates for benchmarking. Disallowance of employee PF contribution was upheld u/s 36(1)(va) u/s 2(24)(x) based on Checkmate Services case, stating belated remittance is not deductible even if paid before the return filing due date.
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• Transfer of booking rights in 2009-10, not 2008-09. Capital gain deletion directed. Assessee's grounds allowed.

  The ITAT ruled that the transfer of booking rights in a capital asset was completed in AY 2009-10, not AY 2008-09. The agreement to sell was contingent on builder's permission granted in 2008. Therefore, the capital gain addition in AY 2008-09 was deleted, and in AY 2009-10, it was converted from protective to substantive basis. The assessee's grounds were allowed.
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• TCS amount collected is not an expense for the seller. Buyer's income tax held by seller not hit by Section 43B.

  The Appellate Tribunal considered whether the CIT (A) and AO erred in adding TCS payable u/s 43B, which was not claimed as an expense. The case involved tax collected at source by the assessee from buyers in the business of trading in Scrap u/s 206C(1) of the Act 61. The Tribunal held that TCS amount is the buyer's income tax collected by the seller for subsequent payment to the Central Government. The assessee acts as a custodian of the Government for this amount. As TCS is not a sum payable by the assessee but the buyer's income tax, it cannot be debited in the profit and loss account. The addition u/s 43B was deemed unnecessary, and the appeal of the assessee was allowed.
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• Penalty imposed on estimated income from bogus purchases overturned by ITAT. Assessee not at fault for incomplete details.

  The Appellate Tribunal held that penalty u/s 271(1)(c) on estimated additions due to bogus purchases from hawala dealers was unjustified as the assessee failed to provide detailed information requested by the AO. The AO estimated the income at 9%, later reduced to 5% by CIT (A). The Tribunal cited similar cases where penalties were not upheld for estimated income additions. The Tribunal rejected the argument that low tax effect appeals by Revenue were invalid, stating that appeals on issues of addition and penalties based on specified information are permissible. The decision favored the assessee.
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• Annuity payment to LIC not exempt u/s 10(10CC) - employer didn't pay, employees did. AO didn't verify, PCIT order upheld.

  The Appellate Tribunal considered a case involving revision u/s 263 of the Act related to annuity payments made to LIC. The employer did not make the annuity payment; it was made on employees' request from VRS amount. The claim for exemption u/s 10(10CC) and u/s 10(10BB) was found incorrect as per PCIT's enquiry. AO allowed exemptions without verifying from the employer, leading to an erroneous order. The annuity amount paid to LIC was deemed taxable as salary per Supreme Court ruling. The AO's failure to conduct proper inquiries rendered the order prejudicial to revenue. Jurisdiction u/s 263 was upheld, dismissing the assessee's appeals.
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• Assessee argued AO didn't give proper hearing for order u/s 143(1)(a). AO's authority u/s 143(1)(a) is limited.

  The ITAT considered the validity of an order u/s 143(1)(a) where the AO made adjustments based on the tax auditor's entry for penalty or fine. The AO communicated the proposed adjustment and provided reasons in the intimation order. The ITAT referenced the distinction between intimation and assessment per the Supreme Court's ruling in CIT Vs Rajesh Jhaveri Stock Brokers P ltd. The AO's authority is limited to adjustments based on the return of income, not debatable issues. In this case, the AO's actions were deemed appropriate as the adjustment was based on a prima facie disallowable amount categorized by the tax auditor. The appeal was allowed for statistical purposes. The decision aligns with legal principles governing adjustments u/s 143(1)(a).
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Customs

• New Tariff Values for Edible Oils, Brass Scrap, Areca Nut, Gold & Silver effective June 15, 2024. Check out the changes!

  The Ministry of Finance, u/s 14 of the Customs Act, 1962, issued Notification No. 43/2024-CUSTOMS (N.T.) on 14th June, 2024, amending tariff values for various goods like edible oils, brass scrap, areca nut, gold, and silver. New tariff values per metric tonne were specified for items such as Crude Palm Oil, RBD Palm Oil, Crude Palmolein, Brass Scrap, Areca Nuts, Gold, and Silver. The notification, effective from 15th June, 2024, substituted previous tables with updated values. This amendment was deemed necessary and expedient by the Central Board of Indirect Taxes & Customs.
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• Notification: Amending Customs ports for specific purposes in Kerala. Effective June 12, 2024. Check it out!

  The Ministry of Finance, Department of Revenue, issued Notification No. 42/2024-CUSTOMS (N.T.) amending Notification No. 62/1994 u/s 7 of the Customs Act, 1962. The notification adds Vizhinjam International Seaport in Kerala for unloading imported goods and loading export goods. This falls u/s 7(1)(a) of the Customs Act, 1962. The amending authority is the Central Board of Indirect Taxes and Customs. The original notification was last amended by Notification No. 101/2018-Customs (N.T.). The amendment is effective from the date of issuance, 12th June, 2024.
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• Anti-dumping duty imposed on 'Poly Vinyl Chloride Paste Resin' from China, Korea, Malaysia, Norway, Taiwan, Thailand for 6 months.

  The Ministry of Finance has issued a notification imposing Anti-dumping duty u/s 9A of the Customs Tariff Act on 'Poly Vinyl Chloride Paste Resin' from China PR, Korea RP, Malaysia, Norway, Taiwan, and Thailand for 6 months. This follows DGTR's findings of dumped prices causing injury to domestic industry. Duty rates specified for different producers and countries. Exclusions from the product scope listed. Duty effective for 6 months in Indian currency. Exchange rate for duty calculation to follow GOI notifications.
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• Tribunal upheld part of enquiry report in customs broker's case. Court clarified timeline as directory.

  The High Court considered whether the Tribunal could discard an enquiry report for breaching the timeline under Regulation 20 (5) of the Customs Broker Licensing Regulations, 2013. The Court held that the Tribunal could not have entirely disregarded the report, citing precedents. The Tribunal partially accepted the report, leading to a penalty on the broker. The Adjudicating Authority must consider proven materials, even if the broker is absent. The Court ruled that the timeline under Regulation 20 (5) is directory, giving the Tribunal discretion to weigh the enquiry report as appropriate. The application was disposed of accordingly.
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• Penalty imposed on Appellant under Customs Act - lack of natural justice - upheld by CESTAT - no interference warranted - Appeal dismissed.

  The High Court upheld the penalty imposed u/s 112(a) of the Customs Act, 1962 on the Appellant. The Court found the order cryptic and non-speaking, violating principles of natural justice. The CESTAT and Commissioner concluded that the appellants were abettors in a fraud scheme involving Ascorbic Acid. The Commissioner determined that the Managing Director played an active role in the fraud, resulting in substantial loss to Government Revenue. The CESTAT confirmed these findings, stating no substantial question of law arises. The appeal was dismissed, affirming the abetment of duty evasion.
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• Applicant accused of bribery for seeking release of goods by illegal means. Prima facie evidence supports proceeding against petitioners.

  The High Court considered a case involving bribery and criminal liability, where an individual sought provisional release for monetary gain. The court held that the accused, a public servant, abused his position to obtain pecuniary gain for releasing a consignment, causing wrongful loss to the government. The court rejected the argument that finality of provisional release under the Customs Act absolves criminal liability. Witness statements and documents supported the conspiracy allegations. The court found sufficient prima facie evidence to proceed against the accused, leading to rejection of petitions and revision application.
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• Pre-arrest bail denied in customs fraud case. Strong evidence against applicant as key conspirator. Bail could hinder investigation.

  The High Court dismissed the application for pre-arrest bail u/s 135 of the Customs Act, 1962. The court found ample material showing the applicant's complicity in clandestine removal of goods from a public bonded warehouse. While acknowledging that statements of co-accused need corroboration, the court noted the strong prima facie case against the applicant as the key conspirator in an economic offense. Granting bail would prejudice effective investigation to uncover the fraud and those involved. The court emphasized the need for proper investigation to reveal the fraud and prevent harm to the economic fabric of society.
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• CESTAT ruled on Customs Broker License revocation due to fraudulent export practices. Time limits were met. License partly revoked, fine upheld.

  The case involves a Customs Broker's license revocation for involvement in mis-declaration and fraudulent export of "Uric Acid." The Commissioner of Customs followed the prescribed timeline u/s Regulation 20 of CBLR, 2013 for issuing Show Cause Notice, conducting inquiry, and issuing the Order-in-Original. The revocation proceedings were found not time-barred. The Broker's license was misused for financial gain in fraudulent transactions, leading to fine and forfeiture of security deposit. The Tribunal modified the order, setting aside license revocation but upholding the penalty and forfeiture.
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• CESTAT ruled on misclassification of copper goods for export incentives. Penalties not justified. No abetment found. Appeal allowed.

  The case involved misclassification and misdeclaration of goods for export incentives and higher drawback rates - Copper Strips/Earth Rods. The cargo declared for export was copper rods, but the actual cargo exported was copper strips. The mistake was due to a mix-up at the CFS gate. The exporter rectified the error with the authorities' guidance and re-imported the goods due to delays. Penalties imposed were deemed unjustified. No evidence of aiding or abetting was found against the second appellant. The lower authorities' actions lacked mala fide intent. The appeal was allowed, and the penalties on the second appellant were set aside.
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• CESTAT ruled on smuggling case involving foreign gold bars seized from two individuals at a railway station. Appeal dismissed.

  The case involved smuggling of gold bars of foreign origin, seized from two individuals boarding a train. The Directorate of Revenue Intelligence (DRI) intercepted them at a railway station and found gold bars concealed in their trolley bags. The individuals failed to produce any documents for the goods. The Adjudicating authority's decision to seize and confiscate the gold bars was upheld by the Appellate Tribunal (CESTAT). The Tribunal found no reason to interfere as the appellants did not provide specific evidence to challenge the decision. The appeal was dismissed.
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DGFT

• 16 agencies are now recognized as PSIAs u/s 2.52(c) of HBP, 2023. 2 existing PSIAs get new instruments. 24 PSIAs have revised areas of operation.

  This public notice recognizes 16 agencies as Pre-Shipment Inspection Agencies (PSIA) u/s Para 2.52(c) of HBP, 2023, valid for 3 years or until further notice by DGFT. Additionally, two existing PSIAs, Hamilton Steel Logistics Inc and Valueguru Chartered Engineers and Valuers Pvt. Ltd, are allowed to add new instruments. The operational areas of 24 existing PSIAs have been revised. The PSIAs must update their membership certificates and contact details within 30 days. The notice is issued by the Director General of Foreign Trade, Santosh Kumar Sarangi.
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SEZ

• Got questions about the new SEZ Rule 11B (DoC Notification 6.12.2023)? The Dept. of Commerce has reviewed all queries and provided responses. Details in Annexure.

  The Department of Commerce (DoC) has issued clarifications regarding the newly inserted SEZ Rule 11B, notified on 6.12.2023, which allows the setup of non-SEZ IT/ITES units in IT/ITES SEZs. The responses to stakeholders' queries include: 1. Tax benefits must be repaid based on the originally availed benefits for demarcation of Non-Processing Areas (NPA) u/s 11B(5). 2. The demarcation of NPA must comply with Rule 11B(7) and Rule 5(b) of SEZ Rules, 2006. 3. No tax benefits are available for the operation and maintenance of common infrastructure in NPAs u/s 11B(9). 4. Demarcation requests must be approved by the Board of Approval (BOA) after repayment of tax benefits. 5. IT/ITES units in NPAs will be subject to all applicable Central and State laws, similar to Domestic Tariff Area (DTA) units. The detailed responses and application form are enclosed in the annexure.
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FEMA

• Appellant directed to provide bank guarantee for penalty under FERA 1973. Tribunal found Appellant's actions intentional. Penalty reduced.

  The Appellate Tribunal found the Appellant in contravention of the Foreign Exchange Regulation Act (FERA) for instructing Indian Banks to credit accounts of non-residents, leading to prohibited transactions. The Tribunal directed the Appellant to provide an unconditional bank guarantee for the penalty amount u/s 52(2) of FERA. The Appellant's denial of responsibility despite initiating the transactions showed intentional engagement in prohibited activities. FERA aimed to regulate foreign exchange transactions for economic development. The burden of proof regarding culpable mental state was on the Appellant, which it failed to discharge, establishing abetment under FERA sections. The Tribunal deemed the penalty amount disproportionate to the offense and adjusted it for justice.
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• Appellate Tribunal found appellant guilty of accepting cricket bets for clients overseas. Reduced penalty imposed for FEMA violations.

  The case involved a violation of the FEMA Act due to accepting and placing bets on cricket matches for clients. The appellant was linked to the raided premises where incriminating evidence was found. The Appellate Tribunal found the appellant guilty based on evidence, including statements and financial transactions. Penalties were imposed u/s 4 of FEMA and u/s 3(d) of the Act of 1999. The Tribunal reduced the penalties to make them proportionate to the contraventions. The total penalty imposed on the appellant was Rs. 50 lakhs, with Rs. 10 lakhs for u/s 4 and Rs. 40 lakhs for u/s 3(d). The appeal was partly allowed based on the revised penalties.
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Corporate Law

• In a recent case, the court clarified that the right to recover money through a mortgage is a Constitutional right. Priority of claims upheld.

  HC addressed priority of claims among secured and unsecured creditors in liquidation. Referring to SC precedent, HC upheld first charge holder's priority over second charge holder u/s 48 of Transfer of Property Act. Despite Companies Act not specifying priorities over mortgaged assets, HC affirmed Transfer of Property Act's application. Recovery officer's report aligned with HC's order, rejecting objections. HC directed Official Liquidator to release Rs. 9.5 Crores to recovery officer for distribution to certificate holders, retaining workers' dues. Application disposed of within fifteen working days.
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IBC

• NCLAT approved Resolution Plan giving flats to Homebuyers without price hike. Dissenting Creditors' appeal dismissed.

  NCLAT dismissed an appeal u/s approval of Resolution Plan by dissenting Financial Creditors objecting to Homebuyers receiving flats without price escalation. Held that Homebuyers, with fixed consideration, can receive units as agreed. No violation of Section 30(2) found, as Homebuyers were treated differently but not discriminated against. Dissenting Financial Creditors entitled to payment u/s 30(2)(b)(ii). They cannot claim payment based on security interest. Appeal dismissed.
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PMLA

• Notification: Reporting entities can now verify identity using Aadhaar for Money-laundering Act compliance. Consulted with UIDAI and RBI.

  The Ministry of Finance issued a notification u/s 11A of the Prevention of Money-laundering Act, 2002, permitting reporting entities to conduct Aadhaar authentication for compliance. The Central Government, after consultation with UIDAI and RBI, allowed entities like IIFCO Kisan Finance Limited, L&T Finance Limited, and Wheels EMI Private Limited to verify identity u/s 11A. This notification ensures compliance with privacy and security standards u/s 18 of the Aadhaar Act, enhancing the effectiveness of anti-money laundering measures.
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SEBI

• New rules for selling shares to employees through stock exchange: Employees now bid at previous day's price. Effective in 30 days.

  SEBI issued a circular modifying the framework for Offer for Sale (OFS) of shares to employees through stock exchange mechanism. Employees will now place bids at the cut-off price of T day instead of T+1 day as previously prescribed. The allotment price will be based on the cut-off of the T day. All other provisions of previous circulars remain unchanged. The circular will be effective 30 days from issuance. Market Infrastructure Institutions (MIIs) are instructed to implement necessary systems, amend bye-laws, and inform market participants. The circular is u/s 11(1) of SEBI Act 1992 and related regulations to safeguard investor interests and regulate the securities market.
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Central Excise

• Notification reducing Special Additional Excise Duty on Petroleum Crude production effective June 15, 2024.

  The Ministry of Finance, u/s 5A of the Central Excise Act, 1944, has issued Notification No. 16/2024-Central Excise on 14th June, 2024, amending No. 18/2022-Central Excise to reduce the Special Additional Excise Duty on Petroleum Crude production to Rs. 3250 per tonne. This amendment, effective from 15th June, 2024, is made in the public interest. The notification was issued by the Under Secretary, and it amends a previous notification from July 2022.
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Articles

• TAXATION THROUGH JUDICIAL VIEWPOINT 
• No Service Tax on revenue sharing agreement between exhibitor & distributor for exhibiting film
• MAINTENANCE OF BOOKS OF ACCOUNT BY CERTAIN PROFESSIONALS OR BUSINESS
• Appeal can be accepted after one month from the prescribed period of limitation

Notifications

• Central Excise

• 16/2024 - dated 14-6-2024 - CE
  Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022 to reduce the Special Additional Excise Duty on production of Petroleum Crude.

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• Customs

• 43/2024 - dated 14-6-2024 - Cus (NT)
  Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

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• 42/2024 - dated 12-6-2024 - Cus (NT)
  Customs ports - Appointment for specified purposes - Seeks to amend Notification No. 62/1994 –Customs (N.T.), dated the 21st November, 1994

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Circulars / Instructions / Orders

• SEZ - Instruction No. 115 - dated 9-4-2024
  Concerns/queries/clarifications regarding the newly inserted SEZ Rule 11 B notified vide DoC Notification dated 6.12.2023

News

• 72nd Meeting of Network Planning Group under PM GatiShakti evaluates three key infrastructure projects

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Case Laws:

• GST

• 2024 (6) TMI 667
  Legality of the imposition of penalty u/s 74(1) and 74(5) of the CGST Act, 2017 - Input Tax Credit (ITC) availed wrongly but not utilized - It is only after the issuance of the show cause notice, the petitioner has reversed the amount - HELD THAT:- The impugned order sustaining the penalty under Section 74(1) and 74(5) of the CGST Act is unsustainable. Reliance placed in an identical issue in M/S. AATHI HOTEL, VERSUS THE ASSISTANT COMMISSIONER (ST) (FAC) , NAGAPATTINAM DISTRICT. [ 2022 (1) TMI 1213 - MADRAS HIGH COURT] where it has been that ' Though under Sections 73(1) and 74(1) of the Act, proceedings can be initiated for mere wrong availing of Input Tax Credit followed by imposition of interest penalty either under Section 73 or under Section 74 they stand attracted only where such credit was not only availed but also utilised for discharging the tax liability. The proper method would have been to levy penalty under Section 122 of TNGST Act, 2017.' The imposition of penalty under the peculiar facts and circumstances of the case is unjustified - considering the fact that the petitioner has availed input tax credit, which was not eligible to be availed, but could have resulted in wrong utilization of input tax credit, a token penalty of Rs. 10,000/- is imposed on the petitioner - petition allowed.

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• 2024 (6) TMI 666
  Rejection of the appeal under Section 107 of the West Bengal Goods and Service Tax Act, 2017 - appeal was filed beyond the time prescribed - HELD THAT:- The appeal had been dismissed solely on the ground that the same had been filed beyond one month of the time prescribed for filing the appeal. The appeal therefor, was obviously barred by limitation. However, at the same time, the aforesaid could not prevent the petitioner from maintaining an application for condonation of delay by invoking the provisions of Section 5 of the Limitation Act, 1963. The issue whether the Appellate Authority is competent to condone the delay beyond one month from the prescribed period for filing of an appeal has already been conclusively decided by the Hon ble Division Bench of this Court in the case of S. K. Chakraborty Sons Vs. Union of India [ 2023 (12) TMI 290 - CALCUTTA HIGH COURT] . No fruitful purpose will be served by remanding the aforesaid matter on the issue of condonation of delay to the Appellate Authority and also considering the explanation given by the petitioner, the petitioner has been able to sufficiently explain the delay in filing the appeal belatedly. The aforesaid appeal restored to its original file and number and direct the Appellate Authority to hear out the same in accordance with law on merit within a period of two months from the date of communication of this order - petition disposed off.

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• 2024 (6) TMI 665
  Excess Input Tax Credit (ITC) - non-reversal of ITC with credit notes - Challenge to tax proposals for 2019-2022 assessment periods - HELD THAT:- The impugned order clearly indicate the complete failure of the respondent to engage with the submissions of the petitioner and record reasons in rejecting such submissions. Since findings were recorded without indicating any reasons for such findings, these orders cannot be sustained. These matters are remanded for reconsideration. The petitioner is permitted to submit additional documents, if any, within 15 days from the date of receipt of a copy of this order - Petition disposed off by way of remand.

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• 2024 (6) TMI 664
  Cancellation of registration of petitioner - non-filing of returns - appeal dismissed on the ground of limitation - HELD THAT:- The registration of the petitioner had been cancelled on the ground of non-filing of returns. It is not the case of the respondents that the petitioner had been adopting dubious process to evade tax. Taking note of the fact that the suspension/revocation of license would be counterproductive and works against the interest of the revenue since, the petitioner in such a case would not able to carry on his business in the sense that no invoice can be raised by the petitioner and ultimately would impact recovery of tax, the respondents should take a pragmatic view in the matter and permit the petitioner to carry on his business. The order cancelling the registration of the petitioner set aside subject to the conditions that the petitioner files his returns for the entire period of default and pays requisite amount of tax and interest and fine and penalty - petition disposed off.

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• 2024 (6) TMI 663
  Challenge to adjudication order issued u/s 73(9) of WBGST CGST Act 2017 - discrepancies not notified by issuance of Form GST ASMT 10 - period 1st July 2017 till 31st March 2018 - HELD THAT:- It was the obligation of the proper officer before passing any order in terms of Rule 99 of the said Rules read with Section 61 of the said Act, to make available to the petitioner the Form GST ASMT 10 and to identifying therein, the discrepancies noticed by the proper officer while scrutinizing the returns - Since, the same had not been made available to the petitioners, the petitioners could not have appropriately respond to the show cause notice. The aforesaid order thus, stands vitiated on the ground of violation of principles of natural justice. The order passed under Section 73 (9) of the said Act, dated 29th December, 2023 kept in abeyance and the proper officer directed to make available Form GST ASMT 10 within two week from date and to provide appropriate opportunity to the petitioners to file additional response to the show cause notice dated 29th September 2023 and thereafter to afford an opportunity of hearing to the petitioners - application disposed off.

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• 2024 (6) TMI 662
  Challenge to the adjudication order rejected - denial of ITC - HELD THAT:- The adjudicating authority has not caused any verification of the genuineness at the supplier s end. According to the appellant, who is the purchaser, he has the valid tax invoice and taxes have been paid and if the registration of the supplier had been cancelled retrospectively, they should not be penalised and their input tax credit cannot be denied. The appellant has to first prove through documents the aspect regarding the movement of goods to establish the genuineness of the transaction. If the same is proved by documentary evidence, then the adjudicating authority can be directed to cause verification at the supplier s end. Without proving the movement of goods, the appellant cannot escape the liability. However, since this aspect of the matter was not properly agitated by the appellant before the authority, we are inclined to grant one more opportunity to the appellant to go before the adjudicating authority to first prove the movement of goods pursuant to the tax invoice, which was issued to the appellant. The appeal and the connected application are disposed of by directing the appellant to treat the order in original dated 16th October, 2023 as a show cause notice and submit his reply to the same enclosing documents to prove movement of goods. Appeal disposed off.

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• 2024 (6) TMI 661
  Violation of Right to Privacy and Human Rights - guidelines for issuance of summons - precautions to be observed while issuing summons - HELD THAT:- The present proceeding is closed with this direction that the GST officers should follow the guidelines and instructions issued by the Commissioner (GST-Investigation) and the CBIC while summoning a person by exercising the powers under section 70 of the GST.

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• 2024 (6) TMI 660
  Seeking grant of bail - evasion of GST - HELD THAT:- Considering the fact that the maximum punishment for the offence under sections 132 (1) (b), 132 (1) (c) and 132 (5) of the Central Goods and Services Tax Act is five years and charge has already been framed in this case, petitioner, is directed to be released on bail on furnishing bail bonds of Rs. 100,000/- (Rupees one lakh) with two sureties of the like amount each, to the satisfaction of learned Presiding Officer, Special Court, Economic Offences, Jamshedpur. Petition allowed.

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• 2024 (6) TMI 659
  Refund of IGST - goods exported out of India - failure of the customs authorities to process the refund claim - HELD THAT:- It is not in dispute that Rule 96 of CGST Rules, 2017 prescribes that the Shipping Bill filed by an exporter of goods shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India, and such bill (deemed application) was presented by the petitioner to the respondents. In view of the same, the respondents ought to have taken up the proceedings in view of Section 54 of the CGST Act, 2017. As per Section 54 (7) of the CGST Act, the proper officer shall issue the order under Sub-section (5) within sixty days from the date of receipt of the application complete in all respects. Herein the present case, the Shipping Bill is dated 24th August 2018. The Circulars dated 16th March 2018 and 2nd January 2019 are issued by the respondents, wherein the responsibility has been fixed on the officers and the shipping agent. Now the respondents cannot say that the petitioner should correct the error SB006. Withholding of the refund is impermissible, it has to be either allowed or rejected, for the reasons to be recorded. No such reasons have been recorded and rejection order has not been passed. Respondent No. 3 are directed to immediately process and sanction an amount of Rs. 2,44,61,247/- of IGST paid by the petitioner towards the goods exported from India in respect of Shipping Bill and deemed refund application bearing No. 7114580 dated 24th August 2018, within a period of four weeks from the date of this order. Petition allowed.

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• Income Tax

• 2024 (6) TMI 658
  Reopening of assessment u/s 147 - petitioner argued that the re-assessment proceedings were time-barred as per the first proviso to the un-amended section 147, asserting that no re-assessment can be initiated after four years in the absence of any omission or failure on the part of the Assessee to make a disclosure - HELD THAT:- The conduct of the petitioner disentitles him from invoking the extraordinary writ jurisdiction of this Court in the instant cases due to delayed filing of return in response to notice u/s 148 of the Act, as the petitioner did not comply either with notice u/s 142(1) in the re-assessment proceedings or with the show-cause notice proposing the claim of deduction, as clearly stated in the impugned assessment order itself. Appears that the petitioner never challenged either the re-assessment notice, or the reasons to believe as furnished to the petitioner, or the sanction granted u/s 151 of the Act on either jurisdictional grounds, or on any other grounds; whatsoever, and now when the re-assessment proceedings stands concluded resulting in passing of assessment orders, the petitioner without preferring the statutory appeal as per the Act, after the expiry of prescribed limitation period, has invoked the writ jurisdiction of this Court. The instant matters require factual adjudication which is beyond the scope of proceedings under Article 226 of the Constitution of India. Such factual aspects being whether at all there was delay in statutory audit by the State Government or whether at all the State Government failed to appoint auditors under the Jharkhand Co-operative Societies Act for the A.Y. 2013-14 and A.Y. 2014-15, or whether petitioner at all requested the State Government for statutory audit under the Jharkhand Co-operative Societies Act; whether petitioner prepared statement of accounts, etc. and submitted to the Registrar under Rule 58 of the Jharkhand Co-operative Societies Rules, 1959. All these facts were never brought on record by the petitioner in course of the re-assessment proceedings. The aforesaid factual aspects do not make this matter fall within any of the exceptions which would justify the Petitioner in invoking the extra-ordinary writ jurisdiction of this Court having not availed the alternative appellate remedy as provided for under the Act. The contention of the petitioner on the doctrine of merger is also misconceived, inasmuch as, the original assessment proceedings which was assailed before the CIT(A) was not on the aspect whether the deduction u/s section 80-P claimed by the petitioner was rightfully claimed, whether the petitioner has fulfilled the condition of statutory audit under the provisions of the Jharkhand Co-operative Societies Act read with section 80-P of the Act read with section 44AB of the Act, etc; rather the reassessment proceedings are on the basis of the aforesaid aspects, and hence, there will be no application of the doctrine of merger in the instant case. We are conscious that though the petitioner has not availed the appellate jurisdiction and the time for the same has already expired but the limitation can be condoned by the competent appellate authority, if the statutory appeal will be filed before it for the relevant assessment years. Accordingly, we are refraining from giving any opinion on the merits of the case regarding audit under the provisions of Jharkhand Co-operative Societies Act etc. We are of the considered opinion that the petitioner has failed to make out any case for interfering with the respective re-assessment/penalty orders avoiding the alternative remedy given to the petitioner and accordingly all these writ applications are hereby, dismissed. Petitioner would be at liberty to challenge the respective re-assessment orders/penalty orders before the competent appellate authority and if the petitioner assails the same along with the petition for condonation of delay, the learned appellate authority should decide the application for condonation of delay in accordance with law and keeping in view the fact of pendency of these writ applications before this Court.

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• 2024 (6) TMI 657
  Reopening of assessment u/s 147 - legitimacy of approval granted by Pr.CIT u/s 151 - HELD THAT:- Prior approval of the Pr.CIT u/s 151 of the Act in the instant case has set the proceedings u/s 147 of the Act into motion. As the law envisage, the permission of superior authority as statutorily designated is a sine qua non to prior to initiation of action u/s 147/148 - CIT in the instant case was the competent authority statutorily designated for this purpose. It was thus on the basis of satisfaction and approval of the CIT that the re-assessment was initiated and completed. The legitimacy of satisfaction of the PCIT for the purposes of sanction u/s 151 has however been called into question in the instant case. As pointed out on behalf of the assessee, CIT has simply recorded action u/s.148 approved towards sanction of reassessment proceedings. Ostensibly, the sanction granted is muted and non-descript. Section 151 of the Act operates as one of the potent safeguards against the arbitrary and disproportionate exercise of powers u/s 147 by the AO. It ensures that powers under s. 147 are not exercised by the AO unless the designated superior officer is satisfied that the condition precedent for exercise of powers as provided under erstwhile Section 147 of the Act is fulfilled. As a corollary, to meet this avowed objective enshrined in enactment of s. 151 of the Act, it is incumbent upon the superior authority to apply its mind innately to the basis derived by AO for alleged escapement while granting sanction to the proposal for reopening. The sanctioning authority while exercising power under Section 151 of the Act, is thus expected to examine the reasons, material or grounds and to judge whether they are relevant to formation of necessary belief on the part of the AO and thereafter to record necessary satisfaction which should not be mechanical but as a result of application for the issuance of notice under Section 148 of the Act by the AO as held in Chhugamal Rajpal Vs. S.P. Chaliha [ 2015 (12) TMI 1334 - SC ORDER] The requirement of sanction u/s 151 is salutary as it ensures that reopening notices are not lightly issued and to shun any misconception or misunderstanding on the part of the AO resulting in harassment to a tax payer. Thus, such sanction must reflect application of mind in earnest to the reasons so recorded and consequent decision making thereon. In the peculiar facts of the instant case, few inseparable points do occur from the reasons recorded for consideration of the sanctioning authority. In the instant case, the assessee has admittedly produced the cash book before the AO prior to initiation of action under Section 147 of the Act in which, the cash transactions alleged to be escaped income, were duly found recorded in the books. CIT was thus expected to deal on this crucial aspect while endorsing allegation of escapement. Secondly, the AO claims that assessee has not disclosed the transactions in the return of income. The Pr.CIT should have examined the plausibility of such allegation having regard the Statutory Form (ITR) designed for filing ROI. The omnibus approval without any comment granted betrays the application of mind on such foundational points. The approval granted do not utter a word towards any reasons which induced him to do so. Under the circumstances, we are compelled to think that the approval u/s 151 suffers from the vice of non application of mind. The Hon ble Delhi High Court in the case of N.C. Cables [ 2017 (1) TMI 1036 - DELHI HIGH COURT ], Pioneer Town Planners [ 2024 (3) TMI 828 - DELHI HIGH COURT ] and Manujendra Shah [ 2023 (7) TMI 1093 - DELHI HIGH COURT ] have struck a balance and declined to endorse the rubber stamped approval granted by the Pr.CIT u/s 151 of the Act. We see palpable merit in the plea of the assessee that the sanction granted u/s 151 of the Act is extraneous and an empty formality and do not accord with its purpose. The validity of the reassessment order is contingent upon a valid approval u/s 151. Where the requirement to grant approval u/s 151 of the Act is not fulfilled, the notice issued u/s 148 as a sequel to such sanction and resultant reassessment flowing therefrom would also be vitiated in law. Re-assessment proceedings under Section 147 as a consequence of such invalid approval is without sanction of law and consequently the re-assessment order in question is bad in law. Assessee appeal allowed.

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• 2024 (6) TMI 656
  Addition u/s 68 r.w.s 115BBE- acceptance of the cash in the form of SBNs [Specified Bank Notes] - HELD THAT:- As the assessee being an Urban Cooperative Bank, which is not being covered by the above referred RBI Circular No. DCM(Plg) No. 1273/10, 27.00/2016-17, dated 14th November, 2016, which clearly states that the exchange facility against the SBNs was restricted only with respect to District Cooperative Central Banks (DCCBs) and not to Urban Cooperative Banks. Thus, acceptance of the cash in the form of SBNs cannot be considered as unexplained for addition u/s. 68 of the Act. We are therefore inclined to allow the grounds raised by the assessee.

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• 2024 (6) TMI 655
  LTCG on sale of land - sale of agricultural land - determination of the property's location in relation to municipal limits u/s 2(14) - Scope of expansion of municipal limits - HELD THAT:- It is correct that the distance of 5 kms. from Dasna flyover, Govindpuram confirmed by Inspectors of Income-tax Department and Tehsildar were on the date of their respective inspections i.e. February and March 2016. On the other hand, assessee s plea that the distance of land in question should be reckoned as existed on the date of Notification No.9447 dated 06.01.1994 when the municipal limits were upto Hapur Chungi and from where the distance was 8.7 kms. approx. as per IT Inspector s report. The basis of submission is that for the purpose of exemption u/s 2(14)(iii)(b) of the Act, the notification by Central Government is mandatory and there was no notification after 06.01.1994. Hence, the expansion of municipal limits from Hapur Chungi to Dasna Flyover on 41.08.1994 should be irrelevant in absence of any further notification. Therefore, the land in question at Village Masuri is not a capital asset. Appeal of the assessee is allowed.

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• 2024 (6) TMI 654
  Validity of reopening of assessment - defective notice issued u/s 148 - As alleged AO lacked material to form a reasonable belief that income had escaped assessment at the time of issuing the notice u/s 148 - HELD THAT:- It is the case of the Department that there was mistake in mentioning the date as 29/03/2017 in the notice issued u/s 148 of the Act, therefore, by rectifying the said error another notice was issued again on 31st March, 2017 replacing the notice that suffered from defect. The said contention of the DR cannot be accepted as even the e-mail sent on 31st March, 2017 was having an attachment that of the very same notice dated 29/03/2017 which can be corroborated from the screen shot of the e-mail produced by the assessee along with the synopsis the downloaded attachment of the notice. Department has not produced any such notice issued u/s 148 of the Act dated 31/03/2010 which was claimed to have been issued to the assessee. Thus, it can be safely concluded tha t as on the date of issuance of notice u/s 148 dated 29/03/2017, A.O. was not having any information, material or evidence in his possession as to form the reason to believe that any income of the assessee for the subject Assessment Year had escaped assessment as the information itself has been received by the A.O. on 30/03/2017 . Thus, in our opinion the reassessment proceedings initiated by the A.O. are erroneous. Accordingly, the Assessment Order and the order of the Ld. CIT(A) are hereby set aside by deleting the Ground No. 1 of the assessee.

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• 2024 (6) TMI 653
  Revision u/s 263 - share premium valuation - valuation report furnished by the Auditor revealed that it was based on the valuation of quoted shares provided u/Rule 11UA(1)(c), whereas this is case of valuation of unquoted shares u/R 11UA(1)(b), which attracted provision of Section 56(2)(b) and AO has failed to examine the issue during the course of assessment proceedings and passed a cryptic order. HELD THAT:- There appears to be substance in the contention of learned AR that during assessment proceedings the AO had raised all the relevant queries to which assessee had duly replied with all evidences. The valuation report is based on the correct method of valuation except for error in mentioning a wrong sub-section. It also comes up that in fact the investor is none other than the parent company M/s Home Soul Infratech Private Limited. Thus, for the reason of lack of inquiry or that the assessment order is not elaborate and does not indicate all the facets of the inquiries made and the conclusion drawn, the assessment order cannot be termed as erroneous insofar as prejudicial to the interests of Revenue. The impugned order u/s 263 of the Act is quashed.

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• 2024 (6) TMI 652
  Revision u/s 263 - AO 143(3) r.w.s.153C being erroneous and prejudicial to the interest of Revenue, non-est and non-service - HELD THAT:- The first contention of the AR is that the impugned order passed by the ld. PCIT is non-est and non-existence in the eye of law as the original assessment order dated 29.12.2019 passed u/s 143(3) r.w.s. 153C is unsigned and unserved on the assessee. No doubt, the ld. DR placed on record, the report of the AO that while passing assessment through online (ITBA) portal, there is no mandatory requirement of manually sending assessment order to the assessee as it was duplication of work. DR contended that in the physical assessment record, order dated 27.12.2019 was found to be signed and by mistake, AO uploaded unsigned copy in the ITBA portal. PCIT rightly examined the assessment record and on his satisfaction invoked the jurisdiction under the Act. We find the contention raised by the AR, whether it is unsigned copy of assessment order in ITBA portal and for non-service is immaterial for initiation of the proceedings u/s 263 as this Tribunal also found duly signed assessment order while examining the assessment records during the course of earlier hearings. On careful reading of the provisions of section 263 which explains that the PCIT/PCCIT or CCIT or PCIT or CIT may call for and examine the records of any proceedings under this Act and if he considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after examining the record and by giving an opportunity to the assessee, conducting such inquiry as he deems necessary and pass an order enhancing or modifying or cancelling the assessment and directing for a fresh assessment. In the present case, PCIT called for record and examined the same having found the order passed by the Assessing Officer under section 143(3) r.w.s. 153C of the Act is erroneous and prejudicial to the interest of Revenue, by giving an opportunity to the assessee, directed the AO to verify the contentions of the assessee and pass a fresh assessment order in accordance with law relating to share amounts of profit and nowhere in the order it was mentioned the assessment order is unsigned. The argument of the ld. AR is that since the order uploaded in the portal is unsigned and for non-service, vitiates the proceedings u/s 263, we note that as discussed above regarding the provisions u/s 263 of the Act, nowhere it is mentioned that non-service of order and unsigned order of the AO makes the proceedings u/s 263 of the Act invalid. The requirement u/s 263 of the Act, i.e., for initiating revision or assuming jurisdiction by the ld. PCIT, to call for the records and after examining of the same, having satisfied that it is a fit case for inquiry in enhancing the assessment. In the present case PCIT held the AO has omitted to consider share profits of the assessee in the original assessment proceedings and invoked the jurisdiction u/s 263. Therefore, the contention of the that the unsigned and non-service of order vitiates the entire proceedings u/s 263 is not justified. Thus, the first issue raised in this regard is dismissed. According to the PCIT, the assessee did not respond to the notice issued u/s 153C and the AO has completed the assessment u/s 143(3) r.w.s. 153C making addition on account of unexplained money u/s 69A of the Act dated 27.12.2019 - As rightly pointed out by the ld. AR that the proposed addition, as referred by the ld. PCIT, is exempted u/s 10(2A) of the Act because the firm was assessed separately, consisting share of partners in its total income. When it taxed in the hands of the firm, the same cannot form part of total income of the partners. Therefore, the fact of whether the proposed share of profit of assessee was assessed in the hands of the firm being part of total income is not established. Further, the details of profits claimed to have been given to the assessee as loans, is also not established clearly. Thus, finding in order of Aiswhwarya Rai Bachan [ 2022 (3) TMI 524 - ITAT MUMBAI] as relied on by the ld. AR is not applicable. AR raised another issue that the PCIT, based on mistake of fact, directed the AO the share of profit in the previous year relating to the assessment year under consideration - In this case, no evidence whatsoever was brought on record to show that the share of the profit as computed by the ld. PCIT was the share of profit of earlier assessment years. We note that no reference was even made before the ld. PCIT by furnishing relevant evidence and therefore, the submissions of the ld. AR are rejected. In the present case, we observe that the assessee has given submissions before the ld. PCIT, which were considered by the PCIT, which are clear. Therefore, the order of the ld. PCIT is not cryptic and has no application of ratio laid down by the Hon ble High Court of Calcutta. We find no infirmity in the order of the ld. PCIT in directing the AO to conduct fresh verification in this regard. PCIT rightly held that the order passed by the AO under section 143(3) r.w.s. 153C is erroneous as far it is prejudicial to the interest of the Revenue by giving specific finding that the Assessing Officer omitted to have added0 in the hands of the assessee. Thus, the grounds concerning the merits fails, are dismissed.

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• 2024 (6) TMI 651
  Revision u/s 263 - Disallowance of deduction u/s. 10AA - Audit Report (Form 56F) was filed at a belated stage instead of filing the same along with the return of income - HELD THAT:- It is pertinent to note that the decision quoted in case of PCIT vs. Wipro [ 2022 (7) TMI 560 - SUPREME COURT] though held that since the assessee did not file the Audit Report in Form No.56F, as required under law, the AO was right in disallowing the deduction claimed u/s 10AA of the Act as it is a mandatory condition prescribed under Section 10AA(8) of the Act read with Section 10A(5) of the Act but in the present case the assessee before the PCIT has filed the Audit Report i.e. Form No.56F. Subsequently, AO passed the order u/s 143(3) read with Section 263 and was having access to the Audit report i.e Form No.56F. The fact remains that when the assessee has filed the Form No.56F and the assessee on merit, is entitled for the deduction for which the AO has not commented anything on merit, the provision for filing Form 56F cannot come in the way of the assessee, as Form No.56F was filed before the Revenue Authorities. In fact, the decision of Zenith Processing Mills [ 1995 (9) TMI 37 - GUJARAT HIGH COURT] will be applicable in the present case and the same should be taken into account wherein it is held that the requirement of furnishing Audit Report in prescribed form along with return is directory in nature prior to 01.04.2014 and it became mandatory w.e.f. 01.04.2014 while filing the returns electronically. The present Assessment Year is that of 2012-13 and, therefore, the decision relied by the assessee will be applicable in the present case. Thus, the appeal of the assessee is allowed.

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• 2024 (6) TMI 650
  Revision u/s 263 - Estimation of unexplained investment - AO got information from Sales Tax Authorities, Bureau of Investigation, Commercial Taxes - additions made by AO at 8% of the alleged gross turnover - HELD THAT:- A perusal of the show-cause notice issued by the ld. Commissioner in both the assessment years would reveal that Commissioner has narrated the brief background of the assessment proceedings, namely assessee has filed the return under section 44AD, ld. Assessing Officer got information from Sales Tax Authorities, Bureau of Investigation, Commercial Taxes. He has recorded the reasons and reopened the assessment. It is pertinent to observe that at the first instance, the assessee submitted that he has not opened any bank accounts, rather somebody has personated him. His case is based on the issue that his IDs have been misused and some unknown person has carried out these transactions in his name. He could only know about this when he received information from Sale Tax Authorities, Bureau of Investigation, Commercial Taxes. He pleaded this stand before those agencies also, but none of the agencies has culminated the inquiry into a positive finding. Nobody has recorded a specific finding that this plea of the assessee is false. We have taken note of the show-cause notice issued by the ld. Commissioner and after the show-cause notice, the finding of the ld. Commissioner is that the assessee was asked to submit his audited balance-sheet, books of account for A.Ys. 2014-15 and 2015-16 along with proof of vouchers/invoices in original, purchases and sales. As assessee was asked to appraise about the status of the complaint lodged by him in Konnagar Police Station. Thereafter he recorded the finding that the assessee failed to give anything. To our mind, this cannot be expected from a Senior Officer of the Income Tax Department to put somebody under the Tax liability without concluding the finding. He ought to have issued notice to the Police Authorities as well as to the Commercial Tax Investigating Authorities for submission of their report. He ought to have first determined whether these accounts belong to the assessee, only thereafter taxability of the amounts available in those accounts would have fallen upon the assessee. A perusal of the impugned orders would reveal that neither the ld. CIT has applied his mind analytically while assuming jurisdiction for taking cognizance under section 263. We have specifically noticed that after narrating the facts, ld. CIT just observed on verification of the record, it is found that the amount was to be added and taxed instead of 8%, hence under- assessment occurred, which is adverse to the revenue. We failed to appreciate, which aspect was verified by him because he has just reproduced the proposal sent by the Additional CIT, Circle-43. There is no independent application of mind at his end for taking cognizance under section 263. While dealing with explanation of assessee we find that ld. CIT has not recorded any finding. He just put the blame on the assessee to prove a negative aspect. It is for the revenue to first determine that these accounts belong to the assessee. Once the assessee has been emphasizing that these accounts do not belong to him and he has lodged a FIR in such situation, there should be adjudication of this aspect but ld. CIT simply ignored this aspect under the garb that the assessee failed to substantiate this issue. It cannot be substantiated by the assessee. It is to be investigated by the ld. Assessing Officer or by the ld. CIT. The role of the ld. AO is not only a prosecutor but he has to play a role of an adjudicator. That very role has to be played by the ld. Commissioner while exercising the powers under section 263. We could have set aside to the issue to ld. CIT for recording a categorical finding on this fold of issue but for the reasons to be recorded by us in the subsequent paragraph, we do not deem it necessary to set aside this issue. As a subsequent stage whether the total amounts credited to the accounts deserve to be treated as cash credit of the assessee or not. This issue is pending before the ld. CIT(Appeals). It is directly linked to the issue taken up in 263 proceedings. 1st Appellate Authority has co-terminus powers of the ld. Assessing Officer if it is felt that the total amount deserves to be considered as an unexplained credit of the assessee, then, that aspect could be looked into by the ld. 1st Appellate Authority and no revisionary power ought to have been exercised on that aspect. Thus we quash orders passed under section 263 of the Income Tax Act in both the years. Decided in favour of assessee.

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• 2024 (6) TMI 649
  Addition on account of premium amount in excess of FMV u/s. 56(2)(viib) - assessee has issued and allotted 1,00,000 Optional Convertible Preference Shares ( OCPS ) to its holding company - HELD THAT:- The legal effect of issue of shares to holding company at a premium has been examined in case of BLP Vayu (Projects-1) Pvt [ 2023 (6) TMI 209 - ITAT DELHI ] and Kissandhan Agri Financial Services (P) Ltd. [ 2023 (3) TMI 769 - ITAT DELHI] as essentially observed that where the allotment has been made to existing shareholders, the deeming provisions of section 56(2)(viib) would not ordinarily be applicable. In consonance with the view expressed, the addition under s.56(2)(viib) on the ground of FMV allegedly lesser than the premium charged on allotment of OCPS to parent co. i.e. holding co. is a damp squib. The addition is thus unsustainable in law on this ground alone. Alternate plea with regard to correctness of FMV determined by the AO on the strength of NAV method - As noted, the NAV method is permissible only in the caseof issue of equity shares as per Rule 11UA(2) of the IT Rules. The converted equity shares on conversion of OCPS, when taken as a base for calculation of NAV, the premium charged would, statedly, be negligible or NIL as essentially found by the CIT(A) in paras 4.4 and 4.5 of its order. CIT(A) has endorsed this line of reasoning. We do find traction in such plea of the assessee that the FMV arrived at by the assessee is apparently justifiable when the calculation of the NAV is calculated with reference to the equity shares to be allotted on conversion. We do not see any cogent reason to discard the calculation of FMV with reference to quantity of equity share to arise on exercise of option relatable to issue of OCPS. Otherwise, the provisions of Rule 11UA(1)(c)(c) would be applicable which permits the Valuer to apply DCF method. Thus, seen from any angle, it is difficult to fault the valuation assigned for determination of FMV. Hence, action of the CIT(A) calls for no interference in terms of Rule 11UA(2) of the Rules. Thus, where the convertible shares have been allotted to wholly owned 100% holding company, the benefit if any arising to the assessee company on account alleged excess premium, in turn, effectively benefits the subscribers themselves having pre-existing rights in the company. Thus, on a common sense approach, no purpose will be achieved by obtaining benefit by way of excess premium by the assessee from its own shareholder. The avowed purpose behind the insertion of deeming fiction under Section 56(2)(viib) of the Act to the charge so called excess premium as deemed income of the assessee, would not be achieved when the shares are allotted to the same set of shareholders. Thus in our view, the conclusion drawn by the CIT(A) cannot be faulted either on facts or in law. Hence, we decline to interfere. Decided against revenue.

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• 2024 (6) TMI 648
  Revision u/s 263 - CIT held that expenditure claimed by the assessee on account of payment to sub-contractors cannot be treated as genuine and therefore, the AO failed to verify the genuineness of the expenses for which the case was selected for scrutiny by conducting a proper inquiry on the said issue - as submitted AO asked the assessee to furnish various details and documents in respect of payment which were subjected to TDS u/s 194C - HELD THAT:- AO has specifically mentioned that in compliance of notice u/s 142(1) the assessee filed details and documents electronically which were considered. It is pertinent to note that the work order itself is an agreement between the parties which is duly signed by both the parties and it is a tangible supporting evidences on the point that the parties have agreed to the payments conditions. Even otherwise deferment of the payment cannot be a ground for disallowing the claim of expenses accrued during the year. The observation of the Pr. CIT is all in the nature of suspicion about genuineness of the claim of the assessee whereas the AO undertaken an inquiry on the very issue of genuineness of the expenditure and allowed the claim based on the facts as well as relevant material available on the assessment record. The view taken by the AO accepting claim of the assessee is a reasonable and a possible view. Therefore, the AO has taken a possible view after conducting inquiry on the issue. The commissioner can invoke the provisions of section 263 and revised the order of the AO but only when he comes to the conclusion that the order passed by the AO is either contrary to the facts or not permissible under law. Once the assessee has deducted substantial amount of TDS from the payments made to the parties and remitted to proceeds of TDS to Income Tax Department which also contains PAN of the parties then no response on the part of the parties to the notice issued u/s 133(6( cannot be attributed to the assessee for making the disallowance of claim or doubt the claim. Impugned order passed by the Pr. CIT when giving concluding finding is not sustainable without outcome of the inquiry conducted by the AO is available on record - It is pertinent to refer the judgment of D.G. Housing Project [ 2012 (3) TMI 227 - DELHI HIGH COURT] wherein as held that in cases where the order of the AO is erroneous because the order passed is not sustainable in law and the said finding must be recorded by Commissioner to establish and show the error or mistake made by the AO making order unsustainable in law such finding must be clear, unambiguous and not debatable in such cases if matter is remanded to the AO it would imply and mean the Commissioner has not examined and decided whether or not the order is erroneous but direct the AO to decide the issue. Once the AO has conducted an inquiry which may be inadequate inquiry in that case it cannot said that the order passed by the AO is erroneous only due to complete lack of inquiry. Once the AO has conducted an inquiry and taken a possible view which is not found to be impermissible under the law or perverse to the fact then the commissioner is not permitted to invoke provisions of section 263 of the Act merely, because he does not agree with the view of the AO. Hence the impugned order of the Pr. CIT passed u/s 263 is not sustainable in law and the same is set aside. Appeal of the assessee is allowed.

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• 2024 (6) TMI 647
  TP adjustment - provision of software development services to AE - Comparable selection - L T Infotech as comparable - HELD THAT:- The appellant is making a vague argument without assigning any reason as to how the above company is functionally different from the assessee company. Even otherwise on broad analysis of profile of the assessee company with that of L T Infotech, in our considered opinion, both are engaged in software development services. Since the company is comparable with the assessee s profile, in our considered opinion, application of other filters are irrelevant, more so when the appellant itself has considered L T Infotech as comparable to the assessee company. Therefore, we are of the considered opinion that there is no error in the reasons given by the learned TPO/DRP to include L T Infotech in the final set of comparable. Thus, we reject the argument of assessee and upheld the reasons given by the TPO/DRP for inclusion of L T Infotech Ltd. Exclusion of Persistent Systems Ltd - Once again we find that the said company is in the list of final comparable selected by the assessee in their TP study on the ground that the functions carried out by the Persistent Systems Ltd are similar to the appellant company. But, the appellant is now seeking exclusion of Persistent Systems Ltd on two grounds. First reasons given by assessee is that the above company is functionally different and had insufficient segmental information. The argument of assessee is fallacious for the simple reason that when the company is functionally different and insufficient information available in their annual report with regard to the comparison of data, then how and why the appellant company has selected the above company in the final list of comparable is not explained. Further, on broad analysis of the profile of the appellant company, on comparison with the Persistent Systems Ltd, in our considered opinion, both are functionally similar except for the reason that the Persistent Systems Ltd is having higher turnover when compared to appellant company. Since the appellant itself has included the above company in the final set of comparables, the argument of the learned Counsel for the assessee that on turnover filter, this company should be excluded cannot be accepted. In so far as various case law relied upon by the assessee, although there are divergent views on this issue, but the fact remains that when the appellant is not able to offer any explanation for exclusion of Persistent Systems Ltd when it was part of their TP study and finds place in final set of comparables, in our considered opinion, the ratio relied upon by the assessee in support of their argument from certain decisions cannot be accepted. Thus, we reject the argument of the assessee and upheld the inclusion of Persistent Systems Ltd by the TPO/DRP. Imputing interest on outstanding receivables - In case the outstanding receivable is denominated and payable in Indian Rupee, then the prevailing rate of interest in India needs to be adopted for bench marking the outstanding receivables. This has been further strengthened by the safe harbor rules notified by the CBDT and as per the said rules the advance or intra group loan referred to item No.(iv) of Rule 10C, where the amount of loan is denominated in Indian rupee, then the SBI PLR rate should be adopted. Where advance or intra group loan referred to in item (iv) of Rule 10C where the amount of loan is denominated in foreign currency, then 6 months LIBOR rate with appropriate mark up should be considered. This is further fortified in the case of CIT vs. Cotton Naturals India (P) Ltd [ 2015 (3) TMI 1031 - DELHI HIGH COURT] has clearly explained the circumstances in which the different rates of interest should be adopted for bench marking receivable from AE. The Court further held that the interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has to be repaid. Therefore, in our considered opinion, the TPO/DRP is not correct in adopting SBI PLR for computing interest on interest receivables. However, the fact remains that the assessee could not furnish necessary evidence and also failed to explain these facts.The matter should go back to the file of the TPO/Assessing Officer for further consideration. Thus, we set aside the issue to the file of TPO/Assessing Officer and direct the TPO to reconsider the issue in light of our discussion herein above and adopt appropriate rate of interest by considering the currency in which the outstanding receivable is denominated by the assessee and its AEs. Disallowance of employee contribution to PF u/s 36(1)(va) r.w.s. 2(24)(x) - We find that this issue is squarely covered by the decision in the case of Checkmate Services (P) Ltd [ 2022 (10) TMI 617 - SUPREME COURT] where it has been clearly held that the belated remittance of employees contribution to PF ESI is not deductible u/s 36(1)(va) r.w.s. 2(24)(x) even if such contribution has been deposited on or before the due date for filing return of income u/s 139(1) - DRP after considering the relevant facts has rightly disallowed the belated remittance of employees contribution and thus, we are inclined to uphold the orders of the learned Assessing Officer/DRP and reject the grounds taken by the assessee.

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• 2024 (6) TMI 646
  Year of transfer of capital asset pursuant to the agreement to sale - whether it is short-term or long-term capital gain - HELD THAT:- Transfer of booking rights contemplated in the agreement to sell dated 08.03.2008 was dependent upon the permission to be granted by the builder, which happened only on 02.05.2008 and thereby the transfer of booking rights would be completed only in AY 2009-10. We hold the transfer had indeed happened only in AY 2009-10. Hence, we direct the AO to delete the capital gain addition made in AY 2008-09 and convert the addition made in AY 2009-10 from protective basis to substantive basis. Accordingly, the grounds raised by the assessee are allowed.

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• 2024 (6) TMI 645
  Disallowance u/s 14A - whether assessee has not earned any exempt income or in excess of income claimed to be exempt? - HELD THAT:- Delhi High Court in the case of Delhi International Airport (P.) Ltd . [ 2022 (10) TMI 300 - DELHI HIGH COURT] held that section 14A would not be applicable if no exempt income was received or receivable during relevant previous year. Delhi High Court in the case of Amadeus India (P.) Ltd [ 2022 (11) TMI 384 - DELHI HIGH COURT] held that section 14A envisages that there should be an actual receipt of income which is not includible in total income; hence, section 14A will not apply where no exempt income is received or receivable during relevant previous year. Ahmedabad ITAT in the case of Edelweiss Financial Advisors Ltd. [ 2020 (12) TMI 392 - ITAT AHMEDABAD] held that disallowance of expenses under section 14A read with rule 8D could not exceed amount of exempted income. The Ahmedabad ITAT in the case of Addlife Investments (P.) Ltd [ 2020 (6) TMI 240 - ITAT AHMEDABAD] held that disallowances made under section 14A read with rule 8D could not exceed amount of exempt income earned by assessee during year. In the case of Asian Grantio India Ltd [ 2019 (10) TMI 1193 - ITAT AHMEDABAD] the Ahmedabad ITAT held that Disallowance of expenses under section 14A read with rule 8D of 1962 Rules cannot be made in absence of exempt income. Further, as observed by the Delhi High Court in the case of Era Infrastructure [ 2022 (7) TMI 1093 - DELHI HIGH COURT] amendment made by the Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 01-04-2022 and cannot be presumed to have retrospective effect and therefore will not apply to the impugned assessment year under consideration. Whether disallowance made u/s 14A could not be added in assessee-company's income for purpose of computation of income u/s 115JB - Supreme Court of India in the case of Atria Power Corporation Ltd. [ 2022 (8) TMI 1322 - SC ORDER] dismissed the SLP of the Department against High Court ruling that disallowance made under section 14A could not be added in assessee-company's income for purpose of computation of income under section 115JB of the Act. The Karnataka High Court in the case of J.J. Glastronics (P.) Ltd. [ 2022 (4) TMI 1187 - KARNATAKA HIGH COURT] held that amounts disallowed under section 14A could not be added to net profit while computing book profit under section 115JB of the Act. The ITAT Ahmedabad in the case of Vishal Export Overseas Ltd [ 2022 (8) TMI 88 - ITAT AHMEDABAD] held that disallowances made under section 14A read with rule 8D could not be applied to provision of section 115JB of the Act. The Delhi ITAT in the case of Vireet Investment (P.) Ltd [ 2017 (6) TMI 1124 - ITAT DELHI] held that computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to computation as contemplated under section 14A read with rule 8D.

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• 2024 (6) TMI 644
  Addition u/s 43B - TCS payable in the Audit report - Whether CIT (A) and AO have erred in making addition u/s 43B of TCS payable which is neither an allowable expense nor has been claimed by the Appellant in his return? - This is a case of tax collected at source by the assessee from the buyer - assessee is engaged in the business of trading in Scrap and the provisions of section 206C(1) of the Act 61, is applicable on him for collection of provisions of section 206C(1) of the Act 61, is applicable on him for collection of tax at specified percentage of consideration of sales, as income tax. HELD THAT:- From the reading of various sub sections of sec 206C of the Act 61, it is clear that the tax collected by the assessee, under the provisions of this section, is the income tax portion of the buyer of the goods, which is collected by the assessee from the buyer, to be subsequently credited to the account of the Central Government within stipulated time frame provided by the statute. Sub section (6A) further provides that in case of failure of the assessee he shall be deemed to be an assessee in default in respect of the tax. The case of the assessee is covered by sub section (8), of the said section where the assessee has not paid the tax to the credit of the Central Government, after the collection, then the tax amount along with interest shall be a charge upon all assets of the person. TCS amount is income tax of the buyer of goods collected by the assessee (seller) for subsequent payment of the amount so collected to the credit of the Central Government, and the assessee is simply holding the said amount as custodian of the Government, till the time of actual deposit. In the instant case, before us the assessee has declared sales in audited profit and loss account at Rs. 9.91 crores (which is excluding TCS) (as confirmed by the AR during hearing of the case) and since the TCS is not credited in the accounts, the question of debit of the said amount in profit and loss account, also does not arise. TCS amount is not a sum payable by the assessee, it is the income tax of the buyers, collected and retained, by the assessee as per provisions of section 206C of the Act 61, and recorded through journal entries, and held by the assessee as custodian of the Government, and the same is duly reflected as liability in the audited balance sheet as at 31/03/2022. Since, the said amount of income tax of the buyers, cannot be debited in profit and loss account and claimed as a deduction, the assessee, it is not hit by the provisions of section 43B and the addition is liable to be deleted. Appeal of assessee allowed.

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• 2024 (6) TMI 643
  Penalty u/s 271(1)(c) on estimated additions - income is generated out of the bogus purchases from hawala dealers and profit of the assessee was estimated - HELD THAT:- The assessee failed to produce the level of details which ld. AO wanted assessee to produce. On these facts, the learned Assessing Officer estimated the income of the assessee by estimating the profit involved in these bogus purchases transaction at the rate of 9%, which was restricted by the learned CIT (A) to 5%. Thus, it is not the case of any information furnished by the assessee found to be inaccurate, but it is a failure of the assessee to substantiate the documents to the extent desired by the learned Assessing Officer. It is also the fact that notices under Section 133(6) of the Act were issued to the various hawala dealers which could not have been served and returned. However, that could have been the reasons for making addition but could not be reason to held that assessee has furnished inaccurate particulars of income. The orders in case of Stripco Springs Pvt. Ltd. [ 2021 (9) TMI 678 - ITAT MUMBAI ] V.K. Ispat Alloys [ 2023 (2) TMI 1058 - ITAT MUMBAI ] are also in favour of the assessee as those are on identical facts and circumstances holding that where addition of income of the assessee is on estimated percentages of bogus purchases, no penalty u/s 271(1) (c) of the Act can be sustained on such addition. Decided in favour of assessee. Validity of low tax effect appeals by the Revenue - Penalty orders are adverse judgments relating to issues of the proceedings where addition is based on information from specified authority. Therefore, revenue could file an appeal on the issues of addition, as well as penalty or any other issue related to additions made based on specified information from specified agencies. Hence, we reject the argument of the ld. AR that these are low tax effect appeals, which could not have been preferred by the ld. AO.

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• 2024 (6) TMI 642
  Revision u/s 263 - annuity amount paid to LIC was not made by the employer rather this payment was made on the request of the employees out of the VRS amount - claim of exemption u/s 10(10CC) made by the assessee was wrong and incorrect - Similarly, the claim for exemption u/s 10(10BB) of the Act was also allowed by the AO without making any enquiry from the employer - HELD THAT:- As revealed from the enquiry made by the Ld. PCIT that the exemption claimed u/s 10(10CC) of the Act and u/s 10(10B) of the Act was not correct and not in accordance with the provisions of law. The deduction u/s 10(10CC) of the Act is available in respect of tax paid by employer for a non-monetary perquisite derived u/s 17(2) of the Act. The employer can t claim any deduction for such perquisite and the same is liable to be disallowed u/s 40(a)(v) of the Act. AO didn t make any enquiry from the employer about payment of perquisite which was claimed exempt u/s 10(10CC) of the Act and had allowed the claim of the assessee. The enquiry made by the PCIT from the employer revealed that neither any perquisite was paid to the assessee nor the employer had made any disallowance u/s 40(a)(v) - Therefore, the claim of exemption u/s 10(10CC) of the Act made by the assessee was wrong and incorrect. Similarly, the claim for exemption u/s 10(10BB) of the Act was also allowed by the AO without making any enquiry from the employer. It is thus evident from the above facts, that the AO had not conducted proper inquiries in respect of the claims as made in the return of income and, therefore, the order was rightly treated as erroneous and pre-judicial to the interest of revenue by the Ld. PCIT. As pointed out by the Ld. CIT-DR, it was held in the case of Navnit Lal Sakar Lal [ 2000 (11) TMI 1 - SUPREME COURT] that the amount utilized by the employer for obtaining deferred annuity policy would form part of remuneration payable to the assessee and was chargeable under the head salaries . Therefore, the annuity amount of Rs. 15 lakh paid to LIC by the employer was remuneration of the assessee and taxable as salary. As the order of the AO was not in accordance with the decision of the Apex Court the order of the AO was erroneous and pre-judicial to the interest of revenue for this reason as well. The decisions relied upon by the Ld. AR are all found different on facts and not applicable to the peculiar facts of this case. It is a trite law and a well settled position that non application of mind or wrong assumption of facts or incorrect application of law by the A.O. will make the order erroneous and pre-judicial to the interest of Revenue. Therefore, we do not find anything wrong with the assumption of jurisdiction u/s 263 of the Act by the Ld. PCIT as the order of the AO was erroneous and pre-judicial to the interest of Revenue for the reasons as already discussed above. We, therefore, upheld the order of the Ld. PCIT. The grounds of appeals taken by the assessee are dismissed.

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• 2024 (6) TMI 641
  Validity of order u/s 143(1)(a) - assessee submitted that the AO has not passed a speaking order nor provided a proper opportunity of hearing - HELD THAT:- As under the provisions of section 143(1) of the Act, the AO is required to compute the income after taking into consideration the adjustment as prescribed subject to communication to the assessee. In the intimation letter, AO has referred the reasons for adjustment. He has made adjustment on the basis of entry made by the tax Auditor of the assessee under the row prescribed for expenditure by way of penalty or fine for violation of law for time in being in force. Out of the two items listed under this row in tax audit report, one item was already added by the assessee for computing returned income but the second item of Rs. 1,00,000/- was omitted for including in the returned income. On the basis of omission observed, the AO (CPC) communicated the proposed adjustment and thereafter passed the intimation order along with reasons of adjustment duly specified as part of intimation order. Therefore, the arguments of the ld counsel that intimation order passed is not reasoned, are incorrect. Hon ble Supreme Court in the case of CIT Vs Rajesh Jhaveri Stock Brokers P ltd [ 2007 (5) TMI 197 - SUPREME COURT] distinguished between intimation and assessment and held that under intimation the authority of the AO is limited to carry out adjustment based on the return of income or accompanying documents and he can t go beyond that and make adjustment on any debatable issue. In our opinion, in view of above observation, the AO was not required to pass a speaking order for adjustments made in strict terms, although he has duly proposed the said adjustment twice to the assessee and thereafter in the intimation he has provided reasons of adjustment. Regarding the ratio of PR Packaging [ 2022 (12) TMI 841 - ITAT MUMBAI] , we find that in said case in the Audit report it was not clearly mentioned whether said amount was disallowable or not but in the instant case , the amount has been categorized by the Tax Auditor under penalty or fine for violation of law for time being in force, therefore, the amount being prima-facie disallowable u/s 143(1)(a)(iv). Ground of the appeal of the assessee is accordingly allowed for statistical purposes.

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• Customs

• 2024 (6) TMI 640
  Timeline prescribed under Regulation 20 (5) of the Customs Broker Licensing Regulations, 2013 - whether, the Tribunal could have discarded the enquiry report in its entirety as being submitted in breach of the timeline prescribed in Regulation 20 (5) of the Regulations of 2013 or should have considered the same on merits and on such consideration have the discretion to attach such weightage to it as deemed appropriate? HELD THAT:- The order impugned before the Tribunal has been premised upon the enquiry report. The order impugned before the Tribunal has prescribed both cancellation of the license as well as forfeiture of the security deposit of the broker. The Tribunal has accepted a portion of the order impugned before it, that is to say that, it has upheld the forfeiture of the security deposit of the broker while setting aside the order of cancellation of the license. In doing so, it has to be held that, the Tribunal accepted the enquiry report partially in imposing such a penalty on the respondent. If the Tribunal had discarded, the enquiry report in its entirety, which it could not have done, in view of the pronouncement of this Court in ASIAN FREIGHT (UNIT OF ESAN FREIGHT TRAVEL PVT. LTD.) AND ORS. VERSUS THE PRINCIPAL COMMISSIONER OF CUSTOMS (AIRPORT ADMINISTRATION) , CUSTOMS HOUSE AND ORS. [ 2016 (8) TMI 1362 - CALCUTTA HIGH COURT] and M/S. OTA FALLOONS FORWARDERS PVT. LTD. VERSUS UNION OF INDIA ANOTHER [ 2018 (6) TMI 656 - CALCUTTA HIGH COURT] which were binding upon it, at that material point of time, then, the order under appeal before the Division Bench could not have been sustained. Again, the Division Bench has noted that, the Tribunal has accepted a portion of the enquiry report and therefore, the Division Bench has proceeded to uphold the order of the Tribunal impugned before it. The Adjudicating Authority while dealing with the proceeding under Regulation 20 of the Regulations of 2013, is called upon to take into consideration the materials proved before it. Absence of the broker before it or refusal of the broker to participate in the adjudication proceedings does not vest the broker with any additional benefits of a requirement on the Adjudicating Authority to apprise the reply of the broker in the manner suggested by the Hon ble Second Judge - In the facts and circumstances of the present case, neither the enquiry report nor the order of adjudication impugned before the Tribunal can be faulted for not having taken into consideration relevant materials. The present reference is answered by holding that, the timeline prescribed under Regulation 20 (5) of the Regulations of 2013 are directory. The Tribunal is vested with the discretion to attach such weightage to the enquiry report as deemed appropriate, after consideration of the same on merits. Application disposed off.

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• 2024 (6) TMI 639
  Imposition of penalty on the Appellant under Section 112 (a) of the Customs Act, 1962 - cryptic and non-speaking order - Non-consideration of any of the submissions of the Appellant - violation of principles of natural justice - HELD THAT:- There are no reason to interfere in the order passed by the CESTAT because the CESTAT as well as the Commissioner have come to a finding of fact that appellants were abettors. It is rather difficult, to accept that a party who is selling 18 metric tons for conversion/coating Ascorbic Acid on capsules does not even know that Suprapti Plastic Limited did not even have electricity connection and it is rather surprising to accept that they brought coated capsules from Suprapti which did not have electricity connection. The Commissioner has also given a finding of fact that Mr. Pradeep Mehta, Managing Director of Vishal Exports Overseas Limited has played active role in perpetrating the fraud, inasmuch as, they also had full knowledge of the scheme and have executed the entire operation right from obtaining LOU fraudulently in contravention of exempted policy until the clearance of import goods through EOU route circumventing payment of customs duty and anti-dumping duty. The Commissioner further has given a finding that Mr. Pradeep Mehta had, in collusion with others, facilitated clearance of Ascorbic Acid in the guise of Ascorbic Acid (feed bread) resulting in substantial loss to Government Revenue. These findings have been confirmed by the CESTAT. The finding arrived at by the Commissioner as well as the Tribunal was on facts that appellant had abetted evasion of duty - no substantial question of law arises - Appeal dismissed.

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• 2024 (6) TMI 638
  Bribery - Criminal liability - seeking provisional release for monetary consideration - application u/s 227 of the CrPC - HELD THAT:- The accusation is that by abusing his position as a public servant, applicant -Virendrakumar Agarwal obtained pecuniary gain in order to release the consignment and thereby he benefited by illegal means and caused wrongful loss to the government by not confiscating the goods. The respondents are relying upon the statements of the witnesses and the documents on record to establish the conspiracy between the various accused. The contention of learned senior advocate that the order of the provisional release having attained finality under the Customs Act has an effect of absolving the petitioners accused of any criminal liability is without any merit. The accusations against the petitioner- Virendrakumar Agarwal is that he obtained pecuniary gain from the co-accused for release of the consignment and thereby he benefited by illegal means and caused wrongful loss to the government by not confiscating the goods. There are thus, prima facie, materials and statements on record which is sufficient to proceed against the petitioners. There are no reason to interfere with the order passed by the trial Court - The petitions and revision application stand rejected.

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• 2024 (6) TMI 637
  Application for pre-arrest bail - clandestine removal of goods from a public bonded warehouse - Section 135 of the Customs Act, 1962 - HELD THAT:- Prima facie, there is ample material to show the complicity of the applicant. It is true, at this stage the material against the applicant is primarily in the form of the statements of the co-accused. It is also true that the statements recorded under section 108, cannot be taken as a gospel truth and accepted at par without corroboration. However, the stage of the proceeding cannot be lost site of. At this stage, the Investigating Agency may take lead from the statements of the co-accused. In the case at hand, the statements of the co-accused, recorded under section 108, are clear, categorical, and, prima facie, incriminate the applicant as the person who floated and executed the plan to defraud the revenue. In the case at hand, there is a very strong prima facie case against the applicant. It is a case of economic offence which has the propensity to affect the economic fabric of the society. Proper investigation is, therefore, necessary to unearth the fraud, unmask the identity of the persons who are privy to the fraud and evasion of customs duty and have the trail of clandestinely removed goods. In the case at hand, having regard to the material pressed into service against the applicant, which prima facie indicates that the applicant is the key conspirator, the grant of bail to the applicant will prejudicially affect the purpose of effective investigation. Application dismissed.

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• 2024 (6) TMI 636
  Compliance with time limits prescribed in terms of Regulation 20 of Customs Brokers Licensing Regulations, 2013 for revoking licence or imposing penalty - Revocation of Customs Broker Licence - forfeiture of security deposit - levy of penalty - mis-declaration and fraudulent export of Uric Acid by M/s. Royal Enterprises through the Appellant (Customs broker) by over valuation of export consignment to claim undue higher drawback - HELD THAT:- In terms of Regulation of 20 of CBLR, 2013, the Commissioner of Customs is mandated to issue a Show Cause Notice within 90 days from the date of receipt of offence report, the Assistant / Deputy Commissioner of Customs nominated has to complete the inquiry and submit his report within 90 days from the date of issuance of Show Cause Notice and then after considering the inquiry report and Customs Broker s representation, the Commissioner is required to issue the order of revocation or revocation of the suspension within 90 days from the date of submission of the inquiry report. In the instant case, the Show Cause Notice was issued on 17.12.2017 well within the time limit of 90 days from the date of receipt of the abovesaid offence report in terms of Regulation 20(1) of CBLR,2013. It is also found that the inquiry report was submitted by the inquiry officer on 12.03.2018 within a period of 90 days from the issuance of notice in terms of Regulation 20(5) of CBLR, 2013. The Adjudicating Authority has issued the Order-in-Original on 01.06.2018 well within the time period of 90 days from the date of submission of report by the inquiry officer as per Regulation 20(7) of CBLR, 2013. Hence, the issuance of Show Cause Notice, inquiry report and its adjudication has been carried out strictly in terms of Regulation 20 of CBLR, 2013. The proceedings for revocation of licence of the Appellant are not hit by limitation. Revocation of License - HELD THAT:- The Customs Broker to derive the financial benefit out of fraudulent transactions indulged in by Mr. Ulhas Gate of M/s. A.P. Cargo Enterprises who was the H card holder had allowed his license to be misused and abused - Fabrication of any documents is a very serious matter and requires to be seriously dealt with. The impugned order dated 01.06.2018 of the Commissioner of Customs, Chennai is partly modified to set aside the revocation of Licence, but, the imposition of fine and forfeiture of security is upheld - appeal allowed in part.

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• 2024 (6) TMI 635
  Misclassification and misdeclaration of goods for availing export incentives and to avail higher rate of drawback - Copper Strips/Earth Rod (in Coil form) - to be classified under CTH 85381090 or not - levy of penalty. HELD THAT:- The cargo declared for exports by M/s. Horizon Enterprises was of copper rods and the cargo being exported by M/s Basant Global Trade Pvt. Ltd. is copper strips. The clearances of both the cargo was given to the forwarder Mr. Rajvardhan Jha of M/s Shivarpan Enterprises. The truck carrying the cargo of M/s. Horizon enterprises, Mumbai arrived the CFS gate first, but the checklist for shipping bill in respect of the cargo of M/s. Basant Global Trade Pvt. Ltd. was produced in its place by mistake. Incidentally, both the cargo were 52MT. In such circumstances, it is clear that the disputed cargo was not relating to the bill of entry No. 5573040 filed by the Appellant No. 1. There is no doubt that the disputed consignment was first time exported by the Appellant No. 1 and when the suspicious and misleading and manipulation of facts came in knowledge of the Appellant No. 1, they approached the Chief Commissioner of Customs, The Principal Commissioner of Customs, Kandla Mundra Port and later the Deputy Commissioner of Customs, Customs House, Mundra on 04.05.2017. Thereafter Appellant appointed new CHA M/s Eiffel Logistics Pvt. Ltd. and after the guidance of new CHA and department they amended the shipping bill No. 5573040 dtd. 21.04.2017 and goods were then exported vide amended shipping bill No. 5573040 dtd. 21.04.2017. As per the appellant No. 1 due to extreme delay in exports, price fluctuations and Ramzan time in UAE, the buyer refused to take the delivery and ultimately the goods had to be re-imported by the Appellant No. 1 vide Bill of Entry No. 2364586 dtd. 07.07.2017. The imposition of any redemption fine and penalties on the allegations and findings of misdeclaration of goods cannot be held to be justified, the same is aside. Imposition of penalties on Appellant No. 2 - HELD THAT:- It is found that no case of aiding and abetting is made out against this appellant. There is no case made out of any abnormal gain by the appellant to indicate any collusion or abetment on his part with the exporter of the consignment under dispute. The Appellant filed the Shipping Bill based upon the information given to him by the exporter and is not expected to investigate and find out the correct declaration of the value and of the goods. In any case, Appellant who apparently acted in a bona fide manner in terms of the instructions of the exporter cannot be penalized on the ground of abetment of any offence of the disputed export goods. In the orders of the lower authorities, the action against the appellant was taken alleging the contravention of regulations of CBLR, 2009, however no action under CBLR, 2009 such as suspension of CB licence, revocation of licence etc. was taken. This itself shows that there is no mala fide on the part of the appellant No. 2. The impugned order relates to the present appellants is set aside - appeal allowed.

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• 2024 (6) TMI 634
  Smuggling - gold bars of foreign origin - Seizure and confiscation of gold bars - persons could not produce any documents in respect of the goods in question - HELD THAT:- It is seen from the Show Cause Notice that the officials of DRI have searched two persons while they were boarding Delhi bound Brahmaputra Mail on 20.06.2016. The DRI maintained a vigil at Kamakhya Railway Station and two persons were intercepted by the DRI officials. Trolley bags carried by them were searched and it was found that cavities were made inside the trolley bags to conceal the gold bars. The officers found 4 yellow metal bars likely to be primary gold of foreign origin. The intercepted persons could not produce any documents in respect of the goods in question. There are no reason to interfere with the detailed order passed by the Adjudicating authority - no specific evidence has been brought to the contrary by the Appellant in their grounds of Appeal - appeal dismissed.

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• Corporate Laws

• 2024 (6) TMI 633
  Recovaery of dues - Priority of claims among secured and unsecured creditors - priority charge on liquidation of company s assets - HELD THAT:- The Supreme Court has in the case of ICICI Bank [ 2006 (4) TMI 264 - SUPREME COURT ] in clear terms, held that the right to property is a Constitutional right and, therefore, right to recover the money lent by enforcing a mortgage would also be a right to enforce an interest in the property. The Court further held that in terms of section 48 of the Transfer of Property Act, claim of the first charge holder shall prevail over the claim of the second charge holder. The Court then, by referring to section 529 of the Companies Act, has opined that merely because such a section does not specifically provide for rights or priorities over the mortgaged assets, would not mean that the provision of section 48 of the Transfer of Property Act, 1882 shall stand obliterated. The report filed by the recovery officer is in tune with the order passed by this Court. The objection is accordingly rejected. Seeking release of amount for the purpose of distribution to the certificate holders in terms of recovery certificate after retaining the amount payable to the workers - HELD THAT:- It will be appropriate to direct the Official Liquidator to release Rs. 9.5 Crores in favour of the recovery officer in terms of the prayer made by him. The amount be released within fifteen working days - Application disposed off.

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• 2024 (6) TMI 632
  Seeking winding up of the respondent company - non-payment of outstanding dues - HELD THAT:- Evidently, the respondent company has failed to pay its debt in the normal and ordinary course of its business, hence, the present petition has been filed. However, on a perusal of the record, it is borne out that this winding up petition has been a complete non-starter, and as of yet, no substantial orders have been passed in furtherance of the liquidation of the respondent company. The instant petition is transferred to the NCLT. Parties to appear before the NCLT on 27.05.2024. The interim orders passed by this Court in these petitions, if any, shall continue till the said date. Petition disposed off.

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• 2024 (6) TMI 631
  Seeking dissolution of the company - Voluntary Liquidation - Section 497(6) of the Companies Act, 1956 - HELD THAT:- It is stated on behalf of the Official Liquidator that the Official Liquidator is satisfied that the necessary compliance of Section 497 and other relevant provisions of the Act have been made and the affairs of the said company have not been conducted in a manner prejudicial to the interest of its members or to the public interest and the said company may be dissolved. In view of the foregoing and in view of the satisfaction accorded by the Official Liquidator by way of the present petition, the said company is hereby wound up and shall be deemed to be dissolved with effect from the date of the filing of the present petition i.e. 03.04.2024. Petition disposed off.

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• Insolvency & Bankruptcy

• 2024 (6) TMI 630
  Approval of Resolution Plan - Appeal filed by two dissenting Financial Creditors objecting to the Resolution Plan - giving of the flats to the Homebuyers under the Resolution Plan, without escalation of price - HELD THAT:- The Homebuyers, who have been allotted the house and amount of consideration has already been fixed in the allotment and it was undertaken by the Corporate Debtor to handover the units on payment of consideration, no exception can be taken to handing over of the units to the Homebuyers on consideration, already paid. The Resolution Plan was approved treating them in two different categories, which was challenged before this Tribunal, on the ground that the treatment of Homebuyers, cannot be discriminated - Present is not a case, where any violation of Section 30, sub-section (2) has been proved by the Appellant. Appellant(s) being dissenting Financial Creditors are entitled to receive their payment as per Section 30, sub-section (2) (b) (ii) and the amounts, which have been offered to dissenting Financial Creditors, is in accordance with the said provision. The Appellants are not entitled to claim payment as per the security interest in the asset of the Corporate Debtor. Appeal dismissed.

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• FEMA

• 2024 (6) TMI 629
  Contraventions of FERA - Appellant issued instructions to Indian Banks for crediting accounts of non-residents - Appellant, which had entered into various agency agreements with Authorized Dealer banks appointed by the RBI to open, maintain and effect transactions from the Vostro Accounts of the Appellant - Tribunal directed the Appellant to furnish unconditional bank guarantee of total penalty amount in the favor of Enforcement Directorate to meet the statutory requirement u/s 52 (2) of FERA 1973 of waiver of the pre-deposit of the penalty amount - HELD THAT:- Appellant cannot get away by an explanation that it was not its business or responsibility to do verification of any kind for such transactions because it was the instructions of the Appellant which initiated the transactions which were prohibited under the Agreement and Arrangements. Even when the matter was taken up with the Appellant by Grindlays Bank and RBI, there is nothing on record to show that any enquiry was taken up by the Appellant. Its response was to deny its responsibility. Such conduct on the part of the Appellant not only reveals instigation but that too intentionally so as to engage with the ADs to indulge in transactions which were prohibited under the Agreement and Arrangements, resulting in contraventions of the provisions of FERA 1973. It is from the facts and circumstances of a case that the intention, instigation and engagement are to be ascertained. The facts of the present case speak for themselves whereby the obligations arising from the Agreement and Arrangements were completely ignored by the Appellant. FERA 1973 provided for a regulatory mechanism for certain payments, dealings in foreign exchange and security, transactions indirectly affecting foreign exchange and the import and export of currency for the conservation of the foreign exchange resources of the country and the proper utilization thereof in the interest of the economic development of the country. Section 59 of FERA1973 provided for presumption of culpable mental state in any prosecution for any offence under the Act which requires a culpable mental state on the part of the accused, unless the accused proved the fact that he had no such mental state with respect to the charge against a particular offence. Sub-Section 3 of that Section makes such presumption applicable to proceeding before an Adjudicating Officer. The circumstances and the evidence in the present case reverse the burden on to the Appellant which it has failed to discharge. Therefore, the charge of the abetment against the Appellant stands established as it contravened Section 64 (2) read with Section 6 (4), Section 6 (5) and Section 49 (i) (a) of FERA, 1973. We would consider the argument on the quantum of penalty imposed on the Appellant. It is submitted that the amount of penalty is disproportionately higher for the charge of abetment alleged against the Appellant. Appellant has even argued against the allegation of abetment which however has not been accepted by the Tribunal. Appellant has prayed for making amount of penalty commensurate to the charge of contravention and abetment therein. The prayer has been opposed by Respondent. In the facts and the circumstances of the case we do find that that amount of penalty is disproportionate to the allegation made against the Appellant. We accordingly substitute the penalty which would meet the ends of justice.

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• 2024 (6) TMI 628
  Violation of FEMA Act - bets accepted/placed on cricket matches on behalf of his clients - Connection of the raided premises with the appellant - Penalty imposed for contravention of Section 4 of FEMA and contravention of Section 3(d) of the Act of 1999 - specific information that the appellant and one Jaspal Singh Saluja were receiving and accepting bets on scores and outcome of cricket matches and other sporting events on behalf of their clients and bookies based locally, nationally and internationally and a search was conducted where documents of incriminating nature in terms of the mobile phones, computers, TV, recording systems, laptop, audio cassettes, etc. were found apart from Indian currency of Rs.80,000/- It was seized under the Panchnama - At the time of search, appellant Satpal Singh Vig was not present but one Jaspal Singh Saluja and some other persons were available Whether appellant was not involved in any illegal activity taking place at the premises? - r eliability of statements of Jaspal Singh Saluja, who had retracted his statements. HELD THAT:- The noticee was indulging in accepting and placing bets on cricket matches on behalf of his clients that the investigations made revealed that the noticee Shri Satpal Singh Vig had 19 clients who were based overseas out of which accounts of 11 were retrieved from the seized computer which are annexed as `relied upon documents . The net amount outstanding at the end of series of bets accepted/placed by a particular overseas client is arrived at in a manner explained in detail Complaint. As seen that there were 25 outstanding accounts bifurcated into two groups of 15 and 10 being `received/receivable and `paid/payable respectively. It is also mentioned in the Complaint that one Shri Manojbhai based in Dubai is handling these accounts i.e. the dealings with overseas clients on behalf of Shri Satpal Singh Vig@Pali. Therefore section 3(d) of FEMA 1999 is invoked in respect of these amounts and it is appropriate given the nature of transactions involved. These amounts are bets accepted/placed and there is/can be a time difference between acceptance/placement of a bet and realisation of the same. However, as stated in the said section ` creation or transfer of a right to acquire any asset outside India by any person in this case is established the moment Shri Manojbhai accepts/places a bet on behalf of the noticee. The terms in question here in fact do not in any way affect the contravention committed by the noticee and appear to have been used to encompass the transactions which could have been at different stages of completion merely on account of time factor or physical delivery of amounts. We find that apart from the statements of the appellant and Shri Saluja, the material produced was sufficient to substantiate the allegation against the appellant. This is to show that on instructions, Manojbhai from the account available was paid Dhirams 80,000/- on 27.6.2004 and Dhirams 1,39,346/- on 02.07.2004. Such other payments have been referred by the Special Director apart from the other material. The case in hand is not such where the respondents could not prove the case by adducing the evidence otherwise if we enter into other facts and the evidence, it would be sufficient to show that substantial evidence was led by the respondents to prove the case, however, what has been referred by us would also be sufficient to find out the case against the appellant. Thus, we do not find any error in the findings recorded by the Special Director. Penalty of Rs. 26 lakhs has been imposed for the contravention of Section 4 and Rs.98 lakhs for Section 3(d) of the Act of 1999 - We find the penalty amount to be in excess to the contravention of the amount involved therein. The appellant has already deposited Rs.50 lakhs towards the pre-deposit pursuant to the order of Bombay High Court though the Tribunal passed an order to deposit 60% of the amount to satisfy the condition of pre-deposit. In any case, to make the penalty amount proportionate to the contravention, we reduce it and accordingly for contravention of Section 4 of the Act of 1999, penalty of Rs.10 lakhs is imposed and thereby Rs.26 lakhs is substituted by Rs.10 lakhs and in the same manner penalty of Rs.98 lakhs is reduced to Rs.40 lakhs and is substituted accordingly. The total penalty of Rs.50 lakhs is imposed upon the respondents and with the aforesaid, appeal is partly allowed.

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• PMLA

• 2024 (6) TMI 627
  Seeking grant of bail - Money Laundering - proceeds of crime - scheduled offences - cheating innocent citizens by alluring them to invest in the M/s Shine City in terms of various lucrative schemes - HELD THAT:- The Apex Court in Rohit Tandon v. Directorate of Enforcement [ 2017 (11) TMI 779 - SUPREME COURT] has held that ' The consistent view taken by this Court is that economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. Further, when attempt is made to project the proceeds of crime as untainted money and also that the allegations may not ultimately be established, but having been made, the burden of proof that the monies were not the proceeds of crime and were not, therefore, tainted shifts on the accused persons under Section 24 of the 2002 Act.' The offence of money laundering as per Section 3 not only relates to generation of such proceeds of crime but it also includes any activity directly or indirectly relating to concealment or possession or acquisition or use amongst others. The said definition is very wide and inclusive, thus, the fact that directly or indirectly if any person is in possession or use of such proceeds of crime whether directly or indirectly, knowingly assists or knowingly is a party or actually involved in any activity connected with proceeds of crime relating to concealment possession acquisition or use or projecting the property as untainted property or claiming as untainted property in any manner whatsoever would be liable for any offence under the PMLA. In the instant case from the perusal of the complaint and the material brought on record, it reflects prima facie involvement of the applicant. Even though, this Court is conscious of the fact that at this stage a mini trial is not be held nor the court is required to enter into the merits or the depth of the evidence to return a finding of guilt, but what is required of the Court is to prima facie consider the material available on record to enable the court to satisfy itself in order to enable it to form reasonable belief that the applicant is not guilty of the offence and that he is not likely to commit any offence on bail which is one of the condition as enshrined in Section 45 of the PMLA. This Court is unable to persuade itself to form a, prima facie, satisfaction in terms of Section 45 of the PMLA, at this stage, that the applicant is not guilty or that he may not commit an offence on bail - Bail application rejected.

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• Service Tax

• 2024 (6) TMI 626
  Condonation of delay in filing of appeal - Levy of service tax - miscellaneous expenses paid by the service recipient in connection with security service provided by the appellant - time limitation - HELD THAT:- From the finding of the Learned Commissioner (Appeals), there is no dispute that the appellant have filed the appeal after 90 days. The learned Commissioner (Appeals) has statutory power to Condon the delay maximum 30 days after the normal period of filing appeal i.e. 60 days. In the present case the appellant have admittedly filed the appeal much after the 90 days. Therefore, the commissioner has no power to condone the delay more than 30 days. Accordingly, appeal was dismissed on time bar. The statutory period of 90 days cannot be condoned by any authority even by this Tribunal as held by SINGH ENTERPRISES VERSUS COMMISSIONER OF C. EX., JAMSHEDPUR [ 2007 (12) TMI 11 - SUPREME COURT] , which was relied by the Learned Commissioner in the above finding. The dismissal of the appeal on being time bar is proper and legal and does not suffer from any infirmity - Appeal dismissed.

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• 2024 (6) TMI 625
  Levy of service tax - Restaurant Service or not - activity rendered by the Appellant at its licenced bar - exemption under N/N. 25/2012-ST dated 20.06.2012 - HELD THAT:- As per the clarification issued vide Board s Circular No. 139/8/2011-TRU dated 10.05.2011, the Service Tax is liable to be paid on restaurants (i) having the facility of air-conditioning in any part of the establishment and (ii) which have a licence to serve alcoholic beverages. The usage of and in the above clarification makes it amply clear that both the requirements are to be fulfilled to satisfy the criteria for attracting Service Tax levy on Restaurant Service. Thus, it is clear that Service Tax is liable to be paid on the Restaurant Service if two essential conditions are fulfilled viz., if it has the facility of air-conditioning in any part of the establishment and it should have licence to serve alcoholic beverages. For the period from 01.05.2011 to 16.03.2012, the restaurant at the premises of the Appellant do not fulfil the requirement of having a licence to serve alcoholic beverages in the premises of the air-conditioned restaurant, in order to bring the service under the ambit of Restaurant Services. The demand raised in the Show Cause Notice is on the total collections (liquor sales) in the licenced bar and not on the value of the food and beverages served inside the bar and as such the demand suffers from infirmity and the adjudicating authority made a blatant error in confirming the demand. For computation of service tax considering entire liquor sales in a permit room is clearly against the provisions of the law as alcoholic liquor for home consumption is outside the Service Tax Act. Even, in a case where snacks and beverages are sold in permit room, service tax payable should have been limited to computing to such sales of snacks and beverages. The demand of service tax on the Appellant is devoid of merits - Appeal allowed.

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• 2024 (6) TMI 624
  Levy of service tax - payment made to foreign banks by the Appellant is already settled under VCES as recorded in the impugned order - appellant has received payment processing services from AFL engaged by M/s. C A, the foreign buyer to process payments to the appellant - reverse charge mechanism - extended period of limitation - levy of penalties. HELD THAT:- There is no service provider-recipient relationship between the appellant and M/s. Amsco and if there is any contract, the same is between M/s. C A (buyer) and M/s. Amsco, both of whom are out of India and the appellant does not have any contract with M/s. Amsco whatsoever - the deduction of 3% from the invoice price was already indicated in the Purchase Order for the goods issued by M/s. C A and therefore it was nothing but a trade discount for the appellant. The deduction from the invoice is also allowed for in terms of the master circular on exports of goods and services issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999. Further, the appellant does not have any legal recourse or any binding contract with M/s. Amsco to enforce any of its rights. Further, the email from M/s. Amsco is only an information and does not bind M/s. Amsco to any contract with the appellant. Extended period of limitation - levy of penalties - HELD THAT:- In the present case, there was no intent to evade tax as the appellant had no contractual relation with AFL; and all the transactions such as payment, transmission of funds are the liability of M/s C A and it is up to them to decide the mode of the transfer and payment; and the appellant had no role in this regard. Further, the deduction in respect of AFL was clearly shown in the shipping bills for export; drawback was also claimed only on the net amount; and further, being an exporter the service tax payable, if any, would anyway be allowable as a rebate to the appellant; and the entire situation would have been revenue neutral. Therefore, there is no question of lack of bonafides on the part of the appellant in the present case. The issues involved in this appeal are identical that have been decided in the case of EASTMAN EXPORTS GLOBAL CLOTHING P LTD VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, COIMBATORE [ 2024 (5) TMI 417 - CESTAT CHENNAI] where it was held that 'the deduction in respect of M/s Amsco was clearly shown in the shipping bills for export; drawback was also claimed only on the net amount; and further, being an exporter the service tax payable, if any, would anyway be allowable as a rebate to the appellant; and the entire situation would have been revenue neutral. Therefore, there is no question of lack of bonafides on the part of the appellant in the present case.' The impugned order is not sustainable in law and so ordered to be set aside - Appeal allowed.

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• 2024 (6) TMI 623
  Refund claim - Time Limitation - inclusion of value of material supplied free of cost by the service recipient in the assessable value - refund could be claimed without challenging the self-assessment or not - HELD THAT:- The law of refund has been settled by the Apex Court that refund can be sanctioned only in pursuance of the assessment made and not de hors the assessment. The principle was laid down in the case of Priya Blue Industries versus Commissioner of Customs [ 2004 (9) TMI 105 - SUPREME COURT] under the provisions of the Customs Act and thereafter, in the case of Collector of Central Excise versus Flock India Private Ltd. [ 2000 (8) TMI 88 - SUPREME COURT ] a case under Central Excise Act. Later, in the case of ITC Limited [ 2019 (9) TMI 802 - SUPREME COURT] , the issue considered was whether the refund could be sanctioned without challenging the self assessment and it was conclusively held that all assessments, including self assessments are appealable and therefore, unless the same is modified, no refund could be sanctioned so as to alter the assessment on the principle that refund proceedings are in the nature of execution proceedings and they cannot be used to determine the liabilities of the parties. The facts in the present case are not disputed to the extent that both the service provider and the service recipient assessed their taxable value and paid the service tax as per their liability. The amount of service tax worked out and paid on the free of cost supplied material by the service provider and service recipient was deposited in the government exchequer on account of their service tax liability during the relevant period. Appeal allowed.

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• 2024 (6) TMI 622
  Levy of service tax - transfer of right to use - freight rebate - Deemed sale - Revenue was of the view that the service provided under the said scheme by the appellant qualified as service and was taxable - HELD THAT:- In the instant case it is no doubt that the rakes which the respondent has supplied to railways are clearly identifiable. Thus, the criteria a laid down by Hon ble Apex Court in the case of BSNL [ 2006 (3) TMI 1 - SUPREME COURT] are satisfied. It is seen that the railways are entitled to use the rakes at their rake to the exclusion of any other party for the said period. There are no legal hindrances to railways in using the said rakes for any client whomsoever they wish to used it for. When the rakes are supplied to railways the said rakes are to be exclusively used by railways and no other party can claim any right to use at the same time. It is also apparent from the nature of transaction that having supplied the rakes to railways the respondents are precluded from giving the same rakes to anybody else for the period in the contract. From the above it is apparent that there is a transfer of right to use of railways rakes and therefore it would consist of deemed sale as described as under article 366 (29A) of the constitution. In the case of M/s. MSPL Vs. Commissioner of Central Excise Customs Belgaum [ 2022 (2) TMI 901 - CESTAT BANGALORE] where it was held that ' the appellants have transferred the right of possession and effective control of the wagons leased out by them to the South Western Railways. The appellants have also discharged applicable VAT/Sales Tax on such transaction, therefore, the activity undertaken by the appellants does not constitute a taxable service of Supply of Tangible Goods .' The effective control and possession has been transferred to the Railways. In this circumstances the transaction would qualify as deemed sale under article 366 (29A) and therefore cannot be taxed as a service. Revenue has also sought to distinguish the decisions on the ground that the respondents have not paid VAT on the transaction. It has been argued that the property in goods remains with the respondents - The nature of transaction does not depend on the fact whether persons engaged in the transaction have paid relevant taxes or not. Just because the respondents have not paid VAT the nature of transaction does not change. When the facts indicate that possession and effective control has been transferred to the railways, the provisions of Article 366(29A) makes the transaction a deemed sale. At best state authorities can act to recover VAT. It does not give right to levy service tax. There are no merit in the appeal filed by the revenue, the same has dismissed.

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• 2024 (6) TMI 621
  Invocation of Extended period of limitation - Non-payment of service tax - demand alongwith interest and penalty - HELD THAT:- Admittedly the Appellant is not disputing that they were collecting the Service Tax from their clients and were required to pay Rs.8,45,998/- during the period under dispute. They had not paid the Service Tax nor had they filed their ST-3 Returns. Only in view of the detailed investigation taken up by the departmental officials, the fact of non-payment of Service Tax has come to light. Therefore, the Department is justified in issuing the demand by invoking the extended period provisions under Section 73 of the Finance Act. However, it is found that When the extended period provisions are invoked, the penalty is required to be imposed under Section 78(1). In the normal course, the penalty would be equivalent to the Service Tax evaded. Interest u/s 75 - HELD THAT:- While the demand pertains to the year 2011-12 to 2014-15, the Appellant has paid the amount of Rs.4,78,730/- in December 2016 and they have paid Rs.3,67,268/- in June 2017. The Appellant is required to pay the interest in terms of Section 75 - as per the proviso to Section 75, the interest payable could be reduced 3% per annum. The Adjudicating authority is directed to verify the claim of the Appellant and arrive at the interest payable after taking this provision into account. The Adjudicating authority should consider that the interest is payable only upto to the date of making the payment of Service Tax. Accordingly, the interest may be calculated and the Appellant may be directed to pay the same after taking into account Rs.30,000/- already paid by the appellants as interest. Other penalties/late fee etc. imposed on the present Appellant upheld. Appeal disposed off.

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• Central Excise

• 2024 (6) TMI 620
  Penalty u/r 209 of the Central Excise Rules, 1944 - failure to provide opportunity for cross-examination u/s Section 9D of the Central Excise Act, 1944 - violation of principles of natural justice - HELD THAT:- It is found from the impugned Order-In-Order under consideration has been passed wherein the appellant has not participated in the process of adjudication. There are no written submission in the appeal papers nor any request for crossexamination of the person whose statements have been recorded by the appellant. The appellant have never made any request of cross-objection of examination in chief of any of the witnesses - the fact is also noted that no retraction of statement made by him has been found in the appeal papers - the appellant have consciously avoided participating in the adjudication process and now they want that the matter to be decided only on the technical ground that cross-examination was not allowed or permitted under Section 9D of the Central Excise Act, 1944. Appeal dismissed.

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• 2024 (6) TMI 619
  Classification of goods - polyester waste - to be classified under Chapter heading 3907 or under Chapter heading 5505? - differential cenvat credit on clearances of waste raw materials - HELD THAT:- It is observed that all type of waste purchased by the respondent were generated by the suppliers during production of textiles fibers, textiles yarns. The suppliers have classified such waste under Tariff heading 55051090 and paid excise duty accordingly. However in the present matter revenue try to re-classify the product under different chapter heading. To our mind this proposition of the law is incorrect. The assessee/respondent purchased the disputed raw materials from their suppliers and suppliers had classified their final products as per the classification indicated on the invoices. There is no dispute at the supplier end as regards the classification of the products purchased by the respondent. It is settled law that once the classification is not challenged at the end of the seller, the same goods cannot be re-classified at the recipient end. Since respondent have not availed the exemption notification No. 4/2006-CE question of application of rule 6 does not apply. Moreover in respect of the goods respondent have admittedly paid the excise duty, once the excise duty has been paid the Cenvat cannot be denied. In the present case, serial No. 78 of Notification No. 4/2006-CE was not absolute exemption and have conditions. It cannot be said that serial No. 78 of Notification No. 4/2006-CE provides absolute exemption. In such circumstance, excise duty was therefore correctly paid by the respondent and Cenvat Credit of the inputs was also admissible. In our view Excise Duty paid cannot be appropriated under Section 11D of the Act. Demand of differential Cenvat Credit of Rs 3,12,27,981/- - HELD THAT:- Sub-rule (5)of Rule 3 of Cenvat Credit Rules 2004 applies only when the inputs which are brought into the factory is now to be removed in the same condition i.e As Such in their original condition. In the instant case, it is on record that the input is not removed, as such from the respondent premises but after the various process the resultant goods obtained in form of residual waste were cleared and therefore the said Rule has no application to the facts of this case - the revenue has not produced any corroborative documentary evidences to prove that the respondent had cleared the waste raw materials as such. Therefore the demand of differential Cenvat Credit is legally not sustainable and demand in the present case was rightly dropped by the adjudicating authority. Demand of Rs. 1,07,88,395/- - it is the revenue s case that the respondent s general manager during the recording of statement on 12.12.2014 could not explain or clarify who were the persons to whom residual waste was sold under the few of invoices at Rs. 1. per kg., and he also agreed that as per RTO reports etc., the vehicle number shown in the sale invoice were not for vehicles capable of being used for transportation - HELD THAT:- In the present matter revenue has not produced any evidence to show that the respondent had cleared Polyester Staple Fibre in guise of residual waste. As Tribunal in the case of Kothari Pouches Ltd. v. CCE, New Delhi [ 2000 (9) TMI 177 - CEGAT, NEW DELHI ] held that confirmation of demand entirely on the basis of documents of the transporters, without any independent corroborating evidence cannot be upheld. It is well settled law that charges of clandestine removal are serious charges and are required to be established by production of positive and tangible evidence. The same cannot be upheld on the basis of surmises and conjecture. There has to be some cogent evidences so as to prove such charges and the same cannot be simplicitor based upon third parties documents and the statement of transporters - In such circumstance and lack of evidences, since the Commissioner has recorded the specific findings that clandestine removal of goods has not been proved by the Department with any tangible evidence and dropped the demand in favour of the respondent, it is not found appropriate to interfere with the said findings in the impugned order at this juncture. The department s appeals are found devoid of merit. Accordingly, the impugned order is upheld - appeals filed by the revenue are dismissed.

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• 2024 (6) TMI 618
  Excisability - waste and scrap arising during the course of manufacture of insulated electrical wires and cables - HELD THAT:- In DSCL Sugars Ltd [ 2015 (10) TMI 566 - SUPREME COURT] , the Hon ble Supreme Court had before it the issue of dutiability of bagasse emerging during production of sugar and, though earlier held as non-dutiable in Commissioner of Central Excise, Allahabad v. Balrampur Chini Mills Ltd [ 2010 (7) TMI 974 - SC ORDER] , for the period after insertion of Explanation it was held that ' the word manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production of manufacture on his own account.' The waste and scrap arising during the process of manufacture of insulated electrical wires and cables are not liable to duties of excise combined with determination that the insertion does not alter the fundamental step of manufacture, the impugned orders lack merit - appeal allowed.

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• 2024 (6) TMI 617
  Exempt goods or not - whether the excisable goods, otherwise liable to duty of excise, when cleared by the Appellant to their principal manufacturer are exempted goods in terms of Notification 214/86-CE or otherwise? - HELD THAT:- While a plain reading of the Notification 214/86-CE would show that the said notification has been issued under Section 5A(1) of the Central Excise Salt Act, 1944 and therefore, it appears to be an exemption notification, as argued by the learned AR or whether this exemption notification is primarily to regulate the movement of goods from the principal manufacturer to the job worker and its return to the principal manufacturer without payment of duty subject to compliance of the conditions stipulated therein. In the case of Precision Metals [ 2016 (4) TMI 187 - CESTAT MUMBAI] , wherein the identical issue was before the Tribunal, the Coordinate Bench, after examining the legal provision as also various case laws, including Sterlite Industries (I) Ltd [ 2004 (12) TMI 108 - CESTAT, MUMBAI] , came to the conclusion that the demand raised for an amount equivalent to 10% of value of the job work goods in terms of Rule 6(3)(b) of CCR is not sustainable. Whether the Appellants are job worker and not manufacturer and therefore, on this count itself, as alleged in the SCN, they are not entitled to take credit? - HELD THAT:- It has not been disputed by Revenue that they were not eligible for Notification 214/86-CE or there has been any non-compliance of stipulated conditions. Thus, even though the issue of Notification 214/86-CE, being an exemption notification or otherwise was never alleged in the SCN though relied upon by Appellant and adjudicated upon by the Original Authority. Whether availment of Notification 214/86-CE makes the goods exempted goods so as to attract Rule 6 of CCR, 2004? - HELD THAT:- The clearance of goods without payment of duty under the provisions of Notification 214/86-CE would not make the said goods exempted goods , so as to attract the provisions of Rule 6 of CCR, is squarely applicable. Since they are not to be treated as exempted goods, therefore, the Appellants have rightly taken the credit in respect of input services. Therefore, the demand made by the Department is not sustainable and the Impugned Orders are required to be set aside - Appeal allowed.

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• 2024 (6) TMI 616
  Levy of Central Excise Duty - transportation of goods from the place of removal till the customer s place - HELD THAT:- The said issue has been examined by this Tribunal in the appellant s own case M/S. HINDALCO INDUSTRIES LTD. VERSUS COMMR. OF CENTRAL EXCISE, KOLKATA-II [ 2023 (11) TMI 1253 - CESTAT KOLKATA] , wherein this Tribunal has observed ' When the goods were handed over to the transporter, the respondent had no right to the disposal of the goods nor did it reserve such rights inasmuch as title had already passed to its customer.' As the issue has already been settled in the appellant s own case when the goods are cleared at factory gate, the transportation charges recovered from the customers for transportation of goods to the customer s place is not includible in the assessable value of the goods. Therefore, the appellant is not liable to pay the duty on the transportation charges. The appellant is not liable to pay duty. As no duty is payable by the appellant, no penalty is imposed against the appellant. The impugned order is set aside - appeal allowed.

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• 2024 (6) TMI 615
  Delayed availment of cenvat credit on capital goods by the appellant - subsequent recovery of an alleged excess refund by the department - HELD THAT:- There is no truth in the allegation of the department that the appellant has been sanctioned excess refund in the month of April 2012 because they have not availed the balance 50% of the capital goods credit in the month of April 2012 itself. The delayed availment of cenvat credit of the balance 50% excise duty suffered on capital goods in the month May 2012 instead of April 2012 in this case, did not affect the overall entitlement of refund for the relevant financial year. Accordingly, the recovery of excess refund of Rs.3,52,093 vide the impugned order is not sustainable and hence the same is set aside. Appeal allowed.

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• 2024 (6) TMI 614
  CENVAT Credit - denial on the ground that the appellant (Howrah unit) has never dispatched their finished goods to the Administrative unit situated at V. V. Nagar, Gujarat and the input service distributed to the appellant by the administrative office has no direct or indirect relation with final product manufacture and cleared by the appellant - time limitation - suppression of facts or not. HELD THAT:- It is observed that the disputed Cenvat credit in this case has been availed by the appellant during the period March 2005 to March 2009. During the relevant period, the distribution of Cenvat credit on Pro-Rata basis was not there in the Cenvat Credit Rules. A conjoint reading of Rule 7 existed prior to issue of Notification 18/2012 CE(NT) and after issue of the notification would clearly reveal that there was no condition in force to distribute the Cenvat based on usage of input service or turnover. The restrictions for proportionate distribution was introduced subsequently vide Notification No. 18/2012-C.E. (N.T.). Thus, it is observed that during the relevant period there was no requirement of establishing one to one correlation. Accordingly, the denial of Cenvat credit in the impugned order is not sustainable. Time Limitation - HELD THAT:- In the impugned order, the demand has been confirmed for the period March 2005 to March 2009. The SCN in this case was issued 24.02.2010. There is no evidence brought on record to substantiate the allegation that suppression of fact with an intention to evade payment of tax exists in this case. Thus, the extended period cannot be invoked to deny the credit in this case - the impugned order confirming the demand by invoking extended period of limitation is liable to be set aside. The impugned order is set aside - appeal allowed.

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• 2024 (6) TMI 613
  Eligibility of abatement under N/N. 01/2006-ST dated 01.03.2006 - works executed involving supply of materials as well as rendition of services is sustainable or not - HELD THAT:- From the facts, it is brought out that the appellant has rendered services which are composite in nature involving both supply of materials as well as rendition of services. The Hon ble Apex Court in the case of Larsen and Toubro Limited and Another v. State of Karnataka and Another [ 2013 (9) TMI 853 - SUPREME COURT] has held that the contracts involving both supply of materials as well as rendition of services can be classified only under WCS. The Tribunal in the case Real Value Promoters Pvt. Ltd. [ 2018 (9) TMI 1149 - CESTAT CHENNAI] has followed the decision in the case of Larsen and Toubro Limited and Another to hold that the demand raised under CICS, CCS, RCS for the period prior to 01.07.2012 cannot sustain when the works executed are in the nature of composite contracts. In the present case, it is brought out and established that the works are composite in nature. The demand raised denying the benefit of abatement cannot sustain. The impugned order is set aside - Appeal allowed.

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• 2024 (6) TMI 612
  Reversal of wrongly availed CENVAT credit - GTA services availed for outward transportation of goods on FOR destination basis from factory gate/depot to the premises of the customers under rule 2(l) of the 2004 Credit Rules - Place of removal - HELD THAT:- This judgment of the Supreme Court in Ultratech Cement [ 2018 (2) TMI 117 - SUPREME COURT ], therefore, needs to be considered first. The Supreme Court examined the admissibility or otherwise of the CENVAT credit availed on service tax paid for GTA service for transport of goods from the place of removal to buyer s premises. In this connection, the Supreme Court referred to the definition of input service in rule 2(l) of the 2004 Rules as it stood prior to its amendment on 01.03.2008 and noted that in view of the use of the expression from the place of removal , the service used by the manufacturer from the place of removal to the warehouse or customer s place would be exigible for CENVAT credit, but in view of the amendment made in the definition of input service from 01.03.2008 replacing the word from by the word upto , it would only be upto the place of removal that service could be treated as input service . In Roofit Industries [ 2015 (4) TMI 857 - SUPREME COURT ], the Supreme Court noticed that the place of removal becomes a determinative factor for the purpose of valuation and it has to be seen at what point of time sale is effected, namely whether it is on the factory gate or a later point of time when the delivery of goods is effected to the buyer at the premises of the buyer. The Supreme Court observed that the charges which are to be added have to be upto the stage of transfer of the ownership in as much as once the ownership in goods stands transferred to the buyer, any expenditure incurred, thereafter, has to be on the account of the buyer and cannot be a component which would be included while ascertaining the valuation of goods. The Division Bench of the Tribunal in Hindustan Zinc [ 2024 (4) TMI 817 - CESTAT NEW DELHI ] held that Hindustan Zinc would be entitled to avail CENVAT credit of service tax paid on the GTA services availed for outward transportation of goods on FOR destination basis from the factory gate/depot to the premises of the customers under rule 2(l) of the 2004 Credit Rules. The impugned order passed by the Commissioner, therefore, cannot be sustained and set aside - Appeal allowed.

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• 2024 (6) TMI 611
  Refund of excise duty and interest - lack of proper duty exemption certificates - HELD THAT:- It is an admitted fact that the appellant had manufactured the goods and supplied to institutions eligible for exemption. These institutions are of stature and cannot be expected to obtain this goods without following the requirement as laid down by the Notification. Even if there is an omission on part of the appellant to produce proper certificate as per the Notification, Considering the same as curable defect, an opportunity should have been extended them to produce the same before rejecting the refund claim. Considering the above facts and also considering the condition of the Notification and the judgment of the Hon'ble Supreme Court in the matter of COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] , it is a fit case to be remanded to adjudication authority by extending an opportunity for the Appellant to produce certificate as per the notification. Appeal is remanded to adjudicating authority for de-novo adjudication - Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2024 (6) TMI 610
  Limitation period for assessment order u/s 23(2) of the MVAT Act - personal hearing despite petitioner seeking a personal hearin not provided - violation of principles of natural justice - whether the impugned assessment order under sub-section (2) was made within a period of four years from the end of the year containing the period to which return relates? - HELD THAT:- The petitioner has made a very categorical statement that the order available in SAP system also indicates that the order was signed digitally by respondent no. 3 only on 23rd June 2020 and SAP system does not show any order dated 19th March 2020. There is no response filed to the said rejoinder by the said Sambhaji Kisan Yadav - He has not explained why he could not have served the same order which was allegedly digitally signed by him on 19th March 2020 and why a fresh digital signature had to be put on 23rd June 2020. It is also pertinent to note that the order which he had served by email on 24th June 2020 in the reference states 2020-21. Therefore, it is obvious that both are different documents. In view thereof, the only conclusion that can be arrived at is the order which has been made is dated 23rd June 2020. In the affidavit in rejoinder, it is categorically stated that even the MVAT portal shows only this order of 23rd June 2020 and there is no order of 19th March 2020. The impugned assessment order having been passed after expiry of four years from the end of the year containing period to which return relates, is not a valid order and same is quashed and set aside. Petition allowed.

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• 2024 (6) TMI 609
  Deduction allowed to a contractor who assigned work to a sub-contractor - proviso to Section 3-B(2) of the Tamil Nadu General Sales Tax Act, 1959 - HELD THAT:- The sub-contractor has to be a registered dealer. In the present case, the authority has concluded that the subcontractor is a registered dealer. In view of that, when the work is already assigned to its sub-contractor, which is registered, the sub-contractor is liable to pay the tax under the Act and it is the responsibility of the sub-contractor to include the same in his return. The Apex Court, in the case of LARSEN TOUBRO LIMITED VERSUS ADDITIONAL DEPUTY COMMISSIONER OF COMMERCIAL TAXES ANOTHER [ 2016 (9) TMI 519 - SUPREME COURT] , has considered the pari materia provision under the Karnataka Sales Tax Act, 1957 and concluded that payments made to the sub-contractor are not to be included while calculating the total turnover of the contractor. In view of the authoritative pronouncement of the Apex Court in the case of Larson Toubro Limited , proviso to Section 3-B(2) to the extent and that the turnover of such amounts is included in the return filed by such subcontractor is read down as not to apply to the contractor who has assigned the work to a sub-contractor who is a registered dealer . It will be open for the Revenue to collect the tax from the sub-contractor, if the same has not been paid by the subcontractor in respect of the works assigned by the petitioner. Petition allowed.

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• Indian Laws

• 2024 (6) TMI 608
  Maintainability of suit - goods were supplied and delivered as per the requirements of the defendant or not - recovery alongwith interest on account of goods sold and delivered - time limitation - HELD THAT:- The plaintiff has not proved what was the total cost of the materials supplied by the plaintiff to the defendant and how much amount has been paid by the defendant to the plaintiff. The plaintiff has made out the specific case that the last payment was made by the defendant on 4th February, 2013 but the plaintiff failed to prove the same. As per the bank statement, confirmation of account, challans and tax invoices all the transactions are till 2011 and the plaintiff has filed the suit on 27th January, 2016, thus the suit filed by the plaintiff is barred by limitation. This Court finds that the plaintiff failed to prove the case and the suit is also barred by limitation. Application dismissed.

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