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TMI Tax Updates - e-Newsletter May 27, 2023 Case Laws in this Newsletter: GST Income Tax Customs PMLA Service Tax Central Excise Highlights / Catch Notes GST: Liability to pay GST under reverse charge basis - Kacha Arhtiya or not - Any interpretation which leads to illogical conclusion has to be eschewed. Therefore, it is clear that by no canon of interpretation, Kacha Arhtiya can be made liable to pay GST in terms of Notification No. 4/2017-CT dated 28th June, 2017(as amended). Moreover, the ultimate objective of RCM is to fix the GST liability on the person who is better organized being engaged in the business of supply of goods and services. Pakka Arhtiya by its very nature of activity is much more organised in the business dealing as compared to Kacha Arhtiya - AAAR Visit to Get Source GST: Quantification of GST / Valuation of supply - GST on whole amount of bill (monthly rental + night charges + fuel on mileage basis) or only on monthly rental (excluding night charges + fuel on mileage basis)? - All the consideration including reimbursement of any kind shall form part of value of supply in view of Section 15 of the CGST Act, 2017 - the service provider has to charge GST on the whole amount of bill which in the instant case is monthly rental plus night charges and fuel on mileage basis. - AAR Visit to Get Source Income Tax: Exemption u/s 11 - assessee a charitable institution u/s 2(15) - depreciation claimed on the cost of assets - the assessee is eligible for claiming depreciation as application of income on the assets purchased during preceding assessment year and consequentially he is also eligible for benefit of exemption u/s 11 and other relevant provisions of the Act. Ground no. 2 of Revenue dismissed being devoid of merits. - AT Visit to Get Source Income Tax: TP adjustments - reference made to TPO - Cognizance u/s 92BA(i) - effect of omission of law - undisputedly, by the Finance Act, 2017, clause (i) of section 92BA has been omitted with effect from 01.04.2017, therefore, once this clause is omitted by subsequent amendment then it would be deemed that clause (i) was never there in the Statute. Therefore, we hold that the reference made to TPO under section 92CA is invalid and bad in law and hence consequential order passed by the TPO and AO is also not sustainable in the eyes of law - AT Visit to Get Source Income Tax: Addition on the ground of balance appearing in HSBC Bank Account, Geneva undisclosed - Nothing has been brought on record in “reasons recorded” or there is any material on record that assessee has any business connection in India and therefore amount deposited in said foreign bank account is income arisen or accrued or deemed to have arisen or deemed to have accrued in India. If at all there is some doubt about the said entity and deposits made therein, then, it is the UK Tax authorities which have to examine this issue. - No jurisdiction to the AO to reopen the case of a non-resident u/s 147 - AT Visit to Get Source Income Tax: Validity of the draft assessment order issued in the name of non-existent entity - TP adjustment - arm’s-length price u/s 92CA - once the draft assessment order and Transfer pricing order itself are bad in law, having been passed in the name of a non-existent entity, then the final assessment order based on the above orders is void ab initio as well. In view of the above settled position of law, we are of the view that the final assessment order sought to be appeal against is void and hence liable to be set aside. Decided in favour of assessee. - AT Visit to Get Source Income Tax: Income deemed to accrue or arise in India - fee for technical services / FTS - If it is of recurring annual fees, there is no question that assessee was making available any technology or knowhow of the Indian customers on year to year basis as has been interpreted by the ld. AO. Assessee is having the technical expertise in the software sub-licensed by it. If there is any bug or problem faced by the customers while using the software, assessee provides trouble shooting to fix those bugs and helps them for maintaining and support of the software used by the clients. This does not mean that assessee had made available any technology in software. - AT Visit to Get Source Income Tax: Addition u/s 68 - Additions based on the information received from ITO having different Jurisdiction - The Information is just an information for setting the machinery into motion, it cannot be treated as a gospel truth. The issue has to be examined, therefore, AO is directed to look into all these aspects afresh and read judicate the issue after providing due opportunity of hearing to the assessee - AT Visit to Get Source Income Tax: Reopening of assessment u/s 147 - Addition u/s 68 - An alleged non-compliance of summons issued in some other years cannot be reckoned as 'failure on the part of assessee' and that too in some other assessment year. An enquiry was made in relation to share application money recd. while framing regular assessment of AY 2009-10 and assessment was framed taking note of outcome of such enquiry. Hence, mere reproduction of statutory language of first proviso would not meet the requirement of law for extension of limitation period beyond 4 years. - AT Visit to Get Source Income Tax: Capital gain - transfer of a capital asset by assessee to its subsidiary company - There are different shareholders of preference share capital other than the holding company and holding company only holds along with its nominees, 100 % equity shares of the transferee company. Therefore, according to us the conditions of section 47 (iv) of the act are not satisfied and if any capital gain or loss arising on transfer of a capital asset by the assessee company to its subsidiary company, is chargeable to tax under the provisions of section 45 of the act. - AT Visit to Get Source Income Tax: Addition u/s. 40(a)(ia) - assessee's failure to deduct TDS on Labour Contract Expenses - Sub-contractor No. 4 & 5 have not filed their return of income, so there is no occasion to include such contract receipt in their income. Before us, assessee made his alternative submissions that the disallowance on their payments may be restricted to 30% of sub contract payment in view of amendment to second Proviso to Section 40(a)(ia) by the Finance Act, 2014 which has been held as retrospective - AT Visit to Get Source Income Tax: TDS on Winnings from online games - Guidelines - Computation of Net winning - TDS in case a user borrows some money and deposits the same - treatment of bonus, referral bonus, incentives etc. - When the amount is considered as withdrawn - TDS in case of insignificant withdrawal - TDS on net winning in kind - valuation of winning in Kind. - CBDT issues Guidelines Visit to Get Source Customs: Levy of penalty on Customs Broker u/s 114AA of the Customs Act, 1962 - , there is enough material to substantiate the allegation of malafide against the Appellant and therefore, Section 114AA has been rightly invoked by the Department - However, the Appellant does not appear to be proportionate to his role in the attempted clearance of undeclared/ restricted goods - Penalty amount reduced to 25% - AT Visit to Get Source Customs: Revocation of Customs Broker licence - In the instant case the report of inquiry was not furnished to the Appellant seeking his response in compliance to para 6 of Regulation 17 apparently for the reason that the report was not against the Appellant. However, in complete disregard of the report and in the absence of a representation from the Appellant Customs Broker, the Commissioner had prepared a disagreement memo instead of passing an order revoking the suspension of the licence or, in the worst scenario, confirming the revocation of licence itself, in compliance to para 7 though before such revocation order Appellant was noticed to submit his response - The licence of Customs Broker is restored back to him. - AT Visit to Get Source PMLA: Investigation under PMLA - There is hardly any scope to afford prior opportunity of hearing in a proceeding under PMLA. If the proposition of the applicants that, prior opportunity of hearing be afforded before starting the investigation is to be accepted by the Court, then the investigating officers will never be able to conclude the investigation in a time bound manner. There may be several persons involved in an offence under the PMLA. It is for the investigating officer to decide as to who should be interrogated and when. It is not for the suspected/proposed accused or the accused to dictate terms upon the investigating officer as to how and in which manner the investigation should proceed. - HC Visit to Get Source PMLA: Seeking grant of bail - misuse of official position as State Revenue Minister to purchase and claim compensation - it is not the case of the Applicant that the authorized officer has not adhered to the safeguards or the stringent conditions contained in Section 19 of the PMLA, 2002, and has thus failed to demonstrate violation of Article 21 of the Constitution as to entitle him for bail. - Bail application rejected - HC Visit to Get Source Service Tax: Levy of Service Tax - Business Auxiliary Service (BAS) - Sharing of Revenue - unincorporated joint venture / JV agreement - there is no relationship of service provider or service receiver, between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. - Service tax liability cannot be fastened on the respondent - AT Visit to Get Source Service Tax: SEZ unit - Refund claim - on the ground of co-relation between the input service and the exportation of goods under the SEZ, the matter has to be verified again at the original stage. - AT Visit to Get Source Service Tax: Refund claim - doctrine of unjust enrichment - The impugned order has relied on the cost accountant certificate to hold that the burden of the tax paid has been built in the price to the end consumer. The cost accountant certificate supports the view taken. Once the burden of the tax paid has been passed on to the consumer, the admissible refund needs to be credited to consumer welfare fund as has been held in the impugned order. - AT Visit to Get Source Central Excise: Clandestine Removal - shortage of stock - Since it is inherent from the very nature of estimation of stocks in steel factories that there will be variations between what is reflected in the RG1 and what is actually found, no malafide can be attributed in the discrepancies or inaccuracies found between the two figures which are based on estimates. In the absence of any mala fide, confiscation of goods found in excess stock and imposition of penalty is not warranted. - AT Visit to Get Source Central Excise: Scope of SCN - Setting a new case which travelled beyond the SCN - Original authority has clearly observed that the said chapter note was applicable in the case and the goods were not classifiable under chapter 5907. Having done so he should have dropped the demand which was made under heading 5907.12. However without assigning any reason he determines the classification under Chapter 54 suo motto without putting the appellant to notice - demand set aside - AT Visit to Get Source Articles IBC: DELAY NOT CONDONABLE BEYOND MAXIMUM STIPULATED PERIOD HOLDING OF DIRECTORSHIP OF COMPANIES IN EXCESS OF THE LIMIT - AN OFFENCE? Trader of second-hand gold in form of lumps or irregular shapes cannot avail GST chargeability under margin scheme Notifications GST 02/2023 - dated 25-5-2023 - UTGST AAR in the Union territories - Entries substituted in Name and designation of the Member for Dadra and Nagar Haveli and Daman and Diu - Amendment in Notification No. 14/2018-Union territory Tax dated 8th October 2018 GST - States S.R.O. No. 555/2023 - dated 6-5-2023 - Kerala SGST State Government, recommendations of the Council, waives the amount of late fee referred to in section 47 of the KGST Act S.R.O. No. 553/2023 - dated 6-5-2023 - Kerala SGST Revocation of cancellation of registration where registration has been cancelled on or before the 31st day of December, 2022 MGST-1023/C.R.21/Taxation 1 - dated 24-5-2023 - Maharashtra SGST Amendment in Notification No. MGST.1017/C.R.193/ Taxation-1, dated 24th October, 2017 06/2023 –State Tax - dated 24-5-2023 - Maharashtra SGST Amnesty scheme for deemed withdrawal of assessment orders issued under Section 62 of Maharashtra Goods and Services Tax Act, 2017 S.O. 37/P.A.5/2017/S.128/Amd./2023 - dated 8-5-2023 - Punjab SGST Amendment in Notification No. S.O.7/P.A.5/2017/S.128/2018, dated the 7th February, 2018 842-F.T. - dated 19-5-2023 - West Bengal SGST Seeks to implement, from 1st August 2023, e-invoicing for the taxpayers having aggregate turnover exceeding Rs. 5 Cr. Circulars / Instructions / Orders SEBI - SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/79 - dated 25-5-2023 Model Tripartite Agreement between the Issuer Company, Existing Share Transfer Agent and New Share Transfer Agent as per Regulation 7(4) of SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015 SEBI - SEBI/HO/MIRSD/POD-1/P/CIR/2023/70 - dated 17-5-2023 Master Circular for Registrars to an Issue and Share Transfer Agents GST - States - CCT-PEI-POL-0155-2021 - 7869/CT & GST - dated 10-5-2023 Instructions regarding care to be taken during the process of registration, cancellation of registration and revocation of cancellation of registration of fake taxpayers under GST Customs - Instruction No. 18/2023 - dated 25-5-2023 Clarification on the classification of product DHA Algal oil News CCI approves acquisition of additional Series E compulsorily convertible preference shares of Acko Technology & Services Private Limited by Multiples Private Equity Fund III and CPP Investment Board Private Holdings (4) Inc. Case Laws: GST 2023 (5) TMI 1071 Validity of orders passed under Section 74(9) of the W.B.G.S.T. Act, 2017 - appealable order or not - appellant did not choose to file appeals but approached the learned Writ Court on the ground that opportunity of personal hearing has to be mandatorily granted in terms of Section 75(4) of the Act - principles of natural justice - HELD THAT:- Considering the peculiar facts situation in the instant case, namely that by way of a third party garnishee order, the entire tax demanded from the appellant have been recovered, it is opined that the revenue will not be prejudiced if a fresh opportunity of personal hearing is granted to the appellant to put forth his submissions - submission of the learned advocate appearing for the respondents/State is that the interest of the revenue should be protected. The interest of the revenue has been sufficiently protected inasmuch as the entire tax demanded under the three impugned orders have been fully recovered by way of garnishee proceedings. The writ petitions as well as these appeals are disposed of by directing the appellant to treat the orders under Section 74(9) of the W.B.G.S.T. Act, 2017, which were impugned in the writ petitions as the show-cause notice and the appellant is directed to file his objections to the notice within 15 days from the date of receipt of server copy of this judgement and order. 2023 (5) TMI 1070 Non-service of SCN - petitioner was not noticed in connection with the dues to be paid and the bank accounts of the petitioner have been attached by opposite party no.1 without issuing any notice - though the petitioner wanted to release the bank accounts, the same was not taken into consideration - Violation of principles of natural justice (audi alterem partem) - HELD THAT:- Mr. S. Mishra, learned Standing Counsel for CT GST Department contended that the order impugned dated 05.04.2023 passed by opposite party no.1 rejecting the application of the petitioner for revoking the order of attachment of the bank accounts is appealable under Section 107 of OGST Act. Instead of approaching the appropriate authority, the petitioner has filed this writ petition, which is not maintainable before this Court. Since the order impugned dated 05.04.2023 passed by opposite party no.1 is appealable, this Court is not inclined to entertain this writ petition - Petition disposed off. 2023 (5) TMI 1069 Taxability under GST Act and Compensation cess Act - coal rejects whose invoice is raised by the applicant upon washery/job worker - eligibility to avail Input Tax Credit (ITC) of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning - admissible proportion of Input Tax Credit. HELD THAT:- The question of maintainability was not examined at the AAR stage and it would be in the fitness of the things that the issue be re-examined by AAR itself. As per subsection (1) of Section 101 of the CGST Act 2017, the appellate authority may pass such order as it thinks fit, confirming or modifying the ruling appealed against or referred to - As the power of remand back is not clearly detailed in the provision, it would be in fitness of things to refer to other Acts wherein similar provisions have been provided to appellate authorities. A bare perusal of the section 35A of Central Excise Act, 1944 and sub-section (5) of Section 85 of Finance Act, 1994, shows that the language used in the section 35A (as applied to cases of Service tax vide Section 85(5)) is similar to that used in Section 101 of CGST Act, 2017. Therefore, the jurisprudence so developed over the years may be referred as para-materia while ascertaining the ambit and scope of the powers of the AAAR. Thus, it is apparent that the appellate authority can remand back the appeal of the appellant to the AAR, Punjab to re-examine the maintainability of the application filed by the appellant as per sub-section (2) of Section 98 of the CGST Act, 2017 and accordingly pass the order on merit. 2023 (5) TMI 1068 Liability to pay GST under reverse charge basis - Kacha Arhtiya or not - registered person in terms of N/N. 13/2017-CentraI Tax(Rate) dated 28 th June, 2017 as amended vide N/N. 43/2017-Central Tax (Rate) dated 14th November, 2017 - appellant contended that a Kacha Arhtiya is not an agriculturist within the meaning of section 2(7) of the CGST Act, 2017 and therefore, is not covered under the notification no. 43/2017-Central Tax (Rate) dated 14th November, 2017. HELD THAT:- The definition of recipient is primarily attributed to the payment of consideration and the person who is liable to pay such consideration. Where the element of consideration does not come into play, the definition ventures into the aspect of identification of the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available, In the case of services, the same is effected by of identification of the person to whom the services have been rendered. Furthermore, the definition also brings the agent within the ambit of recipient where he/she is acting on the behalf of the recipient in relation to the goods or services supplied - As per clause (94) of section 2 of the CGST Act, registered person means a person who is registered under section 25 but does not include a person having a Unique Identity Number. So any person who has obtained registration under section 25 of the CGST Act shall be covered by the said definition. As per clause (5) of section (2) of the CGST Act, agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another. The definition of agent includes an arhatia and further postulates that he/she should carry on business of supply or receipt of goods or services on behalf of another. So, in the issue under consideration, the Kacha Arhtiya shall fall within the definition of an agent provided he/she carries on business on the behalf of another i.e. the principal, which in this case would be the agriculturist. The definition of supplier of goods in section 2(105) of the CGST Act includes his agent and, therefore, Kacha Arhtiya becomes supplier of goods. If a view is taken that supplier of goods is only the agriculturist and not KachaArhtiya, then it goes against the very definition of supplier so also goes against the logic as an agent is working in the capacity of having authority to act on behalf of principal. In other words, an agent enters into the shoes of principal. Thus, for the purpose of the said notification, the expression agriculturist would include the agent who acts on the behalf of the said person. Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services and not goods. It is an accepted position that Kach Arhtiya does not hold title to the raw cotton so supplied to him by the agriculturist. However, from the activities so enumerated in para 3 of this order, he gets the right in goods in respect of receiving, storing, cleaning, grading and finally auctioning of raw cotton which he receives from the agriculturist without getting any title over the raw cotton. Therefore, in terms of above entry of Schedule Il, this transfer is deemed as supply of services for the purpose of CGST Act, 2017. RCM Notification No. 4/2017-CT dated 28th June, 2017 - HELD THAT:- As is abundantly clear from the notification, RCM liability is in respect of supply of goods and not in respect of services in connection with goods. Hence, the transaction between an agriculturist and that of Kaccha Arhtiya is a transaction involving supply of services and therefore, by no stretch of imagination, it could be covered under RCM Notification No. 4/2017-CT dated 28th June, 2017. Any interpretation which leads to illogical conclusion has to be eschewed. Therefore, it is clear that by no canon of interpretation, Kacha Arhtiya can be made liable to pay GST in terms of Notification No. 4/2017-CT dated 28th June, 2017(as amended). Moreover, the ultimate objective of RCM is to fix the GST liability on the person who is better organized being engaged in the business of supply of goods and services. Pakka Arhtiya by its very nature of activity is much more organised in the business dealing as compared to Kacha Arhtiya as he is purchasing cotton primarily for trading and hence is having much higher level of business volume and turn over. This also logically leads to fixing the liability of GST on Pakka Arhtiya in terms of sub-section (3) of Section 9 of CGST Act. Appeal dismissed. 2023 (5) TMI 1067 Classification of supply - works contracts - supply of services by the Appellant to M/s Uttar Pradesh Jal Nigam - M/s Uttar Pradesh Jal Nigam are covered under Local Authority or not - applicability of N/N. 15/2021-Central Tax (Rate) dated 18th November, 2021 read with N/N. 22/2021-Central Tax (Rate), dated 31.12.2021 - Rate of tax - HELD THAT:- As per the scope of work submitted by the Appellant they are engaged in contracts for construction of head works sumps, pump rooms, laying jointing of pipe line and commissioning and maintenance of the entire work for water supply projects/sewerage projects/facilities. They are mainly supplying these services to Government Authorities/Government entities, mainly to M/s Uttar Pradesh Jal Nigam. On going through the constitution of Uttar Pradesh Jal Nigam (hereinafter referred to as the UPJN). It is found that it was created by Government of Uttar Pradesh by enacting the U.P. Water Supply and Sewerage Act, 1975 (hereinafter referred to as the UPWSS Act). It is a body corporate having perpetual succession and a common seal and capable of suing and being sued in its name. It has power to acquire, hold and dispose of the property. Whether M/s Uttar Pradesh Jal Nigam is a 'Local Authority'? - HELD THAT:- The term local authority is defined in S. 2(69) of CGST Act. 2017. The definition of local authority in the CGST Act includes within its ambit any other authority legally entitled to or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund . Thus, for the purpose of the GST Laws, any authority legally entitled to or entrusted by the Government with the control or management of a municipal or local fund qualifies as a Local Authority - M/s UPJN is not satisfying some of the conditions for qualifying as local authority. The Apex court in the UNION OF INDIA ORS. VERSUS RC. JAIN ORS. [ 1981 (2) TMI 200 - SUPREME COURT] has held that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the State Government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state - The Apex court in the RC Jain case has held that the authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably and an appreciable measure of autonomy there must be. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy. A perusal of the UPWSS Act, would reveal that no municipal or local fund has been entrusted by the Government. The fund of UPJN is its own fund and cannot be equated with a fund entrusted by the Government. Thus, the important requirement in order to qualify as a local authority viz. control and management of a municipal/local fund is absent in the present case - the UPJN is not a 'local authority'. Whether the UPJN is 'Governmental Authority'? - HELD THAT:- In order to qualify as a governmental authority, such authority must be set up by an act of Parliament/State Legislature, should have 90% or more stake of government, and should carry out any functions entrusted to a municipality under article 243W of the Constitution of India - the UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per Section 3 of the UPWSS Act, UPJN is a body corporate established by the Government of U.P., as such, the second requirement of governmental authority has also been fulfilled in the present case. Moreover, the UPJN is constituted for the development and regulation of water supply and sewerage services in the State of U.P. Under Section 14 of UPWSS Act, UPJN is inter alia entrusted with the function to operate, run, and maintain any water works and sewerage system - the requirement that the authority must be established to carry out any function entrusted to a Municipality under article 243 W of the constitution has been fulfilled in the present case. Thus M/s UPJN is a 'Governmental Authority'. By way of Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017 was restricted to works contract supplied to Central Government, State Government, Union territory and a local authority only. As the UPJN does not qualify as a 'local authority' and it qualifies as a governmental authority, tax rate of 18% is applicable on the works contract services provided to UPJN by way of Entry 3(xii) of Notification No. 11/2017-Central Tax(Rate) dated 28.06.2017. 2023 (5) TMI 1066 Quantification of GST/Valuation of supply - GST on whole amount of bill (monthly rental + night charges + fuel on mileage basis) or only on monthly rental (excluding night charges + fuel on mileage basis)? - HELD THAT:- Section 15 of the CGST Act, 2017 mandates that the value of supply shall include among other things, any other amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both - the provisions of the Section 15 are very clear and in unambiguous terms it has been mandated that any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both. The use of words supplier is liable to pay in relation to such supply brings out the intent of the legislature and leaves no room for any doubt. Further, the term supply is defined in Section 7 of the CGST Act, 2017 and as per the provisions all forms of supply of goods or agreed to be made for a consideration is a part of supply. And the term consideration has been defined in Section 2(31) of the CGST Act, 2017 which mandated that consideration includes any payment whether in money or otherwise made or to be made or monetary value of any act or forbearance for the inducement of the supply of goods. The usage of the terms or otherwise and or forbearance for the inducement of the supply of goods or services or both, whether by the recipient , in the statute leaves no doubt about the spirit and essence of the Act. The contract entered between the applicant and the provider of services presented is for motor vehicle hire services, wherein the liability to arrange fuel and the maintenance of the vehicle, so deployed lies with the service provider and is a comprehensive contract with the consideration which varies depending upon the kilometer travelled. Hence, the reimbursement of expenses for providing said services, under any head is nothing but the additional consideration for the provision of said services and attracts GST on the total value. It is further observed that Karnataka Authority for Advance Ruling in the case of M/s. Goodwill Auto's, Hubbali; Dharwad [ 2021 (8) TMI 355 - AUTHORITY FOR ADVANCE RULINGS, KARNATAKA ]has held that the cost of the diesel incurred for running DG Set in the course of providing DG Rental Service is nothing but additional consideration for the supply of DG Set on rent as per section 15 of the GST Act. All the consideration including reimbursement of any kind shall form part of value of supply in view of Section 15 of the CGST Act, 2017 - the service provider has to charge GST on the whole amount of bill which in the instant case is monthly rental plus night charges and fuel on mileage basis. Service provider has to charge GST on the whole amount of bill i.e. monthly rental + night charges + fuel on mileage basis. Income Tax 2023 (5) TMI 1065 TDS u/s 195 - Royalty - taxability of software receipts - Whether constitutes as taxable income deemed to accrue in India u/s 9(1)(vi) - income deemed to accrue or arise in India - HELD THAT:- The issue raised by the Revenue in the present special leave petitions is covered against them vide judgment in the case of Engineering Analysis Centre of Excellence Private Limited [ 2021 (3) TMI 138 - SUPREME COURT] Learned Additional Solicitor General states that a Review Petition has been filed against this judgment, which is currently pending and the right of the Revenue to revive the present special leave petitions may be reserved, in case the Review Petition is allowed. Special leave petitions are dismissed, as the same is covered by the said decision of this Court. In case the review petition on the issue raised in the present special leave petitions is allowed, it will be open to the petitioner(s) to get the present special leave petitions revived. 2023 (5) TMI 1064 Assessment of income - residential status - assessment by treating the assessee as Resident as against the return of income filed in the status of Non-Resident - plea of the assessee that the assessee is a non-resident for the past 10 years and has been filing its return of income in the status as non-resident‟ -as per the assessee, he was in India, during the year under consideration, only for 65 days - HELD THAT:- From the perusal of the impugned order, it is evident that the learned CIT(A) neither sought any remand report from the AO nor considered any of the aforesaid documents while dismissing the assessee s appeal in respect of the computation of long-term capital gains. There is no examination of the correct residential status of the assessee by any of the lower authorities. Therefore, in view of the above and in the interest of justice, we deem it appropriate to restore both issues to the file of the AO for de novo adjudication after considering the details filed by the assessee pertaining to his residential status as well as the documents/information furnished before the learned CIT(A) as additional evidence. Grounds raised by the assessee are allowed for statistical purposes. 2023 (5) TMI 1063 TP adjustment - international transaction relating to ITeS segment - comparable selection of Domex e-Data Pvt. Ltd - HELD THAT:- As observed from the annual report that Domex e-Data Pvt. Ltd. is also into software development product renovation etc. and, therefore, this company is doing various activities and is different from the functions performed by the assessee before us. When the revenue authorities have not specifically examined and brought out why a particular company in the ITeS segment is specifically similar with that of the functions performed by the assessee and when the reason for inclusion of such comparable has not been analyzed with regard to the specific business, in such case, we are of the considered view in the given set of facts and circumstances and even considering the decision of coordinate benches, this company i.e. Domex e-Data Pvt. Ltd. is functionally dissimilar with that of the assessee company. We therefore, direct the AO/TPO to exclude Domex e-Data Pvt. Ltd. from the final set of comparables. Since on this issue, the assessee succeeds and Domex e-Data Pvt. Ltd. is excluded while benchmarking of the ITeS segment from the final list of comparables in the case of the assessee, therefore, all other transfer pricing grounds raised in this appeal becomes academic. With these observations, the appeal of the assessee stands allowed. 2023 (5) TMI 1062 CIT-A dismissed the appeal ex-parte - HELD THAT:- As assessee has raised grounds of appeal challenging the additions of the A.O and there could be various reasons for non appearance which cannot be overruled. Therefore, considering the principles of natural justice shall provide one more opportunity of hearing to the assessee to substantiate the case with evidences and information. Accordingly, set aside the order of the CIT(A) and remit the entire disputed issues to the file of the CIT(A) to adjudicate afresh and the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of the appeal. Grounds of appeal of the assessee for statistical purposes. 2023 (5) TMI 1061 Exemption u/s 11 - assessee a charitable institution u/s 2(15) - assessee eligibility for allowance of depreciation claimed on the cost of assets purchased during the preceding assessment years - HELD THAT:- As we reached to a logical conclusion that the Ld.CIT(A) right in holding that the assessee is eligible for claiming depreciation as application of income on the assets purchased during preceding assessment year and consequentially he is also eligible for benefit of exemption u/s 11 and other relevant provisions of the Act. We reached to a logical conclusion that the Ld.CIT(A) right in holding that the assessee is eligible for claiming depreciation as application of income on the assets purchased during preceding assessment year and consequentially he is also eligible for benefit of exemption u/s 11 and other relevant provisions of the Act. Ground no. 2 of Revenue dismissed being devoid of merits. Disallowance on account of personal use of car by office reasons - HELD THAT:- In view of above on being asked by the bench the Ld. Sr. DR could not show as any contrary view or finding of the Tribunal or any higher authority such as Hon ble High Court. Therefore, we hold that the issue is squarely covered in favour of assessee by the order of the coordinate bench of the Tribunal in assessee s own case for AY 2009-10. Accordingly, the ground no. 1 of Revenue is also dismissed. 2023 (5) TMI 1060 Bogus LTCG - Share transactions - undisclosed income - Denying the claim of long term capital gain - HELD THAT:- It is the date of broker s note that should be treated as date of transfer in cases of sale transactions of securities, provided such transactions are followed up by delivery of shares and also transfer deeds. Similarly, in respect of purchasers of securities, holding period shall be reckoned from the date of broker s note for purchases on behalf of investors. Contract notes clearly show the date of purchase as 04.05.2005 and 10.05.2005. Purchases are duly reflected in the financial accounts for F.Y. 2005-06 ending on 31.03.2006. Merely because payments were made to the brokers on subsequent dates would not make the entire gains as income from undisclosed sources, not by any stretch of imagination. Since the purchases and sales of shares have not been disputed, and are supported by demonstrative evidences, we do not find any logic/ justification in treating the gain as income from undisclosed sources. We direct the Assessing Officer to consider the gains as long term capital gains as per provisions of law. Decided in favour of assessee. 2023 (5) TMI 1059 Unexplained cash deposits - AO has passed a remark that there exist other transactions of equivalent amounts from these persons and that it is not clear whether these amounts are also advances. The properties which have been purchased in the name of the assessee - CIT(A) deleted the addition on the grounds that the sources of the entire amounts, the credits and debits in the bank account have been duly explained - HELD THAT:- There is no embargo in law to purchase a property from borrowed funds. The appellant has explained that the nature of income earned by him is solely that of commission/ brokerage, pension, interest and capital gains. While explaining his investment activities from which capital gains are earned in the year of sale, the appellant submitted that he makes investment in properties either from his own funds or from borrowed funds. Whenever such properties are sold, the resultant capital gains is offered to tax in the relevant assessment year. During the course of search, no incriminating evidence was discovered or seized to show that the credits of the appellant s bank statements were in the nature of income or that he was engaged in any other line of work. It is noteworthy that the appellant was required to explain the source of funds utilized for purchasing the said properties, which has been duly discharged by the appellant. A mere suspicion has been raised by the AO on such other credits of equivalent amounts, without seeking explanation of such other credits from the appellant. All credits appearing in his bank statement are duly explained, and the documentary evidence placed on record has been duly perused and examined. The source of investment made by the appellant during the year stands sufficiently explained. Decided against revenue. 2023 (5) TMI 1058 Deduction u/s 54B - ancestral property sale - land as sold was held by assessee in the status of HUF - property the agricultural land inherited - whether the agricultural land which is the ancestral property belonging to HUF and its subsequent sale and purchase of another agricultural land by the wife is eligible for deduction or not? - HELD THAT:- Investment in new capital asset as agricultural land u/s 54B was made in the name of wife of Karta as member of HUF, it is owned by the HUF and hence entitled to exemption u/s 54B of the Income Tax Act. Availability of exemption u/s 54B to HUF (the assessee being the co-parcener) or restricted to individual only - Section 54B stand amended by Finance Act, 2012, having its effect from 01.04.2013, wherein, the HUF has specifically been incorporated by replacing the word the assessee being an individual or a parents of his with the words the assessee being an individual or parents or Hindu Undivided Family for agricultural purpose in the statue w.e.f. 01.04.2013, itself. Hence the amended provisions are applicable for the computation of Income for A.Y. 2013-2014. So the by implication of the said amended law, the assessee includes the HUF. Hence, the exemption u/s 54B after amendment is available to HUF also. Hence the objections by the A.O. in this regards, that the section is not applicable to HUF misconceived. Agriculture land has been held by the assessee in the status of HUF and as the land was purchased in the name of wife of the Karta as one of the members is eligible for exemption u/s 54B of the Income Tax Act. Assessee appeal allowed. 2023 (5) TMI 1057 Penalty u/s 271(1)(c) - Non specification of charge - defective notice u/s 274 - HELD THAT:- Since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged concealment of income OR furnishing of inaccurate particulars of such income , the penalty levied is hereby obliterated. Also quantum addition stands deleted. And hence, the penalty proceedings do not survive - Appeal of assessee allowed. 2023 (5) TMI 1056 Disallowance of Bogus Sundry Creditors - assessee has shown sundry creditors towards purchase of raw meat - whether the sundry creditors or infact genuine or bogus? - HELD THAT:- Having gone through the facts of the case, arguments of the parties, we hold that the allegation of the revenue that the sundry creditors are bogus has not been proved and hence, we decline to interfere with the well reasoned order of the ld. CIT(A). Appeal of the Revenue is dismissed. 2023 (5) TMI 1055 Unexplained expenditure u/s 69C - AO observed that the parties to whom the commission was paid were incurring huge losses - HELD THAT:- Commission income has been shown by the respective parties in their return of income and they paid the taxes thereon. Therefore, genuineness of the transaction should not be doubted. Assessing Officer did not make disallowance u/s 37 of the Act but made the addition u/s 69C of the Act, as unexplained expenditure - Even the AO invoked Section 69C only and he confirmed the addition under the said section. Apparently, no addition can be made u/s 69C as assessee made the payment of commission through banking channel which is reflected in the audited financial statements and therefore source of the expenditure is proved. Addition u/s 69C of the Act can be made only when assessee did not offer the explanation about the source of expenditure. AO and the CIT(A) both have failed to justify that how the assessee's explanation regarding source of the expenditure is not acceptable. In fact, both the lower authorities have not raised any doubt regarding the source of the payment of the commission. Therefore, as submitted that addition so made by the AO may be deleted. We note that assessee has proved the genuineness and bona fide of the commission expense. Hence, we are not inclined to accept the contention of the AO in any manner and hence the addition so made is deleted. Hence this appeal of the assessee is allowed. 2023 (5) TMI 1054 Deduction u/s 80IB - Concealed Sales arising out of concealed production - difference is arising due to various factors such as wastage of raw material, overages vitamins, enzymes etc., additional material input for potencies and moisture consumption, salt form and wastage during production - AO was of the view that the excessive consumption of raw materials revealed that the assessee has not correctly reported the production of finished goods and accordingly concluded that the assessee had not reported the production to carry out sales outside its books - HELD THAT:- We notice that for the years under consideration the basis on which the disallowance is made by the Assessing Officer and the decision of the CIT(A) modifying the addition is similar to A.Y. 2012-13 [ 2020 (7) TMI 568 - ITAT MUMBAI] and, therefore, respectfully following the above decision of the co-ordinate bench, we modify the order of the CIT(A) wherein the A.O is directed to restrict the disallowance in respect of the excess raw material wastage in terms of the aforesaid observations of the Hon ble Tribunal. Allowing 80IB Deduction in respect of increased income due to addition on account of alleged concealed production - CIT(A) did not allow this claim of the assessee for the reason that the additional income is not supported by the amount mentioned in Form 10CCB basis which the deduction u/s.80IB is allowed - HELD THAT:- Respectfully following the said decision of the co-ordinate bench, we see no reason to interfere with the decision of the CIT(A) in rejecting the claim of the assessee that 80IB deduction be allowed in respect of increase in the business income due to addition on account of concealed production. This ground is dismissed. Sales promotion expenses - For the year under consideration there is no critical evaluation of the expenses and post the Hon ble Supreme Court judgment, the dictum laid down, same needs to be followed and each of the expenditure needs to be evaluated to see if the disallowance is justified. In the present case, the A.O. had primarily made disallowance by referring the CBDT Circular No.5/2012 dated 01.08.2012. The A.O. has not critically examined the nature of expenditure incurred by the assessee. In the larger interest of justice, in view of the latest judgment of the Hon ble Apex Court, which has examined the very same issue, it becomes necessary to examine the exact nature of expenses incurred by the assessee for Doctors from all angles. Therefore, for substantial question and cause, necessarily, the matter needs fresh verification by the A.O, especially in the light of the recent judgment in the case of M/s.Apex Laboratories Pvt. Ltd. [ 2022 (2) TMI 1114 - SUPREME COURT] - The issues for both AYs is remitted back to the AO with a direction to examine the details of expenses submitted from MCI guidelines perspective in the light of the decision of the Apex Court after giving an opportunity of being heard to the assessee. Allowing of deduction u/s 80IB in respect of the sale promotion expenses disallowed - HELD THAT:- In view of the CBDT circular No.37/2016 dated 2nd November 2016, we direct the AO to consider enhanced profits due to the disallowance if any of sales promotion while computing the revised deduction u/s.80IB for AY 2010-11 and 2011-12. Needless to say that the assessee be given a reasonable opportunity of being heard. 2023 (5) TMI 1053 Deemed dividend addition u/s 2(22)(e) - correctness of the CIT(A)'s action reversing the assessment findings making sec.2(22)(e) addition - assessee s stand throughout is that the impugned sum represents intercorporate deposits bearing interest than loans/advances covered under the deeming fiction of dividends u/s.2(22)(e) - HELD THAT:- This tribunal s learned coordinate bench in [ 2020 (2) TMI 616 - ITAT PUNE] has already reversed the CIT(A)'s identical action deleting the similar addition of deemed dividends representing intercorporate deposits. This tribunal s yet another coordinate bench s order in Revenue s appeal [ 2022 (8) TMI 1382 - ITAT PUNE] has also adopted judicial consistency for accepting the Revenue s very stand as well. Faced with the situation, we hereby adopt the above detailed reasoning mutantis mutandis to restore the impugned deemed dividend addition made by the AO in his assessment - This Revenue s appeal succeeds. 2023 (5) TMI 1052 Cognizance u/s 92BA(i) - effect of omission of law - validity of reference made to TPO under section 92CA - HELD THAT:- Hon ble Supreme Court in GENERAL FINANCE CO. AND ANOTHER [ 2002 (9) TMI 3 - SUPREME COURT] wherein it has categorically been examined with regard to the effect of deletion of a provision in the Statute and it was held that the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as a law that never existed. In case there is no saving clause or provision introduced by way of an amendment while omitting the provision, therefore, the result is that the said provision had never been passed and we consider it as a law that never existed. Therefore, we have no hesitation to hold that the cognizance taken by the AO under section 92BA(i) are reference made to TPO under section 92CA is invalid and bad in law in view of the deletion of provision (i) of section 92BA from the enactment. As it is clear that once a particular provision of section is omitted from the Statute, it shall be deemed to be omitted from its inception until and unless there is some saving clause or provision to make it clear that action taken or proceedings initiated under that provision or section would continue and would not be left on account of omission. Since in the instant case, undisputedly, by the Finance Act, 2017, clause (i) of section 92BA has been omitted with effect from 01.04.2017, therefore, once this clause is omitted by subsequent amendment then it would be deemed that clause (i) was never there in the Statute. Therefore, we hold that the reference made to TPO under section 92CA is invalid and bad in law and hence consequential order passed by the TPO and AO is also not sustainable in the eyes of law and the addition so made/sustained by ld. CIT (A) too deserves to be deleted. Appeal of the assessee is allowed. 2023 (5) TMI 1051 Exemption u/s 11 - Assessment of trust - assessee has paid interest to three financial institutions - AO has disallowed the on the premise that the interest rate is very high the loan taken has been utilized for the payment of earlier loans leading to unnecessary/excess interest running in loss - HELD THAT:- The funds of the assessee is not utilized for the objectives of the institution, but utilized for repayment of earlier loan and interest. On perusal of details it is noticed that the SBI has sanctioned loan to the assessee at 9.25% p.a. on monthly basis. The bank has granted loan for the specific purpose i.e. land development expenses, Building amenities computer etc. for Rs. 10.80 Crores - Assessee has shown application of income under the capital expenditure, it shows that the bank loans were utilized for the designated purpose. In view of this, interest paid to the bank is allowed. Assessee has paid interest to HDFC Bank Ltd. and Tata Motors Ltd. for the vehicle loan and the use of the vehicles have not been doubted by any of the lower authorities, therefore, this interest is also to be allowed. For the balance of the interest paid to others lenders/depositors, the AO is directed to examine whether the loans were utilized for the objective of the society and if so, we direct the AO to restrict interest @ 9.25% p.a., which is equal to the interest rate of loan taken from State Bank of India. The assessee is directed to provide necessary documents for substantiating its case that the loans were utilized for the charitable purpose as set out in the object clause of the assessee and avoid unnecessary adjournments. Accordingly, this ground of appeal is partly allowed for statistical purpose. Disallowance of remuneration paid to the Secretary - Whether nature of duties performed by the Secretary cum Principal was justified who was carrying out various business activities of the trust? - HELD THAT:- CIT(A) has rightly observed that the nature of work undertaken by the Secretary-cum-Principal are common in other institutions also it is routine work. CIT(A) while deciding the issue verified through online information that the average pay is Rs.10.98 lakhs per year as of 2020, whereas the case of the assessee relates to AY 2010-11 i.e., 10 years back, where the remuneration must be much lower. Assessee s contention is that the recipient has paid due taxes on the entire amount of Rs.24 lakhs and produced computation of income along with the copy of acknowledgment of return and submitted that there is no loss to the revenue.This aspect has not been examined by the lower authorities. Therefore, we remit this issue to the AO for the purpose of verification as to whether there is any loss to the Revenue or not and decide the issue as per law. This ground is allowed for statistical purposes. Application of income for repayment of loan - HELD THAT:- As it is not clear whether the loans taken were utilized for the application of income in the past years as well as in current year for the purpose of the objective of the institution. This issue has not been examined by the AO as well as CIT(A) in the light of the judgement relied by the ld. DR. For this limited purpose of verification, we remit this issue to the AO to examine the same and decide this issue as per law. AO is directed not to grant double benefit to the assessee. This ground is allowed for statistical purposes. 2023 (5) TMI 1050 Assessment u/s 153C - Addition u/s 68 - addition of corresponding expenses u/s 69C - HELD THAT:- The revenue has to follow the procedures laid down under the provisions of section 153C in a situation where the documents were found from the premises of the 3rd party irrespective of the fact that the other party was also subject to the search. The process as provided u/s 153C has to be followed by the revenue for the purpose of making the addition based on the documents found in the course of search from the premises of the 3rd party. Coming to the facts of the case on hand, we note that the AO while making the addition in the hands of the assessee u/s 68 nowhere mentioned about any material found from the premises of the assessee. The entire thrust of the AO to treat the credit of share capitals, premiums and loans as bogus and unexplained was based on materials and information collected during the search at third parties being Shri Shrish Chandrakant Shah, Shri Parveen Kumar Jain and Shri Partik R Shah and the premises of Shri Ashit Vohra and office of Shri Anil Hiralal Shah others B-406, Wall Street-II Ellisbridge Ahmedabad. Therefore materials could only have been made basis for making addition after following the procedure laid down under the provisions of section 153C which has not been followed. Thus, we do not find any infirmity in the finding of the learned CIT (A). Grounds of appeals raised by the Revenue are hereby dismissed. Addition u/s 68 - bogus credit of loan - expenses incurred for taking such bogus entry - AO doubted the creditworthiness merely on the basis that the loan party was showing meagre income in income tax return - HELD THAT:- As far as creditworthiness of the loan party is concerned, the same can be viewed from a different angle i.e. there may be funds in the form of capitals, reserve surplus and loans. Undoubtedly, the learned CIT-A has given finding that huge additions were made in the assessment framed with respect to the loan party under the provisions of section 68 - If these additions are deleted by the higher forum, then it becomes evident that there was sufficient fund available with the loan creditors. Likewise, if these additions are confirmed by the higher forum, then also it becomes evident that there was sufficient fund available with the loan creditor. In our considered view, in either of the case, the creditworthiness of the parties cannot be doubted. We find that in the case on hand, the credit of unsecured loan, the assessee is only liable to explain the source of credit in its books not in the books loan creditor. In the case on hand, the assessee has duly explained the source of credit in its books by providing the details of identity of the creditor, genuineness of transaction and creditworthiness was also established by furnishing details. The assessee cannot be expected to explain the source of funds in the books of the creditor and if the AO have any doubt with regard genuineness of fund in the books of creditor, then the same should be verified at the creditor end and not from the assessee. We hereby hold that the assessee on merits discharged the onus cast under section 68 of the Act. Once the loan amount credited in the books of the assessee found to be genuine and addition under section 68 of the Act is deleted, in our considered view the corresponding estimated expenses against such loan cannot be sustained. Decided against revenue. Treating the credit of share application money and unsecured loan as unexplained cash credit under section 68 - HELD THAT:- Once the repayment of the loan received is established, then the genuineness cannot be doubted. In this respect we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of the CIT Vs. Rohini builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT ] Appeal of assessee allowed. 2023 (5) TMI 1049 Late deposit of employees share towards Provident Fund contribution after the due date - whether income has to be computed pursuant to Rule 8(1) of the Income Tax Rules, 1962 needs to be computed from the business of tea growing and manufacturing equal to 40% of total income determined - HELD THAT:- As perused the Rule 8(1) of the Income Tax Rules, 1962, which deals with the manner of computing the income from cultivation and manufacturing of tea. Sub-Rule (1) provides that where the income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business, and forty per cent of such income shall be deemed to be income liable to tax . Having considered the above Rule, we find merit in the contention of the assessee that the income of the assessee should be computed first after making the disallowance and whatever is the resultant income only 40% of that income has to be treated as taxable income in terms of Rule 8(1) of the Income Tax Rules, 1962. Since the issue requires no examination and verification of records, we are, therefore, restoring the issue to the file of ld. Assessing Officer to examine the same to compute the income in terms of our observations as stated above by following the Rule 8(1) of the Income Tax Rules. Assessing Officer is directed to compute the income after making disallowance in respect of EPF late deposit by the assessee and then re-compute the taxable income by applying Rule 8(1) of the Income Tax Rules, 1962. Appeal of the assessee is allowed for statistical purposes. 2023 (5) TMI 1048 Validity of the reopening of the assessment - jurisdiction of proceedings - initiation of proceedings by an Authority which has no jurisdiction - HELD THAT:- From the decision of CIT(A), it is clear that notice u/s 148 was not issued by the jurisdictional AO. As per CIT(A), the assessment was framed by Jurisdictional AO i.e. ITO, Ward-65(5), New Delhi. The Revenue has miserably failed to answer the question of jurisdiction as Ld.CIT(A in the impugned order himself states that the notice u/s 148 was not issued by the jurisdictional AO . Therefore, it can be safely inferred that notice u/s 148 of the Act was issued by the Authority which has no jurisdiction for the assessee. Revenue has not brought any order by the Competent Authority whereby the jurisdiction was conferred on the Authority who issued notice u/s 148 of the Act. In the absence of such order, we hold that assessment order passed by the AO was based on invalid notice hence, it also vitiated the assessment order in the light of binding precedents as cited by the assessee. The assessment order is hereby, quashed. Addition u/s 69A - as stated by the assessee that there were cash withdrawals and deposits. Before Ld.CIT(A), it was stated that the cash was withdrawn and deposited in the bank account. Assessee has pointed out that a sum was available out of withdrawals on the bank account for making the deposits. CIT(A) has not given any findings. Therefore, facts or findings of the Lower Authorities are based on conjectures and surmises and ignored the facts placed on record. AO was not justified in making the addition. The grounds raised by the assessee are allowed on merit. Appeal of the assessee is allowed. 2023 (5) TMI 1047 Unexplained cash credit u/s 68 - share application money received / share capital issued at premium - Genuity of investment by investor companies - AO primarily based on the statements of Entry Operator and the Directors of the investor companies that the entities were not existing at the address mentioned and the assessee did not produce the Directors for examination but only filed all the documentary evidences - HELD THAT:- Source of investment made against the share capital/ premium/ warrants, stands explained, as appellant and investor companies, have substantiated the same by furnishing evidences and proved the Identity, genuineness of transactions and creditworthiness of investor companies. Provisions of section 68 of the Act, are not attracted in the case of appellant, as investment by investor companies, is considered as explained. Therefore, in these facts and circumstances, we decline to interfere with the order of the ld. CIT(A). Decided against revenue. 2023 (5) TMI 1046 Validity of reopening u/s.147 r.w.s. 148 - income accrued and arisen in India - addition on the ground of balance appearing in HSBC Bank Account, Geneva undisclosed - HELD THAT:- Once the AO while recording the reasons has accepted that assessee is a non-resident, then how balance in the bank account with HSBC bank, Geneva represents income which is accrued or arising or is deemed to accrue or arise in India so as to come within the scope of total income in terms of Section 5 of the Act. - AO should have mentioned it in the reasons recorded before acquiring jurisdiction to reopen an assessment for an extended period of 16 years that, firstly, assessee is a resident in terms of Section 6; and if not then secondly, the balance lying in the foreign bank account represents income which has accrued or arisen or deemed to accrue or arise in India u/s. 5. Once that fact has not been brought on record, ostensibly there cannot be any reason to believe that the income in relation to such an asset has escaped assessment for the A.Y.s 2006-07 and 2007-08 and extended time limit of 16 years is available The reasons recorded by the AO are not only vague and general but without any application of mind on the records and the material which was filed by the assessee before the Income Tax department right from the year 2011 to 2014, till the issuance of notice u/s.148. The reasons have been recorded in a very mechanical manner without even ascertaining the facts and material available on record. Even going by the so called Base Note as mentioned by the ld. AO refers to account holder, Amaya Ltd. which is a separate legal entity and incorporated outside India. At the time of recording, the reasons or even in the Base Note, nowhere it has been brought on record that the said entity Amaya Ltd. is fictitious or some kind of transparent entity. Nothing has been brought on record in reasons recorded or there is any material on record that assessee has any business connection in India and therefore amount deposited in said foreign bank account is income arisen or accrued or deemed to have arisen or deemed to have accrued in India. If at all there is some doubt about the said entity and deposits made therein, then, it is the UK Tax authorities which have to examine this issue. No jurisdiction to the AO to reopen the case of a non-resident u/s 147 of the Act based on some vague and general information as noted in the reasons recorded and without ascribing how income chargeable to tax has escaped assessment in India. Therefore, entire re-assessment order is held as null and void . Decided in favour of assessee. 2023 (5) TMI 1045 TP Adjustment - comparable selection - HELD THAT:- We direct the Ld.AO/TPO to apply upper turnover filter and exclude all comparables mentioned hereinabove from the final list. Comparables sought for exclusion / inclusion under the trading segment - AR requested for the trading segment to be remanded to TPO / TPO for denovo consideration - HELD THAT:- DR did not object for the request adhered by the Ld.AR. Considering the submissions by the AR, we remand the entire trading segment to the Ld.AO/TPO to carry out denovo search with the direction to include comparables having parity with the trading activities carried on by the assessee. Needless to say that the FAR analysis must be given primary importance for selecting the comparables. Assessee must be granted proper opportunity of being heard for considering this issue. Grievance of the assessee for considering the trading segment at entity level - We direct the Ld.AO/TPO to restrict the adjustment if any only in respect of the value of international transaction between assessee and AE. Respectfully following the ratios laid down in plethora of decisions hereinabove, we remand this issue back to the Ld.AO/TPO to consider the claim in accordance with law. Non-granting of working capital adjustment - HELD THAT:- DRP may be correct in denying working adjustment due to unavailability required data, however there is no merit in observations of DRP/TPO as supported by Ld.CIR DR, in denying working capital adjustment due to absence of details for working out adjustments in comparable companies chosen. If we appreciate the argument advanced by Ld.CIT.DR, there would remain no comparables for the purpose of comparability analysis to determine ALP of an international transaction, and this would be fatal to entire exercise of transfer pricing analysis. Endeavor should be made to bring in comparable companies for the purpose of broad comparison and working capital adjustment claimed by Assessee should be analysed, keeping in mind, OECD guidelines. As respectfully following decision of Huawei Technologies India (P.) Ltd. [ 2018 (10) TMI 1796 - ITAT BANGALORE] we direct working capital adjustment to be computed and to allow as per actual, after considering exclusion/inclusion of comparable companies in the final set of comparables as discussed hereinabove. Notional interest computed on the outstanding receivables - HELD THAT:- This Bench referred to decision of Special Bench of this Tribunal in case Instrumentation Corpn. Ltd. [ 2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. As argued that working capital adjustment subsumes sundry creditors and computing interest on outstanding receivables and loan and advances to international transaction would amount to double taxation - We deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down in case of CIT vs. Cotton Naturals (I) Pvt. Ltd.[ 2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days. Short grant of TDS and interest u/s. 234C - interest levied on the assessed income or returned income as required under the provision of the Act - HELD THAT:- We direct the Ld.AO to grant credit of TDS in accordance with law after carrying out necessary verifications in respect of the interest u/s. 234C, it is directed that the levy of interest must be on the returned income as mandated u/s. 234C of the act. 2023 (5) TMI 1044 Validity of the draft assessment order issued in the name of non-existent entity - amalgamation - TP adjustment - arm s-length price u/s 92CA - Final assessment order issued in the name of correct assessee - assessee had filed a formal intimation before the DCIT, Transfer Pricing intimating that AIPL has been converted into LLP - HELD THAT:- Fact of conversion of AIPL into LLP was intimated to both the AO and the TPO much before passing of their respective orders, yet both the TPO and the AO passed the Transfer Pricing Order and the draft assessment order in the name of a non-existent entity. The view of the Courts and Tribunals on this issue is unanimous that once the draft assessment order and Transfer pricing order itself are bad in law, having been passed in the name of a non-existent entity, then the final assessment order based on the above orders is void ab initio as well. In view of the above settled position of law, we are of the view that the final assessment order sought to be appeal against is void and hence liable to be set aside. Decided in favour of assessee. 2023 (5) TMI 1043 Income deemed to accrue or arise in India - Taxability of fee for technical services on payments received from provision of income from maintenance and other support and training services under India Singapore DTAA - whether the said services satisfying make available clause ? - AO held that, not only its fees for technical services under the provision of Section 9(1)(vii) but also falls in the ambit of Article 12(4) of India-Singapore DTAA - whether income from rendering maintenance and other support services is taxable in India as FTS under Article 12 (4) of India-Singapore DTAA? - HELD THAT:- The in-house support team of the Indian customers is mainly a centralized point of contact for purpose of co-ordination and related activities of Indian customers with the assessee. Since, the role of in-house support team involves coordinating with the assessee regarding MSEA software programme supplied by the assessee, the personnel in such In-House support team / IT team need to be competent to know how to use the software program to be able to effectively explain the query / bug to MSEA which would then enable MSEA to identify the issue and resolve the same. This fact is clearly borne out from the relevant clauses of the agreements which has been filed before us and also which has been noted in the foregoing paragraphs. For training part there is no addition in the functionalities through such update which are only standard updates and not customization. The entire maintenance service contract is dependent on the software sublicensing agreement. In case of separate agreements for sublicensing and maintenance, there is a termination clause which provides that maintenance services will automatically terminate if software sublicensing contract is expired or terminated. Here, fees for maintenance services are annual and based on a percentage of licence fee and is not dependent upon the number of queries / bugs raised or resolved by the assessee. If it is of recurring annual fees, there is no question that assessee was making available any technology or knowhow of the Indian customers on year to year basis as has been interpreted by the ld. AO. Assessee is having the technical expertise in the software sub-licensed by it. If there is any bug or problem faced by the customers while using the software, assessee provides trouble shooting to fix those bugs and helps them for maintaining and support of the software used by the clients. This does not mean that assessee had made available any technology in software. Services have been provided on on telephone, on email, remote login and providing training for the software and therefore, it is make available - If assessee is resolving the problems on software sub-licensed by it, this does not per se mean that any technology has been transferred or any know how has been make available which can enable the inhouse team of the customer to acquire the technology. Such maintenance support services and training services do not fall in the ambit and nature of FTS within Article 12(4) of India Singapore DTAA, as these services do not make available any technical skill knowledge or expertise etc., which can enable Indian customer to apply the technology content therein. Thus, we hold that these services are not liable to be taxable. In the result, this issue is passed in favour of the assessee. 2023 (5) TMI 1042 Addition u/s 68 - AO received information from ITO, Ward-4(3), Kolkata containing that assessee was advanced unsecured loans and received interest on unsecured loans from fake /shell company - HELD THAT:- Here it is a loan transaction, which according to the assessee, these loans have been repaid. Similarly in the first seven pages, CIT(Appeals) has just reproduced the assessment order. There is no cross verification of the evidence at the end of both the revenue authorities. We deem it appropriate to set aside the orders of revenue authorities and restore this issue to the file of AO. AO is directed to either confront the assessee with Shri Sajjan Kumar Garg or do not rely upon his statement while examining the loan transaction of the assessee because the statement was recorded by Investigation Wing. Its veracity has not been tested by any of the authorities on judicial platforms. Information given by the ITO, Ward-4(3), Kolkata is just an information for setting the machinery into motion, it cannot be treated as a gospel truth. The issue has to be examined, therefore, AO is directed to look into all these aspects afresh and read judicate the issue after providing due opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes. 2023 (5) TMI 1041 Reopening of assessment u/s 147 - unexplained investment - contradiction in reasons to believe - whether AO has tangible material in his possession for the purpose of initiating the reassessment proceedings in the case of appellant? - HELD THAT:- Reasons recorded and consequent assessment completed are full of contradictions giving wrong figures and wrong names in the case of assessee. It is also noted by ld. CIT (A) that during remand proceedings also, the AO was asked to reconcile the aforesaid figures of amounts and also the names but he failed to do so. CIT (A) s finding that the AO has formed his belief for recording the reasons and reopening the assessment proceedings on the basis of the wrong premise is correct. CIT (A) has properly appreciated the matter and referred to case laws. His order does not need any interference on our part. Hence, we uphold the order of ld. CIT (A). As regards merits of the case, we note that reopening has been found invalid and grounds on merits are only academic interest - Appeal of the Revenue is dismissed. 2023 (5) TMI 1040 Unexplained cash credit u/s 68 - share capital received from 22 shareholders - addition made on non discharge of onus in establishing identity, genuineness and creditworthiness of the share applicants - HELD THAT:- All the 22 share applicants and their source firms independently responded to the notices u/s 133(6) issued to them and provided the desired information to the AO. AO brought no evidence on record to support his baseless allegations which are mere conjectural and hypothetical that share capital introduced in the Assessee Company is unaccounted income/money of the Assessee Company. There was no allegation of share capital issued at unreasonable share price or excessive share premium and there was also no allegation of any cash deposit prior to payment of share capital in the bank statements of the share applicants or the source firms. If the AO had any doubt then he could have made further inquiries and issued summons u/s 131 to the share applicants and their source firms but he did not do. Assessee Company has discharged its onus in establishing identity, genuineness and creditworthiness of the share applicants and all the amounts have been emanated from three entities namely, M/s. Shree Ram Enterprises, M/s. Shubh Laxmi Tex and M/s. Shree Amarnath Synthetics. The same has been confirmed by the shareholders as well as the Directors of all the three entities. Hence, we hold that the addition made by the AO has rightly been deleted by the ld. CIT(A). The order of the ld. CIT(A) is affirmed. Decided against revenue. 2023 (5) TMI 1039 Reopening of assessment u/s 147 - Addition u/s 68 - unexplained credits in the books of account of the assessee being share application money received - whether the Assessee could be stated to have disclosed fully and truly all material facts has to be examined in the light of facts of each case? - HELD THAT:- Requirement of first proviso are not met for multiple reasons namely, the allegation of failure to disclose facts of material nature is non-descript and obscure and is merely an iteration of statutory language; it is not known what primary facts of substantive nature were not 'disclosed' which were in the knowledge of the Assessee; which specific fact disclosed were found to be untrue later on. Allegation that the share application received are accommodation entries without further corroborative facts is by itself insufficient to allege the escapement in terms of first proviso. Withholding the material facts which is in the knowledge of Assessee is one of the conditions precedent to lift the embargo of limitation placed under the first proviso. Importantly, such failure of the assessee to disclose material facts contemplated in first proviso to S. 147 has to be judged in the context of proceedings of the same year i.e. AY 2009-10 and not with reference to some enquiry in subsequent AY 2010-11. Any alleged failure in some other assessment year would not meet the requirement of first proviso to S. 147 with reference to reopening of some other year. From the body of reasons recorded for AY 2009-10 in question, it can not be deciphered as to what material facts in relation to share application money were withheld by the Assessee in AY 2009-10 in question. An alleged non-compliance of summons issued in some other years cannot be reckoned as 'failure on the part of assessee' and that too in some other assessment year. An enquiry was made in relation to share application money recd. while framing regular assessment of AY 2009-10 and assessment was framed taking note of outcome of such enquiry. Hence, mere reproduction of statutory language of first proviso would not meet the requirement of law for extension of limitation period beyond 4 years. When seen holistically, the conclusion is inescapable that the AO has failed to satisfy the pre-requisites of main provision of S. 147 and also first proviso thereto. The jurisdiction assumed thus is clearly without legal foundation. The notice issued u/s 148 to reopen the completed assessment is thus without jurisdiction and consequently, the reassessment order is bad in law and thus quashed. Decided in favour of assessee. 2023 (5) TMI 1038 TDS u/s 194H - Disallowance u/s 40(a)(ia) - service fees retained by the bank on credit card charges - HELD THAT:- As perused the material available on record we find that the coordinate bench of the Tribunal in assessee s own case in Future Retail Limited [ 2017 (5) TMI 1745 - ITAT MUMBAI] for the assessment year 2010-11, after following various judicial pronouncements on similar issue held that the commission paid to the credit card companies is not subject to the TDS provisions of the Act - Decided against revenue. 2023 (5) TMI 1037 Income deemed to accrue or arise in India - Amount received by the assessee from Indian customers towards subscription fee - nature of royalty or Fee for Technical Services (FTS) - HELD THAT:- Undisputedly, the assessee collects material/information in the field of cessation, technology, medical information and product and services and credited a database material. Assessee s products include printing of books and journals and line database solution, the disputed revenue was earned by the assessee towards subscription fee for Indian subscribers for providing excess to its science database, various information relating to the subject, have been collated and stirred. As per the assessee, the subscription fee received is in the nature of business income and in absence of a PE in India is not taxable in terms of India-UK DTAA. The aforesaid submission of the assessee has not found favour with the departmental authorities. From the material placed before us, it is observed, while deciding identical issue in case of assessee s sister concern, CIT vs. Infosys Technology Ltd [ 2011 (10) TMI 370 - KARNATAKA HIGH COURT] the coordinate Bench has held that the subscription fee received by the assessee is not in the nature of royalty or FTS. DR has brought to our notice two decisions of CIT vs. Wipro Ltd [ 2011 (10) TMI 473 - KARNATAKA HIGH COURT] and CIT vs. Infosys Technology [ 2011 (10) TMI 370 - KARNATAKA HIGH COURT] wherein contrary view has been expressed by the Hon'ble High Court but as observed, while deciding the Special Leave Petition filed by the concerned assessees, the Hon'ble Supreme Court has set aside the respective judgments of the Hon'ble Karnataka High Court and restored the matters back for fresh adjudication keeping in view the decision of the Hon'ble Supreme Court in case of Engineering Analgsis Centre of Excellence [ 2021 (3) TMI 138 - SUPREME COURT] This is so because while deciding the matters relating to Wipro Ltd. and in Infosys Technology Ltd.,it followed its own decisions in case of CIT vs. Samsung Electronics Co. Ltd. [ 2011 (10) TMI 195 - KARNATAKA HIGH COURT] which stood reversed by the Hon'ble Supreme Court in case of Engineering Analysis Centre to Excellence Pvt. Ltd. (supra). We hold, the subscription fee received by the assessee from Indian customers is not in the nature of royalty/ FTS/FIS under the provisions of India-UK DTAA. Thus, the receipts being in the nature of business profit, in absence of a PE in India, they are not taxable. Appeal of assessee allowed. 2023 (5) TMI 1036 TP Adjustment - comparable selection - inclusion of comparable of Axis Integrated Systems Limited - HELD THAT:- No hesitation in holding that, (i) in absence of any change in the facts and circumstances in the case, (ii) as well as functional profile of the assessee and the comparable company, i.e. Axis Integrated Systems Limited, remaining the same, respectfully following the decision of the co-ordinate Bench, we hold that Axis Integrated Systems Limited should be excluded from the comparability analysis. Accordingly, we uphold the order of the learned CIT (A) in excluding the above comparable. Capital gain - transfer of a capital asset by assessee to its subsidiary company, which is also an Indian company - HELD THAT:- 3. According to us, the 'share capital' includes equity as well as preference shares both. Because, the share capital is deriving its meaning from The Companies Act which includes equity and preference capital both. It is also because wherever legislature wanted particular percentage of particular share capital qua voting right, etc same is provided in those sections, such as Section 47 (xiii) and (xiv) of the Act. Similarly section 2(22) and section 40 A of the Income tax Act provides for beneficial ownership of shares. Section 47 (iv) exempts transfer of capital assets from Holding company to subsidiary company only where share capital in its entirety is held by holding company. Plain meaning of the words of the section clearly suggest so. We find that the requirement of holding the whole of the share capital applies to both the types of share capital i.e. equity share capital and preference share capital. As apparent that entire issued and paid-up share capital of the subsidiary company should be held by holding company or its nominees for claiming exemption from capital gains under this clause. There are different shareholders of preference share capital other than the holding company and holding company only holds along with its nominees, 100 % equity shares of the transferee company. Therefore, according to us the conditions of section 47 (iv) of the act are not satisfied and if any capital gain or loss arising on transfer of a capital asset by the assessee company to its subsidiary company, is chargeable to tax under the provisions of section 45 of the act. Assessee is not eligible for exemption of section 47 (iv) of the act as we hold that transactions of the transfer of capital asset by the holding company to its subsidiary company is to be regarded as 'transfer'. Therefore we direct the learned assessing officer to hold that capital gain or loss arising to the assessee on transfer of shares to its subsidiary company is not tax-exempt u/s 47 (iv) of the act. There is no occasion to compute the capital gain or loss arising on the transfer of the above shares. Accordingly, we direct the assessee to substantiate sale consideration, cost of acquisition and indexed cost of acquisition before the learned assessing officer and its computation of capital gain/loss. AO is directed to verify the computation and accordingly decide the quantum of such gain or loss. 2023 (5) TMI 1035 Addition u/s. 40(a)(ia) - assessee's failure to deduct TDS on Labour Contract Expenses - assessee had not adhered to all the conditions of first proviso of Section 201 - CIT(A) granted relief to the assessee merely by accepting the submission of assessee that the recipient has included the income in their return of income and has shown in their taxable income - HELD THAT:- We find that neither the AO narrated the name and details of sub-contract in assessment order nor the CIT(A) recorded in his order bifurcation of impugned expenses paid to various sub-contractors. CIT(A) called the remand report from the Assessing Officer during the pendency of first appeal. AO again in his remand report has not specified the name and bifurcation of different payments made to such sub-contractors. Thus, after hearing the submissions of both the parties, we directed the assessee to furnish the list of such persons alongwith their PAN number, details of sub-contract payment and the return of income if any shown by such sub-contractor. As noted before the CIT(A), the assessee contended that the recipients of contract payments have included the contract payment in their return of income and has paid the due tax. CIT(A) on such submission, obtained remand report from the AO. AO except sub-contractor No. 4,5 and 6, accepted that recipients of contract payments, have included the contract payment in their return of income. Thus, we affirm the order of ld CIT(A) to that extent. Sub-contractor No. 4 5 have not filed their return of income, so there is no occasion to include such contract receipt in their income. Before us, assessee made his alternative submissions that the disallowance on their payments may be restricted to 30% of sub contract payment in view of amendment to second Proviso to Section 40(a)(ia) by the Finance Act, 2014 which has been held as retrospective by various courts and Tribunal and relied upon the decision of Rajkot Tribunal in Punabhai G. Pardava [ 2022 (6) TMI 1338 - ITAT RAJKOT] On considering such plea of assessee, we direct AO to restrict the disallowance to the extent of 30% of payments made to sub-contractor No. 4 5, thereby, the order of ld CIT(A) is modified to that extent. Discrepancy in the computation of income of Mahendrabhai Radadiya, wherein he has shown gross receipt that too from Diamond labour income and not from the contract of construction, whereas the assessee have claimed to have paid it - Before us, assessee has filed copy of return of income of Mahendrabhai Radadiya for AY 2013-14, with computation of income wherein he has shown construction labour income of Rs. 29,17,000/-, which is contrary to the remand report of assessing officer dated 03.10.2018, therefore, this part of disallowance is restored back to the file of assessing officer to examine the fact, if the assessee has included construction contact receipt in his computation of income or the assessee has filed this false and fabricated evidence before Tribunal. If the assessee has included construction contract receipt in his computation of income, then disallowance be restricted to 30% of such receipt, if not included entire alleged contract payment be disallowed and action may be initiated against the assessee as per law. In the result, this part of issue is allowed for statistical purpose. Disallowance of expenses as are not fully supported with bills and vouchers - CIT-A restricting the various expenses to 10% in place of 20% disallowed by AO - HELD THAT:- We find that the assessing officer made disallowance without specifying the specific defect. In our view the ld CIT(A) reasonable restricted the disallowance to the extent of 10%, which we affirm. In the result, this ground of appeal is dismissed. Customs 2023 (5) TMI 1034 Levy of penalty on Customs Broker u/s 114AA of the Customs Act, 1962 - use of false and incorrect material - discrepancies in respect of description of the goods mentioned in IGM and the description given in invoice and packing list (gross misdeclaration) - acting in good faith, exercising due diligence or existence of malafide intent in tacitly helping the importer to clear the consignment? - HELD THAT:- The role of the Customs Broker is very crucial in the process of clearance of goods as they are required to do due diligence before facilitating filing of relevant documents for clearance of goods. As a regular Customs Broker, it is not expected that he would accept any document including KYC in a mechanical manner. He is expected to exercise due diligence to satisfy about the bonafide of the importer and the documents submitted by him. The employee of the Customs Broker in the instant case has in fact noted and admitted that there was some kind of impersonation and that should have alerted him and he should have brought to the notice of the Customs Authority immediately, instead he remained silent. This is the admitted position in the statement given by the Appellant and the Appellant is also not denying this fact nor giving any substantive reason about him being silent about the impersonation in the first place. He is responsible for the act of his employee also who is misrepresenting the CHB before the Customs Authorities. In the facts of the case on record, there is enough material to substantiate the allegation of malafide against the Appellant and therefore, Section 114AA has been rightly invoked by the Department and upheld by the Commissioner (Appeals). However, it is further seen that the Original Authority has imposed redemption fine of Rs.1,00,000/- each on used Xerox/ photocopy machines and spare parts. He has also imposed penalty of Rs.3,00,000/- on importer and Managing Partner of M/s Rupesh Xerox for their act of improper import. It is also noted that a penalty of Rs.1,00,000/- each has been imposed on Shri B. Sudhakar, employee of Nanda International, Shri Ashok and Shri Bhaskaran alias R. Saravanan also - Considering the roles played by each one of them, the penalty of Rs.1,00,000/- on the Appellant does not appear to be proportionate to his role in the attempted clearance of undeclared/ restricted goods. It is also informed by both the sides that no action was taken by the Department for revocation or suspension of CHA license for the aforesaid acts of Shri Chand and Shri Sudhakar, under the applicable law and regulation. The penalty of Rs.1,00,000/- imposed on the Appellant is reduced to Rs.25,000/- only. Except for the modification in the penalty amount, the Appeal filed by the Appellant is dismissed. 2023 (5) TMI 1033 Enforcement of bond/bank guarantee for recovery with further order to confiscate capital goods imported under EPCG Authorization - Confiscation - Redemption Fine - Penalty - HELD THAT:- It is found from the EODC dated 1.2.2019 granted by the Competent Authority is sufficient proof that the appellant have discharged their export obligation in respect of EPCG licence No. 1330001563 dated 14.03.2007. It is further found that the Court below have in a callous manner ignored the written submissions and evidence placed before it, which is highly undesirable and unbecoming of a court. The impugned order is set aside - appeal allowed. 2023 (5) TMI 1032 Revocation of Customs Broker licence - forfeiture of security amount under Regulation 14 of the Customs Broker Licensing Regulation, 2018 (CBLR) - imposition of penalty of Rs.50,000/- under Regulation 18 of CBLR - even after absolution of liabilities in the inquiry report is assailed - HELD THAT:- On perusal of the entire proceeding with reference to the procedure mentioned in the CBLR for revocation of licence and imposition of penalty, it is noted that the entire proceeding conducted by the Principal Commissioner of Customs (General) was irregular and unsupported by any legal provision for the reason that after serving show-cause notice on dated 25.11.2021 to the Appellant, causing and completing inquiry by 21.03.2022 concerning legality of suspension of licence made on 07.09.2021 which was admittedly done beyond 90 days without any justifiable excuse, he had issued a disagreement memo to the inquiry in which the charges were not proved despite the fact that Regulation 17(6) (7) had not contemplated such a mechanism. In the instant case the report of inquiry was not furnished to the Appellant seeking his response in compliance to para 6 of Regulation 17 apparently for the reason that the report was not against the Appellant. However, in complete disregard of the report and in the absence of a representation from the Appellant Customs Broker, the Commissioner had prepared a disagreement memo instead of passing an order revoking the suspension of the licence or, in the worst scenario, confirming the revocation of licence itself, in compliance to para 7 though before such revocation order Appellant was noticed to submit his response. However, a close reading of para 7 of the Regulation 17 would clearly indicate that the Commissioner was only empowered to consider the inquiry report and representation of the Customs Broker, if made against such report - To bring more clarity to this provision, it may be said that only when the report is against the Customs Broker, his representation is to be considered against the adverse report before passing any order and it has never empowered the Principal Commissioner of Customs (General) or the Commissioner of Customs to proceed against the Customs Broker even when the inquiry report, prepared after taking evidence and recording findings against the offence report containing summary of investigation and prima facie framing of charge into the acts of omission and commission by the Customs Broker, if any. The Principal Commissioner of Customs (General) had exceeded his jurisdiction in proceeding against the Customs Broker, despite charges being not established in the inquiry report - Appeal allowed. PMLA 2023 (5) TMI 1031 Money Laundering - Attachment of assets of petitioner - case of the Petitioners was that the 180 days period after the PAO was passed, as prescribed under the PMLA, has expired - HELD THAT:- There is no doubt that the issue relating to the expiry of 180 days and the manner in which the same would affect the PAO, is pending in Vikas WSP and Others Vs. Directorate Enforcement and Another, [ 2020 (11) TMI 629 - DELHI HIGH COURT ]. However, the same being a legal issue, there are various other submissions also which may have to be considered in the present matter, bearing in mind that the Petitioner Company has gone into insolvency and moratorium has been declared. Admittedly, the Tribunal under the PMLA is functioning and the Petitioner is free to approach the Tribunal under Section 26 of the PMLA. 15. The Petitioner has already filed an appeal before the Appellate Tribunal, which is stated to have been dismissed for non-prosecution - However, since the Petitioner was already before this Court and was granted interim protection, it is deemed appropriate to permit the Petitioner Company through the RP to approach the Appellate Tribunal for restoration of its appeal within the next two weeks. The Appellate Tribunal would proceed to hear the appeal in accordance with law. Petition disposed off. 2023 (5) TMI 1030 Seeking recall of order - allegation of bias - application on which the said order was passed, does not contain any pleading in connection with the public speech made by AB - HELD THAT:- The application on which the impugned order was passed was filed by ED wherein it was mentioned that one of the accused who is presently in custody in the PMLA case i.e. KG lodged a complaint before the police station making false, frivolous and baseless allegations against the officers of ED. Copy of the complaint was neither served upon the ED nor upon the learned Special Court, PMLA. Aspersions have been cast upon the investigation of ED. Based upon the inputs received from the media and elsewhere, ED came to learn that the said accused i.e. KG lodged a complaint before the CBI Court and before the Hastings police station against the officers of ED through the Superintendent, Presidency Correctional Home. The said accused along with other politically exposed persons were trying to lodge similar complaints against the officers of ED through the police authorities - Though ED did not make any specific prayer with regard to the relief(s) sought for and made an innocuous prayer for passing appropriate order on the submissions made in the body of the application, but the Court upon hearing submissions made on behalf of all the appearing counsels and upon perusal of documents placed before the Court passed the said impugned order. The offence which ED is dealing with is under the Prevention of Money Laundering Act, 2002 and the predicate offence under the Prevention of Corruption Act, 1988 and the Indian Penal Code is being investigated by CBI. It appears from records that the investigation started a couple of months back and the same has proceeded to a fair extent. Several high ranking politicians including Member of Legislative Assembly, Minister-in-Charge of Education, ex President of the West Bengal Board of Primary Education, several persons in the Bengali film industry have been arrested and taken in custody. Astronomical amount of cash, documents, evidences both physical and electronic have been seized from the custody of the accused - There is hardly any scope to afford prior opportunity of hearing in a proceeding under PMLA. If the proposition of the applicants that, prior opportunity of hearing be afforded before starting the investigation is to be accepted by the Court, then the investigating officers will never be able to conclude the investigation in a time bound manner. There may be several persons involved in an offence under the PMLA. It is for the investigating officer to decide as to who should be interrogated and when. It is not for the suspected/proposed accused or the accused to dictate terms upon the investigating officer as to how and in which manner the investigation should proceed. The principle of adherence to natural justice thereby meaning that opportunity of hearing is to be given to a person prior to summoning him to give evidence is not the same in all branches of law. The said principle has a different connotation in a proceeding involving civil consequences but has an absolute contrary implication in a criminal proceeding. Application of the principle of natural justice in connection with PMLA and the predicate offences is practically nil. Summoning a person for interrogation in connection with a public scam of such humungous magnitude does not ipso facto imply that coercive step will be taken against him; neither does it suggest that he is an accused or a suspected accused - There is no application of the principle of natural justice requiring prior opportunity of hearing to be given to a person who may be required for investigating a crime. In the instant case, the application for intervention and recalling has been filed by third parties not connected with the relief sought for in the writ petition. The applicants may be required for investigation purpose, but that does not mean that their presence will be necessary for adjudicating the writ proceeding. Intervention/addition of the applicants will in no way aid in disposal of the writ petition. The applicants can always put forward their defence and avail remedies in law, if at all, they are aggrieved by any act of the investigating agencies - The proceeds of crime have penetrated through several strata and have exchanged numerous hands. In such type of cases it is not unusual that threats and challenges will be there in practically each and every step. It is for the investigating officers to overcome the hurdle and unravel the truth to punish the offenders. The powers of the investigating officers to summon are not restricted to any particular person and the said power to investigate is to be utilized effectively to reach the goal. It appears from the prayers made in the applications that recalling has been sought only for the portion of the order where direction has been passed for causing investigation of the involvement of the applicants. The applicants do not appear to be bothered by the investigation per se. It is only where direction has been passed to investigate their involvement, that the applicants oppose the same. The act of the applicants in pressing the instant applications raises doubt in the mind of the Court that the same have been filed with mala fide intention to deter the investigating officers to follow through the process of investigation which has already opened up a box of worms with more to follow suit. The idea is to delay the entire process to the extent possible so that the real culprits can remain shielded. In fact, on account of filing the applications neither the ED nor the CBI appear to have proceeded any further - If the trend to delay the main investigation and intimidate the investigating officers is not dealt with appropriately at the very first stage, then the same will develop as a style and very many investigations in future may be held up for the same reasons. Such a move must be stubbed with an iron hand and upon imposition of exemplary costs so that the same has a deterring effect and similar offenders will be compelled to think a multiple time before adopting such a stand. Thus, no relief can be granted to the applicants - application dismissed. 2023 (5) TMI 1029 Money Laundering - existence of scheduled offences or not - no accused persons shown in FIR - Petitioners contend that since no scheduled offences were alleged against them and even though more than a year had elapsed after filing the prosecution complaint against them, no summons could be issued to the Petitioners under the PMLA - HELD THAT:- In Vijay Madanlal Choudhary [ 2022 (7) TMI 1316 - SUPREME COURT ], the Hon'ble Supreme Court, in the context of attachment of property, held that it is only such property which is derived or obtained directly or indirectly as a result of criminal activity relating to a scheduled offence that can be regarded as proceeds of crime. Therefore, the Authorities under the PLMA 2002 cannot act against any person for money laundering on the assumption that a scheduled offence has been committed unless the same is registered with the jurisdictional Police or pending inquiry/trial, including by way of criminal complaint before the competent forum. The Hon'ble Supreme Court held that taking any other view would be rewriting of these provisions and disregarding express language of the definition clause proceeds of crime , as it obtains now. Based upon Vijay Madanlal Choudhary, a case is made out for a grant of relief to the Petitioners now that it is clear that there is no prosecution against the Petitioners for any scheduled offence under the PMLA 2002. Based upon the communication dated 20/4/2023, addressed by the Crime Branch to the Enforcement Directorate, no case is made to dismiss these Petitions or defer hearings therein - As and when investigations are completed, and further, if the Petitioners are implicated for their involvement in any of the scheduled offences, the Respondent will have the liberty to seek revival of the PMLA proceedings by taking appropriate steps. However, based on the communication dated 20/4/2023, no case has been made to deny relief to the Petitioners. The Division Bench found that a 'C' summary report had been filed regards the scheduled offences. The Division Bench relied upon State of Maharashtra vs. Bhimrao Vithal Jadhav [ 1974 (9) TMI 137 - BOMBAY HIGH COURT ], where it had been observed that granting of a 'C' summary amounts to an acquittal. After quoting from Vijay Madanlal Choudhary (supra), the Division Bench concluded that if a person is discharged or acquitted of a scheduled offence by a competent Court, there could be no offence of money laundering against him. Finally, the Division Bench held that since no scheduled offence was alleged against the Petitioner because of the closure report filed by the Police, the impugned FIR registered by the Enforcement Directorate would not survive, and the said ECIR would have to be quashed, and set aside. Petition allowed. 2023 (5) TMI 1028 Seeking grant of bail - misuse of official position as State Revenue Minister to purchase and claim compensation in respect of the land under survey No.52/2A/2 of Village Bhosari, Taluka Haveli, District Pune - twin condition specified under Section 45 of PMLA or not - bail is sought mainly on the ground that there is no valid predicate offence for the reason that the Anti Corruption Bureau has filed C Summary Report - HELD THAT:- It is well settled that the grant of bail is the rule and refusal and exception. In the case of SATENDER KUMAR ANTIL VERSUS CENTRAL BUREAU OF INVESTIGATION ANR. [ 2022 (8) TMI 152 - SUPREME COURT] the Hon ble Supreme Court has reiterated that liberty is one of the most essential requirements of the modern man. It is stated to be the delicate fruit of a mature civilization. It is the very quintessence of civilized exist and the essential requirement of a modern man. The nature of offence and the material in support thereof, possibility of the accused fleeing justice, reasonable apprehension of tampering the evidence or influencing the witnesses are the circumstances which normally weigh with the Court while exercising discretion under Section 439 of Cr.P.C. In P. CHIDAMBARAM VERSUS DIRECTORATE OF ENFORCEMENT [ 2019 (12) TMI 186 - SUPREME COURT] , the Apex Court upon considering the previous decisions has reiterated that the basic jurisprudence relating to bail remains the same in as much as the grant of bail is the rule and refusal is the exception so as to ensure that the accused has the opportunity of securing fair trial, however, while considering the same the gravity of the offence is an aspect which is required to be kept in view by the Court. The gravity for the said purpose will have to be gathered from the facts and circumstances arising in each case. Keeping in view the consequences, that would befall on the society in cases of financial irregularities, it has been held that even economic offences would fall under the category of grave offence and in such circumstances, while considering the application for bail, the Court will have to deal with the same, being sensitive to the nature of allegation made against the accused - the underlining confusion is that irrespective of the nature and gravity of charge, the precedent of another case alone will not be the basis for the grant or refusal of bail, though it may have a bearing on principle. But ultimately, the consideration will have to be on case to case basis on the facts involved therein and securing the presence of the accused to stand trial. The language of Section 3 clearly implies that the money involved in the offence of Money laundering is necessarily the proceeds of crime, arising out of criminal activity in relation to the scheduled offence. In VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] the Apex Court has observed that the proceeds of crime being the core of the ingredients constituting the offence of money-laundering, that expression needs to be construed strictly. In that, all properties recovered or attached by the investigating agency in connection with the criminal activity relating to a scheduled offence under the general law cannot be regarded as proceeds of crime - In Vijay Chaudhary the Supreme Court has observed that 2002 Act is a special legislation to deal with the subject of money laundering activities having transnational impact on the financial system including sovereignty and integrity of the countries. It is observed that money laundering is not an ordinary offence. It is a separate class of offence requiring effective and stringent measures to combat the menace of money laundering. The records reveal that though in the agreement for sale dated 28/03/2016 the sale consideration was mentioned as Rs.50 Lakhs, the Applicant and the co-accused subsequently purchased the said property vide sale deed dated 28.04.2016 for sale consideration of Rs.3.75 Crores. The Applicant and the co-accused have paid stamp duty of Rs.1,78,16,600/- on the prevailing market rate of the land, which as per the ready reckoner was assessed to be Rs. 22,83,63,300/-. It is thus evident that the Applicant and the co- accused had purchased the said land much below the prevailing market rate. The defence that the land was purchased at a distress sale is a matter to be proved during the trial - The material on record prima facie reveals that the Applicant and the co-accused have acquired the property by means which are not legally approved, and the property acquired by criminal activity is relatable to scheduled offence. Prima facie, a case of criminal misconduct, which is a scheduled offence is made out. It is stated that the closure report has not been accepted and further investigation has been ordered. Hence, at this stage the predicate offence does not cease to exist. The Hon ble Supreme Court, while upholding the validity of Section 19, rejected the grounds pressed into service to declare Section 19 as unconstitutional and held that such a provision has reasonable nexus with the purposes and objects sought to be achieved by the 2002 Act of Prevention of Money Laundering and Confiscation of proceeds of crime involved in money laundering, including to prosecute persons involved in the process or activity involved in the process of crime so as to ensure that the proceeds of crime are not dealt with in any manner which may result in frustrating any proceedings relating to confiscation thereof. In the instant case, it is not the case of the Applicant that the authorized officer has not adhered to the safeguards or the stringent conditions contained in Section 19 of the PMLA, 2002, and has thus failed to demonstrate violation of Article 21 of the Constitution as to entitle him for bail. The Applicant has failed to meet the test of twin condition under Section 45 of PMLA. Moreover, the Applicant is a British citizen and as such the possibility of the Applicant not being available for trial cannot be ruled out - Application disposed off. Service Tax 2023 (5) TMI 1027 Levy of Service Tax - Business Support Service (BSS) - value added services provided by the overseas entity - appellant is the recipient of such service in India - commission charged from the appellant - reverse charge mechanism. Value added services - HELD THAT:- Apart from supplying the rough diamonds to the appellants, the overseas entity had supplied the value added service to the appellant, which were levied with the service tax demand by the department confirming those services to fall under the scope and ambit of the taxable service namely Business Support Service. The VAS services include supply of planning tools services which include continuity of supply, Intention to offer, Consistency of Boxes, sight holder Extranet services, SOC integrity (3rd party verification) provision of key Account Manager provided by them, as also Business sustainability services like consumer demand, consumer confidence, Best practice principles (BPP) (given at no additional cost along with supply of planning of tools services) which include creating consumer confidence for natural diamond, certification process to ensure that the diamond are mined from conflict-free zones and are not involved into illegal or illegitimate activities. The value added services provided by the overseas entity are part and parcel of the rough diamond supplied by them and considering the commission amount on such services, the Customs Department had assessed the bills of entry by including such value in the transaction value for the purpose of levy of Customs duty. It is not the case of Revenue that the value added services were otherwise can be arranged or provided by the appellant in furtherance to their business activities; rather availment of the said services were condition precedent, meaning thereby that, those services have to be compulsorily availed from the overseas entity and there is no choice for not availing those services. From the clarification in D.O.F. No.334/4/2006-TRU dated 28.02.2006 issued by the TRU, it is observed that the intention of the legislature was to collect service tax on the outsourced services only - In the present case, since for provision of the value added services, the appellant had not outsourced services to the overseas entity, it cannot be said that such services provided by the overseas entity should be taxed under the category of Business Support Service. Thus, the confirmation of the service tax demand in the adjudication order on Business Support Service will not stand in judicial scrutiny. Business Auxiliary Services provided by M/s. H Goldie Co. Ltd. to the appellant - HELD THAT:- In an identical situation, Tribunal has dismissed the appeal in favour of the importer holding that the activity provided as a commission agent should fall under the category of Business Auxiliary Service. Further, the appellant has also concedes the fact that it is not contesting the demand confirmed under Business Auxiliary Service. Therefore, the appellant is liable to pay service tax confirmed in the adjudication order with regard to that category of service. Hence, there are no infirmity in the impugned order insofar as it has confirmed the adjudged demands under the Business Auxiliary Service. The matter should go back to the original authority for the limited purpose of quantifying the service tax demand with regard to the Business Auxiliary Service, which should be paid for the units by the appellant - Appeal allowed in part. 2023 (5) TMI 1026 Levy of Service Tax - Business Auxiliary Service (BAS) - Sharing of Revenue - services provided by unincorporated joint venture to its constituent members - principal-to-principal basis or not - tax on share of Gross Win received from the Joint Venture Entity - the Joint Venture Entity. The period in dispute is from October, 2008 to March, 2013 - applicability of circular No. 179/5/2014-S.T., dated 24/9/2014 issued by Tax Research Unit of CBIC in F. No.354/187/2013-TRU - HELD THAT:- A perusal of the joint venture agreement indicates that out of the net collections from the clients (after deducting the winning amounts), these are settled, by paying 55% to M/s GGCPL and 45% to M/s BAPL. Upon analysis and scrutiny of the joint venture agreement, including the terms and conditions mentioned therein, the adjudicating authority by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. In conclusion, he had dropped the demand of service tax raised in respect of Business Auxiliary Service . This precise issue of retaining certain amount by a hospital towards the necessary infrastructure facilities provided by it to the doctors who render medical services, for which the patients are charged as fees, and the total fees paid are settled between the hospital and doctors at the ratio of 22:78 had come up for consideration earlier before two benches of the Tribunal in the case of M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [ 2020 (11) TMI 536 - CESTAT NEW DELHI ]. The demand of service tax for which show cause notice dated 17/4/2014 was issued to the respondent relate to taxable service provided or to be provided, to a client by any person in relation to business auxiliary service under Section 65(105) (zzb) of the Finance Act, 1994. From the legal provisions on taxable service relevant to this case, joint venture agreement, the clarification issued by CBIC and the various decisions cited on the issue as discussed above, it transpires that there is no involvement of two persons, to execute the terms of agreement; one is to be considered as service provider and other to be service receiver - by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver, between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. He has further held that the agreement specifically provides that the profit/loss arising out of the business should be shared by both sides. Thus, service tax liability cannot be fastened on the respondent - appeal of Revenue dismissed. 2023 (5) TMI 1025 Denial of CENVAT credit - service tax paid on hotel halls booked for business activity and hotel stay expenses - Nexus with output services (of market research) - HELD THAT:- The show cause notice was issued by Revenue for denial of CENVAT Credit on above stated input services. Since, the show cause notice was issued by Revenue, burden of proof was on Revenue to establish that the hiring of halls and hotel rooms had no nexus with the output services. Whereas the finding as recorded by both the original and appellate authorities did not indicate that the burden of proof is discharged by Revenue. Both the Order-in-Original and Order-in-Appeal in the present matter are not sustainable. The above stated two activities are input services for the appellant for providing output services of market research and, therefore, service tax paid on above stated input services is admissible to the appellant for CENVAT Credit - appeal allowed. 2023 (5) TMI 1024 SEZ unit - Refund claim - SEZ units are not liable for payment of service tax on the input services as per various notifications issued by the Government of India - input services or not - Renting of Immovable Property Services - Club Association Membership Services - Waste Management Services - nexus with output services or not - Cleaning Services - Event Management Services - Business Support Services - supporting documents i.e. invoices / details not submitted - Common / shared input services utilised at both the premises i.e. within the SEZ and outside SEZ. Contention that Renting of Immovable Property Services, Club Association Membership Services and Waste Management Services are not included in the list of specified services approved by SEZ authorities - HELD THAT:- The competent authority under the SEZ Act, i.e. the Development Commissioner after consideration of the facts and circumstances of the case of the appellants, had included all those disputed services in the list subsequently approved by him. However, such approved list was not examined by the authorities below and the refund applications were not considered favourably by them - Since, the relevant factual aspects are required to be examined at the Original stage, the matter should go back to the Original Authority for examination of the approved list subsequently issued by the Development Commissioner and also to examine the judgements delivered on this ground by the judicial forums. Denial of the refund benefit on the ground that certain services have no nexus with the output service - HELD THAT:- The authorities below have not specifically denied the fact that the appellant is operating as a SEZ unit for manufacture of electronic motor and such operations were as per the guidelines framed under the SEZ policy. In other words, there is no contra findings by the authorities below that the appellants are also engaged in the business of supplying the manufactured goods within the Domestic Tariff Area (DTA ). Thus, under such circumstances, since the entire goods were manufactured by utilizing the disputed services, the nexus between the input and the output services cannot be questioned by the refund sanctioning authority. However, the original authority had not examined or recorded any findings on the issue whether, the appellants have sold some goods within the DTA as a different unit. Therefore, on the ground of co-relation between the input service and the exportation of goods under the SEZ, the matter has to be verified again at the original stage. Non-submission of the documents for claiming the refund benefit - HELD THAT:- Learned Advocate appearing for the appellant submitted that all those documents are available with the appellants and the same can be submitted by them before the original authority for proper verification. Since, the appellants accept the facts that they have relevant documents in their possession, and for proper examination of those documents, the matter should also be remanded back to the original authority. Appeal allowed by way of remand. 2023 (5) TMI 1023 Refund claim - doctrine of unjust enrichment - Period of limitation - freight inward and freight outward for the period pertaining to April 14 to March 2015 - service tax paid on transportation of Chemical Fertilizer from the different buyers and transported the same by Road to their Pulgaon Factory and the same type of transporting is Exempt Under Notification No- 25/2012 - HELD THAT:- Undisputedly the refund claim has been filed by the appellant much beyond the prescribed period of limitation as per the Section 11 B of the Central Excise Act, 1944 as made applicable to the cases of Service Tax by Section 83 of the Finance Act, 1994. The finding recorded by both the authorities, on this aspect cannot be said to be perverse and should not be interfered with. The impugned order has relied upon series of the decision rendered in the matter by various authorities, which support the view taken. A part of refund claim has been rejected by the impugned order on the ground of time bar on the reasoning similar to one which was adopted. As it is upheld that impugned order there recording the finding on the issue of time bar which is identical in the present cases this order needs to be upheld on this issue. In case of COMMISSIONER OF CUSTOMS (IMPORT) , MUMBAI VERSUS M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT ], a five judges bench of Hon ble Supreme Court has held that Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification and When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. In view of the decision of the Hon ble Apex Court, interpreting an exemption notification, in strict manner so as to deny inadmissible refund claimed in respect of service tax paid on the inward transportation service cannot be faulted with. Accordingly the impugned order to the extent it hold that refund claim in respect of inward transportation service is inadmissible cannot be faulted with. It is now settled law that all the refund claims need to be examined as per the provisions of the section 11B and it is for the claimant to establish that the burden of the tax paid has not been passed on to the consumer of the goods or services. In case the claimant fails to establish the same the refund even if admissible needs to credited to Consumer welfare Fund. Hon ble Supreme Court has in case of MAFATLAL INDUSTRIES LTD. VERSUS UNION OF INDIA [ 1996 (12) TMI 50 - SUPREME COURT ] has held that Where the petitioner-plaintiff has suffered no real loss or prejudice, having passed on the burden of tax or duty to another person, it would be unjust to allow or decree his claim since it is bound to prejudicially affect the public exchequer. In case of large claims, it may well result in financial chaos in the administration of the affairs of the State. Both the authorities have after consideration of the facts on recorded have arrived at the finding that the burden of the tax claimed as refund has been passed on by the appellant to their consumers. The finding recorded by both the authorities, on this aspect cannot be said to be perverse and should not be interfered with. The impugned order has relied on the cost accountant certificate to hold that the burden of the tax paid has been built in the price to the end consumer. The cost accountant certificate supports the view taken. Once the burden of the tax paid has been passed on to the consumer, the admissible refund needs to be credited to consumer welfare fund as has been held in the impugned order. Appeal dismissed. Central Excise 2023 (5) TMI 1022 Clandestine Removal - shortage of stock - Demand of differential value of the stock - various differences in the physical stock of finished/semi-finished goods shown in their statement when compared with the adjusted RG-1 opening balance of stock of finished/semi-finished goods for the years 2001-02, 2002-2003 and 2003-2004 - validity of SCN - parameters relied upon by the authorities in the show-cause notice and the parameters relied upon by the learned Commissioner are at variance - HELD THAT:- The show-cause notices though demanded duty beyond the normal period fail to invoke proviso to Section 11A but the learned Commissioner in his impugned order invoked proviso to Section 11A and imposed penalty under Section 11AC which is beyond the scope of show-cause notices. In this regard, the Hon ble Supreme Court in case of COMMR. OF CENTRAL EXCISE CUSTOMS, SURAT VERSUS M/S SUN PHARMACEUTICALS INDS. LTD. ORS. [ 2015 (12) TMI 670 - SUPREME COURT] has held that the genuineness of the price at which the physician samples were sold by the assessee to the distributors was not even doubted. It is only on the ground that the goods were not actually sold by the distributors to the physicians, which was the ground on which it was contended that the case was not covered under Section 4(1)(a). The Commissioner in present case has held that In fact, the genuineness of the price at which the physician samples were sold by the assessee to the distributors was not even doubted. It is only on the ground that the goods were not actually sold by the distributors to the physicians, which was the ground on which it was contended that the case was not covered under Section 4(1)(a) - further they held that In the instant case, discrepancies between the accounts (RG1) and the audited accounts have been noticed in respect of closing stocks. Since it is inherent from the very nature of estimation of stocks in steel factories that there will be variations between what is reflected in the RG1 and what is actually found, no malafide can be attributed in the discrepancies or inaccuracies found between the two figures which are based on estimates. In the absence of any mala fide, confiscation of goods found in excess stock and imposition of penalty is not warranted. In spite of these observations, he proceeds to impose invoke proviso to section 11A and impose penalty under Section 11AC which is legally not sustainable. The appellant s in their own case reported in STEEL AUTHORITY OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., MYSORE [ 2005 (10) TMI 181 - CESTAT, BANGALORE] , the Tribunal has held that the discrepancy between the RG1 stock and the physical stock are based on the estimated production and not on actual weighment. Comparison between two estimations is inherently inaccurate. Because of these shortages, if any, is inflated due to errors in taking opening balance and physical stock. Considering the practical difficulties in estimating the actual stock and in view of the submissions made by the appellant, the Tribunal had set aside the impugned order. In the case of ROURKELA STEEL PLANT [SAIL] VERSUS COMMISSIONER OF C. EX., BHUBANESWAR [ 2000 (7) TMI 726 - CEGAT, KOLKATA] , the Tribunal had held that even if there are differences in the stock taking and the shortages are found, the duty can be demanded only when they are removed from the factory. The findings on the clandestine manufacture and removal cannot sustain against the appellants as Revenue has not provide any proof of clandestine removal. Accordingly, demand was set aside. In the present appeal also even if the shortages are to be accepted, there is no iota of evidence either in the show-cause notices or in the impugned order to prove that these goods were clandestinely removed. The demands are set aside and accordingly, penalty is also set aside - Appeal allowed. 2023 (5) TMI 1021 Maintainability of appeal - appeal dismissed on account of non-deposit of the pre-deposit amount of 7.5% as required - reversal of CENVAT Credit - wrongful availment of CENVAT Credit on input services - HELD THAT:- The appellant has now deposited the mandatory pre deposit of 10% of the disputed amount. Since the appeal has been dismissed by the Commissioner (Appeals) only on the ground that the mandatory pre-deposit of disputed amount was not complied with by the appellants at the time of filing the appeal, the said compliance has been made by the appellant and thus the requisite pre deposit has been deposited, It would, therefore be in the interest of justice that the appeal is remanded back to the Commissioner (Appeals) to be considered on merits, more so as the stand taken by the appellant is that the issue on merits is covered by the decision of the Apex Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT ]. The appeal is allowed by way of remand to the Commissioner (Appeals) to be heard on merits. 2023 (5) TMI 1020 Scope of SCN - Setting a new case which travelled beyond the SCN - Levy of Excise Duty - activity of flock printing done with the aid of power operated machine - process amounting to manufacture or not - HELD THAT:- From the order of the CESTAT remanding the matter to the original authority, it is evident that the matter was remanded with specific direction to determine the correct classification under heading 5907 after consideration of the Chapter Note 5(c) to the Chapter 59 of the Central Excise Tariff. Original authority has clearly observed that the said chapter note was applicable in the case and the goods were not classifiable under chapter 5907. Having done so he should have dropped the demand which was made under heading 5907.12. However without assigning any reason he determines the classification under Chapter 54 suo motto without putting the appellant to notice - the submissions made by the counsel for the appellants, that adjudicating authority was barred from setting out a new case which travelled beyond in show cause notice agreed upon. Impugned order in most mechanical manner confirms the findings recorded by the original authority without giving any thought or reason - there are no merits in the impugned order - appeal allowed.
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