TMI Tax Updates - e-Newsletter
June 15, 2023

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy FEMA Service Tax Central Excise Indian Laws

TMI Short Notes

1. Manner of disposal of application for advance ruling under Income Tax Act, 1961

  Income Tax:

Articles

1. GLOBAL MINIMUM TAX SERIES - Guidance on Rebasing monetary thresholds in the Globe Rules

   By: Amit Jalan

2. GST ITC available on Taxable Works Contract Services for Construction of Hotel Building

   By: Bimal jain

3. SETTLEMENT COMMISSION - CUSTOMS AUTHORITY?

   By: DR.MARIAPPAN GOVINDARAJAN

4. Cash-credit account cannot be attached by Revenue being not debt

   By: Bimal jain

News

1. 2-Factor Authentication mandatory for taxpayers with AATO above Rs.100 crore from 15th July 2023

2. India’s seafood exports touch an all-time high in FY 2022-23; grow 26.73% in quantity terms and 4.31% in value terms over FY 2021-22

3. Central Banking in Uncertain Times: The Indian Experience (Opening Plenary Address by Shri Shaktikanta Das, Governor, Reserve Bank of India - June 13, 2023 - Delivered at the Summer Meetings organised by Central Banking, London, UK)

4. WPI maintains the declining trend; falls to -3.48% in May, 2023

5. CCI approves acquisition of certain shareholding in Ambit Private Limited by Daiwa International Holdings Inc.

Notifications

DGFT

1. 11/2023 - dated 14-6-2023 - FTP

Amendment in Import Policy and Policy Condition of Copra under ITC (HS) Code 12030000 of Chapter 12 of ITC (HS), 2022, Schedule-I, Import Policy

GST - States

2. 4/2023 - State Tax (Rate) - dated 5-6-2023 - Jharkhand SGST

Amendment in Notification No. 2/2017-State Tax (Rate), dated the 29th June, 2017

3. 2/2023 – State Tax (Rate) - dated 5-6-2023 - Jharkhand SGST

Amendment in Notification No. 13/2017-State Tax (Rate), dated the 29th June, 2017

4. 1/2023 – State Tax (Rate) - dated 5-6-2023 - Jharkhand SGST

Amendment in Notification No. 12/2017-State Tax (Rate), dated the 29th June, 2017

5. 24/2022 - State Tax - dated 1-6-2023 - Jharkhand SGST

Jharkhand Goods and Services Tax (Fourth Amendment) Rules, 2022

6. 22/2022-State Tax - dated 1-6-2023 - Jharkhand SGST

Jharkhand Goods and Services Tax (Third Amendment) Rules, 2022

7. 21/2022 – State Tax - dated 1-6-2023 - Jharkhand SGST

Seeks to extends the due date for furnishing the return in FORM GSTR-3B for the month of September, 2022 till the 21st day of October, 2022

8. G.O. Ms. No. 4 - dated 19-5-2023 - Puducherry SGST

Amnesty scheme for deemed withdrawal of assessment orders issued under Section 62 of Puducherry Goods and Services Tax Act, 2017

Circulars / Instructions / Orders

Indian Laws

1. 01/2023 - F. No. 1080/05/DLA/SC/2023/2110-2150 - dated 16-5-2023

Briefing of Law Officers, Advocates, Counsels & DRS in cases pending before the Hon'ble Supreme Court and CESTAT

GST - States

2. GST-02/2023-24 - dated 23-5-2023

Generation and quoting of Document Reference Number (RFN) on communication /document pertaining to search and inspection

GST

3. Instruction No. 03/2023 - dated 14-6-2023

Guidelines for processing of applications for registration

DGFT

4. 14/2023 - dated 14-6-2023

Amendment in Appendix 2X of FTP, 2023

Customs

5. Public Notice No. 37/ 2023 - dated 18-4-2023

Consolidated instructions for granting manual Out of Charge of import consignments where duty is not being reflected in ICES after payment- reg.

6. Public Notice No. 28/2023 - dated 6-4-2023

Clearance of import consignments where duty is not being reflected in ICES after payment- reg.

7. PUBLIC NOTICE NO. 26 /2023 - dated 29-3-2023

Clarification for separate registration required in respect of First time import and First time export at JNCH-reg.

Highlights / Catch Notes

GST

• GST Applies to Demo Car Transfers Over Rs. 50,000 Between States, Even Without Sale, per Rule 138(1.

  Case-Laws - HC : Levy of GST on movement of Demo Car from one state to another - Movement of a goods exceeding the value of Rs.50,000/- - Failure to furnish mandatory information in Form-A GST, EWB-01 as per Rule 138(1) of GST Rules - Even is the supply is not sale or no financial consideration involved, the transactions is liable to GST - HC
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Income Tax

• Dispute Over Arm's Length Price: Lack of Clarity in Foreign Language Debit Notes Leads to Confusion in Transfer Pricing.

  Case-Laws - AT : TP Adjustment - computing the Arm's Length Price (ALP) - any other method - We fail to understand that how the lower authorities have reached at a conclusion on the 3 Sample debit notes which are in a foreign language. Assessee has also not narrated the facts properly that how the above expenditure cross-charged to the assessee company by its associated enterprises. Even the complete breakup of the expenditure showing the nature of expenditure was also not submitted. - AT
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• Time Charter Vessel Receipts Not Taxable as Royalties u/s 9(1)(vi), ITAT Rules; Control Remains with Owner.

  Case-Laws - AT : Taxability of receipts on hire of vessel on a time charter basis - Royalty receipts u/s 9(1)(vi) - Addition on the ground that Charter has option of making structural alterations to the vessel and therefore, the charterer has specific control upon the vessel for its business activities. - ITAT dismissed the argument, as the clause also stated that the vessel would be returned to its original condition at the charterer's expense and the repairs could also be undertaken by the assessee. Therefore, the vessel was under the exclusive control and command of the assessee throughout the operation, navigation, and management. - AT
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• Penalty for Not Submitting Tax Audit Report u/s 271B; Notice Issued Post Assessment for FY 2012-2013.

  Case-Laws - AT : Penalty u/s 271B - Failure to furnish Tax audit report - Period of limitation - notice for the said year was issued only on the conclusion of the assessment u/s.147 r.w.s. 143(3) - The assessee may not have filed the return for a particular year, as infact is the case for AY 2012-2013, so that the fact of non-furnishing the audit report u/s.44AB would not come to the notice of the Revenue. It is presumably for such like reasons that the Legislature had deemed it fit not to prescribe any time limitation for the issue of the said notice. Once commenced, the proceedings though are to be concluded within prescribed time. - AT
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• Supreme Court Upholds CIT Revision u/s 263 Despite Lack of DIN in Show Cause Notice.

  Case-Laws - AT : Revision u/s 263 by CIT - Notice issued u/s 263 not accompanied with DIN (Document identification number) - As explained by the Hon'ble Apex Court per a series of decisions, that a show cause notice is not a concomitant of the proceedings u/s. 263. - Both these attributes of putting the assessee to notice as well as extending due opportunity of hearing, are met in the instant case - Revision proceedings sustained. - AT
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• Tax Officer's Rejection of Cotton Exporter's Books Overturned Due to Lack of Specific Defects and Industry Margin Variations.

  Case-Laws - AT : Addition on account of low GP - cause and effect relationship between the defect found by the AO and the addition made - AO rejected the book results as unreliable, but as rightly pointed out by the Ld.CIT(A) no specific defect has been pointed out by the AO in the books of the assessee. CIT(A) rightly said that the AO has failed to take note of the business circumstances in which the assessee operates, being an exporter of cotton garments wherein he has noted there is wide variation in margins. - CIT(A) rightly deleted the additions - AT
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• Court Rules No Notice Needed u/s 143(2) for Non-Compliant Manual Return in Income Escaping Assessment Case.

  Case-Laws - AT : Validity of Income Escaping assessment u/s 147 - notice u/s 143(2) was not issued - the assessee has not filed the return as required under the Income-tax Act on the online portal and the manual return filed by the assessee is no return in terms of the Income Tax Rules, 1962, the ld. Assessing Officer was not required to issue any notice u/s 143(2) - AT
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• Tax Residency Certificate Challenges in India: Implications for India-Mauritius DTAA and Foreign Investment Policy u/s 263.

  Case-Laws - AT : Revision u/s 263 - Income taxable in India - evidence of residence - TRC produced by a resident of a contracting state - benefits under India- Mauritius DTAA - the Revenue’s attempt to question and to behind the TRC is wholly contrary to the Government of India’s consistent policy and repeated assurances to Foreign Investors. - AT
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• Court Adjusts Net Profit Rate for Kachha Arahtiyas to 1.5% u/s 44AB, Overturning Assessing Officer's 5% Rate.

  Case-Laws - AT : Estimation of income on Cash Deposited in Bank Account - Kachha Arahtiya - Estimation of Net Profit (NP) @ 5% instead of 1% as claimed by the assessee - so far as kachha arahtias are concerned, the turnover does not include the sales affected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB - it would be justified to apply a net profit rate of 1.5% as against 5% applied by the AO, on the Total Turn Over estimated - AT
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• Section 2(22)(e): Deemed Dividend Rules Exclude Loans to Non-Shareholders & Require Dual Shareholder Status.

  Case-Laws - AT : Deemed dividend u/s 2(22) - Treating loan to a non shareholder as deemed dividend - If a person is a registered shareholder but not the beneficial then the provision of section 2(22) (e) will not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the first limb of the provisions of section 2(22)(e) will not apply. - AT
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Customs

• Petitioner Denied Export Benefits Due to Customs Delay in Data Entry, Relief Possible Under Foreign Trade Policy Para 2.58.

  Case-Laws - HC : Denial of legitimate export benefits in the nature of Merchandize Exports from India Scheme - Details of exports were entered in the portal of the DGFT with 2 months delay by the jurisdictional Customs officer - The respondents does not dispute the entitlement of the petitioner for grant of MEIS benefit - It appears that the case of the petitioner could be considered for granting appropriate relief under para 2.58 of the Foreign Trade Policy. - HC
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• Valuation for Countervailing Duty on imported adhesives must use Maximum Retail Price per Section 4A, Central Excise Act.

  Case-Laws - AT : Method of Valuation for payment of CVD - transaction value or MRP based value - There are no reason to differ with the decision of the lower appellate authority on the issue of including the imported adhesives for the purpose of collection of CVD on the basis of retail sale price in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act, 1944 - AT
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• Export Goods Overvaluation: Confiscation and Penalties Upheld Under Customs Act Sections 113(h), (i), (ia) & 114(iii.

  Case-Laws - AT : Valuation of export goods - overvaluation - a careful reading of the orders of the lower adjudicating authorities indicate that there is mis-declaration of the value of the export goods thereby contravening the provisions of the Customs Act and Rules made thereunder. So, we cannot find fault with the orders of the original adjudicating authority in holding the goods liable for confiscation under Section 113(h), (i) and (ia) of the Customs Act, 1962 or for imposition of penalty under Section 114 (iii) of the Act ibid. - AT
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• Industrial Solvent Import Confiscation Upheld, Pending Overseas Chemical Analysis Confirmation; Not Absolute Confiscation Yet.

  Case-Laws - AT : Absolute confiscation - Import of industrial composite solvent - prohibited goods - There is no allegation that the import was not bona fide and the Appellant knowingly imported kerosene in the guise of Industrial solvent not for use in their factory but for sale. But, simultaneously, it cannot be ignored that that on the basis of the re-test reports the goods are liable for confiscation and ground for imposition of penalty, till further test of the samples resulting into confirmation of the overseas chemical analysis report - the goods are liable for confiscation but not absolute confiscation as held by the adjudicating and upheld in the impugned order. - AT
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FEMA

• Appellants Prove Compliance with Section 18(3) of FERA 1973 by Taking Reasonable Steps to Recover Export Payments.

  Case-Laws - HC : Non-realization export proceedings of goods - convertible foreign exchange - Reasonable steps u/s 18(3) of FERA - The appellants adequately explained the steps taken by them to receive or recover the payment of the goods exported. The steps taken by the appellants in filing a suit and obtaining a decree thereon within the extended period is a reasonable step taken to receive and recover the payment of the goods exported within the meaning of Section 18(3) of the Act of 1973. Such facts rebut the statutory presumptions of Section 18(3) of the Act of 1973. - HC
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Indian Laws

• Defendants' Argument on Dishonored Cheques Rejected; Precedent in Motilal Laxmichand Salecha HUF Case Applied.

  Case-Laws - HC : Dishonour of Cheque - Insufficient Funds - the Defendants have not denied issuance of the said cheques but have only attempted to contend that the same were for return of investments and not loans. That argument is not open to the Plaintiff anymore in view of the ratio laid down in the case of Motilal Laxmichand Salecha HUF. Thus even on merit the Defendants’ contentions are untainable and devoid of merit. - HC
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• High Court Quashes Summoning Order: Cheque Dishonor Due to Moratorium and IRP Letter Invalidates Cashing.

  Case-Laws - HC : Dishonour of Cheque - in view of the moratorium, the cheques were incapable of encashment - prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter. As a result, the cheques became incapable of encashment. - The petition is allowed and the summoning order is quashed. - HC
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Service Tax

• Appellant Penalized u/s 72 for Failing to Submit Documents, Confirmed Service Tax Demand by Department.

  Case-Laws - AT : Best Judgement Assessment - It was incumbent upon the appellant to make available all the relevant documents to the Department even prior to the issuance of the show cause notice but that was not done and even in reply to the show cause notice no evidence had been produced by the appellant which may indicate that the service tax collected by the appellant, had been deposited with the Department. The only course open to the Department was to have initiated proceedings u/s 72 of the Finance Act and it did - Demand with penalty confirmed - AT
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Central Excise

• Refund Claim Denied: Tribunal Cites Unjust Enrichment Doctrine as Duty Burden Passed to Buyers via Invoices and Records.

  Case-Laws - AT : Refund claim - Duty paid under protest - Doctrine of unjust enrichment - Dispute relating to classification was resolved in favor appellant assessee - The tribunal found that the burden of duty had been passed on to the buyers based on the examination of the appellant's books of accounts and invoices. - Therefore, the appellant's refund claim was dismissed, as it was hit by the principles of unjust enrichment. - AT
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• Trade Discount Not Included in Transaction Value for Excise Duty u/s 4; No Flow Back Proven.

  Case-Laws - AT : Valuation - Nature of discount offered to Distributors and not to other buyers - Section 4 essentially seeks to accept different transaction value which may be charge by an assessee from it different buyers - It is found that since the sale invoice which have been issued to the distributors by the appellant offering 15 % discount is normally a trade discount and the department has failed to discharge its responsibility to establish that there has been any flow back of consideration from buyer to the appellant. - Value not to be added - AT
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Case Laws:

• GST

• 2023 (6) TMI 579
  Cancellation of GST registration of petitioner - non-supply of relevant reasons and material while proposing cancellation of registration - denial of reasonable opportunity of defending himself and replying to the show cause notice thereby breaching the rule of natural justice (audi alteram partem). HELD THAT:- Affording of opportunity of being heard is a pre-condition for exercising the power of cancellation of registration. The expression opportunity of being heard has been explained time and again by various decisions of the Apex Court as well as this Court and other High Courts. Reverting to the facts herein, it is obvious at first glance that the show cause notice did not contain sufficient reasons to enable the assessee-petitioner to file a reply and, therefore, reasonable opportunity of being heard was denied to the petitioner. By saying that the registration has been obtained by fraud/wilful misstatement/suppression of facts, is not sufficient. Such terms need to be supported by reasons as to why, how and under what circumstances the registration was obtained by fraud/wilful misstatement/ suppression of facts. More so, such reasons ought to be supported by at least some fundamental supporting material, which, in the instant case is conspicuously missing. This Court has no manner of doubt that the impugned show cause notice dated 28.01.2022 (Annexure P/2) and the consequential order of cancellation of registration dated 11.02.2022 (Annexure P/4), rejection of application for revocation of cancellation of registration dated 30.03.2022 and the appellate order dated 13.06.2022 (Annexure P/9) are vitiated in law for being vague and having been issued in violation of principles of natural justice ( audi alteram partem ). The impugned order of cancellation of registration dated 11.02.2022 (Annexure P/4), the order of rejection of application for revocation of cancellation dated 30.03.2022 and appellate order dated 13.06.2022 (Annexure P/9) are quashed - petition allowed.

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• 2023 (6) TMI 578
  Levy of GST - supply or not - bringing of demo vehicle into the State of Madhya Pradesh - financial consideration is involved or not - HELD THAT:- Bare perusal of the relevant statutory rule i.e. Rule 138(1)(ii) makes it clear that the causing of movement of a goods exceeding the value of Rs.50,000/- even for the reasons other than supply, makes it incumbent upon the supplier to inform about the supply of goods in Form-A GST, EWB-01 electronically on the common portal alongwith other information as required. It is not disputed at the Bar that no such information as mandatory in Rule 138(1) of GST Rules, was given by the petitioner supplier. It is obvious that in the absence of information given, the entry of demo car into the State of Madhya Pradesh renders it exigible to GST - This Court does not find any fault or jurisdictional error in the order of appellate authority dated 23.12.2019 - Petition dismissed.

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• Income Tax

• 2023 (6) TMI 577
  TP Adjustment - international transaction for reimbursement of expenses, which has been determined by the assessee to be at arm s-length price by adopting any other method - AO determined the ALP at Rs. Nil for the reason that assessee has failed to furnish the requisite details with respect to the actual rendition of the services, benefit derived by the assessee and services are rendered not duplicative in nature - HELD THAT:- On perusal of the debit memos, we find that the narration of the services are in a foreign language. Except the address of the assessee and the amount in Euro, everything else is in foreign language. The three invoices/debit notes shows that two debit notes are of Euro 9225, and one debit note of Euro 11,118. The English words in the debit notes refers to the Microsoft and SAP details for three quarters. The two quarters pertaining to 2017 and first quarter of 2018. The details are not also supported by any agreement. We fail to understand that how the lower authorities have reached at a conclusion on the 3 Sample debit notes which are in a foreign language. Assessee has also not narrated the facts properly that how the above expenditure cross-charged to the assessee company by its associated enterprises. Even the complete breakup of the expenditure showing the nature of expenditure was also not submitted. Set-aside ground back to the file of the learned transfer pricing officer with a direction to the assessee to substantiate the nature of such expenditure, and how such expenditure have benefited to the assessee. The learned TPO may examine the same and decide the issue afresh in accordance with the law. Disallowance of foreign exchange losses - DRP upheld the disallowance holding that there is no evidence submitted by the assessee that the expenditure of foreign exchange loss is allowable as business expenditure HELD THAT:- Additional evidence furnished by the assessee shows that the assessee submitted description of expenditure, foreign currency in which transaction was incurred, amount of expenditure in foreign currency, date of booking, exchange rate used on date of booking, amount of expenditure booked in Indian rupee, date of actual payment, exchange rate on date of payment, resultant foreign exchange gain or loss, landed cost number, invoices number, vendor details and bank payment reference. All these details conclusively shows that the assessee has incurred foreign exchange loss during the course of business transaction. Without examining these details, it is unfair to treat the expenditure incurred on foreign exchange loss by the assessee as non business expenditure - we set-aside the whole issue back to the file of the learned assessing officer with a direction to examine the claim of the foreign exchange loss incurred by the assessee. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (6) TMI 576
  Taxability of receipts on hire of vessel on a time charter basis - Royalty receipts u/s 9(1)(vi) - services rendered for the use of industrial, commercial or scientific equipment - HELD THAT:- We find that in assessee s own case in Smit Singapore Pte Ltd. [ 2020 (11) TMI 415 - ITAT MUMBAI] held that the receipts on hire of vessel, viz Smit Borneo, on time charter basis to Leighton India Contractors Private Limited is not in the nature of Royalty as per Article 12 of the India Singapore DTAA. Also see assessee own case for the assessment year 2015-16 [ 2021 (8) TMI 329 - ITAT MUMBAI] . Nothing has been brought on record to show that during the entire operation, navigation and management of the vessel, it was not in exclusive control and command of the assessee. The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decisions of the coordinate bench of the Tribunal for the preceding assessment years. Decided in favour of assessee. Taxability of reimbursement of expenses - Once the main receipt, i.e. pertaining to chartering of vessel has been held to be not a Royalty, the reimbursement of expenses in relation to the same agreement cannot be held to be taxable as Royalty, in the present case, as the AO is also of the view that the receipts are intricately linked to the chartering income. Accordingly, the addition on account of reimbursement of expenses is deleted. Decided in favour of assessee.

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• 2023 (6) TMI 575
  Disallowance u/s 14A - Scope of amendment of section 14A - retrospectivity - assessee incurred interest expenditure in respect of the amounts that were used for making investment also - CIT(A) relied upon the amendment to section 14A of the Act by insertion of explanation by Finance Act, 2022 - HELD THAT:- In the case of Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] considered the effect of amendment made by the Finance Act, 2022 to section 14A of the Act by insertion of a non obstante clause and explanation after the proviso, subsequent to the decision of the Hon ble Delhi High Court in the case of PCIT vs. IL FS Energy Development Co. Ltd. [ 2017 (8) TMI 732 - DELHI HIGH COURT] analysed the same in the light of the decision in the case of Sedco Forex International Drill. Inc. vs. CIT [ 2005 (11) TMI 25 - SUPREME COURT] reiterated in M.M. Aqua Technologies Ltd. [ 2021 (8) TMI 520 - SUPREME COURT] and held that the amendment of section 14A of the Act which is for removal of doubt cannot be presumed to be retrospective even where such language is used, if it alters or changes law as it earlier stood. Thereupon the Hon ble High Court followed the decision of IL FS Energy Development Co. Ltd., (supra) and concluded that no disallowance u/s 14A of the Act can be made if the assessee had not earned any exempt income during the year under consideration. Hon ble High Court, however, was pleased to clarify that the orders passed in the case of Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] shall abide by the final decision of the Hon ble Supreme Court in the SLP filed in the case of IL FS Energy Development Co. Ltd., (supra). We are not in agreement with the submissions made on behalf of the Revenue that since the Tribunal at Hyderabad is not bound by the decisions of the other Hon ble High Courts, the findings of the learned CIT(A) following the provisions of law has to be upheld. As pertinent to note that learned CIT(A) himself followed the decision in the case of Williamson Financial Services Limited [ 2022 (7) TMI 451 - ITAT GAUHATI] In the absence of any decision of the Hon ble jurisdictional High Court/Hon ble Supreme Court, the decisions of other Hon ble High Courts will constitute the binding precedent to be followed by the Tribunal. Decided in favour of assessee - orders now passed in this appeal shall abide by the final decision of the Supreme Court in the SLP filed in the case of IL FS Energy Development Co. Ltd., (supra).

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• 2023 (6) TMI 574
  Penalty u/s 271B - assessee having not furnished the audit report before the specified date, as required by sec.44AB - delayed receipt of audit report under the Kerala Act - HELD THAT:- Nothing on record to exhibit the stated dates of receipt of the audit reports under the Kerala Act. Two, even granting so, the said information may not by itself be complete, and would require being supplemented by the date/s of making available the books of account to the Auditor for audit. Delay therein, extent of which is not known, could certainly not be attributed to the Auditor. Be that as it may, there is no explanation for the admitted delay of six years and over six months beyond the stated dates of receipt for the two successive years respectively. Infact, the said explanation would carry weight only where the tax audit report in the prescribed form, duly signed and verified, as required by sec.44AB, had been furnished by the assessee by the specified date, further furnishing the audit report received from the Registrar soon after its receipt in July, 2013 and December, 2017, respectively. The law has been amended since 01.7.1995, effectively delinking the furnishing of the said report from furnishing the return of income, requiring the assessee to, instead, furnish along with the return of income a proof of furnishing the said report earlier. Inasmuch as we have, for the reasons stated above, found the assessee s explanation not tenable, we do not insist on it furnishing material to bear out its case. Infact, a similar plea, i.e., the delayed receipt of audit report under the Kerala Act, was found not acceptable by the Hon ble jurisdictional High Court in Peroorkkada SCB Ltd. [ 2020 (1) TMI 624 - KERALA HIGH COURT ] The argument that the audit reports were available with the AO at the time of assessments, is, neither here nor there. As stated of the delinking of the requirement of furnishing the audit report from that of the return of income. It is the non-furnishing of the audit report in time, as opposed to the return of income, that constitutes the default u/s. 44AB, providing for penalty where the same is not shown to be due to a reasonable cause. How the information furnished per an audit report is used by the Revenue is only it s concern. Notice u/s.271B r.w.s. 274 was issued only on 19.11.2019, i.e., much after the end of the relevant assessment year, questioning thus the validity of the said notice on the basis of the time of its issue - We find no such restriction either u/s.271B or u/s.274. That apart, notice for the said year was issued only on the conclusion of the assessment u/s.147 r.w.s. 143(3) on 19.11.2019, as we find the case to befor AY 2017-2018. That is, for both the years,s.274 notice stands issued within a reasonable time of the conclusion of the assessment proceedings. The assessee may not have filed the return for a particular year, as infact is the case for AY 2012-2013, so that the fact of non-furnishing the audit report u/s.44AB would not come to the notice of the Revenue. It is presumably for such like reasons that the Legislature had deemed it fit not to prescribe any time limitation for the issue of the said notice. Once commenced, the proceedings though are to be concluded within prescribed time. Decided against assessee.

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• 2023 (6) TMI 573
  Revision u/s 263 by CIT - Notice issued u/s 263 not accompanied with DIN (Document identification number) - Assessment u/s 143(3) - addition u/s 56 - stamp value of the immovable property (IP), being land, acquired by the assessee during the relevant previous year, being higher that the stated purchase consideration and, consequently, the applicability of sec. 56(2)(vii)(b)(ii) of the Act on the said acquisition - HELD THAT:- Notice u/s. 263(1) of the Act, even as observed by the Bench during the hearing, is not a jurisdictional notice. - As explained by the Hon ble Apex Court per a series of decisions, that a show cause notice is not a concomitant of the proceedings u/s. 263. - Both these attributes of putting the assessee to notice as well as extending due opportunity of hearing, are met in the instant case - Revision proceedings sustained. Addition u/s 56 - Purchase of property below the stamp value - the applicability of sec. 56(2)(vii)(b)(ii) of the Act - HELD THAT:-The only enquiry made in assessment with regard to the purchase of land was with reference to the source of investment, i.e., as disclosed, and which was explained by the assessee as by way of withdrawal from his capital in his proprietary firm. There is no whisper of valuation thereof and, accordingly, of it being a case of under-valuation, i.e., with reference to the FMV, to which therefore sec. 56(2)(vii)(b)(ii) of the Act may apply. The failure to make enquiry, where it is prima faice warranted, would make an order of adjudication erroneous and prejudicial to the interests of Revenue, liable for revision u/s. 263 of the Act. Case law in the matter is legion, and toward which the ld. Pr. CIT cites two, i.e., Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] and Raja Co. [ 2010 (10) TMI 575 - KERALA HIGH COURT] . It is then said that purchases do not amount to receipt , and that the matter ought to have been referred by the ld. Pr. CIT to the Valuation Officer (DVO). We are unable to appreciate the import of the said objection. The revisionary autnority has not adjudicated on merits of the matter, but only set aside the assessment, directing the AO to examine it afresh, and decide in accordance with law. All contentions are open for being made before the assessing authority, and the assessee can make out a case of it being, despite apparent, undenied difference in value, not a case of under-valuation or falls under the provisos to the provision. Decided against assessee.

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• 2023 (6) TMI 572
  Deduction u/s. 54F - AO disbelieved the Assignment deed as self-serving document entered mainly to justify the untenable claimed u/s. 54F - transfer of lease rights in the said two plots without obtaining the consent from MIDC - HELD THAT:- We note that in the case of Thiruvengada Pillai Vs. Navaneethammal Anr [ 2008 (2) TMI 391 - SUPREME COURT] clearly held that there is no provision in the Indian Stamp Act, 1899 prescribes any expiry date for use of a stamp paper, it is only if the purchaser of the stamp paper has no immediate use can seek refund of the value thereof by surrendering such stamp paper to the Collector. From the deed of Assignment it is clear that the said deed of Assignment entered with M/s. Samsun Industries Pvt. Ltd. anticipating the order of MIDC to transfer the leasehold rights in favour of M/s. Samsun Industries Pvt. Ltd. in pursuance of letter dated 18-03-2015. Therefore, we find the arguments of ld. DR as not acceptable in view of the decision of case of Thiruvengada Pillai (supra) and reject his contention that the stamp paper on which the Assignment deed dated 10-04-2015 was executed as invalid. Within one year criteria prior to purchase of residential bungalow - In the present case, Assignment deed dated 10-04-2015 entered by the assessee with M/s. Samsun Industries Pvt. Ltd. for transfer of his leasehold rights on two plots granted by the MIDC, is valid which is entered in pursuance of his application dated 18-03-2015 which resulted into order dated 16-04-2015 passed by MIDC granting consent to transfer assessee s leasehold rights to M/s. Samsun Industries Pvt. Ltd. if the period reckoned from the date of his application to the MIDC on 18-03- 2015 along with the date of Assignment deed on 10-04-2015 agreeing to transfer said leasehold rights to M/s. Samsun Industries Pvt. Ltd., in our opinion, the assessee s case falls under within one year prior to purchase of residential bungalow on 05-05-2015. Decided in favour of assessee. Addition on account of sundry creditor balances - HELD THAT:- As the assessee filed unsigned reconciliation of purchases with regard to VAT return / manufacturing trading profit and loss account for the F.Y. 2015-16 which shows the purchases as per manufacturing trading account to an extent. Admittedly, this reconciliation, as that of VAT returns of Quarter 1 to 4 (April, 2015 to March, 2016) were not before the AO, therefore, as the additional evidences in the form of Paper Book-II filed before us for the first time and in the interest of justice, we deem it proper to remand the issue to the file of AO to decide the issue afresh in terms of VAT return and reconciliation of purchases with regard to the said VAT return - Decided in favour of assessee for statistical purpose.

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• 2023 (6) TMI 571
  Addition on account of low GP - rejection of books of accounts without pointing out the defects - CIT-A deleted the addition - cause and effect relationship between the defect found by the AO and the addition made - As per revenue assessee had not furnished any specific explanation for fall in GP and the ld.CIT(A) despite the said fact had deleted the addition made - HELD THAT:- There is no coherence in the order of the AO. The defect found by the AO and the addition made by him, we find has no connection at all. AO had found that there were two annexures attached to the tax audit report reflecting two figures of GP for the year. However, he went to reject the books of the assessee and made GP addition on account of absence of any justification given by the assessee for fall in GP ratio in the impugned year, which was 5.7% as opposed to the GP shown by the assessee in the preceding year i.e. 11.14%. Therefore, there is no cause and effect relationship between the defect found by the AO and the addition made by him. AO rejected the book results as unreliable, but as rightly pointed out by the Ld.CIT(A) no specific defect has been pointed out by the AO in the books of the assessee. CIT(A) rightly said that the AO has failed to take note of the business circumstances in which the assessee operates, being an exporter of cotton garments wherein he has noted there is wide variation in margins. CIT(A) has rightly found no basis with the AO for making GP addition @ 2%, which is purely adhoc. No reason to interfere in the order of the ld.CIT(A) deleting the GP addition - Decided against revenue.

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• 2023 (6) TMI 570
  Validity of Income Escaping assessment u/s 147 - notice u/s 143(2) was not issued - ITR not filled on online portal - since the assessee filed the return manually, it was not possible for the revenue authorities to replicate the return on the system and the same was communicated to the assessee vide letter - HELD THAT:- The requirement of notice u/s 143(2) comes into effect only when the assessee has filed the return in compliance to the notice u/s 148 and to carry out the scrutiny proceedings AO should issue notice u/s 143(2) since it is a statutory requirement. In the instant case, the assessee has not filed the return as required under the Income-tax Act on the online portal and the manual return filed by the assessee is no return in terms of the Income Tax Rules, 1962, the ld. Assessing Officer was not required to issue any notice u/s 143(2) of the Act. Thus, Ground No. 1 raised by the assessee is dismissed. Proceedings initiated u/s 147 without application of mind and simply accepting the information without any further enquiry - No merit in this ground of the assessee because once the reasons were issued to the assessee sufficient opportunity was provided to establish the source of credits in the bank account stated in the information received from the Investigation unit - no mechanism for the income tax authorities to examine the fact that the alleged two bank accounts have been disclosed in the regular books of accounts and the credits appearing therein have not be taken into the books for the purpose of calculating the income, thus reopening proceedings were initiated with proper application of mind. Assessee was not provided reasonable opportunity of being heard - Assessee has not filed the financial statement of the sole proprietorship concerns as to whether they have been disclosed in the return of income. No details have been filed about the nature of business being carried out in these two proprietorship concerns and what is the profit being offered in the regular income tax return of such type of receipts. All through the proceedings before the lower authorities and before us, no specific details have been filed except copy of bank statement which does not indicate communication relevant for arriving at the income of the assessee. Thus restore the issue of merits to the ld. CIT(A), before whom, the assessee shall file all the supporting documents to establish that the alleged credits in the two bank accounts are business receipts, all the other entries in the bank account other than credits are also to be explained as to whether they are for purchasing the goods - Appeal of the assessee is partly allowed for statistical purposes.

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• 2023 (6) TMI 569
  Unexplained investment in the shares - Investment was made in shares out of Appellant Salary Income which was earned out of India - CIT(Appeals) dismissed the appeal of the assessee as assessee has not shown that purchase of shares were out of his income earned outside of India and further declined to send the additional evidence filed by the assessee, with respect to purchase and sale of shares on the ICICI direct platform, to AO u/r 46A on the ground that this may not serve any fruitful purpose. HELD THAT:- As during the course of appellate proceedings before Ld. CIT(Appeals), the assessee had sought to file details/statement of ICICI Direct regarding loss on sale of shares on ICICI Direct platform. However, the same was not admitted and referred to the file of AO for his observations. CIT(Appeals) has erred in facts and law in not allowing opportunity of assessee to place on record the relevant facts/information in support of its case. Counsel has also filed certificate from Punj Lloyd to the effect that the assessee was working as General Manager, Malaysia with the aforesaid concern during the period under consideration, and accordingly, the source of investment in the shares of Infosys Tech was duly explained. No addition is called for - Decided in favour of assessee.

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• 2023 (6) TMI 568
  Correct head of income - addition made treating the agricultural income as income from other source - HELD THAT:- This issue has been deleted by the ITAT in assessee s own case [ 2022 (3) TMI 899 - ITAT DELHI] . In the absence of any change in the factual matrix, we hereby delete the addition made by the AO. Unexplained purchase of property - Addition on the basis of MoU - Based on MOU found during search for purchase of property no. 9/11 , Nehru Place, Delhi, the AO made addition - HELD THAT:- As MOU relates to A.Y. 2006-07 and not for A.Y. 2007-08 - AY 2006-07 is not covered in the block of six years, since the date of search was 12.02.2013 - AO considered the MOU in A.Y. 2007-08 on the basis of assumption that the MOU to be completed by 19. 06.2006 (A.Y. 2007 -08) - The said MOU was never been finally completed due to dispute between the parties.Case was filed in the Court of Addl. District Magistrate, Saket for execution of agreement to sell and MOU stands cancelled by the Court and hence the same stands null and void. The property in question has not been acquired. Hence, we hold that no amount can be taxed on this ground. Income from Partnership Firm - AO may examine whether the same has already been declared in the regular return of income. Commission Income - CIT(A) confirmed addition made on commission income @ 1.4% on a gross basis. as pleaded that no provision for expenses incurred for earning such income has not been given by the revenue. It cannot be said that the assessee incurred absolutely no expenses for earning such income - HELD THAT:- Keeping in view, the sub- commission payments and other expenses, we determine 1% as the net commission income earned. The assessee gets relief of 0.4% on the commission income determined. Unexplained cash and Jewellery - cash found during the search - location of the cash found - HELD THAT:- No statement of the assessee with regard to the cash found has been recorded u/s 132 (4) and statement recorded of the father of the assessee on day of search itself revealed that the amount pertains to the father and other family members. There was a clear demarcation of the dwelling premises pertaining to the father of the assessee who was a retired Government employee and also earning income from agricultural operations. The issue of income from agricultural operations has already been dealt above. Hence location of the cash found, the statement of father recorded on the date of search, we hold that no addition is called for on account of cash in the hands of the assessee. Jewellery has been separately valued in different names of three family member. The panchnama drawn has also clearly mentioned the fact of ownership of the jewellery with various people. Hence, the addition ought not to have been made in the hands of the assessee and hence, the same is ordered to be deleted. Appeals of the assessee are allowed.

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• 2023 (6) TMI 567
  Revision u/s 263 - Income taxable in India - evidence of residence - TRC produced by a resident of a contracting state - benefits under India- Mauritius DTAA being not a resident for tax purposes because of non-fulfillment of condition of liable to tax criteria - An order erroneous or prejudicial to the interest of the Revenue or not - Two view are possible - whether the income earned by the assessee who is a tax resident of Mauritius, out of the gains on currency derivates and the interest income on bonds is taxable in India or not? - HELD THAT:- The revenue cannot deny the benefit of India-Mauritius Tax Treaty to the assessee which is the assessee is legally entitled to on the strength of TRC issued by the Mauritian Tax Authorities. The Finance Ministry, through a clarification dated 2 March 2013, also clarified that the TRC produced by a resident of a contracting state would be accepted as evidence of residency in that contracting state and the Income-tax Authorities in India would not go behind the TRC and question the TRC holder s resident status. We are also not in agreement with the observation of the ld. CIT that the assessee has about 21 investors who are non-tax resident of Mauritius and hence the assessee is a conduit. What is relevant is whether the assessee company is a taxable entity in Mauritius or not? Observation of the ld. CIT that the assessee has entered in only two transactions in the whole years in G-sec Bonds and few transactions in cash is only a partial truth. In addition to the investments in bonds and exchange traded cash equities, the assessee has large number of exchange traded derivatives transactions. The same can be proved by examination of the contracts notes which have been already provided to CIT. These contract notes reflect transactions of the assessee on MCX, BSE NSE. In addition to the investments in India, the assessee has also invested in LME, CMX, SSE DGCX. Hence, the contention of the ld. CIT that the income earned by the assessee from derivatives is not a business income also cannot be accepted. Thus, receipt is not taxable in India, hence there is no prejudice caused to the revenue and as the result, the order passed of ld. CIT u/s 263 is liable to be obliterated. Decided in favour of assessee.

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• 2023 (6) TMI 566
  Estimation of income on Cash Deposited in Bank Account - Estimation of Net Profit (NP) @ 5% instead of 1% as claimed by the assessee - appellant being a Kachha Arahtiya - Addition made assuming the total cash deposited as turnover without giving the benefit of rotation of funds - HELD THAT:- Appellant is not making independent sale and is only acting as an agent on behalf of the principle. The said contention of the appellant is further proved from the fact that the cash has been deposited at different locations where the buyer is placed and the payment is made to the vendor in Mandi on behalf of buyer. In these circumstances, the turnover of a Kachha Arhtiya would not include the sale consideration and only includes the commission earned by him. CBDT circular No 452 dated 17.03.1986 make it apparently clear that in the case of Kachha Arhtiyas, only the commission has to be considered while working out the turnover, as above. In our view, so far as kachha arahtias are concerned, the turnover does not include the sales affected on behalf of the principals and only the gross commission has to be considered for the purpose of section 44AB. Thus admittedly, the appellant being a Kachha Arahtiya, it would be justified to apply a net profit rate of 1.5% as against 5% applied by the AO, on the Total Turn Over estimated. Levy of penalty u/s 271(1)(b) - non-compliance of notices u/s 142(1) - HELD THAT:- It is settled law that the imposition of penalty u/s 271(1)(b) is not mandatory rather is discretionary provided the appellant proves that there was a reasonable cause for the said failure of non-compliance. In the present case, it was duly informed to the AO that the appellant was not served with any notice u/s 142(1) of the act and moreover, the email id given on the online portal was that of the accountant who was expired on 19.04.2021. The Parliament has used the words may and not shall , thereby making legislative intention clear in as much as that levy of Penalty is discretionary and not automatic. The said conclusion is further justified by Section 273B of the Act which provides that Penalty not to be imposed in certain cases . Thus considering the nationwide COVID Pandemic and death of the account whose email ID was given for correspondence, certainly demonstrate reasonable cause on the part of the appellant assessee for the said non-compliance of notices issued u/s 142(1) - levy of penalties u/s 271(1)(b) set aside. Decided in favour of assessee.

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• 2023 (6) TMI 565
  Reopening of assessment u/s 147 - reasons to believe - independent application of mind or borrowed satisfaction - bogus purchase on account of inflation of purchase price - contention of the assessee that the Ld. AO issued notice purely on borrowed satisfaction of DCIT, Central Circle-4, Surat without application of independent mind - HELD THAT:- Assessee had filed objections for initiation of proceedings by issue of notice u/s148 and AO met the objections by passing a speaking order in accordance with GKN Drive Sharft (India) [ 2002 (11) TMI 7 - SUPREME COURT] case - Assessee contention that AO issued notice purely on borrowed satisfaction of DCIT, Central Circle-4, Surat without application of independent mind has also been found to be without merit by the Ld. CIT(A). Reopening of assessment has taken place after following due procedure as per law. We decline to interfere. Estimation of income - Bogus purchases - Finding of AO/CIT(A) is that the assessee did purchase goods without bills from some other suppliers otherwise sales could not be effected and that he has been benefitted by providing margin of grey market - AO/CIT(A) instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee restricted the addition to 25% of such purchases following the decision in Vijay Protein Ltd [ 2015 (1) TMI 828 - GUJARAT HIGH COURT] and Sanjay Oil Cake Industries [ 2008 (3) TMI 323 - GUJARAT HIGH COURT] The above findings remain uncontroverted before us. No infirmity in the order of the Ld. CIT(A) and sustain the same. Assessee appeal dismissed.

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• 2023 (6) TMI 564
  TDS u/s 194A - Addition u/s 201(1) (1A) - failure on the part of the assessee to deposit TDS on interest payments - whether payments made on account of interest on compensation /enhanced compensation forms part of compensation and not part of interest? - HELD THAT:-Identical issue came up for consideration before the Delhi Bench of the Tribunal in assessee s own case [ 2022 (3) TMI 1031 - ITAT DELHI] following the judgment of Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT] we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the LA Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Act. Decided in favour of assessee.

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• 2023 (6) TMI 563
  Addition on account of low household withdrawals - HELD THAT:- Tax Authorities have failed to take into consideration assessee s claim that the assessee was living in house owned by his father who pays electricity bills and other maintenance. Assessee s wife is also an income-tax payee who has withdrawn a sum out of her capital account. Bench is of the considered opinion that house-hold expenditure on the basis of low withdrawals for an individual have to be considered in the light of the family as a unit. No justification to take the withdrawals of the assessee alone to conclude that the same are on the lower side and presuming expenditure as to what he would be expending on the family as a unit. Addition thus made AO deserved to be deleted in the whole which ld. CIT(A) has failed to do. Decided in favour of the assessee. Addition u/s 40A(3) - genuineness of the payee/transactions wasnot fully established - HELD THAT:- When assessee is not buying the plot/building for the purpose of private needs, but as part of the business activity of raising construction on the plot and selling them, the payment of Rs. 2,80,000/- cash is questionable. There is no force in the contention that as this amount is not shown in the P L A/c and forms part of the stock, the same cannot be disallowed u/s 40A(3) - as this amount forms part of the cost of construction the same is required to be shown in the P L A/c and justified to be made for business exigency. Thus, the Bench is not inclined to interfere in the finding of tax authorities below. Decided against the assessee. Unexplained cash deposited in bank - reasonable show cause notices assessee failed to bring evidence - HELD THAT:- CIT(A) but failed to consider the evidence and plea taken before Ld. CIT(A), that the deposits were from the prior withdrawals. Therefore, the issue deserve to be restored to the files of Ld. CIT(A) to verify the fact of deposits being from the prior withdrawals and benefit the assessee.

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• 2023 (6) TMI 562
  Assessment u/s 153C - cash payment for purchase of property - Addition u/s 69 - addition made on basis of the copy of the agreement - HELD THAT:- As during hearing the registered deed was filed by the assessee and the copy of the audited balance sheet of the assessee - Where it is clear that the entire amount Rs.31,50,000/- was paid through banking channel. Supporting document was also submitted before the first appellate authority. DR had not made any contradictory submission against the facts of the assessee. During assessment and in the appeal proceeding the issue was fully agitated by the assessee but it was not taken care by the revenue. Accordingly, the addition amount is quashed. Decided in favour of assessee.

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• 2023 (6) TMI 561
  Delayed employees contribution to PF u/s 36(1)(va) r.w.s 2(24)(x) - As admitted by the assessee to have been paid beyond the due date under respective Act but was made before the due date of filing of return - HELD THAT:- As in view of the decision of Checkmate Services P. Ltd. [ 2022 (10) TMI 617 - SUPREME COURT] holding that explanation 2 to Section 36(1)(va) to be retrospective and explanation 5 of Section 43B of the Act are not applicable any more, the assessee withdrew the claim to the extent of Rs. 19,28,127/- - set aside the order of Ld. CIT(A) and direct the AO to allow the claim of the assessee. Computation of income of the assessee engaged in growing and manufacturing of tea - HELD THAT:- Rule 8(1) of Income Tax Rules, 1962 which provides for manner of computing taxable income in the assessee is engaged in tea plantation business provides that the total income arrived at shall be apportioned in the ratio of 60:40 and 60% would be treated as agricultural income and remaining 40% would be business income. Therefore we find merit in the arguments of the ld counsel that the disallowance of EPF has to be first added to the income of the assessee and only thereafter 40% would be taxed as business income. Thus the income of Rs. 6,92,424/- is be treated as business income being 40% of income of manufacturing of tea as per Rule 8 of Rules, 1962 instead of Rs. 23,43,506/- assessed as per intimation u/s 143(1). Decided in favour of assessee.

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• 2023 (6) TMI 560
  Deduction u/s 80P(2)(d) - interest income derived from fixed deposits - denial of deduction for reason that such receipts from cooperative societies is not eligible for the foregoing relief - HELD THAT:- Find no merit in the Revenue s stand in the light of this Tribunal s recent decision in The Belagavi Manufacturers cooperative Industrial Estate Ltd., Udyambag Belagavi and others [ 2022 (4) TMI 339 - ITAT PANAJI ] held investment of assessee in cooperative bank is eligible investment u/s 80P(2)(d) of the Act. The interest of the said investment related to Cooperative Society, assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. Accordingly the appeals of the assessee are allowed.

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• 2023 (6) TMI 559
  Estimation of income - bogus purchases treating it as unexplained investment u/s. 69 - GR rate estimation - HELD THAT:- AO while framing assessment had not drawn any adverse inferences as regards the GP rate of 15.30 % that was disclosed by the assessee during the year under consideration. For the reason that in case if the assessee would have only booked bogus expenses in the garb of the impugned purchases, then its GP rate for the year under consideration would have witnessed a steep decline, which is neither the case of the revenue nor a fact discernible from the records before me. Addition in the case of the assessee is liable to be restricted only to the extent of profit which it would have made by procuring the goods at a discounted value from the open /grey market. Quantification of the profit which the assessee would have made by procuring the goods at a discounted value from open/grey market - As decided in Mohhomad Haji Adam Company [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases is to be made to the extent of bringing the G.P rate of such bogus purchases at the same rate of other genuine purchases. Thus addition in the case of the assessee is liable to be restricted only to the extent of the profit which he would have made at a discounted value from the open/grey market as against the value at which the same had been booked by the assessee in its books of accounts, and the quantification of the same shall be done by the A.O in terms of the aforesaid observations.

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• 2023 (6) TMI 558
  Bogus LTCG - unexplained credit u/s 68 - share application money received by the assessee company - assessee could not offer any satisfactory explanation regarding the nature and source of this so called share application money - CIT-A deleted the addition - HELD THAT:- We find that CIT(Appeals) has given a finding on fact that the assessee has duly filed the requisite evidences and there was no cash deposit before making investment. Hence, no good reason to interfere in the finding of the learned CIT(Appeals) and the same is affirmed. Ground of the Revenue s appeal are dismissed. Disallowance of advances against secured advance against property rights - CIT-A deleted the addition - HELD THAT:- AO without examining the fact has added this amount. This amount could not have been added in the first place as it represented the opening balance pertaining to earlier years. This finding of the learned CIT(Appeals) that the amount partly represented the advance of earlier year is not rebutted by the Revenue. Therefore, we do not see any reason to disturb the finding of the learned CIT(Appeals). The same is hereby affirmed. Remaining deletion of addition, CIT(Appeals) has given a finding on fact that in some cases there was an unfinished flat as per sale-deed and purchaser paid extra amount for its finishing and in some cases the amounts in the sale-deed and copy of account tally where the finished flat is being sold. Revenue has not brought any material to rebut this finding of the learned CIT(Appeals). The same is hereby affirmed. Thus, ground no. 3 of the Revenue s appeal is dismissed. Addition being the advance for the purchase of plots - AO made addition on the basis that as per IAS-11 the assessee was required to declare profits on actual sale - HELD THAT:- AO ought to have made further efforts to verify whether the payments received by the assessee are genuine. Non response from the customers would not be a definite conclusion that money was not an advance - assessee had discharged the preliminary onus by filing the addresses of the customers. Therefore, in the light of the binding precedence the impugned addition deserves to be deleted. Hence, ground no. 1 of the assessee s appeal is allowed. Deemed dividend u/s 2(22) - Treating loan to a non shareholder as deemed dividend - as contended that loan was a routine loan and the assessee company is not a shareholder - HELD THAT:- As relying on Ankitech P. Ltd. [ 2011 (5) TMI 325 - DELHI HIGH COURT] expression shareholder being a person who is the beneficial owner of shares referred to in the first limb of section 2(22) (e) refers to both a registered shareholder and beneficial shareholder. If a person is a registered shareholder but not the beneficial then the provision of section 2(22) (e) will not apply. Similarly, if a person is a beneficial shareholder but not a registered shareholder then also the first limb of the provisions of section 2(22)(e) will not apply. Thus the appeal has to fail on the ground that the assessee cannot be taxed as it is not a shareholder in loan advancing company even on the aforesaid ground, i.e., it was not having 10/20 per cent shareholding therein, non-applicability of section 2(22)(e) of the Act is apparent. Decided in favour of assessee.

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• 2023 (6) TMI 553
  Assessment u/s 153C - Reckoning of six years for assessment - whether the assessment year for reassessment u/s 153C are to be reckoned as six years prior to the year in which search has taken place or six years prior to the year in which seized material is received by the AO of the other person? - HELD THAT:- We find in the case of CIT v. RRJ Securities [ 2015 (11) TMI 19 - DELHI HIGH COURT] has held that for the purpose of section 153C six years has to be reckoned as six years prior to the date of receipt of seized material by the AO of the other person. We hold that in the case of the assessee six years for assessment u/s 153C has to be reckoned are assessment year 2013-14 to assessment year 2018-19. Assessment proceedings in these two years completed u/s 153C are not accordance with law and accordingly we quash the assessment proceedings for AY 2011-12 2012-13. Decided against revenue.

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• Customs

• 2023 (6) TMI 557
  Violation of principles of natural justice - grant of opportunity of cross-examination of third parties from whom statements have been recorded which have been referred to and relied upon in the adjudication order - corroborative statements or not - retraction of statements - HELD THAT:- Admittedly, as per the view taken by the adjudicating authority as is evident from the order of adjudication that there are sufficient evidence available to justify the imposition of penalty on the noticees. It is true that the adjudicating authority has stated that this defence which is available corroborates the statement given by the third parties under Section 108 of the Act. Thus, if according to the adjudicating authority, there is enough evidence to pin down the respondent dehors the statements recorded under Section 108 of the Act, this Court fails to understands as to why the adjudicating authority should place reliance upon the statement under Section 108 of the Act. Considering various factors more particularly the peculiar facts and circumstances of the case and also taking note of the fact that the adjudication proceedings commenced with the issuance of the show cause notice in the year 2018, and the matter has been lingering before this Court as well as before the Tribunal for several years - without answering the substantial questions of law which have been raised by the revenue in these appeals, a workable direction can be issued whereby the questions of law can be left open at the same time, the rights of the respondents/noticees are protected as well as the interest of the revenue also can be protected. In the event, the adjudicating authority is of the view that the statement under Section 108 of the Act has to be relied upon then it goes without saying that the respondents shall be entitled to a full-fledged opportunity of cross-examining such of those persons from whom statements under Section 108 of the Act have been recorded - the substantial questions of law which have been raised by the revenue are left open and the observations and findings rendered by the learned Writ Court to justify its ultimate conclusion are not to be treated as precedent and the legal question is left open. The adjudicating authority shall endeavor to complete the adjudication proceedings afresh as expeditiously as possible preferably within a period of four months from the date on which the personal hearing is concluded - Appeal disposed off.

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• 2023 (6) TMI 556
  Maintainability of appeal - time barred u/s 128 of Customs Act, 1962 - exporter has not realized the foreign exchange involved on the goods exported under the said Shipping bills as per Rule 16(A) (1) and (2) of Customs, Central Excise and Duties and Service Tax Drawback Rules, 1995 - HELD THAT:- Section 128 of the Customs Act, 1962 provides for filing of appeals before Commissioner (Appeals). According to the said section any person aggrieved by any decision or order may appeal to the Commissioner (Appeals) within 60 days from the date of the communication to him of such decision or order.[emphasis supplied] This section bars the Commissioner (Appeals) from condoning the delay beyond the period of 30 days. So what is relevant is the date of communication of the order of the adjudicating authority. Section 128 ibid which has been relied upon by the learned Commissioner (A) for dismissing the appeals on the ground of limitation, uses the words date of communication of order, which in my view is 13.9.2019 as the department failed to produce on record any evidence including the tracking record in support of their submission that the adjudication order was sent to the appellant immediately after the passing of the Order-in-Original. Merely by sending a copy of the Order-in-Original by speed post, the department cannot be said to have discharged their liability as they have to communicate the same to the appellant which means it has to be served on the assessee as the wording used in Section 128 ibid is date of communication of order - In the instant case the appellant received copy of the Order-in- Original on 13.9.2019 the appeal before the learned Commissioner (A) was filed on 24.10.2019 which is well within a period of three months from the date of receipt/communication of the Order-in-Original. Therefore, the Commissioner (Appeals) has erred in rejecting the appeal on the ground of time bar. The matter is remanded back to the Commissioner (Appeals) to decide the same on merits after following the principle of natural justice within a period of three months from the date of receipt of this order. The appeal is allowed by way of remand.

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• 2023 (6) TMI 552
  Denial of legitimate export benefits in the nature of Merchandize Exports from India Scheme - HELD THAT:- What admittedly emerges from the facts of the cases and the response of the respondents to the grievance of the petitioner is that the exports were actually made by the petitioner during the period from July 2020 to August 2020. The shipping bills could not be uploaded and operated in the system as it was the time marked by the Covid - 19 Pandemic period. The office of the respondent no.3 was not working. The officers had been working from home. It was for that obvious reasons, not attributable to the petitioner, that the export orders were manually made and they were not feeded in the Electronic system. It appears that by Notification dated 01.09.2020, the cap of Rs.2 crores was introduced in respect of the benefit under the Scheme. It is to be recollected that the petitioners Export Orders manually registered with the competent authorities were for the period during July and August 2020 - For non-grant of MEIS export benefit, a technical reason is put forth that the details of such exports were entered in the portal of the Director General of Foreign Trade in the month of September 2020 and October 2020 by the jurisdictional Customs officer. The respondents does not dispute the entitlement of the petitioner for grant of MEIS benefit. The entire tenor of the affidavit is that under para 2.58 of the Foreign Trade Policy, the relief of the petitioner could be granted. It was submitted on behalf of the respondents that the petitioner may make representation as stated in the affidavit-in-reply. From the facts of the case, it appears that the case of the petitioner could be considered for granting appropriate relief under para 2.58 of the Foreign Trade Policy. While this aspect is to be finally examined by the competent authority-Director General of Foreign Trade, the petitioner is permitted to make representation to the competent authority-respondents in respect of the grievance raised and prayers made in this petition - the petitioner may make representation to the competent authorities of the respondents within a period of three weeks from the date of receipt of this order in respect of the grievance raised in this petition. Petition disposed off.

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• 2023 (6) TMI 551
  Method of Valuation for payment of CVD - transaction value or MRP based value - Import of adhesives including Power Bond A1 (adhesive) - Applicability of retail sale price based valuation to the imported adhesives which were classified under CTH 3506 1000 - calculation adopted for the purpose of charging CVD - N/N. 49/2008-C.E.(N.T.) dated 24.12.2008 - whether under Section 4 or Section 4A of the Central Excise Act read with Section 3 of the Customs Tariff Act, 1975? HELD THAT:- On a perusal of Sl. No. 43 of the Notification No. 49/2008-C.E.(N.T.), it is seen that the same states Chapter Heading at four-digit level namely, 3506 [Col (2)] and the description reads Prepared glues and other prepared adhesives, not elsewhere specified or included . A careful reading of the Notification issued under sub-sections (1) and (2) of Section 4A of the Central Excise Act, 1944 makes it clear that it specifies the goods mentioned in Column (3) of the Table therein and falling under Chapter or heading or sub-heading or tariff item of the First Schedule to the Central Excise Tariff Act, 1985 mentioned in the corresponding entry in column (2) of the said Table, as the goods to which the provisions of sub-section (2) of said section 4A shall apply, and allows as abatement the percentage of retail sale price mentioned in the corresponding entry in column (4) of the said Table. The item that is imported is classifiable under CTH 3506 1000, which covers Products suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg - MRP based valuation is adopted for the purpose of collection of Excise Duty or CVD in respect of imported goods on goods specified under Section 4A of the Central Excise Act, 1944, in relation to goods which are subject to the provisions of the Legal Metrology Act (erstwhile Standards of Weights and Measures Act), where declaring the retail sale price on the package is mandatory. The provisions of the Legal Metrology Act/Standards of Weights and Measures Act or the rules made thereunder are applicable to all the goods, unless exempted, which are put up for retail sale in units / containers / packages. There is no doubt that the items under dispute in the instant appeal are adhesives [including Power Bond A1 (adhesive)], put up for retail sale and were having a net weight not exceeding 1 kg. A constructive reading of Chapter Heading 3506 along with the Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 makes it clear that it covers all prepared glues and other prepared adhesives, not elsewhere specified or included, including products that are suitable for use as glues or adhesives, put up for retail sale as glues or adhesives, not exceeding a net weight of 1kg. To our mind, as the imported goods are classified under CTH 3506 1000, which is not disputed and which covers products put up for retail sale whose net weight does not exceed 1 kg., should be treated as included for the purpose of the impugned Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 for subjecting the goods to retail sale price based levy - Taking a stand that the prepared glues and other prepared adhesives, not elsewhere specified or included, are included in the said Notification, as given therein, and would not include the same products put up for retail sale whose net weight is not exceeding 1 kg., is not legally correct. There are no reason to differ with the decision of the lower appellate authority on the issue of including the imported adhesives for the purpose of collection of CVD on the basis of retail sale price in terms of Notification No. 49/2008-C.E.(N.T.) dated 24.12.2008 issued under Section 4A of the Central Excise Act, 1944 - the order passed by the lower appellate authority does not call for any interference and the appeal stands dismissed.

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• 2023 (6) TMI 550
  Valuation of export goods - overvaluation - rejection and redetermination of value - restriction of duty drawback to such re-determined value - Confiscation - imposition of redemption fine and penalty - HELD THAT:- The appellant was allowed to re-export the goods after re-determining the value on the basis of cost construction statement submitted which was duly certified by the Chartered Accountant - there is no dispute as to the basis for fixation by the Valuation Committee has not been communicated to the appellant and the appellant was not accorded any opportunity to rebut the same, thus, violating the principles of natural justice. The revised values are fixed in terms of Rule 6 of Customs Valuation (Determination of Value of Export Goods) Rules, restricting the drawback amount to such re-determined value. In terms of the Valuation Rules, the adjudicating authority should sequentially go through Rule 4 and Rule 5 before fixing the value under Rule 6 ibid. Circular No. 07/2003-Cus., dated 05.02.2003 F. No. 605/147/2002-DBK was issued on the subject of admissibility of drawback and market verification for ascertaining the present market value of export goods under Drawback. This Circular gives the methodology to be adopted in cases of over-valuation of goods for export and there is no mention of constitution of any Valuation Committee. The Tribunal in the case of M/S. WOODERN STYLE PLUS EXPORTS VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE, TIRUCHIRAPALLI [ 2018 (7) TMI 709 - CESTAT CHENNAI] wherein an identical goods of over valuation of export goods based on the price fixed by the Valuation Committee was involved has held Apart from the report of the Valuation Committee, there is no other evidence to show over-valuation of the cargo. Even the status of the Valuation Committee does not stand disclosed i.e., as to who were the members of the said Committee, how they arrived at the value?; what was the basis of the findings? and what was the technical and expert qualification of the said members? - impugned orders are not sustainable. The above decision has been followed by this Tribunal in the case of M/S. ABHISHEK EXPORTS INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CUSTOMS, CUSTOM HOUSE, TUTICORIN [ 2018 (9) TMI 1673 - CESTAT CHENNAI] while deciding an identical issue of over valuation on the basis of the prices fixed by the Valuation Committee. As such adopting the values as fixed by the Valuation Committee without revealing the methodology and basis adopted for such values is not correct and is not in accordance with the Valuation Rules. The drawback as applicable is payable on the re-determined value of Rs.8,24,245/- in respect of Exports effected under Shipping Bills Nos. 7758554 and 7758286 dated 27.02.2012 and on re-determined value of Rs.22,23,609/- in respect of Exports effected under Shipping Bills Nos. 8654826, 8654845, 8654852 and 8654864 dated 26.04.2012 - a careful reading of the orders of the lower adjudicating authorities indicate that there is mis-declaration of the value of the export goods thereby contravening the provisions of the Customs Act and Rules made thereunder. So, no fault found with the orders of the original adjudicating authority in holding the goods liable for confiscation under Section 113(h), (i) and (ia) of the Customs Act, 1962 or for imposition of penalty under Section 114 (iii) of the Act ibid. in both these appeals. Appeal allowed in part.

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• 2023 (6) TMI 549
  Refund claim of 4% Additional Duty of Customs - refund sanctioning authority has not verified compliance to the important conditions for sanctioning the SAD refund - N/N. 102/2007-Cus dated 14.09.2007 as amended by N/N. 93/2008 dated 01.08.2008 read with Board s Circulars No.6/2008-Cus dated 28.04.2008 and 16/2008-Cus dated 13.10.2008 - HELD THAT:- The Respondent has died on 22.08.2019 during the pendency of the present appeal. In terms of Rule 22 of Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982 on the death of the Respondent, the proceedings will be abated unless an application is made for continuance of such proceedings. In this case no such application is made. As the Death has occurred on 22.08.2019, more than three and half years passed already. In view of the judgement of the Hon ble Supreme Court in the case of SHABINA ABRAHAM AND OTHERS VERSUS COLLECTOR OF CENTRAL EXCISE CUSTOMS [ 2015 (7) TMI 1036 - SUPREME COURT ], wherein it has been held that no proceedings can be initiated or continued against a dead person as it amounts to violation of natural justice in as much as the dead person, who is proceeded against is not alive to defend himself. On the death of the Respondent, the appeal stands abated. The appeal is accordingly disposed of.

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• 2023 (6) TMI 548
  Absolute confiscation - Import of industrial composite solvent - prohibited goods - to be classified under CTH 38140010 for clearance? - allegation of the Department is that the goods imported when tested by the Revenue in their laboratory and on re-test in the BPCL laboratory, found to be Kerosene, whose import as per policy permitted through canalised agencies - HELD THAT:- It is also an admitted fact that copies of both test reports were not handed over to the appellant nor further testing of sample was allowed by the Department to be drawn for test in a well-equipped reputed Laboratory. Being not satisfied with the said test reports, and the subject assessment order of the adjudicating authority directing absolute confiscation and imposing condition of re-export after payment of fine and penalty, they have approached the Hon ble High Court of Kerala by filing a writ petition for appropriate relief. While disposing the writ petition, Hon ble High Court has directed the Revenue to handover the test reports and allow the petitioner to draw samples for re-testing so as to establish that the goods imported in question are not prohibited goods. Both the directions of the Hon ble High Court were not complied with by the Revenue. The appellants are engaged in the manufacture of paints for which they import industrial composite solvent, a raw material, use it captively in the manufacture of paints. They have been importing the same goods earlier also, declaring it under the same chapter sub-heading 38140010 of Customs Tariff Act, 1975 on the basis of invoice, chemical analysis report supplied along with goods by overseas supplier; the Customs Department also assessed it accordingly accepting the same and no objection was raised. In relation to the present consignment, except re-testing the samples, the reports though disputed by the Appellant, no further investigation was carried out, nor any statement of the appellant was recorded, whereby it could be inferred that the appellant had knowingly imported Kerosene but mis-declared it as industrial solvent. If the re-test reports are accepted to be correct, the only breach of condition on the part of the appellant would be that they did not import the goods through canalised agencies. Such goods if imported through canalised agencies, there will be no restriction of its use in the country - once the goods are allowed to be redeemed on payment of appropriate fine, the condition of re-export tagged with it in the facts and circumstances of the present case is unwarranted. The judgment of the Hon ble Supreme Court in the case of Raj Grow Impex LLP [ 2021 (6) TMI 778 - SUPREME COURT] is not applicable to the facts of the present case as in that case, the goods, namely Yellow peas were knowingly imported in excess than the permissible quantity under the Policy and if allowed to be released on payment of fine to be sold in India, then it would have adversely affected the interest of indigenous farmers. In that scenario, giving due weight to the public interest in contrast to the interest of few importers, the Hon ble Supreme Court upheld the imposition of fine and penalty with the direction of re-export of the goods. In the present case, the appellants have imported goods viz. Industrial solvents for consumption in their factory for manufacture of paints. Hence, the interest of public would not in any manner be affected if the said goods are allowed to be used by the Appellant for their own use even if found to be a different item than imported, the import of which is allowed only through canalized agencies. There is no allegation that the import was not bona fide and the Appellant knowingly imported kerosene in the guise of Industrial solvent not for use in their factory but for sale. But, simultaneously, it cannot be ignored that that on the basis of the re-test reports the goods are liable for confiscation and ground for imposition of penalty, till further test of the samples resulting into confirmation of the overseas chemical analysis report - the goods are liable for confiscation but not absolute confiscation as held by the adjudicating and upheld in the impugned order. There are no merit in the Order of the lower authorities directing absolute confiscation and allowing redemption solely to re-export on payment of redemption fine and penalty. Hence, the impugned order is modified to the extent of setting aside the direction of absolute confiscation and condition of re-export for redemption on payment of fine and penalty and hold that the goods are liable for confiscation; in the event the appellant choose to redeem the goods on payment of fine and penalty, he shall be allowed to exercise the said option and after payment fine of Rs.75,000/- and penalty of Rs.30,000/- as determined by the adjudicating authority, the goods be released to the Appellant forthwith - The appeal is disposed of.

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• Insolvency & Bankruptcy

• 2023 (6) TMI 547
  Initiation of CIRP - the claim of the applicant kept in abeyance - existence of dispute - pendency of arbitration - entitlement to participate in the CoC as per Section 21 - HELD THAT:- It transpires that on 17.11.2021, the Adjudicating Authority / Tribunal, had initiated the Corporate Insolvency Resolution Process, against the Respondent / Corporate Debtor, appointed an Interim Resolution Professional and declared Moratorium, as per Section 14 of the I B Code, 2016. It is represented on behalf of the Appellant that despite the baseless Claim of the Interim Resolution Professional, that no proof, was attached in regard to the Existence of Debt, the Appellant / Petitioner, had resubmitted the relevant documents, and submit further clarification and information, in their Reply, to the letter of the IRP, dated 8th December 2021, so as to facilitate the process of collation of claims, as undertaken by the Resolution Professional - Before the Adjudicating Authority, the Respondent / Resolution Professional of the Corporate Debtor, in the Counter to IA (IBC) No. 155 / 2022 in CP (IB) No. 58 / 9 / AMR / 2021, had mentioned that only after the Respondent, came to know that there is an Arbitration Proceedings, initiated by the Appellant / Applicant, which is pending, the Respondent / Resolution Professional, had kept the Financial Claim of the Appellant, in abeyance. The clear cut stand of the Respondent is that, he took all measures to collate, verify, determine all the Valid Claims, which were submitted for the Payment, in the Corporate Insolvency Resolution Process of the Corporate Debtor, and complied with the Provisions of the Code, in a meticulous manner. Because of the Appellant s Claim, is pending before the Arbitral Tribunal, and the outcome of the said Proceedings will determine, whether the Claim, is to be admitted or rejected, and if it is to be admitted, what is the quantum of Money Claimed and Interest? As such, the Respondent / Resolution Professional, was not in a position, to admit / reject the Claim, and hence, kept in abeyance. In the instant case, the very fact that the Appellant s Claim, cannot be admitted, till the counterclaim of the Corporate Debtor, is determined, which may end in set off of the Sum, payable to the Appellant / Petitioner, the plea of the Respondent / Resolution Professional, cannot be brushed aside and in an emergency and also when a situation arises, the Resolution Professional, is within his power and limit, to keep the Claims, in abeyance, for plurality of reasons. The action of the Resolution Professional, in keeping the Claims, in abeyance, because of the pending Arbitration Proceedings, in regard to the counterclaim of the Corporate Debtor, only after which, the Claim Sum of the Appellant, can be determined with certainty - Appeal dismissed.

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• FEMA

• 2023 (6) TMI 546
  Non-realization export proceedings of goods - convertible foreign exchange - Reasonable steps u/s 18(3) of FERA - Suit for recovery of the balance of the price of the goods sold and delivered in respect of an export in any court in India - All Reasonable steps to receive or recover the payment for the goods as envisaged u/s 18(3) of the Act of 1973 - whether, filing of the suit by the appellants before the Hon ble High Court at Calcutta and obtaining a decree thereon for realisation of the balance of the price of goods sold and delivered to the importer would constitute reasonable steps to receive or recover the payment for the goods ? HELD THAT:- In the facts of the present case, the exporter company exported goods of the invoice value of US$ 8,37,200 and received payment of a portion thereof leaving a sum of US$ 6,37,200 outstanding. The exports took place in 1996. Suit was filed for recovery and a decree with regard thereto was obtained. The decree could not be executed in India due to lack of assets of the importer in India. The appellants claimed that, execution of the decree in the foreign country where the importer was situated was not cost effective and feasible. In the facts of the present case, the explanation offered by the appellants with regard to inability to execute the decree obtained is plausible. The appellants adequately explained the steps taken by them to receive or recover the payment of the goods exported. The steps taken by the appellants in filing a suit and obtaining a decree thereon within the extended period is a reasonable step taken to receive and recover the payment of the goods exported within the meaning of Section 18(3) of the Act of 1973. Such facts rebut the statutory presumptions of Section 18(3) of the Act of 1973. The impugned show cause notice, the adjudication order passed thereon and the impugned order of the appellate authority are set aside.

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• Service Tax

• 2023 (6) TMI 555
  Levy of Service Tax - expenditure incurred by the appellants on foreign training of insurance agents - expenditure incurred by the appellants by way of reimbursement of certain expenses related to the training of insurance agents - demand on account of 4% debit adjustment from the insurance commission paid by the appellant to their Insurance/Corporate Agents. Expenses incurred towards overseas inland training - HELD THAT:- The regulations mandate upon the insurer to provide training and the said cost incurred is reimbursed only to avoid any financial hardship to the insurance agents. Also as far as levy of service tax amounting to Rs. 47,70,218/- on the expenses incurred by M/s Max Life Insurance Company by way of reimbursement of certain expenses related to the training of insurance agents there being common grounds in the arguments, the same are also being dealt along with. In view of the aforesaid proposition, expenses incurred being towards discharge of a statutory mandate, it was pointed out by the learned advocate that there is no merit in the demand of service tax on this count and it needs to be set aside. The payment of expenses to the insurance agents for attending training is not in relation to the service of soliciting or procuring business provided by the insurance agents. The taxable event is rendition of the taxable service and in the present circumstances no taxable service is rendered by the insurance agents to the appellants for which the said expenses are reimbursed by the appellants - the training for insurance agents, is mandatory and imperative and is not only statutorily prescribed but is also a must for knowledge enhancement and to imparting the necessary skills beside the development and acquisition of work habits and product knowledge for the insurance agents. Section 42 of the Insurance Act mandates that individual insurance agents must possess the requisite qualification and/or practical training and are required to pass the examination as may be specified by the IRDA. A mandatory 50 hours of training to agents prior to issuance of the license is provided for. Without a doubt, training per se is not a part of appellants service it only seeks to make agents better at performance of their jobs it nonetheless is not a part of Soliciting providing insurance business. Thus, for the reasons the levy of demand does not survive. Demand for service tax on account of 4% debit adjustment from the insurance commission paid by the appellants to its insurance/ corporate agent - HELD THAT:- In terms of Section 68(2) of Finance Act, 1994 read with Rule 2(1)(d)(i)(A) of the Service Tax Rules, the liability to pay service tax in respect of insurance auxiliary service is upon the appellants. However, the value at which such tax is leviable has to be considered in terms of Section 67(1)(i) of the Act. Thus, where the provisioning of service is for a consideration in monetary terms, the service tax is leviable on the gross amount charged. - any payment by whatever mode paid viz. cheque, credit card, direct debit to account or in any other form including issuance of credit or debit notes is a component of the value for purpose of determination of the tax liability. It has been contended that the agents do not owe any amount(s) to the appellant requiring a set off against commission paid to the said agents. Thus, the 4% debit adjustment from commission payable to the agents is no more than a discount as per agreed contractual terms. The service tax shall be payable and is to be paid on the actual commission paid to the said insurance agents. There are no merit in the order passed by the learned Commissioner, LTU (Audit) upholding the confirmation of the demand of the service tax collectively for an amount of Rs. 1,25,37,365/-. Such being the position and in view thereof as the issue in its entirety has been considered on merits, any other question ancillary raised by the appellants need not be considered and commented upon - appeal allowed.

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• 2023 (6) TMI 545
  Levy of Service Tax - support services of Business or Commerce or not - amount received under what has described as non-compete fee - Section 65 (104c) of the Finance Act, 1994 - HELD THAT:- With effect from 01.07.2012, there is no dispute that the said amount would be exigible to tax under Section 66E (5) but as on date of the agreement under which the amount was received all that existed on the statute book in a manner of speaking was Section 65 (104c) of the Finance Act, 1994 defines support service of Business or Commerce . The amount which was made under the agreement was a one time payment. In other words, the amount did not spill over after 01.07.2012. In such circumstances, the order of the Commissioner appeal as upheld by the CESTAT appear to be untenable in law. Appeal allowed.

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• 2023 (6) TMI 544
  Refund of accumulated input credit - ineligibility of refund prior to registration - ineligible input services - Proportionate credit was arrived by restricting the formula to the period after registration - HELD THAT:- The learned lower appellate authority has relied upon the decision in the case of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT ] on the issue of allowing accumulated CENVAT Credit for refund prior to registration held that In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law - Thus, Whether it be registration or centralized registration, when there is no mandatory provision in the Rules regarding registration, the CENVAT Credit cannot be denied. The case-law relied upon by the learned Authorized Representative for the Revenue in COMMISSIONER OF CENTRAL EXCISE, COIMBATORE VERSUS SUTHAM NYLOCOTS [ 2014 (11) TMI 496 - MADRAS HIGH COURT ] is distinguishable on facts as the decision was rendered prior to the coming into effect of the CENVAT Credit Rules, 2004 and our view is also supported by the decisions of the Hon ble Madras High Court in the cases of THE COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI VERSUS BNP PARIBAS SUNDARAM GLOBAL SECURITIES OPERATIONS PVT LTD. [ 2018 (6) TMI 676 - MADRAS HIGH COURT ] and Commissioner of G.S.T. and Central Excise, Chennai v. Pay Pal India Pvt. Ltd. [ 2020 (7) TMI 321 - MADRAS HIGH COURT ] relied upon by the learned Advocate for the respondent, wherein it has been held that Rule 5 of the CENVAT Credit Rules, 2004 has not mandated registration as a condition for refund of accumulated credit. Disallowance of credit on Authorized Service Station, CHA Service, Advertising Service and Real Estate Agent Service - HELD THAT:- Disallowing the credit on the aforesaid services is not sustainable as the definition of input service is inclusive and as long as it is used in or in relation to the business, the assessee is eligible for taking the credit. The Hon ble Apex Court in the decision rendered in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD.[ 2010 (10) TMI 13 - BOMBAY HIGH COURT ] has held all services used in relation to the business of manufacturing the final product are covered under the definition of input service and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed by the Tribunal. Appeal of Revenue dismissed.

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• 2023 (6) TMI 543
  Reversal of CENVAT Credit - common input services used in providing of taxable as well as exempt goods - procurement of bought out items through high sea sale and local procurements - sub-rule (3A) of Rule 6 of CCR 2004 - non-adoption of correct formula resulted in short reversal of cenvat credit as required under Rule 6 (3) of CCR 2004 - levy of penalty as regards confirmation of demand under BAS. Formula that has to be adopted for reversing the credit as required under Rule 6 (3) of CCR 2004 - HELD THAT:- The only dispute is whether the total cenvat credit on input services availed by the appellant has to be taken for computation of amount that has to be reversed or whether the total cenvat credit availed on common input services has to be applied. This issue is no longer res integra and has been decided by the Tribunal in the case of CCE ST, Chennai Vs Chennai Petroleum Corporation Ltd. where it was held that amendment made by substitution is clarificatory in nature and, therefore, applicable retrospectively. Following the said decision, we do not find any error in the view of the Commissioner (Appeals) that the computation has to be done by adopting the total common Cenvat credit and not total Cenvat credit. The Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT VERSUS M/S. RELIANCE INDUSTRIES LIMITED [ 2019 (3) TMI 784 - CESTAT AHMEDABAD] had considered the issue as to interpreting the term total cenvat credit given in the formula. It was held that whole Rule 6 (1) (2) (3) has to be read harmoniously and conjointly and it would be clear that total cenvat credit for the purpose of formula under Rule 6 (3A) is only the total cenvat credit on common input services and will not include cenvat credit on input / input services exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, it would result in an anomaly that the cenvat credit which is availed for manufacture of dutiable goods also will get disallowed - The said decision was appealed by the Revenue before the Hon ble High Court of Gujarat in C.C.E AND S.T., RAJKOT VERSUS RELIANCE INDUSTRIES LTD. [ 2020 (1) TMI 1640 - GUJARAT HIGH COURT] . The Hon ble High Court vide order dated 23.01.2020 dismissed the plea of the department in regard to the issue whether Tribunal was correct in holding that total cenvat credit for the purpose of formula under rule 6 (3A) is only total cenvat credit of common input service and will not include the cenvat credit on input/input service exclusively used for manufacture of dutiable goods. The demand confirmed alleging that appellant has adopted incorrect formula requires to be set aside. The demand therefore cannot sustain and the same is set aside. Penalty u/s 76 of FA for demand of service tax under BAS - HELD THAT:- On perusal of the impugned order, it is seen that the original authority has imposed an amount of Rs.42,989/- only as penalty. Further option to pay reduced penalty @ 25% of the service tax demand has also been given. Taking into consideration these aspects, there are no grounds to set aside the penalty and the same is upheld. The impugned orders are modified to the extent of setting aside the demand raised alleging non-adoption of correct formula for reversal of cenvat credit under Rule 6 (3) of CCR only - appeal allowed in part.

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• 2023 (6) TMI 542
  Best Judgement Assessment - Faithful discharge of service tax liability for the relevant years or not - proceedings conducted under section 73 of the Finance Act, 1994 - applicability of section 72 of the Finance Act - levy of penalty u/s 78 - HELD THAT:- It is clearly a case where the Department acquired knowledge of the fact that the appellant had collected service tax for the services provided to BALCO when the records of BALCO were examined which indicated that BALCO had taken credit of service tax paid by the service providers. This resulted in seeking information from the appellant, but the appellant did not provide the relevant information sought by the Department as a result of which the Department had to gather information from BALCO. It is on the basis of the information provided by BALCO that the show cause notice was issued to the appellant for initiating proceedings under section 72 of the Finance Act. The appellant not only failed to produce any evidence in reply to the show cause notice, but in this appeal also nothing has been brought on record to substantiate whether the appellant had, in fact, deposited service tax which it had been collected from BALCO. It was incumbent upon the appellant to make available all the relevant documents to the Department even prior to the issuance of the show cause notice but that was not done and even in reply to the show cause notice no evidence had been produced by the appellant which may indicate that the service tax collected by the appellant from BALCO, had been deposited with the Department. The only course open to the Department was to have initiated proceedings under section 72 of the Finance Act and it did - The appellant does not dispute the figures that have been provided by BALCO but what is sought to be contended is that these may include some other services that may have been provided. It may be so, but then it was for the appellant to have conclusively demonstrated before the Department that the service tax collected from BALCO for the services provided to it had actually been deposited by the appellant and was also shown in the ST-3 returns filed by the appellant. Whether service tax liability should have been determined @ 4% and not @ 12% under the composite scheme for the works contract? - HELD THAT:- For invocation of the composite scheme it was incumbent upon the appellant to first demonstrate that the services related to works contract and secondly that the appellant had also opted for the composite scheme. In the absence of these two vital factors, the appellant cannot contend that service tax could have been levied only @ 4% and not @ 12%. This is also what has been observed by the Commissioner in the impugned order and there is no infirmity in this finding recorded by the Commissioner. Levy of penalty under section 78 of the Finance Act - HELD THAT:- It is not possible to accept this contention of the learned counsel appearing for the appellant. Once the best judgment assessment has been carried out under section 72 of the Finance Act, it is section 73 of the Finance Act which provides for recovery of the amount and that is why the levy of interest and penalty are recoverable under section 73 of the Finance Act and not under section 72 of the Finance Act. It is also not possible to accept the contention of the learned counsel that the matter should be remitted to the Commissioner for a fresh determination after providing an opportunity to the appellant. The order passed by the Commissioner is sustained and the appeal is dismissed.

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• Central Excise

• 2023 (6) TMI 554
  CENVAT Credit - common input service utilized in its Die Lube Unit as per the provision of Rule 7 of Cenvat Credit Rules, 2004 - Suppression of facts or not - revenue neutrality - HELD THAT:- Similar issue came up for consideration before the Hon ble High Court of Judicature at Bombay in the matter of THE COMMISSIONER, CENTRAL TAX, PUNE-I COMMISSIONERATE VERSUS M/S. OERLIKON BALZERS COATING INDIA P. LTD. [ 2018 (12) TMI 1300 - BOMBAY HIGH COURT] in an appeal filed by the department and in that matter the assessee having units at various places viz. Pune, Gurgaon, Chennai, Jamshedpur etc. took the Cenvat credit in its books during the period October, 2009 to March, 2014 at the Pune Unit only which was objected to by the department and it was the specific case of the department that the assessee should have distributed the tax credit to the various units situated across the country and should not have availed Cenvat Credit at Pune Unit only. In that decision the Hon ble High Court after considering Rule 7 ibid as it was existing both pre and post amendment in 2012 held that the assessee was entitled to utilize the Cenvat credit at its one unit only i.e. Pune unit. The Hon ble High Court also gone into the issue of revenue neutrality in that matter. The opening words of Rule 7 is may distribute and therefore the assessee is not under any obligation to distribute. The word shall which has been used later in the clauses/ subclauses to rule 7 will come into operation only if the assessee chooses to distribute among its units. Meaning thereby if the appellant chooses to distribute then only he has to follow all the conditions laid down in Rule 7 therein including clause (d) which mandates that such distribution be done on pro rate basis. During the period in issue the distribution was optional only was further strengthen from the fact that in the year 2016 Rule 7 was further amended and the word may was substituted with the word shall which makes it mandatory for the assessee to distribute the credits between the units - Otherwise also it is no doubt true that the entire excise would be revenue neutral as the utilization by any unit of the same entity would not make any loss to the exchequer as the credit disallowed from one unit in proportion to second unit will be eligible as credit to such other unit and the net credit availment and utilization form a company s perspective will remain unchanged and also that the appellant is not going to gain anything extra to its entitlement. In such a scenario there is no question of any suppression on the part of the appellant and therefore extended period is also not invokable in the facts of the case and on this count also the demand fails. The impugned order is set aside and the appeal filed by the appellant is allowed.

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• 2023 (6) TMI 541
  Wrongful availment of MODVAT Credit - denial on the ground that Bills of Entry was not in appellant name but in the name of M/s. German Remedies on whose behalf the appellant was carrying out the manufacturing activities - failure to establish with relevant documentary evidences the receipt of the impugned goods in their manufacturing premises - HELD THAT:- As per the show cause notices the case of the department is that the appellants have taken credit on the basis of the Bills of entry which were not in their name but in the name of M/s. German Remedies and therefore they are not eligible to take the credit and the said stand of the department was later supported by this decision of the Larger Bench of the Tribunal in the matter of BALMER LAWRIE CO. LTD. VERSUS COMMISSIONER OF C. EX., KANPUR [ 2000 (1) TMI 74 - CEGAT, NEW DELHI] . But the said decision of the Tribunal was distinguished by the Hon ble High Court in the matter of MARMAGOA STEEL LTD. VERSUS UNION OF INDIA [ 2005 (4) TMI 89 - HIGH COURT OF JUDICATURE AT BOMBAY] by holding that Rule 57G ibid does not require that the bill of entry should be in the name of the person claiming credit of duty and what is required to be established for taking credit is that the goods used as inputs are duty paid and the credit of duty paid on the said goods has not been taken. The said view of the Hon ble High Court has been upheld by the Hon ble Supreme Court in an appeal filed by the department against the decision of the Hon ble High Court which has been reported in UNION OF INDIA VERSUS MARMAGOA STEEL LTD. [ 2008 (7) TMI 95 - SUPREME COURT] . When the show cause notices have been issued for rejecting the credit only on the ground that bills of entry were not in the name of the appellant then it is not open for the Commissioner (Appeal) to go in any other issue as no one can go beyond the show cause notice and the said ground itself is sufficient to set aside the impugned order. While remanding the matter back to the first appellate authority, this Tribunal has specifically recorded that the appellant was stating before the lower authorities that they had received the material/inputs covered under the bills of entry and the said bills of entry had endorsement alongwith dealer s invoice. It is established that goods covered with the bills of entry in issue have been received by the appellant and the same were consumed in their manufacturing premises. Therefore the Appellant is eligible to avail the Modvat Credit and has rightly availed the same. Appeal allowed.

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• 2023 (6) TMI 540
  Cash Refund - pre-deposit amount deposited through Cenvat Credit - refund claimed on the ground that appellant working under exemption notification 30/2004-CE, dt. 9.7.2004 and hence not able to utilize the Cenvat Credit - HELD THAT:- The issue is no more res integra and Hon ble High Courts and this Tribunal in the matters of COMMISSIONER OF CENTRAL EXCISE VERSUS BIRLA TEXTILE MILLS [ 2010 (10) TMI 1061 - DELHI HIGH COURT] ; M/S. K.G. DENIM LTD. VERSUS CUSTOM, EXCISE SERVICE TAX APPELLATE TRIBUNAL, COMMISSIONER OF CENTRAL EXCISE [ 2017 (7) TMI 22 - MADRAS HIGH COURT] , M/S LAV KUSH TEXTILES VERSUS THE COMMISSIONER, CENTRAL EXCISE, JAIPUR [ 2017 (5) TMI 1021 - RAJASTHAN HIGH COURT] , M/S. RAYMOND LTD. VERSUS CCE MUMBAI III [ 2011 (6) TMI 530 - CESTAT, MUMBAI] , time and again have held that when the assessee is not in a position to utilize the credit, the amount is permitted to be refunded in cash although the same has been paid through their Cenvat Credit account. In the instant matter the appellant herein has requested for cash refund on the ground that they are working under exemption notification 30/2004-CE, dt. 9.7.2004 and hence not able to utilize the Cenvat Credit. Therefore the appellant is entitle for the cash refund. In view of totality of the facts involved herein viz. that the basis of issuing the show cause notice and of passing of the orders by both the authorities below has gone alongwith the fact that the Order-in-Original sanctioning the refund in cash has not been challenged by the Revenue coupled with the fact that the issue involved herein is no more res integra as discussed. The impugned order is set aside and the appeal filed by the appellant is allowed.

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• 2023 (6) TMI 539
  Refund claim - Duty paid under protest - Doctrine of unjust enrichment - Dispute relating to classification was resolved in favor appellant assessee - Classification of goods - Tuberculin PPD - products are directly sold to the customer - HELD THAT:- The facts of the appellant have been examined in detail and a report has been given by jurisdictional range office which shows that any majority of cases the burden of duty has been passed to the buyers of the product. It has also been verified and established from the scrutiny of annual profit and loss accounts of the appellant that excise duty paid by them has not been shown in the annual accounts for the financial year beginning from 2002-03 to 2008-09 as a amount receivable from the Government which means that the excise duty paid by the appellant has been included as a part of expenditure for the product. From the scrutiny of the invoice, it can be seen that excise duty has been charged in the invoice from the buyers of their product. Since the annual accounts of the company are nothing but total of such invoice and once the amount which have been shown on the invoice as excise duty which is the part of the value of the product, same has to be recovered from the buyer as the principles of accounting and is rightly been done. Thus, as per the report submitted by the jurisdictional range officer after examining the appellant s books of accounts for the relevant period, wherein it has been reported that the appellant have shown excise duty in their invoice while clearing the goods from the factory as per ledger in majority cases the invoice value including excise duty has been recovered from the customers. This fact clearly shows that duty was paid by the appellant even though under protest has become an integral part of the total sales value and therefore the excise duty so paid by the appellant was collected from their customers. For the purpose of deciding whether element of unjust enrichment are present in a particular case or not, the only fact need to be ascertained is whether the duty paid by the assessee irrespective of under protest or otherwise was passed on to any other person. From the facts as mentioned in the preceding paragraphs, it can easily be ascertained that incidence of central excise duty has clearly been passed on to the buyers of the appellant s product. In view of above facts, the appellant has passed on the burden of the excise duty to their customers and therefore they are hit by provisions of unjust enrichment - The appellant has passed on the burden of the excise duty to their customers and therefore they are hit by principles of unjust enrichment. The principles of unjust enrichment in this case is clearly applicable and the appellant has failed to discharge its burden of proving that burden of duty has not been passed on to the customer - since incidence of the duty has been passed on to the buyers therefore, the refund is hit by the principles of unjust enrichment. Appeal dismissed.

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• 2023 (6) TMI 538
  Valuation - Nature of discount offered to Distributors and not to other buyers - two sets of assessable value for the same product - the higher value in case of direct sales and discounted value for the clearances made to distributors - inclusion of expenses with regard to installation and after sale service during the warranty period in the assessable value - HELD THAT:- Section 4 essentially seeks to accept different transaction value which may be charge by an assessee from it different buyers. For assessment purpose so long as this are based upon purely commercial consideration where buyer and seller have no relationship and the price remains sole consideration for sale. This way it enables valuation of goods for charging excise duty on value charged per commercial invoice rather than for notionally determinative value. The discount which have been offered in the present case is well known to the customers which are distributors of the appellant as same is being mentioned in their distribution agreement - it is an establish practice now that discounts of any description given on any normal price payable for any transaction and same will not form part of the transaction value of goods. The discount is not being given in the form of a reimbursement for distributors undertaking installation and after sale services during the warranty period . Since both the activities are beyond the place of removal and post sale activities and therefore it is not a liability of the manufacturer assessee to undertake such activity. Thus, we are of the view that it is wrong on the part of the department to assume that distributors are being compensated in the form of discount for the expenditure which they have incurred on undertaking installation and after sale service during warranty period. It has also been held under the various decisions of this Tribunal that such expenditures are not includable otherwise also in the assessable value. In this regard reliance placed in Tribunal decision in the case of GENERAL MOTORS INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE I [ 2022 (4) TMI 1539 - CESTAT MUMBAI] . The issue under consideration has already been settled by Hon ble Supreme Court in the case of M/S. PUROLATOR INDIA LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI III [ 2015 (8) TMI 1014 - SUPREME COURT ] which have also been followed by this Tribunal in the case of M/S. BIOCHEM PHARMACEUTICAL INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III [ 2016 (3) TMI 664 - CESTAT MUMBAI ] where it was held that quantity discount was correctly claimed by the appellant as the same was claimed at the time of sale of the goods. It is found that since the sale invoice which have been issued to the distributors by the appellant offering 15 % discount is normally a trade discount and the department has failed to discharge its responsibility to establish that there has been any flow back of consideration from buyer to the appellant. Thus, the transaction value declared by the appellant is correct assessable value for the payment of central excise duty and discount cannot be added to the assessable for charging central excise duty. Appeal allowed.

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• 2023 (6) TMI 537
  Denial of CENVAT Credit - denial on the premises that the appellant is not entitled to take the cenvat credit on the invoices issued by the second stage dealer, where the appellant is not a buyer and is only a consignor - HELD THAT:- The present issue is squarely covered by the decision of the Tribunal in the case of M/S. S.S. ENGINEERING WORKS VERSUS COMMR. OF CGST CX, KOLKATA SOUTH COMMISSIONERATE [ 2023 (3) TMI 1370 - CESTAT KOLKATA] , wherein this Tribunal has observed that just because the invoices issued by M/s. SC Enviro Agro India Pvt. Ltd. mention M/s. Sumitomo Chemicals India Pvt. Ltd. as the customer, while at the same time mentioning the appellant as the consignee, will not become invalid document for taking Cenvat credit, we therefore, hold that the impugned order is not sustainable. The CENVAT Credit allowed to the appellant - there are no merit in the impugned order and the same is set aside.

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• Indian Laws

• 2023 (6) TMI 536
  Dishonour of Cheque - Insufficient Funds - issuance of cheque for investment or repayment of loan - inadvertent mention of names in the cheque - HELD THAT:- The fact that the name of Manish Bhawani was inadvertently been mentioned is evident from the fact that the name of Tejal V. Bhawani was mentioned on the last page and was to be executed by Vipul Bhawani and Tejal Bhavani. Thus, the Defendants contention that the letter has been fraudulently altered by the Plaintiff is patently false. Most importantly the said letter also refers to the said cheques in Annexure A as being issued for repayment of loan. The defences raised by the Defendants are really frivolous and/or vexatious. Even Exhibit C to the Affidavit-in- Reply which the Defendants contend is the agreement between the parties makes reference to the cheques set out in Annexure A thereto as being repayment of loan and not investment. Thus, it is clear that the Defendants at all times had agreed to treat the said cheques as being repayment towards loans and not investments. Additionally, as has been held in the case of MOTILAL LAXMICHAND SALECHA, HUF VERSUS M/S. MOUR MARBLES INDUSTRIES PVT. LTD. ORS. [ 2018 (4) TMI 1950 - BOMBAY HIGH COURT] that once a party issues a cheque for repayment of a loan, then the liability under the loan is substituted by the liability to honor the cheque and in a sense the original liability to pay the loan is discharged by means of execution of cheque. And in the event such cheque is not honored, a new liability arises under the provisions of the Negotiable Instruments Act. In the present case, the Defendants have not denied issuance of the said cheques but have only attempted to contend that the same were for return of investments and not loans. That argument is not open to the Plaintiff anymore in view of the ratio laid down in the case of Motilal Laxmichand Salecha HUF. Thus even on merit the Defendants contentions are untainable and devoid of merit. Since there was no contract as regards the rate at which the interest was to be charged on the said amount of Rs. 1,47,64,000/-, it would be justifiable to apply the interest at 12% per annum from 31st December, 2019, the date on which the cheques drawn by the Defendants in favour of the Plaintiff were payable. Defendants to pay the Plaintiff sum of Rs. 1,47,64,000/- along with interest at 9% per annum on the sum of Rs. 1,47,64,000/- from 31st December, 2019 till realization - suit decreed.

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• 2023 (6) TMI 535
  Seeking grant of bail - recovery of 700 grams amphetamine - contraband item - presumption regarding the culpable mental state of an accused and possession of illicit articles - HELD THAT:- This Court is of the considered opinion that prima facie it seems that the petitioner was not the owner of the package and had merely facilitated the booking of the package with the courier company on behalf of and at the request of the Nigerian national. This seems prima facie possible from the sequence of events in that when the NCB approached the petitioner on 16th November, 2022, the petitioner stated clearly that he had indeed booked the parcel for the Nigerian and sent the receiver details through Whatsapp to the courier person. This was further corroborated by the statement recorded by the courier person. Also, upon asking of the NCB, the petitioner continued to communicate with the Nigerian Ike and told him regarding the return of the package. Pursuant to his communication with the Nigerian, that the lady Abigail Momah was sent to collect the return of the package. This would possibly show that he was merely an intermediary who was used to courier the package which did not belong to him. There is no evidence in the complaint that the package belonged to the petitioner, in that he was the one who was packing and dispatching the contraband. There are call records to show that messages have been received from the Nigerian and that the return parcel was to be collected by the person sent by the Nigerian. At this stage, the benefit of doubt would have to go to the petitioner as not being the owner and possessor of the said package of contraband. In the considered opinion of this Court, there are reasonable grounds for believing that the petitioner is not guilty of the offence as alleged. Furthermore, considering he has no previous involvements and that his conduct and work has been certified by his employer and there is no adverse information regarding his past, it would be prudent to believe that he is not likely to commit any offence while on bail. The petitioner is directed to be released on bail on furnishing a personal bond with one surety of the like amount subject to the satisfaction of the Ld. Trial Court, further subject to the conditions imposed - application allowed.

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• 2023 (6) TMI 534
  Dishonour of Cheque - in view of the moratorium, the cheques were incapable of encashment - prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter - petitioners can be liable for prosecution under Section 138 of the NI Act or not - HELD THAT:- In the present case, admittedly, CIRP proceedings were admitted against M/s Ajanta on 04.02.2020. In my opinion in view of the CIRP proceeding, the moratorium under Section 14 kicks in on the same day. The IRP vide email dated 07.02.2020 had, in accordance with the provisions of the IBC, directed all the financial institutions not to permit any debit transactions from the account of M/s Ajanta without written approval - once the CIRP proceedings have been admitted, the proceedings against the corporate debtor cannot continue. Whether the petitioners can continue to be prosecuted under Section 138 of the NI Act in view of them being natural persons? - HELD THAT:- The observation of the Bombay High Court in ASMITA SARANG VERSUS YOGESH BADONI, SENTHIL KUMAR KARMEGAM ANR. [ 2023 (2) TMI 1149 - BOMBAY HIGH COURT] agreed upon, wherein the High Court has held When the cheques were presented for encashment, the respondents were no longer in control and management of day to day affairs of the Corporate Debtor. It is not known as to whether there were sufficient funds in the bank account of Corporate Debtor to honour the cheques. Since from the date of the admission of the CIRP proceedings, it was the IRP who was In-Charge of and responsible for the conducting the business of the company at the time when the cheques were presented for encashment, it is thus clear that the role of the natural persons had ceased - The instrument, namely, the cheque on the basis of which the complaint was filed could not have been encashed by the financial institutions in view of the mandate of Section 14 IBC read with Section 17 and 18 IBC - On the basis of the combined reading, it is the IRP who had the authority to operate the bank accounts and on the date of presentation, the petitioners cannot be stated to be in control and management of the affairs of M/s Ajanta. In the judgment of P. MOHANRAJ ORS. VERSUS M/S. SHAH BROTHERS ISPAT PVT. LTD. [ 2021 (3) TMI 94 - SUPREME COURT ] the facts are distinguishable from that of the present case. In P. Mohanraj, 51 cheques were issued by the company in favour of the respondent towards amounts payable from 21.09.2015 to 11.11.2016. On 31.03.2017, the respondent issued a statutory demand notice under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881. The order admitting the application was passed on 06.06.2017 by the Adjudicating Authority directing commencement of the corporate insolvency resolution process with respect to the company and putting a moratorium in terms of Section 14 of the IBC. Hence in judgment of P. Mohanraj, the moratorium commenced from 06.06.2017. Prior to that not only the cheques had bounced but demand notices were also issued - In the present case, prior to presentation of cheques, not only the mortarium kicked in but the IRP had also sent the effective letter. As a result, the cheques became incapable of encashment. The petition needs to be allowed.

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