TMI Tax Updates - e-Newsletter
July 10, 2023

Case Laws in this Newsletter:

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

Articles

1. GLOBAL MINIMUM TAX : Rules on Corporate Restructurings and Holding Structures

   By: Amit Jalan

2. Demand stayed as entire tax demand already paid and Appellate Tribunal is not yet constituted

   By: Bimal jain

3. Order passed before the dates provided for filing of reply and personal hearing is violative of principles of natural justice

   By: Bimal jain

4. Refund application cannot be kept pending on the ground of pendency of proceedings

   By: Bimal jain

News

1. Important Update: Geocoding Functionality Now Live for All States and Union Territories

Notifications

Income Tax

1. 47/2023 - dated 6-7-2023 - IT

Jurisdiction of Income tax Authorities - Seeks to amend Notification No. 70/2014 dated 13th November, 2014

Money Laundering

2. G.S.R. 491(E) - dated 7-7-2023 - PMLA

ED to share information with GSTN for launching prosecution - Director, Financial Intelligence Unit, India, under the Ministry of Finance, Department of Revenue, appointed as Director for PMLA - Seeks to amend Notification No. G.S.R. 381(E), dated the 27th June, 2006

SEZ

3. S.O. 2989(E) - dated 6-7-2023 - SEZ

SEZ for Multi-Services at Gandhinagar in the State of Gujarat - Revise the survey numbers in original Notification No. S.O. 1910(E) dated 18th August, 2011

Circulars / Instructions / Orders

Customs

1. Instruction No. 22/2023-Customs - dated 6-7-2023

Standard Operating Procedure for stepping up of Preventive Vigilance Mechanism by the jurisdictional CBIC field formations and to prevent flow of suspicious cash, illicit liquor, drugs/narcotics, freebies and smuggled goods during elections

Highlights / Catch Notes

GST

• High Court Orders Reconsideration of Rejected Incentives Under Bihar Industrial Policy Due to SIPB's Alleged Oversight.

  Case-Laws - HC : Rejection of claim of disbursement of incentives promised under Bihar Industrial Incentive Policy, 2011 on 1 & 2nd expansion of the Petitioner's unit - rejection on the ground that the proposal for said expansions were not approved by the SIPB ignoring the Resolution - Matter restored back for reconsideration - HC
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• Claiming ITC for Warehouse Construction Costs: Conditions and Utilization for Rental Services Explained.

  Case-Laws - AAR : Utilization of input tax credit (ITC) - inward supply of said input/input service used for construction of warehouse can be claimed and utilized to pay tax on the outward supply of services provided by way of renting of said warehouse - Input tax credit is admissible if such construction expenses are not capitalized in books. - AAR
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Income Tax

• Income Tax Exemption for Scheduled Tribes: Does Section 10(26) Apply to Individuals or Families? ITAT to Review.

  Case-Laws - HC : Exemption u/s 10(26) - income of Scheduled Tribe residing in Specified Areas - applicable to income of an individual or extended to a group of individuals of same family - Matter restored back to the ITAT - Larger Bench to be constituted for dispose of the legal issue which has arisen as expeditiously as possible - HC
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• No automatic penalty u/s 270A for income misreporting if taxpayer shows bona fide belief on leave encashment.

  Case-Laws - AT : Levy of penalty u/s 270A r.w.s. 274 - misreporting of income on the addition of leave encashment - levy of penalty is not automatic on mere making addition, if the assessee has explained his bonafide belief about deduction of exemption of any component of income, no penalty is leviable on such component of income. Hence, no penalty u/s 270A is leviable on the addition of leave encashment. - AT
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• Objection to Private Counsel Appointment in CIC Proceedings Rejected; Cited Conflict of Interest Deemed Baseless.

  Case-Laws - AT : Conflict of interest - Objection against the appointment of private counsels in connection with CIC proceedings (RTI) on behalf of the ITAT - The same counsel are appearing before the same bench of ITAT on behalf of clients and against the revenue - The ‘conflict of interest’ comes in a situation where there is dual representation, adverse interests, personal interests and business interests. The ‘conflict of interest’ can be addressed as legal ethic rules requires a lawyer to identify and avoid conflicts wherever possible. - This issue raised by ld.CIT-DR, Dr.S. Palanikumar before us is totally out of context, without any basis, totally different and distinguished on facts. - Objection rejected at the threshold. - AT
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• Dispute Over Fairness of Share Premium Valuation u/s 56(2)(viib) of Income Tax Act; DCF Method Rejected by AO.

  Case-Laws - AT : Addition u/s 56(2)(viib) - income from other sources - share premium received by the assessee - discarding the DCF method of valuation of shares adopted by the assessee - Whether the valuation report is fair and reasonable and the assessee has failed to justify the premium of Rs. 130/- per share charged on allotment of un-quoted equity share? - AO erred in discarding the DCF method of valuation of shares adopted by the assessee - AT
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• Penalty u/s 271B Deemed Unjustified Due to Minor Technical Delay in Filing Tax Audit Report.

  Case-Laws - AT : Penalty u/s. 271B - delay of 1 day in filing the tax audit report - There is no deliberate intention on the part of the assessee, nor could the conduct of the assessee be regarded as to breach the provision of the law. The delay if any is on account the reasons on the technical letches on the portal and the same is venial in nature based on the provision of the Act the penalty levied u/s 271B is not justified - AT
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• Company Fails to Prove Share Capital Authenticity; Order Affirmed u/s 68 for Unexplained Cash Credits.

  Case-Laws - AT : Unexplained cash credits u/s 68 - appellant company has failed to prove the identity, genuineness and creditworthiness of the parties to whom the share capital including premium was issued - since the assessee failed to rebut the findings of the revenue, the order of the ld CIT(A) is hereby affirmed - AT
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Customs

• Petitioner Eligible for MEIS Benefits Despite Shipping Bill Error; Intention Clearly Communicated in Invoice.

  Case-Laws - HC : Benefit under MEIS scheme - amendment in the shipping bills - the petitioner has already mentioned in the shipping invoice and has declared its intention to avail the benefits of the MEIS scheme. Thus, merely an error of clicking `No’ instead of ‘Yes’ does not debar the petitioner from availing the benefits under MEIS scheme. More particularly, the communication reveals that the intention of the petitioner was to avail the benefit of MEIS. - HC
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• Imported LCD Panels Classified Under Chapter 9013 8010; Parts to be Classified Under 9013 9010 by Customs Guidelines.

  Case-Laws - AT : Classification of imported goods - the LCD Panels are to be classified under Chapter Heading 9013 8010 and parts of LCD panels are to be classified under Chapter Heading 9013 9010 - AT
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• Import Valuation Enhancement Fails: Lack of Manufacturer and Origin Details Invalidates Duty Demand and Transaction Value Rejection.

  Case-Laws - AT : Valuation of imported goods - Enhancement of value based on NIDB data - the department has failed to substantiate as to how the value adopted on the basis of NIDB data is comparable in the absence of details required in the nature of name of manufacturer, country of origin etc. to arrive at contemporaneous price. The facts being so, there are no sufficient reasons to reject the transaction value and for the enhancement of value. The demand of differential duty cannot sustain and requires to be set aside. - AT
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• Appeal Allowed Against Assessing Officer's Decision Denying Exemption; Commissioner (Appeals) Offers Sole Remedy for Appellants.

  Case-Laws - AT : Maintainability of appeal against the mere communication by the assessing officer - Even though it is a communication but decision of denial of exemption has been taken by the assessing officer. After this decision the appellant would not have claimed the exemption therefore the only remedy lies against the said decision is an appeal before Commissioner (Appeals). - AT
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• Incorrect Use of Deductive Value Method for Imported Cosmetics Breaches Customs Valuation Rules 2007 Sequence.

  Case-Laws - AT : Valuation of imported goods - ‘deductive value’ method - various types of cosmetics - the original authority has improperly proceeded beyond the preceding methods in the sequential enumeration. The first appellate authority, in endorsing the re-determination, had failed to take note of breach of this prescriptionin Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Accordingly, the resort to deductive value for assessment is incorrect. - AT
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• Re-import of goods from SEZ to DTA not classified as 'import', affecting customs duty exemptions under SEZ Act, 2005.

  Case-Laws - AAR : Exemption from payment of customs duty, IGST and compensation cess - Re-import of goods/equipment from a SEZ/FTWZ to DTA - It is also important to note that activity of bringing goods from a Unit or Developer in SEZ to DTA is not covered under the definition of the term, 'import' under the SEZ Act, 2005, therefore such transfer from SEZ to DTA cannot be termed as 're-import'. - AAR
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SEZ

• New Rules Simplify Trade in Special Economic Zones, Enhancing Ship Transactions in International Financial Services Centres.

  Notifications : Special Economic Zones (Third Amendment) Rules, 2023 - Procedure of import or export or procurement from or supply to Domestic Tariff Area of ship by a Unit in International Financial Services Centre - Notification
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Indian Laws

• Courts Urged to Use Caution in Dismissing Cheque Dishonor Cases u/s 482 of Criminal Procedure Code.

  Case-Laws - HC : Dishonor of Cheque - Security cheques were given - Future consideration or legally enforceable debt - When there is a legal presumption and where facts are contested, it would not be judicious for the Court to separate the wheat from the chaff under the garb of inherent powers. It has been held time and again that the power of quashing criminal proceedings while exercising power under Section 482 of the Cr.P.C should be exercised sparingly and with circumspection. - HC
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IBC

• NCLT Rejects Extension Request for Compromise Scheme Due to Lack of Prepared Plan and Creditor Consent.

  Case-Laws - AT : Liquidation of Corporate debtor - Rejection of application seeking extension of timeline as mentioned in the “Invitation for Submission of Scheme” - The Appellant has not shown any proof of a scheme of compromise and arrangement that is formulated and ready, and proposed for consideration nor has the Appellant obtained the consent of 75% of the secured creditors of the corporate debtor in support of such a scheme. - The 90 days’ timeline has already expired - NCLT rightly rejected the application - AT
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• Resolution Plan Approval Limits Secured Creditors from Enforcing Security Interests During CIRP Under Insolvency and Bankruptcy Code.

  Case-Laws - AT : Approval of Resolution Plan - Right of the secured creditor over immovable asset of the Corporate Debtor - Unless the prohibition is imposed, all assets of the Corporate Debtor shall not be available for revival and maximisation of the value of the Corporate Debtor, which is principal/primary objective of the I&B Code. Financial Creditor who is part of the CoC is prohibited from enforcing any security interest. A third-party security holder like Appellant is equally bound by the provision of Section 14(1)(c) and cannot claim any enforcement of security interest in the CIRP. - AT
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• Corporate Debtor Misses Hearing; Adjudicating Authority Proceeds Ex-Parte in Insolvency Resolution Process.

  Case-Laws - AT : Initiation of CIRP - The Corporate Debtor despite having been allowed time, failed to file reply and did not appear on the date when matter was fixed for hearing. The Adjudicating Authority rightly proceeded ex-parte against the Corporate Debtor when he chose not to file reply and failed to appear on the date fixed. - AT
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• NCLT Dismisses CIRP Application Due to Lack of Financial Debt; Debt Transfer and Arbitration Failure Cited.

  Case-Laws - AT : Initiation of CIRP - Existence of financial Debit - Purchase of litigation by the applicant - Impact of closure of the arbitration proceedings - it is clear that assignor had assigned its debt of Rs. 104 Crores to the Appellant on 24th March, 2017 when it failed to obtain an Interim Award from the sole arbitrator by filing an application under Section 31(6) of the Arbitration and Conciliation Act which was rejected on 23rd September, 2016. - NCLT rightly dismissed the application - AT
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Service Tax

• Activation Charges for Software or Equipment Features Classified as Sales, Not Service, Exempt from Business Auxiliary Service Tax.

  Case-Laws - AT : Business Auxiliary Service - activation charges for activating software - amount collected by the Appellant from their customers against as “activation charges” of equipment/ software features are covered under the activity of sales of goods and not covered under the provisions of “Service” as defined in the Act. - AT
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• Tax Demand Challenged Over Improper Service Classification for Advances on Works Contract Services; Validity Questioned.

  Case-Laws - AT : Demand of service tax on advances received - Validity of demand made, without classifying the services - the merit classification of the activity undertaken by the appellant is works contract services and the appellant has obtained advances for execution of the activity of works contract services and the revenue has not classified the activity undertaken by the appellant under works contract services and no demand is made for works contract services - AT
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Central Excise

• CENVAT Credit Allowed for Rail Freight Input Services After Clarification of Assessable Value by Counsel.

  Case-Laws - AT : CENVAT Credit - input services - rail freight - Credit has been denied by the appellate authority only on the grounds that the assessable value has not been indicated. This has been satisfactorily explained by the learned counsel that that the freight amount mentioned in all the RRs is the assessable amount for the disputed period. Once the payment of tax is not disputed, and the receipt of service is not disputed - Credit allowed - AT
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• Calibration and Configuration of Appliances by Appellant Not Considered Manufacturing; No New Product Created, Character Unchanged.

  Case-Laws - AT : Manufacture - Activity of calibration tests and upgradation/configuration of the appliances - the activity undertaken by the appellant as calibration tests and upgradation/configuration of the appliances according to the requirements/specifications of the customers, does not amount to manufacture as no new product came into existence and their character and use remain the same. - AT
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Case Laws:

• GST

• 2023 (7) TMI 354
  Rejection of claim of disbursement of incentives promised under Bihar Industrial Incentive Policy, 2011 on 1 2nd expansion of the Petitioner s unit - rejection on the ground that the proposal for said expansions were not approved by the SIPB ignoring the Resolution. HELD THAT:- Perusal of the impugned order reveals that the authority concerned has not taken into consideration the letter dated 15.07.2011 (Annexure-5), which clearly states that for the purpose of expansion and diversification of an existing industry no separate approval of State Investment Promotion Board is necessary. Having regard to the same, this Court deems it appropriate the impugned order needs to be set aside and the matter remanded back to the authority concerned for reconsidering the matter afresh duly taking into consideration the letter dated 15.07.2011 (Annexure-5). Therefore, the impugned order is set aside, the matter is remanded back to the authority concerned to pass an appropriate order duly taking consideration the letter dated 15.07.2011 (Annexure-5) as expeditiously as possible preferably within a period of eight weeks from the date of receipt of a copy of this order. Petition allowed by way of remand.

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• 2023 (7) TMI 353
  Seeking extension of date of filing of appeal - Section 112 of the Central Goods and Service Tax Act, 2017 - HELD THAT:- The Co-ordinate Bench of this Court in ROCHEM INDIA PVT. LTD., M/S. HINDUSTAN CONSTRUCTION COMPANY LIMITED, JSB DREAM HOMES PVT. LTD. AND DOLACE SOLUTIONS PRIVATE LIMITED VERSUS THE UNION OF INDIA THE SECRETARY, (REVENUE) MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI, THE CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, THE GST COUNCIL, THE STATE OF MAHARASHTRA, COMMISSIONER OF CGST CX, PALGHAR, THE COMMISSIONER OF STATE TAX, MUMBAI [ 2023 (2) TMI 878 - BOMBAY HIGH COURT] on very similar issue held that The period of filing the Appeal will stand extended as indicated in Clause 4.2 of the Circular dated 18 March 2020. Respectfully, following the Co-ordinate Bench decision, the present petition is disposed off in terms of the order passed in case of Rochem India P. Ltd. - petition disposed off.

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• 2023 (7) TMI 352
  Revocation/cancellation of attachment of petitioner s bank account - section 83 of CGST Act - HELD THAT:- If, according to the petitioner, the amount was not payable and/or should not have been demanded and/or that the authority had no jurisdiction to retain such amount, then it is for the authority to take an appropriate decision in that regard, if an application is made for refund of the said amount by the petitioners - It is thus opined that if the petitioners make an application in this regard praying for refund of the amount to the concerned designated officer of the respondent within two weeks from today, let the petitioners be heard on such application and an appropriate order be passed on such application of the petitioners. Application disposed off.

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• 2023 (7) TMI 351
  Utilization of input tax credit (ITC) - inward supply of said input/input service used for construction of warehouse can be claimed and utilized to pay tax on the outward supply of services provided by way of renting of said warehouse in case such construction expenses are capitalized in books or not - ITC against inward supply of said input/input service used for construction of warehouse can be claimed and utilized to pay tax on the outward supply of services provided by way of renting of said warehouse in case such construction expenses are not capitalized in books. HELD THAT:- When any purchase or sales claimed to have been made by a person on his own account , it means the person is not making such purchases or sales on behalf of others and the person accounts for the expenses/income in his books. In the instant case, admittedly the applicant has constructed the warehouse and has accounted for the same in his books of accounts and retains the ownership/ title of the said warehouse. Further, the said warehouse is being used by the applicant for providing outward supplies of warehousing service and/or renting or leasing service - the warehouse has been constructed in the applicant s own account and the contention of the applicant in this regard is not acceptable. Whether the warehouse constructed by the applicant can be regarded as an immovable property or not? - HELD THAT:- In the instant case, it is not the case that the applicant and nor the intention, that if he desires so, he can remove the entire warehouse with its flooring without any damage or deterioration and re-erect it on other piece of vacant land. The intention behind the construction of the warehouse, as it has been submitted by the applicant, is to let it out and earn rental income from it, i.e., to provide outward supplies of warehousing service and/or renting or leasing service - the warehouse as constructed by the applicant, for its permanent characteristics and in absence of mobility like other goods, would be regarded as immovable property and therefore the contention of the applicant cannot be accepted in this regard. Whether the ratio of the judgement delivered by the Hon ble Orissa High Court in the case of M/S. SAFARI RETREATS PRIVATE LIMITED AND ANOTHER VERSUS CHIEF COMMISSIONER OF CENTRAL GOODS SERVICE TAX OTHERS [ 2019 (5) TMI 1278 - ORISSA HIGH COURT] is applicable in the case in hand? - HELD THAT:- In Safari Retreat case, the issue before the Hon ble Orissa High Court was to decide whether the petitioner is eligible for input tax credit in respect of inward supply of goods and services received by him and used for construction of shopping mall. Issues like whether the shopping mall can be regarded as immovable property or not and whether the petitioner has received such inward supplies on his own account or not were not a matter of dispute before the Hon ble court. However, in the case in hand, the applicant has contended that since the warehouse has been constructed for the purpose of let it out to another person against rent, it cannot be said that the applicant has received the inward supplies for construction of the warehouse on his own account - the aforesaid case is not identical with the present case and therefore the ratio of the aforesaid judgment is not applicable to the present case, as it is distinguishable on the basis of facts. Thus, the restriction under clause (d) of sub-section (5) of section 17 of the GST Act in respect of input tax credit on goods or services received by the applicant for construction of warehouse is applicable in the instant case i.e., the applicant is not eligible for credit of input tax charged on inward supply of goods and services related to construction of warehouse which is capitalized in the books of account.

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• Income Tax

• 2023 (7) TMI 350
  Exemption u/s 10(26) - income of Scheduled Tribe residing in Specified Areas - applicable to income of an individual or extended to a group of individuals of same family - As in Mahari Sons [ 1991 (12) TMI 51 - GAUHATI HIGH COURT] ruled that when certain individuals who belonged to the same family had set up a business jointly, they would be entitled to the benefit of the exemption under Section 10(26) - Whether such rule was per incuriam or, at any rate, no longer good law in view of subsequent Supreme Court pronouncements? - HELD THAT:- In the present appeals, in one of the matters the registered partnership firm has a husband and wife as partners. In the other matters, uterine brothers constitute the partnership firm in each case. Going by the dictum in Mahari Sons and, particularly, the interpretation of the concept of family made therein, it would appear that an association, even if it be a partnership, between a husband and wife or between a brother and another, would be entitled to the same exemption as any of the partners would in their individual capacity. The fact that the dictum in Mahari Sons has held the field for three decades and the recognition that the order impugned has been rendered by a specialised tribunal it is deemed fit and proper to remand the matter before the Appellate Tribunal with a request to the President of the Tribunal to constitute a larger bench without including either member who was a party to the order impugned, for the consideration of the entire gamut of the matter. The President is requested to ensure that a larger bench of at least three members is constituted within a month of the receipt of an authenticated copy of this order with a request to the relevant bench to dispose of the legal issue which has arisen as expeditiously as possible and, preferably, within three months of the first sitting of such bench.

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• 2023 (7) TMI 349
  Settlement application u/s 245C(1) - mandatory requirements of Section 245D (2D) - application admitted u/s 245D(1) for which original petitioner was required to pay the additional amount of income tax payable on the income disclosed within 35 days of the receipt of the order - HELD THAT:- As the original petitioner would be entitled to interest on the excess payment. If we add together the amount interest on refund of AY-1997-1998, 1999-2000 and 2000-2001, towards refund and interest thereon relating to AY-1998-1999 and 2003-2004 and interest on excess payment of tax the original petitioner would have paid amount more than the short fall indicated by respondent no. 2 in Statement-A, vide his letter dated 29th March 2007. Therefore, we are satisfied that original petitioner has complied with his obligations under the provisions of Section 245D of the Act. We are quashing and setting aside the impugned order dated 3rd January 2008. We direct the matter be placed before the Interim Board for Settlement constituted under Section 245AA for consideration. Since the matter is old, petitioners shall file a copy of the settlement application that was originally filed on 27th April 1997 before the Board within two weeks of this order being uploaded.

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• 2023 (7) TMI 348
  Reopening of assessment u/s 147 - reason to believe - change of opinion - allowability of interest and other expenditure as revenue expenditure - HELD THAT:- Just because the assessee revised the return of income for AY-2005-2006 by disallowing the expenses on account of interest income, the refund was for assessment year entirely different from the impugned assessment year, each assessment year is separate and that can never be a ground for re-opening the assessment. The primary thrust was, of course, on change of opinion. The same issue of investment and interest on loans taken etc., were subject matter of a query raised by the AO as can be seen from the letter issued to petitioner. Petitioner also addressed a communication to give an explanation in regard to allowability of interest and other expenditure as revenue expenditure, i As held in Aroni Commercials Ltd. [ 2014 (2) TMI 659 - BOMBAY HIGH COURT ] once a query is raised during the assessment proceedings and the assessee has replied to it, it follows the query raised was a subject of consideration of the assessing officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an assessing officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceedings even where he is satisfied, it would be impossible for the assessing officer to complete all the assessments which are required to be scrutinised under Section 143(3) - Decided in favour of assessee.

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• 2023 (7) TMI 347
  Reopening of assessment u/s 147 - reassessment after the expiry of four (4) years from the end of the relevant AY - reasons to believe - HELD THAT:- A perusal of the reasons furnished by the AO for triggering the reassessment proceeding would show that there is no reference to the fact that the petitioner had failed to disclose, fully and truly, all material facts necessary for carrying out the assessment. Since the proceeding was triggered after the expiry of four (4) years from the end of the relevant AY, the concerned officer, i.e., the ACIT, was required to assert that income chargeable to tax has escaped assessment on account of the failure on the part of the petitioner to disclose truly and fully all material facts necessary for assessment qua the concerned AY, as stipulated in the first proviso appended to Section 147 of the Act. Decided in favour of assessee.

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• 2023 (7) TMI 346
  Levy of penalty u/s 270A r.w.s. 274 - underreporting of income - addition on account of interest earned from banks - HELD THAT:- Assessee explained that he was under impression that being retired person he is senior citizen and interest income is exempt under section 80TTB, thus find merit in the submissions of assessee.AO initiated penalty on interest income for under reporting of income, however, at the time of levying penalty it was levied for misreporting of income thus, no penalty for misreporting income is justified on this addition. Hence, I direct to delete penalty u/s 270A on such addition. Salary income - misreporting of income on the addition of leave encashment - Exemption u/s 10(10AA) - Assessee explained that initially he was employed Gujarat State Electricity Board, an organ of State Government, which was splitted in to seven state owned company and that he was under the bonafide belief that he is Government employee and that he has disclosed all the particulars of his income. Thus, he was under bonafide belief of State Government employee. It is settled position under law that levy of penalty is not automatic on mere making addition, if the assessee has explained his bonafide belief about deduction of exemption of any component of income , no penalty is leviable on such component of income. Hence, no penalty u/s 270A is leviable on the addition of leave encashment. In the result, the grounds of appeal raised by the assessee are allowed. Decided in favour of assessee.

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• 2023 (7) TMI 345
  Unexplained money u/s 69A - assessee has not given the explanation in respect of the cash withdrawn and cash deposited prior to demonetization as well as during the pre-demonetization period - HELD THAT:- As before AO assessee has filed the cash book of the Yogi Hosiery as well as purchase register, sales register and ledger account with Vijaya Cooperative Bank Ltd. Assessee has also submitted details of cash deposits withdrawn from Vijaya Cooperative Bank Ltd. as well as bank statement of the said bank. Month wise opening cash in hand and cash sales as well as cash deposited in bank and cash withdrawal from bank from May 2015 till October 2015 was summarized and it appears that the assessee was regularly depositing cash in the banks account. Business of the assessee was not disputed by the AO as well as the cash transactions and the sales books as well as purchase books were also not disputed by the AO. Thus, the addition made by AO on account of unexplained money u/s 69A does not sustain as the assessee has explained in entirety all the amounts through various documents. Appeal of assessee allowed.

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• 2023 (7) TMI 344
  Claim of exempt income made for the first time to the rectification application - receipt of survival benefit received from LIC on a single premium policy - CIT(A) said that an exempt income cannot be brought on record by way of a rectification application, because such a claim of the assessee does not alter the total income returned initially - HELD THAT:- Hon ble Apex Court in the case of NTPC [ 1996 (12) TMI 7 - SUPREME COURT] held that it is open for the assessee to raise the points of law even before the appellate authorities, when consideration thereof does not necessitate any enquiry into the facts or calling for any fresh evidence. In this case, according to the assessee Form 26AS does not refer to the income received by the assessee towards survival benefit received from LIC on a single premium policy. It is not the case of the Revenue that such a receipt is not exempt income. Only point for consideration of such a plea by the assessee is that the assessee preferred the same by way of letter dated 25/06/2020. Since the plea of the assessee that such a receipt is an exempt income, is purely a question of law, and does not require calling for any fresh evidence, there is no legal impediment for the Ld. CIT(A) to consider the same. With this view of the matter, we are of the considered opinion that interest of justice demands that the plea taken by the assessee through letter dated 25/6/2020 as to the nature of receipt from LIC as survival benefit on a single premium policy, being a pure question of law, requires consideration; lest it would amount that an exempt income is brought to tax. We set aside the impugned order and rest of the issue to the file of the jurisdictional AO to verify whether the nature of the impugned receipt is received towards survival benefit received from LIC on a single premium policy. If it is so, it is an exempt income. The grounds of appeal are accordingly treated as allowed for statistical purpose.

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• 2023 (7) TMI 343
  Conflict of interest - Appointment of private counsels in connection with CIC proceedings (RTI) - Counsel appeared before the CIC on behalf of the ITAT - The same counsel are appearing before the same bench of ITAT on behalf of clients and against the revenue - HELD THAT:- We are of the view a conflict of interest in the context of lawyers refers to a situation where lawyer s personal or financial interest conflicts with their professional obligations to their clients. The conflict of interest comes in a situation where there is dual representation, adverse interests, personal interests and business interests. The conflict of interest can be addressed as legal ethic rules requires a lawyer to identify and avoid conflicts wherever possible. In the instant case, Shri I. Dinesh as authorized representative of APIO, ITAT Chennai represented ITAT before CIC and he also represents his clients before ITAT Benches. It is not the case of the Ld.CIT-DR that there is any financial interest, personal interest between the client or any of the Member constituting the Bench neither it is the case of the Ld.CIT-DR that any of the Member of ITAT constituting the Bench has represented the client during their professional services. This is a simple case of lawyer Shri I. Dinesh has been appointed by President, ITAT to represent CPIO by virtue of power vested in him u/s. 255(5) and 255(6) of the Act, who happens to be a Member of ITAT. This tribunal has seen members from Indian Revenue Services who have all along been with the Revenue becoming members of this Tribunal and have unblemished record of dispensing justice without fear or favour. This Tribunal has also seen emergence of some of the finest members who have been representing the department in their professional careers later to become Members of the Tribunal and judges of the High Court and Supreme Court If these are to be considered as instance of Conflict of interest than no departmental representative and no member from Indian Revenue Services would be eligible to become members of tribunal. Now, this issue raised by ld.CIT-DR, Dr.S. Palanikumar before us is totally out of context, without any basis, totally different and distinguished on facts. According to us, there is no conflict of interest in this matter. Hence, this should be rejected at the threshold. Whether Tribunal is not the appropriate judicial forum to raise this issue? - From the functions of Departmental Representative, it is very clear that the role of the Departmental Representative is to represent the case and does not have any authority to append his signature in his official capacity to file additional grounds of appeal or miscellaneous application. The AO is authorized to file appeal, additional ground, any application or miscellaneous application and for that he has to seek permission from the competent authority. Hence in our view, CIT-DR has no locus standi to file this impugned application and further argue the same. It seems that ld.CIT-DR is acting in his individual or personal capacity as an aggrieved party for the reasons known to him. Hence, for this reason also this petition is dismissed as not-maintainable. Income taxable in India - income accrues and arises in India - AO treated the guarantee fee as other income - contracting state - Indo-Korea DTAA - assessee is a foreign company incorporated in Korea which is engaged in the manufacture of automobile and auto parts - HELD THAT:- As following Article 23 of Indo-Korea DTAA which specifically provides that taxability of other income is only in the contracting state and in the present case, the contracting state is Korea and not India, hence taxability under the Income Tax Act is not at all desirable. Hence, we delete the addition and allow this appeal of assessee on this very issue. The appeal of the assessee is allowed. Revision u/s 263 - payments received on account of guarantee fee as taxable under the Income-tax Act - HELD THAT:- As, as already adjudicated the issue in assessment year 2015-16 in preceding paras and finding is given that the guarantee fee is not taxable in India in view of Article 23 of Indo-Korea DTAA, we quash the revision order passed by PCIT u/s. 263 of the Act. The appeal of the assessee is allowed.

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• 2023 (7) TMI 342
  Forex unrealized loss on account of Foreign Exchange - allowable deduction or not? - gain on Foreign Exchange fluctuation is taxable - assessee submitted that the transactions entered into foreign currency are required to be reported in Indian Rupees following the accounting treatment prescribed in the Accounting Standard-11 of ICAI and loss arising on account of difference in the Foreign Exchange rates prevailing on the date of transaction and the closing rate on the date of balance sheet (when the transaction is settled for the subsequent year) on account of restatement of outstanding loss for Revenue transactions on the balance sheet date is Revenue loss eligible for deduction u/s 37(1) as relying on Woodward Governor India Pvt. case [ 2009 (4) TMI 4 - SUPREME COURT] - HELD THAT:- We feel it appropriate to restore the issue to the file of the AO for examining the issue afresh taking into consideration all the facts and contentions of the assessee and to decide the issue in accordance with law after providing adequate opportunity of being heard to the assessee. Addition in respect of supplemental lease rent u/s 40(a)(i) - exemption u/s 10(15A) of the Act would not apply to supplemental rent/maintenance reserve - assessee contended that maintenance reserve is in the nature of supplemental rent paid by the assessee on monthly basis in addition to the basic lease rental for the aircraft and is part of lease rent - HELD THAT:- Tribunal [ 2023 (1) TMI 652 - ITAT DELHI] decided the issue in favour of the assessee holding that supplemental rent/maintenance reserve would be exempt from tax in the hands of lesser in India as per Section 10(15A) of the Act and hence, no disallowance u/s 40(a)(ia) can be made. Special Bench of the Delhi Tribunal in the case of Inter Globe Aviation Ltd. (Indigo) [ 2021 (9) TMI 1400 - ITAT DELHI] considered the lease rental pursuant to agreements executed after 01.04.2007 and its chargeability to tax in the hands of lesser under Article 12 of DTAA between India and Ireland and the Special Bench held that supplementary rent paid for lease agreements executed after 01.04.2007 are not chargeable to tax in India. Decided in favour of assessee. Disallowance on account of interest paid on late deposit of service tax and VAT u/s 37(1) - CIT(Appeals) deleted the disallowance - HELD THAT:- We observe that the disallowance was deleted on appreciation of facts and the evidences on record and also applying the decision of Sri Radha Krishna Shipping Ltd. [ 2019 (10) TMI 836 - ITAT MUMBAI] wherein it has been held that interest on account of delay in payment of service tax is allowable as deduction u/s 37(1) of the Act - Decided in favour of assessee.

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• 2023 (7) TMI 341
  Higher rate of depreciation on dumpers - @30% OR 15% - vehicle/dumpers were given on hire - HELD THAT:- To claim higher depreciation it is required that goods transported must belong to someone else and use of motor vehicles for transportation is a key to claim higher depreciation. After perusal of material on record we find that the assessee is engaged in providing equipment and motor vehicle on hire. As relying in assessee s own case for the earlier assessment years 2011-12 to 2013-14 we have no hesitation in following the same, and allow the benefit of higher rate of depreciation @ 30% on Dumper, Tipper etc. Thus the grounds raised by the Revenue is devoid of merits.

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• 2023 (7) TMI 340
  Revision u/s 263 - As per CIT AO had incorrectly allowed deduction of payment made to illegal occupants - as per CIT where property was not mortgaged by previous owner but by assessee himself, then amount paid to discharge mortgage debts could not be treated as cost of acquisition so as to allow same as deduction - HELD THAT:- As given the fact that the proceedings in question are 263 proceedings, wherein the AO had given a thoughtful consideration on the issue whether the sum paid directly by the seller to Titco Ltd could be claim deduction while computing capital gains in the hands assessee, it cannot be held that there was any lack of enquiry on the part of AO while computing the assessment or that the view taken by the Assessing Officer was not a legally plausible. View taken by PCIT was perhaps a legally more plausible view, in light of the decision rendered in the case of VSMR Jagadish Chandran [ 1997 (7) TMI 6 - SUPREME COURT] however, considering the fact that what is being analyzed is the scope of revisionary power vested with the PCIT under 263 of the Act, where during the course of assessment, AO gave a thoughtful consideration to the material placed on record and took a view which cannot be held to be absurd or legally implausible, then, in our considered view, the PCIT is not empowered to supplant his own view, with the view taken by the AO by taking recourse to proceedings u/s 263 of the Act. Scope of proceedings u/s 263 - Principal CIT cannot in 263 proceedings set aside an assessment order merely because he has different opinion in the matter. In our view, sec 263 of the Act does not visualise a case of substitution of the judgment of the Principal CIT for that of the AO who passed the order unless the decision is held to be wholly erroneous. Principal CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. No error in the order of Ld. AO so as to justify initiation of 263 proceedings by the Ld. Pr. CIT. Decided in favour of assessee.

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• 2023 (7) TMI 339
  Disallowance u/s 14A - expenses incurred on earning exempt income - sufficiency of funds - Suo-moto disallowance made by assessee - HELD THAT:- No reason to deviate from the stand taken in assessee s own case[ 2022 (12) TMI 447 - ITAT AHMEDABAD] in holding that since the assessee is having interest free funds much larger as compared to the investment, disallowance of assessee s claim for interest expenditure by applying Section 14A of the Act was incorrect. As the assessee has already disallowed suo-moto in his return of income by making disallowance under Section 14A r.w. Rule 8D, the Ld. CIT(A) rightly deleted the amount on account of administrative expenditure made by the Ld. AO. The Ground of appeal filed by the Revenue is found to be devoid of merit and, thus, dismissed. Disallowance u/s 14A while computing income u/s 115 JB - HELD THAT:- As in assessee s own case [ 2022 (12) TMI 447 - ITAT AHMEDABAD] relying upon the judgment passed by the Hon ble Supreme Court in the case of Atria Power Corporation Ltd [ 2022 (8) TMI 1322 - SC ORDER] whereby held disallowance made under Section 14A of the Act could not be added in assessee company s income for the purpose of computation of income u/s 115JB. Revenue appeal dismissed.

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• 2023 (7) TMI 338
  Estimation of income - Addition u/s 69C - bogus purchases - non rejecting of books of accounts - HELD THAT:- Profit made by the assessee in this case i.e. by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. Thus, restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. Appeal of the assessee is allowed for statistical purposes

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• 2023 (7) TMI 337
  Assessment u/s 153A - Bogus purchases - Whether incriminating documents found in search? - addition being 15% of the total bogus purchase - HELD THAT:- As in the absence of any incriminating material and by placing reliance on the decision of Continental Warehousing Corporation (NHAVA SHEVA) Ltd. [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] , Murli Agro Products Ltd. [ 2010 (10) TMI 1052 - BOMBAY HIGH COURT] and All Cargo Global Logistics [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] we delete the impugned addition made by the A.O. and confirmed by the ld. CIT(A) and also restricted to 12.5% on bogus purchases by the Tribunal order. Hence, we allow the additional ground of appeal raised by the assessee.

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• 2023 (7) TMI 336
  Addition u/s 56(2)(viib) - income from other sources - share premium received by the assessee - discarding the DCF method of valuation of shares adopted by the assessee - Whether the valuation report is fair and reasonable and the assessee has failed to justify the premium of Rs. 130/- per share charged on allotment of un-quoted equity share? - HELD THAT:- Hon ble Delhi High Court in the case of Pr. CIT Vs. Cinestaan Entertainment Pvt. Ltd. [ 2021 (3) TMI 239 - DELHI HIGH COURT] in an identical issue held that the shares had not been subscribed to by any sister concern or closely related person but by outsider investors. It was further held that the methodology adopted was a recognized method of valuation and the Revenue was unable to show that the assessee adopted a demonstrably wrong approach or that the method of valuation was made on a wholly erroneous basis or that the method of valuation or that it committed a mistake which went to the root of the process AO erred in discarding the DCF method of valuation of shares adopted by the assessee. Thus, we reverse the order of the ld. CIT (A) and direct the AO to delete the addition made u/s 56(2)(viib) - Decided in favour of assessee.

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• 2023 (7) TMI 335
  Disallowance towards the amount paid to the landlord as compensation - compensation as paid to the seller of the land not towards purchase of the land but towards the delay in handing over the possession of the built up area, as was stipulated to be - HELD THAT:- At the initial stage, the assessee claimed such compensation to have been paid to Tenant, whereas, during the course of assessment proceedings, the assessee claimed it as compensation to the seller. AR relied on the Sale cum Development made on 05-12-2008, which has been placed on record to support the contention that the payment so made was compensation to the owner of the flats for delay in handing over of the possession. Since this is an additional evidence which was not there before the authorities below, it would be just and fair if the impugned order is set aside and the matter is remitted to the AO for verifying the relevant clauses of the agreement. Appeal is allowed for statistical purposes.

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• 2023 (7) TMI 334
  Subsequent assessment on the same issue - as per assessee for the same AY 201-12 ITO ward 47(2), Delhi have already passed reassessment order u/s. 147/143(3) - HELD THAT:- As for AY 2011-12 the AO ITO, Ward 47(2), Delhi passed reassessment order on 28.09.2018 and thereafter the ITO, Ward 63(3) also passed second assessment order for the same AY 2011-12 u/s. 147/144 of the Act ex-parte qua assessee. In such a situation subsequent ex-parte reassessment order cannot be held as sustainable and valid being bad in law. Therefore grievance of assessee is allowed and impugned assessment order dated 06.12.2018 and consequent first appellate order dated 27.04.2022 are quashed being not valid and unsustainable. Accordingly, ground no. 1 of assessee is allowed.

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• 2023 (7) TMI 333
  Assessment u/s 153A - addition u/s 69A - incriminating material found during search or not? - HELD THAT:- Admittedly, there was no incriminating document/ material found and seized against the appellant assessee, as it is further evident from the assessment order itself where addition has been made without referring to any incriminating documents. CIT(A) failed to appreciate the facts on record that there was no incriminating document seized and that the assessment was completed passed u/s 143(3)/153C whereby assessing total income after making addition u/s 69A in a routine manner in respect of unabated assessment without referring to incriminating documents is illegal and unjustified. In our view, the impugned order of the CIT(A) are perverse to the facts on record and bad in law. On similar facts, in the recent SC Judgement of Abhisar Buildwell P. Ltd. [ 2023 (4) TMI 1056 - SUPREME COURT ] had observed that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A. Also in M/s U.K Paints (OVERSEAS) LTD. [ 2023 (5) TMI 373 - SC ORDER ] had observed that as found by the High Court in none of the cases any incriminating material was found during the search either from the Assessee or from third party. In that view of matter, as such, assessments u/s 153-C of the Act are rightly set aside by the High Court. Appeal of assessee allowed.

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• 2023 (7) TMI 332
  Penalty u/s. 271B - delay of 1 day in filing the tax audit report - assessee contended that the assessee explained that it got the accounts audited and obtained the tax audit report but due to some technical glitches it was submitted by just one day delay - HELD THAT:- There is only one day delay in submission of the audit report and that too only the technical glitches and latches on the portal which can be a reasonable cause for not complying the law. The similar view has been taken by the Hon ble Madhya Pradesh Court in the case of Staywell Hotels Private Limited [ 2005 (3) TMI 47 - MADHYA PRADESH HIGH COURT] where in the court has condone the delay in filling the audit report by two months. Levy of penalty for delay in filling the audit report by one day did not have any deliberate intention on the part of the assessee, nor could the conduct of the assessee be regarded as to breach the provision of the law. The delay if any is on account the reasons on the technical letches on the portal and the same is venial in nature based on the provision of the Act the penalty levied u/s 271B is not justified - Decided in favour of assessee.

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• 2023 (7) TMI 331
  Estimation of income - Bogus purchases - Average rate of gross profit declared by the assessee is more than 17%, which was stated to be more than the industry average - HELD THAT:- We noticed earlier that the manufacturing loss declared by the assessee was less than the SION standards prescribed by DGFT. The gross profit rate declared by the assessee was more than the industry average. Hence, in the normal circumstances, no disallowance of purchases is called for. However, since some of the suppliers have stated that they have not supplied the materials and since the AO DGCEI has opined that the assessee might have procured materials from others, it is possible that the assessee could have made some profit in such an exercise. Hence, in order to take care of revenue leakages, if any, some addition is called for. Thus we modify the order passed by Ld CIT(A) in all these years and direct the AO to restrict the addition on account of non-genuine purchases to 2% of the value of alleged bogus purchases in both the years., i.e., AY 2014- 15 and 2015-16. TP adjustment in respect of Commission on Corporate Guarantee given to the Associated Enterprises by the assessee -TPO made adjustment @ 1.50% of the Guarantee amount given by the assessee - HELD THAT:- We notice that the co-ordinate bench of Tribunal has examined an identical issue in the assessee s own case in AY 2010-11 and the Tribunal has restricted the rate of commission at 0.50% of the value of loan actually availed by the Associated Enterprises. In this regard, the Tribunal has followed the decision rendered in the case of Everest Canto Cylinders Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] - Since the decision rendered by Ld CIT(A) on this issue is covered by the decision rendered by the jurisdictional High Court and the Tribunal, we do not find any reason to interfere with the decision so taken by Ld CIT(A) on this issue. Addition made towards cash component paid in purchase of agricultural land - AO made the addition on the basis of a draft agreement found in the laptop of Shri Shalin Thaker - HELD THAT:- Discrepancies noticed in the draft agreement and also the fact that the AO did not conduct proper enquiries to find the veracity of the draft agreement would drive us to conclude that the AO could not have placed reliance on the draft agreement in entirety without corroborating the same with any independent enquiries. The above said view of ours finds supports from the decision of AKME PROJECTS LTD. [ 2013 (12) TMI 197 - DELHI HIGH COURT] as held draft agreement to sell could have been the starting point of investigation and further detailed verification, which has not been carried out. Decided in favour of assessee.

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• 2023 (7) TMI 330
  Deduction u/s 80IA - CIT(A) justification allowing more deduction in the set aside proceedings than that was claimed by the assessee in its original return of income as assessed u/s 143(3) - HELD THAT:-There was no restriction to the CIT(A) to restrict the deduction to the extent it was originally claimed in the return of income. CIT(A) was justified to examine all the details furnished by the assessee to determine the eligible claim of deduction to the assessee. As in the cases of Ahmedabad Electricity Company Ltd and Godavari Sugar Mills Ltd.[ 1992 (4) TMI 29 - BOMBAY HIGH COURT] has observed that the basic purpose of an appeal procedure in an income tax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stages, either by the Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee. They can consider the entire proceedings to determine the tax liability of the assessee. No infirmity in the order of the CIT(A) in considering the claim of the assessee for deduction u/s 80IA in the set aside proceedings, even if the same was more than the originally claimed in the return of income. Computation of deduction - We find force in the contention of the ld. DR that as per the provisions of section 80A(2) of the Act, the claim of deduction under Chapter VIA shall not in any case exceed the gross total income of the assessee. As directed that the claim of deduction u/s 80IA will be allowed to the assessee to the extent of gross total income of the assessee and the assessee will not be entitled to any claim of carry forward of loss resulting from the allowance of claim of deduction u/s 80IA of the Act by the CIT(A) more than the originally claimed. With the above observation, the appeal of the assessee is treated as partly allowed.

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• 2023 (7) TMI 329
  Unexplained cash credits u/s 68 - appellant company has failed to prove the identity, genuineness and creditworthiness of the parties to whom the share capital including premium was issued - commission paid u/s 69C of the Act - HELD THAT:- CIT(A) held that the assessee (1) Failed to establish that the money in the form of share capital and share premium was received in the financial year 2008-09 as claimed. (ii) Assessee failed to provide the bank statement for the year 2009-10 to 2014-15 to prove that the money was actually received in these years. Assessee failed to produce Directors of the assessee company as well as the alleged share subscribers companies. CIT(A) held assessee has filed first return of income for the AY 2014-15 and it has been proved that the assessee has no evidence that the share capital and share premium was received in the financial year 2008-09 relevant to assessment year 2009-10, it is held that the assessee has credited the aforesaid sum in its books of accounts during the year itself for which it failed to satisfactorily explain the identity, genuineness and creditworthiness of the parties against whom the amount in question has been credited. On going through the issues, since the assessee failed to rebut the findings of the revenue, the order of the ld CIT(A) is hereby affirmed. Appeal of the assessee is dismissed.

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• 2023 (7) TMI 328
  Disallowance of business expenses - assessee business has not commenced - HELD THAT:- From the copy of the note on administrative cost as well as the invoices raised by Hindustan Construction Company Ltd, filed by the assessee, we find that in the year under consideration, the assessee incurred project-related administrative costs on personnel. Therefore, in the present case, there exists sufficient evidence to show that the business of the assessee had commenced in the year under consideration. Further in subsequent years the assessee has been found to have entered into various agreements of urban development and many projects were in pipeline, also supports that the business of the assessee which started in the year under consideration continued in subsequent years. Since the business of the assessee had commenced during the year, therefore, the expenditures claimed by it on the revenue account are allowable. As a result, grounds raised by the assessee are allowed.

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• 2023 (7) TMI 293
  Exemption u/s. 11 - late filing of Audit Report u/s. 12A(1)(b) in the prescribed Form 10B - As per assessee it is a sufficient compliance with the procedure, if the Audit Report u/s. 12A(1)(b) is filed at any stage before the completion of assessment or even at the appellate stage - whether it is permissible to the assessee to produce the audit report at the appellate stage? - HELD THAT:- As decided in the case of CIT Vs. Gujarat Oil Allied Industries Ltd. [ 1992 (9) TMI 67 - GUJARAT HIGH COURT] the provisions regarding furnishing of audit report along with the return has to be treated as a procedural provision. It is directory in nature and its substantial compliance would suffice. Benefit of exemption should not be denied merely on account of delay in furnishing the same. Also see SOCIAL SECURITY SCHEME OF GICEA case [ 2022 (12) TMI 1172 - GUJARAT HIGH COURT] No hesitation in confirming the order passed by Ld. CIT(A) who has directed JAO to verify the Form No. 10B and allow the claim of exemption u/s. 11 and compute the total income. Decided in favour of assessee.

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• 2023 (7) TMI 292
  Revision u/s 263 - Allowability of interest on non-performing asset ( NPA ) - HELD THAT:- AO had issued sec.143(2) notice as well as sec.142(1) notice specifically raising the issue of Income Computation and Disclosure Standards ICDS compliance. The assessee had duly replied the same highlighting the fact before the AO that the interest income regarding the impugned NPA advances could neither be assessed on accrual principle nor as per the recently introduced ICDS . DR could hardly dispute that all these standards uniformly contain this uniform clause thereby paving way for applicability of the provisions of the Act wherein the assessee has already succeeded on the instant issue of accrual of interest on NPAs right up to hon ble jurisdictional high court having attained finality We hold that the CBDT s circular issued in tune with the foregoing Income Computation and Disclosure Standards ICDS also would not apply once the assessee is not required to recognize its accrued interest on NPAs as income on accrual basis. We conclude that the PCIT has erred in law and on facts in terming the AO s sec.143(3) regular assessment as an erroneous one causing prejudice to interest of the Revenue - Decided in favour of assessee.

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• Customs

• 2023 (7) TMI 327
  Seeking grant of bail - illegal possession of 2 kg of Gold bullion - bag belonging to petitioner or not - HELD THAT:- Considering the facts and circumstances of the case and the fact that petitioner bears the clean antecedent and charge-sheet has been submitted in this case against the petitioner, let the petitioner be released on bail on furnishing bail bond of Rs. 10,000/- with two sureties of the like amount each to the satisfaction of learned Chief Judicial Magistrate, Patna in connection with the conditions imposed - application allowed.

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• 2023 (7) TMI 326
  Benefit under MEIS scheme - amendment in the shipping bills to claim benefit under MEIS scheme - correction of technical error by allowing selection table `yes for shipping bill to be under reward scheme. HELD THAT:- In the present case, the petitioner has already mentioned in the invoice that he has opted for the benefit under the MEIS scheme and has clearly mentioned in the invoice that I/WE hereby declare that we intend to claim benefit of merchandise exports from India scheme MEIS - merely a technical lapse would not debar the petitioner from availing the benefits under the scheme which has been floated by the respondent authorities. The rejection of the benefits is merely a technical rejection based on noncompliance of clauses of the procedure which the respondent authorities could have avoided and could have granted the benefit under the scheme and could have amended the shipping bills - the petitioner has already mentioned in the shipping invoice and has declared its intention to avail the benefits of the MEIS scheme. Thus, merely an error of clicking `No instead of Yes does not debar the petitioner from availing the benefits under MEIS scheme. More particularly, the communication reveals that the intention of the petitioner was to avail the benefit of MEIS. The decision of the respondents is erroneous and requires an interference by this Court. The petitioner company is entitled to claim the benefit under MEIS scheme and hence impugned order is set aside - The concerned respondents are also directed to amend the shipping bills and also further directing the respondents to allow the modification in online system to enable the petitioner to correct the technical error by allowing selection table `Yes for shipping bills to be under reward scheme and thereby process the application to grant export incentives under MEIS scheme to the petitioner. Petition allowed.

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• 2023 (7) TMI 325
  Classification of imported goods - Liquid Crystal Display (LCD) panels and parts of LCD panels - to be classified under Chapter Heading 9013 9010 or under Chapter 8529 9090? - HELD THAT:- The Apex Court in the case of CCE, AURANGABAD VERSUS M/S VIDEOCON INDUSTRIES LTD. THR. ITS DIRECTOR [ 2023 (3) TMI 1338 - SUPREME COURT] on interpreting the General Rules of Interpretation and the Section Notes and Chapter Notes observed The CESTAT s reasoning and conclusions, in both cases, that the LCD sets were under Chapter 90, Entry 9013.8010, is sound and unexceptionable. By following the ratio of the above apex court judgment rendered in the case of CCE, Aurangabad vs. M/s. Videocon Industries Ltd., the LCD Panels are to be classified under Chapter Heading 9013 8010 and parts of LCD panels are to be classified under Chapter Heading 9013 9010 - Appeal allowed.

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• 2023 (7) TMI 324
  Refund of SAD - interpretation of Notification No. 21/2012-Cus. dated 17.03.2012 - Revenue entertained a doubt that the goods imported by the assessee-respondent did not appear to be meant for retail sale - goods imported can be considered to be a pre-packaged commodity in terms of the provisions of the Legal Metrology Act or not - HELD THAT:- There are clearly buyers, identified or otherwise, for the pre-packaged goods; there is no dispute that such pre-packaged goods were sold by the importer to the buyers/resellers and that MRP/RSP labelling was witnessed by the proper officer at the Customs notified area - there are no disputes to the factual position taken out either in the grounds-of-appeal or even in the impugned Order-in-Original, except as per paragraph 13 of this order, and therefore, it is held that the importer has satisfied the conditions of Notification No. 21/2012-Cus. ibid. It is noticed that in the earlier paragraphs of this order that the levy of SAD is to counterbalance the State levies in the form of VAT / ST / CST. This means that the importer is normally liable to pay SAD at the time of import; when such goods imported are subsequently sold locally on payment of applicable VAT / ST / CST, the whole of the SAD that was levied on such imported goods could be claimed as refund by the importer. This is the scheme incorporated in Notification No. 102/2007-Cus. dated 14.09.2007, which was intended to provide a level playing field to importers/traders who clear goods against payment of SAD vis- -vis manufacturers, who did not pay SAD while manufacturing the goods domestically and thereby to remove the burden of double taxation on such importers. The above Notification underwent subsequent amendments. Extended period of limitation - HELD THAT:- By virtue of the above counterbalancing act, there is no loss to the exchequer and therefore, the issue is clearly revenue neutral. This will definitely have a bearing on the allegations as to suppression of facts, etc., for invoking the extended period of limitation - Hence, it is not only on the issue of revenue neutrality, but also on the point of invocation of extended period of limitation, apart from merits, that the Revenue has to fail. Thus, it is clear that the Department was aware as to what was being imported and the purpose and hence, there was nothing that was suppressed , more so, to evade payment of duty. There are no infirmity in the impugned order and therefore, the same does not call for any interference - appeal of Revenue dismissed.

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• 2023 (7) TMI 323
  Valuation of imported goods - Enhancement of value based on NIDB data - violations of PFT Act and the PFA Rules - packages imported did not contain the details of manufacturer as required under the said Act - confiscation of the goods - imposition of redemption fine and penalty. Enhancement of value based on NIDB data - demand of differential duty - HELD THAT:- It is correct that in show cause notice the proposal is to enhance the value in terms of Rule 9 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. However, adjudicating authority has applied Rule 5 to confirm the enhancement of value and to demand differential duty. The value has been enhanced solely on the basis of NIDB data. The details of bill of entry has been mentioned. It is not clear as to which is the country from which the contemporaneous imports are made. So also, the name of the supplier is not clear. The appellant ought to be provided with complete details of the contemporaneous import relied upon to enhance the value. The courts have cautioned against the sole reliance of NIDB data for enhancement of value - In the case of M/S. TOPSIA ESTATES PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI (IMPORT-SEAPORT) [ 2015 (1) TMI 750 - CESTAT CHENNAI ], the Tribunal held that the value declared cannot be rejected merely on the basis of NIDB data. In the present case, the department has failed to substantiate as to how the value adopted on the basis of NIDB data is comparable in the absence of details required in the nature of name of manufacturer, country of origin etc. to arrive at contemporaneous price. The facts being so, there are no sufficient reasons to reject the transaction value and for the enhancement of value. The demand of differential duty cannot sustain and requires to be set aside. Confiscation of the goods and the imposition of redemption fine and penalty - main allegation of violations of PFT Act and the PFA Rules is that the packages imported did not contain the details of manufacturer as required under the said Act - HELD THAT:- The infractions alleged under the PFA Act and Rules and FFS Act 2006, if any, has been rectified - The Tribunal in the case of M/S. AVENUE IMPEX VERSUS THE COMMISSIONER OF CUSTOMS [ 2012 (2) TMI 39 - MADRAS HIGH COURT] had occasion to consider a similar situation. The imported goods which did not comply with the requirement of providing necessary details on the bulk bags was ordered to be released after complying with the repacking and relabelling in the customs bonded premises. In the present case, the goods having been released after rectifying the deficiency and on fulfilment of the conditions, as per direction of Hon ble High Court, the confiscation of goods cannot sustain. Consequently, the redemption fine and penalties imposed are required to be set aside. The impugned order cannot sustain. The same is set aside. Appeal is allowed.

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• 2023 (7) TMI 322
  Maintainability of appeal - appeal filed against a communication by the assessing officer seeking clarification from the importer during the course of assessment of bills of entry filed by the appellant and that the assessment is still pending - Revenue contended that as per Section 128 of the Customs Act, 1962 the appeal before Commissioner (Appeals) lies only against any decision or order under this Act. HELD THAT:- By giving reasoning the authority under group A of Customs clearly concluded that the appellant s claim for basic customs duty exemption under the said notification DFIA cannot be extended and it was also directed that the bills of entry may be assessed on merits. As per this decision of the assessing officer, the appellant have no option but to forego exemption notification under DFIA scheme for assessment of bills of entry. If the contention of the Commissioner (Appeals) is accepted then in such a case, it shall be prejudicial to the appellant for the reason that as per the decision taken while raising the query, the bills of entry shall invariably be assessed by denying the exemption and the appellant shall be forced to pay duty and thereafter the appellant shall be forced to file appeal before the Commissioner (Appeals). This entire exercise will prejudice the interest of the appellant which is not an intention of the law. To claim the exemption the appellant has no remedy except to file appeal before Commissioner (Appeals). As per the contention of the learned Commissioner (Appeals) this is only a communication and it is not worthy to appeal. Even though it is a communication but decision of denial of exemption has been taken by the assessing officer. After this decision the appellant would not have claimed the exemption therefore the only remedy lies against the said decision is an appeal before Commissioner (Appeals). In the case of M/S. SHREE CHAMUNDA ENTERPRISES VERSUS ADDITIONAL DIRECTOR GENERAL-MUMBAI ADJ. [ 2020 (10) TMI 1112 - CESTAT MUMBAI] the bench considering the maintainability of appeal against a communication, held that Any such determination during the course of adjudication by the adjudicating authority is an order passed by the passed by the adjudicating authority and is within the purview of Section 129A(1)(a) against which the appeal lies to this Tribunal. A similar issue has been considered about the maintainability of the appeal against communication denying conversion of shipping bills against appellant in the case of STERLITE OPTICAL TECHNOLOGIES VERSUS COMMR. OF CUS. (EXP.), ACC, MUMBAI [ 2008 (1) TMI 166 - CESTAT MUMBAI] wherein the Tribunal held that It is strange that after numerous orders have been passed by the various Benches of the Tribunal over a period of number of years on the question of conversion of shipping bills from one scheme to another, the same old question is raked up in a naive manner. The issue is not covered by Chapter X of the Customs Act, 1962 and hence this Tribunal rightfully has the jurisdiction to hear any appeal on the subject. Thus, there are no hesitation to hold that decision taken by the assessing authority is clearly a challengeable decision before the Commissioner (Appeals). However, since the learned Commissioner (Appeals) has not given any findings on merit the matter needs reconsideration by the learned Commissioner (Appeals) on merit without going into maintainability of the appeal before him - the Commissioner (Appeals) has power to decide the appeal on the grounds of appeal made by the appellant and if at all it is required to satisfy himself with other details or documents he may call for the same from the appellant as well as from the department to come to the conclusion about the merit of the case. Appeal allowed by way of remand.

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• 2023 (7) TMI 321
  Imposition of penalty on the appellant under Section 117 of the Customs Act, 1962 - alleged violation of Warehousing Regulations, 2016 - SCN not issued - violation of principles of natural justice - HELD THAT:- There are force in the contention of the learned advocate for the appellant inasmuch as the show-cause notice issued proposing confiscation of the goods lying outside the bonded area cannot suffice the requirement of imposition of penalty without issuance of a show-cause notice proposing actions for violation of Warehouse (Custody Handling of Goods) Regulations, 2016. The Department after conducting inquiry even though endorsed a copy of the same to the appellant; however, notice was not issued to the appellant proposing actions on the basis of the said report for alleged violation of Warehouse (Custody Handling of Goods) Regulations, 2016. There is a violation of principles of natural justice - matter is remanded to the adjudicating authority to initiate the proceedings afresh if so inclined by way of issuance of the show-cause notice and observing principles of natural justice in deciding the case afresh - Appeal allowed by way of remand.

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• 2023 (7) TMI 320
  Valuation of imported goods - various types of cosmetics - rejection of declared value - revision of assessable value under rule 7 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - requirement to carry the retail selling price (RSP) in accordance with requirements of Legal Metrology Act, 2009 - HELD THAT:- The ascertainment of abatement from local sale price lipgloss / lipstick was applied, across the board, to other goods in the consignment entered for import by the appellant. This, in itself, is not acceptable as no justification had been offered for different types of goods to be treated alike. Furthermore, three conditions are pre-requisite in the deductive value method option, viz., that the sale is to persons who are not related to the person in India, that derivation of the unit price should have been from identical or similar imported goods sold in the highest aggregate quantity and that sale be in the condition as imported and about the time at which the bills are presented for import. The rejection of declared value without subjecting the invoice of the manufacturer to scrutiny is clear breach of circumstances in which rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 could be invoked legally. Compounding this deviation from the law, failure on the part of the adjudicating authority to acknowledge the local sale invoices as evidence of existence of transaction value of identical/similar goods is further indication of command performance instead of application of mind warranted by the exercise of valuation in accordance with statutory prescription. In such circumstances, rejection of the declared value under the authority of rule 3(3) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 requires that transaction value of identical goods/similar goods takes precedence over substitution by deductive value from local prices even if the ascertainment had been of each type of goods and in conformity with the conditions therein. It would appear that the original authority has improperly proceeded beyond the preceding methods in the sequential enumeration. The first appellate authority, in endorsing the re-determination, had failed to take note of breach of this prescriptionin Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Accordingly, the resort to deductive value for assessment is incorrect. The impugned order is set aside and appeal allowed.

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• 2023 (7) TMI 319
  Time Limitation - SCN issued by change of opinion beyond five years - HELD THAT:- The Show Cause Notice has been clearly issued after more than five years from the material date i.e. 12 November 2014 when the Bill of Entry was filed and assessed. Further the Appellant had complied with the requirements of the Project Imports Regulations and completed the documentation. It is further found that the Show Cause Notice has been issued by way of change of opinion beyond the period of five years. Accordingly, the Show Cause Notice is hit by limitation. Appeal allowed.

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• 2023 (7) TMI 318
  Levy of penalty - confiscation of Gold along with option of redemption fine - gold seized were of foreign origin, cannot be established by Department - HELD THAT:- On going through the recorded statements, it is seen that both Shri Debabrata Saha and Sanjay Ray have clearly admitted in their Recorded Statements that they were given these gold biscuits by Bangladeshi National for handing over the same to an Indian person. For this task, these two Appellants have been given Rs. 3,000/-. They have stated that Shri Mithun Ghosh, is one of their friends and they had approached him to lend the car for their personal use. Both of them have stated that Shri Mithun Ghosh is not involved in this activity in any way. From the Order-in-Original, it is seen that all these Recorded Statements have been relied upon by the Department. The Adjudicating Authority has not given any finding as to why all three statements stating that Shri Mithun Ghosh was not involved in the smuggling activity and his car was used without his knowledge for this purpose. Without giving any finding as to why the Recorded statements are not applicable, the Adjudicating Authority has confiscated the vehicle and imposed redemption fine. This Bench concludes that no case has been made out against Shri Mithun Ghosh. Accordingly, confiscation of this vehicle with an option to redeem the same in respect of Shri Mithun Ghosh along with penalty imposed on him stands set aside - In respect of the other two Appellants, it is clear that they have indulged in the smuggling activity and they have given their statements in terms of Section 108 which has not been retracted at any time before Adjudicating Authority/Appellate authorities. However, considering the fact that they are only the carriers of the gold and gold valued at more than Rs. 39 Lacs has already been absolutely confiscated, the penalties of Rs. 4,00,000/- imposed on them is reduced to penalty of Rs. 1,00,000/- each. Appeal disposed off.

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• 2023 (7) TMI 317
  100% EOU - specialised imported chemicals for providing fire retardant property, made duty free - clearing chemicals imported by them under Notification No. 52/2003 - conditions stipulated in para 4 of the Notification, satisfied or not - HELD THAT:- In their own case, this Tribunal has dropped the demand against the appellant - reliance placed in the case of M/S. TARASAFE INTERNATIONAL PVT. LTD. VERSUS COMMR. OF CENTRAL EXCISE, KOLKATA-V [ 2019 (6) TMI 502 - CESTAT KOLKATA] where it was held that The activity carried out at the premises of job workers will be squarely covered within the para 4 (iii) of the Notification under which due permission has been granted by the Development Commissioner. There is no dispute that the processed fabrics on which the imported chemicals coated has been duly received in the premises of appellant and there is no justification for raising the demand for Customs duty, not paid at the time of import on the chemicals. The issue is no more res integra. Therefore, there are no merit in the impugned order and the same is set aside - appeal allowed.

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• 2023 (7) TMI 316
  Exemption from payment of customs duty, IGST and compensation cess - Re-import of goods/equipment from a SEZ/FTWZ to DTA - applicability of serial number 5 of Notification No. 45/2017-Cus. dated 30.06.2017 - whether the goods are re-imported, whether the re-imported goods have been exported by a hundred percent export-oriented undertaking or a unit in a Free Trade Zone (Special Economic Zone)? HELD THAT:- It is found from the submissions of the applicant that condition of re-export of the equipment after their import availing exemption under Notification 50/2017-Cus. is a condition built in the contract of the importer with their Contractor and the applicants have themselves admitted that it is not a condition prescribed under Notification No. 50/2017-Cus. However, the applicant has attempted to make a case starting with export of such equipment(s) on which exemption vide Notification No. 50/2017-Cus. has been availed. The Notification No. 50/2017-Cus. provides for compliance with conditions prescribed under the notification. Non-fulfilment of such condition(s) will make the importer liable to pay differential duty along with interest, fine, penalty etc., as the case may be. It appears that the applicant has introduced concept of export in relation to such imported equipment(s) in order to link it with Notification No. 45/2017-Cus which is not warranted but un-necessary as the same appears to have been done to confuse the issue for claiming exemption from payment of duties/taxes. In the instant case, goods have not been imported for warehousing in FTWZ but performance of a contract for specified purpose for which exemption from duties at the time of import has been claimed vide serial number 404 of Notification No. 50/2017-Cus., thereby goods transferred from FTWZ to DTA cannot be treated as re-imported goods, making the Notification No. 45/2017-Cus., inapplicable. It can be convincingly stated that under the SEZ Act, 2005 read with SEZ Rules, 2006, words import and procure have been assigned different meanings. It is also important to note that activity of bringing goods from a Unit or Developer in SEZ to DTA is not covered under the definition of the term, import under the SEZ Act, 2005, therefore such transfer from SEZ to DTA cannot be termed as re-import . Moreover, as per dictionary meaning of the word, procure is to obtain something but when the goods are being warehoused in FTWZ, these are not procured by a Unit or Developer, therefore when transfer of goods from DTA to FTWZ or FTWZ to DTA is neither covered under the term procure nor import , therefore such transfer/supply of goods cannot be treated as reimport for application of procedures and conditions as applicable in the case of normal re-import of goods from outside India. Notification No. 45/2017-Cus. is not applicable in the instant case. The facts of the application amply indicate that goods have been exported by Unit in FTWZ, which again makes the said Notification, inapplicable in view of the second proviso of the Notification. Moreover, there is no condition for re-export of goods under the Notification 50/2017-Cus., however a deeming fiction has been created by bringing in re-export which appears to have been done to deviate from the issue and the word export/re-export is being un-necessarily equated with warehousing of goods.

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• Insolvency & Bankruptcy

• 2023 (7) TMI 315
  Maintainability of SLP - CIRP - question of unjust enrichment left open - Demand / Refund of Tax dues and assessment - no final adjudication/determination had taken place on unjust enrichment - HELD THAT:- The present special leave petitions are not entertained at this stage. However, as and when any issue/question of unjust enrichment is raised, it goes without saying that it may be open for the petitioner to defend/oppose the same and all the defences which may be available to the petitioner are left open and which may be considered and dealt with in accordance with law and on its own merits - SLP dismissed.

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• 2023 (7) TMI 314
  Admission of application - CIRP initiated - existence of financial debt not established. Case of appellant is that the financial creditor though has failed to establish financial debt of any written agreement, learned Adjudicating Authority incorrectly admitted the application and initiated CIRP. HELD THAT:- The learned Adjudicating Authority has rightly passed the impugned order which requires no interference. It is true that on the record there is no written agreement regarding claim of sanctioning loan to the corporate debtor. However, there are number of circumstances which in unequivocal term shows that financial creditor had been approached by the appellant for a loan of Rs.1,01,00,000/- and the loan was given to the corporate debtor in two tranches. 1st tranche was paid through cheque for an amount of Rs.51 lakh on 26.05.2017 and second amount i.e. Rs.50 lakh was given to the corporate debtor by financial creditor through RTGS and through RTGS it was paid on 03.06.2017 which has not been disputed by the either side. However, since there was no written agreement for sanctioning loan with interest the appellant has taken a futile stand that in absence of any written agreement it cannot be said that there was a financial debt. The circumstances and documents which have been brought on record suggest that impliedly there was an agreement for providing loan to the corporate debtor for time value and also with interest. In view of the provisions for the admission of a petition under Section 7 of the IBC there are certain relevant criteria. There must be debt and default. If an application fulfils the said criteria, the Adjudicating Authority is to admit such application. However, proviso 1st to Section 7 (5) speaks that only for rejection of an application reasons are required to be assigned. Meaning thereby if an application fulfils certain criteria, the Adjudicating Authority is to admit the said application and while admitting there is no requirement for assigning detailed reasons. However, if the Adjudicating Authority is going to dismiss the application as per provisions contained Section 7 of the IBC reasons are mandatory. Accordingly it is evident that admission of an application under Section 7, if fulfils certain criteria is a rule, however, rejection of such application is an exception. The Learned Adjudicating Authority has not committed any error in passing the impugned order. There is no reason to interfere with the impugned order - Appeal dismissed.

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• 2023 (7) TMI 313
  Liquidation of Corporate debtor - Rejection of application seeking extension of timeline as mentioned in the Invitation for Submission of Scheme - case of appellant is that Appellant has finalised a scheme of arrangement, but did not submit it since he had not been able to obtain an extension of the deadline - HELD THAT:- Admittedly, the order for liquidation of the corporate debtor was passed by the Adjudicating Authority on 7.10.2022. It is also noted that section 230 of the Companies Act, 2013 allows a scheme of compromise or arrangement to be proposed in respect of a corporate debtor under liquidation to achieve its revival as a going concern. Further Regulation 2-B of the Liquidation Process Regulations, 2016 stipulates a time period of ninety days for submission and final consideration of such a scheme of compromise or arrangement. The possibility of revival of a corporate debtor under liquidation has been considered as a valid mode of revival and during liquidation process, a scheme of compromise or arrangement in terms of section 230 of The Companies Act, 2013 is a distinct and clear possibility. It is also observed in para 68 of the Arun Kumar Jagatramka [ 2021 (3) TMI 611 - SUPREME COURT] judgment that an amendment was made on 25.7.2019 to the Liquidation Process Regulations, 2016 by the Insolvency and Bankruptcy Board of India to refer and include a process envisaged under section 230 of the Companies Act, 2013 as a valid method of revival of the corporate debtor during liquidation. As the various actions of the Appellant show, it is noted that by 4.1.2023, the Appellant had neither proposed a scheme of compromise and arrangement to the Liquidator or Stakeholders Consultation Committee or the secured creditors of the corporate debtor, and even after it was allowed to access the VDR on 19.1.2023 it did not show any concrete evidence for formulation such a scheme and its presentation to the Liquidator. The reasons given by the Appellant that it was waiting for a decision in IA No. 122/2023, which was filed for seeking extension of the deadline given in public notice dated 26.10.2022 to propose such a scheme are not convincing as merely filing of IA 122/2013 in no way stopped it from proposing a clear scheme of arrangement - there are no reason or logic as to why the Appellant did not approach the secured creditors to obtain their consent of the 75% threshold as required under section 230(2)(b) of The Companies Act if it was in possession of such a scheme. It is not clear as to why he did not propose a scheme to the Liquidator or the Stakeholders Consultation Committee. The Appellant has not shown any proof of a scheme of compromise and arrangement that is formulated and ready, and proposed for consideration nor has the Appellant obtained the consent of 75% of the secured creditors of the corporate debtor in support of such a scheme. Merely seeking an extension of the timeline without showing any evidence of sincere and serious efforts in preparation and formulation of such a scheme clearly shows that the request for extension of timeline is not supported by concrete action. In view of the fact that the 90 days timeline prescribed under the Regulation 2-B of the Liquidation Process Regulations, 2016 had expired on 4.1.2023 and no evidence about readiness of the scheme was shown, it is opined that the Adjudicating Authority has not committed any error in passing the Impugned Order. Appeal dismissed.

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• 2023 (7) TMI 312
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - service of demand notice - privity of contract - HELD THAT:- In Form 3, Demand Notice / Invoice, demanding payment, under I B Code, 2016, as per Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, dated 30.07.2021, addressed to the Vantage Machine Tools Private Limited, represented by Mr. Pothluru Mohana Murali Krishna, Krishna District, under Particulars of Operational Debt, the Total Debt, as on 22.07.2021, was mentioned as Rs.3,04,76,004/-, and the Principal Outstanding, was mentioned as Rs.1,53,16,611/-. The interest outstanding, as on 22.07.2021, was Rs.1,51,59,393/-, and that the total Outstanding as on 22.07.2021, was Rs.3,04,76,004/-. The Corporate Debtor, in its Counter, before the Adjudicating Authority, had averred that the alleged Principal Amount, claimed by the 1st Respondent / Operational Creditor / Petitioner, and Interest, claimed thereon, as consequential damages, is completely arbitrary and baseless, which cannot be relied upon in the absence of adjudication, and further that the alleged Claim, was not adjudicated, by any Competent Authority, in Law, and therefore, such a Claim, cannot be described as Operational Debt. The Corporate Debtor, before the Adjudicating Authority / Tribunal, took a stand that the alleged Claim, of the 1st Respondent / Operational Creditor / Petitioner, was based on misconstruction of facts, devoid of merits, and as such, the Company Petition, was not maintainable in Law, and the same was liable to be dismissed. It is to be remembered that the Proceedings, under the I B Code, 2016, are Summary in Character, and that an Adjudicating Authority, not being a Recovery Fora or Court, (no elaborate enquiry is conducted like that of a Regular Trial of a Civil case, and also, it does not determine, a Money Claim or Civil Suit, this Tribunal, is of the earnest opinion, that the Controversy / Dispute / Claim, in respect of Interest, based on Privity of Contract or otherwise, has no relevance / significance, if the Debt, payable is more than the threshold limit of Section 4 of the I B Code, 2016, considering the fact that the Principal Outstanding, as mentioned in Form 3 of the Demand Notice dated 30.07.2021, was Rs.1,53,16,611/- (which is more than Rs.1 Crore), to be paid by the Corporate Debtor / M/s. Vantage Machine Tools Private Limited. In Law, once the Debt, shown as Due, it is for the Corporate Debtor, to establish that, there are no Outstanding Dues, to be paid to an Operational Creditor. This Tribunal, points out that the aspect of determining a Claim, which may include the interest by an Adjudicating Authority / Tribunal, does not arise for the purpose of triggering the Corporate Insolvency Resolution Process, because of the fact that an initiation of Corporate Insolvency Resolution Process, under Section 7 or 9 of the I B Code, 2016, will not amount to a Recovery Proceeding - It cannot be lost sight off that it is incumbent upon the Corporate Debtor, to show that its Liability, is in Dispute, as to the Debt, and not a just demand, made by it, to satisfy certain obligations, on the part of the 1st Respondent / Operational Creditor / Petitioner. In the instant case on hand, this Tribunal, considering the contentions advanced on the respective sides, taking into account of the Part Payments, made by the Corporate Debtor, under Invoices, and keeping in mind of the Email dated 02.11.2017, whereby the Debt confirmation, was made by the Corporate Debtor, and the same being received by the 1st Respondent / Operational Creditor / Petitioner, on 03.11.2017, considering the fact that the Part Payment of Rs.10,00,000/- and another payment for Rs.20,00,000/-, by the Corporate Debtor, was made, one day earlier, on to the mail dated 03.10.2017, and keeping in mind of the facts and circumstances of the instant case, in an encircling manner, comes to a consequent conclusion that the Debt and Default, committed by the Corporate Debtor, were established, by the 1st Respondent / Operational Creditor / Petitioner, and hence, the Outstanding Debt, is due and payable in Law, by the Corporate Debtor, to the 1st Respondent / Operational Creditor / Petitioner, and that the Admission of the CP(IB) No.51 / 9 / AMR / 2021, by the Adjudicating Authority (National Company Law Tribunal, Amaravati Bench), is a just, Valid and Proper one, in the eye of Law. Appeal dismissed.

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• 2023 (7) TMI 311
  Approval of Resolution Plan - Appellant submits that the Appellant having security interest in the immovable asset of the Corporate Debtor, the said land cannot be sold extinguishing the security interest of the Appellant by the Resolution Plan - HELD THAT:- The Resolution Professional did not accept the claim of Appellant as Financial Creditor rightly. Law in this context is well settled. Reference made to judgment of Hon ble Supreme Court in Anuj Jain, Interim Resolution Professional for PROFESSIONAL FOR JAYPEE INFRATECH LIMITED VERSUS AXIS BANK LIMITED ETC. ETC. [ 2020 (2) TMI 1259 - SUPREME COURT ] where the Hon ble Supreme Court had occasion to consider the role and status of Financial Creditor and a Creditor who has only security interest. A Financial Creditor who is part of the CoC has important role to play in the reorganisation and insolvency resolution of the Corporate Debtor. The Creditor who has only security interest is only interested in his security interest and have no interest in revival of the Corporate Debtor - On looking into the Scheme of I B Code, after moratorium is declared, there is prohibition on enforcement of any security interest created by the Corporate Debtor in respect of its property. The prohibition from enforcement of any security interest by one or other creditor including Secured Financial Creditor or third party Secured Creditor is for a purpose and object. Unless the prohibition is imposed, all assets of the Corporate Debtor shall not be available for revival and maximisation of the value of the Corporate Debtor, which is principal/primary objective of the I B Code. Financial Creditor who is part of the CoC is prohibited from enforcing any security interest. A third-party security holder like Appellant is equally bound by the provision of Section 14(1)(c) and cannot claim any enforcement of security interest in the CIRP. The Hon ble Supreme Court in COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY VERSUS SATISH KUMAR GUPTA OTHERS [ 2019 (11) TMI 731 - SUPREME COURT ] while considering the provisions of Section 30, 50, 52 and 53 of the Code has held that provision of Section 53 cannot be applicable in the insolvency resolution process and the said provision is applicable only during liquidation. The argument of the Appellant that security interest contained by the Appellant in the asset of the Corporate Debtor cannot be dealt with in the plan is clearly contrary to the scheme delineated under Regulation 37. Further, Sub-clause (d) permit the resolution plan to contain provision for satisfaction or modification of any security interest. Thus, as per scheme of Regulation 37, security interest in assets of the Corporate Debtor can be dealt with, modified, satisfied and there is no exclusion to the resolution plan with regard to dealing of the security interest - When the security interest of Financial Creditor can be dealt with in the resolution plan in any manner, it is not found that how a third party having security interest in the assets of the Corporate Debtor can claim any higher status or different status from the Financial Creditor. When any asset including security interest in the asset is part of the CIRP process, there is no constraint or prohibition in I B Code or Regulations to deal with the said asset including a security interest - A third-party security interest holder is entitled to retain the security proceeds on the land of security interest under Section 52 of the Code. Section 52 and 53 becomes applicable only in Liquidation Proceeding and reference of Section 53 under Section 30(2) is for the purpose of computing the payment to Operational Creditors and dissenting Financial Creditors to which they may be entitled under Section 53. There are no error in the impugned orders passed by the Adjudicating Authority. There are no merit in both the Appeals. Both the Appeals are dismissed.

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• 2023 (7) TMI 310
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - demand notice and application was barred by 10A of IBC - total claim is more than Rs.1 Crore which include the Principal Amount of Rs.56,63,061/- and interest - HELD THAT:- The emails which have been sent by the Operational Creditor, which have been brought on the record along with the Reply filed in this Appeal, indicate that the claim contains Principal Amount as well as interest as was due on the date when email was sent. The Corporate Debtor chose not to file reply and filed an I.A. for dismissing the application under Section 9. I.A. which was filed by the Appellant was dismissed for non-prosecution. We may also look into the grounds taken in the I.A. for dismissing the Company Petition. In the I.A. the ground taken was that the interest component cannot be added in the Operational Debt. Further Section 10A of the Code was relied referring to Demand Notice dated 21.12.2020. Learned counsel for the Operational Creditor has rightly relied on judgment of this Tribunal in Prashant Agarwal vs. Vikash Parasrampuria Anr [ 2022 (7) TMI 835 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH] , where three Member Bench of this Tribunal held that the total amount for maintainability of claim will include both principal debt amount as well as interest on delayed payment which is stipulated in the invoice has to be added - the above judgment of Prashant Agarwal clearly supports the submission of learned counsel for the Respondent that for calculating the amount for maintainability of the claim, for threshold purpose, both Principal Amount and Interest has to be calculated when the interest is stipulated between the parties. The ground taken in the I.A. under 10A is clearly misconstrued since the default is being claimed by the Operational Creditor w.e.f. 26.07.2018 which was much before the 10A period. The mere fact that the Demand Notice was dated 21.12.2020 shall not has any effect on the maintainability of the application under Section 9 when default is committed on 26.07.2018 and admitted thereafter. In the facts of the present case, the Adjudicating Authority did not commit any error in admitting Section 9 application which clearly fulfils the threshold. The Corporate Debtor despite having been allowed time, failed to file reply and did not appear on the date when matter was fixed for hearing. The Adjudicating Authority rightly proceeded ex-parte against the Corporate Debtor when he chose not to file reply and failed to appear on the date fixed. No error has been committed by the Adjudicating Authority in admitting Section 9 application. There is no merit in the Appeal - appeal dismissed.

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• 2023 (7) TMI 309
  Initiation of CIRP - Purchase of litigation by the applicant - Financial Debt or not - NCLT dismissed the application - non-speaking order which does not deal with contentions raised by the Appellant - closure of the arbitration proceedings which have been relied by Ld. Adjudicating Authority has a bearing on the claim of the Appellant or not - neither the Appellant nor its assignor and nor Corporate Debtor were parties to the arbitration proceedings - debt in question was assigned to the Appellant in the year 2017 by which time Arbitration Proceeding has not even come to an end. HELD THAT:- IFS was entered into between Members of Jayaswal Family. The assets and properties including CIAL and JNIL were distributed among the two groups i.e. BLS Group and MKJ Group. CIAL was allocated to MKJ Group whereas JNIL was given to BLS Group. Strip Mill Division of CIAL was to be demerged from CIAL and was to be merged with JNIL. IFS provided for payment of lease rental by JNIL and payment towards loan and interest was from out of lease rental. IFS further clearly contemplated that after units are merged with JNIL, the liability for payment of the balance loans and interest shall be on JNIL. In the arbitration proceedings MKJ Group filed an Application under Section 31(6) of the Arbitration and Conciliation Act claiming for an Interim Award for an amount of Rs. 102,26,78,728/- which amount according to the MKJ Group was admitted in the balance sheet of Corporate Debtor JNIL. The Application praying for Interim Award for aforesaid amount by MKJ Group was dismissed by Sole Arbitrator on 26th November, 2014 which order was not challenged. It is clear that in the arbitration proceedings which was between two groups i.e. BLS and MKJ Groups. MKJ Group claimed the amount paid by CIAL towards installments to the lenders and claim of Rs. 102,26,78,728/- was made which claim was repelled in the arbitration proceedings thus the claim of assignor of the Appellant was very much raised as a counter claim. It is admitted fact that after approval of the scheme of arrangement by the High Court on 13th April, 2013, payment of servicing of the loan is being done by the JNIL for which there is no dispute - there are no error in the finding of the Adjudicating Authority that there is no financial debt owed by JNIL to the CIAL on basis of which an Application under Section 7 to be filed either by CIAL or its assignee. From the sequence of events as noted above it is clear that assignor had assigned its debt of Rs. 104 Crores to the Appellant on 24th March, 2017 when it failed to obtain an Interim Award from the sole arbitrator by filing an application under Section 31(6) of the Arbitration and Conciliation Act which was rejected on 23rd September, 2016. Entries in balance sheets of the Corporate Debtor. Annual Report of 2013-14 contains an entry of unsecured loan to CIAL of Rs. 10432.79/- Lakhs - HELD THAT:- When at the relevant time i.e. Annual Year 2014, it is immediately after demerger, dispute arose with regard to payments made by CIAL to Lenders of the Strip Mill Division which CIAL claimed from the Corporate Debtor which liability were denied by the Corporate Debtor, the claim of the Appellant that JNIL has acknowledged its debt in the balance sheet cannot be accepted as admission of any liability by JNIL. The record indicates that from the year 2015-16 till 2020-21 in the financial statements of the Corporate Debtor there was categorical note denying the liability of 102,26,78,728/- as claimed, financial statement thus cannot be read as acknowledgement of the debt by Corporate Debtor. The submission of Appellant that there is acknowledgement of debt by Corporate Debtor towards CIAL i.e. assignor of Appellant, cannot be accepted. The claim of amount of Rs. 104,43,67,347.94/- was throughout disputed by the BLS Group/Corporate Debtor which sequence of the events we have noticed above. The sequence of events and facts noticed above clearly indicate that MKJ Group who did not succeed in any proceedings to establish the claim of Rs. 104,43,67,347.94/- against the Corporate Debtor assigned its debt to the Appellant to further litigate and involve the corporate debtor in proceedings. MKJ Group despite raising the claim in the arbitration proceedings by means of counter claim and despite their application for Interim Award for an amount of Rs. 102,26,78,728/- having been dismissed in the year 2016 assigned the debt to Appellant, Appellant by means of assignment only purchased the litigation. Thus, no error has been committed by the Adjudicating Authority in allowing I.A. filed by the Corporate Debtor for dismissing the Section 7 Application - appeal dismissed.

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• 2023 (7) TMI 308
  Maintainability of Recall Application - whether the present Recall Application which is review in disguise cannot be entertained? - HELD THAT:- In another judgment of Budhia Swain Ors. Vs. Gopinath Deb Ors. [ 1999 (5) TMI 596 - SUPREME COURT] , the Hon ble Supreme Court has dealt with poser to recall. The Hon ble Supreme Court held in the said case that power of recall cannot have been exercised and order of the Collector could be sustained only if supportable by the power to recall - The above judgment of the Hon ble Supreme Court clearly laid down that when a judgment is rendered in ignorance of the fact that a necessary party had not been served at all or heard, the power to recall can be used. The subsequent judgment of Rajendra Mulchand Varma Ors VS K.L.J Resources Ltd Anr. [ 2022 (10) TMI 383 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] heavily rely on judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited Anr. [ 2021 (10) TMI 1039 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] . This Tribunal held that in the absence of any power of review or recall, order of this Appellate Tribunal or the Adjudicating Authority cannot be reviewed or recalled. Thus, it is clear that although this Tribunal dealt with both the concepts of review and recall but distinction between review and recall has not been noticed. There is no dispute to the preposition that no power of review is vested in this Tribunal but power to recall judgment can very well be exercised under Rule 11 in an appropriate case - Recall can be asked only as procedural infirmity like order passed without necessary party/service to the necessary party or affected party not being heard by the Court. Thus, it is felt appropriate that the issue which has arisen in the present application need to be referred to a larger bench to decide following questions: I. Whether this Tribunal not being vested with any power to review the judgment can entertain an application for recall of judgment on sufficient grounds? II. Whether judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited Anr [ 2021 (10) TMI 1039 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] , Rajendra Mulchand Varma Ors Vs K.L.J Resources Ltd Anr. [ 2022 (10) TMI 383 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] can be read to mean that there is no power vested in this Tribunal to recall a judgment? III. (In the above two judgments this Tribunal has held that this Tribunal cannot recall its judgment in exercise of its inherent jurisdiction) Whether the judgment of this Tribunal in Agarwal Coal Corporation Private Limited Vs Sun Paper Mill Limited Anr. and Rajendra Mulchand Varma Ors Vs K.L.J Resources Ltd. Anr. lays down the correct law? Let the papers be placed before Hon ble Chairperson, NCLAT for constituting a larger bench for considering the above questions.

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• Service Tax

• 2023 (7) TMI 307
  Levy of Service Tax - Business Auxiliary Service - activation charges for activating software which is inbuilt in the telecom system of EPABX, when the sales tax on the same activity was discharged - HELD THAT:- The facts which is under dispute is that the appellant have collected activation charges in respect of telecom equipment EPABX system which was sold earlier. The case of the department is that since activation of software activity was carried out after the sale of equipment, the same is liable for service tax under Business Auxiliary Service - in identical issue, only for the different period, has been decided in BLACK BOX LIMITED (FORMERLY KNOWN AS AGC NETWORKS LIMITED.) VERSUS COMMISSIONER OF CENTRAL EXCISE ST, AHMEDABAD-III [ 2023 (1) TMI 188 - CESTAT AHMEDABAD ] where it was held that amount collected by the Appellant from their customers against as activation charges of equipment/ software features are covered under the activity of sales of goods and not covered under the provisions of Service as defined in the Act. It can be seen that the facts and legal issue are identical to the present case therefore, the ratio of the above decision is squarely applicable - Appeal allowed.

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• 2023 (7) TMI 306
  Denial of abatement on recipient of Goods Transport Agency Services - non-production of certificate of the transporter - denial of abatement on the ground that Appellant has submitted a Xerox copy of the declaration made by M/s Vivekanand Roadlines stating that no Cenvat Credit was taken by them. HELD THAT:- It has been consistently held by various co-ordinate Benches of this Tribunal that the condition specified is by way of CBEC Circular and is not a mandatory condition specified under any Notification. Hence, non-production of certificate of the transporter will not deprive the Appellant from the benefit of abatement of 75%. The Ahmadabad Tribunal in the case of CST AHMEDABAD VERSUS M/S CADILA PHARMACEUTICALS LTD. [ 2010 (2) TMI 237 - CESTAT, AHMEDABAD ] has held that The Board had clarified that the endorsement has to be made on the consignment note. Further, we have to take note of the fact that the notification, as such, does not stipulate any such condition. Notification requiring the receiver of the service to pay the tax also does not stipulate any such condition. Therefore, the requirements prescribed by the Board as per circular cannot be mandatory and cannot be used for denying substantive rights. It is not the case of the Revenue that the appellants have not received the service or service tax has not been paid. Similar was held in the case of AARTI INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., SURAT [ 2012 (9) TMI 451 - CESTAT, AHMEDABAD ]. As the issue involved in the present case is identical, the impugned OIA is set aside and the Appeal filed by the Appellant is allowed.

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• 2023 (7) TMI 305
  Demand of service tax on advances received - Validity of demand made, without classifying the services - advance receipt pursuant to the work order assigned to them for construction of various turnkey projects - Revenue is of the view that the appellant were liable to pay service tax at the time of receipt of the advances for execution of their work - HELD THAT:- It is found that in this case facts are not in dispute that appellant is engaged in an activity of supply of goods as well as services. Therefore, the merit classification of the activity undertaken by the appellant is works contract services and the appellant has obtained advances for execution of the activity of works contract services and the revenue has not classified the activity undertaken by the appellant under works contract services and no demand is made for works contract services - In that circumstances the advances mobilized by the appellant for execution of the said works contract services is not liable to be taxed. Therefore, it is held that the demand of service tax is not payable by the appellant. Demand of interest has been made against the appellant for delayed payment of service tax - HELD THAT:- As no service tax is payable by the appellant, therefore, the question of payment of interest on delayed payment of service tax does not arise as held by this Tribunal in the case of M/S. JAI BALAJI INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, BOLPUR [ 2023 (6) TMI 1102 - CESTAT KOLKATA] , wherein this Tribunal held that as the appellant was not liable to pay duty in terms of Rule 8 of Central Excise Valuation Rules, 2000, therefore, no interest is payable by the appellant - the demand of interest is not sustainable. Appeal allowed.

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• 2023 (7) TMI 304
  Exemption from Service Tax or not - making payment for royalty fee to their group company situated abroad for using their technology, Brand name etc. - applicability of Notification No.17/2004-ST dated 10.09.2004 - reverse charge mechanism - HELD THAT:- Section 66 of the Finance Act, 1994 is the charging Section, which provides that in respect of taxable services mentioned therein, service tax shall be levied and collected in such manner as may be prescribed. Even for the import of service, the service tax has to be levied under Section 66 ibid. Since a deeming fiction was created in Rule 66A ibid, providing for payment of service tax by the recipient of service, such levy is in consonance with the charging provisions contained in Section 66 ibid. Thus, all the provisions of Chapter V of the Finance Act should also be applicable in respect of the service tax paid under Section 66A ibid - In the present case, since the appellant is liable to pay service tax as a recipient of the taxable service, the provision of Section 66 ibid should also be applicable to it. In other words, upon fixing the responsibility for payment of service tax under reverse charge mechanism, no distinction can be placed between the service receiver and service provider for the purpose of Section 66 ibid. Therefore, the benefit of exemption Notification No. 17/2004-S.T., dated 10.9.2004 should also be available to the respondent. The issue before us in the present case has already been decided by the Co-ordinate Bench of the Tribunal in the case of M/S UNITED NEWS OF INDIA VERSUS C.S.T. NEW DELHI [ 2017 (3) TMI 17 - CESTAT NEW DELHI] . While interpreting the provisions of Section 66A ibid, it has been held that the benefit of the exemption should also be available to the recipient of service. The Hon ble High Court of Bombay, in the case of Indian National Shipowners Association [ 2008 (12) TMI 41 - BOMBAY HIGH COURT ], had held that the law laid down by the Hon ble Supreme Court in its judgement in LAGHU UDYOG BHARATI VERSUS UNION OF INDIA [ 1999 (7) TMI 1 - SUPREME COURT ] is squarely applicable to Rule 2(d)(iv), where by issue of notification dated 31.12.2004, any taxable service provided by a person who is a non-resident or is from outside India is notified for payment of service tax by a person who receives such taxable service in India. It was held by Hon ble High Court of Bombay that the Union of India got the legal authority to levy service tax on the recipients of the taxable service, first time when the Finance Act, 1994 was amended by inserting section 66A through the Finance Act, 2006 w.e.f. 18.4.2006. In other words, it is only after enactment of Section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of Indian residents. There are no infirmity in the impugned order passed by the Ld. Commissioner of CGST Central Excise, Thane Rural, Mumbai - Accordingly, the appeal filed by the Revenue is dismissed.

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• 2023 (7) TMI 303
  CENVAT Credit - input or capital goods - Towers and Parts Accessories of Towers falling under Chapter 73 of the Central Excise Tariff Act, 1985 - credit disallowed on the ground that the Towers were not capital goods as defined under Rule 2(A) of the said Rules and that the parts accessories used in the erection of towers do not satisfy the definition of input as the towers are civil structures attached to earth and not excisable goods - HELD THAT:- It is observed that a provider of output service is eligible for availing credit on duty of excise paid on capital goods, input and Service Tax paid on input service used in relation to providing of output service. Towers parts accessories of Towers are an essential ingredient for providing the said output service. Installed Towers are used for receiving and transmitting signals without which clients of the assessee would not be able to receive or transmit signals in their individual sets. Hence, it satisfies the definition of input as defined under Rule-2(k) of the said Rules - Since the department has accepted the payment of duty on Towers by considering them as excisable goods, the credit availed on the inputs used in manufacturing the excisable goods cannot be denied. Thus the Commissioner has rightly dropped the demand in the impugned order and the dropping of the demand is sustainable. ETR ETP transferred credit of Rs.6,68,37,663/- to the assessee through inter office memo called ATD/TED during the period 2005-06 and 2006-07 - HELD THAT:- The Appellant has fulfilled the two primary conditions of availing credit, one is that the input/capital goods/ input service is duty paid and the second is that those have been used in rendering of the said output service. Since, the Appellant satisfies the essential conditions for availing the credit, the Cenvat credit cannot be denied on account of procedural lapse, if any. Accordingly, the findings of the adjudicating authority that Cenvat credit availed on the basis of Invoice/bills issued through ATD/TED, by ETR and ETP, the two branches of the Appellant cannot be denied on the ground that they have not been registered as Input Service Distributor for transferring the credit, agreed upon. There is no substance in the allegation of the department that the Appellant has not manufactured any dutiable final products during the relevant period - the adjudicating authority has rightly dropped the demand on this count in the impugned order - Appeal of Revenue dismissed.

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• 2023 (7) TMI 302
  Seeking waiver of Penalty - delay in payment of service tax for the period from April 2015 to September 2007 due to non receipt of transport subsidy from the Central Government, which was paid when transport subsidy was received - HELD THAT:- There was a delay in payment of service tax by the Appellant for the period April 2005 to September 2007. They were paying service tax before that period and filed returns. The Appellant attributed delay in receipt of transport subsidy from the Government as the reason for the delay in payment of service tax. It is observed that the Revisionary authority has not given any finding to reject the reason stated by the Appellant for the delay in payment of service tax. Immediately on receipt of the transport subsidy from the Government they have paid the service tax along with interes - this is a fit case for not issuing show cause notice as provided under Section 73(3) of the Finance Act, 1994. Since there is no evidence available on record to establish that the Appellant has delayed the payment of service tax with an intention to evade payment of service tax, we hold that penalty under Section 78 of the Finance Act, 1994, not imposable in this case. The Appellant is liable to pay interest for the delayed payment of service tax, which they have paid. The impugned Revision Order is not sustainable, and the same is set aside - appeal allowed.

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• Central Excise

• 2023 (7) TMI 301
  Method of Valuation - Section 4 or 4A of the Central Excise Act, 1944? - medicaments supplied to institutional buyers like Indian Railways, Government Hospitals, BHEL for their exclusive use - HELD THAT:- The issue is not under dispute that whether the medicament supplied to institutional buyers i.e. Indian Railways, Government Hospitals, BHEL for their exclusive use should be valued under Section 4 and Section 4A of Central Excise Act, 1944 - It is found that since the supplies are not for retails sale but for exclusive used by the government institutes therefore, since the goods are not meant for retail sale nor it is sold to retail buyers. The condition of the Revenue is that value under Section 4A of Central Excise Act, 1944 has no legs to stand. This issue, in the appellant s own case has been considered by this Tribunal JB CHEMICALS PHARMACEUTICALS LTD, PARMESHWAR B BANG VERSUS C.C.E. S.T. -DAMAN [ 2023 (1) TMI 588 - CESTAT AHMEDABAD] wherein it was held that in the appellant s case value of goods is clearly governed by Section 4 of Central Excise Act and not under Section 4A therefore, the impugned order is not sustainable. The issue stand settled in view of the above decision - appeal allowed.

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• 2023 (7) TMI 300
  CENVAT Credit - input services - rail freight - non-fulfillment of condition of Rule 9 of the CENVAT Credit Rules, 2004 - whether the appellant can avail the credit of service tax paid on rail freight on the strength of the certified copy of railway receipts read with Monthly Consolidated Certificates and STTG certificate issued by the Western Central railway? HELD THAT:- At the outset, it has to be stated that the fact of payment of service tax on the receipt of taxable services from WCR has not been disputed by revenue. This is apparent from the perusal of para 9(vi) of the impugned order which says the monthly consolidated certificate is proof that the services covered by the said document have been received and accounted for in the books of account of the receiver . There is no dispute on the qualification of transportation service as an input service to the appellant under the Rules. Rule 3(1) of the Credit Rules permits a manufacturer of final product to take credit of the tax paid on any input service received by it. We note that the issue of certified RRs read with MCC and STTG being valid documents for availing credit is no longer res integra - The Tribunal in the case of M/S. JK CEMENT LTD. VERSUS CCE, UDAIPUR [ 2017 (12) TMI 82 - CESTAT NEW DELHI ] has held that The list of documents which are required are given in rule 9(1). It is also to be noted that the jurisdictional Asst Commissioner/Deputy Commissioner has the discretion in terms of proviso to Rule 9(2) of the said rules to allow the credit if the documents produced contains details of duty or service tax payable, description of the goods or the taxable service, assessable value, service tax registration number of the person issuing the invoice et cetera. In the instant case as well, it is noted that credit has been denied by the appellate authority only on the grounds that the assessable value has not been indicated. This has been satisfactorily explained by the learned counsel that that the freight amount mentioned in all the RRs is the assessable amount for the disputed period. Once the payment of tax is not disputed, and the receipt of service is not disputed and further the revised STTG document has been issued by the WCR, there can be no justification for denial of credit due to the appellant. The appellant are entitled to avail the credit of Rs. 95,79,263/- which has been held inadmissible in the impugned order - appeal allowed.

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• 2023 (7) TMI 299
  Violation of principles of natural justice - Process amounting to manufacture or not - activity undertaken by the appellant as calibration tests and upgradation/configuration of the appliances according to the requirements/specifications of the customers - Extended period of limitation. Violation of principles of natural justice - matter was heard by one Commissioner and the order was passed by another Commissioner without considering the submissions made by the appellant - HELD THAT:- It is fact on record that the matter was heard by Dr. Sanjay Agarwal, the erstwhile Commissioner of Central Excise, Kolkata and the order has been passed by Shri Prashant Kumar, Commissioner of Central Excise, Kolkata V, which is in gross violation of principles of natural justice. Before passing the impugned order, Shri Prasant Kumar, Commissioner of Central Excise, Kolkata V, was required to hear the appellant on merit. It is also noticed that the appellant during the course of personal hearing and in the written submissions and the reply to the show-cause notice had relied upon certain case laws relying to the issue involved in hand, but the same has not been considered by the adjudicating authority while passing impugned order - thus, non-consideration of the judicial pronouncement submitted by the appellant is in gross violation of principles of natural justice - answered in favor of appellant. Activity of calibration tests and upgradation/configuration of the appliances - Whether the activity undertaken by the appellant amounts to manufacture of not? - HELD THAT:- CBEC Circular No.454/20/99-CX dated 12.04.1999 clarified that the upgradation does not amounts to manufacture as it does not bring into existence new name, character and use - Further, in the case of UNION OF INDIA VERSUS DELHI CLOTH AND GENERAL MILLS CO. LTD. [ 1962 (10) TMI 1 - SUPREME COURT] , the Hon ble Apex Court dealt the issue and held that manufacture means bringing existences new substance known to the market and not mere on some changes in the substance. The Hon ble Apex Court has held The definition of manufacture as in S. 2 (f) puts is beyond any possibility of controversy that if power is used for any of the numerous processes that are required to turn the raw material into a finished article known to the market the clause will be applicable; and an argument that power is not used in the whole process of manufacture using the word in its ordinary sense, will not be available. It is only with this limited purpose that the legislature, in our opinion, inserted this definition of the word manufacture in the definition section and not with a view to make the mere processing of goods as liable to excise duty. In the present case, the activity undertaken by the appellant as calibration tests and upgradation/configuration of the appliances according to the requirements/specifications of the customers, does not amount to manufacture as no new product came into existence and their character and use remain the same. Therefore, the activity undertaken by the appellant does not amount to manufacture. Accordingly, this issue is answered in favor of the appellant. Whether in the facts and circumstances of the case, the extended period of limitation is invokable or not? - HELD THAT:- The appellant has taken registration as trader from 03.12.2001 and filing their Dealer s return regularly and thereafter, on 13.03.2009, the appellant took registration as manufacture of the same activity. Therefore, the process undertaken by the appellant was well-known to the Department on 13.03.2009 and also on the visit done on 11.12.2009 for examination of Books of Account and other activities undertaken by the appellant and the appellant was also submitting ER Returns to the Department. In that circumstances, the show-cause notice issued on 27.12.2010 by invoking extended period of limitation, is not sustainable - all the demand against the appellant is barred by limitation. Hence, this issue is also answered in favor of the appellant. Appeal allowed.

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• 2023 (7) TMI 298
  Exemption to all good supplied against international competitive bidding under N/N. 6/2006-CE dated 1.3.2006 - denial on the ground that the goods cleared were classifiable under Central Excise Tariff Sub-heading Nos. 8413 8431 whereas the above mentioned Customs Notification exempted goods under Customs Sub-heading No. 9801 - HELD THAT:- In the case of SARITA STEELS INDUSTRIES LTD. VERSUS COMMR. OF C. EX., VISAKHAPATNAM [ 2010 (7) TMI 568 - CESTAT, BANGALORE ], it has been held that The Tribunal, in the case of AUTOMATIC ELECTRIC LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI [ 2004 (8) TMI 242 - CESTAT, MUMBAI] , has held that the benefit of exemption under Notification 108/95-C.E. is available to a sub-contractor when M/s. BHEL is the main contractor of an approved project. The Appellant is eligible for the benefit of Notification No. 6/2006-CE dated 1.3.2006, as they have fulfilled all the conditions required to avail the said exemption. Accordingly, the demands made in the impugned order are not sustainable and the same is liable to be set aside - Appeal allowed.

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• 2023 (7) TMI 297
  Recovery of excess collection of Clean Energy Cess against sale of Clean Coal as per presumptive calculation - Section 11D of the Central Excise Act, 1994 - HELD THAT:- The basis of calculation of differential Clean Energy Cess Rate @ Rs. 73.27 per MT on Clean Coal, in the impugned order is only on the basis of a presumption that this amount collected separately was on account of Clean Energy Cess. The Appellant has clearly established that the amount collected was on account of differential rate arrived at due to late signing of MOUs. In the impugned order the demand has been confirmed under Section 11D of the Central Excise Act, 1994. As per Section 11D, any amount collected as duty is to be deposited in the Government Account. In the present case, the Appellant has already paid Clean Energy Cess amounting to Rs. 14,76,04,018 on the gross extracted quantity of raw coal of 29,50,080 MT during the period July 2010 to March 2013, at the time of removal of the same from the mines. They are entitled to collect this amount from the customers. Provisions of Section 11D would be attracted only when it is established that the Appellant has collected more than Rs 14,76,04,018/- as Clean Energy Cess from the customers - the investigation has not established any such excess collection by the Appellant over and above the amount of Rs 14,76,04,018/- of Clean Energy Cess already paid by the Appellant. The Appellant has paid Clean Energy Cess @ Rs 50 per MT on the quantity of raw coal of 29,50,080 MT amounting to Rs.14,76,04,018. After processing in the Washery, the Clean Energy Cess is chargeable only on the Clean Coal, as there is no Clean Energy Cess on the other products emerge in the Washery. Thus, the Appellant has to collect the amount of Rs 14,76,04,018/- paid on 29,50,080 MT of raw coal from 16,78,729 MT of Clean Coal cleared from the Washery - it is observed that the Clean Energy Cess collected by the Appellant from their customers was much less than the amount of Clean Energy Cess actually paid by them on the raw coal. The demands confirmed in the impugned order under Section 11D of the Central Excise Act , 1994 is not sustainable. Accordingly, the demand of interest under Section 11DD is also not sustainable - Appeal allowed.

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• 2023 (7) TMI 296
  CENVAT Credit - input services - outward transportation charges - denial on the grounds that the sale contract and the invoices do have the words Door Delivery or FOR mentioned on the said documents - HELD THAT:- From the Circular dated 08.06.2018, it is apparent that the essential criteria for allowing or disallowing the credit is if the Central Excise duty has been paid after including the freight element or otherwise. In case the Central Excise duty has been paid after including the freight element in the assessable value then the cenvat credit of the service tax paid on the freight element has to be allowed. Prima facie from the perusal of the sample documents produced by the appellant, it is noticed that the central excise duty has been paid after including the freight element. However, since only sample documents have been produced, it is necessary that a detailed verification may be conducted by the lower authorities to ascertain if Central Excise duty on all the documents have been paid after inclusion of the freight element in the assessable value. In case the Central Excise duty have been paid after inclusion of the freight element in the assessable value then the cenvat credit of GTA paid on said freight element cannot be denied in terms of the aforesaid Circular. The matter is remanded to the original adjudicating authority for fresh adjudication - Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2023 (7) TMI 295
  Levy of penalty under Section 9 (2A) of the CST Act read with Section 37 (6) of HGST Act, 1973 - Evasion of tax - Inter-State Sales shown as branch transfers - HELD THAT:- In the present case, a consignment of motor cycles destined to Ghaziabad and Secunderabad Depots were checked at STCB, Faridabad and a penalty was imposed under Section 9 (2A) of the CST Act read with Section 37 (6) of HGST Act, 1973. The verification regarding stock transfer to Ghaziabad and Secunderabad Depots from Faridabad was also made. The assessee admitted the certain branch transfer in the original return as inter state sales. The dealer filed revised returns for first and second quarter showing an enhanced turnover of interstate sales and paid additional tax - the lack of bona fides on the part of appellant s part as he did not file the revised returns under Section 25 (4) of the 1973 Act and waited till the filing of fourth return. The appellant had deliberately filed incorrect return and omitted to pay the amount of tax due and thus contravened Section 25 (2) and 3 of 1973 Act. The penalty has rightly been imposed by the Assessing Officer. The assesse filed his revised return when his vehicle was confiscated. The mens rea and deliberate attempt to conceal and suppress the taxable turnover by fabricating or maintaining false returns with a motive to evade the payment of tax due are the essential ingredient of Section 48 of HGST Act. No material was brought on record by the assessee to prove any deliberateness. The Assessing Officer had enough ground to impose penalty under Section 48 of the Act. No substantial question of law arises for consideration in the present appeal and the same stands dismissed.

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• Indian Laws

• 2023 (7) TMI 294
  Dishonor of Cheque - validity of summon, and notice framed under Section 251 of the CrPC - whether the security cheques given by the petitioners were towards any future consideration or legally enforceable debt? - invocation of jurisdiction of this Court under Section 482 of the CrPC - HELD THAT:- In the case of Indus Airways Private Limited and Others v. Magnum Aviation Private Limited and Another [ 2014 (4) TMI 464 - SUPREME COURT] , the Hon ble Apex Court, in the facts of that case, held that a post-dated cheque issued by way of advance payment against a purchase order cannot be considered as a cheque issued towards the discharge of legally enforceable debt. In the said case, it was admitted between the parties that the purchase order was cancelled. The Hon ble Apex Court held that in such circumstances, the cheque could not be held to have been presented for encashment for discharge of legally enforceable debt or liability. This Court, in the case SURESH CHANDRA GOYAL VERSUS AMIT SINGHAL [ 2015 (5) TMI 1246 - DELHI HIGH COURT] had an occasion to deal in detail with the circumstances where the debt in question can be interpreted to be owed by the accused to the complainant for the purpose of Section 138 of the Negotiable Instruments Act. The Court interpreted the term legally enforceable debt when the cheques are issued as a security. It was held that the expression security cheque is not a statutorily defined expression in the Act. There can be a situation where the cheques are given to provide an assurance or comfort to the drawee that in case of failure to pay the primary consideration on the due date, the security may be enforced. Section 138 specifically mentions that the cheque must have been issued for discharge of not only any debt but can also be for other liability . It is therefore, not necessary that when the cheques are issued, the drawer had any debt to discharge on the date of issuance. The debt or any liability is to exist when the cheque in question is presented for encashment - the allegations made in the complaint, at the stage when the complaint is sought to be quashed at the initial stage, are to be taken as correct unless evidence of unimpeachable character has been produced. The defence taken by the petitioner is that it had not received any gold from the complainant and that the liability has not been crystalized so as to attract the provisions of Section 138 of the Negotiable Instruments Act. The legal presumption of the cheques having been issued in the discharge of liability must also receive due weightage. In a situation where the accused moves Court for quashing even before the trial has commenced, the Court s approach should be careful not to prematurely extinguish the case by disregarding the legal presumption supporting the complaint. The Hon ble Supreme Court in a recent decision of S.P. MANI AND MOHAN DAIRY VERSUS DR. SNEHALATHA ELANGOVAN [ 2022 (9) TMI 846 - SUPREME COURT] , had held that the provisions contained in the NI Act create a statutory presumption of dishonesty, exposing a person to criminal liability if payment is not made within the statutory period even after issuance of notice. It further held that everything stated in the complaint is taken to be correct at the initial stages and the allegations made therein are to be liberally construed in favour of the complainant at the time of issuance of process. When there is a legal presumption and where facts are contested, it would not be judicious for the Court to separate the wheat from the chaff under the garb of inherent powers. It has been held time and again that the power of quashing criminal proceedings while exercising power under Section 482 of the Cr.P.C should be exercised sparingly and with circumspection. The Court, at this stage is not to embark upon an inquiry as to the reliability or genuineness of the allegations made in the complaint - The presumption envisaged under Section 139 of the Negotiable Instruments Act is a rebuttal presumption at the time of trial. The Court can exercise power under Section 482 of the Cr.P.C, if the complaint on the face of it does not make out any case against the accused or if any evidence of an unimpeachable nature is produced. This Court finds that the petitioners, at best, have raised questions of fact mixed with questions of law which cannot be examined in the limited jurisdiction under Section 482 of the CrPC, for it is desirable that the same be left to be adjudicated upon based on the evidence led by both sides at the trial. Petition dismissed.

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