TMI Tax Updates - e-Newsletter
March 29, 2024
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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GST:
Seeking grant of regular bail u/s 439 of CrPC - Offence punishable u/s 132(1)(i)(i) of GST Act - bogus purchasers - GST registration was either suspended or cancelled - The High Court of Chhattisgarh granted bail to the applicant in a case related to alleged GST offences, considering factors such as completion of investigation, lack of criminal antecedents, and ongoing trial proceedings. The Court imposed conditions to ensure the applicant's compliance with legal obligations during the bail period. It also urged the trial court to expedite the trial process, emphasizing the importance of timely justice delivery.
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GST:
Seeking to revoke the cancellation of GST registration - The petitioner, a university, contended that despite fulfilling tax obligations and filing returns until a certain period, their registration was cancelled, allegedly infringing upon constitutional rights and principles of natural justice. The court noted a delay in submitting returns but recognized the petitioner's efforts to rectify the situation by promptly clearing outstanding dues. While the petitioner had not submitted a specific application for revocation as required by law, they undertook to do so within a stipulated timeframe. Considering precedents emphasizing caution in cancelling GST registrations, the court adopted a pragmatic approach, ultimately allowing the petition and directing the restoration of GST registration.
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GST:
Validity Of Show cause notice - The case pertains to a dealer of woven fabrics and readymade garments challenging a tax demand order due to allegedly insufficient opportunity to contest. Despite delay in response to a show cause notice, subsequent communication and evidence submission by the petitioner suggest efforts to refute discrepancies and comply with requirements. The Government maintains adherence to procedural fairness but acknowledges the petitioner's subsequent explanations for discrepancies. The High Court intervenes, quashing the order subject to conditions ensuring procedural fairness and opportunity for the petitioner to address the tax demand.
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GST:
Validity of Tax demand - Non consideration of reply submitted by the petitioner / assessee - The High Court found merit in the petitioner's contentions. It quashed the impugned orders and directed the respondent to appropriate 10% of the disputed tax demand from the petitioner's bank account. Additionally, the petitioner was granted three weeks to submit a reply to the show cause notice, and upon satisfaction of the payment and receipt of the reply, the Assessing Officer was directed to provide a reasonable opportunity for further proceedings and issue fresh orders within two months.
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GST:
Violation of Principles of natural justice - The High Court, upon examining the petition, found that the order-in-original passed by the Commissioner, CGST & Central Excise, Belapur, was in breach of the principles of natural justice. It noted discrepancies in the scheduling of personal hearings and the delayed service of the order on the petitioner. Considering these factors, the High Court quashed the impugned order and remanded the proceedings to the respondent for fresh orders.
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GST:
Proper officer - Jurisdiction of Initiate investigation proceedings by the Central GST and State GST authorities simultaneously - cross-empowerment - The Court found that in the absence of specific notifications enabling cross-empowerment, except for purposes related to tax refunds, the proceedings initiated by an authority (either Central or State) against taxpayers not assigned to them are without jurisdiction. - While the Court quashed the impugned proceedings for lacking jurisdiction, it also directed the respective authorities (Central or State) to whom the petitioners are administratively assigned to initiate fresh proceedings, if warranted, in compliance with the applicable laws and regulations. The period during which the impugned proceedings were initiated and pending litigation was to be excluded from the calculation of any limitation period for initiating new proceedings.
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GST:
Seeking refund of amount deposited - department coerced to deposit the tax amounts - The High court found the petitioner's claim of coercion unsubstantiated, highlighting evidence of voluntary payment and the petitioner's failure to raise complaints regarding coercion. The court emphasized that determining coercion versus voluntary payment involves disputed factual questions beyond the scope of writ proceedings. It asserted that such determinations require extensive evidence analysis, akin to civil suits, which cannot be conducted in summary proceedings under Article 226.
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GST:
Seeks to refund the GST - deposited against the non-migrated GST - The petitioner argued that they had only been using the migrated GST number and were surprised to discover the existence of the non-migrated GST number with a significant credit balance. The respondent acknowledged the technical error that led to the automatic generation of the non-migrated GST number but argued that there was no provision for transferring credit between GST numbers. - The High Court, considering the unique circumstances of the case, directed the transfer of the credit from the non-migrated GST number to the migrated GST number of the petitioner. Additionally, it ordered the authorities to address the issue of automatic generation of non-migrated GST numbers and take corrective action within a specified timeframe.
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GST:
Availment of wrongful credit - bonafide mistake - The High Court observed that the mistake made by the appellants was inadvertent, and despite the acknowledgment of the error by the adjudicating authority, the demand was confirmed without providing any guidance or assistance to rectify the error. Considering previous legal precedents and the transitional phase of legislation, the court directed the authorities to enable the appellants to rectify the mistake and submit the correct form within a specified timeframe. Additionally, the Nodal Officer of IT Grievance Redressal Mechanism was directed to facilitate the filing process and provide options for manual rectification if necessary.
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GST:
In the case before the Calcutta High Court, the petitioner sought relief regarding the additional tax liabilities arising from government contracts, irrespective of whether they were awarded before or after the introduction of GST. The court allowed the petitioner to file a representation before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks. The Additional Chief Secretary is required to make a final decision within four months after consulting relevant departments and considering the petitioner's arguments. Until a decision is made, no coercive action can be taken against the petitioner.
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Income Tax:
The Income-tax (Fifth Amendment) Rules, 2024, introduced through this notification, come into effect from April 1, 2024. The key amendment highlighted in the notification revolves around the substitution of two forms within Appendix-II of the Income-tax Rules, 1962 i.e. Substitution of FORM ITR-V and Substitution of FORM ITR-Ack.
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Income Tax:
The Tribunal meticulously analyzed each issue, heavily relying on precedent ITAT decisions and the specifics of the case presented. For the major contentious points, such as disallowance under section 14A and the deduction of salary to expatriate employees, the Tribunal sided with the assessee, providing detailed rationales based on prior rulings and the facts of the case. Similarly, for transfer pricing adjustments and the methodological disputes therein, the Tribunal preferred the assessee's approach, especially highlighting the inappropriate application of the Comparable Uncontrolled Price (CUP) method by the Transfer Pricing Officer (TPO) in the context of interbank indemnities.
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Income Tax:
Notification No. 36/2024 grants tax exemption to the National Mission for Clean Ganga (NMCG) for specified incomes, including grants-in-aid and interest earned on bank deposits. The exemption is subject to conditions ensuring non-commercial activities, unchanged nature of specified income, and compliance with tax filing requirements. Effective for assessment years 2021-2024.
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Income Tax:
Validity of Charge memo issued to CIT(A) - The case involved a challenge to an order issued by the Central Administrative Tribunal, which had quashed a charge memo against the respondent, a former Commissioner of Income Tax (Appeals). The petitioners alleged that the respondent had wrongly decided five appeals during his tenure, prompting the issuance of the charge memo in 2014. However, the High Court found that the delay of over ten years in issuing the charge memo was unjustified and could prejudice the respondent's defense. Despite arguments regarding the applicability of previous court decisions and the nature of the respondent's duties, the Court upheld the Tribunal's decision and dismissed the writ petition.
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Income Tax:
Exemption from Pre-deposit - The petitioner argued that their request for exemption from pre-deposit was wrongly rejected, and they challenged the jurisdiction of imposing liability. The court, after considering the submissions and relevant provisions of the Income Tax Act, directed the CIT (Appeals) to decide the appeal expeditiously without insisting on the pre-deposit. The court emphasized compliance with Notification and Instruction No. 1914 issued under Section 220 of the Income Tax Act. However, the judgment did not delve into the specifics of the jurisdictional challenge raised by the petitioner.
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Income Tax:
Validity of reopening of assessment - clandestine and unaccounted sales - The High Court reviewed a petition challenging the rejection of objections to a notice for reassessment under the Income Tax Act. The petitioner argued that the reassessment was based on a change of opinion rather than a mistake. The court examined the assessment procedure and found that the reasons for reopening the assessment did not indicate the discovery of new material but rather a potential change of opinion. - Consequently, the court quashed the impugned order and notice, ruling in favor of the petitioner.
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Income Tax:
Revision u/s 263 - The Tribunal concluded that the assessing officer had conducted a reasonable inquiry into the relevant issues, and the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. Despite the discrepancy between the intended scrutiny and the actual assessment, the Tribunal upheld the validity of the assessment order. Additionally, the Tribunal rejected the application of Instruction No. 9/2007, stating its inapplicability to the case at hand. - In light of the findings, the High Court dismissed the appeal, as it found no question of law arising from the impugned order.
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Income Tax:
Penalty u/s. 271(1)(c) - The Revenue argued that the assessee's actions constituted furnishing inaccurate particulars of income or concealing income. However, the High Court disagreed, ruling that the claim for deductions was bona fide and directly linked to the business profit. They emphasized that the mere rejection of a claim by the Assessing Officer does not automatically result in the imposition of penalties under Section 271(1)(c). Therefore, the High Court concluded that no substantial questions of law arose from the case and dismissed the appeal of the Revenue.
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Income Tax:
Rectification of mistake u/s 154 - limited scrutiny of “Agricultural Income” - The High Court deliberated on the challenge to an Impugned Notice issued u/s 154 - It examined the contentions of both parties regarding the jurisdiction of the Assessing Officer and the scope of rectification u/s 154. Finding that certain issues raised in the notice were not addressed in the original Assessment Order, the Court affirmed the jurisdiction of the Assessing Officer to rectify such errors. It emphasized that the power to rectify extends to mistakes of fact or law apparent from the record. Ultimately, the Court dismissed the writ petition, upholding the validity of the Impugned Notice and allowing for further proceedings.
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Income Tax:
The case involved challenges to the disallowance of expenses on repairs and maintenance and a donation to a trust. The appellant argued that both expenses were incurred for business purposes and should be allowed as deductions. The opponents contended that the expenses were not wholly and exclusively for business and should be disallowed. The Tribunal ruled in favor of the appellant on both issues, finding the expenses to be revenue in nature and made for commercial expediency. The High Court dismissed the appeal on the repairs and maintenance issue but admitted the appeal on the donation to the trust, indicating a need for further consideration.
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Income Tax:
Income taxable in India or not - Taxation of Technical Collaboration Fees @ 10% u/s. 9(1)(vii) r.w.s 115A(1)(b) - The Appellate Tribunal considered the arguments presented by both parties and examined relevant provisions of the Income Tax Act and the India-Mauritius tax treaty. It noted that the assessee, being a foreign company, did not have a permanent establishment (PE) in India. Additionally, there was no specific clause in the tax treaty addressing the taxability of the income in question. - ITAT held that in the absence of a permanent establishment and specific treaty provisions, the income should be treated as business profits and is not taxable in India.
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Income Tax:
Rejection of application for final approval u/s 80G(5)(iii) - The appellant, previously approved under Section 80G(5) of the Income Tax Act as a charitable institution, sought final approval following an amendment. Despite applying for provisional approval and subsequently for final approval, the application was rejected by the CIT(Exemption). The Tribunal clarified the interpretation of statutory provisions, emphasizing the application process for final approval and the applicability of CBDT Circulars. It held that the commencement of activities before provisional approval did not hinder the application process. The Tribunal directed the grant of provisional approval to the appellant and ensured the continuation of benefits under Section 80G of the Act.
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Income Tax:
Rejection of approvals u/s 80G - approval application filed belatedly - The Tribunal noted that the CBDT had extended deadlines for filing applications for registration or approval in light of genuine hardships faced by charitable entities. This was a significant consideration, indicating a recognition of practical difficulties and an intent to mitigate them. The Tribunal held that the timelines prescribed under clause (iii) of the first proviso to section 80G(5) should be treated as directory rather than mandatory, especially in light of the transitional nature of amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. (TOLA)
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Income Tax:
Transfer Pricing Adjustments - The Tribunal reaffirmed the primacy of the TNMM over CUP for benchmarking certain types of transactions, especially when comparable data for CUP is not readily available or applicable. - The ruling emphasized the reduced rate of taxation on interest income from foreign currency loans under specific conditions, thereby clarifying the applicability of section 115A over normal tax rates. - The allowance of deductions under section 44C was confirmed, highlighting the importance of adhering to the statutory limits and maintaining proper documentation to support such claims. - Lastly, the Tribunal's interpretation of the India-Canada DTAA in the context of taxability of interest on income tax refunds signals a broader understanding of DTAAs' provisions, particularly regarding the exemptions available to non-residents.
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Income Tax:
Validity of assessment order passed u/s 153C/143(3) against Settlement Commission order - The Tribunal found the reassessment to infringe upon the principles laid out by the ITSC, which had already settled the income at 8% of the receipts from the water pipeline project. The reassessment was deemed impermissible in law, rendering the impugned order dated 30.12.2019 passed u/s 153C/153A/143(3) as invalid. Consequently, all additions made therein were deleted.
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Income Tax:
Estimation of income - bogus purchases - The Tribunal addressed various issues, including the validity of the reopening of assessment, the genuineness of purchases, calculation of the profit element, and determination of the gross profit rate. It found that the purchases were reconciled with sales, indicating their genuineness. Relying on judicial precedents, the Tribunal concluded that only the profit element of the alleged bogus purchases should be assessed. It accepted the industry-standard gross profit rate of 3% for diamond trading and modified the CIT(A)'s order accordingly, restricting the addition to the profit element.
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Income Tax:
Calculation of Capital Gain - Non-Resident - Applicability of section 144C - eligible assessee - The appellant contested the rejection of their valuation report and the adoption of circle rates, arguing that the valuation report should have been relied upon. Discrepancies in the calculation of capital gains, particularly concerning brokerage expenses and stamp duty, were also highlighted. The Tribunal found merit in several of the appellant's arguments, directing the AO to reconsider certain aspects and providing relief to the appellant.
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Income Tax:
TDS u/s 195 - payments made to its Non-Resident Telecom Operators (NTOs) for provision of bandwidth capacity and provision of interconnect services - The Tribunal referred to previous proceedings involving the payer (the domestic entity making the payments), where it was initially held that the payments constituted Royalty/FTS and were taxable under section 9 of the Act. However, this decision was later overturned by the jurisdictional High Court, which ruled that the payments were not Royalty/FTS. Relying on the High Court's judgment, the Tribunal concluded that the payments could not be taxed in the hands of the assessee under section 9 of the Act or the relevant DTAA. Therefore, the CIT(A)’s decision to allow the appeal of the assessee was upheld.
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Customs:
Smuggling - Gold, with Swiss markings - Contraband item - Validity of Seizure and Evidentiary Value of the Sworn Statement - The court found the seizure to be valid under the Customs Act, emphasizing the evidentiary value of the sworn statement made under Section 108 of the Act. Despite the later retraction of this statement, the court deemed other material evidence sufficient to support the initial findings. - The Swiss markings on the gold bars were deemed conclusive evidence of their foreign origin. The appellants successfully demonstrated that the respondents failed to establish a legal importation pathway for the gold into the country, thus justifying the seizure. - The High Court set aside the orders of the Appellate Authorities, restored the order of the original authority, and allowed the appeal in favor of the revenue-appellant with specified costs.
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Customs:
Smuggling - Gold - baggage rules - The petitioners, a husband and wife, returned to India from the United States and were stopped by customs officials upon arrival. The officials found the wife wearing five gold bangles, which had not been declared. The petitioners claimed the bangles were a gift from their daughter. - The High court categorized the gold bangles as restricted items under customs laws, emphasizing that failure to declare such items amounts to their prohibition. - The court found that the petitioners' failure to declare the gold bangles constituted a violation of customs laws, as they exceeded the permissible limits for duty-free importation. - The court upheld the adjudicating authority's decision to confiscate the gold bangles and impose fines and duties, citing the provisions of the Customs Act and related regulations.
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Customs:
Right of the Purchaser of confiscated vessel in an action - Direction to issue No Due Certificate (NDC) in relation to subject vessel MSV Safina Al-Miraz to the Petitioner and permit the Petitioner to shift the Vessel from Salaya Port to Okha Port forthwith - The High Court referred to Sections 115 and 126 of the Customs Act, stating that upon confiscation, the confiscated goods vested in the Central Government. Consequently, any encumbrances, including the mortgage by the GMB, would cease to exist. - Given the legal framework and absence of outstanding dues, the Court directed the GMB to issue the NDC to the petitioner, enabling them to shift the vessel. The rule was made absolute in this regard, with no orders as to costs.
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Customs:
Seeking review of order - error apparent on the face of record or not - The court acknowledged the existence of the amendment to Paragraph 9.3 of the Handbook of Procedures and recognized its relevance to the case. However, it concluded that the amendment had been duly considered in the earlier order, and there was no error apparent on the face of the record regarding its application. In line with the respondents' argument, the court emphasized that a review cannot be used as a disguised appeal. It cited a Supreme Court decision that cautioned against exceeding jurisdiction in review applications and reiterated the principle that a review cannot reevaluate evidence already considered in the main petition.
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Customs:
Absolute confiscation of gold - The case involved the confiscation of gold by customs authorities from a jeweler, who contested the allegations of smuggling and illegal importation. The appellant provided substantial evidence, including invoices and transaction records, to prove the legality of their gold procurement activities. They argued that the seized gold was domestically sourced and not of foreign origin, highlighting discrepancies in its characteristics. The Appellate Tribunal found merit in the appellant's submissions, criticizing the lower court's reliance on unsubstantiated assumptions. Consequently, the appeal was allowed, and the appellant was granted relief, including the return of seized gold or refund of auction proceeds.
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Customs:
Intention and Compliance with Notification Conditions - Import and sale of Motor Spirit, commonly known as Petrol - Availing of a concessional rate of Countervailing Duty (CVD) - intention' at the time of import - By analyzing the sequence of actions - from the addition of additives post-importation to the payment of differential duty - the Tribunal underscored the procedural intricacies involved in the assessment and re-assessment of imported goods. It was determined that the appellant's actions did not warrant the confiscation of goods or the imposition of penalties, given the fulfillment of the conditions for concessional CVD rates based on the intention at the time of import and the voluntary payment of differential duty.
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Customs:
Classification of exported goods - Abrasive Mesh - The Tribunal observed that the lower authorities failed to address the Appellant's submissions adequately. Specifically, they did not justify the denial of the Appellant's requests for retesting the sample or for cross-examining the Chemical Examiner. Moreover, they did not provide reasons for the non-disclosure of communications from the relevant entity. Emphasizing the technical nature of the goods' properties and the importance of adhering to principles of natural justice, the Tribunal remanded the case for reconsideration by the adjudicating authority.
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Customs:
Classification of imported goods - Agricultural Reaper - Spare parts of Reaper - classifiable under CTH 84672900 and 84679900 respectively (Revenue) or under CTH 84331190 and 84339000 respectively? - The Tribunal decisively rejected the appellant's classification under headings for agricultural machinery, instead siding with the Revenue's designation of the goods as brush cutters suited for manual operation. This case underscores the importance of accurately declaring goods based on their most common commercial identity, reinforcing the legal maxim that the essence of classification lies in the goods' predominant use and public perception.
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Customs:
The Appellate Tribunal addressed multiple issues raised in the appeals concerning the classification of Rubber Processing Oil (RPO), enhancement of its imported value, mis-declaration of the country of origin, and the imposition of penalties and redemption fine. On the classification issue, the tribunal found that proper testing methods were not followed by the revenue, leading to the classification of RPO under Chapter Heading No. 27101990 as per the appellant's claims. Similarly, the enhancement of value based solely on consent letters was deemed improper without following due valuation procedures, leading to the decision to set aside the enhancement. Regarding the mis-declaration of the country of origin, the tribunal concluded that no preferential rates of duty were claimed, and any mis-declaration did not impact revenue, thus relieving the appellant of penalties.
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Customs:
Levy of penalty - Misclassification - nature of imported goods as Dried Garlic or not - Regarding the classification of the goods, the Tribunal upheld the appellant's argument, stating that the mention of "Garlic Bulbs" did not determine whether the garlic was dried or not. - The Appellate Tribunal found no evidence of misdeclaration by the appellant. The physical verification and test reports supported the appellant's claim that the imported goods were indeed Dried Garlic. The Tribunal dismissed the department's contention based on terminology and classification, emphasizing that the goods conformed to the declared classification. - No penalties.
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Customs:
Levy of penalty for delay in Submission of Documents - finalization of the provisional assessments - The Tribunal acknowledged the delay in document submission but noted that eventually, all necessary documents were provided for finalization of the provisional assessments. Citing precedent cases, the Tribunal emphasized that penalties should be proportionate to the offense and that there was no evidence of deliberate delay or revenue implication in this case. The Tribunal found that the penalty of Rs.20,000 imposed by the adjudicating authority was sufficient, considering that the required documents were eventually submitted.
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DGFT:
The DGFT issued Public Notice No. 53/2023, notifying the procedure for General Authorization for Export of Information Security items (GAEIS) under Category 8A5 Part 2 of SCOMET. - Key conditions include the submission of detailed applications through the online SCOMET portal, providing end-user certificates (EUCs), maintaining records, and adhering to post-reporting requirements. GAEIS will not be issued for items intended for military applications or to countries/entities under UNSC embargo or proliferation concerns. Non-compliance may lead to penalties or suspension/revocation of GAEIS.
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DGFT:
The Public Notice No. 52/2023 issued by the DGFT introduces a procedure for General Authorization for Export of Telecommunication items (GAET) under SCOMET Category 8A5 Part I. GAET allows for the one-time export of SCOMET items without individual authorization, subject to specified conditions, application processes, and post-reporting requirements. Non-compliance can lead to penalties, suspension, or revocation of GAET.
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DGFT:
The notification introduces amendments to Para 10.08 of Chapter 10 of FTP 2023, outlining two significant provisions: (1) General Authorization for Export of Telecommunication-related items (GAET): This provision covers items falling under SCOMET Category 8A5 Part I, excluding Software & Technology and items referenced in Para 10.15(I) of the HBP 2023. The export of these items will be governed by the procedure specified in Para 10.15(I) of the Handbook of Procedures (HBP) 2023. (2) General Authorization for Export of Information Security items (GAEIS): This provision applies to Information Security items falling under SCOMET Category 8A5 Part 2, excluding Technology. The export of these items will be regulated by the procedure specified in Para 10.15(II) of the HBP 2023. - The notification states that these amendments grant one-time bulk licenses for the export of Telecommunication-related items and Information Security items under SCOMET Category 8A5.
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Indian Laws:
Time Limitation - Curable Defect - Electronic Filing Compliance - Procedural Compliances vs. Substantive Rights: - The High Court found that the petitioners complied with the e-filing requirements, evidenced by the generation of an e-filing number. This compliance, despite the subsequent procedural deficiency, was considered as filing within the limitation period. The "Document not serial" error, a result of technical failures, was deemed a curable defect. Importantly, the Court opined that procedural compliances, including those encountered in the e-filing process, should not defeat the substantive rights of the parties. The essence of the ruling was that technical glitches should not bar access to legal remedies, particularly when the initial attempt to file was made within the prescribed limitation period.
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IBC:
Liquidation of the Corporate Debtor - The right of the appellant to propose a revised resolution plan - The judgment highlights the NCLAT's approach to balancing the interests of creditors and debtors within the framework of the IBC, particularly in the context of MSMEs. It reaffirms the principle that liquidation should be a last resort, with a preference for resolution and revival to maintain the entity's contribution to the economy.
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SEBI:
Recovery proceedings by SEBI - Maintainability of provisions of IBC over the provisions of the SEBI Act - The High Court affirmed the decision of the Single Judge, stating that no moratorium was in force during the relevant period. Thus, SEBI's issuance of the impugned certificate was justified. It held that the provisions of IBC do not override SEBI regulations, particularly in cases where no moratorium exists. The High Court did not delve into the question of whether the levy by SEBI constituted a fine or a penalty, leaving it open for consideration in future proceedings. Ultimately, the appeal was dismissed, and no costs were awarded.
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Service Tax:
SVLDRS - Rejection of the Petitioner’s Application filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Despite repeated directives from the court, the respondent failed to file a reply affidavit within the stipulated time frame, indicating a lack of compliance. However, the court found that the liability had indeed been quantified before the cutoff date, making the petitioner eligible for the scheme. Interpretation of the SVLDRS scheme and relevant circulars supported this conclusion. As a result, the court allowed the writ petition, quashing the rejection of the petitioner's application and directing the department to consider it in accordance with the law.
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Service Tax:
Export of service - “intermediary service” or not - service rendered by the appellant to overseas universities/colleges - The Tribunal found that the appellant's services fit the criteria for "export of services." It noted that the appellant's activities were directed towards promoting foreign universities in India and assisting students with admissions, which directly benefited the universities outside India. Since the services were provided to recipients outside India, for which payment was received in convertible foreign exchange, these activities were deemed exports of services. - On examining the definition of "intermediary services," the Tribunal observed that the appellant did not merely arrange or facilitate the provision of services between two or more persons but provided substantial services on their own account to the foreign universities. Thus, it was determined that the appellant's services did not constitute "intermediary services."
TMI Short Notes
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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GST
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2024 (3) TMI 1221
Seeking grant of regular bail u/s 439 of CrPC - Offence punishable u/s 132(1)(i)(i) of GST Act - GST registration was either suspended or cancelled - bogus purchasers - invoice of none existing suppliers - HELD THAT:- The fact that the compliant has been filed and further investigation which was pending in pursuance of the complaint has also been completed and the applicant has no previous criminal antecedents and as the complaint has already been submitted, there is no chances of tampering with the evidences and further that the applicant is in jail since 05.11.2023, I am of the opinion that the applicant is entitled to be released on bail in this case without commenting on the merits of the case.
However, this Court hopes and trusts that the trial Court shall make earnest endeavour to conclude the trial as expeditiously as possible, if there is no legal impediment.
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2024 (3) TMI 1220
Seeking to revoke the cancellation of GST registration - which was accepted by the portal and was also issued a Form DRC-03 under Rule 142(2) and 142(3) of the GST Rules, 2017 but has not issued any DRC-03 - Petitioning university paid the taxes - HELD THAT:- Learned counsel for the petitioner, today, undertakes that the petitioner shall move an application for revocation within a period of two weeks from today. Though, it is beyond the prescribed time limit u/s 30 of the Act, the petitioner is willing to pay whatever late fee/penalty be imposed for the delay in submission of the returns, and the respondents, upon such receipt of application from the petitioner, shall immediately revoke the cancellation of registration.
Given the said factual matrix of the case as also the judicial pronouncements that are referred to in the preceding paragraphs, if the default on the part of the petitioner is only so far as non-furnishing of the returns, we are of the considered opinion that subject to the petitioner making good the default, the said GST registration of the petitioner-university would get restored which would enable the petitioner to process the affiliation proceedings in respect of the various colleges under the petitioner-university, which would also generate GST revenue to the respondent authorities as well.
Thus, this Writ Petition stands allowed.
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2024 (3) TMI 1219
Validity Of Show cause notice - No reasonable opportunity provided - tax demand as a condition for remand - HELD THAT:- On examining the show cause notice and impugned order, it is clear that the entire tax liability is with regard to disparity between the GSTR-3B and GSTR-2B returns. The petitioner has, albeit subsequent to the issuance of such order, explained that ITC was validly availed of by submitting documents in support thereof. Undoubtedly, the petitioner was negligent in not doing so upon receipt of the intimation and show cause notice. Nonetheless, if the explanation of the petitioner is valid, the interest of justice would be prejudiced unless the petitioner is provided an opportunity to explain the alleged disparity.
Thus, albeit by putting the petitioner on terms, the impugned order calls for interference. Therefore, the impugned order is quashed subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a maximum period of two weeks from the date of receipt of a copy of this order.
W.P. is disposed of on the above terms.
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2024 (3) TMI 1218
Validity of Tax demand - Non consideration of reply submitted by the petitioner / assessee - works contractor and registered dealer under applicable GST enactments - Pre-deposit - HELD THAT:- The petitioner's reply has been placed on record. Although such reply is terse, the petitioner requested for two months' time to reply by citing the pending proceedings at the instance of the central GST authorities. The petitioner also pointed out that a deposit of Rs. 1,50,00,000/- was made with regard to three assessment periods. Thus, the petitioner's reply was not taken into account and the petitioner was not provided time as requested in the said reply. In these circumstances, albeit by putting the petitioner on terms, the petitioner should be provided another opportunity.
Therefore, the orders impugned herein are quashed. Since the bank account of the petitioner was attached pursuant to a communication from the respondent to the Bank, the respondent is directed to appropriate 10% of the disputed tax demand in respect of each assessment year from such bank account. The petitioner is permitted to submit a reply to the show cause notice within a period of three weeks from the date of receipt of a copy of this order.
These writ petitions are disposed of on the above terms.
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2024 (3) TMI 1217
Assailing the order-in-original passed by the Commissioner - Violation of Principles of natural justice - HELD THAT:- We are of the clear opinion that the respondent before passing the impugned order, ought to have adopted the procedure not only to serve the show cause notice in the manner known to law, but also grant a fair and sufficient opportunity to the petitioner by issuing appropriate notices and only after granting an opportunity of a hearing and placing of all materials on record, an endeavour should have been made to pass appropriate orders. The principles of law in this regard are well settled. Thus, as the impugned order is passed in breach of the principles of natural justice, the same cannot be sustained.
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2024 (3) TMI 1216
Proper officer - Jurisdiction of Initiate investigation proceedings by the Central GST and State GST authorities simultaneously - Absence of a proper Notification u/s 6 of the respective GST Enactments for cross-empowerment - Challenged the Jurisdiction of Central Authorities - Whether the petitioners who are assigned to either the Central Tax Authorities or the State Tax Authorities under respective Central Goods and Services Tax Act, 2017 (CGST Act, 2017) and/or Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act, 2017) can be subjected to investigation and further proceeding by the counterparts under the respective GST Enactments - Validity of notices issued under Sections 62 & 67 of the TNGST Act, 2017 and orders passed u/s 73 and 74 of the TNGST Act, 2017 -
HELD THAT:- The returns to be filed by the Assessee's under the respective GST Enactments are same. They capture all the details under the respective GST Enactments applicable to an assessee. The returns are to be filed in the common portal as defined in Section 2(26) of the respective GST Enactments. As per Section 2(26) of the respective GST Enactments “Common portal” means the common goods and services tax electronic portal referred to in Section 146.
That apart, the payment of tax whether under the CGST Act, 2017 or under TNGST Act, 2017 are at the same rate. The only difference that may arise at the time of payment of tax due to utilization of the Input Tax Credit (ITC) availed on the inward supplies and their cross utilization for discharging the tax liability in terms of Chapter-X of the respective GST Enactments r/w Chapter-IX of the respective GST Rules, 2017.
As per Section 49A of the CGST Act, 2017, Input Tax Credit availed on account of Central Tax, State Tax or Union Territory Tax can be utilized towards payment of Integrated Tax, Central Tax, State Tax or the Union Territory Tax as the case may be, only after the Input Tax Credit available on account of Integrated Tax Credit has been first available on such cases. Section 49A of the CGST Act, which was inserted with effect from 01.02.2019 and notified vide Notification No.2/2019-CT 29/1-2019 as amended by GST (Amendment) Act 2018 (31 of 2018) has to be read in conjunction with Rules 88 A of the CGST Rules, 2017 as inserted by Notification No.16/2019-CT.
A similar provision is absent under the TNGST Act, 2017 and TNGST Rules 2017.
As per Section 88A of the TNGST Rules, 2017, Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order. Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully.
Under Section 3 of the respective Central and State GST Enactments of 2017, both the Central Government and the State Government have appointed a “class of officers” for the purpose of enforcement of the respective GST Enactments of 2017. Apart from the officers mentioned u/s 4(1) of the respective Central GST Act, 2017 and TNGST Act, 2017, the Board (the Central Board of Indirect Taxes and Customs [CBIC]) as defined in Section 2(16) of the CGST Act, 2017 and the Government as defined in Section 2(53) of TNGST Act, 2017, can appoint such officers as they may deem fit to be the officers under these GST Enactments.
Thus, the Board can authorize any officer referred to in clauses (a) to (h) of Section 3 of CGST Act, 2017 to appoint any officers of the Central Tax below the rank of Assistant Commissioner of Central Tax to be the Central Tax Officer for the administration of the CGST Act, 2017 alone. Thus, u/s 4(2) of the CGST Act, 2017, these can be only a linear delegation.
Under Section 4(2) of the TNGST Act, 2017, all other officers shall have jurisdiction over the whole of the State or over such local areas as the Commissioner may, by an order, specify, in respect of all or any of the functions assigned to them, subject to such conditions as may be specified. Thus, the Commissioner has power to delegate powers under the Act to other Officer specified in Sub-clause (c) to (f) to Section 3 of the TNGST Act, 2017. There is no cross-empowerment u/s 4(2) of the TNGST Act, 2017.
Thus, neither the Board u/s 4(1) and (2) of CGST Act, 2017 nor the Government and/or the Commissioner u/s 4(1) and (2) of SGST Act, 2017 can appoint such officers in addition to the officer notified under Section 3 of the respective Act. Thus, the Board can appoint and delegate only to Central Tax Officers appointed under the CGST Act, 2017 for CGST Act, 2017 and the Government and/or the Commissioner can appoint and delegate only to State Tax Officers appointed under the TNGST Act, 2017 for TNGST Act, 2017.
These provisions are pari materia with Section 4 of the Customs Act, 1962 and Section 12(E) of the Central Excise Act, 1944.
Section 6(1) of the respective GST Enactments empowers Government to issue notification on the recommendation of GST Council for cross-empowerment. However, no notification has been issued except u/s 6(1) of the respective GST Enactments for the purpose of refund although officers from the Central GST and State GST are proper officers under the respective GST Enactments.
Since, no notifications have been issued for cross-empowerment with advise of GST Council, except for the purpose of refund of tax under Chapter-XI of the respective GST Enactments r/w Chapter X of the respective GST Rules, impugned proceedings are to be held without jurisdiction. Consequently, the impugned proceedings are liable to be interfered in these writ petitions.
Thus, if an assessee has been assigned administratively with the Central Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017, the State Authorities have no jurisdiction to interfere with the assessment proceedings in absence of a corresponding Notification u/s 6 of the respective GST Enactments.
Similarly, if an assessee has been assigned to the State Authorities, pursuant to the decision taken by the GST Council as notified by Circular No.01/2017 bearing Reference F.No.166/Cross Empowerment/GSTC/2017, the officers of the Central GST cannot interfere although they may have such intelligence regarding the alleged violation of the Acts and Rules by an assessee.
The manner in which the provisions have been designed are to ensure that there is no cross interference by the counterparts. Only exception provided is u/s 6 of the respective GST enactement. Therefore, in absence of a notification for cross-empowerment, the action taken by the respondents are without jurisdiction. Officers under the State or Central Tax Administration as the case may be cannot usurp the power of investigation or adjudication of an assesse who is not assigned to them.
Therefore, the proceedings initiated by the respondents so far against the respective petitioners by the Authorities other than the Authority to whom they have been assigned to are to be held as without jurisdiction. Therefore, the impugned proceedings warrants interference.
At the same time, it is noticed that there is possibly case made out against each of the petitioners and since same power ought to have been exercised by the respective counterparts of the respondents, namely the Central Authority/State Authority as the case may be, to whom the respective petitioners have been assigned, proceedings should be initiated against each of the petitioners by the Authority to whom they have been assigned for the purported loss of Revenue under the respective GST Enactments.
Therefore, while quashing the impugned proceedings, there shall be a direction to the Central Authority/State Authority as the case may be to whom the respective petitioners have been assigned for administrative purpose to initiate appropriate proceedings afresh against them strictly in accordance with the provisions of the respective GST Enactments and GST Enactments Rules and Circular issued thereunder. The time between the initiation of the proceedings impugned in these writ petitions and time during the pendency of the present writ petitions till the date of receipt of this order shall stand excluded for the purpose of computation of limitation.
These writ petitions are disposed with the above observations.
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2024 (3) TMI 1215
Seeking refund of amount deposited - department coerced to deposit the tax amounts - whether it is genuinely a coercion or it was a voluntary deposit - HELD THAT:- At the outset, it needs to be noted that the petitioner is a legal person, it is described to be a company registered under the Companies Act, 1956. As a legal person, the petitioner certainly cannot be physically coerced. The question is which of the representatives of the petitioner or its officers who were incharge of the day to day affairs of the petitioner, whether were coerced into such act. This is certainly a question of fact.
It appears that not only the petitioner decided to voluntarily deposit an amount of Rs. 2,50,00,000/-, but also, agreed that the “balance tax payment scheduled” would be made within 10 days. It also appears that the search and seizure operations revealed that an amount of more than Rs. 5 crores was due and payable towards the outstanding tax which was very well realized by the petitioner. Thus, the case of the petitioner in the present facts, in regard to any coercion or allegation of any criminal act against the respondent cannot be accepted, not only on account of the petitioner’s letter dated 13 October 2022, addressed by the petitioner to respondent No. 1, but also on the petitioner’s own conduct which does not inspire any confidence for the writ Court to accept such contention.
In our opinion, in reality or genuinely if the petitioner was to be coerced, as a prudent legal person would resort, the petitioner could have made complaints and/or representation on such actions of the officers, which in law can certainly be regarded as highhanded and illegal. However, the petitioner did not even whisper anything of such kind, in the several letters addressed to the authorities including in answering the summons, to say that such amount was recovered by the department under coercion, much less to raise the same before the appropriate police authorities. Hence, a case of such nature being directly made out in the writ petition de hors any material to that effect would not give any impetus to the petitioner’s case of any coercion by the department. In this view of the matter, such factual dispute as to whether any coercive methods were adopted by the respondents and that such amounts were deposited under duress and coercion certainly cannot be conclusively ascertained and/or gone into in the proceedings of a writ petition under Article 226 of the Constitution.
In the present case, it appears that several summonses were issued to the petitioner and that the investigation is in progress, it therefore, appears that the show cause notice, is yet not issued. It is in these circumstances, the petitioner by approaching this Court, for the first time, has made a grievance of a coercive recovery, which in our opinion, cannot be accepted.
We may also observe that when an assessee comes before the Court invoking jurisdiction under Article 226 of the Constitution and that too making a serious grievance that the department had coerced the assessee to deposit the tax amounts, certainly as to whether it is genuinely a coercion or whether it was a voluntary deposit, as seen in the present case, is purely a disputed question of fact. Such question cannot be gone into and appreciated in the proceedings under Article 226 of the Constitution.
As a result of the discussion, in our opinion, the petition is thoroughly misconceived. It is accordingly, rejected.
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2024 (3) TMI 1214
Seeks to refund the GST - deposited against the non-migrated GST - HELD THAT:- Learned counsel appearing for the respondent submits that there is no provision available in the GST portal for transfer of the credit from one GST number to another. He however concedes that the petitioner did not opt for the migration of the service tax registration and the system automatically created a GST number (i.e. the non-migrated GST number).
We direct that the amount standing to the credit of the non-migrated GST number be transferred to the migrated GST number of the petitioner. The petition is disposed of in the above terms.
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2024 (3) TMI 1213
Availment of wrongful credit - bonafide mistake - appellants entered the amount in a wrong table due to technical misunderstanding, as a result of which, the credit of Rs. 46,91,982/- was credited to the CGST account - consistent case of the appellants is that they would fall under Entry 7B and inadvertently the TRAN-1 was filed under Entry 7A and the appellants explained that since they are not registered under the Central Excise Act, they are required to file TRAN-1 under Entry 7B - HELD THAT:- The question would be as to whether on account of such a technical error which undoubtedly is an inadvertent error can the appellants be denied the transitional credit. This issue is no longer res integra and has been considered by several courts as well as this court in a batch of cases in MAT 552 of 2020. More or less an identical issue arose for consideration and the court considered the various orders passed by the other High Courts and disposed of the appeals by permitting the writ petitioners therein to file individual tax credit in GSTR-3B Forms for the relevant months and the assessing officer was at liberty to verify the genuineness of the claim. We are informed that the judgment [2021 (12) TMI 835 - CALCUTTA HIGH COURT]. batch has been given effect to. More recently in the case of S.V. Halavagali and Sons v. Superintendent of Central Excise [2023 (11) TMI 1013 - KARNATAKA HIGH COURT] an identical issue arose for consideration before the court.
In the said case also there was an inadvertent error and the credit was filed under wrong head i.e. 7(d) instead of 7(b). The court after taking into consideration the various orders passed by the other High Courts directed the authorities to consider the claim of the petitioners therein under Column 7(b) of the CGST Rules, 2017 and if there are supporting documents to make the claim and the claim is established, then consequential relief should be allowed.
Earlier similar issue was considered in the case of M/S. G&C INFRA INNOVATIONS VERSUS UNION OF INDIA THE COMMISSIONER, STATE GOODS AND SERVICES TAX DEPARTMENT, KERALA, THE GST COUNCIL, THE PRINCIPAL COMMISSIONER, CENTRAL TAX AND CENTRAL EXCISE, KOCHI GOODS & SERVICES TAX NETWORK, THE NODAL OFFICER, AND OTHERS [2022 (5) TMI 694 - KERALA HIGH COURT] wherein the court took note of the fact that after the GST regime came into force the period between 2017 and 2020 ought to be regarded as the nascent period of legislation and admittedly several glitches occurred even from the part of the department. Further, it was pointed out that the courts have repeatedly held that the said period as a trial and error phase as far as implementation of the statute was concerned and the taxpayers were also in a state of confusion, during the relevant period.
Thus, taking note of the law and the subject as well as the facts of the case, it is a fit case where directions should be issued to the authorities to enable the appellants to rectify the mistake and submit GST TRAN-1 under heading 7B of Table 7(a) of Form GST TRAN-1 and the appellants are directed to comply with the same within three weeks from the date of receipt of the server copy of this order after which the adjudicating authority is directed to verify the same and if admissible, extend the transitional credit to the appellants.
The Nodal Officer of IT Grievance Redressal Mechanism, Kolkata CGST & CX Zone is directed to take note of the direction issued in this judgment and order and facilitate the filing of the TRAN-1 and TRAN-2 by the appellants by rectifying the mistake - In the event such rectification is not possible electronically, the appellants shall be given an option to do so manually.
Appeal disposed off.
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2024 (3) TMI 1212
Petition for the relief - additional tax liability for execution of subsisting Government contracts either awarded in the pre-GST regime or in the post-GST regime - without updating the Schedule of Rates (SOR) incorporating the applicable GST while preparing Bill of Quantities (BOQ) for inviting the bids - HELD THAT:- Petitioner has also prayed for relief of issuance of direction upon the respondents authority concerned to neutralize the impact of unforeseen additional tax burden on Government contracts since the introduction of GST w.e.f. 1st July, 2017 for ongoing contract awarded before the said date and to update the State SOR incorporating applicable GST in lieu of inapplicable West Bengal VAT henceforth.
Considering the submissions of the parties this writ petition is disposed of by giving liberty to the petitioner to file appropriate representation in the aforesaid regard as referred in preceding of this order, before the Additional Chief Secretary, Finance Department, Government of West Bengal within four weeks from date.
It is also recorded that the Additional Chief Secretary, while taking decision on the representation to be filed by the petitioner shall act in accordance with law and pass a reasoned and speaking order on merit and after considering all the judgments of different High Courts upon which petitioners intend to rely. With this observation and direction this writ petition being WPA is disposed of.
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Income Tax
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2024 (3) TMI 1204
Income taxable in India or not - Taxation of Technical Collaboration Fees @ 10% u/s. 9(1)(vii) r.w.s 115A(1)(b) - As per assesee there is no “Service PE” existing in India - as submitted during the scrutiny assessment proceedings assessee has voluntarily agreed to tax the FTS u/s. 115A to buy peace, to avoid litigation and also to avoid penal proceedings, thus this amount is not taxable in India, in the absence of Service PE - HELD THAT:- There is no dispute on the fact that the assessee is not having a Permanent Establishment [PE] in India. Further, there is no specific clause in the DTAA entered into between the Republic of India and Mauritius as pointed out by the Ld. AR in his written submissions, Article-12A was inserted w.e.f 1/4/2017 and cannot be applied for the FY 2017-18. We also find that various judicial pronouncements including the Coordinate Benches and various Hon’ble High Courts have held that in the absence of any specific provisions in the DTAA, the scope of taxing the said income shall be only business profits subject to existence of PE in India, and cannot be tax under the residuary Article of the relevant DTAA.
The said income cannot be expanded within the scope of section 9(1)(vii) r.w.s 115A of the Act.
It is settled position of law that in the absence of a clause in DTAA not dealing with a particular item of income, the payments are not be regarded as residuary income but as business income which is not chargeable to tax in India, in the absence of any PE of the Non-Resident in India. Decided in favour of assessee.
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2024 (3) TMI 1211
Charge memo issued to CIT(A) - disciplinary actions on allegations of mala fide against an officer exercising quasi-judicial powers - delay in issue charge memo - appeals decided in exercise of quasi-judicial powers while he was serving as Commissioner of Income Tax (Appeals) at Raipur, between 13.05.2003 and June 2007, had been were wrongly decided by ignoring material facts - Quasi-judicial powers of CIT(Appeals) -Tribunal has quashed the charge memo issued to the CIT(A)/respondent - as argued Tribunal was justified in quashing the charge memo which besides having been issued belatedly, was only a counterblast to the respondent’s challenge to the earlier charge memo wherein the petitioners had leveled similar allegations qua cases decided by him while he was posted as Joint Commissioner of Income Tax during the period between 1996 to 1998
HELD THAT:- We are of the view that even if we were to accept the petitioners’ plea that the decision in S. Rajguru [2014 (8) TMI 1243 - DELHI HIGH COURT] was not applicable to the facts of the present case, or that the said decision as urged by the petitioners was liable to be ignored, the fact remains that the petitioners have not been able to explain the inordinate delay of over ten years in issuing the charge memo.
The appeals which the CIT(A)/respondent is purported to have wrongly decided pertained to the period between 13.05.2003 to June 2007, when he was functioning as the Commissioner, Income Tax (Appeals) at Raipur and therefore, there is undoubtedly a delay of over ten years if computed from 13.05.2003. A CIT(Appeals) decides appeals on a regular basis in his quasi-judicial capacity and cannot be expected to have access to records of all decided cases after so many years. It is, therefore, evident that on account of this inordinate delay in issuance of the charge sheet, grave prejudice was likely to be caused to the respondent.
Even before us, petitioners except for baldly stating that the delay was occasioned due to the long drawn procedure required to be followed before issuing the charge memo to a Group ‘A’ officer like the respondent, has not been able to furnish any reason much less to say any justifiable reason for this inordinate delay. WP dismissed.
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2024 (3) TMI 1210
Rejection of request for exemption from pre-deposit - basis of imposing the liability of the petitioner - HELD THAT:- Taking into consideration the notification, Instruction No.1914 issued u/s 220 of the Income Tax Act as read with OM [F. No.404/72/93-ITCC], we deem it appropriate to direct the first Appellate Authority CIT (appeals) to decide the appeal within a period of three months, without insisting on the recovery of the demand. Till the pendency of the appeal, the demand shall be deemed to be stayed without depositing the pre-deposits 20%.
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2024 (3) TMI 1209
Validity of reopening of assessment - clandestine and unaccounted sales - Reason to believe - absence of power to review - report of the Directorate General of Goods and Service Tax Intelligence relied upon to conclude that there was a large-scale suppression of sale by the petitioner and therefore assessee had not offered sales to tax in its return of income, thus addition of gross profit at the rate of 1% to the income of the business and profession of the assessee - HELD THAT:- Notice giving the reasons for reopening the assessment in the case of the petitioner does not indicate, that any new material has been found, but relies upon the same material and same set of facts as were prevailing, when the earlier order of assessment dated 28.12.2018 was made.
The entire assessment order was based upon the report of the Directorate General of Goods and Services Tax Intelligence, based upon which respondent no. 2, had assessed the income of the petitioner as indicated above. The same report has been considered as a reason for re-opening the assessment in the impugned order, which clearly would indicate that it was not a case of mistake, but was a change of opinion, as the same material, which cannot be sustainable in law.
Though reliance is also placed on the amended section 147 of the Income Tax Act, it does not assist her case for two reasons, (i) the amendment having been brought into effect from 1.4.2021, cannot be applied to the case of the petitioner and (ii) even otherwise, though the expression “reason to believe has been deleted therefrom, what has been held in Kelvinator of India [2010 (1) TMI 11 - SUPREME COURT] regarding the concept of “change of opinion” being treated as an in-built test to check abuse of power by the Assessment Officer, in absence of power to review, would continue to hold the field. Reopening notice set aside - Decided in favour of assessee.
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2024 (3) TMI 1208
Revision u/s 263 - case of the assessee was selected for scrutiny and the AO was passed u/s 143(3) by accepting the returned income - As per CIT internal Audit Party observed that during the assessment proceedings, no proper verification of the purchase of the new assets and depreciation claimed on the assets has been made by the AO - Tribunal held that the AO framed the assessment on limited scrutiny and not the complete scrutiny. However, on perusal of the certified copy of the Assessment Order, it appears that the case of the assessee was selected for complete scrutiny - HELD THAT:- On perusal of the finding of facts arrived at by the Tribunal it is clear that the Tribunal after considering the issue of claiming the depreciation by the respondent-assessee as per the Act has come to the conclusion that the Assessment Order is neither erroneous nor prejudicial to the interest of Revenue.
Tribunal has also observed that the CBDT Instruction No. 9 of 2007 dated 11.09.2007 relied upon by the PCIT would also not be applicable in the facts of the case as the same pertains to the issue of allowability of depreciation and brought forward losses/unabsorbed losses. However, in the case of the respondent-assessee there was no issue pertaining to the brought forward losses or unabsorbed depreciation. No substantial question of law.
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2024 (3) TMI 1203
Disallowance of WIP - CIT(A) deleting the disallowance being the amount provided in valuing work-in-progress of construction contracts - As per revenue to that extent profit of the assessee company got reduced - HELD THAT:- Respectfully following the decision of Co-ordinate Bench in assessee's own case in the preceding Assessment Years 1994-95, we find no merit in the ground raised by the Revenue in its appeal wherein as observed that the Tribunal has made specific finding in the earlier years that the valuation of work-in-progress relating to incomplete contracts has been made by the assessee company in a consistent manner following the accepted principles of accounting and decided the issue in favour of the" assessee. Respectfully following the decision of the coordinate bench in assessee's own case, we set aside the impugned orders of the authorities below and allow the ground of appeal raised by the assessee. Decided against revenue.
Disallowance of Commission - AO has disallowed payment of commission as the assessee had not furnished adequate evidence to substantiate that the expenditure was incurred wholly and exclusively for the purpose of business - HELD THAT:- We find that this issue is recurring. In absence of any cogent evidence, the assessee’s claim of payment of commission has been consistently dismissed. Similar is the situation in the impugned assessment year. No evidence has been brought on record by the assessee to substantiate its claim. Decided against assessee.
Addition u/s. 40A(9) - Contribution to Utmal Employees Welfare Fund - disallowed assessee’s claim on the ground that the said payment is not backed by any legal provision or any law for the time being in force, hence, the amount was disallowed u/s. 40A(9), also confirmed by CIT(A) - HELD THAT:- As this issue has been decided by the Tribunal [2022 (5) TMI 104 - ITAT MUMBAI] (supra). The Co-ordinate Bench following the order of Tribunal in assessee's own case for preceding Assessment Year allowed assessee’s contribution towards Utmal Employees Welfare Fund. We find that this issue has been recurring since Assessment Year 1994-95. In preceding Assessment Years, the Tribunal has consistently allowed contribution towards said Fund.. The facts being similar in the impugned assessment year, ground No.2 of appeal is allowed for parity of reasons.
Reduction in depreciation claim arising on account of refusal to treat transfer of Bangalore Undertaking as “Slump Sale” - HELD THAT:- We find that identical ground was raised by the assessee as additional ground of appeal in appeal for Assessment Year 2001-02 [2020 (10) TMI 1324 - ITAT MUMBAI] The Co-ordinate Bench decided the issue following the decision of Tribunal in assessee’s own case for Assessment Year 1998-99. No contrary material is placed before us by the Department. Hence, respectfully following the decision of Co-ordinate Bench we direct the Assessing Officer to accept assessee’s claim of depreciation. Decided in favour of assessee.
Disallowance u/s.14A on account of interest expenditure - assessee has earned income from tax free bonds - contention of the assessee is that assessee is having own funds sufficient to cover the investments - HELD THAT:- It is no more res-integra that where the assessee is having mixed bag of; own interest free funds and borrowed interest bearing funds, it shall be presumed that the assessee has made investments from own interest free funds. Similar disallowance made by AO in Assessment Year 2001-02 & Assessment Year 2002-03 [2022 (5) TMI 104 - ITAT MUMBAI] was deleted by the Co-ordinate Bench. We deem it appropriate to restore this issue to Assessing Officer for the limited purpose of verification of availability of assessee’s own funds matching investments. In the result, ground No.4 of appeal is allowed with aforesaid directions.
Nature of receipts - Extinguishment of Sales Tax deferred loan liability treated as revenue receipts - HELD THAT:- As decided in assessee own case [2020 (10) TMI 1324 - ITAT MUMBAI] we are inclined to set aside the order of CIT(A) on this issue by holding that such receipt is a capital in nature - Decided in favour of assessee.
Deduction u/s. 80HHC - Reduction of 90% gross interest received from profits & gains of Business - HELD THAT:- We find that the Co-ordinate Bench while deciding the appeal for Assessment Year 2001-02 and Assessment Year 2002-03 following the decision of Tribunal in assessee's own case in [2020 (10) TMI 1324 - ITAT MUMBAI] for Assessment Year 2001-02 restored the issue back to the file of Assessing Officer. Both sides are unanimous in stating that the facts relating to Assessment Year under appeal on this issue are identical, hence, respectfully following the decision of Co-ordinate Bench we restore this issue back to the file of Assessing Officer with similar directions.
Set off of loss on export of trading goods against profits on export of Manufactured goods - As assessee fairly stated that this issue has been decided against the assessee in the preceding Assessment Years, the facts in the impugned assessment year are identical. In view of the statement made by ld.Counsel for the assessee, sub-ground No. (b) is dismissed.
Reduction of 90% Miscellaneous Income received from profits of Business - We find that similar issue was raised before Co-ordinate Bench in appeal by the assessee in Assessment Year 2001-02 and Assessment Year 2002-03 placing reliance on the decision of Tribunal for Assessment Year 2000- 01 [2020 (10) TMI 1324 - ITAT MUMBAI] restored the issue back to the file of Assessing Officer. The Revenue has not placed on record any material to controvert the submissions of the assessee, hence, following the decision of Co-ordinate Bench, we restore sub-ground (c) to the Assessing Officer for parity of reasons.
Reduction of profits in respect of projects eligible for deduction u/s. 80HHB - We find that this issue was also considered by Co-ordinate Bench in the preceding Assessment Year and was restored to the Assessing Officer. Both sides are unanimous in stating that the facts relevant to the issue are identical to the facts in appeal for Assessment Year 2001-02 [2020 (10) TMI 1324 - ITAT MUMBAI] Hence, following the decision of Co-ordinate Bench, the issue in sub-ground (d) is also restored to the Assessing Officer.
Rejection of claim of deduction u/s. 80IA in respect of Captive Power generating units - HELD THAT:- this issue has been considered by the Tribunal in the preceding Assessment Years in favour of assessee.
Disallowance u/s. 14A for the purpose of computing book profit u/s. 115JB - HELD THAT:- Special Bench in the case of Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that while computing book profits u/s. 115JB of the Act disallowance made u/s.14A r.w.r. 8D shall not be considered. The Hon’ble Karnataka High Court in the case of Sobha Developers Ltd. [2021 (1) TMI 378 - KARNATAKA HIGH COURT] has reiterated that disallowance made u/s. 14A could not be added to book profits of assessee u/s.115JB of the Act. In light of aforesaid decisions, assessee succeeds.
Adjudication of additional grounds - assessee is claiming deduction u/s. 80HHC and 80HHE of the Act under MAT provisions - HELD THAT:- The additional grounds raised by the assessee are purely legal, hence, additional grounds are admitted for adjudication. Since, these grounds have been raised for the first time before the Tribunal, we deem it appropriate to restore this ground to the Assessing Officer for consideration and adjudication on merits after affording reasonable opportunity of making submissions to the assessee, in accordance with law. Hence, additional ground No.1 and 2 are allowed for statistical purpose.
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2024 (3) TMI 1207
Penalty u/s. 271(1)(c) - addition on account of disallowance of claim of deduction u/s. 36(i)(viii) - ITAT deleted addition holding that the variation in the deduction u/s. 36(1)(viii) was due to the change in the business profit and it cannot be said that assessee has furnished inaccurate particulars of income - It is department’s case that only because assessee has offered income and not claimed deductions in the return of income would not absolve assessee from the liability of Section 271(1)(c)
HELD THAT:- TAT, in our view, correctly held that provisions of Section 271(1)(c) of the Act are not attracted. The ITAT was of the view and rightly so that assessee had made a bona fide claim under Section 36(1)(viii) as such deductions claimed is linked to the business profit. Only because there was variance in the deductions allowable due to change in determination of business profit, it cannot be said that assessee has furnished inaccurate particulars of income or concealed inaccurate particulars of income.
As held by the Apex Court in Commissioner of Income Tax Vs. Reliance Petro Products Pvt Ltd. [2010 (3) TMI 80 - SUPREME COURT] if we accept the contention of revenue, then in case of every return where the claim sum is not accepted by the AO for any reason, assessee will invite penalty u/s 271(1)(c). A mere making of the claim which is not sustainable in law by itself, will not amount to furnishing inaccurate particulars regarding the income of assessee, such claim made in the return cannot amount to be inaccurate particulars. Decided in favour of assessee.
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2024 (3) TMI 1202
Application for final approval u/s 80G(5)(iii) rejected - as per revenue assessee had already commenced its activities since long even prior to grant of provisional registration, and since the time period for making application mentioned in Clause (iii) to First Proviso to section 80G(5) of the Act had already expired, therefore, the assessee could not be granted final registration u/s 80G(5) - HELD THAT:- The issue is squarely covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the case of “Tomorrow’s Foundation [2024 (3) TMI 941 - ITAT KOLKATA] the appeal of the assessee is allowed accordingly and the ld. CIT(Exemption) is directed to grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. It is directed that the ld. CIT(E) will decide the application of the assessee for final approval as expeditiously as possible but not later than two months from the receipt of this order.
As further directed that, if the assessee is granted final approval by the ld. CIT(E) then, the benefit of approval u/s 80G of the Act, available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to be continued without any break. The assessee will not be deprived of the benefit during the time period falling between 31/03/2021 and the date of grant of provisional approval under clause (iv) i.e., 28/05/2021, due to technical errors occurred in making the application under the relevant provisions of the Act because of the confusion and misunderstanding on part of the assessee as well as on part of the ld. CIT(E) in properly interpreting the relevant provisions. Appeal of the assessee allowed for statistical purposes.
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2024 (3) TMI 1201
Rejection of approvals u/s 80G - approval application filed belatedly - As per revenue Form 10AB has not been filed within the due dates as mentioned in the Act or within the time limits extended by CBDT - whether its is genuine hardship case? - HELD THAT:- It is to be noted that the assessee trust has commenced its activities on 14.07.2017 and assessee is also provisionally approval u/s. 80G(5)(iv) - assessee trust was required to file application in Form No.10AB u/s. 80G(5)(iii) of the Act within the time period of six months prior to expiry of the period of provisional approval or within six months of commencement of its activities, whichever is earlier, in term of clause (iii) of first proviso to sub-section (5) of section 80G.
We have gone through the CBDT Circular No.6 of 2023 dated 24.03.2023 and noted that the CBDT has clarified the provision relating to charitable and religious trusts and has extended the timeline for furnishing Form No.10A seeking provisional registration/approval within the extended period up-to 30.09.2023.
Timeline prescribed for filing Form No.10AB for registration u/s. 12A of the Act in the case of assessee trust has been extended up-to 30.09.2023 after considering the genuine hardship faced by charitable institutions vide various CBDT circulars and finally, vide Circular No.6/2023 dated 24.05.2023. Similarly, the timeline prescribed for filing Form No.10A for recognition u/s. 80G of the Act was also extended up-to 30.09.2023 by the same circular for trusts filing registration under clause (i) to first proviso to section 80G(5) of the Act.
Once, the CBDT has extended the timeline for filing Form No.10AB for recognition u/s. 12A of the Act and also for filing Form No.10A for recognition u/s. 80G of the Act extended up to 30.09.2023 for trusts filing registration under clause (i) of first proviso to section 80G(5) of the Act, we find no difference in continuing hardship as recognized by CBDT even in filing Form No.10AB for renewal of recognition u/s. 80G of the Act under clause (iii) of first proviso to section 80G(5) of the Act.
In our view, this being a genuine hardship case, which is recognized by Revenue or CBDT by issuing a general circular, we are of the view that this specific provision of clause (iii) to first proviso to section 80G(5) cannot be excluded and or it has not been the intention of the CBDT while issuing the circular.
In our view, we agree with the argument of assessee that the timeline prescribed under clause (iii) of first proviso to section 80G(5) of the Act should be treated as directory and not mandatory especially considering the transitional nature of the amendment as brought out by the taxation of other laws (relaxation and amendment of certain provisions) act 2020 for bringing new regime. Hence, in our view, the CIT(Exemptions) should not have rejected the assessee’s application in Form No.10AB only for this technical reason.
Hence we remand the matter back to the file of the CIT(Exemption) to decide the issue on merits.
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2024 (3) TMI 1200
TP adjustment for administrative support serves in relation to Inter Bank Indemnities - selection of MAM - HELD THAT:- The facts in the impugned assessment year are identical to the facts in Assessment Year 2008-09 held that TNMM method would be the Most Appropriate Method in the facts and circumstances of the instant case and CUP could not be applied herein because of non availability of data.
In any case in respect of adjustment made simply relying on 133(6) information from the market had been deleted by this Tribunal in the case of Asian Paints Ltd [2014 (1) TMI 16 - ITAT MUMBAI] It is also prudent to note that the same transactions were accepted by the Id. TPO upto A Y2012-13 in the case of the assessee Hence, even going by the rule of consistency as has been held in the case of Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] there is no need for the Id. TPO to take a divergent stand when there is no change in the facts and circumstances during the year with that of earlier years Hence, we direct the Id TPO to delete the adjustment made in respect of guarantee fees. Decided in favour of assessee.
Rate of tax on interest income from foreign currency loans - Tribunal has consistently held that interest income earned on foreign currency loans is taxable @20%. CIT(A) in impugned order has followed the decision of his predecessor in AY 2008-09, which in turn followed the decision of Tribunal in assessee's own case in AY 1997-98 - We find no infirmity in the findings of the CIT(A) on this issue, hence, ground No.1 of appeal is dismissed, sans-merit.
Deduction u/s. 44C - AO allowed head office expenses only to the amount reflected in Form 3CEB - Assessee claimed that deduction u/s. 44C should be allowed to the extent of Rs. 9,90,15,825/- or 5% of adjusted total income, whichever is lower - AO rejected the contentions of the assessee further held that the assessee had furnished incomplete and partial details - HELD THAT:- No specific details in respect of the amount in excess of Rs. 2.10 crores is furnished by the assessee - CIT(A) re-examined the documents and accepted submissions of the assessee. CIT(A) allowed assessee’s claim primarily for the reason that the claim of the assessee is within the limit of 5% of the adjusted total income and the said claim of the assessee is supported by auditors certificate. The Co-ordinate Bench in the case of Doha Bank QSC [2020 (11) TMI 371 - ITAT MUMBAI] held that head office expenses attributable to the business of assessee in India is allowable in accordance the provisions of section 44C, irrespective of the fact whether or not any amount is debited in the books of account.No contrary material is brought before us by the Department to controvert the findings of the CIT(A) or the decision cited by assessee.
Not allowing interest on income tax refund as exempt from tax in accordance with the provisions of Article 11(3)(a)(i) of India – Canada DTAA - Whether interest income on income tax refund is exigible to tax in India or is exempt in light of provisions of Article 11(3) of India-Canada DTAA? - HELD THAT:- The treaty under reference in the said case was India-Italy DTAA. On reading of Article 12 of the aforesaid treaty which deals with “Interest”, we find that provisions of clause (3) are pari-materia to clause (3) of Article 11 of India Canada-DTAA. Hence, the ratio decidendi in the case of Ansaldo Energio SPA [2016 (5) TMI 945 - MADRAS HIGH COURT] would apply to the instant ground of appeal.
In so far as the decision in the case of B.J. Services Co. Middle East Ltd. [2015 (5) TMI 1036 - UTTARAKHAND HIGH COURT] on which the CIT(A) has placed reliance, we find that it referred to UK-India DTAA. We have examined the provisions of the said treaty. The provisions of Article -12 dealing with interest in the said DTAA are not parimateria to India- Canada DTAA. There is no clause in Article-12 of India UK-Treaty similar to Article -11(3) in India –Canada Treaty. Hence, the decision in the case of B.J. Services Co. Middle East Ltd [2015 (5) TMI 1036 - UTTARAKHAND HIGH COURT] would not apply to the facts of the present case. In the facts of case and the decision of Hon'ble Jurisdictional High Court, we find merit in assessee succeeds on ground No.2.
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2024 (3) TMI 1223
Additional interest u/s 244A(1A) not granted - whether the assessee is entitled to additional interest as prescribed under Section 244A(1A) of the Act or not? - HELD THAT:- A bare reading of Section 244A(1A) of the Act would reflect that once the assessee’s right of refund originates as a result of an appeal effect order under Section 250 of the Act, whereby, fresh assessment or reassessment has not been undertaken, then the assessee is entitled to receive an additional interest of three per cent per annum apart from the interest accrued under Section 244A(1) of the Act, for the duration starting from the date following the date of expiry of time as permitted u/s 153(5) of the Act to date on which the refund is granted.
Section 244A(2) of the Act would manifest that the only contingency in which the statutory interest can be denied to the assessee is the circumstances where the delay is attributable to the assessee itself.
The reasons for non-issuance of the refund alongwith additional interest which is statutorily prescribed u/s 244A(1A) of the Act should be weighed on the anvil that those reasons are attributable to the assessee or not.
In the instant case, it is seen that the additional interest of three percent per annum as mandated u/s 244A(1A) of the Act is the statutorily prescribed interest and can only be denied if the statute so permits. It is also evident that the contingency for the denial of additional interest u/s 244A(1A) is envisaged u/s 244A(2) of the Act and only on the ground where the delay is attributable to the assessee. In any case, it is not the case of the Revenue that the COVID-19 pandemic is attributable to the assessee.Revenue may have had some difficulties in dealing with such instances, however, the same would not absolve the Revenue from the rigour of Section 244A(1A) of the Act.
Notably, since the Revenue has already granted the interest under Section 244A(1) of the Act without attributing any reason of delay to the assessee, we do not find any cogent reason for not granting additional interest as mandatorily prescribed under Section 244A(1A) - reasons of delay attributed to the assessee are without any logical explanation and lack merit. Therefore, taking into consideration the abovenoted facts and legal position, we find no reason to sustain the impugned order.
Allow the writ petition and hereby quash and set aside the order dated 18 November 2022. We further direct the Revenue to grant the statutorily prescribed interest as mandated under the Section 244A(1A) of the Act to the assessee, with due expediency.
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2024 (3) TMI 1199
Validity of assessment order passed u/s 153C/143(3) against Settlement Commission order - as submitted assessee JV had carried out one single contract during the relevant year and that the Settlement Commission had finally settled the taxable income for AY 2013-14 qua such contract undertaken for UMC and that the final assessment order pursuant thereto had been passed by the AO, thus no further income in relation to the same contract could be again re-assessed by the AO - HELD THAT:- Section 153A or 153C of the Act, is overriding only Sections 139, 147, 148, 149, 151 & 153 of the Act. As rightly pointed out by the Ld. AR, it does not override the specific provision of Section 245-I of the Act, which provides that the orders passed by the ITSC shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in that Chapter, be reopened in any proceeding under the Act or under any other law for the time being in force. In this regard, we take note of the legal maxim expressio unius est exlcusio alterius, which means that express mention of one is the exclusion of other [GVK Industries Ltd [2011 (3) TMI 1 - SUPREME COURT]]. Since Section 153A overrides only the specific provisions, as stated hereinabove, then it clearly means that provisions of Section 245-I has been excluded and that it has not been overridden by Section 153A of the Act.
We therefore hold that the AO erred in law by reopening the assessment for AY 2013-14 and made addition u/s 153C of the Act, which assessment had already been concluded and settled by ITSC, Mumbai, whose order had attained finality. Thus orders passed u/s 153C/153A/143(3) is held to be impermissible in law and is accordingly all additions made therein also stands deleted. - Decided in favour of assessee.
Bogus purchases - payments made to the thirty (30) vendors were fake - HELD THAT:- Analysis and the inference drawn by the AO is found to be actionable. This analysis was however only the starting point of investigation. The Revenue however ought to have brought on record further corroborative material to support their analogy that the entire value of these payments had come back and remained unaccounted in the hands of the assessee. We take note of the fact that, the assessee had provided the relevant supporting evidence such as invoices, ledgers, proof of payments etc. which it was ordinarily required to substantiate the genuineness of these purchases. Also, there was no statement made by any Directors of the assessee Group averring that these payments found noted on these loose papers were not genuine. However, at the same time, none of these parties complied with the enquiries made by the AO. None of them provided their work orders, financials, audit reports, details of expenses incurred, bank statements etc. to justify the work done for the assessee. Amongst the thirty (30) parties, Shri Gursahani who represented six (6) parties attended the enquiry and admitted to undertaking work viz., providing labour to the assessee but was unable to provide any of the details as sought by the AO and the reason given by him was theft, for which copy of FIR was provided. The fact however remains that, independent enquiries from the vendors could not be made. Overall therefore, we are in agreement with the Ld. CIT(A) to the extent that the assessee was unable to fully discharge the genuineness of these payments made to the thirty (30) vendors.
Estimation of income on Bogus purchases - Only the profit element embedded in the payments ought to be assessed to tax and that on the given facts, the disallowance of entire value of purchases was unwarranted.
Following the above order of ITSC and having regard to the fact that the same contract was continued in the relevant AY 2014-15, we hold that the profit of the assessee for the year is to be estimated at 8% of the contractual receipts. The Ld. AR had pointed out to us that, the assessee had offered 8% of contractual receipts in the return of income filed u/s 153C of the Act. The AO is accordingly directed to verify this contention and ensure that the total income is finally assessed at 8% of the contractual receipts for the relevant AY 2014-15. With these directions, these grounds are disposed off.
Disallowance of contractual payments - AO had disputed the genuineness of the contractual payments made by the assessee to IDCC - HELD THAT:- IDCC had regularly filed their service tax returns and VAT Audit reports and that it had fully discharged its service tax and VAT liabilities levied on their invoices to the credit of the Government. Having perused the financials of IDCC, we note that it has reported substantial turnover in excess of several hundred crores in AYs 2013-14, 2014-15 & 2015-16 respectively. The audited financials reveal that IDCC is a fully functioning company engaged in rendering contractual services.
CIT(A) is also noted to have taken cognizance of the income declared by IDCC across various assessment years of the appellate order, which showed that IDCC was declaring substantial income each year and therefore lacked the characteristics of a paper/shell entity as alleged by the AO. It is further noted that the AO was unable to find any defect in any of these documents. Even before us, the Revenue was unable to point out any specific infirmity in these evidences furnished by the assessee and IDCC, which demonstrated the genuineness of the payments made towards sub-contract charges. Payments made to IDCC was genuine and the AO is held to be unjustified for disallowing the same.
Unexplained cash credit in the hands of the assessee JV - principle of telescoping - protective addition - HELD THAT:- Same income should not be taxed twice i.e. once at the time of generation and thereafter at the time of application for routing back into the business. The said principle would equally apply where the cash generated by business concerns are routed through partners/directors - JV partners had disclosed income in the hands of the assessee JV before the ITSC, Mumbai and such additional income represented the intangible addition / secret profit, which applying the judicially approved principle of telescoping, could be set off against any unexplained money/investment found by the Revenue.
Since the additional income offered to tax in earlier years was sufficient to cover such cash investment alleged to have been made by JV partners, no separate protective addition was required to be made in the hands of assessee JV. Accordingly, the appeal of the Revenue is dismissed.
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2024 (3) TMI 1198
Estimation of income - bogus purchases - HELD THAT:- Since there is allegation of getting accommodation bills, it is possible that the assessee could have purchased goods from someone else, while the purchase bills were obtained from some body else. In that case, there is a possibility that the assessee could have made some profit, which can be assessed by the AO
What could be assessed by the AO is only the profit element involved in the alleged bogus purchase transactions
The gross profit rate in respect of trading of diamonds may be taken at 3%. In the instant case, the assessee has sold the alleged bogus purchases and hence it was a trading transaction. Since the assessee has already declared gross profit rate of 1.42%, we are of the view the addition should be restricted to 1.58% (3% less 1.42%). Accordingly, we modify the order passed by Ld CIT(A) and direct the AO to restrict the addition to 1.58% of the value of alleged bogus purchases. Appeal filed by the assessee is partly allowed.
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2024 (3) TMI 1197
Calculation of Capital Gain - Non-Resident - Applicability of section 144C - eligible assessee - Disallowance of brokerage expenses - Fair market value determination of the rear basement - HELD THAT:- We are of the considered view that the facts as brought before us require verification and, therefore, in regard to disallowance of brokerage, the issue is restored to the file of ld. AO for giving an opportunity to the assessee and allow the same in totality, if found verified.
Fair market value of the rear basement - We are of the considered view that before the DRP, the assessee had brought on record evidences indicating that the assessee had acquired interest in the rear basement by way of agreement to sell dated 15.04.1994. The fact that this property was rented out and Form 16A against the rent paid by Israel Aircraft Industries Ltd. for the period 01.04.1996 to 31.03.1997 was sufficient piece of evidence to show that the rear basement was acquired before 01.04.2001. Thus, there was no justification for the DRP to disregard the registered valuer’s report and instead direct AO to accept the circle rates. Thus, the directions of the DRP to the AO to apply circle rate is also not sustainable and, to that extent, the DRP directions and the findings of the ld. AO in the final assessment order require to be reversed with the direction that the indexed cost of rear basement should be taken, on the basis of the valuation report as provided by the assessee, as per law.
Assessee has sold the second floor of D4/5, Vasant Vihar, New Delhi, in which she had 50% of the share by way of sale deed dated 07.12.2018 for a sale consideration coming to her share at Rs. 6,87,50,000/-. The assessee has claimed that there was a brokerage of Rs. 20,28,125/- and a copy of invoice is made available aThe claim of the assessee is that the assessee has been charged brokerage of Rs. 20,28,125/- in respect of her 50% share in the second floor and the AO ought to have allowed the same in full. A clarification of the broker Satia Homes Pvt. Ltdis provided certifying and confirming that the assessee was owner of 50% of second floor of D4/5, Vasant Vihar, New Delhi for which separate tax invoice No.18 dated 04.12.2018 was issued on account of brokerage to the assessee and the same was paid by her. This amount was inclusive of GST @ 18%. This brokerage amount pertains only to 50% share in the second floor of D4/5, Vasant Vihar, New Delhi.
We are of the considered view that the facts as brought before us require verification and, therefore, in regard to disallowance of brokerage, the issue is restored to the file of ld. AO for giving an opportunity to the assessee and allow the same in totality, if found verified.
Stamp duty paid by the assessee for purchase of second floor have not been considered by the AO in the cost of acquisition - As submitted on behalf of the assessee that stamp duty of Rs. 10 lakhs was paid at the time of sale deed on 09.02.2009, in regard to front portion of the second floor on and a stamp duty of Rs. 7 lakh was paid on the purchase of rear portion of the second floor by sale deed dated 07.02.2009 and, thus, for arriving at the cost of acquisition for second floor, this amount of Rs. 17 lakhs should have been considered.
We are of the considered view that apparently, the ld. AO has failed to take note of the directions of the DRP in this regard and, accordingly, we direct the AO to give benefit of the stamp duty for arriving at the cost of acquisition in regard to second floor.
As a consequence of the aforesaid discussion, the grounds No.4-7 are cumulatively decided in favour of the assessee.
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2024 (3) TMI 1196
TDS u/s 195 - proceedings u/s 201 - non-deduction of tax at source on payments made to its Non-Resident Telecom Operators (NTOs) for provision of bandwidth capacity and provision of interconnect services - HELD THAT:- Tribunal in the case of M/s. VSL (the payer) [2019 (12) TMI 206 - ITAT BANGALORE] in the proceedings under section 201 of the Act, had held that the said charges paid to the non-resident is Royalty/FTS and the income is deemed to accrue or arise under section 9 - However, the order of the Tribunal in the case of VSL was reversed by the Hon’ble jurisdictional High Court in the case relied on by the CIT(A)
Since the Hon’ble jurisdictional High Court has categorically held that the payment made by the VSL is not Royalty/FTS, the same cannot be brought to tax in the hands of the assessee under section 9 of the Act and the relevant DTAA. The relevant finding of the Hon’ble jurisdictional High Court has been elaborately extracted in the impugned order of the CIT(A), therefore the same is not reiterated here. In view of the aforesaid judgment of the Hon’ble High Court in the case of VSL [2023 (7) TMI 1164 - KARNATAKA HIGH COURT], we hold that CIT(A) is justified in deciding the issue on merits in favour of assessee and deleting the additions made by the AO for Assessment Years 2009-10 and 2010-11 - Decided in favour of assessee.
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2024 (3) TMI 1222
Addition u/s 14A - Disallowance of expenditure towards earning interest income exempt u/s 10(15) - After referring the tax free funds the assessee submitted that no disallowance u/s 14A should have been made - HELD THAT:- Since it is undisputed fact that during the year under consideration also the available tax free funds were more than the investment made on which exempt income was earned therefore, following the decision of ITAT on the similar fact and identical issue as discussed supra we direct the assessing officer to delete the disallowance made u/s 14A r.w.Rule 8D in the case of the assessee. Accordingly, this ground of appeal of the assessee is allowed.
Expatriate Salary - AO was of the view that the aforesaid expenses had been incurred as overseas salaries of the expatriate was in the nature of head office expenditure, therefore, same was disallowed u/s 44C of the Act - HELD THAT:- We find that the lower authorities has not contrary disproved the material fact that both these employees have continually worked for the Indian branches of the assessee bank and both have offered their global income in India for tax. The assessee has also provided copy of document showing that necessary approval as per Sec. 35B of the Banking Regulation Act, 1949 for appointment of Mr. Danis Vaz as Chief Executive Officer of the India branches was obtained. The assessee has demonstrated from the return of income filed in the case of both these employees that their global income has been offered to tax in India for the assessment year 2005-06 to the amount of Rs.60,43,321/- in respect of Mr. Denis Vaz and amount of Rs.45,65,652/- in the case of Mr. Terry Watkins. The assessee has brought on record the relevant return of income of both the employees showing that global income was offered to tax in India in accordance with provision of Sec. 5 and Sec. 6 of the Income Tax Act for remaining present in India on secondment with Indian Branch of BNS. The revenue has not brought on record any relevant materials to disprove these material facts and evidences - Decided in favour of assessee.
Applicability of Sec. 115A to interest income from Foreign Currency Loan - CIT(A) holding that the interest u/s 115A has to be computed on the gross interest income and not on the net interest income - HELD THAT:- As per decision of ITAT for assessment year 2004-05 [2024 (1) TMI 414 - ITAT MUMBAI] as held the legislature has intended to tax the interest only on gross basis. Further in support of his arguments ld. A.R has also cited Article 10& 11 of DTAA with Canada. Notification No.10503(F No.505/2/87-FTD) - Further it has also been mentioned that section 90(2) of IT Act also provides that the provisions of this Act shall apply to the extent they are more beneficial to that assessee.- Decided in favour of assessee.
Deduction of interest paid by Indian branch to Head Office - Indian branches of the assessee bank has paid interest to the head office/overseas branches - AO had not allowed the deduction in respect of payment of interest to the HO - HELD THAT:- We have gone through the decision of ITAT for A.Y. 2004-05 [2024 (1) TMI 414 - ITAT MUMBAI] Tribunal decided the issue in favour of assessee and dismissed the ground raised in appeal by the Revenue.
Restriction of Claim of bad debts in terms of the proviso to Sec. 36(1)(vii) - HELD THAT:- As per decision of ITAT for assessment year 2004-05 [2024 (1) TMI 414 - ITAT MUMBAI] wherein Tribunal placing reliance on the decision in the case of CIT vs.UTI Bank Ltd [2013 (1) TMI 209 - GUJARAT HIGH COURT] and CBDT Instruction No.17/2008 dated 26/11/2008 dismissed the ground raised in appeal by the Department.
TP adjustment - administrative support services in relation to inter bank indemnities - assessee’s overseas branches have executed interbank indemnities against which assessee has issued guarantees on behalf of the clients of overseas branches and vice versa - MAM selection - TNMM OR CUP - HELD THAT:- Assessee has given the analysis of the aforesaid transactions that Inter-Bank indemnity is a financial arrangement wherein a bank branch will be compensated for any financial liability that it incur on behalf of its co-branch. The issuance of these arrangement is standard practice in international banking service. The assessee explained that by issuing a guarantee on behalf of the clients of BNS overseas branches, the assessee did not fall under any default/credit risk as it is secured by a back to back inter-bank indemnity issued by overseas BNS branches to the assessee. In a reverse scenario where the associated enterprises of the assessee issues guarantees on behalf of the assessee, the remuneration charges by them to the assessee was only the administrative services provided by them and not based on the rates that would have been charged to third parties.
We find in the case of BNS India no public information on third party to third party transaction of similar or identical services was found that reflects the characterstics of the services provided by BNS India. Further as per provision of Rule 10B of the I.T Rules comparables for provision of interbank indemnity services would have to be companies which provide same or similar services as BNS India, and are comparable in terms of function performed, risk assumed and asset utilized. As per the information provided by BNS India it had earned operating margin of 25.41% on operating cost which was higher than the arm’s length margin of 15.28% on operating cost. The lower authority has not brought on record any relevant material to contrary to the material facts as discussed supra in this order.
We have gone through the decision of ITAT in the case of Australia & New Zealand Banking Group Ltd. Vs. [2022 (4) TMI 1438 - ITAT MUMBAI] wherein it is held that where TPO observed that assessee had earned processing fees for issuing guarantees on behalf of its associated enterprises and rejected TNMM adopted by the assessee and proceeded to benchmark guarantee transaction using external CUP method, since data under CUP method was not available and data margins under TNMM was readily available and held that it would be appropriate to apply TNMM as most appropriate method. In the aforesaid decision it is held that TNMM method would be the most appropriate method in the facts and circumstances of the case and CUP could not be applied because of non-availability of data.
We have also perused the decision of Bank of Tokyo Mitsubishi UFJ Ltd. [2020 (5) TMI 665 - ITAT DELHI] wherein identical issue on similar fact was decided in favour of the assessee.
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2024 (3) TMI 1206
Rectification of mistake u/s 154 - limited scrutiny of “Agricultural Income” - respondent seeks to alter the Assessment Order made u/s 143(3) by including those issues which were not expressly dealt earlier namely (i) Interest on Borrowing, (ii) Goods in Transit & (iii) Interest on account of Excess Refund of amounts. These items were not included in the Assessment Order
HELD THAT:- Under Sub-Section(3) to Section 154 of the Income Tax Act, 1961, an amendment, shall not be made unless the authority concerned has given notice to the assessee or the deductor etc a reasonable opportunity of being heard where such amendment has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee [or the deductor], Thus, it cannot be said that the impugned notice issued to the petitioner was without jurisdiction as the assessing officer is empowered to rectify a mistake which is apparent from the record.”
The power of the officers mentioned in Section 154 is to correct “any mistake apparent from the record” is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an “error apparent on the face of the record”.
Court spelt out the distinction between the expressions “error apparent on the face of the record” and “mistake apparent from the record” and held suffice it to say that the Income Tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.
The meaning of the expression, “error apparent on the face of record” is wider than the expression “mistake apparent from the record”. An Assessing Officer is not incompetent to invoke the jurisdiction under section 154 of the Income tax Act, 1961 if such officer had committed a glaring mistake of fact or law while passing the assessment order as held by the Hon’ble Supreme Court in Commissioner of Income Tax vs. Hero Cycles (P) Ltd [1997 (8) TMI 6 - SUPREME COURT]
If an Assessing Officer had also failed to do what was required under the law at the time of passing Assessment Order and has passed an Assessment Order with such defects, such assessment orders can be rectified by the officer by exercising power under section 154 of the Income tax Act, 1961. In this case, this is the effort of the Assessing Officer while exercising the power under section 154 of the Income tax Act, 1961.
No merits in the submission that the impugned notice is liable to be interfered and quashed. Writ petition dismissed.
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2024 (3) TMI 1195
TP adjustment - price of the power transferred by the section 80IA eligible captive power plant of the assessee to the non-eligible manufacturing units of the assessee and thereby, reducing the claim of deduction claimed by the assessee u/s 80IA - HELD THAT:- As decided in assessee own case [2023 (2) TMI 341 - ITAT KOLKATA] transfer pricing adjustment made for deduction u/s 80IA of the Act raised by the Revenue are dismissed.
Claim of balance additional depreciation - assessee purchased and installed new plant and machinery in the preceding year but put to use the same for a period less than 180 days in that year - HELD THAT:- As decided in assessee own case [2023 (2) TMI 341 - ITAT KOLKATA] we are of the view that the law laid down by the Hon'ble High Court of Karnataka in the case of CIT and another vs. Rittal India Private Lid [2016 (1) TMI 81 - KARNATAKA HIGH COURT] is applicable to the present case, thus we hold that the assessee is entitled to claim remaining 50% depreciation of such 20% which is equal to the actual cost of new plant and machinery, accordingly ground no-I raised by the assessee is allowed.
Nature of expenses - Deduction on proportionate basis of the compensation paid in connection with the mining activity for obtaining limestone, used as raw material for manufacturing of cement - AO disallowed the claim of the said expenditure by observing that the same was capital expenditure in nature - HELD THAT:- As decided in assessee own case [2023 (2) TMI 341 - ITAT KOLKATA] held that payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature.
Nature of receipt - amount received by the assessee as industrial promotion assistance from the State Govt. - revenue v/s capital receipt - HELD THAT:- As decided in Tribunal [2023 (2) TMI 341 - ITAT KOLKATA] to hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed.
Disallowance u/s 14A r.w.r.8D - HELD THAT:- The impugned order of the CIT(A) is modified and it is directed that the Assessing Officer would recompute the disallowance u/s 14A r.w.r 8D(2)(iii) by considering all investments including investments in subsidiary companies which yielded dividend income. This Ground of the revenue’s appeal is partly allowed.
MAT Computation - exclude the subsidy from the books profits assessable u/s 115JB - HELD THAT:- As decided in own case of assessee [2023 (2) TMI 341 - ITAT KOLKATA] no infirmity in the finding of ld. CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB.
Upward adjustment made to book profit on account of disallowance of expenditure computed u/s 14A of the Act r.w.r. 8D - HELD THAT:- It is to be pointed out that as per Explanation 1(f), the book profit means the profit shown in the statement of profit and loss account as increased by the amount of expenditure relatable to the exempt income. The said amount of expenditure has already been ordered to be determined as per our observations made above while adjudicating the issue relating to the disallowance u/s 14A vide Ground No.10 of the revenue’s appeal. It has to be further noted that section 115JB in itself does not prescribe any procedure to calculate the expenditure relatable to exempt income earned by the assessee. The said provision has been separately and specifically placed in the Act u/s 14A of the Act. Therefore, the book profits of the assessee are liable to be increased by the expenditure as calculated u/s 14A of the Act as provided under Explanation 1 to Clause (f) of section 115JB of the Act. In view of this, it is directed that the book profits will be increased u/s 115JB of the Act by the disallowance calculated as per our directions given while adjudicating Ground No.10 of the revenue’s appeal. This ground of the revenue’s appeal is hereby allowed.
Deduction of leave encashment actually paid - HELD THAT:- Claim of leave encashment actually paid by the assessee during the previous year relevant to A.Y 2015-16 allowed.
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2024 (3) TMI 1205
Nature of expenses - expenses on repairs and maintenance of stores and spares - revenue or capital expenditure - HELD THAT:- The Division Bench of this Court in [2019 (8) TMI 1347 - GUJARAT HIGH COURT] dismissed the appeal of the Revenue relying on an order of the Division Bench in the case of Gujarat Narmada Valley Fertilizers and Chemicals Ltd. [2023 (4) TMI 334 - ITAT AHMEDABAD] as held from the perusal of the documents, it can be seen that these expenditures were not totally on the replacement but replacement of part of machinery/plant which in totality cannot be treated at par with the repairs and maintenance that of entire Plant & Machinery. The pipelines and duel fuel burner system are forming some part of entire plant and machinery and both these parts do not function independently or used independently for the projects of the assessee company. Thus, the CIT(A) was not right in confirming the addition. In fact, these expenditures are revenue in nature.
Disallowance u/s 37(1) - expenses being contribution /donation to a trust, though the same is devoid of any business expediency? - HELD THAT:- The Division Bench of this Court in [2019 (8) TMI 1347 - GUJARAT HIGH COURT] held that Agro Products of the assessee company are sold under the brand name ‘Sardar’ which is very popular amongst the farming community since more than four decades. It was an apprehension of the assessee that the construction of a statue of Sardar Vallabhbhai Paltel would significantly enhance the value of the brand name under which the assessee carries on its business. This would help enhance sales as well as exports of the company’s agro products and would as a corollary enhance the brand value of other products of the company. Thus, the contention of the Ld. AR that the expenditure was incurred wholly and exclusively for the purpose of business on account of commercial expediency and accordingly is allowable u/s 37 of the Act, appears to be genuine. Further, it appears that the funding was for State Government. The decision of Gujarat Narmada Valley Fertilisers Co Ltd. (supra) under identical facts held that, the said expenditures were allowed related to deduction under Section 37
Expenditure written off by the assessee - HED THAT:- ADMIT – Only on substantial question of law-(C)
"Whether the Appellate Tribunal is justified in law and on facts in holding that the expenditure written off by the assessee has to be considered as business revenue expenditure without appreciating the fact that expenses incurred for establishing a new project will remain capital expenditure in nature even if these projects did not materialize and hence, cannot be allowed as business expenditure under section 37 of the Act?”
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Customs
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2024 (3) TMI 1190
Absolute confiscation of 211.07 gms of gold - imposition of penalty u/s 112 (a) and (b) of CA - domestic transportation of foreign marked Gold Bars without proper documents - onus to prove - HELD THAT:- The appellant have led cogent evidence that they are jewellers dealing in gold and gold jewellery having their shop under the name of M/s Padmavati Jewellers at Vijayawada. Appellant have also led evidence that in the ordinary use of business they regularly purchase gold from the reputed sellers like M/s DP Gold Pvt Ltd., and M/s SVBC Gold etc. In support of their contentions, the appellant have led evidence being extract of their stock register, summary of gold dealings showing quantum and value for the financial year 2020-21 and also a copy of ledger account of M/s DP Gold and M/s SVBC Gold for the financial year 2020-21 wherein appellant have got regular purchases from these concerns and they have been making payments through the banking channel - Appellant have also led evidences being screen shots of summary of the invoice of the purchase by them which are reflected on GSTN portal for few months in support of their regular business transactions wherein they purchase gold upon proper GST invoices.
The cogent evidences led by the appellant have not been found untrue. Thus the appellant have discharged the onus under Section 123 of the Customs Act. Further, the Court below have rejected the cogent explanation given, arbitrarily based on assumptions and presumptions, having no legs to stand.
The appellant shall be entitled to return of the seized gold and if the same have been disposed of, shall be entitled for refund of the auction proceeds along with interest as per rules - the impugned order set aside - appeal allowed.
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2024 (3) TMI 1189
Short payment of Countervailing Duty (CVD) - evasion of Customs Duty - import of Motor Spirit falling under CTFI 2710, by not declaring that a substantial portion of such imported Motor Spirit was not ‘intended for sale without a brand name’ - benefit of Sl.No. 70(i) of N/N. 12/2012-CE dated 17.03.2012 (as amended) - HELD THAT:- The Hon’ble High Court of Bombay in the case of COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VERSUS MAHESH INDIA [2006 (7) TMI 306 - BOMBAY HIGH COURT] while considering the main issue as to whether the Show Cause Notice dated 22.03.1993 issued by DRI under Section 28 read with Section 124 of the Customs Act, 1962 is valid and proper had observed that the assessment being only provisional, the Show Cause Notice is not maintainable. It was held that the Show Cause Notice issued under Section 28 when the goods have not been finally assessed is bad in law and not maintainable.
The Hon’ble High Court of Calcutta in the case of JAJU PETRO CHEMICAL PVT. LTD. & ANOTHER VERSUS THE COMMISSIONER OF CUSTOMS (PORT) & OTHERS [2017 (7) TMI 633 - CALCUTTA HIGH COURT], considered the issue with regard to the demand raised under Section 28 of the Customs Act, 1962 when the assessment was only provisional. It was observed that when the duty to be paid is yet to be finalised the importer cannot be saddled with the guilt of not paying the duty or short paying the duty.
In the present case, the Show Cause Notice is issued under Section 18 read with Section 124 of the Customs Act, 1962. There is no invocation of Section 28 for recovery of short paid duty. However there is proposal for recovery of differential CVD. There is no requirement for issuing a Show Cause Notice under Section 18 for finalisation of assessment. At the time of finalisation, the Department is free to look into all factors and finalise the Bills of Entry. The Show Cause Notice has been issued invoking Section 18 and 124 proposing to confiscate the goods, proposing to recover the differential duty and for imposing redemption fine and penalties.
The appellant has added the additives to make the Petrol branded after filing the ex-bond Bill of Entry. During such process of branding by adding additives, the goods are not in shore tanks and are outside the Customs area. Taking all these aspects in to consideration, it is not found that the appellant had any malafide intention to evade Customs duty by availing concessional rate of duty. It is not established by the Department that the appellant had estimated the quantity that is to be sold as branded at the time of import itself - the order of confiscation of the goods and the imposition of redemption fine and penalties set aside, without disturbing the finalisation of the assessment and confirmation of higher CVD as paid along with interest by the appellant and appropriate by Department.
The impugned order is modified to the extent of setting aside the confiscation of goods and imposition of redemption fine and penalties imposed under Section 112 (a) of the Customs Act, 1962 - appeal allowed in part.
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2024 (3) TMI 1188
Classification of imported goods - Agricultural Reaper - Spare parts of Reaper - classifiable under CTH 84672900 and 84679900 respectively (Revenue) or under CTH 84331190 and 84339000 respectively? - Levy of penalty under Section 114A of the Customs Act - HELD THAT:- Being a matter of classification of goods the burden of proof is on Revenue to show that the particular case or item in question is taxable in the manner claimed by them. The correct manner of classifying imported goods under the Customs Tariff, is by interpreting the headings and notes etc. as per the Rules for the Interpretation of the Schedule to the Customs Tariff Act, 1985 - It is not dispute that the Schedule to the Customs Tariff in itself does not contain a specific heading for “Agricultural Reaper” and its parts. There is also no dispute that though different models of goods have been imported all are sought to be classified under one heading. Finally, it is also not disputed that the impugned goods are marketed and known in the trade as “brush cutters” as also seen from the product literature and the tender notices etc. enclosed with the appeal.
In INDO-INTERNATIONAL INDUSTRIES VERSUS COMMISSIONER OF SALES TAX, UP. [1981 (3) TMI 77 - SUPREME COURT], it has been held by the Apex Court that "if any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted".
The Appellant has stated that as per Note 4 to Section XVI, which covers chapter 84, for machines with a clearly defined function by one of the headings in Chapter 84 or 85, the whole falls to be classified in the heading appropriate to that function. It is found that both the disputed heading fall under chapter 84 and as per the discussions have been found to have a clearly defined function covered by CTH 8467. Revenue has thus been able to discharge its burden and the impugned orders merit to be upheld - Since the classification of the goods is found to be falling under CTH 8467, hence in terms of Note 2(b) of Section XVI, parts of ‘brush cutter’ will be classifiable under CTH 84679900.
Levy of penalty under Section 114A of the Customs Act - HELD THAT:- As far as the description of the goods, quantity, classification etc. are concerned, the importer is bound to state the truth in the Bill of Entry. As per section 46(4) of the Customs Act, 1962, the importer while presenting the Bill of Entry shall make and subscribe to a declaration as to the truth of such Bill of Entry. Further, Section 114A does not incorporate ‘intention to evade payment of duty’. This is because while mens rea is an essential or sine qua non for criminal offence it is not an essential element for imposing penalty for breach of civil obligations or liabilities, unless specifically stated so in the statute. Similarly, the importer is required to make a true declaration of the description and quantity of goods etc which have actually been imported and not just the goods as declared in the import documents. Thus, if the goods actually imported are more in number or the actual description or CTH as determined by an order under the Act is different from what is declared in the Bill of Entry, the importer would have made a mis-declaration. If this is done knowingly it’s a willful misstatement.
Even if a matter is under appeal it does not mean that the legal stand of the importer which has been defeated in quasi-judicial proceeding can continue to be recognized as legitimate and duty short paid. A valid order determining the CTH of the imported goods and a statutory document filed for the same goods knowingly misstating the CTH cannot coexist legally and be recognised in law to be valid. It cannot be said that ordinary prudence has been exercised by the importer-appellant according to the standards of a compliant tax payer or even a reasonable person - The undertaking is meant to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed and thus cannot be brushed off as being merely procedural.
Hence if an order or judgment has been passed on a lis between the department and an assessee, he is bound to follow that order, until it is upset in appeal by a higher judicial forum. The responsibility is more when the tax is self-assessed. This is not a mere failure to pay duty. It is something more. The Appellant has deliberately sought to defeat the provisions of law. Thereby contravening the provisions of Section 46(4) ibid. Further there is nothing in the section to mean that because there is knowledge by the Department of the earlier mis-classification of the goods by the Appellant the willful misstatement in the Bill of Entry subsequently which stands established disappears.
The Hon’ble High Court of Madras in M/S. KING BELL APPARELS VERSUS THE COMMISSIONER OF CENTRAL EXCISE [2018 (10) TMI 267 - MADRAS HIGH COURT] held that the contention that once knowledge has been acquired by the department, there is no suppression and the ordinary statutory period of limitation would be applicable was rejected as a fallacious argument inasmuch as once the suppression is established, merely because the department acquires knowledge of the irregularity, the suppression would not be obliterated. A statutory penalty flows from a disregard of statutory provisions. With relaxation in procedure in the clearance of goods comes greater responsibility on the part of importers. This responsibility has not been discharged and the impugned order hence merits to be upheld on this score.
Further it is seen that interest is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon’ble Supreme Court's judgment in COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS M/S SKF INDIA LTD. [2009 (7) TMI 6 - SUPREME COURT] interest is leviable on delayed or deferred payment of duty for whatever reasons.
The impugned order upheld - appeal disposed off.
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2024 (3) TMI 1194
Smuggling - two kilograms of gold, with Swiss markings - Contraband item - number of material facts as well as the judgments cited were overlooked while arriving at conclusions - reliability of statements - burden to prove -HELD THAT:- It is from the statement under Section 108 itself that the identity of the person intercepted was revealed, which was found to be verified and correct by the Assistant Commissioner (Preventive) - The identity of the owner of the gold seized from the intercepted person also was revealed from the statement. The statement also admitted the person having boarded Howrah-Mumbai Mail Express, and that he was travelling to Raipur; in the course of which, some persons in civil dress woke him up and introduced themselves as officers of DRI, Patna. They searched his body and during the course of search, the smuggled gold kept hidden and covered inside the pants, was detected. So much of the statement has not been retracted from.
The person intercepted had also disclosed the name of the person from whom he had received the gold bars at Kolkata, who had directed him to hand over the same to the respondent, who was his employer. The statement indicated the intercepted person having confessed to his knowledge, that the gold was smuggled from Bangladesh, as told to him by one Sonu, who handed over the gold bars for onward transmission to his employer, the respondent - The retraction admits the possession of the gold bars at the time of interception. The description of which, as is found with the DRI, is also admitted to be that which was seized.
There is no escape from the fact that the contraband was imported as revealed from a mere visual inspection, which discloses the markings on the gold bars. Now, the question arises as to whether the alleged owner of the goods referred to as Noticee No. 2, the respondent herein, had obtained valid possession through a legal import made by him - The First Appellate Authority found that the entire case of the Department spins around the confessional statement of the intercepted person. The First Appellate Authority found that the statement recorded under Section 108 was specifically stated to be under duress and there was a finding by the Original Authority that he had not retracted the statement; while, in fact, the statement was specifically retracted. It was found that Section 108 of the Act, though is substantive evidence, some corroboration has to be available before acting upon it, which can be the slightest corroboration.
The First Appellate Authority and the Tribunal had entirely relied on the invoice dated 21.07.2017 produced by Noticee No.2 to hold that the seized gold bars were purchased from Saheli Gems and Jewellers Pvt. Ltd. It cannot but held that the reliance placed is wholly irrelevant since the two sets of bill books produced requires further evidence to establish the transactions between Saheli Gems and Jewellers and Adinath Jewellers having occurred on the day it is said to have occurred; prior to the interception and seizure, especially since no payment was made for the purchase - If Saheli Gems and Jewellers had imported it by a proper bill of entry filed and the same received from a notified entry point for the purpose of home consumption, then and only then would the burden of proof under Section 123 be discharged and the goods seized from Noticee No.1 be absolved of the confiscation proceedings under the Customs Act. The falsity of the story projected by the owner of the gold bars, is one another circumstance standing against the claim raised by the owner and in favour of the confiscation proceedings.
Whoever be the owner, the gold being one manufactured outside the country, if it is seized in the same form, the owner who raises a claim for release of the said gold should establish unequivocally before the Authority that it had been brought into India duly in accordance with the provisions of the Customs Act. This is the rigor placed on the person possessing or the owner of the seized goods, by Section 123, which puts the burden of proof squarely on the person from whose possession or the owner who has entrusted the said gold to the person possessing it, to establish the source from which it has been received.
The appellate authorities have found the findings of the original authority, regarding the absence of proof of the transaction, including the movement of the goods to be bad, only by reason of the invoice produced - the invoice is not a document on which any reliance can be placed. Even if such reliance can be placed, in the present case, the gold bars; which demonstrably were manufactured and sourced from outside the country, should be proved to have been brought into the country in accordance with the provisions of the Customs Act.
The orders of the Appellate Authorities set aside - the orders of the original authority restored - appeal allowed with costs computed at Rs. 5,000/- which can be recovered from the respondent by the Revenue.
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2024 (3) TMI 1187
Classification of imported goods - Rubber Processing Oil (RPO) - enhancement the value - mis-declaration of the country of origin in the bills of entry.
Whether the Rubber Processing Oil imported by the Appellant is classifiable under Chapter Heading No. 27101990 as classified by the Appellants or under Chapter Heading No. 27079900 as classified by the Revenue? - HELD THAT:- From the judgment of this Tribunal in AMIT PETROLUBES P. LTD VERSUS C.C. -KANDLA AND HEMANT SHAH VERSUS C.C. -KANDLA [2023 (12) TMI 796 - CESTAT AHMEDABAD], it can be seen that in the identical fact the department’s claim of classifying the RPO under 27.07 was rejected. Therefore with the support of the above referred judgment and particular facts of the present case, the impugned order on the issue of classification is not sustainable.
Whether the value of the imported RPO can be enhanced based on the consent letters given by the directors of the Appellants at the time of release of the goods, without following the due process of law as contemplated under Section 14 of the Customs Act read with Customs (Determination of Value of imported value) Rules, 2017? - HELD THAT:- In the present case neither any contemporaneous value was adopted nor any method as prescribed under Section 14 read with Custom Valuation Rules, 2007 was followed. Therefore, merely on the basis of statements of director valuation cannot be enhanced. Therefore, the enhancement of the value is not sustainable in the facts of the present case. This similar issue has been considered in the case of GURU RAJENDRA METALLOYS INDIA PVT LTD VERSUS C.C. -AHMEDABAD [2020 (6) TMI 68 - CESTAT AHMEDABAD] wherein the tribunal held that only on the basis of the consent letters of the importer enhancement of valuation cannot be made - the enhancement of the value by the lower authorities is without any legal basis. Hence, the same will not sustain and accordingly, the enhancement of the value done by the Revenue is set aside.
Whether the Appellants mis- declared the Country of Origin in the Bills of entry filed by them? - HELD THAT:- The material information declared in the bill of entry mainly corresponds to the goods that are under import and mis declaration of country of origin is immaterial towards the valuation, description and other such particulars concerning the goods, and the appellant would have gained nothing as no preferential rate of duty was claimed by the appellant. Without prejudice, mis declaration of origin being an issue technical in nature does not seem to form any implication towards the revenue. Therefore, if there is a mis-declaration of country of origin the appellant being not the party to make any incorrect declaration cannot be held responsible and no consequential penalty can be imposed on the appellant.
Whether the quantum of penalties and redemption fine imposed disproportionate to differential duty involved in the matter? - HELD THAT:- This Tribunal held that for incorrect mention of country of origin, the importer cannot be penalized. Accordingly, in the present case also considering overall facts and the fact of incorrect declaration, if any, regarding country of origin in the Country of Origin Certificate, the appellant is not liable for any penalty or fine - As regard the appeals filed by individuals as observed, since there the impugned order against the main appellants is not sustainable, there is no reason to continue the personal penalty upon the individuals co- appellants.
The impugned order is set aside - Appeals are allowed.
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2024 (3) TMI 1193
Smuggling - Gold - baggage rules - petitioners have not given proper declaration in respect of the gold they were bringing in even if it was allegedly in the form of jewellery or bangles - existence of mens rea on the part of the petitioners to smuggle gold into India or not - HELD THAT:- The import and export of goods into and out of India are subject to the provisions of the Foreign Trade (Development and Regulation) Act, 1992. In exercise of the powers conferred by Section 3 read with Section 4 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992), the Central Government has framed the Foreign Trade (Exemption from Application of Rules in Certain Cases) Order, 1993. As per Rule 3(h) of this Order, a passenger of Indian Origin or having a valid Indian passport and who has a stay of more than six months abroad is allowed to import gold subject to certain conditions.
An international passenger is required to file International Customs Declaration Form (I.C.D.) with the Customs Department under Section 77 of the Customs Act, 1962. Merely wearing the bangles on body by the petitioners does not obviate the statutory requirement of filing an ICD form with the Customs Department. Further, the fact of non-filing this ICD Form and not submitting the same to the Customs Department has not been disputed by the petitioners.
The petitioners were permitted to redeem only on payment of redemption fine and appropriate customs duty so that the gold bangles would be cleared for domestic consumption. However, the option of re-export of gold bangles does not provide any right on the petitioner to get the gold bangles cleared for home consumption and it is under these circumstances that no duty is demanded on the option of re-export of gold bangles - there are no illegality or perversity on the part of the adjudicating authority at the first instance and then by the Commissioner of Appeals subsequently, while modifying the order, both of which subsequently stood affirmed by the CESTAT vide the impugned order under challenge in the present case.
In the instant case, the petitioner No. 1 was in possession of the gold bangles while passing through the Green Channel of the Customs at the Rajiv Gandhi International Airport, Shamshabad. Despite possessing the gold bangles which are dutiable goods, the petitioners neither adopted the Red Channel nor submitted the ICD Form to the Customs Department and thus tried to take the undue advantage of the Green Channel facility at the Customs violating the provisions of Section 77 of the Act - since the petitioners are not eligible passengers in terms of the provisions of the Foreign Trade (Development and Regulation) Act, 1992 read with the Foreign Trade (Exemption from Application of Rules in Certain Cases) Order, 1993, the original authority was correct in finding the petitioners ineligible to import the gold bangles. Thus, the order of the original authority to confiscate the gold bangles in terms of Section 111(1) of the Act, cannot be found fault with.
Another reason why this Court is not inclined to entertain the Writ Petition is the fact that the petitioners have voluntarily availed the option that was floated by the adjudicating authority at the first instance. Having availed the option floated and having paid the redemption fine and customs duty while redeeming the gold bangles, the petitioners cannot now be permitted to turn around and challenge the order which he has voluntarily complied with.
Petition dismissed.
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2024 (3) TMI 1192
Right of the Purchaser of confiscated vessel in an action - Vires of of Art. 14 and 19 of the Constitution of India - direction to issue No Due Certificate (NDC) in relation to subject vessel MSV Safina Al-Miraz to the Petitioner and permit the Petitioner to shift the Vessel from Salaya Port to Okha Port forthwith - seeking refund the amount paid by the Petitioner towards e-auction of MSV Safina Al-Miraz alongwith amount incurred by the Petitioner towards repairing of the Vessel, with interest - confiscation of vessel u/s 115 of the Customs Act, 1962 - HELD THAT:- It is not in dispute that the subject vessel was confiscated by the respondent Nos. 1 and 3 as per the provisions of the Customs Act and therefore in accordance with the provisions of Section 126 of the Act, the subject vessel would vest in the Central Government. Once such subject vessel vests in the Central Government, the mortgage of the respondent No. 4-GMB would come to an end and therefore the respondent No. 4-GMB is required to issue the ‘No Due Certificate’ qua the subject vessel which was auctioned to the petitioner by the Customs Authority in accordance with law.
With regard to the reliance placed by the learned advocate for the respondent No. 4-GMB in the decision of the Supreme Court in case of O. Konavalov [2006 (3) TMI 145 - SUPREME COURT] is concerned, the said decision is rendered under the Maritime Laws under the provisions of the Merchant Shipping Act, 1958 in relation to the pre-existing right of the crewmen vis-a-vis Section 115 read with Section 126 of the Customs Act. The Hon’ble Apex Court in the facts of the said case applied the principles enshrined in Article 21 to a foreigner for holding that confiscation by the Government of Vessel cannot extinguish the pre-existing rights of the crewmen as India has become signatory to various international conventions honouring the social, political, civil and economic rights of human beings. It was further held that India has travelled very far from 1950 and the Courts have given way to dynamic constructive approach in the aspect of social justice while referring to international conventions, etc. - The reliance placed on the provisions of the Admiralty (Jurisdiction and Settlement Maritime Claims) Act, 2017 to submit that maritime claim means mortgage or charge of the same nature on a vessel with regard to exercise of jurisdiction by the High Court under said Act to hear and determine such question on maritime claim against the vessel. Therefore, the judgment rendered by the Apex Court vis-a-vis the pre-existing rights of the crewmen of the vessel would not apply to the facts of the present case.
The respondent No. 4-GMB is directed to issue No Due Certificate to the petitioner so as to enable the petitioner to shift the vessel from Salaya Port to Okha Port - Petition allowed.
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2024 (3) TMI 1191
Seeking review of order - error apparent on the face of record or not - petitioner submits that while concluding that the applications filed by the petitioner for revalidating the Advance Authorizations were belated, the Court has not taken note of the amendments to the Foreign Trade Policy for the period 2009-2014 with effect from 27.08.2009 - HELD THAT:- The revalidation of the Advance Authorization can be made only for a period of six (6) months from the date expiry of the Original Authorization.
The application could be made in time before the expiry of the period. However, revalidation can be made only for a period of six (6) months from the date of expiry of the Original Authorization. The six (6) months period expired long before - as per paragraph 4.23 of the Hand book of Procedure as in force from 27.08.2009, the petitioner had to satisfy with the requirements of 4.23(b) as in Column II to the above table.
It cannot be said that there is an error apparent on the face of the record. The order is detailed. Therefore, a review of the order is impermissible. A review cannot be an appeal in disguise.
This Review Application is liable to be dismissed and is accordingly dismissed.
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2024 (3) TMI 1186
Classification of exported goods - Abrasive Mesh - whether the goods exported are classifiable under CTH 2513 20 90 as ‘Abrasive Mesh’ as declared by the Appellant or under CTH 2513 20 30 as ‘Natural Garnet’ as assessed by the Department? - HELD THAT:- The Learned Commissioner (Appeals) while deciding the classification of the disputed goods under heading 2513 20 30 has not given any finding as to why the Appellant was not given an opportunity to cross examine the Chemical Examiner so as to determine what are the properties of the goods of the Appellant that correspond to the said classification nor ascertained reasons as to why the communications of M/s. IREL as requested by the Appellant were not shared with them.
It is noted that, the properties of the goods are technical in nature and vital to be determined before ensuring appropriate classification whereas the findings of the Commissioner (Appeals) are silent on this vital aspect of the factual circumstances.
This Tribunal draws support from the case of SWADESHI POLYTEX LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MEERUT [2000 (7) TMI 85 - SC ORDER],wherein it was held that “if the Adjudicating Authority intends to rely upon the statement of any such persons, the Adjudicating Authority should give an opportunity of cross examination to the appellant".
The lower authorities have not considered the submissions made by the Appellants in order to properly come to the conclusion for correct classification of goods in question - the matter needs to be remanded for re-consideration back to the adjudicating authority - Appeal allowed by way of remand.
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2024 (3) TMI 1185
Levy of penalty under Section 114A of the Customs Act and under Section 112A and Section 114AA of the Customs Act, 1962 - nature of imported goods as Dried Garlic or not - contravention of various provisions of the Customs statute as well as the provisions of Destructive Insects and Pests Act, 1914, PFS Order, 1989 and Plant Quarantine (Regulation of Import Into India) Order 2003 - HELD THAT:- There is no mis-declaration on the part of the appellant and if at all there was any breach it was a technical breach of importing the goods through LCS not listed in Schedule 1 of the Plant Quarantine (Regulation of Import into India) Order 2003. However, it is found that the department has never objected on this score. The department of its own freewill and accord has not drawn any samples of the goods imported in these different consignments. However, it is a fact that all these imports were part of a single contract and a single letter of credit executed with the exporter of the country of origin. Be as it may, the department only at the time of last imports (out of six) chose to have the matter examined by the Plant Quarantine Authorities, which report undisputedly was not in contravention or violation of the statutory provisions - the test report has emanated almost after a gap of five months and has therefore chosen to disregard the findings under the presumption “I therefore hold that a Garlic Bulb can become dry during this period”. The delay in such test reporting certainly cannot be attributed to any omission or commission of delinquency on the part of the appellant.
All these evidences have been simply ignored without even a thought. Furthermore, a ‘Bulb’ is understood in local parlance as a short stem with fresh leaves or leaf bases that function as food storage organs during dormancy. It is very well known that Garlic, an agricultural produce, occurs as a bulb. Upon drying it loses moisture content to a large extent, but retains its shape as a bulb. Therefore, the mention of the term “Garlic Bulb” cannot be considered as determinative of the fact of it being dry or not. For which, if at all it was imperative for the department to get the water contents verified as they sought to dispute the classification declared and re-classified the product under heading 7032000. For this failure on the part of the department the assessee/importer/appellant cannot in any way be held responsible.
As for this eligibility to exemption Notification seeking concessional rate of duty for import of the impugned goods from the People’s Republic of Bangladesh, it is found that the dispute on this score is completely arbitrary and baseless. It has nowhere been disputed that the goods did not originate and have been imported from Bangladesh. The importer has submitted necessary Government certification as referred above in support of his contention. The impugned goods are squarely covered in terms of Notification No.99/2011 dated 09.11.2011 and therefore exemption from payment of duty is admissible to the appellants in terms of the said Notification.
Thus, no case can be made out for imposition of any of the penalties on the appellant - the order of the lower authorities is therefore liable to be set aside - appeal allowed.
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2024 (3) TMI 1184
Levy of penalty for delay in submission of documents for two Bills of Entry, under regulation 5 of the Customs Provisional Duty Assessment) Regulations, 2011 - HELD THAT:- From the records it is seen that the appellant has imported goods vide 31 Bills of Entry and there was a delay in submission of the documents only in respect of two Bills of Entry, for finalisation of the provisional assessments. Subsequently, they have submitted all the documents, in respect of the remaining two Bills of Entry also, and they have been finalised. As there was a delay in submission of documents in respect of two Bills of Entry, the Department initiated proceedings for imposition of penalty under Regulation 5 of the above said Regulations 2011.
The adjudicating authority has imposed a penalty of Rs.20,000/- as the appellant has already submitted the documents in respect of the two Bills of Entry and they also have been finalised. The Appellant cited various decisions in support of their contention that reduced penalty can be imposed for such procedural violations - On perusal of decisions cited by the appellant in support of their contentions that the enhanced penalty is not sustainable in this case. In the case of M/S JAI BALAJI INDUSTRIES LTD. VERSUS COMMR. OF CUSTOMS (PREVENTIVE) , BHUBANESWAR [2021 (1) TMI 767 - CESTAT KOLKATA], this Tribunal has held The order of the Commissioner (Appeals) does not establish any ground for enhancing the penalty to the maximum of Rs. 50,000/- per Bill of Entry yet to be finalised.
The present case on hand is squarely covered by the decisions cited above. The appellant has already submitted the documents necessary for finalization of the provisional assessment. Thus, the penalty of Rs.20,000/- imposed by the Assistant Commissioner would be sufficient to meet the ends of justice. It is also found that the Ld. Commissioner (Appeals) has not given adequate reason for enhancing the penalty from Rs.20,000/- to Rs.1,00,000/-. In view of discussions and the decisions cited above, the enhanced penalty is not warranted in this case. Accordingly, the same is set aside.
The enhanced penalty set aside - appeal allowed.
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Securities / SEBI
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2024 (3) TMI 1183
Recovery proceedings by SEBI - Maintainability of provisions of IBC over the provisions of the SEBI Act - notice was challenged by the appellants on the ground that the same cannot be enforced as the proceedings under the Insolvency and Bankruptcy Code, 2016 and the provisions of the Provincial Insolvency Act, 1920 initiated against the appellants are pending and the orders of interim moratorium have been passed - penalty imposed and sought to be recovered from the appellants by issuing the impugned certificate fall within the meaning of ‘fine’, which is excluded under clause (a) of sub-section (15) of Section 79 of IBC and therefore, the interim moratorium order issued in favour of the appellant No. 1 has no application to the penalty sought to be recovered under the impugned certificate
HELD THAT:- Once an application is admitted under Section 100, a moratorium shall commence in relation to all the debts and shall cease to have effect at the end of the period of 180 days beginning with the date of admission of the application or on the date the adjudicating authority passes an order on the repayment plan under Section 114, whichever is earlier.
In the instant case, so far as appellant No. 1 is concerned, the period of moratorium commenced on 04.02.2022 which cease to operate on expiry of 180 days i.e., 04.08.2022. Similarly, in respect of appellant No. 2, the period of moratorium commenced on 13.12.2022 and the same expired on efflux of 180 days on 13.06.2023. The writ petition was heard by the learned Single Judge on 19.09.2023. Thus, it is evident that no moratorium was in force in favour of the appellants. Therefore, respondents No. 1 and 2 were justified in issuing the impugned certificate under Section 28A of the SEBI Act. It is pertinent to note that the provisions of Chapter IV of IBC, namely Sections 121 to 124 do not apply to the facts of the case as the application under Section 122 was not filed when the Certificate under Section 28A of the SEBI Act was issued. The issue whether the impugned levy is a fine or a penalty is also not required to be decided in the facts and circumstances of the case and we keep the same open to be adjudicated in an appropriate proceeding.
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Insolvency & Bankruptcy
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2024 (3) TMI 1182
Liquidation of the Corporate Debtor - The right of the appellant to propose a revised resolution plan - Chance to revive the corporate debtor, emphasizing the entity's MSME status and its potential for rehabilitation - HELD THAT:- The IBC itself recognises the right of MSME to revive a Corporate Debtor and even if certain ineligibility under Section 29A are not attracted. The object of Corporate Insolvency Resolution Process is always to revive the Corporate Debtor and liquidation being the last resort, which is nothing but a corporate death.
The present is a case where the Appellants – Promoters of the Corporate Debtor have undertaken to liquidate the entire debt of the Financial Creditor, who is the only Financial Creditor consisting of 100% CoC. It is relevant to notice that there are no other creditors of the Corporate Debtor. It is also relevant to notice that Appellant is making efforts from very beginning to revive the Corporate Debtor - When the Appellant is ready to liquidate the entire debt of the Financial Creditor/, there are no reason to deny an opportunity to revive the Corporate Debtor on its feet. There is no doubt that Financial Creditor is entitled to entire debt and it cannot be directed to take any haircut. The present is a case where the Appellant has undertaken to clear the entire claim, which was admitted in the CIRP.
The Adjudicating Authority committed error in not accepting the Bank Draft of Rs.75 lakhs shown to the Court on the date when the matter was heard. The Adjudicating Authority ought to have given an opportunity to deposit the Bank Draft to complete the payment of Rs.1 crore as was directed by the Adjudicating Authority.
The order passed by Adjudicating Authority is set aside - the order dated 07.08.2022 passed in IA 64 of 2023 directing the liquidation is set aside - Appellant is permitted to deposit the entire balance amount of Rs.4,92,81,826/- within 30 days from today by the Bank Draft or RTGS to the Bank. The Appellant shall bear entire CIRP costs.
Appeal disposed off.
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PMLA
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2024 (3) TMI 1181
Legality of arrest and consequential payment of compensation - HELD THAT:- Earlier order records that the issue of legality and validity of the arrest of the appellants as well as the other questions will be gone into in these appeals.
The said questions need not be decided in these appeals. Therefore, legal contentions arising in these appeals are left open to be decided in appropriate cases.
Appeal disposed off.
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Service Tax
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2024 (3) TMI 1179
Levy of Service tax - Banking & Financial Services - providing corporate guarantee on behalf of its sister concerns to lenders but had not charged any commission or interest or fees for providing the guarantee - demand has been made only on a notional amount which, according to the Revenue, the respondent could have received had it charged its sister concern for providing the guarantees - HELD THAT:- Service tax can be charged on the consideration received for providing taxable services. In other words, there must be a service provider, a service recipient, a taxable service and a consideration. The service provider shall be liable to pay service tax on the consideration which it receives for providing a taxable service. Any amount which is received but which is not a consideration for providing a taxable service is not exigible to service tax. Similarly, if a service is rendered, but no consideration is received no service tax can be charged. It is for the reason that if the consideration received is zero any percentage will be zero itself.
In the case of OLAM AGRO INDIA LTD VERSUS COMMISSIONER OF SERVICE TAX [2013 (11) TMI 1503 - CESTAT NEW DELHI] it is recorded “a show cause notice dated 03.04.2012 was issued covering the period October 2010 to 31.12.2011 proposing levy of service tax, interest and penalties for corporate guarantee commission remitted by the petitioner to the signatory entity and agency commission remitted for service provided by agents in respect of the export business of the petitioner”. Thus, in both cases, a commission or other consideration was received for providing the taxable services and the dispute was whether service tax could be charged on such commission which is received.
In the present case, there is not an iota of doubt that no consideration was received at all because the show cause notice itself says so. This being the position, it is found that the impugned order is correct and proper and calls for no interference.
The impugned order is upheld and Revenue’s appeal is rejected.
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2024 (3) TMI 1178
Classification of service - service rendered by the appellant to overseas universities/colleges amounts to “export of service” or “intermediary service” or not - period 1.07.2012 to March 2016 - HELD THAT:- The undisputed fact is that the appellant had entered into agreement with various foreign universities whereby the appellant was required to provide services to the universities which implies that the service provider is located in India and the recipients of service were located outside India. It is also an undisputed fact that the appellant was receiving the consideration for the service rendered by way of convertible foreign exchange. The nature of service provided by the appellant was to recruit students in the courses conducted by these universities/institutes.
From the definition of “intermediary services”, it is found that activity between two parties cannot be considered as an intermediate service as intermediary essentially arranges or facilitates the main supply between two or more persons, which is not the case here. Further, the definition of intermediary service excludes any person who has provided the service on their own account. Here from the facts, it is evident that the appellant has provided the service on his own account to the recipient of service, i.e. the foreign university placed beyond the taxable territory of India.
The Chandigarh Bench in M/S SUNRISE IMMIGRATION CONSULTANTS PRIVATE LIMITED VERSUS CCE & ST, CHANDIGARH [2018 (5) TMI 1417 - CESTAT CHANDIGARH] considered the issue whether the assessee is an intermediary with reference to the service to universities, colleges and banks and whether any service tax could be levied and answered the issue in favour of the assessee.
Following the observations in MS EVALUESERVE SEZ PVT LTD, EVALUESERVE COM PVT LTD VERSUS C.C.E & S.T GURGAON – I (VICE-VERSA) [2018 (12) TMI 1242 - CESTAT CHANDIGARH], that receipt of consideration from the overseas client excluded them from tax as intermediary, the appellant cannot be held to be providing intermediary service as it is an admitted position that the appellant had been receiving consideration in the form of commission from the recipients of service placed abroad.
The stand of the department that the appellant was rendering two types of services, one by way of rendering consultancy services to the students who wanted to study abroad by assisting them and the second was service to foreign universities by way of recruitment of students for them, is not correct. Firstly, the fees deposited by the students is directly remitted to the universities. Secondly, the appellant is not charging any consideration from the students and there cannot be any taxable service without any consideration - there is no privacy of contract between the appellant and the prospective students as laid down by the Delhi High Court in VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV & ANR. [2017 (9) TMI 632 - DELHI HIGH COURT].
The learned Counsel for the appellant has taken an alternate plea in terms of the exemption notification No. 25/2012 dated 20.06.2012 issued by the Central Government in exercise of power under section 93 of Finance Act, 1994, where at serial No. 9 services provided to or by an educational institution in respect of education has been exempted from service tax and subsequently by amendment vide Notification No. 06/2014 dated 11.07.2014 the exemption was provided to services relating to admission to, or conduct of examination by such institution and therefore the appellant was not liable to pay service tax.
The impugned order deserves to be set aside - The appeal is, accordingly allowed.
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2024 (3) TMI 1177
Short payment of service tax - service of Authorised Service Station for Motor Vehicle servicing and repairing - non-addition of the value of consumable used while providing service to vehicle owners and free service commission in the taxable value - HELD THAT:- The issue as regards includability of the cost of spares in the gross taxable value is in contradiction as regards Circulars dated 05.03.2003 and 23.08.2007. It is observed that positive findings need to be recorded on the basis of factual verification as regards existence of separate bills for spare parts and/ or payment of sales tax/VAT thereon before arriving to the conclusion to drop demand. It is found that separate invoices were not found as regards the Assessee having carried out installations on CNG kits that despite the assessee having carried out such installations and paid VAT thereon, it cannot be ipso facto concluded that they have not rendered any taxable service and are not liable to service tax. Therefore in the interest of justice the said issues need to be examined in depth.
The issue needs to be remanded to the adjudicating authority for reconsidering the value for demand taking to consideration the dispute raised in the show cause notice and submissions made by both the sides.
The appeal is allowed by way of remand to the adjudicating authority to decide the issues de-novo.
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2024 (3) TMI 1176
Levy of service tax - liquidated damages - Circular No. 178/10/2022-GST dated 3.8.2022 - HELD THAT:- The issue as contended by the learned Advocate, in the case on hand, has already been addressed to in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [2020 (12) TMI 912 - CESTAT NEW DELHI] and settled in favour of the taxpayer where it was held that It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards “consideration” for “tolerating an act” leviable to service tax under section 66E(e) of the Finance Act.
The service tax liability fastened on the appellant on the liquidated damages received does not survive - the impugned order set aside - appeal allowed.
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2024 (3) TMI 1175
Classification of service - insurance service or not - general insurance scheme related to P&I Clubs which is only a membership fee paid to the club for third party insurance - HELD THAT:- Since both the counsel agree for remanding the matter back to the file of the original authority for denovo adjudication, it is deemed appropriate to set aside the impugned order and restore the matter back to the file of the original authority who shall pass a denovo adjudication order in the light of the judgment of the Hon'ble Supreme Court in STATE OF WEST BENGAL & ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE & ORS. VERSUS M/S. RANCHI CLUB LTD. [2019 (10) TMI 160 - SUPREME COURT].
The appeal is allowed by way of remand.
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2024 (3) TMI 1180
Rejection of the Petitioner’s Application filed under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - rejection on the ground that the amount of tax is not quantified before 30th June 2019 and investigation is going on - HELD THAT:- It is thus seen that the Department has taken a clear position that the duty liability admitted by any person during enquiry, investigation or audit would amount to making him eligible for the benefits of the scheme. Such interpretation, as made by the Department, has also become relevant in terms of Section 121(r), which defines the term quantified. Section 125 (1) (e), as referred, clearly sets out that an assessee, who has been subjected to an enquiry or investigation or audit, and the amount of duty involved in the said enquiry or investigation or audit has not been quantified on or before the 30th day of June, 2019, would not make him eligible to take the benefit of the scheme. However, in the present case, the duty was quantified much prior to the cut off date of 30th June 2019.
The rejection, as generated by the electronic system, appears to be not correct, and would be required to be held to be illegal considering the clear position as brought out by the terms and conditions of the Scheme, and the clarification of the Scheme as issued by the Circular of the Revenue dated 27th August 2019.
The Petitioner was clearly eligible to avail benefits of the Scheme and the rejection, as impugned, is illegal - Petition allowed.
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2024 (3) TMI 1174
Nature of activity undertaken by the appellant - Amounting to manufacture or not - Business Auxiliary Service or not - business of surface treatment of article/structures of steel provided to them by their clients, which is performed at site/workshop - non-payment of service tax for the period 16.06.2005 to 30.09.2009 - HELD THAT:- The process undertaken by the appellant makes a new identifiable product and the same cannot be held that it is only a job work activity. In fact, the activity undertaken by the appellant amounts to manufacture as held by this Tribunal in the case of M/S. MOHATA COAL COMPANY (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, BOLPUR COMMISSIONERATE [2024 (3) TMI 1166 - CESTAT KOLKATA], wherein this Tribunal has relied on the decision of the Tribunal in the case of M/S FERRO SCRAP NIGAM LIMITED VERSUS COMMR. OF CGST & EXCISE, BOLPUR (VICE-VERSA) [2021 (1) TMI 711 - CESTAT KOLKATA] and it was held that As it has already been decided that the said activity undertaken by the appellant amounts to manufacture and the appellant is doing the said activity on job work basis and such job worked goods have suffered duty at the end of the principal manufacturer, in these circumstances, the demand of Service Tax under the category of “business auxiliary service” is not sustainable against the appellant.
As the issue has already been decided by this Tribunal, wherein it has been held that the activity undertaken by the appellant amounts to manufacture and the appellant is doing such activity on job work basis and such “job work” has suffered duty at the end of principal manufacturer.
The appellant is not liable to pay service tax under the category of Business Auxiliary Service. Accordingly, the impugned demand is not sustainable against the appellant - Appeal allowed.
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2024 (3) TMI 1173
Refund claim - rejection on the ground that the appellant have not complied with the condition of N/N. 12/2013-ST clause-III sub-clause(C) in as much as the appellant have not obtained the Service Tax registration before filing the refund - HELD THAT:- From the condition of the Notification, the assessee is required to obtain a registration before filling a refund claim in terms of Clause-III Sub-clause (c) of Notification. However, as per sub-clause (g) even if the appellant has not obtained the registration they may obtain registration before filing the refund claim. As per the facts of the present case the appellant though did not obtain the registration before filing the refund application but subsequently on 14.07.2015 they had obtained registration. After obtaining the registration, the condition of the Notification provided under clause (c) stands made and on that account refund could not have been rejected as at the time of rejection of claim the appellant had registration in possession. Therefore, considering the same refund should have been sanctioned.
Moreover, even as per the condition the appellant is required to apply for the registration prior to filing the refund application. This condition is merely a procedural requirement and for breach of the procedural condition the substantial benefit of refund cannot rejected, particularly when the payment of service tax and use of service in the SEZ is not under dispute - Section 26 of SEZ Act provides that no tax/ duties are leviable on the input or input service received and use in the SEZ. As per this statutory provision which override any other Act, the service tax is not leviable on the service received in SEZ. Accordingly, the tax paid on the service needs to be refunded.
The impugned order is set aside - appeal allowed.
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Central Excise
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2024 (3) TMI 1171
CENVAT Credit - received only invoices and no goods - reliability of statements recorded - HELD THAT:- Statements of the above persons have been summarised in the SCN. Not one of these persons was questioned about any of the disputed invoices on the strength of which the appellant had taken Cenvat credit. If the department’s case is that only specific invoices were supplied without goods the least one expects is to question if it was so. All the statements were general statements and are vague and not one deals with the invoices in dispute.
It has also not been disputed that the appellant had recorded the receipt of inputs in its RG-23A Part I and Part II registers. It is also not the dispute that the appellant had paid for the inputs. It is also not in dispute that the appellant had manufactured final products and had cleared them on payment of duty. There is also nothing on record to show that the stock of the inputs and final products in the appellant’s premises were taken and any shortage of either inputs or final products was discovered as a result.
The entire SCN is based on presumptions and assumptions and the confirmation of demand based on such an SCN cannot be upheld - the impugned order is set aside - Appeal allowed.
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2024 (3) TMI 1170
CENVAT Credit - purchase and sale of goods i.e., trading of goods - availing common input services without maintaining separate inventory for the taxable and exempted services in terms of rule 6(2) of the Cenvat Credit Rules (CCR), 2004 - separate accounts are not being maintained for dutiable and exempted services - whether proportionate reversal of credit is sufficient to comply with the relevant CCR, 2004? - period of dispute is July 2014 to June 2017 - HELD THAT:- Rules 6 very clearly establish that the taxpayer has been given an option to reverse the credit along with the interest when common credit is availed on inputs and input services on both dutiable and exempted goods/services.
In the case of M/S. SIFY TECHNOLOGIES LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI [2023 (3) TMI 12 - CESTAT CHENNAI] relied upon by the Revenue, the facts are entirely different and the question there was one who manufactures and clears simultaneously dutiable and exempted goods, various alternatives were provided to the taxpayer and having chosen a particular option, they cannot avail any other option simultaneously and the amended provisions are also not being considered - In the present case, the appellant does not manufacture consciously dutiable and exempted products but at times, trades in goods that were found to be excess and therefore, he was liable to reverse the CENVAT credit availed on the traded goods which are nothing but exempted products. Since the audit officers have noticed this irregularity, the appellant having accepted it, they have reversed the proportionate credit as laid down by Rule 6(3A) of the CCR, 2004 which is one of the options provided to the tax payer. Therefore, the question of denying this option to the appellant is not acceptable.
The Hon’ble High Court of Telangana Hyderabad in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] had observed We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly, Rule 14 of the Cenvat Credit Rules, 2004 empowered the authorities to recover such credit which had been taken or utilised wrongly along with interest. However, the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner.
In the case of COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX VERSUS M/S RAJASTHAN PRIME STEEL PROCESSING CENTER PVT LTD., SHRI SACHIN GUPTA, SENIOR EXECUTIVE (ACCOUNTS AND EXCISE) , SHRI RAJPAL SINGH, SENIOR MANAGER (FINANCE AND ADMINISTRATION) AND AUTHORISED SIGNATORY [2019 (8) TMI 1175 - RAJASTHAN HIGH COURT] in a similar set of facts, the Hon’ble High Court observed that “in short, the Revenue argument is that Rule 6(3A) is not nearly procedural but was binding upon the assessee, who could not have claimed the benefit of even proportionate credit or it would have otherwise been entitled to input service for which CENVAT Credit was admissible, without following the procedure the Show-cause notice in this case covers two different periods(2011-16) substantial part of that period was when Rule 6(3A) did not exist - In the present case the period of dispute is after the introduction of Rule 3(A) in the CENVAT Credit Rule 2004 which was introduced from 01.04.2016, and Rule 3 provided an option to pay an amount as determined under subrule (3A) which allowed the appellant to reverse the proportional credit.
From the above, it is very clear that even if the manufacturer or a provider of service had failed to exercise the option under subrule (3) will be allowed to pay proportionate credit along with the interest at the rate of 15% per annum from the due date for payment of amount till the date of payment. However, there is nothing on record to show that the appellant has reversed the entire proportionate credit along with interest, therefore the matters needs to be remanded for verifying the same.
There are no reason denying the benefit of reversal of proportion CENVAT credit to the appellant - the impugned order is set aside - appeal allowed by way of remand for verification of payment/reversal of the proportional cenvat credit along with interest.
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2024 (3) TMI 1169
CENVAT Credit - clearance of inputs as such without reversal of payment of amount of credit availed on the said inputs - it is alleged that while clearing the inputs as such, they were required to reverse the input on the highest value of input received in a particular month - HELD THAT:- The said method of adoption of value is not correct as held by this Tribunal in the case of LSR SPECIALITY OIL PVT LTD, AROKIA SAMY, RAMESH BABU VERSUS COMMISSIONER OF CENTRAL EXCISE, BELAPUR [2015 (9) TMI 983 - CESTAT MUMBAI] wherein this Tribunal has held that the average value of input procured in a year is to be taken for reversal of cenvat credit on input cleared as such and the adjudicating authority has also relied on the said decision.
Admittedly, the show-cause notices were issued to the assessee to direct them for reversal on highest value of inputs in a particular month when they were procured, which is not correct. The adjudicating authority cannot improve the case of the Revenue by adopting the decision in the case of LSR Speciality Oil Private Limited at the stage of adjudication.
The charge made in the show-cause notices against the assessee as highest value of input for the month of procurement cannot be adopted for reversal of the cenvat credit by the assessee, is set aside - the impugned order is not sustainable in the eyes of law - appeal filed by the Revenue is dismissed.
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2024 (3) TMI 1172
Scope of Capital goods - whether the finding of the CEGAT/CESTAT, applying the ration laid down in the larger bench of CEGAT in the case of JAWAHAR MILLS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, COIMBATORE [1999 (4) TMI 153 - CEGAT, NEW DELHI] was correct, legal and proper, when the goods are specifically excluded from the purview of Capital Goods as defined in Rule 57 Q of Central Excise Rules, 1944? - HELD THAT:- The order of the larger bench of CEGAT was further subjected to challenge before the Hon’ble Supreme Court by the Department which stood decided on 27.07.2001 in the case of COMMISSIONER OF C. EX., COIMBATORE VERSUS JAWAHAR MILLS LTD. [2001 (7) TMI 118 - SUPREME COURT] where it was held that The stand of the revenue was not as has been projected now by Mr. Rohtagi. In this view, the question of directing remand of these matters for fresh decision by the Tribunal does not arise. On the facts and circumstances of these cases, therefore, the stand that the items in question are not used for manufacture of final product cannot be accepted for the reasons aforestated.
The aforesaid view was further considered by the Hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, JAIPUR VERSUS M/S RAJASTHAN SPINNING & WEAVING MILLS LTD. [2010 (7) TMI 12 - SUPREME COURT] wherein, the Hon’ble Supreme Court again reiterating the view rendered in the case of Jawahar Mills where it was held that the Tribunal was correct in law in holding that the assessee was entitled to avail of MODVAT credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57Q of the Rules
In view of the authoritative decision of the Hon’ble Supreme Court in the aforesaid two cases, particularly, in the case of Jawahar Mills, which was relied upon by the CESTAT while deciding the appeal of the Department at the first instance which is under challenge in the present appeal, we do not find any merits in the submissions made by the learned Senior Counsel for the Department.
The appeal, thus fails and is accordingly rejected.
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Indian Laws
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2024 (3) TMI 1168
Time Limitation - Election Petition filed to challenge result of an Election (public) - Whether any procedural deficiency in the proceedings filed online within the prescribed limitation period designated with objection can be labelled as proceedings filed beyond limitation? - HELD THAT:- This Court observed that any deficiency in filing the Appeal / Application for failure to file the physical documents, cannot make the Appeal or the proceedings which was registered on the online portal within the prescribed period of limitation to be labelled and held to be barred by limitation. This Court held that once the proceedings are filed albeit under the online method within the prescribed limitation, any deficiency in the same certainly could be removed later on as the law does not provide that proceedings be strictly filed sans deficiency and only then the proceedings would be held to be validly filed.
While referring to the e-filing Rules applicable to the present case, it is seen that there is nothing in the said Rules which could construe that the proceedings which have been filed by Petitioners on 20.11.2023 would debar them from maintaining the Election Petition. It is clear that the Petition is filed online and electronically by them before the end of the limitation period generating the remark “Document not serial”. This Court has held that to take an extreme view that if there is deficiency in filing it would debar the party from maintaining the action would tantamount to patent absurdity and it would result in gross injustice prejudicially affecting the legitimate right of persons to a legal remedy (access to justice). It is trite that parties will undoubtedly have an opportunity to remove the deficiencies, if any, which may prevail at the time of filing the proceedings, after the proceedings are filed.
This Court has observed that procedural compliances can never defeat the substantive remedy and right to pursue substantive challenge and proceedings when filed within the limitation period - In the present case the procedural deficiency noted as “Document not serial” after admittedly electronically filing and registration of the Election Petition online on 20.11.2023 cannot be held to be as the Petition being not filed within the limitation period. What is crucial is the fact of receiving the Petition in the record of the Registry, which infact has been accomplished.
The impugned orders dated 21.12.2023 passed by the learned Trial Court though have rejected the Application filed by Writ Petitioners which was on account of considering the physical filing of the Election Petition two days later, the jurisdiction of this Court and the amplitude of this Court while hearing writs under its extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India is extremely wide - The objection raised or subsequent act of the Petitioners to file the Petition physically later cannot render the electronic filing of the Petition on 20.11.2023 as nugatory. Petitioners’ right to maintain challenge is upheld as the Petitions are held to have been filed on 20.11.2023 online, despite the objection raised. The objection undoubtedly being a curable defect. This Court can always cure the defect of the action which is occurred.
Both the aforesaid Election Petitions have been filed within limitation on 20.11.2023 which was supposed to expire on 21.11.2023. They have therefore to be accepted as filed within limitation - Petition allowed.
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