TMI Tax Updates - e-Newsletter
August 29, 2024

Case Laws in this Newsletter:

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

Articles

1. Does advance booking of a standard product turn it into a service?

   By: Madhusudan Mishra

2. WHILE MAKING A REFERENCE OF DISPUTE UNDER SECTION 10(1) OF INDUSTRIAL DISPUTES ACT, 1947 THE APPROPRIATE GOVERNMENT IS NOT TO ADJUDICATE THE DISPUTE ON MERITS

   By: DR.MARIAPPAN GOVINDARAJAN

3. SCRUTINY OF GST RETURNS: NOTICE AND ITS REPLY

   By: Dr. Sanjiv Agarwal

4. Revolutionizing Customs: How ICETABs are Transforming Trade Facilitation in India

   By: DrJoshua Ebenezer

News

1. CCI approves combination involving Reliance Industries Limited (RIL), Viacom18, Digital18 Media Limited, Star India Private Limited (SIPL) and Star Television Productions Limited (STPL)

2. India is world-class cost-effective healthcare destination and global pharma leader: Union Minister of State for Commerce & Industry Shri Jitin Prasada

3. Cabinet approves 12 Industrial nodes/cities under National Industrial Corridor Development Programme

4. Pradhan Mantri Jan Dhan Yojana (PMJDY) — National Mission for Financial Inclusion — completes a decade of successful implementation

Notifications

Indian Laws

1. G.S.R. 504 (E) - dated 16-8-2024 - Indian Law

Geographical Indications of Goods (Holding Inquiry and appeal) Rules, 2024.

Circulars / Instructions / Orders

GST - States

1. CCT/26-4/2024-25/G/1622 - dated 30-7-2024

Clarification on time of supply in respect of supply of services of construction of road and maintenance thereof of National Highway Projects of National Highways Authority of India (NHAI) in Hybrid Annuity Mode (HAM) model

2. CCT/26-4/2024-25/G/1623 - dated 30-7-2024

Clarification on time of supply of services of spectrum usage and other similar services under GST

3. CCT/26-4/2024-25/G/1624 - dated 30-7-2024

Guidelines for recovery of outstanding dues, in cases wherein first appeal has been disposed of, till Appellate Tribunal comes into operation

Highlights / Catch Notes

GST

• Excess stock triggers wrong proceedings under GST Act; Court quashes order and directs initiating proper proceedings.

  Case-Laws - HC : Excess stock found during inspection triggered proceedings u/s 130 read with Section 122 of UP GST Act. Court held that if excess stock is found, proceedings u/ss 73/74 of GST Act should be initiated, not Section 130 read with Rule 120. Impugned order passed u/s 130 read with Section 122 for excess stock cannot be sustained and is quashed. Petition allowed.
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• Court Overturns Ex-Parte Tax Orders, Grants Petitioner Right to Reply and Personal Hearing on Bank Account Attachment.

  Case-Laws - HC : The petitioner challenged the differential tax liability demand for the financial years 2017-18 to 2021-22 and the attachment of the bank account. The court observed that although the respondent issued Form DRC-01A, and the petitioner replied, the subsequent Form DRC-01 was uploaded on the portal without the petitioner's knowledge. The petitioner blamed the accountant for not appearing before the authority. However, the court held that the assessee is responsible for appearing before the authority. Once the show cause notice is uploaded on the portal, the petitioner should have filed a reply within the stipulated time. The petitioner cannot blame the department for not providing a physical copy. The court opined that an opportunity to file a reply and a personal hearing before the authority should be granted to the petitioner, as the impugned orders were passed ex-parte, violating natural justice principles. Consequently, the court set aside the impugned orders and disposed of the petition.
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• High Court Allows Appeal After Delay Due to Medical Condition, Citing Limitation Act for Delay Condonation.

  Case-Laws - HC : The High Court set aside the order of the appellate authority rejecting the appeal on the ground of delay beyond the prescribed period. Despite the petitioner's representative's medical condition and reasons preventing timely filing, the appellate authority dismissed the appeal citing no scope for admission beyond four months from the order date. However, the court held this contrary to its earlier directive applying Section 5 of the Limitation Act, 1963, allowing condonation of delay beyond one month from the prescribed period. Considering the petitioner's bona fides, the substantial recovery already made, and the established principle of not gaining by filing a belated appeal, the court found the rejection unsustainable and disposed of the petition.
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• Central Excise non-payment appeal revived after quashing dismissal order on deposit undertaking.

  Case-Laws - HC : The order dismissing the appeal due to non-payment of the mandatory pre-deposit amount u/s 35F of the Central Excise Act, 1944 was challenged. The court relied on a previous judgment where it was held that there was no intent to avoid payment of the pre-deposit, and the Revenue Board had provided a facility for making such pre-deposits. Consequently, the court quashed the appellate order and revived the appeal, subject to the petitioner depositing the pre-deposit amount within two weeks, as per their undertaking.
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• Taxpayer wins remand on assessment case over lack of due process, gets chance for fresh hearing.

  Case-Laws - HC : Petitioner challenged the impugned order alleging violation of principles of natural justice, being unaware of the order and preceding notices, and discrepancy between GSTR 1 and GSTR 3B filings. The High Court found the petitioner may have a case on merits, set aside the impugned order, and remitted the case to the respondent for fresh orders on merits and in accordance with law, subject to the petitioner depositing 25% of disputed tax within 30 days. The quashed impugned order shall be treated as an addendum to the preceding show cause notice. The petition was disposed of.
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• Court Invalidates GST Cancellation Due to Vague Notice, Orders Restoration and Permits Fresh Proceedings.

  Case-Laws - HC : The High Court held that the show cause notice (SCN) issued for cancellation of the petitioner's Goods and Services Tax (GST) registration was vague and violated principles of natural justice. The SCN did not specify the date or time for personal hearing, nor did it provide proper reasons for the proposed cancellation, such as details of the alleged fraud, willful misstatement, or suppression of facts. Additionally, the SCN proposed retrospective cancellation without mentioning the same. The court emphasized that the purpose of an SCN is to enable the noticee to respond to allegations, and denying this opportunity violates natural justice. Consequently, the impugned order canceling the petitioner's GST registration was set aside as unreasoned and in violation of natural justice principles. The respondents were directed to restore the petitioner's GST registration immediately, though fresh proceedings for statutory violations or recovery of dues were permitted.
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• Taxpayer gets final chance to present objections on GST mismatch before 30.08.2024, order set aside.

  Case-Laws - HC : The court held that considering the petitioner has remitted the entire taxes and penalty, and was unable to present objections, the petitioner should be granted one final opportunity to appear before the respondent on 30.08.2024 along with objections and relevant documents. The impugned order dated 05.06.2023 passed by the respondent u/s 74 of the TNGST Act, 2017 regarding the mismatch between GSTR-1 and GSTR-3B is set aside. The petition is allowed.
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• Faulty orders over Input Tax Credit carry forward without fair hearing quashed; re-adjudication ordered.

  Case-Laws - HC : Non-application of mind in passing orders regarding carry forward of Input Tax Credit, resulting in violation of principles of natural justice. Orders quashed due to contradictory statements about personal hearing granted or not. Proper Officer directed to re-adjudicate Show Cause Notices after considering petitioner's reply and contentions that input tax credit was carried forward to next year without utilization in the same year.
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• Lack of natural justice led to faulty tax computation, corporate unawareness unacceptable but relief granted.

  Case-Laws - HC : Principles of natural justice violated due to errors apparent on record. Petitioner claimed inability to respond or participate due to unawareness of proceedings. Court held that tax computation erred by considering total turnover instead of turnover difference between profit and loss account and GSTR 9. Petitioner's explanation of unawareness unacceptable for a large corporate entity. However, substantial liability imposed without considering GSTR 9C reconciliation statement. Cumulatively, opportunity granted to petitioner to contest tax demand by remitting Rs.2.50 crore within four weeks and submitting reply with relevant documents. Impugned order set aside subject to compliance. Petition disposed of.
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• GST reversal of ITC due to GSTR mismatch set aside; reconsideration ordered after 10% tax deposit.

  Case-Laws - HC : The court held that the reversal of Input Tax Credit (ITC) by the department due to discrepancy between GSTR 3B and auto-populated GSTR 2A violated principles of natural justice as the petitioner was not provided a reasonable opportunity to contest the tax demand on merits. The court set aside the impugned order and remanded the matter for reconsideration, subject to the condition that the petitioner remits 10% of the disputed tax demand within two weeks. The court emphasized the need to provide an opportunity to the petitioner to contest the tax demand on merits, albeit by putting the petitioner on terms.
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Income Tax

• High Court Rules DTVSV Act Determinations Final, Invalidates Income Tax Act Notices for Rectification.

  Case-Laws - HC : The High Court quashed the rectification notice, rectification order, and notice of demand issued u/s 154 of the Income Tax Act, holding that the order of determination made by the Designated Authority under the DTVSV Act attained finality and could not be reopened or revised by any authority under the Income Tax Act. The court observed that the determination made under the DTVSV Act is rendered final, except where the application is found to suffer from an incorrect declaration or suppression of material facts. The action u/s 154 did not fall within the ambit of the exception provided in Section 4(6) of the DTVSV Act. The court emphasized the legislative intent of the DTVSV Act to accord closure to tax disputes and the finality attached to the determination made thereunder.
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• Penalty for Underreported Income Overturned Due to Bona Fide Belief and Full TDS Coverage; Appeal Allowed.

  Case-Laws - AT : The assessee failed to file the original return of income, and the Assessing Officer initiated penalty proceedings for underreporting income. The assessee's authorized representative contended that all due taxes on salary income were deducted by the employer, leading to a bona fide belief of not underreporting income. The Tribunal held that since the income was subject to tax deducted at source (TDS) and the entire tax liability was paid through TDS, there was no loss to revenue. The provisions of Section 270A(6)(a) exempt underreporting if the assessee discloses material facts and the explanation is bona fide. The assessee's failure to file the return was due to a bona fide belief, as the income was subject to TDS reflected in the department's records. Regarding the addition, the assessee claimed a higher deduction u/s 24 due to a bona fide belief. Consequently, no penalty u/s 270A shall be levied for underreporting income, and the assessee's appeal is allowed.
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• Assessee's Surrendered Gains Deemed Legitimate; Recharacterization u/s 69A Overturned, Section 115BBE Inapplicable.

  Case-Laws - AT : During a search operation, the assessee surrendered a lump sum amount as alleged long-term capital gains from the sale of shares as additional income u/s 132(4). The Assessing Officer (AO) completed the assessment by recharacterizing the surrendered income as income u/s 69A and made an addition accordingly. However, the assessee admitted to earning long-term capital gains along with his wife, which was initially claimed as exempt income but later offered for taxation. The assessee revised the return, declaring the actual gain of Rs. 20,57,590/- earned solely by him, not his wife. Since the assessee voluntarily declared the income as income from other sources, recharacterizing it u/s 69A was deemed unjustified. Additionally, upon verifying the wife's return, no long-term capital gain was earned by her. The addition was made solely based on the assessee's surrender during the search. As per the precedent, the assessee did not offer income u/s 69A, and the AO merely recharacterized the nature of the offered income. Consequently, the provisions of Section 115BBE were deemed inapplicable. The case was decided in favor of the assessee.
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• Cash deposits recorded with source maintained not 'unexplained money' under Income Tax Act.

  Case-Laws - AT : Cash deposits during the demonetization period were recorded in the books of accounts, with the source maintained. The Assessing Officer invoked Section 69A and charged tax u/s 115BBE, treating the deposits as unexplained money. However, Section 69A is applicable when the assessee is the owner of money, bullion, jewelry, or valuable articles not recorded from any source. Since the cash deposits were recorded with the source maintained, invoking Section 69A was incorrect. Consequently, the addition made by the Assessing Officer is liable to be deleted, and the decision is in favor of the assessee.
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• Ship operators' reserve deductions impact tax breaks - profits from qualifying ships only eligible for shipping income deduction.

  Case-Laws - HC : The High Court held that the deduction u/s 33AC for creating a reserve to acquire new ships must be factored in while computing the deduction u/s 80-I, which is based on profits from operating ships. The amendment in 1996 capping the Section 33AC deduction at 50% of profits did not change the core character of the allowance. If the Section 33AC deduction results in no profits from ships, the Section 80-I deduction cannot be claimed. Regarding proportionate allocation of the Section 33AC deduction between qualifying and non-qualifying ships for Section 80-I purposes, the High Court stated that it cannot provide its own basis for apportionment as an appellate forum.
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• Balance Sheet Entry Insufficient for Gratuity Obligation; Specific Agreement Required for Payment Under Gratuity Act.

  Case-Laws - HC : The High Court ruled that mere reflection of an entry in the balance sheet liability column cannot constitute an 'agreement' for payment of gratuity u/s 4(5) of the Payment of Gratuity Act. An underlying document or contract between the parties explicitly agreeing to pay gratuity is necessary. In the absence of such an agreement or contract, the stray entry made by the petitioners themselves in the company's balance sheet, days before selling their stake, cannot create a liability for gratuity payment. The petitioners' names were not included in the LIC gratuity insurance policy, and no evidence suggested previous directors received gratuity. Therefore, the petitioners' claim for gratuity amounting to Rs. 1.21 crores was untenable and rightly rejected by the authorities.
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• Penalties for Loan Violations Overturned Due to Lack of Evidence and Denied Cross-Examination of Key Witness.

  Case-Laws - AT : Penalties levied u/ss 271D and 271E were challenged. The assessee was found to have violated Sections 269SS and 269T. However, there was no concrete finding that the assessee accepted loans or repaid them in violation of these sections. The Revenue's only evidence was the statement of the Director of Sudama Resorts, whose cheques were found with the assessee. The assessee sought cross-examination of the Director, which was not granted by the Assessing Officer. This statement lacks evidentiary value as per the Supreme Court's ruling in Andaman Timber Industries. Moreover, the Director of Sudama Resorts had surrendered income related to the cheques found during the search. There was no clear finding based on authentic evidence that the assessee violated Sections 269SS and 269T. Therefore, the penalties u/ss 271D and 271E were not applicable, following the ITAT Pune's decision in Sneh Builders. The assessee's appeals were allowed.
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• Interest and Late Fees from Delayed GST Filings Deemed Deductible Business Expenses by Tribunal Decision.

  Case-Laws - AT : The assessee claimed deduction for interest and late fees paid on account of delay in filing GST returns. The authorities disallowed the claim, invoking Explanation 1 to Section 37(1) of the Income Tax Act. The Tribunal held that the interest and late fees were compensatory in nature, levied for non-compliance with the GST Act provisions, and not for committing any prohibited offence. Hence, such expenses are allowable as business expenditure u/s 37(1). The Tribunal relied on the precedent of ITO vs. Virtue Financial Services (P) Ltd, which allowed deduction for interest on delayed statutory payments as compensatory expenses. Accordingly, the assessee's grounds were allowed, and interest and late fees on delayed GST returns were held deductible u/s 37(1).
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• Trust Secures 22% Tax Rate as Representative Assessee, Aligning with Beneficiary's Rate u/s 115BAA.

  Case-Laws - AT : The assessee, a trust, claimed to be taxed at the same rate applicable to its beneficiary u/s 115BAA. However, this claim was dismissed as the assessee was not treated as a representative assessee. The CIT(A) accepted the assessee's status as a representative assessee and held that since the assessee is a determinate trust with RIIHL as its sole beneficiary and settler, and RIIHL has opted for taxation under the new regime at 22%, the assessee is also liable to be taxed at the same rate. The court held that u/s 161(1), a representative assessee shall be taxed in the same manner and to the same extent as the person represented. Since RIIHL was taxed u/s 115BAA, the assessee trust should also be taxed at the same rate. The court distinguished the case from Mrs. Amy F. Cama, where the trust was not considered a representative assessee. The Tribunal's decision in favor of the assessee was upheld.
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• Taxpayer Wins: Court Overturns Expense Disallowance, Recognizes Limits on Proof for Business Expenditures u/s 37(1.

  Case-Laws - AT : Income under the head 'business and profession' would be earned by incurring relevant expenditure. While unjustified expenditure could be disallowed, there are limits to the documentation and evidence a normal business would maintain. The assessee meticulously maintained documents, deducted tax at source on payments to vendors executing turnkey projects. The CIT(A) failed to appreciate the limits on evidence a business entity would have to justify expenditure. The assessee provided detailed documents justifying the expenditure incurred. Relying on judicial precedents, the burden of proof on the assessee regarding proving expenditure u/s 37(1) has limits and cannot be mainly disallowed on the grounds adopted by the Assessing Officer. Disallowance u/s 37(1) was deleted, decided in favor of the assessee.
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• Tax Tribunal Rules CPC Adjustments Invalid Without Prior Notice to Taxpayer Under Income Tax Act Section 143(1.

  Case-Laws - AT : Validity of adjustments made in an intimation u/s 143(1) of the Income Tax Act, where there was a mismatch between the income tax return and the tax audit report filed by the assessee. The key issue was whether the Centralized Processing Centre (CPC) could make adjustments u/s 143(1)(a) while processing the return without complying with the first proviso, which requires prior intimation to the assessee. The Tribunal held that any proposed adjustment necessitates prior intimation to the assessee, either in writing or electronically, as per the first proviso to Section 143(1)(a). The CPC failed to issue such prior intimation before making the adjustment. Consequently, the impugned intimation issued u/s 143(1)(a) was not in compliance with the provisos and was deemed invalid under the Act. The assessee's appeal was allowed.
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• Asset depreciation disallowed over invoice errors; assessee's arguments upheld.

  Case-Laws - AT : Depreciation on assets disallowed by authorities due to invoices bearing names of associate company and incorrect dates. Assessee contended ownership transferred via inter-office memos, incorrect invoice dates rectified, assets in use with payments made during assessment year. Business transfer agreement for purchase of running business caused delay in record date of acquisition. No employee cost as operations commenced with directors and assistance from associates, with billing arrangement of cost plus 15% markup to associated enterprise. When revenue accepted based on depreciation plus markup, no reason to deny cost. Authorities erred in disallowing depreciation. Decided in favor of assessee.
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• Tribunal Rules Documentary Evidence Valid Over Presumption in Unexplained Agricultural Investment Case.

  Case-Laws - AT : The case pertains to an addition made u/s 69 for unexplained investment in agricultural land at Ratlam. The issue revolved around whether the addition was based on presumption or evidence. The Tribunal held that the registered sale deed and bank statements showing payment through post-dated cheques cannot be disregarded. The authorities' apprehension that cash must have exchanged hands is merely a presumption without any evidence. The Tribunal emphasized that presumption, no matter how strong, can never substitute evidence. When documentary evidence in the form of a registered deed and bank statements exist, mere presumption should not prevail. The Tribunal allowed the assessee's appeal, giving credence to the documentary evidence over presumption.
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Customs

• Bunker oil in ship engines classifiable under CTH 8908 for vessels imported for breaking.

  Case-Laws - AT : Oil contained in bunker tanks in the engine room of a vessel imported for breaking up is classifiable under CTH 8908 along with the vessel itself. This issue has been decided by the Hon'ble Tribunal West Zonal Bench Ahmedabad in favor of ship breakers of Alang, allowing their appeal and setting aside the assessment of bills of entry and the order issued by the Commissioner (Appeal) Customs, Ahmedabad. The common finding is that the oil contained in the bunker tanks is classifiable under CTH 8908 along with the vessel imported for breaking up.
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• Customs Broker Wins Appeal: License Restored, No Liability for Mis-Declared Goods by Another Broker, Penalties Overturned.

  Case-Laws - AT : The appeal challenges the revocation of customs broker license, forfeiture of security deposit, and penalty imposed for alleged violations of Regulations 10(d) and 10(n) of Customs Brokers Licensing Regulations (CBLR). Regarding Regulation 10(d) violation, it was held that the appellants, being customs brokers (CB), neither had contact with the exporter nor informed the delay in export consignment, but they were not responsible for the mis-declaration of goods as 'Kraft paper' instead of prohibited 'Red Sanders' in the shipping bill filed online by another CB. As for Regulation 10(n) violation, the allegation of not conducting proper KYC verification of the exporter was rejected, as the appellants had initially obtained KYC documents and later transferred the consignment to another CB in Pune. The Delhi High Court had held that a CB is not an expert to identify mis-declaration of goods. Since the appellants were not handling the export consignment, they cannot be held responsible for violating Regulations 10(d) and 10(n). The impugned order revoking the CB license, forfeiting the security deposit, and imposing penalty was set aside by the Appellate Tribunal as it was contrary to facts and unsustainable in law.
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• Shipping bills conversion from drawback to advance license allowed; No time limit under Customs Act.

  Case-Laws - AT : Appellate Tribunal examined the issue of conversion of shipping bills from drawback scheme to advance license scheme. It held that there is no time limitation prescribed u/s 149 of the Customs Act, 1962 for such conversion, relying on the Gujarat High Court judgment in Principal Commissioner of Customs, Mundra vs. M/s Lykis Limited. The Tribunal set aside the impugned order denying conversion on the ground of time bar and remanded the matter to the adjudicating authority to consider the request for conversion from drawback scheme to advance license on merits.
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• Customs Authority's Discretion Upheld in Shipping Bill Conversion Case Under Customs Act, 1962.

  Case-Laws - AT : This is a summary of a case involving an application for conversion of shipping bills under the NFEI scheme to the drawback scheme and the consequent duty drawback u/s 74 of the Customs Act, 1962. The key points are: The authority has discretionary power to allow or reject the conversion based on circumstances. The shipping bills' eligibility for conversion is not a matter of right but subject to the authority's discretion. The identity of the re-exported goods must be established to the satisfaction of the customs officer for granting drawback u/s 74. Physical examination of goods may be required for identification, and the officer's discretion in this regard cannot be curtailed. Non-declaration of drawback claim on the shipping bill as required u/r 4 of the Drawback Rules is a mandatory requirement, and non-compliance can lead to rejection. The Tribunal found the exercise of discretion by the authority to be fair and reasonable, and upheld the rejection of the appeal.
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• Customs agent's penalties revoked for lack of evidence in illegal red sanders export despite CHALR violation.

  Case-Laws - AT : Levy of penalty u/ss 114(i) and 114(iii) of the Customs Act without evidence of abetment in the export of red sanders. The appellant failed to obtain and verify the KYC of the exporter for whom they filed the shipping bill, violating Regulation 11 of the Customs House Agents Licensing Regulations (CHALR) 2004. They also failed to advise their client to comply with the Customs Act 1962 and the Shipping Bill of Export Regulations 1991. The Tribunal held that the violation of CHALR alone cannot constitute abetment without evidence of the appellant's knowledge about the illegal export. Mere violation of CHALR without knowledge cannot sustain penalties u/ss 114(i) and 114(iii). The impugned order was set aside, and the appeal was allowed.
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Corporate Law

• Tribunal empowered to investigate forgery, oppression & mismanagement in companies.

  Case-Laws - HC : The National Company Law Appellate Tribunal (NCLAT) held that the National Company Law Tribunal (NCLT) has wide powers under the Companies Act and NCLT Rules, 2016 to inquire into allegations of oppression and mismanagement. The NCLT can examine alleged forgery of documents that purportedly led to changes in directorship and transfer of shares. Sending disputed documents for forensic investigation is part of this inquiry. The NCLT is empowered to adjudicate such issues and give findings based on contentions advanced by counsel and forensic reports. The matter was remanded back to the NCLT for adjudication, with the appeal disposed of by way of remand.
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• Appeal Dismissed: Individual Lacks Standing Without Company in Share Transfer Rectification Case Under NCLT Rules.

  Case-Laws - AT : This case pertains to a prayer for rectification in the Register of Members concerning the transfer of shares, invoking Section 154 of the NCLT Rules. The key points are: The appeal against the relief granted by NCLT in the Principal Company Petitions was sustainable only when the Company (Appellant No.1) was contesting the matter as a legal entity. However, upon withdrawal by the Company, Appellant No. 2 (an individual) had no cause of action flowing from Appellant No.1. Consequently, the appeals were dismissed without prejudice to Appellant No. 2's rights u/s 59 of the Companies Act. The relief sought for re-entering names and share configuration in the Register of Members could not be pressed by Appellant No. 2 in the absence of an effective contest by Appellant No. 1 (the Company). Appellant No. 2 is free to resort to appropriate proceedings u/s 59(2) of the Companies Act, 2013, which will be decided per the law.
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Indian Laws

• Supreme Court Emphasizes Distinction Between Breach of Contract and Criminal Offences; Stresses Thorough Evaluation Needed.

  Case-Laws - SC : The Supreme Court quashed the summoning order issued for offences u/ss 406, 420 and 120B of the Indian Penal Code, 1860, emphasizing the non-application of mind by the lower courts. It clarified the distinction between criminal breach of trust and cheating, stating that vicarious liability cannot be attributed to office bearers for these offences unless a statutory provision exists. Mere breach of contract or trust does not constitute criminal breach of trust or cheating unless fraudulent intention is proven from inception. In sale of goods, failure to pay consideration cannot amount to criminal breach of trust as the property passes to the purchaser upon delivery. The magistrate and police must carefully apply their mind to ascertain if allegations genuinely constitute these offences before taking cognizance or registering FIR.
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PMLA

• Attachment Order Under PMLA Upheld; Possession Restored to Respondent Pending Appeals.

  Case-Laws - HC : Provisional attachment order u/s 5 of PMLA Act challenged. Court held no third-party rights can be created over attached properties. Direction to restore possession to respondent upheld, subject to attachment order. Appellant's contention regarding notice period adherence to be decided by Appellate Tribunal. Possession of seven properties to remain with respondent, subject to attachment order. Appeal disposed of.
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Service Tax

• Supreme Court Dismisses Appeal: No Evidence of Willful Tax Evasion in CENVAT Credit Case.

  Case-Laws - HC : This case pertains to the utilization of ineligible CENVAT credit by a company. The key points are: The company availed ineligible CENVAT credit amounting to Rs. 1,30,84,835/- which was not permissible under the CENVAT Credit Rules, 2004. As per Section 73 of the Finance Act, 1994, a show-cause notice for non-payment of service tax must be issued within 18 months, extendable to 5 years in case of fraud, misstatement or suppression of facts. The company had disclosed all relevant information regarding CENVAT credit availed in its ST-3 returns. The Commissioner alleged misstatement and contravention with intent to evade tax, which the High Court found perverse as the show-cause notice did not mention willful misstatement or suppression. The Supreme Court has held that for invoking extended limitation, the show-cause notice must specifically mention willful misstatement or suppression. As the company disclosed facts and there was no allegation of willful suppression, the CESTAT order was upheld, and the appeal dismissed.
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• Tax Tribunal Overturns Service Tax Demand on Warranty Provisions; No Separate Payment, No Tax Due.

  Case-Laws - AT : The appellant provides warranty services to customers who purchased machines from its parent company, receiving commission on sales. The appellant made provisions in its books for expenses incurred in providing warranty services, termed as "warranty income." The department construed this "warranty income" as consideration received for repair and maintenance services during the warranty period and demanded service tax. However, the appellant had already discharged service tax on the commission received and did not receive any separate consideration for warranty services. The provisions made were as per Accounting Standard 29 to meet future expenses for fulfilling warranty obligations, not consideration received. The demand was raised solely based on book entries, assuming such figures as consideration, which is impermissible. The Tribunal held that since no separate consideration was received for warranty services, the demand cannot sustain and set aside the impugned order, allowing the appeal.
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• Service Tax on Residential Complexes Accrual Basis, Preferential Location Charges Taxable.

  Case-Laws - AT : Service tax liability on construction of residential complexes assessed on accrual basis as per Point of Taxation Rules, 2011, overriding receipt basis followed earlier. Appellant directed to reconcile tax paid on receipt basis with accrual basis liability, pay interest on delay. Service tax upheld on Preferential Location Charges based on Bombay High Court ruling that separate charge for service attracts tax, not a tax on land. Appeal dismissed by CESTAT, finding no merits.
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• Taxman's Fruitless Pursuit: Revenue Dept Overreaches on Non-Taxable Fruit Sales.

  Case-Laws - AT : The Department of Revenue lacked jurisdiction to issue a Show Cause Notice (SCN) demanding service tax from the appellant. The SCN failed to establish that the appellant provided any taxable service. The appellant's activity involved sale of fruits, covered under the negative list in Section 66D(e) of the Finance Act, 1994, exempting it from service tax. Additionally, the SCN was sent to an incorrect address, resulting in the appellant not receiving it or the order until November 2022, after requesting it. During the relevant period, the Department lacked authority to demand service tax from the appellant. Consequently, the impugned order was set aside, and the appeal was allowed by the CESTAT (Appellate Tribunal).
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Central Excise

• Supreme Court Rules Excise Act Provisions Apply to Finance Act for Diesel Duties, Overturns Prior Order Supporting Exemption.

  Case-Laws - AT : Levy and collection of Special Additional Excise Duty (SAED), Road and Infrastructure Cess (RIC), and Agriculture Infrastructure and Development Cess (AIDC) on removal of High Speed Diesel manufactured in Special Economic Zone (SEZ) to Domestic Tariff Area (DTA). The provisions of the Central Excise Act, 1944 can be resorted to while construing the levy and collection under the three Finance Acts. The Supreme Court's judgment in Unicorn supports the appellant's case, holding that exemption provisions u/s 5A of the Central Excise Act could have been applied if the Central Government chose to do so. The appellant was justified in contending that the Central Excise Act provisions apply equally to the Finance Act provisions, and the Finance Act duties, being additional to excise duty, are in the nature of excise duty u/s 3 of the Central Excise Act. The impugned order is set aside, and the appeal is allowed.
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• Excise Duty Recovery: CESTAT Allows Appeal, Sets Aside Order u/s 11D of Central Excise Act, 1944.

  Case-Laws - AT : Interpretation of Section 11D of the Central Excise Act, 1944, regarding the recovery of amounts collected as excise duty but not deposited with the government. The key points are: If an assessee collects excise duty or any amount representing excise duty, they cannot retain it and must deposit it with the government. Section 11D can be invoked to recover such amounts. In this case, the appellant made a pre-deposit of Rs. 1 crore and later issued supplementary invoices passing on the burden to another party. The demand raised in the show cause notice invoked Section 11D, not Rule 14 of the Cenvat Credit Rules, 2004. Section 11D is applicable only when excise duty or an amount representing excise duty is collected but not deposited with the government. The impugned order was set aside, and the appeal was allowed by the CESTAT (Appellate Tribunal).
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• Refund Denial Overturned: CESTAT Supports CENVAT Credit Claim Despite Technical Invoice Lapse.

  Case-Laws - AT : The respondent claimed refund of accumulated CENVAT credit, which was rejected for non-compliance with Notification No. 5/2006-CE(NT) dated 14.03.2006 issued u/r 5 of CENVAT Credit Rules, 2004. The definition of 'input service' u/r 2(l) of CENVAT Credit Rules, 2004 covers services used directly or indirectly in manufacturing and clearance of final products. Each input service involved was held eligible for CENVAT credit based on various decisions. Refund eligibility cannot be questioned in refund proceedings as per the HCL Comnet case. Invoices addressed to the corporate office instead of manufacturing premises was a technical lapse, and substantive benefits cannot be denied for procedural irregularities. The CESTAT upheld the impugned order and dismissed the Revenue's appeal.
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• CENVAT Credit Partially Allowed; Extended Period and Penalties Set Aside Due to Interpretational Issues.

  Case-Laws - AT : Eligibility of CENVAT credit on various input services, write-off of obsolete items, rental charges for EOU, credit taken without documents, and the applicability of time limitation and penalties. The key points are: Prior to 01.04.2011, the appellant is eligible for credit on services like outdoor catering, courier, civil construction, logistics, customs agent, and insurance services as they fall under the inclusive definition of input services. After 01.04.2011, credit on outdoor catering, civil construction, and insurance services is ineligible, and the appellant has reversed the credit. The demand for write-off of obsolete items is set aside before 01.03.2011 but sustained after that date, with the appellant reversing Rs. 27,36,474/-. The demand on rental charges for EOU is upheld as the appellant is not contesting it. The demand alleging common use of input services for DTA and EOU units cannot be sustained based on the Dashion Ltd. case. The denial of credit transferred from the de-bonded EOU to the DTA unit without documents is set aside, following the Wipro Ltd. case and the appellant's own case before the High Court. Considering the interpretational nature of issues and lack of suppression, the extended period and penalties are set aside. The appeal is allowed in.
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VAT

• Bank's security interest prevails over govt tax dues, CERSAI registration key advantage.

  Case-Laws - HC : The court held that the petitioner-bank's registered security interest with CERSAI, dated 17th March 2017, has priority over the dues claimed by the GST and Sales Tax Departments. The order of attachment issued by the Sales Tax Department is dated 19th April 2022, after the bank's security interest registration. As per Section 26-E of the SARFAESI Act and the ratio laid down by the Full Bench and Division Bench judgments cited, the secured creditor's claim, i.e., the petitioner-bank's claim, will have preference over the respondents' (GST Department and Sales Tax Department) claims. Consequently, the petition was allowed.
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Case Laws:

• GST

• 2024 (8) TMI 1265
  Challenge to impugned order passed u/s 130 read with Section 122 of UP GST Act - excess stock found during inspection - proceedings u/s 73/74 of the GST Act or u/s 130 of the GST Act, read with rule 120 of the Rules framed under the Act - HELD THAT:- It is not in dispute that survey was conducted at the business premises of the petitioner on 14.9.2018. It is also not in dispute that excess stock was found, which triggered the initiation of the present proceedings against the petitioner. On various occasions, this Court has held that if excess stock is found, then proceedings under sections 73/74 of the GST Act should be pressed in service and not proceedings under section 130 of the GST Act, read with rule 120 of the Rules framed under the Act. The law is clear on the subject that the proceedings under section 130 of the GST Act cannot be put to service if excess stock is found at the time of survey. The impugned order dated 26.12.2023 passed by the respondent no. 1 under Section 130 read with Section 122 of UP GST Act, cannot be sustained in the eyes of law and same is hereby quashed. Petition allowed.

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• 2024 (8) TMI 1264
  Violation of principles of natural justice - vague SCN - no date or time was indicated in the impugned SCN for personal hearing - no proper reasons for cancellation mentioned in SCN - Cancellation of petitioner s Goods and Services Tax (GST) registration with retrospective effect - petitioner found to be non-functioning / non-existing at the principal place of business - HELD THAT:- It is apparent that the impugned SCN is cryptic and does not set out any details for proposing to cancel the petitioner s GST registration. It merely reproduces the statutory provision which enables the proper officer to cancel a tax payer s GST registration if it is obtained by means of fraud, wilful misstatement or suppression of facts. The impugned SCN does not mention either the particulars or the nature of the alleged fraud. It does not mention any statement which is alleged to be a wilful misstatement or the facts which were allegedly supressed by the petitioner. It is also relevant to note that the impugned SCN does not propose the cancellation of the petitioner s GST registration with retrospective effect - also, the impugned SCN also did not mention the date and time fixed for the personal hearing. The purpose of issuance of a show cause notice is to enable the noticee to respond to the allegations on the basis of which an adverse action is proposed. It is a fundamental rule of natural justice that a person must be afforded an opportunity to meet the allegations made against him. In the present case, the petitioner has been denied of that opportunity. The impugned order has been passed in violation of the principles of natural justice. The same is also unreasoned. Therefore, it is liable to be set aside. The impugned order is set aside. The respondents are directed to restore the petitioner s GST registration forthwith. However, it is clarified that this order will not preclude the respondents from initiating any fresh proceedings for any statutory violation or for recovery of any dues - Petition allowed.

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• 2024 (8) TMI 1263
  Validity of impugned order passed under Section 73 of the UPGST/CGST Act, 2017 - time limit prescribed under Section 73(10) of GST Act, 2017 has been extended is ultra vires Section 168A of GST Act, 2017 - the parties have consented that the order dated April 26, 2024 may be quashed and set aside with a direction upon the authority concerned to grant an opportunity of hearing to the petitioner and thereafter pass an order in a time bound manner. HELD THAT:- The order dated April 26, 2024 is quashed and set aside with a direction upon the authority concerned to grant an opportunity of hearing to the petitioner and thereafter pass a reasoned order within eight weeks from date. We make it cleat that since the order is being passed de novo, the question of limitation shall not arise. The petitioner shall not be allowed any adjournment in the said matter. The writ petition is disposed of.

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• 2024 (8) TMI 1262
  Demand of differencial amount in respect of impugned assessment periods - mismatch of tax liability for the financial years 2017-2018, 2018-2019, 2019-2020, 2020-2021 and 2021-2022 - attachment of bank account - HELD THAT:- It is evident that the respondent issued Form DRC-01A dated 27.01.2023 and the petitioner also filed a reply to the said notice. Though, the Form DRC-01 dated 12.06.2023 was issued, no reply was filed by the petitioner, as the said notice was uploaded in common portal and the petitioner was unaware of such notice. The learned counsel for the petitioner contended that the reason adduced by the petitioner for non-filing of reply and non-participating in the proceedings is that he has given instruction to his Accountant to file a reply, however, the Accountant has failed to appear before the Authority concerned to present the case. Under these circumstances, the present impugned orders dated 13.09.2023 came to be passed by the respondent. This Court is of the opinion that it is the responsibility of the Assessee to appear before the Authority concerned to present the case. Once, the show cause notice was uploaded in the common portal, the petitioner ought to have filed a reply within a stipulated time. The petitioner cannot blame the Department for not furnishing a physical copy - This Court is of the view, than an opportunity to file suitable reply and a personal hearing before the Authority concerned should be granted to the petitioner, as the impugned orders were passed ex-parte violating the principles of natural justice. This Court is inclined to set aside the impugned orders - Petition disposed off.

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• 2024 (8) TMI 1261
  Violation of principles of natural justice - opportunity of hearing not provided to the petitioners - seeking amendment of Section 146 of the WBGST / CGST Act, 2017 - HELD THAT:- From a perusal of the provision contained in Section 169 of the said Act it appears that one of the recognized manner and mode of service of summons / notice is by registered post or speed post or courier with acknowledgment due to the person to whom it is intended, inter alia, including the communication to his email address. In the instant case, the petitioner no.1 had duly been served with a notice in his email address. The petitioners had failed to make out any case for interference. Admittedly, although the petitioners were notified as regards the date of hearing, yet the petitioners chose not to appear. Having not appeared before the appellate authority, the petitioners cannot thrust the burden on the appellate authority by, inter alia, contending that since, the notice was not uploaded in the portal, the petitioners had no adequate notice. There is no scope for interference in this writ petition - Petition dismissed.

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• 2024 (8) TMI 1260
  Challenge to determination already made by the respondents u/s 73 of CGST/WBGST Act, 2017 - HELD THAT:- This matter is remitted to the proper officer, being the respondent no.2, for reconsideration of the order passed on 23rd November, 2020 having regard to the amendment introduced in Section 16 of the said Act. Further by taking note of the amendment of Section 16 of the said Act and the realisation of Rs.1,73,174/- from the petitioner s electronic credit ledger, it is opined that notice in Form GSTDRC-13 attaching petitioner s bank account dated 27th December, 2022, cannot be continued any further, the same is accordingly quashed. The writ petition is disposed of.

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• 2024 (8) TMI 1259
  Delay in filing appeal - appeal rejected on the ground that there was no scope to admit the appeal beyond a month from the prescribed period - HELD THAT:- In this case, it is noticed that after the order under Section 73 of the said Act was passed on 26th July, 2023, a sum of Rs. 2,37,894/- was recovered from the petitioner. The petitioner, in addition to the said recovery had made payment of Rs. 31,380/- towards pre-deposit. The appellate authority was made aware with regard to the reasons which prevented the petitioner from preferring an appeal. Taking note of the stand taken by the petitioner it cannot be said that there was lack of bona fide on the part of the petitioner in preferring the appeal. It is well-established that the one does not stand to gain by filing a belated appeal especially when the respondents by then recovered a sum of Rs. 2,37,894/- from the petitioner. The appellate authority, however, despite acknowledging the medical conditions of the petitioner s representative and despite ascertaining that the petitioner was otherwise prevented from filing the appeal within the time prescribed had purported to dismiss the said appeal, inter alia, on the ground that there was no scope for admission of the appeal filed beyond four months from the date of the order appealed against. The aforesaid order appears to be contrary to the directive issued by the Hon ble Division Bench of this Court in the case of S.K. CHAKRABORTY SONS VERSUS UNION OF INDIA ORS. [ 2023 (12) TMI 290 - CALCUTTA HIGH COURT] which, inter alia, provide that the provisions of Section 5 of the Limitation Act, 1963 stands attracted for condoning the delay beyond one month from the prescribed period. The order passed on 29th April, 2024 by the appellate authority cannot be sustained and the same is set aside - Petition disposed off.

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• 2024 (8) TMI 1258
  Assessment under Section 74 of the TNGST Act, 2017 on the premise that there is mismatch between GSTR-1 and GSTR-3B - HELD THAT:- Taking into account the fact that the entire taxes and penalty has been remitted and the petitioner has been unable to put-forth his objection, this Court is of the view that the petitioner may be granted one final opportunity, which was consented to by the learned counsel for the respondent. In the circumstances, the impugned order passed by the respondent dated 05.06.2023 is set aside and the petitioner is directed to appear before the respondent on 30.08.2024 along with objections and other relevant documents. The petition is allowed.

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• 2024 (8) TMI 1257
  Order dismissed on failure to make pre-deposit - Request for revival of appeal on depositing the pre-deposit amount - HELD THAT:- As would appear from the order passed by the appellate authority wherein the appeal has been dismissed due to non-payment of the mandatory pre-deposit amount as required under Section 35F of the Central Excise Act, 1944 - The learned counsel appearing for the petitioner, based upon the said reason of dismissal of appeal, has relied upon the order passed by the Coordinate Bench of this Court in M/s. Amar Enterprises [ 2023 (3) TMI 295 - JHARKHAND HIGH COURT ] where it was held that It does not appear that there was intent on the part of the petitioner to avoid payment of pre-deposit @7.5% as provided under the amended section 35F of Central Excise Act, 1944. Respondents have also adverted to the facility provided under the RBI Instruction for making such pre-deposit by unregistered dealer / registered non-assessees. This Court is of the view that the appellate order passed by the authority requires interference - the order dated 14.06.2024 passed by the Commissioner (Appeals), CGST Central Excise, Ranchi (Respondent No.2) in the Order in Appeal is hereby quashed and set aside by reviving the said appeal, subject to deposit of the pre-deposit amount as required under Section 35F of the Central Excise Act, 1944, which as per the undertaking furnished by the petitioner, is to be done within two weeks from today. Appeal allowed.

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• 2024 (8) TMI 1256
  Violation of principles of natural justice - notices that preceded the impugned order were posted in the GST common portal and therefore, the petitioner could not respond to the notices in time - discrepancies between the amount of the credit reflected in Form GSTR 2A, which is auto populated Input Tax Credit and the Returns filed by the petitioner in Form GSTR 3B - HELD THAT:- The Court is of the view that the petitioner may have a case on merits and therefore, the discretion is exercised partly in favour of the petitioner by setting aside the impugned order and remitting the case back to the respondent to pass fresh orders on merits and in accordance with law, subject to the petitioner depositing 25% of disputed tax to the credit of the respondent from its Electronic Cash Register within a period of 30 days from the date of receipt of this order. The impugned order, which stands quashed, shall be treated as addendum to the show cause notice that preceded the impugned order. Petition disposed off.

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• 2024 (8) TMI 1255
  Violation of principles of natural justice - petitioner was unaware of the impugned order and the notices that preceded the impugned orderdiscrepancy on account of the supply reported in GSTR 1 and GSTR 3B filed by the petitioner - petitioner is willing to comply with the reasonable conditions that the Court may impose - HELD THAT:- The Court is of the view that the petitioner may have a case on merits and therefore, the discretion is exercised partly in favour of the petitioner by setting aside the impugned order and remitting the case back to the respondent to pass fresh orders on merits and in accordance with law, subject to the petitioner depositing 25% of disputed tax to the credit of the respondent from its Electronic Cash Register within a period of 30 days from the date of receipt of this order. The impugned order, which stands quashed, shall be treated as addendum to the show cause notice that preceded the impugned order. Petition disposed off.

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• 2024 (8) TMI 1254
  Violation of principles of natural justice - petitioner did not have a reasonable opportunity to contest the tax demand on merits - petitioner asserts that he was unaware of proceedings until recently because the consultant who was entrusted with GST compliances did not inform the petitioner about these proceedings - mismatch between the petitioner s GSTR 3B returns and the auto-populated GSTR 2A - HELD THAT:- On perusal of the impugned order, it is evident that the tax proposal was confirmed because the petitioner failed to reply to the show cause notice. By taking into account the assertion that such non participation was on account of not being aware of proceedings, the interest of justice warrants reconsideration, albeit by putting the petitioner on terms. The impugned order dated 24.08.2023 is set aside on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order. The petitioner is permitted to submit a reply to the show cause notice within the aforesaid period. Petition disposed off.

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• 2024 (8) TMI 1253
  Violation of principles of natural justice - order challenged on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits - HELD THAT:- The petitioner has placed on record the electronic credit ledger, which shows reversal in May 2022. Such reversal is also reflected in the petitioner s GSTR 3B return for the month of May in the year 2022-2023. In these circumstances, albeit by putting the petitioner on terms, reconsideration is necessary. The impugned order dated 19.12.2023 is set aside and the matter is remanded for reconsideration on condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (8) TMI 1252
  Carry forward of Input Tax Credit oncorrectly - non-application of mind in passing impugned order - violation of principles of natural justice - HELD THAT:- Perusal of the orders dated 23.12.2023 shows that same are cryptic, contrary in as much as in some there is a reference of personal hearing given and some orders record that petitioner did not avail the opportunity of personal hearing. Said orders clearly show complete non-application of mind. Accordingly, the same are quashed. The petition is disposed of directing the Proper Officer to comply with order and re-adjudicate the Show Cause Notices after taking into account the reply filed by the petitioner as also the contentions of the petitioner that there is no utilization of the input tax credit in the same year as the same has already been carried forward to the next year - Petition disposed off.

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• 2024 (8) TMI 1251
  Violation of principles of natural justice - non-service of SCN - notice and order were uploaded on the GST portal in the View Additional Notices and Orders tab - HELD THAT:- The petitioner has asserted in the affidavit that the tipper lorry was purchased in furtherance of business. The entire tax liability along with interest thereon was appropriated from the bank account of the petitioner. Consequently, revenue interest has been secured at this juncture. In these facts and circumstances, the interest of justice warrants that the petitioner be provided an opportunity to contest the tax demand on merits. The impugned order dated 20.07.2023 is set aside and the matter is remanded for reconsideration by the respondent. The petitioner is permitted to submit a reply to the show cause notice within a period of 15 days from the date of receipt of a copy of this order - Petition disposed off by way of remand.

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• 2024 (8) TMI 1250
  Violation of principles of natural justice - errors apparent on the face of record - petitioner asserts that it was unable to respond to the show cause notice or participate in proceedings on account of not being aware of such proceedings - HELD THAT:- It is evident that the respondent added the total turnover as per the profit and loss account and the turnover as per the annual return in GSTR 9. As a consequence, tax was computed on the sum of Rs.330 crore. Since the tax proposal pertains to turnover difference, the difference between the turnover as per the profit and loss account and the turnover as per the GSTR 9 should have been taken into consideration. To that extent, the impugned order calls for interference. The explanation of the petitioner that it was unaware of proceedings cannot be accepted especially in view of the petitioner being a large corporate entity. However, substantial liability was imposed on the petitioner without taking into consideration documents on record such as the GSTR 9C reconciliation statement. When these facts and circumstances are considered cumulatively, it is just and necessary to provide an opportunity to the petitioner to contest the tax demand, albeit on terms. The impugned order is set aside subject to the condition that the petitioner remits a sum of Rs.2.50 crore within four weeks from the date of receipt of a copy of this order. Within the aforesaid period, the petitioner is permitted to submit a reply to the show cause notice by enclosing all relevant documents - Petition disposed off.

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• 2024 (8) TMI 1249
  Challenge to impugned order - challenge on the ground that the petitioner did not have a reasonable opportunity to contest the tax demand on merits - violation of principles of natural justice - HELD THAT:- The Input Tax Credit (ITC) availed of by the petitioner was reversed on account of the disparity between the petitioner s GSTR 3B returns and the auto-populated GSTR 2A. The petitioner has placed on record the annual return and learned counsel contended on such basis that the discrepancy is only to an extent of Rs.19,341/-. In these circumstances, albeit by putting the petitioner on terms, it is just and necessary to provide an opportunity to the petitioner to contest the tax demand on merits. The impugned order dated 15.09.2023 is set aside and the matter is remanded for reconsideration subject to the condition that the petitioner remits 10% of the disputed tax demand as agreed to within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off by way of remand.

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• 2024 (8) TMI 1248
  Challenge to assessment orders relating to assessment periods 2017-2018, 2018-2019, 2019-2020 and 2020-2021 - orders issued without hearing the petitioner - violation of principles of natural justice - HELD THAT:- On account of the cancellation of the petitioner s GST registration on 06.11.2019, the petitioner would have had little reason to monitor the GST portal on an ongoing basis. The orders impugned herein indicates clearly that such orders were issued without hearing the petitioner. As regards assessment periods 2017-2018 and 2018-2019, the exemption under Notification No.10/2019 was not available. The petitioner submits that the petitioner agrees to remit 5% of the disputed tax demand as a condition for remand in assessment years 2017-2018 and 2018-2019. As regards the period subsequent thereto, she submits that the petitioner was entitled to exemption under Notification No.10/2019. By taking into account the cancellation of registration with effect from 06.11.2019 and Notification No.10/2019, it is just and appropriate that the petitioner be provided an opportunity to contest the tax demand pertaining to the respective assessment period, albeit by putting the petitioner on terms with regard to assessment periods 2017- 2018 and 2018-2019. The impugned assessment orders are quashed subject to the condition that the petitioner remits 5% of the disputed tax demand as regards assessment years 2017-2018 and 2018-2019 within a period of two weeks from the date of receipt of a copy of this order - Petition disposed off.

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• 2024 (8) TMI 1247
  Application for condonation of delay in filing revocation application of cancellation of GST registration rejected - reasons placed on record for condoning the delay in filing the revocation application of cancellation of registration is not satisfied - opportunity for a personal hearing as required by Section 30 of the CGST Act, 2023 not provided - violation of principles of natural justice - HELD THAT:- Under the provision of Section 30, it is mandatory for the purpose this case to provide an opportunity of hearing to the applicant before deciding the application. No such opportunity was provided to the petitioner and therefore, the order suffers from apparent illegality by not following the mandatory provision of Section 30 of giving an opportunity of personal hearing to the applicant by the proper officer. The present writ petition along with impugned order is set aside. The 3rd respondent is directed to issue notice of personal hearing to the petitioner and the petitioner shall appear before the 3rd respondent and make his submission and thereafter fresh orders are being passed as expeditiously, in accordance with law.

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• Income Tax

• 2024 (8) TMI 1246
  Deduction u/s 33AC reduction from the profits and gains of business for computing the allowance u/s 80I - HELD THAT:- The amendment brought into effect from 1st April, 1996 only capped the deduction allowed to 50% of the profits from operating ships, as opposed to 100% of the total income of the assessee. Such a change in the indicia for computation of the cap is of no relevance to the core character of the allowance. Parliament, in its wisdom, thought it fit to disable loss-making shipping companies from seeking an allowance in the name of acquiring new ships, but in fact, effected no change to object of the deduction creating a reserve to acquire a new ship. In our opinion, the ITAT was right in noticing that the amendment of 1996 was only in connection with the computation of the cap on the amount of the allowance. We also agree that the amendment made subsequently (in 1996) does not throw any fresh light on interpretation of the provision that existed prior to the amendment (between 1991 and 1993). In the absence of any explicit positive legislative stipulation requiring the deduction u/s 33AC to be disregarded when computing the deduction u/s 80-I, we have no hesitation in upholding the concurrent views expressed in the proceedings so far prior to the institution of these appeals. Indeed, no case law has been cited at the bar to indicate that the deduction allowed u/s 33AC (which deals only with shipping companies) must have no impact on or holds no relevance for, the deduction allowed u/s 80-I. We find no reason to interfere with the impugned order. As indicated by Revenue, the concurrent outcome in the proceedings so far result in an eminently plausible and reasonable view. For the reasons articulated above, we independently find that for computing the deduction under Section 80-I (25% of profits from a ship), it would be necessary to give effect to, and factor in, the deduction allowed under Section 33AC. If the result of such deduction under Section 33AC is that there is no profit from the ship, the necessary consequence would be that the deduction u/s 80-I (a percentage of profits) cannot be claimed. Proportionate Allocation of Section 33AC Deduction - Under Section 80-I (6), the profits and gains from all qualifying ships would have been the base for computing the deduction under Section 80-I (1). Therefore, applying Section 80-I (6), the qualifying ships must be treated as the only source of income (in this case, income from Prabhu Das), but it cannot be stated that the reserve created under Section 33AC could never be attributed to Prabhu Das. It would not be possible to make adjustments at this stage by apportionment between qualifying and non-qualifying ships. It would not be open to us, as an appellate forum with a jurisdiction to hear appeals on substantial questions of law, to provide our own basis and proportions for such apportionment.

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• 2024 (8) TMI 1245
  Validity of Rectification proceedings - proceedings under the DTVSV Act and the issuance of Form 5 concluded - statutory period of limitation - respondents take the view that the AO while computing the additions in the original order of assessment had referred to and applied an incorrect tax rate HELD THAT:- Validity of the notice would necessarily have to be evaluated basis the date of its issuance as opposed to when the same may have be drawn. Notwithstanding the above, and in our considered opinion, the order u/s 154 is liable to be struck down on a more fundamental plane. As per the scheme of the DTVSV Act, we find that an applicant desirous of settlement is required to file a declaration carrying requisite particulars in terms of Section 4. Designated Authority is required to grant a certificate which would encapsulate particulars of the tax arrears and the amount payable upon such determination. In terms of sub-section (2) of Section 5, the declarant is thereafter statutorily placed under an obligation to pay the amount as determined under sub-section (1) within 15 days of the receipt of the certificate and duly intimate the Designated Authority of compliance. Sub-section (1) of Section 5 clearly injuncts the respondents thereafter from reopening any matter covered by an order of determination made by the Designated Authority in any other proceedings under the Income Tax Act or, for that matter, any other law for the time being in force. We also bear in mind the provisions which stand enshrined in Section 4 (6). On a conjoint reading of Section 4 (6) alongside Section 5 (3), we find that the determination as carried out by the Designated Authority is clearly rendered finality and cannot possibly be reopened or revised by any authority under the Income Tax Act by taking recourse to a power which may otherwise be available to be exercised. As is manifest from a reading of those provisions, the only contingency where a determination made may be liable to be revisited or recalled would be where it is subsequently found that the application made by the declarant is found to suffer from an incorrect declaration or the suppression of a material fact. Absent the above, the declaration and the determination is conferred finality under the DTVSV Act. The closure which comes to be accorded to the dispute thus is intended to operate upon both sides, namely, the assessee as well as the Revenue. This would clearly flow from the special legislative objectives underlying the DTVSV Act and its avowed intent of according a closure to all tax disputes. It is perhaps for this reason that the Legislature constructed in Section 4 (6) a salutary safeguard with regard to the conclusiveness and finality which otherwise stands attached to a determination under the enactment by virtue of Section 5 (3). However, the action which is asserted to be one in exercise of the powers conferred by Section 154 of the Act would clearly not fall within the ambit of Section 4 (6). We note that it is not the case of the respondent that the petitioner had failed to make a disclosure with respect to any material particular or any disclosure so made subsequently being found to be false. We find ourselves unable to sustain the impugned action. We consequently allow the instant writ petition and quash the rectification notice, rectification order and notice of demand.

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• 2024 (8) TMI 1244
  Non payment of Gratuity payable to director or managing director - Controlling Authority-cum-Labour Court passed orders rejecting the applications filed by the Petitioners, inter-alia, holding that they were in control over the affairs of the Company and therefore did not fit in definition of the term employee HELD THAT:- Since the amount claimed by Petitioners is in excess of Rs. 10,00,000/-, they have contended that there is a contract with Respondent No. 1, under which Petitioners are entitled to receive gratuity. Thus, right to receive gratuity is essentially premised on existence of agreement under Section 4 (5) of the Payment of Gratuity Act. Therefore, the key to the issue at hand is existence or otherwise of an agreement to pay gratuity within the meaning of Section 4 (5). No doubt, section 4 (5) is also applicable to an employee and unless person seeking enforcement of agreement is an employee , jurisdiction of Controlling Authority under the Payment of Wages Act would be unavailable and a plain claim of a person (not being an employee) to enforce specific performance of agreement for payment of amount described as gratuity may not lie before the Controlling Authority. The first inquiry should have been about the issue as to whether Petitioners were employees of the first Respondent-Company. However, since substantially high amount of Rs. 1,21,96,154/- is claimed by both Petitioners as gratuity as compared to cap of Rs. 10,00,000/- each under Section 4 (3), a slightly different approach is being adopted where I first embark upon the path to enquire about existence of agreement under Section 4 (5) of the Act between the parties. What is contemplated under sub-section (5) of Section 4 of the Payment of Gratuity Act is any award or agreement or contract with the employer . Admittedly the claim is not premised on existence of any Award and therefore what needs to be proved is existence of an agreement or contract. No express written agreement or contract is however produced on record, under which the first Respondent-company agreed to pay any gratuity to Petitioners. In absence of such express written contract, Petitioners contend that the entries made in the Balance Sheet for the year ending 31 March 2012 are required to be construed as an agreement for payment of gratuity. Whether Balance Sheet prepared for taxation purposes would constitute an agreement for payment of gratuity under section 4 (5) ? - Mere reflection of an entry in the liability column of balance sheet would amount to creation of a right which never existed. Such right will have to be independently established either through a transaction or a document in the form of a contract. In the present case, there is no underlying document in the form of a contract between Petitioners and the First Respondent-Company under which it agreed to pay gratuity to Petitioners. For the purpose of application of sub-section (5) of Section 4 of the Payment of Gratuity Act, it is necessary that existence of specific agreement or contract must be proved. In the present case, beyond reflection of entry in the balance sheet, there appears to be no underlying document under which the First Respondent-Company agreed to pay any gratuity to Petitioners. Thus in absence of any underlying agreement or contract, it cannot be stated that mere entry in balance sheet would give rise to creation of liability for the First Respondent-Company to pay gratuity under the provisions of subsection (5) of Section 4 of the Payment of Gratuity Act. An entry made by Petitioner themselves in the balance sheet of the company on 15 September 2012 (five days before execution of SPA) is made basis for claiming gratuity of Rs. 1.21 crores. The claim puts an additional burden on purchasers over and above the purchase price of Rs. 23 crores. There is no underlying agreement for payment of gratuity to directors to support the stray entry in the balance sheet. There is nothing of record to indicate that the previous directors (Mr. and Mrs. Deo) who owned 50% stake in the company during financial year 2010-11, were paid any gratuity. Petitioners names do not figure in the list of employees for whom gratuity is insured by purchasing insurance policy from LIC under Section 4A of the Act. Even then, if a specific agreement was to be produced for payment of better terms of gratuity under Section 4 (5) of the Act, the claim of Petitioners could have been awarded. Mere entry in the balance sheet created for the first time by Petitioners, who were in complete control of the company on that date, that too 5 days before sale of their stake in the company, cannot amount to agreement under provisions of section 4 (5) of the Payment of Gratuity Act. Petitioners claim for gratuity is thus totally untenable and has rightly been rejected by the Controlling and Appellate Authorities.

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• 2024 (8) TMI 1243
  Delay of 704 days in filing the appeal before the ld. CIT (A) - there was a delay of 614 days due to Covid pandemic period and there is only delay of 90 days - HELD THAT:- After going through the ratio laid down in its order reported [ 2021 (11) TMI 387 - SC ORDER] we condone the delay of 614 days and with regard to 90 days delay, we observe that there is reasonable ground to condone the delay in the form of affidavit filed. Further, we find that as the ld. CIT (A) has not decided the issues on merit for AY 2018-19 and the issues involved are same in both the assessment years i.e. 2018-19 2019-20 and also assessee prayed that the matter may be remitted back to the AO for considering the documentary evidences as the CIT (A) did not decide the appeal on merits. The disallowance made by the AO needs verification of the documentary evidence filed by the assessee. Therefore, in the interest of justice, we direct AO to consider the documentary evidences and also give an opportunity of being heard to the assessee

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• 2024 (8) TMI 1242
  Disallowance of expenditure as assessee has not carried any business activities during the current assessment year - HELD THAT:- Assessee is having a huge plant for the purposes of generating, transmitting, distribution and supply of electricity since 1995 with an agreement for supply of electricity with HPCL, at present HPPC for 15 year power purchase agreement, however, the same was suspended by HPCC w.e.f. 10th May, 2005 in compliance with the order of HERC. We observed that the assessee has not received any payment of fixed tariff from HPPC and has filed a suit in Supreme Court which is pending as on date. It is a fact on record that assessee has not declared any income due to non realisation of fixed tariff and AO has objected to the same and opined that the assessee should have declared deemed income in order to claim of the expenditure. We are in agreement with the findings of the CIT(A) until the relevant fixed tariff are realisable the same cannot be declared as income in the hands of the assessee and further the assessee has to keep up the plant in running condition it has to incur certain expenditures. As and when withdrawal of the suspension of power purchase agreement the assessee may continue to generate power, therefore, the temporarily suspension of the business is with a proper reason declared on record, therefore, in our view assessee is eligible to claim the Revenue expenditure as well as the relevant depreciation of the fixed assets during the current year, therefore, we are inclined to agree with the findings of the CIT(A) and, accordingly, appeal filed by the Revenue is dismissed.

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• 2024 (8) TMI 1241
  Condonation of delay filling appeal before CIT on non-receipt of the assessment order - assessee filed appeal against assessment order of AO after gap of over seven years - only reason given by the assessee for the inordinate delay in filing of appeal was that due to change in address of the assessee, the assessment order was not received by the assessee Whether the AO had followed the due process laid down for service of notice by affixture in the instant facts? - Scope of Procedure for service of notice - HELD THAT:- It is evident that the assessee has been deliberately avoiding receipt of notices issued by the Income Tax Department and had also deliberately not participated in assessment proceedings. The assessee had changed his address and such change in address was also intimated to the Income Tax Department and neither was the PAN data base was updated by the assessee to keep the Income Tax Department informed about the whereabouts of the assessee. It was only when the bank account of the assessee was attached by the Tax Recovery Officer that the assessee decided to file appeal before the CIT(A) and that also after a gap of over seven years. As per the provisions of Section 282 of Income Tax Act,1961, the service of notice of summon or requisition or order under the I.T. Act may be made by delivering a copy thereof, by post or by such courier services as may be approved by the Central Board of Direct Taxes. Sub-Rule (1) of the Rule 127 of the Income Tax Rules, 1962 provides that for the purposes of sub-Section (1) of Section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the may be delivered or transmitted shall be as per sub-Rule (2). AO can also serve the assessment order by affixture. Service by affixture is resorted to in two circumstances: First, when the assessee or his agent refuses to sign the acknowledgement for service or when the serving official, after using all due and reasonable diligence, cannot find the assessee in his residential or business premises within a reasonable time and second, when there is nobody else authorized to receive the notice. In the above circumstances, the Income Tax Inspector can effect the service by affixture on his own initiative without waiting for an order from the AO. A report is to be drawn up by the Income Tax Inspector, on the facts and circumstances of the service by affixture, specifying the date and time of service and the name of the identifier if any. From the facts placed on record before us, it is not clear where the complete process of affixture as laid down u/s 282 r.w.r. 127 of the Income Tax Rules, 1961 has been followed by the Income Tax Department. Accordingly, in the interest of justice, the matter is restored to the file of Ld. CIT(A) to call for the relevant assessment records for the purpose of verifying whether the due process of service of assessment order by way of affixture has been followed in the instant case. Assessee has not pressed for vacating / setting-aside of the assessment order, as being bad in law, but the only request of the Counsel for the assessee before us is that in case it is found that the due process for service of notice has not been followed by the Income Tax Department, then the Ld. CIT(A) may condone the delay in filing of the appeal before him and thereafter, decide the issue on merits after giving due opportunity of hearing to the assessee. Accordingly, the matter is set-aside to the file of Ld. CIT(A) for carrying out the verification as directed - Appeals of the assessee are allowed for statistical purposes.

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• 2024 (8) TMI 1240
  Reopening of assessment u/s 147 - cash deposits in bank account - HELD THAT:- Cash deposits in Bank Account maintained with YOUTH DEVELOPMENT CO-OP. BANK LTD., KOLHAPUR. It is also observed that no addition has been made on account of impugned cash deposits. Thus, no addition has been made on account of reason for reopening. As decided in Jet Airways (I) Ltd [ 2010 (4) TMI 431 - BOMBAY HIGH COURT] if no addition has been made on account of the income alleged to have been escaped assessment in the reasons recorded, then it is not open for AO to independently assess some other income. In this case, AO had independently tried to assess which was outside the initial reasons. Therefore, it is held that AO had no jurisdiction to add independently. Accordingly, we direct the AO to delete the addition. Addition u/s 56 - As observed that assessee s father had issued a cheque in the name of assessee. The source of this is well explained as maturity amount received from maturity of Fixed Deposits. Therefore, source stands explained. Hence, assessee has fulfilled his primary onus of proving identity, genuineness and creditworthiness. Assessing Officer has not brought on record any document to negate the Assessee s submission. Any sum of money received from a Relative(defined in the section) as gift is not taxable as per section 56(2)(vii). Assessee has received sum by cheque as gift from his father. We are of the opinion that addition is not sustainable - Decided in favour of assessee.

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• 2024 (8) TMI 1239
  Estimation of income - bogus purchases - HELD THAT:- When the revenue has made the addition to the extent of only 3% on bogus purchases for same parties in different years, there is no reason to make 100% addition on the alleged bogus purchases in the year under consideration. We, accordingly, direct the AO to reduce the addition to 3% of the total impugned purchases - Appeals of the assessee and revenue are partly allowed.

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• 2024 (8) TMI 1238
  Unexplained creditor - CIT(A) deleted addition admitting additional evidences - HELD THAT:- CIT(A) has considered the additional evidence filed before it by the assessee which was not available before the ld. AO. No doubt, according to the provisions of Rule 46A, the ld. CIT(A) is empowered to admit the additional evidence, provided it falls into conditions as mentioned in clause (a) to (d). For admitting such evidence a specific order under Rule 46A also to be passed under the appellate order. Accordingly, to sub-rule (iii), he has to give an opportunity to the AO to verify the same. In the appellate order, we do not find any (1) reference to any application made by the Assessee for admission of additional evidence, (2) Correspondence with the AO for comments on admission of such evidence, (3) any order admitting such additional evidence. Thus, there is no reference of any power exercised by him u/r 46A of The IT Rules, 1962. Therefore, it is apparent that ld. CIT(A) has admitted the additional evidence without any application made by the assessee, without making any order and without providing any opportunity to the AO. Thus, there is clear violation of rule 46A of the IT Rules. We restore the whole issue back to the file of the ld. CIT(A) to comply with the provisions of Rule 46A and decide the issue afresh. The solitary ground raised by the ld. AO is allowed.

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• 2024 (8) TMI 1237
  Revision u/s 263 - difference between no enquiry and lack of enquiry - HELD THAT:- All issues are share application money/share premium, transactions with related parties specified u/s 40A(2) of the Act, expenditure on account of freight and octroy/clearing and sawing, security premium reserve and verification of sundry creditors/sundry debtors were examined by Ld. AO and decided in favour of assessee in original assessment proceedings. PCIT had no where found any flaw in the documents. PCIT had not undertaken any enquiry or given reasons for coming to conclusion that assessment order was erroneous and prejudicial to interest of revenue. Explanation 2 to section 263 of the act does not give unfettered power to Ld. PCIT to revise each and every order to re-examine the issues already examined by the AO during assessment proceedings. Therefore, the impugned order is beyond jurisdiction, bad in law and void ab initio . Consequently, the impugned order deserves to be set aside.Assessee s appeal is allowed.

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• 2024 (8) TMI 1236
  Quantification of short payment of TDS and interest exparte of the assessee - HELD THAT:- Considering the facts and circumstances of the cases for AY 2009-10 2012-13 and in view of the decision of the Hon ble High Court of Delhi in the case of CIT v. Ansal Land Mark Township (P.) Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] along with other appeals for AYs 2013-14 2014-15, we deem it proper the remand the matter to the file of the Assessing Officer for his consideration in terms of the fresh evidence filed before us by way of paper book containing the details of various parties in Form 26A and pass order in accordance with law. Thus, the order of the ld. CIT(A) is set aside for all the assessment years under appeal and the grounds raised by the assessee are allowed for statistical purposes.

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• 2024 (8) TMI 1235
  Penalties levied u/s 271D 271E - assessee having been found to be violated the provisions of Section 269SS and 269T - HELD THAT:- There is no concrete finding of the assessee having accepted loans in violation of the provisions of Section 269SS of the Act or repaid the same in violation of the provisions of Section 269T of the Act. The only finding of the Revenue is to the effect that 11 cheques pertaining to the assessee were found at Sudama Resorts whose Director had contended that the cheques were obtained from financiers for arranging loans in cash to them. Except for the statement of the Director of the Sudama Resorts, there is no other evidence with the Revenue. Assessee in fact had sought cross-examination of the Director of the Sudama Resorts and the same was not given by the AO. Therefore, this statement of Director of Sudama Resorts has no evidentiary value in the eyes of law as laid down in the case of Andaman Timber Industries[ 2015 (10) TMI 442 - SUPREME COURT] - Moreover it is a fact on record that the director of Sudama Resorts had surrendered income on account of cheques found during search at its premises. There is agree with assessee, no concrete finding of the Revenue ,based on authentic evidence, of the assessee having accepted and repaid loan in violation of the provisions of section 269SS/T of the Act. The finding of the Revenue to this effect is merely based on surmises and conjectures. With no clear finding based on authentic evidence of the assessee having violated the provisions of Section 269SS and 269T of the Act, we agree with assessee that there was no case for levy of penalty u/s 269D and 269E of the Act respectively. As in the case of Sneh Builders [ 2011 (5) TMI 1156 - ITAT PUNE] squarely applies to the case of the assessee wherein identical penalty levied u/s 271D of the Act on the presumption that the assessee must have taken loan in violation of provisions of Section 269SS was deleted noting no concrete evidence brought on record to establish the fact of the assessee having violated the relevant provisions - Appeals of the assessee are allowed.

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• 2024 (8) TMI 1234
  Addition u/s 69A - Cash deposits during demonetization period - HELD THAT:- AO has made addition u/s. 69A which will be applicable only when the assessee is found to be the owner of any money, bullion, jewellery or other valuable articles and such money etc. is not recorded in the books of accounts maintained by him from any source of income and any explanation offered by the assessee is not in the opinion of the AO is satisfactory then, the same can be added as the unexplained money in the hands of the assessee. In the present case, the assessee has recorded the above cash deposits in his books of accounts and source of cash deposits during demonetization period were also been maintained by the assessee. Therefore in our considered view, the A.O. is not correct invoking provisions of Section 69A of the Act and charging tax u/s. 115BBE of the Act. Thus the addition made by the Assessing Officer is liable to be deleted. Decided in favour of assessee.

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• 2024 (8) TMI 1233
  Penalty levied u/s 270A - the assessee did not file original return of income AO initiated penalty proceedings for underreporting of income - AR before us submitted that all the due tax on the income earned by the assessee under the head salary were already deducted by the employer and, therefore, there was bona-fide belief on the part of the assessee that he has not underreported HELD THAT:- Undisputedly the income of the assessee was subject to the tax liabilities on which tax at source was duly deducted by the employer and deposited with the government exchequer on behalf of the assessee which was also reflecting in the record of the department. Accordingly, there was no loss to the revenue as far as the tax liability is concerned. The provisions of clause (a) of sub-section 6 of section 270A provides that there will not be any under reporting of income if the assessee furnish explanation with respect to the income and discloses all the material facts regarding such income and the AO is satisfied that the explanation offered is bona fide. In the present case, the income of the assessee was subject to TDS and almost entire tax liability was already paid by way of TDS and the same was duly reflecting in the record of the department. Hence there was no reason for the assessee to underreport his income by not furnishing return of income. The assessee has been filing return of income for the last many years. Therefore, we find that the explanation furnished by the assessee for failing to file return of income was bona fides as the assessee never intended to underreport the income. Likewise, as far as the addition is concerned, we reiterate that the assessee under the bona fides belief has claimed a higher amount of deduction u/s 24 of the Act. Therefore, no penalty under the provision of section 270A of the Act shall be levied. We can safely hold that the assessee due to bona fide belief failed to file the return of income. Therefore, no penalty shall be levied under section 270A of the Act on account of underreporting of income - Appeal of the assessee is allowed.

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• 2024 (8) TMI 1232
  Addition under the provisions of Explanation 1 to sec. 37(1) - As argued expenses in dispute have not been prohibited under the provisions of law - interest and the fee were levied on account of non-compliance of the different provisions under the different Act, which is compensatory in nature and, therefore, the same should be allowed as a deduction. HELD THAT:- As regards the first category of expenses representing the interest and late fee on account of delay in filing GST return, we find that it was levied for non-compliance of the provisions of GST Act. Assessee is required to comply the provisions of GST Act by filing the return within the stipulated time. Since the returns have not been filed within the stipulated time, the interest and fee were charged under the GST Act. As such the interest in dispute was not charged by the revenue for committing any offence which was prohibited under the provisions of GST Act. Thus, interest and late fees paid by the assessee in the given facts and circumstances is compensatory in nature which is allowable as deduction under the provisions of section 37(1) As decided in the case of ITO vs. Virtue Financial Services (P) Ltd [ 2012 (9) TMI 762 - ITAT DELHI] regarding the payment made on account of delay in submitting statutory requirement/returns held that the same are compensatory in nature and allowable as business expenditure u/s 37 Interest on delayed payment of Professional tax, PT, and licence fee for which the assessee was under the statutory obligation to deposit/pay within the stipulated time but there was a delay and therefore the interest was charged under the relevant Act which is nothing but compensatory in nature and therefore the same cannot be hit by the explanation 1 to section 37(1) of the Act. Accordingly, we hold that such interest on account of delayed payments is eligible for deduction as business expenses under section 37(1) - grounds of appeal of the assessee are allowed.

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• 2024 (8) TMI 1231
  Taxability u/s 115BAA - assessee being a representative assessee, claimed to be taxed at same rate applicable to its beneficiary claim as dismissed as the assessee was not treated as a representative assessee. CIT(A) accepted the status of the assessee as a representative assessee and held that since the assessee is a determinate trust with RIIHL as its sole and 100% beneficiary and settler and as RIIHL has opted to be taxed under the new tax regime @22% being a representative assessee u/s 161 of the Act, the assessee is also liable to be taxed at the same rate i.e., @22% + applicable surcharge and CESS. HELD THAT:- Sub-Section (1) is the relevant sub-Section. It can be seen that the tax shall be levied upon and recovered from a representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him which means that the trust will be subject to same rate of tax as applicable to the person represented by it i.e., RIIHL which was taxed u/s 115BAA. As in the case of Mrs. Amy F. Cama [ 1998 (6) TMI 60 - BOMBAY HIGH COURT] assessee claimed purchase price of the flat should be deducted from the capital gain arising out of the sale of the said immovable property, under section 54. ITO negatived the assessees claim on the ground that the trust who was the owner was not residing in the said flat and the beneficiaries who resided therein were not the owners and, therefore, the assessee did not fulfil the conditions laid down in section 54. On appeal, the AAC also negatives the claim of the assessee. On second appeal, the Tribunal, dismissed of assessee s claim on the ground that the excess amount realised by the trustee would be income in her hands and the said income could not be said to be income receivable on behalf of the beneficiary. Tribunal came to the conclusion that the question of applicability of section 161 did not arise in the instant case. Decided in favour of assessee.

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• 2024 (8) TMI 1230
  Revision u/s 263 - disallowance u/s. 14A - HELD THAT:- PCIT has simpliciter carried out unnecessary exercise without analyzing that the assessee has received the exempt income - PCIT has not noted any error in the assessment order or any prejudice caused to the Revenue by the assessment order. Further for revising the assessment, the PCIT has to give a clear cut finding that the order passed by the AO u/s. 143(3) of the Act suffers from the twin conditions i.e., erroneous insofar as prejudicial to the interest of Revenue, which is sine qua non to invoke the powers u/s. 263 Loss of sale of assets - Claim being capital in nature was disallowed by the assessee company while computing taxable income for the relevant assessment year and moreover, the disallowance of this loss on sale of assets was duly disclosed in the return of income filed for the relevant assessment year and appropriate disclosure was made in TAR filed by the assessee for the relevant assessment year. PCIT has nowhere recorded finding of fact that the assessment order is erroneous insofar as prejudicial to the interest of Revenue and once this twin conditions is not mentioned or not probed, the PCIT has no power to exercise powers u/s. 263 of the Act for revising the assessment. Satisfaction as noted by CIT - For invoking the revisionary powers u/s. 263 of the Act, it is necessary for the PCIT to state in what manner he consider the assessment order as erroneous and prejudicial to the interest of Revenue and what the basis and material for such conclusion. Though the provisions of section 263 of the Act vests power in PCIT in subjective terms, but even when an enactment vests discretion in any authority saying, if it appears , if he satisfied , if he considers necessary , that does not mean that it is a matter only of subjective satisfaction and such authority has not to judge the circumstances in an objective manner. PCIT must give his own reasons for being satisfied that the order passed by the AO is erroneous and prejudicial to the interests of Revenue and this provision postulates a scrutiny by PCIT of all the relevant facts for holding that the order is erroneous and is also prejudicial to the interest of Revenue. In the present case none is the finding qua that and PCIT has not given any reasoning for setting aside the assessment order and directing the AO verification without any basis. Assessee appeal allowed.

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• 2024 (8) TMI 1229
  Disallowance u/s 37(1) - business expediency on account of expenditure incurred towards various heads; testing commissioning, security services, repairing, loading unloading, labour charges, installation charges, freight expenses, etc. when the Income earned from corresponding activities remain undisputed - assessee had failed to submit documentary evidences to confirm the genuineness of expenditure booked - as submitted assessee duly deducted tax at source and provided all details as were available with him to show that the payments have been made only and exclusively for the purposes of his business. HELD THAT:- Income under the head business and profession would be earned by making certain relevant expenditure. While demonstrably unjustified expenditure could be disallowed, but it is also clear that there are limits to the kind of documentation and evidences that a normal business would be expected to maintain. In this case, the assessee has adequately demonstrated that he has meticulously maintained documents and even deducted tax at source on the payments made to vendors who were associating with him in executing turnkey projects. Even the CIT(A) has failed to appreciate that there are limits to the kind of evidences that any normal business entity would have with it to justify the expenditure incurred for earning business income. In this case it is felt that the assessee could not have done any better than what he has already done in terms of filing detailed documents to justify the expenditure incurred. As relying on ASHOK SURANA [ 2016 (6) TMI 696 - CALCUTTA HIGH COURT] and M/S. PAHARPUR COOLING TOWERS LTD. [ 2022 (9) TMI 1608 - CALCUTTA HIGH COURT] to show that the burden of proof on the assessee regarding proving expenditure u/s 37(1) has limits and cannot be mainly disallowed on the grounds adopted by the AO. Disallowance u/s 37(1) deleted - Decided in favour of assessee.

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• 2024 (8) TMI 1228
  Addition u/s 69A r.w.s 115BBE - During the search operation, statement u/s 132(4) was recorded in which the assessee surrendered lumpsum for alleged long term capital gains earned from sale of shares as additional income - AO completed assessment by recharacterizing the income surrendered as income u/s 69A and made addition HELD THAT:- Assessee admitted that he has earned long term capital gain along with his wife which has been claimed as exempt income and offered the same for taxation. However, the assessee realized that actual gain earned by him was Rs. 20,57,590/- and no such gain was earned by his wife. Immediately the return was revised. Since the assessee himself has declared income as income from other sources, we do not find any merit in recharacterising the same as income u/s 69A of the Act. Further, on verification of the return of the wife of the assessee, we find that she has not earned any long term capital gain and the entire addition has been made only on the basis of surrender made by the assessee at the time of search. As decided in [ 2023 (11) TMI 333 - ITAT DELHI] assessee has not offered the income under Section 69A of the Act. Even, the Assessing Officer has not made any separate addition under Section 69A of the Act. He has merely re-characterized the nature of income offered by the assessee. Thus, in our considered opinion, the provisions of sections 115BBE would not be applicable to the facts of the present appeal. Decided in favour of assessee.

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• 2024 (8) TMI 1227
  Validity of Adjustments made in intimation u/s 143(1) - mismatch between the income tax return and tax audit report filed by the assessee -Whether adjustment can be made by CPC u/s. 143(1)(a) of the Act while processing the return filed by the assessee without complying with the condition stipulated in first proviso to clause (a) of sub-section (1) of section 143? - HELD THAT:- We do find force in the submissions made by assessee in respect of any adjustment which is proposed to be made, a prior intimation is required to be served on the assessee, either in writing or electronically, as contained in 1st proviso to section 143(1)(a) - Counsel has evidently demonstrated before us, the failure on the part of CPC to issue such prior intimation to the assessee before making an adjustment. Thus, the only aspect which emerges in the appeal is whether the adjustment has been made in compliance to 1st proviso to sec. 143(1)(a) of the Act. Considering the facts on record and the perusal of the provisions contained in sec. 143(1)(a) of the Act, we find that on this aspect, the revenue fails. This position has not been controverted by Ld. Sr. DR also. In case, where there is no response received from the assessee then, within thirty days of the issue of such intimation, department is free to make such adjustment or disallowance. The documentary evidence placed on record and the e-proceedings downloaded from the Income Tax portal, no where suggests that such a process has been followed. Thus, we find that the impugned intimation issued u/s. 143(1)(a) is not in compliance with the provisos to section 143(1)(a) of the Act and thus, the impugned intimation is invalid under the Act. Assessee appeal allowed.

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• 2024 (8) TMI 1226
  Disallowance of the depreciation - assets which were held by the assessee were not put to use as per authorities below - as per revenue some of the invoices were in the name of associate company of USA and some invoices were bearing the date of next Financial Year - HELD THAT:- Ownership of assets invoiced to Arcserve USA was transferred to the assessee via inter- office memos. Incorrect invoice , the same was rectified after the fiscal year end but the assets were in use and payments were made during the current assessment year. Assessee stated that there was a business transfer agreement for purchase of running business of CA India Technologies Pvt. Ltd. which was to take place from 26.02.2015 but due to some technical reason the record date of acquisition was extended to 31.05.2015. No employee cost is there, assessee s submission in this regard is that operations commenced with directors and assistance from Arcserve USA and CA Technologies employees, negating additional manpower costs. Furthermore, the most important feature is that assessee had arrangement with its AE for billing cost plus 15%. This has been duly billed during the year and entire depreciation cost plus 15% has been billed to the AE. When the Revenue is accepting the revenue earned which is totally based upon depreciation plus 15% markup, there is no reason to deny the cost. Thus, authorities below have erred in disallowing the depreciation - Decided in favour of assessee.

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• 2024 (8) TMI 1225
  Addition u/s 69 - unexplained investment in agricultural land at Ratlam - addition based on presumption v/s evidence - HELD THAT:- The sale-deed is executed and registered by stamps authority and cannot be brushed aside. Secondly, we find that the bank statement of Stare Bank of India clearly mentions the details of debit entries of those six cheques cleared on various dates as narrated earlier. The bank statement is also a document issued by bank and cannot be brushed aside. Thus, from these documents, it is clearly established that the entire consideration was paid only through cheques. Undoubtedly this clearly shows that there is no passing of cash between the parties. So far as clearance of cheques after about two years is concerned, Ld. AR has made a submission that this was due to a mutual understanding of parties. Ld. AR has further made a clear submission standing at the bar that both parties belong to Dowdy Bohra Community of Muslims where interest is not charged following customary practice. These factors pointed by Ld. AR certainly make a sense and dislodge the apprehensions made by authorities. Lower authorities have no basis or proof to establish that the assessee or his brother had made any cash payment to the sellers and subsequently recovered the same on clearance of cheques. Such a conclusion taken by authorities is merely based on apprehension, presumption or suspicion. It is an established judicial wisdom that presumption howsoever strong can never become an evidence. When we have two sets of evidence, one documentary evidence in the form of registered-deed and bank statement showing the factum of payment through post-dates cheques and other a mere presumption that cash mush have exchanged the hands, we must necessary give credence to the documentary evidences and should not be guided by mere presumption. Assessee appeal allowed.

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• Customs

• 2024 (8) TMI 1224
  Classification of imported goods - oil contained in bunker tanks in engine room of vessel imported for breaking up - classifiable under CTH 8908 along with such vessel or not - HELD THAT:- Similar issue has been decided by Hon ble Tribunal West Zonal Bench Ahmedabad of the Appellant in NAVYUG SHIP BREAKING CO., DHAN STEELS PRIVATE LIMITED. AND OTHERS VERSUS C.C., JAMNAGAR (PREV) [ 2022 (12) TMI 100 - CESTAT AHMEDABAD] on the similar issue in favour Ship Breakers of Alang allowing their appeal on the issue and set a siding the assessment of B/Es and OIA NO. OIA-JMN-CUSTM-000-APP-004- 072-18-19 dated 30.04.2019 issued by Commissioner (Appeal) Customs, Ahmedabad and with the common finding that oil contained in bunker tanks in engine room of vessel imported for breaking up is classifiable under CTH 8908 along with such vessel. Appeal allowed.

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• 2024 (8) TMI 1223
  Refund of SAD u/s 3(5) of Customs Tariff Act, 1975 - rejection of refund claims on the ground that there is discrepancy in description of the goods imported and goods sold - HELD THAT:- The issue relating to the rejection of the Special Additional Duty of Customs (SAD) refund claim alleging that there is discrepancy in in description of the goods imported and goods sold in the sales invoices when compared to the Bills of Entry is no longer res integra. The fact remains that the appellant has produced a Chartered Accountant s Certificate along with the reconciliation statement as required by Boards Circular No. 6/2008, dated 28-4-2008. In such a case the decision to discard the certificate should be based on certain incriminating and reliable documents and the reasons for disbelieving the certificate should be clearly spelt out. In the absence of such action the claim cannot be rejected. In CHOWGULE COMPANY PVT LTD VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE [ 2014 (8) TMI 214 - CESTAT MUMBAI (LB)] , a Larger Bench of this Tribunal examined a reference of a related matter as to whether to avail the benefit of Notification No. 102/2007, the condition 2(b) of the Notification is mandatory for compliance being a trader who cleared the goods on the strength of commercial invoices. The judgment went on to examine the genesis and object of the levy and the role of the exemption notification, which is very useful in understanding the issue. The Hon ble Madras High Court in its judgment in PP PRODUCTS LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI SEAPORT COMMISSIONERATE-IV [ 2019 (5) TMI 830 - MADRAS HIGH COURT] , examined whether the Tribunal, in the face of documentary evidence produced by the appellant, was correct in setting aside the order of the lower Appellate Authority, holding that there was no correction between the imports and subsequent sales? It is held that the goods imported and the goods sold are one and the same and are co-relatable. The lower authority has not issued any DM or PH to the appellants for making the deficiencies good or to make any submissions. The department has not proved that the goods sold are different from the goods imported. The lower authority has not disputed the fulfillment of the other substantive conditions of the notification by the appellants. Rejection of partial amount of refund on this flimsy ground is not sustainable. The impugned order rejecting the refund claim is not proper. The impugned order is hence set aside - Appeal allowed.

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• 2024 (8) TMI 1222
  Revocation of Customs Broker License - forfeiture of security deposit - levy of penalty - violation of Regulations 10(d) and 10(n) of CBLR. Violation of Regulation 10(d) ibid - appellants CB neither in contact with the exporter nor informed the inordinate delay in export consignment from Pune to JNCH, Nhava Sheva - HELD THAT:- In the instant case, mis-declaration of the description of the goods in the S/B as Kraft paper , for smuggling out of the country the prohibited Red Sanders , was submitted by the CB M/s Exim Management Services, by filing the same online from their office, as it is evident from the face of the shipping Bill. Thus, there is no possibility for the appellants CB to either know the actual content of the export goods and to bring to the notice of the Deputy Commissioner of Customs (DC) or Assistant Commissioner of Customs (AC) about the mis-declaration of export goods or about the delay in transportation of such export goods. Thus, we are of the considered view that the violation of Regulation 10(d) ibid, as concluded in the impugned order is not sustainable. Violation of Regulation 10(n) ibid - allegation is that appellants had never met the exporter/IEC holder, and they were not careful and diligent in undertaking the KYC verification process about the background of exporter - HELD THAT:- It is found from the records, that the appellants CB had initially obtained the KYC documents from the exporter and once they were not handling the export consignment, they had sent it to other CB or persons concerned with such export at Pune. Thus, the appellants CB has no role to play in respect of export documents handled by one another CB at Pune. The Hon ble High Court of Delhi has held in the case of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI [ 2017 (3) TMI 1494 - DELHI HIGH COURT ], that the appellants CB is not an officer of Customs who would have an expertise to identify mis-declaration of goods. Thus, when the appellants CB was not handling the export consignment, it cannot be said that they had violated Regulation 10(n) ibid. Further, it is not the case that the appellants CB is the customs broker, who had handled the export consignment - It is an undisputed fact that the appellants CB had no role to play in the export transaction and it is only M/s. Exim Management Services, Pune holding CB license No. CHA.PNR 54 is the CB in the case. Thus, the impugned order holding violation of Regulation 10(d) and 10(n) ibid on the appellants CB is not legally sustainable. There are no merits in the impugned order passed by the learned Principal Commissioner of Customs (General), Mumbai in revocation of the CB license of the appellants; for forfeiture of security deposit and for imposition of penalty, inasmuch as there is no violation of regulations 10(d) and 10(n) ibid, and the findings in the impugned order is contrary to the facts on record. The impugned order is set aside - appeal allowed.

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• 2024 (8) TMI 1221
  Denial of request for conversion of shipping bills from drawback scheme to advance license scheme - denial on the ground of time limitation - HELD THAT:- It is found that the Hon ble Gujarat High Court in the case of THE PRINCIPAL COMMISSIONER OF CUSTOMS, MUNDRA VERSUS M/S LYKIS LIMITED [ 2021 (2) TMI 261 - GUJARAT HIGH COURT] has examined the issue and held that there is no time-limit prescribed under Section 149 of the Customs Act, 1962 and therefore, conversion of shipping bills from drawback scheme to DFIA scheme cannot be rejected on the ground of time bar. As the issue has already been decided that if an amended in the shipping bill is filed under Section 149 of the Customs Act, 1962, there is no time-limit prescribed under the Act for conversion of shipping bill from one scheme to another scheme. Thus, the application for conversion of shipping bills from drawback to advance licence was filed by the appellant in time - the impugned order is set aside - matter remanded to the adjudicating authority to consider the request for conversion from drawback scheme to advance licence, on merit. Appeal disposed off by way of remand.

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• 2024 (8) TMI 1220
  Application for conversion of shipping bills under NFEI scheme to drawback scheme and to the consequent duty drawback under the provisions of sec. 74 of the Customs Act, 1962 read with Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 - re-export of style steel Cord S311, Steel Spools B80, Plastic Pallets, Plastic Separators - HELD THAT:- There is no doubt that the formation of opinion by the Competent Authority is a purely subjective process founded on existent circumstances. The dispute here pertains to the discretionary jurisdiction of the Commissioner of Customs under the impugned section of the CA, 1962. However, there are no allegations made by the appellant that the discretion has been exercised in an illegal manner or on wholly untenable grounds or is arbitrary or perverse. Shipping Bills are eligible for conversion into drawback shipping bills under Section 149 of the CA 1962 or not - HELD THAT:- A discretionary power to allow also carries with it the power not to allow, based on the facts and circumstances of the issue at hand. It is to be stated that the power under Section 149 of CA 1962 involves exercise of discretion, the scope of review during appeal in such a case is to examine if the discretion has been rightly exercised and that it is not based on irrelevant materials and is fair and reasonable in the circumstances. The Hon ble Supreme Court in its judgment in the case of STATE OF ORISSA ORS. VERSUS MD. ILLIYAS [ 2005 (11) TMI 469 - SUPREME COURT] held that a decision is a precedent on its own facts. It is not everything said in a judgment that constitutes a precedent. The enunciation of the reason or principle on which a question before a Court has been decided is alone binding as a precedent. Section 149 is a discretionary provision which gives the power to the proper officer to authorise any document, after it has been presented in the custom house to be amended, under certain restrictions and conditions, if he so deems fit. It is not an exclusive provision for the conversion of one type of SB into another. Amendment from one SB type to another cannot be claimed as a matter of right. Further no formal request for an amendment of the SB s under section 149 of CA 1962, as is being pleaded now, appears to have been made. That technicality however need not detain us as a disqualification, but is useful in understanding the action that followed. Whether the subject goods were the same goods that were re-exported vide the impugned Shipping Bills, are not relevant for permitting the conversion of the impugned Shipping Bills? - HELD THAT:- Section 149 of CA 1962 is not a section specific to the conversion of one SB type to another. When a specific request is made by an exporter for a particular amendment in the SB which has monetary implications on the exchequer any prudent officer would have to take a holistic view of the amendment being sought. This discretion has to be tempered by the mandate of section 74 which permits the payment of drawback only if the goods are identified to the satisfaction of the AC / DC of Customs as the goods which were imported. Hence the proper officer feeling that the request for amendment of the SB and to reassess it for drawback under section 74 of CA 1962 requires examining the identity of the goods, cannot be faulted. Whether the conversion of shipping bills under Section 149 cannot be rejected on the basis of Circular 36/2010-Cus dated 23.09.2010? - HELD THAT:- There is no reason why when goods are being returned by way of re-export involving a payout from the exchequer, a lesser standard of verification based on documents alone is to be held sufficient. In the case of the detection of a fraud such a decision could be held as irrational and perverse, at times with consequences for the officer causing the loss. The goods can best be identified satisfactorily by physical examination, unless the proper officer for reasons known to him arrives at his satisfaction otherwise. Hence no such direction can be given curtailing the discretion of the proper officer to confine his satisfaction to a verification of documents alone - In any case the Commissioner of Customs has not leaned too heavily on Circular No.36/2010 and the order is in conformity with the existing provisions of the Act and Rules. Section 74 of the CA 1962 nowhere mentions the requirement of physical examination as the only basis on which the proper officer is satisfied regarding the goods exported - HELD THAT:- Whether the subjective satisfaction by the proper officer could have been achieved only by physical examination cannot be a matter of challenge so long as the use of discretion is not perverse etc. - No such allegation is made by the appellant whose main grouse is only the use of discretion by the proper officer resulted in him wanting to examine the goods. In the case of WB. ELECTRICITY REGULATORY COMMISSION VERSUS CESC. LTD. ETC. [ 2002 (10) TMI 772 - SUPREME COURT] the Hon ble Apex Court has held that the rule of prudence in law is that the appellate power is not to be exercised for the purpose of substituting one subjective satisfaction with another, without there being any specific reason for such substitution. Whether non-declaration of drawback claim on the Shipping Bill as required under Rule 4 of Drawback Rules cannot be a basis for rejecting Appellant s request for conversion of Shipping Bills? - HELD THAT:- The object and purpose of the procedure laid down is to ensure that the Customs department is made aware that the SB involves the payment of drawback and the goods can be subject to checks as felt necessary. Since the object of the rule would be defeated by non-compliance causing a loss to the exchequer, hence the said rule has to be held as mandatory - It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. Further when a statute uses the word shall , prima facie, it is mandatory, more so for the reason that non-compliance of the rule may result in excess / undue payment of drawback causing a loss to the exchequer. It is found that the exercise of discretion by the original / proper authority is fair and reasonable. Neither has the appellant alleged or brought out any perversity or irrationality in the use of such a discretion. Hence the decision does not require any substitution just because the appellant feels that another view may be possible - the impugned order is upheld and the appeal is rejected. Appeal disposed off.

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• 2024 (8) TMI 1219
  Levy of penalty u/s 114(i) and 114(iii) of CA without evidence of abetment - export of red sanders - failure to obtain and verify the KYC of the exporter for which they were filing the subject shipping bill - failure to fulfill the obligation as envisaged under Regulation 11 of the CHALR 2004 by not advising their client to comply with the various Provision of Customs Act 1962 read with Regulation 2 of Shipping Bill of Export (Form) Regulations 1991 - HELD THAT:- From the observations in the Order in Original as well as in the impugned order, it is seen that they only relate to violation of various provisions of CHALR 2004. On the basis of the said violation, it has been alleged that the appellant had abetted the export of red sanders. It is apparent that abetment can occur only if the person has knowledge about the wrong or illegal act. In the instant case, there is no admission of any knowledge by the appellant. None of the other co-noticees or witness has also indicated that the appellant had any knowledge about the red sanders. There is no evidence of the knowledge of appellants. In this background, the allegation of abetment solely based on violation of CHALR without any knowledge on the part of the appellant cannot be sustained. The penalty under section 114 (i) and 114 (iii) cannot be sustained. The impugned order is, therefore, set aside - Appeal allowed.

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• Corporate Laws

• 2024 (8) TMI 1218
  Oppression and Mismanagement - lack of jurisdiction to adjudicate the issue of forgery of documents - whether the NCLT has the authority to examine documents allegedly to be forged and fabricated, which purportedly led to the changes in directorship of the company and the transfer of shares to the respondents? - HELD THAT:- In the case of CHANNEL FOODS PRIVATE LIMITED, MR. JALEEL HUSSAIN S/O. SHAMSUDHIN, A.K. MANSOOR, G. JOSEPH ASSOCIATES VERSUS MR. A.K. NOWSHAD [ 2022 (11) TMI 1506 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, CHENNAI.] , the appellate body, i.e. the NCLAT unequivocally held that the NCLT has very wide powers under the Companies Act and the NCLT Rules, 2016 to enquire into the allegation of oppression and mismanagement and sending disputed documents for forensic investigation is also part of this enquiry. The learned CLB had denied the adjudication of the dispute on the ground that the contention of the appellant regarding the alleged forgery was out of its jurisdiction - the Rule 43 of the NCLT rules, 2016 as well as the judicial dicta provides for powers to the NLCT to adjudicate such claims and direct expert examination of the alleged forgery. This Court is of the view that the NCLT is well empowered to adjudicate the issues and give its findings on the basis of the contentions advanced by the respective counsel as well as the forensic report. Matter remanded back to the NCLT for adjudication - appeal disposed off by way of remand.

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• 2024 (8) TMI 1217
  Prayer for rectification in the Register of Members - controversy pertaining to the transfer of shares - section 154 of the NCLT Rules - HELD THAT:- What is being observed here is that in the light of relief granted by NCLT in the Principal Company Petitions to the Respondents herein, the cause for Appeal against such reliefs itself was subsisting only during the time when the Appellant No.1 i.e. the Company, having legal status, being a juristic person, was contesting the matter, but, upon its withdrawal, the Appellant No. 2 individually, will have no cause, as such, which could at all flowing from the Appellant No. 1. In the absence of there being any plausible answer extended by the Learned Counsel for the Appellant No. 2, on the objection raised by the Learned Counsel for the Respondent / Petitioner, this bunch of Company Appeals, would stand dismissed, without prejudicing the rights of the Appellant No. 2, to resort to the appropriate remedies, as available to him, under Section 59 of the Companies Act, the reason behind it being that the relief prayed against the order of rectification of Register of Members of the First Appellant, by re-entering the names and the configuration of the Shares, held by the Shareholders, under the respective Folio, could have had been possible only when the Company was contesting the proceedings and in the event of Company itself having chosen not to contest the Company Appeal, no such relief can be pressed for by Appellant No. 2 in the absence of an effective contest by Appellant No. 1. It will be open for the Appellant No. 2, to resort to the appropriate proceedings, under Section 59 (2) of the Companies Act, 2013, which would be decided, exclusively, in accordance with Law - Appeal dismissed.

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• Insolvency & Bankruptcy

• 2024 (8) TMI 1266
  Jurisdiction to resolve dispute with regard to payment of outstanding dues, if any, by the Respondent to the Corporate Debtor - Admissibility of claims under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - recovery of admitted dues - HELD THAT:- The Respondent has candidly and unequivocally admitted in the email dated 04.06.2022 its liability to pay a sum of INR 12,36,28,455/- to the Corporate Debtor. Therefore, there is not even a semblance of dispute so far as this amount is concerned. In Gujarat Urja Vikas Nigam Ltd [ 2021 (3) TMI 340 - SUPREME COURT ], it has been held by the Hon ble Supreme Court that one of the important objects of the Code is to bring the insolvency law in India under a single unified umbrella with the object of speeding up the insolvency process. It was further observed in the aforesaid case that the non-obstante clause in Section 60(5) of the Code is designed for a purpose i.e. to ensure that NCLT alone has the jurisdiction when it comes to applications or proceedings by or against the Corporate Debtor covered by the Code, making it clear that no other forum has jurisdiction to entertain or dispose of such applications or proceedings and therefore, NCLT has jurisdiction to adjudicate disputes which arise solely from or which relate to the insolvency of the corporate debtor. If the Applicant is relegated to civil court(s) or arbitral proceedings even in respect of admitted dues, it would definitely defeat the objects of the Code and the objective of concluding the process in a time bound manner would never be possibly adhered to. Even otherwise, in the context of this case, undisputedly, the Corporate Debtor continued to render services to the Respondent despite initiation of CIRP against it and against those services, the Liquidator is seeking to realize the dues. Therefore, it cannot be said by any stretch of imagination that there is no nexus of the dues sought to be recovered or the relief(s) being claimed in the application with the insolvency/liquidation process. This application deserves to be partly-allowed directing the Respondent to pay the admitted liability of INR 12,36,28,455/- to the Applicant forthwith. For the remaining amount, permission is hereby granted to the Liquidator u/s 33(5) of the Code to initiate appropriate legal proceedings - Application allowed in part.

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• PMLA

• 2024 (8) TMI 1216
  Provisional attachment of properties under Section 5 of the PMLA Act - seeking release if attached property - third party rights/interests - HELD THAT:- The order in appeal dated 24th December, 2019 clearly protects the Appellant, insofar as attachment is concerned. No third-party rights and/or interests can be created in respect of all seven properties by the Respondent. The direction for restoring the possession of the properties cannot be faulted with on merits. Moreover, even the order dated 24th December, 2019 directed that the Appellant/Department was restrained from taking the possession of the properties. The stand of the Appellant is that notices were issued on 18th December, 2019 and 19th December, 2019 and the time period as prescribed in the PMLA Rules were adhered to. These issues would have to be now resolved in the Appellate Tribunal. The possession of all the seven properties shall now remain with the Respondent subject to the order of attachment in terms of paragraph 19 of the impugned order dated 17th January, 2020. Appeal disposed off.

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• 2024 (8) TMI 1215
  Seeking recall of the Judgment - petition has been dismissed without dealing with any of the grounds raised by the petitioner and without dealing with the submissions made in the written submissions which were placed on record - HELD THAT:- Reliance placed in the decision of the Apex Court in VIJAY BHATIA VERSUS UNION OF INDIA AND OTHERS [ 2023 (5) TMI 1375 - SUPREME COURT] has deprecated the practice of filing Writ Petitions challenging the validity of Section 50 of the Act despite its validity having been decided in VIJAY MADANLAL CHOUDHARY ORS. VERSUS UNION OF INDIA ORS. [ 2022 (7) TMI 1316 - SUPREME COURT] . It is observed that before concluding, that the prayer made in both the Writ Petitions was to challenge the constitutional validity of Section 50 PMLA. It paragraph 84 of the impugned Order, reference has been made to the case of Vijay Madanlal Choudhary vs. UOI wherein the Three Judge Bench of Apex Court has upheld the constitutional validity of Section 50 of PMLA. Therefore, the relief sought may have existed at the time when the petition was filed in 2019, but with the findings of the Apex Court as mentioned above, the relief stood answered and satisfied. It is concluded that there were only typographical errors in the impugned Order which hereby stand rectified. There is no ground for recall of the impugned Order, as has also been conceded by Ld. Senior Advocate on behalf of the Petitioner. Application disposed off.

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• Service Tax

• 2024 (8) TMI 1214
  CENVAT Credit of Central Excise Duty utilized by the assessee - barred by time limitation - HELD THAT:- It is not in dispute that the respondent Company had availed ineligible CENVAT Credit which was not permissible in terms of the provisions of CENVAT Credit Rules, 2004. It is also not in dispute that the total amount of ineligible CENVAT Credit which includes Service Tax, Education Cess, Secondary Higher Education Cess comes to Rs. 1,30,84,835/-. As per Section 73 of the Service Tax (Finance Act, 1994), where any service tax is not levied or paid, short-levied or short-paid or erroneously refunded, a show-cause notice is required to be served upon the person chargeable with the Service Tax within a period of 18(eighteen) months from the relevant date. However, where any Service Tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter 5 of the Finance Act or of the Rules made thereunder with the intent to evade payment of Service Tax, then the limitation for serving notice upon the person chargeable with the Service Tax is extended upto 5 (five) years from the relevant date. Whether the respondent Company, in its ST Return, had disclosed all the relevant information regarding availment of CENVAT Credit while submitting ST-3 Returns? - HELD THAT:- On looking into the show-cause notice, it is clear that the respondent Company had provided every details regarding availment of CENVAT Credit in the ST-3 Returns. In the show-cause notice, the details provided by the respondent in ST-3 Return, had been taken into consideration by the Commissioner, Central Excise Service Tax. It is also to be noticed that in the said show-cause notice, it is nowhere mentioned that the respondent had misstated any fact with intent to evade the payment of Service Tax - The findings recorded by the Commissioner, Central Excise Service Tax to the effect that there was an element of misstatement and contravention of Service Tax Rules with the intent to evade payment of Service Tax is perverse, as the said finding is not based on any material available before it. The Hon ble Supreme Court in various pronouncements has categorically held that the fact of willful misstatement or suppression should specifically be mentioned in the show-cause notice. In M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I [ 2007 (8) TMI 11 - SUPREME COURT] the Hon ble Supreme Court has defined the expression suppression and it was held that When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. The respondent Company had disclosed all the details about availment of the CENVAT Credit in ST -3 Returns and there is no allegation by the Revenue of willful suppression and misstatement with intent to evade Service Tax in the show-cause notice, there are no illegality in the impugned order dated 04.12.2019 passed by the CESTAT. Hence, the substantial question, so framed in this appeal, is answered in the affirmative. The instant excise appeal stands dismissed.

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• 2024 (8) TMI 1213
  Classification of services - maintenance and repair services or not - warranty income - Liability to pay service tax on the warranty income - Compliance with Accounting Standards (AS) 29 in making provisions for warranty services - time limitation - HELD THAT:- The appellant is providing warranty services to the customers who have purchased the machines directly from HIl Germany. The appellant receives commission for such sale. The appellant has discharged service tax on the commission received and there is no dispute. From the amount received as commission they have made provision in their books of account to incur expenses that is required to provide warranty services. It is very much clear from the SCN itself that the appellant has not received any specific or separate consideration for providing repair and maintenance during the warranty services. The provisions made in their books of account as warranty income has been construed by the department as a consideration received by them for providing repair and maintenance during the warranty services. Even after remand, the department has not been able to establish that any separate consideration is received by appellant over and above the commission income - From the SCN, it can be seen that the demand has been raised on the basis of entries made in the books of account of the appellant - AS 29 provides for making Provisions, Contingent Liabilities, Contingent Assets. As per 10.1 of this Accounting Standards, a provision is a liability which can be measured only by using a substantial degree of estimation. On the provision made in the balance sheet as per Accounting Standards to meet future expenses that may be incurred for carrying out the obligation of warranty services the demand of service tax has been raised. The appellant has made such provision from the commission received from the parent company. They have already discharged service tax on the commission. Demand of service tax cannot be raised on mere book entries assuming such figures as consideration - the appellant has not received any separate consideration for providing maintenance and repair services during the warranty period. The demand therefore cannot sustain and requires to be set aside - the impugned order is set aside - Appeal allowed.

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• 2024 (8) TMI 1212
  Classification of services - Technical Inspection and Certification Services or Business Auxiliary Services - export of services under Export of Service Rules, 2005 or not - suppression of facts - invocation of extended period of limitation - penalty. Whether the services rendered by the appellant fall Technical Inspection and Certification Services or as Business Auxiliary Services ? - HELD THAT:- Admittedly, the services rendered by the appellant are undertaken on behalf of the parent company and therefore, rightly classifiable under Business Auxiliary Service as claimed by the appellant. Moreover, Technical Inspection and Certification Service is complete only when the certificate is issued and in the instant case, admittedly, the certificate is issued by the parent company. Therefore, the question of classifying the same under Technical Inspection and Certification Service is ruled out. Whether irrespective of classification these services can be considered as export of services under Export of Service Rules, 2005 ? - HELD THAT:- As per Export of Service Rules, 2005 under Rule 3 (1)(ii) proviso, it clearly reads as Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India; therefore, in the instant case, a service is partly performed outside India and it has to be treated as performed outside India. Hence, as rightly claimed by the appellant, the services are to be treated as Export of Service. Similarly, in the case of COMMISSIONER OF SERVICE TAX, MUMBAI-III VERSUS M/S. SGS INDIA PVT. LTD. [ 2014 (5) TMI 105 - BOMBAY HIGH COURT] the Hon ble High Court observed the Tribunal takes a view that if services were rendered to such foreign clients located abroad, then, the act can be termed as export of service . Such an act does not invite a Service Tax liability. Whether facts were misrepresented/suppressed so as to invoke extended period and impose penalty under various Sections of the Finance Act, 1994? - HELD THAT:- It is a fact that the appellant has been filing Service Tax returns regularly and has paid Service Tax on various services rendered within India; therefore, there being no mis-representation of facts, the said services being partly undertaken in India and partly abroad, the question of paying tax on export of services did not arise. Therefore, when there is no liability itself, the question of suppression of facts does not arise. The impugned order is set aside and the appeal is allowed.

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• 2024 (8) TMI 1211
  Time and manner of payment of service tax - construction of residential complexes - accrual basis or receipt basis - Service tax on Preferential Location Charges Time and manner of payment of service tax - construction of residential complexes - HELD THAT:- From the impugned order it is evident that appellants are paying service tax on receipt basis and revenue has issued notice and confirmed the demand against the appellant demanding the tax on accrual basis relying on the provisions of Point of Taxation Rules, 2011. Indeed the scheme of levy of taxation of services was changed with the introduction of Point of Taxation Rules, 2011 and the service tax which was till then being paid on the basis of receipt basis was changed to accrual basis. Undisputedly, in India the accounts of the companies are based on the accrual basis and the Financial Statements are also prepared on the accrual basis. There are no merits in the submissions made by the appellant to the extent that Rule 3 of the Point of Taxation Rules shall not apply and service tax should be paid by them on the receipt basis - the impugned order, recognizes the fact that appellant s claim with regards to payment of service tax on the receipt basis and remands the matter back to the original authority for reconciliation of the payment of the service tax made by the appellant on receipt basis with the payment of service tax on accrual basis as per Rule 3. There are no infirmity in the direction given for the reason that Point of Taxation Rules, only determine the time when the service tax becomes due for the payment and do not create additional liability to tax. In case by following the receipt basis or any other basis if the entire tax liability has been discharged then there can be no demand for the same. However in view of specific stipulation as per the said Rules, if the tax is paid later than the due date then there interest has to be paid for the period of delay. Service tax on Preferential Location Charges - HELD THAT:- In case of Maharashtra Chamber Of Housing Industry [ 2012 (1) TMI 98 - BOMBAY HIGH COURT ] Hon ble Bombay High Court has held if no separate charge is levied, the liability to pay service tax does not arise and it is only where a particular service is separately charged for that the liability to pay service tax arises. The fact that the service is rendered in the context of a location, does not make it a tax on land within the meaning of Entry 49 of List II. The tax continues to be a tax on the rendering of a service by the builder to the buyer. There is no vagueness and uncertainty. The legislative prescription is clear. Hence, there is no excessive delegation. - there are no merits in the submission made in respect of Preferential Location Charges. There are no merits in this appeal - appeal dismissed.

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• 2024 (8) TMI 1210
  Jurisdiction of the Department of Revenue to issue SCN - SCN did not establish that the appellant was providing any service to anybody which was leviable to service tax - time limitation - HELD THAT:- The SCN did not establish that the appellant was providing any service. It is also noted that the SCN was sent to some address in Navi Mumbai whereas the appellant is conducting his business at Dombivli, Thane which is a place different than Vashi, Navi Mumbai and, therefore, the appellant neither received the show cause notice nor the order-in-original till such time the appellant made a request to provide the same somewhere in November 2022. The activity carried out by the appellant was sale of fruits which is covered by entry (e) under Section 66D of Finance Act, 1994 which deals with negative list. During the relevant period, Department of Revenue did not have any jurisdiction to issue any show cause notice demanding service tax from the appellant. The impugned order is set aside - appeal allowed.

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• Central Excise

• 2024 (8) TMI 1209
  Condonation of delay of 528 days in filing SLP - HELD THAT:- The reasons assigned for seeking condonation of delay are neither satisfactory nor sufficient in law to be condoned - the applications seeking condonation of delay are dismissed - these Special Leave Petitions also stand dismissed.

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• 2024 (8) TMI 1208
  Requirement to deduct entire excise duty while computing the amount, if value addition is in terms of para 6.5 of the Notification - freight and transit are part of the sale price as appellant s sales are for destination sales or not. Whether the entire excise duty is to be deducted while computing the amount, if value addition is in terms of para 6.5 of the Notification? - HELD THAT:- The issue decided in the case of KANGARO INDUSTRIES LIMITED VERSUS CCE, JAMMU [ 2017 (11) TMI 90 - CESTAT CHANDIGARH] where it was held that when an amount of duty is refunded to the assessee, under Notification No. 1/2002- C.E., the same has to be deducted from the excise duty paid by the appellant while arriving at actual value addition . Whether freight and transit are part of the sale price as appellant s sales are for destination sales? - HELD THAT:- The issue decided in the case of KANGARO INDUSTRIES LIMITED VERSUS CCE, JAMMU [ 2017 (11) TMI 90 - CESTAT CHANDIGARH] where it was held that the freight outward is includible in the sale value. The impugned orders are not sustainable in law therefore, set aside - appeal allowed.

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• 2024 (8) TMI 1207
  Valuation - inclusion of value of clearance of exports made by the appellant for which duty was not paid by availing exemption under N/N. 30/2004-CE dated 09.07.2004, while reversing the credit of inputs taken, as per Rule 6 of CCR 2004 - HELD THAT:- The issue stands covered by the decision in the case of COMMISSIONER OF CENTRAL EXCISE VERSUS DRISH SHOES LTD. [ 2010 (5) TMI 334 - HIMACHAL PRADESH HIGH COURT] , wherein the Hon ble High Court has analyzed the issue as to whether credit is eligible on the duty paid on inputs and input services used in the manufacture of exempted goods which are exported - it was held that even if the exempted goods are exported, credit is eligible. Once the issue does not sustain on merits the question of examining the dispute relating to interest and penalty does not arise. The demands cannot be sustained. The impugned orders are set aside - Appeal allowed.

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• 2024 (8) TMI 1206
  Requirement of pre-deposit under Section 35F of Central Excise Act, 1944 - Invocation of Section 11D of Central Excise Act, 1944 for recovery of amount - It is submitted that the allegation in the SCN is that the appellant collected an amount of Rs.1 crore by raising supplementary invoices by representing the amount as excise duty only for the purpose of passing on the burden of predeposit so as to facilitate M/s.Renold to take the credit. HELD THAT:- When the assessee fails to deposit with the Central Government the duties of excise or any amount collected representing excise duty has to deposit it to the Government. In other words, if an assessee collects excise duty or any amount representing excise duty cannot retain it. For eg:-- if an assessee wrongly collects central excise duty on exempted goods has to deposit the amount collected as duty with the Government. If not paid to Government, Section 11D can be invoked to recover such amount. In the instant case, the appellant has made predeposit of Rs.1 crore and later issued supplementary invoices passing on the burden of the duty paid by them as predeposit to M/s.Renold. The deposit made by them is still with the Government. The appeal in which they had made the predeposit has attained finality wherein the demand, interest and penalties have been entirely set aside on merits as well as on issue of limitation. Consequently, the appellant would be eligible for refund of predeposit of Rs. 1 crore made by them. The appellant has not applied for refund and does not intend to claim refund of the predeposit made. The intention of predeposit is to protect the revenue involved in the appeal and making the recovery of the demand easy and hassle free in case the demand is confirmed in favour of Revenue. The amount is deposited with the Central Government towards the demand impugned in the appeal. In case the demand is confirmed the deposit attains the character of duty / tax and is recovered / adjusted. There is no requirement of further recovery proceedings in regard to predeposit. On the contrary, when the demand is set aside, an assessee can obtain refund of the predeposit. The assessee need not take the course of Section 11B of Central Excise Act, 1944, to obtain refund of predeposit. A mere request letter would be sufficient. The restrictions of time bar and unjust enrichment are not applicable for refund of predeposit making it easy and hassle free. This is because the predeposit is just an amount deposited. It would thus appear that predeposit is of a flexible nature. The demand raised in the SCN is invoking Section 11D and not invoking Rule 14 of Cenvat Credit Rules, 2004. The confirmation of demand under Section 11D cannot be on the allegation that the appellant has facilitated availment of ineligible cenvat credit. Section 11D will be applicable only when the Central Excise duty is collected but not deposited with the Government or any amount representing Central Excise is collected and not deposited with the Government. The impugned order is set aside - The appeal is allowed.

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• 2024 (8) TMI 1205
  Denial of CENVAT credit - Input services - allegation that certain input services do not qualify to be input services under Rule 2 (l) of Cenvat Credit Rules 2004 - Rental charges for EOU - Confirmation of demand Rs.1,50,278/- alleging that certain input services which have been used commonly for DTA unit and EOU - Credit taken without documents - Time Limitation - penalties. Input services - Period prior to 01.04.2011 - HELD THAT:- The period of dispute is prior to 01.04.2011 as well as after. The definition of input services prior to 01.04.2011 has already been reproduced above. The said definition uses the words activities relating to business . The definition was wide enough to include almost all services. The appellant is eligible for the credit availed on services like outdoor catering services, courier service, civil construction services, logistic services, custom house agent services, insurance services availed for the period prior to 01.04.2011. All these services fall in the inclusive part of the definition of input services. It is therefore found that the appellant is eligible for credit for all these services prior to 01.04.2011. Input services - Period after 01.04.2011 - HELD THAT:- After 01.04.2011 the definition excludes services in the nature of outdoor catering services, insurance and civil construction services. The Ld. Counsel for appellant has submitted that they have reversed the credit for the period after 01.04.2011 with regard to these services. It is also submitted that the appellant is not contesting the issue on eligibility of credit on services like outdoor catering, civil construction, insurance (hospital) for the period after 01.04.2011. The demand confirmed for the period after 01.04.2011 on this issue is upheld. Write off of obsolete items is set aside for the period prior to 01.03.2011 as well as for period after 01.03.2011 - HELD THAT:- The demand in respect of the issue on write off of obsolete items is set aside for the period prior to 01.03.2011. However, the demand for the period after 01.03.2011 is sustained. The appellant has reversed the credit of Rs.27,36,474/- being after 01.03.2011. They are liable to pay duty after 01.03.2011 only. The demand confirmed on this issue is Rs.72,36,340/-. The amount confirmed in excess of Rs.27,36,474/- along with interest is set aside. The penalty on this issue is set aside. Rental charges for EOU - HELD THAT:- The amount has been reversed by the DTA unit and has been re-availed by the EOU. The appellant has submitted that they are not contesting this issue. For this reason, the demand in respect of rental charges is upheld. Confirmation of demand Rs.1,50,278/- alleging that certain input services which have been used commonly for DTA unit and EOU - HELD THAT:- Applying the ratio laid in the decision in the case of Dashion Ltd., (supra) the demand cannot sustain - the demand cannot sustain and requires to be set aside. Credit taken without documents - HELD THAT:- From the facts, it is seen that this allegation has been raised when the credit lying with debonded EOU was transferred to DTA unit - The department is of the view that since the unit had availed the credit as EOU unit, even though it has been debonded and become a DTA unit, the credit cannot be transferred. The same issue has been analyzed and decided by the Tribunal in the case of M/S. WIPRO LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2023 (6) TMI 237 - CESTAT CHENNAI ], wherein it was held that the credit carried forward to the DTA unit after de-bonding cannot be denied - the denial of credit alleging that the transferred credit has been availed without documents cannot sustain and require to be set aside. It also needs to be noted that part of this demand relates to credit availed in respect of inputs at the time of de-bonding. The adjudicating authority as well as the Tribunal denied the eligibility of credit on inputs availed by EOU consequent to de-bonding. The appellant preferred an appeal before the Hon ble Jurisdictional High Court and the issue was held in favour of the appellant. Thus, the issue as to whether credit can be availed on inputs at the time of de-bonding stands settled in favor of appellant. The Hon ble High Court in the appellant s own case M/S. AVO CARBON (INDIA) PVT. LTD. M/S. STANADYNE AMALGAMATIONS (P) LTD VERSUS CCE, CHENNAI-II [ 2017 (4) TMI 428 - CESTAT CHENNAI ], Chennai considered the issue and held as under to conclude that the credit on inputs is eligible at the time of debonding. Time Limitation - penalties - HELD THAT:- Show Cause Notice and Statement of demand are issued for the period 2009-10 to 2012-13. Part of the demand falls within the extended period. In the present case, the issues are mostly interpretational in nature - The issue with respect to credit on various input services is also interpretational in nature, as an amendment was introduced in the definition on inputs services w.e.f. 01.04.2011. Further, there is no positive act of suppression established against the appellant. Show cause notice has been issued based on the objections raised by the audit. As and when pointed out, the appellant has reversed the credit in respect of the issue of write off as well as ineligible input services post 01.04.2011 - there are no grounds for invoking the extended period. The issue of limitation is answered in favour of the assessee and against the Revenue. For the same reasons, the penalties imposed are also set aside. Appeal allowed in part.

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• 2024 (8) TMI 1204
  CENVAT Credit - invoices issued before the introduction of time limit for credit availment - HELD THAT:- Admittedly for two invoices issued on 28.06.2014 and 01.07.2014 credit of Rs.13,59,600/- each was taken by the Appellant, as revealed from the show-cause notice. These invoices would go to show that by the time N/N. 21/2014-CE (NT) was brought into force on 01.09.2014, the said period of six months was not over but because of the fact that during those period no specific time limit was prescribed to avail the credit, denial of the same credit for the invoice issued prior to the effective date would naturally be in violation of the statutory provision contained in Section 38A of the Central Excise Act, 1944. To bring more clarity to the issue the same can be explained by placing an example that instead of invoice being issued on 01.07.2014, had it been issued on 07.01.2014, period of six months would have expired by the time N/N. 21/2014-CE (NT) was brought into force on 01.09.2014. It is apparently for this reason that consistent decision is passed by this Tribunal that the same N/N. 21/2014-CE (NT) is applicable to the invoices issued post N/N. 21/2014-CE (NT) - the Appellant having availed credit on these two invoices on 31.01.2015, since within six months of 01.09.2014, is entitled to the credits availed by it. The order passed by the Commissioner of CGST Central Excise (Appeals), Nashik is hereby set aside - Appeal allowed.

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• 2024 (8) TMI 1203
  100% EOU - refund of accumulated CENVAT Credit - refund claim rejected because the Respondent has not complied with the conditions prescribed in Notification No. 5/2006-CE(NT) dated 14.03.2006 issued under Rule 5 of Cenvat Credit Rules, 2004 - Applicability of National Litigation Policy - HELD THAT:- As per the submission of the learned Counsel for the Respondent, the amount of refund involved in the present appeal is totally amounting to Rs.48,38,722/- is below the monetary limit as prescribed under instructions dated 22.08.2019 issued by the CBIC; whereas the submission of the learned AR for the Revenue is that the Department has challenged the entire impugned order and therefore, the case is not covered under National Litigation Policy. After considering the submissions of both the parties, it is decided to decide the present appeal against the impugned order in its entirety without going into the question of National Litigation Policy. The terms of input service as defined under Rule 2(l) of the Cenvat Credit Rules, 2004 uses terms means and includes in the definition. First leg of the definition i.e. the means portion would cover every service used directly or indirectly, in or in relation to manufacture of final products and clearance of final products from the place of removal and the inclusive part is illustrative and certainly is not exhaustive. Each of the input service involved in the present case has been held to be input service in view of the various decisions relied upon by the Respondent - the eligibility of Cenvat Credit cannot be questioned in refund proceedings in view of the decision in the case of COMMISSIONER, SERVICE TAX COMMISSIONERATE VERSUS M/S HCL COMNET SYSTEM SERVICES LTD., NOIDA [ 2017 (12) TMI 1661 - ALLAHABAD HIGH COURT] . As regards the refund in respect of the invoices addressed to the corporate office at Gurgaon instead of manufacturing premises, it is found that it is only a technical lapse and substantive benefits cannot be denied for procedural irregularities. There is no infirmity in the impugned, the same is upheld - appeal of Revenue dismissed.

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• 2024 (8) TMI 1202
  Denial of CENVAT credit under Rule 14 of Cenvat Credit Rules, 2004 with proposal to impose penalties and recover interest - denial on the ground that input service invoices did not have registration number of service provider - HELD THAT:- In respect of cenvat credit of Rs.26,445/- there are allegations that registration number of service provider is not available. It is noted that there are no allegations that the services provided through the said invoices were not received by the appellant nor there are allegations that the said services did not suffer service tax. It is, therefore, held that the appellant was eligible for cenvat credit of Rs.26,445/-. It is further found that cenvat credit of Rs.60,776/- was denied to the appellant on the ground that the invoices were having the address of office and not that of factory - there are plethora of judgments of this Tribunal and higher courts that on such ground, cenvat credit cannot be denied so long as there are no allegations that the services or the goods were not received in the factory and the goods and services did not suffer service tax or central excise duty, as the case may be. In the present case, I find that there are no allegations that the goods and services did not suffer tax or duty. Therefore, the appellant was eligible to avail cenvat credit of Rs.60,776/-. CENVAT credit of Rs.4,68,680/- was availed of service tax paid on rent paid by the appellant after the year 2001 when they made application for inclusion of additional premises into the approved plan of the factory - the appellant was eligible for cenvat credit of Rs.4,68,680/-. It is further noted that the disputed cenvat credit of Rs.1,24,044/- also involved service tax or central excise duty on MS angles and electrodes. It is noted that learned AR has relied on ruling by Hon ble Bombay High Court in the case of MANIKGARH CEMENT VERSUS COMMISSIONER OF CUS. C. EX., NAGPUR [ 2017 (7) TMI 1117 - BOMBAY HIGH COURT] wherein in the year 2018, it was held that central excise duty paid on welding electrodes used for repair and maintenance of plant and machinery is not admissible for availment of cenvat credit - the appellant was eligible for cenvat credit of Rs.1,24,044/-. Thus, the appellant was eligible for cenvat credit of Rs.26,445/-, Rs.60,776/-, Rs.4,68,680/- and Rs.1,24,044/- - appeal allowed.

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• CST, VAT & Sales Tax

• 2024 (8) TMI 1201
  Recovery of dues - priority of dues - Petitioner-Bank s registered security interest with CERSAI has priority over the dues claimed by the GST and Sales Tax Departments or not - HELD THAT:- In the present case, the order of attachment issued by the Sales Tax Department is dated 19th April 2022. It is thereafter that steps have been taken to attach the immovable property. It is on this basis that the respondents seek to rely upon the provisions of Section 37 of MVAT Act. The registration of the Bank Security Interest with CERSAI is dated 17th March 2017 which is much prior to the order of attachment. In view of the clear position of law under Section 26-E of the SARFAESI Act and further the ratio as laid down by the Full Bench of this Court in Jalgaon Janta Sahakari Bank Ltd. and another [ 2022 (9) TMI 163 - BOMBAY HIGH COURT] and the judgment of the Division Bench of this Court in Indian Bank thr. Chief Manager [ 2024 (7) TMI 1309 - BOMBAY HIGH COURT] , there are no hesitation to hold that the claim of secured creditor that is the Petitioner Bank, will have preference over the claim of Respondents (GST Department and the Sales Tax Department). Petition allowed.

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• Indian Laws

• 2024 (8) TMI 1200
  Criminal breach of trust - Quashing of summoning order - offence punishable under Sections 406, 420 120B respectively of the Indian Penal Code, 1860 - Vicarious liability of the office bearers - non-application of mind - HELD THAT:- The impugned order passed by the High Court is a fine specimen of total nonapplication of mind. Although the complaint was filed for the offence punishable under Sections 406, 420 and 120B respectively of the IPC yet the Additional Chief Judicial Magistrate thought fit to take cognizance and issue process only for the offence of criminal breach of trust as defined under Section 405 of the IPC and made punishable under Section 406 of the IPC - even if the entire case of the complainant is accepted as true no offence worth the name is disclosed. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the CrPC, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the appellant Nos. 2 and 3 respectively herein who are none other than office bearers of the appellant No. 1 Company. When the appellant No. 1 is the Company and it is alleged that the company has committed the offence then there is no question of attributing vicarious liability to the office bearers of the Company so far as the offence of cheating or criminal breach of trust is concerned - Vicarious liability of the office bearers would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well - The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously. There is no manner of any doubt whatsoever that in case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust. Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it. The magistrate must carefully apply its mind to ascertain whether the allegations, as stated, genuinely constitute these specific offences. In contrast, when a case arises from a FIR, this responsibility is of the police to thoroughly ascertain whether the allegations levelled by the informant indeed falls under the category of cheating or criminal breach of trust. Unfortunately, it has become a common practice for the police officers to routinely and mechanically proceed to register an FIR for both the offences i.e. criminal breach of trust and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind. The impugned order passed by the High Court is set aside so also the order passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar taking cognizance upon the complaint - Appeal allowed.

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