TMI Tax Updates - e-Newsletter
August 8, 2023

Case Laws in this Newsletter:

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

Articles

1. Impact of restricting imports on Laptops, Tablets, PCs, Servers, etc

   By: Vivek Jalan

2. RECENT NOTIFICATIONS ISSUED UNDER GST LAWS

   By: DR.MARIAPPAN GOVINDARAJAN

3. No service tax on ancillary services for sale of goods when included in the full invoice value

   By: Bimal jain

News

1. Webinar on PM GATISHAKTI NMP with Central Training Institutes (CTIs) and State Administrative Training Institutes (ATIs)

2. Secretary, Department of Financial Services (DFS) and the Chief Secretary, Tamil Nadu, jointly hold review meeting to assess the progress under PM SVANidhi Scheme along with other senior Government Officials and Bank Officials of Tamil Nadu in Chennai, Tamil Nadu

Notifications

GST - States

1. 42/GST-2 - dated 7-8-2023 - Haryana SGST

Amendment of Notification no. 14/GST-2, dated 24.04.2023 under the HGST Act, 2017

2. 41/GST-2 - dated 7-8-2023 - Haryana SGST

Amendment of Notification no. 13/GST-2, dated 24.04.2023 under the HGST Act, 2017

3. 40/GST-2 - dated 7-8-2023 - Haryana SGST

Amendment of Notification no. 12/GST-2, dated 24.04.2023 under the HGST Act, 2017

4. 39/GST-2 - dated 7-8-2023 - Haryana SGST

Amendment of Notification no. 11/GST-2, dated 24.04.2023 under the HGST Act, 2017

5. 38/GST-2 - dated 7-8-2023 - Haryana SGST

Amendment of Notification no. 03/ST-2, dated 09.01.2018 under the HGST Act, 2017

6. 24/2023-State Tax - dated 3-8-2023 - Maharashtra SGST

Seeks to extend amnesty scheme for deemed withdrawal of assessment orders issued under Section 62.

7. 23/2023-State Tax - dated 3-8-2023 - Maharashtra SGST

Seeks to extend time limit for application for revocation of cancellation of registration.

8. 22/2023-State Tax - dated 3-8-2023 - Maharashtra SGST

Seeks to extend amnesty for GSTR-4 non-filers.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/AFD/AFD-POD-2/P/CIR/2023/138 - dated 7-8-2023

Transactions in Corporate Bonds through Request for Quote (RFQ) platform by FPIs

Highlights / Catch Notes

GST

• Court Grants Bail in Tax Evasion Case Due to Family Ties, Clean Record, and Co-Accused's Bail Status.

  Case-Laws - HC : Seeking grant of bail - Evasion of tax - Being a family man having responsibilities, clean antecedents and fixed abode, it is unlikely that he poses any flight risk and/or will flee from the trial proceedings - Co-accused of the petitioner has already been granted bail by this Court. - Bail granted - HC
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Income Tax

• ITAT Upholds Deletion of Additions in Anonymous Donation Case; Assessee's Records Sufficient u/s 115-BBC(3.

  Case-Laws - HC : Revision u/s 263 - ‘anonymous donation’ receipts - the assessee had furnished record of the identities indicating name and address of persons making the contributions. Revenue has not been able to demonstrate further requirement by prescribed particulars, as mentioned under sub-section (3) in section 115-BBC - Order of ITAT deleting the additions sustained - HC
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• Exploring Taxability of Foreign Income: Royalty Receipts Under India-Switzerland DTAA, Article 12, Similar to India-Germany DTAA.

  Case-Laws - AT : Income accrued in India - Taxability of foreign income in India - Royalty receipt - Only difference is that it relates to royalty under India- Switzerland DTAA, and Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and India-Switzerland are similar. - AT
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• AWS Service Fees Not Royalty Under Article 12(3) of India-USA DTAA; Not Taxable in India.

  Case-Laws - AT : Income deemed to accrue or arise in India - Taxability of “cloud service fee” received by the assessee from customers in India - the payments received by the assessee from Indian Customer(s) from rendering AWS Services do not qualify as royalty under Article 12(3) of the India-USA DTAA and hence are not taxable in India. - AT
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• Unrecorded Cash from Flat Sales Deemed Unexplained Income u/ss 56 and 69A of Income Tax Act.

  Case-Laws - AT : Income from other sources u/s 56 or unexplained cash receipts u/s 69A - when the amounts received in cash against the same transaction of sale of flats which have not been recorded in the books of account of the assessee at the time of search and seizure operation and subsequently recorded in the books as advance from customers is nothing but an eye wash to supplement the explanation of the assessee regarding the cash receipts - AT
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• Reassessment Order u/s 147 Invalid Due to Section 153A(1) Proviso; Notice u/s 148 Annulled.

  Case-Laws - AT : Validity of the assessment order passed u/s 147 r.w.s. 143(3) - post search assessment - in the case on hand the pending reassessment proceedings u/s 147 got abated by virtue of 2nd proviso to section 153A(1) - once the reassessment proceedings initiated vide notice u/s 148 stood abated by virtue of search and seizure action u/s 132(1) carried out then the reassessment order passed by the AO u/s 147 r.w.s. 143(3) is illegal and void-ab-initio and liable to be quashed. - AT
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• Understanding Business Expenses: Pre-Operative vs. Revenue Expenditures in Startups Explained.

  Case-Laws - AT : Allowable business expenses - There is difference between commencement of the business and setting off of the business. All the expenses incurred pre-commencement are to be treated as pre-operative expenses and the expenses incurred which do not form the part of the “work in progress” (WIP) like office expenses, salaries, advertising, brokerage and commission which are incurred for running of the business operations and to bring revenues to the company are to be treated as revenue expenditure. - AT
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• Customs Data and Related Party Transactions: Challenges in Determining Uncontrolled Transaction Prices Without Full Contract Details.

  Case-Laws - AT : TP adjustment - The issue of related party transactions in customs data would equally apply to any other public data as well. In the absence of complete details of the differences arising out of contract terms and product quality, the customs data being Govt, notified would provide a reasonable basis for arriving at the uncontrolled transaction price. - AT
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IBC

• Insolvency application u/s 9 rejected; Supreme Court upholds Rs. 1 crore default threshold per Section 4 proviso.

  Case-Laws - SC : Application filed under Section 9 of the IBC, 2016 rejected - rejection on the ground that it does not fulfil the threshold as prescribed under Section 4 proviso where minimum default amount has been increased to Rs. 1 Crores - Apex court upheld the order of rejection of application - SC
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Central Excise

• Electrode Carbon Paste Qualifies for CENVAT Credit as Manufacturing Input, Confirms Decision Under Central Excise Regulations.

  Case-Laws - AT : Reversal of CENVAT Credit - input or not - Electrode Carbon Paste is used inside the furnace - the appellant has correctly taken Cenvat credit on Electrode Carbon Paste, which gets consumed during the course of manufacturing process. - AT
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Case Laws:

• GST

• 2023 (8) TMI 341
  Seeking grant of bail - Evasion of tax - obtaining GST number in the name of M/s Vinita Enterprises which was not found existing at the stated address - HELD THAT:- Petitioner is being kept in preventive custody merely on an unfounded suspicion that if he is let out, he may either tamper with evidence and/or influence witnesses. There is no probability of tampering with the evidence as the same has already been seized by the investigating agency - Offence allegedly committed by petitioner is of non-violent nature and in that sense his release on bail is not a threat to society at large by committing any violent crime. Petitioner is not involved in any other case. It is stated that petitioner is a 40-year old person having wife and one minor daughter to look after, who are totally dependent on him as he is the only bread-winner and on his absence, they are living in sheer penury. Being a family man having responsibilities, clean antecedents and fixed abode, it is unlikely that he poses any flight risk and/or will flee from the trial proceedings - Co-accused of the petitioner has already been granted bail by this Court. Considering the overall scenario and without commenting on the merits of the case, the instant petition is allowed.

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• 2023 (8) TMI 340
  Recovery of amount wrongly transitted as input tax credit lying un-utilised under the VAT return - interest under Section 50(3) of the TNGST Act, 2017 read with Rule 121 of the TNGST Rules - HELD THAT:- The Hon ble Supreme Court has meanwhile taken note of the difficulties faced by the assessee and the mistakes committed by them, while transitting the input tax credit lying un-utilised on the cut off date on 30.06.2017. The Hon ble Supreme Court in its decision in the case of Union of India Vs. Filco Tade Centre Pvt Ltd , SLP(C).No.32709-32710 of 2018, order dated 22.07.2022 [ 2022 (7) TMI 1232 - SC ORDER] and 02.09.2022 [ 2022 (9) TMI 514 - SC ORDER] , has directed the respondents to allow the transitional credit. Pursuant to the aforesaid order of the Hon ble supreme Court, the respondent has also regularised the credit worngly transitioned as a un-utilised VAT lying in the petitioner s account. However, the respondent has not set aside the interest that was imposed on the petitioner under Section 18(3) of the TNGST Act, 2017 vide the impugned order. The impugned order stands recalled - Petition allowed.

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• 2023 (8) TMI 339
  Violation of principles of natural justice - without any reason the order has been passed without notice of petitioner or without hearing of petitioner - HELD THAT:- Pursuant to order dated 19.06.2023, the respondent has filed personal affidavit of the concerned respondent. The same is taken on record. In para 5 of the affidavit, it is fairly admitted that the petitioner has not been provided notice before taking impugned action. At the same time, the petitioner in respect of grievance, simultaneously he had approached the concerned statutory authority and it is pending consideration. In fact, it is reliably learnt that blacklisting order is stated to have been stayed by the statutory authority. The present petition do not survive for consideration - Petition disposed off.

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• 2023 (8) TMI 338
  Profiteering - project Bhagwati Eminence - benefit of ITC was not passed on to the recipients by way of commensurate reduction in the prices or not - contravention of section 171 of CGST Act - HELD THAT:- This Commission has carefully considered the Report of the DGAP and the other material placed on record and finds that the DGAP, in pursuance to the Order No. 68/2022 dated 02.09.2022, has investigated the matter pertaining to the other projects executed by the Respondent in terms of Section 171 of the CGST Act, 2017 and the Rules made thereunder, so as to determine whether there had been any profiteering by the Respondent. Thereafter the DGAP has submitted that no other project has been executed by the Respondent except the project Bhagwati Eminence , profiteering in respect of which has already been determined by the NAA in BHAGWATI INFRA, [ 2022 (9) TMI 726 - NATIONAL ANTI-PROFITEERING AUTHORITY] . The DGAP has furnished his Report dated 23.02.2023 to NAA, stating that no other projects is being executed by the Respondent and hence Respondent was not liable to pass on the benefit of Input Tax Credit and Section 171(1) of the Central Goods and Services Tax Act, 2017 requiring that any reduction in the rate of tax on any supply of goods or services or the benefit of the input tax credit shall be passed on to the recipient by way of commensurate reduction in prices , is not applicable in the present case. This Commission finds that the provisions of Section 171 (1) of the CGST Act, 2017 are not attracted in the case of other projects of the Respondent and therefore the present proceedings are hereby dropped.

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• Income Tax

• 2023 (8) TMI 337
  Revision u/s 263 - anonymous donation receipts - as given in section 2(24)(iia) and submits, sub-section (3) in section 115-BBC requires the assessee to maintain record of identity indicating name and address of the donors and such other particulars as may be prescribed - HELD THAT:- We did not find a dispute regarding disclosure of identity of donors, their addresses and the amount of donations they had made to the assessee. This fact is sufficient for compliance of requirement u/s 115-BBC(3), in claiming exemption of the donations from being chargeable to income tax. Facts found by the Commissioner and the Tribunal clearly show that the assessee had furnished record of the identities indicating name and address of persons making the contributions. Revenue has not been able to demonstrate further requirement by prescribed particulars, as mentioned under sub-section (3) in section 115-BBC. As such, we answer the question in the negative and in favour of assessee.

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• 2023 (8) TMI 336
  Penalty u/s 271C - demand notice issued u/s 156 - petitioner treated as an assessee-in-default u/s 201/201(1A) for its failure to deduct withholding tax qua External Development Charges (EDC) paid to the Haryana Urban Development Authority [ HUDA ] - HELD THAT:- As relying on case DLF Homes Panchkula Pvt. Ltd. [ 2022 (12) TMI 1426 - DELHI HIGH COURT] the same result should follow vis-a-vis the penalty order and the demand notice assailed in the instant writ petition. Accordingly, the aforementioned penalty order and demand notice are quashed.

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• 2023 (8) TMI 335
  Addition u/s 68 - capital gain declared by assessee as non-genuine - question to genuineness of the transactions - HELD THAT:- The shares were purchased and sold through recognized stock-exchange and not off-market. Next we find that the purchase price was paid through A/c payee cheques and the sale consideration was also received through A/c payee cheques; there is no payment or receipt in cash. Then, we find that immediately after purchase of shares, the assessee got those shares credited in De-mat A/c (there was some time-gap of 11 months which is suitably explained by Ld. AR). Notably, the assessee was holding share in De-mat A/c for as many as 10 years from purchase till last sale and this single factor is more than enough to dislodge any allegation of revenue on assessee s transactions. Then, we also find that the assessee is having investment in other securities as well and it is not the case that the assessee has made a stray transaction of shares of KCLIPL only. Thus, there is a complete series of factors and evidences demonstrating the genuineness of assessee s transactions and not a single of them has been disputed by revenue. Thus capital gain declared by assessee must be accepted as genuine and we do so. Accordingly, we delete the additions made by revenue-authorities. The assessee succeeds in these appeals.

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• 2023 (8) TMI 334
  Correct head of income - income from rent - business income or House property - assessee company was allotted land by Noida Authority on 90 years lease of the development of amusement park. The permissible use is on area of 85% under theme amusement and entertainment park and area of 15% under commercial facilities supportive of park - Application of principle of res judicata - It is the case of assessee that for A.Y. 2014-15 and 2015-16 also with rental income under head income from house property has been accepted HELD THAT:- Appreciating the matter on record it can be observed that Ld. DR could not dispute the fact that in the preceding and subsequent years the assessee s claim of income from rent has been accepted and same has been foundation of relief given by Ld. CIT(A). Thus, the Bench is of considered opinion that though the principle of res judicata does not apply to the income tax proceedings still when the revenue has accepted the head of income in the preceding and subsequent year s assessment, then attributing income on a different head in a stray manner cannot be made. The reliance of ld. CIT(A) on the judgment of Hon ble Supreme Court in the case of Raj Dadarkar Associates Vs. ACIT [ 2017 (5) TMI 586 - SUPREME COURT] cannot be interfered. Consequently, the grounds raised by the Revenue have no substance. The appeal of Revenue is dismissed.

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• 2023 (8) TMI 333
  Income accrued in India - Taxability of foreign income in India - Royalty receipt - Fees for Technical Services on accrual basis - differential amount of actual receipt and amount as accrued - determination of actual receipt in accordance with the India- Switzerland Tax Treaty - HELD THAT:- The assessee is a NRI and has received royalty from ABB Technology Ltd. of Rs. 184,07,46,730 which has been offered to tax @ 10% and the same is reflected in Form 26AS. The assessee is offering income since AY 2011-12 on cash basis. From the Form 3CEB the AO found a difference - AR assessee submitted this amount has not been received by the assessee. The facts of the above decision on fees for technical services in M/s. ABB AG ( 2020 (12) TMI 74 - ITAT BANGALORE] relating to India-Germany DTAA are similar to present case as held that FTS is taxable only in the year of receipt as per the provisions of DTAA. Accordingly, we are of the view that the tax authorities are not justified in assessing the impugned income on accrual basis. Only difference is that it relates to royalty under India- Switzerland DTAA, and Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and India-Switzerland are similar. Therefore, respectfully following the above judgment, we allow the appeal of the assessee.

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• 2023 (8) TMI 332
  Penalty u/s. 272A(2)(k) - delay in filing quarterly statements of TDS - ssessee deposited the TDS to the concerned Central Government account in time - HELD THAT:- We note that there was no delay in deposit of TDS amounts in the concerned account of Central Government and it is only delay in furnishing of TDS statement which is technical in nature, no penalty is warranted in terms of the finding of this Tribunal in the case of Maharashtra Jeevan Pradhikaran Works Division [ 2021 (5) TMI 584 - ITAT PUNE ] as held that mere non-filing of TDS statement being merely a technical default no penalty is warranted. Decided in favour of assessee. Thus, the order of CIT(A) is not justified and grounds raised by the assessee are allowed.

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• 2023 (8) TMI 331
  Income deemed to accrue or arise in India - Taxability of cloud service fee received by the assessee from customers in India - payments received by the appellant from Indian customers for standard and automated services - royalty and fee for technical/included services ( FTS/FIS ) - India-USA DTAA - assessee argued that appellant merely provides standard and automated cloud computing services to its customers which do not make available technical knowledge, know how, skill, experience, etc., to the service recipient so as to fall within the ambit of FTS/ FIS under Article 12(4) of the Tax Treaty - HELD THAT:- It is seen that the issue of taxability of receipts from cloud services is covered by the order of the Delhi Tribunal in the case of Microsoft Regional Sales Pte. Ltd. [ 2022 (12) TMI 864 - ITAT DELHI ], Urban Ladder Home Decor Solutions Pvt. Ltd., [ 2021 (8) TMI 927 - ITAT BANGALORE ] MOL Corporation [ 2023 (2) TMI 1177 - DELHI HIGH COURT ] and Microsoft Regional Sales Pte. Ltd. [ 2022 (5) TMI 246 - ITAT DELHI ] wherein held that consideration for cloud computing services is not chargeable to tax in India. We have also considered various decisions relied upon by the Ld. DR and in our considered view these decisions do not support the Revenue s contentions being distinguishable on facts than that of the assessee. Thus we hold that the payments received by the assessee from Indian Customer(s) from rendering AWS Services do not qualify as royalty under Article 12(3) of the India-USA DTAA and hence are not taxable in India. Decided in favour of assessee. Taxability of AWS Services provided by the assessee - AR submitted that in terms of Article 12(4)(b) of the India-USA DTAA, payment made towards technical or consultancy services constitutes fees for technical services only if such services make available technical knowledge, experience, skill, know-how or processes, etc. - HELD THAT:- AWS services provided by the assessee are standardised services that do not provide any technical services to its customers nor satisfy the make available test as the customer will not be able to make use of the technical knowledge, skill, process etc. used by the assessee in providing cloud services by itself in its business or for its own benefit without recourse to the assessee in future. We are in agreement with the submission of the Ld. AR that the impugned issue also stands covered by the decision of the Pune Tribunal which was rendered in the context of similar cloud services in the case of M/s Sunguard Availability Services LLP [ 2022 (11) TMI 1313 - ITAT PUNE ] and Rackspace, US Inc. [ 2020 (2) TMI 63 - ITAT MUMBA ] wherein it has been held that rendering cloud computing service cannot be held to be liable to tax in India as FTS/FIS. We are of the view that the impugned receipts of the assessee for AWS services/cloud computing services rendered to the customers in India do not fall within the purview of FIS under Article 12(4)(b) of the India-USA DTAA as the same do not satisfy the make available clause envisaged therein. Accordingly, we allow ground raised by the assessee in both the AYs.

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• 2023 (8) TMI 330
  Income from other sources u/s 56 or unexplained cash receipts u/s 69A - cash seized during the search and seizure operation - assessee stated that these receipts have been received on account of advance received from the customers and as no sale has been booked - AO disagreed with assessee and made addition observing that it is only due to search that these cash receipts have been noticed and found that the same have not been recorded in the books of account, thus made addition u/s 69A - CIT(A) concluded that the income from regular business transaction has to be taxed under the business head income from unaccounted/ undisclosed business transactions are not mandated by the law and are to be treated differently and taxed under the head income from other sources. HELD THAT:- Undisputedly the assessee entered the amounts of cash receipts in the books of account as advance from customers but in fact these amounts were on money receipt in cash against the sale of flats and never intended to be accounted for by the assessee in its books of account. Therefore, when the transactions of sale of flats have attained finality then it is obvious that all the amounts receipt by the assessee and recorded in the books of account of the assessee as advance from customers has to be set off and included in the turnover of the assessee. At the same time when the amounts received in cash against the same transaction of sale of flats which have not been recorded in the books of account of the assessee at the time of search and seizure operation and subsequently recorded in the books as advance from customers is nothing but an eye wash to supplement the explanation of the assessee regarding the cash receipts. We are unable to agree with the contention and submission of the assessee placed before the authorities below and at the same time we are inclined to agree with the findings recorded by the CIT(A) as noted above, while confirming the addition are correct but his findings towards change of charging section from 69A to 56 are not correct. Therefore we are inclined to hold that the addition made by the AO deserves to be confirmed in the hands of the assessee u/s 69A of the Act. Unexplained expenditure u/s. 69C - HELD THAT:- The tax authorities should have examined and verified the contention of the assessee that the source is cash receipt against the bills and the same was again utilized for incurring expenditure on commission and payment by way of examination of books of account and relevant bank accounts of assessee as to how the cash was generated and Revenue-deposited for making further payments and incurring expenditure. CIT(A) is directed to adjudicate the issue afresh after allowing due opportunity of hearing to the assessee and without being influenced with the earlier first appellate order. Accordingly, ground no. 3 of revenue is allowed for statistical purposes. Inclusion of bogus purchases and to add the same to work in progress - bogus claim unearth and found during the course of search and seizure operation and post search enquiry and outcome of survey operation on the related parties which were found to be in the business of providing bogus purchases entries and with whom the assessee undertaken purchases and added the same to the work in progress - HELD THAT:- Assessee is not deserve to be allowed to show an include bogus purchases and to add the same to work in progress with an intention to increase the cost of construction and consequently reducing the profit therefrom. AO has made detailed enquiry and thereafter recorded a clear findings, as has been reproduced hereinabove then the ld. CIT(A) cannot be held as correct and justified in dismissing the action of the AO which reduced work in progress shown by the assessee in the books of accounts. The bogus purchases cannot be allowed to be continued and to be shown as part of work in progress till the project is completed and sale is affected. When the Assessing Officer has found that the purchases are bogus and work in progress has been enhanced with the aid of bogus purchases then the same has to be reduced instantly in the year in which these were shown and recorded in the books of accounts and particularly in the work in progress account. Action of the Assessing Officer in reducing work in progress by the amount of work in progress is restored. Accordingly ground no. 4 of revenue is allowed.

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• 2023 (8) TMI 329
  Validity of the assessment order passed u/s 147 r.w.s. 143(3) - post search assessment - reassessment proceedings stood abated by virtue of search and seizure action u/s 132(1) - scope and ambit of assessment proceedings u/s 153A - HELD THAT:- There will be only one assessment order in respect of each of the six assessment years in which both disclosed and undisclosed income would be brought to tax . Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment u/s 153A merges into one and consequently only one assessment shall be made. Therefore, a mandate is cast upon the assessing officer as per the first proviso to section 153A(1) that the assessing officer shall assess or reassess the total income in respect of each assessment years falling within such six assessment years and the assessment or reassessment as the case may be relating to the assessment years pending on the date of search u/s 132 or requisition u/s 132A shall abate and consequently those pending assessment proceedings gets merged with the proceedings u/s 153A of the Act. Sub- section (2) of section 153A of the Act provides that if any proceedings or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal proceedings then the assessment or reassessment relating to the assessment years which is abated under 2 nd proviso would stand revived. Therefore, in the case on hand the pending reassessment proceedings u/s 147 of the Act got abated by virtue of 2 nd proviso to section 153A(1) and scope and ambit of assessment proceedings u/s 153A would cover the assessment as could have been passed u/s 147 of the Act because the proceedings u/s 147 will merge with the scope and ambit of the assessment u/s 153A. Thus, the jurisdiction of the AO to make the original assessment and assessment u/s 153A of the Act, so far as pending assessment are concerned, merges into one and consequently only one assessment shall be made on the basis of the finding of the search and any other material existing or brought on record of the AO. Thus, once the reassessment proceedings initiated vide notice u/s 148 stood abated by virtue of search and seizure action u/s 132(1) carried out then the reassessment order passed by the AO u/s 147 r.w.s. 143(3) is illegal and void-ab-initio and liable to be quashed.

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• 2023 (8) TMI 328
  Disallowance u/s 14A r.w. Rule-8D - Mandation to record satisfaction - HELD THAT:- Assessee furnished the complete details of the availability of the own funds in its kitty to prove the fact that investments were made only out of the own funds of the assessee and not borrowed funds. The assessee had also given breakup of suo moto disallowance of expenses made by it before the AO. We find that the AO had completely disregarded the entire contentions of the assessee and not even bothered to record his objective satisfaction with cogent reasons having regard to the accounts of the assessee as to why the suo moto disallowance made by the assessee is incorrect. This is the mandate provided in provisions of section 14A(2) of the Act r.w. Rule 8D(1) of the Rules. Without recording such objective satisfaction for rejection of the claim of the assessee, the disallowance made by the Ld. AO u/s 14A of the Act would have no legs to stand in the eyes of law. Our view is further fortified by the decision of Maxopp Investment Ltd. [ 2018 (3) TMI 805 - SUPREME COURT] and, hence, we direct the Ld. AO to delete the disallowance made u/s 14A in the assessment. Accordingly, grounds raised by the assessee are allowed.

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• 2023 (8) TMI 327
  Exemption u/s. 11 - assessment of trust - A.O was of the view that as the gross receipts of the assessee society during the year under consideration were surplus, thus ineligible for deduction u/s. 10(23C)(iiiad) - as per CIT(A) A.O was of the view that as the assessee society was not registered either u/s. 12A or u/s. 10(23C)(vi) therefore, it was not eligible for claiming exemption of the surplus amount - HELD THAT:- Now when the CBDT Circular No. 01/2015 (supra) was brought to the notice of the CIT(Exemption) who is vested with powers which are co-terminus with that of the A.O, the latter, however, instead of acting as per the mandate of law had declined the assessee s claim for exemption u/s. 11 of the Act for the reason that there was no evidence to prove that any assessment for an earlier assessment year was pending before the A.O on the date of grant of registration i.e. on 20.04.2017. As in the backdrop of the CBDT Circular No. 01/2015, dated 21.01.2015 the assessee would duly be entitled for the benefit of Sections 11/12 of the Act for the year under consideration i.e. A.Y. 2015-16. As the A.O had in the course of the assessment proceedings summarily rejected the assessee s claim for exemption u/s. 11/12 of the Act, i.e., without looking into the other aspects, therefore, the matter in all fairness requires to be restored to his file for framing of a fresh assessment in light of my aforesaid observations. What was required to be looked into by AO was as to whether or not any assessment for the year under consideration i.e. A.Y.2015-16 was pending on the date of which registration was granted, i.e., on 20.04.2017, which material aspect we are afraid had absolutely been lost sight of by him while disposing off the appeal. The observations recorded hereinabove are confined to the assessee s entitlement for the relief contemplated in CBDT Circular No. 01/2015 (supra) and the same would not come in the way of the A.O as regards making of further verifications as regards the assessee s entitlement for exemption u/s. 11/12 of the Act for which, he shall remain at a liberty to carry out necessary verifications. Accordingly, the matter is restored to the file of the A.O with a direction to frame a fresh assessment. Appeal of assessee allowed for statistical purposes.

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• 2023 (8) TMI 326
  Allowable business expenses - assessee claimed expenses directly in the computation of income, when such expenses had not been claimed by the assessee itself in its audited books of accounts - assessee was following Accounting Standard 7 issued by the Institute of Chartered Accountants of India, according to which assessee would start reporting Revenue once 25% of the project is complete and before that all the expenses will go in cost of development and would not be allowed to be debited to the Profit and Loss account - assessee had not conducted any business activity and had only done construction work which was debited to construction work in progress, therefore of the view that there was no justification of claiming expenses. HELD THAT:- As decided in assessee own case [ 2022 (8) TMI 1417 - ITAT DELHI] for Noida Authority-Interest and Late registration charges assessee was allowed 16 half yearly installments to pay the amount of Rs. 302.31 Cr. to NOIDA and in case of default interest @ 14% compounded half yearly leviable for the default period on the defaulted amount. The balance sheet also reflects cost of land of Rs. 387.25 Cr. which has been capitalized. Since, the interest is attributable to the cost of land, the interest expenditure is not allowable as per Section 36(1)(iii). Similarly, the registration charges and the fee/penalty/damages/price for late registration amounts to an integral part of cost of acquisition of land has also to be allotted to the cost of project and to be treated as part of capital work-in-progress. Hence, we hereby affirm the order of the CIT(A) on these two issues. Advertisement Expenses, Brokerage Commission - The project cost in relation to a project comprises of cost of land and cost of development rights, borrowing cost, construction and development cost. In relation to land, the entire cost of land and development rights, stamp duty registration charges and other incidental expenses have to be capitalized. With relation to the borrowing cost, the interest directly related to the project is to be capitalized. All the direct costs relating to the construction and development of the specific project have to be capitalized. The construction cost includes conversion cost, municipal sanction fee, expenses incurred, site labour cost, cost of material, cost of hiring plant machinery, cost of designs and claims of the third party. The general administrative cost, advertisement, brokerage, selling cost, depreciation of the vehicles and office expenditure are part of the revenue expenditure and need not be capitalized. There is difference between commencement of the business and setting off of the business. All the expenses incurred pre-commencement are to be treated as pre-operative expenses and the expenses incurred which do not form the part of the work in progress (WIP) like office expenses, salaries, advertising, brokerage and commission which are incurred for running of the business operations and to bring revenues to the company are to be treated as revenue expenditure. Hence, we hereby affirm the order of the ld. CIT(A) on account of the disallowance on Noida Authority-Interest and Late Registration Charges (LRC) and hold that the disallowance affirmed by the CIT(A) on account of Advertisement Expenses and Brokerage Commission are liable to be obliterated. DR could neither point out any fallacy in the findings of CIT(A), nor could point out any distinguishable facts in the present case - Decided against revenue.

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• 2023 (8) TMI 325
  TDS u/s 194D - payment of ceding commission - Non deduction of TDS - Addition u/s 40(a)(ia) - assessee is a non-resident corporate entity, incorporated under the laws of France and is engaged in the business of providing insurance and reinsurance - HELD THAT:- As identical issued in assessee s own case in assessment year 2018-19 [ 2023 (1) TMI 62 - ITAT DELHI] deleted the disallowance made u/s 40(a)(ia) as held that the cedant commission paid by the assessee to the insurance company is actually the share of assessee in the nature of manpower cost, third party administration cost, administration cost, etc. which are actually reimbursement of expenses in relation to the gross premium which the assessee company has received in this regard, so ceading commission cannot be considered to be paid for soliciting or procuring insurance business. Also decided in M/s Royal Sundaram Alliance Insurance Company Limited [ 2019 (2) TMI 923 - MADRAS HIGH COURT] as held as a matter of industrial practice it was termed as commission on reinsurance premium received , however, in substance it is discount on re-insurance premium received by an Insurance Company from another Insurance Company. Thus we delete the disallowance made under section 40(a)(ia) - Decided against revenue.

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• 2023 (8) TMI 324
  TP adjustment - enhancing the income of the assessee by relying on the data collected from custom authorities by rejecting the comparable uncontrolled price ( CUP) analysis undertaken by the assessee - assessee contended that as no import or export duty was payable on these commodities, the data provided by the Customs Department thereon pertains to the invoice values of the commodities as and when declared by various taxpayers vide Shipping Bill/ Bill of Entry - HELD THAT:- We do not agree with the above contention of the Ld. Counsel for the assessee, even where no tariff rate is notified as in the case of sugar, cotton, meals and grains, the transaction values of customs data can be relied upon as it is based on transaction of similar nature and items on the same date at the same port. The issue of related party transactions in customs data would equally apply to any other public data as well. In the absence of complete details of the differences arising out of contract terms and product quality, the customs data being Govt, notified would provide a reasonable basis for arriving at the uncontrolled transaction price. The Co-ordinate bench of the Tribunal in the case of M/s Sinosteel India Pvt. Ltd. Vs. DCIT (I.T.A No.-175/Del/2012), Hon ble ITAT, Delhi has held that bare quotation price cannot be accepted under the CUP method for the purposes of benchmarking under Rule lQBA(1)(a) of the IT Rules, 1962. Thus we are of the opinion that the objections of the assessee against the use of customs data under CUP had been rightly rejected by the Authorities. Further we do not find any error or infirmity in the direction given by the DRP. Decided against Assessee.

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• Customs

• 2023 (8) TMI 323
  Valuation of export goods - enhancement of value - value of the goods determined by AO based on the price by adopting the wet metric ton weight of the Iron Ore find i.e. by including moisture content - Appellant submits that inspite of going through the Contract Copy with the overseas importer, still the Commissioner (Appeals) has held that the value should be as per wet weight. HELD THAT:- This Tribunal in the case of COMMISSIONER OF CUSTOMS (PORT), KOLKATA VERSUS M/S. SESA GOA LTD. [ 2014 (8) TMI 213 - CESTAT KOLKATA] has held the determination of export duty on the basis of dry weight or wet weight, in our opinion, is irrelevant as the duty to be computed on the value of the goods in dry weight condition, as agreed by the parties. This Tribunal in the case of COMMR. OF CUSTOMS (PORT) , KOLKATA VERSUS ESSEL MINING INDUSTRIES LTD. [ 2019 (1) TMI 833 - CESTAT KOLKATA] has held We find that the assessment of export goods whether on Dry Weight or on Wet Weight basis, for the period after 13-6-2008, has been decided by this Tribunal in favour of the Assessee/Respondent, observing that the export goods namely, Iron Ore Fines, be assessed to duty, adopting the criteria of Dry Weight , as agreed to between the Assessee/Respondent and the overseas purchasers, vide Order Nos. FO/A/75192-75217/2014, dated 30-4-2014. Hence, this issue is decided in favour of the assessee and against the Revenue. The above decisions are squarely applicable in the present case also since no Stay has been granted by the Supreme Court in respect of the Appeal filed by the Revenue against Tribunals order in Sesa Goa case. Appeal allowed.

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• Corporate Laws

• 2023 (8) TMI 322
  Professional Misconduct - Acceptance of audit appointment without complying with mandatory legal and ethical requirements and issuing audit report without a valid appointment as per the Act - Failure to comply with Standards on Auditing (SAs) - Non-Compliance with SA 210 Agreeing the Terms of Audit Engagements - Non-Compliance with SA 230 Audit Documentation - Non-Compliance with SA 700, Forming an Opinion and Reporting on Financial Statements - Non-Compliance with other SAs - Penalty and sanctions. Acceptance of audit appointment without complying with mandatory legal and ethical requirements and issuing audit report without a valid appointment as per the Act - HELD THAT:- In the absence of a valid appointment order, EP s acceptance vide letter dated 09.09.2017 of the appointment as statutory auditor of the branches and issuance of the Independent Branch Auditor s Report for the eight Branches of DHFL, including the report required under CARO 2006 describing the engagement as Branch Statutory Audit shows the absence of professional skepticism and lack of due diligence on his part - The EP s position, (shifting the onus on the Company), cannot be accepted as the EP was required to exercise due diligence under the SA 200 and adhere to the specific provisions of the CAs Act under Section 22 read with Clause 9 of the First Schedule. The non-compliance is thus professional misconduct in terms of section 132(4)(c) of the Companies Act 2013. The said lack of due diligence and gross negligence in accepting an invalid appointment is also professional misconduct as per the Chartered Accountants Act, 1949, the meaning of which is conceived in Section 132(4)(c) of the Companies Act 2013. Non-Compliance with SA 210 Agreeing the Terms of Audit Engagements - HELD THAT:- EP s negligence of the provisions of SA 210 has resulted in accepting an illegal and invalid appointment and issuing a report that is not appropriate to the situation. Thus, apart from the non-compliance with SA 210, this shows absence of professional scepticism and professional judgment in understanding the objective and scope of the audit, thereby violating SA 200 also. Therefore, charges stand proven. Non-Compliance with SA 230 Audit Documentation - HELD THAT:- The lack of sufficient documentation in an audit is not a mere technical and procedural formality but is a serious issue which strikes at the very root of the audit and may defeat the very purpose of the audit itself. Lack of sufficient documentation has been viewed seriously by national and international regulators as well - In the absence of proof documented in the audit file, the inevitable conclusion is that the requirements of the SAs are not met. The facts are evidence that the EP did not follow the requirements of SA 230 and the audit documentation does not give evidence of the nature, timing and extent of audit procedures performed, results of those audit procedures and conclusions reached during the audit. Hence the charges regarding non-compliance with SA 230 stand established. Non-Compliance with SA 700, Forming an Opinion and Reporting on Financial Statements - HELD THAT:- In the absence of any documented conclusions, determination of materiality and assessment of the risk of misstatements and the test of controls and based on the contradictory evidence available, we conclude that the unmodified opinion issued by EP is without any valid basis and therefore the EP did not comply with the provisions of SA 700. The Charges stand established - such lapses relating to the verification of documents during the audit are viewed seriously by audit regulators. A Chartered Accountant, in the audit of a Bank branch, did not verify the securities for debts and was held guilty of professional misconduct of absence of due diligence and gross negligence. Non-Compliance with other SAs - HELD THAT:- Para 6,7, 8, 9 10 of SA 300 as the EP failed in establishing an overall audit strategy and development of audit plan etc. in accordance with SA 300 - para 5, 6 11 of SA 315 and para 1, 5 6 of SA 330 as the audit file lacks any documentation regarding the performance of risk assessment procedures for material misstatements at the financial statement level and assertion level and response to such risks etc. - para 10, 11 14 of SA 320 for determining materiality, performance materiality and documentation thereof - para 5, 6, 8, 14 15 of SA 450 absent the evaluation of identified misstatements and uncorrected misstatements - para 6 9 of SA 500 in not designing and performing audit procedures to obtain sufficient appropriate audit evidence and not evaluate the reliability of information produced by the company - para 5, 6 and 8 of SA 510 relating to the performance of necessary audit procedures and obtaining sufficient and appropriate audit evidence to ascertain the accuracy of Opening Balances and the accounting policies reflected in the Opening Balances - para 6 of SA 520 relating to design and performance of analytical procedures - para 4, 6,7, 8 9 of SA 530 relating to the determination of sample design, sample size and required audit procedures - para 8,9 10 of SA 580 regarding obtaining written representations from the management about their responsibilities. Penalty and sanctions - HELD THAT:- Section 132(4) of the Companies Act, 2013 provides for penalties in a case where professional misconduct is proved. The law lays down a minimum punishment for such misconduct. Considering the fact that professional misconducts have been proved and considering the nature of violations and principles of proportionality and keeping in mind the deterrence, proportionality, signalling value of the sanctions and time required for improvement in knowledge gaps we, in the exercise of powers under Section 132(4)(c) of the Companies Act, 2013, proceed to order the following sanctions: i. Imposition of a monetary penalty of Rs 100,000 (One Lakh) upon CA Akash Goel; ii. CA Akash Goel is debarred for one year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.

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• Insolvency & Bankruptcy

• 2023 (8) TMI 321
  Application filed under Section 9 of the IBC, 2016 rejected - rejection on the ground that it does not fulfil the threshold as prescribed under Section 4 proviso where minimum default amount has been increased to Rs. 1 Crores by Notification of MCA dated 24.03.2020 - it was held by NCLAT [ 2022 (12) TMI 1427 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI] that no error has been committed in rejecting Section 9 application filed by the Appellant which did not fulfil the threshold of Rupees One Crore. HELD THAT:- There are no reason to interfere in the order impugned passed by the National Company Law Appellate Tribunal - appeal dismissed.

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• 2023 (8) TMI 320
  Application hit by Section 10A of IBC - Barter Transactions - dues claimed are prior to 25/03/2020 and interest has been calculated from that date and the date of default written in Section 9 Application is 22/02/2020 and the calculation of interest is from 01/04/2020 - existence of pre-existing dispute or not - HELD THAT:- From the Invoice, it is clear that it is agreed between the Parties that interest would be charged at 24 % p.a., if payment is not received within 30 days from the Invoice date. Likewise, a bare reading of the aforenoted Invoice shows the interest component to be 24 % p.a. with a default clause that if the amount is not paid within 30 days from the Invoice date, interest will be attracted. Therefore, the contention of the Learned Senior Counsel that the calculation ought to be based on 11 days to 42 days, is untenable. The total amount for maintainability of Claim will include both Principal Debt amount as well as the Interest on the delayed payment which is stipulated in the Invoice dues. In the instant case, the Principal amount is said to be Rs. 1,65,60,017/- and the interest portion at 24 % as per the second Clause in Invoice No. 2 is Rs. 56,31,027/-. Therefore, this Tribunal is of the considered view that the amount has crossed the threshold of Rs. 1,00,00,000/- and also that the amounts due and payable are for a period prior to 25/03/2020. The date of default mentioned in the Section 9 Application is 22/02/2020. Therefore, it is clear that for any amounts due and payable prior to 25/03/2020, Section 10A cannot be made applicable. Pre existing dispute between the Parties as there was a Barter Transaction and when the Respondent / Operational Creditor had initiated Arbitration Proceedings under the MSME Council - HELD THAT:- It is seen from the record that the MSME Council has rejected the Application and there is no Claims / Suit pending in any Court of Law before any Tribunal and there is no Arbitration Proceeding pending prior to the initiation of the Section 8 Notice. Additionally, the Appellant had stated in Para 8 of their Counter, that a payment of Rs. 40,000/- was made on 10/08/2021, 09/09/2021, 12/10/2021 22/03/2022 which further establishes that some amounts were paid even subsequent to the filing of the Application before the MSME Council - Additionally, the Appellant had stated in Para 8 of their Counter, that a payment of Rs. 40,000/- was made on 10/08/2021, 09/09/2021, 12/10/2021 22/03/2022 which further establishes that some amounts were paid even subsequent to the filing of the Application before the MSME Council. The Hon ble Apex Court in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd reported in [ 2017 (9) TMI 1270 - SUPREME COURT ] has addressed to the question of pre existing dispute and observed So long as dispute truly exists in fact and is not spurious, hypothetical, or illusory, the Adjudicating Authority has to reject the application. This Tribunal is of the considered view that the ratio of the aforenoted Judgment is squarely applicable to the facts of this case as this Tribunal is of the considered view that the Dispute raised is a spurious one and is an illusory one. Additionally, it is significant to mention that before the very same MSME Council , the Appellant / Corporate Debtor in his Reply, in Paras 4 and 5 (Reply to MSME Annexure A4) has clearly admitted that the reason for delay of settlement of outstanding amounts is not wanton and that Company is making all sorts of efforts to settle the outstanding dues as soon as possible . Appeal dismissed.

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• Service Tax

• 2023 (8) TMI 319
  Classification of services - auctioneer s service or not - conducting auction of various commodities for which they receive consideration in the form of commission / service charges - demand of Service Tax under GTA service - levy of penalties u/s 76, 77(1)(a) and 77(2) of the Finance Act, 1994. HELD THAT:- This very Bench in the appellant s own case for an earlier period has, in its Final Order [ 2021 (3) TMI 218 - CESTAT CHENNAI] , set aside the demands insofar as auctioneer s service and business support service are concerned, but however, has sustained the demand under GTA service for the normal period, if any - since the Revenue did not place any deviating circumstances on record, following the above order the impugned order is set aside insofar as auctioneer s service is concerned. But however, the demand of Service Tax, if any, in respect of GTA service, is sustained for the normal period alone. Penalties - appellant seeks waiver of penalties imposed on them on the ground that the issue being one of interpretation of law, the non-payment of Service Tax was under a bona fide belief, thus arguing that there was no suppression or intention to evade duty on their part - HELD THAT:- It is deemed fit to set aside the imposition of penalty under Section 76 of the Finance Act, 1994. However, the proportionate penalties insofar as GTA service alone is concerned, imposed under Section 77(1)(a) and 77(2) ibid., for non-obtaining Service Tax Registration as stipulated under Section 69 and for non-furnishing of statutory ST-3 returns as required under Section 70 respectively, are sustained. Appeal allowed in part.

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• 2023 (8) TMI 318
  Recovery of inadmissible credits - CENVAT Credit availed on various inputs like steel, cement, other materials used in construction services - invoices raised in the Appellant s Head office address which was different from the place of use of inputs - Service Tax computed on the differential calculation made, basing on the price agreed in the bilateral agreement and the actual amount collected against invoices raised for renting of immovable property by the Appellant from its tenants. HELD THAT:- On the point of admissibility of credits on steel, cement etc., Appellant s stand is consistently in favour of its complete availability up to 07.07.2009 till Notification No. 16/2009-CE introduced an explanation-II into the definition of inputs . Undisputedly credits were admissible on purchase and use of those items up to the amendment was brought on record on 07.07.2009. Learned Counsel for the Appellant took the stand that if period beyond 07.07.2009 till the subsequent amendment made on 01.04.2011 is to be taken as the period on which credit is also inadmissible, then only about Rs.7 lakhs some odd amount of credits were availed by the Appellant after 07.07.2009. Department placed its reliance solely on the judgment of Larger Bench of this Tribunal passed in the case of Vandana Global [ 2008 (6) TMI 400 - CESTAT, NEW DELHI] wherein it was held that Explanation-II to Rule 2(k) of CENVAT Credit Rules, 2004 inserted vide Notification No. 16/2009-CE was clarificatory in nature and hence it has retrospective application w.e.f. 2004 but the same judgment has been overruled by the Hon ble High Court of Chhattisgarh in [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] . This being the position of law, going by the submissions of learned Counsel on the facts of the case, out of total credit of Rs.1,12,91,950/- availed on cement and steel, credit to the extent of Rs.1,07,33,533/- being availed prior to 07.07.2009 were clearly admissible credits. Disputed credit that taken after 07.07.2009 - HELD THAT:- It is required to be mentioned here that in placing reliance on the judgment on the issue raised by the adversaries including that of M/s Mundra Port SEZ Ltd. [ 2015 (5) TMI 663 - GUJARAT HIGH COURT] and M/s. Vandana Global [ 2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] and after going through the amended definition of input service brought w.e.f. 07.07.2009, the above referred order was handed out. In carrying forward the judicial precedent set by our own Tribunal, we are inclined to conclude our findings that the entire credit availed by the Appellant-service provider in respect of goods purchased for construction of premises are admissible credits. Further, in view of the decision of the Hon ble High Court of Gujarat passed in the case of CCE Vs. Dashion Ltd. [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] and the settled position of law that ISD registration cannot be a pre-condition precedent for availment of CENVAT Credit on inputs services post October, 2010 - The reason cited in the Order-in-Original that addresses mentioned in the invoices were different is unsustainable in law unless it is established that the services were not actually availed by the assessee on which credits were taken by it. Demand of Service Tax on the basis of the value shown in the lease rental agreement documents - HELD THAT:- There is no denying of the fact that no subsequent change of the terms and conditions of the agreement were made in respect of those documents by way of addendum or amendment of those agreement and admittedly lesser amount on the basis of sale turnover was taken to be the rent of the property in respect of most of the tenants, though agreements indicate that higher amount was to be billed and collected by the Appellant but this cannot form the basis to make a duty demand since invoice value, which is consistent with the collection of rent value, would determine the taxability irrespective of the fact that it is inconsistent with the agreed upon terms. To put it differently, any agreement can be breached by either of the parties against which civil remedy by way of liquidated or unliquidated damaged can be claimed in a civil court and parties can be at variance to the terms of agreement on mutual consent through an oral agreement but it would be out of purview of any 3rd party including the tax authorities to compel observation of the conditions of the contracts/agreements, other than the parties who are signatories to it. Appeal allowed.

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• 2023 (8) TMI 317
  Classification of service - Works Contract Service or not - works awarded for supplying material and providing of service - contention of the appellant is that the service tax in the nature of works contract service came into effect from 01.06.2007 - HELD THAT:- The appellant is providing their services along with material which is not in dispute. They merit classification for the said services is works contract service as held by the Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] and the appellant is liable to pay service tax on 33% of the gross value of the contract which appellant is paying. The revenue wants to collect service tax on remaining 67% of the value of contract which his not sustainable in the eyes of law. Accordingly, the said demand is set aside. With regard to the service rendered by the appellant to Government College, Port, SEZ, Hospital and Public Utility Service Water Supply are fully exempt from the service tax as per Circular No.80/10/2004-ST dated 17.09.2004. Therefore, for those services, the appellant is not liable to pay service at all. In these circumstances, the appellant is not liable to pay service tax as proposed in the show cause notice. The impugned order is set aside and appeal is allowed.

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• Central Excise

• 2023 (8) TMI 316
  Erroneous refund claim - overvaluation of the goods by including freight charges in the assessable value in violation of Rule 5 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - notified area declared under Notification No.32/99-CE dated 08.07.1999 - HELD THAT:- The facts are not in dispute that the appellant is selling goods to their buyers on FOR basis and cost of freight is not shown separately in the invoice which means the selling price is inclusive of freight charges. Both sides are relying on the decision of this Tribunal on the said issue. On going through the decision of this Tribunal in the case of COMMISSIONER OF C. EX., SHILLONG VERSUS GUWAHATI CARBON LTD. [ 2009 (4) TMI 269 - CESTAT, KOLKATA] , it is found that the said decision was passed by this Tribunal way back on 1st April 2009, wherein this Tribunal relied upon the decision of Hon ble Apex Court in the case of ESCORTS JCB LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-II [ 2002 (10) TMI 96 - SUPREME COURT ] and COMMISSIONER OF CENTRAL EXCISE, NOIDA VERSUS M/S. ACCURATE METERS LTD. [ 2009 (3) TMI 1 - SUPREME COURT] to hold that the insurance and transportation charges cannot be included in the assessable value even though the goods were transported by the assessee from factory gate to the place of State Electricity Board as per the contract. As the issue has been clarified by the subsequent Circulars of CBEC, therefore, the decision of this Tribunal in the case of Guwahati Carbon Ltd. cannot be relied upon in the changing circumstances. Hence, relying on the decision of this Tribunal in the case of M/S. RNB CARBIDES FERRO ALLOYS PRIVATE LIMITED AND OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE, SHILLONG [ 2021 (9) TMI 29 - CESTAT KOLKATA] and CBEC Circular No.1065/4/2018-CX dated 08.06.2018 it is held that the appellant has correctly assessed their goods and paid duty thereon in cash and rightly taken the refund thereof. There are no merit in the contention of the revenue that appellant has taken erroneous refund. Therefore, the impugned order is set aside - appeal allowed.

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• 2023 (8) TMI 315
  Captive consumption - benefit of N/N. 8/2004-CE dated 21.01.2004 - intermediate product called Compound used for captive consumption in the same factory - Extended period of limitation - revenue neutrality - HELD THAT:- The Appellants manufactured two products one, compound and the other, chewing tobacco in the same factory and compound was used entirely captively. According to the Department while chewing tobacco is exempt under notification No. 8/2004-CE, compound is not, even though both are products specified under notification No. 8/2004-CE. The substantive condition for exemption under notification No. 8/2004-CE is that an amount equal to the duty payable on the specified product should be invested in the North East for any of the notified purposes through the mechanism of Escrow Account deposit and withdrawal. Other conditions are purely procedural. It is not in dispute that the Appellants used the compound only for captive consumption and nothing was cleared from the factory as such. Once the condition of deposit of an amount equal to the duty payable, but for exemption under notification No. 8/2004-CE stands satisfied for chewing tobacco, the same condition gets automatically satisfied for compound captively consumed as well. This is for the reason that the amount of duty payable on compound, but for the exemption contained in notification No. 8/2004-CE, is nothing but ZERO. It is calculated that the amount to be deposited/invested for compound keeping this in mind, the amount comes to be ZERO because in a tax regime in which 8/2004-CE is nonexistent, the intermediate compound having been used captively in dutiable chewing tobacco gets the benefit of duty exemption under notification No. 52/2002-CE and thus no amount of duty is payable on compound. Thus, the exemption to chewing tobacco under notification No. 8/2004-CE automatically accompanies with it the exemption to captively used compound under the same very notification. In other words, exemption to compound travels along with exemption on chewing tobacco. In the present case also, the Appellants were liable to pay Additional Duty as per Finance Act, 2005. The word exempted used in the proviso to notification No. 52/2002-CE has to be interpreted keeping in view the context and purpose of exemption to chewing tobacco under 8/2004-CE, otherwise it would defeat the very purpose of exemption and cause anomaly. The finished goods Chewing Tobacco were not wholly exempted. Consequently, the benefit of Notification 52/2002-CE also cannot be denied to demand duty on the intermediate product Compound manufactured and captively consumed in the manufacture of Chewing Tobacco. Extended period of limitation - HELD THAT:- They stated that no evidence of suppression of facts with intention to evade duty has been brought on record either in the SCN or discussed in the findings of the impugned order, except merely stating that suppression of facts involved in this case. Revenue neutrality - HELD THAT:- The contention of the Appellants agreed upon that the entire exercise would be revenue neutral and the Appellants would not have achieved any benefit by not paying duty on the intermediate product namely, Compound . The demand of duty is not sustainable on the ground of limitation also - Since, demand of duty is not sustainable, the demand of interest and penalty also not sustainable - the demand confirmed against the Appellants in the impugned order is not sustainable - Appeal allowed.

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• 2023 (8) TMI 314
  Reversal of CENVAT Credit - input or not - Electrode Carbon Paste - Electrode Carbon Paste is used inside the furnace - contention is that the same is in the nature of consumable and gets consumed during the course of the manufacturing process - HELD THAT:- In appellant s own case M/S SOVA ISPAT ALLOYS (MEGA PROJECTS) LTD. VERSUS COMMISSIONER OF CGST EXCISE, BOLPUR [ 2023 (4) TMI 1130 - CESTAT KOLKATA ], this Tribunal has observed that electrode carbon paste used and consumed in the process of manufacture of ferro alloys is an input eligible for cenvat credit under Rule 2 (k) of the Cenvat Credit Rules, 2004. As the issue has already been settled in favour of the appellant in their own case for the subsequent period, therefore, the appellant has correctly taken Cenvat credit on Electrode Carbon Paste, which gets consumed during the course of manufacturing process. The impugned order is set aside - appeal allowed.

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• 2023 (8) TMI 313
  Levy of penalty under Rule 209A of the Central Excise Rules, 1944 - wrongfully paid less duty - on detection of mistake the duty was paid and intimation to Range superintendent also made, before issuance of SCN - HELD THAT:- In the present case penalty has been imposed on the Appellants under the provisions of Rule, 209A of the Central Excise Rules, 1944. The provisions of Rule 209A ibid specifically postulates that any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these Rules, shall be liable to a penalty not exceeding three times of the value of such goods or Rs.5,000/-, whichever is greater. There is merit in the contention of the Appellant. Penalty under Rule 209A, which is akin to Rule 26 of the Central Excise Rules, 2002 is imposable only on an individual and not on a Firm, as held by the Tribunal, Kolkata in the case of WOODMEN INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, PATNA [ 2003 (9) TMI 228 - CESTAT, KOLKATA] - In the case of ADITYA STEEL INDUSTRIES VERSUS COMMR. OF CENTRAL EXCISE, HYDERABAD [ 1996 (2) TMI 232 - CEGAT, MADRAS] , also it has been held that Penalty under Rule 209A not imposable on a partnership concern and only person concerned can be penalized under this section. The Appellant has short paid the duty inadvertently, which has been rectified by them by paying the differential duty along with interest before issue of the Notice. Also, the impugned order has not brought any evidence on record to substantiate the allegation of abetment of the offence by the Appellant. By relying on the decisions cited above, the penalty under Rule 209A of the Central Excise Rules, 1994 imposed on the Appellant is not sustainable. Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (8) TMI 312
  Scope of SCN - Challenge to Review order - jurisdiction of the Respondents to pass the impugned order which is contrary to the decision of the Supreme Court in case of GANNON DUNKERLEY CO. VERSUS STATE OF RAJASTHAN LARSEN TOUBRO LTD. UNION OF INDIA [ 1992 (11) TMI 254 - SUPREME COURT ] - principles of natural justice. Whether the orders impugned in the present petition passed by Respondent No. 2 would satisfy the test of law when questioned on the ground of jurisdiction and illegality being attributed to it by the Petitioners? - whether, in the facts and circumstances of the case, whether it is required to entertain this petition, by not accepting the objection urged on behalf of the revenue of an alternate remedy available to the Petitioners to file an appeal before the Tribunal? HELD THAT:- On a perusal of the show cause notice dated 22nd October 2018 and on a complete reading of the said show cause notice, it is very clear that the show cause notice was issued only to deny deduction on account of profit on supply of labour and service, amounting to Rs. 9,41,22,626/- which would only fall under Rule 58(1)(h) and therefore, the reference to Rule 58 in the show cause notice although not specifying the sub-rule, should be read to mean that the show cause was only for disallowance of the item under Rule 58(1)(h) of the MVAT Rules and not all the deductions under Rule 58(1)(a) to (h). This is further fortified by the second show cause notice dated 23rd November 2020 which specifically refers to Rule 58(1) (h) only to deny the deduction of Rs. 9,41,22,626/. The figure of Rs. 9,41,22,626/- in the show cause notice is only under Rule 58(1)(h). Therefore, in our view, the show cause notice was only for item to be disallowed under Rule 58(1)(h) and not all the items under Rule 58(1)(a) to (h). However, in the review order dated 8th March 2021 under Section 25 of the MVAT Act, what is disallowed is all the items under Rule 58(1)(a) to (h), amounting to Rs. 30,59,93,405/-. The Respondents have not brought to our notice any document which would show that the show cause notice was issued for disallowing all the items specified in Rule 58(1)(a) to (h). It is well settled that any order beyond the show cause notice is bad-in-law. The Supreme Court in case of COMMISSIONER OF CUSTOMS, MUMBAI VERSUS TOYO ENGINEERING INDIA LIMITED [ 2006 (8) TMI 184 - SUPREME COURT ] noted that the Department cannot be allowed travel beyond the show cause notice. The Supreme Court further observed that it would be against the principles of natural justice that a person who has not been confronted with any ground is saddled with liability thereof and since the issue did not form the basis of the show cause notice and was not even confronted to the order passed beyond show cause notice is to be quashed. The Supreme Court in case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS M/S BALLARPUR INDUSTRIES LTD [ 2007 (8) TMI 10 - SUPREME COURT ] observed that if Rule 7 of the Valuation Rules 1975 have not been invoked in the show cause notice, it would not be open to the Commissioner to invoke the said rule in the remand proceedings. The view expressed by the Supreme Court in cases of Commissioner of Customs, Mumbai vs. M/s. Toyo Engineering India Limited and Commissioner Of Central Excise, Nagpur vs. M/s. Ballarpur Industries Ltd. was applied in subsequent decisions of the Supreme Court in case of The Commissioner of Central Excise, Bhubaneswar-1 vs. M/S. Champdany Industries Ltd., [ 2009 (9) TMI 7 - SUPREME COURT ] and also in the case of Commissioner of Central Excise Vs. Gas Authority of India Limited [ 2007 (11) TMI 276 - SUPREME COURT ]. Therefore applying the ratio of the Supreme Court, the impugned order disallowing all the deductions under Rule 58(1)(a) to (h) without giving any show cause notice to the Petitioner would be rendered bad in law. Such defect in the adjudication goes to the root of the matter and is an incurable defect. Further the Respondents in the review order have applied the rate of 20% specified in table under Rule 58(1). On a reading of Rule 58(1) of the MVAT Rules, the rates specified in the Table can be applied only if the contractor has not maintained accounts which would enable a proper evaluation of the different deductions as specified in Rule 58(1)(a) to (h) or where the Commissioner finds that the accounts maintained by the contractor are not sufficiently clear or intelligible. It is only under these circumstances that the Commissioner may in lieu of the deduction as prescribed under Rule 58(1)(a) to (h) of the MVAT rules on actual basis can apply the percentage specified in the Table to arrive at the sale price of the goods for the purpose of MVAT Act - in the absence of satisfying the pre-condition prescribed under proviso to Rule 58(1) the application of rate specified in Table below Rule 58(1) in the final review order is without jurisdiction. Even otherwise, in the assessment order dated 11th December 2015, the Assistant Commissioner of Sales Tax has recorded a finding that he has verified the books of accounts with respect to the claim of the dealer under Rule 58 on actual basis. Insofar as the GAIL project is concerned, the assessment order records verification of trial balance, expense ledger copies, contract copies, sample invoices, sub-contractors works order, etc. The audit done under Section 22 of the Act by the Deputy Commissioner prior to the passing of the said assessment order also accepts the maintenance of the books of accounts by the Petitioner with respect to the works contract executed by the Petitioner - the jurisdictional condition required for applying the rates prescribed in the table to Rule 58(1) have not been complied with before passing the review order and, therefore, even on this account, the impugned order is without jurisdiction. The issue of exercising jurisdiction under Article 226 of the Constitution of India, when an alternate remedy is available has been a subject matter before the Supreme Court in the case of Whirlpool Corporation Vs. Registrar of Trade Marks Mumbai [ 1998 (10) TMI 510 - SUPREME COURT ], and the also very recently in the case of Godrej Sara Lee Limited [ 2023 (2) TMI 64 - SUPREME COURT ] wherein, the principles laid down in the case of Whirlpool Corporation [ 1998 (10) TMI 510 - SUPREME COURT ] for exercising the jurisdiction under Article 226 of the Constitution of India have been reiterated on the ground of challenge to the very jurisdiction and principles of natural justice. The impugned orders dated 8th March 2021 and 6th July 2021 are hereby quashed and aside - Petition allowed.

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• 2023 (8) TMI 311
  Seeking restoration of appeal - Appeal dismissed on account of non compliance of Section 62 (5) of the Punjab VAT Act, 2005 - HELD THAT:- In view of the fact that proceedings in respect of the assessment year 2010-2011 are pending since 2016, the prayer of the petitioner deserves to be accepted. Keeping in view the peculiar circumstances of the case, the impugned order dated 12.04.2023 (Annexure P-13) is being set aside and the Appellate Authority is directed to accept 25% of the tax due after adjusting the amount already deposited by the petitioner and pass a fresh order on the appeal filed by the petitioner, on merits, expeditiously, within a period of two months from the date of receipt of certified copy of this order. Petition disposed off.

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• 2023 (8) TMI 310
  Rectification of order - It is submitted that the petitioner may be asked to file a rectification application under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 (TNVAT Act) as made applicable to assessment under provisions of the Central Sales Tax Act, 1956 (CST Act) - HELD THAT:- The Assessing Authority has wide powers to reopen the assessment under Section 27 in the circumstances specified in sub clause(3), on the ground of discovery of new facts or revision by a higher authority on the ground that the findings of the Assessing Authority are contrary to law. Such re-assessment or revision may be done in accordance with the provisions of the General Sales Tax law of the state. As per decision of the Hon ble Supreme Court in Ashok Leyland Limited vs. State of Tamil Nadu and Another, [ 2004 (1) TMI 365 - SUPREME COURT] , an Assessing Officer can reopen the assessment if it is found that there was a jurisdictional error committed and the order passed under retain Sub-Section (2) of Section 6A was found to be illegal or void ab initio or otherwise voidable - as per this decision, the Assessing Authority would derive jurisdiction to reopen of the assessment only under those circumstances and not otherwise. A reading of the notice issued to the petitioner on 30.12.2021, indicates that it proceeds on the assumption that generally cars with high value are transferred to sales Depots on stock transfer basis only after getting confirmed booking from the customers or making financial arrangement from financial companies. There is a fallacy in this approach. The view that since, the value of the cars manufactured by the petitioner was high and are sold only after getting financial arrangement and confirmed order from financial companies is also based on an assumption, presumption and conjectures. Thus, the conclusion that the cars were transferred to the petitioners s branches based on pre-confirmed order or prior order and therefore, the value of stock transfer was not eligible for exemption under Section 6A, and liable to tax did not give an authority to reopen the assessment. Reading of the impugned order makes it clear that the notice was passed on assumption, presumption and conjecture. There were no material that was available on the date when a revision notice dated 30.12.2021, based on which the assessment could be re-opened. In fact, the notice itself calls upon the petitioner to furnish the purchase orders/stock transfer note received from other branches with documentary evidence for the value of stock transfer for the aforesaid value. If there were no purchase orders, questioning of furnishing non existing purchase order also does not arise. Merely because the petitioner has sold one of the car which was stock transfered, for which the petitioner produced Form F was later sold as an interstate sale and produced Form C and sold as an inter-state sale, ipso facto would not mean that all the eleven stock transferred cars were sold in the course of inter-state sale. To hold that there was an inter-state sale, the twin test as recognized by the Hon ble Supreme Court in the State of Tamil Nadu vs. The Cement Distributors Private Limited. [ 1975 (3) TMI 104 - SUPREME COURT] , has to be satisfied - The settled view of this Court is that if the movement of goods from one State to another is the result of a covenant or an incident of the contract of sale ten the sale is an inter-state sale. The petitioner has also showed that ten of these cars were given to its own employees and were later transferred to them on written down value after use. Thus, there is no scope for interfering inter-state sale. At best, there could be first sale in the State of Haryana where ten of the cars which were stock transferred were later sold to the petitioners own employees after use. Petition allowed.

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