TMI Tax Updates - e-Newsletter
August 23, 2022
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Highlights / Catch Notes
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GST:
Classification of supply - supply of service to an Educational Institute or not - printing stationery items - The supply of answer booklets and other formats used for and during examinations falling under the heading 4802 is taxable and subject to GST - AAR
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GST:
Transitional credit - Seeking direction to credit the amount relating to input tax credit (ITC) - Rule 120A does not, by itself, stipulate any time limit, though undoubtedly, the timeline stated under Rule 117 has to be read into Rule 120 as well. This would not, lead to a conclusion that the application of Rules 117 and 120A cannot be harmonized, to make them workable, viable and practical - the timelines under Rule 120A must be of a period over and above the timelines stipulated in Rule 117, mandamus as sought for by the petitioner is issued. Since the credits filed by the petitioner relate to Central Excise and Service both coming under Central jurisdiction, R1 may will enable opening of the portal such that revision may be sought. - HC
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GST:
Classification of services - printing services - Since the applicant has stated that he provides the materials (physical Inputs) and the content is owned by the KTBS, the applicant is into printing of the content supplied by the recipient of supply and the same is the principal supply. Therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services - AAR
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Income Tax:
Appropriate High Court for filing appeals u/s 260A - While returning the files to be represented in the appropriate court, certain observations were made stating that the appeals could be filed in the High Court which exercises territorial jurisdiction over the concerned ITAT. These observations are only obiter. In any event they did not preclude the party from filing the appeal before the appropriate High Court where the Assessing Officers exercised jurisdiction. However, we are reiterating for clarity and certainty that the jurisdiction of a High Court is not dependent on the location of the ITAT, as sometimes a Bench of the ITAT exercises jurisdiction over plurality of states. - SC
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Income Tax:
TDS u/s 194C - non deduction of TDS from the payments made to transporters - relief u/s 194(6) - non-filing of the statutory form as required u/s 194C(7) - On seeing these questions which are to be answered by the assessee in the statutory Form 26Q, it gives an impression that the assessee is entitled to file more than one statement and probably for that reason a query was made to the assessee if he has filed any statement earlier for the said quarter. In any event, the Assessing Officer having not found fault with the contents of Form 26Q filed by the assessee, on a technical ground the relief cannot be denied to assessee and the Tribunal was right in dismissing the revenue’s appeal. - HC
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Income Tax:
Deduction u/s 54 - The agreement to purchase new house property never fructified into registered Sale Deed till date - till actual conveyance happens, it could not be said that the assessee has purchased the houses property. Another fact to be noted is that the agreement has never fructified into registered sale deed till date despite the fact that the assessee has paid full consideration of Rs.165 Lacs and the document was executed on 30-03-2012. No valid circumstances which have impeded the registration of final deed have been adduced by the assessee. - the unregistered document as entered into by the assessee could not be considered as fulfilment of requirement of Sec.54 - AT
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Income Tax:
Undisclosed sale consideration against the sale of property - The draft sale deed - The admission made by the buyer of the property before the Settlement Commission does not establish the fact that the assessee has received unaccounted consideration. Thus, we are not convinced with the findings of the authority below - AT
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Income Tax:
Disallowance of commission expenses paid by the assessee to its related concern - the fact that the assessee deducted tax at source and both the companies are falling under maximum marginal rate of tax, does not satisfy the requirement of reasonableness of expenditure qua the services alleged to be received by the assessee. All the above aspects were neither examined by the AO nor by the CIT(A) and appeal filed by the assessee was allowed vide impugned order without even calling for any remand report, in this regard, from the AO. - Matter restored back - AT
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Income Tax:
Penalty u/s 271(1)(c) - Disallowance u/s 40(a)(ia) - AO has not applied his mind before initiating the penalty proceedings rather borrowed his satisfaction from the “tax audit report” and proceeded to initiate and levy the penalty which is not sustainable in the eyes of law. - Since the AO has not issued a valid notice by framing a specific charge to be initiated against the assessee rather invoked both the limbs of section 271(1)(c) of the Act for furnishing inaccurate particulars of income or for concealing the particulars of income no penalty can be imposed on the basis of the same. - AT
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Customs:
Levy of Anti-dumping duty - import of unclad/non-clad aluminium foil from China PR - it is declared that levy and collection of ADD on unclad or non-clad aluminium foils for automobile industry imported from China PR in terms of Notification No.23/2017-Cus.(ADD) dated 16.05.2017, is incorrect and contrary to Section 9A read with 9B(b)(iii) of the Customs Tariff Act, 1975 and read with paragraph(s) 9(ii)(c), 12, 31, 79 and 136(xlix) of Final Findings dated 10.03.17 - HC
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Customs:
Maintainability of application filed by the appellant under section 129B of the Customs Act, 1962 read with R.20 of the CESTAT (Procedure) Rules, 1982 for rectification of the mistake apparent on the record - power of review and rectification - When an application is filed to recall, several decisions are referred to and for the reasons already excerpted the Tribunal made the order dated 06.01.2017. The Tribunal proceeded on the grounds available for review of the order without appreciating the inherent error in exercise of its jurisdiction. - HC
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Customs:
Smuggling - Rejection of request of importer for provisional release of seized currency - it is clear that belief of the department about the impugned currency notes to be the sale proceeds of imported goods allegedly under-valued goods, but otherwise not alleged to be smuggled goods cannot, be a reason to deny the provisional release of the said currency. The said belief is still to be proved by the department - AT
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Corporate Law:
Oppression and mismanagement - maintainability of suit of appellant - Cumulatively, unless, there is specific bar excluding the jurisdiction of the civil Court on any matter, which is also traceable to Companies Act, the jurisdiction of the civil Court to decide the civil dispute is not ousted - what is urged before the civil Court is a dispute civil in nature and the civil Court has jurisdiction under Section 9 of the CPC and the jurisdiction of civil Court is not ousted by Section 241 of the Companies Act. Except Section 241 no other provision is brought to our notice, which ousted the jurisdiction of the civil Court to adjudicate the dispute raised by the plaintiff company. - HC
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Indian Laws:
Dishonor of Cheque - In case part payment/s is made after the filing of the complaint, since the offence already stands completed in terms of Section 138(c) of the N.I. Act, and the proceedings have to go on, it would be appropriate, in case of conviction, for the learned Special Court, to direct compensation payable after taking into consideration, amounts received by the payee/holder of the cheque, till that time - The conduct of the complainant in disclosing recovery of part cheque amount, in the notice of demand itself, is an indicature of his bonafides and absence of malafides - HC
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Indian Laws:
Dishonor of Cheque - Once the signature is admitted and execution is proved by the appellant by examining the independent witnesses, there is a presumption that the appellant has executed a promissory note for the valuable consideration. Therefore, under Section 118 of the Negotiable Instruments Act, no doubt, the said presumption is rebuttable presumption. The appellant has not rebutted the said presumption in the manner known to law. - HC
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Indian Laws:
Dishonor of Cheque - vicarious liability of Director u/s 141 of NI Act - The provisions under Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the company. Further, the primary responsibility is on the complainant to make specific averments as are required under the provisions in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction - HC
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Service Tax:
Non-payment of service tax - manpower supply service - differences in the figures reflected in ST-3 Returns and in form 26AS - form 26AS is not a statutory document for determining the taxable turnover under the Service Tax as form 26AS is maintained on cash/receipt basis by the Income Tax department for the purpose of TDS etc. whereas the Service Tax is chargeable on mercantile basis (approval basis) on the services provided. - AT
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Central Excise:
Clandestine Removal - allegation of two sets of invoices - admissible evidences - it is found that the department has not complied with Section 36B of the Central Excise Act, 1944 while retrieving the data from the hard disc. The provision does not say that if the documents are sent to Central Forensic Laboratory, Hyderabad, it would become admissible. Further, such documents have been compared with the photocopies of the printouts sent by the Income Tax Department to the Central Excise investigating officers. Such documents cannot be relied for confirmation of duty, when obtained without following the mandate under Section 36B of the Central Excise Act, 1944 - AT
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Central Excise:
CENVAT Credit - duty paying documents - The Appellant correctly availed the cenvat credit. Further, the department nowhere raised any dispute on the said records. Thus the contention of the department that appellant have availed cenvat credit without receipt of goods (raw material) is not tenable. Further, as the Appellant have discharged the Central Excise duty on the final product manufactured out of the alleged raw material, if the department is of the opinion that the alleged goods was not received by the appellant then it is the onus on the department to prove that any other alternative raw material was used in the final products, department has failed to do so. - AT
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Central Excise:
CENVAT Credit - since admittedly, in the case on hand, the Principal manufacturer, i.e. the Daman unit, paid duty on finished goods, evenif it is produced at job worker’s end, there is no question of recovery of duty once again from job worker at Vadodara unit at all. As regards the Cenvat Credit demand on Daman unit, having paid duty as principal manufacturer, which is admitted by revenue authorities as well, the input stage credit too cannot be denied to them in the facts and circumstances of the present case. - AT
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Central Excise:
Classification of the goods manufactured by the appellants - chewing tobacco - the learned commissioner has erred in not resorting to the Trade Parlance Test in the facts of the present case by erroneously observing that as the product can be classified as per the contents, there is no need to resort to the parlance test. In Trade parlance i.e. from packaging and presentation, sales and distribution and till its consumption by the ultimate consumer the product in issue is known as chewing tobacco only. - the classification cannot be based on contents. - AT
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Central Excise:
Extended period of limitation - Suppression of facts or not - The returns contained all the requisite details as that of the invoice numbers, the amount of invoice, the amount of service tax etc. Nothing has stopped Department to look into those invoices - the allegation of suppression of facts against the appellant are without any basis. Accordingly the foremost reason for invoking the extended period of limitation remains not available with the Department. Otherwise also the onus is always upon the Department to prove the alleged misrepresentation or suppression of fact that too with an intent to evading duty - AT
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VAT:
Validity of assessment order - As a matter of fact, the law casts an obligation on the revenue to inform the assessee in no uncertain words as to the charge against him i.e., as to whether it is a case for concealment, or omission or failure to disclose material particulars or a sum of one or more infractions. - There are too many infractions committed by the respondent/revenue in the instant matter - HC
Articles
Notifications
GST - States-
38/1/2017-Fin(R&C)(235)/681 - dated
18-8-2022
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Goa SGST
Amendment in Notification No. 38/l/2017-Fin(R&C)(l33), dated the 30th March, 2020
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8/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend notification No. 3/2017-State Tax (Rate), dated the 7th June, 2017
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7/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend Notification No. 2/2017-State Tax (Rate), dated the 7th July, 2017
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6/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend Notification No. 1/2017-State Tax (Rate), dated the 7th July, 2017
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5/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend Notification No. 13/2017- State Tax (Rate), dated the 7th July, 2017
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4/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend Notification No. 12/2017-State Tax (Rate), dated the 7th July, 2017
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3/2022-State Tax (Rate) - dated
26-7-2022
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Mizoram SGST
Seeks to amend Notification No. 11/2017-StateTax (Rate), dated the 7th July, 2017
News
Case Laws:
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GST
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2022 (8) TMI 869
Withdrawal of Provisional Attachment order - Section 132 of the CGST Act, 2017 - HELD THAT:- It appears that there is another entity which appears to have been floated by the same set of persons, i.e. M/s Global Suppliers; qua which as well Mr Surat Singh evidently, had no clue - It now appears that the petitioner, has no knowledge of the affairs of the petitioner concern. It is his say that the affairs of the petitioner concern were managed by Mr Ravinder Baweja.
The Registrar General of this Court is directed to refer the matter to the concerned Judicial Magistrate, so that proceedings, as per law, are triggered against Mr Surat Singh - list the matter before the Registrar General on 06.09.2022.
Petition disposed off.
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2022 (8) TMI 868
Classification of supply - supply of service to an Educational Institute or not - printing stationery items such as question papers, admit cards, answer booklets, SSLC Pass Certificate, the overprinting of variable data and lamination, fail marks cards, Circulars, ID Cards and other formats used for and during examinations, envelopes for packing answer booklets on contract basis for the Karnataka Secondary Education Examinations Board and utilized for the conduct of examinations - applicability of Sr. No. 66 (Heading 9992) of Notification No.12/2017-Central Tax (Rate), as amended.
HELD THAT:- In the instant case, the applicant is supplying question papers, admit cards, SSLC Pass Certificate, the overprinting of variable data and lamination, fail marks cards, Circulars, ID Cards printed with the content supplied by the recipient i.e., KSEEB, made using physical inputs including paper belonging to the printer. Here, supply of printing (of content supplied by the recipient of supplier) is the principal supply and therefore such supplies would constitute supply of service falling under Heading 9989 of the scheme of classification of services - it is evident that Karnataka Secondary Education Examination Board is an educational institution for the limited purpose of providing services by way of conduct of examination to the students.
The services provided by the applicant are exempted as per entry No.66 of Notification No.12/2017-Central Tax (Rate) dated 28th June, 2017 as amended vide Notification No.02/2018-Central Tax (Rate) dated 25th January, 2018.
In the instant case, the applicant is also supplying answer booklets, other formats used for and during examinations and envelopes for packing answer booklets printed with the content supplied by the recipient i.e., KSEEB made using physical inputs including paper belonging to the printer. Here, the usage of the products gives its essential characteristic while printing (of content supplied by the recipient of supplier) is an ancillary activity and therefore such supplies would constitute supply of goods falling under respective Headings of Chapter 48 and 49 of the Customs Tariff - The supply of answer booklets and other formats used for and during examinations falling under the heading 4802 is taxable as per entry No.112 of Schedule II of Notification No.1/2017-Central Tax (Rate), dated 28th June, 2017 and the supply of envelopes for packing answer booklets falling under the heading 4817 is taxable as per entry 152 of Schedule III of Notification No.1/2017-Central Tax (Rate) dated 28th June, 2017.
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2022 (8) TMI 864
Classification of services - printing services - Karnataka Text Book Society (KTBS) can be classified as educational institution or not - KTBS is a State Government or not - rate of tax being charged at present by printers on the printing of text books supplied to the Karnataka Text Book Society - HELD THAT:- KTBS is a Society registered under the Karnataka Societies Act, 1960 and receives grants from the Government of Karnataka for the supply of textbooks freely to students enrolled in government and aided schools and by sales to private schools affiliated to the Karnataka State Board - KTBS is not an institution providing services by way of pre-school or higher secondary education or education as a part of curriculum or as a part of approved vocational education course, but it is society which is only into supply of textbooks to students. Hence we can say that KTBS cannot be classified as “educational institution” for the reasons mentioned above. As already said above, KTBS is a Society registered under the Karnataka Societies Act, 1960, the same cannot be considered as “State Government”.
Since the applicant has stated that he provides the materials (physical Inputs) and the content is owned by the KTBS, the applicant is into printing of the content supplied by the recipient of supply and the same is the principal supply. Therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services - Rate of tax being charged at present by the printers on the printing of textbooks supplied to KTBS i.e., @ 12%, is incorrect and the same is taxable @ 18% as per entry No. 27 of Notification No.11/ 2017-Central Tax (Rate) dated: 28.06.2017 further amended vide Notification No.6/ 2021-Central Tax (Rate) dated: 30.09.2021.
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2022 (8) TMI 867
Cancellation of registration certificate of the petitioner - time limitation - due date for filing of application for revocation of cancellation deed had expired - HELD THAT:- This is an order passed by the first appellate authority under Section 107(1) of the CGST Act. As per subsection (1) of Section 107 of the CGST Act, limitation for filing appeal is three months from the date of communication of the order appealed against - Under subsection (4) of Section 107 of the CGST Act, the appellate authority may allow the appeal to be presented within a further period of one month, provided sufficient cause is shown by the appellant.
Though the lower appellate authority may be right in holding that while it may allow filing of an appeal beyond the limitation of three months for a further period of one month, therefore, by extension of limitation beyond the extended period of one month delay beyond the extended period of one month cannot be condoned, we are of the view that such a stand taken by respondent No.1 may adversely affect the petitioner. This is more so because respondent No.2 had suo motu cancelled the GST registration of the petitioner on the ground of non-filing of returns and as GST Tribunal has not been constituted under Section 109 of the CGST Act, petitioner would be left without any remedy.
The matter remanded back to the file of respondent No.2 to consider the grievance expressed by the petitioner against cancellation of GST registration and thereafter pass an appropriate order in accordance with law - petition disposed by way of remand.
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2022 (8) TMI 866
Transitional credit - direction to open common portal for filing concerned forms for availing Transitional Credit through TRAN-1 and TRAN-2 - HELD THAT:- It is directed that any aggrieved registered assessee' to file a form seeking Transitional credit or revision thereof.
Writ petition disposed off.
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2022 (8) TMI 865
Seeking direction to credit the amount relating to input tax credit (ITC) - time limit for availment of credit by transition is mandatory or directory? - validity of the retrospective amendments to Section of CGST Act and Rule 117 of the CGST Rules - HELD THAT:- No doubt, the timelines for seeking transition of credit have been held to be mandatory. The decision in the case of M/S. P.R. MANI ELECTRONICS VERSUS UNION OF INDIA, THE GOODS AND SERVICE TAX COUNCIL, THE PRINCIPAL CHIEF COMMISSIONER OF GST & CENTRAL EXCISE, THE ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE [2020 (7) TMI 443 - MADRAS HIGH COURT] can be referred - However, in the subsequent decision in M/S. AMPLEXOR INDIA PRIVATE LIMITED VERSUS UNION OF INDIA AND OTHERS [2021 (2) TMI 477 - MADRAS HIGH COURT], the Bench has, considering a slew of judgments cited by both sides, been persuaded to formulate certain issues for resolution. This includes the issue as to whether the timelines seeking transition under 140 and 117 are mandatory or directory and the same is pending declaration.
In M/S. BHARAT ELECTRONICS LIMITED VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, ASSISTANT COMMISSIONER OF GST & CENTRAL EXCISE, CENTRAL BOARD OF EXCISE & CUSTOMS, PRINCIPAL COMMISSIONER, CHENNAI NORTH COMMISSIONERATE, CHENNAI [2021 (7) TMI 334 - MADRAS HIGH COURT], it is held that it does not stand to reason that the time limit for revision of a TRAN 1 return be identical to the timeline for filing of a return seeking transition. The purpose of revision is to enable correction/modification of a return of transition. In such an event, it would stand to reason that some additional time, over and above the timeline granted for a TRAN-1 return be provided by the respondent, in the later instance.
Rule 120A does not, by itself, stipulate any time limit, though undoubtedly, the timeline stated under Rule 117 has to be read into Rule 120 as well. This would not, lead to a conclusion that the application of Rules 117 and 120A cannot be harmonized, to make them workable, viable and practical - the timelines under Rule 120A must be of a period over and above the timelines stipulated in Rule 117, mandamus as sought for by the petitioner is issued. Since the credits filed by the petitioner relate to Central Excise and Service both coming under Central jurisdiction, R1 may will enable opening of the portal such that revision may be sought.
Petition allowed.
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Income Tax
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2022 (8) TMI 863
Appropriate High Court for filing appeals u/s 260A - appropriate High Court for filing an appeal against an order of a bench of the ITAT exercising jurisdiction over more than one state - meaning attributed to the expression ‘cases’ in the Explanation to Section 127(4) of the Act - whether appellate jurisdiction of the High Court stands on its own foundation and cannot be subject to the exercise of executive power to transfer a ‘case’ from one Assessing Officer to another Assessing Officer? - HELD THAT:- The legal structure under the Income Tax Act commencing with Assessing Officer, the Commissioner of Appeals, ITAT and finally the High Court under Section 260A must be seen as a lineal progression of judicial remedies. Culmination of all these proceedings in question of law jurisdiction of the High Court under Section 260A of the Act is of special significance as it depicts the overarching judicial superintendence of the High Court over Tribunals and other Authorities operating within its territorial jurisdiction.
The power of transfer exercisable under Section 127 is relatable only to the jurisdiction of the Income Tax Authorities. It has no bearing on the ITAT, much less on a High Court. If we accept the submission, it will have the effect of the executive having the power to determine the jurisdiction of a High Court. This can never be the intention of the Parliament. The jurisdiction of a High Court stands on its own footing by virtue of Section 260A read with Section 269 of the Act. While interpreting a judicial remedy, a Constitutional Court should not adopt an approach where the identity of the appellate forum would be contingent upon or vacillates subject to the exercise of some other power. Such an interpretation will clearly be against the interest of justice. Under Section 127, the authorities have the power to transfer a case either upon the request of an assessee or for their own reasons. Though the decision under Section 127 is subject to judicial review or even an appellate scrutiny, this Court for larger reasons would avoid an interpretation that would render the appellate jurisdiction of a High Court dependent upon the executive power. As a matter of principle, transfer of a case from one judicial forum to another judicial forum, without the intervention of a Court of law is against the independence of judiciary. This is true, particularly, when such a transfer can occur in exercise of pure executive power. This is a yet another reason for rejecting the interpretation adopted in the case of Sahara.
For the reasons stated above, we hold that the decision of the High Court of Delhi in Sahara [2007 (5) TMI 208 - DELHI HIGH COURT] and Aar Bee [2013 (7) TMI 94 - DELHI HIGH COURT] do not lay down the correct law and therefore, we overrule these judgments.
In conclusion, we hold that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s).
While returning the files to be represented in the appropriate court, certain observations were made stating that the appeals could be filed in the High Court which exercises territorial jurisdiction over the concerned ITAT. These observations are only obiter. In any event they did not preclude the party from filing the appeal before the appropriate High Court where the Assessing Officers exercised jurisdiction. However, we are reiterating for clarity and certainty that the jurisdiction of a High Court is not dependent on the location of the ITAT, as sometimes a Bench of the ITAT exercises jurisdiction over plurality of states.
Order passed by the Assessing Officer, Delhi against which an appeal was decided by CIT (Appeals) – IV, New Delhi against which the ITAT, New Delhi disposed of an appeal against which an appeal was filed in the High Court of Punjab & Haryana which it disposed of by order against which Civil Appeal was filed before this Court. The said Civil Appeal is dismissed by upholding the order passed by the High Court of Punjab & Haryana, with a direction that the appropriate High Court for disposal of the appeal would be the High Court of Delhi as the case was assessed by the Assessing Officer, Delhi.
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2022 (8) TMI 861
Disallowance u/s 14A - strategic investments - expenditure incurred to earn the exempt income - HELD THAT:- We find that, in terms of decision of Hon’ble Apex Court in the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] exclusion of strategic investment is not correct. Therefore, the impugned order stand modified to that extent. The other directions as given by Ld. CIT(A) do not require any interference on our part. This ground stand partly allowed.
Long Term Capital Loss on Sale of Shares - CIT-A deleted the addition - HELD THAT:- The sale of shares through buy-back route as per extant rules could not be said to be a colorable device. The cited decision of Hon’ble High Court of Bombay in Capgemini India P. Ltd. [2015 (4) TMI 1069 - BOMBAY HIGH COURT] clearly support this proposition. We also concur with other observations of Ld. CIT(A), in the impugned order. Accordingly, we find no reason to interfere in the impugned order, on this issue. The grounds thus raised stand dismissed.
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2022 (8) TMI 860
Revision u/s 263 - assessee claimed expenses of the subsidiary entities who were independent companies with separate legal status and also assessable to income tax in their own status, thus when the resulting income was likely to arise in the hands of subsidiary companies, the claim of expenses would not be allowable to the assessee - HELD THAT:- We would confirm the revision order, however, with certain modifications since the earlier order of the Tribunal for AY 2009-10 [2014 (7) TMI 1219 - ITAT CHENNAI] as available to Ld. AO was not considered while framing the assessment for this year. Further, fresh adjudication has been done by the bench for AYs 2011-12, 2012- 13 & 2014-15 in its latest order which would have material bearing on the assessment. In terms of latest order dated 14.03.2022, Ld. AO is directed to disallow incubation expenses, if any, as incurred by the assessee. The income would be assessed as ‘Income from other sources’ against which related expenditure would be allowable in terms of Sec.57(iii). The Ld. AO is directed to reframe the assessment on above lines.
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2022 (8) TMI 859
Reopening of assessment u/s 147 - reassessment triggered on the basis of audit objection - HELD THAT:- We find that the regular assessment was framed u/s 143(3) and the case was reopened within 4 years. There is nothing on record which would show that any such verification of examination was carried out by Ld. AO during regular assessment proceedings. The proceedings were triggered on the basis of Audit Objection which certainly constitutes ‘information’. As long as there is independent application of mind by Ld. AO to arrive at conclusion that there was escapement of income, this information could certainly be utilized to arrive at this formation of belief. The case laws as cited by the Ld. CIT(A) duly support the validity of reassessment proceedings. We are in complete agreement with the adjudication of Ld. CIT(A), in this regard, in the impugned order. Ground Nos. 1 to 5 stands dismissed.
Deduction u/s 54 - legal impact of unregistered Joint Development Agreement - whether the assessee could be granted deduction u/s 54 merely on the basis of unregistered Agreement to Sale couple with possession which never fructified into registered Sale Deed till date? - HELD THAT:- The provisions of Sec.54 enable the assessee to claim deduction of Long-Term Capital gains provided the assessee, within specified period, purchases or construct a residential house. The term purchase, in our considered opinion, has to be absolute purchase since the object of the beneficial provision is to encourage investment in housing. An agreement to sale, till it translates into conveyance of full ownership rights, by way of registered documents, is merely an agreement and do not result into transfer of ownership absolute. It only given partial rights out of bundle of rights to the parties intending to purchase the property. However, till actual conveyance happens, it could not be said that the assessee has purchased the houses property. Another fact to be noted is that the agreement has never fructified into registered sale deed till date despite the fact that the assessee has paid full consideration of Rs.165 Lacs and the document was executed on 30-03-2012. No valid circumstances which have impeded the registration of final deed have been adduced by the assessee.
This agreement is unregistered one and therefore, the adjudication of Hon’ble Supreme Court in the case of CIT vs. Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT] would apply wherein it was held that fulfilment of Sec.53A of Transfer of Property Act itself was not enough to consider a transfer within the meaning of Sec. 2(47) - Also after the commencement of amendment act, 2001, an unregistered agreement would have no effect in law for the purposes of Sec.53A - there is would be no agreement in the eyes of law which could be enforced u/s 53A of the Transfer of Property Act. In order to qualify as a transfer u/s 2(47)(v), there must be contract which could be enforced in law u/s 53A of Transfer of Property Act. A reading of Section 17(1A) and Sec.49 of the Registration Act shows that in the eyes of law, there is not contract which could be taken cognizance of for the propose specified in Sec.53A. Therefore, the unregistered document as entered into by the assessee could not be considered as fulfilment of requirement of Sec.54. Therefore, the adjudication of lower authorities on merits could not be faulted with.
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2022 (8) TMI 858
Transfer pricing adjustment - management services availed by the assessee from its associated enterprise - HELD THAT:- The management fees paid by the assessee forms part of the cost base, while computing the net margin of the assessee, which has already been accepted to be at arm”s length by the TPO. Therefore, once margin of profit in distribution segment has been accepted after consideration of management fees, then there is no question of making any separate adjustment insofar as payment of management fees is concerned.
As relying on SONY ERICSSON MOBILE COMMUNICATIONS INDIA PVT. LTD. (NOW KNOWN AS SONY INDIA LIMITED) [2015 (3) TMI 580 - DELHI HIGH COURT] we are of the considered opinion that TPO / Assessing Officer was not justified in making adjustment in respect of international transaction of “Payment of Management Fees” in the present case. Accordingly, grounds raised in assessee's appeal are allowed.
Addition u/s 40(a)(i) of the Act for the non-deduction of tax at source on payment made by the assessee to Tekla Corporation for purchase of license, upgrades and maintenance - HELD THAT:- In the present case, though during the course of hearing, learned AR placed reliance upon the aforesaid order passed by the coordinate bench of Tribunal and prayed for similar directions, however, despite adequate opportunity being granted the assessee did not file any additional evidence as were filed in preceding assessment years. Be that as it may, since, as submitted, similar issue is still pending before the Assessing Officer pursuant to aforesaid remand in preceding assessment years, in the larger interest of justice we deem it appropriate to remand this issue, in the present appeal, to the file of Assessing Officer for de novo adjudication with similar directions as were passed by the coordinate bench of Tribunal in aforesaid order. AO further directed to examine the documentary evidence either presented by the assessee or gathered by the Assessing Officer through enquiries which he may deem fit in the facts of the case. Needless to mention that no order shall be passed without affording opportunity of hearing to the assessee. As a result, grounds No. 12 to 15 raised in assessee”s appeal are allowed for statistical purpose.
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2022 (8) TMI 852
Revision u/s 263 by CIT - Denial of deduction u/s 54F - Gain on sale of property was short term capital gain hence, exemption u/s 54F of the Act was wrongly claimed by the Assessee and allowing exemption u/s 54F by the AO on incorrect assumption of the fact that profit earned on the sale on land in question was long term capital gain was erroneous assessment prejudicial to the interest of revenue - HELD THAT:- As with regard to the case in hand the bench is of considered opinion that when the Assessee had claimed deduction which was examined by the ld AO then not only the question of quantum of deduction but also of eligibility has to be presumed to be under examination before the Ld. AO.
Considering the grounds before the Ld CIT(A), even the question of applicability of Section 50 F or 50 C itself has come under challenge, as assessee claimed the land does not fall in category of Capital Assets. After the Tribunal's order [2018 (2) TMI 2080 - ITAT DELHI] this issue as a whole is pending before the ld CIT(A). Thus, when this issue stands restored to the file of the ld CIT(A) by order the exercise of jurisdiction u/s 263 by Revisional Authority by order was not called for as not only the question of quantum of deduction but even the liability and taxability of the consideration arising out of sale of agricultural land by the Assessee had not attained finality.
Now that the matter is with CIT(A) and if the ld CIT(A), decides the issue in favour of the Assessee then issues which the ld Revisional Authority has considered to be erroneous and prejudicial to the interest of revenue, are open to be agitated by the Revenue before the Tribunal, by challenging such, findings of the CIT(A). It appears from the para 6 of the impugned order that Ld Revisional authority was specifically informed of pendency of appeal being pending before the Tribunal but still without giving reasons in the light of section 263(1)(c) of the Act, decided the matter and thus committed an error which needs correction.
This bench is of firm view that grounds raised by the Assessee in the present Revisional petition are covered on facts and law, in ground raised and pending before the ld CIT(A), in appeal against the original assessment order. However, the ground no 1 deserves to be sustained.
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2022 (8) TMI 862
TDS u/s 194C - deduct TDS from the payments made to transporters - whether non-filing of the statutory form as required u/s 194C(7) can deny the benefit provided to the assessee u/s 194C(6) upon the assessee filing the PAN number of the transport contractors? - HELD THAT:- In the cases of Parameswari Spinning Mills (P.) Ltd. 2019 (9) TMI 775 - MADRAS HIGH COURT] and Dilip Kumar [2019 (11) TMI 987 - MADRAS HIGH COURT] the matter was remanded to the AO since the statutory form was not considered by the AO - However, on facts in the instant case we find that the said form was available on the file of the AO much before the completion of the assessment and the AO has not rendered any finding as to the correctness of the details furnished by the assessee in the said statutory form and in identical circumstances in the case of Asian Mills (P.) Ltd. [2021 (12) TMI 365 - GUJARAT HIGH COURT]the case of the assessee was accepted.
Thus, we are of the view that the correctness of the details in the statutory form having not been faulted by the Assessing Officer, the first Appellate Authority as well as the Tribunal were right in granting the relief in favour of the assessee.
Learned senior counsel appearing for the respondent/assessee pointed that in column 1(e) of Form 26Q the assessee is required to answer the question “Has any statement been filed earlier for this quarter (Yes/No)”. Clause 1(f) of the said Form states, “if answer of (e) is `Yes’, then Provisional Receipt No. of original statement”.
On seeing these questions which are to be answered by the assessee in the statutory Form 26Q, it gives an impression that the assessee is entitled to file more than one statement and probably for that reason a query was made to the assessee if he has filed any statement earlier for the said quarter. In any event, the Assessing Officer having not found fault with the contents of Form 26Q filed by the assessee, on a technical ground the relief cannot be denied to assessee and the Tribunal was right in dismissing the revenue’s appeal. Tribunal had noted the decision of the Calcutta Tribunal in the case of Soma Rani Ghosh. It is submitted by the learned standing Counsel for the appellant that as against the said decision the revenue had filed appeal being Principal Commissioner of Income Tax, Kolkata-17, Kolkata vs. Soma Rani Ghosh [2018 (6) TMI 1812 - CALCUTTA HIGH COURT]
However, it is not disputed that subsequently the appeal was dismissed on the ground of low tax effect. Thus, as on date, the decision of the learned Tribunal in Soma Rani Ghosh remains intact and this decision also would ensure in favour of the respondent/assessee.
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2022 (8) TMI 857
Undisclosed sale consideration against the sale of property - survey operation u/s 133A - In survey operation, a draft sale deed was found between the assessee and other party wherein the sale consideration was shown different leading to a difference in the sale consideration which was less/short reported by the assessee - HELD THAT:- The draft sale deed based on which the addition has been made by the authorities below has never been signed by the assessee and therefore no credence can be given to such draft sale deed. Likewise, the admission before the Settlement Commission made by the third party cannot be used against the assessee until and unless it is provided to the assessee for the confrontation.
Draft sale deed in the absence of other corroborative materials cannot substitute the evidence. Hon’ble Supreme Court in the case of CBI vs. VC Shukla [1998 (3) TMI 675 - SUPREME COURT] held that entry can be made by any person against the name of any other person in any sheet, paper or computer, but the same cannot be the basis of making charges against the person whose name noted on sheet without corroborating the same
The admission made by the buyer of the property before the Settlement Commission does not establish the fact that the assessee has received unaccounted consideration. Thus, we are not convinced with the findings of the authority below. Hence, we set aside the finding of the Ld. CIT(A), and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed.
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2022 (8) TMI 856
Addition u/s 14A r.w.r. 8D - Contention of assessee before us is, the disallowance under Rule 8D(2)(iii) should be computed by considering only those investments which have yielded exempt income during the year - HELD THAT:- Matter is restored to the file of the Assessing Officer with a direction for factual verification of assessee's claim with reference to working of investments which have either yielded taxable income or not yielded any income and compute the disallowance with reference to only those investments which have yielded exempt income during the year.
Determination of taxable income at a higher figure - As submitted that the AO while giving appeal effect to the order of the ITAT has wrongly assumed the assessed income at a higher figure without any basis, the correction of which has not been carried out resulting in the determination of higher taxable income without any legal basis - HELD THAT:- As per submissions made on behalf of the assessee, we consider it expedient to restore this issue also back to the file of the AO. The assessee shall be at liberty to provide suitable explanation and adduce such evidence as may be necessary to establish its case before the AO. AO shall dispose of the grievance of the assessee in the light of the facts in accordance with law.
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2022 (8) TMI 855
Validity of reopening of assessment u/s 147 - scope of new/fresh information or material initiating reassessment - Rental income receipts as deemed income - HELD THAT:- Property in question which was situated at Milton Apartments Mumbai was rented upto assessment year 2008-09. For assessment 2008-09, the said property was rented for a sum and assessment order for AY 2008-09 u/s 143(3) was also passed including the above rented income. For the subsequent assessment years namely AY 2009-10 and AY 2010-11, no rental income was declared by the assessee in the return of income and order was passed u/s 143(1) and the Department had accepted the assessee’s stand that there was no rental income earned by the assessee from the said property situated in Milton apartments.
For the impugned assessment year AY 2011-12, no rental income was declared on the said property in the return of income, which was the same situation as was prevailing for the previous two years as well. During the impugned year, the property in question was sold by the assessee and the income from LTCG on sale of said property came for consideration before the AO. Details were called for by the AO during the course of assessment and an addition was made as LTCG on sale of the impugned property. Therefore, from the facts before us, it is evident that no new/fresh information or material came into the possession of the assessing officer necessitating him to initiate reassessment proceedings under section 147.
All the information on the basis of which reassessment proceedings have been initiated by AO was within his knowledge at the time of passing of original assessment order. AO has initiated reassessment proceedings on reconsideration of the same facts which prevailed during the course of original assessment. No new facts/materials/information was discovered which led to the belief that income had escaped assessment, which was not in the knowledge of the assessing officer at the time of original assessment.
Re-assessment proceedings were on a mere “change of opinion” and the AO is seeking a review of his earlier order vide the present reassessment proceedings. We are of the view that Ld. CIT(Appeals) has erred in facts and in law in confirming the additions made by the AO in the reassessment proceedings. - Decided in favour of assessee.
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2022 (8) TMI 815
Reopening of assessment u/s 148 - Impugned order under Section 148A(d) has been passed on the ground that no reply has been submitted - HELD THAT:- The petitioner has filed a copy of screen-shot of uploading his reply dated 29.03.2022, which appears at page 25 of the writ petition. Thus, the impugned order passed by the respondents, prima facie appears to be erroneous.
Sri Gaurav Mahajan, learned counsel for the respondent Nos.2 and 3 prays for and is granted a week's time to file short counter affidavit in which the respondents shall specifically state as to whether petitioner has submitted reply dated 29.03.2022 and whether it is available on the portal.
Put up as a fresh case before the appropriate bench on 02.08.2022.
As an interim measure, it is provided that the impugned notice under Section 148 and the impugned order under Section 148A(d) of the Act, 1961, shall be kept in abeyance till the next fixed.
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2022 (8) TMI 854
Addition u/s 68 - non-confirmation of credit balances payable as provision for internal audit to TR Chadha and Co. and sum payable as leave and pension contribution to deputationist Ms. P Meera Anusha who came from State Govt. as undisclosed credit balances - HELD THAT:- Contention of the assessee that the amount was made as a provision entry for F.Y. 2015-16 relevant to A.Y. 2016-17 towards internal audit fees payment to M/s. T. R. Chadha & Co., who the internal auditors of the company. Since M/s. T. R. Chadha & Co. has raised invoice in subsequent Financial Year i.e. in F.Y. 2016-17 after the completion of work, it was not reflected in their confirmation. Assessee has also produced the copy of account which evidences the payment of Rs. 99,000/- made to M/s. T. R. Chadha & Co. in subsequent financial year aforesaid contention of the assessee has not been controverted by Revenue. Considering the totality of the aforesaid facts, we are of the view that no addition was called for more so, when no evidence about the expenses being bogus in nature has been brought on record by the Revenue. We, therefore, direct the deletion of addition made by AO.
Addition payable to M/s. P. Meera Anusha, it is the contention of the assessee that she is an employee of State Govt. on deputation to the company and as per the understanding with State Govt., assessee is required to pay her in addition to her salary, the leave and pension contribution and reimbursement of expenses like Telephone, newspaper etc. The assessee has also placed on record the copy of the claims towards the expenses and the leave and pension contribution made by the assessee through her parent organization. Assessee has also demonstrated that the aforesaid amount has been paid to the assessee in subsequent year - Thus in the absence of the any evidence placed by the Revenue to demonstrate that the payment is bogus in nature, we are of the view that no disallowance of aforesaid expenses is called for in the present case. We, therefore, direct its deletion thus the ground of assessee is allowed.
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2022 (8) TMI 851
Disallowance of commission expenses paid by the assessee to its related concern - As per AO no basis whatsoever for paying anything to MCPL, especially in view of the fact that even without the payment of such commission the assessee company was showing a healthy growth and no documentary or even circumstantial evidence has been produced to prove that any service was rendered by MCPL - HELD THAT:- In the present case, it has not been denied by the assessee that MCPL is a related entity. The assessee has only claimed that the commission payment to MCPL is not excessive and unreasonable and tax was deducted at source as well as both the companies are falling under maximum marginal rate of tax, thus there is no tax evasion. It is pertinent to note that as per the provision of section 40A(2), if the AO is of the opinion that payment made by the assessee to its related entity is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to the assessee therefrom, so much of the expenditure as is considered to be excessive or unreasonable shall not be allowed as a deduction to the assessee.
In the present case, we find that the AO did not summon the Directors of MCPL despite the fact that their identity was known to the AO. We also find that the AO has also not examined whether MCPL was rendering similar services to entities other than the assessee and the commission charged from such entities. From the record, it is also evident that the AO treated the entire commission expenditure of Rs. 2,39,45,501, as commission paid to MCPL, on the other hand, assessee’s claim is that only Rs. 2,13,10,818, is commission paid to MCPL and the balance is 26,34,683, was paid to an individual (Mr. J. Kamdar), thus, in view of the above, the transaction with Mr. J. Kamdar was neither examined by the Assessing Officer nor the details pertaining to same are available on record. It is also pertinent to note that though MCPL has claimed to be having experience of 40 years, however, it cannot be denied that till assessment year 2012–13 the said entity was engaged in manufacturing activities and the said activity was discontinued thereafter. Therefore, we are of the considered view that it is also to be examined as to how an entity who has been in manufacturing business till assessment year 2012–13 became experienced in rendering marketing activities of the nature mentioned by the assessee before the AO.
Also the fact that the assessee deducted tax at source and both the companies are falling under maximum marginal rate of tax, does not satisfy the requirement of reasonableness of expenditure qua the services alleged to be received by the assessee. All the above aspects were neither examined by the AO nor by the CIT(A) and appeal filed by the assessee was allowed vide impugned order without even calling for any remand report, in this regard, from the AO. In view of the above, the impugned order passed by the CIT(A) is set aside and matter is remanded to the AO for de novo adjudication after examination of all the aspects as highlighted above. The assessee is directed to produce all the documents/details necessary to prove rendition of service for which commission expenditure is incurred. Accordingly, grounds raised by the Revenue are allowed for statistical purpose.
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2022 (8) TMI 853
Exemption u/s 10(23C) (vi) - denial of benefit was actually withdrawal of the exemption which was provided to the assessee with its former name - appellant is an institution established by the Government of India, Ministry of Road Transport and Highway and was previously known by the name National Institute for Training of Highway Engineers (NITHE) - As argued assessee Appellant society is an extended arm of the Government, formed and running with an object to give the technical training and necessary professional grounding in the field of Highway engineering including bridges to ensure an efficient, safe, reliable and economic highway system as in integral part of nation's economy, and without considering these facts on record, the CIT (Exemption) has arbitrarily rejected the application by wrongly inferring that the Appellant Society is not doing any charity and is running on commercial lines only because it has surplus -
HELD THAT:- Broadening of objectives did not in any way change the nature of objectives of the institution or its functionality. It continued to be an institution to give technical training and necessary professional grounding in the field of highway engineers including bridges to ensure an efficient, safe, reliable and economic highway system as an integral part of nation’s economy.
Tax Authority has questioned the charitable objectives of the appellant. An important aspect that is over looked by the Ld. Tax Authority is that appellant is an autonomous institution of a Ministry of Road Transport and Highway, Government of India. The initial funding was from this administrative ministry and even the land for building has been purchased in name of President of India. The Bench is of view that there cannot be a more sacrosanct purpose of an institution like the present appellant which is giving formal training to professionals like highway engineers, who otherwise would not have any training or continued learning, from ordinary academic institutions or Universities.
A self sustaining autonomous institution is rather expected to be generating receipts for its subsistence rather then being dependent on the Government for aid. So, merely collection of fee for training programs cannot make an autonomous institution to be commercial, as observed by the Ld. Tax Authority.
It is actually imperative for the Tax Authorities examining applications under section 10(23C)(vi) of the Act, to reflect in their orders that matter has been examined on basis of tests recognized by the Hon’ble Apex Court in Queens Educational Society Case [2015 (3) TMI 619 - SUPREME COURT] to determine whether an educational institution exists solely for educational purposes and not for purposes of profit and which has not been done in present case by the Ld. Tax Authority.
The impugned order is not sustainable and same is set aside. CIT(E) is directed to issue the exemption certificate to 10(23C)(vi) of the Act for the relevant assessment years. Decided in favour of assessee.
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2022 (8) TMI 850
Revision u/s 263 - Disallowance u/s 40A(3) - AO initiated reassessment proceedings on the strength of cash payments - HELD THAT:- It is apparent that if the payment is made to a person otherwise than through the modes prescribed in the section and the recipient is residing in any village or town, not served by any bank, then no disallowance shall be made u/s.40A(3) - The assessee furnished certificates dated 22-12-2016 from Gram Panchayat (Local Govt. authority) that the two villages namely (1) Pakahrsangvi and (2) Khandgaon were not served by any bank. All the payments under consideration have been made to the residents of these villages as have been admitted by the ld. Pr.CIT as well. Not only such certificates were produced before the AO during the course of assessment proceedings on the basis of which he got satisfied and did not make any disallowance, these were also filed before the CIT in the revision proceedings. He did not find anything amiss in them and still preferred to direct the AO to verify their veracity. Under such circumstances, we fail to comprehend as to how the assessment order can be termed as erroneous and prejudicial to the interest of revenue. The position would have been different if the AO had accepted the contention of the assessee of being covered under rule 6DD(g) without any support of the certificates. Here is a case in which the assessee furnished necessary certificates from Gram Panchayat (Local Govt. authority) indicating that the recipients under consideration were living in two villages which were not served by any bank and the AO accepted genuineness of the certificates. In that view of the matter, we do not find any infirmity in the order of the AO in not making disallowance in respect of the payments made to the residents of these two villages. The impugned order is set aside to this extent.
Pr.CIT invoked his revisionary jurisdiction is non-verification of advances from the customers - In the assessment order passed u/s 147 of the Act, the AO made addition of Rs.11 lacs, being, the amount which, in his opinion, contravened the provisions of section 40A(3). Thus, it is apparent that the question of verification of advances from customer totaling to Rs.89,60,500 was not the subject matter of re-assessment concluded by means of an order on 29.12.2016. Once the issue of advances from customers is held to be not a part of re-assessment proceedings, naturally, it will pertain to the original assessment proceedings.
The limitation for revision is contained in sub-section (2) of section 263 of the Act, being, a period of two years from the end of financial year in which the order sought to be revised was passed. Thus, an order u/s 263 is required to be passed within a period of two years from the end of financial year in which the order sought to be revised is passed. The impugned order u/s 263 has been passed in this case on 25.03.2019. Though the reassessment order was passed on 29.12.2016, the relevant assessment order for the purposes of advances from customers is the original assessment order, which was passed on 21.03.2014. The period of two years from the end of financial year in which the order was passed, came to end on 31.03.2016. As the impugned order has been passed in the year 2019, it is therefore, held to be barred by limitation on the issue of advances from customers. We, therefore, set aside the impugned order on this score as well. Assessee appeal is allowed.
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2022 (8) TMI 849
Validity of the assessment order passed u/s 153A read with section 143(3) - as argued notice under Section 143(3) of the Act was not issued and served within the statutory time limit - HELD THAT:- Assessee had filed its return of income under Section 139(1) on 13.09.2013. Thus, as per proviso to Section 143(2) as it existed prior to its amendment by Finance Act, 2016 w.e.f. 01.06.2016, no notice under Section 143(2) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished under Section 139(1) or section 142(1) - In the facts of the present appeal, assessee had filed its return of income on 30.09.2013, therefore, in terms with the proviso to section 143(2) of the Act, notice under Section 143(2) of the Act, should have been served on the assessee on or before 30th September 2014
As per facts available on record, notice under Section 143(2) of the Act was issued by the assessing officer on 13th October 2014. Thus, the notice issued under Section 143(2) of the Act in the instant case is beyond the period of limitation prescribed in the statute, hence, is an invalid notice. Based on such an invalid notice, assessing officer could not have assumed jurisdiction for completing the assessment under Section 143(3) of the Act. Therefore, in absence of a valid notice issued under Section 143(2) of the Act, the assessment order passed in consequence thereof is unsustainable. Similar view has been expressed by the co-ordinate Bench in case of Harman Singh Dhingra [2021 (11) TMI 854 - ITAT DELHI]
We hold that the assessment order passed under Section 153C read with section 143(3) of the Act based on an invalid notice issued under Section 143(2) of the Act is equally invalid. Accordingly, we quash the assessment order. As a natural corollary, the impugned order of learned Commissioner (Appeals) is set aside. The additional ground is allowed.
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2022 (8) TMI 848
Addition 56(2)(vii)(b) - difference in stamp duty value and purchase price of the property - original difference in valuation adopted by the AO by taking into consideration the valuation worked out by the DVO and the 50% share of the assessee came - HELD THAT:- AO passed the order u/s 154 when the DVO by considering the objection of the assessee worked out the difference at Rs. 13,41,900. The total consideration for the property was declared by the assessee at Rs. 3,24,00,000/- and his 50% share was at Rs. 1,62,00,000/- while the DVO worked out the valuation of assessee’s share at Rs. 1,75,41,900/-, thus, the difference in valuation determined by the DVO and declared by the assessee was 8.28% which was less than 10%.
On a similar issue, the ITAT Delhi Bench ‘SMC’ for the A.Y. 2014-15 in the case of Geetika Sachdeva [2019 (12) TMI 451 - ITAT DELHI] held that the addition confirmed by the CIT(A) was not tenable since the difference between the sale consideration shown by the assessee and fair market value submitted by the DVO was less than 10% in the said case earlier decision in the case of Rahul Constructions [2012 (1) TMI 229 - ITAT PUNE] where in difference is less than 10 per cent and considering the fact that valuation is always a matter of estimation where some degree of difference is bound to occur, we are of the considered opinion that the AO in the instant case is not justified in substituting the sale consideration as against the actual sale consideration disclosed by the assessee - Decided in favour of assessee.
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2022 (8) TMI 847
Estimation of income - bogus purchases - additions @ 5% of bogus purchases - main submission of the ld. AR of the assessee are that the assessee has shown Gross Profit @ 22.10% which is high in the line of business of the assessee - HELD THAT:- We do not find any merit in the submission of the assessee as no such submission was raised either before Assessing Officer or before ld. CIT(A). Before Assessing Officer no such fact and figure was furnished. AO while rejecting the books of accounts clearly held that no details of quantity and quality wise and rough and polished diamond was furnished - details of carat wise diamond manufactured and quality details were not furnished. The assessee for the first time has come with these fact and figure. No such one to one correlation of purchase and export was prove before Assessing Officer.
The case laws relied by ld. AR is not applicable on the facts of the present case as furnished in the case of Pankaj Kawarlal Jain [2019 (8) TMI 1769 - ITAT SURAT]
in the instant case, there is clear finding of AO that no quantity wise and quality wise detail were furnished, no original challan or jhangad was produced. The assessee has not established as to how much rough diamond used for manufacturing in diamond. Thus, in view of aforesaid discussion, we do not find any merit for further reducing the addition of disputed purchases shown from alleged hawala/bogus entry provider. - Decided against assessee.
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2022 (8) TMI 846
Penalty u/s 271(1)(c) - Disallowance u/s 40(a)(ia) - whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of income so as to make aware the assessee under which of the limb of section 271(1)(c)? - HELD THAT:- AO at the time of initiating the penalty proceedings during framing assessment order has failed to apply his mind as he was not clear enough as to whether he is initiating the penalty proceedings for furnishing inaccurate particulars of income or for concealing the particulars of income rather invoked both the limbs of section 271(1)(c) of the Act.
AO has not applied his mind before initiating the penalty proceedings rather borrowed his satisfaction from the “tax audit report” and proceeded to initiate and levy the penalty which is not sustainable in the eyes of law.
When we examine penalty notice issued by the AO u/s 274 read with section 271(1)(c) it is again vague and ambiguous being not specific as to whether the assessee has concealed the particulars of its income or has furnished inaccurate particulars of income so as to make aware the assessee under which of the limb of section 271(1)(c) of the Act it is going to be penalized.
Since the AO has not issued a valid notice by framing a specific charge to be initiated against the assessee rather invoked both the limbs of section 271(1)(c) of the Act for furnishing inaccurate particulars of income or for concealing the particulars of income no penalty can be imposed on the basis of the same.
Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] has decided the identical issue as to initiating the penalty proceedings on the basis of invalid notice and held that penalty levied on the basis invalid notice issued under section 274 read with section 271(1)(c) of the Act is not sustainable and is liable to be set aside.
As contended for the assessee that when the assessee company has suffered huge losses no penalty under section 271(1)(c) of the Act can be levied and relied upon the order passed by Hon’ble Gujarat High Court and order passed by the co-ordinate Bench of the Tribunal in the cases cited as National Textiles [2000 (10) TMI 19 - GUJARAT HIGH COURT], Qpro Infotech Ltd. [2016 (7) TMI 757 - ITAT MUMBAI] and ACITvs. Manish Organics India Ltd. [2011 (11) TMI 165 - ITAT AHMEDABAD]
Ratio of the order passed by co-ordinate Bench of the Tribunal is that when the disallowance made by the AO has not been contested by the assessee as it had incurred huge losses, which were not even available for carrying forward and set off in future years, no motive can be attributed to the assessee to make a bogus or inflated claims while filing the return of income as the entire process is revenue neutral. So in this case also when the assessee company is suffering huge losses no motive can be attributed to it. When there is no intention of the assessee to gain by making inadmissible claim penalty proceedings are not attracted as it appears to be a bonafide mistake. Even otherwise Assessing Officer has not brought on record any evidence if the assessee has claimed bogus, false or ingenuine expenses rather blindly relied upon the “tax audit report” without recording his satisfaction and as such penalty levied by AO is not sustainable.
We are of the considered view that penalty levied by AO has been rightly deleted by CIT(A), hence finding no illegality of perversity in the impugned order passed by Ld. CIT(A). Present appeal filed by the Revenue is hereby dismissed.
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Customs
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2022 (8) TMI 841
Undervaluation - Rejection of request of importer for provisional release of seized currency - rejection on the ground that since the investigation by DRI was under process, release cannot be ordered and there is no provision under the Customs Act for provisional release of the currency - HELD THAT:- Whether or not the allegations leveled in the Show Cause Notice stands the fate of truth is not the subject matter of present adjudication which is confined merely to the question as to whether the currency notes seized from the premises of the appellant despite being alleged to be sale proceeds of the imported goods owned by appellant, can be provisionally released. Show Cause Notice is sufficient to show that investigation has been concluded in this matter. Hence first ground for rejecting appellant’s request for provisional release of currency is now redundant.
Coming to the other ground of rejection that there is no provision of law to provisionally release the currency notes, it is observed that section 110 of Custom Act 1962 rather requires that any goods seized under section 110 of Customs Act 1962 may pending adjudication can be released provisionally on taking bond with security or such conditions as may be required - No doubt in terms of section 121 of Customs Act, the sale proceeds of smuggled goods shall be liable to confiscation, but apparently the said provision shall not be applicable to the present case wherein there is no allegation of goods imported in question to be smuggled one. The allegations against the importing firm are that the goods as have been imported are undervalued.
The Hon’ble Apex Court in the case of Gurmukh Singh vs UOI [1983 (12) TMI 69 - HIGH COURT OF PUNJAB AND HARYANA, CHANDIGARH] has held that where there is nothing to prove that the amount which is sought to be confiscated is sale proceed of smuggled goods, that must be returned to the person from whom it is seized and authorities are not empowered to take said money into custody. The said money has been taken into custody as on the sole consideration that the appellant is beneficial owner of the goods imported by M/s. Rudra Overseas. The correctness of the said allegation has yet to undergo the test of truth.
Hon’ble Apex Court also in the case of Commissioner of Customs New Delhi vs. Euroasia global [2009 (3) TMI 199 - SUPREME COURT] has considered the question as to whether mis-declaration of description and value constitute “smuggling” as defined under section 2(39) of Customs Act, 1962, the question was decided in negative. Further the release of currency notes was stayed but for the reason that the Hon’ble High Court had granted unconditional release of cash.
Thus, it is clear that belief of the department about the impugned currency notes to be the sale proceeds of imported goods allegedly under-valued goods, but otherwise not alleged to be smuggled goods cannot, be a reason to deny the provisional release of the said currency. The said belief is still to be proved by the department - The release of currency notes otherwise also cannot be denied merely on the basis of statements as was held by Hon’ble Supreme Court of Madras in the case of J K.S. Air travels vs Chief Commissioner of Customs, Chennai-I, [2015 (12) TMI 536 - MADRAS HIGH COURT].
Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 840
Confiscation of seized goods - levy of penalty - 3 pieces of gold bars - discharge of burden of proof under section 123 of the Customs Act, 1962 - HELD THAT:- Mere mentioning during investigation on 28.02.2014 by Vikash Agarwal that the purchase was from Jalan & Co. of Kolkata, cannot be even a circumstance to discredit the documentary evidences produced before the investigating authority and subjected to vivid investigation by DRI. It is apparent that DRI has also recorded subsequent statements of Vikash Agarwal and followed the trail of his purchase from Harimanthan Jewellery House Pvt. Ltd. and being unsuccessful in disproving such transaction between the parties, an effort has been made to raise doubts only upon suspicion, which cannot sustain in law. In such a circumstance, the genuity of transaction between Agarwal Gold House and Harimanthan Jewellery House Pvt. Ltd. under Invoice dated 15.02.2014 for purchase/ sale of 1000 gms. of pure gold is well established upon documents.
There is nothing on-record from the investigating authority to deny the stock of pure gold available with Agarwal Gold House as on 01.04.2013 and as such, there is no evidence on-record to doubt that the seized gold was not from the said stock and subsequent purchases of Agarwal Gold House, which were handed over to Mohanlal @ Ram by Vikash Agarwal. The only question, thus, remains whether the appellants, specially Sri Vikash Agarwal, Proprietor of M/s. Agarwal Gold House has been able to discharge his burden of proof u/s. 123 of the Customs Act, 1962 in the facts of the present case.
There is nothing on-record from the investigating and/or adjudicating authority to controvert the evidences produced by the Appellants in the present case. In such a circumstance, the order of confiscation of the seized gold weighing 1958.240 gms. under section 111(d) of the Customs Act, 1962 only on suspicion and presumption, is bad in law and cannot sustain and hence, we set aside the same with consequential relief to the claimant/ Appellant Sri Vikash Agarwal, Proprietor of M/s. Agrawal Gold House - penalties imposed upon the Appellants under section 112 of the Customs Act, 1962, are also set aside.
Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 845
Over invoicing - fraudulent claim of duty drawback - Power to remand the case to collector - validity of remanding the proceedings to the respondent to decide on the issue of limitation, when neither the appellant nor the respondent requested for remand of the proceedings - failure to exercise the jurisdiction conferred upon it under section 129B of the Customs Act in not deciding the appeal on the grounds raised by the appellant and remanding the proceedings to the respondent - HELD THAT:- It needs to be clarified that although the present appeal was filed by the appellant in this Court on 17th September 2021, it had been listed before this Court for the first time on 27th July 2022, when the matter could not be taken up due to paucity of time, by which time, in any case, the Commissioner of Customs (Export Promotion) had already passed the order dated 6th October 2021 upon remand. Since there was no order passed in the present appeal staying the operation of the order impugned, the mere fling of the appeal or its pendency before this Court would thus by itself not be a legal impediment for passing the order dated 6th October 2021 upon remand.
The directions having been already carried out and a detailed view having been already expressed by the original authority, in case the matter is considered in appeal by the Tribunal, it would have the benefit of the views expressed on the issues on which the matter stood remanded - Appeal dismissed.
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2022 (8) TMI 844
Levy of Anti-dumping duty - import of unclad/non-clad aluminium foil from China PR - exclusion in the Notification No.23/2017, Respondent No.4, the Commissioner of Customs, JNPT assessed all the imports of clad aluminium foil from China PR without payment of anti-dumping duty - no reply has been filed though the Petition has been served more than a year ago - HELD THAT:- The portion which is relevant to the Petition at hand is Subclause (iii) of Clause (b) of Sub-section (1) of Section 9(B). This provides that the Central Government shall not levy any anti-dumping duty under Sub-section (2) of Section 9(A) on import into India of any article from the specified countries unless in accordance with the rules made under Sub-section (2) of Section 9(A), a preliminary finding has been made of subsidy or dumping and consequent injury to domestic industry, and a further determination has also been made that a duty is necessary to prevent injury being caused during the investigation. As could be seen from the averments in the Petition as well as the Rules, the finding has to be given by the Directorate General of Anti-Dumping and Allied Duties in the Department of Commerce, Ministry of Commerce and Industry, Government of India.
Subsequently, there is a clarification issued by the Directorate General of Anti-Dumping and Allied Duties on 1st February, 2018 which is quoted earlier. Therefore, it is quite clear that clad as well as clad with compatible non-clad or unclad aluminium foil has been excluded from anti-dumping duty. Respondent No.4 therefore was not justified in insisting on payment of anti-dumping duty for clearance of unclad or non-clad consignment of aluminium foil, more so, when the same product is allowed to be imported from other ports without insisting on payment of levy of anti-dumping duty.
Thus, it is declared that levy and collection of ADD on unclad or non-clad aluminium foils for automobile industry imported from China PR in terms of Notification No.23/2017-Cus.(ADD) dated 16.05.2017, is incorrect and contrary to Section 9A read with 9B(b)(iii) of the Customs Tariff Act, 1975 and read with paragraph(s) 9(ii)(c), 12, 31, 79 and 136(xlix) of Final Findings dated 10.03.17 - it is directed that Respondents by themselves, their officers, subordinates, servants and agents to forthwith grant refund of Antidumping Duty paid by the Petitioner under protest on import of unclad/non-clad aluminium foil from China PR in terms of Notification No.23/2017–Cus. (ADD) dated 16.05.2017 during the period from August 2017 to December 2018.
Respondent No.4 are directed to refund all amounts paid by Petitioner with applicable interest in accordance with law/return all bank guarantees - petition disposed off.
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2022 (8) TMI 843
Maintainability of application filed by the appellant under section 129B of the Customs Act, 1962 read with R.20 of the CESTAT (Procedure) Rules, 1982 for rectification of the mistake apparent on the record - power of review and rectification - HELD THAT:- Strangely for reasons not discernible from the order dated 30.04.2015 the appellant, while suffering an order of dismissal ex parte, is called upon to deposit the full amount. The Tribunal did not impose a default clause that the appeal would be heard only upon the amount is deposited by the appellant. However, by referring to the default in complying with the condition imposed on 30.04.2015, the appeal is dismissed. When an application is filed to recall, several decisions are referred to and for the reasons already excerpted the Tribunal made the order dated 06.01.2017. The Tribunal proceeded on the grounds available for review of the order without appreciating the inherent error in exercise of its jurisdiction.
The orders dated 06.01.2017 and 13.07.2015 are ex facie illegal and unavailable in the circumstances of the case. Thus, the appeal filed by the appellant before the CESTAT resulted in dismissal for unavailable grounds and reasons. With the comprehensive consideration of both substantial questions of law, the ground is made out for our interference. The questions are answered in favour of the appellant and against the respondent.
Appeal allowed.
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2022 (8) TMI 842
Violation of principles of natural justice - whether Commissioner of Customs merely concurred with the Inquiry Report without any consideration? - all the documents and evidence on record, were considered or not, to arrive at conclusion - HELD THAT:- The findings recorded by the Tribunal have their basis in the record which it perused for holding that there was a violation of the principles of natural justice rendering the order of revocation of the license of the respondent unsustainable in law. There is nothing in the said order which can be said to be perverse - Different view from the one recorded by the Tribunal, cannot be taken.
The appeal is found to be without merit is accordingly dismissed.
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Corporate Laws
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2022 (8) TMI 839
Maintainability of writ petition - non-speaking order - Principles of res judicata - Appointment of statutory auditors - gross violation of the provisions of section 141 (3)(i) read with section 144(b) of the Companies Act, 2013 - seeking to appoint some other qualified Chartered Accountant as the Statutory Auditors of the Company to complete the financial audit for the five financial years starting from 1st April, 2016 and ending on 31st March, 2021 and to file its revised financial statements - HELD THAT:- A bare perusal of the impugned order is sufficient for this court to hold that it is bereft of reasoning, as the issue raised by the petitioner herein has not been dealt with by the Regional Director in any manner. The review application has also been dismissed simply on the ground of res-judicata, which cannot be a ground to reject an application for review.
Maintainability of writ petition - HELD THAT:- The Supreme Court, in the case of Satwati Deswal v. State of Haryana, [2009 (11) TMI 998 - SUPREME COURT] has held It is well settled that a writ petition can be held to be maintainable even if an alternative remedy is available to an aggrieved party where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right; or if there had been a violation of a principle of natural justice; or where vires of the Act were in question.
Thus, when the order is totally silent on the issues raised by the petitioner, despite noting the same, it is nothing but an unreasoned order, violating the principles of natural justice and thus, can be challenged before this court under Article 226 of the Constitution.
The impugned order being passed without assigning reasons on the issue involved is hereby set aside as also the review order, and the matter is remanded back to the Regional Director to decide the petitioner's application afresh by a reasoned and speaking order, within a period of one month from the date of receipt of this order - Petition disposed off by way of remand.
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2022 (8) TMI 838
Oppression and mismanagement - misappropriation of crores of rupees - increase of shareholdings illegally - misuse of capacity as Managing Director of the company and had transferred lands belonging to the appellant company illegally in his favour and in favour of his family members - entitlemet to injunctions prayed for - maintainability of suit of appellant - HELD THAT:- In the case on hand, the complaint is not by the individual member of the company, but by the company itself seeking to cancel the sale deeds executed by the then Managing Director/first respondent representing the company in his own name or in the name of his family members, a total of 79 transactions and sale transactions were made much prior to three months from the date of filing of the civil suit. Therefore, even if course suggested by Section 242 is to be followed, no such action can be taken under Section 242 (2)(g). Therefore, perforce, provisions in Sections 241 and 242 are not attracted to the cases on hand - Juxtaposing Section 59 with Section 241, it is apparent that while under Section 59 a company can also file complaint or application before the Tribunal, under Section 241 only a member can file such a complaint. A company has no remedy before the Tribunal. Further, the course suggested by Section 242 (2)(g) can be adopted when the Tribunal is satisfied that winding-up process be set in motion. Therefore, it cannot be assumed that jurisdiction of the civil Court is ousted.
In SHASHI PRAKASH KHEMKA (DEAD) THROUGH LRS. AND ANOTHER VERSUS NEPC MICON (NOW CALLED NEPC INDIA LTD.) AND OTHERS [2019 (2) TMI 971 - SUPREME COURT], matter concerns transfer of shares. On appeal filed against the order of Company Law Board, Madras High Court reversed the decision of the Company Law Board and appellants were left to avail a remedy of civil suit.
The issue raised therein is covered by the provision in Section 59 of the Act. Section 59 vests jurisdiction in the NCLT. In view thereof the civil suit remedy completely barred and only National Company Law Tribunal alone is entitled to adjudicate the dispute raised under Section 59.
Cumulatively, unless, there is specific bar excluding the jurisdiction of the civil Court on any matter, which is also traceable to Companies Act, the jurisdiction of the civil Court to decide the civil dispute is not ousted - what is urged before the civil Court is a dispute civil in nature and the civil Court has jurisdiction under Section 9 of the CPC and the jurisdiction of civil Court is not ousted by Section 241 of the Companies Act. Except Section 241 no other provision is brought to our notice, which ousted the jurisdiction of the civil Court to adjudicate the dispute raised by the plaintiff company. The Cross Objection No. 24 of 2022 on maintainability of suit is rejected.
Grant of injunction pending trial of a suit - HELD THAT:- The elementary principles to consider application to grant injunction pending trial of a suit are prima facie case, balance of convenience and irreparable loss and hardship to the plaintiff - The proceeds of sale transactions are not reflected in the company accounts. The appellant marked Exs.P96 - bank statement, to show that it does not reflect depositing of sale proceeds. Sale deeds may reflect payment of full sale consideration, but in 49 sale deeds he represented the company as vendor and he is the vendee and in 15 other sale deeds his family members are the vendees. Therefore, it was only nominal transaction. At any rate, sale proceeds are not credited to the company account. As no money is credited to the bank accounts of the company, prima facie, it cannot be said that the sale of land was in the interest of the company. The allegations leveled by the appellant, if proved, are serious. It may be possible that what all was done by the first respondent was justified and in the interests of the company. Parties are entitled to lead evidence in support of respective claims. While so, if injunction is not granted, respondents/defendants are free to change the physical features of the land and create third party interests. If that happens, in the event of plaintiff succeeding in the suit it would be difficult to enforce the decree and secure possession of the land and might lead to more litigation.
Appellant has made out a prima facie case. In the peculiar facts of these cases, balance of convenience is in favour of the appellant and unless injunction is granted, grave prejudice would be caused to the appellant which cannot be remedied later.
Appeal allowed.
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Insolvency & Bankruptcy
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2022 (8) TMI 837
Seeking withdrawal of application admitted - OTS proposal of the Appellant accepted by the Bank or not - RP received any such communication by the Bank regarding the acceptance of OTS of the Appellant, or not - HELD THAT:- The Letter dated 16.10.2020 is the only communication which was received by the Appellant from the Bank regarding OTS Offer of the Appellant. When we read the letter dated 16.10.2020 it clearly indicates that OTS Offer dated 14.10.2020 was not accepted by the Bank rather the second paragraph of Letter clearly indicates that if the Corporate Debtor intends to settle the matter under OTS, appropriate application is to be filed by the Corporate Debtor under Section 12A of the IBC, 2016 mentioning the details of offer, source of fund, payment schedule etc. Thus the letter dated 16.10.2020 required further information as indicated in the Letter for consideration of OTS Offer - From the pleadings, it does appear that Application under Section 12A was shared by the Appellant to the RP and the Bank, but the said Application under Section 12A was never filed before the Adjudicating Authority. The Resolution Professional has stated in his Reply that he never received any acceptance from the Bank of OTS offer of the Appellant hence there was no question of filing any Application under Section 12A of the Code.
Whether the minutes of Committee of Creditors dated 03rd February, 2021 indicates that OTS proposals made by the Appellant was not considered and without consideration of the OTS Proposal, CoC proceeded to approve the Resolution Plan of the Respondent No. 3? - HELD THAT:- Form-FA was never provided. It was also noted that officials of Corporate Debtor were in talk with the Bank and matter regarding the settlement was yet to be formalized through NCLT. CoC resolved that CIRP need to be continued and steps in the process need to be covered accordingly. The CoC when decided to proceed to consider the Resolution Plan at hand it is implicit the OTS Offer made by the Appellant was never accepted.
Thus, withdrawal Application under Section 12A after the constitution of CoC is to be dealt in further two sub-heads. There is stringent requirement which is to be mentioned by the Appellant for withdrawal if the Application is made after the issue of invitation of EoI. In the present case, EoI was published on 15.09.2020 and even the OTS Offer made by the Appellant was after publication i.e. 14.10.2020 thus present is the case where invitation of EoI was made much earlier than OTS offer hence there has to be some reason justifying the withdrawal after issue of such invitation. Present is a case where Application under Section 12A was never filed before the Adjudicating Authority. Thus, for withdrawal, in the present facts of the case, specific reasons were required justifying withdrawal when the OTS Offer was made after publication of Form-G.
There is no material to indicate that OTS Offer of the Appellant was ever accepted by the Bank. We had also noticed the Letter dated 16.10.2020 which requires certain information from the Appellant for consideration of the OTS Offer. Thus the present is a case where OTS offer of the Appellant was never accepted hence occasion to proceed under route of Section 12A did not arise.
There is no error in the Order of the Adjudicating Authority - The Adjudicating Authority also did not commit any error in passing the Order dated 19th April, 2022 approving the Resolution Plan filed by the Resolution Professional - Application disposed off.
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2022 (8) TMI 836
Maintainability of application - initiation of CIRP - non-payment of Minimum Guaranteed Royalties as compensation in lieu of Licensing Agreement entered into with the Corporate Debtor - Operational Debt u/s 5(21) of the Code or not - case of the Appellant is that the payment of Minimum Guaranteed Royalties under the Agreement does not arise out of any ‘goods or services’ and therefore does not fall within the ambit of 'Operational Debt' as defined under Section 5(21) of the Code - pre-existing dispute or not - service of notice - HELD THAT:- In the instant case, the Respondent has permitted the (a) use manufacture, sell, distribute and advertise the licensed products (b) use of intellectual property rights i.e., the trademark ‘Kolkata Knight Riders’/(‘KKR’) brand logo and any other trademark which as the first Respondent may designate in its sole and absolute discretion or in association with the licensed products in India as well as on packaging, promotional and advertising material associated therewith - the 'Claim' of the Respondent is in respect of the provision of the Goods and Services for which the 'Corporate Debtor' is contractually obligated to make the payments towards such 'Claim'. The clauses of the Agreement provided for Royalties to be paid as a variable amount to the first Respondent and the minimum guaranteed amount to be paid as a fixed payment as stipulated under Clause 4.2 of the Agreement.
The 'Claim' in respect of such provisions of ‘goods and services’, under the terms of the Agreement, fall within the ambit of the definition of 'Operational Debt' as defined under Section 5(21) of the Code.
Pre-Existing Dispute between the parties - HELD THAT:- It is relevant to peruse the emails exchanged between the parties where nowhere did the 'Corporate Debtor' raise any dispute in terms of Section 8(2)(a)read with section 5(6) of the Code, either with regard to existence of the amount of debt or with regard to the quality of goods or services or regarding the breach of the representation or warranty either directly or indirectly.
Service of section 8 notice - HELD THAT:- The contention of the Learned Counsel for the Appellant that in the very same email dated 25.04.2018, it is stated that the record establishes that the 'Corporate Debtor' had willfully and actively avoided service of the Notice and therefore, this statement proves that the Notice was never received by them is untenable, keeping in view that the Demand Notice was sent to the Email ID of the 'Corporate Debtor' which is the registered Email ID shown in the Master Data as stipulated by the Ministry of Corporate Affairs.
Thus, there is no illegality or infirmity in the well-reasoned Impugned Order of the Learned Adjudicating Authority - appeal dismissed.
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2022 (8) TMI 835
Non-production of Additional Documents/ Additional Evidence - Party negligent in preferring the documents and not filing the same, despite knowledge at appropriate time - screenshots - admissible evidence or not - It is the plea of the 1st Respondent that Applicant/Appellant has exhibited its Legal Bias and the Fraudulent Actions are visible from the Reports filed by the 2nd Respondent - failure to establish any reason for not bringing the Additional Documents/Evidence before the Adjudicating Authority at the appropriate time - HELD THAT:- In the instant case, the Appellant has come out with a plea that the Respondents No. 1 and 2 have joined together in declaring the 3rd Respondent as the Successful Highest Bidder. The Appellant before the Adjudicating Authority had relied upon the screenshots, which were System generated to fall back upon its contention that the auction was closed at 05:43:17 hours (Indian Standard Time) which was not accompanied by a Certificate as per the ingredients of Section 65B (4) of the Indian Evidence Act, 1872.
As a matter of fact, it is evident from the Bid History, that the Bids Sum was made known as Rs.17,80,00,000/-. On 21.01.2021, the snapshots of the screen were taken at 05:43:17 hours (Indian Standard Time), which is not backed up by a furnishing of Certificate, as per Section 65B (4) of the Indian Evidence Act. In reality, the onus is upon the Appellant/Applicant to ascertain the Equipment / System through which the snap shots were generated and a Certificate ought to have been filed by the Appellant / Applicant in terms of Section 65B of the Indian Evidence Act, 1872, coupled with the Information Technology Act, 2000. Unfortunately, the Appellant had not produced the Certificate in question, as per the requirement of aforesaid Acts before the Adjudicating Authority.
Sections 65A and 65B of the Indian Evidence Act, 1872 are brought in, under Schedule II to the Information Technology Act, 2000. Section 5 of the Indian Evidence Act, 1872, provides that an evidence can be given regarding only facts that are at issue or of relevance. Section 136 of the Indian Evidence Act, 1872, empowers a Judge to determine on admissibility of evidence, in a given case. The contents of Electronic Record may be proved as per Section 65B of the Indian Evidence Act, 1872.
In the present case, it is brought to the fore from the System generated ‘Log Report’ that the ‘Appellant’ had logged in at 17:37:20 hours. It placed its Bid at 17:37:34 hours. The Appellant logged in at 17:57:59 and for nearly 20 minutes and 25 seconds, had logged out for a considerable time (there being no activity on its part), of course in breach of the E-auction terms and conditions - One cannot ignore the important fact that as per the E-auction conditions, the Auction screen ought not be shared with any Third Party and in fact, the Third Party Application ZOOM was active / operated at the time of Auction Process and also that various other Applications were running at the same time during active Auction. During the period of inactivity for about 20 minutes, the 3rd Respondent had increased the Bid by Rs.10,00,000/- to Rs.17,90,00,000/-. The 3rd Respondent had placed its Bid at 17:41:01 hours. Indeed, the Appellant’s last Bid at 17:37:34 hours for Rs.17,80,00,000/-.
It cannot be gainsaid that Schedule I Mode of Sale (under Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations 2016, Serial No. 10, it is mentioned as ‘If the Liquidator is of the opinion that an auction where bid amounts are not visible is likely to maximize realizations from the sale of assets and is in the best interests of the creditors, he may apply, in writing, to the Adjudicating Authority for the permission to conduct an auction in such manner’. It is to be borne in mind that the 1st Respondent/’Liquidator had not resorted to the recourse of preferring an Application, based on the ground that the Bid Sums were not discernible, as per the stand taken on behalf of the Appellant/Applicant.
A charge of Fraud must be substantially proved as laid and when one kind of Fraud is charged, another kind of Fraud cannot be substituted - A party guilty of fraud can insist of his rights under the Contract, when the Party defrauded insists on the Performance of Contract.
As a matter of fact, the term Material means Real and not merely Formal and Academic, as opined by this Tribunal. An Irregularity which may be termed as Material, ought to be such as it affects the ultimate decision of the given Proceedings or Case.
As far as the present case is concerned, the Appellant/Applicant had admitted that Yes, I am getting logged out frequently (vide Vol. II Page 237 - translated version of the Transcript from Hindi in Preliminary Reply Affidavit of R2 / Linkstar Infosys Private Limited to I.A. No. 74/2021 in CP/508/IB/2017), which is certainly an unfavorable circumstance against it. ‘Admissions’ are admissible even though they are self harming. Admission is substantive evidence Pro Prie Vigore.
In law, it is impermissible for an Unsuccessful Bidder in Auction (after taking part in the Auction) to question the validity and legality of whole Auction Process, especially after the completion of the Auction Sale. Under the pretext of maximisation of value from the Sale of Assets, the Appellant/Applicant is not to be permitted to question the Auction Sale, when the 3rd Respondent had made payment of full balance sum, in the teeth of Process Memorandum on 15.02.2021 and 16.02.2021, respectively and that the 1st Respondent/Liquidator was to act as per Clause 13 Schedule I of Regulation 33 of Liquidation Regulations. In the instant case, after the conclusion of Auction Sale, the same was acted upon and the fact of the matter is, the amount received was disbursed, in terms of the Waterfall Mechanism, as per Section 53 of the I & B Code, 2016.
This Tribunal on the basis of surrounding facts and circumstances of the case, keeping in mind of the prime fact that if a validly conducted E-Auction Process in a fair and transparent manner is to be set at naught by this Appellate Tribunal, then there will be no sanctity to the Sale that was concluded to and in favour of the 3rd Respondent (of course in accordance with Law), who had admittedly paid the sale consideration and applied for Renewal of Licenses before the concerned Authorities and the whole process of E-auction cannot be revisited, comes to a consequent conclusion that the impugned order dated 18.03.2021, passed by the Adjudicating Authority in dismissing the IA No.74 of 2021 in CP/508/IB/2017 is free from legal infirmities
Appeal dismissed.
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Service Tax
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2022 (8) TMI 833
Short payment of service tax - differential taxable value in the balance sheet and ST-3 returns - Extended period of limitation - HELD THAT:- The period covered here is beyond the normal period of limitation and it has to be seen whether for this period the Department was justified in invoking the extended period of limitation contemplated under the proviso to section 73 (1) of the Finance Act. To examine this it would be necessary to ascertain what was the allegation regarding this aspect made in the show cause notice and how it has been dealt with by the impugned order.
In regard to the overlapping of period from October 2014 to March 2015, it is noticed that a portion of it is covered by the earlier show cause notice dated 18.04.2016. This mater would also, therefore, have to be remitted to the Commissioner to examine this aspect afresh - matter remitted to the Commissioner (Appeals) to examine both the issues relating to the applicability of the extended period of limitation as also the overlapping of period.
Appeal allowed.
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2022 (8) TMI 832
Non-payment of service tax - manpower supply service - differences in the figures reflected in ST-3 Returns and in form 26AS - extended period of limitation - HELD THAT:- It has been settled by way of various decisions of the Tribunal that the Revenue cannot raise the demand on the basis of merely differences without establishing that the entire amount received by the appellant as reflected in form 26AS is consideration for services provided because it is also not proper to presume that the entire differential amount was on account of consideration for providing services without verifying it. It is the specific case of the appellant that the amount shown in Form 26AS by the service recipient have not been received by the appellant.
Tribunal in the matter of M/S QUEST ENGINEERS & CONSULTANT PVT. LTD. VERSUS COMMISSIONER, CENTRAL GOODS & SERVICE TAX AND CENTRAL EXCISE [2021 (10) TMI 96 - CESTAT ALLAHABAD] in which the co-ordinate Bench of the Tribunal has held that form 26AS is not a statutory document for determining the taxable turnover under the Service Tax as form 26AS is maintained on cash/receipt basis by the Income Tax department for the purpose of TDS etc. whereas the Service Tax is chargeable on mercantile basis (approval basis) on the services provided.
Extended period of limitation - HELD THAT:- In various decisions of the Tribunal it has been held that the figures in form 26AS are already included in Income Tax Returns in the Profit & Loss account and balance sheet which is a public document and the ST-3 Returns were also filed by the appellants regularly therefore, no suppression can be alleged and no evidence has been adduced by the Revenue to establish melafide intention for evasion of Service Tax and therefore extended period cannot be invoked - The appellant has failed to adduce any evidence/document in support of their claim that the said amount has not been received by them or that the invoices/bills were cancelled.
The appeal of the appellant is partly allowed.
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2022 (8) TMI 834
Benefit of waiver of the interest - SVLDRS [Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019] - rejection of interest on the ground of ineligibility - whether the component of interest would be covered by the expression “amount of duty”/“amount in arrears” under the said Scheme of 2019 to extend the amnesty available under the scheme to the petitioner or not?
HELD THAT:- The Division Bench of Allahabad High Court in Beenu Gupta vs. Union of India and four others [2021 (1) TMI 104 - ALLAHABAD HIGH COURT], dealing with the issue of waiver of interest amount arising from late deposit of tax arrears rejected the petition of the assessee. The Division Bench of Allahabad High Court while rejecting the petition held that “Sabka Vishwas Scheme”, although a beneficial scheme for a declarant, is statutory in nature, which has been enacted with the object and purpose to minimize the litigation and to realize the arrears of tax by way of settlement at discounted amount in an expeditious manner. In other words, the scheme is a step towards the settlement of outstanding disputed tax liability.
Whereas petitioner has placed reliance of the Division Bench judgment of Bombay High Court in Thought Blurb vs. Union of India and others. [2020 (10) TMI 1135 - BOMBAY HIGH COURT] - In the said decision of Bombay High Court, the question of interest being a part of the arrears of tax for the purpose of the Scheme of 2019 was not involved. The question before the Bombay High Court was as to whether despite the assessee therein being eligible under the scheme was entitled to an opportunity of being heard before the designated Committee under Clause 127 of the Scheme or not? Thus, the said decision of the Bombay High Court is of no avail to the petitioner.
Thus, in view of the conflicting views, it would be appropriate that the Competent Authority i.e. the respondent No.2 should apply its mind on the said issue as to whether component of interest levied due to late deposit of tax dues, can be waived under the Scheme of 2019 or not?
This Court declining to take any view in the matter leaves it to the respondent No.2 to dwell upon the question - Respondent No.2 is directed to dwell upon the question as to whether the component of interest arising out of delayed payment of tax dues, can be waived under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 or not? - Petition disposed off.
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2022 (8) TMI 831
Continuation of the proceedings by the successor-in-interest - Rule 22 of the CESTAT (Procedure) Rules, 1982 - HELD THAT:- It is evident from the record that, as per the direction of the Bench on 29.06.2022, the Registry had on 30.06.2022 sent notice to Resolution Professional. Till date I do not find any application being filed in the matter for continuation of the proceedings by the successor-in-interest in terms of Rule 22 of the CESTAT (Procedure) Rules, 1982.
Sufficient time has been allowed for the successor-in-interest to file an application for continuation of proceedings in this case. In absence of any such application by the operation of Rule 22 of the CESTAT (Procedure) Rules, these appeals abate.
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Central Excise
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2022 (8) TMI 830
SSI Exemption - clubbing of clearances - Clandestine Removal - principles of mutuality of interest - evasion of Central Excise duty by clearing the goods in the name of other units - suppression of sales turnover of M/s.VPPL - it is also alleged that M/s.VPPL though raised invoices showing discount being passed on to the customers, have not actually passed on any such discount and have suppressed the value of actual clearances - admissible evidences - HELD THAT:- In an allegation of clubbing of clearances, the main unit would have several other units (as dummy units) and the clearances of main unit would be diverted or accounted as clearances of the dummy units. In the present case, the department does not allege that goods produced by M/s.VPPL were accounted as clearances of the other units. So also, there is no allegation that raw material was purchased and accounted in the name of the small units and thereafter used for manufacture of goods by M/s.VPPL.
The main documentary evidence relied by the department is the computer printouts obtained from Income Tax Department as well as from the hard disc of the CPU seized from the factory premises of VPPL. The Ld. Counsel for appellant has argued that such computer printouts cannot be relied upon as evidence as the required procedure under Section 36B of the Central Excise Act, 1944 has not been complied by the department.
Sub-section (2) of Section 36B provides that the document seized should be accompanied by a certificate which states that the computer printout containing the statement was fed into the computer during the period over which computer was used regularly to store or process information etc. and it should contain a certificate that throughout the said period computer was operating properly. Such procedures have not been complied - The Hon’ble High Court of Delhi in the case of CCE DELHI -1 (NOW PRINCIPAL COMMISSIONER OF GST DELHI NORTH) VERSUS JINDAL NICKEL AND ALLOYS LTD & ORS. [2019 (11) TMI 122 - DELHI HIGH COURT] held that provisions of Section 36B of Central Excise Act, 1944 are mandatory and to be complied with before admitting the said printouts as an evidence.
In the present case, it is found that the department has not complied with Section 36B of the Central Excise Act, 1944 while retrieving the data from the hard disc. The provision does not say that if the documents are sent to Central Forensic Laboratory, Hyderabad, it would become admissible. Further, such documents have been compared with the photocopies of the printouts sent by the Income Tax Department to the Central Excise investigating officers. Such documents cannot be relied for confirmation of duty, when obtained without following the mandate under Section 36B of the Central Excise Act, 1944 - on perusal of records, there is no documentary evidence to show that two sets of invoices have been recovered by the department. The department has relied upon the statement of Accounts Manager Shri Gopinath. In absence of examination/cross examination his recorded statement is of no evidentiary value.
Clubbing of clearances - principles of mutuality - HELD THAT:- For clubbing the clearances, the department has to establish mutuality of interest, flow back of funds between the main unit and the alleged dummy units. For this, the department has to produce evidence that the main unit was purchasing raw material through the dummy units and also removing the finished products manufactured by them through the dummy units. It also has to be established that the dummy units do not have any existence or facilities for manufacture of goods on their own. Such evidences are absolutely absent in the present case - Merely because Shri V.Arumugasamy, his son and family members were partners in the different units cannot be a ground to say that there is mutuality of interest.
Thus, the department has been able to establish sufficient grounds for clubbing the clearances of each unit or for confirming duty against all the 6 units.
Allegation that M/s.VPPL has not passed on the discount to their customers and has thus suppressed their actual sales turnover - HELD THAT:- It is the case of the department that the sales ledgers of the customers show that they have paid to the appellants amounts including the discount. It is not convincing how the department has been able to rely upon the sales ledgers of such customers and totally discard the entries in the sales ledger of the appellants. At the cost of repetition, it has to be stated that comparison is made with the computer printouts which have already been held to be inadmissible in evidence. Thus, the department has failed to establish the allegations for confirming the duty that the appellant has not passed on the discounts to their customers.
The demand cannot sustain - appeal allowed - decided in favor of appellant.
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2022 (8) TMI 829
CENVAT Credit - duty paying documents - credit availed on the basis of invoices of dealers which are claimed to have been received along with inputs - denial in the ground of investigations by third party - HELD THAT:- The officers visited the appellant’s factory on the basis of information that the appellant availed the Cenvat credit on invoices, without actual receipt of the goods. However revenue did not find any shortage/excess of inputs or finished goods in factory of Appellant. Officers also seized records/ documents related to the receipt of the goods and availment of cenvat credit. The Revenue could not bring any evidence from the Appellant’s factory by which it can be shown that the goods covered under the invoices were not received by them. It is found that in the entire investigation the evidences which were relied upon are related to transporters/ RTO check post. On the basis of such third party evidences revenue alleged that goods were not received by the appellant in their factory.
When the statutory records maintained by them do not disclose absence of receipt of inputs in the factory and there is no cogent evidence of disposal of the same goods elsewhere the credit cannot be denied. It is also not the case of the department that the appellant have procured some unaccounted inputs to cover up the quantity of input shown in the invoices. There is no allegation by the department regarding the financial flow back that against the invoices for which the payments were made through cheque, any cash payment was received by the appellant. With all these undisputed facts, merely on the basis of the transporter records and RTO check-post reports, it cannot be concluded that the inputs were not received by the appellant - the denial of Cenvat credit on the basis of the investigations conducted at the third party end cannot be adopted as the sole basis for denial of credit.
The Appellant correctly availed the cenvat credit. Further, the department nowhere raised any dispute on the said records. Thus the contention of the department that appellant have availed cenvat credit without receipt of goods (raw material) is not tenable. Further, as the Appellant have discharged the Central Excise duty on the final product manufactured out of the alleged raw material, if the department is of the opinion that the alleged goods was not received by the appellant then it is the onus on the department to prove that any other alternative raw material was used in the final products, department has failed to do so.
The allegation of the Revenue that the appellant have not received the inputs made against the appellant are not sustainable and thus, the impugned orders are liable to be set aside - appeal allowed - decided in favor of appellant.
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2022 (8) TMI 828
CENVAT Credit - inputs - structural items such as MS Angle, Plates, HR Sheets, CR Sheet, CR coil, Beam, MS Rod, Joist, MS Channel, and other Steel products used for manufacture of capital goods - period from 2007-08 to 2009-10 - HELD THAT:- The Ld.Adjudicating authority had confirmed the demand of recovery of Cenvat credit on items such as Cement, TMT Bar, Beam, Angle, Channels & Joist by relying on the judgement of the Larger Bench of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)].
However, the said judgement, as rightly pointed by the Ld.Advocate has been quashed by the Hon’ble High Court of Chhattisgarh. Also, the Hon’ble Calcutta High Court in the case of SURYA ALLOY INDUSTRIES LTD. VERSUS UNION OF INDIA [2014 (9) TMI 406 - CALCUTTA HIGH COURT] had disapproved the judgement of the Larger Bench. Thus, the Cenvat credit of the items mentioned is an eligible Cenvat credit upto 06/07/2009 and hence the appeal to this extent ought to be allowed.
Further, it has been stated by the Ld.Advocate appearing for the Appellant, that they are not pressing for the same and only have requested for waiver of penalty as the issue involved interpretation of law. There are force in such argument as the issue is related to interpretation of law. Hence the imposition of penalty cannot be sustained in the instant case.
Appeal disposed off.
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2022 (8) TMI 827
CENVAT Credit - Daman Unit had sent certain cenvatted inputs (CRGO sheets) to their Vadodara unit, to undertake processing thereon - demand on the ground that processed goods have not been returned back to Daman unit, and such goods were not used in Daman unit but at Vadodara unit/ Amod Steel Processors - Rule 4(5)(a) of the Cenvat Credit Rues, 2004 - HELD THAT:- Admittedly the various customers have received the processed goods and also certified to this effect and at the same time, no cogent evidence is adduced by revenue to show that such goods in fact physically travelled from Vadodara to customers premises, instead of from Daman to customer premises, as claimed by the Appellant. In any case, it is found that the entire controversy can be decided on legal basis, without entering into the chequered controversy regarding return movement of goods to Daman and from Daman to eventual customers, in light of certain admitted facts.
There are merits in the legal contention raised by the Ld. Counsel for the Appellants that since the inputs were originally sent under Rule 4(5)(a) procedure to job workers, and since finally duty stands discharged by the Principal at Daman on finished goods, evenif it is cleared directly from job workers to eventual customers, neither Cenvat Credit requires to be denied to the Appellant at Daman nor duty demand can be raised on the job worker at Vadodara, even though they are the actual manufacturers, since the duty admittedly stands paid at Daman, and even collected by revenue authorities as such.
The present case is not one where the Appellant claimed the benefit of Notification No.214/86-CE, but instead, one where job work procedure under the Cenvat Credit Rules, 2004 was adopted. Rule 4(6) thereof has a specific provision to permit the finished goods to be cleared directly from job worker’s premises where the Principal pays duty thereon, which is done in the present case. As regards not seeking permission under Rule 4(6), the impugned order itself at Para 10.6 suggests that had such permission been sought, there would not have been any demand as such. Thus, not seeking such permission is merely a procedural lapse and there is no loss to the revenue department in the matter as such anyway.
That since admittedly, in the case on hand, the Principal manufacturer, i.e. the Daman unit, paid duty on finished goods, evenif it is produced at job worker’s end, there is no question of recovery of duty once again from job worker at Vadodara unit at all. As regards the Cenvat Credit demand on Daman unit, having paid duty as principal manufacturer, which is admitted by revenue authorities as well, the input stage credit too cannot be denied to them in the facts and circumstances of the present case.
The appeals therefore deserve to be allowed, since the demand cannot be sustained on merits - Appeal allowed.
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2022 (8) TMI 826
Classification of the goods manufactured by the appellants - chewing tobacco - classifiable under heading 24039910 as claimed by the appellants or its jarda scented tobacco classifiable under heading 24039930 as claimed by the revenue? - HELD THAT:- There is no indication in the test report as to what is the definition of jarda scented tobacco and chewing tobacco and under which parameter test of sample conducted viz. Moisture content, Nicotine, Ash etc. as provided in the BIS specification - the conclusion arrived at by the Chemical Examiner, CRCL that ‘sample has the characteristics of Jarda Scented Tobacco’ in the test reports (supra) is without any basis and since the CRCL report which has been relied upon by the revenue for changing the classification is not as per the BIS specification, the reliance placed on it by revenue as well as by the adjudicating authority for changing the classification is totally misplaced.
The chemical examiner has failed to provide the parameters set out for jarda scented tobacco during her cross-examination. Apart from the test report, the revenue has not adduced any evidence to support its proposal to classify the impugned product as jarda scented tobacco and not chewing tobacco.
In the present case neither in the show cause notice nor before the adjudicating authority, it is the case that the appellant have used ‘jarda scent’ in their product. Even the statements relied upon by the department nowhere mention that ‘jarda scent’ has been used by the appellant in their product. The learned commissioner mistook the pleasant odour as mentioned in CRCL test report as scent which is totally different from ‘jarda scent’, an essential ingredient for manufacturing jarda scented tobacco - the learned commissioner has erred in not resorting to the Trade Parlance Test in the facts of the present case by erroneously observing that as the product can be classified as per the contents, there is no need to resort to the parlance test. In Trade parlance i.e. from packaging and presentation, sales and distribution and till its consumption by the ultimate consumer the product in issue is known as chewing tobacco only. The learned commissioner has also overlooked that the contents of the product in dispute have been prescribed under the Tariff and therefore the classification cannot be based on contents.
Admittedly the pouches of the products in including presentation, sales, distribution and usage issue described the product as ‘chewing tobacco’ and in Trade Parlance it is known as ‘Chewing Tobacco’ only. The manufacturer, distributor and the consumer, everyone understands and consume the product as chewing tobacco only. The Tribunal in the matter of M/S. FLAKES-N-FLAVOURZ VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH [2014 (9) TMI 664 - CESTAT NEW DELHI (LB)] has held that in the absence of anything to the contrary, the product in question has to be treated as per the description given by the manufacturer on outer cover of pouch, common parlance and established practice as the chewing tobacco or zarda scented tobacco have not been defined in the tariff.
In view of the facts of this case the classification given by the appellant is proper and hence the impugned order is set aside - Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 825
Distribution of ITC - sales agents have charged service tax on commission so received by them - Department formed an opinion that since the (Consignment Sales Agents) CSAs were appointed for the sale promotion of chewing tobacco, the Cenvat has wrongly been distributed by the ISD to the appellants who were engaged in manufacturing Kiwam - Rule 7 C of Cenvat Credit rules - extended period of limitation - suppression of facts or not - HELD THAT:- Since Rule 7C has been amended w.e.f. 01.04.2016 and the period of impugned demand is till 30.06.2016 that the amended Rule 7C is not applicable to the present case. Hence the effect of word “shall” of the amended provision cannot be implemented upon the demand and period of demand in the present case.
Since the appellant is observed to be dealing with the same product, though an ingredient thereof, as that being manufactured by ISD finally and for which the service in question was availed, hence even though the service precisely was not used in the appellant premises but in the different premises of the ISD Cenvat Credit cannot be denied by invoking rule 7 C of Cenvat Credit Rules - keeping in view the peculiar fact of the present case that the appellant herein was manufacturing an inseparable essential ingredient for the final product of the ISD that the input service of sales agent availed by the ISD for promotion of tobacco is held to have rightly been distributed to the appellant. The sole reliance of the adjudicating authority below, on Rule 7 C, the amendment thereof, is held to be absolutely wrong also for the reason that amendment came into effect after the period of demand in the present case was over.
Extended period of limitation - Suppression of facts or not - HELD THAT:- The only ground taken by the adjudicating authority is that the documents in relation to availment of credit were not the part of those ERs is held not acceptable in the light of the fact that appellant had never committed any default or delay while filing the ER Returns. The returns contained all the requisite details as that of the invoice numbers, the amount of invoice, the amount of service tax etc. Nothing has stopped Department to look into those invoices - the allegation of suppression of facts against the appellant are without any basis. Accordingly the foremost reason for invoking the extended period of limitation remains not available with the Department. Otherwise also the onus is always upon the Department to prove the alleged misrepresentation or suppression of fact that too with an intent to evading duty. Admittedly, present is not the case of duty evasion. There is no evidence for any positive act on part of the appellant to prove the alleged misrepresentation or suppression of facts.
For want of any evidence by the Department to prove the alleged suppression, fraud or collusion on part of the appellant to not to pay or to short pay the duty. It is held that Show Cause Notice should have been issued in the normal period of limitation. Since the SCN is issued after an expiry of period of more than 2 years same is held to be barred by time - Appeal allowed - decided in favor of appellant.
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2022 (8) TMI 824
Maintainability of appeal - non-prosecution of the case - Rule 20 of the CESTAT (Procedure) Rules, 1982 - HELD THAT:- This appeal is liable for dismissal on the ground of default in appearance in terms of Rule 20 of the CESTAT (Procedure) Rules, 1982.
The appeal is dismissed under Rule 20 of the CESTAT (Procedure) Rules, 1982 for non-prosecution.
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CST, VAT & Sales Tax
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2022 (8) TMI 823
Validity of assessment order - time limitation for completion of assessment under Section 32 of the DVAT Act - reasons to beleive - In the petitioner’s case, with respect to the financial year in issue i.e., FY 2011-2012, the four-year period expired on 31.03.2016 - HELD THAT:- The Commissioner simply appended his signature on the note prepared on 03.08.2017, without independently applying his mind, as to how the intelligence note which was suggestive of the fact that the petitioner had infracted the CENVAT Credit Rules, 2004, would have a bearing on the matter [concerning the petitioner] which related to transactions under the CST Act and the DVAT Act.
The problem got compounded as the Commissioner did not advert to any of the aspects which are prerequisites for triggering the extended period of limitation i.e., as to how the concealment, omission or failure of the petitioner to disclose material particulars, resulted in his formation of belief that tax had not been paid by the petitioner. Reasons are the link between the material that is brought to the notice of the Commissioner and the formation of the belief that tax has not paid by the assessee. Reasons have to be bona fide and honest. Reasons are required to have a rational nexus with formation of belief. Belief should be based on material which relevant and cogent.
As a matter of fact, the law casts an obligation on the revenue to inform the assessee in no uncertain words as to the charge against him i.e., as to whether it is a case for concealment, or omission or failure to disclose material particulars or a sum of one or more infractions.
There are too many infractions committed by the respondent/revenue in the instant matter; in particular, there has been no, independent, application of mind as to whether this was a case, in which, the extended period of limitation could have been invoked - Petition disposed off.
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Indian Laws
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2022 (8) TMI 870
Dishonor of Cheque - Vicarious liability - whether applicants were either in-charge of or responsible to the company for the conduct of its business at the time of the commission of the alleged offences? - HELD THAT:- The legal position as regards the nature of the liability of the persons who are sought to be prosecuted by invoking the provisions contained in section 141 of the Act, 1881 is fairly crystallized. Under section 141 of the Act, 1881 when an offence is committed by the company, apart from the company, every person who at the time of the commission of the offence was in-charge of and responsible to the conduct of the business of the company shall also be deemed to be guilty of the offence. There are a plethora of judgments governing the aspect of the liability of the Directors and/ or officers of the company who are impleaded by invoking section 141 of the Act, 1881. It would be superfluous to make a reference to all the judgments relied upon by the learned counsel for the applicants as the field is substantially covered by two pronouncements of Supreme Court.
In exercise of inherent jurisdiction under section 482 of the Code, the High Court is required to approach the issue in two stages. First, whether there are basic averments in the complaint to demonstrate that the applicant was in-charge of and responsible for the conduct of the business of the company at the time of commission of the offences. If, at this first stage, the High Court is satisfied about the existence of adequate averments to make out the liability under section 141 of the Act, 1881, it would be within its right in refusing to embark upon further inquiry and exercise the discretion. Second, in a given case, the High Court may proceed to probe further and examine whether despite the existence of basic averments, the complaint qua the applicants/Director or other officers of the company deserves to be quashed on account of peculiar circumstances.
A profitable reference in this context can be made to the case of ASHUTOSH ASHOK PARASRAMPURIYA & ANR. VERSUS M/S. GHARRKUL INDUSTRIES PVT. LTD. & ORS. [2021 (10) TMI 431 - SUPREME COURT]. In the said case, these were averments in the complaint to the effect that all the Directors of the company were responsible to the business of the company and they were involved in the business of the company and responsible for all the affairs of the company. In the backdrop of such averments, the Supreme court declined to interfere with the order of High Court dismissing the application under section 482 of the Code.
The applicants have not succeeded in making out a case that despite existence of the basic averments in the complaint, there are peculiar circumstances, supported by material of unimpeachable character to demonstrate that they were not in-charge of or responsible to the conduct of the business of company at the time of the commission of the offences. Thus, the application deserves to be dismissed.
Application dismissed.
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2022 (8) TMI 821
Dishonor of Cheque - part amount recovered by complainant prior to the issuance of cheque by the accused, a fresh cheque should be issued - rebuttal of presumption - acquittal of the accused - HELD THAT:- Once the issuance of the cheque and the signature thereupon is admitted, the presumption under Section 139 of the N.I. Act, is clearly attracted, and therefore, the burden, would shift upon the accused to show that either by way of cross-examination or by leading defence evidence, the presumption stood rebutted. In the instant matter admittedly no defence evidence has been led.
The evidence of the complainant therefore assumes importance. The complainant, in his evidence has proved a document namely Exh. 42 (page 94) dated 15.06.2011 which is a communication issued by the accused, in favour of the complainant. A perusal of this communication, would indicate, that the accused in clear and specific terms, has admitted the relationship as indicated in the complaint - the existence of a legal liability for which the cheque in question was issued, as a result whereof the applicability of the presumption under Section 139 of the N.I. Act, stood justified.
In case any part amounts are received post the dishonor, but prior to the notice of demand, the course contemplated by Section 56 of the N.I. Act, not being available, the prudent course would be to secure a fresh negotiable instrument for the balance and present it for realisation. However, many a times that does not happen, leaving the payee/holder of the cheque with the original cheque. Such part payment, at times, could also be mischievous with the intent to thwart the initiation of legal proceedings on the basis of the original cheque.
In case part payment/s is made after the filing of the complaint, since the offence already stands completed in terms of Section 138(c) of the N.I. Act, and the proceedings have to go on, it would be appropriate, in case of conviction, for the learned Special Court, to direct compensation payable after taking into consideration, amounts received by the payee/holder of the cheque, till that time - The conduct of the complainant in disclosing recovery of part cheque amount, in the notice of demand itself, is an indicature of his bonafides and absence of malafides, for the reason that even the reply of the accused, does not address the statement made in the notice regarding recovery of Rs.40,500/- by the complainant, inspite of being aware that the accused had not made payment by letting the cheque be dishonored.
Appeal allowed.
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2022 (8) TMI 822
Rejection of application for appointment of an Arbitrator - non-renewal of the lease - Section 11(6) of the 1996 Act - HELD THAT:- The Division Bench fell in error in arriving at the finding that the arbitration clause could only be invoked if the proposal for renewal was accepted by the lessor, but there was dispute with regard to the period of renewal or there was dispute with regard to the quantum of rent proposed to be paid by the lessee to the lessor.
It is well settled that clauses in a lease deed cannot be read and construed in isolation. The lease deed is to be construed as a whole. Clause 4(xiii) has to be read with Clause 3 which clearly provides that the initial term of the lease under the deed shall be a period of 24 years from 1st June 1997 to 31st May 2021 and shall be renewable for such acceptance of the lessee’s offer in terms of Clause 4(xiii). Clause 4(xiii) has wrongly been printed as Clause 4(xii). It is not in dispute that it is to be read as Clause 4(xiii) and all concerned have proceeded on the basis that the offer is to be in terms of Clause 4(xiii) - Prima facie, the parties to the lease deed have used the expression “shall” which connotes a command. If the lessee offered its terms for renewal or extension of the lease within the time stipulated in the lease, prima facie the same would have to be accepted. However, if the quantum of rent or the period of lease could not be mutually agreed upon, the same would necessarily have to be referred to arbitration by an Arbitrator to be appointed by the Chief Justice of the Sikkim High Court.
The Division Bench fell in error in rejecting the application of the Appellant under Section 11(6) of the 1996 Act for appointment of an Arbitrator. The dispute arising out of non-renewal of the lease is clearly arbitrable - All disputes between the parties to the lease with regard to renewal and/or non-renewal, the period of renewal and the quantum of rent would have be decided by the Arbitrator. The issue of arbitrability of the dipsute over non-renewal of the lease is within the realm of the Arbitral Tribunal/Arbitrator.
Justice Bhaskar Bhattacharya, Former Chief Justice of Gujrat High Court and Former Chairman of the Sikkim Law Commission is appointed Arbitrator to adjudicate the disputes between the parties - appeal allowed.
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2022 (8) TMI 820
Dishonor of Cheque - non-service of notice - whether without establishing service of notice upon the accused a prosecution under section 138 of the Negotiable Instruments Act, 1881 can be conducted? - HELD THAT:- The offence under section 138 of the Negotiable Instruments Act, 1881 requires the complainant to establish (i) issuance of cheque in discharge of any debt or other liability, in whole or in part (ii) return of cheque unpaid either for insufficient fund or any other reason (iii) notice providing clear 15 days' time for repaying the debt amount, and (iv) proof of service of notice upon the accused.
On admitted facts, there is no proof of service of notice dated 1st June 2012 upon the petitioner. Both Courts have taken note of the aforesaid circumstance that no proof as regards service of legal notice dated 1st June 2012 has been produced by the complainant - the proposition as regards "giving of notice" and "receipt of notice" is in relation to presumption of service under section 27 of the General Clauses Act, 1897 which would attract only on proof by the complainant by producing postal receipt which would clearly establish that the postal cover was correctly addressed and sufficiently stamped, and by proving the same in accordance with the rules of evidence. Admittedly, postal receipt and postal cover have not been produced by the complainant to show that the legal notice dated 1st June 2012 was sent to the petitioner.
This Court finds that the essential facts to prove the offence under section 138 of the Negotiable Instruments Act, 1881 have not been established during the trial and while so conviction and sentence of the petitioner are held bad - conviction and sentence awarded to the petitioner, are set aside - the petitioner is discharged of liability of the bail bonds furnished by him pursuant to the order dated 14th June 2016 passed by this Court.
Revision allowed.
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2022 (8) TMI 819
Dishonor of Cheque - amicable settlement between the parties - compounding of the offence punishable under Section 138 of the Negotiable Instruments Act - HELD THAT:- Perusing the averments made in the application filed for compounding the offence, taking into consideration the fact that the matter now stands amicably settled between the parties, the prayer for compounding of the offence is allowed. It is further ordered that out of the amount of Rs. 50,000/-, which has been deposited by the petitioner with the Himachal Pradesh Legal Service Authority, 25% be retained as compounding fee and the balance amount be given to the petitioner/accused.
The conviction and sentence imposed upon the petitioner stands quashed and set aside - Petition disposed off.
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2022 (8) TMI 818
Dishonor of Cheque - compounding of offences or not - settlement by way of filing a civil suit - HELD THAT:- It is directed that the accused may appear before the court below within a period of one month from today through the representing counsel and move an application seeking compounding of offence, through compromise. On such application being moved the concerned court may take adequate steps in accordance with law in this regard and shall provide further opportunity to the accused which shall not exceed a maximum period of four months from today to make an endeavour in this direction.
The court shall be at liberty to proceed in accordance with law against the accused and take all necessary steps and measures to procure their attendance as the law permits - Application disposed off.
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2022 (8) TMI 817
Dishonor of Cheque - validity of suit pro-note dated 12.04.2012 - entitlement to suit amount - Admission of signature - preponderance of probabilities - rebuttal of presumption - HELD THAT:- The case of the respondent is that the appellant had borrowed a sum of Rs.10,00,000/- from him on 12.04.2012 and executed a promissory note as well as the cheque. Since the appellant has not repaid the money, the respondent has sent legal notice and filed the suit. In order to substantiate his case, the respondent was examined as P.W.1 and also examined two other witnesses. Though the main defence taken by the appellant is that he has not borrowed any money from the respondent, he had borrowed a sum of Rs.7,00,000/- from one Sri Rajalakshmi Finance. The said Rajalakshmi Finance set up the respondent to file the suit as well as the criminal complaint under Section 138 of the Negotiable Instruments Act in C.C.No.324 of 2017, before the learned Fast Track Court at Magisterial Level, Karur and the same is pending. A careful perusal of the entire materials, pleadings, oral and documentary evidence, shows that the appellant has not denied the signature found in Ex.A1-Promissory note, but the denial is that the promissory note was not given to the respondent and it was given to Sri Rajalakshmi Finance while borrowing a sum of Rs. 7,00,000/- as loan.
Once the signature is admitted and execution is proved by the appellant by examining the independent witnesses, there is a presumption that the appellant has executed a promissory note for the valuable consideration. Therefore, under Section 118 of the Negotiable Instruments Act, no doubt, the said presumption is rebuttable presumption. The appellant has not rebutted the said presumption in the manner known to law. No doubt, the appellant need not prove his defence by direct evidence, it can be substantiated through preponderance of probabilities. Once execution and signature found in Ex.A1 are proved, the onus will be shifted to the appellant. Therefore, in this case, a reading of the materials, oral and documentary evidence show that the appellant admitted the signature and he has not substantiated his defence as taken in the written statement and as already stated, the appellant has not examined any of the independent witnesses for proving that the suit promissory note was not given to the respondent and it was given to Rajalakshmi Finance. Onus of proof lies only on the appellant.
It is the duty of the appellant to discharge his onus and therefore, under these circumstances, since, the first appellate Court is a fact finding Court it can re-appreciate the entire materials and give independent findings and this Court does not find any merit in the appeal and there is no perversity or any good reason for interfering with the judgment and decree passed by the trial Court and the appeal is liable to be dismissed - appeal dismissed.
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2022 (8) TMI 816
Dishonor of Cheque - vicarious liability of Director u/s 141 of NI Act - petitioner had knowledge about the issuance of impugned cheques at the time of presentation or not? - case of petitioner is that at the time of borrowal of loan and at the time of issuance of cheques, the petitioner was neither Managing Director nor signatory of the impugned cheques - HELD THAT:- Admittedly, at the time of borrowal of loan on behalf of the first accused company, the post dated cheques were issued in favour of the respondents signed by the authorized signatory of the first accused company namely, the Managing Director of the first accused company and father of the petitioner herein. The date of borrowal of loan were on 13.07.2019 and 27.07.2019. However, the Managing Director of the first accused company cum authorized signatory of the first accused company, unfortunately died on 03.09.2019. Thereafter on 17.09.2019, the petitioner was inducted as one of the Director of the first accused company. Therefore, at the time of issuance of cheques, the petitioner was neither a Director of the first accused company nor authorized signatory of the cheques. Therefore, simply because a person is a Director of a company, does not make him liable under the Negotiable Instruments Act. Every person connected with the company will not fall into the ambit of the provision.
Time and again, the Hon'ble Supreme Court of India and this Court repeatedly held that only those persons who were in charge of and were responsible for the conduct of the business of the company at the time of commission of an offence will be liable for criminal action. A Director, who was not in charge of and was not responsible for the conduct of the business of the company at the relevant point of time, will not be liable for an offence under Section 141 of the Negotiable Instruments Act.
The provisions under Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of commission of the offence, were in charge of and were responsible for the conduct of the business of the company. Further, the primary responsibility is on the complainant to make specific averments as are required under the provisions in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction - Admittedly in the case of hand, the petitioner was inducted as one of the Director of the first accused company, only after the demise of his father who acted as Managing Director of the first accused company as well as authorized signatory of the first accused company. Therefore, the petitioner cannot be liable to be punished for offences under Sections 138 and 141 of the Negotiable Instruments Act. Hence, if the impugned complaint are allowed to proceed against the petitioner, it would result in gross injustice and tantamount to an abuse of process of Court.
Petition allowed.
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