TMI Tax Updates - e-Newsletter
September 16, 2023

Case Laws in this Newsletter:

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

Articles

1. How do salaried employee save income tax in India?

   By: Sparsh wadhwa

2. How should small companies manage GST compliance?

   By: Ishita Ramani

3. Notice issued: Whether GST Council has the authority to change the classification of the product

   By: Bimal jain

4. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

5. Service provided by SEZ developer to unit within the SEZ are exempt from service tax

   By: Bimal jain

News

1. India's leadership committed to integrating nation into global economy and renewable energy plays a central role in this: Sh. Piyush Goyal

2. India’s overall exports in August 2023 estimated at USD 60.87 Billion; Merchandise exports estimated at USD 34.48 Billion in August 2023, despite global sluggish growth

3. Delhi Customs Preventive Zone destroys 147 kg illegal narcotic substances worth Rs. 396.5 crore

4. DPIIT holds review meeting with North Zone States/UTs on PM GatiShakti National Master Plan

5. Shri Piyush Goyal encourages engineering community to achieve US$100 billion export target in engineering services, design, construction, and R&D by 2030

Notifications

Customs

1. 55/2023 - dated 14-9-2023 - Cus

Graded BCD structure for wearable and hearable devices and its parts, sub-parts and sub-assembly - Amendment in Notification Nos. 11/2022-Custom and 12/2022-Custom dated 01-02-2022

2. 54/2023 - dated 14-9-2023 - Cus

Effective rates of customs duty and IGST for goods imported into India -Notification No. 50/2017-Customs, dated the 30th June, 2017 as amended.

3. 66/2023 - dated 14-9-2023 - Cus (NT)

Land Customs Stations and Routes for import and export of goods by land or inland water ways - Maia in Murshidabad District, West Bengal notified - Amendment in Notification No. 63/1994-Customs (N.T.) dated the 21st November, 1994

GST

4. S.O. 4073 (E) - dated 14-9-2023 - CGST

Constitution of State Benches of the GST Appellate Tribunal (GSTAT)

GST - States

5. 38/1/2017-Fin(R&C)(255)/3219 - dated 30-8-2023 - Goa SGST

Special procedure to be followed by a registered person engaged in manufacturing of the goods - Additional records to be maintained by the registered persons manufacturing the goods mentioned in the Schedule

6. 38/1/2017-Fin(R&C)(254)/3220 - dated 30-8-2023 - Goa SGST

Special procedure to be followed by a registered person or an officer u/s 107(2) of GGST Act who intends to file an appeal against the order passed by the proper officer

7. G.O. Ms. No. 24 - dated 29-8-2023 - Puducherry SGST

Electronic commerce operator as required to collect tax at source u/s 52 notified as the class of persons who shall follow the special procedure.

Circulars / Instructions / Orders

Customs

1. 21/2023 - dated 14-9-2023

Norms for posting of officers and benchmark performance criteria while granting exemption from payment of Cost Recovery Charges (CRC) at Air Freight Stations (AFS)

Highlights / Catch Notes

GST

• GST Registration Canceled Due to Inspection at Old Address Despite Approved Change on August 19, 2021.

  Case-Laws - HC : Cancellation of GST registration of petitioner - assessee was not found to be existing at its principal place of business - it is noted that the petitioner had made an application dated 19.08.2021 for change of its registered principal place of business. This application was allowed and the amended certificate of the GST Registration was issued. Admittedly, the concerned officer had inspected the old premises and not the new premises as reflected in the certificate of the GST registration issued on 19.08.2021. - HC
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• Court Urges Consideration of Seized Documents in GST Case; Orders to be Based on Merits and Legal Compliance.

  Case-Laws - HC : Validity of proceedings initiated by the respondent - The fact remains that the documents required to be produced by the respondent were already seized by other authority viz., the DG of GST Intelligence, Chennai Zonal Unit, during their search and that, those copies were not available with the appellant - this court is of the opinion that the respondent shall consider the documents, which are in possession of the other authority as well as in the custody of the respondent and also based on the replies submitted by the appellant and thereafter, pass appropriate orders, on merits and in accordance with law. - HC
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• Consumer Forum Rules: Customers Not Liable for Excess GST Charged by Hotels, Can Claim Against Hotel Management Only.

  Case-Laws - HC : Lability of GST department where the service provider charges excess GST from the customers - Customer approached the state consumer forum - If the Hotel Management is imposing any GST beyond the prescription of the Act, the petitioner will not be liable for the same. The consumer may have right against the Hotel Management but not against the Commercial Tax Department. - HC
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Income Tax

• PCIT/CIT Cannot Reopen Already Examined Tax Issues Without New Evidence; AO's Order Stands Valid.

  Case-Laws - HC : Revision u/s 263 by CIT - The same issue was again sought to be inquired into by the PCIT/CIT/ revisional authority which could not be allowed to be inquired multiple times. The order passed by the AO as such could not be stated to be erroneous and since as per the re-assessment, no income was held to have escaped assessment by the AO and as PCIT/CIT also could not bring any such material on record, therefore, the assessment order cannot be held to be pre-judicial to the interest of revenue - HC
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• Section 271B Penalty Not Imposed: Assessee's Mistake in Uploading Form 3CD Doesn't Attract Penalty for Tax Audit Report.

  Case-Laws - AT : Penalty order u/s. 271B - tax audit report U/s. 44AB - Assessee has wrongly uploaded the Form 3CD by selecting the earlier AY 2016- 17 instead of selecting the AY 2017-18. Hence, we are of the considered view that the assessee has complied with the provisions of section 44AB by getting its accounts audited and therefore the penalty U/s. 271B of the Act cannot be levied in the instant case for failure to upload the tax audit report U/s. 44AB - AT
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• Assessee Failed to Allocate Employee Costs and Expenses Between Trading and Manufacturing Segments Despite TPO's Opportunity.

  Case-Laws - AT : TP Adjustment - allocate various costs between the ‘Trading’ and ‘Manufacturing’ segments - Despite an opportunity granted by the TPO, the assessee still did not come clean by not properly allocating Employee cost, Depreciation and Other expenses as discussed supra. This demonstrates that the assessee failed to properly apportion the expenses between the manufacturing and trading segments, as has been correctly adjudicated by the ld. CIT(A). - AT
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• India-Portugal DTAA: Business Support Services Not Classified as Fees for Technical Services Under Article 12(4)(b.

  Case-Laws - AT : Income taxable in India - taxability of receipts from business support services as Fee - Since, the Revenue has failed to demonstrate before us that in course of rendition of services, the assessee has made available technical knowledge, knowhow, skill etc. to the recipient of service, we are unable to upheld the nature and character of receipt as FTS, even under Article 12(4)(b) of India – Portugal DTAA. Thus, in our view, the amount cannot be treated as FTS under the treaty provisions. - AT
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• Approval Denied: Section 80G Rejection Due to Unclear Building Purpose and Funding Sources by Govt and MPLADS.

  Case-Laws - AT : Approval u/s 80G Denied - Real purpose to construct a building not known - Revenue submitted that the applicant generated huge resources in the name of building construction even the said building construction was to be financed by/from MPLADS and constructed by Government of Haryana - CIT(E) rightly rejected the approval u/s 80G - AT
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• Long-term capital gain (LTCG) calculation allows deduction of construction costs from building valued at Rs. 3.78 crore.

  Case-Laws - AT : Computation of long term capital gain and indexation of the same - there exists building as per sale deed which is valued by stamp duty authority at Rs. 3.78 Cr. Hence, we cannot doubt the expenses of building as claimed by the assessee. - Cost of construction allowed to be deducted from LTCG - AT
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• Tax Deduction Revision Upheld: Lack of Inquiry into Land's Agricultural Use u/s 263 and 54B Confirmed.

  Case-Laws - AT : Revision u/s 263 - deduction u/s 54B - No specific enquiry with regard to the land use prior to its date of sale i.e. whether the land which was sold was used for agricultural purposes or not - Revision proceedings sustained - AT
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• Section 68 Cash Credits Linked to Business Not Taxable u/s 115BBE; Taxed as Business Income Instead.

  Case-Laws - AT : Unexplained cash credits u/s. 68 - taxability u/s. 115BBE - once the nature and source of credit found in the books of accounts of the assessee is linked to business, then any income generated out of such business activity is assessable under the head income from business and profession alone, but not under the provisions of section 68 of the Act. - Taxable under normal rate of tax applicable to firms. - AT
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• AO Can't Reject Purchases Due to Unknown Customer Fund Sources During Demonetization u/s 68. Cash Sales Allowed.

  Case-Laws - AT : Addition of Cash deposits u/s. 68 - cash deposit during demonetization - AO cannot disbelieve the purchases made from the assessee simply on the ground that those parties could not submit the source of their funds which is not the requirement of the assessee to prove specifically when assessee is a retail seller of jewellery and even law does not prohibit any cash sales or there is any requirement to seek any further detail. - AT
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Customs

• Refund of Excess Antidumping Duty Allowed Despite Rescinded Notification Not Applying to Past Clearances.

  Case-Laws - AT : Refund of antidumping duty in excess of the actual dumping margin determined for such article - Reduction in rate of ADD after clearance of goods - denial of refund claim solely on the ground that the notification resending rescinding the anti-dumping duty does not apply to past clearances is not correct - refund allowed - AT
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• Section 114 Customs Act: Penalties for Overvaluation of Exports Overturned Due to Lack of Merit for Appellants.

  Case-Laws - AT : Levy of penalties u/s 114 of the Customs Act, 1962 - overvaluation of export of goods for availment of higher rate of drawback - Penalty on person who partnered with exporter - Penalty on Bank / Approved Banker for abetment - There are no merits in the impugned order, in so far as it has imposed penalties under Section 114 ibid, on the appellants - AT
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• High Court Overturns Custom Broker's License Revocation Due to Lack of Revenue Loss Evidence.

  Case-Laws - HC : Revocation of Custom Broker License - Proceedings against the CB when it is revenue neutral case - The question whether there was any loss of revenue as a consequence of actions of the appellant is a material factor for consideration by the respondent while determining the punitive measure to be inflicted on the appellant. - the impugned order revoking the appellant’s CB License is set aside - HC
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IBC

• Electricity dues recovery from corporate debtors must adhere to the Insolvency and Bankruptcy Code's waterfall mechanism in resolution plans.

  Case-Laws - SC : Recovery of arrears of electricity dues - waterfall mechanism - The dues of the corporate debtor have to be paid in the manner prescribed in the resolution plan, as approved by the adjudicating authority. The resolution plan is approved when it is in accord with the provision of the Code. - SC
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PMLA

• High Court Grants Interim Anticipatory Bail in Money Laundering Case with No Direct Involvement or Recovered Proceeds.

  Case-Laws - HC : Seeking grant of anticipatory bail - money laundering - No proceeds of crime have been recovered from the applicant Ramji Singh and the only allegation against the applicant is that he was indirectly involved in the activity of abetment with regard to generation of proceeds of crime, and even as per the complaint, there is no allegation of his direct involvement in commission of any offence. - interim anticipatory bail granted - HC
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Service Tax

• ERP Systems Classified as IT Services, Not Business Auxiliary; Exempt from Service Tax Under Business Auxiliary Category.

  Case-Laws - AT : Classification of services - providing ERP system - Business Auxiliary Service or not - It is settled that the ERP Service is clearly an Information Technology Service. The same being excluded from the Business Auxiliary Service cannot be charged to service tax under Business Auxiliary Service. - AT
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• Tamil Nadu Hospitals' Drug Procurement Not Exempt from Service Tax Without Central Notification, Unlike State Sales Tax Exemption.

  Case-Laws - AT : Exemption from Service Tax - discharge of sovereign functions or commercial functions - procurement and distribution of drugs and medicines for Tamil Nadu State Government Hospitals - t in the absence of a specific notification by the Central Government exempting their activities from service tax, like that issued by the State Government in the case of sales tax reproduced above, the appellant will not be eligible to claim exemption from service tax - AT
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• Court Rules Marketing Services for Singapore Firm Qualify as Export; Entitled to Export Benefits in India.

  Case-Laws - AT : Export of services - services were consumed in India or outside India - The appellant has entered into an agreement only with Sun Singapore. It is on the request and direction of Sun Singapore that the appellant carried out the marketing activities in India and it is for these services that they get the consideration from Sun Singapore in convertible foreign exchange. - Benefit of export of services allowed - AT
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• Court Orders Acceptance of Tax Application Under "Investigation, Enquiry or Audit" Category Before June 30, 2019 Deadline.

  Case-Laws - HC : Rejection of SVLDRS-1 -Quantifiation of demand - It is evident that there was a quantification by the audit Department on 31.05.2019 based on which the petitioner has filed Form SVLDRS-1 dated 07.11.2019 under the category "Investigation, Enquiry or Audit" Subcategory Audit. It cannot therefore be construed that there was no determination of tax liability of the petitioner on or before 30.06.2019. - Application directed to be accepted. - HC
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• Service tax on liquidated damages and bank guarantees u/s 66E(e) deemed unlawful; not payment for breach tolerance.

  Case-Laws - AT : Legality of demand for service tax under section 66E(e) - The amounts retained towards liquidated damages and also invoked as bank guarantee are not a consideration for tolerating breach of contract. Any amount, which is not a consideration for provision of service, cannot be subjected to service tax - It cannot be agreed that CMRL had received a consideration for tolerating the delay in execution of the projects contracted by them. - AT
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VAT

• Courts Must Enforce Clear Tax Statutes: 4% Sales Tax on Barns Prevails Over General Provisions.

  Case-Laws - HC : Overriding effect of specific provision over general provision - In terms of the specific provision, barn is exigible to sale tax @ 4% Where the tax statute is clear, unambiguous and direct, the court is not generally called upon to interpret such statute. Court has to act upon the literal provision only. - HC
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• Assessment Reopening Under Puducherry VAT Act Section 30 Focuses on Limitation Period; Notice Issued April 19, 2022.

  Case-Laws - HC : Reopening of assessment - limitation under Section 30 of the Puducherry Value Added Tax Act, 2007 - Assessing Officer was thereafter merely required to pass assessment order based on the notice issued on 09.08.2018. The petitioner was to meet out the allegations in the notice on merits. There was no scope for entertaining any question of limitation merely because notice dated 19.04.2022 was issued - HC
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• High Court Invalidates Reassessment Due to Unjustified Six-Year Delay Between Notices; Demand and Order Set Aside.

  Case-Laws - HC : Unreasonable delay in completion of reassessment - It is thus clear that even if the notice was issued within the prescribed period of limitation, inordinate/unreasonable delay in completing the proceedings would vitiate the same. In the present case, there is no explanation as to why it has taken more than six years after the issuance of the first notice on 23.07.2014 to issue the second notice on 23.06.2020 while proceeding to pass the impugned order on 05.02.2021 after almost 10 years from the deemed assessment - Demand and order set aside - HC
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Case Laws:

• GST

• 2023 (9) TMI 701
  Seeking grant of Regular Bail - Investigation is over and the charge-sheet has been filed by the Investigating Officer but till date charge has not been framed - No notice has been issued to the present applicant by the GST authority - Other co-accused have been released on regular bail either by this Court or by Sessions Court - HELD THAT:- In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the First Information Report, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail. The applicant is ordered to be released on regular bail in connection with I-C.R.No. 11210015220240 of 2022 with DCB Police Station, Surat on executing a personal bond of Rs.10,000/- (Rupees Ten Thousand only) subject to the satisfaction of the trial Court and subject to the conditions - application allowed.

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• 2023 (9) TMI 700
  Relevant date for calculation of interest - Section 50(3) of Tamil Nadu Goods and Service Tax Act 2017 - HELD THAT:- The respondent while passing the order elaborately reproduced. The reply of the petitioner from Internal Page No.2 of the impugned order upto the Internal Page No.9. However, there is no discussion. Clearly, the impugned order has been passed in an arbitrary manner without considering the reply of the petitioner. The impugned order is set aside and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law, within a period of six weeks from the receipt of a copy of this order - Petition disposed off.

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• 2023 (9) TMI 699
  Cancellation of GST registration of petitioner - cancellation on the ground that the Registration has been obtained by means of fraud, wilful misstatement or suppression of facts - HELD THAT:- The petitioner filed an appeal against the impugned order before the Appellate Authority. However, the appeal was rejected by an Order-in-Appeal dated 09.06.2023, on the ground of delay. It is submitted that the petitioner s GST registration was cancelled as it was not found to be existing at its principal place of business. However, it is noted that the petitioner had made an application dated 19.08.2021 for change of its registered principal place of business. This application was allowed and the amended certificate of the GST Registration was issued. Admittedly, the concerned officer had inspected the old premises and not the new premises as reflected in the certificate of the GST registration issued on 19.08.2021. The impugned order cancelling the petitioner s GST registration is set aside. The Show Cause Notice suspending the petitioner s registration is also set aside - Petition allowed.

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• 2023 (9) TMI 698
  Rejection of application filed by the petitioner for fresh registration under the respective GST enactments to carry on business - HELD THAT:- The Court is inclined to dispose this writ petition by directing the respondent to permit the petitioner to carry on the business either by allowing the petitioner to avail the benefit of Notification No.3/2023-Central Tax dated 31.03.2023 as extended by Notification No.23/2023-Central Tax dated 17.07.2023 or in the alternative, accept the application filed for fresh registration. Considering the fact that the petitioner has discharged major part of the tax liability by debiting his Electronic Credit Ledger for the supplies effected by the petitioner during the period in dispute, the petitioner shall deposit a sum of Rs. 1,50,000/- in cash within a period of thirty days from the date of receipt of a copy of this order without prejudice to the rights of the petitioner in the proceedings that is to be completed pursuant to the notice dated 25.07.2023 in Form GST ASMT-14 issued under Section 63 of the TNGST Act, 2017. Petition disposed off.

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• 2023 (9) TMI 697
  Validity of proceedings initiated by the respondent - parallel proceedings initiated against the appellant by two different agencies - HELD THAT:- During March 2020, there was an inspection conducted by the officials of the Directorate General of GST Intelligence and pursuant to such inspection, investigation has been going on for about two years. It is also an admitted fact that the documents relating to the financial transaction for the period from July 2017 to March 2021 have been handed over by the appellant to the officials of the Directorate General of GST Intelligence for their verification. While so, the respondent, invoking the provisions contained under Section 65 of the CGST Act, initiated proceedings and demanded the appellant to furnish the documents. There are exchange of communications between the appellant and the respondent, which make it clear that the documents sought for by the respondent were already seized and are in custody of the Directorate General of GST Intelligence. The fact remains that the documents required to be produced by the respondent were already seized by other authority viz ., the Directorate General of Goods and Services Tax Intelligence, Chennai Zonal Unit, during their search on 13.03.2020 and 16.03.2020 and that, those copies were not available with the appellant - this court is of the opinion that the respondent shall consider the documents, which are in possession of the other authority as well as in the custody of the respondent and also based on the replies submitted by the appellant on 10.09.2022 and 29.11.2022 and thereafter, pass appropriate orders, on merits and in accordance with law. Petition disposed off.

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• 2023 (9) TMI 696
  Lability of the GST department where the service provider charges excess GST from the customers - Customer approached the state consumer forum - Seeking to forbear the respondents to grant any relief in favour of any consumers against the petitioner s Department in Tirunelveli Division, in the Consumer Petition before them respectively - HELD THAT:- The petitioner is executing the statutory function under the State GST Act. The petitioner is not collecting any GST over and above what is prescribed in the GST Act. If the Hotel Management is imposing any GST beyond the prescription of the Act, the petitioner will not be liable for the same. Therefore, the petition filed by the so-called consumer is beyond the purview of the Act and the Consumer Court is not having any jurisdiction and pass orders against the statutory authorities and against the statutory functions. The petitioner, Commercial Taxes Department is executing the statutory function under the State GST Act and the petitioner is not collecting any GST over and above what is prescribed in the GST Act. If the Hotel Management is imposing any GST beyond the prescription of the Act, the petitioner will not be liable for the same. The consumer may have right against the Hotel Management but not against the Commercial Tax Department. Petition allowed.

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• Income Tax

• 2023 (9) TMI 695
  Revision u/s 263 - assessee took benefit of the Direct Tax Vivad se Vishwas Scheme - HELD THAT:- It was not open for the authorities to initiate proceedings under Section 263 of the Act, especially when they were clearly so barred. We are also conscious of the fact that even if the appeal memo which is placed on record is seen, the matter in issue before the CIT (Appeals) which was sought to be brought to rest by opting for the benefit of the Scheme was in context of the same issue which the Revenue sought to invoke by issuing notice u/s 263 of the Act.

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• 2023 (9) TMI 694
  Recovery against the crystallized tax liability - stay on the demand pending the decision in the appeal will have to factor in TDS and TCS - As argued respondents/revenue could have recovered only 20% of the crystallized demand - HELD THAT:- The order passed under the Act is the order framing the assessment i.e., the order dated 09.12.2022. As per the said order, the crystallized tax liability of the petitioner/assessee was Rs. 44,10,05,569/-. Therefore, 20% can only be calculated against the said amount and not against the scaled-down amount i.e., Rs. 33,05,82,936/-; which is a figure arrived at, after giving credit to the petitioner/assessee in respect of tax deposited by the third parties. In other words, contrary to the contention of respondents/revenue, the amount that an assessee would need to deposit for the purposes of obtaining stay on the demand pending the decision in the appeal will have to factor in TDS and TCS. Given the foregoing reasons, we are inclined to direct the respondents/revenue to refund the amount, which is in excess of 20% of Rs. 44,10,05,569/- after carrying out the requisite verifications. The amounts already collected by TDS and TCS will have to be adjusted against the amount arrived at by applying the rate of 20% against tax crystallised as per the assessment order. The amount payable, if any, will be remitted to the petitioner/assessee within the next four (4) weeks.

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• 2023 (9) TMI 693
  Perquisites - where the employer has advanced any loan to the employee for the purpose of building a house or purchasing a site or a house and a site or for purchasing a motor car, and either no interest is charged by the employer - Validity of Section 17(2)(vi) of the Income Tax Act, 1961, as inserted by the Finance Act, 2001 (Act No. 14 of 2001) w.e.f., 01.04.2002) - the petitioner-association also seeks to challenge the validity of Rule 3 of the Income Tax Rules, 1962, as substituted by the Income Tax (22nd Amendment) Rules 2001 by notification dated 25.09.2001 on the ground that the same is hit by the vice of excessive delegation - HELD THAT:- Section 17(2)(vi) of the Income Tax Act, 1961, which was inserted by the Finance Act, 2001 w.e.f., 01.04.2002 provision has been substituted by the Finance Act, 2005 (18 of 2005 w.e.f., 01.04.2006) and thereafter, the same has been substituted by the Finance (No. 2) Act, 2009 (33 of 2009). Therefore, the challenge to the aforesaid provision has been rendered academic by efflux of time. The petitioner has assailed the validity of Rule 3 of the Income Tax Rules, 1962, as substituted by the Income Tax (22nd Amendment) Rules, 2001. The validity of the aforesaid provision has been examined by various High Courts. In P.N. TIWARI V. UNION OF INDIA (2003) [ 2003 (9) TMI 52 - ALLAHABAD HIGH COURT] upheld the validity of Rule 3. Similarly, in BHEL EMPLOYEES ASSOCIATION v. UNION OF INDIA [ 2003 (2) TMI 48 - KARNATAKA HIGH COURT] as upheld the validity of Rule 3. Similar view was taken by a Division Bench of Madras High Court in BHEL EXECUTIVES OFFICERS ASSOCIATION [ 2003 (4) TMI 10 - MADRAS HIGH COURT] We respectfully agree with the view taken by various Division Benches of Allahabad, Karnataka and Madras High Courts.

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• 2023 (9) TMI 692
  Reopening of assessment - shorter period to reply - HELD THAT:- As fact remains that the petitioner was issued with show cause notice on 25.08.2022. The time given to the petitioner was hardly 24 hours. The petitioner could not have responded to the same in time with full particulars. In any event, the petitioner had sought for a personal hearing which was also not granted to the petitioner. Therefore the impugned order has to be set aside and the case has to be remitted back to the respondents to pass a fresh order on merits after hearing the petitioner. This exercise shall be carried out by the respondents within a period of eight (8) weeks from the date of receipt of a copy of this order. Since, the assessment was re-opened prior to the amendment to Section 148 of the Income Tax Act, 1961, with effect from 01.04.2021, therefore, the respondents shall pass a speaking order within a period of eight weeks from the date of receipt of a copy of this order.

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• 2023 (9) TMI 691
  Revision u/s 263 by CIT - Validity of re-assessment proceedings - Bogus purchases - Tribunal had set aside the order passed by the present appellant by observing that the same could not be held to be erroneous or pre-judicial to the interest of the revenue as the AO had made proper verification during the assessment proceedings and the question of bogus purchases could not be enquired multiple times - HELD THAT:- On assessment of the record, it emerges that so far as the observation to the effect that the appellant who was the revisional authority could not revise the order of AO as it was approved by an officer of the same rank concerned, the same cannot be held to be correct in view of the fact that infact there is no bar for the Principal Commissioner to invoke powers under Section 263 of the Act to examine an assessment order passed by the AO by issuing notice after seeking approval from Principal Commissioner and such power can certainly be exercised by the revisional authority. However, so far as an argument as raised by the appellant that the AO had failed to make proper verification of the record during assessment proceedings concerned and the Tribunal had wrongly held so is concerned, we are unable to accept the same. AO had framed assessment after reopening of the same pursuant to notice issued under Section 148 of the Act on the ground that there was escapement of income as information had been received from the Excise and Taxation Department regarding bogus purchases of husk being made by the respondent. The AO in his order Annexure A-1 had clearly mentioned that the books of accounts, vouchers, audit report along with audited Trading, Profit and Loss account along with balance sheet of the respondent-assessee had been examined. The order as passed by the AO might not be a detailed one but it stands revealed from the same that he had conducted due inquiry in the matter. It is well settled proposition of law that if there was an inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass an order under Section 263 of the Act merely because he had different opinion in the matter. In the instant case, the order (Annexure A-1) as passed by the AO might not be a detailed order, however, it cannot be stated that he had not verified the documents with books of account of assessee and had not applied his mind on the question of bogus purchases. The learned Tribunal while passing the impugned order had observed that a office note which was prepared by the AO while conducting re-assessment proceedings revealed that he had duly verified the documents and had applied his mind on the question of bogus purchases also. Thus re-assessment proceedings were concluded by the AO by taking into consideration the material available on record and it could not be stated that the same had not been appreciated and examined by him. The same issue was again sought to be inquired into by the appellant-revisional authority which could not be allowed to be inquired multiple times. The order passed by the AO as such could not be stated to be erroneous and since as per the re-assessment, no income was held to have escaped assessment by the AO and as appellant also could not bring any such material on record, therefore, the assessment order cannot be held to be pre-judicial to the interest of revenue as well within the meaning of Section 263 - Decided in favour of assessee.

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• 2023 (9) TMI 690
  Deduction u/s 54F - multiple units - denying deduction for more than one flat (residential house) - whether the assessee was having one property or two properties at the time of transfer of capital assets? - case of the assessee that there was no house at all in the property situated at Ganesh Nagar, Sholinganallur, whatever old building existing in dilapidated condition and submitted that since electricity meter exists, it cannot be said that it is a residential property - scope of amendment - HELD THAT:- We are of the view that the amendment in the provisions of s. 54(1) replacing the word a residential house by one residential house was brought in Finance (No.2) Act, 2014 w.e.f 01.04.2014 and will apply for A.Y 2015-16. The relevant assessment year before us is 2013-14 and hence, the assessee is eligible for claim of deduction u/s. 54F of the Act, though there may be multiple units. Accordingly, the appeal of the Revenue is dismissed.

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• 2023 (9) TMI 689
  Levy of penalty u/s. 270A - assessee erroneously while filing the VAT returns omitted to include the purchases and the relevant sales - AR further submitted that the purchase invoice was also presented before the Ld. AO which was not considered by the Ld. AO and AO has estimated the disallowance @ 20% on the expenditure claimed by the assessee, thus since the disallowance is an estimated amount, no penalty can be levied U/s. 270A - HELD THAT:- We find that the assessee has produced copies of bills for purchases and the sales returns before the Ld. AO which cannot be considered as underreported arising out of the misrepresentation or suppression of facts - we find it deem to be fit to restrict the penalty to 50% of the amount of tax payable on the above underreported income and thereby direct the Ld. AO accordingly. Disallowance of expenditure arising out of estimation, we are of the considered view that once the disallowance is made on estimation basis, no penalty can be levied. Disallowance of expenditure cannot be said to be considered as underreporting of the income. In the instant case, even though the Ld. AO has discussed about the self-made vouchers but has not quantified the same thereby resorting to estimation of 20% of disallowance of expenditure claimed by the assessee. Therefore, the penalty levied by the Ld. AO and confirmed by the Ld. CIT(A)-NFAC on this issue is unsustainable - Decided in favour of assessee. Penalty order u/s. 271B - tax audit report U/s. 44AB of the Act was not filed for the AY 2017-18 at the time of filing of return of income - AR argued that the tax audit report was filed by the assessee through online but while selecting the Assessment Year, the assessee has wrongly selected the AY 2016-17 instead of AY 2017-18 - HELD THAT:- We find merit in the arguments of the Ld. AR that the assessee has mistakenly selected the AY 2016-17 instead of selecting the AY 2017-18. Section 271B of the Act can be invoked only if an assessee fails to get its accounts audited in respect of any Previous Year relevant to the Assessment Year. Assessee has wrongly uploaded the Form 3CD by selecting the earlier AY 2016- 17 instead of selecting the AY 2017-18. Hence, we are of the considered view that the assessee has complied with the provisions of section 44AB by getting its accounts audited and therefore the penalty U/s. 271B of the Act cannot be levied in the instant case for failure to upload the tax audit report U/s. 44AB - Decided in favour of assessee.

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• 2023 (9) TMI 688
  TP Adjustment - allocate various costs between the Trading and Manufacturing segments in the Gross Profit ratio as against the Sales ratio applied by the Transfer Pricing Officer (TPO) - HELD THAT:- When the TPO confronted the assessee with omission of several expenses in the allocation, the assessee came out with a revised figure of allocation at Rs. 28.37 crore, thereby and increasing the allocation of expenses to the trading segment by Rs. 34,88,446/-. Despite an opportunity granted by the TPO, the assessee still did not come clean by not properly allocating Employee cost, Depreciation and Other expenses as discussed supra . This demonstrates that the assessee failed to properly apportion the expenses between the manufacturing and trading segments, as has been correctly adjudicated by the ld. CIT(A). The assessee s solitary grievance in this regard is, therefore, not jettisoned. Proper allocation of expenses to the segment - First item is `Employees cost - TPO has rightly excluded the salaries of site Directors/Managers etc. from the ambit of common employee cost for allocation. Depreciation - Assessee allocated depreciation only in respect of building amounting to Rs. 58,837/- to the trading segment. It was fairly conceded by the assessee before the TPO that Land, Building, Warehouse and other facilities were also used for the trading activity - depreciation on these items also needed to be allocated to the trading segment. However, depreciation on plant and machinery, which is peculiar to the manufacturing segment alone, is required to be excluded from the ambit of common base of depreciation, which has rightly been done by the TPO. Other expenses - The assessee did not allocate expenses on account of Local travel, Lodging, Communication expenses, Stationary, Courier charges to the trading segment, having turnover of Rs. 28.00 crore. Obviously, some sort of travelling would be required for the trading segment including visiting clients. Similarly, stationary etc. would also be needed for this segment as part of any office expense. In our considered opinion, the TPO was justified in clubbing such expenses in the purview of the common expenses for the allocation. We, therefore, hold that the TPO rightly constituted the base of common expenses for allocation to the trading segment. Adjustment to own operating profits was made on the ground that it paid higher amount of custom duty vis-a-vis the comparables - HELD THAT:- Under the TNMM, the ALP is determined by considering the operating margin to a common base and while computing the operating margin, all the operating expenses and the corresponding revenue are taken into consideration. Having done so, it is usually not open to again go back to the individual items of the operating costs for claiming that such expenditure was higher in the case of the assessee in quantitative terms vis-a-vis the comparables and adjustment should be given. It is but natural that if a costly purchase of high quality product is made, it will yield higher sale price as well. This shows that if the operating cost is higher, the operating revenue will also be higher and vice versa . Once operating margin is considered for benchmarking, it implies that the higher operating costs have equalised the corresponding higher operating revenue as well. In such cases, there can be no question of granting any separate adjustment in respect of costly purchases. However, the adjustment will be warranted only if there is a difference between the rate of custom duty paid by the assessee and comparables. We are confronted with a situation in which the difference is only in respect of amount of custom duty and not the rate of custom duty. In such circumstances, there is no point in allowing any adjustment on account of custom duty. We, therefore, overturn the impugned order on this score. Working capital adjustment - HELD THAT:- We observe that the CIT(A), too, has not gone into such details taken note of by the TPO and simply accepted the assessee s contention without any discussion on these relevant points having bearing. In view of the fact that the assessee could not furnish relevant details before the TPO qua the working capital adjustment and further the ld. CIT(A) was swayed by the submissions of the assessee and did not consider the objections of the TPO, we are satisfied that it would be just and fair if the impugned order on this score is set-aside and the matter is remitted to the file of the AO/TPO. TP Adjustment - selection of MAM - CUP or TNMM - TPO observed that the assessee applied the TNM method in respect of international transaction of `Sale of finished goods at the transacted value, but CUP method should have been applied instead of the TNMM - HELD THAT:- As against the item COMITE 31R, the assessee sold 15000 units for the month of February, 2014 to its AE as against third party export of 25 units. Similarly for August, 2013, the item sold is COMITE 86. Sale to AEs is of 3000 units and to third parties of 40,000 units. Such difference in the quantity sold to the AEs and non-AEs appears for other months as well. In view of such huge quantitative differences, one cannot say that the price charged for a product sold in huge quantity can be taken as comparable price for the sale of lower units of the same product. Thus the CUP is not the most appropriate method in the facts of the case. If the CUP method is excluded, what remains is the TNMM, as was applied by the assessee. We, therefore, hold that the ld. CIT(A) was justified in accepting the assessee s contention that the TNMM should be applied in respect of international transaction of `Sale of finished goods . The grounds relating to this issue in the appeal of the Revenue are, thus, not allowed.

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• 2023 (9) TMI 687
  Deduction u/s 54 - investment in new House Property within prescribed time or not? - as purchase date did not lie within one year before so, the AO opined that the claim of exemption u/s 54 of the Act is not admissible - HELD THAT:- We find that on the touchstone of SH. AKSHAY SOBTI, SH. PRADEEP SOBTI, SMT. SEEMA SOBTI [ 2020 (1) TMI 407 - DELHI HIGH COURT] in the present case, the agreement for sale can be construed as agreement of construction. So the assessee has a window upto 11.11.2014 to construct the house property. The date of grant of possession can be construed as completion of construction. Hence, the assessee deserves to succeed on account of construction of house within 3 years of the date of sale/transfer of the original asset - Appeal of the assessee is allowed.

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• 2023 (9) TMI 686
  Income taxable in India - receipt of sale of software licences as fee for technical services in accordance with the provisions of section 9(1)(vii) and Article 12 of the DTAA between India and Singapore - HELD THAT:- ITAT in assessee s own case for AY 2016-17 [ 2022 (6) TMI 882 - ITAT DELHI] has referred to case of Engineering Analysis Center of Excellence Pvt. Ltd. [ 2021 (3) TMI 138 - SUPREME COURT] held amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of 5 which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act and decided the issue in favour of the assessee.

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• 2023 (9) TMI 685
  Income taxable in India - taxability of receipts from business support services as Fee for Technical Services (FTS) under Article 13 of India France Double Taxation Avoidance Agreement (DTAA) read with paragraph 7 of its Protocol read with Article 12(4)(a) of India Portugal DTAA - assessee s claim of benefit under MFN [Most Favoured Nation] clause in terms of paragraph 7 of Protocol to India France DTAA and more restricted definition of FTS as per Article 12(4) of India Portugal DTAA would apply to the disputed receipts - Whether receipts will not fall in clause (a) of Article 12(4) of India-Portugal tax treaty? - HELD THAT:- The business support service fee received by the assessee from the Indian entity cannot be considered to be ancillary and incidental to the royalty paid by the Indian entity to another group affiliate. Meaning thereby, the business support service fee under no circumstance can be covered under Article 12(4)(a) of India Portugal DTAA. Thus, in our view, learned first appellate authority has completely misconceived the facts while concluding that the fees are in the nature of FTS under Article 12(4)(a) of India Portugal DTAA. The judicial precedents cited before us by learned counsel for the assessee support this view. Therefore, we reverse the decision of learned first appellate authority on the issue. Whether the fee received by the assessee can be covered under Article 12(4)(b) of India Portugal DTAA ? - After considering the nature of services, mode and manner in which services were rendered and various other aspects, it is observed that the test of make available condition under Article 12(4)(b) of India Portugal treaty has not been satisfied. In fact, no material has been brought on record by the Revenue to establish that while rendering management services, the assessee has made available technical knowledge, know-how, skill etc. to the service recipient, which has enabled the service recipient to acquire the technical knowledge, know-how, skill etc. so as to enable it to apply them independently in future without requiring the aid and assistance of the assessee. As on analyzing the nature of services provided by the assessee under the agreement, it is very much clear that the services are provided on regular day-to-day basis for utilizing in various business operations of the assessee. It is further evident, the assessee has been rendering such services on regular basis and these are not one time services, which once availed, are to be used by the service recipient for their future purpose. Since, the Revenue has failed to demonstrate before us that in course of rendition of services, the assessee has made available technical knowledge, knowhow, skill etc. to the recipient of service, we are unable to upheld the nature and character of receipt as FTS, even under Article 12(4)(b) of India Portugal DTAA. Thus, in our view, the amount cannot be treated as FTS under the treaty provisions. Amount constituting reimbursement of expenses on cost to cost basis - We direct the Assessing Officer to examine the nature and character of reimbursement of expenses keeping in view the additional evidences and various other evidences filed by the assessee and determine whether such amount qualifies as FTS under Article 12(4) of India Portugal DTAA. However, before deciding the issue, the assessee must be provided a reasonable opportunity of being heard. Ground no. 2 is partly allowed.

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• 2023 (9) TMI 684
  Approval u/s 80G Denied - Real purpose to construct a building not known - no emphasis whatsoever on the objects on the basis of 12AA Registrations was accorded - Revenue submitted that the applicant generated huge resources in the name of building construction even the said building construction was to be financed by/from MPLADS and constructed by Government of Haryana, the appellant had not evidenced whether the money generated was handed over to the Government of Haryana which was to construct the building and handed over to the society - HELD THAT:- PCIT found that the expenditure for the building was to be financed from MPLAD Scheme and construction was to be undertaken by the Government of Haryana till the building was handed over to the Society. Though the assessee has specifically urged a ground against the observation and the conclusion of the CIT(A) that the construction has to be undertaken by the Government of Haryana till the building was handed over to the society but the assessee has not produced any evidence/document in support of the said contention of the assessee to controvert the findings of the CIT(A). The action of the CIT(E) in relying on the agreement entered into between Government of Haryana and the appellant society and concluding that the construction was to be undertaken by the Government of Haryana to till the building was handed over to the society in accordance with law and we find no error in the said observation. Thus, we find no error or infirmity in the order of the CIT(E) in rejecting the approval u/s 80G of the Act, accordingly, Grounds of Appeal of the assessee are dismissed.

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• 2023 (9) TMI 683
  TP Adjustment - comparable selection - rejection of government owned companies - HELD THAT:- We are of the considered view that there is no thumb rule not to accept the government company for comparability analysis to benchmark the international transactions merely because of the fact that it is a government company. Each and every comparable is to be examined for comparability on its own facts. So the contention of the Ld. DRP for the Revenue as per ground No. 1 is not sustainable. If the profit loss account of a government company shows some preferential treatment to the government company, impacting profit only then government company can be excluded. Engineers India Ltd.is into providing certification services, project management services, process design services, engineering services, commissioning services, construction management services, procurement services etc. which is not comparable to the assessee. So the Ld. DRP has rightly rejected this comparable chosen by the Ld. TPO. Mahindra Consulting Engineers Ltd. (MCEL) as a comparable to benchmark the international transactions vis- -vis the assessee is concerned, it is also functionally dissimilar being into project design and engineering including planning and scheduling statutory and laboratory approvals, procurement advisory, venture evaluation, bid process, project supervision etc. whereas the assessee is providing homeland security solution to their customer. As such the Ld. DRP has rightly excluded MCEL as a comparable vis- -vis assessee. Tata Consulting Engineers Ltd. (TCEL) is shown to be engaged in integrated engineering consultancy solution including commissioning solutions in construction management, advanced technologies, power, nuclear, infrastructure, industrial, mining, minerals, steels and metals, transportation, water, building, manufacturing, spatial planning, environment etc. again which is not comparable to the assessee who is into providing homeland security solutions to their customers. So the Ld. DRP has rightly excluded TCEL as a comparable vis- -vis assessee. Adjustment on account of capacity utilization - rationale for adjustment is the difference in the level of capacity utilization between the assessee and the four comparables applied by the Ld. TPO - HELD THAT:- We are of the considered view that these grounds raised by the Revenue are not maintainable as the adjustment on account of capacity utilization has been given by the Ld. TPO himself. So when the adjustment with regard to the idle capacity utilization has been given by the Ld. TPO these grounds raised by the Revenue are not maintainable, hence the ground Nos.4 5 are dismissed.

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• 2023 (9) TMI 682
  Computation of long term capital gain and indexation of the same - Determination of cost of Acquistion / construction - A.O noted that the assessee has not filed any evidence or proof for expenses and hence, the A.O denied the claim of exemption - HELD THAT:- As total cost of construction/cost of improvement was declared by the assessee at Rs. 10,00,000/-. We admit that there exists building as per sale deed which is valued by stamp duty authority at Rs. 3.78 Cr. Hence, we cannot doubt the expenses of building as claimed by the assessee. We find the claim of the assessee of Rs. 10,00,000/- invested in cost of construction/cost of improvement as originally claimed and we allow the same. Capital gain on property acquired by way of inheritance - A.O has to determine the fair market value as on 01.04.2001 and thereafter, he has to allow indexation benefit to the assessee in term of Section 48, second Proviso and Explanation (iii) of the Act. We direct the A.O to adopt the cost of acquisition as fair market value in the present case of the assessee as on 01.04.2001 as the assessee has adopted this fair market value at Rs. 1,360/- per Sq. ft. and for this, the assessee has taken the basis. The indexation benefit from 01.04.2001 is available to the assessee in view of Section 2(42A) more particularly Explanation 1(b) Thus we direct the A.O to adopt the guideline value on as 01.04.2001 as the cost of acquisition and thereby, given index benefit accordingly. Indexation benefit - We direct the A.O to allow the indexation benefit to the cost of improvement as on the date of 01.04.2001 in term of the decision given above by taking the cost of construction/cost of improvement at Rs. 10,00,000/- and taking fair market value as on 01.04.2001 of the same and allow index accordingly. We direct the A.O accordingly. Denial of claim of tax exemption u/s. 54 - assessee invested a sum in the purchase of house property - As per the project completion certificate this property which is beyond stipulated time of 3 years as mandated in the Act - HELD THAT:- We noted that as per project completion certificate, this property was handed over as on 01.04.2022 which is admittedly beyond three years from the date of sale, but assessee s contention was that this delay in getting completion certificate and handed over of possession of plot is attributable due to Covid-19 related lockdown and restrictions. As assessee has made payments to the builder in 2018 2019 only and the receipts are enclosed, we are of the view that the assessee has complied with the provisions of the Act and hence, he is entitled for the claim exemptions u/s. 54 of the Act.

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• 2023 (9) TMI 681
  Faceless Assessment u/s 144B - violation of principle of natural justice - not providing opportunity of hearing to the petitioner giving no response to the request made by the petitioner for grant of opportunity of hearing through video conferencing - HC [ 2022 (12) TMI 701 - ALLAHABAD HIGH COURT] remitting matter back to the competent authority/National Faceless Assessment Centre for passing fresh assessment order after providing due opportunity of hearing to the petitioner by fixing a date for personal hearing through video conferencing HELD THAT:- As we find that the matter has been remitted in order to give an opportunity to the petitioner of being heard. However, learned counsel for the petitioner submitted that certain contentions touching upon the constitutional validity of Section 144-B(9) as well as the exercise of jurisdiction under Section 143(2) were raised in the writ petition and being aggrieved by the impugned order, this special leave petition has been filed. We note that since the matter has been remitted to the Assessing Authority to be considered on merits, we dispose of this Special Leave Petition reserving liberty to the petitioner to revive this petition in the event the petitioner is unsuccessful before the statutory authorities so as to raise the contentions raised in this special leave petition on the other aspects of the matter.

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• 2023 (9) TMI 680
  Income taxable in India - taxability of receipts towards software and subscription - AO had held the receipt to be royalty and taxed it @10% on the gross basis as per Article 12 in India-Netherland treaty - HELD THAT:- The issues which arise in this special leave petition have been considered by this Court in a case of Engineering Analysis Centre of Excellence Private limited [ 2021 (3) TMI 138 - SUPREME COURT] as held consideration end user license, Copy Right Act, and provisions contained in DTAA and the Income Tax Act and has laid down the parameters to test whether the receipt from sale of software would tantamount to royalty or not. SLP dismissed.

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• 2023 (9) TMI 679
  Revision u/s 263 - as per CIT AO had considered the assessee eligible for claiming deduction u/s 10AA of the Act in spite of the fact that mandatory Auditor s report in prescribed Form 56 was not filed before the due date of filing the return - HELD THAT:- As during assessment proceedings in response to notices issued by the AO assessee had submitted justification of the deduction u/s 10AA of the Act. Thus, as such, the issue stood examined by the learned AO and also before the assessment order was passed, the Auditor s report in form 56 stood filed. The judgments relied by the learned AR were certainly then holding the field as in the case of Pr. CIT v. Wipro Ltd. [ 2022 (7) TMI 560 - SUPREME COURT] held that filing of declaration under Section 10B is mandatory. Assessing Officer exercises quasi judicial powers so if in exercise of such powers an assessing officer accepts delayed compliances, which as per prevailing law he considered only directory in nature, that cannot make the assessment order erroneous, so as to justify the exercise of powers u/s 263 by the learned PCIT. The grounds raised in the appeals are allowed.

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• 2023 (9) TMI 678
  Disallowance of unpaid service tax liability u/s 43B - assessee is an individual running a concern in the name and style Mercury Security Services which provides security guards and manpower to various customers [from inception, the assessee had been registered with service tax authorities and depositing service tax in the relevant Government Account; and following consistently mercantile system of accounting] - HELD THAT:- We countenance the impugned action of Ld. CIT(A)/AO inter-alia for the simple reason that the assessee has not claimed deduction regarding the balance-sheet item - Therefore, the AO/Ld. CIT(A) could not have applied section 43B of the Act to disallow because neither the assessee debited the amount (Rs. 10.92 Lakhs) in the profit and loss account as an expenditure nor did he claim any deduction in respect of this amount; and considering that assessee has been following mercantile system of accounting the judicial precedent cited by Ld. AR in the case of Noble and Hewitt (I) Pvt, Ltd [ 2007 (9) TMI 238 - DELHI HIGH COURT ] is squarely applicable to the facts and circumstances of the present case, and therefore direct the AO to delete disallowance made on this issue. Disallowance under Business Promotion Expenses - relevant bills and vouchers are not produced - HELD THAT:- CIT(A) has noted that the expenses disallowed are not petty expenses and one of such expense itself is to the tune and the other two expenses [i.e. balance expenses] were also disallowed, since assessee failed to produce any supporting evidence. Before this Tribunal also assessee failed to produce supporting evidence of the three expenses which has been disallowed - Therefore, AO/Ld. CIT(A) has rightly disallowed which action of the Ld. CIT(A) does not require any interference. And therefore, action of Ld CIT(A) stands confirmed. Disallowance incurred under Conveyance Expenses - HELD THAT:- CIT(A) while confirming the action of AO observed that these expenses cannot be termed as petty expenses and since the assessee failed to produce any evidence to substantiate the incurrence of such expenses he confirmed the action of the AO. Before this Tribunal, the assessee failed to produce any material to support the expenses therefore, the action of the Ld. CIT(A) is confirmed. Addition made under the Travelling Expenses - part expenses are personal in nature - HELD THAT:- CIT(A) has directed AO to allow expenditure in the event assessee is able to bring supporting evidence and which are not of personal nature. Assessee before me, also could not produce the vouchers/bills which he couldn t produce before the AO. But the assessee s accounts are audited and the AO has not rejected the books of assessee. Therefore, in the interest of justice and fair play, we partly allow the assessee s claim by restricting the disallowance to 5% of the claim made by the assessee. This ground of assessee is partly allowed.

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• 2023 (9) TMI 677
  Unexplained cash credits u/s. 68 - taxability u/s. 115BBE - amount offered under the caption Incentives and Discounts relating to cash deposits made in the bank account - on analysis of financial results, including purchase and sale and also stock position before demonetization and after demonetization, the AO came to the conclusion that the assessee has suppressed turnover and whatever unaccounted income earned from said turnover has been brought into books as income from discounts and incentives - As per CIT(A) it is assessable under the head income from business and profession - HELD THAT:- As clearly admitted by the Assessing Officer in the assessment order, the appellant had disclosed income from discounts and incentives for last two assessment years and the Department has accepted the claim of the assessee. Further, the disclosure made by the appellant is taken support from the conclusion drawn by the AO in light of analysis of purchase and sales turnover for last five years, where the AO had recorded categorical finding that after demonetization, the sales turnover of the assessee has been increased by more than 100%. AO further concluded that the assessee has routinely suppressed its turnover and generated unaccounted cash over the period and the same has been brought into books in the form of discounts and incentives. Therefore, from the reasons given by the AO, it is abundantly clear that the income disclosed under the head discounts and incentives is inextricably linked to the business activity of the appellant. Therefore, once the nature and source of credit found in the books of accounts of the assessee is linked to business, then any income generated out of such business activity is assessable under the head income from business and profession alone, but not under the provisions of section 68 of the Act. The ld. CIT(A), after considering relevant facts has rightly held that income declared by the appellant towards discounts and incentives is assessable under the head income from business and profession, but not u/s. 68 of the Act. Application of provisions of section 115BBE - In the present case, since the assessee has declared income under the head profit and gains of the business, and further the same has been held so, the question of application of higher rate of tax under provisions of section 115BBE of the Act, does not arise. The ld. CIT(A), after considering relevant facts has rightly directed the Assessing Officer to compute tax in respect of income declared under the head profit and gains of business towards discounts and incentives, under normal rate of tax applicable to firms. Thus, we are inclined to uphold the findings of the ld. CIT(A) and reject grounds of appeal taken by the revenue. Enhanced rate of tax - application of provisions of section 115BBE of the Act, in light of amendment to section 115BBE of the Act by the Taxation Laws (Second Amendment) Bill, 2016 - We find that, although the Ld. Counsel for the assessee and the ld. DR present for the revenue has argued the issue of applicability of enhanced rate of tax by the Taxation Law (Second Amendment) Bill, 2016 which has received assent of the President on 15.12.2016, but fact remains that income declared by the appellant towards discounts and incentives under the head income from business and profession has been held to be assessable under the head income from profit and gains of business, the question of adjudication of legal ground taken by the appellant and argued by the ld. DR becomes infructuous in nature and thus, the same is therefore not taken up for adjudication. But, we left open the issue for adjudication at appropriate times, if issue arises for consideration. Appeal filed by the revenue is dismissed.

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• 2023 (9) TMI 676
  Exemption u/s 10(23C)(vi) - CIT(E) rejecting the application of assessee seeking exemption as filed after due date - HELD THAT:- It is apparent that assessee society had applied for exemption u/s 10(23C)(vi) on October, 2018 whereas the due date for filing the same was 30 th September, 2018. Therefore, the Ld. CIT(E), Bhopal had correctly rejected the application of the assessee in accordance with provisions of law. Decided against assessee.

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• 2023 (9) TMI 675
  Levying late fee u/sec. 234E - intimation u/s 200A - fees u/sec. 234E has been imposed for the delay in furnishing the statements for quarters prior to 01/06/2015 - HELD THAT:- Sec. 200A deals with processing of statements of tax deducted at source. Clause (c) of sec. 200A(1) was inserted by Finance Act, 2015 w.e.f. 01/06/2015 providing for levy of fee u/sec. 234E - such fee u/sec. 234E can be levied only for the default committed after 01/06/2015 and not prior to that. The Hon ble Kerala High Court in Olari Little Flower Kuries (P.) Ltd.[ 2022 (2) TMI 1061 - KERALAHIGH COURT] has confirmed the non-imposition of fee for the period prior to 01/06/2015. Similar view has been taken in JIJI Varghese [ 2022 (3) TMI 1291 - KERALA HIGH COURT] holding that no interest u/sec. 234E can be imposed for the period of respective assessment years prior to June 01, 2015. Thus, it is seen that issue raised in these appeals is covered in favour of the assessee.

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• 2023 (9) TMI 674
  Unexplained cash deposit in savings bank account - assessee had not furnished details in respect of agricultural income, family members and their activity, borrowings for agricultural activities, cash flow statement, ownership of bank account etc. - HELD THAT:- CIT(Appeals) has erred in facts and in law in sustaining the addition of Rs. 5 lakhs on ad-hoc basis, when it has not been disputed that the assessee is having agricultural income for past many years and further, no rationale/basis has been given for confirming the addition on ad-hoc basis. The ITAT Ahmedabad in the case of Samir Kishor Parekh [ 2022 (6) TMI 1111 - ITAT AHMEDABAD] held that that addition made on estimated basis, without rejecting books of accounts of the assessee, is unsustainable in law. Further, it is well-settled law that no addition could be made on estimated basis without rejecting books of account of assessee as held by various Courts in the case of Asian Grantio India Ltd. [ 2019 (10) TMI 1193 - ITAT AHMEDABAD] , Royal Marwar Tobacco Product (P.) Ltd.[ 2007 (12) TMI 321 - ITAT AHMEDABAD] , Anil Kumar Company [ 2016 (3) TMI 184 - KARNATAKA HIGH COURT] , Ercon Composites [ 2013 (12) TMI 902 - ITAT JODHPUR] to name a few. Accordingly, the addition as sustained by Ld. CIT(Appeals) is directed to be deleted, looking into the instant facts which has been done as on ad-hoc basis, especially when fats placed on record by the assessee have not been disputed. Appeal of assessee allowed.

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• 2023 (9) TMI 673
  Addition of Cash deposits u/s. 68 - immediately after the demonetization assessee had shown inflated cash sales and also made deposits in the bank account which is completely abnormal compared to the earlier year and also subsequent year - HELD THAT:- From the perusal of the material placed on record and also the explanation given by the assessee before the ld. AO, it is seen that assessee has maintained regular books of accounts which was subject to audit and has produced the entire sale bills, stock register and purchases and also quantitative tally of sales and corresponding stock. The assessee has also demonstrated that there was a direct correlation of cash outflow from the books of accounts with cash deposit in the bank accounts and also produced day wise stock report, wherein the outflow of stock against sales has been clearly reflected. Assessee has duly filed cash compliance report with respect to cash sales in Form 61A giving all the details with respect to cash sales. Nowhere, the ld. AO has pointed out that assessee did not have sufficient stocks in its possession or otherwise found any defect in the stock register. If that finding has not been given and no discrepancy has been pointed out, then how the corresponding sales of same stock and quantity can be treated as undisclosed income of the assessee. Once, AO has accepted the sales and there is direct nexus with the closing stock and the sales along with movement of stock linked to purchases then such credit on account of sales cannot be added u/s. 68. Addition u/s. 68 on account of cash deposits cannot be made simply on the reason that during the demonetization period, cash deposits vis-a-vis cash sales ratio is higher. Here in this case the parties to whom notices u/s. 133(6) were issued have confirmed the purchases but also filed the purchase bills. AO cannot disbelieve the purchases made from the assessee simply on the ground that those parties could not submit the source of their funds which is not the requirement of the assessee to prove specifically when assessee is a retail seller of jewellery and even law does not prohibit any cash sales or there is any requirement to seek any further detail. For this compliance assessee has also filed Form 61A before the ld. AO. Once, it has been established that sales representing outflow of stocks is duly accounted in the books of accounts and there are no abnormal profits during the year, then there is no justification why AO should treat the deposits made in the bank account out of cash sales to be income from undisclosed sources - Decided in favour of assessee.

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• 2023 (9) TMI 672
  Revision u/s 263 - deduction u/s 54B - No specific enquiry with regard to the land use prior to its date of sale i.e. whether the land which was sold was used for agricultural purposes or not - HELD THAT:- Assessee was in possession of two properties, one of which was sold during the impugned year under consideration. Further, it is observed that the counsel for the assessee has contended that the assessee has shown agricultural income as is evident from the return of income for the past assessment years, however, no enquiry was made whether such agricultural income was with respect to the land which was sold by the assessee during the impugned year under consideration, against which the assessee has claimed deduction under section 54B - As observed that the assessee has not made any specific enquiry with regard to the land use prior to its date of sale i.e. whether the land which was sold was used for agricultural purposes or not. On perusal of the assessment records, it is seen that no specific details regarding the land use was submitted before the assessing officer during the course of assessment proceedings. Therefore, we are of the considered view that adequate enquiries were not made by the assessing officer during the course of assessment proceedings in respect of satisfaction of the conditions of eligibility to claim of deduction u/s 54B. Principal CIT has correctly observed that during the course of assessment, the assessee only produced copy of 7/12, which does not establish the actual use of land for agricultural purposes, so as to claim benefit of deduction u/s 54B - Accordingly, looking into the facts, we find no infirmity in the order of Principal CIT so as to call for any interference. Decided against assessee.

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• 2023 (9) TMI 671
  Penalty u/s. 271B - assessee failed to get its accounts of the previous year - HELD THAT:- According to sub-clause (a) to Section 44AB of the Act, the audit is mandatory for every person carrying business if its turnover of the said assessee exceeds rupees sixty lakhs. Since in the present case, the turnover of the assessee was below rupees sixty lakhs, we are of the considered opinion that the audit u/s. 44AB of the Act in Form 3CA had to furnish the particulars in form 3CD are not required. Thus according to the provisions of sub-clause (a) to Section 44AB of the Act, the assessee is out of the ambit of mandatory requirement of audit u/s. 44AB of the Act. Therefore, the question of imposing penalty u/s. 271B of the Act for not getting the accounts audited u/s. 44AB of the Act, does not arise in the present case. Appeal of assessee allowed.

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• 2023 (9) TMI 670
  Addition of bad debts - assessee has shown it as a provision for bad and doubtful debts - HELD THAT:- On perusal of the financial statements as well as the statement filed by the assessee find merit in the contention of the ld. Counsel for the assessee that it was an inadvertent mistake resulting into showing the bad debts claim as provision for bad and doubtful debts. Both the lower authorities ought to have considered this argument and considering the facts should have come to a conclusion that it was a bad debts claim and not provision for bad and doubtful debts. It has been rightly submitted by assessee that, nomenclature is of no consequences rather the substance of the matter should be looked into while deciding the liability of the expenditure. Whether the assessee has rightly claimed the bad debts? - Now going through the Section 36(2)(i) of the Act, one of the condition that no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off. The said condition is duly fulfilled in the case of the assessee as the amount of bad debts claimed has already been taken into account while computing the income by way of showing it as gross receipts and the outstanding amount was standing as sundry debtors. It clearly shows that the assessee has made justified claim under section 36(1)(vii) of the Act and the same should have been allowed as an expenditure during the year. Respectfully following the ratio laid down in the case of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] finding of the ld. CIT(A) is set aside and bad debt claim is allowed. Ground No. 2 raised by the assessee stands allowed. Addition u/s 41(1) r.w.s. 28(iv) - HELD THAT:- As undoubtedly, as on 31/03/2012, there was an outstanding liability of sundry creditors in the name of SAMPL towards the services rendered by it to the assessee. The assessee has nowhere stated that the said liability is not payable. All documentary evidence have been placed before us to prove that the liability is active and the action is from both the sides i.e., the sundry creditor is trying hard to recover its amount and the assessee is trying hard to collect the sum from sundry debtors and repay the sundry creditors. No justification at the end of both the lower authorities of having invoked the provisions of Section 41(1) pertaining to cessation of liability and treating it as income in the hands of the assessee. Accordingly, the finding of the ld. CIT(A) is set aside, addition is deleted and Ground No. 3 raised by the assessee is allowed. Disallowance of pandal decoration expenses - not a allowable business expense - HELD THAT:- The assessee has not been able to place any documentary evidence to prove that the said sum has been repaid subsequently. Confirmation of account of Amit Agencies has also not been filed. It thus adds to the suspicion created in the instant case that the said expenditure was bogus in nature and even the Inspector deputed to verify the address of the sundry creditor was not able to trace any whereabouts of the entity. Under these circumstances, as the assessee has miserably failed to prove the genuineness of the transactions incurred towards pandal decoration expenses, we fail to find any infirmity in the finding of the ld. CIT(A) in confirming the said disallowance. Thus, the addition confirmed. Ground No. 4 is dismissed. Disallowance regarding repair and maintenance expenses - interior decoration of office premises - HELD THAT:- The assessee is into the entertainment business and thus, interior decoration of the office is very important and with its help the assessee can impress its clients and can make better efforts to increase its business. Assessee also incurred office rent expenses. There is no immovable property in the form of an office under the head fixed asset . It prima facie indicates that in the rental premises assessee has incurred some interior decoration work and same is subject to change as and when needed. Therefore, considering the total turnover of the assessee and the alleged sum being hardly 1% of the gross turnover and the assessee not having any self-owned office premises, we are inclined to hold that it is a revenue expenditure and the same should have been allowed by the ld. CIT(A). We accordingly reverse the finding of the ld. CIT(A) and allow Ground No. 5

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• 2023 (9) TMI 669
  Disallowance made u/s. 14A r.w.r. 8D - assessee had made suo-moto disallowance of expenses as expenses incurred for the purpose of earning exempt income - HELD THAT:- We find that assessee is having sufficient interest free funds in its kitty, which would meet the investments that yield exempt income. Hence the presumption of availability of own funds theory would certainly come to the rescue of the assessee. This view of ours is further fortified by the recent decision of Hon ble Supreme Court in the case of South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] Hence there cannot be any disallowance of interest in terms of Rule 8D2(ii) of the Rules. - AO is directed to delete the same. Mandation of recording satisfaction - In the instant case, the ld. CIT(A) had even categorically stated that the ld. AO had not recorded any satisfaction before implementing the computation mechanism provided in Rule 8D(2) of the Rules. CIT(A) however goes to record his satisfaction, which is also ignoring the books of accounts of the assessee. First of all, the statute mandates the ld. AO to record his satisfaction in terms of section 14A(2) of the Act read with Rule 8D(1) of the Rules and the same cannot be supplemented by the action of the ld. CIT(A) in recording satisfaction on behalf of the ld. AO. Against the aforesaid finding of ld. CIT(A), the revenue is not in appeal before us. Hence it could be safely concluded that in the instant case, there is a clear violation of provisions of section 14A(2) of the Act read with Rule 8D(1) of the Rules. Hence we have no hesitation in deleting the entire disallowance made by the Ld. AO u/s. 14A of the Act, in the facts and circumstances of the instant case. Limitation period for considering any fresh claim of an assessee - Action of the lower authorities in not considering the revised computation of income filed during the course of assessment proceedings - HELD THAT:- We find that in the recent Supreme Court decision rendered in the case of Wipro Finance Ltd. [ 2022 (4) TMI 694 - SUPREME COURT] after considering the decision rendered in the case of Goetze (India) Ltd. had reiterated that the decision in Goetze (India) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] make it very clear that limitation period for considering any fresh claim of an assessee would apply only to the assessing authority and does not impinge upon the preliminary powers of the Tribunal bestowed u/s. 254 of the Act. We deem it fit and appropriate, in the interest of justice and fair play, to restore this issue raised in ground no. 3 and 3.1 to the file of Ld. CIT(A) for denovo adjudication on merits, in accordance with law.

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• Customs

• 2023 (9) TMI 668
  Revocation of Custom Broker License - failure to consider the specific submissions / grounds so raised by the appellant - HSS Agreement incorrect or not - requirement on the part of CESTAT to consider the merit of the appellant s contention that the sale and purchase of goods between TDAAL and IDDSL on HSS basis - revenue neutrality - HELD THAT:- The Adjudicating Authority passing the offence report (Order-in-Original dated 15.03.2017) as well as the respondent relied on the definition of High Seas as per the Convention of High Seas done at Geneva on 29th April, 1958, United Nations, Treaty Series - according to the concerned authorities, HSS necessarily mean sale in respect of the goods that are outside the territorial waters of the country of export or the country of import. This is the foundation of the punitive measure imposed on the appellant. However, none of the authorities have discussed as to how the sale and purchase of the goods between IDDSL and TDAAL offended the Sales tax Act, as according to the said authorities the said transaction was effected while the goods in question were still in Singapore. It is also material to note that there is a serious dispute whether the sale transaction between IDDSL and TDAAL was incorrectly reflected as HSS. According to the appellant, the goods had been handed over to the carrier and thus, were outside the control of the Beetel and IDDSL. Thus, even though the goods had not left the shores of Singapore, the same would be in transit and therefore, their sale was correctly reflected as HSS. Even though it is considered that reflecting the sale as HSS is incorrect; the error is not of material consequence. Assuming that reflecting the sale and purchase transaction of goods in question while they are in Singapore, as a HSS, was erroneous; it is found difficult to accept that the same would require a seller to file the Bill of Entry and not the purchaser. The Revenue and the respondent have proceeded on the basis that because the goods did not left the shore of Singapore, when the sale and purchase agreement was entered into, thus there was no sale at all. And, the HSS Agreement is void - the same cannot be accepted and the learned counsel for the Revenue had not referred to any statutory provision or any authority in support of the view that sale and purchase transaction of the goods in question is void on account of reflecting the same as sale and purchase on high seas. According to the learned counsel for the Revenue, the fact that the transaction was revenue neutral was of no consequence - The question whether there was any loss of revenue as a consequence of actions of the appellant is a material factor for consideration by the respondent while determining the punitive measure to be inflicted on the appellant. It is also a settled law that failure to take into account the relevant factors in the decision making process render the decision arbitrary and thus, amenable to challenge as offending the equal protection clause. The appellant s CB License was valid till 25.04.2023 and thus in any event would have expired. However, the learned counsel appearing for the respondent do not controvert the appellant s contention that in normal course, the appellant would be entitled to seek renewal of CB License - the impugned order revoking the appellant s CB License is set aside - appeal disposed off.

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• 2023 (9) TMI 667
  Duty Drawback - denial of benefit on the ground of non-submission of relevant document by petitioner - contention of the petitioner is that the Bank would grant statement of bank realization manually until 2000, but subsequently it is the duty of the Bank is to upload the Bank Realization Statement in its portal - HELD THAT:- In the present case, the Bank has uploaded as early as on 02.09.2013 itself. Before passing order, the respondents have not verified the same. Moreover, the respondents have not issued any Show Cause notice. Therefore, the petitioner was not in a position to explain the same before the authorities. It is also submitted that the company was closed in the year 2015 itself. Therefore, there was no communication among the parties. In view of the foregoing reasons, this Court is of the considered opinion that the petitioner is entitled to the relief based on the statement of Bank realization, which the petitioner has enclosed in page No.46 of the typed set of papers. Petition allowed.

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• 2023 (9) TMI 666
  Refund of antidumping duty in excess of the actual dumping margin determined for such article - Reduction in rate of ADD after clearance of goods - phenol originating in or exported from Korea, Taiwan or USA - denial of refund claim solely on the ground that the notification resending rescinding the anti-dumping duty does not apply to past clearances - HELD THAT:- The entire argument in the impugned order is based on the following words appearing in the said notification except as respects things done or omitted to be done before such suppression . This exact expression has been examined by Hon ble High Court of Madras in case of VETCARE ORGANIC PVT. LTD. VERSUS CESTAT, CHENNAI [ 2011 (4) TMI 521 - MADRAS HIGH COURT] , wherein it was held that we allow writ Petition No. 21504 of 2001 and declare that Notification No. 5/2001-Cus., dated 22-1-2001, issued by the first respondent, in so far as it purports to save things done or omitted to be done before such rescission, is ultra vires Sections 9A, 9AA, 9B and 10 of the Customs Tariff Act, 1975, Article 265 of the Constitution of India and Rules 13, 17, 18(4) and 21(3) of the Customs Tariff (Identification Assessment and Collection of Anti-Dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, in so far as the petitioner is concerned. The impugned order cannot be sustained - The impugned order is set aside and appeal is allowed.

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• 2023 (9) TMI 665
  Levy of penalties u/s 114 of the Customs Act, 1962 - overvaluation of export of goods for availment of higher rate of drawback - Penalty on person who partnered with exporter - Penalty on Bank / Approved Banker for abetment - HELD THAT:- The department had not issued any summon(s) to the appellant Shri Sanjay D. Bhalerao for recording of statement(s) with regard to irregular exportation of the subject goods and for ascertaining his specific role with regard to such activities. Though, the impugned order has stated that the appellant had earned 50% of profit out of the export proceeds, but did not elaborate any findings with regard to the actual role played by the appellant in irregular exportation of the goods - in absence of proper substantiation of the case, especially with regard to the appellant herein, the penal provisions contained in Section 114 ibid, cannot routinely be invoked for penalising the appellant. The Indian bank s role is confined only for scrutinization of documents to be submitted by the exporter and to forward the same to the Russian designated bank. It has also been provided that if no discrepancy report is received from the Russian Bank within seven days, then the documents sent by the Indian bank should be considered as sufficient for lodgment of claim with the RBI - when the appellant s role starts after exportation of the goods and issuance of the Let Export Order (LEO) and issue of exchange control copy of Shipping Bill by the Customs department, it would not be proper to allege that the appellant had omitted or did some act in relation to improper export of goods. In the present case, since the appellants role as a banker has started after physical exportation of the goods, more particularly after issuance of LEO and physical movement of goods from the port of export, it cannot be said that they were involved in improper exportation of goods and consequently, would be exposed to the penal liabilities provided under Section 114 ibid. There are no merits in the impugned order, in so far as it has imposed penalties under Section 114 ibid, on the appellants - appeal allowed.

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• Insolvency & Bankruptcy

• 2023 (9) TMI 664
  Recovery of arrears of electricity dues - waterfall mechanism - insistence on on payment of arrears, for grant of an electricity connection can be done or not - overriding effect of IBC - Section 53 of the Code - HELD THAT:- The electricity connection, applied for or revival sought by the successful resolution applicant is not an asset or property. The observations from Embassy Property Developments Private Limited [ 2019 (12) TMI 188 - SUPREME COURT] would confer jurisdiction on the tribunal constituted under the Code insofar as the appellant Southern Power Distribution Company of Andhra Pradesh Limited is insisting on payment of the dues of the corporate debtor for restoration/grant of the electricity connection. The dues of the corporate debtor have to be paid in the manner prescribed in the resolution plan, as approved by the adjudicating authority. The resolution plan is approved when it is in accord with the provision of the Code. Thus, the issue of corporate debtor dues falls within the fold of the phrase arising out of or in relation to insolvency resolution under section 60(5)(c) of the Code. There are no good ground and reason to interfere with the impugned judgment(s)/order(s) and hence, the present appeals are dismissed.

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• 2023 (9) TMI 663
  Prayer for direction to the Resolution Professional for considering and settling the claim of the Appellant workers - Approved Resolution plan - HELD THAT:- It is the responsibility of the Claimant to bring all relevant record to substantiate the claim. The Resolution Professional having admitted the claim of Rs.96 lakhs and odd on the basis of balance sheet of the Corporate Debtor, no error can be said to have been committed by the Resolution Professional for accepting the claim of Rs. 96 lakhs and odd. The Adjudicating Authority also held that there are no documents filed to support the claim of the workmen. Approved Resolution plan - HELD THAT:- The entire claim which was admitted of the workmen has been proposed to be paid i.e. Rs.96,83,497/- - there are no ground to interfere with the order of the Adjudicating Authority approving the Resolution Plan. Appeal dismissed.

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• PMLA

• 2023 (9) TMI 662
  Seeking grant of anticipatory bail - money laundering - proceeds of crime - illegal sale of coal - HELD THAT:- Section 45 of the PMLA, which contains certain restrictions on the Courts power to grant bail, does not contain any provision saving the special powers to grant bail conferred upon the High Courts by Section 439 Cr.P.C., whereas Section 44 of the PMLA, which confers jurisdiction for trial of offences under the Act upon Special Courts and which does not contain any provision which may affect the powers of any Court regarding grant of bail, provides that nothing contained in Section 44 shall affect the High Court s special powers regarding bail under Section 439 Cr.P.C. - It appears that the provision contained in Section 44 (2) of PMLA saving special powers of the High Courts regarding grant of bail was meant to be incorporated in Section 45 of the Act, but it has erroneously been placed just above Section 45. The aforesaid Acts deal with heinous offences like hijacking of aero planes, unlawful acts against safety of civil aviation, maritime piracy, unlawful acts against safety of maritime navigation and fixed platforms on continental shelf, and offences relating to manufacture and sale of adulterated or spurious drugs, which would affect a very large number of population, and the offences carry punishment upto death. All the Acts contain restrictions of Courts power to grant bail to an accused person, which are similar to the restriction provided in Section 45 (1) and (2) of PMLA. All the acts provide that the aforesaid restrictions can be waved by the Special Courts in case of a person, who, is under the age of sixteen years, or is a woman or is sick or infirm, like the provision contained in the proviso appended to Section 45 (1) of PMLA. The restriction contained in Section 45 of PMLA that bail cannot be granted to a person accused of an offence under the PMLA without recording a prima facie satisfaction of innocence of the applicant, is not applicable to the Constitutional Courts in view of the harmonious interpretation of Sections 44 and 45 of PMLA and, therefore, irrespective of the fate of the applications under Section 482 Cr.P.C., this Court need not record a prima facie satisfaction of innocence of the applicants. No proceeds of crime have been recovered from the applicant Ramji Singh and the only allegation against the applicant is that he was indirectly involved in the activity of abetment with regard to generation of proceeds of crime, and even as per the complaint, there is no allegation of his direct involvement in commission of any offence. Meanwhile the applicant Ramji Singh has attained the age of 72 years and obviously he has retired long ago and he does not appear to be in a position to influence the witnesses or tamper with the evidence. Having retired, there appears no reasonable apprehension of the applicant Ramji Singh indulging in commission of a similar offence after grant of anticipatory bail to him. All the orders granted interim anticipatory bail to the applicants deserve to be confirmed and the applications deserve to be allowed.

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• 2023 (9) TMI 661
  Money Laundering - Justifiability of the issuance of NBW against the petitioners - no reasons given for such issuance - appellant entered into criminal conspiracy and committed criminal breach of trust, cheating, forgery etc. and invested the proceeds of crime generated thereby in assets standing in their names - HELD THAT:- No reason whatsoever was cited by the Court below to direct issuance of NBW. The reasons cited by Mr. Agarwal (opposite party) to justify issuance of NBW such as, gravity of the economic offences etc. have not been referred to by the Court below itself. To such extent therefore, the judgment of the Rajasthan High Court cited by Mr. Agarwal would have no application to the peculiar facts and circumstances obtaining in the present case. This Court is of the view that given the absence of the accused persons and non-taking of the steps on their behalf, the Court below ought to have issued a bailable warrant of arrest since there is nothing on record to suggest that the accused persons have been deliberately avoiding to appear before the Court. The impugned order is thus rendered unsustainable in the eye of law warranting interference - Application allowed.

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• 2023 (9) TMI 660
  Money Laundering - illegal arrest - Reasons for arrest of the accused are not supported with any justifiable material - transfer of funds to the subsidiary and associated entities - fake entities - HELD THAT:- The Apex Court in V. Senthil Balaji [ 2023 (8) TMI 410 - SUPREME COURT] categorically held that there is no need of compliance of Section - 41A of the Cr.P.C. However, as on the date of the impugned order dated 14.06.2023, the Designated Court is not having benefit of going through the said judgment and relying on the principle laid down in Satender Kumar Antil [ 2022 (8) TMI 152 - SUPREME COURT] the Designated Court rejected the remand of the respondents vide impugned order dated 14.06.2023. The Apex Court in Senthil Balaji categorically held that Section - 41A of the Cr.P.C. has got no application to an arrest made under the PMLA. The said judgment was rendered by the Apex Court on 07.08.2023, whereas the impugned order is dated 14.06.2023. Therefore, the Designated Court is not having benefit of going through the said order, and consider the said aspect. Reasons for arrest of the accused are not supported with any justifiable material - HELD THAT:- There is dispute with regard to furnishing of documents by the ED along with remand application. According to the respondents, ED has filed copies of FIR, grounds of arrest and medical certificates, whereas according to the ED, it has filed all the supporting material in support of the reasons for arrest of the accused. However, the Designated Court did not refer the said aspects in its order dated 14.06.2023. It is for the Designated Court to consider the material filed by the ED in support of the reasons for arrest of the accused. The Designated Court is not having the benefit of going through the judgment of the Apex Court in Senthil Balaji - impugned order set aside - matter is remanded back to the learned Metropolitan Sessions Judge/Designated Court under PMLA, Nampally, Hyderabad, with a direction to consider the remand application submitted by the ED and pass appropriate orders strictly in accordance with law by putting the ED and the respondents - accused on notice and affording them an opportunity - petition allowed by way of remand.

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• Service Tax

• 2023 (9) TMI 659
  Rejection of SVLDRS-1 - audit department had not qualified the amount due from the petitioner before 30.06.2019 - impugned communication gives no reason as to why the aforesaid application/declaration filed by the petitioner under the provisions of the aforesaid scheme on the aforesaid date has been rejected - principles of natural justice - HELD THAT:- A perusal of the declaration/application petitioner in Form SVLDRS-1 dated 07.11.2019 under the provisions of Sabka Visvas (Legacy Dispute Resolution) Scheme, 2019 indicates that the petitioner has made a reference was made to the audit communication dated 31.05.2019 - It is evident that there was a quantification by the audit Department on 31.05.2019 based on which the petitioner has filed Rs. 62,03,346/- Form SVLDRS-1 dated 07.11.2019 under the category Investigation, Enquiry or Audit Subcategory Audit. It cannot therefore be construed that there was no determination of tax liability of the petitioner on or before 30.06.2019. The benefit of the Scheme ought to have been extended to the petitioner. The delay in communicating the amount due for the petitioner cannot be a reason for denying the benefit cannot be a reason for denying the benefit of the above Scheme especially when the petitioner was declared higher amount than the amount quantified on 29.06.2020 by the Audit Department. This Writ Petition stands allowed.

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• 2023 (9) TMI 658
  CENVAT Credit - input service - architect service - office renovation service - credit also denied for the reason that PAN based service tax number was not available on the invoices of input services - denial of credit also on account of nexus - HELD THAT:- The appellant was entitled to avail Cenvat credit of service tax paid for repair and renovation of office as provided through a clarification in circular issued by CBEC bearing No. 943/04/2011 dated 29.04.2011 and also as held by this Tribunal through precedent decision in the case of M/S ASRANI INNS RESORTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX NAVI MUMBAI [ 2023 (4) TMI 606 - CESTAT MUMBAI] . Tribunal in the case of COMMISSIONER OF CUSTOMS, C.E. S.T., NOIDA VERSUS M/S PANGEA-3 LEGAL DATA BASE SYSTEM PVT. LTD. [ 2018 (4) TMI 110 - CESTAT ALLAHABAD] held that when the invoices are issued after performance of service, the service receiver cannot be held responsible for non-mentioning of PAN based service tax number on invoices. Other CENVAT Credit are denied - appeal allowed.

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• 2023 (9) TMI 657
  Business Auxiliary Service - Activity amounting to manufacture or not - welding, fabrication, cutting, binding and other related activities on job work basis in respect of manufacture of ship - activity is provision of service under the category of Business Auxiliary Service - HELD THAT:- As per the facts of the case, the respondent have undertaken the job of various activities such as welding, fabrication, cutting, binding and other related activities for the purpose of manufacture of ship on behalf of M/s L T. The learned Commissioner (Appeals) after detailed analysis came to the conclusion that the appellant s activity is amount to manufacture of excisable goods, therefore, the same is excluded from the definition of Business Auxiliary Service, hence not liable to service tax. After close analysis of section 2 (f) and definition of Business Auxiliary Service, and also relying on the various judgments, the learned Commissioner (Appeals) has come to the conclusion that the activity of the appellant is indeed an activity amounts to manufacture in terms of Section 2(f) which is excluded from the definition of Business Auxiliary Service as well as in the Notification No. 8/2005-ST. Therefore, the finding of the learned Commissioner (Appeals) is convincing and there are no infirmity therein. It appears that the contention of the Revenue is that even though the same activity though amounts to manufacture but since M/s L T is the manufacturer, the appellant is a service provider for the same activity - as per the exclusion provided in the definition of Business Auxiliary Service, the activity is not a person specific but the activity specific, therefore, if the activities of welding, fabrication, cutting, binding and other related activities amount to manufacture even if M/s L T is a manufacturer but the activities per se is manufacturing activity irrespective of the ownership of the goods or M/s L T being a manufacturer, the respondent who carried out such activity which is otherwise a manufacturing activity in terms of Section 2(f) merely because M/s L T is a manufacturer will not fall under the definition of BAS because the Business Auxiliary Service excludes only the activity of manufacturing not related to manufacturer, therefore, the Revenue s ground on this aspect also not affected the concluding finding of the learned Commissioner (Appeals) in the impugned order. The impugned order is legal and proper which does not require any interference - Appeal of Revenue dismissed.

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• 2023 (9) TMI 656
  Classification of services - Business Auxiliary Service or not - providing ERP system - suppression of facts or not - time limitation - HELD THAT:- There is no dispute that the appellant have received ERP System for their use from their head office USA. In case of service tax liability and reverse charge mechanism, the service tax is payable considering the service provided by the service provider in the present case head office USA is a service deemed to have been provided by the service recipient, therefore, in case of procurement of ERP System, the appellant s head office USA is a service provider of ERP system which is nothing but Information Technology Service, therefore, in the hand of the appellant, the classification service must be same as IT Service - In the present case, the demand was raised under BAS which admittedly excluded the IT Service, which is not in dispute for the relevant period - the service received by the appellant is indeed Information Technology Service and during the relevant period, the same was not taxable in terms of exclusion from Business Auxiliary Service. It is settled that the ERP Service is clearly an Information Technology Service. The same being excluded from the Business Auxiliary Service cannot be charged to service tax under Business Auxiliary Service. There are force in the argument of the learned counsel with regard to the limitation in the present case, if at all there is any service tax liability, the appellant is entitled for cenvat credit of the same and due to which the entire exercise will amount to Revenue neutral. In this position as settled in various judgments wherever there is a revenue neutral situation, the malafide cannot be attributed to the assessee. In the present case also, there is no mens rea or suppression of fact etc., on the part of the appellant, therefore, the demand is not sustainable on the ground of time bar also. The impugned order is not sustainable - Appeal allowed.

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• 2023 (9) TMI 655
  Refund of unutilized CENVAT Credit - export of service - rejection on the ground that the input service invoices received at the premises not registered with the service tax authorities - nexus of input service with output service - rejection also on the ground that the Input services availed on the basis of incomplete invoices which do not contain the name/ address of the Appellant - Rejection also on the ground that input services availed on the basis of photocopies of invoices and original invoices not provided - last ground of rejection is input services which are utilised for providing output service to foreign affiliates in relation to projects in India. Rejection on the ground of input service invoices received at the premises not registered with the service tax authorities - HELD THAT:- The appellant has four operating offices and his registered address is as 249A, Udyog Vihar, Gurgaon which is registered under the service tax but certain invoices were issued at other offices and the revenue has rejected the refund claim only on the ground that the registration is mandatory pre-condition of availment of credit or refund thereof. In this regard, it is pertinent to refer to the judgement of Hon ble Madras High Court in the case of COMMISSIONER OF SERVICE TAX-III, CHENNAI VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, CHENNAI M/S. SCIOINSPIRE CONSULTING SERVICES (INDIA) PVT LTD, CHENNAI [ 2017 (4) TMI 943 - MADRAS HIGH COURT] wherein the Hon ble High Court after considering the various rules and the notification No. 5/2006-CE NT dated 14.03.2006 has come to the conclusion that registration of the premises is not a pre-condition for grant of refund - thus, the denial of refund on this ground is not justified. Nexus of input service with output services - Entertainment Service - Helpdesk Services - Coffee Vending Machine - hospitality services - Gold Resort Services - Event Management service - Catering, Pandal and Shamiana Services - Lawn Services - Insurance Services - Accounting and Audit Services in relation to filing of refund - insurance services relating to employee health scheme - HELD THAT:- In various cases ach of the impugned services has been held to be input service as the same is availed in connection with the business and rendering of output service. The definition of input service as provided under Rule 2(l) of CCR, 2004 mean any service used by a provider of taxable service for providing output service. The definition is very wide in its ambit for the following reasons that any implies there is no restriction of any kind and consequently it is inclusive definition and not an exhaustive one. Thirdly the usage of word used brings those services within the fold of input services which facilitate the provider to render output services and the term in relation to is a very broad expression - the cenvat credit on input services are in fact relating the business activity of the appellant and are covered by the definition of input service under Rule 2(l) of CCR, 2004 and the appellant has rightly claimed the cenvat credit. The third ground on which the refund has been rejected is that the Input services availed on the basis of incomplete invoices which do not contain the name/ address of the Appellant - HELD THAT:- Out of the total amount of INR 5,41,352/- that has been rejected on account of missing details on the invoices mainly relates to invoices raised by M/s Orange Cabs Pvt. Ltd to the extent of Rs. 5,07,995/-. To this effect, the Ld. Counsel submits that M/s Orange Cabs issued a certificate admitting its mistake and certifying that the invoices amounting to INR 1,02,65,217/- (including service tax amount of INR 5,07,995/- were issued against provision of rent-a-cab service to the Appellant - with regard to other invoices issued by other vendors, the appellant s name has been mentioned, and only address is not mentioned. Reference made to NOVOZYMES SOUTH ASIA PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE [ 2013 (12) TMI 1474 - CESTAT BANGALORE] wherein the Tribunal has observed When a document on the basis of which credit was taken is not required to be produced, how suppression of facts can be invoked and on what basis defies imagination. Thus, the rejection of refund on this ground is also not valid in law. Rejection on the ground that input services availed on the basis of photocopies of invoices and original invoices not provided - HELD THAT:- This issue has been considered by various benches of the Tribunal and it has been held that the refund of cenvat credit cannot be denied on the ground that the original invoices were not filed or credit availed on the basis of photocopies - reliance can be placed in SHIVAM ELECTRICAL INDUSTRIES VERSUS UNION OF INDIA [ 2018 (2) TMI 816 - JAMMU AND KASHMIR HIGH COURT] - thus, the rejection of refund on the ground of not filing the original invoices is not justified. Rejection on the ground that input services which are utilised for providing output service to foreign affiliates in relation to projects in India - HELD THAT:- The services provided by the appellant were used ultimately by the overseas affiliates only as benefit arising out of the services provided by the appellant accrued to the overseas affiliates only and hence, the requirement of Rule 3(2) of the export of the services stood satisfied as the services were provided by the appellant from India and the recipient of the services are located outside India and were used by the foreign affiliates located outside India satisfying the condition of Rule 3(1)(iii) of export rules. Moreover, the Circular No. 111/05/2009-ST dated 24.02.2009 has clarified that the phrase used outside India is to be interpreted to mean that the benefit of the service should accrue outside India. Moreover, the decision of the Tribunal in the case of M/S. FANUC INDIA PVT. LTD. VERSUS C.C.E. S.T. -BANGALORE-LTU [ 2020 (1) TMI 316 - CESTAT BANGALORE] wherein the Tribunal after considering the export of service rules and the Circular No. 111/05/2009-ST dated 24.02.2009 has held that where the benefit of the services accrued outside India it will be termed as export of services. The impugned order set aside by allowing the appeal of the appellant - appeal allowed.

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• 2023 (9) TMI 654
  Non-payment of service tax - liquidated damages - charging and recovering liquidated damages from the outstanding payment due to suppliers / service providers for delay in supply contract and service contract, but tax not paid - HELD THAT:- Circular No. 214/1/2023-Service Tax dated 28.02.2023 relied upon by the Ld. Advocate wherein the Board has chosen not to pursue Civil Appeals filed by the Department against some of the Orders of the Tribunal before the Hon ble Supreme Court considered. The contentions of the Ld. Advocate agreed upon that the demand of Service Tax on liquidated damages has been set aside in those orders. Appeal allowed.

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• 2023 (9) TMI 653
  Taxability - Classification of services - Works Contracts Services - electrical installation works undertaken by the appellant during the disputed period - time limitation - suppression of facts or not - HELD THAT:- There must be installation of electrical devices or electronics devices. Whereas appellant are engaged in the business of electrical contractor for State Government and Semi-Governments Department. The nature of business of appellant is both, electrification and electrical material supply through tender from Government Department. In the present matter revenue nowhere provided any invoices or any documents by which it can be conclude that the appellant are engaged in erection, commissioning or installation of electrical and electronic devices. Further, general wiring contracts and fitting thereof are not covered under the above entry. Therefore, the Service tax demand in the present matter not sustainable under works contract services on appellant s activity. Time Limitation - Suppression of facts - HELD THAT:- In the facts of the present case that firstly the issue involved is of pure interpretation of legal provisions and classification of services therefore, it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax. It is also on record that the Appellant have represented the matter before department during the investigation of case. This clearly shows that there is no suppression or willful misstatement on the part of the Appellant. Further, Revenue has picked up the figures from the balance sheet and profit and loss account maintained by the assessee. Reference can be made to Tribunal s decision in the case of C.S.T. NEW DELHI VERSUS M/S. KAMAL LALWANI [ 2016 (12) TMI 398 - CESTAT NEW DELHI] , laying down that extended period is not invokable if services rendered are reflected in balance sheet and income tax returns and no evidence was produced that non-payment of duty was due to any mala fide. There are no proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation - demand is time barred and, therefore, cannot sustain. For the same reason, the penalties imposed upon the appellant also cannot be upheld. The impugned order is required to be set aside - Appeal allowed.

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• 2023 (9) TMI 652
  Classification of services - providing series of services like breaking the upper cover of shell of castings by pneumatic hammer, and also drilling for removal of upper cover and separating each of the pieces in the welding and reduction of size of scrap pieces - to be classified under Manpower Recruitment or Supply Agency Service or not - HELD THAT:- There is no dispute that the appellant have provided particular job of wax repairing and assembly department work for M/s Intricast Private Limited. In view of the invoice raised by appellant and work order it is absolutely clear that the appellant was assigned a particular job of various activities and the consideration for the same was fixed and paid on per KG basis. As per the terms of the contract, the service recipient has not been given the Man Power, the service recipient is concerned only for a particular processing assigned by them to the appellant, irrespective of nature of man power, quantum of man power - the appellant have not provided the Man Power Recruitment or Supply Agency Service whereas they have provided the service of Business Auxiliary Service i.e. production or processing on behalf of their clients. In view of the various judgments which is on the identical issue and the facts involved in the present case, the Tribunal/ High Court has taken a consistent view that when the agreement between the service provider and recipient is for a particular job and not for supply of man power, the activity cannot be classified under Man Power Recruitment or Supply Agency Service . In respect of identically placed assessee Shri Rajesh C. Pipadia, the learned Commissioner (appeals) has dropped the demand vide Order No. OIA No. RJT-EXCUS-000-APP-132- 14-15 dated 30.07.2014 and the said order was accepted by the Revenue and no further appeal was filed. This order is also a strong persuasive value in the present case for the reason that in this case also the identical activity was carried out by the assessee for the same service recipient M/s Intricast Private Limited. The demand in the present case is not sustainable. Accordingly, the impugned order is set aside - Appeal allowed.

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• 2023 (9) TMI 651
  Exemption from Service Tax - discharge of sovereign functions or commercial functions - appellant engaged in procurement and distribution of drugs and medicines for Tamil Nadu State Government Hospitals - Service classifiable under Storage and Warehouse Services or not - services rendered by TNMSCL in relation to loading, unloading, packing, unpacking and transporting of drugs to Government Hospitals should not be classified under the category of Cargo Handling Services or not - extended period of limitation - HELD THAT:- IN RE: THE BILL TO AMEND S. 20 OF THE SEA CUSTOMS ACT [ 1963 (5) TMI 57 - SUPREME COURT] pertaining to indirect taxation, a Special Bench of eight judges of the Hon ble Apex Court exercising its advisory jurisdiction decided on whether the provisions of Art. 289 of the Constitution precluded the Union from imposing, or authorising the imposition of (a) Customs duties on the import or export or (b) excise duties on the production or manufacture in India of the property of a State used for purposes other than those specified in cl. (2). of that Article. In a majority decision the Hon ble Chief Justice speaking for himself and four other Judges held that the immunity granted to the States in respect of Union taxation, under Art. 289(1) does not extend to duties of customs including export duties or duties of excise. The impugned activities of the appellant are not primary inalienable functions and are liable to be done by a private body. It is also relevant to note the State Government has issued a conditional notification exempting sales tax payable by TNMSCL for the drugs and medicines procured and distributed to the various medical institutions. (G.O.Ms No 431 dated 18/12/96). The exemption is not on account of its sovereign functions. Had the exemption not been granted or if the conditions of the notification are violated TNMSCL would be liable to pay sales tax. The notification states exemption in respect of tax payable , this shows that had the notification not been issued TNMSCL would have to pay sales tax and the benefit of sovereign function has not been recognized by the State Government itself in the appellant s case. Further as held in In re. The Bill to Amend the Sea Customs Act the immunity granted to the States in respect of Union taxation, under Art. 289(1) does not extend to indirect taxes. For the reasons discussed above we are of the opinion that in the absence of a specific notification by the Central Government exempting their activities from service tax, like that issued by the State Government in the case of sales tax reproduced above, the appellant will not be eligible to claim exemption from service tax citing the sovereign function principle. Whether the services rendered by TNMSCL to the Government of Tamil Nadu is classifiable under the category of Storage and Warehouse Services? - HELD THAT:- It is seen from the facts of the case that the impugned goods are received and stored in the warehouses. Subsequently samples are sent for testing and on completion of the testing process, the goods are dispatched to respective destinations as per the requirements. This being the factual position, the essential activities undertaken by the assessee like packing, repacking, loading, unloading etc. are a part of cargo handling service. In fact sub clause 11 of clause III (C) of the Memorandum of Association of TNMSCL dealing with other objects for which the company is established, states To carry on the business of packing and forwarding agents. The amounts are also accounted for under income from operations in their profit and loss account. If any part of this payment is also paid as statutory fees for testing to Government Authorities on behalf of their suppliers, it is for the appellant to bifurcate the said amount received from the total receipts separately towards cargo handling and for testing . They should have disclosed the factual information within their exclusive knowledge - the matter needs to be considered afresh by the Original Authority after giving the appellant sufficient opportunity to put forward his submissions both on law and fact before deciding the matter. Extended period of limitation - Suppression of facts or not - HELD THAT:- There should not have been any confusion in the interpretation of law especially in the light of the Apex Courts advisory In re. The Bill to Amend the Sea Customs Act in the early 1960 s. The declaratory responsibility of an assessee in the self-assessment regime is much bigger and the non-disclosure of taxable activity in the ST-3 Return and non-payment of duty has to be viewed strictly and can only be held to be an act of suppression of facts with an intention to evade payment of duty. Hence the extended period of limitation has been rightly invoked and the appeal in this regard is without merit. The matter remanded back to the Original Authority to decide the issue of Cargo Handling Services only, afresh - impugned order is otherwise upheld except for the matter remanded - appeal disposed off.

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• 2023 (9) TMI 650
  Legality of demand for service tax under section 66E(e) of Finance Act 1994 - monies received for allegedly tolerating breach of contract through encashment of performance Guarantee / Bank Guarantee - failure to comply with the agreed obligation by various contractors / sub-contractors - HELD THAT:- Section 65B(44) defines service to mean any activity carried out by a person for another for consideration and includes a declared service. The contract entered into by the appellant with the contractors/ sub-contractors is not aimed at any activity to receive compensation by a breach of contract, similarly it cannot be said that it was the intention of the contractors to breach or violate the contract and incur a loss. Hence there is no agreement/ contract between the parties involving a consideration to be received for a service provided by the appellant which will attract service tax. We find that the issue is no longer res intigra and has been clarified by the CBIC itself as per the Circulars cited by the appellant. In the case of the CMRL, Revenue has not pointed out any such contractual arrangement which is an independent arrangement in its own right to receives damages by tolerating breach of contract. The amounts retained towards liquidated damages and also invoked as bank guarantee are not a consideration for tolerating breach of contract. Any amount, which is not a consideration for provision of service, cannot be subjected to service tax - It cannot be agreed that CMRL had received a consideration for tolerating the delay in execution of the projects contracted by them. A demand for service tax on the monies received through encashment of performance Guarantee / Bank Guarantee and that collected/ retained as liquidated damages for non-performance and failure to comply with the agreed obligation by various contractors / sub-contractors, hence fails. This being so the demands for duty along with interest made and the penalties imposed by the impugned order are required to be set aside. Appeal allowed.

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• 2023 (9) TMI 649
  Cargo Handling service - Exemption to certain services provided to GTA - Benefit of N/N. 01/2009-ST dated 05.01.2009 denied - appellant have not mentioned the name and date of consignment note in the invoice issued by them for providing manpower supply service to the GTA service provider - period of demand is for October 2007 to March 2009 - demand of service tax on Cargo Handling service - HELD THAT:- The retrospective amendment came into effect only on 19.08.2009, whereby the Finance (No.2) Bill, 2009 was given assent by the President of India. Before that the exemption notification No. 01/2009 was not available to the assessee, therefore, presuming to comply with the condition of Notification No. 01/2009 cannot be expected from the assessee. Therefore, the appellant have not mentioned the name and date of the consignment note in their invoice issued to their service recipient who is undisputedly GTA service provider. However to extend the benefit of such notification even though the procedural lapse can be ignored, but the fact that the service provided by the appellant to the GTA service provider which has been used in providing a GTA service needs to be established, which can be established not only on the basis of invoice alone which is not bearing the consignment note number but on any other documents details of the service recipient. Therefore, for that purpose, the matter needs to be remanded to the adjudicating authority. Demand of Rs. 4,34,241/- on cargo handing service - HELD THAT:- The learned Commissioner (Appeals) appreciating the submission of the appellant remanded the matter to reconsider the said demand based upon the fact whether the service was provided prior to its levy or thereafter and the payments received therefore, the record to this fact was not available before him - there is no infirmity in the order of the Commissioner (Appeals) to the extent it relates to the demand of Rs. 4,32,241/- remanding the matter to the adjudicating authority, therefore, this portion of the Commissioner (Appeals) order is upheld. The matter needs to be remanded for reconsideration of the overall issue. The issue regarding time barring of the demand is also kept open for reconsideration by the adjudicating authority - Appeal disposed off by way of remand.

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• 2023 (9) TMI 648
  Levy of Service tax - Goods Transport Agency Service - tax on 2% amount, which it had collected towards transportation from M/s NTPC - HELD THAT:- It is evident from the records that the appellant s contracts were for supply of the goods, and for provision for Erection, Commissioning and Installation and Management Maintenance and Repair Services. In order to erect and install the equipment, they need to be transported to the site by the appellant. As per the agreement, the appellant could charge 2% of the sale value of the equipment for this transportation. It did not matter what was the actual cost of transportation incurred by the appellant. If it was more, the appellant would have to suffer the loss and if it was less, the appellant could gain. Nothing in the records produced show that the appellant was providing Goods Transport Agency Service to M/s NTPC. The person liable to pay service tax in case of Goods Transport Agency Service is the one who is liable to pay the freight for the transportation of such goods. In other words, it is the NTPC which would have been liable to pay service tax and not the appellant. It also needs to be pointed out that the appellant had hired the services of Goods Transport Agencies for transporting the goods and as the service recipient, it had discharged service tax on the amounts which it paid towards goods transportation. Given the nature of contract, there is nothing to establish that the appellant was providing Goods Transport Agency Service to the NTPC. It was only charging 2% towards the cost of transportation of goods. Even if the appellant had provided the Goods Transport Agency Service, it is the NTPC which would have been liable to pay service tax on such services and not the appellant. The impugned order is not sustainable and is liable to be set aside - Appeal allowed.

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• 2023 (9) TMI 647
  Export of services - services were consumed in India or outside India - providing marketing/sales promotion, technical pre sales support services - HELD THAT:- The aforesaid principles laid down by the Larger Bench in M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II [ 2023 (8) TMI 107 - CESTAT MUMBAI] are applicable to the facts of the present case, which are similar in nature, in as much as, the activity undertaken by the appellant is canvassing for the products and services of Sun Singapore which is ultimately used by Sun Singapore for further business. There is no agreement between the prospective customers of Sun Singapore in India and the appellant. The appellant has entered into an agreement only with Sun Singapore. It is on the request and direction of Sun Singapore that the appellant carried out the marketing activities in India and it is for these services that they get the consideration from Sun Singapore in convertible foreign exchange. Thus, the service provided by the Appellant to Sun Microsystems PTE Ltd., Singapore, be considered as an export of service , consequently, the impugned order passed by the Commissioner cannot be sustained. Appeal allowed.

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• Central Excise

• 2023 (9) TMI 646
  Rejection of Refund of excise input credit, after adjustment of the tax liability for the relevant period towards the output liability - N/N. 1/2005-CE - HELD THAT:- The findings of the lower authorities in the opinion of this Court are unclear as to what was the relevant period. Although there is a reference to under Section 11 B of the Central Excise Act; the exact period in this case would be determinative. In case, the appellant had indeed sought refund of excess credit or whatever credit was lying to its account as on the date it applied for exemption under Notification No. 1/2005-CE, its arguments before this Court would be justified. In these circumstances, the impugned order and the orders of the lower authorities are hereby set aside. The matter is remitted to the appellate commissioner to decide whether the controversy in respect of which period the appellant had claimed refund of credit and if its contention is valid and justified, to what extent to which it is entitled to any relief. Appeal allowed by way of remand.

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• 2023 (9) TMI 645
  CENVAT Credit - denial on account of nexus of input service with output service - Customs House Agent Service - Goods Transport Agency Services - Banking Services - Commercial Industrial Construction Services etc. - penalties - HELD THAT:- The appellants are eligible for availing credit on Commercial Industrial Construction Service for the period prior to 01.04.2011 - on this count, credit of Rs. 207/- is not admissible to the appellants. Rest of the credit is, however, admissible. Photocopy Service - HELD THAT:- The credit of Rs.32,795/- is admissible; similarly, CENVAT credit of Rs.3,658/- on Repair Services is also admissible. The appellants have not disputed the denial of credit of Rs.3,70,800/- on Renting of Property Service and have reversed the same. Thus, a total of Rs.3,71,007/- is not admissible. Customs Clearance Services - Tour Travels Services - HELD THAT:- The impugned order records that the appellants have not produced invoices etc. to prove that the credit is correctly availed by them. While holding in principle that credit on these two services is admissible to the appellants, the issue requires to go back to the Adjudicating Authority to calculate the admissible credit on the basis of the evidence that may be produced by the appellants. Penalties - HELD THAT:- As the issue pertains to interpretation wherein most of the issues were settled by the decisions of this Tribunal at a later date, the appellants cannot be held to have any intention to evade payment of duty. Therefore, no penalties are imposable. The Adjudicating Authority shall calculate the credit admissible on the two disputed services i.e. Customs Clearance Services and Tour Travels Services - Appeal allowed by way of remand.

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• 2023 (9) TMI 644
  Exemption benefit on clearance of goods to UNICEF by the appellant s 100% EOU under N/N. 108/95-CE dated 28.08.1995 - denial of benefit on the ground that this Notification is not extended to the 100% EOU and the same is applicable only to DTA Unit - HELD THAT:- The appellant have claimed the Exemption Notification No. 108/95-CE dated 28.08.1995 but the same is not available to the 100% EOU. However, there is no dispute that while calculating the duty of Excise in case of 100% EOU, all duties of customs to be taken along with the Exemption Notification of customs for calculating the duty for clearance of goods by 100% EOU - In the present case, the clearance of customs goods to UNICEF is clearly covered by Customs Notification No 84/97-Cus dated 11.11.1997, therefore, even if the Exemption Notification No. 108/95-CE dated 28.08.1995 is not available to the appellant but the benefit of Custom Notification 84/97-Cus has to be extended for calculating the duty and since the said Notification exempts the custom duty, the appellant is not liable to pay any duty. The learned Commissioner (Appeals) has relied upon on the exactly identical issue a judgment of RATANGIRI TEXTILES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II [ 2003 (6) TMI 136 - CESTAT, NEW DELHI] , LUCKY STAR INTERNATIONAL VERSUS UNION OF INDIA [ 2000 (7) TMI 964 - GUJARAT HIGH COURT] and HANDUM INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2005 (4) TMI 239 - CESTAT, BANGALORE] . Moreover similar view has been expressed by the Tribunal in case of GENERAL OPTICS (ASIA) LTD. VERSUS COMMISSIONER OF C. EX., PONDICHERRY [ 2004 (3) TMI 252 - CESTAT, CHENNAI] , therefore, it is not the findings of the Commissioner on his independent view but is supported by various decision. The appellant are eligible for exemption even if not by virtue of Notification No. 108/95 but by the virtue of Notification No. 84/97-Cus. Accordingly, the demand is not sustainable - Appeal allowed.

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• 2023 (9) TMI 643
  Recovery of CENVAT Credit from Input Service Distributor (ISD) against credits disputed by it to its manufacturing units - HELD THAT:- Going by the judgments of KANSAI NEROLAC PAINTS LTD. VERSUS COMMISSIONER OF GST, MUMBAI [ 2018 (5) TMI 673 - CESTAT MUMBAI] , and INDIAN OIL CORPORATION LTD. VERSUS COMMISSIONER OF C. EX., DELHI-II [ 2014 (10) TMI 729 - CESTAT NEW DELHI] there can t be any second opinion that Rule 14 of the CENVAT Credit Rules, 2004 can only be made applicable against the manufacturer/service provider or the person who availed the allegedly inadmissible credit and show-cause notice can t be issued against the Input Service Distributor for recovery of CENVAT Credit. Board Circular dated 10.03.2014 re-affirmed the same position and clarified further that show-cause notice can t be issued against ISD under Rule 14 of the CENVAT Credit Rules, 2004. The entire demand raised against the Input Service Distributor is not sustainable in law - Appeal allowed.

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• 2023 (9) TMI 642
  CENVAT Credit - denial on the ground of lack of nexus of input service with Manufacturing Activity - Commercial and Industrial Construction Service - Rent-a-Cab Service - Outdoor Catering Services - Real Estate Agent Service. Commercial and Industrial Construction Service - HELD THAT:- Hon ble Punjab Haryana High Court in the case of COMMISSIONER CENTRAL EXCISE COMMISSIONERATE, DELHI-III VERSUS M/S BELLSONICA AUTO COMPONENTS INDIA P. LTD. [ 2015 (7) TMI 930 - PUNJAB HARYANA HIGH COURT] has held that input services used in relation to setting up, modernization, renovation or repairs of a factory will be allowed as credit, even if they are assumed as not an activity relating to business as long as they are associated directly or indirectly in relation to manufacture of final products and transportation of final products upto the place of removal - credit allowed. Rent-a-Cab Service - HELD THAT:- Hon ble High Court of Punjab Haryana in the case of COMMISSIONER OF CENTRAL EXCISE DELHI-III VERSUS M/S MARUTI SUZUKI INDIA LTD. [ 2016 (11) TMI 237 - PUNJAB AND HARYANA HIGH COURT] observed that Regarding Rent-a-Cab services used by the executives of the respondent for the purpose of travelling required for business meetings, visits to the dealerships, visits to the vendor sites, dealers meet, business promotion activities, vehicles launch, conferences etc. is a an expenditure in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail CENVAT credit - Credit allowed. Outdoor Catering Services - HELD THAT:- Hon ble High Court of Bombay in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT] held that the definition of input service read as a whole makes it clear that the said definition not only covers services, which are used directly or indirectly in or in relation to the manufacture of final product, but also includes other services, which have direct nexus or which are integrally connected with the business of manufacturing the final product. In the facts of the present case, use of the outdoor catering services is integrally connected with the business of manufacturing cement and therefore, credit of service tax paid on outdoor catering services would be allowable - credit allowed. Real Estate Agent Service - HELD THAT:- Coordinate Bench at Mumbai in the case of AXIS BANK LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI AND VICE-VERSA [ 2017 (3) TMI 874 - CESTAT MUMBAI] held that Cenvat credit of service tax paid on the services of real estate agent who help in finding residential accommodation for their employees is permitted, as also the decision of the Tribunal in the case of TOYOTA KIRLOSKAR MOTORS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, LTU, BANGALORE [ 2016 (9) TMI 133 - CESTAT BANGALORE] . In view of this, Cenvat credit availed by appellant is correct. In view of the wider scope given in the definition under Section 2(l) of CENVAT Credit Rules, 2004, the services of which the credit was availed by the appellants, merit to be classified as Input Services used in or in relation to the manufacture and sale of final products or in relation to the business activity of the appellants - Credit cannot be denied - the impugned order is not legally sustainable - appeal allowed.

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• 2023 (9) TMI 641
  Relevant date for calculation of interest on refund, which was sanctioned and disbursed on 30.12.2020 - HELD THAT:- There is clear direction by the Commissioner (Appeals) to pay interest and there was further direction to treat the period of interest starting after three months from the date of filing of refund claim i.e. 9.5.2019. The denial of interest subsequently by the Adjudicating Authority is highly illegal and also amounts to insubordination, by not following the directions of the superior court. Further, such act by the Adjudicating Authority is also contemptuous. The impugned order is set aside and the Adjudicating Authority is directed to grant the interest starting from 9th August, 2019 till the date of disbursement i.e. 30th December, 2020 - Appeal allowed.

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• 2023 (9) TMI 640
  Calculation of duty - production of a new retail sale price was done from 28.12.2011 to 31.12.2011 - whether the duty for the entire month has to be paid or duty on pro-rata basis only for four days, when the production has taken place? - abatement claim - HELD THAT:- The contention of the department is that appellant was supposed to pay duty for the entire month of December 2011. Thereafter, they should have claimed abatement by filing a refund claim. This shows that department is in agreement that for the closer days of the production duty per se is not payable. Therefore, it is a Revenue neutral situation, even if the appellant pay the duty and undisputedly entitled for claim of abatement or pay the duty only for the production days, in the present case four days. The identical issue has been considered by this Tribunal in M/S ZEST PACKERS PVT. LTD AND UNICORN PACKERS PVT. LTD VERSUS CCE AHMEDABAD-II [ 2015 (8) TMI 25 - CESTAT AHMEDABAD] even against the impugned order and the demand was set aside holding that It is already observed that the expression in Rule 10 are clear that the manufacturer shall calculate the duty by reducing amount on a proportionate basis in respect of non-production of goods. From the above Tribunal s order, it can be seen that the Tribunal dealing with the same issue even against the impugned order for the portion of demand confirmed, the Tribunal has set aside the demand and allowed the appeal of the respondent. Therefore, there is no substance in the revenue s appeal. Appeal of Revenue dismissed.

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• CST, VAT & Sales Tax

• 2023 (9) TMI 639
  Classification of goods - toffee - to be covered under the Entry No. 137 Schedule II Part A and liable to tax @ 4% as against the claim of the revenue that the said commodity was taxable as an unclassified commodity @ 12.5%? - HELD THAT:- The SLP is dismissed.

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• 2023 (9) TMI 638
  Interpretation of statute - whether in presence of a specific provision, the general provision can have the sway or whether in presence of a specific provision in a tax statute, can a Court embank on interpretation by taking aid from the subsequent statute or not? - HELD THAT:- By enacting the notification dated 08.02.1999 the State has clearly excluded bran from exemption as provided by Section 30-D. In terms of the specific provision, barn is exigible to sale tax @ 4% Where the tax statute is clear, unambiguous and direct, the court is not generally called upon to interpret such statute. Court has to act upon the literal provision only. As such, the observation, based on which the order of the First Appellate Court was reversed by the Tribunal, is un-called for and the interpretation made by the Tribunal is not only unwarranted in the present context but is also inappropriate. The impugned order is quashed - petition allowed.

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• 2023 (9) TMI 637
  Reopening of assessment - limitation under Section 30 of the Puducherry Value Added Tax Act, 2007 - HELD THAT:- The date of the notice dated 09.08.2018 which was subject matter of challenge before this Court in W.P.No.10998 of 2019 stood decided by an order dated 25.11.2021. The petitioner has not challenged the same in the manner known to law - Assessing Officer was thereafter merely required to pass assessment order based on the notice issued on 09.08.2018. The petitioner was to meet out the allegations in the notice on merits. There was no scope for entertaining any question of limitation merely because notice dated 19.04.2022 was issued. The first respondent has merely issued a notice on 19.04.2022 which has now given a reason to the writ petitioner to state that the proceedings are time barred. This stand of the petitioner cannot be accepted. Petition dismissed.

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• 2023 (9) TMI 636
  Compounding assessment under Section 3(4) of the Tamil Nadu Value Added Tax Act, 2006 - opportunity of hearing not provided - violation of principles od natural justice - HELD THAT:- The fact remains that the Assessing Authority passed the assessment order without hearing the appellant. It may be true that the appellant also to be blamed for his failure to submit the documents and appear before the Assessing Authority within fifteen days. The appellant, in his representation, dated 10.07.2021, has requested time for collection of evidence and to submit documents. As per the earlier direction of this Court, the appellant was asked to appear before the Assessing Authority on a particular date. It is for the Assessing Authority to fix a date for hearing. If the communication is received immediately on the expiry of fifteen days time asked for by the appellant, he would only expect the second respondent to fix a date for hearing, so that he would be in a position to appear before the Assessing Authority and produce the documents to substantiate his case. Only in the said circumstances, the assessment order impugned in the writ petition cannot be sustained merely because it was passed fifteen days after the expiry of the time asked for by the appellant. The appellant cannot be punished for expecting a notice fixing a date for hearing. This Court finds that the assessment order impugned in the writ petition is in violation of the principles of natural justice and finds merits in the writ petition - petition allowed.

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• 2023 (9) TMI 635
  Unreasonable delay in completion of reassessment - reassessment have been completed after almost 10 years after the deemed order of assessment - whether this Court in exercise of its jurisdiction under Article 226 of the Constitution of India can determine as to what would constitute reasonable period for passing orders under Section 27 of the TNVAT Act or should it be left to the assessing authorities to decide the same? HELD THAT:- It would be useful to refer to the judgment of the Hon ble Supreme Court in the case of STATE OF PUNJAB VERSUS BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. [ 2007 (10) TMI 300 - SUPREME COURT ] , wherein question arose as to what would constitute a reasonable period for exercising revisional jurisdiction in the absence of limitation provided under the Act and whether it could be left to the statutory authorities to decide the same. It was held the authorities under the Act being creatures of the statute would not be able to determine the same. Thus, it is for this Court in exercise of its plenary jurisdiction under Article 226 of the Constitution of India, to determine what would constitute reasonable period for passing orders under Section 27 of the TNVAT Act - A reading of the above judgment would show that it is for this Court to decide as to what would constitute reasonable time for taking actions or passing order in the absence of statutory prescription of limitation. It is thus clear that even if the notice was issued within the prescribed period of limitation, inordinate/unreasonable delay in completing the proceedings would vitiate the same. In the present case, there is no explanation as to why it has taken more than six years after the issuance of the first notice on 23.07.2014 to issue the second notice on 23.06.2020 while proceeding to pass the impugned order on 05.02.2021 after almost 10 years from the deemed assessment - This Court in the case of J.M.Baxi [ 2016 (6) TMI 813 - MADRAS HIGH COURT] found that failure to explain the delay of 5 years after initiation would vitiate the proceeding on the ground of unreasonable delay. This Court is of the view that the impugned order of reassessment cannot be sustained and is liable to be set aside - Petition allowed.

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• Indian Laws

• 2023 (9) TMI 634
  Misappropriation of Fixed Deposits (FDs) furnished as security by RFL and its group companies - Criminal liability of a company - HELD THAT:- The criminal liability of the individuals now attributed to DBS are actions of (1) Anjani Kumar Verma, (2) S. Venkatesh, (3) Pradeep Kumar and (4) Parthsarathi Mukherjee. They were all officials of LVB. Their individual responsibility and accountability in criminal law, is and remains unaffected by the amalgamation. Therefore, there is in fact, no involvement of DBS Bank, revealed in the charge sheet filed by the Delhi Police. In completely ignoring these aspects and proceeding on a rather superficial basis, the High Court, in our considered opinion fell into error. There is no gainsaying that the power to quash a criminal investigation or proceedings should not be lightly exercised. Yet, to refuse recourse to that power, in cases that require or may demand it, is being blind to justice, which the courts can scant afford to be. In the present context, the public s confidence in the banking industry was at stake, when RBI stepped in, imposed the moratorium and asked DBS to take over the entire functioning, management assets and liabilities of the erstwhile LVB. To permit prosecution of DBS for the acts of LVB officials (who are in fact, facing criminal charges) would result in travesty of justice. The impugned judgment is accordingly set aside; the appeal by DBS is allowed.

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• 2023 (9) TMI 633
  Dishonour of Cheque - inquiry under Section 202 of the Code of Criminal Procedure, 1973 not held - respondent was having its office outside the jurisdiction of the Court of the learned Magistrate - HELD THAT:- The Trial Court is directed to proceed from the stage of Section 202 of the CRPC. While doing so, the learned Magistrate will be guided by the direction issued by the Constitution Bench which says that For the conduct of inquiry under Section 202 of the Code, evidence of witnesses on behalf of the complainant shall be permitted to be taken on affidavit. In suitable cases, the Magistrate can restrict the inquiry to examination of documents without insisting for examination of witnesses. Appeal allowed in part.

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