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TMI Tax Updates - e-Newsletter September 9, 2023 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Highlights / Catch Notes GST: Seeking grant of Anticipatory Bail - Evasion of GST - creating fake, forged and fabricated firms - The custodial interrogation of the applicant is required. Considering the overall facts and circumstances of the case and the fact that the applicant needs to be confronted with various documents and statements of the witnesses, and the allegations levelled against him are serious, being in the nature of forgery and GST evasion - Bail application rejected - HC Visit to Get Source GST: Seeking grant of anticipatory bail - evasion of tax - illegal transportation - from the material collected by the prosecution , prima facie, it is not established that the applicant committed the offence under Sections 420, 467, 468, 471 read with Section 34 of I.P.C, the benefit of Section 438 of the Cr.P.C. extended to the applicant. - Bail granted - HC Visit to Get Source Income Tax: Validity of Best judgment assessment - Assessment u/s 153C - since petitioner has filed a return, no best judgment assessment u/s 144 of the Act could have been passed - So far as, the provisions of Section 144(1)(b) of the Act are concerned, as explained hereinabove, there has been no failure to comply with the terms of any notice issued under Section 142(1) of the Act. Therefore, the purported exercise of powers u/s144 of the Act cannot be sustained. - HC Visit to Get Source Income Tax: TDS u/s 194A(3)(ix) - TDS on accrued interest on the compensation amount - compensation and interest thereupon awarded by Motor Accident Claims Tribunal, by no stretch of imagination, can be said to be ‘income’ rather same being ‘damages’ granted by court on account of injury or death in accidental cases, cannot be subjected to TDS u/s 194A - HC Visit to Get Source Income Tax: Addition u/s 56(2)(vii)(c) - bonus shares received - when there is an issue of bonus shares, the money remains with the company and nothing comes to the shareholders as there is no transfer of the property and the provisions of Section u/s 56(2)(vii)(c) of the Act are not attracted to the fact situation of the case. - AT Visit to Get Source Income Tax: Deduction u/s 80IA(4) - Developer of works contractor - Disallowance of claim as no development of the infrastructure facility carried away - the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. - AT Visit to Get Source Income Tax: Penalty u/s 271(1)(b) - non compliance to statutory notice u/s 143(2) - there was irregularity in disposing of the objection raised by the assessee against re-opening u/s 147 r.w.s. 148 of the Act which was after four months. Therefore there is irregularity on the part of AO also, which we have observed with the help of sequence of events narrated above, therefore, we note that there is sufficient compliance on the part of assessee to response such notices. - No penalty - AT Visit to Get Source Income Tax: Penalty u/s. 272A(1)(d) - non compliance to notice u/s. 142(1) due to covid pandemic - addition u/s. 68 - As it is observed that when there is a reasonable cause for the said failure, the penalty imposed u/s. 272A sub section (1) of the Act is protected as per the provision of section 272B where the penalty shall not be imposed when the assessee has substantiated reasonable cause for such failure. - AT Visit to Get Source Income Tax: Disallowance of interest expenses u/s 57 - nexus between the interest income from FDs and the interest paid by the assessee - In assessee's case the assessing officer has not considered the movement in the loan account details submitted by the assessee and also has not considered the fresh FDs and renewal of FDs before concluding that the entire claim is not allowable u/s 57. - Matter restored back - AT Visit to Get Source Income Tax: Income deemed to accrue or arise in India - Royalty receipt - Voice Interconnect Services (IUC) - the installation and operation of sophisticated equipments are with the view to earn income by allowing the users to avail the benefits of such equipments or facility and does not tantamount to granting the use or the right to use the equipment or process so as to be considered as royalty within the definition of “royalty” as contained in clause 3 of Article 13 of India-Austria DTAA. - AT Visit to Get Source Income Tax: Denial of tax treaty benefit due to lack of commercial substance in Singapore - Benefit of DTAA - In any event, the ld. AO in all fairness ought to have accepted the assessment orders of Singapore Tax Authorities which goes to prove that the Assessee is a tax resident of Singapore and is independently carrying on its business activities in Singapore. All these documents and behavior of the Assessee collectively go to prove that affairs of the Assessee company were not controlled from outside Singapore. - AT Visit to Get Source Customs: Cancellation of the MEIS Scrips granted to the Respondent Company confirmed - levy of penalty - The initial supply of goods by the exporter to a logistics company is purely facilitative, for the purpose of convenience. Therefore, the relevant provisions of the FTP dealing with MEIS Scrips cannot be interpreted in a manner that permits secondary facilitative transactions to supplant the principal export transaction thus preventing actual exporters from obtaining the benefit of MEIS Scrips. - The order of revalidation of the MEIS Scrips is correct - HC Visit to Get Source Customs: Rejection of Petitioners’ application for amendment of the shipping bills - Section 149 of the Customs Act - the Assistant Commissioner could not have been oblivious of the settled position in law that once the Gujarat High Court had struck down the Circular considering that the Customs Act has a pan-India operation being a Central Act - The decision of the Gujarat High Court on the Circular in question was applicable and binding on all the customs jurisdictions throughout India. - HC Visit to Get Source Customs: Levy of penalty on CHA u/s 112(a) and Section 114AA of the Customs Act 1962 - misdeclared goods - Abetting in illegal imports - The appellant has this certainly rendered himself liable to penal action under Section 112(a) of the Customs Act 1962 - No case is made out for waiver of penalty imposed - AT Visit to Get Source Customs: Determination of classification and valuation - Old & Worn Clothing - It is a well settled principle that in case of old and used goods, if the value is liable for rejection, the same cannot be determined under Rules 4 to 8 as these goods do not have uniform standards and can only be re- determined under Rule 9 of CVR, 200 - AT Visit to Get Source Corporate Law: Auction of assets by the Bank - sale certificate issued with encumbrances - The petitioner Bank filed the present writ petition seeking a direction against the Sub-Registrar to register the sale certificate, but the sale certificate was issued by the Authorised Officer with known encumbrances. Thus, the sale certificate issued cannot be construed as free from encumbrances as contemplated under Rule 9 of the Security Interest Enforcement Rules - the sale certificate issued with encumbrances is non-registrable and the Registering Authority is not empowered to remove encumbrances at the request of the Bank. - HC Visit to Get Source Corporate Law: Criminal conspiracy - deceive the banks - committing a criminal breach of trust and faith - vicarious liability - It is submitted that Petitioner were never being the Director of the accused companies - In order to constitute the offence, the intention to deceive should be in existence at the time when the inducement was made - on a perusal of the complaint and material, comes to a conclusion that the allegations levelled in the complaint on the face of it does not constitute any offence as against the petitioners. - HC Visit to Get Source Corporate Law: Prosecution proceedings against the Directors of the company - Falsification of accounts of A1 Company - Complaint against the persons where not the Directors during the relevant period, quashed - Proceedings against the persons who singed and verified the Balance Sheet shall continue. - HC Visit to Get Source IBC: Maintainability of Section 9 application - pre-existing dispute - admittedly 97 % of the amount due for the invoices raised by the Appellant was paid and 3 % of the Invoices amount was withheld by the Respondent Company. - a ‘dispute’ truly existed for the Respondent Company to have withheld 3% of the total invoice amount. - application was rightly rejected by the NCLT - AT Visit to Get Source Service Tax: Refund of unutilised CENVAT - export of services - intermediary services or not - The plea that SGIPL is not providing any services on its own account is misplaced. It is manifest that there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis - Benefit of export cannot be denied - HC Visit to Get Source Service Tax: Recovery of Service Tax - foreign exchange outflow on RCM basis for personal use - credit card was used to make payments to “Facebook” - The entire premise under which the SCN has been issued is flawed and the Department could not have issued SCN to an individual without properly connecting the usage of the credit card expenses for business purposes by him. - AT Visit to Get Source Service Tax: CENVAT Credit - steel materials such as Steel Plates, HR Plates, Angles, Channels etc. - providing output services such as Port service, Cargo Handling Service, Supply of Tangible goods for use - the credit is correctly admissible - AT Visit to Get Source Service Tax: Non-payment of service tax - rendering of services as a consortium partner - The Appellant has rendered their respective share of the work order to BHEL, but service tax pertains to that portion of service was also paid by the Lead Partner, as they have raised the bills on the total value with BHEL - Demand of service tax to that extent set aside - AT Visit to Get Source Central Excise: Capacity based payment of duty - Chewing Tobacco and Unmanufactured Tobacco Packing Machines - The challenge to Rule 8 must fail when tested on the anvil of the Second Proviso to Section 3A(2)(b). It becomes pertinent to note that the Second Proviso deals with a contingency where the “factor relevant” is altered or modified at any time during the year. It is in such a situation alone that the annual production is liable to be redetermined on a proportionate basis. - HC Visit to Get Source Central Excise: Inordinate delay in passing adjudication order - delay of 18 years - It is not a situation of the show cause notice transferred to call book. It is a case in which there is delay in taking up the matter for de novo adjudication after the remand by the Tribunal (earlier known as CEGAT). The department has not been able to explain the delay of about 18 years in completing the de novo adjudication. - Demand set aside - AT Visit to Get Source Articles Valuation Of Supply - Online Gaming and Casinos ITC available on gold coin distributed to dealers as incentive under the scheme LIMITATION FOR CORRECTION OF ARBITRAL AWARD Writ not entertained if alternative remedy of filing of appeal not availed Notifications Customs 65/2023 - dated 6-9-2023 - Cus (NT) Land Customs Stations and Routes for import and export of goods by land or inland water ways - insertion of entries for land frontier of Bangladesh - Notification No. 63/1994-Customs (N.T.) dated the 21st November, 1994 amended. 64/2023 - dated 6-9-2023 - Cus (NT) Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No.61/2023-Customs(N.T.), dated 17th August, 2023 GST 45/2023 - dated 6-9-2023 - CGST Central Goods and Services Tax (Third Amendment) Rules, 2023. GST - States ERTS(T)65/2017/Pt.III/Vol.I/468 - dated 26-7-2023 - Meghalaya SGST Amendment in Notification No. ERTS(T) 65/2017/1, dated the 29th June, 2017 S.O. 70/P.A.5/2017/S.128/2023 - dated 23-8-2023 - Punjab SGST Waives the amount of late fee referred to in section 47 of the PGST Act S.O. 65/P.A.5/2017/S.128/2023 - dated 23-8-2023 - Punjab SGST Amendment in Notification No. S.O.7/P.A.5/2017/S.128/2018, dated the 7th February, 2018 G.S.R. 81/P.A.5/2017/S.164/Amd.(66)/2023 - dated 23-8-2023 - Punjab SGST Punjab Goods and Services Tax (Seventh Amendment) Rules, 2023. Money Laundering S.O. 3965 (E) - dated 6-9-2023 - PMLA Reporting Entities notified for Aadhaar authentication service of the Unique Identification Authority of India u/s 11A of the Prevention of Money-laundering Act, 2002 News G20 document prepared by World Bank lauds India’s progress Credit Intermediation – Can regulations tango with markets? (Keynote Address by Shri M. Rajeshwar Rao, Deputy Governor, Reserve Bank of India - September 04, 2023 - at the Inaugural Seminar on Banking Regulation, Intermediary Soundness, and System Stability at IIM Kozhikode) India showcases PM Gatishakti National Masterplan at Asian Development Bank’s 2023 Regional Cooperation and Integration Conference Case Laws: GST 2023 (9) TMI 344 Seeking grant of Anticipatory Bail - Evasion of GST - creating fake, forged and fabricated firms and received payments including GST in different accounts against the purchased goods from the complainant, but have not deposited GST with the GST department - HELD THAT:- The present case is not just relating to the applicant having duped the complainant of a huge sum of money, it also involves allegations of issuing fake invoices and e-way bills for the purposes of GST evasion, which is an economic offence involving loss to the public exchequer. Such offences need to be viewed seriously as the same pose a threat to the economy of the country. Further, the present case involves offence under Section 467 of the IPC read with Section 471 of the IPC, for which the maximum punishment is imprisonment for life. The custodial interrogation of the applicant is required. Considering the overall facts and circumstances of the case and the fact that the applicant needs to be confronted with various documents and statements of the witnesses, and the allegations levelled against him are serious, being in the nature of forgery and GST evasion by creating false invoices issued by non-existent entities, no grounds for grant of anticipatory bail to the applicant are made out. The present bail application along with all pending applications is dismissed. 2023 (9) TMI 343 Seeking to unfeeze Bank Account of petitioner - Revenue contended that the Petitioner had not cooperated by producing the relevant materials/documents for ascertainment of the tax - HELD THAT:- Mr. Takke (on behalf of State) on instructions of the said officer who is present in the Court would submit that the impugned order dated 24th June 2022, passed under Section 73(5) of the Maharashtra Goods and Service Tax Act, 2017 (MGST Act), can be set aside. As also the consequent attachment of the Petitioner s bank account vide notice dated 23rd November 2022, issued in Form GST, DRC-13 can also be set aside, with liberty to the Revenue to pass a fresh appropriate order. The impugned order as well as attachment set aside - This however shall be subject to the Petitioner extending full cooperation in regard to the fresh assessment now being undertaken by the Revenue. Petition disposed off. 2023 (9) TMI 342 Freezing of petitioner's bank accounts - cancellation of GST registration - HELD THAT:- The petitioner is directed to pay the entire tax portion in four equal installments. As far as the interest portion is concerned, that will be considered after the payment of the tax liability - The petitioner is directed to pay the first installment within a period of one week from the date of receipt of a copy of this order. On such payment the respondents are directed to de-freeze the petitioner's bank account. Post the case on 01.09.2023. 2023 (9) TMI 341 Cancellation of tender - non-submission of GST certificate by petitioner - HELD THAT:- It is admitted that the petitioner has not submitted the GST Certificate due to which his tender has been rejected by the Municipal Council, Bhatapara vide order dated 09.01.2023 and further the fact that a fresh tender has already been issued, there are no good ground to interfere in this writ petition. The present writ petition is dismissed. 2023 (9) TMI 340 Seeking grant of anticipatory bail - evasion of tax - illegal transportation - goods were supposed to be delivered to Mahamaya Hardware, Kusmi, however the Truck driver was going to Dhanwar and on the basis of the same - HELD THAT;- Perusal of the case dairy goes to show that in the case dairy there is a report of Assistant Commissioner, GST, Ambikapur, who has given his report to the Police Station Incharge on 4-5- 2023 wherein it has beer clearly mentioned that invoice of GST is there and tax of Rs.51,798/- has been mentioned, but since it is illegal transportation, therefore, the tax is not valid. It has also been recorded that on physical verification, 700 cement bags were found and both bills confirmed this fact. Considering the material on record and further considering the fact that it is not a case of prosecution that the forged documents have been prepared by the applicant with regard to GST or other invoices and also the fact that no material has been collected by the prosecution so far with regard to commission of offence under Sections 420, 467, 468, 471 read with Section 34 of I.P.C. ,and also considering the fact that this may be a case of violation of GST Act, but from the material collected by the prosecution , prima facie, it is not established that the applicant committed the offence under Sections 420, 467, 468, 471 read with Section 34 of I.P.C, the benefit of Section 438 of the Cr.P.C. extended to the applicant. The instant anticipatory bail application is allowed subject to conditions imposed. 2023 (9) TMI 339 Release of goods alongwith conveyance - benefits of release of the goods under Section 129 of GST Act not availed - H ELD THAT:- Rule, returnable on 21.06.2023. By way of interim relief, it is directed that the goods of the petitioner as well as vehicle shall be released subject to conditions imposed - application allowed. 2023 (9) TMI 338 Cancellation of GST registration - appeal under Section 112 of the CGST Act disposed off on the ground of limitation - HELD THAT:- The petitioner has not filed any application for revocation of the cancellation. Presently, the notification dated 31.03.2023 is issued providing for revocation of cancellation of the registration. If the cancellation is under the provisions of Section 29(2)(b) or ( c) of the CGST Act and such cancellation is before 31.12.2022, and an application for revocation is not filed, it is submitted that in terms of this notification the petitioner will be entitled to file an application according to the special procedure now notified. The petition stands disposed of with liberty to the petitioner to avail such remedy subject to all just exceptions. 2023 (9) TMI 337 Profiteering - landowners have received their share of flats from the developer or not - Respondent has not collected GST from the landowners as claimed by the Respondent - liability to pass on Input Tax Credit benefit to the landowners or not - HELD THAT:- This Commission has carefully considered the Report dated 26.02.2021 furnished by the DGAP and the other material brought on record and it has been revealed that the Applicant No. 1 has been found eligible for ITC benefit of Rs. 19,286/- including 12% GST. It has also been revealed that the Respondent has suo-moto passed on Rs. 40,000/- i.e. 0.95% of the taxable turnover to the Applicant No. 1 as such benefit. It is also revealed that the Applicant vide email dated 02.05.2022 sent to the NAA in response to letters No. 3482 dated 30.03.2022 and No. 4291 dated 27.04.2022, has stated that the issue stands resolved and the matter may be treated as closed - It is apparent from the emails that the Applicant No. 1 does not want to pursue the matter further as she has already received the benefit of ITC from the Respondent as is also stated in the Report of the DGAP. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017 as the benefit of ITC has already been passed on to the Applicant No. 1 - the present proceedings launched under Section 171 of CGST Act, 2017 are not maintainable and are hereby dropped. Income Tax 2023 (9) TMI 336 Prosecution of appeal in High Court - scope of Section 12AA after its amendment with effect from 1st June, 2010 - HELD THAT:- There is a huge delay of 1507 days in filing the special leave petitions. The explanation offered is not satisfactory. In fact, the explanation does not say anything between 11.03.2019 and 31.10.2022. We are not satisfied with the affidavit in support of the application seeking condonation of delay. Hence, the special leave petitions are dismissed on that ground alone. Pending application(s), if any, shall stand disposed of. 2023 (9) TMI 335 Assessment u/s 153C - Whether the provisions of Section 144 of the Act could be invoked to pass a best judgment assessment? - Validity of issuance of notice without DIN - HELD THAT:- Respondent has erroneously proceeded on the basis that no return had been filed by petitioner pursuant to the notice u/s 153C since he records that no return is available on the ITBA portal. This factual basis is demonstrably erroneous. A return of income pursuant to notice issued u/s 153C(1) of the Act has been filed on 15th August 2021 and an acknowledgment showing an e-filing acknowledgment number is on record. Section 144(1)(a) of the Act cannot apply since petitioner has filed a return, no best judgment assessment u/s 144 of the Act could have been passed - Respondent no. 1 has also, in the impugned order of assessment dated 28th September 2021, recorded that no notice u/s 143(2) of the Act was issued by him. Therefore, there is no question of the provisions of Section 144(1)(c) of the Act being applicable. So far as, the provisions of Section 144(1)(b) of the Act are concerned, as explained hereinabove, there has been no failure to comply with the terms of any notice issued under Section 142(1) of the Act. Therefore, the purported exercise of powers u/s144 of the Act cannot be sustained. Even if one assumes that one of the jurisdictional preconditions set out in Section 144(1)(a), (b) or (c) of the Act is satisfied then, Section 144(1) read with the 1st proviso requires that an AO shall give an assessee an opportunity of being heard as to why the proposed assessment of income to the best of his judgment should not be made. A perusal of the show cause notice shows that this has not been done in the instant case. Further, the provisions of the 2nd proviso to Section 144(1) of the Act cannot apply since petitioner has not failed to comply with any notice under Section 142(1) of the Act. Therefore, the impugned assessment order could, if at all, have been passed under Section 153C read with Section 143(3) of the Act. If the validity of the impugned order of assessment is tested on this basis it cannot be sustained. It is a jurisdictional condition precedent to passing an order under Section 153C read with Section 143(3) of the Act that a notice u/s 143(2) of the Act must be issued as held in Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT] Whether the impugned assessment order is invalid on account of it being issued without a DIN? - HELD THAT:- It is indisputable that the impugned assessment order dated 28th September 2021 does not bear a DIN and further that the said order issued without a DIN does not bear the required format set out in paragraph 3 of the Circular and, therefore, the impugned assessment orders for Assessment Year 2011-2012 to 2019-2020 ought to be treated as invalid and deemed never to have been issued. We find support for this view in Brandix Mauritius Holdings Ltd. [ 2023 (4) TMI 579 - DELHI HIGH COURT] wherein has held that an order passed in contravention of the said Circular is void, bad in law and of no legal effect - Therefore, the satisfaction note dated 13th July 2021 and the impugned order of assessment dated 28th September 2021 ought to be treated as invalid and deemed never to have been issued. Whether respondent has jurisdiction to take proceedings u/s 153C in the case of petitioner in respect of assessment years where assessments proceedings have not abated? - Since the original assessment in the case of petitioner has not abated, and since no incriminating material has been found relating to petitioner in the course of proceedings under Section 132 of the Act in the case of Hubtown Limited, respondent cannot assume jurisdiction to assess/re-assess petitioner under Section 153C. Whether it can be said that any income chargeable to tax has escaped assessment in respect of the issues setout in the satisfaction note? - During the course of the original assessment proceedings, a specific query was raised by respondent as to the allowability of write off of part of the loan granted by petitioner to Hubtown Limited. In response, full and comprehensive details of the amount written-off was provided as well as the reasons therefore and the same were accepted by the Assessing Officer when completing petitioner s assessment on 29th June 2019. Therefore, there can be no question of the allowability of this write-off now being reviewed and a different view being taken in these proceedings. Ex-facie, there has been no failure to disclose truly and fully all material facts. Further, no new tangible material having a bearing on petitioner s income in this regard has come to the notice of respondent. Disallowing the very same write-off that had been allowed in the original assessment clearly constitutes a change of opinion and a review of the original decision taken by the assessing officer and cannot fall within the ambit of the phrase the Assessing Officer is satisfied that the documents seized have a bearing on the determination of the total income of petitioner. The provisions of Section 153C of the Act cannot override the jurisdictional safeguards and conditions precedent required to assess or re-assess income such as a review, a change of opinion, a different view being taken without any new tangible material and without any failure on the part of petitioner to disclose fully and truly all material facts. Assuming that respondent has jurisdiction to take proceedings u/s 153C whether assessments can be made in respect of years beyond six years preceding the assessment year relevant to the previous year in which the proceedings under Section 132 of the Act was conducted? - In order to make an assessment for assessment year which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year, in which the search was conducted, the 4th proviso to Section 153(A)(1) of the Act sets out certain further conditions which are required to be fulfilled before a notice can be issued for the relevant assessment years. Clause - (a) of the 4th proviso requires that the Assessing Officer must have in his possession books, documents or evidence which reveal that income represented in the form of an asset which has escaped assessment amounts to or is likely to amount to rupees fifty lakhs or more. Explanation 2 to Section 153A(1) of the Act sets out an expanded definition of the word asset for the purposes of the 4th proviso. In the instant case, the satisfaction note refers to two items. First, the loan account between petitioner and Hubtown Limited and the alleged escapement is only in respect of the part thereof which is written off during the year. That clearly, i.e., the writing-off of a bad debt cannot fall within the ambit of income, represented in the form of an asset . In view of the fact that this has been considered and allowed in the original assessment proceedings, the same cannot be said to be income which has escaped assessment. Secondly, the other item referred to in the satisfaction note, that is to say, trading in shares of Hubtown Limited has been undertaken on the stock exchange, recorded in the books of account of petitioner, and the resulting gain offered for tax and the amounts taxed in the hands of petitioner. Finally, even in the impugned re-assessment order for A.Y. 2017-2018 no addition has been made on this account; Since the write-off of a bad debt cannot be held to be an asset, clause - (a) of the 4th proviso to Section 153A(1) of the Act would bar any assessment that is proposed to be made for the relevant assessment year/years. 2023 (9) TMI 334 Reopening of assessment - Capital gain computation - Assessee sold the subject immovable property [ ground floor property ] for an amount which was less than stamp duty value, in contravention of the provisions of Section 50C r.w.s. 43CA - Also the petitioner had not disclosed the fact that it had received sum on sale/transfer of another part referred to as basement property - defence taken by the petitioner/assessee was that since the variation in the price received by the petitioner and the circle rate value was less than 5%, the transaction would fall in the safe harbour in terms of the 3rd proviso to Section 50C HELD THAT:- We are of the view that apart from the fact that the petitioner has approached this court after nearly five months from the date when the order u/s 148A(d) was passed, there are aspects which the AO needs to enquire into. Having regard the fact that the order under Section 148A(d) was passed on 23.03.2023, the AO may have made some progress in the matter. If we were to interdict the proceedings at this stage, against the backdrop of what has been noted hereinabove, it may, in real terms, neither help the cause of the petitioner/assessee nor the respondent/revenue. Respondent is right that this is one of those rare cases where the stamp duty has been paid by the seller in respect of the transaction concerning the ground floor property. As regards the second transaction concerning the basement property, it also seems rather strange that the petitioner/assessee, after having received 50% of the sale consideration, has not pursued the buyers for the paying remaining amount, although more than four years have passed. We have queried Petitioner as to whether any suit action has been taken out by the petitioner/assessee against the buyers, who says no such steps have been taken. Therefore, having regard to the facts and circumstances given in this case, we are not inclined to entertain the writ petition. Revenue, which is duty-bound to furnish a copy of the document whereby approval was obtained, will do so within the next ten (10) days. It is made clear that during the reassessment proceedings, the petitioner/assessee will be free to take all the legal and factual contentions. 2023 (9) TMI 333 TDS u/s 194A(3)(ix) - TDS on accrued interest on the compensation amount - claimants, filed claim petition u/s 166 of the Motor Vehicles Act, 1988 seeking compensation on account of injury sustained by him in a motor accident - award passed as claimant entitled to compensation to the tune of Rs. 20,31,000/- alongwith interest at the rate of 9% from the date of filing petition till the deposit of award amount - whether TDS can be deducted from the amount awarded as compensation as well as interest accrued thereupon in motor accident cases or not? HELD THAT:- This court finds that the aforesaid issue stands already adjudicated as titled Court On Its Own Motion v. the H.P. State Cooperative Bank Limited [ 2014 (10) TMI 972 - HIMACHAL PRADESH HIGH COURT] while placing reliance upon said judgment in National Insurance Company Limited v. Dil Kumari and others [ 2018 (6) TMI 1838 - HIMACHAL PRADESH HIGH COURT] has held that no TDS can be deducted on the amount of interest accrued on compensation amount deposited by insurance company on account of injury or death in accident cases. Recently, High Court of Gujarat at Ahmedabad, in Oriental Insurance Co. Ltd. [ 2022 (5) TMI 282 - GUJARAT HIGH COURT] has also held that compensation as well as interest thereupon is not income but damages as such, same cannot be subjected to TDS as per 194A(3)(ix) of the Income Tax Act. Thus it can be safely concluded that compensation and interest thereupon awarded by Motor Accident Claims Tribunal, by no stretch of imagination, can be said to be income rather same being damages granted by court on account of injury or death in accidental cases, cannot be subjected to S. 194A of Income Tax Act, which otherwise mandates for Tax Deduction at Source for the interest amount beyond Rs. 50,000/-. 2023 (9) TMI 332 Penalty imposed on Excess deduction u/s 35(2AB) - expenditure incurred on research and development - petitioner ended up claiming deduction at the rate of 200% - argument of breach of the principles of natural justice - According to the petitioner, this was a mistake which occurred because the law was amended after AY 2017-18 and also averred by the petitioner that between 2018-19 and 2019-20, the cap for deduction was pegged at 150% - petitioner says that the impugned penalty order was passed without according personal hearing to the petitioner s authorized representative - HELD THAT:- As petitioner sought personal hearing, our attention has been drawn to the screenshot of the designated portal on which the request was made. This fact which emerges from the record is not disputed by Respondents. Having regard to the fact that personal hearing was not granted, we are inclined to set aside the impugned order and the consequential notice.It is ordered accordingly. Liberty is, however, given to the AO to pass a fresh order after according personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner indicating the date and time of the hearing. 2023 (9) TMI 331 Invalid return - petitioner had applied for change of name - although the PAN remained the same, the change in name was recognized by the concerned authority and despite this position a notice was issued u/s 139(9) labelling the petitioner s return as defective - as submitted petitioner could have approached the Central Board of Direct Taxes (CBDT), for an extension of time to file a revised return, by taking recourse to Section 119(2)(b) - HELD THAT:- We are of the view that this course of action does not align with the provisions of the Act. The fact that there has been a change in the name of the petitioner is not in dispute; in fact, on the date when the return was filed, i.e., 15.10.2018, the petitioner was described as RWML. Accordingly, the impugned order and communications are set aside. The respondents/revenue are directed to process the return filed on 15.10.2018 concerning the aforementioned AY, and pass necessary consequential orders. 2023 (9) TMI 330 Addition u/s 56(2)(vii)(c) - bonus shares received - Assessee submitted that provisions of section 56(2)(vii)(c ) of the Act would not apply to bonus shares at all as it is merely done by capitalization of profits - HELD THAT:- We hold that the bonus shares are issued only out of capitalization of existing reserves in the company. In the instant case, the ld. AO had not disputed the fact that the overall wealth of a shareholder post bonus or pre bonus remains the same. Having held so, it is wrong on his part to invoke the provisions of section 56(2)(vii)(c ) of the Act on the ground that there is an double benefit derived by the assessee due to bonus shares. We find that the issue in question is also covered by the decision of Dr Ranjan Pai [ 2016 (5) TMI 216 - ITAT BANGALORE] as held there is no material on record to infer that bonus shares have been transferred with an intention to evade tax, which is the object of the provision in question. Therefore, the Commissioner of Income Tax (Appeals) as well as the tribunal have rightly held that when there is an issue of bonus shares, the money remains with the company and nothing comes to the shareholders as there is no transfer of the property and the provisions of Section u/s 56(2)(vii)(c) of the Act are not attracted to the fact situation of the case. Appeal of the revenue is dismissed. 2023 (9) TMI 329 Reopening of assessment - notice issued in the name of a non-existent entity - order being in the name of merged company - HELD THAT:- The factum of amalgamation was intimated to the AO even before the issuance of notice u/s 148 - The assessee had intimated and requested the AO to cancel the PAN in the name of M/s Mangalam Infotech Pvt. Ltd. Therefore, of the Hon ble Supreme Court rendered in the case of Pr.CIT Vs. Maruti Suzuki [ 2019 (7) TMI 1449 - SUPREME COURT] we do not see any infirmity into the order of learned CIT(Appeals) and the same is hereby affirmed. Grounds raised by the Revenue are rejected. 2023 (9) TMI 328 Unexplained money u/s. 69A - addition on account of cash deposits in the bank account during the demonization period - undisclosed income - HELD THAT:- AO has not refuted or discredited the evidences and documents given by assessee. AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidences in support of its claim, they cannot be brushed aside based on surmises and guesswork. Assessee has submitted cash book, cash flow statement and cash book, which shows that assessee has sufficient opening cash balance at the beginning of 01.04.2016. Apart from this, the assessee is a partner in M/s Shivam Polishing LLP and from the partnership firm, the assessee has received remuneration and profit - assessee has submitted the cash deposited during the demonetization and hence it is quite clear from the cash book, cash flow statement and cash withdrawal from the bank, that assessee has explained the source of cash deposit in bank account in a satisfactorily manner - addition so made is deleted. Decided in favour of assessee. 2023 (9) TMI 327 Addition u/s 69 - unexplained investment - As per assessee he fully explained since the same has been made from past savings as well as tax-free RBI Relief bonds interest income and hence, it needs to be deleted - HELD THAT:- As assessee has explained the source of investment with help of the bank statement, wherein the assessee has explained the source of the investment made by him and exempted interest received - The assessee need not prove the source of the source, however in this case, the assessee has proved the source of the source also about the disputed amount - Therefore, considering these facts,we delete the addition - Decided in favour of assessee. 2023 (9) TMI 326 Penalty u/s. 271(1)(c) - Defective notice - issuing show cause notice u/s. 274 without defining the nature of default - allegation of non striking off the irrelevant default - HELD THAT:- Admittedly, on a perusal of the SCN it stands revealed that the AO had failed to strike off the irrelevant default while calling upon the assessee to explain why he may not be subjected to penalty u/s 271(1)(c) Failure on the part of the A.O. to put the assessee to notice as regards the default for which penalty u/s 271(1)(c) was sought to be imposed on him by clearly and explicitly pointing out the specific defaults in the SCN, for which he was called upon to explain that as to why penalty u/s. 271(1)(c) of the Act may not be imposed upon him, had, thus, left the assessee guessing of the default for which he was being proceeded against, and had divested him of an opportunity to put forth an explanation before the A.O that no such penalty was called for in his case. We, thus, are of a firm conviction that as the A.O had failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the defaults for which he was being proceeded against, therefore, the penalty u/s 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. Decided in favour of assessee. 2023 (9) TMI 325 Revision u/s 263 - Reassessment proceedings concluded - main contention of the assessee, therefore, is this that the status of the assessee claiming as joint venture, the claim of deduction u/s 80IA(4), the disallowance of interest expenditure u/s 40(a)(ia) and exemption of receipt of insurance claim under the Act had been duly verified by the AO in the re-assessment proceeding itself which is clearly evident from the order passed by the Ld. AO u/s 143(3) r.w.s. 147 - HELD THAT:- As evident from the records itself that the Ld. AO upon due application of mind verified the four above issues and allowed the same in respect of status of assessee claimed as joint venture, claim of deduction u/s 80IA(4), disallowance of interest expenses under Section 40A(i)(a) of the Act and exemption of receipt of insurance claim under the Act but disallowed on account of interest paid to Citycorp Finance Ltd. u/s 40(a)(ia) of the Act and added to the total income of the assessee out of interest payment GSHP-9A contract work which clearly establishes due application of mind by the Ld. AO. Moreso, the issues in question, as raised by the Ld. PCIT has already been explained by the assessee. The assessee further clarified that the assessee made substantial investment for developing the infrastructure facility with supporting financial documents. It was further mentioned that the entire investments were made by the appellant and no subsidy and/or assistance from any other prescribed authority was received; the explanation rendered by the assessee. There is no iota of doubt that the AO has made a detailed enquiry in the case of the assessee in the scrutiny proceeding, particularly, in regard to the issue raised by the Ld. PCIT in the order impugned. Upon making the exhaustive enquiry and excessive documents so placed by the assessee before the Ld. AO, the return of income filed by the assessee had been accepted. We would like to mention that though the PCIT sought to justify his point of view in holding the order passed by the Ld. AO erroneous so as to prejudicial to the interest of the Revenue due to lack of enquiry, such finding is totally found to be non-application of mind and a colorable exercise of power. We find that in this case proper and adequate enquiry has been conducted by the Ld. AO. Thus, the order passed by the Ld. PCIT quashing the order passed by the Ld. AO holding it erroneous and prejudicial to the interest of the Revenue due to lack of adequate enquiry is not sustainable in the eye of law - Decided in favour of assessee. Deduction u/s 80IA(4) - Disallowance of claim as no development of the infrastructure facility carried away - assessee company engaged in the civil construction work mainly laying roads, dams, bridges, a developer of infrastructural facility upon making investment of its own capital as well as borrowed funds in the form of plant and machinery, structures at sites, working capital, human resources, technical expertise etc. entrusted by the State Government/Central Government on various projects - HELD THAT:- As dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly makes out the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee as discussed above clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. If the contention of the Revenue is encouraged then possibly none of the developers will be entitled to the claim made under Section 80IA(4) of the Act. Our this view has been strengthened by the observation and the ratio laid down by the Hon ble Delhi High Court in the case of CIT vs. VRM India Ltd [ 2015 (3) TMI 941 - DELHI HIGH COURT] - No doubt in regard to the admissibility of the claim made by the assessee and to entertain the same by giving relief to that effect. Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, the assessee is referred to as contractor or just because some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s. 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which confers right of eligibility to the assessee to claim benefits under section 80IA(4) of the Act. Decided in favour of assessee. 2023 (9) TMI 324 TP adjustment - addition towards deduction claimed u/s. 80IA for power generating division - determining ALP of domestic transactions in case of captive consumption of power generated by one unit and consumed in other unit - assessee has claimed deduction u/s. 80IA of the Act, for Windmill Division and has determined profit from eligible undertaking by charging power to Textile Division at the rate at which the assessee buys power from M/s.TANGEDCO Ltd. - TPO has rejected rate adopted by the assessee and has adopted rate paid by TNERC to power generating companies for purchase of power - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the decision of ITAT Chennai Benches, in the assessee s own case for AY 2007-08 [ 2011 (11) TMI 368 - ITAT CHENNAI ], where the Tribunal has considered an identical issue in light of deduction claimed u/s. 80IA of the Act, and observed that for the purpose of computing deduction u/s. 80IA price at which the TNERC purchased power from the power generating companies is not correct rate to be adopted, but the price at which the assessee purchased power from electricity supply companies is the rate to be compared for the purpose of determining ALP of price charged by the assessee to its other division. The ITAT Chennai Benches in the case of M/s The India Cements Limited vs. The DCIT, [ 2021 (12) TMI 390 - ITAT CHENNAI ] has considered an identical issue in light of deduction claimed u/s. 80IA for profit derived from eligible undertaking in respect of transfer of power from Windmill Division to other division and observed that while computing deduction u/s. 80IA for power generation units for captive consumption of power, rate at which Electricity Boards supplies power to its consumers should be considered instead of the rate at which the power generating companies supply power to the Electricity Boards. Hon ble Bombay High Court in the case of CIT-LTU v. Reliance Industries Ltd. [ 2019 (2) TMI 178 - BOMBAY HIGH COURT ] has also considered similar issue and held that for the purpose of computing deduction u/s. 80IA of the Act, the rate at which the assessee purchased power from distribution companies is to be considered instead of rate at which the power distribution companies purchased power from generating companies. Thus determining ALP of domestic transactions in case of captive consumption of power generated by one unit and consumed in other unit, the rate at which power purchased by the assessee from distribution company is alone needs to be considered but not the rate at which distribution companies purchased power from generating companies. In the present case, the TPO and the DRP has adopted rate fixed by TNERC for purchase of power from various power generating companies by TNEB. TPO as well as the DRP are completely erred in making downward adjustment towards deduction claimed u/s. 80IA in respect of Wind Power Division, and thus, we direct the AO/TPO to delete TP adjustment made towards deduction u/s. 80IA - Decided in favour of assessee. 2023 (9) TMI 323 Penalty u/s 271(1)(b) - non compliance to statutory notice u/s 143(2) - earlier two notices were sent by AO by way of physical mode, however, other two notice u/s 142(1) later were sent to assessee through e-mail - assessee was in the hope that other notices would also be sent by way of physical mode, thus has not checked her e-mail portal to see the notices, but as soon as the assessee checked her e-mail assessee found that notice u/s 142(1) took the print out of two notices and submitted her reply before the AO - HELD THAT:- As in response to notice issued by AO u/s 142(1) sent by email AO has not given reasonable time to assessee to reply. The above sequence of events established that assessee was co-operated with the Department and the Assessing Officer during assessment proceedings. We note that there was irregularity in disposing of the objection raised by the assessee against re-opening u/s 147 r.w.s. 148 of the Act which was after four months. Therefore there is irregularity on the part of AO also, which we have observed with the help of sequence of events narrated above, therefore, we note that there is sufficient compliance on the part of assessee to response such notices. Hence, no penalty should be levied on the assessee and therefore we delete the penalty imposed by the AO u/s 271(1)(b) of the Act - Decided in favour of assessee. 2023 (9) TMI 322 Validity of reopening of assessment - mandation of disposal of objections by the AO which were raised by assessee - HELD THAT:- As identical order in the case of assessee s brother, Aman Sharma has been set aside by the ITAT [ 2018 (5) TMI 54 - ITAT DELHI] AO is under a mandate to dispose of such objections before proceeding with the assessment by passing a speaking order, which has not been done by him, therefore, the reassessment under section 147 cannot be sustained and hence, we quash the reassessment order and allow the ground raised by the assessee. 2023 (9) TMI 321 GP rate estimation - Since the factory is closed from 17.09.2013 the Counsel showed his inability stating that all the book of accounts and documents are in the premises and, therefore, could not be produced and AO applied GP rate of 12.8% and made addition - CIT(A) deleted addition - HELD THAT:- It is true that at the assessment stage the assessee did not produce books of account and related documents/ evidences but it is equally true that before the first appellate authorities the assessee submitted all the evidences alongwith books of account. It is an undisputed fact that the CIT(A) called for a remand report directing the AO to examine the book of accounts and other related documents. We find that not only the AO examined the book of accounts alongwith bills and vouchers but also accepted the same. On these facts we do not find any reason to interfere with the findings of the CIT(A). The ground No.1 is dismissed. Addition of miscellaneous expenses - CIT(A) restricted part addition - HELD THAT:- CIT(A) has restricted the disallowance considering the facts of the case to Rs. 3,50,000/- which calls for no interference. Appeal of the revenue is dismissed. 2023 (9) TMI 320 Penalty u/s. 272A(1)(d) - non compliance to notice u/s. 142(1) - addition u/s. 68 on the ground that the assessee has failed to substantiate the source for purchase of property treating the same to be unexplained credit - HELD THAT:- AO shall levy a penalty for each default or failure to comply with the notice u/s. 142(1) of the Act or section 143(2) of the Act or fails to comply with the direction u/s. 142(2A). Here in the present case, the A.O. has issued notice u/s. 142(1) on five occasions for furnishing the details and the documents called for by the A.O. The assessee, on the other hand, contends that he was non compliant to the said notices as it was during the Pandemic period and due to which the assessee himself was hospitalized. It is also observed that the assessee vide letter dated 03.03.2021 has furnished copies of purchase deed dated 29.09.2017 and had also made written submission subsequently. A.O. has passed the assessment order u/s. 143(3) r.w.s. 143(3A) and 143(3B) and not u/s. 144 i.e., the best judgment assessment. It is evident that the assessee has made some compliance before the A.O. and it is not a case of the complete non compliance. As it is observed that when there is a reasonable cause for the said failure, the penalty imposed u/s. 272A sub section (1) of the Act is protected as per the provision of section 273B where the penalty shall not be imposed when the assessee has substantiated reasonable cause for such failure. In the present case in hand, the notice issued u/s. 142(1) of the Act was during the Covid Pandemic period which is a justifiable cause for the non compliance before the A.O . We, therefore, deem it fit to delete the impugned penalty levied by the A.O. and, therefore, the grounds raised by the assessee are allowed. 2023 (9) TMI 319 Disallowance of interest expenses u/s 57 - nexus between the interest income from FDs and the interest paid by the assessee - AO has contended that the assessee failed to establish the nexus of the FD balance as of 31/03/2017 and the details of the loan amount borrowed from related parties as provided by the assessee - It is the claim of the assessee that the FDs are placed using the funds borrowed in earlier years from the related parties and therefore the revenue cannot make the disallowance in the years under consideration for the reason that the assessee failed to establish the nexus HELD THAT:- During the course of hearing our attention was drawn to Balance Sheet of the assessee as at 31/03/2017 and 31/03/2018 to submit that there cannot be a one to one match between the loan amount used for investing in FD and used for business. We tend to agree with this contention for the reason that one of the partners' capital account is having a considerable credit balance (own funds) and there is also sizeable balance shown under the head Span Margin in the asset side which substantiates the claim that there is no one to one match between the source and the investments. The claim of the assessee that the amount borrowed from related parties has been used for investment in FD as well as business purpose has merits. Be that as may be for the purpose of claiming deduction under section 57, it is important to establish that the expenditure (not being in the nature of capital expenditure) is laid out or expended wholly and exclusively for the purpose of making or earning such income. In assessee's case the assessing officer has not considered the movement in the loan account details submitted by the assessee and also has not considered the fresh FDs and renewal of FDs before concluding that the entire claim is not allowable u/s 57. Alternate plea of the assessee that the interest expenditure if disallowed u/s 57 should be allowed as business expenditure for the reason that the FDs are kept for business purpose has also not been considered by the lower authorities - In view of these discussions we deem it fit to remit the issue back to the assessing officer for a de novo consideration. AO is directed to consider the movement in the FD account and the loan account to understand the nexus and also to consider the alternate claim of interest as business expenditure based on the facts and evidences that may be submitted by the assessee. Appeal allowed for statistical purposes. 2023 (9) TMI 318 Income deemed to accrue or arise in India - Royalty receipt - Taxability of Voice Interconnect Services - transaction between assessee and the Indian customers - payments received by the Appellant for provision of Voice Interconnect Services - scope of India-Austria Tax Treaty - revenue characterised the payments received by assessee towards interconnectivity utility charges as Royalty since the payment is made to use the process or an equipment - HELD THAT:- Similar issue came up in case of Bharti Airtel vs.ITO (TDS) [ 2016 (3) TMI 680 - ITAT DELHI ] The issue considered therein was in respect of payment towards call interconnectivity charged for call transmission on foreign network. The Tribunal therein, on applying ratios pronounced in the above referred decisions, held it not as Royalty . Therefore in our opinion, the Payments made by the assessee in lieu of services provides by the assessee cannot fall within the ambit of Royalty under section 9(1)(vi) Explanation 5 6. We also note that the Explanations 5 and 6 to section 9(1)(vi) are not found in the definition of Royalty under India- Austria DTAA. The definition of Royalty under the DTAA is much more narrower in its scope and coverage, than the definition of Royalty contained in section 9(1)(vi) r.w. Explanations 2,5 and 6 of the act. On perusal of the agreement between the assessee and the end users it is noted that the installation and operation of sophisticated equipments are with the view to earn income by allowing the users to avail the benefits of such equipments or facility and does not tantamount to granting the use or the right to use the equipment or process so as to be considered as royalty within the definition of royalty as contained in clause 3 of Article 13 of India-Austria DTAA. We also note that in the present facts of the case, at no point of time, any possession or physical custody, control or management over any equipment is received by the end users / customers. It is also noted that the process involved in providing the services to the end users / customers is not secret but a standard commercial process followed by the industry players. Therefore the said process also cannot be classified as a secret process , as is required by the definition of royalty mentioned in clause 3 of Article 13 of India-Austria DTAA. We are therefore of the opinion that the receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India- Austria DTAA. As relying in case of Vodafone Idea Ltd. [ 2023 (7) TMI 1164 - KARNATAKA HIGH COURT ] and the discussions hereinabove, we hold that payments received by assessee towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty to be brought to tax in India under section 9(1)(vi) of the Act and also as per DTAA. The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Even Hon ble High Court held that the non-resident service providers do not have any presence in India. Decided in favour of assessee. 2023 (9) TMI 317 Denial of tax treaty benefit due to lack of commercial substance in Singapore - Benefit of Article 13(4A) of the DTAA denied - capital gains earned on transfer of shares of DHFPL - directions of the ld. DRP rejected - as argued investments in DFHPL were made by the Appellant in 2016 and income arising on transfer thereof were specifically exempt from the purview of General Anti- Avoidance Rule as contained in Chapter X-A of the ITA read with Rule 10U(1)(d) of the Income-tax Rules, 1962 ( Rules ) - as per AO scheme of arrangement employed by the Assessee is one of tax avoidance through treaty shopping mechanism - Whether the affairs of the Assessee were controlled from outside Singapore ? - HELD THAT:- With regard to first direction of ld. DRP to the ld. AO to check whether the affairs of the Assessee were controlled from outside Singapore, the ld. AO simply reiterated what has been stated by him in the draft assessment order. The draft assessment order was the subject matter of adjudication by the ld. DRP and the ld. DRP on perusal of the same had directed the ld. AO to give a clear finding after due verification as to whether the affairs of the Assessee company were controlled from outside Singapore. AO did not take any efforts to make further verification in this regard and simply reiterated what has been stated earlier by him in the draft assessment order and concluded against the Assessee. On the contrary, we find that the Assessee had given enough evidences to prove that its entire affairs are not controlled from outside Singapore. Since the loan borrowed from its Holding Company was subsisting in the books of the Assessee company, the assessee chose to use the sale proceeds of the shares to repay the loan dues payable to Holding Company. In case if the allegation of the ld. AO, that Assessee is a shell or conduit company and entire activities were carried out only by the BVI entity, is to be accepted, then there is absolutely no need for the Assessee to even repay the loan back to the Holding Company. In any event, the ld. AO in all fairness ought to have accepted the assessment orders of Singapore Tax Authorities which goes to prove that the Assessee is a tax resident of Singapore and is independently carrying on its business activities in Singapore. All these documents and behavior of the Assessee collectively go to prove that affairs of the Assessee company were not controlled from outside Singapore. Hence the ld. AO erred in not following the directions of the ld. DRP in this regard thereby making the final assessment order as bad in law. AO had confirmed that no interest was paid by the Assessee on the loan to BVI entity as the loan was interest free - AO had observed that however, consultancy charges were paid to related entities of BVI entity and hence the benefit has been passed on by the Assessee company to BVI entity. We find from the financials of the Assessee company for the year under consideration, absolutely no consultancy charges had been paid to any entity during the year and there is no debit towards consultancy charges paid in the financials. The ld. AO had considered the payment of consultancy charges made by the Assessee in the earlier years and linked the same to the year under consideration. We find that the ld. AO had approached the entire issue with a pre-conceived mind in order to reach the pre-determined destination of denying the treaty benefits somehow to the Assessee. Denial of deduction for premium component of cost of acquisition of shares of DFSPP - DRP observed that from the facts of the case, the amount paid towards premium is Rs. 95.45 and Rs. 90 on the two dates of transfer. Accordingly, the observation of the AO that there is a huge variation in the share premium is not correct. AO is directed to consider the premium on the shares if no other anomaly is observed. As per the provisions of section 144C(13) of the Act, the ld. AO was prohibited from granting any opportunity of being heard to the Assessee, which included any document requisition from Assessee, post directions of ld. DRP. In the instant case, the ld. AO proceeded on such basis himself and never sought any further piece of information subsequent to the directions of the ld. DRP and framed the final assessment order. Hence it could be safely concluded that there was no anomaly in the records before the ld. AO which would enable him to draw adverse conclusion on the issue of allowability of long term capital loss on sale of shares. In this factual background, we hold that the ld. AO had not adhered to the directions of the binding directions of ld. DRP with regard to denial of deduction for premium component paid on acquisition of shares of DFSPL. Short term capital gains - The Assessee had provided enough evidences to prove the case of entitlement of treaty benefits. Hence we hold that the short term capital gains on sale of shares shall not be taxable in India in the hands of the Assessee company. Long term capital loss - Acquisition of shares at premium had been duly reflected by the Assessee company in its audited balance sheets. We also find that the shares were allotted by the Indian Companies to the Assessee company at a premium and return of allotment in the prescribed form had been duly filed by those Indian Companies with the Registrar of Companies in India. We hold that the shares were acquired by the Assessee in the instant case at premium and sources for making payments for the same had been duly drawn from the books of accounts. No portion of it could be construed as unexplained by the assessee. Hence when those shares which were lying in the audited balance sheets, were sold by the Assessee during the year under consideration, then there is absolutely no case for the revenue to deny the benefit of such cost (including premium component) as deduction. Hence we direct the ld. AO to allow benefit of carry forward of long term capital loss to the Assessee. Applicability of General Anti Avoidance Rules (GAAR) - As we find that the same was already adjudicated by this Tribunal in Assessee s sister concern case in Reverse Age Health Services Pte Ltd [ 2023 (2) TMI 1008 - ITAT DELHI] as observed that in the case of sister concern i.e. The Golden State Capital Pte Ltd (assessee herein before us), tax avoidance has been established for the same transaction conclusively. Hence it could be seen that the facts adjudicated by this Tribunal in the Reverse Age case are identical to the facts of the assessee before us. 2023 (9) TMI 316 Nature of receipt - Taxable income - Method of recording transaction - Income from duty credit entitlement received under the served from India scheme (Duty credit entitlement) - whether is capital receipt and not chargeable to tax - whether Served from India Scheme has to be treated as capital receipt or revenue receipt - HELD THAT:- As the assessee has recorded the SFIS benefit as the other income and included duty portion in the gross value of the capital assets. The legislature consciously prohibits the assessee not to record the duty or subsidy portion in the cost of the assets, it will lead to claim of additional depreciation on the subsidy. This is called unjust enrichment. Therefore, we are inclined to direct the Assessing Officer to allow the subsidy or SFIS benefit to the assessee as the capital receipt. At the same time, we direct the Assessing Officer to collect the utilization of SFIS credit in the various capital assets acquired or procurement of spare parts by the assessee i.e., the custom / excise duty credit claimed by the assessee assets wise and direct him to reduce the respective value from the cost of the assets recorded in the depreciation schedule. Also recalculate the depreciation for the year. Accordingly, reassess the taxable income of the assessee. Accordingly, we allow the Ground raised by the assessee as the SFIS is not a taxable income as held in the case of Container Corporation of India Ltd., [ 2022 (12) TMI 157 - ITAT DELHI] Duty credit entitlement should be reduced from cost of the capital assets to the extent utilized for payment of import duty - HELD THAT:- This issue is remitted back to Assessing Officer to recalculate the depreciation. In our view, the assessee has claimed the credit of SFIS as an income, the corresponding debit will be the cost charged to the capital assets. Therefore, the value of assets has to be readjusted. This ground of appeal is allowed for statistical purpose. Not considering that income to the extent of duty credit utilized, for corresponding custom duty on import of spares etc, is shown as expenses in profit loss account and is ultimately tax neutral and hence does not have any effect on the profit of the Appellant - HELD THAT:- We observe that assessee has submitted that it has also purchased certain spare parts under this scheme, as discussed above, assessee has declared the SFIS credit as an income, then duty portion is included in the cost of the spare parts. Therefore, this ground also remitted back to AO to verify the same. In case it is included in the spare parts, the same has to be reduced or disallowed. Income claimed by the assessee in the books of account is not proper - HELD THAT:- Since it is a credit to be adjusted in the cost of the capital assets. It should not be treated as an income as disclosed by the assessee. Once, it is reduced from the capital assets, it will not be additional income or incentive, therefore there will not be much impact on the profit except depreciation impact and will not impact the claim u/s. 80IA of the Act. Therefore, this ground become infructuous. Accordingly, dismissed. Other income as eligible for benefit of deduction u/s 80IA - HELD THAT:- As brought to our notice that assessee has earned other miscellaneous income which are in the nature of duty credit entitlement, interest income, reversal of provision, small scarp sales. It is also submitted that assessee is engaged in one single activity i.e., running of a port. Therefore, assessee is not involved in any other activity other than running of port which is eligible for deduction u/s. 80-IA of the Act, any other income or expenditure incurred by the assessee only for running or maintenance of the port. Therefore, irrespective of various income declared in the business, any income generated out of this port is eligible for deduction u/s. 80-IA - we direct the AO to treat this miscellaneous income as part of the business carried on by the assessee. Accordingly, ground raised by the assessee is allowed. MAT computation - Entitlement under SFIS ought to be reduced from computation of profit for the purposes of Section 115JB - Assessee submitted that in view of the treatment of benefit under the SFIS are being a capital receipt, the amount of benefit will be excluded from the computation of book profit - HELD THAT:- Assessee has declared the SFIS subsidy as an additional income without reducing the value of subsidy in the cost of the assets. When the same is being directed to be modified as directed to Assessing Officer the Assessing Officer will verify the same and make the changes in the depreciation schedule and reduce the subsidy from the income declared by the assessee. When the same is reduced from the income, this income will no longer be an item of income in the Profit and Loss. As held in the Pushkar Chemicals Fertilizers Ltd. [ 2021 (8) TMI 982 - ITAT MUMBAI] the SFIS subsidy is capital in nature, it cannot form part of book profit. Since this issue is remitted to the file of the Assessing Officer, we remit this issue also to the file of AO to determine the book profit u/s. 115JB of the Act as per the direction in Ground Nos. 2 to 4. Deduction u/s 80IA - Income from scrap sale - as per DR income earned from scrap sales is not directly derived from undertaking - HELD THAT:- We observe that the list of scrap materials declared by the assessee shows that these are generated out of the maintenance of the Port. The scrap cannot be accumulated from outside, unless, the assessee has bought for the business. We noticed that the assessee is not in the business of scrap sales, therefore, it should have been generated out of the port maintenance. It is integral part of the business and should be part of business income and the deduction u/s 80IA cannot be denied. Accordingly, we observe that Ld.CIT(A) has considered this aspect and allowed the claim of the assessee as per law. 2023 (9) TMI 280 Income taxable in India - Characterization of payments received towards interconnectivity utility charges as Royalty - satisfy 'use or right to use' - payment is made to use the process or an equipment - scope of presence in India - various service providers in India entered into agreement with assessee for international carriage and connectivity services against which an interconnectivity charges are received by the assessee - HELD THAT:- As in the present facts of the case, at no point of time, any possession or physical custody, control or management over any equipment is received by the end users / customers. It is also noted that the process involved in providing the services to the end users / customers is not secret but a standard commercial process followed by the industry players. Therefore the said process also cannot be classified as a secret process , as is required by the definition of royalty mentioned in clause 3 of Article 13 of India-Spain DTAA. We are therefore of the opinion that the receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India-Spain DTAA. As relying in case of Vodafone Idea Ltd. [ 2023 (7) TMI 1164 - KARNATAKA HIGH COURT] and Vodafone South Ltd. [ 2015 (1) TMI 1018 - ITAT BANGALORE] and the discussions hereinabove, we hold that payments received by assessee towards interconnectivity utility charges from Indian customers / end users cannot be considered as Royalty / FTS to be brought to tax in India under section 9(1)(vi)/(vii) of the Act and also as per DTAA. The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Even Hon ble High Court has held that the non-resident service providers do not have any presence in India. Decided in favour of assessee. Customs 2023 (9) TMI 315 Cancellation of the MEIS Scrips granted to the Respondent Company confirmed - levy of penalty - Respondent Company was placed on the Denied Entry List which constituted a complete prohibition on availing any licenses and / or benefits from the DGFT - HELD THAT:- The case of the DGFT is that the Respondent Company misrepresented their destination as France in the Bill of Export and that the actual consignee of the supplied goods is Siddhartha Logistics - In the considered opinion of this Court, the contention advanced by the DGFT is contrary to the factual position evidenced by the documents and payments on record. The Respondent Company has produced its Export Invoice, Bill of Export, and e-Bank Realisation Certificates which clearly establish the relationship of buyer and seller between the Respondent Company and DA. The initial supply of goods by the exporter to a logistics company is purely facilitative, for the purpose of convenience. Therefore, the relevant provisions of the FTP dealing with MEIS Scrips cannot be interpreted in a manner that permits secondary facilitative transactions to supplant the principal export transaction thus preventing actual exporters from obtaining the benefit of MEIS Scrips. This Court is of the view that the successive orders passed by the Asst. DGFT and the Addl. DGFT display a lack of application of mind by the afore-noted authorities and their refusal to consider the decision delivered by the Madras High Court in Jindal Drugs [ 2021 (7) TMI 1034 - MADRAS HIGH COURT] , which was presented by the Respondent Company on two occasions, in their reply and their appeal, is erroneous. This Court, therefore, finds no infirmity in the Impugned Judgement whereby the Learned Single Judge set aside the Impugned Actions and directed the concerned authorities to revalidate the MEIS Scrips previously issued to the Respondent Company - patent appeal dismissed. 2023 (9) TMI 314 Violation of principles of natural justice - opportunity for personal hearing not provided - Denial of benefit of Duty Free Replenishment Certificate (DFRC) - DFRC license was actually issued for import of cotton processed fabrics of GSM 95+/-10%, but it has been used to avail the import duty benefit for the import dyed woven polyester fabrics - Maintainability of petition - petitioner is having an alternate remedy - Penalty u/s 114A of CA - suppression of facts or not - HELD THAT:- On perusal of the order, it is seen that only three persons have attended the personal hearing, rest of them did not respond to the summons. It is also seen that the petitioner has specifically requested for cross examination - Respondents submitted that the petitioner has mentioned designation but has not mentioned the name of the official, hence such request cannot be considered. This Court is of the view that such contention of the respondents cannot be entertained, since the official who was serving at that point of time is the appropriate person and the respondents are well aware of such persons rather than petitioner. Maintainability of petition - petitioner is having an alternate remedy - HELD THAT:- This Court is of the view that this writ petition is pending from 2014 onwards and at this point of time, the petitioner cannot be directed to file appeal. Penalty imposed under Section 114A - suppression of facts or not - HELD THAT:- When an element of criminality is alleged on the petitioner, then the petitioner is entitled to personal hearing along with cross examination. When the petitioner has specifically sought for cross examination by giving a list of persons, denying opportunity of cross examination is clear violation of principles of natural justice. Therefore, this Court is remitting the matter back to the authorities. The authorities shall grant personal hearing as well as the authorities shall allow cross examination especially to the list of persons which the petitioner has mentioned in the list of persons. Petition allowed. 2023 (9) TMI 313 Rejection of Petitioners application for amendment of the shipping bills - Section 149 of the Customs Act - HELD THATAttention given to the view taken by the Gujarat High Court in the case of M/s. Mahalaxmi Rubitech Ltd. [ 2021 (3) TMI 240 - GUJARAT HIGH COURT] when the Division Bench, considering the purport of Section 149, as it stood post 2019 amendment, has held the Circular to the extent it incorporates para 3(a) was ultra vires of Article 14 of the Constitution of India as also ultra vires of Section 149 of the Customs Act, 1962 - the Assistant Commissioner could not have been oblivious of the settled position in law that once the Gujarat High Court had struck down the Circular considering that the Customs Act has a pan-India operation being a Central Act, following the decision of the Supreme Court in Kusum Ingots Alloys Ltd. vs. Union of India And Anr. [ 2004 (4) TMI 342 - SUPREME COURT] . The decision of the Gujarat High Court on the Circular in question was applicable and binding on all the customs jurisdictions throughout India. Thus, there is also no warrant in the Respondents contending that by virtue of the amendment as brought about to Section 149 by the 2019 Amendment Act, without following the procedure as mandated by Section 149, namely, in the manner as prescribed and as recognized by Section 2(35) the Circular would be valid. Petition allowed. 2023 (9) TMI 312 Levy of penalty on CHA u/s 112(a) and Section 114AA of the Customs Act 1962 - misdeclared goods - Abetting in illegal imports - goods declared as Calcium Carbonate were found to be AA size, 1.5 volt Chinese batteries of Zabai Brand and Ammonium Chloride - appellants claims that he was under the bonafide belief that the goods under export were Calcium Carbonate and not mis-declared - HELD THAT:- It is observed that the show cause notice has been issued to the appellant for aiding and abetting the aforesaid illegal imports liable for confiscation (para 18 of the notice) and apparently no notice has been issued to the appellants for imposing penalty under Section 114AA. Thus, it is a foregone conclusion that having not been put to notice for imposition of penalty under Section 114AA, the appellant cannot be subjected to such a penalty, howsoever grave the case be - to the extent of imposition of penalty under Section 114AA of the act, the impugned order is bad in law and cannot be sustained. The import of Calcium Carbonate was discussed by the appellants with Raj Kumar Kothari and Vinod Lachwani repeatedly, even in the latter s office. Having come to know about the firm M/s. S.D. Commotrade International and Md. Asgar (Proprietor) on receipt of the authorization letter dated 01.10.2012 as early as in the middle of October, nearly two weeks before filing of the Bill of Entry, there is nothing to show by way of measures taken by the appellant as regards subject import vis- -vis their promising role as a Customs Broker. Thus to believe the theory of innocently taken for ride with no mistake at the appellant s end belies complete logic - once having come to know the actual and complete identities of the importer and those brokering the deal viz. Raj Kumar Kothari and Vinod Lachwani and despite that signing of blank documents for shifting of the cargo from the port to the CFS or non-seeking of KYC particulars directly or undertaking appropriate verification, are nothing but a conscious act of omission and commission. Thus, it is quite evident that A.K. Singh by his wilful act, despite being aware of the whole factual matrix, has deliberately and consciously played alongwith the key conspirators of mis-declared imports and contributed to the illegal importation of battery and ammonium chloride by filing B/E mis-declaring the imported cargo as calcium carbonate. The appellant has this certainly rendered himself liable to penal action under Section 112(a) of the Customs Act 1962. No case is made out for waiver of penalty imposed under Section 112 (a) of the Act. However, in so far as the appellants have not been made noticee for imposition of penalty under Section 114AA of the Act, no penalty on them can therefore be imposed under the said section - Appeal allowed in part. 2023 (9) TMI 311 Determination of classification and valuation - culpability of the noticee - Old Worn Clothing Completely Fumigated or not - Imposition of penalty - charging of interest - HELD THAT:- A garment which shows signs of wear and tear, sufficient or otherwise, will be classifiable under CTH 6309 and a garment having no signs of wear and tear will be classified on merit under its respective heading. It may be pertinent to point out here that it is only the reasonable belief of the seizing officers that is the basis for concluding that the goods were not having sufficient wear and tear and as such could not be treated as old and used garments classifiable under CTH 6309. There is no expert opinion rendered by any technical person, nor is there a report from the testing agency onto the actual state and nature of goods. In the given situation, the re-examination of the goods not having been done completely, determination of the actual nature of the impugned goods have to be based on the basis of available records. On record, is the specific finding of the Examination Committee pointing out the old and used nature of the goods - a very small percentage of bales which on re-examination by DRI, had been found to contain quilts, bags, curtains, etc. would also have to go alongwith old and used worn clothing as for their valuation and classifiable under CTH 6309 or the appropriate heading under the Customs Tariff. The declared assessable value of old and used garments imported was rejected, in terms of Explanation 1(iii)(a) to Rule 12, wherever the declared value was less than USD 0.60 per Kg CIF. It is a well settled principle that in case of old and used goods, if the value is liable for rejection, the same cannot be determined under Rules 4 to 8 as these goods do not have uniform standards and can only be re- determined under Rule 9 of CVR, 2007 - Similar view has been taken by the Tribunal in the matter of BK. SPINNING MILLS (P) LTD. VERSUS COLLECTOR OF CUSTOMS, COCHIN [ 1999 (8) TMI 359 - CEGAT, NEW DELHI] wherein it was held that the (erstwhile) Rule 8 of the Customs Valuation Rules was correctly applicable in case of subject goods for which there was no uniform standard. Therefore, based on market enquiries undertaken, the assessing officer re-determined the value of such goods - there are no qualms with such valuation arrived at. Imposition of penalty - charging of interest - HELD THAT:- The goods have been determined to be old and used garments. These are restricted for the purpose of import and require an import licence for import and clearance. For the purpose and related aspects like lack of a valid licence for import and the excess weight, the adjudicating authority has subjected the importer to appropriate action in law. Thus, he has rightly confiscated the said goods under Section 111(m) of Customs Act, 1962 and also imposed penal liabilities. Admitting their own handicap at subjecting the goods to a comprehensive examination on account of infrastructural constraints, it is deeply distressing that the Revenue prefers to subject the importers to the implication of a frivolous appeal. The impugned order calls for no interference. The order passed by the learned Commissioner is upheld and the appeal filed by the revenue is dismissed. Corporate Laws 2023 (9) TMI 310 Removal of attachment in respect of secured property belonging to the 2nd respondent - attachment made for recovery of public dues - sale certificate issued with encumbrances - procedures followed by the Bank under the provisions of the SARFAESI Act and Rules are proper or otherwise - whether the claim of secured creditor will prevail over Crown's debts? - HELD THAT:- There is no proof on record filed by the petitioner to show that the sale certificate was properly sent by the Authorised Officer to the 3rd respondent for making entries as contemplated under Section 89(4) of the Registration Act. In the absence of any such proof, the relief as such sought for against the 3rd respondent is not entertainable and is pre-mature. The 1st respondent has further stated that the Writ of Mandamus is not maintainable since the entry in the Encumbrance certificate could be quashed but by merely seeking Writ of Mandamus, the petitioner is not entitled for the relief. The Bank has not initiated any steps to resolve the issues through AMRD as per the Government of India memorandum. It is not as if the Bank's interests alone is to be protected by the Courts. The Courts are bound to consider the plight of Crown's debt equally. In the event of any procedural violations or violations of the provisions of the SARFAESI Act or Rules, then the Court may not be in a position to grant the relief in favour of the petitioner, as such sought for in the writ petition - mandatory procedures contemplated under the Rules, if violated or not complied with, then the secured creditor/ Bank is not entitled for the relief to lift the attachment without clearing the dues or to remove the attachment from the encumbrance certificate under the provisions of the Registration Act. Whether the interest of the third party purchaser can be protected in such circumstances, when the sale certificate was issued with encumbrances? - HELD THAT:- By Applying the principles of Caveat emptor, the third party purchaser, who purchased the property through public auction was made aware of the encumbrances. Once the purchaser has the knowledge about the encumbrances and purchased the property through auction, then it is his obligation to discharge the encumbrances and convert the encumbered property free from encumbrances. The Bank cannot file a writ petition so as to protect the interest of the third party, who has purchased the property knowing the fact that there are other encumbrances. Once the Bank auctioned the property and issued a sale certificate under Sub Rule (6) to Rule 9 of Security Enforcement Rule 2002 by mentioning the list of other encumbrances, then such sale certificate cannot be registered by the registering authority. In the event of non-compliance of the statutory rules issued under the SARFAESI Act, the Bank is not entitled for any relief from the hands of the Constitutional Courts. Unilateral actions of the secured creditors, at no circumstances be appreciated. They, being a public sector, is duty bound to protect the interest of the other statutory creditors as it is Crown's debt. The power conferred under the SARFAESI Act cannot be exercised, so as to deprive the other statutory creditors from realising their dues. The compliance of the procedures contemplated in the rules are not only mandatory but the non-compliance would result in denial of an opportunity to the non-secured creditors to recover their dues - in the present case, the secured creditor is not in a position to recover their dues in entirety. In such circumstances, Sub Rule (10) of Rule 9 contemplates that the certificate of sale issued under Sub Rule (6) shall specifically mention whether the auction purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. If the auction sale is made with encumbrances, then the registering authority under the Registration Act cannot remove the same. In the present case, the petitioner / Indian Overseas Bank conducted public auction of the secured assets. They recovered their dues partly. The sale certificate was issued by the authorised officer notifying the known encumbrances. The petitioner Bank thereafter filed the present writ petition seeking a direction against the Sub-Registrar to register the sale certificate, but the sale certificate was issued by the Authorised Officer with known encumbrances. Thus, the sale certificate issued cannot be construed as free from encumbrances as contemplated under Rule 9 of the Security Interest Enforcement Rules - the sale certificate issued with encumbrances is non-registrable and the Registering Authority is not empowered to remove encumbrances at the request of the Bank. This Court has to arrive at an inevitable conclusion that the writ petition filed by the petitioner Bank and the relief as such sought for are untenable - the writ petition stands dismissed . 2023 (9) TMI 309 Criminal conspiracy - deceive the banks - committing a criminal breach of trust and faith - vicarious liability - It is submitted that Petitioner were never being the Director of the accused companies - Directors of associate companies are liable for punishment as per sub Section (9) of Section 212 of the Companies Act, 1956 or not - HELD THAT:- On perusal of the Investigation report, it is seen that there is no specific averment that the petitioners were in charge of and responsible to the Companies for the conduct of its business at the time of commission of the offence. In the instant case, except the fact that the petitioners are wife and brother of the Director, nothing has been produced by the complainant showing that the petitioners were controlling the day-to-day affairs of the Company. With regard to the nature of charge against the petitioner/A5, as per the report of SFIO, that she, in connivance with other Promoter Directors, involved in misappropriation of fixed Assets of PAPL, siphoning off funds of PAPL to the tune of Rs. 12.03 Crore, by sale of aircraft spares and by receiving the sale proceeds in associate companies by sale of fixed assets and stocks of PAPL to aircraft spare dealers in US and Singapore and non-cooperation in investigation. The case of the respondent-complainant is, the petitioners along with others acted in a criminal conspiracy to deceive the banks and committed a criminal breach of trust and faith, the banks reposed on them. Further, they connived with the promoters of PAPL, in the disposal of the assets belonging to the banks under hypothecation, with a motive to benefit them and the entities belonging to them. On perusal of the SFIO report, it is seen that the information is bereft of even the basic facts, which are absolutely necessary for making out the offence, as against the petitioners herein / A5 and A10. The inherent powers of the High Court is not the one conferred by the Code, but the one which the High Court already has in it and which is preserved by the Court. Section 482 saves inherent power of the High Court postulating that nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice - Further, the High Court can quash an F.I.R. or a complaint in exercise of its powers under Article 226 of the Constitution or under Section 482 of the Criminal Procedure Code, if the allegations found in the F.I.R. or the complaint, taken at their face value and accepted in its entirety, does not prima facie disclose commission of a cognizable offence or make out a prima facie case against the accused or where manifestly the proceeding is actuated by malice. On careful perusal of the report of SFIO, absolutely nothing would reveal that the petitioners were in overall control of the day-to-day affairs of business of the Company, controlling the day-to-day affairs of the Company and they, in connivance with other Promoter Directors, involved in misappropriation of fixed Assets of PAPL, siphoning off funds of PAPL to the tune of Rs. 12.03 Crore, by sale of aircraft pares and by receiving the sale proceeds in associate companies by sale of fixed assets and stocks of PAPL to aircraft spare dealers in US and Singapore. In order to constitute the offence, the intention to deceive should be in existence at the time when the inducement was made - on a perusal of the complaint and material, comes to a conclusion that the allegations levelled in the complaint on the face of it does not constitute any offence as against the petitioners. The Criminal Original Petitions are allowed. 2023 (9) TMI 308 Prosecution proceedings against the Directors of the company - Falsification of accounts of A1 Company for the financial year 2001 2002 to 2007 2008 - whether the Petitioners / Directors of the Companies during the relevant period, false statements made wilfully knowing them to be false? - HELD THAT:- On perusal of the records, it is seen that the falsification is alleged to have been done on 27.12.2010 and the same was submitted on 20.05.2011. In the complaint, date of resignation of the respective petitioners, and cessation of being directors given, which is not disputed by the complainant, which would clearly confirm that they resigned from the Directorship much before the alleged commission of offence and to that effect, the petitioners filed Form 32 with the Registrar of Companies - there is no specific averment of any irregularity committed by the petitioners during the relevant period. From the facts, it is clearly seen that, when the petitioners were not Directors of the Companies at the relevant period. Admittedly, the offence and the cause of action taken place during the years 2010 and 2011, but the present complaint is filed in the year 2014. The admitted case of the respondent is that the offence of submission of falsification of accounts have been taken place during the year 2010-11. The cessation of Directors has been admitted and the same tabulated in the complaint. In view of such admitted position, the case against the petitioners to be considered along with the Balance sheet submitted by them - In the document submitted it was found that maximum data manipulation and falsification of accounts have been done by the Company and the Company Balance sheet do not project fair picture of the affairs of the Company. As regards the persons, who have signed and submitted return, report, certificate, balance sheet, prospectus, statement or other documents with false material particulars knowing it to be false or omitted any material fact knowing it to be material, they can be prosecuted for offence under Sections 628 and 629 of the Companies Act. Since the Petitioners 7, 8 and 9, who are A8, A10 and A12 have signed the above documents with the other Director, the case against them has to be proved whether they had requisite mens rea or guilty mind only during trial. Complaint against the persons where not the Directors during the relevant period, quashed - Proceedings against the persons who singed and verified the Balance Sheet shall continue. Insolvency & Bankruptcy 2023 (9) TMI 307 Maintainability of Section 9 application - pre-existing dispute - Respondent Company was a Commercially Solvent Company - HELD THAT:- The issue whether there was a pre-existing dispute between the Parties is to be adjudicated on the touch stone of the ratio laid down by the Hon ble Apex Court in the matter of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd [ 2017 (9) TMI 1270 - SUPREME COURT] and in the matter of TRANSMISSION CORPORATION OF ANDHRA PRADESH LIMITED VERSUS EQUIPMENT CONDUCTORS AND CABLES LIMITED [ 2018 (10) TMI 1337 - SUPREME COURT ], wherein the Hon ble Apex Court has held Existence of an undisputed debt is sine qua non of initiating CIRP. It also follows that the adjudicating authority shall satisfy itself that there is a debt payable and there is operational debt and the corporate debtor has not repaid the same. In the instant case, admittedly 97 % of the amount due for the invoices raised by the Appellant was paid and 3 % of the Invoices amount was withheld by the Respondent Company. It is the case of the Appellant that despite service of Notice on the Respondent Company at the address No. 11th, K.M. Hosur Road, Bommanahalli, No. 38/5/B Hyland, Industrial Estate, Bengaluru 68 , there was no reply and hence, a pre-existing dispute cannot be raised subsequent to the filing of the Section 9 Petition - It is not denied by the Appellant that the postal code of the Respondent s Registered Office Company is 560035. Be that as it may, in their Reply to this Section 9 Petition, the Respondent Company has raised a pre-existing dispute for having withheld the 3 % amount towards liquidated damages. It is the consistent stand of the Respondent Company that 97% of the Amount was paid and the balance 3 % was kept on hold only on account of evaluating customer satisfaction and it was established that there was a delay of six weeks on behalf of the Appellant Company in executing the job assigned to them on account of which liquidated damages / Penalty of Rs. 40,56,539/- which is as per the terms of the Contract was levied. Therefore, this Tribunal is of the considered view that there is a pre-existing dispute which is not a spurious defence which is a mere bluster. In the judgment of Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., it is clearly held that the Court does not at this stage examine the merits of the dispute, but as long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the Adjudicating Authority has to reject the Application. This Tribunal is of the considered view that the aforenoted ratio is applicable to the facts of this case as we are satisfied that a dispute truly existed for the Respondent Company to have withheld 3% of the total invoice amount. Whether Section 9 Application can be entertained against a Solvent Company, the scope and objective of the Code has to be kept in mind before admission of such an Application? - HELD THAT:- The spirit of the Code is maximization of the assets and Resolution and not Recovery. The Hon ble Supreme Court in the matter of Swiss Ribbons Pvt. Ltd. Anr. Vs. Union of India Anr. [ 2019 (1) TMI 1508 - SUPREME COURT] has held that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. Appeal dismissed. 2023 (9) TMI 306 Maintainability of Section 7 application - opportunity of filing reply not given - order passed ex-parte - principles of natural justice - HELD THAT:- In view of the fact that notice by registry was received and served on 04.11.2022 which fact is not disputed, Adjudicating Authority ought to have given one more opportunity to file a reply. Proceeding ex-parte and reserving order is not giving sufficient opportunity to the appellant as contemplated by Rule 37 Sub Rule 2 of the NCLT Rule, 2016. Ends of justice be served in giving one opportunity to the appellant to file a reply before the Adjudicating Authority. Let the appellant filed reply within two weeks from today and appear on the next date fixed by Adjudicating Authority - The order dated 06.12.2022 is set aside - appeal disposed off. Service Tax 2023 (9) TMI 305 Levy of Service tax - Ocean Freight - the CESTAT, Ahmedabad had set aside the demand - HELD THAT:- The Civil Appeal is dismissed. 2023 (9) TMI 304 Refund of unutilised CENVAT - export of services - intermediary services or not - place of provision of services - location of the recipient of services or not - HELD THAT:- As per Rule 6(A), the provision of service shall be treated as export of service when the place of provision of service is outside India. As per Rule 3 of the POPS Rules, the place of provision of a service shall be the location of the recipient of service. However, vide Rule 9(c) of POPS Rules, the place of provision for Intermediary services would be the location of the service provider. On a careful perusal of the terms and conditions of the aforesaid Agreement dated 14 July 2011 between SingTel and SGIPL, there are no legal infirmity or irrational approach adopted by the learned CESTAT when it comes to conclude that SGIPL is not providing intermediary services . The plea that SGIPL is not providing any services on its own account is misplaced. It is manifest that there is no contract between SingTel and service providers in India like Airtel, Vodafone, Reliance etc., and the agreement between SGIPL and SingTel is on principal-to-principal basis - Clause 19 of the Agreement specifically stipulates that the relationship of the parties to the Agreement shall always and only be that of independent contractors and nothing in the Agreement shall create or be deemed to create a partnership or the relationship of principal and agent or employer and employee between the parties. Incidentally, the appellant has not even alleged that the aforesaid agreement is a camouflage, fraudulent or designed to get over the service tax dragnet. The issue that came to be was addressed by the Co-ordinate Bench was whether the telecommunication services provided by Verizon India for the period in question amounted to export of services within the meaning of Rule 6(A) of the ST Rules - This was answered in the affirmative. It was held that since the recipient of the service Verizon US was outside India, Verizon India rightly treated it as an export of service and accordingly it was exempted from the liability of paying service tax. The present appeals are bereft of any merit. Accordingly, the same are dismissed. 2023 (9) TMI 303 Seeking reduction in demand - amount paid by the appellant by way of two Challans dated 05.06.2007 04.06.2008, which were not considered by the adjudicating authority - HELD THAT:- The two challans were not considered by the adjudicating authority and at the time of hearing of the Stay Petition filed by the appellant, the same were sent for verification but the respondent neither denied the said payment made by the appellant nor verified the same from their records. Therefore, it was concluded by the Tribunal while considering the Stay Petition that the appellant has paid the said amount. Therefore, to that extent, the demand of service tax of Rs.12,99,559/- is not sustainable. Liability of appellant to pay tax - contention is that the service tax on the said service was paid by the service provider i.e. transporter, who raised the bills on the appellant, which showing that the service tax has been paid by them - HELD THAT:- It is evident from the records that the transporter, who has transported the goods at the premises of the appellant, has paid the service tax on the transportation service and the same is made evident from the invoices. In that circumstances, the demand of Rs.3,29,320/- is not sustainable against the appellant. GTA Services - freight paid sale - HELD THAT:- It is evident from the record that the service received by the appellant for transportation of goods on sale to their various buyers. Therefore, the said service is not a service received by the appellant, in fact, the appellant has paid the transportation charges for the railways of transportation of goods outward from their factory. In that circumstances, the appellant is not liable to pay service tax thereof. Therefore, the demand of Rs.3,40,377/- is not sustainable. Outward Freight - provision made for payment of freight - HELD THAT:- The appellant was not receiving the invoices of transportation charges from the transporter and later on the transporter sent the invoices of less amount on which the service tax is paid to them. In that circumstances, the provision made by the appellant is adjusted at the end of the year and the said entry has been taken in the corresponding year. In that circumstances, the appellant is required to pay service tax on actual transportation charges not on the provision made for transportation charges. Therefore, the said demand is also not sustainable. Thus, whole of the demand by way of impugned order is not sustainable against the appellant - the impugned order qua demanding service tax of Rs.28,47,510/- is set aside and the appeal is allowed. 2023 (9) TMI 302 Classification of services - Business Auxiliary Service or not - providing the services to the municipality and collected the municipality tax on behalf of the municipality - HELD THAT:- On analysing the definition of Business Auxiliary Service , it is found that the municipal committees are not engaged in sale of goods or services, hence, none of the clauses from (i) to (vi) of Business Auxiliary Service definition are applicable to the activity of collection of municipal tax by the respondent. The respondent was providing services to the municipal committee but not on behalf of the municipal committee. The respondent are collecting the municipal tax as levied by the municipal committees which are part of State Govt. of Haryana, even if it is assumed that the services of the respondent are taxable services, even then the taxable services of collecting duties and taxes levied by the Central/State Govt. are fully exempted from service tax under the authority of Notification No. 13/2004-ST dated 10.09.2004. There are no infirmity in the impugned order warranting interference by this Tribunal - appeal of Revenue dismissed. 2023 (9) TMI 301 Recovery of Service Tax - foreign exchange outflow on RCM basis - credit card was used to make payments to Facebook by way of foreign exchange and the amount used in this credit card has been reimbursed by BPVL - HELD THAT:- In the present case, the Department has failed to establish that the service was imported by the Appellant and was used for business purpose. The Department has not rebutted the fact that this was used by Mr. Y. Ravindra Reddy. Again, strangely, Mr. Y. Ravindra Reddy has not been made co-noticee in the entire proceedings. There is no allegation that BPVL which is a private limited company has used the services of Facebook and made the payment indirectly through the credit card of the present Appellant. The entire premise under which the SCN has been issued is flawed and the Department could not have issued SCN to an individual without properly connecting the usage of the credit card expenses for business purposes by him. The Impugned Order is legally not sustainable - Appeal allowed. 2023 (9) TMI 300 Condonation of delay in filing appeal - proper service of order in terms of Section 37C of Central Excise Act, 1944 or not - HELD THAT:- From the plain reading of the authorization given to M/s. Kamleshkumar Associates, Chartered Accountant, it is found that authority is given for specific acts as prescribed under serial No. 1 to 3. On going through applicable acts, it is found that there is no specific act of receiving the adjudication order in the authorization. The learned Commissioner (Appeals) construed that the authorised representative who received the order is authorised agent in terms of clause 3 of the authorization letter. From the reading of the said clause 3, it is found that the clause 3 is related to the acts prescribed in serial No. 1 and 2 and according to which the authority is not given to the authorised representative for receiving the order. Moreover, as per Section 37C, the order can be served only either to the person for whom it is intended or his authorised agent. The authorised legal representative cannot be equated with an authorised agent of the assessee. For this reason also service of the order to authorised representative i.e. Chartered Accountant dealing with the matter before the Adjudicating Authority is not legal and proper. The subsequent service of the order copy to the appellant on 22.07.2022 is the date of communication of the order-in-original to the appellant. Accordingly, the appeal filed on 19.09.2022 is well within the prescribed time limit of two months (60days), therefore, there is no delay in filing the appeal - the appeal is allowed by way of remand to the Commissioner (Appeals) for passing a fresh order on merits of the case. 2023 (9) TMI 299 Utilization of CENVAT Credit from the common pool of Cenvat credit - input and inputs service related to manufacturing of goods for payment of service tax on output service when the assessee is involved in both manufacturing as well as service providing - HELD THAT:- This issue is no more res-integra as the same haz been decided in various decisions which have been considered in the judgment in the case of COMMISSIONER OF CENTRAL EXCISE, NASHIK VERSUS GRAPHITE INDIA LTD. [ 2017 (2) TMI 155 - CESTAT MUMBAI] , where it was held that the respondent has rightly paid the service tax from a common pool of Cenvat credit. Thus, the issue is no more res-integra as it has been decided that utilisation of credit for payment of service tax is permissible. Therefore, the demand in the present case cannot be sustained - impugned order set aside - appeal allowed. 2023 (9) TMI 298 Rejection of appeal on the ground of time limitation - appellant had not filed condonation of delay application as required under Section 85 (3A) of the Finance Act, 1994 - HELD THAT:- The order-in-original against which the appeal was filed was passed on 19.05.2010. The appeal was filed on 17.04.2013. As regards the prescribed period of two months for filing the appeal before the Commissioner (Appeals) and 30 days for condonable period, the said provision was brought into statute in the Finance Bill, 2012. From Sub Section (3) it is clear that in support of order passed by the learned Adjudicating Authority against which the appeal lies before the Commissioner (Appeals), the appeal shall be presented within three months from the date of receipt of the order. However, in the case of order passed after assent of Finance Bill 2012, the period is 60days plus 30 days as condonable period - In the present case the order-in-original was passed on 19.05.2010 i.e. much before the assent of Finance Bill, 2012 therefore, in spite of the fact that appeal was filed on 17.04.2013, three months normal period is available to the appellant to file appeal. The appellant in the present case has filed appeal within three months from the date of receipt of the order. Therefore, the appeal was filed very muchin the time limit - the impugned order is set-aside and the appeal is allowed by way of remand to the Commissioner (Appeals) for passing a fresh order on merit of the issue. Appeal allowed by way of remand. 2023 (9) TMI 297 CENVAT Credit - steel materials such as Steel Plates, HR Plates, Angles, Channels etc. - providing output services such as Port service, Cargo Handling Service, Supply of Tangible goods for use - denial on the ground that the material on which the Cenvat credit was claimed were not used directly for providing of any taxable service - HELD THAT:- The issue that any material used for making some equipment or building and in turn that equipment and barge is used for providing output service, material which were used shall be treated as input in terms of Rule 2(k) of Cenvat Credit Rules, 2004. On this very issue, much water has flown and even in the identical facts in the case of M/S. SHREEJI SHIPPING SERVICES INDIA LIMITED, M/S. KRISHNARAJ SHIPPING CO. LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, RAJKOT. [ 2018 (7) TMI 2319 - CESTAT AHMEDABAD] has held that steel material used for repair of barges are admissible for Cenvat credit. Thus, the issue is no longer res-integra accordingly any material used for construction of building or fabrication of any equipment which is in turn used for providing output taxable service, on the material so used, the credit is correctly admissible. Therefore, considering the settled legal position on the issue in hand, the impugned order is not sustainable, hence the same is set-aside. Enhancement of penalty - HELD THAT:- As regards the Revenue s appeal, since it is only for enhancement of penalty which is nothing but consequential to confirmation of demand and when demand itself is not sustained there is no question of penalty. Hence the Revenue s appeal has no substance accordingly the same is liable to be dismissed. The assessee s appeal is allowed and Revenue s appeal is dismissed. 2023 (9) TMI 296 Disallowance of refund sanctioned erroneously by the adjudicating authority - exercise of power of revision under Section 84 of the Finance Act - unjust enrichment - request of appellant not discussed - proper opportunity of hearing not provided - violation of principles of natural justice - HELD THAT:- The exercise of power of revision by the Commissioner under Section 84 after the expiry of more than one year and ten months from the date of sanctioning of refund is not justified, secondly issuance of show cause notice dated 28.12.2010 affording one opportunity on four dates mentioned in the said notice only amount to one opportunity. There are no reason not to grant a week s time to the appellant to file reply to the show cause notice. It appears from the impugned order that the Commissioner was bent upon passing the impugned order without affording any opportunity of hearing to the appellant. Further, the Commissioner has not even declined the request of the appellant and has not discussed his request at all in the impugned order. Unjust enrichment - HELD THAT:- Once the nestle has issued the certificate dated 23.01.2009 certifying that during the period 01.01.2005 to 31.10.2006 the appellant has not claimed any service tax from them, therefore, the question of unjust enrichment does not arise, but in the impugned order Commissioner (Appeals) did not consider any evidence whatsoever to come to the conclusion that principle of unjust enrichment is applicable in the present case. The impugned order is not sustainable in law - Appeal allowed. 2023 (9) TMI 295 Non-payment of service tax - Erection, Commissioning and Installation Services - rendering of services as a consortium partner - rendering of services as a sub-contractor to the main contractors - penalty - HELD THAT:- The appellant has rendered two types of services. In the first category, they have rendered services as a consortium partner, along with the Lead Partner, M/s Rajshekhar Constructions, to BHEL. In the second category, they rendered services as a sub-contractor to the main contractors namely M/s L T, S L Kolkata, TATA Project West Bengal - It is observed that the impugned order considered the Appellant as sub-contractor on both these categories and confirmed service tax by citing the Master Circular No. 96/7/2007 ST dated: 23.08.2007, issued by Board - it is observed that there is a distinction in both the above categories, which has not been considered in the impugned order. In case of services rendered to BHEL, the Appellant was a consortium partner - HELD THAT:- From the arrangement, it is evident that the Lead Partner has collected and paid service tax on the full value received for the services rendered to BHEL. The Appellant has rendered their respective share of the work order to BHEL, but service tax pertains to that portion of service was also paid by the Lead Partner, as they have raised the bills on the total value with BHEL - In view of the above, the Appellant were not subcontractors in this case and hence the clarification issued by the Board Vide Master Circular No. 96/7/2007 ST dated: 23.08.2007 is not applicable in this case. Accordingly, the demand confirmed in the impugned order on this count is not sustainable. In case of services rendered to main contractors namely M/s L T, S L Kolkata, TATA Project West Bengal - main defense is that they have not collected service tax from the main contractors and hence the demand of service tax on them is not sustainable - HELD THAT:- From clarification issued by Board by Circular No. 96/7/2007 ST dated: 23.08.2007, it is observed that a subcontractor is liable to pay service tax, even if the main contractor pays service tax on the full value, as the service tax paid by the sub-contractor will be available as input service to the main contractor. Relying on the above Circular issued by the Board, the Appellant, as sub-contractor is liable to pay service tax on the services rendered by them to the main contractor. Accordingly, the demand confirmed in the impugned order upheld on this count. Levy of penalty - HELD THAT:- The entire issue is revenue neutral. Appellant has not collected the service tax from the main contractors. Hence, there was no mensrea established on the part of the Appellant to evade payment of service tax - the Appellant has clearly justified their reasons for non-payment of service tax. Accordingly, this is a fit case for waiver of penalty under section 80 of the Finance Act, 1994, which existed during the relevant period under dispute. Accordingly, the penalty imposed in the impugned order waived off. Thus, the demand of service tax in the impugned order, on the services rendered by the Appellant as a consortium partner to BHELset aside - The demand of service tax, along with interest, as a sub-contractor to other main contractors (Other than services rendered to BHEL) in the impugned order is upheld - All the penalties imposed on the Appellant are waived as per Section 80 of the Finance Act, 1994, which existed during the relevant period under dispute - appeal allowed in part. Central Excise 2023 (9) TMI 294 Application seeking condonation of delay - Recovery of erroneous refund / irregular Cenvat credit availed - Demand of duty with interest - allegation of misuse of Area based exemption - HELD THAT:- These special leave petitions are disposed reserving liberty to the petitioner herein to file a review petition(s) before the High Court, if so advised. The application for seeking condonation of delay would not survive for consideration and stands disposed of. 2023 (9) TMI 293 Quantum of duty which the appellant / petitioner was liable to pay in terms of the provisions contained in the Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules 2010 - Rule 8 of the CTUT Rules 2010 is ultra vires to Section 3A of CE Act or not - HELD THAT:- It is deemed appropriate to note at the outset that the challenge to Rule 8 of the CTUT Rules 2010 was founded solely upon the Second Proviso to Section 3A(2)(b). The appellant / petitioner does not question the authority of the Union Government to either prescribe the manner in which the the annual capacity of production may be determined nor does it question its right to formulate a factor relevant for the purposes of estimating production in a factory. As is manifest from a reading of Section 3A(2)(a), the Union Government is empowered not only to prescribe the manner for determination of annual capacity of production of a factory, the said provision by way of a legal fiction stipulates that the capacity of production as determined in accordance with the Rules shall be deemed to be the annual production of goods in that factory. The computation of annual production and the same being computed by virtue of a statutory deemed fiction does not owe its genesis to Rule 8. The said legal fiction stands incorporated in Section 3A(2)(a) itself. The challenge to Rule 8 must also fail when tested on the anvil of the Second Proviso to Section 3A(2)(b). It becomes pertinent to note that the Second Proviso deals with a contingency where the factor relevant is altered or modified at any time during the year. It is in such a situation alone that the annual production is liable to be redetermined on a proportionate basis. However, and as is evident from the recital of facts in the preceding parts of this decision, the factor relevant as prescribed by Rule 4 remained unaltered. The quantification of duty liable to be paid by a manufacturer remained constantly during the period in question hinged upon the number of packing machines in the factory of a manufacturer - the Tribunal has abjectly failed to advert to the deeming fiction which stands introduced by Rule 8. It is unable to hold Rule 8 as being ultra vires Section 3A nor there are any error in the view as expressed by the Tribunal while passing the order impugned. Petition dismissed. 2023 (9) TMI 292 Denial of CENVAT Credit - input or not - Mirror Assembly (left right) and Sari Guard - whether or not the mirror assembly (right left) and sari guard undisputedly sold by the appellant alongwith Motor Cycle fall within the purview of the definition of Input eligible for cenvat credit under Rule 2(k) of the Cenvat Credit Rules, 2004? HELD THAT:- This issue is no more res-integra and has been considered by various benches of the Tribunal in the appellant s own case and cenvat credit on these two items have been allowed - reliance can be placed in COMMISSIONER OF CENTRAL EXCISE, DELHI-I VERSUS HERO HONDA MOTORS LTD. [ 2014 (10) TMI 931 - CESTAT NEW DELHI] . It is found that these two items fall under the definition of input as defined under Rule 2(k) of the Cenvat Credit Rules, 2004 because these two items were cleared along with the motor cycle from the factory by paying the excise duty on the final products - as per the Motor Vehicle Act, it is a statutory obligation of the manufacturers of two wheelers to clear the motor cycle from the factory with mirror assembly (right left) and sari guard. The impugned order is not sustainable in law and is set aside - appeal allowed. 2023 (9) TMI 291 Non-imposition of penalties under Rule 25(1)(a), 25 (1) (d) and 27 of Central Excise Rules - respondent claimed refund as self-credit for the months of April and May, 2008 @36%, but after amendment to the Notification on 10/06/2008 as stated above they claimed refund as self credit of differential amounts of Rs. 30,06,458/- and Rs. 43,06,368/- (difference of 75% and 36% of value addition) for the months of April and May, 2008 - HELD THAT:- It is noted that the penal provisions under Rule 25(1) of the Central Excise Rules, 2002 are subject to Section 11AC of the Central Excise Act, 1944 which shows that penalty is imposable if there is intention to evade payment of duty as mens rea is a necessary ingredient before imposition of penalty under Rule 25. The Ld. Commissioner in Para 19 of the impugned order has given the reasons for non-imposing the penalty holding that There is nothing on record which may warrant invocation of the provisions of Section 11AC of the Act. Further, I observe that the Noticee have kept the department informed of all the facts. In view of the above facts, the Noticee are not liable to penalty under Rule 25(1)(a), 25(1)(d) and 27 of the Rules. I observe that recovering or erroneous refund alongwith interst under Section 11AB of the Act, shall meet the end of justice. It is also a fact that the appellant has applied for the fixation of special rate vide his application dated 27.05.2008 whereas the revenue has approved the special rate after more than one and half year which has caused loss to the respondent and they had to refund the amount with interest which is appropriated in the impugned order. There are no infirmity in the impugned order passed by the Ld. Commissioner - appeal of Revenue dismissed. 2023 (9) TMI 290 Operating packing machine or not - packing machine which has been sealed/uninstalled by the jurisdictional superintendent, but not removed from the factory - determination order passed by the adjudicating authority is within time as prescribed under the Rules or not - adjudicating authority is within jurisdiction to determine the monthly duty liability or not - HELD THAT:- The legislature has very carefully used the words and the words available and installed have been used in different context. That means that it s not necessary that all available packing machines can be considered as installed or operating in the factory and that has to be determined on the facts of each case. Similar words have been used in Rule 6(1)(iv), (v) (vi) ibid for multiple line packing machines. Mere existence/availability of a packing machine in the factory would not entitle Revenue to count its capacity for imposing duty and the words used in the aforesaid clauses itself makes the distinction between the operating/installed machines as compared to available machine. he appellant did not intend to operate machine No.1 (SL110S,L2), therefore they requested for sealing/uninstalling of the same vide request letter dated 27.2.2012 in accordance with Rule 6(5) ibid and the same was uninstalled sealed by the jurisdictional authorities on 29.2.2012. No reasoning is available on record as to why the same was not removed from the factory premises and that does not mean that wherever a sealed/uninstalled machine is available in the factory it necessarily has to be taken into account while determining the annual production capacity as there is an exception provided in Rule 6(5) by way of proviso stating that where it is not feasible to remove packing machine out of factory premises, it shall be uninstalled and sealed by the Superintended in such a manner that it cannot be operated. Merely because the sealed/uninstalled packing machine is available in the factory premises is not sufficient to saddle the manufacturer with the duty liability except if it falls under Rule 18 (2) ibid which provides for Penalty for contravention etc. The appellant has also raised the issue about the deeming acceptance of the declaration given by them in Form-1 as per Rule 6 ibid - The upper time limit for any modification to be made by the concerned authority is of thirty days and it means that after thirty days the declaration made by the manufacturer in Form-1 cannot be modified by the revenue under any circumstance. Admittedly in the present case the modification has been made by way of determination order/Order-in-Original dated 4.12.2012 whereas the declaration Form-1 was filed by the appellant on 23.10.2012, which is certainly beyond the period prescribed by the statute for making any modification by the revenue authorities and therefore the same is without any authority of law. Jurisdiction to determine the monthly tax liability - HELD THAT:- As per Rules, 2010 the adjudicating/capacity determining authority was required to only determine the annual capacity of production and determining the duty payable per month certainly is beyond his jurisdiction in view of Rule 6(2) ibid as the said rule require the said authority to determine and pass order concerning the annual capacity of production of the factory. The appeal filed by the appellant deserve to be allowed - Impugned order set aside - appeal allowed. 2023 (9) TMI 289 Principles of natural justice - SCN not decided completely but in piecemeal - non-ascertainment of MRP - non-adjudication of the issue of time bar/extended period - HELD THAT:- Time and again the Hon ble Supreme Court has deprecated the practice of piecemeal adjudication. If the piecemeal adjudication is permitted and department is permitted to demand duty after carrying out the exercise as directed in the impugned order, then another issue will crop up whether another show cause notice be issued for the very same period/goods for which earlier show cause notice has already been adjudicated - the adjudicating authority ought to have worked out the MRP and after allowing admissible abatement should have worked out the duty demand instead of issuing directions to the department to do the same after determining the same under Rule 4 ibid. After working out the duty, the adjudicating authority ought to have adjudicated on the issue of penalty or interest also. The invocation of extended period of limitation, which is very important aspect of the matter, has also been left open whereas the same ought to have been decided before going into the other issues because if the assessee succeeds on that issue then there would have been very less period or no period left for adjudicating the issue on merits. Piecemeal adjudication is the least of the judicial virtues which is not approved. So far as the denial of cross-examination of the officers who investigated the case, is concerned, there are no valid justification for denying the same to the assessee because justice should not only be done but must be seen to be done. Matter remanded back to the adjudicating authority for deciding the same afresh after following the principle of natural justice and giving proper opportunity of hearing to the assessee. 2023 (9) TMI 288 Refund claim - goods used for captive consumption - Applicability of principles of unjust enrichment - HELD THAT:- With disposal of appeal by the Tribunal, the MODVAT credit utilized was rendered legal and the other debit being moneys paid other than as duty. That the duty so legalized may be presumed to have been passed on with the value of the goods cleared is not in issue. The issue concerns the payment made again on 7th August 2000 and could neither have been expense of 2000-01 nor duty of 2000-01. The conclusion that recognition as income in the year of sanction, which it undoubtedly was, does not automatically turn that into expense of earlier years. In UNION OF INDIA VERSUS SOLAR PESTICIDE PVT. LTD. [ 2000 (2) TMI 237 - SUPREME COURT] it was held that evidence of duty incidence not having been passed on cannot be claimed to be unavailable and, therefore, entitling claimant to exclusion from the onus of section 11B of Central Excise Act, 1944 does not bar the test of unjust enrichment. Appellant has furnished certification from Chartered Accountant that amount was not debited against any particular clearance. Without evaluation of the pricing practice of the appellant for lubricant , discard of the certification on supposition of it having been treated as expense and, therefore, built into the manufacturing cost of products cleared after 2000 is neither logical nor consistent with obligation of appellate authorities to restrict fact finding only upon evidence. In a departmental appeal, that should have been preferred as a ground of appeal on the basis of computation; a finding without such factual evaluation, in circumstances of that onus resting on the reviewing authority, cannot sustain. The certification by Chartered Accountant, considering the contents therein, suffice for discharging obligation to demonstrate that incidence of such duty has not been passed on - impugned order set aside - appeal allowed. 2023 (9) TMI 287 SSI exemption - value of clearances crossing the threshold limit - Delay in adjudication - department has not been able to explain the delay of about 18 years in completing the de novo adjudication - non-availability of documents especially the show cause notice - violation of principles of natural justice - HELD THAT:- It is seen from the impugned order that de novo adjudication was done only in 2013. The impugned order or the records do not show why the show cause notice dt. 05.05.1989 was not taken up for de novo adjudication by the Department. Though the date of show cause notice has been mentioned in the impugned order it was not available before the adjudicating authority while passing the order and is not available - thus, it can be seen that the show cause notice was not available before the officer while passing this impugned order. So also, the documents were not available. SSI Exemption - HELD THAT:- The discussions have been quoted and extracted in para 10 of the impugned order. In such discussion, it is held that value of goods of Galaxy Rubber has to be included in the value of clearances of the appellant to determine that the value of clearances of appellant and thus has exceeded the SSI exemption limit. It is very much evident that there was no evidence available before the adjudicating authority to conclude that M/s.Galaxy Rubber was a benami of the appellant - Revenue has drawn attention to para 11 of the impugned order wherein it is stated that a report from the Government Examiner of Questioned Documents was obtained to show that hand writing and signatures found on invoices pertaining to both Galaxy Rubber Industries and Galaxy Rubber were the same - there are no such report being made part of the records. Inordinate delay in passing adjudication order - delay of 18 years - Allegation of Collection of excess amount from the buyers in the guise of sales tax - non-payment of the amount to the sales tax department - HELD THAT:- The department has not given any explanation as to what has caused this unreasonable delay - there is delay in passing the adjudication order and also that the impugned order has been passed without perusing any documents and even the show cause notice. It is indeed violation of the principles of natural justice. The Hon ble High Court of Punjab Haryana in M/S MENTHA ALLIED PRODUCTS LTD THROUGH ITS AUTHORISED REPRESENTATIVE SATYA NARAIAN VERSUS COMMISSIONER, CENTRAL GOODS SERVICE TAX, CHANDIGARH AND M/S ARORA AROMATICS PVT. LTD. VERSUS UNION OF INDIA AND OTHERS [ 2020 (12) TMI 1230 - PUNJAB AND HARYANA HIGH COURT] had occasion to analyse the issue with regard to the delay of 10 years in passing the adjudication order. The Hon ble High Court considered the decision in M/S GPI TEXTILES LIMITED VERSUS UNION OF INDIA AND OTHERS [ 2018 (9) TMI 25 - PUNJAB HARYANA HIGH COURT] wherein there was unreasonable delay in passing the order after issuing the show cause notice and held that the order passed with unreasonable delay to be unsustainable. In the present case, it is not a situation of the show cause notice transferred to call book. It is a case in which there is delay in taking up the matter for de novo adjudication after the remand by the Tribunal (earlier known as CEGAT). The department has not been able to explain the delay of about 18 years in completing the de novo adjudication. The matter was remanded by the Tribunal on 31.08.95 and the remand order of de novo adjudication has been passed only on 29.09.2013. The delay is humongous and unexplained. The documents were also not available for perusal by the adjudicating authority who has been fair enough to record the same in the order - there is complete violation of principles of natural justice. The impugned order cannot sustain - appeal allowed. 2023 (9) TMI 286 CENAVT Credit - procedural irregularity - credit distributed by various depots of the Appellant spread across the country - credit denied on the ground that the depots were either not having the Service Tax registrations at all, or the credit has been distributed prior to obtaining the registration - HELD THAT:- It is an undisputed fact that services received by the depots are eligible input service to the Appellant, as the depots are their place of removal and all the expenditure incurred upto the place of removal has already been included in the assessable value on which duty has been paid. It is also not in dispute that the said input services have been received by the depots and appropriate service tax has been paid. Under such circumstances, denial of CENVAT credit merely on the ground of non-registration/delay in registration of the depots is not sustainable. In the case of THE COMMISSIONER OF CENTRAL EXCISE, O/O THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX VERSUS M/S. PRICOL LTD. [ 2021 (2) TMI 495 - MADRAS HIGH COURT ], it has been held Credit availed and distributed by respondent prior to getting registered as an input service distributor not deniable. Central Board of Excise and Customs has issued Circular No. 1063/2/2018-CX dated 16.02.2018, wherein the various decisions of the High Court have been accepted with an objective to reduce litigation and dispose of the cases on similar questions of law or identical case on facts pending with the department. In the said circular, the Board has accepted the decision of Hon ble High Court of Gujarat in the matter of COMMISSIONER OF CENTRAL EXCISE VERSUS DASHION LTD [ 2016 (2) TMI 183 - GUJARAT HIGH COURT] , wherein the Hon ble High Court dismissed the department s appeal holding that non-registration of ISD is only a procedural irregularity for which substantial benefit of CENVAT credit cannot be denied when all the necessary records have been maintained by the respondent. Thus, substantial benefit cannot be denied merely on account of procedural infractions - Since, credit is held to be admissible the question of demanding interest and imposing penalty does not arise - appeal allowed. 2023 (9) TMI 285 Manufacture or not - activity of packing, re-labelling of the spare parts of HEMM undertaken by the appellant amounts to manufacture or not - CENVAT Credit - Extended period of limitation - HELD THAT:- The parts in question are covered by Serial No.100A of the Third Schedule of the Central Excise Act, 1944. The said issue has been dealt by this Tribunal in the case of Mercedes Benz India Pvt. Ltd. [ 2017 (10) TMI 1183 - CESTAT MUMBAI ], wherein this Tribunal has observed In the facts of the present case, the goods as discussed above are falling under various chapter heading as proposed in the show cause notice are covered under Third Schedule and the activity which is undisputedly carried out by the appellants are packing in unit container, labelling with declaration of the MRP on the unit container are clearly covered under Section 2(f)(iii) therefore amounting to manufacture. It is seen that the goods are marketable as the same has been sold to M/s TSL on against the payment. Therefore, the said parts are marketable - the activity undertaken by the appellant amounts to manufacture. Consequently, the cenvat credit availed by the appellant, cannot be denied to the appellant. CENVAT Credit - HELD THAT:- As the appellant is paying duty on the manufactured goods by availing CVD paid on the imported goods, in that circumstances, the appellant is correctly taken the cenvat credit. Extended period of limitation - HELD THAT:- The appellant has registered with the Department and their activity is known to the Department, the appellant is also filing ER-I Returns regularly showing payment of duty and availing cenvat credit therein, in that circumstances, the extended period of limitation is not invokable in the facts and circumstances of the case. Therefore, on limitation also, the show-cause notice is not sustainable. Appeal allowed. 2023 (9) TMI 284 Exemption on water treatment and supply projects - N/N. 47/2002-CE dated 06.09.2002 - exemption denied on the ground that the pipes supplied by the appellant were laid for supplying water from source to storage tank owned by SIPCOT located in the compound of Hyundai and not for the delivery of water treatment plant and the treated water used for industrial purposes and not for human or animal consumption. HELD THAT:- The appellant had supplied the pipes to M/s Trichy Construction Company Private Limited by availing the benefit of Notification No.47/2002-CE dated 06.09.2002 and the Competent Authority has issued the Certificate for intended use for the said pipes - On going through the said Certificate, it is found that the said Certificate has been issued in pursuance to the Notification No.47/2002-CE dated 06.09.2002 issued by the Ministry of Finance,Government of India and the use of pipes has also been explained. In that circumstances, the said Certificate cannot be doubted as held by this Tribunal in the case of M/S. INDIAN HUME PIPE CO. LTD. VERSUS CCE, TIRUCHIRAPPALLI [ 2016 (11) TMI 1436 - CESTAT CHENNAI] wherein this Tribunal has held that In absence of any proforma prescribed by the Notification, the certificate issued by the Collector was basis for the appellant to claim duty exemption. But it is very strange to note that when the Executive Engineer guided Revenue that the supply was not for the purpose of water treatment plant, further enquiry was not conducted by Revenue to ascertain the facts from the Collector. In absence of any enquiry, certificate issued by Collector cannot be discarded. Thus, the appellants are entitled for the benefit of Notification No.47/2002-CE dated 06.09.2002 and are not liable to pay duty - appeal allowed. 2023 (9) TMI 283 CENVAT Credit - service tax paid by a job worker on returning the goods that has been sent to him for galvanizationNature of transaction - provision of service or manufacturing activity - HELD THAT:- The same issue was considered by Ahmadabad Bench of this Tribunal in the case of C.C.E. S.T. -VAPI VERSUS KRIS FLEXIPACKS PVT LTD (VICE-VERSA) [ 2023 (7) TMI 943 - CESTAT AHMEDABAD] where reliance was placed in the case of COMMISSIONER OF CENTRAL EX. CUS., SURAT-III VERSUS CREATIVE ENTERPRISES [ 2008 (7) TMI 311 - GUJARAT HIGH COURT] where it was held that The Tribunal is justified in holding that if the activity of the respondent-assessee does not amount to manufacture there can be no question of levy of duty, and if duty is levied, Modvat credit cannot be denied by holding that there is no manufacture. As the issue is squarely covered by the above decision of this Tribunal in favour of the appellant, there are no merits in the impugned order and set aside the same - appeal allowed. CST, VAT & Sales Tax 2023 (9) TMI 282 Validity of assessment order - Constitutional Validity of Section 26(6A)(a) of the Maharashtra Value Added Tax Act, 2002 as ultra vires the Central Sales Tax, 1956 and the Central Sales Tax Rules (Registration and Turnover Rules) of 1957 as well as the Constitution of lndia - C-forms and F-forms not taken into consideration - HELD THAT:- There are substance in the contentions as urged by Mr. Patkar. It is a clear case of the petitioner that all the details in regard to C-Forms and F-Forms were placed for consideration of the assessing officer which ought to have been taken into consideration by the assessing officer in passing the impugned order. It is a clear case of the petitioner that all the details in regard to C-Forms and F-Forms were placed for consideration of the assessing officer which ought to have been taken into consideration by the assessing officer in passing the impugned order - the assessment order provides no reasoning whatsoever in this regard. The assessment order neither refers to all such materials as placed on record by the petitioner nor there is a discussion as to why such material ought to be discarded in arriving at the final assessment. The only consequence from such order which is bereft of particulars and any discussion in that regard, would be that the order would be required to be held to be passed in patent non application of mind and materials on record. The impugned order cannot be sustained, it would be required to be quashed and set aside with a directions to the Assessing Officer to hear the petitioner and after considering all the materials on record, pass a fresh order in accordance with law - Petition allowed. 2023 (9) TMI 281 Violation of principles of natural justice - respondent had passed impugned order without calling the petitioner for hearing - HELD THAT:- It is evident that the order has been passed in a tearing hurry, although the petitioner has requested for hearing after 18.05.2023. The petitioner appears to have made out a prima facie case on merits. That apart, on merits also, it appears that the petitioner has a good case, as the petitioner has assessed the respective bill of entries, which were at the Special Economic Zone (SEZ), wherein, the goods were stored after their initial import - The only difficulty has arisen on account of non-filing of the details by the customs in respect of the four of the bills of entries out of six. The impugned order set aside and the case remitted back to the respondent to pass a speaking order within a period of six weeks from the date of receipt of a copy of this order - petition disposed off.
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