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AI TextQuick Glance (AI)Headnote
CESTAT Rules No Unjust Enrichment Under Section 18(5) Customs Act on Provisional Duty Refunds
CESTAT Rules No Unjust Enrichment Under Section 18(5) Customs Act on Provisional Duty Refunds
The CESTAT Ahmedabad held that the adjudicating authority erred in applying the doctrine of unjust enrichment under Section 18(5) of the Customs Act, 1962, regarding refund of excess customs duty paid during provisional assessment. The tribunal found that the initial duty deposit was provisional and notional, and the appellant demonstrated that the excess duty was recorded in accounts and not passed on to buyers. Consequently, the recovery order for Rs. 11,05,908/- plus interest was quashed. The appeal was allowed, and the impugned recovery order set aside.
Refund of excess customs duty paid - adjudicating authority failed to properly examine the provisions of Section 18(5) of the Customs Act, 1962 which came into effect from 13.07.2006 - incidence of duty has been passed on to other person or not - principles of unjust enrichment - HELD THAT:- It is settled legal position that initial deposit of duty during provisional assessment was on estimation basis and is in the nature of deposit and it is notional duty deposit. Hence, doctrine of unjust-enrichment is not applicable in the refund of excess duty paid in respect of unutilized stores.
The appellant has successfully explained that the refund claim of excess duty paid at the time of provisional assessment was recorded in the books of accounts and was transferred to Ambuja Cement, who paid Customs duty at the time of provisional assessment and the said amount was not passed on to buyers on the sale of the goods. Therefore, the impugned order for recovery of amount of Rs. 11,05,908/- alongwith applicable interest is not sustainable and liable to be set-aside whereas the appeal is liable to be allowed.
The impugned order of recovery of an amount of Rs. 11,05,908/- alongwith applicable interest from the appellant is set-aside - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Penalty under Section 114(iii) waived for CHA as export authorization and procedures were properly followed
Penalty under Section 114(iii) waived for CHA as export authorization and procedures were properly followed
The CESTAT Chennai allowed the appeal of the CHA against penalty under Section 114(iii) of the Customs Act, 1962 for alleged failure to verify exporter credentials and obtain written authorization. The Tribunal found no proven lapse by the CHA as export goods were examined and authorized by officers, and the exporter's signature on Shipping Bills sufficed as authorization in absence of a prescribed proforma. Precedents from CESTAT Mumbai and Madras HC supported that penalty under Section 114 is not warranted for alleged procedural lapses covered under Custom House Agents Licensing Regulations. Consequently, the penalty was set aside.
Penalty on CHA u/s 114(iii) of the Customs Act, 1962 - failure to verify credentials of the exporter - failure to verify declaration to Shipping Bill - without obtaining written authorization from the exporter, the documents for export of the goods are processed - HELD THAT:- It is seen that apart from alleging vaguely that the CHA had not obtained exporter’s authorization, investigation could not prove any lapse on the part of the Appellant as the goods being exported under draw back were examined by the officers who allowed the export. No fault could be found with the CHA’s conduct. Further, at the relevant time, there was no proforma prescribed for obtaining the authorization of the exporter and the exporter in this case obtained exporter’s signature on the Shipping Bills which have to be treated as sufficient compliance of obtaining authorization.
The Tribunal Mumbai in the case of Somaiya Shipping Clearing Private Limited Vs. Commissioner of Central Excise, Mumbai [2005 (12) TMI 151 - CESTAT, MUMBAI] had held that penalty under Section 114 of the Customs Act not imposable on the ground that the CHA failed to file authorization of the export. Further, jurisdictional Madras High Court has supported the Tribunal’s finding in the case of Commissioner of Customs, Chennai Exports Vs. I. Sahaya Edin Prabhu [2015 (1) TMI 1032 - MADRAS HIGH COURT] that allegation set out in the Show Cause Notice was related to alleged failure of discharge of functions as CHA for which provisions are available in the Custom House Agents Licensing Regulations would be sufficient and penalty under Section 114 of the Customs Act, 1962 was unwarranted.
As the Appellant CHA has obtained authorization of the exporter and carried out the verification before filing the documents to the exporter, the penalty imposed is ordered to be set aside.
Appeal allowed.
AI TextQuick Glance (AI)Headnote
Higher customs duty on iron ore lumps denied without solid evidence under transaction value rules
Higher customs duty on iron ore lumps denied without solid evidence under transaction value rules
The CESTAT Hyderabad allowed the appeal, setting aside the order to the extent of re-determining the transaction value and applying a higher customs duty of 15% on the lumps component of iron ore exported without segregation. The tribunal held that the declared transaction value based on the sale agreement and realized consideration could not be discarded without substantial evidence of higher prices for identical goods or related-party transactions. The Department failed to prove that the appellant received consideration beyond the invoice value. The iron ore lumps, being part of the bulk ore predominantly consisting of fines, could not be separately taxed at a higher rate, especially when the contract allowed a 10% tolerance for lumps with a penalty clause. The application of contemporaneous FOB value for duty re-determination was found flawed, and duty should be based on the actual amount realized.
Valuation of export duty - rejection and re-determination of the transaction value - enhancement of declared transaction value based on contemporaneous export for the purpose of export duty or otherwise - correctness in applying the higher customs duty @ 15% in respect of lumps component of the ore, which has been exported without segregating the same into ores fines and lumps - HELD THAT:- In this case, prices were determined based on the negotiation between the appellants and the foreign buyers in terms of sale agreement. It is also noted that in the following cases, the transaction value mentioned in the Bill of Entries cannot be discarded without any substantial basis and it can be discarded only when import of identical goods or similar goods at a higher price at around the same time is proved by the Department.
There are also force in the contention of the appellant that merely because export of identical or similar goods were at a slightly higher price by other customers, the value declared by the appellant would not be liable for re-determination in terms of the judgment in the case of Devika Trading Pvt Ltd. [2003 (11) TMI 213 - CESTAT, MUMBAI] - it is also found that there is no evidence on record or alleged by the Department that the appellant had received consideration more than what has been declared in the invoice or that the appellant in the overseas buyers are related parties. It is also on record that the appellant realised the amount from the buyers as per the BRC and on the said value has discharged duty.
It is found from the impugned order that it does not mention quantity of goods exported in respect of shipping bills relied upon for the purpose of contemporaneous prices and therefore the submission of the appellant that in the case of export of small quantity, the prices are likely to be higher in comparison with bulk export. Further, there is no information on record about the destination of exports nor any documentary evidence exists that the original declared transaction value was rejected and the value was re-determined based on contemporaneous export of the same grade and that same redeemed value has now been applied in the present case - there cannot be any justification for charging higher rate of duty on iron ore lump in excess of 5% in each consignment when admittedly they were part of the same bulk iron ore which was predominantly iron ore fine. The lump contents are varying from 9.26% to 10.38%.
Similar issue was for consideration before the Tribunal in the case of Daksh Minerals Vs CCT [2024 (5) TMI 1155 - CESTAT HYDERABAD] wherein, it was held that consignment of iron ore fine having certain percentage of iron ore lumps also has to be treated as iron ore fines only and cannot be artificially segregated into iron ore fines and lumps for the purpose of levying export duty.
Thus, in terms of the contract between appellant and the foreign buyer there was a penalty clause for having iron ore lump (iron ore above 10mm) in excess of 10% and the penalty has also been imposed and the same was deducted from the consideration. Therefore, when the contract itself provided for tolerance waiver upto 10% there is no reason for Department not to accept the same.
Further, in so far as the application of the contemporaneous FOB value for the re- determination of the export FOB, it is found that it suffers from various infirmities in terms of statutory provisions, as also the fact that there is no allegation that the exporter has received any amount over and above than what has been realised by them in terms of BRC and the commercial invoices and therefore the duty should have been demanded only in terms of the amount actually realised. It is noted that there is no evidence that they have received anything extra over and above the amount realised and admittedly the correct duty had been discharged on said value except to the extent of applying high rate of duty for certain amount of iron ore lump, which is already said is not correct.
The impugned order is set aside to the extent appealed against by the appellant - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Amendment of Bills of Entry Allowed Under Section 149, Not Section 17(5); Exemption Denied Due to CENVAT Condition
Amendment of Bills of Entry Allowed Under Section 149, Not Section 17(5); Exemption Denied Due to CENVAT Condition
The CESTAT upheld that amendment of Bills of Entry under section 149 of the Customs Act is permissible, rejecting the department's contention that section 17(5) allows such amendments. The Tribunal clarified that section 17(5) mandates a speaking order for reassessment under section 17(4) but does not authorize amendments by the assessee post-clearance. Reliance was placed on precedents from Bombay HC, Telangana HC, and prior CESTAT decisions permitting amendments under section 149. The appellant's claim for exemption was denied due to non-fulfillment of a specific condition related to CENVAT credit, consistent with SC ruling in SRF Ltd. The department's appeal was dismissed, affirming the Commissioner (Appeals)'s order allowing the assessee to amend the Bills of Entry filed between February and October 2014.
Amendment of bills of entry under provisions of sections 149 and 17(5) of the Customs Act, 1962 - applicant has not challenged the assessment - no provisional assessment - duty was not paid under protest - HELD THAT:- The Supreme Court, in the context of import of Nylon Filament Yarn of 210 deniers, examined a similar Condition No. 20 in SRF Ltd. vs. Commissioner of Customs, Chennai (SC) [2015 (4) TMI 561 - SUPREME COURT]. The appellant had claimed nil rate of Additional Duty by relying upon a Notification dated 01.03.2002. The Deputy Commissioner of Customs held that SRF Ltd. would not be entitled to exemption from payment of Additional Duty since it did not fulfill Condition No. 20 of the said the Notification, which is to the effect that the importer should not have availed credit under rule 3 or rule 11 of the CENVAT Rules in respect of the capital goods used for the manufacture of these goods. The admitted position was that such CENVAT credit was not availed by SRF Ltd. The Tribunal held that when the credit under the CENVAT Rules was not admissible, the question of fulfilling the aforesaid condition did not arise and, therefore, as Condition No. 20 was not satisfied SRF Ltd could not claim nil rate of Additional Duty.
Revenue is justified in contending that amendment in the Bills of Entry cannot be made under section 17(5) of the Customs Act - Section 17(5) of the Customs Act only requires a speaking order to be issued if the proper officer re-assesses the Bills of Entry under section 17(4) of the Customs Act contrary to self-assessment. It has nothing to do with permitting amendment of any document by the assessee under section 149 of the Customs Act. The process of assessment under section 17 of the Customs Act comes to an end once an order clearing the goods for home consumption is given by the proper officer. This, however, would not prevent an assessee from seeking amendment of a document under section 149 of the Customs Act.
The Commissioner (Appeals) has followed the decisions of the Bombay High Court in Dimension Data India [2021 (1) TMI 1042 - BOMBAY HIGH COURT] and the Telangana High Court in Sony India [2021 (8) TMI 622 - TELANGANA HIGH COURT] to arrive at a conclusion that Trust Marketing can file an application section 149 of the Customs Act for seeking amendment in the 180 Bills of Entry filed during the period from February, 2014 to October, 2014. These two judgments of the Bombay High Court and the Telangana High Court have been followed by this Tribunal in Vivo Mobile [2021 (9) TMI 646 - CESTAT NEW DELHI] and Ingram Micro India [2024 (3) TMI 460 - CESTAT NEW DELHI]. There is, therefore, no error in the order passed by the Commissioner (Appeals).
The appeal filed by the department, therefore, deserves to be dismissed and is dismissed.
AI TextQuick Glance (AI)Headnote
Urgent Repairs to Municipal Pumping Mains Classified as Non-Taxable MMRS Under Service Tax Rules
Urgent Repairs to Municipal Pumping Mains Classified as Non-Taxable MMRS Under Service Tax Rules
The CESTAT Hyderabad held that services rendered for urgent repairs to municipal pumping mains fall under management, maintenance, and repair services (MMRS) and are not taxable as works contract services. Construction of water distribution systems for government or municipal bodies, including APIIC and industrial growth centers, is exempt from service tax as these are non-commercial activities. Services provided to SEZ developers are exempt under the SEZ Act and related notifications, even if procedural deviations occur. Repairs to non-commercial government buildings, such as those for Military Engineering Services, are also outside service tax scope. The tribunal set aside the demand confirmed by the adjudicating authority, ruling it unsustainable, and allowed the appeal.
Classification of services - works contract services or not - services rendered by the assessees to Municipal Corporation VSP viz., Urgent repairs to 500 mm dia GRP pumping main (HLR) at Opp Sita towers and Balaji Harmonium Apartment in Factories layout - classifiable under manamgement, maintenance and repair services or not - Construction of water distribution system irrespective of whether it has been provided as contractor or as sub-contractor - Demand of service tax on services provided to APIIC, in their capacity as SEZ developer - Demand on construction of water supply facilities at the industrial growth center for APIIC - Services rendered to Military Engineering Services (MES).
Services rendered by the assessees to Municipal Corporation VSP viz., ‘Urgent repairs to 500 mm dia GRP pumping main (HLR) at Opp Sita towers and Balaji Harmonium Apartment in Factories layout’, are classifiable under MMRS as defined under section 65(105)(zzq) of the Finance Act, 1994 - HELD THAT:- As far as the issue of laying of pipelines and shifting of pipelines in respect of GVMC and Graphite India Ltd are concerned, the adjudicating authority has held that these were primarily used for commerce. However, this is not relevant as these works are in the nature of Erection, Commissioning or Installation Services (ECIS) and not construction services, whereas, these services are held to be covered under construction service and not under ECIS. Reliance has been placed on the judgment of Larger Bench in the case of Lanco Infratech Ltd Vs CCE & ST, Hyderabad [2015 (5) TMI 37 - CESTAT BANGALORE (LB)]. Moreover, it has also been held by the Coordinate Benches that laying of pipeline for municipalities and drinking water facility are not leviable to service tax.
Construction of water distribution system irrespective of whether it has been provided as contractor or as sub-contractor - HELD THAT:- The activities of construction of water distribution system irrespective of whether it has been provided as contractor or as sub-contractor is in the nature of construction services and are not taxable as such constructions are for government department or municipalities and are in relation to drinking water supply.
Demand of service tax on services provided to APIIC, in their capacity as SEZ developer - HELD THAT:- The services provided to SEZ are exempted by virtue of section 26(1)(e) of SEZ Act, 2005 read with Rule 31 of SEZ Rules, 2006 and Notification No.09/2009-ST till 28.02.2011 and under Notification No.17/2011-ST from 01.03.2011. It is also noted that in this case, Office of Development Commissioner has issued certificate certifying the fact that appellants are appointed as contractor by the Developer and that the execution of the work is for the authorized operations and hence exemptions can be extended. Therefore, it is obvious that the subject services were provided to SEZ developer and that the said services were required for authorized operations of SEZ unit. Therefore, even if there is deviation in following prescribed procedure for claiming exemption, the same cannot be a ground for demanding duty in view of provisions under section 26(1)(e) of SEZ Act.
Demand on construction of water supply facilities at the industrial growth center for APIIC - HELD THAT:- The demand on construction of water supply facilities at the industrial growth center for APIIC, is also not tenable as APIIC is a public authority and their primary objective is promotion of industries and not to engage in commerce.
Services rendered to Military Engineering Services (MES) - HELD THAT:- It is noted that it was in relation to Sainik School run by them and such building cannot be used for commerce and hence repairs of such building are beyond the scope of service tax. It is found that as per the definition of WCS, construction services in relation to properties, not primarily for commerce, are beyond the scope of levy of service tax and even repair services in relation to non-commercial government building are kept outside the scope of levy for the period 16.06.2005 to 30.06.2012.
The demand confirmed by the adjudicating authority is not proper and legal and cannot be sustained and accordingly, the impugned order is set aside - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Trading Activity Exempt Only From 2011-2012; CENVAT Credit Reversal Allowed Under Rule 6(3)(ii) & 6(3A) CCR
Trading Activity Exempt Only From 2011-2012; CENVAT Credit Reversal Allowed Under Rule 6(3)(ii) & 6(3A) CCR
The CESTAT Hyderabad held that trading activity was considered an exempted service only from 01.04.2011 to 30.06.2012 as per the Notification, and prior to that, there was no clarity on this classification. Consequently, the extended period of limitation could not be invoked due to conflicting interpretations. The appellants were entitled to reverse proportionate CENVAT credit attributable to trading turnover under Rule 6(3)(ii) read with Rule 6(3A) of CCR, 2004, despite procedural lapses or delayed reversal. The matter was remanded to the Original Authority to compute the demand accordingly and determine interest liability, considering whether credit was utilized. The appeal was allowed by remand.
CENVAT Credit - proportional reversal of credit - trading was an exempted service during the relevant period or otherwise for the purpose of CCR, 2004 - common inputs are used for manufacturing of both dutiable and exempted goods/services - extended period of limitation - HELD THAT:- The appellants were found to have been engaged in manufacturing of goods as well as in trading of goods, which was considered to be an exempted service. Therefore, in terms of Rule 6 of CCR, when common inputs are used for manufacturing of both dutiable and exempted goods/services, certain compliances are required to be followed by the appellant, who are otherwise not able to maintain separate accounts for use of such inputs or input service.
Insofar as trading being an exempted service or otherwise, it is found that the definition of exempted service was amended vide Notification No.03/2011-CE (NT) dt.01.03.2011 w.e.f. 01.04.2011, whereby, by way of an explanation, it was clarified that exempted service includes trading. Moreover, subsequent thereto, w.e.f. 01.07.2012 till 31.03.2016, the trading activity was brought under the negative list of services. However, there was always a dispute whether exempted services also include the activities which are not at all a service in the first instance. Subsequent to 01.04.2016, various amendments were brought in by way of explanation (3) under Rule 6(1) of CCR vide Notification No.13/2016 dt.01.03.2016, which categorically provided that for the purpose of such rule, exempted services as defined in clause (e) of Rule 2 shall include an activity, which is not a service as defined in section 65B(44) of the Finance Act, 1994.
There is force in the argument of the appellant that till 13.04.2016, there was no clarity as regards treating the trading activity as an exempted service for the purpose of Rule 6 of CCR or otherwise. While for the period 01.04.2011 to 30.06.2012, there is clear cut provision that exempted service includes trading, the same cannot be given retrospective effect.
Extended period of limitation - HELD THAT:- It is found that clearly there were several conflictions, views and judgments whether trading activity shall be treated as exempted service or otherwise and it was the subject matter of various amendments and interpretations and therefore, in the absence of any specific and positive ground for invoking extended period, the extended period cannot be invoked in the present appeal.
Considering the fact that the appellants have already reversed proportionate credit attributable to the activity of trading on their own, therefore, there is no infirmity merely because it has been exercised at a later date or that there was no strict compliance of the procedural requirements under Rule 6(3A) of CCR. Thus, we find merit in the argument that they are entitled for reversal of proportionate credit attributable to trading turnover under Rule 6(3)(ii) read with Rule 6(3A) of the CCR.
The matter should be remanded back to the Original Adjudicating Authority to compute the demand in terms of Rule 6(3)(ii) read with Rule 6(3A) of CCR, 2004 and thereafter, appropriate the same, if already discharged along with interest. It is also clarified that the demand of interest on reversal of credit is regulated by the provisions under CCR and if it was only taken and not utilized, in view of the factual matrix, then the interest may not be chargeable in terms of extant provisions applicable during the relevant period. This aspect may also have to be re-examined for the purpose of computing interest, if any.
Appeal is allowed by way of remand.
AI TextQuick Glance (AI)Headnote
Penalty under Rule 26(1) and 26(2) CER 2002 not applicable without confiscation or proof of invoice fraud
Penalty under Rule 26(1) and 26(2) CER 2002 not applicable without confiscation or proof of invoice fraud
The CESTAT AHMEDABAD held that although the appellant company devised a scheme to avail inadmissible Cenvat credit through improper documents, the penalty under Rule 26(1) CER, 2002 was not applicable as confiscation was not proposed. Regarding penalty under Rule 26(2), the authority failed to establish that the appellants issued or abetted issuance of excise duty invoices without delivery of goods or facilitated ineligible benefits. The statements of the individuals involved did not demonstrate their role in such activities. Consequently, the tribunal allowed the appeals and set aside the penalty imposed on the appellants, modifying the impugned order accordingly.
Levy of penalty u/r 26 of CER, 2002 - availment of Cenvat Credit on own invoices without actual transfer of the material to the buyer - it is alleged that CR coils never left the premises of M/s. ISCL and only invoices were issued to facilitate availment of credit - violation of Rule 9 of the Cenvat Credit Rules, 2004 - HELD THAT:- Rule 9 specifies list of documents eligible for availment of Cenvat credit. However, where goods rejected by the buyer are received back in the factory of the manufacturer for remaking etc, Cenvat credit can be availed on own invoices.
From the statements of Shri Vijay Kumar Sharma and Shri Vinod Kashyap (appellants in this case), it is clear that M/s. KEPL were not having any godown or storage place and were working from the premises of M/s ISCL. The goods manufactured on job work basis for M/s. KEPL, were directly dispatched by M/s ISCL on payment of duty. As M/s KEPL were not registered as dealer, they could not issue cenvatable invoices. The Accountant of M/s KEPL sitting in the premises of M/s ISCL was given blank signed invoices for issuance. In the backdrop of above factual position duly corroborated by the statements of the concerned persons, it is clear that M/s ISCL have devised a scheme to avail inadmissible Cenvat Credit, on the basis of documents which were not proper documents as per Rule 9 of the Cenvat Credit Rules, 2004.
The show cause notice does not propose confiscation of the impugned goods and therefore, Rule 26(1) is not attracted in this case for imposing penalty on the appellants. For imposing penalty under Rule 26(2), essential ingredients are that the person should have issued excise duty invoice without delivery of goods specified therein or abets in making such invoice; or any other documents or abets in making such document on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like Cenvat credit or refund etc.
The Learned Adjudicating Authority has not elaborated as to how the present appellants fall under the criteria of Rule 26(2) for imposing penalty. Even, the statements of Shri Vijay Kumar Sharma and Shri Vinod Kashyap do not bring out their role in issuance of invoices or abetting in issuance of invoices/documents to facilitate the user of such invoices/documents to get ineligible benefits. Therefore, agreeing with the contention, both the appeals are allowed and the penalty imposed on the appellants are set aside. The impugned order is modified to the above extent.
Appeal allowed.
AI TextQuick Glance (AI)Headnote
CESTAT Upholds Refund of CENVAT Credit on DTA to SEZ Clearances as Exports Under Rule 5
CESTAT Upholds Refund of CENVAT Credit on DTA to SEZ Clearances as Exports Under Rule 5
The CESTAT Mumbai upheld the refund of accumulated CENVAT credit on inputs used for manufacturing excisable goods cleared from Domestic Tariff Area (DTA) to Special Economic Zone (SEZ), treating such clearances as exports under the Circular dated 28.04.2015. The tribunal relied on the CBEC circular and the Gujarat HC ruling that movement of goods from DTA to SEZ qualifies as export, entitling the assessee to refund under Rule 5 of the CENVAT Credit Rules, 2004. The impugned order rejecting Revenue's appeal against the original authority's grant of refund was affirmed. Revenue's appeal was dismissed for lack of merit.
Refund of accumulated CENVAT credit taken in respect of the inputs used for the manufacture of finished excisable goods “pre-fabricated steel building structures” and cleared to Special Economic Zone (SEZ) - applicability of benefit of circular dated 28.04.2015 issued by the CBEC - HELD THAT:- It is found that the issue of ‘refund of accumulated CENVAT credit when the goods are cleared from DTA to SEZ’, have been clarified by the CBEC and in the judgements of the higher judicial forum.
On plain reading of the Circular dated 28.04.2015 issued by the Ministry of Finance, CBEC, it transpires that clearances of excisable goods made from DTA to SEZ shall be treated as ‘export’ and the resultant CENVAT Credit in the books of accounts of the assessee, when claimed as refund of accumulated CENVAT credit shall be allowed in terms of Rule 5 CANVAT Credit Rules, 2004.
The issue has also been examined by the Hon’ble High Court of Gujarat in the case of Essar Steel Limited [2009 (11) TMI 141 - GUJARAT HIGH COURT] by holding that movement of goods from Domestic Tariff Area to Special Economic Zone units or developers shall be considered as export.
The impugned order dated 11.02.2009, in setting aside the orders of the original authority in rejection of refund claims filed by the respondent-assessee, is legally sustainable and does not require any interference - the appeals filed by Revenue does not have any grounds for entertaining the same.
Appeal of Revenue dismissed.
AI TextQuick Glance (AI)Headnote
Ad hoc disallowances invalid without formal books rejection under Section 145(3); profit estimation must be justified
Ad hoc disallowances invalid without formal books rejection under Section 145(3); profit estimation must be justified
The ITAT Visakhapatnam held that neither the AO nor the CIT(A) formally rejected the assessee's books of accounts before making ad hoc disallowances or estimating profit at 2%. The tribunal found no basis for the CIT(A)'s profit estimation, as it lacked support from comparable cases or the assessee's past records. Citing the Madras HC, the tribunal emphasized that formal rejection of books under Section 145(3) is mandatory before making such assessments. Arbitrary partial rejection of entries without justification is impermissible. Consequently, the matter was remanded to the CIT(A) for fresh consideration, allowing the assessee another opportunity to substantiate purchase claims. The grounds raised by the assessee were allowed for statistical purposes.
Estimation of income - bogus purchases - non-submission of purchase bills for verification of the genuineness of the purchases - CIT(A) estimated the net profit @2% on the sales made by the assessee without rejecting the books of accounts - HELD THAT:- Neither of the Revenue Authorities has invoked provision of Section 145(3) of the Act nor recorded any formal rejection of the books of accounts of the assessee before adhoc disallowance or estimation of profit. Further it is also found that there is no basis for the Ld. CIT(A) to estimate the profit @2%. It is not supported either by the comparable cases or past records of the assessee.
As in the case of PCIT v. Marg Ltd.[2017 (7) TMI 823 - MADRAS HIGH COURT] the division bench of High court of Madras held that the rejection of books of accounts is sine qua non before the AO to make his own assessment.
Any pick and choose method of rejecting certain entries from the books of account while accepting other, without an appropriate justification, is arbitrary and may lead to an incomplete, unreasonable and erroneous computation of income of an assessee.
In the instant case both the disallowance by the Ld.AO and estimation of the Profit by the Ld.CIT(A) were made without formally rejecting the books of accounts and without fully appreciation of the factual and legal issues. In our considered view, unless the Ld.AO / Ld.CIT(A) reject the books of accounts with valid reasons, cannot resort to estimation of profit even in the case of best judgement assessments.
Thus, we set-aside the file to the Ld.CIT(A) for reconsideration of the issue afresh by providing one more opportunity to the assessee to substantiate the claim of purchases - grounds raised by the assessee are allowed for statistical purposes.
AI TextQuick Glance (AI)Headnote
Penalty under Section 270A not justified if return filed after notice with full disclosure and no concealment
Penalty under Section 270A not justified if return filed after notice with full disclosure and no concealment
The ITAT Ahmedabad held that penalty under section 270A cannot be imposed solely because the return was filed in response to a notice under section 148. The tribunal found no concealment or misreporting as the income was fully disclosed, supported by third-party documents, and subjected to TDS. Failure to file the return under section 139(1) alone does not amount to under-reporting unless suppression or misrepresentation is shown. The discretion to levy penalty must be exercised judiciously, considering the assessee's bona fide conduct and absence of tax evasion. Since the assessment concluded without any additions or disallowances, and no revenue loss occurred, the penalty was not justified. The appeal was allowed, and penalty under section 270A was set aside.
Levy of penalty u/s 270A - return was not filed u/s 139, and that the total income was above the basic exemption limit - Filing of return in response to notice u/s 148.
HELD THAT:- Penalty u/s 270A cannot be imposed mechanically merely because the assessee filed the return of income in response to a notice under section 148. The timing of filing, in itself, is not determinative.
Whether there is any concealment, misreporting, or deliberate non-disclosure of income? - Complete disclosure of income in response to a statutory notice, especially where such income is accepted as-is without variation or inquiry, cannot be equated with under-reporting or misreporting, particularly when the same is supported by third-party verifiable documents such as Form 26AS, salary certificates or bank statements.
Failure to file a return u/s 139(1), by itself, does not constitute “under-reporting” within the meaning of section 270A(2)(b), unless it is shown that the income offered later was suppressed or misrepresented. The provision must be applied with regard to substance over form.
The discretion to levy penalty u/s 270A(1) must be exercised judiciously. The provision is not mandatory in nature. The authority must evaluate the assessee’s explanation, conduct, and supporting documents to determine whether the omission was bona fide or contumacious.
When income is fully subjected to TDS and reflected in the tax system, and the assessee does not claim any false deduction or exemption, the possibility of tax evasion is inherently neutralised. In such cases, penal consequences are not justified in the absence of revenue loss or fraudulent intent.
We consider the decision in case of Archana Achyut Sail [2025 (4) TMI 206 - ITAT MUMBAI] where the Bench noted that if there was no disallowance or addition made by the AO in the income as disclosed in pursuance of notice u/s 148 of the Act, no penalty can be levied u/s 271(1)(c).
The mere fact that the return was filed in response to notice under section 148 does not ipso facto justify the invocation of section 270A(2)(b), unless there is a demonstrable act of under-reporting in substance. The statute does not intend to penalise delayed but truthful compliance, particularly where no tax loss arises and the income is fully traceable in departmental systems.
We are of the considered opinion that the present case does not warrant the imposition of penalty u/s 270A. The return filed in response to notice u/s 148 was complete, truthful, and supported by verifiable evidence. The income was already subjected to tax through TDS, and the assessment was concluded without any addition or disallowance.
The omission to file the return u/s 139(1), though not condonable, does not constitute under-reporting or misreporting in the statutory sense - AO, in the facts of this case, ought to have exercised his discretion under section 270A(1) judicially, particularly in view of the complete tax compliance, absence of concealment, and voluntary disclosure. Appeal of the assessee is allowed.
AI TextQuick Glance (AI)Headnote
Assessment under Section 153A and 143(3) barred by limitation due to DTAA protocol timing and exclusions
Assessment under Section 153A and 143(3) barred by limitation due to DTAA protocol timing and exclusions
The ITAT Delhi held that the assessment framed under Section 153A read with Section 143(3) for AY 2011-12 was barred by limitation. The Court relied on the Delhi HC ruling in Sneh Lata Sawhney, clarifying that the exclusion under Explanation (ix) to Section 153B applies only when the reference for exchange of information is made under Sections 90/90A in accordance with the India-Hongkong DTAA. Since the DTAA came into force on 30.11.2018, requests for information relating to periods before that date are invalid under Article 26 of the Protocol. Consequently, the period of limitation for assessment could not be extended based on the reference made on 04.12.2018. The appeal was allowed, and the assessment order was set aside as barred by limitation.
Assessment u/s 153A - Period of limitation - FT&TR reference to Hongkong on 04.12.2018 for seeking information - due date from passing the assessment order as per section 153B
HELD THAT:- As in the case of Sneh Lata Sawhney [2025 (5) TMI 1338 - DELHI HIGH COURT] held that the exclusion as provided under Explanation (ix) to Section 153B (which was numbered as Clause (viii) at the material time) is applicable only if a reference for exchange of information has been made as per Section 90/90A. Where the request is not made in terms of the India-Hongkong DTAA, it was contrary to the limitations as expressly specified under Article 26 of the Protocol and thus, the period of limitation to frame the assessment could not be extended on the basis of such Reference
The instant appeal is pertaining to AY 2011-12, wherein the assessment orders have been passed u/s 153A r.w. Section 143(3) of the Act on 24.12.2019. The DTAA between India-Hongkong come into force w.e.f. 30.11.2018. As per paragraph 5(c) of the Article 26, request for disclose any information for periods prior to 30.11.2018 should be forcibly relevant to the fiscal year or taxable event following that date.
Thus, no request can be made under Article 26 of the DTAA for the period/ fiscal year prior to 30.11.2018. Therefore, in our considered opinion, the period of limitation could not be extended under Explanation (ix) to Section 153B of the Act to frame the assessment based on such reference.
By relying on Sneh Lata Sawhney [2025 (5) TMI 1338 - DELHI HIGH COURT] we hold that all the assessment framed, which is subject matter of the captioned Appeal is barred by limitation, accordingly same is set aside. The ground of appeal No.1 of the assessee is allowed.
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Transfer of Assessment Proceedings Without Formal Section 127 Order Is Invalid, Hearing Must Be Given to Assessee
Transfer of Assessment Proceedings Without Formal Section 127 Order Is Invalid, Hearing Must Be Given to Assessee
The ITAT Delhi held that the transfer of assessment proceedings between AOs without a formal order under section 127 was invalid. The AO who completed the assessment lacked jurisdiction as no proper transfer order was passed, and the assessee was not given an opportunity to be heard as required by section 127(1). Following the Delhi HC precedent, the tribunal quashed the order passed by the unauthorized AO and allowed the assessee's appeal.
Transfer of case u/s 127 based on the Address of the Assessee - AO jurisdiction to pass order - No Formal order was passed - assessee has not raised the issue of jurisdiction before the AO or before Ld.DRP - HELD THAT:- From the records, it is seen that there was no order passed u/s 127 for transfer of case from one AO to other AO i.e. from ACIT/DCIT, Circle International Taxation- 1(3)(1), Delhi to ACIT/DCIT, Circle International Taxation-1(1)(1), Delhi who completed the assessment though the assessment proceedings were initiating by issue of notice u/s 143(2) by the other AO.
As per sub-section (1) to Section 127 where the case is transferred from one AO who is sub-ordinate to the Commissioner or Pr. Commissioner or Chief Commissioner of Income Tax to another AO who also is subordinate him, the assessee should be provided a reasonable opportunity of being heard and also recording the reasons for doing so.
In the instant case, it is seen that the provision of section 127 of the Act, are not followed though the case has been transferred from one authority to another authority
As decided in the case of Raj Sheela Growth Fund (P.) Ltd.[2024 (5) TMI 506 - DELHI HIGH COURT] we are of the considered view that in the instant case, the jurisdiction has been transferred from one AO to another AO without there being any order passed u/s 127 of the Act.
The jurisdiction assumed by the another AO i.e. ACIT, Circle International taxation 1(1)(1), Delhi without any authority and therefore, the order passed by him is without jurisdiction and the same is hereby quashed - Assessee appeal allowed.
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Sale of Licenses as Other Income Not Eligible for Deduction Under Section 80IB(11A)
Sale of Licenses as Other Income Not Eligible for Deduction Under Section 80IB(11A)
The ITAT Visakhapatnam held that the assessee's inclusion of revenue from sale of licenses as "other income" under section 80IB(11A) was incorrect. The licenses, being tradable products, were not used to offset customs duty and thus did not reduce the cost of production. The tribunal distinguished the Supreme Court ruling in Meghalaya Steel Ltd, noting that export incentives differ from direct subsidies. Consequently, the deduction claimed by the assessee was disallowed, and the appeal was decided against the assessee.
Deduction u/s 80IB(11A) - net profits derived from J. Thimmapuram Unit - AO noticed that assessee has included other revenue in the form of duty draw back and sale of licenses - scope of term “other income”
HELD THAT:- From the submissions of the Ld.AR it is noticed that the assessee has sold the licenses, which is a tradable product, and has characterised as “other income” in the profit and loss account.
From these facts, it is observed that the assessee has not utilised the licenses for the purpose of neutralising the customs duty while making imports which goes to the root of the matter of reducing the cost of production.
In these circumstances, it cannot be said that the sale of licenses disclosed under “other income” reduces the cost of production. Subsequently, in the case of Saraf Exports [2023 (4) TMI 420 - SUPREME COURT] distinguished the decision of Meghalaya Steel Ltd [2016 (3) TMI 375 - SUPREME COURT] where the incentives mainly arise due to direct subsidies and not export incentives. Decided against assessee.
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Section 9 IBC Petition Dismissed Due to Limitation and Pre-Existing Dispute Evidence
Section 9 IBC Petition Dismissed Due to Limitation and Pre-Existing Dispute Evidence
The NCLAT upheld the dismissal of the Section 9 IBC petition on grounds of limitation and existence of a pre-existing dispute. The tribunal found the default date as 01.05.2016, with the limitation period expiring on 30.04.2019. The alleged settlement dated 13.06.2019 was unauthenticated and beyond the limitation period. Evidence including ongoing arbitration, disputed trade bills in the corporate debtor's annual report, and a default status marked as disputed in NeSL records confirmed the pre-existing dispute. The appellant's admission and documentary evidence supported the tribunal's findings. The appeal was dismissed for lack of merit.
Applicability of time limitation for application filed u/s 9 of IBC - existence of pre-existing dispute or not - absence of other supporting corresponding document on record to establish the settlement - HELD THAT:- The Learned Tribunal in the impugned order has clearly recorded that there is a pre-existing dispute, which is evident from the two stages of settlement, which were being attempted to be arrived at that is on 08.03.2017 & 13.06.2019, that the alleged settlement of 13.06.2019 is shown in a document that is unauthenticated, that the arbitration process, is being conducted, by the Hon’ble Supreme Court with respect to the dispute in respect of the receivables from TSGENCO, by appointing sole arbitrator, that in the annual report of the Corporate Debtor, the amount in respect of trade bills is shown to have been disputed and that Record of Default report from NeSL shows the status of ‘Default” as disputed all of which point to a pre-existing dispute.
Regarding the aspect of limitation, Learned Adjudicating Authority has held that the date of default, which has been mentioned in the notice issued under Section 8 of I & B Code, will have to be taken as a date of default which cannot be altered, that therefore date of default will be 01.05.2016, that letter sent by statutory auditor merely asked for balance confirmation from the Operational Creditor, that the alleged final settlement of 2019 is not authenticated by Corporate Debtor, that limitation period expired on 30.04.2019 and the alleged acknowledgement in form of settlement dated 13.06.2019 and the alleged balance sheet entries are all beyond the said limitation period and the petition has to be taken as to have been filed beyond the limitation period.
The reason which has been assigned in the Impugned Order dismissing the petition under Section 9 of I & B Code because of the aspect of limitation and existence of the pre-existing dispute, since being an admitted fact, which stood established by the documents which were brought on record and more particularly, because of the admission made by the Appellant himself in the proceedings before the Learned Adjudicating Authority, there is no anomaly or any perversity in the Impugned Order which could call for any interference.
Appeal dismissed.
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Margin Money Held by Bank Guarantees Is Not Refundable During Liquidation Under Insolvency Rules
Margin Money Held by Bank Guarantees Is Not Refundable During Liquidation Under Insolvency Rules
The NCLAT upheld the NCLT's decision dismissing the appeal regarding the refund of margin money deposited by the corporate debtor during liquidation. Since the bank guarantees had already been invoked, the margin money securing those guarantees did not constitute an asset of the corporate debtor. The margin money serves only as security for the bank guarantee and remains with the bank while the guarantee is active. Upon invocation, the margin money is applied towards the guaranteed amount payable to the beneficiary, leaving no refundable balance to the corporate debtor. Consequently, the liquidator is not entitled to claim the margin money as an asset, and the appeal was dismissed.
CIRP - Return of bank Guarantees, that were lying with Respondent No. 2 on behalf of the Corporate Debtor - refund of Margin Money, that stood deposited by the Corporate Debtor during liquidation proceedings - Bank Guarantee and the margin money deposited to secure such Bank Guarantee would constitute to be the asset of the Corporate Debtor or not - HELD THAT:- The admitted facts, in respect to the proceedings, which were held before the Ld. NCLT, in the instant case are that at the relevant point of time when the Interlocutory Application was being considered, the Bank Guarantees had already been invoked and hence, it was contended that, as a matter of fact, the Interlocutory Application has become infructuous, because of the invocation of the Bank Guarantee was a fact that was not denied by the parties to the proceedings and hence, it was rightly observed by the Ld. Tribunal in its Impugned Order dated 13.04.2023, that the Appellant will not be entitled for refund of all the margin money once the Bank Guarantee has already been invoked because, the margin money is only a part of the amount for which the Bank Guarantee is taken and invocation of the Bank Guarantee would be both against the money which was deposited as margin money by the Corporate Debtor and the money which has been extended by the Bank towards securing the performance of the Corporate Debtor.
There cannot be any iota of doubt, that though the Liquidator has the rights to preserve the assets of the Corporate Debtor, in the present set of circumstances, where the Bank Guarantee and the margin money deposited to secure such Bank Guarantee would not constitute to be the asset of the Corporate Debtor - the view is endorsed that the margin money is a contribution only, towards securing the Bank Guarantee, that it remains with the Bank, as long as the Bank Guarantee is alive, that if the Bank Guarantee expires without being invoked, the margin money reverses back to the Borrower and in case, the Bank Guarantee is invoked by the beneficiary, the margin money goes towards the payment of the amount guaranteed by the said Bank Guarantee to the beneficiary and nothing remains with the Financial Institution, which can be reversed to the Corporate Debtor.
Appeal dismissed.
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CoC Can Accept Revised Resolution Plan After Voting Begins Under Insolvency Rules Section 30(6)
CoC Can Accept Revised Resolution Plan After Voting Begins Under Insolvency Rules Section 30(6)
The NCLAT upheld the CoC's discretion to permit a resolution applicant (R-3) to submit a revised resolution plan after voting on another plan had commenced but not concluded. Despite the initial voting on the appellant's plan starting on 22.05.2024, the CoC allowed R-3 to submit a higher offer of Rs.85 crore on 03.06.2024 and decided to consider both plans before completing voting. The tribunal found no illegality in the CoC's decision, emphasizing that the CoC has sole authority to approve or reject resolution plans at any stage. The NCLT's order affirming the CoC's decision was upheld, and the appeal was dismissed.
Jurisdiction to submit revised resolution plan - R-3 not submitted a revised plan within the time allowed by the CoC - voting on the resolution plan of the appellant has already commenced on 22.05.2024, but not concluded - power of CoC to take a decison at any stage - HELD THAT:- Clause 2.8.5(d) of Resolution Plan reserves the power of the CoC to approve or not to approve resolution plan which has secured the highest as per the evaluation matrix and it is solely on the basis of discretion of the CoC to approve any compliant resolution plan. The subsequent steps are provided for approval of the resolution plan. In the present case, the facts brought on the record indicate that the voting on the resolution plan of the appellant was not completed and before completion of the voting, revised plan was submitted by R-3 for an amount of Rs.85 crore that was more than Rs.75 crore of the appellant’s revised plan. On 03.06.2024 before voting could be completed, application was filed before the adjudicating authority by R-3. The present is a case where voting was not complete and CoC in 24th CoC meeting took a conscious decision to consider the resolution plan of R-3. Affidavit was also filed by the CoC before the adjudicating authority where it had categorically stated that CoC has decided to consider revised plan.
From the judgment of Jindal Stainless Ltd. [2023 (3) TMI 1282 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI], it is clear that the CoC has never taken a decision to consider the plan which was sought to be filed by Shyam Sel & Power Ltd. CoC on the other hand has taken a decision not to grant any further opportunity. More so, as noticed by the adjudicating authority in Jindal Stainless Ltd. the name of the applicant Shyam Sel & Power Ltd. was never included in the final list of RA. In the present case, the CoC has taken a decision to permit the R-3 (whose name was in the final list of RA) to submit a revised plan as well as the appellant.
It is the sole discretion of the CoC to approve or not approve the resolution plan. We have already extracted Clause 2.8.5(d) of the RFRP. The present is a case where out of two RAs only one has submitted a revised resolution plan and since R-3 did not submit a revised resolution plan, CoC decided to vote on the plan of the appellant with effect from 22.05.2024. Voting was to complete on 04.06.2024 and on 31.05.2024 email was received from R-3 and it is informed that R-3 shall be filing a revised plan and on 03.06.2024 revised plan was also submitted along with the application filed before the adjudicating authority seeking a direction where the plan value disclosed by R-3 was Rs.85 crore. The CoC who has decided to vote on the plan of the appellant took note of the offer given by R-3 by email 31.05.2024 and revised plan given on 03.06.2024. The CoC noted the revised plan of Rs.85 crore submitted by R-3 and decided to consider the revised plan of R-3 and to give opportunity to both appellant and R-3.
NCLT has rightly come to answer the questions in the facts of the present case, CoC’s decision to permit R-3 to submit a revised plan is in accordance with law. There is no infirmity in the order of the adjudicating authority dated 16.06.2025, answers given by the adjudicating authority to the questions framed need no interference.
Appeal dismissed.
AI TextQuick Glance (AI)Headnote
Bus transport services for employees and children exempt from service tax under Notification 25/2012, Entry 23(b)
Bus transport services for employees and children exempt from service tax under Notification 25/2012, Entry 23(b)
The CESTAT held that the appellant's arrangement for providing bus services to transport employees and school children did not attract service tax under the contract carriage or tour operator categories. The activity was exempt under Notification No. 25/2012, entry 23(b), and no tax was leviable under Section 75 of the Finance Act, 2001, and Notification No. 20/2009. The department's reliance on a prior HC decision was found inapplicable due to differing facts. The demand for service tax and penalty was set aside, and the appeal was allowed. The department's appeal against the extended period demand was withdrawn, and the order confirming tax demand for the normal period was quashed.
Taxability - providing bus services to the factory employees and school going children on various routes on the terms and conditions mentioned in the agreements - applicability of N/N. 30/2012-ST dated 20.06.2012 (as amended from time to time) - Applicability of reverse charge mechanism - HELD THAT:- The appellant had entered into an agreement with various tour and travel agencies for providing buses to the appellants for transportation of their employees and the school going children as per their requirement on various routes on per day payment basis alongwith the payment of amount towards diesel and mobil oil consumed on actual basis. These facts when glanced through the definition of the contract carriage it becomes clear that the appellant entered into the contract for taking motor vehicles on hire for carrying passengers. Admittedly the appellant has not used the hired contract carriage / motor vehicle / bus for the purposes of tourism or conducted tour or charter. It becomes clear that the activity of taking contract carriage / buses for transportation of school children / employee of the appellant on payment of per day charges alongwith the charges of diesel / mobil oil is an activity fully exempted from payment of tax in terms of notification no. 25/2012 dated 20.06.2013, entry no. 23(b).
The decision relied upon by the department in the case of Anil Kumar Agnihotri vs. Commissioner of Central Excise Kanpur [2018 (1) TMI 171 - ALLAHABAD HIGH COURT] is not applicable to the fact and circumstances of the present case: the activity in the present case not being rent a cab service. It is not even precisely, ‘hire’ due to terms and conditions of the agreement between the appellant with the tour operator.
By virtue of Section 75 of the Finance Act, 2001 and in view of Notification No. 20/2009-S.T., dated 7th July, 2009, no Service tax is leviable in respect of the amount paid by the appellants by carrying the passengers (Employees and Scholl Children) in contract carriage. Thus, even if it is assumed that service rendered by the appellant comes under the category of 'tour operator' in sub-clause (n) of clause (105) of the Finance Act, in any case, for the period from 1st April, 2000 onwards, no Service tax whatsoever can be demanded from the appellants. Consequently, no penalty can be imposed on them for the said period.
Finally it is observed that the findings in Impugned order regarding setting aside demand for extended period have attained finality. The department’s appeal being withdrawn. The order confirming the demand for the normal period is hereby set aside in the light of entire above discussion - Appeal allowed.
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Refund claim denied under Section 65B as joint venture transactions are taxable between distinct entities
Refund claim denied under Section 65B as joint venture transactions are taxable between distinct entities
The CESTAT upheld the rejection of the appellant's refund claim for service tax paid to a joint venture partner, holding that the transactions between two distinct legal entities cannot be treated as self-service. Services rendered under the joint venture agreement between separate entities are taxable, as both the joint venture and its members are distinct persons under Section 65B of the Finance Act, 1994. The appellant failed to provide sufficient documentary evidence to establish payment of service tax, and the tribunal found that the service tax was correctly paid by the appellant. Consequently, the appeal was dismissed, affirming the denial of the refund claim.
Taxability of services between Joint Venture Companies - Refund of service tax paid by the appellant as per debit notes raised by Rajasthan State Mines & Minerals Limited (RSMML) - two different entities are involved in the activity/transaction and as such the same cannot be treated as self service - Activities undertaken as per joint venture agreement can be said to be a service between copartners of the joint venture or not - rejection of refund on the ground that the claimant had not furnished concerned documentary evidences by which it could be established that the amount of Service Tax was actually paid by Assessee to M/s RSMML.
Two different entities are involved in the activity/transaction and as such the same cannot be treated as self service - HELD THAT:- The corporation is registered under Section 69 of the Finance Act, 1994 and having Service Tax Registration No. AAACR78571IST001 and charging service tax on the services charges plus royalty recovered. Commissioner (Appeals) finds that the appellant filed the instant refund in respect of this service tax paid by them to the corporation. It is observed that after the introduction of Negative List w.e.f. 01.07.2012, the terms ‘service’ is defined under Section 65(B)(44) of the Finance Act, 1944, as “any activity carried out by a person for another for consideration and includes a declared service.” In the instant case two distinct legal entities vis M/s. Mayun Inorganics Ltd., (the appellant) and M/s. Rajasthan State Mineral Development Corporation Ltd. (the Corporation) are involved in the transaction and a consideration is also flowing for activity performed by the Corporation. It cannot be termed as ‘self service’ in as much as two different legal persons/entities are involved in the said transaction.
Activities undertaken as per joint venture agreement can be said to be a service between copartners of the joint venture or not - HELD THAT:- Reference made to Explanation 3(a) of the definition of service, according to which an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons. Resultantly, Joint Venture and the members of the Joint Venture are to be treated as distinct person and held that taxable services provided for consideration, by the Joint Venture to its members or vice versa and between the members of the Joint Venture are therefore taxable. M/s. Mayur Inorganics Ltd. being new Company is having distinct legal existence and the consideration flowing from the new Company to the CORPORATION is liable for service tax even in terms of the said CBEC Circular dated 24.09.2014.
Rejection of refund also on the ground of non submission of documentary evidences - HELD THAT:- The activity in question falls within the scope of taxable services as defined under Section 65B(44) of the Finance Act, 1994. Section 65B(37) defines the person. According to both the provisions, any activity carried out by one person for another person for consideration is a service and the company and its subsidiary company/joint ventures are the distinct persons. Resultantly, it stands established that the services provided by RSMM to newly formed joint venture company for a consideration are covered under the aforesaid definitions. Both being the separate entities and the admitted fact that appellant had paid service tax as apparent from above mentioned invoices/debit notes. Accordingly, RSMM had correctly paid the service tax. The appellant cannot claim refund of the service tax paid, as per it liability.
There are no infirmity in the order under challenge. Same is hereby upheld - appeal dismissed.
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CIT(A) Order Set Aside for Violating Right to Hearing Under Section 69A and 115BBE, Matter Remanded
CIT(A) Order Set Aside for Violating Right to Hearing Under Section 69A and 115BBE, Matter Remanded
The ITAT Hyderabad held that the CIT(A) failed to provide the assessee with a reasonable opportunity of hearing, as notices were not received and no specific reference to such notices was made before disposing of the appeal. The tribunal found this to be a violation of natural justice principles. Consequently, the ITAT set aside the CIT(A) order treating unexplained cash found during survey as income under section 69A read with 115BBE and remanded the matter back to the CIT(A) for reconsideration after affording the assessee a proper hearing. The appeal was allowed for statistical purposes.
Cash found during the survey operation as additional income - unexplained money u/sec.69A r.w.s.115BBE by treating the amount under the Head ‘Income from other sources” instead of ‘Business Income’ offered by the assessee.
HELD THAT:- Since the assessee has not received the notices issued by the CIT(A), the assessee could not file it’s reply along with relevant documentary evidences to substantiate it’s case.
Further, although, the learned CIT(A) claims that, several opportunities are provided to the assessee, but, there is no specific reference of any notice issued by the CIT(A) before disposing of the appeal filed by the assessee.
Therefore, from the above, it is undisputed clear that, the CIT(A) has not provided reasonable opportunity of hearing to the assessee to explain it’s case and disposed off the appeal in gross violation of principles of natural justice.
We set-aside the order of the CIT(A) and restore the issue back to the file of learned CIT(A) with a direction to re-consider the issue, after providing reasonable opportunity of hearing to the assessee to explain it’s case to meet the ends of justice. Appeal of the assessee is allowed for statistical purposes.
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ITAT Orders Taxable Income Revision to INR 53.16 Cr Under Section 154 and Allows Leave Encashment Deduction Under Section 43B
ITAT Orders Taxable Income Revision to INR 53.16 Cr Under Section 154 and Allows Leave Encashment Deduction Under Section 43B
The ITAT DELHI - AT allowed the appeal, directing the AO to compute the assessee's taxable income at INR 53,16,66,580/- as per the rectified order under section 154, replacing the previously assessed income of INR 58,29,98,519/-. Regarding the addition under section 43B for leave encashment, the tribunal noted that the assessee had paid INR 48,77,017/- before the due date of filing the return, which should be allowed. The AO was instructed to verify these payments and grant the claim accordingly.
Computation of taxable income - rectification order passed u/s 154 - description “income as per section 143(1) of the Act” was rectified - HELD THAT:- As intimation order u/s 143(1) was rectified u/s 154 vide order dated 30.01.2024 according to which the total income of the assessee was reached to INR 53,16,66,580/- as against the income declared at INR 52,04,08,740/-. The said income is computed after rectification done on the request of the assessee. Therefore, while computing the final taxable income of the assessee, the AO is directed to replace this income as against the income of INR 58,29,98,519/- taken in the final assessment order. Accordingly, the captioned grounds of appeal are allowed.
Addition u/s 43B towards provision of leave encashment - HELD THAT:- From the perusal of the Tax Audit Report filed by the assessee and the rectification order u/s 154 available before us, it is seen that in the rectification order, a sum of INR 94,88,237/- is disallowed u/s 43B of the Act by the CPC however, as per Tax Audit Report, the assessee has paid a sum of INR 48,77,017/- on or before the due date of filing of return of income which has to be allowed u/s 43B of the Act. Accordingly, we direct the AO to verify these facts and allow the claim of the assessee in accordance with law.