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AI TextQuick Glance (AI)Headnote
Dissolved Company Liable Under PMLA and IPC; Director Can Represent It Under Section 305 Cr.P.C.
Dissolved Company Liable Under PMLA and IPC; Director Can Represent It Under Section 305 Cr.P.C.
The HC held that a dissolved company remains liable for its obligations and can be prosecuted under PMLA and IPC provisions by following the procedure under Section 305 Cr.P.C. Restoration of the company may be sought for prosecution; if not possible, a director or authorized representative can be made an accused to represent the company. The Court upheld the prosecution's action of naming the director as the representative of the dissolved company, rejecting the petition to remove him. The order of the Special Court refusing to remove the accused as the company's representative was confirmed, and the petition was dismissed.
Money Laundering - criminal conspiracy - reasonable cause to believe that, the company is not carrying on any business or operation - Director or an authorized representative of a company can be complelled to be an accused to represent the company and it is the option of the company to appoint a representative or not - offences punishable under Section 420 read with 120B of the Indian Penal Code, under Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act - HELD THAT:- In the instant case, in view of Section 70 of the PMLA Act and the overriding effect given under Section 71, a company can be prosecuted by following the procedure under Section 305 of Cr.P.C, if the same is in existence. Section 250 of the Companies Act, even though provides that, when a company is dissolved under Section 248 of the Companies Act, the same cease to operate as a company and the Certificate of Incorporation issued to it shall be deemed to have been cancelled from such date, an exception is carved out for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company. If so, it has to be inferred that, even after dissolving a company, the liability of the company still survives. If so, such a company could not be held as ceased to operate as such and the same deemed to be in existence insofar as for the payment or discharge of the liabilities or obligations of the company. Be it so, a dissolved company can be proceeded by initiating civil litigation for discharge of the liabilities or obligations of the company.
In the absence of a specific provision to deal with the matter, the Parliament has to consider amendment of Criminal Procedure Code and if necessary the special statutes to address this situation. Till then, a company, which committed an offence before its dissolution or struck off, could not spared without being prosecuted. For the said purpose, the prosecution can get the company restored to existence and follow the procedure under Section 305 of Cr.P.C. or under Section 342 of the BNSS. If no such restoration is possible, the prosecution can show somebody who was in charge of the company in the Final Report to represent the dissolved company and continue the prosecution proceedings.
Holding so, it has to be held that the action of the prosecution in arraying the 3rd accused as the representative of the 1st accused company, who was the director of the company, is only to be justified, in the interest of justice. In such view of the matter, the prayer in this petition to set aside the order, whereby the Special Court was not inclined to remove the petitioner as the person, who is representing the 1st accused company, is liable to fail.
The impugned order stands confirmed - Petition dismissed.
AI TextQuick Glance (AI)Headnote
Criminal Court Can Allow Complaint Amendments Post-Cognizance If No Prejudice, Under Section 200 Cr.P.C.
Criminal Court Can Allow Complaint Amendments Post-Cognizance If No Prejudice, Under Section 200 Cr.P.C.
The SC held that a criminal court has the power to allow amendment of a complaint under Section 200 Cr.P.C. post cognizance if the amendment relates to a curable infirmity and causes no prejudice to the accused. In this case, the amendment corrected a misdescription of the supplied product from "Desi Ghee" to "milk," an inadvertent error carried from the legal notice. Since the amendment occurred after summons issuance but before completion of evidence, and did not alter the complaint's nature or cause prejudice, the Trial Court rightly permitted it. The HC erred in focusing on GST implications and in holding that the amendment changed the complaint's character. The SC set aside the HC order and allowed the appeal, affirming the Trial Court's decision to permit the amendment.
Dishonour of cheque - power of criminal court to order amendment of a complaint filed u/s 200 of the Cr.P.C. post cognizance stage - By virtue of the impugned order, the High Court has allowed the petition, holding that the amendment sought was not in the nature of a typographical error, but it had a wider impact upon the entire matter in dispute and, therefore, it changed the nature of the complaint. The High Court also found merit in the contention of the respondents that the amendment was sought, as no GST was leviable on milk.
HELD THAT:- The issue, whether a criminal court has power to order amendment of a complaint filed under Section 200 of the Cr.P.C., is no longer res integra. In S.R. Sukumar v. S. Sunaad Raghuram [2015 (7) TMI 1260 - SUPREME COURT], this Court held that 'What is discernible from U.P. Pollution Control Board case is that an easily curable legal infirmity could be cured by means of a formal application for amendment. If the amendment sought to be made relates to a simple infirmity which is curable by means of a formal amendment and by allowing such amendment, no prejudice could be caused to the other side, notwithstanding the fact that there is no enabling provision in the Code for entertaining such amendment, the court may permit such an amendment to be made. On the contrary, if the amendment sought to be made in the complaint does not relate either to a curable infirmity or the same cannot be corrected by a formal amendment or if there is likelihood of prejudice to the other side, then the court shall not allow such amendment in the complaint.'
A careful reading of the judgment in S.R. Sukumar’s case reveals that the said judgment followed the earlier judgment of this Court in U.P. Pollution Control Board vs. Modi Distillery and Others [1987 (8) TMI 449 - SUPREME COURT]. In Modi Distillery, after the process was issued to the respondents therein, a revision was filed by few of the accused and a Section 482 petition was filed by few other accused. Invoking the revisional jurisdiction, the High Court quashed the proceedings holding that vicarious liability could not be saddled on the Directors unless “Modi Industries Limited” was arrayed as accused. The Complainant in that case had arrayed “Modi Distillery”, an industrial unit and averred that Modi Distillery was a Company. The High Court focusing on the technical flaw in the complaint quashed the proceedings on the premise that “Modi Industries Limited” was not made an accused.
The complaint and the application for amendment is carefully perused. The amendment was moved at a stage when after summons being issued to the respondents, the chief examination of the complainant had concluded and when cross-examination was awaited. The amendment made is also only with regard to the products supplied. According to the complainant, while what was supplied was “milk”, by an inadvertent error “Desi Ghee (milk products)” was mentioned. The error which occurred in the legal notice was carried in the complaint also.
On the facts of the present case and considering the stage of the trial, it is found that absolutely no prejudice would be caused to the accused/respondents. The actual facts will have to be thrashed out at the trial. As to what impact the amendment will have on the existence of debt or other liability is for the Trial Court to decide based on the evidence. It was a curable irregularity which the Trial Court rightly addressed by allowing the amendment. It could not be said that by allowing the amendment at a stage when the evidence of the complainant was incomplete, failure of justice would occasion.
The High Court completely mis-directed itself in delving into the aspects of leviability of GST which would be the concern of the appropriate authorities under the relevant statute. It could also not be said that the amendment altered the nature and character of the complaint - The judgment and order of the High Court of Punjab and Haryana at Chandigarh is set aside - appeal allowed.
AI TextQuick Glance (AI)Headnote
Second Appeal Allowed After Appointment of GST Appellate Tribunal President Under Section 112(9) of GST Act
Second Appeal Allowed After Appointment of GST Appellate Tribunal President Under Section 112(9) of GST Act
The HC held that since the GST Appellate Tribunal in the State has been notified but its President or members are yet to be appointed, the petitioner may file a second appeal once the President or State President assumes office. Upon filing the appeal after the statutory deposit, the Authority must decide it strictly according to law. The statutory stay under Section 112(9) of the GST Act, 2017, will continue until the appeal is decided. The petition was disposed of accordingly.
Filing of second appeal before GST appellate tribunal - though the Tribunal has been notified in the State of Chhattisgarh, the president or the members have not yet been appointed - HELD THAT:- Particularly considering the order dated 03.12.2019 issued by the Central Board of Indirect Taxes and Customs and also considering the order dated 09.05.2024 passed by the Co-ordinate Bench in WPT No. 40/2023 and other connected matters [2024 (5) TMI 1549 - CHHATTISGARH HIGH COURT], this Court finds it appropriate to direct that as soon as the President or State President enters the office of Goods and Service Tax Appellate Tribunal constituted under the Act of 2017, the petitioner may invoke the aforesaid provision for filing an appeal after statutory deposit. On such appeal being filed, the concerned Authority shall decide the same strictly in accordance with law. The statutory stay as provided under Section 112 (9) of the Act 2017 would remain in operation till the decision of said appeal.
Petition disposed off.
AI TextQuick Glance (AI)Headnote
HC refuses writ petition against blocking of input tax credit under Rule 86A CGST Rules, citing need for factual inquiry
HC refuses writ petition against blocking of input tax credit under Rule 86A CGST Rules, citing need for factual inquiry
The HC declined to entertain the writ petition challenging the blocking of input tax credit under Rule 86A of the CGST Rules, 2017, emphasizing that such extraordinary relief requires objective evidence and careful evaluation. The court held that the issue of genuineness of invoices and eligibility of input tax credit is a factual matter for the adjudicating authority to determine, not suitable for judicial interference under Articles 226 and 227. The petitioner was directed to submit explanations to the competent authority, which must consider the same with an opportunity of hearing within four weeks. The petition was disposed of by remanding the matter for appropriate administrative adjudication.
Blocking of input tax credit under Rule 86A of the Central Goods and Services Tax Rules, 2017 / the Odisha Goods and Services Tax Rules, 2017 - non-existent suppliers - burden of proof - violation of principles of natural justice - HELD THAT:- Rule 36 of the CGST Rules warrants documentary proof for claiming input tax credit which are necessarily for the fact-finding adjudicating authority to verify and assess its sanctity on production of such documents for examination. Therefore, for the paucity of material on the record relating to writ petition to consider the genuineness of the invoices and waybills, correctness of entries in the books of account along with other relevant and related evidences, this Court desists from adjudicating the issue raised on factual merit by the petitioner, which is strongly opposed by the learned Standing Counsel.
Rule 86A mandates that the Commissioner, or an officer authorised by him, not below the rank of Assistant Commissioner, must have “reasons to believe” For elaborate illuminating discussion about the expression “reason to believe” reference can be had to State of U.P. Vrs. Aryaverth Chawal Udyog, [2014 (11) TMI 1095 - SUPREME COURT] that credit of input tax available in the electronic credit ledger is either ineligible or has been fraudulently availed by the registered person, before disallowing the debit of amount from electronic credit ledger of the said registered person under Rule 86A.
The remedy of disallowing debit of amount from electronic credit ledger being, by its very nature extraordinary has to be resorted to with utmost circumspection and with maximum care and caution. It contemplates an objective determination based on intelligent care and evaluation as distinguished from a purely subjective consideration of suspicion. The reasons are to be on the basis of material evidence available or gathered in relation to fraudulent availment of input tax credit or ineligible input tax credit availed as per the conditions/grounds under sub-rule (1) of Rule 86A.
Finding the present case in similitude with that of the above case where decision has been rendered in the context of allegation against the availing input tax credit that fact-finding on the nature of dispute set up by the Department can be subject-matter for adjudication by the statutory authority empowered in this behalf and thereafter, if need arises the same could be tested before the other statutory authorities in the hierarchy of adjucatory process.
Having found that it is not a fit case for exercise of extraordinary jurisdiction under Articles 226 and 227 of the Constitution of India, this Court refrains from entertaining the writ petition. Hence, it would be mete and appropriate, if the authority in seisin over the matter is directed to consider reply/explanation submitted by the petitioner vide Annexure-4 within a period of four weeks hence by affording opportunity of hearing to the petitioner - Petition disposed off by way of remand.
AI TextQuick Glance (AI)Headnote
No penalty for non-filing Part-B of e-way bill under GST Section 129(3) due to technical glitch without tax evasion intent
No penalty for non-filing Part-B of e-way bill under GST Section 129(3) due to technical glitch without tax evasion intent
The HC held that non-filing of Part-B of the e-way bill due to a technical glitch does not attract penalty under section 129(3) of the GST Act in the absence of any intent to evade tax. The Court relied on precedents establishing that mere non-filing without evasion intent is not penalizable. Since no authority recorded any finding of tax evasion and the petitioner's claim of technical error was undisputed, the penalty imposed was set aside and the petition allowed.
Levy of penalty u/s 129(3) of the GST Act - non-filling of Part -B of the e-way bill - intent to evade tax, present or not - HELD THAT:- The record shows that the stand of the petitioner was that due to technical glitch, Part - B of the e-way fill could not be filled, but there was no intention to evade payment of tax as well as none of the authorities below has recorded any finding with regard to intention to evade payment of tax.
The Division Bench of this Court in M/s Tata Hitachi Construction Machinery Company Private Limited [2025 (5) TMI 770 - ALLAHABAD HIGH COURT] has categorically held that non-filling of e-way bill will not attract penalty under section 129(3) of the GST Act. The same view has been reiterated by this Court in M/s Citykart Retail Private Limited [2022 (9) TMI 374 - ALLAHABAD HIGH COURT] and M/s Roli Enterprises [2024 (1) TMI 813 - ALLAHABAD HIGH COURT]. Further, the record reveals that due to technical error, Part - B of the e-way bill could not be filled, which has not been disputed at any stage.
In the light of the aforesaid facts, there was no intention of the petitioner to evade payment of tax, which would amount to levy of penalty under section 129(3) of the GST Act.
The impugned order is set aside - petition allowed.
AI TextQuick Glance (AI)Headnote
ITAT reduces bogus purchase addition using 2.73% profit rate under Income Tax rules, directs reassessment
ITAT reduces bogus purchase addition using 2.73% profit rate under Income Tax rules, directs reassessment
The ITAT Mumbai reduced the addition made by the AO on account of alleged bogus purchases by applying the assessee's average gross profit rate of 2.73% instead of the AO's 12.5%. The assessee had provided supporting documents which were not discredited by the AO. Following the Bombay HC precedent, the ITAT directed the AO to modify the assessment order accordingly. The appeal was allowed for statistical purposes and the matter was remanded for reassessment in line with these findings.
Estimation of income - bogus purchases - AO determined the gross profit rate at 12.5% - HELD THAT:- The assessee submitted a year-wise chart analyzing the gross profit for AY 2008-09 to 2012-13, which reflects an average gross profit rate of 2.73% in the assessee’s line of business.
Upon perusal of the impugned assessment order, we observe that the assessee had furnished all relevant documents in support of the purchases, and such evidence was not rejected by the Ld. AO.
Respectfully following the decision of M/s. Nikunj Exim Enterprises Pvt. Ltd. [2013 (1) TMI 88 - BOMBAY HIGH COURT] we restrict the addition to the extent of 2.73% gross profit rate on the alleged bogus purchases pertaining to the impugned assessment year. DR had not made any strong objection against the submission of the AR.
Accordingly, the matter is remanded to the file of the AO with a direction to modify the assessment order in light of the above observations and in accordance with law. Appeal of the assessee is allowed for statistical purpose.
AI TextQuick Glance (AI)Headnote
Penalty under Section 271C declared invalid as issued beyond six-month limit under Section 275(1)(c)
Penalty under Section 271C declared invalid as issued beyond six-month limit under Section 275(1)(c)
The ITAT Delhi held that the penalty order under section 271C was barred by limitation as it was passed beyond the six-month period prescribed under section 275(1)(c) from the date the AO referred the matter to the Addl. CIT. Since the penalty order was issued after this limitation period, it was declared invalid. Consequently, the appeals filed by the assessee were allowed, and the penalty order was quashed.
Penalty proceedings u/s 271C - period of limitation - order passed beyond the due date prescribed under the Act - HELD THAT:- We observe that the period of limitation for completion of penalty proceeding shall be calculated from the date of reference made by the AO to Addl.CIT. It is observed that the reference in the present case has been made by ACIT, Circle 76(1) on 10.10.2016 and as per the provision of section 275(1)(c), no order imposing of penalty under the provisions of the Act shall be passed beyond the six months from the end of the month in which action for imposition of penalty is initiated. Accordingly, we are of the considered opinion that since the order was passed beyond six months, the order is bad in law.
We observe that penalty order passed u/s 271C of the Act in the case of the assessee is barred by limitation as the same has been passed beyond the due date prescribed under the Act and accordingly, the appeals filed by the assessee are allowed by quashing the penalty order being barred by limitation - Assessee appeal allowed.
AI TextQuick Glance (AI)Headnote
Revenue's appeal dismissed for improper reassessment under Section 138B of Customs Act, no cross-examination allowed
ISSUES:
1. Whether the transaction value declared by importers can be rejected and enhanced uniformly across multiple imports of varying specifications, quantities, times, and countries of origin without contemporaneous evidence of higher values of identical or similar goods?
2. Whether statements recorded under Section 108 of the Customs Act, 1962, without examination and admission under Section 138B, and without allowing cross-examination, can be relied upon as evidence?
3. Whether the provisions of the Customs Valuation Rules, 1988/2007, particularly Rules 3, 4, and 5, were properly applied in re-determining the value of imported goods?
4. Whether the invocation of extended limitation period and imposition of confiscation, redemption fine, and penalties under Sections 112, 114A, and 114AA of the Customs Act is justified when goods have been cleared for home consumption?
RULINGS / HOLDINGS:
1. The Court held that rejection of transaction value based solely on enhancement of value in one past bill of entry, without evidence of contemporaneous imports of identical or similar goods at higher prices, is "unheard of in the annals of customs law and jurisprudence" and "irrational, illogical and thus objectionable." The Customs Valuation Rules, 2007 were not properly applied, and uniform enhancement across diverse imports is unjustified.
2. Statements recorded under Section 108 of the Customs Act, 1962, without adherence to Section 138B procedures-specifically, without examination of the declarants as witnesses before the adjudicating authority and without admission of statements in evidence-have "lost evidentiary value" and cannot be relied upon. Denial of cross-examination further renders such reliance illegal.
3. The Court reaffirmed that under Rule 4(1) of the Customs Valuation Rules, the "price actually paid or payable" for the particular transaction is to be accepted as the transaction value unless rejected for reasons enumerated in Rule 4(2), which require cogent reasons and supporting material. Reliance on vendor price lists or non-contemporaneous imports without proper evidence is insufficient to reject declared transaction value.
4. The Court held that when goods have been cleared for home consumption, they are not liable for confiscation under Section 2(25) of the Customs Act; accordingly, redemption fines and penalties under Sections 112, 114A, and 114AA cannot be imposed. Invocation of extended limitation period was not justified on the facts.
RATIONALE:
The Court applied the statutory framework under Section 14 of the Customs Act, 1962, and the Customs Valuation Rules, 1988/2007, emphasizing that the assessable value is the "deemed value" based on the "price actually paid or payable" for the imported goods unless specific exceptions apply under Rule 4(2). The Court relied on binding precedent from the Supreme Court and High Courts, including the detailed exposition in Sanjivani Non-Ferrous Trading Pvt. Ltd. and South India Television (P) Ltd., which clarify that rejection of declared transaction value requires evidence of contemporaneous imports at higher prices or other specified grounds.
Regarding evidentiary value of statements recorded during investigation, the Court underscored the mandatory procedural safeguards under Section 138B of the Customs Act (and analogous Section 9D of the Central Excise Act), requiring that such statements be recorded as evidence only after examination of the declarant as a witness before the adjudicating authority and admission in the interests of justice. This procedure protects against coerced confessions and ensures compliance with principles of natural justice, including the right to cross-examination.
The Court found that the adjudicating authority failed to comply with these mandatory procedures, thereby rendering reliance on such statements unlawful and undermining the Revenue's case.
No doctrinal shift was observed; rather, the Court reaffirmed established principles and stressed strict compliance with statutory valuation rules and procedural safeguards in customs adjudication.
Revenue's appeal dismissed for improper reassessment under Section 138B of Customs Act, no cross-examination allowed
The CESTAT Chandigarh dismissed the Revenue's appeal against the appellants concerning alleged under-valuation and mis-declaration of imported goods. The tribunal found no evidence to reject the declared transaction value, noting the Revenue's reliance on prior import values and statements not examined per Section 138B of the Customs Act, 1962, was improper. The failure to allow cross-examination further weakened the Revenue's case. Citing Supreme Court and Principal Bench precedents, the tribunal held that without cogent reasons and adherence to mandatory procedural safeguards under Section 138B, the reassessment of value was erroneous. Consequently, the impugned order of confiscation, redemption fine, and penalty was set aside, and the appeal was allowed.
Mis-declaration of imported goods - under-valuation of goods - enhancement of transaction value based on earlier imports - non-adherence to the provisions of Section 138B of the Customs Act, 1962 - Confiscation - redemption fine - penalty - HELD THAT:- It is found that Revenue has not provided any evidence regarding the prevalence of any value, of goods contemporaneously imported by other, so that the transaction value declared by the appellants could be rejected. Therefore, we find that the very rejection of transaction value is on a weak ground. It cannot be held that the goods are under-valued for the reason that the value of one variety of goods, imported by the appellant in the past, was enhanced by about 30%; this kind of reference price is unheard of in the annals of customs law and jurisprudence that evolved over the years. What is more irrational, illogical and thus objectionable and acceptable, is the attempt to fasten the value of a particular variety to a spectrum of items imported by the appellant - the value adopted cannot be a basis for rejection of value declared by the appellants over a period of time for all imports.
The adjudicating authority while relying on the statements of some persons, did not examine the statements under the rigours of Section 138B of the Customs Act, 1962. Once the adjudicating authority has not examined the persons in terms of Section 138B, the evidentiary value, of the statements recorded under Section 108 of the Customs Act, 1962, is lost. The adjudicating authority by not permitting the cross-examination of the persons, as requested by the appellants, has further compounded the loss of case for Revenue. The ship of investigation, show cause notice and the impugned order, not so carefully built, are bound to be wrecked by the deluge of case laws presented by the learned Counsel for the appellants. At the same time, it is not necessary to discuss each of the cases and their applicability. Thus, it would suffice, in the interest of justice, if a couple of them are considered.
Hon’ble Apex Court in the case of Sanjivani Non- Ferrous Trading Pvt. Ltd. [2018 (12) TMI 738 - SUPREME COURT] has gone into the issue of re-determination of the value of imported goods in an elaborate manner and Hon’ble Court held that 'The Tribunal has clearly mentioned that this declared price could be rejected only with cogent reasons by undertaking the exercise as to on what basis the Assessing Authority could hold that the paid price was not the sole consideration of the transaction value. Since there is no such exercise done by the Assessing Authority to reject the price declared in the Bills of Entry, Order-in-Original was, therefore, clearly erroneous.'
As regards the non-adherence to the provisions of Section 138B of the Customs Act, 1962, the Principal Bench of CESTAT in a recent judgment in the case of Surya Wires Pvt. Ltd. [2025 (4) TMI 441 - CESTAT NEW DELHI] has gone into the issue at length. Principal Bench held that 'The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act.'
The impugned order cannot be sustained and is liable to be rejected - Appeal allowed.
AI TextQuick Glance (AI)Headnote
Appellant Not an Intermediary Under Rule 2(f) of Place of Provision of Services Rules, Appeal Allowed
Appellant Not an Intermediary Under Rule 2(f) of Place of Provision of Services Rules, Appeal Allowed
The CESTAT Bangalore held that the appellant could not be classified as an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012, despite the agency agreement with its holding company. The Tribunal found no evidence that the appellant acted as an intermediary facilitating supply between multiple parties, as required. The cost-plus fee arrangement and contractual clauses did not establish intermediary services. Consequently, the demand based on this classification was unsustainable. Since the appeal succeeded on merits, the extended period of limitation issue was rendered irrelevant. The impugned order was set aside and the appeal allowed.
Classification of service - export of service or taxable service falling under the category of intermediary service under Rule 2(f) of the Place of Provision of Services Rules, 2012 - agency and distribution agreement entered into by the appellant with their holding company - extended period of limitation - HELD THAT:- Clause 3.3 states the appellant acting as commercial agent shall act as an intermediary for the sale of the products in the name and on account of Plansee and Clause 8.1 states if acting as a commercial agent, sales company shall act only in accordance with Plansee’s instructions. Relying on these two clauses of the agreement without dwelling into how actually the activities of the appellant can be treated as intermediary services has not been explained in the impugned order.
It is agreed that unless there is evidence to prove that the appellant has acted as an intermediary, the Clauses of the Agreement cannot be attracted to state that the appellant is an intermediary. Moreover, the consideration received by the appellant is on cost plus fee arrangement which has no bearing on the sale of goods by the holding company.
In the case of CCE vs. M/s. Informatica Business Solutions Pvt. Ltd. [2024 (11) TMI 922 - CESTAT BANGALORE], this Tribunal referring to various decisions observed that “the basic requirement to be an intermediary is that there should be atleast three parties; an intermediary is someone who arranges or facilitates the supply of goods or services or securities between two or more persons. In other words, there is main supply and the role of the intermediary is to arrange or facilitate another supply between to or more another person and does not himself provide the main supply.” Referring to the Board Circular relied upon by the Revenue, this Tribunal held that the intermediary services are not attracted in a case where an agreement is entered into for rendering, marketing and self-services as is the case in the present proceedings.
The agreement between the appellant and their holding company cannot justify that the appellant is an intermediary and hence, the demand on this ground cannot be sustained - Since the appeal succeeds on merits, the question of discussing invocation of extended period of limitation, does not arise - the impugned order is set aside.
Appeal allowed.
AI TextQuick Glance (AI)Headnote
CESTAT allows CENVAT credit on input services for renting immovable property under relevant rules
CESTAT allows CENVAT credit on input services for renting immovable property under relevant rules
The CESTAT Bangalore allowed the appellant's claim for CENVAT credit on various input services used in rendering renting of immovable property and construction services. The Tribunal relied on its earlier decision and the Karnataka HC's dismissal of the department's appeal, which upheld the entitlement to credit on inputs and input services utilized for construction related to output services like renting of immovable property. The appeal was allowed, affirming the appellant's eligibility to claim CENVAT credit.
Eligibility of the Appellant to claim CENVAT credit on various inputs services - Services like Architects Service, Banking service, Business support Service, Chartered Accountant service, Commercial or industrial construction service, Design service, Insurance service, Management consultant service and Real Estate Agent service., which were used for rendering service under Renting of Immovable Properties, commercial and industrial construction services, etc. - HELD THAT:- This issue is no longer res integra in as much as for the previous period, this Tribunal in [2018 (8) TMI 331 - CESTAT BANGALORE] allowed the appeal of the appellant by setting aside the impugned order.
An appeal filed by the department against this order of the Tribunal was set aside by the Hon’ble High Court of Karnataka in COMMISSIONER OF SERVICE TAX VERSUS M/S. GOLFLINKS SOFTWARE PARK PVT LTD. [2022 (12) TMI 472 - KARNATAKA HIGH COURT] wherein it was observed that 'After considering various authorities, the Tribunal has held that the assessee was entitled to CENVAT credit both on inputs and input services utilized for the construction to be utilized as output service being renting of immovable property.'
Appeal allowed.
AI TextQuick Glance (AI)Headnote
CESTAT Rules Only Common Input Credit Must Be Reversed Under Rule 6(3A), Penalty Set Aside
CESTAT Rules Only Common Input Credit Must Be Reversed Under Rule 6(3A), Penalty Set Aside
The CESTAT Chennai held that Secure Socket Layer Certification and Digital Signature Certificate services were exempt from 16-5-2008 to 30-6-2012, following precedent. Under Rule 6(3A) of the CCR, 2004, only common input services credit-not total CENVAT credit-must be proportionately reversed. The penalty imposed under Rule 15(1) read with Section 76 of the Finance Act, 1994, was set aside as the appellant's accounting practice was reasonable and the main issue was decided in their favor. The demand confirmed against the appellant was quashed, but the matter was remitted to the original authority for recomputation of the credit reversal under Rule 6(3A). The appeal was allowed by way of remand.
Interpretation of statute - Rule 6(3A) of the CENVAT Credit Rules, 2004 - proportionate reversal of CENVAT Credit on input services used in taxable as well as exempt services - Secure Socket Layer Certification (SSLC) and Digital Signature Certificate (DSC) Services are exempted or not - value of export services adopted by the Appellant for reversal of provisional credit - penalty imposed u/r 15(1) of CCR, 2004 read with Section 76 of the Finance Act 1994.
Whether the Secure Socket Layer Certification (SSLC) and Digital Signature Certificate (DSC) Services are exempted? - HELD THAT:- The above issue has been answered by the Chennai Tribunal in the Appellant’s own case in Sify Technologies Ltd. Versus Commissioner of C.EX. & S.T., LTU, Chennai [2018 (6) TMI 644 - CESTAT CHENNAI] wherein it was held that Secure Socket Layer Certification (SSLC) and Digital Signature Certificate (DSC) Services stood exempted for the period from 16-5-2008 onwards till 30-6-2012 covering the period in dispute and in compliance with the judicial discipline the same is necessarily to be followed. Therefore, the issue is answered against the revenue.
Whether under Rule 6 (3A) of the CCR, 2004, total CENVAT credit should be subjected to proportionate reversal or only the common input services credit? - HELD THAT:- The Tribunal in the case of Reliance Industries Ltd. [2019 (3) TMI 784 - CESTAT AHMEDABAD] Ahmedabad had considered the issue as to interpreting the term "total CENVAT credit" given in the formula. It was held that whole Rule 6 (1) (2) (3) has to be read harmoniously and conjointly and it would be clear that total CENVAT credit for the purpose of formula under Rule 6 (3A) is only the total CENVAT credit on common input services and will not include CENVAT credit on input/input services exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, it would result in an anomaly that the CENVAT credit which is availed for manufacture of dutiable goods also will get disallowed.
From the case law discussed, and also by the amendment of the Rule 6(3A) of CCR 2004 wef 1.4.2016 retrospectively as per clarification issued in TRU Circular 334/8/2016-TRU dated 29.02.2016, it is concluded that the common credit is only to be considered for reversal of credit under Rule 6(3A) and not Total credit availed by the Appellant - the main issue is answered squarely in favor of the Appellant and against the Revenue.
Whether penalty imposed under Rule 15(1) of CCR, 2004 read with Section 76 of the Finance Act 1994 is justified? - HELD THAT:- The Respondent vide Impugned Order in Original Number LTUC/331/2013 dated 26.09.2013 has confirmed the demand along with interest, appropriated the amount provisionally reversed by them under Rule 6(3A) and imposed penalty of Rs.10,00,000/- under Section 76 of the Act. Whatever the practice of accounting adopted by the Appellant cannot be faulted with as he was not availing any input service credit in those SBUs which are involved in trading or exempted services. The services of those SBUs dealing in Finance, Corporate, Administrations and Human Resources Department are common to all other SBUs necessitating reversal of common Cenvat credit of these SBUs. Further, as the main issue is thus settled in favor of the Appellant and as such there is no justification for imposing any penalty. It is ordered to set aside the penalty.
The demand confirmed against the appellant cannot sustain and hence, ordered to be set aside. However, there is a need to recompute the amount of credit to be reversed in terms of provisions of Rule 6(3A) of the CENVAT Credit Rules, 2004 - the matter is remitted back to the Original Adjudicating Authority for re-computation of the amount of common credit and the credit to be reversed under the Rule 6(3A) of the CCR, 2004.
Appeal allowed by way of remand.
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Time Limit for Filing Refund Claims of Unutilized Input Service Credit Starts from Quarter-End Date Under Section 11B
Time Limit for Filing Refund Claims of Unutilized Input Service Credit Starts from Quarter-End Date Under Section 11B
CESTAT Chennai upheld that the time limit for filing refund claims of unutilized input service credit under Section 11B of the Central Excise Act, as applied to service tax via Section 83 of the Finance Act, should be calculated from the end of the quarter in which the FIRC is received, not from the date of payment receipt. This aligns with the Larger Bench ruling in CESTAT Bangalore, which clarified that for export of services, refund claims filed quarterly are timely if made within the prescribed period from the quarter-end date. The tribunal allowed the appeal, ruling in favor of the appellant and rejecting the limitation objection.
Refund claim of unutilized credit of input services - time limitation - rejection of limitation of time prescribed u/s 11B of the Central Excise Act, 1944 made applicable to service tax matters as per Section 83 of the Finance Act, 1944 - HELD THAT:- It is seen that a Larger Bench of this Tribunal reported in C.C.E, Cus. & S.T., Bengaluru v. Span Infotech (India) Pvt. Ltd, [2018 (2) TMI 946 - CESTAT BANGALORE - LB] has examined and answered the question whether the time limit prescribed under Section 11B in respect of filing of refund claims is to be applied from the date of receipt of payment for export of services or can be considered from the end of the quarter in which such payments have been received.
Since the Larger Bench of this Tribunal has held that “in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis.”, it is found that the dispute in law in this matter is squarely settled in the appellant’s favour.
Appeal allowed.
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Transfer of Development Rights Seen as Sale, Not Rent; CRCS Taxable with Abatement Under Notification 29/2010
Transfer of Development Rights Seen as Sale, Not Rent; CRCS Taxable with Abatement Under Notification 29/2010
The CESTAT held that the transfer of development rights and lump sum premium for commercial/vacant land constituted a lease akin to sale and was not taxable as renting of immovable property. The appellant was liable to pay service tax on Construction of Residential Complex Service (CRCS) but was entitled to abatement under Notification No. 29/2010, as no violation was proven and reversed CENVAT credit was acknowledged. Interest received on delayed payments was held not taxable as it amounted to liquidated damages. Supply of water by the government authority was deemed a sovereign function and not subject to service tax. The demand was set aside except for the CRCS activity, where the appellant's liability stood confirmed with abatement benefits allowed. The appeal was allowed in part.
Levy of service tax - renting of immovable property services for the period upto 30.06.2012 and under Section 66E read with 65B (44) for the period post 01.07.2012 - transfer of development right - lump sum premium and transfer fee received in respect of commercial/vacant land - Construction of residential complex service (CRCS) on lump sum premium and transfer fee received in respect of residential land and sale of superstructure constructed thereon - Interest received under CRCS (01.04.2010 to 31.03.2013) - Supply of water under management, maintenance or repair services (MMR) - Denial of CENVAT credit availed and utilized included in availed amount.
Levy of service tax - renting of immovable property services for the period upto 30.06.2012 and under Section 66E read with 65B (44) for the period post 01.07.2012 - lump sum premium and transfer fee received in respect of commercial/vacant land - HELD THAT:- The demand of this issued is based upon a agreement dated 11.11.2005 as was entered between the appellant and M/s. GIPL for development of City Centre Mall on the land which was otherwise owned by the appellant. However, on the basis of own ownership and transfer (BOOT Policy). The said project was sanctioned by Chhattisgarh Government vide letter dated No. 1950/1452/32/2005 dated 13.07.2005. Undisputedly the appellant was appointed as the body responsible for urban planning including town planning, one of the sovereign function but department has alleged that the act of the appellant vide the said agreement is meant to have a personal commercial motive of RDA and that the activity is taxable. Krishi Upaj Mandi Samiti (supra) has already held that personal commercial motive even of government authority vis-à-vis service is also taxable. Hence, we need to look into whether the act of transferring the land on lease to the appellant for a period of 30 years extendable to 90 years against the one time premium giving all rights of use, possession and even sale to the developer amounts to fall under the definition of service for the period w.e.f. 01.07.2012 or under the definition of renting of immovable property till the period 30.06.2012. Finance Act, 2012 w.e.f. 01.07.2012 has defined the term 'service' under Section 65B (44) of Finance Act, 1994.
Once the possession of property is transferred to the developer against the payment of share of sale consideration for the development/construction on the said immovable property, the transaction is also that of the transfer to immovable property.
The land in question as given by RDA to the developer was initially a vacant land which was sanctioned to be developed by the developer under a government notification. As already held above, the transaction agreed under agreement dated 11.11.2005 was not purely an act as covered under the aforesaid definition. It was an act of leasing out the land permanently for a longer period as that of 90 years against the one time payment. Irrespective that an annual ground rent was received but the lessee was allowed to retain the possession with all control on the immovable property. The transaction is one similar to sale as defined under Arcticle 366 (29A)(d) of the Constitution of India incorporated vide 46th amendment. The activity therefore cannot fall under the definition of renting of immovable property even for the prior period.
Construction of residential complex service (CRCS) on lump sum premium and transfer fee received in respect of residential land and sale of superstructure constructed thereon - HELD THAT:- There is a Chartered Accountant Certificate produced by the appellant certifying that the appellant while discharging the service tax liability under Construction of Residential Complex Service has included the value towards the sale of super structure and the lease premium which is the cost of land/amount of consideration for sale of land - No evidence is produced by the department that any of the said four conditions as mentioned in N/N. 29/2010 dated 22.06.2010 have been violated by the appellant. It is also apparent on record that the appellant earlier availed the Cenvat credit, however the same already stands reversed. It is settled that Cenvat credit, till it is not utilized it is as good as it it is not availed. Resultantly, though the appellant is liable to pay service tax with respect of the CRCS activity, however as per the abatement under Notification No. 29/2010 dated 22.06.2010.
Interest received under CRCS (01.04.2010 to 31.03.2013) - HELD THAT:- The appellant had received the interest from the buyers of residential units in cases where there was deferment of payment of sale considerations. This apparent fact is sufficient for us to hold that the amount of interest is actually in the nature of penal consequences of delayed payment. It is as good as liquidated damages which have already been held to not to be includable into the gross taxable value. The Circular No. 96/7/2007 dated 23.08.2007 states that the amount collected for delayed payment of bill is not to be treated as consideration charged for the provision of taxable service and resultantly will not form part of the value of taxable service under Section 67 read with Service Tax (Determination of Value) Rules, 2006. Support drawn from the decision of this Tribunal in the case of AP Trade Promotion Corporation Vs. Commissioner of Central Excise, Hyderabad [2009 (9) TMI 94 - CESTAT, BANGALORE].
Supply of water under management, maintenance or repair services (MMR) - HELD THAT:- From the meaning of government authority as discussed above, supply of water by a government authority is a sovereign function. Also from the definition of service as discussed above, it is clear that discharging a sovereign function cannot be called as the provision of services. Otherwise also, as pointed out on behalf of the appellant that Chhattisgarh State Act, 2003 in its Schedule I while talking about tax free goods has specifically covered water in its ambit. Once water is as good as a good supply thereof is an act of transfer of goods which is subject to VAT and not to service tax.
Denial of CENVAT credit availed and utilized included in availed amount - HELD THAT:- There is no denial nor any evidence to the contrary to the fact that the Cenvat credit as was availed by the appellant stands already reversed. On this basis appellant is already held entitled for the benefit of abatement under Notification No. 29/2010 dated 22.06.2010. Hence there remains no need to give any findings for the eligibility of input services based where upon the Cenvat credit was availed.
The entire demand confirmed vide impugned OI- O except that appellant is held liable to pay service tax w.r.t activity of Construction of Residential Complex set aside. However, appellant is held eligible for abatement benefit of Notification No. 29/2010 - appeal allowed in part.
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High Court sets aside order for ignoring stone dust issue under Section 31 of U.P. VAT Act, remits for fresh hearing
High Court sets aside order for ignoring stone dust issue under Section 31 of U.P. VAT Act, remits for fresh hearing
The HC set aside the Commercial Tax Tribunal's order dated 14.08.2024 for failing to address the issue of stone dust under Section 31 of the U.P. VAT Act, 2007. The case was remitted to the Tribunal for fresh consideration and recording of findings specifically on stone dust within two months, following proper hearing of the assessee. The revision was allowed in part.
Rectification of mistake - error apparent on the face of record or not - Section 31 of U.P. VAT Act, 2007 - HELD THAT:- From perusal of the order passed by the Tribunal, it transpires that it has dealt with the question of imposition of tax on royalty as far as solemstones is concerned, and also in right to use i.e. use of truck to transport the stone, but no finding has been recorded as to the stone dust, while specific plea was taken under Section 31. It is found that the Tribunal should have recorded its finding as far as stone dust is concerned.
In view of the said fact, order dated 14.08.2024 passed by the Commercial Tax Tribunal, Jhansi is set aside.
The matter is remitted back to the Commercial Tax Tribunal, Jhansi to decide the matter afresh under Section 31 of the Act, and record its finding on the ground so raised in the said application within a period of two months from the date of production of certified copy of this order, strictly in accordance with law, after hearing the assessee - revision allowed in part.
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Payment under Section 129(5) CGST Act doesn't replace need for final, reasoned order under Section 129(3)
Payment under Section 129(5) CGST Act doesn't replace need for final, reasoned order under Section 129(3)
The SC held that payment of tax and penalty under section 129(5) of the CGST Act does not dispense with the requirement for the proper officer to pass a final, reasoned order under section 129(3). Where objections are filed and payment is made under protest, the adjudicating authority must issue a speaking order to conclude proceedings and enable the taxpayer's right of appeal under section 107. The absence of such an order deprives the taxpayer of a statutory remedy and renders any tax or penalty demand without legal authority, violating Article 265. The HC's refusal to direct passing of a final order was set aside. The SC directed the proper officer to pass a reasoned order in Form GST MOV-09, provide an opportunity of hearing, and upload the summary in Form GST DRC-07 within one month. The appeal was allowed.
Requirement of proper officer to pass a final order under section 129(3) of CGST Act or deeming fiction under section 129(5) dispenses with such requirement - Though detained goods were released under Form GST MOV-05, final order was not passed - payment of tax and penalty done by the appellant within the time stipulated in the notice u/s 129(3) - HELD THAT:- Evidently, the discharge order merely records that the detained goods and vehicle were released upon payment of the proposed tax and penalty. It makes no mention of any withdrawal of objections or of the conclusion of proceedings initiated under Section 129(3) of the CGST Act, 2017 - It is a well settled principle that every show cause notice must culminate in a final, reasoned order. While Section 129(5) of the CGST Act, 2017 provides that proceedings shall be deemed to be concluded upon payment of tax and penalty, this deeming fiction cannot be interpreted to imply that the assessee has agreed to waive or abandon the right to challenge the levy – a right that is protected by the very enactment itself. The term “conclusion” as used in Section 129(5) merely signifies that no further proceedings for prosecution will be initiated. It does not absolve the responsibility of the proper officer to pass an order concluding the proceedings. Therefore, the proper officer is duty-bound to pass a formal order in Form GST MOV-09 and upload a summary thereof in Form GST DRT 07 as mandated under Rule 142(5) and the Circular dated 13.04.2018, so as to enable the taxpayer to avail the appeal remedy as per law.
In the present case, payment was made under protest, and objections had already been filed by the appellant. Once objections are filed, adjudication is not optional, it becomes imperative to pass a speaking order to justify the demand of tax and penalty, to safeguard the right of appeal under Section 107 of the CGST Act, 2017. The language of section 129(3) is categorical in stating that the officer “shall issue a notice… and thereafter, pass an order”. The use of the words “and thereafter” reinforces the mandatory nature of passing a reasoned order, regardless of payment, particularly where protest or dispute is raised.
A waiver, as settled, is an abandonment of a right by express terms or by implication. It is an act by which a party elects to abandon his right to pursue a particular remedy with full knowledge of its existence, making the other party to alter his position or legal status. Acquiescence, on the other hand, will imply the conduct of a party, who refrains from taking any action for a long period of time, despite the knowledge of the violation of his right, thereby precluding his future right to agitate the issue, as it would be hit by laches.
The principles of natural justice mandate that when a taxpayer submits a response to a show cause notice, the adjudicating authority is required to consider such response and render a reasoned, speaking order. This is not a mere procedural formality, but a substantive safeguard ensuring fairness in quasi- judicial proceedings. The right to appeal under Section 107 of the CGST Act, 2017, is predicated upon the existence of a formal adjudication. An appeal can lie only against an ‘order’, and in the absence of a reasoned order passed under Section 129(3) of the Act, the taxpayer is effectively deprived of the statutory remedy of appeal -
Any consequential action including imposition of tax or penalty, would then be unsupported by authority of law, thereby potentially violating Article 265 of the Constitution of India, which prohibits the levy or collection of tax except by authority of law.
Thus, taking into account that objections were filed, payment was stated to have been made under protest due to business exigencies, and the appellant seeks to challenge the levy, the proper officer was under a clear statutory obligation to pass a final order under section 129(3) in Form GST MOV-09 and DRC-07. The refusal by the High Court to direct the passing of such an order, has the effect of frustrating the appellant’s statutory right to appeal and is contrary to well established legal principles governing tax adjudication and procedural fairness.
The impugned order passed by the High Court is set aside. Respondent No.3 is directed to pass a reasoned final order under section 129(3) of the CGST Act, 2017, in Form GST MOV-09, after granting an opportunity of being heard as mandated under Section 129(4), and upload the summary thereof in Form GST DRC-07 within a period of one month from the date of receipt of a copy of this judgment - Appeal allowed.
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Anti-dumping duty on aluminum alloy wheels from China set aside due to lack of evidence and proper assessment
Anti-dumping duty on aluminum alloy wheels from China set aside due to lack of evidence and proper assessment
The CESTAT Mumbai allowed the appeal, setting aside the order imposing anti-dumping duty on aluminum alloy wheels imported from China. The tribunal found no evidence that the appellant mis-declared the country of origin or evaded anti-dumping duty on 30 bills of entry under investigation. The record did not show imports from the suspected Taiwanese company, and the certificate of origin suspected to be forged pertained to a different transshipment unrelated to the appellant. Additionally, the assessments on the goods were finalized within the limitation period, with no reassessment done. Consequently, the goods did not attract anti-dumping duty, and the appellant's appeal was allowed.
Levy of Anti-dumping duty - aluminum alloy wheels imported from China on provisional basis - mis-declaration of country of origin - HELD THAT:- During the relevant period, goods such as aluminum alloy wheels imported from China were attracting anti-dumping duty. The investigation started with an intelligence that appellant was mis-declaring the country of origin and evading anti-dumping duty. Therefore, on looking for evidence that was put forth by the Revenue to establish that in respect of 30 bills of entry in respect of which investigation took place whether there was any mis-declaration of country of origin and whether the goods were imported from China or goods were manufactured or supplied by China and were routed through Taiwan.
The record does not indicate any import dealt with in this appeal by appellant from Fortune Rainbow Co. Ltd, Taiwan. Therefore, it is clear that though the certificate of origin number of import at serial no. 30 of said table annexed to show cause notice matches with the certificate of origin which is suspected to be forged but the same certificate of origin number matches with another transshipment which relates to Fortune Rainbow company limited, Taiwan from whom the appellants have not imported any of the said 30 consignments. Further, while filing additional written submissions, the appellant has submitted that the assessment of the goods to duty was completed and no re-assessment was done in respect of said bill of entry including at serial no. 30 of list of bills of entry was done by proper officer resorting to Sub-section 4 of Section 17 of Customs Act, 1962 thereby after the period of limitation the assessment has become final. By taking the said evidences and facts available on record, there are no evidence to establish that in respect of the said 30 bills of entry there was any evidence to establish that the said goods were either manufactured or supplied from China or were routed through Taiwan after being supplied from China.
The goods under consideration did not attract anti-dumping duty - the impugned order is set aside - appeal allowed.
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Section 9 Application Rejected Due to Pre-Existing Dispute Under Section 8 of the IBC
Section 9 Application Rejected Due to Pre-Existing Dispute Under Section 8 of the IBC
The NCLAT upheld the rejection of the Section 9 application, affirming that the termination of the contract constituted a pre-existing dispute under Section 8 of the IBC. The Corporate Debtor had timely communicated the dispute within 10 days of the Demand Notice, citing illegal and unilateral contract termination. The Adjudicating Authority correctly found that the dispute was genuine and not a fabricated defense, relying on communications confirming the production of contracted material and ongoing discussions. The tribunal emphasized that the IBC is not a recovery mechanism but a remedy for insolvency resolution. Consequently, the appeal was dismissed for lacking merit, affirming the Adjudicating Authority's decision to reject the Section 9 application.
Rejection of Section 9 application filed by the Appellant - correctness in treating the termination of contract as a pre-existing dispute - HELD THAT:- A plain reading of Section 8 of the IBC shows that the Operational Creditor, on occurrence of a default by the Corporate Debtor, is required to deliver a Demand Notice in respect of the outstanding operational debt. Section 8(2) lays down that the Corporate Debtor within a period of 10 days of the receipt of the Demand Notice would have to bring to the notice of the Operational Creditor, the existence of dispute, if any.
The existence of dispute and communication of such a dispute to the Operational Creditor is statutorily provided for in Section 8. It is an undisputed fact that in the present matter the Operational Creditor had issued a Demand Notice on 15.05.2020 following which the Corporate Debtor had sent a Notice of Dispute on 20.05.2020 highlighting inter alia the dispute surrounding the “illegal and unilateral contract termination”. We also notice that the Corporate Debtor did not return the advance payment to the Operational Creditor by contending that the demanded amount was “not payable legally”. The Appellant thereafter filed the Section 9 application before the Adjudicating Authority which has been rejected on grounds of pre-existing dispute.
It is noticed that the Corporate Debtor has made a categorical statement at Sl. No. 6 on 20.03.2020 that the contracted material had already been produced and that they had kept the stock in their warehouse to ship it for exports when the ban is lifted. The bonafide of the Corporate Debtor is also manifested from a statement made by them in the same message that they were trying to lift this embargo. It is equally noteworthy that the Operational Creditor in these messages did not controvert or raise any doubts on the claim made by the Corporate Debtor that they had already produced the contracted material. Instead it appears that implicitly they had accepted that the goods had been produced as they requested the Corporate Debtor to keep the material ready for dispatch on 23.03.2020 besides assuring to update the Corporate Debtor on the future course of action as is seen at messages at Sl. No. 7 and 9. Neither has any document or material put on record by the Appellant to show that they had offered any clarity on the cargo despatch. Given this backdrop of e-mails and WhatsApp messages we are therefore of the considered view that the reliance placed by the Adjudicating Authority on the aforementioned communications to conclude that the Corporate Debtor had already produced the contracted material was not premised on wrong assumptions.
It is well settled that in a Section 9 matter, the Adjudicating Authority is only to take notice that a dispute was in existence prior to issue of Section 8 Demand Notice but is not required to enter into final adjudication with regard to existence of dispute. All that is required to be seen is whether the defence taken by the Corporate Debtor raises a dispute which needs further adjudication by the competent court and that the defence taken is not orchestrated or a moonshine defence unsupported by evidence - Keeping in view that the time span being only about 45 days from the date of cancellation of the contract on 01.04.2020 to the issue of Demand Notice on 15.05.2020, we are of the view that raising the ground of cancellation of contract as a pre-existing dispute in the Notice of Dispute of 20.05.2020 suffices for the purpose of Section 9(5)(ii)(d) of IBC. The Adjudicating Authority did not commit any error in taking cognisance of the termination of the contract as ground of pre-existing dispute. The reliance placed on the principles of Mobilox judgment supra by the Adjudicating Authority is therefore found to be in order.
IBC is a remedy of last resort intended for resolution of genuine insolvency and not for recovery proceedings. The present is not a case where there is any insolvency resolution of the Corporate Debtor. We are thus of the view that the Adjudicating Authority has rightly rejected the Section 9 application filed by the Appellant which warrants no interference in this Appeal.
The Appeal being devoid of merit is dismissed.
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Writ Court Can Hear Cases Despite Alternate Remedies If Natural Justice Violated Under CBIC Guidelines
Writ Court Can Hear Cases Despite Alternate Remedies If Natural Justice Violated Under CBIC Guidelines
The HC allowed the appeal, holding that the writ court could exercise jurisdiction despite the availability of an alternate remedy, as the State Tax Authority acted in violation of natural justice and contrary to CBIC guidelines. The impugned order relied solely on the Central Tax Authority's verification report without providing the petitioner an opportunity to object or be heard, rendering the order procedurally improper. The court directed the State Tax Authority to treat the verification report as information, furnish it to the petitioner, invite objections, seek comments from the Central Tax Authority on those objections, and conduct a personal hearing before passing a reasoned order. The earlier order was quashed for non-compliance with the prescribed procedure and principles of natural justice.
Maintainability of petition - learned Single Bench non-suited the appellant on the ground of availability of alternate remedy before the Appellate authority - Inadmissible transitional credit claimed by the writ petitioner - HELD THAT:- It is settled legal principle that existence of an alternate remedy is not always a bar for the Constitutional Courts to exercise jurisdiction under Article 226 of the Constitution and the Hon’ble Supreme Court has carved out certain exceptions, - one of which is when the authority has acted without jurisdiction and the other is when the order is passed in violation of principles of natural justice etc. If the fact of the case on hand is tested on the anvil of these exceptions and if the case falls under any one of the exceptions, the Writ Court can exercise jurisdiction. The transitional credit claimed by the writ petitioner has been denied by the State Tax Authority wholly relying upon the Verification Report submitted by the Central Tax Authority dated 20th February, 2023, sent vide e-mail dated 21st February, 2023, setting out certain reasons for denying transitional credit to the appellant. The procedure which has to be followed in such cases has been laid down by issuance of a circular/guideline by the Central Board of Indirect Taxes and Customs dated 10th November, 2022.
On reading of the order impugned in the writ petition dated 27th February, 2023, we find State Tax Authority was of the opinion that he is bound by the opinion expressed in the verification report of the Central Tax Authority. The guideline framed by the Central Board of Indirect Taxes and Customs speaks otherwise. If such interpretation is not given then clause 5.3.7 of the guideline would become redundant and this obviously is not the purpose for issuing of guideline. Therefore, the State Tax Authority should consider the verification report as of the Central Tax Authority as an information, furnish copy thereof to the dealer/RTP, invite their objections and request for comments to be furnished by the Central Tax Authority on the objections raised by the RTP and thereafter afford an opportunity of personal hearing to the RTP and then take a decision by passing a reasoned order.
The order passed by the Deputy Commissioner of Revenue, Salt Lake Charge dated 27th February, 2023, has to be held to be in violation of principle of natural justice and not in accordance with the policy guideline framed by the Central Board. Therefore, the same calls for interference and the Writ Court is well within its jurisdiction to exercise its powers - Appeal allowed.
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Ex-parte assessment order set aside for violating natural justice; petitioner to get personal hearing under Section 10A
Ex-parte assessment order set aside for violating natural justice; petitioner to get personal hearing under Section 10A
The HC set aside the ex-parte assessment order due to violation of natural justice, as the petitioner was not properly served with a notice of personal hearing. The petitioner was deprived of the opportunity to be heard since the notice was only placed under "Additional Notices and Orders." The court directed that the petitioner be granted a chance to file a show cause and appear for a personal hearing before the Respondent Authorities within three weeks. The application was allowed accordingly.
Violation of principles of natural justice - seeking quashing of ex-parte assessment order without passing a reasoned and detailed order - HELD THAT:- In this case, there being no contest to the statement of the petitioner made in paragraph ‘16’ of the writ application that the notice of personal hearing was not served upon the petitioner by any other mode except by way of placing the same under the heading ‘Additional Notices and Orders’ and for that reason, the petitioner has been deprived of a valuable opportunity of hearing, this Court is of the considered opinion that the impugned orders be set aside and an opportunity to file show cause and personal hearing be granted to the petitioner to appear before the Respondent Authorities and make his submissions.
This Court sets aside the impugned orders. The petitioner shall appear through his authorized representative/lawyer, as the case may be, within three weeks from today i.e. on or before 13th August, 2025 - Application allowed.
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Sanction Valid Under Income Tax Act Sections 276C(1) and 277A; Prosecution Can Proceed Despite Pending Assessment
Sanction Valid Under Income Tax Act Sections 276C(1) and 277A; Prosecution Can Proceed Despite Pending Assessment
The HC dismissed the petition challenging the prosecution under Sections 276C(1) and 277A of the Income Tax Act. It held that the sanction for prosecution granted by the Principal Director (Inv.)-I was valid, as "Commissioner" includes Directors under the Act. The filing of the complaint by the Deputy Director of Income Tax (Inv.) was not premature or unauthorized, and objections regarding jurisdiction could be raised later. The sanction order was not vague, as it clearly pertained to Section 276C(1). The pendency of assessment proceedings did not bar criminal prosecution. The petitioner's claim that the application for discharge was not considered was unsubstantiated. Overall, the court found no merit in the petition and upheld the continuation of the prosecution.
Criminal claim u/s 276C(1) and 277A of Income Tax Act, 1961 - willful intent to enable the beneficiaries to evade tax chargeable - competent office to sanction for prosecution granted
As claimed in the Complaint that the accused had generated huge unaccounted income by way of commission in unaccounted cash from various beneficiaries for providing accommodation entries to them - beneficiaries admitted that they had taken Accommodation Entries of various amounts mentioned in their respective Accounts in different names, from the Petitioner
First contention raised by Petitioner is that Sanction has been granted by the Principal Director (Inv.)-I for launch of Prosecution, when in fact Section 279(1) of the Act authorizes only Principal Commissioner or Commissioner or Commissioner (Appeals) as the appropriate Authority within the meaning of Section 279-C UA - HELD THAT:- As per Section 2(16) of the Act which defines Commissioner and Section 116 gives the list of Income-tax Authorities we make it clear that Commissioner means and includes the Director and Principal Director of Income Tax.
In the case of Dr. Nalini Mahajan [2002 (5) TMI 29 - DELHI HIGH COURT] on which reliance has been placed by the Petitioner has been rightly distinguished as the question for consideration in the said case was whether Additional Director can exercise the powers of Director under Section 132 was in the context of Authority for search under Section 132(1) Income Tax Act and not to the grant of Sanction for the prosecution.
As rightly observed by the ACMM that the Sanction has been granted by the Competent Authority, though it is under the different nomenclature. This ground of challenge has been rightly rejected by the learned ACMM and upheld by the learned ASJ in the Revisional Order.
Criminal Complaint has been filed by the Deputy Director of Income Tax (Inv.) who had no jurisdiction to do so - Complaint can be filed by any Officer who may be notified by the Principal Director General in this regard. To say at this stage that the Deputy Director had no authority to file the Complaint, is premature and no such inference can be drawn that the Complaint has been filed by a person not duly authorised. However, the Petitioner shall be at liberty to raise this objection at the appropriate stage.
Sanction Order is vague in so much as it does not specify if the Sanction has been granted under Section 276-C(1) of 276 (2) - This argument has been made without referring to the Sanction Order wherein the Sub Section (1) of Section 276 has been reproduced for considering whether the Sanction is mandated. The very fact that the entire Section 276 (1) has been reproduced and thereafter, Sanction granted clearly implies that the Sanction is under Section 276 (1) Income Tax Act. The argument on the Sanction being without application of mind or vague is not tenable on record.
Complaint is premature as the Assessment of the income for the Financial Year 2015-16 was yet to be finalized - In the case of P. Jayappan vs. S.K. Perumal, First Income Tax Officer [1984 (8) TMI 1 - SUPREME COURT] held that pendency of re-assessment proceedings cannot act as a bar to the institution of criminal prosecution for the offences u/s 276-C or Section 277 Income Tax Act. The proceedings conducted under Section 153(A) by the Assessing Officer are different and do not pertain to the jurisdiction of the Investigating Unit for the purpose of investigations.This contention also, therefore, is not tenable.
Petitioner is aggrieved by the fact that his Application for discharge has not been considered even when writing an Order on Charge. However, there is nothing to show that in the Application for Discharge any other grounds other than those which have been considered while passing an Order on Charge, was raised. Therefore, this argument also does not come to the benefit of the Petitioner.
In the light of aforesaid discussion, it is held that there is no merit in the Petitions which are hereby, dismissed.