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2023 (11) TMI 899 - MADRAS HIGH COURT Service Tax

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Issues: (i) whether the time prescribed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for payment of the quantified amount was directory and capable of extension in the facts of the case; (ii) whether the rejection of the petitioner's representation and the refusal to issue Form SVLDRS-4 were sustainable.

Issue (i): whether the time prescribed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for payment of the quantified amount was directory and capable of extension in the facts of the case.

Analysis: The Scheme was introduced under the Finance (No. 2) Act, 2019 and the Central Government was empowered to prescribe and extend the time limits for availing the Scheme and making payment through notifications. The time for making payment had been extended from time to time, including during the COVID-19 pandemic. In the circumstances, the Court treated the time prescription for payment as directory rather than mandatory, particularly where the petitioner had already availed the Scheme, the declaration had been accepted, and payment was ultimately made pursuant to an earlier court order.

Conclusion: The time limit for payment was held to be directory and capable of being acted upon in the petitioner's favour.

Issue (ii): whether the rejection of the petitioner's representation and the refusal to issue Form SVLDRS-4 were sustainable.

Analysis: The petitioner had complied with the earlier judicial direction by remitting the quantified amount with interest, and the subsequent representation was required to be considered in that light. The Court found that the impugned rejection was contrary to its earlier orders and that the respondent ought to have accepted the payment under the Scheme and issued the discharge certificate. The refusal to issue Form SVLDRS-4 was therefore unjustified.

Conclusion: The rejection order was set aside and the petitioner was held entitled to issuance of Form SVLDRS-4.

Final Conclusion: The petitioner succeeded in securing acceptance of the declaration under the legacy dispute resolution scheme, and the respondents were bound to treat the payment as valid for discharge of the service tax liability.

Ratio Decidendi: Where the statutory scheme empowers the Government to extend the time for payment and the declarant has substantially complied pursuant to judicial directions, the payment timeline may be treated as directory and the discharge certificate cannot be denied on a rigid technical view of delay.

Directory payment timeline under Sabka Vishwas scheme; discharge certificate could not be denied after compliant payment.
Time prescribed under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for payment of the quantified amount was treated as directory because the scheme empowered extension of timelines by notification and the period had in fact been extended, including during the pandemic. As the declarant had already been accepted under the scheme and later remitted the amount pursuant to judicial direction, rigid insistence on the original deadline was held unjustified. The rejection of the representation and refusal to issue Form SVLDRS-4 were set aside, and the authorities were directed to treat the payment as valid and issue the discharge certificate.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - extension of time for payment under SVLDRS - directory vs mandatory nature of statutory time limits - effect of compliance with court order on acceptance under SVLDRS - issuance of Form SVLDRS-4 (discharge certificate) - lapse of declaration for non-payment Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - effect of compliance with court order on acceptance under SVLDRS - issuance of Form SVLDRS-4 (discharge certificate) - lapse of declaration for non-payment - Whether the respondents could reject the petitioner's representation and refuse issuance of Form SVLDRS-4 after the petitioner paid the quantified amount and interest pursuant to this Court's orders - HELD THAT: - The Court found that the petitioner had filed and obtained acceptance under the SVLDR Scheme and Form SVLDRS-3 was issued. Although payment was made after the original due date, it was made pursuant to this Court's directions (orders dated 21.06.2021 and 29.06.2021). The respondents did not challenge those orders before the trial Judge and thereafter rejected the petitioner's representation by the impugned order dated 27.08.2021. The Court held that the rejection was contrary to its positive directions permitting payment and seeking consideration of the representation; such action was unreasonable and unsustainable. Consequently the respondent's contention that the declaration had lapsed for non-payment was not allowed to prevail against the fact of payment made in compliance with the Court's orders, and the respondent was directed to issue Form SVLDRS-4 discharging the liabilities under the scheme within 30 days. [Paras 11, 12, 13, 22, 23] Impugned order dated 27.08.2021 set aside; respondents directed to issue Form SVLDRS-4 to discharge the petitioner's liabilities within 30 days. Extension of time for payment under SVLDRS - directory vs mandatory nature of statutory time limits - Whether the time limits for availing the SVLDR Scheme and for making payment are mandatory or directory and whether the Court could intervene given the COVID-19 situation - HELD THAT: - The Court observed that the Finance Act and subsequent notifications delegated to the Central Government the power to fix and, where necessary, extend the time limits for availing the scheme and for payment. This delegation indicates that the fixation of time was directory in nature rather than strictly mandatory. The Court noted the exceptional circumstances of the COVID-19 pandemic, the Central Government's notifications extending time, and the Supreme Court's suo motu directions on limitation, and held that these factors justified judicial interference in the present case where the petitioner had paid pursuant to the Court's direction. On that basis the court concluded it could and should direct acceptance under the scheme despite the delayed payment. [Paras 16, 17, 18, 19, 20] Time limits under the scheme are directory in nature; the Court may, in appropriate circumstances such as the pandemic and where payment is made pursuant to its orders, direct acceptance and relief under the scheme. Final Conclusion: Writ petition allowed; impugned order dated 27.08.2021 quashed and respondents directed to issue Form SVLDRS-4 discharging the petitioner's liabilities within 30 days; no costs.

2023 (11) TMI 794 - ITAT PUNE Income Tax

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Issues Involved:
1. Legality of invoking revision jurisdiction under Section 263 of the Income-tax Act, 1961.
2. Taxability of Government grants as capital or revenue receipts.

Summary:

Issue 1: Legality of invoking revision jurisdiction under Section 263 of the Income-tax Act, 1961

The assessee filed appeals against the common order passed by the Principal Commissioner of Income-tax (PCIT) under Section 263 for the assessment years 2012-13 and 2013-14. The PCIT issued a show cause notice based on the assessment proceedings for A.Y. 2014-15, observing that the assessee had received Government grants which were taxable but taken as capital receipts. The PCIT directed the AO to frame the assessment afresh after conducting enquiries and verification. The Tribunal noted that the PCIT's initiation of revision was premised solely on the report submitted by the AO requesting for the revision of the assessment order. The Tribunal emphasized that Section 263(1) mandates the Commissioner to call for and examine the record of any proceeding and then consider if the order is erroneous and prejudicial to the interests of the revenue. The Tribunal found that the PCIT did not independently call for and examine the records but acted solely on the AO's report. Citing the judgments in Smt. Sumitra Devi Khirwal Vs. CIT and CIT Vs. Bhagat Shyam & Co., the Tribunal highlighted that the satisfaction of the CIT is paramount and must be based on an independent examination of the records. The Tribunal concluded that the PCIT exercised his jurisdiction to initiate the revision proceedings in a wrongful manner.

Issue 2: Taxability of Government grants as capital or revenue receipts

The assessee contended that the Government grants were capital receipts not chargeable to tax, citing the SC decision in the case of PJ Chemicals. However, the PCIT found the contention unacceptable, referring to the SC decision in Sahney Steel & Press Works Limited Vs. CIT, which held that incentives received year after year after the commencement of production are to be treated as revenue receipts. The Tribunal did not delve into the merits of the issue, as it quashed the revision proceedings on the legal ground of wrongful exercise of jurisdiction by the PCIT.

Conclusion:

In view of the wrongful exercise of jurisdiction by the PCIT, the Tribunal set aside the impugned order passed under Section 263 for both assessment years. Consequently, the appeals were allowed.

Order pronounced in the Open Court on 19th October, 2023.

PCIT's revision under section 263 quashed for failing to independently examine assessment records before initiating proceedings
The ITAT PUNE-AT quashed a revision proceeding under section 263 initiated by the PCIT regarding taxability of government grants. The tribunal held that the PCIT failed to independently examine the assessment record and instead relied solely on the AO's request for revision dated 22-03-2018. The court ruled that both conditions under section 263 - calling for and examining records, and independently determining the order as erroneous and prejudicial to revenue - must be cumulatively satisfied by the CIT alone. Since the PCIT exercised jurisdiction wrongfully without independent examination, the revision was quashed in favor of the assessee.

Revisionary jurisdiction under section 263 of the Income-tax Act - Personal satisfaction of the Commissioner before invoking revisionary power - Requirement that the Commissioner must call for and examine the record independently before revising an order - Initiation of revision based solely on the Assessing Officer's proposal does not activate section 263 jurisdiction - Admission of additional grounds raising a pure question of law where relevant facts are on recordRevisionary jurisdiction under section 263 of the Income-tax Act - Personal satisfaction of the Commissioner before invoking revisionary power - Requirement that the Commissioner must call for and examine the record independently before revising an order - Initiation of revision based solely on the Assessing Officer's proposal does not activate section 263 jurisdiction - Validity of initiation of revision proceedings under section 263 where the Principal Commissioner acted on the Assessing Officer's proposal without independently calling for and examining the record and satisfying himself that the assessment order was erroneous and prejudicial to the revenue. - HELD THAT: - Section 263 empowers the Commissioner to call for and examine the record and, if he is satisfied that an order is erroneous and prejudicial to the revenue, to revise it. Both acts - calling for and examining the record and the Commissioner's independent satisfaction - are cumulative and must be performed by the Commissioner himself. In the present case the show cause notice and the record disclose that the Principal Commissioner issued the notice solely on the basis of the Assessing Officer's proposal routed through the range JCIT, without any independent examination of the records or formation of his own satisfaction. Authority to place material before the Commissioner or to propose revision lies with the AO, but the power to invoke section 263 requires the Commissioner to apply his own mind to the material and form his personal satisfaction. Where the notice is founded merely on the AO's proposal and the Commissioner's independent satisfaction is absent, the jurisdiction under section 263 is not activated and the revision is infirm. Applying these principles to the facts, the Tribunal held that the Principal Commissioner acted without the requisite independent examination and satisfaction and therefore the exercise of revisionary jurisdiction was unjustified. [Paras 5, 6, 7, 8, 9]The initiation of revision proceedings under section 263 was invalid because the Principal Commissioner acted solely on the Assessing Officer's proposal without independently calling for and examining the record and forming his own satisfaction; the revision is quashed.Admission of additional grounds raising a pure question of law where relevant facts are on record - Admissibility of an additional ground raising a pure question of law not earlier urged before the Principal Commissioner or in the original memorandum of appeal but based on facts already on record. - HELD THAT: - The Tribunal applied the principle that where a question of law bearing on tax liability arises from facts already on record, the Tribunal may entertain that question even if it was not previously raised before the lower authority. The additional ground challenged the validity of invocation of section 263 and involved a pure legal question requiring no fresh factual investigation. In these circumstances - and having regard to the show cause notice and material on record - the Tribunal admitted the additional ground and proceeded to decide it. The decision to admit the ground was guided by precedent allowing tribunals to consider legal questions first raised before them when the factual matrix is already available. [Paras 10, 11, 12]The additional ground was admitted as it raised a pure question of law on facts already on record, and the Tribunal entertained and decided that ground.Final Conclusion: Both appeals are allowed; the order passed by the Principal Commissioner under section 263 for A.Y. 2012-13 and A.Y. 2013-14 is quashed on the ground that the revision was initiated without the Commissioner independently calling for and examining the record and forming his own satisfaction.

2023 (11) TMI 757 - DELHI HIGH COURT Income Tax

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Amalgamated Entities Must File Modified Tax Returns for Valid Assessment; Pre-Merger Returns Not Accepted.
The HC addressed the interpretation of Section 170A of the Income Tax Act, 1961, concerning the obligation to file a modified return post-amalgamation. The Court held that the assessing officer could not proceed with the assessment based on the pre-merger return and stayed the proceedings until 31.03.2023 to allow for filing the modified return. After the petitioner filed the modified return, the Court directed the assessing officer to conduct a scrutiny assessment based on this return, excluding the stay period, and allowed 60 days for completing the assessment as per Section 153's first proviso.

Interpretation of Section 170A in the context of amalgamation and filing of a modified return - Non-obstante clause overruling pre-merger return for successor entities - Exclusion of period during which assessment proceedings are stayed - First proviso to Explanation 1 of Section 153 - grant of sixty days for completion of assessment - Assessing officer to proceed on the basis of the modified returnInterpretation of Section 170A in the context of amalgamation and filing of a modified return - Assessing officer to proceed on the basis of the modified return - Exclusion of period during which assessment proceedings are stayed - First proviso to Explanation 1 of Section 153 - grant of sixty days for completion of assessment - Liberty of the assessing officer to carry out scrutiny assessment after the petitioner filed the modified return, with exclusion of the period of stay and availability of sixty days under the first proviso to Explanation 1 of Section 153 starting from receipt of the order. - HELD THAT: - The petitioner filed the original return for AY 2021-2022 prior to sanction of an amalgamation scheme and thereafter filed a modified return on 30.03.2023 pursuant to Section 170A and the CBDT timeline. The respondents/revenue accept that on filing of the modified return the assessing officer may proceed with scrutiny. The Court directed that the time during which assessment proceedings were stayed shall be excluded from the limitation computation. Further, in accordance with the first proviso to Explanation 1 of Section 153, the assessing officer is entitled to a further period of sixty days to complete the scrutiny assessment; that sixty-day period will commence from the date of receipt of the copy of the Court's order. The assessment proceedings are to be carried out having regard to the modified return filed by the petitioner. [Paras 5]The assessing officer is permitted to carry out scrutiny assessment on the basis of the modified return; time of the stay is excluded; and sixty days are available for completion of assessment commencing from receipt of the order.Final Conclusion: Writ petition disposed: assessing officer granted liberty to carry out scrutiny assessment based on the modified return; the period of the Court-ordered stay is excluded from limitation; and the sixty-day extension under the first proviso to Explanation 1 of Section 153 begins from receipt of the order.

2023 (11) TMI 716 - KERALA HIGH COURT Indian Laws

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Statutory presumptions in cheque dishonour cases survived where the accused failed to raise a probable defence.
Once execution of the cheque and signature are proved, the presumptions under Sections 118(a) and 139 of the Negotiable Instruments Act operate in favour of the holder, and the accused must rebut them by raising a probable defence on a preponderance of probabilities. A plea that signed blank cheques were stolen and misused was found improbable because no prompt criminal action was taken, so the presumption of legally enforceable liability remained unrebutted. Revisional interference is confined to patent illegality, manifest error, or total misreading of the record, and none was shown. The concurrent conviction and sentence under Section 138 were therefore upheld.

Presumption under Section 139 of the Negotiable Instruments Act - presumption of consideration under Section 118 of the Negotiable Instruments Act - reverse onus - rebuttable presumption - preponderance of probabilities - legally enforceable debt or liability - conviction under Section 138 of the Negotiable Instruments ActPresumption under Section 139 of the Negotiable Instruments Act - reverse onus - rebuttable presumption - preponderance of probabilities - legally enforceable debt or liability - conviction under Section 138 of the Negotiable Instruments Act - Validity of the conviction under Section 138 of the Negotiable Instruments Act in view of the statutory presumption and the accused's defence that the cheque was stolen and not issued towards a legally enforceable debt. - HELD THAT: - The Court applied the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act, and the doctrine of reverse onus, whereby once the signature on the cheque is established the obligation shifts to the accused to rebut the presumption that the cheque was issued for discharge of a legally enforceable debt. The settled standard for discharging that burden is the preponderance of probabilities. The accused raised a defence that signed blank cheques were given to his brother for business and that one such cheque was stolen and later used by the complainant. The courts below found this defence improbable, particularly in view of the accused's position as a police officer and his failure to initiate criminal proceedings if the cheque was indeed stolen; instead, a lawyer's notice was issued by his brother. On reappraisal, the High Court found no error in the concurrent findings that the accused failed to raise a probable defence sufficient to rebut the presumption of a legally enforceable debt, and therefore the conviction under Section 138 stood justified. The High Court confirmed the conviction and sentence imposed by the courts below. [Paras 16, 17, 18, 19, 20]Conviction under Section 138 of the Negotiable Instruments Act is confirmed as the accused failed to rebut the statutory presumption of a legally enforceable debt on the preponderance of probabilities.Final Conclusion: The revision petition is dismissed; concurrent convictions and sentences for the offence under Section 138 of the Negotiable Instruments Act are confirmed, and directions are given for the accused to undergo sentence and pay the fine, with specified timelines and consequential directions for payment as compensation under Section 357(1)(b) of the Code.

2023 (11) TMI 706 - DELHI HIGH COURT Income Tax

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PCIT cannot invoke Section 40A(3) when no expenditure claimed for cash withdrawal neutralized in closing stock
Delhi HC upheld ITAT's decision setting aside PCIT's revision order under Section 263. The assessee withdrew cash to purchase land shown as stock-in-trade, with no expenditure claimed as it was neutralized in closing stock. Section 40A(3) was inapplicable since no deduction was claimed. PCIT wrongly invoked Section 40A(3) provisions. Additionally, PCIT could not initiate proceedings for cash withdrawals when no addition was made regarding the original reassessment amount. Decision favored assessee.

Power of revision under Section 263 of the Income Tax Act - application of Section 40A(3) to cash withdrawals used to purchase stock-in-trade - reopening of assessment and scope to assess subsequently discovered income under Section 147/148 - Explanation 3 to Section 147 - requirement that the income which caused the reopening must continue to form part of reassessed income before other income can be assessedApplication of Section 40A(3) to cash withdrawals used to purchase stock-in-trade - power of revision under Section 263 of the Income Tax Act - Whether the Principal Commissioner could invoke revision under Section 263 by treating cash withdrawals as disallowable expenditure under Section 40A(3) when the amounts were used to purchase land shown as stock-in-trade and no expenditure had been claimed - HELD THAT: - The Tribunal's finding that Section 40A(3) was not attracted was accepted. The respondent had not claimed any expenditure in respect of the cash withdrawals because the amounts were utilized to purchase a parcel of land which, in the books, was treated as stock-in-trade and thereby neutralised in closing stock. Given this accounting treatment and the absence of any claimed expenditure, the provisions of Section 40A(3) were not applicable and the PCIT's order under Section 263, which relied on Section 40A(3), was therefore not sustainable. [Paras 12]PCIT's exercise of revision under Section 263 based on Section 40A(3) was incorrect and rightly set aside by the Tribunal.Reopening of assessment and scope to assess subsequently discovered income under Section 147/148 - Explanation 3 to Section 147 - requirement that the income which caused the reopening must continue to form part of reassessed income before other income can be assessed - Whether it was open to the Assessing Officer or the PCIT to make additions in respect of cash withdrawals (not mentioned in the original reasons to believe) when the income upon which the notice under Section 148 had been issued (cash deposits of Rs.16.80 crores) was not assessed - HELD THAT: - The Court agreed with the Tribunal's view, endorsing the line of authority that an Assessing Officer, having issued a notice under Section 148 on a particular aspect, cannot independently assess some other income discovered during reassessment proceedings if the income which led to the reopening is not assessed. Explanation 3 to Section 147 must be read with the substantive provision and does not permit circumvention of the condition that the escaped income forming the basis for reopening must be assessed; only then can other income discovered in the course of proceedings be brought to tax. On this ground also the PCIT's initiation of revision in respect of the cash withdrawals was unsustainable. [Paras 12, 13]Proceedings/treatment based on cash withdrawals could not be sustained where the original escaped income (basis for reopening) was not assessed; Tribunal was correct in setting aside the PCIT's order.Final Conclusion: The High Court declined to interfere with the Tribunal's order setting aside the PCIT's order under Section 263; the appeal is dismissed/closed.

2023 (11) TMI 575 - GUJARAT HIGH COURT Customs

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Shipping bill amendment allowed to correct MEIS reward flag and enable export incentive claim processing.
Section 149 of the Customs Act, 1962 was applied to permit amendment of a shipping bill to correct the MEIS reward flag from "No" to the appropriate entry. The amendment was sought to enable transmission of the shipping bill on the portal and support a claim under the Merchandise Exports from India Scheme. A September 2023 CBIC advisory introduced a system option for post-EGM MEIS/reward amendment and transmission to DGFT, and the portal was required to such requests when made before the competent authority. The competent authority was directed to process the amendment application accordingly.

Amendment of shipping bill - post EGM MEIS / Reward amendment - Merchandise Exports from India Scheme (MEIS) - reward scheme flag - amendment under Section 149 of the Customs Act, 1962 - administrative advisory compliancePost EGM MEIS / Reward amendment - amendment of shipping bill - reward scheme flag - Merchandise Exports from India Scheme (MEIS) - Direction to accept and process applications for amendment of shipping bills to change the reward scheme flag from 'N' to 'Y' on the portal in light of the advisory so as to enable grant of MEIS rewards. - HELD THAT: - The petitioner exported goods under the MEIS but, due to oversight, the shipping bill recorded 'No' for claiming rewards. An application for amendment under Section 149 was earlier rejected, but the CESTAT allowed the appeal directing amendment so the petitioner could claim rewards. A manual amendment was later granted. The Director General of Systems and Data Management, CBIC issued an advisory adding an option 'Post EGM MEIS / Reward amendment' in the ICES portal to permit officers to amend the reward scheme flag post-EGM and enable transmission to DGFT. In view of this advisory, the Court directed that if the petitioner makes an application to the competent authority for amendment of the shipping bills, the portals shall accept such amendment under the newly provided system option and grant the MEIS rewards to which the petitioner is otherwise eligible. The order thus gives effect to the administrative change and requires the portal-based acceptance and processing of the petitioner's application for amendment so that rewards under the Scheme are granted. [Paras 5, 6]Petition allowed to the extent that, upon application to the competent authority, the portal shall accept post-EGM amendments of the reward scheme flag and grant the petitioner the MEIS rewards it is otherwise eligible for.Final Conclusion: The High Court allowed the petitions to the limited extent of directing that, in light of the CBIC advisory adding a 'Post EGM MEIS / Reward amendment' option on the portal, applications for amendment of shipping bills to change the reward flag from 'N' to 'Y' shall be accepted and the petitioner shall be granted the MEIS rewards to which it is entitled.

2023 (11) TMI 549 - GUJARAT HIGH COURT GST

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Gujarat HC Nullifies Order for Ignoring Response, Directs Reconsideration with Fair Hearing for Partnership Firm.
The HC of Gujarat quashed the order dated 06.06.2022 against the petitioner, a partnership firm, due to a violation of natural justice principles. The petitioner had submitted a timely response to a show cause notice, which was ignored. The Court directed authorities to reconsider the case, ensuring a personal hearing and considering the petitioner's response. The petition was partly allowed, with the rule made absolute to the specified extent.

2023 (11) TMI 542 - KERALA HIGH COURT Income Tax

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Court Overturns Penalties for Armed Forces Veterans Canteen; Timely Tax Payment Validates Petitioner's Compliance.
The Court set aside the impugned order in Ext. P6, allowing the writ petition filed by the petitioner, an Armed Forces Veterans Canteen. The Court recognized that the petitioner had filed the quarterly TDS returns on time, albeit in the incorrect Form, which was later corrected. Consequently, it ruled that there was no justification for imposing penalties or interest for late filing, as the tax was deducted and deposited on time. The earlier decision of the Assessing Authority to impose a late fee and interest was deemed improper, and the penalties were annulled.

Levy of late fee under Section 234E for delayed TDS return - Filing of TDS return in incorrect Form and subsequent revision - Effect of Tribunal remand and binding nature of Tribunal's findings on assessing officer - Interest on late fee and interest on late payment - Timely deposit of TDS disentitling imposition of interestLevy of late fee under Section 234E for delayed TDS return - Filing of TDS return in incorrect Form and subsequent revision - Effect of Tribunal remand and binding nature of Tribunal's findings on assessing officer - Interest on late fee and interest on late payment - Timely deposit of TDS disentitling imposition of interest - Whether late fee and interest could be levied where the quarterly TDS return was filed on time in an incorrect Form and later revised, and tax was deposited on time. - HELD THAT: - The Tribunal had found that the quarterly TDS return for the second quarter of FY 2017-18 was filed within time though in an incorrect Form (computer generated Form 24Q), and that the return was subsequently revised to the correct Form 26Q. On remand the Assessing Officer initially gave effect to the Tribunal's order and assessed nil demand, but thereafter levied late fee and interest again. The High Court observed that where the return was filed on time and only the Form was incorrect but was later revised, the condition for imposing the late fee and related interest did not exist. Further, since the tax deducted at source was deposited on time, there was no basis for levying interest for late payment. The Court therefore set aside the impugned order which had re-imposed the late fee and interest contrary to the Tribunal's finding and the factual position of timely filing and deposit of TDS. [Paras 5]Impugned order levying late fee and interest set aside; no late fee or interest is leviable where the TDS return was filed on time albeit in an incorrect Form that was subsequently revised, and tax was deposited on time.Final Conclusion: Writ petition allowed; impugned order in Ext.P6 setting aside the nil demand is quashed and the levy of late fee and interest is set aside.

2023 (11) TMI 453 - MADRAS HIGH COURT GST

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Refund Application Rejection Violated Natural Justice; Case Sent Back for Reconsideration with Personal Hearing Mandate.
The HC set aside the orders of the first and second respondents, identifying a violation of natural justice due to the rejection of refund applications without a personal hearing, as required by Rule 92(3) of the CGST Rules, 2017. The matter was remitted back to the second respondent for reconsideration, mandating a personal hearing for the petitioner. The Writ Petition was allowed with these directions, and no costs were awarded.

Right to personal hearing before rejecting refund application - proviso to Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - principles of natural justice - remand for fresh consideration after affording personal hearingRight to personal hearing before rejecting refund application - proviso to Rule 92(3) of the Central Goods and Services Tax Rules, 2017 - principles of natural justice - remand for fresh consideration after affording personal hearing - Whether the refund applications were validly rejected without affording an opportunity of personal hearing in terms of the proviso to Rule 92(3) of the CGST Rules, 2017 and the appropriate remedy. - HELD THAT: - The Court examined Rule 92(3) of the Central Goods and Services Tax Rules, 2017, including its proviso which mandates that no application for refund shall be rejected without giving the applicant an opportunity of being heard. The admitted factual position was that the second respondent rejected the two refund applications without granting any personal hearing and the first respondent, on appeal, confirmed that rejection while failing to consider the absence of the hearing. The failure to afford the opportunity required by the proviso constituted a breach of the principles of natural justice. In view of this legal infirmity, the Court found it necessary to set aside both the appellate order and the original rejection and to remit the matter to the second respondent for fresh adjudication. The remand is limited to reconsideration of the refund applications on merits after affording the petitioner a personal hearing and passing fresh orders in accordance with law. [Paras 6, 7, 8]Orders dated 20.01.2020 and 26.07.2022 set aside; matter remitted to the second respondent for fresh consideration after affording the petitioner a personal hearing and deciding the refund applications on merits and in accordance with law.Final Conclusion: Writ petition allowed; orders rejecting the refund applications and the confirming appellate order set aside and remitted for fresh consideration after providing the petitioner an opportunity of personal hearing; no costs.

2023 (11) TMI 351 - DELHI HIGH COURT GST

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Issues involved:
The petitioner filed a petition challenging the rejection of refund applications for the period January, 2020 to March, 2020 under the Central Goods and Services Tax Act, 2017 and the State Goods and Services Tax Act, 2017. The rejection was based on the grounds of availing input tax credit from "non-existent / high risk" entities and failure to prove timely payment for goods and services.

Issue 1: Rejection of refund applications based on supplier's existence and payment timeline

The petitioner sought refund of Rs. 18,00,202 for the period January, 2020 to March, 2020. The Adjudicating Authority rejected the applications citing availing input tax credit from a supposedly non-existent supplier, M/s. Yamuna Overseas, and failure to demonstrate payment within 180 days from invoice dates. Despite providing invoices and bank statements, the refund claims were denied.

Issue 2: Appeal and rejection by Appellate Authority

The petitioner contested the rejection and filed appeals under Section 107 of the CGST Act. However, the Appellate Authority upheld the decision to reject the refund applications, leading to the petitioner's further challenge through the present petition.

Issue 3: Grounds for setting aside the impugned order

The High Court set aside the impugned order and the rejection of refund applications, directing a fresh consideration by the Adjudicating Authority. The Court noted discrepancies in the rejection grounds, particularly the failure to mention payment timelines and the specific non-existent dealer. The petitioner was instructed to provide necessary documentation, including a reconciliation statement, within four weeks for a renewed review of the refund applications.

This judgment highlights the importance of procedural fairness and the need for clear communication of grounds for rejection in tax refund cases. The Court's decision to remand the matter for fresh consideration emphasizes the significance of providing adequate opportunity for the petitioner to address the allegations and submit relevant evidence.

Refund Rejection Overturned; Case Remanded for Fresh Review Due to Discrepancies in Supplier and Payment Timeline Evidence.
The HC set aside the impugned order rejecting the petitioner's refund applications under the CGST and SGST Acts for the period January to March 2020. The rejection was initially based on availing input tax credit from a non-existent supplier and failure to prove timely payments. The Court identified discrepancies in the rejection grounds, particularly the lack of clarity regarding payment timelines and the supplier's existence. The case was remanded to the Adjudicating Authority for fresh consideration, allowing the petitioner four weeks to submit necessary documentation, including a reconciliation statement, for a renewed review of the refund applications.

Refund of GST - show cause notice - failure to specify grounds in show cause notice - non-existent supplier - payment within 180 days - opportunity to be heard - remand for fresh considerationRefund of GST - failure to specify grounds in show cause notice - non-existent supplier - payment within 180 days - remand for fresh consideration - The orders rejecting the petitioner's refund applications were set aside and the matter remanded for fresh consideration. - HELD THAT: - The Court found that the Adjudicating Authority rejected the refund claims on two principal bases: that a supplier (M/s Yamuna Overseas) was found to be non-existent at its registered place of business, and that payments were not made within 180 days of the invoices. However, the show cause notices issued to the petitioner did not specify the named supplier nor put the ground relating to delayed payment to the petitioner. In these circumstances the impugned orders, which proceeded on a ground not raised in the show cause notices, could not stand. The Court therefore set aside the orders rejecting the refund applications for the period January, 2020 to March, 2020 and remanded the matter to the Adjudicating Authority for fresh consideration. [Paras 8, 9]Impugned orders set aside and matter remanded to the Adjudicating Authority for fresh decision on the refund applications.Show cause notice - opportunity to be heard - remand for fresh consideration - Whether a fresh show cause notice was necessary before reconsideration. - HELD THAT: - Although the impugned order articulated the allegations that a supplier was non-existent and that payments were made beyond 180 days, the Court held that a fresh show cause notice was not necessary because the allegations were already articulated in the impugned order. The petitioner was afforded the opportunity to respond to those allegations and to file supporting material, including a reconciliation statement showing invoice dates and payment dates. The Adjudicating Authority was directed to consider the refund applications afresh after affording the petitioner an opportunity to be heard. [Paras 9]No fresh show cause notice required; petitioner permitted to respond and file reconciliation; Adjudicating Authority to decide afresh after hearing.Final Conclusion: The petition is allowed: the orders rejecting the refund applications for January, 2020 to March, 2020 are set aside and the matter is remanded to the Adjudicating Authority to consider the applications afresh after allowing the petitioner to file a reconciliation statement and be heard; no fresh show cause notice is necessary.

2023 (11) TMI 258 - CESTAT NEW DELHI Service Tax

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Issues involved: Appeal dismissed for being filed beyond prescribed period under section 85(3A) of the Finance Act, 1994.

The judgment addresses the issue of the dismissal of an appeal by the Commissioner (Appeals) due to it being filed beyond the prescribed period under section 85(3A) of the Finance Act, 1994. The appellant contended that the appeal was actually received within the stipulated time, and the order was deemed to have been served incorrectly by the Commissioner (Appeals) as it was sent by speed post, not registered post.

The Commissioner (Appeals) dismissed the appeal solely on the grounds of being filed beyond the prescribed period under section 85(3A) of the Finance Act, 1994. The appellant argued that the order was actually received within the stipulated time, and the method of service was incorrectly deemed by the Commissioner (Appeals) as registered post instead of speed post.

The Commissioner (Appeals) noted the delay in filing the appeal and based the dismissal on the grounds of the appeal being beyond the prescribed period under section 85(3A) of the Finance Act, 1994. The appellant claimed that the order was actually received within the stipulated time, and the method of service was incorrectly deemed by the Commissioner (Appeals) as registered post instead of speed post.

The Assistant Commissioner confirmed that the order was dispatched by speed post and not returned undelivered. The Commissioner (Appeals) incorrectly deemed the order to have been served by registered post, contrary to the actual method of dispatch by speed post. The appellant argued that the order was received within the stipulated time, as claimed.

The judgment highlighted the discrepancy between the method of service, with the order being dispatched by speed post but deemed served by registered post. The appellant asserted that the order was received within the stipulated time, challenging the Commissioner (Appeals)'s decision to dismiss the appeal based on the incorrect method of service.

The amended section 37C of the Central Excise Act, applicable to service tax matters, outlines the requirements for service of decisions, orders, summons, etc. The Commissioner (Appeals) incorrectly applied the unamended section 37C in this case, leading to a misinterpretation of the method of service of the order.

The judgment emphasized the importance of the correct method of service under the amended section 37C of the Central Excise Act in service tax matters. The appellant's argument that the order was received within the stipulated time was supported by the confirmation that the order was dispatched by speed post.

The Commissioner (Appeals) was directed to set aside the impugned order and decide the appeal on its merits. The appellant's claim that the order was received within the stipulated time was upheld, leading to the allowance of the appeal.

Appeal Dismissal Overturned Due to Misinterpretation of Service Method; Case to Be Decided on Its Merits.
The appeal was initially dismissed by the Commissioner (Appeals) for being filed beyond the prescribed period under section 85(3A) of the Finance Act, 1994. The appellant contended that the order was received within the stipulated time, challenging the method of service, which was dispatched by speed post rather than registered post. The court found that the Commissioner (Appeals) incorrectly applied the unamended section 37C of the Central Excise Act, leading to a misinterpretation. Consequently, the Commissioner (Appeals) was directed to set aside the dismissal and decide the appeal on its merits, allowing the appellant's claim.

Service of orders, notices and proof of delivery - deemed service by registered post - limitation period for filing appeal under section 85(3A) of the Finance Act, 1994 - application of amended section 37C of the Central Excise Act to service tax matters - commencement of limitation from actual receiptService of orders, notices and proof of delivery - application of amended section 37C of the Central Excise Act to service tax matters - commencement of limitation from actual receipt - Whether the appeal before the Commissioner (Appeals) was rightly dismissed as time-barred when the Original Order-in-Original was dispatched by speed post without proof of delivery. - HELD THAT: - The Tribunal examined the mode of dispatch and the applicable provision on service. The Assistant Commissioner recorded dispatch by speed post and that the consignment was not returned undelivered; there was no proof of delivery. Under the amended section 37C of the Central Excise Act (made applicable to service tax matters by section 83 of the Finance Act), service by speed post requires proof of delivery. The Commissioner (Appeals) treated the order as having been sent by registered post and deemed to have been served, but the factual record shows dispatch by speed post without proof of delivery. In these circumstances the limitation under section 85(3A) of the Finance Act begins to run from actual receipt of the decision by the appellant. The Tribunal accepted the appellant's claim that the order was received on 01.09.2018 (and alternatively that the appellant became aware on 06.10.2020) and held that the Commissioner (Appeals) should have examined and applied the requirement of proof of delivery rather than mechanically deeming service by registered post.The dismissal of the appeal as time-barred was not sustainble because there was no proof of delivery of the order sent by speed post; limitation runs from actual receipt and the Commissioner (Appeals)'s finding is set aside.Limitation period for filing appeal under section 85(3A) of the Finance Act, 1994 - Whether the matter should be remitted for fresh adjudication on merits after setting aside the impugned order which dismissed the appeal on limitation grounds. - HELD THAT: - Having concluded that the impugned order could not stand on the limitation finding, the Tribunal set aside the Commissioner (Appeals)'s order and directed that the Commissioner (Appeals) decide the appeal on merits. The Tribunal did not decide the substantive merits of the controversy and left those matters for fresh consideration by the Commissioner (Appeals).The impugned order is set aside and the appeal is remitted to the Commissioner (Appeals) for adjudication on merits.Final Conclusion: The appeal is allowed; the Commissioner (Appeals)'s order dated 25.02.2021 dismissing the appeal as time-barred is set aside for lack of proof of delivery of the order sent by speed post, and the Commissioner (Appeals) is directed to decide the appeal on merits.

2023 (11) TMI 257 - CESTAT NEW DELHI Service Tax

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Works contract services to local authority exempted from service tax under Notification 25/2012 section 65B(31)
CESTAT NEW DELHI allowed the appeal regarding non-payment of service tax on works contract services for April-September 2013. The tribunal held that services provided by appellant to local authority involving construction, erection, and commissioning of pipeline/water supply were exempted under Notification 25/2012 dated 20.06.2012, considering the definition of local authority under section 65B(31) of Finance Act. The Commissioner's order dated 31.3.2015 was set aside as unsustainable.

Exemption under Notification No. 25/2012 dated 20.06.2012 - services to a local authority by way of construction, erection, commissioning of pipeline or water supply - definition of "local authority" under section 65B(31) of the Finance Act, 1994 - works contract services within Explanation (e) to section 65(105)(zzzza) - consideration of exemption notwithstanding non reply to show cause noticeExemption under Notification No. 25/2012 dated 20.06.2012 - services to a local authority by way of construction, erection, commissioning of pipeline or water supply - definition of "local authority" under section 65B(31) of the Finance Act, 1994 - Whether the services rendered by the appellant to Municipal Corporations/Municipal Councils for laying, jointing, testing and commissioning of pipelines/water supply during April 2013 to September 2013 were exempt under the Notification dated 20.06.2012. - HELD THAT: - The Tribunal examined the work orders and the text of the Notification dated 20.06.2012 (Serial No.12(e)) which grants exemption for services provided to the Government or a local authority by way of construction, erection, commissioning, installation, completion, repair, maintenance, renovation or alteration of pipeline or plant for water supply, water treatment or sewerage treatment or disposal. The statutory definition of "local authority" in section 65B(31) includes Municipalities and Municipal Committees. The services recorded in the work orders plainly fall within construction/laying, jointing, testing and commissioning of pipelines for water supply provided to municipal authorities. Applying the Notification to those facts, the Tribunal concluded that the services were exempt from service tax for the period in question. [Paras 10, 12]The demand of service tax confirmed by the Commissioner is set aside insofar as it relates to the services rendered to the municipal/local authorities for pipeline/water supply during April 2013 to September 2013, which are exempt under the Notification dated 20.06.2012.Consideration of exemption notwithstanding non reply to show cause notice - Whether the appellant's failure to file a reply to the show cause notice precluded the adjudicating authority from considering the applicability of the exemption. - HELD THAT: - The Tribunal noted that the show cause notice and the adjudicating order themselves contained the material facts and documents from which the applicability of the Notification could be determined. The absence of a formal reply by the appellant did not relieve the adjudicating authority (or the Tribunal on appeal) from taking into account a legally available exemption apparent on the record. Consequently, the exemption had to be considered and applied despite non filing of a reply. [Paras 11]Non filing of a reply to the show cause notice did not bar consideration of the exemption; the exemption was to be applied on the available record.Final Conclusion: The appeal is allowed: the demand of service tax, interest and penalty confirmed by the Commissioner for services rendered to municipal/local authorities in respect of pipeline/water supply for April 2013 to September 2013 is set aside as exempt under the Notification dated 20.06.2012; the appellant's failure to reply to the show cause notice did not preclude this conclusion.

2023 (11) TMI 190 - ITAT HYDERABAD Income Tax

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TPO justified charging 6% interest on receivables beyond 30 days due to inadequate supporting evidence from assessee
The ITAT Hyderabad upheld the TPO's decision to charge 6% interest on receivables outstanding beyond 30 days, finding the assessee failed to provide adequate supporting evidence like ledgers and confirmations despite submitting invoices and calculations. The tribunal rejected the assessee's argument that deferred receivables don't constitute separate international transactions requiring benchmarking. However, regarding section 10AA deduction, the tribunal directed the AO to delete the disallowance, noting that CPC had already allowed the deduction through rectification and the AO had not disputed this in the draft assessment order.

International transaction - arm's length price - benchmarking of outstanding receivables - notional interest on delayed receivables - reasonable credit period - working capital adjustment - imputation of interest at 6% p.a. - adjustment of interest payable against interest receivable - deduction under section 10AA - rectification under section 154International transaction - benchmarking of outstanding receivables - notional interest on delayed receivables - reasonable credit period - imputation of interest at 6% p.a. - adjustment of interest payable against interest receivable - Interest on receivables outstanding beyond reasonable credit period constitutes an international transaction and may be benchmarked; notional interest at 6% p.a. to be applied for receivables outstanding more than 30 days, subject to adjustment against substantiated interest payable. - HELD THAT: - The Tribunal upheld the DRP/TPO approach that deferred receivables form a separate international transaction requiring separate benchmarking, following judicial precedents and coordinate-bench decisions. A credit-free period of 30 days was allowed and notional interest is to be computed for amounts outstanding beyond that period. The Tribunal found the assessee's production of only invoices and calculations insufficient to meet the DRP's direction to furnish complete evidence (ledgers, confirmations, agreements or other proof) to substantiate that interest was not charged or paid to counterparties; mere sample submissions did not satisfy the requirement for offsetting the imputed interest. The TPO's rejection of the assessee's limited samples and its use of the short-term deposit (S81) rate with a 30-day free period was sustained. Consequently, the adjustment stands subject to reduction to the extent the assessee, by proper and complete evidence, establishes interest payable on trade payables that can be offset; absent such substantiation the notional interest will be charged at 6% p.a. for receivables outstanding beyond 30 days. [Paras 5, 8, 9, 10, 11]Adjustment for notional interest on delayed receivables sustained; interest to be charged at 6% p.a. for amounts outstanding beyond 30 days, with permitted offset only upon proper substantiation of interest payable.Deduction under section 10AA - rectification under section 154 - Deduction claimed under section 10AA allowed as per rectification order; the addition made in the final assessment order is to be deleted. - HELD THAT: - The Tribunal recorded that the CPC initially disallowed the section 10AA claim in the intimation under section 143(1)(a) but subsequently allowed it by an order under section 154 dated 19/12/2019. The draft assessment order did not disallow the deduction, and the Assessing Officer's final order wrongly reintroduced the addition. As there is no challenge to the rectification order, the Tribunal directed the Assessing Officer to give effect to the earlier section 154 order and delete the addition. [Paras 12]Addition on account of denial of section 10AA deduction deleted and deduction allowed in accordance with the rectification order.Ground not pressed - Grounds relating to education cess and secondary and higher education cess were not pressed by the assessee and are dismissed as not pressed. - HELD THAT: - The Tribunal noted that the assessee's counsel did not press Grounds Nos. 11 and 12 at the hearing and accordingly dismissed those grounds without further adjudication. [Paras 13]Grounds relating to education cess dismissed as not pressed.Final Conclusion: Appeal partly allowed: (a) TPO/DRP determination that notional interest on receivables is an international transaction is sustained with imputation at 6% p.a. for receivables outstanding beyond 30 days, subject to offsets upon proper substantiation; (b) addition on account of denial of section 10AA deduction is deleted in accordance with the rectification order; remaining grounds are consequential or dismissed as not pressed.

2023 (11) TMI 87 - TELANGANA HIGH COURT Income Tax

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Issues involved:
The judgment involves the issue of whether payments made to international telecom operators are considered fees for technical services or not.

Summary:
The judgment pertains to three appeals arising from a common order concerning the same assessee for different assessment years. The instant appeal by the Revenue challenges the order passed by the Income Tax Appellate Tribunal regarding payments made to international telecom operators. The Assessing Officer initially held the assessee liable for TDS, leading to the declaration of the assessee as "an assessee in default." The Commissioner of Income Tax (Appeals) granted relief to the assessee, citing a jurisdictional High Court decision and a limitation period issue. The Tribunal rejected the appeals, prompting the present appeals. The High Court considered the limitation period for passing orders under Section 201(1) and 201(1A) of the Income Tax Act, emphasizing the absence of a specific time limit for non-residents. The Court highlighted the importance of a reasonable period for such orders, referencing a recent decision and remitted the matter back to the Commissioner of Income Tax (Appeals) for fresh orders based on these observations.

The core issue of whether payments to international telecom operators constitute fees for technical services was discussed extensively in the judgment. The Division Bench of the High Court emphasized the lack of a prescribed limitation period for initiating proceedings under Section 201(1) and 201(1A) of the Act. The Court noted that the term "reasonable period" is case-specific and rejected fixed timeframes like four or one year for passing orders under Section 201. Consequently, the Tribunal's acceptance of a four-year limitation period was deemed improper, leading to the orders being deemed unsustainable and remitted back to the Commissioner of Income Tax (Appeals) for fresh consideration in line with the Court's observations in a related case.

The judgment underscores the significance of a reasonable period for passing orders under the Income Tax Act, particularly in cases involving payments to international entities. The decision provides clarity on the absence of a specific limitation period for non-residents and stresses the need for a case-specific approach to determining what constitutes a reasonable timeframe for such proceedings. The Court's ruling highlights the importance of judicial propriety and aligning decisions with recent precedents to ensure legal validity and justification in tax-related matters.

Income Tax Commissioner's four-year limitation period for TDS default proceedings under sections 201(1) and 201(1A) set aside as legally unjustified
Telangana HC set aside orders of Commissioner of Income Tax (Appeals) and Tribunal that applied a four-year limitation period for proceedings under sections 201(1) and 201(1A) regarding TDS default on payments to international telecom operators. Following Division Bench precedent in Dr. Reddys Laboratories Limited, the court held no specific statutory limitation exists for such proceedings, and reasonable period depends on case facts. The HC found the four-year limitation period legally unjustified and remitted the matter back to Commissioner for fresh orders.

Reasonableness of limitation for proceedings under Section 201(1) and 201(1A) - absence of statutory time-limit for non-residents - the seven-year limitation for residents as a guiding yardstick for non-residents - remand for fresh adjudication in light of binding Division Bench precedent - discontinuance by Department of challenge on classification as fees for technical servicesReasonableness of limitation for proceedings under Section 201(1) and 201(1A) - absence of statutory time-limit for non-residents - the seven-year limitation for residents as a guiding yardstick for non-residents - remand for fresh adjudication in light of binding Division Bench precedent - Validity of treating four years as the prescribed limitation period for initiating and concluding proceedings under Section 201(1) and 201(1A) where the deductee is a non-resident, and consequential validity of appellate orders that proceeded on that basis. - HELD THAT: - The Division Bench view in Dr. Reddys Laboratories Limited establishes that the statute prescribes no specific time-limit for orders under Section 201(1) insofar as the deductee is a non-resident, and that what constitutes a 'reasonable period' must be determined on facts and circumstances of each case. The court accepted that the seven-year limitation applicable to resident deductees is a useful guide and it is impermissible to read a straightjacket shorter period into proceedings concerning non-residents. The Commissioner of Income Tax (Appeals) and the Tribunal proceeded on the basis that a four-year period was the prescribed limitation; that approach is inconsistent with the Division Bench authority and cannot be sustained. In consequence, the impugned orders which adopted a four-year limitation were set aside and the matter remitted to the Commissioner of Income Tax (Appeals) for fresh consideration in light of the Division Bench observations, leaving factual determination of what is a reasonable period to be made afresh. [Paras 13, 14]Orders adopting a four-year limitation for Section 201(1)/201(1A) proceedings were held to be incorrect; those orders are set aside and the matter is remitted to the Commissioner of Income Tax (Appeals) for fresh decision in light of the Division Bench precedent on reasonableness of time.Discontinuance by Department of challenge on classification as fees for technical services - Effect of the Department's decision not to pursue further challenge on whether payments to international telecom operators constitute fees for technical services. - HELD THAT: - Counsel for the respondent placed on record that the Department, by communication from the Joint Director of Income Tax (OSD)(LNR), New Delhi, has decided as a matter of principle not to pursue further challenge to the issue, following earlier judicial treatment in comparable cases. The Court recorded that this leaves the substantive controversy on classification largely of academic interest in the present appeals, although the procedural question on limitation remains live and requires fresh consideration as ordered. [Paras 10]The Department has discontinued further challenge to the technical-services classification; the question is therefore of limited practical significance here, but the appeals were remitted on the limitation issue as noted above.Final Conclusion: The appeals are allowed to the extent that the Tribunal's and the Commissioner (Appeals)'s orders which proceeded on a four year limitation are set aside; the matters are remitted to the Commissioner of Income Tax (Appeals) for fresh orders in light of the Division Bench decision on reasonableness of limitation for Section 201(1)/201(1A) proceedings. No order as to costs.

2023 (11) TMI 48 - DELHI HIGH COURT Income Tax

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Issues Involved:
1. Validity of the search and seizure operations.
2. Limitation period for completion of assessment under Section 153A of the Income Tax Act.
3. Validity of the invocation of revisional jurisdiction under Section 263 of the Income Tax Act.

Summary:

1. Validity of the Search and Seizure Operations:
The Petitioner, an entrepreneur in apparel design and consultancy, was subjected to search and seizure operations under Section 132 of the Income Tax Act in March 2021. The searches included various premises and lockers held by the Petitioner and her family. The searches were conducted in two phases: initially from 02nd to 06th March 2021, and subsequently on 29th and 30th April 2021. No articles were seized during the second phase of the searches, and panchnamas were drawn accordingly.

2. Limitation Period for Completion of Assessment:
The Petitioner received notices under Section 153A for AY 2015-16 to 2020-21 and submitted returns accordingly. The assessment orders were issued in March 2023. The Petitioner contended that the assessment order for AY 2015-16 was barred by the limitation period prescribed under Section 153B, arguing that the limitation should be calculated from the first search in March 2021. The Court analyzed Section 153B and determined that the limitation period should be twelve months from the end of the financial year in which the last authorization for search was executed. The Court found that the search concluded on 29th April 2021, making the assessment order dated 31st March 2023 within the prescribed time limit.

3. Validity of the Invocation of Revisional Jurisdiction:
The Respondent issued a notice under Section 263, observing that the assessment order was erroneous and prejudicial to the interest of revenue. The Petitioner challenged this, asserting the notice was barred by limitation. The Court concluded that the search operation definitively concluded on 29th April 2021, and thus, the assessment under Section 153A, completed on 31st March 2023, was within the limitation period. Consequently, the invocation of revisional jurisdiction under Section 263 was found to be valid.

Conclusion:
The Court dismissed the petition, finding no jurisdictional error in the assessment order dated 31st March 2023 for AY 2015-16. The merits of the assessment order were not examined, and all rights and contentions of the parties were left open.

Assessment order within limitation period under Section 153B makes Section 263 revision valid despite petitioner's challenge
Delhi HC dismissed the petition challenging revision under Section 263 of IT Act. The court held that the assessment order dated 31st March, 2023 for AY 2015-16 was within the limitation period prescribed under Section 153B. Despite petitioner's argument that search operations concluded in March 2021, the court found that the search definitively concluded on 29th April, 2021 when Locker 299 was inspected for the first time. The assessment order fell within the twelve-month limitation period from the last search date, making the revisional jurisdiction under Section 263 valid and petitioner's challenge untenable.

Time limit for completion of assessment under Section 153B - Execution of authorisation deemed on conclusion of search as recorded in the last panchnama - Last panchnama - Revisional jurisdiction under Section 263 - Assessment under Section 153A and limitationTime limit for completion of assessment under Section 153B - Execution of authorisation deemed on conclusion of search as recorded in the last panchnama - Last panchnama - Assessment under Section 153A and limitation - Revisional jurisdiction under Section 263 - Assessment framed on 31st March, 2023 for A.Y. 2015-16 was within the limitation prescribed by Section 153B and therefore not vitiated on limitation grounds so as to invalidate invocation of revisional jurisdiction under Section 263. - HELD THAT: - Section 153B prescribes the period for completion of assessment following searches and deems the authorisation executed on conclusion of search as recorded in the last panchnama. The factual question was whether the 'last panchnama' occurred in March 2021 or on 29th April 2021. The record shows that Locker No. 299 was first inspected on 29th April, 2021 pursuant to a warrant of authorisation dated 05th April, 2021, supported by contemporaneous restraint and revocation orders. Although lockers 2070 and 1320 were re-inspected in April 2021 with nil recovery and such panchnamas reflecting nil recovery cannot be equated with a fresh concluding panchnama where there is merely repetition, the panchnama and related orders for Locker 299 demonstrate that the search operation as a whole conclusively continued until 29th April, 2021. Consequently the relevant 'last panchnama' is 29th April, 2021, and the twelve month period (as applicable for searches executed in the financial year commencing on or after 1 April 2019) for completion of assessments under Section 153B extends accordingly. On that basis the assessment order dated 31st March, 2023 falls within the time allowed by Section 153B and is not barred by limitation; there is therefore no jurisdictional error on limitation grounds that would render the impugned Section 263 notice invalid. [Paras 5, 6, 7, 8, 9]Petition dismissed as the assessment for A.Y. 2015-16 was within the limitation under Section 153B and the challenge to invocation of Section 263 on limitation grounds fails.Final Conclusion: Challenge to the notice issued under Section 263 was dismissed: the Court held that the search conclusively ended on 29th April, 2021 (the last panchnama), so the assessment dated 31st March, 2023 was within the time prescribed by Section 153B; merits of the assessment were not examined and are left open.

2023 (10) TMI 1304 - BOMBAY HIGH COURT Service Tax

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Issues Involved:
The judgment involves questions of law related to the Central Excise Act 1944 and the Finance Act, 1994, specifically addressing the acceptance of an order passed by the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) regarding the recovery of a significant amount on 'premium' received towards 'marine policy' for a specific period.

Details of the Judgment:

Issue 1: Acceptability of CESTAT Order
The appellant challenged the CESTAT order questioning the acceptability of the Order-in-Original dated 09 September, 2015, which proposed recovery of a substantial amount based on 'premium' received towards 'marine policy' for the period from 2006-07 to 2013-14. The tribunal remanded the matter back to the original authority for further adjudication due to incomplete adjudicatory process, impacting the acceptability of the order.

Issue 2: Core Legal Issues
The appellant raised questions of law regarding the scope of 'premium collected on insurance of export of goods from India' and the validity of the CESTAT order of remand. The appellant contended that the inland transportation from a place within India to the port of export should be exempted under Notification No. 3/1994, as the insurance risk for export cargo commences from the loading point till the port of export.

Issue 3: Examination of Premium Breakup
The CESTAT order was influenced by a CERA objection regarding the appellant not paying Service Tax on the entire 'Marine Insurance Premium' collected. The tribunal observed that the demand for the period 2006-11 was dropped based on CERA's acceptance of appropriate tax discharge. However, the tribunal found shortcomings in the adjudicating authority's examination and the lack of detailed evaluation for subsequent periods.

Conclusion:
The High Court set aside the CESTAT order and restored the proceedings for adjudication on the specific issues raised by the appellant. The court emphasized that all contentions of the parties should be kept open for consideration once the tribunal examines and decides on the issues at hand. The remand was limited to the questions of law presented, without delving into other issues not raised before the court.

Marine insurance premiums service tax exemption case remanded to tribunal for legal examination
The Bombay HC set aside the tribunal's order in a service tax recovery case involving marine insurance premiums. The dispute concerned exemption under N/N. 3/1994 for premiums on export goods insurance. Rather than remanding to the adjudicating officer as the tribunal had done, the HC remanded the matter back to CESTAT to examine the legal questions posed. The court kept all parties' contentions open for future consideration of other issues that may arise after the tribunal's decision on the primary legal questions.

Remand to appellate tribunal - incomplete adjudicatory process - scope of exemption of premia collected on insurance of export of goods from India - treatment of inland transit component of marine insurance premium - equal treatment of taxpayers and scrutiny of certificatesRemand to appellate tribunal - incomplete adjudicatory process - Whether the CESTAT's order remanding the matter to the original adjudicating authority was appropriate or required setting aside and restoration to the tribunal for determination of the legal questions raised by the appellant. - HELD THAT: - The High Court found that the CESTAT had not addressed the specific legal questions raised by the appellant and that the adjudicatory process, as reflected in the impugned order, was incomplete. The Court observed that the tribunal failed to examine and decide the core legal issues which the appellant had specifically placed before it and, instead, remanded the matter to the original authority without resolving those legal points. In those circumstances the High Court concluded that a remand back to the adjudicating authority was inappropriate and that the proceedings should be restored to the CESTAT so that it may adjudicate the legal questions urged by the appellant; the impugned CESTAT order dated 9 September 2022 was set aside and the appeal restored to the tribunal for consideration of the issues identified by the High Court. All contentions of the parties were kept expressly open for the tribunal's decision. [Paras 6]Impugned CESTAT order set aside; Service Tax Appeal restored to CESTAT for adjudication of the legal issues identified by the High Court; contentions kept open.Scope of exemption of premia collected on insurance of export of goods from India - treatment of inland transit component of marine insurance premium - Whether the Court would decide on the substantive question of law concerning whether the portion of premium notionally attributed to inland movement to port of export falls within the exemption for premia on insurance of export of goods from India. - HELD THAT: - The High Court expressly declined to decide the substantive merits of the legal question regarding the inclusion of the inland transit component within the exemption for premia on insurance of export of goods. Instead, the Court remanded that legal question to the CESTAT for fresh adjudication, making clear that its remand is limited to the questions of law raised by the appellant and that other issues, if they arise thereafter, remain open for consideration by the tribunal.Substantive legal question as to the scope of the exemption (including inland transit component) not decided; remanded to CESTAT for adjudication on merits; other contentions reserved.Equal treatment of taxpayers and scrutiny of certificates - Whether the practice of giving blanket acceptance to certificates (for example, Chartered Accountant certificates) or according special treatment to public sector entities was endorsed by the Court. - HELD THAT: - The High Court endorsed the tribunal's observation that blanket acceptance of certificates without independent scrutiny does not lend credence to a finding and that according special treatment to public sector entities is inconsistent with the principle of equal treatment under tax law. That observation formed part of the Court's assessment that the adjudicatory process was incomplete and required fuller consideration by the tribunal. [Paras 6, 8]Court rejected any approach of uncritical acceptance of certificates or preferential treatment to public sector entities and required the tribunal to consider such matters in the course of fresh adjudication.Final Conclusion: The CESTAT order dated 9 September 2022 is set aside and Service Tax Appeal No. 85066 of 2016 (with cross-objection) is restored to the CESTAT for fresh adjudication of the specific legal questions identified by the appellant (including the scope of the exemption for premia on export insurance and the inland transit component); the remand is limited to those questions of law, other contentions are kept open, and no costs were awarded.

2023 (10) TMI 1298 - CESTAT AHMEDABAD Central Excise

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Job worker entitled to CENVAT credit on supplier's supplementary invoices for differential duty in stock transfer transactions
CESTAT Ahmedabad allowed the appeal where job worker was denied CENVAT credit on supplementary invoices issued by supplier for differential duty payment. The tribunal held that Rule 9(1)(b) of CENVAT Credit Rules 2004 restricting credit on supplementary invoices applies only to sale transactions, not stock transfers for job work. Since goods were received on returnable basis without consideration and ownership remained with supplier, the transaction was not a sale. Penalties on both appellant job worker and supplier were set aside as credit was rightfully available and supplier's supplementary invoice issuance was proper.

Rule 9(1)(b) of CENVAT Credit Rules, 2004 - stock transfer - sale of goods - revenue neutrality - extended period - suppression, fraud or wilful mis-statement - penalty under Section 11AC(1)(c) of the Central Excise Act - penalty under Rule 26(2) of the Central Excise Rules, 2002Rule 9(1)(b) of CENVAT Credit Rules, 2004 - stock transfer - sale of goods - revenue neutrality - extended period - suppression, fraud or wilful mis-statement - Whether CENVAT credit on supplementary invoices issued by the supplier is denyable under Rule 9(1)(b) where goods were transferred to the recipient as returnable stock for job work (not a sale). - HELD THAT: - The Tribunal held that the prohibition in Rule 9(1)(b) applies where the supplier's clearance is in the nature of a sale and the additional duty became recoverable from the supplier on account of non levy or short levy by reason of fraud, collusion or wilful mis statement or suppression of facts with intent to evade duty. The present transactions involved returnable transfers for job work; ownership remained with the supplier and no consideration was paid, therefore the transfers were not 'sale' as defined. Prior decisions of this and other Benches were followed to the effect that where there is merely a stock transfer (including inter unit transfers or transfers to a job worker) and the duty subsequently paid by the supplier is available as credit to the recipient, the exercise is revenue neutral and Rule 9(1)(b) does not bar the recipient from availing credit even if the supplier paid differential duty for an extended period. Applying this settled principle to the facts, the appellants were entitled to take CENVAT credit on the supplementary invoices issued by Hindustan Unilever Ltd.Credit on supplementary invoices admissible to the job worker/recipient because the transfers were not sales; Rule 9(1)(b) does not apply.Penalty under Section 11AC(1)(c) of the Central Excise Act - penalty under Rule 26(2) of the Central Excise Rules, 2002 - aid or abet - Whether penalties imposed on the appellant under Section 11AC(1)(c) and on Hindustan Unilever Ltd. under Rule 26(2) are sustainable in view of the availability of credit and the nature of the transactions. - HELD THAT: - Having held that the recipient was entitled to CENVAT credit because the transfers were not sales and the differential duty paid by the supplier made the overall exercise revenue neutral, the Tribunal found that the imposition of penalties could not be sustained. The record showed that Hindustan Unilever Ltd. issued legitimate supplementary invoices to discharge differential duty and there was no evidence that Hindustan Unilever aided or abetted any wrongful availment of credit by the recipient. Consequently, neither the penalty on the appellant under Section 11AC(1)(c) nor the penalty on Hindustan Unilever Ltd. under Rule 26(2) could be upheld.Penalties on both the recipient and Hindustan Unilever Ltd. set aside as unsustainable.Final Conclusion: The impugned order is set aside; the appeals are allowed - CENVAT credit on the supplementary invoices is admissible for the period in question and the confirmed demands and penalties against the appellant and Hindustan Unilever Ltd. are vacated.

2023 (10) TMI 1252 - CESTAT ALLAHABAD Central Excise

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Penalty upheld under Rule 26 CER for clandestine removal from unregistered factory manufacturing LPG valves
The CESTAT Allahabad dismissed an appeal challenging penalty under Rule 26 of CER for clandestine removal of excisable goods. The appellant operated an unregistered factory manufacturing LPG stove valves and brass bars without maintaining proper records. Despite claiming non-service of show cause notice, the tribunal found service was properly effected through pasting at premises under panchnama. The appellant's own statement under Section 14 of Central Excise Act admitted active involvement in clandestine operations. The tribunal rejected the appellant's alibi defense, finding natural justice principles were complied with and the penalty was justified given admitted participation in unauthorized manufacturing activities.

Valid service by pasting under panchnama and compliance with principles of natural justice - liability of persons operating a benami factory for clandestine manufacture and evasion of central excise duty - demand of excise duty under Section 11A(4) and recovery from persons concerned - interest on confirmed demand under Section 11AA/11AB - penalty on the unit under Rule 25 read with Section 11AC - penalty on persons responsible under Rule 26 - proof standard in clandestine removal cases and reliance on statements and private records to infer evasionValid service by pasting under panchnama and compliance with principles of natural justice - Service of show cause and hearing notices by pasting under panchnama was valid and there was no violation of principles of natural justice. - HELD THAT: - The adjudicating authority and the Tribunal found on the evidence of panchnamas that notices and hearing intimation were pasted at the factory and residential premises after other modes of service failed. The panchnamas record attempts to locate the noticees, refusal or inability of occupants to receive the notices, identification of panch witnesses and peaceful conduct of the proceeding. Applying the accepted test of procedural fairness and the prejudice principle (that principles of natural justice are flexible and a hearing requirement will not vitiate an order where sufficient notice was given and no prejudice is shown), the Tribunal held that adequate opportunity was afforded and the appellant, having chosen not to appear or file a reply, cannot claim breach of natural justice. [Paras 4]Service by pasting under panchnama was lawful; no breach of natural justice is made out and no prejudice shown.Liability of persons operating a benami factory for clandestine manufacture and evasion of central excise duty - demand of excise duty under Section 11A(4) and recovery from persons concerned - interest on confirmed demand under Section 11AA/11AB - penalty on the unit under Rule 25 read with Section 11AC - penalty on persons responsible under Rule 26 - proof standard in clandestine removal cases and reliance on statements and private records to infer evasion - Appellant was held liable as an operator/beneficiary of the benami factory; the demand of excise duty, interest and penalties on the unit and on the persons were sustained. - HELD THAT: - On the record-statements recorded under Section 14, materials seized at the factory, and admission of operational involvement-the Tribunal accepted the finding that the factory was operated jointly by the appellant and his deceased brother as an unnamed/benami unit engaged in clandestine manufacture and removal of excisable goods. The appellant's own statement acknowledged active participation, details of production capacity, absence of statutory records and use of kachha slips, supporting the inference of clandestine removals. Applying the established approach in clandestine removal cases, the burden of proof considerations and the admissible private and oral records were treated as sufficient to establish prima facie clandestine manufacture and clearance, justifying confirmation of the demand under Section 11A(4), interest under Section 11AA/11AB, penalty on the unit under Rule 25 read with Section 11AC and personal penalty under Rule 26 for persons responsible. The appellant did not challenge the material findings and did not discharge any onus to rebut the inferences drawn from the seized records and statements. [Paras 4]Findings of clandestine manufacture and evasion are upheld; demand, interest and the penalties on the unit and on the appellant under the stated provisions are sustained.Final Conclusion: The appeal is dismissed; the adjudicated demand of excise duty, interest and penalties as sustained by the adjudicating authority are upheld.

2023 (10) TMI 1222 - DELHI HIGH COURT Companies Law

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Delhi HC transfers winding up petitions to NCLT under Section 434 of Companies Act 2013
Delhi HC transferred winding up petitions to NCLT under Section 434 of Companies Act, 2013. Court held that proceedings were at nascent stage with only pleadings completed and no substantive orders passed. Following SC precedent in Action Ispat case, HC ruled that non-advanced winding up proceedings should be transferred to NCLT. Registry directed to transfer all petitions and electronic records to NCLT, with parties required to appear before NCLT on specified date.

Transfer of pending winding-up proceedings to the National Company Law Tribunal - stage of winding-up proceedings determining transferability - no fresh demand required where notice under Section 433 has been issued - registry obligation to list matters adjourned sine die after COVID-19Registry obligation to list matters adjourned sine die after COVID-19 - Registry to prepare list and ensure matters adjourned sine die during COVID-19 are listed before the Company Court; early hearing allowed. - HELD THAT: - The Court recorded that these petitions were last listed in February 2020 and were not listed thereafter despite the Company Court becoming functional post-pandemic. The Registry was directed to prepare a complete list of matters adjourned sine die during the COVID period and to list them before the Company Court after giving intimation to the parties' counsel. The applications for early hearing were allowed and disposed of. [Paras 2, 3, 4, 5]Registry to compile and list adjourned matters before the Company Court; early hearing granted and applications disposed of.Transfer of pending winding-up proceedings to the National Company Law Tribunal - stage of winding-up proceedings determining transferability - Winding-up petitions at a nascent stage are to be transferred to the NCLT for disposal in accordance with the Companies Act, 2013. - HELD THAT: - The petitions involved claims for unpaid commissions and, save for issuance of notices and completion of pleadings, no substantive or irreversible steps towards winding up had been taken. Having regard to Section 434 of the Companies Act, 2013 and the Supreme Court precedent that winding-up proceedings which have not reached an advanced or irreversible stage ought to be transferred to the NCLT, the Court held that these petitions no longer deserved continuation before the High Court and directed transfer to the Tribunal so that the NCLT may proceed in accordance with law. [Paras 9, 10, 11, 12]Petitions transferred to the NCLT because they are at a nascent stage and not fit to be continued before the High Court.No fresh demand required where notice under Section 433 has been issued - Petitioner is not required to issue a fresh demand before the NCLT because notices under Section 433 were already issued prior to filing. - HELD THAT: - The Court recorded that notices had been issued on 23rd August, 2013 and that the petitions were filed after such notices in accordance with law at the relevant time. Consequently, no fresh demand need be issued by the petitioner for continuation of the proceedings before the NCLT. [Paras 6, 13]No fresh demand required; proceedings to continue before the NCLT based on prior service of notice.Transfer of pending winding-up proceedings to the National Company Law Tribunal - Registry to transfer physical and electronic records of these petitions to the NCLT and parties directed to appear before the NCLT on the specified date. - HELD THAT: - Having ordered transfer of the petitions, the Court directed the Registry to transfer the petitions as well as the electronic record of the High Court to the NCLT so that the Tribunal may proceed in accordance with law. A date for appearance before the NCLT was specified. [Paras 14]Registry to transfer records to the NCLT; parties to appear before the NCLT on the notified date.Final Conclusion: The High Court directed the Registry to list matters adjourned sine die post-COVID and, on the merits of these petitions being at a nascent stage with only notices and pleadings completed, ordered transfer of all three winding-up petitions and the electronic record to the NCLT; no fresh demand was required and parties were directed to appear before the NCLT on the specified date.

2023 (10) TMI 1213 - CESTAT AHMEDABAD Central Excise

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Issues:
The issues involved in the judgment are related to the determination of related persons under the Central Excise Act, 1944, specifically in the context of a partnership firm and a proprietorship firm being considered as related entities. The case also deals with the imposition of excise duty based on alleged undervaluation of goods and the applicability of the time bar for raising demands and penalties.

Issue 1: Related Persons Determination:
The case revolved around the contention that the manufacturing firm and the trading firm were related due to familial connections, leading to the demand for differential duty. The Adjudicating Authority confirmed the demand, citing Section 4 of the Central Excise Act, 1944. The appellant challenged this, arguing that a partnership firm is a juridical person and cannot be considered a relative as per the Companies Act, 1956. The appellant also emphasized that the term "family" is not defined in Section 4 of the Act. Additionally, the appellant highlighted the timely communication of changes in partners and proprietors to the department, asserting that there was no suppression of facts, thus invoking the defense of being time-barred.

Issue 2: Time Bar and Evidence Consideration:
The Tribunal analyzed the evidence presented, including correspondence informing the department of changes in the firms' constitution. The appellant contended that despite acknowledgment by the department, the Adjudicating Authority questioned the authenticity of the letters due to missing entries in the inward register. The Tribunal found that the department failed to investigate the genuineness of the letters, relying on presumption and assumption. It was established that the demand fell under the extended period of limitation, but the Tribunal ruled in favor of the appellant, holding that the demand was not sustainable due to being beyond the normal limitation period.

Conclusion:
The Tribunal set aside the demand on the grounds of time bar, allowing the appeals and providing consequential relief to the appellant. The judgment emphasized the importance of proper investigation and adherence to legal provisions in determining related persons under the Central Excise Act, ensuring that demands are raised within the prescribed limitation period to maintain the validity of penalties imposed.

Partnership firm and proprietorship firm not related parties under Section 4 Central Excise Act despite common proprietor-partner
The CESTAT Ahmedabad held that a partnership firm and proprietorship firm cannot be considered related parties under Section 4 of Central Excise Act 1944, even when the proprietor is a partner in the partnership firm. The demand raised in 2013 for period 2002-08 was time-barred as it exceeded normal limitation period. Since the appellant regularly informed the department about firm constitution changes, there was no suppression of facts to invoke extended limitation period. The tribunal found no undervaluation as parties were not related, and dismissed the demand along with penalties as time-barred. Appeal was allowed.

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