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2023 (12) TMI 565 - CESTAT NEW DELHI Central Excise

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Excise duty confirmed on clandestine gutka manufacture after cross-examination of witnesses under Section 9D
CESTAT New Delhi upheld the adjudicating authority's order against the appellant for clandestine manufacture and clearance of gutka. The tribunal found sufficient opportunity was provided for cross-examination under Section 9D of the Central Excise Act, 1944, with four witnesses cross-examined. Large quantities of raw materials, packing materials, and finished gutka worth Rs.1,17,04,930/- were seized from four godowns without documentation. The tribunal confirmed excise duty of Rs.21,48,030/- was recoverable under Section 11A(1) with interest and penalty under Section 11AC, and ordered confiscation of seized goods. The appeal was dismissed.

Principles of natural justice - relevancy of statements under section 9D - right to cross-examination - burden of proof to establish identity of goods - failure to maintain statutory records under Rule 12(1) - confiscation and imposition of excise duty, interest and penalty - mens rea not required for imposition of tax penaltyPrinciples of natural justice - relevancy of statements under section 9D - Whether principles of natural justice and the requirements of section 9D were complied with in adjudication. - HELD THAT: - The Tribunal found that the Adjudicating Authority afforded multiple opportunities of personal hearing to the appellant and its authorised representative on specific dates and that hearings were conducted in compliance with the earlier remand directions. The Authority recorded that the authorised representative appeared and made submissions and that those noticees who did not appear were proceeded against on available evidence. On these facts the Tribunal held that the requirements of natural justice and the applicability of section 9D in the proceedings were satisfied. [Paras 5]Principles of natural justice and the applicability of section 9D were complied with.Right to cross-examination - relevancy of statements under section 9D - Whether the opportunity to cross-examine witnesses whose statements were relied upon was given and, if so, whether it was adequate. - HELD THAT: - The Adjudicating Authority allowed and recorded cross-examination of four of six witnesses by the appellant's authorised advocate; the remaining witnesses were not cross-examined because those noticees did not avail the opportunity. The Tribunal distinguished earlier authorities where cross-examination requests were denied, noting here that cross-examination was permitted and conducted in part. It applied the principle that the necessity and extent of cross-examination depends on the facts and must be relevant and not a device to delay; no prejudice was shown by the appellant arising from the manner in which cross-examination was conducted. [Paras 6, 7, 8]Opportunity for cross-examination was afforded and was not vitiated so as to infringe natural justice; no interference warranted.Burden of proof to establish identity of goods - Whether the appellant discharged the burden of proving that the goods seized from the four godowns were the same goods provisionally released earlier. - HELD THAT: - The Tribunal noted the appellant's contention that seized goods were those provisionally released earlier, but held that the appellant failed to produce any documentary or satisfactory evidence linking the seized goods to the earlier provisional release. The Adjudicating Authority's comparison showed no common entries between the two seizures and the identity of goods therefore remained unestablished; this contention was rejected. [Paras 10]Appellant failed to prove identity of seized goods with those provisionally released; contention rejected.Failure to maintain statutory records under Rule 12(1) - Whether the appellant complied with the statutory return and record-keeping requirements under Rule 12(1). - HELD THAT: - The Tribunal observed that the appellant did not submit the monthly returns and the specific statement summarising purchase and sales invoices as required under Rule 12(1) for pan masala products. In the absence of such records the appellant's explanation that the raw material was meant for distribution among units was unsupported and therefore not accepted. [Paras 11, 12]Non-compliance with Rule 12(1) established; appellant's explanation not accepted.Confiscation and imposition of excise duty, interest and penalty - mens rea not required for imposition of tax penalty - Whether seizure is liable for confiscation and whether duty, interest and penalty were rightly imposed. - HELD THAT: - Having accepted the findings of clandestine manufacture and storage of unaccounted raw material and finished goods and having found lack of statutory records and wilful suppression, the Tribunal upheld the Adjudicating Authority's conclusion that the seized goods were liable to confiscation under the Rules and that excise duty, interest and penalty under the relevant provisions of the Act were recoverable. The Tribunal applied the settled principle that mens rea is not necessary to attract tax penalties and that, where ingredients for penalty provision are made out, quantification at the duty amount was properly imposed. [Paras 13, 14]Confiscation upheld and duty, interest and penalty affirmed as justified.Final Conclusion: The Tribunal dismissed the appeal, holding that natural justice and section 9D requirements were complied with, that cross-examination opportunities were afforded and sufficiently availed, that the appellant failed to prove identity of the seized goods or compliance with Rule 12(1), and that confiscation together with recovery of excise duty, interest and penalty was justified and is affirmed.

2023 (12) TMI 564 - CESTAT CHENNAI Central Excise

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ISSUES PRESENTED AND CONSIDERED

1. Whether an assessee who, after payment of excise duty on clearances, issues credit notes to the buyer (or otherwise neutralizes the price/duty incidence) can satisfy the proviso to section 11B(2)(d) and obtain refund, or whether such post-clearance adjustments are irrelevant to the unjust enrichment inquiry.

2. Whether the presumption that the incidence of duty is passed to the customer (arising under statutory provisions governing invoices/clearances) is irrebuttable for purposes of denying refund, or is a rebuttable presumption capable of being displaced by evidence such as credit notes or subsequent price adjustments.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Relevance of post-clearance credit notes/adjustments to unjust enrichment under section 11B(2)(d)

Legal framework: Section 11B(2)(d) permits refund where the duty paid by the manufacturer has not been passed on to any other person. The statutory scheme focuses on whether the incidence of duty has been borne by the manufacturer or shifted to the buyer; unjust enrichment is the operative concern for refund sanction.

Precedent treatment: A coordinate tribunal bench and certain High Court decisions have held that evidence of post-clearance neutralization (credit notes, subsequent reduced pricing) rebuts the presumption of passing on and can establish absence of unjust enrichment. Other decisions have taken a stricter view, emphasizing that post-clearance adjustments are post facto and not relevant to the statutory test. The Court follows the line treating the presumption as rebuttable and giving effect to evidentiary neutralization by credit notes or adjusted pricing.

Interpretation and reasoning: The Court examined whether issuance of credit notes after clearance is a "post-clearance activity" irrelevant to section 11B(2)(d). It concluded that such actions are relevant and admissible evidence to show that the incidence of duty was not ultimately passed on. The Court emphasized that where the assessee produces credible proof that the duty burden has been neutralized vis-à-vis the customer (for example, by credit notes and certification by the customer that no input credit was availed), the initial statutory presumption shifts the evidentiary burden to the Revenue to prove continued passage of incidence or that the credit notes were bogus/not acted upon. The Court also noted considerations of trade facilitation and avoidance of financial hardship to an assessee who was compelled to pay duty because of administrative delay in issuance of exemption/amendment certificates.

Ratio vs. Obiter: Ratio - Post-clearance issuance of bona fide credit notes or demonstrable subsequent price adjustments are admissible and sufficient evidence to rebut the presumption of passing on, thereby satisfying the proviso to section 11B(2)(d) unless the Revenue shows contrary proof. Obiter - Observations concerning administrative sympathy and trade facilitation are persuasive but ancillary to the legal holding.

Conclusions: The Court held that credit notes issued after payment of duty can neutralize the passing on of incidence and are relevant for refund under section 11B(2)(d). Where such evidence is produced, refund must be allowed unless the Department adduces evidence disproving the genuineness/effect of those adjustments.

Issue 2 - Rebuttable nature of statutory presumption that duty incidence is passed to the customer

Legal framework: Statutory provisions create a presumption that where goods are cleared on payment of duty and the invoice shows an amount as duty, the incidence of that duty has been passed on to the purchaser. The presumption allocates the initial burden of proof.

Precedent treatment: Prior appellate and High Court authorities have characterised this presumption as rebuttable; once the assessee produces evidence (credit notes, lower subsequent pricing), the onus shifts to Revenue to disprove the claim. The Court adheres to this line of authorities and applies it to the facts.

Interpretation and reasoning: The Court recognized the presumption but treated it as rebuttable. It reasoned that the statutory presumption does not foreclose admission of contemporaneous or subsequent evidence demonstrating that the buyer did not, in fact, bear the duty (e.g., reimbursement reversed by credit notes, buyer's certification of non-availment of input credit). The practical effect is that the presumption raises a burden which the assessee can discharge; once discharged, the Revenue must prove unjust enrichment or that the adjustments are spurious.

Ratio vs. Obiter: Ratio - The statutory presumption that duty was passed on is rebuttable; credible post-clearance evidence of neutralization shifts the burden to Revenue and permits refund if Revenue cannot rebut. Obiter - The Court's remarks on the comparative weight of different forms of evidence (e.g., customer certification) are illustrative but not strictly necessary to the holding.

Conclusions: The Court concluded that the presumption of passing on is rebuttable by evidence such as credit notes or adjusted pricing, and that a genuine neutralization of incidence satisfies the proviso to section 11B(2)(d) for refund purposes.

Cross-reference and operational conclusion

Where an assessee paid duty due to administrative delay but subsequently issued bona fide credit notes (or otherwise neutralized the duty incidence) and produced corroborative evidence that the customer did not avail input credit or had been credited, the statutory proviso is satisfied and refund should be granted unless the Revenue adduces specific evidence of unjust enrichment. The burden allocation: initial presumption on passing on ? assessee may rebut by evidence of neutralization ? if rebutted, burden shifts to Revenue to disprove genuineness/effect of neutralization.

Refund granted for excess duty paid after credit notes issued under Section 11B(2)(d) neutralized tax burden passing
The CESTAT Chennai allowed an appeal for refund of excess duty paid. The appellant cleared goods without duty under a notification but later paid Rs.6,08,053/- on five consignments due to delayed receipt of amendment certificate. After receiving the certificate confirming duty exemption eligibility, they issued credit notes to customers and sought refund. The tribunal held that issuing credit notes neutralized the tax burden passing, satisfying Section 11B(2)(d) of Central Excise Act. The department should facilitate assessees in such circumstances rather than cause financial hardship when proof exists of neutralizing unjust enrichment. The refund was granted and impugned order set aside.

Rebuttable presumption of passing on of duty - unjust enrichment - refund under section 11B(2)(d) of the Central Excise Act - credit notes as evidence to neutralize passing of duty - burden of proof shifting to Revenue upon production of credit notesRebuttable presumption of passing on of duty - credit notes as evidence to neutralize passing of duty - refund under section 11B(2)(d) of the Central Excise Act - unjust enrichment - burden of proof shifting to Revenue upon production of credit notes - Post-clearance issue of issuing credit notes can rebut the presumption that the incidence of duty was passed on to the customer and thereby satisfies the condition in section 11B(2)(d) for grant of refund unless Revenue proves continued unjust enrichment by the assessee. - HELD THAT: - The Tribunal examined whether issuance of credit notes after clearance is a permissible means to neutralize an earlier passing-on of duty and thus remove the bar of unjust enrichment under section 11B(2)(d). It followed the Coordinate Bench decision in Commissioner of Central Excise Raipur v. IBP Ltd., which, affirmed by the Supreme Court, holds that the statutory presumption that duty shown on an invoice was passed on to the customer is rebuttable. When the assessee produces evidence such as credit notes or subsequent lower pricing showing neutralization of the earlier higher duty incidence, the initial burden of proof is discharged and the onus shifts to Revenue to demonstrate that the credit notes are bogus or that the assessee remained unjustly enriched. Applying that principle to the facts, where the appellant raised credit notes and produced evidence that the customer had not availed CENVAT credit, the Tribunal held that Revenue must have affirmative evidence to deny refund. The Court also noted that trade facilitation and avoidance of financial hardship to an assessee in such circumstances support allowing refund where the incidence has been neutralized and Revenue does not rebut the evidence of neutralization.The presumption of passing on is rebuttable by credit notes issued post-clearance; absent proof by Revenue of continued unjust enrichment, the refund condition under section 11B(2)(d) is satisfied.Final Conclusion: Impugned order set aside and appeal allowed; refund claim is sustainable where the assessee has shown neutralization of the passed-on duty by credit notes, unless Revenue proves that the credit notes were not effective or that unjust enrichment persists.

2023 (12) TMI 1319 - DELHI HIGH COURT Income Tax

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Tax Appeal Dismissed: Disallowance Can't Exceed Exempt Income for Assessment Year 2015-16.
The HC dismissed the revenue's appeal concerning the disallowance under Section 14A of the Income-tax Act for Assessment Year 2015-16, ruling that the disallowance cannot exceed the exempt income earned by the assessee. The decision was based on established precedents, and no substantial question of law was found. Consequently, the appeal and pending applications were closed as infructuous.

2023 (12) TMI 1304 - ITAT DELHI Income Tax

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Issues involved:
The issues involved in this judgment include the validity of assessment proceedings under section 153C of the Income Tax Act, the confirmation of addition made under section 69 of the Act, and the addition made on account of audit objection before completion of section 153C proceedings.

Validity of Assessment Proceedings under Section 153C:
The appeal challenged the initiation of assessment proceedings under section 153C of the Act, alleging absence of a valid satisfaction note prior to initiation. The appellant contended that the jurisdictional transfer was not accompanied by the required satisfaction note, rendering the entire assessment proceedings void ab initio. However, the Departmental Representative argued that only one satisfaction note is needed if the Assessing Officer is the same for both the searched and other persons under section 153C. The Tribunal upheld the validity of the assessment proceedings, noting that the satisfaction note had been duly recorded by the Assessing Officer.

Confirmation of Addition under Section 69:
The appeal contested the addition of Rs.76,75,000 made under section 69 of the Act, based on a document found during a search operation. The appellant argued that the document was unreliable as it lacked essential details and clarity, making it a "dumb document" with questionable evidentiary value. The Tribunal agreed with the appellant, emphasizing that the document did not provide sufficient basis for the addition. It highlighted that the document was unsigned, undated, and lacked corroboration, leading to the deletion of the addition under section 69.

Addition on Account of Audit Objection:
Another issue raised was the addition of Rs.24,04,394 on account of an audit objection and passing of an order under section 154 before completion of section 153C proceedings. The appellant argued that the addition was premature and exceeded the scope of rectification proceedings. However, the Tribunal dismissed this ground as it did not directly relate to the impugned order under challenge. Consequently, the Tribunal partly allowed the appeal, deleting the addition made under section 69 of the Act while dismissing the challenge related to the audit objection addition.

Separate Judgment Delivered:
No separate judgment was delivered by the judges in this case.

Assessment officer needs only one satisfaction note under section 153C when handling both searched and other person cases
ITAT Delhi upheld validity of assessment proceedings under section 153C, ruling that AO need record only one satisfaction note when same officer handles both searched person and other person cases. However, tribunal deleted addition under section 69 based on unsigned, undated loose papers found during search, holding such "dumb documents" without corroborative evidence cannot support additions. The papers lacked identification of author, contained incorrect figures, and had no substantive enquiry or cross-examination opportunity. Ground regarding audit objection and section 154 order was dismissed as not emanating from impugned CIT(A) order under challenge.

Initiation of proceedings under section 153C of the Income-tax Act - satisfaction note under section 153C - use of seized non-speaking / dumb documents as basis for additions - addition by way of unexplained investment under section 69 - rectification proceedings under section 154 limited to correction of mistakes apparent from recordInitiation of proceedings under section 153C of the Income-tax Act - satisfaction note under section 153C - Validity of assessment proceedings initiated under section 153C on the ground of absence of a valid satisfaction note - HELD THAT: - The assessee contended that no satisfaction note was recorded by the AO of the searched person prior to transfer of jurisdiction and therefore proceedings under section 153C were void. The CIT(A) reproduced the satisfaction note recorded by the AO identifying seized documents relating to the assessee and stating satisfaction for initiation of proceedings for deep investigation. The Tribunal noted the settled position that a single satisfaction note suffices where the same AO functions for the searched person and the other person, and applied the decision of the jurisdictional High Court relied on by the lower authorities. On the facts, the record contained a satisfaction note and the Tribunal found no merit in the contention that proceedings were vitiated for want of such note. [Paras 5, 6, 7, 8, 9]Ground alleging invalidity of proceedings under section 153C for want of satisfaction note is dismissed.Use of seized non-speaking / dumb documents as basis for additions - addition by way of unexplained investment under section 69 - Sustainability of addition made under section 69 of the Act based on an unsigned, undated loose paper and marginal jottings found during search - HELD THAT: - The assessment addition of the claimed cash payment was founded on an unsigned, undated computer-generated loose sheet found in the searched premises containing disparate entries, inconsistent totals, and marginal handwritten notings. The Tribunal observed that the paper did not belong to the assessee or seller, lacked dates, signatures, head-notes or explanatory particulars, and contained discrepancies between the agreement and the loose paper. The AO did not make enquiries such as summoning the seller, recording statements of relevant persons, or verifying the value of the property. Relying on established authorities accepting that 'dumb' or non-speaking documents without corroboration cannot sustain additions, the Tribunal held that the loose paper was an insufficient evidentiary basis for an addition under section 69 and that no substantive enquiry had been made to validate it. [Paras 12, 13, 14, 15, 16]Addition of Rs.76,75,000 made under section 69 is deleted.Rectification proceedings under section 154 limited to correction of mistakes apparent from record - Challenge to rectification under section 154 on account of audit objection made before completion of proceedings under section 153C - HELD THAT: - The assessee contended that the AO erred in making additions by rectification pursuant to audit objections before completion of proceedings under section 153C and that rectification is confined to mistakes apparent from the record. The Tribunal observed that this grievance did not emanate from the impugned CIT(A) order under challenge and accordingly treated the ground as not arising for adjudication in the present appeal. [Paras 17, 18]Ground relating to rectification under section 154 is dismissed as not emanating from the impugned order and devoid of merit in this appeal.Final Conclusion: The appeal is partly allowed: the addition of Rs.76,75,000 under section 69 is deleted; the challenge to initiation under section 153C for want of satisfaction note is dismissed; the grievance regarding rectification under section 154 is dismissed as not arising from the impugned order.

2023 (12) TMI 1300 - ITAT BANGALORE Income Tax

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Issues: (i) Whether receipts from supply of software licence and hardware were taxable as royalty; (ii) Whether maintenance and support service receipts were taxable as fees for technical services.

Issue (i): Whether receipts from supply of software licence and hardware were taxable as royalty.

Analysis: The receipts arose from granting a non-transferable, non-exclusive right to use software and related hardware as part of an integrated system. The terms did not transfer any copyright or proprietary interest in the software, and the transaction was materially identical to the one earlier considered in the assessee's own case. The governing principle applied was that consideration for use of a copyrighted article, without transfer of rights in the copyright itself, is not royalty.

Conclusion: The receipts from supply of software licence and hardware were not taxable as royalty and the addition was deleted.

Issue (ii): Whether maintenance and support service receipts were taxable as fees for technical services.

Analysis: The support services were routine post-sale maintenance and monitoring services and did not make available any technical knowledge, skill, experience, know-how, or technical design to the Indian customers. The services also did not satisfy the treaty conditions for fees for technical services under Article 13 of the India-United Kingdom DTAA. The Tribunal followed its earlier view in the assessee's own case and applied the make available test.

Conclusion: The maintenance and support service receipts were not taxable as fees for technical services and the addition was deleted.

Final Conclusion: The assessee succeeded on the substantive transfer-pricing characterisation issues, and the appeal was allowed.

Ratio Decidendi: Payment for a non-exclusive software licence and related support services is not taxable as royalty or fees for technical services where no copyright rights are transferred and no technical knowledge is made available to the recipient under the applicable treaty.

Non-exclusive software licence and support receipts were not royalty or technical services absent copyright transfer and make available of know-how.
Receipts from a non-transferable, non-exclusive software licence and related hardware were held not to be royalty because the arrangement granted only use of a copyrighted article without transferring any copyright or proprietary interest. The Tribunal also held that routine maintenance and support services were not fees for technical services, as they did not make available technical knowledge, skill, experience, know-how, or technical design to the customers and failed the treaty make available test under the India-United Kingdom DTAA. Applying its earlier view in the assessee's own case, it deleted the additions on both issues.

Royalty under DTAA - fees for technical services - make available clause - license versus sale of an integrated system - non exclusive non transferable software licence - interpretation of copyright rights in computer softwareRoyalty under DTAA - license versus sale of an integrated system - non exclusive non transferable software licence - interpretation of copyright rights in computer software - Receipts from supply of software license, hardware and provision of support services cannot be treated as "royalty". - HELD THAT: - The Tribunal held that the agreements grant only a non exclusive, non transferable licence to use object code as part of an integrated system (set top box, viewing card and software), without parting with proprietary copyright rights. Relying on its earlier decision in the assessee's own case and the Supreme Court's analysis in Engineering Analysis Centre of Excellence, the Tribunal treated the transactions as sale/supply of an integrated product rather than transfer of copyright; therefore the payments do not fall within the definition of royalty under the DTAA or the Act for the year under consideration. Applying the principle that the real nature of the transaction must be ascertained by reading the agreement as a whole, and noting restrictions such as prohibition on copying, reverse engineering and absence of transfer of IPR, the Tribunal concluded the receipts are not taxable as royalty. [Paras 4]Ground challenging characterization as royalty allowed; receipts not taxable as royalty for AY 2021-22.Fees for technical services - make available clause - interpretation of copyright rights in computer software - Maintenance and support receipts are not chargeable as Fees for Technical Services (FTS). - HELD THAT: - The Tribunal accepted the assessee's contention that the support and maintenance services are routine after sales services which do not 'make available' technical knowledge, skill, know how or processes to the Indian customers. Following its earlier reasoning in the assessee's own preceding assessments and precedent emphasizing that post sale support for an integrated product does not satisfy the 'make available' requirement of the DTAA, the Tribunal held that such receipts are not taxable as FTS under the India-UK treaty. [Paras 7]Ground recharacterising maintenance and support as FTS allowed; such receipts not taxable as FTS.Final Conclusion: The assessee's appeal is allowed for assessment year 2021-22: receipts from supply of software, hardware and related support are neither "royalty" nor "fees for technical services"; consequential stay petition is dismissed as infructuous.

2023 (12) TMI 1288 - CESTAT CHENNAI Service Tax

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Issues: (i) Whether the discounts or incentives received from airlines and shipping lines were taxable as Business Auxiliary Service; (ii) whether reimbursable expenses were includible in the taxable value for Custom House Agent Service; (iii) whether the demand relating to Goods Transport Agency Service was sustainable; (iv) whether limitation and penalty could be invoked.

Issue (i): Whether the discounts or incentives received from airlines and shipping lines were taxable as Business Auxiliary Service.

Analysis: One view held that the appellant booked cargo space on a principal-to-principal basis, that the airline or shipping line was not its client, and that the surplus arose from trading in cargo space rather than from promotion or marketing of services. Reliance was placed on earlier decisions treating such mark-up or incentives as non-taxable where the transaction was not one of agency or promotion of the client's services. The contrary view held that the true nature of the arrangement could not be determined on the existing record and that the factual matrix, agreements, and commercial flow required further examination.

Conclusion: One view held the demand unsustainable and set it aside, while the other view held that the matter required remand for fresh factual determination.

Issue (ii): Whether reimbursable expenses were includible in the taxable value for Custom House Agent Service.

Analysis: One view applied the settled principle that valuation under service tax is confined to the gross amount charged for the service and that reimbursable amounts not forming part of the consideration cannot be included. The other view considered that the factual basis for excluding the claimed reimbursements had not been adequately established and required reconsideration by the original authority.

Conclusion: One view held the demand unsustainable and set it aside, while the other view remanded the issue for fresh adjudication.

Issue (iii): Whether the demand relating to Goods Transport Agency Service was sustainable.

Analysis: The demand under this head was not contested on merits in one view, and the tax and interest were accordingly upheld, though penalty was waived. The other view treated the overall dispute as requiring reconsideration, while excluding the admitted GTA component from remand.

Conclusion: The GTA demand was upheld, with penalty set aside, but the matter as a whole did not culminate in a final majority determination.

Issue (iv): Whether limitation and penalty could be invoked.

Analysis: One view held that the facts were accounted for in financial statements and that no suppression with intent to evade was established, so the extended period and penalties were not justified. The other view held that the evidentiary and factual foundation was insufficient and that the matter required de novo consideration.

Conclusion: One view held limitation and penalty against the appellant unsustainable, while the other view directed reconsideration.

Final Conclusion: The appeal did not result in a final majority determination on the disputed tax heads, and the remaining controversy was left unresolved in the absence of a conclusive bench view.

Ratio Decidendi: Where the factual foundation for characterising receipts and valuation is incomplete, the dispute may require fresh adjudication rather than final determination on assumptions; reimbursable amounts are not taxable unless they form part of the consideration for the service.

Service tax valuation disputes: incentives, reimbursements, GTA liability, and limitation turned on unresolved factual characterisation.
Discounts or incentives from airlines and shipping lines were discussed in relation to Business Auxiliary Service, with one view treating the amounts as trading surplus from cargo-space booking on a principal-to-principal basis and not taxable as promotion or marketing of another's services, while the contrary view called for remand because the commercial arrangement needed fuller factual examination. Reimbursable expenses in Custom House Agent Service were addressed on the settled valuation principle that only the gross amount charged for the service is taxable, but one view sought fresh adjudication on the factual basis. The paper also notes a disputed Goods Transport Agency component and divergence on limitation and penalty, with one view rejecting suppression and the other seeking de novo consideration.

Business Auxiliary Services - Custom House Agent Service - Goods Transport Agency Service - Taxability of markup/discount as trading (purchase and sale of cargo space) and not consideration for service - Valuation - reimbursed expenses excluded from taxable value - Burden of proof and shifting of onus where facts are within assessee's knowledge - Limitation / extended period - no suppression where amounts are reflected in accountsBusiness Auxiliary Services - Taxability of markup/discount as trading (purchase and sale of cargo space) and not consideration for service - Demand of service tax raised on incentives/discounts received from airlines and shipping lines under Business Auxiliary Services - HELD THAT: - The Tribunal (Majority, Member Judicial) examined the nature of the appellant's activity of booking and selling cargo space and concluded that discounts/incentives received from liners are not consideration for promotion or marketing of liners' services where the transactions are principal-to-principal (purchase and sale of space). Relying on earlier Tribunal precedents, it held that trading in space produces a profit or loss and such surplus is business profit and not consideration for a taxable service under clause (ii)/(vii) of the definition of Business Auxiliary Service. The Bench therefore found the demand on such incentives unsustainable and set aside the demand, interest and penalties in respect of BAS. The Tribunal emphasised that where the liners are not clients and no promotion/marketing service is rendered to them, the incentive cannot be taxed as BAS. [Paras 6, 11]Demand of service tax, interest and penalties under Business Auxiliary Services set aside.Custom House Agent Service - Valuation - reimbursed expenses excluded from taxable value - Demand of service tax raised under Custom House Agent (CHA) service on various expenses reimbursed by clients - HELD THAT: - Applying the Supreme Court's decision in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal (Majority) held that reimbursed expenses which do not form part of the gross amount charged 'for such service' are not includible in the taxable value. On appreciation of facts and authority, the Bench held that the demand under CHA in respect of reimbursable expenses cannot be sustained and set aside the demand, interest and penalties confirmed by the original authority. [Paras 3, 7, 11]Demand of service tax, interest and penalties under Custom House Agent Service set aside.Goods Transport Agency Service - Limitation / extended period - no suppression where amounts are reflected in accounts - Demand of service tax raised under Goods Transport Agency (GTA) service and related penalties and interest - HELD THAT: - The appellant did not contest the demand under GTA before the Tribunal. The Tribunal upheld the demand and interest for GTA services but set aside the penalties, finding that the appellant offered a reasonable explanation and that there was no established positive act of suppression given that the amounts were reflected in the accounts. The Tribunal therefore sustained the tax and interest due on GTA while remitting or cancelling penalties. [Paras 3, 8, 11]Demand and interest on GTA upheld; penalties in respect of GTA set aside.Burden of proof and shifting of onus where facts are within assessee's knowledge - Limitation / extended period - no suppression where amounts are reflected in accounts - Whether extended period of limitation and penalties could be invoked where amounts were disclosed in the assessee's financial statements - HELD THAT: - The Tribunal considered the department's investigatory material and the appellant's financial statements. It observed that while the initial burden to establish taxability lies on the department, the onus shifts when relevant facts are peculiarly within the assessee's knowledge. Nonetheless, because the appellant had accounted the relevant amounts in its financial statements (not concealed) and there was no positive act of suppression, the Tribunal answered limitation issues in favour of the appellant and set aside penalties (specifically invoking Section 80 for GTA penalties). [Paras 10, 11, 16, 17]Limitation and penalty contentions resolved in favour of the appellant: no suppression established; penalties set aside (GTA penalties set aside explicitly).Business Auxiliary Services - Custom House Agent Service - Remand / further factual examination sought by the dissenting Member (Technical) on BAS and CHA issues - HELD THAT: - The Member (Technical) disagreed with the majority's disposal on BAS and CHA. He held that the Tribunal, as last fact-finding forum, should examine factual records, written agreements, dates of master/house bills of lading, invoicing sequences, evidence of bulk booking, risk/indemnity arrangements, and whether incentives constituted commission or discounts, before adjudicating taxability. Consequently, he directed that BAS and CHA issues be reexamined afresh by the original authority with opportunity to the appellant to adduce evidence, and framed points of difference for resolution. [Paras 13, 24, 28, 36, 38]Matter remitted by the dissenting Member for fresh factual examination of BAS and CHA; points of difference framed between Members.Final Conclusion: The appeal was partly allowed: the Tribunal (majority) set aside demands, interest and penalties in respect of Business Auxiliary Services and Custom House Agent Service; it upheld the demand and interest for Goods Transport Agency service but set aside penalties relating to GTA. A Member (Technical) dissented on BAS and CHA and directed remand for fresh factual examination, resulting in points of difference being framed.

2023 (12) TMI 1500 - ITAT MUMBAI Income Tax

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Section 68 addition fails where share applicants prove identity, creditworthiness and genuineness, and no cross-examination is given.
Where an assessee substantiates share application money with PAN, returns, financial statements, bank statements and confirmations from the applicants, the requirements of identity, creditworthiness and genuineness are met on primary evidence. An addition under section 68 cannot then be sustained merely on the basis of an untested third-party statement recorded behind the assessee's back, especially where the statement was not confronted and no cross-examination was allowed. As the applicants responded to notices and the revenue did not show any infirmity in the materials produced, the unexplained cash credit addition was held unsustainable and deleted.

2023 (12) TMI 1489 - Supreme Court Indian Laws

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Dishonour of cheque notice challenged for omnibus demand invalidity, resulting in quashing of criminal summons.
Negotiable Instruments Act matter concerning validity of statutory notice for cheque dishonour where the notice included an omnibus demand beyond the cheque amount together with interest, damages and notice charges; the presence of an unspecified omnibus claim renders the demand notice noncompliant with statutory requirement and invalid, applying the principle in Suman Sethi that additional omnibus demands vitiate a s.138 notice, and consequently the criminal summoning order based on such notice was quashed.

2023 (12) TMI 1487 - CESTAT NEW DELHI Service Tax

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Statutory police security charges are not security agency service consideration when collected under law and remitted to treasury.
Charges collected by the police for providing guards to banks were held not to constitute consideration for security agency services, because the activity was performed as part of a statutory duty rather than in the course of a security business. The applicable CBEC circular covered charges recovered by a sovereign or public authority for mandatory statutory functions, where the fee is collected under law and remitted to the Government treasury. Those conditions were satisfied, so service tax was not leviable and the demand failed.

2023 (12) TMI 1469 - CESTAT MUMBAI Customs

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Issues: (i) Whether the imported hydraulic rock breaker was liable to additional duty of customs on the basis of retail sale price under Section 3(1) of the Customs Tariff Act, 1975. (ii) Whether re-determination of retail sale price on the basis of a market survey report and the consequent demand of differential duty were legally sustainable.

Issue (i): Whether the imported hydraulic rock breaker was liable to additional duty of customs on the basis of retail sale price under Section 3(1) of the Customs Tariff Act, 1975.

Analysis: Liability to additional duty on retail sale price basis arises only when two conditions are satisfied: the imported article must be one on which the Legal Metrology law requires declaration of retail sale price on the package, and the like domestic article must be subject to retail sale price based valuation under Section 4A of the Central Excise Act, 1944. The imported goods were found packed in wooden crates and not in individually packaged form. The goods were also of heavy weight, far exceeding the exclusion threshold under the Packaged Commodities Rules. On these facts, the goods did not answer the description of a pre-packaged commodity and were outside the scope of the mandatory declaration regime.

Conclusion: The imported goods were not liable to additional duty of customs on retail sale price basis.

Issue (ii): Whether re-determination of retail sale price on the basis of a market survey report and the consequent demand of differential duty were legally sustainable.

Analysis: Where the Legal Metrology law does not require declaration of retail sale price on the imported package, the customs authorities cannot ascertain or re-determine retail sale price by resorting to a market survey or by adopting another notional price. The relevant notifications applied only where the statutory preconditions for retail sale price based levy were met. Since the imported goods were not covered by those preconditions, the reassessment adopted in the impugned order lacked legal foundation.

Conclusion: Re-determination of retail sale price and the resulting demand of differential duty were not sustainable.

Final Conclusion: The impugned duty demand based on retail sale price valuation could not be sustained, and valuation had to proceed on the ordinary customs value framework.

Ratio Decidendi: Retail sale price based assessment under Section 3 of the Customs Tariff Act, 1975 is permissible only when the imported goods are statutorily required to bear a retail sale price declaration and the customs authorities cannot substitute a notional retail price where that statutory prerequisite is absent.

Retail sale price-based customs duty applies only when packaged goods are legally required to bear RSP declarations.
Retail sale price-based additional customs duty applies only where the imported goods are required by legal metrology law to bear an RSP declaration and the corresponding domestic article is valued under the retail sale price mechanism. Hydraulic rock breakers imported in wooden crates and not as individually packaged commodities fell outside the pre-packaged commodity regime, so additional duty on RSP basis was not chargeable. Customs authorities could not re-determine RSP through a market survey or adopt a notional retail price when the statutory preconditions were absent. The valuation therefore had to proceed under the ordinary customs value framework, and the differential duty demand based on RSP valuation was not sustainable.

Liability to additional duty of Customs (CVD) on the basis of Retail Sale Price (RSP/MRP) under Section 3(1) of the Customs Tariff Act, 1975 - import of Hydraulic Rock Braker - re-determination of MRP/RSP of the imported goods on the basis of market survey report - demand of differential additional duty of customs - HELD THAT:- The Additional Duty of Customs (CVD) is leviable on any imported goods under Section 3 of the Customs Tariff Act, 1975. The value for the purpose of determining CVD is provided under sub-section (2) of Section 3 ibid, is the transaction value or the tariff value, as determined under Section 14 of the Customs Act, 1962. In terms of the proviso to Section 3(2) ibid, the value of the imported goods shall be determined on the basis of RSP/MRP declared on the package thereof, if such imported goods fulfill both the following two legal requirements. These are, firstly (i) there shall be a requirement under the Legal Metrology Act, 2009 or the rules made thereunder, for declaration of RSP/MRP on the packages thereof; and secondly (ii) the excise duty on like article produced or manufactured in India, to that of the imported goods, are subjected to RSP/ MRP based levy under Section 4A of the Central Excise Act, 1944. On careful perusal of the facts on record, and the entry appearing in Sl. No. 109 of Notification No.49/2008-C.E. (N.T.) dated 24.12.2008 as amended by Notification No.19/2010-C.E. (N.T.), dated 29.04.2010, it transpires that the imported goods falling under ‘any chapter’ of the First Schedule to the Central Excise Tariff, and covered by the description viz., “Parts, components and assemblies” of goods falling under tariff item 8426 41 00, headings 8427, 8429 and sub-heading 8430 10, are liable to be pay CVD/Central Excise duty on the basis of RSP/MRP, in terms of the above notification. The imported ‘Hydraulic Rock Breaker’ being parts, components and assemblies of Excavators classifiable under tariff item 8429 4030, are rightly covered under the scope of the entry under the above notification. Thus, the second legal requirement is fulfilled in the present case. As regards the first legal requirement, it is found that the scope of the coverage of Legal Metrology Act and Rules made thereunder, has specifically provide for declaration of mandatory details including the RSP/MRP only in respect of "pre-packaged commodity" under Rule 6 ibid. The phrase, prepacked commodity has also been defined to mean a commodity which without the purchaser being present is placed in a package of whatever nature, whether sealed or not, so that the product contained therein has a pre-determined quantity. The Circular No. WM/10(5)/2016 dated 16.12.2016 issued by Line Ministry dealing with the Legal Metrology (Packaged Commodities) Rules have clearly spelt out mandatory declaration on the packages thereof, including RSP/MRP is applicable only to the goods sold to the consumer in pre-packed form and this will not apply for those goods sold in loose form. Thus, it follows that when the competent authority in the line Ministry dealing with the parent statue administered by them, have clarified the correct legal position, the same is required to be followed by the other governmental authorities, including Customs field formations, for the purpose of uniformity in implementation of the law - the Hydraulic Rock Brakers imported by the appellants as subjected to RSP/MRP based levy of additional duty of customs is not legally sustainable. It is found that on a similar set of facts, in the case of King Kaveri Trading Co. [2018 (11) TMI 1768 - CESTAT MUMBAI], the Co-ordinate Bench of the Tribunal has dealt with the similar issue of levy of additional duty of customs on RSP/MRP basis in respect of import of trailer parts and have held that on account of the fact that the parts are of heavy weight, these are excluded from the scope of coverage of Packaged Commodity Rules and that the adoption of another price by the customs officer does not constitute proper assessment of duty. It is further found that the Hon’ble Supreme Court in the case of Jayanthi Food Processing (P) Ltd., [2007 (8) TMI 3 - SUPREME COURT] have held that if the appellant is successful in showing that there is no requirement under the Standards of Weights and Measures Act or the Rules made thereunder for declaration of MRP on the package, then there is no question of application of Section 4A(1)&(2) of the Act for MRP/RSP based levy. The imported ‘Hydraulic Rock Braker’ is not leviable to additional duty of Customs (CVD) on the basis of Retail Sale Price (RSP/MRP) under Section 3(1) of the Customs Tariff Act, 1975, but on the basis of transaction value as determined under the Customs Act, 1962 - the impugned order passed by the learned Principal Commissioner of Customs in confirmation of the adjudged demands cannot be sustained on merits. Appeal allowed.

2023 (12) TMI 1466 - SC Order Indian Laws

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Arbitrator Ineligibility under Section 12(5) did not justify Article 136 interference; Special Leave Petition was dismissed.
Interference under Article 136 was sought despite the admitted ineligibility of the arbitrator under Section 12(5) of the Arbitration and Conciliation Act, 1996. The Supreme Court did not find a basis to disturb the matter in these circumstances and dismissed the Special Leave Petition; the pending application was also disposed of.

2023 (12) TMI 1430 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI IBC

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Resolution plan allocation upheld where tax claim was contingent and secured operational creditor status was not established.
The Income Tax Department's claim in the resolution plan was treated as a contingent liability because the assessment order was under appeal, and its demand for a higher allocation was not accepted. The tribunal found that the allocation made to the operational creditor was not shown to be below the amount payable in liquidation, so the plan did not require interference on that ground. The claim to secured creditor status was rejected because no basis was established for treating the claimant as a secured operational creditor. The allocation under the approved resolution plan was therefore upheld.

2023 (12) TMI 1402 - KERALA HIGH COURT GST

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Stay condition requiring 20% deposit upheld where concessional tax claim lacked supporting documents.
A stay condition requiring deposit of 20% of the assessed tax demand was upheld as lawful where the appellate authority found, on a prima facie basis, that the assessee had not produced documents to justify concessional tax treatment. The challenge failed because the partial deposit requirement was imposed in light of the substantial tax liability and the absence of substantiating material for the claimed concessional rate.

2023 (12) TMI 1361 - DELHI HIGH COURT Indian Laws

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Delhi HC orders disclosure of recruitment rules under RTI but exempts sexual harassment allegations
Delhi HC ruled on RTI disclosure regarding sexual harassment allegations. Court held that information about recruitment rules does not fall under Section 24 exemption of RTI Act 2005, but non-disclosure of sexual harassment allegations constitutes human rights violation exempted under the proviso. HC set aside CIC order dated 27th November 2019 and directed ED to disclose requested information within eight weeks. Petition disposed of with direction for information disclosure.

Exemption under Section 24 of the RTI Act, 2005 - Proviso to Section 24 relating to allegations of corruption and human rights violations - Human rights violation as exception to statutory exclusion - Directorate of Enforcement as an organisation specified in the Second Schedule - Applicability of RTI to service records and promotion-related information - Administrative disclosure despite statutory exclusionExemption under Section 24 of the RTI Act, 2005 - Directorate of Enforcement as an organisation specified in the Second Schedule - Applicability of RTI to service records and promotion-related information - Whether information relating to recruitment rules and related notes sought from the Directorate of Enforcement falls within the proviso to Section 24 and is disclosable under the RTI Act - HELD THAT: - Having regard to binding and consistent precedents treating organisations specified in the Second Schedule (including the ED) as excluded from the RTI Act, and to the scope of the proviso to Section 24 which confines disclosure to information pertaining to allegations of corruption or human rights violations, the Court examined the RTI request for recruitment rules, note sheets and seniority-maintenance details. On the facts of this petition the information sought concerned recruitment/service rules and processes and did not pertain to allegations of corruption or to human rights violations. Although courts have in particular fact situations treated non-supply of certain service records as engaging human rights, the present request does not fall in that category. Accordingly the proviso does not apply and the Directorate of Enforcement is entitled to the statutory exemption; the Central Information Commission's direction to disclose in its order dated 27th November, 2019 cannot be sustained. [Paras 25, 26]Impugned CIC order dated 27th November, 2019 set aside; information relating to recruitment rules held not disclosable under the proviso to Section 24.Proviso to Section 24 relating to allegations of corruption and human rights violations - Human rights violation as exception to statutory exclusion - Applicability of RTI to service records and promotion-related information - Whether information sought concerning alleged sexual harassment and implementation of an order against an individual falls within the proviso to Section 24 and is disclosable under the RTI Act - HELD THAT: - The Court observed that the question whether information of organisations in the Second Schedule is disclosable under the proviso to Section 24 must be addressed on the facts of each case; the Supreme Court has left the broader question of law open. On the facts of the present RTI application, the information sought related to allegations of sexual harassment and the implementation of an order arising from those allegations. The Court held that non-disclosure of such information would impede the RTI applicant's ability to agitate her right to promotion and, in the conspectus of rights relating to life, liberty, equality and dignity, constituted a human rights concern falling within the proviso. The Court expressly limited its determination to the issue of disclosure of the requested information and did not adjudicate the underlying sexual harassment allegation. [Paras 27, 29, 30]Impugned CIC order dated 18th March, 2019 upheld in substance; ED directed to disclose the information sought in the RTI application within eight weeks.Final Conclusion: The writ petitions are disposed of: the CIC order directing disclosure of recruitment-related documents is quashed, while the CIC order directing disclosure of information relating to alleged sexual harassment is affirmed and the ED is directed to furnish that information within eight weeks; the Court did not adjudicate the merits of the harassment allegations.

2023 (12) TMI 1327 - ITAT BANGALORE Income Tax

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Co-operative society's interest income from Central Co-operative Bank may qualify for section 80P deduction if investment was compulsory under state law
ITAT Bangalore allowed the assessee's appeal for statistical purposes, directing the AO to re-examine whether interest income from Central Co-operative Bank investments was compulsory under Karnataka Co-operative Societies Act, 1959. If compulsory, such income qualifies as business income eligible for deduction under section 80P(2)(a)(i). The Tribunal followed precedent from Totgars Co-operative Sale Society Ltd case, restoring the matter to AO for fresh consideration with proper hearing opportunity for the assessee.

Deduction under section 80P(2)(a)(i) - Principle of mutuality - Interest income from investments with Central Co-operative Banks treated as business income where investments are made under statutory compulsion - Cost of funds deduction under section 57 for interest assessed as income from other sources - Disallowance under section 40(a)(ia) - Remand to Assessing Officer for verification of compliance with Karnataka Co-operative Societies Act, 1959Deduction under section 80P(2)(a)(i) - Interest income from investments with Central Co-operative Banks treated as business income where investments are made under statutory compulsion - Remand to Assessing Officer for verification of compliance with Karnataka Co-operative Societies Act, 1959 - Whether interest income received on investments with Central Co-operative Banks is entitled to deduction under section 80P(2)(a)(i) if such investments are made pursuant to compulsion under the Karnataka Co-operative Societies Act, 1959 and the relevant Rules. - HELD THAT: - The Tribunal applied and followed earlier coordinate-bench decisions holding that where investments with Central Co-operative Banks are made in compliance with statutory compulsion under the Karnataka Co-operative Societies Act, 1959 and the relevant Rules, the interest income arising therefrom is to be treated as business income of the co-operative society and would attract deduction under section 80P(2)(a)(i). On identical facts in earlier orders the Tribunal directed remand to the Assessing Officer to examine whether the investments were made by compulsion under the Act and Rules; if so, to assess the receipts as business income and allow deduction under section 80P(2)(a)(i). Applying that reasoning, the Tribunal restored the issue to the AO for verification and fresh decision in accordance with law, directing that if the investments are found to be made under statutory compulsion they be treated as part of the assessee's business activity and entitled to the claimed deduction. [Paras 10, 12]Remit to the Assessing Officer to examine whether the interest income from investments with Central Co-operative Bank arises from investments made under compulsion of the Karnataka Co-operative Societies Act, 1959; if so treat the receipts as business income and allow deduction under section 80P(2)(a)(i).Cost of funds deduction under section 57 - Netting of administrative and proportionate expenses against interest income - Whether the assessee is entitled to deduction of cost of funds and proportionate administrative expenses under section 57 in respect of interest income assessed under the head 'income from other sources'. - HELD THAT: - Relying on the decisions of the Karnataka High Court and recent coordinate-bench authority, the Tribunal held that where interest earned on deposits placed with banks is assessed under 'income from other sources', the assessee is entitled to deduct the proportionate cost of funds and administrative expenses incurred in earning that interest. The Tribunal therefore directed remand to the Assessing Officer to quantify the cost of funds and proportionate administrative expenditure and allow such deduction under section 57 (and Section 57(3) as applicable), permitting the Assessing Officer to compute and give effect to the deduction after affording the assessee a reasonable opportunity of hearing. [Paras 11, 12]Remit to the Assessing Officer to compute and allow deduction for cost of funds and proportionate administrative expenses under section 57 for interest income assessed as income from other sources, in accordance with the cited judicial precedents.Final Conclusion: Appeal allowed for statistical purposes; matters remanded to the Assessing Officer to (i) examine whether investments with Central Co-operative Banks were made under statutory compulsion and, if so, treat the interest as business income eligible for deduction under section 80P(2)(a)(i), and (ii) quantify and allow deduction of cost of funds and proportionate administrative expenses under section 57 for interest assessed as income from other sources, after affording the assessee a reasonable opportunity of hearing.

2023 (12) TMI 1277 - TELANGANA HIGH COURT GST

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Writ petition against GST Rule 129 show-cause notice dismissed as premature without final adverse order
The Telangana HC dismissed a writ petition challenging a show-cause notice issued under Rule 129 of the Central Goods and Services Tax Rules, 2017 in anti-profiteering proceedings. The court held that writ petitions against mere show-cause notices are premature as they do not create any cause of action or infringe rights. Such notices do not constitute adverse orders affecting parties' rights unless issued without jurisdiction. The authority may drop proceedings or find charges unestablished after considering replies. Only final orders imposing punishment or adversely affecting parties give rise to grievances warranting judicial intervention.

Writ against show-cause notice - prematurity of writ - jurisdictional challenge to notice and non est - failure to pass on benefit of tax reduction under Section 71 of the CGST Act, 2017 - obligation to reply to notice and produce documents - virtual hearings by the Competition Commission of IndiaWrit against show-cause notice - prematurity of writ - jurisdictional challenge to notice and non est - obligation to reply to notice and produce documents - Maintainability of writ petition challenging notice and summons issued under Rule 129 of the CGST Rules, 2017 and Section 71 allegations - HELD THAT: - The High Court applied settled precedents holding that ordinarily a writ petition challenging a show-cause notice or charge-sheet is premature and should not be entertained unless the notice is totally non est or issued without jurisdiction. A show-cause notice does not by itself give rise to a cause of action because no adverse order affecting rights has been passed; the recipient must ordinarily be directed to reply and pursue statutory remedy. The petitioner's factual and practical contentions (difficulty of passing on commensurate reduction for services, ticket price fixation by State, variation across categories, and payment of tax at reduced rate) are defences available to be raised before the authority and do not establish a jurisdictional defect. Consequently the petitioner was directed to appear, furnish a detailed reply and relevant documents; the authority is expected to consider the submissions and proceed in accordance with law, including dropping proceedings if warranted. [Paras 13, 14, 15]Writ petition to quash the notice and summons is not entertained; petitioner to appear and file response and the authority to decide further in accordance with law.Virtual hearings by the Competition Commission of India - Direction to the Competition Commission of India regarding manner of hearings - HELD THAT: - Noting practical hardship caused by requirement of physical appearance at the Commission in New Delhi, the Court directed the Competition Commission of India to take steps to permit interested parties to appear and contest their cases virtually. The direction recognises the move towards digital hearings and addresses economic and logistical difficulties of mandatory physical presence, while leaving the Commission to implement measures permitting virtual participation. [Paras 16]Competition Commission of India to ensure interested persons may be permitted to appear and contest their cases virtually instead of insisting on physical presence.Final Conclusion: Writ petitions dismissed with liberty to the petitioner to appear before the authorities, file detailed replies and documents; authorities to proceed in accordance with law. The Competition Commission of India is directed to facilitate virtual appearances for parties.

2023 (12) TMI 1257 - ITAT SURAT Income Tax

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Issues: (i) whether the delay in filing the appeals deserved to be condoned; (ii) whether the reassessment for the earlier year was valid when objections to reopening were not disposed of by a speaking order and the recorded reasons were found to be arbitrary; and (iii) whether the additions arising from bank deposits for the later year should be sustained in full or restricted to an estimated profit element.

Issue (i): whether the delay in filing the appeals deserved to be condoned.

Analysis: The delay was considered in the backdrop of the Covid-19 period, the assessee's medical condition, and the surrounding circumstances pleaded for the late filing. The explanation was tested on the settled principle that applications for condonation require a liberal and justice-oriented approach where the delay is not shown to be deliberate or contumacious. The materials were found sufficient to show reasonable cause for the delay.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): whether the reassessment for the earlier year was valid when objections to reopening were not disposed of by a speaking order and the recorded reasons were found to be arbitrary.

Analysis: The assessee had objected to the reopening during assessment proceedings. The Assessing Officer was bound to dispose of those objections by a speaking order before completing reassessment. That was not done. The recorded reasons were also found to suffer from material mismatch and lack of application of mind. In these circumstances, the reassessment could not be sustained.

Conclusion: The reassessment was quashed in favour of the assessee.

Issue (iii): whether the additions arising from bank deposits for the later year should be sustained in full or restricted to an estimated profit element.

Analysis: The cheque deposits were treated as being from known sources and were deleted. As regards the cash deposits, the Tribunal applied an estimated profit approach and, on the facts, restricted the addition to 5% of the cash deposits. The remaining addition was sustained only to that limited extent.

Conclusion: The addition was partly deleted and partly sustained in favour of the assessee to a limited extent.

Final Conclusion: The delay challenge was accepted, the reassessment for one year was annulled, and the additions for the other year were substantially reduced by deleting the cheque-related amount and estimating only a limited profit element on cash deposits.

Ratio Decidendi: Objections to reopening under sections 147 and 148 of the Income-tax Act, 1961 must be disposed of by a speaking order before reassessment is completed, and where bank deposits are not fully explained, the addition may be confined to a reasonable estimated profit element rather than the entire gross deposits.

Reopening objections must be decided by speaking order, and unexplained bank deposits may justify only estimated profit addition.
Delay in filing the appeals was condoned on a liberal, justice-oriented approach, as the assessee showed reasonable cause linked to the Covid-19 period and medical circumstances. Reassessment for the earlier year was quashed because the Assessing Officer did not dispose of reopening objections by a speaking order and the recorded reasons showed mismatch and lack of application of mind. For the later year, additions based on bank deposits were reduced: cheque deposits were deleted as explained from known sources, while cash deposits were sustained only to the extent of an estimated 5% profit element.

Condonation of delay for sufficient cause (COVID-19 and ill health) - reopening of assessment - disposal of objections to notice under Section 148 by passing a speaking order - reasons to believe - quashing of reassessment for failure to dispose objections and for arbitrary reasons - treatment of unexplained bank deposits as income - ad hoc addition at the rate of 5% of cash deposits for small assesseeCondonation of delay for sufficient cause (COVID-19 and ill health) - Condonation of delay in filing the appeals for AYs 2010-11 and 2011-12 - HELD THAT: - The Tribunal examined the affidavit and materials filed in support of the application for condonation of delay and noted that the period from 15.03.2020 to 28.02.2022 (with an additional 90 days) had been the subject of relief by the Hon'ble Supreme Court. The assessee additionally relied on serious ill-health and continuous medical treatment as the cause for the residual delay. Applying the established principles for condonation of delay (as summarised from B. Madhuri Goud), the Tribunal found the explanations convincing, observed no deliberate or culpable negligence on the part of the assessee and held that substantial justice required condonation. On these facts and in the interest of justice the delay in both appeals was condoned. [Paras 8, 9, 10]Delay in filing both appeals is condoned.Reopening of assessment - disposal of objections to notice under Section 148 by passing a speaking order - reasons to believe - quashing of reassessment for failure to dispose objections and for arbitrary reasons - Validity of reopening of assessment for AY 2010-11 and consequential quashing of reassessment proceedings - HELD THAT: - The assessee had filed objections to the notice under section 148 and furnished documents asserting regular compliance. The Assessing Officer, however, did not dispose of those objections by a speaking order and the reasons recorded for reopening were shown to be arbitrary and lacking application of mind (the reasons misstated amounts). Relying on the binding ratio in GKN Driveshafts that an assessing officer must furnish reasons and dispose of objections by a speaking order before completing reassessment, and on the record showing failure to do so plus arbitrariness in the reasons recorded, the Tribunal held the reassessment proceedings to be void. As the reassessment was quashed, all consequential merits issues became academic. [Paras 20, 21, 22, 23, 24]Reassessment proceedings for AY 2010-11 are quashed; appeal for AY 2010-11 is allowed and other merits issues are rendered academic.Treatment of unexplained bank deposits as income - ad hoc addition at the rate of 5% of cash deposits for small assessee - Merits of additions made on account of bank deposits for AY 2011-12 (deletion of cheque deposits and restricted ad hoc addition on cash deposits) - HELD THAT: - For AY 2011-12 the Assessing Officer made additions on account of cash and cheque deposits. On facts the Tribunal found that amounts deposited by cheque were from known sources and therefore deleted that portion of the addition. With regard to cash deposits, having regard to the smallness of the amounts and consistent coordinate-bench practice, the Tribunal applied a limited ad hoc approach and directed an addition equal to 5% of total cash deposits. The Tribunal thus reduced the addition: cheque deposits deleted and cash deposits taxed at 5% (calculated in the order). The appeal was accordingly partly allowed. [Paras 33, 35, 36]Addition on account of cheque deposits is deleted; cash deposits are taxed by way of an ad hoc addition at 5% of cash deposits (appeal partly allowed for AY 2011-12).Final Conclusion: The Tribunal condoned the delay in filing both appeals; the reassessment for AY 2010-11 was quashed for lack of disposal of objections and arbitrary reasons and that appeal is allowed; the appeal for AY 2011-12 is partly allowed by deleting the addition relating to cheque deposits and restricting the addition on cash deposits to 5%.

2023 (12) TMI 1247 - SC Order Insolvency and Bankruptcy

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Delay Condoned: Appeal Granted, Case Remitted for Further Examination of Claims and Costs.
The SC condoned the delay and granted permission to file the appeal. The respondent company agreed to pay the claimed amount and interest to the Resolution Professional within three weeks, with the NCLT determining the interest due. The SC set aside the judgments of the NCLAT and NCLT, remitting the case to the adjudicating authority for further examination of claims and the RP's fee/cost. The appeals were allowed, and pending applications were disposed of.

Condonation of delay - permission to file appeal - payment of admitted claim to the Resolution Professional - remittal to the adjudicating authority for examination of interest and disputed claims - adjudicating authority to decide interest from specified date - adjudicating authority to examine fee/cost of Resolution Professional - setting aside impugned orders of NCLAT and NCLTCondonation of delay - permission to file appeal - Application for condonation of delay and grant of permission to file the appeal - HELD THAT: - The Court exercised its discretion to condone the delay in filing and granted permission to file the appeal. The order records the grant of leave to proceed despite the delay and admits the appeal for hearing.Delay condoned and permission to file the appeal granted.Payment of admitted claim to the Resolution Professional - adjudicating authority to decide interest from specified date - Submission by respondent no.1 to pay the amount claimed due as of 31.12.2017 to the Resolution Professional and the question of interest thereafter - HELD THAT: - Respondent no.1 (White Water Hospitality Private Limited) stated its willingness to pay the amount claimed as due on 31.12.2017 to the Resolution Professional within three weeks. The Court recorded this statement and left the determination of interest payable from 01.01.2018 until the actual payment date to the adjudicating authority. The respondent agreed to pay whatever interest the adjudicating authority calculates and determines to be payable to the Resolution Professional.Recorded respondent's undertaking to pay the admitted amount to the Resolution Professional within three weeks; remitted determination of interest from 01.01.2018 to the adjudicating authority.Remittal to the adjudicating authority for examination of interest and disputed claims - adjudicating authority to examine fee/cost of Resolution Professional - examination of disputed claims during CIRP - Scope of remand to the adjudicating authority to examine disputed claims, interest, and fee/cost of the Resolution Professional - HELD THAT: - The Court set aside the impugned orders and remitted the matter to the adjudicating authority (NCLT) to examine and decide: (a) the interest due and payable from 01.01.2018 until the date of payment; (b) the disputed claims made by the appellants and those raised by White Water Hospitality Private Limited during the Corporate Insolvency Resolution Process, including issues that arose before the Committee of Creditors; and (c) the question of the fee/cost of the Resolution Professional. The remand requires the adjudicating authority to consider the parties' contentions afresh while keeping in view the directions recorded by the Court.Impugned orders set aside and matter remitted to the adjudicating authority to examine disputed claims, interest from 01.01.2018, and the fee/cost of the Resolution Professional.Setting aside impugned orders of NCLAT and NCLT - Whether the impugned orders of the NCLAT and NCLT should be maintained - HELD THAT: - Having recorded the parties' undertakings and directed remand for fresh consideration of the contested issues, the Court set aside the impugned judgment dated 17.08.2023 of the NCLAT and the order dated 21.11.2019 of the NCLT. The effect is to vacate those orders and require the adjudicating authority to adjudicate the outstanding questions in accordance with the directions given by the Court.Impugned NCLAT and NCLT orders set aside.Final Conclusion: The appeals are allowed: delay in filing is condoned and permission to prosecute the appeal granted; respondent no.1's undertaking to pay the admitted claim to the Resolution Professional is recorded; the matter is remitted to the adjudicating authority to determine interest from 01.01.2018, to examine the disputed claims and the fee/cost of the Resolution Professional; impugned NCLAT and NCLT orders are set aside; pending applications disposed of.

2023 (12) TMI 1219 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues Involved:
1. Non-submission of bank guarantee within the stipulated last date.
2. Submission of bank guarantee in non-compliance mode.
3. The Appellant being ineligible in terms of Section 29A of the Insolvency and Bankruptcy Code, 2016.

Summary:

Issue 1: Non-submission of bank guarantee within the stipulated last date
The Appellant, Mr. Satish Dhondiram Chavan, filed an appeal to set aside the Impugned Order dated 02.02.2023, which dismissed his application IA 1899 of 2021 in CP (IB)-1852/(MB)/2019. The Appellant sought relief to direct the CoC to condone a delay of three days in submitting a bank guarantee and to consider his Resolution Plan. The Adjudicating Authority found that the Appellant failed to furnish the bank guarantee within the stipulated time, which was extended multiple times, and ultimately rejected the application. The CoC's decision to reject the Resolution Plan due to the delay was upheld, emphasizing the importance of adhering to the timelines stipulated in the RFRP.

Issue 2: Submission of bank guarantee in non-compliance mode
The Appellant submitted a bank guarantee from ICICI Bank, a non-nationalized bank, contrary to the requirement of Clause 1.8.1 of the RFRP, which mandated a bank guarantee from a nationalized bank located in India. The CoC rejected the Resolution Plan on this ground as well. The Appellate Tribunal agreed with the CoC's decision, stating that the terms and conditions stipulated in the RFRP are sacrosanct and binding, and any deviation from these terms justifies the rejection of the Resolution Plan.

Issue 3: The Appellant being ineligible in terms of Section 29A of the Code
The Appellant was also found ineligible under Section 29A of the Code due to being declared a willful defaulter and having fraud allegations against him. The Appellate Tribunal noted that the Appellant's ineligibility under Section 29A was another valid ground for rejecting the Resolution Plan, although the primary focus was on the non-compliance with the RFRP requirements.

Conclusion:
The Appellate Tribunal upheld the Adjudicating Authority's decision to reject the Appellant's Resolution Plan due to the failure to comply with the RFRP requirements and the Appellant's ineligibility under Section 29A. The appeal was dismissed, and the connected appeal in Company Appeal (AT) (Ins.) No. 219 of 2023 was also dismissed as infructuous. The Tribunal emphasized the paramount status of the CoC's commercial wisdom and the non-justiciability of its decisions.

NCLAT upholds liquidation order after resolution plan rejection for missing deadline and wrong bank guarantee under Section 29A
NCLAT dismissed appeal challenging liquidation order after rejection of resolution plan. Appellant failed to comply with RFRP conditions including 3-day delay in bank guarantee submission beyond March 1, 2021 deadline and providing ICICI bank guarantee instead of required nationalized bank guarantee. Tribunal held RFRP terms are legally binding and their evaluation falls within CoC's commercial wisdom domain. Court found no error in Adjudicating Authority's order dated February 2, 2023, confirming appellant's ineligibility under Section 29A IBC.

Commercial wisdom of the Committee of Creditors - binding nature of terms in the Request for Resolution Plan - condonation of delay in submission of bank guarantee - eligibility criteria for resolution applicants under the RFRP - ineligibility under Section 29A of the Code - non-justiciability of CoC's commercial decisionBinding nature of terms in the Request for Resolution Plan - eligibility criteria for resolution applicants under the RFRP - condonation of delay in submission of bank guarantee - Whether the Resolution Applicant's plan could be considered despite (a) a three day delay in furnishing the bank guarantee and (b) the bank guarantee being issued by a non nationalised bank in breach of clause 1.8.1 of the RFRP. - HELD THAT: - The Tribunal examined clause 1.8.1 of the RFRP which prescribed as a threshold condition that the Binding Submission Bond Guarantee be executed from a nationalised bank located in India and set deadlines for submission. The admitted facts were that the bank guarantee was furnished on 5 March 2021, after the extended last date of 1 March 2021, and that the guarantee was issued by a bank other than a nationalised bank. The Tribunal held that the terms and conditions of the RFRP are valid, legally binding and form the eligibility matrix which the CoC may rely upon in exercising its commercial wisdom. Compliance with such bid conditions is a pre requisite for consideration of a resolution plan; failure to meet them (including non compliant mode of guarantee and delay beyond the stipulated timeline) justified the CoC's decision not to treat the plan as a binding resolution plan. The Tribunal declined to interfere with the Adjudicating Authority's rejection of the interlocutory application seeking condonation of delay, finding no error in treating the Appellant's non compliance as fatal to the plan's consideration. [Paras 46, 47, 48, 50, 52]The CoC correctly refused to consider the plan because the applicant failed to comply with clause 1.8.1 of the RFRP (late submission and non nationalised bank guarantee); the Adjudicating Authority's rejection of the interlocutory application is upheld.Commercial wisdom of the Committee of Creditors - non-justiciability of CoC's commercial decision - ineligibility under Section 29A of the Code - Whether the Tribunal should re examine the CoC's commercial decision (including the ground of ineligibility under Section 29A) after finding the RFRP non compliance. - HELD THAT: - The Tribunal observed that the CoC's exercise of commercial wisdom is entitled to paramountcy and is largely non justiciable by the Adjudicating Authority or this Appellate Tribunal. It noted that, having found the Appellant failed to satisfy the RFRP threshold, there was no need to enter into the separate issue of ineligibility under Section 29A; moreover, the Tribunal relied on the established principle that courts and tribunals should not substitute their view for the CoC's commercial decision. Applying that principle to the facts, the Tribunal found no infirmity in the CoC's resolution to recommend liquidation and declined to re evaluate the commercial merits or the Section 29A issue on the record before it. [Paras 44, 45, 50, 51, 52]The Appellate Tribunal will not interfere with the CoC's commercial decision; having upheld RFRP non compliance, it need not and does not re decide the Section 29A ineligibility, and it dismissed the appeal.Commercial wisdom of the Committee of Creditors - Whether Company Appeal (AT) (Ins.) No. 219 of 2023 challenging the Adjudicating Authority's order accepting liquidation remains maintainable after dismissal of the connected appeal. - HELD THAT: - The Tribunal noted that I.A. No. 1984 of 2021 (filed by the Resolution Professional) seeking liquidation was accepted by the Adjudicating Authority and, because the connected appeal (Company Appeal (AT) (Ins.) No. 190 of 2023) was dismissed, the second appeal became infructuous. No separate interference was warranted. [Paras 54, 55, 56, 57]The second appeal is infructuous and is dismissed.Final Conclusion: The appeals are dismissed. The Tribunal upheld the Adjudicating Authority's rejection of the interlocutory application and declined to interfere with the CoC's decision to recommend liquidation, holding that the appellant failed to comply with the RFRP eligibility conditions and that the CoC's commercial decision is not to be judicially re examined.

2023 (12) TMI 1096 - CALCUTTA HIGH COURT Service Tax

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Show Cause Notice Valid: Independent Investigation Prevails, Fresh Hearing Scheduled Within 30 Days.
The HC upheld the validity of the show cause notice, ruling it resulted from an independent investigation rather than solely NSDL data. It rejected the appellant's time-bar argument, allowing proceedings under the repealed law. The Court directed issuance of a fresh notice for a personal hearing within 30 days, with a decision due within two months. The appeal and related applications were disposed of, with no opinion expressed on the merits of the case.

Challenge to show cause notice at inception - reliance on income-tax TDS/returns versus independent investigation - entitlement to personal hearing before adjudication - saving provision under section 174(2) of the CGST Act, 2017 - time limit under section 74(10) of the CGST Act, 2017 - combined show-cause-cum-demand and allegation of foreclosed mindReliance on income-tax TDS/returns versus independent investigation - challenge to show cause notice at inception - Validity of the show-cause notice challenged as being founded solely on TDS entries and therefore impermissible. - HELD THAT: - The court examined the contents of the impugned show-cause notice and found that the authority, alerted by TDS entries, proceeded to conduct an independent investigation which included examination of the firm's records and audited balance-sheets. On that basis the authority formed a reasonable belief of short deposit of service tax for specified financial years. Therefore the notice was not a mere product of reliance on income-tax declarations alone and the decision in Sameer Suryakant Gupta (as relied upon by the appellant) was distinguishable. The court held that only in rare cases, such as absence of jurisdiction, may a show-cause notice be struck down at inception; no such patent lack of jurisdiction or purely TDS-based notice was shown here. [Paras 6, 7, 8, 9, 13]The show-cause notice is valid insofar as it is founded on an independent investigation and is not ex facie unsustainable for being based solely on TDS/IT records.Saving provision under section 174(2) of the CGST Act, 2017 - time limit under section 74(10) of the CGST Act, 2017 - Whether adjudication or recovery proceedings are time-barred under section 74(10) of the CGST Act, 2017. - HELD THAT: - The court applied the saving clause in section 174(2) of the CGST Act, 2017 which preserves accrued rights, obligations and ongoing investigations, enquiries, adjudications or recovery proceedings under the repealed law. Having regard to that provision, the demand-cum-show-cause notice in respect of short deposit of service tax for the financial years in question is to be treated as instituted and continued under the earlier law and therefore cannot be pre-empted by the time-frame in section 74(10) of the Act of 2017. Consequently the notice cannot be held to be time-barred on that ground. [Paras 10, 11]Proceedings are not time-barred by section 74(10) because they are saved and continue under the repealed law by virtue of section 174(2).Combined show-cause-cum-demand and allegation of foreclosed mind - entitlement to personal hearing before adjudication - Whether issuance of a combined show-cause-cum-demand notice demonstrates a foreclosed mind and whether the assessee is entitled to personal hearing. - HELD THAT: - The court found that the recitals in the show-cause-cum-demand notice merely set out the materials that gave rise to a reasonable belief of short payment; they do not demonstrate that the authority had a pre-determined view or a closed mind. Accordingly, the combined form of the notice does not, by itself, invalidate the proceedings. Notwithstanding that conclusion, the court recognised the assessee's right to a personal hearing and directed the authority to issue notice for hearing and thereafter decide the matter afresh within the specified timelines. [Paras 12, 13, 14]A combined show-cause-cum-demand does not evidence a foreclosed mind; however the assessee must be afforded a personal hearing and the authority directed to hear and decide the matter within the stipulated time.Final Conclusion: No patent illegality or jurisdictional bar was found in the issuance of the show-cause-cum-demand notice; the notice was based on an independent investigation and proceedings are saved under section 174(2) of the CGST Act, 2017 against time-bar under section 74(10). The allegation of foreclosed mind was rejected, but the assessee was directed to be afforded a personal hearing and the authority to decide the matter within the prescribed period.

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