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2023 (12) TMI 860 - SC Order Customs

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Delay and merits defeat Customs SLP dismissal after 404-day delay leaves no interference by the SC
A Customs SLP against the impugned decision was dismissed by the SC on two grounds: delay and merits. The Court recorded that the petition was barred by 404 days' delay and also found no basis to interfere on the merits. No further substantive customs principle was set out in the text provided.

2023 (12) TMI 840 - CESTAT KOLKATA Central Excise

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Tribunal Overturns Order, Allows Cenvat Credit Use; No Interest or Penalty Imposed Following Calcutta HC Ruling.
The Tribunal allowed the appeal, setting aside the order that confirmed the demands of Rs.1,15,689/- and Rs.2,91,476/-, including interest and penalty, under Rule 25 of the Central Excise Rules, 2002. It held that the Appellant could use Cenvat credit to pay duty during the period specified under Rule 8(3A), as the rule was declared ultra vires by the Calcutta HC. Consequently, no interest or penalty was imposed, and the appeals were allowed, aligning with the precedent set by the HC and a similar Tribunal decision.

Validity of Rule 8(3A) of the Central Excise Rules, 2002 - Restriction on utilization of Cenvat credit during debarred period - Entitlement to discharge duty by utilizing Cenvat credit - Unsustainability of demand, interest and penalty where enabling provision is declared ultra viresRestriction on utilization of Cenvat credit during debarred period - Entitlement to discharge duty by utilizing Cenvat credit - Appellant entitled to discharge duty by utilizing Cenvat credit during the period when Rule 8(3A) required payment consignment wise through PLA. - HELD THAT: - The Tribunal examined whether the use of Cenvat credit to discharge duty liability during the period when the appellant was required to pay duty consignment wise through PLA attracted the prohibition contained in Rule 8(3A). Relying on the decision of the Hon'ble Calcutta High Court in M/s. Goyal MG Gases Pvt. Ltd. v. Union of India (reported in 2017 (8) TMI 1515) which declared Rule 8(3A) ultra vires, and the Tribunal's earlier decision in Rana Sponge Ltd. which followed that High Court ruling, the Tribunal held that the restriction on utilizing Cenvat credit during the debarred period cannot sustain. The Tribunal further noted the Gujarat High Court's view that the words "without utilizing Cenvat Credit" are ultra vires and that subsequent parity must be extended to assessees who discharged duty by using Cenvat credit. Applying those conclusions to the present facts, where the appellant partly used Cenvat credit during the specified months, the prohibition under Rule 8(3A) could not be enforced to sustain the demand.Demand confirmed for contravention of Rule 8(3A) is unsustainable and is set aside; appellant entitled to discharge duty by utilizing Cenvat credit.Unsustainability of demand, interest and penalty where enabling provision is declared ultra vires - Whether interest and penalty could be sustained once the primary demand (based on Rule 8(3A)) was held unsustainable. - HELD THAT: - The Tribunal held that since the substantive demand founded on the invalid provision could not be sustained, consequential imposition of interest and penalty based on that demand did not survive. The reasoning follows directly from the conclusion that the legislative provision invoked to raise the demand was declared ultra vires by the authoritative High Court decision relied upon and followed by the Tribunal.Interest and penalty founded on the unsustainable demand do not arise and stand quashed.Final Conclusion: Impugned orders confirming demands, interest and penalties set aside; appeals allowed and appellant permitted to discharge duty by utilising Cenvat credit in respect of the period in question.

2023 (12) TMI 821 - APPELLATE AUTHORITY FOR ADVANCE RULING, RAJASTHAN GST

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Jaipur Smart City Limited deemed Governmental Authority under IGST Act with 50:50 government shareholding control
The AAAR Rajasthan held that M/s Jaipur Smart City Limited qualifies as a Governmental Authority under IGST Act, 2017, as the State Government and Jaipur Nagar Nigam hold 50:50 equity shareholding, constituting over 90% government control. Fire fighting system installation services to JSCL attracted GST at 12% until 31.12.2021, after which the governmental authority exemption was omitted. The appellant was liable to pay GST at 18% under reverse charge mechanism for road cutting charges paid to Jaipur Nagar Nigam, and also liable for 18% GST on recovery of such charges from JSCL, as the exemption under constitutional functions was not applicable.

Governmental Authority - participation by way of equity or control - works contract services to a Governmental Authority - original works - pure agent - reverse charge mechanism - services neither supply of goods nor supply of services (Section 7(2) and Notification) - Entry (vi) of Notification No.11/2017 (works contract to Governmental Authority)Governmental Authority - participation by way of equity or control - M/s Jaipur Smart City Limited (JSCL) qualifies as a Governmental Authority as defined in the explanation to clause (16) of Section 2 of the IGST Act, 2017. - HELD THAT: - The Authority examined whether JSCL was either set up by statute or established by Government with ninety per cent or more participation by way of equity or control. JSCL was not set up by statute but was established as an SPV by the State Government and the Jaipur Nagar Nigam (JNN) with 50:50 equity. Considering the corporate form, the composition of promoters, the role of JNN as a municipal corporation incorporated under State law, and the appointment/officiation of Government officials on JSCL's board, the Authority concluded that Governmental participation exceeding 90% existed by way of control. Reliance on other AARs and Supreme Court authorities was considered but the determinative facts of control and the relationship between the State and JNN led to the conclusion that JSCL falls within the definition of a Governmental Authority. [Paras 9]JSCL is a Governmental Authority.Entry (vi) of Notification No.11/2017 (works contract to Governmental Authority) - works contract services to a Governmental Authority - original works - The appellant's contract for installation of the firefighting system and pump house falls within Item (vi) of Entry 3 of Notification No.11/2017 as services provided to a Governmental Authority. - HELD THAT: - The scope of work (supply, erection, commissioning, installation, construction of pump houses, underground tanks, civil, mechanical and electrical works, testing and commissioning and 5 years O&M) was examined against the definition of 'original works' and the description in Item (vi). The Authority found the contract to be construction/erection/installation of a civil structure and original works meant predominantly for non commercial public use. Given that JSCL was held to be a Governmental Authority, services provided to it by the appellant therefore fall within Item (vi) of Notification No.11/2017. [Paras 10]The supply is covered by Item (vi) of Notification No.11/2017 as services to a Governmental Authority.Entry (vi) of Notification No.11/2017 (works contract to Governmental Authority) - GST rate applicable to the appellant's services under the contract is 12% (6% CGST + 6% SGST) for the contractual period up to 31.12.2021. - HELD THAT: - Because the services fall under Item (vi) as supplies to a Governmental Authority, the Authority applied the rate specified in the notifications as in force for such entry. The Authority noted the subsequent omission of the words 'a Governmental Authority or a Government Entity' from the Entry w.e.f. 01.01.2022, and therefore limited the applicability of the concessional rate to the period up to 31.12.2021. [Paras 11]Services attract GST at 12% (6% CGST + 6% SGST) up to 31.12.2021.Reverse charge mechanism - services neither supply of goods nor supply of services (Section 7(2) and Notification) - The appellant is liable to pay GST under the reverse charge mechanism on amounts paid as NOC/road cutting charges to Jaipur Nagar Nigam (JNN); Notification exemptions for public authority activities are not attracted. - HELD THAT: - The Authority examined whether the activity of granting permission/NOC for road cutting is an activity 'in relation to' functions entrusted to a municipality under Article 243W such that it would be outside the scope of supply per Section 7(2) and the Notification. While roads and fire services are listed in the Twelfth Schedule, the Authority held that the act of granting road cut permission is not the same as construction of roads and bridges and therefore is not covered by the Schedule entries. The permission/NOC was provided by the municipal authority to the appellant (a business entity) and not as a public authority activity qualifying for exclusion; consequently, the appellant, as recipient of the municipal service, is liable under RCM at the applicable rate. [Paras 12]Appellant liable to pay GST @18% under reverse charge on road cutting/NOC charges paid to JNN.Pure agent - Entry No.3 of Notification No.12/2017 (pure services to Governmental Authority) - Reimbursement recovered by the appellant from JSCL for road cutting/NOC charges does not qualify for exclusion as amounts paid as a pure agent nor for nil rate exemption under the Notification; such recoveries are taxable at 18%. - HELD THAT: - The Authority tested the facts against Rule 33 (pure agent) and the three conditions of Entry No.3 of Notification No.12/2017 (pure services to Governmental Authority). Although the payments were reimbursement in character and involved no goods, the Authority found that the municipal demand note was addressed to the appellant and indicated that the appellant held the title to the approval procured, undermining the contention that the appellant neither intends to hold nor holds title. Further, even accepting JSCL as a Governmental Authority, the activity of obtaining the NOC was not held to be an activity 'in relation to' functions entrusted under Article 243W. Consequently, the exemption/nil rate was not available and recoveries from JSCL are includible in value and taxable. [Paras 13]Recovery of road cutting charges from JSCL is taxable at 18% (9% CGST + 9% SGST); appellant not entitled to pure agent exclusion or nil rate exemption.Final Conclusion: The Appellate Authority allowed the appeal in part: M/s Jaipur Smart City Limited is a Governmental Authority; the appellant's firefighting system contract is covered by Item (vi) and attracts GST at 12% (6%+6%) up to 31.12.2021; however, road cutting/NOC charges paid to Jaipur Nagar Nigam are subject to GST under reverse charge at 18%, and reimbursements recovered from JSCL for those charges are taxable at 18% (pure agent treatment and the Notification exemption were not available).

2023 (12) TMI 792 - CESTAT BANGALORE Customs

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Tribunal Overturns Penalties Due to Lack of Evidence in Customs Violation Case; Appeal Allowed for Relief.
The Tribunal set aside the penalties imposed on the appellant under Section 114(i) and 114AA of the Customs Act, 1962, due to insufficient evidence proving the appellant's knowledge or facilitation of the illegal export. The Tribunal emphasized the necessity of concrete evidence to establish the appellant's involvement in the mis-declaration of goods. Consequently, the appeal was allowed, granting consequential relief to the appellant.

Penalty under Section 114(i) and 114AA of the Customs Act, 1962 - knowledge and mens rea for abetment - evidence of facilitation or complicity in mis declaration - requirement of proof of agent/representative's knowledgePenalty under Section 114(i) and 114AA of the Customs Act, 1962 - knowledge and mens rea for abetment - evidence of facilitation or complicity in mis declaration - requirement of proof of agent/representative's knowledge - Whether the penalty imposed on the appellant under Section 114(i) and 114AA of the Customs Act, 1962 can be sustained in the absence of evidence that the appellant had knowledge of or facilitated the mis declaration. - HELD THAT: - The adjudicating authority imposed penalties on the appellant alleging that he assisted the exporter in illicitly exporting Muriate of Potash as Bentonite Powder. The Tribunal found no admissible evidence on record establishing that the appellant had knowledge of the mis declaration or that he facilitated the export with such knowledge. The fact that the appellant prepared documents without obtaining the exporter's signature was held insufficient to infer awareness of prohibited goods. The Tribunal relied on the principle that the owner or principal must be able to show absence of knowledge by the agent or person in charge and noted that the department did not allege, nor adduce statements showing, that any agent, driver or person in charge had such knowledge. Prior decisions of this Tribunal on materially similar facts were considered, including an instance where penalty was set aside for lack of evidence linking the co noticee to supply of the prohibited goods. Applying these principles, the Tribunal concluded that there was no concrete evidence to prove the appellant's complicity or mens rea necessary to sustain penalties under the cited provisions. [Paras 3, 5]Penalties imposed under Section 114(i) and 114AA of the Customs Act, 1962 are set aside for lack of evidence that the appellant had knowledge of or facilitated the mis declaration.Final Conclusion: The appeal is allowed; penalties under Section 114(i) and 114AA are set aside for want of evidence of the appellant's knowledge or complicity, with consequential relief as per law.

2023 (12) TMI 772 - DELHI HIGH COURT Income Tax

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Court Allows 460-Day Delay in Appeals on Profit Attribution, Closing Case with No Substantial Legal Questions Found.
The court condoned a 460-day delay in re-filing appeals by the appellant/revenue, allowing the appeals to be decided on their merits. The appeals, concerning Assessment Years 2007-08 to 2014-15, challenged an Income Tax Appellate Tribunal order. The primary issue was the attribution of 15 percent of profits from Indian operations to the respondent/assessee, as previously upheld by the SC. Finding no substantial question of law, the court closed the appeals, with orders to be dispatched to the respondent/assessee through all available modes, including e-mail.

Condonation of delay - substantial question of law - binding precedent effect of a Supreme Court decision - attribution of profits to Indian operations - appeal disposed on meritsCondonation of delay - appeal re-filing - Condonation of delay of 460 days in re-filing the appeals was sought and decided. - HELD THAT: - The applications filed by the appellant/revenue seeking condonation of delay in re-filing the appeals were considered. The Court, stating its intention to decide the appeals on merits, granted condonation of the delay and disposed of the applications accordingly. The order condones the delay and allows re-filings to proceed. [Paras 1, 4, 5]Delay of 460 days in re-filing the appeals is condoned and the applications are disposed of.Binding precedent effect of a Supreme Court decision - substantial question of law - attribution of profits to Indian operations - Whether any substantial question of law arises for consideration in the appeals in view of the Supreme Court's dismissal of SLP and the coordinate bench's decision attributing 15% of profits to Indian operations. - HELD THAT: - The learned senior standing counsel for the appellant/revenue conceded that the Supreme Court's decision in the group-entity case governs the merits. The Supreme Court had dismissed the special leave petition after recording that issues were considered and held against the Revenue by affirming the High Court. The primary merit issue before the Tribunal - the sustainability of attributing 15% of profits from Indian operations to the respondent/assessee - was upheld by the coordinate bench and subsequently affirmed by the Supreme Court dismissal of SLP. In view of this binding precedent, the High Court held that no substantial question of law arises for its consideration and closed the appeals. [Paras 7, 8, 9, 10, 12]In light of the Supreme Court's dismissal of the SLP and the coordinate bench's finding on attribution, no substantial question of law arises; the appeals are closed.Final Conclusion: Applications for condonation of delay are allowed; on the merits the appeals are closed as no substantial question of law arises in view of the Supreme Court's dismissal of the special leave petition affirming the coordinate bench's conclusion on attribution of profits.

2023 (12) TMI 736 - CALCUTTA HIGH COURT GST

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Service Tax Order Upheld: Procedural Challenge Rejected, Appellants Directed to Seek Remedy Through Tribunal Appeal
The SC dismissed the writ petition challenging a service tax order, finding procedural challenges and allegations of perversity not suitable for judicial review. The court held that the appellants should pursue their remedy through an appeal to the Tribunal, preserving their right to contest the order's factual and legal aspects within 90 days, without prejudicing their substantive rights.

Maintainability of writ when alternative statutory remedy exists - invocation of extended period of limitation - mixed question of fact and law - reappreciation of evidence by the appellate tribunal - entertainment of appeal without reference to limitationMaintainability of writ when alternative statutory remedy exists - reappreciation of evidence by the appellate tribunal - Whether the writ petition challenging the adjudication order can be entertained in view of the availability of an alternative statutory appellate remedy. - HELD THAT: - The Single Bench's order was upheld on the basis that the adjudicating authority's conclusions involve disputed questions of fact and mixed questions of fact and law which require reappreciation of evidence. The Court observed that the appellants have an efficacious and effective remedy by way of appeal to the Central Excise and Service Tax Appellate Tribunal and therefore should not bypass that statutory remedy. Procedural objections and allegations of perversity in the adjudication-such as non-consideration or rejection of documents-are matters for factual adjudication and are appropriately addressed on appeal to the Tribunal rather than in writ jurisdiction. The Court's observations were expressly prima facie and stated not to prejudice the appellants' rights to raise all issues before the Tribunal. [Paras 4, 5, 6, 7]Writ petition dismissed; appellants directed to pursue remedy by filing an appeal before the Tribunal.Invocation of extended period of limitation - mixed question of fact and law - Whether the extended period of limitation under the relevant law could be invoked against the appellants for the tax period in question. - HELD THAT: - The Court found that the question of invoking the extended period of limitation is not purely a legal issue but a mixed question of fact and law because the show-cause notice and the adjudicating order contain factual allegations which the appellants have contested. Since determinations as to wilful misstatement, suppression, fraud or collusion require factual examination, the matter cannot be finally resolved in the writ petition and must be gone into by the appropriate adjudicatory forum on appeal. [Paras 4, 5]Issue not decided on merits; to be considered by the appellate Tribunal as a mixed question of fact and law.Entertainment of appeal without reference to limitation - Relief available to the appellants regarding limitation for filing appeal to the Tribunal. - HELD THAT: - The Court granted liberty to the appellants to file an appeal against the adjudicating order before the Central Excise and Service Tax Appellate Tribunal and directed that if such appeal is filed within 90 days from receipt of the certified copy of this judgment the Tribunal shall entertain the appeal without reference to limitation. All questions of law and fact are left open for adjudication before the Tribunal. [Paras 9, 10]Liberty granted to file appeal within 90 days; Tribunal directed to entertain the appeal without reference to limitation.Final Conclusion: Appeal dismissed; appellants directed to challenge the adjudication order before the Central Excise and Service Tax Appellate Tribunal, which shall entertain an appeal filed within 90 days without reference to limitation; questions of law and fact left open for adjudication by the Tribunal.

2023 (12) TMI 670 - KARNATAKA HIGH COURT Indian Laws

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Issues: (i) whether interference was warranted with the appellate acquittal in a prosecution under Section 138 of the Negotiable Instruments Act, 1881; (ii) whether permission should be granted to adduce additional evidence under Section 391 of the Code of Criminal Procedure, 1973.

Issue (i): whether interference was warranted with the appellate acquittal in a prosecution under Section 138 of the Negotiable Instruments Act, 1881.

Analysis: The complaint was founded on dishonour of a cheque and the defence evidence of the accused had been recorded by affidavit instead of examination-in-chief. The legal position recognised that, while the complainant may depose by affidavit in a cheque dishonour case, the same procedure is not available to the accused. Evidence tendered in a manner contrary to the prescribed procedure could not be relied upon. On that basis, the acquittal rendered on acceptance of such defence evidence was held unsustainable.

Conclusion: Interference with the acquittal was justified and the challenge succeeded.

Issue (ii): whether permission should be granted to adduce additional evidence under Section 391 of the Code of Criminal Procedure, 1973.

Analysis: The request was to examine the handwriting expert and place the report in evidence. Since the matter was being remitted for fresh disposal and an opportunity was required for proper proof of evidence, permitting additional evidence was considered appropriate to secure a fair adjudication.

Conclusion: The application for additional evidence was allowed.

Final Conclusion: The dismissal of the complaint at the appellate stage was set aside, the matter was remanded to the trial court for fresh consideration, and both sides were directed to lead evidence in accordance with law.

Ratio Decidendi: Defence evidence in a cheque dishonour prosecution cannot be received by affidavit in place of examination-in-chief, and an acquittal founded on such impermissible procedure is liable to be set aside with remand for proper trial.

Cheque dishonour evidence rules: defence affidavit evidence was impermissible, acquittal set aside, and remand ordered for fresh trial.
In a Section 138 Negotiable Instruments Act prosecution, defence evidence cannot be received by affidavit in place of examination-in-chief, even though the complainant may depose by affidavit. An acquittal based on such impermissible defence evidence was held unsustainable, and interference with the appellate acquittal was justified. The request under Section 391 CrPC to adduce additional evidence, including examination of a handwriting expert and production of the report, was allowed because the matter was being remanded and proper proof of evidence was required for fair adjudication. The complaint dismissal at appellate stage was set aside and the matter remitted for fresh consideration in accordance with law.

Offence under Section 138 of the Negotiable Instruments Act, 1881 - presumption under Section 139 of the Negotiable Instruments Act, 1881 - inadmissibility of defence evidence by affidavit - procedure prescribed by Section 145 of the Negotiable Instruments Act, 1881 - remand for adducing evidence in accordance with law - application under Section 391 of the Code of Criminal Procedure to permit additional evidenceInadmissibility of defence evidence by affidavit - procedure prescribed by Section 145 of the Negotiable Instruments Act, 1881 - offence under Section 138 of the Negotiable Instruments Act, 1881 - Validity of the appellate Court's acquittal when defence evidence was admitted by affidavit instead of examination-in-chief and whether the matter required remand. - HELD THAT: - The Court held that the defence evidence by DW1 and DW2 was presented by way of affidavit in lieu of examination-in-chief, contrary to the procedure contemplated by the statute. Relying on the reasoning in M/s. Mandvi Co-operative Bank Ltd. v. Nimesh B. Thakore and the coordinate decision in Smt. H. Bhagya v. Smt. R. Savithramma, the Court observed that the legislative scheme permits the complainant to give evidence on affidavit but does not confer a like right on the accused; the nature of defence evidence is often different from that of the complainant and cannot be equated. Because the appellate Court accepted and acted upon the affidavit evidence of the defence without ensuring that such evidence was taken in accordance with law, its conclusion of acquittal was unsustainable. For these reasons the matter could not be decided on the basis of affidavit evidence and required remand to the trial Court to permit the accused to adduce defence evidence by oral examination in accordance with law. [Paras 10, 12, 13, 14]Impugned acquittal set aside; trial Court judgment set aside; matter remitted to trial Court with direction to permit the accused to adduce defence evidence in accordance with law.Application under Section 391 of the Code of Criminal Procedure to permit additional evidence - remand for adducing evidence in accordance with law - presumption under Section 139 of the Negotiable Instruments Act, 1881 - Whether the complainant should be permitted to adduce additional evidence, specifically the handwriting expert's evidence, by leave under Section 391 Cr.P.C. - HELD THAT: - The Court noted that the appellate Court's decision had turned in part on the handwriting expert's report not having been proved in accordance with law because the expert had not been examined. The complainant sought permission under Section 391 Cr.P.C., by affidavit, to examine the handwriting expert and to lead any further evidence. No objection was filed by the respondent. In view of its conclusion that the defence evidence must be re taken in accordance with law, the Court found it appropriate and just to allow the complainant the opportunity sought to prove the handwriting expert report and to adduce any additional evidence. Accordingly the application under Section 391 Cr.P.C. was allowed and the complainant directed to appear before the trial Court to place the additional evidence. [Paras 10, 15, 16, 17]I.A. No.1/2014 under Section 391 Cr.P.C. allowed; complainant permitted to examine the handwriting expert and to adduce additional evidence upon remand.Final Conclusion: Appeal allowed; appellate Court's acquittal and the trial Court's conviction set aside; matter remitted to the trial Court for fresh disposal - accused to be permitted to adduce defence evidence orally in accordance with law and complainant permitted to examine the handwriting expert and lead additional evidence; trial Court to proceed and conclude the case within six months from the accused's appearance.

2023 (12) TMI 653 - MADHYA PRADESH HIGH COURT Income Tax

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Deceased assessee's declaration under Direct Tax Vivaad se Vishwas Act cannot be rejected for appeal pendency condition
The HC set aside orders rejecting a declaration under the Direct Tax Vivaad se Vishwas Act, 2020. The Designated Authority had rejected the deceased assessee's declaration claiming the appeal pendency condition wasn't satisfied. The court held that "pending" in Section 2(1)(a) means an appeal filed and not yet adjudicated, regardless of validity or admission status. Citing SC precedents, the court ruled that appeals remain pending even if ultimately found incompetent. The court declared CBDT's FAQ No.59 of Circular No.21/2020 contrary to law insofar as it required appeal admission as a condition precedent for VSV Act eligibility. The respondent was directed to process the claim.

Pendency of appeal - admission of appeal - eligibility for settlement under the Direct Tax Vivad Se Vishwas Act, 2020 - CBDT circulars not to be adverse to assessee - Section 10 powers analogous to Section 119Pendency of appeal - eligibility for settlement under the Direct Tax Vivad Se Vishwas Act, 2020 - Interpretation of the requirement that an appeal be "pending" as on the specified date for purposes of eligibility under the VSV Act, 2020. - HELD THAT: - The Court held that for the purpose of Section 2(1)(a) of the VSV Act the word "pending" means that an appeal which has been filed remains pending until it is adjudicated upon and there is no requirement that the appeal must be valid, competent or admitted on the specified date. The Court relied on established authorities holding that whether an appeal is competent or maintainable is a question for the appellate forum to determine and that an appeal does not cease to be an appeal merely because it may later be found to be incompetent or barred by limitation. Applying that principle, an appeal filed before an appellate forum within the period contemplated by the scheme is to be treated as pending for the purposes of the VSV Act until adjudicated, and thus satisfies the statutory predicate for filing a declaration under the scheme. [Paras 11, 12, 13]An appeal filed and awaiting adjudication is to be treated as pending on the specified date; no separate requirement of validity, competence or admission on that date is necessary for eligibility under the VSV Act.Admission of appeal - CBDT circulars not to be adverse to assessee - Section 10 powers analogous to Section 119 - Validity of FAQ No.59 of Circular No.21/2020 to the extent it treats admission of an appeal as a condition precedent to pendency under the VSV Act. - HELD THAT: - The Court held that the CBDT's FAQ which imposed a condition that an appeal must be "admitted" before a declaration could be filed is contrary to the statutory scheme. While recognising that Section 10 confers power on the CBDT to issue directions, the Court observed that such power is analogous to Section 119 of the Income-tax Act and does not permit issuance of circulars adverse to assessees. Relying on precedents that circulars inconsistent with statutory provisions have no legal existence, the Court concluded that FAQ No.59 insofar as it contemplates admission of appeal as a precondition must be ignored. [Paras 15, 16, 17, 18]FAQ No.59 requiring admission of appeal as a condition precedent is contrary to law and must be ignored; the requirement of admission cannot be read into the VSV Act.Eligibility for settlement under the Direct Tax Vivad Se Vishwas Act, 2020 - Correctness of the Designated Authority's orders rejecting the petitioner's declaration under the VSV Act. - HELD THAT: - Applying the interpretation that a filed appeal remains pending until adjudicated and that the CBDT circular cannot add the precondition of admission, the Court found the Designated Authority's rejection of the declaration on the ground that the appeal was not pending on the specified date to be legally unsustainable. The Court directed that the declarations rejected by the orders dated 31.03.2021 and 15.04.2021 be set aside and that the authority process the petitioner's claim under the VSV Act in accordance with law. [Paras 19]The orders rejecting the declaration dated 31.03.2021 and 15.04.2021 are set aside and the Designated Authority is directed to process the petitioner's declaration under the VSV Act.Final Conclusion: The writ petition is allowed: the Court rules that an appeal filed and awaiting adjudication is "pending" for the specified date under the VSV Act; FAQ No.59 to the extent it requires admission of the appeal is contrary to law and must be ignored; the orders rejecting the declaration are set aside and the Designated Authority is directed to process the petitioner's claim under the scheme.

2023 (12) TMI 616 - DELHI HIGH COURT Customs

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Goods Release Order Overturned; Case Remanded for Quick Decision Due to Perishable Nature.
The HC set aside the impugned order dated 02.12.2023, which directed the provisional release of goods based on a now-invalid Circular No. 35/2017-Cus. The matter was remanded to respondent no. 6 for a fresh decision within four working days, given the perishable nature of the goods. Pending applications were disposed of.

Ultra vires - curtailment of adjudicating authority's discretion - provisional release of seized goods - reliance on administrative circular - setting aside administrative order passed on invalid circular - remand for fresh decision - speaking order - perishable goods - expedited disposalUltra vires - curtailment of adjudicating authority's discretion - reliance on administrative circular - Validity of paragraph 2 of Circular No. 35/2017-Cus to the extent it curtails the discretion of the adjudicating authority - HELD THAT: - The Court held that paragraph 2 of the impugned Circular, insofar as it curtails the discretion of the adjudicating authority to grant provisional release of goods, had been declared void by a Coordinate Bench and, following the decision in the connected petition, that portion is set aside. Consequently, the petitioner's challenge to the impugned Circular does not survive and the Circular cannot be the basis for restricting the adjudicating authority's discretion in provisional release matters. [Paras 3, 5]Paragraph 2 of the impugned Circular to the extent it curtails the adjudicating authority's discretion is void/has been set aside.Provisional release of seized goods - setting aside administrative order passed on invalid circular - remand for fresh decision - speaking order - perishable goods - expedited disposal - Validity of the impugned provisional-release order and appropriate remedy - HELD THAT: - The impugned order granting provisional release subject to specified bonds and security was passed on the basis of paragraph 2 of the impugned Circular. Because that paragraph has been set aside as curtailing adjudicatory discretion, the impugned order is liable to be set aside. The matter is remitted to the adjudicating officer for fresh consideration of the petitioner's application for provisional release. The Court directed that a fresh, speaking order be passed within an expedited timeframe because the goods are perishable, and restored the petitioner's application before the adjudicating authority for rehearing. [Paras 6, 8, 9]Impugned order set aside; matter remanded to respondent no.6 for fresh, speaking decision within four working days (expedited due to perishability); petitioner's application restored.Final Conclusion: The petition is allowed: the portion of the Circular curtailing adjudicatory discretion is set aside; the impugned provisional-release order, being founded on that Circular, is set aside; the matter is remanded for fresh, expedited decision with the petitioner's application restored.

2023 (12) TMI 604 - SC Order Central Excise

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Central Excise appeals dismissed in view of prior Supreme Court order in connected matters
Civil appeals were dismissed in view of the Supreme Court's earlier order dated 27 November 2019 in connected matters involving Central Excise issues, and any pending applications were disposed of accordingly.

2023 (12) TMI 597 - DELHI HIGH COURT Customs

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Issues involved: Impugning a Circular u/s Customs Act, 1962 & Order for provisional release of imported goods.

Impugned Circular Contrary to Customs Act:
The petitioner challenged a Circular and an order directing provisional release of goods, contending that the Circular curtailed the adjudicating authority's discretion granted by Section 110A of the Customs Act. The Circular set conditions and security requirements for provisional release, which the petitioner argued were contrary to the Act. The petitioner relied on a previous decision by a Coordinate Bench of the Court in a similar case.

Validity of Impugned Circular:
The Court examined the impugned Circular and noted that it restricted the adjudicating authority's discretion provided under Section 110A of the Act. The Circular outlined specific cases where provisional release would not be allowed and detailed the security measures required for release. Citing the previous decision, the Court found that the Circular was in conflict with the statutory provision and, therefore, declared it void and unenforceable.

Setting Aside Impugned Order:
The Court also considered the impugned order directing provisional release of goods based on the Circular's provisions. It was observed that the order was influenced by the Circular's requirements for a bond and security deposit. Consequently, the Court set aside the impugned order and directed a fresh decision by the adjudicating authority, emphasizing the perishable nature of the goods involved.

Decision and Directions:
The Court allowed the petition, setting aside the impugned Circular to the extent it limited the adjudicating authority's discretion. The impugned order was also overturned, and the petitioner's application for provisional release was restored before the adjudicating authority. Given the perishable nature of the goods, the authority was instructed to make a prompt decision within four working days after hearing the petitioner. The petitioner was required to appear before the authority on a specified date and time. The pending application was disposed of accordingly.

Delhi HC quashes Customs Circular restricting adjudicating authority's discretion, orders fresh decision on provisional release within four days
Delhi HC set aside Customs Circular No. 35/2017-Cus dated 16.08.2017 for curtailing adjudicating authority's discretion contrary to Customs Act. Court quashed impugned order denying provisional release of imported goods and restored petitioner's application before respondent authority. Considering perishable nature of goods, respondent directed to decide matter afresh within four working days after hearing petitioner and pass speaking order. Petitioner required to appear before authority on specified date. Application disposed of.

Provisional release under Section 110A - Discretion of adjudicating authority to impose conditions and security - Circular No.35/2017-Cus paragraph 2 ultra vires - Set-aside and remand for fresh adjudication - Expedited decision for perishable goods Provisional release under Section 110A - Discretion of adjudicating authority to impose conditions and security - Circular No.35/2017-Cus paragraph 2 ultra vires - Paragraph 2 of Circular No.35/2017-Cus to the extent it prescribes categories ineligible for provisional release and mandates specific securities is contrary to Section 110A and is liable to be set aside. - HELD THAT: - Section 110A confers discretion on the adjudicating authority to release seized goods on a bond with such security and conditions as the adjudicating authority may require. Paragraph 2 of the impugned Circular attempts to exclude certain categories of goods from provisional release and prescribes fixed requirements for bond and security, thereby curtailing the statutory discretion. A coordinate Bench has held that para 2 is contrary to Section 110A and void to the extent it supplants the statutory provision; that decision has been followed and the petitioner's challenge to para 2 is prima facie meritorious. Consequently, para 2 is set aside insofar as it limits the discretion conferred by Section 110A. [Paras 6, 7] Paragraph 2 of the impugned Circular is set aside to the extent it curtails the discretion of the adjudicating authority under Section 110A. Set-aside and remand for fresh adjudication - Expedited decision for perishable goods - The impugned order fixing bond and security in reliance on paragraph 2 of the Circular is set aside and the matter is remitted to the adjudicating authority for fresh decision. - HELD THAT: - The impugned order fixed the value of the bond and the quantum of security by applying paragraphs 2.1 and 2.2 of the impugned Circular. Because paragraph 2 has been held to impermissibly curtail statutory discretion, the order that relied upon those prescriptions cannot stand. The matter is remanded to respondent no. 6 to decide the petitioner's application for provisional release afresh, with opportunity to be heard. Given that the goods are perishable, the Court directs a speaking order to be passed within four working days from the date and gives a specific date for the petitioner's appearance before the adjudicating authority. [Paras 8, 9, 10] The impugned order is set aside and the application for provisional release is restored for fresh consideration by respondent no. 6, who shall decide and pass a speaking order within four working days after hearing the petitioner. Final Conclusion: The petition is allowed: paragraph 2 of Circular No.35/2017-Cus is set aside insofar as it curtails the adjudicating authority's discretion under Section 110A; the impugned provisional-release order is set aside and remitted for fresh, expedited consideration with a four-working-day direction due to the perishable nature of the goods.

2023 (12) TMI 546 - ITAT DELHI Income Tax

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Issues: (i) Whether additions made in the search assessment could be sustained in the absence of incriminating material. (ii) Whether an amount treated as deemed dividend under section 2(22)(e) could be taxed in the hands of a non-shareholder recipient. (iii) Whether the disallowance made in respect of advance payments for alleged non-deduction of tax at source under section 40(a)(ia) was sustainable.

Issue (i): Whether additions made in the search assessment could be sustained in the absence of incriminating material.

Analysis: The additions for unsecured loans and estimated expenses were made in assessments framed under the search assessment provisions, but the assessment records did not show that they were based on any incriminating material found during the search. In such a situation, the additions could not be sustained merely on the basis of the regular assessment record.

Conclusion: The additions were deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether an amount treated as deemed dividend under section 2(22)(e) could be taxed in the hands of a non-shareholder recipient.

Analysis: The loan/advance was received from a company in which common shareholding and directorship were relied upon, but the recipient assessee was not a registered shareholder of the lending company. The legal position applied was that deemed dividend taxation under this provision is attracted only in the hands of a shareholder.

Conclusion: The deemed dividend addition was deleted and the issue was decided in favour of the assessee.

Issue (iii): Whether the disallowance made in respect of advance payments for alleged non-deduction of tax at source under section 40(a)(ia) was sustainable.

Analysis: The first appellate authority examined the payment-wise details and found that part of the amount was never paid, part alone required deduction of tax and had been complied with, and the remaining payments either did not attract deduction or were below the threshold. The disallowance was therefore unsupported on the facts.

Conclusion: The disallowance was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The Revenue failed on all issues, and the consolidated result is that the additions made in the three appeals did not survive.

Ratio Decidendi: In a search assessment, additions not founded on incriminating material cannot be sustained; deemed dividend under section 2(22)(e) is taxable only in the hands of a registered shareholder; and a disallowance for non-deduction of tax at source cannot stand where the payments were not liable to deduction or compliance was otherwise established.

Search assessment additions need incriminating material; deemed dividend and TDS disallowance also failed on the facts.
In search assessments, additions cannot be sustained without incriminating material found during the search, so regular-record based adjustments were deleted. Deemed dividend under section 2(22)(e) applies only in the hands of a registered shareholder, so a non-shareholder recipient cannot be taxed on that basis. A disallowance under section 40(a)(ia) for advance payments also fails where payment-wise facts show either no tax deduction obligation, compliance with deduction requirements, or amounts below the threshold. On the facts noted, the additions in all three appeals were deleted.

Additions made dehors incriminating material found during search - deletion of additions in absence of incriminating material (PCIT vs Abhisar Buildwell) - section 2(22)(e) deemed dividend limited to shareholder and inapplicable where advance is a trade advance - addition under section 68 for unsecured loan not sustainable without seized material - disallowance under section 40(a)(ia)/TDS cannot be mechanical and requires application of mind - Rule 27 ITAT petition challenging post-search additions on ground of finalityAdditions made dehors incriminating material found during search - deletion of additions in absence of incriminating material (PCIT vs Abhisar Buildwell) - Rule 27 ITAT petition challenging post-search additions on ground of finality - Deletion of additions made without reliance on seized/incriminating material as per Hon'ble Supreme Court authority - HELD THAT: - The Tribunal found that multiple additions in the assessments under challenge were not founded on any incriminating or seized material recovered during the search and were made dehors such material. The Revenue's concession on this factual position was recorded. Applying the principle in PCIT vs Abhisar Buildwell Pvt. Ltd. (2023) SCC Online SC 481, additions which are not supported by incriminating material seized in the search cannot be sustained. On this basis the Tribunal held that the additions so made were liable to be deleted and allowed the assessee's petitions filed under Rule 27 of the ITAT Rules asserting finality of assessment in absence of incriminating material. [Paras 7, 13, 23]Additions made dehors seized/incriminating material deleted; assessee's Rule 27 grounds allowed and revenue grounds dismissed.Section 2(22)(e) deemed dividend limited to shareholder and inapplicable where advance is a trade advance - addition under section 68 for unsecured loan not sustainable without seized material - Deletion of addition as deemed dividend under section 2(22)(e) where recipient was not a registered shareholder and advance was found to be a trade advance - HELD THAT: - The Assessing Officer treated a loan/advance from another company as deemed dividend under section 2(22)(e) on account of common director/shareholding. The Appellate Authority found the nature of the advance to be a trade advance and recorded that the assessee was not a registered shareholder of the lender-company. Reliance was placed on precedents holding that the scope of section 2(22)(e) is confined to shareholders and that trade advances do not attract deemed dividend treatment. On these findings the Tribunal upheld the deletion of the addition treated as deemed dividend. [Paras 14, 15, 17]Addition as deemed dividend deleted; revenue appeal dismissed on this issue.Disallowance under section 40(a)(ia)/TDS cannot be mechanical and requires application of mind - Deletion of addition for alleged failure to deduct TDS where the Assessing Officer acted mechanically and Appellate Authority's factual findings on nature of payments and compliance were upheld - HELD THAT: - The Appellate Authority remanded and then examined the nature of payments alleged to be made without deduction of tax. It found that certain transactions were not made, that only a small portion attracted TDS and had been complied with, and that remaining payments either did not attract TDS or were below threshold. The Tribunal agreed that the Assessing Officer had made the disallowance mechanically without applying his mind and that the Appellate Authority's reasoning was cogent. Accordingly, the deletion of the addition under section 40(a)(ia) was affirmed. [Paras 24, 26]Addition for alleged non-deduction of TDS deleted; Appellate Authority's order affirmed.Final Conclusion: All three appeals filed by the Revenue are dismissed: additions made without reliance on incriminating/seized material are deleted under the principle in PCIT vs Abhisar Buildwell; the deemed dividend addition is deleted as section 2(22)(e) was inapplicable; and the TDS-related disallowance was deleted for being mechanical and lacking application of mind.

2023 (12) TMI 545 - ITAT KOLKATA Income Tax

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ITAT allows appeal against second revision under section 263 on undisclosed share capital and premium
The ITAT Kolkata allowed the assessee's appeal against the Pr. CIT's second revision u/s 263 regarding undisclosed share capital and share premium. The tribunal held that the AO had conducted proper enquiry and taken a plausible view based on examination of evidence from both assessee and subscribers. The revision was invalid as twin conditions under section 263 were not satisfied - the order was neither erroneous nor prejudicial to revenue interest. Additionally, revisionary jurisdiction cannot be exercised twice on the same issue, following precedents from Calcutta HC and SC decisions.

Revisionary jurisdiction under Section 263 of the Income-tax Act - Requirement of twin conditions for invoking Section 263 - Scope of interference where Assessing Officer has conducted independent enquiry and taken a plausible view - Maintainability of a second revision on the same issue - Duty of the revisional authority to make independent enquiry before invoking revisionary powerScope of interference where Assessing Officer has conducted independent enquiry and taken a plausible view - Requirement of twin conditions for invoking Section 263 - Validity of exercise of revisionary jurisdiction to set aside an assessment where the Assessing Officer had made enquiries, called for details from shareholders and taken a plausible view deleting additions. - HELD THAT: - The Tribunal found that in the set-aside assessment proceedings the Assessing Officer had called for and considered details from the assessee and subscribers (including notices under section 133(6)), carried out examination and enquiry and recorded reasons for deleting the addition made earlier under section 68. The revisional power under Section 263 can be exercised only when the twin conditions envisaged therein are satisfied; if those conditions are not met the jurisdiction is not available. Where the Assessing Officer has conducted an enquiry and taken a plausible view based on material on record, the Principal Commissioner cannot exercise revisionary jurisdiction merely because he would have taken a different view. Further, if the revisional authority believes there was inadequate enquiry, it is incumbent on him to make or cause an independent enquiry to reach a conclusion that the order is erroneous and prejudicial to revenue before invoking Section 263. Applying these principles to the facts, the Tribunal held that the twin conditions were not satisfied and the second revisionary order was therefore invalid. [Paras 9, 10, 11, 12]Revision under Section 263 quashed as the Assessing Officer had conducted inquiry and taken a plausible view; the twin conditions for invoking Section 263 were not satisfied.Maintainability of a second revision on the same issue - Revisionary jurisdiction under Section 263 of the Income-tax Act - Whether a second invocation of revisionary jurisdiction under Section 263 on the same issue, after an earlier revision and fresh assessment, is maintainable. - HELD THAT: - The Tribunal noted precedents of the Calcutta High Court holding that a second round of revision under Section 263 on the same issue, following an earlier exercise of revision, is invalid. Respecting that ratio and applying it to the facts - where the matter had already been subjected to revision and the Assessing Officer had adjudicated the set-aside assessment - the Tribunal held that a subsequent revision in respect of the same issue was not maintainable. Consequently the second revisional order was held to be invalid. [Paras 13, 14]Second revision on the same issue held invalid and not maintainable; the revisional order quashed.Final Conclusion: The second revisional order passed under Section 263 was quashed: the Assessing Officer had conducted inquiries and taken a plausible view, the twin conditions for invoking Section 263 were not satisfied, and a second revision on the same issue is not maintainable; appeal allowed.

2023 (12) TMI 544 - ITAT MUMBAI Income Tax

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Assessment orders against dissolved companies under Section 560(5) Companies Act 1986 are nullities and unsustainable
ITAT Mumbai held that assessment orders passed against a company struck off under Section 560(5) of the Companies Act, 1986 are nullities and unsustainable. The assessee company was dissolved on 18th March, 2011 per MCA certificate under the Easy Exit Scheme, 2010. Following coordinate bench precedents and J&K and Ladakh HC ruling, the tribunal confirmed that once a company ceases to exist through dissolution, no valid assessment order can be passed against it under the Income Tax Act. The CIT(A)'s quashing of assessment orders was upheld. Appeal decided against revenue.

Assessment against a dissolved company is a nullity - company struck off under Section 560(5) of the Companies Act ceases to exist - restoration and continuance of juridical personality under Section 560(6)-(7) - liability and recovery from directors or third parties under Section 179 and Section 226(3) of the Income tax Act - competence to prosecute appeals: dissolved company versus directorsCompany struck off under Section 560(5) of the Companies Act ceases to exist - assessment against a dissolved company is a nullity - competence to prosecute appeals: dissolved company versus directors - liability and recovery from directors or third parties under Section 179 and Section 226(3) of the Income tax Act - Validity of assessment orders passed in the name of a company that had been struck off and dissolved under Section 560(5) of the Companies Act - HELD THAT: - The Tribunal found on facts that the assessee company had been struck off and dissolved w.e.f. the date notified by the Registrar of Companies and therefore had ceased to exist on the dates when the impugned assessment orders were passed. Relying on the statutory scheme in Section 560(5)-(7) (which permits restoration in limited circumstances) and on authoritative precedents, the Tribunal held that a company dissolved under Section 560(5) has no juridical existence and an assessment made against a non existent entity is a nullity. The Tribunal noted that Sections 226(3) and 179 of the Income tax Act preserve remedies to recover tax from persons who hold money for the dissolved company or from directors where recovery from the company is not possible; such persons retain locus to challenge assessments. The Tribunal distinguished decisions concerning conversion of a company into another form (such as conversion to an LLP) where dissolution was not involved. In the circumstances, and following coordinate bench decisions and the J&K & Ladakh High Court authority, the Tribunal upheld the Commissioner (Appeals) in quashing the assessments which were made in the name of the non existing company and dismissed the Revenue appeals. [Paras 4, 6]Both assessment orders passed in the name of the struck off and dissolved company are not sustainable and are quashed; Revenue appeals dismissed.Final Conclusion: The Tribunal upheld the CIT(A)'s orders quashing the assessments for A.Y. 2008 09 and A.Y. 2009 10 because the company had been struck off and dissolved under Section 560(5) of the Companies Act, and an assessment against a non existent company is a nullity; appeals by the Assessing Officer are dismissed.

2023 (12) TMI 520 - CESTAT CHENNAI Central Excise

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Tribunal Allows Transfer of Unused Cenvat Credit Post-Factory Closure, Citing Precedents for Justification.
The Tribunal set aside the impugned order, allowing the appeal and permitting the transfer of unutilized cenvat credit despite the factory's closure. The decision followed precedents from the HC of Madras and the SC, which supported the transfer of credit in such circumstances. The Tribunal concluded that the rejection of the transfer request was unjustified, granting consequential relief where applicable.

Transfer of Cenvat credit on closure of factory - Scope of Rule 10 of Cenvat Credit Rules, 2004 - Requirement of transfer of inputs or capital goods for credit transfer - Precedential effect of High Court decision affirmed by Supreme CourtTransfer of Cenvat credit on closure of factory - Scope of Rule 10 of Cenvat Credit Rules, 2004 - Requirement of transfer of inputs or capital goods for credit transfer - Precedential effect of High Court decision affirmed by Supreme Court - Legality of rejecting the appellant's request to transfer unutilized Cenvat credit to another unit on account of closure of the factory. - HELD THAT: - The appellant notified the department of closure of its Puducherry unit and sought transfer of unutilized Cenvat credit to its Sriperumbudur unit. Rule 10 of the Cenvat Credit Rules, 2004 permits transfer of Cenvat credit when a manufacturer shifts his factory to another site or when factory is transferred on account of change in ownership, sale, merger, amalgamation, lease or transfer to a joint venture, subject to accounting of inputs or capital goods to the satisfaction of the proper officer. The Tribunal followed the reasoning in the Madras High Court decision in CCE Chennai v. Featherlite Products Pvt. Ltd., which held that Rule 10's purpose-enabling use of unutilised Cenvat credit-permits transfer in situati ons of factory closure/shift, and that the question of transfer of stocks or capital goods depends on factual accounting and was addressed in the record before the authority. That decision was affirmed by the Supreme Court, so the High Court ratio is binding. Applying that precedent to the facts, the Tribunal held that rejection of the transfer request solely on the ground that Rule 10 does not cover closure/shifting is unsustainable, and directed allowance of the transfer with consequential relief.The impugned order rejecting transfer of unutilized Cenvat credit on account of closure of the factory is set aside; the appeal is allowed with consequential relief.Final Conclusion: Following the binding precedent of the Madras High Court affirmed by the Supreme Court, the Tribunal allowed the transfer of unutilized Cenvat credit on closure/shift of the factory and set aside the rejection, granting consequential relief.

2023 (12) TMI 518 - SC Order VAT and Sales Tax

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Supreme Court Dismisses Appeals, Upholds Lower Court Decision; No Additional Relief for Petitioners.
The SC dismissed the Special Leave Petitions filed under Article 136 of the Constitution of India. The delay was condoned, and any pending applications were disposed of. The decision effectively upheld the lower court's ruling, with no further relief granted to the petitioners.

2023 (12) TMI 513 - KERALA HIGH COURT GST

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Issues involved:
The issues involved in the judgment are related to rectification of mistakes in Form GSTR-3B, refund of IGST Input tax credit, reconsideration of assessment orders, and quashing of unjust and illegal orders.

Rectification of mistakes in Form GSTR-3B:
The petitioner, a registered dealer under the provisions of the KVAT Act and now under the provisions of the CGST/SGST Act, filed a writ petition seeking permission to rectify the mistake in Form GSTR-3B by accounting input tax credit as IGST instead of SGST and CGST credit. The petitioner submitted that errors were made in submitting the returns, leading to the passing of the assessment order. The petitioner made a representation for rectifying the mistakes, which the court directed the 3rd respondent to consider as a rectification application and pass necessary orders expeditiously after giving an opportunity of hearing to the petitioner.

Refund of IGST Input tax credit:
The petitioner also sought permission to refund IGST Input tax credit and adjust the same towards SGST and CGST liability. The learned Government Pleader did not object to this prayer, and the court disposed of the petition with a direction to consider the rectification application and pass necessary orders within a period of two months.

Reconsideration of assessment orders:
Additionally, the petitioner requested the court to direct the respondents to reconsider Exhibit.P3 or P6 by taking into account the evidences produced, especially highlighting that IGST credit and liability towards CGST and SGST are the same. The court did not specifically address this prayer in the judgment but directed the 3rd respondent to consider the rectification application and pass necessary orders expeditiously.

Quashing of unjust and illegal orders:
The petitioner also sought a writ of certiorari or any other appropriate writ to quash Exhibits.P3 and P6 as unjust and illegal. The judgment did not explicitly address this prayer, as the focus was on the rectification application and passing necessary orders expeditiously.

In conclusion, the High Court of Kerala disposed of the writ petition by directing the 3rd respondent to consider the rectification application filed by the petitioner and pass necessary orders expeditiously within a period of two months, after giving an opportunity of hearing to the petitioner.

Tax Dealer Wins Right to Rectify GSTR-3B Form Errors, Enabling Input Tax Credit Classification Correction
Kerala HC allowed a tax dealer's petition to rectify GSTR-3B form mistakes, permitting correction of input tax credit classification between IGST, SGST, and CGST. The court directed tax authorities to expeditiously review the rectification application within two months and provide a hearing to the petitioner, effectively granting relief for administrative tax error correction.

2023 (12) TMI 502 - ITAT AHMEDABAD Income Tax

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AO cannot disallow short-term capital loss on share trading without concrete evidence proving transactions are sham
ITAT Ahmedabad allowed assessee's appeal against disallowance of short-term capital loss on share trading. AO treated transactions as sham based on general observations about company's financial viability and unusual price movements without conducting proper investigation or gathering corroborative evidence. ITAT held that AO's conclusion was based on assumptions and conjecture rather than concrete material. The tribunal noted transactions occurred on BSE platform where parties don't know each other, assessee traded in 48 different scripts with mixed results, and only set off partial gains against losses. Following Delhi HC precedent in Krishna Devi case, ITAT directed deletion of addition, emphasizing need for cogent material beyond circumstantial evidence to establish bogus transactions.

Sham transaction / bogus transaction - pre-arranged transaction / accommodation entry - surrounding circumstantial evidence - onus on assessee to prove genuineness of transaction - assessment based on trade and financial analysis of scrip - onus under Section 68 - set-off of short term capital loss against long term capital gainSham transaction / bogus transaction - pre-arranged transaction / accommodation entry - surrounding circumstantial evidence - assessment based on trade and financial analysis of scrip - onus on assessee to prove genuineness of transaction - set-off of short term capital loss against long term capital gain - Validity of disallowance of claimed short-term capital loss on sale of shares of M/s Looks Health Services Ltd as a bogus/sham transaction - HELD THAT: - The AO and the CIT(A) concluded that the assessee's short-term capital loss was a product of a pre-arranged accommodation entry and therefore bogus, relying on trade data, price movements of the scrip, concentration of bulk deals, the use of a broker pool account and payments from the assessee's father's account. The Tribunal examined whether these circumstantial observations were supported by corroborative material or enquiries directed to other participants or brokers. It found that the transactions were executed on the BSE platform where counter-parties are anonymous, and there was no independent or corroborative evidence on record showing collusion, rigging by the assessee or his broker, or any material establishing that money was converted through accommodation entries. The Tribunal held that the principle of surrounding circumstantial evidence, applied without further corroboration, was insufficient to sustain a finding of sham transactions in the facts of this case. The Tribunal noted that the assessee had made payments routed through banking channels, had dematerialised shares and that the claimed loss did not equal the entire long-term gain (which, the Tribunal observed, would have been expected if a wholly pre-arranged set-off had been contrived). Relying on the reasoning in PCIT v. Krishna Devi, the Tribunal concluded that absent cogent corroborative material or further inquiry, the lower authorities' conclusion was conjectural. On that basis the Tribunal set aside the disallowance and directed deletion of the addition.Disallowance of the short-term capital loss held unsupported by corroborative material and set aside; the addition deleted and the assessee's ground of appeal allowed.Final Conclusion: The Tribunal allowed the appeal, set aside the findings of the AO and CIT(A) that the short-term capital loss on sale of Looks Health Services Ltd shares was bogus, and directed deletion of the addition for Assessment Year 2014-15.

2023 (12) TMI 493 - MADRAS HIGH COURT Customs

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Conditional EPCG relaxation depends on proper shipping bill particulars and supporting documents; missing details can defeat the claim.
Relaxation under the EPCG scheme for procedural lapses was conditional, not automatic. For third-party exports, the cited circular required supporting documents and the relevant shipping bills to show both the third party's name and the licence holder's name, alongside the prescribed endorsement requirements in the Handbook of Procedures. Because the appellant did not produce the shipping bills and admitted that the required particulars were absent, the authorities could not verify the genuineness of the claim. On those facts, non-compliance was treated as substantive rather than curable, and the claimed EPCG benefit was rejected.

Third party exports under EPCG scheme - condonation of procedural lapse - relaxation of procedural conditions - endorsing EPCG licence details on shipping bills - verification of exports by DGFT - export obligation fulfillment requirementsRelaxation of procedural conditions - third party exports under EPCG scheme - condonation of procedural lapse - Whether benefit of Circular No.7/2002 relaxing procedural lapses could be extended despite non-compliance with condition (v) requiring shipping bills to contain both the names of the third party and the licence holder. - HELD THAT: - The Court examined Circular No.7/2002, which permitted condonation of procedural lapses subject to specified documentary safeguards for third party exports, including condition (v) that the relevant shipping bills contain both the names of the third party(s) and the licence holder. The appellant conceded that the shipping bills did not bear those names and also failed to place the shipping bills on record. The Court held that where the prescribed condition aimed at enabling verification of the exports is not complied with, the regulatory authority did not err in refusing relaxation. The determinative reasoning is that the conditional relaxation in the policy is contingent upon fulfilment of all prescribed safeguards; non-compliance with the shipping-bill endorsement requirement frustrates verification and is fatal to claiming the benefit of the circular. [Paras 11, 12, 14]Claim for relaxation under Circular No.7/2002 was rightly rejected because condition (v) was not complied with and the shipping bills were not produced to enable verification.Endorsing EPCG licence details on shipping bills - verification of exports by DGFT - export obligation fulfillment requirements - Whether failure to place shipping bills and to endorse EPCG licence number, date and names on the shipping bills justifies denial of the condonation/relaxation claim. - HELD THAT: - The Court noted that paragraph 5.7.1 of the Handbook of Procedures requires endorsement of EPCG licence number and date on shipping bills presented to discharge export obligation. The appellant admitted non-endorsement and also did not produce shipping bills before the authority. Given that the endorsement and production of shipping bills are integral to the respondents' ability to verify the genuineness of the exports and the linkage to the EPCG licence, the Court found no error in the authority's decision to deny the benefit. The Court explicitly refrained from adjudicating the separate question of timely fulfilment of export obligation since that was not the basis for denial in the impugned order. [Paras 13, 14]Denial of benefit was justified because required endorsement on, and production of, shipping bills was absent, preventing verification and warranting refusal of relaxation.Final Conclusion: Writ appeal dismissed; the authority did not err in refusing relaxation under Circular No.7/2002 where the shipping bills did not bear the names and EPCG licence endorsements required by the circular and the shipping bills were not placed for verification.

2023 (12) TMI 486 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues: (i) Whether the Real Estate Regulatory Authority had locus to file the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016; (ii) whether the Aquacity Consumer and Societies Welfare Society had locus to file the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016; (iii) whether non-discharge of the barter component under the barter agreements created an operational debt enabling initiation of proceedings under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the Real Estate Regulatory Authority had locus to file the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The Authority is a statutory body entrusted with protecting the interests of allottees and regulating real estate projects. The appeal challenged not merely the moratorium as a consequence of admission, but the very maintainability of the Section 9 proceedings and alleged collusion between the parties. In that setting, the Authority was directly affected by the continuation of corporate insolvency proceedings and the resulting impact on actions already taken under the real estate law.

Conclusion: The Real Estate Regulatory Authority had locus to file the appeal and was a person aggrieved.

Issue (ii): Whether the Aquacity Consumer and Societies Welfare Society had locus to file the appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The Society represented homebuyers of the real estate project and had already pursued consumer proceedings concerning refund and interest. The impugned admission order affected the claims and remedies of the homebuyers whom the Society represented. It was therefore not a remote or abstract objector but an affected association of allottees with a direct grievance against the admission order.

Conclusion: The Aquacity Consumer and Societies Welfare Society had locus to file the appeal and was a person aggrieved.

Issue (iii): Whether non-discharge of the barter component under the barter agreements created an operational debt enabling initiation of proceedings under Sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The agreements were framed as barter arrangements under which the operational creditor was to provide advertising services and, in return, receive a cash component and allotment or transfer of units as the barter component. The pleaded default related to non-handover of units, not to non-payment of a monetary liability arising from services. For a claim to qualify as operational debt, it must be a claim in respect of goods or services that gives rise to a right to payment. A right to obtain allotment of units under a barter arrangement is not the same as a right to recover money. The Court treated the statutory scheme of Sections 8 and 9 as requiring unpaid operational debt in money terms before a demand notice and insolvency application can lie.

Conclusion: Non-discharge of the barter component did not create operational debt, and the Section 9 application was not maintainable.

Final Conclusion: The admission order was unsustainable and was set aside, with both appeals allowed.

Ratio Decidendi: A claim arising only from non-allotment or non-transfer of units under a barter arrangement does not amount to operational debt under the Insolvency and Bankruptcy Code, 2016, because Sections 8 and 9 are attracted only where there is a legally enforceable right to payment in money.

Operational debt under insolvency law requires a money claim; non-allotment of barter units is insufficient.
Locus under the Insolvency and Bankruptcy Code was recognised for both the real estate regulator and the welfare society because each was directly affected by the admission order and represented affected allottees. On the insolvency issue, the text states that a barter arrangement for advertising services, with units promised as the barter component, did not create operational debt when the grievance was only non-allotment of units. Sections 8 and 9 apply only where there is an unpaid operational debt giving rise to a legally enforceable right to payment in money, so a claim limited to transfer of units cannot sustain a demand notice or insolvency application.

Operational debt - operational creditor - barter agreement - payment means money - locus to appeal under Section 61 of the Code - moratorium under the I&B Code - non-maintainability of Section 9 applicationLocus to appeal under Section 61 of the Code - moratorium under the I&B Code - Real Estate Regulatory Authority has locus to file an appeal under Section 61 of the I&B Code against admission of a Section 9 application. - HELD THAT: - RERA is a statutory authority constituted to protect the interests of allottees and had taken multiple regulatory actions and orders against the Corporate Debtor prior to the Section 9 petition. The consequence of admission and the attendant moratorium would halt RERA's enforcement proceedings under the RERA Act; this direct effect establishes RERA as an aggrieved person within the meaning of Section 61. The Tribunal distinguished precedents where other statutory bodies or regulators had no direct enforcement interest against the corporate debtor, noting that locus is a question distinct from the merits of the appeal. [Paras 12, 18, 25]RERA held to have locus to file Company Appeal (AT) (Ins.) No. 1172-1173 of 2022.Locus to appeal under Section 61 of the Code - Aquacity Consumer and Societies Welfare Society (association of homebuyers) has locus to file an appeal under Section 61 of the I&B Code. - HELD THAT: - The association represents homebuyers who obtained a favourable consumer adjudication and whose ability to secure refunds or enforcement would be directly affected by initiation of CIRP and the moratorium. The Tribunal recorded that the association had active proceedings (including a Supreme Court order altering the interest direction) and that it was not contended by respondents that the association lacked locus. [Paras 27, 28]Aquacity Consumer and Societies Welfare Society held to have locus to file Company Appeal (AT) (Ins.) No. 1321 of 2022.Operational debt - operational creditor - barter agreement - payment means money - non-maintainability of Section 9 application - The transactions under the Barter Agreements did not give rise to an operational debt payable in money such as would permit initiation of a Section 9 application by the Operational Creditor. - HELD THAT: - The I&B Code defines an operational debt as a 'claim' entailing a right to payment. The Barter Agreements provided for consideration partly in cash and partly by transfer/allotment of units (barter component). The Tribunal applied the principle that 'payment' in the Code denotes monetary payment (as explained by the Supreme Court), and held that non-delivery of units under the barter component cannot be converted into a claim for payment of money under Section 8/9. Consequently, there was no unpaid operational debt in money due to the Operational Creditor that would justify a demand notice and initiation of CIRP under Section 9. [Paras 41, 42, 49]No operational debt in money was owed to the Operational Creditor on the basis of the Barter Agreements; the Section 9 application was non maintainable.Final Conclusion: Both appeals allowed. The admission order dated 05.08.2022 under Section 9 is set aside on the ground that no operational debt in money arose from the Barter Agreements; consequential IAs disposed of and parties to bear their own costs.

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