TaxTMI Updates e-Newsletter Sep 18,2024

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5 Notes

1. Unraveling the Mineral Rights Regime: The Supreme Court's Landmark Judgment

Summary: The Court concluded that the central legislative framework occupies the field of mineral regulation and that royalties are compensation for depletion of state-owned natural resources, not conventional taxes; consequently the Centre may impose such levies while States remain constrained from imposing royalties in the nature of compensation that would encroach on the Centre's exclusive regulatory domain.

2. Navigating the Faceless Assessment Regime: A Judicial Perspective

Summary: The Scheme framed under the enabling provision must be read to include preliminary proceedings linked to reassessment, so that reassessment initiation and related steps follow the faceless mechanism; concurrent exercise of territorial and faceless functions would undermine the Scheme's purpose and render steps taken outside the faceless protocol inconsistent with the statutory framework.

3. Evidentiary Value of Statements Recorded During Income Tax Surveys: A Judicial Analysis

Summary: Statements recorded during a tax survey are permissive and not taken on oath, so they are not conclusive evidence by themselves; they cannot be treated as inherently incriminating material to justify reopening assessments or making additions without independent corroboration, and must be recorded free of coercion in line with administrative instructions and judicial precedents.

4. Faceless Assessment: Ensuring Compliance with Statutory Provisions

Summary: The court determined that reassessment notices and related proceedings were inconsistent with the statutory faceless assessment framework because they were issued without following the prescribed allocation of jurisdiction and procedural sequence under the faceless mechanism; administrative orders purportedly exempting cases were not read to displace the statutory requirements and earlier precedent interpreting the faceless provisions was applied.

5. Faceless Assessment Mechanism: Jurisdictional Limits in Income Tax Proceedings

Summary: The court analysed Section 151A read with Sections 144B and 148A and held that administrative instructions dated March 31, 2021 and September 6, 2021 issued under section 119 apply only to assessment orders and do not extend to proceedings under Sections 148A and 148; those instructions cannot be read into the scheme notified on March 29, 2022. The mandatory faceless procedure under Sections 144B and 151A applies to notices and proceedings, including central charges and international taxation charges, and notices issued outside that mechanism fall outside the statutory jurisdictional framework.

41 Highlights

4 Articles

1. INPUT TAX CREDIT (ITC) ON DEMO CARS ALLOWED: RECENT CBIC CLARIFICATIONS

By: Dr. Sanjiv Agarwal

Summary: CBIC Circular No. 231/25/2024 GST rules that ITC on demo vehicles is not blocked by the motor vehicle exclusion because demo cars used by authorised dealers for business purposes fall under the exception in section 17(5)(a). Demo vehicles capitalized in the dealer's books qualify as capital goods and attract ITC subject to other statutory limits; however, if depreciation on the tax component has been claimed under income tax, or if the vehicle is used for non permitted purposes (e.g., staff transport), ITC is disallowed. Conflicting advance rulings existed but the circular clarifies availability for authorised dealers while preserving use based and depreciation related restrictions.

2. Global Trade Commitments and National Law-The Intersection of SCOMET and India's Constitutional Fram...

By: DrJoshua Ebenezer

Summary: The Catch-All control in India's SCOMET framework permits regulation of exports not explicitly listed when there is a credible risk of diversion to military or WMD uses, implementing obligations under the Wassenaar Arrangement and Section 14C of the Foreign Trade Act. Application of this control must rest on concrete evidence and rational decision making-considering civil certification, end user documentation, and objective diversion indicators-and should balance national security with legitimate commercial interests, necessitating clearer administrative guidance on evidentiary thresholds and proportionality.

3. Energy Taxation in 2024: A Tool for Sustainability and Economic Growth

By: Pallavi Prakash

Summary: Energy taxation operates as a fiscal and regulatory mechanism to reduce carbon emissions and promote renewables by altering relative prices across energy sources and uses. Carbon pricing-through taxes or emissions trading-raises the cost of carbon-intensive activities, while sector-specific taxes, tax credits, and subsidies target transportation, aviation and energy-intensive industries to accelerate decarbonisation. Smart metering and digital monitoring enable dynamic, consumption-reflective tax designs, and revenue recycling is used to mitigate distributional impacts on low-income households.

4. REGISTRATION OF FIRMS UNDER INCOME TAX ACT, 1961

By: DR.MARIAPPAN GOVINDARAJAN

Summary: Registration requires application before the end of the relevant previous year with the partnership instrument evidencing individual partners' shares; Form 11 is used if no changes occurred and Form 11A if changes occurred or the application is late. Applications must include originals or certified copies and be signed personally by all partners (minors excluded), with authorised representatives allowed for absent or incapacitated partners. Post registration, certified revised instruments must accompany returns for years with changes and changes must be intimated to the assessing officer; firms are assessed as firms only when an instrument specifies partners' shares.

2 News

1. The cumulative overall exports during April-August 2024 is estimated at USD 374.33 billion, as compared to USD 350.11 billion in April-August 2023, with as estimated growth of 5.35%.

Summary: Estimated trade aggregates for April-August 2024 show total exports of USD 328.86 billion and total imports of USD 375.33 billion, producing a widened trade deficit versus the prior year driven by stronger import growth. Services exports registered notable estimated growth, generating a services surplus that partially offsets the larger merchandise deficit. Sectoral contributors to export growth include Engineering Goods, Chemicals, Electronic Goods, Textiles and Pharmaceuticals, while non petroleum and non gems imports rose more sharply, affecting trade composition.

2. Re-opening of Reporting ITC Reversal Opening Balance

Summary: Taxpayers may report cumulative previously reversed but unclaimed Input Tax Credit as an opening balance in the Electronic Credit Reversal and Re claimed Statement on the GST portal within a final opportunity window; monthly and quarterly filers must limit reporting to reversals up to specified return periods. Once the ledger is hard locked, the system will prevent reclaiming ITC in excess of the recorded reversal balance.

2 Notifications

GST - States

S.O. 451 - dated - 12-9-2024 - Bihar SGST

State Benches of Goods and Services Tax Appellate Tribunal, relaxes the qualification from the requirement of “completion of twenty-five years of service in Group ‘A’, or equivalent

Summary: The Governor of Bihar relaxes the statutory qualification for appointment as Technical Member (State) in the State Benches of the GST Appellate Tribunal by replacing the requirement of completion of twenty five years in Group 'A' or equivalent with a qualification limited to officers of the Bihar Commercial Tax Department who have completed at least twenty five years of government service as Gazetted Officers, for a ten year period; all other conditions in clause (d) of sub section (1) of section 110 of the Central GST Act remain applicable.

S.O.449 - dated - 6-9-2024 - Bihar SGST

Amendment in Notification No. S.O. No. 173, dated the 21st September 2017

Summary: The notification substitutes the entries at serial (i) and (ii) of an earlier Bihar GST notification with the designations "(i) Additional/Joint Commissioner (Tech.), CGST & CX, Patna-1" and "(ii) Senior most Additional Commissioner (Appeal.), Central Division, Patna," respectively, under the Governor's statutory authority, and provides that the amendment shall come into force from the date of its notification.

48 Case Laws

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2024 (9) TMI 909 - SC Order

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Regular bail in CGST prosecution granted after completion of investigation, with custody concerns and documentary allegations noted.
Regular bail was granted in a CGST Act prosecution because the accused had been in custody since 18.10.2023, the allegations were said to concern mainly documentary evidence, investigation was complete and the challan had been filed, and the trial was likely to take time. The Court granted release without expressing any opinion on the merits, subject to conditions including bail bonds, sureties, surrender of passport, restraint on leaving India without leave, and regular attendance before the trial court.

2024 (9) TMI 908 - SC Order

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Preservation of appellate remedy and limitation protection after dismissal of the Special Leave Petition
The Special Leave Petition was dismissed, but the petitioner was granted liberty to file an appeal against the adjudication order and to raise contentions not specifically decided by the High Court. The petitioner was also protected against dismissal on the ground of limitation, provided the appeal is filed within the stipulated period. The operative effect is that the merits were not reopened in the SLP, while the right to pursue the statutory appeal and argue unresolved issues was preserved.

2024 (9) TMI 907 - ANDHRA PRADESH HIGH COURT

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Limitation and wilful suppression challenge leads to interim stay of CGST show-cause proceedings
Proceedings under a show-cause notice issued under the CGST Act were challenged on the basis that the limitation period under Section 73 had expired and that wilful suppression was not made out for invocation of Section 74. The respondents said those objections could be raised before the assessing authority, and the matter remained pending for further hearing. Pending that hearing, the High Court granted protective relief and stayed further proceedings under the impugned notice for six weeks.

2024 (9) TMI 906 - ORISSA HIGH COURT

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Electronic credit ledger blocking must be reviewed on merits before rejection under the GST rules
Rule 86A(2) of the Odisha GST Rules allows debit of the electronic credit ledger to be restored when the conditions for blocking no longer exist, and rule 86A(3) limits the restriction to one year. A rejection that merely relied on an earlier writ order, without examining whether the blocking should continue or whether the applicant had shown that the reasons for restriction had ceased, was unsustainable. The authority was required to consider the request on its merits and pass a reasoned order. The impugned communication was set aside and the application was restored for fresh decision.

Blocking of input tax credit - remedy under rule 86A(2) of the Odisha Goods and Services Tax Rules, 2017 - automatic cessation of restriction after one year - application of mind by authority - principles of natural justice - judicial interference where statutory redress not considered

Blocking of input tax credit - application of mind by authority - remedy under rule 86A(2) of the Odisha Goods and Services Tax Rules, 2017 - Validity of impugned communication rejecting the application under rule 86A(2) without reasons or consideration of the statutory redressal provision - HELD THAT: - The Court found that the impugned communication did not disclose any application of mind by the authority to the petition filed under sub rule (2) of rule 86A and merely disposed of the petition by reference to a prior dismissal of a writ petition without addressing the redressal sought. Rule 86A(2) contemplates that the Commissioner or an authorized officer may, if satisfied that the conditions for disallowing debit no longer exist, allow debit during the blocking period (which in any event ceases after one year). The statutory scheme therefore embeds an internal remedy; where an authority is required to consider a petition under sub rule (2), it must apply its mind to the factual and legal contentions raised rather than reject the application out of hand. Given that blocking causes commercial hardship, the Court directed that a fresh considered order be passed after affording due consideration to the application under sub rule (2). [Paras 5, 6, 7]

Impugned communication set aside and quashed; the application under rule 86A(2) restored for fresh and reasoned decision by the authority.

Principles of natural justice - judicial interference where statutory redress not considered - Whether writ petition challenging blocking on grounds of jurisdiction or violation of natural justice was maintainable in the facts - HELD THAT: - The Court noted that earlier coordinate Benches had rejected similar challenges on grounds of jurisdiction and breach of natural justice. However, the present petition was entertained because the grievance before the Court was not merely a repetition of those grounds but arose from the authority's failure to consider the statutory redress available under rule 86A(2). The Court emphasised that where a statutory remedy exists and the authority neglects to exercise the adjudicatory function mandated by the rule, judicial interference is appropriate to secure consideration of the remedy; the decision in this case turned on the absence of any reasoned consideration rather than on acceptance of the earlier grounds of jurisdiction or natural justice. [Paras 2, 3, 6, 7]

Writ petition entertained and disposed of by directing fresh consideration of the application under rule 86A(2); grant of relief was on the ground of failure to consider the statutory redress, not on a revisiting of previously rejected jurisdictional or natural justice contentions.

Automatic cessation of restriction after one year - Interpretation of temporal operation of blocking and the scope for unblocking under the rules - HELD THAT: - The Court construed sub rule (3) as providing that the restriction ceases automatically after one year from imposition, and that sub rule (2) permits the Commissioner or an authorized officer to allow debit earlier upon satisfaction that the conditions for disallowing no longer exist. The legislative scheme thus contemplates both an inbuilt time limit and an administrative mechanism for earlier redress at the instance of the affected dealer. [Paras 5, 7]

Blocking remains in effect for a maximum of one year unless the authority, on application under rule 86A(2), is satisfied to the contrary and unblocks earlier.

Final Conclusion: Impugned communication rejecting the petition under rule 86A(2) was quashed for want of application of mind; the application is restored for fresh, reasoned consideration by the authority (to be completed within three weeks), recognising the statutory remedy under rule 86A(2) and the automatic cessation after one year.

2024 (9) TMI 905 - KERALA HIGH COURT

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Issues:
1. Whether the petitioner is entitled to a refund of unutilized credit on account of payment of Service Tax, EC, SHEC, and KKC under the GST regime.
2. Whether the rejection of the petitioner's application for refund as time-barred is legally sustainable.
3. Whether the petitioner can maintain an application for refund under Section 54 of the CGST Act.

Analysis:
1. The petitioner, a Public Limited Company, sought a refund of Rs.1,57,53,287/- for unutilized credit on account of payment of Service Tax, EC, SHEC, and KKC under the GST regime. The petitioner claimed that the retrospective amendment of Section 140 of the CGST Act prevented the transition of accumulated credit on account of various Cess payments to the GST regime. The petitioner argued that the transitional credit claimed was reversed, entitling them to seek a refund under Section 142(3) of the CGST/SGST Acts. The respondent rejected the refund claim as time-barred under Section 11B of the Central Excise Act, 1944. The petitioner also filed a refund application under Section 54 of the CGST Act, contingent on the rejection of the initial refund claim. The petitioner contended that the rejection of the refund application as time-barred was illegal and unsustainable, citing judgments supporting their entitlement to the refund.

2. The respondent Department argued that the petitioner was not entitled to a refund of EC, SHEC, and KKC under the CENVAT Credit Rules, as these Cess amounts could only be set off against similar Cess payments. The Department highlighted that EC and SHEC were abolished before the introduction of GST, and KKC was abolished with the Taxation Law (Amendment) Act 2017. The Department referenced the Division Bench judgment of the Madras High Court in a similar case to support their position. They contended that the petitioner's claim for refund was not maintainable and time-barred, as per Section 54(3) of the CGST Act, which limits cash refunds to zero-rated supplies or inverted duty structures.

3. The Court analyzed the statutory provisions and previous judgments, including the Madras High Court decision, to determine the petitioner's entitlement to a refund. The Court agreed with the Division Bench's interpretation that Cess amounts like EC, SHEC, and KKC could not be transitioned to the GST regime under Section 140 of the CGST Act. The Court noted that the petitioner had no statutory right to claim a refund for unutilized Cess amounts. Additionally, the Court found that the petitioner's claim under Section 54 of the CGST Act was not valid, as there was no provision enabling the transition of EC, SHEC, and KKC. The Court dismissed the petitioner's arguments based on the statutory provisions and held that the petitioner was not entitled to a refund.

4. The Court rejected the petitioner's contention that various Tribunals had taken a contrary view, emphasizing that the statutory provisions did not support the petitioner's claim for a refund of EC, SHEC, and KKC. The Court also declined to direct the competent authority to consider the petitioner's refund application under Section 54 of the CGST Act, as the petitioner was not entitled to such a refund. Ultimately, the Court dismissed the writ petition, finding no merit in the petitioner's contentions and upholding the rejection of the refund claim.

GST cess credits cannot be cross-utilized against Service Tax or transition under Section 140 CGST Act, refund petition dismissed
Kerala HC dismissed the petition seeking refund of unutilized credit for EC, SHEC, and KKC under GST regime. The court held that these cess credits cannot be cross-utilized against Service Tax under Finance Act 1994, nor can they transition under Section 140 of CGST Act. The petitioner's claim for refund under Section 54 of CGST Act was rejected as it applies only to zero-rated supplies or inverted duty structures. The court found no merit in petitioner's contentions despite contrary tribunal decisions.

Transition of Cess (Education Cess, Secondary and Higher Education Cess, Krishi Kalyan Cess) to GST - utilisation of Cess credit under the CENVAT Credit Rules - exclusion of Cess from carry forward and set-off under Section 140 (Explanation 3) - refund under Section 142(3) of the CGST Act as applied to Service Tax regime - time-bar under Section 11B of the Central Excise Act, 1944 - refund under Section 54 of the CGST Act - limited availability (zero-rated supplies or inverted duty structure)

Transition of Cess (Education Cess, Secondary and Higher Education Cess, Krishi Kalyan Cess) to GST - exclusion of Cess from carry forward and set-off under Section 140 (Explanation 3) - Transitioning of EC, SHEC and KKC credit to the GST regime is impermissible - HELD THAT: - The Court held that Cess amounts such as Education Cess, Secondary and Higher Education Cess and Krishi Kalyan Cess could not be carried forward or transitioned into the GST regime. The CENVAT Credit Rules restrict utilisation of these Cess credits only for payment of the same Cess, and Explanation 3 to Section 140 of the CGST Act excludes such Cess from Section 140 carry forward and set-off. The Court placed the matter in respectful agreement with the Division Bench of the Madras High Court in Sutherland Global Services, observing that accounting entries in the electronic ledger do not create a vested right to transition such Cess as input credit where the levy itself ceased prior to 01.07.2017. Consequently, the petitioner's foundational premise that transitional credit of EC, SHEC and KKC was available was rejected. [Paras 5]

Claim for transition of EC, SHEC and KKC to GST denied

Utilisation of Cess credit under the CENVAT Credit Rules - refund under Section 142(3) of the CGST Act as applied to Service Tax regime - time-bar under Section 11B of the Central Excise Act, 1944 - The petitioner's refund claim under Section 142(3) (Finance Act, 1994 as applied) is not maintainable because no statutory right to refund of these Cess amounts exists - HELD THAT: - Given that EC and SHEC were abolished before GST and that CENVAT Rules confined utilisation of such Cess credits only against the same Cess, there is no statutory provision enabling refund of unutilised EC, SHEC and KKC. The Court relied on the principle that a right to refund is circumscribed by statute and, absent provision permitting refund of those Cess amounts, an application under Section 142(3) could not be entertained on merits. Thus the administrative rejection of the refund claim as time-barred was upheld in substance because the underlying claim itself lacked statutory foundation. [Paras 5]

Refund claim under Section 142(3) cannot be entertained for EC, SHEC and KKC and the rejection is sustainable

Refund under Section 54 of the CGST Act - limited availability (zero-rated supplies or inverted duty structure) - Claim for refund under Section 54 of the CGST Act is not maintainable for unutilised Cess amounts - HELD THAT: - The Court construed Sub section (3) of Section 54 to mean cash refunds under the CGST Act are limited to (i) zero rated supplies and (ii) refunds arising from an inverted duty structure. Since the petitioner could not transition EC, SHEC and KKC and its claim did not arise under either of the two statutorily recognised circumstances, an application under Section 54 could not be entertained. The Court therefore declined to direct consideration of the pending Section 54 application as doing so would be futile in light of the statutory bar. [Paras 6, 8]

Section 54 refund claim not maintainable and no direction to decide Ext.P5

Final Conclusion: Writ petition dismissed: the Court denied transition of EC, SHEC and KKC credits to GST, held there is no statutory entitlement to refund of those Cess amounts under the pre GST regime or under Section 54 of the CGST Act, and declined to direct further consideration of the pending refund application as futile.

2024 (9) TMI 904 - UTTARAKHAND HIGH COURT

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GST registration cancellation may be pursued through revocation, with pending returns and dues filed first under the CGST framework.
Cancellation of GST registration for continuous non-filing of returns was addressed by directing the taxpayer to seek revocation under Section 30(2) of the CGST Act, together with filing of pending returns and payment of outstanding tax dues. The competent authority was required to consider the revocation application and pass an appropriate order in accordance with law within the stipulated time. The writ petition was therefore disposed of with liberty to pursue revocation in the manner directed, reflecting that the dispute was treated as covered by an earlier coordinate bench order.

Cancellation of registration for non-filing of returns - revocation of cancellation under Section 30(2) of the CGST Act, 2017 - filing of outstanding returns and payment of outstanding tax, interest and penalty - direction to authority to consider revocation application within fixed time - precedent and judicial consistency

Revocation of cancellation under Section 30(2) of the CGST Act, 2017 - filing of outstanding returns and payment of outstanding tax, interest and penalty - direction to authority to consider revocation application within fixed time - precedent and judicial consistency - Petitioner permitted to seek revocation of cancellation of GST registration on compliance with specified conditions and the competent authority directed to consider the application within a fixed timeframe in accordance with the coordinate bench decision. - HELD THAT: - The Court, noting consensus between the parties and that the controversy is covered by the order in WPMS No. 75 of 2023, held that the petitioner whose registration was cancelled for continuous non-filing of returns may move an application under Section 30(2) of the CGST Act, 2017 for revocation of the cancellation. The petitioner is required to file all outstanding GST returns and deposit the outstanding tax and dues (including interest and penalties, if any) along with the application, to be filed within two weeks. Upon receipt of such application, the competent authority is directed to consider the claim and pass an appropriate order in accordance with law within four weeks thereafter. The Court disposed of the petition by directing compliance with the coordinate-bench order rather than adjudicating the merits of the cancellation itself. [Paras 7, 8]

Petitioner to file an application under Section 30(2) within two weeks with all outstanding returns and payments; competent authority to decide the application within four weeks; writ petition disposed accordingly.

Final Conclusion: Writ petition disposed by permitting the petitioner to apply for revocation of GST registration on filing outstanding returns and payment of dues; competent authority to consider and decide the application within the time directed, in terms of the coordinate-bench order.

2024 (9) TMI 903 - MADRAS HIGH COURT

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Issues:
Challenge to order dated 28.12.2023 for Assessment Year 2017-2018 due to tax liability mismatch, failure to serve physical copy of order, demand for payment, attachment of bank account, violation of natural justice.

Analysis:
The petitioner filed a Writ Petition challenging the order passed by the first respondent for the Assessment Year 2017-2018, alleging a tax liability mismatch. The respondents demanded payment of the differential amount due to the alleged mismatch. The petitioner claimed that they were unaware of the show cause notice issued through the GST Portal and that the physical copy of the notice was not provided to them. The petitioner also highlighted that their bank account was attached, and 20% of the disputed tax liability was already collected by the respondents.

The petitioner's counsel argued that the petitioner was not informed about the proceedings until a Recovery Notice was issued proposing to attach the bank account. The petitioner sought an opportunity to present their case by filing a suitable reply and participating in the proceedings. The respondents' counsel stated that the court could consider passing appropriate orders subject to verifying the payment made by the petitioner.

After hearing both parties and examining the evidence, the court found that the impugned order was passed without affording the petitioner an opportunity for a personal hearing, thus violating the principles of natural justice. Consequently, the court decided to set aside the order dated 28.12.2023 and remand the matter to the first respondent for fresh consideration regarding the assessment period. The court directed the petitioner to file their reply within two weeks and instructed the respondents to issue a clear notice for a personal hearing. The court also ordered the lifting of the bank account attachment and directed the bank to de-freeze the account upon production of the court's order.

In conclusion, the court disposed of the writ petition with the above directions, without imposing any costs. The connected miscellaneous petition was also closed as a result of the judgment.

Tax Assessment Order Quashed: Procedural Violations Nullify Proceedings, Mandate Fair Hearing and Notice Reissuance
The HC allowed the writ petition challenging a tax assessment order for AY 2017-2018. The court found violations of natural justice, set aside the impugned order, and directed fresh proceedings. The HC ordered lifting of bank account attachment, mandated issuance of a clear notice, and directed the petitioner to file a reply within two weeks, effectively providing an opportunity for a fair hearing.

Violation of principles of natural justice - Opportunity of personal hearing - Setting aside order and remand for fresh consideration - Remedial directions for filing reply and fixation of 14 days clear notice - Interim recovery by attachment of bank account and discharge on setting aside order

Violation of principles of natural justice - Opportunity of personal hearing - Setting aside order and remand for fresh consideration - Impugned assessment order dated 28.12.2023 was passed without affording personal hearing and therefore was liable to be set aside and remanded for fresh consideration. - HELD THAT: - The Court found that the show cause notice and the impugned order were uploaded on the GST portal and, according to the petitioner, the petitioner had not been made aware of the show cause notice nor furnished the original notice. In those circumstances the impugned order was passed without affording any opportunity of personal hearing to the petitioner, amounting to a breach of the principles of natural justice. Accordingly the Court set aside the impugned order and remanded the matter to the first respondent for fresh consideration on merits. The Court directed that the petitioner may file a reply/objection with documents within two weeks and, upon filing, the respondents must issue a clear 14 days notice fixing the date of personal hearing and thereafter decide the matter on merits and in accordance with law, expeditiously. [Paras 8, 9]

Impugned order set aside and matter remanded to the first respondent for fresh consideration with directions to permit filing of reply and to provide a 14 days personal hearing before passing fresh orders.

Interim recovery by attachment of bank account and discharge on setting aside order - Attachment of the petitioner's bank account in consequence of recovery proceedings could not survive once the impugned order was set aside and was ordered to be lifted. - HELD THAT: - The Court observed that 20% of the disputed tax liability had already been collected by attachment of the petitioner's bank account. Given that the impugned order itself was set aside, the attachment could not continue. The Court therefore directed that the attachment be lifted and the Bank instructed to de-freeze the petitioner's account immediately upon production of a copy of this order. The Court noted no further condition was required since the 20% had been paid. [Paras 9]

Bank attachment lifted and respondents directed to de-freeze the petitioner's bank account on production of a copy of this order.

Final Conclusion: The writ petition is allowed in part: the assessment order dated 28.12.2023 is set aside and remanded for fresh consideration after permitting the petitioner to file a reply and after a 14 days personal hearing; the attachment on the petitioner's bank account is lifted and the account shall be de-frozen on production of this order; matter to be decided expeditiously. No costs.

2024 (9) TMI 902 - MADRAS HIGH COURT

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Fair opportunity in disputed input tax credit demands led to setting aside and remand for fresh adjudication.
An assessment order demanding tax on alleged wrongful input tax credit was set aside because the affected party had not been given a fair and reasonable opportunity to contest the demand on merits. Although notice and show cause proceedings had been initiated, the court noted that a fresh reply and personal hearing were necessary, especially where part of the disputed demand had already been recovered from the bank account. The matter was remanded for fresh adjudication after permitting a reply and hearing.

Reasonable opportunity of hearing - wrongful availment of input tax credit - remand for fresh consideration - personal hearing - setting aside assessment order - Impugned assessment order set aside and matter remanded for fresh adjudication with opportunity to the petitioner to defend the claim of input tax credit. - HELD THAT: - The Court found that although show cause proceedings had been initiated, the petitioner contended that he was unaware of the proceedings and did not have a reasonable opportunity to contest the tax demand alleging wrongful availment of input tax credit on purchase of a motor vehicle. Having regard to the petitioner's claim and the fact that a substantial portion of the disputed demand had already been appropriated, the Court exercised its supervisory jurisdiction to set aside the order dated 11.10.2023 and remand the matter for reconsideration on merits. The petitioner was permitted to file a reply to the show cause notice within two weeks of receipt of this order, and the first respondent was directed to afford a reasonable opportunity, including a personal hearing, before passing a fresh order. A time-limit of three months from receipt of the petitioner's reply was fixed for disposal of the remanded proceedings. [Paras 5, 6]

Assessment order dated 11.10.2023 set aside; matter remanded for fresh consideration with directions to accept petitioner's reply within two weeks, afford personal hearing and pass a fresh order within three months.

Provisional appropriation pending outcome - lifting of bank attachment - Appropriation of amounts from the petitioner's bank account to abide by the outcome of the remanded proceedings and the bank attachment raised. - HELD THAT: - The Court recorded that a sum appropriated from the petitioner's bank account represents a significant portion of the disputed demand. In the interest of justice, it directed that the appropriated sum shall abide by the result of the remanded proceedings. Consequent to setting aside the assessment order, the Court ordered that the bank attachment be lifted. [Paras 3, 7, 8]

Sum appropriated from the petitioner's bank account to abide by the outcome of the remanded proceedings; bank attachment lifted.

Final Conclusion: Writ petition allowed by setting aside the assessment order dated 11.10.2023; matter remanded for fresh adjudication after permitting the petitioner to file a reply and be heard; appropriated funds to abide the outcome and bank attachment lifted; order to be decided within three months of receipt of the petitioner's reply.

2024 (9) TMI 901 - MADRAS HIGH COURT

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Natural justice in tax assessment upheld: orders set aside, fresh hearing directed, and bank attachment raised.
Tax assessment orders passed without hearing the assessee on the merits of the tax proposals were set aside because the authority had not afforded a reasonable opportunity of contesting the demand. The court required a preconditioned remittance of 10% of the disputed tax demand for each order, allowed the assessee to file a reply to the show cause notice within the stipulated time, and directed the authority to consider that reply, grant a personal hearing, and pass fresh orders. The bank attachment was also raised.

Natural justice / right to be heard - Personal hearing - Quashing of administrative orders for lack of hearing - Interim relief subject to deposit - Remand for fresh consideration - Provisional bank attachment and its vacation - Forum allocation between Central and State GST authorities

Natural justice / right to be heard - Quashing of administrative orders for lack of hearing - Impugned orders issued without affording the petitioner a hearing were liable to be set aside. - HELD THAT: - The High Court found on perusal of the impugned orders that they were issued without hearing the petitioner on the merits of the tax proposals. In view of the absence of an opportunity to be heard and having regard to the hardship caused by attachment of the petitioner's bank accounts, the Court considered it just to set aside the orders and to put the petitioner on terms to enable a fair adjudication. The court recorded that the petitioner may submit a reply to the show cause notices and be afforded a reasonable opportunity, including a personal hearing, before fresh orders are passed. [Paras 4, 5]

Impugned orders set aside and petitioner granted opportunity to submit reply and obtain a personal hearing prior to fresh adjudication.

Interim relief subject to deposit - Remand for fresh consideration - Provisional bank attachment and its vacation - Relief by vacating bank attachment was made subject to the petitioner remitting 10% of the disputed tax demand and the matter was remanded for fresh decision on merits. - HELD THAT: - The Court allowed interim relief conditional upon the petitioner remitting 10% of the disputed tax demand in respect of each order within three weeks from receipt of this order. Upon receipt of the 10% deposit and the petitioner's reply to the show cause notices, the respondents were directed to provide a reasonable opportunity, including personal hearing, and to pass fresh orders within three months from receipt of the reply. Consequent to setting aside the assessment orders, the attachment of the bank accounts was directed to be lifted. [Paras 5]

Bank attachment raised; petitioner to remit 10% and respondents to reconsider and pass fresh orders within three months after hearing.

Final Conclusion: Writ petitions allowed on terms: impugned orders set aside for lack of hearing, attachment vacated subject to deposit of 10% of disputed demand and submission of reply; respondents to afford personal hearing and pass fresh orders within three months; no costs.

2024 (9) TMI 900 - ORISSA HIGH COURT

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Court Stays Demands under Quashed GST Circular; Issues Notices for Further Instructions and Counter Affidavits.
The HC acknowledged challenges to circular no.34/8/2018-GST and notification no.9/2023-CT, recognizing the circular as ultra vires. It issued necessary notices to concerned parties, directing further instructions and counter affidavits. As interim relief, the court stayed demands raised under the quashed circular, scheduling further proceedings alongside a related matter.

Interim stay of demand - administrative circular declared ultra vires - challenge to notification - notice and service of process - direction to file counter affidavits

Interim stay of demand - administrative circular declared ultra vires - Interim stay of demand raised pursuant to the circular dated 01.03.2018 (Annexure-7). - HELD THAT: - The Court observed that certain High Courts have declared the circular dated 01.03.2018 to be ultra vires and the Standing Counsel for the CT & GST Department admitted the factum of that declaration. In view of the pendency of challenges before other courts and the admitted status of the earlier circular, the Court considered it appropriate to preserve the position by granting an interim relief. Consequently, the demand raised pursuant to the circular under Annexure-7 is stayed for a limited period to protect the petitioner's position pending further adjudication. [Paras 12]

Demand raised pursuant to Annexure-7 shall remain stayed until 21.05.2024.

Notice and service of process - direction to file counter affidavits - Issuance of notice to the opposite parties and directions for service of extra copies to enable them to obtain instructions or file counter-affidavits. - HELD THAT: - The Court directed issuance of notice and ordered the petitioner to serve extra copies of the writ petition on the Standing Counsel for the CT & GST Department and on the counsels appearing for other opposite parties within specified short timelines so they could obtain instructions or file counter affidavits. The Court further directed the office to effect service on certain opposite parties by registered post with acknowledgment and listed the matter for an early returnable date, thereby ensuring procedural compliance and expeditious adjudication. [Paras 7, 8, 9, 10, 11]

Notice issued; petitioner to serve extra copies and office to effect service as directed so opposite parties may file their responses.

Final Conclusion: Writ petition admitted for consideration; notice issued to opposite parties with directions for service and filing of counter affidavits, and the demand arising from the circular dated 01.03.2018 (Annexure-7) is stayed until 21.05.2024, with the matter posted for further consideration.

2024 (9) TMI 899 - DELHI HIGH COURT

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GST registration cancellation application to be decided in accordance with law after petitioner furnishes required details
The Delhi High Court directed that, where cancellation of GST registration is pending, the petitioner may furnish the details sought by the proper officer within one week, and the proper officer must decide the cancellation application in accordance with law within four weeks. The direction addresses both the furnishing of requisite particulars and the timely disposal of the cancellation request, ensuring the matter is concluded on the basis of the material supplied and the governing legal position.

2024 (9) TMI 898 - DELHI HIGH COURT

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Parallel show cause proceedings for the same tax period must be clubbed before one proper officer after reply.
Parallel adjudication on separate show cause notices for the same tax period, issued from the same jurisdictional office and leading to nearly identical demands, was not sustainable. The proceedings were required to be clubbed before one proper officer, especially where the taxpayer had not been able to file replies to the notices. The impugned orders were set aside, and the matter was remitted for fresh adjudication after giving the taxpayer an opportunity to respond, with completion to follow the statutory time prescribed for adjudication.

Duplication of adjudication by different officers in the same jurisdiction - adjudication under Section 73 of the CGST Act, 2017 - right to be heard - clubbing of show cause notices for consolidated adjudication - remand for fresh adjudication by a proper officer - time-limit for adjudication under Section 75(3) of the Act - avoidance of issuance of nearly identical demands

Duplication of adjudication by different officers in the same jurisdiction - avoidance of issuance of nearly identical demands - clubbing of show cause notices for consolidated adjudication - Both orders passed on show cause notices dated 21.09.2023 and 24.09.2023 for the same tax period were set aside and the proceedings were ordered to be clubbed and re-adjudicated by one proper officer. - HELD THAT: - The Court observed that two different officers of the same jurisdictional office issued show cause notices and passed orders creating nearly identical demands for the identical tax period July 2017 to March 2018. In view of the duplication and the risk of inconsistent or overlapping adjudications, both orders were set aside and the two proceedings were directed to be clubbed. The remedial measure of consolidation was chosen to ensure a single dispositive adjudication by a proper officer and to avoid multiplicity and possible contradictions in demands. [Paras 3, 4]

Both orders set aside; proceedings on both show cause notices are clubbed for re-adjudication by one proper officer.

Right to be heard - remand for fresh adjudication by a proper officer - time-limit for adjudication under Section 75(3) of the Act - Petitioner permitted to file replies and the matter remanded for fresh adjudication within the statutory time-limit. - HELD THAT: - Noting the petitioner's submission that he was unaware of the notices and could not file responses, the Court granted an opportunity to file replies to both show cause notices within 30 days. Thereafter the consolidated matter was directed to be adjudicated by the proper officer within the period prescribed by Section 75(3) of the Act. The Court expressly refrained from commenting on the merits and reserved the parties' rights and contentions. [Paras 4, 5, 6]

Petitioner to file replies within 30 days; proper officer to re-adjudicate within the period under Section 75(3); merits left open.

Final Conclusion: Both impugned orders were set aside and the two show cause proceedings for July 2017 to March 2018 were ordered to be clubbed and re-adjudicated by a single proper officer; the petitioner granted 30 days to file replies and re-adjudication directed to be completed within the time prescribed by Section 75(3) of the Act, with merits reserved.

2024 (9) TMI 897 - MADRAS HIGH COURT

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Show-cause notice challenge in GST matters not entertained, but interim protection kept registration suspension in abeyance pending reply.
At the show-cause notice stage, the HC declined to interfere in writ jurisdiction with notices proposing cancellation of GST registration and tax liability, treating the matter as premature for judicial intervention. It nevertheless granted limited interim protection by directing that suspension of GST registration remain in abeyance until the taxpayer filed a reply. The Court further required the authority to afford a reasonable opportunity of hearing and then pass orders on the notices in accordance with law.

2024 (9) TMI 896 - ORISSA HIGH COURT

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Writ challenge to demand-cum-show cause notice declined, with taxpayer directed to pursue statutory remedy before the proper authority.
A writ challenge to a demand-cum-show cause notice under the OGST Act/CGST Act was not entertained in light of the High Court's earlier precedent, which had directed the taxpayer to file objections and participate before the Proper Officer. Following that approach, the Court declined to quash the notice and permitted the petitioner to pursue the available statutory remedy before the appropriate authority, where all contentions could be raised and decided in accordance with law.

2024 (9) TMI 895 - JHARKHAND HIGH COURT

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Contempt for non-compliance with payment direction: notice issued after continued non-payment despite finalised order.
Non-compliance with an earlier payment direction was treated as a prima facie basis for contempt because the prior judgment had attained finality for the time being and the pending review petition did not excuse withholding compliance. Continued non-payment despite the direction was viewed as sufficient to invoke contempt jurisdiction at the notice stage, and notice was issued to the alleged contemnors with a direction to file a show-cause reply within two weeks.

Contempt of court for non-compliance - direction of payment under earlier judgment - prima facie contempt - show-cause notice for contempt - Article 215 of the Constitution - Contempt of Courts Act, 1971 - effect of filing a review petition on compliance - statutory interest liability on delayed GST payment

Direction of payment under earlier judgment - effect of filing a review petition on compliance - Filing of a review petition by JBVNL does not excuse compliance with the payment directions contained in W.P.(T) Nos. 4885 of 2022 and analogous cases. - HELD THAT: - The court noted that the Special Leave Petition filed by JBVNL had been dismissed by the Hon'ble Supreme Court after adjudication on facts, and that this Court had earlier indicated it could not reopen the concluded issue. Consequently, the subsequent filing of a review petition, particularly nearly nine months after the judgment, cannot be relied upon by JBVNL as a ground to withhold or delay payment ordered by this Court. The Court therefore treats the obligation to make payment as continuing and enforceable notwithstanding the pending review petition. [Paras 3, 4, 5]

JBVNL's review petition does not relieve it from the duty to comply with the earlier payment directions.

Contempt of court for non-compliance - prima facie contempt - show-cause notice for contempt - Article 215 of the Constitution - Contempt of Courts Act, 1971 - statutory interest liability on delayed GST payment - Non-compliance with the Court's earlier payment directions shall prima facie constitute contempt and opposite parties 2 and 3 are to be issued show-cause notices to explain non-compliance. - HELD THAT: - Applying Article 215 of the Constitution read with the Contempt of Courts Act, 1971 and relevant High Court rules, the Court held that failure to obey its payment directions would prima facie amount to contempt. In light of the potential accrual of statutory interest liabilities on delayed GST payments, the Court directed prompt action: the Registry is to issue notices to the contemnors (opposite parties 2 and 3) requiring filing of show-cause replies within a limited timeframe. The Court limited the time to two weeks to mitigate further interest accrual on the GST component of indirect transactions. [Paras 6, 7, 8]

Issue show-cause notices to opposite parties 2 and 3 requiring show-cause replies within two weeks; non-compliance is prima facie contempt.

Final Conclusion: The Court directed issuance of show-cause notices under Article 215/Contempt of Courts Act to opposite parties 2 and 3 for prima facie contempt for failure to comply with its earlier payment directions; the filing of a review petition does not excuse non-compliance, two weeks are granted for filing show-cause replies, and the matters are posted on 10th May 2024.

2024 (9) TMI 913 - BOMBAY HIGH COURT

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Issues:
1. Interpretation of proviso to Section 147 for quashing the order of the Assessing Officer within 4 years.
2. Application of explanation 1 & 2 (c)(ii) regarding income chargeable to tax.
3. Reliance on judgment of Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd. for quashing order under Section 147.
4. Consideration of decisions by Hon'ble Bombay High Court and Hon'ble Gujrat High Court in similar cases.

Analysis:
1. The case involved the reopening of an assessment under Section 147 of the Income Tax Act, 1961, within 4 years of the original assessment. The Assessing Officer (AO) passed a fresh assessment order based on a shortfall in the General Ledger balance, resulting in a change in the total income of the Assessee. The ITAT allowed the appeal by the Assessee, stating that the reopening was merely a change of opinion without new tangible material, as all facts were disclosed earlier.

2. The ITAT's decision was based on the premise that all relevant information indicating an escapement of income was already provided during the initial assessment proceedings. The documents submitted by the Assessee, including Form No. 3CD, Annual Report, and computation of total income, clearly outlined the provisions and write-offs relating to prior years. The ITAT concluded that there was no new evidence to support the reopening, making it a case of change of opinion rather than a valid reassessment under Section 147.

3. The ITAT's judgment highlighted the importance of distinguishing between a genuine case of income escapement and a mere change of opinion by the Assessing Officer. It emphasized that the reasons for reopening an assessment must be based on new material or information not previously disclosed. In this case, the AO's reasons were solely reliant on documents already in possession, leading to the quashing of the reassessment order.

4. The High Court upheld the ITAT's decision, stating that no substantial question of law arose from the appeal. The Court found no grounds to interfere with the ITAT's ruling, as the reassessment was deemed a clear instance of a change of opinion rather than a valid exercise of power under Section 147. Therefore, the appeal was dismissed, affirming the ITAT's decision in favor of the Assessee.

Reassessment within four years invalid where officer relied on material already available at original assessment; change of opinion
HC held that reassessment initiated within four years was invalid because the material relied upon by the assessing officer was already available during the original assessment, so the action constituted an impermissible change of opinion rather than discovery of new tangible material. The tribunal's finding that the reopening lacked fresh information was upheld and no substantial question of law arose. Appeal dismissed.

2024 (9) TMI 912 - BOMBAY HIGH COURT

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Petition Granted: Assessment Order Quashed Due to Missed Deadline Under Income Tax Act Section 144C.
The HC allowed the petition, issuing a Writ of Certiorari to quash the final assessment order, notice of demand, and show cause notice for penalty, as they were deemed barred by limitation under Section 144C of the Income Tax Act, 1961. The Court found the assessment order was passed beyond the statutory time limit, accepting the petitioner's submission regarding the receipt date of the draft assessment order. The Respondent's affidavit failed to provide evidence to counter the petitioner's claims, leading to an adverse inference. The order was directed to be sent to the Principal Chief Commissioner of Income Tax, concluding the matter.

Limitation under Section 144C(4) of the Income Tax Act - service of draft assessment order - objections before the Dispute Resolution Panel and intimation to Assessing Officer under Section 144C(2) - final assessment on basis of draft where no objections filed under Section 144C(3) - adverse inference for non-disclosure in official affidavit

Service of draft assessment order - objections before the Dispute Resolution Panel and intimation to Assessing Officer under Section 144C(2) - final assessment on basis of draft where no objections filed under Section 144C(3) - limitation under Section 144C(4) of the Income Tax Act - adverse inference for non-disclosure in official affidavit - Whether the final assessment order dated 27th December 2023 is barred by limitation in view of service of the draft assessment order on 23rd September 2023 and non-filing of objections under Section 144C(2). - HELD THAT: - The Court accepted the petitioner's evidence that the draft assessment order under Section 144C was served on 23rd September 2023. The statutory regime under Section 144C(2) afforded one month from receipt of the draft to file objections with the DRP and inform the Assessing Officer, which in the present case expired on 22nd October 2023. In terms of Section 144C(3)(b) read with Section 144C(4)(b) the Assessing Officer was required to pass the final assessment within one month from the end of the month in which the objection period expired, i.e., by 30th November 2023. The Assessing Officer passed the final order on 27th December 2023, after the limitation period. The affidavit-in-reply by the department failed to deny receipt on 23rd September 2023 and produced only a later ITBA snapshot for 16th October 2023; the Court drew an adverse inference against the department for non-disclosure and accordingly accepted the petitioner's chronology. Applying these findings to the statutory timeline, the final assessment was held to be time-barred and liable to be quashed. [Paras 5, 6, 7, 8]

Final assessment order dated 27th December 2023 was barred by limitation and quashed.

Final Conclusion: The petition is allowed; the final assessment order dated 27.12.2023, the notice of demand and the show cause notice for penalty are quashed as time-barred in accordance with the statutory timeline under Section 144C.

2024 (9) TMI 911 - GUJRAT HIGH COURT

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Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for A.Y. 2013-14.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961 for the A.Y. 2013-14, contending that the notice sought to reopen the assessment based on the petitioner's reduction of a specific amount under Section 115JB of the Act. The petitioner argued that all material facts were disclosed during the regular assessment conducted under Section 143(3) of the Act, including the deduction claimed. The respondent, however, maintained that the petitioner wrongly availed the reduction and that the notice was valid. The High Court analyzed the facts and legal provisions, emphasizing that the petitioner had fully disclosed all material facts during the regular assessment, rendering the notice under Section 148 without jurisdiction. The Court cited legal precedents to support its decision, highlighting the importance of the "change of opinion" concept in re-opening assessments post the Direct Tax Laws (Amendment) Act, 1987. Ultimately, the Court quashed and set aside the impugned notice, ruling it to be without jurisdiction.

The petitioner's argument centered on the contention that all material facts, including the deduction claimed under Section 115JB of the Act, were fully disclosed during the regular assessment. The petitioner asserted that the notice under Section 148 was a mere change of opinion by the Assessing Officer, lacking fresh tangible material to support the belief that income had escaped assessment. The respondent, on the other hand, argued that the petitioner had wrongly claimed the deduction, justifying the notice. The High Court carefully examined the submissions and found that the petitioner had indeed disclosed all relevant facts during the regular assessment, rendering the notice without jurisdiction. The Court also referenced the legal position post the Direct Tax Laws (Amendment) Act, 1987, emphasizing the need for a valid reason to believe that income had escaped assessment.

The High Court's decision was based on a thorough analysis of the facts and legal provisions. The Court noted that the petitioner had submitted the required audit report disclosing all material facts, including the deduction claimed, during the regular assessment. The Court highlighted the importance of the "change of opinion" concept in re-opening assessments, citing legal precedents to support its ruling. Ultimately, the Court quashed and set aside the notice under Section 148, holding it to be without jurisdiction. The decision underscored the significance of fully disclosing material facts during assessments and the limitations on re-opening assessments based on a mere change of opinion by the Assessing Officer.

Reassessment notice under Section 147 quashed for lack of fresh material evidence beyond original disclosure
The HC quashed a reassessment notice u/s 147 where the petitioner had fully disclosed all material facts during regular assessment. The court held that the AO's belief was based solely on record verification without fresh tangible material, constituting a mere change of opinion. Following Kelvinator precedent, the court distinguished between review and reassessment powers, emphasizing that reassessment requires fulfillment of pre-conditions. The concept of change of opinion serves as an in-built test to prevent abuse of power by AOs. The petition was decided in favor of the assessee.

2024 (9) TMI 910 - ITAT MUMBAI

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Tribunal Orders Re-evaluation of Denied Registrations u/s 12AB and 80G, Ensuring Fair Assessment.
The ITAT allowed both appeals (ITA No. 1856/Mum/2024 and ITA No. 1857/Mum/2024) concerning the denial of registration under Section 12AB and recognition under Section 80G of the Act. The Tribunal directed the CIT(E) to reconsider the assessee's submissions and conduct necessary inquiries, emphasizing fairness and comprehensive evaluation of all relevant details. The orders, pronounced on 28/08/2024, provided relief to the assessee by mandating a fresh decision in accordance with the law.

Registration under Section 12AB - recognition under Section 80G(5) - non-consideration of assessee's submissions causing prejudice - remand for fresh consideration - condonation of delay - rectification under Section 154

Registration under Section 12AB - non-consideration of assessee's submissions causing prejudice - remand for fresh consideration - condonation of delay - rectification under Section 154 - Admission of the appeal against rejection of registration under Section 12AB and restoration of the matter to the CIT(E) for fresh consideration of the assessee's submissions - HELD THAT: - The Tribunal recorded that the assessee's application for registration was rejected by the CIT(E) by order dated 29.03.2023, while the assessee contends it had furnished material by letter dated 06.02.2023 which was not considered. Although the appeal was filed late and the rectification application under Section 154 was made only on 14.02.2024, the Tribunal found that non-consideration of the 06.02.2023 submission caused severe prejudice to the assessee. In view of these peculiar facts the Tribunal exercised discretion to admit the appeal despite the delay and restored the matter to the file of the CIT(E) with a direction to consider the explanation dated 06.02.2023, make any lawful enquiry for verification of genuineness of activities, and decide the registration claim afresh, while placing on the assessee the duty to produce details and proof of genuineness of activities. [Paras 7, 8, 9]

Appeal admitted; matter remitted to the CIT(E) to consider the 06.02.2023 submission and decide the registration claim under Section 12AB afresh after such verification as may be required.

Recognition under Section 80G(5) - non-consideration of assessee's submissions causing prejudice - remand for fresh consideration - condonation of delay - Admission of the appeal against refusal of recognition under Section 80G(5) and restoration of the matter to the CIT(E) for fresh consideration of the assessee's submissions - HELD THAT: - The Tribunal noted that the application for recognition under Section 80G(5) was rejected by the same order dated 29.03.2023 and that the assessee relies on the same unconsidered submission of 06.02.2023. For the same reasons applied to the registration matter-namely, the prejudice caused by non-consideration of the assessee's submission-the Tribunal allowed the appeal for statistical purposes and restored the matter to the CIT(E) to consider the explanation/submission and decide the recognition claim afresh in accordance with law. [Paras 10]

Appeal admitted; matter remitted to the CIT(E) to consider the 06.02.2023 submission and decide the claim for recognition under Section 80G(5) afresh.

Final Conclusion: Both appeals were admitted despite the delay and restored to the file of the learned CIT(E) for fresh consideration of the assessee's submission dated 06.02.2023; the CIT(E) is directed to verify genuineness of activities and decide the claims for registration under Section 12AB and recognition under Section 80G(5) afresh.

2024 (9) TMI 879 - SC Order

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Supreme Court Upholds High Court Decision, Dismisses Petition, Condoning Delay and Disposing Pending Applications.
The SC dismissed the special leave petition, upholding the HC's impugned judgment and order. The delay in filing was condoned, and all pending applications were disposed of, affirming the lower court's decision without further intervention.

2024 (9) TMI 878 - BOMBAY HIGH COURT

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JAO cannot issue Section 148 notice when faceless assessment scheme mandates FAO jurisdiction under Section 151A
The Bombay HC held that a notice issued by the Jurisdictional Assessing Officer (JAO) under Section 148 was invalid as it violated Section 151A provisions mandating faceless assessment. Following Hexaware Technology Ltd., the court ruled that JAO and Faceless Assessing Officer (FAO) do not have concurrent jurisdiction for issuing Section 148 notices. When specific jurisdiction is assigned to either JAO or FAO under the March 29, 2022 Scheme, it excludes the other. The Revenue's non-compliance with the faceless assessment scheme vitiated the entire proceedings, making the notice invalid.

Section 151A compliance - Faceless assessment scheme - Validity of notice under Section 148 - Prior enquiry under Section 148A - Central charges exclusion - Quashing action for lack of jurisdiction

Section 151A compliance - Faceless assessment scheme - Validity of notice under Section 148 - Prior enquiry under Section 148A - Quashing action for lack of jurisdiction - Impugned notices under Section 148A(b), order under Section 148A(d) and consequent notice under Section 148 issued by the Jurisdictional Assessing Officer without following the faceless scheme are invalid. - HELD THAT: - The Court found on the record that the notice dated 20 March 2023 under Section 148A(b), the order dated 20 April 2023 under Section 148A(d) and the notice dated 20 April 2023 under Section 148 were issued by the Jurisdictional Assessing Officer and not through the Faceless Assessing Officer as required by the scheme notified pursuant to Section 151A. Relying upon this Court's decision in Hexaware and subsequent decisions (including Kairos Properties), the scheme notified by the Central Government (notification dated 29 March 2022) and Section 151A apply to issuance of notices under Section 148 and to the prior enquiry under Section 148A. The scheme mandates automated allocation and faceless issuance; concurrent jurisdiction of JAO and FAO is rejected. Where an authority acts contrary to the statutory scheme, the action is vitiated and liable to be quashed without the assessee having to establish further prejudice. Applying these principles, the initiation of proceedings in the present case was held to be non-compliant with Section 151A and the notified scheme and therefore vitiated the reassessment proceedings. [Paras 5, 6, 8, 10, 11]

Notices and order issued without compliance with Section 151A and the notified faceless scheme are invalid and the impugned notices/orders are quashed.

Central charges exclusion - Faceless assessment scheme - Section 151A compliance - Contention that cases falling under central charge are excluded from applicability of the faceless scheme (and thus Section 151A) is rejected. - HELD THAT: - The Court examined the Revenue's submission that prior orders dated 31 March 2021 and 6 September 2021 exclude central-charge cases from the scheme. Relying on this Court's decisions (including Abhin Anilkumar Shah and CapitalG LP) and the scheme's language, the Court held that those prior orders relate to assessment orders and do not operate to exclude the scheme notified under Section 151A. Reading the scheme to incorporate the earlier orders would be to rewrite or import provisions not present in the notification; Section 151A and its scheme stand independent and are applicable to proceedings under Section 148A and Section 148 even for central and international charge matters. Consequently, the Revenue's exception based on central charge was not accepted. [Paras 7, 9]

The plea that central-charge cases fall outside the notified faceless scheme is rejected; the scheme under Section 151A applies.

Final Conclusion: Writ petition allowed: notices under Section 148A(b), order under Section 148A(d) and notice under Section 148 dated March/April 2023 (relating to Assessment Year 2019-20) are quashed for non-compliance with Section 151A and the faceless assessment scheme; no opinion expressed on other grounds raised in the petition.

2024 (9) TMI 877 - KERALA HIGH COURT

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Reopening assessment notice invalid when revenue changes opinion on previously disclosed facts under Section 148
The Kerala HC held that the revenue's notice under Section 148 for reopening assessment was invalid. The department had raised queries about fund accumulation and utilization during original assessment proceedings in 2011, which the assessee had responded to through detailed submissions. Since the assessing officer did not address this issue in the original assessment order despite receiving responses, it was deemed accepted. The HC ruled that issuing a reopening notice in 2016 based on the same grounds constituted a mere change of opinion, which is impermissible. The extended limitation period of six years was not applicable as the assessee had fully disclosed all material facts. The petition was allowed.

Reason to believe - income escaping assessment - limitation under Section 149(1) - extended six year period - failure to disclose fully and truly all material facts - change of opinion test in reassessment - accumulation of income under Section 11(3A)

Limitation under Section 149(1) - extended six year period - failure to disclose fully and truly all material facts - income escaping assessment - Whether the notice under Section 148/147 issued in respect of assessment year 2009-10 was within the period of limitation - HELD THAT: - The Court held that extended limitation under the proviso to Section 147 (as reflected in Section 149(1)) is available only where the assessing officer has a 'reason to believe' both that income has escaped assessment and that such escapement is by reason of the assessee's failure to disclose fully and truly all material facts. The records show that the department had raised the specific query about the Rs.50 lakh accumulation during scrutiny proceedings by issuing Ext.P2 and the petitioner had replied by Ext.P3 in 2011, explaining the change in intended utilization and stating that a formal application for permission under Section 11(3A) had been filed. Thus the material facts concerning accumulation and subsequent utilization were before the department well within the six-year period and the department cannot now invoke the extended period merely because the assessing officer formed a different view later. In these circumstances there is no satisfaction of the proviso's twin conditions to invoke the extended six-year period and the notice under Section 148 cannot be said to be within limitation. [Paras 13, 14, 15, 16]

The notice under Section 148/147 is barred by limitation because the department had the relevant material facts on record and did not satisfy the proviso conditions permitting the extended six-year period.

Change of opinion test in reassessment - reason to believe - accumulation of income under Section 11(3A) - Whether the reassessment proceedings constitute an impermissible 'change of opinion' under the doctrine governing reopening of assessments - HELD THAT: - Applying the settled principle that reassessment must be founded on 'tangible material' and not a mere change of opinion, the Court found that the very issue (accumulation for construction and subsequent utilization for purchase of land) was specifically raised by the department in Ext.P2 and answered by the petitioner in Ext.P3 during the original scrutiny proceedings. The fact that the original assessment order (Ext.P4) does not expressly deal with the petitioner's explanation is not decisive where a query was raised and satisfactorily answered; the omission to refer to the matter in the assessment order is indicative that the assessing officer had applied mind and formed an opinion. On the material before it, the Court concluded that the proposed reassessment is based on no more than a change of opinion and therefore cannot sustain reopening under Section 147. [Paras 16, 20, 21]

Reassessment proceedings are vitiated as constituting an impermissible change of opinion and are therefore invalid.

Final Conclusion: The writ petition is allowed; Ext.P10 is quashed and the reassessment steps initiated by Ext.P5/Ext.P10 in respect of assessment year 2009-10 are held to be invalid - the reopening is barred by limitation and amounts to an impermissible change of opinion.

2024 (9) TMI 876 - BOMBAY HIGH COURT

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Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with the provisions of Section 151A and the faceless mechanism introduced by the Central Government.
3. Jurisdiction of the Assessing Officer in issuing notices under Section 148 of the Act.
4. Applicability of the Scheme framed by the CBDT and the Notification dated 29 March 2022.
5. Effect of non-compliance with Section 151A on the validity of the notice and subsequent proceedings.

Detailed Analysis:
1. The writ petition challenges a notice dated 23 March, 2023, issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns filed by the petitioner for the Assessment Year 2019-20. The petitioner argues that the notice, along with prior notices under Section 148A(b) and 148A(d), were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) as required by Section 151A of the Act.

2. The Central Government introduced a faceless mechanism through a Notification dated 29 March 2022, mandating compliance with Section 151A for notices issued under Section 148. The Division Bench in the case of Hexaware Technologies Limited vs. Assistant Commissioner of Income Tax clarified that the FAO, not the JAO, has the exclusive jurisdiction to issue notices under Section 148 in a faceless manner.

3. The Court emphasized that the Scheme framed by the CBDT, applicable to both assessment and issuance of notices under Section 148, cannot be selectively applied. Non-compliance with the faceless mechanism outlined in Section 151A renders the notice invalid, as it prejudices the assessee by deviating from the statutory procedure.

4. The judgment in Nainraj Enterprises Pvt. Ltd. and Kairos Properties Pvt. Ltd. further supports the requirement for FAO issuance of notices under Section 148 in accordance with the Scheme notified by the Central Government. The Court rejected arguments regarding central charges exempting the case from the Scheme's applicability, emphasizing adherence to the statutory provisions.

5. In the case of Abhin Anilkumar Shah vs. Income Tax Officer, the Court reiterated that exceptions related to central charges do not exclude the application of Section 151A and the faceless mechanism. The writ petition was allowed, quashing the impugned notices issued under Section 148 due to non-compliance with Section 151A. The judgment clarifies that the decision is based solely on non-compliance and does not address other issues raised in the petition.

Notices under section 148 invalid for breaching faceless-assessment scheme under section 151A and Scheme dated 29 March 2022
HC held that notices issued by the Jurisdictional Assessing Officer under section 148 were invalid because they breached the faceless-assessment regime established by section 151A and the Scheme dated 29 Mar 2022. The Court found Revenue had not complied with the Scheme's allocation of exclusive jurisdiction between the Jurisdictional AO and the Faceless Assessment Office; concurrent jurisdiction was impermissible. Applying Hexaware, the HC allowed the writ, concluded the impugned notice was without jurisdiction, and held the initiation of proceedings in that manner vitiated the assessment process.

Faceless assessment scheme and mandatory compliance of Section 151A - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Validity of notice for reassessment issued under Section 148 and notices under Section 148A - Applicability of the faceless Scheme to issuance of notices and Section 148A proceedings - Invalidity of action taken contrary to statutory scheme - Effect of non-compliance with procedural mandate-no requirement to prove prejudice

Validity of notice for reassessment issued under Section 148 and notices under Section 148A - Jurisdiction of Faceless Assessing Officer versus Jurisdictional Assessing Officer - Faceless assessment scheme and mandatory compliance of Section 151A - Invalidity of action taken contrary to statutory scheme - Notices issued by the Jurisdictional Assessing Officer in place of a Faceless Assessing Officer, without compliance with the notified faceless Scheme under Section 151A, are invalid and vitiate the reassessment proceedings. - HELD THAT: - The Court found that the impugned prior notice under Section 148A(b), the order under Section 148A(d) and the consequent notice under Section 148 were all issued by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as mandated by the Scheme notified pursuant to Section 151A. Applying the reasoning in Hexaware Technologies Ltd., the Scheme mandates automated allocation and confers exclusive jurisdiction on the officer so allocated; concurrent jurisdiction of JAO and FAO is not permissible. The Scheme, having been framed under Section 151A and tabled in Parliament, governs issuance of notices under Section 148 and related Section 148A steps; departure from the Scheme renders the action contrary to law. Where an authority acts contrary to the statutory scheme, the act is to be quashed without requiring the assessee to prove further prejudice, since non-compliance with the prescribed procedure itself causes prejudice and vitiates the proceedings. On this basis the Court held that the proceedings initiated in the present case are unsustainable for want of compliance with Section 151A and the notified Scheme. [Paras 4, 6, 9, 11]

Impugned notices and related order are invalid for non-compliance with the faceless Scheme and the reassessment proceedings initiated thereby are vitiated.

Applicability of the faceless Scheme to issuance of notices and Section 148A proceedings - Faceless assessment scheme and mandatory compliance of Section 151A - Effect of non-compliance with procedural mandate-no requirement to prove prejudice - The Revenue's contention that cases falling under central charge (and related exceptions) are excluded from the Scheme is not accepted; the objections based on central charge and international tax charge are rejected and do not justify exclusion from the Scheme. - HELD THAT: - The Court considered the Revenue's submission that the present case relates to central charge and therefore falls within earlier orders under Sections 144B(2) and 119 and outside the Scheme framed under Section 151A. Having regard to recent decisions of this Court (including the contemporaneous Abhin Anilkumar Shah decision) and the decision in Kairos Properties, the Court rejected the revenue's objection that central charge or international tax charge exceptions remove a matter from the applicability of the notified Scheme. Consequently, the Scheme governs issuance of notices under Section 148A and Section 148 even where the Revenue invokes central-charge arguments, and such objections do not save notices issued otherwise than in compliance with the Scheme. [Paras 7, 9]

Objections based on central charge and international tax charge are rejected; such exceptions do not exempt the Revenue from complying with the faceless Scheme under Section 151A.

Final Conclusion: Writ petition allowed; the notices dated 01.03.2023 (under Section 148A(b)), the order dated 23.03.2023 (under Section 148A(d)) and the notice dated 23.03.2023 (under Section 148) are quashed for non-compliance with the faceless Scheme framed under Section 151A; no costs.

2024 (9) TMI 875 - BOMBAY HIGH COURT

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Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reassessment of returns filed for the Assessment Year 2018-19. Compliance with Section 151A of the Act regarding the issuance of notice in a faceless manner.

Analysis:
The Writ Petition was filed to challenge a notice issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns. The notice, along with prior notices and orders, was issued by the Jurisdictional Assessing Officer (JAO) and not a Faceless Assessing Officer (FAO) as required by Section 151A of the Act. The Central Government introduced a faceless mechanism through a Notification dated 29 March 2022, mandating adherence to Section 151A for valid notice issuance under Section 148. The Division Bench in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax clarified that only the FAO, not the JAO, can issue notices under Section 148 in a faceless manner to avoid chaos and ensure the efficacy of faceless proceedings.

The Scheme framed by CBDT, applicable to assessment, reassessment, or recomputation under Section 147 and issuance of notice under Section 148, must be followed. The FAO is the only authority empowered to issue notices under Section 148 in a faceless manner. Any action by an authority contrary to law must be quashed, causing prejudice to the assessee. Compliance with the Scheme is crucial, and the failure to do so vitiates the proceedings.

The Respondent-Revenue did not comply with the Scheme under Section 151A, leading to an invalid notice issuance. The Petitioner's grievance regarding the notice's invalidity is sustainable based on the Hexaware judgment. The proceedings initiated under Section 148 are deemed unsustainable due to non-compliance with Section 151A. The recent decision in Nainraj Enterprises Pvt. Ltd. also supports the invalidity of proceedings initiated without adherence to Section 151A.

The impugned notice was issued after the notification of the faceless mechanism, but the substantive provision of Section 151A prevails. The notification does not control Section 151A, as interpreted by the Court in Hexaware. The JAO lacked jurisdiction to issue the notice, leading to the allowance of the Writ Petition. Other issues raised in the petition were not addressed as they were deemed unnecessary.

In conclusion, the Writ Petition was allowed based on non-compliance with Section 151A, emphasizing the importance of following the prescribed procedures for notice issuance under Section 148 in a faceless manner.

Notice under Section 148 invalid for violating Section 151A faceless assessment mandate
The Bombay HC held that a notice issued by the Jurisdictional Assessing Officer under Section 148 was invalid as it violated Section 151A of the IT Act, which mandates faceless assessment. Following the precedent in Hexaware Technology Ltd., the court ruled that the Revenue failed to comply with the Central Government's scheme under Section 151A(2). The court emphasized that there is no concurrent jurisdiction between JAO and Faceless Assessing Officer, and when specific jurisdiction is assigned to either officer under the March 29, 2022 scheme, it excludes the other. The writ petition was allowed, quashing the proceedings initiated through the invalid notice.

Validity of reassessment notice under Section 148 - Faceless assessment scheme under Section 151A - Jurisdiction of Jurisdictional Assessing Officer versus Faceless Assessing Officer - Mandatory compliance with Notification implementing the faceless scheme - Quashing of action for acting contrary to statutory scheme without requirement of proving prejudice

Validity of reassessment notice under Section 148 - Faceless assessment scheme under Section 151A - Jurisdiction of Jurisdictional Assessing Officer versus Faceless Assessing Officer - Impugned notice issued under Section 148 is invalid because it was issued by the Jurisdictional Assessing Officer and not in compliance with the faceless scheme mandated by Section 151A and the Notification dated 29 March, 2022. - HELD THAT: - The Court examined the record and found that the notices and orders under Sections 148A(b), 148A(d) and the consequent notice under Section 148 were issued by the Jurisdictional Assessing Officer instead of a Faceless Assessing Officer as required by the scheme notified under Section 151A. Reliance was placed on the Division Bench decision in Hexaware Technologies Limited which held that the Scheme dated 29 March, 2022 mandates automated allocation and that there is no concurrent jurisdiction between the JAO and FAO for issuance of notice under Section 148. The Scheme, having been issued pursuant to Section 151A(2) and tabled in Parliament, governs issuance of notice under Section 148 as well as subsequent proceedings; non-compliance with that Scheme renders the action contrary to law. Following Hexaware, the Court accepted that when an authority acts contrary to the statutory scheme, the action is liable to be quashed without the assessee having to prove separate prejudice. The Court rejected the submission that the proximity of dates (notice issued one day after the Notification) validates the JAO's action, holding that the purport of Section 151A and the implemented Scheme controls the validity of the proceedings. Consequently, the initiation of reassessment proceedings in the manner adopted vitiated the process. [Paras 3, 4, 5, 8]

Writ petition allowed; impugned notice under Section 148 (and underlying Section 148A proceedings) quashed for non-compliance with Section 151A and the faceless scheme.

Final Conclusion: The reassessment proceedings initiated for Assessment Year 2018-19 were vitiated because the notice and antecedent steps were not issued under the faceless scheme mandated by Section 151A; the writ petition is allowed and the impugned notices/orders are quashed. No costs.

2024 (9) TMI 874 - MADHYA PRADESH HIGH COURT

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Revenue's appeal dismissed as ITAT correctly deleted Section 144 additions after books rejection under Section 145(3) lacked specified defects
The MP HC dismissed the revenue's appeal challenging ITAT's deletion of additions made under Section 144 after rejecting books under Section 145(3). The court held that no substantial question of law arose as the revenue merely disputed ITAT's factual findings without demonstrating perversity. The ITAT had reasonably concluded that the AO failed to specify defects when rejecting books of account. Since ITAT is the final fact-finding authority and had passed a well-reasoned order considering all material, the HC refused to interfere with concurrent findings of lower appellate authorities. The appeal was dismissed for lack of substantial question of law under Section 260A.

2024 (9) TMI 873 - KARNATAKA HIGH COURT

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Issues:
1. Whether the order passed under Section 201 (1) and 201 (1A) of the Income Tax Act, 1961 for the assessment years 2007-08 to 2009-10 is barred by limitationRs.
2. Whether the payment made by the appellant to a Singapore based company should be treated as fees for technical services and subject to tax deduction at source under section 195 of the ActRs.
3. Whether the payment made to the foreign company for consultancy services is chargeable to tax in India without a permanent establishment in IndiaRs.

Analysis:
1. The appellant challenged the order passed by the Income Tax Appellate Tribunal (ITAT) for the assessment years 2007-08 to 2009-10, questioning the legality and correctness of the order dated 12.8.2016. The key substantial questions of law examined were the limitation on the order passed under Section 201 (1) and 201 (1A) of the Act, the nature of payments made to a Singapore based company, and the tax liability on payments made for consultancy services.

2. The appellant contended that the order passed under Section 201 (1) and 201 (1A) of the Act was beyond the limitation period. The appellant argued that the order dated 6.3.2014 was issued for payments made during the financial years 2006-07 to 2008-09, which exceeded four years from the end of the financial year 2008-09. Citing relevant judgments, the appellant claimed that the order was time-barred, and if the court accepted this contention, other substantial questions need not be addressed.

3. The revenue, represented by counsel, argued that there is no specific time limit prescribed under the Act for payments made to non-residents or foreign companies for consultancy charges. The Tribunal and authorities supported the order passed, contending that no time limit applies to such transactions. However, the High Court held that the initiation of proceedings and the order passed were beyond the four-year limitation period, as per relevant precedents. Consequently, the Court ruled in favor of the appellant on the issue of limitation, setting aside the orders passed by the lower authorities.

4. Given the finding on the limitation issue, the High Court did not delve into the other substantial questions raised by the appellant. The Court allowed the appeal, setting aside the orders dated 6.3.2014, 15.12.2014, and 12.8.2016, thereby ruling in favor of the appellant on the basis of the limitation aspect.

This detailed analysis of the judgment provides a comprehensive understanding of the issues raised, arguments presented, and the final decision rendered by the High Court in this case.

Tax Assessment Orders Overturned Due to Limitations Period Exceeding Four Years for 2007-10 Income Tax Assessments.
The HC ruled in favor of the appellant, determining that the order under Section 201(1) and 201(1A) of the Income Tax Act for assessment years 2007-08 to 2009-10 was barred by the four-year limitation period. Consequently, the HC set aside the ITAT's orders dated 6.3.2014, 15.12.2014, and 12.8.2016, without addressing other substantial questions.

2024 (9) TMI 872 - GUJRAT HIGH COURT

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Reassessment notice quashed for NSEL transactions after statutory audit confirmed no transactions occurred in relevant year
Gujarat HC quashed reassessment notice issued four years after original assessment regarding NSEL transactions. The court held that the assessing officer acted without jurisdiction and on borrowed satisfaction, ignoring statutory audit report under Section 142A which confirmed no NSEL transactions occurred in AY 2014-15. Since no purchase/sale transactions existed in the relevant year, no stock valuation impact on profit/loss arose. The reopening constituted impermissible change of opinion as the issue was already scrutinized during regular assessment. Full disclosure was made in financial statements showing nil debt to NSEL. Assessee's appeal was allowed.

Reopening of assessment - Reason to believe under section 147 - Quashing of notice under section 148 - Special audit report under section 142(2A) - Change of opinion - Information from third parties (NSEL) as basis for reassessment

Reopening of assessment - Reason to believe under section 147 - Special audit report under section 142(2A) - Information from third parties (NSEL) as basis for reassessment - Change of opinion - Quashing of notice under section 148 - Validity of the notice issued under section 148 read with section 147 for Assessment Year 2014-15 - HELD THAT: - The assessing officer issued the reopening notice after receiving information from NSEL alleging large outstanding payables and alleged bogus sales. The petitioner relied on the special audit conducted under section 142(2A) and the notes to accounts (note no.31 and the statutory auditor's report) which recorded that there were no purchase or sale transactions in the financial year relevant to AY 2014-15 and no opening stock related to NSEL; the special auditor expressly concluded that the question of impact on profit and loss did not arise. The Court found that the assessing officer, without applying his mind to these materials on record, formed a belief of escapement of income solely on the confidential information from NSEL and earlier-year liabilities determined for prior years. That formation of belief ignored the statutory audit findings and amounted to issuing the notice on a 'borrowed satisfaction' and effectively a change of opinion since the issue had been examined during the original assessment (including special audit) without any addition. In those circumstances the requirements for a valid reason to believe under section 147 were not satisfied and the reopening was held to be without jurisdiction. [Paras 19, 20, 21, 22, 23]

Impugned notice under section 148 and the order rejecting objections quashed and set aside

Final Conclusion: The petition is allowed; the notice for reopening assessment for AY 2014-15 and the consequent order rejecting objections are quashed and set aside. No order as to costs.

2024 (9) TMI 871 - PATNA HIGH COURT

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Issues:
1. Assessment order passed without affording an opportunity of hearing.
2. Interpretation of provisions regarding oral hearing under the Wealth Tax Act and the Income Tax Act.
3. Applicability of faceless assessment procedures under the Income Tax Act.
4. Jurisdiction of High Court under Article 226 of the Constitution regarding alternate remedies and principles of natural justice.

Analysis:
The petitioner challenged an assessment order passed without a hearing. The petitioner sought a remand for a proper hearing, citing a Full Bench decision interpreting Section 18(2) of the Wealth Tax Act, emphasizing the requirement of an oral hearing. The Full Bench clarified that "heard" means to be heard "orally," and there is an implied obligation to offer an oral hearing under the Wealth Tax Act, even without a request. However, the Court noted the provision under Section 144B(vii) of the Income Tax Act post faceless assessment, which mandates a request for an oral hearing. The Court concluded that under the faceless assessment scheme, an oral hearing must be requested, and without such a request, the assessment would proceed without one, aligning with the Act's provisions.

The Court considered the jurisdiction under Article 226 of the Constitution to interfere with appellable orders, citing precedents emphasizing the discretionary nature of writ remedies. It was highlighted that the High Court can refuse to exercise discretion if an adequate alternative remedy exists. The Court clarified that interference is warranted only in cases of breach of natural justice principles, fundamental rights infringement, lack of jurisdiction, or when challenging an Act's vires. The Court noted that the failure to request an oral hearing amounted to a waiver, and the petitioner was reserved the liberty to approach the appellate authority.

Ultimately, the Court dismissed the writ petition, emphasizing that the period during the petition filing till the judgment would not be considered a delay. The judgment underscored the importance of adhering to procedural requirements and the availability of appellate remedies, while also outlining the discretionary nature of the High Court's jurisdiction under Article 226.

Faceless Tax Assessment: Court Upholds Dismissal, Stresses Procedural Compliance and Available Appellate Remedies.
The HC dismissed the writ petition, emphasizing procedural adherence under the faceless assessment scheme of the Income Tax Act, which requires a request for an oral hearing. The Court highlighted the discretionary nature of its jurisdiction under Article 226, noting that interference is warranted only for breaches of natural justice, fundamental rights, or jurisdictional issues. The petitioner failed to request an oral hearing, constituting a waiver, and was advised to pursue appellate remedies. The judgment clarified that the period during the petition filing until judgment would not count as a delay, underscoring the importance of procedural compliance and available alternative remedies.

Faceless assessment - request for oral hearing - principles of natural justice - waiver by failure to opt for hearing - availability of alternative remedy by appeal - extraordinary jurisdiction under Article 226

Faceless assessment - request for oral hearing - principles of natural justice - waiver by failure to opt for hearing - Whether an assessment order passed under the faceless assessment scheme without an oral hearing violates principles of natural justice requiring remand. - HELD THAT: - The Court examined the statutory scheme for faceless assessment and observed that Section 144B(vii) requires the assessee to file a response and provides an explicit option to request an oral hearing when uploading objections. Unlike the Full Bench decision in Commissioner of Wealth-Tax v. Sri Jagdish Prasad Choudhary which interpreted a different statutory provision to require an oral hearing even without a request, the scheme under the Income-tax Act contemplates conclusion of faceless assessment without oral hearing unless the assessee avails the specific option to request one. Hence absence of an oral hearing where the assessee did not tick the request option amounts to a waiver and does not, in the facts before the Court, constitute a breach of the principles of natural justice necessitating remand. [Paras 4, 5]

No remand on ground of absence of oral hearing; assessment under the faceless scheme is not vitiated where the option to request oral hearing was not exercised.

Availability of alternative remedy by appeal - extraordinary jurisdiction under Article 226 - principles of natural justice - Whether the High Court should exercise writ jurisdiction under Article 226 in lieu of the appellate remedy when the assessee has not availed the statutory appeal. - HELD THAT: - Relying on settled principles limiting exercise of writ jurisdiction where an adequate and efficacious alternative remedy exists, the Court noted that Article 226 is discretionary and should be exercised only in strong cases such as breach of natural justice, jurisdictional error, or violation of fundamental rights. Given the availability of the statutory appeal where facts can be argued in person and the appellate authority's power to obtain reports and afford hearings, the petitioner's failure to avail the appellate remedy militates against interfering by writ. The Court nonetheless preserved liberty to approach the appellate authority and directed that the period from filing of the writ petition to the date of the order would not be counted for delay. [Paras 6, 7]

Writ jurisdiction declined; petitioner directed to pursue the appellate remedy; period from 20.04.2024 to date excluded for computing delay.

Final Conclusion: Writ petition dismissed; no remand on ground of absence of oral hearing under the faceless assessment scheme where no request was made; petitioner granted liberty to prefer statutory appeal and the period from 20.04.2024 to the date of this order shall not be reckoned as delay.

2024 (9) TMI 870 - MADRAS HIGH COURT

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Statutory appeal and limitation relief: Madras HC allowed the petitioner to file appeal within three weeks on merits.
The Madras HC disposed of the writ petition by leaving it open to the petitioner to pursue a statutory appeal. It directed that if the appeal is filed within three weeks, the appellate authority must receive it and decide it on merits without raising the issue of limitation. The operative effect is that the petitioner is permitted to seek appellate review, while the limitation objection is excluded if the appeal is presented within the stated period.

Writ jurisdiction - Availability of alternative statutory remedy - Discretionary relief in tax assessment - Opportunity of cross-examination - Admission of receipt of consideration in sale deed and plaint - Relaxation of limitation for filing appeal

Writ jurisdiction - Availability of alternative statutory remedy - Discretionary relief in tax assessment - High Court declined to exercise writ jurisdiction against the assessment order and directed the petitioner to pursue the statutory appeal remedy. - HELD THAT: - Having examined the record and the submissions, including prior proceedings in which the earlier assessment order was set aside and remitted, the Court concluded that it was not an appropriate case to exercise its discretionary writ jurisdiction to adjudicate the challenge to the assessment order. The Court observed that an alternative statutory remedy in the form of an appeal is available and, therefore, invoked the principle that extraordinary writ relief should not be granted where an efficacious statutory remedy exists. The Court did not undertake a determination on the merits of the assessment in exercise of its writ powers and instead left the matter to the appellate forum for adjudication on merits. [Paras 3, 5]

Writ petition disposed of; petitioner directed to file statutory appeal.

Relaxation of limitation for filing appeal - Admission of receipt of consideration in sale deed and plaint - Opportunity of cross-examination - The Court directed the appellate authority to receive and decide the statutory appeal on merits without going into the question of limitation, if filed within the prescribed short window. - HELD THAT: - Although the petitioner complained of not being supplied with the vendor's subsequent statement and of being denied cross-examination, the Court declined to adjudicate those contentions in writ jurisdiction. Noting on record that the receipt of the total consideration had been admitted in the sale deed and in the plaint filed by the parties in the civil suit, the Court nonetheless provided a limited remedy: if the petitioner files the statutory appeal within three weeks from receipt of the order, the appellate authority is directed to receive and dispose of the appeal on merits and to refrain from raising the issue of limitation. The direction is procedural and designed to preserve the petitioner's ability to challenge the assessment before the competent appellate forum. [Paras 4, 5]

Appellate authority to admit and decide the appeal on merits without considering limitation, if appeal filed within three weeks.

Final Conclusion: Writ petition dismissed in exercise of discretion; petitioner given leave to file statutory appeal within three weeks, and appellate authority directed to admit and decide the appeal on merits without regard to limitation.

2024 (9) TMI 869 - BOMBAY HIGH COURT

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Issues:
1. Whether the contribution made by the Assessee to the Compensatory Afforestation Fund (CAF) amounting to Rs. 212.52 crores should be treated as capital expenditure or revenue expenditure.

Analysis:
The judgment involves an appeal under Section 260A of the Income Tax Act, 1961, concerning the treatment of the Assessee's contribution to the Compensatory Afforestation Fund (CAF) as either capital or revenue expenditure. The Assessee, engaged in the manufacturing of iron and steel products, had filed a return of income for Assessment Year 2006-2007, declaring a total income of Rs. 44,22,82,61,971. Subsequently, the Commissioner of Income Tax set aside the original assessment order on three issues, one of which was the allowability of the Assessee's contribution to the CAF amounting to Rs. 212.52 crores. The Assessing Officer disallowed this contribution, leading to appeals before the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT).

The ITAT, in its order, allowed both appeals filed by the Assessee. It observed that similar issues had been decided in favor of the Assessee by various ITAT Benches and sister concerns. The ITAT held that the Commissioner of Income Tax was not justified in invoking the provisions of Section 263 of the Act. The Assessee raised three substantial questions of law, including the justification of the CIT's actions and the nature of the afforestation expenditure. The main issue in this appeal was whether the Assessee was entitled to treat the contribution to the CAF as capital or revenue expenditure.

The judgment cited a previous decision by the Bombay High Court (Goa Bench) in a similar case, where it was held that the contribution to the CAF should be treated as revenue expenditure and not capital in nature. Additionally, a Special Leave Petition filed by the Revenue against the aforementioned decision was dismissed. Consequently, the court concluded that no substantial question of law arose in the present case and dismissed the appeal.

ITAT Rules Rs. 212.52 Crores Contribution to Afforestation Fund as Revenue Expenditure, Dismissing Revenue's Appeal.
The ITAT ruled in favor of the Assessee, determining that the Rs. 212.52 crores contribution to the Compensatory Afforestation Fund should be treated as revenue expenditure, aligning with previous decisions by various ITAT Benches and the Bombay HC (Goa Bench). The court dismissed the Revenue's appeal, finding no substantial question of law.

2024 (9) TMI 847 - MADRAS HIGH COURT

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Provisional release of imported printing machines granted on enhanced duty payment, with expeditious duty quantification and demurrage waiver consideration.
Provisional release of imported second-hand digital multifunction printing and copying machines was directed on payment of the enhanced duty amount, with Customs required to quantify the duty expeditiously and release the goods within the stipulated time after payment. The department's right to pursue adjudication in accordance with law was preserved. Any application seeking waiver of demurrage charges was also to be considered and decided objectively by the respondents if filed.

Provisional release of goods on deposit of enhanced duty - quantification of duty by Customs within a fixed time - consideration of reply to show cause notice and adjudication - consideration of waiver of demurrage charges on application

Provisional release of goods on deposit of enhanced duty - quantification of duty by Customs within a fixed time - Provisional release of imported second hand digital multifunction printing and copying machines on condition of payment of enhanced duty and time-bound quantification of such duty by Customs. - HELD THAT: - The writ petitions were disposed of on the same terms as an earlier batch order dated 23.11.2023. Petitioners were directed to file replies to the show cause notices and the respondent Customs were directed to consider those replies and pass necessary orders. For release of the goods, the Court directed provisional release conditioned upon deposit/payment of the enhanced duty. Customs was directed to complete quantification of the enhanced duty forthwith within one week from receipt of a copy of the order, and on receipt of such quantification the petitioners were to make immediate payment; the goods were to be released within three weeks thereafter at the outer limit.

Writ petitions allowed to the extent that goods are to be provisionally released on condition of payment of quantified enhanced duty, with Customs to quantify within one week and release within three weeks on payment.

Consideration of reply to show cause notice and adjudication - Continuation of departmental adjudicatory powers despite provisional release. - HELD THAT: - The Court made clear that the direction for provisional release does not preclude the Customs Department from proceeding with adjudication or other proceedings in accordance with law. The disposal therefore preserves the respondent's statutory authority to continue and conclude adjudicatory processes notwithstanding the interim relief granted.

Order for provisional release does not bar Customs from carrying on with adjudication or other lawful proceedings.

Consideration of waiver of demurrage charges on application - Consideration of any application by petitioners for waiver of demurrage charges. - HELD THAT: - Referring to an earlier interim order of a Division Bench, the Court directed that if petitioners file applications seeking waiver of demurrage charges, such applications shall be considered and decided by the respondents objectively. The direction confines the relief to consideration of any such applications by the department and does not itself grant a waiver.

If petitioners apply for waiver of demurrage charges, Customs shall consider and decide such applications objectively; no automatic waiver granted by this order.

Final Conclusion: The writ petitions were disposed of on the same terms as the earlier batch order: petitioners to reply to show cause notices, Customs to consider and adjudicate; provisional release of goods permitted on deposit of quantified enhanced duty (quantification within one week and release within three weeks on payment); and any application for waiver of demurrage charges to be considered objectively by the department. No costs.

2024 (9) TMI 846 - CESTAT KOLKATA

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Quick Lime with 70-75% purity classified under CTH 2522 1000, refund ordered with 12% interest
CESTAT Kolkata ruled on classification of imported Quick Lime, determining it should be classified under CTH 2522 1000 rather than CTH 2825 as claimed by Revenue. Following precedent from Delhi Bench in Jindal Stainless case, tribunal held Quick Lime with 70-75% purity falls under CTH 2522 per Board's Circular and HSN Explanatory Note. Since appellant paid customs duty and interest during investigation in April-May 2018 before show cause notice issued March 2019, tribunal ordered refund of amounts paid with 12% interest, citing precedents from Delhi and Allahabad Benches. Appeal disposed favorably for appellant.

Classification under Customs Tariff Heading 2522 versus 2825 - application of HSN explanatory notes to tariff classification - precedential effect of coordinate Benches and supervisory non-interference by the Supreme Court - amount deposited in the course of investigation - refund of customs duty and interest with interest at 12%

Classification under Customs Tariff Heading 2522 versus 2825 - application of HSN explanatory notes to tariff classification - precedential effect of coordinate Benches and supervisory non-interference by the Supreme Court - Quick Lime imported by the appellant is classifiable under CTH 2522 1000 and not under CTH 2825. - HELD THAT: - The Tribunal examined prior decisions of coordinate Benches, notably the Delhi Bench decision in Jindal Stainless (Hisar) Ltd. which applied HSN explanatory notes excluding calcium oxide of purity less than 98% from Chapter 28 and held that such quicklime falls under Chapter 25. The Mumbai Bench in Viraj Profiles Ltd. reached a similar conclusion, and the Hon'ble Supreme Court declined to interfere with that Mumbai Bench decision. Respectfully following these decisions and the applicable HSN explanatory note reasoning, the Tribunal concluded that the imported quicklime in the present case is correctly classifiable under CTH 2522 1000 rather than under CTH 2825. [Paras 9]

Classification under CTH 2522 1000 confirmed and appeal allowed on merits.

Amount deposited in the course of investigation - refund of customs duty and interest with interest at 12% - Amounts of customs duty and interest paid by the appellant during the investigation are not to be retained by the Revenue and are to be refunded with interest at the rate of 12% from the date of deposit until refund. - HELD THAT: - The Tribunal noted that the appellant deposited the duty and interest in April-May 2018, prior to issuance of the Show Cause Notice on 29.03.2019, and therefore these payments qualify as amounts deposited in the course of investigation. Relying on recent decisions of coordinate Benches which direct payment of interest at 12% on refunds of amounts deposited during investigation, the Tribunal held that, since classification is in the appellant's favour, the Revenue must refund the deposited amounts along with interest at 12% from the date of deposit up to the date of actual refund. [Paras 11]

Direct refund of deposited duty and interest ordered, with 12% interest from date of deposit until refund.

Final Conclusion: Appeal allowed on merits: imported quicklime classified under CTH 2522 1000; amounts deposited during investigation to be refunded with interest at 12% from date of deposit until actual refund.

2024 (9) TMI 845 - SC Order

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Conditional closure of prosecution on payment terms where the underlying monetary obligation had already been discharged.
Where the underlying shareholder payment had already been made with interest and that payment was acknowledged, the Supreme Court treated continuation of criminal proceedings as unnecessary in the peculiar facts. It substituted further prosecution with a conditional monetary consequence, requiring a fine and proof of deposit within the stipulated time. On compliance, the criminal proceedings would stand closed; if the deposit was not made, the appeals would fail automatically. The decision reflects that, where the monetary obligation has been discharged and justice so requires, prosecution may be brought to an end on terms rather than carried through to trial.

Quashing of criminal proceedings - exercise of judicial discretion to impose a fine in lieu of prosecution - closure of proceedings upon compliance with court-imposed terms - statutory obligation to deposit and disburse amounts within prescribed period - judicially imposed settlement on peculiar facts not to operate as precedent

Quashing of criminal proceedings - statutory obligation to deposit and disburse amounts within prescribed period - Whether criminal proceedings could be brought to a close in view of payment having been made to shareholders and the statutory breach alleged. - HELD THAT: - The Court noted that there was a prima facie violation of the statutory provisions relating to non-deposit within five days and non-disbursement within thirty days, and that the amounts due to shareholders had, in substance, been paid along with interest. Having considered the competing contentions - appellants seeking quashing in light of repayment and SEBI asserting that statutory provisions afford no escape - the Court exercised its supervisory jurisdiction to avoid subjecting the parties to a full trial. In the exercise of that discretion and in the interest of justice, the Court directed that criminal proceedings shall stand closed if the appellants comply with the terms imposed by the Court (deposit of the fine and filing of proof of deposit within the stipulated time). The order is expressly confined to the peculiar facts of the case and is not to be treated as a precedent. [Paras 5, 6, 7, 9]

Criminal proceedings shall be closed upon compliance with the Court's terms; the Court declined to allow trial to proceed in light of repayment and imposed conditional closure.

Exercise of judicial discretion to impose a fine in lieu of prosecution - closure of proceedings upon compliance with court-imposed terms - Whether imposition of a monetary penalty as a term for closure of proceedings was appropriate and the consequences of non-compliance. - HELD THAT: - The Court considered that, in the facts and circumstances, it was appropriate to put the appellants to terms rather than permit the trial to proceed. The appellants were directed to deposit a specified fine into the designated welfare fund within eight weeks and to file proof of deposit within ten weeks. Upon filing of proof within the time fixed, the criminal proceedings initiated by the respondent would stand closed. The Court made clear that failure to file proof within ten weeks would result in automatic dismissal of the appeals without further reference to the Court. The order is made on the peculiar facts and is not to be cited as precedent. [Paras 5, 6, 7, 9]

A fine was imposed and conditional closure of proceedings granted upon timely deposit and filing of proof; non-compliance will lead to automatic dismissal of the appeals.

Final Conclusion: Appeals allowed to the extent that, in the peculiar facts, the appellants are directed to pay the prescribed fine and file proof of deposit within the time fixed, upon which the criminal proceedings initiated by SEBI shall stand closed; failure to comply will result in automatic dismissal of the appeals. The order is confined to the facts of the case and shall not operate as a precedent.

2024 (9) TMI 844 - MADRAS HIGH COURT

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Broad scope of money-laundering under PMLA upheld; prima facie case survives challenge to discharge.
Section 3 of the Prevention of Money Laundering Act was construed broadly to cover possession, acquisition, concealment, use, and other dealings with proceeds of crime, not merely the final integration of tainted funds into the formal economy. The court held that the relevant inquiry is whether the accused was involved in handling proceeds of crime, and rejected the argument that the amended explanation could not apply retrospectively to the alleged receipt and handling of bribe money. On that basis, the refusal to discharge was upheld and the complaint was found to disclose a prima facie offence under the Act.

Money-laundering - proceeds of crime - possession as an offence under Section 3 of PMLA - pre-amended Section 3 of PMLA - acquisition, possession, use, projecting or claiming as activities under Section 3 - continuing offence - clarificatory amendment and non-retrospective effect

Pre-amended Section 3 of PMLA - possession as an offence under Section 3 of PMLA - Whether, as per the law in force at the relevant time, mere possession or deposit of seized cash in Court precluded prosecution under Section 3 of PMLA. - HELD THAT: - The Court examined the text and judicial precedents and held that the original (pre-amended) provision of Section 3 already captured a broad range of processes and activities connected with proceeds of crime, including possession, acquisition and use. The trial court correctly applied the law in concluding that mere depositing of seized cash in Court did not negate that the persons had been involved in activities connected with proceeds of crime for purposes of PMLA; therefore the petitioners could not be discharged at the threshold. The court relied on Supreme Court rulings which treat possession/acquisition of bribe money as falling within the definition of proceeds of crime and within Section 3's ambit. [Paras 11, 12, 16, 19, 22]

The contention that possession or deposit of the seized money in Court in 2009 precluded invocation of Section 3 of PMLA is rejected and the petitioners were not entitled to discharge on that ground.

Clarificatory amendment and non-retrospective effect - continuing offence - Whether the amendment to Section 3 of PMLA (including the Explanation) made after the events could be given retrospective effect so as to criminally penalise conduct antecedent to the amendment. - HELD THAT: - Relying on the Supreme Court's exposition, the Court held that the activities captured by Section 3 may be continuing in nature and that the Explanation inserted later was clarificatory of the original provision rather than expanding its scope. As such, where a person continued to indulge in processes or activities connected with proceeds of crime after the offence became triable under PMLA, prosecution is permissible; the mere fact that the predicate acts dated from an earlier time does not preclude application of Section 3 to continuing dealings with proceeds of crime. [Paras 17, 18, 22]

The plea that the 2013/2019 amendments could not be applied to the facts is unsustainable; the amendments are clarificatory and do not prevent prosecution for continuing activities connected with proceeds of crime.

Acquisition, possession, use, projecting or claiming as activities under Section 3 - proceeds of crime - Whether receipt/acquisition of bribe amounts by a public servant constitutes 'proceeds of crime' and falls within the scope of Section 3 so as to justify refusal of discharge. - HELD THAT: - The Court followed binding Supreme Court authority that bribe money constitutes 'proceeds of crime' under Section 2(1)(u) and that acts such as acquisition and use are expressly enumerated activities under Section 3. Given the material that the petitioners fixed and received illegal gratification for fraudulent clearances, the trial court rightly found a prima facie case under PMLA. The petitioners therefore bore no entitlement to discharge at the stage of consideration under the criminal miscellaneous petitions. [Paras 19, 20, 21, 23]

Receipt or acquisition of bribe money amounts to proceeds of crime and the trial court was justified in refusing discharge; the petitioners' discharge petitions rightly failed.

Final Conclusion: The High Court confirmed the trial court's order dismissing the discharge petitions, holding that the petitioners' involvement with illicitly received money fell within the ambit of Section 3 of PMLA and that the amendments relied upon are clarificatory; the criminal revision petitions are dismissed.

2024 (9) TMI 843 - GAUHATI HIGH COURT

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Stay of recovery proceedings granted pending returnable date, with maintainability of the writ petition left open.
Recovery proceedings were stayed until the next returnable date, preserving the status quo while the writ petition remained under consideration. Notice was issued, the respondents waived service, and the matter was directed to be listed after four weeks. The question of maintainability of the writ petition was left open for later determination.

2024 (9) TMI 842 - CESTAT CHENNAI

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Reimbursable Expenses Excluded from Taxable Value: Tribunal Allows Appeal, Citing Supreme Court Precedent.
The tribunal set aside the impugned order, ruling in favor of the appellant. It concluded that reimbursable expenses should not be included in the taxable value for service tax calculation. The tribunal's decision was based on a Supreme Court precedent, determining that the department's demand for service tax on reimbursable expenses was unsustainable. Consequently, the appeal was allowed with consequential reliefs.

Inclusion of reimbursable expenses in taxable value - reverse charge mechanism - pure agent doctrine - Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 - precedent of Intercontinental Consultants and Technocrats, Pvt Ltd

Inclusion of reimbursable expenses in taxable value - reverse charge mechanism - Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 - precedent of Intercontinental Consultants and Technocrats, Pvt Ltd - Demand of service tax on reimbursable/incidentals paid to mutual fund distributors under reverse charge - HELD THAT: - The department issued a show cause alleging that incidental expenses incurred by distributors (auditorium rent, mailing, transport etc.), though billed by debit notes, formed part of the assessable value and the service receiver was liable to discharge service tax on those amounts under Rule 5(1). The Tribunal examined the factual position that such expenses were reimbursed to the service providers and that service tax on service charges (invoices) had been discharged on reverse charge where applicable. Applying the binding decision in Intercontinental Consultants and Technocrats, Pvt Ltd, the Tribunal held that reimbursable expenses of the service provider are not to be included in the taxable value for the purpose of charging service tax and therefore the demand based on inclusion of such reimbursed incidental expenses could not be sustained. The Tribunal noted the department's contention regarding non-fulfilment of pure agent conditions but proceeded on the authoritative Supreme Court precedent which excludes reimbursement items from the value charged to tax in the circumstances before it.

The demand of service tax, interest and penalties insofar as based on inclusion of reimbursable incidental expenses in the taxable value for 2010-2011 and 2011-2012 is set aside and the appeal is allowed.

Final Conclusion: Following the Supreme Court precedent in Intercontinental Consultants and Technocrats, the Tribunal quashed the demand, interest and penalties to the extent they arose from inclusion of reimbursable expenses in the taxable value for the periods 2010-2011 and 2011-2012 and allowed the appeal with consequential reliefs.

2024 (9) TMI 841 - CESTAT CHANDIGARH

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Issues: (i) Whether the services rendered to foreign educational institutions constituted intermediary services liable to service tax or export of services; and (ii) whether the remand by the Commissioner (Appeals) to await the outcome of another pending matter was justified.

Issue (i): Whether the services rendered to foreign educational institutions constituted intermediary services liable to service tax or export of services.

Analysis: The assessee's activity had already been examined in earlier tribunal decisions on the same statutory definition of intermediary service under Rule 2(f) of the Place of Provision of Service Rules, 2012. The services were found to be rendered to foreign clients on their own account and not as an arranger or facilitator between two parties. On that reasoning, such services were held to fall outside intermediary service and to qualify as export of services. The same legal position was reiterated in subsequent tribunal orders covering an identical dispute.

Conclusion: The services were not intermediary services and were to be treated as export of services; the demand could not be sustained on that basis.

Issue (ii): Whether the remand by the Commissioner (Appeals) to await the outcome of another pending matter was justified.

Analysis: The Commissioner (Appeals) had already accepted that the dispute stood covered in favour of the assessee on merits, and the departmental appeal on that issue was not pursued further. In those circumstances, remand solely to await a future decision in another matter was inconsistent with the binding effect of the existing tribunal rulings and served no legitimate adjudicatory purpose.

Conclusion: The remand order was unjustified and was set aside.

Final Conclusion: The appeal succeeded, the remand was annulled, and the assessee obtained final relief in the service tax dispute.

Ratio Decidendi: Where an issue is already covered by binding precedent on identical facts, and the lower appellate authority has accepted that position on merits, it cannot remand the matter merely to await the outcome of another pending case; services rendered on own account to foreign clients are not intermediary services and may constitute export of services.

Intermediary service test: services to foreign clients on own account were treated as export of services, and remand was set aside.
Services rendered to foreign educational institutions on the client's own account, rather than as an arranger or facilitator between two parties, were treated as outside intermediary service and therefore as export of services, so the service tax demand could not stand. A remand by the Commissioner (Appeals) was also held unjustified because the dispute was already covered by binding tribunal precedent on identical facts and the merits had been accepted in favour of the assessee; remitting the matter merely to await another pending case served no proper adjudicatory purpose. The remand order was set aside and final relief followed.

Remand pending outcome of Supreme Court decision - Binding effect of Tribunal decisions on lower authorities - Validity of the Commissioner (Appeals)'s remand to the Adjudicating Authority to await the decision of the Hon'ble Supreme Court in M/s Microsoft Corporation (I) Pvt Ltd despite adverse Tribunal precedent. - HELD THAT: - The Commissioner (Appeals) accepted that the Tribunal decision in M/s Sunrise Immigration Consultants (cited) favoured the appellant but nonetheless remanded the matter to the Adjudicating Authority to await the outcome of the Supreme Court proceedings in M/s Microsoft Corporation (I) Pvt Ltd. The Tribunal held that once the Commissioner (Appeals) recorded that the issue was covered in favour of the appellant and the Revenue did not challenge that finding, there was no justification to remit the matter for reconsideration pending the apex court's decision. The remand thus ran counter to the binding effect of existing Tribunal precedent and was set aside. [Paras 7, 8]

Impugned remand order set aside; Commissioner (Appeals) erred in remanding the matter to await the Supreme Court decision when the issue was already covered by Tribunal precedent.

Intermediary service under Rule 2(f) of the Place of Provision of Service Rules, 2012 - Export of services - Extended period of limitation in service tax proceedings - Whether the services rendered by the appellant amount to 'Intermediary Service' or qualify as 'Export of Services', and whether extended period of limitation is invokable. - HELD THAT: - The Adjudicating Authority had held, on analysis of agreements and relying on Tribunal precedent in M/s Sunrise Immigration Consultants and related decisions, that the appellant did not arrange or facilitate the main service between two or more persons and thus was not an 'intermediary' under Rule 2(f) of the POPS Rules, 2012. The services were held to be promotional/business auxiliary in nature and supplied to clients located outside India, thereby qualifying as export of services. The Tribunal noted that this position has been consistently followed by subsequent decisions, and that interpretation of the POPS Rules precluded invocation of the extended period of limitation. On that basis the demands were unsustainable. [Paras 6, 8, 9]

Services held to be 'Export of Services' and not 'Intermediary Services'; demands (including those under extended limitation) unsustainable and relief granted to appellant.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals)'s remand and allowed the appeal, holding that the appellant's services are export of services and not intermediary services under the POPS Rules, with consequent relief and rejection of demands made under the extended period of limitation.

2024 (9) TMI 840 - CESTAT MUMBAI

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Service tax refund allowed for diamond exports despite address discrepancy in invoices under Notification 41/2002-ST
CESTAT Mumbai allowed the appeal regarding refund of service tax paid on input services used for export of Cut and Polished Diamonds during October 2015 to March 2016. The tribunal held that appellant fulfilled all conditions under Notification 41/2002-ST dated 29.06.2012 for refund eligibility, having proper registration with Export Promotion Council and Service Tax authorities. Regarding CENVAT Credit denial based on address discrepancy in invoices, CESTAT found appellant had duly applied for address change which was acknowledged by department and incorporated in ST-2 certificate. Following Madras HC precedent, refund cannot be denied merely for address correlation issues when proper registration exists.

Refund of service tax on input services used for export of goods - Rebate under Notification No.41/2012 ST - registration with Export Promotion Council as condition for rebate - service tax registration and amendment of registered address (ST 2) - procedural irregularity not to defeat substantive right to refund - CENVAT credit/refund eligibility despite invoice address mismatch

Refund of service tax on input services used for export of goods - Rebate under Notification No.41/2012 ST - CENVAT credit/refund eligibility despite invoice address mismatch - procedural irregularity not to defeat substantive right to refund - Refund of service tax paid on input services used for export of cut and polished diamonds for October, 2015 to March, 2016 is allowable despite invoices bearing a different office address - HELD THAT: - The Tribunal examined Notification No.41/2012 ST and noted that the statutory scheme grants rebate of service tax paid on specified services used for export of goods subject to fulfillment of conditions including registration requirements. The original authority had found that the appellant satisfied the procedural and substantive conditions of the notification and had sanctioned the refund. The Principal ADG set aside that sanction solely because supporting invoices showed the Bandra Kurla Complex address while the service tax registration earlier reflected a different address, without addressing that the appellant had applied for and secured amendment of address in the ST 2 certificate and had declared registration with the Export Promotion Council. The Tribunal held that the statutory requirement is registration as exporter with the Export Promotion Council and service tax registration; where the appellant had duly notified and obtained incorporation of the changed address in the ST 2 and the use of input services for export was otherwise established, denial of refund on the ground of invoice address mismatch was a curable procedural irregularity which cannot defeat the substantive right to rebate. The Tribunal also relied on the authority that location correlation for fixation of jurisdiction does not extinguish the exporter's right to refund. Given that the original authority had already applied the notification's substantive tests and allowed the refund, the Revenue's appeal which challenged only the procedural address discrepancy was unsustainable. [Paras 8, 9, 10, 11]

Impugned order rejecting the refund was set aside and the refund sanctioned by the original authority restored, with consequential relief payable to the appellants

Final Conclusion: The appeal is allowed: the Tribunal set aside the Principal ADG's order refusing the refund on the ground of invoice/registered address discrepancy, held that the appellant had fulfilled the registration and amendment requirements under Notification No.41/2012 ST and restored the refund as sanctioned by the original authority.

2024 (9) TMI 839 - CESTAT MUMBAI

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Issues Involved:
1. Admissibility of the refund claim filed on 31.03.2010 for service tax paid on services provided by the Commission Agency located outside India for the period April 2009 to June 2009.
2. Whether the refund claim filed on 31.03.2010 is time-barred.

Issue-wise Detailed Analysis:

1. Admissibility of the Refund Claim:
The appellants, engaged in the export of goods, filed refund claims for input services under Notification No. 41/2007-S.T. dated 06.10.2007. The original authority rejected part of the refund claims, which was upheld by the Commissioner (Appeals-IV). The Tribunal, in its Final Order No. A/2563-2564/15/SMB dated 17.06.2015, remanded the matter for fresh consideration, noting that the condition of non-availment of drawback was omitted by Notification No. 33/2008-ST dated 07.12.2008, and the refund claims were within the stipulated time. In the de novo adjudication, the original authority sanctioned part of the refund but rejected Rs. 16,17,016/- for the period April 2009 to June 2009, which was upheld by the Principal Additional Director General (ADG), DGPM. The Tribunal, upon direction from the Bombay High Court, reconsidered the matter and found that the appellants fulfilled the conditions stipulated in the instructions dated 01.01.2010, which clarified that the refund scheme under Notification No. 17/2009-S.T. dated 07.07.2009 applies to exports prior to its issuance, provided the refund claim is filed within one year and no previous refund claim was filed. The Tribunal concluded that the appellants are legally entitled to the refund of Rs. 16,17,016/-.

2. Time-barred Refund Claim:
The original authority and the Principal ADG, DGPM, rejected the refund claim on the grounds of being time-barred. However, the Tribunal noted that the refund claim for the period April 2009 to June 2009 was filed on 31.03.2010, which is within the stipulated one-year period as per the instructions dated 01.01.2010. The Tribunal emphasized that the refund claim was filed within the permissible time frame and that the conditions for such refund claims were met, thus overturning the previous decisions and allowing the refund.

Conclusion:
The Tribunal set aside the impugned order dated 18.05.2018, allowing the refund claim of Rs. 16,17,016/- for service tax paid on services provided by the Commission Agency located outside India for the period April 2009 to June 2009. The appeal filed by the appellant was allowed in their favor.

Service tax refund allowed on input services used in export of goods despite government's initial denial
CESTAT Mumbai allowed the appeal regarding service tax refund on input services used in export of goods. The appellant sought refund for services provided by commission agents located outside India for the period April 2008 to December 2008. The tribunal held that service tax on input services used in exports must be refunded to maintain level playing field in international markets. The government's notification dated 07.07.2009 and subsequent instructions dated 01.01.2010 clarified that refund benefits extend to earlier periods. The appellant fulfilled both conditions - filing within one year and declaring no prior refund claims. The tribunal set aside the original order denying refund of Rs.16,17,016/- and allowed the appeal.

Refund of service tax on input services used in export - Applicability of a superseding notification to exports made prior to its issuance - Temporal limitation for filing refund claims - Refund admissibility subject to fulfillment of conditions in the later notification - Nexus of commission agent services with export of goods

Refund of service tax on input services used in export - Applicability of a superseding notification to exports made prior to its issuance - Refund admissibility subject to fulfillment of conditions in the later notification - Nexus of commission agent services with export of goods - Refund claim filed on 31.03.2010 in respect of service tax paid on services of a commission agent located outside India for the period April, 2009 to June, 2009 is admissible. - HELD THAT: - The Tribunal examined whether the superseding Notifications (No.17/2009-S.T. and No.18/2009-S.T. dated 07.07.2009) precluded allowance of refund claims in respect of exports that took place prior to their issuance. The Board's instruction dated 01.01.2010 clarified that Notification No.17/2009-S.T. would apply to exports prior to 07.07.2009 provided (a) refund claims are filed within one year from date of export and (b) no earlier refund claim had been filed under the previous notification. The impugned order denied refund on the ground that certain conditions in Notification No.18/2009-S.T. (relating to ceiling, half-yearly returns and canalized items) were not met; however, those conditions were irrelevant where exports had already taken place before 07.07.2009. The appellant had declared that no earlier refund was claimed and had filed the claim on 31.03.2010 within one year of the quarter ending 30.06.2009. The Tribunal also accepted that services of an overseas commission agent are attributable to export of goods and satisfy the nexus requirement. In consequence, the claim satisfied the material conditions prescribed by the Board's instruction and the later notification, and therefore the refund was admissible. [Paras 6, 7, 8]

Allow refund claim for the period April, 2009 to June, 2009 as admissible under the applicable notifications and Board instructions.

Temporal limitation for filing refund claims - Refund admissibility subject to fulfillment of conditions in the later notification - The refund claim filed on 31.03.2010 is not time-barred. - HELD THAT: - The Tribunal considered the time-limit issue in light of the Board's instruction dated 01.01.2010 which interpreted Notification No.17/2009-S.T. to be applicable to exports prior to 07.07.2009 if claims are filed within one year of export. The appellants filed the refund application on 31.03.2010 for the quarter ending 30.06.2009, which is within the one-year period stipulated by the superseding notification as clarified by the Board. The authorities below did not find that the appellant had earlier claimed the refund. Consequently, the claim met the temporal requirement and could not be rejected as time-barred. [Paras 6, 8]

Hold that the refund claim filed on 31.03.2010 is within the permitted time and is not barred.

Final Conclusion: Impugned appellate order set aside; appeal allowed and refund in respect of service tax paid on commission-agent services for April, 2009 to June, 2009 is sanctioned.

2024 (9) TMI 838 - CESTAT KOLKATA

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CENVAT credit allowed on outward transportation services before April 2008 following Vasavadatta Cements precedent
CESTAT Kolkata allowed the appeal regarding CENVAT credit on outward transportation services for the period April 1, 2006 to October 31, 2007. Following SC precedent in Vasavadatta Cements Ltd., the tribunal held that prior to April 1, 2008, CENVAT credit was available for outward goods transportation service up to the place of removal. The demand was set aside and no penalty was imposed on the appellant, with the impugned order being overturned.

2024 (9) TMI 914 - CESTAT BANGALORE

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Sealing machine manufacturer wins SSI exemption under N/N. 08/2003-CE as revenue fails to prove dummy unit allegations
CESTAT Bangalore set aside the denial of SSI exemption under N/N. 08/2003-CE for sealing machine manufacturer. Revenue alleged that Decentralized Mother Units (DMUs) were dummy units controlled by appellant to claim SSI exemption benefits, and that appellant was the actual manufacturer since final processes occurred at their premises. CESTAT found DMUs had independent existence based on commercial negotiations and separate operations. The sealing machines received by appellant from DMUs were complete products, with subsequent branding and packing not constituting manufacturing. Revenue failed to establish that DMUs were dummy units or that appellant should be denied SSI exemption benefits. Appeals allowed, confiscation and penalties set aside.

Clubbing of clearances for SSI exemption - dummy units / effective control test - financial flow-back - principal-to-principal transactions - marketability and manufacture - Note 6 to Section XVI

Clubbing of clearances for SSI exemption - dummy units / effective control test - financial flow-back - principal-to-principal transactions - Whether clearances of the Decentralised Mother Units (DMUs) should be clubbed with Sepack for denial of SSI exemption on the basis that the DMUs were dummy units controlled by Sepack. - HELD THAT: - The Tribunal held that clubbing cannot be sustained on the facts. The legal position is that clubbing/dummy-unit determination is fact-sensitive and requires proof of pervasive financial and managerial control or flow-back; no universal rule applies. On the record the Tribunal found that (a) many DMUs existed before Sepack and had independent existence; (b) shared negotiations, supplier identification, periodic meetings and mutual cost-reduction efforts produced mutual commercial benefit and do not demonstrate pervasive control or impermissible financial flow-back; (c) absence of common workforce, lack of shareholding, no undisputed evidence of advances/loans or profit siphoning, and varying transfer prices weighed against a finding of dummy units; and (d) the release of seized goods to DMUs and imposition of fines on DMUs were inconsistent with a finding that DMUs had no independent existence. Applying settled authorities, the Tribunal concluded that the Revenue had not proved that the DMUs were dummy units and therefore the turnover of DMUs could not be clubbed with Sepack for denial of benefit under Notification No.8/2003-CE. [Paras 13, 16, 18, 19, 23]

Clubbing of clearances is not justified; DMUs are not dummy units of Sepack and are entitled to SSI exemption under Notification No.8/2003-CE on the facts of this case.

Marketability and manufacture - Note 6 to Section XVI - principal-to-principal transactions - Whether the sealing machines supplied by DMUs to Sepack were incomplete/unfinished such that subsequent branding, packing and quality checks at Sepack's premises amount to 'manufacture' under Note 6 to Section XVI, making Sepack the manufacturer liable to duty. - HELD THAT: - The Tribunal examined the factual evidence of inspection and packaging and applied the test of marketability. It found that the machines received from DMUs were complete and capable of being used and sold in the market; Sepack carried out quality checks (including pre-delivery inspection) and branding/packing thereafter, but those processes did not convert an unfinished article into a finished one. The Tribunal held that mere branding, packing and warranty insertion, and the ancillary quality checks undertaken by Sepack, did not constitute manufacture so as to render the DMUs' output non marketable at source. Accordingly, Note 6 was not attracted on the facts and Sepack could not be treated as the manufacturer for the purposes claimed by the Revenue. [Paras 21, 22, 23]

The sealing machines were marketable at the DMUs' premises; the subsequent processes by Sepack do not amount to manufacture under Note 6 to Section XVI and do not render Sepack the manufacturer for duty liability.

Final Conclusion: The impugned adjudication is unsustainable on merits: the Tribunal set aside the order and allowed the appeals, holding that the DMUs are not dummy units and that the sealing machines were marketable at the DMUs; consequential claims of duty, confiscation and penalties were rendered academic and not adjudicated.

2024 (9) TMI 837 - GUJARAT HIGH COURT

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Captive consumption exemption upheld where sulphuric acid was only an incidental by-product in copper manufacture.
Captive use of oxygen in the manufacture of copper products was treated as eligible for exemption under Notification No. 67/95-CE where sulphuric acid emerged only as an incidental by-product of the process. The analysis followed the settled position that sulphuric acid generated during processing of sulphur dioxide is not the final product of the manufacturing activity, and relied on the principles recognised in Hindustan Zinc and Sterlite Industries. The Tribunal's factual findings were found consistent with the evidence and not perverse, so the exemption could not be denied merely because the by-product was cleared at nil rate and the duty demand was unsustainable.

Captively produced input eligible for exemption under Notification No. 67/95-C.E. - by product versus final product classification in excise law - application of Hindustan Zinc Ltd. precedent on Modvat/Cenvat credit and Rule 57CC - requirement of separate records where inputs are common to dutiable and exempt products - appellate authority's factual finding not to be interfered with unless perverse

Captively produced input eligible for exemption under Notification No. 67/95-C.E. - by product versus final product classification in excise law - Entitlement of the assessee to benefit of Notification No. 67/95-C.E. for oxygen produced and captively consumed where sulphuric acid emerges from the process - HELD THAT: - The Tribunal applied the reasoning of the Supreme Court in Union of India v. Hindustan Zinc Ltd. and the Tribunal decision in Sterlite Industries to conclude that sulphuric acid produced from sulphur dioxide in the smelting process is a by product, not the final product of the assessee's manufacturing activity, which is the metal (copper). The Tribunal examined the manufacturing process and environmental obligations which require processing of SO2, and found that the oxygen from the captive plant is used in the purification of copper concentrate and not as an input into the chemical steps that create sulphuric acid; additional oxygen for conversion comes from the atmosphere and water contributes oxygen in the final acid. On those factual findings and by following the Hindustan Zinc ratio that by products arising as technological necessity do not render Rule 57CC or related provisions applicable, the Tribunal held the assessee eligible for the exemption under Notification No. 67/95 for the captive oxygen and set aside duty and penalty demands. [Paras 5, 6]

Assessee entitled to benefit of Notification No. 67/95 for the captive oxygen; sulphuric acid treated as by product and not a bar to exemption.

Application of Hindustan Zinc Ltd. precedent on Modvat/Cenvat credit and Rule 57CC - requirement of separate records where inputs are common to dutiable and exempt products - Whether Rule 57CC or record keeping requirements disentitle the assessee to exemption when a by product cleared at nil rate is produced - HELD THAT: - Relying on the Apex Court's treatment in Hindustan Zinc Ltd., the Tribunal and this Court accepted that where a by product (sulphuric acid) emerges out of a technological necessity and no part of the dutiable raw material is traceable in the by product, the mischief that Rule 57CC seeks to prevent is absent. The Court endorsed the view that separate accounts requirement under Rule 57CC is inapplicable in such circumstances and that the exemption provisos (including compliance with the relevant rule) were satisfied. Consequently, the exemption cannot be denied on the ground that a by product is cleared at nil rate. [Paras 5, 6]

Rule 57CC and separate accounts requirements do not defeat the exemption where sulphuric acid is a by product arising as technological necessity; exemption remains available.

Appellate authority's factual finding not to be interfered with unless perverse - Entrenchment of the Tribunal's factual findings and whether they are perverse or unsupported by record - HELD THAT: - The High Court reviewed the Tribunal's findings about the manufacturing process, role of captive oxygen, and the environmental regulatory requirement to process SO2. The Court found no perversity or contradiction with the evidence in the Tribunal's factual conclusions and determined that the Tribunal correctly applied binding precedent to those facts. Therefore, there was no basis for judicial interference with the Tribunal's determination. [Paras 7]

Tribunal's factual findings are not perverse and do not warrant interference.

Substantial question of law arising from appellate order - Whether the appeals raised any substantial question of law warranting this Court's interference with the Tribunal's order - HELD THAT: - The Court examined the substantial questions of law advanced by Revenue, including whether the Tribunal properly verified use of oxygen in manufacture of sulphuric acid and whether the impugned order was speaking. Having found the Tribunal's reasoning to follow and apply the Supreme Court precedent and to rest on unchallenged factual findings, the High Court concluded that no substantial question of law arose from the impugned order that would justify upsetting the Tribunal's decision. [Paras 1, 8]

No substantial question of law arises; Revenue's appeal dismissed.

Final Conclusion: The High Court upheld the Tribunal's allowance of the assessee's appeals for the stated tax periods, agreeing that sulphuric acid produced in the process is a by product and that captive oxygen is eligible for exemption under Notification No. 67/95; the Tribunal's factual findings were not perverse and no substantial question of law arises, and the Revenue's appeal is dismissed.

2024 (9) TMI 836 - CESTAT AHMEDABAD

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Issues:
(i) Whether income shown in Profit and Loss Account can be presumed as income from sale of dutiable goods and subjected to excise duty in absence of any other evidenceRs.
(ii) Whether CENVAT credit availed based on valid invoices and admittedly upon receipt of inputs/input services can be denied on the ground of erroneous filing of NIL returns during the periodRs.

Analysis:

Issue (i):
The appellant argued that the order was non-speaking and solely based on assumption and presumption, violating natural justice. They contended that the verification report relied upon in the order was not provided to them, causing a procedural irregularity. The demand raised was on a presumption basis without justifying the difference between ER-1 and the profit and loss account for the year 2016-2017. The appellant submitted documents explaining the difference, which were not considered. The Tribunal found that the Adjudicating Authority failed to provide the vital report by the Divisional Assistant Commissioner to the appellant, breaching principles of natural justice. Consequently, the impugned order was set aside, and the matter was remanded for de novo adjudication, ensuring the appellant's right to a fair hearing.

Issue (ii):
Regarding the denial of CENVAT credit due to erroneous filing of NIL returns, the appellant's counsel cited various judgments to support their argument. The Deputy Commissioner for the Revenue reiterated the findings of the impugned order, suggesting a remand for fresh adjudication. The Tribunal observed that the adjudicating authority did not properly consider the documents submitted by the appellant, leading to a non-compliance with the principles of natural justice. As a result, the impugned order was overturned, and the matter was remanded to the Adjudicating Authority, emphasizing the appellant's entitlement to a fair opportunity to present their case.

In conclusion, the appeal was allowed by way of remand to the Adjudicating Authority, ensuring the appellant's right to a fair hearing and proper consideration of all relevant documents and evidence.

Tribunal Overturns Order, Ensures Fair Hearing and Evidence Review in Major Justice Victory.
The Tribunal set aside the impugned order and remanded the matter for de novo adjudication, emphasizing the appellant's right to a fair hearing. The Adjudicating Authority failed to provide crucial reports and did not consider submitted documents, breaching natural justice principles. The appeal was allowed, ensuring proper consideration of all evidence.

Violation of principles of natural justice - presumption of income from Profit and Loss Account as sale of dutiable goods - denial of CENVAT credit for alleged erroneous filing of NIL returns - remand for de novo adjudication

Violation of principles of natural justice - Adjudicating Authority failed to comply with principles of natural justice by not providing the Divisional Assistant Commissioner's verification report to the appellant and by not considering the appellant's documentary explanations. - HELD THAT: - The Tribunal found that the vital verification report relied upon by the learned Commissioner was not supplied to the appellant prior to finalization of the adjudication order. The adjudicating authority also did not properly consider the documents and explanations submitted by the appellant regarding the discrepancy between ER-1 returns and the Profit & Loss account. These procedural omissions amounted to a grave breach of natural justice, rendering the impugned order non-speaking and unsustainable. [Paras 4, 5]

Impugned order set aside and matter remanded to the Adjudicating Authority for fresh adjudication with directions to afford the appellant adequate opportunity of hearing and to consider the material on record.

Presumption of income from Profit and Loss Account as sale of dutiable goods - Whether income shown in the Profit and Loss Account can be treated as income from sale of dutiable goods was not adjudicated on merits and is remanded for fresh consideration by the Adjudicating Authority. - HELD THAT: - The Tribunal did not decide the substantive question of treating P&L account entries as sales of dutiable goods. Given the procedural defects-non-supply of the verification report and non-consideration of the appellant's explanations-the Tribunal left the factual and legal determination open and directed de novo adjudication so that the Adjudicating Authority may examine evidence, submissions and invoices and record a reasoned conclusion. [Paras 4, 5]

Issue remanded to the Adjudicating Authority for fresh adjudication, keeping all contentions open.

Denial of CENVAT credit for alleged erroneous filing of NIL returns - The question whether CENVAT credit availed on the basis of valid invoices and receipt of inputs/input services can be denied on account of erroneous filing of NIL returns was not adjudicated on merits and is remanded for fresh consideration by the Adjudicating Authority. - HELD THAT: - The Tribunal observed that the adjudicating authority did not properly consider the appellant's documentary record and explanations before denying credit. In view of the procedural infirmities and the need for a reasoned decision, the Tribunal directed that the Adjudicating Authority shall re-examine the entitlement to CENVAT credit, including invoices and proof of receipt, after giving the appellant an opportunity to be heard. [Paras 4, 5]

Issue remanded to the Adjudicating Authority for fresh adjudication, keeping all contentions open.

Final Conclusion: The appeal is allowed in part: the impugned adjudication order is set aside for non-compliance with principles of natural justice and the matter is remanded to the Adjudicating Authority for de novo adjudication on all issues after affording the appellant adequate opportunity to place submissions and evidence.

2024 (9) TMI 835 - CESTAT KOLKATA

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Issues:
1. Confirmation of demand of Central Excise duty and penalty by invoking extended period of limitation.
2. Inclusion of sales tax concession in the assessable value for levy of Central Excise duty.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

The Appellate Tribunal CESTAT Kolkata heard an appeal against an Order-in-Original confirming a demand of Rs. 68,60,128/- for non-inclusion of VAT in the assessable value, invoking the extended period of limitation and imposing a penalty under Section 11AC of the Central Excise Act, 1944. The Appellant argued citing a Supreme Court decision and a Board Circular that the demand should only be for the normal period of limitation. The Revenue representative supported the penalty imposition. The Tribunal noted the previous decision by the Supreme Court requiring inclusion of sales tax concession in the assessable value for Central Excise duty levy. The Appellant agreed to pay for the normal period but contested the extended period demand and penalty, citing lack of suppression of facts. The Tribunal found no evidence of suppression and set aside the demand under the extended period and the penalty, in line with a Board Circular disallowing extended period invocation without evidence of suppression. The appeal was partially allowed, with duty payment for the normal period and the penalty under Section 11AC being set aside.

In the present appeal, the main issue was the inclusion of sales tax concession retained by the Appellant in the assessable value for Central Excise duty levy. The Tribunal referred to a Supreme Court decision that mandated such inclusion. Despite the Appellant agreeing to pay for the normal period, the demand was confirmed using the extended period of limitation. However, as there was no evidence of suppression of facts and previous tribunal decisions supported the Appellant's stance, the Tribunal held that the extended period demand should be set aside. The Tribunal also highlighted a Board Circular stating that the extended period should not be invoked without clear evidence of suppression, leading to the setting aside of the penalty under Section 11AC as well.

The Tribunal's decision was based on the issue of includability of sales tax concession in the assessable value for Central Excise duty. While the Appellant agreed to pay for the normal period, the demand was confirmed using the extended period of limitation. However, as there was no evidence of suppression of facts and the Appellant had followed previous tribunal decisions, the Tribunal set aside the extended period demand and the penalty under Section 11AC. This decision was in line with a Board Circular that disallowed the invocation of the extended period without clear evidence of suppression, providing relief to the Appellant.

Sales tax concession retained by manufacturer must be included in assessable value for Central Excise duty levy
CESTAT Kolkata held that sales tax concession retained by the appellant must be included in assessable value for Central Excise duty levy, following SC precedent in Commissioner of Central Excise, Jaipur-II v. Super Synotex (India) Ltd. However, extended period of limitation was not invokable as no suppression was established, with VAT details disclosed in audited financial statements. Penalty under Section 11AC was also not imposable. Appeal disposed of with partial relief to appellant.

Includability of sales tax concession in assessable value - invocation of extended period of limitation in excise demands - penalty under Section 11AC of the Central Excise Act, 1944 - application of Board Circular No. 1063/2/2018-CX

Includability of sales tax concession in assessable value - Super Synotex precedent - Sales tax concession retained by the assessee is required to be added to the assessable value for levy of Central Excise duty. - HELD THAT: - The Tribunal held that the issue is no longer res integra in view of the Hon'ble Supreme Court's decision in Super Synotex (India) Ltd. v. Commissioner of Central Excise, Jaipur-II, and accordingly applied that precedent to the facts of this appeal. Relying on that binding authority, the sales tax concession retained by the appellant must be included in the assessable value for central excise duty. The appellant has, however, agreed to pay duty only for the normal period of limitation. [Paras 6]

Sales tax concession retained by the appellant is includable in the assessable value; appellant liable to pay duty accordingly for the admissible period.

Invocation of extended period of limitation in excise demands - application of Board Circular No. 1063/2/2018-CX - Extended period of limitation cannot be invoked for the demand in the absence of suppression of facts; therefore the demand raised by invoking the extended period is set aside. - HELD THAT: - The Tribunal examined whether there was any positive act of suppression by the appellant. It found that details of VAT collected and retained were reflected in the audited financial statements and that earlier tribunal decisions had taken contrary views, so the appellant could not be faulted for omitting the amount from assessable value. The Board's Circular No. 1063/2/2018-CX, which accepts certain orders and clarifies that the extended period should not be invoked in such cases (including reliance on Super Synotex), was applied. In view of absence of suppression and the Circular's clarificatory position, invocation of the extended period was held not permissible and the extended-period demand was set aside. [Paras 7, 8, 9]

Demand confirmed by invoking the extended period of limitation is set aside; duty is payable only for the normal period of limitation.

Penalty under Section 11AC of the Central Excise Act, 1944 - penalty not imposable in absence of suppression - Penalty imposed under Section 11AC is set aside because there is no evidence of suppression of facts warranting penalty. - HELD THAT: - Since the Tribunal found no positive act of suppression and applied the Board Circular which indicated extended period and related penalties were not invocable in such cases, it concluded that the penalty under Section 11AC could not be sustained. The appellant's disclosure in audited accounts and absence of settled fault militated against imposition of penalty. [Paras 8, 9]

Penalty under Section 11AC of the Central Excise Act, 1944 is set aside.

Final Conclusion: Appeal partially allowed: inclusion of retained sales tax concession in assessable value affirmed; demand confirmed only for the normal period of limitation (extended-period demand set aside); penalty under Section 11AC set aside. Appeal disposed of with consequential relief, if any, as per law.

2024 (9) TMI 834 - CESTAT MUMBAI

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Tribunal Remands Case on Excise Duty Exemption for Research Prototypes, Calls for Clear Non-Compliance Findings.
The tribunal set aside the impugned order denying M/s Scitech Centre the benefit of excise duty exemption for prototypes produced during research and remanded the case for a fresh decision. The tribunal emphasized the need for a conclusive determination of non-compliance with the exemption notification's conditions to justify denial.

Exemption for goods produced in a technical, educational and research institution - satisfaction of the designated officer as condition precedent to exemption - certification, maintenance of records and inspection as enforcement measures - remand for fresh decision where findings are inadequate - Whether the exemption under notification no.167/71-CE applies to the impugned prototypes and upgradations produced and cleared by the appellant, and whether the adjudicating order contains adequate findings to deny the exemption. - HELD THAT: - The Tribunal found that the factual matrix was not in dispute but the core question was the applicability of the exemption to the impugned clearances. The notification makes the exemption subject to satisfaction of a designated officer and, where required, production of certification, maintenance of records and inspection of premises. The adjudicating authority did not engage with the changed clearance paradigm, did not seek or record certification, records or inspections for the clearances in question, and the impugned order fails to demonstrate the nature and characteristics of each clearance or to establish non-compliance with the conditions expressly contained in the notification. In these circumstances the findings recorded in the order are inadequate to support denial of the exemption. The Tribunal therefore concluded that the matter must be reopened and decided afresh by the original authority, directing that denial of the benefit of the notification be predicated on a clear finding of non-compliance with the notification's conditions.

Impugned order set aside and matter remanded to the original authority for fresh decision; exemption may be denied only upon clear findings of non-compliance with the conditions of the notification.

Final Conclusion: The Tribunal set aside the adjudicating order and remanded the matters for fresh decision by the original authority, directing that denial of the exemption under notification no.167/71-CE be based on clear findings of non-compliance with the notification's conditions (including satisfaction of the designated officer and, where applicable, certification, records or inspection).

2024 (9) TMI 833 - CESTAT MUMBAI

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CENVAT credit denial fails where third-party statements lack proper cross-examination and independent evidence supports actual receipt of inputs.
CENVAT credit could not be denied where the department's case rested mainly on third-party statements and alleged non-receipt of inputs, because such statements required cross-examination and compliance with Section 9D of the Central Excise Act, 1944 before reliance could be placed on them. Cross-examination in the de novo proceedings was incomplete, and one witness who was examined supported receipt of the goods. Independent material also showed that the supplier had installed machinery and could manufacture copper ingots. On this evidentiary record, the finding of no manufacturing facility and no receipt of goods was unsustainable, so the credit was admissible and the demand and penalties could not survive.

CENVAT credit admissibility - reliance on third party statements and right to cross examination - evidentiary value of independent local commissioner's inspection report - remand for cross examination and de novo adjudication - precedential weight of similar Tribunal decisions on supplier existence

CENVAT credit admissibility - evidentiary value of independent local commissioner's inspection report - precedential weight of similar Tribunal decisions on supplier existence - CENVAT credit taken by the appellants on the basis of invoices issued by M/s Annapurna Impex Pvt. Ltd., Ludhiana is admissible. - HELD THAT: - The Tribunal found that the adjudicating authorities erred in concluding that the supplier did not possess manufacturing facilities and that the invoices were without supply. An independent Local Commissioner's inspection report, produced in civil proceedings and detailing installed copper processing machinery and corroborative photographs, constituted independent evidence that M/s AIPL had manufacturing capability and supplied copper ingots. Further, cross examination of witnesses available during the remand supported the appellants' case (the manager confirming receipt of invoices with material), and a coordinate Tribunal decision with similar facts held that credit could not be denied where documents established the supplier's existence and supply. On holistic appreciation of the record, therefore, the denial of CENVAT credit and confirmation of demand was unsustainable. [Paras 4, 6, 7, 8, 9]

The denial of CENVAT credit was set aside and the appellants' appeal allowed to the extent of credit claimed.

Reliance on third party statements and right to cross examination - remand for cross examination and de novo adjudication - Obligation to allow cross examination of third party witnesses relied upon by the department and effect of failure to conduct adequate cross examination. - HELD THAT: - The Tribunal reiterated that when adjudication relies on statements of third parties adverse to a person, the adjudicating authority is obliged to allow cross examination under the statutory scheme; if such cross examination is not allowed, the statements cannot be used. In the earlier litigation the matter had been remanded for cross examination. On remand, cross examination could be carried out only for two of seven witnesses; those examinations did not support the department's adverse conclusion. Given the partial and inconclusive cross examination and the existence of independent inspection evidence, the authorities could not sustain denial of credit based solely on third party statements that were not properly tested. [Paras 5, 6]

Failure to permit or effectively complete cross examination of relied upon third party witnesses rendered the adverse reliance unsustainable.

Final Conclusion: The impugned order denying CENVAT credit and confirming demand is set aside; the appeal is allowed in favour of the appellants with consequential relief.

2024 (9) TMI 832 - CESTAT KOLKATA

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Tribunal Modifies Order on Clandestine Cement Clearance: Confirms Duty, Overturns Penalty Due to Timely Payment.
The Appellate Tribunal CESTAT Kolkata addressed the clandestine clearance of 411 MT of Portland Cement without duty payment. The Tribunal confirmed the duty payment of Rs. 1,00,000/- by the appellant but overturned the penalty, citing timely payment and lack of stock taking. The order was modified to confirm the duty amount while partially allowing the appeals, emphasizing the significance of duty compliance and legal principles in penalty imposition.

Clandestine clearance - admission of facts - recovery under Section 11A - payment before show cause notice - interest under Section 11AA - penalty under Section 11A(6) - proof of shortage without stock taking

Clandestine clearance - admission of facts - proof of shortage without stock taking - Admissibility of clandestine clearance and reliance on admissions to uphold duty liability despite absence of independent stock taking. - HELD THAT: - The Account Manager and the Director unequivocally admitted removal and sale of 411 MT of cement without payment of excise duty and without invoices. The Tribunal accepted that these admissions, corroborated by the private records showing the quantity removed and its omission from the Daily Stock Account Register, suffice to establish clandestine clearance. Applying the settled principle that admitted facts need not be proved, the finding of clandestine clearance and the resulting duty liability were upheld. [Paras 7, 8]

Duty liability in respect of the clandestinely cleared quantity is upheld on the basis of admissions and supporting records.

Recovery under Section 11A - payment before show cause notice - Effect of payment of duty prior to issuance of show cause notice under the recovery scheme of Section 11A. - HELD THAT: - Section 11A(6) permits a person chargeable with duty to pay the duty (and specified interest and penalty) before service of a show cause notice and to inform the officer in writing; where duty is so paid prior to issuance of the show cause notice, the question of issuance of a show cause notice does not arise. The Tribunal found that the assessee paid the duty promptly-on the next day and before the due date of filing the central excise return-thus attracting the protection contemplated by the provision and negating the need for initiation of recovery proceedings by show cause notice. [Paras 8, 9]

Payment of duty before issuance of the show cause notice precludes the requirement of issuance of a show cause notice under Section 11A.

Interest under Section 11AA - payment before show cause notice - Liability to pay interest where duty was paid before due date of return and prior to show cause notice. - HELD THAT: - Interest under Section 11AA is payable where duty is not paid in time. The Tribunal recorded that duty was paid on the very next day and prior to the due date of filing the central excise return; consequently, no interest was leviable in the circumstances of the case. [Paras 9]

No interest is payable as the duty was paid before the due date of filing the return.

Penalty under Section 11A(6) - payment before show cause notice - Levy of the penalty specified in Section 11A(6) where duty was paid within the month in which it was payable. - HELD THAT: - Section 11A(6) prescribes a penalty calculated from the month following the month in which duty was payable. The Tribunal found that the duty itself was discharged within the month in which it was payable; accordingly, the statutory penalty (calculated from the month following the month in which duty was payable) could not be imposed. On this basis the Tribunal set aside the orders of the lower authority insofar as penalties were imposed. [Paras 9, 10]

Penalty under Section 11A(6) is not leviable because the duty was paid within the month in which it was payable; penalty findings are set aside.

Final Conclusion: The Tribunal upheld the duty recovery in respect of the clandestinely cleared cement based on admissions and records, held that payment of duty prior to issuance of the show cause notice precluded issuance and relieved the assessee of interest, and set aside the lower authorities' imposition of penalties under Section 11A(6); appeals are allowed partially.

2024 (9) TMI 831 - BOMBAY HIGH COURT

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Secured creditor priority prevails over tax attachment where revenue procedure and proclamation requirements were not proved.
The Bombay HC held that a Sales Tax Department attachment under the Maharashtra Value Added Tax Act, 2002 could not defeat a secured creditor's priority under Section 26E of the SARFAESI Act, 2002 unless the attachment was shown to have been effected in the manner required by the Maharashtra Land Revenue Code, 1966 and the applicable rules, including proclamation of attachment. Mere issuance of an attachment order was insufficient. As there was no material proving compliance with the prescribed revenue procedure, the department's claim did not override the secured creditor's statutory priority, and the secured creditor was entitled to priority over the attached dues.

Priority of secured creditors vis-a -vis revenue attachments - priority under section 26-E of the SARFAESI Act - attachment under the Maharashtra Land Revenue Code, 1966 and proclamation requirement under the 1967 Rules - effect of non-publication of attachment on statutory priority

Priority of secured creditors vis-a -vis revenue attachments - priority under section 26-E of the SARFAESI Act - effect of non-publication of attachment on statutory priority - Whether the Co-operative Bank's secured charge obtains priority over the Sales Tax Department's attachment dated 27/06/2016. - HELD THAT: - The Court applied the Full Bench reasoning in Jalgaon Janta Sahakari Bank Ltd (paras 153-154) to hold that statutory priority conferred by section 26-E of the SARFAESI Act will not displace a prior properly publicised attachment made in accordance with the Maharashtra Land Revenue Code and the 1967 Rules. Conversely, where an attachment has not been made public by the proclamation/manner prescribed by the MLR Code and Rules, the secured creditor's charge created and acted upon under the SARFAESI mechanism will have priority once Chapter IV-A (and thereby section 26-E) is enforced. The petitioner's mortgage and subsequent action under the SARFAESI provisions therefore entitles it to priority unless the department demonstrates a legally effective prior attachment and proclamation. [Paras 4, 5]

The Co-operative Bank's secured charge has priority because there is no material that the Sales Tax Department's attachment was made and publicised in accordance with the MLR Code and Rules.

Attachment under the Maharashtra Land Revenue Code, 1966 and proclamation requirement under the 1967 Rules - effect of non-publication of attachment on statutory priority - Whether the Sales Tax Department established that its attachment of the secured asset complied with the MLR Code and the prescribed proclamation requirements. - HELD THAT: - The affidavit filed on behalf of the Sales Tax Department did not place any material on record to show that the attachment dated 27/06/2016 was effected in accordance with the Maharashtra Land Revenue Code, 1966 and the Rules framed thereunder, including the requirement of publication/proclamation. On the authority of the Full Bench decision, mere issuance of an attachment order is insufficient; the prescribed proclamation and manner of making it public must be shown. The Department's silence on this point meant it could not claim priority over the secured creditor. [Paras 5]

No compliance with the MLR Code's proclamation requirement was shown; the Department cannot claim priority.

Final Conclusion: Writ petition allowed; order of attachment dated 27/06/2016 and notice dated 19/07/2016 quashed insofar as they impinge on the petitioner's claim to priority, with no order as to costs.

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