TMI Tax Updates e-Newsletter
Oct 10,2024

Recovery of inadmissible income tax return with interest and penalty - Challenge against the order of adjudication - non-application of mind in the adjudication order - principles of natural justice - HELD THAT:- It requires to be seen as to whether the order is an outcome of non-application of mind and whether the order has not taken into consideration the documents which ought to have considered. These issues ought to have been decided in the writ petition, however, the writ petition has been dismissed solely on the ground of availability of alternate remedy. The preliminary ground raised by the assessee in challenging the adjudication order would not involve adjudication into facts and because all that the writ court can go into is as to what effect of the earlier order dated 03.07.2018 and subsequent proceeding can be drawn on the same set of facts. Therefore, the writ petition should be heard afresh after affidavit-in-opposition is filed by the Department.

The writ petition is restored to its original file and number before the learned Single Judge. The appropriate respondent shall file their affidavit-in-opposition within a period of six weeks from date - Appeal allowed.

Blocking the Electronic Credit Ledger (ECL) - Constitutional validity of Rule 86A of the CGST/SGST Rules, 2017 - HELD THAT:- In the instant case since no pre-decisional hearing are provided/granted by the respondents before passing the impugned order, coupled with the fact that the impugned order invoking Section 86A blocking of the Electronic credit ledger of the petition does not contain independent or cogent reasons to believe/accept by placing reliance upon reports of enforcement authority which is impermissible in law, since the same is on borrowed satisfaction as held by Division Bench, the impugned order deserves to be quashed. It is also pertinent to note that the impugned order except stating that the registered person/ supplier "found to be non-existent or not to be conducting any business from the place for it has obtained registration", no other reasons are forthcoming in the impugned order.

Interestingly respondents have themselves stated that the aforesaid supplier had obtained registration and the same was cancelled only on 20.06.2024 and since the transaction between the petitioner and supplier was prior to 20.06.2024, the respondents clearly fell in error in describing/categorizing the supplier as non-existent or not to be conducting any business at the time of transaction with the petitioner.

The impugned order dated 14.08.2024 deserves to the quashed - Petition allowed.

Valuation for GST - free supply of fuel can be included / added to the freight consideration? - Whether GST to be charged on value of free diesel filled by service recipient under the accepted terms of contractual agreement in the fleet(s) placed by GTA service provider by adding this free value diesel in the value of GTA service, under the Central Goods and Services Tax Act, 2017 & Uttarakhand Goods and Service Tax Act, 2017 or not?

HELD THAT:- The Supreme Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT] was examining Section 67 of the Finance Act, 1994, with respect to the goods / materials supplied by the service recipient while procuring the taxable service of construction if the amount charged is not included in the gross amount charged by the service provider for providing such service under a composite contract of service and supply of goods, then it will lead to the obvious conclusion that the value of the goods / materials provided by the service recipient free of charge is not to be included while arriving at the gross amount simply because no price is charged by the assessee / service provider from the service recipient in respect of such goods / materials. The service tax has to be calculated on the gross amount that was charged from the service recipient.

UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357 - SUPREME COURT] was another case where the Supreme Court was examining the validity of the expenditure / cost incurred by the service provider in the course of providing taxable services. The Supreme Court in this case also was examining Section 67 of the Finance Act, 1994 which relates to the expenditure / cost incurred by the service provider in the course of providing taxable services. In para 26 of the above said judgment, the Supreme Court held that the value of free supplies of diesel and explosives in respect of service of “Site Formation and Clearance Service” can be included for the purpose of assessment to service tax under Section 67 of the Act. The Supreme Court further held that the value of such material which is supplied free by the service recipient cannot be treated as “gross amount charged” and it is not the consideration for rendering the services. In this backdrop, the value of free supplies of diesel and explosives would not warrant inclusion while arriving at the gross amount charged on the service tax to be paid, and all the appeals filed by the Union of India were dismissed.

The Supreme Court in the judgments referred to hereinabove has consistently held that where diesel is filled free of cost (FOC) by the service recipient and is not included in the value of GTA service, then the cost of fuel cannot be added to the payment made by the service recipient to the transporter, and further GST be charged from the transporter.

Hence, as per the consistent view taken by the Supreme Court in the judgments referred to above the cost of fuel cannot be added in the account of the petitioner, who was a transporter, and was governed by the GST rules. Thus, in the case of the petitioner, as per the agreement (Annexure-2), the cost of fuel was to be borne by the service recipient and this cost of this fuel cannot be subjected to charge of GST by adding the value of free diesel in the transaction value of GTA service done by the petitioner. Hence, value of free fuel cannot be added to value of taxable supply under Section 15 (1) and Section 15 (2) (b) of the CGST Act, 2017.

The order dated 30.01.2023 (Annexure-1), passed by the Appellate Authority for Advance Ruling for the State of Uttarakhand Goods and Service Tax is, hereby, set aside - Petition allowed.

Refund of unutilized Input Tax Credit - remittance being received in a different branch's bank account - Treatment of Establishments as Distinct Persons under CGST Act - HELD THAT:- It transpires that while originally the writ petitioner, while applying for registration for its Delhi BO had not provided any details of a bank account at Bangalore, at the time of the first core field amendment and review exercise and the filing submitted on 29 December 2020, bank account details including in respect of the one maintained at the Standard Chartered Bank Limited at Bangalore were also uploaded and mapped along with the original registration. It becomes relevant to note that the remittances from VGSL were credited to this account.

While it is true that the aforesaid mapping of the Bangalore bank account has occurred after the remittances were received, they are clearly in validation of the fact that services had been exported by the Delhi BO and which has now clearly disclosed an additional bank account maintained at Bangalore. That these remittances are connected with the services rendered by the Delhi BO to VGSL was neither questioned nor doubted by the respondents. The objection as taken thus clearly appears to be overly technical and unsustainable.

The argument based on sub-sections (4) and (5) is equally misconceived. One must bear in mind that the CGST Act is principally concerned with the levy of a tax on intra-State supply of goods and thus presupposes the possibility of an entity having more than one establishment or a place of business in different States of the Union. It is this basic objective of the enactment that informs subsections (4) and (5) of Section 25 and the Legislature thus, out of abundant caution, having overridden the otherwise jurisprudential precept of branch offices not being separate and distinct juridical entities.

The impugned Order-in-Appeal dated 07 June 2022 which had upheld the Order-in-Original dated 29 June 2021 is quashed - petition allowed.

Validity of notices issued to a dead person - challenge to assessment orders passed based on such notices are void ab initio or not - violation of principles of natural justice - HELD THAT:- On perusal of records, it is seen that the deceased, viz., Mr. Ramasamy Singaravelan was an assessee on the files of the respondent under the provisions of Tamil Nadu Goods and Service Tax Act, 2017 and the said person died as early as on 07.05.2022, however, the respondent, who is ignorant of the said fact has been continuously issuing notices in the name of the said deceased person and also passed assessment orders and not stopping with that also proceeded to initiate recovery proceedings. The petitioner came to know about the impugned proceedings only when the same was intimated by the respondent through phone call and on receipt of the recovery notice.

Thus, it is crystal clear the impugned orders are ex parte orders, and suffers from violation of principles of natural justice and de hors the same, the notices issued to an assessee, who is no more and assessment orders passed based on such notices are void ab initio and liable to be set aside. Hence, this Court is inclined to set aside the impugned orders.

The orders impugned as well as the consequential orders towards initiation of recovery proceedings are set aside - the matters are remitted back to the respondent for fresh consideration - petition allowed by way of remand.

Grant of Interim order - direction to appellants to secure the entire tax component as made under the adjudication order by furnishing a bank guarantee to the satisfaction of the learned Registrar General of this Court - HELD THAT:- The adjudicating authority, which is the first authority in the hierarchy of authorities, is bound to consider the reply and record reasons as to why the reply is not satisfactory. This is manifestly absent in the adjudication order dated April 29, 2024. This would be sufficient to set aside the order and remand the entire proceedings back to the adjudicating authority/assessing officer.

The interim order passed in the writ petition is set aside and the writ petition is allowed and the adjudication order dated April 29, 2024 passed under section 73 of the WBGST Act, 2017 is set aside and the matter is remanded to the adjudicating authority for fresh consideration - Appeal allowed by way of remand.

Maintainability of petition - availability of alternative remedy under the Arbitration Act - Seeking direction to respondents to reimburse the extra GST amount paid, along with interest - HELD THAT:- Needless to say that no disputed question of facts are involved in this case, therefore, the petitioner cannot be relegated to the Dispute Resolution Form as provided under the agreement - Respondent No.4 which is a State GST Department, according to which also the rate of GST has been enhanced from 12% to 18% and same is liable to be paid by respondent No.2 which is a Government Entity.

The respondent No.2 is directed to pay the difference of GST amount to the petitioner @ 6% from 01.01.2022 to 30.09.2022 with a period of three months from the date of receipt of certified copy of this order, failing which the petitioner shall be entitled for interest @ 6% per annum from the date of entitlement - petition disposed off.

Challenge to impugned orders along with the consequential GST DRC-13 notice for attachment of Bank Account passed by the first respondent for the assessment year 2017-2018 - mismatch of tax liability between GSTR-3B and GSTR-2A filed by the petitioner for the assessment year 2017-2018 - principles of natural justice - HELD THAT:- Upon perusal of the materials, it is evident that the impugned show cause notice was uploaded on the GST Portal Tab. According to the petitioner, the petitioner was unaware of the issuance of the show cause notice issued through the GST Portal and the original of the said show cause notice was not furnished to them.

In such circumstances, this Court is of the view that the impugned order came to be passed without affording any opportunity of personal hearing to the petitioner to establish its case, thereby violating the principles of natural justice and that it is just and necessary to provide an opportunity to the petitioner to establish their case on merits and in accordance with law.

This Court is inclined to set aside the impugned orders dated 29.12.2023 along with the consequential GST DRC-13 dated 19.06.2024 passed by the first respondent, subject to conditions imposed - petition disposed off.

Time limitation - dismissal of appeal on the ground that the appeal was filed even beyond the condonable period of limitation - mismatch between GSTR - 3B and GSTR - 1 - HELD THAT:- The first respondent observed that there is no provision under the said Act to condone the delay and entertain the appeal. The first respondent is well justified in dismissing the appeal itself on the ground that it had been presented beyond the condonable period of limitation stipulated under the said Act.

In the instant case, on going through the assessment order, it is seen that a total liability of Rs. 2,47,398/- together with penalty has been imposed against the petitioner on the ground that there was a mismatch of liability between GSTR - 3B and GSTR - 1. The petitioner has come up with a clear case that no opportunity was given to them before passing the assessment order. Hence, they filed an appeal before the first respondent. However, the appeal itself was dismissed by the impugned order as it was filed beyond the condonable period. However, this Court is inclined to afford an opportunity to the petitioner by putting the petitioner on terms.

The impugned order passed by the first respondent is hereby set aside. The delay in filing the appeal before the first respondent is condoned - Petition allowed.

Violation of principles of natural justice - failure to take advantage of the show cause notices issued by the respondent before the impugned orders were passed - time limitation - HELD THAT:- The petitioner can be given an opportunity to ventilate his grievance before the respondent on terms. Therefore, the petitioner shall deposit 25% disputed tax confirmed by the impugned order from Electronic Cash Ledger within a period of thirty (30) days from the date of receipt of copy of this order. The impugned order, dated 14.10.2023 passed by the respondent is quashed and the case is remitted back to the respondent to pass a fresh order on merits. The impugned order which stands quashed shall be treated as Addendum to the Show Cause Notice in DRC 01A, dated 06.04.2022 and DRC 01, dated 20.07.2023.

The petitioner shall file a consolidated reply within a period of 30 days from the date of receipt of copy of this order. The respondent shall thereafter proceed to pass a final order on merits and in accordance with law, as expeditiously as possible, preferably, within a period of three (3) months from the date of reply to be filed by the petitioner.

Petition allowed.

Admissibility of the Advance Ruling application in view of the investigation initiated by DGGI - Definition and scope of 'proceedings' under the CGST Act, 2017 - scope of 'proceedings' under the CGST Act, 2017 - Levy of GST on fees collected by the Tamil Nadu Nurses and Midwives Council - HELD THAT:- An advance ruling is not required to be pronounced once an investigation is initiated against the applicant under the provisions of the CGST Act, or the GST Act of the respective State or Union Territory, involving the same issue on which the query for advance ruling has been raised. It is also opined that pronouncing a ruling on the same issue in respect of which a show cause notice has been issued, may vitiate the adjudication proceedings involving the said notice. At this juncture, it becomes imperative to analyse as to whether the query raised in the application for advance ruling is the same on which the investigation was initiated, and whether the investigation proceedings precedes the application for advance ruling.

Further, it is seen that while the application for advance ruling in the instant case was received on 28.06.2022, the first summon issued by the Senior Intelligence Officer, DGGI, Chennai Zonal Unit is dated 12.04.2022 based on which a statement has been recorded from Dr. S. Ani Grace Kalaimathi, Registrar of Tamil Nadu Nurses and Midwives Council on 18.04.2022, wherein the details of charges/fees collected by Tamil Nadu Nurses and Midwives Council for the period from 01.07.2017 to 31.03.2022, through their letter in Ref. No. 1538/NC/2022 dated 18.04.2022 is seen to have been communicated. Through another statement dated 14.06.2022, the legalities relating to taxability in the instant issue, is seen to have been discussed in a detailed manner.

The initiation of investigation by way of issue of summons; recording of statements dated 18.04.2022 and 14.06.2022; furnishing of details/ documents by the applicant on 18.04.2022 in relation to the issue involved in the instant case; issue of Incident Report No. 89/2022 dated 24.06.2022 issued by the DGGI, Chennai Zonal Unit, all precede the date of filing of advance ruling application, i.e.. 28.06.2022 by the applicant.

The application for advance ruling dated 28.05.2022 by the applicant is liable for rejection under the first proviso to Section 98 (2) of the CGST / TNGST Acts, 2017, in view of the fact that ‘proceedings’ on the same issue was already initiated and pending against the applicant.

The advance ruling application is rejected.

Admissibility of the Advance Ruling application in view of the investigation initiated by DGGI - Definition and scope of 'proceedings' under the CGST Act, 2017 - scope of 'proceedings' under the CGST Act, 2017 - Levy of GST on various fees collected by Tamil Nadu Medical Council, a Government Authority - HELD THAT:- Since the first proviso to Section 98 (2) restricts admitting application seeking advance ruling on questions which are already pending in any proceedings in the case of an applicant under any of the provisions of the Act, the term ‘proceedings’ assumes immense significance in the context of the instant case. More so, because the applicant opines that the inquiry or investigation initiated by DGGI, would not fall within the ambit of the word ‘proceedings’ impacting the admissibility of the original application for advance ruling filed by the appellant - It is quite clear that the term ‘proceedings’ has not been defined under the CGST Act, 2017. However, the word ‘proceedings’ is seen to have been widely used in the Act, ibid, either as it is, in the context of the situation, or with a prefix bringing out the meaning and purpose in an unambiguous manner like Recovery proceedings’, ‘Assessment proceedings’, etc.

The term ‘proceedings’ used in the CGST Act, 2017 is not restricted to proceedings which commence after the issue of show cause notice alone, and that the same also denotes proceedings prior to the issue of show cause notice, or proceedings which may not culminate in the issue of any show cause notice at all. Accordingly, the notion of the applicant that the process relating to commencement of inquiry/investigation under summon procedure do not get covered the category of the term ‘proceedings’, under the CGST Act, 2017, is misconceived and misplaced, for the reason that apart from such judicial proceedings’, even the other relating to assessment, audit, detention/ seizure/ release of goods and conveyance which may or may not entail any issue of show cause notice, are also treated as ‘proceedings’ under the CGST Act, 2017.

Investigation is activated when there is enough predication to show that there is an alleged tax evasion and the essence of investigation is to carry out an in-depth review of the taxpayer’s records and activities to ensure that the tax due to the Government is not lost in evasion. Therefore, the commencement of investigation or inquiry is to be seen as the start of a proceeding to safeguard Government revenue.

It is opined that an advance ruling is not required to be pronounced once an investigation is initiated against the applicant under the provisions of the CGST Act, or the GST Act of the respective State or Union Territory, involving the same issue on which the query for advance ruling has been raised.

Further, it is seen that while the application for advance ruling in the instant case was filed by the applicant online on 30.12.2022, the first summon issued by the Senior Intelligence Officer, DGGI, Chennai Zonal Unit is dated 30.11.2022 for appearance on 07.12.2022. It is seen that the date of issue of the second summon is 20.12.2022 for appearance on 09.01.2023. It is quite clear from the above, that the initiation of proceedings by way of issue of both the summons that seeks the details/documents in relation to the issue involved in the instant case, precedes the date of filing of advance ruling application by the applicant. More specifically, the letter dated 19.12.2022 of the applicant furnishing the details of fees collected, unambiguously proves the case in point.

The application for advance ruling filed online dated 30.12.2022 by the applicant is liable for rejection under the first proviso to Section 98 (2) of the CGST / TNGST Acts, 2017, in view of the fact that ‘proceedings’ on the same issue was already pending against the applicant.

The advance ruling application is rejected.

Classification of supply - supply of services or supply of goods - job work activity or not - body building activity on the chassis (meant for carrying goods) owned and provided by the principal (who is either independent customer who buy the chassis from OEM and send for body building or Chassis sent by OEM i.e. manufacturer of chassis who sends for body building activity) - to be classified under SAC Code - 998881 “Motor vehicle and trailer manufacturing services or under 8707 as “Bodies (including cabs), for the motor vehicles of headings 8701 to 8705? - HELD THAT:- It is found that any treatment or process which is applied to another person’s goods is a supply Of service. In the instant case the chassis is being supplied by customers to the applicant and the applicant undertakes the activity of body building on the chassis supplied to them. Hence the activity of body building on customer owned chassis is a ‘supply of service.

It is found that though the applicant has not submitted as to whether the individual private customer who buys the chassis from OEM and provide the same to the applicant for body building is registered under GST or not, the provisions of law enumerated in the preceding paras make a clear demarcation between the supply of body building activity made to GST registered persons and the supply of body building activity made to GST I-in-registered persons. Whereas the bus body building on chassis owned by GST registered customer is Job work, the bus body building on chassis owned by un-registered customer does not amount to job work. As per the definition of Job Work provided under Section 2 (68) of CGST Act 2017, “job work” means any treatment or process undertaken by a person on goods belonging to another registered persons and the expression “job worker” shall be construed accordingly. Hence, in as much as the treatment or process is undertaken on the goods belonging to un-registered person the same does not qualify to be job work - the activity Of body building by the applicant on chassis owned and provided by registered customer or un-registered customer both fall under the scope of supply of service and as per the scheme of classification of services merits to be classified at Heading 9988 Manufacturing services on physical inputs (goods) owned by others’ and precisely at Service code (Tariff) 998881 ‘Motor vehicle and trailer manufacturing services’.

If it is regarded as “job work activity” and “Supply of Services, whether the correct applicable rate of GST, will be at % (9+9) as applicable under Sr. No.26 (ic) or wilt it be 18% (9+9) as applicable under Sl. No. 26 (iv)? - HELD THAT:- The bus body building on chassis owned by GST registered customer amounts to Job work and the bus body building on chassis owned by un-registered customer does not amount to job work The rate of tax in both the cases i.e. if chassis is provided by the GST registered person or when chassis is provided by GST un-registered person, would be 9% under the CGST Act, 2017 and 9% under the SGST Act,2017, as per Entry No.26 (ic) and per Entry No. 26 (iv) respectively of the CGST Notification No. 11/2017 CT (R) dated 28-06-2017 and SGST Notification No. II(2)/CTR532(d-14)/2017 vide G.O. (Ms) No. 72 dated 29.06.2017.

Addition of cash deposit u/s 68 - Ownership of bank accounts and cash deposits - substantial question of law or fact - as decided by HC [2024 (5) TMI 1474 - DELHI HIGH COURT] principal argument which was sought to be addressed on this appeal was that various transactions which fell for scrutiny were not undertaken in the accounts of the assessee requires us to delve into facts and which do not even appear to have been either raised or urged before the ITAT. In any case, such a course would not be merited bearing in mind the limited scope of this appeal and which stands confined to the consideration of a substantial question of law.

HELD THAT:- Heard the learned counsel appearing for the petitioner. We are not inclined to interfere with the impugned judgment passed by the High Court. Hence, the Special Leave Petition is dismissed

Maintainability of appeal on low tax effect - monetary limits for filing appeal by department before the Tribunal, High Court and Supreme Court - HELD THAT:- By Circular 9 of 2024 dated 17.09.2024, monetary limits specified in Circular 5 of 2024 were enhanced

Circular 9 of 2024 albeit, enhanced the monetary limits but retained the exceptions in Para 3.1 & 3.2 of Circular 5 of 2024. From perusal of Para 5 of Circular 9 of 2024, it is evident that the circular shall apply to the appeals to be filed henceforth and also to the appeals pending before the Supreme Court, High Court and the Tribunal. Thereby making monetary limit specified in it and exceptions in Para 3.1 & 3.2 of Circular 5 of 2024 applicable to all the pending appeals. In other words, Circular 5 of 2024 was applicable prospectively but Circular 9 of 2024 while enhancing the monetary limit, retaining the exceptions of Circular 5 of 2024 made it applicable to the pending appeals also.

The contention of learned counsel for the appellant that the Circular give retrorespective effect only to the monetary limit lacks merit. In case the argument is accepted, the result would be of adding words to the clear and plain language of Para 5 of Circular 9 of 2024.

The reliance of the counsel for the appellant on the exceptions carved out in Circular 3 of 2018 cannot be sustained. Circular 3 of 2018 was superseded by Circular 5 and the exceptions of Circular 5 with the enhanced monetary limits in Circular 9 of 2024 were made applicable to pending appeals.

The appeals are dismissed as non-maintainable in view of the Circular 9 of 2024.

Revision u/s 263 - Addition u/s 69 and 115BBE - unexplained investment - HELD THAT:- A careful perusal of Section 263 (1) of the IT Act would show that it is the essential condition to invoke Section 263 that the Commissioner must find that the order of assessment is erroneous firstly and secondly, that the order of the assessing authority is prejudicial to the interests of the revenue. The Commissioner of Income Tax has power to take into consideration all records available at the time of examination by him. ‘Record’ would mean all records relating to proceeding available at the time of examination with the Commissioner. See Shree Manjunatheaware Packing Products & Camphore Works [1997 (12) TMI 4 - SUPREME COURT]

The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue.

AO has issued specific show cause notice to the assessee as to why the excess stock be treated as unexplained investment under Section 69 of the IT Act which the assessee replied stating that the said excess business stock was found during survey proceedings under the IT Act during the year under consideration in the business premises of the assessee Company and duly recorded in the books of accounts of the concerned year and thus, Section 69 would not be attracted to the assessee Company, as excess stock would not be treated as undisclosed income within the meaning of Section 69, which the AO has accepted and taken it as one of the possible views and which the ITAT has accepted holding to be the correct view.

We are of the considered opinion that both the twin conditions, namely, the order of the AO sought to be revised is erroneous and it is prejudicial to the interests of the Revenue, are not satisfied at all to invoke the jurisdiction u/s 263 as the AO has passed the order of assessment after conducting inquiry. As such, the PCIT is absolutely unjustified in invoking the jurisdiction u/s 263 of the IT Act which has rightly been set-aside by the ITAT. Decided in favour of assessee.

Denial of Foreign Tax Credit claim - belated filling of Form No.67 - mandatory v/s directory provision - HELD THAT:- It is an admitted fact that the petitioner has filed his income tax return along with Form No.67. The petitioner was working in a foreign country and paid the income tax. While passing the intimation under Section 143 (1) of the Act, the aspect of payment of foreign tax has not at all been considered, though it was filed along with the income tax return.

After receipt of the intimation, the petitioner filed rectification application to rectify the same and to consider the Form No.67. Though the application was submitted once again, without considering the vital aspects, simply it was rejected, which is not proper and the same is not in accordance with law.

This Court has already held in Duraiswamy Kumaraswamy's case [2023 (11) TMI 1000 - MADRAS HIGH COURT] that filing of Form No.67 is not mandatory or directory. Even by following the law laid down by the Hon'ble Supreme Court of India in CIT Vs. G.M.Knitting Industries (P) Ltd. [2015 (11) TMI 397 - SC ORDER]this Court had held that filing of Foreign Tax Credit in terms of Rule 128 is only directory in nature. Assessee appeal allowed.

Validity of reopening of assessment u/s 147 - prima facie ground for forming belief that there is some escapement of income - Appellant failed to disclose revenue from sales made to Indian customers - HELD THAT:- We consequently find no justification to interfere with the view taken by the Tribunal insofar as invocation of Section 148 is concerned. Regard must be had to the indubitable fact that a challenge to commencement of reassessment is liable to be tested on the threshold of a jurisdictional error and the assumption of authority itself being liable to be faulted on a failure to meet the preconditions which stand statutorily erected. Tested on those basic precepts, we find no merit in the challenge which stands raised on that score.

Existence of a fixed place PE of the assessee/ Appellant in India - Fixed Place PE, DAPE, Fee for Technical Services and attribution of profit - Did ITAT fall into error in concluding that the assessee separately had an independent agent PE, located in India? - ITAT justified in attributing as high as 35% of the profits to the alleged marketing activities and thereafter, attributing 75% of such 35% profits to the alleged PE of the Appellant in India - HELD THAT:- Fixed Place PE and DAPE are concerned, the Court had, in the previous round of litigation, by way of a detailed determination ultimately come to hold against the appellant. That decision has undoubtedly attained finality. While it is true that the principles of res judicata may not, and strictly speaking, be applicable to tax litigation, we cannot completely ignore the precepts of consistency which are of equal significance be it from the point of the Revenue or for that matter the assessee.

This assumes added importance where the assessee abjectly fails to advert to any set of facts or allude to any circumstance which may distinguish the position that may obtain in a particular assessment year warranting separate or independent evaluation.

Although the appeal and the writ petition were heard over a course of time, the appellants had woefully failed to draw our attention to any fact or feature which would have warranted the respondents undertaking an independent enquiry in relation to Fixed Place PE or DAPE. In any case, the decision of this Court in the earlier round, coupled with a failure on the part of the appellant to establish that the factual scenario had come to be fundamentally altered, the respondents were clearly entitled to proceed on the basis of the unchanged facts and commence reassessment.

While principally speaking and on a foundational plane, the power to reassess can be invoked only on the basis of material that may be pertinent to a particular AY, that principle would pale into insignificance where the assessee fails to assert a change or a fundamental alteration of the facts which are asserted to have remained unaltered. We find no merit in the challenge which stands raised to the initiation of reassessment action.

Attribution of profit - As decided by ITAT we hold that GE India conducted core activities and the extent of activities by assessee in making sales in India is roughly one fourth of total marketing effort. We, thus estimate 26% of total profit in India as attributable to operations carried out by PE in India. Therefore, as against Ld. AO applying 3.5% to sales made by assessee in India, we direct Ld.AO to apply 2.6% on total sales for working out profits attributable to PE in India

The conclusions as arrived at by the Tribunal are clearly unexceptionable bearing in mind the findings that this Court had rendered in its earlier judgment and which has attained finality. We consequently find no merit in the challenge that stands raised in this respect.

Validity of reopening of assessment u/s 147 - taxability of "live feed" and its asserted tax ability as royalty - bifurcation of licence fee between live feed and recorded content - revenue received by the petitioner from an Indian payer had not been subjected to deduction of tax at source even though the consideration received was income chargeable to tax in India - HELD THAT:- In view of the above position in law as enunciated in CIT (International Taxation) v. Fox Network Group Singapore Pte. Ltd. [2024 (1) TMI 1008 - DELHI HIGH COURT] we find no justification to recognize a right inhering in the respondents to continue the impugned reassessment action. The view taken by the AO that there was no basis for the bifurcation of the revenue in the ratio of 95 per cent. and five per cent. is clearly rendered perverse in the light of the stipulations contained in the agreement and which has been extracted hereinabove.

We accordingly allow the instant writ petitions and quash the order under section 148A(d).

TP Adjustment - selection of MAM - international transaction(s) of sale of Paclitaxel, Disodium Pamidronate and purchase of Methelene Chloride Soluble ("MCS") by relying upon Transitional Net Margin Method ("TNMM") instead of Comparable Uncontrolled Price Method ("CUP"), as the 'Most Appropriate Method' - HELD THAT:- Insofar as Paclitaxel and Disodium Pamidronate are concerned, we note that the ITAT has taken into consideration the fact that the TPO while rejecting the price as proposed had merely relied upon prices prevailing in different markets and regions. It is on the aforesaid basis that the CIT(A) came to conclude that the TPO had clearly failed to bear in mind the factors which imbue Rule 10B(2) of the Income Tax Rules, 1962 [“Rules”].

It was also found by the CIT(A) that the net margins earned from sale of Paclitaxel and Disodium Pamidronate is higher at 14.10% as against other sales at 10.90%. Ultimately and on due consideration of the view taken by the CIT(A), ITAT came to conclude that in the absence of the appellant having produced any material which could have cast a shadow of infirmity on the findings recorded, there appeared to be no justification to interfere with the CIT(A)’s order.

TP adjustment which was made in respect of Methylene Chloride Soluble extract from the associated enterprise of the assessee - Dabur Nepal - Here too, the assessee had adopted the TNMM as the most appropriate method and which was rejected by the TPO who proceeded to invoke the CUP method for determining the ALP.

TPO had ultimately come to conclude that the cost price per kg for the purposes of computing proposed adjustment was liable to be determined as being Rs. 32 per kg. Before the CIT(A), the assessee had filed cost certificate and other material in support of its case that the cost price per kg was liable to be determined at Rs. 4648 per kg.

Although the cost certificate was introduced before the CIT(A) as additional evidence, and the TPO had doubted the veracity and correctness thereof, the appellant ultimately does not appear to have drawn the attention of the CIT(A) to any material which may have cast a doubt on the claimed cost being Rs. 4648 per kg. We further note that the veracity of the cost certificate is also not a question which appears to have been urged before the ITAT by the appellant.

Thus, we find that the issues essentially remain findings of fact which could have been plausibly rendered bearing in mind the evidence which was submitted for the consideration of the CIT(A). No substantial question of law arises.

Rejection of books of accounts u/s 145 - Addition u/s 68/69A with 115BBE - cash deposited during demonetization as unexplained credit - HELD THAT:- As is not disputed that ld. AO has not rejected the books and not passed order u/s. 144. Ld. CIT(A) has done so based on the mere surmise and conjecture as noted herein above. As is also evident from the orders of the lower authority that the assessee has produced all the details that has been required by the AO and they have not found the records defective.

Merely the AO and the ld. CIT(A) made suspicions on the records of sales of stone that too on account of rocky land excavated and thereby sold stone so excavated. Relevant receipt is reflected in the books of accounts. Out of the sum of received part of the amount considered as explained and part of the same as not genuine for the same set of records.

We note that the CIT(A) has not advanced single a reason or basis of rejection of the book results which are otherwise verified, and no defects were found by the ld. AO and ld. CIT(A) and that when ld. AO and CIT(A) has already considered the part of the amount deposited into the bank account as business receipt and the part of the same was not considered.

CIT(A) has not satisfied the condition as required as per provision of section 145(3) of the Act and that too without pointing out any defects in the books of accounts. The ld. CIT(A) merely rejected the book results because the assessee deposited cash in demonetized currency, and that was the reasons to reject the book results which is not a valid reason to invoke the provision of 145(3).

Section 145(3) can be invoked when the AO is not satisfied about the correctness or completeness of the accounts of the assessee, when the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee and when the accounting standards notified u/s 145 (2) have not been regularly followed by the assessee.

From the observations recorded in the order of the lower authority none of the conditions are satisfied and thus same is not evident from the finding of the lower authority. Not only that the bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 and the proper opportunity is required to be given by pointing out the defects in the books of account which we observe that the same is not followed and the order is passed u/s.143(3) of the Act which is also not correct. We get strength to support our view based on the provision of the Act and decision of the Hon’ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [2017 (11) TMI 1082 - RAJASTHAN HIGH COURT]

Here we note that out of the sales of wort partial amount was not considered as genuine because the assessee out of those sales deposited the amount in the specified bank notes. Thus, on the same set of records revenue was satisfied for sales hold a view that the assessee has not maintained proper sales records and therefore invoked the provision of section 145(3) of the Act is not correct. Ld. AO or that of ld. CIT(A) has not considered it fit to make the verification of the contention at the place of business / site to verify the contention and thereby tried to collect the corroborative evidence and without doing so part sales is accepted and part not is not correct reasons to reject the books of accounts. Based on these observations ground no. 1 raised by the assessee is allowed.

Treating the part of the sales attributable to cash sales as unexplained money (u/s 69A) or that of the unexplained cash credits (u/s 68 ) - As we hold a view that the revenue cannot be accept the part of the sales as explained and part of the sales not explained on the same set of evidence. Therefore, the cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit & loss account.

Therefore, there is no occasion to consider the same as unexplained credit entry of the assessee by applying the provisions of section 68 of the Act. We get support from Smt. Harshila Chordia [2006 (11) TMI 117 - RAJASTHAN HIGH COURT] case “wherein it was held that no addition could be made in respect of the amount standing in the books of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.” As the fact of this cash being similar that part of the sales is considered by the revenue has explained and part of it not is not correct and therefore, we hold that cash deposited by the assessee out of sales proceeds of stone cannot be considered attributable to the provision of section 68 or that of 69A of the Act. Based on these observations ground no. 2 raised by the assessee is allowed.

Unexplained cash credit u/s 68 during demonetization period - difference of cash deposits and opening cash balance held as on 09/11/2016 - addition u/s u/s 115BBE - AR contended the assessee is a aided trust running government college and the amount of SBN actually deposited by it solitarily represents the exam fees collected from its students during the subsistence of demonetisation which then remitted to the Registrar of the DBAMU - HELD THAT:- In explaining the nature & source of cash deposits the appellant before the tax authorities below and also in the present proceeding claimed that it was entitled to accept SBN being a Government College. The said claim is not only baseless but untrue in the evince of category of registration granted by AICTE. The material placed on records does in no way suggest that the appellant is a Central or State Govt. College engaged in running educational institution, rather it a private unaided college as per the details laid in letter of approval extension issued by AICTE.

Thus the very foundation of being a Government College is failed on record, in consequence explanation that it accepted the fees from the student also failed like house of cards. Further there is hardly any cogent deprecative material placed by the appellant to dismantle the Revenue’s findings beyond an iota of doubt that the difference of SBN deposits assessed as income and brought to tax u/s 115BBE of the Act represents unaccounted income which appellant tried to colour it as being student fees received by misquoting itself as Government College, when it is not.

Onus to prove - The burden of proof that, the nature & sources of amount of cash deposits made into bank account do not in any way represents income is on claimant assessee and when assessee fails to discharge the same to the satisfaction of the Revenue with corroborative evidences, then the Revenue in view of Hon’ble Apex Court decision in ‘Shashi Garg Vs PCIT’ [2020, 113 taxmann.com 93 (SC)] is entitled to treat the same as unexplained income of the assessee and can assessed as such.

We see strong reasons in countenancing the action of both the tax authorities below. Consequently, we uphold the impugned addition sustained by Ld. NFAC - Decided against assessee.

Addition u/s 41(1) - cessation of trading liabilities on the part of the assessee appellant - AO made the addition merely the notice / summons issued u/s. 133(6)/131 were not responded - AO was not satisfied about the genuineness of sundry creditors HELD THAT:- As is evident from the provision of the Act the assessee has not made any remission or cessation thereof, the amount shown as liability in the books of account the assessee has not received any benefit accruing to him and therefore, the said liability cannot be considered as income of the assessee. The decision our High Court relied upon by the AO in the order of assessment in the case of CIT Vs. M/s. Bright Future Gems [2016 (11) TMI 539 - RAJASTHAN HIGH COURT] deals with the addition u/s. 69C of the Act, whereas in the case on hand the addition is in relation to section 41(1) of the Act and therefore, the same is pari material on the different facts.

As decided in case having the similar set of facts in the case of CIT vs. Narendra Mohan Mathur [2013 (11) TMI 1707 - RAJASTHAN HIGH COURT] Section 41(1) requires that the onus is on the assessing officer to come to the conclusion that the liabilities ceased to exist or the assessee has obtained whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure, or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person. On the one hand the assessee claims that the amount was payable and the assessee may be justified in saying so because one never knows when a creditor will come and raise the demand. May be, the creditor was justified that interest was being paid, so he did not turn up to take the principal amount. Therefore, it was for the assessing officer to come to a definite finding that the liability ceased to exist during the previous year relevant to the year under appeal which, in our view, has not been proved by the assessing officer.

As the facts of the case on hand with that facts of the above case decided by our High Court we respectfully following the binding precedent direct the ld. AO to delete the addition made in the year under consideration. Based on these observations ground no. 1 raised by the assessee stands allowed.

Addition u/s 68 - bogus LTCG on sale of shares - AO has primarily placed reliance on the report given by the Investigation Wing of the Income tax Department in order to arrive at the conclusion that it is pre-arranged method employed by the assessee with the connivance of the operators in order to generate bogus long term capital gains - HELD THAT:- In the case of CIT vs. Jamnadevi Agarwal [2010 (9) TMI 81 - BOMBAY HIGH COURT] held that the transactions of purchase and sale of shares cannot be considered to be bogus, when the documentary evidences furnished by the assessee establish genuineness of the claim.

In the case of PCIT vs. Indravadan Jain (HUF) [2023 (7) TMI 1091 - BOMBAY HIGH COURT] broker through whom, the assessee had carried out the transactions have been alleged to have been indulged in price manipulations and the SEBI had also passed an order regarding irregularities and synchronized trades carried out in the shares by the said broker. However, the evidences furnished by the assessee with regard to purchase and sale of shares were not doubted.

In the instant case also, we noticed that the evidences furnished by the assessee to prove the purchase and sale of shares, payment made/received, entry/exit of shares in the demat account of the assessee etc., were not doubted with.

In the case of PCIT vs. Smt Krishna Devi [2021 (1) TMI 1008 - DELHI HIGH COURT] as noticed that the reasoning given by the AO to disbelieve the capital gains declared by the assessee, viz., astronomical increase in the price of shares, weak fundamentals of the relevant companies are based on mere conjectures. Accordingly, the Hon’ble Delhi High Court affirmed the decision rendered by ITAT in deleting the addition of capital gains.

Thus as the AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee.

Thus, we hold that the long term capital gains declared by the assessee cannot be assessed as unexplained cash credit u/s 68 - Decided in favour of assessee.

Addition u/s 68 - unexplained deposits found in the bank account - whether Section 68 can be invoked for deposits found in bank account or not? - main contention of the assessee is bank passbook is not a book as per section 2(12A) and thus, the provisions of Section 68 cannot be invoked to cash deposits into bank account as unexplained cash deposit - HELD THAT:- According to the assessee, unexplained cash deposits in a bank account can be considered as unexplained money u/s 69A of the Act, but the same cannot be treated as unexplained credits as per Section 68, because the said deposit is not a credit as per books of accounts, but only out of cash balance available in the books of accounts. We do not subscribe to the arguments of the counsel for the assessee for the simple reason that, merely for the reason of choosing wrong head or incorrect section, the addition itself cannot be nullified or held to be void. But what is to be seen is the context of discussion and substance of the issue and if, the discussion points to an issue, then in our considered view the issue needs to be considered. Therefore, we reject the arguments of the assessee along with relevant case laws cited in support of this proposition.

Addition made towards cash deposit as unexplained money -Once the AO accepted the advances as genuine in the earlier assessment year, then in our considered view, the AO cannot question the advances received by the appellant in the present assessment year as non-genuine while examining the source of cash deposits into the bank account. This legal principle is supported by the decision of Basetteppa B. Badami [2018 (5) TMI 902 - KARNATAKA HIGH COURT] wherein it has been clearly held that when closing balance of cash in hand for the preceding assessment year is sufficient to cover the expenditures in the subsequent year, no addition can be made towards cash deposit as unexplained money. Therefore, in our considered view, the addition made by the AO u/s 68 of the Act, cannot be sustained.

Advances received from 6 parties - The appellant has established the transactions with all evidence, including the confirmation from the parties. Therefore, in our considered view, the appellant is able to explain the source of cash of Rs. 14.60 crores towards cash deposit to bank account out of advances received from 6 parties in earlier financial year and the corresponding cash balance available as per books of accounts, and thus, we direct the AO to delete the addition made to the extent of Rs. 14.60 crores. In so far as remaining cash deposit of Rs. 81 laces, out of advance received from one person in the FY 2016-17 relevant to AY 2017-18, all though the appellant filed all details, but failed to prove credit worthiness of the person and thus, in our considered view advance received from Sri. M Satya Gopal for Rs. 81 laces cannot be considered as source for cash deposit and thus, we confirm the addition to the tune of Rs. 81,00,000/-.

Source for cash deposits out of cash withdrawals from the bank account - AO and ld.CIT(A) have not disputed the fact that the assessee is having cash balance out of cash withdrawals from the very same bank account, but the AO rejected the explanation of the assessee only on the ground that the appellant has prepared books of accounts after date of search and there is a possibility of dressing up the books of accounts to cover up the source of cash deposits. In our considered view, the reasons given by the AO is fallacious for the simple reason that, unless AO proves with necessary findings that the cash balance available in the books of accounts is not backed by any evidence, including withdrawals from the bank account or the said cash in hand has been utilized or appropriated for any other purposes, the cash balance available as per books of accounts cannot be denied merely for the reason that the said books of accounts has been audited or prepared after the date of search.

Merely for the reason that the book of accounts has been prepared and audited after the date of search, the books of accounts cannot be rejected by the AO, unless the AO points out that the books of accounts are not verifiable or there is a discrepancy in supporting evidence maintained by the assessee in respect of said books of accounts.

In the present case, the AO neither made out a case of incorrectness in books nor pointed out any inconsistencies or discrepancies in the books of accounts maintained by the appellant. Therefore, in our considered view, once the AO having noted the fact that the cash balance to the extent of Rs. 4.63 crores is out of past withdrawals from very same bank account, then he should not have rejected the assessee’s explanation with regard to source for cash deposits.

CIT(A), without considering the said fact, simply sustained the additions made by the AO towards cash deposits on a flimsy ground that the appellant’s line of business there would be substantial cash expenditure and that the withdrawals from bank account should have been utilized for cash payments. In our considered view, the said observation of ld.CIT(A) is not based on any evidence, but purely on suspicion and without any valid evidence. Direct the AO to delete the additions made u/s 68.

Appeal filed by the assessee is partly allowed.

LTCG on sale of land - nature of land sold - finding recorded by the AO that agricultural land sold by the appellant during the year is a capital asset and not an agricultural land within meaning of sec. 2(14)(iii) - HELD THAT:- AO without finding any shortcomings in the said certificate, issued a notice under section 133(6) of the Act, 1961 to verify the claim of the assessee to Tehsildar Sanganer. In reply to the said notice, the Tehsildar Sanganer stated that the aerial distance of the said agricultural land is beyond 7 km from Municipal Limits of Jaipur. Thus the Tehsildar has issued two different distances one is in the form of certificate and another in response to notice u/s 133(6) in the form of letter for same agricultural land. AO should have examined the Tehsildar thereon and should also make enquiry from him that how the distances were measured while issuing two different distances for the same land. AO did not make any enquiry to verify the correctness of position.

AO only on the ground that the certificate filed by the appellant is in photo copy and not in original, held that the certificate furnished by the appellant cannot be relied on. Thus, prima facie it appears that Tehsildar Sanganer has issued certificates on his whims without verifying the actual distance only on estimates as per dictate which cannot be relied. The distance is to be measured aerially as per law in force for A.Y. 2014-15 which can only be done scientifically by putting aerial line on khasra maps from municipal limit and should have attached with certificate so as to rely any certificate of distance. Thus reliance placed by AO on certificate issued by Tehsildar, Sanganer is disregard of the certificate produced by assessee of the same Tehsildar, is without any basis and is wrong and bad in law.

Regarding land sold at village Rampura, Tehsil Chaksu, the assessee claimed that said agricultural land is beyond 2 Km from Chaksu Municipality which has population of more than ten thousand but less than one lac.

The said land of assessee’s husband is agricultural land within the meaning of section 2 (14) and as it is not falling in exceptions given in Section 2 (14) (iii) (b) of I. T. Act, 1961 and therefore is not a capital asset. Similar is the position in the case of assessee. Therefore, in the case of assessee before us, on the same identical facts that agricultural land of the assessee being adjoining to the agricultural land of the assessee’s husband, the certificate issued by the Director, RGDC, Survey of India being authentic/reliable, correct and scientifically acceptable, is equally applicable.

Therefore, relying on the certificate issued by the Survey of India, Government of India, we are of the considered opinion that the land being agricultural land in the case of assessee, situated at village Rampura, Chaksu is beyond 2 km of Municipal limit of Chaksu Tehsil and accordingly not a capital asset as per law. Hence no capital gain tax is leviable thereon u/s 45 - The long term capital gain tax levied by A.O. on the sale of said agricultural land is wrong and unjustified.

We find no justification to sustain the addition. Thus the additions made by the AO and sustained by the CIT (A) in respect of both the agricultural lands are deleted.

Grant of deduction u/s 54B and 54F - AO denied the claim of the assessee on the ground that the assessee has not claimed the deduction in return filed under section 139(1) nor filed a revised return claiming the said deduction - HELD THAT:- The power of the Appellate Authorities to consider claims made based on material already on record is co-terminus with the power of the AO. The failure to advert to the claim in the original return or the revised return cannot denude the appellate authorities of their power to consider the claim, if, the relevant material is available on record and is otherwise tenable in law. Any other view will set at naught the plenary powers of appellate authorities. It is well settled that even if a claim made by the assessee does not form part of the original return or even the revised return, it can still be considered, if, the relevant material is available on record, either by the Appellate Authorities, which includes both the Commissioner (A) and the Tribunal by themselves or on remand, by the AO.

We are of the view that the assessee is entitled to benefit of exemption/deduction u/s 54B and 54F in respect of investments made in purchase of agricultural land and residential house purchased by the assessee.

Assessee appeal allowed.

Addition on account of interest on capital of assessee lying with the partnership firm - addition was made on account of interest on capital contribution to partners and remuneration was added thereby reduced the claim of deduction u/s 80IB - AO made addition of 12% of interest on capital of assessee - HELD THAT:- As we find that in the case of Alidhara Taxpro Engg. (P) Ltd. [2009 (3) TMI 74 - GUJARAT HIGH COURT] held that “mere incorporation of interest on partners’ capital account and remuneration does not signify that the same are mandatory in nature. As we have noted above, in the present case the appellant has not charged any interest and remuneration as per partnership deed therefore, the appellant firm cannot be compelled to charge interest or remuneration.

Further in the case of Myhome Developers [2021 (3) TMI 345 - GUJARAT HIGH COURT] has held that though the clauses of the partnership deed provided for interest on partner's capital and remuneration, the same is subject to their mutual agreement. The clauses contained are only enabling provision not mandatory in nature so as to lead to an inference that, the assessee had to pay interest on capital and remuneration to its partners.

No justification for making addition of interest when neither the assessee has claimed interest on its capital lying with the firm nor the said firm has paid any interest to the assessee. Hence, there is no justification for making addition by the AO and same is deleted. Appeal of assessee is allowed.

Addition pertaining to the undisclosed export sales bill - assessee received the foreign remittance qua “invoice No. SSL 1920/Ex 101” and Dena Bank has recovered the sum credited to the Assessee on such bill discounted, from the foreign remittance and credited the balance value of the above recovery and bank charges in the Assessee’s account - HELD THAT:- From the export invoice it clearly appears that the Assessee has exported SS round bars worth Euro Dollars 47,985.55 which was discounted by the Dena Bank and the same was shown as contingent liability in clause 21(g) of the financials/audit report as on 31.03.2021, wherein it is clearly written (contingent liability for bill discounted since realized : Rs. 34,34,000/-) and on dated 15.04.2020, the Assessee ultimately has received foreign remittance of the aforesaid amount of Rs. 34,34,000/-being credited by Dena Bank. It is also an admitted fact that said amount was offered for taxation.

Hence considering the peculiar facts and circumstances in totality, addition on this context is un-sustainable. Accordingly, the addition under consideration pertaining to the export sales bill i.e. “invoice No.SSL 1920/Ex 101” is deleted.

Disallowance of unpaid interest u/s 43B - loan taken by the assessee from the World Bank by incorrectly presuming that loan was advanced by State Government and interest was paid to State Government even when neither the World Bank nor the State Government falls under any of clause (d), (da) or (e) of section 43B - HELD THAT:- We note that clause (d), (da) or (e) of Section 43B do not cover interest payable on any loan or borrowing taken from World Bank /Government. It is noted that in these clauses interest payable to specific financial institutions / NBFC / Schedule Banks / Co-operative Banks are only covered. The interest payable to State Government/ World Bank is not covered under any of these clauses.

Explanation no. 4 to section 43B of the Act specifies the institutions which are covered under this section as has been elaborately discussed in the written submission filed by assessee. Therefore, from the plain reading of the definitions, it is clear that neither the State Government nor the World Bank falls under the definition of Public Financial Institution, State Financial Corporation, State Industrial Investment Corporation, Deposit taking NBFC, Scheduled Bank and Co- operative Bank.

Interest payable on loan taken from State Government / World Bank is not covered with in the provision of section 43B of the Act. Hence disallowance of Rs.2,56,43,688/- confirmed by CIT(A) u/s 43B is not as per the provision of law and therefore the same is directed to be deleted.

Addition on account of electricity duty u/s 43B - electricity duty collected by the assessee from consumer forms an integral part of a commercial transaction of supplying and distributing the electricity - HELD THAT:- This is not a tax or duty or cess levied on the assessee. Hence, provision of section 43B is not applicable in the case of the assessee. Assessee simply remits the electricity duty only to the extent it is collected. The uncollected electricity duty is not payable / recoverable from the assessee. Further the State Govt. grants subsidy to the assessee which it allows to adjust against the electricity duty payable by the assessee. Thus section 43B is not applicable as the State Government do not impose electricity duty on the assessee and therefore it is not a deduction which is otherwise allowable to the assessee. See Kerala State Electricity Board [2010 (11) TMI 127 - KERALA HIGH COURT] the words, 'by way of tax' are relevant as they are indicative of the nature of liability - when sec 43B(a) speaks of the sum payable by way of tax etc., the said provision is dealing with the amounts payable to the sovereign qua sovereign, but not the amounts payable to the sovereign qua principal. We are therefore of the opinion that sec 43B cannot be invoked in making the assessment of the liability of the appellant under the IT Act with regard to the amounts collected by the appellant pursuant to the obligation cast on the appellant under s. 5 of the Electricity Duty Act, 1963 - Assessee appeal allowed.

Assessment u/s 153A - addition u/s 69A by AO on account of difference in amount credited in bank and the sale proceeds shown in the bank in the income tax return - HELD THAT:- It is settled law that no addition can be made u/s 153A otherwise than based on incriminating document. Meaning thereby that the additions made by the AO and sustained by the Hon’ble CIT(A) being not based upon any document found during the course of search, would be liable to be deleted.

In the present case, since no incriminating material had been found during search nor brought on record by Assessing Officer and thus, the issue is squarely covered by judgment of Abhisar Buildwell (P.) Ltd [2023 (4) TMI 1056 - SUPREME COURT]

Accordingly, we delete the addition made by Assessing Officer in absence of any incriminating material found during course of search under section 132 of the act.

Validity of the assessment order passed by AO u/s 153A - Addition made u/s 69A by AO on account of difference in returned income and income as per certificate issued by M/s Naveen Aggarwal & Associates - In the present case under appeal before us, admittedly. Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person. Under the circumstances, we are of the considered view, that in the present case, assessment proceedings must be initiated under Section 153C rather than Section 153A of the Act, after the satisfaction was being arrived in the assessment proceedings of M/S Golden Tulip Hospitality Pvt. that the material found and seized during search pertain to appellant.

We, therefore, hold that the assessment order passed under Section 153A by the AO is without jurisdiction and the same is as such quashed.

Additional late deduction/collection default u/sec.201(1A) - changing head of it’s payment from salary disclosed in form-24Q to commission in proceedings u/sec.154 r.w.s.200A -Recharacterization of salary paid to the Managing Director as fees for professional services - NFAC jurisdiction to change the “head” of the corresponding TDS provision and more particularly from “salary u/sec.192” to “commission u/s.194A”

As stated assessee’s remuneration paid to Mr. Kairus Dadachanji in fact amounts to commission requiring TDS deduction u/sec.194(1)(ba) of the Act - HELD THAT:- We hardly see any reason to cause our agreement with the Revenue’s arguments supporting the NFAC’s foregoing directions invoking sec.194A qua assessee’s salary payment(s) attracting TDS deduction u/sec.192 as sec.200A appears to be in the nature of a complete code in itself for the purpose of processing of TDS returns.

Faced with this situation, we invoke stricter interpretation thereof as per Commissioner of Customs vs. Dilip Kumar And Co. & Ors. [2018 (7) TMI 1826 - SUPREME COURT] And that sec.200A of the Act is a specific provision having overriding effect over all other general provisions going by the principle of ‘Generalis Specialibus non Derogant’.

Revenue’s next plea is that nothing prevents the learned field authorities to make such an adjustment in case of an incorrect claim u/sec.200A(a)(ii) r.w.s. Explanation (ii) thereof - It’s instant latter plea is also found to be devoid of merits once Explanation-(i) and (ii) to Sec.200A itself specify the scope thereof to any mutually inconsistent items vis-à-vis another entry in form- 24Q or qua rate of deduction; respectively. There is no indication that sec.200A “processing” could in any way change head of the TDS applicability; what so ever. We thus conclude that once the assessee having deducted TDS u/sec. 192 of the Act “at the time of payment”; the CPC’s intimation going by the date of credit i.e., 31.03.2019 (supra) as well as the NFAC’s impugned action changing “salary” head to “commission”, have erred in law and on facts in raising the demand in issue. The same stands reversed. We accept the assessee’s foregoing main as well as additional ground(s) in very terms. Ordered accordingly.

Registration of the assessee trust u/s 12A(a) cancelled - activities of the trust are not as per the objects of the trust deed and therefore, are not genuine - property and income of the Trust have been used for the personal benefit of the trustee.

HELD THAT:- There is receipts from the hospital activities although less but it cannot be said that the activities of the trust are not genuine and the objects of the trust are not being carried out as per objects of the trust.

As noted that the letting out of shops is an activity permitted under clause 7(xii) of the Trust deed and such income has been used for the main objects of the Trust and it cannot be said that the trust has violated the provisions of Sec 12AA(3). It is also noteworthy to mention that the trustees who are residing in small quarters of the trust property are rendering full service to the Trust and they are not getting salary against such service and in spite of this they are bearing electricity, water bills and maintenance charges of the trust building and in order to meet the requirement of capital expenditure such persons also provided interest free deposit which does not show that there is misuse of the trust property.

These comments of the ld. CIT(E) did not doubt the activities of the trust, the receipt of income from rent is as per object of the trust and the benefit that the trustees are getting cannot be a sole reason to reject the registration of the trust.

Thus activities of the trust are charitable in nature and the registration was incorrectly denied to the assessee trust. Appeal of the assessee is allowed.

Disallowance of premium paid on account of repayment of optionally convertible debenture (OCD) u/s 37 - HELD THAT:- We find that identical ground of appeal was raised before this Tribunal in assessee’s own case for subsequent assessment years [2023 (11) TMI 1145 - ITAT MUMBAI] wherein the Tribunal had rejected similar claim made by assessee as held Assessee did not have any obligation to redeem the CCDs as at the end of the relevant previous year, or at the date of finalization of account, or even at the date of filing return of income. Therefore, in our view, Assessee had no liability, whether ascertained or contingent, to redeem the debentures. It is admitted position that no payment towards redemption or premium was made during the relevant previous year. Therefore, in our view, the Assessee could not be permitted to claim deduction either on accrual or paid basis during the relevant previous year.

Since the OCDs were not in existence during the relevant previous year, the question of allowing deduction for the proportionate amount of redemption premium as interest during the relevant previous year, in our view, does not arise.- Decided against assessee.

Challenge to order of attachment for recovery of dues by way of attachment of properties - Priority of dues between the Central Excise Department and secured creditors - HELD THAT:- In the case of Punjab National Bank [2022 (2) TMI 1171 - SUPREME COURT], issue that came into consideration whether in the absence of any provision providing for first charge in relation to the central excise dues in the Central Excise Act, 1944, the dues of the excise department would have priority over the dues of the secured creditor or not? The Hon’ble Apex Court has answered this issue in favour of the secured creditors that there is no provision under Section 11-E of 1944 providing for the first charge on the property of the assessee or any person.

So far as the judgment of the State Tax Officer [2022 (9) TMI 317 - SUPREME COURT] is concerned, that relates to the recovery of Sales Tax and VAT. The question raised by the appellant therein is whether Section 53 of the Insolvency and Bankruptcy Code, 2016 overrides Section 48 of the Gujarat Vat Act. After considering Section 48 of GVAT, the Apex Court has held that the State is also a secured creditor as defined under Section 3(30) of IBC.

The Debt Recovery Tribunal has not committed any error while dismissing the objections raised by M/s Maya Spinners Ltd. - Petition dismissed.

Seeking grant of bail - Smuggling of Gold bullion of foreign origin - offences punishable under Sections 135(1)(a) and 135(1)(b) of the Customs Act - HELD THAT:- Considering the facts and circumstances of the case and the nature of allegation levelled against the petitioner as well as the period of custody, the petitioner abovenamed, is directed to be enlarged on bail on furnishing bail-bond of Rs. 20,000/- with two sureties of the like amount each to the satisfaction of learned Special Judge, Economic Offence, Patna in connection with Economic DRI, Patna Case No. 20(O) of 2024, arising out of Unit Case No. 29 of 2023-24, with further condition imposed - bail application allowed.

Seeking benefit under MEIS Scheme - goods exported under Shipping Bills - Petitioner submits that the Petitioner is entitled to reward under MEI Scheme in respect of various notified products that it has exported - HELD THAT:- The grievance of the Petitioner is that despite being eligible, it is not getting benefit under the MEI Scheme in the sum of Rs. 47,10,685.38. It is the admitted case of the parties that in view of the inadvertent error the shipping bills have not been processed by Respondent No. 1. The Counter-Affidavit of Respondents also sets out that in view of the fact that the EDI shipping bills of the Petitioner were left blank and the electronic transmission in the automatic environment assumed the Shipping Bills ‘No’ and accordingly proceeded to reject the case.

Given that the Respondents have not examined case of the Petitioner, in view of the inadvertent error, the Court deems it expedient to direct the Respondent to undertake the examination of the 185 EDI shipping bills of the Petitioner afresh, treating its submissions as a ‘Yes’ - The Respondent shall pass a Speaking Order to decide the entitlement of the Petitioner to the MEI Scheme rewards, in accordance with law, within a period of 12 weeks from today.

Petition disposed off.

Rejection of declared value - Quotation obtained by under-invoicing - big difference in values between the quotation and the declared invoice value - enhancement of value based on the quotation with the acceptance from the importer - HELD THAT:- Having rejected the declared value based on quotations received from M/s. Shanghi Light Industries Equipment, the Ld. Original Authority went on determine the value by adopting the prices in the quotation as he found them to be reasonable and having being accepted by M/s Evergreen Enterprises.

It is found that it has been held by a Division Bench of this Tribunal in COMMISSIONER OF CUSTOMS, CHENNAI VERSUS SAHARA ENTERPRISES [2005 (9) TMI 572 - CESTAT, CHENNAI] that a proforma invoice is in the nature of a quotation or offer and hence does not constitute valid basis for enhancement of value of the imported goods.

The transaction value based on a much later day import where the value proposed by the department was accepted by another importer in his own case, cannot be the basis of valuation in the impugned case, where there is no such consent. It is only when a transaction value arrived at by mutual consent, between the importer and the department, is subjected to the rigorous of examination and meets statutory requirements that an Authority may be able to determine and assess its probative value in another case - Transaction value is a function of price, however there was no evidence to show that there is a flow back or that the importer in the impugned matter has paid any amount over and above the declared transaction value. Thus, Revenue has not proved its case and the impugned order hence merits to be set aside.

The impugned order is set aside - appeal allowed.

Refund of SAD - discrepancy in description of the goods imported and the tax invoice and the endorsement as per condition in para 2(b) of N/N. 102/2007-Cus dated 14.9.2007 - refund rejected on the ground that along with the Chartered Accountant’s statement, the appellant submitted copies of invoices issued by them for movement of the said imported goods to the respective buyers against the said invoices but the Chartered Accountant did not certify such sales invoices in the correlation sheet.

HELD THAT:- It is not disputed that the appellant had submitted sales invoices and VAT / CST paid challans / VAT / CST returns as proof that the goods imported were sold and that necessary VAT / CST were paid on such sale along with Chartered Accountant’s certificate and correlation sheet. The rate of duty CST was paid is not relevant so long as it has been paid correctly at the effective rate. In this context the CA not certifying the invoices issued by the appellant for movement of the said imported goods to the respective buyers was a curable defect. With the Original Authority expressing his satisfaction with the description of the goods being made the claim could very well have been verified and the rejection of refund on this ground was not warranted.

As regards the endorsement in the invoice not being worded properly the matter was examined by the Larger Bench of the Tribunal in CHOWGULE & COMPANY PVT LTD VERSUS COMMISSIONER OF CUSTOMS & CENTRAL EXCISE [2014 (8) TMI 214 - CESTAT MUMBAI (LB)] and it was held that in respect of a commercial invoice, which shows no details of the duty paid, the question of taking of any credit would not arise at all. Therefore, non-mention of the duty in the invoice issued itself is an affirmation that no credit would be available. This being so, the condition prescribed under clause (b) of para 2 of the N/N. 102/2007 stood satisfied. Further there is no allegation of any fraud or misrepresentation against the appellant.

The impugned order rejecting the refund claims is not proper. The same is hence set aside - Appeal allowed.

Refund for the Special Additional Duty (SAD) - Commissioner (Appeals) before passing the impugned order failed to give a personal hearing to the appellant though a representation was made through counsel - Violation of principles of natural justice - HELD THAT:- It is found that the fact that no personal hearing was given to the appellant by the Commissioner (Appeals) inspite of a request for the same is itself fatal to revenue’s case.

On merit, it is found that the appellant has satisfactorily explained that duty for the four bills of entry were initially debited in DEPB script while filing the bills of entry i.e. on 31.05.2011 and the remaining duty was paid on the next day. The same was also easily verifiable from the documents submitted. There is no dispute that the appellant has paid the VAT on all the goods and “No credit of Additional Duty of Customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 have been availed/shall be admissible” is endorsed on the invoices. This being so, a case of unjust enrichment does not arise and the conditions prescribed under Notification No. 102/2007 dated 14.09.2007 have been complied with. Hence, the impugned order rejecting refund of the subject 4 bills of entry is liable to be set aside even on merits.

The Hon’ble Madras High Court in its judgment in PP PRODUCTS LTD. VERSUS COMMISSIONER OF CUSTOMS, CHENNAI SEAPORT COMMISSIONERATE-IV [2019 (5) TMI 830 - MADRAS HIGH COURT], examined whether the Tribunal, in the face of documentary evidence produced by the appellant, was correct in setting aside the order of the Appellate Authority, holding that there was no correction between the imports and subsequent sales? - It held 'The explanation offered by the appellant/importer is that the numbers which followed the letters HDPE/LDPE/LLDPE are relevant only for person who is importing goods from the foreign country on orders being placed by the appellant and is of no consequence on the sale while selling the product in the local market. In our considered view, the adjudicating authority has not come to a conclusion that the product sold was entirely different. In fact, there was nothing on record to disbelieve the Chartered Accountant’s certificate which certified that both products are one and the same. If the adjudicating authority had to disbelieve such certification, then there should have been material to do so. However, the larger question would be whether at all such jurisdiction is vested with the adjudicating authority, when there is no allegation of any fraud or misrepresentation against the appellant.'

The impugned order rejecting the refund claims is not proper. The same is hence set aside - Appeal allowed.

Contradiction to an earlier order - recovery of refund granted erroneously - statutory time limit of one year - HELD THAT:- In the facts of the case, it is obvious that there has been a double payment in the sense that payment has been made through MEIS scrips as well as in cash. Admittedly, there is no dispute on eligibility of refund on merit as such. However, it is also obvious that in the first instance, the refund claim was filed beyond the statutory time limit of one year and therefore, the Original Authority should have examined the claim within the four walls of the statutory provisions. In subsequent proceedings, the Commissioner (Appeals) has taken into account the interpretation of certain exclusion of period due to COVID etc., in terms of Taxation and Other Laws (Relaxation of certain provisions) Ordinance, 2020 and came to the conclusion that even after allowing this, the original statutory time limit would not have been adhered and therefore, the refund was required to be rejected as time barred.

There is also substantive force in the arguments made by the Department that once the order of the Commissioner (Appeals) had attained finality, rightly or wrongly, the Importer/Respondent can now not reopen the same issue by going through the Appeal in the proceedings relating to consequential recovery of erroneous refund - Therefore, it appears that both the sides have certain points and issues in their support and substantive law points and order may have different interpretations.

The submissions of the learned Advocate agreed upon that this Bench, in its discretion, may refuse to admit the Appeal on the ground of its being less than Rs.2 lakhs. Due to unique facts of the case and in the interest of justice, the Departmental Appeal need not be pursued any further and therefore, in exercise of my discretion, the Appeal of the Department is not admitted.

Appeal disposed off.

Revocation of the customs broker license - forfeiture of the security deposit - fraudulent activities and misdeclaration by the Customs Broker's G-Card Holder - exporters were found to be using fake IECs and have claimed huge IGST refund on later occasion - violation of provisions of Regulation 10(a), 10(e), 10(n), 10(o) and 13(12) of the CBLR, 2018 for some export clearances attended by its G-Card Holder.

HELD THAT:- On checking of IEC of M/s. Della Enterprises it was found to be a dummy firm created in the name of Shri Veerchand Kisturchand Jain. The IEC holder Shri Veerchand Kisturchand Jain has denied any connection with M/s. Della Enterprise and also denied having exported any goods. It is found that the declared premises of the exporters are fake and also no business activities were found in the places of business addresses provided in GSTIN. Persons involved exporting these consignments were also found to be involved in several cases of commercial fraud in the past. Hence it is clear on record that a group of syndicate with the said bogus IECs has availed ineligible IGST refund on the basis of bogus invoices, wherein fact remains is that no IGST had been paid to the exchequer in respect of such invoices.

The bogus IECs' were used to hide the identity of the actual beneficiary of such fraudulent activity and to escape detection of their direct involvement by the Customs authority. As per Rule 12 of Foreign Trade Regulation Rules 1993 "any person using someone else's Importer-Exporter Code shall be held liable for violation of this rule and shall accordingly be liable for penalty under sub-section (2) of Section 11 of the rule.

The Radioactivity Measurement Laboratory, Radiation Safety System Division, Bhabha Atomic Research Centre, Trombayhas confirmed vide Ref. No. RSSD/RKL/2018 dated 17.12.2018 that “No detectable radioactivity was found in these concrete bricks’ as mentioned in the shipping bills descriptions - it is clear that G-card holder has violated the above quoted provisions of CBLR. The G-card hold is none but a customs broker of the CHA/appellant, hence appellant is responsible for the act of his agent.

There are no reason to differ from the findings in the order under challenge - appeal dismissed.

Rejection of transaction value and re-determination of the value of the imported goods on the basis of imports of the same model goods by the same importer earlier - Confirmation of the demand of differential duty with interest and penalties - HELD THAT:- Only the invoice number of the goods whose value is adopted is given. There is no discussion as to why the declared values were rejected under Rule 12 of the Valuation Rules nor any details of the Bills of Entry under which identical or similar goods were imported. There is also no comparison of the features of the goods which were imported and the features of the goods based on whose values the values were re-determined.

It is found that the rejection of transaction value, re-determination of values, demand of differential duty, holding the imported goods liable for confiscation and imposition of penalties cannot be sustained in respect of these four goods.

The impugned order is modified to the extent of setting aside the re-determination of the value, demand of differential duty and interest and equivalent mandatory penalty under section 114A in respect of the goods - the penalty under imposed in the impugned order section 114AA is reduced to rupees four lakhs - matter remanded to the Principal Commissioner solely for the purpose of calculation.

Appeal allowed in part and part matter on remand.

Dismissal of application under Order VII Rule 11 of CPC - name of the respondent/plaintiff company had been struck off from the Register of Companies in terms of Section 248(5) of the Companies Act, 2013 - HELD THAT:- As per Section 248 (1) to (5) of the Act, a mechanism has been provided whereby the Registrar of Companies on finding the grounds which are enumerated under Section 248 (1), can issue notice to the company and its directors and after adopting the appropriate procedure, it may proceed to strike off the name of the company from the register under sub-section (5) thereof.

On a careful reading of the words in Section 250 of the Act by invoking the golden rule of construction that the words in the statute should be interpreted in their ordinary, normal and grammatical meaning, is that even if the name of a company is struck off from the register, it remains operational in so far as it can pursue legal remedies for realisation of the ‘dues’ of the said company against its debtors, which have either crystalised or remain uncrystallised, arising from any liability or obligation of its debtors to the company, but even the creditors can pursue legal remedies against the said company for the payment and discharge of its liabilities or obligations arising from any contract or statutory implications.

This Court finds that the mere striking-off of the name of the respondent-company from the register by the Registrar of Companies does not automatically invalidate or renders flawed the civil suit filed by the respondent/plaintiff. In the instant matter, apparently the cause of action existed on the day the suit was instituted. Accordingly, the respondent/plaintiff company can pursue its remedies in law even after its name being struck off from the register by the Registrar of Companies.

The present civil revision petition is dismissed.

Disregard of commercial wisdom of the Committee of Creditors - removal of the Interim Resolution Professional (IRP) and the appointment of a new Resolution Professional (RP) - appointment of Appellant as the RP of the CD as per the voting in the 2nd CoC meeting - HELD THAT:- The claim of Respondent No. 2 in Form-C was received by IRP on 24.01.2024. It is also seen that M/s Asha Apartments Pvt. Ltd. was inducted as Sole Financial Creditor with 100% voting rights in the Committee of Creditors by the appellant as IRP at a stage when he was already voted out as IRP of the CD by the existing CoC. At no point the appellant informed the AA about the fact that first CoC has not approved his proposal for ratification as RP, rather they have voted him out.

The actions of the appellant IRP are not bona fide in the present matter. He has been very biased in his approach in this matter, particularly after the first CoC meeting where a decision was taken to remove him and appoint a new RP. Prima facie he seems to be guilty of perjury as he has stated before AA on record that the claim of Asha Apartments has been accepted by him on 25.01.2024 and accordingly he has reconstituted the CoC. Whereas in the minutes of the second CoC held on 30.01.2024, he has stated that the claims of all three creditors are under ‘verification’ category. It should be mentioned that the claim of Respondent No.1 was admitted and informed by him to AA on 12.01.2024 itself. This clearly suggests that the Respondent No.2 was introduced as the Financial Creditor, without proper verification to ensure that the Committee of Creditors consisted solely of financial creditor who would appoint the IRP as RP and further allow him to conduct the CIRP process in tandem with the newly introduced sole member of CoC.

The conduct of the RP in the instant CIRP proceeding seems to be premediated, biased and authoritarian in clear violation of the core objectives and principles of the Code, which seeks to ensure fair and transparent insolvency proceedings. The facts and circumstances presented above clearly reveal the Appellant's abuse of authority, demonstrating both overreach and bad faith; further compromising the integrity and trust that is essential to the insolvency resolution process.

It is found that the conduct of the appellant has not been neutral and impartial in the aforesaid CIRP proceedings. He had tried to conduct CIRP in such a manner to keep himself as RP by prematurely admitting the claim of Respondent No.2 as Financial Creditor and reconstituting the IRP. The Respondent No.2 in turn helped him by appointing him as RP. This conduct goes against the objectives of the Code. If such conduct and collusive practices are allowed to continue, the entire edifice of IBC would collapse. This would enable entry of erstwhile promoters though back door in the CD.

Appeal dismissed.

Direction to RP to reconstitute the Committee of Creditors (CoC) after excluding the Appellant and other unsecured Financial Creditors - Appellant qualifies as a 'related party' or not - Appellant's claim as a financial creditor - disbursement of funds - secured creditor - necessity of a forensic audit to investigate the transactions related to the Appellant's claim - HELD THAT:- There can be ‘financial debt’ only when liability or obligation in respect of a claim, which is due from any person. The whole claim of financial debt by the Appellant is based on Deed of Guarantee-cum-indemnity dated 05.08.2022 executed by the Corporate Debtor. Clause 3 of Deed of Guarantee-cum-Indemnity as extracted above contains undertaking of Guarantor to make good the loss of lender, if the borrower fails to repay such amount to lender. Thus, there can be no liability of Guarantor, if principal borrower is not liable.

Regulation 8, sub-regulation (2) provides that existence of debt due to the Financial Creditor may be proved based on- (a) the records available with an information utility, if any, or (b) other relevant documents, including the record evidencing that the amounts committed by the Financial Creditor to the Corporate Debtor under a facility has been drawn by the Corporate Debtor. Further, sub-regulation (b) (i) refers to a financial contract supported by financial statements as evidence of the debt. Thus, financial statements need to be brought on record evidencing that amounts committed by Financial Creditor to the Corporate Debtor under a facility has been drawn by the Corporate Debtor, are the statutory prescription for proving the existence of debt. The debt shall become due only when there is liability or obligation in respect of a claim, which is due from any person. Thus, unless the liability or obligation becomes due on the Corporate Debtor, who is liable to pay the debt to the Appellant, it cannot be said that the amount of Rs.195 crores for which facility was sanctioned has become due without disbursement of Rs.195 crores, to enable the RP to admit the claim of Rs.195 crores submitted by the Appellant - When Financial Creditor has not disbursed the amount of Rs.195 crores to the principal borrower, it is failed to see that how against the guarantor, the claim of Rs.195 crores can be admitted.

There are no ground to interfere with the impugned order passed in the present Appeal. However, since Adjudicating Authority has directed for transaction audit report, which report was to be received within 60 days, in the facts of present case, the ends of justice will be served in giving liberty to both the parties to file fresh Application about:

(A)Whether any material comes in the light of transaction audit report based on which Appellant can be held to be ‘related party’?

(B)Whether based on transaction audit report, there is any ground by the Appellant to claim itself as Financial Creditor/ secured creditor?

The order dated 02.08.2024 passed by National Company Law Tribunal in IA No.2142 of 2023 is not interfered with - appeal disposed off.

Initiation of CIRP - continous default - Rs 1 crore threshold - Dismissal of Appellant's Application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016 - Applicability of Section 10A of the Insolvency and Bankruptcy Code (IBC) regarding the prohibited period - HELD THAT:- Reliance is placed by the Respondent on Krishna Enterprises [2018 (7) TMI 1963 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] in which it was held that ‘debt’ cannot be said to include ‘interest’ in all cases. It shall include interest only when the same has been agreed by the parties, otherwise, only the principal amount shall fall within the definition of ‘claim’ for the purpose of calculating default amount. Despite there being no provision for the Application of interest in the L&L agreement, the Appellant in its Section 8 notice and Section 9 Application claimed interest in its computation on the license fees as set out in the L&L agreement. There are no infirmity with the above analysis of the Adjudicating Authority and do not find merit in the claim of the Appellant for the interest of Rs 1,66,56,022 (rupees one crore, sixty-six lakhs, fifty-six thousand and twenty two only).

The Adjudicating Authority correctly interpreted that any default falling within this period cannot form the basis for initiating CIRP. In this case, a portion of the default claimed by the Appellant clearly falls within the protected period under Section 10A. The Corporate Debtor is entitled to seek exclusion of the license fee of Rs 69,30,442/-, which fell due and defaulted by the Corporate Debtor during the prohibited period.

It is argued by the Appellant that the default is continuous, occurring before, during and after the prohibited period under Section 10A and therefore, the CIRP petition is maintainable. Looking at the facts in the case, we find that the date of default is proposed to be changed to 31.03.2023 as per the purported settlement agreement vide letters dated 29.08.2021 and 10.03.2023 which shifts the date of default for the purposes of Section 9 to 31.03.2023 - continuous default is being artificially created by inflating claims, omitting to consider the revised license fees during the COVID period, arbitrary and unsubstantiated claim of ‘other expenses reimbursement and incorrectly claiming interest on default in payments. Therefore, the argument that it is a continuous default cannot be accepted.

The total amount of outstanding default that the Appellant has against the Respondent stands at Rs 35,02,857/-, which is below the threshold limit of Rs 1 crore prescribed under Section 4 of IBC, making the Section 9 Petition filed by the Appellant not maintainable. The IBC mandates that for a Corporate Debtor to be admitted into CIRP under Section 9, the defaulted amount must meet the threshold of Rs 1 crore. In recalculating the actual unpaid amount, excluding the portion protected under Section 10A and the improperly calculated interest and reimbursements, the NCLT correctly determined that the outstanding default amounted to Rs 35,02,857/-, far below the threshold requirement. This finding is legally sound and consistent with established principles of insolvency law.

This Tribunal finds that the Adjudicating Authority correctly interpreted and applied Section 10A of the IBC and rightly concluded that the outstanding default did not meet the Rs 1 crore threshold - the Appeal is devoid of merit and deserves to be dismissed - appeal dismissed.

Dismissal of Company Petition on the ground of pre-existing disputes - seeking initiation of CIRP - claim did not meet the threshold of Rs. 1 crore - whether a pre-existing dispute existed between the parties at the time of filing the Section 9 Petition, which would bar the initiation of Corporate Insolvency Resolution Process (CIRP) under the Code? - HELD THAT:- The Respondent has provided documentary evidence, including communications and police complaints, that demonstrated ongoing disputes related to the possession of the leased premises and the payment obligations under the lease - The Adjudicating Authority rightly considered these disputes as substantial and pre-existing, thereby rendering the Section 9 Petition non- maintainable under the Code. It is a well-settled principle that the existence of a pre-existing dispute, regardless of its merit, disqualifies an Operational Creditor from initiating CIRP under Section 9 of the Code.

Upon careful examination of the materials on record and submissions, it is evident that there was indeed a pre-existing dispute between the Appellant (Operational Creditor) and the Respondent (Corporate Debtor) regarding the lease agreement and the outstanding dues. The Respondent provided documentary evidence, including communications and police complaints before the Adjudicating Authority that demonstrated ongoing disputes related to possession of the leased premises and the payment obligations under the lease.

Since it is a clear case of pre-existing dispute and the Appeal can be dismissed on this ground alone, therefore we are not looking into other issues in this Petition. But without going into the merit of each of them, they are just noted for record as like it could fail on the ground of not meeting the threshold of Rs. 1 crore as prescribed under Section 4 of the Code. Also likely to fail on the grounds that there are discrepancies in the amounts claimed by the Appellant, which when adjusted for prior payments, advance rent, and security deposits, could fall short of the requisite threshold. There are also claims of fabrication of invoices etc.

The Appellant has failed to demonstrate that the Adjudicating Authority erred in its decision to dismiss the Section 9 Petition - Appeal dismissed.

Contravention of Section 3(a) of FEMA, 1999 - Appellant acquired and sold various foreign currencies to various persons resident in India - validity of the search and seizure conducted by the Respondent Directorate - Reliance on recorded statements with the independent corroborative evidence in the form of seized documents recovered from the residential premises of the Appellant

HELD THAT:- The Appellant has not furnished any evidence to the contrary so as to disprove the statements recorded under oath under Section 37 of FEMA, 1999. The recorded statements with the independent corroborative evidence in the form of seized documents recovered from the residential premises of the Appellant make him liable for the contravention of the provision of FEMA, 1999 for operating unauthorised business of selling/buying foreign exchange without the general/special permission of the RBI.

The plea taken by the Appellant that cross-examination was denied since Shri Ramchandra Khedekar, the other Panch witness and the handwriting expert were not examined on oath by the Respondent Directorate as material witnesses. However, we note that the plea to conduct the cross-examination is not dependent on examination on oath of witnesses. It is not on record that the Appellant asked for such cross-examination during the course of the adjudication proceedings. In any case, denial of such cross examination does not appear to have caused prejudice to the interest of the Appellant in view of independent corroborative evidence.

Thus we agree with the finding that the Appellant acquired and sold various foreign currencies to various persons resident in India during the period from 09.07.2002 to 24.07.2002 in contravention of the provisions of Section 3(a) of FEMA, 1999. The Appellant has taken the plea to reduce the penalty since he made all out efforts to keep the licensed money changer business M/s Griffin Forex Pvt. Ltd. clean of any illegality which is evident from nothing incriminatory having been recovered from the search of his business premises. We therefore reduce the penalty to Rs. 8,50,000/- on the Appellant which will meet the ends of justice.

Imposition of penalty finding Contravention of Section 18(2) of FERA - export only against 06 GR by M/s. Universal Traders and 05 GR by Zen Series though in both cases 10 GR were issued by the Custom Department - HELD THAT:- GRs are issued by the Customs Department when export has to commence and thereby the export material is brought in the bonded area. It results in exports other than in the case of withdrawal of the export so is GR but there is nothing on record to prove it. The Adjudicating Authority has referred to the statement of KVS Ram Mohan, Manager of the Bank recorded on 30.04.2002.

As per his statement M/s. Universal Traders failed to realize export proceeds to the tune of Rs. 4,09,90,925/- while in the case of M/s. Zen Series, it was Rs. 3,15,50,668/-. He was asked to confirm physical exports against all the GR to which it was replied that he cannot confirm the same being not the relevant person. The fact remains that the Customs Department has endorsed for issuance of 10 GR each for both the firms and there is nothing on record to prove withdrawal of export from bounded area.

Appellant has failed to prove the case in his favour. It is also a fact that the Appellant even failed to make recovery of the export proceeds against the export admitted by him other than 05 GR exports of M/s. Universal Traders. No material is placed on record to show his reasonable efforts to make recovery and therefore we do not find any error in the impugned order for recording the Contravention of Section 18(2) of the Act, 1973 in the hands of the Appellant. We are unable to accept the arguments raised by the Appellant. The Appeal accordingly fails and is dismissed.

Offence under FEMA - Allegation of illegal purchase and sell of foreign currency - Confiscation of seized foreign exchange and Indian currency - Penalty imposed - HELD THAT:- The two Respondents were indulging in illegal business of buying foreign exchange from the local market so as to sell the same to the passengers who were travelling abroad. These passengers would not only buy the tickets from them but also the foreign exchange against Indian currency. It was well organized network since these passengers used to be identified by Shri T. Abdulla under whose instructions the foreign currency used to be handed over to them. Moreover, Shri Mohd. Salim had made arrangement with one Shri Birbal for purchase of required foreign currency. It has also come out during the investigation that the seized Indian currency of Rs. 10,57,000/-was sale proceed arising from foreign exchange transactions.

Adjudicating Authority while imposing penalty of Rs. 24,00,000/- on Shri Abbas Mohd. Poyyail and Rs. 12,00,000/- on Shri Shaikh Mohd. Salim, ordered the confiscation of the seized foreign exchange of US$. 6, 370, US$. TCs 100/0, Euro 280. Stg. €. 160, Qatar Rls. 300, UAE Dhm. 2300, BD 40, OR 154, O. Baisa 200, SR 2571 and KD 1619.50 recovered from the premises of M/s. Safar International Tour and Travels, Mumbai and Shri Shaikh Mohamed Salim under section 13 (2) of FEMA. He further ordered that since no direct evidence was found to link between the seized Indian Currency of Rs. 10,57,000/- with the contraventions, he refrained from passing any order of confiscation for the same.

We intervene with the impugned order with respect to the seized Indian currency of Rs. 10,57,000/-. We order the confiscation of the said Indian currency of Rs. 10,57,000/- under section 13(2) of FEMA.

Contravention of Section 3(c) of FEMA - allegations have been made against the appellant for receipt of the payments from various persons as per the instruction of one Abdulla of Abu Dhabi, a person residing outside India without general or special permission of RBI - main argument of the appellant is in reference to the retracted statement relied by the Adjudicating Authority in passing the order - HELD THAT:- We do not find that the impugned order has been passed solely based on the retraced statement. The printout of the mobile owned by the appellant was corroborative evidence to show that appellant was not only having relation with Abdulla but was having frequent conversation with him. It was also that no books of accounts of gold business were found during the search thus the statement of the appellant about his gold business remained without substance.

Finding overall evidence on the record, the Special Director (Appeals), while maintaining the finding on contravention of section 3(c) of FEMA, the amount of penalty was reduced from Rs. 7,00,000/- to Rs. 5,00,000/-.

After going through the record, we find, evidence to prove contravention of Section 3(c) of FEMA. The appellant could not prove his gold business and reason to call Abdulla of Abu Dhabi frequently and other material however we intend to reduce the amount of penalty from Rs. 5,00,000/-to Rs. 1,50,000/-. The appellant has already deposited Rs. 1,00,000/- towards pre deposit and Rs. 50,000/- are still lying with the ED after the confiscation of sum Rs. 4,00,000/-out of Rs. 4,50,000/-thus the amount lying with the ED should be taken towards the deposition of penalty amount and with the aforesaid appeal is partly allowed.

Forfeiture of property under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act - Ownership and tenancy rights over the disputed property - alleged that the property in question was acquired out of the illegal earning by Dawood Ibrahim Sheikh - appellant, submitted that the property in question is a rented premises in her hands thus not liable to be forfeited.

HELD THAT:- The assessment order reflects as to how the property was occupied by Dawood Ibrahim Sheikh and thereupon huge amount was invested on it. They could not disclose the sources to invest huge amount of Rs.80 lakhs and in absence of which the Income Tax Department added entire investment in the hands of Dawood Ibrahim Sheikh and accordingly seizure of the property was ordered.

The appellant has shown the property to be under the ownership of K.M. Pardawala. Even if it is assumed for the sake of argument that the property belongs to him, he or his legal heirs could have challenged the order of forfeiture of property. However, neither he nor his legal heirs ever challenged the seizure of property, rather challenge is made by the deceased appellant who claims herself to be not the owner but the tenant.

The logical consequence of the above would be that while the alleged owner has not challenged the order of forfeiture of the property, the person having no ownership right is challenging it despite the fact that the property is rented out and the forfeiture may not affect because the tenant can be evicted by the means of law. The property in question was acquired by Dawood Ibrahim Sheikh by taking possession somewhere in the year 1990 and thereupon given to his sister and Rs.80 lakhs were invested on the property. Dawood Ibrahim Sheikh was subjected to assessment by the Income Tax Department and the amount spent on the property was added. Thus, argument of the appellant cannot be accepted.

We have otherwise analysed the rent receipts recently submitted by the appellant to show regular payment of rent to K.M. Pardawala and now his legal heirs. The payments therein are not through cheques but seems to be in cash. The rent receipts further shows that at many places the receiver has not signed the receipt and even the signature of landlord differs.

We are not commenting the way the receipts have been generated. The prayer was made by the respondents to allow them to lodge the prosecution against the appellant and now the legal heirs for production of receipts which are not trustworthy. The permission was sought to lodge the criminal case against them. Since certain receipts were produced even at the final stage of arguments, we would not preclude the respondents to take up the matter in reference to those receipts produced before the Tribunal. The Registry is directed to preserve the receipts produced by the respondents and if it is called upon for the investigation, if a criminal case is lodged by the respondents, then give it to the police.

The conduct of the party should be such where one can depose confidence and not where the platform of Court/Tribunal is misused. We are not precluding the respondents to take the action in reference to the rent receipts produced before us at the time of hearing. We would not comment on the conduct of the legal heirs who produced the rent receipts but we are unable to depose our confidence therein.

Violation of Section 6(3)(b) of FEMA and Regulation 5(1) of Regulation of 2000 - delay of 24 days occurred in reporting FDI remittance - Penalty imposed on the appellant company and on the Director individually - HELD THAT:- It is not in dispute that the appellant company failed to make a report of the receipt of the amount of USD 3,09,00,000 within a period of 30 days thereby committed violation of the provisions of FEMA and Regulations.

As we refer to the facts of the case pertaining to the amendment in the Act and the excuse taken by the appellant for the delay. It was submitted that online reporting was made effective since 08.02.2016 by RBI and otherwise reporting of FDI on the forms (ARF) was to be made manually. The appellant said to have faced teething problem in making report online. The respondents have demonstrated that online system for reporting was introduced on 12.02.2015 itself though with liberty to make reporting manually.

In view of the above, we are unable to accept the excuse taken by the appellant in reference to teething problems. Teething problem, if substantiated, may remain initially but not in deplorable form under operation for a year before making it compulsory. Thus, the lame excuse taken by the appellant cannot be accepted to justify the delay. It is more so when there is no material placed on record to prove any teething problem in reporting. The appellant had not placed on record that even other Company also faced the difficulties which the appellant faced to substantiate their plea/excuse.

The appellants no doubt have made reference of the letter sent to the RBI to seek excuse for delay in reporting and issuance of UIN. The RBI is not the authority to take up the matter of delay rather if reporting is made even with delay, UIN can be issued. It is not that for delayed reporting, UIN cannot be issued by the RBI. Thus, the letters sent to the RBI cannot fill the gap and prove the case in favour of the appellant which otherwise has not substantiated with material. In view of the above, we are unable to accept the case of the appellant on facts to find justification in delay in making report of the FDI. It is more so when appellant Company committed default in reporting in previous years also and for that an application for compounding was filed and for it learned counsel for the respondent has submitted documents to show an application by the appellant for compounding for the delay caused in reporting of FDI. It was not that for the first time but on several occasions, appellant caused delay in making report of FDI. The facts are relevant to analyse the bonafide of the appellant company and even in reference to justification for imposition of the penalty of the nature imposed herein.

Whether delay in reporting should be considered only as a technical default so that no penalty be imposed? - If the plea raised by the appellant is accepted and no penalty on delay in making report is imposed, then there would be no sanctity to mandate for reporting of FDI within a period of 30 days and to make compliance of the provisions. Nobody would make a report within time or comply the mandate of law if the penalty for the delay in making report cannot be imposed on the pretext of technical delay. In fact, technical delay needs to be defined properly and in a given case technical delay may not require imposition of penalty but when it is not offending any statutory provision. If any provisions of law have not been complied, then violation may result in penal consequences, if provided. In view of the above, we are not in a position to subscribe the argument of the appellant to give immunity from imposition of penalty taking it to be a technical delay and to cause interference in the impugned order.

Reference to the provisions of Section 6(3)(b) and Regulation of 2000 superseded by the Regulation of 2017 followed by the Regulation of 2019 - repeal or express omission and substitution of any provision unless a different intention appears, the repeal/omission shall not affect the continuance of such enactment by the enactment so repealed and in operation at the time of such repeal. The detailed discussion on the issue has been made to show that words "repeal" and "omission" are interchangeable and even there is express omission of the provision it would remain in operation in a given case detailed out by the Apex Court in the case of Fibre Boards Pvt. Ltd. [2015 (8) TMI 482 - SUPREME COURT]

It is necessary to clarify that so far as the regulations are concerned, it has not been framed by the Central Government and thereby the Regulations framed by the RBI remain in operation pursuant to Section 47(3) of the Act of 1999 as amended and when it was in continuity, the appellant cannot take excuse regarding repeal/omission of the provision in the light of operation of Section 6 and 6A of the General Clauses Act read with Section 24. The issue is squarely covered by the judgment in the case of Fibre Boards Pvt. Ltd. [2015 (8) TMI 482 - SUPREME COURT]. In the light of the discussion made above, we do not find even any legal ground to assail the order of the Adjudicating Authority.

Quantum of penalty imposed on the appellant - We find reasons to interfere in the amount of penalty. It is true that the FDI for a sum of more than Rs. 204 crores was received by the appellant and it was required to be reported within a period of 30 days. The delay is of 24 days but for it the penalty of Rs. 20 crores on the Company and Rs. 5 crores on the Director is excessive in our opinion.

Reasonableness in imposition of penalty needs to be shown and accordingly we cause interference in the quantum of penalty and substitute it by imposition of penalty of Rs. 2 cores on the Company while on Director it would be of Rs. 5 lakhs. With the substitution of the penalty, we cause interference in the impugned order to that extent while maintaining it on the legal and factual issues dealt with by the Adjudicating Authority and elaborately discussed by us on all the issues raised before the Tribunal.

Validity of proceedings under FERA - Violation of Section 9(1)(f)(i) of FERA 1973 - failure to permit the Appellant to cross-examine - HELD THAT:- Suffice it to say that there is sufficient evidence on record for the Ld. Adjudicating Authority to hold that the Appellant was indeed guilty of violating Section 9(1)(f)(i) of FERA 1973 that called for imposition of penalty on him.

Adjudicating Authority has recorded a finding that clinching evidence is there to impose penalty on Shri Keshav Bangur and the Appellant. He observed that corroboratory statements of the version of Shri Keshav Bangur were available in the depositions of the Appellant and of Shri Prakash Khaitan. Ld. Adjudicating Authority has further observed that while the Appellant stayed away from giving a clean statement he did admit making payment to Shri Keshav Bangur for payment of duties in his statements dated 19.02.1998 and 20.02.1998. Hence, Ld. Adjudicating Authority could not absolve the Appellant on the basis of his denial about the fact of arranging foreign exchange transaction overseas yet having admitted other transactions. He found that the whole case was based on seized documents and its explanation offered by the concerned persons and contemporaneous evidences.

The plea of the Appellant that in his statement u/s 40 of FERA 1973, he did not admit arranging for foreign exchange transaction on payment of Indian Rupees by Shri Keshav Bangur does not cut much ice in face of seizure of crucial documents from the residence of Shri Bangur and his explanation thereof which have been corroborated by the statements of Shri Prakash Khaitan and Shri AK Jain on certain material facts. The findings of the Ld. Adjudicating Authority in the impugned Order cannot be disturbed.

Appellant expired on 28.03.2008 and his widow has substituted the Appellant as legal heir. We further note that 20% of the amount of penalty has been pre-deposited. The Appeal was filed on 28.01.2005 and has remained pending for almost 19 years even though having been reserved for orders thrice on 08.10.2014, 13.08.2015 and 21.04.2016. In view of these attenuating factors and in the interest of justice the penalty amount is reduced to Rs. 10,00,000/- which is the pre-deposit already made by the Appellant.

Provisional Attachment Order - time limitation - whether it is appropriate to entertain the present writ petition against the Provisional Attachment Order (PAO) issued by the Directorate of Enforcement on 28.08.2024 before the statutory period of 30 days elapsed when the Adjudicating Authority is required to examine the same under Section 5 (5) of the Prevention of Money Laundering Act, 2002? - HELD THAT:- The Supreme Court, in Vijay Madanlal Choudhary & Others v. Union of India & Others [2022 (7) TMI 1316 - SUPREME COURT], while examining the constitutional validity of various provisions of the 2002 Act, has also examined the validity of Section 5. It has been found that the adequate safeguards have been provided in the 2002 Act in order to give an opportunity to the aggrieved person to file his response/objections before the Adjudicating Authority. The 2002 Act has also ensured that the PAO will be passed either by the Director or any other officer not below the rank of Deputy Director authorized by the Director for the purpose of this Section while giving reasons to believe on the basis of material in his possession.

Once the sufficient provisions have been made in the 2002 Act to ensure availability of the adequate remedies, it would not be appropriate for this Court to entertain the petition even before the statutory 30 days’ period from the date when PAO has been passed. It is only in the rare and exceptional cases, the Constitutional Court would entertain the petition before the expiry of the period of 30 days.

This Court disposes of the writ petition relegating the petitioner to avail its alternative remedy. Needless to observe that this Court has not made any observation on the merits of the case and the Adjudicating Authority will make efforts to expedite the matter.

Petition disposed off.

Money Laundering - Application for quashing of proceeding - predicate offences - petitioner had amassed huge amount of wealth, which could not have been from his known source of income - HELD THAT:- In Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], the Hon’ble Supreme Court upheld the validity of several salient features of the PML Act. Among other things, it was held there that if a person is finally discharged/acquitted of the scheduled offence or the criminal case against him is quashed by the Court of competent jurisdiction, there can be no offence of money laundering against him.

Admittedly, the present proceeding under the PML Act relates to predicate offences in a case instituted by the CBI, which has not been dropped and/or quashed. It is still pending. It is a different thing that in the said parent case, the petitioner has still been shown as witness. The proposition of law that an accused in a PML Act case need not be an accused in the predicate offences case covers this issue.

The proceeding that has been dropped is an independent one that was started against the petitioner on charges, inter alia, of amassing disproportionate assets. This case too was initiated by the CBI. But, the instant PMLA proceeding does not owe its origin to the purported predicate offences contained in such subsequent case started by the CBI. Therefore, the dropping of such subsequent proceeding would hardly have much bearing on the PML Act case started in respect of first case concerning predicate offences.

The allegations levelled against the petitioner indeed involve disputed questions of fact that cannot be gone into at this stage.

There are no merit in the petitioner’s application for quashing of proceeding. Therefore, the same is dismissed, however without any order as to costs.

Money Laundering - proceeds of crime - the respondent ED are allowed to retain/seize/freeze the documents, digital records, bank accounts etc., seized from the premises of various persons including the present appellant - HELD THAT:- The plea of the present appellant that he is not involved in any offence is without any merit in view of the allegations pointed out by the respondent.

However, seeing the fact that prosecution complaint is already filed, the present appellant is entitled to the copies of all relied upon documents/seized material and he has right to apply for release of all un-relied documents (if any), if the same are not required for any further investigation.

The present appeal is hereby dismissed.

Money Laundering - Proceeds of crime - scheduled offences - respondent ED are allowed to retain/seize/freeze the documents, digital records, bank accounts etc., seized from the premises of various persons including the present appellant company, during the search conducted on 07.04.2017 - Sections 420 & 120B of the Indian Penal Code, 1860 and Section 13(2) r/w 13(1) (d) of the Prevention of Corruption Act, 1988 - principles of natural justice - HELD THAT:- The fact that present appellant is neither named in the CBI/police charge-sheet case, nor in the prosecution complaint filed by respondent ED is no ground to release the said amount, as there is nothing on record that appellant supplied any goods or services against the said amount to M/s Prenda Creations, by way of any invoice/bill. Therefore, the sum of Rs. 6.05 Crores being part of proceeds of crime which were transferred to the aforesaid bank account of M/s RAP Events is correctly seized/frozen by respondent ED. The appellant M/s RAP Events cannot be allowed for unjust enrichment out of the proceeds of crime, simply because, appellant was ignorant about the nature of said remittance.

The present appeals are liable to be dismissed being devoid of any merits - Appeal dismissed.

Money Laundering - predicate offence - provisional attachment of immovable properties - source of income - invocation of Section 5(1) of the Act of 2002 - HELD THAT:- It is a fact that the appellant Nirmal Chandra Rout had disclosed a very meagre income of Rs. 5,74,880/- in the Assessment Years 2008-09 to 201213 but invested in many properties to the tune of more than Rs. 20,87,700/-, apart from his investment in the construction of one-storied building. No document was produced to prove loan to purchase the properties of the worth more than his income. Even the wife, who is also appellant before us in whose name some of the properties have been purchased has stated that she is a housewife and money was taken by way of loans, however could not produce any documentary evidence to substantiate the same. Accordingly, argument of the appellant that no material or evidence has been shown for his involvement in the case cannot be accepted. It is also that they had not disclosed the source of income.

The chances of transfer of the property remains immediately on registration of the FIR and ECIR. Thus, whenever there is likelihood of transfer of the property, the attachment can be made. In the instant case, the appellant has not stated that he would not transfer the property till conclusion of the trial and if he makes a statement to this effect, then he needs to clarify how he would be affected by the attachment when properties can be used by him without its alienation.

There are substance in the argument of the learned counsel for the respondent. In fact, it would be impossible to produce the material to show preparation for transfer of property. If the accused would be intent to transfer the property, it can be done within no time.

Finding no merit in the issues raised by the appellants, appeal would fail and is dismissed.

Extended period of limittaion - suppression of facts or not - Short payment of service tax - construction of residential complex service - advances received from customers - demand confirmed on the portion of construction premises allotted to the landowner - demand confirmed in respect of the Siliguri project - HELD THAT:- The information regarding the details of the advances received by the Appellant were collected by the Department from the Balance Sheet and reconciliation statement submitted by the Appellant themselves. The Notice has been issued on the basis the differences found in the data furnished by the appellant in these two documents. Therefore, it is observed that there is no suppression of facts with intention to evade payment of tax established in this case. Further, it is observed that the Show Cause Notice in this case has been issued on 27.09.2019, which is beyond the period of thirty months from the date of filing of the Return by the Appellant i.e., 13.01.2017/14.01.2017. The entire demand confirmed in the impugned order is hit by the bar of limitation.

Since the Department has not brought any evidence on record to establish the intention to evade payment of tax on the part of the Appellant in the instant case, the demand confirmed by invoking the extended period of limitation is not sustainable.

The demand confirmed in the impugned order is not sustainable on the ground of limitation and accordingly, the same is set aside - Since the demand itself is not sustainable, the question of demanding any interest or imposing penalty does not arise - appeal allowed.

Classification of service - Nature of activity - manufacture or business auxiliary service? - marketibility of the product - interest - penalty - HELD THAT:- The appellant has been undertaking the activity of segregation of metal and slag, sizing and packaging, as per the requirement of their customers. It is observed that the activity of sizing and packaging is an essential process, which makes the final product viz. Fe-Mn/Fe-Si-Mn/HCFC, marketable.

It is observed that in order to classify the activity as liable to service tax, the said activity should fall under any of the above sub-clauses. According to the ld. adjudicating authority, the activity undertaken by the appellant falls under sub-clause (v) of Section 65(19). However, the appellant has submitted that as per the definition cited above, ‘business auxiliary service’ does not include any activity that amounts to ‘manufacture’. According to the appellant, the activity undertaken by them amounts to ‘manufacture’ and hence it goes out of the purview of the definition of ‘business auxiliary service’.

It is required to be examined whether the activity undertaken by the appellant amounts to ‘manufacture’ or not, as defined under section 2(f) of the Central Excise Act, 1944.

It is found that the definition of ‘manufacture’ as provided under Section 2(f) is wide enough to cover all processes which create a change in the product whereby a new product emerges in the end, which is marketable. In the present case, the appellant is undertaking the work of sizing and packaging and these are essential processes required to make the product marketable. Accordingly, the activity undertaken by the appellant falls squarely within the ambit of the definition of ‘manufacture’ as defined under Section 2(f) of the Central Excise Act. Once the activity is held as amounting to ‘manufacture’, it is excluded from the purview of Service Tax as per the definition of ‘business auxiliary service’. Thus, the demand of Service Tax under the category of ‘business auxiliary service’ is not sustainable.

Since the demand itself is not sustainable, the question of demanding interest and imposing penalties does not arise.

The impugned order is set aside - appeal allowed.

Refund of service tax paid under RCM - denial of refund claimed under Section 142(3) of CGST Act on the premise that the amount paid after audit objections was not eligible to be availed as credit under Rule 9(1)(bb) of the CENVAT Credit Rules, 2004 - levy of penalty - Transition of credit -

HELD THAT:- It is seen from the Rule that since tax is paid under RCM, the relevant provision is Rule 9(1)(e) ibid and not Rule 9(1)(bb), as evoked in the OIO and credit cannot be denied. In M/s Polygenta Technologies [2018 (2) TMI 804 - CESTAT, MUMBAI] a similar matter was examined by CESTAT Mumbai, where it was held that 'it is apparent that Rule 9(i)(bb) is applicable to supplementary invoice, bill or challan issued by provider of output service and Rule 9(i)(e) is applicable, inter alia, to a person liable to pay service tax under Rule 2(1)(d) of Service Tax Rules, 1994. It is apparent that the appellant is not service provider and therefore Rule 9(i)(bb) would not be applicable to them. The appellant is paying service tax on reverse chare basis in terms of Rule 2(1)(d) of Service Tax Rules, 1994 and therefore credit can be availed in terms of Rule 9(i)(e) of Cenvat Credit Rules. Since Rule 9(i)(bb) is not applicable to the appellant, the credit cannot be denied.'

Imposition of equal penalty under sec. 78 of the Finance Act, 1994 - HELD THAT:- Assumptions and presumptions cannot lead to a charge of suppression of facts and replace actual proof of intention to evade tax, more so when the appellant was eligible to take credit of tax paid on RCM basis instantly. Similarly holding that non-payment of Rs.3,750/- on expenditure incurred towards cafeteria charges viz. the license fee paid to the Revenue Department, Government of Tamil Nadu for running such cafeteria, amounts to evasion of duty merits to be rejected. The imposition of penalty must hence be set aside.

Transition of credit - HELD THAT:- The transition provisions contained under section 142(3) of CGST Act 2017 allows refund of any amount of CENVAT credit, duty, tax or interest paid under the existing law. As per section 140 of the GST Act, 2017, the appellant was eligible to transfer the amount as TRAN-1 credit. However, since the amount was paid on 31/07/2020 and the last date for availment as TRAN-1 credit was on 27/12/2017, the appellant was unable to carry forward the Cenvat Credit to the GST regime - since the duty was paid after the GST Act came into force, CENVAT Credit could not be availed in the appellants books before 01.07.2017. However, once the credit is found eligible, it is to be refunded in cash. In such a situation the appellant is eligible for refund as per section 142 of CGST Act 2017.

The impugned order rejecting the refund claims is not proper. The same is hence set aside. The appeal is allowed.

Non-payment of service tax - scope of entry Sr. No. 19 A in the N/N. 14/2013-S.T, dated 22.10.2013 - Respondent has contended that it is providing services in relation to serving food or beverages only in the canteens maintained in the factories governed under the Factories Act, 1948 - HELD THAT:- In terms of the said notification, services provided for serving of food or beverages in a canteen maintained by the factory was exempted from payment of Service Tax. There is no ambiguity in reading the said notification. The show cause notice, in this case, has not disputed the fact that the factories, where the Respondent was proving the canteen facilities, were registered under the Factories Act, 1948 and that the canteens were having the air conditioning facility. Thus, the learned Adjudicating authority has rightly dropped the show cause proceedings initiated against the respondent.

Tthe issue arising out the present dispute is no more open for any debate, there are no merits in the appeal filed by the Revenue - appeal of Revenue dismissed.

Nature of activity - service or sale - service tax on erection, commissioning, and installation charges - extended period of limitation - HELD THAT:- There is no dispute in the facts that the appellant have manufactured and sold Draw Texturizing Machines and the same was cleared in part as it was not practically possible to transport the entire machine in one truck. When any machine or equipment cannot be cleared duly assembled in one truck, the department has prescribed the procedure under Trade Notice No.MP/29/83 dated 23.03.83 for removal of such machineries. The appellant have scrupulously followed such procedure and intimation to that effect was also given to the jurisdictional department of Central Excise vide a letter dated 08.09.2011. Since, the machinery could not be cleared in one truck and the same was cleared in piecemeal in different trucks. It is obvious that the appellant is under obligation to do the final assembling and erection, installation of the same machine at buyer’s premises. The contract with the buyer is undisputedly for the sale of machine and no service involved.

It is fact on record that the appellant are registered with Central Excise department, discharging excise duty and filing the periodical return. The appellant were not charging any amount towards service the total value of the goods and so called erection are billed for manufacture and sale of the machine. As regard the supply in piecemeal machine, the appellant have intimated to the department as per the Trade Notice No.MP/29/83 dated 23.03.83. It was also disclosed that since, the machines are supplied in piecemeal, the same will be assembled and erected at customer’s site. Therefore, there is absolutely no suppression of fact with intent to evade the payment of duty. Accordingly, the extended period for demand was wrongly invoked. Hence, the demand for extended period is clearly time barred and the same is not sustainable apart from the merit of the case.

The impugned orders are not sustainable. Hence, the same is set aside - Appeal allowed.

Non-payment of service tax on advances received - non-inclusion of value of materials supplied by the customers in the assessable value - recovery of service tax with interest and penalty - whether the appellant is required to pay service tax for rendering ‘commercial or industrial construction’ and ‘construction of complex services’, during the period in question i.e. 16.06.2005 to 31.03.2006? - HELD THAT:- The appellant explained that they have paid the service tax on the advances received during the period in question at the time of settling the final bills, which the learned Commissioner has recorded in the impugned order.

As far as the remaining demand of Rs.58,34,404/- is concerned, it is found that the issue is covered by the judgment of the Hon’ble Supreme Court in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. [2018 (2) TMI 1325 - SUPREME COURT]. Also, it is found that the appellant had undisputedly rendered ‘Works Contract Service’ during the relevant period as has been repeatedly mentioned in the reply to the show-cause notice and referred to in the impugned order. Further, it is found that this Tribunal in the appellant’s own case, for subsequent period 2006 to 2009, has concluded that the appellant has provided Works Contract service. In these circumstances, there are no merit in the impugned order.

The impugned order is set aside and the appeal is allowed.

Availment of CENVAT credit on the goods which are not inputs and the same have been cleared as such - goods having relationship whatsoever with the manufacture of the appellant's final products or not - recovery with interest and penalty - extended period of limitation - levy of penalty - HELD THAT:- A manufacturer is permitted to avail credit of the duty paid on inputs, which are used in the manufacture of final product. In the instant case, it is noted that the appellant had availed credit on Aluminium Rod (Chapter 76), Aluminium Wire (Chapter 76) and PVC Compound (Chapter 39) during the Financial Year 2015-16, 2016-17 and 2017-18 (upto June, 2017). As the said goods were not inputs, the appellant was not eligible to avail the credit of the duty paid on such inputs - the impugned order has noted that Aluminium Wire, Aluminium Rods and PVC Compound was not declared as raw materials in Form B of the Central Excise Registration of the appellant - the appellant had incorrectly availed the credit of duty on goods which were not inputs for their final product.

The appellant should be given the opportunity to present all documentary evidences to substantiate their claim of having reversed the Cenvat Credit at the time of clearance of the Aluminium Rod, Aluminium Wire and PVC Compound at the time of clearance as such before the adjudicating authority, who will decide the matter afresh.

It is noted that the appellant has claimed that they have paid the interest liable for the period from the date of availment to the date of reversal. The impugned order has already appropriated the said interest amount. However, liberty is given to the appellant to produce documents and establish the correctness of the said interest amount paid and so appropriated.

The impugned order is set aside - appeal allowed by way of remand.

Recovery of wrongly availed CENVAT credit of Service Tax paid on outward transportation charges from place of removal - recovery with interest and penalty - Department issued the Show Cause Notice on the basis of this data for this period on the basis of the data provided by them inclusive of credit taken against services other than GTA services vide their letter dated 23.03.2011 - HELD THAT:- The question whether this credit sought to be denied is in relation to services other than GTA services is a verifiable fact and needs to be verified from the records of the appellant. In respect of the amounts mentioned in column 5 of the table above matter needs to be remanded back to the original authority for rendering a finding after causing the verification of the records of the appellant.

Though Boards circular no. 97/8/2007-CX dated 23.08.2007, 988/12/2014-CX dated 20.10.2014 and 999/6/2015-CX dated 28.02.2015 were available at the time of adjudication of the show cause notices and when the matter was considered by the first appellate authority. However no findings have been recorded in the matter by referring to these circulars. Impugned order misdirects itself by recording that in terms of Rule 9 (5) burden to prove the admissibility of the Cenvat Credit was on the appellant and appellant failed to discharge the same. Such an approach was totally uncalled for and the appellant should have been asked produce the necessary documents for verification as per the above referred Board Circulars.

The matter needs to be remitted back to the original authority for consideration de novo of the issues involved in the light of Board Circulars and the documents which appellant will produce when called for.

The matter is remanded to the original authority for determination of the issue - appeal allowed by way of remand.

Dishonor of Cheque - challenge to judgment of acquittal - presumption that the cheque was issued in discharge of legal liability and the burden is upon the accused to prove the contrary - HELD THAT:- It was laid down by the Hon’ble Supreme Court in Mallappa v. State of Karnataka, [2024 (2) TMI 1391 - SUPREME COURT] that while deciding an appeal against acquittal, the High Court should see whether the evidence was properly appreciated on record or not; second whether the finding of the Court is illegal or affected by the error of law or fact and thirdly; whether the view taken by the Trial Court was a possible view, which could have been taken based on the material on record. The Court will not lightly interfere with the judgment of acquittal. It was observed 'The presumption continues at all stages of the trial and finally culminates into a fact when the case ends in acquittal. The presumption of innocence gets concretised when the case ends in acquittal. It is so because once the trial court, on appreciation of the evidence on record, finds that the accused was not guilty, the presumption gets strengthened and a higher threshold is expected to rebut the same in appeal.'

In the present case, the accused has not examined himself to prove that he had issued the cheque as security; rather he examined his driver Roop Lal (DW-1) and Baldev (DW-2) regarding the snatching of the vehicle. Therefore, the version of the complainant that he had issued a blank cheque as a security has not been proved on record.

In the present case, the statement of account (Ex.CW1/M) shows that the amount of ₹94,135/- was due on 11.06.2008. The cheque was issued for ₹94,135/- on 18.04.2008 which means that the accused had a subsisting liability of ₹94,135/- on the date of issuance of the cheque. Even if a blank cheque was issued by the accused as a security, the complainant had sufficient authority to fill the amount and present it before the Court since the amount of ₹94,135/- was due on 18.04.2008. It was laid down by the Hon’ble Supreme Court in Bir Singh v. Mukesh Kumar [2019 (2) TMI 547 - SUPREME COURT], that a person is liable for the commission of an offence punishable under Section 138 of the Negotiable Instruments Act even if the cheque is filled by some other person.

Hon’ble Supreme Court held in Rohit bhai Jivanlal Patel v. State of Gujarat [2019 (3) TMI 769 - SUPREME COURT] that once the presumption had been drawn, the onus shifted to the accused and unless the accused discharged the onus, any doubt on the complainant’s case could not have been raised for want of evidence regarding the source of fund or non- examination of the witnesses.

The complaint could not have been dismissed on the ground that the presumption did not extend to the existence of legally enforceable debt or liability - the accused would be liable for the commission of an offence punishable under Section 138 of N.I. Act when the cheque was dishonoured with an endorsement of the account closed.

The complainant stated that a notice (Ex.CW1/H) was issued to the accused by registered post as well as a postal certificate. The registered letter (Ex.CW1/L) was returned with an endorsement ‘refused’. Thus, the same was deemed to have been delivered to the accused. Further, the complainant stated that the registered letter sent by UPC was not returned, therefore, the same is presumed to have been served upon the accused. It was laid down by the Hon’ble Supreme Court in C.C. Alavi Haji v.Palapetty Muhammed [2007 (5) TMI 335 - SUPREME COURT] that when the registered letter containing the notice is returned unserved with the endorsement of refused, the notice is deemed to have been served.

The ingredients of Section 138 of the Negotiable Instrument Act were duly satisfied in the present case and the learned Trial Court erred in acquitting the accused.

The judgment passed by the learned Trial Court is set aside. The accused is convicted of the commission of an offence punishable under Section 138 of N.I. Act - Appeal allowed.