Customs, Excise and Service Tax Appellate Tribunal

Sharda Rerollers Pvt Ltd vs. Commissioner of CGST, CX and Customs

MANU/CK/0019/2024

08.02.2024

Customs

Mere factum of two set of invoices is not sufficient to prove charge of clandestine removal in absence of positive evidence with regard to the same

The facts of the case are that, the departmental officers searched the factory premises of the Appellant and during the course of search some pages containing some entries allegedly Daily Report, three invoices, waybill were found. Statement of the employees of the appellant company were recorded, who stated that the entries made in those documents pertains to clearance of some goods without payment of duty, some on which duty has been paid, therefore, further investigation was conducted and the statement of Managing Director was recorded on 03.05.2013, who gave a contradictory statement to the statement given by the employees.

Later, on the show cause notice alleging that, the appellant has cleared the goods on the strength of parallel invoices. Some demands sought to be confirmed on the basis of the documents recovered during the course of investigation. The matter was contested by the appellant, but adjudication order was passed confirming the demand proposed in the show cause notice along with interest and penalties on both the appellants were imposed.

The case has been made out on the basis of rough papers seized during the course of investigation, which were in the possession of the employees of the appellants, who made inculpatory statement at the time of seizure of the documents. But, the Managing Director has controverted the statement made by the employees. Moreover, three parallel invoices on the basis of which demand has been confirmed against the appellants were not examined. Neither an investigation was made with the buyers mentioned in those parallel invoices nor any investigation was made with the transporters. No effort was made to find out, who is the author of those invoices. In the absence of any corroboration to that effect, the demand is not sustainable.

Moreover, the cross-examination of the employees were not granted to the appellants which is in gross violation of the principles of natural justice in terms of Section 9D of the Central Excise Act and same view was taken by the Hon'ble Apex Court in the case of Andaman Timber Industries vs. Commissioner of C.Ex., Kolkata-II, wherein it has been held that denial of cross-examination is in violation of principles of natural justice when the statement of that person has been relied upon to allege against the assessee.

Further, without corroboration of the corroborative evidence, the demand cannot be raised against the appellant when appellant has denied the said charge during the course of investigation. Moreover, this Tribunal in the case of S.K.V. Chemicals vs. Commissioner of Central Excise, Pondicherry held that, mere factum of two set of invoices is not sufficient to prove the charge of clandestine removal in the absence of positive evidence with regard to the same.

Admittedly, in the case at hand no investigation was conducted at the end of the buyers mentioned in the invoices and transporter of the goods. In the absence of the same, the demand cannot be raised against the appellants. Therefore, the impugned demand raised against the main appellant and penalty imposed on both the appellants is set aside. The impugned order is set aside. Appeals allowed.

Tags : Demand Penalty Legality

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Income Tax Appellate Tribunal

ACIT, Ahmedabad vs. Apex Dye Stuff Industries

MANU/IB/0043/2024

07.02.2024

Direct Taxation

Payment of foreign commission is not taxable in India

The assessee is a partnership firm engaged in the business of manufacturing and trading of fertilizers, chemical and paints during the year under consideration. The return of income was filed by the assessee for assessment year 2012-13 on 26-07-2012 declaring total income of Rs. 65,14,590. While passing the assessment order under Section 143(3) of the Income Tax Act, 1961 (IT Act) the total income was determined at Rs. 67,46,150 after making the disallowances of expenditure under Section 40(a)(ia) of Rs. 1,19,341 and disallowances of personal expenses of Rs. 1,10,290.

The Assessing Officer made an addition of Rs. 21,22,061 and disallowed the commissions expenses under Section 40(a)(ia) on the ground that, as per clarification made by CBDT vide Circular dated 22-10-2009 for applicability of the provisions of Section 195(2) regarding commission payments to foreign party, the assessee is liable to deduct tax at source on the payment credited in the foreign parties account.Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.

The contention of the learned Departmental Representative that the assessee is liable to pay/deduct tax at source as per Section 195 appears to be not correct as the CBDT has withdrawn, the circular No. 7 of 2009 dated 22-11-2009.

The CIT(A) has rightly taken the consistent view of the Supreme Court in the light of decision of G. E. India Technology Centre Pvt. Ltd., as the assessee is not liable to deduct tax at source as the payments are not taxable in India. As in the present case, the payment of foreign commission is not taxable in India and therefore Section 195 is not applicable. There is no need to interfere with the findings of the CIT(A). The appeal of the Revenue is dismissed.

Tags : Assessment Provision Applicability

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Supreme Court

Union of India (UOI) and Ors. Vs. B.T. Patil and Sons Belgaum (Construction) Pvt. Ltd. (Neutral Citation: 2024 INSC 83)

MANU/SC/0081/2024

05.02.2024

Customs

When duty drawback is not paid within a period of three months from the date of filing of claim, the claimant would be entitled to interest in addition to the amount of drawback

In present matter, Respondent is a class-I contractor specializing in the field of civil contract works especially funnelling and hydro electric power projects. Aggrieved by rejection of the request for interest on the amount of duty drawback paid, Respondent preferred a writ petition before the High Court. After hearing the parties, a learned Single Judge of the High Court vide the judgment referred to the notification dated 5th December, 2000 and held that Respondent was entitled for duty drawback. After observing that there was delay in payment of duty drawback, learned Single Judge held that Respondent would be entitled to interest for delayed payment of duty drawback.

This judgment and order of the learned Single Judge came to be assailed by the Appellants before the Division Bench of the High Court assailing the direction of the learned Single Judge to pay interest only from 5th December, 2000. Vide the judgment, the Division Bench opined that Respondent would be entitled to interest from the date of expiry of three months after submitting the applications for refund of duty drawback in the year 1996 at the rate of fifteen percent as awarded by the learned Single Judge.

On a conjoint and careful reading of the relevant provisions of the Exim Policy, 1992-1997 in conjunction with the Central Excise Act and the Customs Act, 1962, it is evident that supply of goods to the project in question by the Respondent was a case of 'deemed export' and thus entitled to the benefit under the Duty Drawback Scheme. The language employed in the policy made this very clear and there was no ambiguity in respect of such entitlement.

Under Sub-section (1) of Section 75A of the Customs Act, where duty drawback is not paid within a period of three months from the date of filing of claim, the claimant would be entitled to interest in addition to the amount of drawback. This Section provides that the interest would be at the rate fixed Under Section 27A from the date after expiry of the said period of three months till the payment of such drawback. As per Section 27A, the interest rate prescribed thereunder at the relevant point of time was not below ten percent and not exceeding thirty percent per annum.

The Central Board of Excise and Customs vide its notification bearing No. 32/1995 (NT) - Customs dated 26th May, 1995 had fixed the rate of interest at fifteen percent for the purpose of Section 27A of the Customs Act. The High Court while awarding interest at the rate of fifteen percent per annum, however, did not refer to such notification; rather, there was no discussion at all as to why the rate of interest on the delayed refund should be fifteen percent. Therefore, at the first glance, the rate of interest awarded by the High Court appeared to be on the higher side and without any reason.

The Respondent was entitled to refund of duty drawback. Appellants had belatedly accepted the said claim and made the refund. Since there was belated refund of the duty drawback to the Respondent, it was entitled to interest at the rate which was fixed by the Central Government at the relevant point of time being fifteen percent. There is no good reason to interfere with the judgment and order of the Division Bench of the High Court. Appeal dismissed.

Tags : Interest Payment Direction

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High Court of Bombay

Popatlal Umedmalji Jain Vs. The Income Tax Officer, Ward 1(5) and Ors. (Neutral Citation: 2024:BHC-AUG:2402-DB)

MANU/MH/0729/2024

05.02.2024

Direct Taxation

Assessing Officer before issuing any notice under Section 148-A of IT Act, shall conduct an enquiry with the prior approval of the specified authority

The Petitioner has invoked jurisdiction of present Court under Article 226 of the Constitution of India, 1950 thereby praying for issuance of Writ of Mandamus to quash and set aside show cause notice dated 28th March, 2023, issued under Section 148-A of the Income Tax Act,1961 (IT Act) as well as the Order dated 10th April, 2023 passed therein.

The issue involved in the present petition is no more res integra. In similar set of facts and circumstances, this Court in case of Satguru Sai Extrusions Pvt.Ltd., V/s. Union of India, held that as per the language of sub-clause (a), the Assessing Officer, before issuing any notice under Section 148-A of IT Act, shall conduct an enquiry, if required, with the prior approval of the specified authority. The acts to be performed by the Assessing Officer would include conducting of any enquiry, if required. Under clause (b), an opportunity of being heard is to be provided to the assessee. Clause (c) requires that the reply of the assessee has to be taken into account and clause (d) requires an order to be passed for forming an opinion that notice under Section 148 of IT Act, has to be issued on the basis of the material available on record, which includes the reply of the assessee. It is further held that, the words "if required" have been set out in 148A(a) so as to leave it to the discretion of the Assessing Officer as to whether he desires to conduct an enquiry.

The Petitioner was served with the notice under Section 148-A of the Act claiming escapement of income chargeable to tax for the assessment year 2019-2020. Along with the notice the Petitioner was also supplied with information forming basis of notice under Section 148A(b). The Petitioner responded to said notice vide communication dated 1st April, 2023 and gave details of his income and also, produced Statement of Bank Account. On 10th April, 2023, the Respondent No. 1 passed the impugned order holding that, prima facie, income chargeable escaped within the meaning of Section 147 of the Act and proposed to re-asses such income and called upon the Petitioner to furnish details/allowances or deduction for the Assessment Year 2019-2020 within 30 days from the service of notice, by order under sub-section (d) of the Section 148A of the Act.

The Respondents shall follow the due procedure laid down in law and ensure that the Petitioner is extended an adequate and reasonable opportunity to contest the notice under Section 148, as is permissible in Law. Accordingly, all contentions of the parties are kept open.Petition disposed off.

Tags : Assessment SCN Legality

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High Court of Bombay

Unique Trading Company and Ors. Vs. Income Tax Officer - 18(3)(5) and Ors. (Neutral Citation: 2024:BHC-AS:5572)

MANU/MH/0690/2024

05.02.2024

Direct Taxation

A penal statute is required to be construed strictly, it is not open to expand the scope of the words used in a penal statute so as to fasten liability

Present is an application under Section 482 of the Code of Criminal Procedure, 1973 (CrPC) to quash the complaint lodged by the Income Tax Authorities for an offence punishable under Section 276C(2) read with Section 278B of the Income Tax Act, 1961 (IT Act).The moot question that wrenches to the fore is, "whether a failure to pay any tax, interest or penalty can be construed as a wilful attempt to evade tax, interest or penalty, without anything more?

The text of sub-section (2) of Section 276C of IT Act is required to be construed keeping in view its evident nature and purport being penal. A penal statute is required to be construed strictly. It is not open to expand the scope of the words used in a penal statute so as to fasten liability on the persons who would otherwise not fall within the dragnet of the penal provision. The object of the penal provision cannot be lost sight of and it must be construed in such a manner as to advance the object of the enactment. In substance, both the text and the context deserve to be taken into account.

Section 276B punishes failure to pay tax to the credit of the Central Government, which has been deducted at source under Chapter XVIIB or the tax payable under Section 115-O or the second proviso to Section 194B. Likewise, Section 276BB provides punishment for failure to pay to the credit of the Central Government, the tax collected by a person as required under the provisions of Section 206C. Under these two sections, it is the act of mere failure to credit the tax, which has already been collected or deducted that entails punishment. The text of Section 276, on the other hand, professes to punish wilful attempt to evade payment of tax interest or penalty.

On a plain reading the provisions contained in Section 276C(2) of IT Act, do not indicate that mere failure to pay the tax, interest or penalty falls within the dragnet of the said provision. Even otherwise, it is a well settled rule of construction of penal statutes that, if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty.

There is material to indicate that within five days of the show cause notice, the applicants had deposited the tax due as declared in the return for AY-2010-2011. Since the applicants had declared the income and assessed the self-assessment tax, it cannot be urged that there was an attempt to evade the tax. It was neither a case of under reporting of income nor that of showing diminished tax liability. The action on the part of the applicants to pay the tax due under five days of the notice militates against the stand of the Income Tax Department that there was an intent to evade the tax throughout. It is not disputed on the date of the lodging of the complaint, no tax was due, and even the applicants deposited the amount of Rs.4,47,420 towards interest on the due amount.

The offence punishable under Section 276C(2) of the Act, 1961 cannot be said to have been made out. The proceedings in Criminal Case pending on the file of the learned Additional Chief Metropolitan Magistrate, stand quashed and set aside. Application allowed.

Tags : Penalty Confirmation Legality

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High Court of Delhi

Gav Developers Pvt. Ltd. Vs. The Publishers Dainik Jagran and Ors. (Neutral Citation: 2024:DHC:809)

MANU/DE/0776/2024

05.02.2024

Civil

In case of defamation, it is not the publication itself but the communication of the alleged libelous material is relevant

The Appellant is aggrieved by the impugned order vide which the Trial Court rejected of the plaint of the Appellant. The Learned Trial Court further held that, the Court in Dehradun has the territorial jurisdiction to entertain the civil suit filed by the Appellant herein and the same be filed there.

The Learned Counsel for the Appellant submitted that, the Learned Trial Court erred in holding contrary to the provisions of Section 19 of Code of Civil Procedure, 1908 (CPC) in not appreciating that, the plaint has to be read in totality in order to ascertain the real nature and character of the plaint, same is specifically averred in paragraph to submit that the impugned publication is also available to public at large through print-media and e-paper on the internet, hence it is within the jurisdiction of the court in Delhi since the cause of action has also arisen in this territorial jurisdiction.

The scope of enquiry under Order VII Rule 10 of CPC is to be seen only from the averments made in the Plaint and the documents filed therewith.

It is manifest that in case of defamation, it is not the publication itself but the communication of the alleged libelous material is relevant. If the newspaper, has circulated at Delhi, then it cannot be said that the wrong would not be done to the appellant at Delhi and thus, the Court at Delhi would have jurisdiction under Section 19 of the CPC. The appellant could file suit for defamation against the newspaper either in Delhi where the publication has been circulated or the place where the newspaper is published or respondent resides or works for gain.

As is apparent from the pleadings made out in the plaint, it is clear that according to the Appellant, the alleged libelous article is published in Dehradun edition, there is nothing pleaded in the Plaint as to when and how Dehradun edition has circulation in Delhi. There is not even a single averment in the Plaint that the Appellant has either bought or someone has bought this Dehradun edition in Delhi. Similarly, there is no averment in the Plaint nor any document placed on record that the Dehradun edition is available in e-paper and that the appellant had read and taken a printout in Delhi. The document being the newspaper item is in Dehradun edition having circulation in Dehradun, the Respondents' work for gain in Dehradun, the legal notice issued by the Appellant addressed to the respondents was at Dehradun.

Thus, the Plaint is silent on that the wrong is done within the territorial jurisdiction of Shahdara District in Delhi, so as to give right to the Appellant to choose the jurisdiction of the Courts at Shahdara District to file the Suit. No infirmity is found in the impugned order. Appeal dismissed.

Tags : Plaint Rejection Jurisdiction

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