CASE LAWS
2018-TIOL-1146-HC-KAR-VAT + Case Story
BHAVANI ENTERPRISES Vs ADDL CCT KARNATAKA HIGH COURT (Dated: June 13, 2018)
Karnataka Value Added Tax - Sections 66 & 70(2)(a)
Keywords - Fake invoice - Genuineness of purchase - Input tax credit
The assessee company filed returns for the relevant AY, claiming input tax credit on certain purchases made. On assessment, the AO alleged that the assessee availed input tax credit based on fake and false invoices issued by dealers who were found to be non-existent. Hence the AO proceeded to impose penalty u/s 70(2) of the Act. On appeal, the appellate authority set aside the penalty imposed. However, the same was restored by the revisional authority.
On appeal, the High Court held that,
Whether the onus of proving the genuineness & correctness of claim for input tax credit lies on the assessee and not on the Revenue - YES: HC
Whether penalty imposed is sustainable where assessee claims input tax credit based on fake invoices issued by dealer who later professes to not being a genuine dealer - YES: HC
++ no question of law arises in the present appeal for consideration by this Court and essentially it is a finding of fact arrived at by the Assessing Authority as well as the Revisional Authority in the present case that the Assessee claimed input tax credit on the basis of invoices issued by the non existent dealers. We do not find any force in the submission made by Counsel for the Assessee and as held by the first Appellate Authority that the burden of proof gets shifted on the Revenue to establish that the circumstances exist for imposition of penalty under Section 70[2] of the Act. The provisions of Section 70 quoted below in its plain terms clearly stipulates that the burden of proving that input tax claim is correct lies upon the dealer claiming such input tax credit;
++ The penalty imposable under Section 70[2] of the Act using the words "knowingly issues or produces a false tax invoice" does not shift the burden on the Revenue, merely because the dealer claiming such input tax credit claims that he is a bona fide purchaser and knowingly he has not produced a false and fake invoice in question. The burden of proving the correctness of input tax credit remains upon the dealer claiming such input tax credit. Such a burden of proof does not get shifted on to the Revenue. Even the findings of fact arrived at by the Assessing Authority after process of cross examination of one of the persons, Mr. Chhatar Singh Kathotia indicates that he obtained the registrations in the name of other firms at the instance of a third party Mr. Goutham Chand and he never claimed himself to be genuine Selling Dealers actually selling goods in question to the Appellant-Assessee. Therefore, mere his production before the Assessing Authority and his cross examination recorded by the Assessing Authority does not dispel the fact that the tax invoices produced by the Assessee for claiming input tax credit emanates from the genuinely existing selling dealers;
++ thus, burden of proving that the claim of input tax credit is correct, is squarely upon the Assessee who never discharged the said burden in the present case. The first Appellate Authority was absolutely wrong in setting aside the penalty assuming such burden of proof to be on the Revenue. The Revisional Authority, was therefore, perfectly justified and within his jurisdiction to restore the order of penalty in these circumstances;
++ it cannot be said, in these circumstances, that the Assessee did not 'knowingly' produce such invoices, knowing them to be false or fake. A dealer entering into a genuine transaction of purchase always knows the existence and identity of selling dealer. Essentially, two parties must actually exist to enter into a valid contract of sale or purchase and therefore, it cannot be said, in these circumstances, that the Assessee did not 'knowingly' produce the tax invoices which were false or fake.
Assessee's Appeal Dismissed
2018-TIOL-1145-HC-MAD-IT + Case Story
ALAMELU VEERAPPAN Vs ITO: MADRAS HIGH COURT (Dated: June 07, 2018)
Income tax - Writ - Sections 147, 148, 159 & 292B.
Keywords - curable defect - deceased assessee - reopening notice - validity of reassessment
The present assessee is the wife of deceased Mr.S.Veerappan. During the year under consideration, she received a notice addressed to her late husband, stating that certain income of said Mr.S.Veerappan had escaped assessment for A.Y 2010-11 and accordingly, the ITO had proposed to re-assess the income for said assessment year. The assessee therefore sent a reply pointing out that her husband had died and enclosed a copy of the death certificate to establish the said fact. She however stated that she was receiving frequent telephone calls from the Department calling upon her to appear before the officer in respect of the reopening notice issued in the name of her late husband. Therefore, left with no option, the assessee visited the office of ITO, who was then informed that she should submit all the documents pertaining to her husband's assessment including the details of bank account statements for the F.Y 2009-10. The assessee, in turn, informed the officer that she did not have any of the documents, which were sought for. Finally, the assessee had approached this Court praying for issuance of a Writ of Certiorarified Mandamus to quash the reopening notice issued in the name of her deceased husband and to forbear the ITO from conducting any proceedings for reassessment as set out in the said notice.
On Writ, the HC held that,
Whether any notice issued under I-T Act in the name of the deceased assessee, is unenfoceable in law - YES: HC
Whether legal heirs of deceased assessee are statutorily obligated to immediately intimate the death of assessee to I-T Department or take steps to cancel his PAN registration - NO: HC
Whether proceedings u/s 159 can be invoked against legal heirs, only if the proceedings have already been initiated when assessee was alive and was permitted for proceedings to be continued as against legal heirs - YES: HC
Whether defective issued against deceased assessee and that too beyond period of limitation, can be cured u/s 292B - NO: HC
++ the issue, which falls for consideration, is as to whether the reopening notice u/s 148 issued in the name of dead person i.e., Mr.S.Veerappan is enforceable in law and the subsidiary issue being as to whether the assessee, being the wife of the said Mr.S.Veerappan, can be compelled to participate in the proceedings and respond to such notice. The fact that the said Mr.S.Veerappan is dead is not in dispute. If this fact is not disputed, then the notice issued in the name of the dead person is unenforceable in the eye of law. The Department seeks to justify their stand by contending that they were not intimated about the death of assessee, that the legal heirs did not take any steps to cancel the PAN registration in the name of assessee and that therefore, the Department was justified in directing the assessee to cooperate in the proceedings pursuant to the notice. The settled legal principle being that a notice issued in the name of the dead person is unenforceable in law. If such is the legal position, would the Revenue be justified in contending that they, having no knowledge about the death of the assessee, are entitled to plead that the notice is not defective. The answer to the question should be definitely against the Revenue;
++ it is admitted that the limitation period for issuance of notice for reopening has expired on Mar 31, 2017. On being intimated about the death, the Department sent the notice to the assessee-his spouse to participate in the proceedings. This notice was well beyond the period of limitation. If we approach the problem sans complicated facts, a notice issued beyond the period of limitation is a nullity, unenforceable in law and without jurisdiction. Thus, merely because the Department was not intimated about the death of assessee, that cannot, by itself, extend the period of limitation prescribed under the Statute. Nothing has been placed before this Court by the Revenue to show that there is a statutory obligation on the part of the legal representatives of the deceased assessee to immediately intimate the death of assessee or take steps to cancel the PAN registration. In such circumstances, the question would be as to whether Section 159 of the Act would get attracted. The answer to this question would be in the negative, as the proceedings u/s 159 can be invoked only if the proceedings have already been initiated when the assessee was alive and was permitted for the proceedings to be continued as against the legal heirs. The factual position in the instant case being otherwise, the provisions of Section 159 have no application;
++ the Revenue then seeks to bring their case u/s 292 to state that the defect is a curable defect and on that ground, the reopening notice cannot be declared as invalid. The language employed in Section 292 is categorical and clear. The notice has to be, in substance and effect, in conformity with or according to the intent and purpose of the Act. Undoubtedly, the issue relating to limitation is not a curable defect for the Revenue to invoke Section 292B of the Act. This court therefore holds that the reopening notice is wholly without jurisdiction and cannot be enforced against the assessee.
Assessee's petition allowed
2018-TIOL-1141-HC-AHM-CX
CORE HEALTHCARE LTD Vs CCE : GUJARAT HIGH COURT (Dated: June 14, 2018)
CX - In application seeking condonation of delay, company had stated, inter alia, that the legal matters were looked after by one Shri Kalpesh Bhatt, Executive (Taxation) who left the job in September, 2004 - The fact of appellate order passed against the company was noticed only in July, 2005, when combined recoveries were raised by department - Companies were seeking to explain the delay of about 70 days - Unfortunately, the Tribunal brushed aside the explanation of applicant without any discussion and dismissed the application for condonation of delay - This Tax Appeal was filed in year 2006 and remained pending all this while, nearly for 12 years - The assessee could have at least brought these facts to the notice of this Court for out of turn hearing - No such attempt was made - After more than a decade now, proceedings remanded before the Tribunal for fresh decision on merits which should have happened in the first instance and in any case, would have been the order passed by the Court if assessee had been vigilant enough to press the appeal for early hearing - Tribunal to hear the appeal on merits expeditiously: HC
Matter remanded
2018-TIOL-1140-HC-AHM-CX
MAHAVIR DYEING MILLS Vs CCE: GUJARAT HIGH COURT (Dated: June 14, 2018)
CX - Assessee engaged in manufacturing man made processed fabrics - During search, partner of firm admitted past clandestine removal of goods without payment of duty - The raiding party also found processed fabric which was not accounted in record - Further quantities were found which were also not entered in record - In this context, SCN came to be issued for confiscation of goods, levying of duty and imposition of penalty - Assessee have confined this appeal to the question of penalty and raised two contentions in this respect; firstly, that the entire duty was paid even before issuance of SCN and the penalty therefore could not have been imposed - Second contention of assessee was that in any case, penalty having been imposed on firm, no separate penalty could be imposed on partners - Ordinarily, instances of payment of duty immediately upon being pointed out short payment would be cases falling outside fraud, willful misstatement - In either cases, the important element would be that the assessee accepts the liability and surrenders the unpaid duty without a contest - In present case, assessee opposed the SCN proceedings all throughout upto the stage of Tribunal - Even before the Tribunal, appeal was not confined to penalty but on the order passed by Adjudicating Authority and confirmed by Appellate Authority regarding confiscation of goods and confirmation of excise duty demand - This was thus, clearly not a case where the assessee had paid the duty even before issuance of SCN - The assessee therefore cannot claim waiver of penalty on this count.
However, on the second limb, assessee is correct - Court in case of Jai Prakash Motwani 2009-TIOL-121-HC-AHM-CUS held that once penalty is imposed on partnership firm, no separate penalty can be imposed on partners - Penalties on the partners of the firm are deleted: HC
Appeal partly allowed
2018-TIOL-1139-HC-MAD-CX
CCE Vs COATS VIYELA INDIA LTD : MADRAS HIGH COURT (Dated: June 05, 2018)
CX - Assessee engaged in manufacture of Cotton Fabrics subjected to process of scouring, without payment of duty under Notfn 40/95 CE - Revenue found that assessee is not entitled to the benefit of exemption notfn, since the process undertaken by assessee was not specified in notfn - Demand confirmed against assessee - Commissioner (A) in-turn allowed the appeal of assessee by observing that Deputy Chief Chemist, to whom the samples were sent, has not tested the samples at all, but has formed his opinion based on Revenue Letter and the Technical Literature available with him - When it is clear and categorical finding of those authorities that Deputy Chief Chemist has not tested the samples and that he has given his opinion only based on the letter addressed by Revenue, such factual findings rendered by those authorities which culminated in rejecting the case of Revenue, do not warrant interference by this Court, more particularly, as it is found that no question of law is involved in this case, for consideration - When the applicability of subject-matter exemption notfn to the case of assessee has been considered and found in favour of assessee by two fact finding authorities, Court is not inclined to interfere with such factual finding rendered by both the authorities below: HC
Appeal dismissed
2018-TIOL-1138-HC-KAR-CUS
CC & ST Vs SCHNEIDER ELECTRIC IT BUSINESS: KARNATAKA HIGH COURT (Dated: June 05, 2018)
Cus - Revenue has challenged the legality of impugned order, whereby Tribunal has allowed an appeal filed by assessee with regard to refunding of SAD in terms of Notfn 102/2007-Cus - For taking credit, quantum of duty paid should be shown in invoices and same should be shown separately for each type of duties - In respect of a commercial invoice, which shows no details of the duty paid, question of taking of any credit would not arise at all - Therefore, non-declaration of duty in invoice issued itself is an affirmation that no credit would be available - Therefore, non-declaration/non-specification of duty element as to its nature and quantum in invoice issued would itself be a satisfaction of condition prescribed under clause (b) of para 2 of Notfn 102/2007 - Although notfn may have prescribed the words which should be included in an invoice, but the words are not magical in their scope since it is a procedural condition, as long as intention is made clear, even by use of other words, assessee cannot be denied the benefit of refund of SAD - Moreover, a bare perusal of impugned order clearly reveals that Tribunal has relied on its earlier decisions - Therefore, it has validly concluded that non-declaration of SAD in commercial invoice is an affirmation that no CENVAT credit thereof, shall be available and the same satisfies the condition of the notification - Hence the assessee is justified in claiming the refund - Since the Tribunal has given legally valid reasons for allowing the appeal filed by assessee, Court does not find any merit in present appeal: HC
Appeal dismissed
2018-TIOL-1137-HC-P&H-IT
CIT Vs OCM INDIA LTD : PUNJAB AND HARYANA HIGH COURT OF (Dated: May 9, 2018)
Income Tax - Sections 194H & 201(1A).
Keywords - Commission agents - Trade turnover discounts.
The assessee company was engaged in manufacturing and sale of woolen articles for the relevant AY. In its return, the assessee had debited an amount to the account of Trade turnover discounts which was netted out from the gross turnover and hence decided not to show an item of expense in P&L account. Further, the assessee went before the AO and pleaded that commission or brokerage raised on account of agency transactions did not attract TDS for the services rendered by the third party. However, the AO considered the explanations of the assessee and concluded that the said amount being turnover discount was directly or indirectly for the services rendered as per the inclusive definition of the Explanation u/s 194H. Further, the assessee was held liable to deduct the TDS u/s 194H and a 'demand' on account of TDS charged u/s 201(1A) was raised. The CIT(A) and the Tribunal allowed appeals in favour of assessee.
On appeal, the HC held that,
Whether any TDS obligation u/s 194H arises on trade turnover discount offered by the assessee to customers directly, withoug involving any commission agent - NO: HC
++ it has been held by CIT(A) that the AO is not justified in attracting provisions of Sec 194H read with its Explanation to the trade discount allowed by the assessee to buyers/customers/direct trade dealers without involvement of any inter-mediatory/commission agents. Accordingly, the massive demand created u/s 201(1) read with sec 201(1A) is hereby deleted being unwarranted and not liable as per the provisions of sec 194H. Similarly, the Tribunal gave the same reason as to the assessee has not infringed the provisions of sec 194H and the AO has decided the issue without considering the explanation of the assessee and, therefore, the CIT(A) has rightly reversed the order of the AO. Hence, the CIT(A) has rightly deleted the said demand created u/s. 201(1) read with sec 201(1A) and the assessee cannot be held to be assessee in default;
++ concurrent finding has been recorded by the CIT(A) as well as the Tribunal that the assessee had been debiting trade discount allowed to its commission agents who were acting and procuring orders/effecting sales of its products for and on its behalf, the AO was not justified in attracting the provisions of Explanation to sec 194H.
Assessee's appeal dismissed
