CASE LAWS

2016-TIOL-219-SC-CX

CCE & ST Vs KRISHNA SAA FABS PVT LTD: SUPREME COURT OF INDIA (Dated: December 5, 2016)

CX - Revenue Appeal dismissed in view of the low tax effect - Question of law is kept open: Supreme Court

Appeal dismissed

2016-TIOL-218-SC-ST

NKG INFRASTRUCTURE LTD Vs CC, CE & ST: SUPREME COURT OF INDIA (Dated: December 6, 2016)

ST - M/s Sahara India Commercial Corporation Ltd. issued a work order to appellant for levelling of soil including filling of gorges/nallah, removing shrubs, grass and rubbish etc. at Sahara City Homes, Amritsar - Assessee claiming that the activity is excluded from taxability under "Site formation and clearance, excavation and earthmoving and demolition" in view of clause (vi) to Section 65 (97a) of FA, 1994 which excludes such services provided in relation to agriculture and also exempted under notification no.17/2005-ST - High Court while dismissing the appeal held that when an agricultural land is taken and development work like soil levelling etc. is carried out for the purpose of development of township etc., then it cannot be said that work of levelling of soil etc. is connected with agriculture or can be said to be an agricultural work at all; that assessee is not exempted from service tax as claimed and since assessee had not disclosed the aforesaid, extended period of limitation was available to the Revenue. Appeal to Supreme Court. Held: Special Leave Petition is dismissed: Supreme Court

Petition dismissed

2016-TIOL-217-SC-IT

CIT Vs SHRI RAM NIWAS DHAM TRUST: SUPREME COURT OF INDIA (Dated: December 5, 2016)

Income tax - depreciation & income of charitable trust

The Revenue had preferred the present appeal challenging the order, whereby the High Court held that, in computing income of a charitable institution/trust, depreciation of assets owned by such an institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available.

Having heard the parties, the Supreme court condones the delay in filing of appeal and grants leave to the Revenue to appear for further hearing.

Revenue's appeal dismissed

2016-TIOL-2958-HC-ALL-CX

KISAN SAHKARI CHINI MILLS LTD Vs CCE: ALLAHABAD HIGH COURT (Dated: November 29, 2016)

CX - During April, 2001 appellant's molasses clerk, Chief Chemist and U.P. Excise Inspector colluded with each other and issued 10020.40 quintals molasses by issuing F4 gate pass and Central Excise invoices without making entries in the excise records - According to the assessee, on account of this theft, a loss occurred and, therefore, an F.I.R. was lodged on 14.10.2001 - Later, an application for remission was filed by the assessee on 24.6.2005 in terms of Rule 49 of the CER, 1944 - Commissioner rejecting the application and Tribunal rejecting the appeal vide order dated 25.3.2009 - Appeal to High Court. Held: View taken by the Commissioner is correct and it has also been confirmed by the Tribunal, which has also taken a view that ambit of Rule 49 of the CER, 1944 includes cases of loss and it would be confined to the natural causes and unavoidable accident and does not include in it cases of theft. appeal dismissed: High Court [para 11, 12]

Appeal dismissed

2016-TIOL-2959-HC-DEL-CUS

MICROMAX INFORMATICS LTD Vs UoI: DELHI HIGH COURT (Dated: September 28, 2016)

Cus - Petitioner had imported mobile phones and paid additional duty of customs at the rate of 6% - Under prevailing notification and at the relevant time the rate of excise duty was 1% in terms of notification 12/2012-Cus subject to condition that no CENVAT credit was availed of Petitioner being an importer and not a manufacturer had not availed of CENVAT credit and, therefore, claimed refund of the difference but the application was rejected by lower authorities - appeal to High Court. Held: Supreme Court in the case of SRF Ltd. 2015-TIOL-74-SC-CUS held that words 'if produced or manufactured in India' do not mean that the like article should be actually produced or manufactured in India; that as per the explanation, if an imported article is one which has been manufactured or produced, then it must be presumed, for the purpose of Section 3(1) of the CTA, 1975, that such an article can likewise be manufactured or produced in India; that for quantification of additional duty in such a case, it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon benefit of notification 12/2012-Cus is, therefore, available - petitioner has filed supporting certificates in the form of Chartered Accountants Certificate and other documents, claiming that the benefit was not passed on to the consumer - respondents are directed to pay the appropriate refund along with interest within three weeks Petition allowed: High Court [para 4, 6]

Petition allowed

2016-TIOL-2956-HC-PATNA-IT

Income tax - Sections 132, 153A, 245C & 245D

Keywords - disclosure of income - excess turnover & rejection of application

During the subject year, a search and seizure operation u/s 132 was conducted on the three assessees at their respective addresses at Dhanbad, wherein total amount of Rs.82,88,73,442/-, Rs.8,99,40,042/- and Rs.1,30,11,471/- respectively were seized, which were not accounted for in their books. of accounts. The assessees admitted these additional income,though stated that the figures were ad hoc as complete details with regard to the relevant transactions were not immediately available. Subsequently, all the three assessees filed their return for the A.Ys 2006-07 to 2011-12 u/s 153A and for the A.Y 2012-13 u/s 139 including the aforesaid income. After seizure, the I-T Department had adjusted Rs. 29,67,59,788/- Rs. 2,87,36,350/- and Rs. 53,27,597/- respectively as advance tax for A.Y 2012-13. The assessees also sought adjustment towards additional tax and interest payable as per the returns filed in response to notice u/s 153A & 139. Thereafter, the assessees filed settlement applications u/s 245C(1) disclosing additional incomes and requested the additional tax/interest totaling to Rs. 69,80,390/-, Rs. 28,24,073/- and Rs. 20,73,104/- respectively payable on the basis of additional disclosure of income made before the Settlement Commission to be collected from the balance seizure amount lying with the Department.

The Settlement Commission allowed the settlement applications to proceed u/s 245D(1) and necessary directions were issued to the jurisdictional Commissioner for adjusting the amount lying in the said Account against the demand (tax and interest) in respect of income declared in settlement application. In pursuence of the same, the Commissioner in his report u/s 245D(2B) submitted that the applications to the Settlement Commission deserve to be rejected because the applicants had not paid such tax & interest on the additional income nor attached a proof of such payment with the application thereby not meeting the basic requirement of filing of such petition before the Settlement Commission. The Settlement Commission, however, noted that except for one FIR filed by the CBI against the petitioners Lal Bahadur Singh and Kumbhnath Singh alleging fraudulent withdrawal of Rs. 1,23,13,354/-, there was no material at that stage to establish that rest of the money had been fraudulently withdrawn by the applicants and further that all the three applicants had indulged in embezzlement in respect of the entire receipts disclosed in their settlement applications. Accordingly, the settlement applications filed by the applicants were held as not invalid and the issue of disclosure u/s 245D(4) remained alive.

However, the CIT was permitted to carry out inquiry u/s 245D(3) which resulted in disclosure of excess turnover, not disclosed by assessees in their applications and it was therefore once again submitted that the applicants had not made full and true disclosure. The Settlement Commission accepted the same and hence no order u/s 245(D)(4) was passed, thereby rejecting the applications.

On appeal, the HC held that,

Whether the decision of Settlement Commission can be interfered with by the HC, when there is nether any grave procedural defect nor absence of nexus between the reasons given and the decision taken by the Settlement Commission - NO: HC

++ It is evident from the decision of the Karnataka High Court in the case of N. Krishnan case, that in writ proceedings the decision of the Settlement Commission can be interfered with only if there has been grave procedural defect or violation of the mandatory procedural requirements of the provisions in Chapter-19-A and/or violation of the rules of natural justice, or if it is found that there has been no nexus between the reasons given and the decision taken by the Settlement Commission and further the writ Court cannot interfere either with an error of fact or error of law alleged to have been committed by the Settlement Commission. It is true in the present matter that in the order u/s 245D(1) it was concluded by the Settlement Commission that the petitioners had complied with the requirements of the conditions as prescribed u/s 245C(1) and thus the application would be allowed to be proceeded with under the said sub-section but it must be remembered that the stage u/s 245D(1) is a preliminary stage when the department is not in the possession of anything except mere application filed by the petitioners, excluding the annexures filed which are treated as confidential till that stage. Stricto sensu even at this stage it cannot really be said that the petitioners had complied with the third requirement of Section 245C, as the said application was instituted without the petitioners having paid the tax and interest as per the admitted additional amount disclosed before the Commission and therefore no proof of payment on or before the date of making the application was attached, rather the prayer had been made to get the amount adjusted from the amounts seized by the Department during the course of search and seizure u/s 132. It is clear that the applicants did not comply with the third condition. However, the said issue may not be relevant considering the fact that ultimately the applications have been rejected at the stage of Section 245D(4);

Whether mere declaration passed by Settlement Commission in order u/s 245D(2C) to treat the application filed by assessee as not invalid, can be treated as the final irrevocable finding of Commission - NO: HC

Whether when the assessees has filed their returns on mercantile basis, it is not open to them to approach the Settlement Commission on the basis of a cash system of accounting - YES: HC

++ The next question would be whether the finding regarding there being true and full disclosure at the stage of Section 245D(2C), the Commission could have subsequently taken a different view of the matter. It is evident from the order u/s 245D(2C) that though declaring the application as not invalid the issue as to whether the disclosure is full and true was still alive at the stage of Section 245D (4), for which reliance has been placed by the Commission on the decision of the Delhi High Court in True Woods case. Thus it cannot be said that a final irrevocable finding had been given by the Settlement Commission in favour of the petitioners with regard to the true and full disclosure, which may not have been gone into again at the stage of 245D(4) order. The question then would be as to whether there was some material before the Commission to have arrived at the said conclusion. In our view such materials are to be found in the further reports of the Commissioner, particularly the report u/s 245D(3) wherein the fact regarding the petitioners not having disclosed the turnover with regard to the huge amount of bills which had been treated as liability and contingent liability in the audited accounts of the BCCL for the area in question with respect to the petitioners. It is not in dispute that the petitioners had not disclosed the said turnover. The stand taken by the petitioners is that they had filed their applications before the Settlement Commission on the basis of the Bank account and income and the receipts and expenditure shown in the said account on a cash basis, whereas the admitted position is that the returns of the petitioners were being filed on mercantile basis and there could be no occasion for the petitioners to have approached the Settlement Commission on the basis of a cash system of accounting. The same may itself lead to a situation of non-disclosure of the full and true income of the applicants and in the present matter has led to non-disclosure of a huge amount of the income of the applicants;

Whether an assessee can plead that the I-T Department or the Settlement Commission should only be concerned with the income tax to be collected on the income disclosed and not the nature of the transactions even if they amounted to a criminal act - NO: HC

Whether the applicant before the Settlement Commission can choose to evade the requirement of disclosing the manner in which the income has been derived - NO: HC

++ The provisions of Section 245C make it very clear that not only full and true disclosure of income has to be made but also the manner in which the income has been derived. It is true that grounds of criminality may not lead to a situation where the Settlement Commission shall refuse to go ahead with the settlement, otherwise there would have been no occasion to confer upon it powers u/s 245H to grant immunity from prosecution and penalty, but the same does not mean that the applicant before the Settlement Commission can choose to evade the requirement of disclosing the manner in which the income has been derived. The only fact that has been admitted by the respondents even in the counter affidavit is that the source of income of the petitioners is from the BCCL. This Court does not find any cogent material produced by the petitioners with regard to the manner in which the income has been derived and thus we see no reason to consider the conclusion of the Commission as suffering from any infirmity. We do not find any substance in the submission of counsel for the petitioners that the Settlement Commission must record categorical finding that the incomes were the proceeds of misappropriation. It is quite open to the Settlement Commission not to enter into any such arena for rejecting the application on account of non-compliance of the requirement with regard to the full disclosure;

Whether it is open to the Settlement Commission to reject the applications filed for settlement, on basic ground of non-fulfillment of conditional requirements u/s 245C - YES: HC

++ As a matter of fact, in the present case the petitioners had already disclosed before the assessing authority in the returns filed u/s 153A and 139 practically the entire amounts which had come out during the search and seizure as undisclosed income of the petitioners which was running into almost 200 crores rupees and thereafter they declared additional income before the Settlement Commission only to the extent of about 2 crores rupees. Whatever else has been discovered is on the basis of investigation carried out by the Department and not on account of any disclosure made by the petitioners before the Settlement Commission. Since the basic requirements of Section 245C have been found to have been not met by the Settlement Commission in view of the materials before it, there could have been no question of the Settlement Commission to have proceeded further in the matter except to reject the applications of the petitioners. Thus, in the light of the aforesaid discussions, there seems no reason to interfere with the impugned order of the Settlement Commission.

Assessee's application dismissed