Budget 2024 Updates

FM overhauls capital gains regime; to come into play from todayTourism: Temple corridors to be developed in Bihar3.4% of GDP allocated as Capital expenditure to support infra sectorFM hikes exemption limit for long-term capital gain to Rs 1.25 lakh + hikes tax rate to 12.5% on specified financial assetsCGST - Finance Bill proposes to amend Sec 9 to take ENA out of purview of GST + inserts Sec 11A to regularise non-levy of tax on general practice in tradeCGST - Sub-sections to be inserted in Act to relax time-limit to avail ITC u/s 16(4) + New Sec 74A proposed to provide for common time limit for demand notices in fraud casesCGST - Proviso to be inserted in Sec 30(2) to provide for enabling conditions for revocation of registration + Amendment in Sec 39 to mandate return filing by TDS deductors even if there is no deduction in a particular monthIGST - Amendment proposed to prohibit refund of unutilised ITC on zero-rated supplyIncome tax - Finance bill revamps re-assessment regime againCustoms - Finance Bill proposes to amend Sec 28DA for acceptance of different types of proof of origin under FTAsFM hikes standard deduction to Rs 75K for new ITR regime + revises tax rates for all income slabs + Rs 7000 Cr revenue foregoneIncome tax - Search & Seizure cases - Block assessment is backBudget withdraws 2% equalisation levyFM reduces corporate tax rate for foreign companies to 35%FM proposes vivad se vishwas scheme + hikes monetary limits for filing appealsFM proposes 20% capital gains tax on short-term assets + listed financial assets held for more than one year to be classified as long-termGovt scraps TDS on Mutual Funds + decriminalises delay in depositing TDS + rationalisation of compounding of offences + revamps reassessment periodBudget proposes comprehensive review of I-T Act, 1961 + simplifies provisions for charities and TDSFM reduces customs duty on gold and silver to 6% + Nil BCD on nickel cathodeBudget proposes to reduce BCD on mobile phone and chargers to 15% + exempts 25 minerals from customs dutyFM exempts cancer medicines from Customs duty + amends BCD for various machinesFM proposes Rs 48 lakh expenditure outlay; 4.9% fiscal deficitFM announces Rs 1 lakh crore fund for developing space economyPromotion of Tourism - Vishnupad temple and Bodh Gaya temple corridors to be supportedFM announces over Rs 11 lakh crore capital expenditure in current fiscalGovt to invest in small Nuclear energy plants in partnership with private playersCentre to ask States to lower stamp duty for women purchasers of housesIBC - More Benches of NCLT to be set up to speed up recoveryFM spikes limit of Mudra loan to Rs 20 lakhsBudget offers financial aid to labour-intensive MSMEs in manufacturing sectorGovt announces 3 crore additional houses under PM SchemeGovt to secure Rs 15K loan for AP from multilateral agenciesGovt to frame new policy for all-round development of Bihar, Jharkhand and OdishaGovt to give one-month salary to all new recruits in formal sector through EPFOGovt to promote vegetable clusters closer to urban settlementsGovt to focus on productivity of agriculture with climate-resilient seedsFM allocates Rs 2 lakh outlay for PM's five schemes for job creation and farmersFM Nirmala Sitharaman presents 7th Union Budget in ParliamentBudget 2024: FM arrives at Parliament; Speech to begin at 11AMEconomic Survey 2023-24 - from GST PerspectiveUkrainian FM goes on tour to ChinaI-T- Additions framed u/s 69A are untenable where affidavits submitted by assessee's parents to explain source of cash deposits, were discarded by AO without consideration : ITATSurvey acknowledges productivity loss due to mental health disordersI-T- Short term capital gains returned by the assessee in terms of provisions of section 50 of the Act on assets held for a period of more than 36 months be treated as long term capital gains: ITATExpenditure on social services up from 6.7% to 7.8% of GDP: SurveyI-T-Additions framed u/s 68 are upheld where assessee is unable to prove genuineness of transaction involving purchase and sale of penny stock: ITATTrade deficit contracts to USD 78 bn from USD 126 bn in 2023I-T-Re-assessment is invalidated when there is no failure on part of assessee to make full and true disclosure of facts necessary for assessment: ITATCorporate profitability has peaked to 15-yr-old high between 2020-2023: SurveyI-T- When cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked: ITATBudget 2024: More relief for senior citizens & individual taxpayers on card; tweaking of capital gains tax likely; steady capital expenditure to stayI-T- If any amount invested is purely a strategic investment & for purpose of commercial expediency, then AO cannot hold such investments to be for non-business purpose: ITATGoogle backpedals on plan to scrap cookies from ChromeCus - For a HNWI individual, an expensive watch of 'Rolex' make would be his personal effect but same may not be the case if the person is of mere means - Pendant studded with diamonds not liable for confiscation: HCGovt amends Recruitment Rules for Debts Recovery TribunalGST - Even if no date, time or place of hearing is indicated in the notice issued, it was the duty of assessee to file his reply to SCN, which was admittedly received - Plea regarding violation of principles of natural justice cannot be countenanced: HCAbhinav Bindra conferred with Olympic OrderGST - Mismatch between value of e-way bills generated on portal and returns filed in Form GSTR-3B - Petitioner did not provide a comprehensive explanation - To remit sum of Rs.3.50 crores within six weeks - Matter remanded: HCHackers mercilessly hack Bangladesh PM’s website along with police portalsGST - Rule 30 of Rules, 2017 - Assessing officer ought to have issued summons and obtained clarification rather than estimating the outward supply value at 110% of purchase value - Order set aside and matter remanded subject to remit of 10% disputed tax demand: HCUS law-makers call for resignation of Secret Service chief in Trump assassination caseGST - Net ITC shown incorrectly - An inadvertent error was committed and such error was rectified, albeit irregularly, however, sum recovered from petitioner's bank account - Order set aside and matter remanded: HCKarnataka IT Industries piling pressure on govt to extend working hoursGST - Since notification is declared unconstitutional, Amount of IGST paid pursuant to Entry No. 10 of Notification No. 10 of 2017 is to be refunded along with statutory interest: HCStudy says earth’s water depleting fastFDI inflows slide to USD 26.5 bn in 2024 from USD 42 bn in 2023: Economic Survey
Fulfilment of Export obligation of Advance Licence by attempting to export inferior goods

JUNE 04, 2024

By S K Rahman, IRS, working as AR at Delhi CESTAT

1. THE CESTAT has passed Final Order No. 55850-55851/2024 dated 31.05.2024 - 2024-TIOL-512-CESTAT-DEL in the cases of M/s Candex Filament Pvt. Ltd. and Shri R K Goyal on the issue of attempting to export inferior quality garments for fulfilment of export obligation of Advance Licence, wherein, good quality polyester knitted fabric was imported duty free.

2. In these cases, there were 2 appeals namely M/s Candex Filament Pvt. Ltd. Vs. Commissioner of Customs, Preventive, New Delhi in Customs Appeal No. 50762 of 2019 and Shri R K Goyal. Vs Commissioner of Customs, Preventive, New Delhi in Customs Appeal No.50761 of 2019 pending before Hon'ble CESTAT all arising out of one Order-in-Original No. DLI/CUS-PREV/OPD/COMMR/10/2018 dated 05.12.2018 passed by the Principal Commissioner, Customs, New Custom House, New Delhi.

3. M/s. Kwality Overseas holding advance licence has imported good quality polyester knitted fabric duty free. They have a factory at Badli, HP to where they were supposed to take these imported fabrics, manufacture Ready Made Garments (RMG) Ladies Dress using these fabrics and export the finished goods namely, readymade garments. But it appears that the impugned goods were diverted to open market instead of using them for manufacture of garments in violation of condition no 14 of the Advance Authorisation which stipulates that the imported goods shall be processed at the declared factory address.

4. M/s Kwality Overseas instead of exporting the finished goods namely, readymade garments, have supplied to M/s Candex Filament Pvt. Ltd. (Appellant) to export as merchant exporter.

5. The Authorized Representative for Revenue has pointed out to the Hon'ble CESTAT, the following omissions by the Appellant while exporting the goods.

6. Mis-declaration of description (Composition):- The export goods were found to be old, torn and very bad quality of RMG. There were no stickers, no brand name, no manufacturing name and date. The exempted raw material imported under Advance Authorization was polyester dyed fabric with GSM of 200-300. The RMGs attempted to be exported are of GSM 55-90.

7. Exports after expiry of EO:- The above exports were attempted to be done on 06.02.2018 as exports for fulfilment of export obligation of advance licences whose EO period has already expired on 10-06-2012 and 18-03-2014. Thus, the exports were beyond 4 to 6 years period compared to EO obligation.

8. DGFT:- The DGFT vide Orders-in-Original dtd 02-06-2017 has cancelled the Advance Authorization as the party has failed to fulfil the export obligation by the prescribed due date of 10-06-2012 and 18-03-2014.

9. Lifting of Corporate veil: The importer of fabric under Advance Authorization and exporter appellant have the same Directors, viz. Shri R K Goyal and Shri Kanav Goyal (father and son) but were operating under different companies. They have camouflaged themselves as manufacturers and merchant exporters. It is well settled law that in the matters of defrauding the Government Exchequer, the corporate veil can be lifted to hold responsible the natural persons who are involved in managing and operating the companies. In this regard, reliance was placed on M/s. Calcutta Chromotype Ltd. vs. CCE, Calcutta where in it is held that :

"It is not only that both the manufacturer and buyer are associated with each other for which the corporate veil may be lifted to see who is behind it"

10. The Counsel for the Appellant has argued that Appellants cannot be held responsible for the default of Kwality Overseas. For this, the Authorized Representative for Revenue has rebutted it by saying that:

11. Appellants cannot be absolved of the default of Kwality Overseas, which allowed them to use their advanced licence and influence them to export low quality goods to fulfil their export obligation The Directors of the appellant company as well as of Kwality Overseas are one and the same Shri R K Goyal a natural person is capable of influencing the function of both the appellant as well Kwality Overseas.

12. The instant case, it is not alleged that the appellants have defaulted in fulfilment of export obligation but were alleged of attempting to export by mis-declaring the description (composition &GSM) quality and quantity of export goods, (ladies dresses) meant for export under the cover of various shipping bills.

13. It was submitted to the Hon'ble CESTAT that in the Shipping Bills "the third party" details are given as Kwality Overseas and the undertaking at the bottom reads as "We declare that the particulars given herein are true and are correct" and exporter signed on it. That is why the exporter is being penalized.

14. The Hon'ble CESTAT has agreed with the submissions of Authorized Representative for the Revenue, upheld the impugned Order-in-Original and dismissed the Appeals filed by the Party.

15. The Lessons learned from this Final Order No. 55850-55851/2024 dated 31.05.2024- 2024-TIOL-512-CESTAT-DEL are:

a) Attempting to export inferior quality finished goods as fulfilment of Export Obligation for duty free imports under Advance Licencing is not permitted.

b) The quality of goods (by test reports) being exported may be compared with the quality of imported raw material so as to verify whether imported duty free goods are used in manufacture of finished goods being exported.

c) Exports done after the due date for fulfilment of export obligation is not permitted.

d) The merchant exporter cannot absolve himself of responsibility for the mis-declaration of quality of goods received from the manufacturer and attempted for export, as particulars declared in the Shipping bills are under signature of exporter.

16. This Final Order No. 55850-55851/2024 dated 31.05.2024-2024-TIOL-512-CESTAT-DELmay be read along with Final Order No. 55357-55360/2024 dated 19.03.2024 - 2024-TIOL-298-CESTAT-DEL in the cases of Himachal Fashion Private Limited (erstwhile known as Candex Chemical Fibres Company Pvt.Ltd) and others on the issue of diversion of imported polyester knitted fabric imported duty free under Advance Licence to open market which was supposed have been used in the manufacture of readymade garments and export them.

(The views expressed are personal and not in official capacity)

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)


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