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Tax Cases Weekly Round-Up: 25 September To 1 October, 2022

Mariya Paliwala
2 Oct 2022 10:22 AM GMT
Tax Cases Weekly Round-Up: 25 September To 1 October, 2022
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Delhi High Court Physical Verification Of Business Premises For GST Registration Without Issuing Notice Is Violation Of Principle Of Natural Justice: Delhi High Court Case Title: Curil Tradex Pvt. Ltd. Versus The Commissioner Citation: 2022 LiveLaw (Del) 905 The Delhi High Court has held that the physical verification of business premises for GST registration without...

Delhi High Court

Physical Verification Of Business Premises For GST Registration Without Issuing Notice Is Violation Of Principle Of Natural Justice: Delhi High Court

Case Title: Curil Tradex Pvt. Ltd. Versus The Commissioner

Citation: 2022 LiveLaw (Del) 905

The Delhi High Court has held that the physical verification of business premises for GST registration without issuing a notice is a violation of the principle of natural justice.

The division bench of Justice Rajeev Shakdher and Justice Taravitasta Ganju has noted that the proper officer opted to have the petitioner's business premises inspected, albeit without the presence of its authorised representative. Had notice or intimation been given, the glitch could have been overcome.

No PMLA Proceedings After Quashing Of FIR Against Accused: Delhi High Court Set Aside Proceedings Against IHFL And Its Employees

Case Title: Indiabulls Housing and Finance Limited v Enforcement Directorate

The Delhi High Court has set aside the proceedings under the Prevention of Money Laundering Act, 2002 against Indiabulls Housing and Finance Limited (IHFL) and its employees.

The division bench of Justice Anish Dayal and Justice Mukta Gupta relied on the decision of the Supreme Court in the case of Vijay Madanlal Choudhary & Ors Vs. Union of India & Ors. The supreme court held that authorities under the PMLA cannot resort to action against any person for money laundering on the assumption that the property recovered by them must be proceeds of crime and that a scheduled offence has been committed. The scheduled offence must be registered with the jurisdictional police or pending inquiry by way of complaint before the competent forum. In the event that there is already a registered scheduled offence but the person named in the criminal activity relating to a scheduled offence is finally absolved by a court of competent jurisdiction owing to an order of discharge, acquittal or quashing of the criminal case of the scheduled offence, there can be no action for money laundering against not only such a person but also any person claiming through him in relation to the property linked to the stated scheduled offence.

Recovery Of Annual Report And Share Certificate From the Assessee's Premises Are Not Incriminating Documents: Delhi High Court

Case Title: PCIT Versus Panchmukhi Management Services Pvt. Ltd.

The Delhi High Court has held that the recovery of the annual report and the share certificate of the assessee premises cannot be considered to be incriminating documents.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that the genuineness of the share capital has been accepted both by CIT (A) and ITAT and that there is no live link between the seized material and the additions made.

Issuance Of Notice To Unrelated Mail Address Does Not Constitute Due Despatch: Delhi High Court

Case Title: Suman Jeet Agarwal Versus ITO

The Delhi High Court has held that the issuance of e-mail-attaching electronic notice to an unrelated e-mail address does not constitute due despatch and, therefore, the notices cannot be said to have been issued on 31st March 2021.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that since an authenticated copy of the notice was placed on the registered account of the assessee on the E-filing portal, as that is how the petitioners learnt about the notices, the notices will be held to have been issued on the date on which the notices were first viewed by the assessees on their e-filing portal.

GST Not Payable On Renting Of A Residential Dwelling For Personal Use: Delhi High Court

Case Title: Seema Gupta Versus Union Of India

The Delhi High Court has held that Goods and Service Tax is not payable on renting a residential dwelling for personal use.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh has observed that the rental of a residential dwelling to a proprietor of a registered proprietorship firm who rents it in his personal capacity for use as his own residence and not for use in the course or furtherance of the business of his proprietorship firm and such renting is on his own account and not that of the proprietorship firm, shall be exempt from tax under Notification No.04/2022-Central Tax (Rate) dated 13.07.2022.

Bombay High Court

Limitation Period Starts After Affixing Signatures On GST Registration Cancellation Order: Bombay High Court

Case Title: Ramani Suchit Malushte Versus Union of India and Ors.

The Bombay High Court has held that the limitation period would start only after the affixing of signatures on the GST registration cancellation order.

"Only on the date on which the signature of Respondent issuing authority was put on the order dated November 14, 2019, for the purpose of attestation, would time to file an appeal commence," the division bench of Justice K.R. Shriram and Justice A.S. Doctor said.

Reassessment Notice Issued Against A Dead Person Would Be Invalid: Bombay High Court

Case Title: Shailesh Shah, Legal Heir of Late Shri Ramniklal Harilal Shah Versus The Income Tax Officer

The Bombay High Court has held that a reassessment notice against a dead person would be invalid unless the legal representatives submit to the jurisdiction of the Assessing Officer without raising any objection.

The division bench of Justice Dhiraj Singh Thakur and Justice Valmiki Sa Menezes has observed that where the legal representatives do not waive their right to a notice under Section 148 of the Income Tax Act, it cannot be said that the notice issued against the dead person is in conformity with the intent and purpose of the Income Tax Act.

Madras High Court

GST Registration Cancellation: Madras High Court Directs Changes In Architecture Of GST Portal

Case Title: M.Mallika Mahal Versus The Commissioner of Central GST and Central Excise

Citation: 2022 LiveLaw (Mad) 411

The Madras High Court has directed the GST department to take suitable steps by instructing GST Network, New Delhi to make suitable charges in the architecture of the GST Web Portal to allow the petitioners to file their returns and pay the tax/penalty/fine.

The single bench of Justice Anitha Sumanth has noted that payment of tax, interest, fine/fee, etc. shall not be allowed to be made or adjusted from and out of any input tax credit which may be lying unutilized or unclaimed in the hands of these petitioners.

Andhra Pradesh High Court

GST Refund Application: Andhra Pradesh High Court Excludes Period From 1st March, 2020 to 28th February, 2022 For Limitation

Case Title: M/S. Gandhar oil refinery (India) Limited v. Assistant commissioner of sales tax

The Andhra Pradesh High Court has relied on the notification dated 05.07.2022 and held that the period from 1st March, 2020 to 28th February, 2022, for the computation of the period of limitation for filing refund applications shall stand excluded.

The division bench of Justice C. Praveen Kumar and Justice A.V. Ravindra Babu has observed that the application for refund was not made beyond the period of limitation and remanded the matter back to the assessing authority for fresh consideration in accordance with the law.

Tripura High Court

Most People Possessing Exotic Species Are Animal Lovers, Cannot Direct Govt To Criminalize Non-Declaration: Tripura High Court

Case Title: Adwitiya Chakrabarti Versus Union of India

Dismissing a PIL seeking to declare the possession of undeclared exotic animals and birds as illegal under the Customs Act and the Wild Life (Protection) Act and prosecution of their owners, the Tripura High Court has said it cannot direct or expect the government to take such drastic measure in haste without assessment of the impact and in absence of a detailed study.

The division bench of Chief Justice Indrajit Mahanty and Justice S.G. Chattopadhyay noted that a large number of citizens across India own pets which may be exotic species and might have been purchased or procured from those involved in captive breeding.

Calcutta High Court

Calcutta High Court Allows Pharma Company To Avail CENVAT Credit On Sales Promotion Services

Case Title: Principal Commissioner Of Central Excise Versus M/s Himadri Speciality Chemical Ltd.

The Calcutta High Court has allowed the pharma company to avail CENVAT credit on sales promotion services.

The division bench of Justice T.S. Sivagnanam and Justice Supratim Bhattacharya has observed that the commission paid by the pharma company to the commission stockist is included in the assessable value of the goods on which excise duty has been paid by the respondent on the final products.

The court has noted that sales promotion would include services by way of the sale of goods on a commission basis.

Rajasthan High Court

Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty

Case Title: Sudershan Lal Gupta & Ors. versus Union of India & Ors.

The Rajasthan High Court has dismissed a batch of writ petitions challenging the levy of GST on reverse charge basis on royalty of mining extraction.

Noting that the Coordinate Benches of the Rajasthan High Court, in several cases, have dismissed the writ petitions challenging the levy of GST on royalty, the Division Bench of Acting Chief Justice Manindra Mohan Shrivastava and Justice Shubha Mehta ruled that it was bound by the final orders passed by the Coordinate Benches.

ITAT

No TDS On Payment Of FTS To Non-Resident Not Having PE In India:ITAT

The Kolkata Bench Income Tax Appellate Tribunal (ITAT) ordered no TDS on payment of fees for technical services (FTS) to non-residents not having a Permanent Establishment (PE) in India.

The two-member bench of Rajpal Yadav (Vice President) and Rajesh Kumar (Accountant Member) has observed that the payment made to non-resident recipients not having any permanent establishment in India and also that the services provided are not in the nature of royalty and fee for technical services.

Charitable Organisation Should spend grant As Per Terms And Conditions, not on whims and fancies: ITAT

Case Title: ITO (E) Versus Sports Good Export Promotion Council

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee is not free to use the funds voluntarily as per its own whims and fancies and that the same has to be spent as per the terms and conditions of the grant.

The two-member bench of Yogesh Kumar U.S. (Judicial Member) and Shamim Yahya (Technical Member) has observed that the grants are given specifically for participation in a particular event held abroad. The grant approval includes a condition that a separate account for the projects has to be maintained. The assessee has utilised the funds as per the terms and conditions of the grant. The grants are not to be utilised for any other purpose than for which they are issued and also that the execution of the project is not to be entrusted to any other organisation. Further, the up-spent grant along with 10% interest from the date of release of the fund has to be reimbursed by the government.

CESTAT

Registration Of Premises Not A Necessary Prerequisite For Claiming A Refund Under Cenvat Credit Rules, 2004: CESTAT

Case Title: M/s. Selling Simplified India Private Limited Versus Commissioner of CGST, East Delhi

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the registration of premises is a necessary prerequisite for claiming a refund under Rule 5 of the Cenvat Credit Rules, 2004.

The bench of Rachna Gupta (Judicial Member) has observed that service providers are entitled to a refund under rule 5 of the Cenvat Credit Rules, 2004 when the output service is exported.

Vodafone Entitled To Claim CENVAT Credit On Tower And Prefabricated Buildings: CESTAT

Case Title: M/s Vodafone Mobile Services Limited Versus Commissioner of Central Excise

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Vodafone is entitled to claim CENVAT credit on tower/tower material and pre-fabricated buildings/shelters.

The two-member bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) has observed that Vodafone was entitled to take CENVAT credit since the items in dispute were "capital goods".

Exemption u/s 26 of Special Economic Zones Act, 2005 Is Overriding In Nature: CESTAT Quashes Service Tax Demand

Case Title: eClerx Services Limited Versus Commissioner of CGST &Central Excise

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has quashed the service tax demand and held that the exemption afforded by section 26 of the Special Economic Zones Act, 2005 is overriding in nature and the breach of conditions is procedural.

The two-member bench of Ajay Sharma (Judicial Member) and C.J. Mathew (Technical Member) has held that the required documentation was not available for the entire period of the dispute but, at the same time, it cannot be denied that at some point, the eligibility did exist. The procedural infirmities, for a shorter or longer time, do not in any way supplant the exemption accorded to the supply of services.

AO Treated Sundry Creditors As Bogus Based On His personal belief: ITAT Deletes Addition

Case Title: Assistant Commissioner of Income-tax, Circle-29, Kolkata Versus Shri Pradip Mullick

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that AO treated the sundry creditors as bogus at the instance of the report of the inspector for a few sample cases was based on AO's personal belief and not by virtue of any concrete facts and evidence placed on record.

The two-member bench of Rajpal Yadav (Vice-President) and Girish Agrawal (Accountant Member) has observed that the conclusion of the AO was based on imagination and directed to delete the addition.

Revenue Can't Characterize Preference Shares As Debt Instrument Ignoring Legal Consequences: ITAT

Case Title: M/s. Enzen Global Solutions Pvt. Ltd. versus ITO

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has reiterated that premium on redemption of preference shares is exigible to tax under the head 'Income from Capital Gains', liable to tax to the extent actually received on the redemption of shares.

The Bench of N.V. Vasudevan (Vice President) and Padmavathy S (Accountant Member) held that the revenue authorities cannot disregard the legal effect of issue of cumulative preference shares, and that they cannot ignore the legal consequences of a document by characterizing a share as a debt instrument.

AAR

Myntra Not Entitled To ITC On Vouchers And Subscription Packages Procured From Third Party Vendors: AAR

Applicant's Name: Myntra Designs Pvt. Ltd.

The Karnataka Authority of Advance Ruling (AAR) has ruled that Myntra is not entitled to an Input Tax Credit (ITC) on vouchers and subscription packages procured from third-party vendors.

The two-member bench of M.P. Ravi Prasad and T. Kiran Reddy has observed that Myntra is not eligible to avail of the input tax credit, in terms of Section 16 of the CGST Act 2017, on the vouchers and subscription packages procured by the applicant from the third party vendors that are made available to the eligible customers participating in the loyalty programme against the loyalty points accumulated by the customers, as the ITC is not available in terms of Section 17(5)(h) of the CGST Act 2017.

Security Services Provided By LLP To Registered Person Not Covered Under RCM: AAR

Applicant's Name: AS&D Enterprise LLP

The Haryana Authority of Advance Ruling (AAR) has ruled that security services provided by LLP to any registered person are not covered by the Reverse Charge Mechanism (RCM) and are taxable on a forward charge basis.

The two-member bench of Sunder Lal and Kumud Singh has ruled that an LLP is a body corporate for the purpose of the Companies Act, 2013 and the same would apply to the term body corporate. As a consequence, the reverse charge mechanism would not be applicable. Moreover, the legislative intention behind the application of RCM is to those supplies in which the government or executive do not have control over the supplier or who are working in the unorganised sector. So, the RCM is made applicable to any person other than a body corporate.

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