Supreme Court and High Court Weekly Round Up

Supreme Court - High Court - Weekly Round Up - taxscan

This weekly round-up analytically summarises the key tax judgements of the Supreme Court and all High Courts reported at during the previous week from July 01 to July 07 2023.

Rejection of Appeal without Considering Break Down of Vehicle and Generation of New e-way Bill within Three Minutes is ‘too technical’: Calcutta HC M/s. OFB Tech Private Limited vs State of West Bengal & Ors CITATION:   2023 TAXSCAN (HC) 1044

The Calcutta High Court has held that rejection of the appeal without considering the breakdown of the vehicle and generation of a new e-way bill within three minutes is ‘too technical’. 

 Justice Md. Nizamuddin set aside the impugned order along with the rectification order and remanded the matter back to the Appellate Authority concerned to pass a fresh speaking order in accordance with the law after giving an opportunity of hearing to the petitioner

 Cash-Credit Facility is not Debt, cannot be Made Attachable: Calcutta HC Orders to Lift Provisional Attachment J.L. Enterprises vs Assistant Commissioner CITATION:   2023 TAXSCAN (HC) 1046

 The Calcutta High Court ordered to lift provisional attachment and held that Cash-Credit Facility is not debt hence cannot be made attachable.
A Division Bench of Chief Justice TS Sivagnanam and Justice Uday Kumar observed that “Therefore, we are of the view that the writ Court ought to have allowed the writ petition in its entirety instead of relegating the appellant to a remedy which is inapplicable to the cases where there is an order of provision attachment of a cash credit account.”

Delhi HC dismisses Plea challenging RBI’s decision to withdraw Rs. 2000 banknotes from Circulation

On Monday, July 3rd, 2023, the Delhi High Court dismissed a Public Interest Litigation (PIL) that contested the Reserve Bank of India’s (RBI) decision to withdraw Rs. 2000 banknotes from circulation. The RBI had withdrawn the Rs. 2000 notes from the economy on May 19th, 2023.

 Following the declaration, the Reserve Bank of India (RBI) Governor, Shaktikanta Das, made a public statement on May 22nd, 2023, regarding the implementation of the ‘Clean note policy’ for Rs. 2000 denomination banknotes. The governor clarified that the withdrawal of Rs. 2000 notes was carried out as part of the currency management operations of the RBI.

 Reassessment Proceedings Initiated on Recovery of Tax Share Premium of Rs 679.32 Crores without any Tangible Material to Prove Income Escapement: Bombay HC Quashes Reassessment Order  SLS Energy Pvt. Ltd vs Iniome Tax Offier CITATION:   2023 TAXSCAN (HC) 1048

In a significant case, the Bombay High Court has quashed the reassessment proceedings initiated to recover the tax share premium of Rs. 679 crores without any reason on tangible material to prove Income Escapement.

 There was neither tangible material from the assessing officer to form the basis for his reason to believe that the petitioner’s income had escaped assessment. In the absence of any basis for the AO’s reason to believe that income had escaped assessment nor any tangible material that would have otherwise given jurisdiction to reopen the assessment, even when the reopening was sought to be made within a period of four years, the Court quashed the reassessment process.

 Condition to Pay Cost to WBGST Authority for Delay of 148 days in Filing Appeal: Calcutta HC Allows Writ  L.G. Balakrishnan & Bros Limited Vs The Assistant Commissioner of State Tax, Bowbazar Charge & Ors. CITATION:   2023 TAXSCAN (HC) 1049

The Calcutta High Court allowed the writ petition in the matter of condition to pay cost to West Bengal Goods and Service Tax Act (WBGST) Authority for delay of 148 days in filing appeal.

 The Court further noted that if petitioner pays the cost within the time stipulated herein, the appeal in question of the petitioner shall be heard and disposed of on merits within a period of 12 weeks from the date of filing of such proof of payment. In case of default in making the payment as indicated hereinabove, this order will not have any force and the order of the Appellate Authority dated would stand revived.

 DTAA Benefits allowable to Assessee acts as Intermediary between Indian Subscribers and Hongkong: Bombay HC  The Commissioner of Income International vs Alibaba.Com Singapore E-Commerce CITATION:   2023 TAXSCAN (HC) 1050

In a recent judgment, the panel composed of Justice K.R. Shriram and Justice Firdosh P. Pooniwalla provided relief to the assessee,, Singapore E-Commerce Private Limited. The panel emphasized that the assessee, acting as an intermediary between Indian subscribers and Hong Kong Company, is eligible for the benefit of Double Taxation Avoidance Agreement (DTAA).

 The High Court has observed that “AO has completely denied the existence of the assessee as an independent entity as if the assessee was only a front or a shadow entity of Alibaba Hong Kong. If the AO was so convinced that the entire activity in India to various subscribers was actually carried out by Alibaba Hong Kong and not by assessee, then we would have expected him to do something to Alibaba Hong Kong and not the assessee.”

 Subsidy Received by Nestle India as Incentive to Establish Industrial Unit is Capital receipt, Cannot be Adjusted Against Block of Assets: Delhi HC  PRINCIPAL COMMISSIONER OF INCOME TAX vs NESTLE INDIA LTD CITATION: 2023 TAXSCAN (HC) 1051

 In a significant ruling the Delhi High Court observed that the Subsidy received by Nestle India, the assessee as incentive to establish industrial unit is Capital receipt and cannot be adjusted against block of assets.
Since the subsidy in this case was not intended as a payment to meet, directly or indirectly, a part of the cost of the assets, no adjustment could have been ordered, as was directed by CIT(A). The Tribunal, on this score, in our view, reached the correct conclusion” the Bench concluded.

 Refund of IGST Allowable on Zero Rated Supply along with 7% Interest: Bombay HC  Sunlight Cable Industries vs The Commissioner of Customs CITATION:   2023 TAXSCAN (HC) 1054

In a recent judgement, the Bombay High Court has allowed the refund of Integrated Goods and Service Tax (IGST) on zero-rated supply along with 7% interest.
The division bench of Justice G.S. Kulkarni and Justice Jitendra Jain has directed “the Respondents are directed to refund to the Petitioner the IGST paid by the Petitioner in respect of the goods exported, i.e. zero-rated supply, under shipping bills in question being an amount of Rs. 21,41,451/- with simple interest at 7% per annum with effect from 22nd February 2018.”

 Importer not Entitled for Proportionate Increase in Import Quota when CTO on Enhanced Production Capacity issued after Fixing Total Import Limit: SC   M/S. SANVIRA INDUSTRIES vs RAIN CII CARBON (VIZAG) LTD. & ORS. CITATION:   2023 TAXSCAN (SC) 1889 

In a significant case, the Supreme Court has held that the importer is not entitled to the proportionate Increase in import Outa when Consent to Operate (CTO) on enhanced production capacity was issued after fixing the total import limit and upheld the decision of the Delhi High Court which set aside the increased quota allocated for the import of raw pet-coke (RPC).
It was held that there is no infirmity with the findings and conclusions of the Division Bench, in the impugned judgment and dismissed the appeal. 

 Special Provision Will Prevail over General Provision in a Statute: Supreme Court Rules about Taxation Classification  Santhosh Maize & Industries Limited vs State of Tamil Nadu & Anr CITATION:   2023 TAXSCAN (SC) 188 

The Supreme Court in a case has ruled that on taxation classification if a special provision will prevail over the general provision in a statute.
The bench of Justices S. Ravindra Bhat and Dipankar Datta held that the Circular dated 8th October 1998 does not run counter to the provisions of the Tamil Nadu General Sales Tax Act, 1959.

 Calcutta HC directs Special Anomaly Committee to take Decision on Scale of Pay of Income Tax Officer  The Union of India & Ors vs Ashis Chakraborty & Ors. CITATION:   2023 TAXSCAN (HC) 1055

In a significant case, the Calcutta High Court directed the government to constitute the special Anomaly Committee to decide on the Scale of Pay of Income Tax Officers as per the recommendation of the Pay Commission.
 Since it is a policy decision of the Government of India the Court comprising Justice Harish Tandon and Justice Prasenjit Biswas directed that the Union of India shall constitute a Special Anomaly Committee within two months and decide the representations made by the respondents within one month from the date of constitution of the said Committee. 

Railway as Scraps Supplier Wrongly Deposited GST in different GSTN: MP HC directs Railway to Refund Rs. 13 Lakhs to Partnership Firm  AGRAWAL AND BROTHERS vs AGRAWAL AND BROTHERS CITATION:   2023 TAXSCAN (HC) 1056g

A Division Bench of Madhya Pradesh High Court observed that “no one cannot be made to suffer for the fault of another”. The bench directed the railway to refund Rs. 13,38,544/- to the petitioner-partnership firm which was paid to the Goods and Services Tax (GST) Authorities to avoid GST registration cancellation.

 It was also mentioned that Respondent No.1 has the option to file a claim with the GST department regarding the amount paid by the petitioner. If such a claim is submitted, the competent authority of Respondent No.2 (GST Authorities) will assess and decide on the claim based on applicable laws.

Scrutiny of Returns not Essential for Initiating Proceedings to Demand Tax under APGST Act: Andhra Pradesh HC M/s Devi Traders vs The State of Andhra Pradesh CITATION:   2023 TAXSCAN (HC) 1053

 The Andhra Pradesh High Court observed that the Scrutiny of Returns not an essential condition for initiating proceedings to demand tax under Andhra Pradesh Goods and Services Act, 2017 (APGST Act).

 The division bench of Justice U. Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa said, “Sections 73 and 74 of APGST Act are not controlled by section 61 as reference to the same is absent. Section 74 uses “where it appears” conferring wide scope as information may be from any credible source. Proper officer may proceed under Section 74 of APGST Act based on action under Section 61 of APGST Act on scrutiny of returns or section 65 on audit or some other fact.”

 Secured Creditor has Priority Over Government Dues Under SARFAESI Act:  Bombay HC  

Ronak Industries vs Assistant Commissioner Central Excise & Customs CITATION:   2023 TAXSCAN (HC) 1052
 The Bombay High Court recently ruled that the secured creditor has priority over the Government dues under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI).

 A Division Bench of the Bombay High Court of Justice B. P. Colabawalla and Justice M.M. Sathaye observed that “Since the Full Bench decision of the Court in the case of Jalgaon Janta Sahakari Bank Ltd. and Anr. as rested the controversy of priority of the secured creditor viz-a-viz the dues of the Central Government or State Government or local authority under Section 26-E of the SARFAESI Act, 2002, thelien/charges/encumbrance/mutation entry, if any, registered with Mamlatdar by Assistant Commissioners cannot be allowed to stand and Sub Registrar would have to be directed to record/register the Sale Certificate/Sale Deed under the provisions of the Registration Act, 1908 as free from any encumbrances of the Assistant Commissioners.”

Payment Received by Colgate Palmolive Malaysia from Colgate India to Access SAP System is not ’Royalty’; Not Taxable: Bombay HC  Commissioner of Income Tax (IT)-2 vs M/s. Colgate Palmolive Marketing SDN BHD CITATION:   2023 TAXSCAN (HC) 1058

A Division Bench of Bombay High Court ruled that the payment received by the Colgate Palmolive Marketing SDN BHD, from the Colgate Palmolive (India) Limited to access the SAP system does not amount to process royalty under Section 9(1)(vi) of the Income Tax Act, 1961. Thus, not taxable.

 The court noted that the payment made by CPI to the Assessee cannot be categorized as royalty according to Explanation 5. Based on the evidence presented, it was established that CPI had been provided restricted access to the SAP system at its own expense to utilize the data available within the system. This finding aligns with the decision made by the ITAT. Hence, payment made by CPI cannot be regarded as payment for use of the system and therefore cannot amount to royalty under the said Explanation 5, thus not taxable.

 Vehicle Tax Exemption Allowable on Car Purchased by Visually Challenged Person: Madras HC  Carunia Seelavathi vs The Secretary to the Government of Tamil Nadu CITATION:   2023 TAXSCAN (HC) 1057

The Madras High Court recently held that Vehicle Tax Exemption is allowable on cars purchased by visually challenged persons.
The authority concerned shall ensure that necessary orders exempting the petitioner from the motor vehicle’s tax as well as the GST are passed within a period of four weeks from the date of receipt of a undertaking letter by the petitioner.”, the Court held.

Delhi HC quashes Registered FIR u/s 482 of CrPC on ground of Civil Nature of Disputed Matter  SHIV KUMAR & ANR. vs STATE OF NCT OF DELHI & ANR. CITATION:   2023 TAXSCAN (HC) 1063

 In a recent case, the Delhi High Court quashes the registered First Information Report (FIR) under section 482 of the Criminal Procedural Code,1973 on the ground of the civil nature of the disputed matter. 
A single-member panel comprising Dinesh Kumar Sharma held that the registered FIR under sections 406/420 read with 120B of the Indian Penal Code registered at Delhi police station was quashed under section 482 of the Criminal Procedural Code. 

 Karnataka HC Dismisses WP against Issuance of Blocking Orders u/s 69A of IT Act on ground of Non-Violative of Doctrine of Proportionality  X CORP vs UNION OF INDIA CITATION:   2023 TAXSCAN (HC) 1062

The Bengaluru bench of Karnataka High Court dismissed the writ petition against the issuance of blocking orders under section 69A of the Information Technology Act,2000 on the ground of the non-violative doctrine of proportionality. 
The Court observed that the impugned orders blocking the tweets/accounts for an indefinite period are unassailable on the doctrine of proportionality.  A single-member bench comprising Krishna S Dixit held that the petition was devoid of merits and is liable to be dismissed with exemplary costs. 

 Penalty can be Imposed when any Person Committed Act of Omission in relation to Goods Rendered for Confiscation u/s 112(a) of Customs Act: Delhi HC  RAJEEV KHATRI vs COMMISSIONER OF CUSTOMS (EXPORT) CITATION:   2023 TAXSCAN (HC) 1061

In a recent case, the Delhi High Court held that the penalty can be only imposed when any person committed an act of omission to goods or services rendered for confiscation under section 112(a) of the Customs Act, 1962. 
The two-member bench comprising Vibhu Bakhru and Amit Mahajan held that the penalty imposed on the assessee under section 112(a) of the Customs Act was not sustainable and quashed while allowing the appeal filed by the assessee. 

Provisional Attachment u/s 83 of CGST Act cannot be Done after Expiry of One Year from Date of Original Attachment: Bombay HC 
 Bharat Parihar vs State of Maharashtra Thr. PP Office And Ors. CITATION:   2023 TAXSCAN (HC) 1059

In a recent case, the Bombay High Court held that the provisional attachment of a Bank Account under section 83 of the Central Goods and Service Tax Act, 2017 cannot be done after the expiry of one year from the date of the original attachment. 

 The two-member panel comprising G.S. Kulkarni and Jitendra Jain held that provisionally attaching the Petitioner’s bank account was rendered illegal and invalid under the provisions of the prescribed law and quashed the order while allowing the appeal filed by the assessee. 

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