Supreme Court and High Courts Weekly Round-Up

This weekly round-up analytically summarises the key tax judgements of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from May 06 to May 12 2023.

Official Liquidator Liable to Discharge Arrears of Property Tax and Water Tax being Post-Liquidation Liability: SC
OFFICIAL LIQUIDATOR vs UJJAIN NAGAR PALIKA NIGAM & ORS. CITATION: 2023 TAXSCAN (SC) 172

The Supreme Court of India observed that the arrears of property tax and water tax until the date of confirmation of sale would qualify as the expenses for “preserving, realising or getting in” the assets of the company and thus, shall have to be paid in priority by the Official Liquidator.

"The Company Court and then the Division Bench of the High Court have rightly underscored the faults on the part of the appellant OL and have rightly held that the liability on account of the property tax and water tax claimed by the respondent to the extent rejected by the official liquidator has been a post-liquidation liability, which the official liquidator was obliged to pay," Justice Dinesh Maheshwari and Justice Aniruddha Bose wrote in their opinion.

Aswini Homeo Arnica Hair Oil classified as ‘medicament’ under CETA: SC rules mere Broad-Basing of Entries under CETA cannot Justify Re-Classification
COMMISSSIONER OF CUSTOMS, CENTRAL EXCISE AND SERVICE TAX vs ASHWANI HOMEO PHARMACY CITATION: 2023 TAXSCAN (SC) 171

In a major ruling the Supreme Court of India classified Aswini Homeo Arnica Hair Oil as ‘medicament’ under Central Excise Tariff Act, 1985 (CETA) and ruled that the classification of a product under the Central Excise Tariff Act, 1985, cannot be changed merely on the ground of change of tax structure or tariff entries, without showing a change in the nature and character of a product or a change in the use of the product.
The Aswini Homeo Arnica Hair Oil ", merits classification as'medicament' under Chapter 30 and not as 'cosmetic or toilet preparations' under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985, and the change in tariff structure by way of amendment brought about in the year 2012 did not justify any re-look at the classification of the product in question."

The Bench came to the conclusion that the department was not justified in trying to reopen the agreed-upon position regarding the product in question, merely because of changes made to Chapters 30 and 33 of the Central Excise Tariff , changes that essentially broadened their ambit and scope and provided modified marginal notes and tariff entries with specific details.

The Court also remarked that anything which is prepared for being used on the hair and carries the name “Hair Oil”, would not lose its character as medicament if otherwise it has been prepared for therapeutic or prophylactic uses.

Talcum Powder with Medications are Cosmetics: Supreme Court Upholds Higher Tax Rate on ‘Nycil’ under “Medicated Talcum Powder” in Heinz India’s Plea
HEINZ INDIA LIMITED vs THE STATE OF KERELA CITATION: 2023 TAXSCAN (SC) 173

The Supreme Court has declared that medicated prickly heat talcum powder ‘Nycil’ is a cosmetic and does not fall under the category of medicines or drugs, making its manufacturer Heinz India Ltd liable to pay a higher rate of tax.

The Tamil Nadu General Sales Tax Act, which specifically included talcum powder, whether medicated or not, in the list of cosmetics, was cited by the Two-Judge Bench. Without leaving any room for interpretation, the court highlighted that all types of talcum powders containing medication, regardless of the amount or proportion, should be regarded cosmetics. As a result, the court rejected the arguments made by Heinz India Ltd. and Glaxo Smithkline Pharmaceuticals against the respective judgements of the governments of Kerala and Tamil Nadu to impose higher sales tax rates for Nycil.

This ruling by the Supreme Court is expected to have significant implications for the manufacturers of medicated talcum powders, who may now face higher tax rates due to their products’ classification as cosmetics.

Non-issue of Notice of Proceeding to Kirloskar Oil Engines: Bombay HC quashes Order by Maharashtra Sales Tax Tribunal 
Kirloskar Oil Engines Ltd vs State of Maharashtra and Ors. CITATION: 2023 TAXSCAN (HC) 779 

The Bombay High Court quashed the order passed by the Maharashtra Sales Tax Tribunal on non-issuance of notice of proceeding to Kirloskar Oil Engines.

The Second Appeal No. 12A of 2016 was returned to the file of the Tribunal to be evaluated on its own merits in accordance with the law by a two-judge panel made up of Justice Nitin Jamdar and Abhay Ahuja. The judgement made by the Tribunal on July 11, 2017, was overturned and set aside. The order made in response to the restoration application filed with the Tribunal, according to the court, "will not survive and is set aside."

Transfer of Development Rights by Builder is Transfer of Capital Assets, not Stock in trade: SC quashes Bombay HC Judgment
Commissioner of Income Tax vs Glowshine Builders & Developers Pvt. Ltd. CITATION:   2023 TAXSCAN (SC) 174

The Two Bench of Justices M.R. Shah and B.V. Nagarathna of the Supreme Court invalidated the decisions of the Income Tax Appellate Tribunal (ITAT) and the Bombay High Court in order to uphold that the transfer of development rights by a builder constitutes a transfer of capital assets rather than stock in trade as recorded by the Assessing Officer.

The Supreme Court ordered that the proper determination be made regarding whether the transaction in question involves the sale of capital assets or the sale of stock in trade, as well as other factors mentioned above. The bench granted the tribunal complete discretion to reach the best decision.

GST Authorities attach Bank Account without Issuing Notice: Orissa HC directs to file appeal before Appropriate Authority u/s 107 of Orissa GST Act
Twisha Educational Private Limited vs Addl. CT & GST Officer CITATION: 2023 TAXSCAN (HC) 784

While entertaining the writ petition, a Division Bench of Justice Dr. B. Sarangi and Justice M.S. Raman of Orissa High Court directed the petitioners to file an appeal before the appropriate authority under Section 107 of the Orissa Goods and Services Tax Act, 2017 (OGST Act).

The bench considered the submissions of the department and stated that this Court is not inclined to entertain this writ petition. However, liberty is granted to the petitioner to pursue its remedy before the appropriate forum.

State Sales Taxes can exceed Limits of Central Tax on Pan Masala and Gutka: Supreme Court 
M/S TRIMURTHI FRAGRANCES (P) LTD vs GOVT.OF N.C.T OF DELHI THROUGH CITATION: 2023 TAXSCAN (SC) 175

In a major ruling the Supreme Court of India ruled that the state sales taxes can exceed limits of Central Tax on Pan Masala and Gutka.

The Justices S. Ravindra Bhat and Dipankar Datta were part of the two-judge panel that made this observation: "The heading that provides the most accurate description must be followed. In this instance, there is no question that pan masala and gutkha, regardless of whether they contained tobacco, fell under Chapter 21 before 2001 as pan masala. The goods that may be classified under Chapter 24—tobacco products—were more general and did not contain pan masala.

The Court noted in its ruling that, in terms of the Central Sales Tax Act, gutkha and pan masala are not covered under sub-heading 2404.40. As a result, the assessee's assertions that the local tax rate cannot exceed the cap set forth in the Central Sales Tax Act are rejected as unjustified.

Bombay HC quashes Re Assessment Order passed on Change of Opinion as to Calculation of Tax Payable
Chanchal Bhagwatilal Gokhru vs Union of India CITATION:   2023 TAXSCAN (HC) 782 

In a recent decision the Bombay High Court quashed the re assessment order passed on change of opinion as to the calculation of tax payable.

"We find no substance in the AO's reason to believe that income chargeable to tax has escaped assessment inasmuch as there is no mention of any tangible material that led to his conclusion," the Coram, composed of Justices Kamal Khata and Dhiraj Singh Thakur, stated. A difference of opinion over how the assessee should calculate their tax liability sets off the entire procedure. It is clear that the evaluation is being reopened using blatant claims that the transaction was "An accommodation entry made in collusion & connivance with the entry provider."

It is well settled judicial principal that, the true test of income chargeable to tax escaping assessment is whether there exists fresh “tangible material” on the basis of which appropriate conclusion is reached” the Bench concluded.

No New Tangible Material available on record to Prove Escapement of Income: Bombay HC quashes Re -Opening of Assessment 
A&J Associates vs Assistant Commissioner of Income Tax CITATION:   2023 TAXSCAN (HC) 783

The Bombay High Court quashed the re-opening of assessment on the ground that no new tangible material available on record to prove escapement of income.

The Bombay High Court noted that "where assessment was not sought to be reopened on the'reasonable belief' that income had escaped assessment on account of failure of assessee to disclose truly and fully all material facts that were necessary for computation of income but was a case wherein assessment was sought to be reopened on account of change of opinion of AO the reopening was not justified."

The Court of Justices Kamal Khata and Dhiraj Singh Thakur observed that in the present case, the Assistant Commissioner of Income Tax has relied upon the same information available from the assessment records there was no new tangible material available on record to conclude that income had escaped assessment. The Bench concluded by noting that the instant case is clearly a ‘change of opinion’.

Deposit under IDS neither refunded nor adjusted against any Outstanding Demand: Bombay HC directs Income Tax Authorities to Refund 
Sunil Wamanrao Sakore vs Union of India CITATION: 2023 TAXSCAN (HC) 785

In a recent ruling, a Division Bench of Bombay High Court directed the Income Tax Authorities to issue a fresh Form-3 subsequent refund of the amount paid under the Income Declaration Scheme (IDS) and the balance amount, if any.

The petitioner admitted that she had not paid the entire sum owing in accordance with the revised Form-3, dated September 27, 2021, the bench remarked. The petitioner's claim under the aforementioned Scheme could not be rejected, according to the petitioner, if the revised Form-3 under the Direct Tax Vivad se Vishwas Act's Scheme were to be adjusted against the sum of Rs. 3,48,752 that was deposited and was lying with the respondents under the IDS.

According to the Bombay High Court, the Direct Tax Vivad se Vishwas Act's goal of eradicating and resolving disagreements between the assessee and revenue would be carefully adhered to.

Pre-Deposit Mandatory for Excise Appeal u/s 35 F: Calcutta HC Allows to Pay Default Pre Deposit
M/s Active Ads vs The State of West Bengal & Ors. CITATION:   2023 TAXSCAN (HC) 778

The Calcutta High Court allowed the assessee to pay the mandatory pre-deposit for appeal under section 35Fof the Central Excise Act, 1944.

Justice Arindam Mukherjee observed set aside the order and directed the petitioner to deposit the pre-deposit amount required under the provisions of Section 35F of the Central Excise Tax, 1944 within a period of ten daysso that the Commissioner of Appeal can hear out the appeal on merits.

The petitioner must pay Rs. 2,30,949 by May 12th, 2023, or the order from March 28th, 2023 would resume and the appeal will be dismissed, it was further decided. The Siliguri case Commissionerate's Commissioner of Appeal will hear the case on the merits if the money is submitted in accordance with this instruction.

Onus is on AO to provide Reasons to Disbelieve Bank Statements and Supporting Documents for Reopening Assessment: Bombay HC 
M/s. Aditi Constructions vs . Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (HC) 781

In a recent decision the Bombay High Court ruled that is the onus of the Assessing Officer (AO) to provide reasons to disbelieve bank statements and supporting documents for reopening assessment.

The Court of Justices Kamal Khata and Dhiraj Singh Thakur noted that “The Petitioner has by production of bank statements and supporting documents shown that the reasonable belief of the Assessing Officer was unfounded and consequently the presumption that the Petitioner was one of the beneficiaries of the accommodation entries based on the statement of the third party was disproved.”

It would be the Assessing Officer's responsibility to give justifications for not believing the bank statements and other supporting documentation in order to reopen the assessment. The Bench stated, "In our opinion, that has not been spelt clearly, and as a result, the reassessment sought to be launched ought to be halted.

Authority cannot Pass Provisional Attachment Order u/s 5 of PML Act without Recording Reasons: Andhra Pradesh HC
C GOPAL REDDY AND CO. vs THE DIRECTORATE OF ENFORCEMENT CITATION: 2023 TAXSCAN (HC) 777

The Andhra Pradesh High Court held that the authority cannot pass provisional attachment order under section 5 of the Prevention of Money Laundering Act, 2002 without recording the reason.

The deposits were made by the National Highway Authorities only and no private transactions or third-party deposits are made.  It was submitted that if the authorities want to attach the said accounts also they should do so by giving proper reasons for attaching the said accounts.  By attaching the said accounts, the petitioners are unable to complete the contract works and are unable to pay salaries to the employees. 

The Court comprising  Justice Ravi Cheemalapati observed that the authority failed to record the specific reasons for attaching Account Nos.641301010050403 and 641304010000001.The Court set aside the impugned order only to the extent of attaching Account Nos.641301010050403 and 641304010000001 of the Union Bank of India. 

The 2nd respondent-Deputy Director, however, is free to investigate the aforementioned two accounts if he so chooses. If he determines that the aforementioned two accounts should be attached, he may do so by issuing a new, legally binding, reasoned order. 

Interstate Purchase of Capital Goods by Dealer does not bar Benefit under Composition of Value Added Tax: Karnataka HC 
M/s. VENKATESHWARA STONE CRUSHERS KANAYANAAGRAHARA vs STATE OF KARNATAKA CITATION: 2023 TAXSCAN (HC) 776

The Karnataka High Court has held that the interstate purchase of capital goods by dealers does not bar benefit under the composition of Value Added Tax (VAT).

The challenged order dated 07.11.2017 as well as the notices dated 09.12.2015 and 11.12.2015 were set aside by a two-judge panel consisting of Justice P S Dinesh Kumar and Justice C M Poonacha. The Court further ruled that the advantage under Section 15(1) of the KVAT Act shall not be impacted by the assessee's interstate acquisition of capital goods. Veena J. Kamath, an attorney, represented the appellant, while Jeevan J. Neeralgi, an attorney, represented the State.

Failure to enrol in Common GST Portal within Time Limit and belated Filing of Appeal: Orissa HC refuses to Remand Matter to AO for Reassessment
M/s Sourav Satapathy vs Commissioner of CT & GST CITATION: 2023 TAXSCAN (HC) 787

The Orissa High Court, in view of the alternative efficacious remedy available to the petitioner, has refused to remand the matter to the Assessing Officer for reassessment when the assessee had failed to enrol in the common Goods and Services Tax (GST) Portal within the prescribed statutory time limit.

The Bench observed that, “if the contention of the petitioner, that he has already paid the demands raised by the authority is accepted, then it is the responsibility of the petitioner to apprise the authority concerned indicating that the demands raised are erroneous and, as such, in view of the dues already paid vide Annexure 5 series, the demand notices be rectified.”

The plea was dismissed, with the Division Bench of Justices B R Sarangi and M S Raman noting that "the assessment order is very clear that the petitioner has been issued with a provisional ID for enrolment on the common portal, but he has failed to enrol on the common portal."

Tax Exemption Claim on Tractors Used in Tea Garden: Calcutta HC directs to Consider Exemption Claim under West Bengal Motor Vehicle Tax Act
Goodricke Group Limited vs The State of West Bengal & Ors. CITATION: 2023 TAXSCAN (HC) 786

The Calcutta High Court directed the Motor vehicle taxing officer to consider the tax exemption claim made by the assessee under the West Bengal Vehicle Tax Act, 1979 on tractors used in Tea Garden which were not used on public roads.

The bench of a single judge Justice Arindam Mukherjee ordered the Regional Transport Officer, Alipurduar, to take into account the representation made by the petitioner on October 14, 2022 before the Taxing Officer, Department of Motor Vehicles, Alipurduar, after providing the petitioner with a reasonable opportunity of hearing to show that the tractors/trailers against which exemption of motor vehicles tax is claimed are not used or do not play in the public road but are confined only within the petitioner's property. According to the ruling, the full process must be finished within six months of the date. The Court reached the same conclusion in a case involving a related problem, Sankos Tea Garden v. State of West Bengal and Others, 2023 TAXSCAN (HC) 312.

No Penalty u/s 53(1) of Tripura VAT Act in Absence of Prescribed Format of Audit Report: Tripura High Court 
M/S Gemini Distilleries (Tripura) Pvt. Ltd. vs The State of Tripura CITATION:   2023 TAXSCAN (HC) 780

The Tripura High Court in its recent judgement held that no penalty under section 53(1) of the Tripura Value Added Tax Act, 2004 in the absence of the prescribed format of the audit report.

The proceedings were started under Section 31(1) of the TVAT Act, 2004, but no separate notice was given under Section 53(1) of the Act, 2004, before the imposition of penalty, a two-judge panel made up of Chief Justice Aparesh Kumar Singh and Justice Arindam Lodh remarked.  Due to the lack of a regulated structure for the submission of audited returns in accordance with Section 53(1) of the Act, 2004, the Court invalidated the contested penalty. Furthermore, it was said that "the remainder of the assessment order remains intact, except for the penalty part."

Appointment by Deputation must be entertained by Division Bench member, not by Single bench: Bombay HC reverses MAT’s Decision to revoke Deputation of Sales Tax Officer
Shri Pradip BapuraoJambhale-Patil vs Smt.Smita Gangaram ZagadeCITATION:   2023 TAXSCAN (HC) 788

In a recent ruling, a Division Bench of Bombay High Court overturned the decision of the Maharashtra Administrative Tribunal (MAT) revoking the deputation of the sales tax officer on grounds of inherent lack of jurisdiction.

Justice Gauri Godse and Justice R. D. Dhanuka bench was reluctant to accept the respondent side’s arguments because doing so would constitute a complete violation of the rules of jurisdiction, a violation of Section 5 of the Administrative Tribunal Act, and a violation of the circular issued by the Chairman in the exercise of his or her authority to order that a particular dispute be decided by the Single Member or by the Division Bench.

The tribunal noted that a single tribunal member lacked the authority to resolve the conflict about "appointment by deputation and order of cancellation." Set aside the Maharashtra Administrative Tribunal's contested order as a result of its lack of jurisdiction. 

Telangana HC allows amalgamated company to file Income Tax Returns Manually in absence of order of Condonation of Delay by competent authority 
M/s TSI Business Parks vs Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (HC) 789

A Division Bench of Telangana High Court quashed the order of the income tax authority disallowing the petitioner’s request to file returns manually The bench of Chief Justice Ujjal Bhuyan and Justice N. Tukaramji allowed the amalgamated company to file income tax returns manually in absence of the order of the condonation of delay by the competent authority.
The bench noted that the NCLT had accepted and sanctioned the merger plan after the deadline for filing the revised return for the assessment year 2016-2017, in accordance with the Supreme Court's decision in the case of Dalmia Power Limited. In the Dalmia case, the Supreme Court also cited the provisions of Section 139(5) of the Income Tax Act and declared that the said provision would not be applicable in a circumstance where a revised return could not be filed because of the time it took for NCLT to approve the amalgamation plan.

The Telangana High Court overturned the respondent authorities’ decision and instructed them to process the petitioner’s revised return of income, which was submitted on December 23, 2022, for the assessment year 2021–2022 in line with the law.

Tax Officer must have to provide Personal Opportunity of Hearing even without Request from Assessee u/s 73 of WBGST Act: Calcutta HC
Mohammad Ilyas vs Assistant Commissioner of Revenue, State Tax, Raiganj Charge & Ors. CITATION: 2023 TAXSCAN (HC) 794

A Single Bench of the Calcutta High Court observed that the Tax Officer must have to provide personal opportunity of hearing even without request from assessee under Section 73 of West Bengal Goods and Services Tax Act (WBGST).

The Court of Justice Md. Nizamuddin cited the Allahabad High Court's decision in the case of Bharat Mint and Allied Chemicals v. Commissioner of Commercial-tax, in which it was noted that all those decisions in unmistakable terms Courts have held that even without any request for a personal hearing by an assessee, the officer must be required to provide a personal opportunity of hearing, if the order is anticipated to be adverse.

Appeal under GST Kept Dormant by Dept: Jharkhand HC Directs Joint Commissioner (Appeals) to Dispose Appeal Within Eight weeks 
M/s. RimjhimIspat Limited vs The State of Jharkhand CITATION:   2023 TAXSCAN (HC) 792

The High Court of Jharkhand directed the joint commissioner (appeals) to dispose of the appeal under Goods and Service Tax (GST) which was kept dormant by the department within eight weeks.

The petitioner already used the appeal provision of Section 107 of the Jharkhand Goods and Services Tax Act, which the Department is keeping dormant, according to a two-judge panel made up of Justice Rongon Mukhopadhyay and Justice Deepak Roshan. This judge pair made this observation. The Jharkhand High Court dismissed the writ motion and ordered the Joint Commissioner (Appeals), Dhanbad Division, Dhanbad to decide the petitioner's appeal mechanically as soon as possible, preferably within eight days.

Orissa HC dismisses Writ Petition Challenging Audit Report being Premature 
Shalimar Chemical Works (P) Ltd. vs Commissioner of Commercial Taxes and Goods and Service Tax CITATION:   2023 TAXSCAN (HC) 793

The Orissa High Court dismissed the writ petition which challenged the audit report since it was premature.

A two-judge bench comprising  Dr Justice B R Sarangi and Justice M S Raman observed that the petitioner has challenged the audit report under Annexure-4 contending that certain observations have been made in the audit report to which the petitioner is not liable to pay the amount.

It was clear that the petitioner had not objected to any orders made by the relevant body. "In any situation, the petitioner may raise an objection with the assessing authority if he has a complaint regarding the audit report and the subsequent order in connection with notice. The petitioner will have an opportunity to speak up during the assessment process. The court concluded that because the writ petition is premature at this point, it is unlikely to be heard.

Presumption u/s 24 of PML Act can be Rebutted only at Stage of Trial: Jharkhand HC Upholds Rejection of Discharge Petition 
Kumar Pranav vs The State through Enforcement of Directorate CITATION:   2023 TAXSCAN (HC) 791

The Jharkhand High Court held that presumption under section 24 of the Prevention of Money Laundering Act, 2002 (PML Act) can be rebutted only at the stage of trial and upheld the rejection of the discharge petition.

A single judge's bench led by Justice Gautam Kumar Choudhary noted that the presumption under Section 24 of the PML Act may only be refuted during the trial stage and not during the charge-formation stage. The Court stated in dismissing the appeal that any connections, if any, between the assets bought in the petitioner's name and the profits of crime should be investigated at the trial stage rather than the discharge stage.

Income Tax Assessment u/s 153 A must be based on Incriminating Material: SC 
Principal Commissioner of Income Tax vs AbhisarBuildwell P. Ltd. CITATION: 2023 TAXSCAN (SC) 176

The Supreme Court in its recent judgement has held that assessment under Section 153A of the Income Tax Act, 1961 must be based on ‘incriminating’ material.

It was noted that the search and request under Sections 132 and 132A of the Act are connected to the assessment under Section 153A of the Act.  The purpose of Section 153A is to tax any undeclared income discovered through a search or in response to a search or request.  Therefore, the AO would only assume the jurisdiction to assess or reassess the whole income for the entire six years block assessment period in the case of completed/unabated assessment if the undisclosed income was discovered based on damning material.

A Division Bench comprising of Justices MR Shah and Sudhanshu Dhulia while dismissing the appeals filed by the Income Tax Department, upheld the view taken by the Delhi High Court in the case of  Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) wherein it was held that no addition can be made in respect of the completed assessments in absence of any incriminating material.

Attachment of Bank Account: Calcutta HC directs Assistant Commissioner of Revenue to file Affidavit-in-Opposition
Mohammad Ilyas vs Assistant Commissioner of Revenue, State Tax, Raiganj Charge & Ors. CITATION:   2023 TAXSCAN (HC) 794

In a recent decision the Calcutta High Court directed the Assistant Commissioner of Revenue to file affidavit-in-opposition in the matter of attachment of bank account.

The Court of Justice Md. Nizamuddin opined that “The issues involved deserves adjudication after calling for affidavits from the respondents. Let the respondents file affidavit-in-opposition within four weeks, petitioner to file reply thereto, if any, within two weeks thereafter.” The Court concluded by noting that there will be the stay of operation of the impugned order of attachment of bank account of the petitioner.

Supreme Court upholds Pre-Import Condition to Claim IGST and GST Compensation Cess under Advance Authorisation Scheme 
UNION OF INDIA & ORS vs COSMO FILMS LIMITED CITATION:   2023 TAXSCAN (SC) 177

The Supreme Court of India upheld the requirement of ‘pre-import condition’ incorporated in the Foreign Trade Policy of 2015-2020 (FTP) and Handbook of Procedures 2015-2020 (HBP) by Notification No. 33 / 2015-20 and Notification No. 79 / 2015-Customs, to claim exemption of Integrated Goods and Services Tax (IGST) and GST compensation cess on inputs imported into India for manufacture of export goods, on the basis of advance authorization (AA).

The Court commented that the introduction of the ‘pre-import condition’ may have resulted in hardship to the exporters, since they could no longer continue with their former business practices of importing inputs, after applying for Advance Authorization, to fulfil their overseas export contractual obligations.

The Court went on to say that when new laws are passed, there will inevitably be some disturbance. "In this instance, the disruption is caused by the requirement that exporters import inputs, pay the two levies, and then submit refund claims. This difficulty, however, does not outweigh the legislative decision to enact completely new fiscal legislation and mandate that a subset of assessees arrange their affairs in accordance with the new law. Therefore, Sections 3 (7) and (9) of the Customs Tariff Act, 1975, with the "pre-import condition," which exclude the benefits of imports made in anticipation of AAs and require the payment of duties, cannot be described as being arbitrarily or unreasonable.

Cancellation of GST Registration on Non-Filing of Tax Returns: Karnataka HC directs to file Revocation Application as per CBIC Notification 
SRI ANNADURAI MUNISWAM vs THE ADDITIONAL COMMISSIONER OFFICE OF THE COMMISSIONER OF CENTRAL TAX CITATION:   2023 TAXSCAN (HC) 795

The Karnataka High Court directed the petitioner, Annadurai Muniswamy to file revocation application as per Central Board of Indirect Taxes and Customs (CBIC) Notification on cancellation of GST Registration on non-filing of tax returns.

"It is seen that this Notification dated 31.03.2023 enables a registered person, whose registration has been cancelled under the provisions of Section 29(2)(b) or (c) of the Central Goods and Services Tax Act, 2017 [CGST Act] on or before 31.12.2022 and who has not filed any application for revocation or cancellation of such registration within the time specified under Section 30 of the CGST Act, to file an application for revocation.

The Bench further went on to note that the petitioner will have to make necessary application as provided for in the Central Board of Indirect Taxes and Customs (CBIC) Notification.

DM must Disposes Applications filed by Secured Creditor u/s 14 of SARFAESI Act without delay if all Prerequisites are Complied: Bombay HC grants 30 days for Disposal
L & T Finance Limited vs The State of Maharashtra CITATION:   2023 TAXSCAN (HC) 796

In a recent ruling, a Division Bench of Bombay High Court directed the district magistrate to dispose of the applications filed by the secured creditor under section 14 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 within 30 days.

The panel held that new applications filed after March 31 must be decided by District Magistrates within thirty days of their filing. In a comparable instance, the Division Bench of this Court issued many decisions, including serial numbering and time-bound resolution of applications. Nothing has changed, which is disappointing.

Assessment Order passed u/s 143 (3) against Dead Person without Issuing Notice to Legal Heirs is Void: Madras High Court 
Prema Rengarajan vs The Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (HC) 799

The Madras High Court held that the assessment order passed under section 143(3) of the Income Tax Act, 1961 against a dead person without issuing a notice to legal heirs is void.

It was viewed that the original assessee passed away on 14.02.2023 and notice of hearing was fixed on 28.03.2023, no ample opportunity was given to the legal heirs of the deceased assessee.

A single-judge panel led by Justice R Vijayakumar dismissed the writ petition and remanded the case to the original authority to allow the original assessee's rightful heirs to present their case. The originating authority was also directed to dispose of the matter after giving both parties due opportunity within 90 days of receiving a copy of this order.

Relief to Jindal Steel and Power: Post-GST VAT Refunds must be Processed u/S 142 (3) of CGST Act, 2017, rules Orissa HC 
Commissioner, Central Excise vs M/s. Jindal Steel and Power Ltd CITATION:   2023 TAXSCAN (HC) 797

In a significant case of Jindal Steel and Power, the Orissa High Court ruled that post-GST Value Added refunds must be processed under section 142 (3) of the Central Goods and Service Tax Act, 2017. 

The Commissioner (Appeals) held that since the application for the rebate was filed after the appointed date, i.e., 01.07.2017, the amount which earlier would have been allowed to be refunded by way of re-credit, should now be refunded in cash as per the provisions of said Section 142(3).

While upholding the impugned order, the two-judge bench comprising Dr Justice B R Sarangi and Justice M S Raman held that “respondent No.2 ought to have directed the sanctioning Authority to refund the amount of the duty refundable to the petitioner in cash instead of credit in CENVAT Account.”

Commissioner failed to Complete Assessment within a Period of Ten Years of issuing Form-H: Bombay HC quashes Notice Issued Further
Siemens Limited vs The State of Maharashtra CITATION:   2023 TAXSCAN (HC) 801

The Bombay High Court quashed the notice issued further since the commissioner failed to complete the assessment within a period of ten years of issuing Form H.

The Court observed that there was no justification indicated by the Municipal Corporation for the failure on the part of the Commissioner to assess the amount of cess due from the Dealer to the best of the Commissioner’s judgment at least from 21.08.2013 till the reminder in Form-H was issued on 24.09.2019.  It is well settled that where no period of limitation is prescribed for completing an act, the same is required to be done/ completed within a reasonable period.

The Court held that since the Commissioner failed to complete the assessment for the relevant years within a period of ten years of issuing the initial notice in Form-H, the notice dated 24.09.2019 is quashed.  It was viewed that the period of ten years from the issuance of notice in Form-H on 30.10.2014 for the year 01.04.2012 to 31.03.2013 is yet to expire, then the Commissioner is free to proceed to complete the assessment expeditiously and by the law.

Assessing Officer has Right to Control the Conduct of Cross Examination During Income Tax Proceedings: Jharkhand HC
Madhu Korah vs Income Tax Department through Director General CITATION: 2023 TAXSCAN (HC) 800

The Jharkhand High Court held that Assessing Officer has the right to control the conduct of cross-examination during the Income Tax Proceedings.  

A two-judge bench comprising Justice Rongon Mukhopadhyay and Justice Deepak Roshan directed the petitioner to file a petition for recall of the witnesses namely, Rohtas Krishnan, Budh Narayan Gupta, Ajay Bafna and Vikas Sinha who have been cross-examined and discharged, to put them the question which has been initially discarded by the Assessing Officer. 
Further held that “the Revenue may also be directed to provide effective cross-examination opportunity by the provisions of the Indian Evidence Act, 1872 and permit the petitioner to cross-examine such persons who are being named by the witnesses being cross-examined without in any manner interfering or restricting the same. In other words, the Revenue is hereby instructed to conduct cross-examination in accordance with the law and the aforementioned guidelines. 

Madras HC upholds Cancellation of Customs Exemption Certificate issued to Apollo Hospitals 
M/s. Apollo Hospitals Enterprises Ltd vs Union of India CITATION:   2023 TAXSCAN (HC) 798

In a recent judgement, the Madras High Court has cancelled the cancellation of the customs duty exemption certificate issued to the Apollo Hospitals.

The Single Judge bench of Justice S.M. Subramaniam has observed that the petitioners could not establish that they have treated 40% of their outdoor patients in the hospital, where the imported medical equipment is installed and further they have failed to establish that 10% of all the hospital beds are reserved for such patients, who have taken free treatment in the hospital, where the imported medical equipment is installed. The Court observed that the respondents have rightly and legitimately cancelled the Customs Duty Exemption Certificate (CDEC) granted in favour of the petitioners, which aligns with the Constitutional principles and the purpose and object of the conditions imposed in Notification No.64/88 in public interest from public funds and dismissed the petition.

Intimation Notices Issued on Discrepancies in Form GST ASMT-10 without Authorization by Proper Officer: Andhra Pradesh HC directs to Issue Fresh Notices
M/s. Sudhakar Traders vs The State of Andhra Pradesh CITATION:   2023 TAXSCAN (HC) 802

In a recent ruling, the Andhra Pradesh High Court directed the authorities to issue fresh intimation notices under the approval of the proper officer. The bench of Justice Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa observed that the two intimation notices issued on discrepancies in Form GST ASMT -10 lacked the proper authorization from the proper officer.

The High Court Division Bench had to determine that the two contested notices were invalid since the Chief Commissioner, the proper officer, had not given the approval.

Smuggling of Areca Nut, Assessee Proved Ownership: Guwahati HC Sets aside order rejecting Zimma of Seized Areca Nut
ANOWAR HUSSAIN vs THE STATE OF ASSAM AND ANR REP. BY THE PP CITATION:   2023 TAXSCAN (HC) 803

The Guwahati High Court in the case of smuggling of areca nut and set aside the order rejecting zimma of seized areca nut since the assessee proved the ownership by submitting invoices.

A single judge bench comprising Justice Susmita PhukanKhaund observed that the petitioner has appended the invoice dated 19.12.2022, 20.12.2022, 22.12.2022 and 24.12.2023 and the copy of the E-way bill which proves that the petitioner is the owner of the seized areca nuts. It was evident that the penalty for the seized areca nuts. has already been paid. The Court set aside the impugned order dated 22.02.2023 relating only to the rejection of the prayer of zimma of the seized areca nuts to the custody of the petitioner.

Revocation on Cancelled GST Registration can be applied by 30th June 2023 as per CBIC Notification: Jharkhand HC 
Md. Naushad Alam vs Union of India CITATION: 2023 TAXSCAN (HC) 804

In a recent case, the Jharkhand High Court held that the revocation of cancelled GST Registration can be applied by 30th June 2023 as per the Central Board of Indirect Taxes and Customs (CBIC) notification

A two-judge bench comprising Justice Rongon Mukhopadhyay and Justice Deepak Roshan observed that the petitioner falls in the first category of cases where the GST registration of the petitioner has been cancelled under section 29(2) of the CGST Act read with Rule 22 of CGST Rules.

The provision is beneficial in nature and appears to lessen the difficulty faced by those registered persons whose GST registration stood cancelled, the court ruled, so the writ petition is dismissed with instructions for the petitioner to approach the proper officer with an application for revocation of cancellation of registration by June 30, 2023, in accordance with the Notification dated 31.03.2023, after complying with the conditions prescribed thereunder.

Commission of Irregularities by Secretary of Red Cross is criminal misconduct by public servant under Prevention of Corruption Act:Punjab and Haryana HC refuses to quash FIR
Manoranjan Sharma and another vs State of Haryana and others CITATION: 2023 TAXSCAN (HC) 806

The Punjab and Haryana High Court refused to quashed the FIR filed the petitioner, Secretary of Red Cross and ruled that the commission of irregularities by the Secretary of Red Cross is criminal misconduct by public servant under the Prevention of Corruption Act, 1988.

The Court of Justice Gurvinder Singh Gill observed that “Having regard to the totality of the facts and circumstances of the case, this Court finds that there are several irregularities committed in the process of awarding an order to a firm owned by daughter of petitioner No.1 which apparently has been done so as to extend an undue favour to petitioner No.2 daughter of petitioner No.1, who was the Secretary, Red Cross.” The Bench concluded by noting that the facts stated in FIR do prima-facie disclose commission of offences. The facts in any case do not warrant invoking of powers under Section 482 Cr.P.C. for quashing of the FIR at this initial stage.

Non-Deposit of GST to Central and State Govt: Chhattisgarh High Court grants Anticipatory Bail to Horticulture Assistant Director 
Nidhan Singh Kushwaha vs State Of Chhattisgarh CITATION:   2023 TAXSCAN (HC) 805

The Chhattisgarh High Court granted anticipatory bail to the Assistant Director of Horticulture for the complaint raised on non-depositing of GST to the Central and State governments.

A Single Judge bench comprising Justice Deepak Kumar Tiwari the bail applications and directed that in the event of arrest of the applicants, they shall be released on bail on each of them furnishing a personal bond in the sum of Rs.50,000/- with one surety each in the like sum to the satisfaction of the arresting officer.

Aiding Fake Firms to Claim ITC Using ID Proof: Punjab & Haryana HC grants Bail during Investigation 
Ravinder Kumar vs State of Haryana CITATION:   2023 TAXSCAN (HC) 807

The Punjab and Haryana High Court granted bail during investigation in the matter of aiding fake firms to claim Input Tax Credit (ITC) Using ID Proof.

The Bench further noted that the present petition is allowed and the petitioner is ordered to be released on regular bail subject to his furnishing bail/surety bonds to the satisfaction of the trial court or Duty Magistrate concerned.” “The Trial Court is at liberty to impose any other condition that it may deem appropriate. It is further clarified that in case of default of any of the conditions, then the concerned Court is competent to cancel the bail granted to the petitioner”

Non-Compliance of Taking Approval of Specified Authority Mentioned u/S 151(ii): Calcutta HC quashes Assessment Order 
Kiran Agarwal vs Income Tax Officer CITATION: 2023 TAXSCAN (HC) 808

The Calcutta High Court quashed the assessment order under Section 148A(d) of the Income Tax Act, 1961 since it was passed without taking approval of the specified authority mentioned under Section 15(ii) of the Income Tax Act, 1961.

The challenged order was revoked in accordance with Section 148A(d) of the Income Tax Act by a single-member bench led by Justice Md. Nizamuddin after taking into account the facts and circumstances. The Court also ruled that the "quashing of the aforesaid impugned order under Section 148A(d) of the Act and subsequent proceedings will not be a bar on the part of the respondent/Assessing Officer concerned to proceed further from the stage where such irregularity has been committed, after taking approval from the "specified authority" in accordance with law."

GST on Online Gaming: Karnataka HC quashes SCN of Rs. 21000 Crores against Gameskraft

The SIngle Bench of Justice S R Krishna Kumar quashed the impugned Goods and Services Tax (GST) Show-Cause Notice (SCN) against the petitioner Gameskraft which had imposed Rs. 21,000 Crore at 28% GST on online gaming services provided to gamers.

The Karnataka HC then sought input from the Directorate General of GST Intelligence (DGGI), which claimed that Gameskraft had filed their taxes under the wrong head, and the company’s services attract a 28% tax rate.

The Karnataka High Court panel, presided over by Justice SR Krishna Kumar, questioned how the GST department had determined that Gameskraft's services constituted games of chance during a hearing on October 27, 2022. The bench had made it clear that experts, not department officers, should choose the games' content. The show cause notice had also been given a temporary hold until the main matter was resolved.

GST Registration Cancellation Order for Non-filing returns without stating Reasons: Patna HC directs Assessee to Apply for Revocation of Cancellation
Md. Nihal Akhtar vs Union of India CITATION:   2023 TAXSCAN (HC) 809

The Patna High Court has recently directed the assessee to apply for revocation of cancellation of Goods and Services Tax (GST) registration when the same was canceled for non-filing of returns.

In relation to the Bihar Goods and Services Tax Act, the Division Bench of Chief Justice K. Vinod Chandran and Justice Madhuresh Prasad stated: "At this time, no Tribunal has been established for the State.

The Patna High Court further remarked that, "This is also subject to the condition that the return shall be filed up to the effective date of cancellation of registration and that the payment of tax, interest, penalty, and late fee in respect of such returns has also been made. If the cancellation was carried out in accordance with clauses (b) or (c) of Sub-section (2) of Section 29 of the Goods and Services Tax Act of 2017, the assessee would also be eligible to exercise the aforementioned remedy.

Reopening of Assessment based on Material Evidence which Proves Income Escapement: Gujarat HC Dismisses Writ Petition 
AKSHAT PRAMODKUMAR CHAUDHARY vs DEPUTY COMMISSIONER OF INCOME TAX CITATION:   2023 TAXSCAN (HC) 812

The Gujarat High Court dismissed the Writ petition since the reopening of the assessment was based on material evidence which proves income escapement.

"The Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold several shares of a company which was found to be engaging in providing bogus claim of long term and short term capital gain," a two judge bench made up of Justice N V Anjaria and Justice Devan M Desai stated. The business was initially suspected to be a shell organisation. The assessee had requested an exemption for the sale of shares of this company that resulted in a long-term capital gain of Rs.1.33 crores.

Non-Compliance of Procedure u/s 144B of Income Tax Act: P&H HC nullifies Income Tax Demand Notice 
Arihant Roller Flour Mills vs National Faceless Assessment Centre and anr. CITATION:   2023 TAXSCAN (HC) 813

The Punjab and Haryana High Court has invalidated the demand notice and penalty proceedings following an assessment order, due to the non-adherence to clauses (vii) and (viii) of Section 144B(6) of the Income Tax Act.

The Bench stated: "In compliance of order dated 12.04.2023, a reply dated 20.04.2023 has been filed by the respondents admitting the fact that information with respect to the request for a personal hearing was forwarded by respondent No. 1 (NFAC) to the concerned assessment unit on 21.03.2023." In this case, the petition was granted and the Punjab and Haryana High Court invalidated the contested decision dated 24.03.2023 (P-6), notice of demand dated 24.03.2023 (P-7) and notice dated 24.03.2023 (P-8) without discussing the case's merits.The matter was also remanded back to the Assessing Officer to pass a fresh order after giving due opportunity of hearing to the petitioner, in accordance with law.

Allahabad HC upholds Tax Penalty u/s 74 UPGST Act imposed on Resort Owner based on Corroborative Evidence 
M/S Jalsa Resorts Thru vs State Of U.P. Tax Dept CITATION:   2023 TAXSCAN (HC) 810

The Allahabad High Court upheld the tax penalty under Section 74 Uttar Pradesh Goods and Service Tax Act (UPGST Act) imposed on Resort Owner based on Corroborative Evidence.

A single justice bench Dinesh Kumar Singh pointed out that even if the petitioner had been unable to produce the necessary paperwork at the time of the Special Investigation Branch raid, there was nothing stopping him from doing so when the Assessing Authority demanded it in response to the show-cause notice that had been served on him. The assessment order was an ex-parte order, and the petitioner never provided the Assessing Authority with the necessary paperwork. "I do not find any merit in the learned petitioner's counsel's assertion that the assessment order is presumption-based. The Bench noted that Each and every document that the petitioner supplied as well as the documents that the Special Investigation Branch recovered have been scrutinised by the appellate authority.

GST Assessment based on Wrong Total Turnover: Andhra Pradesh HC Sets aside the Assessment Order 
M/S JBT (JAI BHARATH TRAVELS) vs THE DEPUTY COMMISSIONER (ST) CITATION: 2023 TAXSCAN (HC) 814

The Andhra Pradesh High Court in a significant case set aside the Goods and Service Tax (GST) assessment made based on the wrong total turnover.

The challenged Assessment Order dated 15.12.2022, which was passed by the first respondent under the SGST/CGST Acts of 2017, was annulled by a two-judge panel consisting of Justice U Durga Prasad Rao and Justice T Mallikarjuna Rao. This was done for the tax years 2017–18, 2018–19, and 2019–20. On the condition that the petitioner deposit admitted tax less the tax already deposited within three (3) weeks, the petitioner was further permitted to present the relevant records showing the turnover relating to his bus business separately for the States of Andhra Pradesh, Telangana, Tamilnadu, and Puducherry before the first respondent.

Issuance of Notice and Initiation of Reassessment Beyond Six Years is Barred by limitation: Calcutta HC 
Coplama Products Private Limited vs Income Tax Officer CITATION:   2023 TAXSCAN (HC) 811

In a recent case, the Calcutta High Court held that issuance of notice and initiation of reassessment beyond six years is barred by limitation.
The petitioner has been able to make out a prima facie case for an interim order by raising the issue of the jurisdiction of the assessing officer concerned in initiating the impugned reassessment proceeding, according to the single-judge bench consisting of Justice Md. Nizamuddin.  The court held that , "There will be no further proceeding on the basis of the impugned order dated 28th July, 2022, which is Annexure P-7 to the writ petition until the writ petition is resolved.

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