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Supreme Court and High Court Weekly Round-Up

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Supreme Court and High Court Weekly Round-Up

Supreme Court - High Court - Weekly Round-Up - Round-Up - Taxscan

This weekly round-up analytically summarises the key stories related to the Supreme Court and High Court reported at Taxscan.in during the previous week from April 9 to April 16, 2023.

The Delhi Bench of High Court has set aside the order passed under Section 148A(d) of the Income Tax Act 1961 as this was passed without considering the reply of the assessee. The assessing officer was directed for de novo exercise in lieu of the above order.

The Division Bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju set aside the order passed under Section 148A(d), and the consequential notice observing that, “What the AO is required to prima facie establish, is that the stand of the petitioner, which is that it had obtained supply of the readymade garments from the aforementioned entities was false. It appears that the AO has not done his due diligence on that behalf.” The Bench also held that the AO would have liberty to carry out a de novo exercise.

In a recent ruling, the Single bench of Justice Manoj Kumar Tiwari directed the petitioner to pay the outstanding dues of the Goods and Services Tax (GST). The petitioner,aggrieved by the cancellation of his GST registration by the GST State department filed the writ petition seeking reliefs.

The petitioner sought to issue suitable writ, order or direction in the nature of certiorari calling the record of the case and quash the cancellation of GST Registration order as the petitioner is ready to pay all the dues. The bench observed that the cause of the cancellation of the GST registration was not clearly mentioned in the cancellation order. Thus the state counsel was asked to submit the instructions on the same.

The Calcutta High Court presided by a single bench Justice Md. Nizamuddin quashed and set aside on the ground that the impugned notice was issued in the name of non-existing company in spite of revenue having notice and knowledge of non-existence of such Company.

The High court stated that once the scheme for amalgamation has been sanctioned by the Court,  from that date amalgamating Company would not be in existence.  Thus under the circumstances, the impugned notices, which are issued against the non-existent Company, cannot be sustained and the same deserves to be quashed and set aside.

The bench of Chief Justice Vipin Sanghi and Justice Alok Kumar Verma of Uttarakhand High Court dismissed the revision petition filed by the Commissioner State/Commercial Tax seeking condonation of delay of 3502 days.

A court or tribunal’s decision or order can be challenged through the process of a revision petition. The request to review and alter the original decision is usually put before the same court or panel that issued it. A petitioner must establish grounds for revision, such as an error of law or fact, a disregard for pertinent evidence, or a breach of natural justice, in order to file a revision petition. Depending on the jurisdiction and nature of the issue, the petition must also be filed within a particular window of time.

In a recent ruling, the bench of Justice Manmeet Pritam Singh Arora and Justice Manmohan of Delhi High Court ruled that the impugned Notifications in withdrawing the exemption from the Electronic Commerce Operators (ECOs) and making the levy of Goods and Services Tax (GST), on the fare of non air-conditioned stage carriage ticket booked through the electronic platform of Petitioners is identical and not discriminatory.

The ECOs are a separate class, in the opinion and judgement of the High Court, and the Respondents have every right to deny the stated class exemption. There is no vested right in the ECOs to claim the continuation of exemption.

The Delhi High Court ordered the cancellation of the GST registration prospectively only since the department failed to mention the retrospective effect of cancellation of GST registration in the Show Cause Notice (SCN).

It was observed that it was evident that the show cause notice issued to the petitioner did not mention that the proper officer proposed to cancel the registration with retrospective effect. Thus, the petitioner had no opportunity to address any proposed action of cancellation of registration ab initio. A two-judge bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan disposed of the petition with the direction that the cancellation of the petitioner’s GST registration would take effect from 11.12.2020 and not from 01.07.2017.

The Orissa High Court stayed the tax demand till the pendency of the writ subject to the deposit of tax amount in absence of the GST tribunal.

A Coram Comprising Dr Justice B R Sarangi and Justice M S Raman held that “since the petitioner wants to avail the remedy under the provisions of law by approaching 2nd appellate tribunal,  which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of four weeks, the rest of the demand shall remain stayed during the pendency of the writ petition.”

In a recent judgement, the High Court of Orissa held that a service tax notice issued after 10 years is not valid and quashed the same.

After considering the observation made in the case of Commissioner of Central Excise, Mangalore vs. M/s. Konkan Marine Agencies, the Coram comprising Chief Justice Dr S. Muralidhar and Justice M S Raman quashed the impugned notice dated 23rd April 2007 and further letter dated 30th October 2017 issued by the Department to the Petitioner.  Further allowed the petition.

The Delhi High Court has held that the GST department cannot reject a refund without any corroborative evidence and is directed to pay the refund claim along with interest.

A Coram comprising Justice Vibhu Bakhru and Justice Amit Mahajan observed that since the petitioner succeeded in its appeal, the petitioner is entitled to the refund as claimed and directed the respondents to forthwith process the petitioner’s claim for a refund including interest.

The Madras High Court condoned the delay in filing the appeal as the petitioner’s GST Registration Certificate was cancelled due to the mistake committed by the accountant.

The Single Bench further went on to state that the petitioner may be permitted to approach the appellate authority before whom all conditions for entertaining the appeal such as pre-deposit would be applicable. If appeal is filed within a period of one week from today, it shall be entertained without reference to limitation but ensuring compliance with all other requirements including pre-deposit.

In a recent judgement the Andhra Pradesh High Court observed that the Court can’t pass an injunction order or attachment to secure debt when matter is pending in other writ petitions. The petitioners in the present matter is Pathakhadarabad Handloom.

The Single Bench further observed that the cause of action for seeking an injunction for securing certain monies lying in the credit of the Respondent No.2, that too to the detriment of Respondent No.6, in the nature of an attachment, cannot be countenanced for the simple reason that without there being a determination of a pending debt, an attachment of this nature cannot be countenanced, especially against the State agency.

Thus, it was observed and held that duty drawback receipts / DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of Section 80-IB of the Income Tax Act.

The assessee is not entitled to a deduction under section 80IB of the Income Tax Act, 1961 for the profit generated by the Duty Entitlement Pass Book (DEPB) and Duty drawback, according to the two-judge bench of Justice M.R. Shah and B. V. Nagarathna of the Supreme Court of India.

Thus, it was observed and held that duty drawback receipts / DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of Section 80-IB of the Income Tax Act.

The Division Bench of High Court of Delhi has dismissed the condonation of delay because of unexplained and inordinate delay without ostensible reasons.

“Even if the period commencing from 15.03.2020 was excluded on account of disruption caused due to outbreak of covid 19. There was a period of six months between the date on which the appeal was marked as defective and the date when the lockdown was imposed in the wake of the pandemic,” the Bench further observed.

The Karnataka High Court has granted a temporary stay to the Corporate Insolvency Resolution Process (CIRP) initiated against Mantri Developers Pvt. Ltd.

The controversy surrounding the loan default and subsequent CIRP has sparked concerns about the state of the real estate industry in India, which has been hit hard by the COVID-19 pandemic. Many companies in the sector are struggling to complete projects on time and generate revenue, leading to a rise in loan defaults and insolvency proceedings.

In a recent ruling, the Delhi High Court bench of Justice Vibhu Bakhru and Justice Amit Mahajan directed the Directorate General of Goods and Services Tax Intelligence (DGGI) not to force GAIL to pay any amount which is not due.

The bench observed that the contested order directing GAIL to pay a sum of ₹13,13,07,485 is not sustainable. Thus, set aside the impugned order issued by the DGGI. Additionally, the bench clarified that the DGGI is not precluded from taking such steps as may be available in law for securing the interests of the Revenue.

The Orissa High Court ordered to stay the demand during the pendency of writ petition in the absence of GST appellate Tribunal to pay tax and penalty. The petitioner in the present matter is M/s. Pratap Kumar Pradhan.

The Court of Justices BR Sarangi and MS Raman held that “Since the petitioner wants to avail the remedy under the provisions of law by approaching second appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of four weeks from today, the rest of the demand shall remain stayed during the pendency of the writ petition.”

The Orissa High Court upheld the allotment of work via e-tender and ruled that the demise of one partner did not take away the right of the proprietor to continue the agency.

The Court of Justice Shampa Sarkar observed that “The business is in the nature of a proprietorship and the legal name is Rakhi Paul. The trade registration issued by the panchayat authorities indicates the same. The trade licence granted under Section 12(1) of the Contract Labour (Regulation and Abolition) Act, 1970 also indicates that the Buddhadeb Paul is the trade name and Rakhi Paul is the proprietor.”

In a major setback to Hitachi Payment Services Pvt Ltd, the Bombay High Court allowed the non-local entities to participate in tender below 200 Crores, not violative of the “Make In India” Policy.

The Bench concluded by noting that the entire gamut of the Petitioners’ case is based upon non-adherence to the “Make In India” policy. However, once it is held that Respondent no.1 had assessed the estimated cost of tender while floating it at Rs.208 crores, Respondent no.1 is entitled to float global tender and the violation of the “Make In India” Policy would not subsist an issue.

The Orissa High Court ordered to furnish bank guarantee on non-appearance of the driver of the seized vehicle with regard to fraudulent business activities and claiming fake Input Tax Credit (ITC). The Petitioner in the present matter is Manish Kumar Jaiswal.

The Bench of Justices BR Sarangi and MS Raman observed that “In view of the instruction received, it appears that the petitioner has not approached the authority, even though the authorities have expressed their view that the conveyance can be released on payment of penalty as per the demand order or after furnishing the bank guarantee of equal amount.”

Upholding the Order of the Customs, Excise and Service Tax Appellate Tribunal (‘CESTAT’) ruled that the period of five years under Section 28 of the Customs Act, 1962 is a prescribed period of limitation.

The Coram comprising Justices Vibhu Bakhru and Amit Mahajan held that “It is relevant to note that the period of limitation as provided under Section 28 of the Customs Act is a period of five years from the relevant date. It is, thus, apparent that theCESTAT had proceeded on the basis that a reasonable period for taking an action under Section 28B of the Customs Act would also be a period of five years.”

The Supreme Court in its recent judgement has held that the same activity of drawing and design can be treated as goods & services provided the contract is indivisible and on the aspect of services there may be a levy of service tax and upheld the levy of service tax on ‘ Engineering Design & Drawings’.

The Court quashed and set aside the impugned judgement and order passed by the CESTAT holding that the respondent is not liable to pay service tax as “design services” on importing various models of “Engineering Design & Drawings” for manufacturing of Wind Turbine Generator (WTG), as defined under Section 65(35b) r/w section 65(105)(zzzzd) of the Finance Act, 1994.

The Delhi High Court has recently held that Customs authorities cannot take action on the sole basis of undertaking submitted by importer and the finding of Directorate General of Civil Aviation that the permit conditions were violated.

The Division Bench of Justice Vibhu Bakhru and Justice Amit Mahajan thus held that, “The impugned order, to the extent that it holds that Customs Authorities can take action on the basis of the undertaking submitted by the importer only when the DGCA holds that the conditions of the permit issued by them have been violated, is set aside.”

The Supreme Court has held that determining the residential status of a company under the Income Tax Act, 1961 lies in the de facto control and management of the company.

The bench comprising Justices M.R. Shah and B.V. Nagarathna upheld the view taken by the AO, CIT(A) and the High Court on the issue of control and management of the affairs of the assessee companies by Rattan Gupta from Delhi and the applicability of the Income Tax Act, 1961. The Court dismissed the appeal.

The Supreme Court (SC) of India has held that the annual increment earned by govt servants for the past period can’t be denied merely because of retirement on the next day when it’s payable.

The Court viewed that the increment can be withheld only by way of punishment or he has not performed the duty efficiently. Any interpretation which would lead to arbitrariness and/or unreasonableness should be avoided. A two-judge bench comprising Justice C T Ravikumar and Justice M.R. Shah held that “the Division Bench of the High Court has rightly directed the appellants to grant one annual increment which the original writ petitioners earned on the last day of their service for rendering their services preceding one year from the date of retirement with good behaviour and efficiently.”

The Supreme Court of India in its recent judgement has held that no deduction under section 80IB of the Income Tax Act, 1961 is allowable on profit from Duty Entitlement Pass Book Scheme (DEPB) / duty drawback schemes.

In light of various precedents, the Coram comprising of Justice M R Shah and Justice B V Nagarathna held that, on the profit earned from DEPB/Duty Drawback Schemes, the assessee is not entitled to deduction under Section 80-IB of the Income Tax Act, 1961.

The Supreme Court (SC) of India has held that mere belated TDS remittance won’t attract a penalty under section 271C of the Income Tax Act, 1961.

A Coram comprising Justice M R Shah and Justice C T Ravikumar held that the assessees remitted the TDS though belatedly and it is not a case of non deduction of the TDS at all they are not liable to pay the penalty under Section 271C of the Income Tax Act. The Court quashed and set aside the Impugned judgement(s) and order(s) passed by the High Court and held that on mere belated remitting of the TDS after deducting the same by the concerned person/assessee, no penalty shall be leviable under Section 271C of the Income Tax Act.

The Supreme Court in a recent case, held that Dettol is a medicine and therefore 4% Value Added Tax is applicable under the Kerala Value Added Tax Act, 2003. Siddharth   Bawa, Advocate appeared for the appellant. C.K. Sasi, Advocate appeared for the respondent.

Thereafter the bench observed that considering the dominant use of Dettol and the active ingredients of  Dettol, it is used as an antiseptic and is used in hospitals for surgical use, medical use and midwifery due to therapeutic and prophylactic properties the same would fall under Entry 36(8) (h) (vi) as claimed by the appellant.

The Supreme Court has recently held that Harpic Toilet Cleaner and Lizol Floor Cleaner are not classifiable under insecticides and they should be taxable at 12.5%.

The single bench of the Supreme Court considered the observation of the High Court that Harpic Toilet   Cleaner” and  “Lizol Floor Cleaner are used for cleaning the floor and toilet; also the two items are essentially used as stain removers and deodorants. Merely because they kill germs as well, the same cannot be said to be insecticides classifiable under Entry 44(5).

In a significant case, the supreme court held that mosquito mats, coils, vaporizers and Mortein are insect killers therefore it was subject to tax at the rate of 12.5%.

Justice M. R. Shah confirmed the order passed by the high court in so far as the products Mosquito Mats, Coils and Vaporizers and Mortein Insect Killers. Thereafter the bench dismiss the appeal filed by the appellant and observed that  Mortein Mosquito Coil, Mat and Liquid Vaporizer is classifiable under Entry 66 of Notification SRO 82/06 dated 21.01.2006 issued under Section 6(1)(d) of the Kerala VAT Act and  Mortein Insect Killer is subject to tax at the rate of 12.5%.

The Orissa High Court has recently quashed the Goods and Services Tax (GST) assessment order passed against the assessee, as the same was issued without giving an opportunity of hearing to the assessee and violating the principles of natural justice.

In view of the above, the Orissa High Court Division Bench of Justices Dr B R Sarangi and M S Raman quashed the impugned Goods and Services Tax assessment order passed against the assessee. Consequently, the matter was remitted back to the Assessing Officer to assess it afresh by giving opportunity of hearing to the petitioner taking into consideration the objection, if any, filed by the petitioner in the matter, and pass a reasoned and speaking order in accordance with law.

The Rajasthan High Court rejected the anticipatory bail application on alleged Fabrication of GST number and name of Firm and fraud of Rupees three crores.

Rejecting the application

 For anticipatory bail the Coram comprising Justice Praveer Bhatnagar observed that “It is pertinent to note that an investigation against the accused persons is still pending and, therefore, custodial investigation may further lead to recovery and disclosure of facts for the allegedly misappropriated goods.”

In a recent decision the Orissa High Court approves the pre-deposit of admitted tax amount debited through Electronic Credit Ledger (ECL). The petitioner in the present matter is Ranjan Naik.

The Bench of Justices BR Sarangi and MS Raman noted that “The impugned order is set aside. As the learned counsel for the Petitioner points out that the Petitioner has already made the pre-deposit using the ECL, that will now be accepted by the Department. The appeal be disposed of afresh after hearing the Petitioner and the Department within a period of three months thereafter.”

The Orissa High Court directed the Assessing Officer to re-compute tax liability and ruled that the supply of ballast and chips as “minerals” falls under Entry 117 of the taxable list subject to tax at 4%.

The Court observed that “This Court, on perusal of record, finds that the factual position obtained in D.K. Construction is identical to the present case and similar questions of law as posed in the present revision petition are decided in favour of the petitioner-assessee and against the revenue.” The Court directed the Assessing Authority is directed to re-compute the tax liability as per observation made above and taking into consideration the judgement of the Court in the case of State of Orissa v. D.K. Construction. To Read the full text of the Order CLICK HERE

The Madras High Court held that a Reassessment made after 4 years for a mere change of opinion is not valid.

A two-judge bench comprising Justice R Mahadevan and Justice Mohammed Shaffiq observed that the reassessment proceedings initiated by the assessing officer beyond four years from the end of the relevant assessment year in question namely 2010-2011 is legally impermissible.

In a recent ruling, the Himachal Pradesh High Court (HC), bench of Justice Ajay Mohan Goel, dismissed the appeal for not making the demand of the amount covered by the bounced cheque.

The bench observed the supreme court decision in K.R.   Indira  Versus  Dr. G. Adinarayana, (2003), that though no formal notice is prescribed in Section 138 of the Negotiable Instruments, the statutory provisions indicate in unmistakable terms as to what should be clearly indicated in the notice and what manner of demand it should make. The bench found no error in the findings of the trial court that the notice was no notice as per the Negotiable Instruments Act.

A Single Bench of the Delhi High Court has recently held that there shall be no impediment on the manufacture and sale of products with Linagliptin as the API on account of the suit patent IN ‘301 and permitted the defendants to manufacture and sell the Diabetes drug subject to necessary approvals.

It was also noted by the Single Bench of Justice Amit Bansal that, “the plaintiffs thus had failed to make out a prima facie case for grant of interim injunction. Balance of convenience is in favour of the defendants and against the plaintiffs. Irreparable injury would be caused not only to the defendants but also to the public, if the interim injunction is granted in favour of the plaintiffs.”

Delhi High Court in its recent judgement held that information about the goods must be produced within a reasonable time by the person in whose custody the goods were found.      

A Coram comprising Justice Vibhu Bakhru and Justice Amit Mahajan observed that “it would be open for a person found in the custody of goods to produce the relevant information in its possession in respect of the goods within a reasonable time on being required to do so by the Commissioner.” The Court set aside the impugned order and the appellant’s appeal was restored to the Appellate Tribunal. The Appellate Tribunal shall consider the documents as produced by the appellant and take an informed decision on the appellant’s appeal.

In a recent case, the Orissa High Court stayed the tax demand till the pendency of the writ subject to the deposit of tax amount due to non-constitution of the GST Appellate Tribunal.

A Coram Comprising of Justice B R Sarangi and Mr Justice M S Raman observed that “since the petitioner wants to avail the remedy under the provisions of law by approaching the 2nd appellate tribunal, which has not yet been constituted, as an interim measure subject to the Petitioner depositing entire tax demand within a period of four weeks and the rest of the demand shall remain stayed during the pendency of the writ petition.”

The Orissa High Court directed the Central Board of Direct Taxes (CBDT) to issue a circular since the assessee failed to file an Income tax return due to technical glitches.

Since the Department has itself acknowledged that there have been technical glitches which have prevented many Assesses from filing their returns and tax audit reports within time, Chief Justice S Muralidhar and Justice G Satapathy held that CBDT should consider issuing an appropriate circular clarifying that by granting an extension of the deadline for filing returns/tax audit reports.

The Supreme Court of India has held that commissioners can exercise revisional jurisdiction under Section 263 of the Income Tax Act, 1961 when the assessment order was erroneous and prejudicial to the interest of revenue.

The Court quashed and set aside the impugned judgement and order passed by the High Court and the order passed by the Commissioner passed in the exercise of powers under Section 263 of the Income Tax Act was restored.

In a recent case in which the seizure of a vehicle was done on allegations of fraudulent business activities and fake claims of ITC, the Orissa High Court directed the release of the vehicle after payment of penalty under Section 129(1) (b) of the GST Act, 2017.

A Coram Comprising of Justice B R Sarangi and Mr Justice M S Raman held that if the petitioner fails to furnish the bank guarantee, it will be open to the opposite parties to confiscate the vehicle of the petitioner.

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