Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Service Tax Appellate Tribunal (CESTAT): This appeal was filed by Revenue before a Coram of Madhu Mohan Damodhar (Technical Member) and P. Dinesha (Judicial Member) being aggrieved by the impugned order where appeal of assessee was allowed on the ground that unwarranted removal were based on the recorded statements with no corroborative evidence.

Facts leading to the dispute were that assessee was found to have maintained two invoices of same number with different dates and different value but accounting only one of the two. Ms T. Usha Devi, learned Deputy Commissioner on behalf of the Revenue, contended that the assessee had maintained duplicate invoices which on being contested was not rebutted and can be considered as sufficient proof that there was unwarranted activity. Whereas Mr M.A. Mudimannan, learned counsel appearing for the assessee, supported the findings of the Commissioner made in the appeal.

Tribunal was of the view that the duplicate invoices caused difference between physical production quantity in the stock register and that in respect of only the duplicate invoices the unwarranted removal will have to sustain. The adjudicating authority was directed to re-work the demand which was based on duplicate invoice. Therefore, this appeal was partly allowed and partly remanded. [CCE v. A.R. Metallurgicals (P) Ltd., 2019 SCC OnLine CESTAT 81, Order dated 01-05-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Customs, Excise and Service Tax Appellate Tribunal, Chennai: Assessee preferred this appeal before P. Dinesha, J., where assessee was only aggrieved by the dismissal of the appeal by the First Appellate Authority, without condoning the delay in filing the first appeal.

Assesse for explaining delay mentioned that one of the partners of the appellant firm had personal problems. Per contra, it was submitted by the respondent that the delay in filing the first appeal was nine months and the power to condone the delay after the end of 90 days lies only with the Court thus, impugned order should sustain. It was contended by the assessee that sufficient cause was shown and that the Courts had held that a liberal approach should be in condoning of delay. Lest a deliberation is shown for delay the explanation for delay needs to be accepted.

Tribunal was of the view that appeal was filed under Section 129-A of the Customs Act and Section 129-A (5) empowered this forum to condone the delay of any number of days. Section 129 does not authorize this forum to enter the domain of the first appellate authority since the scope of appellate jurisdiction was limited and to assume the jurisdiction of the first appellate authority by this forum was not authorized. It was observed that the first appellate authority had exercised its discretion in accordance with limitation law and thus, this forum could not have judged the correctness of the same. Therefore, this appeal was dismissed. [Vikgnesh Enterprises v. Commissioner (GST), 2019 SCC OnLine CESTAT 55, Order dated 16-04-2019]

Case BriefsHigh Courts

Punjab and Haryana High Court: This order disposed of five appeals filed by revenue under Section 260-A of Income Tax Act, 1961 before a Division Bench of Ajay Kumar Mittal and Avneesh Jhingan, JJ., against the order passed by Income Tax Appellate Tribunal where the Tribunal had quashed the order of the Commissioner of Income Tax (CIT), canceling the registration of assessee-Trust.

Facts of the case are that the assessee i.e. Improvement Trust, was a Trust constituted under the Punjab Town Improvement Act, 1922 and was granted registration under Section 12-AA of the Act. The definition of ‘charitable purpose’ under Section 2(15) of the Act was amended by Finance Act, 2008 after which a show cause notice was issued to the assessee-Trust to show cause as to why registration should not be cancelled. CIT had held that the activities of the assessee were not for charitable purpose within the amended provision of Section 2(15) of the Act and thus its registration was cancelled. Hence, the appeal was filed before the Tribunal but the same was dismissed.

Assessee contended that though they were earning some profits the same were used for public utilities. Whereas Revenue submitted that assessee’s activities do not fall under charitable purposes but of a developer and builder.

High Court was of the view that CIT was not correct in canceling the registration under Section 12-AA of the Act as the funds were used for charitable purpose. It was found that the selling of the plots was merely an ancillary activity carried out for the improvement of the area and the same cannot be equated with carrying of the business of colonizer or developer. Further, there was no provision that the activities of charitable purposes have to be undertaken only by donations or by financial aid of the government. The Court favoured the assessee-Trust and stated the activities of Trust to be of charitable purposes. Therefore, the appeals were dismissed. [CIT v. Improvement Trust, 2018 SCC OnLine P&H 3861, dated 01-08-2018]

Case BriefsHigh Courts

Punjab and Haryana High Court: Petitioner had filed this petition before a 2-Judge Bench of Ajay Kumar Mittal and Sudip Ahluwalia, JJ., under Article 226 of the constitution in nature of mandamus.

Petitioner was engaged in the business of manufacturing of glass containers for which he purchased gas from GAIL (India) Ltd. and Bharat Petroleum Corporation Limited to be used in the manufacturing of goods which included taxable goods. As per the registration certificate petitioner was registered under the Haryana VAT Act, 2003 as well as Central Sales Tax Act, 1956. Petitioner was procuring Form ‘C’ and it was issuing the same to the suppliers from time to time. The taxation law was amended in 2017. The petitioner was unable to file the online quarterly returns R-1 for the period July 2017 to June 2018. It was brought before Court that the Excise and Taxation Commissioner issued instructions for issuance of ‘C’ Forms for the purchases made after 01-07-2017.

High Court without expressing any opinion on the merits of the case directed respondent to take decisions on the letter sent by petitioner. [Hindustan National Glass & Industries Ltd. v. State of Haryana, 2018 SCC OnLine P&H 2245, decided on 20-12-2018]

Case BriefsHigh Courts

Kerala High Court: A 2-Judge Bench comprising of K.Vinod Chandran and Ashok Menon, JJ. dealt with an appeal against the order of Income Tax Appellate Tribunal, where order of first appellate authority was affirmed. It was found that sale of assessee’s land comes under exception of capital gains under Section 45 of the Income Tax Act, 1961 and hence was not taxable.

Assessee is alleged with not declaring capital gain in the income return filed when he sold his property to the owners of a newspaper. Assessee contended that the land in question is an agricultural land and thus is not taxable. Assessee only showed a certificate issued by Village Officer as an evidence to show land as agricultural. Court found that this certificate could not have been relied on as it was issued after sale. Assessee submitted that under Section 2(14) of the Act according to which only those land come under the category of capital asset which comes under (a), (b) of clause (iii).

The High Court stated that merely the fact that land does not come under above provision does not exclude property from the definition of capital asset. High Court viewed that assessee had failed to show that the land in question was an agricultural land thus sale of this land would be taxable under the Act. Therefore, orders of first appellate authority and the Tribunal were set aside. [Principal Commissioner of Income Tax v. Kalathingal Faizal Rahman, 2018 SCC OnLine Ker 3239, decided on 02-07-2018]



Case BriefsHigh Courts

Allahabad High Court: A Single Judge Bench comprising of Surya Prakash Kesarwani, J., dealt with a question where petitioner/Assessee was engaged in the manufacturing and sale of sugar and its bagasse. Petitioner was held liable under Section 3-B of the U.P. Trade Tax Act, 1948 on the ground that he had issued a false certificate of declaration.

The facts of the case are that the petitioner was alleged of consuming purchased diesel oil when the manufacturing units were closed. According to the recognition certificate, diesel oil was purchased on concessional rate of tax against form 3 Kha. As per Section 4B of the Act a recognition certificate is provided through which concessional rate of tax is applied in the manufacture of a final product. With regard to the recognition certificate, the petitioner contended that the diesel oil was used for maintenance of machine when the manufacturing units were closed and not for manufacturing a final product. The Tribunal found no basis for this contention as petitioner failed to show how the diesel oil was used in the maintenance of machine. High Court found no error in the findings of tribunal.

Another issue which arose questioned the sale of bagasse on which no tax was paid under Section 13 of U.P. Sugarcane (Purchase Tax) Act, 1961. With regard to this issue, Court was of the view that if on purchase of sugarcane, tax is paid then there is no requirement of paying tax on sale of bagasse as per Act 1961. Since petitioner failed to pay tax on purchase of sugarcane, he was liable to pay tax on sale of bagasse. Court found no merit and therefore this revision was dismissed.[Kanoria Sugar and General Mfg. Co. Ltd v.  CCT,2018 SCC OnLine All 1108, order dated 01-05-2018]

Case BriefsSupreme Court

Supreme Court: A five-Judge Constitution Bench speaking through N.V. Ramana, J., while invalidating the ratio of Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564, laid at rest the controversy regarding the interpretation of an ambiguous provision exempting tax. The Bench comprised of Ranjan Gogoi, N.V. Ramana, R. Banumathi, M.M. Shantanagoudar and S. Abdul Nazeer, JJ.

The present Bench was set up on a reference by a three-Judge Bench to examine the correctness of the ratio in Sun Export case. The question was, “what is the interpretative rule to be applied while interpreting a tax exemption provision when there is an ambiguity as to its applicability with reference to the entitlement of the assessee or the rate of tax to be applied?” In the said case, a three-Judge Bench ruled that any such ambiguity must be interpreted so as to favour the assessee claiming the benefit of such exemption. On the other hand, the three-Judge Bench in the present case, while sitting in appeal to interpret Custom Notification No. 20/1999 (provision for concessional rate of duty), noticed the unsatisfactory state of law and opined that the dicta in Sun Export case requires re-consideration by a larger bench. That is how the matter was before the present Bench.

The  Supreme Court, at the outset, noticed that there was distinction between interpreting a charging section and an exempting section. In case of ambiguity in a charging section, the interpretation has to be made in favour of the assessee. For deciding the question as formulated above, the Court referred to a catena of judgments including CCE v. Parle Exports (P) Ltd., (1989) 1 SCC 345 as explained in Union of India v. Wood Papers Ltd., (1990) 4 SCC 256, wherein the Court held that whether  a subject falls in the exemption clause or not has to be construed strictly. The present Bench concurred with the said view as was also elaborated in another Constitution Bench decision in CCE v. Hari Chand Shri Gopal, (2011) 1 SCC 236, and held that any ambiguity in an exemption provision in a taxing statute has to be interpreted in favour of the revenue. The decision of the Bench while answering the reference is summed up hereinbelow:

  • Exemption notification should be interpreted strictly; burden of proving the applicability of such provision is on the assessee/claimant.
  • In case of ambiguity in an exemption notification, the benefit thereof cannot be claimed by the assessee, and it must be interpreted in favour of the revenue.
  • The ratio in Sun Export case was not correct and all the decisions which took similar view stood overruled.

While answering the reference in above terms, the Court directed the appeal to be placed before the appropriate bench for consideration of the matter on merits. [Commr. of Customs v. Dilip Kumar and Co.,  2018 SCC OnLine SC 747, dated 30-07-2018]