Tax Weekly Round-Up: January 20 - January 26, 2025

Supreme Court Sets Aside Excise Duty Demand On Oil Marketing Companies For Inter-Supply Of Petroleum Products

Case Title: Bharat Petroleum Corporation Ltd. versus Commissioner of Central Excise Nashik Commissionerate (and connected matters)

Case no.: CIVIL APPEAL NO. 5642 OF 2009

In a significant relief for Oil Marketing Companies (OMCs), the Supreme Court ruled (Jan. 20) that prices under the MoU for inter-supply of petroleum products, designed to ensure smooth nationwide distribution, do not constitute "transaction value" and are exempt from excise duty due to their non-commercial nature.

The Court emphasised that the inter-supply arrangement was not solely price-driven but aimed at facilitating seamless distribution, rendering it ineligible for excise duty.

'Badly Drafted Petition' : Supreme Court Dismisses PIL Challenging TDS System Of Income Tax Act

Case title: Ashwini Upadhyay v Union of India

Case no.: W.P.(C) No. 20/2025

The Supreme Court today (January 24) refused to entertain a Public Interest Litigation challenging the provisions of the Income Tax Act which impose an obligation on private employers to deduct tax at source (TDS) on the salaries paid by them.

A bench comprising Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar said that the petition filed by BJP leader Ashwini Upadhyay was "badly drafted" and asked him to approach the High Court

HIGH COURTS

Delhi HC

Trader Cannot Accept Settlement Commission's Order U/S 127C Of Customs Act 'In Parts': Delhi High Court

Case title: KBS Industries Ltd & Anr. v. The Customs Central Excise And Service Tax Settlement Commission Principal Bench New Delhi & Ors

Case no.: W.P.(C) 10505/2024

The Delhi High Court has held that an order passed by the Settlement Commission under Section 127C of the Customs Act, 1962 is in the nature of a 'settlement' and cannot be accepted by a trader only in part.

A division bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma observed, “Given the nature of the order passed under Section 127C of the Act – which is in the nature of a settlement – it would not be permissible to dissect the same and accept that parts of the order which are favourable to the applicant while rejecting the other directions which are not. The order of Settlement Commission must be accepted in entirety.”

Customs Dept Cannot Run Parallel Proceedings By Passing Penalty Order While Challenge To SCN Is Pending Before Court: Delhi HC

Case title: Vijay Enterprises & Anr v. The Principal Commissioner Of Customs & Anr

Case no.: W.P.(C) 5809/2024

The Delhi High Court has set aside a final order of penalty passed by the Customs Department against a paper trader for alleged undervaluation of imported goods, stating that the same was passed during pendency of challenge to the show cause notice (SCN) issued to the trader.

A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed, “passing of the impugned Order-in-Original while the impugned SCN was under challenge before this Court would amount to initiation of parallel proceedings rendering the scrutiny of the Court as infructuous.”

Once Court Orders Release Of Bank Guarantee Furnished By Trader, Customs Dept Can't Hold Back Compliance And Direct Adjustment In Demand Order: Delhi HC

Case title: M/S Om Gems And Jewellery v. Deputy Commissioner Of Customs (Import) Air Cargo Complex Nscbi Airport & Ors.

Case no.: W.P.(C) 6218/2024

The Delhi High Court has made it clear that once a court of law directs the Customs Department to release the bank guarantee furnished by a trader, the Department cannot turn around and say that the amount will be adjusted towards the final demand order.

A division bench of Justices Prathiba M. Singh and Dharmesh Sharma observed, “the Division Bench judgment had to be complied with and the Customs Department could not hold back compliance thereof by directing adjustment in the final order. Such a course of action would not be permissible.”

Rates Charged By Power Distribution Companies, State Board For Electricity Can Be Considered To Determine Its Market: Delhi HC

Case title: Principal Commissioner Of Income Tax – 1, New Delhi v. DCM Shriram Ltd.

Case no: ITA 566/2023

The Delhi High Court has held that the rate at which power is supplied by the State Electricity Board (SEB) or the Power Distribution Companies is an appropriate metric for determining market price of electricity.

A division bench of Acting Chief Justice Vibhu Bakhru and Justice Swarana Kanta Sharma further held that rate at which electricity is sold on the Indian Energy Exchange (IEX) platform is not a 'comparable' and should not be considered to determine market value of the power supplied by the Assessee to its industrial units.

Gauhati HC

S.69 CGST Act | Commissioner Must Specify Necessity Of Arrest In Addition To 'Reasons To Believe' That Assessee Committed Offence: Gauhati HC

Case title: Dharmendra Agarwal v. The Union Of India And 2 Ors.

Case no.: WP(C)/6963/2024

The Gauhati High Court has held that Section 69 of the Central Goods and Services Tax Act 2017, which confers power to arrest on a Commissioner under the Act, requires the authority to not only record 'reasons to believe' that an assessee committed the specified offence but also specify the necessity to arrest.

While dealing with a writ petition challenging Petitioner's arrest, Justice Soumitra Saikia observed, “The requirement under Sub-section (1) of Section 69 is to have “reasons to believe” that not only a person has committed any offence as specified but also as to why such person needs to be arrested.”

Jharkhand HC

Advocate Not Liable To Verify Fake Documents Provided By Client For Firm Registration To Evade Tax: Jharkhand High Court

Case Title: Satya Prakash Singh v. The State of Jharkhand

Case Number: A.B.A. No. 2096 of 2024

The Jharkhand High Court stated that an advocate is not liable to verify fake documents provided by a client for registration of a firm to evade tax.

The bench of Justice Anil Kumar Choudhary was dealing with a case where an advocate had moved a petition for anticipatory bail in a case registered under sections 406/420/468/471/120B of the Indian Penal Code and under Section 132 (1) (b)/131 (1) (e)/132 (1) (1) of Jharkhand Goods and Services Tax (JGST).

Karnataka HC

Proceedings Initiated Against Income Tax Assessee After His Death Cannot Be Continued Against Legal Representative: Karnataka HC

Case Title: The Income Tax Officer & ANR Preeti V

Case No:WRIT APPEAL NO. 1407 OF 2024

The Karnataka High Court has said proceedings initiated against an Income Tax Assessee by issuing notice after his demise cannot be continued against his/her legal representative.

A division bench of Justice Krishna S Dixit and Justice G Basavaraja said, “Had the proceedings been initiated against the Assessee during his lifetime, they could have continued against the legal representatives of the deceased Assessee.”

Kerala HC

[Income Tax] Assessing Officer Not Only An Adjudicator But Also An Investigator, Cannot Remain Oblivious To Claim Without Enquiry: Kerala HC

Case Title: Cochin International Airport Ltd v. The Assistant Commissioner Of Income Tax

Case Number: ITA NO. 77 OF 2018

The Kerala High Court stated that the Income Tax Commissioner can exercise Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961.

The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S. observed that “The role of the assessing officer under the Income Tax Act, 1961 is not only that of an adjudicator but also of an investigator and he cannot remain oblivious in the face of a claim without any enquiry.”