Summary: During the week ending November 10, 2024, several key notifications, circulars, and court rulings were issued across sectors. In Income Tax, a circular specified limits for authorities to waive interest under Section 220(2A), depending on the amount, with the highest authority (Pr. CCIT) handling cases above ₹1.5 crore. Additionally, the Supreme Court ruled in favor of HDFC Bank in a case involving locker access allowed despite restrictions, emphasizing the lack of malafide intent. Under GST, guidelines now require personal hearings through video conferencing, while physical hearings are allowed only upon documented requests. GSTN also extended a 30-day reporting window on the IRP portal to taxpayers with an AATO of ₹10 crore or more from April 2025. Form GST DRC-03A was introduced to ensure demand adjustments for incorrect DRC-03 payments. SEBI’s proposed revision of the Unpublished Price Sensitive Information (UPSI) definition aims for better regulatory clarity, while IBBI proposed mediation between operational creditors and corporate debtors before insolvency filings to reduce caseloads. Additionally, in a Supreme Court case, royalty charges on advertisement hoardings were differentiated from taxes, allowing municipal corporations to charge royalty with stipulated conditions. These updates provide clarity on various legal, tax, and regulatory aspects across sectors, addressing procedural and compliance gaps effectively.
Notifications & Circulars issued during week (4th – 10th Nov 2024)
A. Income Tax
Fixing monetary limits of the income-tax authorities in respect of reduction or waiver of interest: The section 220(2) imposes interest on taxpayers for delayed payment of tax as per demand notices issued under Section 156, at a rate of 1% per month or part of the month for the period of delay. However, under Section 220(2A), certain authorities are empowered to reduce or waive this interest if specific conditions are met. As per this circular, the Pr.CIT or CIT can waive interest for amounts up to ₹50 lakh, while the Chief CCIT) or DGIT) can handle amounts exceeding ₹50 lakh but not exceeding ₹1.5 crore. The Pr.CCIT) has authority for amounts above ₹1.5 crore. (Income Tax Circular 15/2024 Dated 04/11/2024)
SC, Liability of banker for allowing operation of locker restrained by Income Tax department: Case of HDFC Bank vs State of Bihar, SC Judgement Dated 22nd October 2024. A peculiar situation arose in this case when HDFC Branch allowed bank locker to be operated by Khemka family on whom a search was earlier conducted and their bank account and lockers were restrained by Director of Income- tax(INV). However, subsequently the said restrain order was revoked though only in relation to Bank account. However, the bank officials interpreted that the revocation is applicable for lockers also, allowed locker to be operated. SC while considering the appeal of HDFC Bank, held that the FIR did not mention prima facie case of offence being made out by the bank officials and there was nothing to show malafide and thus allowing the appeal, quashed the FIR against the bank officials. (SC Judgement Dated 22/10/2024)
B. GST
Guidelines for conduct of personal hearings under GST, Customs and others: It revises previous instructions concerning the mode of personal hearings under various tax acts, including the CGST and Customs Acts, for adjudicating and appellate authorities. The amendment on 28th July 2022, allowed personal hearings to be conducted in virtual mode only upon request from the assessee, with physical hearings as an option for those who did not opt for virtual hearings. However, this amendment has now been withdrawn, reinstating the original instruction, which mandates that personal hearings must be conducted through video conferencing. Physical hearings may only occur at the request of the party involved, with a requirement to document the reasons for this request. (Min of Finance Instructions Dated 05/11/2024)
Advisory, Time Limit for reporting e-Invoice on the IRP Portal- Lowering of threshold to AATO 10 crores and above: As per earlier advisory dated 13th September 2023, a time limit of 30 days for reporting e-Invoices on IRP portals for taxpayers with an AATO of 100 crores and above was implemented, The threshold has now been lowered to cover taxpayers with an AATO of 10 crores and above from 1st April 2025. It would apply to all document types (Invoices/Credit Notes/Debit Notes) for which an IRN is to be generated. (GSTN Advisory Dated 05/11/2024)
Advisory, Form GST DRC-03A for demand payment adjustment: GSTN has launched Form GST DRC-03A to address issues arising when taxpayers pay outstanding demands using Form GST DRC-03, rather than the “Payment towards Demand” feature on the GST portal. When DRC-03 is used incorrectly, the electronic liability register does not register the demand as closed, even though the payment has been made. To resolve this, Form DRC-03A was introduced under Notification No. 12/2024, issued on July 10, 2024. This form allows taxpayers to link payments made under Form DRC-03 (where the reason for payment is marked as “Voluntary” or “Others”) directly with specific demand orders. To use Form DRC-03A, taxpayers must enter the Application Reference Number (ARN) of the DRC-03 along with the relevant demand order number on the portal. A detailed advisory and FAQs have been provided on the GST portal to guide taxpayers through the process. (GSTN Advisory Dated 05/11/2024)
Advisory related to ‘Other Territory’ applications for registration: The advisory for GST registration under the “Other Territory” category applies to applicants located in India’s continental shelf and exclusive economic zones along the western and eastern coasts. Such applicants shall only be administered under ‘Mumbai South’ or ‘Chennai North’ Commissionerate. The applicants should select the jurisdiction based on geographic proximity. For those near the western coast (covering Gujarat, Maharashtra, and neighbouring areas), the designated Commissionerate is Mumbai South. Similarly, for applicants near the eastern coast (covering West Bengal, Tamil Nadu, and surrounding territories), the jurisdiction falls under Chennai North Commissionerate. Applicants should then select the appropriate division and range, which is organized alphabetically by the first letter of their name. (GSTN Advisory Dated 07/11/2024)
Advisory, Waiver Scheme for GST Taxpayers Under Section 128A: A waiver scheme for taxpayers has been introduced to reduce disputes by waiving interest and penalties on demands or orders under Section 73 of the CGST Act, for financial years 2017-18, 2018-19, and 2019-20, excluding cases involving fraud or wilful misstatements. To avail of the waiver, taxpayers must pay the full tax amount by March 31, 2025. The Notification No. 20/2024 on 8th October 2024, notified Rule 164 which outlines the procedural guidelines for this waiver scheme. Taxpayers are required to file applications in Form GST SPL-01 or GST SPL-02 on the common portal by the deadline of March 31, 2025. These forms will be available by the first week of January 2025. In the meantime, taxpayers should ensure payment of the demanded tax using the “payment towards demand” facility in case of demand orders or Form GST DRC-03 in case of notices. If payment is already made using Form GST DRC-03, taxpayers must link it with the demand order through Form GST DRC- 03A, available on the portal. (GSTN Advisory Dated 08/11/2024)
HC, No GST liabilities on salary paid to Seconded Employees as per CBIC Circular: Case of Metal One Corporation vs Union of India, HC Delhi Judgement Dated 22nd October 2024. Foreign entities were absolved of liability to pay Goods and Services Tax ( GST ) on the salaries paid to seconded employees as the value of the service rendered would have to be treated as ‘Nil’ in light of CBIC circular No. 210/4/2024 dated 26th June 2024. Once the position of the CBIC Circular to govern all concerned assessees Pan India was laid down, penalty proceedings or imposition of interest would not sustain. (HC Delhi Judgement Dated 22/10/2024)HC, Two GST Adjudication Orders for Same Period Not Permissible: Case of Jain cement Udyog vs Sales tax Officer, HC Delhi Judgement Dated 23rd October 2024. The petitioner, Jain Cement Udyog, was served with a Show Cause Notice (SCN) on 30th December 2020, for the same tax period. This process culminated in a final order passed on 1st February 2021. The petitioner subsequently filed an appeal against this 2021 decision. However, despite the finality of the 2021 order, a second order, dated 23 April 2024, was issued, referring to the same tax period and based on the original Show Cause Notice issued in 2020. The Court took note of the discrepancy between the prior decision and the new order, questioning the validity of re-addressing the same issue. The Delhi HC allowed the writ petition, thereby providing relief to Jain Cement Udyog. However, the judgment does not affect any rights or contentions related to the initial 2021 order, which remains under appeal. (HC Delhi Judgement Dated 23/10/2024)
HC, IGST on ocean freight could not be levied on FOB Transactions: Case of BLA Coke vs Union of India, HC Gujarat Judgement Dated 19th September 2024. The company was engaged in the manufacturing and sale of hard coke, which imported coking coal both on CIF ( Cost, Insurance, and Freight ) and FOB bases. Assessee argued that while CIF transactions included freight costs in the consolidated invoice raised by the foreign exporter, in Free on Board (FOB) transactions, the freight was paid directly by assessee to the shipping line. Importantly, IGST was paid on the total value of imports, inclusive of freight, at the time of customs clearance. HC held that IGST on ocean freight could not be levied on FOB transactions also as once the IGST was paid on value of goods including the freight, cost and insurance, it would not make any difference between the transactions was on CIF basis or FOB basis. (HC Gujarat Judgement Dated 19/09/2024)
C. Central Excise
No notification and Circular during the week.
D. Custom Duty
Amendment, Handling of Cargo in Customs Areas Regulations: The licensing term for Customs Cargo Service Providers (CCSPs) under Regulation 5(3) is reduced from ten years to five years. The changes in Regulation 10(2) introduce a provision for CCSPs operating under the Authorised Economic Operator (AEO) Program. Such CCSPs appointment shall be deemed to be extended and remain valid, as long as their AEO authorization is valid and not suspended or revoked. (Custom Notification 75/2024 (NT) Dated 07/11/2024)
Clarification on Insurance Amount and Bond Value for CCSPs and validity of Bond for AEO-LO: The circular reduce the insurance amount by considering an average storage duration of 5 days, from earlier 10-day period. It is based on the reduced dwell time of imported and export goods, as well as efforts to reduce the operational costs for Customs Cargo Service Providers (CCSPs). Besides, the circular also amends the validity of custodian bonds for Authorized Economic Operator – Low Risk (AEO-LO) CCSPs, aligning it with the validity of their AEO authorization. (Custom Circular 22/2024 Dated 08/11/2024)
Anti-dumping Duty on Welded Stainless Steel Pipes and Tubes originating in or exported from Thailand and Vietnam: Anti-dumping Duty has been imposed on imports of Welded Stainless Steel Pipes and Tubes originating in or exported from Thailand and Vietnam, and imported into India. It shall be applicable for a period of 5 years. (Custom Notification 23/2024 (ADD) Dated 04/11/2024)
E. Directorate General of Foreign Trade (DGFT)
Enabling provisions for import of inputs that are subjected to mandatory Quality Control Orders (QCOs) by Advance Authorisation holders, EOU and SEZ: The Public Notice update the list of ministries and departments exempt from mandatory Quality Control Orders (QCOs) for imported inputs. It adds the Ministry of Heavy Industries to Appendix 2Y of Foreign Trade Policy (FTP), which outlines exemptions for goods utilized in manufacturing export products. (DGFT Public Notice 31/2024 Dated 05/11/2024)
F. Securities and Exchange Board of India (SEBI)
Investments in Overseas Mutual Funds/ Unit Trusts by Indian Mutual Funds: The circular allows Indian mutual funds to invest in overseas mutual funds (MFs) and unit trusts (UTs), specifically those with exposure to Indian securities, subject to certain conditions. Investments in these overseas MFs/UTs are capped at 25% of their total assets in Indian securities. The requirements include pooling contributions from all investors, ensuring a blind pool structure without segregated portfolios, and managing the funds through independent managers. Besides, these overseas entities must disclose their portfolios quarterly. (SEBI Circular Dated 04/11/2024)
Disclosure of expenses, half yearly returns, yield and risk-o-meter of schemes of Mutual Funds: The circular requires Mutual funds to disclose separate total recurring expenses, half-yearly returns, and yields for direct and regular plans, effective from 5th December 2024. Besides, the risk-o-meter, which indicates the risk level of mutual fund schemes, will now incorporate a colour scheme to enhance clarity for investors. The colour designations range from “Low Risk” (Irish Green) to “Very High Risk” (Red). Any changes to the risk levels must be communicated to unitholders via notice, email, or SMS, with both the previous and revised risk levels disclosed for comparison. (SEBI Circular Dated 05/11/2024)
Advisory on unauthorized virtual trading / gaming platforms: The advisory relates to unauthorized virtual trading platforms, including apps and web applications that offer virtual trading, paper trading, or fantasy gaming services based on stock price data of listed companies. Such activities violate the Securities Contract (Regulation) Act, 1956, and the SEBI Act, 1992, which are designed to protect investors. The advisory emphasizes that the public should only engage in trading through registered intermediaries and cautions that participation in unregistered schemes is at the investors’ own risk. These unauthorized platforms are not recognized by SEBI, and thus investors will lack access to investor protection mechanisms and grievance redressal provided by SEBI or exchanges. (SEBI Press Release Dated 04/11/2024)
Advisory on communication with SEBI Officials: The advisory clarifies that informal discussions, summaries, or meeting minutes sent by entities to SEBI should not be interpreted as official approval or clarification on securities market policies or operational issues. SEBI emphasized that entities should proceed with implementing measures requiring SEBI approval only after receiving explicit, written authorization or clarification from SEBI. For interpretative or policy-related queries, entities are advised to use the SEBI (Informal Guidance) Scheme, 2003, to formally request interpretive or no-action letters. (SEBI Advisory Dated 07/11/2024)
Consultation Paper on Measures for Reforms to Debenture Trustees (DTs) Regulations Including towards Ease of Doing Business: The key proposals include establishing activity-based regulations for DTs, defining “cross-default,” and standardizing the debenture trust deed (DTD). The aim is to separate non-SEBI regulated activities from those governed by SEBI, ensuring that DTs do not misrepresent their regulatory status. The comments from stakeholders are invited. (SEBI Consultation Paper Dated 04/11/2024)
Consultation paper on review of requirements of alignment of interest of the Designated Employees of the AMC with the interest of the unitholders: The consultation focuses on the “skin in the game” requirements, which mandate AMCs’ employees to invest a portion of their compensation in mutual fund units they oversee. The working group has raised concerns about the impact of the current requirement of 20% investment, particularly on employees with lower salaries, as well as the challenges posed by including non-cash components like Employee Stock Ownership Plans (ESOPs). The paper proposes to reduce the mandatory investment percentage and exclude non-cash compensation from the calculation. The recommendations also suggest a slab-based system where the minimum investment amount varies based on employees’ compensation, with adjustments for employees with significant non-cash components. The comments from stakeholders are invited. (SEBI Consultation Paper Dated 06/11/2024)
Consultation Paper on Proposed review of the definition of Unpublished Price Sensitive Information (UPSI) under Prohibition of Insider Trading (PIT) Regulations: The proposal aligns the UPSI definition with events under Regulation 30 of SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, emphasizing material events that may impact stock prices. SEBI’s study revealed that companies often limit UPSI to items directly listed in PIT Regulations, missing broader compliance intents. The proposals are intended to enhance regulatory clarity, consistency, and compliance among listed companies. The comments from stakeholders are invited. (SEBI Consultation Paper Dated 09/11/2024)
G. Ministry of Corporate Affairs (MCA)
No Notification/ Circular during the week.
H. Insolvency and Bankruptcy Board of India (IBBI)
Discussion paper on Mediation by the operational creditors (OCs) before approaching Adjudicating Authority (AA) for filing Section 9 application: The paper highlights that a significant number of Section 9 applications involve disputes between the operational creditors and corporate debtors over issues like quality of goods, contract terms, or payment discrepancies. Many of these cases are settled before admission, resulting in only a fraction proceeding to insolvency. By promoting pre-filing mediation, the IBBI aims to ease the Adjudicating Authority’s (AA) caseload and address disputes more efficiently. Under the proposal, if mediation fails, a non-settlement report would accompany the OC’s insolvency application to the AA. This approach is intended to streamline the resolution process, reduce judicial delays, and facilitate quicker case admissions. The comments from stakeholders are invited. (IBBI Discussion Paper Dated 04/11/2024)
Discussion Paper on issues related to Real Estate: The key proposals include mandating the participation of land authorities as invitees in Committee of Creditors (CoC) meetings to improve decision-making on land- related issues, establishing protocols for cases with cancelled land allotments, and clarifying conditions for allottee associations to participate as resolution applicants. Besides, the paper suggests including 8% interest in homebuyers’ claims for consistency across cases, allowing facilitators to represent large creditor classes, and improving communication by sharing CoC meeting minutes with all creditors in real estate projects. These proposals seek to address procedural gaps, improve transparency, and strengthen creditor representation. The comments from stakeholders are invited. (IBBI Discussion Paper Dated 07/11/2024)
SC laid down legal framework for withdrawal and settlement of claims in CIRP while adjudging Byju’s matters: Case of GLAS Trust Company vs YJU Raveendran, SC Judgement Dated 23rd October 2024. SC emphasized the need to follow the legal framework laid down by statutory provisions for the withdrawal of petitions and settlement of claims in a Corporate Insolvency Resolution Process (CIRP). It was held that Chapter II of the IBC provides that CIRP can be invoked in three ways: (i) by a financial creditor under Section 7; (ii) by an operational creditor under Section 9; and (iii) by a corporate debtor itself under Section 10. Section 5(11) of the IBC defines the “initiation date” as the date on which the financial creditor, operational creditor or corporate applicant makes an application to the NCLT for initiating insolvency proceedings, including CIRP. Upon admission of application, CIRP commences, moratorium is declared and an Insolvency Resolution Professional (IRP) is appointed who manages all further affairs of the corporate debtor. Further, claims are received from all the creditors and they are collated to determine the financial position of the corporate debtor and a Committee of Creditors (CoC) is constituted.
— NCLAT’s exercise of its inherent powers under Rule 11 of the NCLAT Rules were rebuked by the SC stating that when a procedure has been prescribed for a particular purpose exhaustively, no power shall be exercised otherwise than in the manner prescribed by the said provisions. The correct course of action for approval of the settlement and source of the funds for the settlement by the NCLAT would have been to stay the constitution of the CoC and direct the parties to follow the course of action in Section 12A read with Regulation 30A of the CIRP Regulations 2016. (SC Judgement Dated 23/10/2024)
I. Reserve Bank of India (RBI)
Amendment to the Master Direction – Know Your Customer (KYC) Direction: It refers Master Direction – Know Your Customer (KYC) Direction, 2016 dated 25th February 2016, in terms of which Regulated Entities (REs) have to undertake Customer Due Diligence (CDD), as per the process laid out therein, for their customers. The key amendments include revisions to customer acceptance policies, which now allow for simplified Customer Due Diligence (CDD) for existing customers when opening additional accounts or obtaining new services. Besides, the periodic KYC updation process has been clarified, and new requirements for updating KYC records with the Central KYC Records Registry (CKYCR) have been established. It also specify how regulated entities must handle the KYC information retrieval process, including the use of KYC identifiers from CKYCR. (RBI Notification 87/2024 Dated 06/11/2024)
Fully Accessible Route for Investment by Non-residents in Government Securities – Inclusion of Sovereign Green Bonds: RBI has expanded the Fully Accessible Route (FAR) to include 10-year Sovereign Green Bonds for non-resident investments. The inclusion of the Sovereign Green Bonds aligns with the issuance calendar for marketable dated securities set for October 2024 to March 2025. It will enables non-resident investors to contribute to sustainable financing within India by investing in designated green projects. (RBI Notification 88/2024 Dated 07/11/2024)
Reporting of Foreign Exchange Transactions to Trade Repository: It refers Master Direction – Risk Management and Inter-Bank Dealings dated 5th July, 2016, which requires Authorised Dealers to report all over-the-counter (OTC) foreign exchange derivative contracts and foreign currency interest rate derivative contracts, undertaken by them directly or through their overseas entities (including overseas branches, IFSC Banking Units, wholly owned subsidiaries and joint ventures of Authorised Dealers), to the Trade Repository (TR) of Clearing Corporation of India Ltd. (CCIL). It has been decided to expand the reporting requirement to include foreign exchange spot (including value cash and value tom) deals in a phased manner. For FX contracts with clients, reporting will be phased in starting May 12, 2025, for transactions over USD 1 million and November 10, 2025, for transactions over USD 50,000. However, money-changing transactions remain outside this scope. (RBI Notification 89/2024 Dated 08/11/2024)
J. Miscellaneous
SC, Royalty on Advertisement Hoardings cannot be equated with imposition of Tax: Case of Patna Municipal Corporation vs Tribo Ad Bureau, SC Judgement Dated 16th October 2024. The Apex court held that imposition of royalty could not be equated with imposition of tax/levy.
— Municipal corporation would charge a royalty of ₹1 per square foot per year for hoardings displayed on land under its jurisdiction. The corporation introduced new royalty rates for advertisements, setting different rates for various types of hoardings, the rate was increased to ₹10 per square foot per year for the respondent. The corporation passed a resolution to cancel the registrations of advertising agencies that defaulted on enhanced royalty payments, after discovering illegal hoardings and unpaid dues. Demands for royalty, fee, or tax were issued to the advertising companies based on these resolutions.
— The division bench of Patna HC held that the appellant(s) herein could not raise any demand of tax/fee/royalty on advertisement(s) since it has been made without any legislative sanction and is, thus, violative of Article 265 of the Constitution of India. It further directed that all amounts recovered by the appellants herein on this count i.e., by way of ‘tax’ on advertisement(s), be refunded to the concerned parties, as also that, as a consequence, there was no question of any imposition of penalty.
— The expression “royalty” has consistently been construed to be compensation paid for rights and privileges enjoyed by the grantee and normally has its genesis in the agreement entered into between the grantor and the grantee. As against tax which is imposed under a statutory power without reference to any special benefit to be conferred on the payer of the tax, the royalty would be in terms of the agreement between the parties and normally has direct relationship with the benefit or privilege conferred upon the grantee.
— SC finds that the decision of the Corporation, to charge Rs.10 per square foot with regard to hoarding(s)/advertisement(s) as communicated at the relevant point of time to the concerned parties needs no interference. However, the imposition of penalty for non- payment needs to be interfered with as no such power exists. It is held thus, but with the clarificatory caveat that the Corporation would not be precluded from charging interest over delayed payment(s). Obviously, interest on delayed payment(s) would not be a ‘penalty’ but rather, in the realm of ‘compensation’ for late/delayed payment of amounts which were payable on/from an earlier date. (SC Judgement Dated 16/10/2024)
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Disclaimer: The contents of this article are for informational purposes only. The user may refer to the relevant notification/ circular/ decisions issued by the respective authorities for specific interpretation and compliances related to a particular subject matter)
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