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2023 (12) TMI 293 - DELHI HIGH COURT GST

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GST search deposit over GSTR-3B vs 2A ITC mismatch held coerced, not voluntary u/s74(5); refund with interest ordered
The dominant issue was whether amounts collected from a taxpayer during search/inspection constituted voluntary payment under s.74(5) CGST Act or were coerced and refundable. The HC held the show cause notices, founded on ITC mismatch between GSTR-3B and GSTR-2A, ignored the prior deposit and raised a demand without credit, indicating action under s.74(7) without following the stipulated procedure; further, no communication under r.142(1A) CGST Rules evidencing ascertainment of liability was issued. Applying the principle that non-compliance with procedure supports a finding of non-voluntariness, the Court accepted the payment was made under compelling circumstances and directed refund in cash with 6% interest from 13.12.2022 until payment, allowing the writ.

Voluntary payment under Section 73(5) and Section 74(5) of the CGST Act - payment made under coercion / compelling circumstances - procedural acknowledgment under Rule 142(2) and communication under Rule 142(1A) of the CGST Rules - show cause notice under Section 74(7) of the CGST Act and accounting for deposits - reversal of debit from Electronic Credit Ledger (ECL) and refund with interest - waiver of penalty consequent to voluntary depositVoluntary payment under Section 73(5) and Section 74(5) of the CGST Act - payment made under coercion / compelling circumstances - procedural acknowledgment under Rule 142(2) of the CGST Rules - Whether the amounts deposited by the petitioner during the search operation on 29-30 July 2022 were voluntary payments under Sections 73(5)/74(5) of the CGST Act or were made under compulsion. - HELD THAT: - The court found that the respondents did not follow the statutory and procedural safeguards applicable to voluntary payments. Although payments were effected through GST DRC-03 forms, no acknowledgement in form GST DRC-04 was issued as required, and Rule 142(2) procedure was not complied with. The Director's recorded statement acknowledged a mismatch in GSTR-2A/3B but did not admit that ITC had been wrongly availed; instead it stated that any tax liability, if found, would be paid with interest and penalty. No liability was ascertained nor was any communication under Rule 142(1A) issued. In these circumstances, and having regard to precedent, the Court accepted that payments made at late hours during the search operation were not voluntary but were made under compelling circumstances. [Paras 9, 11, 17, 18, 19]Payments made during the search operation were not voluntary but were made under compulsion; therefore they cannot be treated as voluntary deposits under Sections 73(5)/74(5).Show cause notice under Section 74(7) of the CGST Act and accounting for deposits - Whether the show cause notices issued to the petitioner properly accounted for the deposits made on 29-07-2022. - HELD THAT: - The show cause notices for the periods in question were predicated on mismatch between GSTR-3B and GSTR-2A and were issued under Section 74(7). The notices, while recording that deposits had been made, did not give credit for those deposits and were not limited to the shortfall after accounting for payments. Thus the respondents neither acknowledged the deposits nor granted their benefit when framing the proposed demand. [Paras 12, 13, 14]The show cause notices did not account for or acknowledge the deposits made by the petitioner and proceeded under Section 74(7) without granting the benefit of such deposits.Reversal of debit from Electronic Credit Ledger (ECL) and refund with interest - Relief to be granted in respect of the sums deposited during the search operation. - HELD THAT: - Having concluded that the deposits were made under compulsion and that procedural acknowledgment and credit were not afforded, the Court directed an appropriate refund. The Court ordered refund of the amount paid in cash (less the portion debited to ECL) with interest at the rate directed, and ordered reversal of the debit made to the petitioner's ECL so that the ledger is restored. [Paras 20, 21]Respondents directed to refund the cash portion with interest at 6% p.a. from 13-12-2022 and to reverse the debit of the amount taken from the petitioner's ECL.Final Conclusion: The petition is allowed: the Court held that the deposits made during the search were not voluntary, the show cause notices did not account for those deposits, and directed repayment of the cash deposit with interest and reversal of the Electronic Credit Ledger debit in the terms set out by the Court.

2023 (12) TMI 292 - DELHI HIGH COURT GST

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Search u/s 67(1)(a) CGST Act upheld; reasons to believe limited review, voluntary tax deposit refunded
HC upheld the legality of the search and inspection under Section 67(1)(a) CGST Act, holding that "reasons to believe" require only rational, relevant material and that sufficiency of such reasons is not justiciable. The information that petitioner purchased goods from a non-existent supplier provided adequate basis to infer wrongful ITC availment; hence, the inspection by central officers was not illegal, nor barred by Section 6(2)(b) CGST Act despite earlier DGST action. However, HC directed refund of Rs. 10,00,000 voluntarily deposited in FORM GST DRC-03. Petition disposed.

Search and inspection under Section 67 of the CGST Act - reasons to believe - rational nexus between information and belief - concurrent inquiries and Section 6(2)(b) of the CGST Act - coercive deposit and refund of amount paid in FORM GST DRC-03 - supply of panchnama and recorded statement - judicial review of sufficiency of reasons to believeSearch and inspection under Section 67 of the CGST Act - reasons to believe - rational nexus between information and belief - Validity of the inspection/search conducted on 12.11.2022 under Section 67 of the CGST Act - HELD THAT: - The Court applied the established test that the expression 'reasons to believe' requires existence of information forming a rational basis for the belief and not mere suspicion. The authorities had material indicating that the petitioner had availed Input Tax Credit in respect of purchases from a supplier found to be non-existent, and this information had a direct link to forming the belief of wrongful availment of ITC. The sufficiency of reasons is not open to reassessment so long as there was material supplying a rational basis for the belief that conditions of Section 67(1) were satisfied. On that basis the inspection was not illegal or vitiated for want of reasons to believe. [Paras 16]Inspection/search of 12.11.2022 held valid and not illegal for want of reasons to believeConcurrent inquiries and Section 6(2)(b) of the CGST Act - Whether Section 6(2)(b) precluded central officers from conducting the inspection in light of a prior DGST inspection - HELD THAT: - The Court examined the contention that prior proceedings by the Delhi GST authorities barred central officers from conducting an inspection as part of an ongoing investigation. Having regard to the factual matrix that the central officers were investigating creation of fake firms and wrongful availment of ITC, the Court found that Section 6(2)(b) did not operate to preclude the central officers from carrying out the inspection to conclude an ongoing investigation. [Paras 22]Section 6(2)(b) does not preclude the central officers from conducting the inspection in the present investigationSupply of panchnama and recorded statement - Entitlement to direction for supply of panchnama and a copy of the statement allegedly recorded on 12.11.2022 - HELD THAT: - The respondents affirmed that no statement of the petitioner was recorded on 12.11.2022 and that no goods or documents were seized under Section 67(2). In view of the respondents' averment and the absence of any established recording or seizure, the Court found no basis to direct supply of a panchnama or a statement copy. [Paras 23]No order for supply of panchnama or statement as the respondents state no statement was recorded and no seizure madeCoercive deposit and refund of amount paid in FORM GST DRC-03 - Vallabh Textiles and Lovelesh Singhal precedents - Whether the Rs.10,00,000/- deposited by the petitioner in FORM GST DRC-03 was made under coercion and refundable - HELD THAT: - Having regard to the Court's earlier decisions cited, and the factual matrix that the deposit was made on the visiting officers' laptop during the inspection and that the petitioner promptly alleged coercion and filed the petition within ten days, the Court concluded that the circumstances warranted refund. The Court clarified that the refund order does not prevent the Revenue from taking protective or adjudicatory steps thereafter if conditions for such steps under the CGST Act and rules are satisfied. [Paras 26]Respondents directed to refund the Rs.10,00,000/- deposited in FORM GST DRC-03; Revenue permitted to pursue appropriate protective or adjudicatory measures subsequentlyFinal Conclusion: The inspection conducted on 12.11.2022 was upheld as valid; Section 6(2)(b) did not bar the central officers from conducting the inspection; no direction was issued for supply of panchnama or statement as none was recorded; the sum of Rs.10,00,000/- deposited in FORM GST DRC-03 is to be refunded, subject to the respondents' liberty to pursue protective or adjudicatory action in accordance with law.

2023 (12) TMI 291 - DELHI HIGH COURT GST

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Issues: (i) Whether the search and inspection conducted under section 67(1) of the Delhi Goods and Services Tax Act, 2017 was illegal for want of proper authorization and reasons to believe. (ii) Whether the amount of input tax credit reversed during the search was liable to be restored on the ground that the reversal was involuntary.

Issue (i): Whether the search and inspection conducted under section 67(1) of the Delhi Goods and Services Tax Act, 2017 was illegal for want of proper authorization and reasons to believe.

Analysis: The authorization in FORM GST INS-01 was held to be sufficient because the prescribed form only required the relevant statutory ground to be indicated and did not require disclosure of detailed reasons before the search. The record also showed that the search was undertaken on the basis that the petitioner had availed input tax credit from suppliers whose registrations had been cancelled. The existence of reasons to believe satisfying section 67(1)(a) was, therefore, not displaced.

Conclusion: The challenge to the legality of the search failed and was decided against the petitioner.

Issue (ii): Whether the amount of input tax credit reversed during the search was liable to be restored on the ground that the reversal was involuntary.

Analysis: The Court held that a payment made on self-ascertainment basis can conclude liability only when it is voluntary. On the facts, the reversal was made late at night during continuing search and questioning, without an acknowledgment in FORM GST DRC-04 and without subsequent adjudication. The Court did not accept that the reversal was voluntary and treated the surrounding circumstances as indicating pressure and coercion. At the same time, the Court preserved the revenue's ability to take lawful protective steps, including under section 83 of the Delhi Goods and Services Tax Act, 2017 and rule 86A of the Delhi Goods and Services Tax Rules, 2017, if conditions are satisfied.

Conclusion: The petitioner was entitled to restoration of the reversed input tax credit, and this issue was decided in favour of the petitioner.

Final Conclusion: The petition succeeded only to the extent of directing restoration of the reversed input tax credit, while the challenge to the search itself was rejected.

Ratio Decidendi: A reversal of tax or input tax credit during search concludes liability only if it is shown to be voluntary and on self-ascertainment basis; where the surrounding circumstances indicate coercion and the statutory post-payment procedure is not followed, the amount is liable to be restored, while lawful revenue-protective measures remain open.

Voluntary tax reversal during search can bind only if made without coercion; involuntary reversal was ordered restored.
Search authorisation under section 67(1) was upheld because FORM GST INS-01 was sufficient to record the statutory ground and the record showed reasons to believe that input tax credit had been availed from suppliers whose registrations were cancelled. The challenge to the search therefore failed. By contrast, input tax credit reversed during the search was ordered to be restored because a self-ascertained payment concludes liability only when voluntary; the late-night reversal during ongoing search and questioning, without FORM GST DRC-04 or later adjudication, was treated as involuntary and under pressure. The revenue's power to take lawful protective measures remained open.

Authorization for inspection or search in FORM GST INS-01 - reason to believe requirement for search/inspection - voluntariness of reversal of Input Tax Credit deposited during search - refund of tax deposited under coercion - self-ascertainment/payment prior to notice and its consequences under Sections 73(5)-(7) and 74(6) - requirement of acknowledgment in FORM GST DRC-04 and Rule 142 complianceAuthorization for inspection or search in FORM GST INS-01 - reason to believe requirement for search/inspection - Validity of the search/inspection authorization dated 18.10.2022 - HELD THAT: - The Court found that the FORM GST INS-01 used on 18.10.2022 recited the statutory reasons under Clause A and thereby satisfied the requirement that a reason for search/inspection be recorded. The form does not oblige the issuing officer to set out detailed reasons on the face of the authorization, and detailed reasons need not be disclosed to the taxpayer before the search; the taxpayer may, however, seek those reasons and, absent justification, they should be supplied. Respondents averred (and the petitioner did not seriously dispute) that the detailed reasons were recorded in the departmental files. On this basis the Court held that the search was not illegal for want of proper authorization. [Paras 7, 8, 9]Authorization dated 18.10.2022 was not invalid for want of specific reasons in FORM GST INS-01; the search was not illegal on that ground.Voluntariness of reversal of Input Tax Credit deposited during search - refund of tax deposited under coercion - self-ascertainment/payment prior to notice and its consequences under Sections 73(5)-(7) and 74(6) - requirement of acknowledgment in FORM GST DRC-04 and Rule 142 compliance - Whether the petitioner voluntarily reversed ITC of Rs.22,14,226/- during the search and whether that amount must be restored - HELD THAT: - The Court examined the petitioner's assertion that the statement and reversal of ITC were made under duress during a prolonged search and the respondents' contention that the petitioner had not retracted the statement and therefore had voluntarily reversed the ITC. While payment on self-ascertainment ordinarily bars penal consequences and obviates notice under Section 73(1) (with analogous consequences under Section 74), the Court emphasised that a deposit made under coercion is refundable and must be refunded while preserving the Revenue's right to proceed in accordance with law. The respondents had not issued the statutory acknowledgment in FORM GST DRC-04 as required by Rule 142-a procedural lapse noted by the Court and treated as material (the Court relied on earlier decisions to that effect). The Court found it plausible that the reversal was effected in intimidating circumstances late at night and that there was no conclusive admission of liability; accordingly the deposit could not be treated as voluntary for purposes of foreclosing relief. The Court therefore directed restoration of the ITC to the petitioner's electronic credit ledger while clarifying that this order does not preclude departmental action (including under Section 83 or Rule 86A) if conditions for such action are satisfied. [Paras 18, 19, 20, 21, 22]The reversal/deposit of ITC of Rs.22,14,226/- is to be restored to the petitioner's Electronic Credit Ledger; the Revenue's right to proceed thereafter in accordance with law is preserved.Final Conclusion: The petition succeeds in part: the search/inspection authorization was held valid, but the Court directed that the ITC of Rs.22,14,226/- reversed during the search be restored to the petitioner's Electronic Credit Ledger because the reversal was not established to be voluntary; procedural lapse in failing to issue FORM GST DRC-04 was noted, and the Revenue remains free to pursue statutory remedies thereafter.

2023 (12) TMI 280 - ITAT DELHI Income Tax

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Issues Involved:
1. Validity of the assessment order due to non-compliance with CBDT Circular No. 19/2019 regarding mandatory DIN.

Summary:

Issue 1: Validity of the Assessment Order Due to Non-Compliance with CBDT Circular No. 19/2019

The primary issue raised by the assessee was the validity of the assessment order dated 27.12.2019, which lacked a Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019. The assessee contended that the absence of DIN rendered the assessment order null and void. The Revenue argued that the order was communicated to the assessee with a DIN through an intimation letter dated 31.12.2019.

The Tribunal examined the contents of CBDT Circular No. 19/2019, emphasizing that any communication issued by the Income-tax Department after 01.10.2019 must include a computer-generated DIN. The Circular provides exceptions for manual issuance under specific circumstances, requiring prior written approval and reasons documented in the file. Paragraph 4 of the Circular states that non-conforming communications shall be treated as invalid and deemed never issued.

The Tribunal found that the assessment order did not mention a DIN nor provided reasons for its absence, contrary to the Circular's requirements. The subsequent communication of DIN was deemed a superfluous exercise. The Tribunal referenced the Delhi High Court's decision in CIT vs Brandix Mauritius Holdings Ltd., which held that communications without DIN are non-est in law.

Additionally, the Tribunal noted that the simultaneous generation and communication of DIN did not comply with the Circular's mandate. The Tribunal cited its decision in Abhimanyu Chaturvedi vs DCIT, reiterating that the assessment order must mention the DIN before it is signed.

Consequently, the Tribunal held that the assessment order was invalid and quashed it. Other grounds raised by the assessee were rendered academic and did not require adjudication.

Conclusion:
The appeal filed by the assessee was allowed, and the assessment order was quashed due to non-compliance with CBDT Circular No. 19/2019 regarding mandatory DIN.

AO's order without DIN number in body is invalid and loses validity despite subsequent communication
ITAT Delhi held that an AO's order without a DIN number mentioned in its body is invalid and loses validity. The tribunal ruled that subsequent separate communication of DIN is superfluous and cannot cure the defect. Following Delhi HC precedent in Brandix Mauritius Holdings Ltd., communications without DIN have no legal standing under the 2019 Circular. The tribunal quashed the impugned AO order, deeming it never passed, and allowed the assessee's appeal, rejecting the department's argument about simultaneous DIN generation.

Validity of communication under CBDT Circular No.19/2019 - Document Identification Number (DIN) - Communication deemed invalid if non-compliant with CBDT Circular No.19/2019 - Audit trail requirement for departmental communications - Binding effect of CBDT circular issued under Section 119Document Identification Number (DIN) - Validity of communication under CBDT Circular No.19/2019 - Communication deemed invalid if non-compliant with CBDT Circular No.19/2019 - Audit trail requirement for departmental communications - Whether the assessment order dated 27.12.2019, which does not quote a DIN in its body and does not record the exceptional circumstances and prior approval in the format prescribed by CBDT Circular No.19/2019, is valid. - HELD THAT: - The Tribunal examined CBDT Circular No.19/2019 which mandates that, with effect from 1 October 2019, no communication relating to assessment or other specified matters shall be issued unless a computer-generated DIN is allotted and quoted in the body of the communication. Paragraph 3 permits limited exceptions only where written reasons are recorded in the file and prior written approval of the Chief Commissioner/Director General is obtained, and the communication must state the specific format set out in the Circular. Paragraph 4 unequivocally provides that any communication not in conformity with paragraphs 2 and 3 shall be treated as invalid and deemed never to have been issued. The AO's order does not quote a DIN in its body nor does it record the requisite reasons or approval in the prescribed format; a subsequent or separate intimation which contains a DIN does not cure the deficiency because the Circular requires the DIN and prescribed statement to appear in the communication itself. The Tribunal followed the reasoning of the Delhi High Court and coordinate Tribunal precedents which hold that non-compliance with the Circular renders the communication non-est in law and that circulars issued under Section 119 are binding on subordinate authorities. Consequently, the absence of the DIN and the prescribed statements in the AO's order vitiates the order ab initio. [Paras 6, 7, 8, 9]The assessment order dated 27.12.2019 is invalid and shall be deemed to have never been passed; the impugned AO order is quashed.Final Conclusion: The appeal is allowed: the assessment order for AY 2015-16 lacking the DIN and the prescribed statements under CBDT Circular No.19/2019 is held invalid and is quashed; remaining grounds are rendered academic.

2023 (12) TMI 279 - ITAT DELHI Income Tax

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Tribunal Rules Against Unfounded Tax Assessment: No Additions Without Incriminating Evidence in Section 153A Cases.
The appellate tribunal set aside the order of the CIT (A) and ruled in favor of the assessee, emphasizing that no addition can be made in an assessment under section 153A without seized incriminating material. The tribunal found that the assessment was improperly framed based solely on bank statements without any incriminating material from the search. Consequently, the tribunal allowed the appeal, highlighting the necessity of incriminating evidence for such assessments, in line with legal precedents established by the Hon'ble SC. The decision was pronounced in open court on 5th December 2023.

Additions under Section 68 in respect of unexplained bank deposits - assessments framed under Section 153A and requirement of incriminating seized material - prohibition on making additions in proceedings under Section 153A dehors seized materialAdditions under Section 68 in respect of unexplained bank deposits - assessments framed under Section 153A and requirement of incriminating seized material - Validity of additions made under Section 68 in an assessment framed under Section 153A where no incriminating seized material relevant to the assessment year was brought on record. - HELD THAT: - The Assessing Officer added amounts deposited in bank accounts to the assessee's declared income under the provision dealing with unexplained cash credits, treating the deposits as unexplained and invoking Section 68. The AO expressly recorded that there was no seized material relating to the assessment year and that the addition was made without any basis derived from seized material. The Revenue did not dispute that no incriminating material from the search pertained to the year under consideration. Applying the legal principle laid down by the Hon'ble Supreme Court in PCIT vs Abhisar Buildwell Pvt. Ltd. - that additions in assessments framed under Section 153A cannot be made dehors incriminating material unearthed during a search - the Tribunal held that the additions could not be sustained. Following the precedent, the Tribunal set aside the CIT(A)'s confirmation of the additions and allowed the appeal. [Paras 3, 5, 9]The additions made under Section 68 were annulled because they were made in an assessment under Section 153A without any incriminating seized material; the order of the CIT(A) confirming the additions is set aside and the appeal is allowed.Final Conclusion: Following the Supreme Court precedent that additions in proceedings under Section 153A must be founded on incriminating material seized during the search, the Tribunal set aside the impugned additions and allowed the assessee's appeal for assessment year 2014-15.

2023 (12) TMI 257 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Insolvency claim classification cannot change after admission; operational debt admitted in CIRP cannot be recast as workmen's dues.
Claims filed in the corporate insolvency resolution process as operational debt through a vendor/sub-contractor could not later be reclassified as workmen's dues to claim parity with directly employed workmen. The admitted claims had been submitted in Form B and treated throughout the process as operational creditors, while workmen's dues were separately recognised and given distinct treatment in the resolution plan. The insolvency framework permits differential treatment between creditor classes, and workmen's dues rank differently from operational debt. Once a claim is admitted in one category, it cannot be transposed into another at the stage of challenge to approval of the resolution plan. The differential treatment in the approved plan was therefore valid.

Treatment of operational creditors versus workmen under the Insolvency and Bankruptcy Code - definition of "workman" under Section 3(36) of the IBC read with Section 2(s) of the Industrial Disputes Act, 1947 - effect of admission of claim in CIRP pursuant to Form B as proof of claim by operational creditor - equitable treatment of similarly situated creditors and permissible differentiation between classes of creditorsEffect of admission of claim in CIRP pursuant to Form B as proof of claim by operational creditor - treatment of operational creditors versus workmen under the Insolvency and Bankruptcy Code - Whether appellants, who were workers engaged by a sub-contractor but did not themselves file claims in the CIRP, can be treated as workmen for the purpose of payment under the approved Resolution Plan and thereby claim parity with admitted workmen dues. - HELD THAT: - The Tribunal found that none of the appellants had filed any claim in the CIRP as workmen. The claims on which the appellants relied were filed by subcontractors/vendors in Form B as operational creditors and were admitted and classified by the Resolution Professional as operational debt. A claim filed and admitted as an operational creditor cannot be transposed into a workmen's claim at the appellate stage. The Resolution Plan appropriately reflected the admitted claims as categorized by the Resolution Professional and treated operational creditor claims separate from workmen dues. Consequently appellants who did not participate in the CIRP as claimants cannot seek reclassification of admitted operational claims into the workmen category to obtain higher recovery. [Paras 8, 9, 14, 17, 19]Appellants cannot be treated as workmen for the purpose of the Resolution Plan where their alleged dues were filed and admitted as operational creditor claims by subcontractors; challenge dismissed.Definition of "workman" under Section 3(36) of the IBC read with Section 2(s) of the Industrial Disputes Act, 1947 - equitable treatment of similarly situated creditors and permissible differentiation between classes of creditors - Whether the Resolution Plan's differential treatment of workmen dues and operational creditor claims is contrary to law and the statutory definition of "workman". - HELD THAT: - The Tribunal acknowledged that the statutory definition of "workman" under the Industrial Disputes Act, adopted by Section 3(36) of the IBC, does not distinguish between direct and subcontracted workers in defining a workman. However, the determinative question was the categorisation and admission of claims in the CIRP. Section 53 of the IBC provides different priority and treatment for workmen dues and operational debts. The Resolution Plan differentiated payments to workmen and operational creditors in accordance with the admitted claims and the Code. The Tribunal relied on the principle-reiterated in precedent-that equitable treatment applies to similarly situated creditors and does not compel identical recovery percentages across different classes of creditors. Thus the differential treatment in the approved Resolution Plan was held to be in accordance with law. [Paras 11, 12, 13, 14, 15]Differential treatment of admitted workmen dues and admitted operational creditor claims in the Resolution Plan is lawful; no interference warranted.Final Conclusion: The appeal is dismissed. The adjudicating authority's approval of the Resolution Plan stands: claims filed and admitted as operational creditor claims cannot be transposed into workmen claims at the appellate stage, and the Resolution Plan's differentiated treatment of workmen and operational creditors, as reflected in the admitted claims and in accordance with the Code and regulations, does not warrant interference.

2023 (12) TMI 256 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues: (i) Whether an application by a successful auction purchaser seeking electricity connection after liquidation was maintainable under section 60(5) of the Insolvency and Bankruptcy Code, 2016. (ii) Whether the electricity distribution company could insist on payment of the corporate debtor's pre-CIRP electricity dues before granting a fresh connection to the successful auction purchaser.

Issue (i): Whether an application by a successful auction purchaser seeking electricity connection after liquidation was maintainable under section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis: The dispute arose directly out of the liquidation process and the demand for a fresh electricity connection after sale of the asset in liquidation. The application was therefore one arising out of or in relation to the insolvency and liquidation proceedings. The contention that the adjudicating authority had become functus officio was rejected because the relief sought had a direct nexus with the liquidation process and fell within the tribunal's jurisdiction under section 60(5).

Conclusion: The application was maintainable under section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Issue (ii): Whether the electricity distribution company could insist on payment of the corporate debtor's pre-CIRP electricity dues before granting a fresh connection to the successful auction purchaser.

Analysis: The sale was on an as is where is, as is what is, whatever there is and without recourse basis, but the pre-CIRP electricity dues of the corporate debtor were claims that had to be dealt with in the insolvency process. Since the distribution company had not filed its claim in the liquidation proceedings, it could not bypass the statutory scheme and recover the old dues from the successful auction purchaser as a condition for a new connection. The authorities relied upon by the appellant were distinguished, while the line of insolvency decisions applying the clean slate principle and the waterfall mechanism was followed.

Conclusion: The electricity distribution company could not insist on payment of the corporate debtor's pre-CIRP electricity dues for grant of a fresh connection.

Final Conclusion: The impugned directions granting electricity connection without recovery of the old dues were upheld, and the appeal failed.

Ratio Decidendi: In liquidation proceedings, pre-CIRP dues of the corporate debtor must be pursued within the insolvency framework and cannot be enforced against a successful auction purchaser as a condition for a fresh utility connection, and disputes arising from such demand are maintainable under section 60(5).

Insolvency liquidation dues cannot be shifted to auction purchasers as a condition for a fresh electricity connection.
A successful auction purchaser of a liquidated asset may invoke section 60(5) of the Insolvency and Bankruptcy Code, 2016 where the dispute over a fresh electricity connection arises from the liquidation process. The tribunal treated the application as maintainable because the relief sought had a direct nexus with liquidation and was not barred by functus officio. It further held that pre-CIRP electricity dues of the corporate debtor must be dealt with in the insolvency process and cannot be demanded from the auction purchaser as a condition for a new connection. The distribution company's failure to file its claim in liquidation prevented it from bypassing the statutory insolvency framework.

Extinguishment of pre-CIRP dues under liquidation - application under Section 60(5) arising out of liquidation proceedings - sale "as is where is" and due diligence clause in liquidation sales - grant of electricity connection without insisting payment of pre-CIRP dues - clean slate principle under the Insolvency and Bankruptcy Code - claim to be filed and adjudicated in liquidation processApplication under Section 60(5) arising out of liquidation proceedings - functus officio of Adjudicating Authority - Maintainability of I.A. No.219/2022 filed by the Successful Auction Purchaser before the Adjudicating Authority after completion of liquidation/sale - HELD THAT: - The Tribunal held that the application filed by the Successful Auction Purchaser arose out of and was in relation to the liquidation proceedings of the Corporate Debtor and therefore was entertainable under Section 60(5). The court rejected the contention that the Adjudicating Authority had become functus officio once the sale and issuance of sale certificate were completed, observing that remedies or disputes connected to a liquidation sale may be brought before the Adjudicating Authority under Section 60(5). The conclusion follows earlier decisions of this Tribunal where similar applications by successful purchasers were held maintainable and the Adjudicating Authority retained jurisdiction to deal with matters arising out of liquidation sales. [Paras 14]The application is maintainable under Section 60(5).Extinguishment of pre-CIRP dues under liquidation - grant of electricity connection without insisting payment of pre-CIRP dues - clean slate principle under the Insolvency and Bankruptcy Code - claim to be filed and adjudicated in liquidation process - Whether the distribution licensee (Paschimanchal Vidyut Vitran Nigam Ltd.) can insist on payment of pre-CIRP electricity dues by the Successful Auction Purchaser as condition for grant/energisation of a new connection - HELD THAT: - The Tribunal found that electricity dues of the Corporate Debtor, if not filed and adjudicated as claims in the liquidation process, stand extinguished vis-a -vis the Successful Auction Purchaser by operation of the liquidation process and the IBC's waterfall/'clean slate' principles. Reliance was placed on Supreme Court and Tribunal precedents distinguishing SARFAESI auction cases and affirming that in insolvency/liquidation proceedings the claim of the electricity distribution company must be raised in the liquidation process; it cannot be enforced separately to burden the successful purchaser. Consequently, the Adjudicating Authority correctly directed the distribution licensee to complete documentation and energise the new connection without insisting on payment of pre-CIRP arrears, while leaving other statutory requirements and fresh-connection charges intact. [Paras 15, 16, 18]The distribution company cannot insist on payment of the pre-CIRP electricity dues; the Successful Auction Purchaser is not liable to pay those arrears as a condition for grant/energisation of the new connection.Final Conclusion: The Appeal is dismissed. The impugned order of the Adjudicating Authority is upheld: the application by the Successful Auction Purchaser was maintainable under Section 60(5), and the distribution licensee is directed to grant/energise the electricity connection after completion of requisite documentation and payment of regular fresh-connection charges, but without insisting on payment of the pre-CIRP electricity arrears claimed against the erstwhile Corporate Debtor.

2023 (12) TMI 255 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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CoC can replace unconfirmed IRP under Section 22 when meetings not convened despite directions
NCLAT dismissed appeal challenging replacement of IRP. Appellant was appointed as IRP but appointment was never confirmed by CoC as required under Section 22. CoC filed application seeking IRP replacement after appellant failed to convene meetings despite court directions. Adjudicating Authority correctly allowed replacement since unconfirmed IRP could be replaced by CoC. Appellant's objection regarding debt assignment was rejected as assignment occurred after replacement resolution was passed. NCLAT found no error in lower court's order and dismissed appeal finding no merit.

Replacement of Interim Resolution Professional under Section 22 - Replacement of Resolution Professional under Section 27 - Committee of Creditors' resolution binding effect - Natural justice and opportunity to be heard - Locus to challenge Committee of Creditors' resolution - Effect of assignment of debt on locus of applicantReplacement of Interim Resolution Professional under Section 22 - Replacement of Resolution Professional under Section 27 - Committee of Creditors' resolution binding effect - Validity of the CoC resolution dated 06.10.2023 replacing the Appellant as IRP/RP - HELD THAT: - The Tribunal found that the Appellant's appointment as IRP had never been confirmed by the CoC by the requisite majority and therefore could be validly replaced under Section 22. The resolution placed for e voting contained alternative formulations referring to both Sections 22 and 27, but that alternative framing did not vitiate the replacement where the CoC passed the resolution with unanimity (100% votes). The statutory scheme contemplates that where the CoC passes the requisite resolution to replace an IRP/RP and forwards the proposed name to the Adjudicating Authority and the Board as provided, the CoC's collective decision is not lightly assailable. Applying these principles to the facts, the Tribunal held there was no infirmity in the CoC resolution effecting the replacement. [Paras 7, 8, 10, 11, 13]The CoC resolution dated 06.10.2023 replacing the Appellant is valid and the Adjudicating Authority correctly gave effect to that resolution.Natural justice and opportunity to be heard - Locus to challenge Committee of Creditors' resolution - Whether the order of the Adjudicating Authority dated 17.10.2023 violated the principles of natural justice by not hearing the Appellant adequately - HELD THAT: - The Tribunal recorded that counsel for both the Financial Creditors and the Appellant/IRP were present before the Adjudicating Authority and that the hearing included the Appellant's submissions (noted in the impugned order). Reliance on precedent was considered; the Tribunal observed that the statutory scheme (notably Section 27) does not mandate that the Adjudicating Authority give the IRP a separate hearing before approving a CoC's validly passed resolution to replace him. In these circumstances, and on the facts that the CoC had passed the replacement resolution in accordance with the Code and that the Adjudicating Authority heard parties, the contention of breach of natural justice was rejected. [Paras 10, 11]No violation of natural justice occurred and the Appellant's challenge on that ground fails.Effect of assignment of debt on locus of applicant - Whether the subsequent assignment of SBI's debt (allegedly on 12.10.2023) affected the maintainability of IA No.1874 of 2023 or the CoC's resolution passed on 06.10.2023 - HELD THAT: - The Tribunal noted the chronology: IA No.1874 was filed in May 2023 and the CoC meeting and resolution to replace the IRP occurred on 06.10.2023, whereas the purported assignment relied upon by the Appellant took place on 12.10.2023. The Adjudicating Authority had accordingly dealt with the assignment point, observing the assignment occurred after the resolution and proceedings complained of. On that basis, the Tribunal held that the subsequent assignment did not negate the CoC's locus or invalidate the steps taken prior to assignment. [Paras 10, 14]The assignment of debt after the CoC resolution did not affect the maintainability of the application or the validity of the CoC's action.Final Conclusion: The appeal is dismissed. The CoC validly replaced the Appellant by resolution; the Adjudicating Authority correctly gave effect to that resolution after hearing parties; and the subsequent assignment of debt did not vitiate the earlier proceedings.

2023 (12) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI Insolvency and Bankruptcy

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Issues Involved:
1. Constitution of the Committee of Creditors (CoC).
2. Approval of the resolution plan by the Adjudicating Authority.
3. Pendency of avoidance applications and their impact on the resolution plan.

Summary:

1. Constitution of the Committee of Creditors (CoC):
The appellants challenged the constitution of the CoC, alleging that certain home buyers involved in fraudulent transactions were illegitimately included. The Adjudicating Authority dismissed these challenges, noting that the appellants had not impleaded the alleged fraudulent home buyers or the Resolution Professional (RP) in their application, thereby failing to provide an opportunity for these parties to be heard. The Tribunal upheld this decision, emphasizing that any decision to remove home buyers from the CoC without hearing them would be prejudicial and violate principles of natural justice. The Tribunal also noted that the appellants had not raised objections to the CoC's constitution before the 8th CoC meeting, indicating their challenge was an afterthought following the rejection of their preferred resolution plan.

2. Approval of the resolution plan by the Adjudicating Authority:
The appellants contended that the resolution plan approved by the CoC was invalid as the CoC was allegedly tainted by the inclusion of fraudulent home buyers. The Adjudicating Authority, however, found that the resolution plan met all statutory requirements and was approved by the requisite majority of home buyers. The Tribunal supported this view, citing the Supreme Court's ruling in the Jaypee case, which held that individual home buyers cannot challenge a resolution plan approved by the majority of their class. The Tribunal concluded that the resolution plan's approval was in line with the IBC's democratic principles and statutory requirements.

3. Pendency of avoidance applications and their impact on the resolution plan:
The appellants argued that the resolution plan should not have been approved while avoidance applications under Sections 43, 44, and 66 of the IBC were pending. The Tribunal disagreed, stating that the IBC allows for the continuation of avoidance applications independently of the resolution process. Section 26 of the IBC explicitly provides that the pendency of avoidance applications does not affect the approval of the resolution plan. The Tribunal cited the Delhi High Court's decision in Tata Steel BSL Limited v. Venus Recruiter Private Limited and Others, which affirmed that avoidance applications can proceed irrespective of the resolution plan's finalization.

Conclusion:
The Tribunal dismissed both appeals, affirming the Adjudicating Authority's orders. It held that the appellants failed to present cogent grounds for interfering with the CoC's constitution or the resolution plan's approval and reiterated that avoidance applications do not impede the resolution process.

Resolution Professional holds exclusive statutory responsibility for filing avoidance applications under IBC Sections 43, 45, 50, 66
NCLAT Principal Bench dismissed appeals challenging CoC constitution and resolution plan approval in CIRP proceedings. Tribunal held that statutory responsibility for filing avoidance applications under IBC Sections 43, 45, 50, and 66 lies exclusively with Resolution Professional, not home buyers or unsuccessful resolution applicants. Court distinguished previous precedent where RP failed to verify claims and conduct proper valuation. Appellants failed to demonstrate grounds warranting interference with adjudicating authority's orders. Resolution plan provision granting CoC exclusive rights over avoidance recoveries was upheld.

Constitution of the Committee of Creditors - binding effect of class vote cast through Authorised Representative - duty of the Resolution Professional to file avoidance/avoidance applications - effect of pending avoidance proceedings on approval of a resolution plan (Section 26 construct) - judicial review of commercial wisdom of the CoC - joinder/necessary parties and principles of natural justiceConstitution of the Committee of Creditors - joinder/necessary parties and principles of natural justice - Tenability of dismissal of IA No.1777/2021 which sought removal of certain alleged fraudulent homebuyers from the CoC and disregard of their votes. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's dismissal of IA 1777/2021. The Adjudicating Authority correctly found that the suspect/allottee homebuyers whose removal was sought had not been made parties and the Resolution Professional was also not impleaded; therefore no order could be passed against them without hearing, failing natural justice. The Court also noted the applicants (individual homebuyers) had not earlier objected to the constitution of the CoC or the Authorised Representative, and their challenge was filed only after the unsuccessful resolution bid of G.S. Constructions, supporting the conclusion that the application was procedurally defective and belated. Further, the Tribunal refused to accept the unilateral expansion by the applicants of the list of suspect homebuyers in the absence of unequivocal findings of fraud and emphasised that the RP has statutory responsibility to pursue avoidance claims. Consequently the dismissal on grounds of non-joinder and lack of locus was sustainable. [Paras 14, 15, 16, 18, 19]Dismissal of IA 1777/2021 is upheld.Duty of the Resolution Professional to file avoidance/avoidance applications - constitution of the Committee of Creditors - Whether individual homebuyers or an unsuccessful resolution applicant could, on their own, seek avoidance remedies and reconstitution of the CoC instead of the RP. - HELD THAT: - The Tribunal held that the IBC places the primary duty to file applications for avoidance of transactions on the Resolution Professional (Section 25(2)(j)), and neither individual homebuyers nor an unsuccessful resolution applicant are entitled to usurp that statutory function. The Jayanta ratio was distinguished: there, the RP had failed to verify claims and the CIRP was otherwise conducted without compliance; those facts are not mirrored here. The Court therefore rejected attempts by the applicants to unilaterally designate other homebuyers as suspect and to seek avoidance relief in place of the RP. [Paras 19, 20]Applicants cannot substitute the RP's role in filing avoidance applications; their standalone avoidance claims were not maintainable.Binding effect of class vote cast through Authorised Representative - judicial review of commercial wisdom of the CoC - Validity of approval of the resolution plan by the CoC when a minority subset of homebuyers challenged the plan despite the class voting in favour through the Authorised Representative. - HELD THAT: - Relying on the statutory scheme and the Supreme Court authority reproduced in the impugned order, the Tribunal affirmed that where the homebuyers as a class (through the Authorised Representative) vote in favour by the requisite internal majority, individual dissenting homebuyers in minority lack locus to challenge the plan. The Adjudicating Authority had found the homebuyers' class vote in favour and that exclusion of the alleged suspect homebuyers would not have altered the requisite majority in favour of the SRA. Given that the plan met statutory requirements, the Tribunal held that the CoC's commercial decision, made by requisite majority, is not amenable to interference merely because a minority within the class dissents. [Paras 15, 17, 22, 23]Approval of the resolution plan by the CoC was valid and not vitiated by the minority homebuyers' objections; judicial interference with the commercial wisdom was unwarranted.Effect of pending avoidance proceedings on approval of a resolution plan (Section 26 construct) - duty of the Resolution Professional to file avoidance/avoidance applications - Whether pendency of avoidance applications (Sections 43-45 and 66) before the Adjudicating Authority barred approval of the resolution plan. - HELD THAT: - The Tribunal held that CIRP is a time-bound process while avoidance proceedings often require extensive inquiry and are not similarly time-bound. Section 26 of the IBC contemplates that avoidance applications shall not impede the CIRP; therefore pendency of such applications does not prevent approval of a viable resolution plan within the CIRP timeline. The Court noted that avoidance claims may continue post-CIRP and that the present resolution plan expressly preserves recovery rights under avoidance provisions for the CoC. Consequently, pendency of IA 149/2021 did not warrant keeping approval in abeyance. [Paras 27]Pendency of avoidance proceedings did not preclude approval of the resolution plan and is no ground to stall CIRP.Constitution of the Committee of Creditors - judicial review of commercial wisdom of the CoC - Tenability of dismissal of IA 1609/2021 filed by the unsuccessful resolution applicant seeking quashing/reconstitution of the CoC and fresh voting. - HELD THAT: - The Tribunal agreed with the Adjudicating Authority that an unsuccessful resolution applicant who did not previously challenge the CoC cannot belatedly assail the CoC after its plan failed to secure votes. No concrete evidence was shown that the transactions of the impugned homebuyers were fraudulent, and the applicant's own proprietor had been held a related party in prior proceedings, undermining locus. For these reasons and for the reasons given in relation to IA 1777/2021 and the validity of the CoC votes, the dismissal of IA 1609/2021 was affirmed. [Paras 25, 26]Dismissal of IA 1609/2021 is upheld and the unsuccessful applicant lacks locus to set aside the CoC after vote rejection.Final Conclusion: All impugned orders dated 11.08.2023 of the Adjudicating Authority - dismissing IA 1777/2021 and IA 1609/2021 and approving the resolution plan in IA 1150/2021 - are upheld; the appeals are dismissed.

2023 (12) TMI 253 - CESTAT CHANDIGARH Service Tax

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Tribunal Orders New Review of Service Tax Refund Claim Due to Procedural Flaws and Lack of Hearing by Authorities.
The Tribunal allowed the appeal by remanding the case for a denovo adjudication of the appellant's refund claim for service tax. It found that the appellant had submitted the necessary documents and disagreed with the original authority's conclusions. The Tribunal noted procedural deficiencies, including the lack of a proper hearing by the Commissioner (Appeals). The original authority was instructed to reconsider the case, taking into account the relevant notifications and evidence, with a deadline of two months for completion.

Exemption of services for transmission of electricity under Notification No. 11/2010-ST - retrospective effect and scope of Notification No. 45/2010-ST - refund claim of service tax - refund claim within limitation under Section 11C of the Central Excise Act, 1944 - burden of duty and passing on of service tax - opportunity of hearing in appellate proceedings - remand for de novo adjudicationExemption of services for transmission of electricity under Notification No. 11/2010-ST - retrospective effect and scope of Notification No. 45/2010-ST - refund claim of service tax - Entitlement to refund in light of Notification No. 11/2010-ST and Notification No. 45/2010-ST and sufficiency of documents produced to establish that the tax paid related to the exempt period. - HELD THAT: - The Tribunal found that the appellant produced evidence of payment of service tax for April, May and June 2010 and submitted bills, work order and a certificate from PSEB, but the original authority wrongly concluded that the appellant had failed to establish that the tax related to services rendered after issuance of Notification No. 11/2010-ST. The appellant also relied on Notification No. 45/2010-ST and claimed the refund within the period permitted under Section 11C of the Central Excise Act, 1944. Because the authorities did not properly consider the documents or the effect of the notifications, the Tribunal concluded that the matter was not finally adjudicated on the merits and required fresh consideration. Accordingly the Tribunal remanded the refund application to the original authority for de novo adjudication, directing that the authority consider the effect of both notifications and the documents filed by the appellant and pass a fresh order in accordance with law within the stipulated timeframe. [Paras 6]Refund claim not finally adjudicated; matter remanded to the original authority for de novo consideration of entitlement under the notifications and the documents produced.Opportunity of hearing in appellate proceedings - Validity of the Commissioner (Appeals) order in light of absence of opportunity of hearing to the appellant. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) passed the impugned order without affording the appellant an opportunity of hearing and without considering all submissions made in the appeal. That procedural lapse vitiated the appellate order and required setting aside for fresh adjudication so that the appellant's submissions and evidence are properly examined. [Paras 6]Impugned appellate order set aside insofar as it was passed without affording opportunity of hearing; appellate authority's decision cannot stand and matter is remitted.Burden of duty and passing on of service tax - refund claim of service tax - Whether the authorities were justified in presuming that the service tax burden had been passed on to the customer. - HELD THAT: - The Tribunal held that both authorities erred in concluding that the burden was passed on to the customer without examining the invoices and bills produced. There was no invoice wherein service tax was specifically charged to PSEB and, in the absence of such specific charging, it cannot be presumed that service tax was actually recovered from the customer. The appellant had paid tax from gross receipts and the terms of the work order made the appellant responsible for payment of taxes; these factual and documentary aspects require fresh examination by the adjudicating authority. [Paras 6]Presumption of passing on is unjustified on the record; issue to be re-examined by the original authority during de novo adjudication.Final Conclusion: Appeal allowed by way of remand. The matter is set aside and directed to be remanded to the original adjudicating authority for de novo consideration of the refund claim, including the effect of Notifications No. 11/2010-ST and No. 45/2010-ST, the documentary evidence produced, and the question of passing on of tax; the authority to decide the matter afresh within two months from receipt of certified copy of this order.

2023 (12) TMI 247 - CESTAT CHANDIGARH Central Excise

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Excess freight collected from dealers cannot be included in assessable value for excise duty under Section 4(1)(a)
CESTAT Chandigarh held that excess freight collected from dealers cannot be included in assessable value for excise duty purposes. The appellant sold vehicles at ex-factory price with title transferring at factory gate. Transportation was arranged separately at dealers' request, making excess freight merely profit from transportation services, not part of goods' value. Following precedent from CESTAT Ahmedabad, the tribunal ruled that since title transfer occurred at factory gate with dealers bearing transportation risk, only transaction value under Section 4(1)(a) applies. Appeal allowed, impugned orders set aside.

Inclusion of excess freight in assessable value - ex-factory sale - transaction value under Section 4(1)(a) of the Central Excise Act - excess freight as profit on transportation - application of Valuation Rules (Rule 5 and Rule 6) - extended period of limitationInclusion of excess freight in assessable value - ex-factory sale - transaction value under Section 4(1)(a) of the Central Excise Act - excess freight as profit on transportation - application of Valuation Rules (Rule 5 and Rule 6) - Excess freight collected from dealers is not includible in the assessable value of excisable goods where sale is ex factory and title passes at factory gate. - HELD THAT: - The Tribunal found as an undisputed factual premise that the appellant's sales were ex factory with transfer of title at the factory gate and that transportation beyond the factory gate was arranged at the dealer's request. Applying Section 4(1)(a) the assessable value is the transaction value and actual transportation cost recoverable from the buyer is excludable. The excess amount collected over and above actual transportation cost has no nexus with manufacture or the sale transaction; it is a profit arising from transportation activity and not an "additional consideration" for the sale. The Tribunal followed and applied the reasoning in the coordinate decisions dealing with excess freight (including the Tribunal's decision in Mercedes Benz India Pvt. Ltd. and the Supreme Court principle in Baroda Electric Meters Ltd. ) holding that excess freight is profit on transportation and cannot be included in transaction value under Rule 6 or by treating it as an "additional amount" under the definition of transaction value. The Revenue's reliance on Rule 5/Rule 6 and on decisions predating the post 1.7.2000 valuation regime was held distinguishable or not applicable on facts, since the essential factual finding - ex factory delivery and separate transportation arrangement - determines that Section 4(1)(a) governs valuation and excludes inclusion of excess freight. Consequential submissions on interest and penalty were considered in the context that the principal duty demand was unsustainable. [Paras 5]Impugned demands for duty (and consequential orders) arising from inclusion of excess freight in assessable value set aside.Final Conclusion: Both appeals allowed; the impugned orders confirming demand of duty and penalties on account of excess freight are set aside with consequential relief as per law.

2023 (12) TMI 246 - CESTAT HYDERABAD Central Excise

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CESTAT allows exemption under Notification 6/2006-CE for goods supplied against International Competitive Bidding for Mega Power Projects
CESTAT Hyderabad allowed the appeal regarding exemption under Notification No. 6/2006-CE for goods supplied against International Competitive Bidding. The revenue denied exemption claiming Project Authority Certificates were not issued by the prescribed authority (Chairman and Managing Director of NTPC) as required under Condition No. 86(b) of Serial No. 400 of Customs Notification No. 21/2002-Cus. The tribunal held that supplies made by appellants through sub-contractor via main contractor BHEL met all stipulated criteria for Mega Power Projects. The exemption was available for domestically procured goods supplied against ICB, without requiring specific certificate signing by PSU Chairman. No duty was leviable on clearances made to these projects, and consequently no penalty was imposable on appellants.

Exemption under Central Excise Notification No. 6/2006-CE for supplies against International Competitive Bidding - condition requiring goods to be otherwise exempt from customs duties when imported - project imports exemption for Mega Power Projects and certification under Notification No. 21/2002-Customs - entitlement of sub-contractors for deemed export relief where main contractor wins contract under ICB - availability of exemption for domestic supplies to an ICB-awarded project irrespective of CMD-signed certification for importsExemption under Central Excise Notification No. 6/2006-CE for supplies against International Competitive Bidding - condition requiring goods to be otherwise exempt from customs duties when imported - project imports exemption for Mega Power Projects and certification under Notification No. 21/2002-Customs - entitlement of sub-contractors for deemed export relief where main contractor wins contract under ICB - Supplies by the appellant to Mega Power Projects through the main contractor awarded the contract under ICB are eligible for exemption under Notification No. 6/2006-CE despite absence of a Chairman and Managing Director's certificate that applies to imports. - HELD THAT: - The condition in Serial No. 19 of Notification No. 6/2006-CE requires that the goods be otherwise exempt from customs duty when imported. Notification No.21/2002-Cus (serial no. 400) grants project import exemption for Mega Power Projects subject to certification requirements for imports (Condition 86). There is no cross-reference making the specific import certification procedure a precondition for domestic clearances under Notification No.6/2006-CE. Where the project is entitled to import similar goods duty-free (i.e., project import exemption exists) and the main contract was awarded through ICB, supplies made to that project through the main contractor - including by subcontractors added later - qualify for the Central Excise exemption. The appellant produced Project Authority Certificates, Ministry of Power certifications recognising the projects as Mega Power Projects, and documentary evidence that BHEL was the ICB-awarded main contractor and had engaged the appellant as sub-contractor. A holistic appraisal of these documents satisfies the condition that the goods were supplied against ICB to projects entitled to import exemption; consequently, the appellant was entitled to exemption under Notification No.6/2006-CE and no duty or penalty was leviable. [Paras 14, 15, 16, 19, 20]Appeal allowed; supplies held exempt under Notification No. 6/2006-CE and consequential duty and penalty set aside.Final Conclusion: The Tribunal held that the appellant's clearances to the two recognised Mega Power Projects via the ICB-awarded main contractor met the conditions for exemption under Notification No. 6/2006-CE; duty and penalty were therefore not leviable and the appeal was allowed with consequential relief.

2023 (12) TMI 238 - DELHI HIGH COURT GST

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Issues Involved:
1. Legality of the search conducted under Section 67 of the CGST Act.
2. Entitlement to the reversal of Input Tax Credit (ITC) debited from the petitioner's Electronic Credit Ledger (ECL).

Summary:

Issue 1: Legality of the Search Conducted Under Section 67 of the CGST Act

The petitioner challenged the search conducted at his premises on 07.10.2022, arguing that the authorization for the search was vague and imprecise. Section 67(1) of the CGST Act allows a proper officer to authorize an inspection if there is reason to believe that the taxable person has suppressed transactions, stock, or claimed excess ITC, among other reasons. The Court examined the authorization form GST INS-01 and noted that the proper officer had listed all possible reasons for the search without specifying any particular one. However, it was observed that the reasons were connected and the cancellation of the suppliers' registration with retrospective effect provided a rational basis for the search. The Court concluded that the authorization was not illegal as it was based on a rational belief that grounds for conducting the search existed.

Issue 2: Entitlement to Reversal of ITC Debited from the Petitioner's ECL

The petitioner claimed that he was coerced into making a deposit of Rs. 18,72,000/- by debiting his ECL during the search operations. The Court noted that the petitioner was subjected to search operations beyond normal business hours, and the deposit was made at 2:06 am on 08.10.2022. The Court accepted the petitioner's claim that the deposit was made under duress and not voluntarily. It was emphasized that voluntary payment of tax under Section 73(5) of the CGST Act requires the taxpayer to acknowledge the underlying liability, which the petitioner disputed. The Court also observed that the requisite procedure under Rule 142 of the CGST Rules was not followed, as no acknowledgment in Form GST DRC-04 was issued by the respondents. The Court referred to previous judgments and guidelines that prohibit the collection of tax during search operations and require any voluntary payment to be made after the conclusion of such operations.

In conclusion, the Court directed the respondents to reverse the ITC of Rs. 18,72,000/- deposited by the petitioner and credit the same in his ECL. The Court clarified that this would not preclude the respondents from taking any lawful steps to protect the interest of the Revenue, including actions under Rule 86A of the CGST Rules if conditions are satisfied.

Search under Section 67 CGST valid, but Sections 73(5) and 74(5) cannot force ITC payments
HC held that the search and inspection under Section 67 CGST Act were not illegal merely because the authorization in Form INS-01 reproduced all possible statutory grounds without specifying a particular one, as the recorded reasons were connected and "reasons to believe" were stated to exist on file. However, HC held that Sections 73(5) and 74(5) are enabling provisions for voluntary tax payment and cannot be used to compel deposit of tax or ITC during search or inspection. As the ITC debit was not voluntary in this sense, HC directed reversal of ITC of Rs. 18,72,000 and its immediate re-credit to the petitioner's electronic credit ledger.

Authorization for search under Section 67 - reason to believe - voluntary payment / self-ascertainment under Section 73(5) and Section 74(5) - payment under duress / coercion during search - reversal and refund of ITC deposited under compulsion - non-compliance with procedural requirements under Rule 142 and Form GST DRC-04 - administrative directions prohibiting recovery during search (Bhumi Associate / CBIC instructions)Authorization for search under Section 67 - reason to believe - Validity of the search/inspection authorization issued in Form GST INS 01 - HELD THAT: - Clause A of Form GST INS 01 contains selectable grounds for authorising inspection/search under Section 67(1). Although the issuing officer had reproduced multiple possible reasons instead of specifying a single distinct ground, the Court found that the reasons stated were connected and that the cancellation of suppliers' registrations with retrospective effect supplied a rational nexus with a reason to believe that Input Tax Credit claimed may be ineligible. Sufficiency of the recorded reasons to believe is not open to judicial re examination so long as a rational basis exists. On these findings the authorization was not held to be illegal for want of reasons to believe. [Paras 17, 19, 20, 21]The search/inspection authorised on 07.10.2022 was not illegal for want of reasons to believe.Payment under duress / coercion during search - voluntary payment / self-ascertainment under Section 73(5) and Section 74(5) - reversal and refund of ITC deposited under compulsion - non-compliance with procedural requirements under Rule 142 and Form GST DRC-04 - administrative directions prohibiting recovery during search (Bhumi Associate / CBIC instructions) - Whether the ITC amount debited from the petitioner's Electronic Credit Ledger during the search was voluntary and hence non refundable, or was deposited under duress and must be reversed - HELD THAT: - The statutory regime recognises voluntary payment by self ascertainment (Sections 73(5)/74(5)) which affords immunity from penalty in specified circumstances, but such provisions do not authorise the Department to compel payment. The material facts show the petitioner was subjected to inspection/search beyond normal business hours, produced numerous documents and did not admit liability for wrongfully availing ITC. The recorded statement did not amount to an acknowledgement of liability. Further, the procedural requirement of issuing an acknowledgement (Form GST DRC 04) under the Rules was not complied with. CBIC and judicial directions prohibit recovery during search and require that any voluntary payment be made after the search team has left to avoid coercion. In these circumstances the Court accepted that the deposit at 02:06 am on 08.10.2022 was made under duress and not within the scheme of voluntary self ascertainment; accordingly the payment must be reversed. The Court clarified that this restoration does not bar the respondents from subsequently initiating proceedings in accordance with law, including under Rule 86A if conditions are met. [Paras 33, 36, 37, 43, 44]The ITC debited on 08.10.2022 is to be reversed and credited back to the petitioner's Electronic Credit Ledger; respondents remain free to pursue lawful action thereafter.Final Conclusion: The petition is allowed in part: the search authorisation dated 07.10.2022 is not invalidated for want of reasons to believe, but the sum debited from the petitioner's Electronic Credit Ledger during the search proceedings (on 08.10.2022) was deposited under duress and must be reversed forthwith and credited to the petitioner; the respondents remain entitled to proceed in accordance with law thereafter.

2023 (12) TMI 237 - DELHI HIGH COURT GST

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Refund remand limited by merger; time-barred Revenue appeal fails, IGST refund with interest ordered, interest adjustment upheld
HC held the Revenue's appeal against the original refund order as time-barred and rejected the contention that limitation ran from a later order; the doctrine of merger applied, and the original order stood merged with the appellate order, confining remand to a limited issue. The Revenue's subsequent appeal on issues already determined was therefore not maintainable. HC upheld the legality of adjusting the adjudicated interest liability against the sanctioned IGST refund, holding that natural justice requirements were met and interest was a statutory consequence of delayed payment. The direction denying refund in entirety was set aside, and the sanctioned refund was ordered to be disbursed with applicable interest, while the challenge to interest adjustment was rejected.

Limitation under Section 107(2) of the CGST Act - communication of order - merger of adjudicating authority's order with appellate order - adjustment of refund against self assessed tax and interest under Section 75(12) read with Section 79 of the CGST Act - interest on delayed payment of tax under Section 50 of the CGST Act - right to refund of IGST on zero rated suppliesLimitation under Section 107(2) of the CGST Act - communication of order - Whether the Revenue's appeal against the Order in Original dated 24.10.2018 was barred by limitation. - HELD THAT: - The Court held that the Commissioner's power under Section 107(2) to direct an appeal must be exercised within six months from communication of the adjudicating authority's order. Intra departmental delay in receiving copies cannot be treated as starting point for limitation where there is no statutory mandate for internal communication; 'communication of the order' for the Revenue's recourse must be construed as the date of issue of the order. The Revenue's post factum endorsement and internal requests for certified copies were insufficient to justify calculating limitation from 24.09.2019. Given the Revenue's notice of and participation in appellate proceedings arising from the original order, and the unexplained internal handling, the appeal impugning the 24.10.2018 order was beyond time and liable to be rejected on limitation grounds. [Paras 18, 24, 25]The Revenue's appeal against the Order in Original dated 24.10.2018 was time barred and not maintainable.Merger of adjudicating authority's order with appellate order - Whether the Order in Original dated 24.10.2018 stood merged with the Appellate Authority's Order in Appeal dated 30.04.2019. - HELD THAT: - The Appellate Authority had affirmed the admissibility of the petitioner's refund claim and expressly recorded that there was no dispute as to the quantum of refund, remanding only on the limited point of legal provision applicable for adjustment. Having affirmed the refund entitlement, the original order was subsumed by the appellate order. Consequently the Revenue could not set aside the settled determinative findings by a belated challenge to the earlier original order. [Paras 29]The Order in Original dated 24.10.2018 stood merged with the Appellate Order dated 30.04.2019; the Revenue could not revive the settled question by belated appeal.Adjustment of refund against self assessed tax and interest under Section 75(12) read with Section 79 of the CGST Act - interest on delayed payment of tax under Section 50 of the CGST Act - Whether the Adjudicating Authority was entitled to adjust the petitioner's admitted interest liability against the refund sanctioned. - HELD THAT: - The Court analysed the statutory scheme: interest under Section 50 is payable where tax disclosed in return is not paid within the prescribed period, and recovery of unpaid self assessed tax or unpaid interest is governed by Section 79. Section 75(12) permits recovery of unpaid self assessed tax or interest under Section 79 notwithstanding Sections 73/74. Where there is no dispute as to tax, dates and payment, interest is a calculable consequence and may be adjusted against refund; where contentious issues exist, natural justice requires notice and adjudication. Here the interest quantum and underlying facts were admitted and the petitioner had opportunity to contest; therefore adjustment of the admitted interest against the refund was permissible. [Paras 34, 41, 42]Adjustment of the admitted interest liability against the sanctioned refund was legally permissible.Interest on delayed payment of tax under Section 50 of the CGST Act - right to refund of IGST on zero rated supplies - Whether the petitioner is liable to pay the interest as determined by the Adjudicating Authority (comprising interest on delayed payment of tax on imports under RCM and interest on delayed payment of IGST on exports). - HELD THAT: - The petitioner's submissions that transactions were revenue neutral and that interest could not be levied because refund would follow were rejected. Liability to pay tax and consequential interest is statutory and cannot be avoided by later entitlement to refund. The petitioner had delayed payment of IGST on inputs and, having amended returns to treat earlier exports as made after payment of IGST, incurred interest on delayed IGST on exports. The admitted facts and dates made interest a calculable statutory consequence. The Court emphasised that equity has limited role in tax statutes and statutory provisions determine entitlement and liability. [Paras 46, 51, 59]The petitioner is liable to pay the interest as quantified; the adjustment of that interest against the refund is the statutory consequence of the facts.Right to refund of IGST on zero rated supplies - Whether the petitioner's refund sanctioned by the Adjudicating Authority should be disbursed despite the Revenue's contrary challenge. - HELD THAT: - Although the Revenue contended the petitioner could not amend its option and thus refund should be denied in entirety, the Revenue's appeal impugning admissibility was time barred. Further, even if the petitioner amended returns, refund of tax paid remains a statutory right and the Revenue cannot, after belated internal review, withhold a refund accepted and affirmed by the Appellate Authority. The Court found it unnecessary to decide the broader question of permissibility of altering the option under Section 16(3) in the abstract because the adjudicating and appellate authorities had already sanctioned the refund. [Paras 61, 64]The refund sanctioned by the Adjudicating Authority is to be disbursed to the petitioner; the Appellate Authority's order to the extent it denied refund in entirety is set aside.Final Conclusion: The Court rejected the Revenue's belated challenge to the Order in Original dated 24.10.2018 as time barred and held that the original order had merged with the appellate order; the adjustment of the petitioner's admitted interest liability against the sanctioned refund was permissible under the statutory scheme and the petitioner is liable for the interest so determined. Consequently the refund sanctioned to the petitioner is ordered to be disbursed (subject to the lawful adjustment already upheld), and the Appellate Authority's order to the extent it denied the refund in entirety is set aside.

2023 (12) TMI 184 - CESTAT NEW DELHI Service Tax

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Issues:
The judgment involves issues related to the applicability of service tax on job work basis for manufacturing alcoholic liquor, denial of exemption for inputs used, invocation of larger period of limitation for issuing show cause notice, and the nature of business activities conducted by the appellant.

Applicability of Service Tax:
The appellant, engaged in manufacturing alcoholic liquor under job-work basis for M/s. United Breweries Limited, was found liable for service tax under the amended definition of "Business Auxiliary Service" from 1.09.2009. The dispute arose regarding the denial of exemption for the value of inputs used, despite the appellant not availing Cenvat Credit. The Tribunal allowed the benefit of exemption upon the filing of an affidavit confirming the non-availment of Cenvat Credit, as per relevant notifications.

Invocation of Larger Period of Limitation:
The show cause notice issued on 05.08.2014 demanding service tax for the period 1.09.2009 to 30.06.2012 was challenged as time-barred, exceeding the 18-month limitation. Citing a recent decision, the Tribunal held that the extended period of limitation could not be invoked, rendering the notice unsustainable. The appellant's tax liability had already been paid under protest, and a refund was sought due to the limitation issue.

Nature of Business Activities:
The appellant, Winsome Breweries Limited, was involved in manufacturing, brewing, and bottling alcoholic beverages under a contract with M/s. United Breweries Limited. Despite providing taxable services to M/s. UBL, the appellant had not registered for service tax, leading to the issuance of a show cause notice in 2014. The Tribunal acknowledged the taxable nature of the services provided by the appellant and directed the adjudicating authority to consider granting the benefit of exemption based on the filed affidavit.

Conclusion:
The Tribunal allowed the appeal in favor of the appellant, emphasizing compliance with exemption conditions regarding Cenvat Credit and the limitation period for issuing the show cause notice. The affidavit submitted by the appellant played a crucial role in establishing eligibility for exemption benefits. The judgment highlighted the importance of fulfilling statutory requirements for claiming exemptions and the necessity of timely issuance of show cause notices within the prescribed limitation period.

Exemption benefits allowed for business auxiliary services under Notifications 39/2009-ST and 43/2009-ST after appellant's undertaking on Cenvat Credit
CESTAT New Delhi allowed the appeal regarding denial of exemption benefits under Notifications 39/2009-ST and 43/2009-ST for business auxiliary services related to alcoholic liquor manufacture during September 2009 to June 2012. The appellant filed an affidavit undertaking not to claim Cenvat Credit, addressing the adjudicating authority's concerns. CESTAT found this undertaking satisfied the notification conditions and directed the adjudicating authority to reconsider and allow the exemption benefit, noting other conditions were already fulfilled.

2023 (12) TMI 1320 - ITAT MUMBAI Income Tax

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Penalty under Section 271(1)(c) deleted for bogus purchases due to defective notice and estimation-based addition
ITAT Mumbai deleted penalty under Section 271(1)(c) imposed on assessee for bogus purchases. The penalty notice under Section 274 read with 271 was defective as it failed to specify whether penalty was for concealment of income or furnishing inaccurate particulars. Additionally, since the addition in quantum proceedings was made on estimation basis (12.5% of alleged bogus purchases), penalty under Section 271(1)(c) could not be sustained. The Tribunal relied on Mohammed Farhan A Shaikh judgment and Orient Fabritech Pvt. Ltd. precedent to rule in favor of the assessee.

Penalty under Section 271(1)(c) for concealment of particulars of income or furnishing inaccurate particulars - invalidity of penalty notice for failure to strike out inapplicable limb - penalty unsustainable where additions are made on estimation - distinction between concealment and furnishing inaccurate particularsInvalidity of penalty notice for failure to strike out inapplicable limb - distinction between concealment and furnishing inaccurate particulars - Penalty proceedings were vitiated because the statutory notice did not strike out the inapplicable limb and thus failed to inform the assessee of the precise charge. - HELD THAT: - The Tribunal held that the penalty notice issued under Section 274 read with Section 271(1)(c) did not delete the irrelevant limb and therefore did not clearly inform the assessee whether penalty was being levied for concealment of particulars of income or for furnishing inaccurate particulars. Relying on the Full Bench decision of the Bombay High Court in Mohammed Farhan A. Shaikh (as discussed in the order), the Tribunal accepted that a penalty proceeding must stand on the statutory notice and that an omnibus or non-specific notice suffers from vagueness. The omission to strike off the inapplicable part was treated as a defect that vitiates the penalty proceedings and cannot be cured by reliance on the assessment order alone. [Paras 9, 10]Penalty deleted on ground that the notice failed to strike off the irrelevant limb and thus was invalid.Penalty unsustainable where additions are made on estimation - penalty under Section 271(1)(c) for concealment of particulars of income or furnishing inaccurate particulars - Penalty could not be sustained because the impugned additions were made on an estimation basis and therefore did not support imposition of penalty under Section 271(1)(c). - HELD THAT: - The Tribunal noted that the Assessing Officer had made addition on account of alleged bogus purchases which, on appeal, were restricted to 12.5% by the CIT(A) and confirmed by the Tribunal in quantum. The addition in the hands of the assessee was therefore based on estimation. The Tribunal followed binding and persuasive authorities (cited in the impugned order and the Tribunal's precedent in Orient Fabritech Pvt. Ltd.) holding that where additions are made on an estimation basis, levying penalty under Section 271(1)(c) is not sustainable. Applying that principle to the facts, the Tribunal concluded that the levy of penalty on an estimated addition was not tenable. [Paras 4, 10, 11]Penalty deleted because additions were sustained on estimate and thus do not justify penalty under Section 271(1)(c).Final Conclusion: The appeal is allowed and the penalty of INR 38,716/- levied under Section 271(1)(c) is deleted as the statutory notice was vitiated for failing to strike out the inapplicable limb and because the additions sustaining the levy were based on estimation.

2023 (12) TMI 1314 - ITAT BANGALORE Income Tax

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Issues involved:
The appeal challenges the order of NFAC for the assessment year 2017-18, raising grounds related to natural justice, additions made without proper consideration, failure to call for necessary documents, lack of discussion on submissions, reliance on precedent judgments, and the treatment of cash deposits as unexplained money under relevant sections of the Income-tax Act, 1961.

Grounds Raised by the Assessee:
1. The order of the ld. CIT(A) is opposed to the law, facts, and circumstances of the case.
2. The order is passed hastily, violating the principle of natural justice.
3. The ld. CIT(A) erred in upholding additions without considering the appellant's submissions.
4. The ld. CIT(A) should have passed a speaking order rejecting appellant's submissions.
5. The matter is covered by a judgment of the Hon'ble jurisdictional Bengaluru ITAT.
6. The cash deposits were made from sales receipts and closing cash balance.
7. The appellant has already admitted the sales as revenue receipts.
8. The addition made was without considering the income included in the turnover.
9. The appellant has no other source of income apart from business income.
10. The appellant seeks leave to amend the grounds of appeal.
11. The appellant prays for the appeal to be allowed for a refund.

Facts and Decision on Cash Deposits Issue:
The assessee deposited a sum during demonetization using demonetized currency notes, which the AO treated as unexplained money. The appellant provided detailed statements of cash transactions, which were overlooked by the lower authorities. The Tribunal referred to a similar case and remanded the issue back to the AO for fresh consideration in light of procedural instructions regarding cash deposits and sales analysis provided by the CBDT. The appeal was partly allowed for statistical purposes.

Conclusion:
The Tribunal remitted the issue of cash deposits back to the AO for reevaluation based on procedural guidelines, emphasizing the need to consider relevant evidence and instructions for assessing cases involving unexplained cash deposits during demonetization. The appeal was partly allowed for statistical purposes.

Tribunal Remands Cash Deposit Issue for Reassessment, Stresses Following Procedure and Considering Evidence in Demonetization Case.
The Tribunal remanded the issue of cash deposits back to the AO for reevaluation, emphasizing adherence to procedural guidelines and consideration of relevant evidence in assessing unexplained cash deposits during demonetization. The appeal was partly allowed for statistical purposes, requiring the AO to reassess the case with due regard to CBDT instructions.

Unexplained cash deposits - addition treated as unexplained money - addition under section 69 read with section 115BBE as unexplained money - comparative month-wise cash sales and deposits analysis - statistical analysis under Operation Clean - remand for de novo verification - application of CBDT instructions/SOPs in demonetisation casesUnexplained cash deposits - addition under section 69 read with section 115BBE as unexplained money - comparative month-wise cash sales and deposits analysis - application of CBDT instructions/SOPs in demonetisation cases - remand for de novo verification - Whether additions on account of deposits of demonetised currency notes should be sustained or require remand for fresh verification in light of comparative statistical analysis and CBDT instructions - HELD THAT: - The Tribunal examined the deposit of demonetised currency into the assessee's bank accounts and the lower authorities' treatment of those deposits as unexplained money leading to additions under the provisions invoked. Relying on a recent Tribunal decision in Bhoopalam Marketing Services Pvt. Ltd., the Bench noted the relevance of the series of CBDT instructions (Operation Clean) which require comparative month-wise analysis of cash sales, deposits and related indicators before arriving at conclusions of fictitious or back-dated sales. The Tribunal observed that those procedural and evidentiary parameters must be applied and that the matter was fit for fresh verification by the assessing officer. Accordingly, the Tribunal remitted the issue to the file of the assessing officer for de novo consideration, directing examination in the light of the prescribed statistical/sOP parameters rather than sustaining the additions in a summary manner. [Paras 3, 4]Appeal partly allowed for statistical purposes and the matter remitted to the assessing officer for de novo verification and examination in accordance with the relevant CBDT instructions and comparative analysis.Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes and remitted the issue of deposits of demonetised currency to the assessing officer for fresh de novo verification and examination in light of the CBDT instructions and comparative month-wise statistical analysis; order pronounced on 5th December, 2023.

2023 (12) TMI 1495 - CUSTOMS AUTHORITY FOR ADVANCE RULINGS, NEW DELHI Customs

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Classification of interactive flat panels as automatic data-processing machines under heading 8471 prevailed over monitor classification.
Interactive flat panels with in-built CPU, memory, input and output capability, and embedded operating system were treated as automatic data-processing machines because they had storage for programs and data, free programmability, arithmetical computation capability, and logical processing functions. The touch-sensitive display and large-format screen did not change their essential character, since the goods formed a composite system with processing, input and output functions in one housing. Classification therefore fell under heading 8471, specifically sub-heading 84714190, and not under heading 8528 as monitors.

Automatic data processing machines - Classification of interactive flat panels - General Rules for Interpretation (Rule 1 and Rule 6)Automatic data processing machines - Classification of interactive flat panels - Interactive Flat Panels (ViewSonic IFP models) are classifiable as automatic data processing machines under sub-heading 8471.41.90 - HELD THAT: - The Authority found that the subject goods meet all four cumulative conditions of Note 6(A) to Chapter 84 - storing processing programs and required data, being freely programmable by the user (including via an OPS slot and installation of additional OS/software), performing arithmetical computations, and executing processing programs that modify their execution by logical decisions during a run - and thus qualify as automatic data processing machines. The goods incorporate in the same housing a central processing unit, input (touch-sensitive surface) and output (LED screen) units, bringing them within the scope of sub-heading 8471.41.90. The Authority applied GRI 1 (and Rule 6) to read the heading and Chapter Notes together, and relied on international and domestic classification precedents (including WCO guidance and CESTAT/CAAR rulings on similar Interactive Flat Panels) to reject the field formation's contention that the panels' display function is their principal function for classification under heading 8528. The interactive capabilities and integrated processing hardware were treated as determinative for classification under heading 8471 rather than as mere display devices governed by Note 6(D)/(E). [Paras 6, 7, 8]The subject Interactive Flat Panels are classifiable under sub-heading 8471.41.90 of the First Schedule to the Customs Tariff Act, 1975.Final Conclusion: The Customs Authority for Advance Rulings ruled that the specified ViewSonic Interactive Flat Panels satisfy the Chapter 84 Note 6(A) definition of automatic data processing machines and directed classification under sub-heading 8471.41.90. The field formation's classification under heading 8528 was rejected.

2023 (12) TMI 1494 - PUNJAB AND HARYANA HIGH COURT Income Tax

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Bona fide belief in registration prevents penalty under Section 271(1)(c); deletion upheld where claim was debatable.
Deletion of penalty under Section 271(1)(c) was upheld where the assessee applied for registration under Section 12A/12AA, pursued rectification, and acted under a bona fide belief that registration would be granted; the assessee disclosed the position in returns and treated disputed interest as a liability. The court endorsed the Tribunal's view that where a claim is bona fide or debatable and rectification proceedings are pending, penalty may not be attracted, and found the Tribunal's conclusion not perverse.

Penalty u/s 271(1)(c) - claims of the assessee with respect to exemption u/s 11 for the AY 2007-08 and 2008-09 were untenable in law since the assessee did not have registration u/s 12AA - relevancy of mens-rea - debatable issue - dismissal of assessee rectification application - HELD THAT:- The assessee was always wanting its applications to be considered from the date he had filed which was 18.12.2006 and his case for registration was to be allowed for the year 2007-08. Once the issue was pending before the authorities, it is in such circumstances, the assessee in his return filed had mentioned that the matter was pending. Thereafter, it was followed up by filing an application for rectification asking for exemption from the date the application was filed. Thus, we are of the considered opinion that the Tribunal has rightly come to the conclusion that the assessee was under a bona fide belief that his application for registration was likely to be allowed. The co-ordinate Bench while deciding [2014 (7) TMI 1399 - PUNJAB AND HARYANA HIGH COURT] has noticed these facts also while upholding the orders of the Tribunal on an earlier occasion while dismissing the appeals on the ground of limitation. Once the matter was pending consideration before the authorities and under the provisions of the Act, the application has to be decided within a period of six months. Tribunal has arrived at a correct finding to the extent that there was bona fide belief in the mind of the assessee that the rectification application was liable to be allowed. In such circumstances, it cannot be said that the view of the Tribunal in setting aside the penalty proceedings is perverse. As decided in Raj Overseas [2010 (7) TMI 553 - PUNJAB AND HARYANA HIGH COURT] it is a debatable issue whether penalty was not liable to be levied was accordingly upheld as the deduction claimed by the assessee did not lack any bona fides and the penalty u/s 271(1)(c) of the Act was not attracted. Also see Reliance Petro-products P. Ltd. [2010 (3) TMI 80 - SUPREME COURT]. Decided against revenue.

2023 (12) TMI 1475 - RAJASTHAN HIGH COURT Indian Laws

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Tender bid clarification may be sought for non-material deficiency when it does not alter qualification criteria or favour a bidder.
The HC held that a bid evaluation committee may seek a missing document to cure a non-material deficiency where the request does not substantively alter qualification information or convert an unqualified bidder into a qualified one. Rule 60(4) was read as barring substantive changes, not permissible clarifications, while Rule 61 authorised waiver of non-material non-conformities and the calling of documents within a reasonable time. On the facts, the shortfall notice for the successful bidder's technical document was issued in a non-selective manner, no special favour was shown, and acceptance of the document was permissible. No illegality or arbitrariness in the tender process was found.

Maintainability of petition - availability of alternative remedy - seeking of shortfall document - failure to fill in column 13 of the E-bid and upload the document in this regard - violation of Rule 60(4) of the Rajasthan Transparency in Public Procurement Rules, 2013 - HELD THAT:- A perusal of Rule 60 reveals that the same gives a discretion to the Bid Evaluation Committee to ask any bidder for a clarification in writing and a response should also be in writing. The Rule prohibits change in the prices or the substance of the bid except to confirm the correction of arithmetic errors discovered by the committee in the evaluation of the financial bids. Sub-Rule (4) provides that no substantive change to qualification information or to a submission including changes aimed at making an unqualified bidder, qualified or an unresponsive submission, responsive shall be sought, offered or permitted. A bare look at the technical bid reveals that under column 6 information regarding registration under the PF Act, 1952, was sought along with certified copy of the registration and under column 13, latest inspection report was sought. It is not in dispute that respondent no.5 had produced the registration with the PF department and apparently, the purpose for getting produced the latest inspection report, was to ensure that the bidder was complying with the provisions of the PF Act - It is nobody’s case that periodical inspection by the PF department with a specified interval has been provided in the statute so as to claim that non-production by respondent no.5 was for the purpose of suppression of a particular aspect. The purpose for seeking the inspection report essentially was to find out if there were any violations of the requirements of PF Act and has nothing to do with the substance of the bid or amounts to substantive change in the qualification information so as to violate provision of Rule 60 of the Rules of 2013. Rather, the clarification sought is in consonance with provisions of Rule 61 of the Rules of 2013. So far as the judgments relied on by learned counsel for the appellant – petitioner are concerned, in the various judgments the facts were entirely different, wherein, in the case of PSEB, a new tender document after the last date was sought to be submitted as the tender documents submitted by the company were forged by its employee, in the case of Goldyan Technoserve Ltd. [2011 (4) TMI 1214 - SUPREME COURT], the required quality certificate was not produced along with bid document, which was found to be in violation of the tender conditions. Similarly, in the case of Maharashtra Housing Development Authority [2018 (2) TMI 2145 - SUPREME COURT], it was found that bid submitted by the respondent was not a valid bid. The facts and document involved in the present case, as discussed hereinbefore, are different and, therefore, the judgments have no application. Thus, no case is made out for interference. The present Special Appeal is, therefore, dismissed.

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