TaxTMI Updates e-Newsletter
Jan 04,2023

Non-speaking order - non-application of mind - violation of Section 75(6) of the CGST Act - requirement to set out relevant facts and the basis of decision - opportunity of hearing - remand for fresh consideration

Non-speaking order - non-application of mind - violation of Section 75(6) of the CGST Act - requirement to set out relevant facts and the basis of decision - Impugned assessment orders were quashed for being non-speaking and for failing to advert to the detailed reply, thereby violating the statutory requirement of Section 75(6) of the CGST Act. - HELD THAT: - The Court found on the face of the record that the assessing officer did not consider the detailed written submissions filed by the petitioner and that the orders are sketchy and non-speaking. Section 75(6) mandates that the proper officer's order shall set out the relevant facts and the basis of his decision. Failure to record reasons and to apply mind to the party's reply renders the orders legally unsustainable. The absence of any reference to the petitioner's written reply demonstrates non-application of mind and breaches the statutory obligation to state reasons.

Impugned orders are quashed and set aside for being non-speaking and in breach of Section 75(6) of the CGST Act.

Opportunity of hearing - fresh speaking order - remand for fresh consideration - Remedial direction given to afford opportunity of hearing and to pass a fresh reasoned order; the show cause notice issued to the officer discharged. - HELD THAT: - In view of the quashing of the impugned orders, the Court directed that the petitioner's representative shall appear before the Joint Commissioner on the specified date and be given an opportunity of oral submissions in addition to the written reply already on record. The Joint Commissioner is required thereafter to consider the written and oral submissions and pass a fresh order which sets out relevant facts and the basis of decision. The Court discharged the show cause notice issued to the officer pursuant to earlier directions.

Matter remanded for fresh adjudication after providing hearing; show cause notice to the officer discharged and fresh speaking orders to be passed.

Final Conclusion: Writ petitions allowed: impugned orders quashed for being non-speaking and in violation of Section 75(6) of the CGST Act; matter remanded for fresh hearing and fresh reasoned orders; show cause notice to the officer discharged; no order as to costs.

Residential Real Estate Project (RREP) - affordable residential apartment - carpet area threshold - gross amount charged threshold - GST at 1% without ITC - GST at 5% without ITC

Residential Real Estate Project (RREP) - carpet area threshold - Whether the applicant's project qualifies as a Residential Real Estate Project (RREP) or a Real Estate Project (REP). - HELD THAT: - The Authority examined the definitions in Notification No. 3/2019 CT (Rate) and RERA, and the definition of carpet area. The applicant's Form 3 states total carpet area of the project as 7,406.99/7,407 sqm and the applicant submitted that commercial shops aggregate to 776.49 sqm. On the basis of the applicant's own filings, the carpet area of commercial apartments is 10.49% of the total carpet area, which is below the 15% threshold prescribed for RREP. Having applied the statutory definitions and the applicant's provided figures, the Authority found that the project falls within the definition of Residential Real Estate Project (RREP). [Paras 18, 19]

The project is a Residential Real Estate Project (RREP) as the carpet area of commercial apartments is less than 15% of the total carpet area.

Affordable residential apartment - gross amount charged threshold - GST at 1% without ITC - GST at 5% without ITC - Whether and at what rates (1% without ITC for affordable units; 5% without ITC for other residential units and commercial units) GST is applicable to the respective units in the project. - HELD THAT: - The Authority set out the conditions for 1% without ITC for 'affordable residential apartment' (non metropolitan location, carpet area threshold, commercial area 15%, gross amount charged Rs.45 lakh) and the additional procedural and input credit related conditions for applicability of the concessional rates. The applicant furnished Form 3 and assertions on carpet area and pricing but did not produce sale deeds, agreements, or documentary evidence detailing the exact carpet areas per unit, the heads constituting gross amount charged, or documentary proof of meeting conditions relating to input tax credit, 80% registered supplier threshold, reverse charge liability, and related compliance. Because the requisite supporting documents for determining the precise gross amount and fulfilment of the notification conditions were not furnished, the Authority declined to pronounce a final ruling on the applicable GST rates for individual units and observed that the question cannot be decided on the basis of the applicant's unsupported assertions. [Paras 20, 21]

No final ruling on applicable GST rates for affordable and non affordable residential units and commercial shops; the question cannot be answered due to insufficiency of documentary evidence and is not adjudicated in this application.

Final Conclusion: The Authority found on the material filed that the project qualifies as a Residential Real Estate Project (RREP). However, the application is not maintainable for pronouncement on the applicable GST rates for the respective units because the applicant failed to furnish requisite documentary evidence to establish unitwise carpet areas, the composition of gross amount charged, and compliance with conditions of the relevant notifications; accordingly no final ruling on tax rates was given.

Sale of land - plotted development - sale of land covered by Sr. No. 5 of Schedule III - composite supply - maintainability of advance ruling application

Sale of land - plotted development - sale of land covered by Sr. No. 5 of Schedule III - Whether the advance ruling application on GST liability of sale of land/industrial plots is maintainable and can be adjudicated on merits - HELD THAT: - The Authority examined whether the applicant's proposed activity is exclusively a transfer of ownership of land (excluded from GST under Sr. No. 5 of Schedule III) or amounts to plotted development involving additional works which may attract GST. The determinative inquiry requires clarity on the nature of the transaction and supporting documents showing the proposed activities, approvals and the amenities to be provided, and the basis on which consideration will be charged. The applicant remained uncertain whether it would sell the land as purchased or convert it into individual developed plots, and did not furnish sale deeds/agreements, plan approvals, details of permitted activities, amenities to be provided, or the basis of charging (super built-up or actual plot area). Because taxability turns on the substance of the activity (sale as barren land versus plotted development with development services), and the application lacked the requisite factual matrix and documents to enable adjudication on the merits, the Authority could not determine whether the transaction falls outside GST or is taxable. For these reasons the application lacks locus to obtain an advance ruling and cannot be decided on merits. [Paras 14, 15, 16, 17, 18]

Application for advance ruling is not maintainable for want of necessary documents and certainty about the nature of activities; ruling on GST liability cannot be pronounced.

Final Conclusion: The Authority declined to adjudicate the GST liability of the proposed sale(s) because the applicant failed to establish the definitive nature of the transaction or furnish essential documents and approvals; accordingly the advance ruling application is not maintainable.

Composite supply - mixed supply - principal supply - tax liability on mixed supply - supply attracting highest rate - goods put up in sets for retail sale - essential character (GIR Rule 3(b))

Composite supply - mixed supply - Whether the packs marketed as Doms A1 Pencil, Doms Smart Kit and Doms My First Pencil Kit constitute a composite supply or a mixed supply. - HELD THAT: - The Authority examined the statutory tests for composite supply under Section 2(30) and for mixed supply under Section 2(74). For a composite supply, four conditions must be satisfied: multiple taxable supplies; natural bundling; supplies made in conjunction in the ordinary course of business; and a principal/predominant supply with others ancillary. Applying these tests to each product, the Authority found that although multiple taxable supplies exist in each pack, the constituent items (pencil, sharpener, eraser, scale, colours, activity book etc.) are normally sold separately in the market, are not shown to be naturally bundled in the ordinary course of business, and no single constituent could be identified as indisputably principal with the others ancillary. Consequently the conditions for composite supply were not satisfied (paras 19.1-19.3). The packs, sold for a single price and not constituting composite supplies, satisfy the conditions of mixed supply under Section 2(74). Therefore the three products are mixed supplies and not composite supplies (paras 19.6-19.7). [Paras 19]

Doms A1 Pencil, Doms Smart Kit and Doms My First Pencil Kit are mixed supplies and do not qualify as composite supplies.

Tax liability on mixed supply - supply attracting highest rate - HSN code of the item attracting the highest rate - What HSN code and tax treatment apply to the packs that are mixed supplies. - HELD THAT: - Section 8(b) provides that a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. Having held that the packs are mixed supplies, the Authority ruled that the invoice and tax treatment must follow the HSN and rate of the constituent item within the pack that attracts the highest rate of GST. The Authority rejected the applicant's submission to classify the entire pack by the 'essential character' rule under customs GIR (Rule 3(b)) because the question before the Authority was the nature of supply (composite vs mixed) and, once characterized as mixed, the statutory rule for mixed supplies governs classification for GST purposes (paras 20-21.3). [Paras 20, 21]

For the packs held to be mixed supplies, the HSN and GST rate of the item in the pack that attracts the highest rate of tax must be used.

Mixed supply - tax liability on mixed supply - supply attracting highest rate - Whether inclusion of a sharpener of nominal value in the pack affects the applicable rate and HSN. - HELD THAT: - The Authority held that inclusion of a sharpener, even if its value is nominal, will affect the tax rate and HSN of the overall pack if the sharpener is the constituent that, by virtue of the revised tariff, attracts the highest GST rate among items in the pack. Since mixed-supply treatment requires treating the supply as that of the item with the highest rate, a nominal-value sharpener that carries the highest rate will determine the tax incidence and HSN to be used for the whole pack (paras 21.2-21.3). [Paras 21, 22]

Yes - a sharpener included in the kit, even of nominal value, will determine the pack's rate/HSN if it is the item attracting the highest GST rate.

Final Conclusion: The Authority ruled that the three products (Doms A1 Pencil, Doms Smart Kit and Doms My First Pencil Kit) are mixed supplies, not composite supplies; the GST treatment must follow the HSN and rate of the constituent item in the pack that attracts the highest rate; and inclusion of a sharpener of nominal value will impact the applicable rate and HSN where the sharpener carries the highest rate.

Restaurant service - takeaway and door delivery as part of restaurant service - tax rate of 5% without input tax credit on standalone restaurants - classification of readily available over the counter food as supply of goods - specified premises (hotel accommodation) exclusion from reduced rate

Restaurant service - takeaway and door delivery as part of restaurant service - tax rate of 5% without input tax credit on standalone restaurants - Prepared and cooked food and beverages supplied by the applicant, whether consumed on the premises or taken away/delivered, qualify as 'restaurant services' and are classifiable under SAC 996331 and leviable to GST at 5% without input tax credit. - HELD THAT: - The Explanation to paragraph 4 of Notification No.11/2017 defines 'restaurant service' as supply by a restaurant of food or drink for consumption on or away from the premises. CBIC Circular No.164/20/2021 clarifies that takeaway and door delivery of cooked food are covered by 'restaurant service', and the GST Council minutes affirm that takeaways from standalone restaurants attract 5% tax without ITC. Applying these authoritative definitions and clarifications to the applicant's facts - cooking in the restaurant kitchen and supplying for consumption at the premises, takeaway, or delivery - the activity falls squarely within the meaning of 'restaurant service'. Consequently, such supplies are classifiable under SAC 996331 and covered by Sr. No.7(ii) of Notification No.11/2017, attracting GST at 5% (2.5% CGST + 2.5% SGST) subject to the no ITC condition. [Paras 15]

Prepared/cooked food and beverages supplied by the applicant are 'restaurant services' classifiable under SAC 996331 and taxable at 5% without input tax credit.

Classification of readily available over the counter food as supply of goods - composite supply-principal supply test (distinction) - Readily available food and beverages not prepared/cooked in the restaurant and sold over the counter by the applicant are supplies of goods and do not qualify as 'restaurant services'; they attract the applicable GST rate for the goods. - HELD THAT: - Although items prepared and cooked in a restaurant fall within the 'restaurant service' definition, the Authority distinguished supplies of goods purchased ready made from the market and sold over the counter. Such supplies are not the result of the restaurant's cooking service and therefore constitute supply of goods. The Appellate Authority for Advance Ruling's reasoning in the cited precedent supports treating ready made edible items sold from a counter as goods with the applicable GST rates and allowing input tax credit accordingly. On the facts, the applicant's over the counter items, not cooked on premises, are correctly characterised as goods rather than 'restaurant services'. [Paras 16, 17]

Readily available over the counter food and beverages not prepared in the restaurant are supplies of goods and do not qualify as 'restaurant services'; they are taxable at the applicable rate for those goods.

Final Conclusion: The Authority ruled that (i) foods and beverages prepared/cooked by the applicant and supplied for consumption on premises, as takeaway, or by delivery are 'restaurant services' under SAC 996331 and taxable at 5% without ITC; and (ii) readily available food and beverages purchased ready made and sold over the counter are supplies of goods and do not qualify as 'restaurant services', attracting the applicable GST on goods.

Charitable activities as defined in clause 2(r) of Notification No.12/2017-CT (Rate) - preservation of environment including watershed, forests and wildlife - exemption under Entry No.1 of Notification No.12/2017-CT (Rate) - supply in the course or furtherance of business - business as defined in Section 2(17) of the CGST Act - registration liability under Section 22(1) of the CGST Act

Charitable activities as defined in clause 2(r) of Notification No.12/2017-CT (Rate) - preservation of environment including watershed, forests and wildlife - exemption under Entry No.1 of Notification No.12/2017-CT (Rate) - Whether the applicant's afforestation activities (including mangrove plantation) qualify as charitable activities and are exempt from GST under Entry No.1 of Notification No.12/2017 CT (Rate). - HELD THAT: - The Authority observed that the applicant is registered under section 12AA of the Income tax Act and that the trust deed expressly contemplates activities promoting human development, welfare and public utility. Having examined the nature, objectives and outputs of the 200 hectare pilot afforestation project - including ecological functions (shoreline stabilization, pollutant filtration, carbon sequestration), socio economic benefits to marginalised coastal communities and generation of wage employment - the Authority concluded these activities fall within clause (iv) of the definition of "charitable activities" in clause 2(r) of Notification No.12/2017 CT (Rate) (preservation of environment including forests and wildlife). On that basis, services by the applicant in carrying out the mangrove plantation are covered by Entry No.1 of the said notification and are exempt from GST when the specified registrations and conditions are satisfied. [Paras 15, 17]

The afforestation/mangrove plantation activity is a "charitable activity" under clause 2(r) (preservation of environment) and, being performed by an entity registered under section 12AA, is eligible for exemption under Entry No.1 of Notification No.12/2017 CT (Rate).

Supply in the course or furtherance of business - business as defined in Section 2(17) of the CGST Act - registration liability under Section 22(1) of the CGST Act - Whether the applicant's receipts and activities constitute a "supply" in the course or furtherance of "business" attracting GST registration under Section 22(1). - HELD THAT: - The Authority applied the statutory definitions of "supply" and "business" and examined the contractual and financial arrangements for the pilot project. The scheme of funding shows milestone linked disbursements used for project implementation, labour payments and administrative costs, with no profit motive or surplus generation. Given that the afforestation activity is undertaken for social, environmental and livelihood objectives rather than for commercial benefit, the Authority found the activity not to be a "business" within Section 2(17) and therefore not a "supply" taxable under Section 7. Consequentially, the applicant does not fall within the registration threshold under Section 22(1) of the CGST Act insofar as these activities are concerned, provided the conditions for charitable exemption and the factual position on receipts and utilization remain as stated. [Paras 16, 18]

The afforestation activity is not a "business" and does not constitute a taxable "supply"; the applicant is not required to register under Section 22(1) of the CGST Act in respect of these activities, subject to fulfilment of the stated conditions.

Final Conclusion: The Authority ruled that the applicant's mangrove afforestation project constitutes "charitable activities" (preservation of environment) and is exempt from GST under Entry No.1 of Notification No.12/2017 CT (Rate) when performed by an entity registered under section 12AA (and meeting the stated trust registration conditions). Further, because the activity is not a "business" and does not amount to a taxable "supply," the applicant is not liable to obtain GST registration under Section 22(1) in respect of the project, subject to the factual and registration conditions noted in the ruling.

Maintainability of an application for advance ruling - Rejection for non-payment of requisite fee - Requirement of fee under rule 104(4) - Application under sub section (1) of section 97 - Effect of amendment to rate notification on original controversy - Withdrawal of application

Rejection for non-payment of requisite fee - Requirement of fee under rule 104(4) - Maintainability of an application for advance ruling - The application for advance ruling is liable to be rejected for non-payment of the requisite fee and for failure to furnish clarification when directed. - HELD THAT: - The Authority found that the applicant had not paid the requisite fee as required when filing the application under sub section (1) of section 97 of the GST Act read with sub rule (4) of rule 104 of the CGST/WBGST Rules. Records indicated a TEMP ID linked to an authorised representative and that an amount deposited under the SGST Act had been refunded, while the CGST amount was not debited. The applicant was given an opportunity to furnish written clarification by the specified date but did not do so. In view of the absence of the required fee and the failure to comply with the Authority's request for clarification, the application was rejected by the Authority under the provisions governing advance ruling applications. [Paras 1]

Application rejected for non-payment of requisite fee and failure to furnish requested clarification.

Final Conclusion: The Authority rejected the applicant's advance ruling application because the requisite fee was not paid and the applicant failed to provide clarification when directed; no adjudication on the substantive question about GST rate of fly ash bricks was undertaken.

Composite supply - principal supply - ancillary supply - supply of services for right to use of parking space - Schedule III non-taxable supply (sale of building) - valuation abatement under Notification No. 11/2017 - paragraph 2

Composite supply - principal supply - ancillary supply - supply of services for right to use of parking space - Supply of services for right to use of car/two-wheeler parking space is to be treated as a separate supply and not as a composite supply with construction of residential apartment. - HELD THAT: - The Authority analysed the factual matrix and statutory scheme and concluded that the decisive question is whether the parking-right service is naturally bundled with construction services as a principal supply. The applicant's own documents show separate disclosure of apartment price and parking consideration and separate payment schedules; the parking facility is optional, may be availed after purchase, and unallotted spaces may be offered separately. These features indicate that the parking-right is a distinct service offered independently rather than being naturally bundled or ancillary to construction. The Authority also examined precedents relied upon by the applicant and noted that the appellate authority modified the earlier AAR view to treat preferential location services and parking-rights as separate services not eligible for the construction-service abatement. On these bases the Authority held the parking-right service to be a separate supply. [Paras 4]

Supply of services for right to use of car parking space is a separate supply and not a composite supply of construction services.

Supply of services for right to use of parking space - taxability at 18% - Rate of tax applicable on amounts charged for right to use of car parking space when treated as a separate supply. - HELD THAT: - Having held the parking-right to be a distinct service, the Authority applied the appropriate tax treatment for such service. The factual record showed instances where the applicant charged GST differently; the Authority identified the parking-right as a service taxable under the appropriate heading and determined the applicable rate for the instant case. The Authority therefore fixed the taxable treatment and rate for the parking-right service as distinct from the concessional valuation/abatement regime applicable to certain construction supplies under Notification No. 11/2017. [Paras 4]

Supply of services for right to use of car parking space is taxable at 18%.

Schedule III non-taxable supply (sale of building) - supply of services for right to use of parking space - Whether amounts collected for right to use of car parking space become non-GST under Schedule III when the apartment is sold after receipt of completion certificate. - HELD THAT: - The Authority considered the applicant's contention that post-completion sales attract Schedule III exclusion for sale of building and that parking-rights bundled therewith would therefore be non-taxable. The Authority distinguished the clarification relied upon (which concerned preferential location charges in long-term lease of land) and noted that the present issue concerns a separate service of parking-rights in the context of construction/sale. Given the finding that the parking-right is a separate service and not part of a non-GST sale of building, tax is payable on the parking-right even where the apartment sale occurs after issuance of the completion certificate. [Paras 4]

Even where the apartment is sold after receipt of the completion certificate, tax is payable on the supply of services for right to use of car parking space.

Supply of services for right to use of parking space - optional post-sale availing of service - Whether taxability changes if the parking-right is opted for or charged after sale/handing over of the apartment (post-completion). - HELD THAT: - The Authority reviewed the fact that buyers may elect parking-rights after possession and that the service is offered separately. That voluntary, post-sale availing does not convert the parking-right into a non-taxable element; the parking-right remains a separate taxable service when provided after sale or after issuance of completion certificate. Accordingly, the tax treatment remains unchanged. [Paras 4]

If parking-right charges are collected after sale/handing over, tax is still payable on the supply of services for right to use of car parking space.

Final Conclusion: The Authority ruled that the right-to-use parking facility is a separate, taxable supply (not a composite/ancillary element of construction services); it is taxable at 18% in the facts of this case, and remains taxable even where the apartment sale occurs after issuance of the completion certificate or where the buyer opts for parking post-sale.

Health care services - clinical establishment - authorised medical practitioner - exemption under Notification No.12/2017 for health care services by a clinical establishment, an authorised medical practitioner or para-medics - human health and social care services taxable at 18% under Notification No.11/2017

Health care services - clinical establishment - authorised medical practitioner - exemption under Notification No.12/2017 for health care services by a clinical establishment, an authorised medical practitioner or para-medics - Whether the doorstep eldercare services provided by the applicant qualify for exemption as health care services supplied by a clinical establishment, an authorised medical practitioner or para-medics under the exemption notification. - HELD THAT: - The Authority examined the nature of services rendered by the applicant to enrolled senior citizens, noting that services comprise regular medical monitoring (home visits by general physicians, paramedics, phlebotomists, home counselling, arranging specialist consultations) and various logistic/support services, some supplied under consolidated membership packages and others charged separately. The definition of "health care services" in the notification covers services by way of diagnosis, treatment or care and may include transportation to/from a clinical establishment. However, serial number 74 exempts such services only when provided by a clinical establishment, an authorised medical practitioner or para-medics. The applicant does not fall within any of those supplier categories. Consequently, although the services may fall within the substantive scope of "health care services," they do not meet the condition of being supplied by an exempt category of service-provider and thus fail to qualify for the exemption under the notification. [Paras 4]

Services provided by the applicant do not qualify for exemption under serial number 74 of Notification No.12/2017 because the applicant is neither a clinical establishment, nor an authorised medical practitioner, nor para-medics.

Human health and social care services taxable at 18% under Notification No.11/2017 - If not exempt, what is the classification and applicable rate of tax on the applicant's services. - HELD THAT: - Having found the services ineligible for the exemption, the Authority considered the appropriate taxable classification. The services rendered - including accompaniment for outings, assistance with errands, organising social activities, arranging and accompanying for medical consultations, and provision of medical and nursing support at home - were characterised as "human health and social care services." Under serial number 31 of Notification No.11/2017, such services are taxable at the specified rate. Applying that entry, the Authority concluded that the applicant's doorstep eldercare and associated support services are taxable at the rate stipulated for human health and social care services. [Paras 4]

The services are taxable as human health and social care services at the rate specified in serial number 31 of Notification No.11/2017 (18%).

Final Conclusion: The Authority ruled that the applicant's doorstep eldercare services do not qualify for exemption under the health-care exemption entry because the applicant is not a clinical establishment, authorised medical practitioner or para-medics; accordingly those services are taxable as human health and social care services at the rate indicated in serial number 31 of Notification No.11/2017 (18%).

Works contract - transfer of property in goods - immovable property - job work - treatment or process on goods - composite supply - general construction services of civil engineering works - classification under Tariff 995429

Works contract - transfer of property in goods - immovable property - The supply undertaken by the applicant is not a works contract as defined in the GST Act. - HELD THAT: - The definition of 'works contract' and the entry in Schedule II require (i) the supply to be in relation to immovable property and (ii) that the supply essentially involves transfer of property in goods. Even if the first condition is set aside, the supply in the present case does not involve transfer of property in goods. On the material and submissions, the Authority held that the applicant's activity of welding rails does not satisfy the requirement of transfer of property in goods and therefore cannot be treated as a works contract. [Paras 4]

Not a works contract.

Job work - treatment or process on goods - immovable property - The supply does not qualify as job work under the GST Act. - HELD THAT: - The definition of 'job work' requires that a treatment or process be undertaken on goods (movable property) belonging to a registered person. The Authority examined whether railway tracks constitute movable goods. Having considered definitions in other statutes, technical aspects of track construction and laying, and relevant precedent, the Authority found that railway tracks possess permanence and are not readily movable; they are part of the 'permanent way' and intended for permanent beneficial enjoyment. Consequently, rails are to be regarded as immovable property and not 'goods' for the purpose of job work. Further, the contract's scope is not limited to a mere treatment or process but includes extensive works (replacement, pulling back rails, lifting, sleeper work, ballast work, refixing fittings etc.), reinforcing that the contract is not confined to job work. [Paras 4]

Does not qualify as job work.

Composite supply - general construction services of civil engineering works - classification under Tariff 995429 - The services of welding of railway track together with labour supply constitute a composite supply and are classifiable under Tariff 995429, taxable at 18%. - HELD THAT: - Having concluded that the activity is neither works contract nor job work, and noting that the welding services and labour are naturally bundled and supplied in conjunction, the Authority held the arrangement to be a 'composite supply'. The nature of the works-conversion of SWR to LWR including associated civil and track works-falls within construction services for railways. By reference to the tariff entries, such services are covered by 'General construction services of civil engineering works' and specifically by Tariff 995429 (services involving repair, alterations, additions, replacements, renovation, maintenance or remodeling of railways). Consequently, the composite service is classifiable under Tariff 995429 and taxable at the rate specified for that entry. [Paras 4]

Composite supply under Tariff 995429; taxable at 18%.

Final Conclusion: The Authority ruled that the applicant's contract for conversion of Short Welded Rails to Long Welded Rails by Flash Butt Welding, together with supplied labour, is neither a works contract nor job work but a composite supply of construction-related services classifiable under Tariff 995429 and taxable at 18%.

Supply of services - supply of goods - transfer of business as a going concern - exemption under Notification No. 12/2017 - services by way of transfer of a going concern - qualification of going concern

Supply of services - supply of goods - Whether the proposed transfer of the proprietorship business to the partnership constitutes a supply and, if so, whether it is a supply of goods or of services. - HELD THAT: - The Authority examined the nature of the transaction as described in the MOU - transfer of all assets, liabilities, customers and employees and cessation of the proprietorship - and the legal tests in Schedule II and the definitions of 'goods' and 'services'. While an isolated transfer of goods forming part of business assets would, in standalone terms, be a supply of goods under Schedule II clause (a), the Authority held that the transfer of the entire business as described cannot be characterised as transfer of 'goods' because a business is not 'goods' as per the statutory definition. Having regard to the residual definition of 'services' and the composite nature of the transaction (assets, liabilities, employees, goodwill, continuity of operations), the Authority concluded that the transfer qualifies as a supply of services. [Paras 4]

The transaction shall be treated as a supply of services.

Transfer of business as a going concern - qualification of going concern - Whether the transfer is a transfer 'as a going concern' and the meaning/requirements of 'going concern' for the purposes of exemption. - HELD THAT: - The Authority noted that 'going concern' is not defined in the GST law but has been explained in accounting standards and CBEC guidance as a running business capable of being carried on independently, including transfer of assets, liabilities, employees, goodwill and the ability to continue operations for the foreseeable future. The Authority observed that the applicant furnished an audit report for the relevant period but there were no auditor's comments addressing the entity's ability to continue as a going concern. Absent evidence demonstrating lack of intention or necessity to liquidate or curtail operations, the Authority could not conclude that the present transaction satisfies the 'going concern' requirement on the material before it. [Paras 4]

Whether the transaction qualifies as a transfer 'as a going concern' is contingent on fulfilment of the going-concern conditions and cannot be conclusively determined on the material before the Authority.

Exemption under Notification No. 12/2017 - services by way of transfer of a going concern - Whether the transfer would be covered by the exemption at Serial No. 2 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority accepted the applicant's submission and prior advance rulings holding that 'services by way of transfer of a going concern' are covered by Serial No. 2 of Notification No. 12/2017. However, coverage under that entry is expressly conditional upon the transfer qualifying as a going concern. Because the Authority could not, on the record before it, conclude that the transaction met the going-concern criteria, it framed the applicability of the exemption as subject to fulfilment of those conditions. [Paras 4]

The transaction would be covered under Serial No. 2 of Notification No. 12/2017 subject to fulfilment of the conditions to qualify as a going concern.

Final Conclusion: The Authority ruled that the proposed transfer of the proprietorship business to the partnership is a supply of services; the transaction would fall within the exemption for 'services by way of transfer of a going concern' under Notification No. 12/2017 only if the transfer satisfies the conditions of being a going concern, which the Authority could not finally determine on the material before it.

Recipient - agent - supply - project implementing agency - tax invoice - works contract

Recipient - agent - supply - tax invoice - project implementing agency - Whether the applicant, acting as a Project Implementing Agency, is required to issue tax invoice to the State Government Department/Directorate on the contract value as determined by the department. - HELD THAT: - The Authority found that the applicant, having entered into an agreement with the contractor and being liable to pay consideration to the contractor, falls within the definition of "recipient" because the definition expressly includes an agent acting on behalf of the recipient. The applicant itself admitted that it functions as an agent of the administrative department when executing the work. Consequently, the contractor's supply is to the applicant (who is the recipient of that supply) and not directly to the department. The Authority therefore concluded that two distinct supplies occur: first, from the contractor to the applicant; and second, from the applicant to the department. Even if the applicant does not add monetary value in the second leg, that second supply is nonetheless a supply under the GST Act. On this basis the applicant, as the supplier in the second transaction, is required to comply with invoicing obligations and issue a tax invoice on the contract value determined by the department. [Paras 4]

The applicant is making supplies to the State Government Department/Directorate while acting as Project Implementing Agency and is required to issue tax invoice on the contract value as determined by the department.

Final Conclusion: Advance ruling: Applicant, while acting as a Project Implementing Agency, must issue tax invoice to the State Government Department/Directorate on the contract value determined by the department, since the applicant is the recipient/agent and a distinct supply from the applicant to the department arises.

Failure to consider assessee's reply - Denial of opportunity of personal hearing - Non-speaking adjudication - Duty of adjudicating officer to perform statutory functions - Veracity of departmental dispatch register as evidence - Imposition of costs for nonperformance of duties

Failure to consider assessee's reply - Denial of opportunity of personal hearing - Non-speaking adjudication - Impugned order was passed without recording consideration of the assessee's reply and without affording a personal hearing to the petitioner or its authorised representative. - HELD THAT: - The court examined the impugned order and the show cause notice reply on record and found the adjudication silent as to any consideration of the petitioner's written reply and that no opportunity of personal hearing was afforded. The dispatch register relied upon by the department recorded service on a person whom the petitioner contends was not authorised to represent it and no e-mail notice was sent to the petitioner. The court held that the order's silence on consideration of the reply and the absence of a recorded personal hearing amounts to a defective, non speaking adjudication and reflects failure to discharge the adjudicatory duty, thereby warranting judicial intervention.

Impugned adjudication is found to be defective for want of consideration of the reply and denial of personal hearing; the conduct of the officer is noted as irregular and the matter cannot stand without further departmental explanation.

Veracity of departmental dispatch register as evidence - Duty of adjudicating officer to perform statutory functions - Imposition of costs for nonperformance of duties - Whether the departmental officer must personally produce original records (including the dispatch register) and explain the alleged irregularities in service and adjudication, and whether proceedings for imposition of costs should be initiated against him. - HELD THAT: - Given the court's reservations about the accuracy of the dispatch register and the officer's failure to record consideration of the reply or to ensure proper notice, the court directed personal attendance of the adjudicating officer with the original file and dispatch register to enable scrutiny of the departmental record and to afford the officer an opportunity to show cause. The direction is rooted in the court's supervisory power to ensure that statutory duties are performed and to consider imposition of costs where there is apparent reckless or illegal action by a departmental official.

The Joint Commissioner is directed to personally appear in court with the original record and dispatch register on the listed date to show cause why costs should not be imposed for nonperformance of duties; the matter is listed for further consideration.

Final Conclusion: The court found the adjudication to be defective for failure to consider the petitioner's reply and for denial of personal hearing, expressed serious reservations about the dispatch register, and directed the adjudicating officer to personally appear with original records on the listed date to show cause why costs should not be imposed; the matter is listed for further orders.

Summary order. Petition disposed of as withdrawn at the instance of the petitioner; Court did not decide merits and observed that all legal remedies remain open; if petitioner pursues legal recourse and goods/vehicle remain with authorities, request for expeditious hearing shall be considered on an urgent basis.

Discharge of accused in criminal proceedings relating to tax offences - Treatment of a managing director as the Principal Officer of a company - Offences under the Income Tax Act relating to tax collected but not paid (Section 276B read with Section 278B) - Quashing of discharge orders and remand for fresh trial

Whether the orders of the trial Court discharging the accused for offences under Section 276B read with Section 278B of the Income Tax Act, as confirmed by the High Court, should be maintained or set aside and the matters remitted for trial? - HELD THAT: - The Court noted that the trial Court discharged the accused on the ground that the person prosecuted as Managing Director had been wrongly treated as the Principal Officer; the High Court confirmed that discharge. After hearing, the respondent-accused, through senior counsel, stated at the Bar that if the discharge orders were set aside and the matters directed to proceed to trial on merits with all defences kept open, they had no objection. In view of that stand, the Court did not adjudicate the rival submissions on the correctness of designation or on the merits of discharge. Instead, the Court quashed and set aside the orders of discharge passed by the trial Court and confirmed by the High Court, and remitted the matters to the trial Court to proceed further and decide the complaints on their own merits. The Court expressly preserved all defences available to the accused and directed the trial Court to consider them in accordance with law on the basis of evidence led. The Court further directed that the trial be concluded within 12 months from receipt of the order.

The orders of discharge passed by the trial Court and confirmed by the High Court are quashed and set aside; the complaints are remitted for trial to be conducted on merits with all defences open and to be concluded within 12 months.

Final Conclusion: Appeals allowed; discharge orders set aside and matters remitted for trial on merits with all defences preserved and a direction to conclude trial within twelve months.

Non-supply of impounded material and violation of principles of natural justice - Section 148A(b) show-cause notice requirement of furnishing material relied upon - Obligation to provide information and material before issuance of notice under Section 148 - Duty to afford opportunity of being heard prior to passing order under Section 148A(d) - Applicability of remedial/amendatory provisions introduced by Finance Act, 2021 to notices issued on or after 01.04.2021

Non-supply of impounded material and violation of principles of natural justice - Section 148A(b) show-cause notice requirement of furnishing material relied upon - Duty to afford opportunity of being heard prior to passing order under Section 148A(d) - Legality of the order passed under Section 148A(d) for non-supply of impounded material relied upon in the show-cause notice under Section 148A(b). - HELD THAT: - The court found that the assessing authority relied on loose papers impounded during a survey to allege unaccounted sundry debtors for AY 2018-19 and issued a show-cause notice under Section 148A(b). The petitioner repeatedly requested copies of the impounded material which, according to the petitioner, were not furnished; the respondents did not produce positive proof of supply. Section 148A(b) is intended to provide the assessee an effective opportunity of being heard and, to that end, the material upon which the Revenue relies must be furnished so that the assessee can file a comprehensive reply. Non-supply of such relevant material amounts to denial of principles of natural justice and renders the consequent order under Section 148A(d) legally vulnerable. The court relied on the remedial intent of the Finance Act, 2021 amendments and the contemporaneous judicial approach requiring that information/material relied upon be provided before further action, and therefore set aside the impugned order. The court directed supply of the impounded material within two weeks, allowed two weeks for the petitioner to file a reply, and required the assessing officer to reconsider and pass an appropriate order under Section 148A(d) after affording hearing. [Paras 8, 9, 10, 11, 13]

Impugned order dated 31.03.2022 under Section 148A(d) set aside for failure to furnish relevant impounded material; Revenue directed to supply the material within two weeks, petitioner to reply within two weeks thereafter, and assessing officer to reconsider and pass appropriate order under Section 148A(d) after affording hearing.

Final Conclusion: Writ petition allowed; order under Section 148A(d) dated 31.03.2022 set aside for non-supply of material relied upon in the Section 148A(b) show-cause notice. Respondent to furnish the impounded material within two weeks, petitioner to file reply within two weeks of receipt, and respondent to reconsider and pass a fresh order under Section 148A(d) after hearing.

Faceless assessment procedure under section 144B - Opportunity of personal hearing in faceless assessments - Principles of natural justice and audi alteram partem - Draft assessment order and show-cause notice requirements - Power to remit for fresh consideration after quashing

Faceless assessment procedure under section 144B - Draft assessment order and show-cause notice requirements - Opportunity of personal hearing in faceless assessments - Principles of natural justice and audi alteram partem - Whether the assessment order dated 23.09.2021 was passed in violation of the faceless assessment procedure and principles of natural justice by failing to furnish a show-cause/draft assessment order and provide opportunity of hearing as mandated under section 144B of the Act. - HELD THAT: - The Court examined the procedural scheme in section 144B, which prescribes that an assessment unit shall prepare a draft assessment order and that the National Faceless Assessment Centre (NFAC) must, where a variation prejudicial to the assessee is proposed, serve a show-cause notice calling upon the assessee to respond and, if requested and permitted, provide a personal hearing through video conferencing. The record established that no draft assessment order accompanied by a show-cause notice under the procedure in section 144B(1) and section 144B(7) was furnished to the petitioner; consequently the petitioner was not given the opportunity to respond to the material and inquiries made after issuance of the draft. The Court held that in these circumstances the final assessment was rendered without affording the statutory opportunity and thus in breach of the audi alteram partem principle embodied in section 144B. The Court therefore concluded that the impugned assessment order could not stand and directed that the assessment be quashed; however, the revenue was permitted to proceed afresh in accordance with the statutory procedure by issuance of a show-cause cum draft assessment order and by giving the petitioner an opportunity of hearing, to be completed within a specified timeframe. The Court expressly did not decide the merits of the additions, leaving those to be considered in fresh proceedings conducted in compliance with section 144B. [Paras 8, 10, 11]

Impugned assessment order dated 23.09.2021 and the demand notice quashed for failure to follow the procedure and afford hearing under section 144B; matter remitted to permit fresh faceless assessment after issuing show-cause/draft order and providing opportunity of hearing within 12 weeks.

Final Conclusion: Writ petition allowed: the faceless final assessment order dated 23.09.2021 and consequent demand are quashed for non-compliance with section 144B and breach of natural justice; revenue permitted to re-assess after issuing show-cause-cum-draft order and affording the statutory opportunity of hearing within 12 weeks; merits not examined.

Mandatoriness of Section 144C procedure in transfer pricing assessments - failure to issue draft assessment order under Section 144C(1) is an incurable defect - remand by the Tribunal requires fresh compliance with Section 144C - appeal remedy under Section 253(1)(d) available only where assessment complies with Section 144C - filing appeal before Commissioner of Income Tax (Appeals) does not constitute waiver of objection under Section 144C

Mandatoriness of Section 144C procedure in transfer pricing assessments - failure to issue draft assessment order under Section 144C(1) is an incurable defect - remand by the Tribunal requires fresh compliance with Section 144C - Legality of the revised final assessment order dated 2.3.2016 (Annexure-E) in the absence of re doing the Section 144C procedure following remand by the Tribunal. - HELD THAT: - The Court held that where an assessment involves transfer pricing adjustments, the procedure prescribed by Section 144C - including issuance of a draft assessment order under Section 144C(1), opportunity to file objections and referral to the Dispute Resolution Panel - is mandatory. Upon remand by the Tribunal with directions to re-examine transfer pricing issues, the Assessing Officer is obliged to re-do the Section 144C process; failure to do so renders the subsequent assessment order illegal and without jurisdiction. Such omission is not a curable defect and vitiates the revised assessment made without compliance with DRP directions. The Court found the decisions relied upon by revenue distinguishable and agreed with authorities holding that non-compliance with Section 144C(1) after remand invalidates the assessment order. [Paras 10]

Annexure-E dated 2.3.2016 is illegal for non-compliance with the mandatory Section 144C procedure on remand; the Tribunal rightly allowed the assessee's objection.

Appeal remedy under Section 253(1)(d) available only where assessment complies with Section 144C - filing appeal before Commissioner of Income Tax (Appeals) does not constitute waiver of objection under Section 144C - Whether the assessee's filing of an appeal before the Commissioner of Income Tax (Appeals) against the revised order precludes raising the objection of non-compliance with Section 144C. - HELD THAT: - The Court observed that the remedy of appeal to the Income Tax Appellate Tribunal under Section 253(1)(d) is available only when the assessment has been made in compliance with Section 144C. An assessment purportedly made under Section 143(3) but without following DRP directions under Section 144C is not a valid Section 144C assessment; consequently, the assessee was justified in approaching the Commissioner (Appeals). Filing an appeal before the CIT(A) in these circumstances cannot be construed as a waiver of the legal objection that Section 144C procedure was not followed. [Paras 10]

The assessee did not forfeit the objection to non-compliance with Section 144C by filing appeal before the CIT(A); the Tribunal correctly entertained and upheld that objection.

Final Conclusion: The Court dismissed the Revenue's appeal, answering the substantial questions of law in favour of the assessee: the revised assessment dated 2.3.2016 is void for failure to comply with the mandatory Section 144C procedure on remand, and the assessee's remedies before the Commissioner (Appeals) did not amount to waiver of that objection.

Disallowance under Section 40A(3) for cash payments - Business expediency as exclusion under the proviso to Section 40A(3) - Exclusion under Rule 6DD(f) for payments to producers in cottage/handloom/handicraft sectors - Burden of proof to establish exemption under the prescribed rules - Application of the ratio in Attar Singh Gurumukh Singh regarding business expediency

Disallowance under Section 40A(3) for cash payments - Business expediency as exclusion under the proviso to Section 40A(3) - Application of the ratio in Attar Singh Gurumukh Singh regarding business expediency - Deletion of the addition made under Section 40A(3) on the basis of business expediency. - HELD THAT: - The Tribunal accepted the assessee's unchallenged averments that cash payments in excess of the statutory limit were made due to business exigencies (suppliers insisting on cash, timing and export-related necessities). Applying the ratio of Attar Singh Gurumukh Singh, which recognises that the terms of Section 40A(3) are not absolute and that considerations of business expediency may be relevant, the Tribunal found that the Revenue did not rebut the assessee's claim. In these circumstances the proviso and prescribed considerations justify exclusion of the payments from disallowance, and the Assessing Officer was directed to delete the impugned disallowance. [Paras 7]

Impugned disallowance under Section 40A(3) deleted on the ground of business expediency; appeal allowed on this point.

Exclusion under Rule 6DD(f) for payments to producers in cottage/handloom/handicraft sectors - Burden of proof to establish exemption under the prescribed rules - Claim that payments fell within Rule 6DD(f) (payments to producers of products manufactured without power in cottage industry / handicraft artisans) rejected for lack of evidence. - HELD THAT: - The Tribunal observed that clause (f) of Rule 6DD excludes payments to producers in specified cottage/handloom/handicraft categories from disallowance, but that the assessee did not produce any evidence to establish that the sellers fell within that category. The lower authorities had not accepted the claim for this specific exclusion, and without supporting material the plea could not succeed. Accordingly the contention under Rule 6DD(f) was rejected for want of proof. [Paras 7]

Claim under Rule 6DD(f) not accepted due to absence of supporting evidence; no relief on this specific ground.

Final Conclusion: The Tribunal allowed the appeal by deleting the disallowance under Section 40A(3) on the basis of business expediency (applying Attar Singh), while rejecting the separate claim under Rule 6DD(f) for lack of evidence; the Assessing Officer was directed to delete the impugned disallowance.

Capitalisation versus revenue treatment of software expenditure - allocation of recurrent and specific software service fees - remand for de-novo adjudication where material on record is incomplete for the relevant period - disallowance of expenses for failure to substantiate claims - capitalisation of interest to Capital Work-in-Progress (CWIP) and burden on revenue to show diversion or actual utilisation - consequential interest under section 234B treated as incidental to assessment outcome - initiation of penalty proceedings under section 271(1)(c) disposed as premature

Capitalisation versus revenue treatment of software expenditure - allocation of recurrent and specific software service fees - remand for de-novo adjudication where material on record is incomplete for the relevant period - Whether recurring software charges debited to profit and loss account are capital in nature or revenue and whether the matter requires fresh adjudication. - HELD THAT: - The Tribunal found that material placed on record by the assessee (IS Service Agreement, invoices and allocation details) demonstrated a distinction between Specific Service Fees and Recurrent Services Fees, but the external auditor's allocation certificate did not cover the relevant previous year and some invoices pre-dated the IS Service Agreement. The CIT(A)'s conclusion that no description was provided and that the software must have useful life of several years proceeded on impermissible presumption contrary to the record. Given the incomplete coverage of the allocation certificate for the relevant year and the Assessing Officer's reliance on presumption, the Tribunal considered it appropriate to remit the issue to the Assessing Officer for fresh adjudication after affording the assessee opportunity to be heard and for the AO to examine the invoices and allocation in relation to the relevant previous year. [Paras 12]

Matter remitted to the Assessing Officer for de-novo adjudication; ground treated as allowed for statistical purposes.

Disallowance of expenses for failure to substantiate claims - admissibility of additional evidence and test-check verification by AO - Whether the ad-hoc disallowances of travelling & conveyance and legal & professional fees should be sustained where primary invoices were placed on record and verified on test-check in remand proceedings. - HELD THAT: - The Assessing Officer made ad-hoc disallowances because of large increases in these expenses and absence of party-wise break-ups. The assessee produced primary invoices as additional evidence and these were test-checked by the AO in remand proceedings without any infirmity being reported. The Tribunal held that the CIT(A)'s finding that no supporting documents were furnished is factually incorrect; neither the AO nor CIT(A) pointed to any defect in the invoices or demonstrated diversion or fabrication. In the absence of any specific infirmity or requirement for the detailed breakup, the ad-hoc disallowance lacked basis and was deleted. [Paras 18]

Disallowances in respect of travelling & conveyance and legal & professional fees deleted; grounds allowed.

Capitalisation of interest to Capital Work-in-Progress (CWIP) and burden on revenue to show diversion or actual utilisation - Whether interest expense was rightly capitalised to CWIP where the assessee produced working capital facility agreements, ledger entries and showed availability of own funds. - HELD THAT: - The AO presumed borrowed funds were utilised for CWIP and capitalised a proportionate interest; CIT(A) rejected the assessee's documentary evidence as showing purpose but not actual utilisation. The Tribunal observed that the assessee produced facility agreements, ledger entries showing interest charged to working capital, and that own funds exceeded the increase in CWIP. In absence of any material suggesting diversion of working capital borrowings for CWIP, the presumption drawn by the AO was unsustainable. The Tribunal therefore overturned the AO and CIT(A) and deleted the disallowance. [Paras 23]

Disallowance of interest attributable to CWIP deleted; ground allowed.

Consequential interest under section 234B treated as incidental to assessment outcome - Whether consequential interest under section 234B should be adjudicated independently in the appeal. - HELD THAT: - The Tribunal treated the question of interest under section 234B as consequential to the assessment adjustments and did not adjudicate it on merits in the present appeal, leaving it to follow from the final assessment result. [Paras 24]

Disposed of as consequential.

Initiation of penalty proceedings under section 271(1)(c) disposed as premature - Whether challenge to initiation of penalty proceedings under section 271(1)(c) is maintainable at this stage. - HELD THAT: - The Tribunal noted that penalty proceedings are separate and distinct from assessment and that challenging initiation of penalty proceedings during the pendency of assessment appeal was premature. [Paras 25]

Ground disposed of as premature.

Final Conclusion: The appeal is partly allowed: the disallowances in respect of travelling & conveyance and legal & professional fees and the interest capitalised to CWIP are deleted; the question of recurring software charges is remitted to the Assessing Officer for de-novo adjudication after affording opportunity of hearing; interest under section 234B is dealt with as consequential; challenge to initiation of penalty proceedings under section 271(1)(c) is premature.

Allowability of prior period/prepaid expenses - business expenditure - proof and documentary evidence - treatment of property tax - business use requirement - depreciation - classification of software and rate applicability - depreciation - substantiation of additions and time of asset receipt - disallowance of expenses for lack of evidence - treatment of import transactions appearing in export import summary data as unexplained/unrecorded expenditure

Allowability of prior period/prepaid expenses - business expenditure - proof and documentary evidence - Disallowance of prior period/AMC amount claimed in A.Y. 2015-16 upheld for want of ledger/breakup showing it as prepaid expense. - HELD THAT: - The Assessing Officer treated the AMC amount as relating to F.Y. 2012-13. The assessee asserted the amount was shown as a current asset in the balance sheet as on 31.03.2013 and disclosed as 'prior period expenses' in Schedule 13, but failed to produce the ledger account or the breakup of the prepaid expenses before any authority. The Tribunal, noting absence of the required details and documentary substantiation even on appeal, agreed with the CIT(A)'s confirmation of the disallowance. [Paras 8]

Ground dismissed; addition sustained for lack of substantiation that the payment was a prepaid expense of the year under appeal.

Treatment of property tax - business use requirement - business expenditure - proof and documentary evidence - Disallowance of property tax paid for a Dock Yard Godown upheld for failure to prove business use by the assessee. - HELD THAT: - The assessee produced receipts in the name of the previous owner and an agreement showing the licence for storage of grains and pulses. It did not produce bank payment evidence or any material demonstrating that the dockyard was used for the assessee's broadcasting/software media business or that it was not used as per the licence. The AO and CIT(A) disallowed the claim for property tax, and the Tribunal found no infirmity in that conclusion given absence of evidence to establish business utilisation. [Paras 9, 10, 11]

Ground dismissed; property tax disallowance sustained for want of proof of business use.

Depreciation - classification of software and rate applicability - depreciation - substantiation of additions and time of asset receipt - Restrictions on depreciation (allowing limited rates and disallowing claims for unsubstantiated additions) affirmed; CIT(A)'s directions to recompute certain depreciation at 25% and to disallow unsupported claims upheld. - HELD THAT: - The assessee claimed substantial depreciation including 60% on software and on certain assets. The AO accepted only 15% in some instances and disallowed amounts for lack of bills and for assets not shown to have been received during the year (e.g., monitors). The CIT(A) directed recomputation at 25% for software in view of the AO's own acknowledgment and allowed 60% only for a specific IMAC item where value was supported. The assessee failed to furnish documentary evidence before the Tribunal. On this basis the Tribunal upheld the disallowances and the limited recomputation ordered by the CIT(A). [Paras 12, 13]

Grounds dismissed; depreciation restricted or disallowed where additions or receipt of assets were not substantiated; limited recomputation at 25% as directed by CIT(A) stands.

Disallowance of expenses for lack of evidence - business expenditure - proof and documentary evidence - Disallowances of various operating expenses (travelling and conveyance, electricity, miscellaneous, security, manpower deputation) upheld for want of documentary proof. - HELD THAT: - The AO disallowed or increased disallowances of multiple expense heads on the ground that the assessee failed to produce documentary evidence proving those expenses were incurred wholly and exclusively for business. The CIT(A) confirmed those additions. The assessee did not produce any evidence before the Tribunal to substantiate these claims. In absence of supporting documents, the Tribunal found no reason to disturb the conclusions of the lower authorities. [Paras 15, 16, 17, 18]

Ground dismissed; additions sustained for lack of corroborative documentary evidence.

Treatment of import transactions appearing in export import summary data as unexplained/unrecorded expenditure - business expenditure - proof and documentary evidence - Addition treating import transactions shown in Export Import Summary Data as unexplained/unrecorded expenditure sustained for failure to substantiate purchases/imports. - HELD THAT: - The AO relied on export import summary data to treat certain import transactions as unrecorded/unexplained, disallowing the claim of import purchases. The assessee asserted capital purchases of computers in foreign currency but failed to produce documentary breakup or evidentiary support for the transactions either before the AO, CIT(A) or the Tribunal. Given absence of substantiation, the Tribunal found no infirmity in the CIT(A)'s confirmation of the addition. [Paras 21, 22]

Ground dismissed; addition on account of unexplained import transactions sustained.

Final Conclusion: All grounds urged in both appeals were considered on the merits; in each instance the Tribunal upheld the findings of the assessing officer and the CIT(A) due to the assessee's failure to substantiate claims with requisite documentary evidence. The appeals are dismissed.

Transfer pricing adjustment - international transaction - notional interest on delayed receivables - comparable uncontrolled price (CUP) method - arm's length price - proviso to section 36(1)(iii) - disallowance arising from application of interest-bearing funds to acquisition of fixed assets

International transaction - notional interest on delayed receivables - comparable uncontrolled price (CUP) method - arm's length price - Whether delayed export receivables from Associated Enterprises constitute a separate international transaction and, if so, whether a transfer pricing adjustment for notional interest is warranted - HELD THAT: - The Tribunal accepted that outstanding export proceeds beyond the agreed credit period constitute an international transaction distinct from the export of goods and therefore require benchmarking. However, on the facts the assessee produced internal comparables showing similar credit periods and absence of interest charges for non-associated parties. The Tribunal found that where identical or comparable independent-party transactions exist with the same credit terms and no interest is charged, those internal CUP comparables establish the arm's length outcome for overdue receivables. The assessee failed to substantiate a general industry practice or recessionary justification for not charging interest, but this did not outweigh the evidentiary value of the internal CUPs produced for the year under appeal. Applying the CUP evidence, the Arms' Length Price of the overdue export proceeds was found to be nil and the transfer pricing adjustment was deleted. [Paras 11, 12, 13, 14]

Adjustment for notional interest on delayed export receivables from Associated Enterprises deleted; ALP of overdue receivables held to be nil on internal CUP evidence.

Proviso to section 36(1)(iii) - disallowance arising from application of interest-bearing funds to acquisition of fixed assets - interest-free funds - Whether proportionate disallowance of interest under the proviso to section 36(1)(iii) is sustainable where assessee had available interest-free funds in excess of the advance for acquisition of fixed assets - HELD THAT: - The Tribunal found that the assessee had sufficient interest-free funds (share capital and reserves) substantially in excess of the advance made for the capital asset. Following the principle in the cited Supreme Court authority relied upon by the assessee, the presumption that investments were financed out of interest-free funds was available. On this basis the Tribunal held the disallowance unsustainable and directed deletion of the same. [Paras 15]

Disallowance of proportionate interest under the proviso to section 36(1)(iii) deleted and the assessment revised accordingly.

Final Conclusion: Appeal partly allowed: transfer pricing adjustment for notional interest on overdue export receivables deleted (ALP held nil on internal CUP), and the disallowance under the proviso to section 36(1)(iii) deleted; remaining, unargued grounds dismissed.

Benefit of Vivad Se Vishwas Scheme - petitioner has filed application filed u/s 154 of the Income Tax Act, 1961 for rectification of some errors, which is partly allowed - HELD THAT:- Petitioner has filed application filed u/s 154 for rectification of some errors, which is partly allowed. The petitioner has filed another application which is pending.

We take the statement on record, the special leave petition insofar, which relates to the year 2006-2007 is dismissed as withdrawn. We clarify that we have not commented on the merit of the computation of tax made under the aforesaid scheme or on the grievance or remedy, which would be available to the petitioner.

Income/capital gain earned on sale of shares - LTCG or STCG - AY 2010-2011 - HC order[2015 (7) TMI 813 - KERALA HIGH COURT] - HELD THAT:- We are inclined to grant leave in respect of income/capital gain earned on sale of shares of M/s J.K. Investo Trade Ltd., M/s Mujnal Showa Ltd. and Samtel Colours Ltd. The parties are given liberty to file additional documents in respect of the said shares.

Gain on sale on shares - LTCG OR STCG - HELD THAT:- No good ground and reason to interfere with the impugned order passed by the High Court [2015 (7) TMI 813 - KERALA HIGH COURT] affirming the decision passed of the Income Tax Appellate Tribunal as the period of holding of the shares sold in the present case was less than one year. We have also taken into account the frequency of transactions.

Appellate jurisdiction of the High Court u/s 260A - Whether this Court has territorial jurisdiction adjudicate upon the lis over an order passed by the Assessing officer, i.e. Income Tax Officer, Ward 1(1), at Surat? - HELD THAT:- The very question fell for consideration before a Bench of three learned Judges which is reported in Principal Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd. [2022 (8) TMI 863 - SUPREME COURT] Therein this Court has held that the appellate jurisdiction of the High Court under Section 260A is exercisable by the High court within whose territorial jurisdiction the assessing officer is located.

In the facts of this case, we have noticed that by the impugned order, the High Court has precisely proceeded on the same principle. This means that the order by which the appeal has been directed to be presented before the High Court of Gujarat as the AO who passed the order was located at Surat within the State of Gujarat, is unexceptionable. We see no reason to interfere with the impugned order.

Learned counsel for the petitioner would point out that on an earlier occasion, the High Court of Gujarat has taken a contrary view.

We need only mention that any contrary view which has been taken cannot survive after the authoritative announcement by this Court in the decision we have referred to. Making this also clear, the special leave petition will stand dismissed.

Undisclosed investment - estimation of undisclosed income - valuation of stock - search and seizure proceedings - Section 158BC notice and block assessment - Section 158BB(1)(d) claimed disclosure - onus to prove cost of raw material - reliability of post-search invoices - corroboration of statements by seized documents - Addition made on the basis of statement, recorded during the course of search proceedings - HELD THAT:- Having heard petitioner and Revenue and having gone through the impugned judgment and order passed by the High Court and the reasoning and the findings recorded and having gone through the order passed by the ITAT as well as the assessment order, it cannot be said that the High Court [2017 (1) TMI 514 - DELHI HIGH COURT] has committed any error in allowing the appeal and quashing the order passed by the ITAT.

We are in complete agreement with the view taken by the High Court. Special Leave Petition stands dismissed.

Re-opening of assessment beyond four years under Section 148 of the Income Tax Act - conditions precedent for reopening - change of opinion - suppression of material fact - setting aside notice under Section 148

Re-opening of assessment beyond four years under Section 148 of the Income Tax Act - conditions precedent for reopening - change of opinion - suppression of material fact - Validity of the notice re-opening assessment beyond four years under Section 148 - HELD THAT: - The Court examined the reasons recorded for initiating reassessment beyond the four-year period and held that the statutory conditions precedent for such reopening were not satisfied. The reassessment proceeded on a mere change of opinion rather than from any established suppression of material fact or newly discovered information warranting reopening. In the absence of allegations or evidence of suppression of material fact, the High Court correctly concluded that the notice under Section 148 was unsustainable. The Supreme Court agreed with the High Court's conclusion and found no error in setting aside the re-opening notice.

The re-opening notice under Section 148 was set aside as conditions for reopening beyond four years were not satisfied; the Special Leave Petition was dismissed.

Final Conclusion: The Supreme Court affirmed the High Court's order setting aside the notice under Section 148, holding that reassessment beyond four years was based on a change of opinion and the conditions for reopening were not met; the Special Leave Petition is dismissed.

Losses due to foreign exchange fluctuation on export proceeds - treatment of interest-free advance to related party - obligation to deduct tax at source on export commission where recipient is non-resident and services rendered outside India - concurrent findings and appellate interference

TDS on commission income paid to foreign agents and the non-deduction of TDS - addition u/s 40(a)(ia) r/w. Section 195(1) as demurrage paid to a non-resident buyer of iron ore without deducting TDS - HELD THAT:- As issues raised before the High Court [2017 (9) TMI 248 - BOMBAY HIGH COURT] were held against the Revenue with respect to the earlier assessment years – 2005-2006 & 2009-2010. The matter has not been carried further by the Revenue.

In that view of the matter, no error has been committed by the ITAT and/or even the High Court. Hence, the present Special Leave Petition stands dismissed.

Losses due to foreign exchange fluctuation on the export proceeds - SLP against HC [2018 (3) TMI 2003 - DELHI HIGH COURT] - HELD THAT:- The issue is covered by the decision of this Court in the case of CIT vs. Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] Mr. N. Venkatraman, learned ASG, is not in a position to dispute the above. Under the circumstances, it cannot be said that the High Court has committed any error in holding the said issue against the Revenue relying upon the decision in the case of Woodward Governor India (P) Ltd. (supra).

Advance of interest-free loans to the related party - As the amount involved is Rs.6,00,000/- only, keeping the question of law, if any, open, we dismiss the present Special Leave Petition(s) qua the said issue.

Non-deduction of TDS on account of export commission - It is required to be noted that there are concurrent findings recorded that the foreign entity receiving the amounts were not Indian residents and subject to tax and that the services rendered were rendered outside India, neither the ITAT nor the High Court have committed any error in holding the said issue against the Revenue.

Assessment orders - setting aside assessments and remand for fresh consideration - opportunity of hearing and principles of natural justice - registration under Section 12AA and its prospective/retrospective effect on tax assessment - exemption under Section 10(23C)(iiiab) as a ground for tax exemption - expeditious adjudication in accordance with governing law

Assessment orders - setting aside assessments and remand for fresh consideration - opportunity of hearing and principles of natural justice - Whether the assessment orders dated 30.03.2022 for the specified assessment years should be set aside and the matters remitted to the assessing officer for fresh consideration with an opportunity of hearing. - HELD THAT: - The Court noted that the assessments impugned were completed on 30.03.2022 and that the petitioner had requested that proceedings be kept on hold because an appeal concerning registration under Section 12AA was pending. Although no exemption had been granted by the date of assessment, the appellate authority allowed the petitioner's appeal shortly thereafter and registration was given effect to later in the year. In the interest of justice and without expressing any opinion on the merits of the petitioner's claim to exemption, the Court found it appropriate to set aside the assessment orders and remit the matters to the assessing officer. The remand is to enable issuance of notices to both parties, to afford an opportunity of hearing, to admit and consider documents produced by the parties, and to decide the matters in accordance with the governing law and rules expeditiously. [Paras 10, 11]

Impugned assessment orders dated 30.03.2022 for the assessment years 2013-14, 2015-16, 2016-17, 2017-18 and 2018-19 are set aside and the matters are remitted to the assessing officer with directions to issue notices, afford hearing, receive documents and pass appropriate orders expeditiously.

Registration under Section 12AA and its prospective/retrospective effect on tax assessment - exemption under Section 10(23C)(iiiab) as a ground for tax exemption - Whether the question of the petitioner's entitlement to registration/exemption and the correctness of the assessments should be reconsidered by the assessing officer. - HELD THAT: - The Court expressly declined to adjudicate the merits of the petitioner's entitlement to exemption or the correctness of the assessments. Instead, because registration under Section 12AA was granted shortly after the assessments were completed and the petitioner had sought adjournment of assessment proceedings pending that appellate resolution, the Court remitted the substantive issues for fresh consideration. The assessing officer is to consider the petitioner's submissions, documents and the legal position afresh and decide in accordance with governing law; the Court did not lay down any view on the substantive entitlement to exemption. [Paras 8, 10, 11]

Merits of the petitioner's entitlement to registration/exemption and the related assessment issues are remitted to the assessing officer for fresh consideration; the Court expressed no opinion on those merits.

Final Conclusion: Writ petitions allowed in part: impugned assessment orders dated 30.03.2022 for the assessment years 2013-14, 2015-16, 2016-17, 2017-18 and 2018-19 are set aside and remitted to the assessing officer for fresh consideration, with directions to issue notices, afford hearings, admit documents and pass appropriate orders expeditiously; no opinion expressed on merits.

Disallowance under Section 14A read with Rule 8D - treatment of investments made from mixed funds - deletion of additions under Section 32 based on documentary evidence - admissibility and consideration of documents by appellate authority vis-a -vis Rule 46(3) - concurrent findings of fact - no substantial question of law

Disallowance under Section 14A read with Rule 8D - treatment of investments made from mixed funds - application of precedent regarding appropriation of mixed funds - Deletion of disallowance under Section 14A/Rule 8D in respect of exempt dividend income - HELD THAT: - The Tribunal and the appellate authority found that the assessee's investments were made out of its own funds and not from borrowed funds, so no interest expenditure could be attributed to the exempt dividend income. The Court noted the Supreme Court's decision in South India Bank Ltd. that where payments are made from mixed funds the assessee has the right to appropriate investments to interest-free funds and that Revenue cannot make an arbitrary proportionate estimation. On the facts, the appellate authorities accepted the assessee's suo moto disallowance computation (taking percentages of employee and administrative cost) and concluded there was no basis for the broader disallowance sought by the AO. The High Court held these concurrent factual findings and application of the said legal principle render the deletion sustainable. [Paras 4, 5]

The deletion of the Section 14A/Rule 8D disallowance was upheld; the appellate findings that investments were from own funds and the application of the mixed-fund principle were sustained.

Deletion of additions under Section 32 based on documentary evidence - admissibility and consideration of documents by appellate authority vis-a -vis Rule 46(3) - concurrent findings of fact - Deletion of addition under Section 32 where appellate authorities relied on documents - HELD THAT: - The CIT(A) and ITAT recorded that the documents supporting the assessee's claim were placed on record and considered; the assessment order itself refers to the assessee's reply dated 11th December, 2012. The High Court noted that the appellate authorities, after verifying the evidence, deleted the additions and that the ITAT observed no new evidence was brought and that the AO had ignored the assessee's earlier reply. Given these concurrent factual findings that the documents were before the AO/Appellate Authority and were duly considered, the High Court found no legal infirmity in the deletions and rejected the contention that reliance was placed on documents in violation of Rule 46(3) without opportunity to the AO. [Paras 6]

The deletions under Section 32 were upheld; the appellate authorities' acceptance of the documentary evidence and resultant deletions were sustained.

Final Conclusion: Both impugned deletions were founded on concurrent findings of fact by the appellate authorities-application of the mixed-fund principle to the Section 14A/Rule 8D issue and acceptance of documentary evidence on the Section 32 additions-and no substantial question of law arises; the appeal is dismissed.

Inordinate delay and resultant prejudice - administrative discipline in concluding show cause proceedings - dormancy of proceedings in the call book - failure to inform noticee of pendency causing prejudice - quashing of show cause notice for delay - restraint on enforcement of stale proceedings

Inordinate delay and resultant prejudice - dormancy of proceedings in the call book - failure to inform noticee of pendency causing prejudice - quashing of show cause notice for delay - Notwithstanding the Respondents' reliance on administrative or audit-related reasons, the notices dated 8 April 2015 and 7 July 2015 (issued pursuant to the show cause notice dated 7 July 1997) cannot validly be acted upon after the prolonged dormancy which caused prejudice to the Petitioner. - HELD THAT: - The show cause notice dated 7 July 1997 was replied to by the Petitioner on 6 August 1997 and thereafter remained dormant, with the file having been transferred to the call book and the Petitioner not informed of the pendency. The Court accepted the settled principle that show cause proceedings must be taken to their logical end promptly as a matter of administrative discipline and that keeping proceedings in the call book for an unreasonable period without informing the noticee causes severe prejudice - the noticee may reasonably assume the proceedings have been dropped and relevant records may no longer be available. The Respondents' explanation that audit-related activity (by the Comptroller and Auditor General) delayed adjudication was noted in the reply affidavit, but the prolonged inaction and lack of communication for many years meant the pendency could not be given effect to. Applying these principles to the facts, the Court found the issuance of hearing notices in 2015 in consequence of a 1997 show cause notice impermissible and liable to be quashed.

The hearing notices dated 8 April 2015 and 7 July 2015 and the enforcement of the show cause notice dated 7 July 1997 are quashed and the Respondents are restrained from enforcing the impugned show cause notice.

Final Conclusion: Writ petition allowed; the impugned notices calling for personal hearing (8 April 2015 and 7 July 2015) and action pursuant to the show cause notice dated 7 July 1997 are quashed and set aside, and the Respondents are restrained from enforcing the show cause notice. No costs.

Revocation of customs broker licence - Forfeiture of security deposit - Imposition of penalty under Customs Broker Licensing Regulation, 2018 - Duty to verify client / familiarity with client - Contributory role of customs broker in smuggling - Timelines under Customs Broker Licensing Regulation, 2018

Revocation of customs broker licence - Contributory role of customs broker in smuggling - Validity of the licensing authority's revocation of the appellant's customs broker licence under the Customs Broker Licensing Regulation, 2018 - HELD THAT: - The Tribunal found that the enquiry focused on technical aspects and did not sufficiently ascertain whether any acts or omissions by the customs broker in fact contributed to the alleged smuggling. Although the appellant had not personally verified the importer's premises, there is no absolute prescription requiring an in-person visit; norms require familiarity with the client and the appellant failed to discharge that obligation. Considering the nature of the lapse and the limited inquiry into contributory culpability, the Tribunal concluded that revocation was a disproportionate consequence and set aside the revocation while addressing other penalties separately. [Paras 6, 7]

Revocation of the customs broker licence set aside.

Forfeiture of security deposit - Imposition of penalty under Customs Broker Licensing Regulation, 2018 - Timelines under Customs Broker Licensing Regulation, 2018 - Validity of the forfeiture of security deposit and imposition of penalty on the appellant under the Customs Broker Licensing Regulation, 2018 - HELD THAT: - The Tribunal accepted that proceedings occurred during the pandemic but treated non-observance of timelines as justifiable context rather than a bar to adjudication. On the merits of the appellant's failure to meet client-familiarity obligations, the Tribunal found it appropriate to sustain the forfeiture of the security deposit and the penalty imposed under the Regulations even while setting aside the licence revocation. [Paras 5, 7]

Forfeiture of the security deposit and imposition of the penalty upheld.

Final Conclusion: The appeal is disposed of by setting aside the revocation of the customs broker licence while upholding the forfeiture of the security deposit and the penalty imposed under the Customs Broker Licensing Regulation, 2018.

Rejection of declared value under Rule 12 of the Valuation Rules - transaction value and valuation under Section 14 of the Customs Act - re-assessment under Section 17(4) and speaking order exception under Section 17(5) - consent to enhanced value and estoppel arising from voluntary acceptance - classification versus valuation interaction in Customs assessment

Rejection of declared value under Rule 12 of the Valuation Rules - re-assessment under Section 17(4) and speaking order exception under Section 17(5) - consent to enhanced value and estoppel arising from voluntary acceptance - Whether the adjudicating authority was justified in rejecting the declared transaction value and re-determining assessable value after the importer, through its authorised representative, accepted the enhanced value and waived show cause, personal hearing and speaking order. - HELD THAT: - The Tribunal held that Rule 12 permits the proper officer to doubt the declared value and proceed to determine value under Rules 4 to 9 where such doubt persists; Section 17(4) permits re-assessment and Section 17(5) requires a speaking order unless the importer confirms acceptance of the re-assessment. The authorised representative, in statements under section 108, accepted the re-determined value after being shown contemporaneous data and expressly waived issuance of a show cause notice, personal hearing and a speaking order. Prior Tribunal decisions establish that where an importer consents to enhancement of value and foregoes a show cause/personal hearing, the consented value in effect becomes the declared transaction value and the importer is estopped from subsequently contesting that value. The Commissioner (Appeals) erred in discarding the categorical acceptance and in requiring the Department to adduce further 'clear and cogent' evidence of additional consideration when the importer had voluntarily accepted the enhanced value and waived procedural safeguards. The Tribunal therefore sustained the adjudicating authority's reassessment and related consequential orders. [Paras 16, 17, 18, 27, 28]

The adjudicating authority's rejection of the declared value and re-determination of assessable value, made after the importer accepted the enhanced value and waived show cause/hearing/speaking order, is upheld; the Commissioner (Appeals) order setting aside the reassessment is set aside.

Classification versus valuation interaction in Customs assessment - consent to enhanced value and estoppel arising from voluntary acceptance - Whether the Commissioner (Appeals) was justified in restoring the importer's classification (as 'Hair Bow Raw Accessories Articles') and rejecting the Department's re classification to resin/plastic beads where the importer had accepted valuation premised on the Department's classification during investigation. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) placed undue emphasis on classification evidence while overlooking that the importer's authorised representative had accepted the enhanced valuation after being shown the Department's classification and contemporaneous prices, and had agreed to pay differential duty while waiving procedural rights. Given that acceptance was recorded and the importer elected not to insist on procedural protections, the consensual nature of the valuation (which was premised on the Department's classification) precludes the importer from later challenging the re-determination on classification grounds. The Commissioner (Appeals) therefore erred in reinstating the original classification and disregarding the effect of the recorded consent. [Paras 5, 6, 7, 27]

The Commissioner (Appeals) was not justified in restoring the original classification; the adjudicating authority's treatment of the goods (and consequential classification/valuation outcome premised on the Department's finding) is sustained.

Final Conclusion: The appeal is allowed; the Commissioner (Appeals) order dated 25.04.2018 is set aside and the adjudicating authority's order rejecting the declared value, re-determining assessable value and consequential orders are upheld in view of the importer's recorded acceptance of enhanced value and waiver of procedural protections.

Prima-facie opinion under Section 26(1) of the Competition Act - administrative/inquisitorial nature of inquiry under Section 26(1) - scope of judicial review of administrative action-illegality, irrationality and procedural impropriety (Wednesbury) - requirement to record minimum reasons when forming a prima-facie view - no statutory right to notice at the stage of formation of prima-facie opinion - Director General investigation as a triggered quasi inquisitorial fact finding exercise - stay of coercive/penalty action pending investigation and limited interim relief

Prima-facie opinion under Section 26(1) of the Competition Act - requirement to record minimum reasons when forming a prima-facie view - Validity of the CCI order dated 13.01.2020 directing investigation under Section 26(1) - whether it complied with the statutory requirement of forming a prima facie opinion and recording reasons. - HELD THAT: - The Court held that Section 26(1) vests the Commission with an inquisitorial, administrative power to form a prima facie opinion and direct the Director General to investigate. While detailed reasons are not required at this preliminary stage, the Commission must still express its mind in clear terms and record minimum reasons substantiating formation of the prima facie view on the basis of information furnished. On the material before it (including the informant's comparison tables and GCEE's response), the Commission recorded that the L1 item wise prices appeared to be the lowest and that there was some force in the informant's submission; it also noted explanations by GCEE and reserved detailed adjudication for the DG's investigation. The High Court found that the Commission had considered the available material and reached a tentative view accordingly; the Court will not re weigh commercial/ statistical data or substitute its own interpretation at this stage. [Paras 17, 18, 19, 20, 21]

The order under Section 26(1) was not vitiated for want of minimum reasoning and was lawfully passed to trigger an investigation; the Court declined to quash it on merits.

Administrative/inquisitorial nature of inquiry under Section 26(1) - no statutory right to notice at the stage of formation of prima facie opinion - Whether the petitioners were entitled to notice or a preliminary hearing before the CCI formed the prima facie opinion and directed investigation. - HELD THAT: - Relying on the statutory scheme and Supreme Court precedent, the Court reaffirmed that formation of a prima facie opinion under Section 26(1) is a departmental/administrative act and does not contemplate a right to notice or full hearing at that stage. The Commission may in its discretion invite parties or seek information, but absence of prior hearing to affected parties does not, by itself, render the order invalid. The Court emphasised that procedural safeguards and opportunities to be heard arise during the DG's investigation and upon submission of the DG's report to the Commission. [Paras 15, 17, 21]

No entitlement to a pre 26(1) hearing was established; the CCI acted within the discretionary administrative framework in proceeding without notice to all affected parties.

Scope of judicial review of administrative action-illegality, irrationality and procedural impropriety (Wednesbury) - competence of High Court under Article 226 to review orders under Section 26(1) - Whether the writ petitions were maintainable and whether the High Court should quash the initiation of investigation on the grounds advanced by petitioners (absence of material, perversity, bias, or premature exercise of writ jurisdiction). - HELD THAT: - The Court recognised that Article 226 is available to review administrative action but applied the established limitations: interference is warranted only for illegality, irrationality (Wednesbury unreasonableness), consideration of irrelevant factors, non consideration of relevant factors, bias or manifest mala fides. The Court found that the Commission had applied its mind to the material placed before it (including the informant's data and GCEE's responses), and that disputed questions of commercial fact and interpretation of statistical/business data are matters for the DG's investigation and for the Commission at the adjudicatory stage. Allegations of arbitrariness or discriminatory invitation of GCEE were considered but the Court held that the Commission has discretion to invite persons to a preliminary conference and that such conduct did not disclose bias vitiating the order. Given the preliminary nature of the 26(1) direction and the factual disputes, the Court declined to exercise writ jurisdiction to quash the investigation. [Paras 15, 18, 20, 21, 22]

Writ relief to quash the 26(1) order was refused; petitions dismissed as devoid of merit and premature to foreclose investigation.

Director General investigation as a triggered quasi inquisitorial fact finding exercise - stay of coercive/penalty action pending investigation and limited interim relief - Whether coercive penalty proceedings/ notices issued by the DG on the basis of the 26(1) order should be stayed pending investigation and the petitions' disposal. - HELD THAT: - Although the Court refused to quash initiation of the investigation, it observed that notices for initiation of penalty proceedings had been issued while the petitions were sub judice and during the pandemic. In the exercise of its discretionary interim jurisdiction the Court found it appropriate to grant limited protective relief: to stay coercive action and to afford the petitioners a defined additional period to respond to any notice issued pursuant to the impugned 26(1) order. [Paras 22, 23, 24]

Coercive/penalty action stayed; petitioners granted four weeks from the order to file replies to the notices; no further extension; petitions otherwise dismissed.

Final Conclusion: The High Court dismissed the writ petitions challenging the CCI's order of 13.01.2020 directing investigation under Section 26(1), holding that the Commission validly formed a prima facie opinion on the material before it and that the preliminary administrative direction was not amenable to quashing on the merits at this stage; however, the Court granted limited interim relief by staying coercive/penalty action and extending four weeks for the petitioners to reply to notices issued pursuant to the investigation.

Service of notice - Private notice versus notice issued by the Adjudicating Authority - Presumption of service by registered post and electronic dispatch - Reasonable opportunity and principles of natural justice - Ex parte proceedings - Adjudicating Authority's limited role in Section 7 proceedings under the Insolvency and Bankruptcy Code - Compliance with Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Overriding effect of the Insolvency and Bankruptcy Code

Service of notice - Private notice versus notice issued by the Adjudicating Authority - Presumption of service by registered post and electronic dispatch - Compliance with Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Whether the copy of the Section 7 application and notice served on the corporate debtor complied with statutory and procedural requirements and whether service was sufficient to permit ex parte disposal. - HELD THAT: - The Tribunal found that the financial creditor had dispatched the copy of the application to the corporate debtor's registered office and had also sent the documents by email to the official address in the company master data, in compliance with Rule 4(3) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Adjudicating Authority directed private service by speed post and email and the creditor filed proof of delivery and electronic transmission. On the facts, postal and electronic records, courier receipts and memo of delivery established delivery or justified the presumption of service. The Tribunal accepted that private notice by the creditor pursuant to the Tribunal's direction under its rules of procedure is permissible and that a private notice in obedience to an NCLT direction satisfied the requirement for notice; a distinction between a tribunal issued form notice and a party's private notice did not render service invalid where the Tribunal had directed private service and proof was placed on record. The court emphasized established law that duly addressed registered post and recorded electronic communication give rise to a presumption of service unless contrary is proved, and it rejected the contention that mere format or hyper technical non compliance required setting aside the admission. [Paras 92, 93, 94, 95, 96]

Service by speed post and email, together with proof filed, was sufficient and complied with Rule 4(3) and the directions of the Adjudicating Authority; the ex parte setting was justified on the basis of sufficient service.

Reasonable opportunity and principles of natural justice - Ex parte proceedings - Adjudicating Authority's limited role in Section 7 proceedings under the Insolvency and Bankruptcy Code - Overriding effect of the Insolvency and Bankruptcy Code - Whether admission of the Section 7 petition in ex parte proceedings breached natural justice or otherwise warranted interference on appeal. - HELD THAT: - The Tribunal reiterated that an Adjudicating Authority must give a reasonable opportunity to the corporate debtor but is not required to determine money claims or adjudicate disputed contractual issues in Section 7 proceedings; its role is to ascertain existence of financial debt and default from records. On the facts the corporate debtor failed to appear despite service and the Adjudicating Authority gave time for filing a counter; the corporate debtor's interlocutory applications were filed but were to be listed in course and did not displace the showing of default. The Tribunal applied established principles that mere procedural irregularity will not nullify an order if no prejudice is caused and where the evidence of debt and default is overwhelming. Having considered the materials (including balance confirmations and admissions in the debtor's filings) the Tribunal concluded the Adjudicating Authority exercised sound discretion in admitting the petition and that no interference was warranted. [Paras 104, 105, 106, 119, 123]

Admission of the Section 7 petition in the ex parte proceedings did not violate principles of natural justice nor require interference; the Adjudicating Authority correctly admitted the petition on the evidentiary material establishing debt and default.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's admission of the Section 7 application, holding that service by speed post and email in compliance with Rule 4(3) and the Tribunal's directions was sufficient, that the corporate debtor had adequate opportunity but did not avail it, and that the Adjudicating Authority rightly exercised its limited role in admitting the petition on the materials establishing debt and default.

Extended period of limitation - suppression of facts - show-cause notice - limitation - invoking extended period - taxable service - commercial training or coaching centre - earlier show-cause notice knowledge defeats invocation of extended limitation

Extended period of limitation - suppression of facts - earlier show-cause notice knowledge defeats invocation of extended limitation - Whether proceedings initiated by the show-cause notice dated 15th April 2014 for the period from 2008 to 2012 could validly invoke the extended period under section 73 of the Finance Act, 1994 by alleging suppression of facts. - HELD THAT: - The Tribunal held that invocation of the extended period requires credible satisfaction by the proper officer that suppression of fact, wilful misstatement or fraud is established in the notice. Mere non-payment or lack of awareness is insufficient. The adjudicating authority had earlier issued and adjudicated a show-cause notice for October 2003 to September 2008 on the same issue, a fact which placed the relevant material within the knowledge of the Department. Relying on the Supreme Court decisions reproduced in the impugned order, the Tribunal observed that where earlier show-cause notices on similar facts were issued and the material was before the authorities, subsequent reliance on suppression to invoke extended limitation is impermissible. Applying that principle, the Tribunal found that the allegation of suppression against the respondent could not be sustained and that the prerequisites for invoking the extended period were not made out. [Paras 5, 7]

Proceedings for the period 2008 to 2012 could not be pursued by invoking the extended period; the Revenue's appeal is dismissed.

Final Conclusion: The appeal by Revenue seeking recovery for 2008-2012 by invoking the extended limitation under section 73 is dismissed on the ground that suppression of facts was not established and earlier show-cause proceedings placed the material facts within the Department's knowledge.

Extension of factory under the definition of "Factory" in the Central Excise Act, 1944 - benefit of Notification No. 67/95-CE for captive use of capital goods - treatment of inter premises transfer of capital goods as captive use and revenue neutrality - utilisation of Cenvat credit of basic excise duty for payment of education cess and secondary and higher education cess - finality of appellate order where Revenue does not prefer further appeal - limitation - extended period under proviso to section 11A of the Central Excise Act, 1944 (context of invocation)

Extension of factory under the definition of "Factory" in the Central Excise Act, 1944 - benefit of Notification No. 67/95-CE for captive use of capital goods - treatment of inter premises transfer of capital goods as captive use and revenue neutrality - Additional premise of the assessee where capital goods were installed is an extension of the factory and the transfers are to be treated as captive use, entitling the assessee to benefit of Notification No. 67/95-CE. - HELD THAT: - The Tribunal accepted that both premises were owned and controlled by the same legal entity, operated under the same name, and that the transferred machines were exclusively used in or in relation to manufacturing of final products cleared by the registered factory on payment of duty. The distance between premises does not defeat the character of an extended factory since the statutory definition of "Factory" includes precincts where a manufacturing process connected with production is ordinarily carried on. Reliance on higher authority holding that physical separation does not automatically negate the continuity of factory activities supports treating the additional premise as an extension. Further, even if duty had been paid on the transfer, it would have been available as Cenvat credit, rendering the transaction revenue neutral; accordingly, a demand merely on the ground that the other premise was not separately registered is not tenable.

Demand of duty confirmed by lower authorities on the ground that the other premise was a separate unit is set aside; benefit of Notification No. 67/95-CE allowed and related portions of the impugned orders modified in favour of the appellant.

Utilisation of Cenvat credit of basic excise duty for payment of education cess and secondary and higher education cess - finality of appellate order where Revenue does not prefer further appeal - Utilisation of Cenvat credit of basic excise duty for payment of education cess and secondary and higher education cess is permissible in the factual matrix of the appellant, and the demand and penalty on that account are not sustainable. - HELD THAT: - The Tribunal endorsed the detailed reasoning of the Commissioner (Appeals), who relied on several judicial pronouncements holding that utilisation of basic excise duty credit for discharge of education cesses is allowable for DTA units. The Commissioner (Appeals) distinguished other decisions relating to area based exemption schemes and held that those ratios were not apposite. As the Department did not appeal against the Commissioner (Appeals)'s order on this point, that part of the order attained finality. Consequently, the demand and the penalty attributable to the alleged improper utilisation of Cenvat credit for payment of education cesses were set aside.

The demand and penalty confirmed on account of utilisation of Cenvat credit of basic excise duty for payment of education cess and secondary and higher education cess are set aside and the appeals are allowed to that extent.

Final Conclusion: The appeals are allowed. The confirmed demands and penalties are set aside to the extent that (i) transfers of capital goods to the additional premise are treated as captive use and eligible for Notification No. 67/95-CE, and (ii) utilisation of Cenvat credit of basic excise duty for payment of education cesses is held permissible; consequential relief is granted.

Input service - means part of the definition - inclusive part of the definition - exclusion for construction services - Rule 4(7) of the Cenvat Credit Rules, 2004 - cenvat credit for services used in setting up of factory

Input service - means part of the definition - inclusive part of the definition - cenvat credit for services used in setting up of factory - Admissibility of cenvat credit for services availed during setting up of the factory after deletion of the words 'setting up' from the inclusive part of the definition of "input service". - HELD THAT: - The Tribunal held that the definition of "input service" has two parts: the wide "means" part (covering services used directly or indirectly in or in relation to manufacture and clearance) and the illustrative "includes" part. Deletion of the words 'setting up' from the inclusive portion w.e.f. 01.04.2011 does not curtail the scope of the "means" part. Consequently, services which are covered by the "means" part remain eligible for cenvat credit even if they were used in the initial setting up of the plant. However, effective 01.04.2012 a specific exclusion for services forming part of execution of works contracts and construction services was introduced; such excluded services are ineligible. The Tribunal observed that the appellants claim they did not take credit on excluded construction services and directed that the original adjudicating authority re-examine the claims in the light of the foregoing principles and the Tribunal's decision in Reliance Industries Limited, allowing credit where services fall within the "means" part but denying credit where the statutory exclusion applies. [Paras 6, 8, 9]

Deletion of 'setting up' does not bar credit where the service falls within the wide "means" part of the definition; matter remanded to the original adjudicating authority to re-adjudicate admissibility in light of this principle and the construction-services exclusion introduced w.e.f. 01.04.2012.

Rule 4(7) of the Cenvat Credit Rules, 2004 - Validity of denial of cenvat credit on account of alleged delay under Rule 4(7) of the Cenvat Credit Rules. - HELD THAT: - The Tribunal found that the adjudicating authority did not examine the appellant's defence and documentary evidence that the disputed credit was availed within the period prescribed under Rule 4(7) (as reflected in ST-3 returns and books of accounts), and that the order contains no findings on this defence. Given the absence of proper consideration of the appellant's submissions and supporting returns, the Tribunal held that the demand based on Rule 4(7) cannot be sustained without fresh adjudication. Accordingly, the matter is remanded for the original authority to examine the defence and documents and decide afresh. [Paras 7]

Demand premised on Rule 4(7) set aside for want of examination of the appellant's defence and documents; remand for fresh adjudication by the original authority.

Final Conclusion: Impugned order set aside; claims of cenvat credit relating to services used during setting up of the factory to be re-adjudicated by the original authority in light of the Tribunal's view that the "means" part of the definition admits credit even for services used in setting up (subject to the construction-services exclusion introduced w.e.f. 01.04.2012), and denial under Rule 4(7) remanded for fresh consideration of the appellant's documentary defence.

Rectification under section 35C(2) of the Excise Act - mistake apparent on the face of the record - extended period of limitation under section 11A(4) of the Excise Act - suppression of facts - entitlement to CENVAT credit - remand for re-determination of duty demand

Rectification under section 35C(2) of the Excise Act - mistake apparent on the face of the record - Non-consideration of submissions advanced at hearing can be rectified as a mistake apparent from the record under section 35C(2). - HELD THAT: - The Tribunal applied the established test that an error apparent on the face of the record must be manifest, self-evident and not require elaborate discussion. Relying on authority that non-consideration of a binding decision can amount to such an error, the Tribunal held that omission to consider two important submissions advanced at the hearing-(a) that extended limitation under section 11A(4) could not be invoked on the facts, and (b) in the alternative the appellant was entitled to CENVAT credit-constituted a mistake apparent from the record and justified rectification under section 35C(2). The power to amend is exercisable where the mistake is apparent from the record and the Tribunal invoked that power to correct its final order dated 22.04.2022 by addressing the omitted submissions.

Rectification under section 35C(2) permitted; the Tribunal amended its final order to consider and decide the omitted submissions.

Extended period of limitation under section 11A(4) of the Excise Act - suppression of facts - Invocation of the extended five year limitation under section 11A(4) was not sustainable on the facts and was set aside. - HELD THAT: - The Tribunal examined the show cause notice allegations and the appellant's declared ER-III/ER-I returns which expressly recorded availment of the exemption notification. Applying settled Supreme Court precedents, the Tribunal held that the proviso to section 11A(4) (covering fraud, collusion, wilful misstatement or suppression of facts) requires a deliberate omission to disclose correct information with intent to evade duty; mere nondisclosure or ordinary default is insufficient. The record showed the Department was aware of material facts and had sought clarifications and invoices, and departmental rules and instructions place an onus on officers to scrutinise returns. In those circumstances the finding of deliberate suppression and resultant invocation of the extended period could not be sustained, and the demand for the extended period (up to and including November 2016) was set aside.

Extended period under section 11A(4) held inapplicable; duty demand confirmed for the extended period is set aside.

Penalty imposed - extended period of limitation under section 11A(4) of the Excise Act - Penalty confirmed for the extended period cannot be sustained once invocation of the extended period is set aside. - HELD THAT: - Because the Tribunal held that the extended period of limitation was wrongly invoked, the consequential imposition of penalty for that period was also found unsustainable. The Tribunal therefore set aside the penalty insofar as it related to the period covered by the erroneous invocation of the extended limitation.

Penalty for the period covered by the set aside extended demand is quashed.

Entitlement to CENVAT credit - CENVAT Credit Rules, 2004 - The appellant is entitled to avail CENVAT credit of duty paid on inputs, input services and capital goods used in manufacture of final products. - HELD THAT: - Applying settled law that where duty is held payable on the final product the assessee is entitled to credit of duty paid on inputs, input services and capital goods, the Tribunal accepted the appellant's alternative submission and directed that paragraph 23 of its earlier order be modified to grant the appellant CENVAT credit. The decision relied on the principle recognised by the Supreme Court that availment of credit follows when duty liability on the final product is upheld.

Appellant entitled to avail CENVAT credit; Tribunal's order modified to grant such credit.

Remand for re-determination of duty demand - Matter remitted to the Principal Commissioner for re-determination of the duty demand in light of the Tribunal's observations. - HELD THAT: - Having set aside the extended period demand and granted CENVAT credit, the Tribunal confirmed the remaining part of the demand and remitted the case to the Principal Commissioner to re-determine the duty demand consistent with the Tribunal's findings, directions and observations. The remand is for fresh computation and determination applying the conclusions reached by the Tribunal.

Case remitted to the Principal Commissioner to re-determine the duty demand in accordance with the Tribunal's observations.

Final Conclusion: The Tribunal granted rectification under section 35C(2), held that invocation of the extended five year limitation under section 11A(4) was unjustified on the facts and set aside the demand and penalty for that extended period (upto November, 2016), allowed the appellant to avail CENVAT credit, confirmed the remaining demand, and remitted the matter to the Principal Commissioner for re determination of duty in accordance with these findings.

Demand under proviso to Section 11A of the Central Excise Act, 1944 - interest under Section 11AB of the Central Excise Act, 1944 - penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25(1) of the Central Excise Rules, 2002 - appropriation of deposit against duty demand - precedent-based decision and not res integra

Demand under proviso to Section 11A of the Central Excise Act, 1944 - interest under Section 11AB of the Central Excise Act, 1944 - penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25(1) of the Central Excise Rules, 2002 - appropriation of deposit against duty demand - binding precedents - Whether the demand of duty, interest and penalty, and appropriation of deposit in respect of clearances effected from 01.01.2007 to 31.12.2010 could be sustained. - HELD THAT: - The Tribunal found that the core controversy - liability to duty, interest and penalty for clearances effected under the brand in question - was no longer res integra and had been authoritatively considered in earlier decisions cited by the Bench. The Tribunal recorded the earlier authorities relied upon and held that those decisions required the impugned adjudication to be set aside. Applying the precedent-based conclusions of the cited authorities, the Tribunal concluded that the demand, interest and penalty confirmed in the orders below could not be sustained and that the deposit ought not to be appropriated against the demand. Consequently, the Tribunal set aside the impugned order and allowed the appeal, following the line of decisions referred to in the order: Sai Aditya Hotels & Super Markets (P) Ltd. , MEL Systems & Services Ltd. , Otto Bilz (India) Pvt. Ltd. , and Ramani Hotels Ltd. .

Impugned order set aside and the appeal allowed; the confirmed demand, interest and penalty and the appropriation were disallowed following the cited precedents.

Final Conclusion: The Tribunal, applying existing precedents, set aside the orders of adjudication and appeal and allowed the appellant's appeal in respect of clearances made from 01.01.2007 to 31.12.2010.