TaxTMI Updates e-Newsletter
Jan 11,2020

Composite supply - principal supply - naturally bundled and supplied in conjunction with each other in the ordinary course of business - supplies by different taxable persons - distinction between nature of supply and valuation of supply - jurisdiction of Authority for Advance Ruling (AAR) - scope of reference

Composite supply - principal supply - naturally bundled and supplied in conjunction with each other in the ordinary course of business - supplies by different taxable persons - distinction between nature of supply and valuation of supply - The AAR's finding that the transactions constituted a composite supply with the instrument as the principal supply was beyond its remit and legally untenable. - HELD THAT: - The AAR, having been asked to decide whether placement of instruments without consideration constituted a "supply" or "movement of goods otherwise than by way of supply", proceeded to recharacterise the arrangement as a composite supply and to treat reagents and consumables as taxed at the rate of the instrument. The Court held that the concept of enhancement of utility and the valuation consequences cannot be imported into the question whether two independent supplies constitute a composite supply. For a composite supply to exist it must satisfy the statutory definition at the time of supply - namely that multiple taxable supplies are "naturally bundled" and supplied in conjunction with each other and one of them is a principal supply. Where supplies are made by different taxable persons, they are not to be treated as a single composite supply; economic reality or commercial linkage does not permit recharacterising separate legal supplies into a composite supply. On the facts, there was no material to show that the supplies were naturally bundled in the ordinary course of business, and the supplies were effected by different taxable persons; accordingly the AAR's conclusion on composite supply was beyond the terms of reference and legally unsustainable. [Paras 8, 9, 10]

The AAR's finding that the transaction was a composite supply with the instrument as the principal supply was without jurisdiction and legally untenable and is quashed.

Jurisdiction of Authority for Advance Ruling (AAR) - scope of reference - remand for fresh consideration - The appropriate remedy was to remit the matter to the AAR for fresh decision on the specific query originally referred to it. - HELD THAT: - Although the AAR could have inquired, on the basis of the contract, whether the ostensibly free placement of instruments amounted to a supply for valid consideration, its excursion into declaring a composite supply went beyond the question posed. The Court therefore quashed the AAR and Appellate Authority orders and remitted the matter to the AAR to decide afresh the query framed under Section 99 of the GST Act, having regard to the observations in this judgment and after hearing the petitioner. [Paras 7]

Exts.P1 and P2 are quashed and the matter is remitted to the AAR for fresh consideration of the query; the AAR shall pass fresh orders within six weeks after receipt of this judgment.

Final Conclusion: Writ petition allowed; the orders of the AAR and the Appellate Authority are quashed and the matter is remitted to the AAR for fresh decision on the original query, in accordance with the observations of the Court, to be completed within six weeks.

Summary order. Petition disposed of on withdrawal with liberty to agitate the claim by filing a fresh writ petition instead of a public interest litigation.

Detention, seizure and confiscation of goods and conveyance - notice for confiscation and opportunity to reply - application of principles laid down in Synergy Fertichem - verification of transit documents and e-way bill - exercise of writ jurisdiction under Article 226

Notice for confiscation and opportunity to reply - application of principles laid down in Synergy Fertichem - detention, seizure and confiscation of goods and conveyance - Authority directed to decide the notice for confiscation of the goods and vehicle after considering the writ applicant's reply and the principles in Synergy Fertichem; court declined to exercise extraordinary writ jurisdiction on merits. - HELD THAT: - The Court recorded that a notice under the law calling upon the writ applicant to show cause for confiscation has been issued and that the goods and vehicle have been detained since 05.11.2019 (para 6). While the Court declined to adjudicate the alleged breach on merits, it observed that the writ applicant should file a detailed reply to the confiscation notice and may rely on this Court's decision in Synergy Fertichem (para 7). Exercising restraint under Article 226, the Court directed the concerned authority to pass an appropriate order on the notice of confiscation within 15 days from the date of the order, taking into account any reply filed and the principles explained in Synergy Fertichem; in any event the authority was directed to decide the matter on or before 21 January 2020 (paras 8-9). The Court also clarified that if no reply is filed the authority need not await its filing before proceeding (para 10). The Court did not decide the merits and discharged the interim notice (para 10). [Paras 6, 7, 8, 9, 10]

Writ jurisdiction not exercised on merits; authority directed to decide the confiscation notice within the specified timeframe after considering any reply and applying Synergy Fertichem principles.

Final Conclusion: The writ petitions are disposed of by directing the concerned authority to decide the notice for confiscation of the goods and vehicle within the time limits indicated, having regard to the applicant's reply and this Court's decision in Synergy Fertichem; the Court did not adjudicate the merits.

Supply of seized documents - opportunity to inspect and object to evidence - rules of natural justice - right to fair hearing - adjudication under CGST/SGST Act - notice under Section 74 read with Section 122(1) of the Central Goods and Service Tax/State Goods and Service Tax Act

Supply of seized documents - opportunity to inspect and object to evidence - rules of natural justice - right to fair hearing - Petitioners entitled to copies of documents seized from their premises and to an opportunity to submit objections before commencement of adjudication based on those documents. - HELD THAT: - The petitioners had been served with notices proposing demand of tax/penalty based on estimated turnover and contended they were not permitted to take copies of documents seized from their premises nor given an opportunity to comment. Although the petitioners approached the authority belatedly for copies, adjudication pursuant to the notices had not commenced. The Court held that denying copies and an opportunity to object before adjudication would violate the rules of natural justice and the petitioners' right to fair hearing. Accordingly, the 1st respondent was directed to furnish copies of the seized documents relied upon in the notice within the prescribed short timelines, to grant a specified period for the petitioners to prefer objections after supply of copies, and thereafter to proceed to adjudicate after hearing the petitioners. These directions ensure that reliance on seized material in adjudication is tested by affording inspection and a hearing before final decision. [Paras 3]

Supply copies of seized documents to the petitioners, grant time to file objections, and thereafter adjudicate the notice after hearing the petitioners in accordance with rules of natural justice.

Final Conclusion: Writ petitions allowed to the extent that the petitioners must be furnished copies of seized documents relied upon in the notices, given time to object, and thereafter the adjudicating authority shall proceed to adjudicate after hearing them in accordance with the directions and timelines stated by the Court.

Benefit of input tax credit - commensurate reduction in prices - profiteering under Section 171(1) of the CGST Act - calculation of profiteered amount - reversal of input tax credit and its effect on profiteering computation - refund with interest and supervisory recovery under Rule 133 - penalty under Section 171(3A) of the CGST Act

Benefit of input tax credit - profiteering under Section 171(1) of the CGST Act - Whether the Respondent availed additional input tax credit during 01.07.2017 to 31.12.2018 which he was liable to pass on to buyers - HELD THAT: - The Authority accepted the DGAP's analysis that the Respondent had no entitlement to CENVAT/ITC in the pre-GST period and availed ITC post-GST such that ITC as a percentage of turnover rose from 0% (pre-GST) to 2.68% (post-GST). On the basis of the data provided by the Respondent and examined by the DGAP, the Authority held that an additional ITC benefit of 2.68% of turnover accrued to the Respondent for the investigation period and that this additional benefit was required to be passed on to the recipients under Section 171(1). The Authority accepted the DGAP computation of availability of ITC and the resulting requirement to pass on the benefit. [Paras 25]

Additional ITC of 2.68% of turnover accrued to the Respondent for 01.07.2017 to 31.12.2018 and was required to be passed on to buyers.

Calculation of profiteered amount - commensurate reduction in prices - Whether the Respondent contravened Section 171(1) by not passing on the ITC benefit and, if so, the quantum of profiteering - HELD THAT: - Relying on Table-B and Table-C of the DGAP report and on the Respondent's supplied data (which was not successfully challenged), the Authority concluded that the Respondent failed to pass on the additional ITC benefit and thereby contravened Section 171(1). The DGAP's computation of the profiteered amount was accepted as correct. The profiteered amount in respect of supplies during 01.07.2017 to 31.12.2018 was determined to be Rs. 3,32,61,809/- (inclusive of applicable GST), representing the shortfall between amounts charged and recalibrated prices reflecting the ITC benefit. The Authority ordered reduction of prices commensurate with the ITC benefit and refund of the profiteered amount to eligible buyers with interest under Rule 133. [Paras 12, 13, 25, 29]

The Respondent contravened Section 171(1); profiteered amount determined as Rs. 3,32,61,809/- for the period 01.07.2017 to 31.12.2018 and ordered to be refunded with interest and supervisory recovery measures.

Reversal of input tax credit and its effect on profiteering computation - benefit of input tax credit - Whether voluntary reversal of ITC by the Respondent after the investigation period could be adjusted against the computed profiteering - HELD THAT: - The Authority held that what matters for computation of profiteering is the additional availability of ITC in the pre- and post-GST periods, not subsequent actions by the Respondent. The Respondent's post-investigation reversals of ITC (in August 2019) could not be taken into account to alter the DGAP's computation for the period 01.07.2017 to 31.12.2018. The voluntary reversals were effected after the investigation period and, given Rule 42 prescribes reversal on completion/occupancy, the Authority treated the early reversals as not altering the profiteering calculation and as indicating mala fide intent to deny benefit to buyers. [Paras 26, 27]

Post-period reversals of ITC do not affect the profiteering computation for 01.07.2017 to 31.12.2018 and cannot be adjusted against the determined profiteered amount.

Refund with interest and supervisory recovery under Rule 133 - Remedial measures: manner of restitution to recipients and supervisory enforcement - HELD THAT: - Under Rule 133(3)(a) and (b), the Authority directed the Respondent to reduce prices commensurate with the ITC benefit and to refund the determined profiteered amount of Rs. 3,32,61,809/- (inclusive of GST) to the identified buyers as per Annexure-20 of the DGAP report, along with interest at 18% from the date the amount was profiteered until payment. The Authority limited its investigation to 01.07.2017-31.12.2018 and stated that any subsequent unpassed benefits may be pursued afresh by buyers. The order also directed jurisdictional Commissioners to monitor implementation under Rule 136 and provided a three-month period for payment, failing which recovery procedures under the CGST/SGST Acts shall follow under DGAP supervision. [Paras 29]

Respondent ordered to refund Rs. 3,32,61,809/- with interest @18% to eligible buyers within three months; supervisory and recovery directions issued to jurisdictional Commissioners and DGAP.

Penalty under Section 171(3A) of the CGST Act - Whether initiation of penalty proceedings under Section 171(3A) is warranted - HELD THAT: - Finding that the Respondent had denied the benefit of ITC to buyers in contravention of Section 171(1), the Authority concluded that the Respondent had apparently committed an offence under Section 171(3A). Consequently, the Authority directed issuance of a show-cause notice asking the Respondent to explain why the penalty under Section 171(3A), read with Rule 133(3)(d), should not be imposed. The order thus mandates initiation of penalty proceedings rather than imposing a final penalty in this order. [Paras 30]

A notice is to be issued to the Respondent to show cause why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed.

Final Conclusion: The Authority accepted the DGAP's finding that an additional ITC benefit of 2.68% accrued to the Respondent for 01.07.2017-31.12.2018, held that Section 171(1) was contravened, determined the profiteered amount as Rs. 3,32,61,809/- (inclusive of GST), ordered refund with interest and supervisory recovery within three months, and directed issuance of a show cause notice for penalty under Section 171(3A).

Deduction under Section 80P(2) of the Income Tax Act - exclusion from Section 80P by reason of being a co-operative bank - classification as a primary agricultural credit society - Assessing Officer's enquiry into the factual activities of a co-operative society under Section 80P(4) - binding effect of departmental circulars vis-a -vis judicial decisions

Classification as a primary agricultural credit society - Assessing Officer's enquiry into the factual activities of a co-operative society under Section 80P(4) - deduction under Section 80P(2) of the Income Tax Act - Whether the Tribunal was correct in confirming allowance of deduction solely on the basis of earlier Division Bench decision (Chirakkal) without applying the law declared by the Full Bench in Mavilayi. - HELD THAT: - The Full Bench in Mavilayi held that following the Apex Court in Citizen Co-operative Society, entitlement to deduction under Section 80P (post-introduction of sub-section (4)) cannot be determined solely by the class of society as per registration certificate; the Assessing Officer must enquire into the factual activities of the society and decide if the exclusion in sub-section (4) applies. Consequently, the Division Bench decision in Chirakkal (which treated registration/classification as conclusive) is no longer good law. The Tribunal's orders confirming the first appellate authority merely on the basis of Chirakkal are therefore legally erroneous in light of Mavilayi, since they failed to apply the requirement of factual enquiry prescribed by the Full Bench. [Paras 6, 7, 8]

The Tribunal's reliance solely on Chirakkal is erroneous in law because Mavilayi requires factual enquiry by the Assessing Officer; however the Court cannot set aside the Tribunal's decision in these appeals since the revenue did not challenge it.

Binding effect of departmental circulars vis-a -vis judicial decisions - deduction under Section 80P(2) of the Income Tax Act - Whether Circular No.133/6 of 2007 issued by the Central Board of Direct Taxes can be relied upon to determine the meaning of 'co-operative bank' for the purposes of Section 80P(4) and displace the High Court's interpretation. - HELD THAT: - Clarificatory circulars issued by departmental authorities are binding on departmental officers but do not bind the Court. Where the High Court or Supreme Court has declared the law, a contrary departmental circular cannot supplant the judicial interpretation. The Court reiterated established precedent that circulars represent the Executive's understanding and cannot override a judicial pronouncement; similarly, a Tribunal or appellate authority is not obliged to follow a circular where judicial decisions on the question exist. Therefore the appellants cannot rely upon the circular to contend for an interpretation contrary to the law declared by the High Court. [Paras 9, 10, 11, 12, 13]

Circular No.133/6 of 2007 does not bind the Court or override the judicial interpretation; it cannot be used to obtain an interpretation contrary to the High Court's decision.

Deduction under Section 80P(2) of the Income Tax Act - Whether the appeals filed by the assessees raise a substantial question of law warranting interference with the Tribunal's orders in their favour. - HELD THAT: - Although the Court finds error in the Tribunal's legal reasoning (for relying on Chirakkal), the appeals are filed by the assessees who are challenging orders that were in their favour; the revenue did not file an appeal or cross-objection. No substantial question of law arises for determination in these appeals instituted by the assessees against favourable orders of the Tribunal. [Paras 14]

No substantial question of law arises; the appeals are misconceived and are dismissed.

Final Conclusion: The Full Bench decision in Mavilayi requires an Assessing Officer to enquire into the factual activities of a society before granting deduction under Section 80P; departmental circulars cannot override judicial decisions; however, since the revenue did not challenge the Tribunal's orders (which were in the assessees' favour), the assessees' appeals are dismissed.

Whether payment for uplinking, bandwidth, air time and carriage charges amounts to fees for technical services - scope of work including broadcasting and telecasting under the definition of work - distinction between a service and a facility for TDS purposes - application of tax deduction at source under Section 194C versus Section 194J - penalty for failure to deduct or pay tax at source

Whether payment for uplinking, bandwidth, air time and carriage charges amounts to fees for technical services - scope of work including broadcasting and telecasting under the definition of work - distinction between a service and a facility for TDS purposes - application of tax deduction at source under Section 194C versus Section 194J - Payments made to uplinking, bandwidth, air time and channel carriage providers fall under the definition of 'work' (broadcasting and telecasting) and are taxable under Section 194C and not as 'fees for technical services' under Section 194J. - HELD THAT: - The Court held that 'fees for technical services' contemplates rendering of managerial, technical or consultancy services which predominantly involve a personal or customized element, as understood by Explanation 2 to Section 9(1)(vii) and judicial authorities. Mere provision of a standardized platform or facility (uplinking, bandwidth, carriage) available to any user for a fee does not constitute rendering of technical services. Reliance was placed on precedents that distinguish between exclusive/customized services (which attract Section 194J) and facilities or standard broadcasting/telecasting arrangements (which fall within the inclusive definition of 'work' under Section 194C, Explanation (iv)). Applying these principles to the material facts, the deductees merely permitted the assessee to use electronic set ups against payment and did not render technical or managerial consultancy services; hence the payments are for 'work' (broadcasting/telecasting) and attract Section 194C rather than Section 194J. [Paras 14, 15, 17, 18, 19]

Section 194C applies; the assessee correctly deducted TDS under Section 194C and Section 194J is not attracted.

Penalty for failure to deduct or pay tax at source - consequence where deductee has paid tax after credit for TDS - Imposition of penalty on the assessee for short deduction was not sustainable where tax records of the deductees were produced and tax due was ultimately paid after credit for the TDS deducted. - HELD THAT: - The Court noted that the deductee companies' tax records and PANs were produced and that the deductees paid the balance tax after allowing credit for the TDS effected by the assessee. In these circumstances, and having regard to the principle reflected in the cited circular and Supreme Court authority that enforcement under Section 201(1) should not be pressed where the deductee has paid taxes after being satisfied by the tax deductor's production of relevant records, the penalty levied by the Assessing Officer under the relevant provisions could not be sustained. [Paras 7, 20]

Penalty imposed on the assessee is not defensible and is set aside.

Final Conclusion: The High Court dismissed the Revenue's appeal, affirming that payments for uplinking, bandwidth, air time and carriage charges are payments for 'work' within Section 194C (A.Y. 2010-11) and not 'fees for technical services' under Section 194J, and held that penalties imposed on the assessee for short deduction are not sustainable.

Excess of jurisdiction by Assessing Officer beyond Tribunal's remit - Scope of remand by Appellate Tribunal - Prohibition on Tribunal enhancing assessment when remitting - Applicability of presumptive scheme where audit report filed - Writ jurisdiction despite availability of alternative statutory remedy

Writ jurisdiction despite availability of alternative statutory remedy - Whether the High Court should entertain the writ petition despite the availability of an alternative remedy of appeal to the CIT (Appeals). - HELD THAT: - The Court recognised the general rule that writ jurisdiction is a discretionary, self imposed restraint where an efficacious statutory remedy exists, and surveyed binding precedents establishing that ordinarily statutory forums must be availed. However, the Court held that the rule yields when the impugned order is, on its face, unsustainable in law. Applying that principle to the facts, the Court found a basic infirmity in the impugned assessment order which justified invocation of Article 226 and declined to reject the petition on the ground of alternative remedy. The Court therefore exercised discretion to entertain the petition and proceeded to decide the merits. [Paras 12, 13, 14]

Writ petition entertained despite availability of alternate statutory remedy because the impugned order was prima facie unsustainable in law.

Excess of jurisdiction by Assessing Officer beyond Tribunal's remit - Scope of remand by Appellate Tribunal - Prohibition on Tribunal enhancing assessment when remitting - Applicability of presumptive scheme where audit report filed - Whether the assessment order passed by the Assessing Officer after remand was sustainable, having regard to the specific direction of the Appellate Tribunal to examine only the claim of a lower rate of profit. - HELD THAT: - The Tribunal had expressly held that Section 44AD was not applicable because the return was accompanied by an audit report under Section 44AB, and remitted the matter to the Assessing Officer to verify and decide the assessee's claim of a lower rate of profit after giving a fair opportunity. The Court found that the Assessing Officer went beyond that limited remit and, by making extensive additions and creating a new liability contrary to the Tribunal's directions, acted in excess of jurisdiction. Reliance was placed on the principle that a tribunal remitting a matter does not empower the assessing authority to alter the appellate direction or enhance assessment contrary to the scope of remand; in that factual matrix the impugned order was held unsustainable. [Paras 15, 16, 17, 18, 19]

Impugned assessment order quashed as not sustainable in law because the Assessing Officer exceeded the scope of the Tribunal's remand and created new liability contrary to the Tribunal's directions.

Scope of remand by Appellate Tribunal - Excess of jurisdiction by Assessing Officer beyond Tribunal's remit - What remedial course should follow the Court's finding that the Assessing Officer exceeded the Tribunal's direction? - HELD THAT: - The Court accepted the Tribunal's limited directive and held that the appropriate remedy was to quash the impugned order and remit the matter to the Assessing Officer for fresh consideration strictly in accordance with the Tribunal's direction. The Assessing Officer was instructed to reconsider only the claim of the assessee for a lower rate of profit (and not to apply the presumptive 8% rate), to verify the claim on the basis of books and to decide afresh after giving a reasonable and fair opportunity of hearing. [Paras 10, 15, 20]

Matter remitted to the Assessing Officer for fresh consideration limited to the assessee's claim of a lower rate of profit in accordance with the Appellate Tribunal's directions; impugned order quashed and set aside.

Final Conclusion: Writ petition allowed: the assessment order dated 27.12.2018 is quashed and set aside; the matter is remitted to the Assessing Officer to reconsider only the claim of the assessee for a lower rate of profit in accordance with the Appellate Tribunal's directions, after giving a reasonable opportunity of hearing.

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness of shareholders - onus on the assessee to prove identity and source - duty of Assessing Officer to make further enquiries / invoke section 131 - accommodation entries / sham transactions - ratio in Lovely Exports and subsequent High Court/Tribunal precedents

Unexplained cash credit under section 68 - identity, genuineness and creditworthiness of shareholders - onus on the assessee to prove identity and source - duty of Assessing Officer to make further enquiries / invoke section 131 - accommodation entries / sham transactions - Validity of addition treating share capital and share premium of the assessee as unexplained cash credits under section 68 for AY 2012-13. - HELD THAT: - The Tribunal examined the material placed on record and the assessment proceedings and found that the assessee had furnished extensive documentary evidence proving the identity, creditworthiness and genuineness of the twenty-two investors, including audited accounts, income-tax return acknowledgements, bank statements, PAN details and confirmations. The assessment file showed that section 131 summons had been issued and that replies were placed on record; there was no contemporaneous notation requiring further documentary production or personal appearance. Applying the established line of authorities (including the ratio in Lovely Exports and subsequent High Court and Tribunal decisions), the Tribunal held that once the assessee discharges the primary onus by producing prima facie credible material, the Assessing Officer must conduct meaningful enquiries before rejecting that material and invoking section 68. Mere suspicion, conjecture or reliance on investigation reports without further probing or without establishing that the investors were bogus is insufficient to sustain an addition. The Tribunal found the Calcutta High Court decision relied upon by Revenue distinguishable on facts and noted co-ordinate Tribunal decisions where similar additions were deleted when the assessee had placed on record adequate evidence and the AO had not carried the inquiry to a logical conclusion. Applying these principles to the facts, the addition was not sustainable. [Paras 4, 5, 6]

The addition of share capital/premium treated as unexplained cash credit is deleted and the appeal is allowed.

Final Conclusion: The Tribunal deleted the addition under section 68 in respect of share capital/premium for AY 2012-13, holding that the assessee had discharged its onus in proving identity, genuineness and creditworthiness of the investors and that the AO did not make the necessary enquiries to justify the addition.

Accommodation entries - genuineness of shares - denial of exemption under section 10(38) - delisting by stock exchange - concurrent findings of fact - follow precedent of higher court

Genuineness of shares - accommodation entries - denial of exemption under section 10(38) - delisting by stock exchange - Long term capital gains claimed on sale of shares of M/s Kappac Pharma Ltd. were not genuine and exemption under section 10(38) could not be claimed. - HELD THAT: - The Tribunal examined documentary material and contemporaneous adjudications and found that M/s Kappac Pharma Ltd. had been delisted by the stock exchange and its transactions were suspicious. Following the reasoning in the ITAT decision in Udit Kalra (ITA No. 6717/Del/2017) and the subsequent order of the Hon'ble Delhi High Court upholding that decision, the Tribunal accepted that the shares represented accommodation entries and were not genuine. Where a company is declared bogus and the entries are found to be accommodation, beneficiaries of such entries are not entitled to claim the exemption available under section 10(38). The assessee produced no contrary judicial precedent or material to distinguish the cited authorities; in these circumstances the Tribunal was bound to follow the higher court's ruling and the concurrent findings of fact rendered by the authorities below.

The addition of long term capital gains arising from sale of Kappac Pharma shares is sustained and the claim to exemption under section 10(38) is rejected.

Concurrent findings of fact - follow precedent of higher court - Appeals against the orders of the Commissioner (Appeals) were dismissed, thereby upholding the additions, interest and penalty consequences flowing from the rejection of the long term capital gains claim. - HELD THAT: - Given the Tribunal's acceptance of the factual conclusion that the transactions involved accommodation entries in a delisted and suspicious company, the consequential reliefs sought by the assessee (deletion of additions, cancellation of interest and quashing of penalty proceedings) could not be sustained. The Tribunal declined to disturb the concurrent factual findings of the AO, CIT(A) and the co ordinate ITAT decision which was affirmed by the Hon'ble High Court. No distinguishing material or contrary judicial order was produced to persuade the Tribunal to depart from that settled position; accordingly the appeals were dismissed in their entirety.

The Tribunal dismisses the appeals and upholds the assessments, including interest and penalty consequences, in line with the precedent followed.

Final Conclusion: Following the ITAT and the Hon'ble Delhi High Court decisions holding M/s Kappac Pharma Ltd. to be delisted and its transactions to be accommodation entries, the Tribunal dismissed the assessee's appeals for AY 2014-15 and upheld the disallowance of the claimed long term capital gains and the attendant interest and penalty consequences.

Applicability of CBDT Instruction No.17 of 2019 (tax-effect threshold for filing appeals) - recall and restoration of tribunal order on account of apparent error - section 153C assessments and requirement of incriminating material for additions - deeming provision under section 50C for valuation of transfer - definition of "capital asset" and agricultural land under section 2(14)(iii) - admission of additional evidence under Rule 46A

Applicability of CBDT Instruction No.17 of 2019 (tax-effect threshold for filing appeals) - recall and restoration of tribunal order on account of apparent error - Whether the Revenue's appeal IT(SS)A.No.133/Ahd/2018 is liable to be dismissed for want of requisite tax effect and whether the Tribunal's earlier dismissal of IT(SS)A.No.132/Ahd/2018 was an apparent error warranting recall and restoration. - HELD THAT: - The Tribunal considered the CBDT Instruction No.17 of 2019 directing non-filing of appeals where the tax effect is below Rs.50 lakhs and applied it to IT(SS)A.No.133/Ahd/2018, noting that the tax effect in that appeal was below the threshold and the Department accepted applicability. The Tribunal dismissed IT(SS)A.No.133/Ahd/2018 accordingly, while observing that if on re-verification the tax effect is shown to exceed the threshold or an exception in the Circular applies, the Department may apply for recall within the time prescribed. Separately, the Tribunal found that IT(SS)A.No.132/Ahd/2018 had been erroneously treated as having low tax effect in the earlier order due to a typographical/cause-title error; that appeal in fact involved tax effect above the monetary limit and therefore the earlier dismissal was an apparent error which warranted recall and restoration of the appeal and cross-objection for fresh adjudication on merits. [Paras 2, 3, 6, 7, 8]

IT(SS)A.No.133/Ahd/2018 dismissed for low tax effect under CBDT Instruction No.17 of 2019; the Tribunal's order dated 3.10.2019 disposing IT(SS)A.No.132/Ahd/2018 was recalled and IT(SS)A.No.132/Ahd/2018 along with CO No.111/Ahd/2019 restored for fresh adjudication.

Section 153C assessments and requirement of incriminating material for additions - Whether the addition of alleged brokerage/commission of Rs.10 lakhs made in assessment framed under section 153C was sustainable. - HELD THAT: - The AO made the addition based on information received during assessment proceedings; the assessee explained that the commission receipt was recorded in its books and offered to tax, supported by bank statements filed during assessment. The Tribunal (following the CIT(A)) held that in proceedings under section 153C no addition can be made in the absence of incriminating material and that the AO did not possess material evidence to justify the addition. The appellate authorities found the assessee's explanation verifiable and the AO's addition unsupported by evidence. [Paras 11, 12, 13]

Addition of Rs.10 lakhs on account of alleged brokerage/commission confirmed as not sustainable; deletion upheld.

Deeming provision under section 50C for valuation of transfer - definition of "capital asset" and agricultural land under section 2(14)(iii) - admission of additional evidence under Rule 46A - Whether the addition made by invoking section 50C (deemed sale consideration) in relation to sale of land is sustainable where the land is contended to be agricultural land not being a capital asset under section 2(14)(iii), and whether admission of the CBDT notification as additional evidence under Rule 46A was permissible. - HELD THAT: - The AO invoked section 50C relying on seized documents to compute a higher deemed sale consideration and assessed long-term capital gain. The assessee contended the land was agricultural and situated beyond the distances which would exclude it from the definition of capital asset under section 2(14)(iii). The CIT(A) accepted the assessee's contentions after considering facts, the CBDT notification delineating boundary limits and other supporting evidence; the CIT(A) also admitted the notification under Rule 46A(4). The Tribunal agreed that if the land is beyond the prescribed limits (as per the notified boundary) it does not qualify as a capital asset and transfer is not chargeable to capital gains; further, admission of the notification as additional evidence for determining geographical situation was permissible under Rule 46A. [Paras 14, 15, 16, 17]

Invocation of section 50C and addition of capital gain was not tenable; CIT(A)'s admission of the notification under Rule 46A and deletion of the addition was upheld and the Revenue's appeal dismissed on this ground.

Final Conclusion: The Tribunal dismissed the Revenue appeal IT(SS)A.No.133/Ahd/2018 for lack of requisite tax effect under CBDT Instruction No.17 of 2019 and recalled and restored IT(SS)A.No.132/Ahd/2018 for fresh adjudication; on merits in IT(SS)A.No.132/Ahd/2018 the Tribunal upheld the deletion of the alleged brokerage addition and affirmed the deletion of the section 50C based capital-gain addition (accepting that the land was not a capital asset and that admission of the CBDT notification under Rule 46A was permissible), resulting in dismissal of the Revenue's appeals and cross-objections accordingly.

Penalty under section 271(1)(c) - Explanation 5A-deemed concealment on post-search disclosures - Revised return filed in response to notice under section 153A treated as return under section 139 - Acceptance of revised return and assessed income same as returned income-no scope for penalty - Ambiguity between concealment of particulars and furnishing inaccurate particulars

Penalty under section 271(1)(c) - Explanation 5A-deemed concealment on post-search disclosures - Penalties under section 271(1)(c) imposed for A.Y.2010-2011 and A.Y.2011-2012 were upheld. - HELD THAT: - The Tribunal affirmed that in consequence of a search the assessee filed returns under section 153A disclosing additional income that had not been declared in the original returns filed under section 139(1). The Assessing Officer and the CIT(A) found that all conditions of Explanation 5A to section 271(1)(c) were satisfied, rendering the deeming provision applicable to treat the post search disclosure as concealment of particulars of income. The assessee failed to produce cogent material to controvert the finding of concealed particulars. In view of these conclusions the Tribunal found no reason to interfere with the orders confirming penalty for the two assessment years. [Paras 8]

Appeals for A.Y.2010-2011 and A.Y.2011-2012 dismissed; penalties under section 271(1)(c) upheld.

Penalty under section 271(1)(c) - Ambiguity between concealment of particulars and furnishing inaccurate particulars - Revised return filed in response to notice under section 153A treated as return under section 139 - Acceptance of revised return and assessed income same as returned income-no scope for penalty - Penalties under section 271(1)(c) for A.Y.2012-2013 to A.Y.2015-2016 were quashed and directed to be deleted. - HELD THAT: - The Tribunal held that the Assessing Officer's proceedings and final penalty order were vitiated by ambiguity: the AO used both limbs of section 271(1)(c) interchangeably (concealment and furnishing inaccurate particulars) without recording a clear, positive finding on which specific limb applied. Such ambivalence is fatal to the penalty order, in the view of authority relied upon by the Tribunal. Further, the revised returns filed in response to the notice under section 153A were accepted and the assessments were completed on the basis of those returns, resulting in assessed income being the same as returned income. Following the principle that a return filed pursuant to section 153A takes the place of the original return and that where the revised return is accepted and assessment made accordingly there is no scope for levy of penalty under section 271(1)(c), the Tribunal set aside and directed deletion of the penalties for the four assessment years. [Paras 18, 19, 20]

Appeals for A.Y.2012-2013 to A.Y.2015-2016 allowed; penalties under section 271(1)(c) deleted.

Final Conclusion: The Tribunal dismissed the appeals for A.Y.2010-2011 and A.Y.2011-2012, upholding penalties under section 271(1)(c) on the ground that post-search disclosures met the conditions of Explanation 5A; and allowed the appeals for A.Y.2012-2013 to A.Y.2015-2016, quashing the penalties because the AO failed to make a clear finding whether penalty was for concealment or for furnishing inaccurate particulars and because the revised returns filed under section 153A were accepted and assessed accordingly, leaving no scope for penalty.

Unexplained cash credit - section 68 - burden to prove identity, genuineness and creditworthiness of creditor - creditworthiness of lender - penalty under section 271(1)(c) - requirement of precise show-cause notice under section 274 - defective notice vitiates penalty

Unexplained cash credit - section 68 - burden to prove identity, genuineness and creditworthiness of creditor - creditworthiness of lender - Addition of Rs. 8,00,000 under the head of unexplained cash credit sustained. - HELD THAT: - The assessee relied on the bank statement of the creditor and argued the payment was by cheque and that the creditor was a director who filed income-tax returns. The Tribunal examined the creditor's income-tax return for the relevant year which showed a low gross income and negligible surplus after deductions and household expenditure. There was no evidence of interest payments on the loan nor proof that the creditor advanced the amount from savings or other legitimate sources. The Assessing Officer noted that a large cash deposit in the creditor's account on the same day was followed by issuance of the cheque to the assessee and that the creditor's account did not otherwise show means to advance the loan. On this material the Tribunal held that the assessee failed to substantiate the creditor's creditworthiness and the AO was justified in making the addition under section 68; the CIT(A) was correct in confirming the addition. [Paras 9]

Addition of Rs. 8,00,000 under section 68 upheld and appeal dismissed.

Penalty under section 271(1)(c) - requirement of precise show-cause notice under section 274 - defective notice vitiates penalty - Penalty under section 271(1)(c) deleted on account of a defective show-cause notice under section 274. - HELD THAT: - The notice issued under section 274 read with section 271 did not have inappropriate words struck off and failed to indicate under which limb of section 271 the penalty proceedings were initiated; the last line referred only to section 271 generally and not to section 271(1)(c). The Tribunal applied the principle that a show-cause notice must specify the charge so the assessee can defend the same and, in view of the defective notice, held the penalty unsustainable. Reliance was placed on the settled law that a notice not specifying the precise limb of section 271 renders the penalty proceedings invalid. [Paras 13]

Penalty under section 271(1)(c) set aside and directed to be cancelled.

Final Conclusion: For Assessment Year 2011-12 the Tribunal upheld the addition of Rs. 8,00,000 as unexplained cash credit under section 68 but allowed the appeal against penalty by setting aside the penalty under section 271(1)(c) due to a defective notice issued under section 274.

Requirement of clear notice specifying the limb under section 271(1)(c) - Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Notice under section 274 - application of mind by Assessing Officer - Non-application of mind vitiates penalty proceedings - Precedent reliance - SSA's Emerald Meadows and Manjunatha Cotton & Ginning Factory

Requirement of clear notice specifying the limb under section 271(1)(c) - Notice under section 274 - application of mind by Assessing Officer - Non-application of mind vitiates penalty proceedings - Validity of penalty under section 271(1)(c) where the notice issued under section 274 did not specify whether penalty was being initiated for concealment of particulars of income or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal found that the notice under section 274 read with section 271(1)(c) was issued in a stereotyped proforma without indicating which limb of section 271(1)(c) was invoked. Such failure to strike out irrelevant clauses or otherwise specify the basis of penalty demonstrates non-application of mind by the Assessing Officer and renders the notice invalid. The Tribunal followed the ratio in Manjunatha Cotton & Ginning Factory and the decision in SSA's Emerald Meadows where it was held that a penal notice must clearly indicate the limb relied upon; issuance of a standard proforma notice without such specification indicates absence of conscious satisfaction and vitiates penalty proceedings. Applying those authorities to the facts, the Tribunal concluded that the penalty could not be sustained as the initiating notice was bad in law. [Paras 8, 9, 10, 11]

Penalty orders under section 271(1)(c) set aside for all assessment years as the section 274 notice was invalid for non-application of mind.

Final Conclusion: Following the precedent that a section 274 notice must specify which limb of section 271(1)(c) is invoked, the Tribunal held the penalty proceedings vitiated by non-application of mind and cancelled the penalty orders for AYs 2010-2011, 2011-2012, 2012-2013, 2013-2014 and 2015-2016; all appeals allowed.

Reassessment under Section 147/148 - formation of reason to believe on concealment/escapement of income - assessment of unexplained cash deposits - onus to prove source and creditworthiness of donors in gifts - examination of 'source of the sources'

Reassessment under Section 147/148 - formation of reason to believe on concealment/escapement of income - Validity of reopening assessment by issuance of notice under Section 148. - HELD THAT: - In the absence of an original return filed under Section 139(1) and in view of substantial cash deposits in the assessee's bank account (Rs. 13,57,500/-), the Assessing Officer was justified in forming the opinion that income had escaped assessment and in issuing notice under Section 148. Mere information of cash deposits of this magnitude, coupled with absence of a prior return, constituted sufficient material to initiate reassessment proceedings. The assessee's legal challenge to the reopening was therefore dismissed. [Paras 8]

Grounds 1 and 2 challenging validity of notice u/s 148 are dismissed; reassessment held valid.

Assessment of unexplained cash deposits - onus to prove source and creditworthiness of donors in gifts - examination of 'source of the sources' - Adjudication of additions in respect of cash deposits - acceptance/rejection of claimed agricultural income, personal/family savings and gifts from relatives. - HELD THAT: - The Tribunal examined the documentary evidence and the conclusions reached by the AO and the CIT(A). On agricultural income and personal/family savings totalling Rs. 4.5 lakhs, the Tribunal found the assessee held agricultural land and produced 7/12 extracts and withdrawal evidence; on an ad hoc basis and in the interest of justice, explanation was accepted to the extent of Rs. 2.5 lakhs and the Assessing Officer was directed to restrict the addition on this account to Rs. 2 lakhs. As to gifts aggregating Rs. 9.25 lakhs, the Tribunal upheld the appellate authority's adverse findings on credibility and documentary support for gifts from father in law, mother and brothers; the CIT(A)'s view that the claimed gift from the husband was not credible was also sustained. The assessee failed to discharge the onus to establish the creditworthiness of donors or to specify further evidence which could be produced, and no remand for further inquiry was warranted. Consequently the additions as enhanced by the CIT(A) were affirmed in material part, with partial allowance on agricultural/personal savings. [Paras 15, 16, 17]

Ground 3 is partly allowed (acceptance of Rs. 2.5 lakhs of agricultural/personal savings with direction to restrict addition to Rs. 2 lakhs); additions relating to gifts upheld as confirmed by CIT(A); ground 4 dismissed. Appeal partly allowed.

Final Conclusion: Reopening under Section 148 was held valid for AY 2011-12; on merits the Tribunal restricted additions in part by accepting a portion of the agricultural/personal savings explanation but upheld the disallowance of gifts for lack of credible documentary evidence and donor creditworthiness, resulting in the appeal being partly allowed.

Disallowance of the commission paid to non-resident foreign agents - under invoicing - Non disclosure of Commission to the agent paid at the time of import - DRI found that customs duty was paid on such net amount remitted to the Assessee; the FOB value disclosed, on which customs duty was paid, did not include the commission paid to the foreign agents - HC [2019 (7) TMI 416 - BOMBAY HIGH COURT] allowed assessee appeal

HELD THAT:- Special leave petition is dismissed on the ground of low tax effect.

Addition u/s 68 - Difference of opening cash and debtor balances - Rejection of books of accounts u/s 145(3) - Addition of agriculture income as income from other sources- Considering the interest income as income from other sources - Disallowance of deduction u/s 80C

High Court upheld the Tribunal's order [2018 (7) TMI 2085 - RAJASTHAN HIGH COURT] - audited books and supporting evidence admitted at the appellate stage were accepted in substance, the rejection of books u/s 145(3) was not sustained, and limited aspects (opening balances, purported agricultural income, potential double taxation of an interest receipt, and section 80C claims) were remanded to the AO for verification; the departmental appeal is dismissed - HELD THAT:- Petitioner seeks permission to withdraw this special leave petition along with pending applications therein due to low tax effect.Permission granted, subject to just exceptions.

The special leave petition and pending applications are dismissed as withdrawn, leaving question(s) of law open.

Penalty u/s 271(1)(c) - Concealment and furnishing of inaccurate particulars - Interpretation of Section 80IA(4)(iv) - Allowability of voluntary retirement scheme payments as business expenditure - Two reasonable interpretations / bona fide controversy - Effect of subsequent statutory amendment (Section 35DDA) on earlier conduct

The fact that Parliament subsequently introduced Section 35DDA by Finance Act, 2001 (w.e.f. 01.04.2001) to address the position did not render the assessee's earlier position culpable; where a bona fide legal controversy exists, penalty u/s 271(1)(c) is not warranted. For these reasons the Tribunal was justified in setting aside the penalty by HC [2018 (10) TMI 1602 - MADRAS HIGH COURT]

- HELD THAT:- SLP dismissed.

Disallowance in assessment u/s 158BC - Appreciation of evidence - disallowance of expenditure in assessment under Section 158BC - sworn statements as corroborative evidence - relevance of seized material to determination of undisclosed income - scope of reassessment under special assessment provisions -

High Court [2019 (4) TMI 1807 - BOMBAY HIGH COURT] recorded that the matter involved factual appreciation of the evidence and materials on record, and that the Tribunal had minutely examined each disallowance and concluded they were unjustified. Given that the dispute turned on appraisal of evidence rather than a question of law, the Tribunal's factual conclusions were not disturbed - HELD THAT:- SLP dismissed.

Power under Section 263 to call for and examine record and revise an order which is erroneous and prejudicial to the interest of the Revenue - availability of revisional jurisdiction where the impugned order has been quashed and ceased to exist - time bar under Section 263 - two years from the end of the financial year in which the order sought to be revised was passed - finality of appellate order accepted by the department

Availability of revisional jurisdiction where the impugned order has been quashed and ceased to exist - finality of appellate order accepted by the department - Whether the Principal Commissioner could exercise power under Section 263 in respect of a reassessment order which had been quashed by the CIT(A) and whose quashing had been accepted by the department - HELD THAT: - The Court accepted the Appellate Tribunal's finding that Section 263 contemplates revision of an existing order which is erroneous and prejudicial to the revenue. Where the reassessment order which the Commissioner purported to examine had already been quashed by the CIT(A) and that order of quashing was accepted by the department, the reassessment order no longer existed for the Commissioner to treat as an erroneous order causing prejudice to revenue. Consequently, there was no scope for the Commissioner to exercise revisional jurisdiction under Section 263 in March 2017 against an order that had been extinguished earlier. The High Court found no infirmity in the Tribunal's conclusion quashing the Commissioner's action on this basis. [Paras 4, 5, 6]

The revisional jurisdiction under Section 263 could not be exercised in respect of the quashed reassessment order which had been accepted as quashed by the department; the Tribunal's quashing of the Commissioner's action is sustainable.

Time bar under Section 263 - two years from the end of the financial year in which the order sought to be revised was passed - Whether the Commissioner's action in March 2017 was time barred under Section 263 in respect of the assessment order passed on 15.10.2011 - HELD THAT: - The Court noted the statutory limitation in subsection (2) of Section 263 that no order should be made after expiry of two years from the end of the financial year in which the order sought to be revised was passed. The assessment order in question was passed on 15.10.2011; two years from the end of that financial year expired on 31.3.2014. Action in March 2017 therefore came after the statutory period and could not be validly taken under Section 263. The High Court agreed with the Tribunal that the Commissioner's action in 2017 was not sustainable in law on this ground. [Paras 3, 6]

The Commissioner's action in March 2017 was time barred under the two year limitation of Section 263 as measured from the end of the financial year in which the assessment order was passed.

Final Conclusion: No substantial question of law is made out; the High Court upheld the Tribunal's conclusion that the Commissioner could not exercise revisional jurisdiction under Section 263 once the reassessment order had been quashed and accepted as quashed, and that action in March 2017 was time barred; the appeal is dismissed.

Interim relief - writ of mandamus - customs assessment and clearance in accordance with the Customs Act, 1962 - treatment of used aircraft tyres for agricultural use - parity of judicial orders / precedential treatment - survey and verification of reusability - conditional release subject to undertaking

Interim relief - customs assessment and clearance in accordance with the Customs Act, 1962 - parity of judicial orders / precedential treatment - survey and verification of reusability - conditional release subject to undertaking - Interim permission to assess and clear the imported used aircraft tyres under the specified Bills of Entry subject to conditions. - HELD THAT: - The Court granted interim relief because identical legal questions and substantially similar facts had been the subject of earlier interim orders placed on record; the respondents did not distinguish the present case from those precedents. In view of that parity, the petition was treated like the earlier matters and an interim order was directed permitting clearance of the goods in accordance with the Customs Act, 1962. The permission was made conditional to address regulatory and safety concerns: a Customs-deputed surveyor must verify whether tyres are reusable with or without retreading; the petitioner is prohibited from clearing tyres found to be non-reusable; and the petitioner must file an undertaking (with a copy to the opposite side) that the goods will be sold and used only in permissible manner, such undertaking to remain on file. The Court ordered issuance of rule and directed that the petition be heard along with Special Civil Application No.8492 of 2015.

Interim order permitting assessment and clearance of the imported tyres under the specified Bills of Entry in accordance with the Customs Act, 1962, subject to survey verification, non-clearance of non-reusable tyres, and filing of an undertaking; rule issued and matter to be heard with SCA No.8492 of 2015.

Final Conclusion: Interim relief granted: respondents directed to permit clearance of the petitioner's imported used aircraft tyres under the named Bills of Entry in accordance with the Customs Act, 1962, subject to survey verification of reusability, prohibition on clearing non-reusable tyres, and filing of an undertaking; rule issued and matter listed with SCA No.8492 of 2015.

Condonation of delay - sufficient cause - perversity of judicial discretion - reasoned application for condonation - res-integra

Condonation of delay - sufficient cause - perversity of judicial discretion - Whether the Tribunal's refusal to condone a delay of 452 days in filing the appeal by the Revenue was perverse and liable to be interfered with. - HELD THAT: - The Tribunal reproduced the reasons advanced by the Revenue for the delay-general assertions of heavy workload, annual transfers and inflow of new officers, inadvertent oversight and corrective steps taken thereafter-but noted absence of particulars identifying the officer responsible, specific urgent work that prevented filing, or any concrete correspondence demonstrating attributable inaction. Applying the principle in Chief Post Master General, the Tribunal declined to condone delay where only generalized explanations are furnished and the appellant is the Government is not entitled to mechanical indulgence. Given the lack of particulars and that the impugned order itself recorded these generalized averments, the High Court concluded that the Tribunal's exercise of discretion in refusing condonation was not perverse. Observations of the Tribunal on the merits (that the issue was no longer res-integra) were superfluous to its dismissal for delay and do not constitute a decision on merits warranting separate consideration. Decisions relied upon by Revenue from the Gujarat High Court were inapposite on their facts and did not demonstrate perversity in the Tribunal's approach here. [Paras 7, 8, 10]

The Tribunal's refusal to condone the 452-day delay was not perverse and the appeal is dismissed for non-condonation of delay.

Final Conclusion: The appeal is dismissed; the Tribunal's rejection of the application for condonation of delay of 452 days is upheld as not perverse, and no substantial question of law arises for further adjudication.

Time limit for issuance of show cause notice under Section 110(2) of the Customs Act, 1962 - detention and seizure of goods - seizure memo - provisional release of goods subject to furnishing of bond - bond equivalent to Freight on Board (FOB) value - over-valuation and determination of correct market value

Time limit for issuance of show cause notice under Section 110(2) of the Customs Act, 1962 - seizure memo - detention and seizure of goods - Maintainability of writ petition prior to expiry of six month period for issuance of show cause notice under Section 110(2) of the Customs Act, 1962. - HELD THAT: - The Court recorded that the goods were detained and a seizure memo dated 16th August, 2019 was issued. Under Section 110(2) of the Customs Act, 1962, the respondents have a six month period within which to issue a show cause notice; that period had not expired at the time of hearing. Given that the statutory window for issuing the show cause notice remained open, the petition seeking relief against detention/seizure was premature. The Court treated the pendency of the statutory period as decisive on maintainability and declined to entertain the writ petition on that ground. [Paras 3, 4, 8]

Petition held premature and not entertained because the six month period for issuing a show cause notice under Section 110(2) had not expired.

Provisional release of goods subject to furnishing of bond - bond equivalent to Freight on Board (FOB) value - over-valuation and determination of correct market value - Effect of respondents' acceptance of provisional release subject to bond and the petitioner's obligation to cooperate in valuation inquiries. - HELD THAT: - The respondents informed the Court that an application for provisional release had been accepted, but the petitioner was required to furnish a bond equal to the FOB value of the goods. The respondents also indicated that the case involved alleged over valuation and that the petitioner was expected to cooperate for determination of correct market value. In view of the availability of provisional release on stipulated terms and the ongoing proceedings to ascertain valuation, the Court found no reason to intervene by way of writ. The combination of an existing administrative remedy (conditional provisional release) and the ongoing statutory process weighed against entertaining the petition. [Paras 5, 6, 7, 8]

Court declined to grant relief, noting provisional release had been accepted subject to a bond (FOB value) and the petitioner must cooperate in valuation; writ was therefore not entertained.

Final Conclusion: Writ petition dismissed as premature and unnecessary in view of the unexpired statutory period for issuance of show cause notice and the respondents' grant of provisional release subject to furnishing a bond and cooperation in valuation.

Deemed export - refund of Terminal Excise Duty - entitlement to refund where tax wrongly paid - Foreign Trade Policy provisions on deemed export and refund (8.2(b), 8.3(c))

Deemed export - refund of Terminal Excise Duty - entitlement to refund where tax wrongly paid - Whether the petitioner was entitled to claim refund of Terminal Excise Duty paid on supplies to Export Oriented Units despite the claim not having been made at the time of supply. - HELD THAT: - The Court held that supplies made to Export Oriented Units during June 2009 till October 2009 constituted deemed export under the Foreign Trade Policy and that the supplier was entitled to claim a refund of Terminal Excise Duty under the FTP provisions relied upon by the parties. The tax having been paid at the time of export was nevertheless wrongly paid and, since the appellants did not dispute that the tax was wrongly paid, they could not retain it. The Single Judge correctly quashed the communication rejecting the refund claim and directed consideration of the claim in accordance with law; there was no merit in the appellants' contention that a belated claim could not be entertained where the tax had been wrongly paid.

The writ petition was rightly allowed by quashing the communication dated 31.3.2016 and the petitioner is entitled to have the refund claim considered in accordance with the Foreign Trade Policy provisions.

Final Conclusion: The appeal is dismissed. The order of the learned Single Judge allowing the writ petition and quashing the communication rejecting the refund claim is upheld, leaving the petitioner entitled to the refund claim in accordance with the Foreign Trade Policy.

Obligation to present Import General Manifest and bill of entry for home consumption - penalty does not discharge obligation to present bill of entry or absolve liability for assessment - date for determination of rate of duty and tariff valuation - deemed presentation of bill of entry on date of actual entry inwards - inapplicability of subsequently introduced levy to earlier imports

Obligation to present Import General Manifest and bill of entry for home consumption - penalty does not discharge obligation to present bill of entry or absolve liability for assessment - Whether deposit of penalties under the Customs Act absolved the petitioner from the obligation to present a bill of entry and permitted withdrawal of the manual bill of entry filed for regularisation. - HELD THAT: - The Court examined the statutory scheme requiring presentation of an Import General Manifest (IGM) under Section 30 and a bill of entry for home consumption under Section 46 and noted that imposition of penalties for contravention of those provisions is a prescribed consequence but does not extinguish the underlying statutory obligation to present the bill of entry. The penalty order itself expressly preserved other actions that may be initiated under the Customs Act. On the facts the petitioner had knowledge of the filing requirement, penalties were imposed and paid, and a manual bill of entry was thereafter presented; the law does not permit the imposition and payment of penalty to be treated as a substitute for presenting the bill or as a bar to further assessment consistent with statutory procedure. Consequently the contention that payment of penalty regularised the import and entitled the petitioner to withdraw the bill of entry was rejected.

Payment of penalties did not absolve the petitioner of the obligation to present a bill of entry; the request to withdraw the manual bill filed for regularisation could not be upheld.

Date for determination of rate of duty and tariff valuation - deemed presentation of bill of entry on date of actual entry inwards - inapplicability of subsequently introduced levy to earlier imports - Whether the rate of duty and applicability of integrated tax (levy introduced w.e.f. 01.07.2017) should be determined by the law prevailing on the date of filing of the belated bill of entry in 2018 or by the law prevailing on the date of actual import on 28.05.2012. - HELD THAT: - The Court construed the statutory rule for determination of rate of duty and tariff valuation to give effect to the principle that where a bill of entry is presented after the date of entry inwards the bill shall be deemed to have been presented on the date of actual entry inwards. Applying that principle to the admitted facts - the vessel entered Indian waters on 28.05.2012 and the applicable customs duties were 'nil' on that date, and the integrated tax provision under the Customs Tariff Act was introduced only from 01.07.2017 - the Court held that the law prevailing on the date of actual import governs duty liability. The Court rejected the respondents' contention that the rates as on the date of belated filing (2018) could be applied, noting that such an approach would produce anomalous and uncertain results and would be contrary to the statutory deeming rule and the settled approach in analogous decisions recognising the relevance of the date of import for earlier exemptions.

The rate of duty and tax is to be determined by the law prevailing on the date of actual import (28.05.2012); the integrated tax introduced w.e.f. 01.07.2017 is not applicable to the import of the vessel on 28.05.2012.

Final Conclusion: The writ petition is allowed. The petitioner is entitled to have the import of the vessel treated in accordance with the law prevailing on 28.05.2012 (when applicable duties were nil) and the respondents are not permitted to assess or re-assess the vessel by applying the levy introduced w.e.f. 01.07.2017; payment of penalties did not discharge the obligation to present a bill of entry and did not justify application of laws prevailing at the later date.

Pooling of duty-free baggage allowance - Bona fide baggage - Interpretation of "family" under the Baggage Rules, 1998 - Application of Section 79 of the Customs Act, 1962 to baggage allowance - Excluded goods under Appendix I of the Baggage Rules, 1998

Pooling of duty-free baggage allowance - Interpretation of "family" under the Baggage Rules, 1998 - Application of Section 79 of the Customs Act, 1962 to baggage allowance - Whether the duty-free baggage allowance admissible to individual passengers who are members of the same family can be pooled to cover articles contained in the baggage of one passenger. - HELD THAT: - The Court held that the duty-free allowance granted to a passenger under the Baggage Rules cannot be clubbed with the allowance of another passenger even if the other passenger is a family member as defined in the Rules. The definition of "family" in the Rules identifies who may be regarded as family for the purposes of determining for whom an article is imported, but it does not permit aggregation of each individual's separate duty-free limit into a single pooled allowance for one passenger's baggage. The baggage in question was declared and registered in the name of the petitioner and the invoices showed the petitioner as the purchaser; accordingly the petitioner could not claim the benefit of his wife's and children's individual allowances by treating them as pooled. The Court therefore set aside the single Judge's conclusion permitting pooling of allowances and concluded that the explanation in the Rules prohibiting pooling must be given effect to. [Paras 3]

Pooling of the duty-free baggage allowance of family members is not permissible; the petitioner's claim to pool allowances is rejected.

Bona fide baggage - Excluded goods under Appendix I of the Baggage Rules, 1998 - Whether the spare parts carried by the petitioner constituted bona fide baggage exempted from duty under the Baggage Rules. - HELD THAT: - The Court upheld the single Judge's finding that the spare parts were bona fide baggage. The spare parts were intended for use in a vehicle previously imported by the petitioner for his personal use and did not fall within the list of excluded goods in Appendix I of the Baggage Rules. Given these facts and the absence of exclusion, the articles qualified as bona fide baggage for the purposes of duty-free allowance. The Court also accepted that the duty liability arose from an erroneous understanding of the Rules and therefore did not disturb the finding that no fine or penalty should be imposed. [Paras 4]

The spare parts are bona fide baggage and not excluded under Appendix I; the finding that they are duty-free baggage is upheld and the imposition of fine or penalty is not sustained.

Final Conclusion: The appeal is allowed in part: the Court holds that baggage allowances of individual family members cannot be pooled to increase the duty-free limit of one passenger (set aside), but upholds the finding that the spare parts carried by the petitioner constitute bona fide baggage not excluded under the Baggage Rules (maintained), and does not disturb the single Judge's conclusion against imposing fine or penalty.

Disposal of seized goods under Section 110(1A) - confiscation and entitlement to sale proceeds - compliance with appellate tribunal direction for release - presumption of correctness of official acts - mistaken identity affecting notice and challenge

Disposal of seized goods under Section 110(1A) - presumption of correctness of official acts - Whether the departmental disposal of the seized gold complied with the statutory procedure and was lawful. - HELD THAT: - The Tribunal examined the notification under Section 110(1A) identifying gold as specified goods subject to prompt disposal and reviewed the sequence of actions taken after seizure on 02.06.1999. The record shows inventory preparation on the date of seizure, verification by the Judicial Magistrate on two occasions, deposit of goods in malkhana and handing over to the bank for sale, followed by auction on 26.03.2001. The Tribunal found these steps to be in accordance with the procedure prescribed under the statute and the departmental manual. In the absence of any evidence rebutting the presumption of correctness in the discharge of duties by the competent officers, and given that the appellant did not object to or challenge the disposal during the earlier appellate processes, the disposal was held to be lawful and compliant with procedure. [Paras 9, 10, 11, 12]

The disposal of the seized gold in 2001 was in accordance with statutory procedure and was lawful; there is no infirmity in the departmental action.

Confiscation and entitlement to sale proceeds - compliance with appellate tribunal direction for release - mistaken identity affecting notice and challenge - Whether the appellant is entitled to the market value of the gold as of 2015 or only to the sale proceeds realized at the time of disposal in 2001. - HELD THAT: - The Tribunal considered its earlier direction of 04.08.2015 commanding return of the confiscated goods to the appellant and the factual matrix showing that the goods had been confiscated and auctioned in 2001. Given that the department returned the sale proceeds received in 2001 and that those proceeds were encashed by the appellant before filing the present appeal, the Tribunal held that compliance with the direction consisted of refunding the sale proceeds realized at the time of disposal. The Tribunal relied on precedent holding that where confiscated goods have been auctioned, the claimant is entitled to the sale proceeds in accordance with law and not to a later market value; further, the delay and complications arose in part from mistaken identity which did not render the departmental disposal improper. Consequently the appellant was not entitled to the market value prevailing in 2015. [Paras 13, 14, 15]

The appellant is entitled only to the sale proceeds realized on disposal in 2001 (which were refunded and encashed) and not to the market value of the gold as of 2015; the Tribunal's 2015 direction was duly complied with.

Final Conclusion: The appeal is dismissed: the departmental disposal of the confiscated gold in 2001 complied with statutory procedure and, having refunded the sale proceeds realized at that disposal (which were encashed by the appellant), the department duly complied with the Tribunal's direction; the appellant is not entitled to the later market value of the gold.

Lawful seizure by security personnel and handover to customs - evidentiary value of uncorroborated confessional statements - corroboration and verification of documentary evidence - claim of ownership and burden of proof in customs proceedings - absolute confiscation and imposition of penalty for smuggled goods - after thought documents

Lawful seizure by security personnel and handover to customs - evidentiary value of uncorroborated confessional statements - Validity of the interception by CISF at the airport and the subsequent seizure and handover of the gold bangles to Customs. - HELD THAT: - The Tribunal found that CISF personnel intercepted the passenger in the security area, doubted the nature of the yellow metal bangles and, after questioning when the passenger admitted she was carrying them for delivery for remuneration, handed the bangles and the passenger to Customs the same day. The Tribunal observed that the CISF submitted a contemporaneous report and that Customs seized the articles immediately thereafter. On these facts the Tribunal held the objection to the legality of the seizure unsustainable. The Tribunal further noted that while the initial statement recorded on the date of seizure formed the starting point of the investigation, reliance solely on that uncorroborated statement without further verification was legally insufficient for sustaining a finding of smuggling; however this infirmity did not render the initial interception and handover itself invalid. [Paras 5]

Seizure and handover by CISF to Customs were lawful, but the admissibility or sufficiency of the initial uncorroborated statement as sole evidence was open to scrutiny.

Claim of ownership and burden of proof in customs proceedings - corroboration and verification of documentary evidence - absolute confiscation and imposition of penalty for smuggled goods - after thought documents - Whether the seized gold bangles were smuggled goods and whether confiscation and penalties imposed on the appellants were justified. - HELD THAT: - The Tribunal examined subsequent statements of family members and the purchase invoices produced by the appellant claiming ancestral ownership. It observed that the Investigating Officer had not carried out adequate verification of those invoices with local sources or municipal records and had proceeded largely on the basis of the initial statement recorded at the time of seizure. The Tribunal held that the subsequent statements were mutually corroborative and that the appellants had discharged the onus of establishing lawful acquisition to the extent required on the record. Relying on established authority that a lone confession or admission, without corroborative evidence, cannot be conclusive, the Tribunal concluded that the department's case rested on conjecture and surmise that the jewellery had been made out of smuggled gold. In those circumstances the Tribunal found the order of absolute confiscation and the penalties to be unjustified and set aside the impugned orders, allowing the appeals with consequential relief. [Paras 11, 14]

The gold bangles cannot be held to be smuggled; confiscation and penalties are not justified and are set aside.

Final Conclusion: The appeals are allowed: the seizure and handover by CISF to Customs were lawful, but on the evidence the bangles could not be held to be smuggled; the orders of absolute confiscation and penalties are set aside and the appellants are granted consequential relief.

Writ jurisdiction and forum appropriateness - liberty to approach appropriate forum - entitlement to duty credit scrip for incremental export growth - interim orders and subsequent administrative action

Writ jurisdiction and forum appropriateness - liberty to approach appropriate forum - interim orders and subsequent administrative action - Writ petition not decided on merits and petitioner granted liberty to challenge the administrative orders before the appropriate forum. - HELD THAT: - The Single Judge had passed interim directions during the pendency of the writ petition and the authorities thereafter passed orders and communications in consequence. The High Court found that, given the subsequent administrative action taken pursuant to those directions, the controversy cannot be finally adjudicated on the pleadings as they stood at the time of filing. In these circumstances the court declined to interfere on merits and disposed of the writ petition while expressly granting liberty to the petitioner to seek remedy before the appropriate statutory or adjudicatory forum. The court also directed that the time already spent by the petitioner in pursuing proceedings before the Court shall be taken into account by the forum that entertains the challenge. [Paras 4, 5]

Writ appeal dismissed; petitioner granted liberty to challenge the orders and communications before the appropriate forum and time spent before the Court to be considered.

Entitlement to duty credit scrip for incremental export growth - Claim to duty credit scrip based on incremental export growth during 01.01.2013 to 31.03.2014 was not adjudicated and must be contested before the appropriate forum. - HELD THAT: - The petitioner sought declaration of entitlement to a duty credit scrip in relation to incremental export growth for the specified period. The court observed that because interim orders had been passed and the authorities issued subsequent orders and communications, the substantive claim could not be disposed of in the writ proceeding on the basis of the pleadings as filed. Consequently the question of entitlement was left unadjudicated and the petitioner was directed to challenge the impugned order dated 09.10.2018 and the communication dated 06.11.2018 before the competent forum for fresh consideration. [Paras 4, 5]

Substantive claim to the duty credit scrip left undecided; petitioner permitted to challenge the administrative orders before the appropriate forum.

Final Conclusion: The writ appeal is dismissed; the petitioner is granted liberty to challenge the order dated 09.10.2018 and the communication dated 06.11.2018 before the appropriate forum, with the direction that the time already spent before this Court shall be taken into account.

Natural justice - transaction value under Customs Valuation Rules - comparability of imports for valuation - sequential application of valuation rules - reasoned order requirement - differential duty and declared RSP

Natural justice - reasoned order requirement - The assessment was vitiated by breach of principles of natural justice and by absence of reasons communicated to the importer. - HELD THAT: - The authority issued two notices in quick succession and proceeded to pass the order without awaiting or allowing adequate time for the appellant's reply or meaningful personal hearing, thereby defeating the spirit of the requirement of fair opportunity. Further, the reasons for rejection of the declared transaction value and the documents relied upon were not communicated to the importer. These procedural failings amount to gross violation of natural justice and render the adjudication unsustainable. [Paras 2, 9]

Findings vitiated by breach of natural justice and lack of reasons; order unsustainable on procedural grounds.

Transaction value under Customs Valuation Rules - sequential application of valuation rules - The assessing authority rejected the declared transaction value without following the sequential methodology of valuation rules and therefore the re-determination was impermissible. - HELD THAT: - On the merits the authority did not proceed through the valuation hierarchy in Rules 4 to 7 but proceeded directly to Rule 8. The order records no reasons for rejecting the declared price and skips the required sequential analysis under the Customs Valuation Rules, 1988. Failure to apply the valuation provisions in the prescribed sequence vitiates the re-determination of assessable value. [Paras 3, 5, 9]

Re-determination of value without sequential application of valuation rules is unsustainable.

Comparability of imports for valuation - transaction value under Customs Valuation Rules - Value could not be validly enhanced by reference to an earlier import of purportedly similar goods which were not shown to be comparable. - HELD THAT: - The assessing authority relied on an earlier import by another importer (imports of components in 2003) to fix value for the appellant's 2005 assembled goods without establishing essential comparability parameters such as same supplier, importer, quantity, quality and time of import. Mere reference to the same brand, without matching comparable factors, does not justify rejection of the declared transaction value or adoption of the earlier import's value. [Paras 6, 9]

Reliance on non-comparable earlier import to reject declared value is unjustified.

Differential duty and declared RSP - reasoned order requirement - The computation of differential duty was flawed because it was made without disputing the declared RSP and without reasoned consideration. - HELD THAT: - The lower authorities computed differential duty without rejecting or re-determining the declared retail sale price (RSP) and without discussing re-determination of RSP in the order-in-original. Such computation, in absence of proper adjudication on declared RSP and without reasoned findings, is improper and cannot sustain the demand; the record does not support the additional duty quantified by the authority. [Paras 7, 9]

Differential duty computation without adjudication on declared RSP and without reasons is unsustainable.

Final Conclusion: The impugned order is set aside; nothing in the adjudication survives. The appeal is allowed and the assessment/re-determination is quashed with consequential reliefs, if any, as per law.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of operational debt and default - absence of a prior dispute in relation to the services for which claim is made - compliance with demand notice requirement for initiation of proceedings - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Existence of operational debt and default - absence of a prior dispute in relation to the services for which claim is made - compliance with demand notice requirement for initiation of proceedings - Whether the Section 9 petition was maintainable on grounds that an operational debt existed, there was default, and no prior dispute barred admission. - HELD THAT: - The Tribunal found that the operational creditor rendered services to the corporate debtor in filing an application under Section 10 of the I&B Code pursuant to the MOU dated 02.05.2018 and that the corporate debtor did not pay the agreed fee for those services. The alleged dispute arising out of the separate agreement dated 27.03.2018 related to different obligations (financial-arrangement services) and was not connected to the liability to pay for services under the 02.05.2018 agreement. Since the corporate debtor did not assert payment of the fee for the NCLT services nor demonstrate a connected prior dispute in respect of those services, the Tribunal held there was no pre existing dispute that would bar admission. The Tribunal also noted that a demand notice was issued and the requirements under Section 9 were complied with. On these findings the Tribunal concluded there was an operational debt and a default by the corporate debtor and that the petition was maintainable and liable to be admitted.

The petition under Section 9 was admitted on the basis that an operational debt existed, default was established, and no prior dispute in respect of the services forming the subject matter was proved.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Whether, upon admission, moratorium should be declared and an Interim Resolution Professional appointed. - HELD THAT: - Having admitted the Section 9 petition, the Tribunal declared the moratorium operative from the date specified in the order until completion of the CIRP or earlier orders as contemplated by the Code, and directed the usual prohibitions on suits, transfer or encumbrance of assets and recovery actions during moratorium. The Tribunal also directed public announcement of the initiation of CIRP and appointed an Interim Resolution Professional to perform the functions under the Code.

Moratorium was declared and an Interim Resolution Professional was appointed consequent to admission of the petition.

Final Conclusion: The Section 9 petition was admitted: the Tribunal held that an operational debt and default existed, no prior dispute barred admission in respect of the services for which the claim was made, a moratorium was declared, and an Interim Resolution Professional was appointed.

Initiation of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - RBI circular declared ultra vires Section 35AA of the Banking Regulation Act, 1949 - actions taken under an ultra vires circular rendered non-est - proceedings initiated solely pursuant to an administrative circular are non-est

Initiation of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - RBI circular declared ultra vires Section 35AA of the Banking Regulation Act, 1949 - proceedings initiated solely pursuant to an administrative circular are non-est - Whether the petition under Section 7 is liable to be rejected because it was instituted solely pursuant to the RBI circular dated 12.02.2018 which the Supreme Court has held to be ultra vires and actions under which are non-est. - HELD THAT: - The Tribunal examined the material placed on record, in particular the minutes of the joint lenders' forum meeting dated 06.09.2018 and the timing of filing of the petition. The minutes expressly rely on the timelines in the RBI circular dated 12.02.2018 and record that the 180-day period for implementing a resolution plan had elapsed, making it mandatory to refer the account to the Adjudicating Authority by 11.09.2018. The petition was filed on 11.09.2018. There was no other contemporaneous material demonstrating an independent decision by the Financial Creditor to initiate proceedings apart from the timeline imposed by the RBI circular. The Supreme Court in Dharani Sugars & Chemicals Ltd. has held that the impugned RBI circular is ultra vires Section 35AA of the Banking Regulation Act, 1949 and that actions taken under that circular, including triggering proceedings under the Insolvency Code solely because of the circular, are non-est. Applying that principle, since the Tribunal is satisfied on the record that the petition was filed only because of the RBI circular, the proceedings are faulted at inception and cannot be permitted to continue. The Tribunal therefore concluded that the petition cannot be admitted on that basis. [Paras 16, 18, 19]

The petition is rejected as having been instituted solely pursuant to the RBI circular which has been held ultra vires and actions under it are non-est; liberty is granted to the Financial Creditor to initiate proceedings as per law.

Final Conclusion: The petition under Section 7 is rejected because the record shows it was filed solely in pursuance of the RBI circular dated 12.02.2018, which the Supreme Court declared ultra vires and actions under which are non-est; the Financial Creditor is granted liberty to pursue remedies under law.

Operational debt - Demand Notice under Section 8 of the IBC, 2016 - application under Section 9 of the IBC, 2016 - pre-existing dispute - admission of petition and initiation of CIRP - appointment of Interim Resolution Professional and substitution by corrigendum - moratorium under Section 14 of the IBC, 2016

Pre-existing dispute - operational debt - Demand Notice under Section 8 of the IBC, 2016 - The plea of a pre-existing dispute raised by the Corporate Debtor is not bona fide and does not bar admission of the Section 9 application. - HELD THAT: - The Tribunal examined the Corporate Debtor's contentions that the dispute arose from alleged inferior quality of goods, rate differences and withholding of Form-57 F, and that a criminal complaint had been filed. The Corporate Debtor failed to produce contemporaneous communications or correlate the debit note with specific invoices prior to issuance of the demand notice. The only document relied upon by the Corporate Debtor to show a prior dispute was a debit note dated 31.03.2016 sent by e-mail on 13.05.2016, which the Tribunal found to be an afterthought and insufficient to establish a pre-existing dispute within the meaning of the Code. Filing of a criminal complaint, which was closed by investigation, was held not to constitute a civil dispute under the IBC. The Tribunal applied the principle that a dispute must be a plausible contention supported by evidence and not a spurious, belated defence intended to defeat the claim, and concluded the Corporate Debtor's defence was tenuous and motivated to evade liability. [Paras 23]

The contention of a pre-existing dispute is rejected as not genuine or substantiated; the dispute pleaded by the Corporate Debtor does not fall within the definition of 'dispute' for the purposes of Section 9.

Application under Section 9 of the IBC, 2016 - operational debt - admission of petition and initiation of CIRP - The Section 9 application is complete, default in payment is established, and the petition is admitted initiating the CIRP. - HELD THAT: - Having found no bona fide pre-existing dispute and having observed that the operational creditor furnished the demand notice and evidence of outstanding dues, the Tribunal concluded that the statutory conditions for admission under Section 9 are satisfied. The Tribunal recorded jurisdiction over the matter, found the application complete, and that default in payment of the operational debt was established beyond reasonable doubt. In consequence, the Tribunal admitted the Company Petition and directed the initiation of Corporate Insolvency Resolution Process. [Paras 24, 25]

The Section 9 application is admitted and CIRP against the Corporate Debtor is initiated.

Appointment of Interim Resolution Professional and substitution by corrigendum - moratorium under Section 14 of the IBC, 2016 - An Interim Resolution Professional is appointed and the statutory consequences of admission, including moratorium, are to follow; the originally appointed IRP named in the order is substituted by corrigendum. - HELD THAT: - The Tribunal appointed the IRP proposed by the Operational Creditor, directing the IRP to perform duties mandated by the Code and to take steps including publication and claims calls. The moratorium under Section 14 was declared to operate upon admission. Subsequently, on registry representation and the Operational Creditor's suggestion, the Tribunal issued a corrigendum substituting the originally named IRP with an alternative nominee. The rest of the order was directed to be read along with the corrigendum. [Paras 26, 27]

Mr. Naresh Verma was appointed as IRP in the main order; by corrigendum the IRP is substituted with Mr. Sourabh Malpani; moratorium under Section 14 is invoked and the IRP is to carry out CIRP tasks.

Final Conclusion: The Tribunal found no genuine pre-existing dispute and admitted the Section 9 petition, directed initiation of CIRP against the Corporate Debtor, appointed an Interim Resolution Professional (with the nominated IRP substituted by corrigendum), and invoked the moratorium under the IBC, 2016.

Limitation - Article 137 of the Limitation Act, 1963 - Article 65 of the Limitation Act, 1963 - accrual of right to apply under Section 7 of the Insolvency and Bankruptcy Code, 2016 - time-barred claim

Limitation - Article 137 of the Limitation Act, 1963 - accrual of right to apply under Section 7 of the Insolvency and Bankruptcy Code, 2016 - time-barred claim - Whether the Section 7 petition is barred by limitation. - HELD THAT: - The adjudicating authority examined Part IV of Form 1 and found the date(s) of default recorded as 10th July, 2013 (cancellation letter) and 25th July, 2013 (receipt of Xerox copy of cheque). The applicant did not aver any subsequent acknowledgement of debt in Form 1. The authority concluded that the claim is not one for possession or title over immovable property (so Article 65 does not apply) but is a money claim falling under Article 137. Accordingly, the limitation period runs from the date the right to apply accrued (the dates of default noted above). Applying Article 137, the three-year limitation expired on or before July 2016, whereas the present Section 7 application was filed on 21st July, 2019. Reliance placed on authorities that treat accrual from commencement of the Code was considered, but the authority held the facts here (no acknowledgement and earlier accrual) were different and therefore those decisions did not aid the applicant. On these findings the claim was held time-barred and the application not maintainable. [Paras 11, 12, 15, 16, 17]

Claim under Section 7 is barred by limitation and the petition is dismissed as not maintainable.

Final Conclusion: The application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was dismissed as barred by limitation: the right to apply accrued in July 2013, no acknowledgement was pleaded, Article 137 applies, and the petition filed in July 2019 is time barred.

Continuation of arbitral proceedings during moratorium - Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code - Counter-claim and claim in arbitration during corporate insolvency - Filing of claims before the Resolution Professional pursuant to public announcement - Overriding effect of the Insolvency and Bankruptcy Code

Continuation of arbitral proceedings during moratorium - Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code - Overriding effect of the Insolvency and Bankruptcy Code - Whether an arbitral proceeding or the determination of a claim by an Arbitral Tribunal can proceed during the moratorium period after initiation of the corporate insolvency resolution process. - HELD THAT: - Relying on the Supreme Court decision in Alchemist Asset Reconstruction Company Ltd. and this Tribunal's decision in K.S. Oils Ltd., the Tribunal held that the moratorium that arises on admission of an insolvency application under the I&B Code bars institution or continuation of suits or proceedings against the corporate debtor, which includes arbitral proceedings instituted or continued during the moratorium. Section 238 gives the I&B Code overriding effect over other laws, including the Arbitration and Conciliation Act, and the Code's scheme requires creditors to submit claims to the Resolution Professional following the public announcement under sections 13 and 15. Consequently, arbitral tribunals are not permitted to proceed with adjudication of claims against the corporate debtor during the moratorium; instead parties may file their respective claims and counter-claims before the Resolution Professional for adjudication in the insolvency process. [Paras 6]

Arbitral proceedings/claims cannot proceed during the moratorium; parties may file their claims and counter-claims before the Resolution Professional.

Counter-claim and claim in arbitration during corporate insolvency - Filing of claims before the Resolution Professional pursuant to public announcement - Whether a counter-claim filed by the corporate debtor (when the corporate debtor is not the claimant in the arbitral proceedings) can proceed during the moratorium. - HELD THAT: - The Tribunal distinguished the decision in Jharkhand Bijli Vitran Nigam Ltd., where the corporate debtor itself was the claimant and its claim was permitted to proceed subject to the moratorium's effect on recovery. In the present facts the corporate debtor is not the claimant; the Tribunal held that the counter-claim cannot be segregated to proceed independently and therefore cannot continue during moratorium because the Arbitral Tribunal cannot determine the claimant's claim against the corporate debtor while moratorium prevents such determination. Given the Code's scheme, such claims/counter-claims should be filed before the Resolution Professional for consideration in the CIRP. [Paras 6, 7, 8]

The counter-claim filed by the corporate debtor (when not the claimant) cannot proceed during the moratorium and must be filed as a claim before the Resolution Professional.

Final Conclusion: The appeal is dismissed. Arbitral proceedings and determination of claims or counter-claims against the corporate debtor cannot proceed during the moratorium; the parties are permitted to file their respective claims and counter-claims with the Resolution Professional in accordance with the I&B Code.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default as foundation for initiation of corporate insolvency resolution process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and claims process under Section 15 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and duties of IRP

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default as foundation for initiation of corporate insolvency resolution process - The application under Section 7 was admitted on the basis that the corporate debtor had admitted the debt and default. - HELD THAT: - The Tribunal recorded that the financial creditor had granted and disbursed a loan and that the corporate debtor committed default, with the corporate debtor itself admitting both the debt and the default in its affidavit-in-reply. The loan agreement permitted recall upon default and the last default was noted. The application under Section 7 was found to be defect free and, considering only the existence of debt and default for admission, the Tribunal admitted the application and ordered initiation of CIRP.

Application under Section 7 admitted and CIRP initiated against the corporate debtor.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and claims process under Section 15 of the Insolvency and Bankruptcy Code, 2016 - A moratorium was declared consequent to admission and directions issued for public announcement and submission of claims. - HELD THAT: - On admission, the Tribunal declared a moratorium to operate from the date of admission until completion of the CIRP, and recorded the scope of prohibited actions during the moratorium, including institution or continuation of suits, transfer or disposition of assets, enforcement of security, and recovery by owners or lessors. The Tribunal directed the IRP to cause the public announcement of initiation of CIRP and to call for submission of claims in accordance with the statutory provisions.

Moratorium declared with specified prohibitions; public announcement and claims process to be carried out by the IRP.

Appointment of Interim Resolution Professional and duties of IRP - The proposed professional was appointed as Interim Resolution Professional and directed to perform CIRP functions; advance fees were ordered to be paid to the IRP. - HELD THAT: - The Tribunal accepted the financial creditor's suggested nominee, noting absence of any disciplinary proceedings against him, and appointed him as the Interim Resolution Professional to ascertain creditors' particulars and convene the Committee of Creditors. The Tribunal directed an immediate public announcement, mandated that the IRP conduct the CIRP in a time bound manner as per regulations, and directed the financial creditor to pay an advance fee to the IRP as per the relevant IBBI regulation to be adjusted against the final bill. Communication of the order to concerned parties was also directed.

Nominee appointed as IRP; IRP to perform statutorily mandated functions and receive advance fees as directed.

Final Conclusion: The Section 7 application was admitted on proof of debt and default; consequential orders were passed declaring moratorium, directing public announcement and claims process, appointing the nominated Interim Resolution Professional with directions regarding conduct of CIRP and payment of advance fees, and listing the matter for progress report.

Corporate Insolvency Resolution Process - admission of insolvency application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - default and existence of operational debt - moratorium - appointment of Interim Resolution Professional - public announcement of CIRP - supply of essential goods during moratorium - payment of IRP remuneration by the Operational Creditor until constitution of the Committee of Creditors

Default and existence of operational debt - admission of insolvency application under Section 9 of the Insolvency & Bankruptcy Code, 2016 - Operational Creditor established existence of debt and default and the Company Application under Section 9 was admitted. - HELD THAT: - The Tribunal examined documentary material including purchase order, delivery challan, dispatch instructions, ledger entries and the invoice; found part payment by the Corporate Debtor and an award from the Madhya Pradesh Micro and Small Enterprises Facilitation Council confirming the outstanding balance. The Corporate Debtor admitted liability on receipt of the Section 8 demand notice and its counsel conceded inability to pay immediately due to financial constraints. On these facts the Tribunal concluded that existence of an operational debt and default were proved and therefore admitted the IBA/Company Application. [Paras 2, 3, 4, 5]

I.A. was admitted on the ground of established debt and default.

Appointment of Interim Resolution Professional - payment of IRP remuneration by the Operational Creditor until constitution of the Committee of Creditors - An Interim Resolution Professional was appointed and the Operational Creditor's consent to pay the IRP's remuneration and expenses until constitution of the Committee of Creditors was accepted. - HELD THAT: - Having admitted the application the Tribunal appointed Mr. Senthil Kumar as Interim Resolution Professional; the appointment was influenced by the Operational Creditor's express consent to meet the IRP's remuneration and related expenditure until the Committee of Creditors is constituted. The appointment was made to enable the IRP to carry out functions under the Code immediately after admission. [Paras 5, 6]

Mr. Senthil Kumar appointed as Interim Resolution Professional, with Operational Creditor to pay IRP's remuneration and expenses until CoC constitution.

Moratorium - supply of essential goods during moratorium - public announcement of CIRP - Moratorium was declared with specified prohibitions and ancillary directions; supply of essential goods shall continue; public announcement of the CIRP directed. - HELD THAT: - The Tribunal declared the moratorium effective from 05.03.2019 until completion of the CIRP or approval of a resolution plan or order for liquidation, prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property by owners/lessors. It directed that supply of essential goods or services, if continuing, shall not be terminated or suspended during the moratorium. The Tribunal further directed immediate public announcement of the Corporate Insolvency Resolution Process and ordered communication of the order to the parties and the IRP. [Paras 6, 7]

Moratorium declared from 05.03.2019 with the stated prohibitions and directions; essential supplies to continue; public announcement and communication of the order directed.

Final Conclusion: The Tribunal admitted the Section 9 application, appointed an Interim Resolution Professional with the Operational Creditor agreeing to meet his remuneration until the Committee of Creditors is formed, declared moratorium effective from 05.03.2019 with specified prohibitions while protecting supply of essential goods, and directed immediate public announcement and communication of the order.

Refund of tax paid under mistake - applicability of limitation under section 11-B - relevant date as date of payment - exemption notification - colour of validity of levy - refund with interest - precedential effect of jurisdictional High Court decisions

Refund of tax paid under mistake - applicability of limitation under section 11-B - exemption notification - colour of validity of levy - Limitation under section 11-B of the Central Excise Act is not applicable to a refund claim where service tax was not leviable and was paid by the assessee under a mistake. - HELD THAT: - The Tribunal examined competing authorities and concluded that where the payment has no "colour of validity" because the tax was never leviable (for example, due to an exemption notification), the payment cannot be treated as a duty attracting the statutory refund regime under section 11-B. Reliance was placed on High Court decisions which held that mistaken payments of amounts not exigible as tax fall outside section 11-B and may be refunded despite expiry of the one year limitation; the Delhi High Court decision in M/s National Institute of Public Finance & Policy and other High Court rulings were treated as germane. The Tribunal distinguished the view expressed by a Larger Bench of the Tribunal which applied section 11-B to claims filed under that provision, noting that tax authorities and the Tribunal must follow jurisdictional High Court rulings and that where levy lacked legal validity the statutory time bar is inapplicable. Applying these principles to the facts, the refund claim arising from service tax paid despite the exemption notification could not be denied solely on the ground of limitation. [Paras 33]

The limitation prescribed by section 11 B does not bar the Appellant's refund claim because the service tax paid was not leviable and was paid under a mistake.

Refund with interest - precedential effect of jurisdictional High Court decisions - The Appellant is entitled to refund of the mistakenly paid service tax along with interest; the impugned order rejecting the claim as time barred is set aside. - HELD THAT: - Having held that the payment was not a valid levy and that section 11 B limitation is inapplicable, the Tribunal directed that the refund claim be allowed. The Tribunal recorded that earlier High Court decisions which found in favour of claimants who paid tax mistakenly (and ordered refunds with proportionate interest) support this result. Consequently, the Commissioner (Appeals) order dismissing the claim on limitation grounds could not be sustained and was set aside. [Paras 34]

Appeal allowed; refund directed to be granted to the Appellant together with interest.

Final Conclusion: The appeal is allowed: where service tax was not leviable because of an exemption and was paid by mistake, the one year limitation under section 11 B does not bar refund; the Commissioner (Appeals) order is set aside and the Appellant is entitled to refund with interest.

Imposition of penalty under Section 78 of the Finance Act, 1994 - Penalty under Section 77 of the Finance Act, 1994 - Waiver of penalty under Section 80 of the Finance Act, 1994 for reasonable cause - Taxability of dry cleaning services as declared service - Acceptance of reduced penalty by rectification (ROM)

Imposition of penalty under Section 78 of the Finance Act, 1994 - Penalty under Section 77 of the Finance Act, 1994 - Waiver of penalty under Section 80 of the Finance Act, 1994 for reasonable cause - Acceptance of reduced penalty by rectification (ROM) - Whether the appellant is liable to pay the balance penalty under Sections 77 and 78 of the Finance Act, 1994 after payment of service tax, interest and partial/ reduced penalty and whether any further relief is payable to the appellant - HELD THAT: - The Tribunal found that the appellant did not dispute the taxability of the dry cleaning activity for the period 01/04/2012 to 30/06/2012 and had paid the service tax liability and interest once the liability was pointed out during investigation. The Original Authority and Commissioner (Appeals) recorded that the appellant paid service tax, interest and 25% of the penalty under Section 78 within the timeframe noted in the record, but that the reduced payment did not satisfy the proviso to Section 78 requiring payment within 30 days of receipt of the order. The Commissioner subsequently allowed the rectification of mistake application and accepted the reduced penalty as per the proviso to Section 78(1), thereby modifying the impugned appellate order to that extent. As the Commissioner himself granted the relief sought in the appeal by accepting the reduced penalty on ROM, there remained no live grievance in respect of the balance penalty; other demands and penalties were found to be unimpeachable on the record. [Paras 4, 6]

Relief in respect of the balance penalty under Sections 77 and 78 is not maintainable in this appeal since the Commissioner, by subsequent ROM order, accepted the reduced penalty; the appeal is dismissed.

Final Conclusion: The appeal is dismissed: the tax, interest and reduced penalty have been accepted (the Commissioner allowed ROM to accept the reduced penalty), and no further relief in respect of the balance penalty is available to the appellant.

Export of services - Business Auxiliary Services - Maintenance or Repair Services - used outside India - payment received in convertible foreign exchange - Export of Service Rules, 2005 - destination-based consumption tax - CBEC Circular No. 56/5/2003-ST - CBEC Circular No. 111/5/2009-ST - penalty under Sections 76, 77, 78

Export of services - Business Auxiliary Services - used outside India - payment received in convertible foreign exchange - Export of Service Rules, 2005 - CBEC Circular No. 56/5/2003-ST - CBEC Circular No. 111/5/2009-ST - destination-based consumption tax - Whether the services rendered by the assessee to its foreign principal constituting 'Business Auxiliary Services' are exports of service and exempt from service tax for the specified periods. - HELD THAT: - The Tribunal found on the facts that the appellants rendered services to Fanuc Ltd., Japan, the beneficiary was located outside India, the services were rendered in India and remuneration was received in convertible foreign exchange. The Bench applied the Export of Service Rules, 2005 (as amended), and the clarifications in CBEC Circulars, observing that Service Tax is a destination-based consumption tax and that for Category III services the relevant test is whether the benefit accrues outside India. The Tribunal relied on its earlier decision in Mapal India Pvt. Ltd. and other precedents of the same Bench, and held that the activities performed by the assessee (promotion, market intelligence, training and order facilitation for the foreign principal) meet the criteria of export of services for the periods 01.07.2003 to 19.11.2003, 15.03.2005 to 30.09.2007 and 01.10.2007 to 30.09.2008, rendering the demands in the SCNs in respect of 'Business Auxiliary Service' unsustainable. [Paras 5]

Demands of service tax relating to 'Business Auxiliary Service' for the stated periods are set aside.

Maintenance or Repair Services - penalty under Sections 76, 77, 78 - CENVAT credit - Whether the service tax demand on 'Maintenance or Repair Services' is sustainable and whether penalties should be imposed. - HELD THAT: - The appellants conceded that the service tax demand on 'Maintenance or Repair Services' was sustainable. The Tribunal accordingly upheld the demand (with interest) for the period in question. However, having regard to the continuous changes in law, evolving interpretation by courts and relevant circulars which may have contributed to bona fide belief, the Tribunal exercised discretion to set aside the penalties. The appellants' submission regarding entitlement to CENVAT credit was noted but the primary disposition was to uphold the tax demand while waiving penalties. [Paras 3, 6, 7]

Demand on 'Maintenance or Repair Services' upheld; interest maintained; all penalties set aside.

Final Conclusion: The appeals are allowed in part: demands of service tax on 'Business Auxiliary Service' for the periods 01.07.2003 to 19.11.2003, 15.03.2005 to 30.09.2007 and 01.10.2007 to 30.09.2008 are set aside; the demand on 'Maintenance or Repair Services' is upheld with interest but all penalties are waived.

Supply of manpower service - Production or processing of goods on behalf of the client - Control and supervision of employees - Contract-based job pricing (per unit of output) - Statutory liabilities and compliance by contractor

Supply of manpower service - Production or processing of goods on behalf of the client - Contract-based job pricing (per unit of output) - Control and supervision of employees - Statutory liabilities and compliance by contractor - Whether the appellant's activity of compressing and filling gas in cylinders amounts to provision of supply of manpower service or is production/processing of goods on behalf of the client and hence not a taxable manpower supply - HELD THAT: - The Tribunal examined the contract and facts and found that the appellant was engaged to perform specified tasks - gas filling, cylinder handling, loading, unloading and dispatch - and was remunerated on the basis of quantity of gas filled (Rs.1 per EU meter) rather than on the basis of man-hours or payment of wages by the service recipient. Although the appellant deputed employees at the recipient's premises, the employees worked under the appellant's supervision and control; the service recipient did not pay employees' wages nor discharge statutory obligations. The appellant was contractually obliged to comply with statutory labour and social security liabilities (Minimum Wages, Factories Act, Contract Labour (R&A) Act, ESI, PF, etc.). These contractual terms and the pricing structure indicate that the arrangement constituted production/processing of goods on behalf of the client rather than mere supply of manpower. The Tribunal noted and applied the ratio of the appellant's relied precedent and rejected the Revenue's reliance on contrary authorities, concluding that the facts do not satisfy the criteria for supply of manpower and recruitment agency service. [Paras 4, 5]

Demand confirmed under the head of supply of manpower service is unsustainable; the impugned order is set aside and the appeal is allowed.

Final Conclusion: On the found contractual terms, method of charging, control of employees, and allocation of statutory liabilities to the contractor, the Tribunal held the services rendered by the appellant to be production/processing of goods on behalf of the client and not supply of manpower; the confirmed demand under manpower supply was set aside and the appeal allowed.

Entitlement to CENVAT credit on outward transportation (pre-01/04/2008) - availability of input service credit for airfreight as outward transportation - adjudication within reasonable time / breach of natural justice by inordinate delay - deciding beyond the lis of the show-cause notice

Adjudication within reasonable time / breach of natural justice by inordinate delay - Whether the Commissioner (Appeals)'s decision rendered after a delay of 12 years without reasons violated principles of natural justice and was vitiated for being not concluded within a reasonable time. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) heard and decided the appeal only after a period of 12 years from filing and did not record any reasons justifying that delay. Reliance on the decisions of the Madras High Court in JM Baxi & Co. and the Apex Court in GOI v. Citadel Fine Pharmaceuticals establishes that adjudication must be concluded within a reasonable time and unexplained inordinate delay causing prejudice vitiates the proceedings. The Tribunal held that the prolonged delay impaired the appellant's ability to secure relevant documents and caused prejudice, rendering the appellate adjudication bad in law. [Paras 6]

The adjudication by the Commissioner (Appeals) after 12 years without reasons was contrary to principles of natural justice and vitiated the impugned order.

Deciding beyond the lis of the show-cause notice - Whether the Commissioner (Appeals) acted beyond the scope of the show-cause notice by introducing the issue of place of removal being limited to port/ICD/CFS and denying credit on that basis. - HELD THAT: - The Tribunal noted that the show-cause notice challenged inclusion of outward freight within input service and did not raise a distinct claim that the place of removal could not be beyond port/ICD/CFS. The impugned order introduced and decided the latter contention, which the Tribunal held to be beyond the lis. Because the appellate order travelled beyond the specific allegations in the show-cause notice and thereby decided a new legal contention not put to the appellant, the course adopted by the Commissioner (Appeals) was impermissible. [Paras 6]

The Commissioner (Appeals) went beyond the show-cause notice in denying credit on the ground of place of removal and that part of the impugned order is unsustainable.

Entitlement to CENVAT credit on outward transportation (pre-01/04/2008) - availability of input service credit for airfreight as outward transportation - Whether the appellant was entitled to claim CENVAT credit on outward transportation (including airfreight) for the relevant period prior to 01/04/2008. - HELD THAT: - Having found the appellate adjudication vitiated by inordinate delay and having held that the Commissioner (Appeals) decided matters beyond the show-cause notice, the Tribunal examined substantive law applicable to the period. Relying on the decisions of the Apex Court in Andhra Sugars Ltd. and Ultra Tech Cement Ltd., the Tribunal accepted that outbound transportation up to the place of removal constituted an input service for the period prior to 01/04/2008, and outbound transportation therefore included airfreight for the relevant period. The Tribunal observed that the authorities relied upon by the Revenue were not applicable in the facts of the present case, particularly because the impugned order had travelled beyond the lis. [Paras 6]

The appellant is entitled to CENVAT credit on outward transportation (including airfreight) for the relevant period prior to 01/04/2008; the impugned denial of such credit is set aside.

Final Conclusion: The appeal is allowed: the impugned order is set aside because the Commissioner (Appeals) adjudicated after an unexplained inordinate delay of 12 years (breaching reasonable time and causing prejudice), travelled beyond the scope of the show-cause notice by raising the place-of-removal issue, and, on the merits for the period prior to 01/04/2008, the appellant is entitled to CENVAT credit on outward transportation (including airfreight).

Admissibility of computer printouts under Section 36B of the Central Excise Act, 1944 - Admissibility of statements recorded during search and seizure and requirement of Section 9D - Need for corroborative evidence to prove clandestine removal / suppression of production

Admissibility of computer printouts under Section 36B of the Central Excise Act, 1944 - Computer printouts and electronic data retrieved from hard disk were admissible only if conditions of Section 36B were complied with; in the present case they were not admissible. - HELD THAT: - The Tribunal examined the Panchnama and retrieval procedure and found that data from Hard Disk No.2 was written to DVD on 03.07.2014 without the appellant or authorised representative being present, and the Panchnama of that date was not relied upon in the SCN. No certificate as required by Section 36B(4) was produced to establish the source, manner of production, regularity of use or control of the computer. Relying on the Supreme Court's decision in Anvar P.V. and consistent authorities, the Tribunal held that electronic records are susceptible to tampering and can be admitted only if the stringent safeguards of Section 36B(2) and (4) are satisfied; those safeguards were not met in the facts at hand, hence the computer printouts could not be admitted as evidence. [Paras 5, 6, 9, 14, 15]

Computer printouts relied upon by the revenue are not admissible and cannot be relied upon as evidence.

Admissibility of statements recorded during search and seizure and requirement of Section 9D - Statements recorded during investigation under Section 14 could not be relied upon because cross-examination was denied and the procedural safeguards of Section 9D were not followed. - HELD THAT: - The adjudicating authority denied the appellant's request for cross-examination of witnesses. In view of the Supreme Court and High Court authorities cited (including Andaman Timber Industries and Hi-Tech Abrasives), the Tribunal held that statements recorded during investigation cannot be treated as admissible evidence unless Section 9D's rigour is observed and the witness is available for examination before the adjudicating authority; denial of cross-examination renders such statements inadmissible. [Paras 9, 10]

Statements recorded during investigation are not admissible and have to be eschewed from evidence.

Need for corroborative evidence to prove clandestine removal / suppression of production - The department failed to produce corroborative evidence (purchase records, dispatches, receipt by buyers, power consumption, cash flows etc.) to establish clandestine removal; therefore the demand based on alleged suppression of production is unsustainable. - HELD THAT: - Applying the principle in Continental Cement Company and related authorities, the Tribunal observed that proof of clandestine removal requires clinching corroborative material such as evidence of excess purchases of raw material, dispatch particulars, realization of sale proceeds, receipts from buyers and excess power consumption. In the present case, aside from inadmissible electronic records and statements, no reliable corroborative evidence was adduced by the department to substantiate the large demand for alleged clandestine removals for April 2011 to Nov 2013; consequently the demand based on suppression of production could not be sustained. [Paras 11, 12]

Demand of Rs. 3,03,41,494/- for April, 2011 to Nov, 2013 on account of suppression of production and clandestine removal is set aside.

Confirmation of duty on stock shortages and penalty relief - The limited duty demand arising from stock verification was confirmed, but penalties imposed on the assessee and its director were set aside. - HELD THAT: - The Tribunal noted that the appellant did not contest the separate duty demand of Rs. 2,81,953/- arising from shortages found during stock verification before the Commissioner; hence that duty demand was confirmed. However, because the departmental case on clandestine removal failed for want of admissible electronic records, admissible statements and corroborative evidence, the imposition of equal penalty on the appellant and the Rs. 5,00,000 penalty on the director was set aside. [Paras 12, 13]

Duty demand of Rs. 2,81,953/- confirmed; penalties on the appellant and on the director set aside.

Final Conclusion: The appeals are allowed in part: the demand of Rs. 3,03,41,494/- for April, 2011 to Nov, 2013 based on alleged suppression of production is set aside for lack of admissible electronic evidence, inadmissible statements and absence of corroborative material; the duty of Rs. 2,81,953/- on stock shortages is confirmed but all penalties imposed on the assessee and its director are set aside.

Clandestine removal - evidentiary value of confessional statements and recovered documents - consistency in concurrent adjudications - quantification of clandestine clearances - remand for computation of duty - penalty under section 11AC of the Central Excise Act, 1944

Clandestine removal - quantification of clandestine clearances - consistency in concurrent adjudications - Extent of clandestine removal by the appellants and appropriate quantification of the duty demand - HELD THAT: - The Tribunal found that the adjudications against the appellants and against M/s Gasha Steels arose from the same investigation and materially relied on the same corpus of recovered documents and statements. The Commissioner, while concluding large-scale clandestine removals by the appellants, recorded in the order against M/s Gasha Steels that only 2,406.52 MT of MS ingots were demonstrably proved to have been received by M/s Gasha Steels (the only tangible evidence being 150 duplicate invoices), whereas the SCN alleged much larger transfers (15,898.175 MT). Inconsistency between the two contemporaneous orders (both passed on the same day) meant the demand against the appellants could not be sustained to the full extent of the original quantification. Applying the principle of consistency in concurrent adjudications and that the department did not appeal the order in respect of M/s Gasha Steels, the Tribunal restricted the proven clandestine clearances to 2,406.52 MT received by Gasha Steels plus 376.39 MT attributable to other units, totalling 2,782.91 MT, and directed remand to the original authority for computation of duty on that restricted quantity using the lowest value per MT as discussed in the SCN. [Paras 9, 10, 11]

Demand restricted to clandestine clearance of 2,782.91 MT of ingots and remanded to the adjudicating authority for computation of duty (using the lowest value per MT as in the SCN) and corresponding penalty limited to the duty so calculated.

Evidentiary value of confessional statements and recovered documents - clandestine removal - Sufficiency of evidence for clandestine clearances to other purchasers (M/s Scot Free Steels and M/s Lal Steels) and confirmation of duty to that extent - HELD THAT: - The Tribunal accepted that directors of M/s Scot Free Steels and M/s Lal Steels admitted purchase of unaccounted ingots from the appellants and had deposited amounts towards duty liability. The adjudicating authority's findings regarding concealment of scrap purchases, unaccounted production and clandestine sales were held to be supported by recovered weighment slips, parallel invoices, confessional statements and other documentary material. Recognising that clandestine operations often lack documentary precision and may not be proved with arithmetical exactness, the Tribunal held that the evidence reasonably established clandestine removal to these units and therefore confirmed the demand to the extent of clearances to such other units (subject to the overall quantitative restriction imposed in the remand). [Paras 11, 12]

Demand confirmed to the extent of clandestine clearances to other units (such as M/s Scot Free Steels and M/s Lal Steels), subject to the overall quantitative limitation remanded for computation.

Penalty under section 11AC of the Central Excise Act, 1944 - personal liability of directors - Legitimacy of penalties imposed on the Managing Director and Director of the appellants - HELD THAT: - The Tribunal examined the role of Smt. K.K. Hajira (Managing Director) and Shri Yousuph Mekkoth (Director). It was found that no material was placed on record to show the Managing Director's active involvement in day-to-day operations or in the omissions/commissions that rendered goods liable for confiscation; accordingly, the penalty imposed on her could not be sustained. With respect to Shri Yousuph Mekkoth, the Tribunal observed that the penalty imposed by the adjudicating authority was already low and, considering his role as reflected in the record, there was no occasion to interfere with the penalty levied on him. [Paras 13]

Penalty on the Managing Director set aside; penalty on the Director sustained.

Final Conclusion: The appeals were partially allowed: the excise demand against the appellants was restricted to clandestine clearance of 2,782.91 MT (remanded for computation of duty using the lowest per-MT value shown in the SCN and penalty under section 11AC limited to the duty so computed); one appeal allowed, another rejected as per the order.

Interest on differential duty from the due date of payment - Provisional valuation and payment of differential duty after finalisation of cost of manufacture - Rule 8 of the Central Excise Rules, 2002 prescribing due date for duty payment - Extended period of limitation not invocable in absence of suppression or mala fide - Revenue neutrality where consignee is entitled to Cenvat credit

Interest on differential duty from the due date of payment - Rule 8 of the Central Excise Rules, 2002 prescribing due date for duty payment - Provisional valuation and payment of differential duty after finalisation of cost of manufacture - Whether interest on differential duty is payable from the due date with reference to the date of removal or from the date of payment of the differential duty. - HELD THAT: - The Tribunal accepted the legal position, as noted from the Supreme Court authority relied upon, that where goods are valued provisionally and differential duty becomes payable subsequently, interest is chargeable from the statutory due date relating to the date of removal and not from the date when the differential duty is paid. The appellant's practice of paying provisional duty at removal and later adjusting on finalisation of costs does not alter the statutory prescription that interest runs from the due date under the relevant rules. [Paras 4]

Demand of interest is sustainable and is chargeable from the due date prescribed by rule 8 of the Central Excise Rules, 2002.

Extended period of limitation not invocable in absence of suppression or mala fide - Revenue neutrality where consignee is entitled to Cenvat credit - Provisional valuation and payment of differential duty after finalisation of cost of manufacture - Whether the extended period for raising demand could be invoked against the appellant who followed a disclosed practice of provisional valuation and later payment of differential duty, and whose removals were to related units entitled to Cenvat credit. - HELD THAT: - The Tribunal found on the material that the appellants had consistently disclosed their modus operandi by way of correspondence and practice of paying provisional duty at removal and subsequently paying any shortfall on finalisation of accounts. The supplies were to related divisions entitled to Cenvat credit, making the transactions revenue neutral. In those circumstances there was no suppression of material facts or mala fide conduct warranting invocation of the extended period. Hence the extended period could not be invoked and the demand raised under the extended period was held unsustainable. [Paras 4]

Demand raised by invoking the extended period is not sustainable; appeal E/174/2012 allowing the challenge to the extended period demand.

Concession as basis for disposal - Disposition of appeal No. E/11927/2019 where the appellant conceded the demand of interest as not contested due to its meagre amount. - HELD THAT: - Counsel for the appellant expressly conceded non-contest to the demand in view of its small amount and undertook to pay the interest demanded. The Tribunal recorded this concession and disposed of the appeal accordingly. [Paras 5]

Appeal No. E/11927/2019 dismissed on the appellant's concession; appellant to pay the demanded interest.

Final Conclusion: The Tribunal upheld that interest on subsequently ascertained differential duty is payable from the statutory due date (date of removal) and sustained the interest demand on merits, but allowed the challenge to demands raised by invoking the extended period because there was no suppression or mala fide and the transactions were revenue neutral; a separate appeal was dismissed by concession and the appellant ordered to pay the interest in that appeal.

Cancellation of bond under Rule 4 - admissibility of exemption under an exemption notification entry - jurisdiction of Assistant Commissioner of Central Excise over end use verification - inappropriateness of bond cancellation proceedings for determining customs exemption entitlement - recovery of differential duty under Rule 8 - proceedings for short payment of duty under Section 28 of the Customs Act, 1962

Cancellation of bond under Rule 4 - inappropriateness of bond cancellation proceedings for determining customs exemption entitlement - Whether the Assistant Commissioner was correct in cancelling the bond executed under Rule 4 on the ground that the importer availed an inadmissible exemption entry. - HELD THAT: - The Tribunal held that cancellation of the bond executed under Rule 4 is not the appropriate proceeding to determine the admissibility of an exemption claimed at the time of clearance. The bond relates to end use assurance and the Assistant Commissioner's role is to ensure end use; disputes as to entitlement to a particular exemption entry and duty shortfall are to be pursued through the mechanisms provided by the Rules and the Customs Act. The court observed that if end use contravention is alleged, action lies under Rule 8 to recover the differential duty and interest; if duty was short paid at clearance, proceedings under Section 28 of the Customs Act are the proper remedy. Cancellation of the bond therefore cannot substitute for these statutory remedies and cannot properly determine entitlement to a specific exemption entry. [Paras 5]

Cancellation of the bond was not a proper vehicle to decide admissibility of the exemption claimed; such questions must be addressed under Rule 8 or Section 28 as applicable.

Jurisdiction of Assistant Commissioner of Central Excise over end use verification - recovery of differential duty under Rule 8 - proceedings for short payment of duty under Section 28 of the Customs Act, 1962 - Whether any effective relief or future consequence flows from the appeal against the bond cancellation after the lapse of time and in the present proceedings. - HELD THAT: - The Tribunal recorded that, as of the date of hearing, any adjudication in the appeal would be futile: it could not alter past imports nor bind future import clearance decisions. Any action relating to alleged contravention of end use conditions must proceed under Rule 8, and any claim of short payment of duty at clearance must proceed under Section 28; those proceedings operate independently of the bond. Given this, the appeal had become an exercise in futility and lacked practical consequences. [Paras 5]

The appeal was rendered infructuous as the Tribunal could not grant effective relief in respect of past or future imports; the appropriate remedies remain Rule 8 and Section 28 proceedings.

Final Conclusion: The appeal is dismissed as infructuous: cancellation of the bond was not the proper forum to determine entitlement to the claimed customs exemption, and any alleged end use contravention or duty shortfall must be pursued under Rule 8 or Section 28 respectively.

Claiming concessional rate of tax on duplicate Declaration Forms - requirement of original Declaration Forms for concessional rate - strict compliance with statutory conditions for concessional rate - reviewability under Section 37(7) of the TNGST Act on discovery of new and important facts

Claiming concessional rate of tax on duplicate Declaration Forms - requirement of original Declaration Forms for concessional rate - strict compliance with statutory conditions for concessional rate - Assessee not entitled to concessional rate/exemption on the basis of duplicate Form 'C' and duplicate Form 'H'. - HELD THAT: - The Court upheld the principle that the statutory scheme for concessional rate of tax requires strict compliance with the conditions for claiming that concession, including production of original declaration forms. The Tribunal's reliance on earlier authoritative decisions of the Supreme Court (as cited in the impugned order) establishes that duplicate forms cannot substitute for original forms to entitle an assessee to the concessional rate. A liberal construction was held inappropriate given the mandatory character of the provisions and settled precedents requiring strict adherence to the rules for claiming concessional rates.

Claim for concessional rate based on duplicate 'C' and 'H' forms rejected; original forms required.

Reviewability under Section 37(7) of the TNGST Act on discovery of new and important facts - Review application before the Tribunal was not maintainable because it did not rest on discovery of new and important facts which were not within the assessee's knowledge despite due diligence. - HELD THAT: - The Tribunal correctly applied the statutory limitation on review by requiring that a review be founded on discovery of new and important facts that were not within the party's knowledge after exercise of due diligence when the original order was passed. The assessee's belated assertion that duplicate declaration forms were now available did not amount to such a discovery; the matter was therefore outside the scope of review under the provision relied upon and the Tribunal was justified in dismissing the review application.

Review application dismissed as not based on newly discovered facts within the meaning of Section 37(7) of the TNGST Act.

Final Conclusion: Writ petition dismissed. The Tribunal did not err in rejecting the review application; duplicate declaration forms do not entitle the assessee to concessional rate and the review was not maintainable for want of newly discovered facts.

Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act, 1881 - requirement of specific averments to fasten liability on directors in complaints under Section 141 - liability of independent and non-executive directors under Section 149(12) of the Companies Act, 2013 - distinction between being a director and being in charge of and responsible for conduct of company's business - quashing of summoning order in criminal complaint under Section 138 of the Negotiable Instruments Act, 1881

Vicarious liability of company directors under Section 141 of the Negotiable Instruments Act, 1881 - requirement of specific averments to fasten liability on directors in complaints under Section 141 - liability of independent and non-executive directors under Section 149(12) of the Companies Act, 2013 - Summons issued to the petitioner (an Independent, Non Executive Director) under a complaint for alleged dishonour of cheques were liable to be quashed. - HELD THAT: - The Court found that the complaint contained only bald, general averments that the directors (including the petitioner) were "in charge and responsible" for the company's business without spelling out how the petitioner was specifically in charge of or responsible for the conduct of the business at the time of the alleged offence. The petitioner produced public records (Form 32) showing appointment as an Additional Director in the category of Independent and Non Executive Director (DIN reflected). Reliance was placed on settled precedents establishing that (i) Section 141 creates vicarious liability which must be strictly construed, (ii) mere holding of directorship or recital of statutory language in the complaint is insufficient, and (iii) specific averments as to how a director was in charge of and responsible for the company's business at the relevant time are essential unless the person is a Managing/Whole time Director or the signatory to the cheque. Further, Section 149(12) of the Companies Act, 2013 limits the liability of independent/non executive directors to acts done with their knowledge, consent or connivance or attributable through board processes or where they failed to act diligently. The respondent's subsequent assertions (in affidavits) that the petitioner was a key managerial person or participated in all board/committee meetings were not pleaded in the complaint and thus could not supply the missing specific averments required to sustain vicarious liability in a criminal complaint. The Court also noted the temporal gap: the company's record showing any asserted KMP status related to the financial year 01.04.2015-31.03.2016, whereas the cheques were drawn on 07.06.2016, undermining an inference that petitioner was in charge at the time of the offence. For these reasons the presumption under Section 141 could not be raised against the petitioner on the basis of the complaint as framed. [Paras 17, 18, 19]

Impugned summoning order dated 20.02.2017 quashed insofar as it issues summons to the petitioner for alleged offence punishable under Section 138 of the Negotiable Instruments Act, 1881.

Final Conclusion: The petition is allowed: summons issued to the petitioner in CC No.45438/2016 under Section 138 of the Negotiable Instruments Act, 1881 are quashed in view of absence of specific averments against an Independent, Non Executive Director and the protections afforded by Section 149(12) of the Companies Act, 2013; the petition is disposed of accordingly.