TaxTMI Updates e-Newsletter
Jan 16,2023

Transitional credit under Section 140 - Form GST TRAN-1 - revised TRAN I window pursuant to Supreme Court decision in Filco Trade Centre - infructuous petition

Infructuous petition - revised TRAN I window pursuant to Supreme Court decision in Filco Trade Centre - Form GST TRAN-1 - transitional credit under Section 140 - Whether the writ petition seeking declaratory reliefs and quashing of the rejection of FORM GST TRAN-1 remained maintainable or became infructuous in view of subsequent filing of a revised TRAN I under the window granted by the Supreme Court in Filco Trade Centre - HELD THAT: - The petitioner had sought declarations on the vires of Rule 117, the directory/mandatory character of the claimed due date, and a direction to quash the Deputy Commissioner's rejection of a manually filed FORM GST TRAN 1 and to consider the petitioner's claim of input tax credit under Section 140. However, the petitioner subsequently filed a revised TRAN I during the special window granted by the Supreme Court in Filco Trade Centre and analogous matters. Learned counsel for both parties recorded that the petition had become infructuous in view of that filing and the relief now available to the petitioner. Having regard to the redressal afforded by the Apex Court's judgment and the subsequent filing of the revised TRAN I, the High Court disposed of the writ petition as infructuous and closed the pending interlocutory application. [Paras 2, 3, 4]

Writ petition disposed of as infructuous in view of the petitioner's filing of revised TRAN I under the window granted by the Supreme Court; pending I.A. closed.

Final Conclusion: The petition seeking declarations and quashing of the rejection of FORM GST TRAN 1 was disposed of as infructuous because the petitioner obtained the relief available under the Supreme Court's Filco Trade Centre judgment by filing a revised TRAN I; consequential interlocutory application closed.

Attachment under Section 83 - remedy under Rule 159(5) of the Maharashtra GST Rules - writ jurisdiction and exhaustion of alternative remedy - authority's power to decide jurisdictional objections and release attached property

Writ jurisdiction and exhaustion of alternative remedy - remedy under Rule 159(5) of the Maharashtra GST Rules - Whether the writ petition should be entertained without the petitioner first availing the remedy under Rule 159(5). - HELD THAT: - Relying on the Division Bench decision in Jaychem Enterprises Pvt. Ltd., the Court declined to exercise writ jurisdiction at this stage because Rule 159(5) provides an effective statutory remedy to challenge an attachment under the GST rules. The Court observed that sub-rule (5) enables an objector to seek release of attached property by making an appropriate application (Form GST DRC-23) to the concerned authority and obtaining a reasoned order after opportunity of hearing. Given that factual examination is often necessary to determine whether an attachment legitimately protects the revenue, the petitioner must first exhaust the prescribed statutory mechanism before seeking judicial interference. The Court therefore directed the petitioner to approach the authority under Rule 159(5) within a limited time and withheld relief pending that statutory process.

Petition dismissed insofar as immediate writ relief was sought; petitioner directed to avail remedy under Rule 159(5) before approaching the court.

Authority's power to decide jurisdictional objections and release attached property - attachment under Section 83 - Whether the authority hearing an application under Rule 159(5) can entertain and decide objections that the attaching authority lacked jurisdiction. - HELD THAT: - The Court held that the contention that the authority cannot decide jurisdictional objections is incorrect. If the petitioner demonstrates, on facts and law, that the action under the relevant provision effecting attachment is not proper, the concerned authority is empowered to release the attachment under Rule 159(5). Therefore, issues of locus or jurisdiction raised by the petitioner are not excluded from determination by the authority seized of the Rule 159(5) application; the authority must examine the objections and pass a reasoned order.

The authority under Rule 159(5) may consider and decide objections including jurisdictional objections and may release the attachment if satisfied.

Remedy under Rule 159(5) of the Maharashtra GST Rules - attachment under Section 83 - Extent and manner of judicial direction where statutory remedy is available and attachment has been in force for a period of time. - HELD THAT: - While recording that the petitioner's bank account had remained attached since April 2022, the Court noted that the petitioner bore partial responsibility for delay in invoking the statutory remedy. Balancing the need for exhaustion of statutory remedy with the petitioner's grievance about prolonged attachment, the Court exercised limited supervisory control by prescribing a timetable: the petitioner was given one week to file the application under Rule 159(5) and the authority was directed to endeavour to decide the application in accordance with law within three weeks of filing. All substantive contentions, including locus, were kept open for decision by the authority.

Petitioner directed to apply under Rule 159(5) within one week; authority directed to endeavour to decide the application within three weeks of filing; substantive issues kept open.

Final Conclusion: Writ petition disposed of by declining interim judicial interference; petitioner must first invoke the statutory remedy under Rule 159(5) and the concerned authority is directed to consider and decide the application on merits (including jurisdictional objections) within the stipulated timeline.

Violation of principles of natural justice - ex parte order lacking reasons - remand for fresh adjudication on merits - requirement of speaking order - deposit as pre-condition for hearing - stay of coercive action during pendency - de-freezing/de-attaching of bank accounts

Violation of principles of natural justice - ex parte order lacking reasons - Impugned appellate order dated 10.02.2021 and the originating order dated 05.03.2020 were vitiated by want of fair opportunity and absence of discernible reasons and therefore liable to be set aside. - HELD THAT: - The Court found that the appeal was rejected without affording sufficient time to the petitioner to represent its case and that the assessing order was ex parte in nature and did not assign sufficient or decipherable reasons showing how the amount due was determined. These defects amounted to violation of the principles of natural justice and rendered the orders legally unsustainable. The Court accordingly quashed and set aside both the appellate order and the assessing order and the summary in Form GST DRC-07 for the stated period.

Impugned orders dated 10.02.2021 and 05.03.2020 and the Form GST DRC-07 summary are quashed and set aside.

Remand for fresh adjudication on merits - requirement of speaking order - Matter remanded to the Assessing Authority for fresh decision on merits after complying with principles of natural justice and passing a speaking order. - HELD THAT: - The Court directed that the Assessing Authority shall decide the case afresh on merits after affording adequate opportunity of hearing, permitting the parties to place on record necessary documents, and passing a speaking order assigning reasons. All issues of fact and law were left open for fresh adjudication; the Court expressly refrained from expressing any opinion on merits and required the Authority to decide expeditiously, preferably within two months of the petitioner's appearance.

Proceedings remanded to the Assessing Authority for fresh adjudication on merits with directions to afford hearing and pass a speaking order; issues on merits left open.

Deposit as pre-condition for hearing - stay of coercive action during pendency - de-freezing/de-attaching of bank accounts - Interim reliefs granted: deposit requirements and protective measures during pendency of remanded proceedings were directed and bank accounts, if attached, were to be de-frozen. - HELD THAT: - The Court accepted the petitioner's statement that ten per cent of the total amount (precondition for hearing) had been deposited and ordered that, if not deposited, it must be made before the next date; the petitioner undertook to additionally deposit ten per cent of the demand within four weeks. These deposits are without prejudice to parties' rights and, if found excessive, to be refunded. The Court further directed immediate de-freezing/de-attaching of the petitioner's bank accounts, if affected by the impugned proceedings, and restrained the Revenue from taking coercive steps during the pendency of the remanded proceedings.

Petitioner to ensure requisite deposits; bank accounts to be de-frozen if attached; no coercive action to be taken during pendency.

Final Conclusion: Writ petition allowed in part: impugned appellate and assessing orders (and the DRC-07 summary) set aside for violation of natural justice and want of reasons; matter remanded to the Assessing Authority for fresh adjudication on merits with directions to afford hearing, pass a speaking order and decide expeditiously; interim directions given regarding deposits, de-freezing of bank accounts and prohibition of coercive steps during pendency; liberty reserved to challenge future orders.

Natural justice - service of notice - opportunity of hearing - burden of proof of service - entertaining writ despite alternative remedy - remand for fresh hearing

Natural justice - service of notice - opportunity of hearing - burden of proof of service - remand for fresh hearing - Validity of the impugned order dated May 25, 2022 in light of alleged non-receipt of hearing notices and consequent breach of the principles of natural justice, and the appropriate remedial step. - HELD THAT: - The Court found that the writ petition, though an alternative remedy of appeal existed, was properly entertained because the petitioner had asserted non-receipt of the notices of hearing (paragraphs 2-4). The Department relied on emailed notices said to have been sent in April 2022 but produced no document showing that the email address was furnished by an authorised representative; the material before the Court did not discharge the burden of proving service of those notices (paragraphs 6-7). Given that the impugned order was premised on the assessee having had notice and an opportunity to be represented, the absence of proof of service meant the order was passed without hearing the assessee and thus breached natural justice (paragraph 8). The Court therefore set aside the impugned order and restored proceedings to the stage of the show-cause notice, directing the Department to issue a reasonable fresh notice for hearing to the email address stated in the assessee's affidavit and to forward a copy simultaneously to the petitioner's advocate within a specified time (paragraphs 8-10). The Court expressly did not decide the merits and left the Department free to proceed in accordance with law after service is established (paragraph 10). [Paras 6, 7, 8, 9, 10]

Impugned order of May 25, 2022 set aside for failure to afford hearing; matter restored to stage of show-cause notice and remitted for fresh service of notice by email to [email protected] and simultaneous intimation to the petitioner's counsel within three weeks, without adjudication on merits.

Final Conclusion: Writ petition allowed: the Service Tax order dated May 25, 2022 set aside for breach of natural justice due to non-proved service of hearing notices; proceedings remitted to the show-cause stage with directions for fresh notice and opportunity of hearing; merits left open to the Department.

Advance ruling - Maintainability of application for advance ruling - Scope of Authority for Advance Ruling limited to proposed or undecided transactions - Transactions already undertaken and on which tax has been paid are outside the purview of advance ruling

Advance ruling - Maintainability of application for advance ruling - Scope of Authority for Advance Ruling limited to proposed or undecided transactions - Transactions already undertaken and on which tax has been paid are outside the purview of advance ruling - Application for advance ruling filed by the applicant is not maintainable as the transactions in question had already been undertaken and GST had been discharged and returns filed. - HELD THAT: - The Authority examined the scope of Chapter XVII of the GST Act and Section 95 read with Section 97(2), which limit advance rulings to matters in relation to supplies being undertaken or proposed to be undertaken by the applicant. The Authority observed that advance rulings are intended to provide certainty in advance for proposed transactions and, while in limited circumstances rulings may be sought for future transactions, matters in respect of which GST has already been discharged and returns filed fall outside its purview. The applicant filed the application after having already discharged GST liability on the supplies in question and after issuance of clarificatory Circular No.164/20/2021-GST and the applicable notification, demonstrating that the applicant was aware of the applicable position and had been complying with it. Given that the subject supplies had been effected and tax paid, the Authority held it could not adjudicate the merits and declined to proceed to substantive issues such as classification or ITC entitlement.

The application for advance ruling is not maintainable and is rejected.

Final Conclusion: The Authority rejected the advance ruling application as not maintainable because the supplies in question had already been undertaken and GST had been paid and returns filed; the matter therefore falls outside the scope of the Authority for Advance Ruling.

Functions entrusted to Panchayats under Article 243G - functions entrusted to Municipalities under Article 243W - pure services excluding works contract service or other composite supplies involving supply of any goods - exemption under Notification No. 12/2017-Central Tax (Rate) (S. No. 3) - State Urban Development Agency (SUDA) / District Urban Development Agency (DUDA) as Governmental authority

Functions entrusted to Municipalities under Article 243W - functions entrusted to Panchayats under Article 243G - State Urban Development Agency (SUDA) / District Urban Development Agency (DUDA) as Governmental authority - Services rendered by the applicant under the contract with DUDA/SUDA for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution. - HELD THAT: - The Authority examined the Memoranda of Association of SUDA and DUDA, the organisational relationship between SUDA and DUDA, government orders showing SUDA's governmental character, and the objects and activities of PMAY. The functions and programme activities listed in the 11th and 12th Schedules (such as slum improvement, urban planning, poverty alleviation and related tasks) correspond to matters entrusted to Panchayats/Municipalities. SUDA, as the state nodal agency for PMAY, and DUDA, as its district-level extension, implement those schemes and utilize government funds. On that basis the consultancy services provided for preparation of DPR and PMC for PMAY were held to be in relation to functions entrusted to Municipalities/Panchayats under Articles 243W/243G respectively, and thus fall within the descriptive scope of the exemption entry considered by the Authority. [Paras 13, 15, 16, 18, 19]

Services rendered under the contract with DUDA/SUDA for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G.

Pure services excluding works contract service or other composite supplies involving supply of any goods - exemption under Notification No. 12/2017-Central Tax (Rate) (S. No. 3) - The consultancy services (Preparation of DPR and Project Management Consultancy) under the contract qualify as "pure services" and are exempt under entry S. No. 3 of Notification No. 12/2017-Central Tax (Rate). - HELD THAT: - The Authority scrutinised the detailed scope of work for DPR preparation and PMC (including surveys, data compilation, architectural/engineering designs, MIS entries, supervision, certification of progress, geo-tagging, quality control, reporting and administrative functions). The services did not involve execution of works contracts or supply of goods as part of composite supplies; they comprised professional/consultancy activities ancillary to implementation of PMAY schemes. Applying the condition in entry S. No. 3 of Notification No. 12/2017-CT (Rate) (that the service be a pure service provided to specified government or local authorities and in relation to functions entrusted to Panchayats/Municipalities), the Authority concluded that these services qualify as pure services eligible for exemption from CGST/UPGST. [Paras 20, 21, 22, 23]

The services qualify as pure services (excluding works contract or other composite supplies involving supply of goods) and are exempt under S. No. 3 of Notification No. 12/2017-Central Tax (Rate).

Final Conclusion: The Authority ruled that the applicant's DPR and PMC services provided to DUDA/SUDA for PMAY are (i) in relation to functions entrusted to Municipalities/Panchayats under Articles 243W/243G, and (ii) constitute pure services eligible for exemption under entry S. No. 3 of Notification No. 12/2017-Central Tax (Rate); the ruling is confined to the jurisdiction of the Authority and subject to statutory provisions governing advance rulings.

Pending refund application - Direction for expeditious disposal

Pending refund application - Expeditious consideration - The refund application filed by the petitioner and kept pending for a prolonged period was required to be considered and decided within a fixed time. - HELD THAT: - The Court noted that the refund application dated 01.06.2019, filed under Section 54 of the Central Goods and Services Tax Act, 2017, had remained pending since 2019 despite repeated reminders. Without entering into the merits of the refund claim, the Court treated the prolonged pendency of a refund application as warranting a direction to the respondent to consider, process and pass orders on the application within a stipulated period, and to communicate the decision to the petitioner promptly. [Paras 6, 7, 9]

The respondent was directed to consider, process and make orders on the refund application within four weeks and to intimate the decision to the petitioner within five working days thereafter.

Final Conclusion: The writ petition was disposed of by directing the respondent to decide the pending refund application expeditiously within the time fixed by the Court, without any adjudication on the merits of the refund claim.

Reopening of assessment - proviso to Section 147 - reopening beyond four years for non-disclosure of material facts - failure to disclose fully and truly all material facts - change of opinion - principle in Commissioner of Income Tax v. Kelvinator of India Ltd.

Proviso to Section 147 - reopening beyond four years for non-disclosure of material facts - failure to disclose fully and truly all material facts - Reassessment notice dated 30.03.2021 under Section 148 for Assessment Year 2013-14 is time-barred and cannot be sustained under the proviso to Section 147. - HELD THAT: - The Court examined the reasons recorded for reopening and the assessment records and concluded that the facts relied upon by the Income Tax Officer - including sale consideration, claimed indexed costs and claimed expenses - had already been disclosed, considered and reflected in the earlier assessment proceedings culminating in the assessment order dated 26.04.2017. The reasons letter itself records that the Department's ITBA '360 degree' tool yielded no fruitful information, and nothing in the notice or reasons demonstrates that the assessee failed to "fully and truly" disclose material facts. The proviso to Section 147 permits reopening after four years only where there is tangible material to show nondisclosure; no such material exists on the record and the reassessment was therefore initiated beyond the permissible period and is time barred. [Paras 5, 6]

Impugned notice dated 30.03.2021 is time barred and cannot be saved by the proviso to Section 147.

Reopening of assessment - change of opinion - principle in Commissioner of Income Tax v. Kelvinator of India Ltd. - Reassessment has been resorted to on the basis of a mere change of opinion of the Assessing Officer and is therefore invalid. - HELD THAT: - On analysis of the reasons and the assessment record the Court found that the reopening was prompted by disagreement with the treatment adopted in the original assessment rather than by any fresh tangible material. The officers' own statement that their ITBA search produced no fruitful information, and the absence of any newly discovered material, show that the reassessment stems from a change of opinion. Such exercise of power is impermissible under the settled principle in Commissioner of Income Tax v. Kelvinator of India Ltd. and therefore the notice cannot be sustained. [Paras 5, 7]

Reassessment initiated on account of change of opinion is untenable and the notice is liable to be quashed.

Final Conclusion: The writ petition is allowed: the notice dated 30.03.2021 issued under Section 148 and all proceedings pursuant thereto are quashed as time barred and insofar as they are founded on a mere change of opinion, unsustainable under settled law. No order as to costs.

Validity of search warrant - Search under Section 132 - Proceedings under Section 153A - Jurisdictional requirement for assessment after search - Quashing of assessment for lack of warrant

Validity of search warrant - Search under Section 132 - Existence of a valid search warrant authorising the searches on 9th and 10th August 2005 - HELD THAT: - The ITAT, after examining the records produced by the Revenue pursuant to the remand, found that no search warrant had in fact been issued authorising the searches of the residential and office premises of the assessee. This factual conclusion was affirmed by the High Court, which noted that the Revenue had been unable to show a valid search warrant in its records. The Court accepted that the remand had been for the limited purpose of verifying the factual question of whether a warrant existed, and that verification supported the Tribunal's finding that no warrant was issued. [Paras 11, 13]

No valid search warrant was shown to have been issued authorising the searches.

Proceedings under Section 153A - Jurisdictional requirement for assessment after search - Quashing of assessment for lack of warrant - Validity of assessments initiated under Section 153A in the absence of a valid search warrant - HELD THAT: - The Court held that initiation of proceedings under Section 153A is contingent upon a valid search under Section 132; in the absence of a valid search warrant authorising the search, proceedings under Section 153A could not be lawfully initiated. Applying that legal principle to the established factual conclusion that no warrant existed, the High Court found that the assessments framed under Section 153A were without jurisdiction. The Court also observed that, if permissible by law, the Department remained free to make assessments by other lawful means, but the Section 153A proceedings as conducted were invalid. [Paras 11, 13, 14]

Assessments under Section 153A are invalid and liable to be quashed where no valid search warrant authorised the search.

Final Conclusion: The appeals are dismissed: the Tribunal's finding that no valid search warrant authorised the searches was affirmed, and consequently the assessments framed under Section 153A for AYs 2000-01 to 2006-07 were held to be without jurisdiction and quashed; no substantial question of law arises.

Reasonable cause under section 273B - penalty under section 271B for failure to comply with direction under section 142(2A) - special audit under section 142(2A) - onus on assessee to prove reasonable cause - impotentia excusat / lex non cogit ad impossibilia

Reasonable cause under section 273B - penalty under section 271B for failure to comply with direction under section 142(2A) - special audit under section 142(2A) - onus on assessee to prove reasonable cause - impotentia excusat / lex non cogit ad impossibilia - Existence of reasonable cause under section 273B excused the assessee's failure to comply with directions for special audit and therefore penalty under section 271B is not leviable. - HELD THAT: - The Tribunal accepted the assessee's contention, supported by order-sheet entries of the assessment proceedings, that relevant ledgers were produced to the assessing officer and were impounded during assessment proceedings, thereby preventing the assessee from producing the same to the Special Auditor and complying with the direction for special audit under section 142(2A). Applying the statutory exception in section 273B, and the legal maxims that impotentia excusat and lex non cogit ad impossibilia excuse performance rendered impossible by circumstances beyond the assessee's control, the Tribunal held that a reasonable cause existed for non-compliance. The Tribunal noted the established onus on the assessee to demonstrate reasonable cause and found that this onus was discharged on the material on record. In view of identical fact patterns across the group appeals, the Tribunal applied the findings in the earlier decision in Ashesh Agrawal mutatis mutandis and directed deletion of the penalty imposed under section 271B. [Paras 4, 5]

Penalty imposed under section 271B deleted and the appeals allowed.

Final Conclusion: The Tribunal found that the assessee established a reasonable cause within the meaning of section 273B-books were produced and impounded, preventing compliance with special audit directions-thereby warranting deletion of the penalty under section 271B; the same conclusion was applied mutatis mutandis to the other group appeals.

Prima facie adjustment under section 143(1)(a)(v) of the Act - treatment of deductions under Chapter VIA at the stage of section 143(1) of the Act - applicability of section 80AC clause (ii) to late-filed returns - natural justice - requirement to afford opportunity before disallowance at section 143(1) of the Act - remand for fresh adjudication to the Assessing Officer

Prima facie adjustment under section 143(1)(a)(v) of the Act - treatment of deductions under Chapter VIA at the stage of section 143(1) of the Act - Whether a prima facie adjustment under section 143(1)(a)(v) could be made in respect of a deduction under Chapter VIA for the assessment year 2018-19. - HELD THAT: - The Tribunal noted that the amendment to section 143(1)(a)(v) - covering deductions under Chapter VIA - came into force with effect from 01/04/2021, and accordingly a prima facie adjustment under that provision could not be made at the stage of section 143(1) for the period in question. The Bench observed that the issue of disallowance of deduction under section 80P does not fall for consideration at the section 143(1) stage and may be a matter to be considered at the stage of section 143(3). The coordinate Bench decision in Shri Nava Ujala Seva Sahakari Mandali Ltd. was noted as holding that late filing of return does not amount to an 'incorrect claim' under section 143(1)(a)(ii), reinforcing that such matters are not to be decided by summary adjustment at the 143(1) stage. [Paras 7]

Prima facie adjustment under section 143(1)(a)(v) in respect of the Chapter VIA deduction was not permissible at the section 143(1) stage for assessment year 2018-19.

Natural justice - requirement to afford opportunity before disallowance at section 143(1) of the Act - remand for fresh adjudication to the Assessing Officer - applicability of section 80AC clause (ii) to late-filed returns - Whether the matter should be restored for fresh consideration and an opportunity afforded to the assessee to substantiate the claim under section 80P. - HELD THAT: - The Tribunal accepted the assessee's contention that principles of natural justice require that the assessee be given an opportunity to explain the claim before it is denied at the 143(1) stage. Having noted that the Assessing Officer did not consider the merits of the section 80P claim, the Tribunal exercised its discretion to set aside the orders below and restore the issue to the file of the Assessing Officer for verification and adjudication on merits after affording opportunity to the assessee. The Tribunal expressly refrained from pronouncing any finding on the applicability of section 80AC clause (ii). [Paras 8, 9]

The issue is restored to the file of the Assessing Officer for fresh adjudication on the merits after giving the assessee an opportunity; no adjudication was made on the applicability of section 80AC clause (ii).

Final Conclusion: The orders of the authorities below are set aside and the issue of allowability of the deduction under section 80P is restored to the Assessing Officer for fresh consideration after affording the assessee an opportunity; the Tribunal did not decide the applicability of section 80AC clause (ii). Appeal allowed for statistical purposes.

Revision under section 263 - Penalty under section 271(1)(c) of the Act - Requirement of assessing officer's recorded satisfaction for levy of penalty - Limits of revisionary power to direct initiation of penalty proceedings - De novo assessment and fresh initiation of proceedings

Revision under section 263 - Penalty under section 271(1)(c) of the Act - Requirement of assessing officer's recorded satisfaction for levy of penalty - Limits of revisionary power to direct initiation of penalty proceedings - Whether the Principal Commissioner of Income Tax could, under section 263, hold assessment orders erroneous and direct initiation of penalty proceedings under section 271(1)(c) where the Assessing Officer had not recorded any satisfaction of concealment or furnishing of inaccurate particulars and had failed to initiate penalty proceedings. - HELD THAT: - The Tribunal examined whether non-initiation of penalty by the Assessing Officer, and absence of any recorded satisfaction regarding concealment or inaccurate particulars in the assessment order, warranted exercise of revisionary jurisdiction under section 263 to direct initiation of proceedings under section 271(1)(c). The Tribunal noted that the Assessing Officer's assessment dated 31.12.2019 did not record satisfaction of concealment or furnishing of inaccurate particulars and therefore contained no basis for levy of penalty. Reliance was placed on consistent judicial authority that where the assessing authority has not recorded requisite satisfaction, the Commissioner in revision under section 263 cannot direct initiation of penalty proceedings. The decisions relied upon by the Principal Commissioner related mainly to revision of orders which had specifically dropped penalty proceedings; those decisions were inapposite to the present question which concerns revision where no satisfaction was recorded and no penalty was initiated. Applying this principle, the Tribunal held that the Principal Commissioner erred in assuming jurisdiction under section 263 to direct initiation of penalty proceedings in the absence of any recorded satisfaction by the Assessing Officer, and that such exercise rendered the revision orders unsustainable. [Paras 13, 17, 18, 19]

The revisionary orders passed by the Principal Commissioner under section 263 directing initiation of penalty proceedings under section 271(1)(c) were quashed and the appeals allowed.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2010-11 and A.Y. 2011-12, quashing the section 263 orders which had directed initiation of penalty under section 271(1)(c) where the Assessing Officer had not recorded any satisfaction of concealment or furnishing of inaccurate particulars.

Violation of Principles of Natural Justice - Audi Alteram Partem - Remand for fresh adjudication / Restoration to appellate authority for reasoned order - Addition under section 56(2)(viib) - share consideration exceeding fair market value - Disallowance under section 40A(2)(b) - expenditure to related person excessive or unreasonable

Violation of Principles of Natural Justice - Audi Alteram Partem - Restoration to appellate authority for reasoned order - Ld. CIT(A) passed orders without taking into consideration the submissions of the assessee, resulting in breach of the principles of natural justice. - HELD THAT: - The Tribunal found that the orders of the Ld. CIT(A) for the assessment years under appeal were rendered without considering the assessee's submissions and were therefore ex parte in effect. In view of this lapse, the Tribunal concluded that the principles of natural justice, namely audi alteram partem, were violated. Rather than adjudicating the substantive grounds on the merits, the Tribunal considered it appropriate to restore the matters to the file of the Ld. CIT(A) so that a reasoned order may be passed after providing the assessee an adequate opportunity of being heard and after taking the assessee's submissions into account. [Paras 5]

Matters restored to the Ld. CIT(A) for de novo consideration after affording the assessee opportunity of being heard; grounds allowed for statistical purposes.

Addition under section 56(2)(viib) - share consideration exceeding fair market value - Remand for fresh adjudication - Addition made under section 56(2)(viib) in respect of shares alleged to have been issued for consideration exceeding fair market value was not finally adjudicated and is remitted to the Ld. CIT(A) for fresh decision after hearing the assessee. - HELD THAT: - Although the Ld. CIT(A) had affirmed the addition under section 56(2)(viib) by accepting the AO's computation of excess consideration over the DCF-based valuation, the Tribunal did not decide the substantive correctness of that addition on the merits because the appellate order was passed without considering the assessee's submissions. Consequently, the Tribunal restored the issue to the Ld. CIT(A) to examine afresh the applicability of section 56(2)(viib), the valuation evidence relied upon by the assessee, and any provisos or exemptions claimed, after affording the assessee an opportunity to be heard. [Paras 5, 8]

Addition under section 56(2)(viib) remitted to the Ld. CIT(A) for fresh adjudication after hearing the assessee.

Disallowance under section 40A(2)(b) - expenditure to related person excessive or unreasonable - Remand for fresh adjudication - Disallowance under section 40A(2)(b) of payments to a director was not finally adjudicated and is remitted to the Ld. CIT(A) for fresh decision after hearing the assessee. - HELD THAT: - The Ld. CIT(A) had affirmed the AO's disallowance under section 40A(2)(b) on the view that the employer and the director were related/same person and that the assessee had failed to demonstrate otherwise. However, because the appellate order did not take into account the assessee's submissions and was effectively ex parte, the Tribunal declined to decide the substantive merits of the disallowance. The Tribunal directed that the question of applicability of section 40A(2)(b), including factual aspects regarding relationship, reasonableness of remuneration, and audit reporting, be considered afresh by the Ld. CIT(A) after providing the assessee a fair hearing. [Paras 5, 9]

Disallowance under section 40A(2)(b) remitted to the Ld. CIT(A) for fresh adjudication after hearing the assessee.

Final Conclusion: All three appeals are allowed for statistical purposes and restored to the file of the Ld. CIT(A) (NFAC) for de novo decision on the contested additions/disallowance after providing the assessee adequate opportunity of being heard and passing reasoned orders.

Advertising, Marketing and Promotion (AMP) expenditure not an international transaction - burden on Revenue to establish existence of an international transaction (agreement/arrangement/action in concert) - arm's length price adjustment requires an antecedent international transaction - bright line test (BLT) cannot by itself create an international transaction for AMP spend - transfer pricing adjustment rendered infructuous where transaction is not an international transaction

Advertising, Marketing and Promotion (AMP) expenditure not an international transaction - burden on Revenue to establish existence of an international transaction (agreement/arrangement/action in concert) - arm's length price adjustment requires an antecedent international transaction - AMP expenditure does not constitute an international transaction and no ALP adjustment was permissible - HELD THAT: - The Tribunal examined whether AMP spend by the assessee could be treated as an international transaction for the purposes of Chapter X. It applied the settled principle that the first precondition for a TP exercise is proof of an international transaction - ordinarily evidenced by an agreement, arrangement or an understanding obliging the Indian entity to incur AMP on behalf of the AE. Mere incidental or perceived benefit to the AE, or the fact that the AE owns the brand, does not by itself establish a transaction. The Tribunal followed earlier decisions of the forum which held that quantifying an AMP excess by application of the BLT and treating that quantum as a price to be adjusted is impermissible: the Revenue must first establish an actual transaction with an ascertainable price before invoking ALP methods. As the AO/TPO did not produce any evidence of a formal or informal arrangement to share or reimburse AMP spend, the threshold for an international transaction remained unfulfilled. Consequently, any benchmarking or ALP adjustment made by the TPO in respect of AMP expenditure was rendered infructuous. [Paras 5, 6]

The finding of the CIT(A) that AMP expenditure is not an international transaction is upheld and the assessee's cross-objection is allowed; the TP adjustment relating to AMP is vacated.

Admission of additional evidence by appellate authority - scope of appellate review where no fresh evidence is recorded - No separate evidence was admitted by the CIT(A) and the Revenue's objection on that ground was dismissed - HELD THAT: - The Revenue contended that the CIT(A) admitted and relied upon new evidence (different PLI/operating profit) without remanding to the AO/TPO in violation of procedural rules. The Tribunal perused the CIT(A)'s order and found no reference to admission of any additional evidence; nothing was placed before the Tribunal by the Department to substantiate this contention. In absence of any record showing admission or reliance on fresh evidence by the CIT(A), the ground raised by the Revenue alleging procedural impropriety was rejected. [Paras 6]

The Revenue's ground alleging admission of new evidence is dismissed for lack of substance.

Final Conclusion: The Revenue's appeal is dismissed and the assessee's cross-objection is allowed: AMP expenditure is not an international transaction, therefore no transfer-pricing (ALP) adjustment could be made for AY 2012-13; the Revenue's complaint about admission of evidence by the CIT(A) is rejected.

Adjustment under section 143(1) - Prior intimation and opportunity to respond - Carry forward of business loss - Principles of natural justice - Remand for fresh consideration

Adjustment under section 143(1) - Prior intimation and opportunity to respond - Principles of natural justice - Carry forward of business loss - Whether the reduction in the carry forward of loss by adjustment in the intimation under section 143(1) without prior intimation and opportunity to respond was permissible, and whether the matter required adjudication by the Assessing Officer with opportunity to the assessee. - HELD THAT: - The Tribunal noted that the legislative scheme for processing under section 143(1) permits specified adjustments only after an intimation is given to the assessee in writing or electronically and after considering any response received within thirty days. The record did not establish that any prior intimation or notice was issued to the assessee before the reduction in the carry forward loss, and the Department was unable to produce such intimation. The Commissioner (Appeals) had not properly adjudicated the grievance raised by the assessee and the Assessing Officer had not responded to the rectification application; moreover the matter was later selected for scrutiny under section 143(3). In these circumstances, the Tribunal held that the question of allowable carry forward required fresh consideration by the Assessing Officer with affording adequate opportunity of hearing to the assessee, rather than being left decided on the basis of the intimation process without record of prior intimation and response. [Paras 4, 5]

Remitted to the Assessing Officer for fresh consideration of the amount of loss eligible for carry forward, after providing the assessee adequate opportunity to be heard.

Final Conclusion: The appeal is allowed for statistical purposes and the matter of the quantum of loss eligible for carry forward for AY 2020-21 is restored to the file of the Assessing Officer for fresh adjudication with opportunity to the assessee.

Treatment of undisclosed fixed deposits in search assessment - assessability of deposits held in family members' names - appellate authority directing Assessing Officer to assess on computation filed during appellate proceedings - taxation of interest income offered in computation of income

Treatment of undisclosed fixed deposits in search assessment - assessability of deposits held in family members' names - appellate authority directing Assessing Officer to assess on computation filed during appellate proceedings - Deletion of addition in respect of fixed deposits and whether the addition could be sustained in the assessee's hands. - HELD THAT: - The CIT(A) accepted the assessee's computation of income which disclosed substantial receipts and called for a remand report. On remand the AO accepted that the assessee had source for fixed deposit of Rs. 5 crores. The Tribunal applied the principle that an appellate authority may direct the AO to consider assessment on the basis of a computation filed during appellate proceedings and observed that the remaining fixed deposits of Rs. 1.5 crores were in the names of family members. The Tribunal held that the addition could not be sustained in the hands of the assessee where the deposits were in family members' names and the AO had not shown absence of source for those deposits distinctively attributable to the assessee; further, the assessee's offered income in the computation was adequate to source the deposits found. Consequently, the deletion of the addition by the CIT(A) was confirmed. [Paras 6]

Deletion of the addition in respect of fixed deposits confirmed and addition not sustained in assessee's hands.

Taxation of interest income offered in computation of income - appellate authority directing Assessing Officer to assess on computation filed during appellate proceedings - Whether interest income added by the Assessing Officer was rightly deleted by the CIT(A). - HELD THAT: - The assessee's computation of income filed before the CIT(A) disclosed actual interest income, and the CIT(A) accordingly directed taxation only of the actual interest income shown. The Tribunal found no error in this approach and confirmed the CIT(A)'s direction to tax the actual interest as offered in the computation. [Paras 7]

Deletion of the interest addition confirmed and taxation limited to the actual interest income shown in the computation.

Final Conclusion: Revenue's appeal dismissed; assessee's cross-objection (not pressed) dismissed. The order of the CIT(A) confirming deletion of additions in respect of fixed deposits and limiting tax to actual interest offered is upheld.

Treaty tie breaker rules under Article 4(2) of the India Singapore DTAA - Permanent home, centre of vital interests and habitual abode tests - Taxability of employment income under Article 15(1) of the DTAA - Primacy of DTAA and treaty tie breaker rules over domestic assessment - Requirement and evidentiary value of a Tax Residency Certificate for claiming treaty relief - Operation of domestic provision for treaty relief and certificate requirement

Treaty tie breaker rules under Article 4(2) of the India Singapore DTAA - Permanent home, centre of vital interests and habitual abode tests - Requirement and evidentiary value of a Tax Residency Certificate for claiming treaty relief - Primacy of DTAA and treaty tie breaker rules over domestic assessment - Whether the appellant was to be treated as resident of Singapore for the period 15.12.2014 to 31.03.2015 and consequently whether the income earned in Singapore during that period was not taxable in India. - HELD THAT: - The Tribunal found that the appellant was resident of both India and Singapore but that residency had to be determined by applying the tie breaker rules in Article 4(2) of the India Singapore DTAA. Applying the sequential tests, the Tribunal accepted that a permanent home was available to the appellant in Singapore (apartment on rent, family relocated and presence of driving licence and local bank/accounting links), and that his personal and economic relations and habitual abode during the relevant period were centred in Singapore. The Tax Residency Certificate from Singapore and payment of tax in Singapore were not doubted by the authorities below and were accorded evidentiary weight. The Tribunal emphasised that DTAA provisions and the tie breaker rules govern residence for avoidance of double taxation and will prevail to the extent they are more beneficial, subject to compliance with domestic certificate requirements; here the certificate requirement was fulfilled. On these bases the Tribunal held that the appellant was resident of Singapore for the period in question and that, under Article 15(1) and the DTAA, the employment income earned in Singapore for the period 15.12.2014 to 31.03.2015 is not taxable in India. The Assessing Officer's reliance on physical presence in India and consequent global taxation was displaced by the treaty determination, and the revised return excluding the Singapore income was to be accepted. [Paras 7, 8]

The appeal is allowed: the tie breaker under Article 4(2) establishes residence in Singapore for the relevant period, the income earned in Singapore is not taxable in India for F.Y. 2014-15, the revised return is to be accepted and the addition deleted.

Final Conclusion: The Tribunal allowed the appeal, holding that for the period 15.12.2014 to 31.03.2015 the appellant was resident of Singapore under the DTAA tie breaker rules; treaty relief (supported by the Tax Residency Certificate) applies and the Assessing Officer's addition is deleted, with the revised return to be accepted.

Deduction under section 80P - revision under section 263 - interest on mandatory reserves - characterisation as business income

Deduction under section 80P - interest on mandatory reserves - characterisation as business income - revision under section 263 - Allowability of deduction under section 80P in respect of interest earned on amounts mandatorily transferred to reserves and validity of revision under section 263 setting aside the assessment for that reason. - HELD THAT: - The Tribunal accepted the assessee's reliance on a coordinate bench decision which held that where a society is legally obliged to transfer 25% of its profit to reserves under section 43(2) of the M.P./Chhattisgarh Societies Act, interest accruing on such reserved amounts partakes the character of business income and is therefore eligible for deduction under section 80P. There being no change in facts or law, the Tribunal found the assessing officer was correct in allowing the deduction in respect of the impugned interest. Consequently, the principal CIT's conclusion that the assessment order was erroneous and prejudicial to the revenue was not justified, and invocation of revisionary powers under section 263 was inappropriate. Relying on the coordinate bench precedent and absence of contrary circumstances, the Tribunal quashed the revision order and restored the original assessment. [Paras 6]

Revision order under section 263 quashed; original assessment restored and deduction under section 80P in respect of the impugned interest upheld.

Final Conclusion: Appeal allowed: the Tribunal upheld the assessing officer's allowance of deduction under section 80P for interest on mandatory reserves, held the revision under section 263 to be unjustified, quashed the revision order and restored the assessment for AY 2017-18.

Eligibility for exemption under section 80P(2)(a)(i) - cooperative society registered under Karnataka Souhard Sahakari Act, 1997 treated as cooperative society under section 2(19) - status of nominal members as members for exemption purposes - exemption under section 80P(2)(d) for interest from investments in other cooperative societies

Eligibility for exemption under section 80P(2)(a)(i) - cooperative society registered under Karnataka Souhard Sahakari Act, 1997 treated as cooperative society under section 2(19) - Whether a society registered under the Karnataka Souhard Sahakari Act, 1997 is eligible for exemption under section 80P(2)(a)(i) of the Income Tax Act for income from credit facilities to its members. - HELD THAT: - The Tribunal accepted the view of the Hon'ble Karnataka High Court that a society registered under the Karnataka Souhard Sahakari Act, 1997 falls within the definition of a cooperative society as envisaged in section 2(19) of the Act. The reasoning of the Commissioner (Appeals) and Assessing Officer that the appellant is not a cooperative society was therefore rejected. Applying that legal position, the income earned by the appellant from providing credit to its members falls within the exemption under section 80P(2)(a)(i). The Tribunal relied on the High Court decisions cited by the assessee to hold that the appellant meets the statutory description of a cooperative society and is entitled to the claimed exemption. [Paras 7]

The appellant society registered under the Karnataka Souhard Sahakari Act, 1997 is a cooperative society for the purposes of section 80P(2)(a)(i); the income from credit to members is exempt.

Status of nominal members as members for exemption purposes - eligibility for exemption under section 80P(2)(a)(i) - Whether income from advances/credit provided to nominal members (who have no voting rights or share in surplus) disentitles the society from exemption under section 80P(2)(a)(i). - HELD THAT: - The Tribunal applied the decision of the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. vs. CIT, holding that nominal members are to be treated as "members of co-operative society" for the purposes of exemption. Therefore, dealing with nominal members does not disentitle the appellant from claiming exemption under section 80P(2)(a)(i). The lower authorities' denial on this ground was rejected. [Paras 7]

Income from credit/advances to nominal members is covered by section 80P(2)(a)(i); this ground of appeal is allowed.

Exemption under section 80P(2)(d) for interest from investments in other cooperative societies - Whether interest income earned by the appellant from investments with other cooperative societies/cooperative banks is exempt under section 80P(2)(d). - HELD THAT: - The Tribunal followed a Coordinate Bench decision which held that interest income derived from investments made with other cooperative societies (including cooperative banks) falls within section 80P(2)(d). The Tribunal found the lower authorities' reasoning unsustainable in light of the Coordinate Bench's examination of relevant precedents and distinctions between claims under section 80P(2)(a)(i) and section 80P(2)(d). Respectfully following that Coordinate Bench, the Tribunal allowed the claim for exemption on interest from investments with cooperative entities. [Paras 8]

The exemption under section 80P(2)(d) for interest from investments in other cooperative societies/cooperative banks is allowable; this ground of appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for A.Y. 2017-18, holding that the society registered under the Karnataka Souhard Sahakari Act, 1997 is a cooperative society for section 80P purposes, that income from advances to nominal members is exempt under section 80P(2)(a)(i), and that interest income from investments in other cooperative societies/cooperative banks is exempt under section 80P(2)(d).

Deduction under section 54F - Proportionate exemption under section 54F - Deduction under section 54B - Substance of ownership where HUF funds are utilised - Beneficial construction of exemption provisions

Deduction under section 54F - Proportionate exemption under section 54F - Whether the assessee is entitled to claim deduction under section 54F to the extent of investment made in the new property before filing the return. - HELD THAT: - The Tribunal examined the receipts evidencing payments of Rs.11,00,000 made to M/s. Aaryan Enterprises before filing the return of income and noted that the assessee had declared long term capital gain arising from the housing project. Relying on the principle affirmed by the Bombay High Court in Humayun Suleman Merchant that exemption under section 54F is to be allowed proportionately to the amount actually invested before filing the return, the Tribunal held that the Assessing Officer erred in disallowing the entire claim. As the receipts dated 10-02-2014 and 27-04-2014 predated the return filed on 31-07-2014, the assessee was entitled to deduction to the extent of such investment made before filing the return. [Paras 6, 7]

Assessee allowed proportionate deduction under section 54F to the extent of Rs.11,00,000 paid before filing the return; grounds 3 and 4 allowed.

Deduction under section 54B - Substance of ownership where HUF funds are utilised - Beneficial construction of exemption provisions - Whether the assessee (HUF) is entitled to deduction under section 54B in respect of reinvestment in agricultural land when purchase deed is in the name of an individual coparcener. - HELD THAT: - The Tribunal considered the material showing that the purchase consideration for agricultural land was paid out of HUF funds and that the land was held and accounted for by the HUF. Following the Surat Bench decision in Babubhai Arjanbhai Kanani (HUF) and authorities holding that beneficial exemption provisions must be construed liberally, the Tribunal accepted that where HUF funds are used and the HUF enjoys the benefits, the registration in the name of a coparcener does not defeat HUF's entitlement. On this basis the enhancement by the CIT(A) was found not justified and the Assessing Officer's allowance of deduction was restored. [Paras 9, 10]

Assessee entitled to deduction under section 54B; enhancement by CIT(A) deleted and AO's order restored; ground 5 allowed.

Final Conclusion: Appeal allowed: proportionate deduction under section 54F granted for payments made before filing the return; deduction under section 54B allowed as HUF entitled to reinvestment benefit where HUF funds were utilised and HUF enjoyed the fruits of the agricultural land.

Arm's length price - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - benefit test - transfer pricing adjustment - depreciation on intangible assets - fictitious assets - remand for de novo adjudication - depreciation on goodwill arising on amalgamation - amalgamation accounting (purchase method) - allowability of goodwill for depreciation - interest under section 234A - interest under section 234B - interest under section 234C - penalty under section 271(1)(c)

Arm's length price - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - benefit test - transfer pricing adjustment - Deletion of transfer pricing adjustment made in respect of technical consultancy fees paid to associated enterprise - HELD THAT: - The Tribunal found the issue to be covered by earlier coordinate-bench decisions in assessee's own group, which held that (i) the agreement conferred a bundled right to services on as and when required basis and entitlement to such bundled services cannot be equated with no rendition merely because particular services were not used in a period; (ii) the TPO/AO/DRP impermissibly questioned commercial expediency and erred in discarding the TNMM without establishing availability of reliable comparables for CUP; and (iii) the benefit test has limited relevance to valuation where price an independent enterprise would pay is the determinative factor. Applying those precedents to the facts of the year under appeal and observing no change of law or material facts, the Tribunal directed deletion of the TP adjustment and remanded the TPO/AO to give effect to that deletion (following the coordinate bench reasoning). [Paras 11]

TP adjustment in respect of technical consultancy fees set aside and deleted; ground No. 2 allowed.

Depreciation on intangible assets - fictitious assets - remand for de novo adjudication - Claim of depreciation on intangibles remitted to Assessing Officer for fresh adjudication - HELD THAT: - The Tribunal noted that depreciation on the subject intangibles had been disallowed in earlier years on the premise that no assets were transferred and the assets were 'fictitious'. A coordinate bench in the assessee's prior years directed de novo adjudication; in absence of any change in facts or law, the Tribunal followed that approach and remanded the issue to the AO for re examination on merits in accordance with the earlier directions. [Paras 18]

Issue remanded to AO for de novo adjudication; ground No. 3 allowed for statistical purposes.

Depreciation on goodwill arising on amalgamation - amalgamation accounting (purchase method) - allowability of goodwill for depreciation - Allowability of depreciation on goodwill arising from amalgamation with Bangalore Genei (India) Pvt. Ltd. - HELD THAT: - On the material before it the Tribunal found that (i) assets and liabilities of the amalgamating company were transferred to the assessee pursuant to a court approved scheme with effect from the appointed date and recorded at fair values, (ii) the excess of consideration over net assets was accounted as goodwill in the assessee's books, and (iii) coordinate case law and authoritative decisions support treating consideration in excess of net assets on amalgamation as goodwill eligible for depreciation. The AO had allowed depreciation on other intangibles arising on amalgamation but initially disallowed goodwill relying on procedural objections; the Tribunal held there was no basis to reject the goodwill claim and directed the AO to grant depreciation on the goodwill. [Paras 29]

Depreciation on goodwill arising on amalgamation directed to be allowed; ground No. 4 allowed.

Interest under section 234A - Return filing timing and consequential chargeability of interest under section 234A remanded to Assessing Officer - HELD THAT: - The Tribunal observed that the question whether the return of income was filed within the time prescribed (and hence whether interest under section 234A is chargeable) requires factual examination. In the absence of such determination at the appellate stage, the matter was remitted to the AO for fresh adjudication after examining the timing and related facts. [Paras 30]

Issue remanded to AO for de novo adjudication; ground No. 5 allowed for statistical purpose.

Interest under section 234B - interest under section 234C - Interest under sections 234B and 234C treated as consequential and allowed for statistical purposes - HELD THAT: - The Tribunal treated the disputes on interest under sections 234B and 234C as consequential to the determination on taxable income and return filing; accordingly these grounds were not separately adjudicated but were allowed for statistical purposes pending the primary determinations. [Paras 31]

Grounds Nos. 6 and 7 allowed for statistical purpose (consequential).

Penalty under section 271(1)(c) - Initiation of penalty proceedings under section 271(1)(c) dismissed as premature - HELD THAT: - The Tribunal found that initiation of penalty proceedings was premature at the appellate stage and that the matter was not ripe for adjudication; accordingly the challenge to initiation was dismissed. [Paras 32]

Penalty initiation dismissed as premature; ground No. 8 dismissed.

Final Conclusion: Appeal partly allowed: transfer pricing adjustment in respect of technical consultancy fees deleted; depreciation on goodwill arising on amalgamation directed to be allowed; depreciation on other intangibles remanded to AO for de novo adjudication; interest under section 234A remanded for factual examination and sections 234B/234C treated as consequential (allowed for statistical purposes); initiation of penalty proceedings dismissed as premature.

Mirror transaction - Arm's Length Price - Transfer pricing adjustment - Comparability of international transactions - Role of Dispute Resolution Panel directions in relation to other parties

Mirror transaction - Arm's Length Price - Transfer pricing adjustment - Whether a transfer pricing adjustment can be sustained in the hands of the assessee where the corresponding transaction (the mirror transaction) has been held to be at Arm's Length in the hands of the associated enterprises. - HELD THAT: - The Tribunal examined the position where the payments made by the assessee's permanent establishment to its associated enterprises had been accepted as at Arm's Length in the hands of those AEs by coordinate benches of the Tribunal (and upheld on facts by the High Court in analogous proceedings). Applying the ratio of those decisions, the Tribunal held that when a transaction between associated parties is found to be at Arm's Length in the hands of one party, the same transaction cannot be treated as not at Arm's Length in the hands of the other party; the correlative nature of the transaction (mirror transaction) requires consistent treatment. The Tribunal further noted that the Dispute Resolution Panel cannot, by directing a different ALP treatment in one case, compel an opposite conclusion in respect of the other contracting party without independent adjudication of that party's case. In the facts and circumstances before it, and having regard to the Tribunal's earlier decisions in the associated enterprises' appeals (which deleted the TPO/AO adjustments), the Tribunal concluded that no transfer pricing adjustment was warranted in the assessee's hands. [Paras 14]

Adjustment to the assessee's procurement cost deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal and directed deletion of the transfer pricing adjustment, holding that where the corresponding transactions were accepted as at Arm's Length in the hands of the associated enterprises (mirror transactions), no adjustment was warranted in the assessee's hands; other grounds were rendered academic.

Availability of alternative remedy - statutory appeal under Section 128 of the Customs Act, 1962 - principle of natural justice - personal hearing - exercise of writ jurisdiction - delay in adjudication and sufficiency of reasons

Availability of alternative remedy - statutory appeal under Section 128 of the Customs Act, 1962 - exercise of writ jurisdiction - Maintainability of the writ petitions in view of the availability of a statutory appeal. - HELD THAT: - The Court examined whether petitions seeking quashing of the impugned order were maintainable despite an alternative remedy of appeal being available. Relying on precedent and the existence of a statutory appellate forum, the Court concluded that where a statute provides an efficacious alternative remedy, litigants are ordinarily required to avail that remedy and the writ petitions should not be entertained. The presence of an alternative statutory appeal route rendered the petitions premature for exercise of writ jurisdiction.

Writ petitions dismissed for non-availability of extraordinary jurisdiction in face of an efficacious statutory appeal; petitioners permitted to pursue the alternative remedy.

Principle of natural justice - personal hearing - Allegation that the impugned order was passed without granting personal hearing and thus violated natural justice. - HELD THAT: - The petitioners contended that no personal hearing was granted before passing the impugned order. The respondents pointed to the order-in-original (referenced by the Court) which records that personal hearing was in fact afforded on various occasions (see para 36.3.12 of that order). On that factual and legal basis the Court found that the contention of breach of natural justice was negatived and did not warrant entertaining the writ petitions.

Claim of violation of the principle of natural justice rejected on the record; no basis to withhold dismissal of the petitions on that ground.

Delay in adjudication and sufficiency of reasons - Whether delay in deciding the matter justified maintainability of the writ petitions. - HELD THAT: - The petitioners challenged delay in adjudication. The Court considered the reasons recorded in the impugned order (noted from para 36.1 onwards) and held that sufficient reasons had been assigned for the delay. As the delay was supported by explanation on the record, it did not provide a substantive basis to entertain the writ petitions in preference to the statutory appeal.

Allegation of prejudicial delay not sustained; does not render the statutory appellate remedy inadequate.

Final Conclusion: The writ petitions are dismissed on the ground of availability of an efficacious statutory appeal; petitioners remain free to pursue the prescribed appellate remedy in accordance with law.

Provisional release of seized imported goods - Provisional assessment parameters to govern provisional release (Navshakti ratio) - Order under Section 110A read with definition of adjudicating authority in Section 2(1) - Communication of a decision versus service of an order - Alternate remedy by appeal not available until order is communicated

Provisional release of seized imported goods - Order under Section 110A read with definition of adjudicating authority in Section 2(1) - Impugned communications dated 02.12.2022 and 06.12.2022 stand withdrawn and the adjudicating authority shall pass fresh orders under Section 110A and serve them on the writ petitioners within the time directed by the Court. - HELD THAT: - The Court recorded the respondents' withdrawal of the communications earlier sent to the petitioners and directed that the officer who is the adjudicating authority for the purposes of Section 110A read with Section 2(1) will pass orders afresh on the provisional release applications. The Court expressly preserved all contentions and rights of the parties and refrained from expressing any opinion on the merits of the matter; further proceedings are to follow the fresh orders to be served under due acknowledgement within the time fixed by this Court. The disposition is interlocutory in nature and requires the adjudicating authority to reconsider and pronounce enforceable orders under Section 110A rather than relying on the earlier communications which are withdrawn.

Impugned communications withdrawn; adjudicating authority to pass fresh orders under Section 110A and serve them within the period directed; rights preserved; no costs.

Communication of a decision versus service of an order - Alternate remedy by appeal not available until order is communicated - A purported decision or order which has not been communicated to the affected person cannot be treated as an order amenable to alternate remedy by appeal. - HELD THAT: - The Court accepted that the material dated 06.12.2022 (and similarly the 02.12.2022 communication) amounted to a communication and that the impugned adjudicatory order under Section 110A had not, in law, been communicated to the writ petitioner. In view of this, the respondents could not successfully urge that the petitioner had an effective alternate remedy by way of appeal, since an appeal lies only against an order which has been communicated. The Court therefore treated the question of availability of appeal as premature while directing fresh orders to be passed and served.

Uncommunicated decision is not an order in relation to the person affected; alternate remedy by appeal is not available until the order is communicated.

Final Conclusion: The communications impugned in the writ petitions are withdrawn; the officer who is the adjudicating authority under Section 110A (as defined) shall pass fresh orders on provisional release and serve them on the petitioners within the time directed by the Court; all rights and contentions are preserved and there shall be no order as to costs.

Provisional release under section 110A requiring bond and bank guarantee - Bank guarantee for provisional release of seized goods - Bond for provisional release - Confiscation for mis-declaration of value - Redemption fine as security for provisional release - CBEC Circular No. 35/2017-Cus. and provisional release policy

Provisional release under section 110A requiring bond and bank guarantee - Bank guarantee for provisional release of seized goods - Confiscation for mis-declaration of value - Redemption fine as security for provisional release - CBEC Circular No. 35/2017-Cus. and provisional release policy - Whether the requirement of a bank guarantee for provisional release should be waived or reduced where the differential duty has been deposited and confiscation is alleged for undervaluation - HELD THAT: - The Tribunal examined the factual matrix: the goods were seized on allegation of undervaluation which the appellant admitted in letters and statements, a show cause notice proposing differential duty, confiscation under Sections 111(l) and 111(m) and penalties was issued, and the appellant deposited the differential duty claimed in the SCN. CBEC Circular No. 35/2017-Cus. permits provisional release subject to bond and a bank guarantee to safeguard recovery of any redemption fine in the event of confiscation. The Tribunal observed that if, after adjudication, goods are held liable for confiscation and redemption is allowed on payment of fine, security will be required to ensure recovery of any such fine. Considering these factors and the admitted undervaluation, complete waiver of bank guarantee was not justified; however, having regard to the deposits already made and the need for an appropriate but not excessive security, the Tribunal modified the impugned order to reduce the bank guarantee requirement to 5% of the value of the goods. [Paras 15]

The bank guarantee for provisional release is reduced to 5% of the value of the goods; other conditions of provisional release, including a bond for full value, remain.

Final Conclusion: The appeal is partially allowed; the impugned order is modified to the extent that the bank guarantee for provisional release shall be 5% of the value of the goods while the requirement of bond for the full value and other conditions remain intact.

Re-importation of exported goods - identity of re-imported goods - confiscation and penalty under Section 112(b) of the Customs Act - exemption on re-import under Notification No. 45/2017-Cus - effect of change of import policy under Foreign Trade Policy para 1.05 (Clause B) - applicability of import restriction on petroleum coke

Re-importation of exported goods - identity of re-imported goods - Whether the goods imported by the appellant were bona fide re-imports of the goods earlier exported and whether identity of the goods was established - HELD THAT: - The Tribunal accepted the factual matrix and documentary evidence that the appellant had exported calcined petroleum coke to the buyer in Saudi Arabia and, following rejection by the buyer, a part of those goods was returned to the appellant. The Tribunal recorded that the re-imported consignments were calcined petroleum coke, that the exporter had not availed export benefits on the impugned goods, and that minor variations in weight were attributable to normal transit loss. On these findings the identity of the re imported goods with the earlier export was held established and the re import treated as genuine. [Paras 11]

Identity of the re-imported goods was established and the consignments were bona fide re-imports of the earlier export.

Exemption on re-import under Notification No. 45/2017-Cus - effect of change of import policy under Foreign Trade Policy para 1.05 (Clause B) - applicability of import restriction on petroleum coke - confiscation and penalty under Section 112(b) of the Customs Act - Whether the re-import could be treated as freely importable despite later notifications restricting import of petroleum coke and whether confiscation and penalty under Section 112(b) were justified - HELD THAT: - The Tribunal applied Section 20 and Notification No.45/2017 Cus to conclude that re imported goods are exempted subject to conditions, and relied on para 1.05 (Clause B) of the Foreign Trade Policy which provides that change of policy from free to restricted does not affect imports/exports already made before such regulation. As the original export occurred on 01.12.2017, prior to the restriction notifications relied upon by Revenue, the Tribunal held that the re import must be treated as freely importable under the FTP. Having so held, the Tribunal found no justification for confiscation or for imposition of penalty under Section 112(b) in respect of the legitimately re imported consignments. [Paras 11, 12]

Re import exemption and FTP protection apply; confiscation and penalty under Section 112(b) are not justified and are set aside.

Final Conclusion: Appeal allowed. The Tribunal held the consignments to be bona fide re imports of goods exported earlier, applied the re import exemption and the non retroactive protection in para 1.05 (Clause B) of the FTP, and set aside the confiscation and penalty; consequential benefits to the appellant to follow in accordance with law.

Leave under Section 446 of the Companies Act - stay of suits on winding up order - jurisdiction of the winding up court to entertain suits and claims - specific performance of contract - requirement to seek leave of the court before proceeding against a company in liquidation - referral to competent civil forum for full trial

Leave under Section 446 of the Companies Act - stay of suits on winding up order - requirement to seek leave of the court before proceeding against a company in liquidation - Whether the application (IA No.2785/2017) filed after the winding up order could be proceeded with in this forum or must be treated as a suit requiring leave under Section 446 and be instituted in a competent civil court. - HELD THAT: - The Court observed that Section 446 precludes commencement or continuation of suits against a company after a winding up order except by leave of the Court and subject to terms. The impugned application, although filed as a leave application, in substance partakes of the character of a civil suit for specific performance and raises disputed questions of fact and law which cannot be finally adjudicated on affidavits and arguments alone. Given the statutory scheme conferring jurisdiction on the winding up court to entertain such suits and the need for leave where proceedings are to be continued after a winding up order, the Court found it inappropriate to decide the merits in summary proceedings and held that the applicant should institute a civil suit in a competent court so that evidence can be led and the claims adjudicated in accordance with law (see the statement of Section 446 and the Court's reasoning at paras. 9 and 11). [Paras 9, 11]

Application treated as a suit for specific performance which must be filed in a competent civil court; the Court declined to decide the matter summary and required proceedings to be instituted in the civil forum after obtaining leave as applicable.

Specific performance of contract - referral to competent civil forum for full trial - Whether the merits of the claimed transfer and specific performance should be decided by this Court in the present proceedings. - HELD THAT: - The Court found multiple disputed factual and legal questions, reliance on document veracity, and conflicting statements recorded by the Official Liquidator which cannot be resolved on affidavits. Consequently, the Court refrained from adjudicating merits or granting specific relief in these summary proceedings and directed that a civil suit be filed in the competent court where the parties may lead evidence and the civil court shall decide the matter in accordance with law, subject to the order in the company petition (paras. 11-12). The Court expressly stated it has not expressed any view on the merits. [Paras 11, 12]

Merits not decided; parties directed to file a civil suit in a competent court for full adjudication; present IA is partly allowed only to the extent of directing institution of such suit.

Final Conclusion: IA No.2785/2017 is partly allowed and disposed of by directing the applicant to file a civil suit in a court of competent jurisdiction for adjudication of the claimed transfer/specific performance; the High Court has not expressed any opinion on the merits and the civil court shall decide the suit in accordance with law, subject to the order in the company petition.

Limitation under the Insolvency and Bankruptcy Code, 2016 - effect of deduction of TDS and Form 26AS as acknowledgment or part payment - effect of part payment on running of limitation - acknowledgement of debt in company accounts and qualified balance-sheet notes

Limitation under the Insolvency and Bankruptcy Code, 2016 - Whether the Section 7 application was barred by limitation. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the Section 7 application had to be filed within three years from the date of default and that the appellant failed to establish any fact legally sufficient to extend or restart the limitation period. All contentions advanced to show that the claim fell within the limitation period were examined and rejected as not proved in accordance with law. In view of these findings the application was held to be time-barred. [Paras 3, 15]

Application under Section 7 was barred by limitation and rightly dismissed.

Effect of deduction of TDS and Form 26AS as acknowledgment or part payment - Whether the respondent's deduction and deposit of TDS (as reflected in Form 26AS) constituted payment or an acknowledgement sufficient to extend limitation. - HELD THAT: - The Tribunal held that production of Form 26AS showing TDS deduction under Section 194A did not suffice to conclude that the respondent had paid interest to the appellant or that such deduction constituted an acknowledgement or part payment for limitation purposes. Reliance was placed on earlier Tribunal decisions applying the same principle and the appellant conceded absence of binding authority to treat mere deduction of TDS as part payment restarting limitation. [Paras 3, 4, 7]

Deduction of TDS shown in Form 26AS is not sufficient to treat the amount as payment or acknowledgement for extending limitation.

Effect of part payment on running of limitation - requirement of pleading and proof for restarting limitation - Whether the ledger entry of Rs. 10 lakh dated 27.09.2017 amounted to part payment restarting the period of limitation. - HELD THAT: - The Tribunal found that the appellant had not pleaded that the Rs. 10 lakh entry represented a part payment restarting limitation nor adduced admissible evidence to prove such payment; the respondent denied it. Citing authority that limitation questions require pleading and evidence, and statutory requirement that acknowledgement be in writing and signed where applicable, the Tribunal concluded the appellant failed to prove part payment that would restart limitation. [Paras 8, 9, 10, 11]

The ledger entry did not constitute proved part payment and did not restart the limitation period.

Acknowledgement of debt in company accounts and qualified balance-sheet notes - Whether the note in the respondent's balance-sheet operated as an unequivocal acknowledgement of the debt for limitation purposes. - HELD THAT: - The appellant relied on a note in the balance-sheet which contained qualifications and referred to disputes and alleged settlements. The Tribunal held that a qualified or conditional statement in the accounts is not an unequivocal acknowledgement of debt; the note did not constitute an admission or written acknowledgement capable of extending limitation. Consequently the note could not be relied upon to bring the Section 7 application within time. [Paras 12, 13, 14]

Qualified note in the balance-sheet did not amount to an unequivocal acknowledgement of debt and could not extend limitation.

Final Conclusion: All pleas invoked to avoid the bar of limitation - TDS/Form 26AS, alleged part payment reflected in ledger, and a qualified note in the balance-sheet - were found unproved or insufficient; the Section 7 application was time-barred and the appeal is dismissed without addressing merits.

Moratorium under Section 14 - Explanation to Section 14(1)(d) - Continuity of licences, permits and similar grants subject to payment of current dues - Lease premium and lease rent not covered by the explanation to Section 14(1)(d)

Moratorium under Section 14 - Explanation to Section 14(1)(d) - Lease premium and lease rent not covered by the explanation to Section 14(1)(d) - Whether the Adjudicating Authority correctly applied the explanation to Section 14(1)(d) of the Code to direct the Resolution Professional to pay lease premium and lease rent to the lessor - HELD THAT: - The Tribunal examined Section 14 and the explanation to Section 14(1)(d), which preserves continuation of a licence, permit, registration, quota, concession, clearance or a similar grant or right subject to non-default in current dues during the moratorium. The Court held that the phrase "similar grant or right" in the explanation must be read in the context of licences, permits, registrations, quotas, concessions and clearances and cannot be extended to encompass the lease premium and lease rent claimed by the lessor. The Adjudicating Authority's reliance on the explanation to treat lease premium and lease rent as current dues within the scope of the explanation was therefore incorrect. Having construed the explanation narrowly and contextually, the Tribunal concluded that the Adjudicating Authority erred in directing the Resolution Professional to pay the claimed lease premium and lease rent during the moratorium. [Paras 10, 11]

Impugned order directing payment of lease premium and lease rent by the Resolution Professional under the explanation to Section 14(1)(d) set aside; appeal allowed.

Final Conclusion: The impugned order of the Adjudicating Authority directing the Resolution Professional to pay the lease premium and lease rent under the explanation to Section 14(1)(d) of the Code was held to be incorrect and is set aside; appeal allowed, without any order as to costs.

Debt and default - financial debt - Corporate Insolvency Resolution Process - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - escrow agreement - equitable mortgage and guarantees as security - collaboration agreement versus term sheet

Debt and default - financial debt - admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - equitable mortgage and guarantees as security - escrow agreement - collaboration agreement versus term sheet - Whether the amounts advanced by the appellant constitute a financial debt and there was default sufficient to admit the Section 7 application for initiation of CIRP against the corporate debtor - HELD THAT: - The Tribunal found on the material on record that the parties executed a collaboration agreement and contemporaneous term sheets which evidenced advancement of funds, the period for repayment and the agreed rate of interest; the amount was transferred from the appellant's bank account to the respondent's account and interest had been paid initially and thereafter stopped by the respondent. Security was created by way of equitable mortgage and personal guarantees. Although the escrow account was not opened and the escrow agreement remained unexecuted by the bank, that circumstance did not negate the documentary and bank evidence of advancement, the existence of security and the cessation of interest payments. The Tribunal concluded that these facts satisfy the statutory concept of a debt and its default for the purpose of Section 7: the appellant established both the existence of a loan advanced with interest and the default in its repayment/servicing. The Adjudicating Authority's contrary finding was held to be a misreading and mis-appreciation of the evidence. [Paras 8, 9, 10, 11]

The Tribunal allowed the appeal, set aside the Adjudicating Authority's dismissal, and directed the Adjudicating Authority to admit the Section 7 application and proceed in accordance with law.

Final Conclusion: The appeal is allowed; the impugned order dismissing the Section 7 application is set aside and the Adjudicating Authority is directed to admit the application and proceed in accordance with law.

Aggrieved person - intervention in insolvency proceedings - commercial wisdom of the Committee of Creditors - liquidation as per recommendation of CoC - inadmissibility of promoter participation as resolution applicant under 29 A - scope of judicial interference in CoC decisions - rights of suspended board to attend CoC meetings (but no voting right)

Aggrieved person - intervention in insolvency proceedings - rights of suspended board to attend CoC meetings (but no voting right) - Whether the appellant, a promoter and suspended director holding equity, is an "aggrieved person" entitled to be impleaded/intervene in the liquidation application before the Adjudicating Authority. - HELD THAT: - The Tribunal held that the insolvency process is a creditors' collective proceeding in which the Committee of Creditors (CoC) exercises decision making by applying its commercial wisdom. Although erstwhile members of the board have a statutory right to receive notice of and to participate in CoC meetings and to discuss resolution plans, they are not members of the CoC and have no voting right. The appellant, being a promoter/shareholder and not a member of the CoC, cannot be treated as an aggrieved person for the purpose of impleading himself in the liquidation petition under the Code; any grievance under the Companies Act may be pursued under Section 230 remedies before the NCLT. Accordingly, the intervening application filed by the appellant seeking impleadment was prima facie not maintainable and the Adjudicating Authority's dismissal is not interfered with. [Paras 36, 37]

The appellant is not an aggrieved person entitled to intervene in the liquidation proceedings and his intervening application is not maintainable.

Commercial wisdom of the Committee of Creditors - liquidation as per recommendation of CoC - scope of judicial interference in CoC decisions - Whether the Adjudicating Authority was right to dismiss the intervening application and order liquidation in view of the CoC's unanimous resolution to liquidate. - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's approach that the CoC had, after examining resolution plans, unanimously decided to liquidate and that such decision, reflecting the CoC's commercial wisdom, could not be lightly interfered with by the Adjudicating Authority or this Appellate Tribunal. Reliance was placed on precedents and statutory scheme showing the limited role of judicial fora in displacing CoC decisions and on the requirement that the adjudicator should not usurp commercial judgments of the CoC. In the facts of the case, the Adjudicating Authority's dismissal of the intervening application and order for liquidation were left undisturbed. [Paras 12, 36]

The Adjudicating Authority's order dismissing the intervening application and directing liquidation pursuant to the CoC's recommendation is affirmed.

Final Conclusion: The appeal is dismissed for lack of merit; the Adjudicating Authority's order dismissing the intervening application and directing liquidation pursuant to the CoC's unanimous recommendation is affirmed and no interference is called for.

Approval of resolution plan - compliance with Regulation 38 of the CIRP Regulations, 2016 - extinguishment of third party rights by a resolution plan - jurisdiction to decide title of immovable property - role of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 in approving resolution plans

Jurisdiction to decide title of immovable property - extinguishment of third party rights by a resolution plan - Whether the Appellate Tribunal has jurisdiction to adjudicate the title of land claimed by a third party which was included in the assets of the corporate debtor and whether the resolution plan could extinguish the third party's rights. - HELD THAT: - The Tribunal held that it does not have jurisdiction to decide questions of title to immovable property which are the subject of separate civil proceedings. The record shows FIRs and subsequent civil proceedings, and the petitioner/appellant had already sought relief before the civil courts and the High Court. Given that the principal controversy raised in the appeal concerned title to the subject land allegedly included in the corporate debtor's assets by the resolution professional, the Appellate Tribunal declined to adjudicate that dispute and observed that the appropriate forum for resolution of title is the civil court. The Tribunal therefore treated the challenge to the inclusion of the land in the corporate debtor's assets as a matter for civil adjudication rather than a ground to set aside the approval of the resolution plan in these proceedings (see paras 7-8). [Paras 7, 8]

The appeal was dismissed as devoid of merits for lack of jurisdiction to decide title; the appellant was directed to seek redress before the civil court in accordance with law.

Final Conclusion: The appeal challenging approval of the resolution plan insofar as it involved alleged third party title to land was dismissed for lack of jurisdiction to adjudicate title; the appellant is left to pursue its remedy before the civil courts. The appeal is dismissed without costs and connected interlocutory applications are closed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Invocability and encashment of irrevocable and unconditional bank guarantees during moratorium - Independent/Advance Bank Guarantees vis-a -vis Performance Bank Guarantees - Effect of Arbitral Tribunal's final findings on challenge to encashment of bank guarantees - Allegation of fraud and requirement of independent remedy

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Invocability and encashment of irrevocable and unconditional bank guarantees during moratorium - Irrevocable and unconditional bank guarantees can be invoked/encashed during the moratorium imposed under Section 14 of the Code. - HELD THAT: - The Tribunal applied the statutory scheme of the Code, noting the 2018 amendment which added Section 14(3)(b) excluding a surety in a contract of guarantee from the moratorium. Relying on the legislative intent reflected in the Insolvency Law Committee's report and prior authoritative decisions holding that an unconditional on-demand guarantee must be honoured by the bank, the Tribunal held that mere pendency of CIRP is not a ground to interdict encashment of bank guarantees. The Tribunal also observed that enforcement against a surety operates against assets separate from the corporate debtor and that the creditor's right shifts but does not extinguish on invocation. Accordingly, an unconditional and irrevocable bank guarantee may be encashed notwithstanding the moratorium. [Paras 10, 13]

Bank guarantees, being outside the moratorium by virtue of Section 14(3)(b), can be invoked/encashed during moratorium.

Independent/Advance Bank Guarantees vis-a -vis Performance Bank Guarantees - Strict construction of bank guarantees - Advance (on-demand) bank guarantees that are unconditional and irrevocable are to be treated as enforceable during moratorium and are not rendered ineffective by distinctions drawn with performance guarantees. - HELD THAT: - The Tribunal noted that Section 3(31) of the Code expressly refers to Performance Bank Guarantees but, in any event, the decisive factor is that an unconditional and irrevocable on-demand guarantee must be honoured when invoked in terms. While bank guarantees require strict construction, the Tribunal found no basis to restrain encashment where the guarantee is in clear on-demand terms and the statutory exclusion in Section 14(3)(b) applies to guarantees. The Tribunal therefore declined to entertain a contention that Advance Bank Guarantees could not be encashed during CIRP on the ground that they differ from PBGs for the purpose of moratorium protection. [Paras 10, 11]

Advance/unconditional on demand bank guarantees are enforceable during moratorium and are not protected merely by being characterised differently from performance guarantees.

Effect of Arbitral Tribunal's final findings on encashment - Allegation of fraud and requirement of independent remedy - Arbitral Tribunal's findings dismissing stay on encashment and recording absence of irretrievable injustice precluded re-agitation of the same challenge before this forum; the allegation of fraud was not established so as to restrain encashment. - HELD THAT: - The Tribunal placed reliance on the Arbitral Tribunal's detailed findings (paras 66-76 of the arbitral award) which considered the same guarantees and refused to stay their encashment, a decision not challenged and which attained finality. Given those findings and the fact that the Bank had not itself taken independent steps to challenge alleged fraud, the Tribunal found no substantive ground to examine breach or fraud inter se IOCL and the corporate debtor. The arbitral conclusion that invocation would not cause irretrievable injustice and that any wrongful encashment could be remedied in an award led the Tribunal to refrain from interfering with the encashment. [Paras 6, 7, 13]

The Arbitral Tribunal's unchallenged findings opposing stay on encashment and lack of established fraud preclude interference; the bank's allegations did not warrant restraining encashment.

Final Conclusion: Having regard to the statutory exclusion of guarantees from moratorium, the binding findings of the Arbitral Tribunal on the same guarantees, and the absence of an independent, established case of fraud by the appellant, the appeal is dismissed.

Classification of services - Cargo Handling Service - mining services - monetary limit for departmental appeals - inclusion of penalty in monetary limit - substantial question of law - appellate forum and route

Monetary limit for departmental appeals - inclusion of penalty in monetary limit - Maintainability of the Department's appeal before the High Court in view of the prescribed monetary limit and whether penalty must be included in computing that limit. - HELD THAT: - The Court recorded the Respondent's preliminary objection that the tax effect of the appeal fell below the monetary threshold for entertaining departmental appeals. The Department contended that inclusion of penalty would push the amount above the threshold. The Court referred to the CBIC instruction which clarifies that the expression 'monetary limit' refers essentially to the excise duty involved and does not include penalty or interest, and concluded that the basic duty involved is below the prescribed limit. On this basis the Court treated the appeal as not meeting the monetary criterion for admission before the High Court and declined to entertain it. [Paras 4, 7, 9]

The appeal is not maintainable before the High Court on the ground that the tax amount falls below the monetary limit; penalty is not to be included in computing that limit.

Classification of services - Cargo Handling Service - mining services - appellate forum and route - substantial question of law - Whether the dispute was a classification question (Cargo Handling Service v. mining services) giving rise to a substantial question of law permitting appeal to the High Court. - HELD THAT: - The Tribunal had held that the work performed by the assessee was essentially mining and therefore not taxable as Cargo Handling Service, noting that a specific entry for mining services was introduced only from 1 June 2007. The Department relied on earlier instructions and an earlier order referring classification to a larger Bench as amounting to a substantial question of law. The Court observed that classification is essentially a classification dispute and, following precedent, such a dispute does not confer a right to appeal to the High Court from the Tribunal's order; ordinarily an appeal, if available, would lie to the Supreme Court. The Court also noted that the earlier order referring the matter to a larger Bench had been recalled and therefore did not sustain the Department's contention of a pending reference giving rise to a substantial question of law. [Paras 3, 5, 6, 8]

The controversy is a classification dispute between Cargo Handling Service and mining services and does not present a substantial question of law permitting appeal to the High Court; any appeal would lie, if at all, to the Supreme Court.

Final Conclusion: The High Court declined to interfere with the CESTAT's order: the appeal is not maintainable before this Court because the tax amount is below the monetary limit (penalty excluded) and the dispute is a classification issue which does not attract High Court appellate jurisdiction; the Department remains free to pursue any other remedy available in law.

Limited jurisdiction of the Designated Committee to verify correctness of declarations under SVLDRS, 2019 - classification into "arrears category" vis-a -vis "litigation category" under the SVLDRS, 2019 scheme - cut-off date of 30.06.2019 as a determinant for eligibility under litigation/enquiry categories of the Scheme - circumferential role of administrative circulars (Circular dated 12.12.2019, para 2(viii)) in interpreting Scheme eligibility - effect of filing of an appeal after declaration on entitlement under the Scheme

Limited jurisdiction of the Designated Committee to verify correctness of declarations under SVLDRS, 2019 - effect of filing of an appeal after declaration on entitlement under the Scheme - Validity of rejection of the petitioner's SVLDRS 1 declaration by the Designated Committee on the sole ground that the Department had taken a decision to file an appeal against the Order in Original. - HELD THAT: - The court held that the Designated Committee's mandate under the Scheme (Sections 126, 127 and corresponding Rules) is confined to verification of the correctness of the declaration and estimation of the amount payable by the declarant for availing the Scheme. The Designated Committee is not vested with jurisdiction to deny the benefit of the Scheme solely because the Department decided to file an appeal against the Order in Original. The impugned rejection travelled beyond the powers conferred on the Committee and was therefore without jurisdiction. The court observed that the petitioner's declaration was filed within the period extended by notification up to 15 January 2020 and that, as of the date of filing the declaration, no appeal by the Department was pending. Consequently, rejection on the ground of contemplated or subsequent filing of appeal was impermissible under the Scheme and its rules. [Paras 10, 11, 12]

Impugned order rejecting the declaration on the sole ground of departmental decision to file an appeal is quashed as beyond the Designated Committee's jurisdiction.

Classification into "arrears category" vis-a -vis "litigation category" under the SVLDRS, 2019 scheme - cut-off date of 30.06.2019 as a determinant for eligibility under litigation/enquiry categories of the Scheme - circumferential role of administrative circulars (Circular dated 12.12.2019, para 2(viii)) in interpreting Scheme eligibility - Whether the petitioner's case fell within the "arrears category" (and hence entitled to the benefits computed therein) or within the "litigation category" under the Scheme. - HELD THAT: - The court analysed the Scheme provisions and the explanatory circular. Sections of the Scheme distinguish cases falling in litigation or enquiry/audit categories by reference to the cut off date 30.06.2019; by contrast Section 121(c) (definition of "amount in arrears") does not incorporate that cut off. The show cause notice in this case was issued after 30.06.2019 and no appeal was pending as on the date the petitioner filed the declaration. The circular dated 12.12.2019 (para 2(viii)) contemplates that certain show cause notices issued on or after 01.07.2019 may be processed in the arrears category after due adjudication and review so as to give effect to the Scheme's objective of liquidating legacy cases. On a harmonious reading, the petitioner's case falls within the "arrears category" and not the "litigation category", and calculation of tax dues under the provisions applicable to litigation cases was unwarranted. [Paras 11, 12]

Petitioner's case is categorized as "arrears" under the Scheme; the Designated Committee erred in treating it as "litigation" on account of departmental steps taken after the declaration date.

Remand for decision in accordance with law - Remedial direction as to further proceedings on the petitioner's declaration under the Scheme. - HELD THAT: - Having quashed the impugned rejection, the court directed the respondents to take a fresh decision on the petitioner's declaration under Section 125(2) of the Scheme in accordance with law and consistent with the court's findings, and to extend consequential benefits if any. The exercise was ordered to be completed within four weeks from receipt/production of the order. [Paras 12]

Declaration remitted to respondents for fresh decision in accordance with law within four weeks; consequential benefits to be extended if merited.

Final Conclusion: The writ petition is allowed: the order rejecting the petitioner's SVLDRS 1 declaration is quashed as beyond the Designated Committee's jurisdiction; the petitioner's case falls within the "arrears category" under the Scheme; respondents to re decide the declaration in accordance with law and extend consequential benefits, the exercise to be completed within four weeks.

Extended period of limitation - preliminary objection on jurisdiction - suppression of facts - stay of adjudication order - adjudicating authority to decide jurisdictional objection first

Preliminary objection on jurisdiction - adjudicating authority to decide jurisdictional objection first - Whether the adjudicating authority erred in failing to first decide the preliminary objection on limitation/jurisdiction before adjudicating the merits. - HELD THAT: - The Court found that once a preliminary objection on jurisdiction (limitation) was raised by the appellants, the adjudicating authority ought to have addressed that objection as the primary issue. Instead, the authority proceeded to decide the merits before dealing with the jurisdictional plea, which was the incorrect sequence. The Court treated this procedural error as material to the fairness of adjudication and recorded that the objection should have been considered first. [Paras 6]

Adjudicating authority's course of deciding merits prior to addressing the limitation/jurisdictional objection was improper.

Extended period of limitation - suppression of facts - stay of adjudication order - Interim relief in respect of the adjudication invoking the extended period of limitation for the tax periods challenged. - HELD THAT: - The respondents had invoked the extended period of limitation for the financial years 2015-2016 to 2017-2018. The appellants raised a preliminary contention that similar allegations had already been the subject of earlier show cause notices for 2011-2012 to 2014-2015 and were pending before the Tribunal, contending that there was no fresh suppression for the later period. The Court held that the substantive legal issue as to whether the extended period could be invoked in these circumstances required consideration after the respondents file an affidavit-in-opposition. In the interim, to avoid prejudice to the appellants pending adjudication of that legal question, the Court ordered that the adjudication order dated 27th July, 2022 shall remain stayed until disposal of the writ petition and directed the respondents to file their affidavit-in-opposition within a stipulated time. [Paras 7, 8, 10]

Order dated 27th July, 2022 stayed pending disposal of the writ petition; respondents directed to file affidavit-in-opposition for determination of the question on invocation of the extended period of limitation.

Final Conclusion: The intra-Court appeal was allowed to the extent that the adjudication order dated 27th July, 2022 is stayed pending disposal of the writ petition; the High Court observed that the adjudicating authority should have first decided the jurisdictional/limitation objection and directed the respondents to file affidavit-in-opposition for fresh consideration of whether the extended period of limitation was rightly invoked.

Limitation - Extended period of limitation - Bona fide belief - Revenue neutrality - Suppression and mala fide - Business Auxiliary Service - Renting of immovable property service

Limitation - Extended period of limitation - Bona fide belief - Revenue neutrality - Suppression and mala fide - Whether the demand confirmed under Business Auxiliary Service and renting of property service was barred by limitation and whether extended period could be invoked. - HELD THAT: - The Tribunal found that the appellant received a share of the contractor's receipts pursuant to an understanding for use of the appellant's premises by the contractor for Mandap keeper services, and that such sharing of receipts did not prima facie amount to the appellant providing a service. The appellant entertained a bona fide belief that Service Tax was not payable on the sharing arrangement. Further, any tax paid by the appellant would be available as Cenvat credit to the contractor, rendering the matter revenue neutral. On these facts suppression or mala fide on the part of the appellant could not be attributed. In view of absence of mala fide and existence of bona fide belief (reinforced by revenue neutrality), the Tribunal held that invocation of the extended period of limitation was not permissible and the demand was therefore time-barred. [Paras 4, 5]

Demand (and consequential penalties) set aside on the ground of limitation; impugned order modified and appeal allowed.

Final Conclusion: The Tribunal set aside the confirmed demand (and attendant penalties) as time-barred after concluding that the appellant had a bona fide belief against liability and that revenue neutrality and absence of suppression/mala fide precluded invocation of the extended period.

Refund of Service Tax under Notification No. 17/2009-ST - refund of Service Tax on foreign/foreign commission agent services paid under reverse charge - procedural conditions of notification condonable where export and tax payment are established - acceptance of certified copies in lieu of original documents for refund claims - correlation of input services with export turnover where the assessee's entire operation is export

Refund of Service Tax on foreign/foreign commission agent services paid under reverse charge - procedural conditions of notification condonable where export and tax payment are established - Refund claim in respect of foreign agent commission service paid under reverse charge was allowable and could not be denied where export of goods and payment of service tax were established. - HELD THAT: - The Tribunal noted that the appellant exported goods and discharged service tax liability under reverse charge for commission paid to foreign commission agents. Following the Bench's precedent, the Tribunal held that non compliance with procedural conditions of the relevant notification (such as formal intimations or forms) amounted to a procedural lapse which could be condoned where export and payment of tax were not in dispute. Applying that ratio, the Tribunal found no reason to sustain denial of refund and allowed the appeal on this count. [Paras 4]

Refund on foreign agent commission allowed; appeal on this count allowed.

Acceptance of certified copies in lieu of original documents for refund claims - refund of Service Tax under Notification No. 17/2009-ST - Whether refund could be rejected for want of original invoices where the CBIC circular permits acceptance of certified copies. - HELD THAT: - The Commissioner (Appeals) had rejected refund claims for Customs House Agent services on the ground that original invoices were not produced, relying on statutory invoice requirements. The Tribunal observed that CBIC clarification in relation to an earlier notification states that normally certified copies should be accepted and originals need be verified only in case of in depth enquiry. The Tribunal found the Commissioner (Appeals) order to be contrary to that clarification and directed that the matter be remanded to the original adjudicating authority with directions to follow the CBIC circular. [Paras 4]

Order rejecting refund for want of original invoices set aside; matter remanded to original adjudicating authority with directions to follow CBIC circular accepting certified copies.

Correlation of input services with export turnover where the assessee's entire operation is export - refund of Service Tax under Notification No. 17/2009-ST - Whether refund of Service Tax on Banking and Financial Services can be denied for want of specific correlation with exports where the assessee's sole business is export of goods. - HELD THAT: - The Commissioner (Appeals) rejected refund claims for Banking and Financial Services on the ground that the appellant failed to correlate those services with export of goods. The appellant asserted-and the Tribunal recorded-that all its business relates to export and that the services were necessarily used for export. As the lower authority had not examined or recorded findings on that assertion, the Tribunal set aside the impugned order on this count and remanded the matter to the adjudicating authority for fresh consideration of correlation in light of the appellant's claim and facts. [Paras 4]

Order on refund claims for Banking and Financial Services set aside and remanded to adjudicating authority for fresh examination of correlation with export activity.

Final Conclusion: Appeal partly allowed: refund on foreign commission allowed; orders rejecting refunds for Customs House Agent invoices and for Banking and Financial Services set aside and remitted to the adjudicating authority-CHA invoices to be considered in accordance with the CBIC circular and Banking/Financial Services to be examined for correlation with export activity.

Cenvat Credit admissibility for input services availed at separate premises - Definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Centralized service tax registration under Rule 4(2) of Service Tax Rules, 1994 - ISD registration as procedural facility and procedural lapse defence

Cenvat Credit admissibility for input services availed at separate premises - Definition of input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Centralized service tax registration under Rule 4(2) of Service Tax Rules, 1994 - ISD registration as procedural facility and procedural lapse defence - Entitlement to Cenvat Credit of service tax paid on input services availed by Zonal Training Centre, Zonal Office and Zonal Audit Office of the appellant and whether those services qualify as 'input service' under Rule 2(l). - HELD THAT: - The Tribunal accepted that the appellant held centralized registration in terms of Rule 4(2) and that the services in issue fall within the definition of input service under Rule 2(l). The Court found that the Zonal Training Centre, Zonal Audit Office and Zonal Office, though located in separate premises and not separately rendering taxable output services, are integral parts of the appellant, operate under its control and supervision, and directly or indirectly assist in provision of the appellant's taxable services. The mere fact of separate location does not negate entitlement to credit. The Tribunal further observed that ISD registration is a mechanism to facilitate distribution of credit and that failure to obtain ISD registration is a procedural lapse which cannot be allowed to defeat the substantive entitlement to credit where service tax on the input services has in fact been paid and details furnished to the department. The Revenue's objection regarding Zonal Office having jurisdiction over other circles was not supported by any finding that those circles had availed credit in respect of the same services; even if they had, that would not alter the appellant's eligibility. Applying these principles, the Tribunal held the demand unsustainable, and, consequentially, interest and penalty fell away once the demand was set aside. [Paras 6, 7, 8]

The appellant is entitled to Cenvat Credit in respect of input services availed by its Zonal Training Centre, Zonal Office and Zonal Audit Office for the period 01.04.2016 to 30.06.2017; the services qualify as input service; demand, interest and penalty set aside.

Final Conclusion: The appeal is allowed; the demand for recovery of Cenvat Credit (and consequent interest and penalty) in respect of input services availed by the appellant's zonal offices for the period 01.04.2016 to 30.06.2017 is set aside with consequential relief as per law.

Liability of sub-contractor to discharge service tax despite payment by main contractor - invocation of extended period of limitation where assessee acted under bona fide belief - application of Larger Bench precedent

Liability of sub-contractor to discharge service tax despite payment by main contractor - application of Larger Bench precedent - Validity of the Commissioner's order dropping the demand on merits insofar as it held that a sub-contractor was not liable where the main contractor had paid service tax. - HELD THAT: - The Tribunal, applying the Larger Bench decision in Melange Developers, held that a sub-contractor is liable to pay service tax even if the main contractor has discharged the tax on the activity performed by the sub-contractor pursuant to the contract. The Commissioner's order that dropped the demand for work undertaken by the sub-contractor for the main contractors was therefore inconsistent with the Larger Bench ruling and must be set aside. The Larger Bench examined earlier Tribunal decisions and the Master Circular dated 23.08.2007 and answered the reference to the effect that sub-contractors remain liable. [Paras 5]

Commissioner's order dropping the demand on merits is set aside to the extent it held the sub-contractor not liable.

Invocation of extended period of limitation where assessee acted under bona fide belief - Whether the extended period of limitation could be invoked against the sub-contractor for the periods in question. - HELD THAT: - The Tribunal examined limitation notwithstanding that the Commissioner had not decided it, observing the chronology of events and the prevailing position of law prior to the Master Circular of 23.08.2007. It noted that before issuance of the Master Circular and the show cause notice, several Tribunal decisions supported the view that sub-contractors were not liable where the main contractor had paid service tax, and that the Larger Bench itself referred to such decisions. Given that the sub-contractor was under a bona fide belief, formed in reliance on existing Tribunal decisions, the Tribunal followed Vinoth Shipping Services and held that the extended period of limitation could not be invoked in circumstances where the non-payment arose from such a bona fide belief. [Paras 10, 11, 12]

Extended period of limitation cannot be invoked; demand cannot be confirmed for the extended period.

Final Conclusion: The Commissioner's order is set aside on merits (sub-contractor liability) but, since the extended period of limitation could not be invoked owing to the sub-contractor's bona fide belief, the Department's appeal is dismissed.

Maintainability of sales tax revision - delegation of suo motu revision power to subordinate authority - appellate interference with findings of fact - each assessment year is a separate unit of assessment

Maintainability of sales tax revision - Sales tax revision under Section 24 of the OST Act is not maintainable against orders passed by the Commissioner in exercise of his appellate jurisdiction under Section 23(4)(c)(ii). - HELD THAT: - The Court held that the remedy of sales tax revision to this Court under Section 24 is available only against orders passed under Section 23(3) (second appeal by the Tribunal) and not against appellate orders passed by the Commissioner under Section 23(4)(c)(ii). The petitioner's plea to treat the Commissioner's order as a suo motu revision order was misconceived; even if it were so treated, the statutory appellate route prescribed by Section 23(4)(c)(i) would lie to the High Court, not by way of a sales tax revision under Section 24. Having exhausted the statutory remedy, the conversion of writ petitions into sales tax revisions did not remedy the fundamental lack of maintainability of the chosen remedy. [Paras 1, 3]

Sales tax revisions dismissed as not maintainable against orders passed by the Commissioner under Section 23(4)(c)(ii).

Delegation of suo motu revision power to subordinate authority - The Assistant Commissioner of Sales Tax, Balasore Range, was competent to exercise suo motu revision power in terms of the delegation under Section 17 and Section 23(4)(a). - HELD THAT: - The Court examined the Notification dated 03.08.1963 by which the Commissioner delegated powers under Section 17, and noted that assessment orders in question were framed by the Sales Tax Officer of Balasore Circle. Consequently, the Assistant Commissioner of Sales Tax, being subordinate to the Commissioner and authorised by the Notification and Rule 80, legitimately initiated and concluded suo motu revision proceedings under Section 23(4)(a). Therefore, the Commissioner's subsequent order was in the nature of an appellate order under Section 23(4)(c)(ii). [Paras 1]

Assistant Commissioner competent to exercise suo motu revision; Commissioner acted as appellate authority in confirming the revisional orders.

Appellate interference with findings of fact - each assessment year is a separate unit of assessment - Findings of fact recorded in the suo motu revision and affirmed by the Commissioner on appeal were not interfered with by the Court; the appellate forum's confirmation based on seized material and evidentiary confrontation was sustainable. - HELD THAT: - The Court reviewed the material: vigilance inspection, seizure of incriminating documents relatable to the assessment years 2001-02 and 2002-03, the dealer's admissions regarding credit sales and constant physical stock, and the revisional authority's detailed re-examination which led to re-casting turnover. Relying on settled principles that each assessment year is a self-contained unit and that interference with factual findings is permissible only where findings are based on no evidence or incorrect principles, the Court found no perversity or error apparent on the face of the record. Consequently, it declined to re-appreciate evidence or substitute its view for that of the statutory authorities. [Paras 3]

Appellate confirmation of the suo motu revision orders upheld; no interference with concurrent factual findings.

Final Conclusion: Both sales tax revision petitions are dismissed: the chosen remedy was not maintainable against the Commissioner's appellate orders, the Assistant Commissioner was competent to initiate and decide suo motu revision, and the factual findings supporting reassessment were affirmed and not amenable to interference by this Court.