TaxTMI Updates e-Newsletter
Jan 20,2023

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - zero-rated supply to SEZ with payment of tax - inadmissibility of refund as time-barred - extension of limitation owing to Suo-motu W.P.(Civil) No.3/2020 - reliance on Circular No.157/13/2021-GST by appellate authority - remand for decision on merits

Refund under Section 54 of the Central Goods and Services Tax Act, 2017 - zero-rated supply to SEZ with payment of tax - inadmissibility of refund as time-barred - extension of limitation owing to Suo-motu W.P.(Civil) No.3/2020 - reliance on Circular No.157/13/2021-GST by appellate authority - Appellate order rejecting refund as time-barred was not sustainable and the appeal was to be decided on merits by the appellate authority. - HELD THAT: - The petition challenged rejection of a refund claim filed under Section 54 for IGST paid on a zero-rated supply to an SEZ unit. The authorities had rejected the claim on the ground that it was time-barred and for lack of SEZ certification, and the appellate authority affirmed the rejection relying on Circular No.157/13/2021-GST. The respondents, through their counsel, accepted that reliance upon Circular No.157/13/2021-GST was misplaced and that the limitation position relied upon by the authorities did not preclude adjudication of the refund claim, having regard to the extension of limitation pronounced in Suo-motu W.P.(Civil) No.3/2020. In these circumstances the Court declined to examine the merits of the refund claim, observed the authorities' admission of error on the limitation point and interference with the appellate order was warranted to secure a decision on merits.

Impugned appellate order dated 24.08.2021 set aside and the matter remanded to the appellate authority to decide the appeal on merits in accordance with law, preferably within 30 days; no opinion expressed on the merits.

Final Conclusion: Petition partly allowed: appellate order set aside and the appeal remitted for adjudication on merits; court did not decide substantive entitlement to refund.

Cancellation of GST registration - Non-speaking order - Violation of principles of natural justice - Authority's duty to record reasons and consider show-cause response - Quashing of order entailing penal and pecuniary consequences - Restoration of registration - Finalisation of assessment on restoration - Estoppel against raising delay in filing returns

Cancellation of GST registration - Non-speaking order - Violation of principles of natural justice - Authority's duty to record reasons and consider show-cause response - Quashing of order entailing penal and pecuniary consequences - Validity of the order dated 12/09/2019 cancelling the petitioner's GST registration. - HELD THAT: - The cancellation order is non-speaking and cryptic, failing to refer to the contents of the show cause notice and the petitioner's response; the authorities did not record discernible reasons for cancellation. Given that the order produces penal and pecuniary consequences, principles of natural justice required a reasoned order and consideration of the reply. For these reasons the order cannot stand and is quashed.

The cancellation order dated 12/09/2019 is quashed.

Restoration of registration - Finalisation of assessment on restoration - Relief to be afforded following quashing of the cancellation: restoration of registration and further proceedings. - HELD THAT: - Consequent to quashing the cancellation, the petitioner's GST registration is restored. The State, through the Commissioner of State GST, is directed to finalise the petitioner's assessment and/or pass appropriate orders in accordance with law. This directs the revenue to proceed afresh and undertake assessment or other consequential action consistent with statutory mandates and the reasons articulated by this Court.

Petitioner's registration restored; respondents directed to finalise assessment and pass appropriate orders in accordance with law.

Estoppel against raising delay in filing returns - Whether the respondents may be permitted to raise the issue of delay in filing returns in subsequent proceedings. - HELD THAT: - The Court records the respondents' representation, through their counsel, that the issue of delay in filing returns shall remain closed and shall not be raised again. The Court reiterates this statement and treats the issue as foreclosed for the present proceedings.

Issue of delay in filing returns shall remain closed and shall not be raised again by the respondents.

Final Conclusion: The writ petition is allowed: the cancellation order dated 12/09/2019 is quashed, the petitioner's GST registration is restored, the respondents are directed to finalise assessment and pass appropriate orders in accordance with law, and the respondents are precluded from raising delay in filing returns in these proceedings.

Reimbursement of increased GST - amendment to contractual clause 2.17.1 - new tax or levy - decision on representation - consideration in light of departmental order

Reimbursement of increased GST - amendment to contractual clause 2.17.1 - consideration in light of departmental order - Respondent authorities directed to consider and decide the petitioner's representation claiming reimbursement for additional GST liability in the light of the departmental amendment to Clause 2.17.1 and to permit fresh representation with supporting proof. - HELD THAT: - The petitioner contended that a work order issued when GST was 12% was later affected by an upward revision of GST to 18%, causing additional liability. The Department had itself on 30.9.2022 amended Clause 2.17.1 to treat subsequent imposition or deviation in taxes as "new tax" entitling the contractor to reimbursement on production of proof, with a reciprocal obligation upon contractors where tax reductions occur. The petitioner filed a representation on 6.11.2022 which remains undecided. The State did not oppose a direction that the representation be decided but submitted that the decision must conform to law and the contract. In these circumstances the Court disposed of the petition by directing the respondents to consider the representation afresh, taking into account the departmental amendment to Clause 2.17.1, and permitting the petitioner to file a further representation with documents evidencing the additional GST paid to facilitate decision-making. The Court further directed that, if the representation is decided in the petitioner's favour, steps be taken to reimburse the amount forthwith.

Respondents to decide the petitioner's representation within 90 days in accordance with law and the amended Clause 2.17.1, permitting fresh supporting documents and, if decision is favourable, to reimburse the additional GST forthwith.

Final Conclusion: Writ petition disposed of by directing the respondent authorities to consider and decide the petitioner's representation regarding additional GST liability within 90 days in light of the departmental amendment to Clause 2.17.1; petitioner may file supporting proof and, if the representation is allowed, respondents to reimburse the amount.

Power of review under Order XLVII Rule 1 CPC - error apparent on the face of the record - finality of judgment and prohibition on rehearing in review - proviso to Section 140(1) - transition of tax deducted at source (TDS) where credit not admissible as ITC

Power of review under Order XLVII Rule 1 CPC - error apparent on the face of the record - finality of judgment and prohibition on rehearing in review - Review applications against the earlier order dated 26.02.2021 dismissed for want of merit - HELD THAT: - The court applied the settled and restrictive principles governing review jurisdiction under Order XLVII Rule 1 CPC, emphasising that review lies only for discovery of new evidence, mistake apparent on the face of the record or analogous grounds and cannot be used as a rehearing of the original matter. The review applicants merely re-argued points already considered in the earlier order and did not demonstrate any grave omission, patent mistake, or new material not previously available. Reliance on an alternative High Court decision did not furnish a ground to reopen the earlier conclusion. Accordingly, the review applications did not meet the strict threshold for review and were rejected. [Paras 5, 11, 12, 15, 18]

Review applications dismissed; no ground made out for review of the order dated 26.02.2021

Proviso to Section 140(1) - transition of tax deducted at source (TDS) where credit not admissible as ITC - Validity of the earlier conclusion permitting transition of TDS under Section 140(1) despite contention based on the proviso that credit is not admissible as ITC - HELD THAT: - The court reaffirmed its earlier reasoning in the order dated 26.02.2021, noting that the specific contention that transition is unavailable where credit is not admissible as ITC under the proviso to Section 140(1) had already been considered and decided. The State's re argument on that proviso merely sought a reconsideration of the same point and did not present any new legal error or material to displace the prior conclusion. Consequently, the earlier conclusion in favour of the assessees on transitional credit of TDS remains intact and was reiterated. [Paras 16, 17, 18, 19]

Writ petitions allowed by reiteration of the order dated 26.02.2021; the challenge to transition of TDS under the proviso to Section 140(1) fails

Final Conclusion: The review petitions are dismissed for lack of any ground warranting review; the writ petitions are allowed by reiterating the court's earlier order dated 26.02.2021 permitting transition of TDS as held therein; connected miscellaneous petitions are closed and no costs awarded.

Bill to - Ship to transaction - Tax invoice requirement to contain recipient's Goods and Services Tax Identification Number / Unique Identity Number - E-way bill handling of 'Bill to' and 'Ship to' entries - Detention of goods for non-mention of recipient's GSTIN

Bill to - Ship to transaction - Tax invoice requirement to contain recipient's Goods and Services Tax Identification Number / Unique Identity Number - Detention of goods for non-mention of recipient's GSTIN - Failure to mention the GSTIN of the 'ship to' address in the e-way bill/tax invoice does not vitiate a bill to-ship to transaction or justify detention where the tax invoice discloses the billed recipient's GSTIN and the consignee particulars are otherwise disclosed. - HELD THAT: - The Court found that Rule 46 mandates inclusion of the recipient's GSTIN/Unique Identity Number on a tax invoice, but that requirement must be read in the factual context of a bill to-ship to arrangement. In the present case the tax invoice disclosed the billed recipient's GSTIN, PAN and address, and the e-way bill separately recorded the consignee ('ship to') particulars. The statutory scheme and the e-way bill system accommodate bill to-ship to movements; administrative guidance (FAQ of the GST Department) recognises distinct 'Billing To' and 'Ship To' entries and prescribes tax treatment based on the billing party. The respondents had not shown any suspicion of tax-avoidance or fraud; instead they treated the transaction as non-compliant by overlooking the commercial practice of bill to-ship to consignments. On these facts the omission of the 'ship to' GSTIN in the e-way bill/invoice did not constitute a fatal defect warranting detention of the consignment, and the detention order was unsustainable.

Impugned detention order set aside; detained consignment to be released forthwith.

Final Conclusion: Writ petition allowed; the order detaining the goods is quashed and the consignment directed to be released immediately. No costs.

Rectification under Section 84 of the TNVAT Act, 2006 - decision on merits and in accordance with law - stay of enforcement of assessment order pending disposal of rectification petition - direction to decide rectification petition within fixed time-frame

Rectification under Section 84 of the TNVAT Act, 2006 - direction to decide rectification petition within fixed time-frame - decision on merits and in accordance with law - Respondent directed to decide the rectification petition filed under Section 84 of the TNVAT Act, 2006 within a stipulated period. - HELD THAT: - The petitioner had filed a rectification petition under Section 84 challenging the reassessment order dated 22.08.2022. On consent between the parties, the High Court directed the respondent to consider and decide the rectification petition on merits and in accordance with law within twelve weeks from receipt of a copy of the order. The Court's direction was framed to secure expeditious adjudication of the statutory remedy available to the petitioner rather than to adjudicate the merits of the underlying assessment itself.

Respondent to decide the rectification petition on merits and in accordance with law within twelve weeks from receipt of a copy of this order.

Stay of enforcement of assessment order pending disposal of rectification petition - Interim restraint on enforcement of the impugned assessment order until disposal of the rectification petition. - HELD THAT: - In conjunction with directing prompt disposal of the rectification petition, the Court ordered that the respondent shall not enforce the assessment order dated 22.08.2022 until the rectification petition is disposed of. This interim protection was granted to preserve the status quo and to make the remedy effective while the statutory reconsideration proceeds; it does not constitute a determination on the merits of the assessment.

Assessment order dated 22.08.2022 shall not be enforced until the rectification petition is disposed of.

Final Conclusion: Writ petition disposed by directing the respondent to decide the rectification petition under Section 84 of the TNVAT Act, 2006 on merits and in accordance with law within twelve weeks; enforcement of the impugned assessment order is stayed until disposal of that petition. No costs.

Deemed bifurcation of gross consideration (70% goods : 30% services) - goods forming part of Solar Power Generating System - supplier based applicability of explanation to Notification entry - services by way of construction/engineering/installation/technical services for setting up solar power generating system - artificial splitting of contract/purchase orders to avoid notification applicability - migration of entry from Sr. No. 234 (Schedule I) to Sr. No. 201A (Schedule II) and change of applicable rate

Goods forming part of Solar Power Generating System - deemed bifurcation of gross consideration (70% goods : 30% services) - Supply of Aluminium Foil Type Winding Inverter Duty Transformers and their parts are covered by the Entry No.234 explanation and the value is to be deemed 70% goods and 30% services where supplied alongwith taxable services specified in Entry No.38. - HELD THAT: - The authority examined the purchase order(s), the Technical Specification issued by M/s AGEL and the documents placed before GAAR and found that the Technical Specification expressly included both supply of the transformers and supervision of erection, testing and commissioning. A conjoint reading of the clauses shows a single contractual intent linking supply of goods with associated services used for initial setting up of the Solar Power Generating System. The explanation to Entry No.234 is supplier based and applies where such goods are supplied alongwith taxable services referred to in Entry No.38; hence the deemed bifurcation (70:30) is attracted to the aggregate consideration for the supplies in question. [Paras 6, 10, 12, 16]

Transformers and their parts are covered by Entry No.234 and the explanation applying a deemed 70% (goods) and 30% (services) to the gross consideration is applicable.

Services by way of construction/engineering/installation/technical services for setting up solar power generating system - classification of supervision of erection, testing & commissioning - The supervision of erection, testing and commissioning services rendered in relation to the transformers fall within the scope of services described at Serial No.38 to Notification No.11/2017 CT (Rate) (i.e., services by way of construction/engineering/installation/technical services) and not under SAC 9985. - HELD THAT: - The appellant's supervisory services (ETC) were examined against the service descriptions in Serial No.38 (covering construction, engineering, installation and other technical services for setting up solar power generating systems). The authority held that supervision of erection, testing and commissioning is squarely covered by that entry and therefore falls within the notified taxable services which trigger the explanation to Entry No.234. [Paras 14]

Supervision of erection, testing & commissioning is covered by Serial No.38 and attracts the notified treatment; classification under SAC 9985 was rejected.

Artificial splitting of contract/purchase orders to avoid notification applicability - supplier based applicability of explanation to Notification entry - Separate purchase orders or labels of different recipient entities do not preclude application of the deemed bifurcation where the underlying contract/documents demonstrate a single supply of goods with attendant services; the splitting was treated as an afterthought to circumvent the notification. - HELD THAT: - Although the appellant contended that goods and services were ordered by different entities and thus distinct, the record before GAAR (purchase orders, Technical Specification and signed documents) showed a comprehensive specification prepared by M/s AGEL covering both supply and services. The authority found no documentary basis before GAAR to establish distinct unrelated recipients and noted identical or commonization in the orders and signatories; consequently the supplier centric explanation applies and artificial splitting cannot be used to avoid the notification's deeming provision. [Paras 9, 10, 12, 13, 16]

The attempt to treat the supplies as separate to evade the deemed valuation fails; the supplies are single and connected for purposes of the explanation to the notification.

Migration of entry from Sr. No. 234 (Schedule I) to Sr. No. 201A (Schedule II) and change of applicable rate - applicable effective tax rate on combined supply - For supplies covered by the deemed bifurcation, the effective tax is 8.9% (70% at 5% + 30% at 18%) upto 30.09.2021; with the omission of Entry No.234 and re inclusion as Entry No.201A w.e.f. 01.10.2021 the effective tax becomes 13.8% (70% at 12% + 30% at 18%). - HELD THAT: - The authority noted that the Explanation to Entry No.234 applied until its omission on 30.09.2021 and that from 01.10.2021 the goods/parts description was recast under Entry No.201A in Schedule II with a different goods rate. Applying the deemed split (70%/30%) to the respective notified rates yields the effective tax incidence as determined by the authority for the two periods. [Paras 17, 18]

Effective tax 8.9% for the supplies under the deemed bifurcation upto 30.09.2021; thereafter effective tax 13.8% w.e.f. 01.10.2021.

Final Conclusion: The appeal modifies the GAAR ruling by upholding that the transformers and their parts supplied for initial setting up of the Solar Power Generating System are covered by the notification explanation attracting a supplier based deemed bifurcation of 70% (goods) and 30% (services); supervisory ETC services fall within the notified service entry; attempts to treat separately placed orders as excluding the explanation are rejected; tax consequence is effective 8.9% upto 30.09.2021 and 13.8% w.e.f. 01.10.2021.

Health care services - clinical establishment - authorised medical practitioner - exemption under Notification No. 12/2017 - Sr. No. 74 - maintainability of advance ruling application

Health care services - clinical establishment - exemption under Notification No. 12/2017 - Sr. No. 74 - The application for advance ruling seeking exemption under Sr. No. 74 of Notification No.12/2017-CT (Rate) in respect of the "Health Care Service (Diamond Plan)" is not maintainable. - HELD THAT: - The Authority examined whether the services comprising the "Diamond Plan" fall within the definition of health care services provided by a clinical establishment or an authorised medical practitioner and hence qualify for exemption under Sr. No. 74 of Notification No. 12/2017-CT (Rate). The Authority noted that to decide taxability it was necessary to examine in detail the nature and characteristics of the services offered under the plan and the scope of services provided by hospitals with which the applicant proposes to tie up. The applicant, however, failed to furnish detailed documents specifying the exact nature, scope, terms of tie-ups with other hospitals and the detailed composition of services to be offered under the plan. In absence of such material it was not possible to ascertain whether the components of the plan constitute exempt health care services by a clinical establishment or an authorised medical practitioner. On this basis the Authority concluded that the application could not be adjudicated and is not maintainable. [Paras 13, 14, 15, 16]

Application not maintainable for want of requisite documentary details to determine applicability of exemption under Sr. No. 74 of Notification No.12/2017-CT (Rate).

Final Conclusion: The Authority dismissed the application as not maintainable because the applicant did not furnish necessary documents and details regarding the nature, scope and contractual arrangements of the services under the "Diamond Plan", preventing a determination whether those services are exempt under Sr. No. 74 of Notification No.12/2017-CT (Rate).

Anticipatory bail - fraudulent availment of Input Tax Credit - non-cooperation with investigation - previous criminal antecedents - sanction for arrest under the CGST statutory scheme

Anticipatory bail - fraudulent availment of Input Tax Credit - non-cooperation with investigation - previous criminal antecedents - Anticipatory bail application of Amit Gupta - HELD THAT: - The court considered the DGGI's investigation alleging large-scale fraudulent availment of Input Tax Credit involving invoices from non-existent/non-operational firms for the financial years 2020-2021 and 2021-2022, and noted the department's assertion that the total alleged fraud extends beyond the earlier period for which the applicant had previously been arrested. The court recorded the department's status report that the applicant was not cooperating with the investigation (including refusal to permit email verification and failure to provide requested shareholder particulars) and took into account the applicant's prior involvement in similar proceedings. Although the applicant submitted an affidavit denying the allegations, offered to cooperate and pointed out differences in figures and periods, the court found on the material before it that the applicant's role, previous antecedents and ongoing investigation made the case unsuitable for grant of anticipatory bail. The court therefore exercised its discretion to refuse protection against arrest.

Application for anticipatory bail dismissed.

Sanction for arrest under the CGST statutory scheme - need for immediate custodial interrogation - Requirement of immediate arrest or custodial interrogation of the applicant - HELD THAT: - The court enquired of the prosecution whether immediate arrest was necessary. The Special Public Prosecutor stated that sanction for arrest under the CGST scheme is granted by the Commissioner and that no such sanction was pending in the present case. On this basis the court observed that there was no requirement of immediate arrest at that stage, but this factual position did not alter the conclusion on anticipatory bail given the other considerations (alleged large-scale fraud, non-cooperation and prior involvement).

No immediate arrest was required as no sanction for arrest was pending, but anticipatory bail was nonetheless refused.

Final Conclusion: Considering the gravity of the allegations relating to fraudulent availment of Input Tax Credit for the stated periods, the applicant's alleged non-cooperation and previous involvement in similar proceedings, the court refused anticipatory bail and dismissed the application; the court also recorded that no sanction for arrest under the CGST scheme was then pending so immediate arrest was not required.

Jurisdiction under Section 263 - deduction under Section 80P(2)(a)(i) - classification of interest as income from other sources versus business income - quashing of assessment order for lack of independent enquiry by Commissioner - distinguishing precedent on facts

Jurisdiction under Section 263 - quashing of assessment order for lack of independent enquiry by Commissioner - Validity of the Principal Commissioner's exercise of revisional jurisdiction under Section 263 in quashing the assessment order - HELD THAT: - The Tribunal found, and this Court concurs, that the PCIT did not conduct any independent inquiry before holding the assessing officer's order to be erroneous and prejudicial. Reliance by the PCIT on the Supreme Court decision in Totagars was applied without examining whether that precedent was factually comparable. The Tribunal applied the principle from DG Housing Projects Ltd. that the Commissioner, before invoking Section 263, must satisfy himself on the material and may have to make inquiries to conclude that the assessment order is erroneous and prejudicial to revenue. Here the PCIT merely set aside the assessment and remanded the matter without making the requisite independent findings or inquiries; that procedural and substantive shortcoming justified quashing the Section 263 order.

The PCIT's exercise of jurisdiction under Section 263 was quashed for lack of independent inquiry and the Tribunal's order so quashing the Section 263 order is upheld.

Deduction under Section 80P(2)(a)(i) - classification of interest as income from other sources versus business income - distinguishing precedent on facts - Whether the interest earned on deposits constituted income from other sources (ineligible for Section 80P) or formed part of business income eligible for deduction under Section 80P(2)(a)(i) - HELD THAT: - On the facts, the Tribunal examined the assessee's replies to the assessing officer's questionnaire and the documentary material demonstrating the nature of the society's activities and the source of funds. The Tribunal concluded that the Supreme Court decision in Totagars was distinguishable because of differing factual matrices, and that earlier decisions (including those of different High Courts and coordinate Tribunal benches) supported treatment of such interest as eligible for deduction under Section 80P where the deposited amounts were not liabilities due to members and the interest arose from the society's business activities. The Tribunal also noted that the assessing officer had limited the deduction to the component relatable to business income after inquiry; having found on the material that the interest could be attributable to the society's business, the Tribunal accepted the assessee's position.

The Tribunal's factual conclusion that the interest at issue could be treated as business income eligible for deduction under Section 80P(2)(a)(i) was sustained and the contrary invocation of Totagars by the PCIT was held to be inapposite on facts.

Final Conclusion: The Income Tax Appellate Tribunal's order quashing the PCIT's exercise of jurisdiction under Section 263, and sustaining the assessee's claim (on the facts) that the interest was eligible for deduction under Section 80P(2)(a)(i), is upheld. The revenue's appeal is dismissed and no substantial question of law is held to arise.

Withholding tax certificate under Section 197 - rate of withholding tax - Fees for Technical Services (FTS) v. business income characterization - without prejudice directions

Withholding tax certificate under Section 197 - rate of withholding tax - Fees for Technical Services (FTS) v. business income characterization - without prejudice directions - Issuance of a certificate under Section 197 fixing the rate of tax withholding at 4% for FY 2022-2023 - HELD THAT: - The Court directed issuance of a certificate under Section 197 of the Income Tax Act, 1961, pegging the rate of deduction at 4% for the subject period (FY 2022-2023). The direction was founded on the respondents' failure to file a counter-affidavit, the respondents' subsequent instructions, and the factual position that lower withholding certificates at 4% had been the position in earlier financial years and returns for earlier years had offered the subject income at 4%. The Court recorded that a dispute subsists on whether the income is taxable as Fees for Technical Services (FTS) or as business income, and observed that the India-UAE Double Taxation Avoidance Agreement does not contain an FTS article; however, the Court did not adjudicate the substantive characterisation issue and expressly granted the relief without prejudice to the rights and contentions of either party. The respondents were directed to issue the certificate expeditiously, and in any event within two weeks from the order. [Paras 7, 14, 15, 16, 17]

Certificate under Section 197 to be issued fixing withholding at 4% for FY 2022-2023, to be done expeditiously and not later than two weeks, direction given without prejudice to parties' rights, writ petition disposed of accordingly.

Final Conclusion: The High Court directed the revenue to issue a Section 197 certificate fixing the rate of tax deduction at 4% for FY 2022-2023 within two weeks, while leaving the substantive dispute over classification of the income (FTS v. business income) open and preserving the parties' respective rights.

Validity of reopening assessment under Section 148 - Borrowed satisfaction and non-application of mind - Change of opinion - Reopening based on information from investigation/DDIT and NSEL scam - Scope of extraordinary constitutional jurisdiction under Article 226

Validity of reopening assessment under Section 148 - Reopening based on information from investigation/DDIT and NSEL scam - Reopening of assessment for the assessment year 2013-2014 under Section 148 was legally sustainable. - HELD THAT: - The Court found that respondent formed an opinion to reopen the assessment on the basis of specific information and documentary material received from DDIT (Investigation) regarding misuse of the NSEL platform, and that the petitioner had not furnished the specific particulars and supporting documents demanded despite summons. The reasons supplied (summarised in the reasons dated 30.12.2020) detailed the NSEL modus operandi and recorded admissions and survey findings indicating paper transactions and non existence of physical deliveries. The authority's satisfaction was based on cumulative and critical analysis of the enquiry report and the petitioner's inadequate explanations (ledger extracts and selected bank statements), and therefore the reopening could not be characterised as unjust, perverse or an exercise without basis. The Court held that constitutional interference was unwarranted where the fact finding authority has recorded a prima facie case for reopening and the assessee is not remediless under the statutory scheme. [Paras 9, 10, 11]

Reopening under Section 148 upheld as being founded on relevant information and inadequate disclosure by the petitioner.

Borrowed satisfaction and non-application of mind - Change of opinion - The order disposing of the petitioner's objections did not suffer from borrowed satisfaction or non application of mind and was not merely a change of opinion requiring interference. - HELD THAT: - The Court examined the objection disposal and concluded it was a reasoned order based on the investigation material and admissions in the DDIT report. The authority considered the petitioner's replies, noted that replies were not specific and did not satisfactorily explain source of funds or genuineness of trades, and relied on survey findings (including admissions regarding paper transactions) to form its view. Given the material unearthed subsequently and the petitioner's failure to make full disclosure, the Court found that the action was not a mere change of opinion and that the authority had applied independent mind rather than adopting a borrowed satisfaction. [Paras 11, 14]

Order disposing objections sustained; no infirmity of borrowed satisfaction, non application of mind, or mere change of opinion found.

Scope of extraordinary constitutional jurisdiction under Article 226 - Extraordinary writ jurisdiction under Article 226 should not be exercised to quash the reopening proceedings in the present facts. - HELD THAT: - Applying established principles, the Court held that it will not usurp the discretion of the statutory authority or substitute its view merely because the petitioner advances a different opinion. Interference is warranted only where the authority's satisfaction is without any basis or perverse. The Court found no such illegality; the authority was seized of material and reasons and the petitioner had statutory remedies available during adjudication. Reliance was placed on the principle that constitutional courts should not take over decision taking function of the statutory authority except in exceptional circumstances, which were absent here. [Paras 12, 15, 16]

Extraordinary jurisdiction declined; petition dismissed and interference refused.

Final Conclusion: Petition dismissed. Notice discharged, interim relief vacated and no interference with the reopening or the disposal of objections.

Deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 - beneficial owner of shares - taxation of deemed dividend in the hands of the shareholder and not in the hands of a concern not holding shares - loan or advance to a concern in which a shareholder is a partner or member

Deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 - beneficial owner of shares - taxation of deemed dividend in the hands of the shareholder and not in the hands of a concern not holding shares - Whether the amount advanced by Orissa Stevedores Ltd. should be treated as deemed dividend in the hands of Mr. Mahimananda Mishra individually or in the hands of the firm M/s. Mahimananda Mishra. - HELD THAT: - The Court held that a plain reading of Section 2(22)(e) dictates that a payment by a closely held company by way of advance or loan is to be treated as a deemed dividend in the hands of the shareholder who is the beneficial owner of shares (and meets the voting power threshold) or in respect of a concern in which such shareholder has a substantial interest. In the present case the individual Mr. Mahimananda Mishra admittedly holds 36.95% of the paid-up share capital of Orissa Stevedores Ltd., whereas the firm M/s. Mahimananda Mishra holds no shares in that company. Consequently, the deemed dividend could only be taxed in the hands of Mr. Mishra in his individual capacity. The Court found that the CIT(A) correctly reached that conclusion and that the ITAT erred in remanding the question for reconsideration; remand was unnecessary because the statutory provision and admitted facts decisively answer the question. [Paras 9, 10, 11, 12]

The deemed dividend is to be taxed in the hands of Mr. Mahimananda Mishra individually and not in the hands of the firm M/s. Mahimananda Mishra; the ITAT order is set aside and the CIT(A)'s conclusion is affirmed.

Final Conclusion: Answering the question framed in favour of the assessee, the Court holds that the amount is a deemed dividend taxable in the hands of Mr. Mahimananda Mishra, the individual shareholder/director, and not in the hands of the appellant firm; the ITAT order is set aside and the CIT(A)'s decision is affirmed.

Deductibility under Section 37(1) - deduction for Corporate Social Responsibility (CSR) expenses - capital expenditure versus revenue expenditure - wholly and exclusively for business - Explanation 2 to Section 37(1) and prospective operation of statutory amendment

HELD THAT: - The Court examined the assessment order, the CIT(A) order and the Tribunal's decision. The AO had disallowed the CSR expenditure on two grounds: that it was capital in nature and that Explanation 2 to Section 37(1) (inserted by the Finance Act, 2014) precluded deduction. The Court found no material on record to show that the assessee had directed funds to acquire a capital asset of the assessee; the AO's conclusion rested on speculative illustrations of how recipients might use funds and thus was erroneous. The CIT(A) and Tribunal framed the question around whether the expenditure was laid out wholly and exclusively for business; the Tribunal relied on prior precedents and concluded that, for the assessment year before the insertion of Explanation 2, CSR expenses were allowable under Section 37(1). The Court noted that the revenue did not file cross objections before the Tribunal on the CIT(A)'s conclusion. The Court accepted the Tribunal's view that Explanation 2 operates prospectively and, in light of earlier authorities including this Court's order referred to in the judgment, declined to interfere with the Tribunal's allowance of the CSR deduction. Consequently, no substantial question of law was found to arise for consideration. [Paras 15, 16, 17, 18, 19]

Tribunal's allowance of CSR expenditure as deductible under Section 37(1) upheld; AO's finding of capital nature rejected; Explanation 2 held not to negate deduction for the assessment year in dispute, and no substantial question of law arises.

Final Conclusion: The Court condoned the delay in filing the appeal and, on merits, declined to interfere with the Tribunal's conclusion that the CSR expenditure was allowable under Section 37(1); the AO's capital-expenditure finding was rejected and the statutory amendment (Explanation 2) was not applied so as to deny deduction for the assessment year in question, accordingly the appeal is closed.

TDS on year-end provisions - identification of payee requirement for Tax Deduction at Source - accrual (mercantile) system of accounting and provisional estimates - disallowance under Section 40(a)(ia) for failure to deduct tax at source - reversal of provisions and absence of income taxable in the hands of payee - applicability of Double Taxation Avoidance Agreement to TDS on services from non-residents

TDS on year-end provisions - identification of payee requirement for Tax Deduction at Source - reversal of provisions and absence of income taxable in the hands of payee - accrual (mercantile) system of accounting and provisional estimates - disallowance under Section 40(a)(ia) for failure to deduct tax at source - TDS was not exigible on ad hoc year end provisions for legal and professional charges which were reversed at the beginning of the next year and where no payees or definite amounts were identified. - HELD THAT: - The Revenue sought disallowance under the TDS provisions on year end accruals made on an estimate basis. The Court recorded that the provisions were reversed in the next year, no payees were identified at the time of making the provisions and the exact amounts payable were not crystallised. Relying on the principle that TDS obligation arises only where income is attributable to a payee, as applied in Karnataka Power Transmission Corporation Ltd. and followed in Volvo India Pvt. Ltd., the Court held that mere accounting provisions not identifiable to a payee and subsequently reversed do not give rise to a liability to deduct tax at source. The Court distinguished Palam Gas Service on the ground that in that case the payees were identifiable. The Court also noted the assessee's case that tax was deducted and remitted in the subsequent year when invoices were received, and found the Tribunal's direction to sustain disallowance to be perverse.

Appeal allowed; first question answered in favour of the assessee and against the Revenue.

Final Conclusion: The High Court allowed the appeal, holding that TDS was not payable on ad hoc year end provisions for professional charges which were reversed in the next year and where no payees or definite amounts were identified; accordingly the Tribunal's order sustaining disallowance was set aside and the second question (relating to DTAA) was not considered.

Validity of notice under Section 148A(b) - Supply of information/material to the assessee - Setting aside of order under Section 148A(d) and consequential notice under Section 148 - Right to opportunity to respond before reassessment - Reassessment proceedings against non-existent or incorrectly identified assessee

Validity of notice under Section 148A(b) - Supply of information/material to the assessee - Setting aside of order under Section 148A(d) and consequential notice under Section 148 - The order passed under Section 148A(d) dated 30.07.2022 and the consequential notice under Section 148 dated 30.07.2022 were set aside because the Assessing Officer was uncertain whether the information/material forming the basis for issuance of the Section 148A(b) notice had been supplied to the petitioner. - HELD THAT: - The court recorded that it emerged during hearing that the material which purportedly justified issuance of the Section 148A(b) notice may not have been supplied to the petitioner, and the Assessing Officer himself was not sure whether supply was partial or complete. In view of that factual uncertainty about disclosure of the material relied upon for initiating reassessment proceedings, the court found it appropriate to set aside the subsequent order under Section 148A(d) and the consequential notice issued under Section 148. The respondents were granted liberty to take further steps, subject to compliance with law and after observance of statutory requirements. [Paras 5, 6, 7]

Order dated 30.07.2022 under Section 148A(d) and consequential notice dated 30.07.2022 under Section 148 are set aside; respondents have liberty to proceed as per law.

Right to opportunity to respond before reassessment - Reassessment proceedings against non-existent or incorrectly identified assessee - The contentions that reassessment proceedings were initiated against a non-existent entity or an incorrectly identified assessee must be considered afresh by the Assessing Officer, after furnishing the relevant material to the petitioner and permitting a response. - HELD THAT: - The court noted the petitioner's claim that reassessment was commenced against a partnership firm of the same name while the petitioner is a proprietorship, and that PAN surrender/cancellation requests were made. The court directed the Assessing Officer to furnish the relevant information/material to the petitioner within four weeks of receipt of this order, and thereafter to grant at least three weeks to the petitioner to respond to both the notice and the material. The court expressly left the factual and legal adjudication of these contentions to the Assessing Officer to decide in the course of proceedings, thereby remanding the matter for fresh consideration in accordance with law. [Paras 8, 10, 11]

AO to furnish material within four weeks and grant petitioner at least three weeks to respond; AO to consider the petitioner's contentions (including identity of assessee) and proceed thereafter.

Final Conclusion: The writ petition is disposed of by setting aside the order dated 30.07.2022 under Section 148A(d) and the consequential notice dated 30.07.2022 under Section 148; the Assessing Officer is directed to furnish the relevant material within four weeks and to grant the petitioner at least three weeks to respond, after which the AO may proceed in accordance with law; liberty reserved to the revenue.

Principles of natural justice in faceless assessment - Duty to communicate grant of adjournment and hearing date in online/portal proceedings - Faceless assessment framework and obligation to afford effective opportunity before finalising assessment - Quashing of assessment and remand for fresh consideration where opportunity not effectively furnished

Principles of natural justice in faceless assessment - Duty to communicate grant of adjournment and hearing date in online/portal proceedings - Quashing of assessment and remand for fresh consideration - Whether the assessment framed in faceless manner on 16/06/2021 without communicating the grant of adjournment and without any response from the petitioner violated principles of natural justice and warranted quashing and remand. - HELD THAT: - The Court found that the petitioner had sought an adjournment on 26/04/2021 for twenty days and that the assessing officer's internal order sheet reflected a grant of time up to 10/05/2021, but there was no evidence that this communication was sent to the petitioner through the portal. In faceless assessment proceedings, the authority must respond to adjournment requests and communicate fresh hearing dates on the portal because the assessee is dependent on the portal for filing replies and seeking hearings. The absence of any communicated response left the petitioner unaware of the next date and unable to file the reply; finalisation of assessment thereafter without affording an effective opportunity amounted to a breach of natural justice. While the Court refrained from adjudicating merits of additions, it concluded that procedural fairness required interference with the assessment. Consequently the assessment order was set aside and the matter restored to the stage at which the petitioner had been given the show-cause/draft assessment order so that an opportunity to file response and be heard is afforded afresh. The Court directed the respondent to grant the petitioner two weeks from receipt of the order copy to file reply and to proceed thereafter in accordance with law, without permitting further adjournment. [Paras 10, 11, 12, 13]

Assessment order dated 16/06/2021 quashed and set aside for breach of principles of natural justice; matter restored for fresh consideration and the petitioner granted two weeks from receipt of this order to file reply, after which the respondent shall proceed in accordance with law.

Final Conclusion: Impugned assessment order of 16/06/2021 for Assessment Year 2018-19 set aside for failure to communicate adjournment/hearing in faceless assessment; matter remanded for fresh opportunity to the petitioner to file reply within two weeks and for the respondent to pass a reasoned order thereafter, merits being left open.

Summary order. Permission to file legible annexures; notice issued and counter-affidavit directed to be filed within six weeks with liberty for rejoinder; matter listed on 26.07.2023; in the meanwhile operation of the impugned order dated 30.07.2022 and the notice dated 30.07.2022 is stayed.

Admission of additional evidence on appeal - verification and remand to assessing officer - compliance with Rule 46A of the Income Tax Rules - treatment of bank deposits as undisclosed turnover / unexplained cash

Admission of additional evidence on appeal - verification and remand to assessing officer - compliance with Rule 46A of the Income Tax Rules - Admission of documents and revised accounts produced before the CIT(A) and whether the matter should be remitted to the Assessing Officer for verification and fresh adjudication. - HELD THAT: - The Tribunal found that the assessee produced, for the first time at the appellate stage, a revised balance-sheet, trading and profit & loss account, bills of purchase and bank statements to explain large bank deposits earlier treated by the AO as suppressed sales and unexplained cash. Although the CIT(A) sought and received a remand report from the AO, the AO's remand report merely objected to the admission of the additional evidence as an afterthought and did not verify or examine the documents on record. The CIT(A) proceeded to restrict the additions by applying the assessee's declared GP rate without directing the AO to verify the newly produced material. In these circumstances the Tribunal held that the additional evidence required examination and verification at the assessment level and that the CIT(A) ought not to have accepted the evidence for adjudication without such verification. Consequently the CIT(A)'s order was set aside and the matter was remanded to the AO for fresh adjudication after proper verification and examination of the evidence produced before the CIT(A). [Paras 6, 8]

Impugned order of the CIT(A) set aside and matter remitted to the Assessing Officer for adjudication afresh after verification and examination of the evidence produced before the CIT(A).

Final Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, set aside the CIT(A)'s order insofar as it admitted and acted upon additional evidence without verification, and remanded the matter to the Assessing Officer for fresh adjudication after proper verification of the documents produced on appeal.

Validity of revision under section 263 - Quashing of reassessment under section 147 - Requirement of tangible material for reopening - Proviso to section 147 - disclosure of material facts - Duty to pass a speaking order disposing objections and four weeks' period - Change of opinion versus reason to believe

Validity of revision under section 263 - Quashing of reassessment under section 147 - Whether the order passed by the Commissioner (Exemption) under section 263 survives where the reassessment order under section 147 has been quashed by the Commissioner of Income Tax (Appeals). - HELD THAT: - The Tribunal noted that the Commissioner of Income Tax (Appeals) quashed the reassessment order dated 30.03.2015 on multiple grounds: absence of any tangible material obtained after the original assessment to justify reopening, failure to demonstrate that the assessee did not disclose fully and truly all material facts as contemplated by the proviso to section 147, and invalid procedure in disposing objections without a speaking order and without allowing the four weeks' interval recognized in precedent. Having recorded that the reassessment order was held illegal and bad in law and therefore quashed, the Tribunal reasoned that the revision order passed under section 263 cannot survive independently because it impugns an assessment order that no longer exists. The Tribunal furthermore recorded that if the Revenue succeeds in any appeal against the CIT(A)'s order, it may seek revival of the present proceedings for decision on merits. Applying these conclusions, the Tribunal allowed the assessee's appeal and set aside the revision order as infructuous. [Paras 5, 6]

The revision order under section 263 is quashed as infructuous because the reassessment order under section 147 has been quashed by the CIT(A); appeal allowed.

Final Conclusion: The appeal is allowed: the order passed by the Commissioner (Exemption) under section 263 is quashed as it impugns a reassessment order which has been set aside by the Commissioner of Income Tax (Appeals); the Revenue may seek revival of proceedings if it succeeds in any appeal against the CIT(A).

Exemption under Section 54/54F - rectification under Section 154 of the Income Tax Act - purchase of under-construction apartment treated as construction for capital-gains exemption - time-limit for investment/construction for claiming capital gains exemption - debatable question not to be decided by rectification proceedings

Rectification under Section 154 of the Income Tax Act - debatable question not to be decided by rectification proceedings - Validity of the Assessing Officer invoking rectification under Section 154 to deny exemption previously allowed - HELD THAT: - The Tribunal upheld the view that the Assessing Officer could not invoke Section 154 to reopen and deny the exemption already allowed where the question of fact and law - namely, whether the Gurgaon investment was a purchase of a ready property in June 2010 or a buyer's right in an under-construction apartment - was debatable. On examination of the apartment buyers' agreement and payment/possession timeline, the agreement indicated an under-construction project with phased construction and payments stretching beyond 2010, rendering the AO's characterization of the investment as a June 2010 purchase a debatable conclusion. Such debatable issues cannot be corrected by invoking Section 154, and the AO erred in doing so. [Paras 5, 10]

Rectification under Section 154 was not validly invoked and the AO erred in denying the exemption through the rectification order.

Exemption under Section 54/54F - purchase of under-construction apartment treated as construction for capital-gains exemption - time-limit for investment/construction for claiming capital gains exemption - Whether the assessee satisfied the temporal conditions for claiming exemption under Section 54/54F by virtue of purchasing/right in an under-construction apartment and completing payment/possession within the statutory period - HELD THAT: - The Tribunal accepted the assessee's case that the agreement dated 05.07.2011 related to an under-construction apartment and not a purchase of a completed house in June 2010. The payment schedule shows installments from FY 2011-12 to 2014-15, and the last payment was made on 21.05.2014. Possession was handed over upon receipt of occupation certificate within three years of the date of transfer. On these facts and by reference to authorities recognizing that buyers' agreements for flats under construction amount to construction rather than purchase of a completed house, the Tribunal found the conditions for exemption under Section 54/54F satisfied and upheld the CIT(A)'s deletion of the addition. [Paras 5, 10]

Assessee satisfied the temporal conditions for exemption under Section 54/54F; the CIT(A)'s deletion of the addition was sustained.

Final Conclusion: The Revenue's appeal is dismissed; the rectification under Section 154 was held to be improperly invoked on a debatable factual/legal question, and the exemption under Section 54/54F was sustained on the finding that the investment related to an under-construction apartment and met the statutory temporal conditions.

Revisionary jurisdiction under section 263 of the Income Tax Act - Revenue expenditure versus capital expenditure - consumables/catalysts - Allowability of expenditure in the year of use - Plausible view doctrine where two reasonable views exist - Depreciation on intangible technical know how forming part of a block of assets - User test for depreciation

Revenue expenditure versus capital expenditure - consumables/catalysts - Allowability of expenditure in the year of use - Plausible view doctrine where two reasonable views exist - Whether the CIT was justified in invoking revisionary jurisdiction under section 263 to direct disallowance of catalyst expenditure claimed as revenue expenditure in the year it was issued to production. - HELD THAT: - The Tribunal recorded that the assessing officer had queried the nature and life of the catalysts and, after examination and receipt of the assessee's detailed reply, allowed the claim treating catalysts as consumables and revenue expenditure in the year of issue to production. Identical treatment had been taken and allowed by the AO for earlier assessment years without revision. The Tribunal noted judicial precedents favourable to treating such consumables as revenue expenditure and observed that the AO's decision represented a plausible view. Since two reasonable views existed and the AO had applied his mind, the exercise of section 263 to overturn that view was not sustainable. The revisionary order was therefore quashed insofar as it disturbed the allowance of catalyst expenditure. [Paras 11, 12, 13, 15]

Revision under section 263 directing disallowance of catalyst expenditure set aside; catalyst expenditure held to be allowable as revenue expenditure in the year of use.

Depreciation on intangible technical know how forming part of a block of assets - User test for depreciation - Revisionary jurisdiction under section 263 of the Income Tax Act - Whether the CIT was justified in invoking section 263 to direct withdrawal of depreciation claimed on technical know how (and related assets) which had been capitalised and used after reconstruction. - HELD THAT: - The Tribunal recorded that the technical know how and related plant had been part of the block of assets taken over on amalgamation, the plant was rebuilt and capitalised in the relevant earlier year, and production was shown from financial year 2005-06 onwards. The Tribunal observed that the section 263 show cause notice referred to destruction of assets in an earlier fire but the assessing officer had evidence of subsequent reconstruction, capitalization and user/production. The PCIT's notice and the conclusion reached were not coextensive and the assessee was not given opportunity to meet the specific conclusion impugned. On the facts the user test was satisfied and the AO's allowance of depreciation could not be characterised as erroneous; accordingly the revisionary direction to withdraw depreciation was unsustainable. [Paras 14, 15]

Revision under section 263 directing withdrawal of depreciation on technical know how (and related items) quashed; depreciation allowance sustained.

Final Conclusion: The Tribunal quashed the Commissioner's revisionary orders under section 263 for A.Y. 2009-10 and A.Y. 2010-11, holding that the assessing officer's allowance of catalyst expenditure as revenue expenditure in the year of use and the allowance of depreciation on the technical know how were plausible and not erroneous; appeals allowed.

Onus of proof on assessee to establish identity, creditworthiness and genuineness of share subscription - unexplained cash credit treated as income under section 68 - disallowance under section 40A(3) for cash payments exceeding statutory limit - capital expenditure and amortisation claim under section 35D - reopening of assessment - reasons to believe leading to notice under section 148 - appellate authority's powers coterminous with assessing officer on re-evaluation of evidence - acceptance of confirmation letters and bank statements as proof subject to verification per Lovely Exports ratio

Disallowance under section 40A(3) for cash payments exceeding statutory limit - Validity of addition of Rs.3,78,642 on account of disallowance under section 40A(3) for cash payments - HELD THAT: - The Tribunal accepted the concurrent findings of the Assessing Officer and the CIT(A) that the assessee failed to demonstrate any exceptional circumstances permitting cash payments in excess of the prescribed limit. The assessee did not furnish satisfactory evidence to substantiate the claim that the cash payments were justified under Rule 6DD or other exceptional grounds. In absence of any material to take a view contrary to the AO and the CIT(A), the addition under section 40A(3) was sustained. [Paras 11]

Addition under section 40A(3) of Rs.3,78,642 upheld and ground of appeal dismissed.

Capital expenditure and amortisation claim under section 35D - Claim for treating fee for increase in share capital as capital expenditure allowable in five instalments under section 35D - HELD THAT: - The Assessing Officer treated the amount claimed as capital in nature and disallowed it. The CIT(A) and the Tribunal found that the assessee failed to produce any documentary evidence to establish that the expenditure fell within the categories eligible for amortisation under section 35D(2), including absence of receipt from the relevant authority. In the absence of such evidence, the claim for allowance under section 35D could not be accepted. [Paras 12, 13]

Claim under section 35D rejected; disallowance of Rs.2,75,000 upheld.

Unexplained cash credit treated as income under section 68 - onus of proof on assessee to establish identity, creditworthiness and genuineness of share subscription - acceptance of confirmation letters and bank statements as proof subject to verification per Lovely Exports ratio - Validity of addition of Rs.3,21,50,000 as unexplained share capital under section 68 for AY 2009-10 - HELD THAT: - The AO added the amount under section 68 on the ground that the assessee failed to prove identity, creditworthiness and genuineness of the 13 subscribers; only three persons were produced and even those three could not satisfactorily establish their creditworthiness. The CIT(A) sustained the addition after recording detailed reasons noting absence of responses from ten subscribers, non-assessment of the investors to tax, reliance on unverifiable agriculturist lenders and other indicia of non-transparency. The Tribunal found no infirmity in the concurrent conclusion that the assessee did not discharge the onus to the satisfaction of the AO and the CIT(A), and therefore upheld the addition. [Paras 6, 8, 14, 16]

Addition of Rs.3,21,50,000 under section 68 for AY 2009-10 upheld; grounds of assessee dismissed.

Unexplained cash credit treated as income under section 68 - onus of proof on assessee to establish identity, creditworthiness and genuineness of share subscription - appellate authority's powers coterminous with assessing officer on re-evaluation of evidence - Deletion by the CIT(A) of addition of Rs.4,00,00,000 as unexplained share capital under section 68 for AY 2010-11 and restoration of AO's order on appeal by Revenue - HELD THAT: - For AY 2010-11 the AO had added Rs.4 crores under section 68 after summons under section 131 elicited no cooperative response from five of six subscribers and one subscriber denied the transaction. The assessee later furnished confirmation letters and bank statements before the CIT(A), who forwarded them to the AO and, relying on the remand report, deleted the addition invoking the Lovely Exports ratio where documentary proof may suffice if verified. The Tribunal, on review of the remand report and material, held that the assessee had not discharged the onus: none of the investors were tax filers, one denied the investment, and bank routing alone did not establish creditworthiness or genuineness. The Tribunal also noted that the CIT(A) failed to properly consider the AO's findings despite having powers coextensive with the AO. In view of these factors and applicable precedents, the Tribunal reversed the CIT(A)'s deletion and restored the AO's addition. [Paras 19, 21, 22, 27, 29]

Deletion of Rs.4,00,00,000 by CIT(A) reversed; AO's addition under section 68 restored and Revenue's appeal allowed.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2009-10, upholding additions under sections 40A(3), denial of section 35D relief, and treatment of share subscriptions as unexplained credits under section 68; in the Revenue's appeal for AY 2010-11 the Tribunal allowed the appeal, reversing the CIT(A)'s deletion and restoring the AO's addition of Rs.4 crores under section 68.

Disallowance of expenses on conjecture and surmise - Burden on Assessing Officer to point out specific defective vouchers - Ad-hoc percentage disallowance without evidentiary foundation - Expenditure wholly and exclusively for business

Disallowance of expenses on conjecture and surmise - Burden on Assessing Officer to point out specific defective vouchers - Expenditure wholly and exclusively for business - Deletion of ad-hoc disallowance made out of travelling expenses for A.Y.2013-14. - HELD THAT: - The Assessing Officer made a 10% disallowance of the increase in local conveyance and conveyance transport on the basis that 'preponderance of probability' indicated possible non-business use, without identifying any specific vouchers as defective or explaining the nature of alleged non-business use. The Commissioner (Appeals) upheld the ad-hoc addition. The Tribunal found that in the absence of any specific defects pointed out in the vouchers or any material showing personal or non-business benefit, the disallowance rested on surmise and conjecture. Given that the assessee is a company and the expenses were recorded as business expenses, the AO failed to discharge the evidentiary burden to establish that the expenditure was not wholly and exclusively for business. The ad-hoc addition therefore lacked any basis and had to be deleted.

The addition out of travelling expenses for A.Y.2013-14 is deleted; the assessee's ground is allowed.

Ad-hoc percentage disallowance without evidentiary foundation - Disallowance of expenses on conjecture and surmise - Burden on Assessing Officer to point out specific defective vouchers - Expenditure wholly and exclusively for business - Deletion of ad-hoc disallowances of travelling expenses and sales promotion expenses for A.Y.2014-15. - HELD THAT: - For A.Y.2014-15 the AO made a 5% disallowance of travelling expenses and a 10% disallowance of sales promotion expenses on the basis of perceived excessive quantum and lack of full supporting documents, but did not identify any specific vouchers as doubtful. The Commissioner (Appeals) confirmed these ad-hoc disallowances. The Tribunal held that where no particular voucher or transaction is shown to be defective and no material demonstrates non-business character, generalized observations about large quantum do not justify percentage disallowances. The AO therefore failed to prove that the expenditures were not incurred wholly and exclusively for business, and the disallowances were founded on conjecture. Consequently, the ad-hoc additions had to be deleted.

The additions made out of travelling expenses and sales promotion expenses for A.Y.2014-15 are deleted; the assessee's grounds are allowed.

Final Conclusion: Both appeals are allowed and the ad-hoc disallowances made by the Assessing Officer in respect of travelling and sales promotion expenses for the assessment years A.Y.2013-14 and A.Y.2014-15 are directed to be deleted for lack of any specific evidence pointing to non-business expenditure.

Limitation for appeal under Section 28KA - proviso to Section 28KA - power to extend time by thirty days only - advance ruling scheme as a time bound mechanism - exclusion of general Limitation Act where special statute prescribes specific period

Proviso to Section 28KA - power to extend time by thirty days only - limitation for appeal under Section 28KA - Whether the High Court has jurisdiction to extend the time for filing an appeal against a CAAR ruling beyond thirty days over and above the sixty day period. - HELD THAT: - The proviso to Section 28KA(1) expressly confines the court's power to extend the period for filing an appeal to a further period of thirty days beyond the sixty days prescribed for filing an appeal from communication of a CAAR ruling. The language of the proviso is plain and, in light of the time bound scheme of Chapter V B (advance rulings) and the legislative amendments reducing CAAR's time to pronounce rulings, the statutory scheme manifests an intent to provide a firm timeframe. As a special code, the Customs Act excludes the operation of general provisions of the Limitation Act to the extent they conflict with the special scheme. Consequently, the court has no jurisdiction to enlarge the extension beyond thirty days even if satisfied that the appellant was prevented by sufficient cause from filing within the initial sixty days. [Paras 6, 11, 15]

The High Court cannot extend the time for filing an appeal under Section 28KA beyond the thirty day period permitted by the proviso.

Advance ruling scheme as a time bound mechanism - exclusion of general Limitation Act where special statute prescribes specific period - Whether the present appeal against the CAAR ruling was maintainable having been filed beyond the permissible period. - HELD THAT: - Applying the statutory limitation under Section 28KA and the restriction on extension under its proviso, the appeal filed on 14.07.2022 is beyond the maximum period allowed even on liberal construction of the date of communication. The court noted the appellant's contention as to the date of communication but observed that, even if the later date is accepted, the appeal was filed after the further period of thirty days had elapsed. A suggestion to exclude court vacation days was rejected on the facts because the appellant was required to file immediately upon re opening and the Registry had opened before that date. Given the time bound object of advance rulings and the statutory bar on extending time beyond thirty days, the Court concluded it lacked jurisdiction to entertain the belated appeal. [Paras 16, 17, 18]

The appeal is barred by limitation and is dismissed.

Final Conclusion: The appeal against the CAAR ruling is dismissed as barred by limitation; the High Court's power to extend time under the proviso to Section 28KA is confined to thirty days beyond the statutory sixty day period and cannot be exercised to allow a further extension.

Advance ruling under the Customs Act - misrepresentation and fraud vitiating an advance ruling - proviso to Section 28-I(2) regarding a question 'pending' before any officer of customs, the Appellate Tribunal or any Court - scope of 'pending' - requirement of a notice or proceeding enabling the assessee to contest the question - non-disclosure of an on-going investigation and its relevance to allowability of an advance ruling

Misrepresentation and fraud vitiating an advance ruling - non-disclosure of an on-going investigation and its relevance to allowability of an advance ruling - Whether the CAAR's order of 05.10.2021 was obtained by fraud or misrepresentation and therefore liable to be declared void ab initio. - HELD THAT: - The CAAR examined the application and the case file and found that the applicant had disclosed in the statement of relevant facts that goods covered under two bills of entry dated 14.01.2019 at ICD Garhi-Harsaru had been detained by the Customs authority at the instance of DRI and were eventually released and cleared under CTH 84248990. The CAAR further ascertained from relevant DRI/Commissionerate offices and noted that no show cause notice had been issued to the applicant at the time of filing. The CAAR thus concluded that the brief declaration regarding an investigation, without further elaboration, did not amount to suppression or misrepresentation of material facts or fraud that would vitiate the advance ruling. The High Court concurred with this reasoning and found no infirmity in the CAAR's conclusion that there was no misrepresentation or fraud warranting voiding the CAAR order. [Paras 9, 10, 12, 17]

Representation by DRI that the CAAR order was void ab initio on account of fraud or misrepresentation is rejected; CAAR correctly found no suppression or fraudulent misrepresentation.

Proviso to Section 28-I(2) regarding a question 'pending' before any officer of customs, the Appellate Tribunal or any Court - scope of 'pending' - requirement of a notice or proceeding enabling the assessee to contest the question - advance ruling under the Customs Act - Whether the respondent's application for advance ruling was barred by the proviso to Section 28-I(2) on the ground that the question was pending in the applicant's case before an officer of customs, tribunal or court. - HELD THAT: - The Court accepted the CAAR's analysis that the proviso to Section 28-I(2) applies only where the question raised in the application is actually pending in the applicant's case before an officer of customs, the Appellate Tribunal or a Court. For a question to be 'pending' there must be some formal proceeding or notice (for example, a show cause notice, provisional assessment, reference to Special Valuation Branch or pre-notice consultation) that puts the question before the assessee to contest. Mere investigative activity or an officer contemplating that a question may arise does not render the question 'pending' so as to oust the CAAR's jurisdiction. In the present case no pre-consultation notice or show cause notice had been issued and previous clearances had been final; accordingly the proviso did not apply and CAAR was entitled to pronounce the advance ruling. [Paras 11, 13, 15, 16]

The proviso to Section 28-I(2) did not operate to bar the CAAR from entertaining and deciding the application; the question was not 'pending' in the applicant's case.

Final Conclusion: The High Court upheld the CAAR's order dated 05.10.2021, rejecting DRI's representations that the advance ruling was void for fraud or that the application was barred as 'pending' under the proviso to Section 28-I(2); the appeal is dismissed.

Pre-Shipment Inspection certificate - Appendix-28 of the Handbook of Procedures - 100% examination as consequence of non-compliance - improper import under Section 111(d) of the Customs Act, 1962 - confiscation and redemption in lieu - penalty under Section 112(a) of the Customs Act, 1962 - ratification by DGFT of Branch Office PSI

Pre-Shipment Inspection certificate - Appendix-28 of the Handbook of Procedures - ratification by DGFT of Branch Office PSI - 100% examination as consequence of non-compliance - improper import under Section 111(d) of the Customs Act, 1962 - confiscation and redemption in lieu - penalty under Section 112(a) of the Customs Act, 1962 - PSI certificate issued by a Branch Office and subsequently ratified by DGFT sufficed; confiscation, redemption fine and penalty were not justified. - HELD THAT: - The Tribunal found that the PSI certificate produced by the appellant was complete in substance though issued by a Branch Office, and that DGFT had recognised that a Branch Office could be enlisted under Appendix-28. The statutory and policy regime prescribes that failure to comply with prescribed conditions attracts 100% examination of the consignment; such inspection, and not mere non-compliance by the exporter/issuing agency, is the prescribed consequence. Here the authorities carried out 100% examination and found no remnants of arms, ammunition or any banned/objectionable substances and the goods were as declared. Confiscation under the Act requires an improper import within the meaning of Section 111(d) - import contrary to a prohibition - which was not established on these facts. Consequently, treating the alleged defect of issuance by a Branch Office as ground for confiscation, imposition of redemption fine and penalty under Section 112(a) was not warranted. The Tribunal thus set aside the orders of confiscation, redemption and penalty, allowing the appeal. [Paras 8, 9]

Impugned order set aside; confiscation, redemption fine and penalty disallowed and appeal allowed.

Final Conclusion: The appeal is allowed: the Branch Office issued PSI certificate (subsequently ratified by DGFT) was sufficient, the prescribed remedy for non-compliance was 100% examination which revealed no prohibited imports, and therefore confiscation, redemption fine and penalty were not sustainable.

Confiscation under Section 111(b) and (d) of the Customs Act, 1962 - Onus on Customs to prove smuggled nature in town seizure - Burden of proof in town seizure - Provisional claim of ownership and entitlement to release - Release of seized goods and waiver of detention/godown charges

Onus on Customs to prove smuggled nature in town seizure - Burden of proof in town seizure - Whether confiscation could be sustained where the seizure was a town seizure and Customs did not lead evidence proving the smuggled nature of the goods - HELD THAT: - The Tribunal found as admitted that the goods were seized in the course of a town seizure and that the appellant had purchased the mobile handsets from the open market in Delhi, a fact supported by transporter evidence and transport documents. In such a case, the legal onus rests on the Customs Department to produce evidence establishing that the goods were of smuggled origin. The record does not contain evidence to corroborate the allegation of smuggling; moreover, the Sales Tax Department had assessed and levied sales tax on the goods, indicating sale/purchase within India. In absence of admissible evidence proving illegality of import or smuggled nature, the confiscation under the Customs Act cannot be sustained and the order below is vitiated on law and facts. [Paras 14]

Confiscation set aside for want of evidence that the goods were smuggled; Customs failed to discharge the onus in a town seizure.

Provisional claim of ownership and entitlement to release - Release of seized goods and waiver of detention/godown charges - Whether the appellant was entitled to release of the seized goods and exemption from payment of detention/godown charges following setting aside of confiscation - HELD THAT: - Having held that confiscation could not be sustained, the Tribunal directed immediate release of the goods to the appellant. The Tribunal also expressly ordered that the appellant shall not be liable to pay godown rent, detention charges or demurrage. This relief follows from the conclusion that the statutory basis for confiscation and attendant penalties was not established, and that the appellant had claimed ownership and produced transport documentation and transporter correspondence corroborating possession and claim. [Paras 15]

Goods to be released forthwith to the appellant and he shall not be liable for godown rent, detention charges or demurrage.

Final Conclusion: The Tribunal allowed the appeal, set aside the confiscation and penalties imposed on the appellant for lack of evidence of smuggling in a town seizure, directed immediate release of the seized mobile phones to the appellant within 15 days and waived godown, detention and demurrage charges.

Sanction of scheme under Section 230 - Compliance with statutory authorities' observations - Appointed date modification and effect on shareholders'/creditors' meetings - Role of Regional Director and Official Liquidator in CAA proceedings - Liberty to file fresh petition after rectification

Sanction of scheme under Section 230 - Compliance with statutory authorities' observations - Role of Regional Director and Official Liquidator in CAA proceedings - Validity of the NCLT's rejection of the scheme on account of unresolved objections raised by the Regional Director and the Official Liquidator. - HELD THAT: - The Tribunal examined the reports and repeated observations filed by the Regional Director (SER) and the Official Liquidator which identified alleged irregularities and non-compliances, including requirements as to updated financial statements, valuation by a Registered Valuer, auditor's certificate on accounting treatment, and updated statutory returns. The NCLT declined to sanction the scheme because these objections were not satisfied to the subjective satisfaction of the respective statutory authorities; the appellate Tribunal found no irregularity or infirmity in that approach. The judgment emphasises that before sanction under Section 230, a company must be in compliance with requirements imposed by statutory/public authorities and that pending objections by such authorities can justify rejection of a petition for sanction. The Tribunal therefore declined to interfere with the NCLT's decision to reject the petition in light of outstanding statutory objections. [Paras 6, 9, 10, 11]

The NCLT's refusal to sanction the scheme for non-compliance with observations of the Regional Director and Official Liquidator is upheld; no interference is warranted.

Appointed date modification and effect on shareholders'/creditors' meetings - Liberty to file fresh petition after rectification - Effect of pendency of application to modify the appointed date and whether the NCLT's handling of that application vitiated the sanction proceedings. - HELD THAT: - The Tribunal noted that an application (I.A. 2/2021) seeking modification of the appointed date was pending and that reports of the Regional Director in that application were not served on the appellant, but held that the NCLT had addressed the matter in the impugned order and declined to grant the modification because of multiple unresolved objections raised by statutory authorities. The appellate Tribunal observed that the need for a common appointed date requires compliance with updated financials and related approvals, and that the mere pendency of an application to change the date did not render the NCLT's order infirm where statutory objections remained outstanding. The NCLT had, however, granted liberty to the appellants to file a fresh petition after rectifying the pointed irregularities. [Paras 3, 4, 6, 11]

The pendency of the application to modify the appointed date did not vitiate the NCLT's rejection; appellants were granted liberty to refile after making the required rectifications.

Final Conclusion: The appeals are dismissed at the admission stage. The appellate Tribunal finds no infirmity in the NCLT's refusal to sanction the scheme in view of unresolved objections of the Regional Director and Official Liquidator, and the appellants were granted liberty to file a fresh petition after rectification; no order as to costs.

Exercise of writ jurisdiction despite existence of alternate statutory remedy - exceptions to rule of exhaustion of alternate remedy - effective hearing and reasoned order as requirement of judicial review - presumption of innocence and infirmity of penal process as sole basis for administrative action - fit and proper person criterion under the Companies (Registered Valuers and Valuation) Rules, 2017 - challenge to maintainability where delegation of powers leaves appellate remedy in dispute

Exercise of writ jurisdiction despite existence of alternate statutory remedy - exceptions to rule of exhaustion of alternate remedy - High Court's power under Article 226 to entertain writ petition notwithstanding existence of an alternate appellate remedy where prima facie exceptions apply. - HELD THAT: - The Court held that the mere existence of an alternate appellate remedy does not automatically divest the High Court of its equitable and discretionary jurisdiction under Article 226. The rule of exhaustion of statutory alternate remedy is one of policy and discretion and subject to well-known exceptions. Where the petitioner prima facie demonstrates that (a) the impugned administrative action lacks basic procedural or substantive propriety, or (b) there is a serious question about the effectiveness or availability of the alternate remedy itself, the writ jurisdiction can be invoked. The Court relied on the principles articulated in the recent Supreme Court authority cited in the petition to underscore that an efficacious alternate remedy is a precondition to non-entertainment, but not an absolute bar in all circumstances. Accordingly the High Court may intervene in an appropriate case where prima facie grounds are made out. [Paras 2, 3, 4, 5, 23]

Writ jurisdiction could be exercised in the present case and intervention by the High Court was appropriate.

Effective hearing and reasoned order as requirement of judicial review - presumption of innocence and infirmity of penal process as sole basis for administrative action - fit and proper person criterion under the Companies (Registered Valuers and Valuation) Rules, 2017 - Impugned suspension of registration based solely on pendency of criminal proceedings and a charge-sheet was prima facie arbitrary, lacked cogent reasoning and thereby warranted interim relief. - HELD THAT: - The Court found that the impugned order by the Authority proceeded on the basis that mere pendency of criminal proceedings and filing of a charge-sheet adversely affected the petitioner's integrity and reputation, rendering him not 'fit and proper' under Rule 3(1)(k). The reasoning was held to be susceptible to review because it ignored the presumption of innocence, treated allegations as conclusive proof of unfitness even before framing of charges or trial, and failed to apply a proportionate and reasoned standard. The Court emphasised that administrative action affecting professional status requires an effective hearing and a considered, intelligible order applying the statutory criteria; a mere allegation cannot ipso facto displace the 'fit and proper' status. On this prima facie assessment the Court was satisfied that the impugned order was liable to be stayed. [Paras 17, 19, 20, 21, 23]

Impugned order suspending registration was stayed interimy; Court granted relief pending final hearing.

Challenge to maintainability where delegation of powers leaves appellate remedy in dispute - Existence and efficacy of the alternate appellate remedy against the Whole Time Member's order was not an undisputed matter and raised a serious question of maintainability. - HELD THAT: - The petitioner's affidavit and submissions contend that the delegated scheme distinguishes orders passed by a Whole Time Member (Administrative Law) from those by a Whole Time Member generally, and that there is no specific provision for appeal against orders passed by a WTM (other than WTM (AL)). The impugned order was signed by a Whole Time Member (WTM) and not a WTM (AL), giving rise to a real controversy as to whether the statutory appeal relied upon by the respondent is available and efficacious. Because this is a contested question going to the availability of an alternate remedy, the Court treated this as a relevant factor militating in favour of entertaining the writ petition at the prima facie stage. [Paras 22]

The existence/effectiveness of the alternate remedy was a live controversy and could not bar writ jurisdiction at this stage.

Final Conclusion: Rule issued; interim relief granted by staying operation and effect of the Authority's order dated 28.02.2022 suspending the petitioner's registration; matter directed to be listed for final disposal with filing of affidavits on the specified dates.

Pre-existing dispute under Section 8(2) of the Insolvency and Bankruptcy Code, 2016 - admission of application under Section 9 and initiation of Corporate Insolvency Resolution Process - Mobilox test for discernibility of a plausible dispute - relevance of contemporaneous communications and reconciliation requests to establish a dispute - setting aside admission of CIRP for failure to recognise pre-existing dispute - consideration of appeal on merits where procedural lapse is explained

Pre-existing dispute under Section 8(2) of the Insolvency and Bankruptcy Code, 2016 - Mobilox test for discernibility of a plausible dispute - relevance of contemporaneous communications and reconciliation requests to establish a dispute - Whether a pre-existing dispute existed between the parties that disentitled the Operational Creditor to admission of the Section 9 application and initiation of CIRP. - HELD THAT: - The Tribunal applied the test in Mobilox and subsequent authorities: the adjudicating authority must ascertain whether a plausible dispute, not a patently feeble or spurious defence, is discernible from the record without going into final merits. The Tribunal examined the demand notice and antecedent communications and found that the Operational Creditor's own demand notice referred to a letter of 15.06.2021 disputing six invoices. The Corporate Debtor's detailed reply dated 19.07.2021 and prior requests for reconciliation dated 22.12.2020, 29.12.2020, 02.01.2021, 25.05.2021 and 19.07.2021 (all predating the demand notice) collectively demonstrated that the Corporate Debtor had raised substantial contentions about the business model (conversion-basis relationship), non-payment of conversion charges, alleged fabricated bills and a need for ledger reconciliation. These materials, the Tribunal held, showed a genuine and substantial dispute which was neither illusory nor a mere legalistic assertion unsupported by evidence, and thus required adjudication by a competent forum rather than termination of the dispute by admission of CIRP under Section 9. [Paras 15, 16, 17, 19, 20]

There existed a pre-existing dispute as at the relevant time; the Adjudicating Authority erred in admitting the Section 9 application and initiating CIRP.

Consideration of appeal on merits where procedural lapse is explained - natural justice and ex-parte proceedings - Whether the appeal should be entertained on merits despite the Adjudicating Authority having proceeded ex parte and whether any procedural irregularity warranted setting aside the impugned order. - HELD THAT: - The Tribunal noted that the Corporate Debtor did not file a reply before the Adjudicating Authority and had been set ex parte; however, the Appellant placed on record evidence of delayed receipt of notice and a medical certificate explaining inability to follow the matter. In the interest of justice the Tribunal treated the appeal on merits. Having examined the pleadings and contemporaneous correspondence, the Tribunal concluded that the Adjudicating Authority's ex parte admission overlooked the substantive disputes evident on record. Consequently, the procedural posture did not preclude the Tribunal from setting aside the admission where the substantive error of law and fact (failure to recognise the pre-existing dispute) had been committed. [Paras 11, 20, 21]

The Tribunal entertained the appeal on merits and, for the reasons stated, set aside the impugned ex parte admission order.

Final Conclusion: The impugned order admitting the Section 9 petition and initiating CIRP was set aside because a pre-existing, bona fide dispute was discernible from the record; the Corporate Debtor is released from the rigours of CIRP and the appeal is allowed, with no order as to costs.

Operational debt - pre-existing dispute - dispute resolution mechanism under the contract - force majeure - admission/rejection of application under section 9 of the IBC

Operational debt - provision of services nexus - acknowledgement clause in the Toll Tax Agreement - The amount claimed by SDMC in connection with the Toll Tax and ECC Agreement is an "operational debt" as defined in the IBC. - HELD THAT: - The Tribunal applied the test in Consolidated Construction Consortium Ltd., holding that an "operational debt" is a claim bearing some nexus with provision of goods or services irrespective of which party is supplier or receiver. The Toll Tax and ECC Collection Agreement entrusted collection to MEP Infrastructure and required fixed weekly/annual remittances to SDMC; the contractor acknowledged it would not claim rebate or reduction for variation in traffic except as permitted by the agreement. On that basis the debt owed by MEP Infrastructure to SDMC falls within the definition of operational debt and the claim satisfies the character of an operational creditor's claim. [Paras 26, 27, 29]

Debt owed by MEP Infrastructure to SDMC under the Toll Tax Agreement is an operational debt.

Pre-existing dispute - existence of dispute prior to demand notice - judicial and internal forum proceedings as notice of dispute - Mobilox / Rajratan principle that existence of dispute bars admission - There existed a pre-existing dispute between SDMC and MEP Infrastructure which required rejection of the section 9 application. - HELD THAT: - The Tribunal examined the claims raised by MEP Infrastructure from 2018-2019 (presented to the High Level Committee and then to the Commissioner) and subsequent writ petitions and LPAs in the Delhi High Court. These claims addressed fundamental issues about reduction in toll collections, diversion of traffic, applicability of Force Majeure and related reliefs and were actively considered by internal forums and by the High Court before issuance of the section 8 notice. Applying the principles in Rajratan Babulal Agarwal and Mobilox, the Tribunal held it is sufficient that a plausible, non spurious dispute existed prior to the demand notice; the existence of such pre existing disputes and pending litigation/references placed the SDMC's section 9 application within the bar under section 9(5) and warranted its rejection. The Tribunal therefore found no error in the Adjudicating Authority's conclusion to dismiss the section 9 application for being affected by pre existing disputes. [Paras 35, 38, 46, 49, 50]

Pre-existing disputes, shown by internal consideration and court proceedings predating the demand notice, existed and justified rejection of SDMC's section 9 application.

Final Conclusion: The Tribunal held that (i) the dues claimed by SDMC under the Toll Tax and ECC Collection Agreement constitute an "operational debt", but (ii) there were bona fide pre existing disputes between the parties - pursued before internal committees and the High Court prior to the demand notice - which disentitled SDMC to admission of its section 9 application; the appeal was dismissed.

Section 436A of the Code of Criminal Procedure - maximum period for which an undertrial prisoner can be detained / statutory bail - Delay in trial caused by the accused - exclusion under the proviso to Section 436A - Court's power to order continued detention after hearing the public prosecutor and recording reasons in writing - Application of Section 436A to offences under the Prevention of Money Laundering Act (PMLA)

Section 436A of the Code of Criminal Procedure - maximum period for which an undertrial prisoner can be detained / statutory bail - Delay in trial caused by the accused - exclusion under the proviso to Section 436A - Court's power to order continued detention after hearing the public prosecutor and recording reasons in writing - Application of Section 436A to offences under the Prevention of Money Laundering Act (PMLA) - Whether the petitioner, who has been in custody for a period exceeding one half of the maximum sentence for the offence under PMLA, is entitled to release on statutory bail under Section 436A CrPC in ML Case No.2 of 2018. - HELD THAT: - The court proceeded on the premise that Section 436A is a statutory provision that contemplates release of an undertrial who has undergone detention extending to one half of the maximum period of imprisonment, subject to the proviso which permits continued detention if delay in the proceedings is attributable to the accused and after hearing the public prosecutor and recording reasons. On the material placed before it - particularly the chronological chart in paragraph 7.6 of the Enforcement Directorate's report - the court found that substantial delay in trial proceedings was primarily attributable to the accused. The chart records repeated adjournments, instances where the accused did not press or prosecute his own bail applications, failure or refusal to accept or obtain copies under Section 207 for an extended period (copies supplied only on 22.03.2022), and other dilatory conduct. The court also took note of alleged obstructive and coercive conduct while on interim bail (attempts to influence officials/witnesses and directions to divert company resources), and that investigation into proceeds of crime was ongoing with the Enforcement Directorate still tracing assets. Considering these factors, the court exercised the proviso in Section 436A after hearing the public prosecutor and for reasons recorded in writing, concluding that the statutory entitlement to bail under Section 436A did not accrue to the petitioner in the circumstances of ML Case No.2 of 2018. [Paras 13, 14, 15]

Application for release on statutory bail under Section 436A CrPC in ML Case No.2 of 2018 is rejected and continued detention is ordered.

Final Conclusion: The petition under Section 436A read with Section 439 CrPC is dismissed on contest: the court, after hearing the Enforcement Directorate and recording reasons, declined to grant statutory bail under Section 436A in view of delay attributable to the accused, his conduct while on interim bail, and ongoing investigations into proceeds of crime.

Inordinate and unreasonable delay in adjudication - requirement to conclude proceedings within a reasonable period - duty to transfer records after grant of centralized registration - prejudice caused by delay and change of management - quashing of show-cause notice on account of delay

Inordinate and unreasonable delay in adjudication - duty to transfer records after grant of centralized registration - prejudice caused by delay and change of management - quashing of show-cause notice on account of delay - Whether the show cause cum demand notice dated 12 October 2009 could be proceeded with after a prolonged delay and after failure to transfer records following centralized registration, or whether it should be quashed. - HELD THAT: - The Court found that the show cause notice issued for the period 2004-05 to 2007-08 remained pending for an inordinate period because the departmental records were transferred to the adjudicating authority only on 24 January 2019 despite centralized registration having effect from 9 September 2010 and an explicit request for transfer made by the petitioner on 8 May 2013. The respondents did not provide a satisfactory explanation for the prolonged inaction. The Court applied the principle that proceedings must be concluded within a reasonable period and that the State does not have an unfettered right to delay adjudication; such delay, particularly when it causes prejudice (including loss of opportunity to avail amnesty and difficulties arising from change in management and staff), vitiates continuation of the proceedings. Reliance on analogous decisions was noted for the legal proposition that long dormancy without satisfactory explanation may justify quashing. On the facts, the delay-measured either from issuance of centralized registration or from petitioner's request for transfer-was held to be unreasonable and prejudicial, and therefore adjudication could not be allowed to be carried forward. [Paras 22, 23, 26, 27, 28]

Show Cause cum Demand Notice No.59 of 2009 dated 12 October 2009 is quashed and set aside on account of the inordinate and unjustified delay in transfer and adjudication.

Final Conclusion: The writ petition is allowed: the show cause cum demand notice dated 12 October 2009 is quashed and set aside for inordinate and unreasonable delay in adjudication following failure to transfer records after centralized registration; parties to bear their own costs.

Refund of excess service tax - fiduciary escrow arrangement - treatment of PSF (SC) as revenue receipt - person liable to service tax - consolidated service tax return - unjust enrichment - refund with interest

Refund of excess service tax - fiduciary escrow arrangement - consolidated service tax return - unjust enrichment - Entitlement of the appellant to refund of the amount paid by challan as excess service tax relating to PSF (SC) for April, 2010 and the half year April to September, 2010. - HELD THAT: - The Tribunal found that the appellant filed a consolidated service tax return for April to September, 2010 declaring all receipts, including PSF (SC), and discharged service tax liability by availing cenvat credit and by a challan payment which became excess when consolidated credit covered the liability. The departmental confusion arising from issue of a separate registration in the name of 'Escrow PSF (SC)' did not alter the legal position that the amount attributable to PSF (SC) had been treated as revenue receipt and included in the consolidated return of the appellant. The appellant had also filed a return for the Escrow account showing nil taxable receipt and nil tax liability and applied for refund of the excess payment. On these facts the Tribunal held that the refund claim could not be rejected on the ground that payment was linked to the Escrow registration or that the Escrow and the appellant were separate entities for the purpose of denying refund. The Tribunal therefore directed grant of the refund with interest as per rules within 45 days. [Paras 11]

Appeal allowed; appellant entitled to refund of Rs.39,09,130 with interest and adjudicating authority directed to grant refund within 45 days.

Final Conclusion: The appeal is allowed and the adjudicating authority is directed to refund the excess service tax paid (Rs.39,09,130) with interest in accordance with rules within 45 days from receipt of the order.

Refund of pre-deposit - limitation under Section 11B - pre-deposit under Section 35F - refund procedure not governed by Section 11B - interest on pre-deposit - prohibition on retention of revenue under Article 265

Refund of pre-deposit - limitation under Section 11B - pre-deposit under Section 35F - refund procedure not governed by Section 11B - interest on pre-deposit - prohibition on retention of revenue under Article 265 - Whether the refund claim is barred by the one-year limitation under Section 11B of the Central Excise Act. - HELD THAT: - The court found that Section 11B applies only to claims for refund of duty and interest paid on such duty, and therefore its one-year limitation is inapplicable to amounts that are deposits/pre-deposits. The amount sought to be refunded was paid by the appellant during the course of investigation and, as recorded by this Tribunal's earlier stay order and supported by authority, retains the character of a pre-deposit until appropriated; consequently it is not an amount of duty. The Board's circular cited by the parties confirms that payments made during investigation may be regarded as pre-deposits under Section 35F when appeal is filed and that refund of such pre-deposits is governed by the provisions dealing with pre-deposit (and interest) rather than by the refund procedure under Section 11B. The court relied on precedent recognizing that deposits made during investigation are ipso facto pre-deposits and are refundable with interest when the appellant succeeds. Retention of the deposit by the Department in the face of the appellant's entitlement was held to be impermissible under Article 265. Applying these principles, the invocation of Section 11B's limitation was incorrect and the refund claim could not be rejected on that ground. [Paras 7, 9, 10]

Section 11B's one-year limitation does not bar the refund claim because the amount is a pre-deposit governed by the law on pre-deposits (Section 35F/35FF and Board circular guidance) and not a refund of duty.

Final Conclusion: The Commissioner (Appeal) erred in invoking Section 11B to reject the refund; the claimed amount was a pre-deposit and refundable (with interest under the pre-deposit provisions and Board guidance). The impugned order is set aside and the appeal is allowed.

Vague and incoherent show cause notice - identification of specific taxable service - classification of taxable service - alternative pleading of taxable services - incoherent adjudication order - due process of law

Vague and incoherent show cause notice - identification of specific taxable service - alternative pleading of taxable services - incoherent adjudication order - Validity of the show cause notice and consequent adjudication where the notice alleged alternative and multiple categories of taxable service without specifying the particular service and the adjudication order considered several categories. - HELD THAT: - The Tribunal examined the show cause notice which alleged that the appellant's service could fall under 'erection, commissioning or installation service', 'works contract service' or 'commercial or industrial construction service', and noted that the Commissioner likewise considered all three categories in the adjudication. Relying on the Tribunal's decision in M/s Shubham Electricals and the subsequent dismissal of the Department's appeal by the Delhi High Court, the Court held that a show cause notice and adjudication which fail to assert which specific taxable service is alleged are vague and incoherent and transgress the due process of law. The judgment emphasises that officers must classify the service with sufficient particularity; departmental inability to gather or state relevant facts does not justify issuing an incoherent notice or passing an adjudication that does not identify the precise taxable service. For these reasons the impugned adjudication based on alternative classifications could not be sustained. [Paras 4, 5, 6, 9, 10]

The show cause notice and the adjudication treating multiple alternative service classifications as pleaded were held to be vague and incoherent; the adjudication order was set aside.

Final Conclusion: The order of the Commissioner confirming demand of service tax, interest and penalty was set aside on the ground that the show cause notice and consequent adjudication were vague and incoherent in alleging alternative taxable services without specifying the particular service; the appeal was allowed.

Availment of Cenvat credit on invoices issued prior to registration - Requirement of particulars under Rule 9(1) and proviso to Rule 9(2) of Cenvat Credit Rules, 2004 - Registration under Service Tax Rules not mandatory for entitlement to Cenvat credit - Extended period of limitation and requirement of intention to evade for its invocation - Allegations in show cause notice as foundation of adjudication; orders beyond SCN are unsustainable

Availment of Cenvat credit on invoices issued prior to registration - Requirement of particulars under Rule 9(1) and proviso to Rule 9(2) of Cenvat Credit Rules, 2004 - Whether Cenvat credit could be denied merely because invoices were issued from an address not yet reflected as the registered address or were issued prior to service tax registration. - HELD THAT: - The Tribunal examined Rule 9(1) which recognises an invoice as a valid document for availment of Cenvat credit and noted that the provision does not mandate that the supplier must be registered at the time of issuing the invoice. Rule 9(2) requires that prescribed particulars be contained in the document, but its proviso permits allowance of credit where essential details (including duty/service tax payable, description of service, assessable value, registration number where available, and name and address of premises from where services were provided) are otherwise on record and the receiver has received and accounted for the goods/services. On the facts, invoices contained requisite particulars and the appellant had in any event applied for and subsequently obtained registration; some invoices related to premises subsequently regularised and others related to licensed premises supported by a license agreement. The Tribunal held that substantial benefit of Cenvat credit cannot be denied on the ground of non-registration alone where the required particulars and receipt/accounting are established and the proviso to Rule 9(2) applies.

Impugned denial of Cenvat credit on the ground of invoices being issued from unregistered address and on pre-registration invoices was held incorrect; credit was allowable.

Registration under Service Tax Rules not mandatory for entitlement to Cenvat credit - Whether registration under Service Tax Rules is an absolute pre-condition to claim Cenvat credit for services rendered prior to registration. - HELD THAT: - The Tribunal analysed Rule 4 of the Service Tax Rules which requires registration for persons liable to pay service tax but observed that the rules also contemplate provision of services prior to registration and an obligation to apply within a specified time. Relying on the position that Rule 9 and its proviso enable credit where particulars and accounting are established, and noting precedents recognising that procedural lapses should not defeat substantive benefits, the Tribunal concluded that mere absence of registration at the time of issue of invoices does not ipso facto disentitle the service recipient to Cenvat credit where conditions of the proviso are satisfied and registration was obtained subsequently.

Registration not treated as an absolute bar to claiming Cenvat credit for pre-registration invoices; denial solely on that ground was unsustainable.

Allegations in show cause notice as foundation of adjudication; orders beyond SCN are unsustainable - Whether findings that the impugned credit related to ineligible import services could be sustained when no such allegation featured in the show cause notice. - HELD THAT: - The Tribunal observed that the scope of adjudication is confined to the allegations contained in the show cause notice which forms the foundation of the case. The Commissioner (Appeals) had introduced a finding that the credit related to ineligible import service though no such allegation was made in the SCN. Relying on the principle that authorities must stick to the case made out in the SCN, the Tribunal held that such findings were beyond the scope of the notice and therefore unsustainable.

Findings impugning eligibility on a ground not pleaded in the show cause notice were held beyond scope and invalidated.

Extended period of limitation and requirement of intention to evade for its invocation - Whether the extended period of limitation (and consequential penalty) could be invoked in the absence of misrepresentation, suppression or intention to evade tax. - HELD THAT: - The Tribunal noted that the SCN was issued invoking extended limitation for periods covering the taxable services. It found no material indicating misrepresentation, suppression, collusion or intention to evade tax; the department did not allege short payment of service tax and records showed tax had been discharged. The Tribunal applied the legal requirement that the extended period is invokable only where there is apparent mis-statement, suppression or collusion with intent to evade tax and concluded that the extended period and penalty were wrongly invoked.

Invocation of extended period and levy of penalty were held to be incorrect and set aside.

Final Conclusion: The appeal is allowed: the denial of Cenvat credit on pre-registration and unregistered-address invoices is set aside as unsustainable under Rule 9 read with its proviso; findings beyond the scope of the show cause notice are quashed; invocation of extended limitation and penalty is found improper.

Entitlement to interest on pre-deposit - pre-deposit made during investigation - refund of tax illegally collected with interest - interest from date of deposit till date of refund - finality of appellate order as basis for refund

Entitlement to interest on pre-deposit - pre-deposit made during investigation - interest from date of deposit till date of refund - finality of appellate order as basis for refund - Whether appellant is entitled to interest on the amount deposited as service tax during investigation (pre-deposit) from the date of deposit until its refund after the Tribunal allowed the appeal. - HELD THAT: - The Tribunal found that the amount paid by the appellant during investigation constituted a pre-deposit and that, on success in appeal and finality of the Tribunal's order, such pre-deposit is liable to be refunded with interest. The Tribunal relied on its Division Bench decision in Parle Agro (P) Ltd. v. Commissioner, CGST , following the Apex Court's ruling in Sandvik Asia Ltd. , which hold that deposits made during investigation or pending litigation are ipso facto pre-deposits and attract interest from the date of deposit until the date of refund. Applying these principles to the facts-where the appellant paid service tax during investigation, the Tribunal's order became final in appellant's favour, and a refund was granted-the Tribunal concluded that interest on the pre-deposit was payable despite the earlier view that interest would arise only after three months from filing of the refund application. The impugned orders denying interest were therefore held unsustainable. [Paras 7, 8]

Impugned order set aside; appellant entitled to interest on the pre-deposit from date of deposit till its realization and appeal allowed.

Final Conclusion: The appeal is allowed: amount deposited during investigation is treated as pre-deposit and, following the Tribunal's precedents and the Apex Court's authority, interest is payable from the date of deposit until refund; the impugned order denying interest is set aside.

Admissibility of CENVAT credit - input service - nexus test between service and manufacture - captively consumed power - removal and disposal of fly ash as manufacturing necessity - final product for excise purposes - statutory/environmental mandate and continuity of production

Admissibility of CENVAT credit - input service - nexus test between service and manufacture - removal and disposal of fly ash as manufacturing necessity - captively consumed power - final product for excise purposes - Credit of service tax paid on services for removal/disposal of fly ash from the captive power plant is admissible as CENVAT credit as an input service for manufacture of the appellant's final excisable goods. - HELD THAT: - The Tribunal found that removal and disposal of coal fly ash from the captive power plant is a necessary operation without which the plant cannot function and electricity cannot be generated. The electricity so generated is captively consumed in the manufacture of the appellant's final excisable products. The admissibility of input service credit does not depend on whether the ash itself is excisable; rather it depends on nexus of the service to the manufacture of the final product. The adjudicating authority had accepted that the appellant discharged excise duty on clearance of fly ash as a finished product; the Commissioner (Appeals) reversed the view without adequately considering the appellant's submissions. Applying established precedents that input services and inputs used in a captive power plant are admissible where the final product is dutiable, and that services used in relation to manufacturing activities qualify as cenvatable, the Tribunal held that services for removal/disposal of fly ash are connected to production of electricity and thereby have the necessary nexus with the manufacture of the excisable final goods. Consequently, denial of credit in respect of those services was unsustainable. [Paras 8, 9, 10, 14, 15]

The appeals are allowed to the extent that service tax paid on services for removal/disposal of fly ash from the captive power plant is admissible as CENVAT credit, and the impugned order denying such credit is set aside with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that services procured for removal and disposal of fly ash from the captive power plant are input services admissible for CENVAT credit because they are necessary for generation of captively consumed power which has nexus with the manufacture of the appellant's excisable final products; the impugned order denying credit was set aside with consequential relief.

Cenvat credit on Rent-a-Cab service - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - exclusion of renting of motor vehicle insofar as they relate to a motor vehicle which is not a capital goods - capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - interpretation of the exclusion clause with reference to the service provider

Cenvat credit on Rent-a-Cab service - exclusion of renting of motor vehicle insofar as they relate to a motor vehicle which is not a capital goods - capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - interpretation of the exclusion clause with reference to the service provider - Appellant is entitled to Cenvat credit on Rent-a-Cab service - HELD THAT: - The Tribunal examined the exclusion introduced in Rule 2(l) of the Cenvat Credit Rules, 2004 which excludes renting of a motor vehicle only insofar as it relates to a motor vehicle which is not a capital goods. The Tribunal accepted the reasoning in earlier decisions that the exclusion is not a blanket bar on renting services but applies only where the vehicle is not capital goods. The correct interpretation is to examine whether the motor vehicle is a capital goods in terms of Rule 2(a) with reference to the service provider (the renting entity), because motor vehicles will ordinarily be capital goods for the person providing renting services; it is not open to the recipient of the renting service to treat the motor vehicle as not being capital goods for the purpose of invoking the exclusion. Applying that interpretation to the present case, and relying on consistent Tribunal precedents, the vehicle taken on rent falls within the definition of capital goods and therefore the exclusion does not operate to deny Cenvat credit to the appellant. Consequently the impugned denial of credit was set aside. [Paras 4, 5]

Impugned order set aside and appeal allowed; appellant entitled to Cenvat credit on Rent-a-Cab service.

Final Conclusion: The appeal is allowed; the impugned order denying Cenvat credit on Rent-a-Cab service is set aside as the exclusion in Rule 2(l) does not apply where the rented motor vehicle is capital goods and the exclusion is to be construed with reference to the service provider.

Penalty under VAT for alleged inter-state concealment - reliance on statement of third-party witness (truck driver) as sole evidence - requirement of material corroboration before imposing penalty - legal sufficiency of transport documents and Form 38 to rebut suspicion of evasion - proof of intention to evade tax

Reliance on statement of third-party witness (truck driver) as sole evidence - requirement of material corroboration before imposing penalty - Whether penalty proceedings could be sustained solely on the statement of the truck driver and on conjecture or surmise without independent corroborative material. - HELD THAT: - The Court held that initiation and sustenance of penalty proceedings cannot rest on conjectures and the uncorroborated statement of the truck driver. The taxing authority failed to produce any independent material to demonstrate that the goods were unloaded within U.P. or that there was any violation by the dealer. The recorded statement of the driver was not corroborated by other evidence and, in the view of the Court, appeared to have been recorded under duress; therefore it was an insufficient foundation for imposing penalty. The Tribunal's acceptance of the department's case based on such material was unsustainable.

Penalty set aside as it was based on conjecture and an uncorroborated driver's statement.

Legal sufficiency of transport documents and Form 38 to rebut suspicion of evasion - proof of intention to evade tax - Whether the presence of tax invoice, transport documents and Form 38 accompanying the goods was sufficient to negate the allegation of tax evasion and preclude imposition of penalty. - HELD THAT: - The Court observed that the consignment was accompanied by Form 38, tax invoice, bilti and transporter's bill when intercepted, and payments were made through banking channel as pleaded. In absence of any material showing that the goods were in fact unloaded in Mathura or that the dealer had the requisite intention to evade tax, the documentary evidence on record rebutted the department's presumption of evasion. The Tribunal itself recorded inability to ascertain unloading at Mathura; on that footing the Court found no basis for penalty.

Documents and Form 38 on record negated the department's case; penalty could not be sustained.

Final Conclusion: The revision is allowed; the Tribunal's order sustaining penalty is set aside. The question of law is answered in favour of the assessee and against the revenue.

Priority of secured creditors in payment under Section 26E of the SARFAESI Act - priority of secured creditors under Section 31B of the RDDB Act - statutory first charge created by State fiscal enactments (Section 26B KGST Act; Section 38 KVAT Act) - effect of sale under SARFAESI / RDB Acts on existing statutory charges - role of Security Interest (Enforcement) Rules, 2002 (Rules 8 and 9) in removal of encumbrances and issuance of sale certificate - constructive notice and duty of purchaser under Section 3 of the Transfer of Property Act

Priority of secured creditors in payment under Section 26E of the SARFAESI Act - priority of secured creditors under Section 31B of the RDDB Act - statutory first charge created by State fiscal enactments (Section 26B KGST Act; Section 38 KVAT Act) - Whether the priority conferred on secured creditors by Section 26E of the SARFAESI Act and Section 31B of the RDDB Act displaces or extinguishes the statutory first charge created in favour of the State under the KGST Act and the KVAT Act. - HELD THAT: - The Court held that Sections 26E and 31B create a priority in payment to secured creditors but do not create a statutory charge that displaces the State's first charge under the KGST Act and the KVAT Act. The amended Chapter IV-A (introduced w.e.f. 01.09.2016) and Section 26E confer priority of payment over other debts and Government dues, but Parliament confined the relief to priority of payment and did not expressly provide that secured creditors' rights would override statutory first charges created by State enactments. Prior decisions (including Central Bank of India) and subsequent judicial pronouncements were examined; the Court concluded that the State's statutory first charge continues to run with the property until encumbrances created under the State statutes are duly cleared, and therefore the banks' right is one of payment priority and not an absolute extinguishment of the statutory charge. [Paras 87, 88, 94, 96, 97]

Priority under Section 26E / Section 31B is limited to payment priority; it does not displace the State's statutory first charge under the KGST Act and the KVAT Act, which continues to run with the property until cleared.

Effect of sale under SARFAESI / RDB Acts on existing statutory charges - role of Security Interest (Enforcement) Rules, 2002 (Rules 8 and 9) in removal of encumbrances and issuance of sale certificate - constructive notice and duty of purchaser under Section 3 of the Transfer of Property Act - Whether a sale conducted by a secured creditor under the SARFAESI / RDDB Acts (and the Rules 2002) produces an encumbrance-free title in favour of the purchaser without discharge of the statutory first charge, and the consequences of non-compliance with Rules 8 and 9. - HELD THAT: - The Court examined Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002, Appendices IV-A and V, and Section 3 of the Transfer of Property Act to conclude that the statutory scheme contemplates specific procedures to notify encumbrances, facilitate discharge of encumbrances and to indicate in the sale certificate whether the purchaser obtains the asset free from encumbrances known to the secured creditor. Those Rules and the TP Act operate to place a duty on the secured creditor to indicate known encumbrances and on purchasers to make due enquiries; failure by a purchaser to enquire amounts to constructive notice. Judicial authorities (including the Full Bench of the Bombay High Court and Telangana State Southern Power Distribution Co. Ltd.) were followed in holding that an auction purchaser who buys on "as is where is/whatever there is" basis may still be obliged to discharge existing statutory dues to obtain a clear, marketable title, and that sale certificates free of known encumbrances cannot be issued unless encumbrances are removed as required by the Rules. [Paras 39, 44, 81, 86, 92]

A SARFAESI sale does not automatically extinguish prior statutory charges; Rules 8 and 9 and the TP Act (Section 3) require disclosure/notice and place onus on purchasers to inquire - purchasers may be liable to discharge statutory dues to obtain an encumbrance-free title unless they can disprove constructive notice.

Final Conclusion: The appeals are allowed. The Court holds that statutory first charges created under the KGST Act, 1963 and the KVAT Act, 2003 (when created prior to any mortgage) continue to run with the property notwithstanding sale under the SARFAESI Act and the RDDB Act; Sections 26E and 31B confer priority in payment to secured creditors but do not extinguish or displace the State's statutory charge, and encumbrances must be cleared as per the statutory scheme and Rules 2002 before an encumbrance-free sale certificate can be treated as effective.