TaxTMI Updates e-Newsletter
Feb 01,2024

Constitutional validity of anti profiteering regime - requirement of commensurate reduction in price - scope of legislative power under Article 246A - doctrine against excessive delegation / delegatus non potest delegare - authority to determine methodology and procedure - notion of unjust enrichment - price fixing vs. consumer welfare regulation - power to levy interest and penalty as ancillary to tax regime - requirement of judicial member in quasi judicial bodies - directory nature of procedural timelines - power to expand investigation beyond the specific complaint

Constitutional validity of anti profiteering regime - scope of legislative power under Article 246A - notion of unjust enrichment - Validity of Section 171 of the Central Goods and Services Tax Act, 2017 and Rules 122, 124, 126, 127, 129, 133 and 134 of the CGST Rules, 2017 - HELD THAT: - The Court held that Section 171 and the challenged Rules are constitutional and fall within Parliament's and State Legislatures' power to legislate "with respect to" goods and services tax under Article 246A. Section 171 is a consumer welfare measure that mandates passing on tax reductions or benefits of input tax credit by way of a commensurate reduction in price and embodies the principle against unjust enrichment of suppliers when Governments forgo tax revenue for consumers. The Act's object, scheme and ancillary powers support inclusion of anti profiteering measures as necessary and incidental to the GST framework. Consequential remedial and enforcement mechanisms provided by the Rules are integral to achieving the statute's objectives and do not render the enactment ultra vires. [Paras 97, 102, 105, 110, 163]

Section 171 and Rules 122, 124, 126, 127, 129, 133 and 134 are upheld as constitutionally valid.

Doctrine against excessive delegation / delegatus non potest delegare - authority to determine methodology and procedure - Whether Section 171 and Rule 126 unlawfully delegate essential legislative functions by leaving methodology and procedural details to the Authority or executive - HELD THAT: - The Court found that Section 171 supplies a clear legislative policy (the obligation to pass on tax related benefits as a commensurate price reduction) and that details as to methodology and procedure can legitimately be left to subordinate rule making and the Authority. Rule 126 empowers the Authority to determine methodology; this is an intended, permissible exercise of delegated administrative power within the framework prescribed by the statute. The maxim delegatus non potest delegare does not invalidate the arrangement where the statute indicates the legislative policy and intends the Authority to work out details. The Executive's rule making is subject to parliamentary scrutiny under Section 166 and therefore does not amount to abdication of legislative function. [Paras 43, 111, 112, 114, 126]

No excessive delegation; empowering the Authority to determine methodology and procedure is constitutionally permissible.

Requirement of commensurate reduction in price - price fixing vs. consumer welfare regulation - Whether Section 171 operates as an impermissible price fixing measure infringing Article 19(1)(g) or otherwise violates fundamental rights - HELD THAT: - The Court concluded Section 171 is not a general price control law; it targets only the indirect tax component and ensures that tax reductions or newly available input tax credits translate into an equivalent reduction in final price to consumers. Suppliers remain free to set base prices for commercial reasons but must not appropriate the tax benefit meant for consumers. Any commercial justification for not effecting a commensurate reduction is rebuttable and must be proved on cogent grounds. The provision is therefore a regulatory measure tied to the GST scheme and does not constitute unconstitutional interference with the right to trade. [Paras 116, 117, 119, 121, 132]

Section 171 is not a price fixing law and does not violate Article 19(1)(g) or Article 300A.

Authority to determine methodology and procedure - no fixed mathematical formula - Whether a single uniform mathematical method must be prescribed for computing the profiteered amount - HELD THAT: - The Court held that no uniform/formulaic method can be laid down because industries and factual situations differ; determination must be fact specific. Rule 126's grant of flexibility to the Authority to determine methodology on a case by case basis is reasonable. While the Authority's methods must be fair and reasonable, absence of pre set uniform formula does not render Section 171 or the Rules invalid. The Court noted particular flaws in some real estate computations and indicated the manner of correct approach for project wise apportionment (e.g., computing total savings per project and allocating per unit area) to be considered on merits in individual cases. [Paras 124, 126, 127, 128, 129]

No single mathematical method is constitutionally mandated; methodology determination by the Authority on a case wise basis is permissible so long as it is fair and reasonable.

Requirement of judicial member in quasi judicial bodies - absence of judicial member - Whether NAA's composition without a judicial member renders Section 171 or the Rules invalid - HELD THAT: - The Court observed that NAA's functions are essentially fact finding and domain specific rather than supplanting judicial functions previously exercised by courts. There is no universal requirement that every quasi judicial body must include a judicial member; many regulatory/quasi judicial bodies operate constitutionally without judicial members. The precedents require judicial members where a tribunal supplants courts' jurisdiction or exercises core judicial powers; that is not the case here. [Paras 25, 61, 146, 148, 149]

Absence of a judicial member in NAA does not invalidate Section 171 or the Rules.

Power to levy interest and penalty as ancillary to tax regime - Rule 133 - imposition of interest and penalty - Validity of Rule 133 to provide for interest and penalty in anti profiteering orders and retrospective interplay of penalty provisions - HELD THAT: - The Court held that Section 171's object of securing passing on of tax benefits logically permits ancillary deterrent measures such as interest and penalty. Rule 133(3)(b)&(d) empowering the Authority to order return with interest and to impose penalty are within the rule making power conferred by Section 164 and the wider amplitude of Section 171. The Court further noted that show cause notices initiating penalty proceedings prior to insertion of Section 171(3A) have been withdrawn in practice, rendering some objections infructuous. [Paras 30, 69, 153, 155, 156]

Provisions empowering imposition of interest and penalty are intra vires and valid.

Directory nature of procedural timelines - time limit for DGAP report - Whether failure to adhere to timelines in Rule 129/133 vitiates anti profiteering proceedings - HELD THAT: - The Court held that the timelines in the Rules for DGAP reporting and Authority determination are procedural and directory rather than mandatory; the Rules do not prescribe consequences for lapse of time and the object of the regime is consumer welfare. Consequently, mere delay in furnishing reports does not automatically abate proceedings; fairness and absence of prejudice are material considerations. [Paras 27, 158]

Time limits for DGAP and Authority are directory; lapse does not per se nullify proceedings.

Power to expand investigation beyond the specific complaint - scope of DGAP investigation - Whether expansion of investigation or proceedings by DGAP/NAA beyond the product or supplier named in a complaint is ultra vires - HELD THAT: - The Court held that Section 171 and the Rules are widely worded; expressions like 'any supply' permit broader inquiry. Rule 133(5) (after amendment) and Rule 129 empower investigation of related or other supplies where the Authority or DGAP has reason to believe contravention exists. Precedents interpreting similar investigatory powers in competition law support the view that Director General type inquiries may cover matters beyond the precise scope of the complaint to give effect to the statutory purpose. [Paras 28, 159, 160]

Expansion of investigation beyond the immediate complaint is not ultra vires and is permissible within the statutory scheme.

Final Conclusion: The Delhi High Court upholds the constitutional validity of Section 171 CGST Act, 2017 and Rules 122, 124, 126, 127, 129, 133 and 134 of the CGST Rules, 2017, holding that the anti profiteering regime is an ancillary, consumer welfare measure within Article 246A; delegated rule making and case specific methodology by the Authority are permissible; the provisions are not a prohibited price control measure; timelines are directory; investigatory scope may extend beyond the immediate complaint; and interest/penalty powers are intra vires - remedies against erroneous application remain available on merits.

Principles of natural justice - audi alteram partem - confrontation of adverse material - Appellate Authority's duty to give opportunity - advance ruling and appellate review by AAAR - remand for fresh consideration

Principles of natural justice - audi alteram partem - confrontation of adverse material - Appellate Authority's duty to give opportunity - advance ruling and appellate review by AAAR - Whether the Appellate Authority for Advance Ruling's order dated 27.07.2021 is vitiated for having relied upon an inspection report not disclosed to the petitioner and without affording the petitioner an opportunity to meet the adverse material. - HELD THAT: - The Court examined the settled doctrine that quasi judicial and administrative authorities must observe the essentials of fair play, including the audi alteram partem rule, and that material intended to be relied upon against a party must be disclosed so that the party can explain or rebut it. The AAAR overturned the AAR's ruling relying on a factual report prepared after the AAR order; that report was not placed before or confronted to the petitioner during the AAAR hearing and was supplied to the petitioner much later under RTI. The Court noted authorities establishing that while revenue authorities may collect material behind the party's back, any material they propose to use to the party's prejudice must be brought to the party's notice and the party given a reasonable opportunity to meet it. The Court found (having regard also to COVID related restrictions in force when the inspection occurred) that the AAAR utilised the adverse report without confronting the petitioner, thereby depriving the petitioner of a fair opportunity to answer the material. For these reasons the impugned appellate order could not be sustained and required setting aside. [Paras 13, 14, 15, 16, 17]

The Order No. 02/Odisha AAAR/Appeal/2021 22 dated 27.07.2021 is set aside and the matter is remitted to the Odisha Appellate Authority for Advance Ruling for fresh decision after due compliance with the principles of natural justice.

Final Conclusion: The AAAR's order dated 27.07.2021 was quashed for failure to afford the petitioner an opportunity to meet adverse material relied upon; the matter is remitted to the AAAR to decide afresh after complying with natural justice (no order as to costs).

Cancellation of GST registration - adequacy of show cause notice (particulars of mis statement or suppression) - right to be heard / personal hearing - opportunity to file detailed response before re adjudication - remand for fresh adjudication with time bound disposal - inspection of premises for verification

Adequacy of show cause notice (particulars of mis statement or suppression) - right to be heard / personal hearing - Cancellation order set aside and petitioner granted opportunity to file detailed response; authority to afford personal hearing - HELD THAT: - The Court observed that the show cause notice relied upon to cancel the GST registration did not disclose particulars of the alleged mis statement or suppression and omitted the name/designation of the officer issuing it. The petitioner had filed a short reply seeking time but did not thereafter file a detailed response. The respondent produced portal screenshots and an official report purportedly containing detailed reasons, whereas the petitioner relied on a rent agreement. Rather than quashing the notice outright for the procedural infirmities, the Court found that, in view of the petitioner's inadequate reply and the dispute over what information was accessible on the portal, the appropriate course was to set aside the cancellation and grant the petitioner an opportunity to file a detailed response. The authority was directed to afford a personal hearing to the petitioner before re adjudicating the matter. The Court expressly refrained from adjudicating the merits of the allegations. [Paras 6, 10, 12, 13, 16]

Cancellation order set aside; petitioner given one week to file detailed response and entitled to personal hearing before re adjudication

Remand for fresh adjudication with time bound disposal - inspection of premises for verification - Matter remanded to assessing authority for fresh disposal within 30 days with liberty to inspect the subject premises - HELD THAT: - Noting that the petitioner had also filed an application for revocation whose prescribed disposal period of 30 days had not yet expired, the Court ordered that after the petitioner files the detailed response within one week, the authority shall dispose of the show cause notice within 30 days. The Court further permitted the competent authority to conduct a fresh inspection of the subject property if required for verification before concluding the adjudication. These directions effect a remand for fresh consideration rather than any final determination on merits. [Paras 11, 12, 13, 14]

Proceedings remitted for fresh adjudication; authority to decide within 30 days after receipt of detailed response and may inspect premises

Final Conclusion: The High Court set aside the cancellation of the GST registration and remitted the matter for fresh adjudication: petitioner to file a detailed response within one week, authority to afford personal hearing, may inspect the premises, and to dispose of the show cause notice within 30 days; the Court did not pronounce on the merits and preserved parties' rights.

Non-filling of Part 'B' of the e-Way Bill - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - absence of intent to evade tax - technical error not attracting penalty - reliance on precedent to negate mens rea for penal liability

Non-filling of Part 'B' of the e-Way Bill - penalty under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 - absence of intent to evade tax - Penalty under Section 129(3) could not be imposed for non-filling of Part 'B' of the e-Way Bill where there was no intention to evade tax and the invoice contained vehicle details. - HELD THAT: - The Court found that the invoice itself recorded the truck details, the goods carried were not in variance with the invoice and the Department failed to demonstrate any intention on the part of the petitioner to evade tax. Reliance was placed on earlier decisions in VSL Alloys (India) Pvt. Ltd. and M/s Citykart Retail Pvt. Ltd. which held that mere omission to fill Part 'B' of the e-Way Bill, without any proximate evidence of tax evasion and where explanations are supported by relevant circulars, does not establish mens rea necessary for imposing penalty under the provision. Given these facts, the error was treated as technical and insufficient to sustain penal consequences under Section 129(3).

The penalty imposed under Section 129(3) was unwarranted and set aside; the impugned orders quashed.

Final Conclusion: Writ petition allowed; orders dated May 24, 2022 and October 15, 2022 quashed and set aside. Consequential reliefs granted and the respondents directed to return the security to the petitioner within six weeks from date.

Entertainment of writ petitions in absence of statutory appellate forum - interim stay of tax demand subject to deposit - non-constitution of Second Appellate Tribunal

Entertainment of writ petitions in absence of statutory appellate forum - non-constitution of Second Appellate Tribunal - interim stay of tax demand subject to deposit - Whether the High Court could entertain the writ petition and grant interim relief in view of non-constitution of the Second Appellate Tribunal and on what terms an interim stay of the demand could be granted. - HELD THAT: - The Court proceeded to entertain the writ petition because the Second Appellate Tribunal had not been constituted, leaving the petitioner without the availability of the statutory second appeal forum. In light of that factual absence of the appellate forum, the High Court granted interim relief confined to the pendency of the writ petition. The interim relief was made conditional: the petitioner was directed to deposit the entire tax demand within fifteen days from the date of the order, and, upon such deposit, the balance of the demand (i.e., other than what had been deposited) would remain stayed during the writ petition's pendency. The order reflects the Court's exercise of discretionary equitable jurisdiction to afford interim protection where the statutory appellate remedy is not available, while protecting the revenue by requiring immediate deposit of the demanded tax as a condition of the stay. Procedural directions relating to service and filing of counter-affidavits were also given to enable adjudication on the merits thereafter. [Paras 2, 8]

Writ petition entertained because the Second Appellate Tribunal is not constituted; interim stay of the rest of the demand granted subject to petitioner depositing the entire tax demand within fifteen days, with consequential directions for service and filing of replies.

Final Conclusion: The High Court entertained the writ petition due to non-constitution of the Second Appellate Tribunal and granted an interim stay of the balance tax demand on the condition that the petitioner deposits the entire tax demand within fifteen days; procedural directions for service and pleadings were given and the matter was listed for further hearing.

Stay of recovery on deposit pending appeal under Section 112(9) of the B.G.S.T. Act - non-constitution of the Appellate Tribunal and deprivation of statutory remedy - requirement to file appeal after constitution of the Tribunal - limitation period to commence after Tribunal President or State President enters office - release of attachment upon compliance with deposit condition

Stay of recovery on deposit pending appeal under Section 112(9) of the B.G.S.T. Act - non-constitution of the Appellate Tribunal and deprivation of statutory remedy - Petitioner entitled to benefit of stay of recovery under Section 112(9) of the B.G.S.T. Act on specified deposit despite non-constitution of the Tribunal. - HELD THAT: - The Court held that because the respondent-Authorities have not constituted the Appellate Tribunal, the petitioner is deprived of the statutory appellate remedy and therefore cannot be denied the statutory stay available under Sub-Section (9) of Section 112. To balance equities the Court directed that subject to deposit of a sum equal to 20 percent of the remaining amount of tax in dispute (in addition to amounts already deposited under Sub-Section (6) of Section 107), the statutory benefit of stay under Section 112(9) shall be extended and recovery of the balance amount and any steps taken for recovery shall be deemed stayed. The Court recognised similar relief granted in earlier authority and applied that principle here. As an alternative, where the petitioner has already paid an amount exceeding the 20 percent threshold (over and above the 10 percent paid at first appellate stage), the Court directed that such payment will attract the stay until the Tribunal is constituted and, if an appeal is filed within the stipulated period thereafter, until disposal of the appeal. [Paras 3, 4, 6]

Stay of recovery extended on deposit of 20% of the remaining disputed tax (plus earlier deposits); existing payments exceeding the threshold likewise attract stay until constitution and, if appeal filed, until disposal.

Requirement to file appeal after constitution of the Tribunal - limitation period to commence after Tribunal President or State President enters office - Petitioner must file the appeal under Section 112 of the B.G.S.T. Act once the Tribunal is constituted; failure to file within the period to be specified will permit respondents to proceed. - HELD THAT: - The Court made the grant of interim statutory relief conditional on the petitioner availing the statutory remedy once the Tribunal becomes functional. The Court directed that the petitioner shall present/file the appeal observing statutory requirements after the Tribunal is constituted and the President or State President enters office so that the appeal can be considered on merits. The Court cautioned that the stay granted by reason of non-constitution is not open-ended; if the petitioner chooses not to file the appeal within the period to be specified upon constitution, the respondent-Authorities will be at liberty to resume proceedings and take action in accordance with law. [Paras 5, 6]

Appeal to be filed after constitution of the Tribunal within the period to be specified; failure to do so will permit respondents to proceed in accordance with law.

Release of attachment upon compliance with deposit condition - Bank attachments pursuant to the demand shall be released if the petitioner pays the directed deposit. - HELD THAT: - The Court ordered that if the petitioner complies with the deposit condition (payment of an amount equivalent to 20 per cent of the remaining disputed tax), any bank account attachment made pursuant to the demand shall be released. This direction follows from extending the statutory stay on recovery upon compliance with the deposit requirement and is conditional upon actual payment of the prescribed sum. [Paras 6]

On payment of the specified deposit, any bank attachment arising from the demand shall be released.

Final Conclusion: Writ petition disposed of by directing grant of statutory stay under Section 112(9) on payment of 20% of the remaining disputed tax (in addition to earlier deposits), with directions to file the appeal once the Tribunal is constituted and release of any bank attachment upon compliance; failure to file the appeal within the period to be specified will allow respondents to proceed.

Operation and effect of Section 83(2) of the Central Goods and Services Tax Act, 2017 - Academic nature of relief where impugned order is no longer operative - Garnishee order / bar on buyers making payment and statutory basis for issuance

Operation and effect of Section 83(2) of the Central Goods and Services Tax Act, 2017 - Academic nature of relief where impugned order is no longer operative - Challenge to the letter dated 29.04.2019 passed purportedly under Section 83 of the CGST Act - HELD THAT: - The Court accepted the respondents' submission that the letter dated 29.04.2019 is no longer operative by virtue of Section 83(2) of the Central Goods and Services Tax Act, 2017. Having found that the impugned order does not continue to have legal effect, the relief sought by the petitioner in respect of that letter was treated as academic and did not require further adjudication on merits. [Paras 2, 3]

The challenge to the letter dated 29.04.2019 is academic and the relief sought in that regard is not granted on merits.

Garnishee order / bar on buyers making payment and statutory basis for issuance - Validity and continued operability of the communication dated 14.05.2018 directing buyers not to make payment to the petitioner - HELD THAT: - The Court noted that a communication dated 14.05.2018 directed buyers not to make payments to the petitioner and observed that the communication is essentially in the nature of a garnishee order. The Court queried the respondents as to the statutory provision under which that communication was issued and whether it remains operative. The respondent's counsel sought time to take instructions on the statutory basis and operability of the communication, and the Court accordingly reserved determination of this matter for further consideration. [Paras 4, 5, 6, 7]

Respondents to take instructions and inform the Court of the statutory basis and whether the 14.05.2018 communication remains operative; matter listed for further hearing.

Final Conclusion: The Court held that the challenge to the 29.04.2019 letter is academic as that order is no longer operative under Section 83(2) of the CGST Act, 2017, and directed the respondents to inform the Court about the statutory basis and continued operability of the 14.05.2018 communication (garnishee-type bar), listing the matter for further hearing.

Validity of Judgement of High Court - While admitting the appeal of the Revenue, the HC [2008 (9) TMI 1035 - CALCUTTA HIGH COURT] has framed 10 question of laws - However, while disposing the appeal, the High Court [2015 (12) TMI 1896 - CALCUTTA HIGH COURT] observed that, no substantial question of law arises out of the judgment rendered by the Income Tax Appellate Tribunal.

HELD THAT:- A combined reading of the above referred orders is sufficient to explain the reason for setting aside the judgment of the High Court. There is no option except to set aside the impugned judgment of the High Court and remand the matter to High Court for hearing the appeal.

Accordingly, we allow this appeal, set aside the impugned judgment of the High Court and restore the appeal on the record of the High Court. High Court shall now hear both the parties and decide the case on merits.

Unexplained gifts - Donee denied to make gifts - burden to prove - As decided by HC [2014 (8) TMI 692 - ALLAHABAD HIGH COURT] gifts are not genuine and Tribunal has deleted the addition merely only on the ground that no opportunity was provided for cross-examination,but fact remains that assessee never availed it - transaction is not genuine but colorable as money is routed indirectly from the firm to the assessee's account under the garb of the gifts.

HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Commercial activity test - benefit of Section 12A registration for charitable trusts - application of precedent

HELD THAT: - The parties agreed that the question in the present petition is covered by this Court's decision in Ahmedabad Urban Development Authority[2022 (10) TMI 948 - SUPREME COURT]. In reliance on that precedent, the Court did not adjudicate the merits on the questions of commerciality or registration under Section 12A but directed that those questions be determined afresh by the Assessing Authority.

The Assessing Authority is to examine the nature of the activities of the petitioner, apply the commercial activity test as guided by the precedent, and consider the petitioner's claim for the benefit of Section 12A registration, thereafter passing appropriate orders in accordance with law.

Matter remitted to the Assessing Authority for fresh determination of commercial activity and consideration of entitlement to Section 12A, with directions to pass appropriate orders.

Final Conclusion: Civil Appeal disposed of by remitting the matter to the Assessing Authority for determination of commercial activity and consideration of benefit under Section 12A in accordance with the cited precedent; pending applications disposed of.

Disallowance of the deduction u/s 80HHC relating to the interest income - As decided by HC [2016 (11) TMI 727 - RAJASTHAN HIGH COURT]assessees have thoroughly failed to establish beyond doubt that the interest earned on the deposit or advance was income from the export business. Hence, extending the benefit of deduction as per computation provided in Clause (baa) to Explanation to section 80HHC cannot be made available to the assessees.

HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Reopening of assessment u/s 148 - period of limitation - as decided by HC [2022 (11) TMI 1443 - ALLAHABAD HIGH COURT] impugned notice u/s 148 of the Income Tax Act, 1961 was issued to the petitioner on 01.04.2021 i.e. after expiry of limitation on 31.03.2021 - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court. Hence, the Special Leave Petition is dismissed.

Approval u/s 80G(5) - eligibility - Conditions for exemption under section 80G(5) - Genuineness of charitable activities versus volume of activity - Whether applicant has not commenced significant charitable activity as per its objects? - as per HC [2018 (7) TMI 1729 - RAJASTHAN HIGH COURT] granted approval u/s 80G(5) - HELD THAT:- We are not inclined to interfere with the impugned judgment passed by the High Court. Special Leave Petition is dismissed keeping the question of law open.

Jurisdiction of Assessing Officer - authority under Section 120(2) v. Section 120(4)(b) - Section 124(3)(a) statutory bar on questioning jurisdiction - waiver by failure to object within one month

Petitioner submitted he has instructions to withdraw the special leave petition, in view of the settlement arrived at between the parties under the ‘Direct Tax Vivad Se Vishwas Act, 2020’.

Copy of the settlement arrived at between the parties has been filed and the same is taken on record.

HELD THAT:- The special leave petition stands dismissed as withdrawn.

Escaped assessment - evidentiary value of statement recorded under Section 133A - survey proceedings under Section 133A - powers under Section 131 including power to examine under oath - notice under Section 148 initiated on basis of survey findings

Evidentiary value of statement recorded under Section 133A - survey proceedings under Section 133A - Whether proceedings under Section 148 can be vitiated because they relied on statements recorded under Section 133A - HELD THAT: - The petitioner contended that a statement recorded under Section 133A cannot be relied upon as evidence and therefore the notice under Section 148 is vitiated. The Court examined the impugned notice and the material arising from the survey and noted that the initiation of proceedings was not founded solely on the statement under Section 133A. The notice records several factual findings from the survey (cash sales not reflected in books, excess/undisclosed stock, and sourcing of funds for property purchase from undisclosed profits) and expressly states that the statement of the partner was not the only basis for initiating proceedings. On that basis the Court concluded that the reliance on survey-related material did not render the reopening invalid. [Paras 5, 6]

Rejection of challenge that reliance on a Section 133A statement alone vitiates the notice; proceedings under Section 148 were not invalidated on that ground.

Powers under Section 131 including power to examine under oath - notice under Section 148 initiated on basis of survey findings - Whether the presence of a statement recorded under Section 131 and other survey findings sufficed to justify initiation of proceedings under Section 148A/148 - HELD THAT: - The impugned notice records that, in addition to a statement under Section 133A, a statement was also recorded under Section 131. The Court observed that Section 131 confers powers akin to a civil court on the officer, including the power to examine persons under oath. Coupled with the array of factual findings unearthed during the survey and the allowance given to the assessee to respond to the information, the Court found no ground to interfere with the initiation of proceedings for alleged escaped assessment. [Paras 6, 7, 8]

Proceedings under Section 148A/148 were justified on the basis of the survey findings and the Section 131 statement; no interference warranted.

Final Conclusion: Writ petition dismissed; initiation of proceedings under Section 148A/148 upheld in view of survey findings and Section 131 material, and the petitioner is at liberty to participate in and resist the escaped assessment proceedings.

Reopening of assessment under Section 147/148 of the Income-tax Act - Fresh tangible material for reopening - Change of opinion - Allowability of prior period expenses under mercantile system of accounting

Reopening of assessment under Section 147/148 of the Income-tax Act - Fresh tangible material for reopening - Change of opinion - Validity of reassessment proceedings initiated for AY-2008-09 by notice under Section 148 read with Section 147. - HELD THAT: - The Court held that the reopening could not be sustained because it rested on the assessment order for AY-2010-2011 as the purported "fresh tangible material". That assessment order had been set aside by the Commissioner of Income Tax (Appeals) who allowed the claim of prior period expenses, and the Revenue did not challenge that appellate order. In these circumstances the material relied upon could not be treated as fresh tangible material to justify reopening; reliance on facts already on record or on an order subsequently accepted by Revenue would amount to a change of opinion and is not a valid basis for reopening. The Court also noted existing judicial precedent favouring allowability of such prior period expenditure when mercantile system is followed, which further undermined the claimed reason to believe. [Paras 7, 8]

Reassessment proceedings for AY-2008-09 initiated by notice dated 28.3.2013 were invalid and the reopening was quashed.

Allowability of prior period expenses under mercantile system of accounting - Whether prior period expenses debited to profit and loss account were correctly disallowed for the year under consideration. - HELD THAT: - The Court recorded that appellate orders and earlier decisions of this Court and the ITAT had held that prior period expenses which do not pertain to the year under consideration are allowable where the assessee follows the mercantile system of accounting. The CIT(A) in AY-2010-2011 applied that ratio and directed deletion of the addition; that order was accepted by Revenue and not disturbed. The existence of that favourable appellate finding meant there was no valid basis to treat the prior period expenses as escapement of income in AY-2008-09. [Paras 4, 7]

Prior period expenses claimed in the profit and loss account were to be treated as allowable under the mercantile system; disallowance could not furnish a valid ground for reopening AY-2008-09.

Final Conclusion: The petition succeeds. The Court made absolute the rule, holding the reassessment proceedings for AY-2008-09 initiated under Section 148/147 to be without jurisdiction and quashed the notice and the order rejecting objections.

Nil rate TDS certificate under Section 197 of the Income Tax Act - Taxability of income under DTAA Article 7 and Article 12 - Permanent Establishment and attribution of business profits - Income deemed to accrue or arise in India under Sections 5 and 9 - Provisional nature of certificate under Section 197

Nil rate TDS certificate under Section 197 of the Income Tax Act - Provisional nature of certificate under Section 197 - Impugned order rejecting the petitioner's application for a nil rate TDS certificate under Section 197 was quashed and the respondents were directed to consider granting a nil rate certificate. - HELD THAT: - The Court found that the assessing officer's order rejecting the petitioner's application under Section 197 had been passed without placing material on record to show that a taxable event had occurred in India. Noting that certificates under Section 197 are provisional and do not preclude subsequent assessment proceedings, the Bench nevertheless declined to relegate the petitioner to the revision remedy under Section 264 in view of the absence of strong material warranting denial of nil rate relief. In the circumstances the writ petition was allowed and the respondents were directed to consider granting the nil rate TDS deduction certificate within eight weeks from receipt of the order. [Paras 24, 25]

Writ allowed; respondents directed to consider grant of nil rate TDS certificate under Section 197 within eight weeks.

Taxability of income under DTAA Article 7 and Article 12 - Permanent Establishment and attribution of business profits - Income deemed to accrue or arise in India under Sections 5 and 9 - Income from the Bangladesh project was not shown to be taxable in India as no material established involvement of the petitioner's Indian PE and the payments related to services performed in Bangladesh governed by the DTAA. - HELD THAT: - On the record the project was being undertaken in Bangladesh, amounts payable were paid in Bangladesh by the Government of Bangladesh, and there was no material to demonstrate that the petitioner's Hyderabad PE was involved in the project. The Court applied the DTAA principles, noting Article 12 restricts source-state taxation to specified fees for included services and Article 7 confines taxation of business profits to the State of source only where business is carried on through a PE. Applying these principles and the factual material before it, the Court inferred that no taxable event in India had been shown and that the payments were not liable to TDS under the Act. [Paras 23, 24]

No material to show income from the Bangladesh project was taxable in India; payments treated as not subject to TDS in India on the record before the Court.

Final Conclusion: The writ petition is allowed; the impugned order is set aside to the extent indicated and the respondents are directed to consider and grant a nil rate TDS certificate under Section 197 within eight weeks from receipt of the order; no order as to costs.

Re-opening of assessment - re-assessment order as appealable order - availability of alternate remedy - principle of natural justice - challenge to order under Section 148A(d) precluded if not raised

Re-assessment order as appealable order - availability of alternate remedy - Whether the writ court should entertain challenge to the re-assessment order or whether the appellant is relegated to the appellate authority - HELD THAT: - The Court held that the re-assessment order is an appealable order and the correctness of the assessing officer's reasons requires examination of disputed facts. A writ court cannot undertake the fact-finding exercise necessary to test those reasons. Consequently, the Single Bench correctly declined to entertain the petition and relegated the appellant to the statutory appellate forum. The Court noted that questions about appreciation of the assessee's replies and entitlement to procedural steps such as cross-examination are matters for the appellate authority. [Paras 4]

The writ petition was properly dismissed and the appellant must pursue the grievance by filing an appeal before the appellate authority.

Principle of natural justice - re-opening of assessment - Whether alleged violation of natural justice in the re-assessment proceedings required interference by the writ court - HELD THAT: - The Court observed the appellant complained that its replies and requests (including cross-examination and production of enquiry material) were not considered and that the final assessment order was cryptic. However, as the statutory re-assessment process was complete and the points raised involve disputed facts and appreciation of evidence, such contentions can be agitated before the appellate authority. The Court therefore declined to intervene in writ proceedings on the asserted natural justice grounds. [Paras 2, 4]

Allegations of breach of natural justice in the re-assessment were not grounds for writ interference; they may be pursued on appeal.

Challenge to order under Section 148A(d) precluded if not raised - Whether the appellant may at this stage challenge the order under Section 148A(d) of the Act - HELD THAT: - The Court recorded that the appellant did not challenge the initiation of proceedings under Section 148A(b) nor the order under Section 148A(d) at the relevant stage. Accordingly, the appellant is precluded, at this distance of time, from questioning the correctness of the Section 148A(d) order. The Court distinguished precedents relied upon by the appellant on the basis that those cases involved direct challenges to notices or to orders under Section 148A(d), which is not the factual posture here. [Paras 4]

The appellant is precluded from challenging the order under Section 148A(d) now; the precedents relied upon are distinguishable.

Final Conclusion: Appeal dismissed. The dismissal preserves the appellant's liberty to raise before the appellate authority the points made in the writ petition if an appeal against the re-assessment order is filed.

Revisionary power under Section 263 exercisable only where assessment order is erroneous and prejudicial to revenue by reason of lack of enquiry or illegality - Requirement of specific finding that assessing officer failed to make necessary enquiries before invoking Section 263 - Understatement of closing stock must be supported by concrete material and specific adverse finding - Interference by appellate forum on re-appreciation of facts where assessing officer has conducted due enquiry

Revisionary power under Section 263 exercisable only where assessment order is erroneous and prejudicial to revenue by reason of lack of enquiry or illegality - Requirement of specific finding that assessing officer failed to make necessary enquiries before invoking Section 263 - Understatement of closing stock must be supported by concrete material and specific adverse finding - Interference by appellate forum on re-appreciation of facts where assessing officer has conducted due enquiry - Validity of the Commissioner's exercise of powers under Section 263 in quashing the assessment and directing further enquiries on issues of closing stock valuation, secured loan and commission - HELD THAT: - The Court examined whether the CIT established that the assessment order was erroneous and prejudicial to the revenue by reason of absence of necessary enquiries. The tribunal recorded that the assessee had produced detailed stock records (item-wise, FIFO valuation and bank hypothecation statements) and that the assessing officer had access to and had considered these documents in completing the scrutiny assessment. The CIT's order under Section 263 contained only an observation that there 'could be a possibility' of understatement of closing stock without recording a specific finding that no enquiries were conducted by the assessing officer. The Court agreed with the tribunal's factual re-appreciation that the assessing officer had conducted due enquiry and that the CIT had not demonstrated a lack of enquiry or illegality in the original assessment order; consequently the jurisdictional precondition for invoking Section 263 was not satisfied. On that basis the tribunal's interference with the CIT's order was upheld and the revenue's appeal failed. [Paras 5, 6, 9]

The CIT's exercise of power under Section 263 was unjustified; the tribunal rightly quashed the CIT's direction and allowed the assessee's appeal.

Final Conclusion: The appeal is dismissed; the substantial questions of law are answered against the revenue and the tribunal's order setting aside the Section 263 action is upheld.

Assessment under Section 153A - incriminating material unearthed during search - search under Section 132 - completed/unabated assessments - reopening under Sections 147/148

Assessment under Section 153A - incriminating material unearthed during search - search under Section 132 - completed/unabated assessments - Whether additions in proceedings under Section 153A can be made in respect of regular items shown in books of account in the absence of incriminating material found during the search under Section 132. - HELD THAT: - The Court held that the question is no longer res integra in view of earlier decisions of this Court and the Apex Court. Reliance was placed on this Court's decision in Principal Commissioner of Income Tax-4 v. Saumya Constructions Limited and the Supreme Court's decision in Principal Commissioner of Income-Tax v. Abhisar Buildwell P. Ltd., which establish that where no incriminating material is unearthed during search under Section 132 (or requisition under Section 132A), the Assessing Officer cannot make additions in respect of completed or unabated assessments by taking into account other material. The term "incriminating" refers to documents, materials or information collected during the search proceedings which bear on the total income. Applying these principles to the facts, the Tribunal correctly upheld the deletion of additions in respect of regular book entries where no incriminating material was found to justify such additions. [Paras 3, 4]

Additions to regular book items cannot be sustained in Section 153A proceedings in the absence of incriminating material discovered during the search; the Tribunal's upholding of deletions was correct.

Reopening under Sections 147/148 - completed/unabated assessments - Whether the power to reopen completed or unabated assessments is preserved despite the rule that no addition can be made under Section 153A without incriminating material. - HELD THAT: - The Court noted the clarification by the Apex Court that while no additions can be made in completed/unabated assessments under Section 153A in the absence of incriminating material found during search, the Assessing Officer's power to reopen assessments under Sections 147/148 is saved and remains available, subject to the conditions prescribed by those provisions. Thus, the unavailability of additions in Section 153A proceedings does not oust the separate statutory remedy of reopening under Sections 147/148 where the statutory conditions for such reopening are met. [Paras 4]

The power to reopen under Sections 147/148 is unaffected and continues to be available even where no addition can be made under Section 153A for lack of incriminating material.

Final Conclusion: The appeal is dismissed. The Tribunal correctly applied settled law that additions in Section 153A proceedings must be supported by incriminating material found during the search; absence of such material precludes additions in completed/unabated assessments, while the Assessing Officer's separate power to reopen under Sections 147/148 remains preserved.

Sales tax subsidy - capital or revenue receipt - Purpose test - Package Scheme of Incentives, 1993 - incentive for industrialisation in underdeveloped areas - Eligibility certificate and timing of grant irrelevant to character of receipt - Incentive linked to fixed capital investment as indicium of capital receipt

Sales tax subsidy - capital or revenue receipt - Purpose test - Package Scheme of Incentives, 1993 - incentive for industrialisation in underdeveloped areas - Incentive linked to fixed capital investment as indicium of capital receipt - Eligibility certificate and timing of grant irrelevant to character of receipt - Nature of the sales tax subsidy received under the Package Scheme of Incentives, 1993 - whether capital receipt or revenue receipt - HELD THAT: - The court applied the established "purpose test" derived from Sahney Steel to determine the character of the subsidy. Examination of the 1993 Scheme's preamble and provisions shows its central object was to disperse and attract new or expanded industrial units to underdeveloped and developing areas of Maharashtra and to promote large-scale fixed capital investment in those areas. The scheme expressly contemplates incentives for "new", "pioneer" and "prestigious" units and links the quantum and period of sales tax incentive to the amount of fixed capital investment; eligibility certificates issued by SICOM related to setting up a new unit or expansion. These features indicate the subsidy was intended to assist in establishing or expanding industrial units (a capital purpose), not merely to support ongoing operational profitability. Further, the court held that the fact that eligibility certificates were issued after commencement of production, or that the incentive operated by retention/deferral of sales tax, does not alter the character of the receipt: timing, source or mode of payment are not determinative where purpose shows the subsidy is to finance capital formation. Applying these principles to the facts (eligibility certificates, link to capital investment, and scheme objectives), the subsidy received by the assessee under the 1993 Scheme is of capital character and must be treated as a capital receipt. [Paras 16, 17, 21, 23, 28]

Sales tax subsidy/incentive received under the 1993 Scheme is a capital receipt; the Tribunal's order is upheld.

Final Conclusion: The appeals are dismissed; the common question of law is answered in favour of the assessee-sales tax incentives under the 1993 Scheme are capital receipts for the assessment years in issue.

Wilful attempt to evade tax - delayed payment of income tax not amounting to evasion - prosecution under Section 276C(2) of the Income Tax Act - acknowledgement of tax in return - quashing of criminal complaint as abuse of process

Wilful attempt to evade tax - delayed payment of income tax not amounting to evasion - prosecution under Section 276C(2) of the Income Tax Act - acknowledgement of tax in return - quashing of criminal complaint as abuse of process - Whether the delayed payment of self-assessed tax, admittedly shown and later paid with interest, constituted a wilful attempt to evade tax so as to sustain criminal prosecution under Section 276C(2), and whether the complaint and subsequent proceedings should be quashed. - HELD THAT: - The Court held that the petitioners had filed the return for Assessment Year 2012-13 and had self assessed and acknowledged the tax liability in that return. Although payment was delayed, the tax together with interest was paid before initiation of prosecution. Applying settled precedents, the Court observed that mere delay in payment of tax, where the liability is acknowledged in the return and there is no allegation of false entries, omissions or other conduct to defeat payment, does not constitute a wilful attempt to evade tax. The Court relied on the principle that criminal proceedings under the evasion provision require demonstration of wilful intent to evade-an intent not established by mere belated payment and subsequent discharge of tax and interest. In these circumstances continuation of the criminal complaint and framing of charges amounted to an abuse of process, and the complaint and consequential orders were quashed as not sustainable. [Paras 15, 16]

The complaint, the order recording that a case was made out, the order framing charges and all consequential proceedings were quashed as the delayed payment (with interest) of the self assessed tax did not amount to a wilful attempt to evade tax.

Final Conclusion: The petition is allowed; criminal proceedings arising from Complaint No. 1368 of 2014 and the impugned orders are quashed insofar as they concern the petitioners, because the delayed payment of acknowledged self assessed tax (Assessment Year 2012-13), paid with interest before prosecution, does not constitute a wilful attempt to evade tax.

Summary order. Special Leave Petition dismissed; liberty preserved to pursue alternative remedies; time granted by the High Court to avail the remedy extended by 30 days from the date of this order; pending applications disposed of.

Customs Brokers Licensing Regulations, 2018 - Regulation 10(d) and 10(e) - penalty under Regulation 18(1) of CBLR, 2018 - classification is a question of law and not a misdeclaration - mens rea requirement for imposition of penalty - Advisory No.1/2002 regarding non-invocation of CBLR in interpretative classification disputes

Customs Brokers Licensing Regulations, 2018 - Regulation 10(d) and 10(e) - penalty under Regulation 18(1) of CBLR, 2018 - classification is a question of law and not a misdeclaration - mens rea requirement for imposition of penalty - Advisory No.1/2002 regarding non-invocation of CBLR in interpretative classification disputes - Whether the penalty imposed under Regulation 18(1) for alleged contravention of Regulation 10(d) and 10(e) is sustainable where the disputed classification was an interpretative question of law and the Commissioner found no mens rea on the part of the customs broker. - HELD THAT: - The Tribunal found that the appellant adopted the contested classification pursuant to the assessment practice prevailing at Tuticorin and that assessing officers had accepted the classification when processing the shipping bills; DGFT had also allowed the claimed benefit, indicating no clear wrongful act by the broker. The Tribunal noted that the Commissioner himself recorded that the broker was not directly benefited and that there was no mens rea. The Tribunal relied on authority and settled principle that classification is a question of law and an erroneous classification does not constitute deliberate misdeclaration warranting penalty. The Tribunal further observed that Advisory No.1/2002 advises against invoking CBLR provisions against customs brokers in interpretative disputes on classification and related benefits. Applying these principles, and because the absence of mens rea was established on the record, imposition of penalty under Regulation 18(1) for alleged breach of Regulations 10(d) and 10(e) was held to be unsustainable. [Paras 7, 8, 10]

Penalty imposed under Regulation 18(1) for alleged violation of Regulation 10(d) and 10(e) set aside; appeal allowed.

Final Conclusion: The penalty of Rs.25,000 imposed on the customs broker for alleged breach of Regulations 10(d) and 10(e) of CBLR, 2018 has been set aside because the contested classification was an interpretative question of law, assessing authorities and DGFT had accepted the classification, the Commissioner recorded absence of mens rea, and Advisory No.1/2002 cautions against invoking CBLR in such interpretative disputes.

Maintainability of appeal under Section 129A - declaration of baggage under Section 77 of the Customs Act, 1962 - absolute confiscation v. redemption on payment of fine - scope of 'prohibited goods' for confiscation - confiscation under Section 111 - requirement of improper importation - penalty under Section 112(a) and Section 114AA - reduction in view of facts

Maintainability of appeal under Section 129A - Appeal against order of the Principal Commissioner of Customs is maintainable before the Tribunal despite proviso to Section 129A. - HELD THAT: - The proviso to Section 129A bars appeals to the Tribunal against orders of the Commissioner (Appeals) where such orders relate to goods imported as baggage. The present appeal is filed against an order of the Principal Commissioner of Customs acting as adjudicating authority and not against an order of the Commissioner (Appeals). Consequently the proviso does not oust the Tribunal's jurisdiction and the appeal is maintainable. [Paras 4]

Appeal is maintainable before the Tribunal.

Declaration of baggage under Section 77 of the Customs Act, 1962 - absolute confiscation v. redemption on payment of fine - scope of 'prohibited goods' for confiscation - Absolute confiscation of the seized gold chains is not sustainable; option to redeem the gold on payment of a redemption fine is to be afforded. - HELD THAT: - The adjudicating authority confiscated the gold absolutely though the passenger had signed the declaration form without marking 'Yes' or 'No' and there is no finding that he was a habitual offender, that the goods were concealed in an ingenious manner, or that the gold is a prohibited import. Established authorities hold that gold is not a prohibited good whose import is absolutely barred and that redemption may be allowed in lieu of absolute confiscation. Applying these principles to the facts, absolute confiscation is set aside and the appellant is given the option to redeem the gold chains on payment of a redemption fine. [Paras 4]

Order of absolute confiscation of the gold chains set aside; option to redeem on payment of redemption fine of Rs.3,00,000/-.

Confiscation under Section 111 - requirement of improper importation - Confiscation of foreign currency (USD 11,325) is set aside for lack of evidence of improper importation under Section 111. - HELD THAT: - Section 111 applies where goods are imported contrary to a prohibition on import. A contravention of FEMA (possession or trading restrictions) does not amount to a prohibition on import such as would trigger Section 111. Revenue adduced no evidence that the foreign currency was smuggled or improperly imported. In absence of proof of improper importation, confiscation under Section 111 is not sustainable and the currency must be released to the appellant. [Paras 4]

Confiscation of the foreign currency set aside and the currency released to the appellant.

Penalty under Section 112(a) and Section 114AA - reduction in view of facts - Penalties imposed under Section 112(a) and Section 114AA are reduced in view of the facts and circumstances. - HELD THAT: - Considering the totality of facts - absence of proof of smuggling or prohibition, the appellant's status and the circumstances of seizure - the Tribunal exercises its power to moderate the penalties. The penalty under Section 112(a) is reduced and the penalty under Section 114AA is also reduced to lesser sums as appropriate to the case. [Paras 4]

Penalty under Section 112(a) reduced to Rs.1,00,000 and penalty under Section 114AA reduced to Rs.50,000.

Final Conclusion: The appeal is partly allowed: the appeal is maintainable; absolute confiscation of the gold chains is set aside and redemption on payment of Rs.3,00,000 is allowed; confiscation of the foreign currency (USD 11,325) is set aside and the currency is to be released; penalties are moderated as ordered.

Classification of imported goods as transmission or reception apparatus - Classification under CTH 85.17 vis-a -vis Chapter 85.28 - Applicability of concessional/exemption notification consequential on classification - Limitation on raising new grounds in appeal beyond show cause notice

Classification under CTH 85.17 vis-a -vis Chapter 85.28 - Classification of imported goods as transmission or reception apparatus - Imported goods described as encoders/multiplexers are classifiable under CTH 8517.6290 and not under Chapter 8528. - HELD THAT: - The Tribunal applied the distinguishing principle that Chapter 85.28 covers reception apparatus (television reception apparatus) while Chapter 85.17 covers "other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network". The Tribunal relied on its earlier detailed decision in the appellant's own case (Final Order No. A/12699/2018 dated 03.12.2018) and on precedents considering the essential/functional character of the goods. The impugned items (encoders, multiplexers, modulators) have independent functions of conversion, compression and transmission of data across wired and wireless networks and are used by a variety of users beyond subscriber reception; they are not mere reception apparatus at the subscriber's end. The Tribunal also relied on prior decisions (including Dejero Logix Pvt Ltd , Multi Screen Media , and other authority discussions reproduced in the earlier order) holding that devices having transmission functions merit classification under the communication apparatus heading (CTH 8517). Applying that reasoning to the present imports, the Tribunal set aside the impugned classification under Chapter 8528 and held the goods classifiable under CTH 8517.6290, allowing the assessee's appeal and granting consequential reliefs if any.

Goods are classifiable under CTH 8517.6290; impugned order classifying them under Chapter 8528 is set aside and the assessee's appeal is allowed.

Limitation on raising new grounds in appeal beyond show cause notice - Revenue cannot rely on a classification in the appeal (CTH 85.28.7100) that differs from the classification specified in the show cause notice (CTH 85.28.7390); such new grounds are beyond the scope of the notice and render the revenue's appeal unsustainable. - HELD THAT: - The Tribunal observed that the revenue's appeal sought to advance a different tariff sub-heading than that pleaded in the show cause notice. Since the new classification head proposed in the appeal was not the same as in the show cause notice, those grounds could not be entertained as they were beyond the scope of the show cause notice. Coupled with the Tribunal's antecedent conclusion on the correct classification under CTH 8517.6290, the revenue's appeal was held not maintainable on this procedural ground as well and was dismissed.

Revenue's appeal is dismissed as unsustainable; new classification grounds in the appeal are beyond the scope of the show cause notice and cannot be entertained.

Final Conclusion: The impugned order is set aside: the assessee's appeal is allowed by classifying the imported encoders/multiplexers under CTH 8517.6290 (with consequential reliefs, if any), and the revenue's appeal is dismissed, including on the ground that new classification grounds in the appeal exceed the scope of the show cause notice.

Validity and enforceability of restructuring proposals - pre-implementation conditions as conditions precedent - date of default and operation of Section 10A suspension - part-payment and unilateral revival/novation of restructuring - debt and default threshold under Section 7 - no requirement to recall loan before initiating CIRP - Adjudicating Authority's power to examine documents bearing on Section 7

Validity and enforceability of restructuring proposals - The legal status of the restructuring proposals dated 21.02.2020 and 29.09.2020 and whether they were in existence and binding. - HELD THAT: - The Tribunal found that both restructuring approvals contained pre-implementation conditions which were not complied with by the corporate debtor. Pre-implementation conditions operate as conditions precedent; failure to fulfil them means the restructuring proposals did not fructify into binding agreements. Where such conditions precedent are not met, the restructuring approval ceases to exist and the original loan agreement is revived as the operative contract. The Appellant's contention that the first restructuring approval continued to subsist notwithstanding the second approval and the non-fulfilment of conditions was rejected. [Paras 53]

Both restructuring approvals did not become binding agreements because the stipulated pre-implementation conditions were not satisfied; the original loan agreement revived.

Pre-implementation conditions as conditions precedent - Whether the pre-implementation conditions in the restructuring proposals were mandatory and whether their non-compliance resulted in non-execution of the restructuring approvals. - HELD THAT: - The Tribunal treated the pre-implementation conditions as akin to conditions precedent that must be satisfied before a restructuring approval takes effect. The corporate debtor did not fulfil those pre-implementation conditions (including tariff order and DSRA creation), and therefore the restructuring approvals failed to take off. Consequently, non-compliance rendered the restructuring approvals non-existent for all practical and legal purposes. [Paras 53]

Pre-implementation conditions were mandatory; failure to comply meant the restructuring approvals did not crystallise into enforceable agreements.

Date of default and operation of Section 10A suspension - Whether the date of default falls within the period excluded for initiation of CIRP under Section 10A of the Code. - HELD THAT: - Section 10A suspended initiation of CIRP for defaults arising between 25.03.2020 and 24.03.2021. The Respondent's Section 7 application pleaded a date of default of 31.03.2018 (and NPA date 30.06.2018). The Adjudicating Authority, applying the second restructuring approval, treated the first payment obligation as falling due on 31.03.2021 and noted that the corporate debtor's first payment was made only on 24.12.2021, thereby treating default as occurring on 31.03.2021. The Tribunal held that whether the date is taken as 31.03.2018 (original loan default) or 31.03.2021 (second restructuring schedule), the date of default was outside the Section 10A exclusion period and did not preclude filing under Section 7. [Paras 58]

The date(s) of default relied upon by the parties fall outside the Section 10A suspension period; Section 10A did not bar the Section 7 filing in this case.

Part-payment and unilateral revival/novation of restructuring - Whether the payment of Rs. 50 Crores by the corporate debtor and its accompanying caveat operated as an automatic revival or novation of the restructuring approvals. - HELD THAT: - The Tribunal rejected the contention that unilateral conditions or a part-payment by the borrower can revive or novate a restructuring approval that had failed due to non-fulfilment of conditions precedent. Payments made in response to demand letters do not operate to automatically reinstate or create a binding restructuring agreement where the lenders had already rejected the proposal or where pre-implementation conditions remained unmet. The Tribunal also noted that the corporate debtor itself had treated the second restructuring proposal as the operative instrument in earlier proceedings, undermining the plea that the first restructuring alone survived. [Paras 60, 61, 62, 63]

The Rs. 50 Crore payment and the debtor's caveat did not effect an automatic revival or novation of the restructuring approvals; part-payment did not convert the failed restructuring into a binding agreement.

Debt and default threshold under Section 7 - no requirement to recall loan before initiating CIRP - Adjudicating Authority's power to examine documents bearing on Section 7 - Whether the corporate debtor's asserted financial viability or the absence of loan recall affected the maintainability of the Section 7 application, and whether the Adjudicating Authority exceeded its jurisdiction in examining implementation of restructuring approvals. - HELD THAT: - The Tribunal observed that the Code requires the Adjudicating Authority to determine existence of debt and default; there is no statutory requirement to recall the loan before initiating CIRP under Section 7. The debtor's assertions regarding operational viability and receipts from the TRA did not negate the large outstanding dues recorded by the financial creditors. The Adjudicating Authority was entitled to examine documents and facts relevant to the Section 7 petition, including whether restructuring approvals had been implemented; such examination did not transgress its jurisdiction. Given the admitted failures to meet payment and pre-implementation obligations and the magnitude of dues, the debtor's claims of viability did not undermine the Adjudicating Authority's admission of the Section 7 application. [Paras 64, 65, 66]

No legal bar to initiation of CIRP for want of loan recall; the Adjudicating Authority properly examined relevant documents; asserted financial viability did not preclude admission of the Section 7 petition.

Final Conclusion: The appeal was dismissed. The Tribunal held that the restructuring approvals did not become binding due to unmet pre-implementation conditions, the relevant date(s) of default lay outside the Section 10A suspension period, part-payment did not effect revival or novation of restructuring, there is no requirement to recall the loan before invoking Section 7, and the Adjudicating Authority rightly examined the matters material to debt and default; the admission of the Section 7 petition was sustained.

Substantial question of law - extended period of limitation - imposition of penalty - admission stage versus merits - right to have substantial questions framed and decided on merits

Substantial question of law - extended period of limitation - admission stage versus merits - High Court ought not to have declined to raise and frame the substantial question of law on the extended period of limitation at the admission stage and should consider it on merits. - HELD THAT: - The Supreme Court held that when appeals are admitted and the main appeals are pending adjudication, the High Court should not, at the admission stage, go into merits and decline to frame a substantial question of law relating to the extended period of limitation. The Court observed that framing and answering such questions at the final adjudication would cause no prejudice and that denial of the right to raise the question at admission may prejudice the appellant since substantial questions can bear on each other and on the conduct of the appeal. Consequently, the portion of the High Court's order which refused to raise the substantial question of law on the extended period of limitation was set aside and the High Court was directed to raise and decide that question on merits. [Paras 8, 9, 10]

Portion of the High Court's order declining to raise the substantial question of law on extended limitation is set aside; the High Court is to raise and decide that question on merits.

Substantial question of law - imposition of penalty - admission stage versus merits - High Court ought not to have declined to raise and frame the substantial question of law on imposition of penalty at the admission stage and should consider it on merits. - HELD THAT: - The Supreme Court held that the High Court erred in declining, at the admission stage, to permit the appellant to raise a substantial question of law relating to the imposition of penalty. The Court emphasized that such questions should be framed when appeals are admitted and thereafter answered on merits at final adjudication, since premature exclusion at admission may prejudice the appellant and affect the hearing on merits. Accordingly, the order portion refusing to raise the penalty-related substantial question was set aside and the High Court was directed to hear the parties, frame the question and decide it on merits. [Paras 8, 9, 10]

Portion of the High Court's order declining to raise the substantial question of law on imposition of penalty is set aside; the High Court is to raise and decide that question on merits.

Final Conclusion: The appeals are disposed of by setting aside the parts of the High Court order that refused to permit raising of the substantial questions of law on extended limitation and on imposition of penalty; the High Court is directed to frame those substantial questions and decide them on merits in accordance with law, the Supreme Court expressing no opinion on the merits.

Sabka Viswas (Legacy Dispute Resolution) Scheme - relief under Section 124(1)(a)(ii) - deduction under Section 124(2) - categorisation as 'arrears of tax' versus 'litigation' - calculation of payable amount under SVLDRS - interest for delayed payment

Relief under Section 124(1)(a)(ii) - Sabka Viswas (Legacy Dispute Resolution) Scheme - Application of the SVLDRS relief provisions to the petitioner's dispute and the correct percentage of relief applicable. - HELD THAT: - The court held that the petitioner's tax dues related to a show cause notice and pending appeal, and therefore the petitioner fell within the category contemplated by Section 124(1)(a)(ii) of the Scheme. Where the amount of duty exceeds fifty lakhs and an appeal arising out of the notice was pending as on 30.06.2019, relief must be calculated at fifty percent of the tax dues. The Designated Committee's computation applying lesser relief percentages was incorrect and contrary to the Scheme's mandate. [Paras 18, 19, 22]

Relief under Section 124(1)(a)(ii) at fifty percent of the tax dues applies to the petitioner's case.

Deduction under Section 124(2) - categorisation as 'arrears of tax' versus 'litigation' - Whether amounts already deposited/pre-deposited must be deducted in computing the amount payable under the Scheme, and whether the Designated Committee could re-categorise the case as 'arrears' when an appeal was pending. - HELD THAT: - The court recorded that the petitioner had pre-deposited amounts during investigation and proceedings, which under Section 124(2) of the Scheme ought to have been deducted from the relief-calculated liability. The impugned communication re-categorised the petitioner's case from 'litigation' to 'arrears of tax' despite a statutory appeal having been filed before the appellate tribunal within limitation. That re-categorisation was held to be impermissible and incorrect, and the Designated Committee failed to give effect to the deduction mandated by Section 124(2). [Paras 10, 15, 16, 17, 21]

Amount pre-deposited by the petitioner must be deducted under Section 124(2); re-categorisation to 'arrears of tax' was incorrect and the petitioner should be treated under the 'litigation' category.

Calculation of payable amount under SVLDRS - interest for delayed payment - Correct quantification of the amount payable under the Scheme and consequences for payment. - HELD THAT: - Applying fifty percent relief to the confirmed tax dues and then deducting the pre-deposited amounts, the court computed the amount payable by the petitioner as Rs. 22,17,857/-. The impugned Form SVLDRS-3, which arrived at a different figure (Rs. 13,73,036/-), was set aside as resulting from negligent calculation and failure to apply the Scheme correctly. The court directed issuance of a fresh SVLDRS-3 reflecting the correct quantified amount and ordered payment with interest at 12% per annum from 28.05.2020 within thirty days, after which the declaration would be accepted and the case settled. [Paras 19, 22, 23, 24, 25]

Impugned SVLDRS-3 set aside; respondents directed to issue SVLDRS-3 quantifying payable amount as Rs. 22,17,857/-, payable with 12% p.a. interest from 28.05.2020 within thirty days, upon compliance the declaration to be accepted and case settled.

Final Conclusion: The impugned Form SVLDRS-3 dated 28.04.2020 is set aside. The petitioner is entitled to relief under Section 124(1)(a)(ii) of the Scheme with pre-deposits deducted under Section 124(2), resulting in a payable amount of Rs. 22,17,857/-, which the petitioner shall pay with interest at 12% p.a. from 28.05.2020 within thirty days; upon such payment the declaration will be accepted and the dispute settled.

Extended period of limitation - Suppression or willful misstatement - Regular departmental audit and knowledge - Liability of subcontractor where main contractor pays tax - Reckoning of tax payment by service recipient as payment by service provider

Liability of subcontractor where main contractor pays tax - Reckoning of tax payment by service recipient as payment by service provider - Whether the Appellant was required to pay service tax on values for which main contractors had discharged tax on their behalf - HELD THAT: - The Tribunal recorded that this question had been the subject of divergent judicial pronouncements and outlined decisions both accepting payment by the main contractor as discharge of the subcontractor's liability and decisions holding the subcontractor liable even if the main contractor had discharged the tax. The Bench observed that the controversy involved interpretation of law and that mala fide suppression could not be attributed to the Appellant on the material on record. However, because the Tribunal set aside the impugned order on limitation grounds, it expressly did not examine or decide the merits of this liability issue. [Paras 11, 12, 13, 17]

Not adjudicated on merits; merits left undetermined because the impugned order was set aside on limitation grounds.

Extended period of limitation - Regular departmental audit and knowledge - Suppression or willful misstatement - Whether the demand was barred by limitation and whether the extended period could be invoked - HELD THAT: - The Tribunal found that the Appellant had regularly filed ST-3 returns and that the Department had conducted regular audits with which the Appellant had complied. The Adjudicating Authority had not recorded any finding of suppression or willful misstatement warranting invocation of the extended period. The Tribunal relied on Supreme Court guidance that extended limitation is not invokable absent willful misstatement, suppression, collusion or fraud, and on Tribunal precedents holding that repeated departmental audits negate a finding of suppression. In the absence of any new corroborative evidence or findings of suppression, the invocation of the extended period was held to be unsustainable. [Paras 14, 15, 16, 17]

Extended period of limitation not invokable; impugned order upholding extended period set aside.

Final Conclusion: The impugned demand was quashed on limitation grounds because extended limitation could not be invoked in the absence of suppression or willful misstatement and given regular departmental audits; the Tribunal did not decide the substantive question of subcontractor's liability where the main contractor had paid tax. The appeal is allowed with consequential relief.

Refund time-bar - limitation period for refund under export-related notification - interpretation of refund notifications for services used in export of goods - non-availability of alternative cenvat credit when refund is time-barred

Refund time-bar - limitation period for refund under export-related notification - Refund claim filed beyond the one-year period prescribed in the notification is barred by limitation and liable to be rejected. - HELD THAT: - The appellant filed a claim for refund of service tax paid on specified services used for export of goods after the one-year period prescribed by the notification. The Original Authority and the Commissioner (Appeals) rejected the claim on the ground of limitation. The Tribunal found on perusal of the notifications relied upon that the claim must be filed within one year from the date of export and that, on the admitted facts, the refund application was time barred. The decisions cited by the appellant were held not to be directly relevant to, or applicable for, displacing the clear statutory time bar under the notification. [Paras 6]

Appeal dismissed insofar as the refund claim is concerned; refund rejected as time barred.

Non-availability of alternative cenvat credit when refund is time-barred - interpretation of refund notifications for services used in export of goods - Prayer to allow cenvat credit as alternative relief when refund is time barred is not permissible under the notification and is rejected. - HELD THAT: - Counsel sought, in the alternative, permission to take cenvat credit of input services where the refund claim was time barred. The Tribunal held that allowing cenvat credit at this stage would amount to granting a rebate or relief not provided by the notification. Consequently, the alternative plea for cenvat credit could not be entertained and was refused. [Paras 6]

Alternative plea for grant of cenvat credit rejected; no relief granted in lieu of the barred refund.

Final Conclusion: The appeal is dismissed: the refund claim was filed beyond the one year period prescribed by the notification and is time barred, and the alternative request to permit cenvat credit is not permissible under the notification and is refused.

Interference with concurrent findings - Delay and long pendency as ground for refusal to interfere - Reservation of question of law for future consideration - Dismissal of Special Leave Petition

Interference with concurrent findings - Delay and long pendency as ground for refusal to interfere - Dismissal of Special Leave Petition - Whether the Court should interfere with the High Court's judgment upholding the CESTAT order in respect of a show cause notice relating to the year 2011 - HELD THAT: - The Court declined to interfere with the impugned judgment and order of the High Court which had upheld the decision of the CESTAT, taking into account the long pendency of the matter - the show cause notice pertains to the year 2011. The Court therefore exercised restraint from reversing concurrent findings on the facts in the circumstances of prolonged delay, while expressly leaving open the substantive question of law for consideration in another case.

Special Leave Petition dismissed; pending applications, if any, disposed of.

Final Conclusion: The Special Leave Petition was dismissed on the ground of long pendency of the matter concerning a 2011 show cause notice; the Court did not rule on the substantive question of law, which is left open for consideration in another case.

Manufacture - by-product versus waste - excisability of incidental residues arising during manufacture - exemption under Notification No. 89/95-C.E. - interpretation of chapter notes in classification of refined vegetable oils

Manufacture - excisability of incidental residues arising during manufacture - Soap Stock arising during refining of groundnut edible oil is not a manufactured excisable good. - HELD THAT: - The Tribunal applied the settled ratio of the Apex Court and the Larger Bench of the Tribunal that the mere fact that a residue or scum fetches a market value does not render it a product of manufacture. Manufacture requires a transformation resulting in a new and different article with distinctive name, character or use; mere removal of unwanted material in the process of producing the intended final product (refined edible oil) does not constitute a process of manufacture of the incidental residues. The Larger Bench in M/s Ricela Health Foods Ltd. held that gums, waxes and fatty acid distillates are waste arising from refining and not manufactured goods; that ratio, and the authorities cited therein, were applied to conclude that soap stock is incidental waste and therefore not exigible to central excise duty.

Soap Stock is not a manufactured excisable good and therefore not exigible to central excise duty.

By-product versus waste - exemption under Notification No. 89/95-C.E. - interpretation of chapter notes in classification of refined vegetable oils - Incidental residues such as Soap Stock constitute waste and fall within the exemption afforded by Notification No. 89/95-C.E. - HELD THAT: - The Tribunal followed the Larger Bench conclusion that the characterisation of incidental products as waste is not negated by their saleability. Applying the principles in Indian Aluminium and subsequent authorities, the removal of unwanted constituents during refining produces waste which cannot be treated as by-products manufactured for that purpose. Consequently, such incidental residues are covered by the exemption under Notification No. 89/95-C.E. and the Commissioner's finding of intent to evade duty (based on absence of registration/clarification) does not alter that legal characterisation.

Soap Stock, being incidental waste arising in refining, is covered by the exemption under Notification No. 89/95-C.E.

Final Conclusion: Appeals allowed; impugned order confirming duty, interest and penalties in respect of Soap Stock for the period April 2006 to February 2015 set aside on the ground that such residues are incidental waste and exempt under Notification No. 89/95-C.E.

Limitation period for availing Cenvat credit - prospective operation of statutory amendment - eligibility of input service for Cenvat credit - location of service received vis-a -vis factory premises - invoice address and entitlement to Cenvat credit under Rule 9(1) CCR

Limitation period for availing Cenvat credit - prospective operation of statutory amendment - Limitation of six months in the 3rd proviso to Rule 4 of the Cenvat Credit Rules, 2004 (as inserted w.e.f. 18.09.2014) is not applicable to duty paying documents/invoices issued prior to 18.09.2014. - HELD THAT: - The Tribunal held that the amendment prescribing a time limit for claiming Cenvat credit cannot be given retrospective effect to documents issued before the date of amendment. Relying on earlier decisions of this Tribunal and High Courts, the court explained that the right to credit accrues on receipt/payment and an amendment introducing a new limitation operates prospectively; hence invoices issued prior to 18.09.2014 are not caught by the six month/one year limitation. The original authority was directed to verify that the invoices were indeed prior to the amendment date, but on the facts of the present case the invoices are not disputed to be prior to 18.09.2014 and the credit therefore could not have been disallowed on the basis of the proviso. [Paras 5]

Credit availed in respect of invoices issued prior to 18.09.2014 is admissible; the limitation proviso does not apply to those invoices.

Eligibility of input service for Cenvat credit - location of service received vis-a -vis factory premises - Cenvat credit for renting of immovable property (warehouse) situated outside the factory is admissible where the service is used in or in relation to manufacture of final products. - HELD THAT: - The Tribunal applied the broad definition of 'input service' and the established authorities which hold that Rule 3 and Rule 4 permit credit for input services received by the manufacturer irrespective of the physical location where the service is provided. Services used directly or indirectly 'in or in relation to' manufacture or the assessee's business are eligible; mere fact that the warehouse is outside factory premises does not disentitle the assessee from credit if the warehouse is used for storage of raw materials and is connected with manufacture. Earlier Tribunal and High Court decisions on analogous facts were followed to allow the credit. [Paras 6]

Cenvat credit for renting the warehouse outside the factory is admissible as the service is in relation to manufacture.

Invoice address and entitlement to Cenvat credit under Rule 9(1) CCR - Cenvat credit cannot be denied merely because the invoice bears the head office address rather than the factory/receiving unit address, provided the input service was received and accounted for by the claimant. - HELD THAT: - The Tribunal noted there was no dispute that the service was received by the appellant at their factory and no finding that the credit had been taken for another unit. Precedents were relied upon holding that absence of the recipient unit's address in the invoice is not a ground to deny otherwise eligible credit where Rule 4A/Rule 9 particulars are satisfied or the adjudicating officer is satisfied goods/services were received and accounted for. Registration of the premises is not a statutory precondition for entitlement to Cenvat credit. [Paras 7]

Credit cannot be refused solely because invoices bear the head office address; credit is admissible where services were received and accounted for by the appellant.

Final Conclusion: All three contested points were decided in favour of the appellant: (i) the six month limitation (3rd proviso to Rule 4 CCR) does not apply to invoices issued prior to 18.09.2014; (ii) credit for renting a warehouse outside the factory is allowable if the service is in relation to manufacture; and (iii) an invoice bearing the head office address alone does not disentitle the claimant to Cenvat credit where the service was received and accounted for. The impugned order is set aside and the appeal is allowed.