TaxTMI Updates e-Newsletter
Feb 06,2024

Liability for penalty of purchaser where supplier is alleged to be a dummy or involved in circulation of bogus input tax credit - detention and release of goods and conveyance seized under GST investigations - effect of subsequent tax payment by supplier on allegation of intention to evade tax - relevance of issuance of registration by competent authority to purchaser's liability - show cause notice in respect of movement of goods under allegedly invalid documents - use of administrative SOP on GST frauds involving fake invoices as evidentiary or cautionary material - movement of goods under invalid documents contrary to statutory provisions

Liability for penalty of purchaser where supplier is alleged to be a dummy or involved in circulation of bogus input tax credit - effect of subsequent tax payment by supplier on allegation of intention to evade tax - relevance of issuance of registration by competent authority to purchaser's liability - detention and release of goods and conveyance seized under GST investigations - Whether the petitioner (purchaser) can be held liable to pay the penalty and have the vehicle and goods detained where the allegations of fictitious/bogus ITC and non existence relate to the supplier, and the supplier subsequently paid the tax and was registered by the competent authority. - HELD THAT: - The Court found that the allegations of non existence of the supplier and consequent non deposit of input tax credit had, by the time the show cause notice was issued, been met by the supplier's payment of input tax on 30.12.2023 (para 13). On that factual basis the Court held that even if there had been an initial intention to evade tax on the part of the supplier, such intention lost its force once the tax was paid (para 14). The Court further observed that the supplier had been issued registration by the registering authority in Assam and, absent any contemporaneous deficiency demonstrably invalidating that registration, the mere fact that documents were later regarded as dubious did not automatically render the purchaser liable for penalties (para 15). Applying these findings, and having regard to the absence of any allegation of tax evasion against the petitioner himself, the Court concluded that it was improper to direct payment of penalty by the petitioner and to continue detention of the vehicle and goods (paras 15-16). The Court therefore set aside the detention order and the subsequent order imposing penalty and directed immediate release of the vehicle and goods within a specified short timeframe (para 17). [Paras 13, 14, 15, 16, 17]

Detention order and order imposing penalty set aside and quashed; respondent directed to release the vehicle and goods in favour of the petitioner within 48 hours upon production of the server copy of the order.

Final Conclusion: Writ petition allowed: the Court set aside and quashed the detention order and the order imposing penalty against the petitioner, directing immediate release of the vehicle and goods within 48 hours.

Cancellation of GST registration - Validity of show-cause notice - Requirement of reasons in administrative orders - Digital signature and authentication of electronic orders - Authority of officer to pass GST orders - Judicial direction for administrative compliance

Cancellation of GST registration - Validity of show-cause notice - Requirement of reasons in administrative orders - Procedural and substantive infirmities in the show-cause notice and cancellation order were noted and directed to be examined by the issuing authority. - HELD THAT: - The Court observed that the show-cause notice alleged failure to pay tax/interest/penalty but the cancellation order requires payment of zero tax, interest or penalty, undermining the foundational premise of the notice. The notice also failed to specify the name or designation of the officer before whom the petitioner was to appear. The impugned order was found to lack reasoned explanation for retrospective cancellation effective from 01.07.2017. Rather than adjudicating the merits, the Court recorded these infirmities and issued directions for the respondents to address and rectify procedural defects and to take instructions in the matter. The observations indicate that the correctness of the cancellation on merits was not finally determined by this order and requires fresh consideration by the competent authority in light of the procedural defects noted. [Paras 3, 4, 7]

Matter remanded for fresh consideration of the validity of the show-cause notice and the exercise of cancellation power, in view of the noted procedural and substantive infirmities.

Digital signature and authentication of electronic orders - Authority of officer to pass GST orders - Judicial direction for administrative compliance - Authenticity of the authorising officer and the digital signature process was directed to be examined by the respondents and relevant officers to be made available for hearing. - HELD THAT: - The Court noticed recurring instances where orders and notices bear the digital signature legend 'DS Goods and Services Tax Network 07' and noted prior judicial concern in other High Courts about similar systemic infirmities. The petitioner pointed out that the named officer on the order was not the authorised officer and that the order did not bear his physical or digital signature. In view of these systemic concerns and absence of remedial steps, the Court directed that the Principal Commissioner/Special Commissioner, and the Director of 'DS Goods and Services Limited' be connected by video conference to explain the electronic signing/authentication process and to 'set their house in order'. The Court therefore required respondents to take instructions and appear on the next date. [Paras 5, 7, 8, 9]

Respondents directed to appear with appropriate officers (including the Director of the digital-signature service provider) to explain and rectify authentication/authority issues in issuance of notices and orders.

Final Conclusion: Exemption application allowed. Court issued notice and directed respondents to take instructions and to appear (via video conference) including the Principal Commissioner/Special Commissioner and the Director of the digital-signature service provider, for fresh consideration of the procedural infirmities and authentication issues in the impugned cancellation; the merits of cancellation were not finally decided.

Extension of limitation by executive notification - condonation of delay in statutory appeal - maintainability of delayed appeal subject to payment conditions - restoration of appeal on compliance with notification conditions - requirement of payment from Electronic Cash Ledger as condition precedent

Extension of limitation by executive notification - condonation of delay in statutory appeal - Notification No.53/2023 (Central Tax) dated 02.11.2023 extends the period for filing appeals against orders passed on or before 31.03.2023 and thereby permits acceptance of appeals filed beyond the statutory period prescribed under Section 107 of the BGST Act, subject to compliance with the notification. - HELD THAT: - The Court reiterated the settled principle that neither the Appellate Authority nor the High Court can condone delay beyond the period expressly provided in statute. The Central Board's Notification No.53/2023, however, lawfully extends the time for filing appeals against orders passed on or before 31.03.2023 by prescribing a special procedure and a new outer date of filing (on or before 31.01.2024). Consequently, appeals pending or filed beyond the statutory period may be treated as properly filed if they comply with the conditions laid down in the notification. The notification therefore operates as an executive extension of limitation for the specified class of orders, subject to its own prerequisites. [Paras 2, 3, 5]

Notification No.53/2023 validly extends the filing period for appeals in respect of orders passed on or before 31.03.2023 and enables acceptance of delayed appeals only in accordance with the notification's procedure.

Maintainability of delayed appeal subject to payment conditions - requirement of payment from Electronic Cash Ledger as condition precedent - restoration of appeal on compliance with notification conditions - An appeal dismissed as time-barred is to be restored and processed on merits if the appellant satisfies the payment conditions prescribed in paragraph 3 of the Notification (payment of admitted amounts and specified percentage debited from Electronic Cash Ledger) on or before the date stipulated in the Notification; failure to comply will result in restoration of the impugned order. - HELD THAT: - Paragraphs 2 to 6 of the Notification set out a conditional scheme: an appeal must be filed on or before 31.01.2024 and no appeal shall be filed under the notification unless the appellant pays in full the amounts admitted (tax, interest, fine, fee and penalty) and a sum equal to 12.5% of the remaining disputed tax (subject to the stated cap), of which at least 20% must be paid by debit to the Electronic Cash Ledger. Additional conditions (paras 4-6) govern refunds, non-admissibility in respect of non-tax demands, and applicability of procedural rules. Applying this scheme, the Court held that the impugned order dated 18.05.2023 must be set aside and the appeal restored to the file of the Appellate Authority on the condition that the petitioner makes good the deficient payments required by paragraph 3 before 31.01.2024; if the conditions are not met, the impugned order will stand restored. [Paras 6, 7, 8, 9, 10]

The writ petition is allowed by setting aside the impugned order and directing restoration of the appeal subject to compliance with the Notification's payment and procedural conditions by 31.01.2024; non-compliance will result in restoration of the impugned order.

Final Conclusion: Writ petition allowed: the impugned order dated 18.05.2023 is set aside and the appeal shall be restored and considered on merits if the petitioner satisfies the payment and procedural conditions of Notification No.53/2023 on or before 31.01.2024; failure to comply will restore the impugned order.

Opportunity of hearing - principles of natural justice - Section 75(4) of the CGST/MGST Act - quashing and remand for fresh hearing

Opportunity of hearing - Section 75(4) of the CGST/MGST Act - principles of natural justice - Whether the Audit/Adjudication Order dated 8th September 2022 was passed in violation of Section 75(4) and the principles of natural justice for lack of personal hearing - HELD THAT: - Section 75(4) requires that an opportunity of hearing be granted either upon a written request by the person chargeable or where any adverse decision is contemplated. The Court held that this statutory requirement is mandatory and that even in absence of a specific request by the taxpayer, the Department must afford a personal hearing before passing an order adverse to the taxpayer. The impugned Order dated 8th September 2022 imposed tax, interest and penalty after recording adverse findings but was passed without granting any personal hearing to the petitioner. That omission was held to be ex facie contrary to Section 75(4) and a violation of the principles of natural justice, warranting interference. [Paras 16, 17, 18]

The Order dated 8th September 2022 was passed in violation of Section 75(4) and the principles of natural justice.

Quashing and remand for fresh hearing - Remedial direction in consequence of the violation - whether the impugned order should be quashed and the matter remanded for hearing and fresh decision - HELD THAT: - Because the order was passed without affording the mandatory personal hearing, the Court quashed the impugned Order. The matter was remanded to Respondent No. 3 with a direction to grant the petitioner a personal hearing, consider all contentions and documents afresh, and pass an appropriate order in accordance with law. The Court specified a temporal limit for compliance with the remand direction. [Paras 20]

Impugned Order quashed; matter remitted for personal hearing and fresh decision within four weeks after hearing.

Final Conclusion: The writ petition is allowed: the Order dated 8th September 2022 is quashed; Respondent No. 3 is directed to grant the petitioner a personal hearing and thereafter, after considering all submissions, pass an appropriate order in accordance with law within four weeks of the hearing; no order as to costs.

Zero rated supply - IGST refund - Higher duty drawback vs IGST refund - Adjustment of drawback - Section 16 of the IGST Act - Refund procedure and interest

Zero rated supply - IGST refund - Higher duty drawback vs IGST refund - Adjustment of drawback - Refund of IGST paid on exports which are zero rated supplies where higher duty drawback has been availed - HELD THAT: - The Court accepted the petitioner's statement that he is willing to have the higher duty drawback adjusted as a condition for sanction of the IGST refund. Relying on the reasoning in the coordinate Bench decision in Sunlight Cable Industries and the jurisprudence referred to therein, the Court treated the core question as one of reconciliation between the claim for IGST refund on zero rated supplies and the fact that a higher drawback was sanctioned. Instead of denying relief outright, the Court directed that the respondents accept the petitioner's offer to adjust the higher duty drawback and thereafter compute and refund the balance IGST payable on the zero rated exports. The Court recorded that the departments (Customs and IGST authority), though different establishments, must give effect to the adjustment and refund in the particular factual matrix of this case where the petitioner has offered adjustment.

Respondents to accept the petitioner's offer to adjust the higher duty drawback and, after adjustment and appropriate calculation, refund the balance IGST within six weeks from service of this order.

Refund procedure and interest - IGST refund - Whether interest is to be considered on the amounts of higher drawback and IGST refund - HELD THAT: - The Court left open the precise quantification of the refund but recorded that payment of appropriate interest in respect of both the amounts of higher duty drawback and the IGST refund is a matter to be considered by the designated authority in accordance with the applicable rule. The Court therefore directed the designated authority to take payment of interest into consideration when giving effect to the adjustment and refund.

Designated authority to consider payment of appropriate interest as per the governing rule while completing the adjustment and refund exercise.

Final Conclusion: Petition disposed by directing respondents to accept the petitioner's offer to adjust the higher duty drawback and thereafter calculate and refund the balance IGST on the zero rated exports, with the designated authority to complete the exercise within six weeks and to consider payment of interest as per rule.

Suppression (Explanation 2 to Section 74) - fraud or willful misstatement as grounds for extended limitation - self-assessment and duty to declare - writ against show-cause notice and forum competence - entertainability of writ petitions challenging show-cause notices

Suppression (Explanation 2 to Section 74) - fraud or willful misstatement as grounds for extended limitation - Validity of the show-cause notice issued under Section 74 insofar as it was alleged to lack particulars of 'suppression'. - HELD THAT: - The Court examined the show-cause notice and recorded that it sets out specific grounds and particulars (including reasons in paras 5, 7, 8 & 9 and the conclusion in para 9) for demanding transitional credit. Under Explanation 2, 'suppression' denotes non-declaration of facts required in returns or failure to furnish requested information; whether the facts constitute suppression is a question of fact for the authority to decide after considering the reply. Use or non-use of the word 'suppression' in the notice is not conclusive. The notice also invokes alternative grounds such as fraud or willful misstatement which are independently relevant under Section 74. Consequently, the content of the notice is sufficient to disclose reasons for its issuance and the question of suppression cannot be finally determined in writ jurisdiction at this stage. [Paras 11, 12, 21]

The show-cause notice cannot be struck down at the threshold for want of particulars of 'suppression'; the question is for the adjudicating authority to decide.

Writ against show-cause notice and forum competence - entertainability of writ petitions challenging show-cause notices - Whether the writ petition under Article 226 attacking the show-cause notice is maintainable at this stage. - HELD THAT: - Relying on established precedents and earlier coordinates (paras 26-30 reproduced), the Court reiterated that writ petitions ordinarily should not be entertained against mere issuance of show-cause notices, particularly where the statutory code permits the authority to investigate and adjudicate. High Courts should intervene only where the notice is wholly non est or the issuing authority lacks jurisdiction. The petitioner must first reply to the notice and exhaust available statutory remedies; interim relief should not usurp the authority's power of initial decision. [Paras 22, 23, 24]

The writ petition is not maintainable against the show-cause notice and is dismissed, leaving the petitioner free to reply and raise objections before the competent authority.

Fraud or willful misstatement as grounds for extended limitation - self-assessment and duty to declare - Whether the impugned notice is barred by limitation and whether issuance under Section 74 was a device to overcome limitation under Section 73. - HELD THAT: - The petition alleged limitation; however, on the material and admissions before the Court the learned senior counsel conceded that the notice was within the three-year limitation even if characterized under Section 73. The Court observed that because the limitation under Section 73 had not expired when the notice was issued, the question of invoking extended limitation under Section 74 does not arise in the present facts. The mere labelling of the notice under Section 74 does not render it invalid if its contents sustain proceedings and the notice is within limitation when tested under the appropriate provision. [Paras 13, 14, 15, 18]

The notice is not barred by limitation on the facts before the Court; issuing the notice under Section 74 does not vitiate it where limitation under Section 73 was not expired.

Final Conclusion: Writ petition dismissed; petitioner directed to file reply and raise all available objections before the authority, with liberty to seek appropriate remedies thereafter; no costs.

Reversal of input tax credit and recovery from recipient - availability of input tax credit where supplier fails to pay IGST - requirement to proceed against supplier before buyer except in exceptional cases - CBIC press release on recovery from recipient - adjudication after opportunity to produce documents and clarify admissions

Reversal of input tax credit and recovery from recipient - availability of input tax credit where supplier fails to pay IGST - requirement to proceed against supplier before buyer except in exceptional cases - CBIC press release on recovery from recipient - adjudication after opportunity to produce documents and clarify admissions - Validity of the order directing refund of input tax credit with interest where supplier filed nil returns and whether the authority was obliged to proceed against the supplier before reversing the purchaser's input tax credit - HELD THAT: - The court found that the authority reversed input tax credit and demanded payment with interest for the period 2017-18 on the basis that the supplier had filed nil returns. Reliance was placed on the Division Bench decision in Suncraft Energy and the CBIC press release, which establish that ordinarily the assessing authority must proceed against the supplier before saddling the buyer with reversal of input tax credit, and the buyer should be proceeded against only in exceptional circumstances (such as supplier being missing or having no assets). The impugned order proceeded on the assumption that no explanation was offered by the petitioners and did not record any acceptance of liability; documents and contentions now relied upon by the petitioners were not placed before the authority. In view of these facts and the settled principle requiring action against the supplier first, the court set aside the order and directed fresh adjudication. The authority must afford the petitioners an opportunity to file their reply and documents, consider whether any admission to pay was made (including the online communication seeking reduction of interest), and decide the matter in accordance with law, including whether exceptional circumstances justify recovery from the buyer. [Paras 9, 10, 11, 13, 16]

Impugned order dated August 21, 2023 is set aside and the matter is remanded for fresh adjudication after allowing the petitioners to file documents and be heard; authority to consider proceeding against the supplier first and whether any exceptional circumstances or admissions exist.

Final Conclusion: Writ petition disposed by setting aside the impugned order dated August 21, 2023 and remanding the matter for fresh adjudication after giving the petitioners an opportunity to place documents and be heard; no order as to costs.

Repeat bail application - consideration of fresh circumstances - non-prejudicial treatment of earlier rejection - bail under Section 439 Cr.P.C.

Repeat bail application - consideration of fresh circumstances - non-prejudicial treatment of earlier rejection - Liberty granted to withdraw the present bail petition and to permit the petitioner to move the trial court with a repeat bail application based on newly disclosed circumstances - HELD THAT: - The Court permitted withdrawal of the present petition filed under Section 439 Cr.P.C. on the basis that the petitioner has discovered a fresh circumstance - namely, the filing of a charge-sheet indicating a reduction in the claimed default - which he wishes to place before the trial court. The Court directed that the Learned Trial Judge, when considering any repeat bail application, shall examine the new circumstance in accordance with law and shall not be influenced by the earlier order refusing bail. The order confines itself to granting liberty to approach the trial court and does not decide the merits of any bail application on record. [Paras 2, 3]

Present MCRC disposed of with liberty to withdraw and to move the trial court; trial court to consider any repeat bail application on fresh circumstances without being influenced by earlier rejection.

Final Conclusion: The petition is disposed of: liberty granted to withdraw the bail petition and to approach the Learned Trial Judge with a repeat bail application based on newly discovered circumstances, which the trial court shall consider on merits uninfluenced by the earlier order.

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

Entertainment of writ in absence of statutory appellate forum - non-constitution of Second Appellate Tribunal - interim stay of tax demand subject to deposit - Petition entertained as second appellate forum not yet constituted and interim protection granted on specified terms. - HELD THAT: - The Court proceeded to entertain the writ petition because the Second Appellate Tribunal has not been constituted, removing the availability of the statutory appellate forum and justifying exercise of writ jurisdiction. The petitioner challenged non-admission of its first appeal and sought relief in view of absence of a second appellate authority. As an interim measure and without deciding the merits of the departmental contentions (including delay and liability), the Court directed that if the petitioner deposits the entire tax demand within four weeks, the balance of the demand (i.e., other than the deposited amount) shall remain stayed during the pendency of the writ petition. The order is interlocutory and conditional; it preserves the department's right to contest merits while providing temporary protection subject to the specified deposit condition. [Paras 2, 8]

Writ entertained because no Second Appellate Tribunal exists; interim stay granted on condition that the petitioner deposits the entire tax demand within four weeks, the remaining demand to be stayed during pendency of the petition.

Final Conclusion: In view of the non-constitution of the Second Appellate Tribunal the High Court entertained the writ petition and granted conditional interim protection: on deposit of the entire tax demand within four weeks the remaining demand shall be stayed while the petition is pending.

Interim stay of tax demand - constitution of second appellate tribunal - deposit as condition for grant of interim relief - availability of writ jurisdiction when statutory appellate forum is not constituted - condonation of delay in preferring statutory appeal

Interim stay of tax demand - constitution of second appellate tribunal - deposit as condition for grant of interim relief - Grant of interim protection against recovery of the tax demand pending the writ petition in view of non-constitution of the second appellate tribunal, and the conditions for such protection. - HELD THAT: - The Court entertained the writ petition because the second appellate tribunal, which would otherwise be the statutory remedy, has not yet been constituted (paras 2, 3). Noting that the petitioner seeks to avail the remedy before that tribunal and that an efficacious appellate forum is absent, the Court granted an interim measure to preserve the petitioner's right to challenge the demand. The interim protection was made conditional: the petitioner was directed to deposit the entire tax demand within fifteen days from the date of the order; upon such deposit, the balance of the demand (i.e., recovery other than the deposited amount) shall remain stayed during the pendency of the writ petition (para 8). The Court recorded the Department's contention about delay and the statutory constraints on condonation of delay in appeals, but resolved only the limited interim question by prescribing the deposit condition as the basis for staying enforcement while the petition is pending (paras 4-5, 8). [Paras 2, 3, 8]

Writ petition entertained in view of non-constitution of the second appellate tribunal; interim stay of recovery granted subject to the petitioner depositing the entire tax demand within fifteen days, and on such deposit the remaining demand is stayed during the pendency of the writ petition.

Final Conclusion: In light of the absence of the second appellate tribunal, the High Court entertained the writ petition and granted an interim stay of the tax demand on the condition that the petitioner deposits the entire tax demand within fifteen days; upon such deposit, the remainder of the demand is stayed during the pendency of the petition.

Advance ruling inadmissible on assumed scenarios in absence of contemporaneous documents - Privity of contract determines taxable person and point of supply - Supplier cannot adopt the tax status or exemption of the recipient - Taxability of services supplied to a lead consultant is separate from agreement between client and lead consultant

Advance ruling inadmissible on assumed scenarios in absence of contemporaneous documents - Advance ruling cannot be given on assumed revenue sharing scenarios in the absence of relevant documents. - HELD THAT: - The Authority observed that the applicant sought a ruling on hypothetical revenue sharing scenarios but produced tax invoices showing supplies made by the applicant to the lead consultant. In the absence of documents supporting the assumed factual matrix, the Authority held it could not adjudicate on such assumed scenarios and therefore declined to give an advance ruling on them. [Paras 12]

Advance ruling refused insofar as it seeks determination based on assumed scenarios without production of relevant documents.

Privity of contract determines taxable person and point of supply - Taxability of services supplied to a lead consultant is separate from agreement between client and lead consultant - The applicant supplied services to the lead consultant (GTBL) and there was no privity of contract between the applicant and the municipal client; therefore the applicant's supply is taxable to the applicant and not determined by the client agreement. - HELD THAT: - The Authority examined the agreement between the municipal corporation and the lead consultant and noted that the contract was signed by the lead consultant in association with the applicant but not by the applicant itself, and that invoices issued by the applicant were addressed to the lead consultant. On that factual basis the Authority concluded there was no privity of contract between the applicant and the client, and that the applicant had supplied services to GTBL which are taxable under GST independently of the contract between the client and GTBL. [Paras 10, 11]

The applicant's supplies to the lead consultant are taxable to the applicant; privity with the client is absent and does not make the applicant's supply non taxable.

Supplier cannot adopt the tax status or exemption of the recipient - The applicant cannot adopt the exemption status of the client and the exemption available to the municipal client does not extend to the applicant. - HELD THAT: - Having found that the applicant supplied services to the lead consultant and there was no direct contract with the exempt municipal client, the Authority held that the exemption claimed by the client does not automatically apply to the applicant. The applicant therefore cannot consider GST at the rate applicable to the client, and the exemption is not available to the applicant. [Paras 11, 12, 13]

The applicant cannot apply the client's exemption; GST exemption claimed by the client is not applicable to the applicant.

Final Conclusion: The Authority declined to rule on hypothetical revenue sharing scenarios for want of supporting documents; on the facts before it the applicant supplied services to the lead consultant (no privity with the municipal client) and such supplies are taxable to the applicant; consequently the municipal client's exemption cannot be extended to the applicant.

Composite supply - principal supply - health care services - clinical establishment - tax liability on composite supply - food supplied to in patients as part of composite supply - retention money - training to nursing students and psychologists not covered as health care services

Composite supply - principal supply - health care services - clinical establishment - tax liability on composite supply - Whether medicines, drugs and consumables supplied to in patients in the course of diagnosis and treatment form part of a composite supply with health care services and are eligible for exemption under entry No. 74(a) of Notification No. 12/2017-C.T.(Rate). - HELD THAT: - The authority found that the applicant is a hospital and thus falls within the definition of a clinical establishment providing health care services as defined in the notification (paras 12, 12.1). Applying the statutory definition of composite supply and the rule that tax liability on a composite supply is determined by the principal supply (Section 8 and related definitions reproduced at paras 13), the Authority held that medicines, consumables and room charges supplied in the course of treatment to in patients are naturally bundled with and ancillary to the predominant health care service. Therefore those supplies form components of a composite supply whose principal element is the exempt health care service and are accordingly covered by the exemption subject to the stated condition in the notification (paras 13, 13.1). [Paras 12, 13, 16]

Medicines, drugs and consumables supplied to in patients in the course of diagnosis and treatment are part of a composite supply with health care services and qualify for exemption under entry No. 74(a) of Notification No. 12/2017-C.T.(Rate), subject to the notification's condition.

Food supplied to in patients as part of composite supply - composite supply - health care services - Whether food supplied to in patients is part of the composite supply of health care services and is exempt under entry No. 74(a). - HELD THAT: - Relying on the explanatory notes for SCS 999311 and Circular No. 32/06/2018 GST (reproduced at para 13.2), the Authority observed that inpatient services expressly comprise medical, pharmaceutical and paramedical services and that food supplied to in patients as advised by a doctor/nutritionist is part of the composite health care supply and not separately taxable. Consequently food supplied to admitted patients forms an ancillary component of the composite supply whose principal supply is the exempt health care service (paras 13.1, 13.2). [Paras 13, 16]

Food supplied to in patients as part of treatment is a component of the composite supply of health care services and qualifies for exemption under entry No. 74(a) of Notification No. 12/2017 C.T.(Rate), subject to the notification's condition.

Retention money - health care services - Whether GST is leviable on retention money retained by the hospital from amounts paid by patients and payable to consultants/technicians. - HELD THAT: - The Authority referred to Para 5(2) of Circular No. 32/06/2018 GST which clarifies that the entire amount charged by hospitals from patients, including retention money and fees paid to doctors or technicians, is consideration towards health care services. Since such healthcare services are exempt under the notification, the retained portion is also exempt (para 14). [Paras 14, 16]

GST is not applicable on retention money retained by the hospital; the entire amount charged from patients, including retention, is towards exempt health care services.

Training to nursing students and psychologists not covered as health care services - health care services - Whether fees collected from nurses and psychologists for practical training are exempt as health care services under the notification. - HELD THAT: - The Authority examined the definition of health care services and concluded that such services must be by way of diagnosis, treatment or care for illness, injury, deformity, abnormality or pregnancy. Practical training provided to nursing students and psychologists does not constitute diagnosis or treatment or care for illness and therefore does not fall within the exemption's definition. Consequently the fees charged for practical training are not covered by the exemption (para 15). [Paras 15, 16]

Fees collected from nurses and psychologists for imparting practical training are not exempt under entry No. 74(a) of Notification No. 12/2017 C.T.(Rate).

Final Conclusion: The Authority ruled that (i) supplies of medicines, drugs and consumables to in patients form part of a composite supply with exempt health care services and are exempt subject to the notification's condition; (ii) food supplied to in patients as advised by doctors/nutritionists is likewise a component of the exempt composite health care supply; (iii) retention money retained by the hospital is not liable to GST; and (iv) fees for practical training of nursing students and psychologists are not covered by the health care exemption.

Royalty - tax deduction at source (TDS) under section 195 - income deemed to accrue in India under section 9(1)(vi) - Double Taxation Avoidance Agreement (DTAA) interpretation

HELD THAT:- Having regard to Order passed by this Court in Microsoft Regional Sales PTE Ltd. [2024 (2) TMI 137 - SC ORDER] this special leave petition is also dismissed.

Capitalization of expenditure and claim of depreciation - Burden of proof in income-tax assessments - Reliance on statements recorded under Section 131/132 as starting point only - Requirement of corroborative evidence versus mere suspicion - Precedential effect of co ordinate Bench decisions in interconnected group cases - Effect of a director's personal disclosure on company claims

Capitalization of expenditure and claim of depreciation - Requirement of corroborative evidence versus mere suspicion - Reliance on statements recorded under Section 131/132 as starting point only - Capitalization could not be denied merely on the basis of a statement recorded by a third party without corroborative evidence; suspicion cannot substitute for evidence in assessment. - HELD THAT: - The Tribunal found that the assessee produced documentary material - invoices, ledger extracts, confirmations, bank statements and a valuer's report showing raw material used in construction - and that the Assessing Officer had denied capitalization solely on the basis of a statement recorded from a third party which was neither confronted nor subjected to cross examination. The Tribunal held, and this Court concurs, that such a statement is a permissible starting point for investigation but is not conclusive; the Department was required to pursue further corroboration and take the matter to a logical conclusion. On the facts the AO left the inquiry at the initial stage and relied on suspicion; the Tribunal therefore rightly directed allowance of capitalization and consequent claim for depreciation. [Paras 6, 9]

Tribunal's factual conclusion upholding capitalization and allowing related claims is affirmed; capitalization cannot be denied solely on the uncorroborated statement relied upon by the AO.

Precedential effect of co ordinate Bench decisions in interconnected group cases - Burden of proof in income-tax assessments - The co ordinate Bench decision in ITA No. 4433/Mum/2013 (AY 2008-2009) was considered and applied; its findings negating certain recorded statements in the group cases supported the Tribunal's approach in the present appeal. - HELD THAT: - The Tribunal examined the coordinate Bench's earlier decision concerning the same group and noted that the coordinate Bench had found no evidence during search or subsequent investigation to support the Department's contention and had negated the incriminating statements in that group matter. The Tribunal therefore treated the issues as interconnected and, after examining documentary evidence in the present appeal, allowed the assessee's claims. This Court finds that the Tribunal did consider the coordinate Bench decision and there is no merit in the contention that the Tribunal ignored or perversely contradicted that decision. [Paras 7]

Tribunal's consideration and application of the coordinate Bench decision is upheld; no infirmity in treating the matters as interconnected.

Effect of a director's personal disclosure on company claims - Depreciation disallowance and admissions - Burden of proof in income-tax assessments - A director's statement or personal disclosure that he would not claim a particular amount did not, without more, mandate disallowance of the company's capitalization/depreciation claim where the Department failed to adduce corroborative evidence against the company. - HELD THAT: - The Revenue relied on admissions recorded during search and on the fact that a director had stated he would not claim depreciation on a certain amount. The Tribunal, on factual appraisal, observed that the AO had not pursued further enquiry or obtained corroborative material and had denied capitalization solely on such statements. This Court agrees with the Tribunal that a personal disclosure by a director does not automatically extinguish the company's entitlement where documentary and other evidence produced by the company support capitalization and where the Department did not complete investigative steps to prove the alleged bogus nature of payments. [Paras 5, 6, 9]

Tribunal's conclusion that the company's claim for capitalization/depreciation could not be disallowed merely on the basis of the director's disclosure is affirmed.

Final Conclusion: The appeal is dismissed. The Income Tax Appellate Tribunal's factual findings that capitalization and related depreciation claims were supported by documentary evidence and could not be negatived solely on uncorroborated statements are upheld; there is no substantial question of law requiring interference. No order as to costs.

Allowability of bidding/preliminary expenditure as revenue expenditure under Section 37 - incurred in the course of business - allowability of interest on borrowed funds under Section 36(1)(iii) - measure of commercial expediency and nexus with business - prospective applicability of Rule 8D from AY 2008-2009

Allowability of bidding/preliminary expenditure as revenue expenditure under Section 37 - incurred in the course of business - Bidding and pre-commencement expenditure incurred for airport modernization bids were allowable as business expenditure where the expenditure was incurred in the course of carrying on the assessee's business. - HELD THAT: - The Tribunal correctly found, and this Court agreed, that although the assessee had not previously carried on infrastructure development, the objects of the company included infrastructure development and the expenditure was incurred in furtherance of carrying on that business. Reliance on earlier decisions upholding preliminary expenses as revenue expenditure (including the Bombay High Court's order dated 16.10.2008) supports treating such bid-related outlays as incurred in the course of business and therefore deductible. The factual conclusion that the expenditure was in furtherance of the assessee's business activities was accepted and not interfered with. [Paras 4, 5]

Allowable as deduction - expenditure incurred in course of carrying on business.

Allowability of interest on borrowed funds under Section 36(1)(iii) - measure of commercial expediency and nexus with business - Interest on funds advanced to the wholly owned subsidiary was not disallowed where the Tribunal found the advance was for the purpose of the assessee's business and served commercial expediency. - HELD THAT: - The Tribunal and the CIT(A) made a factual finding that the assessee, engaged in infrastructure development management and finance, had provided funds to its subsidiary to undertake infrastructure projects on its behalf; the advances were used for that purpose and a nexus with the assessee's business was established. Applying the settled principle that interest on borrowed capital is deductible if advanced funds are for the purpose of business and where advances are a measure of commercial expediency (as explained in S.A. Builders and related authorities), the Court declined to disturb the factual conclusion. Interference was not warranted on these facts. [Paras 6, 7]

Disallowance deleted - interest allowable as deduction on factual finding of commercial expediency and nexus with business.

Prospective applicability of Rule 8D from AY 2008-2009 - Rule 8D was not applicable to the assessment year under consideration as its applicability is prospective from AY 2008-2009. - HELD THAT: - The Tribunal had noted, and this Court observed, that Rule 8D's provisions apply from AY 2008-2009 as held in the referenced decision of this Court (Godrej and Boyce). The question was not argued before the Tribunal and there is no indication that the Tribunal or this Court erred in treating Rule 8D as prospective in operation for the years in issue. [Paras 8]

Rule 8D not applicable to the year under consideration - prospective operation from AY 2008-2009.

Final Conclusion: All three substantial questions of law were answered against the Revenue: (i) bidding/preliminary expenditure was held deductible as incurred in course of business; (ii) interest on funds advanced to the subsidiary was allowable on the factual finding of commercial expediency and nexus with business; and (iii) Rule 8D was prospective from AY 2008-2009. Appeal dismissed.

Treatment of applications filed after 31.01.2021 as "pending applications" under the CBDT circular - exclusive jurisdiction of the Settlement Commission / Interim Board over cases allowed to proceed under section 245D - power and procedure of the Interim Board to exercise all powers of an income-tax authority in relation to pending settlement applications - consequences of passing assessment orders during pendency of a settlement application - remand to the Interim Board for adjudication on merits and order under section 245D(4)

Treatment of applications filed after 31.01.2021 as "pending applications" under the CBDT circular - validity of settlement application filed on 30.03.2021 - The application filed by the petitioner on 30.03.2021, though after 31.01.2021, is to be treated as a 'pending application' under the CBDT circular dated 28.09.2021 and is eligible for adjudication by the Interim Board. - HELD THAT: - On a conjoint reading of the statutory scheme and the CBDT ORDER dated 28.09.2021 (issued under section 119(2)(b)), applications filed by assessees who were eligible to file as on 31.01.2021 and where the relevant assessment proceedings were pending on the date of filing may be treated as valid and processed as "pending applications" till 30.09.2021. The Court held that the petitioner satisfied the conditions in para 4 of the Circular and therefore his application filed on 30.03.2021 falls within the relaxation and must be considered as a pending application for adjudication on merits. [Paras 11]

The settlement application filed on 30.03.2021 is to be treated as a pending application under the CBDT circular and is eligible for consideration by the Interim Board.

Exclusive jurisdiction of the Settlement Commission / Interim Board over cases allowed to proceed under section 245D - consequences of passing assessment orders during pendency of a settlement application - Assessment orders passed by the Income-tax authorities during the pendency of a settlement application that is to be treated as pending are not sustainable and are required to be quashed. - HELD THAT: - Section 245F(2) confers on the Settlement Commission (and, by statutory adaptation, the Interim Board) exclusive jurisdiction to exercise the powers of an income-tax authority in relation to a case where an application under section 245C has been allowed to proceed under section 245D, until an order under section 245D(4) is passed. In such circumstances the income-tax authorities lack jurisdiction to proceed with assessments. The Court found that respondent No.3 passed assessment orders in July 2021 while the petitioner's settlement application was pending (and eligible under the CBDT Circular), and therefore those assessment orders could not have been validly passed and are non-est. [Paras 12, 13]

The assessment orders dated 27.07.2021 for the relevant assessment years are quashed and set aside as not sustainable.

Remand to the Interim Board for adjudication on merits and order under section 245D(4) - power and procedure of the Interim Board to exercise all powers of an income-tax authority in relation to pending settlement applications - The Interim Board's order treating the petitioner's settlement application as non-est and not maintainable is quashed and the matter is remanded to the Interim Board to decide the application on merits after giving opportunity of hearing and to pass an order under section 245D(4). - HELD THAT: - Because the assessment orders by respondent No.3 have been quashed, the factual basis on which the Interim Board rejected the petitioner's application as non-est no longer subsists. The Court directed that the Interim Board, vested with the powers of the Settlement Commission and of an income-tax authority for pending applications, shall treat the petitioner's application as a pending application under the CBDT circular and adjudicate it on merits in accordance with law, following the Rule 9 procedure and after hearing both parties, and pass the requisite order under section 245D(4). [Paras 14]

Impugned order of the Interim Board is quashed and set aside; matter remanded to the Interim Board for fresh adjudication on merits and pass an order under section 245D(4) after hearing both sides.

Final Conclusion: The petition is allowed: the petitioner's settlement application filed on 30.03.2021 is to be treated as a pending application under the CBDT circular; assessment orders dated 27.07.2021 for A.Ys. 2013-14 to 2019-20 are quashed; the Interim Board's order rejecting the application is quashed and the matter is remanded to the Interim Board to decide the settlement application on merits and pass an order under section 245D(4) after giving opportunity of hearing to both sides.

Revisionary jurisdiction under Section 263: satisfaction of error prejudicial to revenue - requirement of recorded satisfaction before exercising revisionary power - additional depreciation under section 32(1)(iia) - disallowability of provision for bad and doubtful debts under section 36(1)(vii) - limits on reassessment where superior officer accepts assessee's explanation - precedential application of Tribunal decision

Additional depreciation under section 32(1)(iia) - revisionary jurisdiction under Section 263: satisfaction of error prejudicial to revenue - precedential application of Tribunal decision - Whether the Principal Commissioner of Income Tax was justified in exercising revisionary jurisdiction under Section 263 by holding that the assessment order incorrectly allowed additional depreciation. - HELD THAT: - The Tribunal noted that the assessee's counsel conceded lack of merit on this point in view of an earlier, identical decision of the Tribunal in Dakshin Gujarat Vij Co. Ltd., and the Tribunal accordingly confirmed the PCIT's satisfaction that the assessment order erred in allowing additional depreciation. The Tribunal applied the earlier appellate view and held that the exercise of revisionary power in respect of incorrect allowance of additional depreciation was sustainable. [Paras 5, 6, 15]

PCIT's exercise of revisionary jurisdiction in relation to the incorrect allowance of additional depreciation is confirmed.

Disallowability of provision for bad and doubtful debts under section 36(1)(vii) - revisionary jurisdiction under Section 263: satisfaction of error prejudicial to revenue - limits on reassessment where superior officer accepts assessee's explanation - Whether the Principal Commissioner of Income Tax was justified in holding the assessment order erroneous and prejudicial to the revenue for having allowed the claim for bad debts/provision for bad and doubtful debts and directing fresh assessment. - HELD THAT: - The Tribunal found that the PCIT, while initially noting an irregularity, received the assessee's explanation and supporting documents during revision proceedings and expressly recorded satisfaction that the claim was in order. Once the superior officer is satisfied, there is no recorded error remaining in the assessment order; Section 263 can be exercised only where an order is shown to be erroneous and prejudicial to revenue. The Tribunal held that merely because the Assessing Officer did not examine the documents during assessment does not by itself render the order erroneous where the revising authority accepts the assessee's case. Consequently the PCIT's exercise of revisionary power on the bad debts issue was not sustainable. [Paras 10, 11, 13, 14, 15]

PCIT's revision under Section 263 insofar as it set aside the assessment on account of the claim for bad debts is set aside.

Final Conclusion: The appeal is partly allowed: the Tribunal confirms the PCIT's revision on the incorrect allowance of additional depreciation (following the Tribunal's earlier decision) but sets aside the PCIT's revision in respect of the claim for bad debts, since the PCIT had recorded satisfaction with the assessee's explanation and no error prejudicial to revenue remained to be corrected.

Quasi-capital vs loan for transfer pricing - Arm's length pricing for lending/borrowing between associated enterprises - Transfer pricing adjustments and commercial expediency - Weighted deduction under Section 35(2AB) for clinical trials - Disallowance for diversion of expenses between related entities - Corporate guarantee as international transaction - Revenue v. capital treatment of debenture issue expenses - Section 14A disallowance for exempt income - Capitalisation of interest under Section 36(1)(iii) - Reasonableness tests under Section 40A(2)(b) - Admission of additional grounds and remand to Assessing Officer

Quasi-capital vs loan for transfer pricing - Arm's length pricing for lending/borrowing between associated enterprises - Transfer pricing adjustments and commercial expediency - Characterisation of interest-free advances to foreign associated enterprises and applicability of transfer pricing adjustment; direction to determine correct amount of interest. - HELD THAT: - The Tribunal held that the nature of an advance must be judged at the time it is granted and cannot be converted into quasi capital merely because it was converted into equity in a subsequent year. A quasi capital character requires contemporaneous indicia (for example regulatory impediment to subscribing as capital or an express arrangement indicating the advance was intended as temporary capital). The appellant's advances did not exhibit such features; therefore the CIT(A)'s deletion of upward adjustments for advances converted later into equity was erroneous. The Tribunal rejected the contention that commercial expediency or benefit derived by way of increased exports precludes transfer pricing scrutiny, reaffirming that lending/borrowing between associated enterprises is an international transaction subject to arm's length price determination. However, the Tribunal agreed that the CIT(A) should have specified the correct amount of notional interest and accordingly remitted that quantification to the CIT(A) for determination after allowing the assessee to furnish submissions and documents. [Paras 11, 15, 21, 22]

Ground of the Department's appeal allowed (upward adjustments sustained); Ground of the assessee's appeal partly allowed for statistical purposes and remand to CIT(A) to compute the correct interest.

Disallowance for diversion of expenses between related entities - Validity of AO's lump sum disallowance on the basis that expenses of a partnership firm were diverted to the assessee company. - HELD THAT: - The Tribunal found no concrete evidence that expenses of the partnership firm were diverted to the assessee. The Department did not challenge the sale price between the partnership and the company, and the CIT(A) had recorded material distinguishing the business models and nature of products (generic v. innovative) and noted lack of errors in the assessee's books. The AO's approach of rejecting books and making a large disallowance on conjecture was held to be unsustainable; the CIT(A)'s restriction of the addition was accepted and the AO's broader disallowance was deleted. [Paras 29, 30, 31]

Ground No. 2 of the assessee's appeal allowed; corresponding ground(s) of the Department dismissed.

Weighted deduction under Section 35(2AB) for clinical trials - Allowability of weighted deduction under Section 35(2AB) for clinical trials conducted by third party CROs and related clinical trial expenditure. - HELD THAT: - Following prior decisions of the Tribunal in the assessee's own case and the jurisdictional High Court's interpretation of the Explanation to Section 35(2AB), the Tribunal held that clinical trial expenses incurred outside an in house approved facility can qualify for weighted deduction. The CIT(A)'s allowance of the claimed clinical trial expenditure was upheld and the Department's appeal against that allowance was dismissed. [Paras 32, 33, 36, 38]

Ground No. 3 of the Department's appeal dismissed; the clinical trial expenditure qualifies for weighted deduction under Section 35(2AB).

Weighted deduction under Section 35(2AB) for product registration, patent and exhibit batch expenses - Allowability of weighted deduction under Section 35(2AB) for certain expenditures (exhibit batches, building maintenance, patent filing and similar items). - HELD THAT: - The CIT(A) and the Tribunal examined earlier precedents and the DSIR approvals. The Tribunal confirmed the CIT(A)'s conclusion that certain items (exhibit batches, building maintenance) lacked DSIR approval and therefore weighted deduction could not be allowed; a nominal foreign patent filing expense was accepted. The Tribunal found no infirmity in the CIT(A)'s partial disallowance and partly allowed the assessee's challenge only to the extent noted. [Paras 39, 41, 42]

Assessee's ground partly allowed (foreign patent filing nominally allowed); remainder of the weighted deduction claims relating to non approved items confirmed as disallowed.

Corporate guarantee as international transaction - Arm's length pricing for guarantee fees - Whether corporate guarantees furnished for overseas AEs constitute an international transaction and quantum of guarantee fee at arm's length. - HELD THAT: - The Tribunal affirmed that corporate guarantees to associated enterprises are international transactions subject to transfer pricing rules. The assessee had itself admitted charging a 0.8% guarantee fee before the AO; the CIT(A) limited the adjustment accordingly. The Tribunal found that charging guarantee fee at 0.8% was supported by precedents and the assessee's acceptance, and no further upward adjustment was warranted. [Paras 48, 51, 52]

Grounds on guarantee fee dismissed (no interference with CIT(A)'s confirmation of 0.8%).

Revenue v. capital treatment of debenture issue expenses - Whether expenses incurred in issuing non convertible debentures are revenue or capital in nature. - HELD THAT: - Applying established precedent, the Tribunal accepted the CIT(A)'s finding that the debentures issued were in the nature of loans used for working capital and the issue expenses were routine business expenditures allowable under Section 37(1). The CIT(A)'s deletion of the AO's capitalisation was upheld. [Paras 53, 56, 57]

Ground of the Department dismissed; debenture issue expenses held to be revenue in nature and allowable.

Section 14A disallowance for exempt income - Whether disallowance under Section 14A was justified for investments made where no exempt income arose and capital employed in partnership. - HELD THAT: - The CIT(A) found that (i) no dividend/exempt income arose from certain group share investments in the year, so Section 14A disallowance was not triggered; and (ii) capital employed in the partnership (yielding exempt profit) was small relative to the assessee's abundant interest free funds so the AO failed to show utilisation of interest bearing funds. The Tribunal found no error in these findings and dismissed the Department's challenge. [Paras 64, 65, 67, 68]

Ground No. 5 of the Department's appeal dismissed; Section 14A disallowance deleted.

Increase in authorised capital - ROC fees - Revenue v. capital treatment for bonus issue related expenses - Whether ROC fees and related expenses for increase in authorised capital tied to issuance of bonus shares are capital or revenue in nature. - HELD THAT: - The CIT(A) distinguished Brooke Bond and relied on precedents holding expenses relating to issuance of bonus shares (capitalisation of reserves with no fresh inflow) to be revenue in nature. The Tribunal found the CIT(A)'s factual and legal distinction sound and refused to interfere with allowance under Section 37. [Paras 69, 71, 74, 75]

Ground No. 6 of the Department's appeal dismissed; ROC fees in the facts of this case held to be revenue and allowable.

Capitalisation of interest under Section 36(1)(iii) - Whether interest on borrowings was rightly capitalised (disallowed) on the basis that borrowed funds financed capital work in progress (CWIP). - HELD THAT: - The CIT(A) found that the assessee possessed sufficient interest free funds far exceeding CWIP advances and the AO failed to establish that interest bearing funds were utilised for CWIP. The Tribunal upheld that finding, relying on High Court and Tribunal authorities which hold that where interest free funds suffice, no proportionate disallowance of interest is warranted. [Paras 76, 77, 78, 79]

Ground No. 7 of the Department's appeal dismissed; disallowance under Section 36(1)(iii) deleted.

Reasonableness tests under Section 40A(2)(b) - Validity of AO's lump sum disallowance under Section 40A(2)(b) for payments to related parties (2.5% ad hoc disallowance). - HELD THAT: - The Tribunal agreed with the CIT(A) that the AO adopted an unsupported ad hoc 2.5% disallowance without demonstrating the fair market value or producing comparables to establish excessiveness. The CIT(A)'s deletion of the disallowance was sustained, with reliance on coordinate Bench authorities emphasising the AO's burden to prove unreasonableness or excess over market value. [Paras 80, 82, 83]

Ground No. 8 of the Department's appeal dismissed; lump sum disallowance under Section 40A(2)(b) deleted.

Admission of additional grounds and remand to Assessing Officer - Admission and adjudication of new claims/grounds raised before the Tribunal and reference/remand to the Assessing Officer for fresh consideration. - HELD THAT: - Two separate matters were remitted for de novo consideration by the Assessing Officer (or CIT(A) as directed): (a) quantification of the correct amount of notional interest to be imputed on interest free advances (remitted to CIT(A) to give a specific finding after allowing submissions); and (b) a claim for deduction under Section 35(1)(i)/(iv) in respect of intangible CWIP which had been raised for the first time late - the Tribunal referred the issue back to the AO for consideration in the interest of justice. Additionally, the assessee's newly raised ground concerning non deduction of TDS under Section 40(a)(ia) (foreign commission) was restored to the AO for fresh adjudication after affording opportunity to the assessee. [Paras 85, 87, 89, 91, 92]

Matters remitted: computation of arm's length interest to CIT(A); claim under Section 35(1)(i)/(iv) and additional 40(a)(ia) ground restored to AO for de novo consideration.

Final Conclusion: For Assessment Years 2009-10 to 2011-12 the Tribunal: (a) held that interest free advances must be characterised at the time of grant and are not quasi capital merely because later converted into equity; transfer pricing adjustments were sustained subject to remand for precise computation of notional interest; (b) rejected the AO's broad disallowances for diversion of partnership expenses and for various other ad hoc disallowances (Sections 14A, 36(1)(iii), 40A(2)(b)), upholding many of the CIT(A)'s deletions or restrictions; (c) upheld allowability of clinical trial expenditure under Section 35(2AB) while confirming limited disallowances where DSIR approval was absent; (d) sustained the CIT(A)'s treatment on guarantee fees and debenture issue expenses; and (e) remitted specified issues to the Assessing Officer/CIT(A) for fresh quantification or consideration as directed.

Incriminating material - search and seizure action - completed/unabated assessments - additions under section 153A in respect of completed/unabated assessments - reopening under Sections 147/148 saved - onus to explain identity, genuineness and creditworthiness under section 68 - KYC deficiencies not constituting incriminating material

Incriminating material - completed/unabated assessments - additions under section 153A in respect of completed/unabated assessments - onus to explain identity, genuineness and creditworthiness under section 68 - KYC deficiencies not constituting incriminating material - Whether additions could be made under section 153A in respect of assessment years 2012-13 to 2015-16 which were completed/unabated at the time of search in absence of incriminating material unearthed during the search - HELD THAT: - The Tribunal held that settled law requires that no addition can be made in respect of completed/unabated assessments if no incriminating material is found during the course of search and seizure; the power to re-open such assessments remains available only under Sections 147/148 subject to their conditions. The coordinate bench's exposition of the expression "incriminating material" was adopted: seized material must prima facie demonstrate that entries in the books do not represent the true state of affairs and not merely raise suspicion. On the facts, the materials seized primarily comprised KYC documents, account opening forms and similar records showing deficiencies and non-compliance; neither the Special Auditor's report nor the seized material established that sums credited to members' accounts or receipts for issuance of demand drafts/at-par cheques belonged to the assessee or disclosed undisclosed income of the assessee. The AO's reliance on KYC gaps, Rule 114B/114E non-compliances and byelaw violations did not convert those materials into incriminating material sufficient to sustain additions in concluded assessments; such deficiencies may attract action under other statutes or against members but do not, by themselves, justify additions under section 153A/section 68 in respect of the concluded years. Accordingly the additions made by the AO for assessment years 2012-13 to 2015-16 were not sustainable and were deleted.

Additions made under section 153A for assessment years 2012-13 to 2015-16 deleted; appeals of the assessee allowed and Revenue appeals dismissed as infructuous.

Final Conclusion: The Tribunal allowed the assessee's appeals for assessment years 2012-13 to 2015-16 by holding that the material seized during search did not constitute incriminating material warranting additions in completed/unabated assessments; Revenue's appeals were dismissed as infructuous.

Long Term Capital Gain - agreement to sale as creating right in property - registration of agreement under the Registration Act - extension of agreement tenure for title clearance - right in property as capital asset under section 2(14) - deduction under section 54B/54EC/54F

Agreement to sale as creating right in property - registration of agreement under the Registration Act - extension of agreement tenure for title clearance - right in property as capital asset under section 2(14) - Long Term Capital Gain - deduction under section 54B/54EC/54F - Whether amounts received by the assessees as confirming parties on sale were receipts on transfer of a capital asset (liable to tax as long term capital gains) and whether the assessees were entitled to deductions claimed - HELD THAT: - The Tribunal found on the material placed that the Banakhat dated 29.04.2005 was subsequently registered as Agreement of Sale (Document No. 174 dated 01.06.2013), and that clause 4 of the Banakhat expressly provided for automatic extension of its tenure until title clearance and non agricultural permission were obtained. The civil dispute had been withdrawn by decree and N.A. permission obtained, facts reflected in the registered sale deed which named the assessees as confirming parties and showed receipt of consideration by them. In view of the enforceable right created by the agreement to sell, and the conduct of parties (payment by account payee cheques, inclusion of confirming parties in the sale deed, and utilisation/investment of amounts by the assessees), the assessees had a right in the property that falls within the meaning of capital asset under section 2(14). Objections based on non registration and reliance on Suraj Lamp were held distinguishable: registration objection was negated by the subsequent registration and clause 4, and the cited authority was not applicable on the facts and the statutory context examined. Consequentially, the receipts were held to be long term capital gains and the assessees were directed to be allowed the claimed deductions under the relevant sections if otherwise in order. [Paras 5, 6, 7, 11, 12]

The Tribunal upheld the CIT(A)'s conclusion that the assessees, as confirming parties, had an enforceable right in the property, the receipts constituted long term capital gains and the assessees were entitled to the claimed deductions; the Revenue's appeals were dismissed.

Final Conclusion: The appeals filed by the Revenue against the CIT(A)'s orders for A.Y. 2013-14 are dismissed; the Tribunal confirmed that the assessees' receipts as confirming parties are taxable as long term capital gains and that the claimed deductions are to be allowed if otherwise allowable under the Act.

Diversion of income to specified persons under section 13(2)(c) - specified person within the meaning of section 13(3) - reasonableness of remuneration to office bearers and comparability test - principle of consistency in departmental treatment of remuneration - limitation of denial of exemption under sections 11 and 12 to the part of income misapplied - taxability of forfeited income at maximum marginal rate confined to the part forfeited

Specified person within the meaning of section 13(3) - diversion of income to specified persons under section 13(2)(c) - reasonableness of remuneration to office bearers and comparability test - principle of consistency in departmental treatment of remuneration - Addition of Rs. 8,28,636 as excessive salary paid to the Secretary (a specified person) invoking section 13(2)(c) r.w.s. 13(3) for AY 2016-17 - HELD THAT: - The Tribunal examined the Assessing Officer's comparison of the salary paid to the specified person with the highest salary of a non specified employee and found the comparison to be an impermissible presumption because the duties, qualifications and roles were not commensurate. The assessee demonstrated that the identical remuneration paid in subsequent assessment years (AY 2017 18 and AY 2018 19) was accepted by the department when those assessments were completed, which established a consistent departmental treatment of the same salary. In absence of any distinguishing material for AY 2016 17 and given the department's acceptance in later years, the Tribunal held that the addition based on invoking section 13(2)(c) could not be sustained. Consequently the disallowance calculated by the AO on the basis of that comparison was struck down. [Paras 6, 12, 13, 14]

Addition of Rs. 8,28,636 as excessive salary under section 13(2)(c)/13(3) is vacated.

Limitation of denial of exemption under sections 11 and 12 to the part of income misapplied - taxability of forfeited income at maximum marginal rate confined to the part forfeited - Validity of denial of exemption under sections 11 and 12 on account of alleged violation of section 13(1)(c) and section 13(2)(c) - HELD THAT: - The Tribunal followed coordinate authority holding that where there is contravention of section 13, the exemption under section 11 cannot be forfeited in toto but must be restricted to the portion of relevant income which has been applied for the benefit of specified persons; taxability at the maximum marginal rate applies only to that part. Since the primary disallowance under section 13(2)(c) for AY 2016 17 has been vacated, there is no basis to deny exemption under sections 11 and 12 for the assessment year. The Tribunal also accepted the alternate legal proposition that, even if a breach were established, denial of exemption must be limited to the excess/misapplied amount and not the entire income. [Paras 16, 17, 18, 19]

Denial of exemption under sections 11 and 12 is not sustainable; exemption cannot be wholly refused and, in any event, would be limited to the extent of income misapplied.

Final Conclusion: Appeal allowed: the addition for excessive salary under section 13(2)(c)/13(3) for AY 2016 17 is set aside, and consequential denial of exemption under sections 11 and 12 is vacated; in law any disallowance for breach of section 13 is to be confined to the part of income misapplied.

Penalty under section 271(1)(c) of the Income tax Act - Effect of appellate deletion of assessment addition on penalty - Principle that penalty cannot survive once the foundational addition is vacated

Penalty under section 271(1)(c) of the Income tax Act - Effect of appellate deletion of assessment addition on penalty - Whether the penalty imposed under section 271(1)(c) can be sustained after the tribunal deleted the addition which formed the basis for imposing the penalty. - HELD THAT: - The assessing officer imposed penalty under section 271(1)(c) having regard to disallowance made in assessment and its confirmation by the first appellate authority. The Tribunal subsequently set aside the addition by allowing the assessee's appeal in ITA No. 148/RPR/2014 dated 23.10.2018, thereby vacating the quantum which constituted the foundation for the penalty. Where the foundational addition is deleted by the appellate tribunal, the legal basis for imposing penalty under section 271(1)(c) ceases to exist. Having regard to the admitted deletion of the addition by the coordinate bench of the Tribunal, the penalty based on that addition cannot survive and must be deleted. [Paras 6]

Penalty under section 271(1)(c) deleted and the assessee's appeal allowed.

Final Conclusion: The penalty imposed under section 271(1)(c) is vacated because the Tribunal deleted the addition which was the basis for the penalty; the assessee's appeal is allowed.

Penalty under section 271D for contravention of section 269SS - Recorded satisfaction in the assessment order as pre condition for initiation of penalty proceedings - Parity between penalty provisions under sections 271D and 271E - Binding effect of Supreme Court precedent

Recorded satisfaction in the assessment order as pre condition for initiation of penalty proceedings - Penalty under section 271D for contravention of section 269SS - Binding effect of Supreme Court precedent - Sustainability of penalty imposed by the Joint Commissioner under section 271D where the Assessing Officer in the assessment order under section 143(3) did not record satisfaction for initiation of penalty proceedings. - HELD THAT: - The Tribunal examined whether penalty under section 271D could be validly imposed by the Joint Commissioner when the assessment order framed under section 143(3) did not record the assessing officer's satisfaction for initiating penalty proceedings. Relying on the Supreme Court decision in CIT v. Jai Laxmi Rice Mills and observing that provisions of sections 271D and 271E are pari materia, the Tribunal held that recording of satisfaction in the assessment order is a prerequisite for initiation of penalty proceedings under section 271D. The Joint Commissioner had imposed penalty without such recorded satisfaction; therefore the assumption of jurisdiction was invalid. The Tribunal further emphasised the binding effect of the Supreme Court precedent and followed subsequent High Court/Tribunal authorities applying the same principle. Having quashed the penalty for want of valid assumption of jurisdiction, the Tribunal refrained from adjudicating other contentions raised by the assessee. [Paras 12, 13, 15, 16]

Penalty imposed by the Joint Commissioner under section 271D is quashed for lack of recorded satisfaction in the assessment order; appeal allowed.

Final Conclusion: Appeal allowed; penalty under section 271D set aside because the assessing officer's assessment order did not record the requisite satisfaction for initiating penalty proceedings, and the Joint Commissioner therefore lacked valid jurisdiction to levy the penalty; other contentions left open.

Disallowance under section 14A read with Rule 8D - expenditure incurred - actual expenditure and not imagined expenditure - casual connection between expenditure and exempt income - legacy investments acquired by amalgamation - temporary investment in mutual funds - recording of satisfaction under Rule 14A(2)

Disallowance under section 14A read with Rule 8D - actual expenditure and not imagined expenditure - casual connection between expenditure and exempt income - legacy investments acquired by amalgamation - temporary investment in mutual funds - recording of satisfaction under Rule 14A(2) - Validity of the disallowance under section 14A read with Rule 8D for AY 2008-09 in view of the assessee's contention that no expenditure was incurred in earning exempt income and that investments were legacy/temporary - HELD THAT: - The Tribunal examined the material and accepted the uncontested position that the assessee had not incurred any interest expenditure, directly or indirectly, for earning the exempt dividend income (paras 21, 22). The Assessing Officer's conclusion that some expenditure must have been incurred for decisions relating to investment was held to be conjectural because no actual expenditure was identified in the accounts (para 22). The Tribunal applied the legal principle stated by the Hon'ble Supreme Court in Maxopp Investment Ltd. that the expression "expenditure incurred" in section 14A denotes actual expenditure and not imagined or hypothetical expenditure; consequently, where no expenditure related to earning exempt income is shown to have been incurred, no disallowance under section 14A can be made (para 22). The Tribunal further noted the factual explanation that substantial funds were legacy investments acquired through amalgamation and were placed temporarily in mutual funds pending project implementation; the CIT(A)'s findings that there was no specific nexus established by the AO between any expenditure and the exempt income and that the mutual fund investments were temporary were not successfully impugned by the Revenue (paras 16, 18, 19, 20). In view of the absence of recorded satisfaction under Rule 14A(2) identifying actual expenditure and the lack of any cogent material to overturn the CIT(A)'s findings, the Tribunal held the deletion of the disallowance to be sustainable (paras 20-24). [Paras 21, 22, 23, 24]

Impugned disallowance under section 14A read with Rule 8D deleted; appeal dismissed.

Final Conclusion: The remanded appeal for AY 2008-09 is disposed of by upholding the CIT(A)'s deletion of the section 14A/Rule 8D disallowance on the ground that no actual expenditure attributable to earning exempt income was established; Revenue's appeal is dismissed.

Burden of proof to establish identity, genuineness and creditworthiness of share application money - addition under section 68 of the Income Tax Act in relation to unexplained share capital/share premium - best judgment assessment under section 144 of the Income Tax Act - allowability of business expenses paid through banking channels as wholly and exclusively for business

Burden of proof to establish identity, genuineness and creditworthiness of share application money - addition under section 68 of the Income Tax Act in relation to unexplained share capital/share premium - Whether the addition made under section 68 in respect of share application money/share premium was rightly sustained. - HELD THAT: - The Assessing Officer made an addition under section 68 treating the share application money as unexplained because the assessee did not respond during assessment proceedings. Before the Commissioner (Appeals) the assessee produced confirmations, share application forms, PAN, bank statements and other documents and those materials were forwarded to the AO who filed a remand report after issuing notices under section 133(6). Each investor furnished confirmations and documentary evidence showing remittances from identified bank accounts and tax filings where applicable. The Commissioner (Appeals) examined the remand report and rejoinder and recorded that the identity, genuineness and creditworthiness of the shareholders were established. The Tribunal, on review of the appellate findings and the evidentiary material, found no rebuttal by the Revenue to the Commissioner (Appeals)'s factual conclusion and agreed that the assessee discharged the initial burden of proof; accordingly the addition under section 68 was rightly deleted. [Paras 5, 6]

Addition under section 68 deleted; Revenue's appeal dismissed on this ground.

Allowability of business expenses paid through banking channels as wholly and exclusively for business - best judgment assessment under section 144 of the Income Tax Act - Whether the disallowance of expenses claimed in the profit and loss account was justified. - HELD THAT: - The Assessing Officer disallowed expenses while completing assessment under section 144 because the assessee had not filed details during assessment. On appeal the assessee produced ledger accounts, bank evidence showing payments largely by account payee cheques/NEFT, details of employees and salary payments, invoices/ledgers for advertisement, electricity, rent and other operating expenses and evidence of TDS where applicable. These documents were sent to the AO but no substantive comment was furnished. The Commissioner (Appeals) accepted that the expenses were incurred wholly and exclusively for business and were routed through banking channels and accordingly deleted the disallowance. The Tribunal found no infirmity in that appreciation of evidence and upheld the deletion. [Paras 5, 6]

Disallowance of expenses deleted; Revenue's appeal dismissed on this ground.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals)'s deletion of the addition under section 68 and the deletion of the disallowance of expenses for assessment year 2012-13 and dismissed the Revenue's appeal.

Best judgment assessment - treatment of unexplained cash deposits as income under section 69 - denial of benefit of opening cash balance - reliability of cash flow statement as evidence - proceedings ex parte for non appearance and non production of evidence

Proceedings ex parte for non appearance and non production of evidence - best judgment assessment - treatment of unexplained cash deposits as income under section 69 - denial of benefit of opening cash balance - reliability of cash flow statement as evidence - Validity of ex parte assessment under section 144 and sustainment of addition treating cash deposits as unexplained income to the extent of Rs. 23,00,000. - HELD THAT: - The Assessing Officer framed a best judgment assessment after the assessee repeatedly failed to respond to notices and did not furnish explanations for cash deposits totalling Rs. 71,10,000 in the bank account. On appeal the assessee produced a cash flow statement and other documents, but the CIT(A) found these insufficient: the cash flow did not reliably explain the opening cash claimed, showed cash balances turning negative after the contested deposits, and did not account for agricultural expenses despite claimed agricultural receipts. The CIT(A) therefore rejected the claim to the opening cash balance of Rs. 19,24,286 and treated the resultant negative balance (and part of the deposits) as unexplained income, sustaining an addition of Rs. 23,00,000. The Tribunal, noting absence of any evidence produced before it to rebut the CIT(A)'s findings and the assessee's non appearance, found no reason to interfere with the CIT(A)'s conclusion and upheld the ex parte assessment and the addition. [Paras 4, 5, 6]

Ex parte best judgment assessment affirmed; addition of Rs. 23,00,000 treated as unexplained income under section 69 sustained and benefit of claimed opening cash denied.

Reliability of cash flow statement as evidence - treatment of unexplained cash deposits as income under section 69 - Rejection of the assessee's claim for credit of gross business turnover and cash receipts from sale of agricultural crop. - HELD THAT: - The assessee claimed business receipts and agricultural sale proceeds to explain the bank deposits and to support declared turnover. The CIT(A) examined the documents and the cash flow statement and observed contradictions and omissions: agricultural receipts in J forms were not accompanied by corresponding agricultural expenses in the cash flow, outstanding balances reflected in third party account statements were not declared, and the cash flow still produced a negative balance after allowing for opening cash. The CIT(A) treated the agriculture claim as an afterthought and found the submissions insufficient to explain the deposits or to justify allowance of the claimed turnover/credits. The Tribunal, in absence of any rebuttal evidence from the assessee, sustained the CIT(A)'s rejection. [Paras 5, 6]

Claims of business gross turnover credit and agricultural sale receipts not accepted; related credits disallowed for lack of reliable evidence.

Final Conclusion: The order of the Commissioner of Income Tax (Appeals) is sustained; the assessee's appeal is dismissed.

Reliance on survey team's notional trading account and gross profit rate - requirement of physical verification for valuation of closing stock during survey - Deeming provisions of section 69A and requirement of identifiable "other valuable article" with proof of ownership - acceptance of books of account and stock records unless shown to be unreliable

Deeming provisions of section 69A and requirement of identifiable "other valuable article" with proof of ownership - requirement of physical verification for valuation of closing stock during survey - Deletion of addition made under section 69A in respect of alleged excess stock found during survey was justified - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the addition under section 69A could not be sustained because the Survey Team recomputed the trading account on a notional basis without any physical verification or identification of the stock and without evidence showing that the stock was not part of the assessee's business. The Bench observed that section 69A, being a deeming provision, requires specific evidence of ownership of money, bullion, jewellery or other valuable articles and that such items must be separately identifiable; mere application of an estimated gross profit rate by the Survey Team, without inventory verification or proof that the books/stock records were unreliable, does not satisfy the requirements for an addition under section 69A. Consequently, in absence of physical verification, identification and proof of non-connection with the assessee's recorded stock, the addition was not justified and was rightly deleted. [Paras 8]

Addition under section 69A deleted; revenue's appeal on this ground dismissed.

Reliance on survey team's notional trading account and gross profit rate - acceptance of books of account and stock records unless shown to be unreliable - Whether the AO properly relied on the Survey Team's computed closing stock using a GP of 25.74% instead of the assessee's books - HELD THAT: - The Tribunal agreed with the CIT(A) that the AO's adoption of the Survey Team's closing stock figure, computed by applying a GP rate of 25.74%, was arbitrary because the Survey working did not disclose the precise basis for that GP and merely applied a preceding-year GP without explanation. The assessee had furnished the trial balance and, on specific query (question no.17), had identified the premises where the closing stock shown in its books was held; neither the Survey Team nor the AO carried out or recorded any physical verification or pointed to any discrepancy in the book values or stock records. In these circumstances, and given that the AO did not reject the books as unreliable nor give reasoned basis for preferring the Survey GP over the GP declared in the return, the reliance on the Survey Team's notional trading account was unsustainable. [Paras 3, 8]

Tribunal upheld deletion of addition based on survey's notional trading account and GP; AO's reliance on the survey computation rejected.

Final Conclusion: Revenue's appeal dismissed; the CIT(A)'s deletion of the addition premised on the survey team's notional stock valuation and the application of section 69A was affirmed for lack of physical verification, identification and proof that the books or stock records were unreliable.

Summary order. Special Leave Petition dismissed; delay condoned; pending applications, if any, disposed of.

Obligations of Customs Broker under Customs Broker Licensing Regulations (CBLR) - Verification of authorisation and KYC obligations of Customs Broker - Forfeiture of security deposit as disciplinary measure - Imposition of monetary penalty on Customs Broker - Doctrine of proportionality in disciplinary action - Revocation of Customs Broker licence as gravest punishment

Verification of authorisation and KYC obligations of Customs Broker - Forfeiture of security deposit as disciplinary measure - Imposition of monetary penalty on Customs Broker - Doctrine of proportionality in disciplinary action - Whether forfeiture of the security deposit and imposition of penalty on the customs broker were justified. - HELD THAT: - The Tribunal found that documents were manipulated by third parties to effect an illegal export of prohibited goods and that the broker's employee failed to verify authorisation and certain address details. However, there was no evidence that the broker connived in or had knowledge of the fraud, and the broker took prompt action on discovery (termination of the employee and lodging FIR). Applying the regulatory obligations of a CHA together with the principle of proportionality, the Tribunal held that complete forfeiture of the security deposit was disproportionate whereas imposition of a monetary penalty was appropriate. The adjudicating authority's finding that the employee played an active role but that the broker itself had not been shown to have connived was accepted; on that basis the Tribunal set aside forfeiture and affirmed the penalty. [Paras 12, 13, 14]

Forfeiture of the security deposit set aside; penalty affirmed.

Obligations of Customs Broker under Customs Broker Licensing Regulations (CBLR) - Revocation of Customs Broker licence as gravest punishment - Doctrine of proportionality in disciplinary action - Whether the broker's licence should be revoked. - HELD THAT: - The Tribunal reiterated that a CHA holds a position of trust and is subject to mandatory obligations under the CBLR, but revocation is the most serious sanction reserved for cases of grave infractions, active facilitation, mens rea or gross and flagrant violations. In the present facts there was no finding of mala fide, knowledge or connivance by the broker; the irregularity arose from manipulation by others and omission by an employee who was promptly dealt with. Precedents were applied to hold that revocation is not warranted where the breach is not of the requisite aggravated character and where proportionality requires a lesser sanction. [Paras 14, 15, 16, 17, 18]

Appeal by the department seeking revocation of licence dismissed; licence not revoked.

Final Conclusion: The Tribunal modified the adjudicating order by setting aside forfeiture of the security deposit but affirming the monetary penalty; the Revenue's appeal for revocation of the Customs Broker licence was dismissed.

Penalty under Section 112(a) of the Customs Act, 1962 - responsibility of importer under Section 46 for bill of entry - liability of customs broker and employee for mis-declaration - first check examination - confiscation under Section 111 of the Customs Act, 1962

Penalty under Section 112(a) of the Customs Act, 1962 - liability of customs broker and employee for mis-declaration - responsibility of importer under Section 46 for bill of entry - first check examination - Validity of imposition of penalty on the appellant (employee of customs broker) under Section 112(a) for alleged mis-classification and failure to advise the importer - HELD THAT: - The Tribunal found that determination of tariff classification and duty liability is based on the bill of entry filed by the importer under Section 46, and that the bill of entry in the present case was filed on a 'First Check' examination basis which required customs examination prior to assessment. The Commissioner's own findings show absence of evidence that the importer intentionally suppressed facts or signed false documents, and the Commissioner refrained from imposing penalty on the importer for that reason. Given that the customs broker acts as agent of the importer and the importer had sought examination, there was no basis to fasten penalty on the broker's employee for mis-declaration. The impugned order also contains internally inconsistent findings - on one hand alleging willful mis-declaration by the importer and on the other declining to impose penalty on the importer for lack of evidence - yet proceeding to penalise the appellant. In view of these factual findings and the statutory allocation of responsibility in the bill of entry process, the Tribunal concluded that imposition of penalty on the appellant under Section 112(a) was not sustainable. [Paras 5, 8, 9]

The imposition of penalty under Section 112(a) on the appellant is set aside and the appeal is allowed in his favour.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under Section 112(a) of the Customs Act, 1962 on the appellant (employee of the customs broker) and held that, on the facts and recorded findings (including the bill of entry being on First Check basis and absence of evidence of intentional suppression by the importer), the appellant could not be fastened with the penalty.

Confiscation for import without required licence (invocation of Section 111(d) of the Customs Act, 1962) - invocation of Section 111(m) requires a declaration/bill of entry and is not sustainable in absence of a declaration - redemption fine in lieu of confiscation and penalty - computation by reference to ascertained value and margin of profit; redemption fine not to exceed market price - remand for disclosure of margin of profit and limited verification of market survey - reduction of redemption fine and penalty in the interests of justice where original quantification is unsustainable

Confiscation for import without required licence (invocation of Section 111(d) of the Customs Act, 1962) - invocation of Section 111(m) requires a declaration/bill of entry and is not sustainable in absence of a declaration - Validity of confiscation of imported old and used worn clothing for want of specific import licence. - HELD THAT: - Relying on the Tribunal's reasoning in Venus Traders (Tri.-Mumbai), confiscation based on non-possession of the specific import licence is sustainable under the provision relating to import without required licence. Invocation of the provision that penalises non correspondence with the bill of entry (Section 111(m)) is not appropriate where no declaration/bill of entry discrepancy is established because that provision presupposes the existence of a declaration. Given the admitted failure to obtain the prescribed licence for import of goods classifiable as old and used worn clothing, the Tribunal upholds confiscation under the licencing based confiscation provision and does not find fault with the impugned order on this point. [Paras 5, 6]

Confiscation of the goods for import without the required licence is upheld.

Redemption fine in lieu of confiscation and penalty - computation by reference to ascertained value and margin of profit; redemption fine not to exceed market price - remand for disclosure of margin of profit and limited verification of market survey - reduction of redemption fine and penalty in the interests of justice where original quantification is unsustainable - Whether the quantum of redemption fine and penalty imposed requires interference or fresh remand for re ascertainment of margin of profit and market survey. - HELD THAT: - The Tribunal observed that the original authority failed to disclose the margin of profit used to compute the fine despite earlier remand directions; although a market survey was undertaken subsequently, the paucity of evidence and impracticability of further ascertainment at this stage deter remanding the matter again. Applying the precedent which reduced excessive quantification where procedural defects in ascertainment remained, the Tribunal considered that the redemption fine and penalty as reduced by the Commissioner (Appeals) to 10% and 5% respectively of the assessed value are sufficient to meet the ends of justice and are accordingly confirmed. The Tribunal thus resolved the quantum issue on the basis of the established approach rather than ordering fresh expansive inquiries. [Paras 5]

Redemption fine and penalty set at 10% and 5% of the assessed value respectively are confirmed; no remand is directed.

Final Conclusion: The appeals are dismissed. The confiscation of the imported goods for lack of the required licence is upheld, and the redemption fine and penalty as reduced by the Commissioner (Appeals) to 10% and 5% of the assessed value are confirmed.

Enhancement of penalty - delayed submission of documents - provisional assessment - nominal penalty - no revenue implication - precedential application of tribunal decisions

Enhancement of penalty - delayed submission of documents - provisional assessment - nominal penalty - no revenue implication - Validity of enhancement of penalty by Commissioner (Appeals) for late filing of import documents where documents were subsequently filed during pendency of final assessment. - HELD THAT: - The Tribunal applied its prior decision in M/s Shyam Steel Industries Limited and other precedents holding that where documents required for finalisation of provisional assessment are ultimately furnished and there is no revenue implication or mala fide delay, a nominal penalty imposed by the adjudicating authority is adequate. The Commissioner (Appeals) did not assign adequate reasons to justify enhancement of the penalty from the amount imposed by the original authority. Following the cited tribunal precedent and the facts that the appellant submitted the documents while replying to the show cause notice and the final assessments were pending, the enhancement was held unsustainable and set aside, restoring the penalty originally imposed as sufficient to meet the ends of justice. [Paras 6, 7, 8]

Order of the Commissioner (Appeals) enhancing the penalty is set aside; the penalty imposed by the original authority is restored and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal, following its earlier decision, set aside the enhanced penalty imposed by the Commissioner (Appeals) for delayed submission of documents during provisional assessment, restored the original nominal penalty and allowed the appeal.

Classification of segregated foreign material - process waste versus clearance of inputs as such - permissible input-output ratio - Notification 52/2003-Custom and bond conditions - SION, norms committee and DGFT ad hoc/final norms - effect of bond on limitation

Classification of segregated foreign material - process waste versus clearance of inputs as such - Whether segregated foreign materials/non foundry scrap arising at the segregation stage can be classified as foundry scrap under chapter 74 and treated as clearance of 'inputs as such'. - HELD THAT: - The Tribunal applied Circular No. 1029/17/2016 (CBIC) which treats foreign materials segregated prior to feeding into the furnace as process waste distinct in character and classification from the imported brass scrap and therefore not removable as 'inputs as such' under Rule 3(5) of the CENVAT Credit Rules. The Commissioner (Appeal) could not on one hand hold the goods non classifiable under heading 7404 0022 and on the other hand confirm demand and confiscation; such simultaneous findings are unsustainable. In view of the Board's clarification that segregated foreign material should be assessed and cleared under its appropriate classification and duty, the impugned confirmation of classification under chapter 74 and attendant demand/confiscation cannot be upheld. [Paras 4, 5]

Appeals E/11294-11295/2014-DB allowed in respect of classification/demand/confiscation of non foundry segregated materials.

Permissible input-output ratio - Notification 52/2003-Custom and bond conditions - SION, norms committee and DGFT ad hoc/final norms - Whether the appellants have utilized imported raw material in excess of permissible norms and whether the method of computation advanced by the appellants (fixed 1.5 ratio and separate addition for slag) is acceptable. - HELD THAT: - The Tribunal examined the DGFT communication dated 04.05.2011 fixing wastage norms for the unit, which prescribes segregation norms subject to verification by Central Excise 'as per actual verified ... subject to a maximum of 1.50 MT' and prescribes the subsequent manufacturing norm of 1.26. The Additional Commissioner applied the verified segregation yields and the DGFT/DGFT norms based computation, which reduced the demand from the original calculation. The appellants' alternate computation impermissibly treated 1.5 as an unqualified fixed ratio (contrary to the DGFT wording limiting the ratio to actual verified yields up to 1.5) and separately sought to add slag losses notwithstanding that the prescribed 1.26 manufacturing norm is inclusive of such losses. For these reasons the appellants' method of computation was rejected and the revised demand as computed by the authority in accordance with the verified norms and DGFT communication was upheld. [Paras 6, 7, 8]

All customs appeals on excess consumption were dismissed and the authority's computation in accordance with DGFT fixed/verified norms was upheld.

Effect of bond on limitation - Notification 52/2003-Custom and bond conditions - Whether limitation would bar the demand when invoked under the conditions of the bond executed pursuant to Notification 52/2003 Custom. - HELD THAT: - The demand was raised invoking clause 3(d)(ii) of Notification 52/2003 Custom and the bond (B17) executed thereunder; the bond obliges the importer/unit to account for and prove utilisation in accordance with SION and norms. Where the demand arises from breach of the bond conditions, the authority's claim is founded on the bond provisions and Section 72 was also invoked; accordingly the period of limitation is not available to the appellants in the facts of the case. [Paras 8]

Period of limitation held inapplicable to the demand which is founded on the bond conditions under Notification 52/2003 Custom.

Final Conclusion: The Tribunal allowed the appeals challenging classification, demand and confiscation of segregated non foundry materials (holding such materials are process waste and not classifiable under chapter 74 for purposes of 'inputs as such'), but dismissed the remaining customs appeals on excess consumption after upholding the authority's computation in accordance with DGFT verified wastage norms; the demand was held not to be time barred because it arises from breach of bond conditions under Notification 52/2003 Custom.

Project imports - Essentiality Certificate - ratification of administrative act - benefit under exemption notification - fulfilment of conditions precedent for exemption

Project imports - Essentiality Certificate - benefit under exemption notification - ratification of administrative act - Whether the appellant fulfilled the conditions of Notification No. 12/2012-Cus (project import exemption) by producing an Essentiality Certificate initially issued by the Deputy Secretary and subsequently ratified by the Secretary, and whether the imported goods were eligible as project imports. - HELD THAT: - The Tribunal found no dispute that the goods were imported for the Power Project and held that goods required for future repairs and maintenance can form part of project imports. The initial Essentiality Certificate issued by the Deputy Secretary was subsequently ratified by the Secretary before the Order-in-Original, and that ratification must be treated as validating the earlier certificate rather than as a fresh post-facto compliance. The Tribunal relied on the principle articulated by the Supreme Court in Commr. of Customs (Imports), Mumbai v. Tullow India Operations Ltd., that conditions as to timing of production of certificates which are not solely within the importer's control and depend on public functionaries should not operate as an absolute bar where a just exception exists; an essentiality certificate is proof that the conditions for obtaining the exemption have been fulfilled. The Tribunal also noted that Serial No. 507 of the Notification renders goods required for setting up a Mega Power Project eligible for exemption, and that the goods in question satisfy that condition. Applying these principles, the Tribunal concluded that the appellant satisfied the conditions specified under Notification No. 12/2012-Cus dated 17-03-2012.

The appellant fulfilled the conditions of the exemption notification by virtue of the Essentiality Certificate ratified by the Secretary and by importing goods as project imports; the demand was set aside.

Final Conclusion: Impugned order set aside; appeal allowed and consequential relief granted as per law.

Penalty under Section 112(b)(ii) of the Customs Act, 1962 - Absolute confiscation of imported goods - Proof of foreign origin - inscriptions and assay certificate - Evidence standard to impose penalty

Penalty under Section 112(b)(ii) of the Customs Act, 1962 - Proof of foreign origin - inscriptions and assay certificate - Evidence standard to impose penalty - Penalties imposed on the appellants under Section 112(b)(ii) were not sustainable - HELD THAT: - The Tribunal found that the Department's show cause notice and seizure inventory did not identify any foreign inscriptions on the seized gold bars, nor was any assay certificate produced to establish foreign origin or purity. The Adjudicating Authority's assertion that inscriptions demonstrated foreign manufacture was not supported by documentary evidence in the record. Given the absence of reliable evidence proving that the gold was imported or of foreign origin, and considering that the appellants gave varying statements, the Tribunal concluded that a proper case was not made out to sustain penalties under the provision relied upon by the Department. [Paras 9, 10]

Penalties imposed on the appellants are set aside and the appeals are allowed on this ground.

Absolute confiscation of imported goods - Absolute confiscation of the seized gold bars - HELD THAT: - The Tribunal noted that no one had challenged the absolute confiscation order. Because the appellants did not contest the confiscation, the Adjudicating Authority's order of absolute confiscation remains undisturbed. [Paras 11]

The order of absolute confiscation stands as it was not challenged by the appellants.

Final Conclusion: Penalties imposed under Section 112(b)(ii) are quashed for lack of evidence proving foreign origin of the seized gold; the absolute confiscation remains intact as it was not contested.

Related party - promoter - key managerial personnel - listing before the regular bench - remand for fresh adjudication

Related party - promoter - key managerial personnel - listing before the regular bench - Whether the appeals against the Adjudicating Authority's direction to place I.A. No. 4951 of 2023 and I.A. No. 3234 of 2023 before the Regular Bench should be entertained or whether the applications should be finally disposed of by the Adjudicating Authority. - HELD THAT: - The Tribunal noted that the impugned order merely directed listing of the two interlocutory applications before the Regular Bench and did not finally decide the applications. Appellants contend they are neither promoters nor key managerial personnel and therefore the earlier order relied upon by the Adjudicating Authority may not apply to them; the Resolution Professional contends they are related parties. Since the Adjudicating Authority has not reached a final decision on the substantive entitlement or the question of related-party/promoter status, the proper course is to have the Adjudicating Authority decide the applications on merits. The Tribunal declined to express any view on the merits or on whether the appellants are related parties or promoters and instead directed fresh adjudication by the Adjudicating Authority in accordance with law. [Paras 6, 7]

Appeals disposed; I.A. No. 4951 of 2023 and I.A. No. 3234 of 2023 remitted to the Adjudicating Authority for final disposal in accordance with law without any expression of opinion on the merits.

Final Conclusion: Both appeals are disposed of and the two interlocutory applications are directed to be finally decided by the Adjudicating Authority in accordance with law; no opinion is expressed on the merits or on the related-party/promoter contentions.

Section 7 admission of corporate insolvency resolution process - Section 10A bar on institution of applications during COVID-19 moratorium period - acknowledgement of debt and repayment agreement as estoppel to plea of non-implementation - date of default and its determination by documentary notice extending repayment - reliance on contemporaneous correspondence to establish extension of time

Section 10A bar on institution of applications during COVID-19 moratorium period - acknowledgement of debt and repayment agreement as estoppel to plea of non-implementation - date of default - Whether the Section 7 application was barred by Section 10A because the date of default fell within the 10A period. - HELD THAT: - The Court held that the Corporate Debtor could not rely on the date of default under the Agreement dated 26.02.2020 (alleged as 25.08.2020) for invoking Section 10A when, in its reply, it had pleaded that the same agreement was signed but never implemented. The judgment records that a party cannot adopt inconsistent stands by asserting non-implementation of the agreement before the Adjudicating Authority and simultaneously rely on the agreement's date of default to claim protection under Section 10A. Further, the Agreement dated 26.02.2020 contains an express acknowledgement that Rs.64,04,90,697/- was due as on 19.02.2020 (prior to 25.03.2020), and the Adjudicating Authority found that earlier disbursements (pursuant to the 15.02.2016 agreement) and the acknowledgements support a default that pre-dates the Section 10A cut-off. Consequently, the plea that the application was barred by Section 10A was rejected. [Paras 16, 18]

The contention that the Section 7 application is barred by Section 10A is untenable and rejected.

Date of default and its determination by documentary notice extending repayment - reliance on contemporaneous correspondence to establish extension of time - Section 7 admission of corporate insolvency resolution process - Whether the date of default could properly be treated as 15.12.2021 by reason of the Financial Creditor's letter of 13.01.2022 recording extension of time, thereby validating admission under Section 7. - HELD THAT: - The Court accepted the Financial Creditor's documentary evidence, particularly the letter dated 13.01.2022 (filed as Annexure-O), which records that on request by the Corporate Debtor the repayment date had been extended to 15.12.2021 and that a demand was made thereafter. The receipt of that letter was not denied; the Corporate Debtor did not place the letter on record in the appeal and had not contested its substance before the Adjudicating Authority. The Tribunal observed that contemporaneous correspondence reflecting the parties' course of dealings is strong evidence of the state of affairs at the relevant time and that there were no circumstances sufficient to overturn the Adjudicating Authority's finding accepting 15.12.2021 as the date of default. On that basis, the Adjudicating Authority correctly admitted the Section 7 application. [Paras 20, 21, 22, 23]

The date of default as 15.12.2021 recorded by the Adjudicating Authority is sustained and the admission under Section 7 was correctly made.

Final Conclusion: The Appellate Tribunal dismissed the appeal and upheld the Adjudicating Authority's admission of the Section 7 application; the plea of bar under Section 10A was rejected and the date of default of 15.12.2021 was accepted.

Dismissal of special leave petition - entertainment of petition in presence of charge-sheet - regular attendance of accused before trial court - passage of time since impugned order

Dismissal of special leave petition - entertainment of petition in presence of charge-sheet - regular attendance of accused before trial court - passage of time since impugned order - Whether the special leave petition challenging the High Court order should be entertained - HELD THAT: - The Court noted that the charge-sheet in the underlying proceedings had been filed subsequent to the impugned High Court order and that the respondent-accused was regularly attending the trial court, a fact not disputed by the petitioner. The Court also had regard to the elapsed period since the impugned order (two years and three months) and the professional status of the petitioner as a Chartered Accountant. In light of these considerations the Court declined to entertain the special leave petition and dismissed it. The order disposing pending applications accompanied the dismissal. [Paras 1, 2, 3]

Special leave petition dismissed; pending applications disposed of.

Final Conclusion: The Supreme Court, having regard to the filing of the charge-sheet, the respondent's regular attendance before the trial court, the passage of time since the impugned order, and the circumstances of the petitioner, declined to entertain the special leave petition and dismissed it, with pending applications disposed of.

Taxability of marketing of agricultural produce as "Auctioneer's Service" - Taxability of charges for jewel loan appraisal as "Business Support Service" - Liability for Goods Transport Agency service and entitlement to abatement/exemptions - Benefit of abatement and exemptions under Notification No. 32/2004 ST, Notification No. 33/2004 ST and Notification No. 34/2004 ST - Imposition and legitimacy of penalty under Section 78 of the Finance Act, 1994

Taxability of marketing of agricultural produce as "Auctioneer's Service" - Distinction between auction and tender in sale of agricultural produce - Marketing and sale of members' agricultural produce through the society's tender process do not constitute taxable "Auctioneer's Service". - HELD THAT: - The Tribunal applied settled distinctions between auction and tender and held that the society conducted sales by tender/calling for offers rather than public open auctions. The process described (sealed/closed tenders, receipt of tender forms, absence of open competitive bidding at the spot) falls within the characteristics of tendering and not auctioning; accordingly the activity cannot be treated as "Auctioneer's Service" for levy of service tax. The Tribunal relied on prior decisions analysing the difference between auction and tender and found the facts of this case identical to those precedents, therefore the demand under the Auctioneer's Service entry was not sustainable. [Paras 10, 14]

Demand under "Auctioneer's Service" set aside.

Taxability of charges for jewel loan appraisal as "Business Support Service" - Service nexus - lending by cooperative society to its members - Charges collected for appraisal in connection with jewel loans to members do not constitute taxable "Business Support Service". - HELD THAT: - The Tribunal found that the society borrowed funds on its own account from a cooperative bank and re-lent them to its members; the appraisal charges are incidental costs of sanctioning those internal loans and are not services rendered to the bank or any external client. The activity is internal and relatable only to members, therefore it does not fall within the statutory ambit of "Business Support Service" and the demand under that head is unsustainable. [Paras 10, 14]

Demand under "Business Support Service" set aside.

Liability for Goods Transport Agency service and entitlement to abatement/exemptions - Benefit of abatement and exemptions under Notification No. 32/2004 ST, Notification No. 33/2004 ST and Notification No. 34/2004 ST - The question of Service Tax on goods transport (GTA) activities is remanded for recomputation; appellant entitled to have GTA tax recomputed after allowing applicable abatement/exemptions subject to verification. - HELD THAT: - The Tribunal held that transportation of ration and other goods undertaken for PDS may attract GTA liability but the demand must be recomputed after giving benefit of Notifications providing 75% abatement (Notification No. 32/2004 ST), exemption for certain low value consignments (Notification No. 34/2004 ST), and exemption for carriage of foodgrains and pulses effective 29.02.2010 (Notification No. 33/2004 ST), insofar as conditions for those notifications are fulfilled. The Statement of Demand did not apportion amounts by service head and the appellant had not produced complete supporting documents earlier; the matter is therefore remitted to the Original Adjudicating Authority to determine tax payable on GTA services, applying the said notifications and computing interest accordingly. [Paras 13, 14]

GTA demand remitted for recomputation with directions to apply abatement/exemptions and compute tax and interest.

Imposition and legitimacy of penalty under Section 78 of the Finance Act, 1994 - Penalty imposed under Section 78 of the Finance Act, 1994 is not justified and is set aside. - HELD THAT: - The Tribunal found imposition of mandatory penalty under Section 78 unjustified in the facts and circumstances, noting the appellant's failure to file ST 3 returns alone did not warrant the penalty as applied. Consequently the penalty was quashed. [Paras 12, 14]

Penalty under Section 78 set aside.

Final Conclusion: The appeal is partly allowed: demands and associated interest and penalties in respect of "Auctioneer's Service" and "Business Support Service" are set aside; penalty under Section 78 is quashed. The demand relating to Goods Transport Agency service is remitted to the Original Adjudicating Authority for recomputation after extending benefits of the specified notifications, and tax determined thereon shall be paid by the appellant with interest.

Supply of Tangible Goods service (STGU) - transfer of right to use goods - possession and effective control - reverse charge mechanism - penalty for suppression with intent to evade - penalty for failure to obtain registration

Supply of Tangible Goods service (STGU) - transfer of right to use goods - possession and effective control - Whether the transactions constituted taxable "Supply of Tangible Goods service" or were transfers of the right to use goods (deemed sale) with transfer of possession and effective control. - HELD THAT: - The Tribunal examined the contracts and work orders and found that excavators and JCBs were provided to customers under terms showing hiring charges, monthly payment basis, requirement of providing machines for specified working days, maintenance terms and inclusion of operator costs in hire charges. On these facts the Tribunal held that effective possession and control passed to the service recipients and the transactions therefore constituted transfer of the right to use goods rather than STGU. The Tribunal relied on and applied precedents (including Petronet LNG, GIMMCO Ltd., and Express Engineers & Spares Pvt. Ltd.) establishing that the question is one of fact dependent on contract terms, and that provision of operators or maintenance obligations does not preclude transfer of possession and effective control where the contract confers dominion on the hirer. Consequently the taxable event under STGU was not attracted on the facts of this case. [Paras 4]

Transactions were transfers of the right to use goods with possession and effective control passing to the recipients and therefore did not qualify as taxable STGU on the facts.

Penalty for suppression with intent to evade - penalty for failure to obtain registration - Whether the demand of service tax, interest and the penalties (including under the provision for suppression and for failure to register) could be sustained. - HELD THAT: - Having decided on the merits that the transactions were not STGU and thus not taxable, the Tribunal held that the demand of service tax could not be sustained. As a corollary, the Tribunal set aside the interest and penalties imposed in consequence of the rejected demand. The Tribunal expressly resolved the matter on merits and therefore declined to address limitation separately. [Paras 4, 5]

Demand of service tax, interest and penalties set aside.

Final Conclusion: Appeal allowed; on the facts and contract terms for 2008-09 to 2010-11 the transactions were held to be transfers of the right to use goods (deemed sale) and not taxable STGU, and the demand of service tax, interest and penalties were set aside.

Service tax on advances - accounting treatment of negative debtors - entries in books of account not conclusive - burden of proof on the department - CENVAT credit as evidence of tax discharged by network firms - demand unsustainable without transaction specific particulars - extended period of limitation and requirement of positive suppression

Service tax on advances - accounting treatment of negative debtors - entries in books of account not conclusive - CENVAT credit as evidence of tax discharged by network firms - demand unsustainable without transaction specific particulars - burden of proof on the department - Whether the demand of Service Tax by treating negative balances under the head 'debtors' as advance payments liable to Service Tax is sustainable. - HELD THAT: - The Tribunal found that the department's case rested on an assumption that figures shown as negative under 'debtors' represented advance receipts from clients on which Service Tax was not paid. The appellant demonstrated that the negative entries arose from transactions with network/associate firms - amounts payable by the appellant to network firms - adjusted against amounts receivable, supported by debit notes/invoices and maintenance of current accounts. The appellant had availed CENVAT credit on the invoices raised by network firms, which the department did not dispute, indicating that Service Tax on those payments had been discharged by the network firms. The SCN and the impugned order failed to identify particular transactions, invoices, dates of receipt, services or recipients as alleged advances; they proceeded merely from book entries. The Tribunal held that entries in the books, without transaction specific particulars and without discharge of the department's burden to prove a taxable advance receipt, are insufficient to sustain a demand. Applying these findings, the Tribunal concluded on merits that the demand could not be sustained and answered the issue in favour of the appellant. [Paras 5]

Demand set aside on merits; appellant succeeds.

Extended period of limitation and requirement of positive suppression - burden of proof on the department - demand unsustainable without transaction specific particulars - Whether the department was justified in invoking the extended period of limitation by alleging suppression with intent to evade payment of Service Tax. - HELD THAT: - The Tribunal examined the audit chronology and replies. Earlier audits for overlapping periods had not raised objections to the appellant's accounting method. The SCN followed a later audit observation dated 13.02.2014. The department produced no evidence of a positive act of suppression by the appellant, nor did it identify specific undisclosed advance receipts; the information was available in the appellant's records and was the subject of audit queries. Mere non reporting in returns, without evidence of willful suppression or intent to evade tax, does not justify invoking the extended period. On these facts the Tribunal held that the department failed to establish suppression with intent and therefore could not invoke the extended limitation period. [Paras 5]

Invocation of extended period of limitation held unsustainable; demand time barred on that ground.

Final Conclusion: The appeal is allowed; the impugned order confirming demand, interest and penalties is set aside and the appellant is given consequential reliefs.

Competence of Central Excise Officer to issue show-cause notice - best evidence rule - consulting engineer service vs manpower recruitment or supply agency service - tests for employer-employee relationship - management or business consultancy vs intellectual property service - reverse charge on import of services under Section 66A - valuation - reimbursable expenses and gross amount charged - taxability of services consumed in India irrespective of place of activity - limitation, extended period under proviso to Section 73 and penalty under Section 78

Competence of Central Excise Officer to issue show-cause notice - tax administration overlapping and shared jurisdiction - Maintainability of Show Cause Notice issued by ADG, DGCEI and competence of Commissioner to adjudicate - HELD THAT: - The Tribunal upheld the impugned authority's finding that ADG (DGCEI) was validly appointed as a Central Excise Officer by Notification No.3/2004-ST and thereby vested with powers to issue show-cause notices; the amended provisions (post 13.05.2005) governing the level of officers to issue SCNs apply to notices issued thereafter. Administrative circulars allocating work do not oust statutory jurisdiction vested in an officer; Rule 3(3) and sectional provisions permit exercise of powers by officers superior to designated officers. The Canon India decision under the Customs Act was held inapplicable to Service Tax by reference to Hari Khemu Gawali, and earlier judicial and board clarifications (including Circular No.80/1/2005-ST) support the competence of DGCEI and Commissioner to issue and adjudicate respectively. [Paras 5]

Objection to maintainability of the SCN issued by ADG (DGCEI) rejected; SCN held valid and adjudication by the Commissioner sustained.

Best evidence rule - Obligation to produce agreements and documents as best evidence and burden of proof - HELD THAT: - The Tribunal endorsed the impugned authority's reliance on written agreements as the best evidence under Section 91 and the burden under Section 106 of the Evidence Act. Where revenue places reliance on contracts, the initial onus shifts to the appellant to produce documentary rebuttal; failure to produce material information within the appellant's special knowledge justified adverse inference and supported the findings in the impugned order. [Paras 6]

Appellant's failure to furnish best evidence negatived its contentions; reliance on contemporaneous agreements by Revenue upheld.

Consulting engineer service vs manpower recruitment or supply agency service - tests for employer-employee relationship - Whether services from foreign firms (e.g., IOMI) are consulting engineer services or MRSAS (manpower supply) - HELD THAT: - Applying purposive interpretation of the contract, the repeated designation of personnel as 'consultants', the contractual obligation of the foreign firm to pay consultants, the per-rig per-day compensation and the scope of advisory, pre-bid/post-award and technical assistance indicated consultancy rather than mere supply of manpower. The Tribunal set out and applied control, integration, mutual-obligation and provision-of-equipment indicia and found the appellant had not discharged its initial burden to demonstrate an employer-employee relationship; therefore the impugned classification as consulting engineering service was sustained. [Paras 7]

Findings classifying the foreign engagement as consulting engineer/consultancy services sustained; MRSAS classification rejected.

Management or business consultancy vs intellectual property service - Whether services from India Offshore Inc. (IOI) fall under management consultancy or Intellectual Property Service (IPS) - HELD THAT: - The collaboration agreement evidenced a composite advisory service covering locating customers, pre-bid and post-award activities, provision of technical documentation and know how among wider managerial tasks. The Tribunal observed that for classification as IPS the provider must be the holder of IPR recognised under Indian law and payments must have character of royalty; the appellant did not demonstrate that IOI was a holder of relevant IPR or that payments were royalty. Further, the appellant failed to place shareholding and other material before the adjudicating authority or seek permission to adduce additional evidence before the Tribunal. Consequently the impugned classification as management/business consultancy was upheld. [Paras 8]

Services by IOI held to be predominantly management/business consultancy; classification as Intellectual Property Service rejected.

Reverse charge on import of services under Section 66A - taxability of services consumed in India irrespective of place of activity - Whether banking/financial advisory services (Barclays UK advising on FCCB) are taxable in India and liable under reverse charge; identity of service recipient - HELD THAT: - The Tribunal held that the contractual recipient of Barclays UK's services was the appellant (Indian company) and the benefits of the advisory services were received by the appellant in India. The taxable event, being supply of service to the appellant, attracts service tax under Section 66A by reverse charge. The Tribunal rejected the appellant's contention that services entirely taking place outside India are not taxable where the contractual recipient is in India and the service is for its benefit. [Paras 9]

Banking and financial advisory services from Barclays UK held taxable in India and exigible under reverse charge on the appellant.

Valuation - reimbursable expenses and gross amount charged - Inclusion of reimbursable expenses in taxable value - HELD THAT: - Relying on the Supreme Court's reasoning in Intercontinental and Bhayana, the Tribunal explained that only amounts charged 'for such service' with nexus to the taxable service form part of gross value; amounts without such nexus are not includible. The impugned order found the appellant did not furnish contractual or descriptive particulars to show the nature of reimbursables or their nexus; piecemeal and delayed disclosures justified the adjudicator's inclusion as per the material before him. In absence of clear evidence from the appellant, the Tribunal found no reason to disturb the valuation approach adopted below. [Paras 9]

No interference with the impugned authority's valuation findings given appellant's failure to demonstrate reimbursables' exclusion; valuation sustained.

Technical inspection service taxable in India - Taxability of technical inspection and certification services assertedly rendered in non designated areas - HELD THAT: - The Tribunal recorded that the appellant failed to produce documentary evidence to substantiate the claim that services related to rigs in non designated areas or that the services were not received in India. The impugned order's findings-that services were taxable and the appellant had not met its evidentiary burden-were adopted without further repetition. [Paras 10]

Findings in the impugned order regarding technical inspection and certification services upheld.

Legal consultancy-place of receipt and taxability - Taxability of legal consultancy services where advice relates to matters outside India - HELD THAT: - Although some legal advice related to matters outside India, the Tribunal accepted the impugned authority's conclusion that the consultancy services were provided to the appellant (situated in India) and therefore satisfied Section 66A conditions for taxability; consultancy being knowledge based is not linked to immovable property and is taxable when received by an Indian recipient. [Paras 11]

Demand for legal consultancy services confirmed as exigible in India; appellant's contention rejected.

Limitation, extended period under proviso to Section 73 and penalty under Section 78 - Invocation of extended period and imposition of penalty under Section 78; availability of Section 80 relief - HELD THAT: - The Tribunal agreed with the impugned authority that extended period was properly invoked in the first SCN dated 26/03/2009 and that delays and non cooperation by the appellant-failure to furnish documents and prolonged responses-justified inference of deliberate suppression. The appellant failed to establish reasonable cause under Section 80; mens rea requirements in Section 78 were considered satisfied by the adjudicator's findings of deliberate or intentional non disclosure. Consequently the extended period demand and penalties were sustained. [Paras 13]

Extended period invoked and penalties under Section 78 upheld; benefit of Section 80 denied.

Final Conclusion: The Tribunal upheld the impugned order in all material respects: the SCN issued by ADG (DGCEI) was maintainable; the classifications of services as consulting/management consultancy, banking/financial advisory and legal/technical inspection services were sustained; the appellant's claims on non-taxability, reimbursables and alternative classifications were rejected for lack of documentary proof; extended period and penalties were held to be rightly invoked. Appeals dismissed.

Advertising Agency service - scope (making, preparation, display or exhibition of advertisement) - Taxable value of advertising agency services - inclusion of commission and exclusion of media space/time - CENVAT credit - broadcasting services as input service - Extended period invocation for suppression with intent to evade (proviso to Section 73(1) of the Finance Act, 1994) - Mutual exclusivity of VAT and Service Tax in composite transactions

Advertising Agency service - scope (making, preparation, display or exhibition of advertisement) - Taxable value of advertising agency services - inclusion of commission and exclusion of media space/time - Mutual exclusivity of VAT and Service Tax in composite transactions - Whether the appellant's various activities (printing/production of banners, flex, cloth, wall-painting and supply of bought-out items) are taxable as 'Advertising Agency' service and whether service tax can be demanded where VAT has been paid - HELD THAT: - The Tribunal examined statutory definitions and the Board circular clarifying that service tax on advertising agency is leviable on the commission/consideration charged for services in relation to advertisements while amounts paid for space/time to media are not includible. Following judicial precedents, the Tribunal held that mere manufacture/printing or execution of advertisement material supplied by clients (without conceptualisation, visualisation or design) does not attract advertising agency service. Where VAT has been paid on the value indicated in invoices, that amount represents a sale and cannot be simultaneously subjected to service tax; payments of VAT and service tax are mutually exclusive. The Tribunal found that the lower authority had mechanically computed differential taxable value from financials without examining whether the appellant engaged in creative/preparatory advertising activity; consequentially, demands in respect of transactions on which VAT was paid, and for printing/manufacture where no creative input was shown, are unsustainable. The Tribunal permitted that service tax could apply to commission/charges actually earned for placement/release (as declared and taxed by the appellant), but not to amounts representing sale of goods or non-creative execution. [Paras 10, 11]

Demands of service tax in respect of sale transactions (where VAT was paid) and in respect of printing/manufacture/other non-creative work without evidence of making or preparation involving conceptualisation/design are not sustainable; service tax is chargeable only on the commission/consideration properly attributable to advertising agency services.

CENVAT credit - broadcasting services as input service - Pure agent doctrine and admissibility of input credit - Whether CENVAT credit claimed on broadcasting (TV/FM) charges is admissible or must be disallowed because the appellant acted as a pure agent - HELD THAT: - The Tribunal reviewed the nature of appellant's use of broadcasting services and the CENVAT Credit Rules. It held that broadcasting services procured by the appellant to effectuate advertisement at the behest of clients were used directly/indirectly in providing the appellant's output service and therefore qualify as input services. The adjudicating authority's conclusion that the appellant acted as a pure agent and so was not entitled to credit was rejected on the facts: the appellant was an advertising agency procuring broadcasting services as inputs in its service relationship with clients. Accordingly, the CENVAT credit on such input services was held to be admissible. [Paras 4, 6, 12]

CENVAT credit availed on broadcasting services is admissible as input service; the appellant was not acting as a pure agent so as to disentitle credit.

Extended period invocation for suppression with intent to evade (proviso to Section 73(1) of the Finance Act, 1994) - Nexus between prior notice/investigation and later invocation of extended period - Whether the demands were time-barred because the department had earlier issued a show-cause/demand notice covering part of the period, thereby precluding fresh invocation of the extended period for subsequent periods - HELD THAT: - The Tribunal considered the earlier show-cause notice issued for the period 01.04.2002 to 30.06.2006 and concluded that the later notices invoking the extended period for overlapping/succeeding periods on the same suppression theory were contrary to law and judicial discipline as explained in the cited Supreme Court precedents. The Tribunal found that the revenue had already been on notice of the same issue and that the fresh extended-period notices for the impugned periods were not maintainable. [Paras 13]

Invocation of the extended period for the impugned show-cause notices was unsustainable; the demands premised on extended limitation are set aside.

Final Conclusion: The impugned orders confirming service tax demands, denial of CENVAT credit, interest and penalties were set aside. The Tribunal held that (i) service tax cannot be demanded where VAT has been paid or where no creative 'making or preparation' of advertisement was shown; (ii) CENVAT credit on broadcasting services procured for advertising is admissible; and (iii) invocation of the extended period for the impugned demands was not maintainable. Consequential reliefs, if any, to follow as per law.

Summary order. Civil Appeals permitted to be withdrawn to enable the appellant to participate in the Sabka Vishwas Scheme, 2019; applications allowed.

Finalization of provisional assessment - reopening of assessments beyond limitation - jurisdiction to reopen assessment - appeal before Commissioner (Appeals) as statutory remedy - validity of show cause notice to reopen finalized assessments

Finalization of provisional assessment - reopening of assessments beyond limitation - jurisdiction to reopen assessment - appeal before Commissioner (Appeals) as statutory remedy - validity of show cause notice to reopen finalized assessments - Finalized provisional assessments could not be reopened by the original authority beyond the period of limitation and the original authority lacked jurisdiction to reopen assessments finalized by Assistant/Deputy Commissioner; consequently the show cause notices and orders based on such reopening were unsustainable. - HELD THAT: - The Tribunal found that provisional assessments submitted by the appellant were regularly finalized by Assistant/Deputy Commissioners, and those finalization orders constituted adjudication orders. If Revenue was aggrieved by such finalization orders, the statutory remedy was to prefer an appeal to the Commissioner (Appeals) within the prescribed limitation. Once the limitation period for filing an appeal before the Commissioner (Appeals) had expired, the assessment orders became final in law and could not be reopened. The original authority in the present case reopened finalized assessments beyond the limitation period and also did not have the competence to reopen assessments finalized by Assistant/Deputy Commissioner, since the proper authority for challenging such finalizations is the Commissioner (Appeals). For these reasons the show cause notices issued to reopen the finalized provisional assessments and the consequential demands and penalties confirmed by the original authority were held to be not sustainable. The Tribunal therefore set aside the impugned orders. [Paras 5, 6]

Impugned orders set aside; appeals allowed.

Final Conclusion: Provisional assessments finalized by Assistant/Deputy Commissioners had become final in law after expiry of the period for appeal; the original authority could not reopen those assessments beyond limitation nor had jurisdiction to do so; the show cause notices and consequent demands and penalties were unsustainable and the impugned orders were set aside.

Cenvat credit entitlement on duty actually paid - Special dispensation under Rule 12 of the Cenvat Credit Rules, 2004 for inputs from notified areas - Recipient cannot be denied credit for valuation or refund irregularities at supplier's end - Ineligibility of demand, interest and penalty where credit legally availed by recipient

Cenvat credit entitlement on duty actually paid - Special dispensation under Rule 12 of the Cenvat Credit Rules, 2004 for inputs from notified areas - Recipient cannot be denied credit for valuation or refund irregularities at supplier's end - Whether the appellant was entitled to Cenvat credit of duty shown on invoices for Mosquito Repellent Refills procured from GCPL, Guwahati units - HELD THAT: - The Tribunal held that the appellant had received the inputs and used them in manufacture of a dutiable final product and had availed credit on the basis of duty-paid invoices. Rule 3 entitles a manufacturer to credit of duty paid on inputs. Further, Rule 12 provides a special dispensation in respect of inputs manufactured in factories located in specified areas (including North-East) by making Cenvat credit admissible "as if no portion of the duty paid . . . was exempted under" the area-based notifications. The Rule operates to preserve the recipient's entitlement to credit even where the supplier had availed refund under an area-based exemption. The appellant had no control over the supplier's method of valuation; denial of credit to the recipient on account of alleged overvaluation or erroneous refund at the supplier's end lacks legal basis. The Tribunal followed precedent recognising that credit accrues where duty has in fact been paid, and concluded that the appellant rightly availed Cenvat credit on the inputs supplied by GCPL, Guwahati. [Paras 9]

Credit availed by the appellant on inputs from GCPL, Guwahati is legal and proper and cannot be denied on the ground of valuation/refund irregularities at the supplier's end.

Ineligibility of demand, interest and penalty where credit legally availed by recipient - Whether the confirmed demand, interest and penalties against the appellant for wrongly availing Cenvat credit could be sustained - HELD THAT: - Having found that Cenvat credit was lawfully availed by the appellant under Rule 3 read with the special dispensation in Rule 12, the Tribunal concluded that the recovery proceedings, interest and penalties premised on alleged ineligible credit could not be sustained. The Tribunal also noted the absence of any legal basis to deny credit at the recipient's end when duty was in fact paid and accepted by the department at the supplier level. Applying the stated legal principles and precedents cited, the Tribunal set aside the impugned order insofar as it confirmed demand, interest and penalties. [Paras 12]

The demand, interest and penalties confirmed against the appellant are not sustainable and are set aside.

Final Conclusion: The appeal is allowed; the impugned order confirming recovery of alleged excess Cenvat credit, with interest and penalties, is set aside, the appellant being entitled to credit on duty actually paid on inputs supplied by GCPL, Guwahati, in view of Rule 3 read with Rule 12 of the Cenvat Credit Rules, 2004.

Deposit requirement for entertaining an appeal under Section 11(1) (second proviso) - power of the Commissioner under Section 8 to extend time for payment of assessed tax - Explanation to sub section (1) of Section 11 and its scope - distinction between extension of time for payment under Section 8 and deferment or waiver of deposit required for filing appeal under Section 11 - appellate authority's power to entertain or stay recovery subject to statutory deposit

Deposit requirement for entertaining an appeal under Section 11(1) (second proviso) - Explanation to sub section (1) of Section 11 and its scope - power of the Commissioner under Section 8 to extend time for payment of assessed tax - Whether an order by the Commissioner under Section 8 (as referred to in the Explanation to Section 11(1)) can waive, defer or suspend the statutory deposit/ payments required under the second proviso to Section 11(1) for an appeal to be entertained. - HELD THAT: - The Court held that the Explanation to sub section (1) of Section 11 must be read in the context of the power expressly conferred on the Commissioner under Section 8, which relates to extending the period for payment of an assessed tax or other demand and permitting installments subject to conditions such as interest and security. The Explanation therefore contemplates cases where an assessee chooses not to challenge the demand but seeks more time to pay the assessed amount. It does not empower the Commissioner to waive, defer or suspend the separate statutory requirement of deposit contained in the second proviso to Section 11(1) which is a condition precedent for the appellate authority to entertain an appeal. If the Legislature had intended the Commissioner to have power to extend or defer the deposit required for filing an appeal under Section 11, it would have referred to Section 11 in the Explanation; instead the Explanation refers to the power under Section 8. Consequently extension under Section 8 cannot be invoked to avoid the deposit obligation required for admission of an appeal under Section 11(1). The Court therefore rejected the petitioner's contention that an order under Section 8 could relieve him from making the payments under clauses (a), (b) and (c) of the second proviso to Section 11(1). [Paras 22, 23, 24, 26, 27]

The Explanation to Section 11(1) does not permit the Commissioner, by exercising powers under Section 8, to waive, defer or suspend the statutory deposit/payments required under the second proviso to Section 11(1); the appellant must make the stipulated deposits for the appellate authority to entertain the appeal.

Obligation to produce documents and to file returns before assessing authority - judicial reluctance to exercise extraordinary writ jurisdiction to reappraise disputed factual record - Whether the Court should exercise extraordinary writ jurisdiction to relieve the petitioner from the deposit requirement on account of alleged wrongful assessment where the petitioner failed to produce documents before the Assessing Authority and did not file returns. - HELD THAT: - The Court observed that the assessment proceeded after statutory notices and that a representative of the petitioner had appeared before the Assessing Authority but failed to produce documents or file returns showing nil liability. The petitioner's present grievance that only a small portion of the contract was executed and that tax liability is absent was a factual contention which could have been presented during assessment or in returns. The petitioner's own inaction contributed to the present position. Given these facts and that relief would require re appraisal of disputed factual matters, the Court declined to invoke its extraordinary jurisdiction under Article 226 to mitigate the petitioner's self created hardship. [Paras 30, 31, 32, 33, 34]

Writ relief is refused; the Court will not intervene to relieve the petitioner from the statutory deposit requirement where the petitioner failed to present relevant documents or file returns and the grievance involves disputed facts.

Final Conclusion: The petition is dismissed. The petitioner is liable to make the deposits/payments contemplated under clauses (b) and (c) of the second proviso to sub section (1) of Section 11 of the Jammu & Kashmir General Sales Tax Act, 1962 if it wishes the appellate authority to entertain the appeal; the Commissioner's order declining extension of time for that purpose is not interfered with.

Maintainability of prosecution under Section 141 of the Negotiable Instruments Act - requirement of specific averments that a person was in charge of and responsible for conduct of company's business - vicarious criminal liability of directors and other officers under statutory fiction - service of summons on a corporation and consequences of non-appearance of corporate representative - inapplicability of warrant of arrest and attachment against a juridical person

Maintainability of prosecution under Section 141 of the Negotiable Instruments Act - requirement of specific averments that a person was in charge of and responsible for conduct of company's business - vicarious criminal liability of directors and other officers under statutory fiction - Whether the complaint contained the necessary averments to fasten liability on the individual petitioners as persons "in charge of and responsible for" the conduct of the company's business under Section 141 of the Negotiable Instruments Act, 1881, and whether proceedings against them should be quashed. - HELD THAT: - The Court applied the settled rule that Section 141 creates a statutory fiction and, therefore, a complaint must specifically aver that the person sought to be made liable was in charge of and responsible for the conduct of the company's business at the time of the offence. The complaint in the present case, beyond reciting the petitioners' designations, narrates their active personal role in the transaction, their representations inducing the complainant, receipt of the advance by RTGS, and that the relevant cheques were issued in the course of that transaction. Those averments, taken together with the admitted fact of cheque dishonour, furnish strong prima facie material to satisfy the threshold required by Section 141 and the authorities constraining vicarious liability. Having considered the pleadings and governing precedents, the Court found no ground to hold the complaint deficient as to the petitioners in CRR 196 of 2016 and CRR 197 of 2016 and therefore refused to quash the proceedings against them. [Paras 28, 30, 31, 32]

Proceedings against the individual petitioners (CRR 196 of 2016 and CRR 197 of 2016) are not quashed; the Magistrate's orders taking cognizance and issuing process are upheld.

Service of summons on a corporation and consequences of non-appearance of corporate representative - inapplicability of warrant of arrest and attachment against a juridical person - Whether the Magistrate's order directing issuance of a warrant of arrest and attachment against the accused company (a juridical person) was lawful and executable. - HELD THAT: - The Court examined the Code provisions on service of summons on corporations (including affixation when due diligence fails) and the special procedure in Section 305 for corporate accused. It noted that Section 305(4) contemplates that where a representative of a corporation does not appear, the requirements of presence and examination of the accused do not apply, and that a company as a juridical person cannot be physically apprehended. Consequently the statutory scheme does not contemplate issuance or execution of a warrant of arrest or attachment against a company in the manner directed in the impugned order. While a company remains liable to be tried and punished if found guilty, coercive measures of arrest/attachment directed at a corporate body are not sustainable. For these reasons the Court interfered with the Magistrate's order to the extent of vacating the warrant of arrest and attachment issued against the company, while permitting the trial to proceed after the Magistrate satisfies himself regarding due service and other procedures. [Paras 33, 35, 36, 40, 41]

The order of warrant of arrest and attachment against the company (CRR 278 of 2016) is set aside; trial shall proceed after the Magistrate deals with service and corporate representation in accordance with law.

Final Conclusion: The revisions by the individual petitioners (CRR 196 of 2016 and CRR 197 of 2016) are dismissed and their prosecutions under Sections 138/141 of the Negotiable Instruments Act are permitted to continue; the revision by the company (CRR 278 of 2016) is allowed in part by setting aside the Magistrate's order for warrant of arrest and attachment against the company, but the complaint and trial as to the company shall proceed in accordance with statutory procedure.