TaxTMI Updates e-Newsletter
Feb 08,2019

Summary order. Petition listed on 14.2.2019; learned Standing Counsel granted one week to obtain instructions; direction that an officer not less than the rank of Assistant Commissioner familiar with the facts be present before the Court on the next date.

Release of goods on furnishing Bank Guarantee - simple bond for value of goods without sureties - Rule 141 of the Central Goods and Services Tax Rules, 2017 - failure to remit tax and penalty under Section 129 - confiscation under Section 130

Release of goods on furnishing Bank Guarantee - simple bond for value of goods without sureties - Rule 141 of the Central Goods and Services Tax Rules, 2017 - Goods and vehicle to be released on furnishing a Bank Guarantee for tax and penalty under Rule 141 and a simple bond for the value of the goods without sureties. - HELD THAT: - The Division Bench directed that upon furnishing a Bank Guarantee covering tax and penalty as envisaged by Rule 141 of the Central Goods and Services Tax Rules, 2017, together with a simple bond (without sureties) for the value of the goods, the goods and vehicle shall be released expeditiously. The court observed that providing a Bank Guarantee suffices to secure the Department's interest pending final adjudication and noted that ultimately the guarantee will either be released or enforced depending on the final orders. Given this mechanism for security, the court was not inclined to keep the matter pending.

Release of goods and vehicle directed on furnishing Bank Guarantee for tax and penalty and a simple bond without sureties; release to be expeditious.

Failure to remit tax and penalty under Section 129 - confiscation under Section 130 - Contention that failure to remit tax and penalty under Section 129 would lead to confiscation under Section 130 is premature as no proceedings under Section 130 have been initiated. - HELD THAT: - The court held that the question whether failure to remit tax and penalty under Section 129 would attract confiscation under Section 130 had not arisen because the Department had not proceeded under Section 130. The appellant was given the option to withdraw the writ petition and challenge any Section 130 proceedings when initiated, or alternatively to furnish the Bank Guarantee to secure release. The court declined to entertain a substantive determination on Section 130 at this interim stage and refused to keep the matter pending merely to decide that larger legal question.

Challenge to applicability of Section 130 deferred as premature; appellant may contest Section 130 if and when proceedings are initiated, or furnish Bank Guarantee in the interim.

Final Conclusion: Writ appeal disposed of by directing immediate release of goods and vehicle on furnishing a Bank Guarantee for tax and penalty and a simple bond without sureties; contention on confiscation under Section 130 held premature and may be raised when Section 130 proceedings are initiated.

Quashing of assessment order - constitutional validity of provisions of the State Goods and Services Tax Act - conflict between statute and the Constitution - ultra vires challenge - application of precedent / ratio of earlier judgment

Quashing of assessment order - Challenge to Exhibit-P1 assessment order passed for the year 2012-13 - HELD THAT: - The writ petition seeking quashing of the assessment order for 2012-13 was considered in the light of an earlier decision recorded as judgment dated 11th January 2019 in W.P.(C) No.11335 of 2018 and connected cases. The learned Judge held that the issues raised by the petitioner on the assessment order are covered by the ratio of that earlier decision and, applying that ratio, dismissed the petition insofar as it sought relief against Exhibit-P1.

The challenge to the assessment order for 2012-13 is dismissed by applying the ratio of the earlier judgment.

Constitutional validity of provisions of the State Goods and Services Tax Act - conflict between statute and the Constitution - ultra vires challenge - Petitioner's constitutional challenges to Clause (d) and (e) of Section 174 of the Kerala Goods and Service Tax Act, 2017 and related declarations - HELD THAT: - The petitioner sought declarations that specified clauses of Section 174 are inconsistent with Section 19 of the Constitution (One Hundred and First Amendment) Act, 2016, that provisions under erstwhile Entry 54 ceased to exist after 15.9.2017, and related reliefs. The Court found that these contentions are squarely covered against the petitioner by the ratio of the earlier decision in W.P.(C) No.11335 of 2018 . No fresh adjudication of those constitutional contentions was undertaken; instead the Court applied the precedent and dismissed the petition insofar as it sought those declarations and related reliefs.

The constitutional and ultra vires challenges to the specified provisions of the Kerala GST Act, 2017 are rejected and the petition is dismissed by applying the earlier judgment's ratio.

Final Conclusion: Writ petition dismissed; all reliefs sought, including quashing of the assessment order for 2012-13 and the constitutional challenges to provisions of Section 174 of the Kerala GST Act, 2017, are refused by applying the ratio of the earlier decision.

Summary order. Writ petition dismissed as covered by the judgment dated 11th January 2019 in W.P.(C) No.11335 of 2018 and connected cases.

Reopening of assessment - reason to believe - income escaping assessment - change of opinion - taxability of receipts without consideration under Section 56 - unexplained receipt / Section 68 - examination during original scrutiny assessment

Reopening of assessment - reason to believe - examination during original scrutiny assessment - change of opinion - Validity of notice issued under Sections 147/148 to reopen assessment for A.Y. 2013-14 - HELD THAT: - The Assessing Officer recorded satisfaction to reopen the assessment on the basis that the assessee was not the owner of the leasehold rights and that the receipt of Rs. 40.51 crore remained unexplained. However, the transaction was disclosed in the return, was the subject of scrutiny, and detailed documents, workings and submissions (merger/demerger orders, lease agreements, computation of capital gain) were placed before and considered by the Assessing Officer during the original assessment which accepted the capital gain computation. The only additional material relied upon was the conclusion reached in the assessment of Morarjee Textiles Ltd., which was based on the same documents available in the assessee's scrutiny. Adoption of another Assessing Officer's view, arising from the same material, amounts to a mere change of opinion and cannot constitute fresh information or material justifying reopening. Absent independent new material external to the original assessment records, the jurisdictional pre condition under Section 147/148 that the Assessing Officer have a genuine ''reason to believe'' that income has escaped assessment was not satisfied. The Court relied on established precedent that reopening is impermissible where it merely represents a change of opinion after full examination in the original scrutiny assessment. [Paras 12, 13, 14, 15, 21]

Notice to reopen assessment quashed as issuance amounted to impermissible change of opinion and there was no new material beyond that examined in the original scrutiny assessment.

Taxability of receipts without consideration under Section 56 - unexplained receipt / Section 68 - Whether, if the assessee were not the owner, the receipt could be treated as taxable income on reopening - HELD THAT: - The Court observed that if the assessee had not been the owner, the receipt would at best be a receipt without consideration (i.e., akin to a gift). The statutory regime in force for the relevant period was examined: clauses then in Section 56 applied only to individuals/HUFs or to specified categories of companies and the broader provision taxing receipts without consideration for any person was introduced only w.e.f. 1.4.2017 and therefore did not cover the assessment year in question. Further, Section 68 could not be invoked because the payment was routed through banking channels and the Assessing Officer did not impugn the creditworthiness of the payer nor suggest undisclosed income routed through that transaction. No other provision was shown to the Court under which the Department could call upon the recipient to offer such receipt to tax for the relevant year. [Paras 7, 8, 9]

On the material before the Assessing Officer, there was no available statutory basis to tax the alleged receipt as income for A.Y. 2013-14; Section 56 as then applicable did not cover the situation and Section 68 was inapplicable.

Final Conclusion: The reopening notice issued under Sections 147/148 for A.Y. 2013-14 was quashed: the transaction had been examined in the original scrutiny assessment and the Assessing Officer relied on a mere change of opinion (adopting another AO's conclusion based on the same records) without new material; further, no provision then available could properly tax the alleged receipt if treated as a gift, and Section 68 was inapplicable. The petition is allowed.

Substantial interest in business or profession - related person for clause (ia) of the proviso to Section 245C(1) - clause (v) and clause (vi) of Explanation (a) to Section 245C(1) - 20% beneficial ownership as threshold for substantial interest - no clubbing of shareholdings to determine substantial interest - strict construction of taxing statutes

Related person for clause (ia) of the proviso to Section 245C(1) - clause (v) of Explanation (a) to Section 245C(1) - substantial interest in business or profession - Whether the petitioner Company qualifies as a 'related person' under clause (v) of Explanation (a) to Section 245C(1) so as to make its settlement application valid. - HELD THAT: - The Court accepted the Settlement Commission's construction that clause (v) applies where a director, partner or member of a company/firm/AoP/HUF has a substantial interest in the business or profession of the specified person; that condition requires an individual to possess the threshold of substantial interest as defined in the Explanation. The petitioner's case did not satisfy that condition and therefore could not be held to fall within clause (v). The Commission's view that the existence of substantial interest of a director in the specified person could not be inferred on the facts of this case was upheld. [Paras 22, 23, 24]

Petitioner does not qualify as a 'related person' under clause (v) of Explanation (a) to Section 245C(1).

20% beneficial ownership as threshold for substantial interest - no clubbing of shareholdings to determine substantial interest - clause (vi)(B) of Explanation (a) to Section 245C(1) - Whether the petitioner can satisfy the definition of 'substantial interest' by aggregating or clubbing the individual shareholdings of multiple persons so as to meet the 20% threshold under the Explanation. - HELD THAT: - The Court concurred with the Settlement Commission and prior authority (Delhi High Court in Rockland Hotels Ltd.) that 'substantial interest' as defined requires an individual or single person to be beneficial owner of not less than 20% of voting power; the statute does not permit aggregation of separate persons' shareholdings to reach the 20% threshold. The legislative scheme, including the specific treatment of beneficial ownership elsewhere, indicates that clubbing of distinct persons' holdings is not intended. [Paras 23, 26, 28]

Clubbing of multiple shareholders' holdings to reach the 20% substantial interest threshold is not permissible; petitioner's aggregate facts do not satisfy clause (vi)(B).

Clause (vi)(A) of Explanation (a) to Section 245C(1) - interpretation by reading singular as plural - strict construction of taxing statutes - Whether the petitioner could be held to be within clause (vi)(A) or by reading singular terms as plural (e.g., under General Clauses Act) so as to make the petitioner a related person. - HELD THAT: - The Court rejected the submission that clause (vi)(A) or a liberal reading (including use of General Clauses Act to read 'person' as plural) would bring the petitioner within the definition. The Court found such reinterpretation contrary to the statutory text and legislative intent and held that the statute must be construed strictly in tax matters; the suggested read down or expansive construction was not warranted. [Paras 29, 30, 31]

Petitioner is not covered under clause (vi)(A) and the proposed expansive reading of statutory terms is not permissible.

Final Conclusion: The writ petition challenging the Settlement Commission's order rejecting the petitioner's application under Section 245C(1) was dismissed. The Court upheld the Commission's construction that the petitioner does not qualify as a related person under the relevant explanations and refused to permit aggregation or expansive reading of the 'substantial interest' threshold.

Disallowance under Explanation 1 to section 37 - reinsurance ceded to non-resident reinsurers - scope of remand - tribunal exceeding jurisdiction - interpretation of Section 101A of the Insurance Act - meaning of "other insurer" in Section 101A(7) - Insurance Regulatory and Development Authority (General Insurance - Reinsurance) Regulations, 2000

Tribunal exceeding jurisdiction - scope of remand - disallowance under Explanation 1 to section 37 - Whether the Tribunal could, suo motu, decide the validity of reinsurance arrangements under the Insurance Act and disallow reinsurance premium by invoking Explanation 1 to section 37 when neither party had raised that issue and the remand was limited. - HELD THAT: - The High Court held that the Tribunal exceeded the scope of the remand and its jurisdiction by raising and deciding, suo motu, the question whether reinsurance ceded to non-resident reinsurers was prohibited by the Insurance Act and therefore hit by Explanation 1 to section 37. The Division Bench's earlier directions required the Tribunal to consider the issues raised by the parties and any additional legal grounds the assessees might file; no additional grounds were filed. Section 254(1) empowers the Tribunal to pass orders on the appeal but does not permit the Tribunal to decide fresh statutory questions not canvassed by the parties or beyond the remit of the remand. The Tribunal also did not find that assessee incurred expenditure constituting an offence; it merely held the payments were "prohibited by law," a conclusion the Court found to be outside the Tribunal's jurisdiction in the appellate proceedings under the Act. For these reasons the Tribunal's conclusion disallowing the reinsurance premium under Explanation 1 to section 37 was set aside. [Paras 11, 12, 13, 15, 26]

Tribunal's suo motu finding that reinsurance payments to non-residents were prohibited and therefore disallowable under Explanation 1 to section 37 was without jurisdiction and is set aside.

Insurance Regulatory and Development Authority (General Insurance - Reinsurance) Regulations, 2000 - interpretation of Section 101A of the Insurance Act - meaning of "other insurer" in Section 101A(7) - Whether Section 101A and the IRDA (General Insurance-Reinsurance) Regulations, 2000 prohibit reinsurance with foreign reinsurers and whether the Tribunal's interpretation of "other insurer" was sustainable. - HELD THAT: - The Court examined the statutory scheme and the Regulations framed under the IRDA Act and Section 114A of the Insurance Act. Chapter II of the 2000 Regulations prescribes objectives and procedures for reinsurance programmes, requires ceding specified percentages to Indian reinsurers but also contemplates placements outside India subject to rating and approval conditions (see Regulations 3(7), 3(9) and related clauses). Section 101A(7) is clarificatory and does not by its language prohibit cessions to reinsurers outside India in excess of the specified percentage. The Tribunal's narrow reliance on the definition of "insurer" in Section 2(9) to conclude an absolute prohibition was rejected as unsustainable. Parliamentary materials and regulatory practice, including historical CBDT guidance and subsequent amendments, show no absolute bar; the Regulations aim to maximize retention but do not forbid foreign reinsurance subject to stipulated safeguards. The Court therefore held the Tribunal's finding that the Regulations were inconsistent with the Insurance Act and that foreign reinsurance was prohibited was perverse and liable to be rejected. [Paras 20, 21, 22, 24, 25]

The Tribunal's interpretation that Section 101A and the Regulations prohibit reinsurance with foreign reinsurers is rejected; the Regulations do not amount to an absolute bar on reinsurance placements outside India.

Scope of remand - Whether the matters remanded by the High Court to the Tribunal should be limited to specific tax issues and whether fresh material may be placed before the Tribunal. - HELD THAT: - The High Court directed that the Tribunal decide only specified taxation questions arising from the appeals and that neither party is entitled to place fresh material before the Tribunal. The Court remitted the matters for fresh adjudication limited to (i) whether the Assessing Officer was right in disallowing the reinsurance premium under section 40(a)(i), (ii) whether the CIT(A) was right in partially rejecting the assessee's appeal, and (iii) whether the CIT(A) was justified in restricting the claim to 15% instead of confirming the Assessing Officer. The Tribunal is to decide these questions alone based on the available material and to do so expeditiously. [Paras 27, 28, 29]

Matter remitted to the Tribunal to decide only the three specified taxation questions on the existing record; no fresh material to be admitted.

Final Conclusion: The High Court allowed the assessees' appeals, set aside the Tribunal's findings that reinsurance ceded to non-resident reinsurers was prohibited and disallowable under Explanation 1 to section 37, rejected the Tribunal's interpretation of Section 101A and the Regulations, and remanded the matters to the Tribunal to decide limited tax issues (assessment of disallowance under section 40(a)(i), CIT(A)'s partial rejection, and the 15% restriction) on the existing material only.

Assessment under section 153A - incriminating material - finality of assessment - scope of search assessments vis-a -vis disclosed records - non-obstante clause and scope of proceedings consequent to search - reliance on audited balance sheet not constituting incriminating material

Assessment under section 153A - incriminating material - finality of assessment - reliance on audited balance sheet not constituting incriminating material - Whether additions in assessment completed under proceedings consequent to search under section 153A are sustainable when the assessment stood final as on date of search and no incriminating material was found. - HELD THAT: - The Tribunal found that the return for the year had been processed under section 143(1) and the time for issuing a notice under section 143(2) had lapsed, so the assessment had attained finality as on the date of search. In that factual matrix the Tribunal held that additions under proceedings initiated by notice under section 153A could be sustained only if based on incriminating material discovered during the search; additions founded on the audited balance sheet filed during assessment proceedings did not qualify as such incriminating material. The Tribunal noted and followed the reasoning in Pro.CIT vs. Ram Avtar Verma and the decision in Kabul Chawla as guiding precedent on the permissible scope of enquiries under section 153A where the regular assessment was complete, and accordingly allowed the ground challenging the additions made under section 153A. [Paras 6]

Ground no.1 allowed; additions under section 153A not sustained as they were not based on incriminating material.

Academic consideration of contested additions - Whether grounds challenging specific additions (conversion charges, personal expenses, commission, unexplained purchases) required adjudication after allowance of ground no.1. - HELD THAT: - The Tribunal observed that once ground no.1 was allowed on the stated legal and factual basis, the remaining grounds (challenging specific additions sustained by lower authorities) became academic and were not addressed on merits by the Tribunal. [Paras 7]

Grounds 2 to 5 rendered academic and not adjudicated.

Final Conclusion: The appeal is allowed by setting aside the additions made under proceedings consequent to search under section 153A insofar as they were not based on incriminating material; the remaining grounds concerning specific additions are academic and were not decided on merits.

Remuneration paid to working partners - deduction under section 40(b)(v) - partnership deed authorisation for remuneration - CBDT circular cannot override statute - quantification of remuneration and statutory maxima

Remuneration paid to working partners - deduction under section 40(b)(v) - partnership deed authorisation for remuneration - CBDT circular cannot override statute - Whether remuneration paid to working partners, authorised by the partnership deed, is allowable under section 40(b)(v) despite the CBDT Circular prescribing fixation/quantification of individual partners' remuneration in the deed. - HELD THAT: - Section 40(b)(v) permits deduction of remuneration to working partners if authorised by and in accordance with the partnership deed and not exceeding the aggregate ceilings specified by the statute. The partnership deed of the firm authorised payment of remuneration and, by its amendment, incorporated scales which, when applied to the assessed book profit, did not result in any excess over the statutory limits. A CBDT Circular requiring fixation of amount for each individual partner or a specific method of quantification cannot introduce conditions contrary to the statute and must be read subject to section 40(b)(v). Where payments are made in accordance with the partnership deed and within the statutory maxima, they are deductible. The Tribunal relied on identical reasoning in earlier judicial authority and applied it to the facts, finding the assessee's payments compliant with the statute. [Paras 7]

Remuneration paid to working partners, being authorised by the partnership deed and not exceeding the limits under section 40(b)(v), is allowable; the disallowance is set aside and the deduction is granted.

Final Conclusion: The Tribunal allowed the appeal, holding that remuneration paid to working partners authorised by the partnership deed and within the statutory ceilings under section 40(b)(v) is deductible; the CIT(A)'s confirmation of disallowance was set aside.

Treatment of excise duty and VAT in valuation of closing stock under section 145A of the Income tax Act - allowability of provisions for warranty as deduction under section 37(1) of the Income tax Act - eligibility for additional depreciation for new commercial vehicles as per Income tax depreciation rates read with the Motor Vehicles Act definition of "commercial vehicle" - precedential effect of assessee's own earlier decisions of the ITAT and binding weight of jurisdictional High Court rulings

Treatment of excise duty and VAT in valuation of closing stock under section 145A of the Income tax Act - precedential effect of assessee's own earlier decisions of the ITAT and binding weight of jurisdictional High Court rulings - Deletion of addition made by AO by including excise and VAT in closing stock valuation under section 145A for AY 2012 13 was upheld in favour of the assessee. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's addition because identical issues in the assessee's own earlier years were decided in favour of the assessee by the ITAT and the jurisprudence of the jurisdictional High Court (ACIT v. Narmada Chematur Petrochemicals Ltd.) supported not disturbing the accounting method regularly followed. The Tribunal noted the revenue neutral character of adding excise duty to closing stock and that an assessing authority cannot change the method of accounting regularly employed; consequently, the CIT(A)'s direction to the AO to follow the Tribunal's earlier directions was affirmed. [Paras 7]

Revenue's ground challenging deletion of the addition under section 145A for AY 2012 13 dismissed.

Allowability of provisions for warranty as deduction under section 37(1) of the Income tax Act - Provision for warranty created by the assessee was held to be allowable as deduction under section 37(1) for AY 2012 13. - HELD THAT: - Applying settled principles in Rotork Controls India Pvt. Ltd., the Tribunal accepted that where provisions are made on a scientific basis supported by systematic data and historical experience they are deductible under section 37(1). The assessee's warranty provision (0.4% of turnover) was supported by ledger evidence showing actual subsequent warranty expenses exceeding the provision; the authorities below did not controvert those entries. The Tribunal therefore found the provision not to be an ad hoc contingent liability but an ascertainable liability deductible under section 37(1). [Paras 12]

Revenue's ground disallowing the warranty provision for AY 2012 13 dismissed.

Eligibility for additional depreciation for new commercial vehicles as per Income tax depreciation rates read with the Motor Vehicles Act definition of "commercial vehicle" - Assessee entitled to higher depreciation (50% for new commercial vehicle) for certain vehicles in AY 2012 13; AO's disallowance of excess depreciation was deleted. - HELD THAT: - The Tribunal agreed with the CIT(A) that the Motor Vehicles Act and related rules define "commercial vehicle" to include Light Motor Vehicles meeting specified weight criteria; where the vehicles satisfied those specifications and were used for business, the assessee qualified for the higher depreciation rate granted to new commercial vehicles. The Tribunal followed its earlier coordinate bench decision in the assessee's own case and related authority, confirming that the statutory definition, not common parlance, governs eligibility for the incentive rate. [Paras 16]

Revenue's ground challenging the allowance of higher depreciation for AY 2012 13 dismissed.

Treatment of excise duty and VAT in valuation of closing stock under section 145A of the Income tax Act - precedential effect of assessee's own earlier decisions of the ITAT and binding weight of jurisdictional High Court rulings - Deletion of addition by AO under section 145A for AY 2013 14 (similar excise/VAT valuation issue) was upheld in favour of the assessee by following the decision in AY 2012 13. - HELD THAT: - The Tribunal applied the same reasoning and precedents relied upon in the AY 2012 13 disposal to the identical issue for AY 2013 14 and found no reason to interfere with the CIT(A)'s order deleting the addition. Consistency with the assessee's own earlier favourable decisions and the jurisdictional precedent warranted dismissal of the revenue's ground. [Paras 19]

Revenue's ground on section 145A for AY 2013 14 dismissed.

Allowability of provisions for warranty as deduction under section 37(1) of the Income tax Act - Deletion of AO's disallowance of provision for warranty (0.5% on sales) for AY 2013 14 was upheld in favour of the assessee. - HELD THAT: - On review of the warranty ledgers, the Tribunal observed that the assessee created a provision in one year which was reversed in the subsequent year and that actual warranty expenses were recorded separately; this accounting showed no double claim for deduction. Applying the same legal principle on allowability of scientifically based provisions, the Tribunal found no infirmity in the CIT(A)'s deletion of the disallowance. [Paras 21, 26]

Revenue's ground disallowing the warranty provision for AY 2013 14 dismissed.

Prohibition on double deduction for the same expenditure across assessment years - allowability of provision versus actual expenditure in successive years - Claim of double deduction (provision in one year and actual expense in a subsequent year) was not established; deletion of AO's addition for alleged double deduction for AY 2013 14 was sustained. - HELD THAT: - The Tribunal examined the ledgers and concluded that the provision created in one year was reversed in the subsequent year and the actual warranty expenses were recorded in the subsequent year; thus the accounting did not amount to double deduction in the same period. Absent demonstrable double claiming of the same expenditure, the AO's addition was unjustified and the CIT(A)'s deletion was maintained. [Paras 26]

Revenue's ground alleging double deduction for warranty expenses for AY 2013 14 dismissed.

Final Conclusion: Both appeals filed by the Revenue (pertaining to AYs 2012 13 and 2013 14) are dismissed; the Tribunal upheld the CIT(A)'s deletions of additions relating to excise/VAT inclusion in stock valuation, allowed scientifically based warranty provisions as deductible under section 37(1), and confirmed entitlement to higher depreciation for qualifying commercial vehicles.

Deduction for bad debts - write-off as irrecoverable in accounts - business expediency - advances for job work as business expenditure - amendment to Section 36(1)(vii) effective 01.04.1989 - allowance under Section 37

Deduction for bad debts - write-off as irrecoverable in accounts - amendment to Section 36(1)(vii) effective 01.04.1989 - business expediency - Whether the Tribunal was correct in allowing deduction of bad debts written off in the assessee's accounts where the debt was due from a subsidiary and no separate recovery steps had been pursued - HELD THAT: - The Tribunal applied the post-01.04.1989 position of Section 36(1)(vii), under which a debt or part thereof that is written off as irrecoverable in the assessee's accounts for the previous year is eligible for deduction. The Court affirmed that the amendment entrusts the prudence of declaring a debt bad to the assessee, subject to factual scrutiny. The Tribunal examined the financial figures of both the assessee and the subsidiary and found the subsidiary to be in absolute financial stringency with no reasonable prospect of recovery. On these facts the Tribunal concluded the write-off was not a colourable device to evade tax. The Court found no question of law in reversing the disallowance and refused to interfere. [Paras 7]

Tribunal's deletion of the disallowance under Section 36(1)(vii) upheld; bad debts written off in accounts allowed.

Allowance under Section 37 - advances for job work as business expenditure - Whether amounts advanced to the subsidiary for job work could be disallowed under Section 37 as non-business advances (not being money-lending) - HELD THAT: - The Assessing Officer treated the advances as financial transactions and denied the claim under Section 37 on the ground that the assessee was not in the business of money lending. The Tribunal, and thereafter the Court, held that the advances were made for specific job works to be executed by the subsidiary and were not advances by way of finance. Such advances fall within allowable business expenditure under Section 37. The Court agreed with the Tribunal's factual conclusion and declined to disturb the deletion of the disallowance. [Paras 8]

Tribunal's deletion of the disallowance under Section 37 upheld; advances for job work allowed as business expenditure.

Final Conclusion: Revenue's appeal dismissed; questions answered against the Revenue and in favour of the assessee, upholding the Tribunal's deletions of the disallowances under Sections 36(1)(vii) and 37 for the year 1994-95.

Vires of section 139AA of the Income Tax Act - mandatory linkage of PAN with Aadhaar - filing of income-tax return in conformity with binding judicial precedent

Vires of section 139AA of the Income Tax Act - mandatory linkage of PAN with Aadhaar - Validity of section 139AA and whether linkage of PAN with Aadhaar is mandatory for filing income-tax returns. - HELD THAT: - The Court recorded that it has decided the earlier challenge and has upheld the constitutional validity of section 139AA. Consequent to that decision, linkage of PAN with Aadhaar is mandatory and returns must be filed in accordance with that mandate. The High Court's interim direction permitting filing without such linkage was given while the matter was pending before this Court and is no longer operative in light of this Court's pronouncement upholding section 139AA.

Section 139AA is constitutionally valid; PAN-Aadhaar linkage is mandatory for filing income-tax returns as per this Court's judgment.

Filing of income-tax return in conformity with binding judicial precedent - Effect of the Court's decision on assessment year 2018-19 and the requirement for assessment year 2019-20. - HELD THAT: - The respondents had filed returns for AY 2018-19 pursuant to the High Court's interim order and those assessments have been completed. The Court clarified that while AY 2018-19 has been processed in terms of the earlier order, for AY 2019-20 taxpayers must file income-tax returns in accordance with this Court's ruling upholding mandatory PAN-Aadhaar linkage.

Returns already filed and assessed for AY 2018-19 stand as completed; for AY 2019-20 returns must be filed in terms of this Court's judgment requiring PAN-Aadhaar linkage.

Final Conclusion: Special Leave Petition disposed of; delay condoned; directions confined to requiring future compliance with this Court's judgment on PAN-Aadhaar linkage; pending interlocutory applications disposed of.

Summary order. Delay condoned; notice issued to the respondent; counter-affidavit to be filed within four weeks and rejoinder affidavit within two weeks thereafter; matter to be listed thereafter.

No tax effect - application of binding Supreme Court precedent - precedent in Commissioner vs. Mahindra and Mahindra Ltd. - dismissal of Special Leave Petition

No tax effect - precedent in Commissioner vs. Mahindra and Mahindra Ltd. - Whether the Special Leave Petition is maintainable where the matter has no tax effect and is covered by this Court's earlier decision in Commissioner vs. Mahindra and Mahindra Ltd. - HELD THAT: - The Court observed that the controversy raised by the petitioners attracts no tax consequence and is squarely covered by the earlier decision of this Court in Commissioner vs. Mahindra and Mahindra Ltd. The combined effect of there being no tax impact and the binding precedent rendered the challenge unsustainable. Relying on that authority, the Court found no basis to entertain the Special Leave Petition and declined to re-open the issue.

Special Leave Petition dismissed; pending applications disposed of.

Final Conclusion: The Special Leave Petition was dismissed as the matter involved no tax effect and was covered by the Court's earlier decision in Commissioner vs. Mahindra and Mahindra Ltd., and pending applications stand disposed of.

Rectification under Section 154 - error apparent on the face of the record - binding precedent - manufacture or production - debatable question - jurisdiction to issue show cause notices

Rectification under Section 154 - error apparent on the face of the record - binding precedent - Validity of the show cause notices issued under Section 154 in respect of the assessment orders for the listed assessment years. - HELD THAT: - The Court held that Section 154 may be invoked to correct an error apparent on the face of the record and that an assessment order must conform to law laid down by a binding precedent. Apeejay, a Division Bench decision of the Calcutta High Court rendered on September 10, 1991, held that blending of different kinds of tea does not constitute manufacture or production for relevant deductions. The assessment orders for the assessment years in question were passed after Apeejay and therefore were not in conformity with that binding ratio. On that basis the assessing officer's proposal to withdraw deductions by initiating proceedings under Section 154 could not be characterised as a patent lack of jurisdiction, abuse of process, or action taken with a closed mind. The Court further noted that interference at the show cause stage is exceptional and that where the legal premise for the show cause notice is that an assessment is inconsistent with a binding precedent, the authority is entitled to proceed and the assessee may answer the notices and raise defences in the statutory proceedings.

The show cause notices issued under Section 154 were not patently without jurisdiction and could be validly issued to bring the assessment orders into conformity with the binding precedent.

Manufacture or production - debatable question - error apparent on the face of the record - Whether the existence of contrary authorities or a debatable legal question precluded invocation of Section 154 in the present facts. - HELD THAT: - The Court examined competing decisions and authorities relied upon by the parties, including decisions holding blending/processing may not amount to manufacture and others distinguishing those views. It observed that where law was authoritatively settled by a binding Division Bench decision prior to the assessment orders (Apeejay), the question was not left as an open debatable issue for the purpose of rectification; the mistake alleged was not the result of a subsequent exposition of law. Hence the presence of earlier contrary authorities did not prevent rectification where the assessment orders were passed after the binding precedent and therefore contained errors apparent on the face of the record. The Court distinguished cases where rectification was disallowed because the issue remained genuinely debatable or the subsequent change in law could not be treated as making the earlier order a mistake.

A prior debate or existence of contrary authorities did not bar invocation of Section 154 where assessment orders were passed after an authoritative binding decision settling the legal position; the issue was not treated as a bar to rectification in these facts.

Final Conclusion: Writ petition dismissed; the show cause notices dated March 21, 2000, issued under Section 154 for assessment years 1991-92, 1992-93 and 1993-94 were not patently without jurisdiction and the authorities may proceed to rectify the assessment orders to conform with the binding precedent.

Deduction under Section 80-IC - Eligibility of new industrial unit for tax incentive - Transfer/splitting of business to create a new unit - Perverse or unreasonable inference on facts - Jurisdiction under Section 260A

Deduction under Section 80-IC - Eligibility of new industrial unit for tax incentive - Transfer/splitting of business to create a new unit - Whether the Selaqui unit qualified for deduction under Section 80-IC and whether the unit was created by an impermissible splitting/transfer of machinery from the Kala Amb unit. - HELD THAT: - The Court accepted the factual evaluation performed by the Income Tax Appellate Tribunal that examined documentary and accountal materials (including invoices, P&L entries, wage records and plant and machinery disclosures) and concluded that the materials supported the conclusion that the Selaqui unit did not establish eligibility for Section 80-IC relief. The ITAT found reasons to disbelieve the assessee's explanation about storage and movement of machinery, noted minimal wage and operating expenses at Selaqui inconsistent with the reported turnover, and treated the transfer of used machinery and the absence of demonstrable manufacturing activity as contrary to the conditions for claiming the deduction. The High Court held that the ITAT's inferences from the evidence were not perverse or manifestly irrational and that the tribunal, as the final fact-finding authority, had legitimately performed its role in assessing these factual matters. [Paras 5]

The ITAT's factual conclusion that the Selaqui unit was not entitled to deduction under Section 80-IC and that the transfer/splitting concerns justified denial was upheld as not perverse.

Jurisdiction under Section 260A - Perverse or unreasonable inference on facts - Whether a substantial question of law arises under Section 260A permitting this Court to entertain the appeal against the ITAT's factual findings. - HELD THAT: - The Court applied the jurisdictional threshold under Section 260A and observed that reversal of facts by successive authorities does not, by itself, confer jurisdiction unless the approach or reasoning of the ITAT is unreasonable or manifestly irrational. Having reviewed the ITAT's detailed analysis of the record and its inferences, the Court found no basis to characterise the tribunal's conclusions as perverse or legally unsustainable. Consequently, the requirements for framing a substantial question of law under Section 260A were not met. [Paras 5, 6]

No substantial question of law arises; the appeal before this Court is dismissed for want of jurisdiction to disturb the ITAT's factual findings.

Final Conclusion: The High Court held that the ITAT's factual findings rejecting the assessee's claim under Section 80-IC were not perverse or manifestly irrational and that no substantial question of law arose under Section 260A; the appeal was dismissed.

Inclusion of packing/container cost in valuation of inventory - allowance of dry-age/weight loss in valuation of goods - computation of unaccounted sales from purchases and sales - appellate fact-finding and perversity standard - distinction between questions of fact and question of law

Inclusion of packing/container cost in valuation of inventory - Whether the cost of the container was to be treated as included in the assessee's per pound cost of cashew kernels and accepted by the Tribunal. - HELD THAT: - The assessee maintained that the per pound cost of kernels at Rs. 12.02 already included the value of the container. The Assessing Officer estimated a higher cost by adding the container value to arrive at Rs. 14 per pound. The Tribunal accepted the assessee's specific case that container value was included in the cost. The High Court found no perversity in the Tribunal's fact finding and did not identify any question of law arising from that factual conclusion.

Tribunal's acceptance that the container cost was included in the assessee's per pound cost is upheld.

Allowance of dry-age/weight loss in valuation of goods - Quantum of dry-age (weight loss) to be allowed in computing cost/valuation - whether the Tribunal's reduction and quantification were justified. - HELD THAT: - The assessee claimed 10% dry-age while the Assessing Officer allowed 5%. The Tribunal examined earlier years' quantitative assessments showing variation between 7.5% and 10% and found no material to justify reducing the claim to 5%. On that factual basis the Tribunal directed allowance at 7.5%. The High Court recorded that the Tribunal's conclusion was a factual determination and not perverse.

Tribunal's allowance of dry-age at 7.5% is sustained.

Computation of unaccounted sales from purchases and sales - Validity of the assessee's additional ground challenging the estimate of unaccounted sales and the Tribunal's computation based on admitted bags of goods. - HELD THAT: - The Assessing Officer estimated unaccounted sales at a certain value based on purchases and sales. The Tribunal computed unaccounted sales using the bags of goods as admitted by the assessee and, in its computation, allowed only 5% dry-age, arriving at a lower figure for unaccounted sales. The Tribunal thereby reduced the addition to the extent found by it. The High Court found this to be an appropriate exercise of the last fact finding authority and did not find the Tribunal's approach perverse.

Tribunal's computation of unaccounted sales (and consequent reduction of the addition) is upheld to the extent found by the Tribunal.

Appellate fact-finding and perversity standard - distinction between questions of fact and question of law - Whether the questions framed by the Tribunal in the reference raised any question of law or whether the Tribunal's factual findings were perverse warranting interference. - HELD THAT: - Although the reference arose at the instance of this Court, the High Court observed that the questions framed by the Tribunal were essentially factual. The Court found no legal question for determination and no perversity in the Tribunal's factual adjudication. Accordingly, there was no ground to interfere with the Tribunal's findings.

Reference against the revenue is answered in favour of the assessee; no interference with Tribunal's factual findings.

Final Conclusion: The High Court upheld the Tribunal's factual findings: the container cost was held included in the assessee's per pound cost, dry-age was allowed at 7.5%, and the Tribunal's computation reduced the estimate of unaccounted sales; the Court found no question of law or perversity warranting interference and disposed of the reference accordingly.

Revenue expenditure - capital expenditure - purpose of the outlay - enduring benefit test - related business / expansion

Revenue expenditure - capital expenditure - enduring benefit test - purpose of the outlay - Preliminary expenditure incurred for preparing and submitting a tender for a BOT berth project is revenue expenditure and not capital expenditure. - HELD THAT: - The Tribunal's factual finding that the expenditure related to submission of a tender for construction, equipping, operation and maintenance of berths at Vaizag Port was not for acquiring an enduring asset but for a venture that did not materialise is affirmed. The Court applied the principle in Alembic Chemical Works Co. Ltd. that no single criterion (such as being 'once for all') is determinative and that the decisive inquiry is the purpose and intended effect of the outlay viewed in commercial realities. Here, because the project was abandoned by the Government and no enduring benefit accrued to the assessee, the expenditure was held to be incurred for the assessee's business activities and therefore properly characterised as revenue expenditure.

Expenditure allowed as revenue expenditure; not capital.

Related business / expansion - purpose of the outlay - Submission of the tender for the Vaizag Port BOT project did not amount to venturing into a new line of business but was connected to the assessee's existing port-related activities. - HELD THAT: - On the facts found by the Tribunal, the assessee was already engaged in port-related activities including clearing and forwarding, cargo handling, steamer agency services and construction works at Madras Port Trust. The Tribunal concluded, and this Court concurs, that tendering for the Vaizag Port BOT project was an attempt to expand activities within the same line of business rather than the commencement of a distinct new business. Consequently, expenses incurred in that endeavour were held to be relatable to the assessee's business and admissible as revenue expenditure.

Tender submission was a related business activity, not a new line of business.

Final Conclusion: The appeal is dismissed; the order of the Tribunal allowing the preliminary tender-related expenditure as revenue expenditure is upheld and no question of law is answered in favour of the Revenue.

Transaction value - Rejection of declared value under Rule 12 of the Customs Valuation Rules, 2007 - Similar goods (definition and test for commercial interchangeability) - Use of contemporaneous imports for value comparison - Section 14 of the Customs Act (valuation - price for delivery at the time and place of importation) - Mandate to accept declared transaction value unless exceptions in valuation rules are satisfied

Transaction value - Rejection of declared value under Rule 12 of the Customs Valuation Rules, 2007 - Similar goods (definition and test for commercial interchangeability) - Use of contemporaneous imports for value comparison - Section 14 of the Customs Act (valuation - price for delivery at the time and place of importation) - Whether the adjudicating authority rightly rejected the declared transaction value of imported HR Coils and re-determined value by reference to contemporaneous imports of HR Steel Plates. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in holding that the Adjudicating Authority erred in rejecting the declared transaction value of HR Coils solely by reference to contemporaneous imports of HR Steel Plates. Under Section 14 the value of imported goods is the transaction value, and Rule 12 provides the limited procedure and grounds for rejection of a declared value. Explanation (1)(i)(iii)(a) to Rule 12 permits comparison with identical or similar goods only where those goods are significantly higher in value and are comparable in time, quantity and commercial level. The Adjudicating Authority did not record any findings that HR Plates and HR Coils perform the same function or are commercially interchangeable; nor did it apply the statutory definition of "similar goods" or consider commercial-level factors (quantities, relationship between parties, manufacturing differences) before rejecting the declared price. The Tribunal found the comparison improper because HR Coils and HR Plates differ in nature, manufacture and market use (examples include differing widths, batch vs continuous manufacture, end-uses such as in the auto industry), and therefore the contemporaneous values of plates could not be used to impugn the coil transaction value. Absent valid reasons recorded under Rule 12, the transaction value must be accepted. The Tribunal also noted earlier tribunal decisions applying the same principles and that no evidence of additional undisclosed consideration was produced by revenue. The Tribunal consequently dismissed the revenue appeal and affirmed acceptance of the declared value. [Paras 5, 6, 7, 8, 11]

Declared transaction value of HR Coils accepted; rejection based on contemporaneous imports of HR Steel Plates was unsustainable and the revenue appeal is dismissed.

Final Conclusion: The adjudicating authority improperly rejected the declared transaction value of HR Coils by relying on contemporaneous imports of dissimilar HR Steel Plates without applying the statutory test for "similar goods" or recording valid reasons under Rule 12; therefore the declared value is to be accepted and the revenue's appeal is dismissed.

Confiscation and penalty under Customs law for breach of conditions of Export Promotion Capital Goods (EPCG) licence - regularisation of licence particulars by amendment and retrospective rectification - place of installation condition in EPCG licence and control over capital goods - redemption on payment of fine as alternative to confiscation - object and purpose of exemption notification vis-a -vis technical irregularities - appellate jurisdiction to test reasonableness of conclusions on established facts

Confiscation and penalty under Customs law for breach of conditions of Export Promotion Capital Goods (EPCG) licence - regularisation of licence particulars by amendment and retrospective rectification - place of installation condition in EPCG licence and control over capital goods - object and purpose of exemption notification vis-a -vis technical irregularities - Whether confiscation of imported capital goods and imposition of penalty was sustainable where the goods were installed and utilised at premises that were originally, or subsequently by amendment, approved by the licensing authority and the export obligation was discharged in full. - HELD THAT: - The Tribunal found on the record that the imported capital goods had been deployed at addresses which were either originally specified in the licences or subsequently incorporated therein by amendment, and that the export obligation under the EPCG licences had been fulfilled. Notification no. 44/2002-Cus is a composite exemption intended to facilitate the export promotion scheme, and its conditions are designed to provide control without physical supervision. Where the licensing authority has approved the places of installation-including by subsequent amendment-and the export obligation has been satisfied, the objectives of the notification and the Foreign Trade Policy prevail over technical irregularities. Consequently, visiting the severe consequences of confiscation and penalty under the Customs Act in light of such rectification and compliance would be inappropriate. The adjudicating authority's conclusion that a condition had not been complied with is not sustained by the established facts; therefore the order imposing confiscation and penalty is set aside. [Paras 5, 6, 7]

Impugned order of confiscation and imposition of penalty set aside; appeal allowed.

Appellate jurisdiction to test reasonableness of conclusions on established facts - Applicability of the Tribunal's supervisory role where facts showing subsequent regularisation contradict the findings of the adjudicating authority and whether the decision in Zenith Computers Ltd is applicable. - HELD THAT: - The Tribunal observed that the decision in Zenith Computers Ltd, which emphasises that the appellate forum tests the reasonableness of conclusions on the facts established and does not substitute an alternative view where facts are undisputed, was rendered in circumstances where facts were not contested. In the present case the facts established on record (deployment at approved addresses and subsequent amendments) are not congruous with the factual basis of the adjudicating authority's conclusion. As a result, the Zenith Computers reasoning does not apply to justify sustaining the impugned order. [Paras 5]

Zenith Computers Ltd not applicable; Tribunal exercised its jurisdiction to set aside the impugned order on the established facts.

Final Conclusion: The Tribunal set aside the adjudicating authority's order of confiscation and penalty in respect of imported capital goods under the EPCG licences, holding that installation at addresses approved originally or by subsequent amendment, together with fulfillment of export obligation, negates the appropriateness of confiscation and penalty; appeal allowed.

Restoration of company name - striking off under Section 560(5) of the Companies Act, 1956 - restoration under Section 560(6) of the Companies Act, 1956 - carrying on business or in operation - it is just that the company be restored - remand for fresh consideration - leave to amend pleadings

Restoration under Section 560(6) of the Companies Act, 1956 - carrying on business or in operation - it is just that the company be restored - Scope of Section 560(6) and whether the Appellant had shown that the company was carrying on business or in operation, or otherwise that it was just to restore the company's name at the time of striking off. - HELD THAT: - The Tribunal extracted the three distinct bases under subsection (6) - that at the time of striking off the company was (i) carrying on business, or (ii) in operation, or (iii) that otherwise it is just that the company be restored. On the material placed before the NCLT (pleadings, balance sheets up to 1999, gaps in filings, income tax return chronology and absence of affidavits accompanying later financial statements), the NCLT reached findings that there was no credible evidence the company was carrying on business or in operation on the date of the Gazette notification striking off. The Appellants had not pleaded that the company was in operation despite suspension of film screenings after 2002, and the documents subsequently produced in this appeal were not before the NCLT when it made its determinative findings. The appellate Tribunal agreed that, on the record then before the NCLT, the conclusion that restoration was not justified was supportable. [Paras 7, 8, 11, 16, 17]

The Tribunal affirmed the legal test under Section 560(6) and accepted that, based upon the materials before the NCLT, the Petitioner had failed to show it was carrying on business or in operation when struck off, and the NCLT's adverse findings on those points were supportable on the existing record.

Remand for fresh consideration - leave to amend pleadings - restoration of company name - Whether the matter should be remitted for rehearing to permit consideration of additional documents and to allow amendment of the original petition to plead the grounds now relied upon. - HELD THAT: - The Appellants filed additional documents before the Tribunal (and obtained leave from the Supreme Court to seek their production before the NCLT). Those documents were not before the NCLT when it decided the petition, and pleadings at that stage did not specifically assert that the company was in operation or otherwise justify restoration. Given the absence of original ROC records regarding notice compliance and the fact that the new material and amended pleadings could bear on the statutory inquiry under Section 560(6) (including the third limb, i.e. whether it is just to restore), the Tribunal exercised its discretion to quash and set aside the impugned order and to remit the petition to the NCLT for re-hearing. The NCLT was directed to permit amendment of the petition, to admit and consider the additional documents (if not already filed), and to afford both parties fresh opportunity of hearing. [Paras 13, 21, 22, 23]

Appeal allowed in part by setting aside the NCLT order and remitting the petition to the NCLT for rehearing with liberty to amend pleadings and to place the additional documents on record for fresh consideration.

Final Conclusion: The appeal is allowed; the impugned NCLT order is quashed and the original petition is restored to the NCLT file for rehearing. NCLT is directed to permit amendment of pleadings, admit the additional documents filed in this appeal (if not already before it), and to decide the petition afresh in accordance with law after giving both parties an opportunity to be heard.

Initiation of corporate insolvency resolution process against a corporate guarantor independent of principal borrower - financial debt includes counter indemnity obligation in respect of guarantee - creditor's right to proceed against guarantor without exhausting remedies against principal debtor - once CIRP is initiated and admitted for the same claim against one corporate debtor, the same claim cannot be admitted against another corporate debtor - simultaneous admission of multiple Section 7 applications for identical claim is impermissible

Initiation of corporate insolvency resolution process against a corporate guarantor independent of principal borrower - financial debt includes counter indemnity obligation in respect of guarantee - creditor's right to proceed against guarantor without exhausting remedies against principal debtor - A financial creditor may initiate corporate insolvency resolution process under Section 7 against a corporate guarantor even if no CIRP is initiated against the principal borrower and the principal borrower is not a corporate debtor. - HELD THAT: - Clause (h) of Section 5(8) of the I&B Code treats a counter indemnity obligation in respect of a guarantee as a "financial debt", establishing that a guarantor can be a corporate debtor vis a vis the financial creditor. Precedents under the Contract Act and the Supreme Court's decisions confirm that a creditor need not exhaust remedies against the principal debtor before enforcing the liability of the surety/guarantor; the guarantor's liability is co extensive and immediate upon demand and default by the principal. Applying these principles, the Tribunal held that a financial creditor is entitled to file an application under Section 7 against a corporate guarantor without first initiating CIRP against the principal borrower, and admission of such an application is permissible if the adjudicating authority is satisfied that a default has occurred on the part of the corporate guarantor. [Paras 21, 22, 23, 24, 25]

The Court answered this question against the appellant and upheld that initiation of CIRP under Section 7 against a corporate guarantor independent of the principal borrower is permissible.

Once CIRP is initiated and admitted for the same claim against one corporate debtor, the same claim cannot be admitted against another corporate debtor - simultaneous admission of multiple Section 7 applications for identical claim is impermissible - Where the same financial creditor files multiple Section 7 applications for the identical claim and default against different corporate debtors, admission of one application for that claim precludes admission of the second application for the same claim against another corporate debtor. - HELD THAT: - Although the Code does not bar filing of multiple Section 7 applications against different debtors (principal borrower and guarantors) at the same time, the Tribunal held that once an application for the same claim is admitted against one corporate debtor, the creditor cannot have the identical claim admitted again against another corporate debtor. The reasoning rests on the practical and legal impossibility of the creditor claiming the same debt from two separate insolvency estates and the established right of a creditor to pursue enforcement against a chosen judgment debtor. Consequently, while multiple applications can be filed, simultaneous admission of separate CIRPs for the identical claim and default is impermissible; where one application has been admitted, the second is not maintainable and must be dismissed. [Paras 29, 30, 31, 32, 33]

The Tribunal held that the second Section 7 application for the same claim was not maintainable and set aside the CIRP initiated pursuant to that application.

Final Conclusion: The admission of the Section 7 application against Sunsystem Institute of Information Technology Pvt. Ltd. (Corporate Guarantor No.2) is upheld; the Section 7 application and all consequential orders against Sunrise Naturopathy and Resorts Pvt. Ltd. (Corporate Guarantor No.1) for the same claim are held not maintainable and are set aside, with the latter company's CIRP proceedings closed and the company released to function through its board.

Short payment of service tax - under reporting of service tax - penalty under Sections 76, 77 and 78 of the Finance Act, 1994 - CENVAT credit admissibility - reconciliation of tax paid and verification of challan - payments (with interest) concluding proceedings under Master Circular No. 97/8/2007 and Circular/Instruction No. F-137/167/2006-CX.4

Short payment of service tax - under reporting of service tax - There was no short payment or under reporting of service tax in the returns filed by the assessee for the period in dispute. - HELD THAT: - The Tribunal found, and this Court recorded, that the assessee had filed ST 3 returns and had paid the due taxes; where deposits were delayed, interest was also paid. In view of those factual findings and the Master Circular No. 97/8/2007 read with Circular/Instruction No. F 137/167/2006 CX.4, once taxes (with interest) have been paid the proceedings under the Finance Act, 1994 stand concluded. The Court accepted the Tribunal's factual conclusion that there was no short payment or under reporting by the assessee.

Finding of no short payment or under reporting upheld; proceedings concluded insofar as tax liability was paid with interest.

Penalty under Sections 76, 77 and 78 of the Finance Act, 1994 - Penalties imposed under Sections 76, 77 and 78 were not sustainable and were set aside. - HELD THAT: - The adjudicating authority had imposed equal and other penalties despite the Tribunal finding that tax dues had been discharged. The Tribunal set aside the penalties and this Court, applying the same factual conclusion together with the Master Circulars which treat paid tax (with interest) as concluding the proceedings, held that penalty could not be sustained.

Penalties under Sections 76, 77 and 78 set aside.

Reconciliation of tax paid - verification of challan and CENVAT credit admissibility - Limited remand to the adjudicating authority for reconciliation of tax paid and verification of the challan allowing CENVAT credit. - HELD THAT: - While disposing the appeal in favour of the assessee on the principal issues, the Tribunal remanded the matter to the adjudicating authority solely to reconcile the tax paid and to verify the challan and the amount of credit admissible, which had not been earlier allowed. The Court endorsed the Tribunal's order insofar as the remand was confined to these limited computational and verification tasks rather than a re adjudication of liability on merits.

Matter remanded for limited reconciliation and verification of challan/credit admissibility.

Final Conclusion: The appeal is dismissed; the Tribunal's findings that there was no short payment or under reporting and that penalties were unsustainable are upheld, and the matter is remanded only for limited reconciliation of tax payments and verification of challans/CENVAT credit admissibility.

Eligibility for abatement under Notification No. 01/2006 ST dated 01.03.2006 - completion and finishing services - commercial or industrial construction service - construction of complex service - abatement of taxable service where gross amount includes value of goods - occupancy/completion certificate as evidencing essential construction work

Eligibility for abatement under Notification No. 01/2006 ST dated 01.03.2006 - completion and finishing services - commercial or industrial construction service - construction of complex service - occupancy/completion certificate as evidencing essential construction work - Appellant entitled to benefit of Notification No. 01/2006 ST dated 01.03.2006 in respect of plumbing/piping services provided to newly constructed buildings. - HELD THAT: - The Tribunal examined whether the piping and plumbing works (installation of water inlet/outlet lines, drainage, rain water harvesting, hydromatic systems etc.) supplied with materials are to be treated as "completion and finishing services" excluded from the abatement under Notification No. 01/2006 ST. Reading the scope of "completion and finishing services" in the definitions of "commercial or industrial construction service" and "construction of complex service" (as reflected in the Finance Act definitions), the specified finishing activities refer to glazing, plastering, painting, tiling, wall covering and similar works. The plumbing/piping network installed in a newly constructed building is an essential component of construction without which local authorities will not grant the necessary completion/occupancy certificate. Being integral and mandatory for the building to be usable, such works cannot be categorised as mere finishing or completion work for the purposes of the notification. Consequently, where the gross amount charged includes the value of materials supplied with the service, the appellant is entitled to the abatement provided by Notification No. 01/2006 ST dated 01.03.2006 for the relevant taxable category. [Paras 6, 7, 8]

Appellant's plumbing/piping services are not "completion and finishing services" and the appellant is eligible for the benefit of Notification No. 01/2006 ST dated 01.03.2006; impugned order modified accordingly and appeal allowed to that extent.

Final Conclusion: The appeal is allowed to the extent that plumbing/piping services (including supply of materials) provided to newly constructed buildings for installation of water, drainage and related systems are eligible for the abatement under Notification No. 01/2006 ST dated 01.03.2006, the impugned order being modified accordingly.

Longer period of limitation - bona fide belief - Service Tax assessable value - exclusion of value of goods from assessable value under Notification No.12/2003-ST - re-quantification of demand - penalty

Longer period of limitation - bona fide belief - Service Tax assessable value - exclusion of value of goods from assessable value under Notification No.12/2003-ST - Extended period of limitation could not be invoked against the appellants. - HELD THAT: - Revenue invoked the longer period on the premise that the appellants had willfully suppressed the value of goods used in providing services and therefore the value could not be excluded under the applicable Notification. The appellants, however, were registered, filed ST-3 returns, and discharged Service Tax on the service component as per the contract which apportioned values on a percentage basis. The Tribunal found that the appellants entertained a bona fide belief in adopting the contractually indicated service value and that there was no mala fide so as to justify invocation of the extended period. Consequently, the extended period of limitation was held unavailable to Revenue. [Paras 4]

Extended period of limitation not available to Revenue; demands confirmed under extended period cannot be sustained.

Re-quantification of demand - Service Tax assessable value - Demands falling within the limitation period to be re-quantified by the adjudicating authority. - HELD THAT: - Although the Tribunal disallowed invocation of the longer period, it noted that part of the asserted demand nevertheless falls within the limitation period. The appellants conceded absence of documentary evidence to separately establish the value of goods and agreed to pay Service Tax to the extent it is within the limitation period. For accurate computation and determination of the amount due within the permissible period, the matter was remanded to the adjudicating authority for re-quantification. [Paras 4]

Matter remanded to the adjudicating authority to re-quantify demands that are within the limitation period.

Penalty - bona fide belief - Penalties imposed on the appellants were set aside. - HELD THAT: - Having concluded that the appellants acted under a bona fide belief in applying the service value indicated in the contract and that there was no mala fide suppression, the Tribunal found no justification for sustaining penalties. In view of the absence of culpability, the penalties imposed by the lower authority were quashed. [Paras 5]

Penalties set aside.

Final Conclusion: Appeals disposed by holding that the extended period of limitation cannot be invoked due to appellants' bona fide belief; demands within the limitation period are remanded for re-quantification by the adjudicating authority; penalties imposed are quashed.

Exclusion of value of goods on which VAT has been discharged from taxable value of services - abatement for value of duty paid goods under Notification No.12/2003 ST - distinction between sale and service under Article 366(29A) of the Constitution - inclusion of cost of goods in gross value under Section 67 of the Finance Act

Exclusion of value of goods on which VAT has been discharged from taxable value of services - abatement for value of duty paid goods under Notification No.12/2003 ST - distinction between sale and service under Article 366(29A) of the Constitution - Whether value of goods/consumables used in repair of LPG cylinders, on which VAT has been paid, must be included in the gross value of service for levy of service tax - HELD THAT: - The Tribunal examined the finding of the Commissioner (Appeals) that the assessee maintained separate records and had discharged VAT on parts/consumables used in repair of LPG cylinders, supported by UPVAT returns and CA certification. The Appellate Authority applied the abatement framework under Notification No.12/2003 ST and followed decisions of the Hon'ble Allahabad High Court and the Tribunal holding that transactions covered by Article 366(29A) as sale are not services and that value of goods on which tax such as VAT has already been paid need not be included in the taxable service value. The revenue did not challenge applicability of those precedents before the Tribunal and relied only on the general contention that Section 67 requires inclusion of cost of all items; the Tribunal found that the cited authorities and the factual finding of VAT discharge were determinative and there was no infirmity in excluding such goods' value from the gross value of the repair service. [Paras 5, 6]

Value of goods/consumables on which VAT has been discharged shall be excluded from the gross value of the repair service for service tax computation; revenue's appeal rejected.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order excluding from taxable service value the cost of goods/consumables on which VAT had been paid, following allied High Court and Tribunal decisions and dismissed the revenue's appeal.

Levy of service tax on supply of tangible goods - Exclusion where VAT is leviable on right to use goods - CBEC Circular No.334/1/2008-TRU - clarification on supply of tangible goods - Interpretation of 'supply of tangible goods' for service tax

Levy of service tax on supply of tangible goods - Exclusion where VAT is leviable on right to use goods - CBEC Circular No.334/1/2008-TRU - clarification on supply of tangible goods - Whether the appellant's leasing of DG sets for the period 2008-09 to 2011-12 attracted service tax as 'supply of tangible goods' or was excluded because VAT was leviable on the transactions. - HELD THAT: - The Tribunal examined the financial records and a Chartered Accountant's certificate which certified that the appellant was registered with the State VAT department and VAT was payable in respect of supply/right to use of DG sets. The CBEC Circular No.334/1/2008-TRU dated 29.02.2008 clarifies that transactions where goods are supplied for use without transfer of legal possession or effective control are not covered by the service of 'supply of tangible goods' if VAT or sales tax is required to be paid; paragraph 4.4.3 of the Circular requires ascertainment of leviability of VAT. Having regard to the certificate evidencing VAT registration and levy in respect of the DG sets, the Tribunal concluded that the transactions fell within the exclusion under the Circular and therefore did not attract service tax as supply of tangible goods. The impugned demand, interest and equal penalty sustained by the Commissioner (Appeals) were set aside accordingly. [Paras 5]

Demand of service tax (and consequential interest and equal penalty) in respect of leasing of DG sets for 2008-09 to 2011-12 set aside as transactions were excluded from 'supply of tangible goods' in view of VAT levy and the CBEC clarification.

Final Conclusion: The appeal is allowed; the Tribunal set aside the demand of service tax (and related interest and equal penalty) in respect of leasing of DG sets for the period 2008-09 to 2011-12, holding that VAT was leviable and the transactions were excluded from the service of 'supply of tangible goods' as per the CBEC clarification.

Entitlement to exemption under Notification No.223/1988-C.E. - proviso (e) - removal of surface defects or excess material without change in form - machining and surface treatments as disqualifying processes - manufacture and marketability test - onus of proof on the Revenue and evidentiary burden on the assessee - perversity of appellate findings - appeal under Section 35G involving a substantial question of law

Entitlement to exemption under Notification No.223/1988-C.E. - proviso (e) - removal of surface defects or excess material without change in form - machining and surface treatments as disqualifying processes - Whether the assessee was entitled to concessional excise duty under Notification No.223/1988-C.E. for cast articles of iron and steel when castings were subjected to processes such as drilling, welding, grinding and gauging. - HELD THAT: - The Court accepted the adjudicatory finding that certain cast articles cleared to the Railways had undergone drilling, welding and related grinding/gauging operations which were carried out to attain required dimensions as per drawings and not merely for removal of surface defects or excess material. Those processes (not specified in the proviso) altered the form or dimensions of the castings and therefore fell outside the limited exceptions in proviso (e) to Notification No.223/1988-C.E. The material evidence relied upon by the Commissioner - including the recorded statement of the superintendent of the machine shop describing welding to bring dimensions to required size, pencil grinding/bore-making and drilling "as per drawings" - was held sufficient to establish that the goods underwent disqualifying machining. The Court rejected the Tribunal's approach of treating the witness statement as a generalized or innocuous description and emphasised that where the Revenue proves manufacture and marketability and produces evidence of processes altering the product, the burden shifts to the assessee to contradict that evidence. On that basis the Tribunal's conclusion that there was no material to deny benefit under the Notification was found to be erroneous and the Commissioner's denial of exemption was restored.

Benefit of Notification No.223/1988-C.E. was not available for the impugned cast articles for the stated periods because they were subjected to machining (drilling, welding and related grinding/gauging) that altered their form and fell outside proviso (e).

Perversity of appellate findings - onus of proof on the Revenue and evidentiary burden on the assessee - appeal under Section 35G involving a substantial question of law - Whether the CESTAT's factual findings reversing the Commissioner were perverse and whether the High Court should interfere under Section 35G on a substantial question of law. - HELD THAT: - The High Court examined the Tribunal's reasoning and found that it misread and glossed over the documentary and testimonial material on record. The Tribunal treated the superintendent's answers as non-admissive and relied on selective reading, ignored that the show-cause and adjudication related to those castings subjected to machining, and failed to appreciate the relevance of self removal procedure (SRP) and the requirement that impugned articles be produced for verification when appropriate. Given that the adjudicating authority had recorded detailed findings on processes carried out to achieve required dimensions and concluded those processes changed the product beyond the proviso, the Tribunal's contrary conclusion amounted to a manifest error of appreciation. The Court held that the question raised was a substantial question of law and that interference was justified; consequently, the Tribunal's order was set aside and the Commissioner's order restored.

The Tribunal's reversal was held to be perverse on the facts and the High Court, on a substantial question of law, set aside the Tribunal's order and restored the Commissioner's adjudication.

Final Conclusion: The Tribunal's order of 06.10.2009 reversing the Commissioner was set aside; the Commissioner's order dated 29.10.2003 denying Notification No.223/1988-C.E. benefit for the stated periods is restored because the cast articles were subjected to disqualifying machining (drilling, welding and related gauging/grinding) that altered their form and excluded them from the Notification's proviso.

CENVAT credit on outdoor catering service - precedent of Larger Bench - rectification of mistake in interim order - listing for final hearing

CENVAT credit on outdoor catering service - precedent of Larger Bench - rectification of mistake in interim order - Miscellaneous applications for rectification of the Interim Order were allowed to enable final hearing of the appeals in light of the Larger Bench decision on CENVAT credit for outdoor catering services. - HELD THAT: - Both parties agreed that the central question in the appeals-entitlement to CENVAT credit on outdoor catering service-had been adjudicated by the Larger Bench in the case of M/s. Wipro Ltd. v. CCE, Bangalore. Given that the controversy has been resolved by the Larger Bench, the Tribunal treated the pending miscellaneous applications for rectification of the Interim Order as suitable to be considered for enabling the appeals to be heard finally. The bench therefore allowed the miscellaneous applications and directed that the appeals be listed for final hearing.

Miscellaneous applications allowed; appeals listed for final hearing on 18th January, 2019.

Final Conclusion: The Tribunal allowed the rectification applications and directed the appeals to be placed for final hearing on 18 January 2019, treating the dispute as resolved by the Larger Bench decision on CENVAT credit for outdoor catering services.

Cenvat Credit - admissible credit calculation - Rule 3(7)(a) of Cenvat Credit Rules, 2004 - EOU clearances under Notification No. 23/2003-CE - remand for fresh determination

Cenvat Credit - admissible credit calculation - remand for fresh determination - Whether the impugned orders correctly determined admissible Cenvat credit having regard to the invoices and calculations furnished by the appellant - HELD THAT: - Tribunal found that the show-cause notices and the impugned orders did not specify or examine the precise manner in which admissible credit was calculated. The annexures to the SCNs and the orders contained inconsistent and unexplained figures (mismatch between columns showing credit availed, credit available and claimed excess), and the lower authorities failed to examine the break-up of duty paid as shown in the invoices. Because the determinative calculations (amount of duty paid against each invoice, amount of credit taken against each invoice, and the admissible credit computed by the prescribed formula) were neither spelled out nor critically examined, the Tribunal was unable to adjudicate the correctness of the demand. The Tribunal therefore set aside the impugned orders and remanded the matter for fresh consideration, directing the lower authority to specify the duty paid per invoice, credit taken per invoice, the admissible credit with necessary calculations for each invoice, and thereafter to reach a reasoned conclusion. The Tribunal noted that the precedent authorities cited by the appellant may be kept in mind while deciding the issue. [Paras 5, 6]

Impugned orders set aside and matter remanded to the lower authority for fresh determination with clear, invoice-wise calculations and reasons.

Final Conclusion: Appeals allowed by way of remand: the impugned orders are set aside and the matter is remitted to the lower authority to recompute and record invoice-wise duty paid, credit taken, admissible credit (with calculations) and then to decide the demand afresh.

Welding electrodes as inputs - eligibility of CENVAT credit - definition of "inputs" in CENVAT Credit Rules - nexus between input and manufacture - precedential effect of Larger Bench and High Court decisions

Welding electrodes as inputs - definition of "inputs" in CENVAT Credit Rules - eligibility of CENVAT credit - nexus between input and manufacture - Welding electrodes used for repair and maintenance of plant and machinery are inputs within the meaning of the definition in Rule 2(k) of the CENVAT Credit Rules, 2004 and therefore eligible for CENVAT credit. - HELD THAT: - The Tribunal examined earlier judicial pronouncements, including the Larger Bench decision in Jaypee Rewa Plant and subsequent High Court decisions (including the Madras High Court's consideration of the Chhattisgarh and Rajasthan decisions), and applied the statutory scope of 'inputs' under Rule 2(k) of the CENVAT Credit Rules, 2004. The Court accepted the view that the term 'inputs' is wide enough to include goods used in or in relation to manufacture, whether directly or indirectly. On that basis, welding electrodes employed for repair and maintenance of machinery used in the manufacture of final products fall within the definition of 'inputs' and are therefore entitled to CENVAT credit. The Revenue's contrary contentions were rejected as unsustainable in light of the consistent judicial treatment recognising such nexus and includibility.

Appeal dismissed; welding electrodes held to be eligible as inputs for CENVAT credit under Rule 2(k) of the CENVAT Credit Rules, 2004.

Final Conclusion: The appeal by Revenue is dismissed: welding electrodes used for repair and maintenance are held to be inputs eligible for CENVAT credit under the definition in the CENVAT Credit Rules, 2004, and the Revenue's challenge to that position fails.

Confiscation as prerequisite for imposition of penalty under Rule 26 of Central Excise Rules, 2002 - penalty under Rule 26 cannot be imposed on a partnership firm - evidentiary burden and requirement of independent corroboration for fictitious invoices / non-receipt of goods - inadmissibility of sole reliance on retracted statement without corroboration

Evidentiary burden and requirement of independent corroboration for fictitious invoices / non-receipt of goods - inadmissibility of sole reliance on retracted statement without corroboration - Sufficiency of evidence relied upon by Revenue to sustain findings that invoices were fictitious and that goods were not received by buyers on record. - HELD THAT: - The Tribunal found no record of any investigation having been pursued with the recipients named in the invoices to ascertain receipt of goods. Despite a statement initially implicating the appellant, that statement was retracted and the investigation did not obtain corroborative facts before the deponent's death. The appellant produced statements and book extracts from recipients as evidence of genuineness. The octroi certifications covered only a few invoices and themselves lacked clarity, and therefore could not be treated as validating the allegation against all 703 invoices. In these circumstances the findings based on the recovered invoices and the limited certifications were held to be unsupported by acceptable corroborative evidence. [Paras 5]

Findings against the appellant based on the recovered invoices and the cited certifications are unsupported due to lack of independent corroboration and failure to pursue inquiries with recipients; such evidence is insufficient to sustain the adjudication.

Confiscation as prerequisite for imposition of penalty under Rule 26 of Central Excise Rules, 2002 - Whether Rule 26 can be invoked where there is no allegation or finding that the goods themselves are liable to confiscation. - HELD THAT: - The Tribunal examined Rule 26 and held that confiscability of goods is an essential prerequisite for imposition of penalty thereunder. In the present case there was no allegation that the impugned goods did not come into the possession of the appellant; the case was built on the contention that goods did not pass into possession of the buyers named in the invoices. Since there was no offence in relation to the goods themselves, Rule 26 could not be lawfully invoked and the impugned order under that rule was liable to be set aside. [Paras 6, 7]

Rule 26 is not invocable in the absence of confiscability of the goods; hence the penalty imposed under Rule 26 cannot be sustained.

Penalty under Rule 26 cannot be imposed on a partnership firm - Whether a partnership firm can be subjected to penalty under Rule 26 of Central Excise Rules, 2002. - HELD THAT: - Relying on earlier Tribunal precedent in Woodmen Industries (which the Tribunal notes found favour with the Supreme Court), the Tribunal held that Rule 26 permits imposition of penalty on a 'person' and not on a firm; accordingly partnership firms cannot be proceeded against under Rule 26. Applying that principle to the present appeal, the Tribunal concluded that the proceedings against the appellant, a partnership firm, were contrary to law. [Paras 8]

Penalty under Rule 26 cannot be imposed on a partnership firm; the proceedings against the appellant firm are contrary to law.

Final Conclusion: The Tribunal set aside the impugned order, allowing the appeal: the evidence before the authority was insufficient and uncorroborated; Rule 26 cannot be invoked absent confiscability of goods; and Rule 26 is not applicable to a partnership firm, rendering the penalty unsustainable.

Rectification of mistake apparent on the face of the record - re-opening a finally disposed proceeding for fresh argument - entitlement to filing a rectification application where no omission or error is found - finality of tribunal orders against collateral re-argument

Rectification of mistake apparent on the face of the record - entitlement to filing a rectification application where no omission or error is found - Application for rectification of an alleged apparent mistake in the Tribunal's order rejected - HELD THAT: - The Tribunal examined the application and the record, including submissions made by the parties and the reasons set out in the original order disposing of the appeal. It found that the original order had dealt with the submissions and that there was no omission or apparent error on the face of the record that would justify rectification. The application was therefore an attempt to re-open a finally disposed matter for fresh argument rather than to point out a discernible mistake warranting correction. In these circumstances the Tribunal concluded there was no room to entertain the rectification application. [Paras 3]

Application for rectification rejected as the order contained no apparent mistake and the matter could not be re-opened for fresh argument.

Final Conclusion: The rectification application was dismissed: the Tribunal found no apparent mistake in its earlier order and refused to re-open the disposed proceedings for fresh arguments.

Duty on raw materials vis-a-vis duty on finished goods - 100% EOU clearances

Duty on raw materials vis-a-vis duty on finished goods - 100% EOU clearances - Customs duty could not be demanded on raw materials used in manufacture of finished goods when duty had already been demanded on those finished goods. - HELD THAT: - The Tribunal found it undisputed that the later notice sought duty on raw materials used in the very finished goods which had already formed the subject matter of the earlier demand. Following M/s Sarla Polyester Limited , which in turn noticed C.C.E., Surat v. M/s. Sanjari Twisters , the Tribunal held that where raw materials have in fact been used in manufacture of finished goods, they cannot be treated as not used for the intended purpose merely because the finished goods were allegedly cleared irregularly. In such a situation, the liability, if any, is on the finished goods, and no separate duty becomes recoverable on the raw materials used in their manufacture. [Paras 4, 5]

The impugned demand on raw materials was held unsustainable and the appeals were allowed.

Final Conclusion: Following the settled view that once duty is demanded on the finished goods, no separate duty can be recovered on the raw materials used in their manufacture, the Tribunal found no merit in the impugned order and allowed the appeals.

Rectification of typographical errors - correction of record - review/recall of order limited to clerical mistakes - allowance of ROM applications

Rectification of typographical errors - correction of record - allowance of ROM applications - ROM applications filed to correct typographical errors in the Tribunal's final order were allowed and the record was corrected accordingly. - HELD THAT: - The Tribunal examined the alleged mistakes in its Final Order No.72313-72317/2018 dated 25.09.2018 and found them to be typographical in nature. The appellant's name had been misstated and the duty amount in the concluding paragraph contained clerical errors. Since the errors were confined to transcriptional/clerical mistakes and did not affect the substantive adjudication, the Tribunal exercised its power to rectify the record. The order was amended to correctly record the appellant's name as M/s Som Pan Products Pvt. Ltd. and to read the demand in the last paragraph as Rs. 5,74,77,500/-. In these terms, the ROM applications were allowed and the corrections were directed to be reflected in the record. [Paras 2, 3]

ROM applications allowed; the appellant's name and the duty figure in the final order corrected as specified.

Final Conclusion: The miscellaneous (ROM) applications are allowed and the Final Order No.72313-72317/2018 dated 25.09.2018 is rectified to correct the appellant's name and the stated duty amount as directed.

Summary order. Matter referred to a Larger Bench for consideration of whether sales tax is leviable on free replacement of defective parts under warranty; papers placed before the Chief Justice for necessary orders.

Violation of principles of natural justice - Opportunity of personal hearing - Duty of Assessing Officer to indicate date of personal hearing - Remand for fresh assessment - Conditional relief requiring payment of a portion of tax liability - Notice of proposal - Administrative circular on personal hearing requirements

Violation of principles of natural justice - Opportunity of personal hearing - Administrative circular on personal hearing requirements - Notice of proposal - Impugned order of assessment is vitiated for failure to afford the petitioner the opportunity of personal hearing by not indicating the date of such hearing as contemplated in the notice of proposal and departmental Circular No.7/2014. - HELD THAT: - The petitioner did not file a written reply to the notice of proposal and the Assessing Officer contends that the petitioner did not avail the opportunity of personal hearing. However, the notice of proposal envisaged that a personal hearing would be afforded and, in terms of the Departmental Circular No.7/2014, the Assessing Officer must intimate and afford a personal hearing and give a reasonable opportunity before passing orders. The Assessing Officer did not indicate any date for personal hearing; therefore the asserted opportunity was not in fact afforded. For that reason the assessment order suffers from a breach of the principles of natural justice. The Court confines its decision to this procedural infirmity and does not adjudicate the merits of the tax liability or the penalty on the present record. [Paras 6]

Order of assessment set aside on ground of violation of natural justice for failure to indicate and afford the date of personal hearing; merits left open for fresh consideration.

Remand for fresh assessment - Duty of Assessing Officer to indicate date of personal hearing - Conditional relief requiring payment of a portion of tax liability - Matter remitted to the Assessing Officer to pass a fresh assessment after affording a specified personal hearing, subject to the petitioner paying 15% of the tax liability and complying with procedural timelines fixed by the Court. - HELD THAT: - In view of the procedural lapse, the Court directs that the impugned order be set aside and the respondent shall pass fresh orders after affording a personal hearing. The petitioner is required to submit a written reply to the notice of proposal and pay 15% of the tax liability within two weeks of receipt of this order. On receipt of the reply and payment, the Assessing Officer shall indicate the date of personal hearing. After completing the hearing and considering all aspects on merits, the Assessing Officer shall pass a fresh order of assessment in accordance with law within the time prescribed by the Court. The Court frames these conditions to balance the procedural defect with an obligation on the petitioner to make a partial payment before pursuing the merits afresh. [Paras 7, 8]

Matter remitted for fresh assessment after personal hearing; petitioner to pay 15% of tax liability within two weeks and then be afforded a dated personal hearing; fresh assessment to be completed within the Court-prescribed timeframe.

Final Conclusion: Writ petition allowed; impugned assessment order for assessment year 2014-15 set aside for breach of natural justice for failure to indicate and afford a personal hearing; matter remitted to the Assessing Officer for fresh assessment after the petitioner files a reply and pays 15% of the tax liability, the Assessing Officer to fix a date for personal hearing and pass fresh orders within the specified period.