TaxTMI Updates e-Newsletter
Feb 12,2019

Ultra vires challenge to Section 174 of the KSGST Act - limitation under Section 25(1) of the KVAT Act - application of precedent / ratio of earlier judgment

Ultra vires challenge to Section 174 of the KSGST Act - application of precedent / ratio of earlier judgment - The challenge that Section 174 of the KSGST Act is ultra vires the State's legislative power was rejected. - HELD THAT: - The petitioners contended that Section 174 of the KSGST Act was ultra vires. The High Court observed that counsel for all parties accepted that the legal question raised was squarely covered against the petitioners by the judgment dated 11th January 2019 in W.P.(C) No.11335 of 2018 and connected cases . Applying the ratio of that earlier decision, the court found no basis to uphold the ultra vires challenge and dismissed the petitions on that ground. [Paras 2]

The ultra vires challenge to Section 174 of the KSGST Act is dismissed by applying the ratio of the earlier judgment.

Limitation under Section 25(1) of the KVAT Act - application of precedent / ratio of earlier judgment - The contention that the demand is barred by limitation under Section 25(1) of the KVAT Act was rejected. - HELD THAT: - Some petitioners argued that the demand was time-barred under Section 25(1) of the KVAT Act. The court noted that this contention too was covered adversely to the petitioners by the judgment dated 11th January 2019 in W.P.(C) No.11335 of 2018 and connected cases . In view of counsel's concession that the issues were so covered, the court applied the same ratio and dismissed the petitions insofar as limitation under Section 25(1) was relied upon. [Paras 2]

The plea of limitation under Section 25(1) of the KVAT Act is rejected and the petitions are dismissed applying the earlier ratio.

Final Conclusion: The writ petitions are dismissed by the High Court, the court applying the ratio of the judgment dated 11th January 2019 in W.P.(C) No.11335 of 2018 and connected cases , leaving no issue in favour of the petitioners.

Power of the Commissioner to extend time for filing declarations under the GST Rules - validation of representation seeking extension of time for filing Form GST Tran-1 - effect of subsequent statutory amendment and notification on pending judicial challenge - infructuousness of writ petition

Power of the Commissioner to extend time for filing declarations under the GST Rules - effect of subsequent statutory amendment and notification on pending judicial challenge - infructuousness of writ petition - The writ petition challenging respondent No.6's communication seeking direction to act on the petitioners' representation was rendered infructuous in view of the subsequent insertion in the Rules and the Commissioner s notification extending the period for filing Form GST Tran-1, and the petitioners were permitted to avail the benefit of the notification. - HELD THAT: - The Court noted that Rule 117 was amended by insertion of a provision empowering the Commissioner, on recommendations, to extend the date for submitting Form GST Tran-1 up to March 2019 for registered persons unable to submit the declaration on the common portal. Further, the Commissioner issued a notification dated 17 September 2018 extending the period for submitting Form GST Tran-1 till 31.01.2019 for a class of registered persons affected by technical defects on the common portal. In light of these developments, the relief sought in the petition-direction to respondent No.6 to act on the petitioners' representation of 6.3.2018-no longer required adjudication, since the statutory mechanism and the notification provided the remedy sought. Consequently, the petition was held to have become infructuous, with the petitioners left free to avail themselves of the extension granted by the Commissioner s notification. [Paras 3, 4, 5]

Writ petition dismissed as having become infructuous; petitioners may avail benefit of the Commissioner s notification extending the period for filing Form GST Tran-1.

Final Conclusion: The petition challenging the communication dated 27.06.2018 was dismissed as infructuous because a Rule amendment and a subsequent notification by the Commissioner extended the period for filing Form GST Tran-1; the petitioners are at liberty to avail the benefit of that notification.

Constitutional validity of clauses (d) and (e) of sub section (2) of section 174 of the Kerala State Goods and Services Tax Act, 2017 - legislative competence under Entry 54 of List II after the One Hundred and First Constitutional Amendment - quashing of administrative tax orders - stay of proceedings under the repealed KVAT Act - application of binding precedent / ratio decidendi

Quashing of administrative tax orders - stay of proceedings under the repealed KVAT Act - Petition for quashing Exts.P5 & P6 and for staying further action under the KVAT Act was dismissed. - HELD THAT: - The petitioner sought quashing of two administrative orders (Exts.P5 & P6) and a direction to stay all further proceedings under the KVAT Act until final disposal. The High Court declined relief and dismissed the writ petition, holding that the present challenge is governed by the ratio of an earlier decision in W.P.(C) No.11335 of 2018 and connected matters. No independent interference with the impugned orders or grant of stay was made in view of the binding precedent applied by the Court.

Writ petition dismissed; prayer to quash Exts.P5 & P6 and for stay under the KVAT Act refused pursuant to the cited precedent.

Constitutional validity of clauses (d) and (e) of sub section (2) of section 174 of the Kerala State Goods and Services Tax Act, 2017 - legislative competence under Entry 54 of List II after the One Hundred and First Constitutional Amendment - application of binding precedent / ratio decidendi - Challenge to the constitutional validity of specified clauses of section 174(2) of the Kerala SGST Act and related contention on post amendment competence under Entry 54 was rejected. - HELD THAT: - The petitioner sought declarations that clauses (d) and (e) of section 174(2) of the Kerala SGST Act, 2017 are unconstitutional and that the State Legislature lacked competence under Entry 54 of List II from 8 9 2017 until any saving provision validated past actions. The Court applied the ratio of the earlier judgment in W.P.(C) No.11335 of 2018 and connected cases, which governs these constitutional and competence questions, and accordingly declined to grant the declaratory reliefs sought. The decision records that the issues are squarely covered by the prior ruling and are disposed of by applying that precedent.

Prayers for declaration of unconstitutionality and for a finding on legislative competence were refused; the petition was dismissed by applying the earlier decision.

Final Conclusion: The writ petition was dismissed; the High Court refused to quash the impugned orders, denied stay of proceedings under the KVAT Act and declined the constitutional and competence declarations, applying the ratio of W.P.(C) No.11335 of 2018 and connected cases.

Allowability of business expenditure to preserve goodwill and reputation - application of prior non-challenge by Revenue as approbation of Tribunal's earlier view - distinction between legal obligation and commercial expediency in incurring business loss - treatment of NRI deposit mobilization expenses for head office purposes

Treatment of NRI deposit mobilization expenses for head office purposes - application of Section 44C (limitations on deductions for head office expenditure) - application of prior non-challenge by Revenue as approbation of Tribunal's earlier view - Deletion of addition made by Assessing Officer on account of NRI Deposit Mobilization expenses was not interfered with. - HELD THAT: - The Tribunal upheld the assessee's claim that the expenditure under "NRI Deposit Mobilization" was administrative and for the purposes of the head office and thereby deletable. The Court noted that the Revenue had previously declined to challenge identical Tribunal findings for earlier assessment years of the same assessee, which the Court treated as a conscious acceptance of the legal proposition involved; on that basis the Court declined to entertain the Revenue's challenge to the Tribunal's application of the head office treatment and the limits asserted under Section 44C. Given the Revenue's prior non filing of appeals in earlier years in respect of the same issue, the Court did not proceed to re decide the matter on merits. [Paras 2, 3]

Tribunal's deletion of the addition in respect of NRI mobilization expenses sustained; question not entertained.

Allowability of business expenditure to preserve goodwill and reputation - distinction between legal obligation and commercial expediency in incurring business loss - application of precedents on business expenditure (Nainital Bank) - Payment of Rs. 3.50 crores by the bank to protect client relations and market reputation held to be an allowable business expenditure. - HELD THAT: - The Tribunal's acceptance of the assessee's contention that the payment made to safeguard relations with clients and to maintain market dignity was a business expedient was upheld. The Court observed that even though there was no strict legal obligation or court order compelling payment, the determinative question is whether the expenditure was incurred in the interest of and for the purpose of the banking business. Relying on the principle applied by the Supreme Court in Nainital Bank, where similar payments to protect the bank's credit and goodwill were held allowable, the Court concluded that the assessee's payment to preserve customer confidence and commercial reputation constituted an allowable business loss. [Paras 4, 5, 6]

Tribunal's allowance of the loss as business expenditure upheld.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's deletions in respect of NRI mobilization expenses and allowance of the payment made to protect client relations and reputation are sustained.

Deemed dividend under Section 2(22)(e) of the Income Tax Act - beneficial ownership and substantial shareholding - payments to a concern in which the shareholder has a substantial interest - application of the second limb of Section 2(22)(e)

Deemed dividend under Section 2(22)(e) of the Income Tax Act - beneficial ownership and substantial shareholding - Whether loans advanced by related creditor companies to the assessee company are taxable as deemed dividend under the first limb of Section 2(22)(e) by reason of shareholding of a common substantial shareholder. - HELD THAT: - Section 2(22)(e) treats advances or loans by a closely held company to a shareholder who is the beneficial owner of not less than ten per cent of the voting power as deemed dividend. The material facts show that the assessee company was not the beneficial owner of shares in the creditor companies; the common substantial shareholder was Sunjewels India Pvt. Ltd. which held majority shares in both the creditor companies and the assessee. The loans were given to the assessee company itself and not to Sunjewels India Pvt. Ltd. The Tribunal and the CIT(A) therefore correctly found that the first limb of Section 2(22)(e) did not apply, since the statutory test requires the recipient to be a shareholder (beneficial owner) meeting the prescribed threshold, which is absent in this case. [Paras 10]

First limb of Section 2(22)(e) does not apply; loans are not taxable as deemed dividend under that limb.

Payments to a concern in which the shareholder has a substantial interest - application of the second limb of Section 2(22)(e) - Whether the second limb of Section 2(22)(e) applies by treating the loans as payments to a concern in which the common shareholder has a substantial interest. - HELD THAT: - The second limb applies where a closely held company makes an advance or loan to a concern in which a shareholder (meeting the statutory criteria) is a member or partner and has a substantial interest; that is, loans must be made to such a concern rather than directly to the shareholder. In the present facts the creditor companies advanced sums directly to the assessee company; there was no loan by the creditors to any third concern in which the assessee company had a substantial interest. Consequently the factual precondition for attracting the second limb is not satisfied, and the finding of the CIT(A) and ITAT that the second limb is inapplicable is sustainable. [Paras 11]

Second limb of Section 2(22)(e) does not apply; loans are not taxable as deemed dividend under that limb.

Final Conclusion: The substantial questions of law are answered in favour of the assessee and against the revenue: neither the first nor the second limb of Section 2(22)(e) attracts the loans advanced to the assessee in A.Y. 2009-10; the appeal is dismissed with no order as to costs.

Rejection of books of account under section 145(3) - Unexplained credits treated as income under Section 68 - Burden on assessee to establish identity, genuineness and creditworthiness of claimed payees - Estimation of income by best judgment assessment under Section 144 - Application of gross profit ratio where books are rejected - Review of factual findings as question of law where conclusions are not founded on relevant evidence (La Medica principle)

Rejection of books of account under section 145(3) - Unexplained credits treated as income under Section 68 - Application of gross profit ratio where books are rejected - Burden on assessee to establish identity, genuineness and creditworthiness of claimed payees - Estimation of income by best judgment assessment under Section 144 - Whether ITAT was justified in applying a gross profit ratio to reduce the addition when the AO and the CIT(A) had concurrently found the purchases to be unverifiable and brought to tax as unexplained credits. - HELD THAT: - The Court held that the AO and the CIT(A) had correctly applied the law in treating the alleged purchases as unverifiable and in bringing the amounts to tax under Section 68 after the assessee failed to establish the identity and genuineness of the payees or the transactions. Reliance upon precedent established that the initial burden lies on the assessee to disclose and prove the recipients' identity, genuineness of transactions and creditworthiness; where suppliers could not be traced and notices remained unserved, the authorities' conclusion was sustainable. The ITAT's approach of applying a gross profit/net profit ratio despite concurrent findings of unverifiability was held to be unwarranted: estimation by adopting a GP ratio is a power available to the AO when books are rejected, but it must be exercised by the AO in a reasoned best-judgment assessment after taking into account relevant materials and affording opportunity; it could not be used by the Tribunal to negate concurrent factual findings of bogus or unverifiable purchases. Further, where concurrent findings are based on relevant material and form a permissible basis for treating amounts as unexplained credits, reworking the assessment by applying a GP ratio without addressing or overturning those findings was improper. The Court applied the principle in La Medica that a finding unsupported by or contrary to relevant material may raise a question of law, and concluded that here the ITAT's reasoning was legally unsustainable. [Paras 9, 10, 11]

ITAT's allowance by applying gross profit ratio was set aside; the concurrent findings of AO and CIT(A) that the purchases were unverifiable and taxable as unexplained credits are sustained.

Final Conclusion: The appeal is allowed: the High Court set aside the ITAT's order which reduced the addition by applying a gross profit ratio and upheld the concurrent finding of the revenue authorities that the claimed purchases were unverifiable and taxable; the assessee's challenge is dismissed.

Jurisdiction under Section 263 of the Income Tax Act - taxability of amounts received on retirement of a partner - transfer under section 2(47) and applicability of section 45(4) - assessment not erroneous where assessing officer has applied his mind and adopted one of two possible views - principle that revisional jurisdiction cannot be invoked where two reasonable views exist

Jurisdiction under Section 263 of the Income Tax Act - taxability of amounts received on retirement of a partner - assessment not erroneous where assessing officer has applied his mind and adopted one of two possible views - Validity of the Commissioner's order under Section 263 revising the assessment on the ground that amounts received by the assessee on retirement from partnership firms were taxable as capital gains - HELD THAT: - The Court examined whether the Assessing Officer had applied his mind to the question of taxability of amounts received on retirement and whether the Commissioner was justified in invoking revisional jurisdiction under Section 263. The Assessment Order is accompanied by an office note showing that enquiries were made and the relevant law considered, which negates the Revenue's contention that no enquiry was undertaken. The Court observed that the Assessing Officer's view - that the amounts were not taxable in the hands of the retiring partner - is supported by this Court's decision in Prashant S. Joshi and by subsequent Supreme Court authority which reversed the earlier High Court view in Tribhuvandas G. Patel. Further, the Tribunal's reliance on contrary authority did not establish that the Assessing Officer's conclusion was incorrect as a matter of law; at the least there existed two reasonable views on the question. Applying the principle that revisional jurisdiction under Section 263 cannot be exercised where the Assessing Officer has taken one of two possible views and has applied his mind (as explained in Max India), the Court held that the Commissioner's order was not sustainable. The Court therefore agreed with the Tribunal's setting aside of the Section 263 order and restoration of the assessment. [Paras 7, 8, 9, 10]

The Commissioner's order under Section 263 is unsustainable; the Tribunal correctly set aside the revision and restored the Assessing Officer's order.

Final Conclusion: Appeal dismissed: the Tribunal correctly held that the Assessing Officer had applied his mind and taken a view supported by precedent, and therefore revision under Section 263 was not permissible; the assessment for AY 2009-10 is restored.

Reason to believe - reopening of assessment - notice under Section 148 - non-filing of return not conclusive - failure to make reasonable inquiry - fishing expedition

Reason to believe - reopening of assessment - notice under Section 148 - non-filing of return not conclusive - failure to make reasonable inquiry - fishing expedition - Validity of the notice dated 28.3.2018 reopening assessment for AY 2011-12 under Section 147/148 in circumstances where the assessee had not filed a return but had communicated he had no taxable income and had produced sales/purchase figures showing a loss. - HELD THAT: - The Assessing Officer formed a reason to believe based on NMS/ITS data of commodity transactions and the fact that no return was filed. The Court found that the AO proceeded on a mistaken premise that the assessee had not responded to queries, whereas the assessee had communicated that he had no taxable income. The AO also referred to an incorrect aggregate transaction figure and failed to verify, even prima facie, the sales and purchase figures pointed out by the assessee which indicated a loss. Although non-filing of return permits wider inquiry, the statutory requirement that the AO must have a bona fide reason to believe that income has escaped assessment was not satisfied where available information and the assessee's explanations were neither examined nor verified. The Court held that issuing the reopening notice without carrying out basic verification amounted to a fishing expedition and thus the notice lacked the requisite foundation.

Impugned notice under Section 148 dated 28.3.2018 quashed and set aside for AY 2011-12.

Final Conclusion: The petition is allowed; the reopening notice issued for AY 2011-12 is quashed because the Assessing Officer lacked a satisfactory prima facie reason to believe and failed to make basic verification of the assessee's explanation, resulting in a prejudicial and unjustified reopening.

Reopening of assessment - failure to disclose truly and fully all material facts - pre-condition under the first proviso to Section 147 - change of opinion - scrutiny assessment - disallowance under Section 40(a)(i)

Reopening of assessment - failure to disclose truly and fully all material facts - pre-condition under the first proviso to Section 147 - Assessing Officer's reasons did not establish failure by the assessee to disclose truly and fully all material facts as required by the first proviso to Section 147 for reopening assessment beyond four years. - HELD THAT: - The recorded reasons merely restated the tax consequence that certain amounts were not subject to TDS and that earlier year reversals were not fully disallowed, leading to a suggested underassessment. The court observed that the Assessing Officer's reasons neither state nor demonstrate any omission by the assessee to disclose primary or material facts; instead they reflect a tax-office conclusion on accounts already placed before the AO. The requirement in the first proviso to Section 147 demands a demonstrable failure to disclose material facts, which was not shown on the material placed by the Revenue. Accordingly, the notice to reopen issued beyond four years could not be sustained on this ground. [Paras 3]

Impugned reopening notice quashed for want of reasons demonstrating failure to disclose truly and fully all material facts.

Change of opinion - scrutiny assessment - disallowance under Section 40(a)(i) - Reopening impermissible as a mere change of opinion where the transaction had been examined in scrutiny assessment and a considered disallowance was made. - HELD THAT: - The court noted that the Assessing Officer had conducted detailed scrutiny: queries were raised, the assessee furnished particulars and explanations (including annexures setting out the GSA charges and reversals), and the AO made a considered limited disallowance under Section 40(a)(i) in the original assessment order. Having examined the same facts and reached an assessment conclusion, the subsequent attempt to reopen amounted to impermissible change of opinion rather than discovery of non-disclosure of material facts. The court relied on the principle that where primary facts have been disclosed and scrutinised, mere disagreement with the conclusion reached in assessment does not justify reopening. [Paras 4, 6]

Impugned reopening notice quashed as it amounted to a change of opinion after scrutiny assessment.

Final Conclusion: The petition is allowed; the notice of reopening dated 15.3.2018 is quashed and set aside and the reopening of assessment for A.Y. 2011-12 is held invalid.

Avoidance of tax by certain transactions in securities - deeming provision - disallowance of loss in business dealing in securities - exemption under Section 10(15) - prospective application of amending provision

Avoidance of tax by certain transactions in securities - deeming provision - disallowance of loss in business dealing in securities - exemption under Section 10(15) - Section 94(4) is not attracted where the assessee did not fall within the deeming fiction of subsection (1) and the interest received by the assessee was exempt under Section 10(15) rather than being deemed non-taxable only by reason of subsection (1). - HELD THAT: - Subsections (1) and (4) of Section 94 operate conjunctively: subsection (1) deals with situations where an owner sells and repurchases securities so that interest payable is received otherwise than by the owner and is deemed to be the income of the owner; subsection (4) disentitles a person carrying on a business in securities from claiming profits or losses where the interest receivable by him is not deemed his income only by reason of subsection (1). In the present case the assessee did not sell and repurchase securities as an owner and there is no application of the deeming fiction in subsection (1) which would render the interest received by the assessee non-taxable solely by virtue of subsection (1). The fact that the interest was exempt under Section 10(15) is legally distinct from being rendered non-taxable by the deeming provision of subsection (1). Accordingly subsection (4) cannot be invoked to disallow the loss claimed by the assessee where the precondition-interest being excluded from the recipient's income only by reason of subsection (1)-is absent. [Paras 5, 6, 7, 8, 9]

The Tribunal was correct in holding that Section 94(4) is not applicable and the loss claimed on sale of securities is allowable.

Prospective application of amending provision - Subsection (7) of Section 94 is to be given prospective application from 01.04.2002. - HELD THAT: - The Tribunal held, and this court follows that holding, that subsection (7) operates prospectively from 01.04.2002. The view adopted by the Tribunal on prospectivity was supported by later authority relied upon (the Hon'ble Supreme Court in the cited case), and accordingly subsection (7) cannot be applied retrospectively to affect the assessments under challenge. [Paras 11]

Subsection (7) applies prospectively from 01.04.2002 and therefore does not affect the assessments under consideration.

Final Conclusion: The appeals filed by the Revenue are rejected and the appeal filed by the assessee is allowed; the loss claimed on the sale of securities for 1991-92 is to be allowed without disallowance under Section 94(4), and subsection (7) of Section 94 is prospective from 01.04.2002.

Satisfaction note as a sine qua non for initiating proceedings under Section 153-C - handing over of seized or requisitioned books/documents/assets to the Assessing Officer having jurisdiction - Section 153-C of the Income Tax Act as a machinery provision analogous to provisions for assessment of persons other than the searched person - writ jurisdiction under Articles 226 and 227 notwithstanding availability of alternative statutory remedy

Satisfaction note as a sine qua non for initiating proceedings under Section 153-C - handing over of seized or requisitioned books/documents/assets to the Assessing Officer having jurisdiction - Section 153-C of the Income Tax Act as a machinery provision analogous to provisions for assessment of persons other than the searched person - Validity of initiation of proceedings under Section 153-C and of the assessment passed under Section 143(3) read with Section 153-C where the assessing officer's satisfaction note is alleged to be deficient - HELD THAT: - The Court applied the principle in Calcutta Knitwears that the provision is a machinery provision and that the assessing officer must be satisfied, and must record that satisfaction, before transmitting seized or requisitioned material and initiating proceedings under the provision. For Section 153-C the ingredients are: (i) a satisfaction note recorded by the Assessing Officer of the searched person; (ii) finding that seized/requisitioned money, bullion, jewellery, documents or other assets belong or belonged to a person other than the searched person; and (iii) handing over of such seized/requisitioned material to the Assessing Officer having jurisdiction over that other person. The note produced by the revenue did not expressly record the requisite satisfaction that the seized material belonged to a person other than the searched person; it merely asserted that the case was covered by Section 153-C and referred to notification/centralization. The form and content of the note lacked explicit expression of the satisfaction mandated by Section 153-C and thus failed to comply with the mandatory statutory requirement. Because the satisfaction note was incomplete in the required respect, the subsequent initiation of proceedings and the assessment passed thereunder were held to be without jurisdiction and vitiated in law. [Paras 13, 14, 15]

Proceedings under Section 153-C and the assessment passed in consequence are set aside for want of the mandatory satisfaction note; revenue may, if permissible, initiate appropriate proceedings afresh.

Writ jurisdiction under Articles 226 and 227 notwithstanding availability of alternative statutory remedy - Maintainability of writ petition challenging proceedings under Section 153-C despite existence of alternative remedy of appeal - HELD THAT: - Given that the defect in the departmental action went to jurisdiction - the mandatory satisfaction required by Section 153-C was not recorded - the Court held that the writ jurisdiction could be exercised. The jurisdictional vice rendered the impugned proceedings void and therefore the availability of an alternative statutory remedy did not preclude relief by way of writ in the present case. [Paras 15]

Writ petitions entertained and allowed; alternative remedy did not bar exercise of writ jurisdiction in view of the jurisdictional defect.

Final Conclusion: Writ petitions allowed; impugned notices and the assessment order for assessment year 2008-09 under Section 143(3) read with Section 153-C are set aside because the mandatory satisfaction required by Section 153-C was not properly recorded; revenue is free to initiate proceedings if permissible under the Act.

Validity of notice under Section 148 - Obligation to furnish reasons for issuance of notice - Right to file objections and requirement of speaking order - Requirement of sanction under Section 151 before issuance of notice - Application of GKN Driveshafts (India) Ltd. precedent

Obligation to furnish reasons for issuance of notice - Right to file objections and requirement of speaking order - Application of GKN Driveshafts (India) Ltd. precedent - Objections to the Section 148 notice must be entertained and decided by the Assessing Officer by a speaking order after reasons are furnished; filing a return and seeking reasons is the proper course for the noticee. - HELD THAT: - Following the enunciation in GKN Driveshafts (India) Ltd., once a notice under Section 148 is issued the noticee may file a return and request reasons. The Assessing Officer is bound to supply reasons within a reasonable time. On receipt of reasons the noticee is entitled to file objections to the issuance of the notice and the Assessing Officer must consider and dispose of those objections by a reasoned (speaking) order. Applying that principle, the court directed that if the petitioner files objections containing all grounds within four weeks, the Assessing Officer shall afford hearing and decide each objection separately by assigning reasons within four weeks of receipt of the objections. [Paras 10, 11]

Petitioner may file objections to the Section 148 notice; the Assessing Officer must decide them by a speaking order within the timetable directed by the Court.

Validity of notice under Section 148 - Requirement of sanction under Section 151 before issuance of notice - Question of validity of the Section 148 notice (including alleged deficiencies in reasons and sanction) was not finally determined by the Court but remitted to the Assessing Officer for adjudication on objections filed by the petitioner. - HELD THAT: - The petition challenged the jurisdictional validity of the notice on multiple grounds, including alleged absence of requisite satisfaction in the reasons and incorrect application of sanction provisions. The court did not quash the notice; instead it directed that those contentions be raised as objections to be decided by the Assessing Officer with reasons. The court therefore remitted determination of the legal validity of the notice-on the merits-to administrative consideration in the objection proceedings, preserving the petitioner's right to approach the appropriate forum thereafter. The interim protection previously granted by the court was extended for three weeks after the Assessing Officer's decision to enable further legal recourse if required. [Paras 11, 12]

Validity of the Section 148 notice is remitted for fresh consideration by the Assessing Officer on the objections; the Court declined to quash the notice at this stage and extended limited interim protection as directed.

Final Conclusion: Writ petition disposed by directing that if the petitioner files objections within four weeks, the Assessing Officer shall hear and decide each objection by a speaking order within four weeks; the validity of the Section 148 notice is remitted to the Assessing Officer for determination and the court's interim restraint continues for three weeks after that decision to permit further legal action.

Admissibility and evidentiary weight of retracted confessional statements - requirement of proof of voluntariness of confession - necessity to examine makers of statements if relied upon in adjudication - use of confession of co-accused to lend assurance only, not as substantive proof - distinguishing precedent on presumptive inference from recent possession in smuggling cases

Admissibility and evidentiary weight of retracted confessional statements - requirement of proof of voluntariness of confession - use of confession of co-accused to lend assurance only, not as substantive proof - Whether confiscation and penalty could be sustained when based solely on confessional statements which were subsequently retracted and not independently corroborated or shown to be voluntary. - HELD THAT: - The Court examined the record and found that the adjudicating authority had relied solely on confessional statements recorded under Section 108 of the Customs Act and that those statements had been retracted. No Customs officer or independent witness was examined to establish that the confessions were made voluntarily, nor was there any other corroborative material linking the respondents to smuggling. Applying settled principles that a confession of a co-accused is not substantive proof and can at best lend assurance to other evidence, and that voluntariness must be proved before relying on a retracted confession, the Court held that reliance exclusively on such retracted statements, without establishing voluntariness or producing independent evidence, rendered the confiscation and penalty illegal and unsustainable.

Confiscation and penalty set aside; CESTAT's conclusion that orders based solely on retracted confessions without proof of voluntariness or corroboration was correct and is affirmed.

Distinguishing precedent on presumptive inference from recent possession in smuggling cases - Whether the decision of the Tribunal was contrary to the law laid down in Collector of Customs, Madras v. D. Bhoormull. - HELD THAT: - The Court considered the ratio in D. Bhoormull regarding presumptive inferences from recent possession in smuggling offences but found the facts distinguishable. In the present case there was no other material or evidence besides the confessional statements to link the respondents to smuggling. Given the absence of corroborative evidence and lack of proof of voluntariness, the Bhoormull principle could not be invoked to uphold the impugned orders. The Court therefore held that the Tribunal did not err in distinguishing that authority and setting aside the orders.

The Tribunal was right to distinguish D. Bhoormull on the facts; no error of law in CESTAT's conclusion.

Final Conclusion: The High Court dismissed the appeals and affirmed the Tribunal's order setting aside the confiscation and penalty, holding that reliance solely on retracted confessional statements without proof of voluntariness or independent corroboration is legally impermissible and the precedent relied upon by the appellant was distinguishable on the facts.

Verification of Certificate of Origin - Preferential tariff claim under Free Trade Agreement - Mechanical verification - Reasonable expedition of verification for perishable goods - Release of goods pending verification subject to post-verification action

Verification of Certificate of Origin - Mechanical verification - Preferential tariff claim under Free Trade Agreement - Verification of the Certificate of Origin under ISFTA cannot be undertaken mechanically in every case and is permissible only on the grounds set out in the Government instruction; random or targeted verification is allowed but must be founded on doubt or selected criteria. - HELD THAT: - The Court examined Instruction No.31 of 2016 and held that the Rules of Origin permit verification of Certificates of Origin but prescribe specific grounds for doing so (including doubt regarding genuineness, doubt as to whether goods qualify as originating, or selection on random/due-diligence basis). Administrative authorities are not empowered to insist on verification in each and every import under the ISFTA; a verification exercise must be anchored to the grounds enumerated in the instruction and cannot be undertaken in a mechanical manner. In the present case, the respondents did not demonstrate that they entertained any initial doubt regarding the genuineness of the petitioner's certificates of origin, nor did they identify criteria that would justify automatic verification. [Paras 8, 9, 10]

Verification cannot be routinely or mechanically required for every ISFTA import; it must be based on the grounds and criteria set out in Instruction No.31 of 2016, which the respondents failed to show were present here.

Reasonable expedition of verification for perishable goods - Release of goods pending verification subject to post-verification action - Unreasonable delay in completing verification of documents for perishable agricultural consignments entitles the importer to release of goods forthwith, subject to the outcome of any subsequent verification and lawful action by authorities if documents are found not genuine. - HELD THAT: - The Court recognised that the consignment consists of perishable agricultural goods and emphasised that verification processes must be expedited so as not to prejudice the importer. The respondents had completed first check examination which found the goods "as declared" but delayed reference to and response from the verifying authorities; more than 84 days had elapsed without a response from Sri Lankan counterparts. Given the absence of materials demonstrating any genuine doubt about the documents and the unreasonable delay, the balance favoured release. The Court directed that formalities be concluded and the goods released forthwith, while preserving the respondents' right to take action if post-release verification discloses fraud or fakery in the documents. [Paras 7, 11, 14, 15]

Because of the unreasonable delay in verification and the perishable nature of the goods, the petitioner is entitled to immediate release of the consignments, subject to post-verification action if the documents are found to be not genuine.

Final Conclusion: Writ petitions allowed; respondents directed to conclude formalities and release the imported consignments forthwith, while retaining the right to take lawful action if subsequent verification shows the submitted documents to be not genuine.

Condonation of delay - Sufficient cause - Limitation for filing appeal under Section 129D(4) of the Customs Act - Power of Tribunal to allow appeals beyond prescribed period - Penalty under Section 114A - measure equivalent to duty evaded

Condonation of delay - Sufficient cause - Limitation for filing appeal under Section 129D(4) of the Customs Act - Application for condonation of delay in filing appeal of 452 days was not maintainable as no sufficient cause was shown. - HELD THAT: - The statutory period for filing an appeal pursuant to a review order under Section 129D(1) is one month from the date of receipt of the Committee's order. The revenue's sole explanations - heavy workload and transfers of officers - were held inadequate to constitute sufficient cause for a delay of 452 days. Accepting such reasons routinely would render the prescribed limitation meaningless. Reliance on precedent (Chief Post Master General & Others v. Living Media India Ltd.) reinforces that government departments must provide plausible, cogent explanations and cannot invoke impersonal bureaucracy or workload as a blanket ground for condonation. In the absence of acceptable justification, the Tribunal declined to exercise its discretion to condone the delay. [Paras 5]

Application for condonation of delay dismissed and appeal thereby dismissed.

Penalty under Section 114A - measure equivalent to duty evaded - Precedent of Tribunal binding on merits - The substantive contention that penalty under Section 114A should include interest in addition to duty evaded is foreclosed by existing Tribunal decisions and therefore would not assist the revenue even if condonation were granted. - HELD THAT: - The Tribunal observed that the question whether penalty under Section 114A is to be equated with duty evaded (and not the duty plus interest) is not res integra and is covered by a series of earlier Tribunal decisions cited in the order. Consequently, the appeal, on merits, lacked prospects of success and no prejudice would be caused to the respondent by refusing condonation. The Tribunal therefore noted that even if delay were condoned the appeal could not be sustained on merits. [Paras 5]

On merits the revenue's contention is covered by precedent against it; appeal would not have succeeded even if delay were condoned.

Final Conclusion: The applications for condonation of delay are dismissed for want of sufficient cause and, accordingly, the appeals are dismissed; the Tribunal further recorded that the substantive issue is covered by adverse precedents against the revenue.

Maintainability of writ petition against show cause notice - Available remedy before adjudicating authority - Interference with pending adjudication

Maintainability of writ petition against show cause notice - Interference with pending adjudication - Writ petition challenging a show cause notice is not maintainable when the issuing authority has jurisdiction and adjudication is pending. - HELD THAT: - The High Court declined to entertain the writ petition filed against the show cause notice because the issuing authority was not shown to lack jurisdiction or competency and the petitioner had already filed a reply to the notice. The Court held that factual and merit-based contentions raised against the allegations in the show cause notice cannot be considered at the pre-adjudication stage. Instead, the petitioner must participate in the adjudication and press all contentions before the Adjudicating Authority; judicial interference prior to completion of adjudicatory proceedings was inappropriate in the circumstances of the case. [Paras 2, 3]

Writ petition dismissed as not maintainable at this stage; petitioner directed to raise all contentions before the Adjudicating Authority during adjudication.

Final Conclusion: The petition is disposed of without expressing any view on the merits; the petitioner is directed to pursue its objections in the pending adjudication before the Adjudicating Authority.

Condonation of delay - monetary limit for filing appeals in High Courts - tax effect threshold for entertainability of appeals - dismissal of appeal without adjudication on merits - leave to agitate question of law in an appropriate case

Condonation of delay - Application for condonation of delay in re-filing the appeal was allowed and delay of 94 days was condoned. - HELD THAT: - The Court considered the application under Section 151 CPC supported by an affidavit and, after hearing counsel and perusing averments, granted relief by condoning the delay of 94 days in re-filing the appeal. The order records that notice was issued and the matter was heard before allowing the application. The allowance of the application enabled the re-filed appeal to be considered before the High Court.

Delay of 94 days in re-filing the appeal is condoned and the miscellaneous application stands disposed of.

Monetary limit for filing appeals in High Courts - tax effect threshold for entertainability of appeals - dismissal of appeal without adjudication on merits - leave to agitate question of law in an appropriate case - Appeal dismissed by the High Court on account of the tax effect being below the monetary threshold prescribed for filing appeals in High Courts; dismissal without deciding merits while leaving the legal question open. - HELD THAT: - The Court noted that the monetary effect in the appeal amounted to the stated redumption fine and penalty totaling below the monetary ceiling fixed by the Ministry of Finance/Central Board of Indirect Taxes & Customs for filing appeals in High Courts. Having regard to the Board's instruction that appeals falling below the prescribed monetary limit should be withdrawn and that the instruction applies to pending appeals, the Court declined to examine the merits. The Court referred to Supreme Court precedent where appeals with low tax effect were dismissed without going into merits, leaving the question of law open. Consequently, the present appeal was dismissed but the dismissal was expressly not to be treated as an affirmation of the Tribunal's order on merits; the legal issue claimed by the revenue was left open for adjudication in an appropriate case. [Paras 2, 4]

Appeal dismissed on the ground that the tax effect falls below the prescribed monetary limit for High Court appeals; merits not decided and the legal question is left open for future adjudication.

Final Conclusion: Miscellaneous application for condonation of delay allowed; appeal dismissed by the High Court on the ground that the monetary effect is below the prescribed threshold for entertaining appeals in the High Courts, without adjudication on merits, and the legal issue is left open for determination in an appropriate case.

Seizure - interim stay - release on furnishing bond and bank guarantee - jurisdiction to seize - impleadment - direction by superior officer and absence of independent mind - Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007

Impleadment - Permission to implead M/s Shiva Enterprises as respondent no.2 - HELD THAT: - The Court granted the petitioner's request to implead M/s Shiva Enterprises, B-33 Sector 65 Noida as respondent no.2 and directed that notice be issued to the newly impleaded respondent.

Impleadment of M/s Shiva Enterprises permitted and notice to be issued.

Seizure - interim stay - release on furnishing bond and bank guarantee - jurisdiction to seize - Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - direction by superior officer and absence of independent mind - Interim relief against the seizure memo dated 24.10.2018 and conditions for release of seized goods - HELD THAT: - The Court noted the petitioner's contention that the seizure was effected by an Inspector of SIIB pursuant to a direction from a superior officer and questioned whether the Inspector was authorised to pass the seizure order under the relevant IPR enforcement rules. Without deciding the merits of that contention, the Court stayed operation and effect of the impugned seizure memo dated 24.10.2018 until further orders. As a condition for release pending adjudication, the seized goods were ordered to be released to the petitioner upon furnishing a bond for the value of the goods and a bank guarantee equal to 25% of that value. The Court also afforded the respondent time to file a counter affidavit and the petitioner time to file a rejoinder, and listed the matter for further consideration after one month.

Operation of the seizure memo stayed; goods to be released on furnishing a bond and a bank guarantee of 25%; timelines for affidavits and listing after one month.

Final Conclusion: The High Court allowed impleadment of M/s Shiva Enterprises, issued notice to it, granted an interim stay on the seizure memo dated 24.10.2018 and ordered release of the seized goods subject to the petitioner furnishing a bond for the goods' value and a bank guarantee of 25%, while directing filing of counter and rejoinder affidavits and listing the matter after one month.

Confiscation and redemption fine under section 114(1) and 114AA of the Customs Act, 1962 - applicability of Notification No.67 dated 23.1.2003 issued under rule 11 of the Export (Quality Control and Inspection) Act, 1963 - show cause notice requirement before denying benefit of a notification - reliance on judicial precedent subsequently reviewed

Confiscation and redemption fine under section 114(1) and 114AA of the Customs Act, 1962 - show cause notice requirement before denying benefit of a notification - Admitted for consideration whether the Tribunal was justified in upholding confiscation and imposing redemption fine and penalties under section 114(1) and 114AA of the Customs Act, 1962. - HELD THAT: - The petition was admitted and a substantial question of law was formulated challenging the Tribunal's confirmation of confiscation and imposition of redemption fine and penalties. The petitioner relied on the principle (as cited from Prince Khadi Woollen Handloom Prod. Coop. Indl. Society v. CCE) that where the revenue contends an assessee is not entitled to the benefit of a notification, the revenue must issue a show cause notice and process the matter from that stage. The Court recorded the contention that no such show cause notice was issued in the present case, and therefore the Tribunal could not properly rely upon the notification to sustain confiscation and penalties without the assessee having been called upon to show cause.

The question was admitted for consideration and framed as a substantial question of law; it remains to be adjudicated on merits.

Applicability of Notification No.67 dated 23.1.2003 issued under rule 11 of the Export (Quality Control and Inspection) Act, 1963 - reliance on judicial precedent subsequently reviewed - Admitted for consideration whether the Tribunal was justified in relying upon Notification No.67 dated 23.1.2003 to treat consignments as prohibited despite that restriction not being specified under the relevant DGFT notification serial entry. - HELD THAT: - The Court noted that the Tribunal placed reliance on Notification No.67/2003 issued under the Export (Quality Control and Inspection) Act to conclude that consignments with non-basmati rice exceeding a specified proportion fell within the prohibition and thus justified confiscation and penalty. Counsel for the petitioner contended that the Tribunal relied upon an earlier Delhi High Court decision which was later reviewed in favour of the assessee, and submitted that the Tribunal was not obliged to follow a precedent subsequently reviewed. These contentions were recorded and the substantial question was framed to examine the correctness of the Tribunal's reliance on that notification and on the precedent.

The question was admitted for consideration and framed as a substantial question of law; it remains to be adjudicated on merits.

Final Conclusion: Petition admitted; two substantial questions of law were framed for consideration - (A) correctness of the Tribunal's confirmation of confiscation and imposition of redemption fine and penalties under section 114(1) and 114AA in light of the absence of a show cause notice regarding applicability of the notification, and (B) propriety of the Tribunal's reliance on Notification No.67/2003 (and the precedent relied upon) where that restriction is not specified under the cited DGFT notification.

Rectification of clerical mistakes - typographical errors in appellate order - refund claim based on actual quantity received vs bill of lading - computation of duty on quantity received - NCCD applicability and refund claim - no interference with rejection of refund claim

Rectification of clerical mistakes - typographical errors in appellate order - Correction of incorrect Order in Appeal numbers in the preamble of the Final Order. - HELD THAT: - The Tribunal accepted the appellant's submission that the Order in Appeal numbers cited in the preamble of Final Order Nos. A/31491 314992/2016 and A/31505/2016 were incorrect. The preamble is rectified to read: "Arising out of Order in Appeal No. 1/2007(V)(D)CH & 50 to 69/2007(V)CH, dated 04.09.2007 passed by CCE, C&ST (Appeals), Visakhapatnam IV." The correction is typographical and does not alter the substantive adjudication.

The preamble's Order in Appeal numbers are corrected as stated and the typographical error is rectified.

Refund claim based on actual quantity received vs bill of lading - computation of duty on quantity received - Rectification of the second sentence of paragraph 2 to correctly record the appellant's refund claim and its basis. - HELD THAT: - The Tribunal found that paragraph 2 contained a typographical error in recording the appellant's contention. The corrected sentence states that the appellant filed a refund claim of Rs. 4,23,30,927/- on the ground that the actual quantity received is less and that duty should be computed on quantity received rather than the quantity shown in the Bill of Lading. The change is a correction of record to reflect the pleaded contention accurately.

Paragraph 2's second sentence is amended to correctly state the appellant's refund claim and its basis.

NCCD applicability and refund claim - refund claim - Correction of the last sentence of paragraph 2 to accurately record the appellant's subsequent refund claim regarding NCCD. - HELD THAT: - The Tribunal amended the last line of paragraph 2 to record that after payment of NCCD the appellant subsequently filed a refund claim of Rs. 12,27,52,950/- contending that NCCD would not be applicable in their case. This amendment corrects the record and clarifies the sequence and nature of the appellant's claims.

Paragraph 2's last sentence is amended to reflect the appellant's refund claim concerning NCCD as stated.

No interference with rejection of refund claim - Rectification of paragraph 4 to state the Tribunal's conclusion that the part of the impugned order rejecting the NCCD refund claim did not call for interference. - HELD THAT: - The Tribunal identified and corrected a typographical error in the third sentence of paragraph 4 to read: "This being so, that part of the impugned order rejecting the refund claim of Rs. 12,27,52,950/- does not call for any interference." The correction records the Tribunal's intended conclusion that the rejection of the NCCD refund claim stands and requires no interference, and is confined to rectifying the text.

Paragraph 4 is amended to state that the rejection of the NCCD refund claim does not call for interference.

Final Conclusion: The application for rectification is allowed; the identified typographical errors in the Final Order are amended as specified and the rectification application is disposed of accordingly.

Refund of SAD under Notification No. 102/2007-cus - identity of imported goods - verification by serial numbers - production of triplicate bill of entry - remand for verification

Identity of imported goods - verification by serial numbers - Whether the rejection of the refund claim on the ground of alleged mismatch in invoices was sustainable where the serial numbers of the imported items matched. - HELD THAT: - The Tribunal found that, notwithstanding certain invoice mismatches, the serial numbers of the static convertors imported and those shown in the sales invoices corresponded. The matching of serial numbers was held to establish the substantial condition of identity of the goods. In view of this, the Tribunal concluded that the impugned adjudication rejecting the refund claim could not be sustained on the ground of invoice mismatch alone and the matter required further verification focused on identity by reference to serial numbers.

Impugned order rejecting the refund was set aside and the matter remanded to the Original Adjudicating Authority to verify identity of goods by serial number.

Production of triplicate bill of entry - remand for verification - Whether the appellant must produce original/certified triplicate copies of the bill of entry and other supporting documents in the remand proceedings. - HELD THAT: - The Tribunal accepted the Revenue's contention about the need for documentary proof but, rather than finally adjudicating the claim in the Revenue's favour for want of documents, directed the Original Adjudicating Authority to permit verification on production of required documents. The appellant was directed to produce the triplicate copy of the bill of entry (original or certified) and other supporting documents establishing clear identity of the goods with reference to import documents, after which the adjudicating authority shall re-examine the claim and complete proceedings within the time prescribed by the Tribunal.

Proceedings remanded with direction that appellant produce original/certified triplicate bill of entry and supporting documents; Original Adjudicating Authority to verify and decide afresh.

Final Conclusion: The Tribunal set aside the orders rejecting the refund claims under Notification No. 102/2007-cus, finding that serial numbers establish substantial identity, and remanded the matters to the Original Adjudicating Authority for verification upon production of original/certified triplicate bill(s) of entry and other supporting documents, to be completed within three months.

Redemption fine - penalty for illegal import - confiscation under Section 125 of the Customs Act, 1962 - assessable value - import of used computers without licence - reduction of fines and penalties

Import of used computers without licence - confiscation under Section 125 of the Customs Act, 1962 - Whether the imported used computers, brought without licence, are liable to confiscation - HELD THAT: - The appellant imported used computers without the requisite licence. The Bench found that such importation violated the provisions of the Customs Act and, therefore, the goods are liable to confiscation under the statutory scheme. The Tribunal recorded that confiscation is the applicable consequence of the unauthorised import, and that punitive measures in the form of redemption fine and penalty arise from that liability. [Paras 4, 5]

Goods imported without licence are held liable to confiscation under Section 125 of the Customs Act, 1962.

Redemption fine - assessable value - reduction of fines and penalties - Whether the redemption fine imposed by the lower authorities should be sustained or reduced and, if reduced, to what extent measured by the assessable value - HELD THAT: - The adjudicating authority had imposed a redemption fine of approximately 15% of the assessable value. On consideration, the Tribunal held that precedent authorities cited by the appellant were applicable and warranted reduction of the redemption fine. Applying those principles, the Tribunal reduced the redemption fine to 10% of the assessable value on the bills of entry in these appeals. [Paras 4, 5]

Redemption fine reduced to 10% of the assessable value.

Penalty for illegal import - assessable value - Whether penalty should be imposed and, if so, the quantum of penalty measured by the assessable value - HELD THAT: - The Tribunal held that, having found the goods liable for confiscation, a penalty was also warranted. Although the lower authorities fixed a higher penalty (around 7.5% of the assessable value), the Tribunal exercised its discretion to fix the penalty at a lower rate in line with the reduction of the redemption fine and the authorities relied upon. Accordingly, the penalty was fixed at 5% of the assessable value in each of the two appeals. [Paras 5, 6]

Penalty imposed at 5% of the assessable value.

Final Conclusion: The Tribunal held that the imported used computers brought without licence are liable to confiscation; directed reduction of the redemption fine to 10% of the assessable value; and imposed penalty at 5% of the assessable value, disposing of the appeals accordingly.

Rectification of mistake - typographical error in order - correction of preamble - Order-in-Original - Order-in-Appeal

Rectification of mistake - typographical error in order - correction of preamble - Application for rectification of a typographical error in the preamble of the Final Order dated 23.02.2018 allowed and corrected wording directed. - HELD THAT: - The Tribunal considered the Revenue's application seeking correction of a typographical mistake in the preamble of Final Order No. A/30332/2018 dated 23.02.2018. The error consisted of the preamble incorrectly referring to the antecedent order as an "Order-in-Appeal No. 18/2008-2009 (RS) dated 31.12.2018" instead of the correct description, namely "Order-in-Original No. 18/2008-2009 (RS) dated 31.12.2018". The application was taken up despite absence of representation for the assessee. Having identified the clerical mistake in the preamble, the Tribunal directed that the preamble be read with the corrected phrase "Order-in-Original No. 18/2008-2009 (RS) dated 31.12.2018 passed by Commissioner of Central Excise & Customs, Visakhapatnam" which reflects the intended reference in the Final Order. [Paras 3, 4]

Rectification application allowed; the preamble of the Final Order dated 23.02.2018 shall be read with the corrected wording substituting "Order-in-Appeal" by "Order-in-Original" and the application disposed of.

Final Conclusion: The Tribunal allowed the Revenue's application for rectification of a typographical error in the preamble of its Final Order dated 23.02.2018, directed the substitution of the incorrect phrase with the correct wording "Order-in-Original ...", and disposed of the rectification application.

Rectification of mistake - error apparent on the face of the record - reimbursable expenses - opportunity to be heard - penalty - limitation

Rectification of mistake - error apparent on the face of the record - reimbursable expenses - opportunity to be heard - Application for rectification of the Tribunal's final order alleging an apparent error in not considering reduction of value for reimbursable expenses and absence of findings on limitation and penalty. - HELD THAT: - The Tribunal examined the final order and noted that paragraph 2 of that order expressly records that, after hearing both sides and upon a specific query from the Bench, the appellant's counsel stated that the appellant did not have bills to prove that the expenses were reimbursable and that no evidence could be produced. The Bench, having afforded full opportunity to make submissions, proceeded on that factual finding and upheld the demands. Given that the order records the appellant's admission and the opportunity to be heard, there is no "error apparent on the face of the record" warranting rectification. The contention that there were no findings on limitation and penalty is addressed by the Tribunal's recording of the hearing and the appellant's inability to produce supporting bills; the Tribunal found no basis to alter its conclusion. Accordingly, the prerequisites for invoking rectification were not satisfied. [Paras 3, 4]

Application for rectification dismissed for lack of any error apparent on the face of the final order.

Final Conclusion: The Tribunal dismissed the application for rectification, holding that the final order had recorded the appellant's inability to produce bills and that full opportunity was afforded to argue reimbursable expenses, and therefore there was no apparent error requiring correction.

Pre-deposit requirement under section 35F of Central Excise Act, 1944 - period of limitation for filing appeal under section 35(1) of Central Excise Act, 1944 - entertainment of appeal - condonable period for filing an appeal - remand for disposal on merits

Entertainment of appeal - pre-deposit requirement under section 35F of Central Excise Act, 1944 - period of limitation for filing appeal under section 35(1) of Central Excise Act, 1944 - condonable period for filing an appeal - Whether non-compliance with the pre-deposit requirement at the time of filing rendered the appeal incapable of being entertained - HELD THAT: - The Tribunal examined the effect of the amendment mandating pre-deposit with effect from 6 August 2014 and the impugned authority's view that the expression 'entertain' required pre-deposit to have been made before filing so as to make the effective date of appeal later than the date of filing. The Court held that filing an appeal within the period prescribed by section 35(1) satisfies the threshold of filing (including any condonable period) and that the sufficiency of the appeal for being entertained is a separate question determined by compliance with the pre-deposit requirement. The appeal in question was filed on 14 November 2014, within the condonable period; the appellant subsequently made the prescribed pre-deposit (evidenced by e-receipts) before disposal by the first appellate authority. The Tribunal found that the first appellate authority erred in refusing to entertain the appeal on the ground that the effective date of appeal post-dated the filing date because of initial non-compliance, and that the change in law should have been reflected in preambles of orders to inform parties of the new requirement. [Paras 3, 4, 5, 6]

The impugned conclusion that the appeal could not be entertained for want of pre-deposit at the time of filing is not sustained; the appeal was filed within the condonable period and the subsequent compliance with pre-deposit entitled the appeal to be considered on merits.

Remand for disposal on merits - pre-deposit requirement under section 35F of Central Excise Act, 1944 - Appropriate remedy where the first appellate authority declined to dispose of the appeal on merits despite subsequent compliance with the pre-deposit requirement - HELD THAT: - Having found that the appeal was filed within the condonable period and that the prescribed pre-deposit had been made before the first appellate authority finally took up the matter, the Tribunal held that the FAA should have proceeded to decide the appeal on merits. The impugned order was therefore set aside and the matter was remitted for fresh disposal by the first appellate authority. The Tribunal mandated that the appellant be given a sufficient opportunity to be heard when the FAA disposes the appeal on merits. [Paras 6]

Impugned order set aside and matter remitted to the first appellate authority for disposal on merits after giving the appellant adequate opportunity to be heard.

Final Conclusion: The appeal against the first appellate authority's order is allowed to the extent that the impugned order is set aside and the matter is remitted to the first appellate authority for fresh disposal on merits, the appellant being afforded adequate opportunity to be heard; the Tribunal found that filing within the condonable period and subsequent compliance with the pre-deposit requirement entitled the appeal to be entertained.

CENVAT credit on goods used for providing output services - definition of inputs under Rule 2(k) of the CENVAT Credit Rules - eligibility of credit for goods used in laying railway tracks within port premises - port services as taxable output services

CENVAT credit on goods used for providing output services - definition of inputs under Rule 2(k) of the CENVAT Credit Rules - eligibility of credit for goods used in laying railway tracks within port premises - CENVAT credit availed on goods used for laying railway tracks within the port premises is admissible as inputs for providing taxable port services. - HELD THAT: - The Tribunal found it undisputed that the goods for which credit was availed were used in laying a railway track within the appellant's port premises and that the appellant renders taxable port services and discharges service tax liability. Applying the definition of "inputs" in Rule 2(k) of the CENVAT Credit Rules, which allows credit on goods used for providing any output services, the Tribunal accepted the appellant's contention that such goods qualify as inputs for the provision of port services. The Tribunal relied on favorable judicial authority referred to in the record, including the High Court decision in Mundra Port & SEZ , and Tribunal precedent in Vimal Infrastructure (India) Pvt Ltd , as guiding authorities on the admissibility of credit for goods used in port-related infrastructure and railway sidings used in cargo handling. In view of these authorities and the facts that the materials were used for the port's operational tracks and that service tax on output had been discharged, the impugned appellate order upholding denial of credit was held to be unsustainable.

Impugned order set aside; appeal allowed and CENVAT credit held admissible.

Final Conclusion: The appellate order denying CENVAT credit on materials used to lay railway tracks within the port, which were employed in providing taxable port services, is set aside and the credit is allowed in accordance with the definition of "inputs" under Rule 2(k) of the CENVAT Credit Rules and relevant precedents.

Deduction of value of spare parts from taxable service value under Notification No.12/2003-ST - Burden of proof to show spare parts were sold separately and suffered VAT/Sales Tax - Remand for adducing evidence

Deduction of value of spare parts from taxable service value under Notification No.12/2003-ST - Burden of proof to show spare parts were sold separately and suffered VAT/Sales Tax - Remand for adducing evidence - Whether the appellant is entitled to deduction/exemption under Notification No.12/2003-ST by proving that spare parts used in repair and maintenance were sold separately and suffered VAT/Sales Tax, and whether the matter should be remanded for adducing such evidence. - HELD THAT: - The adjudicating authority found in principle that the appellants could be eligible for benefit of Notification No.12/2003-ST but rejected the claim for want of evidence that the value of spare parts had been excluded and that such goods had borne VAT/Sales Tax. The appellant now asserts possession of bills/invoices to establish that spare parts were sold separately and suffered VAT/Sales Tax. The Revenue raised no objection to remand. In the interest of justice and because entitlement turns on proof of sale and tax incidence on the parts, the Tribunal remands the matter to the adjudicating authority to allow the appellant an opportunity to produce and rely upon relevant invoices/bills and for the authority to examine and decide the claim afresh. The Tribunal expressly keeps all issues open for adjudication by the authority on receipt of evidence. [Paras 6, 7]

The appeal is allowed by way of remand to the adjudicating authority for the appellant to adduce evidence regarding sale of spare parts and payment of VAT/Sales Tax; all issues are kept open.

Final Conclusion: Appeal allowed by way of remand to the adjudicating authority to enable the appellant to produce invoices/bills and other evidence to prove that spare parts were sold separately and suffered VAT/Sales Tax so as to determine entitlement under Notification No.12/2003-ST; adjudicating authority to decide all issues afresh.

Levy of service tax on reimbursed expenses - Valuation of taxable service - treatment of expenditures incurred by service provider as consideration - Ultra vires declaration of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006

Levy of service tax on reimbursed expenses - Valuation of taxable service - treatment of expenditures incurred by service provider as consideration - Ultra vires declaration of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - Whether amounts reimbursed to the clearing and forwarding agent by the principal for actual expenses are includible in the value of taxable services and liable to service tax. - HELD THAT: - The Tribunal examined the dispute concerning reimbursements received by the appellant from the principal and noted that the Commissioner (Appeals) had remanded the matter for recalculation of duty. Applying the binding precedent of the Hon'ble Supreme Court in Intercontinental Consultants and Technocrats Pvt. Ltd. v. Union of India, which upheld the Delhi High Court's decision striking down Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 as ultra vires, the Tribunal held that expenditure or costs incurred by the service provider in the course of providing the taxable service cannot be treated as consideration for the service. In view of this legal position, the levy of service tax on reimbursed expenses could not be sustained and the demand confirmed by the adjudicating authority could not stand.

Levy of service tax on the reimbursed expenses is unsustainable; the demand is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the service-tax demand insofar as it related to reimbursed expenses, and dismissed the levy on such reimbursements in view of the Supreme Court's decision invalidating Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006.

Interpretation of exemption notification - reckoning of input content for eligibility - strict construction of exemption - benefit of doubt to the revenue in case of doubt on exemption - extended period of limitation - requirement of suppression, fraud or willful misstatement to invoke extended period - penalty under Section 11AC for suppression or collusion

Interpretation of exemption notification - reckoning of input content for eligibility - strict construction of exemption - benefit of doubt to the revenue in case of doubt on exemption - Whether the fly ash contained in inputs (Flex-O-Board sheets) procured from a sister unit can be reckoned along with fly ash added during the appellant's own manufacturing process to satisfy the 25% by weight requirement of the exemption notifications. - HELD THAT: - The Tribunal examined competing views: (a) the 25% by weight must be present in the manufacture of the final product without reference to the composition of inputs; and (b) the 25% may include fly ash already contained in inputs supplied by others. Noting precedents where beneficial notifications were interpreted in light of purpose, the Tribunal observed that the constitutional-bench decision requires strict construction of exemption notifications and, if doubt exists, the benefit goes to the revenue. Applying that principle, two interpretations are possible here and the doubt must be resolved against the assessee. Consequently the assessee is not entitled to include fly ash contained in procured inputs for meeting the 25% threshold of the exemption notifications. [Paras 11, 12]

Assessee not entitled to reckon fly ash contained in inputs for satisfying the 25% threshold; exemption not available on that basis.

Extended period of limitation - requirement of suppression, fraud or willful misstatement to invoke extended period - penalty under Section 11AC for suppression or collusion - Whether the Department was entitled to invoke the extended period of limitation and impose penalty under Section 11AC. - HELD THAT: - On review of records and trade directions, the Tribunal found that the assessee maintained the records and filed the returns required by the notifications, produced information requested during audit, and had supplied data regarding fly ash content of inputs received from the parent unit. There was no finding of fraud, collusion, willful misstatement or suppression of facts with intent to evade duty. In absence of such culpable conduct, invocation of the extended period was not justified and the penalty under Section 11AC, which depends on such misdeeds, could not be sustained. Accordingly the demand is confined to the normal period and the penalty is set aside. [Paras 13, 14]

Extended period of limitation not invokable; demand limited to normal period and penalty under Section 11AC set aside.

Final Conclusion: The appeal is partly allowed: on merits the assessee cannot include fly ash contained in procured inputs to meet the 25% threshold and therefore is not entitled to the exemption on that basis, but the department's demand is confined to the normal period and the penalty under Section 11AC is set aside; appeal disposed accordingly.

Reversal of Cenvat credit - Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 - Penalty bar where duty is paid with interest under Section 80(2) of the Finance Act, 1994 - Trading of goods not a 'service' for service tax purposes - Remand for quantification of reversible Cenvat credit

Penalty bar where duty is paid with interest under Section 80(2) of the Finance Act, 1994 - Penalty under Cenvat Credit Rules, 2004 - Whether penalty imposed on the appellant should be sustained - HELD THAT: - The Tribunal found that the appellants had paid the disputed amounts (part payments noted) and that Section 80(2) of the Finance Act, 1994 mandates that where the duty shortfall is paid with interest in full, penalty shall not be imposed. The respondents failed to produce cogent evidence of wilful suppression or mala fide intent to evade duty. In these circumstances the imposition of penalty and invocation of extended period for issuance of the SCN lacked legal basis and was set aside. [Paras 10]

Penalty imposed on the appellants is set aside.

Reversal of Cenvat credit - Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 - Remand for quantification of reversible Cenvat credit - Trading of goods not a 'service' for service tax purposes - Whether the matter should be remanded for determination of the quantum of reversible Cenvat credit - HELD THAT: - The Tribunal accepted that common input/service credits were availed and that trading was treated as exempt; appellants admitted remand for ascertaining the quantum of reversible Cenvat credit and produced documents. The Commissioner (Appeals) had already directed remand to the original adjudicating authority to examine documentary evidence and determine the reversible credit; the Tribunal held that such redetermination is not prejudicial and upheld the remand for quantification. The Court also observed that trading (sale of goods) is not a 'service' under the statutory definition and that inclusion of 'trading' in the Explanation to Rule 2(e) is clarificatory, but the adjudicatory remand remains necessary to quantify reversible credit. [Paras 10]

Remand to the original adjudicating authority for ascertainment of the quantum of reversible Cenvat credit is upheld.

Final Conclusion: The appeal is partly allowed: the penalty imposed is set aside; the remand for redetermination and quantification of reversible Cenvat credit is upheld.

Rectification of mistake - reading of cause title and operative sentences - set aside of Orders-in-Appeal - entitlement to refund - consequential relief

Rectification of mistake - reading of cause title and operative sentences - Application for rectification of mistake in the Tribunal's final order correcting the cause title and operative sentences to reflect both Orders in Appeal. - HELD THAT: - The Tribunal examined the impugned final order and records and found a clerical/error in the cause title and in the first and last sentences where only one Order in Appeal had been referred to, whereas the appeals arose out of two distinct Orders in Appeal. The Tribunal directed that the title be read to record both Orders in Appeal and substituted the first and last operative sentences accordingly to correctly state that the appeals are against both Orders in Appeal and that the Orders in Appeal are set aside with consequential relief. The correction was effected under the power to rectify a mistake in its order to reflect the true adjudicatory outcome already intended by the Tribunal. [Paras 3, 4, 5, 6]

Application for rectification of mistake allowed; the impugned order is amended to refer to both Orders in Appeal and the operative sentences are corrected as directed.

Set aside of Orders-in-Appeal - entitlement to refund - consequential relief - Substantive outcome reflected in the corrected order that the assessee is entitled to refund and the Orders in Appeal are set aside. - HELD THAT: - Upon rectifying the clerical error, the Tribunal recorded that the assessee is entitled to refund and that the impugned Orders in Appeal are liable to be set aside. The Tribunal ordered that the impugned Orders in Appeal be set aside and that the appeals be allowed with consequential relief, thereby giving effect to the substantive decision in favour of the assessee. [Paras 5, 6]

The impugned Orders in Appeal are set aside and the appeals are allowed with consequential relief; the assessee is held entitled to refund.

Final Conclusion: The application for rectification is allowed: the Tribunal's final order is amended to correctly refer to both Orders in Appeal, and, as so corrected, records that the assessee is entitled to refund and that the impugned Orders in Appeal are set aside and the appeals are allowed with consequential relief.

Rectification of mistake apparent on the face of the record - CENVAT credit - eligibility to avail CENVAT credit for Renting of Immovable Property - eligibility to avail CENVAT credit for Security Services - eligibility to avail CENVAT credit for Cleaning - eligibility to avail CENVAT credit for Internet services - exclusion of Works contract services from allowed credits

Rectification of mistake apparent on the face of the record - CENVAT credit - eligibility to avail CENVAT credit for Renting of Immovable Property - eligibility to avail CENVAT credit for Security Services - eligibility to avail CENVAT credit for Cleaning - eligibility to avail CENVAT credit for Internet services - exclusion of Works contract services from allowed credits - The Tribunal rectified an apparent error in its final order to exclude 'Works contract services' and to record 'Internet services' as an eligible input service for CENVAT credit alongside Renting of Immovable Property, Security Services and Cleaning. - HELD THAT: - The Bench observed an inconsistency between Paragraph No. 6 (which recorded the appellant's arguments and denied benefit of CENVAT credit on works contract services) and Paragraph No. 7 (which in its last line incorrectly included works contract services among the allowed credits). The Tribunal found this to be a mistake apparent on the face of the record and corrected the last line of Paragraph No. 7 so that it recognizes entitlement to CENVAT credit for Renting of Immovable Property, Security Services, Cleaning and Internet services, but does not include Works contract services. The rectification was effected by substituting the corrected sentence in place of the erroneous one, thereby aligning the order's operative language with its reasoning. [Paras 6, 7]

Application for rectification allowed; Paragraph No. 7 amended to exclude Works contract services and to record Internet services as eligible for CENVAT credit, conforming the order to the record.

Final Conclusion: The Tribunal allowed the rectification application, correcting the final order to exclude Works contract services from allowed CENVAT credits and to record Internet services (along with Renting of Immovable Property, Security Services and Cleaning) as eligible, and disposed of the application accordingly.

Rectification of mistake - no error apparent on record - acceptance of earlier orders on merits versus monetary limit - binding precedent - application of ratio of higher courts

Rectification of mistake - acceptance of earlier orders on merits versus monetary limit - Whether the Final Order omitted the monetary limit or wrongly recorded that earlier orders were not accepted on merits, thereby necessitating rectification. - HELD THAT: - The Tribunal examined the Final Order and found that the question of whether the Commissioner (Appeals) acceptance by the department was on merits or on monetary grounds was expressly considered in paragraph 6 of the Final Order. The order records the competing contentions of the department and the assessee and concludes that no evidence supported either argument, and that the earlier order of the Commissioner (Appeals) is not a binding precedent on the CESTAT. Having addressed the contention squarely, the Tribunal held there was no apparent mistake in relation to omission or mischaracterisation of the monetary limit or the nature of acceptance. [Paras 2]

The contention of omission or mischaracterisation regarding acceptance on merits versus monetary limit does not disclose an apparent mistake; no rectification warranted on this ground.

Binding precedent - application of ratio of higher courts - no error apparent on record - Whether the Final Order failed to note or apply a binding CESTAT decision on the issue, requiring rectification. - HELD THAT: - The Tribunal noted that the Final Order explicitly relied upon the ratios of higher court decisions, including the Hon'ble High Court of Bombay and the Hon'ble Supreme Court, when deciding the matter. The order therefore dealt with precedential authority and applied relevant judicial ratios rather than omitting or overlooking a binding decision of the CESTAT. On reviewing these aspects, the Tribunal found no error apparent that would justify rectification. [Paras 2, 3]

No apparent mistake in respect of treatment or omission of binding precedent; rectification application on this ground rejected.

Final Conclusion: Applications for rectification of mistake are rejected as the Final Order had considered and addressed the contested points-including the nature of earlier acceptance and the precedential authorities relied upon-and no error apparent on record was shown.

Reversal of CENVAT credit on removal of capital goods 'as such' - meaning of "as such" in Rule 3(4) of CENVAT Credit Rules - depreciated value for credit reversal - scope of demand, interest and penalty in credit reversal cases

Meaning of "as such" in Rule 3(4) of CENVAT Credit Rules - reversal of CENVAT credit on removal of capital goods 'as such' - The expression 'as such' in Rule 3(4) does not extend to capital goods cleared after having been put to use for some years. - HELD THAT: - The Tribunal held that the phrase 'as such' contemplates removal without putting the machinery or capital goods to any use. Following the decisions of the High Court of Madras in CCE, Coimbatore v. Lakshmi Machine Works Ltd. and other precedents cited, removal after use cannot be treated as removal 'as such' requiring reversal of the full credit originally availed. The factual finding that the respondent had used the capital goods for years before sale therefore takes the removals outside the scope of 'as such' within Rule 3(4). [Paras 4, 5]

Removal of capital goods after use is not a removal 'as such' under Rule 3(4); full reversal on that ground is not warranted.

Depreciated value for credit reversal - scope of demand, interest and penalty in credit reversal cases - Where capital goods are removed after being used, reversal of CENVAT credit has to be on the depreciated transaction value and not on the original full credit amount; consequential demand, interest and penalty cannot be sustained. - HELD THAT: - Relying on precedents including CCE, Salem v. Rogini Mills Limited , Navodaya Plastic Industries Ltd. (LB) and Shree Rajasthan Syntex Ltd. , the Tribunal held that when capital goods are sold after depreciation through use, the quantum of reversal must be computed on the depreciated sale/transaction value and not on the original value at which credit was taken. Consequently, differential duty, interest and penalties based on full reversal are not justified and were correctly set aside by the first appellate authority. [Paras 4, 5]

Reversal limited to depreciated value; demand of differential duty, interest and penalty based on full reversal set aside.

Final Conclusion: The Revenue's appeal is rejected; the order of the First Appellate Authority setting aside the demand, interest and penalties is upheld.

Input tax credit - disallowance of input tax credit under Rule 21(3) of the U.P. Value Added Tax Rules, 2008 - ex-parte enquiry - opportunity to rebut and adversarial procedure - provisional assessment proceedings - final assessment

Input tax credit - disallowance of input tax credit under Rule 21(3) of the U.P. Value Added Tax Rules, 2008 - ex-parte enquiry - opportunity to rebut and adversarial procedure - provisional assessment proceedings - final assessment - Whether the matter should be remitted to the assessing authority for fresh consideration in the light of ex-parte enquiries relied upon to disallow the assessee's claim of input tax credit for A.Y. 2016-17 (April 6 August 2016). - HELD THAT: - The Court observed that ordinarily, for invoking the disallowance provision in Rule 21(3), enquiry is required only with respect to the seller from whom the assessee claims to have purchased goods; if that transaction is found genuine no further enquiry is normally necessary. However, in the present case revenue relied not only on enquiry against the originating seller but also on certain other enquiries which, as admitted, were conducted ex-parte and were not confronted to the assessee nor was the assessee afforded an opportunity to cross-examine or rebut those materials during the provisional assessment. In these circumstances, rather than finally deciding the merits, the Court directed that the assessing authority in the course of final assessment proceedings may confront the assessee with all adverse material collected by revenue concerning the ITC claim and pass a fresh assessment order in accordance with law. Meanwhile the Tribunal's order allowing ITC will continue to operate until a final assessment order is passed, and where a final assessment order has already been passed, either party may apply to recall the present order within the specified period. [Paras 11, 12, 13, 14]

Matter left open for the assessing authority to confront the assessee with adverse material and to pass assessment in accordance with law; the Tribunal's order shall remain operative until final assessment, with liberty to seek recall if final assessment is already passed.

Final Conclusion: Revisions disposed by permitting the assessing authority, in final assessment proceedings for A.Y. 2016-17 (April 6 August 2016), to confront the assessee with all adverse material relied upon to challenge the input tax credit claim; until such final assessment order is passed the Tribunal's order allowing ITC shall remain in force, with limited liberty to recall if a final order already exists.

Natural justice - rectification under Section 69(1) of the KVAT Act - acceptance of statutory Forms C and F and their effect on taxable turnover - writ jurisdiction under Articles 226 and 227 despite availability of alternative statutory remedy - stay of operation pending disposal of rectification application

Writ jurisdiction under Articles 226 and 227 despite availability of alternative statutory remedy - natural justice - Maintainability of writ petition despite existence of an alternative statutory appellate remedy. - HELD THAT: - The Court held that writ jurisdiction under Articles 226 and 227 is not ousted merely because an alternative remedy exists where the impugned order is ex facie vitiated by breach of principles of natural justice. The reassessment order was passed without considering or permitting proper opportunity to place the statutory Forms C and F on the electronic portal; those forms, material to determination of taxable turnover, were not available to the Assessing Officer when the order was passed. Because the lack of adequate opportunity to present and consider the statutory forms went to the root of the matter, discretionary writ jurisdiction could be exercised notwithstanding the availability of appeal under the Act. [Paras 7]

Writ petition was maintainable and could be entertained despite alternative statutory remedy because the impugned order suffered from breach of natural justice.

Rectification under Section 69(1) of the KVAT Act - acceptance of statutory Forms C and F and their effect on taxable turnover - stay of operation pending disposal of rectification application - Direction to the Assessing Officer to consider the rectification application and interim restraint on giving effect to the reassessment order. - HELD THAT: - The Court directed respondent No.2 to consider the rectification application filed under Section 69(1) of the KVAT Act and to decide it in accordance with law after hearing the petitioner, rather than transferring the file. The Court observed that the assessee had the statutory Forms C and F and, if their genuineness and applicability were verified, the assessee could be entitled to concessional treatment affecting taxable turnover. Consequently, the Court ordered that the reassessment order dated 29.12.2018 shall not be given effect to until the rectification application is decided, and fixed a date for the petitioner to appear before the Assessing Officer for that purpose. [Paras 7, 8, 10]

Respondent No.2 directed to decide the rectification application in accordance with law after hearing the petitioner; reassessment order stayed until such decision; transfer of proceedings refused.

Final Conclusion: Writ petition allowed to the extent that respondent No.2 is directed to consider and decide the rectification application under Section 69(1) of the KVAT Act after hearing the petitioner; the reassessment order dated 29.12.2018 relating to April 2013 to July 2013 shall not be given effect to pending that decision; request to transfer proceedings was declined.

Reopening of assessment - change of opinion - reason to believe - escapement of assessment - binding effect of prior adjudication

Reopening of assessment - change of opinion - reason to believe - escapement of assessment - Validity of permission to reopen the completed assessment and consequential reassessment notice for Assessment Year 2012-13. - HELD THAT: - The Court examined the impugned order granting permission under the Act to reopen the completed assessment on the ground that rice bran and broken rice (kana) given free to millers in lieu of hulling charges resulted in escapement of tax. The assessing authority in the original assessment had accepted that broken rice supplied free of cost in lieu of hulling charges did not form part of taxable turnover. The reassessment was initiated without any new material and amounted to a mere change of opinion. Reliance was placed on the principle in State of Uttar Pradesh v. Aryaverth Chawal Udyog [the Supreme Court] that a mere change of opinion, absent nexus with newly discovered material or discovery of a mistake, cannot constitute a "reason to believe" for reopening assessments. The record further showed prior appellate and tribunal decisions on substantially similar facts in favour of the petitioner, and no revision or contrary action had been taken in those years. In these circumstances the Court concluded the reopening was not supported by permissible reasons and was impermissibly based on a change of opinion rather than any fresh material indicating escapement of assessment.

Permission to reopen the completed assessment and the consequential reassessment notice for Assessment Year 2012-13 were set aside as constituting an impermissible change of opinion and not based on a valid reason to believe escapement of assessment.

Binding effect of prior adjudication - escapement of assessment - Effect of earlier appellate and tribunal decisions on the present reassessment proceedings. - HELD THAT: - The Court noted that the issue of broken rice (kana) given free of cost in lieu of hulling charges had been considered and decided in favour of the petitioner by the first appellate authority and confirmed by the Tribunal in earlier proceedings. No revision or differing adjudication for the previous or subsequent years was shown to exist. Given those prior decisions on substantially similar facts, the dispute stood concluded in favour of the petitioner and undermined the basis for reopening the assessment in the present year.

Earlier appellate and tribunal decisions in favour of the petitioner on the same controversy were held to conclude the dispute and further supported setting aside the reopening and reassessment for Assessment Year 2012-13.

Final Conclusion: The writ petition is allowed. The order dated 14.11.2017 granting permission to reopen the completed assessment and the consequential reassessment notice dated 26.12.2017 in respect of Assessment Year 2012-13 are set aside as being founded on an impermissible change of opinion and inconsistent with prior adjudications in favour of the petitioner.

Works contract - transfer of property in goods on accretion - right to use goods - Build Operate Maintain and Transfer (BOMT) contract - accretion of goods - deemed transfer on accretion of goods under Section 366(29A)(b) - taxation of transfer of value of goods involved in a works contract - deductions for labour and civil works in a works contract

Works contract - transfer of property in goods on accretion - right to use goods - Build Operate Maintain and Transfer (BOMT) contract - deemed transfer on accretion of goods under Section 366(29A)(b) - Whether the BOMT contract entered into by the appellant is a works contract involving transfer of property in goods or merely a transfer of right to use the goods. - HELD THAT: - The contract required the appellant to build infrastructure, install and commission the computerized system, and thereafter operate and maintain the system for three years with deferred quarterly payments. Clause (9) of the agreement provides that all assets deployed shall be at the disposal of the MVD and shall become the property of the MVD on completion or termination of the contract. The court held that the property in the goods is transferred when the system becomes operational (goes-live) and the works contract is completed; the subsequent obligation to operate and maintain the system for three years does not confer title on the appellant nor convert the transaction into a mere transfer of a right to use. The court relied on the principle in the cited Supreme Court decision that where the essential characteristics of a works contract transferring goods (though not in the form of goods) are satisfied, the contract is a works contract notwithstanding additional obligations. The court also noted the deeming introduced by Section 366(29A)(b) concerning accretion of goods and rejected the appellant's contention that a sale occurs only after the three year period. Claims for allowable deductions (civil works, labour component, deployment and training costs) were left to be considered by the assessing officer in taxation proceedings; no direction on those deductions was issued in this clarificatory appeal.

The BOMT contract is a works contract; property in the goods accrues to the MVD on the system going-live and the contract does not amount to only a transfer of right to use.

Final Conclusion: The clarification order holding the contract to be a works contract is affirmed and the appeal is rejected; no order as to costs.

Penalty for delayed deposit of TDS under Section 34(8) - Interest liability under Section 34(9) is without prejudice to penalty - Discretionary imposition of penalty - Mens rea not prerequisite for penalty (civil liability) - Bonafide reasons and mitigating factors to be considered - Government department procedural delays as mitigating factor

Penalty for delayed deposit of TDS under Section 34(8) - Mens rea not prerequisite for penalty (civil liability) - Imposability of penalty under Section 34(8) in absence of deliberate defiance, dishonest intention or conscious disregard - HELD THAT: - The Court held that mens rea or dishonest intent is not a prerequisite for imposing penalty under Section 34(8); the provision creates a civil liability. However, the statutory scheme confers discretion on the assessing authority (use of 'may' and requirement of opportunity of hearing) which must be exercised justly and fairly. If bonafide reasons or mitigating circumstances explain the delayed deposit of TDS, such factors should be taken into account in deciding whether to impose penalty and in determining its quantum. Failure to make deduction (as distinct from delayed deposit after deduction) is a different species of violation.

Mens rea is not required for imposition of penalty under Section 34(8), but assessing authorities must consider bonafide reasons and mitigating factors in the exercise of their discretion.

Interest liability under Section 34(9) is without prejudice to penalty - Effect of payment of interest under Section 34(9) on imposition of penalty under Section 34(8) - HELD THAT: - The Court observed that Section 34(9) expressly states 'without prejudice to the provisions of Sub-section (8)', indicating that interest for delayed deposit and penalty are separate liabilities. Payment of interest on delayed deposit does not by itself preclude imposition of penalty, nor does payment of penalty negate the obligation to pay interest; each is distinct and may be imposed according to the statutory scheme.

Payment of interest under Section 34(9) does not preclude the imposition of a penalty under Section 34(8); the two liabilities are independent.

Discretionary imposition of penalty - Bonafide reasons and mitigating factors to be considered - Government department procedural delays as mitigating factor - Appropriate quantum of penalty in the facts where TDS deposits were delayed by a Government department for periods ranging between 24 and 94 days - HELD THAT: - Applying the principle that discretion under Section 34(8) must be exercised fairly and in light of mitigating circumstances, the Court accepted that the revisionist (a Government department) had delayed deposit of TDS for specified months and that some procedural delay in government agencies is understandable. The Tribunal had reduced the penalty to 10% of the TDS; having regard to the nature of the default (delay in deposit after deduction), payment of interest, and the departmental context, the High Court further moderated the penalty as a measured deterrent while recognizing mitigating factors.

The Tribunal's order was modified and the penalty was reduced to 5% of the TDS amount.

Final Conclusion: The Court answered the admitted question by holding that mens rea is not a prerequisite for penalty under Section 34(8) but that the assessing authority must consider bonafide and mitigating factors when exercising its discretion; payment of interest under Section 34(9) does not preclude penalty under Section 34(8); on the facts (delays of 24-94 days by a Government department) the penalty originally imposed was reduced and the Tribunal's order was modified so that the penalty stands at 5% of the TDS.