TaxTMI Updates e-Newsletter
Feb 15,2024

Electronic filing of appeal - self certified copy of the decision or order - proviso to Rule 108 of the Central Goods and Services Tax Rules, 2017 - date of filing of appeal - provisional and final acknowledgement - de novo hearing

Electronic filing of appeal - self certified copy of the decision or order - proviso to Rule 108 of the Central Goods and Services Tax Rules, 2017 - date of filing of appeal - Validity of rejection of appeals as time barred for non submission of self certified copy where appeal was electronically filed in FORM GST APL-01. - HELD THAT: - The Court found that the appeals were electronically filed on the common portal in FORM GST APL-01 and therefore the requirements in the provisos to Rule 108 apply only where the decision or order appealed against is not uploaded on the common portal. A literal reading of the first proviso shows that submission of a self certified copy within seven days is mandated only when the decision or order is not uploaded; where the decision or order is uploaded, the date of provisional acknowledgement is to be treated as the date of filing. The appeals were filed within the three month period prescribed by Section 107 of the Central Goods and Services Tax Act, 2017. Consequently, the appellate authority erred in treating the appeals as time barred for non submission of a self certified copy. [Paras 4, 5]

Impugned order rejecting the appeals as time barred is quashed; appeals to be heard de novo by the appellate authority and a reasoned order on merits to be passed within three months from date.

Final Conclusion: Writ petition allowed; impugned order dated October 18, 2023 set aside and matter remitted for de novo consideration with directions to decide the appeals on merits within three months.

Consideration and disposal of representations by administrative authority - exemption from the provisions of Section 51 of the SGST/CGST Acts - exemption from levy of TDS at source - exclusive domain of the GST Council - reasonable opportunity to be heard - judicial direction to decide representations within a stipulated time

Consideration and disposal of representations by administrative authority - exemption from the provisions of Section 51 of the SGST/CGST Acts - exemption from levy of TDS at source - exclusive domain of the GST Council - reasonable opportunity to be heard - Respondent authority directed to consider and dispose of the petitioner's representation seeking exemption for wholesale kerosene dealers from TDS and from applicability of Section 51, after affording a reasonable opportunity, and to decide whether to raise the matter with the GST Council. - HELD THAT: - The Court noted communications from the Civil Supplies Department requesting exemption from TDS and from the Commercial Taxes Department proposing that the question of exemption from Section 51 be taken up with the GST Council. While recognition was given to the GST Council's exclusive domain to decide on GST exemptions, the existence of the departmental communications coupled with the petitioner's representation established a case for administrative consideration. The Court therefore limited its intervention to directing the first respondent to consider and dispose of the representation on merits, after giving the petitioner a reasonable opportunity of being heard, and to decide whether the matter should be referred to the GST Council.

The first respondent is directed to consider and dispose of the representation dated 28.01.2019 after affording a reasonable opportunity to the petitioner and to complete the exercise within two months from receipt of a copy of the order.

Final Conclusion: Writ petition disposed by directing administrative consideration and disposal of the representation seeking exemption from TDS and from Section 51 applicability, after hearing the petitioner, to be completed within two months; no order as to costs.

Mandamus - transfer of input tax credit - cancellation of GST registration - notice under Section 61 read with Rule 99 - assessment under Section 73(9) - appeal under Section 107 - alternative statutory remedy - migration error in GST registration

Mandamus - transfer of input tax credit - cancellation of GST registration - alternative statutory remedy - appeal under Section 107 - assessment under Section 73(9) - notice under Section 61 read with Rule 99 - migration error in GST registration - Petition for a writ of mandamus seeking cancellation of an old GST registration and transfer of ITC to a new GST registration was not entertained by the High Court and the petitioner was directed to pursue the statutory appellate remedy. - HELD THAT: - The petitioner sought a writ of mandamus directing respondent no.2 to cancel the old GST registration and to transfer the input tax credit to a new registration on the ground of an alleged system error during migration. The assessment authority had issued a notice under Section 61 read with Rule 99 and considered the petitioner's reply that migration failed due to a system error, but rejected that plea while passing an order under Section 73(9). The High Court held that the challenge to those findings and the claim for transfer of ITC fall within the scope of the appellate remedy provided under the statute. In view of the availability of the alternative remedy of appeal under Section 107, the Court declined to grant the equitable relief of mandamus and afforded liberty to the petitioner to raise the said contentions before the appellate authority, which can decide the matter in accordance with law.

Writ petition not entertained; petitioner granted liberty to raise the challenge before the appellate authority and allowed to pursue appeal under the statutory scheme.

Final Conclusion: The writ petition seeking issuance of mandamus to cancel the old GST registration and to transfer ITC is not entertained; petitioner is directed to pursue the statutory appellate remedy and to raise the migration and ITC transfer issues before the appellate authority for decision in accordance with law.

Principles of natural justice - service of notice via GST portal - distinction between 'View Notices' and 'View Additional Notices' - reversal of Input Tax Credit (ITC) - exercise of writ jurisdiction to quash administrative orders subject to conditions (conditional quashing) - right to personal hearing / opportunity to be heard on reconsideration

Principles of natural justice - service of notice via GST portal - distinction between 'View Notices' and 'View Additional Notices' - Impugned assessment orders were vitiated for breach of principles of natural justice because the notices and orders were uploaded to the 'View Additional Notices' tab on the GST portal, of which the petitioner asserted she was unaware. - HELD THAT: - The Court noted that the intimation (Form GST DRC-01A), show cause notice (Form GST DRC-01) and the assessment orders were uploaded on the GST portal under the 'View Additional Notices' tab, whereas previously such documents appeared under the 'View Notices' tab. The petitioner stated she did not become aware of the proceedings until an oral intimation in December 2023. Having regard to the change in portal dashboard and the appellant's contention that she was unaware of the uploaded documents, the Court held that the proceedings required interference to afford the assessee an opportunity to contest the matters, particularly since the subject-matter related to reversal of ITC and entailed documentary evidence and possible oral examination. The Court therefore concluded that interference was warranted to secure compliance with the principles of natural justice and to permit reconsideration after affording an effective opportunity to be heard. [Paras 5, 6]

The impugned assessment orders were quashed to secure compliance with principles of natural justice and to afford the petitioner an opportunity to be heard.

Exercise of writ jurisdiction to quash administrative orders subject to conditions (conditional quashing) - right to personal hearing / opportunity to be heard on reconsideration - Quashing was made conditional on the petitioner remitting 7.5% of the disputed tax demand within four weeks, and, upon such compliance, the assessing officer was directed to reconsider after providing a reasonable opportunity including a personal hearing; failure to comply would permit recovery under the impugned orders. - HELD THAT: - Balancing the need to vindicate the assessee's right to be heard with the respondent's statutory machinery, the Court exercised its writ jurisdiction to quash the orders subject to a protective condition. The petitioner was placed on terms to remit a portion of the disputed demand (7.5%) within a fixed period; on receipt of that amount the assessing officer must give the petitioner a reasonable opportunity, including a personal hearing, and pass fresh assessment orders within four weeks of such compliance. The Court also recorded that in default the respondent could proceed with recovery under the existing orders. The condition was imposed to ensure effective adjudication while protecting revenue interests. [Paras 7]

Quashing was ordered subject to the condition of depositing 7.5% of the disputed tax demand within four weeks and, on compliance, directed reconsideration after affording a personal hearing; non-compliance permits recovery under the impugned orders.

Final Conclusion: Writ petitions allowed in part: impugned assessment orders quashed on terms - petitioner to remit 7.5% of disputed demand within four weeks, upon which fresh assessment shall be conducted after giving a reasonable opportunity including a personal hearing; failure to comply will permit recovery under the original orders. No order as to costs.

Non-application of mind - natural justice - GST treatment of salary paid to director as exempt supply under Schedule III - exemption notification for training/coaching in art and culture - reverse charge mechanism and exemption notifications - remand for fresh consideration

Non-application of mind - GST treatment of salary paid to director as exempt supply under Schedule III - Assessment orders quashed insofar as they impose GST on director's remuneration without proper consideration of the petitioner's replies - HELD THAT: - The Court found that the Assessing Officer recorded that the taxpayer had not clarified the category of directorship or whether salary was paid, whereas the petitioner's reply expressly stated that remuneration was paid to the managing director. The impugned conclusion therefore reflects non-application of mind to the material placed on record. The petitioner, however, had not produced supporting employment and TDS records; the Court therefore quashed the orders and remanded the matter for fresh consideration after the petitioner files all relevant documents and is given an opportunity of hearing. [Paras 5, 9]

Quashed and remanded for reconsideration after production of relevant documents and opportunity of personal hearing

Non-application of mind - reverse charge mechanism and exemption notifications - Assessment orders quashed insofar as they imposed tax, interest and penalty on miscellaneous expenses without verifying supplier registration status or the applicability of exemption notifications - HELD THAT: - The Assessing Officer computed tax demand by aggregating figures from financial statements for heads such as advertisement, repairs and maintenance, and computer/software maintenance, without ascertaining particulars of suppliers or whether supplies attracted reverse charge or specific exemptions. The Court held that such aggregate treatment amounted to lack of proper application of mind to the petitioner's explanations and relied-upon notifications, warranting interference. The matter is remitted for fresh appraisal after the petitioner furnishes documentary particulars and is heard. [Paras 6, 9]

Quashed and remanded for fresh adjudication after verification of supplier particulars and exemption applicability

Non-application of mind - exemption notification for training/coaching in art and culture - Assessment orders quashed insofar as they treated exempt training/coaching services as taxable supplies (sale of paintings/arts) without addressing the petitioner's reliance on the exemption notification - HELD THAT: - The petitioner invoked Notification No.12/2017 to contend that services of training or coaching in relation to art and culture fall under the exempt heading. Despite the petitioner's submissions, the Assessing Officer recorded a contrary conclusion that the petitioner was engaged in sale of paintings and art works. The Court held this to be a bizarre conclusion indicating non-application of mind to the material brought on record and remitted the issue for fresh consideration with directions to allow submission of relevant supporting documents such as bills and attendance records. [Paras 7, 9]

Quashed and remanded for re-examination of exempted turnover claims after production of supporting documents and opportunity of hearing

Final Conclusion: Writ petitions allowed; impugned assessment orders for AY 2018-19, 2019-20 and 2020-21 are quashed and the matters remanded to the Assessing Officer for fresh adjudication after the petitioner files all relevant documents within two weeks and is afforded a reasonable opportunity, including personal hearing, with fresh orders to be passed within two months.

Cancellation of registration without application of mind - requirement of reasons in quasi-judicial orders - invalidity of non-reasoned administrative action under Article 14 - opportunity to file reply and hearing before adjudication - setting aside non-reasoned order and remand for de novo consideration

Cancellation of registration without application of mind - requirement of reasons in quasi-judicial orders - invalidity of non-reasoned administrative action under Article 14 - The impugned order cancelling the petitioner's registration was vitiated for want of any application of mind and absence of reasons and therefore liable to be set aside. - HELD THAT: - The Court found that the original cancellation order contained an internal contradiction regarding whether a reply had been filed, demonstrating absence of application of mind. Relying on precedents emphasizing that reasons are the heart of any judicial or quasi-judicial order, the Court held that an order devoid of reasons that adversely affects the right to carry on business does not satisfy the test of Article 14. Consequently, the original order dated October 17, 2019 was quashed as non-reasoned and invalid. [Paras 3, 6, 7]

Impugned original order cancelling registration quashed for want of application of mind and absence of reasons.

Setting aside non-reasoned order and remand for de novo consideration - opportunity to file reply and hearing before adjudication - The appellate order was set aside and the matter was remitted for fresh adjudication after affording the petitioner an opportunity to file reply and be heard. - HELD THAT: - Although the appeal was time-barred, the Court treated the defect in the original non-reasoned order as a ground to quash both the original and appellate orders. The petitioner was permitted to file a reply to the show-cause notice within three weeks, and the adjudicating authority was directed to proceed afresh and pass a fresh order after hearing and considering the petitioner's defence. The remand directs de novo consideration rather than mere quantification. [Paras 6, 7]

Appellate order set aside; matter remanded for de novo adjudication after permitting petitioner to file reply within three weeks and after hearing.

Final Conclusion: Both the original order dated October 17, 2019 and the appellate order dated July 12, 2022 are quashed for lack of reasons and application of mind; petitioner allowed to file reply within three weeks and the adjudicating authority directed to hear the petitioner and decide afresh.

Interim stay of coercive action - Conditional interim relief subject to deposit - Assessment under Section 73 of the CGST/OGST Act - Challenge to eligibility of input tax credit under Clause (c) of sub-section (2) of Section 16

Interim stay of coercive action - Conditional interim relief subject to deposit - Assessment under Section 73 of the CGST/OGST Act - Grant of interim relief by directing deposit of a portion of the assessed tax and staying coercive action pending disposal of the writ petition - HELD THAT: - The petitioner challenged the assessment dated 27.12.2023 framed under Section 73 of the CGST/OGST Act for the tax period July, 2017 to March, 2018 and impugned the provision governing entitlement to input tax credit. The Court issued notice to the opposite parties and, after hearing preliminary submissions and at the request of the Revenue for time to file a counter affidavit, granted an interim measure. As a balance between the parties and to preserve the subject matter of adjudication, the Court directed the petitioner to deposit 20% of the tax as determined in the assessment within four weeks. Upon such deposit, the Court restrained the Revenue from taking coercive action against the petitioner until the writ petition is finally disposed of. The order preserves the Revenue's remedy of appeal and the parties' rights while providing provisional protection to the petitioner pending adjudication on merits. [Paras 6]

Petitioner directed to deposit 20% of the tax within four weeks; no coercive action to be taken if deposit is made until disposal of the writ petition.

Final Conclusion: Notice issued; counter affidavit permitted; interim direction that the petitioner shall deposit 20% of the assessed tax within four weeks and, upon such deposit, coercive action shall be stayed until final disposal of the writ petition.

Condonation of delay - proviso to Rule 23 of the Odisha Goods and Services Tax Rules - revocation application - acceptance of 3B Return Form - deposit of taxes, interest, late fee and penalty - opening of portal to enable filing of GST return

Condonation of delay - proviso to Rule 23 of the Odisha Goods and Services Tax Rules - revocation application - deposit of taxes, interest, late fee and penalty - Delay in invoking the proviso to Rule 23 of the OGST Rules was condoned and the petitioner's application for revocation was directed to be considered on compliance with statutory dues and formalities. - HELD THAT: - The Additional Standing Counsel for the Ct & GST Department stated that, provided the delay is condoned and the petitioner complies with payment of taxes, interest, late fee and penalty and other requirements, the 3B Return Form will be accepted. On that statement, the Court condoned the delay in invoking the proviso to Rule 23 and directed that the petitioner's revocation application shall be considered in accordance with law subject to deposit of all taxes, interest, late fee, penalty and compliance with other formalities. The order is operative only upon the petitioner meeting those conditions. [Paras 2, 3]

Delay condoned and revocation application to be considered on petitioner depositing dues and completing formalities.

Acceptance of 3B Return Form - opening of portal to enable filing of GST return - Proper officer directed to open the portal to enable filing of the GST return upon production of the order and compliance by the petitioner. - HELD THAT: - The Court directed that a copy of the order be produced before the proper officer and, subject to the petitioner complying with the condition of depositing all taxes, interest, late fee, penalty and other formalities, the proper officer shall open the portal to enable the petitioner to file the GST return. This direction follows the departmental undertaking recorded by the Additional Standing Counsel that the 3B return would be accepted on such compliance. [Paras 4]

Proper officer to open portal for filing of GST return subject to petitioner producing the order and complying with the stated conditions.

Final Conclusion: Writ petition disposed of by condoning the delay in invoking the proviso to Rule 23; petitioner's revocation application to be considered and portal access for filing the 3B return to be granted, provided the petitioner deposits all taxes, interest, late fee, penalty and complies with other formalities.

Adjustment of tax liability for works contracts spanning pre- and post-GST - supplementary agreement for GST-inclusive contract value - setting aside pre-intimation notice and summary show-cause notice - order under Section 73(9) of the Karnataka Goods and Services Tax Act - non-precipitative action / stay of tax enforcement - revival of notices/orders upon successful appeal

Setting aside pre-intimation notice and summary show-cause notice - order under Section 73(9) of the Karnataka Goods and Services Tax Act - supplementary agreement for GST-inclusive contract value - revival of notices/orders upon successful appeal - Pre-intimation notice dated 20.12.2022 (Annexure-G), Summary of Show Cause Notice dated 20.02.2023 (Annexure-H), order under Section 73(9) (Annexure-J) and order at Annexure-K are to be set aside and respondent No.2 directed to execute a supplementary tender agreement in terms of the directions in W.P. No. 9721/2019. - HELD THAT: - The High Court disposed of the petition by applying the directions and guidelines recorded in paragraph 20 of W.P. No. 9721/2019, which prescribe the method for calculating tax differences for works contracts executed partly before and partly after implementation of GST, and contemplate execution of a supplementary agreement where the revised GST-inclusive value for balance work warrants adjustment. In consequence, the Court set aside the impugned pre-intimation notice, summary show-cause notice and the order passed under Section 73(9) as well as the order at Annexure-K, and issued a writ of mandamus directing respondent No.2 to enter into the necessary supplementary tender agreement as permissible under the said directions. The order is subject to any appellate order in proceedings arising from W.P. No. 9721/2019; if the appellate order overturns that judgment, the set-aside notices and orders would be revived. The Court also noted and preserved the revenue's limitation concerns by making revival contingent on the appeal outcome and kept all other contentions open. [Paras 5, 6, 7, 8]

Impugned Annexures-G, H, J and K are set aside and respondent No.2 is directed to execute a supplementary tender agreement in accordance with the directions in W.P. No. 9721/2019; the relief is subject to any appellate order which may revive the set-aside notices/orders.

Final Conclusion: The petition is disposed of by setting aside the specified notices and orders and directing execution of a supplementary tender agreement in terms of the High Court's guidelines in W.P. No. 9721/2019; the order is subject to any appellate determination in proceedings arising from that earlier judgment and all other contentions are left open.

Taxability of services - treatment or disposal of bio-medical waste - applicability of Notification No. 03/2022-Central Tax (Rate) - omission of an exempting entry and substitution by a taxable entry - rate of GST on services - advance ruling

Taxability of services - treatment or disposal of bio-medical waste - applicability of Notification No. 03/2022-Central Tax (Rate) - Services of disposal and treatment of bio-medical waste obtained from clinical establishments are liable to tax under Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022. - HELD THAT: - The earlier exempting Entry No. 75 in Notification No. 12/2017 (covering services by operators of common bio-medical waste treatment facilities to clinical establishments) was omitted by Notification No. 04/2022 effective 18.07.2022. Thereafter Notification No. 03/2022 amended Notification No. 11/2017 to insert entry 32(ia) effective 18.07.2022 describing "Services by way of treatment or disposal of or the processes incidental thereto by a common bio-medical waste treatment facility to a clinical establishment." That amendment replaces the prior exemption with a taxable description, thereby bringing the specified services within the charge of GST under the amended notification.

The services are taxable under Notification No. 03/2022-Central Tax (Rate) dated 13.07.2022.

Applicability of Notification No. 03/2022-Central Tax (Rate) - effective date of tax liability - The registered dealer is liable to pay GST on the said services from 18.07.2022. - HELD THAT: - The amendments that omitted the exempting entry and inserted the taxable entry (entry 32(ia)) in Notification No. 11/2017 were made by Notifications dated 13.07.2022 and specified to be effective from 18.07.2022. Consequently, the liability to pay GST on the described services arises from that effective date.

Liability to pay GST arises from 18.07.2022.

Rate of GST on services - treatment or disposal of bio-medical waste - The rate of GST applicable to the services is 12% (CGST 6% and SGST 6%). - HELD THAT: - Notification No. 03/2022 inserted entry 32(ia) in Notification No. 11/2017 specifying the taxable description and providing the rate as 6% in the Central column; read with corresponding State tax yields a combined rate of 12% (CGST 6% and SGST 6%) on the services described.

The applicable GST rate is 12% (CGST 6% and SGST 6%).

Final Conclusion: The Advance Ruling holds that services of treatment or disposal of bio medical waste supplied to clinical establishments became taxable pursuant to the amendments effected by Notification No. 03/2022 (as effective from 18.07.2022) at the combined rate of 12% (CGST 6% + SGST 6%), and the registered dealer's liability to pay GST on such services commences from 18.07.2022.

Exemption under Entry No.41 of Notification No.12/2017-CT(Rate) - long term lease of thirty years or more - lease for development of infrastructure for financial business - local/State industrial development authority allotting plots - lease premium treated as supply of services under Schedule II - distinction between lease and sale of land for GST purposes

Exemption under Entry No.41 of Notification No.12/2017-CT(Rate) - long term lease of thirty years or more - lease for development of infrastructure for financial business - local/State industrial development authority allotting plots - Applicability of nil rate (exemption) on the upfront amount (lease premium) charged for grant of long term lease of plots by NOIDA under Entry No.41 of Notification No.12/2017-CT(Rate). - HELD THAT: - The Authority examined whether the conditions of Entry No.41 are satisfied: (i) existence of an upfront amount for granting long term lease of thirty years or more; (ii) the lease being of an industrial plot or for development of infrastructure for financial business; (iii) allotment by a State Government industrial development corporation/undertaking or an entity having at least 20% ownership of the Government; and (iv) allotment to industrial units or developers in an industrial or financial business area. The facts show NOIDA grants leases exceeding thirty years, is a State industrial development authority (meeting the ownership criterion), and allots plots to developers in the notified industrial area. The model lease deed describes the demised premises as for development of infrastructure for financial business, including commercial activities. The Authority held that commercial or mixed use development falls within 'infrastructure for financial business' when the lease and other conditions of the notification are satisfied. Consequently, where the long term lease is of an industrial plot or for development of infrastructure for financial business and all conditions of the notification are met, the upfront amount (lease premium) is exempted; otherwise the lease premium is taxable at the applicable rate. [Paras 11, 12, 13, 15, 16]

Exempted if the long term lease qualifies as an industrial plot or for development of infrastructure for financial business and satisfies the conditions of Entry No.41; otherwise taxable.

Lease premium treated as supply of services under Schedule II - distinction between lease and sale of land for GST purposes - Whether the upfront amount charged for a long term (ninety years) lease is in the nature of sale of land and therefore outside the scope of GST. - HELD THAT: - The Authority referred to paragraph 2(a) of Schedule II to the CGST Act which treats lease, tenancy, easement or licence to occupy land as a supply of services. It noted there is no statutory distinction between long term and short term leases for this purpose. Ownership in a long term lease remains with the lessor and the relationship is of lessor lessee, not seller buyer. Specific entries in the notifications also recognise 'long term lease' for tax treatment rather than treating it as a sale of land. On this basis the Authority held that a long term lease cannot be equated to sale of land and is not outside the scope of GST. [Paras 14, 15, 16]

In the negative - the upfront amount for long term lease is not a sale of land and is within the scope of GST (subject to any exemption if notification conditions are satisfied).

Final Conclusion: The Authority ruled that NOIDA's upfront lease premium for ninety year leases is eligible for exemption under Entry No.41 of Notification No.12/2017-CT(Rate) only if the lease qualifies as an industrial plot or for development of infrastructure for financial business and all conditions of the notification are fulfilled; otherwise the premium is taxable. Further, a long term lease is not to be treated as a sale of land and remains within the ambit of GST.

Advance ruling admissible only to the supplier proposing to make the supply - Scope of "supply" under GST includes sale, transfer, barter, exchange, licence, rental, lease or disposal - Advance Ruling is binding only on the applicant

Advance ruling admissible only to the supplier proposing to make the supply - Scope of "supply" under GST includes sale, transfer, barter, exchange, licence, rental, lease or disposal - Application for advance ruling by the recipient of a proposed transfer of leasehold industrial land is not maintainable and is not admitted for consideration on merits - HELD THAT: - The Authority examined the definitions in section 95 and the scope of "supply" under section 7 and concluded that an advance ruling is available in relation to the "supply of goods or services or both being undertaken or proposed to be undertaken by the applicant." The definition of applicant in section 95 must be read in consonance with that meaning, so that only a person who is the supplier (or proposes to be the supplier) may seek an advance ruling on matters specified in section 97(2). The Authority further noted that advance rulings are binding only on the applicant under section 103. On the facts before it, the applicant was a proposed recipient of the transfer of a leasehold industrial plot from the seller and therefore fell within the category of service recipient, not supplier. Consequently the application did not meet the statutory requirement of being filed by a supplier and could not be admitted for a ruling on the substantive question of taxability of the transaction. [Paras 10, 11, 12, 13, 14]

Application not admitted; no ruling on merits can be given because the applicant is a recipient and not the supplier contemplated by the Advance Ruling provisions

Final Conclusion: The Authority declined to admit the application for advance ruling since the applicant is the recipient of the proposed transaction and not the supplier; accordingly no substantive ruling on the taxability of the transfer of the leasehold industrial plot was given.

Validity of Revision u/s 263 set aside by HC - as per CIT Large ‘other expenses’ claimed in profit and loss account, Payments made to related parties u/s 40(A)(2)(b), Current liabilities, Payments made to the contractors and Payment made towards stamp duty - as decided by HC [2023 (3) TMI 673 - DELHI HIGH COURT] for the PCIT to exercise jurisdiction under Section 263 of the Act, twin conditions have to be fulfilled, that is, not only should the order be erroneous, but it should also be prejudicial to the interest of the revenue. Clearly, some expenses which were deleted, their reversal would cause prejudice to the revenue. However, in this case, to our minds, the first condition was not fulfilled, which is that the order was erroneous, as has been categorized by the PCIT.

HELD THAT:- Having regard to the facts of the present case, we are not inclined to interfere in the matter.

Special leave petition is hence, dismissed.

Stay on recovery of disputed demand - academic controversy - extension of stay beyond 365 days - power under the third proviso to Section 254(2A) of the Income Tax Act, 1961 - effect of High Court precedents

HELD THAT:- As submitted at the Bar that ITA [2023 (5) TMI 508 - ITAT MUMBAI] has been disposed of by the Income Tax Appellate Tribunal, and, therefore, this petition has been rendered infructuous since the benefit of the impugned order was available to the respondent/assessee during the pendency of the proceedings before the ITAT.

In the circumstances, the Special Leave Petition would not survive for consideration on merits and hence is disposed of accordingly.

Even otherwise, it was also brought to our notice that the issue which arises in this petition has been covered by a judgment of this Court in the Case of Deputy Commissioner of Income Tax & Anr. V/s. Pepsi Foods Limited (Now Pepsico India Holdings Private Limited) [2021 (4) TMI 369 - SUPREME COURT]

Time-barred reassessment notices under the pre 2021 and post 2021 regimes - Section 3(1) of TOLA - executive extension of limitation - repeal and substitution of reassessment provisions by the Finance Act, 2021 without savings - proviso to the substituted Section 149(1) not operating as a savings clause - ultra vires notifications issued under TOLA (Notification No. 20/2021 and No. 38/2021) - treatment/conversion of old Section 148 notices as notices under newly inserted Section 148A(b) - quashing of subsequent proceedings founded on time barred notices

Treatment/conversion of old Section 148 notices as notices under newly inserted Section 148A(b) - time-barred reassessment notices under the pre 2021 and post 2021 regimes - Validity of notices issued on or after 1 April 2021 (converted/taken as issued under Section 148A(b)) in respect of assessment years 2013-14 and 2014-15. - HELD THAT: - The Court held that notices relating to AY 2013-14 and AY 2014-15 which were issued on or after 1 April 2021 by converting or treating earlier proposed/reassessment action as if issued under the newly inserted Section 148A(b) are barred by limitation. The Finance Act, 2021, which came into effect on 1 April 2021, repealed and substituted the old reassessment scheme (including old Sections 147-151) without any savings clause; accordingly the period of limitation under the old regime ceased to exist beyond 31 March 2021. The validity of notices issued after the repeal must be tested under the new regime and cannot be rescued by invoking extensions applicable to the pre amendment law. Applying these principles, the Court concluded that the impugned notices issued on or after 1 April 2021 (for the two specified assessment years) are time barred and unsustainable. [Paras 59, 62]

Notices issued on or after 1 April 2021 (converted/taken as under Section 148A(b)) for AY 2013-14 and AY 2014-15 are time barred and invalid; proceedings founded thereon are unsustainable.

Section 3(1) of TOLA - executive extension of limitation - ultra vires notifications issued under TOLA (Notification No. 20/2021 and No. 38/2021) - delegated/subordinate legislation cannot override plenary parliamentary repeal - Validity of Notification No. 20/2021 (31 March 2021) and Notification No. 38/2021 (27 April 2021) issued under Section 3(1) of TOLA to extend time for issuance of reassessment notices beyond 31 March 2021. - HELD THAT: - The Court found that Section 3(1) of TOLA was directed to relax/extend time limits applicable under statutes for the period in which the pre amendment provisions remained on the statute book, and could not be exercised so as to extend application of a provision beyond its repeal. The Finance Act, 2021, effected repeal/substitution of the old reassessment provisions effective 1 April 2021; therefore notifications purporting to extend time for the repealed old provisions beyond 31 March 2021 were inconsistent with, and had no effect against, the parliamentary enactment. Where a delegated instrument conflicts with plenary legislation, the latter prevails; accordingly the notifications were held to be unauthorised to the extent they sought to continue or extend the life of the repealed provisions after their repeal. [Paras 28, 30, 31, 32, 33]

Notification No. 20/2021 and Notification No. 38/2021 are unauthorised to the extent they attempt to extend or continue the pre amendment reassessment provisions beyond 31 March 2021 and are therefore not effective to validate notices issued after repeal.

Proviso to the substituted Section 149(1) not operating as a savings clause - repeal and substitution of reassessment provisions by the Finance Act, 2021 without savings - Whether the first proviso to the substituted Section 149(1) of the Income tax Act operates as a savings clause preserving the old regime or validating actions under pre amendment law after 1 April 2021. - HELD THAT: - The Court interpreted the first proviso to the new Section 149(1) as an exclusionary measure which prevents resort to the new scheme where limitation had already run under the old law; it is not worded or intended as a savings clause preserving expired rights or reviving a repealed provision. The proviso does not save anything that had already expired prior to the enactment of the substituted provision. Consequently the proviso cannot be read so as to permit the continued operation of or extend the life of the repealed pre amendment reassessment provisions beyond their repeal. [Paras 15, 16, 17, 18]

The first proviso to the substituted Section 149(1) is not a savings clause and does not preserve or extend the operation of the old reassessment provisions beyond their repeal.

Final Conclusion: Writ petitions allowed. All impugned notices issued on or after 1 April 2021 in respect of assessment years 2013 14 and 2014 15 that rely on extensions under TOLA and Notifications No. 20/2021 and No. 38/2021 are quashed as time barred; all subsequent proceedings founded on those notices are set aside.

Fair market value determination under Explanation to Section 56(2)(viib) - Compliance with court directions and remand for fact finding - Assessment rendered without jurisdiction for non compliance with judicial direction - Requirement of reasonable opportunity before completion of assessment

Fair market value determination under Explanation to Section 56(2)(viib) - Compliance with court directions and remand for fact finding - Requirement of reasonable opportunity before completion of assessment - Whether the impugned assessment complied with the High Court's direction to undertake fact finding by determining the fair market value of shares under the Explanation to Section 56(2)(viib), and whether the assessment is sustainable where that direction was not followed. - HELD THAT: - The Court found that its earlier direction in T.C.A. No.224 of 2019 required the assessing authority to undertake the exercise of fact finding by determining the fair market value of the shares as contemplated in the Explanation to Section 56(2)(viib). The impugned assessment proceeded without completing that mandated exercise and without demonstrating compliance with the Court's direction. Reliance was placed on the principle that subordinate authorities and tribunals must conform to the law and orders declared by the High Court; an order made in disregard of such directions is liable to be treated as without jurisdiction. The assessing officer is therefore not permitted to ignore the earlier judicial direction; the appropriate course is to set aside the assessment and remit the matter for completion in accordance with the Court's directions. The Court also recorded that the assessing officer must provide reasonable opportunity to the assessee (including consideration of any valuation report and any clarification sought from the CBDT) before completing the exercise mandated by the Explanation to Section 56(2)(viib). [Paras 7, 8]

Impugned assessment set aside; matter remitted to the assessing officer to complete the fair market value fact finding exercise in accordance with the Court's earlier directions and after affording the petitioner a reasonable opportunity.

Final Conclusion: The writ petition is allowed; the assessment order is set aside and remitted to the assessing officer to be completed in compliance with this Court's directions regarding determination of fair market value under the Explanation to Section 56(2)(viib), after providing reasonable opportunity to the petitioner.

Addition under Section 68 of the Income Tax Act, 1961 - genuineness of deposits/creditors' receipts - onus on Assessing Officer to make inquiries from third parties - banking channel evidence as proof of payment - concurrent findings of fact by the Tribunal - absence of substantial question of law

Addition under Section 68 of the Income Tax Act, 1961 - genuineness of deposits/creditors' receipts - onus on Assessing Officer to make inquiries from third parties - banking channel evidence as proof of payment - concurrent findings of fact by the Tribunal - absence of substantial question of law - Deletion of addition made under Section 68 in respect of deposits amounting to the sale proceeds of jewellery was correctly upheld by the Tribunal. - HELD THAT: - The assessing officer's case rested on suspicion alone and no credible or tangible material was placed on record to establish that the transactions were not genuine. The assessee disclosed the jeweller's identity and produced supporting documents - purchase invoices, cheques issued by the jeweller for sale consideration and bank account credits showing receipt of sale proceeds by the nine parties. Despite these materials, the assessing officer did not make any inquiry of the jeweller M/s Raghunandan Jeweller Pvt. Ltd. or other available sources to test the suspicion. The Tribunal's view that the AO failed to exercise his inquiry powers is a finding of fact based on the evidence and materials on record. As these are concurrent factual findings, they do not give rise to any substantial question of law warranting interference. [Paras 5, 6]

Tribunal's deletion of the addition under Section 68 is affirmed and no substantial question of law arises.

Final Conclusion: Revenue's appeal is dismissed; the Income Tax Appellate Tribunal's order deleting the addition under Section 68 (except a limited amount sustained separately) is upheld and the Tribunal's factual findings do not raise any substantial question of law.

Disallowance under section 14A read with Rule 8D - amortisation of lease payments - remand to Assessing Officer for de novo consideration - deemed tax credit under DTAA (India-Oman) - treatment of dividend exempt under foreign law for DTAA credit - binding effect of coordinate-bench and higher court decisions

Amortisation of lease payments - remand to Assessing Officer for de novo consideration - binding effect of coordinate-bench and higher court decisions - Validity of disallowance of amortisation of lease payments and disposal of that challenge between lands leased from Noida Authority and lands at Visakhapatnam/Tuticorin. - HELD THAT: - The Tribunal, following the coordinate bench decisions in the assessee's own earlier years, held that the amortisation portion of the lease relating to land taken from the Noida Authority must be decided against the assessee. The Tribunal found no change in the material facts for the years under appeal and therefore, respectfully followed the earlier findings. In respect of leasehold land at Visakhapatnam and Tuticorin, the Tribunal restored the issue to the file of the Assessing Officer for fresh consideration de novo, directing the AO to examine facts and terms of lease for those locations in accordance with law as done in earlier proceedings. [Paras 6, 7]

Assessee's appeals partly allowed for statistical purposes: amortisation relating to Noida land rejected; issue as to Visakhapatnam and Tuticorin remanded to AO for de novo decision.

Disallowance under section 14A read with Rule 8D - no exempt income - section 14A inapplicable - binding effect of coordinate-bench and higher court decisions - Validity of deletion of disallowance under section 14A read with Rule 8D where the assessee did not earn any exempt income. - HELD THAT: - The Tribunal noted that the assessee earned no exempt income in the relevant years and therefore the provisions of section 14A (as interpreted by relevant judicial precedents relied upon by the Delhi High Court and followed by the coordinate bench) could not be invoked to sustain a disallowance. Respectfully following the coordinate-bench decision in the assessee's own case and the cited High Court authority, the Tribunal dismissed Revenue's grounds challenging deletion of the section 14A/Rule 8D disallowance. [Paras 13]

Grounds 1 and 2 of the Revenue's appeals dismissed; deletion of disallowance under section 14A/Rule 8D upheld.

Deemed tax credit under DTAA (India-Oman) - treatment of dividend exempt under foreign law for DTAA credit - binding effect of coordinate-bench and higher court decisions - Allowability of deemed tax credit under the India-Oman DTAA for dividend income treated as exempt in Oman and correctness of CIT(A)'s deletion of the disallowance relating to such credit. - HELD THAT: - The Tribunal followed the coordinate-bench and the higher court precedents (including the Hon'ble Supreme Court's dismissal of the Revenue's appeal in the assessee's earlier year) which held that dividend income taxable in India but exempt under Omani law falls within the scheme of the DTAA and that clarifications and official Omani communications supported treating such exemption as a tax incentive covered by the treaty. On this basis, and given the identical facts for the years in question, the Tribunal found no reason to interfere with the deletion of the disallowance and the grant of the deemed tax credit. [Paras 15, 17]

Grounds 3 to 5 of the Revenue's appeals dismissed; deemed tax credit under the India-Oman DTAA allowed as previously held.

Final Conclusion: Assessee's appeals for AY 2017-18 and 2018-19 are partly allowed for statistical purposes (Noida lease amortisation disallowed; Visakhapatnam/Tuticorin lease issues remanded to AO). Revenue's appeals for AY 2017-18 and 2018-19 are dismissed (deletion of section 14A/Rule 8D disallowance and allowance of deemed tax credit under the India-Oman DTAA upheld).

Addition of unexplained sundry creditors - burden of verification and corroborative evidence - treatment of transactions as bogus in absence of adequate verification - principle of natural justice and reasonable opportunity of hearing

Addition of unexplained sundry creditors - burden of verification and corroborative evidence - treatment of transactions as bogus in absence of adequate verification - Whether the addition of the opening balance of sundry creditors to the assessee's income as unexplained/ bogus (amounting to Rs. 2,04,23,945/-) was justified. - HELD THAT: - The Tribunal examined the materials placed on record, including replies to notices under section 133(6), ledger copies, postal track records, VAT/CST registration and returns and earlier consistent acceptance of sales and purchases. The Tribunal noted that verification lapses occurred not only on the assessee's side but also from the Revenue's side, and that several creditors had in fact replied to 133(6) notices. The Assessing Officer's addition rested principally on non-verification and departmental inspection reports alleging non existence of some creditors; however, the Revenue did not demonstrate rejection of books or any contrary finding by other authorities (including indirect tax authorities), nor produce sufficient corroborative material to justify treating the creditors as bogus. In view of the coherent documentary evidence and earlier coordinate bench order in the assessee's own case, the Tribunal held that mere non-completion of cross-verification under section 133(6) could not, by itself, sustain the substantial addition, and that the addition was unjustified on the material before the authorities. [Paras 8, 9]

The addition of the opening balance of sundry creditors as unexplained income is quashed and the impugned assessment order is set aside.

Principle of natural justice and reasonable opportunity of hearing - Whether the assessee was denied reasonable opportunity of being heard in relation to the assessment made under section 144. - HELD THAT: - The Tribunal considered the assessee's contention that documents and submissions had been filed before the Assessing Officer and that some replies to 133(6) notices were on record, while the Assessing Officer proceeded to complete assessment under section 144 after issuing a short show-cause requiring response within two working days. The Tribunal observed that lack of verification and procedural deficiencies were attributable to both parties but, on the material on record, the assessee had placed relevant documentary evidence before the authorities and the appellate process. Given the documentary record and the absence of conclusive contrary material from the Revenue, the Tribunal concluded that procedural irregularity and absence of adequate verification could not sustain the addition. [Paras 8]

The contention of denial of reasonable opportunity is addressed in the Tribunal's reasoning and does not support the impugned addition; the addition is therefore quashed.

Final Conclusion: Appeal allowed; the Tribunal set aside the assessment order passed under section 144 for AY 2013-14 and quashed the addition of the opening balance of sundry creditors as unexplained income, finding the addition unsustainable on the material and verification available.

Penalty under section 271(1)(c) - Bona fide mistake in return - Deletion of penalty where discrepancies corrected during assessment proceedings - Rectified computation and payment of differential tax during assessment - Application of Price Waterhouse precedent on penalty for bona fide mistake

Penalty under section 271(1)(c) - Bona fide mistake in return - Rectified computation and payment of differential tax during assessment - Application of Price Waterhouse precedent on penalty for bona fide mistake - Levy of penalty under section 271(1)(c) in respect of additions discovered in scrutiny assessment was not sustainable as the errors were bona fide and rectified during assessment proceedings. - HELD THAT: - On perusal of the profit and loss account the AO identified that certain amounts debited (donation and charity and loss on sale of assets) were not incorporated in the computation of income. The assessee accepted the discrepancies, filed a revised computation during the assessment proceedings, and paid the differential tax. The Tribunal found that the omissions were inadvertent human errors, supported by the fact that the donation was disclosed in the Tax Audit Report and the tax auditor had computed the section 80G deduction, but the assessee failed to carry it into the return. Applying the principle in Price Waterhouse Coopers (P.) Ltd. v. CIT that bona fide mistakes corrected in the assessment process do not attract penalty under section 271(1)(c), the Tribunal held that the case did not warrant levy of penalty. Having been granted relief on the merits, the Tribunal directed deletion of the penalty. [Paras 7, 8, 9]

Penalty under section 271(1)(c) deleted as the omissions were bona fide mistakes rectified during assessment; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the penalty imposed under section 271(1)(c) for AY 2011-12, holding that the errors were bona fide, were corrected by revised computation and payment of tax during assessment proceedings, and therefore did not attract penalty.

Revocation of approval under section 10(23C)(iv) - charitable purpose and proviso to section 2(15) - distinction between threshold conditions and compliance conditions for grant/withdrawal of approval - requirement of separate books/accounts and sufficiency of ERP/system-based accounting - effect of appellate order restoring approval on pending assessment

Revocation of approval under section 10(23C)(iv) - distinction between threshold conditions and compliance conditions for grant/withdrawal of approval - Validity of the order of the Commissioner (Exemptions) revoking the assessee's approval under section 10(23C)(iv) for the relevant year and whether such revocation was sustainable. - HELD THAT: - The Tribunal examined the material relied upon by the Revenue and concluded that the revocation was primarily triggered by a proposal from the Assessing Officer during assessment proceedings but that the Revenue failed to produce cogent material demonstrating deviation from the core objects on which approval was originally granted. The Tribunal highlighted that once threshold conditions for grant of approval are satisfied, the competent authority cannot retrospectively withdraw approval by merely alleging breaches of compliance conditions; compliance issues, if any, must be examined year-wise and, where established, can affect exemption for that year but do not automatically justify revocation of the approval itself. On this basis the Tribunal set aside the CIT(Exemption)'s order revoking approval; the Tribunal's reasoning was accepted by the appellate authority and the Tribunal's order was followed by the present bench. The Revenue offered no new material to distinguish or undermine the Tribunal's findings. [Paras 8, 9]

Order of CIT(Exemptions) revoking approval under section 10(23C)(iv) is unsustainable and set aside; CIT(A) and Tribunal conclusions on validity of revocation are upheld.

Charitable purpose and proviso to section 2(15) - Whether the assessee's activities are non-charitable or commercial in nature so as to fall outside the scope of 'charitable purpose' by operation of the proviso to section 2(15). - HELD THAT: - The Tribunal analysed the projects (Pehel and NACO), the contractual terms, pricing and regulatory context, and the use of funds. It found that the activities, including promotion of family planning methods and distribution/sale of regulated products at government-prescribed prices, were directed towards the targeted public-health objectives and fell within medical relief/charitable activity. There was no material from government authorities or other competent bodies to show diversion of foreign contribution or commercial exploitation contrary to the objects. Interpreting section 2(15) strictly, the Tribunal held the proviso did not apply to negate the assessee's charitable character in the facts of the case. [Paras 8]

Assessee's activities held to be charitable in character for the relevant year; proviso to section 2(15) not attracted on the facts.

Requirement of separate books/accounts and sufficiency of ERP/system-based accounting - Whether non-maintenance of separate books of account for business activity breached the 7th proviso to section 10(23C) and justified withdrawal of approval. - HELD THAT: - The Tribunal observed there is no statutory mandate under the Foreign Contribution Regulation Act to maintain separate books for foreign contribution and business activities; only separate bank accounts are required. The assessee's accounts were maintained on an ERP system (Lawson), which the Tribunal accepted as capable of segregating and recording transactions for different segments. Applying precedents holding that SAP/ERP systems can amount to maintenance of separate books, the Tribunal rejected the Special Auditor's allegation and the CIT(Exemptions)'s conclusion that the proviso was violated for want of separate books. [Paras 8]

Allegation of breach of proviso for non-maintenance of separate books rejected; ERP-based accounts held sufficient.

Effect of appellate order restoring approval on pending assessment - Consequences for the assessment completed by the Assessing Officer after the CIT(Exemptions) revoked approval, given the Tribunal restored the approval. - HELD THAT: - The appellate authority recorded that since the approval under section 10(23C)(iv) for the relevant year has been restored by the Tribunal, the basis on which the assessment was framed (i.e., revocation of approval) no longer subsists. The Tribunal and CIT(A) held that an assessment made by treating the trust as not entitled to exemption because of a now-set-aside revocation cannot stand; therefore there is no occasion to sustain the assessment. The present bench found no substance in Revenue's attempt to re-agitate points already considered by the Tribunal and CIT(A) and noted that mere dissatisfaction of the Department with an appellate order does not justify refusing to follow it. [Paras 7, 9, 11]

Assessment founded on the revoked approval is liable to be quashed in view of restoration of approval by the Tribunal; the assessment does not survive.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal's setting aside of the CIT(Exemptions) order revoking approval under section 10(23C)(iv) is affirmed; the findings that the assessee's activities are charitable, that ERP-based accounts suffice in lieu of separate books, and that the assessment premised on the revoked approval cannot stand are upheld.

Reference to Departmental Valuation Officer where declared value is less than fair market value - reference to Departmental Valuation Officer impermissible where assessee's declared value exceeds fair market value - non-retrospective effect of Finance Act, 2012 amendment to section 55A(a) - purposive construction of tax statutes

Reference to Departmental Valuation Officer where declared value is less than fair market value - reference to Departmental Valuation Officer impermissible where assessee's declared value exceeds fair market value - non-retrospective effect of Finance Act, 2012 amendment to section 55A(a) - Validity of the reference to the Departmental Valuation Officer and adoption of DVO value for computing capital gains where the assessee's declared 1981 value exceeded the DVO/AO estimate. - HELD THAT: - The Tribunal held that at the relevant time Section 55A(a) permitted a reference to the Departmental Valuation Officer only where the value adopted by the assessee was less than the fair market value. In the present case the assessee declared the cost as on 01.04.1981 at a figure substantially higher than the DVO's estimate and the AO's guideline-based estimate. Reliance was placed on the reasoning in Puja Prints (Bombay High Court) and on the distinction that the 2012 amendment (substituting "is at variance with its fair market value") is not retrospective and therefore did not apply to assessment year 2010-11. Consequently, the AO's reference to the DVO and adoption of the DVO value could not be sustained where the declared value was higher than the DVO estimate; the DVO-determined lower value could not be used to defeat the assessee's declared higher value. Applying purposive construction to the statutory scheme, the Tribunal reversed the findings of the AO and the CIT(A) on this point and allowed the assessee's contention on valuation for computation of capital gains. [Paras 8]

Assessee's appeal on valuation/capital gains allowed; the reference to and valuation by the DVO could not be adopted where the assessee's declared 01.04.1981 value exceeded the DVO/AO estimate, and the 2012 amendment does not apply to AY 2010-11.

Jurisdictional ground - Claim regarding jurisdictional objection raised by the assessee. - HELD THAT: - The Tribunal recorded that the jurisdictional ground was not argued before it. No substantive consideration was given to the jurisdictional plea in the hearing. [Paras 9]

Jurisdictional ground dismissed for want of argument.

Final Conclusion: Appeal partly allowed: valuation/capital gains issue in favour of the assessee (DVO valuation not to be adopted where declared value exceeds DVO/AO estimate and the 2012 amendment is not retrospective to AY 2010-11); jurisdictional objection dismissed.

Application of CUP method for benchmarking specified domestic transactions - arm's length price for transfer of power between captive power plant and non eligible units - deduction under section 80IA and computation of profits of a captive power plant - market value of electricity - relevance of State Electricity Board consumer tariff - computation of disallowance under Rule 8D and section 14A

Application of CUP method for benchmarking specified domestic transactions - arm's length price for transfer of power between captive power plant and non eligible units - deduction under section 80IA and computation of profits of a captive power plant - market value of electricity - relevance of State Electricity Board consumer tariff - Deletion of transfer pricing adjustment and grant of deduction under section 80IA by adopting the SEB consumer tariff as the ALP for captive power supplied to non eligible units - HELD THAT: - The Tribunal accepted the assessee's benchmarking under the CUP method by treating the rate at which the non eligible units procured power from the State Electricity Board as the appropriate comparable price. The Tribunal found the TPO/AO's selection of external comparables and tariff schedules to be functionally flawed and not reflective of similar market conditions for the thermal CPP at issue. Applying the internal CUP parameters and following the consistent approach of coordinate Tribunal decisions, the Tribunal held that where non eligible units also procure substantial power from the SEB, the average landed cost paid by such non eligible units to the SEB constitutes a reliable internal comparable and represents the arm's length price for the specified domestic transaction. The Tribunal further relied on the principle affirmed by the Apex Court that market value for computation under section 80IA is to be inferred from the rate at which SEB supplies power to industrial consumers rather than from rates at which generators sell to a supplier. Accordingly, the transfer pricing adjustment made by the TPO/AO was deleted and the deduction under section 80IA was restored based on the SEB consumer tariff; the Tribunal declined to interfere with the CIT(A)'s reasoning on this issue and followed earlier Tribunal precedents and the Apex Court's ratio (CIT vs. Jindal Steel and Power Ltd. ).

Transfer pricing adjustment deleted; deduction under section 80IA allowed by adopting the SEB consumer tariff as ALP (revenue grounds dismissed).

Computation of disallowance under Rule 8D and section 14A - Quantum of disallowance under Rule 8D limited to expenses relatable to dividend yielding investments - HELD THAT: - The AO and CIT(A) had applied Rule 8D(2)(iii) by taking 0.5% of the average investment balance to compute the section 14A disallowance. The Tribunal observed that not all investments yielded exempt income in the year under appeal and that the only exempt receipt was dividend actually earned. Applying the proximate cause principle embodied in section 14A and Rule 8D, the Tribunal restricted the 0.5% computation to the amount of investment actually yielding dividend income. On the assessee's calculation, this reduced the disallowance accordingly (the parties' accepted computation produced a lesser disallowance), and the Tribunal partly allowed the revenue's ground by directing that the disallowance be limited to the proportionate amount pertaining to dividend yielding investments.

Addition under section 14A/Rule 8D reduced and restricted to disallowance computed on dividend yielding investment (reduction of AO/CIT(A) addition).

Final Conclusion: The revenue appeals are dismissed on the transfer pricing/section 80IA issue for AY 2013 14 and 2014 15 (TP adjustment deleted and deduction under section 80IA restored on SEB consumer tariff), while the section 14A addition is partly sustained but restricted to the disallowance attributable to dividend yielding investments; both appeals disposed accordingly.

Unexplained cash credit - onus of assessee to explain source of deposits - reopening of assessment on ground of escaped income - effect of bank data migration error on PAN linking - requirement of verification before making additions

Unexplained cash credit - onus of assessee to explain source of deposits - effect of bank data migration error on PAN linking - requirement of verification before making additions - Addition of Rs. 1.27 crores as unexplained cash credit in the assessment for AY 2011-12 was not sustainable. - HELD THAT: - The Tribunal accepted the assessee's case that the partnership was dissolved earlier and that the bank account in question belonged to the erstwhile partner as a proprietary concern; the PAN of the partnership was inadvertently reflected in the bank's records due to data/CBS migration. The assessee furnished a bank certificate recording the migration error and the proprietor's audited accounts showing disclosure of the bank account and its transactions. The Assessing Officer made the addition without verifying these facts or obtaining originals of dissolution deed, and the First Appellate Authority confirmed the addition without independent verification. In these circumstances, and given the documentary evidence before the Tribunal (bank certificate and disclosure in the proprietor's audit report), the addition under the head of unexplained cash credit could not be sustained absent proper verification by the authorities. [Paras 9, 10]

Addition deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition of Rs. 1.27 crores treated as unexplained cash credit for AY 2011-12, and set aside the assessment's finding for want of proper verification of bank PAN migration and related disclosures.

Limitation under Section 263(2) - revisional power under Section 263 - computation of limitation period for revision under Section 263

Limitation under Section 263(2) - revisional power under Section 263 - Whether the revision order passed by the Principal Commissioner of Income Tax under Section 263 on 18.03.2021 in respect of the assessment order dated 13.12.2017 was barred by limitation. - HELD THAT: - Section 263(2) provides that no order shall be made under subsection (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The assessment order was passed on 13.12.2017 and the revision order was passed on 18.03.2021; these facts are not disputed. Applying the statutory two-year limitation prescribed by Section 263(2) to the undisputed dates, the Tribunal holds that the revision order is time-barred and therefore not maintainable. The Court did not proceed to adjudicate the substantive merits of whether the original assessment was erroneous or prejudicial to the revenue. [Paras 5]

Revision order under Section 263 is barred by limitation; appeal allowed.

Final Conclusion: The revision order framed under Section 263 dated 18.03.2021 in respect of the assessment order dated 13.12.2017 is time barred under Section 263(2); the assessee's appeal is allowed.

Reimbursement (one-to-one correlation and identical amount test) - fees for technical services - deduction of tax at source under section 195 - disallowance under section 40(a)(i) - burden of proof on the assessee to establish reimbursement - applicability of DTAA/Article 12 for taxation of technical fees

Reimbursement (one-to-one correlation and identical amount test) - burden of proof on the assessee to establish reimbursement - Payments made by the India branch to the Singapore head office for IT expenses do not constitute reimbursement. - HELD THAT: - The Tribunal examined the IT services agreement (between BYK Germany and BYK Singapore) and found that the India branch was not a party to that contract; the agreement does not establish that payments made by the India branch to BYK Singapore were reimbursements. The earlier Tribunal had remanded the matter for want of the agreement and documentation; on the remand the assessee failed to produce ledger entries and other requested records despite opportunity. The Tribunal also noted the assessee's own accounting policy records revenue from services as recognized with an agreed mark-up on net costs, and earlier findings observed a mark-up charged on related-party expenses. Applying the twofold test for reimbursement - (i) a direct one-to-one correlation between outgo and inflow, and (ii) recovery of identical amount without mark-up - the Tribunal held that the assessee did not discharge the burden of proof and therefore the payments cannot be characterized as reimbursement. [Paras 6, 11, 12, 13, 14]

Assessee failed to prove reimbursement; payments are not reimbursements.

Fees for technical services - deduction of tax at source under section 195 - disallowance under section 40(a)(i) - applicability of DTAA/Article 12 for taxation of technical fees - Payments in respect of the IT services were held to be fees for technical services taxable in India, attracting TDS under section 195 and consequential disallowance under section 40(a)(i). - HELD THAT: - On the material before it, including the IT Services agreement and the nature of services described therein, the Tribunal and the Assessing Officer concluded that the services provided by BYK Germany (rendered via the group IT arrangement) are technical in nature and not mere BPO. The agreement's scope and schedule show provision of substantial IT infrastructure, support and technical functions. In the absence of evidence that payments were mere reimbursements, and given the earlier finding of mark-up in related-party allocations, the Tribunal accepted the AO's view that the amounts are chargeable as fees for technical services (referable to section 9(1)(vii) and Article 12 of the DTAA with Germany as applied by the AO) and that non-deduction of tax at source under section 195 exposed the assessee to disallowance under section 40(a)(i). [Paras 7, 8, 14]

Payments held to be fees for technical services; TDS obligation under section 195 and disallowance under section 40(a)(i) sustained.

Final Conclusion: For AY 2016-17 the Tribunal dismissed the assessee's grounds: the IT-related payments were not shown to be reimbursements and were held to constitute fees for technical services, attracting TDS liability and consequent disallowance; the assessee's appeal is dismissed.

Taxability of software licence subscriptions - Royalty under Article 12 of the India-Japan DTAA - Business profits under Article 7 of the India-Japan DTAA - Application of Engineering Analysis Supreme Court decision - Treatment of sale of shrink wrapped / licensed software

Taxability of software licence subscriptions - Royalty under Article 12 of the India-Japan DTAA - Business profits under Article 7 of the India-Japan DTAA - Application of Engineering Analysis Supreme Court decision - Consideration received by the non-resident assessee from Indian end customers for sale of software licence subscriptions is not in the nature of royalty under Article 12 of the India-Japan DTAA and is not taxable as business profits under Article 7. - HELD THAT: - The Commissioner (Appeals) examined precedents including ITAT and AAR decisions on identical facts and applied the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT. The Assessing Officer had accepted the assessee's position for AY 2018-19 and AY 2019-20. The Revenue did not demonstrate any factual or legal distinction to displace those authorities or the Supreme Court ruling. In view of the settled position in Engineering Analysis and the consistent treatment in earlier assessments and appellate decisions, the addition made by the AO treating the receipts as royalty was deleted and the CIT(A)'s deletion was upheld.

Deletion of addition upheld; receipts from sale of software licence subscriptions held not to be royalty or taxable business profits under the India-Japan DTAA.

Final Conclusion: Revenue's appeals dismissed; the assessment addition treating software licence subscription receipts as royalty is deleted, following the Supreme Court decision in Engineering Analysis and consistent appellate/assessment treatment for the relevant years.

No power to detain goods in lieu of seizure - seizure of goods - show cause notice under Section 124 - return of seized goods under Section 110(2)

No power to detain goods in lieu of seizure - seizure of goods - show cause notice under Section 124 - return of seized goods under Section 110(2) - Validity of detention receipts issued in respect of gold chains and the consequent right to release where no show cause notice under Section 124 has been issued within the period prescribed by Section 110(2). - HELD THAT: - The Court held that the Customs Act does not recognise 'detention' of goods as a device to avoid the consequences of seizure and the statutory scheme requires that where goods are seized the procedure in the Act for confiscation must be followed. Section 110(1) empowers seizure where the proper officer has reason to believe goods are liable to confiscation and Section 110(2) mandates that if no show cause notice under Section 124(a) is issued within six months of seizure (subject to a one-time extension by the Principal Commissioner/Commissioner for reasons recorded), the goods shall be returned to the person from whose possession they were seized. Applying the principle in the co ordinate bench decision in Mohd. Salman Khan and the Supreme Court decision in Chaganlal Gainmull, the Court found that issuance of a detention receipt in substance amounted to seizure and, where no SCN under Section 124 has been issued within the statutory period, the consequence prescribed by Section 110(2) follows and the goods are liable to be released. The Court directed release of the gold chains forthwith, subject to appraisal/valuation in the petitioners' presence and payment, if any, of customs duty as communicated by the Proper Officer; the release being without prejudice to any action otherwise permissible in law in respect of the alleged wrongful import. [Paras 13, 15, 18, 19, 20]

Detention receipts issued on 20.12.2022 amounted to seizure; in absence of any show cause notice under Section 124 within the period mandated by Section 110(2), the gold chains are to be released to the petitioners subject to appraisal in their presence and payment of any customs duty communicated by the Proper Officer.

Final Conclusion: Writ petitions allowed; customs authorities directed to release the gold chains seized on 20.12.2022 in terms of Section 110(2) of the Customs Act, 1962, with appraisal in the petitioners' presence and release on payment of any applicable customs duty, without prejudice to other lawful action.

Provisional release of goods on bank guarantee - Reasonableness of conditions for provisional release - Equal treatment/non-discrimination in customs clearance - FSSAI approval as relevant to release - Perishable goods - need for expedited release

Provisional release of goods on bank guarantee - Perishable goods - need for expedited release - Provisional release of the two consignments on specified bank guarantees and bond - HELD THAT: - The Court directed provisional release of the consignments covered by bills of entry No. 8219403 and 8362251 on the petitioner furnishing specified bank guarantees and a bond. The determinative reasons were: (a) the consignments are edible and perishable, warranting expedited treatment; (b) the department had previously granted provisional release of materially identical consignments on bank guarantees varying between 16% and 28%, and no material has been placed before the Court to justify a different yardstick for the present consignments; and (c) absent any acceptable material showing why harsher conditions are necessary, it is in the interest of justice to permit release on the bank guarantees directed by the Court. Accordingly the respondents were directed to accept a bank guarantee of Rs. 3,49,000/- for bill of entry No. 8219403 and Rs. 2,00,000/- for bill of entry No. 8362251 and to release the goods within the time stipulated once the guarantees and bond are furnished. [Paras 15, 18]

Respondents to grant provisional release on acceptance of bank guarantees of Rs. 3,49,000/- and Rs. 2,00,000/- respectively, and on petitioner furnishing the bond; release to follow within the timelines ordered.

Reasonableness of conditions for provisional release - Equal treatment/non-discrimination in customs clearance - FSSAI approval as relevant to release - Validity of the department's insistence on a 100% bank guarantee and requirement of different treatment vis-a -vis prior consignments - HELD THAT: - The Court found the departmental insistence on a 100% bank guarantee of Rs. 25,00,000/- to be unjustified in the absence of any material explaining why the present consignments should be treated differently from earlier consignments released on lower bank guarantees. The Court noted that the goods had FSSAI approval for domestic consumption, as was the case with prior consignments, and that no affidavit or material had been produced to justify imposing the onerous condition. Consequently, the 100% bank guarantee condition was not sustained and a lower, reasonable quantum of bank guarantee was directed. [Paras 15, 16, 17]

The 100% bank guarantee requirement is not justified on the record; the department must accept the lower bank guarantees as directed by the Court.

Provisional release of goods on bank guarantee - Reasonableness of conditions for provisional release - Procedure for return of bank guarantees already furnished in respect of earlier consignments - HELD THAT: - The Court did not adjudicate the merits of any past claim for return of bank guarantees but granted the petitioner liberty to make a representation to the respondents for return of any bank guarantee. The designated officer was directed to consider such representation on its merits and in accordance with law and to communicate a decision within four weeks of its submission. This provides an administrative remedy rather than a substantive determination on the merits of return. [Paras 19]

Petitioner may file a representation for return of bank guarantee within two weeks; designated officer to decide on merits within four weeks.

Final Conclusion: The petition is allowed insofar as respondents are directed to provisionally release the two consignments on acceptance of the specified bank guarantees and bond, with timelines for release; the 100% bank guarantee condition is set aside for lack of justification; the petitioner is granted liberty to seek return of any earlier bank guarantee by representation, to be decided by the designated officer within the time directed.

Consideration of claim of ownership of seized goods - personal hearing before adjudication under Section 124 of the Customs Act - status quo of seized goods pending adjudication - restoration or compensation upon successful claim - adjudicatory authority to decide representations uninfluenced by prior Order-in-Original

Consideration of claim of ownership of seized goods - personal hearing before adjudication under Section 124 of the Customs Act - adjudicatory authority to decide representations uninfluenced by prior Order-in-Original - Respondent No.1 directed to consider the petitioner's representations and grant personal hearing and decide the claim without being influenced by the earlier Order-in-Original - HELD THAT: - The Court found that the petitioner's written representations claiming ownership of the seized gold had not been considered. It held that Respondent No.1 must decide those representations afresh and give the petitioner a personal hearing. The decision on the representations is to be taken within six months from intimation of this Order and must be made independently of the Order-in-Original dated 13th January, 2023. The direction contemplates fresh consideration rather than affirmation of the earlier adjudication and confines the adjudicating authority to decide the ownership claim on its merits after affording opportunity of hearing. [Paras 14, 16]

Respondent No.1 to decide the petitioner's representations within six months after granting personal hearing and without being influenced by the earlier Order-in-Original.

Status quo of seized goods pending adjudication - Status quo to be maintained in respect of the seized gold until Respondent No.1 decides the petitioner's representations - HELD THAT: - The Court directed that the physical and legal position of the said gold remain unchanged pending disposal of the representations. This preserves the petitioner's ability to seek restoration if its ownership claim succeeds and prevents alteration of the subject matter while fresh consideration takes place. [Paras 15, 16]

Status quo to be maintained in respect of the gold until a decision is taken on the petitioner's representations.

Restoration or compensation upon successful claim - If the petitioner succeeds in proving ownership, the respondents are directed to return the gold or equivalent gold or compensate by payment of market value - HELD THAT: - The Court provided the consequential relief that, upon the petitioner establishing its claim, Respondents must either restore the same gold, deliver an equivalent quantity of gold, or pay compensation equivalent to the market value as on date. This instruction ensures an effective remedy in case the adjudicating authority upholds the petitioner's ownership after fresh consideration. [Paras 15, 16]

On successful proof of ownership, respondents to return the gold or an equivalent quantity or compensate the petitioner by payment equal to market value.

Final Conclusion: Writ petition allowed in part; Respondent No.1 directed to decide the petitioner's representations after personal hearing within six months, status quo maintained over the seized gold pending such decision, and directions given for restoration or compensation in the event the petitioner's ownership claim succeeds; petition disposed of with no order as to costs.

Valuation of imported goods - classification as sludge/sediment or lubricating oil - market value evidence for valuation - burden of proof for classification and valuation - remand for fresh adjudication

Classification as sludge/sediment or lubricating oil - valuation of imported goods - market value evidence for valuation - Whether the material found in the imported vessel should be treated and valued as sludge/sediment or as lubricating oil, and whether the valuation at USD 420/MT is sustainable. - HELD THAT: - The Tribunal found that the revenue adopted USD 420/MT by treating the imported material as lubricating oil, relying on comparisons with bills of entry of other importers and on laboratory observations. However, the record does not contain material evidence establishing beyond doubt that the goods were lubricating oil rather than sludge/sediment. The adjudicating authority itself acknowledged that sludge oil value was USD 120/MT and relied on inferences (quantity, impurity percentage, and third party opinions) rather than conclusive proof. Given the absence of conclusive evidence to support reclassification and higher valuation, the Tribunal held that applying the lubricating oil price was based on assumption and presumption. Consequently, the matter was not finally decided on merits but required fresh consideration: the adjudicating authority must reexamine the classification and valuation and produce any available evidence to establish that the goods are lubricating oil before applying the higher value. [Paras 4, 5]

Impugned order set aside and matter remanded to the adjudicating authority for fresh consideration and evidence on classification and valuation.

Final Conclusion: The appeal is allowed by way of remand: the order fixing value at USD 420/MT is set aside and the adjudicating authority is directed to reconsider classification and valuation afresh, producing any evidence to establish that the material is lubricating oil before applying the higher rate.

Transaction value - Section 14(1) - assessable value to be transaction value - Customs Valuation Rules - Rule 3 - determination of method of valuation - Rule 5 - transaction value of similar goods - Rule 12 - rejection of declared value and procedure - contemporaneous imports / NIDB data insufficiency - requirement to record reasons and provide opportunity of hearing - confiscation under Section 111(m) of the Customs Act - penalty for mis-declaration

Transaction value - Rule 3 - determination of method of valuation - Rule 12 - rejection of declared value and procedure - requirement to record reasons and provide opportunity of hearing - Whether the authorities validly rejected the declared transaction value and re-determined assessable value without complying with the procedural and substantive requirements of the Valuation Rules. - HELD THAT: - The Tribunal held that transaction value is to be accepted unless one of the exceptions in the Valuation Rules is established. Rule 5 must be read subject to Rule 3 and Rule 12; consequently, rejection of declared transaction value requires cogent reasons, evidence and adherence to the procedure in Rule 12 including recording grounds for doubt, seeking further information and affording opportunity of hearing. In the present case the authorities rejected the declared value merely on the basis that higher values appeared in NIDB for imports at other ports, without showing any of the statutory circumstances necessitating rejection under Rule 4/Rule 12, without recording reasons for doubt or seeking further information from the importer; reliance solely on NIDB data did not discharge the onus on the department. The Tribunal relied on the legal principle in Eicher Tractors and subsequent precedents that the transaction value of the particular transaction cannot be displaced absent specified exceptions and procedural compliance. [Paras 4]

Rejection of the declared transaction value was improper; the impugned re assessment is set aside for failure to comply with Rule 12 and for lack of cogent reasons or evidence to reject the transaction value.

Rule 5 - transaction value of similar goods - contemporaneous imports / NIDB data insufficiency - similar goods - Whether the department validly re assessed value under Rule 5 by relying on NIDB/contemporaneous import data and whether the goods relied upon were shown to be 'similar'. - HELD THAT: - The Tribunal found that re assessment under Rule 5 requires a demonstration that the goods relied upon are similar in quality, characteristics and commercially interchangeable, and that comparisons are for imports at or about the same time in comparable quantities and commercial terms. The adjudicating authorities did not examine or establish comparability of quality, quantity or other relevant parameters of the contemporaneous imports, and relied solely on NIDB reports which were not shown to correspond in time or parameters to the appellant's imports. The Tribunal noted consistent authority that NIDB data alone, without independent evidence or analysis of comparability, is insufficient to enhance declared value. [Paras 4]

Enhancement of value based solely on NIDB/contemporaneous import data without establishing similarity and comparable parameters is unsustainable; such re assessment is set aside.

Confiscation under Section 111(m) of the Customs Act - penalty for mis-declaration - Whether confiscation of goods under Section 111(m) and penalties imposed were justified where no mis declaration or intent to suppress value was established. - HELD THAT: - The show cause notice did not allege any discrepancy in declared quantity, nor did the department produce evidence of mis declaration of value or intent to defraud. The Tribunal observed that confiscation and penalty are not sustainable where the bonafides of the importer are not in doubt and goods had been examined and cleared without objection; reliance on precedents establishes that confiscation and penalties cannot be imposed absent proof of mis declaration or suppression. Consequently, in the facts of the case confiscation and penalties were set aside. [Paras 4, 5]

Confiscation under Section 111(m) and the penalties imposed are unsustainable and are set aside.

Final Conclusion: The Tribunal set aside the impugned orders, holding that the authorities improperly rejected the declared transaction value and re assessed value based solely on NIDB/contemporaneous import data without complying with Rule 12 or establishing similarity; confiscation and penalties were also set aside. Appeals allowed with consequential relief in accordance with law.

Inherent power to recall orders - Jurisdiction of Adjudicating Authority under Section 60(5) of the IBC - Form of claim under CIRP Regulations is directory not mandatory - Duty of the Resolution Professional to verify claims and maintain list of creditors - Resolution plan must satisfy the requirements of Section 30(2) of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016 - Commercial wisdom of the Committee of Creditors is not justiciable but approval can be reviewed for statutory non-compliance or material shortcomings

Inherent power to recall orders - Jurisdiction of Adjudicating Authority under Section 60(5) of the IBC - Recall application under Section 60(5) IBC is maintainable before the Adjudicating Authority. - HELD THAT: - The Court held that a Tribunal/Court possesses ancillary or incidental inherent powers to recall its orders to secure the ends of justice or prevent abuse of process, unless explicitly prohibited by statute. Section 60(5)(c) of the IBC, with its non-obstante clause, empowers the NCLT to entertain questions of law or fact arising in insolvency proceedings; Rule 11 of the NCLT Rules preserves inherent powers. Consequently, even in absence of an express provision for recall, the NCLT may exercise such power sparingly and only on limited grounds (for example: lack of jurisdiction, non-service/absence of a necessary party, fraud/misrepresentation, or procedural error causing gross failure of justice). The Court found the appellant's pleaded grounds (non-notification of COC meetings, ex parte proceedings up to approval, misrepresentation as to non-submission of claim, and failure of the plan to meet Section 30(2) parameters) to be valid bases on which recall could be sought and therefore held the recall application maintainable. [Paras 50, 51, 52]

The recall application was maintainable and could properly be entertained by the Adjudicating Authority.

Limitation and suspension of limitation - The applications for recall were not barred by time. - HELD THAT: - The Court accepted the chronology asserted by the appellant: I.A. No.344/2021 was filed on 6.10.2020 soon after the appellant learned of approval on 24.09.2020; I.A. No.1380/2021 was filed on 15.03.2021 immediately after suspension of limitation (between 15.03.2020 and 14.03.2021) was lifted. In view of these facts and the effect of the suspension of limitation, the plea of inordinate delay was rejected. [Paras 53]

The recall applications were not time-barred.

Form of claim under CIRP Regulations is directory not mandatory - Duty of the Resolution Professional to verify claims and maintain list of creditors - Resolution plan must satisfy the requirements of Section 30(2) of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016 - Commercial wisdom of the Committee of Creditors is not justiciable but approval can be reviewed for statutory non-compliance or material shortcomings - The resolution plan did not conform to the requirements of Section 30(2) of the IBC read with Regulations 37 and 38 of the CIRP Regulations, 2016. - HELD THAT: - The Court analysed the statutory scheme: claims submitted with proof must be verified by the IRP/RP and reflected in the list of creditors; the Form prescribed by Regulations (Form B or C) is directory and not a ground to ignore a verifiable claim. The resolution plan here described the appellant as having not submitted a claim and recorded a materially lower outstanding figure than the unrebutted claim on record; it also failed to record the appellant's statutory charge and did not place the appellant in the class of secured creditors despite Section 13-A of the 1976 Act creating a charge. Further, where a plan envisages use of land owned by a third party statutory authority, feasibility requires closer scrutiny including necessary approvals. These omissions and errors were material and affected distribution, notice entitlement to the appellant under Section 24(3)(c) and the feasibility assessment under Regulations 37 and 38; neither NCLT nor NCLAT addressed these shortcomings. Accordingly the Court concluded the plan failed the statutory requirements. [Paras 30, 31, 33, 34, 54]

The resolution plan did not meet the mandates of Section 30(2) read with Regulations 37 and 38 and was vitiated by material omissions and errors.

Remand for re-submission of resolution plan - Judicial review limited to statutory compliance - Relief to be granted: approval of the resolution plan set aside and the plan remitted to the COC for re-submission after satisfying statutory parameters. - HELD THAT: - Given the material deficiencies identified (non-recognition of a verifiable claim, incorrect quantification, failure to record statutory security interest, and absence of consideration of necessary approvals for use of third-party statutory land), the Court found that neither NCLT nor NCLAT had addressed these matters. The appropriate relief, consistent with the limited scope of judicial review (which does not permit substitution of commercial judgment but does permit return of a plan for compliance with Section 30(2) and Regulations 37/38), was to set aside the order approving the resolution plan and remit the plan to the COC for re-submission after satisfying statutory requirements. No order as to costs was made. [Paras 55]

Impugned NCLAT order set aside; NCLT order approving the resolution plan dated 04.08.2020 set aside; resolution plan remitted to the COC for re-submission after complying with the Code; no costs.

Final Conclusion: The appeals are allowed. The impugned NCLAT order is set aside and the NCLT order approving the resolution plan dated 04.08.2020 is quashed; the resolution plan is remitted to the Committee of Creditors for re-submission after satisfying the parameters of Section 30(2) of the IBC and Regulations 37 and 38 of the CIRP Regulations, 2016. No order as to costs.

Interference with appellate tribunal's order - Appeal against NCLAT order - Insolvency and Bankruptcy - Dismissal of appeal

Interference with appellate tribunal's order - Appeal against NCLAT order - Dismissal of appeal - Whether this Court should interfere with the National Company Law Appellate Tribunal's order dated 8 January 2024 in Company Appeal (AT)(Insolvency) Nos. 1715-1716 of 2023 - HELD THAT: - The Court recorded its conclusion that there was no reason to interfere with the NCLAT's order dated 8 January 2024. Having considered the matter, the Supreme Court affirmed the appellate tribunal's decision and found the appeals unsustainable, leading to their dismissal. The Court also disposed of any pending applications relating to the appeals. [Paras 1, 2, 3]

Appeals dismissed; no interference with the NCLAT order dated 8 January 2024; pending application, if any, disposed of.

Final Conclusion: The Supreme Court affirmed the National Company Law Appellate Tribunal's order dated 8 January 2024 in Company Appeal (AT)(Insolvency) Nos. 1715-1716 of 2023, dismissed the appeals and disposed of any pending applications.

Challenge to NCLAT order - interference with appellate order - dismissal of civil appeal

Challenge to NCLAT order - interference with appellate order - Whether the Supreme Court should interfere with the National Company Law Appellate Tribunal order dated 17 November 2023 in Company Appeal (AT) (Insolvency) No 1281 of 2023. - HELD THAT: - The Bench reviewed the impugned order of the National Company Law Appellate Tribunal dated 17 November 2023 and found no reason to disturb it. Having considered the submissions, the Court concluded that interference was not warranted and therefore dismissed the Civil Appeal. The order disposing of pending applications was made consequent to the dismissal of the appeal. [Paras 1, 2, 3]

The challenge to the NCLAT order is rejected and the Civil Appeal is dismissed; pending applications are disposed of.

Final Conclusion: The Supreme Court found no reason to interfere with the NCLAT order dated 17 November 2023, dismissed the Civil Appeal and disposed of pending applications.

Code of conduct for Committee of Creditors - commercial wisdom of the Committee of Creditors - limited judicial review of CoC decisions - IBBI's power to frame guidelines under Section 196 - procedural due process - Wednesbury reasonableness and proportionality - principles of natural justice in CIRP - fiduciary duties of the Committee of Creditors

Code of conduct for Committee of Creditors - IBBI's power to frame guidelines under Section 196 - fiduciary duties of the Committee of Creditors - Direction to IBBI to frame and finalise a code of conduct/guidelines for the effective functioning of the Committee of Creditors. - HELD THAT: - The Court held that, notwithstanding the primacy and protected status of the CoC's commercial wisdom, the CoC cannot be devoid of a code of conduct governing its functioning and discharge of fiduciary duties under the IBC. The IBC and reports of relevant expert committees recognise the need for standards and guidance for CoC members; Regulation 17(1A) and the mandate in Section 196 vest the IBBI with power and responsibility to specify guidelines, grievance redressal mechanisms and best practices for insolvency stakeholders. The Court emphasised that any code must be subservient to the Code and must not dilute the sanctity of CoC's commercial wisdom, but must ensure decision-making adheres to integrity, objectivity, professional competence, due care, confidentiality and procedural safeguards. The Court accordingly directed the IBBI to frame/finalise such code/guidelines within a reasonable period, preferably within three months from the date of the judgment. [Paras 72, 73, 84, 85, 86]

The petition is partly allowed insofar as the IBBI is directed to frame/finalise a code of conduct/guidelines for the CoC within a reasonable period, preferably within three months.

Commercial wisdom of the Committee of Creditors - limited judicial review of CoC decisions - procedural due process - Wednesbury reasonableness and proportionality - principles of natural justice in CIRP - Reaffirmation of the non-justiciable character of the CoC's commercial wisdom and the permissible contours of judicial review over CoC decisions. - HELD THAT: - The Court reiterated settled law that the CoC's commercial wisdom is accorded primacy under the IBC and its business decisions are not to be subjected to merits-based judicial scrutiny by the Adjudicating Authority or the courts save within the limited parameters prescribed by the Code. At the same time, the Court held that the CoC's decision-making process must conform to basic standards of fairness, reasonableness and proportionality (Wednesbury principles) and observe principles of natural justice to the extent they are applicable in the CIRP context. The Adjudicating Authority retains supervisory jurisdiction to ensure decisions are taken in accordance with the Code and that procedural safeguards are respected, but must not qualitatively re-examine the commercial judgment of the CoC. [Paras 46, 50, 67, 68, 84]

The Court reaffirmed that CoC's commercial wisdom is sacrosanct and non-justiciable on merits, subject to limited supervisory review to ensure compliance with the Code and standards of reasonableness, proportionality and natural justice.

Final Conclusion: The writ petition is partly allowed in respect of prayer (a): the IBBI is directed to frame and finalise a code of conduct/guidelines for the effective functioning of the Committee of Creditors, in accordance with the principles articulated in the judgment and without diluting the sanctity of the CoC's commercial wisdom, preferably within three months. Other reliefs seeking to quash or bar proceedings relating to personal guarantees were not granted by this order.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - debt and default as threshold for initiation of CIRP - declaration of account as NPA in accordance with RBI prudential norms - treatment of accrued interest in a resolution plan - approval of Resolution Plan under Section 31 read with Section 30(2) of the Code - commercial wisdom of the Committee of Creditors and its limited judicial review

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - debt and default as threshold for initiation of CIRP - declaration of account as NPA in accordance with RBI prudential norms - Impugned admission of the Section 7 application and the finding of debt and default against the Corporate Debtor were correct. - HELD THAT: - The Tribunal found that the Corporate Debtor had availed credit facilities since 2008 and repeatedly defaulted, resulting in admitted outstanding dues. The Adjudicating Authority examined the bank's records, security documents and the chronology of 'holding on operations' and recall notices and correctly treated those banking forbearances as not extinguishing the secured creditor's right to recover; continuation of operations under cut-backs did not negate debt or default. The declaration of the account as NPA on 30.04.2018 was held to be in accordance with RBI Prudential Norms; automated interest calculations and reversals were accepted on the bank's explanation. Given admitted principal and interest outstanding above the statutory threshold, the Section 7 application was rightly admitted and no error was found in the Impugned Order. [Paras 26, 27, 28, 29, 30]

Appeal against admission under Section 7 dismissed; finding of debt and default upheld and Impugned Order maintained.

Treatment of accrued interest in a resolution plan - approval of Resolution Plan under Section 31 read with Section 30(2) of the Code - commercial wisdom of the Committee of Creditors and its limited judicial review - Approval of the Resolution Plan including an upfront payment of accrued interest over and above the admitted claim to the secured financial creditor was permissible and rightly approved by the Adjudicating Authority. - HELD THAT: - The Tribunal reiterated the limited scope of judicial review of the CoC's commercial decision and accepted that the CoC's unanimous approval (100% voting share) of the revised plan falls within its commercial wisdom. The Resolution Plan provisioned full payments of CIRP costs, operational creditors, workmen and employees, and 100% payment to the secured financial creditor together with an upfront accrued interest component for the CIRP period, which the Resolution Applicant offered as part of its commercial proposal. The Adjudicating Authority inspected compliance with statutory requirements under Section 30(2) and Section 31 and found the distribution fair and compliant. Absent any specific statutory prohibition or material non-compliance, the extra accrued interest component was not contrary to the Code and did not warrant interference. [Paras 66, 67, 69, 70, 71]

Appeal against approval of the Resolution Plan dismissed; approval, including the upfront accrued interest payment, upheld.

Final Conclusion: Both appeals are devoid of merit and dismissed: the admission of the Section 7 petition was correctly sustained on findings of debt and default, and the Resolution Plan - including an upfront accrued interest payment to the secured financial creditor approved by the CoC and sanctioned by the Adjudicating Authority - was permissible within the limited scope of judicial review.

Recusal of judicial members - private communications with a judge are forbidden - prohibition of ex parte communications and bench hunting - President's power to transfer cases and master of roster - functions and powers under Rule 16 of NCLT Rules, 2016 - limited appellate review of voluntary recusal - public hearing/open court principle

Recusal of judicial members - limited appellate review of voluntary recusal - Validity and reviewability on appeal of the decision of both Members of the Adjudicating Authority to recuse themselves from the matters. - HELD THAT: - The Tribunal examined the order by which both Members recused themselves and concluded that the decision of the Members to recuse cannot be interfered with in exercise of the Appellate Tribunal's jurisdiction. Having perused the impugned order, the Appellate Tribunal held that, where Members have recused themselves, the appellate forum is unable to grant the relief sought against that recusal. The reasoning proceeds from the fact of voluntary recusal recorded by the Adjudicating Authority and the limited scope for appellate interference in such circumstances. [Paras 12]

The Members' recusal stands and is not interfered with on appeal.

President's power to transfer cases and master of roster - functions and powers under Rule 16 of NCLT Rules, 2016 - Whether the transfer of the matters by the President of the NCLT to another Bench was within the President's powers. - HELD THAT: - The Tribunal noted Rule 16 of the NCLT Rules, 2016 which enumerates the President's administrative functions, including power to transfer any case from one Bench to another and to withdraw work from a Member's court. The President, being master of the roster and vested with administrative powers, validly exercised the transfer in exercise of those powers. The Appellate Tribunal observed that aggrieved parties have remedy to approach the President on administrative side, and that the subsequent transfer to Court II had in fact been effected by the President's order. [Paras 13, 14, 15]

The transfer by the President to another Bench is within the President's powers and is valid.

Private communications with a judge are forbidden - prohibition of ex parte communications and bench hunting - public hearing/open court principle - Whether counsel's email sent directly to a Judicial Member during pending proceedings constituted impermissible private communication and justified concern. - HELD THAT: - Relying on the Bar Council of India Rules and Supreme Court authority emphasising that proceedings must be conducted in open court, the Tribunal held private communications with a judge relating to a pending case are forbidden. The email sent on 08.01.2024 was not part of any filed proceeding or affidavit and was a direct communication to the Judicial Member; the Tribunal observed that requests or applications must be made by filing before the Court, not by direct emails to Members. While noting the impropriety of such communication and its potential to amount to bench hunting, the Tribunal nonetheless proceeded to treat the Members' ensuing recusal and the administrative transfer as matters not amenable to appellate interference in the present appeal. [Paras 8, 9, 10, 11]

The email constituted impermissible private communication; such communications are forbidden and applications should be filed in open court, but the consequence of recusal and transfer is not disturbed in this appeal.

Final Conclusion: The appeal is dismissed: the Members' recusal is not interfered with, the President's transfer of the matters to another Bench is confirmed as within administrative powers under Rule 16, and the Tribunal records that private communications with a Judge are impermissible while declining to grant relief against the recusal or transfer.

Maintainability of Section 7 application and threshold of 100 allottees - initiation of inquiry under Section 340 CrPC for alleged false affidavits - imposition of penalty under Section 65 of the IBC for fraudulent or malicious initiation - effect of a withdrawn claimant's subsequent declaration on pending proceedings - malafide intention to delay adjudication

Maintainability of Section 7 application and threshold of 100 allottees - malafide intention to delay adjudication - Whether the Section 7 application filed by the allottees satisfied the threshold requirement and was maintainable, and whether the Appellant's repeated challenges amounted to mala fides to delay adjudication. - HELD THAT: - The Tribunal recorded that the threshold and maintainability of the Section 7 petition had already been considered and upheld by the Adjudicating Authority and by this Tribunal in the earlier appeal, and that the Supreme Court had declined further interference while noting that maintainability before NCLT/NCLAT stood concluded. The impugned IAs were filed after those decisions and, on the facts, the Adjudicating Authority found the consolidated application to be a delayed and misleading attempt to impede disposal. The Tribunal agreed with those findings, noting the history of unsuccessful challenges to maintainability and that the IAs were filed in the same vein to resist the Section 7 petition rather than to raise a fresh justiciable defect. [Paras 8, 9, 10]

The finding that the Section 7 application is maintainable was affirmed and the Adjudicating Authority's conclusion that the Appellant's petitions were motivated by mala fide intent to delay was upheld.

Initiation of inquiry under Section 340 CrPC for alleged false affidavits - Whether proceedings under Section 340 CrPC should be ordered on the allegation that certain affidavits filed in support of the Section 7 application were forged or notarised without record. - HELD THAT: - The Adjudicating Authority considered the allegation that six affidavits were forged or not entered in the notary register but observed that those six applicants subsequently filed fresh affidavits reaffirming their authorisation of the authorised representatives. Reliance was placed on the Supreme Court's test that a court must form an opinion that it is expedient in the interests of justice to initiate an inquiry under Section 340(1) CrPC, which requires a clear case of intentional fabrication and prospects that inquiry is warranted. On the material before it, the Adjudicating Authority declined to direct a Section 340 inquiry, and the Tribunal found no error in that exercise of discretion. [Paras 14, 15]

No direction for inquiry under Section 340 CrPC was called for; the Adjudicating Authority rightly refused to initiate such proceedings.

Imposition of penalty under Section 65 of the IBC for fraudulent or malicious initiation - Whether the Section 7 petitioners should be penalised under Section 65 of the IBC for having fraudulently or maliciously initiated insolvency proceedings. - HELD THAT: - Section 65 permits imposition of penalty where proceedings are initiated fraudulently or with malicious intent for purposes other than resolution of insolvency. The Adjudicating Authority found, on the material, that the petitioners were genuine homebuyers seeking to protect their rights and that there was no basis to characterise the initiation of proceedings as fraudulent or malicious. The Tribunal found no illegality in declining to impose penalties under Section 65. [Paras 16, 17]

The prayer for imposition of penalty under Section 65 was correctly rejected; there was no finding of fraudulent or malicious initiation of proceedings.

Effect of a withdrawn claimant's subsequent declaration on pending proceedings - Whether a withdrawn claimant's later assertion that he did not sign the affidavit filed in the Section 7 application vitiates the proceedings or warrants further action. - HELD THAT: - The record showed that the claimant (Ajay Khajuria) had earlier obtained leave to withdraw his claim by an order recording an out of court settlement and revocation of authority; no contemporaneous allegation was made in that withdrawal application that the claimant had not signed the affidavit. The claimant thereafter provided a certificate of signature dissimilarity to the corporate debtor but did not file an affidavit before the Adjudicating Authority denying execution. Given that he had been permitted to withdraw his claim and was no longer a party to the Section 7 petition, the Adjudicating Authority reasonably treated his subsequent certificate as insufficient to reopen or derail the proceedings. The Tribunal found no error in that conclusion. [Paras 18, 19]

The later certificate by the withdrawn claimant did not vitiate the Section 7 proceedings and did not justify relief; the Adjudicating Authority rightly overruled that challenge.

Final Conclusion: The Adjudicating Authority's rejection of the consolidated IAs challenging the Section 7 petition-refusing to direct inquiry under Section 340 CrPC, refusing to impose penalties under Section 65, and dismissing the contention based on the withdrawn claimant's certificate-was upheld; the appeal is dismissed.

Grant of bail under the Prevention of Money laundering Act, 2002 - Section 45(1)(ii) of the Prevention of Money laundering Act, 2002 - pre trial release pending trial of the complaint under PMLA - power of the Special Court to impose appropriate terms and conditions on bail

Grant of bail under the Prevention of Money laundering Act, 2002 - Section 45(1)(ii) of the Prevention of Money laundering Act, 2002 - pre trial release pending trial of the complaint under PMLA - power of the Special Court to impose appropriate terms and conditions on bail - Whether the appellant should be released on bail under Section 45(1)(ii) of the PMLA pending disposal of the complaint case filed by the Directorate of Enforcement. - HELD THAT: - The Court, having heard senior counsel for the appellant and the learned ASG for the Directorate of Enforcement, and noting the ASG's concession leaving the matter to the Court, concluded that the appellant is entitled to be enlarged on bail in accordance with Section 45(1)(ii) of the PMLA. The Court did not record detailed reasons in view of the stand taken by the ASG. The Court directed that the appellant be produced before the Special Court within one week and that the Special Court shall enlarge the appellant on bail on appropriate terms and conditions until the trial of the complaint case is concluded. The direction preserves the Special Court's discretion to impose such terms and conditions as it deems fit while ensuring pre trial release pending final disposal of the complaint.

Appeal allowed; appellant to be produced before the Special Court within one week and to be enlarged on bail by the Special Court on appropriate terms and conditions until the trial of the complaint concludes.

Final Conclusion: The Supreme Court allowed the appeal and directed the Special Court to admit the appellant to bail on appropriate terms under Section 45(1)(ii) of the PMLA, with production before the Special Court within one week and bail to continue until conclusion of the complaint trial.

Principles of natural justice and audi alteram partem - Condonation of delay - Judicial restraint in interference with impugned orders - Right of the Enforcement Directorate to proceed if predicate offence is registered or revived

Principles of natural justice and audi alteram partem - Judicial restraint in interference with impugned orders - Condonation of delay - Right of the Enforcement Directorate to proceed if predicate offence is registered or revived - Whether the Special Leave Petitions should be entertained despite the impugned order having been passed without giving the petitioner an opportunity to file a reply, and whether delay should be condoned. - HELD THAT: - The Court noted that the impugned order appears to have been passed without affording the petitioner, the Enforcement Directorate, an opportunity to file a reply, thereby raising concerns under the principles of natural justice. Notwithstanding these reservations, the Court exercised judicial restraint and declined to interfere with the impugned order, choosing to dismiss the Special Leave Petitions. The Court separately condoned the delay. The Court further clarified that the Enforcement Directorate is not foreclosed from taking action in future: if any predicate offence(s) is registered or revived, the Directorate remains free to take steps and proceed in accordance with law.

Delay condoned; Special Leave Petitions dismissed; Court declines interference despite procedural reservation; Enforcement Directorate permitted to proceed if predicate offence(s) is/are revived or registered.

Final Conclusion: The Special Leave Petitions are dismissed with delay condoned; although the Court recorded reservations that the impugned order may have been passed without affording the Enforcement Directorate an opportunity to reply, it declined to interfere and clarified that the Directorate may take steps in accordance with law if any predicate offence is registered or revived.

Interference with impugned order - Special Leave Petition dismissed - question of law left open

Interference with impugned order - Special Leave Petition dismissed - The Special Leave Petition challenging the impugned order is dismissed and the Court declines to interfere with the impugned order. - HELD THAT: - The Court heard the senior counsel for the petitioner and the Advocate-on-Record and Additional Solicitor General for the respondents. After hearing, the Court recorded that it found no reason to interfere with the impugned order and therefore dismissed the Special Leave Petition. The Court disposed of the pending application in consequence. Although the petition was dismissed on the merits of not interfering with the impugned order, the Court expressly left the question of law open for future consideration.

Special Leave Petition dismissed; pending application disposed of; question of law left open.

Final Conclusion: The Supreme Court heard arguments, found no ground to interfere with the impugned order and dismissed the Special Leave Petition while leaving the substantive question of law undecided.

Supply of Tangible Goods Service - definition of 'Supply of Tangible Goods Service' under Section 65(105)(zzzzj) - transfer of right to use goods (deemed sale) - transfer of possession and effective control - declared service under Section 66E(f) - criteria in Bharat Sanchar Nigam Ltd. for determining transfer of right to use goods

Supply of Tangible Goods Service - definition of 'Supply of Tangible Goods Service' under Section 65(105)(zzzzj) - transfer of right to use goods (deemed sale) - transfer of possession and effective control - criteria in Bharat Sanchar Nigam Ltd. for determining transfer of right to use goods - Liability to pay service tax under 'Supply of Tangible Goods Service' for lease of aircraft for the period May 2008 to January 2013. - HELD THAT: - The Tribunal examined the lease agreement and applied the Supreme Court's criteria in Bharat Sanchar Nigam Ltd. to determine whether the arrangement conveyed a transfer of the right to use the aircraft (thereby constituting a deemed sale) or whether it was a supply of tangible goods for use without transfer of possession and effective control taxable as service. The agreement showed delivery of the aircraft to the appellant, operation by crew employed by the appellant, liability on the appellant to obtain licences/registrations, responsibility for maintenance and repair, and obligation to procure hull and liability insurance naming the owner as loss payee. These indicia demonstrate transfer of possession and effective control to the appellant during the lease term. Applying the BSNL criteria and the Tribunal's precedents (including Blue Dart Aviation and Heligo Charters), the transaction qualifies as transfer of the right to use the goods and thus falls within the concept of deemed sale excluded from levy as 'Supply of Tangible Goods Service' under the pre-1.7.2012 regime and is not taxable as service for the periods in question. Consequently the demand of service tax under the impugned show cause notice cannot be sustained. [Paras 12, 15]

Demand of service tax under 'Supply of Tangible Goods Service' set aside; appeal allowed with consequential relief for the period May 2008 to January 2013.

Final Conclusion: On examination of the lease terms and applying the BSNL criteria and Tribunal precedents, the lease of the aircraft conveyed the transfer of the right to use the aircraft (transfer of possession and effective control) and therefore the service tax demand under 'Supply of Tangible Goods Service' for May 2008 to January 2013 is unsustainable; the appeal is allowed and the demand set aside.

Exemption under Notification No. 14/2004-ST - Business Auxiliary Service - textile processing (interpretation) - service tax under reverse charge - limitation and revenue neutrality - cenvat credit and refund - penalty under Section 77 and Section 78

Exemption under Notification No. 14/2004-ST - Business Auxiliary Service - textile processing (interpretation) - service tax under reverse charge - limitation and revenue neutrality - cenvat credit and refund - penalty under Section 77 and Section 78 - Eligibility of the appellant for exemption under Notification No. 14/2004-ST dated 10.09.2004 in respect of commission paid to overseas agents for export promotion - HELD THAT: - The Tribunal held that Notification No. 14/2004-ST exempts taxable services provided in relation to Business Auxiliary Service insofar as they relate to specified activities including "textile processing", and that the phrase "textile processing" must be understood in a broad sense to include the activities of the textile manufacturer-exporter. Commission paid to overseas agents for procuring export orders constitutes an activity incidental or auxiliary to the production/processing of textile goods and thus falls within clause (d) of the Notification as a service incidental or auxiliary to the activity specified. In light of earlier consistent decisions of the Tribunal (including those where demands were set aside on merits and limitation) and the dismissal by the Supreme Court of the Department's appeal in the cited Aravind A Traders matter, the appellant is entitled to the exemption and is not liable to pay service tax under reverse charge for the period in question. The Tribunal further observed that, if any service tax were exigible, the same would be revenue-neutral as the appellant could take cenvat credit and seek refund under the relevant notification, and accordingly the question of imposing penalties under the cited provisions does not arise once the tax demand is dropped. [Paras 6, 7, 8]

The appellant is eligible for the benefit of Notification No. 14/2004 ST dated 10.09.2004; the impugned Order in Appeal dated 29.12.2016 is set aside.

Final Conclusion: Appeal allowed; impugned appellate order set aside and consequential reliefs, if any, granted in accordance with law.

Recovery of CENVAT credit wrongly taken or utilised with interest under Rule 14 of the CENVAT Credit Rules, 2004 - Liability to pay interest under Section 11AB of the Central Excise Act, 1944 - No statutory time limit for recovery of interest under Section 11AB - Effect of substitution/amendment of a rule and retrospective operation - Penalty under Rule 15 of the CENVAT Credit Rules, 2004 - Interpretation of taxing/statutory provisions in light of authoritative Supreme Court precedents (Ind Swift Laboratories)

Recovery of CENVAT credit wrongly taken or utilised with interest under Rule 14 of the CENVAT Credit Rules, 2004 - Interpretation of 'taken or utilised wrongly' in Rule 14 - Ind Swift Laboratories decision - Interest is chargeable on CENVAT credit wrongly taken even if not utilised - HELD THAT: - The Tribunal held that Rule 14, read in conjunction with Section 11AB, makes credit which has been 'taken' or 'utilised' wrongly recoverable along with interest on the occurrence of any one of those events. The decision of the Hon'ble Supreme Court in Ind Swifty Laboratories was applied to reject the appellant's contention that interest is payable only if the credit was utilised; the word 'or' in Rule 14 cannot be judicially read as 'and'. The appellant's reliance on contrary High Court or tribunal decisions was held to be distinguishable or inconsistent with the Supreme Court precedent, and therefore not persuasive.

Demand for interest on the wrongly taken CENVAT credit upheld.

Liability to pay interest under Section 11AB of the Central Excise Act, 1944 - No statutory time limit for recovery of interest under Section 11AB - Limitation and applicability of Section 11A vs Section 11AB - Recovery of interest under Section 11AB is not time barred by Section 11A and the demand is maintainable - HELD THAT: - The Tribunal examined the distinction between Section 11A (which prescribes limitation for recovery of duty) and Section 11AB (which prescribes liability to pay interest) and held that Section 11AB contains no express time limit for raising or recovering interest. Reliance was placed on judicial precedents to the effect that where the legislature has not prescribed a limitation, courts should not read one in. Applying those authorities, the Tribunal found no merit in the appellant's plea of limitation and sustained the interest demand.

The plea that interest demand is time barred is rejected; interest recovery is upheld.

Effect of substitution/amendment of a rule and retrospective operation - Section 38A of the Central Excise Act and General Clauses Act principles - Amendment substituting 'or' by 'and' in Rule 14 by Notification No.18/2012-CE(NT) is not retrospective to affect liabilities arising prior to its stated effective date - HELD THAT: - The Tribunal noted Notification No.18/2012 explicitly prescribed the substitution to take effect from 17 March 2012. Applying Section 38A of the Central Excise Act and settled principles on substitution and repeal, the Tribunal concluded that the earlier textual form of Rule 14 governs events occurring prior to the stated effective date and the amendment does not revive or alter liabilities already accrued under the prior text. Authorities on substitution and on interpretive limits were discussed to reject the appellant's contention that the 2012 substitution operates retrospectively to negate earlier liability.

The 2012 substitution does not retrospectively alter the liability under the pre amendment Rule 14; earlier liabilities remain governed by the rule as it then stood.

Penalty under Rule 15 of the CENVAT Credit Rules, 2004 - Imposition of penalty where credit wrongly taken - Penalty under Rule 15 for the wrongly taken credit is sustainable - HELD THAT: - Having upheld the finding that inadmissible CENVAT credit was taken and interest was rightly recoverable, the Tribunal found no merit in the appellant's challenge to the penalty imposed under Rule 15. The Tribunal applied Supreme Court precedent (including Rajasthan Spinning and Weaving Mills Ltd.) to support imposition of penalty where wrongful availment of credit was established.

Penalty imposed under Rule 15 is upheld.

Final Conclusion: The appeal is dismissed: the Tribunal upheld the demand of interest on CENVAT credit wrongly taken (even if not utilised) under Rule 14 read with Section 11AB, held the interest demand not time barred, rejected the contention that the 2012 substitution operated retrospectively to alter prior liabilities, and sustained the penalty under Rule 15.

Entitlement to interest on delayed refund - refund under exemption notification not being a refund under Section 11B - doctrine of finality of litigation and effect of subsequent change of law - operation and effect of Circular No.682/73/2002-CX

Entitlement to interest on delayed refund - doctrine of finality of litigation and effect of subsequent change of law - Appellants are not entitled to interest on refunds already sanctioned pursuant to earlier orders following SRD Nutrients, despite the subsequent Supreme Court decision in Unicorn Industries. - HELD THAT: - The Tribunal considered whether interest should attach to refunds already sanctioned to the appellants in consequence of earlier orders following the then-prevailing Supreme Court decision in SRD Nutrients. The Court relied on the principle that a subsequent change of opinion by a higher court in a case concerning another party does not permit reopening of decisions which had attained finality; the Jammu & Kashmir High Court so held and that view has been upheld by the Supreme Court. Applying that principle, the Tribunal observed that if the Department is barred from recovering refunds already granted, the assessees correspondingly cannot claim interest on those refunds. On this basis the request for interest was held not maintainable. [Paras 6, 7, 8]

Request for interest on the refunds already sanctioned is rejected and the appeals on this ground are dismissed.

Refund under exemption notification not being a refund under Section 11B - operation and effect of Circular No.682/73/2002-CX - Refunds arising under Notification No.56/2002 are a mechanism to operationalize the exemption and are not refunds under Section 11B of the Central Excise Act; accordingly interest under Section 11B is not payable. - HELD THAT: - The Tribunal accepted the view recorded in Circular No.682/73/2002-CX that the refund mechanism under Notification No.56/2002 (and No.57/2002) was created to operationalize the exemption and therefore does not constitute a refund within the meaning of Section 11B of the Central Excise Act. The Tribunal concurred with the learned Commissioner (Appeals) that, for this reason, interest under Section 11B is not applicable to refunds granted under those exemption notifications. [Paras 2, 7]

Refunds under Notification No.56/2002 are not refunds under Section 11B and interest under Section 11B is not payable.

Final Conclusion: All the appeals are dismissed: appellants are not entitled to interest on refunds already sanctioned, and refunds under Notification No.56/2002 are not treated as refunds under Section 11B for purposes of interest.

CENVAT Credit - input services - nexus to the manufacture of final product - ancillary and incidental activities to manufacture - integrally connected with the business/manufacture - penalty and interest for wrongful availment of CENVAT credit - judicial precedent

CENVAT Credit - input services - nexus to the manufacture of final product - ancillary and incidental activities to manufacture - penalty and interest for wrongful availment of CENVAT credit - judicial precedent - Denial of CENVAT credit and imposition of interest and equal penalty in respect of specified input services for the period August, 2007 to July, 2011 was unsustainable - HELD THAT: - The Commissioner had denied credit on certain services (employee bus transport, canteen services including renovation and maintenance, Mathadi contractor/worker subsidy, renovation of executive toilets, professional fees, and housekeeping of administrative building) principally on the grounds that there was no statutory obligation to provide such services and that some services lacked use by workmen or nexus with manufacture. The Tribunal observed that the Commissioner accepted only core production activities and excluded ancillary and incidental activities which form an integral part of the manufacturing process. Having regard to judicial precedents of this Tribunal and higher fora treating identical or similar services as valid inputs, the denial cannot be sustained. The Tribunal held that executive facilities or other ancillary services cannot be excluded simply because they are used by managerial staff or because no statutory obligation compels provision; such services, if integrally connected with and incidental to the manufacture of final product, qualify as input services for CENVAT credit. In view of settled decisions construing admissibility of credit on such services, the Commissioner's order confirming demand, interest and penalty was set aside. [Paras 5, 6]

Order of the Commissioner denying CENVAT credit and imposing interest and equal penalty is set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, set aside the Commissioner's order dated 08.12.2014, and granted consequential relief, holding that the impugned denial of CENVAT credit on the specified input services for August, 2007 to July, 2011 was unsustainable in view of precedent and the integral nexus of those services to manufacture.

Definition of excisable goods - marketability requirement for levy of excise - process of manufacture - Explanation to Section 2(d) of the Central Excise Act - waste and scrap not excisable where no manufacturing process creates dutiable goods - precedential effect of prior tribunal orders in the same case

Definition of excisable goods - marketability requirement for levy of excise - waste and scrap not excisable where no manufacturing process creates dutiable goods - Leviability of excise duty on waste and scrap (paper/paper boards, corrugated boxes, aluminium foils etc.) arising during manufacture and packing of cigarettes for the period January 2012 to December 2012. - HELD THAT: - Having regard to the statutory scheme and established precedent, the Tribunal held that both the existence of manufacture and marketability are necessary conditions for imposing excise duty. The Court observed that the Explanation to Section 2(d) describing marketability does not eliminate the foundational requirement of manufacture; waste and scrap which arise as unusable, rejected, torn, deformed or soiled inputs during the production/packing process cannot, without more, be treated as excisable goods. The Tribunal relied on earlier authoritative decisions, including the reasoning in West Coast Industrial Gases Ltd. and subsequent rulings, which treat similar categories of waste as not leviable to excise. The Tribunal further noted that in the appellant's own earlier proceedings for other periods the same category of waste had been held non-excisable and those orders have attained finality; to maintain consistency and predictability the same conclusion was applied to the period under adjudication. [Paras 5]

Duty on the said waste and scrap is not leviable for the period in question.

Explanation to Section 2(d) of the Central Excise Act - process of manufacture - precedential effect of prior tribunal orders in the same case - Whether the Explanation to Section 2(d) and departmental circular suffice to render such waste excisable notwithstanding absence of a manufacturing process producing dutiable goods. - HELD THAT: - The Tribunal held that the departmental Circular (CBEC Circular No. 904/24/2009-CX) and the Explanation to Section 2(d), while clarifying marketability, cannot by themselves obviate the requirement that duty attaches only to goods which result from a process of manufacture. The court emphasised that administrative pronouncements do not override the statutory scheme and judicial precedents which require a demonstrable process of manufacture and resultant dutiable product before excise can be imposed. Consequently, reliance on the Explanation and Circular did not sustain the demand in the absence of the manufacturing condition being satisfied. [Paras 5]

Explanation and Circular do not justify charging excise on the waste in the absence of a manufacturing process producing excisable goods.

Final Conclusion: The appeal is allowed; the Commissioner (Appeals) order confirming duty, interest and penalty on the described waste and scrap for January 2012 to December 2012 is set aside, with consequential relief where applicable.

Unjust enrichment - refund of differential duty after provisional assessment under Rule 7 of the Valuation Rules - burden of proof to demonstrate passing on of excise duty - evidentiary value of Chartered Accountant certificate for proving financial transactions - entitlement to interest on delayed statutory refund

Unjust enrichment - refund of differential duty after provisional assessment under Rule 7 of the Valuation Rules - burden of proof to demonstrate passing on of excise duty - evidentiary value of Chartered Accountant certificate for proving financial transactions - Entitlement of the appellant to refund of excess duty paid on provisional assessment (for July 2011 to November 2011) and whether refund is barred by the doctrine of unjust enrichment - HELD THAT: - The Tribunal found that the appellant had provisionally assessed and paid duty at the factory gate and that final assessments after clearances at C & F agents/depots showed excess payment. The Assistant Commissioner's verification recorded that discounts were in fact passed on by C & F agents to dealers, and duties collected at the place of removal were realized and accounted for; consequently the excess duty was borne by the appellant alone. The Tribunal further held that the appellant had produced financial statements and a Chartered Accountant's certificate showing the differential duty remained an excise duty refund receivable in its books and was not recovered from customers. Relying on precedent that a Chartered Accountant's certificate may be a sufficient record to establish financial transactions where appropriate, the Tribunal concluded that the appellant discharged the burden of proving that the duty element was not passed on and therefore was not an instance of unjust enrichment. Applying the statutory scheme embodied in Rule 7 (which contemplates refund on re-determination after provisional assessment), the Tribunal held that refund should have been granted upon final assessment and directed payment of the refund with applicable interest. [Paras 5, 6, 7]

Refund of the excess duty of Rs.14,77,688/- is allowable to the appellant for the period in question, since unjust enrichment was not established and the appellant proved non-passing-on of duty; refund to be paid with applicable interest.

Final Conclusion: The appeal is allowed; the order of the Commissioner (Appeals) is set aside and the respondent is directed to pay the refund of Rs.14,77,688/- with applicable interest within three months, with consequential relief if any.

Revisional jurisdiction - legality and propriety - scope of revision versus appeal - perversity as ground for interference with findings of fact - findings of fact based on no evidence or misreading of evidence - acceptance of tribunal's factual findings - revision under Section 58 of the UPVAT Act, 2008

Acceptance of tribunal's factual findings - perversity as ground for interference with findings of fact - Whether the High Court should interfere with the Tribunal's acceptance that the surveying authority miscounted cigarette stock and thereby uphold the dealer's books of account. - HELD THAT: - The Court held that the Tribunal is the primary fact-finding body and the High Court's revisional jurisdiction does not permit a fresh re-examination of factual findings already adjudicated by the Tribunal unless there is perversity, patent illegality, or no evidence. The Tribunal examined the discrepancies and accepted the dealer's explanation that the survey count was erroneous; there is no demonstrable perversity or other jurisdictional defect in that conclusion. The Revisionist merely sought reappraisal of the evidence and re litigation of merits, which is impermissible in revision. In the absence of any glaring illegality, the impugned order does not warrant interference. [Paras 6, 14, 15, 16, 17]

Revision court refused to disturb the Tribunal's factual finding that the stock discrepancy arose from miscounting and upheld acceptance of the dealer's books.

Revisional jurisdiction - scope of revision versus appeal - legality and propriety - findings of fact based on no evidence or misreading of evidence - What is the scope and limit of the High Court's revisional power under Section 58 of the UPVAT Act, 2008 in relation to findings of fact recorded by the Tribunal? - HELD THAT: - Relying on settled precedent, the Court explained that revision is narrower than appeal and is a supervisory power to examine legality, propriety and regularity of proceedings. While revision may examine findings of fact to determine whether they are according to law, interference is justified only where a finding is perverse, based on no evidence, arrived at by misreading or overlooking material evidence, or results in gross miscarriage of justice. The High Court must not act as a second appellate forum to reappraise evidence simply because it would have taken a different view. Applying these principles, the Court found no jurisdictional or legal error in the Tribunal's order. [Paras 8, 9, 11, 12, 13]

Revisional interference is confined to cases of perversity, absence of evidence, misreading or ignoring material evidence; absent such infirmity, the Tribunal's order must be left undisturbed.

Final Conclusion: The revision petition is dismissed; the impugned order dated January 25, 2023 of the Commercial Tax Tribunal is upheld and no interference is warranted under Section 58 of the UPVAT Act, 2008.

Vicarious liability of company officers - application of Section 46B (offences by companies) - arraignment of company as accused - quashing of prosecution for non-impleading company - abuse of process of law - prosecutorial discretion and protection against unjust prosecution

Arraignment of company as accused - application of Section 46B (offences by companies) - vicarious liability of company officers - quashing of prosecution for non-impleading company - Maintainability of criminal proceedings against the director without impleading the company where the alleged offence arises from company premises and concern goods imported by the company. - HELD THAT: - The Court found that the seized foreign liquor was recovered from the registered office/premises of the company and the petitioner, a director, was arrested from that office. Section 46B of the Bengal Excise Act contemplates that where an offence is committed by a company the company and every director, manager, secretary or agent shall be liable unless such person proves lack of knowledge or consent. Binding authority requires that prosecution of a director for an offence attributable to a company ordinarily requires that the company be arraigned; vicarious liability of officers arises only where the company can be prosecuted. The Court relied on the principle that criminal proceedings should not be initiated mechanically and that prosecuting agencies must exercise discretion fairly, particularly where breaches may be technical or based on bona fide belief. In the facts of the case the company was not made an accused despite the locus of seizure and the relationship of the goods to the company, and therefore continuation of proceedings against the petitioner alone was contrary to the statutory scheme and amounted to an abuse of process. [Paras 32, 33, 36, 37, 38]

Proceedings against the petitioner without impleading the company are not maintainable; the prosecution report and complaint proceedings are quashed and the revisional application is allowed.

Final Conclusion: The revisional petition is allowed; prosecution Report No. 02/19-20 dated 26.04.2019 and Complaint Case No. 1986 of 2018 (and connected orders) are quashed because the company, whose premises and imported goods gave rise to the case, was not arraigned, rendering the proceedings unlawful and an abuse of process.

Pre-deposit under Section 63(4) of the Karnataka Value Added Tax Act - power under Article 226 to modulate or waive pre-deposit - waiver or reduction of pre-deposit in exceptional or peculiar facts - entertainment of appeal despite non-payment of statutory pre-deposit

Power under Article 226 to modulate or waive pre-deposit - pre-deposit under Section 63(4) of the Karnataka Value Added Tax Act - waiver or reduction of pre-deposit in exceptional or peculiar facts - Whether the High Court has jurisdiction under Article 226 to waive or reduce the pre-deposit requirement prescribed by Section 63(4) of the KVAT Act. - HELD THAT: - The Court held that it is open to the High Court, in the exercise of its writ jurisdiction under Article 226, to modulate, reduce or waive the pre-deposit condition prescribed by Section 63(4) of the KVAT Act depending upon the peculiar and special facts of a case. Earlier decisions of this Court and other benches (including cases involving public undertakings) demonstrate that the requirement of pre-deposit may be adjusted to ensure access to appellate remedy while remaining mindful of the statutory scheme. The Court rejected the submission that it is powerless to act and observed that contrary decisions relied upon by the State did not lay down a principle barring the High Court from exercising such jurisdiction. The power, however, is to be exercised in appropriate cases having regard to the facts and precedents indicating modulation in rare or special circumstances. [Paras 13, 14, 15]

High Court may, in exceptional or peculiar circumstances, waive or reduce the pre-deposit required under Section 63(4) of the KVAT Act.

Entertainment of appeal despite non-payment of statutory pre-deposit - financial hardship and corporate insolvency as basis for waiver - discretion to permit prosecution of appeal without 30% pre-deposit - Whether the petitioner should be permitted to maintain and prosecute Sales Tax Appeal No. 400/2018 without making the 30% pre-deposit prescribed by Section 63(4). - HELD THAT: - Applying the aforesaid principle to the facts, the Court found that the petitioner was in severe financial distress, had not generated revenue for over five years, was undergoing corporate insolvency resolution proceedings with moratorium declared, and thus was not in a position to make the 30% pre-deposit. The Court noted other relevant circumstances placed on record, including prior treatment of similar contentions in subsequent periods by the Tribunal, and concluded that these peculiar facts justified relief. Consequently, the Tribunal was directed to entertain the specified appeal and decide it on merits without insisting on the 30% pre-deposit. The Court emphasised that the direction was given in the special facts of the case and would not have precedential value. [Paras 16, 17, 18, 19]

Petitioner permitted to maintain and prosecute Sales Tax Appeal No. 400/2018 before the Karnataka Appellate Tribunal without payment of the 30% pre-deposit; Tribunal directed to consider and dispose the appeal on merits.

Final Conclusion: Writ petition allowed in part: the High Court affirmed its power under Article 226 to modulate or waive the statutory pre-deposit in appropriate cases and, on the peculiar facts of petitioner's insolvency and financial incapacity, directed the Karnataka Appellate Tribunal to admit and decide Sales Tax Appeal No. 400/2018 on merits without insisting on the 30% pre-deposit; the order is confined to the special facts and is not to be treated as precedent.

Forfeiture of gratuity - Requirement of conviction for forfeiture under section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 - Principles of natural justice - Loss of confidence

Forfeiture of gratuity - Requirement of conviction for forfeiture under section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 - Whether gratuity can be forfeited under section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972 in the absence of a conviction by a court of competent jurisdiction. - HELD THAT: - The Court examined the scope of section 4(6)(b)(ii) and applied binding authority holding that forfeiture under that sub-clause operates only where the termination is for an act that constitutes an offence involving moral turpitude and such offence is established by a court of law. It reiterated that to qualify as an 'offence' the act must be made punishable by law and that it is for the criminal court, not the employer, to determine whether an offence has been committed and to record conviction. The Court surveyed precedents including Union Bank of India and Jaswant Singh Gill and subsequent High Court decisions, and concluded that forfeiture made by the management at the stage where only a charge-sheet exists (and no conviction has been recorded) is premature. The Court further noted that this legal requirement must be strictly construed because forfeiture is an exception to the statutory scheme of gratuity as an earned benefit. Applying these principles to the present facts, the Court found the impugned forfeitures unsustainable in the absence of conviction. [Paras 13, 14, 16, 19, 24]

Forfeiture of gratuity under section 4(6)(b)(ii) cannot be sustained in the absence of a conviction; the impugned decisions setting aside payment of gratuity are set aside.

Principles of natural justice - Loss of confidence - Whether the petitioners were denied principles of natural justice by non-issuance of a specific show-cause notice under the Act for forfeiture of gratuity. - HELD THAT: - The Court observed that there is no statutory format mandated under the Act for a separate show-cause notice regarding forfeiture. It found that the memoranda notifying proposed dismissal without terminal benefits and inviting the petitioners to show cause within seven days sufficed for the purposes of natural justice. The Court did not decide the broader necessity of a separate notice under the Act because the dismissal notice without terminal benefits was already given and the main legality of forfeiture was addressed on other grounds. The Court also noted that the management's later characterization of the termination as due to 'loss of confidence' weakened its earlier misconduct-based stance, but declined to decide collateral submissions since the forfeiture decision was set aside on the conviction requirement. [Paras 9, 10]

The memoranda proposing dismissal without terminal benefits and inviting show cause met natural justice requirements for the disciplinary process; however, the question of forfeiture was disposed of on the ground that conviction is required.

Final Conclusion: The writ petitions are allowed: the impugned appellate decisions denying gratuity are set aside because forfeiture under section 4(6)(b)(ii) is premature in the absence of conviction; incidental contentions on notice and change of management's stance were considered but did not sustain forfeiture.