TaxTMI Updates e-Newsletter
Feb 18,2025

Stay of demand - pre-deposit under Section 112(8) of the CGST Act - deposit in terms of Section 107(6) of the CGST Act - interim relief pending disposal of writ petition - undertaking to file appeal - recovery proceedings

Stay of demand - interim relief pending disposal of writ petition - Whether interim stay of recovery of demand recorded in the appellate order dated 24th July, 2024 should be granted. - HELD THAT: - The High Court, taking note that the Appellate Tribunal is yet to be constituted and that the petitioner has made out a prima facie case, granted an unconditional stay of the demand arising from the appellate order dated 24th July, 2024 for two weeks from the date of the order. The court exercised its discretionary jurisdiction to protect the petitioner from immediate recovery pending adjudication of the writ petition and to afford an opportunity for further interim arrangement.

Unconditional stay of recovery for two weeks from date of the order.

Deposit in terms of Section 107(6) of the CGST Act - pre-deposit under Section 112(8) of the CGST Act - undertaking to file appeal - Conditions for continuation of interim protection beyond the initial two-week stay. - HELD THAT: - The court provided that if the petitioner, within two weeks from date, pays 10% of the balance amount of tax in dispute in addition to the amount already deposited under the procedure of Section 107(6) of the Act, the interim order will continue until disposal of the writ petition or further order. The order thus conditions continuation of interim relief on a specified deposit by the petitioner while leaving in place the earlier deposited amount under the statutory provision referenced.

Interim order to continue until final disposal (or further order) if petitioner pays 10% of the balance tax in dispute within two weeks in addition to amounts already deposited under Section 107(6).

Recovery proceedings - Procedure and timelines for filing opposing affidavits and further proceedings in the writ petition. - HELD THAT: - The court directed the State to file an affidavit-in-opposition within six weeks and permitted the petitioner to file a reply within one week thereafter. Liberty to mention after exchange of affidavits was granted. These directions structure the post-interim timetable for adjudication of the writ petition and for the parties to assist the court in final disposal.

Affidavit-in-opposition to be filed within six weeks; reply within one week thereafter; liberty to mention after exchange of affidavits.

Final Conclusion: Interim protection granted: unconditional stay of recovery for two weeks; continuation of stay until final disposal (or further order) subject to petitioner depositing 10% of the balance tax in dispute within two weeks in addition to amounts already deposited under Section 107(6); directions issued for exchange of affidavits and further proceedings.

Petitioner seeking the return of gold ornaments - appropriate amount to be paid to the Petitioner, the liability of the Bank of Maharashtra - HELD THAT:- We are assured that the rest of the items of the Tax Department are found to be safe and tallied in the bank’s strong room/vault and further, this has been the first incident, we do not wish to pursue this matter any further.

We record that Mr. Sancheti, the learned Senior Advocate for the Bank and Mr. Suresh Kumar, the learned counsel for the Income Tax Department have adopted a most reasonable approach in the matter which requires to be appreciated.

They have not only done their best to protect the interest of the parties to whom they represent, but, as officers of this Court, they have also ensured that no injustice is caused to the Petitioner. Accordingly, we record our appreciation for their role in this matter. But for them, we are not too sure, whether their clients, would have adopted or agreed to adopt such a reasonable course in this matter.

Accordingly, from out of the amount of Rs. 70,00,000/- deposited in this Court, the Petitioner is granted liberty to withdraw an amount of Rs. 60,00,000/-. Petitioner should provide the bank details to the Registry and the Registry should as early as possible and in any event, within a maximum of a week from Petitioner’s applying the bank details transfer this amount into the Petitioner’s bank account.

Petitioner can receive this amount without prejudice to his rights to pursue ordinary remedies, should the Petitioner still have any grievances.

Registry to return balance amount of Rs. 10,00,000/- to the Bank of Maharashtra since, to overcome administrative difficulties, it is the bank which deposited the entire amount of Rs. 70,00,000/- though, our direction was that this amount should be split up equally between the Tax Department and the Bank.

Petition is disposed of in the above terms without any costs order. Still, now that the CBDT and the CMD of the Bank have taken cognizance of this incident, we sincerely expect that they take such cognizance to its logical conclusion so that such incident do not recur and citizens are not forced to run from pillar to post or approach the Courts of law for even securing their just entitlements.

Assessment orders passed in the name of non-existing companies on account of amalgamation order by which these companies were merged with Reliance Industries Limited (RIL) -

Whether the assessment order with regard to amalgamating company should be assessed in the name of amalgamating company or amalgamated company post the amalgamation order ? - HELD THAT:- The facts of the present appellant-assessee before us are similar to the significant facts in the case of Maruti Suzuki India Ltd. [2019 (7) TMI 1449 - SUPREME COURT] on the basis of which the Supreme Court has held that inspite of the fact of the AO being informed of the amalgamating company having ceased to exist as a result of the scheme of amalgamation, if the proceedings are initiated against the non-existing companies, then such proceedings are void ab initio although the amalgamated company participated in the proceedings.

In our view, in the present case also although RIL-amalgamated company participated in the proceedings, the respondent-revenue having knowledge of the amalgamation still passed an order in the name of the amalgamating companies which would make the assessment order dated 27 March 1997 void ab initio. Decided in favour of assessee.

Rejection of application of the petitioner filed vide DTVSV Form-1 - resolving the dispute regarding interest charged under Sections 234A, 234B and 234C - HELD THAT:- Revenue was afforded an opportunity to examine the present petition, as to whether the issue was covered by the aforesaid judgements and complete his instructions. The learned counsel was also directed to seek instructions regarding whether judgements cited by the petitioner have been challenged by the Department before Supreme Court or not.

Today, Revenue states that there is no information available with the Department as to whether any further appeal of the judgement of Kapri International [2022 (8) TMI 805 - DELHI HIGH COURT] has been laid before the Supreme Court. In that view of the matter, the ratio laid down in Kapri International is still good law and binds this Court too. In any case, having examined the facts of the present matter, we are of the considered opinion that the ratio laid down in Kapri International (supra) too would apply.

In view of the ratio laid down in Kapri International Pvt. Ltd [supra] and in Tvl. Sanmac Mootor Finance Ltd. [2024 (11) TMI 86 - MADRAS HIGH COURT] the present petition is allowed, with the directions provided therein being applicable mutatis mutandis to the present petition also. Consequently, Rejection Order/Intimation dated 30.10.2024 is set aside, with directions to the CIT to re-examine/reassess the declaration filed by the petitioner under the DTVSV Scheme and decide on its merits in terms of procedure envisaged under the Act read with its Rules.

Penalty u/s. 272A(1)(d) - failure to comply with notice u/s. 142(1) or 143(2) or failure to comply with the direction issued u/s. 142(2A) - assessee’s case was selected for scrutiny based on the verification of data pertaining to ‘cash deposits during demonetization period - HELD THAT:- The assessee in his reply has stated that he is neither cognizant of law and its intricacies and had submitted the details of bank statements after which the AO passed the assessment order and the penalty order thereafter.

CIT(A) in the quantum appeal has upheld the addition made by the ld. AO for which the assessee submitted that the assessee has not preferred an appeal against the said order.

Assessee from the statement of ld. AR seems to be a small-time fruit vendor selling fruits on the pavements and presumably is unaware of the proceedings but nevertheless made compliance before the lower authorities if not proper compliance. Had the assessee been vigilant about the consequences of such proceedings and had the privilege of engaging counsels to represent his case, he would have as well challenged the addition made by the ld. AO and upheld by the ld. CIT(A) which amounts to in lacs of rupees which, for a small vendor like the assessee is exorbitant.

It is not a case of non-compliance in toto but is merely a case of lack of sufficient compliance.

Thus, as revenue cannot take undue advantage of the inability of the assessee and taking cognizance of the same, we deem it fit to direct the ld. AO to delete the impugned penalty levied in assessee’s case for the abovementioned observations. Appeal filed by the assessee is allowed.

Addition of retrial benefits - apart from pension, retiral benefits include gratuity and commutation of service pension - HELD THAT:- The death-cum-retirement gratuity is exempt from tax u/s. 10(10) of the Act and commutation of pension is exempt u/s. 10(10A) of the Act. Hence, the AO erred in making addition of amounts received under the above heads by the assessee. The AO is directed to exclude aforesaid amount from the addition made in impugned assessment year. In the result ground no. 3 of appeal is allowed pro tanto.

Addition u/s. 56 under the head ‘Income from Other Sources’ -HELD THAT:- No submissions were made in respect of the above said ground of appeal. The ld. AR of the assessee made statement at Bar that he is restricting his submissions only on the issue of retiral benefits of gratuity and commutation of pension. Therefore, ground no. 4 of appeal is dismissed.

Appeal of the assessee is partly allowed.

Disallowance of 25% of travelling expenses - taking into account past history of the expenses and in consonance with the business acquired by the assessee from the foreign parties - HELD THAT:- It is pertinent to note that from the perusal of the records it can be seen that the CIT(A) has disallowed 25% of the confirmed total expenses after taking into account past history of the expenses and in consonance with the business acquired by the assessee from the foreign parties. Therefore, the disallowance out of travelling expenses made by the AO and the 25% confirmed by the CIT(A) is accordingly sustained.

Disallowance u/s 40(a)(ia) - reimbursement of expenses - assessee made TDS in respect of agency charges but being reimbursement has not made any TDS on such parties relying upon various judicial pronouncements & CBDT Circular No.715 dated 08.08.1995 - HELD THAT:- The assessee had availed services of clearing and forwarding agency for clearing of its goods from Customs and had to make payment of agency charges to the C&F Agent. Assessee also made payment of reimbursement of expenses incurred by C&F agency on behalf of the assessee like Freight Charges, Transportation charges, Customs duty etc. on actual basis.

AR rightly relied upon the decision of Consumer Marketing (India) (P.) Ltd [2015 (11) TMI 124 - GUJARAT HIGH COURT]. Therefore, the CIT(A) was not right in disallowing the same.

Appeal of the assessee is partly allowed.

Registration under section 12AB - Approval for donation deduction under section 80G - Charitable purpose of environmental protection and waste management - Public participation in furtherance of charitable objects - Invalidity of cryptic orders lacking cogent reasons - Encouragement of activities serving public interest and ecological balance

Registration under section 12AB - Invalidity of cryptic orders lacking cogent reasons - Charitable purpose of environmental protection and waste management - Registration under section 12AB was directed to be granted - HELD THAT: - The Tribunal found that the CIT(E) rejected the assessee's application for registration by passing cryptic orders without giving cogent reasons. The assessee-society's objects-promoting waste prevention, recycling, waste minimisation, environmental education and public participation to restore ecological balance-were held to be activities serving a charitable purpose in the public interest. The Tribunal noted there was no doubt recorded by the CIT(E) as to the genuineness of the activities and therefore the rejection on the ground that activities were 'commercial' was not sustainable. In view of the stated objects and public-oriented activities, and because the impugned order lacked adequate reasoning, the Tribunal directed the learned CIT(E) to grant registration under section 12AB. [Paras 5, 6]

Application for registration under section 12AB is allowed and the CIT(E) is directed to grant registration.

Approval for donation deduction under section 80G - Charitable purpose of environmental protection and waste management - Invalidity of cryptic orders lacking cogent reasons - Approval under section 80G was directed to be granted - HELD THAT: - The Tribunal, applying the same reasoning as for registration, held that denial of approval under section 80G was based on the same cryptic and inadequately reasoned conclusion of 'commercial' activity by the CIT(E). Given that the society's activities promote public participation in waste management and environmental protection-objectives serving the public interest and ecological balance-and that the CIT(E) did not impugn the genuineness of those activities, the Tribunal found no merit in the denial. Consequently, the Tribunal directed the learned CIT(E) to grant approval under section 80G. [Paras 5, 6]

Application for approval under section 80G is allowed and the CIT(E) is directed to grant approval.

Final Conclusion: The appeals are allowed: the Tribunal set aside the CIT(E)'s orders as cryptic and without cogent reasons, held the society's activities to be charitable and in the public interest, and directed grant of registration under section 12AB and approval under section 80G.

Validity of proceedings u/s 153C - period of limitation - reckoning of six assessment years - HELD THAT:- Hon'ble Supreme Court in the case of ITO Vs. Vikram Sujitkumar Bhatia [2023 (4) TMI 296 - SUPREME COURT] held that six assessment years has to be computed from the assessment year relevant to the financial year in which the bogus documents or assets are received by the ld. AO of the other persons from the ld. AO of the search person.

Therefore, considering the facts of the case in the light of the above decisions, we are inclined to hold that the assessment year 2015-16 is beyond the period of six assessment years which could be reopened u/s 153C of the Act. Accordingly, the assessment order framed u/s 153C of the Act is quashed. Decided in favour of assessee.

Undisclosed commission for providing accommodation entries -Addition on account of commission at the rate of 1% on the total turnover which ought to have been made / reduced by the ld. CIT (A) to 0.10% to 0.15% of the total turnover - HELD THAT:- After perusal of the decision of the co-ordinate Bench in assessee’s own case for A.Y. 2010-11 [2024 (12) TMI 1533 - ITAT KOLKATA] under similar facts has decided the appeal by directing the ld. AO to applying the profit rate of 0.15% as against 1% made by the ld. AO.

We set aside the order of the CIT (A) and direct the ld. AO to make the addition at the rate of 0.15%. The appeal of the assessee is allowed.

Validity of notice issued u/s. 274 r.w.s 271 in mechanical manner Nin specification of clear charge - HELD THAT:- A perusal of notice shows that the same is omnibus notice in a preprinted performa. Though, the AO has tick marked in the notice, however, it is not clearly emanating from the notice as to whether penalty u/s. 271(1)(c) is levied on the charge of ‘concealment of particulars of income’ or ‘furnishing inaccurate particulars of income’ or on both limbs of section 271(1)(c). This makes the notice vague and defective.

Perusal of the assessment order reveals that the AO while recording satisfaction for levy of penalty u/s. 271(1)(c) has failed to mention the charge i.e. whether satisfaction for levy of penalty u/s. 271(1)(c) of the Act is recorded for, ‘concealment of particulars of income’ or ‘furnishing inaccurate particulars’ or ‘concealment of particulars of income and furnishing inaccurate particulars’.

Thus, no charge as specified u/s. 271(1)(c) has been invoked by the AO while recording satisfaction. Penalty is liable to be deleted on the ground of ambiguity in recording of satisfaction.

Ambiguity in mind of the AO regarding charge on which penalty is to be levied u/s. 271(1)(c)of the Act is reflected in notice as well.

AO has not struck off irrelevant matter in the notice issued in pre printed performa.

As decided in the case of Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] where omnibus notice has been issued and irrelevant matter in the notice has not been struck off, the notices is defective. No penalty can be levied on such defective notice. Thus, non striking off irrelevant matter by the AO has rendered the notice defective, hence, penalty proceedings are vitiated. Decided in favour of assessee.

Revision u/s 263 - distinction between lack of inquiry and inadequate inquiry - disallowance of bogus losses on sale of steel scarp - HELD THAT:- This is not a case where there was an omission on the part of the AO to examine the aspect of disallowance of bogus losses on sale of steel scarp. AO had put specific questions before the assessee during the course of assessment proceedings and had taken the assessee’s reply on record.

AO had also discussed this aspect as part of the assessment order and thereafter took a legally plausible view, taking into consideration assessee’s set of facts.

This is not a case where no enquiry has been made by the Assessing Officer during the course of assessment proceedings. It is also not the case of the PCIT that the AO failed to apply his mind to the issues on hand or he had omitted to make enquiries altogether or had taken a view which was not legally plausible in the instant facts.

As held by various Courts, PCIT cannot, in 263 proceedings, set aside an assessment order merely because he has different opinion in the matter. In our view, Section 263 of the Act does not visualise a case of substitution of the judgment of the PCIT for that of the AO who passed the order unless the decision is held to be wholly erroneous.

PCIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-visit the entire assessment and determine the income himself at a higher figure. Appeal of the assessee is allowed.

Addition u/s 14A r.w.r. 8D - AR submitted that the investment being specific and strategic there was no question of considering the same would attract the provisions of Rule 8D - HELD THAT:- Contention of the Ld. AR that the investments being specific, strategic, did not receive any dividend as well and assessee only invested Rs. 24.5 crores out of its own interest free funds (Rs. 350 crores), these aspect though stated, has not been demonstrated clearly by the assessee before the AO as well as before the CIT(A).

The contention of the DR that opening and closing investments was to the tune of Rs. 10,20,98,000/- and Rs. 10,29,96,000/- respectively does not indicate which component is interest bearing fund utilized for investment and what was the specific and strategic component for investing the same.

All these aspects needs verification, hence this issue is remanded back to the file of the AO. Besides this whether any expenditure relating to administrative expenditure incurred or not by the assessee also needs verification. Thus, the issue is remanded back to the file of the AO for proper verification.

Disallowance u/s 43B - AR submitted that the amount represent short payment out of amount of interest provided in respect of DBT Soft Loan 2 is accepted by the assessee while the residual amount represents amount of disallowances - HELD THAT:- AR submitted that in the return of income it is already disallowed. The auditor has certified net amount of payment and the remaining amount was to be paid, the same was brought forward from earlier years and this will amount to double disallowance. This fact and contentions of the assessee needs verification as that has not been dealt by the AO or by the CIT(A). Hence, the said issue is remanded back to the file of the Assessing Officer for proper verification and adjudication. The assessee be given opportunity of hearing by following principles of natural justice. Ground No. 3 is partly allowed for statistical purpose.

Disallowing claim u/s.35 - expenditure is not incurred by the assessee company - the relevant expenditure recorded by the assessee company, having been netted by merger entries of excess of assets over liabilities representing reserves and surplus of erstwhile - HELD THAT:- Since the assessee is filing reconciliation at this juncture and the contentions taken before us needs verification, we remand back this issue to the file of the Assessing Officer for proper verification of reconciliation and the submissions of the assessee as per the evidence and adjudicate the same as per the Income Tax Act. Assessee be given opportunity of hearing.

Excess deduction u/s.35(2AB) considered @ 200% of the amount of expenditure on clinical trials etc. laid out for the in-house R&D -amount was disallowed only due to the difference in the 3CL and this issue is decided in favour of the assessee in assessee’s own case - HELD THAT:- Since this issue was remanded back in A.Y. 2011-12, but allowed in A.Y. 2013-14 by the Tribunal, whether DSIR has given the approval and if so whether other conditions as per requirement of Section 35(2AB) was fulfilled by the assessee, needs to be verified thoroughly by the AO. This issue is remanded back to the file of the Assessing Officer for proper verification and adjudication and if satisfied as per Section 35(2AB) be allowed. Assessee be given opportunity of hearing. Ground No. 5 is partly allowed for statistical purpose.

Addition being the signing amount of Grant received, and been treated by the assessee company as liability, being not spent during the year - HELD THAT:- It is pertinent to note that it is signing amount for grant received and the contention of the Ld. AR that unless and until project is fully executed and delivered, the assessee is a custodian of that grant otherwise it has to be remitted back if the project is not executed which is a liability. This appears to be justifiable. Hence, Ground No. 6 is allowed.

Disallowing interest expenses considering the same to be of capitalized on account Tangible Assets Capital WIP of the assessee company - HELD THAT:- CIT(A) has categorically mentioned that the assessee did not furnish any evidence to prove that any amount of interest was capitalized to CWIP with supporting evidence. Though the Ld. AR submitted that this issue was allowed in A.Y. 2011-12, but the supporting documents was not seen by the CIT(A) in this year, therefore, we are remanding back this issue to the file of the Assessing Officer for verification and adjudication as per the evidence and decide the same accordingly. The assessee be given opportunity of hearing. Ground No. 7 is partly allowed for statistical purpose.

Disallowing exchange fluctuation debit considering the same to be of capitalized on account Capital WIP/Assets of the assessee company - HELD THAT:- Section 43A provides that any increase or decrease in liability due to foreign exchange fluctuation in respect of the acquisition of a capital asset is to be adjusted to the actual cost of the asset and depreciation shall be allowed from the year in which the asset is put to use, subject to actual settlement of the liability. Since the expenditure is of capital nature, it requires verification as to whether it pertains to Work-in-Progress (WIP) or an asset that has been put to use. Accordingly, the matter is restored to the file of the Assessing Officer (AO) for verification and adjudication in accordance with the provisions of Section 43A. The AO shall examine whether the fluctuation loss pertains to an asset that has been put to use, in which case depreciation shall be allowed from the date of put to use, or if it remains as WIP, in which case no depreciation shall be admissible. The assessee be given an opportunity of hearing before the AO. Consequently, Ground No. 8 is partly allowed for statistical purposes.

Foreign commission expenditure treated as ineligible expenditure under the provisions of the Section 40 when the assessee company has duly brought out that the said remittances did not attract TDS/WHT provisions of Sec. 195 - HELD THAT:- The finding of the CIT(A) that the assessee failed to adduce necessary evidences appears to be not correct as the assessee has dealt with these non-resident and rendered service outside India in A.Y. 2013-14, there was no distinguishing facts established by the Revenue that the services was rendered in India by the non-residents. Hence, following the decision of the Tribunal in assessee’s own case for A.Y. 2013-14, this issue is allowed in favour of the assessee.

Addition on account of Sec.14A addition made in the assessment to the book profit u/s.115JB deleted as no such addition can be made as relied upon the decision of Special Bench of Tribunal in case of Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI]

Rejecting the application for registration u/s. 12A(1)(ac)(iii) - Section 13(1)(b) applicability - whether the Trust's objects were charitable in nature and open to the general public or confined to a specific community? - HELD THAT:- Hon’ble Apex Court in the case of Ahmedabad Rana Caste Association [1971 (9) TMI 8 - SUPREME COURT] categorically observed that it is sufficient if intention to benefit a section of public as distinguished from a specified individual and that will not go beyond the purview of public connected together and society at large.

The reliance on the decision of Tribunal in case of Brahmakshatriya Kanji Damji Hindu Sarvajanik Dharamshala Palitana [2024 (12) TMI 1532 - ITAT AHMEDABAD] has also mentioned the decision of CIT vs. Dawoodi Bohara Jamat which was relied upon by the DR and has categorically mentioned the jurisdictional High Court in the case of Jamiatul Bannat Tankaria [2024 (10) TMI 712 - GUJARAT HIGH COURT] which has given interpretation of Section 13(1)(b) while issuing registration u/s 12A of the Act.

Thus, the decision relied by the DR actually supports the applicant Trust’s case.

The Hon’ble Supreme Court in the case of Shastri Yagnapurush Dasji vs. Muldas Bhudardas Vaishya [1966 (1) TMI 78 - SUPREME COURT] has also reiterated the same and thus the CIT (Exemption) should have taken into account these basic principles. The present applicant Trust has categorically mentioned the beneficiaries of the society at large in cl. 7 of the objects. Appeal filed by the assessee is partly allowed for statistical purpose.

Addition u/s 69A - unexplained deposit - Addition invoking the provisions of Section 115BBE - HELD THAT:- It is pertinent to note that the assessee is staying in USA alongwith her daughter who is a widow. The assessee received pension as she retired from Town Planning Valuation Department.

Assessee being a patient with heart problem keeps the cash in hand for the medical emergencies and the cash in hand has been explained by the assessee through her pension details as well as the consideration of the property/flat sold at a particular period.

Thus, the assessee has in detail explained the cash deposits which was totally ignored by the AO as well as by the CIT(A). Hence, appeal of the assessee is allowed.

Deduction in respect of foreign taxes paid u/s 37(1) - allowance of foreign tax credit to the assessee over and above the one eligible u/s 90/91 of act - Section 40(a)(ii) applicability - HELD THAT:- The law postulates that when a taxpayer earns overseas income and is exposed to taxes in foreign tax jurisdiction, then it is liable to get credit for such taxes paid in overseas jurisdiction while submitting his final tax liabilities in the domestic tax jurisdictions. The idea is to avoid double taxation of the same income. Section 90 and 91 of the act prescribe in exquisite details as to how and how much of the taxes paid in foreign tax jurisdiction would be available to the taxpayers. It is noteworthy that the quantum of deduction available is defined in the impugned sections. There is nothing in the act that provides that the excess amounts of taxes paid in foreign tax jurisdiction and which could not be claimed under Section 90 and 91, would be available for deduction under any other statute of the Income tax act 1961.

Prohibition u/s 40(a)(ii) applies to these foreign taxes or not? -The argument propounded by assessee are not found to be satisfactory for the very reason that section 2 of the act begins with a clause “in this act, unless the context otherwise requires”, and which goes on to indicate that the definition is to be understood in the context of the situation. The clear, unambiguous legislative intent appearing from insertion of provisions of 40(a)(ii) is that any sum paid by a tax payer on account of any amount of money, be it be any rate or tax levied on the profits or gains of any business or profession would not be allowed as a deduction.

As undisputed fact of the case that the amounts of foreign taxes claimed as the deduction by the assessee are in respect of taxed levied on its component of income earned in foreign tax jurisdiction and hence the same cannot be allowed under the provisions of section 40(a)(ii). It is pertinent to note that explanation 1 to section 40(a)(ii) excludes amounts of monies eligible for relief u/s 90 and 91 of the act. Now what cannot be claimed u/s 90 and 91 does not becomes automatically allowable u/s 40(a)(ii).

The scheme of allowance mentioned u/s 90 and 91 of the act is a part of a sovereign agreement between the Government of India and other governments, arrived at after detailed and prolonged discussions/deliberations. The taxing rights of each contracting nations are deliberated at length before a DTAA is signed which forms the basis of procedure of deduction prescribed u/s 90/91 of the act.

Argument propounded by assessee regarding eligibility of its claim u/s 37(1) thus gets squarely hit by the mischief of section 40(a)(ii) and does not come to its rescue given a clear prohibition. It is therefore seen that the position of the statute on the subject of allowance of claim of taxes paid in foreign tax jurisdiction u/s 40(a)(ii) is clear in as much as it is categorically provided that no allowance can be made. As observed earlier in the order, Hon’ble Apex Court has ruled and also reiterated in several of its decisions that when the provisions of a statute are unambiguously clear no different interpretation is to be adopted.

Hon'ble ITAT, Ahmedabad in DCIT Vs. Elite Core Technologies Pvt. Ltd. [2017 (4) TMI 394 - ITAT AHMEDABAD] has exhaustively discussed the above issue of allowability of foreign tax credit u/s 37(1) in great detail in its impugned order before reaching at its conclusion that the same is not permissible.

No case is made out in favour of the assessee to allow its claim of foreign taxes u/s 37(1) of the act. Thus, we are of the view that the order of the Ld. AO and its confirmation by the Ld. First Appellate Authority is based upon the correct understanding and appreciation of facts of the case, inter-alia, including statutory provisions and judicial pronouncements. The Order of the Ld. CIT(A) is confirmed and all the grounds of appeal raised by the assessee are dismissed.

Anti-Dumping Duty - sunset review - continuation of anti-dumping duty - Office Memorandum setting aside DGTR recommendation - jurisdiction of CESTAT over an Office Memorandum - waiver of claim by domestic industry - mootness of dispute

Jurisdiction of CESTAT over an Office Memorandum - waiver of claim by domestic industry - mootness of dispute - Whether the challenge to CESTAT's orders setting aside the Central Government's Office Memorandums continuing antidumping duty is maintainable in the present cases - HELD THAT: - The petitions concern final orders of CESTAT setting aside Office Memorandums by which the Central Government had declined to accept DGTR's recommendation to continue antidumping duties following sunset reviews. Subsequent to CESTAT's orders, the domestic industries informed the Government and indicated that they no longer pressed their claims based on the DGTR recommendations. The Supreme Court in a related matter recorded that domestic industries had given up their rights and dismissed the special leave petition as infructuous. Given the respondents' clear stand that they do not press for imposition of the ADDs, the question whether CESTAT has jurisdiction to set aside an Office Memorandum has become academic in these cases. On this factual foundation the Court accepted the respondents' stand and held that the petitions are rendered infructuous and need not be decided on the merits. [Paras 12, 13]

Petitions disposed of as infructuous; the jurisdictional question is rendered moot by the domestic industry's waiver and need not be adjudicated in these proceedings.

Continuation of anti-dumping duty - Office Memorandum setting aside DGTR recommendation - sunset review - Disposition of interim relief and preservation of substantive legal questions for future adjudication - HELD THAT: - Although these petitions are disposed of as infructuous on account of the domestic industry's withdrawal of claims, the Court expressly refrained from deciding the substantive legal issues arising from DGTR recommendations, sunset reviews, and the Government's Office Memorandums. Those legal issues are left open for consideration in an appropriate case where the questions are live. Meanwhile, any interim orders granted in these matters are vacated. [Paras 14, 15]

Substantive legal issues left open for adjudication in an appropriate case; interim orders, if any, are vacated.

Final Conclusion: The writ petitions are disposed of as having become infructuous in view of the domestic industries' waiver of claims based on the DGTR recommendations; the substantive legal questions regarding continuation of antidumping duties and the consequences of Office Memorandums are left open for adjudication in an appropriate future case and interim orders stand vacated.

"taken into use" - duty drawback - manufactured, processed or on which any operation has been carried out in India - proviso to Rule 3(1) of the Duty Drawback Rules - configuration of exported goods - quashing of administrative clarifications

"taken into use" - proviso to Rule 3(1) of the Duty Drawback Rules - configuration of exported goods - Whether unlocking/activation of mobile phones amounts to the goods having been "taken into use" for the purpose of the proviso to Rule 3(1) of the Duty Drawback Rules - HELD THAT: - The Court analysed the expression "taken into use" in the context of Section 75 and the Duty Drawback Rules, noting that its meaning varies with the nature of the product and the statutory scheme. Mobile phones have multifarious functionalities; however, the unlocking/activation procedures adopted by the petitioners (SIM insertion and brief call or air-activation) merely configure the phones to render them usable in the destination territory without employing their broader functionalities or causing depreciation. Prior decisions relied on by Revenue involved operation or demonstration that diminished value or otherwise utilised the product for purposes inconsistent with exportation; those decisions were not pari materia and do not control the interpretation under Section 75/Rule 3(1). Given that unlocking/activation is a onetime configuration making the product marketable abroad and does not amount to use that diminishes the product or places it outside the statutory ambit for drawback, the Court held such unlocking/activation does not constitute "taken into use" under the proviso to Rule 3(1). [Paras 72, 73, 74, 75, 76]

Unlocking/activation of mobile phones, including by airactivation, is configuration to render the goods usable in the destination market and does not amount to goods having been "taken into use" under the proviso to Rule 3(1) of the Duty Drawback Rules.

Quashing of administrative clarifications - duty drawback - Validity of CBIC clarifications dated 25.09.2020 and 14.12.2021 which declared unlocked/activated mobile phones ineligible for drawback - HELD THAT: - The Court found that the Clarifications construed the proviso to Rule 3(1) in a manner inconsistent with the statutory scheme under Section 75 and the Rules, by treating unlocking/activation as "taken into use." Because the Clarifications went beyond permissible interpretation and were contrary to the Court's construction that unlocking is merely configuration (not use depriving drawback), the Clarifications could not be sustained. Consequently, administrative directions that denied drawback on that basis were unlawful. [Paras 78, 79]

The CBIC Clarifications dated 25.09.2020 and 14.12.2021 are quashed.

Duty drawback - quashing of administrative clarifications - Consequences of quashing: validity of impugned show cause notices and OrdersinOriginal and directions as to further processing and interest - HELD THAT: - Having held that unlocking/activation does not amount to "taken into use" and quashed the Clarifications, the Court also quashed the challenged SCNs and OrdersinOriginal insofar as they relied on those Clarifications. The Court did not adjudicate the individual entitlement of each petitioner on merits; instead it directed the Customs Department to process the individual claims for drawback in accordance with law. The Court provided a timeline: if drawbacks are processed and granted within three months, no interest under Section 75A will be payable; if not processed within three months, interest shall be payable thereafter in accordance with law. The Court declined to award interest for the prior period because of the prior legal ambiguity. [Paras 80, 81, 82, 83]

Impugned SCNs and OrdersinOriginal that denied drawback based on the Clarifications are quashed; Customs must process individual drawback claims in accordance with law and the Court specified the timeline and consequences regarding interest.

Final Conclusion: The writ petitions are allowed: the Court holds that unlocking/activation of mobile phones to render them usable in destination markets does not amount to goods having been "taken into use" under the proviso to Rule 3(1) of the Duty Drawback Rules; the CBIC clarifications denying drawback on that basis are quashed; orders and showcause notices founded on those clarifications are set aside and the Customs Department is directed to process the individual drawback claims in accordance with law, with the Court prescribing a threemonth timeline and consequential position on interest.

Doctrine of forum convinens - forum shopping - jurisdiction of High Court to entertain the petition filed by the petitioners seeking to quash the order passed by the Committee of the ICICI Bank - Classification of Petitioner’s account as fraud - HELD THAT:- Admittedly, the Petitioners and the branch of the Respondent No. 1-Bank transacting with the Petitioners is in New-Delhi. The OTS Proposals are also being exchanged with the New-Delhi Branch of the ICICI Bank. All the correspondence and the communication between the parties are exchanged with the New-Delhi Branch. Hence, the Petitioners rightly approached the Delhi High Court by way of its earlier W. P. No. 11886 of 2021. The integral part of the cause of action even going by the Petitioners own averment in paragraph 29 of its Petition before the Delhi High Court arose within the territorial limits of Delhi High Court. Thus, applying the settled legal position to the facts in the present matter, it is clear that the cause of action must be addressed to the Delhi High Court.

The Petitioners have assailed the act of the Committee of the Bank in classifying its accounts as ‘fraud’, even though the Master Circular is not assailed, perhaps since its validity was already tested before the Supreme Court. Nevertheless, the integral part of the cause of action is similar in both the Petitions. Even the averment in the present Petition regarding cause of action relating to the corporate office of the Respondents being within the territorial jurisdiction of this Court is identical to the averment made in the Petition before the Delhi High Court. It is failed to see as to how the Petitioners could have averred the same pleading in both these Petitions based on the corporate office of the Respondents, to selectively choose a forum of their choice.

Invoking the jurisdiction of this Court in the second round of litigation involving the same issue is nothing but Forum-Shopping on the part of the Petitioners. The forum convinens is undoubtedly the Delhi High Court and not this Court.

Conclusion - The petitioners engaged in forum shopping and should have filed the petition before the Delhi High Court.

Petition disposed off.

Dismissal of section 9 application - failure to give reply to the notice issued under Section 8 of the Code - whether the CD can raise its defence at the stage of Section 9 application without giving reply to the notice issued under Section 8 of the Code? - HELD THAT:- As per the scheme of the Code and the Rules, for the purpose of filing an application under Section 9, it is an obligation on the part of the OC that on the occurrence of the default, he should to deliver a demand notice of unpaid operational debt, copy of the invoice demanding payment of amount involved, following rule 5 and in form 3 of the Rules. The CD is given 10 days’ time to react to the notice or copy of the invoice, for raising defence qua existing of a dispute between the parties before issuance of notice under Section 8 or that the CD had already paid the operational debts.

The argument raised by the Appellant that since there was no reply to the notice issued under Section 8(1) of the Code, therefore, the CD could not have contested the application filed under Section 9 by filing a reply thereto is totally misplaced because Section 8 travels in a different direction then an application filed under Section 9. Section 8 lays an obligation upon the OC to serve the notice if he had to maintain the application under Section 9 because the language employed in Section 9 of the Code is that the OC had to wait for 10 days from the date of delivery of notice or the invoice, prescribed under Section 8 (1) of the Code and if he does not receive payment from the CD or any notice of dispute as prescribed under Section 8(2) then only the OC can file an application otherwise the application is not maintainable.

Conclusion - Notice under Section 8 is a sine qua non for maintaining an application under Section 9 but if the notice under Section 8 is not replied by the CD for some reason or other it does not debar the CD to contest the application filed under Section 9 of the Code by raising its defence.

Appeal dismissed.

Ownership of machinery in the context of insolvency proceedings - It is alleged that the machinery was given on lease to the CD and since it was only a transfer of interest, therefore, it does not amount to transfer of ownership - HELD THAT:- It is pertinent to mention that CD had already executed hypothecation cum loan agreement on 06.06.2014 with the FC whereby the machinery alongwith other machines were hypothecated. The FC had created charge over machinery much prior to the hypothecation in favour of IndusInd Bank by the Appellant which is otherwise not permissible much less without making intimation or taking approval from the FC because such hypothecation was clearly bad in law. It is also pertinent to note that application under Section 7 for initiation of CIRP had been filed by FC on 04.02.2019 and after its filing, the Appellant designedly included a journal entry dated 31.03.2020 on the basis of which the machinery was taken out from the books of the CD to avoid the asset going to the hands of the creditors of the CD and as soon as the RP came to know about it, the application bearing I.A No. 787 of 2023 was filed.

The basic argument of the Appellant is that the machinery was leased out to the CD has to be established by way of a lease deed because it is a transaction between two companies and the lease amount has also to be mentioned but neither the lease deed nor the amount of lease has seen the light of the day rather the CD had hypothecated the machinery with the FC while securing the loan in terms of the loan agreement dated 06.06.2014 and in terms of clause 5(a)to(c) of the said hypothecation agreement, CD has created charge in respect of the machinery and a declaration has been made by the CD that the machinery has already been acquired and shall form part of prompters contribution to the loan sanctioned by FC.

The last but not the least, the CD had admittedly claimed depreciation on the machinery as an owner because a lessee cannot claim depreciation.

Conclusion - i) The machinery rightfully belonged to the CD and should be included in the resolution plan. ii) The depreciation benefits under income tax law are applicable to asset owners, not lessees.

There are no error in the impugned order which calls for any interference by this Court in this appeal. Hence, both the appeals are found to be devoid of merit and the same are hereby dismissed.

Short payment of service tax - demand confirmed without classifying the category of the taxable service - demand of interest on deposit made without interest.

Short payment of service tax - HELD THAT:- The issue involved in the matter is in respect of the demand of Rs 2,17,314/- is not in respect of the services provided by the appellant to M/s Hindalco, but is in respect of the services provided by the appellant else where - the demand is not even in respect of the consideration received from M/s Hindalco, Renukoot, as the appellant has paid the service tax due on the said consideration. Appellant had been issuing the invoices to M/s Hindalco for the services provided and have been receiving the gross consideration along with the service tax due against the provision of the said services. They also had been providing the services else where on which service tax was not paid. This amount has been found from the comparison of the figures in the profit and loss account of the appellant and the amount of consideration received by the appellant from M/s Hinndalco.

As the return for the period October 2009 to March 2010 would have been due only in the month of April 2010, the Show Cause Notice issued for the period 2009-10 on 16.03.2011 is well within the normal period of limitation and cannot be disputed on any account.

Demand of interest for the period 2008-09 - appellant has deposited the tax for the period on 12.09.2009 - HELD THAT:- From the appellant has deposited the after receiving the same from the M/s Hindalco as per Voucher No 960611770, 222SKS-UCOT-02-09-2009 dated 02.09.2009. The service tax has been deposited as soon as the same was received by the appellant. At the relevant time the service tax was payable on the receipt basis and not the accrual basis. Thus there are no delay in the payment of this amount to the exchequer. Hence the proceedings demanding interest in respect of this amount and consequent penalties imposed under section 76 of the Finance Act, 1994 cannot be justified. Thus the demand of interest made in respect of this amount along with the penalty imposed set aside.

Conclusion - The appellant has clearly suppressed the value of the gross consideration received. ii) Demand of Service Tax to the tune of Rs 2,17, 314/- along with interest (Section 75) and penalties (Section 78) imposed is upheld. ii) Demand of interest on the amount of Rs 4,17,179/- deposited by the appellant on 12.09.2009 is set aside along with the penalties imposed under Section 76.

Appeal allowed in part.

Refund of CENVAT credit arising from the balance of Education Cess and Secondary & Higher Education Cess, as per the revised ST-3 return for the period of June-September 2017 - sub-sections (3) and (9) of Section 142 of the CGST Act, 2017, read with Section 11B of the Central Excise Act, 1944 - main ground on which the refund application of the appellants was held as not entertainable in the impugned order is, that there exists no provision under Rule 5 of the CCR, for cash refund of excess CENVAT credit and therefore the refund in terms of proviso (c) to Section 11B(2) ibid, is not permissible in the case of the appellants.

HELD THAT:- The provisions of Sections 142(3) and 142(9)(b) of the CGST Act, is a transitional arrangement wherein it has been specifically provided that such provisions apply as a non-obstanate clause whereby such provisions will have overriding effect, if anything to the contrary is contained under the provisions of existing law i.e., Central Excise Act, 1944, except for the provisions of sub-section (2) of section 11B ibid. Thus, all the conditions of the requirements of Section 11B ibid as it remained under the existing law, other than those relating to Unjust Enrichment clause contained in Section 11B(2) ibid would apply, only if they are not contradictory to the provisions of Section 142(9)(b) of the CGST Act, 2017, in dealing with refund of ‘CENVAT credit’. It is also on record, that there is no dispute with respect to fulfillment of unjust enrichment angle in the case of the present refund, as the authorities below have not raised any objection with respect to these. Further, the appellants have also submitted that the amount claimed as refund has not been passed to any other person and the amount of Rs.25,52,385/- reversed has been shown in their books of accounts and the return filed with the department.

The proviso (c) to Section 11B(2) ibid, cannot be read to state that refund of such excess CENVAT credit has not been provided under Rule 5 of the CCR, as the entire arrangement of refund of excess CENVAT credit is arising as a transitional arrangement by moving from Excise duty/Service Tax regime to GST regime.

There are merit in the argument of the learned Advocate for the appellants that they are eligible for refund of duty in cash under Section 11B(2)(d) ibid, inasmuch as the phrase ‘duty of excise’ used in Section 11B(2)(d) ibid refers to duties of excise leviable under Section 3 of the Central Excise Act, 1944 and it also includes CENVAT credit, which is nothing but such duty of excise paid on inputs or service tax paid on input services, which have been allowed for taking credit in terms of Rule 3 of the CCR. In view of the above discussions, the impugned order is not legally sustainable and the appellants are eligible for refund of excess CENVAT credit paid by them, and specifically allowed to be refunded in terms of Section 142(9)(b) of the CGST Act, 2017.

When the Central Excise Act, 1944 amongst other laws relating to old tax regime was repealed by Section 174 of the CGST Act, 2017 and that the CCR is also being superseded vide Notification No.20/2017-C.E. (N.T.) dated 30.06.2017, by the Central Government for smooth implementation of transfer to GST regime in indirect taxation, the provisions of Section 142 of the CGST Act, 2017 are sufficient to provide for the tax administration for sanction of cash refund in circumstances stated therein, and there is no need and it is not legally feasible to make any specific provision in CENVAT statute itself, for enabling cash refund of excess CENVAT credit relating to earlier regime while moving to the new GST regime.

The Co-ordinate Bench of this Tribunal in DY. GEN. MANAGER (FINANCE & EXCISE) BHARAT HEAVY ELECTRICALS LTD. VERSUS COMMISSIONER, CGST & CE, KANPUR. [2022 (4) TMI 1637 - CESTAT ALLAHABAD], have held that rejection of refund of accumulated balance amount of credit on education cess, secondary and higher education cess and Krishi Kalian cess by original authority and upheld by the Commissioner (Appeals-Thane) cannot be legally sustained and set aside the impugned order of rejecting the appeal filed by the appellants in that case.

Conclusion - There are no merits in the impugned order passed by the learned Commissioner (Appeals) to the extent it has rejected the refund of excess CENVAT credit, which is contrary to the legal provisions of Section 142(3) and Section 142(9)(b) of the CGST Act, 2017 and thus, it does not stand the scrutiny of law. Therefore, by setting aside the impugned order dated 18.11.2020, the appeal is allowed in favour of the appellants, with consequential relief, with respect to refund of excess CENVAT credit of Rs.25,52,385/- payable to the appellants.

Appeal allowed.

Classification of service - Manpower Recruitment Agency service or not - supplying labor and loading/unloading services to a company - Scope of SCN.

Classification of service - HELD THAT:- The appellant is only supplying the labour on daily basis and also for loading & unloading to Markfed but he does not fall under the definition of Manpower Recruitment Agency as provided in Section 65(68) of the Finance Act, 1994 and therefore not liable to pay any service tax on the said charges.

Scope of SCN - HELD THAT:- The impugned order is beyond the show cause notice and the Order-in-Original because in the show cause notice as well as in the Order-in-Original it has not been stated that the appellant has recovered service tax from the Markfed and not deposited the same to the Government Exchequer in terms of the provisions in Section 73(A) of the Act. This finding of the Ld. Commissioner (Appeals) is not sustainable in law as the same is beyond the show cause notice and the Order-In-Original and further alleged services for loading and unloading Taucks/LCV are not covered under manpower recruitment or supply agency as provided in Section 65(68) of the Finance Act, 1994.

Conclusion - i) The demand for service tax was not justified as the appellant's services did not fall under the category of a Manpower Recruitment Agency. ii) The allegations made in the impugned order went beyond the scope of the original documents and were not supported by the evidence.

The impugned order is not sustainable in law - Appeal allowed.

Summary order. Delay condoned; impugned order dated 05-08-2024 of the Customs, Excise and Service Tax Appellate Tribunal, Allahabad, affirmed; Civil Appeal dismissed and pending applications disposed of.

CENVAT Credit - input service - advertisement services, tour operator services used for consignment agents and installation/dismantling of machinery at Haridwar Unit of the appellant - Tour Operator Service - duty paying invoices - invoices not in the name of the assessee - extended period of limitation - penalty.

Services in terms of the inclusive part of the definition of “input service” under Rule 2(l) - HELD THAT:- The appellant was manufacturing at their Bhiwadi Unit LED TV, Condenser Coils, Evaporatire Coils and Air Conditioners for Railways only whereas CENVAT Credit of Rs.73,56,722/- was availed in respect of service tax paid for advertising of the air conditioners meant for domestic purpose, which were manufactured at another unit of the appellant. That CENVAT Credit of service tax paid on advertisement service can be availed only in terms of Rule 2(l) of CCR - There is no co-relation of the input services received and consumed in the unit at Bhiwadi. The appellant failed to discharge the burden that the input service taken and utilised was related to manufacture, clearance and sale of the final products manufactured by them - The appellant is not entitled to the CENVAT Credit on account of advertisement services relating to the Air Conditioners for domestic purpose which were manufactured at another unit of the appellant.

Tour Operator Service - Input services or not - consignment agents were carrying out the function of sales promotion for the appellant as they were entrusted with the responsibility of interacting with the buyers, arranging sale of the goods to the buyers and also for pitching further sales to buyers - HELD THAT:- These services do not fall within the definition of “input service” as it has no relation to manufacture of their finished goods manufactured by the Bhiwadi unit in as much as these services have been utilised at their other unit at Haridwar. Moreover, as noted by the Adjudicating Authority, the services of execution of contract, construction services and service of foundation or making of structure for support of capital goods as well as ‘tour operator service‘ have been mentioned under the exclusion clause of the definition of “input service” definition. Hence, the appellant is not entitled to avail the CENVAT Credit on the said amount.

Credit of service tax taken in respect of invoices, which are not in the name of the assessee - HELD THAT:- To be a valid document in terms of Rule 9(2), it is necessary that the document contains all particulars as mentioned therein to avail the credit. The name of the consignee or service receiver on the invoice is the basic requirement for availing the CENVAT Credit. Considering the facts of the present case, it is undisputed that the invoices were not in the name of the appellant and therefore, cannot be said to be valid documents as per Rule 9(2). The appellant was, therefore, not eligible to avail the CENVAT Credit on the basis of the invoices which were not in their name.

Extended period of limitation - penalty - appellant had already reversed the credit before the issuance of the show cause notice - HELD THAT:- The appellant has wrongly availed and utilised the credit amounting to Rs.80,95,227/- on in-eligible input services by suppressing material facts with intent to evade payment of duty and have also contravened the provisions of Rule 2 and 3 of CCR, hence the said amount is recoverable and the appellant has rightly debited the said wrongly availed credit which has to be approspriated to the Government Account. Under the circumstances, the appellant is also liable to penal action under the provisions of Rule 15(2) of CCR read with section 11 AC (1)(c)of the Act.

Conclusion - i) The appellant is not entitled to the CENVAT Credit on account of advertisement services relating to the Air Conditioners for domestic purpose which were manufactured at another unit of the appellant. ii) The services of execution of contract, construction services and service of foundation or making of structure for support of capital goods as well as ‘tour operator service‘ have been mentioned under the exclusion clause of the definition of “input service” definition. Hence, the appellant is not entitled to avail the CENVAT Credit on the said amount. iii) The invoices were not in the name of the appellant and therefore, cannot be said to be valid documents as per Rule 9(2). The appellant was, therefore, not eligible to avail the CENVAT Credit on the basis of the invoices which were not in their name. iv) Extended period of limitation and penalties also invoked.

There are no infirmity in the impugned order and the same is hereby affirmed. The appeal is, accordingly dismissed.

Acceptance of bid and subsequently encashing the bank guarantee - typographical error - valid agreement or not - Section 20 of the Indian Contract Act, 1872 - whether BRO was justified in accepting the bid of Rs.1,569, and on the failure of the Appellant to execute the agreement asking for forfeiture vide encashment of bank guarantee of Rs.15,04,64,000? - HELD THAT:- A mistake may be unilateral or mutual, but it is always unintentional. If it is intentional, it ceases to be a mistake. Mistakes or errors, though avoidable, are committed inadvertently. They have varied consequences in law. As per Section 20 of the Indian Contract Act, 1872 whereby both parties to an agreement are under a mistake as to matter of fact essential to an agreement, the agreement is void. The explanation to Section 20 says that an erroneous opinion as to the value of the thing which forms the subject matter of an agreement is not deemed to be a mistake as a matter of fact. This will not be a case covered by Section 20 of the Contract Act. However, this is not the first time that this question has arisen either before this Court or Courts outside of India.

In West Bengal State Electricity Board [2001 (1) TMI 921 - SUPREME COURT], the private party, the bidder did not succeed for several reasons, including the factum that the error was not obvious and self-evident. Further, the correction of such mistakes after one and a half months after the opening of the bids would have violated the express clauses relating to the computation of the bid amount. Thus, waiver of the rule or conditions in favour of the one bidder would have created unjustifiable doubts in the minds of others impairing the rule of transparency and fairness and providing room for manipulation for awarding contracts.

The Appellant was at fault and had made the mistake, of having failed to add the required zeros in the financial bid. The plea of a system glitch should not be accepted, as others had successfully uploaded their bids without a problem - BRO justified encashing the bank guarantee by citing delays caused by issuing a second notice inviting bids. This claim is baseless, as BRO was aware of the Rs.1,569/- error. Instead of declaring the bid non est due to the clear mistake, BRO asked the appellant to justify the bid, cancelled the notice, declared the Appellant a defaulter, invoked the bank guarantee, and issued a fresh notice inviting bids.

BRO’s claim that the delay was entirely due to the Appellant’s mistake is flawed, ignoring BRO’s own lapses. Mistakes, including by authorities, should be resolved through corrective steps. A practical approach could have avoided the delay, which was caused by BRO’s refusal to acknowledge the Appellant’s genuine error and the unwarranted cancellation of the bid - the Appellant is directed to pay Rs.1 crore to BRO, as a consequence of their error. Upon receiving this payment, BRO shall return the Appellant’s original bank guarantee or demand draft of Rs.15.04 crores within one week.

Conclusion - M/s ABCI was at fault for the mistake but criticized BRO for not acknowledging the error promptly. The BRO's refusal to acknowledge the mistake and its subsequent actions caused unnecessary delays in the project.

Appeal allowed.

Liquidated damages for delay in delivery of the plant and machinery - Section 74 of the Indian Contract Act, 1872 - HELD THAT:- The High Court rightly rejected the appellant's contention that the claim for damages of Rs.107.54 has been concluded against the respondent. The High Court rightly observed that if that were so, this Court would not have confirmed the order of remand to the Arbitral Tribunal even on the said issue.

Penalties/liquidated damages were stipulated for the delay in delivering machinery and plant, failure to give the guaranteed performance of continuous fermentation plant, failure to provide a guaranteed performance with respect to steam, and failure to give a guaranteed performance with respect to power. Even the rates of liquidated damages have been laid down - Careful perusal of the claim made before the Arbitral Tribunal by the appellant shows that the claim for the sum of Rs.107.54 lakhs was not based on clause 21 of the agreement. It is not the appellant's case that the respondent was called upon to replace the plant and machinery, and as the respondent failed to do so within a reasonable time, the appellant replaced the plant and machinery by themselves. The claim was on account of a refund of the amount spent by the appellant on the plant, as is evident from paragraph 16 of the statement of claim.

The claim was not made in terms of Clause 21 of the Agreement. The claim was not on account of the breach of warranty. What is claimed is virtually the refund of the amount spent - the appellant was not entitled to the claim of Rs.68.15 lakhs as it was claimed in the statement of claim as the refund of the amount spent by the appellant on the acquisition of plant and machinery.

Conclusion - The appellant got liquidated damages as provided in the agreement on account of breaches committed by the respondent. The claim for damages of the appellant will remain confined to what is expressly provided under the Agreement in view of Section 74 of the Contract Act. The appellant retained the plant and machinery and did not take the benefit of clause 21. Therefore, as rightly held by the High Court, the appellant was not entitled to the claim of Rs.68.15 lakhs as it was claimed in the statement of claim as the refund of the amount spent by the appellant on the acquisition of plant and machinery.

There are absolutely no error in the view taken by the High Court, and accordingly, the appeal is dismissed.