TaxTMI Updates e-Newsletter
Feb 19,2024

Issuance of notice - Power of High Court under Article 226 of the Constitution - Non-restraint of High Court proceedings by interim order of a superior court

Issuance of notice - Non-restraint of High Court proceedings by interim order of a superior court - Power of High Court under Article 226 of the Constitution - Grant of notice by the Supreme Court and its effect on the High Court's power to proceed with disposal of the main petition under Article 226. - HELD THAT: - The Court issued notice in the petition. It concurrently clarified that the mere issuance of notice by this Court shall not be construed by the parties or by the High Court as imposing any restraint on the High Court from proceeding to dispose of the main petition, including WPC No. 1655 of 2019, under Article 226 of the Constitution. The direction preserves the High Court's jurisdiction to adjudicate and dispose of the writ petition notwithstanding the Supreme Court's issuance of notice. [Paras 1, 2]

Notice issued; High Court's power to dispose of the main petition under Article 226 is not restrained by the Supreme Court's issuance of notice.

Final Conclusion: Notice was issued, and the Supreme Court expressly left the High Court free to hear and dispose of the main petition, including WPC No. 1655 of 2019, under Article 226 without treating the Supreme Court's notice as a stay or restraint.

Violation of principles of natural justice - Right to copy of material relied upon in adjudication - Opportunity of hearing after disclosure of material - Remand for fresh adjudication following disclosure

Violation of principles of natural justice - Right to copy of material relied upon in adjudication - Assessment and appellate orders were vitiated by non-provision of the SIB report on which the demands were based. - HELD THAT: - The Court found on the material before it that the SIB report, which formed the basis of the assessment, was never furnished to the petitioner. Where charges or demands are founded upon material and documents, the delinquent must be provided those materials to enable effective response. Failure to supply the SIB report prejudiced the petitioner's ability to meet the case against it and amounted to a gross violation of the principles of natural justice. On this ground the assessment order and the appellate order which upheld it cannot stand. [Paras 10, 11, 12]

The assessment order dated 19.5.2022 and the appellate order dated 25.10.2023 are arbitrary and illegal and are set aside.

Opportunity of hearing after disclosure of material - Remand for fresh adjudication following disclosure - Matter remitted for fresh consideration after providing the SIB report and other material, with liberty to the petitioner to respond and with directions on timelines. - HELD THAT: - The Court directed that the SIB report and any other material forming the basis of the demands be furnished to the petitioner forthwith (within two weeks). The petitioner is granted liberty to file its response to the show cause notice within two weeks thereafter. The adjudicating authority was directed to afford full opportunity of hearing and to finalize the matter in accordance with law within six weeks after receipt of the petitioner's response. The remit is for fresh adjudication in the light of disclosed material and submissions, not for deciding the merits in the writ proceedings. [Paras 13, 14]

The matter is remitted to the adjudicating authority for de novo adjudication after disclosure; specified timelines for disclosure, response and finalization are imposed.

Final Conclusion: Writ petition allowed; assessment and appellate orders quashed for breach of natural justice by non-provision of the SIB report; matter remitted for fresh adjudication after disclosure of the report and other material, with specified timelines for disclosure, response and final decision.

Cancellation of registration without application of mind - Requirement of reasons in quasi-judicial orders - Quashing and remand for de novo adjudication after opportunity of hearing

Cancellation of registration without application of mind - Requirement of reasons in quasi-judicial orders - Whether the order cancelling the petitioner's GST registration was vitiated for want of application of mind and absence of reasons. - HELD THAT: - The Court found that the order in original dated November 15, 2022 recorded inconsistent statements about whether a reply to the show-cause notice had been filed, demonstrating lack of application of mind. Relying on earlier decisions of this Court emphasising that reasons are the 'heart and soul' of administrative or quasi judicial orders, the Court held that an order which effects cancellation of registration without cogent reasons does not satisfy the requirements of fairness and Article 14. Although the appeal under Section 107 was time barred, the Division Bench precedent considered the original order and set it aside for want of reasons and permitted the assessee to file a reply; following that approach, the High Court concluded that the impugned original order was non reasoned and therefore liable to be quashed.

The order cancelling registration dated November 15, 2022 is quashed for want of application of mind and absence of reasons; the appellate order is also quashed.

Quashing and remand for de novo adjudication after opportunity of hearing - What relief should follow the quashing of the non reasoned cancellation order. - HELD THAT: - The Court directed that the petitioner be permitted to file its reply to the show cause notice within three weeks and that the adjudicating authority shall proceed de novo after granting an opportunity of hearing and considering the petitioner's defence. The appellate order was set aside as well, and the matter was remanded for fresh adjudication consistent with the requirement to record reasons and to afford the petitioner a hearing.

Petitioner to file reply within three weeks; adjudicating authority to decide afresh after hearing; impugned original and appellate orders quashed and set aside.

Final Conclusion: Writ petition allowed; impugned cancellation and appellate orders quashed for lack of reasons and want of application of mind; matter remanded for fresh adjudication after the petitioner files reply within three weeks and is granted an opportunity of hearing.

Non-application of mind - GST exemption for salary paid to employee - reverse charge mechanism and applicability of exemption notifications - classification of services as training/coaching in art and culture - remand for fresh consideration with opportunity of personal hearing

Non-application of mind - GST exemption for salary paid to employee - Validity of levy of GST on director's remuneration in the assessment order - HELD THAT: - The Court found that the assessment recorded a conclusion that the petitioner did not clarify the category of directorship or whether salary was paid, notwithstanding the petitioner's categorical reply stating that remuneration was paid to its Managing Director. The assessing authority therefore reached a conclusion inconsistent with the material on record, demonstrating non-application of mind. The Court noted that the petitioner had not, however, furnished supporting documents such as employment contract, terms of employment or TDS particulars, which are relevant for final determination. Consequently the impugned conclusion cannot stand and requires reconsideration. [Paras 5]

Conclusion that GST was leviable on director's remuneration was quashed for non-application of mind and remanded for fresh consideration after production of relevant documents.

Non-application of mind - reverse charge mechanism and applicability of exemption notifications - Sustainability of imposition of tax, penalty and interest on miscellaneous expenses assessed on the basis of financial statement figures - HELD THAT: - The petitioner had replied asserting applicability of exemption notifications and that certain supplies were from registered dealers. The Assessing Officer, however, imposed tax, penalty and interest by simply drawing totals from the financial statements without verifying particulars of suppliers, registration status or applicability of notifications under reverse charge mechanism. The Court held that such blanket imposition based on ledger figures without proper enquiry or application of mind is unsustainable. The matter was therefore remitted for reassessment where the Assessing Officer must consider supplier particulars and claimed exemptions. [Paras 6]

Imposition of tax, penalty and interest on miscellaneous expenses quashed; reassessment directed with verification of supplier particulars and notifications.

Non-application of mind - classification of services as training/coaching in art and culture - Validity of treating petitioner's activities as sale of paintings/artworks instead of exempt training/coaching services - HELD THAT: - The petitioner invoked Notification No.12/2017 to show that services by way of training or coaching in recreational activities relating to art or culture fall within an exempt heading. Despite the petitioner's replies, the Assessing Officer concluded that the petitioner was engaged in sale of paintings and art works-an inference the Court described as 'bizarre' and indicative of non-application of mind. The Court held that the Assessing Officer failed to reasonably consider the material placed on record and thus the impugned finding cannot be sustained. [Paras 7]

Assessment treating the petitioner as engaged in sale of art works quashed; issue remitted for fresh consideration taking into account documentary evidence supporting exemption.

Remand for fresh consideration with opportunity of personal hearing - Procedure to be followed on remand and timeline for fresh assessment - HELD THAT: - The Court recorded that while the petitioner had not placed all relevant materials, the impugned orders exhibited non-application of mind and warranted interference. The petition was allowed, the impugned orders were quashed and the matter remanded to the Assessing Officer. The petitioner was directed to furnish all relevant documents within two weeks of receipt of the order. Upon receipt, the Assessing Officer must afford a reasonable opportunity to the petitioner, including a personal hearing, and pass fresh assessment orders within two months from receipt of the documents. [Paras 9]

Matters remitted for fresh assessment; petitioner to submit documents within two weeks and Assessing Officer to provide hearing and pass fresh orders within two months.

Final Conclusion: Writ petition allowed; impugned assessment orders for AY 2017-18 quashed for non-application of mind on issues of director's remuneration, miscellaneous expenses and exempted turnover; matter remanded for fresh consideration on production of relevant documents and after affording a personal hearing, with timelines specified.

Input Tax Credit - genuineness of transaction - reversal of ITC on account of supplier's retrospective cancellation of GST registration - burden of proof of supplier's existence at time of supply - remand for fresh consideration

Input Tax Credit - reversal of ITC on account of supplier's retrospective cancellation of GST registration - genuineness of transaction - ITC claimed by the assessee cannot be disallowed solely because the supplier's GST registration was later cancelled with retrospective effect; the assessing officer must examine the genuineness of the transaction on available evidence. - HELD THAT: - The assessment impugned disallowed ITC exclusively on the basis that the supplier's registration had been cancelled retrospectively and held the supplier to be a 'non-existent dealer' without crediting documentary proof produced by the petitioner. The Court observed that where purchases relate to an earlier period (here 2017-2018) the purchaser may be required to prove the supplier's existence at the relevant time and to establish the genuineness of the transaction by producing contemporaneous documents such as tax invoices, e-way bills, transport documents, delivery challans and proof of payment. In the present case the petitioner produced such documents which were not considered; the assessing officer's sole reliance on retrospective cancellation was therefore unsustainable. The determinative legal principle applied is that retrospective cancellation of a supplier's registration, by itself, is not a conclusive basis for disallowing ITC without a fresh, document-based examination of the transaction's genuineness. [Paras 5]

Impugned disallowance on the sole ground of retrospective cancellation set aside and matter remanded for consideration of genuineness on available evidence.

Remand for fresh consideration - burden of proof of supplier's existence at time of supply - Procedure to be followed on remand: the assessing officer must reconsider the ITC claim by examining all relevant documents and provide a reasonable opportunity to the petitioner before passing a fresh assessment order within a specified period. - HELD THAT: - The Court directed that the assessing officer should not reject the ITC claim solely because of retrospective cancellation of the supplier's registration but must conduct a fresh assessment of genuineness after considering all relevant documents submitted by the petitioner. The petitioner is to be afforded a reasonable opportunity of being heard. A time limit of two months from receipt of the Court's order was imposed for passing the fresh assessment order upon reconsideration. [Paras 6]

Assessment quashed and remanded with directions to reconsider on evidence and to pass a fresh order within two months after giving the petitioner an opportunity.

Final Conclusion: Writ petition allowed; impugned assessment order quashed and matter remanded for fresh consideration of the genuineness of the transactions on the basis of documentary evidence, with directions to afford the petitioner a reasonable opportunity and to pass a fresh assessment order within two months; no costs.

Regular bail under Section 439 Cr.P.C. - Delay in arrest - Reliance on co-accused's statement - Triability by Magistrate - Protracted trial as factor favouring bail - Presentation of challan - Fraudulent GST registration and bogus Input Tax Credit

Regular bail under Section 439 Cr.P.C. - Delay in arrest - Reliance on co-accused's statement - Triability by Magistrate - Protracted trial as factor favouring bail - Presentation of challan - Grant of regular bail to the petitioner in FIR No. 405 dated 24.10.2020. - HELD THAT: - The Court noted that the petitioner has remained in custody since 09.12.2022 and that all offences alleged are triable by the Magistrate, making the trial likely to be protracted. The petitioner's involvement was founded on a supplementary statement by a co-accused who has already been released on bail by this Court. The challan against the petitioner has been presented. Taking these circumstances together, and without expressing any opinion on the merits of the allegations of fraudulent GST registration and utilization of bogus Input Tax Credit, the Court exercised its discretionary power under Section 439 Cr.P.C. to allow bail. The decision emphasises delay in arrest, the nature of triability, the likelihood of long trial, and the co-accused's earlier grant of bail as material factors warranting release on bail. [Paras 6, 7]

Petition allowed; petitioner admitted to bail on furnishing bonds/sureties to the satisfaction of the trial Court/Duty Magistrate/Chief Judicial Magistrate.

Final Conclusion: Bail granted: the petitioner is ordered to be released on bail subject to furnishing bail bonds/surety bonds as directed by the trial Court, having regard to custody period, triability by Magistrate, reliance on co-accused's statement and presentation of challan.

Rectification of bonafide error in return - permissibility of amendment to GSTR-1 - no loss of revenue principle - mismatch between GSTR-3B and GSTR-2A - input tax credit entitlement - certificate from chartered accountant certifying discharge of GST

Rectification of bonafide error in return - permissibility of amendment to GSTR-1 - no loss of revenue principle - Petitioner permitted to rectify GSTR-1 for the period 2017-2018. - HELD THAT: - The Court held that where a bonafide error occurred in filing GSTR-1 and no loss to the revenue is caused, technical impediments should not prevent legitimate rectification. Relying on the decision in M/s. Star Engineers (I) Pvt. Ltd., the Court observed that inadvertent filing errors which would otherwise have cascading adverse effects ought to be remedied. Applying that principle to the present facts, and having regard to the petitioner's steps to obtain confirmation and a certificate from its chartered accountant that GST was discharged, the petition was allowed to the extent of permitting correction of GSTR-1 for the specified period. [Paras 6, 7, 8]

Allowed - petitioner permitted to rectify GSTR-1 for 2017-2018.

Input tax credit entitlement - mismatch between GSTR-3B and GSTR-2A - leave to apply for determination of ITC claim - Claim for entitlement of input tax credit (prayer (b)) not decided and left open. - HELD THAT: - The Court expressly refrained from adjudicating the petitioner's claim that respondent no. 4 is eligible to avail input tax credit and left all contentions on that prayer open. The Court recorded that if the petitioner wishes to pursue prayer (b) it may make an appropriate application as permitted by law, indicating that the substantive determination of ITC entitlement and any issues arising from mismatch between GSTR-3B and GSTR-2A remain undetermined in this petition. [Paras 9]

Contentions on prayer (b) kept open; petitioner may make an application as permissible in law.

Final Conclusion: The petition is allowed to the extent that the petitioner is permitted to rectify the GSTR-1 for the period 2017-2018; the separate claim regarding entitlement to input tax credit is left open for determination if the petitioner chooses to pursue it in accordance with law.

GST on petroleum and diesel - Article 279A(5) of the Constitution - opportunity to produce evidence - remand for fresh adjudication

GST on petroleum and diesel - Article 279A(5) of the Constitution - Whether CGST could be levied on petroleum and high-speed diesel in the absence of a date recommended by the GST Council under Article 279A(5) - HELD THAT: - The High Court did not resolve the substantive question on the merits but recorded that the GST Council has not notified the date from which petroleum and diesel would be leviable under CGST. In view of that factual position and the pleadings before it, the Court set aside the adjudication order and remanded the matter to the adjudicating authority for fresh consideration in accordance with law, directing that the authority take into account that no date has been recommended/notified by the GST Council when arriving at its decision. The Court therefore required a fresh adjudication rather than pronouncing finally on the constitutional point.

Impugned order set aside and the question remanded to the adjudicating authority for fresh adjudication, with the authority to consider the absence of a GST Council notification regarding leviability.

Opportunity to produce evidence - remand for fresh adjudication - Whether the petitioner was afforded an opportunity to produce authentic documents supporting its claim and the effect of such documents on liability to CGST - HELD THAT: - The Court found that the adjudicating authority had recorded non-production of documents referred to in paragraph 7.6 of the impugned order. Rather than deciding the evidentiary sufficiency, the Court directed that the adjudicating authority must give the petitioner an opportunity to produce the specified documents (including the Chartered Accountant's certificate relied upon by the petitioner) and thereupon pass a fresh order. The Court required the adjudicating authority to complete proceedings within four weeks and cautioned against unnecessary adjournments.

Remanded to the adjudicating authority to allow production of the indicated documents and to pass a fresh adjudication within four weeks; if the documents are produced as required, the petitioner shall not be asked to pay CGST on the petroleum and diesel.

Final Conclusion: Writ petition disposed by setting aside the adjudication order dated 29th November 2023 and remanding the matter to the adjudicating authority to afford the petitioner an opportunity to produce specified documents and to pass a fresh adjudication within four weeks; if the requisite documents are produced and having regard to the absence of a GST Council notification of a date under Article 279A(5), the petitioner shall not be required to pay CGST on the petroleum and diesel.

Availability of alternative mode of filing appeal - physical/offline filing of appeal under Rule 108 of the Central Goods and Services Tax Rules - acceptance of appeals filed physically due to portal unavailability - judicial direction to competent authority to entertain offline appeals - no expression of opinion on merits

Availability of alternative mode of filing appeal - physical/offline filing of appeal under Rule 108 of the Central Goods and Services Tax Rules - acceptance of appeals filed physically due to portal unavailability - judicial direction to competent authority to entertain offline appeals - Competent authority to accept and decide offline appeals filed by the assessee against assessment orders for the assessment years 2019-20 and 2020-21 where online portal was unavailable and no notification under Rule 108 had been issued. - HELD THAT: - The petitioner, an assessee under the GST Act, could not file appeals against assessment orders for 2019-20 and 2020-21 owing to non-availability of the online portal and absence of a notification under Rule 108 permitting physical filing. The State, through the Additional Advocate General, stated that despite no formal notification under Rule 108, if the petitioner were directed to file the appeal physically, the authority would entertain and decide it on merits. In these circumstances the Court directed that if the petitioner files offline appeals by physical mode within ten days from the date of the order, the competent authority shall accept and decide those appeals. The Court expressly refrained from expressing any view on the merits of the appeals. [Paras 6, 7]

If the petitioner files offline appeals against the assessment orders for 2019-20 and 2020-21 within ten days, the competent authority shall accept and decide them; the Court has not expressed any opinion on the merits.

Final Conclusion: Writ petition disposed by directing the competent authority to accept and adjudicate offline appeals filed within ten days for assessment years 2019-20 and 2020-21 due to portal/non-notification impediment; merits not adjudicated.

Show Cause Notice - Section 73 of the Central Goods and Services Tax Act, 2017 - lack of material and failure to disclose basis for issuance - mechanical issuance without application of mind - quashing of proceedings - reservation of departmental right to initiate proceedings in accordance with law

Show Cause Notice - Section 73 of the Central Goods and Services Tax Act, 2017 - lack of material and failure to disclose basis for issuance - mechanical issuance without application of mind - quashing of proceedings - reservation of departmental right to initiate proceedings in accordance with law - Validity of the Show Cause Notice issued to the petitioner for the tax period April, 2018 to March, 2019 (and the identical earlier notice for July, 2017 to March, 2018) under Section 73 of the CGST Act. - HELD THAT: - The Court found that the impugned Show Cause Notice is verbatim in content to an earlier notice which this Court had quashed for being bereft of necessary facts, materials and the basis on which proceedings were initiated. Section 73 proceedings require that the authority have material, information or some basis to 'appear' necessary for initiation; a bare, mechanical notice without disclosure of source, material or reason fails this requirement. The impugned notice similarly lacks particulars of the alleged evasion or suppression and was issued despite the earlier quashment and despite information already furnished by the petitioner. In these circumstances the notice is unsustainable and liable to be set aside. The Court, however, left open the statutory right of the Department, if permissible, to initiate proceedings afresh in accordance with law. [Paras 4, 5, 6, 7]

The impugned Show Cause Notice is set aside/quashed; the Department's right to initiate proceedings in accordance with law is reserved.

Final Conclusion: Writ petition allowed to the extent that the impugned Show Cause Notice (relating to April, 2018 to March, 2019 and, by reference, the earlier notice for July, 2017 to March, 2018) is quashed for being bereft of requisite material and particulars; liberty reserved to the Department to proceed lawfully.

Interim stay of recovery - deposit as condition for grant of interim relief - consistency with coordinate bench decision - directions for filing affidavits and rejoinder - tagging and listing of connected writ petitions

Interim stay of recovery - deposit as condition for grant of interim relief - consistency with coordinate bench decision - Grant of interim relief on condition of deposit of a portion of disputed tax and consequent stay of recovery proceedings - HELD THAT: - The Court accepted the petitioners' reliance on a coordinate bench order and agreed with that view. By adopting the approach of the coordinate bench, the Court directed that the petitioners shall make an additional deposit of 20% of the disputed tax liability over and above the earlier deposit of 10% already made before the assessing authority. Upon compliance with this deposit within four weeks, recovery proceedings in respect of the balance amount are stayed until the writ petition is finally decided. The order embodies the principle that conditional deposits may be imposed as a precondition for grant of interim relief and that consistency with earlier coordinate-bench decisions is a relevant factor in disposing of similar interim applications. [Paras 3, 6, 7]

Petitioners directed to deposit 20% in addition to earlier 10%; on such deposit, recovery of the balance is stayed until final disposal of the writ petition.

Directions for filing affidavits and rejoinder - tagging and listing of connected writ petitions - Ancillary procedural directions regarding pleadings and case management - HELD THAT: - The Court directed the respondents to file a counter affidavit within four weeks and permitted the petitioners to file a rejoinder within two weeks thereafter. The matter is ordered to be tagged and listed with specified connected writ petitions for further hearing on a listed date. These directions are procedural and intended to ensure orderly adjudication of the petition alongside related matters. [Paras 4, 5]

Respondents to file counter affidavit in four weeks; rejoinder in two weeks; matter tagged and listed with connected writ petitions on the specified date.

Final Conclusion: The Court granted interim relief on terms: petitioners to deposit 20% of the disputed tax in addition to the earlier 10% within four weeks, and on such deposit recovery of the balance is stayed until final disposal; consequential procedural directions for affidavits and tagging were also issued.

Supply under section 7 of the CGST Act - Consideration as element of supply - Perquisite / employer-employee contractual benefit outside scope of supply - Input tax credit under the proviso to section 17(5)(b) (obligatory provision to employees) - Composite supply of food as service (Schedule II) - Outward supply and business (section 2(83) and section 2(17)) - Blocked credit for food and beverages under section 17(5)(b)(i)

Supply under section 7 of the CGST Act - Perquisite / employer-employee contractual benefit outside scope of supply - Consideration as element of supply - Deduction recovered from permanent employees for subsidised canteen meals is not a supply; recoveries from employees not on the applicant's payroll are supplies liable to GST. - HELD THAT: - Applying section 7 and the CBIC clarifications, the Authority found that canteen meals provided mandatorily under the Factories Act to the applicant's permanent employees are perquisites provided in terms of the employer-employee contractual relationship and therefore do not constitute supply. The Meal Policy and statutory obligation establish that the amounts recovered from permanent employees are not consideration for an independent supply by the applicant. By contrast, persons who are not on the applicant's payroll (employees on deputation, persons on business travel and temporary/contract workers) do not satisfy the employer-employee relationship test; supply of food to them falls within the definition of outward supply and composite supply of food as a service (Schedule II), and the nominal recoveries constitute consideration, attracting GST. [Paras 31, 33, 34, 35, 36]

No GST on recoveries from permanent employees; GST liable on recoveries from employees on deputation, employees on business travel and temporary/contract workers.

Input tax credit under the proviso to section 17(5)(b) (obligatory provision to employees) - Blocked credit for food and beverages under section 17(5)(b)(i) - ITC is available to the applicant for GST charged by the canteen service provider to the extent of the cost borne by the applicant for permanent employees; ITC is not available for the portion relating to employees on deputation/business travel/temporary workers. - HELD THAT: - Having held that canteen provision to permanent employees is obligatory under section 46 of the Factories Act and in light of the proviso to section 17(5)(b) (as clarified by CBIC Circular No.172/04/2022), the Authority ruled that ITC on GST charged by the CSP is admissible but only to the extent of the cost actually borne by the applicant (disallowing credit proportionate to amounts recovered from employees). Conversely, supplies to non employees (deputation, business travel, temporary/contract workers) are taxable outward supplies and fall within the blocked category under section 17(5)(b)(i), so ITC for those supplies is not available. [Paras 37, 38, 39, 40]

ITC admissible for canteen services used for permanent employees limited to applicant's borne cost; ITC not admissible for canteen services provided to deputation/business travel/temporary/contract workers.

Outward supply and business (section 2(83) and section 2(17)) - Composite supply of food as service (Schedule II) - Supply of subsidised food to persons who are not the applicant's employees is an outward supply in the course or furtherance of business and taxable as supply of service. - HELD THAT: - The Authority applied the statutory definitions of 'business' and 'outward supply' and Schedule II to conclude that providing food to deputed personnel, business travel personnel and contractual/temporary workers is incidental or ancillary to the applicant's business and constitutes supply of service; recoveries made are consideration as defined in section 2(31). Consequently such recoveries attract GST. [Paras 32, 33, 34, 35, 36]

Recoveries from non payroll persons are taxable outward supplies of service.

Blocked credit for food and beverages under section 17(5)(b)(i) - Input tax credit on capital/inputs used for canteen operations - ITC is not admissible on kitchen utensils and equipment used for providing canteen facilities. - HELD THAT: - Although the applicant retains ownership of utensils and equipment, section 17(5)(b)(i) blocks credit for food and beverages and related supplies; further, notification and rate provisions treating canteen supplies as without ITC confirm that ITC on such kitchen utensils and equipment utilized in canteen operations is not allowable. The Authority therefore disallowed ITC on these inputs. [Paras 41, 42, 43, 44]

No ITC on kitchen utensils and equipment used in the canteen.

Final Conclusion: The Authority ruled (1) recoveries from permanent employees for statutory canteen meals are not supplies and not taxable, while recoveries from deputation/business travel/temporary/contract workers are taxable supplies; (2) ITC on CSP charges is available only to the extent of cost borne by the applicant for permanent employees and is not available for supplies to non employees; and (3) ITC is disallowed on kitchen utensils and equipment used for canteen services.

Eligibility for input tax credit where rate notification conditions prohibit credit - effect of Explanation (iv) to the rate notification on availment and reversal of ITC - application of section 17(2) for apportionment where supplies are partly taxable and partly exempt - operation of Rules 42 and 43 for reversal and determination of common input tax credit - strict interpretation of exemption/benefit notifications

Eligibility for input tax credit where rate notification conditions prohibit credit - effect of Explanation (iv) to the rate notification on availment and reversal of ITC - Entitlement to claim input tax credit of general expenses of the company which are meant for the purpose of business - HELD THAT: - The applicant avails the concessional rate in the notification for restaurant services subject to the condition that credit of input tax charged on goods and services used in supplying the service has not been taken. Explanation (iv) makes clear that (a) credits on inputs/services used exclusively for supplying the restaurant service are not eligible, and (b) where inputs/services are used partly for supplying the restaurant service and partly for other supplies eligible for credit, reversal is required as if the restaurant service were an exempt supply and section 17(2) applies. The applicant has not identified other supplies eligible for ITC; on the material before the Authority, where only restaurant services are established, ITC in respect of general company expenses used for the restaurant business is not available. If the applicant supplies other taxable supplies eligible for ITC (not disclosed), Explanation (iv)(b) would apply and credits could be admissible subject to reversal under section 17(2) and rules made thereunder. [Paras 14]

ITC on general expenses used for the restaurant business is not admissible under the notification; if other taxable supplies exist, Explanation (iv)(b) and section 17(2) govern admissibility subject to reversal.

Application of section 17(2) for apportionment where supplies are partly taxable and partly exempt - operation of Rules 42 and 43 for reversal and determination of common input tax credit - Entitlement to claim input tax credit apportioned on the basis of square foot/area of usage of premises - HELD THAT: - Where inputs or input services are used partly for supplying the restaurant service (subject to the notification) and partly for other supplies eligible for ITC, Explanation (iv)(b) requires reversal treating the restaurant supply as if exempt, and section 17(2) restricts credit to that attributable to taxable supplies. The manner of determination and reversal of ITC for inputs and input services is governed by Rule 42, and for capital goods by Rule 43 of the CGST Rules. Consequently, apportionment cannot be determined solely by area/square footage if the statutory provisions and rules require prorata reversal on the basis of turnover or the methodology prescribed in Rules 42/43. [Paras 15, 16]

Apportionment of ITC is subject to section 17(2) and must be determined under Rules 42 and 43 rather than solely by area; eligibility depends on whether other taxable supplies exist and the reversal provisions.

Operation of Rules 42 and 43 for reversal and determination of common input tax credit - strict interpretation of exemption/benefit notifications - Applicability of Rules 42/43 (read with SGST rules) to the applicant's claim of input tax credit despite declared tariff remaining below the specified threshold - HELD THAT: - The notification condition disallowing credit where credit has been taken engages the reversal and apportionment provisions of the CGST Act and Rules. Given Explanation (iv) and the statutory scheme, Rules 42 and 43 apply to determine and, where necessary, reverse ITC. The applicant's contention that section 17 and Rules 42/43 do not apply because the declared tariff is below the threshold is untenable in view of Explanation (iv) and the requirement of strict interpretation of exemption notifications; accordingly Rules 42/43 (and corresponding SGST rules) are applicable to the claim of ITC. [Paras 16, 17]

Rules 42 and 43 (with SGST counterparts) apply to the applicant's ITC claims; the declared tariff being below the threshold does not exclude operation of those rules.

Final Conclusion: The applicant cannot claim ITC in respect of inputs/services used exclusively for restaurant services where the concessional notification prohibits credit; where inputs/services are used partly for other taxable supplies, Explanation (iv)(b), section 17(2) and Rules 42/43 govern admissibility and reversal, and apportionment cannot be determined solely by area. Rules 42/43 (and SGST equivalents) are applicable and the notification must be strictly construed.

Inclusion of interest on borrowed money in cost of acquisition for computation of capital gains - treatment of pre-construction/pre-acquisition interest under Section 55(2) - distinction between cost of an asset and cost of raising money for its purchase (Tata Iron & Steel principle) - allowability of indexed cost of interest for computation of long-term capital gains

Inclusion of interest on borrowed money in cost of acquisition for computation of capital gains - treatment of pre-construction/pre-acquisition interest under Section 55(2) - distinction between cost of an asset and cost of raising money for its purchase (Tata Iron & Steel principle) - allowability of indexed cost of interest for computation of long-term capital gains - Whether interest paid on housing loan (claimed as pre-acquisition/pre-construction interest and indexed) is includible in the cost of acquisition for computing long-term capital gains - HELD THAT: - The Tribunal examined the claim that interest of Rs. 94,17,082 (indexed to Rs. 1,16,43,521) paid on a housing loan should be included in cost of acquisition when computing long-term capital gains. It applied the statutory scheme under Section 55(2), which provides for accumulation and phased deduction of pre-construction interest and permits treatment of unclaimed pre-construction interest as part of the cost of the asset only in specified circumstances. The Tribunal accepted the principle laid down by the Hon'ble Supreme Court in Commissioner of Income Tax v. Tata Iron & Steel Co. Ltd. that the cost of an asset and the cost of raising money to purchase it are separate and independent transactions and subsequent events (including manner of repayment or cost of raising funds) do not alter the actual price paid for the asset. The Tribunal also followed precedents of the Tribunal (including the Delhi and Mumbai Benches) applying the same ratio to reject inclusion of interest as part of capital cost where there is no direct nexus making such interest part of the purchase price. The CIT(A)'s concurrent conclusion that the indexed interest could not be added to cost of acquisition was held to be consistent with Section 55(2) and the Tata Iron & Steel principle. The Tribunal noted the factual position that possession had been taken and that the assessee had not otherwise established entitlement to treat the interest as capital cost; accordingly the assessing officer's disallowance was sustained. [Paras 11, 14, 15]

Assessee is not entitled to include the interest claimed (and its indexed amount) in the cost of acquisition; the disallowance confirmed and the appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the disallowance of the indexed interest claimed as part of cost of acquisition, applying Section 55(2) and the Supreme Court's principle that the cost of an asset is distinct from the cost of raising funds to acquire it.

Admissibility of seized loose papers as evidence - unexplained investment based on seized documents - requirement of corroborative evidence for additions - ownership of property held on behalf of a firm versus ownership by individual partners - weight of concurrent findings and binding precedents of the jurisdictional High Court

Admissibility of seized loose papers as evidence - requirement of corroborative evidence for additions - Whether additions based solely on loose sheets seized from a third party (Annexure AS/5 pp.72-73) can be sustained as proof of unexplained cash payments by the assessees. - HELD THAT: - The Tribunal found that the seized loose paper does not contain the names or signatures of the assessees or the firm, does not expressly mention the word 'cash' in relation to the assessees, and records entries pertaining to dates and amounts that relate to an earlier year. Following the view taken by the CIT(A) and by earlier Tribunal and High Court decisions, the Tribunal held that such loose sheets are not self speaking documents and cannot, without independent corroborative material connecting them to the assessee, constitute a legitimate basis for assessing undisclosed income. The Tribunal noted that the seized material was recovered from a third party (a land broker) and that no evidence was produced tying the entries on the loose paper to the assessees; consequently the Assessing Officer's conclusion that the balance amount represented cash payments was held to be conjectural and unsustainable. [Paras 9, 10]

Addition based solely on the seized loose papers was deleted; the Assessing Officer's addition was not sustained for lack of corroboration.

Ownership of property held on behalf of a firm versus ownership by individual partners - unexplained investment based on seized documents - Whether the agricultural lands in question belonged to the individual partners (assessees) or to the Partnership Firm M/s Vadsar Industrial Development Corporation (VIDC), and whether the firm's books corroborate ownership and payment. - HELD THAT: - The Tribunal accepted the CIT(A)'s factual finding that the firm paid the consideration by account payee cheques (reflected in sale deeds and in the firm's bank accounts and books) and that the lands were shown in the firm's balance sheet and later sold by the firm with the sale proceeds disclosed in the firm's profit and loss and ITR 5 for a subsequent year. The Tribunal observed that the sale transactions were effected by the firm and proceeds credited to the firm's bank account; the lands did not appear in the individual assessees' balance sheets. In these circumstances, and in absence of material connecting the seized loose papers to the partners personally, the Tribunal held that the lands pertained to the firm and that additions in the hands of the individual partners could not be sustained. [Paras 4, 9, 10]

The Tribunal upheld the CIT(A)'s conclusion that the lands belonged to the firm VIDC and not to the individual partners; additions in the hands of the partners were deleted.

Weight of concurrent findings and binding precedents of the jurisdictional High Court - requirement of corroborative evidence for additions - Whether reliance on the Tribunal's and High Court's prior decisions on the same seized material justifies dismissal of the Revenue's appeal. - HELD THAT: - The Tribunal applied and followed earlier decisions where identical seized loose papers were held inadequate to support additions (including the Tribunal's decision in the case of M/s. Sopan Industrial Infrastructure Park and the Gujarat High Court's dismissal of the Revenue's Tax Appeal No.1372 of 2018). Given concurrent findings that the seized documents did not connect the assessees to the entries, and the High Court's approval of that approach, the Tribunal concluded there was no substantial question of law warranting interference. The Tribunal therefore relied on those precedents and concurrent factual findings in confirming deletion of the additions. [Paras 8, 9, 10]

Revenue's appeals dismissed following the Tribunal's and High Court's precedents; concurrent findings affirmed and applied.

Final Conclusion: The Revenue's appeals are dismissed: additions made by the Assessing Officer on the basis of loose sheets seized from a third party were deleted for lack of corroborative connection to the assessees, and the lands were held to belong to the partnership firm VIDC (reflected in the firm's books and subsequent sale), not to the individual partners.

Revision under section 263 - reopening under section 147 and scope of reassessment - jurisdictional limits on Commissioner's power to revise - requirement of inquiry/verification under Explanation 2 to section 263 - change of opinion and substitution of AO's view

Requirement of inquiry/verification under Explanation 2 to section 263 - revision under section 263 - Whether the order of the Principal Commissioner of Income Tax holding the reassessment order erroneous and prejudicial for alleged non-verification of freight advance ledgers was valid - HELD THAT: - The Tribunal examined the reassessment order framed under section 147 r.w.s. 143(3) and the materials placed before the Assessing Officer. The AO during reassessment issued notices, called for and considered ledger copies and other submissions and specifically concluded that the alleged mismatch in freight advances did not necessitate any addition. The PCIT had relied on debit entries from advance-ledgers while ignoring corresponding credit entries and concluded that the AO failed to verify the matter. The Tribunal held that the AO had applied his mind and conducted inquiries in the reassessment proceedings (paras 10, 10.1, 10.3). Where the AO has conducted proper enquiries and reached a plausible conclusion, the Commissioner is not justified in treating the order as erroneous on the ground of non-verification; selective reliance on parts of the ledger by the PCIT did not demonstrate lack of inquiry by the AO (paras 10.1, 10.3). Accordingly the premise that the assessment was erroneous for want of verification was rejected. [Paras 10]

The finding of the PCIT that the AO's reassessment was erroneous for non-verification is rejected and the PCIT's conclusion on this ground is not sustained.

Reopening under section 147 and scope of reassessment - jurisdictional limits on Commissioner's power to revise - change of opinion and substitution of AO's view - Whether the PCIT could, under section 263, expand the scope of reassessment or direct the AO to make additions on issues which the AO had considered and chosen not to pursue in the section 147 proceedings - HELD THAT: - The Tribunal analysed section 147 and relevant authorities and concluded that while an AO in reassessment proceedings may assess other escaped income which comes to his notice in the course of those proceedings, the satisfaction required to reopen or to assess such other income is that of the AO in the reassessment. If the AO, after conducting reassessment proceedings, examines an issue and declines to make an addition, the PCIT cannot in exercise of revision powers under section 263 substitute his own view and direct fresh additions thereby effecting a change of opinion (paras 10.4-10.6, 10.7). The PCIT in the present case picked partial information from ledgers and sought to expand the reassessment scope and direct fresh enquiry/additions on matters which the AO had considered; that amounted to exceeding jurisdiction and amounted to impermissible substitution of opinion (paras 10.6-10.8). Reliance on settled decisions demonstrating that the Commissioner cannot act as an appellate authority when the AO has applied his mind was affirmed (paras 10.2, 10.4). [Paras 10]

The PCIT exceeded his jurisdiction under section 263 by directing fresh assessment/additions on issues which the AO had considered in the reassessment; the revision order is quashed as an impermissible substitution of the AO's view.

Final Conclusion: The appeal is allowed. The order passed by the Principal Commissioner of Income Tax under section 263 quashing the reassessment order is set aside: the Assessing Officer had applied his mind in the section 147 proceedings and the PCIT impermissibly substituted his view and exceeded his jurisdiction.

Transfer Pricing - Arm's Length Price (ALP) - Most Appropriate Method - Comparable Uncontrolled Price (CUP) method - Transactional Net Margin Method (TNMM) - TIPS database - Re-characterisation of functions (Licensed Manufacturer vs Value Added Distributor) - Quality adjustments under CUP - Segregation of business segments for transfer pricing - Remand to Assessing Officer/Transfer Pricing Officer

Re-characterisation of functions (Licensed Manufacturer vs Value Added Distributor) - Transfer Pricing - Assessee's plea to re-characterise its role from 'Licensed Manufacturer' to 'Value Added Distributor' in relation to import and conversion of APIs. - HELD THAT: - The Tribunal examined the factual matrix showing that the assessee procures APIs, maintains quality control during toll manufacturing and remains associated with the manufacturing process from procurement to conversion into finished drug formulations using third party manufacturing facilities under toll arrangements. The assessee sought re-characterisation for the first time before the TPO and confined the plea to transactions involving AEs while operating similarly in transactions with non AEs. On these facts the Tribunal found no basis to treat the assessee as merely a distributor and accepted the view recorded by the TPO/DRP that the assessee's function is that of a licensed manufacturer rather than a value added distributor. [Paras 14]

Assessee's re characterisation plea rejected; assessee remains a 'Licensed Manufacturer' for the transactions in question.

Comparable Uncontrolled Price (CUP) method - TIPS database - Quality adjustments under CUP - Most Appropriate Method - Validity of TPO's use of TIPS database and adoption of CUP (over TNMM) as the most appropriate method to benchmark imports of APIs from Associated Enterprises, and scope for adjustments. - HELD THAT: - The Tribunal reviewed precedent and the record, noting that earlier co ordinate bench decisions in the assessee's own case and in analogous pharmaceutical cases had accepted CUP and use of TIPS data to identify comparable uncontrolled transactions. The Tribunal held that TIPS is public customs data and may be relied upon for selecting comparables, subject to reasonable adjustments. The Tribunal also recognised that CUP requires a high degree of comparability and that where the assessee alleges superior quality of its APIs, adjustments for quality differences can legitimately be made. Applying the principle that once CUP has been held by the Tribunal in earlier identical transactions to be the most appropriate method, the finding remains applicable absent material change in facts, the Tribunal concluded CUP is the most appropriate method for the APIs at issue but allowed that reasonable adjustments (including for quality) should be examined. [Paras 15, 16, 18]

CUP held to be the most appropriate method; use of TIPS database is permissible; matter partly allowed to permit examination and allowance of reasonable adjustments (including quality) by AO/TPO.

Segregation of business segments for transfer pricing - Remand to Assessing Officer/Transfer Pricing Officer - Whether distribution of finished drug formulations (FDF) imported from AEs and contract manufacturing (third party manufacture) are distinct segments and the consequence for transfer pricing examination. - HELD THAT: - The Tribunal analysed the contractual terms governing the contract manufacturing arrangements (sampled clauses extracted from the Zyg agreement) and compared the nature of transactions under the two segments. It found that in the distribution segment the assessee imports FDFs manufactured by the AE (product liability resting with AE), whereas in the contract manufacturing segment the assessee contracts third parties to manufacture FDFs to the assessee's specifications with different obligations and functional profile. The Tribunal held that the two activities are distinct and that the earlier conflation in the transfer pricing study was an error capable of correction. Because the TPO had not examined the distribution segment after segregation, the Tribunal considered it appropriate to restore the matter for fresh examination by AO/TPO. [Paras 22, 23]

Segregation of 'Distribution' and 'Contract Manufacturing' upheld; issue restored to AO/TPO for fresh examination of the distribution segment after segregation.

Final Conclusion: Appeal partly allowed: re characterisation plea rejected; CUP accepted as the most appropriate method for benchmarking the specified API imports with TIPS comparables permissible subject to reasonable/quality adjustments to be examined by AO/TPO; segregation of distribution and contract manufacturing segments allowed and distribution segment remanded to AO/TPO for fresh consideration.

Revision under section 263 of the Income Tax Act - Erroneous and prejudicial to revenue - Explanation 2(a) to section 263 - Opportunity of being heard under section 263 / principles of natural justice - Capital gains on transfer of a capital asset - Assessing Officer's duty to verify documents in scrutiny assessment

Revision under section 263 of the Income Tax Act - Erroneous and prejudicial to revenue - Explanation 2(a) to section 263 - Validity of the Principal Commissioner's exercise of revision under section 263 in setting aside the assessment for being erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal examined the material placed before the Principal Commissioner and the assessment order. The Principal Commissioner concluded that the assessment under section 143(3) failed to make inquiries or verifications which should have been made, as contemplated by Explanation 2(a) to section 263, particularly regarding transfer of leasehold rights and the receipt of sale consideration. The Tribunal found the explanation to section 263 squarely applicable to the facts and declined to interfere with the exercise of revision by the Principal Commissioner. The Tribunal therefore upheld the invocation of section 263 and the direction to set aside the assessment for reassessment/verification. [Paras 7, 8, 9]

Held that the Principal Commissioner validly exercised powers under section 263; order under section 263 is upheld and the appeal is dismissed.

Opportunity of being heard under section 263 / principles of natural justice - Whether the order under section 263 was passed without giving the assessee a proper opportunity of being heard. - HELD THAT: - The assessee contended non-receipt of the re-fixing email and that inspection/copies of assessment records were pending, alleging breach of natural justice. The Tribunal observed from the record that the assessee was aware of the proceedings (dates 27.09.2019 and 23.10.2019) and that the show-cause notice had been issued and served. On this basis the Tribunal found no ground to interfere with the Principal Commissioner's finding and did not accept that there was denial of opportunity warranting quashing of the revision order. [Paras 7, 9]

Assessee's plea of denial of opportunity rejected; no interference on natural justice grounds.

Capital gains on transfer of a capital asset - Assessing Officer's duty to verify documents in scrutiny assessment - Whether the Assessing Officer erred in not treating the registered sale deed and attendant facts as constituting a transfer giving rise to capital gains in A.Y. 2015-16. - HELD THAT: - The Principal Commissioner, after perusal of the registered sale deed (which recorded physical delivery of possession, right to mutate, and a clause stating no balance was due), concluded that the AO had not properly verified the issue and ought to have treated the full sale consideration as receipt and computed indexed cost to determine capital gain. The Tribunal accepted that the registered deed and related material indicated a transfer and that the AO ought to have made the requisite verification; accordingly the Tribunal sustained the Principal Commissioner's direction to the AO to re-verify and determine the taxable capital gains in accordance with the Act. [Paras 3, 7]

AO found to have failed in verification; direction to AO to re-verify and determine capital gains upheld.

Final Conclusion: The appeal is dismissed; the order of the Principal Commissioner under section 263 is upheld for A.Y. 2015-16 and the Assessing Officer is directed to re-verify and determine the capital gains arising from the transfer as per law.

Evidentiary value of statements recorded under Section 132(4) - retraction of confessional statement and its effect on admissibility - requirement of corroborative/incriminating material to sustain additions after search - prohibition on making additions solely on the basis of search confessions - necessity to correlate disclosure with seized documents or books of account - invocation of special charge provisions (Section 115BBE) based on uncorroborated confession

Evidentiary value of statements recorded under Section 132(4) - retraction of confessional statement and its effect on admissibility - requirement of corroborative/incriminating material to sustain additions after search - necessity to correlate disclosure with seized documents or books of account - Validity of addition of residual sum derived from a disclosure made in statements recorded under Section 132(4) when the disclosure was not supported by incriminating material and was subsequently retracted - HELD THAT: - The Tribunal agreed with the view of the ld. CIT(A) that where an addition is made solely on the basis of a statement recorded under Section 132(4) of the Act, such a statement, especially if subsequently retracted, has diminished evidentiary value and cannot, by itself, sustain an addition. The authorities below did not point to any seized or incriminating material found during search that had nexus with the alleged undisclosed income of the assessee; nor did the Assessing Officer undertake independent enquiries to establish the form or manner in which the surrendered amount was available with the assessee on the date of search. The Tribunal reproduced and relied upon CBDT instructions and judicial precedents emphasising that confessional statements recorded during search must be corroborated by tangible material before forming the sole basis for assessment. On the facts, Shri Kailash Chandra Lohia's disclosure of Rs.8.00 crore for the assessee was not supported by any specific seized document or confronting question; he retracted the disclosure by affidavit; the assessee explained seized documents (SPL-01 to SPL-20) and offered an amount as sundry balances written back. In absence of any live link between the disclosure and seized material or other corroboration, the Assessing Officer's addition of the residual amount lacked the necessary evidentiary basis and was therefore unsustainable. [Paras 15, 16, 17, 18, 19]

Addition of Rs.4,50,00,000/- made solely on the basis of statement under Section 132(4), which was retracted and unsupported by corroborative material, is deleted.

Invocation of special charge provisions (Section 115BBE) based on uncorroborated confession - prohibition on making additions solely on the basis of search confessions - Whether the Assessing Officer was justified in invoking Section 115BBE to tax the said addition in the absence of corroborative material - HELD THAT: - The Tribunal accepted the ld. CIT(A)'s conclusion that invocation of Section 115BBE by the AO was incorrect where the foundational addition itself was based solely on an uncorroborated and retracted confession. Since there was no establishment of any unexplained investment, asset, or other material fact linking the alleged surrender to the assessee, the precondition for charging under the special provision did not exist. The AO had drawn a unilateral conclusion from the confessional statement without making enquiries or correlating seized material; in such circumstances application of Section 115BBE was not sustainable. [Paras 9, 16, 17, 19]

Invocation of Section 115BBE consequent to the impugned addition was held to be incorrect and therefore cannot be sustained.

Final Conclusion: The Tribunal upheld the ld. CIT(A)'s deletion of the addition of Rs.4,50,00,000/- and dismissed the revenue's appeal, holding that an addition founded solely on a statement under Section 132(4) which was retracted and unsupported by any corroborative/incriminating material cannot be sustained and that consequential charging under Section 115BBE was not justified.

Time-barred transfer pricing order - mandatory nature of time limit under section 92CA(3A) read with section 153 - ineligible assessee under section 144C(15)(b) where no transfer pricing variation exists - invalidity of draft assessment order under section 144C(1) for want of jurisdiction - final assessment barred by limitation under section 153

Time-barred transfer pricing order - mandatory nature of time limit under section 92CA(3A) read with section 153 - TPO's order held to be time-barred and therefore void - HELD THAT: - The Tribunal, following the Coordinate Bench decision in the assessee's own case, accepted that the time limit fixed by section 92CA(3A) (calculated as 60 days prior to the expiry of limitation under section 153) is mandatory. Applying that principle to the facts, the TPO's order dated 31.01.2016 was passed after the prescribed cut-off (midnight of 30.01.2016) and is therefore barred by limitation. Consequent to being time barred, the TPO order is treated as a nullity and is quashed. [Paras 6, 7]

TPO order quashed as time barred

Ineligible assessee under section 144C(15)(b) where no transfer pricing variation exists - invalidity of draft assessment order under section 144C(1) for want of jurisdiction - Draft assessment under section 144C(1) held invalid because the assessee was not an 'eligible assessee' once TPO order was void - HELD THAT: - The Tribunal held that the statutory definition of 'eligible assessee' in section 144C(15)(b) is restrictive and applies only where a transfer pricing variation arises as a consequence of a TPO order or to specified non-residents/foreign companies. If the TPO order is a nullity, there is no transfer pricing variation and the assessee cannot be treated as an 'eligible assessee'. Consequently, forwarding a draft assessment order under section 144C(1) to an ineligible assessee is without jurisdiction and renders that draft order invalid. [Paras 6, 7]

Draft assessment order under section 144C(1) invalid for want of jurisdiction

Final assessment barred by limitation under section 153 - invalidity of draft assessment order under section 144C(1) for want of jurisdiction - Final assessment order held to be barred by limitation and quashed - HELD THAT: - Because the TPO order was time barred and the draft assessment under section 144C(1) therefore void, the foundation for the subsequent final assessment did not survive. The Tribunal followed the Coordinate Bench's conclusion that where the extended limitation under section 153 has expired and the prerequisite TPO/draft proceedings are invalid, any final assessment made thereafter is barred by limitation and liable to be quashed. Applying those principles to A.Y.2016-17, the Tribunal allowed the additional grounds and quashed the assessment proceedings to that extent. [Paras 6, 7, 8]

Final assessment quashed as barred by limitation

Final Conclusion: Following the Coordinate Bench's reasoning, the Tribunal held the TPO's order time barred and void, concluded that the assessee was not an 'eligible assessee' for section 144C(1) purposes (making the draft assessment invalid), and quashed the consequential final assessment for A.Y.2016-17 as barred by limitation; the appeal is partly allowed.

Foreign Tax Credit - Form No. 67 filing requirement - directory not mandatory - Rule 128(9) of the Income Tax Rules as a procedural requirement - Section 90 - entitlement under DTAA overrides conflicting procedural requirements

Foreign Tax Credit - Form No. 67 filing requirement - directory not mandatory - Rule 128(9) of the Income Tax Rules as a procedural requirement - Section 90 - entitlement under DTAA overrides conflicting procedural requirements - Whether delay in furnishing Form No.67 in contravention of Rule 128(9) precludes grant of foreign tax credit claimed under section 90/DTAA for AY 2019-20 - HELD THAT: - The Tribunal examined whether non-filing of Form No.67 by the due date prescribed in Rule 128(9) disentitles the assessee to foreign tax credit. Relying on coordinate decisions of the Tribunal and on the principle that procedural rules which do not prescribe a negative consequence for non compliance should be treated as directory, the Court held that Rule 128(9) does not itself provide for denial of foreign tax credit. The entitlement to credit under section 90 and the DTAA cannot be nullified by a procedural omission in the Rules where no statutory consequence is prescribed. Applying these principles to the facts - the assessee claimed FTC in the timely return, filed Form No.67 belatedly before completion of assessment proceedings and sought rectification - the Tribunal found that the claim could not be rejected solely on this technical ground and directed verification and grant of credit by the Assessing Officer in accordance with law and precedents. The Tribunal therefore upheld the CIT(A)'s approach of allowing the claim for consideration on merits and directing the AO to give credit after due verification. [Paras 11, 12]

Delay in filing Form No.67 did not oust the assessee's right to foreign tax credit; CIT(A)'s order sustaining that approach is upheld and the AO is directed to allow the credit after due verification.

Final Conclusion: The Revenue's appeal is dismissed; the CIT(A)'s order allowing the assessee's claim for foreign tax credit (subject to verification) is upheld and the Assessing Officer is directed to grant credit as per Form No.67 after due verification.

High pitched assessment - waiver of pre deposit of 20% under Section 220(6) of the Income tax Act - grant of installment facility pending appeal - binding effect and scope of CBDT instructions on high pitched scrutiny assessments - genuine hardship as a ground for waiver or modification of pre deposit - public interest and balance of convenience in stay of revenue recovery

High pitched assessment - waiver of pre deposit of 20% under Section 220(6) of the Income tax Act - grant of installment facility pending appeal - genuine hardship as a ground for waiver or modification of pre deposit - binding effect and scope of CBDT instructions on high pitched scrutiny assessments - public interest and balance of convenience in stay of revenue recovery - Whether the petitioner was entitled to waiver of the statutory pre deposit of 20% of the assessed tax liability on the ground of a high pitched assessment, or otherwise entitled to quash the orders granting instalment payment directions. - HELD THAT: - The Court examined the assessment order and the material before the Assessing Officer including survey findings and related party transactions, and noted that the Assessing Officer recorded specific reasons and materials to support the assessment. The revenue authorities (ACIT and PCIT) considered the petitioner's stay application under Section 220(6) and, after hearing, granted instalment relief and thereafter reduced instalments; those orders were neither arbitrary nor the result of non application of mind. The petitioner failed to adduce evidence to substantiate 'genuine hardship' or proof of financial inability to comply with the instalment scheme; vague assertions of hardship were insufficient. While CBDT instructions and prior decisions relating to high pitched assessments may guide departmental practice, they do not oust the statutory framework or the discretionary power of authorities to fix deposit conditions, nor do they render instalment directions issued after hearing perverse. The Court also applied the established principle that public interest and the balance of convenience in revenue matters inform interim relief, and that mere showing of a prima facie case does not automatically warrant stay of recovery. Having regard to the facts, the material relied upon by the Assessing Officer, the instalment facility granted by the revenue, and the petitioner's failure to pursue or place before the appellate authority an application for waiver of pre deposit, the Court found no ground to interfere with the orders under challenge and declined to treat the assessment as such a high pitched case requiring waiver of the pre deposit. [Paras 13, 16, 17, 18, 23]

Petition dismissed; no waiver of the pre deposit was directed and the revenue orders granting and moderating instalment payments were upheld.

Final Conclusion: Writ petition dismissed. The Court upheld the revenue authorities' exercise of discretion in granting and reducing instalment payments pending appeal, found no arbitrariness or failure to consider genuine hardship, and refused to direct waiver of the statutory 20% pre deposit for Assessment Year 2018 2019.

Violation of principles of natural justice - right to be heard / hearing in person before adverse order - revision under Section 264 of the Income Tax Act, 1961 - ex-parte order

Violation of principles of natural justice - right to be heard / hearing in person before adverse order - revision under Section 264 of the Income Tax Act, 1961 - The revision order dated March 23, 2021 was passed in breach of the petitioner's right to be heard under Section 264 proceedings. - HELD THAT: - The court examined the file noting that the matter was fixed for hearing on March 10, 2021 but no order was recorded on that date and no noting indicated that the petitioner had been heard or that an adjournment application had been considered. Although there is a file note dated March 16, 2021 indicating rejection, the material order bears the date March 23, 2021. As the revision application under Section 264 was not heard on the earlier date, the officer ought to have afforded the petitioner a further opportunity of personal hearing before passing an adverse order. Failure to grant such an opportunity amounted to a breach of the principles of natural justice. The court emphasised that hearing in person is a salutary requirement before an adverse order is passed and therefore intervened. [Paras 5, 6, 7]

Order dated March 23, 2021 quashed and set aside; matter remitted to the officer to issue notice and hear the petitioner within two months, no adjournment to be granted and entire process to be completed within three months, with liberty to pass an ex-parte order if the petitioner does not participate.

Final Conclusion: Writ petition allowed; the administrative order under Section 264 is set aside for breach of natural justice and the respondent is directed to afford a fresh personal hearing within the stipulated time frame, failing which an ex-parte decision may follow.

Change of opinion - reopening of assessment - reassessment under Section 148 - procedure under Section 148A - limited scrutiny assessment

Limited scrutiny assessment - change of opinion - reopening of assessment - Validity of the reopening of assessment and notice under Section 148/148A when the same issue was considered and accepted during the original limited scrutiny assessment - HELD THAT: - The Court found that the question whether the sale of the flat gave rise to short-term capital gain was raised and considered during the limited scrutiny assessment, and the Assessing Officer accepted the explanation and made no addition in the assessment order dated 28 April 2021. The subsequent initiation of reassessment under Section 148/148A, which reached an opposite conclusion, amounted to a mere change of opinion by the Assessing Officer. The Court applied the settled principle that reassessment cannot be used as a vehicle to review issues already considered and accepted in the original assessment; change of opinion, by itself, does not furnish the requisite justification for reopening an assessment. Consequently the order under Section 148A(d) and the notice under Section 148 dated 31 March 2022 were quashed. [Paras 8, 9]

Reopening was invalid as it resulted from change of opinion on an issue already considered in the original limited scrutiny assessment; impugned order and notice dated 31.03.2022 quashed.

Change of opinion - reassessment under Section 148 - procedure under Section 148A - Whether the concept of change of opinion survives despite amendments to reassessment provisions contended by the Revenue - HELD THAT: - The Court addressed the Revenue's submission that amendments made by the Finance Act, 2021 altered the reassessment scheme so as to displace the change-of-opinion doctrine. Relying on the Court's earlier discussion in Siemens Financial Services Private Limited and established authorities, the Court held that the change-of-opinion principle continues to operate as a normative check against arbitrary reopening. The Court accepted that if a reopening is shown to be based on a change of opinion where the matter was earlier considered, the reassessment cannot stand. [Paras 7, 8]

The change-of-opinion principle remains applicable; a reopening founded on mere change of opinion is impermissible.

Final Conclusion: Writ petition allowed; the order under Section 148A(d) and notice under Section 148 dated 31.03.2022 are quashed as the reassessment proceeded from a change of opinion on an issue already considered and accepted in the original limited scrutiny assessment (AY-2018-19).

Validity of reassessment notice under Section 148/148A in absence of tangible material - Onus on Revenue to prove receipt of 'on-money' / cash payments - Application of Explanation to Section 149(1)(b) and escaped asset threshold - Protection against double taxation where amount has been offered to tax before the Settlement Commission - Relief under Article 226 against invalid assessment and consequential deposit/direction for appeal

Validity of reassessment notice under Section 148/148A in absence of tangible material - Application of Explanation to Section 149(1)(b) and escaped asset threshold - Impugned order under Section 148A(d), the notice under Section 148 and the consequent assessment order are quashed for lack of satisfactory/material basis. - HELD THAT: - The Court found the order dated 23rd July 2022 under Section 148A(d) to be unacceptable and unsupported by tangible material. The Assessing Officer relied primarily on a letter said to be from the builder (Lucina) and made assumptions about the market value and total payments to classify the property as an 'asset' within the ambit of the Explanation to Section 149, apparently to meet the escaped asset threshold. The AO did not explain valuation discrepancies or produce evidence showing that amounts in excess of the prescribed threshold were paid in the relevant assessment year. On the material on record, particularly given the assessee's categorical denial of cash payments and documentary assertions about sources of funds, the notice and the assessment could not be sustained. The Court therefore quashed the order under Section 148A(d), the notice under Section 148 and the assessment order. [Paras 2, 10, 11, 13]

Impugned order dated 23rd July 2022, the notice under Section 148 and the assessment order are quashed and set aside.

Onus on Revenue to prove receipt of 'on-money' / cash payments - Protection against double taxation where amount has been offered to tax before the Settlement Commission - Revenue's reliance on the builder's statement alone was insufficient; further, amounts admitted by the builder before the Settlement Commission militated against taxing the assessee on the same amount. - HELD THAT: - The Court emphasised that the burden lies on the Revenue to demonstrate that the assessee in fact made cash/on-money payments and acquired an asset representing escaped income. Reliance solely on a letter allegedly from the builder, without independent corroboration, is inadequate especially when the assessee has denied cash payments and has explained sources of funds. The assessment also overlooked that the builder had offered the purported amounts to tax before the Settlement Commission; where the amount has been so offered, the Court questioned the basis for taxing the same sum again in the hands of the assessee. These considerations reinforced the conclusion that there was no tangible material to sustain reassessment or additions. [Paras 11, 12]

Reliance on the builder's statement was inadequate; the Revenue failed to discharge its onus and the fact that the builder had offered the amount before the Settlement Commission undercut taxation of the same amount in the assessee's hands.

Final Conclusion: Considering the absence of tangible material to justify reopening, the Assessing Officer's reliance on the builder's letter and the prior offer of the amount to tax by the builder, the High Court quashed the order under Section 148A(d), the reassessment notice and the assessment order for AY 2015-2016; the petitioner was permitted to withdraw the appeal and no costs were awarded.

Unexplained expenditure treated as income under section 69C - peak credit in bank account treated as income - burden of explanation and valuation of seized documents - concurrent findings of fact by Assessing Officer, CIT(A) and ITAT - remand for verification of interest under section 234B

Unexplained expenditure treated as income under section 69C - burden of explanation and valuation of seized documents - Addition made on account of amounts recorded in seized diary treated as unexplained expenditure under section 69C was upheld - HELD THAT: - The Court accepted the concurrent factual findings of the revenue authorities that lose papers and diary entries seized from the assessee's residence, admitted to belong to the assessee's household, recorded amounts which the Assessing Officer found to be payments made by the assessee and not merely commissions received. The assessee's shifting and inconsistent explanations, failure to produce persons whose names were recorded, the mismatch between details furnished by M/s. Devashri Real Estate Developers and the entries in the seized material, and absence of contemporaneous disclosure in returns led the authorities to conclude the sums were unexplained expenditure. The High Court held that adverse inference was not drawn solely from the entries but from the assessee's explanations and surrounding materials, and therefore the addition under section 69C was sustainable on the facts. [Paras 11, 12, 13, 14, 19]

Addition under section 69C on account of amounts in seized diary sustained; appellant's challenge rejected.

Peak credit in bank account treated as income - burden of explanation and valuation of seized documents - Treating peak credit in the undisclosed bank account as assessable income was upheld - HELD THAT: - The Assessing Officer identified peak credits in an account maintained for agricultural receipts and, considering the assessee's inadequate explanation and lack of documentary proof for alleged sale of capital goods or other sources, treated the peak credit as income from non-agricultural activity. The CIT(A) and ITAT considered the material, including the absence of contemporaneous evidence and the timing of production of books after the search, and concurred with the assessment of the peak credit. The High Court found no reason to interfere with these concurrent findings of fact. [Paras 10, 14, 16, 17]

Addition on account of peak credit sustained; appellant's challenge dismissed.

Remand for verification of interest under section 234B - Matter remitted for verification and adjudication regarding increase of interest under section 234B - HELD THAT: - The ITAT observed that an increase in interest under section 234B could be made only if interest under that section had been charged in the original assessment. On that basis the Tribunal remitted the question to the Assessing Officer for verification of facts and proper adjudication of interest liability. The High Court records this remand and does not disturb the Tribunal's direction regarding verification. [Paras 15, 16]

Issue of interest under section 234B remitted to Assessing Officer for verification and fresh adjudication.

Final Conclusion: The High Court dismissed the taxpayer's appeal and upheld the additions made by the revenue on the facts - including the addition under section 69C and the treatment of peak bank-credit as income - while noting and preserving the ITAT's remand to the Assessing Officer for verification and adjudication of interest under section 234B.

Unexplained cash credits under Section 68 - Burden of proof and cogent evidence for genuineness under Section 68 - Brokerage/commission as income for providing accommodation entries - Peak credit principle for determining income - Application of ratio from co-ordinate tribunal decision to a sub-broker

Unexplained cash credits under Section 68 - Burden of proof and cogent evidence for genuineness under Section 68 - Addition of the entire cash deposits as unexplained credits under Section 68 was unsustainable where the assessee disclosed source and particulars and income was assessed as brokerage. - HELD THAT: - The Court examined whether Section 68 could be invoked despite large cash deposits. The assessing officer and subsequent authorities recorded that the assessee had disclosed full details of bank accounts, cheques issued and had admitted receiving cash against cheques; they treated the assessee as a sub-broker earning brokerage for providing accommodation entries and assessed commission accordingly. Applying the principles in P. Mohannakala and Sumati Dayal, the Court held that once the source and transaction details were disclosed and income was assessed as brokerage/commission, Section 68 was not invokable to treat the entire cash deposits as the assessee's income. The opinion of the assessing officer rejecting any other explanatory contention must be based on materials, but here the assessing officer himself treated the receipts as resulting in commission income rather than unexplained income; accordingly the ITAT's deletion of the addition under Section 68 was correct. [Paras 16, 17, 18, 20]

Addition of Rs. 166.59 crores under Section 68 set aside; Section 68 inapplicable where receipts were disclosed and assessed as brokerage.

Brokerage/commission as income for providing accommodation entries - Peak credit principle for determining income - Tribunal correctly applied the peak credit principle and determined income by adopting the peak credit amount in place of the lower brokerage computation. - HELD THAT: - The ITAT, after noting the assessee's role as a sub-broker and the detailed daily summaries of bank credits, found the peak credit during the relevant period to be higher than the commission computed at 2% of total deposits. Following the material placed before it (including daily summaries establishing peak balance), the Tribunal applied the peak credit principle to fix the assessee's income at the higher figure. The High Court found no reason to interfere as the principal broker's decision (upholding either 2% commission or peak credits whichever higher) remained unchallenged before the High Court and the ITAT's adoption of peak credit flowed from the facts and records placed before it. [Paras 13, 21]

ITAT's substitution of income by applying peak credit is sustained.

Application of ratio from co-ordinate tribunal decision to a sub-broker - Peak credit principle for determining income - Tribunal was justified in applying its earlier ratio in the principal broker's case to the sub-broker on the facts before it. - HELD THAT: - The Tribunal followed its order in the case of the principal broker after due consideration of the respondent's factual position. Both the assessing officer and appellate authorities had recorded that the respondent was a sub-broker of the principal broker. Given that the ITAT in the principal broker's case had held that either commission at 2% or peak credits during the period, whichever was higher, should be taken as income, and since the principal broker's decision had not been interfered with by the High Court, the Tribunal's application of that ratio to the sub-broker-after examining the respondent's records and peak balance-was appropriate. The High Court found no error in the Tribunal's reliance on the co-ordinate Bench's decision in those circumstances. [Paras 13, 14, 21]

Tribunal permissibly applied the ratio from the principal broker's decision to the respondent (sub-broker).

Final Conclusion: All substantial questions of law were answered in favour of the assessee and against the revenue: the addition under Section 68 was correctly set aside, the ITAT correctly applied the peak credit principle to determine income, and application of the co-ordinate Bench's ratio from the principal broker's case to the sub-broker was justified; the revenue's appeal is dismissed.

Power of revision under Section 263 - Limited scrutiny assessment - Deduction under Section 80P(2)(d) - Erroneous and prejudicial to the interests of revenue

Power of revision under Section 263 - Limited scrutiny assessment - Erroneous and prejudicial to the interests of revenue - Whether the Principal Commissioner could exercise revisionary jurisdiction under Section 263 to set aside an assessment on a matter that was not within the scope of the limited scrutiny selection of the assessment proceedings. - HELD THAT: - The Tribunal held that the assessment had been selected for limited scrutiny only on specific issues (investments/advances/loans; disallowance under Section 40(9); disallowance under Section 40A(7)). The Principal Commissioner invoked Section 263 to revise the assessment on the separate ground that deduction claimed under Section 80P(2)(d) was not admissible. The Court concluded that it is impermissible for the Principal Commissioner to expand the scope of limited scrutiny by invoking Section 263 to find fault with an assessment on an issue which the Assessing Officer could not have examined in the limited scrutiny exercise. Reliance on judicial precedents (as discussed in the judgment) supports the principle that, in limited scrutiny cases, the AO is confined to the reasons of selection and the Commissioner cannot, under Section 263, remit matters beyond that scope on the ground of the assessment being erroneous and prejudicial. Applying that principle to the facts, the Tribunal found that the Principal Commissioner erred in revising the assessment on the Section 80P issue which was not part of the limited scrutiny scope and therefore the exercise of revisionary power was not justified. [Paras 12, 13]

The order passed under Section 263 is set aside and the assessment order is held not to be erroneous and prejudicial to the interests of revenue.

Final Conclusion: The appeal is allowed; the revisionary order under Section 263 is quashed and the assessment for Assessment Year 2018-19 is upheld as not erroneous and prejudicial to the interests of revenue.

Second hand capital goods - EPCG Scheme - benefit of Notification No.22/2013 dt. 18.04.2013 - expert/chartered engineer opinion as corroborative evidence - transaction value and enhancement of assessable value - penalty and redemption fine under Customs Act

Second hand capital goods - EPCG Scheme - benefit of Notification No.22/2013 dt. 18.04.2013 - Imported 14 sets of plastic injection moulds are eligible for EPCG benefit and are not to be treated as second hand capital goods. - HELD THAT: - The appellate tribunal examined the materials on record - purchase order, drawings, photographs and the supplier's certificate - and found a plausible inference that the moulds were manufactured for and intended to be used by the appellant (the etching 'SALZER' and the drawings requiring such etching). Although a Chartered Engineer reported that the moulds appeared two to three years old and 'used', the report did not record the factual basis for that conclusion (for example, specific wear-and-tear particulars) nor did it note the etching evident in the photographs. In these circumstances the tribunal held that the engineer's conclusion that the moulds were 'used' could not be accepted as conclusive and outweighed by other contemporaneous evidence. On the totality of evidence the denial of exemption under Notification No.22/2013 and refusal of EPCG benefit on the ground that the goods were second hand was not justified. [Paras 11, 12, 13, 15]

The moulds are not to be treated as second hand for the purposes of the EPCG Scheme and the benefit of Notification No.22/2013 is allowable.

Expert/chartered engineer opinion as corroborative evidence - The Chartered Engineer's opinion cannot be the sole conclusive basis for denying EPCG benefit where it is not supported by stated factual findings and is contradicted by other documentary and photographic evidence. - HELD THAT: - The tribunal emphasised that an expert opinion is corroborative and must state the facts on which it is based. The engineer's report merely concluded that the items were 'used' and two to three years old without detailing the factual indicators of wear or reconditioning; it also omitted reference to the etching evident in photographs. Acceptance of such an opinion without stated factual foundations would amount to undue delegation of the adjudicatory function. Therefore, reliance solely on that report to decide eligibility was unsustainable. [Paras 13]

The expert opinion could not be given overriding weight in the absence of stated factual basis and in face of contrary documentary and photographic evidence.

Transaction value and enhancement of assessable value - The enhancement of the declared transaction value by the department was unjustified and unsupported by reasons on record. - HELD THAT: - The Chartered Engineer's report expressly stated that the declared value was fair and reasonable, yet the adjudicating authority enhanced the assessable value without recording how such enhanced figures were derived or why the transaction value was rejected. The tribunal found no satisfactory reasons for doubting the transaction value and observed that the impugned order fails to explain the basis for the enhanced valuation; such unexplained enhancement cannot be sustained. [Paras 14, 15]

The enhancement of value is set aside for lack of reasoned basis and the declared transaction value must be accepted.

Penalty and redemption fine under Customs Act - The demand of duty, confiscation, redemption fine and penalty imposed by the adjudicating authority are unsustainable and are set aside. - HELD THAT: - Since the tribunal concluded that the goods were eligible for EPCG benefit and that there was no valid basis for enhancement of value, the consequential measures imposed by the original order - duty demand, redemption fine and penalty - lacked legal foundation. The orders imposing penalty and redemption fine proceeded from the same erroneous findings about the nature and value of the goods and therefore could not stand. [Paras 15]

Duty demand, confiscation/redemption fine and penalty are quashed.

Final Conclusion: The appeal is allowed. The impugned order is set aside: the imported moulds are entitled to EPCG/Notification No.22/2013 benefit; the enhancement of value is annulled; and the duty demand, redemption fine and penalties are quashed, with consequential relief as applicable.

Foreign markings not sufficient to establish foreign origin - reasonable belief for action under section 123 requires evidence of foreign origin and smuggling - inadmissibility of statements not supported by examination under section 138B - confiscation under section 111(d)/119/115 unsupported without evidence of smuggling

Foreign markings not sufficient to establish foreign origin - reasonable belief for action under section 123 requires evidence of foreign origin and smuggling - Validity of absolute confiscation of seven gold bars on the ground that they were of foreign origin and smuggled. - HELD THAT: - The Tribunal held that the authorities below placed undue reliance on foreign make markings to infer foreign origin and smuggled nature of the seven seized gold bars. Citing precedent, foreign markings do not by themselves establish that the markings were put by the foreign manufacturers or that the goods are of foreign origin; such markings amount to hearsay unless supported by evidence. Even if foreign origin were established, that alone does not prove smuggling because lawful import of foreign gold is possible and prevalent. Section 123 can be invoked only where there is evidence to form a reasonable belief that the goods are of foreign origin and brought into the country contrary to law; mere absence of purchase documents or markings is insufficient to constitute such reasonable belief. In the absence of prima facie evidence of foreign origin or illegal importation, confiscation under the Customs Act could not be sustained. [Paras 4]

Confiscation of the seven gold bars set aside.

Inadmissibility of statements not supported by examination under section 138B - confiscation under section 111(d)/119/115 unsupported without evidence of smuggling - Sustainability of confiscation of eight gold bars allegedly purchased earlier (based on appellants' statements) and reliability of those statements. - HELD THAT: - The Tribunal found the allegation that eight gold bars were of foreign origin and smuggled rested solely on the appellants' statements which were inconsistent with subsequent departmental findings (nine bars released as of Indian origin) and lacked corroborative details. Further, the deponents of such statements were not examined or cross-examined as required by section 138B, rendering those statements unreliable and inadmissible as decisive evidence. In absence of reliable evidence showing foreign origin or illegal importation, confiscation under section 111(d) and the redemption fine imposed could not be sustained. [Paras 4]

Confiscation of the eight gold bars and the redemption fine set aside.

Confiscation under section 119 unsupported without evidence of smuggling - foreign markings not sufficient to establish foreign origin - Validity of confiscation (and option of redemption fine) in respect of nine MMTC-PAMP marked gold bars held to have been used for concealment of smuggled gold under section 119. - HELD THAT: - The Tribunal observed there was no evidence that the nine MMTC-PAMP bars were used to conceal smuggled goods or that the appellants knew or had reason to believe any bars were smuggled. The bars were not found concealed, forensic analysis of phones did not yield incriminating material, and absent proof that the seven bars were smuggled, the premise for treating the nine bars as instruments of concealment fails. Given that mere foreign markings or absence of bills does not establish smuggling or concealment, confiscation under section 119 and the imposition of redemption fine under section 125 were held unsupportable. [Paras 4]

Confiscation of the nine MMTC-PAMP bars and the redemption fine set aside.

Confiscation under section 115 unsupported without evidence of smuggling - Sustainability of confiscation of the Hyundai Verna car as used for transport/concealment of smuggled gold under section 115. - HELD THAT: - The Tribunal noted the car was not shown to have contained concealed goods, the seized gold's smuggled character was not established, and there was no evidence appellant knew of any smuggling. The argument that the appellant could not challenge confiscation because transfer formalities were pending was not tenable in the factual matrix. Since the foundational finding of smuggling failed, section 115 could not be invoked to confiscate the vehicle or sustain the redemption fine. [Paras 4]

Confiscation of the Hyundai Verna and the redemption fine set aside.

Confiscation under section 111(d)/119/115 unsupported without evidence of smuggling - inadmissibility of statements not supported by examination under section 138B - Sustainability of penalties and fines imposed on the appellants consequent to the confiscations. - HELD THAT: - Because confiscations and the underlying findings of foreign origin and smuggling were held unsupportable for lack of evidence, and certain penalties were premised on inadmissible or unreliable statements, the Tribunal held that consequential fines and personal penalties could not survive independently. Where the foundational adjudication is quashed, associated fines and penalties fall away. [Paras 4, 5]

All fines and penalties imposed in the impugned orders set aside.

Final Conclusion: The appeals are allowed; the impugned adjudication and appellate orders of confiscation, fines and penalties in respect of the seized gold bars and the vehicle are set aside for want of evidence to form the necessary reasonable belief of foreign origin and smuggling, and for reliance on inadmissible statements; consequential relief, if any, to follow in accordance with law.

Modification/rectification of Bill of Entry - time bar - classification (CTH) - principles of natural justice - show cause notice for reassessment - remand for fresh consideration

Modification/rectification of Bill of Entry - time bar - Whether dismissal of the appeal by the Commissioner (Appeals) on the ground of time bar was justified despite modification of the Bill of Entry on 01/07/2015 and filing of the appeal thereafter. - HELD THAT: - The Tribunal found on facts that the appellant voluntarily sought rectification by letter dated 20/05/2015 and that the Bill of Entry was reassessed/modified on 01/07/2015 removing the earlier exemptions and changing the CTH. The Commissioner (Appeals) treated the original assessment date 11/04/2015 as determinative and dismissed the appeal as time-barred, ignoring the reassessment and the fact that the appellant filed the appeal within about fifty days of the reassessed Bill of Entry. The Tribunal held that dismissal on time-bar in those circumstances was erroneous and unjust, particularly where the appellant (a PSU) had sought reassessment to rectify a mistake and had paid the duty. The impugned order of the Commissioner (Appeals) was therefore set aside. [Paras 8, 9]

Impugned order dismissing the appeal as time-barred set aside; appeal was filed within time from the reassessed Bill of Entry.

Classification (CTH) - principles of natural justice - show cause notice for reassessment - remand for fresh consideration - Whether the Assessing Officer's re-classification of the goods from CTH 27101219 to CTH 27101990 without notice was sustainable and what remedial directions are required. - HELD THAT: - The Tribunal found that the Assessing Officer had reclassified the imported goods to CTH 27101990 and removed notification benefits without issuing any notice to the appellant. The Tribunal emphasised that the principle of natural justice requires that an importer be put on notice when classification is proposed to be changed, and that the assessing authority could not arbitrarily alter the CTH without giving the appellant an opportunity to be heard. The Tribunal also noted an inconsistency in departmental treatment, with exports of the same product being classified under CTH 27101219. In view of these defects, the Tribunal remanded the matter to the Assessing Authority to issue a show cause notice specifying the proposed modification of the CTH and the grounds therefor, afford the appellant an opportunity to make submissions in defence, and proceed thereafter. The Tribunal directed completion of the proceedings within four months from receipt of its communication. [Paras 10, 11, 12, 13]

Reassessment set aside for want of notice; matter remanded to Assessing Authority to issue show cause notice, hear the appellant and decide afresh within four months.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order dismissing the appeal as time-barred, finding the appeal was filed in time from the reassessed Bill of Entry, and remanded the classification issue to the Assessing Authority with directions to issue a show cause notice, follow principles of natural justice and complete proceedings within four months.

Exemption for small service providers under Notification No.6/2005 (as amended) - option to avail or waive exemption for a financial year - Business Auxiliary Services (BAS) - characterization and burden on Revenue to identify sub-clause

Exemption for small service providers under Notification No.6/2005 (as amended) - option to avail or waive exemption for a financial year - Validity of the demand of service tax confirmed by the lower authorities in light of the small service provider exemption and the appellant's exercise (or non-exercise) of option under the Notification. - HELD THAT: - The Tribunal found that the Revenue treated the appellant as rendering Business Auxiliary Services but failed to identify under which sub-clause the alleged service fell. The Notifications governing the small service provider exemption allow a provider the option to not avail the exemption and pay service tax for a financial year, and once such option is exercised it operates only for that financial year. The authorities below did not dispute the appellant's claim that the aggregate value of taxable services for the years under dispute was below the threshold prescribed by the Notifications. In these circumstances, and having regard to the settled duty of a Tribunal to grant relief where a taxpayer is entitled to it (as noted by reference to Commissioner of Income Tax, Madras Vs. Mahalakshmi Textile Mills Ltd ), the Tribunal held that the demand confirmed in the impugned order could not be sustained and must be set aside. [Paras 6, 7, 8]

Demand confirmed in the impugned order set aside and the appeal allowed with consequential benefits as per law.

Final Conclusion: The appeal is allowed: the demand for service tax confirmed by the lower authorities is set aside because the appellant's receipts were below the threshold for exemption under the Notifications and the Revenue did not establish a valid basis to deny that exemption; consequential benefits, if any, to follow as per law.

Eligibility for abatement under Notification No. 01/2006-ST when CENVAT Credit was availed - reversal of CENVAT Credit equates to non-taking of credit - utilisation of CENVAT Credit disqualifies abatement

Eligibility for abatement under Notification No. 01/2006-ST when CENVAT Credit was availed - reversal of CENVAT Credit equates to non-taking of credit - Assessee's entitlement to benefit of Notification No. 01/2006-ST for the period April 2010 to March 2011 despite having availed and utilised CENVAT Credit, which was subsequently reversed with interest. - HELD THAT: - The Tribunal found that the appellant had availed CENVAT Credit during the impugned period while also claiming abatement under Notification No. 01/2006-ST, thus prima facie contravening the notification's condition. However, on reversal of the availed credit along with payment of applicable interest, the legal position-following Chandrapur Magnet Wires and subsequent tribunal and High Court decisions-is that a reversal/debit entry operates as if no credit had been taken. The Tribunal relied on binding and consistent decisions holding that subsequent reversal of credit (even if reversed at a later stage) results in the assessee being treated as not having taken the credit, thereby restoring eligibility for an exemption or abatement conditioned on non availment of credit. Applying these precedents to the facts, where the appellant reversed the CENVAT credit with interest, the bar on claiming the abatement ceased to operate and the denial of exemption by the lower authorities was unsustainable. [Paras 7, 8, 11, 13]

The denial of abatement was set aside and the appeal allowed; reversal of the availed CENVAT credit with interest entitles the appellant to benefit of Notification No. 01/2006-ST for the period April 2010 to March 2011.

Final Conclusion: Appeal allowed. Following settled precedent, reversal of the availed CENVAT credit with interest is treated as non taking of credit and consequently the appellant is entitled to the abatement under Notification No. 01/2006 ST for the impugned period, with consequential relief as per law.

Renting of immovable property service - person who receives payment is liable to pay service tax - co-owners treated as separate service providers - threshold exemption under Notification No. 6/2005-ST - association of persons not to be presumed for levy

Person who receives payment is liable to pay service tax - co-owners treated as separate service providers - Liability of the partnership firm (appellant) to discharge service tax in respect of rent from a jointly owned property - HELD THAT: - The Tribunal found that the rent was paid by the service recipient directly to the individual co-owners and TDS was deducted in their names; no amount was received by the partnership firm. Under the facts, each co-owner who received rent is the person liable for service tax as the service provider. The show cause notice issued to the partnership firm (which did not itself receive the rent) is unsustainable. The Tribunal distinguished authorities where the firm had received rent and later distributed shares, holding those facts to be materially different. Accordingly the demand against the appellant (partnership firm) cannot be sustained. [Paras 4]

Demand against the partnership firm set aside; firm not liable as it did not receive the rent.

Threshold exemption under Notification No. 6/2005-ST - co-owners treated as separate service providers - association of persons not to be presumed for levy - Whether the benefit of the SSI exemption (Notification No. 6/2005-ST) can be denied to co-owners because the aggregate rent for the property exceeds the threshold - HELD THAT: - The Tribunal applied settled precedents holding that where co-owners receive rent individually in their accounts, each co-owner is an independent service provider for renting of immovable property and service tax liability must be determined in respect of each individual. The aggregate rent for the single property cannot be treated as one composite receipt for levy against an individual co-owner. Therefore, if the rent received by each co-owner in his individual capacity is below the threshold, the exemption under Notification No. 6/2005-ST applies to that co-owner. The Tribunal rejected the Revenue's contention that co-owners should be treated as an association of persons or that the entire rent must be apportioned without regard to individual receipts. [Paras 4]

Co-owners entitled to exemption if their individual receipts are below the threshold; aggregate receipt of the property not to be imputed to an individual co-owner.

Final Conclusion: The appeal is allowed: the demand against the partnership firm is set aside because the firm did not receive the rent; each co-owner who received rent must be treated as an individual service provider and, being below the threshold, is entitled to exemption under Notification No. 6/2005-ST.

Business Auxiliary Services - Service - Principal-to-principal transaction - Forfeiture / liquidated damages not consideration for service - CENVAT credit reversal under Rule 6(3) / Rule 6(3A) - Show Cause Notice must specify classification/sub clause

Business Auxiliary Services - Service - Principal-to-principal transaction - Show Cause Notice must specify classification/sub clause - Demand of service tax on incentives/discounts received from Volkswagen and Castrol as consideration for Business Auxiliary Services - HELD THAT: - The Tribunal found that the show cause notice merely alleged that the receipts were BAS without specifying the sub clause of the BAS definition, and the adjudicating authority went further to treat the receipts as consideration for promotion/marketing. Material (dealer) agreements, however, established a principal to principal purchase and resale relationship: the appellant acquired title to goods and resold them, and incentives were linked to sales targets benefitting the appellant for its own commercial gain. Following precedents treating dealer incentives/discounts as trade discounts rather than consideration for services, the Tribunal held there is no element of service either under the BAS definition (pre 1/7/2012) or under the definition of service (post 1/7/2012). Consequently the demands on incentives/discounts from Volkswagen and Castrol were unsustainable and set aside.

Demand of service tax on incentives/discounts from Volkswagen and Castrol set aside.

Forfeiture / liquidated damages not consideration for service - Declared service - Service - Liability to pay service tax on amounts forfeited from customers as advance on cancellation of car bookings - HELD THAT: - Relying on consistent Tribunal authority, the Tribunal treated forfeiture/penal charges or liquidated damages as payments by way of penalty or compensation for breach/forfeiture and not as consideration for any service. The forfeited advance was held to be a contractual condition or liquidated damages rather than payment for agreeing to tolerate an act or for providing any service; hence receipts on forfeiture do not attract service tax under declared services or the general definition of service. The Tribunal therefore held the confirmed demand on forfeitures unsustainable.

Demand of service tax on forfeited advance amounts set aside.

CENVAT credit reversal under Rule 6(3) / Rule 6(3A) - Demand for reversal by applying percentage method under Rule 6(3)(i) despite appellant having reversed proportionate credit under Rule 6(3)(ii)/(3A) - HELD THAT: - The Tribunal held that the procedural requirement of prior intimation under Rule 6(3A) is procedural only and does not deprive an assessee of the substantive option to reverse proportionate credit (Rule 6(3)(ii)). Precedents establish that failure to follow the intimation procedure does not automatically force application of the fixed percentage method under Rule 6(3)(i). The appellant had quantified and paid the proportionate credit with interest under the Rule 6(3A) mechanism; accordingly the department could not demand the 5%/6%/7% percentage based reversal. The demand based on applying Rule 6(3)(i) was therefore unsustainable.

Demand for reversal under Rule 6(3)(i) set aside where appellant reversed proportionate credit under Rule 6(3)(ii)/(3A).

Final Conclusion: The Tribunal set aside the impugned order in its entirety for the period April 2011 to March 2016: demands of service tax on manufacturer/third party incentives and on forfeited advances were quashed, and the claim for percentage based CENVAT reversal was disallowed where proportionate reversal under Rule 6(3A) had been effected; consequential reliefs granted.

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

Remission of duty on destroyed finished goods - absence of negligence / proper steps taken to avoid fire - evidentiary value of insurance survey and forensic inspection - rectification of registration to cure inadvertent error retrospectively - re-adjudication / de novo consideration on remand

Remission of duty on destroyed finished goods - evidentiary value of insurance survey and forensic inspection - absence of negligence / proper steps taken to avoid fire - Whether the adjudicating authority correctly rejected the appellant's claim for remission of duty for finished goods destroyed by fire - HELD THAT: - The Tribunal found that the insurance survey and forensic inspection established that the fire occurred due to a short circuit and that the appellant's staff took immediate and appropriate steps to extinguish the fire. The adjudicating authority's rejection rested on an assumption of appellant's lapse without conducting or relying on any departmental inspection; the Tribunal held that the commissioner ought to have considered the detailed insurance-related survey and forensic reports before rejecting the remission claim. In view of these evidentiary materials and the absence of departmental findings of negligence, the appellant's defence was held to be prima facie reasonable. The matter was not finally decided on merits by the Tribunal but directed to be reconsidered by the adjudicating authority in the light of the insurance survey, forensic report and the appellant's submissions. [Paras 4]

Impugned rejection set aside and the remission claim remanded to the adjudicating authority for de novo consideration having regard to the insurance survey and forensic inspection reports.

Rectification of registration to cure inadvertent error retrospectively - re-adjudication / de novo consideration on remand - Whether the discrepancy in plot numbers in the Central Excise registration justified denial of the remission claim - HELD THAT: - The Tribunal accepted the appellant's explanation that the omission of one plot number in the 2001 registration certificate was an inadvertent mistake subsequently rectified by a fresh certificate issued on 25.07.2013; it held that such rectification should be given retrospective effect to cure the inadvertent error for purposes of adjudicating the remission claim. The Tribunal observed that once the mistake is rectified, the corrected registration ought to be considered in processing the remission claim. The Tribunal did not itself decide the ultimate entitlement but directed reconsideration of the claim and the consequential demand in the light of the rectified registration. [Paras 2, 4]

Discrepancy in registration held to be inadvertent and rectifiable; matter remanded to the adjudicating authority to treat the rectified registration retrospectively and re-adjudicate the claim and demand.

Final Conclusion: The impugned orders are set aside and the appeals are allowed by remanding the matters to the adjudicating authority for fresh, de novo consideration of the remission claim and the consequential demand, having regard to the insurance survey and forensic inspection reports and the rectified registration.

Eligibility of CENVAT credit on input services - credit on common input services and requirement of separate accounts - interpretation of "exempted services" for trading activities (pre-amendment) - scope and application of Rule 3 of CENVAT Credit Rules

Eligibility of CENVAT credit on input services - scope and application of Rule 3 of CENVAT Credit Rules - Whether the appellant was entitled to CENVAT credit on security services used for both factory and trading premises for the period in dispute - HELD THAT: - The Tribunal examined the adjudicating authority's finding that security services were directly connected with the appellant's business and hence credit was allowable. The FAA reversed that finding relying on a wider analysis of Rules, concluding that credit attributable to goods was available only to a manufacturer or provider of taxable output service and that trading did not qualify. The Tribunal held that the original adjudication and documentary record limited the question to whether the services were connected with the appellant's business, which was answered in the appellant's favour. The Tribunal further observed that trading activity during the period June 2007 to January 2009 could not be construed as an exempted service for the purpose of denying credit, and that there was no contention that the security service was used exclusively for manufacturing. Applying these considerations, the Tribunal concluded that the FAA's disallowance was unsustainable and set aside the impugned order. [Paras 8, 10, 11, 12, 13]

Credit on security services used for both factory and trading premises for the period June 2007 to January 2009 was allowable and the FAA's disallowance was set aside.

Credit on common input services and requirement of separate accounts - interpretation of "exempted services" for trading activities (pre-amendment) - Whether the FAA properly introduced and relied upon non-maintenance of separate books for common input services (Rule 6(5) concept) and post amendment definition of exempted services to deny credit when those issues were not raised in the Show Cause Notice or addressed in the Order in Original - HELD THAT: - The Tribunal noted that the Show Cause Notice and the Order in Original confined the controversy to whether the security service was connected with the appellant's business; the Original authority had adjudicated that connection in favour of the appellant. The Tribunal observed that the revenue raised the separate books contention only before the FAA and that this ground was neither the subject of the SCN nor adjudicated in the OIO. The Tribunal further held that the amendment to the definition of exempted services (affecting treatment of trading) took effect after the period in dispute and therefore could not be invoked to reinterpret usage of the service for the earlier period. In these circumstances, reliance by the FAA on non maintenance of separate accounts and on the later amendment was unsustainable. [Paras 9, 11, 12]

The FAA erred in relying on non maintenance of separate books and on a post period amendment to deny credit; those contentions could not sustain the disallowance and the FAA's order was set aside.

Final Conclusion: The appeal is allowed; the First Appellate Authority's order disallowing CENVAT credit on security services is set aside and the credit as allowed in the Order in Original is restored for the period June 2007 to January 2009.

Cenvat credit on capital goods - Cenvat credit on input services used for erection, commissioning and installation - Exemption under Notification No. 67/1995-CE for molasses captively consumed - Rule 6(3)(i) CCR, 2004 - payment equal to 6% of value of exempted goods - Obligations under Rule 6(3A) and provisional monthly reversal - Interpretation of definition of "input service" post 01.04.2011 - Principle of natural justice - requirement to furnish adverse report and opportunity to rebut

Cenvat credit on capital goods - denatured alcohol as final excisable product - Cenvat credit on capital goods installed in the distillery plant is admissible. - HELD THAT: - The Tribunal held that entitlement to Cenvat credit on capital goods cannot be negatived merely because an intermediate product (ethyl alcohol) that is exempt from central excise arises prior to the final excisable product (denatured alcohol), or because the final act of denaturing occurs in tankers and not within the distillery machinery. The admissibility must be determined by whether the goods cleared from the factory are excisable goods. Nothing in the Cenvat Credit Rules bases eligibility on the precise stage at which the final goods become liable to central excise; where the goods cleared are excisable and duty has been paid, credit on capital goods used in the manufacture of those goods cannot be denied. The Tribunal therefore allowed the appellant's claim on this issue and rejected the Department's reliance on the decision in Rai Bahadur Narain Singh (distinguished on facts). [Paras 9, 10]

Allowed - Cenvat credit on capital goods installed in the distillery plant upheld in favour of the appellant.

Cenvat credit on input services used for erection, commissioning and installation - Interpretation of definition of "input service" post 01.04.2011 - Cenvat credit is admissible on erection, commissioning and installation services used for setting up the distillery plant after 01.04.2011. - HELD THAT: - The Tribunal applied its earlier reasoning in Pepsico and Kellogs: after the amendment of 01.04.2011 the definition of "input service" contains a main part, inclusive part and exclusive part; services used in setting up or installing plant and machinery, although not specifically mentioned in the inclusive part, are not in the exclusion and fall within the main part if that part is wide enough. The main part covers services "used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal." Services used for erection and commissioning are activities directly or indirectly in relation to manufacture and therefore qualify as input services unless specifically excluded. Consequently, Cenvat credit on such input services is allowed. [Paras 14, 15]

Allowed - Cenvat credit on erection, commissioning and installation input services upheld.

Exemption under Notification No. 67/1995-CE for molasses captively consumed - Obligations under Rule 6(3A) and provisional monthly reversal - Principle of natural justice - requirement to furnish adverse report and opportunity to rebut - Whether the appellant fulfilled obligations under Rule 6(3A) and hence was entitled to the exemption under Notification No. 67/1995-CE is remanded to the Original Authority for fresh consideration after affording opportunity of hearing. - HELD THAT: - The Tribunal noted that the Commissioner relied on an adverse report of the Range Superintendent (identifying alleged non-compliance with Rule 6(3A) computations and reversals) which was obtained after the personal hearing and was not furnished to the appellant for rebuttal. Finding that such reliance without supplying a copy and giving opportunity to respond would violate principles of natural justice, the Tribunal remanded the matter to the Original Authority with directions to provide the Range Superintendent's report to the appellant, grant a reasonable opportunity to rebut and to decide afresh whether the Rule 6(3A) obligations were fulfilled and whether the exemption notification applies. [Paras 17, 18, 20, 22, 23]

Remanded - matter relating to entitlement to Notification No. 67/1995-CE on molasses captively consumed to be reconsidered by the Original Authority after supplying the Range Superintendent's report and hearing the appellant.

Rule 6(3)(i) CCR, 2004 - payment equal to 6% of value of exempted goods - assessee's option under Rule 6(1)/6(2)/6(3) - Demand for payment equal to 6% of the value of exempted goods under Rule 6(3)(i) CCR, 2004 is not sustainable and is set aside. - HELD THAT: - Relying on the jurisdictional High Court decision in Tiara Advertising, the Tribunal observed that the provisions of Rule 6(1), 6(2) and 6(3) present alternative options available to the assessee; the Department cannot impose Rule 6(3) (payment of 6%) upon an assessee who has not elected that option. If the assessee fails to follow any option, the remedy is denial of the related credit but the department cannot compel payment under Rule 6(3). Accordingly, the confirmed demand under Rule 6(3) for 6% of value of exempted goods was set aside. [Paras 21, 22]

Set aside - demand under Rule 6(3)(i) for 6% of value of exempted goods quashed.

Final Conclusion: All three appeals are partly allowed and partly remanded: Cenvat credit on capital goods and on erection/installation input services is allowed; demands under Rule 6(3)(i) for 6% are set aside; questions of entitlement to Notification No. 67/1995-CE for molasses captively consumed are remanded to the Original Authority for fresh decision after providing the Range Superintendent's report and affording the appellant an opportunity to be heard.

Determination of number of operating packing machines for monthly duty liability - treatment of a packing machine used exclusively for non notified goods (Sweet Supari) - reliance on Form I declaration and ground plan for capacity determination - monthly maximum machines rule for compounding duty under Pan Masala Packing Machines Rules, 2008 - recovery of short paid duty under Section 11A and interest under Section 11AB

Determination of number of operating packing machines for monthly duty liability - monthly maximum machines rule for compounding duty under Pan Masala Packing Machines Rules, 2008 - Number of operating packing machines to be reckoned for computing duty liability for July, 2008 - HELD THAT: - The Tribunal accepted the factual finding that during the relevant month a maximum of six packing machines were installed and operational (five Gutkha machines plus one additional machine). The impugned fixation by the Deputy Commissioner on the basis of nine machines was held to be incorrect because there was no evidence that more than six machines were operational on any day in July, 2008. The Tribunal applied the Rules' monthly computation principle that duty liability is to be calculated on the basis of the maximum number of machines operative on any day of the month; once a machine remains installed and operative on any day of the month, duty for that machine is leviable for the entire month. On the facts, only six machines qualified for the month and the higher determination based on nine machines was set aside. [Paras 4]

Deputy Commissioner's fixation of capacity on the basis of nine machines is incorrect; duty liability for July, 2008 is to be computed with six operating machines.

Treatment of a packing machine used exclusively for non notified goods (Sweet Supari) - reliance on Form I declaration and ground plan for capacity determination - Whether the machine installed in a separate room and declared to be used exclusively for packing Sweet Supari must be treated as an operating machine for Gutkha duty liability - HELD THAT: - The Tribunal examined the appellant's Form I declaration and the ground plan filed contemporaneously and noted that these documents showed one machine was installed in a separate room and used only for Sweet Supari. The Tribunal found that the Revenue produced no evidence to rebut the appellant's showing that the machine was segregated and used exclusively for a non notified product. In consequence, the Tribunal held that the Commissioner erred in treating that machine as an operating Gutkha packing machine where the declaration and ground plan supported exclusive use for Sweet Supari. The Tribunal therefore disallowed the portion of the demand attributable to treating that separately sited machine as liable for Gutkha compounding duty. [Paras 4, 5]

The demand insofar as it relates to the machine declared and shown by ground plan to be used exclusively for Sweet Supari is not sustainable; the appellant's declaration and ground plan prevail in absence of contrary evidence.

Final Conclusion: Appeal allowed. The fixation of capacity on the basis of nine machines is set aside; duty liability for July, 2008 is to be determined on six machines, and the demand insofar as it treats the separately sited machine (declared and shown to be used exclusively for Sweet Supari) as liable for Gutkha compounding duty is quashed.

Refund under Notification No. 56/2002-CE - erroneous refund - recovery under Section 11A of the Central Excise Act - extended period of limitation under the proviso to sub section (1) of Section 11A - requirement of fraud, collusion or wilful misstatement or suppression for invoking extended recovery

Refund under Notification No. 56/2002-CE - erroneous refund - recovery under Section 11A of the Central Excise Act - requirement of fraud, collusion or wilful misstatement or suppression for invoking extended recovery - Validity of the demand and recovery (including interest) of self credit of Education Cess and S&H Education Cess treated as an 'erroneous' refund and recovered under Section 11A. - HELD THAT: - The Tribunal followed the earlier Division Bench decision in M/s Alu Bond Enterprises vs. CCE & ST which held that a refund sanctioned under Notification No. 56/2002-CE that has attained finality cannot be characterised as an 'erroneous refund' and recovered under Section 11A unless the refund was made by reason of fraud, collusion, or wilful misstatement or suppression of facts, or contravention with intent to evade duty. Applying that ratio to the facts, the impugned order treating the self credit of cesses as an erroneous refund and confirming demand with interest was not sustainable in law. Consequently, the demand and recovery (and interest thereon) based on such characterisation must be set aside. [Paras 7, 8]

Appeal allowed; impugned order confirming the demand and recovery (with interest) set aside.

Final Conclusion: Following the Tribunal's precedent that refunds under Notification No. 56/2002-CE which have attained finality are not recoverable as 'erroneous refunds' under Section 11A except in cases of fraud, collusion or wilful misstatement/suppression, the appeal is allowed and the impugned order confirming demand and recovery (with interest) is set aside.

Right to information under Article 19(1)(a) - Informational privacy of political affiliation - Proportionality test (including double proportionality) - Electoral Bond Scheme and anonymity of political donations - Least restrictive means / necessity stage - Unlimited corporate funding and manifest arbitrariness under Article 14 - Disclosure obligations of political parties and companies - Issuance of bearer instruments and RBI authority

Right to information under Article 19(1)(a) - Electoral Bond Scheme and anonymity of political donations - Disclosure obligations of political parties and companies - Electoral Bond Scheme and related amendments insofar as they anonymise contributions infringe the right to information of voters under Article 19(1)(a). - HELD THAT: - The Court held that political parties are a relevant political unit for voters and that information about funding of political parties is essential for voters to exercise the franchise intelligently. The Electoral Bond Scheme's intrinsic anonymity and the amendments to Section 29C of the RPA, Section 13A of the IT Act and Section 182(3) of the Companies Act operate to deprive voters of particulars of donor-wise contributions and therefore infringe the voter's right to information. The Court concluded that anonymisation by the Scheme cannot be sustained under Article 19(1)(a) because it removes information deemed essential for assessing influence on electoral and policy outcomes. The finding is given effect by declaring the impugned non disclosure provisions unconstitutional. [Paras 104, 216]

The Electoral Bond Scheme and the amendments to Section 29C(1) RPA, Section 13A(b) IT Act and Section 182(3) Companies Act insofar as they anonymise contributions are unconstitutional as violative of Article 19(1)(a).

Proportionality test (legitimate aim, rational connection, necessity, balancing) - Least restrictive means / necessity stage - Curbing black money as state objective - The stated objective of curbing black money does not justify the blanket non disclosure under the Electoral Bond Scheme; the Scheme fails the least restrictive means and necessity prongs of proportionality. - HELD THAT: - Applying the structured proportionality standard, the Court accepted that curb ing unaccounted money is a legitimate concern but examined suitability and necessity. It found alternatives (electronic transfers, Electoral Trusts and existing cheque/ECS requirements) that materially advance the same purpose while imposing a lesser restriction on voters' right to information. The Scheme's anonymity was not the least intrusive way to realise the purpose; the Scheme is not fool proof and permits risks (trading of bonds, shell companies) that undercut its stated objective. Consequently, the infringement of the right to information is not justified on the ground of curbing black money. [Paras 119, 120, 129, 168]

Non disclosure via the Electoral Bond Scheme is not justified as a proportionate measure to curb black money and therefore cannot sustain the restriction on Article 19(1)(a).

Informational privacy of political affiliation - Double proportionality / balancing competing fundamental rights - Privacy vis-a -vis political party and public - Informational privacy of political affiliation is a recognised constitutional interest but the Electoral Bond Scheme does not adequately and narrowly protect that interest so as to justify denial of voters' right to information. - HELD THAT: - The Court recognised that informational privacy extends to political affiliation and that donations can be an expression of political support. It also rejected the proposition that privacy must extend absolutely vis a vis the political party (the Scheme's claimed confidentiality), observing that de jure anonymity under the Scheme does not ensure de facto confidentiality to the donor and that parties can, in practice, become aware of donors. Applying the double proportionality approach, the Court analysed suitability and necessity for both rights: while non disclosure serves donor privacy to an extent, it wholly defeats the suitability and necessity requirements for the voter's informational interest. Less restrictive alternatives (statutory thresholds, Electoral Trusts, disclosure regimes) realise both interests in a substantial manner. Thus, privacy claims do not validate the blanket non disclosure enacted by the Scheme and related amendments. [Paras 138, 142, 162, 169]

Although informational privacy of political affiliation exists, the Electoral Bond Scheme's non disclosure is not the least restrictive nor adequately balanced measure and therefore does not justify the infringement of the voter's right to information.

Unlimited corporate funding and manifest arbitrariness - Article 14 - non arbitrariness as facet of equality - Disclosure obligations of companies to shareholders/public - Omission of the cap on corporate contributions (deletion of the proviso to Section 182(1) Companies Act) is manifestly arbitrary and violates Article 14. - HELD THAT: - The Court examined the legislative history of company contribution limits and the rationales for limiting corporate donations (preventing shell/loss making companies, protecting fairness). It found the 2017 amendment removed distinctions (between companies and individuals; between profit making and loss making and older companies vs shell entities) that addressed differing degrees of harm to electoral equality. The deletion lacks an adequate determining principle, is inconsistent with constitutional values of political equality and free and fair elections, and permits unregulated corporate influence. On these grounds the amendment was held arbitrary and unconstitutional under Article 14. [Paras 199, 214, 216]

The deletion of the cap on corporate contributions in Section 182(1) (Finance Act 2017, Section 154) is manifestly arbitrary and thus unconstitutional under Article 14.

Judicial relief and directions - Disclosure by issuing bank and Election Commission - Prohibition on further issuance of electoral bonds - Consequential relief and directions: issuance of electoral bonds must stop and specified disclosure of records to the Election Commission and public publication are ordered. - HELD THAT: - Because anonymity is intrinsic to the Scheme, the Court struck down the Scheme and the relevant statutory non disclosure provisions. To give effect to the judgment and interim orders, the Court directed (inter alia) that the authorised issuing bank cease issuance; State Bank of India must submit purchaser and encashment details since the interim order of April 2019 to the ECI within the timeline fixed; the ECI shall publish the received information on its website; valid unencashed bonds must be returned and refunded as directed. These directions implement the declaration of unconstitutionality and enable disclosure of the donor and encashment particulars gathered pursuant to the Court's interim order. [Paras 219, 220]

Issuance of electoral bonds is prohibited; SBI to furnish details of purchases and encashments to the ECI and the ECI to publish the information within the timelines fixed by the Court; other specified remedial directions are issued.

Final Conclusion: The Constitution Bench held that the Electoral Bond Scheme and the Finance Act, 2017 amendments which anonymised political donations and removed company contribution limits are unconstitutional: the anonymisation provisions violate the voter's right to information under Article 19(1)(a) and cannot be justified under proportionality, and the deletion of the corporate cap is manifestly arbitrary in breach of Article 14. Consequentially the Scheme and the identified statutory provisions are struck down and specific disclosure and operational directions (including cessation of bond issuance and SBI/ECI disclosure orders) are directed.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by preponderance of probabilities - compliance with statutory demand notice requirement under Section 138 - admissibility and evidentiary weight of ledger and loan documents maintained in ordinary course of business - penal liability under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttal of presumption by preponderance of probabilities - admissibility and evidentiary weight of ledger and loan documents maintained in ordinary course of business - compliance with statutory demand notice requirement under Section 138 - Accused failed to rebut the statutory presumption under Section 139 of the Negotiable Instruments Act and was liable for the offence under Section 138. - HELD THAT: - The complainant proved execution of loan documents (demand promissory note and loan agreement) and produced the personal ledger maintained in its ordinary course showing an outstanding balance exceeding the cheque amount. The disputed cheque bore the accused's admitted signature and the cheque return memo recorded insufficiency of funds. The complainant served the statutory demand notice to the accused at his registered address and produced the postal acknowledgment. The accused admitted executing blank signed cheques but did not deny the loan or receipt of notice; his defence consisted of suggestions and discrepancies in oral testimony which, without supporting evidence or a plausible explanation, could not by themselves discharge the presumption under Section 139. The Court applied settled principles that once signature is admitted and documents show liability, the onus shifts to the drawer to rebut the presumption on preponderance of probabilities; mere contradictions or inability of the complainant's witness to bifurcate ledger items did not suffice to negate the regular ledger entries or the claimed outstanding balance. Having regard to these materials and the accused's admissions, the Magistrate's acquittal was found perverse and contrary to law, and the appellate Court concluded that the presumption remained unrebuffed. [Paras 21, 24, 25, 27, 28]

Presumption under Section 139 is not rebutted; conviction under Section 138 follows.

Final Conclusion: Appeal allowed. The impugned order of acquittal is quashed and set aside; Respondent No.1 is found guilty of the offence punishable under Section 138 of the Negotiable Instruments Act. Matter is listed for hearing on sentence.