TaxTMI Updates e-Newsletter
Feb 21,2022

Scope of advance ruling under Section 97(2) of the CGST Act - Admissibility of questions before Authority for Advance Ruling - Advance ruling limited to matters specified in Section 97(2) - Definition of "advance ruling" under Section 95 - relation to supply undertaken or proposed - Non maintainability of queries on refund entitlement, zero rating and reverse charge before AAR - Disposal of application for lack of jurisdiction

Scope of advance ruling under Section 97(2) of the CGST Act - Admissibility of questions before Authority for Advance Ruling - Advance ruling limited to matters specified in Section 97(2) - Whether the questions raised by the applicant fall within the matters on which an advance ruling can be sought under Section 97(2) of the CGST Act, 2017. - HELD THAT: - The Authority examined the six questions posed by the applicant against the catalogue of matters in Section 97(2)(a)-(g). It found that questions regarding whether a supply to an SEZ unit is "for approved purpose", whether the supplier's supplies are "zero rated", entitlement to refund of unutilised input tax credit on supplies made under LUT, potential liability for recipient's diversion of goods from LOA purposes, documents to be maintained, and liability under reverse charge mechanism do not fall within any of the categories specified in Section 97(2). Further, relying on the definition of "advance ruling" in Section 95(a), the Authority stressed that an advance ruling can be given only on matters specified in Section 97(2) and only insofar as they relate to supplies undertaken or proposed to be undertaken by the applicant. The questions before the Authority were therefore held to be outside the statutory scope of admissible queries to the Authority for Advance Ruling. [Paras 11, 12]

The questions raised do not fall within the mandate of Section 97(2) and the application is not maintainable before the Authority for Advance Ruling; the application is disposed of for lack of jurisdiction.

Final Conclusion: The Authority concluded that the applicant's queries are not covered by Section 97(2) of the CGST Act, 2017 and accordingly the advance ruling application is outside the Authority's jurisdiction and is disposed of.

Input tax credit - Section 17(5)(d) restriction on ITC for construction of immovable property on own account - Blocked credit to the extent of capitalization - Works contract services exclusion where capitalized - Plant and machinery exclusion from blocked credit - Use in the course or furtherance of business

Input tax credit - Section 17(5)(d) restriction on ITC for construction of immovable property on own account - Blocked credit to the extent of capitalization - Use in the course or furtherance of business - Admissibility of input tax credit in respect of expenditure on civil and interior works in the applicant's building which is let out to tenants - HELD THAT: - The Authority examined Section 16 entitlement to ITC subject to conditions and the express restrictions in Section 17(5). Clause (d) of Section 17(5) bars ITC in respect of goods or services received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account, including when used in the course or furtherance of business. The Explanation to Section 17(5) limits the bar to construction to the extent of capitalization; consequently, input tax credit on expenditures that are capitalized as part of the immovable property (including civil, interiors and related services) is not admissible. The Authority rejected the applicant's submission that letting out and payment of GST on rent would permit ITC, holding that the statutory restriction in Section 17(5)(d) applies notwithstanding the subsequent leasing and recovery of renovation costs as part of rent. [Paras 15, 16, 18, 19]

ITC on civil and interior works carried out on the applicant's own immovable property for letting out is not admissible; answer negative.

Input tax credit - Section 17(5)(d) restriction on ITC for construction of immovable property on own account - Blocked credit to the extent of capitalization - Plant and machinery exclusion from blocked credit - Availability of input tax credit on construction of a commercial complex by the applicant for the purpose of renting out - HELD THAT: - The Authority applied the same statutory scheme: Section 17(5)(d) bars ITC for goods or services received for construction of immovable property on one's own account (other than plant and machinery), and the Explanation confines the bar to items capitalized. The exclusion for plant and machinery does not extend to buildings or civil structures. Relying on these provisions and noting the applicant's construction is for letting out (and thus constitutes immovable property capitalized in books), the Authority concluded that ITC in respect of such construction is not admissible. The Authority noted reliance placed on a High Court decision but observed that an appeal against that decision is pending before the Supreme Court, leaving the statutory provision operative for the present ruling. [Paras 16, 17, 18, 19]

ITC on construction of the commercial complex for letting out is not admissible; answer negative.

Final Conclusion: The Authority rules that input tax credit is not available to the applicant in respect of (i) civil and interior works on the applicant's building let out to tenants and (ii) construction of a commercial complex for letting out, by application of the bar in Section 17(5)(d) read with the Explanation; both questions are answered in the negative.

Advance ruling admissibility - Supply undertaken by applicant - Authority's jurisdiction to rule only on supplies by the applicant - Input Tax Credit eligibility - Tax deduction at source (TDS) liability on payments for services

Advance ruling admissibility - Supply undertaken by applicant - Authority's jurisdiction to rule only on supplies by the applicant - Whether the Authority for Advance Ruling may admit and decide the question whether services supplied by UPPTCL to the applicant are exempt under Entry No.25, when the supply is undertaken by UPPTCL and the applicant is only the recipient. - HELD THAT: - The definition of 'advance ruling' in clause (a) of Section 95 of the CGST Act confines the Authority's power to decisions in relation to supplies of goods or services 'being undertaken or proposed to be undertaken by the applicant.' The Authority examined the application and found that the subject supply is undertaken by UPPTCL and not by the applicant. Since the applicant seeks a ruling in respect of a supply by another entity (the supplier), the matter falls outside the statutory scope of advance ruling. Consequentially, the question framed as Question No.1 does not satisfy the admissibility requirement under Section 95(a)/Section 98(2) and is not admitted for consideration on merits by the Authority. [Paras 10, 11, 14]

Application not admitted under Section 98(2) read with Section 95(a) of the CGST Act/UPGST Act because the applicant seeks a ruling as recipient in respect of a supply undertaken by UPPTCL.

Input Tax Credit eligibility - Advance ruling admissibility - Whether the applicant is eligible to claim Input Tax Credit of tax paid on services received from UPPTCL. - HELD THAT: - The question on ITC (Question No.2) was expressly framed 'subject to above' and therefore contingent upon a determination of Question No.1. As Question No.1 was not admitted (being outside the Authority's jurisdiction), the Authority did not consider or decide the ITC entitlement. The Authority recorded that ITC would only arise if the services are taxable; however, because the primary question on exemption was not admitted, the contingent ITC question is not answered by the Authority. [Paras 12, 14]

Not answered because Question No.1 was not admitted.

Tax deduction at source (TDS) liability on payments for services - Advance ruling admissibility - Whether the applicant is liable to deduct TDS on amounts paid to UPPTCL for services supplied by it. - HELD THAT: - The TDS question (Question No.3) was similarly prefaced 'subject to above' and depends on whether the services supplied by UPPTCL are taxable. Given that Question No.1 was not admitted for ruling by the Authority, the contingent question on TDS could not be entertained or decided. The Authority therefore refrained from issuing any determination on the applicant's TDS liability. [Paras 13, 14]

Not answered because Question No.1 was not admitted.

Final Conclusion: The Authority declined to admit the primary question on exemption because the supply in question is undertaken by UPPTCL and not by the applicant; consequently the related questions on eligibility for Input Tax Credit and liability to deduct TDS, being contingent on the primary question, were not answered.

Nil rate for supply of online educational journals or periodicals - distinction between online database and journal/periodical - applicability of exemption notification to subscription for online database - advance ruling on applicability of a notification

Nil rate for supply of online educational journals or periodicals - distinction between online database and journal/periodical - applicability of exemption notification to subscription for online database - Whether the applicant's supply of on-line text based information (annual subscription to an online database encompassing judgments, bare acts, rules, e books, news, articles, directories etc.) to educational institutions is covered by the exemption entry for "supply of online educational journals or periodicals" and thus taxable at nil rate. - HELD THAT: - The Authority examined the amended entry at Sl. No. 66(b)(v) of Notification No.12/2017-Central Tax (Rate) (as amended) and found that the nil rate applies specifically to "supply of online educational journals or periodicals". The invoices produced by the applicant describe the supply as "Annual Subscription Online Database" and do not describe the supply as "online educational journals or periodicals"; the subscription is for access to and download of database content. Reliance on dictionary meanings showed that a "database" is a specially organized collection of data for rapid search and retrieval, while "journal" or "periodical" denotes a magazine or newspaper published regularly on a particular or specialized subject. On this basis the Authority concluded that online databases, e books, newspapers, directories and non educational journals are conceptually distinct from journals/periodicals referred to in the exemption entry. Consequently the exemption at Sl. No. 66(b)(v) does not extend to the applicant's online database subscriptions and such supplies are not nil rated under that entry. [Paras 14, 15, 16, 17, 18]

The applicant's supplies by way of subscription to an online database are not covered by the nil-rated entry for "supply of online educational journals or periodicals" and therefore are not exempted under that notification.

Final Conclusion: Advance Ruling: The applicant's service of providing access to an online database (annual subscription online database) does not fall within the exemption for supply of "online educational journals or periodicals" and is not taxable at nil rate under the cited notification; answer to the applicant's question is in the negative.

Pure agent - Rule 33 of the CGST Rules, 2017 - composite supply - use of goods or services for supplier's own interest - consideration - advance versus deposit - time of supply

Use of goods or services for supplier's own interest - pure agent - Rule 33 of the CGST Rules, 2017 - composite supply - Electricity charges paid to UPCL for power consumed by residents in their residential apartments and recovered on actual cost basis are liable to GST. - HELD THAT: - The Authority examined the Lease Deed and the Maintenance & Facilities Agreement and found that the applicant supplies a unified package of services (ACB and related facilities) which cannot be provided without electricity. The agreements make provision of services and payment of service charges compulsory and vest responsibility for supply of electricity to each apartment with the applicant. Consequently the applicant uses electricity procured from UPCL in furtherance of its own service provision, thereby failing the condition that a pure agent must not use the procured goods or services for his own interest. Since the conditions of Rule 33 are not satisfied and electricity is integral to the composite service supplied by the applicant, the electricity charges recovered from residents for apartment consumption cannot be excluded from the value of supply and are taxable under GST. [Paras 16, 17]

Electricity charges for residential apartment consumption recovered by the applicant are taxable.

Pure agent - Rule 33 of the CGST Rules, 2017 - composite supply - use of goods or services for supplier's own interest - Electricity charges paid to UPCL for power consumed towards common areas and recovered from residents on actual cost basis are liable to GST. - HELD THAT: - The Authority found that common-area electricity is essential to operate and maintain the community infrastructure (club, lifts, pools, common facilities) and that the applicant is obliged to provide and ensure electricity supply to the community. The applicant thereby incorporates common-area electricity into the composite service package and uses the electricity in furtherance of its own services. The applicant does not satisfy the requirements of Rule 33 to treat such amounts as pure agent reimbursements. Relying on the integrality of electricity to the maintenance services, the Authority held that common-area electricity charges collected from residents form part of the consideration for the taxable service. [Paras 12, 14, 15, 17]

Common-area electricity charges recovered from residents are taxable.

Consideration - advance versus deposit - time of supply - Amounts collected as Asset Replacement Deposits are advances for future supply of services and are taxable at the time of receipt. - HELD THAT: - Applying the proviso to the definition of 'consideration', the Authority distinguished deposits from advances: a deposit is not consideration unless applied as such by the supplier. The applicant admitted that Asset Replacement Deposits are non refundable, calculated pro rata to super area, and intended to meet planned or unplanned future capital outlays. Those characteristics indicate an advance for future supply rather than a refundable deposit. Under Section 13(2)(a) and the time of supply rules, receipt of such advance constitutes time of supply; hence GST is attracted at receipt. [Paras 19, 20, 21]

Asset Replacement Deposits collected by the applicant are advances for future supply and taxable at the time of receipt.

Final Conclusion: The Authority ruled that (1) electricity charges recovered from residents for apartment consumption are liable to GST, (2) electricity charges recovered for common area consumption are liable to GST, and (3) Asset Replacement Deposits are advances for future supply of services and taxable at the time of receipt.

Classification as parts of railway rolling stock under Chapter 86.07 - Coachwork / parts of coach work - Principal use rule under Note 3 of Section XVII - Admissibility of advance ruling under Section 97(2) of the CGST Act

Classification as parts of railway rolling stock under Chapter 86.07 - Coachwork / parts of coach work - Principal use rule under Note 3 of Section XVII - Classification of Driver Cab Air Conditioner Unit for EMU/MEMU trains manufactured as per railway design and supplied exclusively to Indian Railways. - HELD THAT: - The Authority examined the product description, RDSO/ICF specifications and the fact that the unit is manufactured strictly to Indian Railways' drawings and specifications and intended solely for fitment in driver's cab of EMU/MEMU rolling stock. Chapter 86 and its Note 2 identify coachwork as falling within Heading 8607. The principal use rule under Note 3 of Section XVII was applied: parts or accessories which are suitable solely or principally for use with the articles of Chapters 86-88 are classifiable under the corresponding heading. Earlier decisions cited by the Authority establish that items manufactured to railway drawings for exclusive use in coaches are integral to coachwork and classifiable under Heading 8607. Applying these principles to the facts, the unit, being specially designed and usable solely in railway rolling stock, falls within the scope of Heading 8607 (specifically the parts subheading). [Paras 18, 20]

The Driver Cab Air Conditioner Unit for EMU/MEMU trains, manufactured as per railways' specific design and supplied exclusively to Indian Railways, is classifiable under Chapter 86.07 of the GST Tariff.

Final Conclusion: The Authority admits the advance ruling application under the CGST Act and rules that the Driver Cab Air Conditioner Unit for EMU/MEMU trains, manufactured to railways' specifications for exclusive use in rolling stock, is classifiable under Chapter 86.07 of the GST Tariff; ancillary questions in the applicant's covering letter were not considered.

Supply - transaction value / valuation of taxable supply - buy one get one free offer - composite supply or mixed supply - availability of input tax credit - activities to be treated as supply even if made without consideration - related persons / distinct persons treated as supply

Buy one get one free offer - supply - composite supply or mixed supply - availability of input tax credit - Extra packs of cigarettes supplied along with purchased packs under the proposed promotional scheme are assessable as supply for GST purposes. - HELD THAT: - The Authority applied the Board's Circular on sales-promotion schemes which treats 'buy one get one free' style offers as two or more individual supplies provided for a single price rather than a gratuitous supply. Taxability therefore is to be determined by treating the entire physical supply (original plus extra packs) as supplied for the single invoice value, with the nature of levy (rate) to be determined under provisions governing composite or mixed supplies. On the facts disclosed, the scheme of supplying additional 30 packs with 100 packs for the price of 100 results in a taxable supply of 130 packs for the invoice value of 100 packs; there is no separate GST liability on the extra packs over and above the tax charged on the invoice value. The Authority also held that input tax credit is available to the supplier for inputs, input services and capital goods used in relation to such promotional offers. The ruling is expressly made subject to the applicant's disclosures that supplies are not to related/sole distributor (failure of which will void the ruling). [Paras 14, 15, 17, 18]

The extra packs will not be separately leviable to GST; the entire supply is taxable on the invoice value and ITC is available for inputs etc. used for such offers.

Transaction value / valuation of taxable supply - Taxable value attributable separately to the extra packs was not determined by the Authority. - HELD THAT: - Because the primary question of separate levy on extra packs was answered in the negative, the Authority did not adjudicate or quantify any separate taxable value attributable to the extra packs and accordingly left that question unanswered. [Paras 18]

Not answered in view of the negative answer to the primary question on separate levy.

Activities to be treated as supply even if made without consideration - related persons / distinct persons treated as supply - Extra packs are not to be treated as exempt supplies or free samples so as to attract reversal provisions of Section 17(2)/Rule 42 or clause (h) of Section 17(5) of the UPGST Act, 2017. - HELD THAT: - The Authority held that the additional packs supplied under the scheme are not free samples or exempt supplies but form part of the taxable supply furnished for the single invoice consideration; consequently the provisions concerning supplies treated as without consideration (and the related ITC reversal rules) are not attracted on the facts and disclosures made by the applicant. The Authority cautioned that if supplies are in fact to related or distinct persons (as in Schedule I), then such supplies would be treated as supply even if without consideration and the ruling would be void ab initio if the applicant's disclosures in that regard are incorrect. [Paras 15, 17, 18]

The extra packs will not be regarded as exempt supplies or free samples and the cited input reversal provisions will not apply, subject to the caveat on supplies to related/distinct persons.

Final Conclusion: The Authority ruled that the promotional additional packs form part of a taxable supply supplied for the single invoice consideration (no separate levy on the extra packs), ITC is available for inputs used in such offers, the question of separately attributing taxable value to the extra packs was not decided, and the extra packs are not treated as exempt/free samples (subject to the applicant's disclosures regarding related/distinct persons).

Composite supply - works contract - classification of supply as supply of services - goods transport agency - immovable property - consignment note

Composite supply - works contract - goods transport agency - consignment note - immovable property - Whether the service of transportation of goods by road provided under the applicant's Contract 3 is taxable or exempt when considered in the context of the EPC package. - HELD THAT: - The Authority examined the contractual structure and the cross-fall breach clause which interlinks Contracts 1-4 awarded under a single tender and makes breaches in one contract a breach of the others. That clause and the contractual terms show the supplies of goods, transportation, installation and related services are naturally bundled and not separately enforceable, thereby constituting a composite supply with a principal supply of goods/services for the EPC package (paras 14-17, 19). The Authority applied the statutory definition of works contract and considered whether the project results in transfer of property in goods in the execution of works in respect of immovable property; having regard to the nature of installation, foundations and civil works, the project was held to result in immovable property and thus fall within the concept of a works contract (paras 20-23). Although the applicant relied on the exemption for road transport services provided other than by a goods transport agency (linked to issuance of a consignment note), the Authority held that isolating transportation from the composite EPC/works contract is not permissible where the supplies are naturally bundled and one is principal and the other ancillary (paras 13, 16-19). On these grounds the entire contract is a composite works contract to be treated as supply of services under Schedule II and liable to tax accordingly (paras 17, 24). The Authority therefore rejected the contention that the transportation component is separately exempt under the GTA-related notification and treated the contract as taxable as a works contract (paras 24-25). [Paras 19, 21, 22, 24, 25]

The transportation services form part of an indivisible composite works contract and are taxable as supply of services under the GST law; the contract is liable to GST as a works contract (answer in affirmative).

Final Conclusion: The Authority ruled that the transportation services under Contract 3 are not separately exempt but form part of a composite works contract for the EPC project and are taxable as supply of services under GST (ruling affirmed within the jurisdiction of AAR Uttar Pradesh).

Expenditure incurred in foreign exchange in providing technical services outside India - export turnover includible amounts received in convertible foreign exchange - deduction under Section 10B - uniformity in components of numerator and denominator in turnover based apportionment

Expenditure incurred in foreign exchange in providing technical services outside India - export turnover includible amounts received in convertible foreign exchange - deduction under Section 10B - Exclusion of expenditure in foreign exchange for onsite technical services from export turnover for computing deduction under Section 10B. - HELD THAT: - The Tribunal's adverse finding that the foreign exchange expenditure of the assessee on onsite development should be excluded from export turnover was considered in light of the view affirmed by the Supreme Court in CIT v. Mphasis Ltd. and the Division Bench decision of the Karnataka High Court on which it relied. Those authorities hold that amounts received in convertible foreign exchange for export of computer software (and related transmissions) form part of the export turnover and that expenditure in foreign exchange connected with export of software by transmission from India cannot be excluded from the export turnover. Applying that principle, the Court concluded that the expenditure in question is includible in export turnover for the purpose of computing the deduction under Section 10B and therefore the Tribunal's contrary conclusion was not sustainable.

The expenditure incurred in foreign exchange for the onsite technical services is not to be excluded from export turnover for computing deduction under Section 10B; issue answered for the assessee.

Uniformity in components of numerator and denominator in turnover based apportionment - deduction under Section 10B - Whether, if the foreign exchange expenditure were excluded from export turnover, the same should also be excluded from total turnover (denominator) when computing the deduction under Section 10B. - HELD THAT: - Following the reasoning in Commissioner of Income Tax And Another Vs. Tata Elxsi Ltd. , the Court applied the principle of uniformity between the numerator and denominator of the formula used to apportion export profits. The statutory scheme contemplates that components excluded from the export turnover in the numerator cannot be treated differently when that export turnover forms part of the total turnover in the denominator, lest anomalous results follow. Although the primary conclusion was that the expenditure is includible in export turnover, the Court nonetheless answered the secondary question by endorsing the uniformity principle: items excluded from export turnover must, if excluded, also be excluded from the total turnover component so as to maintain consistency in apportionment.

Answered in favour of the assessee: where an item is excluded from export turnover it must similarly be excluded from total turnover to preserve uniformity; however, on facts the expenditure was held includible in export turnover.

Final Conclusion: In view of the settled precedents relied upon, both substantial questions of law were decided in favour of the assessee; the Revenue's tax case appeal is dismissed.

Restraint on encashment of bank guarantee and lien on deposits pending appellate decision - deposit as security pending appeal and its limited recovery - circular under Section 220(6) limiting total recovery to 20% pending appeal - treatment of communication as show cause notice and entitlement to adjudication on merits

Restraint on encashment of bank guarantee and lien on deposits pending appellate decision - treatment of communication as show cause notice and entitlement to adjudication on merits - Respondents were restrained from encashing the bank guarantee or amounts lying in deposit pursuant to the Court's earlier order until the CIT(A) concluded the appeal. - HELD THAT: - The High Court recorded that the petitioner had sought relief against enforcement of the demand and the continued lien over fixed deposits and bank guarantees. Having noted the Supreme Court's directions treating the communication as a show cause notice, permitting a reply and oral hearing and directing a decision on merits, the Court directed that respondents shall not encash the bank guarantee or the amounts lying in deposit pursuant to the earlier order of this Court pending final orders by the Commissioner of Income Tax (Appeals). The Court recorded the respondents' concession as to the schedule for the appellate hearing and directed preservation of the status quo until conclusion of CIT(A)'s decision. [Paras 15]

Encashment of the bank guarantee or amounts in deposit is prohibited pending disposal of the appeal by the CIT(A).

Deposit as security pending appeal and its limited recovery - circular under Section 220(6) limiting total recovery to 20% pending appeal - Total recovery from amounts deposited as security pending appeal cannot exceed 20% in terms of the CBDT circular under Section 220(6); any excess security must be refunded if an appeal is filed. - HELD THAT: - Relying on the policy reflected in the circular issued under Section 220(6) of the Income Tax Act and the earlier interlocutory orders preserved by the Supreme Court, the High Court directed that in the event adverse orders are passed and the petitioner files an appeal within the statutory time, total recovery shall not exceed 20% and any amount held in excess as security shall be refunded to the petitioner. The Court thus limited the respondents' power of recovery consistent with the circular and protected the petitioner from enforcement beyond that threshold while appellate remedies remain available. [Paras 15]

Recovery pending appeal limited to 20% under the Section 220(6) circular; excess security to be refunded to the petitioner.

Final Conclusion: Writ petition disposed by directing respondents not to encash bank guarantees or deposits until the CIT(A) disposes the appeal; if adverse orders are passed and appeal is filed, total recovery shall not exceed 20% in terms of the circular under Section 220(6) and any excess shall be refunded to the petitioner.

Principles of natural justice - faceless assessment - failure to supply adequate opportunity to respond - remand for fresh speaking order

Principles of natural justice - failure to supply adequate opportunity to respond - faceless assessment - Validity of the assessment order dated 21.09.2021 in light of alleged denial of adequate opportunity to the petitioner and malfunctioning of the department's website. - HELD THAT: - The petitioner replied on 24.08.2021 to the notice dated 23.08.2021 under Section 142(1), stating inability to upload the required information because the department's website had not been functioning since 01.06.2021 and requesting time until the website was functional. The respondents did not respond to that communication. Instead, a show cause notice dated 17.09.2021 enclosing a 56 page draft assessment was issued, calling for a response by 20.09.2021. The assessment order was passed on 21.09.2021. The High Court found that affording two days to peruse and respond to a voluminous draft, after the petitioner had informed the department of inability to upload documents due to technical malfunction, resulted in a gross violation of the principles of natural justice. The Court observed that the faceless assessment procedure, instituted to eliminate irregularities and ensure fairness, was not served by the mechanical conduct of proceedings in the present case. In view of these defects the impugned order could not stand and required reconsideration on merits in accordance with law.

Impugned assessment order dated 21.09.2021 set aside and proceedings remitted for fresh decision in accordance with law.

Remand for fresh speaking order - Directions on remand and compliance following setting aside of the assessment order. - HELD THAT: - The Court remitted the matter to the respondents to pass a fresh speaking order within forty five days from receipt of the judgment. The petitioner was directed to upload the information and documents called for under Section 142(1) within fifteen days from receipt of the judgment. The assessment proceedings on remand were to be conducted in accordance with law, allowing the petitioner the opportunity to file the required material before consideration.

Matter remitted for fresh speaking order within forty five days; petitioner to upload required information within fifteen days; assessment proceedings to be in accordance with law.

Final Conclusion: Writ petition allowed: the assessment order dated 21.09.2021 for Assessment year 2011-12 is set aside; the matter is remitted for fresh speaking consideration within forty five days and the petitioner directed to furnish the required information within fifteen days; no costs.

Royalty - use of or right to use copyright - characterisation of software sale/distribution agreements vs royalty - Article 12 of the India-USA Double Taxation Avoidance Agreement - distribution/reseller agreements/EULAs - obligation to deduct tax at source under section 195

Royalty - use of or right to use copyright - characterisation of software sale/distribution agreements vs royalty - Article 12 of the India-USA Double Taxation Avoidance Agreement - distribution/reseller agreements/EULAs - Whether amounts received by the assessee from Indian resellers/distributors for sale of software products and ancillary support services constitute 'royalty' under Article 12 of the India-USA DTAA (and consequently taxable in India). - HELD THAT: - The agreement with Indian resellers/distributors grants a non-exclusive, non-transferable right to sell/resell the assessee's software within a specified territory, explicitly preserves all intellectual property rights with the assessee, prohibits reproduction, modification or creation of derivative works by the reseller/distributor, and limits trademark use to indicating authorised reseller status. On these facts the arrangements relate to sale/distribution of software and do not transfer any copyright or create a right to use copyright. Applying Article 12's definition of 'royalties' and the determinative ratio of the Hon'ble Supreme Court in Engineering Analysis Center of Excellence Pvt Ltd., distribution agreements/EULAs that do not create any interest or right amounting to use of or right to use copyright do not give rise to royalty taxable in India. The Assessing Officer's and DRP's characterisation of the receipts as 'royalty' is therefore not sustainable and the addition must be deleted. [Paras 12, 13, 14, 15, 16]

Amounts received from Indian resellers/distributors for sale of software products and ancillary services are not 'royalty' under Article 12 of the India-USA DTAA and the impugned addition is to be deleted; the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2014-15, holding that the receipts from Indian resellers/distributors do not constitute 'royalty' under Article 12 of the India-USA DTAA (as informed by the Supreme Court's decision in Engineering Analysis), and directed deletion of the addition made by the Assessing Officer.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Explanation (1) to section 271(1)(c) - exclusion where claim made bona fide and disclosed during assessment - Additions made on an estimated/adhoc basis do not warrant levy of penalty under section 271(1)(c)

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Explanation (1) to section 271(1)(c) - bona fide belief and disclosure during assessment - Levy of penalty in respect of undisclosed income of Rs. 4,79,000 from Malhar Dairy Farm - HELD THAT: - The Tribunal found that the assessee had a bona fide belief that income from dairy farming was exempt and therefore did not include it in the return, but during assessment he disclosed and offered the income to tax. The claim was neither mala fide nor false and was disclosed in the scrutiny proceedings; consequently the conditions of Explanation (1) to section 271(1)(c) are satisfied and the levy of penalty cannot be sustained. The tribunal treated the matter as having attained finality on confirmation in appeal and applied the exclusion from penalty where disclosure is bona fide and made during assessment. [Paras 8]

Penalty in respect of the Rs. 4,79,000 addition is cancelled.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - Additions made on an estimated/adhoc basis do not warrant levy of penalty under section 271(1)(c) - Levy of penalty in respect of addition of Rs. 10,88,357 by way of adjustment for bogus purchases (estimated disallowance) - HELD THAT: - The Tribunal observed that the addition for bogus purchases was substantially altered on appeal and ultimately sustained only on an estimated/adhoc basis by the CIT(A). Following the view of the jurisdictional High Court that additions made on estimation without concrete material do not attract penalty under section 271(1)(c), the Tribunal held that estimation alone does not demonstrate furnishing of inaccurate particulars or concealment of income, and therefore penalty cannot be imposed qua such estimated addition. [Paras 9]

Penalty in respect of the estimated addition for bogus purchases is cancelled.

Final Conclusion: The penalty imposed under section 271(1)(c) is set aside in respect of both the undisclosed dairy income and the estimated addition for bogus purchases; the assessee's appeal is allowed and the penalty cancelled.

Capital receipt - revenue receipt - sales tax incentive / remission - fertilizer subsidy / price concession - profits and gains derived from business - direct nexus with the industrial undertaking - deduction under section 80-IB

Sales tax incentive / remission - capital receipt - Sales tax incentive retained under the West Bengal Incentive Scheme, 1999 is a capital receipt not chargeable to tax. - HELD THAT: - The Tribunal examined the West Bengal Incentive Scheme, 1999 and applied the settled principle that the object for which a subsidy or assistance is given determines its character. Relying on the approach in Ponni Sugar (as cited), the Tribunal held that the sales tax remission, granted to promote industrialisation in backward areas and available as an option to defer or remit sales tax for nine years up to a ceiling tied to fixed capital assets, is given for a capital purpose. The form of mechanism through which the incentive is given was held irrelevant; since the scheme's object is to encourage industry (a capital-oriented purpose), the sums retained under Section 41 read with the scheme are capital receipts and not chargeable to tax. The Tribunal therefore allowed the additional ground raised by the assessee that the sales tax incentive is not income taxable under the Income-tax Act. [Paras 16, 17, 18]

Additional ground 3 allowed: the sales tax incentive is a capital receipt not chargeable to tax.

Fertilizer subsidy / price concession - profits and gains derived from business - deduction under section 80-IB - direct nexus with the industrial undertaking - Fertilizer subsidy (price concession) paid by Government as reimbursement of the difference between cost and notified MRP is income derived from the business of the industrial undertaking and eligible for deduction under section 80-IB. - HELD THAT: - The Tribunal analysed whether the subsidy is sufficiently proximate to the business so as to be 'profits and gains derived from' the eligible industrial undertaking. Applying the ratio of the Supreme Court in Meghalaya Steel, the Tribunal held that subsidies which reimburse elements of cost of manufacture or sale (here, the difference between cost and government-fixed MRP) have a direct nexus with the business and form part of net profit. The Tribunal distinguished earlier lines of authority concerning incentives that arise post-manufacture or are one step removed (for example export entitlements or deposits), and accepted that the retention pricing/controlled MRP scheme results in direct reimbursement of production/sale costs. On that basis the fertilizer subsidy is includible in profits and is eligible for deduction under section 80-IB, and the Tribunal set aside the CIT(A)'s disallowance and restored the matter to the file of the AO for consequential adjudication consistent with this conclusion. [Paras 21, 22, 23, 24]

Ground 5 allowed insofar as fertilizer subsidy is income derived from the industrial undertaking and eligible for deduction under section 80-IB; matter restored to AO for fresh adjudication on that basis.

Final Conclusion: The Tribunal recalled the coordinate-bench order and, on merits, held that the sales tax incentive under the West Bengal scheme is a capital receipt not chargeable to tax, and that the fertilizer price-concession subsidy is a revenue receipt derived from the industrial undertaking and eligible for deduction under section 80-IB; the appeal (to the extent recalled) is allowed and the fertilizer subsidy issue is remitted to the AO for fresh adjudication consistent with these findings.

Reopening of assessment under section 147/148 - formation of belief based on tangible material - reassessment quashed where reopening based on factually incorrect premise - approval under section 151

Reopening of assessment under section 147/148 - reassessment quashed where reopening based on factually incorrect premise - formation of belief based on tangible material - approval under section 151 - Validity of reassessment proceedings initiated by the AO under section 147/148 where reopening was premised on the assessee not having filed a return. - HELD THAT: - The Tribunal found that the AO recorded reasons for reopening stating the assessee had purchased property and had not filed a return, such that income had escaped assessment. The assessment record itself and the AO's own order showed that the assessee had filed the original return on 31.10.2006 and the return was processed. Reopening therefore rested on a factually incorrect premise and on borrowed or mechanical satisfaction without application of independent mind. Reliance was placed on precedents establishing that reassessment initiated on the basis of incorrect departmental records or without tangible material and without further enquiry is not in accordance with law. Because the foundational reason for reopening was factually wrong, the reassessment proceedings were quashed. The Tribunal further held that, having succeeded on this legal ground, other challenges to the reopening and to the additions on merits became academic and were not adjudicated. [Paras 19, 20]

Reassessment proceedings under section 147/148 (and consequential proceedings) quashed; appeal allowed.

Final Conclusion: The Tribunal quashed the reassessment initiated for AY 2006-07 because the reopening was based on a factually incorrect premise that the return was not filed; other grounds were rendered academic and not decided.

Exclusive jurisdiction of the Income tax Settlement Commission - subjudice bar pursuant to section 245F - rectification under section 154 - penalty under section 271AAC - curable defect and section 292B - infructuous order

Exclusive jurisdiction of the Income tax Settlement Commission - subjudice bar pursuant to section 245F - rectification under section 154 - penalty under section 271AAC - infructuous order - Whether the Assessing Officer had jurisdiction to levy penalty under section 271AAC by invoking section 154 after the assessee's petition under section 245C had been admitted to be proceeded with under section 245D by the Income tax Settlement Commission. - HELD THAT: - The Tribunal found as an undisputed fact that the assessee filed a petition under section 245C which was admitted and allowed to be proceeded with under section 245D(1) by the Settlement Commission prior to the Assessing Officer's rectification order. In that situation section 245F(2) vests exclusive jurisdiction in the Settlement Commission to exercise the powers and perform the functions of an income tax authority in relation to the case until an order under section 245D(4) is passed (subject to section 245D(3)). Because the assessment was thus sub judice before the Settlement Commission, the Assessing Officer was precluded from passing any order or levying/initiating penalty that related to the quantum which was before the Commission. The attempted rectification under section 154 to substitute initiation of penalty under section 270A with penalty under section 271AAC could not cure the jurisdictional bar created by the admitted Settlement Commission proceedings; accordingly the levy of penalty by the AO was without jurisdiction and thereby infructuous. The Tribunal also observed that the CIT(A) erred in treating the appeal as not maintainable before it instead of quashing the penalty order as without jurisdiction; on the jurisdictional ground the penalty order was set aside. [Paras 6]

Impugned order dated 27.01.2020 levying penalty under section 271AAC is quashed as infructuous for want of jurisdiction of the Assessing Officer; appeal allowed on this ground and penalty deleted.

Final Conclusion: The appeal is allowed: because the Settlement Commission had admitted the assessee's petition and thereby had exclusive jurisdiction under section 245F until further order, the Assessing Officer lacked jurisdiction to levy the penalty under section 271AAC by a rectification order under section 154; the penalty order is quashed as infructuous.

Estimation of income on the basis of incriminating material seized during search - requirement of nexus between seized material and extrapolated additions - application of presumptive rate for civil construction to estimate profit element - onus on assessee to substantiate development expenditure with verifiable records - reasonableness of estimation versus arbitrary extrapolation - restriction of disallowance in absence of documentary proof

Estimation of income on the basis of incriminating material seized during search - requirement of nexus between seized material and extrapolated additions - application of presumptive rate for civil construction to estimate profit element - Validity and quantum of addition on account of alleged unaccounted/suppressed sales for AYs 2013-14, 2014-15 and 2015-16. - HELD THAT: - Tribunal held that additions in assessments arising from search must be founded on the incriminating material seized and that extrapolation from a few instances to all transactions requires a clear nexus with the material found. A blanket presumption that registered documents reflect only a fraction of true consideration across all transactions, without corroborative seized evidence for each transaction, is impermissible. Recognising that sale of developed sites ordinarily involves expenditure (cost of construction) and that entire sale proceeds cannot be equated with taxable profit, the Tribunal directed estimation of the profit element rather than taxation of gross sale value. By analogy to the statutory presumptive rate applicable to civil construction, the Tribunal applied an 8% profit rate to the unaccounted sales computed by the Assessing Officer for AY 2013-14 and 2014-15 (and mutatis mutandis for AY 2015-16), deleting the balance addition. The Tribunal emphasised that such estimation must not be arbitrary and must maintain nexus with seized material, but accepted an 8% profit estimate as a fair method on the facts of the case. [Paras 8, 9, 10]

Additions for unaccounted sales partly deleted; AO directed to compute taxable income by applying an 8% profit rate on the unaccounted sales figures for AYs 2013-14, 2014-15 and 2015-16, with the balance deletions confirmed.

Requirement of proof before treating land purchase excess as unaccounted investment - reasonableness of extrapolation based on seized agreements - Validity of additions on account of alleged unaccounted investment in land for AYs 2009-10, 2012-13 and 2013-14. - HELD THAT: - On examination of agreements and loose papers, Tribunal found absence of credible evidence showing actual payment of amounts in excess of registered values or that such payments related to the assessee in the relevant assessment years. Several agreements either did not materialise, related to other years, or lacked corroborative receipts. Extrapolation by the AO to presume payment of excess amounts across transactions was held to be based on conjecture and surmise and therefore unsustainable. The Tribunal noted that the AO bears the burden of establishing the making of undisclosed payments and that mere statement in seized papers without corroboration is insufficient. [Paras 8]

Additions on account of unaccounted investment in land deleted for the years in question; revenue has not contested the appellate findings and the issue stands final.

Onus on assessee to substantiate development expenditure with verifiable records - restriction of disallowance in absence of documentary proof - reasonableness of estimation versus arbitrary extrapolation - Allowability and extent of disallowance of development expenses claimed by the assessee for AYs 2009-10 to 2015-16. - HELD THAT: - Tribunal accepted that development of land into saleable plots necessarily entails expenditure (clearing, levelling, roads, posts etc.) and that certain services may be procured from the unorganised sector without proper bills. Nevertheless, the assessee must furnish particulars to substantiate claimed expenditure. Having regard to the facts, the Tribunal deemed a 70% disallowance (as made by AO) excessive and concurred with the CIT(A)'s assessment that a 40% disallowance appropriately balances the lack of verifiable documentation with the reality of genuine expenditure. The Tribunal found the 40% estimate reasonable and declined to interfere. [Paras 8, 11]

Disallowance of development expenses confirmed at 40%; appeals on this issue dismissed.

Restriction of disallowance in absence of documentary proof - reasonableness of estimation versus arbitrary extrapolation - Allowability and quantum of disallowance of sales commission expenses for AYs 2009-10 to 2015-16. - HELD THAT: - Assessing Officer disallowed 70% of sales commission on estimate; Tribunal noted that large land sales commonly involve brokers and that many payments were small (below threshold requiring TDS) and one-time referral payments. In the absence of documentary proof justifying a 70% disallowance, the Tribunal applied the same reasoning and quantum as for development expenses and restricted the disallowance to 40%, finding this to be a fair and reasonable estimate. [Paras 8]

Disallowance of sales commission restricted to 40%; assessee's grounds partly allowed.

Final Conclusion: On cross-appeals for AYs 2009-10 to 2015-16 the Tribunal partly allowed the assessee's appeals: additions for unaccounted sales for AYs 2013-14, 2014-15 and 2015-16 are to be recomputed by applying an 8% profit rate to the unaccounted sales figures; additions for unaccounted investment in land were deleted; disallowance of development expenses is confirmed at 40%; disallowance of sales commission is restricted to 40%. The assessee's appeals are partly allowed and the revenue's appeals are dismissed.

Registration under section 12AA - charitable purpose as per section 2(15) - opportunity of hearing and compliance with notice - ex-parte decision for non-compliance - remand for fresh decision and verification of records

Registration under section 12AA - opportunity of hearing and compliance with notice - ex-parte decision for non-compliance - remand for fresh decision and verification of records - Whether the application for registration under section 12AA should be decided afresh by the CIT(Exemption) after giving the assessee an opportunity to comply and be heard. - HELD THAT: - The Tribunal noted that the assessee had applied for registration under section 12AA and that the CIT(Exemption) rejected the application after proceeding ex parte because the assessee did not respond to notices dated 16.08.2018 and 03.09.2018. The assessee, however, admitted non-compliance and offered an explanation that it is a State Government organisation which was shifting offices and therefore could not attend the hearings. The Departmental representative consented to remand. Having regard to the admitted non-compliance together with the explanation and the consent of the Department, the Tribunal considered it appropriate in the interests of justice to remit the matter to the file of the CIT(Exemption) for fresh consideration. The Tribunal directed that the CIT(Exemption) give the assessee an opportunity to be heard, permit compliance and decide the application on merits after considering the assessee's response and documentary material. [Paras 6, 7, 8]

The matter is remitted to the CIT(Exemption) to decide the application for registration under section 12AA afresh after giving the assessee an opportunity to be heard and to make the requisite compliance; the appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal set aside the CIT(Exemption)'s order refusing registration and remitted the application for fresh adjudication on merit with directions to afford the assessee an opportunity to be heard and to comply with the notices; the appeal is disposed of as allowed for statistical purposes.

Penalty under section 271(1)(c) read with section 274 - concealment of particulars of income - furnishing inaccurate particulars of income - requirement to specify the limb of offence in penalty notice - principles of natural justice

Penalty under section 271(1)(c) read with section 274 - requirement to specify the limb of offence in penalty notice - principles of natural justice - Whether the penalty notice and proceedings under section 271(1)(c) were valid when the assessing officer failed to specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income - HELD THAT: - The Assessing Officer issued penalty notices and recorded satisfaction without striking off or specifying which limb of section 271(1)(c) applied, using a printed form that left both alternatives open. The Tribunal examined the notices and the assessment order and found that the AO did not indicate whether the penalty was initiated for concealment or for furnishing inaccurate particulars. Reliance was placed on authoritative decisions holding that a notice under the penal provisions must inform the assessee of the specific ground to be met; merely sending a printed form listing all possible grounds or taking up one limb and finding guilt under another offends the principles of natural justice. Because the AO failed to specify the limb of offence in the notice and while recording satisfaction, the penalty proceedings were not in accordance with law and could not be sustained. The Tribunal consequently cancelled the penalty; having decided the appeal on this legal defect, it did not adjudicate the merits of the underlying addition as that became academic. [Paras 10, 11, 12, 13, 14]

Penalty proceedings and penalty under section 271(1)(c) quashed for want of a valid notice specifying the applicable limb; penalty cancelled.

Final Conclusion: The appeal is allowed; the penalty imposed under section 271(1)(c) is quashed for failure by the AO to specify whether proceedings were for concealment or for furnishing inaccurate particulars of income; the merits of the assessment were not adjudicated.

Disallowance under section 14A read with Rule 8D - Principle that disallowance under section 14A requires existence of exempt income - Remand for fresh consideration to the assessing officer - Dismissal of appeal for non prosecution

Disallowance under section 14A read with Rule 8D - Principle that disallowance under section 14A requires existence of exempt income - Validity of the disallowance quantified under Rule 8D where the assessment order is silent about exempt income for the relevant year. - HELD THAT: - The Assessing Officer quantified disallowance under Rule 8D(2)(ii) and Rule 8D(2)(iii) but the assessment order contains no finding or observation about any exempt income for the relevant assessment year. It is an established legal principle that disallowance under section 14A can be made only where there is exempt income in the relevant year; absent any exempt income, no disallowance is sustainable. The CIT(A) disposed of the appeal on grounds of non prosecution without addressing the substantive question of the presence of exempt income. In these circumstances the Tribunal found it appropriate to send the matter back to the file of the Assessing Officer for fresh examination in the light of these observations and directed the Assessing Officer to reexamine the disallowance in the context of dividend (or other) exempt income actually earned in the year under appeal. [Paras 4]

Matter remanded to the Assessing Officer to reexamine and determine disallowance under section 14A read with Rule 8D in light of any exempt income for assessment year 2012-13; if no exempt income is found, the additions under section 14A are to be deleted.

Dismissal of appeal for non prosecution - Remand for fresh consideration to the assessing officer - Whether the CIT(A)'s summary dismissal for non prosecution required setting aside in view of the substantive defect in the assessment. - HELD THAT: - The record shows the assessee did not appear before the CIT(A) and did not furnish details despite multiple opportunities, leading the CIT(A) to dismiss the appeal for non prosecution. The Tribunal, having found that the assessment itself is silent on the existence of exempt income (a determinative point for disallowance under section 14A), did not simply confirm the dismissal as disposing of the substantive controversy. Instead, the Tribunal remitted the substantive issue to the Assessing Officer for fresh consideration and thereby treated the appeal in a manner that preserves the assessee's substantive rights to have the section 14A question answered on merits. [Paras 3, 4, 5]

Although the CIT(A) dismissed the appeal for non prosecution, the Tribunal remanded the substantive issue to the Assessing Officer and treated the appeal as allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the question of disallowance under section 14A read with Rule 8D to the Assessing Officer for fresh examination in light of whether any exempt income was earned in assessment year 2012-13, directing deletion of the addition if no exempt income is found; the appeal is treated as allowed for statistical purposes.

Transfer pricing adjustment - turnover filter - Related Party Transactions filter - restriction of adjustment to international transactions - capacity utilization adjustment - remand for fresh consideration - rectification under section 154

Turnover filter - transfer pricing adjustment - remand for fresh consideration - Application of turnover filters in the benchmarking exercise for determining the transfer pricing adjustment and whether the TP analysis requires fresh examination. - HELD THAT: - The Tribunal found that the TPO applied a lower turnover filter of Rs. 300 crore without any legal basis and failed to apply an upper turnover limit. The DRP's substitution of a lower limit equating to ten times the assessee's turnover was also held to be arbitrary and without legal sanction. The Tribunal observed absence of a proper FAR analysis to support any turnover filter and noted that the Dun & Bradstreet material relied upon concerned the IT industry and was inapposite. For these reasons the Tribunal directed that the AO/TPO must conduct a fresh transfer pricing analysis afresh, performing a proper FAR analysis when considering any turnover-based filters. [Paras 7]

TP issues relating to application of turnover filters restored to AO/TPO for fresh consideration with direction to undertake proper FAR analysis.

Related Party Transactions filter - transfer pricing adjustment - remand for fresh consideration - Appropriate RPT filter to be applied in selection of comparables and whether the existing RPT filter requires reconsideration. - HELD THAT: - The Tribunal held that the TPO's application of a 5% RPT filter lacked basis or legal sanction and referred to precedents of the Bangalore Tribunal supporting a 15% RPT filter. On this basis the Tribunal directed that fresh TP analysis should be conducted applying an RPT filter of 15%, and the AO/TPO should reconsider the comparable set accordingly. [Paras 7]

RPT filter issue remitted to AO/TPO for fresh analysis, with direction to apply a 15% RPT filter.

Restriction of adjustment to international transactions - transfer pricing adjustment - remand for fresh consideration - Whether the transfer pricing adjustment should be made at entity level or restricted only to international transactions with associated enterprises. - HELD THAT: - Relying on the Tribunal's precedent in IKA India (P.) Limited v. ACIT and the assessee's earlier acceptance in its own assessment history, the Tribunal held that the TP adjustment should be restricted to international transactions. The TPO's approach of making an entity-level adjustment was therefore inappropriate. The Tribunal directed the AO/TPO to confine the adjustment to international transactions in the fresh examination. [Paras 7]

TP adjustment must be restricted to international transactions; matter remitted to AO/TPO for re-determination accordingly.

Capacity utilization adjustment - transfer pricing adjustment - remand for fresh consideration - Claim for capacity utilization (and related project expenses) to be considered in the transfer pricing exercise. - HELD THAT: - The Tribunal noted that the assessee had commissioned a new plant which commenced production during the relevant year and that the TPO had refused capacity utilization and related adjustments on the ground that adjustments were made on comparables and that the company was ten years old. Citing the Tribunal's decision in IKA India (P.) Limited v. ACIT and precedent permitting such adjustments (and permitting adjustments on the tested party where details are lacking), the Tribunal directed the AO/TPO to consider the assessee's claims for capacity utilization and related project expenses afresh in the remand. [Paras 7]

Capacity utilization and related adjustments restored to AO/TPO for fresh consideration in the TP re-analysis.

Corporate tax - depreciation - remand for fresh consideration - Disallowance of depreciation in assessment and whether the matter requires re-examination by the Assessing Officer. - HELD THAT: - The Tribunal observed that an identical issue had been earlier remitted in the assessee's own case for assessment year 2003-2004 and, following verification, the AO had allowed the claim. Having considered those earlier orders placed on record, the Tribunal concluded that the question of depreciation disallowance must be remitted to the AO for de novo consideration, directing the AO to examine the claim in light of the Tribunal's earlier directions and to afford the assessee a reasonable opportunity of hearing. [Paras 3, 7]

Depreciation disallowance restored to AO for fresh verification and decision in accordance with Tribunal's earlier directions.

Infructuous appeal - Disposition of the appeal arising from the rectification order when identical issues are pending in the main appeal. - HELD THAT: - The Tribunal accepted the assessee's submission that the grounds in IT(TP)A No. 1346/Bang/2017 are identical to those in IT(TP)A No. 1714/Bang/2016 and that a decision in the latter would render the former infructuous. On that basis the Tribunal dismissed IT(TP)A No. 1346/Bang/2017 as infructuous. [Paras 8]

IT(TP)A No. 1346/Bang/2017 dismissed as infructuous.

Final Conclusion: The Tribunal allowed the main appeal for statistical purposes by restoring all transfer pricing issues (including turnover and RPT filters, restriction to international transactions, and capacity utilization adjustments) to the files of the AO/TPO for fresh consideration with directions, and remitted the depreciation issue to the AO for de novo examination; the related rectification-appeal was dismissed as infructuous.

Arm's Length Price - Transfer Pricing comparables - Adjustment under Section 92CA of the Act - Tolerance margin in transfer pricing ( 5%) - Low tax effect doctrine - Non-precedential dismissal

Transfer Pricing comparables - Arm's Length Price - Tolerance margin in transfer pricing ( 5%) - Low tax effect doctrine - Inclusion of two comparables (M/s. Jain Granites & Projects India Ltd. and M/s. Somany Ceramics Ltd.) for determining Arm's Length Price and whether such inclusion alters the tax effect sufficiently to sustain the Revenue's appeal. - HELD THAT: - The Tribunal examined the effect of including the two comparables specified by the Revenue and found that the Arm's Length Price would move to a range of 37.5% to 41%. That range remains within the prescribed tolerance margin of 5% under the transfer pricing guidelines. Because the adjustment, even if accepted, would not produce a tax effect outside the tolerance band, the Tribunal applied the low tax effect reasoning and dismissed the Revenue's appeal. The Tribunal also expressly clarified that dismissal on the basis of no or low tax effect is non-precedential and will not preclude the Revenue from contesting similar issues on merits in cases where there is a tax effect. [Paras 5, 6]

Revenue's appeal seeking inclusion of the two comparables is dismissed as the resulting Arm's Length Price remains within the tolerance margin and produces no material tax effect; dismissal is non-precedential.

Non-precedential dismissal - Low tax effect doctrine - Consequence for the cross-objection filed by the assessee consequent to dismissal of the Revenue's appeal. - HELD THAT: - Given the dismissal of the Revenue's appeal on the ground of no tax effect, the Tribunal held that the assessee's cross-objection had become infructuous. The Tribunal therefore dismissed the cross-objection as no substantive relief or variation arose from the outcome of the Revenue's appeal. [Paras 7, 8, 9]

Assessee's cross-objection is dismissed as infructuous following the dismissal of the Revenue's appeal for lack of tax effect.

Final Conclusion: The Revenue appeal is dismissed because inclusion of the disputed comparables would keep the Arm's Length Price within the 5% tolerance and produce no material tax effect; the assessee's cross-objection, rendered infructuous by that dismissal, is also dismissed. The Tribunal's dismissal on low tax effect is not to be treated as a precedent in matters where tax effect exists.

Disallowance under section 36(1)(va) of the Income-tax Act for non-deposit of employees' contribution - deposit before filing return as defence to disallowance under section 36(1)(va) - applicability of Finance Act 2021 amendment (Explanation 2) - conflicting coordinate-bench precedents-rule favouring assessee

Disallowance under section 36(1)(va) of the Income-tax Act for non-deposit of employees' contribution - deposit before filing return as defence to disallowance under section 36(1)(va) - Whether the addition under section 36(1)(va) is leviable where employees' PF/ESIC contributions were deposited after the prescribed due dates but before filing the return for AY 2018-19. - HELD THAT: - The Tribunal found as an undisputed fact that the employees' contribution to PF and ESIC was deposited with the appropriate authorities after the prescribed due dates but before the filing of the return for the relevant assessment year. The Tribunal applied the decision of the Hon'ble Delhi High Court in CIT vs. AIMIL Ltd., which holds that deposit before filing the return precludes disallowance under section 36(1)(va). When coordinate-bench decisions conflict on this point, the view favourable to the assessee is to be followed. On these bases the Tribunal concluded that no disallowance under section 36(1)(va) was called for and directed deletion of the addition. [Paras 7]

Addition under section 36(1)(va) deleted; appeal allowed on this ground.

Applicability of Finance Act 2021 amendment (Explanation 2) - conflicting coordinate-bench precedents-rule favouring assessee - Whether the amendment effected by Finance Act 2021 (Explanation 2) applies to Assessment Year 2018-19. - HELD THAT: - The Tribunal noted the Finance Bill 2021 amendment was held by a coordinate Bench in Indian Geotechnical Services to take effect from 1 April 2021 and therefore apply to AY 2021-22 and subsequent years. The assessment year before the Tribunal is 2018-19; accordingly the amended provision was held not to apply. The Tribunal further observed that, where there are conflicting coordinate-bench decisions, the one favourable to the assessee is to be applied, reinforcing the conclusion that the Finance Act 2021 amendment does not affect AY 2018-19. [Paras 7]

Amendment by Finance Act 2021 held not applicable to AY 2018-19.

Final Conclusion: For AY 2018-19 the Tribunal held that delayed deposit of employees' PF/ESIC contributions, when paid before filing the return, does not attract disallowance under section 36(1)(va); the Finance Act 2021 amendment does not apply to AY 2018-19. Appeal allowed and the addition deleted.

Show cause notice - principles of natural justice - requirement of issuance of show cause notice to the person affected before passing an order - penalty under section 112(a) of the Customs Act

Show cause notice - principles of natural justice - penalty under section 112(a) of the Customs Act - Impugned penalty order set aside because the show cause notice was not issued to the appellant, violating principles of natural justice. - HELD THAT: - The show cause notice was issued only to specified individuals, including a director of the appellant, but was not addressed to the appellant corporate entity; consequently the appellant did not file a reply because it was not called upon to do so. A show cause notice is the foundational basis for any adverse order and issuance to the person against whom the order is sought is a basic requirement of natural justice. Since the appellant was not served with the notice and therefore had no opportunity to reply, the order imposing penalty on the appellant could not be sustained. For this reason alone the Tribunal set aside the penalty order and did not undertake examination of the Directorate of Revenue Intelligence's jurisdiction under section 28(4). [Paras 7, 8, 9, 10]

The order imposing penalty on the appellant under section 112(a) is set aside and the appeal is allowed.

Final Conclusion: The appeal is allowed; the penalty imposed under section 112(a) of the Customs Act is set aside because the show cause notice was not issued to the appellant, resulting in breach of principles of natural justice.

Conversion of free shipping bills to Advance Authorization shipping bills - amendment of documents under Section 149 of the Customs Act, 1962 - time bar under departmental circulars vis-a -vis statutory silence - requirement of physical examination for permitting amendment of shipping bill - documentary evidence in existence at the time of export as basis for post export amendment

Time bar under departmental circulars vis-a -vis statutory silence - amendment of documents under Section 149 of the Customs Act, 1962 - Rejection of the request for conversion of shipping bills as time barred by applying Board Circular No.36/2010 when Section 149 does not prescribe a time limit. - HELD THAT: - The Tribunal held that the shipping bills in question fall after the amendment of Section 149 effective 1.8.2019. The amended provision contemplates amendment within such time and subject to conditions as may be prescribed, but no notification prescribing a time limit for amendment of shipping bills had been issued. A departmental circular issued prior to the statutory amendment (Board Circular No.36/2010) prescribing a three month limit cannot be applied to deny conversion where the statute is silent as to time; Section 149 would prevail over the circular. The Tribunal relied on earlier decisions, including the Tribunal's own decision in Autotech Industries and High Court precedents, which held that a circular cannot impose a statutory time bar where the Act or rules do not prescribe one, and that Rule 12(1) of the Drawback Rules and Section 149 do not prescribe a limitation that precludes belated amendment where documentary evidence existed at the time of export. [Paras 14, 15, 16]

Request for conversion could not be rejected as time barred by resort to Board Circular No.36/2010 and the rejection on that ground was not justified.

Requirement of physical examination for permitting amendment of shipping bill - documentary evidence in existence at the time of export as basis for post export amendment - Rejection of the request for conversion on the ground that the goods were not physically examined before export. - HELD THAT: - The Tribunal found no requirement in Section 149 that conversion or amendment of a shipping bill may be allowed only if the goods have been physically examined. The record showed that a Preventive Officer supervised stuffing of the goods and endorsed the shipping bill; such supervision and endorsement demonstrated verification of invoices and packing lists prior to export. The Tribunal concluded that supervision of stuffing by a Preventive Officer does not make the amendment contingent on a separate or additional requirement of 'physical examination' beyond documentary verification, and that denial on that ground lacked legal basis. [Paras 19, 20]

Rejection of conversion on the ground of absence of physical examination was without legal basis; conversion could not be refused for that reason.

Final Conclusion: The impugned order rejecting the request to convert the free shipping bills to Advance Authorization shipping bills is set aside; the appeal is allowed and the request for conversion is to be permitted with consequential relief, if any.

Compliance with HCCAR, 2009 obligations of Customs Cargo Service provider - Responsibility for security and segregation of customs area - Duty to verify identity and prevent unauthorized access - Obligation to check LEO status before bond closure - Procedure under Regulation 12(6) - opportunity to submit representations on inquiry report - Adjudication and imposition of penalty under Regulation 12(8) - Remand for de novo adjudication where representations not filed

Procedure under Regulation 12(6) - opportunity to submit representations on inquiry report - Remand for de novo adjudication where representations not filed - Adjudication and imposition of penalty under Regulation 12(8) - Whether the appellant must be afforded an opportunity under Regulation 12(6) to file representations on the inquiry report and whether the adjudication and penalty imposed should be set aside and remitted for fresh adjudication. - HELD THAT: - Regulation 12(6) requires the Commissioner to furnish the Assistant/Deputy Commissioner's inquiry report to the Customs Cargo Service provider and permit the provider to submit representations within a specified period not less than thirty days. Although the appellant had replied to the Show Cause Notice, it did not file any objections or counter-representations after receipt of the inquiry report. The Tribunal noted that the appellant sought an opportunity to file objections and to adduce evidence, and that a custodian which is a statutory body ought to be given a further chance to establish its defence. In view of the absence of representations on the inquiry report and the appellant's request to file objections and evidence, the Tribunal found it appropriate to set aside the impugned adjudication order and remit the matter to the Commissioner. The Commissioner is directed to afford the appellant the opportunity to file representations under Regulation 12(6) and thereafter to proceed with de novo adjudication, which may include examination or cross-examination of witnesses and consideration of any material the appellant places before the authority. [Paras 13, 14, 15]

Impugned order setting penalty is set aside; appeal allowed insofar as matter is remitted to the Commissioner to permit filing of representations under Regulation 12(6) and for de novo adjudication.

Final Conclusion: The Tribunal allowed the appeal by setting aside the adjudicating authority's order imposing penalty and remitted the matter to the Commissioner with a direction to permit the appellant to file representations on the inquiry report under Regulation 12(6) of HCCAR, 2009 and to conduct de novo adjudication thereafter.

Prohibition of customs broker - jurisdictional competence to impose prohibition - C Form authorization - procedure for revoking licence - Customs Broker Licensing Regulations, 2013 - limitation under Regulation 20

Prohibition of customs broker - jurisdictional competence to impose prohibition - C Form authorization - Validity of the prohibition order issued by the Commissioner of Customs at the station which granted the licence instead of the Commissioner at the station who authorised the CHA to operate on C Form intimation. - HELD THAT: - The Tribunal examined the Board's circular and the facts and concluded that the prohibition order was issued by the Commissioner at the station where the licence was granted whereas, in terms of the circular, action in the form of prohibition in respect of a CHA operating at another station on C Form intimation should be taken by the Commissioner of the station where the CHA was permitted to operate. The impugned prohibition therefore lacked the competence delegated by the circular and was not validly issued by the authority that took the step. The Tribunal treated the locus of authority to prohibit as determinative of validity. [Paras 5]

Prohibition order issued by the Commissioner at the licence-granting station was not validly made; the appeal against revocation was not maintainable on this ground.

Procedure for revoking licence - Customs Broker Licensing Regulations, 2013 - limitation under Regulation 20 - Whether the procedural requirements and time limits under Regulation 20 of CBLR, 2013 for initiating revocation proceedings were complied with and whether proceedings could be initiated after the prescribed period. - HELD THAT: - The Tribunal found that Regulation 20 prescribes issuance of notice and initiation of inquiry within specified time periods (notice within 90 days from receipt of offence report and related timelines). On the record no notice had been issued to the customs broker within the prescribed period and more than six years had elapsed without initiation of the mandated proceedings. Having regard to the statutory procedure and the lapse of the prescribed period, the Tribunal held that proceedings under Regulation 20 could not be validly initiated at this stage and that the department's appeal relying on such delayed action was untenable. [Paras 5]

No valid notice or inquiry under Regulation 20 was conducted within the prescribed period; proceedings are time-barred and the appeal is not maintainable on this ground.

Final Conclusion: The appeal filed by the Revenue is dismissed: the prohibition order was not validly issued by the competent Commissioner under the Board's circular and, separately, the procedural timelines under Regulation 20, CBLR 2013 were not complied with, rendering initiation of proceedings at this stage impermissible.

Re-export of warehoused goods without payment of duty - Clearance of warehoused goods for exportation - Extension of warehousing period - Board Circular No.03/2003-Cus dated 14.01.2003 - Section 69 of the Customs Act, 1962 - Section 72(1)(d) of the Customs Act, 1962 - Duty drawback under Section 74 of the Customs Act, 1962

Re-export of warehoused goods without payment of duty - Section 69 of the Customs Act, 1962 - Re-export of warehoused goods may be permitted without payment of import duty even where demand in respect of those goods has been confirmed, provided the goods are exported directly from warehouse. - HELD THAT: - The Tribunal held that duty in respect of warehoused goods becomes payable only on clearance for home consumption; so long as the goods remain in warehouse, no duty is payable. Section 69 permits clearance of warehoused goods for exportation without payment of import duty when the statutory conditions are met. Applying these principles to the facts, the goods in question remained in warehouse and the appellant sought re-export from the warehouse; accordingly re-export may be allowed without payment of duty. [Paras 4]

The appellant is entitled to re-export the warehoused goods without payment of duty.

Board Circular No.03/2003-Cus dated 14.01.2003 - Extension of warehousing period - A request for re-export under Section 69 may be allowed even after the permitted bonding period has expired and/or a demand notice has been issued, but the warehousing period must be extended to enable re-export. - HELD THAT: - The Tribunal relied on Board Circular No.03/2003-Cus which expressly provides that re-export requests under Section 69 may be permitted despite expiry of bonding period or issuance/decision to auction, and stipulates that extension of warehousing under Section 61 is necessary before permitting re-export so the importer can export within the extended period. The appellant had sought re-export and extension; the circular applies and supports granting both re-export and an extension to permit exportation. [Paras 4]

The appellant is entitled to have the warehousing period extended to permit re-export in accordance with the Board circular.

Section 72(1)(d) of the Customs Act, 1962 - Board Circular No.03/2003-Cus dated 14.01.2003 - Section 72(1)(d) does not preclude permitting re-export under the Board circular where the department has not proceeded to sell the goods by auction and the owner seeks re-export. - HELD THAT: - Section 72(1)(d) empowers demand of duty and, on non-payment, detention and sale by auction; it applies where the department intends to sell or where the owner fails to clear goods for home consumption. The Tribunal observed that in the present case the department had neither cleared the goods for home consumption nor initiated auction. Therefore Section 72(1)(d) does not conflict with allowing re-export under the Board circular; the circular contemplates permitting re-export despite issuance of demand or decision to auction, subject to extending warehousing. [Paras 4]

There is no conflict between Section 72(1)(d) and permitting re-export under the Board circular where auction has not been commenced.

Duty drawback under Section 74 of the Customs Act, 1962 - As an alternative to re-export from warehouse without payment of duty, the appellant would, if required to clear the goods for home consumption and thereafter export, be entitled to claim duty drawback such that the net duty burden would be the differential (effectively 2%). - HELD THAT: - The Tribunal noted earlier precedents and prior decisions where re-export was allowed on payment of net differential duty after adjusting admissible drawback. It observed that even if the appellant chose or were required to clear goods for home consumption, the availment of drawback under Section 74 would limit the net duty liability; however, because the present claim is for re-export from warehouse, this alternative was not necessary to apply. [Paras 4]

If re-export from warehouse were not available, the appellant would alternatively be entitled to export after payment of differential duty after adjusting drawback; but this is an alternative and not necessary here.

Final Conclusion: The appeal is allowed: the appellant is permitted to re-export the imported capital goods lying in warehouse without payment of import duty/fine/penalty, and the warehousing period is extended for six months or for such further period as required to effect re-export, in conformity with Section 69 and Board Circular No.03/2003-Cus.

Entitlement of IRP/RP to fees as part of CIRP costs - power to make regulations under Section 240 of the Code - regulation of remuneration of insolvency professionals - advisory role of IBBI recommendations in fee determination

Entitlement of IRP/RP to fees as part of CIRP costs - advisory role of IBBI recommendations in fee determination - Whether the Adjudicating Authority erred in referring the question of the Appellant's fee to the IBBI and whether IBBI has jurisdiction to examine or recommend on the fee payable to an IRP/RP. - HELD THAT: - The Tribunal affirmed that the Adjudicating Authority is vested with final authority to decide entitlement to fees of an IRP/RP as part of CIRP costs, but the order under challenge only sought recommendations from the IBBI and did not delegate final decision-making to it. The IBBI possesses rule-making power under Section 240 of the Code to frame regulations consistent with the Code, which includes regulation of matters relating to insolvency professionals. The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 and the Code of Conduct in the First Schedule (notably the requirement that remuneration be transparent and a reasonable reflection of work) demonstrate that IBBI is empowered to regulate remuneration. Pending specific regulations, IBBI may issue executive instructions and furnish recommendations; such recommendations are permissible and may assist the Adjudicating Authority but do not oust the Adjudicating Authority's ultimate jurisdiction to decide the fee claim. [Paras 6, 7, 8, 9, 10]

The referral to IBBI for recommendations was not impermissible; IBBI is competent to regulate and recommend on remuneration of IRP/RP, while the Adjudicating Authority retains final decision-making power.

Final Conclusion: Appeal disposed of with observation that IBBI may be asked for recommendations regarding remuneration of insolvency professionals and that the Adjudicating Authority shall thereafter decide the fee claim; no jurisdictional defect in seeking IBBI's recommendations was found.

Operational creditor - operational debt - claim - completeness of application under Section 9 - requirement to attach invoices and ledger evidence - percolation process for operational debt - Adjudicating Authority's scrutiny under Section 9 - existence of a dispute and demand notice reply

Completeness of application under Section 9 - requirement to attach invoices and ledger evidence - Whether the application under Section 9 was incomplete for failure to place on record copies of the invoices and the ledger account. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the application accompanying the Demand Notice only listed the details of approximately 1,110 invoices but did not enclose copies of those invoices nor the ledger account. The Adjudicating Authority and this Tribunal treated those documents as necessary to enable proper adjudication of the Section 9 application. The absence of such documentary particulars rendered the application incomplete and justified its dismissal. The Tribunal noted that an application under Section 9 must be complete so that the Adjudicating Authority can determine whether the debt is due and payable. [Paras 14, 28, 31, 34]

Application was incomplete for want of invoices and ledger evidence and such incompleteness justified dismissal.

Operational creditor - operational debt - percolation process for operational debt - Adjudicating Authority's scrutiny under Section 9 - Whether the appellant qualified as an "operational creditor" qua the corporate debtor given mutual supplies between the parties. - HELD THAT: - Relying on the statutory definitions and the percolation process for an operational debt, the Tribunal held that to qualify as an operational creditor one must have supplied goods or rendered services to the corporate debtor. The factual matrix showed that the parties supplied materials to each other and that, in context, the claim arose when the appellant had received goods/services from the respondent. On this basis the Tribunal concurred with the Adjudicating Authority that the appellant did not stand solely in the position of an operational creditor vis-a -vis the corporate debtor and therefore the claimed debt did not establish the appellant's entitlement to initiate CIRP under Section 9. [Paras 18, 19, 29, 30, 34]

Appellant does not qualify as an operational creditor in relation to the respondent; therefore the Section 9 application could not be maintained on that ground.

Existence of a dispute and demand notice reply - Adjudicating Authority's scrutiny under Section 9 - Whether there was a record of dispute or other bar (including the respondent's reply to the demand notice) that would preclude admission of the Section 9 application. - HELD THAT: - The Tribunal reviewed the correspondence: the demand notice was issued and the respondent replied after the statutory period asserting counter-claims and factual contentions about the commercial understanding between the parties. The Tribunal observed that an Adjudicating Authority must assess whether a plausible dispute exists or whether the matter is a patently weak assertion. While the Tribunal did not undertake a full merits inquiry, it recognised the respondent's contentions and treated the overall record (including absence of supporting invoices and ledger) as supporting the Adjudicating Authority's conclusion that admission was not warranted without further material. [Paras 12, 23, 24, 25, 34]

Respondent's reply and the factual record weighed against admission; no basis to admit the Section 9 petition on the material before the Adjudicating Authority.

Final Conclusion: The National Company Law Appellate Tribunal dismissed the appeal, upholding the Adjudicating Authority's order dismissing the Section 9 application as bereft of necessary documentary particulars and because the appellant did not qualify as an operational creditor vis-a -vis the corporate debtor; the impugned order is free from legal infirmity. No costs.

Carry forward and set off of losses under Section 79 of the Income tax Act, 1961 - exception to Section 79 for change in shareholding pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 - affording reasonable opportunity to the jurisdictional Principal Commissioner/Commissioner of Income tax - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016

Carry forward and set off of losses under Section 79 of the Income tax Act, 1961 - exception to Section 79 for change in shareholding pursuant to a resolution plan approved under the Insolvency and Bankruptcy Code, 2016 - affording reasonable opportunity to the jurisdictional Principal Commissioner/Commissioner of Income tax - Whether the Successful Resolution Applicant can claim carry forward of unabsorbed business losses under Section 79 subject to compliance with the proviso relating to resolution plans approved under the Code. - HELD THAT: - The Tribunal held that the Third Proviso to Section 79 (which exempts changes in shareholding pursuant to a resolution plan approved under the Code provided the jurisdictional Principal Commissioner/Commissioner is afforded a reasonable opportunity to express views) permits the claim of carry forward of losses where a resolution plan has been approved. The Resolution Professional had served notice on the Income tax Authority and no objection was filed. The Tribunal relied on the principle articulated in the earlier JSW Steel Ltd. decision that the Successful Resolution Applicant may claim the benefit before the appropriate Income tax Authority, which must decide the claim in accordance with Section 79 and applicable rules. The Tribunal emphasised that it expressed no opinion on the merits of the claim; the entitlement is subject to adjudication by the competent Income tax Authority after affording opportunity as mandated by the proviso. [Paras 12]

Observation in paragraph 238 disallowing carry forward of losses deleted; the Appellant may claim carry forward of losses under Section 79 before the appropriate Income tax Authority subject to opportunity being afforded to that Authority and adjudication in accordance with law.

Overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - compliance of a resolution plan with the provisions of the Code and Regulations - Whether the Adjudicating Authority's reference to the overriding effect of Section 238 of the Code in the approved resolution order was appropriate. - HELD THAT: - The Tribunal found that, having approved the Resolution Plan after recording that it complies with the Code and Regulations, the Adjudicating Authority had no necessity to make the observations regarding the overriding effect of Section 238. Those observations were unnecessary to the approval and were therefore uncalled for. The Tribunal deleted the impugned observations while leaving the remainder of the Adjudicating Authority's order intact. [Paras 13]

Observation in paragraph 244 referring to Section 238 of the Code deleted as unnecessary to the approval of the Resolution Plan.

Final Conclusion: The Appeal is allowed only to the extent of deleting the Adjudicating Authority's observations in paragraphs 238 and 244; the Appellant may claim carry forward of losses under Section 79 before the competent Income tax Authority (which shall decide the claim in accordance with law after affording the required opportunity), and no opinion has been expressed on the merits of that claim; the remainder of the Adjudicating Authority's order stands confirmed.

Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 - operational debt arising from commercial lease/rent - admission of debt in reply - limitation exclusion due to COVID-19 order - appointment of Interim Resolution Professional and moratorium

Limitation exclusion due to COVID-19 order - Whether the application under Section 9 is time-barred on account of alleged defaults occurring between July 2017 and March 2018. - HELD THAT: - The Tribunal accepted the applicant's contention that the Supreme Court's order excluding the period from 15.03.2020 to 02.10.2021 for computation of limitation applies. Applying that exclusion, the period of limitation which otherwise would have expired was extended, and therefore the petition filed on 01.10.2021 is not barred by limitation. The Tribunal recorded this conclusion in the context of the parties' rival contentions on limitation and the cited Supreme Court order. [Paras 7]

The petition is not time-barred in view of the exclusion of the COVID-19 period for computing limitation.

Admission of debt in reply - Whether there was a pre-existing dispute or, alternatively, whether the corporate debtor admitted the debt pleaded by the operational creditor. - HELD THAT: - The Tribunal noted that the corporate debtor, by its reply dated 24.02.2021, admitted the default and sought time to pay by 01.12.2021. The bench treated that admission as conclusive for the purposes of Section 9, observing that no pre-existing dispute had been shown to exist prior to the demand notice; the request for time to pay was recorded but not accepted by the operational creditor and no payment was made. On that basis the Tribunal found that the debt stood admitted. [Paras 8]

The corporate debtor admitted the default in its reply; no pre-existing dispute was established that would bar the Section 9 application.

Operational debt arising from commercial lease/rent - Whether the claim for lease/rental and related recoveries qualifies as an operational debt under the Code. - HELD THAT: - Relying on precedent reasoning referenced in the order, the Tribunal held that lease rentals arising out of use and occupation of commercial office space qualify as operational debt. Given that the corporate debtor used the office premises for running its primary office and the rent-related dues arose from that commercial arrangement, the Tribunal concluded that the claimed dues fall within the definition of operational debt under the Code. [Paras 9]

The applicant's claim for rent and related charges is an operational debt within the meaning of the Code.

Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and moratorium - Whether the Section 9 application should be admitted and, consequentially, whether an interim resolution professional should be appointed and moratorium imposed. - HELD THAT: - Having found that the claim qualified as operational debt, that limitation did not bar the petition, and that the corporate debtor had admitted the debt, the Tribunal held the Section 9 application deserved to be allowed. The bench therefore admitted the application under Section 9(5), appointed an Interim Resolution Professional (subject to conditions and formal consents), directed the operational creditor to deposit an advance to meet IRP expenses, and declared that the moratorium under Section 14(1) of the Code shall follow, with consequential application of Sections 14(2)-14(4). The directions for communication of the order and updation of ROC master data were also recorded. [Paras 10, 11, 12, 13, 14]

Section 9 application admitted; IRP appointed; deposit directed; moratorium imposed and requisite communications ordered.

Final Conclusion: The Tribunal allowed the Section 9 application: it held the rent-related claim to be an operational debt, found the petition not barred by limitation due to the COVID-19 exclusion, treated the corporate debtor's reply as admission of liability, admitted the application, appointed an IRP on specified conditions, directed a deposit for IRP expenses and declared the moratorium under the Code.

Validity of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - authority of signatory to issue Section 8 notice - rejection of Section 9 application for procedural/technical defects in notice - duty to afford opportunity to cure defects before rejecting Section 9 petition - remand for fresh consideration after setting aside impugned order

Validity of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - authority of signatory to issue Section 8 notice - rejection of Section 9 application for procedural/technical defects in notice - duty to afford opportunity to cure defects before rejecting Section 9 petition - Whether the Adjudicating Authority was justified in rejecting the Section 9 application solely on the ground that the demand notice under Section 8 was signed by an unidentified person and that the signatory's designation/name did not appear. - HELD THAT: - The Tribunal found that the Section 8 demand notice was referred to and adopted in the Section 9 petition and that the Adjudicating Authority's observation that the notice was signed by an unidentified person could not be sustained as a ground to reject the Section 9 application without giving the Operational Creditor an opportunity to explain or cure any defect. The Appellant's Section 9 application was filed by a person duly authorised by a Board resolution dated 15.11.2019; it was not a case of an unauthorised filing. Where the Adjudicating Authority has doubts about the identity or authority of the signatory of the demand notice, principles of natural justice require affording the applicant an opportunity to clarify and, if necessary, produce evidence of authorization rather than outright rejection on that technical ground. Consequently, the finding of the Adjudicating Authority that differing signatures or absence of designation in the notice justified dismissal was held to be incorrect. [Paras 5]

The rejection of the Section 9 application on the sole ground that the Section 8 notice was signed by an unidentified person (and that signatory details differed) was not justified; the Adjudicating Authority ought to have given an opportunity to explain or cure the defect.

Remand for fresh consideration after setting aside impugned order - What relief should follow from the incorrect rejection of the Section 9 application by the Adjudicating Authority. - HELD THAT: - Having concluded that the Adjudicating Authority erred in rejecting the Section 9 application on the stated technical ground, the Tribunal examined the material subsequently placed on record showing that the person who issued the Section 8 notice was a Director and therefore competent to issue the notice. In view of these developments and because the Tribunal expressed no opinion on the merits, it set aside the Adjudicating Authority's order and directed revival of the Section 9 application for fresh consideration and decision after hearing the parties. The remand is for adjudication on merits and any other issues by the Adjudicating Authority, not for the Tribunal to express views on the substantive claim. [Paras 6]

Order of the Adjudicating Authority is set aside and the Section 9 application is revived and remitted to the Adjudicating Authority for fresh consideration after hearing the parties; no opinion expressed on merits.

Final Conclusion: The impugned order rejecting the Section 9 application was set aside because rejection on the ground of an allegedly unidentified signatory to the Section 8 notice was untenable without affording an opportunity to the Operational Creditor to clarify or cure the defect; the Section 9 petition is revived and remitted to the Adjudicating Authority for fresh consideration after hearing the parties, with no expression of opinion on the merits.

Operational Creditor - Demand notice under Section 8 - Section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation-last payment resetting limitation period - pre-existing dispute on operational debt - initiation of Corporate Insolvency Resolution Process - appointment of Interim Resolution Professional - moratorium under Section 14

Demand notice under Section 8 - Operational Creditor - Demand notice in Form No. 3 dated 06.08.2019 was duly served on the Corporate Debtor. - HELD THAT: - The Adjudicating Authority examined the postal receipts, tracking report and email evidence annexed to the application and found that the demand notice dated 06.08.2019 was sent by registered post and email to the corporate debtor and its directors and was properly delivered. The materials on record establish service of the statutory notice as required under the Code and Rules. [Paras 15, 17]

Demand notice was properly served on the Respondent.

Pre-existing dispute on operational debt - Operational Creditor - No pre-existing or valid dispute in respect of the claimed operational debt was proved by the Corporate Debtor. - HELD THAT: - Although the Corporate Debtor alleged disputes relating to shortfall in supply and quality of goods from 2015 onwards, it did not place any substantiating communications or evidence on record. The Authority found that documents filed by the Applicant, including invoices and the affidavit under Section 9(3)(b), demonstrate absence of any notice of dispute and that the Corporate Debtor failed to prove a pre-existing dispute which would bar the claim under the Code. [Paras 10, 16, 17]

The claimed operational debt is not shown to be disputed; no pre-existing dispute established.

Limitation-last payment resetting limitation period - Section 9 of the Insolvency and Bankruptcy Code, 2016 - The application under Section 9 is within limitation because the last payment received on account reset the period of limitation. - HELD THAT: - The Authority accepted the Applicant's contention that the last payment by the Corporate Debtor was made on 07.03.2017 and that the account operated as a running account. Applying the settled principle that a payment on account before expiry of the prescribed period restarts limitation, the Adjudicating Authority held the petition filed on 15.10.2019 to be within limitation. [Paras 13, 14]

The petition is not time-barred; filed within limitation having regard to last payment on 07.03.2017.

Jurisdiction - Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Adjudicating Authority has jurisdiction to entertain the Section 9 application. - HELD THAT: - The registered office of the Corporate Debtor is located within the territorial jurisdiction of this Bench. The Authority recorded that the matter falls within its territorial competence and therefore it was competent to try the application under the Code. [Paras 3, 14]

This Adjudicating Authority has jurisdiction to entertain the application.

Initiation of Corporate Insolvency Resolution Process - Section 9 of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 - Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor is to be initiated and moratorium invoked. - HELD THAT: - Having found service of the demand notice, absence of a proved pre-existing dispute, satisfaction of conditions under Section 9 and that the debt remains unpaid, the Authority held that CIRP should commence. Consequences of admission, including invocation of moratorium under Section 14 and the IRP taking over management and calling for claims, were directed as per the Code. [Paras 17, 18, 21]

CIRP is admitted and moratorium is invoked in relation to the Corporate Debtor.

Appointment of Interim Resolution Professional - Operational Creditor - Mr. Prashant Agrawal is appointed as Interim Resolution Professional (IRP). - HELD THAT: - The Operational Creditor had proposed the name of Mr. Prashant Agrawal and filed his consent in Form 2, confirming no disciplinary proceedings. The Authority, after noting his registration with the IBBI and receipt of consent, appointed him as IRP and directed him to perform functions under the Code, including publication and claim collating, and directed the Operational Creditor to deposit an amount for initial costs. [Paras 19, 20, 21]

Mr. Prashant Agrawal is appointed as the Interim Resolution Professional to conduct the CIRP.

Final Conclusion: The Section 9 petition filed by the Operational Creditor is admitted: the demand notice was served, no valid pre existing dispute was proved, the application is within limitation and the Tribunal has jurisdiction; CIRP is ordered, moratorium is invoked and Mr. Prashant Agrawal is appointed as the Interim Resolution Professional.

Suspension of certificate pending consideration of cancellation - Requirement to record reasons in writing for suspension - Interim suspension without prior opportunity of hearing - Inquiry under Section 14 and inspection/audit under Sections 20 and 23 as basis for cancellation proceedings - Judicial review confined to mala fide, arbitrariness or perversity - Doctrine of proportionality in review of executive suspension

Suspension of certificate pending consideration of cancellation - Interim suspension without prior opportunity of hearing - Validity of the suspension order dated June 07, 2021, in the absence of prior inquiry or opportunity of hearing to the petitioner - HELD THAT: - The Court held that Section 13(1) contemplates an optional interim suspension where the Central Government, for reasons recorded in writing, is satisfied that suspension is necessary pending consideration of cancellation under Section 14. The statute does not mandate an inquiry or opportunity of hearing prior to suspension; where the legislature has intended such safeguards it has done so expressly (as in Section 14). Thus suspension may be validly ordered without prior notice or hearing provided reasons based on material on record justify the satisfaction of the authority. The Court further accepted that material such as questionnaires and replies, and later audit/inspection proceedings, can form part of the material leading to the satisfaction requisite for suspension. The scope of judicial interference is limited and arises only where the satisfaction recorded is mala fide, arbitrary or perverse. [Paras 37, 38, 39, 41, 48]

The suspension order was not vitiated for want of prior inquiry or opportunity of hearing.

Requirement to record reasons in writing for suspension - Inquiry under Section 14 and inspection/audit under Sections 20 and 23 as basis for cancellation proceedings - Whether the impugned suspension order disclosed the requisite reasons and whether those reasons were connected to an ongoing inquiry - HELD THAT: - The Court found that the suspension order contained specific factual recitals of alleged contraventions (non disclosure in FC 4, non intimation of utilisation bank accounts, refund of foreign contribution, and mixing of funds) which could be read as reasons recorded in writing under Section 13(1). The questionnaires issued earlier and the replies furnished by the petitioner were held to be relevant material and part of the consultative/inquiry process; the subsequent audit/inspection under Sections 20 and 23 further furnished inquiry material and justified the extension of suspension and issuance of a Show Cause Notice under Section 14(2). The Court emphasised that reasons may be derived from material on record and that it will not substitute its view for the authority's satisfaction unless the reasons are perverse. [Paras 42, 43, 45, 46, 48]

The reasons recorded in the suspension order were sufficient and were relatable to the inquiry material, including questionnaires and subsequent audit/inspection.

Doctrine of proportionality in review of executive suspension - Judicial review confined to mala fide, arbitrariness or perversity - Whether the suspension order was arbitrary, disproportionate, or otherwise unsustainable in law - HELD THAT: - Applying the doctrine of proportionality and the limited scope of judicial review, the Court examined whether the suspension overreached the object of the statute or was wielded vindictively. Having found that statutory safeguards (recording reasons, provisos permitting limited receipt/utilisation with approval, and post suspension audit/Show Cause mechanism) exist and that the impugned order arose from material showing prima facie contraventions, the Court concluded there was no arbitrariness or disproportionate exercise of power. Precedents relied upon by the petitioner were considered distinguishable on facts where reasons or inquiry had been absent; here inquiry and recorded reasons were found to exist. [Paras 43, 49, 51, 53, 54]

The suspension order was not arbitrary or disproportionate and did not warrant interference.

Final Conclusion: The writ petition challenging the suspension of the petitioner's FCRA registration dated June 07, 2021 (as extended), was dismissed; the Court held that the suspension was lawfully recorded, supported by material relating to questionnaires and subsequent audit/inspection, and was not vitiated by lack of prior inquiry, want of reasons, arbitrariness or disproportionality.

Refund claim time-bar - computation of limitation under Section 11B - adjustment of duty - deduction of period between payment and adjustment/realisation/proof - remand for fresh adjudication and observance of principles of natural justice

Refund claim time-bar - computation of limitation under Section 11B - adjustment of duty - deduction of period between payment and adjustment/realisation/proof - Whether the appellant's refund claim in respect of exports under bond was within the one year time limit prescribed under Section 11B, having regard to payment and subsequent adjustment of duty and the period until realisation of export proceeds and submission of proof of export. - HELD THAT: - The tribunal found that the core question is the reckoning of the one year period under Section 11B where duty was initially paid (on audit objection) and thereafter allegedly adjusted by the department only after submission of proof of export and realisation of export proceeds. The adjudicating authority had rejected the claim as time barred without having examined whether the department had adjusted the duty or when the export proceeds were realised and proof was submitted. The tribunal observed that, in the peculiar facts of the case, the period from payment of duty until adjustment by the department, receipt of export proceeds and submission of proof of export falls to be excluded when computing the one year limitation, since refund could not be processed without those events. However, because there is no documentary evidence on record before the tribunal regarding adjustment by the department or dates of realisation/submission, and the appellant did not place these facts before the adjudicating authority, the tribunal concluded that the matter requires fresh consideration. Accordingly the impugned order was set aside and the matter remitted to the adjudicating authority to verify dates, allow the parties to be heard and decide afresh applying the principle that the interregnum between payment and adjustment/realisation/proof should be deducted for computation of the limitation period if warranted by the facts. [Paras 4, 5, 6]

Impugned order set aside and matter remanded to the adjudicating authority for fresh adjudication after giving opportunity of hearing, to determine whether the period between payment and adjustment/realisation/submission of proof must be excluded in computing the one year time limit under Section 11B.

Final Conclusion: The appeal is allowed by way of remand: the tribunal set aside the impugned order and directed the adjudicating authority to reconsider the refund claim under Section 11B after verifying dates of payment, adjustment, realisation of export proceeds and submission of proof, to deduct any period during which the appellant could not reasonably file the refund, and after observance of the principles of natural justice.

Suo moto reversal of CENVAT credit - wrongly availed but not utilized CENVAT credit - distinction between recovery without interest where credit is reversed prior to utilization and recovery with interest where credit is utilized or erroneously refunded - recovery under the provisions of Section 11A of the Central Excise Act, 1944 and Section 73 of the Finance Act, 1994 where credit is not utilized - application of Chandrapur Magnet Wires precedent

Suo moto reversal of CENVAT credit - wrongly availed but not utilized CENVAT credit - no interest where credit reversed before utilization - Chandrapur Magnet Wires precedent - Whether CENVAT credit which was availed inadvertently, suo moto reversed before utilization and intimated to the Department, amounts to credit never taken so as to preclude recovery of interest and penalty. - HELD THAT: - The Tribunal applied the legal principle laid down in Chandrapur Magnet Wires that CENVAT credit which was taken and thereafter suo moto reversed without having been utilized effectively amounts to credit never taken. The statutory scheme and Rule 14 draw a clear distinction between cases where wrongly availed credit was not utilized (recoverable under the statutory recovery provisions without interest) and cases where credit was utilized or erroneously refunded (recoverable with interest). On the admitted facts the appellant discovered the software-induced excess credit, reversed the same in the CENVAT register, revised returns and reduced refund claims, and informed the Department in February 2011. The show-cause notice and adjudication seeking interest and penalties were therefore contrary to the principle that reversal prior to utilization negates liability for interest, and the impugned order could not be sustained. [Paras 6, 7, 8, 9]

Suo moto reversal of the excess CENVAT credit prior to its utilization, together with intimation to the Department, amounts to the credit never having been taken; consequently, recovery of interest and penalty on that reversed credit was not justified and the impugned order is set aside.

Final Conclusion: Appeal allowed. The order disallowing the CENVAT credit and imposing interest and penalties was set aside on the ground that the excess credit had been suo moto reversed before utilization and intimated to the Department, consistent with the precedent and the statutory distinction; consequential relief to follow as per law.

Capital goods - user test - integral part doctrine - retrospective application of amendment - extended period/limitation - suppression requiring positive act - reliance on departmental circulars

Capital goods - user test - integral part doctrine - Whether CENVAT credit on MS Angles, MS Channels, MS Pipes, joists etc. used in fabrication of items connected with plant and machinery is eligible as credit under the category 'capital goods'. - HELD THAT: - The Tribunal applied the user test and the principle that components, parts or supporting structures which are integral to plant and machinery fall within the definition of capital goods under Rule 2(a). The assessee produced a Chartered Engineer's report, photographs and invoices identifying the items fabricated and installed as parts or accessories of capital goods (blast furnace, continuous casting machine, sinter plant, conveyors, chimneys, ducts, platforms, rails/girders for cranes etc.). The departmental verification (Range Officer) did not demonstrate infirmities in the documentary evidence nor did the department produce material showing that credit was claimed on goods used for civil works disconnected from machinery. Reliance on authorities applying the user test and recognising structurals as integral parts of capital goods supported admissibility of credit. On these findings the Tribunal held that disallowance of credit on the impugned goods could not be sustained and set aside the adjudicating authority's order. [Paras 26, 29, 30, 35]

Disallowance of credit on the impugned MS structural items was set aside and the credit was held eligible as capital goods (or their parts/accessories) to the extent shown by the assessee.

Retrospective application of amendment - reliance on departmental circulars - extended period/limitation - suppression requiring positive act - Whether the amendment to the definition of 'capital goods' (effective 7.7.2009) and the Larger Bench decision applying it retrospectively could be used to deny credit for the period April 2005 to December 2006; and whether extended limitation could be invoked for alleged suppression. - HELD THAT: - The Tribunal noted that the amendment to Rule 2(a) was effected with effect from 7.7.2009 and that there was nothing in the amendment indicating retrospective operation. The adjudicating authority had relied on the Larger Bench decision (Vandana Global) and Board Circular dated 8.7.2010 to apply the amendment retrospectively; the Tribunal observed that subsequent High Court decisions had held Vandana Global not to be good law. Further, on limitation the department failed to produce evidence of a positive act of suppression; the assessee had declared credits in ER-1 returns, produced invoices and a Chartered Engineer's report and the Range Officer's verification did not demonstrate misrepresentation. In absence of material establishing willful suppression, invocation of extended period was unsustainable. Accordingly the Tribunal allowed the appeal also on limitation grounds. [Paras 34, 36]

Retrospective application of the 7.7.2009 amendment and reliance on the Larger Bench and Board Circular to deny credit for April 2005-December 2006 was not sustained; invocation of extended limitation period for alleged suppression was rejected and the appeal allowed on limitation grounds.

Final Conclusion: The Tribunal allowed the appeal, set aside the adjudicating authority's order and held that the CENVAT credit on the specified MS structural items was admissible as capital goods (or their parts/accessories) for the period from April 2005 to December 2006; the retrospective application of the 2009 amendment and invocation of extended limitation were rejected, and consequential relief was granted.

Transfer of unutilised CENVAT credit on shifting of factory - meaning of 'shifts' in Rule 10(1) of CENVAT Credit Rules, 2004 - requirement of transfer of inputs or capital goods under Rule 10(3) of CENVAT Credit Rules, 2004

Transfer of unutilised CENVAT credit on shifting of factory - meaning of 'shifts' in Rule 10(1) of CENVAT Credit Rules, 2004 - Whether closure of one unit and transfer of its input stocks to another unit amounts to 'shifting' of factory so as to permit transfer of unutilised CENVAT credit under Rule 10(1). - HELD THAT: - The Tribunal examined Rule 10(1) and followed the reasoning of the High Court that the word 'shifts' in Rule 10(1) must be read purposively to effectuate the object of enabling an assessee to utilise unutilised CENVAT credit when manufacturing is relocated. Applying that principle to the facts, where the Bangalore factory was closed and the inputs in stock were moved to the Puducherry unit which continued manufacturing, the factual situation falls within the concept of 'shifting' under Rule 10(1). The departmental denial on the ground that there was no explicit statutory template of relocation was rejected as contrary to the purposive construction of the rule. [Paras 12, 14]

Rule 10(1) applies where a unit is closed and inputs are shifted to another unit; the transfer of unutilised CENVAT credit on that basis cannot be denied.

Requirement of transfer of inputs or capital goods under Rule 10(3) of CENVAT Credit Rules, 2004 - Whether transfer of only inputs (and not capital goods) satisfies the condition in Rule 10(3) for allowing transfer of unutilised CENVAT credit. - HELD THAT: - Rule 10(3) permits transfer of unutilised credit where the 'stock of inputs as such or in process, or the capital goods' is transferred. The Tribunal accepted the view in earlier decisions that the disjunctive wording ('inputs or capital goods') means that transfer of inputs alone suffices. On the facts, the appellant transferred duty-paid inputs and work-in-progress to the Puducherry unit and duly accounted for them; therefore the condition in Rule 10(3) was met and non-transfer of capital goods did not preclude transfer of the unutilised credit. [Paras 15, 16]

Transfer of inputs without transfer of capital goods satisfies Rule 10(3) and permits transfer of the unutilised CENVAT credit.

Final Conclusion: The Tribunal set aside the impugned order, holding that Rule 10(1) applies to the closure of the Bangalore unit with transfer of inputs to the Puducherry unit, and that transfer of inputs (even where capital goods were not shifted) meets the requirement of Rule 10(3); the appeal is allowed with consequential relief.

Pre-deposit as condition for entertaining an appeal - prima facie case requirement before insisting pre-deposit - discretion under the proviso to Section 73(4) of the VAT Act - stay of recovery pending appeal - quashing and restoration for hearing on merits

Pre-deposit as condition for entertaining an appeal - prima facie case requirement before insisting pre-deposit - discretion under the proviso to Section 73(4) of the VAT Act - quashing and restoration for hearing on merits - stay of recovery pending appeal - Validity of the Tribunal's direction for a pre-deposit as a condition to entertain the second appeal and consequence of non-compliance. - HELD THAT: - The Court examined Section 73(4) of the VAT Act and its proviso, holding that an appellate authority has a discretion to entertain an appeal without full payment but must exercise that discretion judicially. Before directing a pre-deposit, the Tribunal is obliged to consider whether the appellant has made out a strong prima facie case; where a strong prima facie case exists, the appellate authority should not ordinarily insist on pre-deposit. The Court applied this principle and found that the Tribunal's order directing a fixed pre-deposit was passed without any recorded consideration of the prima facie case put forward by the writ-applicant. The Court reiterated that failure to take note of pertinent facts or to apply the recognised principles governing exercise of discretion would amount to non exercise or improper exercise of discretion (Hindustan Steels Limited Rourkela vs. A. K. Roy relied on). The Court also drew guidance from the decision of the Bombay High Court in Bhupendra Murji Shah v. Deputy Commissioner of Income Tax and the CBDT instructions referred to in the judgment, which illustrate that standardized pre-deposit formulas exist as guidelines but permit deviation in appropriate cases. In the circumstances, the Tribunal's pre-deposit direction and the consequent dismissal for non-compliance were quashed and the matter was remitted for fresh hearing on merits. [Paras 16, 21, 22, 23, 24]

The Tribunal's order dated 17.6.2021 directing pre-deposit and the consequential order dated 15.12.2021 dismissing the Second Appeal for non-compliance are quashed; the Second Appeal No.327 of 2020 is restored for hearing on merits and the Tribunal is directed to dispose it in accordance with law within eight weeks, with no recovery to be made pursuant to the impugned assessment order until final disposal.

Final Conclusion: Writ petition allowed: pre-deposit order and consequential dismissal by the Tribunal set aside; appeal restored for fresh adjudication on merits within eight weeks and recovery stayed until final disposal.

Penalty under the Central Sales Tax Act for issuance of incorrect Form C - Mens rea for imposition of penalty - Bonafide belief and pending amendment of registration as mitigating factor - Judicial modification of penalty on appellate review

Penalty under the Central Sales Tax Act for issuance of incorrect Form C - Mens rea for imposition of penalty - Whether the petitioner was liable to penalty for issuing Form C in respect of goods not covered by its Form B registration certificate and whether mens rea existed for imposition of penalty. - HELD THAT: - The assessing officer found that the petitioner had claimed concessional CST by issuing Form C for items not covered by its Form B registration certificate and treated the act as an offence under the statutory provision attracting penalty. The Appellate Authority and the Tribunal examined the factual matrix and the intention behind the transactions; the Tribunal concluded that mens rea was established and upheld liability for penalty while observing the quantum to be excessive. The High Court accepted that the petitioner had ultimately admitted tax liability for the disputed purchases but noted that the petitioner had made applications to amend its Form B registration and had acted under a bonafide impression that the items would be included. On the facts, although liability to penalty was sustained, the existence of mitigating circumstances (pending amendment requests and bonafide belief) weighed against treating the conduct as wholly deliberate misconduct warranting maximum penalty. [Paras 5, 8, 9]

Liability to penalty upheld, but mitigated by petitioner's bonafide belief and steps to amend registration.

Judicial modification of penalty on appellate review - Bonafide belief and pending amendment of registration as mitigating factor - What is the appropriate quantum of penalty to be imposed in view of the admitted liability and mitigating facts? - HELD THAT: - The assessing officer imposed penalty at 150% of tax due. The Appellate Authority reduced the penalty (as recorded by the court) and the Tribunal further modified it to 100%, holding the original penalty excessive. Having regard to the petitioner's admissions of tax liability, the communications seeking amendment of the Form B registration (which demonstrated a bonafide belief that the goods would be included) and the overall factual matrix, the High Court found the Tribunal's reduction to 100% still excessive. The Court exercised its appellate jurisdiction to further moderate the penalty, balancing the need for enforcement against the petitioner's demonstrated bona fide conduct and remedial steps. [Paras 8, 9]

Tribunal's order modified: penalty reduced to 50% (from 100% fixed by the Tribunal and 150% originally imposed).

Final Conclusion: Writ petitions allowed in part; appellate order is modified insofar as the penalty is reduced to 50%, and otherwise the petitions are disposed of without costs.

Rectification under Section 55 of the TNGST Act - power to rectify error apparent on the face of the record - maintainability of a rectification application despite prior appeal or writ disposal - non-speaking order cannot sustain dismissal of a rectification petition - quashing and remand for a speaking order - computation of resale tax and surcharge

Rectification under Section 55 of the TNGST Act - maintainability of a rectification application despite prior appeal or writ disposal - Application under Section 55 to rectify an apparent error is maintainable even though the original assessment was the subject matter of an earlier writ disposal and a belatedly filed appeal rejected as time-barred. - HELD THAT: - The Court recorded that the earlier writ petition was disposed without expressing any opinion on merits and the appellate order rejecting the belated appeal did so on limitation grounds. Those outcomes do not, by themselves, preclude the assessing authority from entertaining an application under Section 55. Section 55(3-A) expressly contemplates exercise of rectification powers even where the original assessment has been the subject matter of an appeal or revision. Therefore, the respondent erred in treating the existence of prior proceedings as an absolute bar to considering the rectification application and in dismissing it without adjudication on the merits. [Paras 12, 18]

The Court held that the rectification application under Section 55 is maintainable and cannot be dismissed solely because the assessment had earlier been the subject of a writ disposal or an appeal dismissed as time-barred.

Non-speaking order cannot sustain dismissal of a rectification petition - quashing and remand for a speaking order - The impugned order passed under Section 55 was non-speaking and therefore liable to be quashed and set aside; the matter was remitted for fresh consideration on merits. - HELD THAT: - The impugned order disposed of the rectification application by stating that once the assessment had been the subject matter of prior proceedings the assessing officer had no power to entertain petitions on the subject, without addressing whether there was an error apparent on the face of the record or applying the statutory test for rectification. The High Court found that there was no discussion of merits in those earlier proceedings and that the assessing authority should have examined the rectification claim on its substance. In view of this absence of reasoned consideration, the Court quashed the order and remitted the matter for a speaking decision. [Paras 19, 20]

Impugned order dated 26.11.2021 under Section 55 was quashed and the matter remitted to the respondent for a reasoned, merits-based decision.

Power to rectify error apparent on the face of the record - computation of resale tax and surcharge - On remand, the assessing authority must consider whether there is an error apparent on the face of the record in the computation of resale tax and surcharge and whether Government orders/clarifications referred to in the assessment were taken into account. - HELD THAT: - The High Court directed the respondent to examine the assessment order and the rectification application to determine if the impact of the Government Order and any clarifications had been reflected in computing tax liability. The Court specifically noted the petitioner's contention that resale tax and surcharge had been demanded on the entire turnover despite the assessment record acknowledging liability only for the last ten days, and instructed the respondent to verify the correctness of the computation and, if an error is found, to grant appropriate relief under Section 55. [Paras 8, 21]

The respondent is directed, on remand, to consider whether an error apparent on the face of the record exists in the computation of resale tax and surcharge and to pass appropriate orders granting relief if warranted.

Final Conclusion: The High Court quashed the order purportedly passed under Section 55 of the TNGST Act on 26.11.2021 for being non-speaking and remitted the matter to the assessing authority to determine on merits-within three months-whether a rectification under Section 55 is maintainable and whether there is an error apparent on the face of the record in the computation of resale tax and surcharge, taking into account the relevant Government Order and clarifications.

Certificate of pre-deposit - condonation of delay in statutory appeal - stay on coercive steps during pendency of appeal - de-freezing/de-attachment of bank accounts - appellate authority to decide on merits and not remand to assessing authority - requirement of speaking order and opportunity to place documents - refund of excess pre-deposit

Condonation of delay in statutory appeal - appellate authority to decide on merits and not remand to assessing authority - Petition was not pressed on merits and the Court granted liberty to file a statutory appeal with condonation of delay and directed the Appellate Authority to decide the appeal on merits without remanding the matter to the Assessing Authority. - HELD THAT: - The petitioner elected not to press the writ petition on merits and was permitted to prefer the statutory appeal within four weeks. The Court accepted the submission that the appellate authority is competent to decide the legal issue and should not routinely remand to the Assessing Authority. The Appellate Authority was directed to condone any delay and to decide the issues on merits after complying with principles of natural justice, preferably within two months (and in view of the age of the dispute, the Court further emphasised expedition and gave a three months expectation from filing). The Court expressly left all merits open and did not express any opinion thereon.

Liberty to file appeal within four weeks; Appellate Authority to condone delay and decide the appeal on merits expeditiously and not remand to the Assessing Authority.

Certificate of pre-deposit - refund of excess pre-deposit - Petitioner was directed to comply with the condition of pre-deposit for hearing of the appeal, subject to refund if the deposit is ultimately found to be in excess. - HELD THAT: - The Court required the petitioner to make the statutory pre-deposit necessary for admission/hearing of the appeal; the deposit was ordered to be without prejudice to contentions of the parties and the Appellate Authority's order. The Court directed that if the deposit is ultimately found to be excessive, it shall be refunded within three months of the appellate order.

Pre-deposit to be made for hearing of appeal; if ultimately found excessive, the amount to be refunded within three months of the Appellate Authority's order.

Stay on coercive steps during pendency of appeal - de-freezing/de-attachment of bank accounts - During pendency of the appeal, no coercive steps shall be taken against the petitioner and any bank accounts attached in respect of the subject proceedings shall be de-frozen/de-attached immediately. - HELD THAT: - Recognising the age of the dispute and the petitioner's pending appeal, the Court directed that enforcement action connected to the challenged proceedings shall not be taken while the appeal is pending. The Court specifically ordered immediate de-freezing/de-attachment of bank accounts, if such attachments related to the proceedings forming the subject matter of the petition.

No coercive steps during pendency of appeal; immediate de-freezing/de-attachment of bank accounts attached in relation to the subject proceedings.

Requirement of speaking order and opportunity to place documents - The Appellate Authority shall afford opportunity to the parties to place on record essential documents and shall pass a speaking order assigning reasons. - HELD THAT: - The Court mandated that the Appellate Authority comply with principles of natural justice by giving parties opportunity to present documents and materials and by recording reasons in a speaking order. The Court emphasised prompt disposal and supply of the order to parties.

Opportunity to place documents to be afforded and a speaking order with reasons to be passed by the Appellate Authority.

Liberty to challenge appellate order - Liberty was reserved to the petitioner to challenge the Appellate Authority's order, and to all parties to pursue other remedies as available in law. - HELD THAT: - While directing expedited appellate adjudication and setting procedural safeguards, the Court expressly preserved the parties' rights to seek further relief or challenge any order passed by the Appellate Authority in accordance with law.

Petitioner and other parties retain liberty to challenge the Appellate Authority's order or to pursue other remedies as available.

Final Conclusion: Writ petition disposed of as not pressed on merits; petitioner granted liberty to file a statutory appeal within four weeks, subject to pre-deposit, with directions that the Appellate Authority condone delay, decide the appeal on merits expeditiously (without remanding to the Assessing Authority), afford full opportunity and pass a speaking order, refrain from coercive action meanwhile and de-freeze any attached bank accounts; all merits left open and rights to further challenge preserved.

Quashing of assessment order - remand for fresh speaking order - statutory requirement to furnish records under Section 22(3) of the TNVAT Act - representation under Section 22(6)(a) of the TNVAT Act and limitation - extension of limitation on account of COVID-19

Quashing of assessment order - remand for fresh speaking order - representation under Section 22(6)(a) of the TNVAT Act and limitation - extension of limitation on account of COVID-19 - statutory requirement to furnish records under Section 22(3) of the TNVAT Act - Validity of the impugned assessment order dated 27.01.2021 in view of non-participation by the petitioner during the COVID-19 lockdown and the timeliness of the petitioner's representation under the statutory provision. - HELD THAT: - The Court noted that notices under the statutory provision requiring production of records were earlier issued and that there was some negligence on the petitioner's part in not furnishing documents. However, the Show Cause Notice dated 31.07.2020 - which preceded the impugned assessment - was issued during the period when the country and districts in Tamil Nadu were under COVID-19 lockdown. In that factual backdrop, and having regard to the extension of limitation announced by higher authority decisions and implemented by the impugned Circular, the Court found it appropriate to set aside the assessment rather than uphold it for failure to respond. The matter was remitted to the assessing authority for a fresh, speaking order and the petitioner was granted a limited opportunity to furnish documents and information within a prescribed short period, with a specified date fixed for the first hearing before the authority. [Paras 12, 13, 14]

Impugned assessment order quashed; matter remitted to respondent to pass a speaking order within 45 days; petitioner permitted to file documents within 15 days and the first hearing fixed on 10.01.2022.

Final Conclusion: Writ petition allowed to the extent that the assessment order dated 27.01.2021 is set aside and the matter is remitted for fresh adjudication with directions permitting the petitioner to produce records and a date for hearing; petition disposed of with no costs.

Power of court to order payment pending appeal/revision - Section 148(3) of the Negotiable Instruments Act - Revisional jurisdiction as continuance of appellate jurisdiction - Release of deposited amount subject to repayment with interest upon acquittal

Power of court to order payment pending appeal/revision - Section 148(3) of the Negotiable Instruments Act - Revisional jurisdiction as continuance of appellate jurisdiction - Release of deposited amount subject to repayment with interest upon acquittal - Permissibility of releasing 30% of the cheque amount deposited by the accused to the complainant during pendency of a revision admitted by the High Court. - HELD THAT: - The Court examined Section 148 read as a whole, including sub-section (3) which permits the appellate Court to direct release of sums deposited by the appellant to the complainant at any time during the pendency of the appeal, and observed that revisional jurisdiction is a continuation of appellate jurisdiction. The Court rejected the submission that power under Section 148 is confined strictly to statutory appeals and held that a revisional Court may exercise the power to release deposited amounts during pendency of revision. The Court considered the antecedent orders admitting the revision and recording deposit of 30% of the cheque amount, reviewed the applicant's earlier procedural application and found no suppression warranting refusal. In exercise of the referred power, the Court allowed withdrawal of the deposited 30% by the complainant subject to verification by the trial court and with the condition that, in the event of subsequent acquittal of the accused, the complainant shall repay the amount so released with interest at the RBI bank rate prevalent at the beginning of the relevant financial year within sixty days (or further period on sufficient cause).

Application allowed; complainant permitted to withdraw the 30% amount deposited by the accused after verification by the trial court, subject to repayment with interest if the accused is acquitted.

Final Conclusion: The High Court allowed the application and directed release of the 30% deposit to the complainant under the power embodied in Section 148 read with the nature of revisional jurisdiction, while preserving the accused's right to repayment with interest in case of acquittal.