TaxTMI Updates e-Newsletter
Feb 22,2021

Delay in disposal of advance ruling application - statutory time limit under Section 98(6) of the CGST Act - quorum requirement for Authority for Advance Ruling - mandamus to decide pending application expeditiously - administrative nomination and processing by the Lieutenant Governor

Delay in disposal of advance ruling application - statutory time limit under Section 98(6) of the CGST Act - quorum requirement for Authority for Advance Ruling - mandamus to decide pending application expeditiously - The petitioner's advance ruling application dated 15th June, 2018 remained undecided; direction to the Authority to decide the application expeditiously once its quorum is complete, preferably within four weeks of such completion. - HELD THAT: - The petition challenged non-adjudication of an advance ruling application despite the statutory expectation of disposal within ninety days under Section 98(6) of the CGST Act. The court recorded that the Advance Ruling Authority in Delhi has not been functioning due to an incomplete quorum: one member nominated by the Government of NCT has been appointed while the CBIC nomination (communicated through the NCT Secretariat to the Lieutenant Governor) awaits notification. In view of the administrative impediment causing continued inaction and the petitioner's prejudice in commencing its proposed business, the court did not compel immediate decision but directed that, upon completion of the quorum and resumption of the Authority's functioning, the pending application be decided expeditiously and preferably within four weeks. The court additionally requested the Lieutenant Governor to prioritise processing the CBIC nomination so that the Authority may function. [Paras 3, 4, 5, 6]

The Authority for Advance Ruling is directed to decide the petitioner's application expeditiously, preferably within four weeks from the date the quorum is complete and the Authority resumes functioning; the Lieutenant Governor is requested to expedite processing of the nomination from the CBIC.

Final Conclusion: Writ petition disposed by directing the Advance Ruling Authority to decide the pending application expeditiously once its quorum is complete (preferably within four weeks), and requesting the Lieutenant Governor to process the CBIC nomination urgently; interim exemption application allowed subject to exceptions.

Reimbursement of differential tax due to transition from Value Added Tax to Goods and Services Tax - revised guidelines relating to works contract under GST - works contract treated as composite supply of service under GST - determination of GST-inclusive work value for balance work - supplementary agreement for revised GST-inclusive work value - administrative consideration of representations in light of executive guidelines - interim protection from coercive action

Reimbursement of differential tax due to transition from Value Added Tax to Goods and Services Tax - revised guidelines relating to works contract under GST - determination of GST-inclusive work value for balance work - supplementary agreement for revised GST-inclusive work value - Petitioner's claim for reimbursement of differential tax arising from the changeover to GST was not adjudicated on merits but directed to be ventilated by way of a representation to the appropriate authority and decided in accordance with the Government of Odisha's revised guidelines dated 10th December, 2018. - HELD THAT: - The writ petition challenged the non-reimbursement of additional tax liability caused by the change in tax regime w.e.f. 01.07.2017. The Court noted the Government had issued revised guidelines dated 10.12.2018 prescribing the method to compute the GST-exclusive and GST-inclusive work value for balance works, the requirement of a supplementary agreement, and reimbursement or recovery where the revised GST-inclusive value is higher or lower than the original agreement value. Rather than deciding the entitlement on merits, the Court directed the petitioner to file a comprehensive representation within four weeks and required the authority to consider and dispose of it expeditiously in light of the revised guidelines, permitting the petitioner to challenge the authority's decision thereafter. The Court thereby left factual and quantification issues to administrative determination under the prescribed procedure in the revised guidelines. [Paras 7, 8, 9]

Representation to be filed within four weeks; authority to consider and dispose expeditiously in light of the revised guidelines dated 10.12.2018; right to challenge the authority's decision preserved.

Interim protection from coercive action - Whether coercive action could be taken against the petitioner pending consideration of the representation. - HELD THAT: - Having directed administrative consideration of the petitioner's representation, the Court granted interim protection by restraining the respondents from taking any coercive action against the petitioner until 31st March, 2021. This protection was granted to preserve the petitioner's position while the authority examined the claim under the Government's revised guidelines. [Paras 10]

No coercive action shall be taken against the petitioner till 31st March, 2021.

Final Conclusion: Writ petition disposed by directing the petitioner to file a representation within four weeks; the appropriate authority to consider and dispose of it in accordance with the Government of Odisha's revised guidelines dated 10.12.2018; interim protection granted against coercive action until 31.03.2021; liberty reserved to challenge the authority's decision.

Provisional attachment - Limitation of operation of provisional attachment under Section 83(2) of the Central Goods and Service Tax Act - Withdrawal of provisional attachment - Liberty to proceed in accordance with law

Provisional attachment - Limitation of operation of provisional attachment under Section 83(2) of the Central Goods and Service Tax Act - Withdrawal of provisional attachment - Provisional attachment effected on 13.08.2019 having continued beyond one year must be withdrawn by the competent authority. - HELD THAT: - The petitioner asserted that its account was provisionally attached on 13.08.2019 and that more than one year had elapsed since the order of provisional attachment. The respondents did not dispute the factual assertion that the period of one year prescribed for the operation of a provisional attachment under Section 83(2) had passed; they only asserted that evidence was being collected to show wrongful availment of input tax credit. In view of the statutory limitation on the duration of provisional attachment, the competent authority is required to pass an order withdrawing the provisional attachment dated 13.08.2019. The court, while directing withdrawal, permitted the respondents liberty to proceed against the petitioner by such remedies as are permissible in law.

Provisional attachment dated 13.08.2019 to be withdrawn; respondents granted liberty to proceed in accordance with law.

Final Conclusion: Writ petition disposed of by directing withdrawal of the provisional attachment order of 13.08.2019 on the ground that the one year period under Section 83(2) has elapsed, while leaving the respondents free to pursue lawful remedies thereafter.

Allegations of harassment and coercion during search - search under Section 67 of the Act - issue of notice and interim directions - service of notice by Email - direction to file counter-affidavit

Allegations of harassment and coercion during search - search under Section 67 of the Act - issue of notice and interim directions - service of notice by Email - direction to file counter-affidavit - Issuance of notice and interim procedural directions in light of allegations of harassment, coercion and threatened transfer of funds during a search - HELD THAT: - The High Court noted allegations that during a search carried out under Section 67 of the Act the writ applicant was subjected to harassment and was allegedly pressured to transfer funds by means of DRC-03. In view of these serious allegations the Court directed issuance of notice to the respondents returnable on 16th February 2021. The Court authorised service of the writ petition and notice directly by Email and permitted ordinary direct service as well. Further, the Court directed respondents Nos.4 and 5 to file their counter and place it on record by the next date so that the matter can be heard further. The order is procedural and interlocutory, taken to secure the respondents' participation and to obtain their response to the allegations before adjudicating merits. [Paras 3, 4]

Notice issued returnable on 16th February 2021; respondents to be served by Email (ordinary service permitted) and respondents Nos.4 and 5 directed to file their counter by the next date.

Final Conclusion: Interlocutory order: notice issued to respondents, service by Email authorised (ordinary service permitted), and respondents Nos.4 and 5 directed to file counter-affidavit by the next date (16th February 2021) for further hearing.

Cryptic and non-speaking order - Characterisation as intermediary - Quashing of administrative orders - Remand for fresh decision

Cryptic and non-speaking order - Characterisation as intermediary - Quashing of administrative orders - Impugned orders rejecting refund claims were quashed on the ground that they are cryptic and non speaking and the reasons for treating the petitioners as intermediaries do not meet the legal standard. - HELD THAT: - On consideration of the pleadings and impugned orders, the Court found that the reasons assigned by the Adjudicating Authority/Appellate Authority for holding the petitioners to be intermediaries were cryptic, non speaking and did not pass the legal test laid down in the authorities relied upon by the petitioners. For these deficiencies in reasoning, the Court held that the impugned orders could not stand and quashed them. The Court expressly refrained from adjudicating the merits so as to avoid pre judging the matter on remand.

The impugned orders dated 27.05.2020, 11.09.2020 and 05.08.2020 are quashed for being cryptic and non speaking and for failing to sustain the characterisation of the petitioners as intermediaries.

Remand for fresh decision - Matters remanded to the Appellate Authority/Adjudicating Authority for fresh decision in accordance with law. - HELD THAT: - Having quashed the impugned orders, the Court remitted the matters to the respective authorities for fresh consideration and decision on the claims of the petitioners. The Court directed the petitioners to appear before the concerned Authority on a specified date and ordered that a decision be taken within two weeks of appearance. The Court further directed that if the claim is accepted, consequential benefits shall be released within one week thereafter. The Court clarified that it has not gone into the merits to avoid prejudicing the parties on remand.

Proceedings remitted for fresh decision; authorities to decide within two weeks of petitioners' appearance and implement any acceptance within one week.

Final Conclusion: The writ petitions are disposed of by quashing the impugned cryptic, non speaking orders and remitting the matters to the Appellate Authority/Adjudicating Authority for fresh decision in accordance with law, with specified timelines for appearance, decision and implementation.

Condonation of delay in filing application for registration - retrospective effect of rectification/amendment of instrument/bye laws - registration under Section 12AA of the Income Tax Act

Condonation of delay in filing application for registration - registration under Section 12AA of the Income Tax Act - Whether the Income Tax Appellate Tribunal was justified in directing the Commissioner to condone the delay and to grant registration with retrospective effect. - HELD THAT: - The Tribunal allowed the assessee's appeal and directed condonation of delay and grant of registration with retrospective effect. On remand the Commissioner had rejected the application following the absence of the requisite instrument/bye laws and the established requirement that the governing document must contain the mandatory clauses in writing. The High Court held that the Tribunal's direction could not be sustained because it failed to apply the principle that amendments or rectifications cannot be treated as operative retrospectively for purposes of registration; the Commissioner was entitled to insist on the instrument/bye laws as they existed and to treat any later amendments as prospective. Accordingly, the Tribunal's direction to condone delay so as to give retrospective registration was set aside and this question was decided in favour of the Revenue. [Paras 2, 7, 9]

Tribunal's direction to condone the delay and grant retrospective registration set aside; question decided for the Revenue.

Retrospective effect of rectification/amendment of instrument/bye laws - registration under Section 12AA of the Income Tax Act - Whether rectification/amendments to the bye laws of the Society operate retrospectively for the purpose of granting registration under Section 12AA. - HELD THAT: - Relying on the ratio in Commissioner of Income Tax v. Kamla Town Trust, the Court held that rectification or amendment of the constitutive instrument does not have retrospective effect and operates prospectively from the date on which the rectification is effected. The Tribunal's contrary view - that Kamla Town Trust applied only to trusts and not to societies - was rejected. The High Court found the Supreme Court's principle squarely applicable and concluded that the amended bye laws could not be read back to validate retrospective registration under Section 12AA; therefore the amendments operate prospectively only. [Paras 6, 8, 9]

Amendments/rectifications to the bye laws operate prospectively and cannot be given retrospective effect for registration; question decided for the Revenue.

Final Conclusion: The appeal is allowed; the Tribunal's order directing condonation of delay and retrospective registration is set aside and the High Court applies the Supreme Court's ratio that rectifications/amendments to the constitutive instrument operate prospectively, not retrospectively.

Unexplained money deemed income under Section 69A - Possession as evidence of ownership - Onus on possessor to explain nature and source - Test of human probability in assessing credibility of transactions - Concurrent findings of fact and limitation on appellate reappreciation

Unexplained money deemed income under Section 69A - Possession as evidence of ownership - Onus on possessor to explain nature and source - Whether the addition of the cash found on the assessee to his income was sustainable under Section 69A in view of the explanation offered that the cash was advance for sale of agricultural land. - HELD THAT: - The Court accepted the concurrent factual findings of the Assessing Officer, CIT(A) and ITAT that the assessee was found in possession of the cash and failed to give a satisfactory explanation about its nature and source. Possession/custody was treated as a facet of ownership, shifting the onus on the assessee to prove that he was not the owner. The tax authorities found material discrepancies and contradictions in the assessee's and other witnesses' statements, absence of original documents, improbabilities in the cash-withdrawal timeline, and concluded the purported sale transaction to be sham. Applying Section 69A, where an assessee is found to be the owner of money and offers no satisfactory explanation in the opinion of the Assessing Officer, the money may be deemed to be the assessee's income for that financial year. The Court held there was no perversity in the concurrent findings and refused to reappreciate evidence, endorsing the application of the test of human probability by the tax authorities. [Paras 8, 9, 11, 17]

Addition of the cash to the assessee's income under Section 69A was sustainable; the appeal in respect of this addition is dismissed.

Concurrent findings of fact and limitation on appellate reappreciation - Test of human probability in assessing credibility of transactions - Whether the Tribunal's order was perverse for relying on irrelevant facts or for failing to consider material facts relied upon by the assessee. - HELD THAT: - The Court found no perversity in the ITAT's order. The ITAT and lower authorities examined the evidence and testimonies, noted contradictions and lacunae in the assessee's account, and applied ordinary and accepted evidentiary tests (including the test of human probability). The observations concerning CBI investigations or charge-sheet materials were used to corroborate the conclusion that the transaction explanation was an afterthought; the Income Tax authorities confined their role to assessing the sufficiency of the explanation under Section 69A and did not purport to make criminal findings. Given the consistent concurrent findings of fact, the High Court declined to reappreciate evidence or interfere. [Paras 10, 11, 13, 19, 21]

No perversity in the Tribunal's reliance on the material before it; no substantial question of law arises and interference is unwarranted.

Final Conclusion: The High Court dismissed the appeal: concurrent factual findings that the assessee failed to satisfactorily explain the cash found in his possession justified deeming the amount to be his income under Section 69A, and there was no perversity or substantial question of law warranting interference.

Provision for warranty deduction - Scientific basis for provisioning - Present obligation and reliable estimate for provision - Reliance on precedent in allowance of deduction - Expenditure allowable under Section 37(1) of the Income Tax Act - Revenue v. capital expenditure distinction - Enduring benefit test

Provision for warranty deduction - Scientific basis for provisioning - Present obligation and reliable estimate for provision - Provision for warranty made by the assessee was deductible as a business expenditure because it satisfied the tests for a valid provision. - HELD THAT: - The Court applied the threefold tests laid down in Rotork Controls - existence of a present obligation arising from a past event, a probable estimate of outflow, and reliability of that estimate - and upheld the Tribunal's finding that the assessee's warranty provision, computed on the basis of machine months and derived from methodology adopted by IBM (from whom business was taken over), met those requisites. The tribunal's factual finding that the provisioning method was scientific was not shown to be perverse; no successful challenge to the fact finding on perversity was made by revenue. Accordingly the allowance of the provision was sustained. [Paras 6]

Deduction for provision for warranty allowed; tribunal's factual finding of a scientific and reliable estimate upheld.

Reliance on precedent in allowance of deduction - Present obligation and reliable estimate for provision - The Tribunal was correct in relying on the Supreme Court decision in Rotork Controls for permitting the warranty provision deduction in the facts of this case. - HELD THAT: - The Court found that the Tribunal correctly applied Rotork Controls' criteria to the assessee's case and that similar authority (including a division bench decision in IBM Ltd.) supports that approach. The reliance on Rotork Controls was therefore appropriate and did not merit interference. [Paras 6]

Reliance on Rotork Controls upheld; second substantial question answered in favour of the assessee.

Expenditure allowable under Section 37(1) of the Income Tax Act - Revenue v. capital expenditure distinction - Enduring benefit test - Marketing support fee as revenue expenditure - Marketing support fee and transition support fee paid to IBM were revenue expenditures deductible under Section 37(1) and not capital expenditure merely because they might confer an enduring benefit. - HELD THAT: - Having examined the agreement and earlier tribunal findings in related assessment years, the Court agreed with the Tribunal that the services provided by IBM facilitated the assessee's sales and smooth carrying on of business. The Court reiterated that the presence of an enduring benefit is not a conclusive test of capital character; the determinative inquiry is whether the payment was for acquisition of a capital asset or for carrying on the business and deriving revenue. Applying this commercial test and relying on precedent that enduring benefit alone is not determinative, the Tribunal's allowance of the marketing and transition support fees as revenue expenditure under Section 37(1) was affirmed. [Paras 7]

Marketing support and transition support fees held to be revenue in nature and allowable under Section 37(1).

Final Conclusion: All three substantial questions of law framed on admission were answered against the revenue and in favour of the assessee for Assessment Year 2007-08; the appeal is dismissed.

Refund of tax - interest on refund - rectification under Section 154 read with Section 143(3) - CPGRAM grievance redressal - rendered infructuous - direction to compute interest up to date of payment

Refund of tax - rectification under Section 154 read with Section 143(3) - Whether refunds determined by the Assessing Officer after rectification were to be released to the petitioner - HELD THAT: - The Assessing Officer, by an order passed under rectification, computed a refund in favour of the petitioner. The petitioner made multiple follow-ups after the AO's rectification order and sought release of the refund; CPGRAM subsequently issued a disposal order directing a lesser refund without communicating reasons to the petitioner. During hearing before the Court the respondents conceded that the principal amount and interest up to November 2019 had been processed and released in favour of the petitioner. In view of this concession and the processing already undertaken by the department, the Court found that the writ petitions seeking release of the refund have been overtaken by events and thus have become infructuous.

The petitions seeking release of the refund are rendered infructuous as the principal and interest up to November 2019 have been processed and released.

Interest on refund - direction to compute interest up to date of payment - Whether interest from December 2019 until actual payment should be computed and paid - HELD THAT: - Counsel for the respondents conceded that computation of interest from December 2019 until the date of payment remained to be completed and undertook to finalise such computation. The Court recorded this concession and directed the respondents to complete computation of interest w.e.f. December 2019 up to the date of payment within four weeks. The Court also afforded parties liberty to approach it by miscellaneous application in case of any dispute regarding calculation or clarification.

Respondents to compute and complete payment of interest from December 2019 up to the date of payment within four weeks; parties granted liberty to move the Court by miscellaneous application if differences remain.

Final Conclusion: Writ petitions rendered infructuous as principal and interest up to November 2019 have been processed and released; respondents directed to compute interest from December 2019 until payment within four weeks, with liberty to the parties to seek clarification or raise calculation differences by miscellaneous application.

Re-assessment under Section 147/148 - full and true disclosure (proviso to Section 147) - consistent method of accounting - recognition of revenue under the mercantile system and Section 145(1) - deduction under Section 35(2AB) and Form 3CM - correction under Section 154

Re-assessment under Section 147/148 - Re-assessment in respect of income from storage of stem cells offered under the Vivad se Vishwas Scheme. - HELD THAT: - The assessee had offered income from storage of stem cells to tax under the Vivad se Vishwas Scheme. Since that income was the subject of the scheme, the question of initiating re-assessment proceedings in respect of that income does not arise. The Assessing Authority's proposal for re-assessment on this aspect was not pressed by the Revenue and is rejected. [Paras 4]

Proposal for re-assessment relating to Vivad se Vishwas declared storage income is not maintainable; re-assessment not to be pursued.

Re-assessment under Section 147/148 - precedent-based exclusion of re-assessment - Re-assessment in relation to tax on Provident Fund and ESI contributions. - HELD THAT: - The Revenue did not press this issue and the matter is covered by a prior decision of this Court (Industrial Securities and Intelligence India v. CIT). On that basis the reassessment initiated on account of alleged underpayment of tax on Provident Fund and ESI contributions is not to be pursued. [Paras 3, 5]

Re-assessment in respect of Provident Fund and ESI contributions shall not be pursued.

Correction under Section 154 - re-assessment under Section 147/148 - Whether re-assessment is permissible where a refund granted under section 143(1) was not added back in the regular assessment. - HELD THAT: - A refund granted while processing the return under Section 143(1) was omitted to be added back in the regular assessment and the Assessing Authority seeks to add it now by invoking re-assessment. The Court holds that where there is no escapement of income but an omission in assessment, the Assessing Officer could address the matter under Section 154; re-assessment is not the appropriate remedy. Accordingly the proposal for re-assessment on this score fails. [Paras 6]

Re-assessment cannot be invoked for the omission of adding back a refund granted under Section 143(1); the Assessing Authority should have resorted to Section 154.

Consistent method of accounting - recognition of revenue under the mercantile system and Section 145(1) - full and true disclosure (proviso to Section 147) - re-assessment under Section 147/148 - Validity of re-assessment in respect of processing fees where the assessee recognises as revenue only that portion relating to deliveries occurring within the financial year and carries forward the balance. - HELD THAT: - The assessee consistently followed a method of accounting by recognising as income only processing fees attributable to deliveries occurring before the year end and carrying forward the balance; similar treatment in earlier and later years was accepted by the Department. Relying on the principle that a consistently followed accounting method is to be presumed correct unless the Assessing Officer gives reasons to the contrary (see discussion of Section 145(1) and Woodward Governor), and applying the proviso to Section 147, the Revenue must demonstrate a failure to make a full and true disclosure to invoke extended limitation. Calcutta Discount (Constitution Bench) is applied to hold that primary facts material for assessment were disclosed (including total receipts and the portion recognised as income) and the absence of an explicit note in the financials did not amount to omission of primary facts. Re-assessment beyond four years therefore cannot be sustained on this ground. [Paras 13, 14, 15, 16, 17]

Proposal for re-assessment in respect of processing fee is quashed; disclosure by the assessee amounts to full and true disclosure for the purposes of Section 147 proviso and re-assessment is not maintainable.

Deduction under Section 35(2AB) and Form 3CM - re-assessment under Section 147/148 - Validity of re-assessment on the ground that Form 3CM (approval for deduction under Section 35(2AB)) was not available on record. - HELD THAT: - The assessee filed Form 3CM and the approval for deduction under Section 35(2AB) is admittedly available on record. The form in question is an exchange between the Assessing Authority and the Prescribed Authority and it is the duty of the Officer to have obtained it. In the absence of any dispute that Form 3CM is on file, there is no justification to initiate re-assessment proceedings on this score. [Paras 18]

Re-assessment in respect of deduction claimed under Section 35(2AB) is not justified and the proceedings initiated on this ground are quashed.

Final Conclusion: Writ petition allowed; reassessment proposals insofar as they related to the Vivad se Vishwas declared storage income, Provident Fund/ESI contributions, refund omitted in assessment, processing fees, and deduction under Section 35(2AB) (Form 3CM) are not sustainable and the re assessment proceedings stand quashed. No costs.

Exemption under section 10(23C)(iiiae) - hospital or other institution for the reception and treatment of persons requiring medical attention or rehabilitation - existence solely for philanthropic purposes - reimbursement as expenditure incurred on behalf of the assessee - definition and scope of 'hospital' not requiring immovable premises - nexus between income and charitable activity

Exemption under section 10(23C)(iiiae) - hospital or other institution for the reception and treatment of persons requiring medical attention or rehabilitation - definition and scope of 'hospital' not requiring immovable premises - reimbursement as expenditure incurred on behalf of the assessee - Whether the assessee's mobile medical vans qualify as a 'hospital or other institution' entitled to exemption under section 10(23C)(iiiae) and whether payments made through or reimbursed to other charitable organizations negate that entitlement. - HELD THAT: - The Tribunal held that section 10(23C)(iiiae) requires (a) income received on behalf of a hospital or other institution engaged in reception and treatment of persons needing medical attention, (b) existence solely for philanthropic purposes, and (c) aggregate receipts within prescribed limits. There was no dispute on (b) and (c). On (a), the term 'hospital' is not statutorily defined and, as a matter of ordinary meaning, denotes a place where the ill are treated by doctors and nurses; it does not require immovable premises. The assessee's mobile medical vans were found to be owned, equipped, maintained, run and controlled by the assessee and were staffed and equipped to provide medical and surgical treatment in remote areas. Expenditure paid by third-party charitable organisations but reimbursed by the assessee was held to be expenditure of the assessee because 'reimbursement' denotes expenditure incurred on behalf of the assessee. Meagre payments to part time doctors did not negate that the assessee undertook reception and treatment. The Tribunal distinguished the cited Apeejay decision on its different facts, and found the Aditanar precedent on 'other institutions' supportive. On these grounds the assessee's mobile medical units were held to fall within the scope of 'hospital or other institution' under section 10(23C)(iiiae) and the claim was allowed. [Paras 6, 7, 8, 9]

The assessee's claim for exemption under section 10(23C)(iiiae) in respect of mobile medical vans is allowed.

Final Conclusion: The appeals are allowed; the Tribunal upheld the assessee's entitlement to exemption under section 10(23C)(iiiae) for the assessment years 2013-14 and 2014-15, holding that the mobile medical vans constitute a 'hospital or other institution' providing reception and treatment and that reimbursements to other charitable organisations reflected expenditure incurred on behalf of the assessee.

Disallowance of expenditure in relation to exempt income under Section 14A read with Rule 8D - admission of fresh evidence under Rule 46(3) of the Income Tax Rules - allowability of depreciation under Section 32 on windmills - deduction of interest under Section 36(1)(iii) where funds borrowed were used for business

Disallowance of expenditure in relation to exempt income under Section 14A read with Rule 8D - Whether the disallowance under Section 14A read with Rule 8D was correctly made in respect of the assessee's investments. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee had made a suo motu disallowance and that the investments were made out of the assessee's own funds with no borrowed funds or interest expenditure directly or indirectly attributable to exempt income. The CIT(A) treated certain investments as strategic and applied Rule 8D(2)(i) methodology as reflected in the assessee's computation (including specified percentages for employee and administrative costs). The Assessing Officer had not shown that interest expenditure was attributable to earning exempt income or controverted the CIT(A)'s findings. On these facts the Tribunal found no infirmity in the deletion of the addition under Section 14A/Rule 8D and dismissed the Revenue's ground.

The deletion of the Section 14A/Rule 8D addition by the CIT(A) is sustained and the Revenue's appeal on this point is dismissed.

Admission of fresh evidence under Rule 46(3) of the Income Tax Rules - allowability of depreciation under Section 32 on windmills - Whether the CIT(A) was justified in admitting the assessee's evidence and deleting the disallowance of depreciation claimed on windmills. - HELD THAT: - The Tribunal agreed with the CIT(A)'s conclusion that the material relied upon by the assessee had been placed on record during assessment proceedings (specifically by the assessee's reply dated 11.12.2012) and was not new evidence. The Assessing Officer had ignored that reply in the assessment order. Upon verification, the CIT(A) found that the assets were owned by the assessee and were put to use for business during the year, making the depreciation claim allowable. The Tribunal found no error in the CIT(A)'s admission of the evidence or in deleting the addition, and declined to interfere with the detailed factual findings.

The deletion of the disallowance of depreciation on windmills is upheld and the Revenue's challenge is dismissed.

Deduction of interest under Section 36(1)(iii) where funds borrowed were used for business - Whether the disallowance under Section 36(1)(iii) in respect of interest was correctly deleted by the CIT(A). - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the assessee had borrowed funds which were applied for business purposes and that interest was paid on such borrowed funds. The Assessing Officer and Revenue did not controvert these facts by adducing contrary material at the hearing before the Tribunal. In the absence of any documentary or contested evidence to the contrary, the Tribunal found the CIT(A)'s conclusion to be proper and declined to interfere.

The deletion of the addition under Section 36(1)(iii) is affirmed and the Revenue's ground is dismissed.

Final Conclusion: All three grounds of the Revenue's appeal are dismissed; the Tribunal upheld the CIT(A)'s deletions in respect of the Section 14A/Rule 8D disallowance, the depreciation on windmills (admission of evidence), and the interest deduction under Section 36(1)(iii).

Exemption under section 10(23C)(v) - approval by the prescribed authority for claiming exemption - Rule 2C of the Income tax Rules, 1962 - burden on the assessee to prove approval for exemption - Section 115BBC(2) and anonymous donations

Exemption under section 10(23C)(v) - approval by the prescribed authority for claiming exemption - Rule 2C of the Income tax Rules, 1962 - burden on the assessee to prove approval for exemption - Assessee's claim to exemption under section 10(23C)(v) denied for assessment year 2011-2012 due to absence of prescribed authority approval. - HELD THAT: - The Tribunal examined section 10(23C)(v) and Rule 2C of the Income tax Rules, 1962 and held that a trust or institution claiming exemption under section 10(23C)(v) must have approval of the prescribed authority. Rule 2C prescribes the Chief Commissioner or Director General as the prescribed authority and Form No.56 as the application mechanism. The assessee did not produce any notification or approval for the assessment year 2011 2012. The contention that the requirement of approval arose only w.e.f. 15.11.2014 was rejected because the statutory provision and the rule as applicable to the year under appeal required prior approval; designation of Commissioner (Exemptions) later did not negate the earlier requirement. The Tribunal also held that the burden to establish entitlement to the exemption by producing adequate evidence of approval lay on the assessee and was not discharged.

Claim for exemption under section 10(23C)(v) rejected for AY 2011 2012 for lack of prescribed authority approval; authorities below rightly sustained denial.

Section 115BBC(2) and anonymous donations - Assessee's reliance on Section 115BBC(2) to avoid requirement of approval under section 10(23C)(v) was rejected as inapplicable on the facts. - HELD THAT: - The Tribunal noted the assessee's submission that Section 115BBC(2) obviates the need for approval where anonymous donations are involved. The Revenue did not contend that anonymous donations were received nor was any addition made under section 115BBC. On the material before it, the Tribunal found this contention immaterial to the claim for exemption and accordingly rejected the reliance on Section 115BBC(2).

Contention based on Section 115BBC(2) dismissed as not applicable on the facts and not a ground to negate the approval requirement.

Addition under section 69C - deletion of additions on appeal - Additions made by the Assessing Officer under section 69C amounting to general expenses were deleted by the Commissioner (Appeals) and the Tribunal declined to interfere. - HELD THAT: - The Assessing Officer disallowed certain expenses under section 69C. The Commissioner (Appeals) accepted the assessee's explanations and deleted the addition. The Tribunal observed that the deletion by the first appellate authority disposed of the substantive addition and therefore the question of charging tax at a higher rate became academic; there was no reason to disturb the appellate order.

Deletion of the addition by the Commissioner (Appeals) upheld; no interference by the Tribunal.

Final Conclusion: Appeal dismissed. The denial of exemption under section 10(23C)(v) for AY 2011 2012 on account of absence of prescribed authority approval is upheld; the assessee's alternative reliance on Section 115BBC(2) is rejected as inapplicable; the deletion of the additions by the Commissioner (Appeals) is sustained and is not interfered with.

Disallowance of business expenses for lack of documentary evidence - acceptance of books of account - reasonableness of expenses in relation to turnover - reliance on comparative/scrutinised earlier assessment

Disallowance of business expenses for lack of documentary evidence - acceptance of books of account - reasonableness of expenses in relation to turnover - reliance on comparative/scrutinised earlier assessment - Whether the disallowance of certain business expenses by the AO, upheld by the CIT(A) on the ground that bills and vouchers were not produced, was sustainable. - HELD THAT: - The Tribunal examined whether the AO was justified in disallowing expenses recorded in the assessee's profit and loss account for want of bills and vouchers despite the assessee maintaining regular books of account which had not been rejected and which had been consistently maintained over decades. The Tribunal noted that the assessee's books had been accepted generally by the AO, there were no other disallowances, and in the preceding year the same categories of expenses had undergone scrutiny and were accepted in an assessment completed under scrutiny. The Tribunal gave weight to the comparative proportions of the expenses to turnover, observing that the expenses for the year under appeal were lower (in percentage terms) than the scrutinised earlier year, and that the claimed expenses therefore appeared reasonable. The Tribunal also took into account a Coordinate Bench decision in respect of a sister concern on substantially similar facts where disallowance was deleted. On these facts the Tribunal concluded that the AO and the CIT(A) had no sufficient basis to sustain the disallowance merely because some vouchers were not produced, where the books were otherwise accepted and the expenses were reasonable in relation to turnover and prior scrutiny.

Disallowance set aside and the Assessing Officer directed to delete the addition; appeal allowed on this issue.

Final Conclusion: The Tribunal allowed the appeal on the disallowance of business expenses for Assessment Year 2014-15, setting aside the orders of the AO and CIT(A) and directing deletion of the addition, on the basis that the books of account were accepted, the expenses were reasonable relative to turnover and were consistent with an earlier scrutinised assessment and a Coordinate Bench decision on a sister concern.

Specified domestic transaction under clause (i) of section 92BA - transfer pricing adjustment and determination of arm's length price by Transfer Pricing Officer under section 92CA - effect of omission as repeal and saving of past actions under Section 6 and Section 6A of the General Clauses Act - re-examination of claim of expenditure under section 40A(2)

Specified domestic transaction under clause (i) of section 92BA - transfer pricing adjustment and determination of arm's length price by Transfer Pricing Officer under section 92CA - Validity of transfer pricing reference and consequential addition made under clause (i) of section 92BA - HELD THAT: - The Tribunal examined whether the reference to the TPO and the transfer pricing adjustment made under clause (i) of section 92BA could be sustained after omission of that clause by the Finance Act, 2017. Relying on the coordinate bench decision in Texport Overseas Pvt. Ltd., and the subsequent decision of the High Court of Karnataka upholding that view, the Tribunal held that clause (i) of section 92BA stood omitted and, absent any saving provision, must be treated as never having existed for the purposes of continuing proceedings initiated under it. The Tribunal considered the contrary view expressed by another Bench (relying on Supreme Court decisions on omission/repeal) but followed the binding High Court decision applicable to the Bengaluru bench. Applying that precedent, the Tribunal concluded that the reference to the TPO and the resultant transfer pricing addition were not valid and directed deletion of the addition made under section 92CA consequent to clause (i) of section 92BA. [Paras 8]

Reference to TPO in respect of specified domestic transactions under omitted clause (i) of section 92BA is not valid; the addition made by way of transfer pricing adjustment is deleted.

Re-examination of claim of expenditure under section 40A(2) - Adjudication of the underlying claim of expenditure after deletion of clause (i) of section 92BA - HELD THAT: - The Tribunal noted that the coordinate bench had restored the matter to the assessing officer for fresh adjudication of the expenditure claim in accordance with section 40A(2). Following that approach and the High Court's treatment, the Tribunal restored the issue to the file of the AO with a direction to examine the claim of expenditure mentioned in the specified domestic transactions under the provisions of section 40A(2), affording the assessee opportunity of being heard. [Paras 9]

Matter restored to the AO for re-examination of the claim of expenditure in terms of section 40A(2).

Final Conclusion: The transfer pricing adjustment made pursuant to a reference under clause (i) of section 92BA is set aside and the corresponding addition deleted; the assessing officer is directed to re-adjudicate the claim of expenditure under section 40A(2). Appeal allowed for statistical purposes.

Penalty under Section 271(1)(c) of the Income Tax Act - furnishing inaccurate particulars of income - revised return - conscious concealment versus inadvertent mistake - relevance of Form 26AS / TDS evidence

Penalty under Section 271(1)(c) of the Income Tax Act - furnishing inaccurate particulars of income - revised return - conscious concealment versus inadvertent mistake - relevance of Form 26AS / TDS evidence - Validity of levy of penalty under Section 271(1)(c) for AY.2016-17 on account of alleged inaccurate particulars furnished in the revised return. - HELD THAT: - The Tribunal examined the facts that the assessee filed an original return showing salary of Rs. 14,43,429 and subsequently filed a revised return showing reduced salary of Rs. 8,45,750 along with an erroneous deduction claim. The CIT(A)'s detailed findings-adopted by the Tribunal-record that the assessee failed to satisfactorily explain the reason for the material reduction in reported salary in the revised return despite being in possession of salary evidence, and that the revised return claimed deductions not supported by evidence. The CIT(A) found the assessee's contentions of inadvertence and reliance on Form 26AS/TDS insufficient to rebut the conclusion that inaccurate particulars were furnished deliberately; the CIT(A) also adjusted the concealed income by excluding certain reductions accepted as inadvertent errors and directed recomputation of penalty on the reduced concealed income. The Tribunal agreed with the CIT(A)'s reasoning and conclusion that the circumstances constituted furnishing of inaccurate particulars warranting penalty under Section 271(1)(c). [Paras 4, 5]

Penalty under Section 271(1)(c) upheld for AY.2016-17; assessee's appeal dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s conclusion that the assessee furnished inaccurate particulars of income by filing the revised return which materially reduced declared salary and claimed unsupported deductions; accordingly the penalty under Section 271(1)(c) for AY.2016-17 was sustained and the appeal dismissed.

Rejection of books of account under section 145(3) of the Income tax Act - estimation of income on rejection of books of account - relevance of past profit history in fixing estimated profit rate - judicial moderation of estimated profit rate

Rejection of books of account under section 145(3) of the Income tax Act - estimation of income on rejection of books of account - relevance of past profit history in fixing estimated profit rate - judicial moderation of estimated profit rate - Whether the estimated net profit rate of 1.5% of gross receipts, sustained by the CIT(A) after rejection of books of account, was reasonable in view of the assessee's past profit history and whether the same required modification. - HELD THAT: - The Tribunal examined the Assessing Officer's rejection of the books and the consequent exercise of estimating net profit. While the Assessing Officer had applied a 2% rate and the CIT(A) reduced it to 1.5%, the Tribunal found that the past three years' gross commission/profit percentages for the assessee were consistently below 1%. Established principle requires that when income is determined on an estimated basis following rejection of books, the assessee's past profit history is a material and relevant factor in fixing the estimate. Given that historical percentages were materially lower than the 1.5% rate affirmed by the CIT(A), the Tribunal held that the 1.5% rate was on the higher side and not justified on the record. Applying judicial moderation in exercise of its appellate power, the Tribunal concluded that a 1% rate of net profit on gross receipts is more appropriate and is still more than the percentage shown in the recent years of the assessee's account history. The Tribunal therefore modified the rate to 1% and directed recomputation of the addition accordingly.

Appeal partly allowed; the estimated net profit rate sustained by the CIT(A) reduced to 1% of gross receipts and the Assessing Officer directed to compute the addition accordingly for AY 2016-17.

Final Conclusion: The Tribunal partly allowed the appeal for Assessment Year 2016-17 by reducing the estimated net profit rate to 1% of gross receipts (as more consistent with the assessee's past profit history) and directed the Assessing Officer to compute the addition on that basis.

Disallowance under section 40(a)(i) of the Income tax Act - fees for technical services / fees for included services (FTS/FIS) - reimbursement of salary of secondees and employer employee relationship - secondment, control and supervision as determinative of employer - distinction between tax withholding under section 192 and obligation under section 195 - rectification under section 154 of the Income tax Act - verification of tax credit by Assessing Officer

Disallowance under section 40(a)(i) of the Income tax Act - fees for technical services / fees for included services (FTS/FIS) - reimbursement of salary of secondees and employer employee relationship - secondment, control and supervision as determinative of employer - distinction between tax withholding under section 192 and obligation under section 195 - Deletion of the addition made under section 40(a)(i) in respect of reimbursement of salaries, allowances and travel expenses of expatriate employees. - HELD THAT: - The Tribunal found that the payments were reimbursements of salary costs to employees who, on the terms of the secondment/salary reimbursement agreement, were under the supervision, control and management of the assessee and were in employment of the assessee. On the facts the assessee had deducted tax under section 192 on the salary cost; therefore the payments could not be characterised as FTS/FIS attractable to tax in India under section 9(1)(vii) or the relevant DTAA articles so as to invoke disallowance under section 40(a)(i). The Tribunal followed its earlier decision in the assessee's subsequent assessment year (where similar additions were deleted), distinguished authorities relied upon by the Revenue and held that the factual matrix established the assessee as the real/economic employer; accordingly the disallowance made in the impugned assessment was deleted. [Paras 4, 5]

Grounds challenging the disallowance under section 40(a)(i) are allowed and the addition is deleted.

Rectification under section 154 of the Income tax Act - disallowance under section 40(a)(i) of the Income tax Act - Deletion of the net addition made by the Assessing Officer in the rectification order under section 154/143(3). - HELD THAT: - The Assessing Officer, by rectification, adjusted the disallowance figures resulting in a net addition in the rectified order. The Tribunal applied the same reasoning as in the main assessment appeal for AY 2011 12-namely that the salary reimbursements did not constitute taxable FTS/FIS and that the assessee had deducted tax under section 192-thereby deleting the rectification order addition to maintain consistency with the decision on the primary disallowance issue. [Paras 7]

The rectification and the consequent net addition are deleted.

Verification of tax credit by Assessing Officer - short credit of taxes - verification and adjustment - Directed remand for verification of the amount of tax credit granted in the assessment/rectification order. - HELD THAT: - The assessee disputed short credit of taxes allowed in the rectification order; the Tribunal treated this as a matter requiring factual verification by the Assessing Officer. It accordingly directed the AO to verify the taxes paid and to allow credit in accordance with law, leaving the quantification and verification to the AO rather than deciding the quantum on appeal. [Paras 8]

Assessing Officer to verify the taxes paid and grant credit in accordance with law (matter remanded for verification).

Final Conclusion: The Tribunal allowed the appeal challenging the disallowance under section 40(a)(i) for AY: 2011 12 and deleted the additions in both the assessment and rectification orders; the Tribunal also directed the Assessing Officer to verify and grant tax credit as appropriate.

Admission of additional evidence under Rule 46A read with section 250(4) - principles of natural justice - remand for fresh consideration

Admission of additional evidence under Rule 46A read with section 250(4) - principles of natural justice - remand for fresh consideration - Whether the additional evidence filed by the assessee should be admitted and the matter remanded to the CIT(A) for fresh decision after affording opportunity of hearing. - HELD THAT: - The Tribunal found that the CIT(A) rejected the additional evidence without assigning particular reasons despite that evidence going to the root of the matter. In view of this procedural defect and the need to decide the substantive contentions on the basis of the material placed on record, the Tribunal directed the CIT(A) to admit the additional evidence, take cognizance of the evidences filed by the assessee and decide the issue afresh. The Tribunal also directed that the assessee be afforded an opportunity of hearing in accordance with the principles of natural justice before the CIT(A) proceeds to decide the appeal on merits. [Paras 6]

Additional evidence to be admitted by the CIT(A); matter remanded to the CIT(A) for fresh decision after taking cognizance of the evidence and after giving the assessee opportunity of hearing.

Final Conclusion: The appeal is partly allowed for statistical purposes by directing the CIT(A) to admit the additional evidence and to decide the matters afresh after giving the assessee an opportunity of hearing; no appellate adjudication on the merits of the additions was undertaken by the Tribunal.

Block assessment - undisclosed income - regular assessment under section 143(3) - Chapter XIV-B scheme and jurisdiction of Assessing Officer - material found during search as basis for block assessment - relevance of pre-search disclosure to exclude income from block assessment - penalty under section 158BFA(2)

Block assessment - undisclosed income - material found during search as basis for block assessment - relevance of pre-search disclosure to exclude income from block assessment - Chapter XIV-B scheme and jurisdiction of Assessing Officer - Whether amounts disclosed in regular returns and accepted in scrutiny assessments can be treated as 'undisclosed income' and assessed in block assessment proceedings under Chapter XIV-B - HELD THAT: - The Tribunal held that Chapter XIV-B is a self-contained code for assessment of undisclosed income and block assessments must be founded on material unearthed during the search or documents requisitioned that are relatable to such material. Where income or transactions have already been disclosed to the Department prior to the search and such disclosure was on record (and in several years had been accepted after scrutiny under the regular assessment mechanism), that income falls outside the definition of 'undisclosed income' for block assessment. Post-search material which is not relatable to evidence seized during the search cannot convert a pre-search disclosed item into undisclosed income for the block period. Applying these principles to the facts, the Tribunal found that the agricultural sales declared in regular returns for the relevant years (many accepted in orders under section 143(3)) were pre-search disclosures on record and therefore could not be taxed as undisclosed income in the block assessment; accordingly the Assessing Officer lacked jurisdiction to make the additions under section 158BC/Chapter XIV-B and the CIT(A)'s confirmation was set aside. [Paras 35]

Amounts already disclosed in regular returns prior to search and accepted on scrutiny cannot be treated as 'undisclosed income' in block assessment; additions deleted and CIT(A) order set aside.

Penalty under section 158BFA(2) - dependence of penalty on determination of undisclosed income - Whether penalty levied under section 158BFA(2) survives where the underlying undisclosed income determination in block assessment is deleted - HELD THAT: - The Tribunal noted that the penalty levied under section 158BFA(2) was computed as a percentage of the tax leviable on the undisclosed income determined by the AO. Since the Tribunal quashed the AO's determination of undisclosed income (as amounts were pre-search disclosures and outside the scope of block assessment), the foundational basis for levy of penalty collapsed. Accordingly, the CIT(A)'s confirmation of the penalty could not survive and the penalty was deleted. [Paras 36, 37]

Penalty under section 158BFA(2) deleted as the determination of undisclosed income on which it was based was set aside.

Final Conclusion: All appeals allowed: additions treating pre-search disclosed agricultural receipts as undisclosed income in the block assessment were deleted for lack of jurisdiction under Chapter XIV-B, and the penalty founded on that determination was consequently cancelled; the matters are set aside to the AO for deletion of the additions.

Jurisdiction of the officer issuing show-cause notices - Proper Officer under the Customs Act - challenge to show-cause notice in writ jurisdiction - interim restraint on publication and communication of adjudication order - affidavit of service taken on record

Affidavit of service taken on record - Affidavit of service filed in Court was taken on record. - HELD THAT: - The Court recorded that the affidavit of service filed on the date was accepted and taken on the record. This administrative step was noted by the Court and forms part of the procedural record of the petition before further consideration.

Affidavit of service is taken on record.

Interim restraint on publication and communication of adjudication order - cooperation with adjudication proceedings - Interim directions were issued requiring the petitioner to cooperate with adjudication, and restraining publication and communication of any adjudication order without leave of the Court. - HELD THAT: - While the writ petition challenging the competency of the officers who issued the show-cause notices was listed for further consideration, the Court granted limited interim relief. The petitioner was directed to cooperate with the adjudicatory process initiated by the impugned notices. Simultaneously, the Court restrained the respondents from publishing or communicating any adjudication order in respect of the petitioner unless prior leave of the Court is obtained. These directions preserve the petitioner's position without staying the adjudication process itself.

Petitioner to cooperate with adjudication; adjudication order shall not be published or communicated without leave of the Court.

Jurisdiction of the officer issuing show-cause notices - Proper Officer under the Customs Act - challenge to show-cause notice in writ jurisdiction - Validity and jurisdictional competence of the officers who issued the two show-cause notices was not finally decided and is reserved for further consideration. - HELD THAT: - The petitioner challenged the two show-cause notices on the ground that they were not issued by a "Proper Officer" within the meaning of the Customs Act, relying on statutory definitions and precedent. Respondents opposed the challenge, asserting that the issuing officers were duly authorised and relying on departmental notifications and earlier case law. The Court did not adjudicate the jurisdictional contention on the merits at this stage; the matter was directed to appear on a subsequent date for further consideration, leaving the question of validity of the notices open for determination.

Question of jurisdiction and validity of the show-cause notices is adjourned for further consideration; not finally decided.

Final Conclusion: The Court took the affidavit of service on record, granted interim directions requiring the petitioner to cooperate with adjudication while restraining publication or communication of any adjudication order without leave, and adjourned the substantive challenge to the jurisdictional competence of the officers who issued the show-cause notices for further consideration.

Right to cross-examination - principles of natural justice - supply of documents in aid of defence - personal hearing - order in original

Right to cross-examination - personal hearing - order in original - Adjudicating officer to decide the petitioner's applications for cross-examination before passing the order in original. - HELD THAT: - The Court noted that no formal order denying cross-examination had been passed and, having regard to precedent relied upon by the petitioner, directed that the concerned officer shall first decide the applications seeking cross-examination of witnesses and related personal hearing before delivering the order in original. The direction requires the officer to entertain and adjudicate the facet of cross-examination as a preliminary step and to afford the opportunity of personal hearing to the petitioner prior to final adjudication. [Paras 2]

Applications for cross-examination must be decided by the officer first, before passing the order in original.

Principles of natural justice - supply of documents in aid of defence - Requests for supply of documentary evidence to be considered and decided along with the applications for cross-examination as a facet of natural justice. - HELD THAT: - The Court treated the grievance regarding non-supply of certain documents as falling within the principles of natural justice and directed that the officer concerned shall consider and decide the petitioner's applications for production/supply of documents together with the applications for cross-examination. The determination of documentary supply is therefore to be co-terminal with, and not subsequent to, the adjudication of the cross-examination applications. [Paras 2]

Entitlement to supply of documents shall be considered and decided along with the cross-examination application.

Summary disposal - Prayer seeking direction to cease phishing and roving investigation was disposed of in limine without opinion on merits. - HELD THAT: - The Court expressly recorded that it was disposing of the prayer for cessation of alleged 'phishing and roving investigation' at the threshold and did not express any view on the merits of that grievance. No adjudication on the substantive contention relating to investigation conduct was undertaken. [Paras 2]

Prayer for direction to cease alleged phishing and roving investigation disposed of in limine; no opinion on merits recorded.

Final Conclusion: The High Court directed the concerned officer to first decide the petitioner's applications for cross-examination and to decide the related applications for supply of documents together with that application, before passing the order in original; the prayer for cessation of alleged phishing and roving investigation was disposed of in limine with no merit determination.

Operational Creditor - Operational Debt - default and debt under the Insolvency and Bankruptcy Code - admission of petition under Section 9 - existence of dispute under Section 5(6) - initiation of Corporate Insolvency Resolution Process (CIRP) and appointment of Interim Resolution Professional - moratorium upon initiation of CIRP

Default and debt under the Insolvency and Bankruptcy Code - Business Transfer Agreement - The Respondent was liable to reimburse amounts paid by the Petitioner under the Business Transfer Agreement and was in default. - HELD THAT: - The Tribunal found on the material before it that a Business Transfer Agreement existed between the parties and, under its terms, the Respondent had an obligation to make payments towards employee retiral liabilities and supplier payables which the Petitioner discharged on the Respondent's behalf. The Respondent's earlier correspondence acknowledged assumption of certain trade payables, and the Tribunal treated the plea of after the fact dispute as an attempt to avoid liability. On that basis the Tribunal concluded there was a debt due and payable by the Respondent and that a default had occurred. [Paras 18, 19, 20]

The claim asserted by the Petitioner flows from the Business Transfer Agreement, is payable by the Respondent and there is default.

Operational Creditor - Operational Debt - existence of dispute under Section 5(6) - The Petitioner qualifies as an Operational Creditor and the claim constitutes an Operational Debt; the Respondent's contention of a pre existing dispute was rejected. - HELD THAT: - Applying the definitions of Operational Creditor and Operational Debt, the Tribunal held that the amounts paid by the Petitioner to suppliers and to employees on account of obligations that the Respondent contractually undertook fall within the scope of operational debt and are accordingly owing to the Petitioner. The Tribunal examined the Respondent's assertions of dispute and mala fide contentions, finding them to be afterthoughts unsupported by the contract or documents, and therefore insufficient to establish a genuine dispute under the Code. [Paras 20]

The petitioner is an Operational Creditor in respect of the claimed Operational Debt and the plea of a viable dispute is rejected.

Admission of petition under Section 9 - initiation of Corporate Insolvency Resolution Process (CIRP) and appointment of Interim Resolution Professional - moratorium upon initiation of CIRP - The Section 9 petition was admitted; CIRP ordered, IRP appointed and moratorium imposed. - HELD THAT: - Having found debt and default and that the petition met the statutory requisites (including filing requirements, evidence of debt and consent of the proposed IRP), the Tribunal held the petition complete and fit for admission under Section 9. Accordingly the Tribunal ordered initiation of CIRP, appointed an Interim Resolution Professional, directed deposit towards initial CIRP costs, and declared the moratorium and other statutory consequences to follow from the date of the order. [Paras 21]

Company petition under Section 9 is allowed; CIRP is initiated, IRP appointed and moratorium imposed.

Final Conclusion: The Company Petition under Section 9 is allowed: the Tribunal held that the Petitioner's claims arising from the Business Transfer Agreement constitute operational debt owed by the Respondent, that the petitioner qualifies as an Operational Creditor and that no genuine dispute barred admission; CIRP has been initiated, an Interim Resolution Professional appointed and the moratorium and attendant directions ordered.

Financial debt - time value of money - disbursement for consideration for the time value of money - absence of stipulation of interest - absence of fixed repayment term - admission of debt in audited accounts as unsecured loan

Financial debt - time value of money - absence of stipulation of interest - absence of fixed repayment term - admission of debt in audited accounts as unsecured loan - The claimed loan does not fall within the definition of financial debt under the Code. - HELD THAT: - The Tribunal examined the statutory definition of financial debt as a debt disbursed against consideration for the time value of money. It accepted the Corporate Debtor's contention that mere admission of a loan in books does not suffice to convert the transaction into a financial debt unless it satisfies the substantive requirement of being advanced for the time value of money. The Petitioner produced audited accounts showing the amount as an unsecured loan and a letter dated 03.04.2016, but did not place on record any document evidencing a stipulation for payment of interest or a fixed repayment term. In the absence of either an agreed time consideration (interest) or a definite repayment schedule, the Tribunal found that the advance was not a disbursement for the time value of money and therefore did not constitute a financial debt. The Tribunal relied on and applied the reasoning of earlier decisions [sanjay kewalramani vs. sunil parmanad kewalramani] and [Shreyans Realtors Private Limited & Anr. Vs. Saroj Realtors & Developers Private Limited] to the effect that an admitted loan without indicia of time consideration cannot be treated as financial debt, and noted the Supreme Court's statement in Innoventive Industries Ltd. v/s. ICICI Bank and Another that financial debt must reflect consideration for time value of money. Because the petition was dismissed on the nature of the claim, the Tribunal did not decide other contentions raised by the Corporate Debtor relating to regulatory permissions or auditor observations. [Paras 12, 13, 14]

Company Petition dismissed as the claimed amount does not qualify as financial debt under the Code.

Final Conclusion: The petition under Section 7 is dismissed on the ground that the admitted advance does not constitute a financial debt (no time value consideration, no interest stipulation, and no fixed repayment term); the petitioner remains free to pursue ordinary recovery proceedings.

Financial debt - default - initiation of CIRP under Section 7 of Insolvency and Bankruptcy Code - appointment of interim resolution professional - moratorium - territorial jurisdiction - public announcement of CIRP

Financial debt - default - The applicant established existence of a financial debt owed by the corporate debtor and proved default, entitling the applicant to seek initiation of CIRP under the Code. - HELD THAT: - The Tribunal found that the agreement executed between the parties recorded a financial contribution and collateral security in the form of a demand promissory note, and treated the amount advanced as having the commercial effect of borrowing. The applicant produced the agreement, evidence of disbursement and demand notices and demonstrated that the corporate debtor failed to discharge the obligation. The corporate debtor did not file a reply or appear to challenge the claim, and the claim therefore remained uncontroverted. On the basis of the documentary record and unchallenged pleadings the Tribunal concluded that the requirements of debt and default necessary for admission under Section 7 were satisfied. [Paras 6, 8, 9, 11]

Application under Section 7 is maintainable on the ground of established financial debt and default.

Territorial jurisdiction - This Bench has territorial jurisdiction to entertain the Company Petition. - HELD THAT: - The Tribunal noted that the registered office of the corporate debtor is situated in Mumbai and accordingly the application lies before the Mumbai Bench. No contest having been raised by the corporate debtor regarding territorial competence, the Tribunal recorded satisfaction with territorial jurisdiction as a prerequisite for admission. [Paras 10, 11]

Petition admitted by the Tribunal having territorial jurisdiction.

Appointment of interim resolution professional - moratorium - public announcement of CIRP - On admission, the Tribunal appointed an interim resolution professional, directed deposit towards initial CIRP costs, and ordered the statutory moratorium and attendant measures including public announcement and vesting of management in the IRP. - HELD THAT: - Upon admitting the petition, the Tribunal appointed the proposed insolvency professional whose consent in Form-2 was on record. It directed the financial creditor to deposit initial CIRP costs, proclaimed the moratorium restraining institution or continuation of suits and certain enforcement actions, preserved supply of essential goods and services, noted exceptions notified by the Central Government, directed public announcement of the CIRP and that management of the corporate debtor shall vest in the IRP/RP. The Registry was directed to intimate the order to the ROC for updating master data. These directions flowed from admission and mirror the statutory consequences of initiation of CIRP. [Paras 11]

IRP appointed, moratorium and ancillary directions issued; public announcement and other procedural steps ordered.

Final Conclusion: Company Petition under Section 7 is allowed; CIRP of the corporate debtor is initiated, an interim resolution professional is appointed, and moratorium and related directions are ordered.

Corporate Insolvency Resolution Process - Operational Creditor - default in payment of operational debt - application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice and compliance with Section 9(3) - moratorium - Interim Resolution Professional - public announcement and claims process

Operational Creditor - default in payment of operational debt - service of demand notice and compliance with Section 9(3) - The Section 9 application is maintainable and the operational debt is due and payable to the operational creditor. - HELD THAT: - The Tribunal found on the material placed by the operational creditor that invoices and delivery challans were produced showing supply of goods to the corporate debtor. A demand notice under Section 8 was placed on record together with postal tracking showing delivery, and the operational creditor filed the affidavit of compliance required under Section 9(3)(b) and 9(3)(c). No person appeared for the corporate debtor despite service and publication of notice. On this basis the Tribunal concluded that the amount claimed is due and payable and that the statutory preconditions for admission under Section 9 were satisfied. [Paras 4, 5, 7]

Section 9 application admitted and debt held to be due and payable to the operational creditor.

Corporate Insolvency Resolution Process - moratorium - public announcement and claims process - The corporate debtor is to be admitted into CIRP and the moratorium under the Code is to be declared; the IRP is to make the public announcement and call for claims. - HELD THAT: - Having held that the statutory preconditions for admission under Section 9 were met, the Tribunal ordered admission of the corporate debtor into the CIRP. It declared the moratorium prohibiting institution or continuation of suits, transfer or disposal of assets, enforcement of security interests, and recovery of property occupied by the corporate debtor. The Tribunal further directed the IRP to make the public announcement and invite submission of claims in accordance with the Code. [Paras 1, 2, 3, 6]

M/s. Radha Madhav Corporation Limited admitted into CIRP; moratorium declared; IRP to make public announcement and call for claims.

Interim Resolution Professional - appointment of IRP - protection and preservation of assets - An Interim Resolution Professional is appointed and directed to perform statutory functions, with interim funding directions and ancillary operational orders. - HELD THAT: - The Tribunal appointed the proposed registrant as Interim Resolution Professional and directed him to perform functions under the Code including protection and management of the corporate debtor as a going concern. The order makes clear the obligation of persons connected with the corporate debtor to assist the IRP, permits the IRP to seek appropriate orders for non-cooperation, and directs the operational creditor to advance interim funds to the IRP with provision for further interim funding as required by the rules. The Tribunal also directed that continuing supply of goods/services not be terminated during the moratorium. [Paras 4, 5, 7, 8]

Mr. Kedar Ramratan Laddha appointed as IRP with statutory duties; directions issued for protection of assets, continuation of supplies and interim funding to the IRP.

Final Conclusion: The Tribunal admitted the corporate debtor into the Corporate Insolvency Resolution Process upon finding the operational debt and statutory compliance for a Section 9 petition, declared the moratorium, appointed the Interim Resolution Professional and issued ancillary directions for public announcement, claims process, protection of assets, continuation of supply and interim funding.

Interpretation of the SVLDRS Rules with reference to the definition of 'case' - maintainability of a single declaration where a single consolidated order/appeal exists - application of Rule 6A of the CESTAT (Procedure) Rules, 1982 permitting a single appeal against a consolidated order - beneficial/amnesty scheme construction and avoidance of hyper technical denial of relief - procedural formalities versus substantive eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019

Interpretation of the SVLDRS Rules with reference to the definition of 'case' - maintainability of a single declaration where a single consolidated order/appeal exists - beneficial/amnesty scheme construction and avoidance of hyper technical denial of relief - Validity of rejection of declaration under Rule 3(2) of the SVLDRS Rules for filing a single declaration in respect of multiple show cause notices adjudicated by a single consolidated order and pending as a single appeal. - HELD THAT: - The Court held that Rule 3(2) requires filing of a separate application for each 'case', and the Explanation defines 'case' to include "a show cause notice or one or more appeal arising out of such notice". Where, as on the relevant cut off date, the show cause notices had been adjudicated by a consolidated order and only a single appeal was pending, a single declaration was appropriate. The Court followed a coordinate bench decision which analysed the same provision and concluded that rejection on the ground that four separate declarations were not filed was hyper technical and unsustainable. The Court emphasised that the Scheme is beneficial in character and directed that procedural formalities should not defeat substantive eligibility where no prejudice to revenue is shown. Consequently the impugned rejections were quashed and the declarations were to be decided afresh. [Paras 7, 9]

Rejection of the declaration solely because a single declaration (instead of multiple) was filed was quashed; the declaration must be decided afresh and the petitioner is entitled to relief if substantive eligibility conditions are met.

Application of Rule 6A of the CESTAT (Procedure) Rules, 1982 permitting a single appeal against a consolidated order - procedural formalities versus substantive eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - substantial right of filing single appeal under Rule 6A - Whether filing of a single appeal under Rule 6A, 1982 in respect of a consolidated order supports maintenance of a single declaration under the Amnesty Scheme. - HELD THAT: - The Court noted that Rule 6A permits filing of one memorandum of appeal against a decision or order irrespective of the number of show cause notices dealt with in that order. Filing of an appeal is a substantial right, whereas filing a declaration under the Amnesty Scheme is a procedural formality. Since the petitioners had filed a single appeal in accordance with Rule 6A and complied with eligibility conditions of the Finance Act, the petitioners could not be denied the Scheme's benefits on the ground of non compliance with a procedural requirement of separate declarations when no prejudice to revenue was demonstrated. [Paras 8, 9]

A single declaration corresponding to a single consolidated appeal is maintainable; petitioners who filed a single appeal under Rule 6A are not to be denied Scheme benefits for filing one declaration when eligibility conditions are satisfied and no prejudice to revenue is shown.

Final Conclusion: Writ petitions allowed; impugned orders rejecting the declarations quashed and respondents directed to decide the declarations afresh and issue discharge certificates subject to compliance with other conditions of the Scheme within the stipulated period.

Quantified - written communication quantifying duty - admission of duty liability during enquiry/investigation/audit - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (investigation/enquiry/audit category) - principles of natural justice - notice and hearing before rejection - remand for fresh consideration with opportunity of hearing and speaking order

Quantified - written communication quantifying duty - admission of duty liability during enquiry/investigation/audit - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (investigation/enquiry/audit category) - Whether petitioner's service tax liability was 'quantified' on or before 30.06.2019 so as to make the declaration under the Scheme maintainable. - HELD THAT: - The court held that 'quantified' for the purpose of the Scheme means a written communication of the amount of duty payable and that such written communication includes a duty liability admitted by the person during enquiry, investigation or audit. Admissions recorded prior to the cut-off date, even if approximate and subject to verification, satisfy the requirement. The director's statement dated 09.04.2019 admitting net service tax liability of about Rs. 40 to 45 lakhs corresponded to the figure in the declaration and thus amounted to written communication quantifying the duty before 30.06.2019. The quantification for eligibility need not await formal adjudication or issuance of a show-cause notice; what is material is admission or other written communication before the cut-off date. [Paras 12, 16, 17, 18, 19]

Petitioner's tax dues stood quantified on or before 30.06.2019 by way of admission recorded on 09.04.2019; petitioner was therefore eligible to file the declaration under the Scheme in the investigation/enquiry/audit category.

Principles of natural justice - notice and hearing before rejection - remand for fresh consideration with opportunity of hearing and speaking order - Whether the designated authority's rejection of the declaration without hearing was sustainable and what relief should follow. - HELD THAT: - The court observed that where the Designated Committee estimates an amount in excess of the declarant's figure, the Scheme requires giving an intimation and an opportunity of hearing before insisting on payment of the higher amount; summary rejection without hearing would violate principles of natural justice and frustrate the object of the Scheme. In view of the admitted quantification and the lack of hearing before rejection, the order dated 02.01.2020 was set aside. The matter was remitted to the designated authority to treat the declaration as valid, afford the petitioner an opportunity of hearing, and pass a speaking order while reconsidering the declaration and granting consequential reliefs. [Paras 19, 20]

Order rejecting the declaration set aside; matter remitted to respondents to reconsider the declaration as valid, provide hearing and pass a speaking order within the time directed.

Final Conclusion: Writ petition allowed to the limited extent of setting aside the rejection order dated 02.01.2020; declaration dated 08.12.2019 to be reconsidered afresh by the designated authority treating it as valid, after affording the petitioner a hearing and passing a speaking order within eight weeks; no order as to costs.

Deduction of pre-deposit or deposit in computation under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2018 - pre-deposit and deposit made during enquiry, investigation or audit - interpretation of relief calculation under the Scheme - accounting entries not determinative of substantive entitlement

Pre-deposit and deposit made during enquiry, investigation or audit - deduction of pre-deposit or deposit in computation under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2018 - Whether an amount remitted during investigation and before issue of show cause notice, though accounted for under the head 'interest', must be taken into account and given credit in computing the amount payable under the Scheme in terms of Section 124(2). - HELD THAT: - The Court held that Section 124(2) operates in two limbs: (i) pre-deposits made at the stage of appellate proceedings; and (ii) deposits made during enquiry, investigation or audit, which are to be deducted when issuing the statement indicating the amount payable under the Scheme. The petitioner's remittance was made during investigation and prior to issuance of the show cause notice and therefore falls within the second limb of Section 124(2). The departmental objection rested solely on the accounting classification of the sum as interest; the Court found this to be a hyper-technical objection. Accounting methodology cannot override substantive entitlement under the Scheme and accounting entries are not decisive of the true nature of a transaction. The object of the Scheme-smooth settlement of disputes-requires that such deposits actually remitted be credited in computing the liability, irrespective of the head under which the Department posted them. Consequently the amount remitted towards interest must be taken into account for computation under the Scheme and credited to the declarant. [Paras 6, 7, 8, 9]

The amount remitted during investigation prior to the show cause notice, though accounted for as interest, must be taken into account and given credit in computing the amount payable under the Scheme in terms of Section 124(2); the writ petition is allowed.

Final Conclusion: Writ petition allowed: the deposit made during investigation prior to issuance of the show cause notice (including the sum accounted as interest) must be credited in the computation under the Sabka Vishwas Scheme; petitioner to pay the balance within 30 days as directed; connected matters closed.

Construction of Complex Service - abatement of value (67%) in composite construction contracts - Works Contract Service (EPC/turnkey projects) - Erection, Commissioning and Installation Service (pipe-laying and civil works) - penalty under Section 78 - bona fide belief/reasonable cause in tax liability - requirement of wilful suppression/mis-statement for extended period penalty

Construction of Complex Service - abatement of value (67%) in composite construction contracts - composite contract - gross value principle - Demand of Service Tax under Construction of Complex Service (CCS) in respect of residential apartments and refusal of abatement. - HELD THAT: - The Tribunal found that the appellant constructed semi-finished residential flats/villas for SAAP which were completed and sold to customers and thus fell within taxable CCS and outside the exclusion for works intended for personal use of the builder. However, the construction was a composite activity for which the law and precedents require levy on the gross amount in composite contracts and entitlement to the statutory abatement; denial of the abatement was incorrect. Applying the settled authorities relied upon, the demand insofar as confirmed cannot be sustained and the appellant was entitled to the abatement available under law. [Paras 6]

Demand under CCS set aside and abatement (67%) to which the assessee was entitled should not have been denied.

Works Contract Service (EPC/turnkey projects) - turnkey/EPC projects require commercial purpose to attract levy - Demand of Service Tax under Works Contract Service in respect of PranahithaChevella Lift Irrigation Project. - HELD THAT: - Relying on the Larger Bench decision in LancoInfratech Ltd., the Tribunal held that EPC/turnkey contracts are taxable as works contract only when they are for commercial or industrial purpose. The appellant, acting as builder who had to complete works post-sale, undertook wide-ranging obligations akin to EPC/turnkey activity; on the facts and by application of the Larger Bench reasoning the demand could not be sustained. [Paras 8]

Demand under Works Contract Service in respect of the project does not sustain.

Erection, Commissioning and Installation Service (pipe-laying and civil works) - commercial or industrial purpose requirement for pipeline works - Demand of Service Tax in respect of pipe-laying and pipeline civil works (MCGM-TANSA Pipeline / drinking water supply). - HELD THAT: - The Tribunal accepted the appellant's contention and authorities showing that the expression covering plumbing, drain-laying or installations does not extend to pipeline works for supply of drinking water undertaken on roads unless it is for commercial/industrial purpose. Revenue failed to establish commercial or industrial character of the project; accordingly the demand could not be sustained. [Paras 3, 9]

Demand in respect of pipe-laying and related civil works set aside.

Penalty under Section 78 - bona fide belief/reasonable cause in tax liability - requirement of wilful suppression/mis-statement for extended period penalty - Validity of imposition of penalty under Section 78 for the various demands. - HELD THAT: - The Show Cause Notice alleged wilful suppression for invocation of extended period, but the adjudicating authority recorded no finding of fraud, collusion, wilful mis-statement or suppression as required by Section 78(1). The appellant consistently pleaded a bona fide belief that certain works (including government contracts and non-commercial projects) were not taxable; the Revenue did not displace that belief or show absence of reasonable cause. In absence of findings establishing the statutory ingredients of Section 78 and given the availability of the prima facie reasonable cause, the Tribunal found the penalty to have been levied mechanically and without justification and therefore deleted it. [Paras 7, 10, 11, 12]

Penalty under Section 78 deleted.

Site formation, excavation and earthmoving service - penalty contest - Position on demand for site formation, excavation and earthmoving and the related penalty. - HELD THAT: - The demand itself was not contested on merits in the appeal, but the appellant challenged imposition of equal penalty under Section 78 on the ground of bona fide belief. The Tribunal accepted that there was basis for bona fide belief given the Government's involvement and absence of evidence dislodging that belief; accordingly the penalty could not be sustained. [Paras 3, 7]

Penalty in respect of the site formation/excavation/earthmoving demand deleted.

Final Conclusion: The appeal is allowed: demands in respect of Construction of Complex Service, Works Contract Service (PranahithaChevella), and pipe-laying/civil works are set aside or held not sustainable and the penalties levied under Section 78 are deleted; consequential relief to follow as per law.

Exemption under Notification No. 25/2012-ST - services rendered to Government through a nodal/implementing agency - agency/principal relationship - refund of tax paid under mistake - limitation under Section 11B of the Central Excise Act - unjust enrichment - Mafatlal principles on refund and unjust enrichment

Exemption under Notification No. 25/2012-ST - services rendered to Government through a nodal/implementing agency - agency/principal relationship - Whether the construction services rendered by the appellant for development of agricultural/warehousing infrastructure through MP MARKFED amounted to services provided to the State Government and were therefore exempt under Notification No. 25/2012-ST. - HELD THAT: - The Tribunal found on the record that the projects were sanctioned by the Central Government as Additional Central Assistance for a State Government scheme, the land was provided free by the State Government, nodal implementing agencies (including MP MARKFED) were appointed by the State Government to invite tenders and execute the works, and MP MARKFED acted as the State's implementing/agent body (appointments to key posts and control being by the State). On the facts, the construction executed by the appellant was held to be for the State Government and thus covered by the exemption at Sr. No. 12(a) of Notification No. 25/2012-ST. The Tribunal therefore held the services to be exempt and that the service tax paid earlier was not leviable in law. [Paras 9, 17, 18, 24]

Construction services were services to the State Government through MP MARKFED as nodal agency and are exempt under Notification No. 25/2012-ST; the tax paid was not leviable.

Limitation under Section 11B of the Central Excise Act - refund of tax paid under mistake - Mafatlal principles on refund and unjust enrichment - Whether the refund claim for service tax paid earlier is barred by the time limit under Section 11B of the Central Excise Act, or whether the amount paid being a mistaken deposit places the claim outside the prescription of Section 11B. - HELD THAT: - There is a clear difference of opinion. The majority (Member Judicial) held that because the service tax was not leviable ab initio (the services qualified for exemption), the amounts paid were deposits paid under a mistake of law and thus were not governed by Section 11B's limitation; relying on precedents (including KBR/KVR), the majority held limitation inapplicable and directed refund with interest and found unjust enrichment absent. The Technical Member (dissenting) accepted that the services were exempt on merits but held that the claim falls squarely within the statutory refund regime and the limitation in Section 11B applies in full; he relied on the constitutional Bench in Mafatlal Industries and its exposition that refunds of wrongly paid excise/service tax are to be governed by Section 11B unless the levy itself is unconstitutional or beyond the statute, and therefore the Tribunal cannot direct a time-barred refund. In view of this split on the applicability of Section 11B, the question of limitation was referred to a third Member for opinion. [Paras 27, 42, 44, 46, 47]

Difference of opinion recorded; applicability of Section 11B to the refund claim is referred to a third Member for decision.

Unjust enrichment - refund of tax paid under mistake - Whether unjust enrichment doctrine precludes refund when the department or recipient has borne/received the tax element. - HELD THAT: - The majority, having found that neither the appellant collected the service tax from the recipient nor did MP MARKFED pay any service tax (supported by certificates on record), concluded that unjust enrichment was not attracted. The finding based on documentary evidence and factual conclusion led to the view that refund could be granted if limitation did not bar it. The Technical Member did not dispute the factual finding of non-payment by the nodal agency but treated the broader refund claim as governed by Section 11B. [Paras 24, 25]

On the material before the Tribunal, unjust enrichment is not attracted.

Final Conclusion: On the merits the Tribunal concluded that the construction services were rendered to the State Government through MP MARKFED and were exempt under Notification No. 25/2012-ST; unjust enrichment was held not attracted. There is, however, a difference of opinion on whether the refund claim is barred by limitation under Section 11B. The matter is referred to a third Member to decide the applicability of Section 11B.

Eligibility for Modvat credit on capital goods - definition of "capital goods" under Rule 57-Q - requirement that capital goods be used in the factory and for the purpose of manufacturing the final product - concurrent finding of fact upheld by Tribunal and Commissioner

Eligibility for Modvat credit on capital goods - definition of "capital goods" under Rule 57-Q - requirement that capital goods be used in the factory and for the purpose of manufacturing the final product - concurrent finding of fact upheld by Tribunal and Commissioner - Entitlement to Modvat credit on H.R. Plates/Coils used in construction of conveyor galleries as capital goods under Rule 57-Q - HELD THAT: - The Court examined whether H.R. Plates/Coils falling under heading No.7208, though not explicitly enumerated in Explanation (1) to erstwhile Rule 57 Q, could be treated as capital goods for the purpose of availing Modvat credit. Applying the test crystallised by the Hon'ble Apex Court in Jayaswal Neco Ltd., the determinative inquiry is whether the purported capital goods are used by the manufacturer in his factory and are utilised for the purpose of manufacturing the final product. The Commissioner recorded a finding that the H.R. Plates/Coils were used as components in platforms for conveyor galleries in aid of the manufacturing process, and that such use brought them within the concept of capital goods as utilised in production. The Tribunal confirmed that factual conclusion. Given these concurrent findings of fact that the items were used for manufacture, and in view of the legal test in Jayaswal Neco, no substantial question of law survives for interference with the Tribunal's order allowing Modvat credit.

The concurrent factual finding that the H.R. Plates/Coils were utilised in the manufacturing process brings them within the scope of capital goods under Rule 57 Q and the entitlement to Modvat credit as allowed by the Commissioner and affirmed by the Tribunal is upheld.

Final Conclusion: The appeal is dismissed; the Tribunal's confirmation of the Commissioner's allowance of Modvat credit on the H.R. Plates/Coils is sustained because concurrent findings that the goods were used in the factory for manufacture of final products meet the legal test in Jayaswal Neco.

Confiscation and penalty - Rule 25 of Central Excise Rules - penalty under Section 11AC - registered dealer liability - invoice requirements for second stage dealer - intent to evade payment of duty - fraudulent availment of CENVAT credit

Rule 25 of Central Excise Rules - confiscation and penalty - registered dealer liability - penalty under Section 11AC - Applicability of Rule 25 and imposition of penalty under Section 11AC on the assessee as a registered dealer for the disputed period - HELD THAT: - The Court examined Rule 25, which prescribes confiscation and penalty where a producer, manufacturer, registered person of a warehouse or a registered dealer removes excisable goods in contravention of the rules or contravenes the rules with intent to evade payment of duty. The assessee was admitted to be a registered dealer. The Tribunal and the Adjudicating Authority found that proper invoices were not issued for removals by the second stage dealer and that goods were cleared under invoices misrepresenting duty payment, enabling fraudulent CENVAT credit and evasion of duty on final products. On these factual findings the Court held that Rule 25 plainly applies and sustains the penalty imposition subject to Section 11AC. The determinative reasoning is that the statutory scheme and the invoice requirements for second stage dealers (including Rule 11(7) implications) were contravened with intent to evade duty, engaging confiscation and penalty provisions. [Paras 10, 11]

Rule 25 applies to the assessee as a registered dealer for the period in question and the penalty under Section 11AC is sustainable on the factual findings of contravention and intent to evade duty.

Fraudulent availment of CENVAT credit - intent to evade payment of duty - invoice requirements for second stage dealer - Whether the assessee had contested the allegation of commission of fraud and whether that raised a substantial question of law - HELD THAT: - The Court reviewed the adjudicatory record and the findings of the Tribunal and Adjudicating Authority that the assessee failed to issue proper invoices and that clear violations occurred in respect of non-duty paid goods cleared as duty paid, enabling fraudulent credit. Although the assessee asserted that it contested the fraud allegation, the factual findings demonstrate the dispute turned on evidence of contraventions and intent. The High Court concluded that these were questions of fact already addressed by the authorities and did not give rise to any substantial question of law warranting interference. [Paras 7, 11, 12]

The contention that fraud was not contested does not raise a substantial question of law; the matter is factual and the adjudicatory findings stand.

Confiscation and penalty - Rule 25 of Central Excise Rules - Whether the Commissioner (Appeals) traversed beyond the scope of the adjudication order - HELD THAT: - The Court considered the contention that the first appellate authority exceeded the scope of the adjudication. Having reviewed the impugned orders and the detailed factual findings in the Order in Original, the High Court found no illegitimate excursion beyond the adjudicatory scope. The appellate findings and the Tribunal's approval concerned the same factual contraventions (invoice non compliance and misrepresentation of duty payment) that formed the basis of the original order, and thus no separate substantial legal question arose from any alleged excess. [Paras 11, 12]

No merit in the submission that the Commissioner (Appeals) traversed beyond the scope; no substantial question of law arises on this ground.

Final Conclusion: The appeal is dismissed. The Court upheld the finding that Rule 25 applies to the assessee (a registered dealer) for the period October, 2004 to July, 2006 and that the penalty under Section 11AC is sustainable on the adjudicatory findings; no substantial question of law was found to warrant interference.

Limitation on assessment and re-assessment - Limitation period for assessment under the DVAT Act - Inapplicability of provision permitting assessment within one year after a court/Tribunal decision where reassessment is not consequent to such decision - Liberty granted by a court does not extend or alter statutory limitation - Quashing of assessment notice as time-barred

Limitation on assessment and re-assessment - Limitation period for assessment under the DVAT Act - Quashing of assessment notice as time-barred - The notice of default assessment dated 15th January, 2021 relating to tax year 2010-11 is barred by limitation under Section 34 of the DVAT Act. - HELD THAT: - Section 34(1) prescribes a four-year limitation for making an assessment or reassessment and, where applicable, an extension to six years on a finding of concealment. The impugned notice relates to the tax year 2010-11 for which limitation expired on 31st March, 2015. The notice dated 15th January, 2021 is therefore ex facie beyond the statutory period. The Court found that no provision of the statute justified treating the 2021 notice as within time and, accordingly, the notice is time-barred and liable to be set aside. [Paras 12, 14]

The assessment notice dated 15th January, 2021 is quashed as barred by limitation under Section 34 of the DVAT Act.

Inapplicability of provision permitting assessment within one year after a court/Tribunal decision where reassessment is not consequent to such decision - Liberty granted by a court does not extend or alter statutory limitation - Section 34(2) could not be invoked because the impugned order was not passed in consequence of, or to give effect to, any decision of a court or the Appellate Tribunal requiring reassessment; and the earlier liberty granted by this Court did not extend the statutory limitation. - HELD THAT: - Section 34(2) permits assessment within one year after a decision of an Appellate Tribunal or court where the assessment is required to be made in consequence of that decision. The Court examined the 17th January, 2020 order which granted liberty to issue further show cause notices consistent with the law and the Court's judgment, and held that such judicial liberty cannot be read as extending or altering the statutory limitation fixed by Section 34. Because the 2021 notice was not occasioned by any decision mandating reassessment, Section 34(2) is inapplicable and the statutory limitation remains operative. [Paras 11, 13]

Section 34(2) is inapplicable to the impugned notice and the High Court's earlier grant of liberty did not and could not extend the statutory limitation period.

Final Conclusion: Writ petition allowed; the notice of default assessment dated 15th January, 2021 (relating to 2010-11) is quashed as barred by limitation under Section 34 of the DVAT Act, and the Court's earlier liberty does not operate to extend statutory limitation.

Exemption under Section 5(3) of the Central Sales Tax Act, 1956 - identity of goods / character of goods - "same goods" theory - inextricable connection or link between local sale and export

Exemption under Section 5(3) of the Central Sales Tax Act, 1956 - identity of goods / character of goods - Whether the dealers are entitled to exemption under Section 5(3) where goods purchased (coffee seeds) were processed and exported in different forms (instant/soluble coffee). - HELD THAT: - The Tribunal found on evidence that the coffee seeds purchased by the dealers were roasted, ground, extracted and spray-dried and that those processes did not alter the essential character or identity of the goods so as to break the link with the export transaction. Applying Section 5(3), the Tribunal held that the last local sale preceding export was for the purpose of complying with the export contract and hence was deemed to be in the course of export. The High Court, after reviewing the documents and authorities relied upon, held there was no error in the Tribunal's conclusion that the dealers were entitled to the benefit of Section 5(3). [Paras 4, 7, 13, 14]

Dealers entitled to exemption under Section 5(3); no interference with Tribunal's finding that processing did not alter the identity of the goods.

"same goods" theory - inextricable connection or link between local sale and export - Whether the 'same goods' theory precludes exemption where the exported items differ in form from the goods purchased, and whether an inextricable link between the local sale and export suffices for exemption. - HELD THAT: - The Court noted that the 'same goods' theory cannot be used to expand or narrow Section 5(3) mechanically; the determinative question is whether the local sale or purchase is inextricably connected with the export sale occasioning export. Relying on the Supreme Court's approach in Azad Coach Builders as explained by the Division Bench, and on earlier authority concerning coffee, the Court accepted the Tribunal's factual finding that the transactions between dealers, exporter and foreign buyer were inextricably connected. Consequently, even though form and processing changed the commodity's presentation, the link justified application of Section 5(3) and the 'same goods' theory did not defeat the claim. [Paras 11, 12, 13]

The 'same goods' theory does not automatically bar exemption where an inextricable link exists between the local sale and export; here such link was found and exemption upheld.

Precedential distinction - application of Azad Coach Builders - Whether the decision in Vijayalakshmi Leather Industries (distinguishing Azad Coach Builders) required a different result in this case. - HELD THAT: - The Court analysed Vijayalakshmi Leather Industries and the underlying Supreme Court decision in Azad Coach Builders, observing that in Vijayalakshmi the link between local purchase and export was not established on the facts. The High Court found the present facts distinguishable because documents before the Tribunal demonstrated the requisite inextricable connection here. Therefore the earlier Division Bench decision did not assist the State in overturning the Tribunal's factual and legal conclusion. [Paras 8, 9, 10, 12]

Vijayalakshmi Leather Industries is distinguishable; Azad Coach Builders' principle (permitting departure from rigid 'same goods' requirement where an inextricable link exists) supports the Tribunal's conclusion on the facts of this case.

Final Conclusion: The High Court dismissed the State's writ petitions, upholding the Tribunal's finding that the dealers were entitled to exemption under Section 5(3) because the local sales were inextricably connected with the export and the processing did not destroy the identity of the goods; earlier authorities relied on by the State were distinguishable on facts.

Rigors of Section 37 NDPS Act apply where recovery (taken together) equals or exceeds commercial quantity - criminal conspiracy under Section 29 NDPS Act - joint or continuous recovery / single transaction doctrine - secret information and GD entry as compliance with Section 42 NDPS Act - factual matrix cannot be adjudicated at bail stage

Rigors of Section 37 NDPS Act apply where recovery (taken together) equals or exceeds commercial quantity - joint or continuous recovery / single transaction doctrine - criminal conspiracy under Section 29 NDPS Act - Whether the petitioner was entitled to regular bail in view of the alleged recovery and the applicability of Section 37 of the NDPS Act. - HELD THAT: - The Court held that at the bail stage the factual matrix must be approached with restraint and detailed factual inquiries are a matter for trial. The petitioner and the co-accused were arrested while travelling in the same vehicle on the basis of a secret information and a search was carried out in the presence of supervisory police. Although the petitioner was found with 555 grams and the co-accused with 955 grams, the recoveries were not treated as independent for the purposes of bail because both accused were travelling together and the prosecution alleges a common plan to bring contraband into Delhi for sale. Having regard to the combined quantity exceeding one kilogram and the co-accused's antecedents, the Court concluded that the statutory bar in Section 37 operates and the mandatory conditions for grant of bail under that provision are not satisfied. On these grounds the bail application was dismissed. [Paras 11, 12]

Bail refused; rigors of Section 37 held to apply in the facts and circumstances and no ground for bail made out.

Secret information and GD entry as compliance with Section 42 NDPS Act - factual matrix cannot be adjudicated at bail stage - Whether there was violation of the mandatory provisions of Section 42 of the NDPS Act affecting legality of the search and seizure. - HELD THAT: - The Court noted the petitioner's contention of violation of Section 42 but observed that whether there was compliance with the mandatory requirements of Section 42 is essentially a question of fact for trial. The record shows that a GD entry (No. 0011A) was recorded on the basis of secret information and the prosecution relies on that entry; the Court declined to undertake a detailed fact-finding exercise at the bail stage and indicated that such factual issues would be examined during the trial proceedings. [Paras 11]

Issue of Section 42 compliance left for trial; no adverse factual finding made at the bail stage.

Final Conclusion: The petition for regular bail is dismissed: on the material before the Court the combined recoveries and surrounding facts engage the bar in Section 37 NDPS Act and the question of compliance with Section 42 is a factual matter to be decided at trial.

Compounding of offence under Section 138 of the Negotiable Instruments Act, 1881 - effect of payment/clearance of cheque amount on criminal liability - imposition of costs in compounding applications - release from custody consequent upon compounding

Compounding of offence under Section 138 of the Negotiable Instruments Act, 1881 - effect of payment/clearance of cheque amount on criminal liability - The Court allowed compounding of the offence after the cheque-related dues were cleared and treated the offences as compounded, setting aside the impugned judgments and orders. - HELD THAT: - The petitioner had been convicted for dishonour of a cheque. The Court noted that a substantial portion of the cheque amount had already been paid and the remaining amounts were deposited or tendered to the respondent society; consequently, there was no difficulty in accepting the plea for compounding. In view of the clearing of dues in full and the parties' consent to compound, the Court exercised its power to permit compounding and set aside the earlier convictions and orders. [Paras 9, 11]

Offences deemed compounded and the impugned judgments and orders set aside.

Imposition of costs in compounding applications - The Court declined to impose costs upon the petitioner notwithstanding the general principle that costs are normally imposed when compounding is permitted. - HELD THAT: - Although the respondent's counsel relied on authority for imposing costs in such matters, the Court found the petitioner's personal circumstances - his low-income occupation as a driver, residence in an interior village, and the adverse impact of the Covid-19 pandemic on his ability to pay - to be a sufficient reason to excuse imposition of costs in the peculiar facts of the case. The Court therefore accepted the submission that costs, while generally appropriate, need not be imposed here. [Paras 8]

No costs imposed on the petitioner.

Release from custody consequent upon compounding - On compounding of the offence, the petitioner, who was in custody after surrender, was ordered to be released forthwith and the Registry directed to issue the writ to facilitate immediate release. - HELD THAT: - The petitioner had surrendered and was reported to be in custody. Once the Court deemed the offences compounded and set aside the impugned judgments and orders, it followed that custody could not continue. The Court therefore directed immediate release and instructed the Registry to ensure issuance of the writ on the same day to enable prompt liberation. [Paras 12, 14]

Petitioner to be released forthwith; Registry to issue writ immediately.

Final Conclusion: Revision allowed by consent; offences under Section 138 NI Act compounded on account of clearance of dues, impugned judgments and orders set aside, no costs imposed given the petitioner's circumstances, and petitioner to be released forthwith with directions to the Registry to issue the necessary writ.

Ingredients of offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption and burden of proof - Service by post deemed under Section 27 of the General Clauses Act, 1897 - Presumptions under Section 118 of the Negotiable Instruments Act - Compensation and sentence on conviction under Section 138

Ingredients of offence under Section 138 of the Negotiable Instruments Act - Service by post deemed under Section 27 of the General Clauses Act, 1897 - Complainant fulfilled the mandatory requirements under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The Court examined presentation and dishonour of the cheque, issuance of legal notice within the statutory period and service of notice. The postal documents and Ex.P.7 (address recorded before issuance of the cheque) supported that the notice was properly addressed and posted. Relying on Section 27 of the General Clauses Act, service by registered post is deemed to be effected unless the contrary is proved; no cogent evidence was produced by the accused to displace that deeming. Having found presentation, dishonour and deemed service in compliance with the provisos to Section 138, the Court held the mandatory ingredients of Section 138 were satisfied. [Paras 22, 23]

Requirements under Section 138 were fulfilled and answered in the affirmative.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption and burden of proof - Presumptions under Section 118 of the Negotiable Instruments Act - Accused failed to rebut the statutory presumption in favour of the complainant under Section 139. - HELD THAT: - On filing of the complaint the statutory presumption under Section 139 arose that the cheque was issued for discharge of a debt. The Court observed that a rebuttal requires cogent material evidence or effective cross-examination to show non-existence of any legally enforceable debt; mere denials and vague suggestions are insufficient. Ex.P.7 and admitted signatures undermined the accused's denials. Section 118 presumptions further reinforced that negotiable instruments are presumed to be for consideration. As accused produced no material evidence to contradict these presumptions or to establish preponderance of probabilities in his favour, the presumption stood unrebutted. [Paras 25, 26, 27, 28, 29]

Presumption under Section 139 was not rebutted; point answered in the negative.

Compensation and sentence on conviction under Section 138 - Rebuttal of presumption and burden of proof - Trial Court's acquittal was unsustainable and is set aside; accused convicted under Section 138 and sentenced with a monetary fine and consequential distribution of the fine. - HELD THAT: - Given fulfilment of Section 138 ingredients and the failure of accused to rebut the presumption under Section 139, the trial Court's reliance on non-service and on placing the entire burden on complainant was held to be erroneous. The appellate Court found the acquittal contrary to the oral and documentary record and therefore reversed it. Considering delay in payment, the Court imposed enhanced monetary relief as punishment and compensation, directing payment within a stipulated period and prescribing imprisonment in default. A portion of the fine was directed to the State and the balance to the complainant as compensation. [Paras 30, 31]

Judgment of acquittal set aside; accused convicted under Section 138 and sentenced to pay double the cheque amount with default imprisonment; a specified portion of the fine to be credited to the State and the remainder to the complainant.

Final Conclusion: Appeal allowed. The acquittal dated 06.12.2010 is set aside and the accused is convicted under Section 138 of the Negotiable Instruments Act; he is sentenced to pay a fine of double the cheque amount within eight weeks (in default to undergo one year simple imprisonment). Of the fine, Rs. 5,000 shall be credited to the State and the remaining amount paid to the complainant as compensation.