TaxTMI Updates e-Newsletter
Feb 23,2021

Job work - supply of services - metal treatment and coating services - SAC 998873 - classification of services - applicability of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 - GST rate contingent on principal's registration - Circular No. 126/45/2019-GST

Job work - supply of services - SAC 998873 - metal treatment and coating services - Whether the applicant's thermal spray / metal coating activity on goods belonging to others amounts to job work and its classification under the Services Accounting Code. - HELD THAT: - The Authority applied the statutory definition of job work as any treatment or process undertaken on goods belonging to another registered person and noted Schedule II which treats any treatment or process applied to another person's goods as a supply of services. The applicant performs thermal spray/metal coating on goods supplied by principals and returns the goods after work; therefore the activity falls within the concept of job work and is a supply of services. The Explanatory Notes to the Scheme of Classification were applied, which identify metal treatment and coating services under SAC 998873. Given the nature of the applicant's processes (thermal spray, plasma spray, HVOF, powder flame and wire flame sprays) and that these are metal treatment/coating services, the Authority held the services are properly classifiable under SAC 998873. [Paras 6]

The applicant's activity is job work and is classifiable under SAC 998873 as metal treatment/coating services.

Applicability of Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019 - GST rate contingent on principal's registration - Circular No. 126/45/2019-GST - Whether Notification No. 20/2019-Central Tax (Rate) is applicable and which GST rate applies to the applicant's job work. - HELD THAT: - The Authority examined the relevant rate notifications and the clarifying Circular which distinguishes services performed on physical inputs owned by persons unregistered under GST from those owned by registered persons. The Authority observed that job work in relation to the applicant's services is covered by the notification entries concerning job work under the heading 9988/998873. Applying the Circular, the Authority held that where the owner (principal) of the goods is registered under the GST Acts, the job work falls under item (id) of SL.No.26 of Notification No.11/2017 and attracts 12% GST; where the owner is unregistered, the job work falls under item (iv) of the same entry and attracts 18% GST. The Authority noted that the applicant had not furnished particulars to determine the registration status of the principals, but resolved the legal position governing the applicable rate. [Paras 6, 7]

Notification No. 20/2019-Central Tax (Rate) applies; the applicable GST rate is 12% if the principal is registered and 18% if the principal is unregistered, as clarified by Circular No.126/45/2019-GST.

Final Conclusion: The Authority ruled that the applicant's thermal spray/metal coating services constitute job work and are classifiable under SAC 998873; Notification No.20/2019 (and the relevant entries in Notification No.11/2017 read with Circular No.126/45/2019-GST) applies, with the GST rate being 12% when the principal is registered and 18% when the principal is unregistered.

Determination and recovery of profiteering - vires of provisions governing profiteering - stay of recovery on deposit of principal profiteered amount - scope of investigation and expansion of computation beyond complaint

Vires of provisions governing profiteering - Issuance of notice and continuation of adjudication on the challenge to the vires of provisions impugned in the petition. - HELD THAT: - The writ petition raises a challenge to the constitutional and legal validity of the statutory scheme governing profiteering. The Court recorded the challenge and issued notice to the respondents for consideration on merits. The respondents are directed to file counter affidavit within the time fixed by the Court, while acknowledging that counter affidavits in similar matters have already been filed in other petitions and may be relied upon for the legal challenge framed in this petition. [Paras 3, 5, 7, 8]

Notice issued; respondents to file counter affidavit within eight weeks (counter affidavits already filed in other petitions may be treated as addressing the legal challenge).

Stay of recovery on deposit of principal profiteered amount - determination and recovery of profiteering - Whether interim stay of recovery should be granted only in respect of amount computed qua power banks or should be conditioned on deposit of the entire principal profiteered amount. - HELD THAT: - The petitioner sought a stay of recovery confined to the computation relating to power banks, contending the original complaint concerned only power banks and that subsequent computation expanding to DSLR cameras was not maintainable for the purpose of interim relief. The Court considered precedents in analogous writ petitions and declined to grant a limited stay confined to power banks alone. As a condition for granting interim protection against recovery, the Court directed deposit of the entire principal profiteered amount (exclusive of GST already deposited) within a stipulated period and in equal monthly instalments; upon such deposit, there would be a stay of recovery pending adjudication of the legal challenge. [Paras 9, 10]

Petition for stay allowed only upon deposit of the entire principal profiteered amount in equal monthly instalments within four months; stay of recovery granted subject to that deposit and not confined to computation qua power banks.

Scope of investigation and expansion of computation beyond complaint - Petitioner's contention that investigation and computation were impermissibly expanded from power banks to DSLR cameras for the purpose of interim relief. - HELD THAT: - The petitioner alleged that the complaint related solely to power banks and that the authorities expanded the scope suo moto to include DSLR cameras, and sought restriction of interim deposit obligation accordingly. The Court considered this contention but, in view of its adherence to orders in related matters, refused to limit the interim protection to the quantum computed only in respect of power banks. The broader scope of computation asserted by the authorities did not justify a confined stay in the present interlocutory order. [Paras 9, 10]

Contention rejected for purposes of interim relief; deposit must cover the entire principal profiteered amount rather than being confined to power banks.

Final Conclusion: Notice issued on the vires challenge; respondents to file counter affidavit within eight weeks. Interim stay of recovery granted subject to deposit of the entire principal profiteered amount (exclusive of GST already deposited) in equal monthly instalments within four months; stay will not be confined to the amount computed only in relation to power banks. Applications for exemption allowed as per rules and the petitions listed for further hearing.

Vires of Section 171 of the Central Goods and Services Act, 2017 - validity of Rules 122, 126, 127 and 133 of the Central Goods and Services Tax Rules, 2017 - interim relief by deposit of disputed amount pending challenge - stay of recovery direction - stay of direction to reduce prices pending hearing - no counter-affidavit required on legal issues where similar affidavits exist

Interim relief by deposit of disputed amount pending challenge - stay of recovery direction - Grant of interim stay of the direction for recovery of the alleged profiteered amount subject to deposit conditions - HELD THAT: - Following earlier orders in similar matters, the Court granted an interim stay of the impugned authority's direction for recovery of the claimed profiteered amount on condition that the petitioner deposits the entire principal profiteered amount as levied (excluding the GST amount already deposited) within six months by equal monthly instalments. The stay is limited to the direction of recovery and is conditioned on compliance with the deposit schedule as stipulated by the Court. [Paras 10]

Interim stay of recovery direction granted subject to deposit of the entire principal profiteered amount (excluding GST already deposited) within six months in equal monthly instalments.

Stay of direction to reduce prices pending hearing - Whether to maintain status quo as to the impugned direction requiring reduction of prices pending further hearing - HELD THAT: - The Court considered the petitioner's challenge to the direction on reduction of prices and deemed it appropriate to direct the respondents to file a reply to the interim relief application. A separate hearing on the interim stay as to the price-reduction direction was fixed to be sought on the listed date, and until that hearing the direction to reduce prices was stayed. [Paras 11]

Stay of the direction to reduce prices until the next listed hearing; respondents to file reply to the interim relief application.

No counter-affidavit required on legal issues where similar affidavits exist - Requirement for filing of counter-affidavits on legal questions - HELD THAT: - The Court observed that counter-affidavits on legal issues have already been filed in other similar writ petitions. Consequently, no further counter-affidavit on legal questions was required in this petition. The Court permitted, however, that if necessary, a counter-affidavit on factual matters be filed within six weeks, with rejoinder within three weeks thereafter. [Paras 7, 8]

No counter-affidavit required on legal issues; counter-affidavit on facts permitted within six weeks and rejoinder within three weeks.

Vires of Section 171 of the Central Goods and Services Act, 2017 - validity of Rules 122, 126, 127 and 133 of the Central Goods and Services Tax Rules, 2017 - Admission and listing of challenge to vires/validity of statutory provisions for adjudication - HELD THAT: - The petition challenges the vires of Section 171 of the Central Goods and Services Act, 2017 and the validity of specified rules of the CGST Rules, 2017. The Court issued notice and listed the matter (along with other similar petitions) for further consideration, thereby admitting the challenge for adjudication. [Paras 3, 4, 5]

Challenge to the vires/validity of the specified provisions admitted; notice issued and matter listed for further hearing.

Exemption from filing formalities - Application for exemption from filing formalities - HELD THAT: - The Court allowed the exemption application made by the petitioner subject to the usual exceptions and disposed of that application. [Paras 1, 2]

Exemption allowed subject to just exceptions; application disposed of.

Final Conclusion: Notice issued and matter admitted for adjudication on challenges to the vires/validity of specified GST provisions; interim relief granted by staying the recovery direction subject to deposit of the principal profiteered amount (excluding GST already deposited) in six months by equal instalments, and the direction to reduce prices stayed until further hearing; counter-affidavits on legal issues dispensed with where similar affidavits exist, with limited factual affidavits permitted.

Vires of Section 171 (anti-profiteering) of the Central Goods and Services Act, 2017 - interim relief pending adjudication - stay of direction for payment of the profiteered amount subject to deposit - stay of direction to reduce prices pending further hearing - deposit of disputed amount in equal monthly instalments as condition for stay

Stay of direction for payment of the profiteered amount subject to deposit - deposit of disputed amount in equal monthly instalments as condition for stay - Grant of interim stay, in respect of the direction for payment of the profiteered amount, subject to specified deposit conditions. - HELD THAT: - The Court, applying its approach in earlier matters listed, granted interim relief by staying the impugned direction for payment of the principal profiteered amount. The stay is conditional upon the petitioner depositing the entire principal profiteered amount as levied (excluding GST already deposited) within four months, to be paid in equal monthly instalments. The stay as to payment is thereby made contingent on compliance with the specified deposit schedule pending adjudication of the challenge to the vires of the provisions invoked. [Paras 8]

Stay granted as to the direction for payment, subject to deposit of the principal profiteered amount within four months in equal monthly instalments.

Stay of direction to reduce prices pending further hearing - interim relief pending adjudication - Whether the direction in the impugned order to reduce prices should be stayed pending further proceedings. - HELD THAT: - The Court refrained from finally adjudicating the challenge to the direction for reduction of prices at the interim stage. It directed the respondents to file a reply to the petitioner's application for interim relief and listed the specific contention for further hearing on the return date. Until that hearing, the Court ordered a stay of the direction to reduce prices, thereby preserving the subject-matter status quo pending the respondents' reply and further consideration. [Paras 9]

Till the next listed hearing and filing of the respondents' reply, the direction to reduce prices is stayed.

Final Conclusion: Notice issued and accepted; interim relief granted by staying the direction for payment on condition of deposit of the principal profiteered amount in equal monthly instalments within four months, and the direction to reduce prices stayed pending respondents' reply and further hearing listed for 15th February, 2021.

Promissory Estoppel - Clarificatory and retrospective operation of fiscal notifications - Modification or rescission of exemption notifications in public interest - Conditional nature of fiscal exemptions and delegated legislation exercised in public interest - Binding effect of Supreme Court ratio on subordinate courts

Promissory Estoppel - Conditional nature of fiscal exemptions - Public interest in fiscal policy - Whether the petitioner is entitled to invoke promissory estoppel to prevent curtailment of previously available excise-exemption benefits and to insist on the erstwhile quantum of benefit under the new Budgetary Support Scheme. - HELD THAT: - The Court held that the questions raised in the present petition are identical to those decided by this Court earlier and subsequently considered by the Supreme Court in V.V.F. Limited (supra). The Supreme Court has explained that exemption notifications are issued in public interest and, where subsequent notifications clarify that refunds are to be limited to duty on actual value addition to prevent misuse, such notifications are clarificatory, can operate retrospectively and are not hit by the doctrine of promissory estoppel. The Court therefore found no basis to independently apply promissory estoppel to sustain the petitioner's claim to the full erstwhile benefit under the GST-era Budgetary Support Scheme, particularly where the change is justified as a measure in public interest to prevent misuse of the exemption mechanism. Applying that ratio, the petitioner's claim that the Budgetary Support Scheme unlawfully curtailed a vested right was rejected and the writ petition was held to lack merit. [Paras 13, 15]

Petitioner's contention based on promissory estoppel and entitlement to the full pre-GST exemption was negatived; no relief granted.

Clarificatory and retrospective operation of fiscal notifications - Binding effect of Supreme Court ratio - Whether this Court ought to re-examine the issues afresh or follow the Supreme Court's decision in V.V.F. Limited that subsequent notifications were clarificatory and issued in public interest. - HELD THAT: - The Court observed that the Supreme Court has authoritatively held that the subsequent notifications rationalising refund on the basis of actual value addition were clarificatory, issued in the larger public interest and could be applied retrospectively; consequently those notifications did not take away any vested right and were not hit by promissory estoppel. In light of Article 141 and the binding nature of the Supreme Court's ratio, this Court declined to re-open the identical questions and applied the Supreme Court's decision as controlling precedent. The Court therefore dismissed the petition without further independent adjudication on the same points. [Paras 14, 15, 16]

The Court applied the Supreme Court's ratio and declined to entertain a fresh examination; petition dismissed.

Final Conclusion: The writ petition challenging the Budgetary Support Scheme and seeking restoration of the full pre-GST exemption was dismissed: the Court applied the Supreme Court's ratio that the subsequent notifications were clarificatory and issued in public interest, and found no merit in invoking promissory estoppel to override the revised scheme.

Detention and seizure of goods and conveyances - release under Section 129 on payment of tax and penalty - show cause notice under Section 130 of the Central Goods and Services Act, 2017 - requirement of reasons for invoking confiscation - application of mind for confiscation - opportunity of being heard

Release under Section 129 on payment of tax and penalty - detention and seizure of goods and conveyances - Court's direction for provisional release of the detained vehicle and goods upon payment of the tax and consequent continuation of proceedings. - HELD THAT: - A Coordinate Bench had directed immediate release of the vehicle and goods detained under the impugned detention order, subject to payment of the tax specified in the impugned notice. The writ applicant availed that interim relief and obtained release of the vehicle and goods by paying the tax. The Court recorded that the consequential proceedings arising from the show cause notice will continue and proceed in accordance with law. The interim direction for release on payment thus stands recognised and the substantive proceedings under the statute were not stayed by this Court. [Paras 4, 5, 8]

The vehicle and goods were ordered released on payment of tax and the proceedings under the show cause notice shall continue in accordance with law.

Show cause notice under Section 130 of the Central Goods and Services Act, 2017 - requirement of reasons for invoking confiscation - application of mind for confiscation - Whether the show cause notice issued under Section 130 should be discharged was left open for determination; the applicant was permitted to rely on this Court's observations in Synergy Fertichem (paras 99-104) when challenging confiscation. - HELD THAT: - The Court did not adjudicate the merits of the show cause notice issued in Form GSTMOV10. Instead, it observed that the applicant is entitled to press the contentions based on this Court's recent decision in Synergy Fertichem (paragraphs 99-104), which emphasises that invocation of Section 130 at the threshold requires recorded reasons and an application of mind and that mere suspicion or absence of requisite materials would not justify immediate confiscation. The Court directed that it is now for the applicant to make good his case that the notice deserves to be discharged, thereby leaving the substantive question for adjudication either before the authority or on further judicial consideration after appropriate contestation. [Paras 6, 7]

The challenge to the show cause notice under Section 130 was not finally decided; the applicant may rely on the Synergy Fertichem observations and must establish that the notice merits discharge.

Final Conclusion: Writ petition disposed; rule made absolute to the extent that the vehicle and goods were to be released on payment of tax and the challenge to the show cause notice under Section 130 remains open for adjudication, with the applicant permitted to rely on this Court's observations in Synergy Fertichem (paras 99-104).

Claim of deduction under Section 80IA(4) - interpretation of 'or' in Section 80IA(4) - mandatory filing under Rule 12(2) of the Income Tax Rules / Form No.10CCB - substantive right versus procedural formality - operation and maintenance activities - construction of Clause 12.2 of the Concession Agreement - perversity of Tribunal's factual finding

Mandatory filing under Rule 12(2) of the Income Tax Rules / Form No.10CCB - substantive right versus procedural formality - Whether non-filing of Form No.10CCB at the time of filing return can defeat the assessee's claim under Section 80IA(4). - HELD THAT: - The Assessing Officer rejected the deduction because Form No.10CCB was not filed with the return, although it was filed during assessment proceedings. The CIT(A) allowed the claim applying the principle that a substantive right cannot be denied by non compliance with a machinery provision. The High Court agreed with the CIT(A), observing that the rule amendment making the form filing mandatory is procedural in nature and cannot defeat the substantive deduction properly claimable under Section 80IA(4), particularly where the claim falls within the statutory scheme. The Tribunal had not decided the Rule 12(2) point; the High Court nonetheless endorsed the view that denial of substantive benefit on account of such procedural lapse was not warranted in the facts of the case. [Paras 7, 8, 9, 12]

Non-filing of Form No.10CCB with the return is a procedural lapse which, on the facts, cannot defeat the assessee's entitlement to deduction under Section 80IA(4).

Operation and maintenance activities - perversity of Tribunal's factual finding - Whether the Tribunal was correct in holding that the assessee did not derive profits from developing or operating and maintaining any infrastructure facility. - HELD THAT: - The Tribunal reached a broad factual conclusion that the assessee had not carried on the activities of developing or operating and maintaining infrastructure, but the High Court found no examination of the factual record or the Concession Agreement by the Tribunal. Section 80IA(4) applies to enterprises carrying on any one of developing, or operating and maintaining, or both. The Tribunal failed to consider whether the assessee satisfied any of these heads. The High Court held that the Tribunal's sweeping observation was perverse because it ignored contractual obligations and factual material indicating the assessee's role in development and in operation and maintenance. [Paras 11, 13, 14, 16, 19]

The Tribunal's finding that the assessee had not carried on developing or operating and maintaining infrastructure is perverse and set aside.

Construction of Clause 12.2 of the Concession Agreement - claim of deduction under Section 80IA(4) - Whether, on a correct construction of Clause 12.2 of the Concession Agreement, the assessee's obligations (including maintenance of existing lanes) fall within the scope of activities envisaged by Section 80IA(4). - HELD THAT: - The concession required the assessee to execute the fifth and sixth lanes and, by Clause 12.2, to maintain at its cost the existing lanes so that traffic-worthiness and safety were not materially inferior to the prior condition. The Revenue's contention before the High Court-that the assessee only developed new lanes and not the existing four lanes-was not the case before the lower authorities. The High Court construed Clause 12.2 as imposing operational and maintenance obligations over existing lanes, bringing those activities within the scope of Section 80IA(4). On that basis the Tribunal's contrary conclusion was found to be factually incorrect. [Paras 15, 17, 18]

Clause 12.2 obliges the assessee to operate and maintain the existing lanes as part of the concession, and such obligations bring the assessee within Section 80IA(4).

Final Conclusion: The High Court allowed the tax case appeal, holding that procedural non compliance in filing Form No.10CCB did not defeat the substantive deduction under Section 80IA(4), that the Tribunal's finding that the assessee did not undertake development or operation and maintenance was perverse, and that Clause 12.2 of the Concession Agreement obliges the assessee to operate and maintain existing lanes thereby supporting entitlement to deduction; substantial questions of law answered in favour of the assessee.

Functional test for classification of Plant and Machinery - Classification of assets as Furniture & Fixtures v. Plant & Machinery - Additional depreciation - eligibility linked to asset classification - Transfer Pricing - Most Appropriate Method (MAM) - Transaction Net Margin Method (TNMM) - Cost Plus Method (CPM) - Profit Level Indicator (Net profit/Net sales v. Gross profit) - Comparability and adjustments under Rule 10B - International transaction - existence requiring agreement/arrangement - Bright Line Test (BLT) and its limits in establishing an international transaction for AMP spend - Arm's Length Price (ALP) - Remand for fresh examination

Functional test for classification of Plant and Machinery - Classification of assets as Furniture & Fixtures v. Plant & Machinery - Additional depreciation - eligibility linked to asset classification - Remand for fresh examination - Whether items classified by the assessee as Plant & Machinery (and claimed additional depreciation) are to be accepted or require fresh examination by the Assessing Officer - HELD THAT: - The Tribunal observed that identical facts and contentions arose in the assessee's earlier year and the Tribunal had applied the functional test (following Hindustan Aeronautics Ltd.) to determine whether listed items form part of plant and machinery or are only furniture and fixtures. Given the similarity of facts, the Tribunal set aside the AO's classification and restored the issue to the AO for fresh consideration in light of the Tribunal's earlier directions instructing application of the functional test; the matter is remanded for fresh examination rather than being finally decided on merits by this bench. [Paras 12]

Order of AO set aside and the classification and additional-depreciation claim remanded to AO for fresh consideration in accordance with the Tribunal's earlier order.

Sales promotion expenditure - presumptive disallowance - Whether the AO's estimated disallowance of 20% of gifts/product-information items given to doctors and chemists is sustainable - HELD THAT: - The Tribunal followed its earlier finding in the assessee's own case that the AO's reasons-presumption that cumulative value per doctor exceeded the MCI limit and that the quantum was excessive-were not a valid basis for making an estimated 20% disallowance where 80% of the expenditure was accepted. The Tribunal observed that applicability of MCI limits to Ayurvedic doctors and the cumulative v. per-item interpretation were debatable and that the AO's view was premised on presumptions. Having found no valid basis to sustain an estimated disallowance when the bulk of the expenditure was accepted, the Tribunal directed the AO to delete the disallowance. [Paras 17]

Estimated disallowance of 20% of sales-promotion expenditure deleted; AO directed to delete the addition.

Transfer Pricing - Most Appropriate Method (MAM) - Transaction Net Margin Method (TNMM) - Cost Plus Method (CPM) - Profit Level Indicator (Net profit/Net sales v. Gross profit) - Comparability and adjustments under Rule 10B - Whether the TPO was justified in adopting CPM (with gross profit PLI) instead of TNMM (with net profit PLI) and in making the resultant TP adjustment on export sales to Associated Enterprises - HELD THAT: - Relying on co ordinate bench decisions in the assessee's own cases for earlier years, the Tribunal held that the factual matrix shows substantial functional and transactional differences between domestic consumer product operations (which incur marketing, distribution and related expenses) and export sales to AEs (where AEs bear marketing/distribution). Rule 10B requires that under CPM the normal gross profit mark up be adjusted for material functional differences; where such differences are many and qualitative, reasonably accurate adjustments are not practicable. TNMM is less affected by transactional/functional differences and internal comparables are to be preferred. Applying the earlier consistent holdings, the Tribunal concluded that TNMM (with net profit/ net sales as PLI) was the MAM and that the export transactions were at arm's length; the TPO's CPM based adjustment was therefore to be deleted. [Paras 28]

TP adjustment based on adoption of CPM and gross profit PLI deleted; exports to AEs held at arm's length under TNMM.

International transaction - existence requiring agreement/arrangement - Bright Line Test (BLT) and its limits in establishing an international transaction for AMP spend - Transaction subsumed within TNMM - Whether the TPO could treat AMP (advertisement and marketing promotion) expenditure as an international transaction and make a separate TP adjustment (using Bright Line Test and profit split) in absence of any agreement with the foreign AE - HELD THAT: - The Tribunal followed co ordinate bench and High Court jurisprudence requiring the Revenue to first establish existence of an international transaction (which, for AMP spend, ordinarily requires an agreement/arrangement obliging the Indian party to incur such spend for the AE). Mere incidental benefit to an AE or comparison with peer AMP ratios (BLT) is insufficient to create an international transaction. Further, where TNMM is the MAM and the AMP spend is subsumed in the operating results, no separate AMP adjustment is warranted. On the facts (no agreement, AMP largely part of routine operations and TNMM adopted), and following prior decisions, the Tribunal deleted the AMP related TP adjustment. [Paras 33]

TP adjustment in respect of AMP expenditure deleted.

Intangible asset - product registrations/licenses - Royalty - separate transaction v. price subsumption - Arm's Length Price (ALP) - Whether the TPO was justified in treating product registrations/licenses as an intangible exploited by AEs and in making a separate royalty TP adjustment - HELD THAT: - The Tribunal, following its earlier decision in the assessee's own case, found that product registrations/licenses arise from regulatory compliance and are obtained by the manufacturer (the assessee) to enable marketing; AEs acted as distributors/resellers and did not manufacture using those registrations. The assessee had not charged royalty to unrelated parties and there was no evidence that AEs exploited registrations in a manner warranting a separate royalty charge. Given identical facts to earlier years and absence of evidence that the AEs appropriated such intangibles separately from the sale price, the Tribunal held the royalty adjustment unsustainable and deleted it. [Paras 45]

TP adjustment on account of alleged royalty on product registrations/licenses deleted.

Validity of reference to TPO - Whether the reference made to the Transfer Pricing Officer under section 92CA was invalid - HELD THAT: - The assessee raised the preliminary objection to validity of the reference; the Tribunal noted that a co ordinate bench in the assessee's own earlier year had decided the point against the assessee and, following that decision, rejected the challenge to the validity of reference in the present year. [Paras 25]

Grounds challenging validity of reference to TPO rejected following co ordinate bench precedent.

Final Conclusion: For assessment year 2015 16 the Tribunal remanded the issue of classification of certain assets (and entitlement to additional depreciation) to the AO for fresh consideration applying the functional test; it deleted the AO/TPO/DRP additions/transfer pricing adjustments in respect of sales promotion (gifts), export sales to associated enterprises (holding TNMM as MAM and exports at arm's length), AMP expenditure, and alleged royalty on product registrations; preliminary objection to the validity of reference to the TPO was rejected. The appeal is partly allowed accordingly.

Defective show cause notice under Section 274 read with Section 271(1)(c) - requirement of a specific charge and principle of natural justice in quasi criminal penalty proceedings - penalty under Section 271(1)(c) for concealment of particulars of income where the income was disclosed earlier - change of head of income post search and voluntary offer of income in return filed under Section 153A - Explanation 5A to Section 271(1)(c)

Defective show cause notice under Section 274 read with Section 271(1)(c) - requirement of a specific charge and principle of natural justice in quasi criminal penalty proceedings - Validity of the penalty show cause notice which mentioned both limbs of Section 271(1)(c) without specifying the particular charge. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in holding that a penalty notice which merely reproduces both limbs of Section 271(1)(c) without striking off the inapplicable limb fails to meet the statutory and natural justice requirement of informing the assessee of the specific charge to be met. The Tribunal followed binding and persuasive precedents of the jurisdictional High Court and other courts which reject cyclostyled/blanket notices that do not disclose which limb-concealment of particulars or furnishing inaccurate particulars-is invoked. Where the notice is so framed, the initiation of penalty proceedings is vitiated because the assessee is not put on notice to meet a particular case and the consequences (substantial penal liability) require strict compliance with the notice requirement. [Paras 11, 13]

The notice issued under Section 274 read with Section 271(1)(c) was held invalid for failing to specify the particular charge; penalty proceedings quashed on this legal ground.

Penalty under Section 271(1)(c) for concealment of particulars of income where the income was disclosed earlier - change of head of income post-search and voluntary offer of income in return filed under Section 153A - Explanation 5A to Section 271(1)(c) - Whether, on the merits, penalty under Section 271(1)(c) could be sustained where the transaction and amount were disclosed in the original return but the head of income was changed and the amount was offered as business income after search. - HELD THAT: - The Tribunal, adopting the view of the Commissioner (Appeals) and relying on authoritative decisions, held that mere change of the head of income does not inevitably attract penalty where the particulars of the transaction and amount were disclosed in the original return and in the books. The facts showed the assessee had disclosed the sale of shares and claimed exemption as long term capital gain in the original return; no incriminating material relating to the transaction was found in the search; the assessee voluntarily offered the same amount as business income in the return filed under Section 153A and tax was paid; and the assessment accepted the return without substantive adverse finding. In those circumstances, and having regard to precedent that voluntary surrender to "buy peace" is distinguishable where the income was already disclosed, the Tribunal concluded that Explanation 5A and penalty could not be invoked to sustain a charge of concealment. The Tribunal therefore found the merits-based contention of concealment unmade on the material before it. [Paras 14, 16]

On merits, penalty could not be sustained: change of head of income after prior disclosure did not amount to concealment; explanation 5A was inapplicable on the facts and the penalty was deleted.

Final Conclusion: Revenue's appeal is dismissed; the penalty of Rs. 1,01,17,700/- imposed under Section 271(1)(c) is quashed - both because the show cause notice under Section 274 was defective for not specifying the particular charge and, on the merits, because the income had been disclosed earlier and the change in head did not amount to concealment.

Tax deduction at source under section 194A - exemption under Notification No. 3489 dated 22.10.2017 - proof of status of deductee for invoking exemption - interest liability under section 201(1A) - speaking order and remand for verification of evidence

Tax deduction at source under section 194A - exemption under Notification No. 3489 dated 22.10.2017 - proof of status of deductee for invoking exemption - interest liability under section 201(1A) - speaking order and remand for verification of evidence - Whether TDS was required to be deducted on deposits of the entity shown as 'HIMURJA' for Financial Year 2011-12 and, consequentially, whether interest under section 201(1A) could be charged. - HELD THAT: - The Tribunal held that the determinative question is the foundational fact whether the entity 'HIMURJA' fell within the scope of the exemption claimed under Notification No. 3489 dated 22.10.2017 (relied upon in the pleadings before the CIT(A)) so as to render section 194A inapplicable. The Bench distinguished reliance on Hindustan Coca Cola Beverages P. Ltd. as dealing with situations where deductees had paid tax and evidence of such payments was available; in the present case the primary factual question is establishment of the entity's status vis-a -vis the notification. Given that the assessee sought to place documentary evidence (including a letter of the entity and an opportunity to produce further material such as statutory registration/finance particulars) and the CIT(A) did not conclusively accept or reject those materials on a speaking basis, the Tribunal found that the matter required fresh consideration. Consequently the Tribunal accepted the parties' request for remand and directed the Assessing Officer to pass a speaking order after affording the assessee a reasonable opportunity to place full facts and supporting evidence; the consequence as to interest under section 201(1A) was held to be dependent on the outcome of that factual enquiry. [Paras 2, 6]

Matter remanded to the Assessing Officer to decide, by a speaking order and after giving the assessee a reasonable opportunity of being heard, whether the exemption under Notification No. 3489 dated 22.10.2017 applies to 'HIMURJA' and, consequentially, whether any interest under section 201(1A) is chargeable.

Final Conclusion: The appeal is disposed of by remitting the issue of applicability of the claimed exemption to the Assessing Officer for fresh, speaking adjudication after allowing the assessee to place complete evidence; the appeal is allowed for statistical purposes.

Quashing of criminal proceedings - Prosecution under section 276CC - Prosecution under section 276C(1) - Proviso (ii)(b) to section 276CC-exemption where tax payable does not exceed threshold - Sanction to prosecute - Abuse of process of law

Sanction to prosecute - Prosecution under section 276C(1) - Quashing of criminal proceedings - Validity of a complaint which alleges offences under two provisions when sanction was accorded only for one of those offences. - HELD THAT: - The Court examined the complaint filed by the respondent which framed offences under sections 276C(1) and 276CC, while the competent authority granted sanction to prosecute only under section 276CC. The Court found that the respondent had mechanically included the offence under section 276C(1) without any supporting allegation of willful evasion, and that sanction had not been obtained for that charge. In these circumstances the complaint as lodged was held to be vitiated and constituted an improper exercise of the process of law. [Paras 6]

Complaint framed for both sections but sanction only for section 276CC rendered the complaint vitiated; proceedings quashed insofar as the petitioner is concerned.

Proviso (ii)(b) to section 276CC - Threshold for prosecution where tax payable does not exceed Rs. 3,000 - Abuse of process of law - Applicability of the proviso to section 276CC where the tax ultimately payable is nil (and refund claimed), thereby barring prosecution. - HELD THAT: - The Court applied proviso (ii)(b) to section 276CC which precludes prosecution where the tax payable on total income determined on regular assessment does not exceed the specified threshold (after reducing advance tax and TDS). On the material before it - the return for Assessment Year 2013-14 showing nil tax payable and a claim for refund after adjusting advance tax, TDS and other payments - the Court concluded that prosecution under section 276CC was barred. Having reached that conclusion, the Court treated the complaint as an abuse of process and unsustainable against the petitioner. [Paras 3, 4, 7]

Proviso (ii)(b) to section 276CC applied on the facts (nil tax payable and refund claimed); prosecution under section 276CC could not be sustained and the complaint was quashed.

Final Conclusion: The Criminal Original Petition is allowed; the proceedings in C.C.No.13 of 2016 on the file of the Additional Chief Judicial Magistrate, Madurai are quashed as against the petitioner and connected petitions are closed.

Tax deduction at source (TDS) - credit of TDS - recovery notices - correction/deletion of demand - Commissioner of Income Tax (CPC) action for adjustment on TRACES

Tax deduction at source (TDS) - credit of TDS - recovery notices - correction/deletion of demand - Whether the outstanding demand shown online for the assessment year 2009-10, raised by issuing recovery notices despite filing of TDS return and payment, should be corrected or deleted by the Commissioner of Income Tax (CPC). - HELD THAT: - The writ applicant, a partnership firm, deducted TDS and filed the TDS return in physical form for F.Y. 2008-09 relevant to A.Y. 2009-10 and furnished information to the Assessing Officer seeking credit and cancellation of the demand. The Revenue informed the Court that the outstanding demand is under verification and that correction/deletion is in process at the Centralised Processing Centre (CPC), Ghaziabad, and the petitioner was not being pressed to pay. Given the narrow compass of the controversy and the CPC's role in effecting online adjustments on TRACES, the Court refrained from adjudicating the quantification of demand and instead directed the CPC to carry out the necessary correction/deletion of the outstanding demand shown online. The Court also required the Registry to forward a copy of the order to the Commissioner of Income Tax (CPC) to facilitate compliance within the stipulated time. [Paras 9]

The Court disposed of the writ by requesting the Commissioner of Income Tax (CPC), Ghaziabad, to effect the necessary correction/deletion of the outstanding demand shown online within four weeks and directed the Registry to forward a copy of the order to the CPC.

Final Conclusion: Writ application disposed of by directing the Commissioner of Income Tax (CPC), Ghaziabad, to effect correction/deletion of the online outstanding demand for A.Y. 2009-10 within four weeks; Registry to forward a copy of the order to the CPC.

Characterisation of subsidy as capital or revenue receipt - purpose test for determining nature of subsidy - nexus of subsidy to capital investment in backward area - Industrial Investment Promotion Assistance Scheme-2010 - timing of payment irrelevant to characterisation - capital subsidy (industrial investment promotion assistance) treated as non-taxable capital receipt

Characterisation of subsidy as capital or revenue receipt - purpose test for determining nature of subsidy - nexus of subsidy to capital investment in backward area - Industrial Investment Promotion Assistance Scheme-2010 - Deletion of addition of Rs. 2,57,07,188/- made by AO by treating the sales tax/VAT subsidy under the Madhya Pradesh Industrial Investment Promotion Assistance scheme as revenue was correct and the subsidy is capital in nature. - HELD THAT: - The Tribunal applied the purposive test: the character of the subsidy is to be determined with reference to the purpose for which the assistance is given, not the time or form of payment. The assessee had set up Unit-II in a notified backward area with substantial fixed capital investment and was eligible under the Scheme for assistance quantified as a percentage of sales tax/CST paid (75%) subject to a cap linked to fixed capital investment and an eligibility period. The Scheme's objective was industrial development and generation of employment through promotion of fixed capital investment in backward districts. Those features establish a direct nexus between the subsidy and the capital investment made to set up/expand the unit. Coordinate decisions of Tribunals and High Courts on identical or similar State incentive schemes, and the Special Bench authority, were followed in holding that such sales-tax-linked industrial investment assistance is in substance an incentive for capital investment and therefore a capital receipt. Timing (payment after commencement of production) or unrestricted use by the recipient does not alter the capital character when the Scheme's object and link to fixed capital investment demonstrate that the assistance incentivises establishment/expansion of industry in backward areas. On these facts, the CIT(A)'s deletion of the addition was upheld and the AO's treatment of the subsidy as revenue was reversed. [Paras 4, 12, 16]

The subsidy received under the Industrial Investment Promotion Assistance Scheme-2010 is capital in nature; the addition of Rs. 2,57,07,188/- is deleted and the Revenue's appeal is dismissed.

Final Conclusion: Appeal dismissed. The Tribunal upheld the CIT(A)'s finding that the sales tax/VAT subsidy under the Madhya Pradesh Industrial Investment Promotion Assistance Scheme is a capital receipt linked to capital investment in a backward area, and accordingly the addition made by the assessing officer was deleted.

Exemption under Section 10(22) - whether the Assessee who is entitled to exemption under Section 10(22) can claim the benefit thereof for the purpose of income deemed to be chargeable to tax under Section 68? - HC [2007 (4) TMI 61 - HIGH COURT, DELHI] held se of the word 'income' in sub-section (22) of Section 10 of the Act is wide enough to include deemed income under Section 68 of the Act - HELD THAT:- Civil appeal is dismissed on the ground of low tax effect.

Question of law is kept open.

Exemption under Section 10(23BBA) - Three-tier statutory hierarchy for exemption - Distinction between managerial authority and constituent temples - Proviso excluding constituent trusts/temples from exemption - Interpretation of 'established, constituted or appointed' in a statutory context

Exemption under Section 10(23BBA) - Three-tier statutory hierarchy for exemption - Distinction between managerial authority and constituent temples - Whether Sri Vaithiyanathaswamy (Velur) Devasthanam qualifies as the "body or authority" entitled to exemption under Section 10(23BBA) and whether its managerial entity is exempt while constituent temples remain outside the exemption. - HELD THAT: - The Court found that the Vaithiyanathaswamy Devasthanam fits the statutory structure contemplated by Section 10(23BBA): (i) existence of applicable enactments (Central and State precursor enactments and the Madras HR&CE Act, 1951), (ii) a body/authority in the form of the Devasthanam vested with administration under a judicially framed scheme and (iii) constituent temples within its fold. The scheme (as reproduced in earlier decisions) establishes a managerial cleavage - the Pandarasannadhi as trustee and a Kattalai Thambiran as manager - with incomes of constituent temples vesting in the deities, thereby effecting the intended bifurcation between the managerial entity (eligible for the exemption) and the constituent temples (excluded by the proviso). On these facts the Court concluded that the Devasthanam qualifies for exemption under Section 10(23BBA), while leaving open that the individual constituent temples, endowments and charities remain liable to tax under the proviso and may be assessed accordingly. [Paras 22, 23, 34, 35, 37]

Writ petition in W.P.No.29315 of 2019 (Vaithiyanathaswamy Devasthanam) allowed; the Devasthanam qualifies as the managerial "body or authority" for exemption under Section 10(23BBA), subject to the proviso that constituent temples are not exempt.

Exemption under Section 10(23BBA) - Interpretation of 'established, constituted or appointed' - Requirement of a scheme or clear bifurcation of roles/assets - Whether Sri Amirthakadeswaraswamy Devasthanam qualifies as a 'body or authority' under Section 10(23BBA) and is entitled to exemption. - HELD THAT: - The Court rejected the submission that the Amirthakadeswaraswamy Devasthanam should be deemed constituted under the 1863 Central enactment. The link relied upon was held to be too indirect and circuitous. Absent a clear scheme effecting a bifurcation of managerial functions and assets (and thereby separating the managerial entity from the income-bearing constituent temples), the object and spirit of Section 10(23BBA) - to exempt only managerial/administrative entities created under a statutory enactment - is not satisfied. Consequently, the petitioner could not be treated as the qualifying "body or authority" under Section 10(23BBA). [Paras 29, 34, 35, 36, 37]

Writ petition in W.P.No.29312 of 2019 (Amirthakadeswaraswamy Devasthanam) dismissed; the Devasthanam does not qualify for exemption under Section 10(23BBA).

Exemption under Section 10(23BBA) - Role of State HR&CE Department vis-a -vis statutory 'body or authority' - Whether the HR&CE Department of the State itself is the "body or authority" envisaged by Section 10(23BBA) so as to limit exemption exclusively to the Department. - HELD THAT: - The Court held that the HR&CE Department is an arm of the State Government and not the type of independent authority constituted under a Central, State or Provincial Act contemplated by Section 10(23BBA). The statutory scheme contemplates independent bodies or authorities set up under enactments (analogous to Wakf Boards or other statutory managing authorities), and the mere fact of State supervision does not convert the Department into the exempt statutory "body or authority." Accordingly the Revenue's argument that only the HR&CE Department could claim the exemption was rejected. [Paras 36]

The contention that the HR&CE Department is the 'body or authority' within the meaning of Section 10(23BBA) is rejected; the Department is not the statutory entity contemplated for exemption.

Final Conclusion: The court allowed the writ petition of Sri Vaithiyanathaswamy Devasthanam, holding that it qualifies as the managerial statutory 'body or authority' entitled to exemption under Section 10(23BBA) while noting that constituent temples remain taxable under the proviso; the writ petition of Sri Amirthakadeswaraswamy Devasthanam was dismissed as it did not satisfy the statutory requirements for exemption. The Revenue's contention that the HR&CE Department alone is the exempt authority was rejected.

Levy of late fee under section 234E - Processing of TDS statements under section 200A - Prospective effect of statutory amendment - Pre-amendment period prior to 1.6.2015

Levy of late fee under section 234E - Processing of TDS statements under section 200A - Prospective effect of statutory amendment - Pre-amendment period prior to 1.6.2015 - Deletion of late fee levied under section 234E for TDS statements relating to periods prior to 1.6.2015 while processing under section 200A. - HELD THAT: - The Tribunal held that the amendment empowering the AO to levy fee under section 234E while processing statements under section 200A came into effect only from 1.6.2015 and must be given prospective operation. Reliance was placed on the coordinate Bench and the decision of the Hon'ble Karnataka High Court in Fatehraj Singhvi, which held that intimation under section 200A to demand fee under section 234E for periods prior to 1.6.2015 was without authority and therefore invalid. No contrary order of the jurisdictional High Court was shown; the Revenue did not controvert the submissions. Applying that precedent to the assessment years in question, the Tribunal concluded that the AO/AO(TDS) had no power to levy section 234E fees for the pre-amendment periods and accordingly the levies confirmed by the CIT(A) were set aside. [Paras 5, 6, 7]

The levies of late fee under section 234E for the periods prior to 1.6.2015 are deleted and the appeals are allowed.

Final Conclusion: Following precedent that the amendment to permit levy of section 234E while processing under section 200A is prospective from 1.6.2015, the Tribunal set aside the impugned intimation insofar as it imposed section 234E fees for the assessment years 2013-14, 2014-15 and 2015-16, and allowed the appeals.

Assessment against non-existent/amalgamated company is nullity - Framing assessment post-amalgamation as a jurisdictional defect - Assessment under section 153A where searched entity has ceased to exist - Provisions of section 292B are not applicable to assessments framed against a non-existent entity - Certainty and consistency in tax litigation where amalgamation has been duly approved

Assessment against non-existent/amalgamated company is nullity - Framing assessment post-amalgamation as a jurisdictional defect - Assessment under section 153A where searched entity has ceased to exist - Provisions of section 292B are not applicable to assessments framed against a non-existent entity - Whether assessments framed in the name of M/s. Sarla Fabrics Pvt. Ltd., which had ceased to exist on account of an approved amalgamation, are sustainable. - HELD THAT: - The Tribunal found on the admitted facts that M/s. Sarla Fabrics Pvt. Ltd. had been amalgamated into M/s. Shahi Exports Pvt. Ltd. with effect from 31.03.2010 by an order of the Delhi High Court and therefore had ceased to exist on the date of search (16.01.2013). Prior intimations of the amalgamation were available on record and had been communicated to the investigating wing and the Assessing Officer. Applying the settled ratio in Spice Enfotainment and subsequent decisions of the Apex Court and coordinate benches, the framing of assessment in the name of a non-existent/amalgamating entity is not a mere procedural irregularity but a jurisdictional defect going to the root; accordingly the curative provision relied upon cannot validate such assessments. The scheme of amalgamation transfers consequences to the successor and the assessing authority was not competent to proceed in the name of an entity which had been struck off the register and ceased to exist. For these reasons the assessments framed under section 153A read with section 143(3) in the name of the amalgamating company were held unsustainable and liable to be quashed. [Paras 6, 11, 12, 15, 16]

Assessments framed in the name of M/s. Sarla Fabrics Pvt. Ltd. for AYs 2008-09, 2009-10 and 2010-11 are quashed as being framed against a non-existent/amalgamated company and therefore void.

Final Conclusion: The Tribunal dismissed the Revenue's appeals and upheld the Commissioner (Appeals)' orders quashing the assessments framed in the name of the amalgamated company for AYs 2008-09, 2009-10 and 2010-11 on the ground that assessments against a non-existent entity are jurisdictionally void.

Depreciation on intangible assets - Allowability of goodwill and other intangible business or commercial rights under Explanation 3(b) to Section 32(1) - Transfer pricing adjustment in respect of AMP expenditure - Requirement to establish existence of an international transaction before benchmarking AMP expenditure - Rejection of Bright Line Test for segmentation of AMP into routine and non-routine components - Use of Residual Profit Split Method for benchmarking combined royalty and AMP payments

Depreciation on intangible assets - Allowability of goodwill and other intangible business or commercial rights under Explanation 3(b) to Section 32(1) - Deletion of disallowance of depreciation claimed on intangible assets by the assessing officer for AY 2015-16. - HELD THAT: - The Tribunal examined the claim of depreciation on Design & Technical Know-how, Vendor Network Relationship and Customer Network Relationship and noted that coordinate benches of the Tribunal have consistently allowed depreciation on identical assets in the assessee's own earlier years. The Tribunal reproduced and relied upon the reasoning in the earlier coordinate-bench decision which held that such intangibles (including goodwill or items of similar nature) fall within Explanation 3(b) and that once depreciation has been allowed in an earlier year and the written down value is carried forward, the opening WDV cannot be disputed in the subsequent assessment year in the absence of action under section 147. In view of the consistent Tribunal precedents and absence of any recorded action to reopen past assessments, the Tribunal directed deletion of the disallowance and affirmed that the depreciation claim is allowable. [Paras 8]

The disallowance of depreciation on the intangible assets is deleted and the assessing officer is directed to allow the depreciation.

Transfer pricing adjustment in respect of AMP expenditure - Requirement to establish existence of an international transaction before benchmarking AMP expenditure - Rejection of Bright Line Test for segmentation of AMP into routine and non-routine components - Use of Residual Profit Split Method for benchmarking combined royalty and AMP payments - Whether the TPO/AO's benchmarking and adjustment of AMP expenditure (and aggregation with royalty) for AY 2015-16 was sustainable. - HELD THAT: - The Tribunal reviewed the TPO's approach which applied a Bright Line Test to segregate AMP into routine and non-routine portions, combined AMP with royalty payments and adopted a Residual Profit Split Method to compute an adjustment. Citing authoritative decisions of the Delhi High Court which rejected the Bright Line Test and held that revenue must first establish the existence of an international transaction before benchmarking AMP, the Tribunal found the TPO's methodology and the aggregation of royalty with AMP to be impermissible without separate examination. Given these legal constraints and the mixed application of methods, the Tribunal did not adjudicate the matter on merits but concluded that the issue requires fresh consideration by the AO/TPO. The Tribunal therefore set aside the assessment order on this aspect and restored the matter to the file of the AO/TPO for re-examination after affording the assessee an opportunity of being heard, directing the authorities to decide in accordance with law. [Paras 12]

The transfer pricing adjustment in respect of AMP expenditure is set aside and remitted to the AO/TPO for fresh examination in accordance with law.

Final Conclusion: The appeal is allowed: the disallowance of depreciation on intangible assets is deleted and the transfer pricing adjustment relating to AMP expenditure is set aside and remitted to the AO/TPO for fresh examination in accordance with law after affording the assessee an opportunity of hearing.

Deduction under section 10B to be computed unit-wise (standalone) prior to aggregation under Chapter VI - Stage of deduction under Chapter IV as against aggregation under Chapter VI - Judicial precedent overrides administrative circular dated 16.07.2013 - Effect of set-off and carry forward under sections 70, 72 and 74 to apply after unit-wise deduction

Deduction under section 10B to be computed unit-wise (standalone) prior to aggregation under Chapter VI - Judicial precedent overrides administrative circular dated 16.07.2013 - Effect of set-off and carry forward under sections 70, 72 and 74 to apply after unit-wise deduction - Whether deduction under section 10B for an eligible undertaking must be computed independently for that undertaking before giving effect to set-off and carry forward provisions, notwithstanding CBDT Circular dated 16.07.2013. - HELD THAT: - The Tribunal held that the deduction contemplated by sections 10A/10B (as amended w.e.f. 01.04.2001) operates qua the eligible undertaking and must be allowed while computing the gross total income of that undertaking under Chapter IV, i.e., prior to the aggregation exercise under Chapter VI. The Tribunal relied on the decision of the Hon'ble Supreme Court in Yokogawa India Ltd., which establishes that deductions under sections 10A/10B are to be applied to the individual undertaking without reference to profits or losses of other eligible or ineligible units of the assessee. Consequently, the administrative pronouncement contained in CBDT Circular dated 16.07.2013, which directs consolidation of profits/losses of other units before allowing deduction u/s 10B, is in conflict with the Supreme Court's ruling and cannot be followed. Once deduction is given unit-wise at the Chapter IV stage, the provisions relating to set-off and carry forward under sections 70, 72 and 74 operate thereafter on a unit-wise basis and any consequences flow accordingly. For these reasons the Tribunal allowed the assessee's grounds that the deduction should not have been restricted by aggregation as per the Circular and set aside the approach adopted by the authorities below. [Paras 11, 12]

Assessee entitled to deduction under section 10B computed on standalone basis for the eligible undertaking; CBDT Circular dated 16.07.2013 cannot be applied in derogation of the Supreme Court's decision; appeal allowed.

Final Conclusion: The appeal is allowed: deduction under section 10B must be computed unit-wise (standalone) at the Chapter IV stage for the eligible undertaking and thereafter the set-off and carry forward provisions operate; the CBDT Circular dated 16.07.2013 cannot be applied contrary to the Supreme Court's precedent.

Allowability of brokerage expenses - burden of proof for business expenditure - valuation by Departmental Valuation Officer (DVO) - section 50C-valuation and proviso regarding 110% rule - treatment of leased property for valuation under section 50C

Allowability of brokerage expenses - burden of proof for business expenditure - Disallowance of brokerage expenses of Rs. 3,60,000/- was deleted and the claimed brokerage was held allowable. - HELD THAT: - The assessee claimed brokerage at 3% on the sale consideration and produced documentary evidence including account-payee cheque payment, bank statement, broker's details and a confirmation letter. The Assessing Officer disallowed the expense for want of production of the broker, and the CIT(A) upheld the disallowance. The Tribunal found that the assessee had discharged the onus to prove genuineness of the expense by furnishing payment proof and broker particulars, and that the AO did not point to any adversities in the evidence nor make efforts to summon the broker. In these circumstances the disallowance was unjustified and was therefore set aside. [Paras 7]

The disallowance of brokerage of Rs. 3,60,000/- is deleted; the brokerage is allowable.

Section 50C-valuation and proviso regarding 110% rule - valuation by Departmental Valuation Officer (DVO) - treatment of leased property for valuation under section 50C - Addition of Rs. 14,11,600/- under section 50C was deleted because the DVO valuation showed the sale consideration was within the permissible range under the proviso to section 50C and the property was a leased/disputed property attracting lower market value. - HELD THAT: - The assessee sold a leased property for Rs. 1,20,00,000/-, while guideline value was Rs. 1,80,00,000/-. The AO referred the matter to the DVO, who valued the property at Rs. 1,34,11,600/-, about 11.6% higher than the sale consideration. The proviso to section 50C provides that where the Stamp Valuation Authority's value does not exceed 110% of the sale consideration, the sale consideration is to be accepted as full value for section 48. The Tribunal treated the DVO valuation as the appropriate benchmark in light of the property's leased and disputed nature and noted that the sale consideration fell within the 110% range of the DVO valuation. Consequently, the addition under section 50C was not warranted and was deleted. [Paras 8, 9, 10]

The addition of Rs. 14,11,600/- made under section 50C is deleted; sale consideration is to be accepted.

Final Conclusion: Both grounds of the assessee's appeal are allowed: the disallowance of brokerage is deleted and the addition under section 50C is set aside; the assessment is consequently altered in favour of the assessee.

Deduction under section 80P(2)(a)(i) - Deduction under section 80P(2)(d) - Members under cooperative societies law - Deduction of proportionate cost and administrative expenses - Restoration to Assessing Officer for fresh examination - Remand for verification

Deduction under section 80P(2)(a)(i) - Members under cooperative societies law - Restoration to Assessing Officer for fresh examination - Claim of deduction under section 80P(2)(a)(i) requires fresh examination by the Assessing Officer in light of the principles laid down by the Hon'ble Supreme Court in Mavilayi Service Co-operative Bank Ltd. - HELD THAT: - The Tribunal held that the Supreme Court in Mavilayi has settled several points including the need to construe the term "members" by reference to the relevant co operative societies law and that the earlier decision in Citizen Co-operative Society Ltd. must be given effect to where applicable. Because those principles require application to the facts of the present assessee (including the status of nominal members, share holding and lending to non members), the Tribunal set aside the CIT(A)'s order on this issue and restored the matter to the file of the Assessing Officer for fresh examination and decision applying the law articulated by the Supreme Court.

Order of the CIT(A) on disallowance of deduction under section 80P(2)(a)(i) is set aside and the issue is restored to the Assessing Officer for fresh adjudication.

Deduction under section 80P(2)(d) - Deduction of proportionate cost and administrative expenses - Whether interest income on bank fixed deposits, if assessed as income from other sources, is to be allowed deduction of proportionate cost, administrative and other expenses. - HELD THAT: - Relying on the view of the High Court of Karnataka in Totgars Co operative Sale Society Ltd., the Tribunal accepted the assessee's submission that where interest on bank deposits is treated as income from other sources, proportionate cost of funds and administrative expenses attributable to earning such income should be allowed as deductions. Accordingly, if the Assessing Officer proposes to assess the bank deposit interest as income from other sources, he is directed to allow the proportionate cost, administrative and other expenses.

If interest on bank deposits is assessed under "Income from other sources", the Assessing Officer shall allow deduction of proportionate cost, administrative and other expenses.

Remand for verification - Restoration to Assessing Officer for fresh examination - Disallowance of provision for bad debts and provision for centenary fund in AY 2015-16 to be reconsidered by the Assessing Officer. - HELD THAT: - The Tribunal noted that the assessee did not raise these disallowances before the CIT(A) but, since the principal issues have been remanded to the Assessing Officer and the outcome on those issues may affect the correctness of the additions, it is appropriate to restore the two items to the Assessing Officer for fresh consideration in the course of the remand proceedings.

Disallowance of provision for bad debts and provision for centenary fund in AY 2015 16 is restored to the Assessing Officer for fresh examination.

Final Conclusion: Both appeals (AY 2015 16 and 2016 17) disposed of: principal issue under section 80P(2)(a)(i) set aside and remitted to the Assessing Officer for fresh examination in light of Mavilayi; interest on bank deposits, if assessed as other sources, to be allowed proportionate cost and administrative expenses; two additional additions in AY 2015 16 restored to the Assessing Officer for reconsideration; appeals treated as allowed for statistical purposes.

Right to presence of advocate during interrogation - Videography of interrogation proceedings - Petition under Article 226 of the Constitution - Summons issued under section 108 of the Customs Act, 1962

Right to presence of advocate during interrogation - Videography of interrogation proceedings - Summons issued under section 108 of the Customs Act, 1962 - Petitioner permitted to have an advocate at a visible but not audible distance during interrogation and to have the interrogation videographed at his cost. - HELD THAT: - The respondents, through the Principal Commissioner of Customs, stated there was no objection to allowing the petitioner an advocate at a visible but not audible distance and to permitting videography of the interrogation. In view of that positive statement by the competent authority and the petitioner's apprehension of being compelled to make incriminating statements, the Court directed that if the petitioner is subjected to interrogation he shall be allowed to have an advocate present at a visible but not audible distance and that the interrogation shall be videographed at the petitioner's cost. The direction is granted as a protective measure while leaving the conduct of the investigation to the respondents. [Paras 5, 6, 7]

Allowed as directed: advocate permitted at visible but not audible distance and videography permitted at petitioner's cost.

Expedition of investigation / time-bound completion - Petition under Article 226 of the Constitution - Prayer for a direction to respondent No. 3 to complete the investigation in a time bound manner declined. - HELD THAT: - The petitioner sought a court direction to expedite and conclude the investigation within a stipulated time. The Court observed that, on the material before it, directing a time-bound completion of the investigation did not arise at this stage and therefore declined to issue such a direction. [Paras 8]

Refused: no direction to conclude the investigation in a time bound manner.

Final Conclusion: Writ petition disposed of: petitioner granted the limited relief of presence of an advocate at a visible but not audible distance and videography of any interrogation at his cost; the request for a time bound direction to conclude the investigation is refused; petitioner to cooperate with the investigation.

Continuing obligation under an exemption notification - limitation not applicable to recovery for breach of post-import conditions - extended limitation for suppression of facts - penalty under Section 112 of the Customs Act - non-retrospective operation of Section 114A

Continuing obligation under an exemption notification - limitation not applicable to recovery for breach of post-import conditions - extended limitation for suppression of facts - Whether the demand of duty for imports effected between 17.03.1994 and 04.10.1995 is barred by limitation or whether recovery is maintainable for breach of post import conditions. - HELD THAT: - The Court held that exemption notifications impose a continuing obligation on the importer and that, when such post importation conditions are not fulfilled, the Department has power to recover duty. Following the reasoning in Mediwell and the Five Member Tribunal in Bombay Hospital Trust, demands arising from failure to comply with post import conditions are not confined by the five year limitation in Section 28 and ordinarily are not time barred. The Tribunal had earlier set aside demand in respect of Bills of Entry from 12.04.1993 to 28.02.1994 on a finding of limitation; that part of its order stands unchallenged. The Court rejected the appellants' contention that extended limitation under Section 28(4) could not be invoked because there was no suppression of facts, explaining that limitation is inapplicable to recovery for continuous post import obligations and that inquiry into suppression was unnecessary; nevertheless, on the facts the record shows conduct (sale into local market and partial remittance) indicative of suppression. For these reasons Questions of Law (i) and (ii) were answered against the appellants. [Paras 14, 15, 16, 18, 20]

Duty recovery for breach of post import conditions in respect of imports during 17.03.1994 to 04.10.1995 is not barred by limitation; extended limitation arguments fail and are answered against the appellants.

Penalty under Section 112 of the Customs Act - non-retrospective operation of Section 114A - Whether the Tribunal could impose or modify penalty under Section 112 when Section 114A and later amendments were not in force for the relevant import period and whether imposition of penalty under Section 112 by the Tribunal for the first time was without jurisdiction. - HELD THAT: - The Court found that the show cause notice did contemplate penalty under Section 112 and that Section 114A (which mandates penalty equal to duty) was not in force for the period of the impugned imports. The Tribunal therefore correctly exercised its discretion to restrict and modify the penalty under the law applicable at the relevant time (pre amendment Section 112), which was more favourable to the appellants. The Tribunal's reduction of penalty and limitation of penalties to those envisaged by Section 112 as it stood for the relevant period was lawful and not a new imposition without hearing, since the show cause and proceedings had put the appellants on notice and they were afforded opportunity to defend. Question of Law (iii) was therefore answered against the appellants. [Paras 21, 23, 24, 25, 26]

Imposition and modification of penalty under Section 112 by the Tribunal was permissible; Section 114A was not applicable retrospectively and the Tribunal's reduction under pre amendment Section 112 is sustainable.

Final Conclusion: The High Court dismissed the appeal: the claims of limitation and inapplicability of extended limitation were rejected for breaches of continuing post import obligations, and the Tribunal's modification and imposition of penalty under pre amendment Section 112 (with non application of Section 114A to the relevant period) was upheld.

Condonation of delay - sufficient cause - limitation under section 9C of the Customs Tariff Act, 1975 - law of limitation as a substantive law - conduct, bona fides and negligence in delay applications - principles governing exercise of judicial discretion in condoning delay

Condonation of delay - sufficient cause - limitation under section 9C of the Customs Tariff Act, 1975 - conduct, bona fides and negligence in delay applications - Whether the delay in filing the appeal under section 9C of the Tariff Act was caused by sufficient cause and whether the delay should be condoned. - HELD THAT: - The Tribunal held that the cause of action arose on issuance of the Customs Notification dated September 12, 2017 and that the appellant had an available remedy under section 9C to file an appeal within 90 days. The appellant failed to challenge the Notification within the prescribed period despite being impleaded as a respondent in four appeals filed by others and aware of the proceedings. Although a corrigendum dated December 19, 2017 was issued by the Designated Authority, the Central Government did not notify any change and the corrigendum was subsequently withdrawn by a later corrigendum dated April 25, 2018. The Tribunal found the appellant repeatedly pursued representations rather than promptly invoking its statutory remedy and concealed material facts (non-disclosure that four appeals were filed with the appellant impleaded). Applying settled principles that the law of limitation is substantive and that sufficiency of cause must be reasonable and bona fide, the Tribunal observed that the appellant's conduct evidenced negligence and did not reflect the behaviour of a prudent litigant entitled to discretionary relief. Reliance on jurisprudence requiring a pragmatic but guarded approach to condonation of delay did not assist the appellant because the explanation was not plausible, the delay was inordinate, and the appellant failed to show it was prevented by sufficient cause from filing within time. In these circumstances the Tribunal exercised its discretion against condonation. [Paras 31, 32, 38, 39, 40]

Delay condonation application rejected; appeal not entertained for want of sufficient cause.

Final Conclusion: The application for condonation of delay was refused on the ground that the appellant failed to demonstrate sufficient cause for the inordinate delay in filing the appeal under section 9C; consequentially the appeal is dismissed.

Sampling procedure - chain of custody - tampering of case property - commercial quantity - Section 37 of NDPS Act - twin conditions for bail

Sampling procedure - chain of custody - tampering of case property - Mixing of samples drawn from multiple packets and alleged tampering by a third agency vitiated the sanctity of the seized consignments and the sampling process. - HELD THAT: - The Court found that the investigating officers mixed material taken from each individual packet to create homogeneous mixtures before drawing representative samples which were sent for chemical examination. That procedure departs from the settled requirement that, where practicable, representative samples should be drawn and preserved in a manner that preserves the identity of individual packets; mixing substances from distinct packets creates suspicion that the test result may reflect the aggregate mixture rather than the contents of each packet. The Court noted allegations that some packets bore lac seals and appeared to have been opened by another agency (FSSAI), indicating possible tampering by persons not entrusted with the investigation. For these reasons the court concluded that the prescribed procedure was not followed and that the processes adopted by the prosecution compromised the evidentiary sanctity of the seized consignments and samples. [Paras 12, 13, 17, 18]

The sampling process and apparent interference with sealed packets were held to be procedurally improper and to vitiate the sanctity of the case property and samples.

Commercial quantity - Section 37 of NDPS Act - twin conditions for bail - Notwithstanding that the recovered substance is of commercial quantity, the petitioner was entitled to bail under Section 37 of the NDPS Act because he satisfied the twin conditions and the trial would be vitiated by the procedural defects in sampling. - HELD THAT: - The Court acknowledged that the recovered substance amounted to commercial quantity. However, it applied the statutory framework of Section 37 of the NDPS Act and found that the petitioner met the twin conditions placed for grant of bail: he was not a habitual offender and there was no likelihood of his absconding or committing further offences while on bail. The Court also took into account the procedural infirmities in sample collection and the alleged tampering which were likely to affect the course and duration of trial. Balancing these factors, the Court exercised its discretion to grant bail, imposing conditions to prevent witness tampering and reserving to the trial court the independence to adjudicate the case on merits. [Paras 15, 19, 20, 21, 22]

Petitioner was directed to be released on bail on furnishing specified personal bond and surety, subject to conditions; the trial court was not to be influenced by the observations in this order.

Final Conclusion: Bail granted to the petitioner despite recovery of commercial quantity because the prosecution mixed samples in violation of prescribed procedure and there was alleged tampering by a third agency; petitioner satisfied the twin conditions under Section 37 of the NDPS Act and was released on conditions to safeguard the trial process.

Provisional release / interim release of seized goods pending adjudication - mandamus directing release of imported consignments - parity / equal treatment in granting interim relief where similarly placed petitioners obtained release - condition of prior approval by Ministry of Electronics and Information Technology for import of Multi Function Devices - Section 125 of the Customs Act, 1962 - discretion where import is treated as prohibited unless condition complied with - release on payment of duty assessed on enhanced valuation determined by a certified/chartered engineer - continuation of adjudication notwithstanding provisional release

Provisional release / interim release of seized goods pending adjudication - parity / equal treatment in granting interim relief where similarly placed petitioners obtained release - release on payment of duty assessed on enhanced valuation determined by a certified/chartered engineer - continuation of adjudication notwithstanding provisional release - The petitioners are entitled to release of the detained consignments of used Multi Function Devices on terms of provisional release, notwithstanding pending adjudication on merits. - HELD THAT: - The Court relied on the consistent practice of this Court and the Supreme Court in granting interim/provisional release in identical cases and on the principle that similarly placed petitioners must be treated alike; consequently it would not be appropriate to deny release to some petitioners when others have obtained release. The Court noted that appellate authorities and a Division Bench of another High Court have, on the merits, favoured assessees in related matters and that the Supreme Court has permitted provisional release in cases where appeals were pending. In view of these circumstances, the Court directed that the consignments be released upon remittance of the enhanced customs duty quantified on the valuation fixed by a certified/chartered engineer, while expressly permitting adjudication proceedings to be initiated or continued and to be concluded expeditiously. The order preserves the revenue's right to adjudicate the merits and does not decide the question whether non compliance with the MeitY approval condition would lead to confiscation; rather it confines the relief to provisional release on the stated terms. [Paras 11, 12, 16, 17]

Writ petitions allowed; consignments to be released on remittance of enhanced duty based on valuation by a certified/chartered engineer, with adjudication to proceed/continue expeditiously.

Final Conclusion: The High Court allowed the writ petitions and directed provisional release of the imported Multi Function Devices on payment of the enhanced duty as fixed by a certified/chartered engineer, while permitting the statutory adjudication to continue and be completed expeditiously.

Classification of goods under the Customs Tariff - Essential character test for mixed or composite goods - General Rules of Interpretation of the Customs Tariff (Rule 3(a), 3(b), 3(c)) - Application of FSSAI food regulations in tariff classification - Primacy of Customs Tariff classification for IGST rates - Precedential value of Supreme Court and Tribunal decisions on classification

Classification of goods under the Customs Tariff - Essential character test for mixed or composite goods - General Rules of Interpretation of the Customs Tariff (Rule 3(a), 3(b), 3(c)) - Imported carbonated beverages with fruit juice are classifiable under Customs Tariff heading 22029920 (fruit pulp or fruit juice based drinks) and not under 22021020/22021090. - HELD THAT: - The products are sold and labelled as "carbonated beverages with fruit juice" containing both carbonated water and fruit juice (5% for fruit, 2.5% for lime). Both components contribute to the goods' essential character and therefore neither heading 220210 (carbonated waters/other non-alcoholic beverages) nor 220299 (fruit pulp or fruit juice based drinks) alone resolves classification under Rules 3(a)-3(b). Applying Rule 3(c), the heading which occurs last in numerical order among those equally meriting consideration prevails. Since 22029920 comes after the competing 220210 subheadings, it governs classification. The Tribunal therefore upheld classification under 22029920 and rejected Revenue's contention that the products should be classified solely as carbonated beverages based on predominance of carbonated water or proportion of juice. [Paras 21, 22, 23, 24, 25]

Goods are classifiable under 22029920 and Revenue's appeal on classification is rejected.

Application of FSSAI food regulations in tariff classification - Precedential value of Supreme Court and Tribunal decisions on classification - FSSAI Regulation 2.3.30 (including Clause 3A) and the Supreme Court decision in Parle Agro, together with the Tribunal's Larger Bench decision in Brindavan Beverages, support classifying the products under 22029920. - HELD THAT: - The Tribunal noted that FSSAI recognises a category of "carbonated beverages with fruit juice" (Clause 3A) which covers products with lower fruit-juice contents (5% or 2.5% for lime). Parle Agro (Appy Fizz) was held to be classifiable under 22029920 and, though Appy Fizz had higher juice content, products with 5%/2.5% juice fall within the FSSAI schema (Clause 3A) and the Larger Bench of the Tribunal has taken a similar view in Brindavan Beverages. On this basis the Tribunal respectfully followed those decisions and treated FSSAI regulations and the precedents as supporting classification under 22029920. [Paras 26, 29, 30]

FSSAI Regulations and the cited precedents support classification under 22029920 and were properly relied upon by the Commissioner (Appeals).

Primacy of Customs Tariff classification for IGST rates - Precedential value and limited scope of advance rulings - The IGST rate is determined by Customs Tariff classification; Advance Ruling Authority decisions and GST Council statements relied upon by Revenue are not binding precedents for this Tribunal and were correctly given no weight. - HELD THAT: - The Tribunal observed that the IGST Notification incorporates the Customs Tariff for classification purposes and that classification under the Customs Tariff determines IGST rates. The ruling of an Advance Ruling Authority applies only to the applicant and its jurisdictional authorities and is not binding on the Tribunal. Similarly, GST Council support or non-binding departmental rulings do not override tariff interpretation under the Customs Tariff and the General Rules of Interpretation. [Paras 5, 13, 27]

Classification under the Customs Tariff governs IGST; advance rulings and Council statements are not binding on the Tribunal and were rightly not followed.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order: the imported "carbonated beverages with fruit juice" are classifiable under Customs Tariff heading 22029920; the impugned order is affirmed and the Revenue's appeal and stay application are dismissed.

Prospective operation of penal/statutory disqualification provisions - Disqualification under Section 164(2) of the Companies Act, 2013 - Deactivation/cancellation of Director Identification Number (DIN) and scope of Rule 11 - Validity of publication of list of directors of struck off companies - Availability of administrative remedies and subsequent condonation schemes not validating earlier invalid action

Disqualification under Section 164(2) of the Companies Act, 2013 - Prospective operation of penal/statutory disqualification provisions - Application of Sub-section (2) of Section 164 of the Companies Act, 2013 is prospective and the three financial years in Clause (a) are to be counted from 1.4.2014. - HELD THAT: - The court adopted the reasoning in the cited Gujarat High Court judgment that Section 164(2) - which attaches disqualification for non-filing of financial statements/annual returns for three continuous financial years - was enacted afresh in the Act of 2013 and was not part of the corresponding law under the Companies Act, 1956 for private companies. Absent a clear legislative intent to make the provision retrospective, the presumption against retrospectivity applies. Therefore the three financial years for the purpose of Section 164(2)(a) must be counted from 2014-15, 2015-16 and 2016-17 (i.e. from 1.4.2014), and any disqualification under Section 164(2) would arise only on expiry of the applicable filing windows after the 2016-17 year. The court held that applying Section 164(2) to earlier years would impair accrued rights under the repealed Act and would amount to impermissible retrospective operation.

Section 164(2) is to be given prospective effect; the three financial years are 2014-15 to 2016-17 and disqualification arises only thereafter.

Validity of publication of list of directors of struck off companies - Availability of administrative remedies and subsequent condonation schemes not validating earlier invalid action - The impugned list published on 12.9.2017 showing petitioners as disqualified from 1.11.2016 to 31.10.2021 was premature and legally unsustainable and therefore liable to be quashed. - HELD THAT: - Relying on the prospective construction of Section 164(2), the court found that the publication which recorded disqualification earlier than the date on which disqualification could lawfully arise was untenable. The subsequently framed condonation scheme (dated 29.12.2017) and its temporal coverage could not retrospectively validate the earlier publication, and due to deactivation of DINs those affected were also prevented from availing the scheme. Consequently, the impugned list was quashed as being contrary to the Act and Rules.

The list published on 12.9.2017 showing premature disqualification is quashed and set aside.

Deactivation/cancellation of Director Identification Number (DIN) and scope of Rule 11 - Validity of publication of list of directors of struck off companies - Deactivation of the petitioners' DINs on account of disqualification in one struck-off company (affecting their ability to act as directors in other companies) was not legally tenable and the DINs are to be reactivated. - HELD THAT: - The court noted that Rules 9-11 contemplate specific grounds and procedures for allotment, cancellation, surrender or deactivation of DIN and that once allotted a DIN is valid for the lifetime of the individual and not to be cancelled or deactivated except on the grounds enumerated in Rule 11. None of those grounds authorise deactivation merely because one company in which a person was director is struck off or that the director has become ineligible under Section 164(2) in respect of that company. Hence deactivation of DINs consequential to the impugned list was contrary to the Rules and could not be sustained. The court nevertheless made clear that respondents remain at liberty to take lawful action for any statutory default or non-compliance in accordance with law.

DIN deactivations made on the basis of the impugned list are legally untenable; respondents are directed to reactivate the DINs, subject to their liberty to proceed by lawful action for any defaults.

Final Conclusion: Writ petitions challenging deactivation of DINs are allowed: the impugned publication recording premature disqualification is quashed and the respondents are directed to reactivate the Director Identification Numbers for use in other companies, without prejudice to lawful action that may be taken against the petitioners for any statutory defaults.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Operational debt - Maintainability of application filed by a sole proprietorship through its proprietor - Pre existing dispute and the Mobilox test for spurious defences - Admission of Section 9 application - Appointment of Interim Resolution Professional - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Maintainability of application filed by a sole proprietorship through its proprietor - Whether the application under Section 9 filed by the sole proprietor (Pradeep Kumar) on behalf of the proprietorship concern is maintainable after amendment of the memo of parties. - HELD THAT: - The Tribunal noted competing authorities and, on being satisfied with the applicant's conduct in seeking and obtaining liberty to amend the memo of parties, treated the technical objection as cured. The applicant relied on precedents holding such applications maintainable and an amended memo was filed in terms of the liberty granted by the Tribunal. The Tribunal accordingly proceeded to consider the application on merits rather than rejecting it on the preliminary maintainability plea. [Paras 11, 16, 17]

The maintainability objection raised by the corporate debtor was effectively removed by amendment and the application was treated as maintainable.

Operational debt - Pre existing dispute and the Mobilox test for spurious defences - Admission of Section 9 application - Whether there was a pre existing, genuine dispute which would bar admission of the Section 9 application and whether the application was otherwise complete for admission. - HELD THAT: - The Tribunal examined the record and found that the corporate debtor's assertions regarding non payment, alleged poor quality, partial supply and credit notes were unsupported by documents. Applying the precedent encapsulated in the Mobilox test, the Tribunal held that a defence which is a patently feeble legal argument or an assertion unsupported by evidence amounts to a spurious dispute. There being no documentary proof of a pre existing dispute and the applicant having complied with the statutory requirements (including service of demand notice and Form V particulars), the Tribunal concluded that default in payment of the operational debt was established and the Section 9 application was otherwise complete. [Paras 6, 9, 15, 17]

The alleged dispute is spurious and not a bar to admission; the Section 9 application is admitted for default in payment of operational debt.

Appointment of Interim Resolution Professional - Appointment of the proposed Interim Resolution Professional (IRP) and related conditions. - HELD THAT: - The Tribunal accepted the consent and registration records filed in Form 2 and the disclosures under the Insolvency Regulations. Subject to the condition that no disciplinary proceedings are pending against him, the Tribunal directed appointment of the nominated insolvency professional as Interim Resolution Professional to perform functions in accordance with the Code and Regulations. [Paras 12, 18]

The nominated professional, Mr. Arun Chadha, is appointed as Interim Resolution Professional subject to the stated condition.

Appointment of Interim Resolution Professional - Provision of interim funds to the IRP to enable discharge of his functions. - HELD THAT: - In exercise of its powers to ensure the IRP can perform statutory duties, the Tribunal directed the operational creditor to deposit a specified sum with the IRP within one week, to be accounted for and subject to adjustment by the Committee of Creditors. [Paras 19]

The operational creditor is directed to deposit the required interim amount with the IRP within the stipulated time.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Consequences flowing from admission - invocation of moratorium under the Code. - HELD THAT: - Following admission of the Section 9 application, the Tribunal directed that moratorium provisions as envisaged under Section 14(1) will follow in relation to the corporate debtor, with applicable exceptions and other provisions of Section 14 operating during the pendency of moratorium, thereby restraining specified actions against the corporate debtor as provided in the Code. [Paras 20]

Moratorium under Section 14 is declared in consequence of admission of the application.

Final Conclusion: The application under Section 9 was admitted: the Tribunal found default of an operational debt and no pre existing genuine dispute; the nominated interim resolution professional was appointed (subject to conditions) and the operational creditor directed to provide interim funds; and the moratorium under the Code was declared consequent to admission.

Binding nature of an approved resolution plan - functus officio of the Adjudicating Authority after approval of a resolution plan - no provision for withdrawal of an approved resolution plan - primacy of the Committee of Creditors' commercial wisdom - forfeiture of performance security under Regulation 36B(4A) of IBBI Regulations - jurisdictional limits of Section 60(5) of the I&B Code

Binding nature of an approved resolution plan - no provision for withdrawal of an approved resolution plan - functus officio of the Adjudicating Authority after approval of a resolution plan - primacy of the Committee of Creditors' commercial wisdom - jurisdictional limits of Section 60(5) of the I&B Code - Whether the Tribunal can recall an approved resolution plan and order liquidation or permit the Resolution Applicant to withdraw the approved plan. - HELD THAT: - The Tribunal held that once a resolution plan is approved by the Committee of Creditors and sanctioned by the Adjudicating Authority it becomes binding on the parties and the Adjudicating Authority cannot permit withdrawal of the approved plan at the behest of the Resolution Applicant. Reliance is placed on the NCLAT decision in Educomp Solutions (as recorded) establishing that the Adjudicating Authority has no jurisdiction to entertain withdrawal of an approved resolution plan and cannot re-examine the commercial decision of the CoC. Consequently, the Tribunal is functus officio after sanctioning the plan and cannot recall its order or pass an order of liquidation in the present proceedings under Section 60(5), as appeal mechanisms are available and jurisdictional limits prevent reopening the approved plan. [Paras 23, 27]

Application to recall the approved resolution plan and to order liquidation or permit withdrawal of the approved plan is dismissed; the Adjudicating Authority cannot reopen or recall its sanctioned resolution plan in these proceedings.

Forfeiture of performance security under Regulation 36B(4A) of IBBI Regulations - binding nature of an approved resolution plan - Whether the EMD / performance deposit paid by the Resolution Applicant can be directed to be refunded and whether forfeiture by the Monitoring Committee could be set aside. - HELD THAT: - The Tribunal observed that Regulation 36B(4A) requires a successful resolution applicant to provide performance security and contemplates forfeiture where the approved plan is not implemented by the applicant. Given that the resolution plan has been approved and the Resolution Applicant now seeks to withdraw citing regulatory concerns, the Tribunal held that it cannot direct refund of the EMD or interfere with forfeiture at this stage. The appropriate remedy lies before the forums or procedures prescribed under the IBBI Regulations; this Tribunal, being functus officio post-approval, will not order refund of the deposit. [Paras 28, 29, 30]

Prayer for refund of the EMD is declined; forfeiture consequences under Regulation 36B(4A) are to be pursued under the appropriate forum and this Tribunal will not direct refund or set aside the forfeiture in these proceedings.

Final Conclusion: Both applications are dismissed: the Tribunal will not permit withdrawal or recall of the sanctioned resolution plan nor will it direct refund of the EMD; enforcement or disputes regarding forfeiture and other consequences are to be pursued under the remedies available under the IBBI Regulations and appellate provisions.

Extension of Corporate Insolvency Resolution Process period under Section 12 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Exclusion of lockdown period for computation of insolvency timelines - Effect of Suo Motu orders of the Supreme Court and directions of the National Company Law Appellate Tribunal on CIRP timelines - Operation of Insolvency and Bankruptcy Board of India regulations (Regulation 40C and Regulation 47A) in suspending timelines during lockdown - Committee of Creditors' resolution in favour of extension

Extension of Corporate Insolvency Resolution Process period under Section 12 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016 - Exclusion of lockdown period for computation of insolvency timelines - Committee of Creditors' resolution in favour of extension - Application by the Resolution Professional for extension of the CIRP period by 90 days beyond 180 days, after excluding the lockdown period, was allowed. - HELD THAT: - The Tribunal noted that CIRP against the corporate debtor commenced on 07.10.2019 and that the 180-day period was to expire on 04.04.2020. The Committee of Creditors, by a resolution passed with 100% voting at its 5th meeting on 12.03.2020, sought an extension of the CIRP in view of prospects of resolution. Having regard to the Supreme Court's Suo Motu order extending limitation w.e.f. 15.03.2020, the NCLAT's order directing exclusion of the lockdown period for computation of the resolution timeline, and the Insolvency and Bankruptcy Board of India's insertion of Regulation 40C (and Regulation 47A for liquidation) excluding the lockdown period from timeline computation, and since the facts were not disputed, the Tribunal exercised the applicable law and directions to permit the requested extension. The Tribunal therefore excluded the period from 25.03.2020 to 31.07.2020 for computation of the CIRP timeline and allowed an additional 90 days beyond the original 180 days to conclude the resolution process. [Paras 3, 8]

IA allowed; CIRP period extended by 90 days beyond 180 days after excluding the period 25.03.2020 to 31.07.2020; IA disposed of.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and extended the corporate insolvency resolution process by 90 days beyond the original 180-day period, excluding the lockdown period from 25.03.2020 to 31.07.2020, and disposed of the application.

Existence of a pre-existing dispute under Sections 8 and 9 of the Insolvency and Bankruptcy Code - operational debt and default evidenced by documentary records - billing procedure and concept of banked units in renewable energy contracts - summary nature of Insolvency resolution proceedings under IBC (not a suit for detailed account settlement) - maintainability of intervention and effect of moratorium on third party claims

Existence of a pre-existing dispute under Sections 8 and 9 of the Insolvency and Bankruptcy Code - operational debt and default evidenced by documentary records - Admissibility of the Section 9 application: whether the Operational Creditor established operational debt and default and whether a pre-existing dispute barred admission. - HELD THAT: - The Tribunal applied the settled test that a dispute must be pre-existing to the demand notice/invoice and not be a patently feeble contention. Examining the SPPA, addenda, settlement abstracts, invoices and the e mail correspondence, the Tribunal found that documentary evidence established that invoices corresponded to units actually consumed and that the debt was due and unpaid. The Corporate Debtor repeatedly cited inability to reconcile accounts from August 2017 onwards but did not, prior to issuance of the demand notice and the Section 9 petition, raise any objection as to rate or a substantive dispute on billing; the rate contention first appeared after initiation of arbitration proceedings and after the petition had been filed. Thus the alleged dispute on rate was not shown to be pre existing and the contention of non reconciliation was held to be a bald denial insufficient to defeat admission. Taking these findings together, the Adjudicating Authority did not err in holding that the conditions for admission under Section 9 (existence of operational debt, documentary proof of debt and absence of a pre existing dispute) were satisfied. [Paras 25, 27, 28, 29, 30]

Section 9 petition was rightly admitted: debt was shown to be due and payable and no pre existing dispute was established to bar admission.

Billing procedure and concept of banked units in renewable energy contracts - summary nature of Insolvency resolution proceedings under IBC (not a suit for detailed account settlement) - Whether Operational Creditor breached the contractual billing procedure by invoicing for non banked units or otherwise raising invoices contrary to the SPPA and settlement abstracts. - HELD THAT: - The Tribunal considered the SPPA clauses on delivery, tariff and billing procedure and the DISCOM settlement abstracts relied upon by the parties. The settlement abstracts and corresponding invoices showed that invoicing was made for units actually consumed (the billed quantity matched settlement particulars). The Tribunal observed that the SPPA envisaged invoicing only to the extent of units adjusted in consumer bills and that the Operational Creditor had not violated the billing procedure. The Tribunal also noted that IBC proceedings are summary in nature and are not intended to resolve complex account reconciliation disputes; having found documentary correspondence favourable to the Operational Creditor, it was unnecessary to undertake a full suit like reconciliation. [Paras 14, 16, 17, 18, 19]

Operational Creditor did not breach the billing procedure; invoices corresponded to consumed units and no further account adjudication was required in the Section 9 summary proceeding.

Maintainability of intervention and effect of moratorium on third party claims - Maintainability of I.A.46/2021 seeking intervention by the lessor and interim reliefs against the Corporate Debtor under the appeal. - HELD THAT: - The intervenor was not a party to the original Company Petition and sought to be impleaded only before the Appellate Tribunal. The Tribunal held that the appeal could be disposed of on the existing record and that the proposed intervenor was neither a necessary nor a proper party for adjudication of the limited challenge to admission of CIRP. The Tribunal also noted the availability of alternate remedies before the Adjudicating Authority and the constraints posed by the moratorium, and therefore declined to entertain the intervention application. [Paras 31, 32, 33, 34]

Intervention application I.A.46/2021 rejected as not maintainable; proposed intervenor not necessary or proper party.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's admission of the Section 9 petition: documentary evidence established operational debt and default, no pre existing dispute on rate or billing was shown to bar admission, invoices matched DISCOM settlement particulars and the Operational Creditor did not breach the billing procedure; the intervenor's application to be impleaded was rejected.

Decree-holder as an Operational Creditor under the Insolvency and Bankruptcy Code - Consent decree and decree arising from settlement as an Operational Debt - Service of demand notice by transmission to company's official e-mail / registered office - Inclusive definition of "person" - proprietor treated as individual for standing as creditor

Decree-holder as an Operational Creditor under the Insolvency and Bankruptcy Code - Consent decree and decree arising from settlement as an Operational Debt - A decree-holder under a court consent decree is not excluded from the definition of Operational Creditor and the decree/consent decree can constitute an operational debt for the purposes of initiating insolvency proceedings under the Code. - HELD THAT: - The Tribunal examined the statutory definitions and the admitted facts that the appellant obtained a consent decree recorded on 25.10.2018 pursuant to a settlement and that the underlying claim arose from supply of goods. Reading Sections 3(10), 3(11) and Section 5(20)/5(21) together, and having regard to authorities on the capacity of decree-holders to remain creditors, the Tribunal held that a decree-holder is not excluded from the ambit of an operational creditor and that a decree arising from a settlement recording admitted liability falls within operational debt. On that basis the Adjudicating Authority's conclusion that a decree-holder cannot be an operational creditor was held unsustainable and set aside. [Paras 39, 40, 43, 44]

Consent decree arising from the settlement is capable of constituting an operational debt and a decree-holder can be an operational creditor under the Code; the Adjudicating Authority's contrary finding was set aside.

Service of demand notice by transmission to company's official e-mail / registered office - Service of the demand notice on the company's official e-mail address as available on the Registrar of Companies portal / sending to the registered office which was returned as undelivered was held to be valid service in the circumstances. - HELD THAT: - The Tribunal considered the Adjudicating Authority's finding that the physical postal delivery had been returned and that the e-mail address used was not that of a specified officer. Relying on the presumption arising where notices to a registered office are returned as 'not available/left/locked' and authorities holding such attempts to be sufficient, the Tribunal held that service by sending the demand notice to the company's official e-mail / to the registered office (when returned undelivered) could not be faulted and was valid in law for the purposes of Section 8(1). [Paras 29, 30, 31, 32, 35]

The demand notice sent to the company's official e-mail / to its registered office (even if returned) constituted valid service in the facts of this case.

Inclusive definition of "person" - proprietor treated as individual for standing as creditor - A proprietor of a firm qualifies as an 'individual' within the inclusive definition of 'person' in the Code and therefore has standing to act as an operational creditor in his individual capacity. - HELD THAT: - The Tribunal observed the inclusive definition of 'person' in Section 3(23) and concluded that the appellant, a proprietor, is an individual for the purposes of the Code and thus competent to claim as an operational creditor. This finding addressed the Respondent's contention that a sole proprietorship falls outside the Code's ambit. [Paras 41]

The appellant, as proprietor, is an individual under the Code and entitled to maintain the petition as an operational creditor.

Validity of NCLT order setting aside and appellate relief - The impugned order of the Adjudicating Authority dismissing the Section 9 application was incorrect and was set aside; the appeal was allowed. - HELD THAT: - Having found the Adjudicating Authority's conclusions on maintainability and service to be unsustainable, and having held that the appellant was a decree-holder who could be an operational creditor and that service was valid, the Tribunal concluded that the NCLT order dated 8.6.2020 must be set aside. The Tribunal allowed the appeal and directed procedural compliance by filing a certified copy of the impugned order within two weeks. [Paras 48, 49]

Impugned order dated 8.6.2020 is set aside; the appeal succeeds and is allowed.

Final Conclusion: The NCLAT allowed the appeal, holding that a decree-holder under a consent decree may be an operational creditor and that the consent decree constituted operational debt; service of the demand notice by official e-mail / attempted service at the registered office was valid; the proprietor-appellant had standing as an individual operational creditor; accordingly the NCLT order dismissing the Section 9 petition was set aside and the appeal allowed.

Challenge to a communication seeking information - absence of a reviewable order - maintainability of writ petition - service tax registration - departmental investigation and issue of notice - centralised registration for construction of residential complex service

Challenge to a communication seeking information - absence of a reviewable order - maintainability of writ petition - Whether the writ petition challenging the communication requesting details regarding service tax registration and mode of payment is maintainable - HELD THAT: - The court found that the impugned communication merely informed the petitioner that records indicated it was not registered for service tax and requested particulars including mode of payment, PAN-based registration number and categories of services. No coercive or adjudicatory order was passed by the departmental officer which could be quashed. The petitioner thereafter furnished some details and applied for centralised registration under the category "Construction of Residential Complex Service". Given that the communication was a request for information and that the department remains entitled to investigate and, if warranted, issue appropriate notice for any non-payment of tax, the challenge to such a communication in writ jurisdiction lacked merits. The petition was therefore dismissed as not maintainable on the grounds pleaded. [Paras 2, 3, 4, 5]

Writ petition dismissed as the impugned communication was not a reviewable order and the challenge was not maintainable; departmental investigation and statutory notices, if necessary, remain open.

Final Conclusion: The writ petition seeking quashment of the departmental communication is dismissed; no costs; connected miscellaneous petition closed, with liberty for the department to investigate and issue appropriate notices if non-payment of service tax is found.

Banking and other financial services - financial leasing services including equipment leasing and hire-purchase - valuation of taxable services - exclusion of interest on loan from taxable value - service tax leviable on processing/management fees and interest component - presumption in absence of mechanism to bifurcate value - hire-purchase characterised as a financing transaction (loan)

Financial leasing services including equipment leasing and hire-purchase - banking and other financial services - hire-purchase characterised as a financing transaction (loan) - service tax leviable on processing/management fees and interest component - Whether the respondent's hire-purchase / financial leasing activity falls within taxable "banking and other financial services" and the consequences for taxability of components of EMI. - HELD THAT: - The Court affirmed that equipment leasing and hire-purchase undertaken by NBFCs constitute financial leasing services falling within the expression "banking and other financial services" and are taxable services under Section 66 read with Section 65. Applying the reasoning of the Apex Court in Association of Leasing and Financial Service Companies, the Court accepted that hire-purchase/finance leases are in substance financing transactions (loans) for the purposes of service tax. It followed that consideration received as EMIs is to be disaggregated into principal, interest (finance/interest charges) and management/processing/documentation charges; taxability devolves on the latter two components and not on the principal amount. The CESTAT's conclusion to treat the activity as a financial service and to confine levy to processing/management fees and the taxable portion of finance/interest charges was upheld as not illegal or perverse. [Paras 9, 10, 12, 14, 15]

The Court upheld CESTAT's finding that hire-purchase/financial leasing are taxable as "banking and other financial services" and that taxability attaches to processing/management fees and finance/interest charges (and not to principal).

Exclusion of interest on loan from taxable value - valuation of taxable services - presumption in absence of mechanism to bifurcate value - notification No.4/2006 - exemption of 90% of interest - Whether service tax could be recovered on the interest component of EMIs for the period prior to 01.03.2006 in absence of any statutory mechanism to bifurcate processing/management charges from interest. - HELD THAT: - The Court held that, for the period prior to 01.03.2006, interest on loans stood excluded from valuation of taxable services by the legislative scheme and by administrative clarifications. In the absence of any mechanism to isolate the processing/management component from the interest component contained in EMIs prior to 01.03.2006, the authorities could not lawfully attribute and recover service tax on the entire interest component. The Court noted the relevance of the Board's circulars and the subsequent Notification No.4/2006 (which prescribed a methodology and exempted 90% of the interest portion prospectively), and concluded that recovery of service tax on interest for the pre-01.03.2006 period was without authority of law because the assessment process could not reliably bifurcate interest and taxable management charges. [Paras 12, 13, 16, 18]

Recovery of service tax on the interest component for the period prior to 01.03.2006 was set aside as without authority of law in the absence of any mechanism to bifurcate processing/management charges from interest.

Final Conclusion: The appeal is dismissed. The High Court upheld CESTAT's conclusions: (a) hire-purchase and financial leasing by NBFCs are taxable as banking and other financial services with taxability confined to processing/management fees and finance/interest charges (not principal); and (b) recovery of service tax on the interest component for the period prior to 01.03.2006 is without authority of law in the absence of any mechanism to bifurcate the taxable component from interest.

Service tax on liquidated damages - service tax on amounts collected for theft of electricity - declared service under section 66E(e) - negative list - transmission or distribution of electricity - consideration must flow from service recipient to service provider - value of taxable service

Service tax on liquidated damages - declared service under section 66E(e) - consideration must flow from service recipient to service provider - value of taxable service - Whether amounts recovered as liquidated damages/penalty from contractors/suppliers are leviable to service tax as a declared service under section 66E(e). - HELD THAT: - The Tribunal applied the statutory definition of "service" and the declared service in clause (e) read with valuation provisions, holding that taxation under section 66E(e) requires an agreement which contemplates an activity of refraining from, tolerating or doing an act coupled with a flow of consideration from the recipient to the provider that accrues to the provider. Relying on the Larger Bench and Supreme Court precedents as discussed in South Eastern Coalfields and Bhayana Builders, the Bench held that penal clauses / liquidated damages in commercial contracts are safeguards to protect contractual expectations and do not represent a pre agreed consideration for tolerating an act. The recovery of liquidated damages arises only on breach and does not reflect an intention of the parties to procure a toleration service; accordingly such recoveries lack the requisite nexus to a declared service and do not enter the taxable value under section 67.

Demand of service tax on liquidated damages/penalty set aside; such recoveries are not taxable as a declared service under section 66E(e).

Service tax on amounts collected for theft of electricity - declared service under section 66E(e) - negative list - transmission or distribution of electricity - consideration must flow from service recipient to service provider - Whether amounts recovered from consumers as theft charges for unauthorized use of electricity are leviable to service tax as a declared service under section 66E(e). - HELD THAT: - The Tribunal examined the character of theft charges collected under the Electricity Act and the supply contracts and applied the same legal test derived from section 65B/66E and the authorities (including Lemon Tree and K.N. Food Industries). It concluded that theft charges are compensatory/penal in nature and do not spring from an agreement whereby the distribution utility agreed to tolerate an act for consideration that accrues as a service. Given the absence of a contractual arrangement contemplating toleration as a service and the lack of nexus between such recoveries and any taxable service, the amounts recovered for theft cannot be sustained as taxable declared services. The fact that the appellant is a transmission/distribution utility in the negative list did not change the determinative analysis that these particular recoveries are not consideration for a declared service under section 66E(e).

Demand of service tax on theft charges set aside; such recoveries are not taxable as a declared service under section 66E(e).

Final Conclusion: The order of the Principal Commissioner dated December 31, 2018 confirming demand of service tax with interest and penalty in respect of liquidated damages and theft charges for the period July, 2012 to March, 2016 is set aside; the appeal is allowed.

Pre-deposit - refund of deposit made during investigation - security deposit rather than duty - remand versus finality of adjudication - Circular No.984/08/2014-CX dated 16.9.2014 - unlawful retention of public money

Pre-deposit - refund of deposit made during investigation - security deposit rather than duty - Circular No.984/08/2014-CX dated 16.9.2014 - Entitlement to refund of the sum deposited by the petitioner during investigation on the footing that it constituted a pre-deposit for hearing of the appeal and must be returned following the Appellate Tribunal's orders. - HELD THAT: - The Court examined whether the Rs.50,00,000/- deposited by the petitioner in October 2004 during investigation could be characterised as a pre-deposit and therefore refundable once the petitioner's appeal was allowed by the Appellate Tribunal and remanded for de novo adjudication. The Appellate Tribunal had, when dealing with stay applications, described the deposit as "enough deposit to hear and dispose of the appeals"; the department also accepted that quantum for the purpose of stay. The Circular No.984/08/2014-CX (16.9.2014) provides that payments made during investigation/audit prior to filing of appeal can be treated as fulfilment of pre-deposit requirement and that on remand refund of pre-deposit is payable with interest. However, the Court found the present facts to be peculiar: the original adjudication fixed a large common demand and made joint and several findings against multiple parties; appeals of co-noticees (notably M/s. Balaji Enterprises) either stood rejected for non-compliance with deposit conditions or attained finality and one alleged mastermind is absconding. Because common findings underpinning joint and several liability have become final as to other parties, the matter was not a simple remand that restored the parties to the same pre-adjudication position. In these circumstances the Court was not persuaded to treat the petitioner's earlier deposit as giving rise to an immediate right to refund despite the Appellate Tribunal's characterization for stay purposes and despite the Circular and precedents relied upon by the petitioner. The Court emphasised that precedents must be applied to comparable facts and that circumstantial differences can be decisive. [Paras 16, 21, 22, 24, 25]

The petitioner's claim for refund of the Rs.50,00,000/- is rejected and the orders below upholding prematurity of the refund claim are not interfered with.

Remand versus finality of adjudication - unlawful retention of public money - Whether the matter remanded by the Appellate Tribunal required directions for expeditious de novo adjudication and ancillary directions for the conduct of proceedings. - HELD THAT: - Although the petition seeking refund was dismissed, the Court recognised delay and the public interest in concluding long pending adjudication. Having been informed of a tentative schedule from respondents and mindful of pandemic limitations, the Court directed that the Adjudicating Authority conclude the de novo adjudication expeditiously and preferably within six months from receipt of this order. The Court allowed use of video-conferencing for hearings and cross-examination where appropriate, clarified that the Adjudicating Authority must decide independently uninfluenced by the Court's discussion on the refund plea, and directed the petitioner to cooperate with the proceedings. [Paras 28, 29, 30]

The Adjudicating Authority is directed to complete the de novo adjudication preferably within six months of receipt of this order, to consider video conferencing where appropriate, and to decide independently.

Final Conclusion: The writ petition seeking refund of Rs.50,00,000/- is dismissed; the orders rejecting the refund claim are upheld. Separately, the Adjudicating Authority is directed to complete the remanded de novo adjudication expeditiously, preferably within six months, using video conferencing where appropriate, and to decide independently of this Court's observations.

Interest on delayed refund - applicability of Section 11B and Section 11BB of the Central Excise Act, 1944 - refund under exemption notification - Notification No. 33/99-CE dated 08.07.1999 - departmental circular - binding effect of High Court decisions - judicial discipline of subordinate/quasi judicial authorities - direction to calculate and pay interest

Interest on delayed refund - applicability of Section 11B and Section 11BB of the Central Excise Act, 1944 - Notification No. 33/99-CE dated 08.07.1999 - refund under exemption notification - Whether the petitioners are entitled to interest under Section 11BB on excise duty refunds made in terms of Notification No. 33/99-CE dated 08.07.1999. - HELD THAT: - The Court applied the reasoning in Amalgamated Plantations (P) Ltd. and held that Sections 11B and 11BB do not exclude refunds made under the exemption notification dated 08-07-1999. By reference to the scheme of the notification and the statutory provisions, the Court observed that once a manufacturer is found entitled to refund under the notification, the refund must be made as per the schedule set out therein and, if not made within the statutory period, interest under Section 11BB accrues. The Court noted that executive circulars cannot override statutory provisions or judicial interpretation and that the Division Bench ruling in Amalgamated Plantations removes any ambiguity as to applicability of Sections 11B/11BB to refunds under Notification No. 33/99-CE. Consequently the petitioners are entitled to have the interest on delayed refund determined by the revenue authority. [Paras 29]

Petitioners entitled to interest under Section 11BB on excise duty refunds made under Notification No. 33/99-CE; revenue to determine the interest payable.

Departmental circular - binding effect of High Court decisions - judicial discipline of subordinate/quasi judicial authorities - Whether departmental circulars can be relied upon by the revenue to deny interest when a contrary binding decision of the jurisdictional High Court stands unreversed. - HELD THAT: - The Court restated the settled principle that executive or departmental circulars are executive in character and cannot override statutory provisions or a binding judicial pronouncement of the High Court. Absent any stay or reversal by a higher court, subordinate and quasi judicial authorities are bound to follow the law as declared by the jurisdictional High Court. Accordingly, the Deputy Commissioner could not refuse interest by reference to Board circulars where this High Court's Division Bench has held Sections 11B/11BB applicable to refunds under the notification. [Paras 27]

Departmental circulars cannot be used to displace the binding effect of the High Court's decision; the revenue must follow the Court's precedent.

Direction to calculate and pay interest - What remedial directions should be given to the revenue in respect of the claim for interest on delayed refund. - HELD THAT: - Having held that interest is payable, the Court directed the revenue to examine the petitioners' claim, calculate the interest payable for the relevant period, and release the amounts after due computation. The Court further prescribed a timetable for completion of the exercise to ensure prompt compliance by the revenue. [Paras 29, 30]

Impugned order rejecting interest set aside; revenue directed to determine and pay the interest and complete the excise proceedings within 60 days from receipt of certified copy of the order.

Final Conclusion: Writ petition allowed: the Court set aside the Deputy Commissioner's order rejecting interest, held that Sections 11B and 11BB apply to refunds under Notification No. 33/99-CE dated 08.07.1999, rejected reliance on departmental circulars to the contrary, and directed the revenue to compute and pay the interest for the period July, 1999 to February, 2003 within the time specified.

Procurement at concessional rate under Section 8(3)(b) of the Central Sales Tax Act, 1956 - meaning of "manufacture or processing of goods for sale" for Form C purpose - misuse/diversion of Form C and endorsement conditions in registration - penalty under Section 10-A of the Central Sales Tax Act, 1956 for diversion/misuse - requirement of mens rea for imposition of penalty under Section 10-A

Procurement at concessional rate under Section 8(3)(b) of the Central Sales Tax Act, 1956 - meaning of "manufacture or processing of goods for sale" for Form C purpose - Whether the petitioner was entitled to procure goods at concessional rate of tax against Form C under Section 8(3)(b) of the Central Sales Tax Act, 1956 - HELD THAT: - The court analysed Section 8(3)(b) and Rule 13 and the endorsement in the petitioner's registration, which authorised procurements only for re-sale or for use in the manufacture or processing of goods for sale. Applying the tests laid down in Union of India v. J.G. Glass Industries for when an activity amounts to manufacture or processing, the court found that although effluent treatment involves processing, the petitioner did not sell the treated effluent nor use the purchased goods as inputs in manufacture or processing of goods for sale. Independent common effluent treatment plants were held to be service providers rather than entities engaged in manufacture or processing for sale. Consequently, the petitioner was not entitled to issue Form C to its suppliers or procure goods at the concessional CST rate under Section 8(3)(b). The court observed that a liberal construction favouring the petitioner would run counter to the specific scheme of concession in Section 8(3)(b).

Petitioner was not entitled to procure goods at concessional rate against Form C since its activity did not qualify as "manufacture or processing of goods for sale" and no re-sale of treated effluent occurred.

Misuse/diversion of Form C and endorsement conditions in registration - penalty under Section 10-A of the Central Sales Tax Act, 1956 for diversion/misuse - requirement of mens rea for imposition of penalty under Section 10-A - Whether imposition of penalty under Section 10-A on the petitioner for diversion of goods to sister concerns was justified and whether mens rea was required for such penalty - HELD THAT: - The notice and records showed that goods procured at concessional rates were consigned to separate sister concerns with different TINs, contrary to the registration endorsement and declarations in Form C. The court rejected the petitioner's contention that absence of mens rea precluded imposition of penalty, noting precedent which requires reading Section 10-A as a penal provision permitting penalty where the concessional undertaking in Form C is not carried out. The court also considered authorities on computation of penalty and confined its inquiry to the diversion for which penalty was proposed in the notice. Finding no infirmity in the respondent's conclusion as to diversion and misuse, the court upheld the imposition of penalty under Section 10-A limited to the proportionate value of goods diverted to sister concerns.

Penalty under Section 10-A was validly imposed for diversion/misuse of Form C to sister concerns; absence of mens rea did not preclude imposition and the penalty as imposed (confined to the diverted proportion) is upheld.

Final Conclusion: Writ petition dismissed: the court held the petitioner was not entitled to procure goods at concessional CST under Section 8(3)(b) because its CETP activity did not amount to manufacture or processing for sale, and the penalty under Section 10-A for diversion of goods to sister concerns was rightly imposed and is sustained (limited to the proportionate value diverted).