TaxTMI Updates e-Newsletter
Feb 23,2023

Grant of bail pending trial - Misuse of input tax credit - Non-necessity of continued detention despite alleged revenue loss - Parity with co-accused released on bail - Charge-sheet having been filed

Grant of bail pending trial - Misuse of input tax credit - Non-necessity of continued detention despite alleged revenue loss - Parity with co-accused released on bail - Charge-sheet having been filed - Appellant released on bail in connection with offences relating to alleged misuse of input credit. - HELD THAT: - The Court recorded that the appellant has been in detention since 27.01.2022 on allegations of misuse of input credit under the Central Goods and Services Act, 2017, and that a charge-sheet has been filed. A co-accused had earlier been enlarged on bail by the High Court on 29.06.2022 and the State had not sought special leave in respect of that order. The State's contention of alleged loss to the exchequer and absence of recovery, quantified as rupees six crores, was considered but held not to justify continued detention pending trial. Applying the principle of parity with the co-accused and having regard to the filing of the charge-sheet, the Court concluded that further detention was unnecessary. The Court therefore set aside the order under appeal and directed release on bail, leaving the precise terms and conditions to be fixed by the Trial Court while mandating that the appellant must not delay trial proceedings and must remain regularly present before the Trial Court.

Order under appeal set aside; appellant to be released on bail on such terms as the Trial Court may impose, subject to his regular attendance and not delaying the trial.

Final Conclusion: Appeal allowed; appellant released on bail in the subject proceedings with direction to comply with conditions to be imposed by the Trial Court and to attend regularly without causing delay to the trial.

Fraudulent GST registration - Suspension of fraudulent GST account - Duty of State GST authorities to examine representations - Police investigation into misuse of identity documents - Obligation of complainant to disclose identity of person to authorities - Cooperation with investigating and regulatory authorities - Liberty to pursue available legal remedies - Non-expression of opinion on merits

Fraudulent GST registration - Duty of State GST authorities to examine representations - Suspension of fraudulent GST account - Petition to treat grievance of alleged fraudulently obtained GST registration as a representation and for action by State GST authorities - HELD THAT: - The Court directed that the petition shall be treated by the Commissioner GST/State GST authorities as a representation and that the grievance of the petitioner be examined in accordance with law. The order requires the concerned State GST authorities to consider the petitioner's claims, including the allegation that a GST registration was obtained without his knowledge, and take appropriate action such as suspension or other steps as warranted after examination. The Court did not adjudicate the merits of the allegations but mandated administrative examination of the representation by the competent State GST authority. [Paras 8, 10, 11]

State GST authorities to treat the petition as a representation and examine the grievance; no judicial finding on merits.

Police investigation into misuse of identity documents - Obligation of complainant to disclose identity of person to authorities - Cooperation with investigating and regulatory authorities - Liberty to pursue available legal remedies - Obligation of the petitioner to disclose identity of person alleged to have been given his identity documents and to cooperate with police and State GST authorities, and availability of further remedies - HELD THAT: - The Court directed the petitioner to disclose to the Police Authorities and to the State GST authorities the identity of the friend to whom he claims to have handed over his Aadhar and PAN cards, and to fully cooperate with the concerned authorities and provide all required information. The order records that if the petitioner's grievance is not resolved by administrative action, he remains at liberty to avail of remedies available in law. The Court clarified that it expresses no view on the merits of the allegations. [Paras 7, 8, 9, 10]

Petitioner to disclose identity and cooperate with authorities; petitioner retains liberty to pursue legal remedies if grievance is not addressed.

Final Conclusion: The petition is disposed of by directing the State GST authorities to treat the filing as a representation and to examine the alleged fraudulent GST registration; the petitioner must disclose the identity of the person to whom he handed his identity documents and cooperate with police and GST authorities; the Court expressed no opinion on the merits and the petitioner remains free to pursue available legal remedies.

Quash and remand - non-application of mind - rate of tax on export goods - deposit as condition for interim relief - principles of natural justice - assessment order under the Tamil Nadu Goods and Services Tax Act, 2017 - penalty under Section 73(1) of the G.S.T. Act, 2017

Non-application of mind - rate of tax on export goods - Impugned assessment order did not consider the claim based on Notification No.41/2017 - Integrated Tax (Rate) dated 23.10.2017 and is liable to fresh consideration on merits. - HELD THAT: - The petitioner contended that exports of the goods described (granite, etc.) attracted the concessional rate under the said Notification and that the assessing officer fixed tax at 18% without applying his mind to that Notification. The court observed that the petitioner's contentions were not dealt with in the assessment order and that the order is non-speaking in that regard. Although there was an inordinate delay of over thirteen months in approaching the court and no statutory appeal had been filed, the court nonetheless found the proper course to be quashing the impugned assessment order and remanding the matter for fresh consideration of the tax rate claim on merits and in accordance with law. [Paras 6, 7, 9, 11]

Impugned assessment order quashed and remanded for fresh consideration on merits of the claim regarding applicable rate on exports.

Deposit as condition for interim relief - penalty under Section 73(1) of the G.S.T. Act, 2017 - Petitioner required to deposit 50% of the amount demanded (including penalty) as a condition for quashing the assessment order and obtaining remand. - HELD THAT: - The court, while noting delay and absence of statutory appeal, exercised its equitable jurisdiction to grant relief subject to terms. It directed deposit of fifty percent of the amount demanded under the impugned assessment order within four weeks from receipt of the order as a pre-condition for quashing and remand. The court made clear that failure to make the deposit within the stipulated time would result in confirmation of the assessment order. [Paras 9, 10, 11]

Petitioner directed to deposit 50% of the demanded amount within four weeks; on such deposit the assessment order is quashed and remitted; failure to deposit will result in confirmation.

Principles of natural justice - quash and remand - On remand the respondent must reconsider the assessment on merits in accordance with law and the principles of natural justice, including granting one personal hearing to the petitioner. - HELD THAT: - The court mandated that the respondent, when reconsidering the matter, shall adhere to the principles of natural justice. Specifically, the respondent was directed to grant one personal hearing to the petitioner and to pass final orders on merits expeditiously and in accordance with law. This obligation follows from quashing the non-speaking order and remanding the matter for fresh adjudication. [Paras 11]

Respondent to decide the matter afresh on merits, observing natural justice and granting one personal hearing; final order to be passed expeditiously.

Final Conclusion: Writ petition allowed in part: the assessment order dated 30.12.2021 is quashed and remanded for fresh consideration on merits; petitioner to deposit 50% of the amount demanded within four weeks as a condition for quash and remand, failing which the order shall stand confirmed; respondent to grant one personal hearing and decide the matter in accordance with law.

Stay of proceedings - show-cause notice - adjudication by appellate authority - bar on issuing duplicate proceedings under Section 112(3) of JGST Act, 2017 - no demand pending

Stay of proceedings - show-cause notice - adjudication by appellate authority - Interim stay of further proceedings in respect of two show-cause notices issued for the same tax period - HELD THAT: - The petition challenged two show-cause notices issued by different authorities for the same tax period April 2019- March 2020, while there existed an earlier adjudication by the Appellate Authority (order dated 16.01.2021) arising from the Summary of Order in Form GST-DRC-07 dated 16.03.2020, and no higher forum had been invoked by the department in respect of that adjudication. The State was granted three weeks to file a counter-affidavit and the petitioner a further week to reply. Pending receipt of instructions and counter-affidavit, the High Court stayed further proceedings in respect of both impugned show-cause notices to preserve the parties' positions and to enable adjudication of the contentions raised in the writ petition. The order is interlocutory and does not decide the substantive question of jurisdiction or the merits of the challenge to the notices under Section 112(3) of the JGST Act, 2017. [Paras 3]

Proceedings in respect of the impugned show-cause notices dated 16.09.2022 and 20.10.2022 are stayed pending further orders.

Final Conclusion: The High Court granted an interim stay of further proceedings on the two impugned show-cause notices relating to April 2019- March 2020 and directed the State to file a counter-affidavit within three weeks, with liberty to the petitioner to reply; the stay is interlocutory and the substantive issues were not finally adjudicated.

Constitution of Appellate Tribunal - extension of limitation for filing appeal due to non-constitution of tribunal - effect of non-constitution of tribunal on implementation of appealable orders - recourse to Circular / Removal of Difficulties Order to avoid prejudice to taxpayers

Extension of limitation for filing appeal due to non-constitution of tribunal - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - Circular No. 132/2/2020-GST dated 18 March 2020 (Clause 4.2) - The time for filing appeals to the Goods and Services Tax Appellate Tribunal is extended in accordance with Clause 4.2 of the Circular dated 18 March 2020. - HELD THAT: - The Court accepted the Board's affidavit and the Board's Circular which apply the Ninth Removal of Difficulties Order, 2019. Clause 4.2 provides that where the Appellate Tribunal has not been constituted, the period to file an appeal shall be three months (six months for Government appeals) from the date of communication of the order or from the date on which the President or State President of the Appellate Tribunal enters office, whichever is later. The Court noted there is no positive date for the contingency (entry of President/State President), but held that the prescribed extension in Clause 4.2 governs the limitation for filing appeals while the Tribunal remains unconstituted. The Court therefore gave effect to the extension as the operative measure to avoid prejudice to taxpayers pending constitution of the Tribunal. [Paras 7, 8, 10]

Period for filing appeals shall stand extended as provided in Clause 4.2 of the Circular dated 18 March 2020.

Effect of non-constitution of tribunal on implementation of appealable orders - interim protection pending constitution of tribunal - Impugned appealable orders shall not be given effect until two weeks after the extended period for filing appeal under Clause 4.2 has expired. - HELD THAT: - Having accepted that the Government does not intend taxpayers to be prejudiced by the non-constitution of the Tribunal and that limitation has been extended to preserve rights, the Court held that appealable orders should not be implemented in a manner that causes prejudice before appellants have the opportunity to file appeals once the contingency in Clause 4.2 is satisfied. To give a clear, administrable respite, the Court directed that impugned orders will not be given effect until two weeks after the period for filing an appeal under Clause 4.2 has run. The Court also recommended that appellate authorities incorporate Clause 4.2 wording in appealable orders to guide parties and reduce needless writ litigation. [Paras 10, 11, 12]

Impugned orders shall not be given effect until two weeks after the period prescribed for filing an appeal under Clause 4.2 has expired.

Final Conclusion: Writ petitions disposed: period for filing appeals extended as per Clause 4.2 of the Board's Circular dated 18 March 2020, and impugned appealable orders are directed not to be given effect until two weeks after the expiry of that extended appeal period; other contentions, including validity challenges, are left open.

Definition of 'local authority' - application of the R.C. Jain attributes for characterising a local authority - distinction between 'local authority' and 'Governmental Authority' for GST rate applicability - concessional GST rate for composite works contracts supplied to a local authority - interpretation of amended rate Notification and deletion of 'Governmental Authority'/'Government Entity' - binding effect of an Advance Ruling on the applicant and jurisdictional officer

Definition of 'local authority' - application of the R.C. Jain attributes for characterising a local authority - distinction between 'local authority' and 'Governmental Authority' for GST rate applicability - Whether BWSSB qualifies as a 'local authority' under Section 2(69) of the CGST Act, 2017 - HELD THAT: - The Authority examined clause (c) of Section 2(69) and applied the attributes laid down by the Supreme Court in Union of India v. R.C. Jain to determine whether BWSSB is 'any other authority legally entitled to, or entrusted by the State Government with the control or management of a municipal or local fund'. The BWSSB Act establishes BWSSB as a body corporate mandated to provide water supply and sewerage within the Bangalore Metropolitan Area and to levy rates and charges for its operations; it therefore satisfies several attributes (separate legal existence, corporate character, defined area, and entrustment of municipal functions). However, BWSSB fails the attribute of being ordinarily elected wholly or partly by inhabitants because its members are appointed by the State Government. Further, BWSSB's governance and powers (appointment and removal of members by the State Government, requirement of prior governmental approval for key appointments and schemes, restrictions on borrowing and write-offs, audit and reporting to the State Legislature, and directions from the State Government) demonstrate an appreciable degree of governmental control that precludes the appreciable autonomy characteristic of bodies comparable to Municipal Committees, Zilla Parishads or District Boards. The Board also raises its own revenues rather than being entrusted with a distinct 'local fund' by the State Government; grants or subventions from the State are financial assistance and do not amount to entrustment of a local fund. The West Bengal AAR ruling relied on by the appellant is distinguishable and does not consider the R.C. Jain test; advance rulings are binding only on the applicant and the jurisdictional officer and lack precedential value. Registrations or PAN/GSTIN entries reflecting a declared constitution do not preclude a fresh legal examination under Section 2(69) when determining rate applicability. On these determinations, BWSSB does not satisfy the statutory definition of 'local authority'. [Paras 14, 15, 16, 17, 18]

BWSSB is not a 'local authority' within the meaning of Section 2(69) of the CGST Act, 2017.

Concessional GST rate for composite works contracts supplied to a local authority - interpretation of amended rate Notification and deletion of 'Governmental Authority'/'Government Entity' - Applicable GST rate on works contract supplies by the appellant to BWSSB with effect from 1st January 2022 - HELD THAT: - Entry 3(iii) of Notification No.11/2017-CT (Rate) originally extended a 12% concessional rate to composite works contracts supplied to the Central Government, State Government, Union territory, a local authority, a Governmental Authority or a Government Entity for specified works. Notification No.15/2021-CT (Rate) (effective 1st January 2022) deleted the words 'Governmental Authority' and 'Government Entity' from that entry, restricting the concessional rate to supplies made to the Central Government, State Government, Union territory or a local authority. Because BWSSB does not qualify as a 'local authority' under Section 2(69), the appellant's supplies to BWSSB no longer fall within the scope of the 12% concessional entry. Consequently, the supplies are chargeable at the general rate applicable to such works contract supplies (as held by the AAR and upheld by this Authority). [Paras 3, 9, 18]

With effect from 1st January 2022 the appellant is not entitled to the 12% concessional rate on supplies to BWSSB; the AAR's finding on the applicable higher rate is upheld.

Final Conclusion: The appeal is dismissed; the Advance Ruling No. KAR/ADRG 23/2022 dated 12-08-2022 is upheld. The Board (BWSSB) is not a 'local authority' under Section 2(69) of the CGST Act, 2017, and supplies by the appellant to BWSSB are not eligible for the 12% concessional rate with effect from 1st January 2022.

Classification under Chapter 6 - cut flowers, foliage and other parts of plants suitable for bouquets - Note 2 to Chapter 6 regarding inclusion of bouquets, floral baskets and similar articles - Tariff item classification as 06039000 or 06049900 depending on constituents - Exemption of goods of Chapter 6 under Notification No.2/2017-Central Tax (Rate) - serial number 34

Classification under Chapter 6 - cut flowers, foliage and other parts of plants suitable for bouquets - Note 2 to Chapter 6 regarding inclusion of bouquets, floral baskets and similar articles - Exemption of goods of Chapter 6 under Notification No.2/2017-Central Tax (Rate) - serial number 34 - Whether bouquets made of dried, bleached, dyed or coloured parts of plants sold with plastic foil packaging are classifiable under the Chapter 6 tariff items and exempt from GST under the notification cited. - HELD THAT: - The Authority examined the nature of the applicant's product and the manufacturing process. Note 2 to Chapter 6 expressly treats any reference in headings 0603 or 0604 as including bouquets and similar articles made wholly or partly of goods of that kind. Heading 0603 covers cut flowers and flower buds prepared (including dried and dyed) and Heading 0604 covers foliage, branches and other parts of plants prepared (including dried and dyed). Accordingly, bouquets composed of dried and/or dyed flower buds fall within Tariff Item No. 06039000, while bouquets composed of dried and/or dyed foliage, branches or other parts of plants fall within Tariff Item No. 06049900, depending on the constituents of the bouquet. The Authority further noted that serial number 34 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017 exempts the whole of Chapter 6 from tax. Therefore, supplies of the applicant's bouquets, when classifiable under the identified tariff items, are covered by that exemption.

Bouquets made from dried, bleached, dyed or coloured parts of plants and sold with plastic foil packaging are classifiable under Tariff Item Nos. 06039000 or 06049900 as applicable, and such supplies are exempt from GST under serial number 34 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017.

Final Conclusion: The Authority rules that the applicant's bouquets, depending on their constituents, fall under Tariff Item Nos. 06039000 or 06049900 and are exempt from GST by virtue of serial number 34 of Notification No.2/2017-Central Tax (Rate) dated 28.06.2017.

Admissibility of advance ruling by recipient - Interpretation of "supply" in advance ruling - Binding nature of advance ruling - Exempt supply and entitlement to exemption - Practical efficacy of advance ruling when not binding on supplier

Admissibility of advance ruling by recipient - Interpretation of "supply" in advance ruling - Binding nature of advance ruling - Exempt supply and entitlement to exemption - Application for advance ruling filed by the recipient of services is not admissible in respect of taxability of the recipient's inward supply. - HELD THAT: - The Authority examined the definition of "applicant" and the scope of advance ruling provisions and concluded that, although the statute permits a person registered or desirous of registration to seek a ruling on matters listed in Section 97(2), the statutory scheme and practical effect show that exemption entries (such as entry 41 of Notification No. 12/2017-Central Tax (Rate)) operate in relation to the taxable person making the outward supply. A conjoint reading of the definitions of "aggregate turnover" and "exempt supply" indicates that the entitlement to claim exemption is to be recognised for the supplier for purposes of calculating aggregate turnover and claiming exemption. Further, Section 103 makes the advance ruling binding only on the applicant and the concerned/jurisdictional officer in respect of that applicant; it does not bind the supplier. If a recipient's ruling on the taxability of his inward supply were pronounced, it would not bind the supplier, thereby rendering the ruling practically ineffective and defeating the legislative purpose. For these reasons the Authority held that an application filed by a recipient seeking a ruling on the taxability/exempt nature of his inward supply cannot be admitted for pronouncement of a binding advance ruling. [Paras 1]

The application for advance ruling filed by the applicant as recipient of services is not admissible and is rejected.

Final Conclusion: The Authority refused to admit the advance ruling application because a ruling sought by a recipient on the taxability/exempt status of inward supplies would bind only the applicant and not the supplier, thereby frustrating the purpose and practical efficacy of the advance ruling mechanism; the application is rejected.

Composite supply - value of supply including non-monetary consideration - determination of value under Rule 27(b) - exemption under entry 3A of Notification No. 12/2017-Central Tax (Rate) - public distribution as activity entrusted under Article 243G/243W - applicability of Circular No. 153/09/2021 - alternate 5% rate

Admissibility of advance ruling application despite prior inquiry - Admissibility of the applicant's advance ruling application under the first proviso to section 98(2) of the GST Act. - HELD THAT: - The Authority considered whether an earlier inquiry by the DGGI rendered the application non-admissible under the proviso to section 98(2). The Authority distinguished the facts from precedents relied on by the applicant, noting that no show-cause notice or specific proceeding on the question had been issued by the DGGI. On these facts the Authority held that the existence of an inquiry, without any pending or decided proceeding on the question raised, did not attract the proviso and the application was admitted for consideration. [Paras 1]

Application admitted as the prior inquiry did not constitute a pending or decided proceeding on the question raised.

Composite supply - public distribution as activity entrusted under Article 243G/243W - Whether the activity performed by the applicant qualifies as a composite supply in relation to a function entrusted to Panchayat/Municipality under the Constitution. - HELD THAT: - The Authority examined the contract obligations - milling of wheat, fortification by premixing micronutrients, and packing in labelled poly-pouches for delivery to nominated distributors - and found these activities constitute a composite supply with milling as the principal supply. The empanelment and supply for distribution under the Public Distribution System, governed by specified Government orders, linked the supply to a function (Public Distribution) listed in the 11th Schedule; thus the composite supply was held to be in relation to a function entrusted under Article 243G/243W. [Paras 4]

The supply is a composite supply and is in relation to a function entrusted under Article 243G/243W (Public Distribution).

Value of supply including non-monetary consideration - determination of value under Rule 27(b) - exemption under entry 3A of Notification No. 12/2017-Central Tax (Rate) - applicability of Circular No. 153/09/2021 - alternate 5% rate - Whether the value of goods in the composite supply exceeds 25% of the total value of supply such that the exemption under entry 3A is unavailable and the alternate 5% rate applies. - HELD THAT: - The Authority applied Rule 27(b) for supplies where consideration is not wholly in money and accepted that non-monetary components (gunny bags, bran and refraction) have ascertainable equivalent money values known at the time of supply. Relying on the Department memos and the parties' agreed contract values, the Authority treated the total value of supply as the sum of cash consideration and the known non-cash consideration, and found the total value and its composition accordingly. On that basis the value attributable to goods (packing and fortification components) was 23.03% of the total, which does not exceed the 25% threshold. Consequently the composite supply qualifies for exemption under entry 3A of Notification No. 12/2017; the alternate 5% job-work rate under Circular No. 153/09/2021 is therefore not attracted. [Paras 4]

Value of supply includes known non-monetary consideration under Rule 27(b); value of goods is 23.03% of total value and the composite supply is exempt under entry 3A of Notification No. 12/2017; alternate 5% rate not applicable.

Final Conclusion: The Authority admitted the application, held the applicant's operations to be a composite supply made in relation to Public Distribution (Article 243G/243W), determined value of supply to include known non-monetary consideration under Rule 27(b), found the value of goods to be below 25% of the total, and ruled that the composite supply is exempt under entry 3A of Notification No. 12/2017-Central Tax (Rate).

Job work - consideration - non-monetary consideration - value of supply - normal loss / wastage - transaction value - value determination under rule 27 of the CGST/WBGST Rules, 2017 - time of supply under sub-section (2) of section 13 of the GST Act

Job work - normal loss / wastage - non-monetary consideration - consideration - value of supply - Liability to pay GST on the 10 grams of pure gold retained by the applicant during job work - HELD THAT: - The applicant performed job work on gold belonging to the principal and was allowed a contractual wastage. Governmental wastage norms indicate prescribed permissible manufacturing loss. Retaining 10 grams out of the input, which exceeds permissible wastage norms and effectively results from an agreement that the applicant will retain a portion of the input, is not mere normal manufacturing loss. Where the price is not the sole consideration because an excess portion of input is retained by the job-worker, that excess constitutes non-monetary consideration. Accordingly, the excess retained gold (10 gm) forms part of the value of the job-work supply and is taxable. [Paras 4]

The applicant is liable to pay GST in respect of the 10 grams of pure gold retained; its value forms part of the value of the job-work supply.

Value determination under rule 27 of the CGST/WBGST Rules, 2017 - transaction value - time of supply under sub-section (2) of section 13 of the GST Act - value of supply - Time and manner of determining value of the supply in respect of the retained 10 grams of gold - HELD THAT: - Since the excess retained gold constitutes non-monetary consideration, its value must be included in the value of supply. The Authority directs that the value of such supply shall be determined in accordance with the valuation provisions, specifically under rule 27 of the CGST/WBGST Rules, 2017. The time of supply for the taxable event will be determined under the provisions governing time of supply, namely sub-section (2) of section 13 of the GST Act. [Paras 4]

Value of the supply to include the value of the retained gold determined under rule 27; time of supply to be determined under sub-section (2) of section 13 of the GST Act.

Value of supply - consideration - transaction value - Classification of the retained gold-whether taxable as goods or as part of job-work service and applicable rate - HELD THAT: - The excess retained gold is treated as non-monetary consideration that forms part of the value of the job-work service provided by the applicant. Therefore, the value attributable to the retained gold is to be aggregated with the consideration for the job-work service. Consequently, the transaction is taxable as a supply of job-work service and not as a separate supply of goods for the purpose of classification and rate application. [Paras 4]

The value of the 10 gm of gold is part of the value of job-work services and is taxable as service at the applicable rate (5%).

Final Conclusion: The Authority rules that the 10 grams of gold retained by the job-worker, being in excess of permissible wastage and constituting non-monetary consideration, forms part of the value of the job-work supply; its value is to be determined under rule 27 of the CGST/WBGST Rules, 2017, the time of supply determined under sub-section (2) of section 13 of the GST Act, and the aggregated value is taxable as job-work service at the applicable rate (5%).

Exempt supply - non-taxable supply - supply - input tax credit - reversal of input tax credit - apportionment of credit

Exempt supply - non-taxable supply - supply - input tax credit - reversal of input tax credit - apportionment of credit - Whether the applicant is obliged to reverse input tax credit under section 17(2) read with Rule 42 in respect of sale of alcoholic liquor for human consumption effected at its premises - HELD THAT: - The Authority examined whether sale of alcoholic liquor for human consumption qualifies as 'goods' and as a 'supply' under the GST Act and whether such sale falls within the definitions of 'non-taxable supply' and thereby 'exempt supply'. The definition of 'goods' under the Act is broad and does not exclude alcoholic liquor, which being a movable property qualifies as goods (findings at 4.4). The inclusive definition of 'supply' in section 7 covers all forms of supply such as sale for consideration in course or furtherance of business; sale of alcoholic liquor by the applicant therefore falls within 'supply' (4.5). Article 366(12A) and section 9 operate to exclude levy of tax on supply of alcoholic liquor for human consumption, but that exclusion means such supplies are 'not leviable to tax' and thus are captured by the statutory definition of 'non-taxable supply' (section 2(78)) and, since 'exempt supply' (section 2(47)) includes 'non-taxable supply', sale of alcoholic liquor is an 'exempt supply' under the GST framework (4.6-4.7). Section 17(2) and Rule 42 require apportionment and reversal of input tax credit attributable to exempt supplies; because sale of alcoholic liquor is an exempt/non-taxable supply, the input tax credit attributable to that exempt supply must be reversed as per the prescribed formula (4.8). The Authority rejected the applicant's contention that reversal would amount to indirect levy of GST on alcoholic liquor (the maxim prohibiting indirect taxation); it distinguished inward input tax (on which reversal operates) from outward tax on exempt supplies and held that reversal of ITC does not equate to levying output tax on the exempted sale, and therefore is not an impermissible indirect tax (4.9). [Paras 4]

The applicant is required to reverse input tax credit in terms of section 17(2) of the GST Act read with Rule 42 of the GST Rules in respect of sale of alcoholic liquor for human consumption effected at its premises.

Final Conclusion: Under the facts and submissions in this application, sale of alcoholic liquor for human consumption is a 'non-taxable' and hence an 'exempt' supply under the GST Act, and the applicant must reverse input tax credit attributable to such exempt supply in accordance with section 17(2) read with Rule 42.

Composite supply of works contract - earth work constituting more than 75% of the value of the works contract - supply to State Government - applicability of Notification No. 39/2017 (Entry No. 3(vii)) - advance ruling under section 97

Supply to State Government - Whether the supply to the Water Resource Department, Government of Andhra Pradesh, qualifies as supply to the State Government. - HELD THAT: - The Authority noted the FAQ issued by the Central Board of Indirect Taxes & Customs which treats a department of the Central/State Government as the Central/State Government for the purpose of taxation. On the materials produced and that position, the Authority held that services provided to the Water Resource Department of the Government of Andhra Pradesh qualify as supplies to the State Government. The ruling treats inter-departmental supplies as supplies to the Government for the purposes of the Notification relied upon. [Paras 4]

Supply to the Water Resource Department, Government of Andhra Pradesh, is a supply to the State Government.

Composite supply of works contract - earth work constituting more than 75% of the value of the works contract - Whether the contract for desilting the foreshore of Prakasam Barrage is a works contract involving predominantly earth work. - HELD THAT: - The Authority examined the agreement, tender conditions and the nature of dredging. It held that the work involves excavation/removal of silt from the foreshore and that dredging is the excavation of material from a water environment. The contract requires procurement of construction materials by the contractor and aims at improvement of immovable property, thereby comprising both supply of services and transfer of goods. Applying definitions and earlier advance rulings referenced, the Authority concluded that the contract qualifies as a works contract and that dredging constitutes earth work. The Executive Engineer's certificate certifying that material cost is less than 25% of the contract value was accepted as evidence that earth work predominates. [Paras 4]

The agreement is a composite works contract which predominantly involves earth work.

Applicability of Notification No. 39/2017 (Entry No. 3(vii)) - Whether Entry No. 3(vii) of Notification No. 39/2017-providing a concessional rate where a works contract predominantly involves earth work and is supplied to Government-applies to the instant supply. - HELD THAT: - Having held that the supply is to the State Government and that the contract is a works contract predominantly involving earth work (i.e., more than 75% of the contract value), the Authority applied Entry No. 3(vii) of Notification No. 39/2017. The Authority also noted the subsequent revision of rates effective from 18.07.2022 but, on the facts and documentary certification before it, concluded that the supply falls within the scope of the said entry as amended. [Paras 4]

Entry No. 3(vii) of Notification No. 39/2017 applies to the instant supply.

Final Conclusion: The Authority ruled that the desilting contract for Prakasam Barrage is a composite works contract predominantly involving earth work, that the Water Resource Department is the State Government for this purpose, and that the supply falls within Entry No. 3(vii) of Notification No. 39/2017 (as amended) thereby attracting the concessional rate specified therein.

Reopening assessment beyond four years under Section 147 - failure to disclose material facts - tangible fresh material requirement for reassessment - change of opinion doctrine - invalid reassessment for mere change of opinion - reasons recorded must disclose new material

Reopening assessment beyond four years under Section 147 - tangible fresh material requirement for reassessment - failure to disclose material facts - Validity of reopening the assessment for AY 2014-15 beyond four years under section 147 in the absence of fresh tangible material or failure to disclose material facts by the assessee. - HELD THAT: - The Court examined whether the AO had formed a valid reason to believe that income had escaped assessment beyond the four-year period. The Court emphasised the dual pre-conditions for such reopening: (a) existence of failure by the assessee to disclose truly and fully any material fact necessary for assessment, and (b) presence of tangible material on which the AO could form a reason to believe that income had escaped assessment. The record showed that the AO had already examined the transaction in the original scrutiny assessment and made an addition treating the investment as bogus. The reasons recorded for reopening did not identify any new material not available at the time of the original assessment, nor did they allege non-disclosure by the assessee of primary facts. Reliance was placed on the settled principle that mere production of documents does not ipso facto amount to non-disclosure of primary facts and that it is not the assessee's duty to advise the AO on inferences to be drawn. In the absence of fresh tangible material or any finding of failure to disclose, the statutory conditions for reopening beyond four years were not satisfied. [Paras 9, 10, 11, 13]

Reopening of the assessment under section 147 beyond four years was invalid as the AO did not record any fresh tangible material nor allege failure to disclose material facts; jurisdictional conditions for reassessment were not satisfied.

Change of opinion doctrine - invalid reassessment for mere change of opinion - reasons recorded must disclose new material - Whether the reassessment and consequent additions/penalty were sustainable where the AO sought to increase the addition by re-opening issues already considered in the original assessment. - HELD THAT: - The Court held that the AO's conduct amounted to revisiting and re-evaluating conclusions already reached in the original assessment, effectively constituting a change of opinion. The reasons recorded showed the AO merely sought to extend an earlier addition rather than demonstrate any fresh material that would justify reopening. The Court reiterated that an assessment cannot be reopened simply because the AO perceives that a larger addition ought to have been made earlier; such re-evaluation without new material is impermissible. Consequently, the reassessment, the order of assessment, the notice of demand and the penalty notice premised on that reassessment could not be sustained. [Paras 10, 11, 13]

The reassessment and resultant additions and penalty were unsustainable as they proceeded from an impermissible change of opinion absent any fresh material; the impugned orders were quashed.

Final Conclusion: The petition is allowed: the notice under section 148, the order of assessment dated 22nd March 2022, the notice of demand and the penalty notice dated 22nd March 2022 are quashed for failure to satisfy the statutory conditions for reopening beyond four years and for amounting to an impermissible change of opinion.

Director's joint and several liability under section 179 of the Income Tax Act, 1961 for non-recovery - gross neglect, misfeasance or breach of duty - burden on director to prove non-attribution of non-recovery - requirement of nexus between alleged gross neglect and non-recovery of tax dues - revision under section 264 of the Income Tax Act, 1961

Director's joint and several liability under section 179 of the Income Tax Act, 1961 for non-recovery - gross neglect, misfeasance or breach of duty - burden on director to prove non-attribution of non-recovery - requirement of nexus between alleged gross neglect and non-recovery of tax dues - Validity of orders under section 179 (and the revisional order under section 264) treating the petitioner liable for company tax dues for the assessment years 2008-09 and 2009-10. - HELD THAT: - The Court examined whether the Assessing Officer validly fastened liability on the petitioner under section 179 by establishing that non-recovery of tax dues from the private company could be attributed to the petitioner's gross neglect, misfeasance or breach of duty. Section 179 casts liability on directors for non-recovery unless a director proves non-attribution to any such fault. The petitioner placed material showing limited operational and decision-making control (investor-nominated board, majority investor control, removal in September 2009 and lack of financial/operational authority). Having discharged the initial burden, the statutory scheme required the AO to identify and demonstrate how the petitioner's conduct constituted gross neglect, misfeasance or breach of duty causally linked to non-recovery. The impugned order focused on the petitioner's participation in board meetings and general involvement rather than identifying any specific incident, act or omission amounting to gross neglect, misfeasance or breach of duty that caused non-recovery. The Court applied the ratio of the cited authorities which hold that mere participation or ordinary neglect in company functioning does not satisfy the statutory threshold; there must be a finding connecting gross negligence, misfeasance or breach of duty to the non-recovery. Because the AO did not make such a finding nor point to material establishing that causal nexus, the order under section 179 was unsustainable. The revisional authority similarly erred by dismissing the revision on the basis that the petitioner was a director, without addressing the specific statutory requirement of gross neglect, misfeasance or breach of duty linked to non-recovery. [Paras 15, 16, 18, 19, 20]

Impugned orders under section 179 and the revisional order under section 264 are set aside as the AO and revisional authority failed to record any finding of gross neglect, misfeasance or breach of duty causally connected to non-recovery.

Final Conclusion: The petition is allowed; the orders dated 22nd December 2017 and 18th March 2019 are set aside.

Disallowance under section 14A read with Rule 8D - requirement of Assessing Officer's recorded satisfaction before invoking Rule 8D - presumption of appropriation to interest free funds where surplus interest free funds are available - matching concept of income and expenditure (relevance to treatment of interest)

Disallowance under section 14A read with Rule 8D - requirement of Assessing Officer's recorded satisfaction before invoking Rule 8D - Validity of the disallowance made by applying Rule 8D when the Assessing Officer did not record satisfaction on the correctness of the assessee's computation of expenditure attributable to exempt income. - HELD THAT: - The Court found on perusal of the assessment order that the Assessing Officer did not examine the assessee's claim nor record any satisfaction that the assessee's working of inadmissible expenditure under section 14A was incorrect having regard to the books of account. Section 14A(2) read with Rule 8D prescribes a method of computation only where the Assessing Officer, on the material before him, is not satisfied with the correctness of the claim; it does not empower the AO to apply Rule 8D straightaway without such satisfaction. In the absence of any reasoning or basis in the assessment order to displace the assessee's claim, the application of Rule 8D and consequent disallowance was held to be contrary to the statutory mandate and established legal principles. The Tribunal and CIT(A) were therefore right to set aside the disallowance in these circumstances. [Paras 11]

Disallowance made by applying Rule 8D was invalid because the AO had not recorded the requisite satisfaction; the deletion of the addition was upheld.

Presumption of appropriation to interest free funds where surplus interest free funds are available - matching concept of income and expenditure (relevance to treatment of interest) - Whether the CIT(A)'s and Tribunal's conclusion that the assessee's investment could be presumed to be made out of interest free surplus funds (thereby negating disallowance of interest) was permissible. - HELD THAT: - The Court agreed with the view that where the assessee has sufficient interest free surplus funds to meet investments yielding exempt income, it is permissible to treat such investments as made from interest free funds rather than borrowed funds. Applying that principle to the material on record, the CIT(A) and the Tribunal correctly found that the assessee had adequate interest free surplus and therefore the interest expenditure could not be disallowed under section 14A read with Rule 8D(2)(ii). The Court endorsed the reliance on authoritative precedents cited in the orders which support the approach of appropriation to interest free funds in such circumstances. [Paras 11]

Presumption that investments were made out of sufficient interest free funds was justified; consequent deletion of interest disallowance was sustained.

Final Conclusion: The appeal is dismissed. The disallowance under section 14A read with Rule 8D was set aside because the Assessing Officer did not record the necessary satisfaction nor examine the assessee's books; the Tribunal and CIT(A) were correct to delete the addition on the basis that sufficient interest free funds were available. No substantial question of law arises and there is no order as to costs.

Re-assessment jurisdiction - successor liability on merger under Section 170 - requirement of valid service of reassessment notice on successor - reassessment cannot be based on mere change of opinion - protection under Section 150 for re-opening

Re-assessment jurisdiction - successor liability on merger under Section 170 - Validity of reassessment proceedings issued against the transferor company which had ceased to exist on the relevant date because of merger - HELD THAT: - The Court held that reassessment proceedings can arise only on a valid assumption of jurisdiction. The transferor company had ceased to exist with effect from 01.04.2014 (previous year 2014-15) due to amalgamation and the income for A.Y. 2015-16 was required to be assessed in the hands of the transferee (successor) company as contemplated by the successor liability principle; therefore, proceedings issued on 28.03.2021 against the transferor (which no longer existed) were inherently and fundamentally defective. The decision relied upon by the revenue was found inapposite because that case involved regular assessment and not reassessment against a non-existent predecessor, and did not engage the jurisdictional defect present here. The Court concluded that the impugned reassessment order suffered from lack of jurisdiction and must be set aside. [Paras 11, 12, 13, 14, 19]

Impugned reassessment order against the transferor is without jurisdiction and is set aside.

Requirement of valid service of reassessment notice on successor - reassessment cannot be based on mere change of opinion - Effect of absence of service of reassessment notices on the transferee (merged entity) and the obligation to consider earlier assessment before reassessment - HELD THAT: - The Court noted that reassessment notice was issued to and served only on the transferor company by e-mail and no notice was ever issued to or served upon the transferee (present petitioner). In reassessment proceedings, the assessing authority is required to be mindful of any earlier assessment; here the assessing authority issuing the reassessment failed to examine the earlier assessment order dated 30.12.2017 in the hands of the transferee which had recorded the merger and dealt with the same transaction. Reassessing on the basis of the same transaction without addressing the original assessment or on a mere change of opinion, particularly when the notice was not directed at the successor, is impermissible. This defect of lack of notice and failure to consider the earlier assessment was material and incurable in the present reassessment context. [Paras 7, 8, 16, 17, 18]

Reassessment is invalid for want of notice to the transferee and for proceeding without regard to the earlier assessment; reassessment cannot stand merely on a change of opinion without examining the original assessment.

Protection under Section 150 for re-opening - Whether the revenue is precluded from proceeding afresh and the scope for fresh action by the assessing authority - HELD THAT: - While the impugned reassessment order was set aside for lack of jurisdiction and procedural infirmity, the Court did not preclude the revenue from taking lawful action. The Court left open the revenue's right to proceed in accordance with law, expressly noting that Section 150 of the Act and the observations in the order must be kept in mind. The Court observed that no useful purpose would be served by relegating the petitioner to alternative remedies in the circumstances and therefore exercised writ jurisdiction to quash the defective reassessment, permitting the revenue to initiate fresh proceedings lawfully. [Paras 15, 20]

Writ granted to set aside the defective reassessment; revenue permitted to proceed afresh in accordance with law keeping Section 150 and the Court's observations in mind.

Final Conclusion: Writ petition allowed; the reassessment order dated 29.03.2022 passed against the transferor is quashed for want of jurisdiction and for failure to issue notice to the successor and to consider the earlier assessment; revenue is at liberty to proceed afresh in accordance with law, bearing in mind Section 150 and the observations made herein.

Condonation of delay - transfer of assessment jurisdiction under Section 127 - opportunity of being heard - recording reasons for dispensing with hearing - remand for fresh decision - abeyance of reassessment proceedings

Condonation of delay - Delay in filing the intra Court appeal was condoned. - HELD THAT: - The Court examined the affidavit filed in support of the application for condonation of delay and was satisfied that sufficient cause had been shown for preferring the instant appeal. On that basis the application for condonation of delay (CAN 1 of 2023) was allowed and the delay in filing the appeal was condoned. [Paras 1]

Application for condonation of delay allowed and delay condoned.

Transfer of assessment jurisdiction under Section 127 - opportunity of being heard - recording reasons for dispensing with hearing - remand for fresh decision - Validity of the order transferring assessment jurisdiction was not upheld and the matter was remanded for fresh consideration after affording opportunity of hearing and recording reasons where applicable. - HELD THAT: - Section 127 requires that, wherever possible, the assessee be given a reasonable opportunity of being heard before transfer of a case and that if an opportunity is not provided, reasons must be recorded for dispensing with such opportunity. The transfer order dated 29th July, 2021 did not record reasons for dispensing with personal hearing nor was a show cause notice issued prior to transfer. The Single Bench had noted a prima facie case but observed that continuation of assessment proceedings might render the writ infructuous. Given the absence of recorded reasons and the statutory requirement to afford an opportunity of hearing, the High Court directed that the impugned order be treated as a show cause notice, ordered the appellant to file objections within fifteen days of receipt of the court's order, and directed the Principal Commissioner to afford a hearing to the authorised representative and pass a speaking order on merit in accordance with law. [Paras 6, 7, 8, 9]

Transfer order set aside for the purpose of fresh decision; authority directed to treat the transfer order as a show cause notice, afford a hearing and record reasons and pass a speaking order.

Abeyance of reassessment proceedings - Reassessment steps taken consequent to the transfer were ordered to remain in abeyance pending the fresh decision by the Principal Commissioner. - HELD THAT: - The Court noted that the assessing authority at Kanpur had proceeded to pass an order under Section 148A(d) and issued a notice under Section 148 on 30th July, 2022. In view of the direction to re examine the transfer and to afford the assessee an opportunity of hearing, the Court held that the order dated 30th July, 2022 under Section 148A(d) and the notice under Section 148 of the same date shall be kept in abeyance and shall abide by the fresh order that may be passed by the Principal Commissioner of Income Tax 5, Kolkata in terms of the Court's directions. [Paras 10, 11]

Reassessment order and notice dated 30th July, 2022 kept in abeyance pending the fresh decision directed to be taken by the Principal Commissioner.

Final Conclusion: The application for condonation of delay is allowed. The transfer of assessment jurisdiction dated 29th July, 2021 is remitted to the Principal Commissioner of Income Tax 5, Kolkata to be treated as a show cause notice; the assessee to file objections within fifteen days, after which a hearing must be afforded and a speaking order passed. Reassessment steps taken on 30th July, 2022 are ordered to remain in abeyance pending the outcome of the fresh decision.

Estimation of undisclosed stock/profit - double taxation from overlapping additions - treatment of unrecorded payments as undisclosed income - burden of proof on the assessee to rebut survey findings - survey under Section 133A

Estimation of undisclosed stock/profit - burden of proof on the assessee to rebut survey findings - Validity of the addition of Rs.3,10,374/- assessed as estimated profit on excess stock found on survey. - HELD THAT: - The Tribunal and lower authorities recorded that a survey under Section 133A on 9.9.1994 inventoried stock valued at Rs.66,11,036/-, which was in excess of the stock shown in the assessee's books. The assessee's contention that goods belonged also to other firms occupying the same building was rejected on the basis that no separate trade licences, sale/purchase memos or individualized books were produced and no separate sale counter was found. The Assessing Officer estimated profit on the excess stock; the CIT(A) granted partial relief and the Tribunal upheld the restricted addition after considering the factual record. In absence of any evidence to rebut the survey valuation or to establish separate ownership of the stock, the estimation was sustained. The court found no perversity or legal error in the Tribunal's factual conclusion and refused to interfere.

Addition of Rs.3,10,374/- confirmed; substantial question of law no.1 answered against the assessee.

Double taxation from overlapping additions - estimation of undisclosed stock/profit - burden of proof on the assessee to rebut survey findings - Whether estimating profit on purchases recorded in a Mahajani Khata after estimating profit on excess stock results in double taxation and whether the addition of Rs.49,640/- was justified. - HELD THAT: - The Assessing Officer relied on entries in a discovered Mahajani Khata showing purchases of Rs.5,72,732/- not recorded in the assessee's books and, finding no supporting documents, estimated profit at 8.65% on that amount. The assessee argued that a separate addition on the basis of the Khata would amount to double taxation where profit had already been estimated on excess stock. The Tribunal and lower authorities observed that the assessee failed to produce any evidence to substantiate its claim or to displace the findings from the Khata. On those factual findings, the Tribunal sustained the addition. Given the factual record and absence of rebuttal by the assessee, the court found no error in sustaining the addition.

Addition of Rs.49,640/- upheld; substantial question of law no.2 answered against the assessee.

Treatment of unrecorded payments as undisclosed income - burden of proof on the assessee to rebut survey findings - Validity of the addition of Rs.10,25,022/- treated as undisclosed income on account of payments not recorded in books. - HELD THAT: - The Assessing Officer found payments made to various parties during the relevant period which were not recorded in the assessee's books and, in absence of any explanation or documentary evidence from the assessee, treated those sums as undisclosed income. The CIT(A) and the Tribunal affirmed the addition, noting that the assessee did not avail opportunities to produce evidence despite notices and remand, and merely asserted that transactions were unrelated to business without substantiation. The Tribunal found no infirmity in the assessment given the assessee's failure to discharge the evidentiary burden; the High Court agreed.

Addition of Rs.10,25,022/- confirmed; substantial question of law no.3 answered against the assessee.

Final Conclusion: The appeal is dismissed; all three substantial questions of law are answered against the assessee and the additions confirmed on the factual findings that the assessee failed to rebut survey and Khata-based records or to explain unrecorded payments.

Notice under Section 148 issued to amalgamating/ceased entity - Amalgamation and corporate death - Intimation of amalgamation by response to notice under Section 142 - Jurisdictional notice void if issued to non-existent entity - Participation by amalgamated entity cannot create estoppel against law - Faceless assessment and availability of electronic records

Notice under Section 148 issued to amalgamating/ceased entity - Amalgamation and corporate death - Jurisdictional notice void if issued to non-existent entity - Validity of notice under Section 148 issued in the name of the transferor (amalgamating) company which had ceased to exist on account of an approved scheme of amalgamation. - HELD THAT: - The Court held that where an entity has ceased to exist pursuant to an approved scheme of amalgamation, a jurisdictional notice issued in its name under Section 148 is fundamentally illegal and without jurisdiction. The reasoning follows the line of authority referred to in the judgment that an amalgamating company, upon corporate death as approved by the Court, cannot be regarded as a person amenable to proceedings under section 147/148; participation by or correspondence on behalf of the extinct entity cannot estop the revenue against the legal effect of amalgamation. Applying those principles to the facts, the impugned notice issued in March 2021 in the name of the erstwhile company was quashed as issued to a non-existent entity. [Paras 6, 7]

Impugned show-cause/Section 148 notices issued in the name of the amalgamated (extinct) company quashed and set aside for A.Y.2016-17.

Intimation of amalgamation by response to notice under Section 142 - Faceless assessment and availability of electronic records - Participation by amalgamated entity cannot create estoppel against law - Whether intimation of the amalgamation given by the petitioner in response to a notice under Section 142 constituted sufficient intimation to the Income-tax Department and whether failure of the department to note that intimation disentitles it from issuing a notice in the name of the extinct company. - HELD THAT: - The Court observed that there is no prescribed format for intimating an approved scheme of amalgamation and that the petitioner's communication in reply to the Section 142 notice, informing the department that the transferor company had been merged with the petitioner and identifying the transferee, was a sufficient intimation. Given the faceless assessment regime and availability of records electronically, the materials were accessible to the officer and lack of inter-departmental coordination or failure to apply mind could not validate issuance of a reopening notice in the name of an entity that had ceased to exist. Consequently, the impugned action of issuing the Section 148 notice in the name of the extinct company warranted interference. [Paras 5, 7]

Petitioner's intimation by reply to Section 142 notice held sufficient; failure to act on that intimation rendered the subsequent Section 148 notice unsustainable.

Final Conclusion: The petition is allowed; the show-cause/Section 148 notices issued in the name of the amalgamated (non-existent) company for A.Y.2016-17 are quashed and set aside with consequential reliefs, without prejudice to the Revenue initiating proceedings against the petitioner in accordance with law.

Principles of natural justice - faceless assessment scheme - service of show-cause notice cum draft assessment under Section 144B - quashing of assessment for non-compliance with statutory procedural requirements

Principles of natural justice - service of show-cause notice cum draft assessment under Section 144B - faceless assessment scheme - Validity of the assessment order dated 31.03.2022 in light of inadequate time given to respond to the show-cause notice cum draft assessment and alleged non-compliance with the procedure under Section 144B. - HELD THAT: - The Court found that the final show-cause notice cum draft assessment proposing substantial additions was uploaded at 17:22 IST on 29.03.2022 and required a response by 23:59 IST the same day, providing the assessee materially less than four hours to respond. This was held to be in gross violation of principles of natural justice and not in conformity with the object and procedure contemplated by the faceless assessment scheme and the service mechanism under Section 144B. The Court observed that such truncated time for compliance effectively rendered meaningful opportunity to the assessee illusory and that non-compliance with the procedural safeguards made the assessment process vitiated. Reliance was placed on the statutory scheme and the relevant CBDT procedural framework to conclude that the manner and timing of service were unsatisfactory and amounted to substantial breach of the assessee's right to be heard. [Paras 5, 6]

The assessment order dated 31.03.2022 together with consequential notices and penalty actions was quashed on grounds of denial of a reasonable opportunity to be heard and procedural non-compliance.

Quashing of assessment for non-compliance with statutory procedural requirements - Whether the respondent is precluded from taking further action after the quashing of the assessment order. - HELD THAT: - While the impugned assessment and consequential notices were set aside for procedural infirmity, the Court explicitly left open the respondent's right to proceed afresh. The quashing remedied the defective action but did not operate as a bar on the revenue initiating further proceedings from the stage where the process was vitiated, subject to compliance with statutory and procedural requirements and giving the assessee adequate opportunity to be heard. [Paras 7]

Quashing does not preclude the respondent from initiating action afresh from the stage left; the assessee is to cooperate in any such valid proceedings.

Final Conclusion: The petition is allowed: the assessment order dated 31.03.2022 for Assessment Year 2016-2017 and all consequential notices and penalty proceedings are quashed for denial of a reasonable opportunity to be heard and procedural non-compliance; the respondent may, however, initiate further proceedings afresh from the stage where the process was vitiated, observing statutory procedure and giving the assessee adequate opportunity to respond.

Reopening of assessment under the first proviso to Section 147/148 - jurisdictional prerequisite for reassessment - failure to disclose truly and fully all material facts - change of opinion - AO's failure to apply independent mind and acting on directions of Director of Investigation - deletion of addition under Section 68 - cross objections contesting jurisdiction of reassessment

Reopening of assessment under the first proviso to Section 147/148 - jurisdictional prerequisite for reassessment - failure to disclose truly and fully all material facts - change of opinion - Validity of reassessment proceedings initiated under Section 147/148 in respect of AY 2007-08 - HELD THAT: - The Tribunal examined the AO's reasons for reopening and the order sheets and found that the AO had already in the original scrutiny assessment enquired into the infusion of share capital (including premium) and unsecured loans, had recorded statements of several share applicants, and had documents on record. The Tribunal recorded that the reasons for reopening did not state a failure by the assessee to disclose truly and fully all material facts and concluded that the first proviso to Section 147 applied because more than four years had elapsed; consequently the pre-requisite for jurisdiction to reopen (demonstrable failure to disclose material facts) was not satisfied. The Tribunal further found that the reopening amounted to a change of opinion and that the AO had not applied his own mind but acted on directions of the Director of Investigation. The High Court agreed with these findings of fact, observed that none of those factual findings were assailed, and held that on this basis reassessment proceedings were not maintainable. [Paras 13, 14, 15, 18, 19]

Reopening of assessment for AY 2007-08 under Section 147/148 is invalid; reassessment proceedings cannot be sustained.

Deletion of addition under Section 68 - cross objections contesting jurisdiction of reassessment - Sustainability of Tribunal's deletion of the addition made under Section 68 for AY 2007-08 - HELD THAT: - The Tribunal allowed the assessee's cross objections (which challenged the jurisdictional basis of reopening) and on merits sustained the CIT(A)'s deletion of the addition under Section 68. Because the Tribunal concluded that reopening was not justified and that the AO had already examined the relevant transactions in the original assessment, it upheld deletion of the addition. The High Court, having found no challenge to the Tribunal's findings of fact and agreeing that the matter involved a change of opinion, declined to interfere with the Tribunal's order deleting the addition. [Paras 3, 5, 18, 19, 22]

Tribunal's deletion of the addition under Section 68 is upheld; appeal dismissed.

Final Conclusion: The High Court dismissed the revenue's appeal and declined to interfere with the Tribunal's order holding the reassessment for AY 2007-08 to be invalid and sustaining the deletion of the addition under Section 68; no substantial question of law arose.

Entitlement to interest for delayed payment - equitable jurisdiction to award interest to preserve real value of money - statutory or contractual entitlement to interest - interest from date of determination until payment - reasonable time for payment

Entitlement to interest for delayed payment - statutory or contractual entitlement to interest - reasonable time for payment - Whether the petitioner is entitled to interest on audit fees due to delayed payment. - HELD THAT: - The court found that there was an inordinate delay of nearly four years in payment of audit fees determined under the Assessing Officer's powers. While interest is ordinarily payable where substantive law, trade usage, custom or agreement so mandates, the Court held that equitable jurisdiction also permits award of interest to preserve the real value of money where delay is undue and without cause. Applying this principle to the facts - viz., prolonged delay in remitting fees - the petitioner was held entitled to compensation in the form of interest because four years and above cannot be considered a reasonable period for payment. [Paras 9, 10]

The petitioner is entitled to interest for the delay in payment of the determined audit fees.

Equitable jurisdiction to award interest to preserve real value of money - interest from date of determination until payment - Quantum, period and manner of payment of interest awarded to the petitioner. - HELD THAT: - Exercising its equitable jurisdiction to compensate for loss of use and erosion of money's value due to inordinate delay, the Court fixed interest at the rate of 7% per annum. Interest was directed to run from the date of determination in each audited case until the actual date of payment. The Court further directed that the interest amount be paid to the petitioner expeditiously and not later than eight weeks from receipt of the order. [Paras 10, 11, 12]

Interest at 7% per annum is payable from the date of determination in each case until payment; interest to be paid within eight weeks of receipt of the order.

Final Conclusion: On the facts of prolonged and unexplained delay in remitting audit fees determined under the Assessing Officer's direction, the Court awarded interest at 7% per annum from the date of each determination until payment and directed payment of the interest within eight weeks.

Presumption of application of interest-free funds where such funds suffice to meet investments - commercial expediency of interest-free loans to subsidiaries - deductibility under section 36(1)(iii) in relation to interest-free inter-corporate advances - precedential effect of prior assessment-year decisions

Presumption of application of interest-free funds where such funds suffice to meet investments - commercial expediency of interest-free loans to subsidiaries - deductibility under section 36(1)(iii) in relation to interest-free inter-corporate advances - precedential effect of prior assessment-year decisions - Addition of Rs. 23,58,600 apportioned as disallowance on account of interest/guarantee charges for interest-free loans to subsidiaries in AY 2014-15 was unsustainable and was to be deleted. - HELD THAT: - The Tribunal accepted the assessee's case that reserve and surplus of Rs. 67.65 crores (admitted by the Assessing Officer) exceeded the loans to body corporate of Rs. 25.95 crores in AY 2014-15, giving rise to the legal presumption that investments/advances were made out of available interest-free funds rather than borrowed funds. The Assessing Officer's contrary conclusion - that bulk of borrowed funds were tied up in fixed assets, investments and debtors so that advances could not have been made out of surplus - was held to be unsupported by valid reasoning and to have ignored the nature and cash-flow characteristics of the assessee's GSA business. The Tribunal further noted that the question of commercial expediency and the character of these advances had been finally considered in earlier assessment years (2010-11 to 2012-13) in favour of the assessee, and the First Appellate Authority had given no reasoned basis to distinguish those earlier decisions; accordingly, the matter was treated as having attained finality for the subject advances. Applying the established principle (as enunciated in Reliance Utilities / Reliance Industries) that where sufficient interest-free funds are available investments may be presumed to have been made from such funds, the Tribunal found the disallowance untenable and directed deletion of the addition under section 36(1)(iii). [Paras 12, 13, 14, 15, 16]

The addition of Rs. 23,58,600 under the head 'Interest Free Loans and advances given to subsidiaries' u/s 36(1)(iii) is deleted; appeal allowed.

Final Conclusion: On the facts and admitted figures for AY 2014-15, the Tribunal held that the presumption arises that advances were made out of available interest-free funds, the Assessing Officer's contrary finding lacked reasoned support and prior assessment-year findings in favour of the assessee had not been distinguished; the addition under section 36(1)(iii) was set aside.

Unexplained cash credit under section 68 - onus of proof for genuineness of loans - best judgment assessment under section 144 - estimation of income on sound and reasonable basis - disallowance of expenses by comparative assessment years - restriction on carry forward of losses due to change in management and control

Unexplained cash credit under section 68 - onus of proof for genuineness of loans - Deletion of addition made by the AO treating increase in unsecured loan from M/s KDS Corporation Pvt. Ltd. as unexplained cash credit under section 68 - HELD THAT: - The Tribunal found that the AO's addition was based on the difference between opening and closing balances of an unsecured loan account with KDS Corporation Pvt. Ltd. The assessee had satisfied identity and creditworthiness of the lender and demonstrated continuity of similar loan transactions in preceding and succeeding assessment years where no addition was made. The AO did not allege the loans were bogus and the search did not produce evidence of sham transactions. Given satisfaction of the requisite elements under section 68 and the acceptance of the loans in other years, the addition lacked a sustainable foundation under section 68 and was rightly deleted by the CIT(A). [Paras 5]

Addition under section 68 deleted; Revenue's ground dismissed.

Best judgment assessment under section 144 - estimation of income on sound and reasonable basis - disallowance of expenses by comparative assessment years - restriction on carry forward of losses due to change in management and control - Validity of AO's estimation of income at 8% of turnover and CIT(A)'s alternative determination disallowing 40% of total expenses and refusing carry forward of losses - HELD THAT: - The Tribunal agreed that while the AO was justified in invoking section 144 in the absence of compliance, the AO's estimation at 8% of turnover lacked a reasonable basis. The CIT(A) applied comparative data from assessments under section 153C for preceding and succeeding years, where disallowances ranged between approximately 12.77% and 20.77% of expenses. Observing no material to suggest the year under consideration was exceptional, the CIT(A) adopted a protective approach, disallowing 40% of total expenses to address non-verification and potential revenue leakage. The Tribunal held that the CIT(A)'s approach constituted a reasonable, evidence-informed basis for estimation and was not arbitrary or perverse. The CIT(A)'s decision to deny carry forward of losses on account of substantial change in management and control was also sustained, noting no successful challenge by Revenue to those findings. [Paras 8, 9, 10]

AO's estimation set aside; disallowance of 40% of total expenses upheld and estimation of profit by AO replaced; carry forward of losses restricted by CIT(A) upheld.

Final Conclusion: Revenue appeals dismissed and the CIT(A)'s deletions and alternative estimates upheld: addition under section 68 deleted, the AO's best judgment estimation under section 144 set aside in favour of the CIT(A)'s 40% disallowance of expenses, and the restriction on carry forward of losses sustained.

Deductibility of TDS where TDS is deposited before the due date of filing return - Effect of following cash system of accounting on allowance of statutory liabilities - Interaction between treatment of taxes payable and disallowance for failure to deduct/deposit tax at source - Remand for verification of reconciliation between Form 26AS credit and income under cash system - Impermissibility of adhoc disallowances without inquiry or evidence

Deductibility of TDS where TDS is deposited before the due date of filing return - Effect of following cash system of accounting on allowance of statutory liabilities - Addition of TDS payable shown as current liability in balance sheet disallowed by AO and sustained by CIT(A) was to be deleted. - HELD THAT: - The Tribunal found that the assessee, following cash system of accounting, had produced challans showing that the TDS amount was deposited before the due date for filing return under section 139(1). The Coordinate Bench's earlier finding in the assessee's own case for earlier assessment year (recorded in the Paper Book) that Section 40(a)(ia) would not apply where TDS is paid before the due date was held to be applicable. Since the Assessing Officer did not invoke a disallowance under Section 40(a)(ia) but disallowed the TDS payable merely because it remained unpaid within the financial year, and given the evidence of deposit before filing date, the addition could not be sustained. The Tribunal thus directed deletion of the TDS addition. [Paras 6, 10]

Addition of Rs. 87,800/- on account of TDS payable deleted and grounds in favour of the assessee.

Remand for verification of reconciliation between Form 26AS credit and income under cash system - Interaction between treatment of taxes payable and disallowance for failure to deduct/deposit tax at source - Discrepancy alleged between TDS credits and income reported required verification and could not be finally adjudicated on the record before the Tribunal. - HELD THAT: - The assessee claimed to follow cash system and furnished reconciliation of TDS as per Form 26AS vis-a -vis ITR for AY 2016-17 together with supporting bills and bank receipts showing receipts in the subsequent year. The Tribunal observed that these details required verification by the Assessing Officer. Accordingly, the matter was restored to the file of the AO for verification after giving opportunity to the assessee. The grounds are allowed for statistical purposes and remanded for factual verification of the reconciliation. [Paras 7]

Issue remanded to the Assessing Officer for verification of the statement reconciling Form 26AS and income under the cash system.

Impermissibility of adhoc disallowances without inquiry or evidence - Adhoc 10% disallowance of travelling expenses without enquiry or supporting evidence was unsustainable and deleted. - HELD THAT: - The Tribunal noted that the Assessing Officer had made an adhoc disallowance of travel expenses on conjecture and the CIT(A) sustained a 10% disallowance on assumption of non-business purpose. The Bench held that such adhoc disallowances without any inquiry or evidence are not sustainable. As similar disallowances in the assessee's earlier years had been deleted in the absence of any revenue case of disproportion or irregularity, the present disallowance was deleted. [Paras 8]

Adhoc disallowance of travelling expenses deleted and ground sustained in favour of the assessee.

Final Conclusion: The appeal is allowed: the TDS payable addition is deleted; the adhoc travel-expense disallowance is deleted; discrepancies between TDS credits and income for AY 2016-17 are remanded to the Assessing Officer for verification after giving the assessee an opportunity.

Royalty under Explanation 2 to Section 9(1)(vi) of the Act - live telecast not constituting a 'copyright' - distinction between broadcasting rights and copyright - transfer of rights in respect of a 'process' under Explanation 6 to Section 9(1)(vi) - short credit of tax deducted at source reflected in Form 26AS - interest under Section 234B - penalty under Section 271(1)(c) - premature initiation

Royalty under Explanation 2 to Section 9(1)(vi) of the Act - live telecast not constituting a 'copyright' - distinction between broadcasting rights and copyright - Addition of income from sub-licensing of designated rights for live transmissions treated as 'royalty' was not sustainable. - HELD THAT: - The Tribunal accepted the assessee's submissions and the reasoning of the coordinate Bench in Fox Network Group Singapore Pte. Ltd., and of the Hon'ble Delhi High Court in Delhi Race Club, holding that live broadcast or live telecast is a communication/broadcast and does not constitute a 'work' in which copyright subsists under the Copyright Act. Consequently, payments for live transmission/sub-licensing of broadcasting rights are distinguishable from payments for transfer of copyright or for 'scientific work' and do not fall within the definition of 'royalty' in Explanation 2 to Section 9(1)(vi). The Tribunal found no merit to characterize the impugned receipts as royalty or as transfer of any copyright and, following the cited precedents, directed deletion of the addition. [Paras 8]

Impugned addition of Rs. 752,16,50,223 treating sub-licence receipts as 'royalty' deleted; issue decided in favour of the assessee.

Transfer of rights in respect of a 'process' under Explanation 6 to Section 9(1)(vi) - Charges characterised as involving transfer of a 'process' under Explanation 6 were not applicable on the facts. - HELD THAT: - The Tribunal noted that the transmission in the present facts was carried out by SIPL and payments were not for transfer of any 'process'. Relying on the reasoning that the circumstances did not establish a transfer of a process, the Tribunal held Explanation 6 inapplicable to the assessee's receipts for live transmission. [Paras 23]

Explanation 6 was not attracted; no addition on account of transfer of a 'process'.

Short credit of tax deducted at source reflected in Form 26AS - Claimed TDS credit reflected in Form 26AS requires verification and correct grant by the Assessing Officer. - HELD THAT: - The Tribunal directed the Assessing Officer to verify the taxes reflected in Form 26AS and, after verification, to grant the correct credit of tax deducted at source. The matter was remitted for administrative verification rather than finally adjudicated on the merits of the credit. [Paras 9]

Directed verification and grant of correct TDS credit; ground allowed for statistical purposes.

Interest under Section 234B - Charging of interest under Section 234B is consequential upon the appellate outcome and requires recalculation by the Assessing Officer. - HELD THAT: - As the primary addition was deleted, the Tribunal held that any interest computed under Section 234B must be recalculated by the Assessing Officer while giving effect to the appellate order. The Tribunal did not decide the interest liability on merits but remitted it for consequential computation. [Paras 10]

Assessing Officer to recalculate interest, if any, consequential to the relief granted.

Penalty under Section 271(1)(c) - premature - Initiation of penalty proceedings under Section 271(1)(c) was premature and not adjudicated. - HELD THAT: - The Tribunal observed that penalty proceedings were premature in the circumstances and therefore did not adjudicate the matter. The point was left open for future consideration if and when appropriate, rather than being finally decided in this appeal. [Paras 11]

Penalty issue left undecided as premature.

Final Conclusion: The Tribunal partly allowed the appeal: the addition treating sub-licensing receipts for live transmission as 'royalty' was deleted; the Assessing Officer was directed to verify and grant correct TDS credit reflected in Form 26AS, to recompute any interest consequential to the appellate order, and the penalty issue was held premature and left undecided.

Right to exemption under section 11 of the Income tax Act - Hostel and transport activities incidental to the main educational object - Non application of section 11(4A) where activities are incidental and not a separate business - Requirement of maintaining separate books for business incidental to a trust - Binding effect of a Coordinate Bench decision in the assessee's own case

Right to exemption under section 11 of the Income tax Act - Hostel and transport activities incidental to the main educational object - Non application of section 11(4A) where activities are incidental and not a separate business - Binding effect of a Coordinate Bench decision in the assessee's own case - Validity of deletion of addition by CIT(A) and allowance of exemption under section 11 for assessment year 2010 11 by reliance on the Coordinate Bench's earlier decision. - HELD THAT: - The Tribunal noted that a Coordinate Bench in the assessee's own set of appeals had held that the hostel, mess and transport activities were incidental to the trust's main object of education and therefore not business income, and that section 11(4A) did not apply as these activities were not separate businesses requiring maintenance of separate books. The CIT(A) relied on that Coordinate Bench decision in deleting the disallowance of exemption under section 11. The Department did not dispute the existence or applicability of that Coordinate Bench decision to the facts of the present assessment. Given the prior adjudication on identical issues in the assessee's favour, the Tribunal found no merit in the Revenue's grounds challenging the CIT(A)'s reliance on the Coordinate Bench order and upheld the deletion of the addition. [Paras 8, 9]

The deletion of the addition and the grant of exemption under section 11 for AY 2010 11, as upheld by the CIT(A) by reference to the Coordinate Bench decision, is confirmed and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal dismissed the Department's appeal and upheld the CIT(A)'s order deleting the addition and allowing exemption under section 11 for assessment year 2010 11, relying on the Coordinate Bench's earlier decision that the hostel and transport activities are incidental to the educational objects and section 11(4A) is not attracted.

Provisional release of seized goods subject to security - show-cause notice under Section 124(a) of the Customs Act, 1962 - protection of revenue versus release of imported goods where differential duty has been paid - splitting of cases for separate adjudication - power to issue supplementary show-cause notice on emergence of fresh material

Provisional release of seized goods subject to security - protection of revenue versus release of imported goods where differential duty has been paid - Release of the seized imported goods and the conditions to be imposed for release despite departmental provisional release order. - HELD THAT: - The Court recorded that the departmental order of provisional release had noted payment by the appellant of the differential duty. The order of provisional release had nevertheless required execution of a bond for the estimated value and submission of a bank guarantee for a specified sum, the quantification of which the Court found unexplained in the provisional release order and accompanying communication. Observing that the differential duty already quantified had been paid and that the goods (readymade garments) had been detained for a prolonged period, the Court held that continued detention served no useful purpose provided adequate security is furnished to protect revenue. Balancing the interest of revenue and the appellant's right to clear the goods, the Court dispensed with the earlier bond/guarantee calculus and directed release of the goods subject to the appellant furnishing a bond for Rs.90,00,000, with release to follow within seven days of furnishing the bond.

Goods to be released on furnishing a bond for Rs.90,00,000; release within seven days of such bond.

Show-cause notice under Section 124(a) of the Customs Act, 1962 - splitting of cases for separate adjudication - power to issue supplementary show-cause notice on emergence of fresh material - Whether a show-cause notice should be issued to the appellant and the temporal and procedural constraints applicable to such issuance. - HELD THAT: - The Court left the issuance of a show-cause notice to the statutory discretion of the departmental authorities but directed that if the department considers the appellant's case separable from that of the individual (Vineet Goel), it may proceed to issue a show-cause notice under Section 124(a) of the Act. The Court cautioned against undue delay and directed the department to endeavour to issue the show-cause notice preferably within two months of receipt of the order if splitting the cases is feasible. The Court also acknowledged the departmental entitlement to issue a supplementary show-cause notice should fresh material emerge during further enquiry, observing that such action is governed by statute and requires no separate court liberty.

Issuance of show-cause notice left to departmental discretion; if separable, department shall endeavour to issue it preferably within two months; supplementary notice permissible if fresh material emerges.

Final Conclusion: Appeal disposed by directing release of the seized goods on furnishing a bond for Rs.90,00,000 within seven days; issuance of show-cause notice under Section 124(a) of the Customs Act, 1962 is left to the department's discretion and, if the appellant's case can be split from that of the co-accused, the department shall endeavour to issue the notice preferably within two months; supplementary proceedings permitted if new material emerges.

Amendment of documents under Section 149 - Discretion of the proper officer to authorise amendments - Proviso to Section 149 requiring documentary evidence in existence at time of export - Conversion of shipping bill into an incentive/license scheme - Judicial review of appellate authority's reasoning and adequacy of examination of original findings

Amendment of documents under Section 149 - Proviso to Section 149 requiring documentary evidence in existence at time of export - Conversion of shipping bill into an incentive/license scheme - Judicial review of appellate authority's reasoning and adequacy of examination of original findings - Whether the Tribunal properly examined the correctness of the Commissioner's reasons for refusing amendment of the shipping bill and whether the Tribunal's order could be sustained. - HELD THAT: - Section 149 confers discretion on the proper officer to authorise amendments to shipping documents, subject to the proviso that no amendment shall be authorised after export except on the basis of documentary evidence which existed at the time of export. The Commissioner refused the request to amend the Shipping Bill on the basis of Circular No.4/2004 and the unilateral declaration made at export that no export incentive was being claimed, the shipment having been allowed under duty-free schemes. The Tribunal allowed the appeal but did not test or pronounce on the validity of the specific grounds recorded by the Commissioner; instead it relied on an analogy that the proposed amendment merely changed numbers and on a general approach favouring amendments to further adjudication. The High Court concluded that the Tribunal's reasons did not engage with or examine the correctness of the Commissioner's findings, and that the Tribunal therefore committed error in its appreciation. Given that the determinative statutory proviso requires documentary evidence existing at the time of export and that the Tribunal did not address whether such evidence justified amendment, the appropriate course is to set aside the Tribunal's order and remit the matter for fresh consideration in accordance with law. [Paras 3, 4]

Tribunal's order set aside and the matter remitted to the Tribunal for fresh disposal in accordance with law.

Final Conclusion: The Customs appeal is allowed; the Tribunal's order is set aside and the matter is remitted to the Tribunal to decide afresh in accordance with law (the Tribunal directed to aim for expeditious disposal, preferably within four months).

Refund as consequential relief to appellate order - effect of pendency of departmental appeal before High Court in absence of stay - binding effect of Board circulars on departmental action regarding refunds - implementability of tribunal/appeal orders unless stayed

Refund as consequential relief to appellate order - implementability of tribunal/appeal orders unless stayed - The appellant/respondent was entitled to refund of the cost recovery charges as a consequential relief to this Tribunal's order setting aside the demand. - HELD THAT: - The Commissioner (Appeals) granted refund pursuant to this Tribunal's order No. A/10788/2020 dated 12.03.2020 which on merits set aside the demand of cost recovery charges. The Tribunal recorded that the refund thus flowed as a consequential relief from that operative appellate order and, in the absence of any stay on the Tribunal's order, the Commissioner (Appeals)'s action in granting refund could not be disturbed. The Court therefore upheld the Commissioner (Appeals)'s grant of refund as correctly given in execution of the Tribunal's order. [Paras 5]

Refund granted by the Commissioner (Appeals) upheld as consequential to the Tribunal's order setting aside the demand.

Effect of pendency of departmental appeal before High Court in absence of stay - binding effect of Board circulars on departmental action regarding refunds - The pendency of the Department's challenge to the Tribunal's order before the High Court, without a stay, did not preclude grant of the refund and rendered the revenue's appeals and stay applications unsustainable. - HELD THAT: - The Tribunal applied the Board's instructions (CBEC Circulars) as clarified and re-affirmed by authoritative precedent, holding that where an order giving rise to refund is not stayed by a higher forum, the refund must be granted (and departmental withholding is impermissible unless stay is obtained). The Tribunal noted that though the revenue had filed a tax appeal before the Gujarat High Court, no stay had been secured even after considerable time; consequently the departmental appeals against the Commissioner (Appeals) order and the stay applications were held not maintainable and were dismissed as infructuous. The Tribunal relied on the principle that departmental circulars obligate revenue authorities to process refunds where the operative appellate order stands unsuspended, and that in such circumstances the revenue's unilateral withholding is not permissible. [Paras 5, 6]

Revenue's appeals and stay applications dismissed; withholding of refund in absence of stay was not justified.

Final Conclusion: The refund of cost recovery charges granted by the Commissioner (Appeals) was upheld as a consequential relief to the Tribunal's order setting aside the demand; the revenue's appeals and stay applications were dismissed as there was no stay on the operative order and departmental withholding could not be sustained in those circumstances.

Taxable service under Section 65(105)(zzm) - renting of immovable property as separate taxable service - classification of services and Section 65A - passing on incidence of service tax - Circulars of the Board not binding on Courts but binding on tax authorities

Taxable service under Section 65(105)(zzm) - passing on incidence of service tax - renting of immovable property as separate taxable service - Whether the Airport Authority of India could be regarded as providing a taxable service under Section 65(105)(zzm) for the period 10.09.2004 to 01.06.2007 and thereby entitled to pass on the incidence of service tax to the petitioner. - HELD THAT: - The Court held prima facie that the definition of "taxable service" in Section 65(105)(zzm) as it stood from 10.09.2004 indicates that the fourth respondent (Airport Authority of India) was providing a taxable service to the petitioner and was entitled to pass on the incidence of tax. The Court observed that the subsequent introduction of a separate levy on "renting of immovable property" w.e.f. 01.06/01.07.2007 does not retrospectively negate the liability of services provided by AAI under Section 65(105)(zzm) from 10.09.2004. The proviso and later amendments (including Section 65A's rules of classification) and the separate category for renting were intended to clarify classification and to avoid confusion, not to undo the legal position antecedent to introduction of the renting levy. The Board's Circular No.80/10/2004-ST (stating that rental/lease charges would not be subjected to service tax) was held to be of no binding effect on the Court, though such circulars may be relied upon before tax authorities. The Court declined to finally adjudicate the merits because the question is the subject of ongoing proceedings before the Tribunal/Delhi High Court and a Special Leave Petition pending before the Supreme Court, and therefore limited itself to expressing a prima facie view while refraining from making a conclusive determination. [Paras 34, 35, 36, 42, 46]

Prima facie view that AAI was providing a taxable service under Section 65(105)(zzm) for the period 10.09.2004 to 01.06.2007 and could pass on the incidence of service tax, but final adjudication is deferred pending the outcome of higher forum proceedings.

Circulars of the Board not binding on Courts but binding on tax authorities - Legal significance of CBEC Circular No.80/10/2004-ST vis-a -vis judicial determination. - HELD THAT: - The Court reiterated the settled principle that Board circulars are not binding on Courts. Accordingly, the clarification in Circular No.80/10/2004-ST that rental/lease charges would not be subject to service tax cannot bind the Court's view on the statutory provisions. However, such circulars may be relied upon before the administrative/tax authorities and are binding on those authorities as administrative guidance. [Paras 21, 22, 37]

Circular No.80/10/2004-ST is not binding on the Court for legal determination, though it may be relied upon before tax authorities.

Status quo direction pending higher forum decision - Relief to be granted while higher forum proceedings are pending. - HELD THAT: - Given that the issue has been considered by the Tribunal and an S.L.P. is pending before the Supreme Court, the Court refrained from making any final order on the merits. Instead, it directed that the respondents shall maintain status quo as on date pending the decision of the Supreme Court in the S.L.P. filed against the Tribunal's decision. The Court observed that the petitioner remains free to pursue remedies before the Supreme Court or to seek refund/defend any recovery proceedings in accordance with law depending on the outcome of higher forum proceedings. [Paras 44, 46, 47, 48, 49]

Writ petition disposed of by directing maintenance of status quo pending the Supreme Court's decision; petitioner permitted to pursue available remedies in law.

Final Conclusion: The High Court expressed a prima facie view that the Airport Authority of India was providing a taxable service under Section 65(105)(zzm) for the period 10.09.2004 to 01.06.2007 and could pass on the incidence of service tax, rejected the binding force of the Board's circular on the Court, but refrained from a final adjudication because the question is pending before the Supreme Court; directed respondents to maintain status quo and disposed of the writ petition accordingly.

Extended period of limitation - wilful suppression with intent to evade - proviso to Section 73 - reasonable cause for failure to pay - review for error apparent on the face of the record

Review for error apparent on the face of the record - Whether the review petition discloses any error apparent on the face of the record warranting recall or revision of the judgment dated 29.07.2022. - HELD THAT: - The Court examined the factual findings recorded earlier - including admission of short disclosure of taxable value in ST 3 returns and the sequence of intelligence report, verification and subsequent payment of differential tax - and the legal submissions as to applicability of settled tests for review. The petitioner's factual correction that payments were made after the intelligence report but before issuance of the show cause notice was accepted as a narration error; however, that factual correction did not alter the determinative findings on non disclosure and delay. The Court found no error apparent on the face of the record in the impugned judgment sufficient to justify review, and accordingly there was no ground to interfere with the earlier decision. [Paras 5, 9]

Review petition dismissed for failure to show any error apparent on the face of the record.

Proviso to Section 73 - wilful suppression with intent to evade - extended period of limitation - reasonable cause for failure to pay - Whether the extended period of limitation under the proviso to Section 73 can be invoked in the facts of this case. - HELD THAT: - The Court reiterated the legal requirement that invocation of any of the situations in the proviso to Section 73 requires a finding of wilful misstatement or suppression coupled with intent to evade duty. While the Commissioner had earlier waived penalty under the principle of reasonable cause for failure to pay in one context, that does not automatically entitle the assessee to contend that the extended period of limitation is thereby unavailable. The Court considered the chronology - intelligence report of short levy, admission of short payment in statements, and delayed remittance over a period aggregating nearly three years - and held that prolonged non payment and failure to disclose correct figures, when unearthed by departmental intelligence, could constitute wilful suppression. A factual correction that payments occurred before the show cause notice but after the intelligence report did not negate that conclusion. Accordingly, the Court found that the question of invocation of the extended period turns on the presence of wilful suppression, and on the material on record the plea of mere system failure was not sufficient to defeat the characterization of wilful suppression for the prolonged default. [Paras 3, 4, 8, 9]

Invocation of the extended period of limitation under the proviso to Section 73 requires wilful suppression with intent to evade; the facts showing prolonged non payment and non disclosure do not support a claim of innocuous system failure and do not favour the petitioner.

Final Conclusion: The review petition is dismissed; no error apparent on the face of the record was made out and the earlier conclusions regarding non disclosure and the legal test for invoking the extended period under the proviso to Section 73 remain undisturbed.

Business Auxiliary Service - Commission Agent - service by way of access to a road or a bridge on payment of toll charges - negative list regime - consideration - Circular No. 152/3/2012-ST

Commission Agent - consideration - Whether the appellant's contractual role in collecting tolls amounted to being a 'Commission Agent' and thereby attracted service tax for the pre-negative-list period. - HELD THAT: - The Tribunal examined the contractual scheme under which the appellant bid for and obtained rights to collect tolls for a lumpsum/assured payment and to retain or bear the surplus/deficit arising from toll collections. The contract transferred possession of the toll-plaza operation and its attendant risks (including shortfall from lower traffic or maintenance costs) to the appellant, which is characteristic of risk assumption rather than an agency arrangement where the principal bears market risk. On that basis, the appellant could not be construed as a mere commission agent under the statutory explanation; the contractual terms demonstrate independent contractor status with consideration in the form of retained collections after fixed payments to NHAI. The Tribunal relied on its earlier decisions holding similar models to be distinguishable from principal-agent commission arrangements. [Paras 11, 12]

The appellant was not acting as a 'Commission Agent' for the pre-01.07.2012 period and tax liability cannot be sustained on that ground.

Service by way of access to a road or a bridge on payment of toll charges - negative list regime - Whether, with effect from 01.07.2012 under the negative list regime, the activity of collecting tolls by the appellant is excluded from service tax under the clause covering access to a road or bridge on payment of toll charges. - HELD THAT: - The Tribunal held that the exclusion in the negative list for 'service by way of access to a road or a bridge on payment of toll charges' is not expressly confined to State agencies and does not, by its language, exclude private entities who provide access to a road or bridge for consideration. The adjudicating approach that limited the immunity only to State agencies was unsupported by the statutory text. Prior Tribunal precedent was applied to conclude that transferring responsibility for collection to a private operator in a BOT/BOOT or similar contractual model does not convert the activity into a taxable service where the negative-list exclusion otherwise applies. [Paras 13, 15]

For the period from 01.07.2012 onwards the appellant's activity falls within the negative-list exclusion and does not attract service tax.

Circular No. 152/3/2012-ST - Business Auxiliary Service - Whether Circular No.152/3/2012-ST operates as a determinative guide to impose service tax on amounts retained by an independent collector (or SPV) and whether the Circular can be read to restrict the negative-list exclusion. - HELD THAT: - The Tribunal observed that the Circular sought to draw a dichotomy between different models of toll collection but did not and could not supplant the statutory scheme or limit the negative-list exclusion to agencies of the State. The Circular's broad wording and model-based guidance cannot be treated as authoritative to override contract-specific analysis or to extend tax liability in models where the statutory exclusion applies. The Tribunal treated the Circular as not determinative for all models of private participation and not a reliable basis to impose service tax in the circumstances of the appellant's contractual risk-assuming model. [Paras 12, 14]

The Circular cannot be read to negate the statutory negative-list exclusion in the appellant's case and is not a conclusive basis to fasten liability under Business Auxiliary Service.

Final Conclusion: The Tribunal set aside the Order in Original dated 24.03.2017 and allowed the appeal, holding that the appellant was not a commission agent for the pre-01.07.2012 period, and that the activity is covered by the negative-list exclusion from 01.07.2012 onwards; the department's reliance on the impugned Circular to impose service tax in the appellant's contractual model was rejected.

Support Services of Business or Commerce - consideration for services - infrastructural support services - charitable/non-commercial status of sports organisations

Support Services of Business or Commerce - consideration for services - infrastructural support services - charitable/non-commercial status of sports organisations - Whether the amount of Rs.10,00,00,000/- received from BCCI was liable to Service Tax as consideration for providing support services of business or commerce, and whether the demands and penalties confirmed by the Original Authority were sustainable. - HELD THAT: - The Tribunal examined whether there was a service provided to BCCI for which the appellant received consideration and whether that service fell within the definition of Support Services of Business or Commerce. The Department did not produce evidence of any understanding that the stadium was handed over to BCCI for the conduct of matches or that the sum of Rs.10,00,00,000/- was received as consideration for such a service. It was established on the record that the stadium was provided to the Chennai Super Kings franchise for which the appellant received Rs.50,00,000/- per match and discharged Service Tax on that amount. Absent proof that the contested receipt was consideration for providing infrastructural support to BCCI, Service Tax could not be levied. The Tribunal followed earlier decisions which held that BCCI and similar cricket associations, in organizing and promoting the sport, are not commercial or business organisations for the purpose of attracting service tax under the support services category, and that services rendered in that context do not constitute taxable support of a commercial enterprise. Applying these principles to the facts, the Department failed to establish the essential elements of a taxable service and consideration payable to the appellant from BCCI. [Paras 7, 8, 9, 11, 12]

The demands and penalties confirmed by the Original Authority were set aside; the appeals are allowed with consequential reliefs.

Final Conclusion: The Tribunal held that the Department failed to prove that the Rs.10,00,00,000/- received from BCCI was consideration for a service falling within Support Services of Business or Commerce

Cenvat credit - classification of service cannot be disputed at the recipient end - sponsorship service - business auxiliary service - invoice and tax paid by service provider entitle recipient to credit - demand of tax on same transaction under a different service-head not justifiable

Cenvat credit - classification of service cannot be disputed at the recipient end - sponsorship service - business auxiliary service - invoice and tax paid by service provider entitle recipient to credit - Whether cenvat credit availed by the appellant can be denied on the ground that the service is classifiable as sponsorship service and the recipient is liable to pay tax on reverse charge basis. - HELD THAT: - The Tribunal found that the service provider M/s. K.P.H. Dream Cricket Pvt. Ltd. had classified the services as Business Auxiliary Service, discharged the service tax and issued invoices. The department's case rested on reclassifying the service as Sponsorship Service and contending reverse charge liability on the appellant. Relying upon earlier Tribunal reasoning in COCA COLA INDIA PVT. LTD., the classification made and tax discharged by the service provider could not be challenged at the recipient's end so as to deny cenvat credit. The Tribunal held that where tax on the same transaction has been paid by the service provider under a particular taxable category and reflected in the invoice, the recipient is entitled to take credit on that basis and a demand that seeks to tax the same transaction under a different category is not sustainable at the recipient's end.

Cenvat credit availed by the appellant cannot be denied on the ground of reclassification to Sponsorship Service; credit upheld.

Final Conclusion: Impugned order set aside; appeal allowed and cenvat credit sustained.

Cenvat credit - Input service - exclusion clause in the definition of Input Service under Rule 2(l) of Cenvat Credit Rules, 2004 - setting up of a new project - expansion, renovation or modernization - services used in or in relation to manufacture of final product - nexus between input services and manufacture

Cenvat credit - Input service - setting up of a new project - expansion, renovation or modernization - services used in or in relation to manufacture of final product - Whether Cenvat credit is admissible on Management & Business Consultant service and Technical Inspection and certification service used for construction of an additional jetty adjacent to an existing jetty. - HELD THAT: - The Tribunal found that the services were utilised for an additional jetty adjoining an already operational jetty and thus constituted expansion of the existing facility rather than the setting up of a new jetty. The exclusion in the definition of Input Service for services used in connection with "setting up" of a new construction did not apply to expansion/renovation/modernisation of an existing facility. The Tribunal applied the main clause of the definition in Rule 2(l) which admits services "used in or in relation to the manufacture of final products" and held that where services are employed for expansion of existing production-related infrastructure they remain input services eligible for Cenvat credit. The decision relied on consistent precedent of the Tribunal holding identical expansions to be covered by the inclusion (and not excluded by the amendment) and distinguishing facts where services were for entirely new set-ups. Consequently the denial of credit on the ground of "setting up" was held to be unsustainable.

Impugned order set aside; Cenvat credit allowed for the services used in construction of the additional jetty treated as expansion of the existing jetty.

Final Conclusion: The appeal is allowed: services employed for construction of an additional jetty adjacent to an existing jetty are treated as expansion/modernisation and qualify as input services for Cenvat credit; the order denying credit on the basis of "setting up" is set aside.

Telecommunication service - reverse charge mechanism - liable to service tax under reverse charge - licence under first proviso to section 4(1) of the Indian Telegraph Act, 1885 - Business Support Service - CBEC Circular F. No. 137/21/2011-S.T. dated 15.07.2011

Telecommunication service - licence under first proviso to section 4(1) of the Indian Telegraph Act, 1885 - reverse charge mechanism - CBEC Circular F. No. 137/21/2011-S.T. dated 15.07.2011 - Business Support Service - Whether service tax under the reverse charge mechanism was payable by the appellant on telecom/broadband services received from foreign service providers when the appellant did not hold a licence under the first proviso to section 4(1) of the Indian Telegraph Act, 1885. - HELD THAT: - The Tribunal recorded that the receipt of telecom services from abroad by the appellant was not disputed. It applied the statutory definition of telecommunication service which requires that the service be provided by a person who has been granted a licence under the first proviso to section 4(1) of the Indian Telegraph Act, 1885. Admitting that the appellant did not possess such a licence, the Tribunal held that the services received could not be treated as telecommunication service as defined for levy of service tax. The Tribunal relied on CBEC instruction F. No. 137/21/2011-S.T. dated 15.07.2011 which states that services like International Private Leased Circuit (IPLC) received from foreign vendors are not taxable as telecommunication service (since the foreign provider is not a licensed telegraph authority) and that such receipts may fall under Business Support Service for levy under reverse charge. On this basis the Tribunal concluded that, in the present facts, the appellant was not liable to pay service tax as telecommunication service under the reverse charge mechanism and that the adjudicating authority's contrary conclusion could not be sustained. [Paras 4, 5]

The impugned order is set aside and the appeal is allowed; the appellant is not liable to pay service tax on the telecom/broadband services received from abroad in the circumstances of this case.

Final Conclusion: Appeal allowed; the order-in-original imposing service tax under the reverse charge for telecom/broadband services received from foreign providers is set aside because the services did not qualify as telecommunication service for levy in the absence of a licence as required by the Indian Telegraph Act, 1885.

Cenvat credit on services used for setting up premises - Eligibility of input/input service where goods or services are used for providing output service - No requirement of a direct nexus between input/input service and output service - Temporal effect of amendment to definition of input service w.e.f. 01.04.2011 - Treatment of goods initially availed as capital goods but usable as inputs - Point of Taxation Rules not determinative for Cenvat admissibility where service completion predates amendment - Denial of credit for non-production of originals where receipt, consumption and utilization are undisputed - Inapplicability of extended period of limitation where dispute is one of interpretation

Cenvat credit on services used for setting up premises - Temporal effect of amendment to definition of input service w.e.f. 01.04.2011 - Admissibility of Cenvat credit on services used for setting up the premises where such services were received prior to 01.04.2011. - HELD THAT: - The Tribunal held that services used in relation to setting up the premises from where output services are rendered qualify as services used for providing the output service and therefore were eligible for Cenvat credit where received prior to 01.04.2011. The adjudicating authority correctly applied the pre-amendment inclusive limb of the definition of "input service" in Rule 2(l) and the Tribunal relied on consistent precedents recognizing that setting up is within the scope of input service prior to the amendment. The Board circular relied upon by Revenue did not override the statutory definition and was held not to provide a legal basis to deny credit. Consequently, credits availed in respect of such services received prior to 01.04.2011 were allowable. [Paras 8]

Credit allowed for services used in setting up premises where such services were received prior to 01.04.2011.

Point of Taxation Rules not determinative for Cenvat admissibility where service completion predates amendment - Whether invoices issued after 01.04.2011 could negate eligibility for credit where services were completed prior to that date. - HELD THAT: - The Tribunal rejected Revenue's new contention that invoiced dates post 01.04.2011 and the deeming provisions of the Point of Taxation Rules would render the services provided after the amendment. It observed that the deeming fiction in the Point of Taxation Rules applies for the purposes of those Rules only, and that Board guidance treats the date of completion of service as relevant for Cenvat where services were completed prior to 01.04.2011. The assessee's production of invoices demonstrating completion prior to 01.04.2011 was accepted. [Paras 9]

Invoices issued after 01.04.2011 do not defeat credit where the services were completed prior to that date.

No requirement of a direct nexus between input/input service and output service - Whether Cenvat credit can be denied for inputs and input services on the ground of lack of direct nexus with the output service. - HELD THAT: - The Tribunal held that neither the definition of "input" nor "input service" nor any provision of the Cenvat Credit Rules requires a direct nexus; it is sufficient that goods or services are used for providing the output service. The Tribunal relied upon judicial authority and Board clarification recognizing that even peripheral connection suffices. Where receipt, consumption and utilization for provision of output service were undisputed, denial on the ground of absence of direct nexus was unsustainable. [Paras 10]

Credit cannot be denied merely for lack of direct nexus; admissible where goods/services are used for providing output service.

Treatment of goods initially availed as capital goods but usable as inputs - Admissibility of Cenvat credit on goods such as concrete blocks, tiles, glass, furniture and prefabricated buildings availed prior to 01.04.2011 where classified as capital goods. - HELD THAT: - Applying precedents, the Tribunal held that such goods used for setting up premises by a service provider were admissible as inputs prior to 01.04.2011; the explanation introduced applicable to manufacturers does not bar service providers. The fact that credit was initially availed as capital goods does not preclude claim as inputs (subject to appropriate adjustments), and capital-goods treatment only deferred full availment. The Tribunal, however, upheld reversal of credit in respect of goods that were subsequently removed as such, in accordance with Rule 3(5). [Paras 11]

Credit allowed as inputs for goods used in setting up premises prior to 01.04.2011, except where goods were cleared as such requiring reversal.

Denial of credit for non-production of originals where receipt, consumption and utilization are undisputed - Whether Cenvat credit can be denied solely because originals of duty-paid documents were not produced at a later audit when receipt and utilization are otherwise undisputed. - HELD THAT: - The Tribunal found that where there was no dispute as to receipt, consumption and utilization of goods and credit had been originally availed on the strength of originals, later non-production of some originals during a subsequent audit did not justify denial of Cenvat credit. The adjudicating authority's disallowance on this ground was therefore set aside. [Paras 12]

Credit cannot be denied where originals were earlier relied upon and receipt/consumption/utilization are not in dispute.

Inapplicability of extended period of limitation where dispute is one of interpretation - Whether the extended period of limitation could be invoked for the periods under challenge. - HELD THAT: - The Tribunal held that the extended period was not invokable because the disputed credits related to questions of interpretation (eligibility of credit for setting up and nexus issues) on which courts ultimately ruled in favour of the assessee. As the contentious matters were interpretative rather than involving fraud or suppression, the extended period could not be applied. [Paras 13]

Extended period of limitation not invokable; proceedings beyond normal period not sustained.

Final Conclusion: The appeal of the assessee is allowed in part and the Revenue's appeal is dismissed: Cenvat credit is permitted for services and goods used in setting up premises received prior to 01.04.2011, for inputs and input services used to provide the output service even without a direct nexus, for goods initially classified as capital goods where law permits input treatment (subject to reversal where goods were cleared), and credits cannot be denied for non-production of originals or by applying Point of Taxation deeming where services were completed prior to amendment; the extended period of limitation is not invocable. Reversal of credit for goods cleared as such is upheld.