TaxTMI Updates e-Newsletter
Feb 25,2022

Release of detained goods and vehicle - interim relief on payment of admitted and disputed tax - interest of revenue - security for revenue - liability of legal representatives on death of registered dealer - non-precedential order

Release of detained goods and vehicle - interim relief on payment of admitted and disputed tax - interest of revenue - Release of detained consignment and vehicle on interim terms - HELD THAT: - The Court upheld the interim order of the Single Judge directing release of the two detained trucks with their consignments on the factual basis that the respondent (wife of the deceased registered dealer) had paid 100% of the admitted tax and 10% of the disputed tax. The Court treated such payment as reasonably safeguarding the interest of revenue at the interim stage, particularly in light of the non-functioning of the GST Tribunal and the delay in detention since September 2021. The order was confined to the facts before the Court and did not involve an interpretation of the provisions of Section 129 of the CGST Act, 2017; the release was granted as an interim factual relief because the revenue's interest, for the time being, stood protected by the payments made.

Interim release of goods and vehicle granted because payment of 100% admitted tax and 10% disputed tax sufficiently safeguarded revenue's interest.

Liability of legal representatives on death of registered dealer - security for revenue - Procedural avenue for contesting technical objections and verification of liability - HELD THAT: - The Court directed that technical objections - including contentions relating to liability of legal representatives following the death of a registered dealer and the applicability of relevant statutory provisions - must be agitated before the Single Judge where the petitioner has been permitted to file an affidavit-in-opposition. The Court observed the respondent is in the process of being recognized as the dealer by substitution and noted Section 93 of the W.B. GST Act, 2017 (on liability of legal representatives) without deciding the legal question. The matter was left for adjudication by the Single Judge on the affidavits and evidence to determine whether any further security (for example, bond or other means) is necessary to protect revenue beyond the payments already made.

Technical objections and the question of further security for revenue remitted to and to be decided by the Single Judge on the affidavits and evidence.

Final Conclusion: The appeal is dismissed; the interim release directed by the Single Judge is to be complied with on the factual terms recorded (payment of 100% of admitted tax and 10% of disputed tax), the State may pursue its contentions before the Single Judge where the parties may file affidavits and replies, and the order is not to be treated as a precedent or as an interpretation of Section 129.

Interest under Section 50 of CGST Act - Automatic liability and quantification of interest - Adjudication under Sections 73 and 74 of CGST Act - Recovery and garnishee proceedings under Section 79 of CGST Act - Calculation of interest and electronic cash ledger proviso

Interest under Section 50 of CGST Act - Automatic liability and quantification of interest - Adjudication under Sections 73 and 74 of CGST Act - Whether interest liability under Section 50 can be determined and recovered without initiating adjudication proceedings when the assessee disputes the liability or its computation. - HELD THAT: - The Court held that although liability to pay interest under Section 50(1) arises automatically, quantification of that liability is not to be unilaterally fixed where the assessee disputes either the leviability or the computation. In such circumstances the proper course is initiation of adjudication proceedings under Section 73 or 74 so that the quantum and period of liability can be determined after considering the assessee's objections and performing the requisite arithmetic exercise. The Court followed the reasoning in the Coordinate Bench decision which explained that 'automatic' liability does not exclude the need for an arithmetic and adjudicatory exercise when disputed, and therefore unilateral fixation of interest in the face of a dispute is impermissible. [Paras 9, 10, 14]

Interest liability under Section 50 cannot be finally determined and made exigible without initiating adjudication under Section 73 or 74 where the assessee disputes the leviability or quantum; the impugned demand is quashed.

Recovery and garnishee proceedings under Section 79 of CGST Act - Adjudication under Sections 73 and 74 of CGST Act - Whether recovery proceedings under Section 79 can be initiated for recovery of interest under Section 50 before adjudication of the disputed interest liability. - HELD THAT: - Relying on the principle that an amount disputed and not adjudicated cannot be treated as an amount payable under the Act, the Court held that garnishee or other recovery proceedings under Section 79 cannot be initiated to recover interest under Section 50 while the liability or its computation is disputed and adjudication under Section 73 or 74 has not been completed. The Court noted that until the Proper Officer adjudicates the interest claim, the revenue cannot treat the disputed interest as a confirmed demand for recovery. [Paras 11, 12, 14]

Recovery proceedings under Section 79 for disputed interest under Section 50 cannot be initiated until adjudication under Section 73 or 74 determines the liability; the garnishee/demand is set aside.

Adjudication under Sections 73 and 74 of CGST Act - Calculation of interest and electronic cash ledger proviso - Liberty and procedure left to Revenue to determine the disputed interest after quashing the impugned demand. - HELD THAT: - The Court quashed the impugned demand and garnishee notices but granted liberty to the respondent authorities to initiate appropriate adjudication proceedings under Section 73 or 74 to determine the liability of interest in accordance with law and after giving the assessee an opportunity of hearing. The effect is that the question of quantum and period of interest is remitted for fresh adjudication rather than finally decided on merits by this order. [Paras 12, 14]

Impugned demand is quashed and the matter is remitted for adjudication by the revenue under Section 73 or 74 with opportunity of hearing to the assessee.

Final Conclusion: The writ petition is allowed: the demand and garnishee notices for interest on delayed GSTR-3B returns for July 2017 to December 2019 are quashed; revenue may initiate adjudication under Sections 73/74 to determine any interest liability after hearing the assessee, but cannot recover disputed interest by Section 79 proceedings until such adjudication is completed.

Offence under Section 132(1)(b)(c) of the Central Goods and Services Tax Act, 2017 - Prima-facie incriminatory role - Absence of tangible evidence of benefit - Personal liberty and custodial incarceration - Grant of bail subject to conditions to prevent flight and tampering with evidence - Security by way of personal surety

Grant of bail subject to conditions to prevent flight and tampering with evidence - Personal liberty and custodial incarceration - Security by way of personal surety - Petition for grant of bail was allowed subject to conditions including furnishing personal surety and restrictions against fleeing, tampering with evidence, and influencing witnesses. - HELD THAT: - The Court observed that the petitioner has been in judicial custody since his arrest on 23.10.2021 and that continued incarceration would unduly fetter personal liberty while investigation and evidence-collection remain incomplete. Recognising the gravity of the allegations, the Court concluded that bail cannot be unconditional; imposition of conditions is necessary to ensure the petitioner does not abscond, tamper with prosecution evidence, or influence witnesses. On the petitioner's undertaking to furnish a personal surety in the form offered and to comply with obligations to attend trial as directed, the petition was allowed and the petitioner ordered released from custody subject to the specified conditions. The Court directed compliance before the trial court and preserved the prosecution's right to proceed with investigation and trial. [Paras 7, 8, 10, 11]

Bail granted on compliance with conditions including furnishing personal surety and obligations to appear and not interfere with the prosecution.

Prima-facie incriminatory role - Absence of tangible evidence of benefit - Offence under Section 132(1)(b)(c) of the Central Goods and Services Tax Act, 2017 - Court recorded that prima-facie the petitioner is alleged to have facilitated issuance of fictitious invoices and statements but there is no tangible material at this stage showing he benefited from the alleged tax fraud. - HELD THAT: - The Court noted the prosecution's allegation that the petitioner, a chartered accountant associated with two proprietorship concerns, facilitated the offence by preparing fictitious accounts and forged invoices, thereby enabling illegal claim of input tax credit. It recognised, however, that whether the petitioner actually authored or uploaded the incriminatory documents is a matter of evidence to be established through investigation. The Court found that while a prima-facie role is ascribed by the prosecution, there is presently no tangible evidence showing the petitioner personally received the proceeds of the alleged fraud; collection and verification of evidence remain underway and will determine the final position. [Paras 4, 5, 6]

Prima-facie allegation recorded but absence of tangible evidence of personal benefit noted; the matter requires investigation and evidentiary determination.

Final Conclusion: The petition for bail was allowed subject to conditions (including furnishing personal surety and restrictions against fleeing, tampering with evidence, and influencing witnesses); the Court recorded a prima-facie incriminatory role alleged by the prosecution but noted absence of tangible evidence of personal benefit and left the matter to investigation and trial.

Regular bail - double jeopardy - conspiracy and forgery - Input Tax Credit fraud - concurrent criminal and statutory proceedings

Regular bail - conspiracy and forgery - Petitioner granted regular bail in FIR alleging preparation of forged documents and participation in conspiracy to facilitate wrongful availing of Input Tax Credit. - HELD THAT: - The Court observed that there is a debatable question on the extent of the petitioner's role - whether confined to preparing forged documents or as a part of the larger conspiracy causing loss by wrongful availing of Input Tax Credit. Without adjudicating the merits, and having regard to the fact that the petitioner has been in custody for about eight months and has a clean record, the Court exercised its discretion in favour of bail. The order directs release on furnishing bail/surety bonds to the satisfaction of the trial Court/Chief Judicial Magistrate/Duty Magistrate, leaving the substantive issues for trial. [Paras 7]

Petitioner ordered to be released on regular bail upon furnishing bonds/surety to the satisfaction of the concerned trial Magistrate/Court.

Double jeopardy - concurrent criminal and statutory proceedings - Input Tax Credit fraud - Existence of a prior complaint under CGST does not preclude continuation of the present FIR under IPC; both proceedings may continue simultaneously. - HELD THAT: - The Court noted that a verbatim similar complaint under CGST is pending and that the petitioner had earlier been granted bail in that complaint. The State conceded that both complaints exist, and advanced the submission that a CGST complaint and an FIR under IPC can proceed concurrently even if forgery forms part of the larger refund-related scam. The Court accepted that position and did not treat the earlier GST complaint as a bar to the present FIR being prosecuted, without making any definitive finding on abuse of process or double jeopardy on the merits. [Paras 5]

The criminal prosecution under the IPC may continue notwithstanding the pending CGST complaint; the existence of the earlier GST complaint did not result in dismissal of the FIR.

Final Conclusion: Bail petition allowed; petitioner to be released on regular bail on furnishing appropriate bonds/surety to the satisfaction of the trial Court/Magistrate. The pending CGST complaint does not bar continuation of the present FIR under the IPC; substantive issues to be decided at trial.

Refund claim time bar - computation and exclusion of period of limitation - extension of limitation due to COVID 19 - benefit of Supreme Court order on limitation - remand for fresh consideration

Refund claim time bar - computation and exclusion of period of limitation - benefit of Supreme Court order on limitation - Whether rejection of the petitioner's refund claim for April-2018 to February-2019 as time barred was proper in view of orders and notifications extending/excluding the period of limitation during the COVID 19 pandemic - HELD THAT: - The Court found that the impugned rejection was based solely on a Central Government notification dated 14.12.2020 extending time only up to 31.03.2021 for actions falling within specified dates. That notification predated the later orders of the Hon'ble Supreme Court which, by suo motu cognizance, directed exclusion of the period from 15.03.2020 till 02.10.2021 for computation of limitation. The direction of the Supreme Court governs the field and, having noted that the petitioner's refund application was filed after the commencement of the period excluded by the Supreme Court order, the petitioner is entitled to the benefit of that order. In view of these conclusions, the Court set aside the rejection order and remanded the matter to the respondent no.1 for fresh adjudication of the refund claim filed on the date recorded in the petition, directing that fresh orders be passed expeditiously and preferably within two months from receipt of the order. [Paras 3, 6, 7]

Impugned rejection set aside; matter remanded to respondent no.1 to decide the refund claim afresh in accordance with the Supreme Court's exclusion of limitation period, with directions to decide preferably within two months.

Final Conclusion: The High Court set aside the order rejecting the refund as time barred, held that the petitioner is entitled to the benefit of the Supreme Court's order excluding 15.03.2020 to 02.10.2021 for limitation computation, and remanded the claim for fresh decision by respondent no.1 within the directed time.

Composite supply - works contract - predominantly earth work - sub-contractor to the main contractor - classification under Notification No. 11/2017-CT (Rate) dated 28.06.2017

Composite supply - works contract - classification under Notification No. 11/2017-CT (Rate) dated 28.06.2017 - Whether the activity carried out by the applicant is supply of goods, supply of services, or a composite supply of works contract - HELD THAT: - The Authority examined the nature of activities subcontracted to the applicant - drilling and blasting using explosives for extraction of boulders as part of land development for an airport - and held that the work involves both goods (explosives and materials) and services (drilling, blasting and related operations). Having regard to the supply being in respect of immovable property (land development) and the bundling of goods and services in the ordinary course of business, the Authority concluded that the applicant's activity constitutes a composite supply and, more specifically, is a composite supply of a works contract under the GST law. The Authority relied on earlier advance-ruling precedent recognising blasting with explosives as a composite supply and on the character of the subcontracted work being part of the works contract for earth/land development. [Paras 6]

The activity is classified as a composite supply of 'works' contract.

Sub-contractor to the main contractor - predominantly earth work - classification under Notification No. 11/2017-CT (Rate) dated 28.06.2017 - Whether the subcontracted drilling and blasting falls within Entry 3(x) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 and is taxable at 5% - HELD THAT: - Entry 3(x) grants the concessional rate to composite works-contract supplies provided by a sub-contractor to a main contractor where the main contractor's supply falls within Entry 3(vii) (works contracts involving predominantly earth work provided to specified government recipients). The Authority analysed whether the main contractor's supply to CIDCO fell within Entry 3(vii) and noted that Notification No. 11/2017-CT (Rate) was amended by Notification No. 15/2021-CT(R) (effective 01.01.2022) which deleted the words "Governmental Authority" and "Government Entity" from Sr. No. 3(vii). Consequently, with effect from 01.01.2022 the statutory structure required for the subcontractor's supply to qualify under Entry 3(x) is not met. On that basis, the Authority held that the applicant's subcontracted service does not qualify for taxation under Entry 3(x) at 5%. [Paras 6]

The activity does not qualify under Entry 3(x) and therefore is not taxable at 5% under that entry (answer in the negative).

Final Conclusion: The Authority ruled that the applicant's drilling and blasting work is a composite supply in the nature of a works contract, but it does not qualify for the concessional classification under Entry 3(x) of Notification No. 11/2017-CT (Rate) dated 28.06.2017 and thereby is not taxable at 5% under that entry.

Composite supply of works contract - original works - Government Entity - classification under Entry No. 3(xii) of Notification No. 11/2017-CT(Rate) - interpretation of deletion and substitution in the rate Notification - taxable at 18% GST

Composite supply of works contract - classification under Entry No. 3(xii) of Notification No. 11/2017-CT(Rate) - interpretation of deletion and substitution in the rate Notification - taxable at 18% GST - The rate of GST applicable to the supplies made under the contract - HELD THAT: - The Authority noted its earlier advance ruling that the applicant's activities constituted a composite supply in the nature of a works contract and had been classified under Entry 3(ii) of Notification No. 11/2017-CT(Rate). Following amendment by Notification No. 3/2019-CT(Rate) which omitted Item (ii), the Authority examined the amended schedule and the remaining entries. Having regard to the deletion and the absence of any new relevant headings, the activities previously covered by Entry 3(ii) fall into the residual category at Serial No. 3(xii) of the Notification as amended. The Authority further observed that no additional facts or submissions were provided and that the applicant had accepted the earlier ruling; accordingly there was no reason to depart from the earlier characterization of the supplies as works contract for classification purposes. On this basis the supplies are to be assessed under sub-clause (xii) of Entry No. 3 of Notification No. 11/2017-CT(Rate) as amended, and taxed at the rate specified for that entry. [Paras 5]

Supplies under the contract are covered by sub-clause (xii) of Entry No. 3 of Notification No. 11/2017-CT(Rate) as amended and are taxable at 18% GST.

Final Conclusion: The Authority answers that the applicant's supplies under the contract are taxable under sub-clause (xii) of Entry No. 3 of Notification No. 11/2017-CT(Rate) as amended and attract GST at 18%.

Classification of services - Support services to exploration, mining or drilling of petroleum crude or natural gas - Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas - Works contract - Composite supply - Principal supply - Composite supply of works contract treated as supply of service

Support services to exploration, mining or drilling of petroleum crude or natural gas - Other professional, technical and business services relating to exploration, mining or drilling of petroleum crude or natural gas - Classification of services - Whether the services supplied by the applicant under the EPC contract for construction of the Sulphate Removal Plant are classifiable under Sr. No. 24(ii) (Support services to mining) or Sr. No. 21(ia) (Other professional, technical and business services relating to mining) of the Rate Notification - HELD THAT: - The Authority examined the scope of the EPC contract and the nature of activities undertaken - design and detail engineering, surveys, procurement and supply, fabrication, manufacturing, inspection and testing, packing, shipping, site establishment, storage, erection and installation, commissioning, testing, training and handover - and observed that these services involve creating a permanent, immovable plant and include transfer of property in goods in the execution of the contract. The Explanatory Notes to Heading 998621 (support services) describe support services as activities linked to oil and gas extraction once infrastructure is in place and do not extend to activities undertaken to create that infrastructure. Likewise, Heading 9983 covers pure professional, technical and business services, whereas the applicant's obligations under the EPC contract are not limited to pure services but include construction and transfer aspects. On this basis the Authority concluded that the subject supply does not fall within Sr. No. 24(ii) or Sr. No. 21(ia).

No; the services are not classifiable under Sr. No. 24(ii) or Sr. No. 21(ia) of the Rate Notification.

Works contract - Composite supply - Composite supply of works contract treated as supply of service - Principal supply - If not covered by the above entries, what is the appropriate classification and rate for the services supplied under the EPC contract - HELD THAT: - The Authority applied the statutory definition of 'works contract' and the concept of composite supply. The EPC contract requires construction, erection, installation and transfer of the completed Sulphate Removal Plant (immovable in nature), thereby involving transfer of property in goods in the course of execution. Schedule II and the definitions treat a works contract as a composite supply which is to be treated as a supply of service where construction for immovable property is involved. Consequently the composite supply falls within the entry for construction services (Heading 9954) dealing with composite supplies of works contracts. The Authority therefore determined that the taxable character of the supply is that of a works contract composite supply and that the rate prescribed for such composite supply under the Notification applies.

The supply is a composite 'works contract' supply and is taxable as construction services under S. No. 3 Heading 9954(ii) of the Notification; GST at 18% (9% CGST and 9% SGST) is payable.

Final Conclusion: The Advance Ruling holds that the EPC supply for construction, commissioning and handover of the Sulphate Removal Plant does not qualify as either 'support services to exploration, mining or drilling' (Sr. No. 24(ii)) or as 'other professional, technical and business services relating to exploration, mining or drilling' (Sr. No. 21(ia)). Instead, the transaction is a composite works contract supply taxable as construction services under S. No. 3 Heading 9954(ii) of Notification No. 11/2017-Central Tax (Rate), attracting GST at 18% (9% CGST and 9% SGST).

Input tax credit - capital goods - plant and machinery - construction of immovable property - blocked credits under section 17(5) - in the course or furtherance of business - captive consumption

Input tax credit - capital goods - in the course or furtherance of business - Eligibility to claim input tax credit on inputs, capital goods and input services procured for installation, erection and commissioning of the rooftop solar power generating plant. - HELD THAT: - Section 16(1) entitles a registered person to take credit of input tax charged on supplies of goods or services used or intended to be used in the course or furtherance of business, subject to conditions in Section 16(2). The applicant proposes a rooftop solar plant for captive consumption to run its manufacturing of taxable goods. The jurisdictional officer and the Authority note that entitlement is conditional upon satisfaction of statutory requirements, including possession of tax invoices, receipt of goods/services and payment of tax, and that capital goods must be capitalised in the books of account. The Authority observed that the applicant has not produced documentary proof of capitalization but expressly recognised that, subject to such capitalization and compliance with applicable rules (including Rule 43 for apportionment), the applicant may be eligible to claim input tax credit on the listed items used for installation of the solar plant. The determinative conclusion is therefore conditional: the supplies qualify for ITC when the statutory conditions for claiming credit are satisfied and the goods are capitalised as capital goods in the applicant's books. [Paras 4, 7, 11, 12]

Subject to fulfillment of the conditions in Section 16(2) and subject to the goods being capitalised in the books of account (and applicable compliance under Rule 43), the applicant is eligible to claim input tax credit on the inputs, capital goods and input services used for setting up the rooftop solar plant.

Plant and machinery - construction of immovable property - blocked credits under section 17(5) - captive consumption - Whether the rooftop solar power generating plant, though involving construction/erection on the applicant's building, qualifies as 'plant and machinery' and is therefore not covered by the blocked credit provisions of Section 17(5)(c)/(d). - HELD THAT: - Section 17(5)(c) and (d) block ITC in respect of works contract services and goods/services for construction of immovable property (other than plant and machinery) on own account. The Explanation defines 'plant and machinery' as apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services, but excludes land, building and other civil structures. The Authority found that installation of the rooftop solar plant involves civil work and permanent fastening to the building (thus amounting to "construction"), but that the solar power generating plant nevertheless falls within the Explanation's definition of "plant and machinery" because it is apparatus/equipment/machinery used to generate electrical energy for manufacturing taxable goods. Consequently, although the installation entails construction on immovable property, the plant is not a civil structure or building and therefore does not attract the exclusion in Section 17(5). The Authority accordingly treated the solar plant as capital goods qualifying as plant and machinery and not a blocked item under Section 17(5). [Paras 8, 9, 10, 11, 12]

The rooftop solar power generating plant qualifies as 'plant and machinery' and is not covered by the blocked-credit provisions of Section 17(5); hence credits on inputs, capital goods and services for setting up the plant are not barred by Section 17(5).

Final Conclusion: The Authority ruled that the applicant may claim input tax credit on inputs, capital goods and input services for the rooftop solar power generating plant and that the plant qualifies as 'plant and machinery' thereby not attracted to the blocked credits of Section 17(5), subject to fulfillment of the statutory conditions for claiming credit and capitalization of the goods in the books of account.

Input tax credit - restriction on input tax credit in respect of health insurance under Section 17(5)(b)(i) - proviso permitting credit where supply is obligatory for employer under any law - availability of credit where inward supply is used for making an outward taxable supply of the same category - availability of credit where inward supply is an element of a taxable composite or mixed supply - advance ruling on admissibility of input tax credit

Input tax credit - restriction on input tax credit in respect of health insurance under Section 17(5)(b)(i) - availability of credit where inward supply is used for making an outward taxable supply of the same category - availability of credit where inward supply is an element of a taxable composite or mixed supply - proviso permitting credit where supply is obligatory for employer under any law - Whether the applicant can claim input tax credit of GST charged by the medical/health insurance company in respect of insurance done for employees. - HELD THAT: - The Authority examined Section 17(5)(b)(i) which disallows input tax credit in respect of health insurance services subject to the provisos. Two conditions identified in the provision for permitting credit are: (i) the inward supply is used for making an outward taxable supply of the same category; and (ii) the inward supply is an element of a taxable composite or mixed supply. The applicant, a manufacturer of textiles, is neither a supplier of health insurance services nor is the health insurance service an element of the applicant's taxable supply of textiles. The applicant relied on Ministry of Home Affairs orders and related SOPs contending that medical insurance was made obligatory for employers; the Authority considered these submissions but applied the statutory tests in Section 17(5)(b)(i) and found that the statutory conditions for allowing credit were not met on the facts. Consequently, the proviso exceptions in Section 17(5)(b)(i) do not operate to permit ITC to the applicant. [Paras 5, 6, 7]

Input tax credit of GST charged on employee medical/health insurance is not available to the applicant.

Final Conclusion: Advance Ruling: the applicant (manufacturer of textiles) cannot claim input tax credit of GST paid on medical/health insurance procured for its employees because the statutory conditions in Section 17(5)(b)(i) for permitting such credit are not satisfied.

Pure services - exemption under Notification No. 12/2017 - Central Tax (Rate) - function entrusted to a Municipality under Article 243W - Governmental authority - 90% equity/control test - works contract service - invoicing to lead member and effect on exemption

Pure services - works contract service - Whether the Project Management Consultancy services constitute 'pure services' for the purposes of the exemption notification - HELD THAT: - The Authority examined the contract scope and held that the applicant's engagement is confined to consultancy, project management and construction supervision without transfer of property in goods. The services do not involve supply of goods or works contract elements and fall within the category of supply of services only. The Authority therefore concluded that the services qualify as 'pure services' excluded from works contract or composite supplies involving goods.

The Project Management Consultancy services are 'pure services'.

Function entrusted to a Municipality under Article 243W - Whether the services are provided in relation to a function entrusted to a Municipality under Article 243W of the Constitution - HELD THAT: - The Authority considered the project objectives (rehabilitation and expansion of water supply and sewerage networks, construction and modernization of water and wastewater treatment plants) and noted that these activities fall within the Twelfth Schedule entries such as urban/town planning and water supply. The consultancy services were found to be in relation to functions entrusted to a Municipality under Article 243W.

The services are in relation to functions entrusted to a Municipality under Article 243W.

Governmental authority - 90% equity/control test - exemption under Notification No. 12/2017 - Central Tax (Rate) - Whether Rajasthan Urban Drinking Water Sewerage & Infrastructure Corporation Limited (RUDSICO) qualifies as a 'Governmental authority' under the notification - HELD THAT: - The Authority applied the definition in the notification which requires an authority to be set up by statute or established by government with 90% or more participation by way of equity or control to carry out municipal functions. On the facts (paid up capital and government share as presented), the Government of Rajasthan's holding was found to be less than 90%. Consequently, RUDSICO did not meet the statutory threshold to qualify as a 'Governmental authority' for purposes of the notification.

RUDSICO does not qualify as a 'Governmental authority' under the notification.

Exemption under Notification No. 12/2017 - Central Tax (Rate) - invoicing to lead member and effect on exemption - Whether the applicant is eligible for exemption under Notification No. 12/2017 having regard to the invoicing arrangement through the lead member - HELD THAT: - Although the Authority found that the services are 'pure services' and are in relation to municipal functions, eligibility under the notification also requires the recipient to be a Central/State/Union territory/local authority or a qualifying 'Governmental authority'. Because RUDSICO does not satisfy the 90% participation test, the exemption cannot be granted. The Authority noted that the contractual invoicing through the leading member is a matter of financial administration of the joint venture and does not alter the legal tests for exemption, but that observation is immaterial where the recipient fails to qualify under the notification.

The applicant is not eligible for exemption under Notification No. 12/2017; the invoicing to the lead member does not affect the legal result but does not cure the recipient's disqualification.

Final Conclusion: Although the Project Management Consultancy services were held to be 'pure services' and to relate to functions listed under Article 243W, the recipient RUDSICO does not satisfy the notification's definition of 'Governmental authority' (the required 90% participation threshold was not met). Consequently, the services are not eligible for exemption under Notification No. 12/2017 - Central Tax (Rate).

Classification of goods - application of Entry 234 (solar power generating system / solar power based devices) - mixed supply - composite supply - highest rate rule for mixed supplies (Section 8(b)) - works contract treated as supply of service - General Rules for Interpretation of Customs Tariff - Rule 2(a) and Rule 3(b) - Section Note 4 to Section XVI - classification of combination machines - Section Note 2(b) to Section XVI - parts suitable solely or principally for a particular machine - deemed value apportionment (70:30) where Entry 234 supplies are accompanied by services under S. No. 38

Classification of goods - application of Entry 234 (solar power generating system / solar power based devices) - Section Note 2(b) to Section XVI - parts suitable solely or principally for a particular machine - Section Note 4 to Section XVI - classification of combination machines - General Rules for Interpretation of Customs Tariff - Rule 2(a) and Rule 3(b) - mixed supply - highest rate rule for mixed supplies (Section 8(b)) - Classification and GST rate on sale of solar pump, controller, structure, solar panels and their various combinations (items (a) to (h)). - HELD THAT: - Solar panels are photovoltaic modules and are covered by the renewable energy entry in the GST Tariff (Entry No. 234) and are taxable at the rate specified for solar PV cells. Solar pumps, being devices designed to pump water and specifically designed to run on solar energy as part of a solar water pumping system, are part of a solar power based device and are classifiable under Entry No. 234 and taxable at the rate applicable to that entry. Controllers and mounting structures, while forming parts of the solar pumping installation, were examined against the Section Notes and tariff headings: controllers fall under Chapter 85 (electrical static converters) and structures under Chapter 73 (iron/steel structures). The Authority concluded that the controllers and structures supplied standalone are not covered by Entry No. 234 for goods when separately supplied and thus attract the rate applicable to their respective headings. For composite goods consisting of the listed components assembled or supplied together, the rules of tariff interpretation apply: Rule 2(a) allows classification of unassembled articles as the finished article and Rule 3(b) and Section Note 4 to Section XVI direct that a machine comprising components intended to contribute together to a clearly defined function is classifiable in the heading appropriate to that function. However, where the sale is a mixed supply of distinct goods supplied for a single price (not a composite supply with a principal element), the supply is governed by the mixed-supply rule and treated as the supply attracting the highest rate. Applying these principles, the Authority held the standalone rates for individual items and held that combinations (serials (iv) to (viii)) constitute mixed supplies of goods and the highest rate applicable to the goods in the package will determine the GST liability.

Solar pump - classifiable under Chapter 84 (HSN 8413) and taxable under Entry No. 234 at the concessional rate applicable to solar power generating devices; Solar panels - taxable under Entry No. 234 (solar PV cells) at the concessional rate; Controller - classifiable under Chapter 85 (HSN 8504) and taxable at the rate applicable to that heading; Structure - classifiable under Chapter 73 (HSN 7308) and taxable at the rate applicable to that heading; any supply of combinations (Solar Water Pumping System or other combinations listed) is a mixed supply of goods and the highest applicable rate among the goods supplied will apply.

Works contract treated as supply of service - composite supply - deemed value apportionment (70:30) where Entry 234 supplies are accompanied by services under S. No. 38 - Classification and GST rate on supply of solar water pumping system along with installation, commissioning and maintenance (supply of goods plus installation for drinking water application). - HELD THAT: - The supply comprising goods (solar panels, controllers, pumps, structures) together with installation, commissioning and maintenance was examined against the statutory definitions of works contract and composite supply. Where the supply involves transfer of goods together with installation/erection and related activities in relation to setting up the system, it falls within the definition of works contract as per Section 2(119) read with Schedule II and is treated as a supply of service. The Authority applied the Notification entries for taxable services (Heading 9954) and concluded that such composite supply of works contract for setting up solar power based devices is taxable as service under the specified entry. Where Entry 234 supplies of goods are provided along with services covered by S. No. 38, the Explanation prescribes that 70% of the gross consideration shall be deemed as value of goods and 30% as value of the taxable service; the applicable rates on those deemed values are to be applied as per the notifications. Having regard to these provisions and the classification of the overall supply as a works contract/composite supply treated as service, the Authority applied the prescribed service rate under the relevant notification.

The supply of the Solar Water Pumping System together with installation, commissioning and maintenance is a composite works contract treated as supply of service and attracts GST at the rate prescribed for such works contract services (as per Heading 9954 (ii)); accordingly the overall supply is taxable at 18%, with the statutory deeming/apportionment (70% goods : 30% service) applicable where Entry 234 goods are supplied along with services under S. No. 38.

Final Conclusion: The Authority ruled that solar panels and solar pumps, when falling within the solar power generating/device description, attract the concessional tariff under Entry No. 234; controllers and mounting structures sold standalone are taxable under their respective chapters/headings; combinations of the components supplied as mixed supplies of goods are taxable at the highest rate applicable to the goods in the package; and where the supply includes installation/commissioning/maintenance such that it constitutes a works contract/composite supply treated as service, the supply attracts GST as a works contract service (18%), with the statutory 70:30 deeming/apportionment applying where Entry 234 goods are supplied along with services under S. No. 38.

Wilful attempt to evade tax, penalty or interest - mens rea requirement for prosecution - prosecution under Section 276C(1) and Section 277 - presumption under Section 132(4)(a) of the Income Tax Act - wrong filing / incorrect return versus concealment of income - abuse of process of law

Wilful attempt to evade tax, penalty or interest - mens rea requirement for prosecution - wrong filing / incorrect return versus concealment of income - prosecution under Section 276C(1) and Section 277 - presumption under Section 132(4)(a) of the Income Tax Act - Whether the criminal complaints in C.C.Nos.582 & 583 of 2017 alleging offences under Section 276C(1) and Section 277 are sustainable where revised returns were filed, penalty was levied and paid, and assessment adjustments arise from disputed disallowance rather than proved concealment of income - HELD THAT: - The Court found that the allegations pertain to incorrect returns and wrong calculation of business loss which were not corroborated by books of account; assessments resulted in disallowances and penalty proceedings, and the petitioner paid the penalties. To attract Section 276C(1) and Section 277, prosecution must establish a wilful attempt to evade tax, penalty or interest (requiring mens rea) or that a statement in verification was made knowing it to be false. The statutory presumption under Section 132(4)(a) regarding documents seized does not extend to establish the ingredients of these offences. On the facts there was no material of deliberate and conscious evasion or concealment of income; the differences arose from disputed estimations and non-verifiable expenditures, not proven intent to evade tax. Reliance on the principle in Prem Dass that mere omission or negligence is not an offence supports that prosecution cannot be sustained. Continuation of proceedings in these circumstances would amount to an abuse of the process of law.

Complaints in C.C.Nos.582 & 583 of 2017 quashed and proceedings stayed as amounting to abuse of process for want of requisite mens rea and absence of proven concealment of income

Final Conclusion: Criminal Original Petitions allowed; prosecutions in C.C.Nos.582 & 583 of 2017 quashed as unsustainable because the assessment adjustments arose from disputed disallowances and there was no established wilful attempt to evade tax, and continuation of prosecution would be an abuse of process of law.

Selection of tested party in transfer pricing - Least complex party/least complex theory - Foreign associated enterprise as tested party - Comparability and segmental analysis in transfer pricing - Intra-group administrative and IT support services-stewardship versus commercial services

Selection of tested party in transfer pricing - Least complex party/least complex theory - Foreign associated enterprise as tested party - Whether the foreign associated enterprise could be accepted as the tested party for determination of arm's length price and whether Indian transfer pricing regulations prohibit selecting a foreign AE as tested party. - HELD THAT: - The Tribunal's finding that the tested party should normally be the least complex party to the controlled transaction and that there is no bar in the Act or transfer pricing guidelines to selecting either a domestic or foreign AE as tested party is upheld. The Court noted the FAR analysis showing the assessee to be the more complex entity and accepted the Tribunal's reliance on authorities and guidance (including the United Nations Practical Manual and subsequent tribunal decisions) which permit selection of a foreign AE where it is the less or least complex party and requisite information is available. The Tribunal's factual conclusion that the AE was less complex and that the assessee had available material to establish risks and functions was held to be just and legally valid, so the assessing officer's refusal to treat the AE as tested party was set aside.

Answered against the revenue; foreign AE may be selected as tested party where it is the least complex and requisite information is available; Tribunal's finding sustained.

Comparability and segmental analysis in transfer pricing - Whether the Tribunal was right in directing the assessing officer to accept the assessee's segmental accounts/segmentation of profitability for transactions of purchase of finished goods, receipt of commission and sale of finished goods. - HELD THAT: - On the facts the Tribunal accepted the assessee's contention that the relevant adjustments and transfer pricing determination must be made transaction-wise and not on an aggregated entity-level basis. Noting that the assessee's activities in relation to those transactions constituted trading functions distinct from other entity activities, and that the DRP had accepted similar segmentation for later assessment years, the Court held that the Tribunal's conclusion to accept the segmentation analysis was factually based and cannot be faulted.

Answered against the revenue; Tribunal's direction to accept segmental analysis upheld.

Intra-group administrative and IT support services-stewardship versus commercial services - Whether administrative support services and IT support services received by the assessee from the AE were correctly characterised as stewardship/shareholder activities. - HELD THAT: - The Tribunal had conducted a factual analysis (referring to its earlier order for AY 2011-12) and found that the services were provided to meet specific needs of the assessee, conferred economic and commercial benefits and were not mere stewardship functions. The High Court found this to be a factual conclusion and observed that no substantial question of law arises from the Tribunal's factual findings.

No substantial question of law; Tribunal's factual conclusion that the services were commercial (not stewardship) stands.

Final Conclusion: The revenue appeal is dismissed: (i) the Tribunal was right in allowing a foreign associated enterprise to be treated as the tested party where it is the least complex and requisite information exists; (ii) the Tribunal correctly accepted the assessee's segmental profitability analysis for the specified transactions; and (iii) the characterisation of intra-group administrative and IT services was a factual finding on which no substantial question of law arises.

Benefit of Pradhan Mantri Garib Kalyan Deposit Scheme - partial compliance - deposit under section 199F - compliance with sections 199D and 199E - appropriation to Deposit Scheme and refund - mandamus directing appropriation and refund

Benefit of Pradhan Mantri Garib Kalyan Deposit Scheme - partial compliance - deposit under section 199F - compliance with sections 199D and 199E - appropriation to Deposit Scheme and refund - Whether petitioner could be denied the benefits of the Pradhan Mantri Garib Kalyan Deposit Scheme for non-deposit of the sum required under section 199F when tax, surcharge and penalty under sections 199D and 199E had been appropriated and the petitioner had attempted, but was unable, to make the deposit due to bank refusal/closure. - HELD THAT: - The Court found that the petitioner had complied with the requirements under sections 199D and 199E as the tax, surcharge and penalty had been appropriated by the Department. The only shortfall related to deposit under section 199F, which the petitioner attempted to make on the prescribed date but could not because the authorised bank branch would not accept the deposit and the alternate branch was closed. The Department continued to hold a sum from the seizure. Having regard to the substantial compliance (described by the Court as approximately 66 per cent.) and the petitioner's continued willingness to deposit the balance and forgo interest, the Court held it would be unduly harsh to deny the scheme's relief. The Court observed that the scheme's operation could reasonably have allowed appropriation from amounts in the Department's custody and that the facts showed bona fide attempts to comply. On that basis the Court quashed the communication denying relief and issued a mandamus directing appropriation of the sum equivalent to the section 199F deposit from the amounts held and refund of the remainder, with the deposit to be held for four years without interest and returned thereafter. [Paras 16, 17, 21, 22, 23]

Writ petition allowed; communication dated March 23, 2018 quashed; respondents directed to appropriate Rs. 7,50,000 to the Pradhan Mantri Garib Kalyan Deposit Scheme from amounts held and refund the balance within 30 days; the deposit to be held for four years and returned without interest.

Final Conclusion: The High Court allowed the petition, quashed the departmental communication refusing scheme benefits, and directed appropriation of the required deposit from sums held by the Department with consequent refund of the balance; the deposited amount is to be held for four years and returned without interest.

Validity of levy under Section 234E - Prospective operation of statutory amendment (clause (c) of Section 200A(1)) - Machinery provision versus charging provision - Competence to compute and issue intimations under Section 200A before 01.06.2015 - Relevance of CBDT Circular No.19 of 2015 in construing commencement

Prospective operation of statutory amendment (clause (c) of Section 200A(1)) - Competence to compute and issue intimations under Section 200A before 01.06.2015 - Relevance of CBDT Circular No.19 of 2015 in construing commencement - Clause (c) of Section 200A(1) does not operate retrospectively and the processing/intimation mechanism under Section 200A cannot be invoked to compute or demand the fee under Section 234E for periods prior to 01.06.2015. - HELD THAT: - The Court agreed with the learned Single Judge and the Karnataka High Court reasoning that the insertion of clause (c) to Section 200A(1) must be read as having prospective effect unless retrospective operation is clearly indicated. The CBDT Circular No.19 of 2015, which explains that Section 200A was amended to enable computation of the fee under Section 234E at the time of processing TDS statements, was material to the interpretation of the commencement and effect of the amendment. The Court held that where Parliament provided the charging provision (Section 234E) earlier but did not provide the processing/demand mechanism in Section 200A until 01.06.2015, the subsequent insertion of clause (c) cannot be treated as conferring retrospective authority to compute and demand fees for periods before its commencement. Accordingly intimations issued under Section 200A purporting to compute/demand fees under Section 234E for periods prior to 01.06.2015 are without authority and liable to be set aside. [Paras 6]

Intimations issued under Section 200A to compute or demand fee under Section 234E for periods prior to 01.06.2015 are illegal and invalid; appeals by Revenue on this point dismissed.

Validity of levy under Section 234E - Section 234E is constitutionally valid. - HELD THAT: - The challenge to the constitutional validity of Section 234E (that the provision is arbitrary or violative of Articles 14 and 19(g)) was negatived by following the decision of the Bombay High Court in Rashmikant Kundalia. The Court accepted that Section 234E is intra vires the Constitution and dismissed the appeal/petition challenging the vires of the provision. [Paras 8]

Writ appeal challenging vires of Section 234E dismissed; Section 234E upheld as constitutionally valid.

Competence to compute and issue intimations under Section 200A before 01.06.2015 - Where returns for periods prior to 01.06.2015 were belatedly filed and intimations under Section 200A were issued to demand fee under Section 234E, those intimations have to be set aside; however, if a return was filed after 01.06.2015, Revenue may issue fresh notice and proceed in accordance with law. - HELD THAT: - Applying the conclusion that clause (c) of Section 200A(1) is prospective, the Court set aside intimations issued for belated TDS statements relating to periods prior to 01.06.2015 as issued without authority. The Court clarified that where a deductor has filed a return after 01.06.2015, the Revenue is at liberty to issue notices, afford hearing and pass orders in accordance with law. The judgment therefore provides relief to assessees for intimations pertaining to pre-01.06.2015 periods while preserving Revenue's power to act for returns submitted post-commencement. [Paras 3, 9]

Intimations under Section 200A for periods prior to 01.06.2015 quashed; respondents given liberty to proceed where returns were filed after 01.06.2015.

Final Conclusion: The Court upheld the constitutional validity of Section 234E but held that the amendment inserting clause (c) in Section 200A(1) operates prospectively from 01.06.2015; intimations issued under Section 200A to compute or demand fee under Section 234E for periods prior to 01.06.2015 are without authority and set aside, while Revenue may proceed in accordance with law for statements filed after 01.06.2015.

Penalty under section 271G for failure to maintain transfer pricing documentation - reasonable cause under section 273B - Rule 10D(1) documentation requirements for transfer pricing - Transaction Net Margin Method (TNMM) - entity level margin versus transaction level margin - determination of arm's length price and obligation to furnish comparable/transaction specific data

Penalty under section 271G for failure to maintain transfer pricing documentation - Rule 10D(1) documentation requirements for transfer pricing - reasonable cause under section 273B - Deletion of penalty under section 271G for alleged non maintenance of Rule 10D(1) records - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the penalty levied under section 271G for failure to maintain transfer pricing documentation could not be sustained. The Assessing Officer/TPO had required bifurcation of profits/costs between transactions with associated enterprises and non associated enterprises to apply TNMM; the assessee explained practical difficulties in bifurcating lot wise costs and sales in the diamond trade and produced lot wise export details which the TPO did not utilise. No adjustment to ALP was ultimately made by the TPO. The CIT(A) evaluated industry peculiarities, the non availability of transaction specific information in public domain, the prior acceptance of benchmarking for an earlier year on identical facts, and held that the assessee had a reasonable belief that the requested information was not required or available. On these findings the Tribunal found no infirmity in holding that the failure was due to a reasonable cause within the meaning of section 273B and therefore penalty under section 271G was not leviable. The Tribunal also noted that the TPO had not been prevented from using the details provided and that the absence of documentary bifurcation, in the circumstances, did not justify imposition of penalty when no adverse ALP adjustment resulted. [Paras 9]

Penalty under section 271G deleted as failure to maintain Rule 10D(1) records was for a reasonable cause and no penalty was leviable.

Applicability of transfer pricing provisions - Assessee's cross objection on applicability of transfer pricing provisions - HELD THAT: - The Tribunal's decision to dismiss the revenue appeal on merits rendered the assessee's cross objection (which challenged applicability of transfer pricing provisions and supported the CIT(A)'s order) infructuous. Consequently the cross objection required no separate adjudication. [Paras 10]

Cross objection of the assessee dismissed as infructuous.

Final Conclusion: The appeal filed by the Assessing Officer is dismissed; the CIT(A)'s deletion of the penalty under section 271G is sustained on the ground of reasonable cause, and the assessee's cross objection is held infructuous and dismissed.

Presumption arising from documents found in search proceedings under Section 132(4A) and Section 292C - onus on the person in search cases to explain seized documents - requirement of nexus between seized incriminating material and the assessee for making additions - treatment of alleged unexplained investment as income under the doctrine of unexplained investments

Requirement of nexus between seized incriminating material and the assessee - onus on the person in search cases to explain seized documents - treatment of alleged unexplained investment as income under the doctrine of unexplained investments - Addition of Rs. 1,40,000 assessed as unexplained investment for AY 2010-11 was unsustainable and vacated. - HELD THAT: - Seized documents included an agreement and ledgers evidencing payments aggregating to Rs. 8,86,000 and transfers in respect of Plot No.47, but the incriminating papers did not refer to the assessee by name. The seized material was found at premises from which a partnership concern involving the assessee and another (Shri Sunil Talariya) was run. The Tribunal held that, although statutory presumptions apply to documents found in search, such presumptions are rebuttable and cannot substitute for a demonstrable nexus between the contents of the seized records and the assessee. The Assessing Officer's conclusion that the payments constituted the assessee's unexplained investments was not supported by material establishing that nexus; the standalone ledger entry evidencing a loan of Rs. 1 lakh was insufficient to prove the assessee's liability for the payments recorded in the seized documents. For these reasons the addition could not be sustained and was vacated. [Paras 7]

Addition of Rs. 1,40,000 for AY 2010-11 held not sustainable for lack of nexus with the assessee; ground allowed and addition vacated.

Application of the findings in one assessment year mutatis mutandis to another year with identical facts - requirement of nexus between seized incriminating material and the assessee - Addition sustained in assessment for AY 2011-12 was set aside on the same grounds as AY 2010-11 and the assessment vacated. - HELD THAT: - Facts and seized material were the same for AY 2011-12 as for AY 2010-11. The Tribunal applied its reasoning in the earlier disposed appeal to the present year, concluding that the CIT(A) and Assessing Officer had not established a nexus between the incriminating documents and the assessee. Consequently, the addition and assessment under the search assessment proceedings for AY 2011-12 could not be sustained and were vacated on the same terms. [Paras 10, 11]

Order of CIT(A) set aside for AY 2011-12 and assessment vacated on the same grounds; appeal allowed.

Final Conclusion: Both appeals for AY 2010-11 and AY 2011-12 allowed: additions/assessments arising from seized documents were vacated because the Department failed to establish a sufficient nexus between the incriminating material and the assessee despite the rebuttable presumptions applicable to documents found in search.

Business Connection - Permanent Establishment - Fixed place Permanent Establishment - Dependent agent Permanent Establishment - Attribution of profits to Permanent Establishment - Distribution expenses - deductibility - Section 40(a)(ia) disallowance - Non-discrimination clause under DTAA - Head office expenditure under section 44C - India-UK Double Taxation Avoidance Agreement

Business Connection - Permanent Establishment - Fixed place Permanent Establishment - Dependent agent Permanent Establishment - India-UK Double Taxation Avoidance Agreement - Existence of Business Connection / Permanent Establishment of the assessee in India - HELD THAT: - The Tribunal upheld the findings of the AO and DRP that the assessee has a Business Connection and a Permanent Establishment in India. This conclusion was reached by respectfully following coordinate-bench precedents in the assessee's own and predecessor entities' cases, including decisions of the Hon'ble Delhi High Court and the Delhi ITAT, which had held that the facts and legal propositions establish BC/PE. The Tribunal therefore decided the grounds relating to presence of BC/PE against the assessee and in favour of the revenue. [Paras 11]

Held that the assessee has Business Connection and Permanent Establishment in India; grounds decided against the assessee.

Attribution of profits to Permanent Establishment - India-UK Double Taxation Avoidance Agreement - Proper rate of attribution of India-related gross booking fees to the alleged PE - HELD THAT: - Although the AO/DRP attributed 75% to the alleged PE, the Tribunal followed coordinate-bench decisions in the assessee's own case and predecessor entities, and the authorities of the Delhi High Court/ITAT, holding that the correct attribution to the alleged India PE is 15% of gross booking fees. Applying those precedents, and observing that Indian related expenses exceed the attributed amount thereby extinguishing taxable profit, the Tribunal allowed the assessee on this issue. [Paras 12]

Attribution fixed at 15% of gross booking fees; issue decided in favour of the assessee.

Distribution expenses - deductibility - Section 40(a)(ia) disallowance - Allowability of distribution (subscriber) fees paid to Indian distributors - HELD THAT: - Relying on coordinate-bench decisions in the assessee's predecessor cases and related CRS jurisprudence, the Tribunal held that distribution expenses are integral to the CRS business and allowable. The Tribunal noted earlier precedents where distribution expenses were allowed in full and that such payments were made to residents and offered to tax in India, rendering section 40(a)(ia) inapplicable. Consequently, the Tribunal allowed the assessee's claim regarding distribution expenses. [Paras 13]

Distribution expenses allowed (claim accepted); issue decided in favour of the assessee.

Non-discrimination clause under DTAA - Section 40(a)(ia) disallowance - Allowability of other India-related expenses (technology service fees, vendor costs, amortisation, finance cost) and extent of disallowance under section 40(a)(ia) - HELD THAT: - Following the coordinate-bench decision in the predecessor's case, the Tribunal directed allowance of 70% of such other expenses in view of non-discrimination principles under the DTAA and earlier authority applying a 30% disallowance under section 40(a)(ia). The Tribunal observed that after allowing distribution expenses and applying the proper attribution, the residual position warrants permitting 70% of other expenses and directed recomputation accordingly. [Paras 14]

Other expenses allowed to the extent of 70%; issue decided in favour of the assessee subject to recomputation.

Head office expenditure under section 44C - Remand for quantification - Claim for deduction of head office expenditure under section 44C - HELD THAT: - The Tribunal accepted that a non-resident may claim head office expenditure under section 44C and noted that the AO and DRP had allowed head office expenditure but computed the amount incorrectly. Given the factual/quantitative nature of the claim and the material on record, the Tribunal did not decide the precise quantum but remitted the matter to the AO to allow the correct claim in light of documents already on record and any further information the AO may require. [Paras 15]

Matter remitted to the AO for fresh computation/allowance of head office expenditure under section 44C.

Final Conclusion: Following and applying coordinate-bench and High Court precedents in the assessee's own and predecessor cases, the Tribunal held that the assessee has Business Connection and Permanent Establishment in India, fixed attribution of India-related gross booking fees to the PE at 15%, allowed distribution expenses and 70% of other India-related expenses, remitted the head office expenditure computation to the AO for correct allowance, and accordingly partly allowed the appeal.

Disallowance under section 14A read with Rule 8D - Computation of average investment attributable to exempt (dividend) income - Investment held during the year but not on opening/closing balance - Remand for recomputation on factual basis - Requirement of opportunity of being heard before recomputation

Disallowance under section 14A read with Rule 8D - Computation of average investment attributable to exempt (dividend) income - Investment held during the year but not on opening/closing balance - Whether the disallowance under section 14A read with Rule 8D sustained by the CIT(A) should be upheld or the matter should be remitted for recomputation considering only investments that actually yielded dividend income. - HELD THAT: - The Tribunal noted that the AO made and the CIT(A) sustained a disallowance under section 14A read with Rule 8D, but the assessee contested both the applicability in absence of recorded satisfaction and the manner of computation. The Tribunal observed that the assessee had earned dividend income during the year and that precedents of the Delhi Special Bench (ACIT vs. Vireet Investment Pvt. Ltd., 165 ITD 27 (Delhi SB)) and the Delhi High Court (ACB India Ltd. vs. ACIT, 374 ITR 108) support the approach of attributing, for Rule 8D computation, only those investments which actually yielded exempt (dividend) income. Applying those authorities, the Tribunal concluded that the appropriate course was to remit the matter to the AO for recomputation of the disallowance under section 14A read with Rule 8D by considering the investments which actually yielded dividend income during the year. The AO is directed to decide the issue afresh in accordance with law and facts after giving the assessee a proper opportunity of being heard. The assessee's grounds were allowed for statistical purposes. [Paras 9, 10, 11]

Issue remitted to the AO to recompute the disallowance under section 14A read with Rule 8D by considering only investments that actually yielded dividend income, after affording the assessee an opportunity of being heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes and directed remand to the AO to recompute the section 14A/Rule 8D disallowance by considering only investments that actually yielded dividend income in AY 2014-15, with opportunity to the assessee to be heard.

Exemption under Section 54F - Capital Gains Account Scheme deposit requirement - acquisition of residential house by way of gift - proof of expenditure for improvement/renovation - genuineness of transactions and corroborative evidence

Exemption under Section 54F - acquisition of residential house by way of gift - Capital Gains Account Scheme deposit requirement - proof of expenditure for improvement/renovation - genuineness of transactions and corroborative evidence - Whether the assessee was entitled to claim deduction under Section 54F for AY. 2011-12 in respect of a property alleged to have been acquired by way of gift and subsequent expenditure allegedly incurred for its development/renovation. - HELD THAT: - The Tribunal upheld the findings of the CIT(A) that the assessee failed to establish acquisition of the property for AY. 2011-12 on the basis of a gift: the registered gift deed was dated 21.03.2012 and there was no documentary evidence corroborating the contention that the gift was received on 14.02.2011. The CIT(A)'s conclusion that no purchase consideration was incurred and hence no reinvestment of net consideration was made was accepted. The Tribunal also endorsed the finding that the assessee had not complied with the statutory alternative of depositing the net consideration in the Capital Gains Account Scheme before the due date of filing the return, as mandated by the provision. Further, the contention that repair and renovation expenses were incurred through a relative contractor was rejected because there was no contract, the contractor failed to produce books, bills or vouchers, and both returns were filed belatedly - circumstances which the authorities found indicative of an artificial arrangement. Those factual findings regarding absence of credible, corroborative evidence and lack of compliance with the deposit requirement were un-rebutted and upheld by the Tribunal as determinative of the claim under Section 54F.

Deduction under Section 54F for AY. 2011-12 was rightly disallowed as the assessee failed to prove acquisition within the relevant period, did not deposit the net consideration in the Capital Gains Account Scheme, and failed to establish genuine expenditure on improvement/renovation.

Final Conclusion: The appeal is dismissed; the Tribunal affirms the CIT(A)'s disallowance of the Section 54F claim for AY. 2011-12 on the grounds of absence of cogent documentary evidence of acquisition and expenditure and non-compliance with the Capital Gains Account Scheme requirement.

Admission of additional evidence under Rule 46A - Pre-requirements for admission: refusal by AO / prevention by sufficient cause / lack of opportunity - Recording reasons for admission and opportunity to Assessing Officer to examine/rebut - Power to direct production of documents or examination of witnesses for substantial cause - Remand for fresh consideration by appellate authority

Admission of additional evidence under Rule 46A - Pre-requirements for admission: refusal by AO / prevention by sufficient cause / lack of opportunity - Recording reasons for admission and opportunity to Assessing Officer to examine/rebut - Remand for fresh consideration by appellate authority - Admission of additional evidence filed before the Commissioner (Appeals) under Rule 46A and the scope of appellate authority to admit such evidence - HELD THAT: - The Tribunal examined the sequence of adjournments, the application for additional evidence filed before the ld. CIT(A) and the provisions of Rule 46A. Noting that the ld. CIT(A) had refused to admit the additional evidence and had recorded conclusions on bias and predetermination which the Tribunal found unnecessary to decide at this stage, the Tribunal held that the matter of admissibility must be reconsidered in the light of the statutory pre requirements set out in Rule 46A(1)(a)-(d). The Tribunal therefore directed that the assessee demonstrate before the revenue authorities compliance with those pre requirements and that the revenue authorities examine the question afresh, recording reasons where required and affording the Assessing Officer the opportunity contemplated by the rule to examine the evidence or produce rebuttal. The Tribunal specifically invoked the appellate power to direct production/examination for substantial cause but did not decide the other substantive grounds of appeal, remanding the matter for fresh adjudication on admission and, thereafter, merits. [Paras 10]

Issue remanded to the file of the ld. CIT(A) for fresh examination of the application under Rule 46A and for further adjudication; other grounds left undecided.

Final Conclusion: The Tribunal remanded the question of admission of additional evidence under Rule 46A to the ld. CIT(A) for fresh consideration in accordance with the statutory pre requirements and procedures, and allowed the appeal for statistical purposes while leaving all other substantive issues to be decided after that exercise.

Annual value - vacancy allowance - deemed let - is let as distinct from actually let - municipal valuation - computation of income from house property under Section 23(1)

Deemed let - vacancy allowance - Section 23(1)(c) - is let as distinct from actually let - Whether the annual value of the assessee's properties, which remained vacant during the whole of the previous year and were not in self-occupation, should be treated as nil under the computation provisions of Section 23(1)(c) or otherwise - HELD THAT: - The Tribunal examined the provisions of Section 23 and its legislative history, including the substitution effected by the Finance Act, 2001, and the earlier vacancy allowance under the erstwhile provision. The Tribunal accepted the legal reasoning that the phrase "is let" in Section 23(1) is wider than "actually let" and that the statutory scheme contemplates both actually let and deemed-to-be-let properties when computing annual value. The Tribunal noted that where properties are deemed to be let and remain vacant for the whole year, Section 23(1)(c) is capable of producing a nil annual value provided the properties are not in self-occupation. However, having found that both the Assessing Officer and the Commissioner (Appeals) proceeded by making ad hoc computations (10% and 5% of investment respectively), and in view of the existence of material on record (municipal valuation evidence and subsequent year actual rent receipts), the Tribunal considered it appropriate not to finally quantify or determine the annual value itself. Instead, it directed that the matter be remanded to the Assessing Officer for computation of income from house property in accordance with Section 23(1), applying municipal valuation and the statutory machinery rather than ad hoc percentages. [Paras 20, 21]

Matter remanded to the Assessing Officer to compute income from house property in accordance with Section 23(1) and municipal valuation; appeal allowed for statistical purposes.

Final Conclusion: Both the AO's and the CIT(A)'s ad-hoc approaches (10% and 5% of investment) were set aside; the Tribunal remanded the matter to the AO for computation of annual value under Section 23(1) applying municipal valuation and the statutory scheme, and allowed the appeal for statistical purposes.

Annual Letting Value - Standard rent under Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 - Notional enhancement of rent - Burden on revenue to obtain authoritative valuation

Annual Letting Value - Notional enhancement of rent - Burden on revenue to obtain authoritative valuation - Standard rent under Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 - Validity of the addition by computing ALV at a flat rate and enhancing rent notionally in absence of authoritative municipal valuation or determination of standard rent - HELD THAT: - The Tribunal found that the Assessing Officer determined the ALV by applying a flat rate per sq. ft. across different tenancies and made additions by taking the highest rent charged to one tenant as the notional rate for others, without procuring municipal valuation or a determination of standard rent from competent authorities. The Court held that once revenue concludes that actual rent is less than ALV, it is incumbent on revenue to obtain details of ALV from appropriate authorities (such as municipal valuation or a statutory determination of standard rent under the Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972) to substantiate the enhancement. Revenue resorted to a notional, flat enhancement ignoring differences in time, location and amenities enjoyed by each tenant. The Commissioner (Appeals) also did not seek authoritative determination of standard rent before confirming the addition. In the absence of any cogent document or computation from competent authority to support the notional enhanced ALV, the action of revenue could not be sustained. [Paras 11, 12]

Additions made by applying a flat rate and enhancing rent notionally without authoritative municipal valuation or standard-rent determination are unsustainable; the appeal is allowed.

Final Conclusion: The Tribunal set aside the enhancements to rent made by the revenue as notional and unsupported by municipal valuation or a statutory standard-rent determination, and allowed the assessee's appeal.

Addition to income as unexplained investment under section 69B - burden on assessee to reconcile stock position submitted to bank with books/audit report - excess stock from undisclosed sources treated as income - commercial immorality in inflating stock position to obtain bank credit

Burden on assessee to reconcile stock position submitted to bank with books/audit report - addition to income as unexplained investment under section 69B - excess stock from undisclosed sources treated as income - Whether the difference between stock shown to the bank as on 28.03.2005 and the stock as per audit report/balance sheet as on 31.03.2005 was satisfactorily explained and whether the addition under section 69B was justified. - HELD THAT: - The Court found that the controversy turned on factual question whether the assessee explained the variation in quantity and value of raw material, stock-in-process and finished goods between the stock statement submitted to the bank as on 28.03.2005 and the audit report/balance sheet as on 31.03.2005. The assessee did not produce evidence of purchases, processing or sales for the period 28.03.2005 to 31.03.2005 despite opportunities; the Assessing Officer and the Tribunal recorded the unexplained excess. The Court reiterated the established principle that the burden lies on the assessee to reconcile stock shown to the bank with the books of account/audit report, and that failure to account for excess stock permits a conclusion that such stock represents unexplained investment from undisclosed sources. The Court noted precedent and the recognized commercial impropriety of inflating stock figures to obtain bank facilities, rejected the appellant's reliance on a distinguishable decision, and concluded that in absence of acceptable explanation the addition under section 69B was warranted.

The orders of the Assessing Officer and the Income Tax Appellate Tribunal upholding the addition as unexplained investment/income are sustained; the appellant's appeal is dismissed.

Final Conclusion: The High Court dismissed the appeal, upholding the addition under section 69B as the excess stock shown to the bank remained unexplained and thus represented income from undisclosed sources.

Reopening of assessment - reason to believe - proviso to Section 147 - failure to disclose fully and truly all material facts - change of opinion - escapement of income - computation of book profits under Section 115JB

Proviso to Section 147 - failure to disclose fully and truly all material facts - reopening of assessment - Whether the reassessment proceedings initiated by notice under Section 148 could be sustained where the proviso to Section 147 requires failure to disclose fully and truly all material facts and no such failure was alleged or shown. - HELD THAT: - The Court examined the reasons recorded for reopening and the materials filed along with the original return and tax audit report. The contested debits - provision for customs duty, provision for doubtful debts and provision for non moving inventory - were specifically disclosed in the audited accounts and in the Form 3CD/annexures accompanying the return. The recorded reasons do not assert any failure by the assessee to disclose fully and truly all material facts; rather, they proceed on a reappraisal of the same material. Under the proviso to Section 147, once an assessment under Section 143(3) is completed, action under Section 147 after four years is permissible only if income has escaped assessment by reason of such failure to disclose. The Court held that full and true disclosure was made and therefore the statutory precondition for reopening under the proviso to Section 147 was not satisfied. [Paras 9, 11, 12, 14]

Reopening under Section 148/147 quashed as the proviso to Section 147 was not attracted because there was no failure to disclose fully and truly all material facts.

Change of opinion - reason to believe - escapement of income - Whether the reassessment was supportable as founded on 'reason to believe' that income had escaped assessment where the reassessment amounts arose from the same disclosed material and the Assessing Officer adopted a different view. - HELD THAT: - The Court found that the Assessing Officer had considered the same documents which were on record at the time of the original assessment and thereafter proceeded to take a different view as to the treatment of the disclosed items. The decision to reopen was thus a reappraisal amounting to a change of opinion rather than the formation of a fresh 'reason to believe' based on new material revealing escapement of income. The Court reiterated that a mere change of opinion cannot constitute 'reason to believe' for reopening assessments under Section 147. The Assessing Officer's later computation of book profits and additions did not cure the absence of the statutory threshold for reopening. [Paras 13]

Reopening could not be sustained as it amounted to a change of opinion and not a valid 'reason to believe' that income had escaped assessment.

Computation of book profits under Section 115JB - Whether the Assessing Officer could reopen the assessment on the basis that certain provisions were not ascertained liabilities and therefore should have been added back to book profits under Section 115JB. - HELD THAT: - The Court noted that the Assessing Officer had applied his mind to the computation of book profits in the original assessment and had reached a conclusion on deferred tax and book profit computation. The particular items which the Assessing Officer sought to treat as unascertained liabilities were disclosed and, insofar as normal income was concerned, had been treated (added back) in the computation. The attempt to revisit the computation under Section 115JB by relying on the same records and to treat it as escapement was held to be a reassessment based on a different view of the same material rather than fresh material justifying reopening. [Paras 12]

The challenge to the book profit computation did not supply a valid ground for reopening; reassessment based on reworking the same disclosed material was impermissible.

Final Conclusion: The petition is allowed. The notice dated 19th October, 2011 under Section 148 and the order dated 26th November, 2012 rejecting objections are quashed on the ground that there was full and true disclosure in the return and the reopening amounted to an impermissible change of opinion rather than action based on the statutory precondition in the proviso to Section 147.

Reopening of assessment - reason to believe - failure to disclose true and full particulars - jurisdiction under Section 147 of the Income Tax Act, 1961 - assessment completed under Section 143(3) of the Income Tax Act, 1961 - change of opinion - presumption of application of mind where query raised and replied - reasons recorded

Jurisdiction under Section 147 of the Income Tax Act, 1961 - failure to disclose true and full particulars - reason to believe - Validity of notice under Section 148 when reopening beyond four years and the proviso to Section 147 applies - HELD THAT: - Where a scrutiny assessment under Section 143(3) has been completed and the Assessing Officer seeks to reopen beyond four years, the proviso to Section 147 requires satisfaction not only that income has escaped assessment but also that such escapement is on account of failure by the assessee to disclose fully and truly all material facts. The reasons recorded by the Assessing Officer in this case merely asserted escapement of income without any finding or satisfaction that there was a failure to make true and full disclosure. The causal nexus between alleged escapement and failure to disclose is absent. In the absence of recording the mandatory satisfaction prescribed by the proviso, jurisdiction to issue the notice did not arise and the reopening is invalid. [Paras 8, 9]

Notice under Section 148 is invalid for want of the mandatory satisfaction that escapement resulted from failure to disclose true and full particulars.

Presumption of application of mind where query raised and replied - assessment completed under Section 143(3) of the Income Tax Act, 1961 - change of opinion - Whether reopening is permissible where the Assessing Officer had raised queries in original scrutiny, the assessee replied, and the matter was thereby considered during assessment - HELD THAT: - When the Assessing Officer raises a query during scrutiny and the assessee furnishes an explanation and documents in response, it is to be presumed that the Assessing Officer applied his mind to that issue while completing the assessment; absence of explicit mention in the assessment order does not negate this presumption. If the revenue, after considering the same material, attempts to revisit the issue, such exercise amounts to a mere change of opinion which is impermissible and cannot justify reopening under Section 147. The material shows that leased assets repurchase expenses were specifically queried, replied to and the Assessing Officer had opportunity to consider them during the original assessment; therefore reopening on that ground is barred. [Paras 11, 12, 13, 15]

Reopening on grounds already raised and replied to during scrutiny is impermissible as a change of opinion and does not constitute fresh tangible material to reopen assessment.

Reasons recorded - non-application of mind - reopening of assessment - Whether the reasons for reopening are vitiated by non-application of mind in relation to an expense already disallowed (added back) in the return - HELD THAT: - The Assessing Officer's reasons alleged that an amount debited as 'assets written off (irregular spares)' was a revenue deduction though capital in nature. The record, however, shows that the said amount was added back in the computation accompanying the return and not claimed as a deduction. The Assessing Officer failed to advert to this material fact when recording reasons and when sanction for reopening was accorded. Failure to take cognisance of the assessee's own addition in the return demonstrates non-application of mind and undermines the validity of the reasons recorded and the sanction obtained. [Paras 16, 17]

Reopening is vitiated for non-application of mind because the Assessing Officer did not consider that the amount in question had already been added back in the assessee's computation.

Final Conclusion: The petition is allowed; the notice under Section 148 and the order rejecting objections are quashed and set aside in respect of Assessment Year 2006 - 2007.

Self-assessment - Re-assessment - Speaking order under Section 17(5) of the Customs Act, 1962 - Classification of imported goods - Principles of natural justice - Provisional assessment

Speaking order under Section 17(5) of the Customs Act, 1962 - Re-assessment - Self-assessment - Respondent's obligation to pass a speaking order on re-assessment contrary to the importer's self-assessment and the appropriate remedy for failure to do so. - HELD THAT: - The Court observed that Section 17(5) requires the proper officer to pass a speaking order within fifteen days where a re-assessment is contrary to the importer's self-assessment, unless the importer accepts the re-assessment in writing. Noting that the petitioner had uploaded representations and subsequently registered a protest after assessment, the Court accepted that procedural steps and subsequent filings affected the timeline. Taking into account that a notice of personal hearing had been issued (though its date was not disclosed), the Court exercised its supervisory jurisdiction to ensure compliance with statutory mandate and principles of natural justice. Consequently the Court directed the respondent to decide the matter on merits and pass a speaking order in accordance with law within thirty days of receipt of the Court's order, after hearing the petitioner in person or through an authorised representative subject to prevailing protocols. [Paras 6, 7, 8]

Respondent directed to pass a speaking order on the re-assessment on merits and in accordance with law within 30 days from receipt of this order, after affording the petitioner an opportunity of personal hearing.

Classification of imported goods - Principles of natural justice - Whether the rival classification of the imported goods is to be adjudicated by the respondent on the available facts and after hearing the petitioner. - HELD THAT: - The Court held that the determination whether the imported wiper blade rubber falls under the tariff heading declared by the importer or under the rival heading raised by the Department is a factual and legal question to be decided by the adjudicating authority on the materials available. The Court left all issues open for the petitioner to canvass before the respondent and required that the petitioner be heard before any final order is passed. This amounts to remanding the classification dispute to the respondent for fresh consideration and adjudication on merits, subject to the statutory requirement to issue a speaking order. [Paras 6, 8]

Classification dispute left open and remitted to the respondent for adjudication on merits after hearing the petitioner; respondent to decide the issue while passing the speaking order within the directed timeframe.

Final Conclusion: Writ petition disposed of by directing the respondent to hear the petitioner and pass a speaking order on the re-assessment and classification dispute on merits and in accordance with law within 30 days; all issues left open for adjudication by the respondent.

Confiscation for goods brought from a place outside India - burden of proof under Section 123 of the Customs Act, 1962 - penalty under Section 112(b)(i) of the Customs Act, 1962 - inference of smuggling from common markings on seized goods - verification of documentary evidence by examining issuing jewellers

Inference of smuggling from common markings on seized goods - confiscation for goods brought from a place outside India - Whether the seized goods can be said to have been smuggled from Myanmar, as held by the Revenue. - HELD THAT: - The Tribunal found that the Revenue failed to establish beyond reasonable doubt that the seized goods were smuggled from Myanmar. Reliance on a previous adjudication involving gold biscuits bearing similar 'KTS' marking was held to be insufficient in the absence of expert comparison, pictorial evidence or examination of the jewellers concerned. Mere similarity of markings, without corroborative expert or documentary linkage and without proof of finality of the earlier order, does not permit a finding that the goods originated from the same batch or place outside India. The Tribunal recorded that the Adjudicating authority could and should have examined the relevant jewellers to verify any common origin but did not do so, and that the Appellant should not be prejudiced for that lapse. [Paras 8]

The Tribunal held that the Revenue has not proved that the seized goods were smuggled from Myanmar and that confiscation under the provision for goods brought from outside India could not be sustained on that basis.

Burden of proof under Section 123 of the Customs Act, 1962 - verification of documentary evidence by examining issuing jewellers - Whether the Appellant has produced sufficient evidence to support his contention that the seized goods are not liable for confiscation. - HELD THAT: - The Tribunal found that the Appellant produced purchase invoices, bank payment evidence and a Vasihatnama (will) supporting claim of ownership of 2158 gms of the seized gold. The Adjudicating authority's finding that the documents were fabricated was not supported by evidence; no attempt was made to examine the jewellers who issued the invoices. In these circumstances, and having regard to the evidence produced, the Tribunal concluded that the Appellant discharged the evidentiary burden under Section 123 and proved ownership in respect of 2158 gms. [Paras 7, 10]

2158 gms of gold (13 biscuits) are to be released in favour of the Appellant after verification of original receipts and the Vasihatnama, the Appellant having discharged the burden of proof for that quantity.

Penalty under Section 112(b)(i) of the Customs Act, 1962 - confiscation for goods brought from a place outside India - Whether the penalty under Section 112(b)(i) of the Customs Act, 1962 is liable to be imposed upon the Appellant. - HELD THAT: - The Tribunal set aside the adjudication which ordered absolute confiscation under the provision for goods brought from outside India because the foundational finding of smuggling was not established. Since confiscation could not be sustained for the quantity of 2158 gms in respect of which ownership was proved, the consequential penalty imposed by the Adjudicating authority in respect of that portion could not be sustained. The Tribunal did not uphold the penalty as applied in the impugned order insofar as it related to the released quantity. [Paras 10]

Penalty imposed in the impugned order cannot be sustained in respect of the 2158 gms of gold released to the Appellant.

Verification of documentary evidence by examining issuing jewellers - issue of fresh show cause notice and remand for claim by third party - Remedial step for the remaining seized goods claimed by a third party (Mr. Vishal). - HELD THAT: - The Tribunal noted that a third party, Mr. Vishal, had claimed ownership of 1328 gms, but he was not a party to the proceedings and the Revenue did not possess full details when the original Show Cause Notice was issued. Given this lacuna, the Tribunal remanded the matter to the Adjudicating authority with directions to issue a fresh Show Cause Notice to Mr. Vishal so that his claim can be adjudicated after necessary verification. [Paras 9, 10]

The matter is remanded to the Adjudicating authority to issue a fresh Show Cause Notice to Mr. Vishal in respect of the 1328 gms claimed by him.

Final Conclusion: The appeal is allowed: the Tribunal set aside the adjudication to the extent of 2158 gms of gold (13 KTS-marked biscuits), directing release after verification of original documents, discharged the Appellant's burden under Section 123 for that quantity and accordingly rendered the confiscation and associated penalty unsustainable for that portion; the remaining claim of 1328 gms by a third party is remanded for fresh show cause proceedings.

Extraterritorial jurisdiction of the Customs Act prior to amendment of 29.03.2018 - Penal provisions of the Customs Act and territorial scope - Section 112 penalty for improper importation / abetment - Section 114AA penalty

Extraterritorial jurisdiction of the Customs Act prior to amendment of 29.03.2018 - Penal provisions of the Customs Act and territorial scope - Whether the Customs Act, as it stood prior to its amendment on 29.03.2018, extended beyond the territory of India so as to permit imposition of penalties on acts or persons situated or acting outside India. - HELD THAT: - The Tribunal considered earlier Division Bench decisions of the Tribunal and observed that those decisions uniformly held that, prior to the amendment of 29.03.2018, the Customs Act extended only to the whole of India and did not have extraterritorial application. The Tribunal rejected reliance on a contrary view of a learned Member which had not adverted to the scope of the then-applicable statutory scheme. In the light of binding Division Bench precedents, the Tribunal held that the Customs Act before 29.03.2018 was not applicable beyond India's territorial jurisdiction and therefore could not be invoked against persons or transactions situated outside India. [Paras 17, 18, 21, 22]

The Customs Act prior to 29.03.2018 did not have extraterritorial application and therefore could not be invoked to impose penalties for acts outside India.

Section 112 penalty for improper importation / abetment - Section 114AA penalty - Whether the penalty imposed by the Principal Commissioner under section 112(a) (and, consequentially, the impugned order including the penalty under section 114AA) could be sustained against the appellant. - HELD THAT: - The show cause and impugned order sought to penalise the appellant for alleged abetment in mis declaration of value and for furnishing fabricated invoices. Having held that the Customs Act did not apply extraterritorially prior to 29.03.2018, the Tribunal concluded that the statutory foundation for imposing penalty under section 112(a) on the appellant was absent. In view of that conclusion the impugned order, which imposed penalties (including under section 112(a) and section 114AA), could not stand and required setting aside. The Tribunal therefore set aside the impugned order. [Paras 6, 22, 23]

The penalty imposed under section 112(a) could not be sustained; the impugned order (including the penalties) was set aside.

Final Conclusion: In view of binding Division Bench precedent that the Customs Act (prior to its amendment on 29.03.2018) lacked extraterritorial operation, the Tribunal set aside the impugned order of 14.10.2019 imposing penalties on the appellant.

Automatic disqualification by operation of law under Section 164(2) - absence of requirement for prior or post decisional hearing in disqualification under Section 164(2) and Section 167(1)(a) - deactivation/cancellation of Director Identification Number (DIN) not automatic on disqualification - prospective operation of proviso to Section 167(1)(a) insofar as it affects offices in other companies

Automatic disqualification by operation of law under Section 164(2) - absence of requirement for prior or post decisional hearing in disqualification under Section 164(2) and Section 167(1)(a) - Validity and effect of disqualification under Section 164(2) and Section 167(1)(a) and applicability of principles of natural justice - HELD THAT: - The court held that disqualification under Section 164(2) and the consequential effect under Section 167(1)(a) operate automatically by operation of law and leave no room for executive discretion; consequently, the requirement of a prior hearing does not arise. The court endorsed co ordinate and higher court decisions which treat the ineligibility as an automatic legal consequence intended to ensure corporate probity and governance, and concluded that neither pre decisional nor post decisional audi alteram partem is contemplated for such statutory disqualification. The court rejected the petitioners' plea that denial of a hearing vitiated the disqualification, finding the scheme and legislative purpose clear and intended to deter wilful defaults in filing statutory returns. [Paras 7, 8, 11, 15]

Disqualification under Section 164(2) and operation of Section 167(1)(a) is automatic and does not require prior or post disqualification hearing; challenge on natural justice grounds fails.

Company Fresh Start Scheme of 2020 - temporal applicability - Whether petitioners were entitled to benefit of the Company's Fresh Start Scheme, 2020 - HELD THAT: - The court accepted respondents' submission that the Fresh Start Scheme was limited in time and was clarified by subsequent circulars as no longer applicable beyond its stipulated period. On the facts the court found the petitioners' explanations for non filing to be frivolous and insufficient to attract relief under the scheme. The factual finding that directors cannot avoid statutory duties by delegating filing responsibility to an accountant was affirmed. [Paras 4, 5, 6]

Petitioners were not entitled to relief under the Fresh Start Scheme of 2020; their explanations for non filing are unacceptable.

Deactivation/cancellation of Director Identification Number (DIN) not automatic on disqualification - obligation to file Form DIR 9 upon company default - Whether the Registrar of Companies may automatically deactivate or cancel the petitioners' DINs on account of disqualification under Section 164(2) - HELD THAT: - Relying on and adopting the reasoning in the cited Yashodhara decision (paras 195-200 therein), the court found that DIN cancellation is not an automatic consequence of statutory disqualification under Section 164(2). While the company must file Form DIR 9 notifying directors when it fails to file financial statements or annual returns, deactivation of DIN on that ground is not permitted under the rules. The court therefore directed revival of the petitioners' DINs subject to the company filing the requisite DIR 9 within the prescribed or extended time, but clarified that such revival does not entitle the petitioners to act as directors of other companies. [Paras 17, 18, 19]

DIN deactivation on account of disqualification under Section 164(2) is not automatic; DINs to be revived provided the company files Form DIR 9, but revival does not permit acting as director in other companies.

Prospective operation of proviso to Section 167(1)(a) insofar as it affects offices in other companies - Temporal operation of the proviso to Section 167(1)(a) as to whether it applies retrospectively to directors disqualified prior to its insertion - HELD THAT: - Adopting the analysis in Yashodhara, the court held that the proviso to Section 167(1)(a) must be read so that the clarificatory portion preserving office in the defaulting company has retrospective effect, whereas the new consequence-vacation of offices in all other companies-introduced by the proviso operates prospectively from the date of amendment (07.05.2018). Consequently, directors disqualified prior to that date are not to be made to vacate offices in other companies by virtue of that proviso. [Paras 17]

The proviso to Section 167(1)(a) operates prospectively in respect of vacation of offices in other companies; it does not apply retrospectively to disqualifications before 07.05.2018.

Final Conclusion: Writ petition allowed in part: statutory disqualification under Sections 164(2) and 167(1)(a) is automatic and not subject to prior or post hearing; petitioners are not entitled to relief under the Fresh Start Scheme; petitioners' DINs are to be revived on compliance by the company with Form DIR 9, subject to restriction that revival does not permit acting as directors of other companies; proviso to Section 167(1)(a) operates prospectively as to offices in other companies.

Power to admit company petition despite pending maintainability application - inherent power under Section 242(m) of the Companies Act, 2013 - status quo order - completion of pleadings and avoidance of procrastination

Power to admit company petition despite pending maintainability application - inherent power under Section 242(m) of the Companies Act, 2013 - Whether the Tribunal erred in admitting the main company petitions while an application challenging their maintainability was pending. - HELD THAT: - The Appellate Tribunal found that the Tribunal possesses an inherent power under Section 242(m) of the Companies Act, 2013 to pass an order of admission even where an application questioning maintainability is pending. Admission of the main company petitions does not preclude the Tribunal from considering the maintainability application at a subsequent stage or taking it up together with the main petitions as it deems fit. Having applied this principle to the facts, the Appellate Tribunal concluded there was no error warranting interference with the impugned admission order.

Appeal dismissed; impugned admission of the company petitions upheld.

Status quo order - completion of pleadings and avoidance of procrastination - Directions as to interim reliefs, status quo and completion of pleadings before the Tribunal. - HELD THAT: - The Appellate Tribunal noted that the Tribunal had already recorded a status quo in one petition and declined to grant other interim reliefs at that stage. The appellate court directed that the respondents file their replies and complete pleadings in the main company petitions and company applications as ordered, emphasising that pleadings be completed without procrastination so that the Tribunal may proceed in accordance with law.

Directions for filing of replies and completion of pleadings reaffirmed; no additional interim relief ordered beyond recorded status quo.

Final Conclusion: The appeal challenging the admission of the company petitions is dismissed; the Tribunal's exercise of its inherent power under Section 242(m) to admit the petitions despite pending maintainability objections is upheld, and the parties are directed to complete pleadings so the Tribunal may proceed in accordance with law.

Dispensing with meetings of shareholders and creditors - consent affidavits - no compromise or arrangement affecting the transferee company - filing of confirmation petition under Section 230(6) read with Section 232(3) - service of notice under Section 230(5)

Dispensing with meetings of shareholders and creditors - consent affidavits - Whether meetings of the equity shareholders and unsecured creditors of the Transferor Company could be dispensed with. - HELD THAT: - The Tribunal found that all equity shareholders of the Transferor Company had filed consent affidavits to the Scheme and that unsecured creditors representing 95.80% in value had likewise given their consent. On that basis, and having considered the application and supporting documents, the Tribunal exercised its power under the Companies Act to dispense with the convening of meetings of the equity shareholders and unsecured creditors of the Transferor Company.

Meetings of the equity shareholders and unsecured creditors of the Transferor Company are dispensed with.

No compromise or arrangement affecting the transferee company - filing of confirmation petition under Section 230(6) read with Section 232(3) - Whether the Transferee Company is required to file any application or petition for sanction of the Scheme. - HELD THAT: - The Tribunal accepted the Transferor Company's submission that the Transferor is a 100% wholly owned subsidiary of the Transferee Company, that the Scheme does not propose any issuance of shares by the Transferee Company, does not reorganise or restructure the Transferee's capital, and does not affect the rights of the Transferee Company's shareholders or creditors. On that basis the Tribunal held there is no compromise or arrangement between the Transferee Company and any class of persons within the meaning of the relevant provisions and directed that the Transferee Company need not file any petition for sanction of the Scheme. The Tribunal nonetheless directed the Transferor Company to file the confirmation petition under the cited provisions for sanction of the Scheme by the Tribunal.

Transferee Company is not required to file any petition for sanction; the Transferor Company shall file the confirmation petition under Section 230(6) read with Section 232(3).

Service of notice under Section 230(5) - What procedural notices and filings are required following dispensation of meetings and acceptance of the application. - HELD THAT: - The Tribunal directed that notice under Section 230(5), together with the Scheme and accompanying statement, be served on the Regional Director (Northern Region), Registrar of Companies, Official Liquidator, the Income Tax Department having jurisdiction and any sectoral regulators or authorities, by hand, post or email within three weeks of the order. The notice must specify a 30 day period for representations to be filed before the Tribunal and be sent in Form CAA3 with necessary variations. The Transferor Company was directed to file an affidavit proving service within two weeks of dispatch, and to file the confirmation petition within three weeks of the order.

Notice under Section 230(5) to specified authorities to be served within three weeks; affidavit proving service to be filed within two weeks; confirmation petition to be filed within three weeks.

Final Conclusion: The application is allowed: meetings of the Transferor Company's equity shareholders and unsecured creditors are dispensed with; the Transferee Company need not file any petition for sanction as no compromise or arrangement affects it; procedural directions were issued for service of statutory notices, proof of service and filing of the Transferor Company's confirmation petition, and the company application is disposed of accordingly.

Winding-up under statutory provisions of the Companies Act, 2013 - Winding-up on ground of inability to carry on business and erosion of net worth - Appointment of Company Liquidator and vesting of management and assets - Moratorium on suits and legal proceedings upon winding-up order - Constitution of winding-up committee and duties of the liquidator

Winding-up on ground of inability to carry on business and erosion of net worth - Winding-up under statutory provisions of the Companies Act, 2013 - Petition for winding-up of the company under Section 271(a) and Section 272(1)(a) of the Companies Act, 2013 was admitted and the company ordered to be wound up. - HELD THAT: - The Tribunal found on the material on record, including the company's financial statements, the provisional liquidator's report and undisputed facts, that the company ceased business operations in 2014, has no employees, its current liabilities exceed its current assets and its net worth has been eroded. No objections were received from the Registrar of Companies and the Income-Tax department filed a report indicating an outstanding demand for Assessment Year 2014-15. These uncontested facts satisfied the Tribunal that the company could not be viably revived and constituted sufficient cause to wind up the company under the statutory provisions relied upon by the petitioner. The Tribunal therefore held the petition to be maintainable and admitted it for winding-up. [Paras 6]

The petition for winding-up was allowed and the company ordered to be wound up.

Appointment of Company Liquidator and vesting of management and assets - Constitution of winding-up committee and duties of the liquidator - Moratorium on suits and legal proceedings upon winding-up order - Appointment of the provisional liquidator as Company Liquidator and directions regarding the conduct of the winding-up were issued. - HELD THAT: - The Tribunal appointed the provisional liquidator as Company Liquidator and directed him to apply within three weeks for constitution of the winding-up committee in accordance with the Act. From the date of the order, a moratorium was imposed so that no suit or legal proceedings could be commenced or continued against the company except with leave of the Tribunal. The existing management was directed to cooperate with the Liquidator, who was empowered to take control of management, custody of properties, effects and actionable claims, and to take steps necessary to protect and preserve company assets. The Liquidator was further directed to follow the Companies Act, 2013 and applicable rules while carrying out the winding-up process. [Paras 7]

Mr. Sameer Ganeshbhai Marathe was appointed Company Liquidator with specified duties and powers, and procedural directions including moratorium and constitution of the winding-up committee were issued.

Final Conclusion: The Tribunal held that the petitioner company is not viable and ordered its winding-up under the Companies Act, 2013; the provisional liquidator was appointed as Company Liquidator with directions to constitute the winding-up committee, a moratorium on proceedings was imposed, and the Registry was directed to communicate the order and update the company status on the MCA portal.

Anticipatory bail - Investigative necessity versus grant of bail - Custodial interrogation - Cooperation with investigation - Prohibition on influencing or tampering with prosecution witnesses - Summons triable offences under Company law

Anticipatory bail - Cooperation with investigation - Prohibition on influencing or tampering with prosecution witnesses - Anticipatory bail granted to the applicants in Criminal Misc. Applications No.643/2022 and No.644/2022 subject to conditions. - HELD THAT: - The court examined the police papers and the materials produced by the applicants and found that one applicant (No.643/2022) is a woman who became director on 23/01/2017, and the other applicant (No.644/2022) is a Chartered Accountant who had audited the company's accounts and resigned. Having regard to the role of the auditor and the documentary material produced, the court concluded that custodial interrogation of these two applicants was not necessary at this stage. The court balanced the investigative interest against the individual circumstances of these applicants and imposed conditions designed to protect the investigation and prosecution: execution of personal bond with local surety, prohibition on influencing prosecution witnesses, requirement to appear before the investigating officer on a specified date, furnishing of residence details and any change therein, surrender or deposit of passport prior to travel abroad, regular attendance at court during trial, cooperation with the investigating officer and availability for interrogation, and monthly presence at the concerned police station until filing of the charge sheet. The court also left open the Investigating Officer's right to apply for remand if justified, to be adjudicated on merits.

The anticipatory bail applications of Nilamben Sumitbhai Bodra (No.643/2022) and Jigneshkumar Pravinbhai Hirapara (No.644/2022) are allowed on specified conditions.

Anticipatory bail - Investigative necessity versus grant of bail - Custodial interrogation - Anticipatory bail refused to the applicants in Criminal Misc. Application No.642/2022. - HELD THAT: - On perusal of the complaint and police papers the court noted that the applicants in No.642/2022 are long standing directors of the company and the complaint alleges substantial discrepancies in the balance sheet and possible breaches involving foreign exchange/regulatory rules. The court held that, in view of the averments about the company's large income and alleged misstatements in accounts, the presence of these director applicants is necessary for effective investigation and that the contention that there are no ingredients of cheating or breach of trust was not tenable on the material before it. Granting anticipatory bail to these director applicants at this stage would prejudice the investigation; accordingly their application was rejected. The court refrained from detailed findings to avoid prejudicing the investigation or effectively deciding the trial on the merits.

The anticipatory bail application No.642/2022 is rejected.

Final Conclusion: Of the three anticipatory bail applications, the court rejected Criminal Misc. Application No.642/2022 (the long standing director applicants) for reasons of investigative necessity, and allowed Criminal Misc. Applications No.643/2022 and No.644/2022 with specific protective and supervisory conditions including bonds, cooperation, appearance requirements, non interference with witnesses, and surrender/deposit of passports before leaving India.

Condonation of delay - financial creditor - verification and admission of claims by liquidator - appeal under Section 42 - prohibition against duplicate claims - jurisdiction under Section 60(5)

Condonation of delay - Application for condonation of delay of 13 days in filing the appeal was allowed. - HELD THAT: - The Tribunal examined the explanation for the 13-day delay in filing the Appeal (availability of the Adjudicating Authority's order on portal, time taken to obtain certified copy and temporary non functioning of the Adjudicating Authority) and, being subjectively satisfied with those reasons, exercised its discretion in the interest of justice to condone the delay. The order granting condonation is interlocutory and was allowed without costs. [Paras 1, 2]

Delay of 13 days in preferring the appeal is condoned and IA No.558/2021 is allowed; no costs.

Financial creditor - verification and admission of claims by liquidator - appeal under Section 42 - prohibition against duplicate claims - jurisdiction under Section 60(5) - The appeal on merits challenging the Adjudicating Authority's dismissal of IA No.416/2020 was dismissed; the Appellant is not entitled to the relief claimed as a financial creditor and the Liquidator's rejection of its claim was lawful. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's findings that the Appellant failed to prove that the sums disbursed constituted a financial debt to the Corporate Debtor (i.e., were disbursed to the Corporate Debtor for the time value of money). The Liquidator had accepted and admitted allottee claims after verification; the Appellant's claim, earlier rejected by the Resolution Professional and not challenged within the remedy provided, could not be revived as a separate claim in liquidation. The Tribunal noted the statutory requirement that an appeal against the Liquidator's decision under Section 42 must be preferred within fourteen days and that two claims in respect of the same debt cannot be maintained. It further observed the limits of jurisdiction under Section 60(5), and that the Liquidator and Tribunal may look behind decisions only in appropriate cases; here there was no demonstrable error or mala fides in the Liquidator's exercise of discretion. On these grounds the Adjudicating Authority's dismissal was free from legal error. [Paras 47, 48, 51, 52, 53]

The view of the Adjudicating Authority in dismissing IA No.416/2020 is upheld and the Company Appeal is dismissed; no costs.

Final Conclusion: The Tribunal condoned the 13 day delay in filing the appeal but, on the merits, upheld the Adjudicating Authority's dismissal of the Appellant's application rejecting its claim as a financial creditor; the appeal is dismissed and there are no costs.

Maintainability of an insolvency application under Section 9 - definition of "Corporate Person" excluding financial service providers - registration with a financial sector regulator as indicium of a "Financial Service Provider"

Maintainability of an insolvency application under Section 9 - definition of "Corporate Person" excluding financial service providers - registration with a financial sector regulator as indicium of a "Financial Service Provider" - Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 for initiation of CIRP against M/s. MCF Finlease Private Limited is maintainable. - HELD THAT: - The Tribunal examined the statutory definition of "Corporate Person" which expressly excludes a "financial service provider." It also considered the definition of "Financial Service Provider" as a person engaged in providing financial services pursuant to authorization or registration by a financial sector regulator. The Corporate Debtor produced its registration certificate issued by the Reserve Bank of India, establishing that it is an NBFC engaged in providing financial services. Reliance was placed on the principle affirmed by the NCLAT that financial service providers (including NBFCs) fall outside the Code's definition of corporate persons for the purposes of initiation of CIRP. Applying these provisions and authorities, the Tribunal concluded that the Respondent is a financial service provider and therefore does not fall within the meaning of "corporate person" under the Code. Consequently, an application under Section 9 seeking initiation of CIRP against such an entity is not maintainable. [Paras 11, 12, 13, 14]

The Section 9 application is not maintainable as the corporate debtor is a financial service provider excluded from the definition of "Corporate Person."

Final Conclusion: The application filed under Section 9 of the IBC is dismissed on the ground that the respondent is a financial service provider (an NBFC) and therefore excluded from the definition of "corporate person," rendering the insolvency application not maintainable.

Operational debt - Privity of contract - Principal versus agent relationship - Estoppel by part payment - Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process (CIRP) - Moratorium under Section 14 - Appointment of Interim Resolution Professional

Operational debt - Privity of contract - Principal versus agent relationship - Estoppel by part payment - Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 9 petition by the operational creditors was maintainable and liable to be admitted against the corporate debtor. - HELD THAT: - The Tribunal found no dispute as to performance of services by the operational creditors. Examination of invoices, payments and tax records showed the invoice was raised in favour of the corporate debtor, part payment was made by the corporate debtor (not by the alleged principal C & K), TDS was deducted by the corporate debtor and GST credit was availed by it. On these facts the corporate debtor could not be treated as merely an intermediary or agent; it acted as principal/co principal and is liable to make the outstanding payment. The part payment and economic indicia estop the corporate debtor from denying contractual liability. Applying these findings, the petition under Section 9 was held maintainable and was admitted to initiate CIRP against the corporate debtor. [Paras 6]

Section 9 petition admitted and CIRP initiated against the corporate debtor as it was held to be liable as principal for the operational debt.

Appointment of Interim Resolution Professional - Corporate Insolvency Resolution Process (CIRP) - Appointment of an Interim Resolution Professional and the related procedural directions. - HELD THAT: - The Tribunal appointed Mr. Nitish Kumar Chugh as Interim Resolution Professional from the IBBI list, subject to filing of consent in the prescribed Form 2 and disclosures under the IBBI Regulations within one week. The Operational Creditor was directed to deposit an amount with the IRP to meet expenses of the IRP in accordance with the Insolvency Regulations, with the amount to be adjusted by the Committee of Creditors as accounted for by the IRP. [Paras 7, 8]

Mr. Nitish Kumar Chugh appointed as IRP; Operational Creditor directed to deposit the specified amount with the IRP and comply with the timelines for consent and disclosures.

Moratorium under Section 14 - Corporate Insolvency Resolution Process (CIRP) - Whether the moratorium under Section 14 should follow upon admission of the Section 9 petition and what prohibitions would apply. - HELD THAT: - Consequent to admission under Section 9(5), the statutory moratorium under Section 14(1) was declared in relation to the corporate debtor. The order records the prohibitions that follow during the moratorium period, including institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets, actions to enforce security interests and recovery of property occupied by the corporate debtor. The order also notes that provisions of Sections 14(2) to 14(4) will apply during the moratorium. [Paras 9]

Moratorium under Section 14 declared and the specified prohibitions shall operate for the duration of the moratorium.

Final Conclusion: The Tribunal admitted the Section 9 petition, holding that on the material (invoices, part payment, TDS and GST treatment) the corporate debtor acted as principal and was liable for the operational debt; CIRP was initiated, an IRP was appointed subject to prescribed formalities and the statutory moratorium under Section 14 was declared, with directions for the operational creditor to deposit the required amount to meet IRP expenses.

Exclusion of period from the corporate insolvency resolution process (CIRP) - extension of CIRP period beyond the outer limit where exceptional circumstances exist - exceptional-case discretion under the jurisprudence on time-limits for CIRP - interest of stakeholders and viability of corporate revival as determinative factor - approval of resolution plan by the committee of creditors (CoC) as a factor favouring extension

Exclusion of period from the corporate insolvency resolution process (CIRP) - extension of CIRP period beyond the outer limit where exceptional circumstances exist - approval of resolution plan by the committee of creditors (CoC) as a factor favouring extension - Application for exclusion of specified periods from the CIRP and for extension of the CIRP period until 02.03.2022 was allowed. - HELD THAT: - The Tribunal found that the corporate insolvency resolution process, initiated on 14.02.2020, was at its final stage and that the resolution plan had been approved by the committee of creditors. Having regard to interruptions caused by the second and third waves of the pandemic, periods of incapacity of the resolution professional, and other unavoidable personal exigencies, the Tribunal treated the matter as an exceptional case warranting exclusion of the specified periods from the CIRP. The Tribunal applied the guiding principle articulated in the Supreme Court's jurisprudence that, while 330 days is ordinarily the outer limit for completion of CIRP, an adjudicating authority may in exceptional cases extend time where a short additional period will secure revival of the corporate debtor and the delay is attributable to factors not properly ascribable to the stakeholders before the authority. On that basis the Tribunal concluded that exclusion and extension were justified to enable the corporate debtor's revival and to protect stakeholders' interests. [Paras 7, 8, 9]

The prayed periods are excluded from the CIRP, the CIRP period is extended till 02.03.2022, and the resolution professional is directed to file the application for approval of the resolution plan within fifteen days.

Final Conclusion: IA No. 366/2021 is allowed; specified periods are excluded from the CIRP, the CIRP is extended until 02.03.2022, and the resolution professional is directed to file the approval application within fifteen days.

Applicability of Section 41-A Cr.P.C. to arrests under Section 19 PMLA - PMLA as a special statute prevailing over Cr.P.C. where inconsistent - procedural safeguards under Section 19 PMLA and Rules, 2005 - power and duty of the Court under Section 167 Cr.P.C. in remand applications - prohibition on returning remand applications by the Court - maintainability and rigours of anticipatory bail in PMLA matters under Section 45 PMLA

Applicability of Section 41-A Cr.P.C. to arrests under Section 19 PMLA - PMLA as a special statute prevailing over Cr.P.C. where inconsistent - procedural safeguards under Section 19 PMLA and Rules, 2005 - Whether Section 41-A of the Cr.P.C. is required to be complied with before effecting arrest under Section 19 of the PMLA. - HELD THAT: - The Court held that PMLA contains a separate and comprehensive arrest regimen under Section 19 and the Prevention of Money Laundering (Forms and Manner ...) Rules, 2005, which furnish pre- and post-arrest safeguards (reason to believe based on material to be recorded in writing, informing grounds of arrest, forwarding material to the Adjudicating Authority etc.). Section 65 read with Section 71 of the PMLA makes Cr.P.C. applicable only to the extent it is not inconsistent with PMLA; where there is inconsistency the special statute (PMLA) prevails. The protections envisaged by Section 41-A Cr.P.C. were held to be adequately addressed by the PMLA regime and its penal sanctions against vexatious or false arrests. Considering the object and seriousness of money laundering offences and the legislative amendment clarifying arrests under PMLA (post Vakamulla), the Court declined to import the pre arrest notice regime of Section 41 A into arrests made under Section 19 of PMLA and concluded that Sections 41 and 41 A Cr.P.C. are not applicable to arrests under Section 19 PMLA. [Paras 23, 31, 35]

Sections 41 and 41 A of the Cr.P.C. are not applicable to arrests made under Section 19 of the PMLA; PMLA's arrest procedure and safeguards govern such arrests.

Power and duty of the Court under Section 167 Cr.P.C. in remand applications - prohibition on returning remand applications by the Court - Whether a Designated Court can 'return' a remand application filed under Section 167(2) Cr.P.C. instead of disposing it by a reasoned judicial order. - HELD THAT: - The Court held that adjudication of a remand application under Section 167(2) Cr.P.C. is a judicial function and the Court must apply its mind and pass a reasoned order either remanding the accused to custody or refusing remand; there is no statutory provision empowering the Court to return such applications. Merely returning the remand report, thereby enabling release of the accused without a judicial determination, was held to be legally impermissible. The impugned orders which returned the remand applications were therefore held to be erroneous and liable to be quashed; the Designated Court was directed to consider remand afresh in accordance with law. [Paras 47, 50, 51]

A Designated Court has no power to return an application for remand under Section 167(2) Cr.P.C.; it must decide the remand application by a reasoned judicial order.

Maintainability and rigours of anticipatory bail in PMLA matters under Section 45 PMLA - PMLA twin conditions for grant of bail - Whether the anticipatory bail application filed by the accused was maintainable and whether anticipatory bail should be granted. - HELD THAT: - The Court held that an application under Section 438 Cr.P.C. (anticipatory bail) is maintainable when the applicant genuinely apprehends arrest and is not in custody; since the accused was not in DOE custody at the time of filing, the anticipatory bail petition was maintainable. However, the Court applied the special rigours of Section 45 PMLA (twin conditions: opportunity to Public Prosecutor to oppose and court being satisfied on reasonable grounds that accused is not guilty and not likely to commit offence on bail) and considered the nature and gravity of allegations, the stage and material of investigation. On the material placed and having regard to the statutory caution in PMLA and precedents that economic offences are a class apart, the Court could not prima facie be satisfied of the accused's innocence and dismissed the anticipatory bail petition. [Paras 59, 60, 69]

The anticipatory bail petition was maintainable but, applying Section 45 PMLA and the court's discretion in serious economic offences, anticipatory bail was refused.

Final Conclusion: The orders dated 18.12.2021 returning the remand applications are quashed; Sections 41 and 41 A Cr.P.C. do not apply to arrests under Section 19 PMLA; the Designated Court must decide remand applications by reasoned order and consider remand afresh; the anticipatory bail petition was maintainable but is dismissed on merits under the standards of Section 45 PMLA.

Declared Service under Section 66E(e) - consideration - nexus between consideration and taxable service - penalty/forfeiture of bank guarantee

Declared Service under Section 66E(e) - penalty/forfeiture of bank guarantee - nexus between consideration and taxable service - consideration - Whether the amount recovered by encashment/forfeiture of Bank Guarantee for shortfall against the Minimum Guarantee Tonnage under the Berth Reservation Scheme constitutes a declared service under Section 66E(e) for 2013-14 - HELD THAT: - The Tribunal applied the established test that a declared service under Section 66E(e) requires an agreement in which, for consideration, one party agrees to refrain from an act, to tolerate an act or situation, or to do an act, so that there is a flow of consideration to the purported service provider. Reliance was placed on earlier Tribunal decisions which held that liquidated damages, penalties or forfeiture of earnest money recoverable for non-fulfilment of contractual obligations do not represent consideration for tolerating an act or situation where the contracting party's intention is to secure performance of the contract and deter breach rather than to obtain toleration. The forfeiture here arose as a penal consequence of non performance of the MGT obligation; it was not charged as consideration for tolerating or agreeing to an act or situation. Consequently, there was no rendition of a declared service under Section 66E(e) because the requisite nexus between the amount recovered and a taxable service - i.e., a consideration flowing for agreeing to tolerate or refrain - was absent. [Paras 8, 9]

Amount recovered by encashment/forfeiture of Bank Guarantee for MGT shortfall does not constitute a declared service under Section 66E(e); demand and penalty set aside for 2013-14.

Final Conclusion: Appeal allowed; impugned demand of service tax and penalty arising from forfeiture/encashment of Bank Guarantee under the Berth Reservation Scheme for 2013-14 quashed, with consequential relief as per law.

Principle of mutuality - club or association service - service provider-service receiver relationship - constituted under any law - extended period and limitation-suppression of facts

Principle of mutuality - club or association service - service provider-service receiver relationship - constituted under any law - Whether the services rendered by the appellant (a registered cooperative apex body) to its member milk unions are exigible to service tax as Business Auxiliary Service, Commercial Training or Coaching Services or Consulting Engineering Services, or are excluded under the principle of mutuality and the club or association service concept because the appellant is constituted under law. - HELD THAT: - The Tribunal found that the appellant is a registered cooperative federation constituted under the State Cooperative Societies Act and functions as an apex body to supervise and coordinate member milk unions, with activities directed to the benefit of its members. Applying the principle of mutuality and the analysis in the Supreme Court's decision in Calcutta Club, the Tribunal accepted that entities "constituted under any law" are excluded from the service tax net insofar as incorporated/constituted clubs or associations are concerned. There is no service provider-service receiver relationship between the federation and its member unions; services rendered to member societies are services to themselves. The Tribunal distinguished Kaira District on its different factual and legal question. On these grounds the demands confirmed under the impugned order cannot be sustained on merits. [Paras 5]

Demand of service tax under the impugned order does not survive on merits and is set aside.

Extended period and limitation-suppression of facts - Whether the show-cause notice was issued within time or the department rightly invoked the extended period alleging suppression of facts with intent to evade tax. - HELD THAT: - The Tribunal recorded that the appellant had proactively approached the department in 2004 seeking clarification about the applicability of service tax and placed all material facts before the authorities. The department delayed action and invoked the extended period several years later. There was no finding of wilful suppression of facts or intent to evade tax by the appellant. Accordingly, the invocation of the extended period was unwarranted and the show-cause notice is time-barred. [Paras 5]

Invocation of the extended period is not justified; the show-cause notice is time-barred and set aside on limitation grounds.

Refund claim-prematurity and Section 11B - Whether the learned Commissioner (Appeals) correctly rejected the appellant's refund claim on the ground of prematurity or on the applicability of the limitation provisions under Section 11B. - HELD THAT: - The Tribunal examined the appellate order and observed that Commissioner (A) did not reject the refund claim on the ground of Section 11B or statutory limitation; the stated ground was that the refund application was premature pending the decision on the main issue. The Tribunal held that the Revenue's objection based on Section 11B was not raised in the impugned appellate order and therefore was not relevant to sustain rejection. In consequence the refund-related appeal could not be dismissed on the asserted grounds and required allowance. [Paras 5]

Rejection of the refund claim on the asserted grounds is not sustained; the refund appeal is allowed.

Final Conclusion: Impugned orders in Appeal No. ST/1143/2010 and ST/797/2009 are set aside; both appeals are allowed and consequential relief, if any, shall follow as per law.

Unjust enrichment - refund of duty - limitation under Section 11B - tax incidence not passed on to customers - effect of CESTAT final order

Limitation under Section 11B - refund of duty - Whether the appellant's refund claim was barred by limitation. - HELD THAT: - The Tribunal found that the appellant filed the refund application dated 28.02.2019 after the CESTAT final order dated 13.06.2018 and that, applying the time limit prescribed by Section 11B and its Explanation, the claim was within the statutory period. There was no factual dispute on dates and no reason shown to treat the claim as time-barred. The appellate finding rejecting the refund on limitation grounds was therefore unsustainable. [Paras 3]

The refund claim is within the period of limitation and the impugned order's rejection on limitation grounds is set aside.

Effect of CESTAT final order - refund of duty - Whether the CESTAT final order excluded service tax liability for the earlier period 01.06.2005 to 30.05.2007 and whether the first appellate authority correctly held otherwise. - HELD THAT: - The Tribunal observed that the CESTAT had held, on the relevant provisions, that there was no tax liability prior to 01.06.2007. The First Appellate Authority's contrary finding that the CESTAT order did not cover the earlier period lacked justification in light of the Tribunal's conclusion on non-liability for that period. Accordingly, that aspect of the impugned order was set aside. [Paras 4]

The finding that the Final Order did not cover the period 01.06.2005 to 30.05.2007 is not sustainable and is set aside.

Unjust enrichment - tax incidence not passed on to customers - refund of duty - Whether the Revenue proved unjust enrichment so as to deny the refund, and whether the appellant demonstrated that the duty element was not passed on to its customers. - HELD THAT: - The appellant produced documents including a Chartered Accountant's certificate, income-tax returns and P&L accounts, and invoices which did not reflect any element of service tax charged to customers. These materials were available to the Department and were considered by the Adjudicating Authority, but the authorities below failed to give any contrary finding on their veracity or to point out defects in them. In the absence of any adverse finding or evidence establishing that the tax incidence was passed on, the allegation of unjust enrichment was not proved by the Revenue. The Tribunal therefore concluded that the appellant had successfully shown that the tax burden was not shifted to customers. [Paras 5]

Unjust enrichment was not established by the Revenue; the appellant has shown that the tax incidence was not passed on, so the refund cannot be denied on that ground.

Final Conclusion: The impugned order is set aside; the appeal is allowed and the refund rejection (both on limitation and unjust enrichment grounds, and the finding regarding the earlier period) is quashed with consequential benefits as per law.

Cenvat credit admissibility - proof of receipt of inputs - clandestine disposal and substitution of inputs - reliance on third-party statements and transport records - documentary chain of transportation and job-work compliance

Cenvat credit admissibility - proof of receipt of inputs - documentary chain of transportation and job-work compliance - reliance on third-party statements and transport records - Denial of Cenvat credit on the ground that duty-paid copper inputs were not received and were clandestinely diverted was not sustainable; the respondent was entitled to the Cenvat credit. - HELD THAT: - The Tribunal found that the Department failed to prove clandestine disposal or substitution of the disputed duty-paid copper inputs. The Revenue's case rested primarily on transporter statements, RTO/check-post records and selected entries, whereas it did not investigate or produce any supplier who stated that goods meant for the respondent were delivered to third parties, nor could it show any buyer, transportation or money-flow for alleged diversion. By contrast, the respondent produced a coherent documentary chain evidencing receipt and use of duty-paid inputs: Central Excise invoices, RG-23A Part I & II entries, delivery challans regularising direct supplies to job-workers, job-work registers showing movement and processing details, daily stock registers under Central Excise Rules, ER-1 returns and supporting store records. Transporter statements were retracted or clarified on cross-examination; toll receipts, two-stage LRs and correspondence corroborated movement from Jammu to Gujarat and door-delivery to job-workers. The DGCEI materials containing arguably inculpatory records were not reflected or relied upon in the show cause notice. In absence of direct or corroborative evidence of receipt of non-duty-paid inputs or any investigation establishing substitution or clandestine sale, the Department's allegations remained conjectural. Applying these findings, the Tribunal concluded that the respondent complied with conditions for availing Cenvat credit and the denial was not warranted. [Paras 5, 6, 7]

Impugned order upholding grant of Cenvat credit is correct; Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the order allowing Cenvat credit, finding that the Department failed to prove non-receipt, clandestine diversion or substitution of the duty-paid copper inputs and that the respondent's documentary and inventory records established lawful receipt and use in accordance with the Cenvat Credit Rules.

Liability of financier-in-possession to pay motor vehicle tax - owner as person in possession under hire purchase/lease/hypothecation - charging provision for transport vehicles requiring advance payment of tax prior to use - refund on non use and surrender of registration/token/permit under Section 12 - first charge on vehicle for recovery of arrears

Liability of financier-in-possession to pay motor vehicle tax - owner as person in possession under hire purchase/lease/hypothecation - charging provision for transport vehicles requiring advance payment of tax prior to use - A financier who takes possession of a transport vehicle under a hire purchase, lease or hypothecation agreement is liable to pay tax from the date of taking possession. - HELD THAT: - The Court construed the definition of "owner" in the U.P. Motor Vehicles Taxation Act, 1997 read with the Motor Vehicles Act, 1988 to include a person in possession of the vehicle under a hire purchase, lease or hypothecation agreement. Section 4(2 A) makes the use of a public service (transport) vehicle in a public place conditional on payment of the prescribed monthly/quarterly/yearly tax, and Section 9(1)(iv)(a) requires payment in advance. The statutory scheme therefore contemplates that tax must be paid before the vehicle is used; it is a case of "pay the tax and use" and not "use and pay". Accepting the appellant's submission that tax arises only on actual operation would render the advance payment requirement of Section 9(1)(iv)(a) nugatory. Consequently, a financier in possession falls within the statutory owner category and is liable to pay the tax from the date of possession. [Paras 7, 8, 9, 12]

The financier in possession is liable to pay the tax from the date it takes possession of the transport vehicle.

Refund on non use and surrender of registration/token/permit under Section 12 - first charge on vehicle for recovery of arrears - Consequences of payment but non use and the procedures for refund or exemption under Section 12, and the financier's remedies and obligations regarding documents and recovery. - HELD THAT: - The Court held that where tax has been paid in advance and the vehicle is not used for a continuous period of one month or more, the payer (owner/operator) may apply for refund under Section 12(1) and obtain the limited refund prescribed, subject to satisfying the Taxation Officer and surrendering required documents as set out in Section 12(1). The only circumstance in which no tax is payable is under Section 12(2), where prior to the due date the owner/operator surrenders the certificate of registration, token and permit to the Taxation Officer; otherwise liability continues. If the financier on taking possession does not have the documents, it is for the financier to obtain them or to follow the procedure in Section 51 of the Motor Vehicles Act, 1988 to secure fresh registration; inability to produce documents does not negate the primary liability to pay tax. Further, arrears constitute a first charge on the vehicle and are recoverable as arrears of land revenue, permitting recovery from the person in possession if necessary, with the financier having a statutory route for reclaiming amounts paid if appropriate. [Paras 9, 10, 11, 12]

After payment, refund on non use is available only by complying with Section 12; exemption from payment is confined to the surrender procedure in Section 12(2); financiers must secure documents or follow Section 51 and remain liable until statutory conditions for refund/exemption are met.

Final Conclusion: The appeal is dismissed. A financier in possession of a transport vehicle under hire purchase, lease or hypothecation is an "owner" for purposes of the U.P. Motor Vehicles Taxation Act, 1997 and is liable to pay the prescribed tax from the date of possession; refunds or exemption are governed strictly by Section 12 and related registration provisions, and the High Court's order is upheld with no order as to costs.

Interest under Section 42(3) of the TNVAT Act - payment of interest for the entire period of default - re assessment under Section 27 of the TNVAT Act - filing of returns under Section 21 of the TNVAT Act - deemed assessment

Interest under Section 42(3) of the TNVAT Act - payment of interest for the entire period of default - Whether interest is payable on the differential tax determined by re assessment for the period from the original due date to the date of actual payment. - HELD THAT: - The Court examined Section 42(3) and observed that interest is payable on any amount remaining unpaid after the date specified for its payment, at the rate prescribed, for the entire period of default. The default period is measured from the date the tax was originally required to be paid in the monthly returns under Section 21. Where a dealer understates taxable turnover and pays the differential tax only after initiation of revision under Section 27, there can be no waiver or premium for such lapse; payment pursuant to revision merely fulfils an obligation that should have been discharged earlier. Accordingly, interest is exigible for the entire period of default on the differential tax determined on re assessment. [Paras 9, 13, 14, 15]

Interest under Section 42(3) is payable on the differential tax for the entire period of default counted from the original date when the tax was due.

Re assessment under Section 27 of the TNVAT Act - filing of returns under Section 21 of the TNVAT Act - Whether payment of the differential tax within thirty days of the re assessment absolves the dealer from liability to pay interest on the differential amount. - HELD THAT: - The Court noted that although the petitioner paid the differential tax within thirty days of the reassessment order, the statutory scheme requires tax under Section 21 to be paid when originally due; consequently the period of default runs from that original due date. The fact of payment after initiation of revision does not extinguish liability for interest accrued during the period when the tax remained unpaid due to understatement in the returns. Therefore payment within thirty days of re assessment does not operate as a waiver of interest for the earlier default. [Paras 3, 8, 15]

Payment of the differential tax within thirty days of the re assessment does not absolve the dealer from interest liability for the earlier period of default.

Final Conclusion: Writ petition dismissed; the petitioner is liable to pay interest under Section 42(3) on the differential tax for the entire period of default in respect of Assessment Year 2009-2010.

Proof of demand and acceptance - gravamen of the offence under Sections 7 and 13 of the Prevention of Corruption Act, 1988 - reliability of sole trap witness - failure to produce independent witness to corroborate trap - presumption under Section 20 of the PC Act (inapplicability absent proved demand)

Proof of demand and acceptance - gravamen of the offence under Sections 7 and 13 of the Prevention of Corruption Act, 1988 - presumption under Section 20 of the PC Act (inapplicability absent proved demand) - Whether the prosecution proved the demand of illegal gratification by the appellant and its acceptance so as to sustain conviction under Sections 7 and 13(1)(d) read with Section 13(2) of the PC Act. - HELD THAT: - The Court applied the settled principle that proof of demand of illegal gratification is the gravamen of an offence under Sections 7 and 13 of the PC Act and mere recovery, without proof of demand, is insufficient. The prosecution relied primarily on the testimony of PW1 (the complainant) and the trap/recovery; an independent witness (LW8) who was directed to accompany PW1 into the chamber did not do so and remained outside, leaving PW1 as the sole witness to the alleged demand. PW1's account of repeated demands on different dates was held to be an improvement in material particulars when compared with earlier statements; critical parts of his narrative (continuous meetings and repeated demands) were not mentioned in earlier statements or in the pre-trap records. The fact that a communication dated 26th February 2000 (served 15th March 2000) recorded that the Society was exempted from tax rendered the alleged demand for issuing a final assessment order on 23rd March 2000 inherently doubtful, since the substantive liability had already been negated and issuance of the final order was a procedural formality. In these circumstances, and given the absence of corroboration by the independent observer who should have witnessed the trap, the Court found that demand - a sine qua non for conviction under Section 7 - was not conclusively proved. Applying these legal principles to the evidence, the Court concluded that the essential element of demand and thereby acceptance was not established. [Paras 8, 9, 11, 12, 15]

Demand and acceptance were not conclusively proved; conviction under Sections 7 and 13(1)(d) read with Section 13(2) of the PC Act could not be sustained.

Final Conclusion: The conviction recorded by the Special Court and confirmed by the High Court was set aside; the appellant is acquitted of the offences under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988.