TaxTMI Updates e-Newsletter
Mar 12,2022

Provisional attachment under Section 83 of the CGST Act, 2017 - debit-freeze of bank accounts as security for penalty - release of provisional attachment on immovable property - show cause notice under Section 74 of the CGST Act, 2017

Provisional attachment under Section 83 of the CGST Act, 2017 - debit-freeze of bank accounts as security for penalty - release of provisional attachment on immovable property - Relief against provisional attachment: extent of bank-account freezing and release of immovable properties. - HELD THAT: - The petition challenged letters directing provisional attachment of the petitioners' bank accounts and immovable properties. The petitioners, without prejudice to their rights, did not object to debit-freezing of their accounts for a sum of Rs. 25,000 each pending final determination of show cause notices. The Court accepted this position as a protective measure to secure the penalty proceedings and directed bankers to debit-freeze each petitioner's account for Rs. 25,000. The Court further directed that immovable properties provisionally attached be released/de freezed within three days and that petitioners be allowed to utilize amounts in their bank accounts in excess of Rs. 25,000, subject to the outcome of the show cause proceedings. These directions were issued while noting that show cause notices under Section 74 and DRC-22 notices had been issued by the respondent; the Court did not adjudicate the merits of those notices but tailored interim relief to balance protection of revenue with petitioners' rights. [Paras 5, 6]

Bankers to debit-freeze each petitioner's account for Rs. 25,000, release/de-freeze the petitioners' immovable properties within three days, and permit use of amounts in excess of Rs. 25,000, subject to final adjudication of the show cause notices.

Final Conclusion: Writ petition disposed by directing limited debit-freeze of Rs. 25,000 on each petitioner's bank account, immediate release of provisional attachment on immovable properties, and permission to utilize bank balances above Rs. 25,000, without adjudicating the merits of the underlying show cause notices.

Provisional attachment of bank accounts - provisional attachment order ceasing by efflux of time - statutory limit on provisional attachment under Section 83(2) of the CGST Act - defreezing of bank accounts following expiry of provisional attachment

Provisional attachment of bank accounts - provisional attachment order ceasing by efflux of time - statutory limit on provisional attachment under Section 83(2) of the CGST Act - defreezing of bank accounts following expiry of provisional attachment - Provisional attachment orders in respect of the petitioners' bank accounts were no longer effective after one year and the accounts were to be defrozen. - HELD THAT: - The Court noted that the impugned orders provisionally attaching the petitioners' bank accounts were passed on 10th and 11th September, 2020 and that no fresh attachment orders have been issued thereafter. Under Section 83(2) of the CGST Act, every provisional attachment order ceases to have effect after the expiry of one year from the date of the order under Section 83(1). Applying that statutory rule to the facts before it, and in the absence of any subsequent attachment having been made, the Court held that the provisional attachment no longer subsisted and directed release of the accounts. [Paras 4, 5]

Respondents directed to defreeze the petitioners' bank accounts within three days; writ petitions disposed of.

Final Conclusion: The Court held that the provisional attachment orders had ceased to operate by efflux of time under Section 83(2) of the CGST Act and directed the respondents to release/defreeze the petitioners' bank accounts within three days, disposing of the writ petitions.

Provisional attachment - provisional attachment ceasing after one year - provisional attachment under Section 83 of the CGST Act - release/defreezing of assets subject to lapsed attachment

Provisional attachment - provisional attachment ceasing after one year - provisional attachment under Section 83 of the CGST Act - Effect of a provisional attachment made by a letter under Section 83 of the CGST Act after the expiry of one year from the date of the order. - HELD THAT: - The Court noted that the impugned communication dated 07th December, 2020 purported to direct provisional attachment of the petitioner's immovable property. The respondent confirmed that no fresh attachment order in Form GST DRC-22 has been issued after that date and no show cause notice under Section 74 has been served. Under Section 83(2) of the CGST Act a provisional attachment order ceases to have effect upon the expiry of one year from the date of the order passed under Section 83(1). Since no fresh attachment was made within that period, the provisional attachment effected by the impugned letter no longer remains effective and the assets subject to that provisional attachment must be released. [Paras 4]

The provisional attachment effected by the impugned letter dated 07th December, 2020 has ceased to have effect after one year and the respondent is directed to release/defreeze the petitioner's bank accounts and immovable property within three days.

Final Conclusion: Writ petition allowed to the extent that the provisional attachment arising from the letter dated 07th December, 2020 is ineffective by virtue of expiry of the one year period; respondent directed to release/defreeze the petitioner's assets within three days and the petition is disposed of.

Cancellation of registration under Section 29(2) - Opportunity of being heard / principles of natural justice - Notice must specify precise grounds and supporting material - Cancellation not permissible on vague allegation of being "bogus" - Duty of authority to plead and prove statutory condition for cancellation - Power to issue fresh notice and decide on merits

Cancellation of registration under Section 29(2) - Cancellation not permissible on vague allegation of being "bogus" - Duty of authority to plead and prove statutory condition for cancellation - Validity of cancellation of the assessee's GST registration where the show-cause notice and subsequent orders described the firm as "bogus" without specifying which statutory ground under Section 29(2) was relied upon or adducing supporting material. - HELD THAT: - The court held that cancellation of a registration previously granted can be effected only if one of the statutory contingencies in Section 29(2) is established. The term "bogus" does not itself constitute a statutory ground and, absent specification, may at best relate to clauses such as non-furnishing of returns or non-commencement of business; but those must be specifically pleaded. A show-cause notice that merely labels the firm as "bogus" without stating which clause of Section 29(2) is invoked, the facts giving rise to that charge, or the supporting material is vague and defective. Such vagueness denies the assessee an effective opportunity to rebut the charge and thus violates the statute's proviso requiring an opportunity of being heard. The authority therefore bore the burden of specifying the exact charge and material in the initial notice; it could not reserve to itself the option of later formulating or improving the charge. For these reasons the cancellation could not be sustained. [Paras 14, 15, 16, 17, 18]

The cancellation orders are invalid because the notice and orders were vague, failed to specify the statutory ground under Section 29(2) or supporting material, and thereby deprived the assessee of a meaningful opportunity to rebut; those orders are set aside.

Opportunity of being heard / principles of natural justice - Notice must specify precise grounds and supporting material - Power to issue fresh notice and decide on merits - Whether the procedures followed in issuing the show-cause notice, fixing (or failing to fix) hearing dates and deciding the revocation application complied with principles of natural justice. - HELD THAT: - The court found procedural defects at multiple stages. Although a hearing date was mentioned in the initial notice, no order was passed on that date and no fresh notice was issued for the later order. In the revocation proceedings the notice recited a right to personal hearing but did not fix any date or time; the authority accepted the assessee's written reply yet passed the revocation rejection order on the same day without affording a personal hearing or recording reasons. These failures amounted to denial of the opportunity to be heard and rendered the ex parte and subsequent orders infirm. In such circumstances the appellate authority, faced with defective original orders, ought to have set them aside rather than adjudicate on merits without those defects being cured. [Paras 8, 19, 20, 21]

Procedural breaches of natural justice were established; the revocation rejection and appeal disposal cannot stand and the impugned orders are set aside.

Final Conclusion: The writ petition is allowed: the orders cancelling the assessee's GST registration, rejecting revocation and dismissing the appeal are quashed for failure to specify statutory grounds and for denial of a proper opportunity of hearing; the revenue may, if it so chooses, issue a fresh notice specifying the precise ground under Section 29(2) with supporting material and decide the matter on merits afresh.

Opportunity of personal hearing - principles of natural justice - quashing of order - remand for fresh adjudication - alternative remedy and maintainability of writ

Opportunity of personal hearing - principles of natural justice - Opportunity of personal hearing under Section 75(4) of the CGST/UPGST Act, 2017 is mandatory where an adverse decision is contemplated against a person. - HELD THAT: - The Court examined Section 75(4) of the Act, 2017 which mandates that an opportunity of hearing shall be granted where a request is received in writing from the person chargeable with tax or penalty, or where any adverse decision is contemplated against such person. The provision was interpreted to mean that, if an adverse decision is contemplated, the authority must afford personal hearing even if no written request is made by the person. Reliance upon a decision under a differently worded provision of the Imports and Exports (Control) Act, 1947 was rejected as inapposite because the statutory language in that provision does not correspond to the mandatory hearing requirement contained in Section 75(4) of the CGST/UPGST Act, 2017. [Paras 8, 9, 11]

Section 75(4) requires that authorities afford an opportunity of personal hearing where an adverse decision is contemplated; such hearing is mandatory.

Alternative remedy and maintainability of writ - quashing of order - remand for fresh adjudication - Whether the impugned adjudication order passed without affording personal hearing merited quashing and whether the writ petition was maintainable despite an alternative statutory remedy of appeal. - HELD THAT: - The Court considered the respondents' contention that the petitioner had an alternative remedy of appeal under Section 107 but observed that availability of an alternative remedy does not automatically bar entertainment of a writ under Article 226. Established exceptions permit writ jurisdiction where there is a total violation of principles of natural justice or where procedure required for decision has not been adopted. The record, including the show cause notice and the assessing authority's order, established that no personal hearing as contemplated by Section 75(4) was afforded; permitting only a written reply did not satisfy the statutory mandate. Given the patent breach of natural justice, the Court held the writ petition to be maintainable and proceeded to set aside the impugned order. [Paras 13, 14, 15, 16, 17]

The adjudication order dated 9.11.2021 for the tax period April (year 2019-20) is quashed for breach of the mandatory hearing requirement; the matter is remitted to respondents to pass a fresh order after affording personal hearing.

Final Conclusion: Writ petition allowed in part: the assessment order dated 9.11.2021 for April (year 2019-20) is quashed for failure to afford the mandatory personal hearing under Section 75(4); respondents are granted liberty to decide afresh after providing personal hearing, and costs awarded.

Principles of natural justice - show cause notice - adjournment and reasonable opportunity to be heard - quashing of order for non-compliance of natural justice - remand for fresh consideration - order under Section 73(9) of the C.G.S.T/U.P.G.S.T. Act, 2017

Principles of natural justice - adjournment and reasonable opportunity to be heard - show cause notice - quashing of order for non-compliance of natural justice - order under Section 73(9) of the C.G.S.T/U.P.G.S.T. Act, 2017 - remand for fresh consideration - Impugned order passed under Section 73(9) was unsustainable for non-compliance with principles of natural justice and was liable to be quashed and remitted for fresh decision. - HELD THAT: - The respondent issued a show cause notice and proceeded to reject the petitioner's adjournment request and objections without affording a reasonable opportunity to participate and file replies. Earlier proceedings in Writ Tax No.933 of 2021 recorded that, if the petitioner participated and filed objections, the authority was to apply its mind to the material and pass a reasoned order; that position and the petitioner's contemporaneous adjournment applications required the authority to grant reasonable time. The refusal to afford such opportunity amounted to breach of the principles of natural justice, rendering the impugned order unsustainable. In consequence, the appropriate remedy was to quash the order and remit the matter to respondent No.3 for fresh consideration in accordance with law, with directions for the petitioner to file its reply within a limited time and for the authority to decide expeditiously.

Impugned order dated 27.11.2021 under Section 73(9) quashed; matter remitted to respondent No.3 to decide afresh in accordance with law after allowing the petitioner to file its reply within three weeks and for the authority to pass a reasoned order preferably within two months of receipt.

Final Conclusion: The writ petition is allowed: the impugned order is quashed for breach of natural justice and the matter is remitted to respondent No.3 for fresh decision after the petitioner files its reply within three weeks; respondent No.3 to decide expeditiously, preferably within two months.

Principles of natural justice - input tax credit wrongly availed or utilised - proposal under Section 74(5) - notice in DRC-01A - mandatory show-cause notice under Section 74(1) - DRC-01 - invalidity of assessment for failure to issue mandatory notice - remand for fresh consideration after issuance of mandatory notice

Principles of natural justice - proposal under Section 74(5) - notice in DRC-01A - mandatory show-cause notice under Section 74(1) - DRC-01 - invalidity of assessment for failure to issue mandatory notice - Failure to issue a DRC-01 show-cause notice under Section 74(1) after issuance of DRC-01A under Section 74(5) vitiated the impugned assessment order. - HELD THAT: - The Court found that initiation of proceedings under Section 74 requires a two-step process where the revenue may first issue a proposal under Section 74(5) in DRC-01A inviting payment of tax, interest and 15% penalty, and if the assessee does not accept that proposal, the proper officer must thereafter serve a notice under Section 74(1) (DRC-01) requiring the assessee to show cause. In the present matter, though DRC-01A was issued and the petitioner responded refusing the proposal, no subsequent DRC-01 under Section 74(1) was issued before passing the final assessment. The Court held that the Section 74(1) notice is an independent and mandatory step to afford a show-cause opportunity; its omission amounted to a breach of the right to be heard and therefore vitiated the assessment. The determinative reasoning rests on the statutory sequence and the requirement of giving the assessee a fair opportunity to respond before finalizing the assessment. [Paras 11, 12, 13, 14]

Impugned assessment order is legally unsustainable for want of a DRC-01 notice under Section 74(1); the assessment is vitiated for breach of natural justice.

Remand for fresh consideration after issuance of mandatory notice - input tax credit wrongly availed or utilised - Whether the matter should be remitted for fresh consideration and the scope of such remand. - HELD THAT: - Having held the assessment vitiated for procedural default, the Court quashed the impugned orders and remitted the matters to the respondent for reconsideration. The remand is restricted: proceedings are to commence from the point reached (i.e., having issued DRC-01A) and the authority must issue the mandatory DRC-01 notice under Section 74(1), afford the petitioner a fair opportunity of hearing, and thereafter pass fresh orders on the assessment, if any. The Court did not decide the merits of the tax demand; it directed a fresh statutory procedure to be followed before any substantive adjudication. [Paras 15]

Impugned orders quashed and matters remitted to the respondent to issue DRC-01, afford a hearing and pass fresh orders in accordance with law.

Final Conclusion: The impugned assessment orders dated 05.08.2021 are quashed for failure to issue the mandatory DRC-01 show-cause notice under Section 74(1) after a DRC-01A proposal; the matters are remitted to the revenue to issue DRC-01, afford the petitioner a fair hearing and thereafter pass fresh orders in accordance with law.

Effect of Section 107 of the SGST Act: automatic stay of recovery upon filing of a valid appeal with statutory pre-deposit - attachment of bank account as a recovery measure - representation pending before the Assessing Authority and duty to decide - extension of limitation by Supreme Court orders

Effect of Section 107 of the SGST Act: automatic stay of recovery upon filing of a valid appeal with statutory pre-deposit - attachment of bank account as a recovery measure - representation pending before the Assessing Authority and duty to decide - Petition for quashing of notice of attachment was not entertained; direction issued to the Assessing Authority to decide the pending representation dated 16.07.2021 within four weeks. - HELD THAT: - The petitioner sought quashing of the notice of attachment dated 09.03.2021 on the ground that filing a valid appeal with the statutory pre-deposit under Section 107 of the SGST Act operates as an automatic stay of recovery proceedings, and therefore the bank attachment ought to be lifted. The court noted that the petitioner had filed a representation before the Assessing Authority on 16.07.2021 raising the same grievance. Rather than adjudicating the claim on merits in writ jurisdiction at the admission stage, and having regard to the fact that the statutory forum was seized of the representation, the court considered it appropriate to direct the Assessing Authority to hear the petitioner and dispose of the representation within four weeks. The court therefore disposed of the writ petition by directing expeditious decision by the authority and did not itself quash the impugned attachment notice. [Paras 4]

Direction to the Assessing Authority to hear and dispose of the representation dated 16.07.2021 within four weeks; writ petition disposed without quashing the attachment notice.

Final Conclusion: Writ petition disposed by directing the Assessing Authority to hear the petitioner and decide the pending representation within four weeks; no quashing of the attachment order was granted and no costs were imposed.

Input tax credit admissibility on motor vehicles used as demo cars - Interpretation of "further supply" in Section 17(5)(a) - Characterisation of demo vehicles as inputs or capital goods - Disallowance of credit for ancillary services under Section 17(5)(ab) - Restriction of ITC where goods are used for personal/non-business use

Input tax credit admissibility on motor vehicles used as demo cars - Interpretation of "further supply" in Section 17(5)(a) - Characterisation of demo vehicles as inputs or capital goods - Input Tax Credit on motor vehicles purchased and used as demo cars is not admissible to the appellant. - HELD THAT: - The Authority applied the statutory definitions of "input" and "capital goods" and the restrictions in Section 17(5). Section 17(5)(a) disallows ITC on motor vehicles of seating capacity up to 13 persons except when used for specific purposes, including the "further supply of such motor vehicles." The word "further" connotes resale as the primary purpose at purchase. The demo vehicles here were purchased but first used for demonstration and thereby lose their character as new vehicles; they are subsequently sold as second hand goods. That sequence does not amount to the statutory exception of "further supply" because the vehicles were diverted to demonstration use prior to sale and are not received simply for resale. Allowing ITC in such circumstances would subvert the restricted scope Parliament prescribed and would permit broad ITC on vehicles across industries. Consequently, despite capitalization in accounts, these demo vehicles do not qualify for ITC as inputs or capital goods for the purposes of Section 17(5).

The Advance Ruling disallowing ITC on demo motor vehicles is upheld.

Disallowance of credit for ancillary services under Section 17(5)(ab) - Restriction of ITC where goods are used for personal/non-business use - Input Tax Credit on ancillary services such as insurance, repair and maintenance in respect of the demo cars is not admissible. - HELD THAT: - Section 17(5)(ab) restricts credit for services of general insurance, servicing, repair and maintenance insofar as they relate to motor vehicles referred to in clause (a), subject to the proviso that credit is available only where the vehicles are used for the specified purposes in clause (a). Because the demo vehicles do not fall within those permitted uses (they are first used for demonstration and later sold as second hand), the proviso enabling credit under (ab)(i) is not satisfied. On the same rationale that precludes ITC on the vehicles themselves, the input services relating to those vehicles are ineligible for ITC.

The Advance Ruling disallowing ITC on insurance, repair and maintenance for the demo cars is upheld.

Final Conclusion: The appeal is dismissed; the AAAR upholds the Advance Ruling that ITC is not available on the demo motor vehicles and on ancillary services (insurance, repair and maintenance) relating to those vehicles, because their use does not fall within the limited exceptions in Section 17(5).

Admissibility of Input Tax Credit on motor vehicles - Restriction on Input Tax Credit for motor vehicles under Section 17(5) - Further-supply exception to the restriction on ITC for motor vehicles - ITC denial on inputs and input services used for non-permitted purposes

Admissibility of Input Tax Credit on motor vehicles - Restriction on Input Tax Credit for motor vehicles under Section 17(5) - Further-supply exception to the restriction on ITC for motor vehicles - ITC on input services relating to motor vehicles - Whether ITC of IGST and Compensation Cess paid on motor vehicles received on stock transfer and used as training, press, marketing and sales/demo vehicles and thereafter sold to dealers after limited use is admissible to the appellant - HELD THAT: - The Authority examined whether the appellant's use of BMW motor vehicles - for training of dealers, provision to media for tests, marketing/promotional activities and for test drives/product experience - brings the purchases within the ambit of admissible input tax credit. Section 17(5) carves out a specific restriction on ITC for motor vehicles of seating capacity up to thirteen, but creates limited exceptions where such vehicles are used for (A) further supply of such motor vehicles, (B) transportation of passengers, or (C) imparting training on driving such motor vehicles. The vehicles in question were acquired, capitalised in the appellant's books and put to demonstrative, promotional and training uses prior to eventual sale as used/old vehicles to dealers. The Authority found that these uses do not qualify as the statutory exception of "further supply of such motor vehicles" because the vehicles were first put to demonstrative/operational uses and later disposed of after prolonged use; they were not received with the character of being acquired simply for onward supply "as such." Allowing ITC on such post-use sales would subvert the restriction in Section 17(5) and broadly extend entitlement beyond the narrow legislative exceptions (thereby making the restriction illusory). The Authority further observed that demonstration vehicles cease to retain the character of new motor vehicles once used and are akin to second hand goods, and therefore should not be treated as inputs for ITC entitlement. On the same legal rationale, ITC on repair, insurance and maintenance services consumed in respect of these motor vehicles (seating capacity up to thirteen) was also held not admissible because those services relate to goods excluded by Section 17(5) when used for the appellant's described purposes.

Input tax credit on the IGST and Compensation Cess paid on the specified motor vehicles is not admissible; similarly, ITC on services (repair/insurance/maintenance) relating to those vehicles is not admissible.

Final Conclusion: The appeal is dismissed on merits: ITC on the specified BMW motor vehicles and related input services is not allowable because the vehicles were used for demonstrative/marketing purposes before being sold as used vehicles and therefore do not fall within the limited exceptions to the prohibition in Section 17(5).

Classification under Chapter 39: Articles for the conveyance or packing of goods, of plastics - Classification under Chapter 84: Poultry-keeping machinery - Application of General Rules for the Interpretation of the Harmonized System (HSN) - Specific description preferred to general description - Use as criterion for classification - Tariff item 39231090 (residual for boxes, cases, crates and similar articles) - Tariff item 84362900 (poultry-keeping machinery - others)

Classification under Chapter 84: Poultry-keeping machinery - Use as criterion for classification - Poultry crates are not classifiable as poultry-keeping machinery under Chapter 8436/84362900. - HELD THAT: - The authority examined whether the impugned poultry crates constitute "poultry-keeping machinery" covered by Chapter 84 (heading 8436). Chapter 8436 was held to cover machinery and mechanical appliances used in poultry setups such as feeding, drinking and monitoring systems, incubators, ventilation and other equipment that create an environment for poultry. The applicant did not demonstrate that the crates are machinery or mechanical appliances; the characteristics relied on (HDPE material, hygienic design, washable surface and safety-oriented shape) do not convert a container into "machinery." Accordingly the goods cannot be regarded as poultry-keeping machinery within heading 8436 or tariff item 84362900. [Paras 5]

The impugned poultry crates are not covered by Chapter 8436 / tariff item 84362900.

Classification under Chapter 39: Articles for the conveyance or packing of goods, of plastics - Tariff item 39231090 (residual for boxes, cases, crates and similar articles) - Specific description preferred to general description - Poultry crates are classifiable under heading 3923, subheading 392310 and residual tariff item 39231090 as "Others", attracting 9% each under Central and State Tax. - HELD THAT: - Chapter 39 covers plastics and articles thereof; heading 3923 includes "articles for the conveyance or packing of goods, of plastics," and subheading 392310 covers "boxes, cases, crates and similar articles." The impugned product is an article of plastic used for the conveyance of poultry and does not fall within the specific tariff items listed under 39231010-39231040; therefore it falls within the residual tariff item 39231090. Because the product is classifiable under subheading 392310, there is no need to invoke the rule about choosing the last numerical heading where two headings prima facie apply. The authority accordingly concluded the product is covered by tariff item 39231090 and taxed at the notified rate corresponding to that classification (9% Central and 9% State). [Paras 5]

The impugned poultry crates are classifiable under tariff item 39231090 and attract 9% Central Tax and 9% State Tax.

Final Conclusion: The Advance Ruling holds that the poultry crates manufactured by the applicant are not poultry-keeping machinery under Chapter 8436/84362900 but are plastic articles for conveyance classifiable under heading 3923, subheading 392310 and tariff item 39231090, and are consequently taxable at 9% each under Central and State GST.

Job work - Job work under section 2(68) and Section 143 - Treatment or process - Ownership of goods - Lease of production plant and transfer of possession - Taxability of payments for job work

Job work - Treatment or process - Ownership of goods - Lease of production plant and transfer of possession - Whether the arrangement between the applicant and M/s Praxair qualifies as 'job work' under section 2(68) of the CGST Act and OGST Act read with Section 143. - HELD THAT: - The Authority examined the contractual facts and invoices and found that Praxair constructed and installed the Hydrogen and Nitrogen plant and thereafter leased the plant to the applicant for a 15 year period, with physical and peaceful possession of the production plant handed over to the applicant. The invoices show fixed lease/rental and operation & maintenance charges; there is no separate job work agreement nor are job work or processing/conversion charges claimed by Praxair. Although the applicant supplies inputs and receives back industrial gases, the production plant is not under Praxair's control or possession at the time of manufacture. On these determinative facts the Authority concluded that the essential concept of job work-processing by a job worker on goods in the job worker's control under a job work arrangement with distinct job work charges-does not exist in the transaction. Consequently, the arrangement does not satisfy the requirements of 'treatment or process' carried out by a job worker in his production plant so as to attract classification as job work under the cited provisions. [Paras 4]

The activities do not qualify as 'Job Work' under section 2(68) and Section 143 of the CGST/OGST Acts.

Taxability of payments for job work - Job work - Whether the payments under the contract will attract GST as applicable to job work. - HELD THAT: - The Authority declined to consider the taxability of payments as payments treated as for 'job work' because it has concluded that the underlying arrangement is not job work. Since the transaction does not qualify as job work on the facts-absence of a job work agreement, absence of distinct job work charges and transfer of plant possession to the applicant-the question of applying GST rates as for job work is not maintainable. [Paras 4]

The question of GST on payments as applicable to job work is not maintainable in view of the finding that the transaction is not job work.

Final Conclusion: The Authority rules that the arrangement between M/s IOCL and M/s Praxair does not qualify as 'job work' under section 2(68) read with Section 143 of the CGST/OGST Acts, and accordingly the applicant's question on whether payments will attract GST as applicable to job work is not maintainable.

Requirement of compliance with section 148A of the Income Tax Act, 1961 before issuance of a notice under section 148 of the Income Tax Act, 1961 - quashing of reassessment notices issued without compliance with newly enacted procedural formalities - validity of Notifications extending pre-existing provisions beyond the period prescribed by the Relaxation Act, 2020 - ultra vires of delegated legislation - limitation

Validity of Notifications extending pre-existing provisions beyond the period prescribed by the Relaxation Act, 2020 - ultra vires of delegated legislation - Explanations A(a)(ii) and A(b) to Notification No.20 [S.O. 1432 (E) dated 31st March 2021] and Notification No.38 [S.O.1703(E) dated 27th April 2021] insofar as they extend the applicability of pre-1 April 2021 provisions of section 148, section 149 and section 151 beyond 31st March 2021 are valid. - HELD THAT: - The court examined whether the Explanations in the cited notifications lawfully extended the applicability of the provisions of the Act as they stood on 31st March 2021 beyond the period envisaged by the Relaxation Act, 2020. Concluding that such extension by delegated instrument exceeded the parent legislation, the court held that the Explanations operated beyond the scope conferred by the Relaxation Act, 2020 and were therefore ultra vires. Consequently, those portions of the notifications that sought to prolong the pre-amendment regime past 31st March 2021 were declared invalid.

Explanations A(a)(ii)/A(b) to the notifications dated 31st March 2021 and 27th April 2021 declared ultra vires the Relaxation Act, 2020 and set aside.

Requirement of compliance with section 148A of the Income Tax Act, 1961 before issuance of a notice under section 148 of the Income Tax Act, 1961 - quashing of reassessment notices issued without compliance with newly enacted procedural formalities - limitation - Impugned notices issued under section 148 of the Income Tax Act, 1961 after 31st March 2021, which were issued pursuant to the notifications held invalid or without observance of the statutory formalities introduced by the Finance Act, 2021, are liable to be quashed. - HELD THAT: - The court considered petitions challenging reassessment notices issued post-31st March 2021 on grounds of limitation and non-compliance with the procedural requirements introduced by Finance Act, 2021 (notably the formalities in section 148A). In light of its finding that the notifications' Explanations were ultra vires, and that notices under section 148 issued on or after 1st April 2021 must follow the amended statutory regime, the court quashed the impugned notices. The court, however, granted liberty to assessing officers to initiate fresh reassessment proceedings in accordance with the Act as amended by Finance Act, 2021 and after complying with the mandated formalities.

All impugned notices under section 148 issued post-31st March 2021 quashed, with liberty to issue fresh notices in conformity with the amended law and required procedural formalities.

Final Conclusion: Writ petitions allowed: the challenged Explanations to the notifications dated 31st March 2021 and 27th April 2021 declared ultra vires and set aside; impugned reassessment notices under section 148 issued after 31st March 2021 quashed, subject to the assessing officers' liberty to initiate fresh proceedings in accordance with the Finance Act, 2021 and after compliance with statutory formalities.

Re-opening of assessment under Section 148 and requirement to furnish reasons to believe - delay in furnishing reasons and the procedure in GKN Driveshafts - violation of principles of natural justice - inadequate time to file objections - responsibility of the Income Tax Department/National Faceless Assessment Centre for delay - quashing of assessment order and remand for fresh consideration

Delay in furnishing reasons and the procedure in GKN Driveshafts - responsibility of the Income Tax Department/National Faceless Assessment Centre for delay - Whether the reasons to re-open the assessment were furnished within a reasonable time as required by law and whether delay was attributable to the department. - HELD THAT: - The Court found that although notice under Section 148 was issued on 19th March, 2020 and return filed on 29th May, 2020, the reasons to re-open were furnished only on 23rd September, 2021 - a delay of about one and a half years. The Court held that this delay in furnishing reasons is attributable to the National Faceless Assessment Centre (i.e., the Income Tax Department) and therefore the procedural requirement identified by the Supreme Court in GKN Driveshafts was not complied with. That factual and procedural lapse by the department formed part of the basis for the relief granted. [Paras 2, 7]

Delay in furnishing reasons was inordinate and attributable to the department; the GKN procedure was not complied with.

Violation of principles of natural justice - inadequate time to file objections - quashing of assessment order and remand for fresh consideration - Whether the petitioner was afforded a reasonable opportunity to file objections to the reasons and, if not, what remedy should follow. - HELD THAT: - The Court observed that reasons were provided on 23rd September, 2021 and notices under Sections 142(1) and 143(2) with a questionnaire required a reply by 27th September, 2021. The assessment order was passed on 29th September, 2021, leaving the petitioner insufficient and unreasonable time to file objections, in breach of natural justice. Having regard to the departmental delay and the inadequate opportunity afforded to the petitioner, the Court found it appropriate to quash the impugned assessment order and remit the matter for fresh consideration after affording the petitioner a fair opportunity to file objections. [Paras 3, 4, 7, 8]

Impugned assessment order quashed; petitioner directed to file objections within a week and Assessing Officer to decide them by a reasoned order within two weeks thereafter.

Final Conclusion: Impugned assessment order dated 29th September, 2021 is quashed for failure to comply with the requirement to furnish reasons within a reasonable time and for denial of adequate opportunity to object; matter is remanded for fresh decision after the petitioner files objections within one week and the Assessing Officer disposes of them by a reasoned order within two weeks.

Payment for use of computer software - royalty under Section 9(1)(vi) of the Income Tax Act read with Article 12 of the Indo US DTAA - non exclusive licence / EULA does not transfer copyright - application of Supreme Court precedent in Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT]

Whether amounts received for licensing/distribution of computer software in India constitute 'royalty' taxable in India? - HELD THAT: - The Court held that the question is governed by the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd., which categorised relevant cases and concluded that amounts paid by resident Indian end users/distributors to non resident software suppliers under EULAs/distribution agreements do not constitute 'royalty' for use of copyright and are not taxable in India. The Court noted that a non exclusive licence or EULA which merely permits use does not part with the proprietary rights under the Copyright Act and thus does not amount to transfer of copyright attracting royalty treatment. Earlier rulings to the contrary, including AAR/Citrix reasoning, were held to be inconsistent with the Supreme Court's decision. Applying that precedent to the facts of the present appeals, the Court found no substantial question of law arising in favour of Revenue and accepted the tribunal/High Court conclusions in favour of the assessee. [Paras 4, 6]

Appeals dismissed as the issue is conclusively decided by the Supreme Court in favour of the assessee; no substantial question of law arises.

Final Conclusion: The appeals under Section 260A are dismissed: payments for licensing/distribution of computer software in the facts before the Court are not taxable as 'royalty' in India, in view of the Supreme Court's decision in Engineering Analysis Centre, and no substantial question of law remains for adjudication.

Obligation under Section 195 to deduct tax at source - person responsible for paying - assessee in default under Section 201 - distinct legal entity of parent and subsidiary

Obligation under Section 195 to deduct tax at source - person responsible for paying - assessee in default under Section 201 - distinct legal entity of parent and subsidiary - Whether petitioner could be treated as a person liable to deduct tax under Section 195 and be made an assessee in default under Section 201 for the alleged purchase of shares where petitioner did not itself make any payment - HELD THAT: - The Court applied the statutory test under Section 195 that tax deduction is mandated from a person "responsible for paying" to a non-resident any sum chargeable under the Act at the time of credit or payment (paragraph 3). The factual findings record that the shares of THL were purchased by IMAHI, a wholly owned subsidiary, and that petitioner acted only as a guarantor; there is no evidence that petitioner made or caused any payment (paragraphs 6, 7, 12 and 13). Reliance by the Assessing Officer on the Ingram Group annual report to treat petitioner as the purchaser was held misplaced, the report reflecting group achievements and not establishing petitioner as the payer (paragraph 12). The Court emphasised that a subsidiary is an independent legal entity and transactions of the subsidiary cannot be equated to transactions of the holding company; the SPA shows IMAHI as purchaser and petitioner as guarantor, and there is no material to show petitioner paid through IMAHI (paragraphs 13-15). Because petitioner did not make payment and was not shown to be "responsible for paying" any sum to a non-resident, Section 195 did not apply to petitioner and consequently the notice and order under Section 201 could not be sustained (paragraphs 14-16). [Paras 12, 13, 14, 15, 16]

Show cause notice dated 25th March 2010 and order dated 10th December 2013 quashed and set aside; petitioner not liable under Section 195/201 for the transaction in question.

Final Conclusion: Petition allowed; impugned notice dated 25th March 2010 and order dated 10th December 2013 set aside on the ground that petitioner was not shown to be the person responsible for paying and thus not liable to deduct tax under Section 195 nor liable as an assessee in default under Section 201 for the purchase of shares in financial year 2004-2005.

Reopening of assessment - escapement of income - taxability of reimbursement under Agricultural Debt Waiver and Debt Relief Scheme - remand for fresh consideration - appellate jurisdiction under section 260A

Reopening of assessment - escapement of income - Validity of reopening assessment and the question whether there was escapement of income warranting reassessment - HELD THAT: - The High Court did not adjudicate the substantive correctness of the Tribunal's conclusion that the assessing officer recorded reasons alleging escapement of income on account of amounts earlier allowed as bad debts and later received under the Scheme. Instead, the Court determined that questions of this mixed fact-law character under the Income-tax Act are not appropriately resolved in exercise of its appellate jurisdiction under section 260A and should be examined afresh by the assessing officer. Consequently, the matter was remitted for fresh consideration without the High Court expressing a final view on whether reopening was justified on the materials available. [Paras 8]

Remanded to the Assessing Officer for fresh consideration of the validity of reopening and escapement of income; High Court declined to decide the substantive issue under section 260A.

Taxability of reimbursement under Agricultural Debt Waiver and Debt Relief Scheme - remand for fresh consideration - application of provisions relating to provisions for bad debts - Whether the amount received under the Agricultural Debt Waiver and Debt Relief Scheme is taxable and whether any set-off against provisions requires verification - HELD THAT: - The Court followed the Tribunal's approach of directing re-examination by the Assessing Officer rather than pronouncing on the taxability of the reimbursement or on the accounting interplay with provisions claimed under the Act. The High Court directed that the Assessing Officer shall consider all issues raised by the assessee, including whether any part of the loan relief was previously allowed as a provision under the relevant provisions and the consequent tax effect, and to do so independently without being influenced by the Tribunal's observations. [Paras 8, 9]

Assessment set aside to the file of the Assessing Officer for fresh adjudication on taxability and related adjustments; AO to consider all contentions afresh.

Final Conclusion: Appeal disposed by remitting the matter to the Assessing Officer for fresh consideration of all issues raised by the assessee, independently of the Tribunal's observations; direction to complete the exercise within three months from receipt of the judgment.

Seized documents/Transfer Instruction as basis for assessment - elements required to tax on seized documents (name, nature, quantum, period) - reliability of information supplied by the Enforcement Directorate - admission of ownership of foreign bank account - natural justice - confrontation with adverse material - right person alone to be taxed

Seized documents/Transfer Instruction as basis for assessment - elements required to tax on seized documents (name, nature, quantum, period) - reliability of information supplied by the Enforcement Directorate - admission of ownership of foreign bank account - natural justice - confrontation with adverse material - right person alone to be taxed - Validity of the addition made by the Assessing Officer on account of an alleged credit of USD 7 million in the assessee's foreign bank account and whether the addition was sustainable on the basis of documents supplied by the Enforcement Directorate. - HELD THAT: - The CIT(A) examined the Transfer Instruction received from the Enforcement Directorate and held that all necessary ingredients to fasten tax liability on the basis of seized documents - the person, nature of transaction, quantum and period - were discernible. The CIT(A) noted that the assessee earlier denied the transaction but subsequently admitted ownership of the specified foreign account in correspondence produced during related proceedings; yet she failed to produce account documents or any material rebutting the Transfer Instruction. The CIT(A) also recorded that the assessee had been confronted with the incriminating documents during assessment and found no breach of principles of natural justice. Reliance was placed on the principle that the right person alone must be taxed and on the authoritative character of information supplied by a Government Department (the Enforcement Directorate) in the absence of contrary material. Applying these conclusions, the CIT(A) upheld the addition made by the AO. The Tribunal, after hearing the Department and noting absence of any material on record to controvert the CIT(A)'s findings, found no reason to interfere and dismissed the appeal on merits. [Paras 6, 7, 10]

Addition on account of alleged credit of USD 7 million in the assessee's foreign account is upheld; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeals on merits, upholding the addition made by the Assessing Officer (as sustained by the CIT(A)) based on the Transfer Instruction from the Enforcement Directorate and the assessee's admitted ownership of the foreign account; the lead decision for AY 2001-02 applies mutatis mutandis to AYs 2002-03 and 2006-07.

Revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - order erroneous insofar as prejudicial to the interest of the revenue - lack of enquiry versus inadequate enquiry - explanation (2) to section 263 - plausible view / two possible views taken by assessing officer

Revisionary jurisdiction under section 263 of the Income Tax Act, 1961 - order erroneous insofar as prejudicial to the interest of the revenue - plausible view / two possible views taken by assessing officer - Validity of exercise of jurisdiction under section 263 by the Principal Commissioner of Income Tax in setting aside assessments for AY 2013-14 to AY 2016-17. - HELD THAT: - The Tribunal examined the record of assessment proceedings including notices under section 142(1), the questionnaires issued and the written submissions with evidences filed by the assessee. It found that the Assessing Officer had called for specific information on the transactions questioned by the PCIT, had considered the assessee's responses and thereafter framed assessments under section 143(3) read with section 153A. The PCIT's orders under section 263 did not point to any concrete instance showing that the AO's orders were contrary to law or that the AO had failed to make enquiries at all; instead PCIT disagreed with the view taken by the AO. Applying settled principles (including that where two views are possible an AO's plausible view cannot be treated as erroneous prejudicial to revenue), the Tribunal held that mere disagreement by PCIT or absence of elaborate discussion in the assessment order does not justify invoking section 263. Consequently the exercise of revisionary power was held to be not maintainable. [Paras 5, 6]

PCIT's revisionary orders under section 263 quashing the AO's assessments for AY 2013-14 to AY 2016-17 are quashed and the appeals are allowed.

Lack of enquiry versus inadequate enquiry - explanation (2) to section 263 - Whether explanation (2) to section 263 permits revision where enquiries were made but, in the opinion of PCIT, were inadequate. - HELD THAT: - The Tribunal accepted the legal distinction between a total lack of enquiry and an enquiry that may be considered inadequate. It held that explanation (2) to section 263, introduced w.e.f. 01.06.2015, does not supplant the substantive requirement that the PCIT must demonstrate that the AO made no enquiry or verification which should have been made; the opinion of the PCIT alone is insufficient. Revisionary power cannot be exercised merely to direct further or deeper investigation where the AO after enquiry took a possible view based on the materials. Absent a recorded finding that no enquiry/verification was carried out resulting in an order contrary to law and prejudicial to revenue, section 263 cannot be validly invoked. [Paras 5, 6]

Explanation (2) does not license setting aside assessments where the AO has conducted enquiries and taken a possible view; PCIT must record lack of enquiry causing prejudice before invoking section 263.

Final Conclusion: The Tribunal quashed the PCIT's orders under section 263 for AY 2013-14 to AY 2016-17, holding that the Assessing Officer had made enquiries and taken a plausible view on the disputed issues and that PCIT failed to show the AO's orders were erroneous insofar as prejudicial to revenue; revisionary jurisdiction was therefore not maintainable.

Crystallisation of liability - deductibility of expenses - accrual in the year of crystallization - treatment of lease incentives - capital receipt versus revenue receipt - amortisation of lease incentives - mercantile system of accounting - reduction from block of assets as per Explanation 10 to section 43(1) - provision for sales returns - Accounting Standard 29 - recognition of provision

Crystallisation of liability - deductibility of expenses - accrual in the year of crystallization - Claim for deduction of octroi expenses pertaining to earlier financial years which crystallized and were paid in the year under consideration. - HELD THAT: - The tribunal found that although the underlying liability related to F.Y. 2011-12 and 2012-13, the demand crystallized during the assessment year and the liability was finally settled by payment before filing the return for the year under consideration. Documentary evidence showed attempts to pay earlier were frustrated by return of demand drafts pending further investigation, and payment was ultimately effected in the assessment year. On these facts, the tribunal held that the expenditure crystallized and accrued in the year under consideration and therefore was allowable in that year.

The Assessing Officer was directed to allow the claim for the octroi expenses; the addition made on this account was deleted.

Treatment of lease incentives - capital receipt versus revenue receipt - amortisation of lease incentives - mercantile system of accounting - reduction from block of assets as per Explanation 10 to section 43(1) - Tax treatment of lease incentives received from lessors - whether they are revenue receipts to be recognised immediately or capital in nature to be adjusted against the block of assets / amortised. - HELD THAT: - The tribunal recorded that the lease agreements entitled the assessee to receive incentives at delivery/opening of premises, indicating that the right to receive the incentives accrued at the commencement of the lease rather than on a yearly basis. The assessee, following mercantile accounting and applicable accounting standards, had amortised the incentives over the lease period, but the Assessing Officer treated the incentives as revenue receipts and made an addition. The tribunal found no clause in the lease showing yearly accrual, and noted absence of any obligation on the assessee to refund incentives on early termination, supporting a capital character. Applying these facts, the tribunal upheld the view that the incentives did not accrue annually and the Assessing Officer/ld. CIT(A)'s conclusion could not be faulted.

The addition claimed by the Revenue was sustained; the assessee's plea to spread the incentives over the lease period as revenue was rejected and the lower authorities' treatment was upheld.

Provision for sales returns - Accounting Standard 29 - recognition of provision - Allowability of provision for sales returns booked against sales effected at year end in conformity with Accounting Standard 29 and the assessee's sales-return policy. - HELD THAT: - The tribunal accepted that the assessee's sales-return policy, incorporated in invoices, created an obligation at the date of sale to accept returns within a defined period. The assessee followed a practice of taking actual returns from 1st April to 24th April (after the balance sheet date but before finalisation of books) and estimating the remainder on a scientific/past-experience basis. The ld. CIT(A) found, and the tribunal agreed, that this method accords with sound accounting principles: the provision recognised at year-end is adjusted when actual returns are recorded in the next year and any excess or short provision is absorbed in profit and loss.

The Assessing Officer's addition on account of the provision for sales returns was deleted and the accounting treatment adopted by the assessee was upheld.

Final Conclusion: The tribunal partly allowed the assessee's appeal by directing allowance of the octroi expense which crystallized and was paid in the assessment year, upheld the Assessing Officer/ld. CIT(A) on the characterisation of lease incentives (treating them other than as yearly revenue accruals), and upheld the deletion of the addition relating to provision for sales returns; both appeals were decided partly in the manner recorded above.

Deduction of employees' contributions to Provident Fund and ESI under Section 36(1)(va) - Application of Section 43B to employees' contribution - Effect of Finance Act, 2003 amendment to Section 43B (retrospectivity issue) - Finance Act, 2021 clarification that Section 43B shall not apply to employees' contribution - Entitlement to deduction where employee contributions are deposited before filing of return

Deduction of employees' contributions to Provident Fund and ESI under Section 36(1)(va) - Application of Section 43B to employees' contribution - Entitlement to deduction where employee contributions are deposited before filing of return - Whether employees' contributions to PF and ESI deposited after the statutory due date but before the filing of the income tax return are allowable as deduction under Section 36(1)(va) or are hit by Section 43B - HELD THAT: - The Tribunal held the claim for deduction of employees' contributions in favour of the assessee. It followed the reasoning in the Hon'ble Allahabad High Court decision in Sagun Foundry which, after considering the Supreme Court decision in CIT v. Alom Extrusions Ltd., concluded that Section 43B should be applied in the context of contributions consistent with the object and historical development of Section 43B and Section 36(1)(va). The Tribunal noted divergent High Court views but agreed with authorities holding that where employee contributions are deposited before the due date for filing the return, deduction under Section 36(1)(va) is allowable. The Tribunal further observed that the Finance Act, 2021 amendment clarifying that Section 43B does not apply to employees' contributions is prospective from 01.04.2021 and does not affect earlier assessment years; accordingly the amendment does not nullify earlier decisions allowing deduction where deposits were made before filing the return. Applying these principles to the facts, where there was common ground that the employee contributions, though deposited after the statutory deposit date, were deposited before the return was filed, the deduction was held to be allowable. [Paras 4, 5]

Addition disallowing employees' contributions to PF and ESI is deleted and deduction allowed.

Claimed deduction already reflected in computation of income - Validity of addition made by CPC in respect of donations when assessee had already added back the donation in computation - HELD THAT: - The Tribunal recorded that the assessee's own computation of income had already added back the donation amount; therefore the further disallowance by CPC was unsustainable. No substantive controversy remained once the assessee had neutralised the claimed deduction in its computation. [Paras 5]

Addition in respect of donation is not justified and is deleted.

Final Conclusion: The appeal is allowed: the disallowance relating to employees' contributions to PF/ESI is deleted and the CPC addition in respect of donation is set aside.

Bogus purchases - profit element in disputed purchases - reassessment based on search and seizure material - acceptance of sales as corroborative evidence - disallowance to prevent revenue leakage

Bogus purchases - profit element in disputed purchases - acceptance of sales as corroborative evidence - disallowance to prevent revenue leakage - Extent of disallowance on purchases shown from entities alleged to be accommodation/entry providers where sales of the assessee are accepted but purchases are questioned as bogus. - HELD THAT: - The Assessing Officer reopened the assessment on the basis of search and seizure material and statements indicating that the suppliers were part of an accommodation-entry racket, and disallowed the entire disputed purchases. The assessee produced purchase bills and bank payments and the Assessing Officer did not reject the assessee's books; the assessee's sales were not disputed. The Commissioner (Appeals) allowed only a 5% disallowance by reference to an earlier order. The Tribunal held that where sales are accepted and books are not rejected, disallowing 100% of purchases is not justified; however, a complete denial of disallowance is also inappropriate because the profit embedded in disputed purchases must be disallowed to prevent revenue leakage. Noting the assessee's gross profit margin of 0.88% and relevant precedents that disallow only the profit element in such cases, the Tribunal found both extremes (100% and 5%) unsuitable and, on the facts, fixed a 6% disallowance of the disputed purchases as a proportionate measure to safeguard revenue while recognising the accepted sales and documentary evidence.

Addition limited to 6% of the disputed purchases; Revenue appeal partly allowed and Assessing Officer directed to disallow 6% of the purchases.

Final Conclusion: The Revenue's appeal is partly allowed; the Tribunal directs that the disallowance in respect of the disputed purchases for assessment year (AY) 2007-08 be restricted to 6% of the purchases instead of 100% or the 5% allowed by the CIT(A).

Treatment of unexplained income - e-filed return data capture and evidentiary value - deduction under section 54F - taxability of capital gains in the year other than year of accrual - accommodation entry

E-filed return data capture and evidentiary value - treatment of unexplained income - deduction under section 54F - Whether the amount of Rs. 37,78,270/- could be treated as unexplained income in AY 2014-15 solely because the system-generated e-return for AY 2008-09 did not reflect the declared long-term capital gain and claim of deduction under section 54F. - HELD THAT: - The Tribunal examined the material filed by the assessee, including the XML/uploaded e-return, the printed ITR, the paper return filed with computation and the affidavit asserting that the long-term capital gain and the claim of exemption under section 54F were declared for AY 2008-09. The assessee pointed to multiple inaccuracies in the system-generated return for AY 2008-09 and produced banking and transactional evidence showing realization and reinvestment. The Revenue did not controvert the documentary record on file. In these circumstances the Tribunal held that the mere absence of the capital-gain figures from the system-ported view of the e-return, when the original uploaded return, paper filing and supporting records indicate declaration and claim of exemption, did not justify treating the amount as unexplained income in AY 2014-15. The Tribunal therefore rejected the conclusion that the amount was undisclosed for the purposes of AY 2014-15. [Paras 7, 8]

Addition treated as unexplained income merely because the system-generated e-return did not capture the capital gain is not sustainable; the ground is allowed and the addition is deleted.

Taxability of capital gains in the year other than year of accrual - accommodation entry - Whether the long-term capital gain arising on sale of shares in AY 2008-09 could be taxed in AY 2014-15 and whether the transaction was correctly characterised as an accommodation entry. - HELD THAT: - The Tribunal noted that the material on record - allotment documentation, sale bills and bank statements - established that the allotment and subsequent sale of shares, and the resultant capital gain, pertained to AY 2008-09. The CIT(A)'s characterisation of the transaction as an accommodation entry was held to be incorrect on the available record, as the Revenue did not produce contrary evidence to rebut the assessee's documentary proofs. Given that the capital gain arose and was claimed (with exemption) in AY 2008-09, the Tribunal held it could not be taxed afresh in AY 2014-15 merely on the basis of an asserted failure of the department's system to capture the e-return data. [Paras 7, 8]

The capital gain related to AY 2008-09 and cannot be taxed in AY 2014-15; the characterisation as an accommodation entry was not sustained and the addition cannot be upheld.

Final Conclusion: The appeal is allowed: the Tribunal held that the long-term capital gain and the exemption claimed under section 54F pertained to AY 2008-09 and, on the documentary record before it, could not be treated as unexplained income or taxed in AY 2014-15; the addition confirmed by the lower authorities is deleted.

Deduction under Section 36(1)(va) for employees' contribution - Applicability of Section 43B to employees' contribution - Interpretation of 'due date' for crediting employees' contribution - Retrospective effect of statutory amendment and its temporal application - Employer's fiduciary deposit of employee contributions

Deduction under Section 36(1)(va) for employees' contribution - Applicability of Section 43B to employees' contribution - Interpretation of 'due date' for crediting employees' contribution - Retrospective effect of statutory amendment and its temporal application - Employees' contributions to PF and ESI deposited after statutory due date but before filing of return are deductible under Section 36(1)(va) for the assessment year in question and Section 43B does not deny that deduction for AY 2005-06. - HELD THAT: - The Tribunal considered competing High Court views and followed the decision of the Hon'ble Allahabad High Court in Sagun Foundry (P.) Ltd., which applied and relied upon the Supreme Court's decision in CIT v. Alom Extrusions Ltd. The Tribunal recorded that several High Courts have taken divergent views on whether Section 43B operates in respect of employees' contributions, but the jurisdictional High Court's reasoning (applying Alom Extrusions and treating the amendment history and object of Section 43B as supporting allowance where contributions were paid before filing of return) governs the present appeal. The Tribunal noted that the clarificatory amendments introduced by Finance Act, 2021 (which expressly exclude application of Section 43B to employees' contributions) have effect from 01.04.2021 (AY 2021-22) as per the Memorandum and therefore do not apply to AY 2005-06. Having regard to the binding precedential position of the jurisdictional High Court and consistent Tribunal precedents following it, the addition disallowing employees' contributions deposited before filing of the return was held not sustainable and was deleted. [Paras 4, 5, 6]

Addition disallowing employees' PF/ESI contributions (deposited after statutory due date but before filing return) is deleted and the appeal is allowed for AY 2005-06.

Final Conclusion: The Tribunal allowed the assessee's appeal, deleting the addition in respect of employees' contributions to PF and ESI for AY 2005-06, following the jurisdictional High Court's view (Sagun Foundry) and holding that the Finance Act, 2021 amendment applies prospectively from AY 2021-22 and does not affect the assessment year before it.

Condonation of delay - substantial justice versus technicalities - treatment of entries in Form 26AS for determining taxable income - credit for tax deducted at source and self-assessment tax - rectification under section 154 as affecting intimation under section 143(1) - interest under sections 234B and 234C - direction for verification and remand for computation

Condonation of delay - substantial justice versus technicalities - Application for condonation of 86 days' delay in filing the appeal before the Tribunal - HELD THAT: - The assessee attributed the delay to the death of his son and the Covid-19 pandemic. Having considered the materials on record and the prevailing nationwide pandemic, and applying the established principle that section 5 of the Limitation Act permits a liberal approach to 'sufficient cause' to secure substantial justice, the Bench found the delay to be excusable. The Tribunal allowed the condonation application and proceeded to decide the appeal on merits. [Paras 3]

Delay of 86 days condoned and appeal admitted for adjudication on merits.

Treatment of entries in Form 26AS for determining taxable income - credit for tax deducted at source and self-assessment tax - rectification under section 154 as affecting intimation under section 143(1) - Validity of addition of Rs. 2,62,930 to income from other sources and denial of credit for TDS and self-assessment tax as reflected in Form 26AS - HELD THAT: - On the material before it, the Tribunal found that the AO (CPC) had treated Form 26AS entries as giving rise to income of Rs. 8,27,553, thereby creating an apparent mismatch with the return. Closer scrutiny of the Form 26AS revealed that an initial entry for interest from a single payer was cancelled/reduced within the same Form 26AS, leaving effective taxable interest at a lower figure. The Tribunal accepted the assessee's explanation that the effective interest taxable as per Form 26AS was Rs. 5,53,970 and that other reported interests in the return aggregated to Rs. 5,64,623, making the impugned addition unwarranted. The Tribunal also observed that the intimation under section 143(1) had earlier allowed credit for TDS and self-assessment tax which were later not given effect to in the rectification under section 154; since the TDS and self-assessment tax were reflected in Form 26AS and claimed in the return, the AO could not refuse those credits on technical grounds. Applying these conclusions, the Tribunal directed deletion of the addition and directed the AO to allow the credits after verification from Form 26AS. [Paras 5]

Addition of Rs. 2,62,930 deleted; credit for TDS and self-assessment tax to be allowed after verification from Form 26AS; Grounds 1 to 3 allowed.

Interest under sections 234B and 234C - direction for verification and remand for computation - Chargeability and computation of interest under sections 234B and 234C consequential to the assessment adjustments - HELD THAT: - The Tribunal observed that interest under sections 234B and 234C is consequential to the assessment and adjustments in tax liability. Since Grounds 1 to 3 (deletion of the addition and allowance of credits) were allowed, the interest charged under these provisions would stand recalculated as a consequence of the directions to give credit and delete the addition. The Tribunal therefore treated interest as mandatory and consequential, leaving computation to the AO after giving effect to the directed adjustments. [Paras 6, 7]

Interest under sections 234B and 234C to be recalculated consequentially after AO gives effect to deletion and credits; computation/verification remanded to AO.

Direction for verification and remand for computation - rectification under section 154 as affecting intimation under section 143(1) - Creation and quantum of demand under section 156 after giving effect to allowed grounds - HELD THAT: - Because the Tribunal allowed deletion of the addition and directed that TDS and self-assessment tax be allowed after verification from Form 26AS, the consequential demand determined earlier by the AO required revision. The Tribunal directed the AO to allow the credit of TDS upon verification and to rework the demand and interest accordingly. This amounts to remand for limited verification and recomputation rather than fresh adjudication on the merits of the underlying facts. [Paras 7, 8]

Demand under section 156 to be recomputed after AO verifies Form 26AS and gives effect to deletion and tax credits; matter remanded for verification and computation.

Final Conclusion: The Tribunal condoned the 86-day delay and allowed the appeal for assessment year 2017-18. The addition of Rs. 2,62,930 to income from other sources was deleted and credit for TDS and self-assessment tax reflected in Form 26AS was directed to be allowed after verification; interest under sections 234B/234C and the resulting demand under section 156 were left to be recalculated consequentially by the AO in accordance with these directions.

Revision under section 263 of the Income-tax Act - limitation under section 263(2) - Explanation 2 to section 263 (failure to make enquiries) - deduction under section 36(1)(viii) - computation of long-term finance income - treatment of loss on repossessed assets as bad debt versus business loss - disallowance of unpaid leave encashment (actual payment rule) - scope of Explanation 1 to section 263(1) - matters 'considered and decided' in appeal

Limitation under section 263(2) - treatment of loss on repossessed assets as bad debt versus business loss - disallowance of unpaid leave encashment (actual payment rule) - Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 in respect of (a) loss on repossessed vehicles and (b) unpaid leave encashment where those matters were concluded in the original assessment and were not part of the reassessment - HELD THAT: - The Tribunal held that the original assessment under section 143(3) was passed on 25 March 2015 and the reassessment under section 147 was passed on 31 December 2018. Section 263(2) permits revision within two years from the end of the financial year in which the order sought to be revised was passed. Where an issue was dealt with in the original assessment and was not reopened in the reassessment, the limitation for invoking section 263 runs from the original assessment (citing the Bombay High Court decision in assessee's own case). The PCIT's show cause and order sought revision of the issues relating to repossessed vehicles and unpaid leave encashment which were covered by the original assessment and not part of the reassessment; consequently the time for revision on those issues had expired. The Tribunal therefore did not examine the merits of those contentions and held that the PCIT lacked power under section 263 to revise those two issues. [Paras 22, 37]

PCIT's revisionary order under section 263 is not sustainable in respect of loss on repossessed vehicles and unpaid leave encashment; those parts of the section 263 order are quashed.

Revision under section 263 of the Income-tax Act - Explanation 2 to section 263 (failure to make enquiries) - deduction under section 36(1)(viii) - computation of long-term finance income - scope of Explanation 1 to section 263(1) - matters 'considered and decided' in appeal - Whether the PCIT was correct in setting aside the reassessment under section 263 insofar as the computation of income eligible for deduction under section 36(1)(viii) (reduction of lease rental income and exclusion of interest on income-tax refund) had not been properly examined by the Assessing Officer - HELD THAT: - The Tribunal examined the AO's computation in the reassessment and the assessee's explanation. On lease rentals, the assessee had reduced a net figure credited to P&L (net of certain interest expense and inclusive of arrears), but the Tribunal concluded the correct reduction for computing long-term finance income should be gross lease rentals and arrears - interest expense should not have been netted off. On interest on income-tax refund, the assessee conceded that such interest is non-finance income and should not have been included in long-term finance income; the assessee also accepted that the inclusion was inadvertent. These showed that the AO did not make necessary enquiries or verification required to determine the correct long-term finance income for computing deduction under section 36(1)(viii). Explanation 2 to section 263 treats an order passed without making inquiries which should have been made as erroneous and prejudicial. The Tribunal further rejected the contention that pendency of an appeal before the CIT(A) ousted PCIT's jurisdiction, observing that the CIT(A) had not yet 'considered and decided' the particular computation issues. For these reasons the Tribunal affirmed the PCIT's exercise of revisionary power insofar as it related to section 36(1)(viii). [Paras 32, 33, 34, 35, 36]

PCIT's revision under section 263 is sustained in respect of the deduction under section 36(1)(viii); the assessment is set aside for fresh enquiry and recomputation of long-term finance income (lease rentals and interest on income-tax refund) and framing of assessment afresh.

Final Conclusion: The appeal is partly allowed: the Tribunal quashes the PCIT's section 263 order insofar as it sought revision of issues covered by the original assessment (loss on repossessed vehicles and unpaid leave encashment) as time barred, but upholds the PCIT's revisionary action under section 263 in respect of the computation of deduction under section 36(1)(viii) (requiring fresh enquiries and recomputation by the AO).

Claim of exemption under section 11 - requirement under section 12A(1)(b) of furnishing audit report in Form No.10B alongwith return - appellate proceedings as continuation of assessment proceedings - acceptance of belated audit report during appellate/set-aside proceedings - discretion to condone delay in furnishing auditor's report

Requirement under section 12A(1)(b) of furnishing audit report in Form No.10B alongwith return - appellate proceedings as continuation of assessment proceedings - acceptance of belated audit report during appellate/set-aside proceedings - Whether the audit report in Form No.10B filed by the assessee during appellate/set-aside proceedings could be accepted and the exemption under section 11 allowed for A.Y. 2002-03 despite non-filing of the report with the return filed pursuant to notice under section 148. - HELD THAT: - The Tribunal examined the statutory requirement in clause (b) of section 12A(1) that a trust must get its accounts audited and furnish the auditor's report in the prescribed form along with the return to invoke sections 11 and 12. Noting precedents of High Courts and the Tribunal, it accepted the principle that appellate proceedings are a continuation of assessment proceedings and that filing the auditor's report during the assessment/appellate process may, in appropriate circumstances, cure initial non-filing. The record showed that the assessee furnished Form No.10B during earlier appellate proceedings and again during the set-aside proceedings; the Tribunal had directed the AO to consider the report after affording an opportunity. The AO, however, ignored the report and did not adjudicate the reasons for earlier non-filing as directed. Given that the Form No.10B was on record during the de novo assessment and no defects were pointed out in it, and there were no adverse findings about the charitable nature of activities or diversion of income under the relevant provisions, the Tribunal held that the AO erred in summarily rejecting the belated audit report. The Tribunal therefore upheld the CIT(A)'s acceptance of the report and direction to allow exemption under section 11, applying the settled view that belated acceptance in assessment/appellate proceedings is permissible where justified by facts and law (and observing that the stricter, mandatory filing rule was introduced only later by amendment effective A.Y. 2018-19). [Paras 12, 13, 14]

The audit report in Form No.10B filed during the appellate/set-aside proceedings was properly considered and accepted; the assessee was entitled to exemption under section 11 for A.Y. 2002-03 and the revenue's grounds are dismissed.

Final Conclusion: The appeal filed by the revenue is dismissed; the CIT(A)'s direction to accept the Form No.10B filed during appellate/set-aside proceedings and to allow the exemption under section 11 for A.Y. 2002-03 is upheld.

Mandatory pre-deposit as condition precedent to entertain appeal under section 129E of the Customs Act - statutory fixation of deposit percentage and limitation on judicial waiver - no power of appellate forum to grant complete waiver beyond statutory proviso - precedential application of Narayan Chandra Ghosh principle on pre-deposit

Mandatory pre-deposit as condition precedent to entertain appeal under section 129E of the Customs Act - statutory fixation of deposit percentage and limitation on judicial waiver - no power of appellate forum to grant complete waiver beyond statutory proviso - Application for waiver of the statutory pre-deposit under section 129E of the Customs Act was not maintainable and is rejected; appeal cannot be entertained in the absence of the mandated pre-deposit. - HELD THAT: - The Tribunal held that section 129E makes deposit of the prescribed percentage a condition precedent to entertain an appeal and does not provide for judicial waiver of that mandatory deposit. Reliance was placed on the Supreme Court's reasoning in Narayan Chandra Ghosh that when a statute confers a right of appeal it may impose conditions for its exercise and that an appellate forum cannot entertain an appeal unless the statutory pre-deposit is complied with; further, the Appellate Tribunal has no power to grant a complete waiver beyond what the statute permits. The Tribunal also noted the Delhi High Court's view in Dish TV India Ltd. that where the statute itself reduces the amount payable by providing an implicit waiver and prescribes the mandatory balance deposit, courts cannot further waive that prescribed deposit. Applying these principles, the Tribunal found the appellant's plea of financial inability insufficient to permit waiver and concluded that, as the statutory pre-deposit requirement under section 129E was not satisfied, the appeal could not be entertained and had to be dismissed.

Application for waiver of the pre-deposit is rejected; appeal dismissed for non-compliance with the statutory pre-deposit requirement.

Final Conclusion: The Tribunal refused to waive the statutory pre-deposit required by section 129E, relying on Supreme Court and High Court authorities; the application for waiver is rejected and the appeal is dismissed for non-compliance with the mandatory pre-deposit condition.

Reconstitution of Committee of Creditors - removal from Committee of Creditors - vitiation of transactions by fraud - right to be heard - locus to appeal of ex-directors - remand for fresh consideration

Right to be heard - removal from Committee of Creditors - vitiation of transactions by fraud - remand for fresh consideration - Order of the Adjudicating Authority setting aside admitted claims, cancelling voting rights and removing certain home buyers from the CoC was set aside and remitted for fresh consideration because the Adjudicating Authority proceeded on findings recorded without considering the replies and without affording a fresh hearing. - HELD THAT: - The Adjudicating Authority recorded adverse findings that several purported home buyers had routed funds back to relatives and declared those transactions vitiated by fraud, and directed cancellation of their voting rights and removal from the CoC. The Bench found that the Adjudicating Authority proceeded on the premise that replies had not been filed and treated an alleged circuitous transaction (notably a reference to Rs. 10 lakhs) as determinative without addressing that the Resolution Professional had earlier admitted larger claims and without properly considering the replies and written submissions filed by the respondents. In these circumstances the Tribunal concluded it was not entering upon the merits but that the impugned order must be set aside and the application reconsidered after taking into account the replies and after affording fresh opportunity of hearing to the parties; the Adjudicating Authority alone is to decide the merits on reconsideration. [Paras 10, 22, 35]

Impugned order set aside; I.A. No. 107/2021 remitted to the Adjudicating Authority for fresh consideration after taking on record and considering the replies and after giving the parties a fresh hearing.

Locus to appeal of ex-directors - Ex directors (suspended directors) have locus to challenge the Adjudicating Authority's observations and orders seeking contribution from them and recording adverse findings against them. - HELD THAT: - The Resolution Professional contended that ex directors lacked locus to challenge the impugned order. The Tribunal observed that the application filed sought directions that the ex directors contribute a sum back to the corporate debtor and that the Adjudicating Authority had made observations against the suspended/ex directors. Given those consequences, the Tribunal held that the ex directors could challenge the order and that their appeals were maintainable; the point of locus was therefore rejected. [Paras 9]

Submission that ex directors lack locus is rejected; ex directors have standing to challenge the impugned order.

Final Conclusion: Both Appeals allowed: the impugned order is set aside and I.A. No. 107/2021 in CP (IB) 2995/MB/2019 is remitted to the Adjudicating Authority for fresh consideration after taking into account the replies and after affording fresh opportunity of hearing; no opinion expressed on the merits.

Admission of corporate insolvency application under Section 9 - existence of operational debt and absence of dispute - definition of "dispute" (Mobilox test) - appointment of Interim Resolution Professional and disclosure/consent requirements - interim deposit to IRP to meet insolvency process expenses - moratorium under Section 14

Existence of operational debt and absence of dispute - definition of "dispute" (Mobilox test) - The corporate debtor owed the claimed operational debt and no genuine dispute pre existed at the time of the Section 8 demand notice. - HELD THAT: - The Tribunal found that the corporate debtor admitted liability by the communication dated 16.08.2018 and that the operational creditor produced correspondence showing no contemporaneous objection by the corporate debtor except a minor debit note. Applying the principle that the adjudicating authority must reject only spurious or feeble defences and accept a plausible contention of debt, the Tribunal held that no bona fide dispute was demonstrated which would bar admission of the Section 9 petition. The Tribunal therefore treated the admitted liability and the record of communications as sufficient to establish the absence of a real dispute for the purposes of admission. [Paras 8, 9, 10, 11]

Claim established as an operational debt and petition admitted as no substantive dispute existed.

Admission of corporate insolvency application under Section 9 - appointment of Interim Resolution Professional and disclosure/consent requirements - interim deposit to IRP to meet insolvency process expenses - moratorium under Section 14 - The Section 9 application was admitted; an Interim Resolution Professional was appointed; the applicant was directed to deposit interim funds; and the moratorium under Section 14 was declared. - HELD THAT: - Having admitted the petition on the basis of the corporate debtor's liability, the Tribunal proceeded to administrative measures necessary on admission. The Tribunal appointed the named Insolvency Resolution Professional subject to the required consent and disclosures, directed the operational creditor to deposit a specified interim amount with the IRP to meet his functions (to be adjusted by the Committee of Creditors), and declared the moratorium under the Code to operate in respect of the corporate debtor. The Tribunal also directed communication of the order to the parties, IBBI and ROC and required provision of the paper book to the IRP. [Paras 11, 12, 13, 14, 15]

Petition admitted; IRP appointed; interim deposit directed; moratorium declared; administrative directions issued.

Final Conclusion: The Section 9 petition was admitted on the finding of an admitted operational debt and absence of a bona fide dispute; an Insolvency Resolution Professional was appointed, the operational creditor directed to make an interim deposit for the IRP, and the moratorium under the Code was put into effect with consequential administrative directions.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - appointment of Liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - cessation of existing moratorium and commencement of fresh moratorium under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - investigation of financial affairs of the corporate debtor under Section 35(1) of the Insolvency and Bankruptcy Code, 2016 - public announcement and conduct of liquidation in accordance with the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - effect of non-receipt of resolution plan - Liquidation of the corporate debtor was to be initiated as recommended by the Committee of Creditors where CIRP ended without any approved resolution plan. - HELD THAT: - The Tribunal recorded that the CIRP for the corporate debtor commenced on 19.11.2019 and, in view of non-submission of any resolution plan despite invitations and timelines, the Committee of Creditors resolved to initiate liquidation. The Adjudicating Authority held that when the language of the Code is clear and the statutory pre-condition (absence of an approved resolution plan) is satisfied, liquidation must follow the mandate of Section 33(1) and the Authority must give effect to that consequence. Accordingly, the application by the Resolution Professional under Section 33(1)(a) was allowed and liquidation was ordered to commence. [Paras 11, 12, 13]

The application for liquidation under Section 33(1)(a) is allowed and liquidation of the corporate debtor is to commence.

Appointment of Liquidator under Section 34(1) of the Insolvency and Bankruptcy Code, 2016 - eligibility and consent of the proposed Liquidator - Appointment of the Resolution Professional as Liquidator in terms of Section 34(1) was approved by the Tribunal in accordance with the Committee of Creditors' resolution and the applicant's consent. - HELD THAT: - The minutes of the Committee of Creditors recorded approval for the appointment of the applicant as Liquidator with requisite voting majority and the applicant presented his consent. The Tribunal directed appointment of Mr. Prashant Agrawal as Liquidator in terms of Section 34(1), thereby giving effect to the CoC's decision and the statutory requirement for appointment of the liquidator when liquidation is ordered. [Paras 10, 13]

Mr. Prashant Agrawal is appointed as Liquidator in terms of Section 34(1).

Cessation of existing moratorium and commencement of fresh moratorium under Section 33(5) of the Insolvency and Bankruptcy Code, 2016 - conduct of liquidation process and statutory duties of the Liquidator - public announcement and compliance with Regulation 12 and Regulation 13 of the Liquidation Process Regulations - investigation of financial affairs under Section 35(1) of the Insolvency and Bankruptcy Code, 2016 - On commencement of liquidation, the earlier moratorium ceases and a fresh moratorium under Section 33(5) begins; the Liquidator must carry out liquidation in accordance with the Code and relevant regulations, including issuing public announcement, investigating financial affairs, following pending applications, and submitting a preliminary report within the regulatory timeframe. - HELD THAT: - The Tribunal directed that the moratorium order under Section 14 shall cease and a fresh moratorium under Section 33(5) shall commence. It further directed the Liquidator to issue the public announcement that the corporate debtor is in liquidation in terms of the Liquidation Process Regulations, to proceed with the liquidation in accordance with Chapter III of Part II of the Code and relevant regulations, to investigate the corporate debtor's financial affairs as required by Section 35(1), to follow up and deal with pending applications and recovery steps during liquidation, and to submit a Preliminary Report to the Adjudicating Authority within seventy-five days from the liquidation commencement date as per Regulation 13. The Registry was also directed to communicate the order to the Registrar of Companies and the IBBI. [Paras 11, 13]

The earlier moratorium ceases and a fresh moratorium under Section 33(5) commences; the Liquidator is directed to undertake statutory steps of liquidation, including public announcement, investigation, dealing with pending applications and submission of a Preliminary Report within the prescribed period.

Final Conclusion: The Tribunal allowed the Resolution Professional's application under Section 33(1)(a) and ordered commencement of liquidation of the corporate debtor, appointed the nominated Liquidator, directed commencement of the fresh moratorium and prescribed statutory steps for conducting the liquidation in accordance with the Code and the Liquidation Process Regulations.

Eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - quantified tax liability as a pre-condition for relief under SVLDRS - ineligibility where enquiry/investigation/audit remains unquantified on or before cutoff date - maintainability of writ after expiry of scheme - application of Clause 121(r) and Clause 125(1)(e) of the Scheme

Eligibility under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - quantified tax liability as a pre-condition for relief under SVLDRS - application of Clause 121(r) and Clause 125(1)(e) of the Scheme - The appellant was ineligible for relief under the Scheme because the enquiry/investigation remained unquantified as on the relevant cutoff date. - HELD THAT: - The Court found that the appellant underwent a search on 28.05.2019 and thereafter furnished documents by letter dated 13.06.2019 for quantification of liability in an ongoing investigation. The Scheme defines 'quantified' as a written communication of the amount of duty payable and excludes from eligibility persons 'who have been subjected to an enquiry or investigation or audit and the amount of duty involved ... has not been quantified on or before the 30th day of June, 2019'. Given that the appellant's liability had not been quantified as at the cutoff, and his 13.06.2019 communication sought quantification rather than claiming Scheme benefits, the designated committee correctly rejected the declaration on the ground of ineligibility. The Court therefore upheld the rejection as consistent with Clauses 121(r) and 125(1)(e) of the Scheme. [Paras 11, 12, 13]

Rejection of the appellant's declaration as ineligible under the Scheme was lawful.

Maintainability of writ after expiry of scheme - inability to grant relief once scheme period has ended - The writ petition challenging the rejection was not maintainable as it was filed after the Scheme period expired. - HELD THAT: - The learned Single Judge refused to entertain the writ petition filed on 08.09.2020 because the Scheme was in force only until 30.06.2020. The High Court agreed that, in view of the Scheme having expired and the timing of the petition falling outside the Scheme period, no direction could be issued to compel respondents to entertain the application under the Scheme. The Court found no illegality in the dismissal of the writ petition on this ground. [Paras 4, 14]

Writ petition filed after the Scheme's expiry was rightly dismissed as not maintainable.

Final Conclusion: The High Court confirmed the Single Judge's order dismissing the writ petition: the appellant was ineligible for relief under the SVLDRS because his liability remained unquantified as at the cutoff, and the writ filed after the Scheme period expired was not maintainable; the appeal is dismissed.

Taxability of laying cables under or alongside roads and railway tracks - applicability of CBEC Circular No. 123/5/2010-TRU dated 24.05.2010 - scope of show cause notice and limits of adjudication - substantial question of law

Taxability of laying cables under or alongside roads and railway tracks - applicability of CBEC Circular No. 123/5/2010-TRU dated 24.05.2010 - Tribunal correctly applied the CBEC circular and set aside the proposed service tax demand in respect of laying cables under or alongside roads and railway tracks. - HELD THAT: - The only issue argued before the Tribunal was whether the CBEC Circular No. 123/5/2010-TRU (24.05.2010) applied to the assessee's activity of laying cables under or alongside roads and railway tracks. The show cause notice on the record sought to confirm demand of service tax only for the work of laying cables alongside roads and railway tracks. The Circular, by virtue of clauses identified by the Tribunal, takes the view that such activity is not taxable under the Finance Act, 1994. The Board, as the highest administrative authority under the statute, has expressed that opinion and the Tribunal did not err in applying the Circular to delete the proposed demand. The appeal does not disclose any legal error in that application and the Tribunal's conclusion stands. [Paras 4, 5, 6, 11]

The Tribunal was justified in applying the CBEC Circular and deleting the proposed service tax demand relating to laying cables under or alongside roads and railway tracks; the appeal is dismissed on this ground.

Scope of show cause notice and limits of adjudication - substantial question of law - Matters not pleaded in the show cause notice (other activities or alleged collection without deposit) do not give rise to a substantial question of law in the present appeal. - HELD THAT: - The revenue sought to raise additional contentions before this Court about other activities performed by the assessee and alleged collection of service tax not deposited with the Exchequer. The adjudication was founded on a show cause notice which did not propose demand on those grounds. As those matters were neither part of the show cause notice nor argued before the Tribunal as a substantive question, they cannot be treated as giving rise to a substantial question of law in the present appeal. Any findings in the adjudication order on those collateral matters do not assist the revenue where they fall outside the scope of the notice and the issues before the Tribunal. [Paras 7, 8, 9, 10]

Contentions concerning other activities or alleged non-deposit of collected tax are outside the scope of the show cause notice and do not constitute a substantial question of law for this appeal; they are not entertained.

Final Conclusion: The appeal is dismissed. The Tribunal correctly applied CBEC Circular No. 123/5/2010-TRU to set aside the proposed service tax demand in respect of laying cables under or alongside roads and railway tracks; issues outside the scope of the show cause notice do not raise a substantial question of law in this appeal.

Cenvat credit on capital goods - use of capital goods exclusively in manufacture of exempted goods - Rule 6(4) of Cenvat Credit Rules, 2004 - eligibility conditions for credit on capital goods - personal penalty under Rule 26 of Central Excise Rules, 2002

Cenvat credit on capital goods - use of capital goods exclusively in manufacture of exempted goods - Rule 6(4) of Cenvat Credit Rules, 2004 - receipt date versus date of first use - Entitlement to Cenvat credit on capital goods received before change in dutiability where the goods began being used only after the product became dutiable - HELD THAT: - The Tribunal examined whether capital goods received between 13.10.2010 and 28.02.2011, but first put to use only in March 2011 after the finished product became dutiable w.e.f. 01.03.2011, are barred from credit by Rule 6(4) which disallows credit on capital goods "used exclusively in the manufacture of exempted goods." The factual record indicated receipt and installation prior to 01.03.2011, but the appellant asserted trial production on 14.03.2011 and commercial production from 29.03.2011, and the Tribunal found it unclear whether the capital goods were in fact used for manufacture of exempted goods prior to 01.03.2011. The Tribunal held that mere receipt of capital goods while the product was then exempt does not automatically establish exclusive use for exempted goods where the machinery was not put to use until after the product became dutiable. Because the adjudicating authority decided the case solely on the timing of receipt without verifying actual commencement of use and the status of finished goods produced by that machinery, the Tribunal directed a fresh consideration to verify when the capital goods were first used and whether they were used exclusively for exempted production within the meaning of Rule 6(4). [Paras 5]

Impugned adjudication set aside and matter remanded to the adjudicating authority for fresh adjudication and verification of whether the capital goods were used exclusively in manufacture of exempted goods.

Personal penalty under Rule 26 of Central Excise Rules, 2002 - mens rea / mala fide requirement for personal penalty - interpretation of Cenvat Credit Rules, 2004 - Validity of imposition of personal penalty on the Zonal Finance Head for alleged ineligible Cenvat credit - HELD THAT: - The Tribunal found that the question whether Cenvat credit was admissible arises from interpretation of the Cenvat Credit Rules, 2004. Given that the matter concerned an arguable question of law and interpretation of the Rules rather than conduct showing mala fide, the imposition of a personal penalty on the employee was not justified. The Tribunal therefore concluded that personal liability could not be sustained in the circumstances. [Paras 5, 6]

Penalty imposed on Shri Amit Radheshyam Gupta quashed and his appeal allowed.

Final Conclusion: The appeal of M/s Hindustan Coca Cola Beverages Ltd. is allowed by remanding the credit issue to the adjudicating authority for fresh verification and adjudication on whether the capital goods were used exclusively for exempted goods; the appeal of Shri Amit Radheshyam Gupta is allowed and the personal penalty is set aside.

Cenvat credit - definition of input service - inclusive construction - services "used in relation to the business of manufacture" versus "used in or in relation to manufacture of final products" - extended period invoked for willful suppression

Cenvat credit - input service - definition of input service - inclusive construction - services "used in relation to the business of manufacture" - Entitlement of the appellant to Cenvat credit of service tax paid on Technical Testing and Analysis and Consulting Engineer Services in respect of limestone deposit for the period 01/06/2008 to 31/01/2010. - HELD THAT: - The Tribunal found that the authorities below proceeded on a factually incorrect premise that the impugned services were availed for a proposed new plant, whereas the correct position on record was that the services were for development of new mines at the existing Rabriyawas unit and were therefore integrally connected with the appellant's manufacturing business of cement. The Tribunal applied the principle of inclusive construction of the definition of input service as explained by the Larger Bench of the Supreme Court in Ramala Sahkari Chini Mills Ltd. v. CCE and held that the inclusive part of Rule 2(l) must be read to enlarge, not restrict, the meaning of input services. Services necessary and inevitable for obtaining limestone - an essential raw material for manufacture of cement - fall within the wide definition of input service, whether used prior to manufacture or otherwise in relation to the business of manufacture. The Tribunal also examined the record (invoices and purchase orders) and found no material to substantiate the revenue's allegation of wilful suppression warranting invocation of the extended limitation period. On these grounds the Tribunal concluded that denial of credit was incorrect and that the appellant was entitled to the Cenvat credit claimed for the period in question. [Paras 6, 7]

Allow the appeal; appellant entitled to Cenvat credit of the service tax paid on the impugned services for the period 01/06/2008 to 31/01/2010 and the demand is not sustainable.

Final Conclusion: The appeal is allowed: the Cenvat credit disallowance confirmed by the authorities is set aside and the appellant is held entitled to credit of service tax paid on Technical Testing and Analysis and Consulting Engineer Services for the stated period; the invocation of the extended period for recovery is not sustained on the record.

Summary order. Writ petitions dismissed without adjudication on merits; petitioners granted liberty to avail alternative remedy of appeal or revision under Sections 79 and 80 of the Jharkhand Value Added Tax Act, 2005.

Reassessment based on inspection and recovered D7 slips - valuation of suppression from recovered records - restoration of turnover addition by the Tribunal - restriction of addition to equal time basis - penalty under section 16(2) of the TNGST Act

Reassessment based on inspection and recovered D7 slips - valuation of suppression from recovered records - restoration of turnover addition by the Tribunal - Whether the Tribunal was justified in restoring the assessing officer's addition of turnover of Rs. 7,63,500/- based on D7 slips recovered during inspection. - HELD THAT: - The Tribunal examined the record of 86 recovered slips and found 13 slips indicating unaccounted purchases valued by the assessing officer at Rs. 7,63,500/-. The Tribunal rejected the Appellate Assistant Commissioner's conclusion that those transactions had been brought to account and taxed in July, noting inconsistency between the bought-note purchases recorded in the accounts and the revised return, and the dealer's own statement that the transactions in the slips were not brought to accounts. The Tribunal held there was no correlation between the suppression shown by the D7 records and the turnover relied upon by the Appellate Authority, and therefore restored the assessing officer's addition. This Court found no reason to differ with the Tribunal's conclusion as it was supported by the material on record. [Paras 6]

Tribunal's restoration of the assessing officer's addition of turnover of Rs. 7,63,500/- upheld.

Restriction of addition to equal time basis - valuation of suppression from recovered records - Whether the Tribunal correctly limited the assessing officer's two-fold addition to an equal-time addition. - HELD THAT: - The assessing officer had made two-times additions on the suppression; the Appellate Authority deleted these additions. The Tribunal, after noting the period covered by the slips (12.04.1999 to 16.05.1999) and that the inspection occurred on 29.06.1999, observed that the left-out months for which additions could be relevant were limited and, considering the gravity of suppression, restricted the addition to equal time. The High Court found this approach reasonable and supported by the Tribunal's assessment of the period and circumstances, warranting no interference. [Paras 7]

Tribunal's restriction of the addition to an equal-time basis sustained.

Penalty under section 16(2) of the TNGST Act - valuation of suppression from recovered records - Whether penalty under section 16(2) of the TNGST Act was rightly imposed and appropriately restricted by the Tribunal. - HELD THAT: - The Tribunal found suppression established by recorded evidence (the recovered D7 slips) and accordingly held that a penalty was warranted but limited the penalty to the actual suppression proved. The High Court approved the Tribunal's finding that suppression was proved and the consequent modification limiting the penalty to actual suppression was appropriate. [Paras 8]

Tribunal's imposition of penalty, restricted to actual suppression, upheld.

Final Conclusion: Writ petition dismissed; the Tribunal's restoration of the assessing officer's addition based on D7 slips, its restriction of the addition to an equal-time basis, and its modification of the penalty to the actual suppression are sustained.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - legally enforceable debt - dishonour of cheque - onus on accused to rebut - presumption under Section 118 of the Negotiable Instruments Act - conviction under Section 138 of the Negotiable Instruments Act

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption - onus on accused to rebut - legally enforceable debt - Presumption that the cheque was issued for discharge of a legally enforceable debt and whether the accused rebutted that presumption. - HELD THAT: - The cheque (Ex. P1) and the accused's signature were admitted. Where signature and possession of cheque are admitted, the court must draw the statutory presumption in favour of the payee under Section 139 that the cheque was issued towards discharge of a legally enforceable debt. That presumption is rebuttable, but mere denial or explanation without material evidence is insufficient to discharge the onus. The accused asserted the cheque was given as security to a third party for a lesser sum and alleged misuse, but produced no corroborative material proof of the alleged transaction, endorsement or business dealings of the third party, nor did he reply to the legal notice or lodge any complaint on receipt of the notice. The trial Court nevertheless treated the complainant's financial capacity and existence of debt as unproved despite the lack of challenge to those matters in cross-examination. On the record the accused did not adduce adequate evidence to rebut the presumptions under Sections 118 and 139; consequently the statutory presumption in favour of the complainant stood unrebutted and the ingredients of Section 138 were established. [Paras 13, 14, 15, 16]

The presumption under Section 139 (and Section 118) in favour of the complainant is to be drawn and the accused failed to rebut it; the existence of a legally enforceable debt was thereby established.

Dishonour of cheque - conviction under Section 138 of the Negotiable Instruments Act - Whether the trial Court's acquittal was perverse and required interference, and consequential relief. - HELD THAT: - The trial Court's acquittal was founded on its conclusion that the complainant had not proved the existence of a legally enforceable debt and on an erroneous assessment of the complainant's financial capacity, despite admission of the cheque and receipt of notice and in absence of rebuttal evidence. That approach ignored the statutory presumptions and gave undue weight to irrelevant considerations. Having found the presumption unrebutted and the ingredients of Section 138 established, the appellate Court concluded the acquittal was perverse, set it aside, convicted the accused for the offence under Section 138, imposed a fine and directed distribution of the fine by way of compensation to the complainant and credit to the State as ordered by the Court. [Paras 17, 18]

The acquittal is set aside; the accused is convicted under Section 138 of the N.I. Act and sentenced with fine and directions for payment of compensation as ordered by this Court.

Final Conclusion: The appeal is allowed; the trial Court's acquittal is set aside, the accused convicted under Section 138 of the Negotiable Instruments Act, and sentence and distribution of fine as ordered by the High Court are imposed.