TaxTMI Updates e-Newsletter
Mar 14,2022

Non-bailable offence under Section 132(1)(a)/(b)/(c) read with Section 132(5) - Amount of input tax credit wrongly availed exceeding five hundred lakh rupees - Custodial interrogation and risk of tampering of evidence - Opportunity to the accused before remand / compliance with Section 132(1)(ii) and Section 69(2)

Non-bailable offence under Section 132(1)(a)/(b)/(c) read with Section 132(5) - Amount of input tax credit wrongly availed exceeding five hundred lakh rupees - Whether the offences alleged against the petitioner attract the non-bailable category under Section 132(1)(a)/(b)/(c) read with Section 132(5) of the TNGST Act because the amount involved exceeds five hundred lakh rupees. - HELD THAT: - The Court examined the materials placed by the prosecution showing continuous transactions since 2018-19 and figures of loss to the State, noting the assessment till July 2021 and the remand application as on 10.01.2022 together indicate the amount of tax evaded or input tax credit wrongly availed exceeds the threshold of five hundred lakh rupees. On that basis, the offences alleged fall within clauses (a), (b) and (c) of Section 132(1) and the proviso in sub-section (5) renders those offences cognizable and non-bailable where the amount exceeds five hundred lakh rupees. The Court rejected the petitioner's contention that the offence is bailable on the basis of the contested figure in the arrest memo since the prosecution material, taken as a whole, supports the higher figure. [Paras 6, 7]

The allegations as supported by the prosecution material satisfy the threshold in Section 132(5), rendering the offences non-bailable.

Opportunity to the accused before remand / compliance with Section 132(1)(ii) and Section 69(2) - Whether the petitioner was denied mandatory opportunity prior to remand and whether lack of communication of grounds vitiates the remand/arrest in a manner entitling him to bail. - HELD THAT: - The Court considered the prosecution's account that the petitioner had been given opportunities to appear and produce documents, having appeared on specified dates and having his statement recorded; further, the prosecution placed materials showing attempts to obtain documents and instances where the petitioner failed to produce records. While noting minor inconsistency between the arrest memo and remand report figures, the Court found the prosecution material demonstrates that the authority had given opportunity and that the remand/decision to arrest was supported by available records. [Paras 4, 7]

The contention of denial of mandatory opportunity or non-communication of grounds did not persuade the Court and did not justify bail.

Custodial interrogation and risk of tampering of evidence - Whether custodial interrogation remains necessary and whether the petitioner's release would impede an ongoing investigation by enabling tampering with evidence, thereby justifying denial of bail. - HELD THAT: - The prosecution contended the investigation was at a crucial stage, additional fake entities and records were yet to be identified, and there was a realistic apprehension that release would permit tampering given the alleged practice of floating fictitious companies and creating records. The Court accepted that the investigation had reached a critical stage and that the risk of tampering and obstruction was substantial if bail were granted at that juncture. [Paras 8]

Granting bail at the present stage would jeopardize the investigation; bail was therefore refused.

Final Conclusion: The petition for bail is dismissed: the alleged evasion/ wrongful availment of input tax credit exceeds the statutory threshold making the offences cognizable and non-bailable, the prosecution had provided opportunities and placed materials to support remand and arrest, and the risk of tampering and prejudice to an ongoing investigation justified refusal of bail.

Goods and services tax excluded alcoholic liquor for human consumption - One Nation-One Tax-One Market - inspection and verification of E-Way Bill and conveyance - state's exclusive privilege over trade in liquor - inter-departmental coordination to prevent illicit liquor trade

Goods and services tax excluded alcoholic liquor for human consumption - state's exclusive privilege over trade in liquor - Legal position of alcoholic liquor for human consumption under GST and the State's exclusive competence over its trade - HELD THAT: - The Court noted the constitutional and statutory position that after the amendment of Article 366 inserting Clause (12A), "goods and services tax" excludes taxes on the supply of alcoholic liquor for human consumption. In that constitutional and statutory context the trade in liquor remains an exclusive privilege of the State and, in the case of Bihar, is subject to complete prohibition. Consequently, liquor is outside the scope of GST and there is no requirement under GST to carry an E-Way Bill for alcoholic liquor for human consumption. The Court observed that despite this exclusion, illicit liquor is being clandestinely transported into Bihar, sometimes disguised as other GST goods or via vehicles registered outside the State.

The Court recorded that alcoholic liquor for human consumption is excluded from GST and that the State retains exclusive competence over its trade; it observed the reality of clandestine importation despite prohibition.

Inspection and verification of E-Way Bill and conveyance - One Nation-One Tax-One Market - inter-departmental coordination to prevent illicit liquor trade - Need for collection of E-Way Bill data, verification of conveyances and coordinated procedure to check clandestine transport of illicit liquor - HELD THAT: - The Court directed that the Commissioner, Commercial Taxes, Bihar should collect relevant documents, including E-Way Bills, of vehicles entering Bihar on a monthly basis to identify movements accompanied by E-Way Bills and to ascertain whether such vehicles are involved in clandestine carriage of liquor. The Court recognised that the GST framework envisages a system facilitating easy upload and tracking of transaction acknowledgement and E-Way Bill information to a common portal, enabling empowered tax officials to inspect E-Way Bills and physically verify conveyances during transit. Given the reported entry of illicit liquor in vehicles registered outside Bihar and the possibility of complicity by registered dealers inside the State, the Court called for a procedure to be evolved to stop such imports.

The Court directed collection and collation of E-Way Bill and related data and called for evolution of a procedure, through coordinated action by Commercial Taxes, Prohibition and Excise, and Transport Departments, to prevent importation of illicit liquor.

Inter-departmental coordination to prevent illicit liquor trade - Requirement for a joint report from Government departments and adjournment of bail hearing pending that report - HELD THAT: - The Court recorded that a combined effort by the Commercial Taxes Department, the Department of Prohibition and Excise and the Transport Department is necessary to formulate measures to stop the trade in illicit liquor. It directed those departments to inform the Court about the measures to be adopted and to provide a report on the general procedure to be followed, particularly in relation to the allegations in the FIR against the petitioner. The hearing on the question of bail was kept pending until the report is received.

The Court ordered the three departments to file a report on measures and procedure to curb illicit liquor imports and adjourned the hearing on bail until receipt of that report.

Final Conclusion: The Court held that alcoholic liquor for human consumption is excluded from GST and remains within State competence; noted clandestine importation into Bihar despite prohibition; directed the Commercial Taxes Department to collect E-Way Bill and related data and called for an inter-departmental procedure involving Prohibition and Excise and Transport Departments to prevent illicit liquor trade; and adjourned the bail hearing pending receipt of the departmental report.

Principles governing grant of bail in criminal cases - pre-conviction detention and presumption of innocence - apprehension of tampering with prosecution evidence or fleeing justice as a ground to deny bail - simultaneous conduct of criminal prosecution and recovery/penal consequences - economic offences and judicial approach to bail - vicarious liability of company and persons responsible under the GST regime - triability by Magistrate as a factor in bail consideration

Principles governing grant of bail in criminal cases - pre-conviction detention and presumption of innocence - apprehension of tampering with prosecution evidence or fleeing justice as a ground to deny bail - economic offences and judicial approach to bail - simultaneous conduct of criminal prosecution and recovery/penal consequences - vicarious liability of company and persons responsible under the GST regime - triability by Magistrate as a factor in bail consideration - Whether the accused-petitioner Lakshya Agarwal should be enlarged on bail in the pending GST-related criminal prosecution and on what considerations and conditions - HELD THAT: - The Court applied settled bail principles, observing that bail is neither punitive nor preventive and that pre-conviction detention is not warranted where no material shows risk of the accused fleeing, tampering with evidence, or otherwise hampering the trial. The Court noted the presumption of innocence at the pre-conviction stage and that the gravity of the offence and maximum sentence are not alone decisive. In the facts of this case no apprehension was shown or material produced by the prosecution to demonstrate risk of absconding or interference with prosecution evidence. The matter relates to an economic offence triable by a Magistrate; the alleged tax evasion and alleged fake invoices can be addressed by recovery proceedings alongside criminal prosecution, and vicarious liability of the company and responsible persons under the GST framework permits recovery from the corporate/firm even if criminal prosecution proceeds. The Court also observed that conviction and sentence (including possible consideration under Sections 360/361 CrPC or Probation of Offenders) remain subject to trial and cannot be presumed at this stage. Having regard to the period of custody since 19.11.2021 and that continued incarceration would not serve any fruitful purpose absent the special grounds to refuse bail, the Court exercised judicial discretion to enlarge the accused on bail with conditions.

Bail application under Section 439 CrPC allowed; accused enlarged on bail subject to furnishing a personal bond and two sureties to appear before the trial court as required.

Final Conclusion: The High Court allowed the petitioner's interim bail application in the GST-related criminal prosecution, holding that in absence of material showing risk of flight or tampering with evidence and having regard to the presumption of innocence and availability of recovery proceedings, further pre-conviction incarceration was unnecessary; bail granted on furnishing bond and sureties.

Mandatory pre-decisional hearing under Section 75(4) of the respective Goods and Service Tax enactments, 2017 - Quashing of orders for failure to comply with mandatory statutory requirements - Remand for fresh adjudication subject to pre-deposit - Availability of alternate remedy by appeal under Section 107

Mandatory pre-decisional hearing under Section 75(4) of the respective Goods and Service Tax enactments, 2017 - Quashing of orders for failure to comply with mandatory statutory requirements - Validity of the impugned assessment orders in view of alleged non-compliance with the mandatory requirements of Section 75(4). - HELD THAT: - The Court noted that show cause notices dated 28.09.2021 preceded the impugned orders dated 09.11.2021 and that the petitioner had tendered a reply on 25.10.2021 though without a dated acknowledgement. The records indicate the petitioner's first attempt to reply post the impugned orders. In these circumstances the Court found it appropriate to set aside the impugned orders for non-fulfillment of the statutory pre-decisional process and the factual position regarding the reply, but without finally adjudicating the merits of the demands. The Court therefore quashed the impugned orders subject to conditions specified for further proceedings. [Paras 5]

Impugned orders quashed for purposes of permitting compliance with statutory hearing requirements and opportunity to reply.

Remand for fresh adjudication subject to pre-deposit - Availability of alternate remedy by appeal under Section 107 - Post-quash procedural directions, including pre-deposit condition, fresh hearing, treatment of impugned orders as corrigendum, and consequence of non-deposit. - HELD THAT: - The Court directed that the petitioner deposit a specified sum within 30 days as a condition for the quash to operate; upon such deposit the respondents are to call the petitioner for hearing and pass a fresh order within 60 days, treating the earlier impugned orders as corrigendum to the show cause notices and allowing the petitioner to file a proper reply. The Court further recorded that if the petitioner fails to deposit the required sum within 30 days the impugned orders will revive without further order. The Court also noted the availability of appeal under Section 107 as an alternate remedy. [Paras 6]

Quash made conditional on pre-deposit; respondents to adjudicate afresh after hearing within a fixed time; impugned orders revive if deposit not made.

Final Conclusion: Writ petition disposed by conditional quashing of the assessment orders for AYs 2018-2019 to 2021-2022; petitioner allowed to file proper reply and respondents directed to pass fresh orders after hearing subject to the prescribed pre-deposit and time limits, with revival of the impugned orders if the condition is not complied with.

Transitional input tax credit - Section 140(1) of the CGST Act, 2017 - Section 142(3) of the CGST Act, 2017 - Refund versus transfer of credit - Doctrine of Necessity - Cenvat Credit Rules, 2004 - one year limitation under Rule 4(1) proviso

Transitional input tax credit - Section 140(1) of the CGST Act, 2017 - Section 142(3) of the CGST Act, 2017 - Refund versus transfer of credit - Whether taxpayers who paid service tax/CVD/SAD after 30.06.2017 (and thus could not file TRAN-1 by the prescribed cut-off) could have their claims considered under Section 142(3) of the CGST Act, 2017 for transfer of eligible Cenvat credit to the GST electronic credit ledger instead of being denied relief because they did not invoke Section 140(1). - HELD THAT: - The court held that Section 140(1) is confined to credit which had already accrued and been reflected in returns relating to the period ending the day before the appointed day, and therefore could not accommodate amounts paid after that cut off. Where payments of service tax/CVD/SAD were made after 30.06.2017 and hence TRAN 1 could not be filed within the prescribed period, Section 142(3) - which requires refund claims to be disposed of in accordance with the existing law - may be invoked to consider such applications. Applying the Doctrine of Necessity to the transitional context, the court found that invoking Section 142(3) to deal with these exceptional factual situations is permissible to avoid rendering the taxpayer remediless. The court clarified that Section 142(3) does not entitle claimants to cash refunds where under the erstwhile law only credit was available, but the authority could, in reconsidering the applications, treat them for the purpose of permitting carry forward of eligible credit into the GST electronic credit ledger. Consequently, the impugned rejections for lack of provision in the new regime were not sustainable and the matters were remitted for reconsideration under Section 142(3) only for transfer/carry forward of credit (not for cash refund). [Paras 41, 42, 46, 47, 48]

Applications were to be reconsidered under Section 142(3) for the limited purpose of permitting carry forward of eligible credit to the GST electronic credit ledger; cash refund was not available.

Cenvat Credit Rules, 2004 - one year limitation under Rule 4(1) proviso - Transitional input tax credit - Whether the petitioners were barred from claiming Cenvat credit by the one year limitation in the third proviso to Rule 4(1) of the Cenvat Credit Rules, 2004 or otherwise ineligible under the erstwhile law. - HELD THAT: - The court recorded that eligibility to claim Cenvat credit under the erstwhile law was not substantially disputed and that the relevant supporting document for the recipients was the challan evidencing payment. The petitioners had made payment and filed their applications within one year from the date of the payment challans relied upon, and the impugned order itself acknowledged eligibility for Cenvat credit. Thus, the Revenue's argument that the one year limitation under Rule 4(1) foreclosed the claims was not accepted on the facts of these cases; the court treated the petitioners as having a prima facie entitlement to credit subject to verification on reconsideration under Section 142(3). [Paras 36, 37, 38, 40]

Petitioners were not precluded on the ground of the one year proviso to Rule 4(1); their eligibility for Cenvat credit was acknowledged and is to be examined on reconsideration.

Final Conclusion: Impugned orders rejecting the claims were set aside and the matters remitted to the authorities to reconsider the petitioners' applications under Section 142(3) of the CGST Act, 2017 for the limited purpose of permitting eligible Cenvat credit to be carried forward to the GST electronic credit ledger (cash refund not available); reconsideration to be completed with opportunity of hearing within six weeks.

Writ jurisdiction under Article 226 - appealability of assessment orders - provisional attachment under Section 45 - statutory life of provisional attachment orders - right to obtain assessment order for filing appeal

Appealability of assessment orders - writ jurisdiction under Article 226 - Whether the Court should interfere with the assessment and rectification assessment orders in exercise of writ jurisdiction. - HELD THAT: - The Court declined to examine the legality or validity of the assessment order and the subsequent rectification order because such assessment orders are appealable. Exercising restraint in writ jurisdiction, the Court held that interference with an appealable assessment order is not appropriate and that the aggrieved party should pursue the statutory appellate remedy. The Court recorded that it will not enter into merits of the assessment or rectification.

Petition seeking quashing of assessment and rectification orders rejected on merits by non-interference; assessee directed to avail statutory appellate remedy.

Right to obtain assessment order for filing appeal - Whether the writ-applicant should be furnished a copy of the original assessment order to enable filing an appeal. - HELD THAT: - The Court directed the Assistant Commissioner to supply one copy of the original assessment order to the writ-applicant within one week. The direction was given to ensure the writ-applicant has the document necessary to challenge the assessment before the appropriate appellate authority, thereby facilitating the statutory appellate process.

Respondent directed to furnish a copy of the original assessment order to the writ-applicant within one week to enable filing of appeal.

Provisional attachment under Section 45 - statutory life of provisional attachment orders - Whether the provisional attachment order continues to operate or requires interference by the Court. - HELD THAT: - The Court observed that the provisional attachment order dated 30.07.2020 has outlived its statutory period and therefore is no longer in operation. Having so found, the Court declined to adjudicate further on the provisional assessment's legality and did not grant any substantive relief in respect of the attachment beyond this observation.

Provisional attachment held to have expired and be no longer in operation; no further interference granted.

Writ jurisdiction under Article 226 - Interim reliefs sought to restrain coercive action or stay assessment proceedings pending disposal of the petition. - HELD THAT: - The Court did not grant the interim directions sought by the writ-applicant to restrain the Department from initiating coercive action or to stay assessment proceedings. Instead, the Court focused on enabling the statutory appeal by directing supply of the assessment order and declined to exercise its writ jurisdiction to stay or quash the assessment which is open to challenge before the appellate authority.

Prayers for interim restraint or stay of assessment proceedings refused; no interim protection granted.

Final Conclusion: Writ petition disposed: Court refused to interfere with appealable assessment and rectification orders, observed the provisional attachment has expired, directed the Assistant Commissioner to furnish a copy of the original assessment order within one week to enable the petitioner to file an appeal, and declined to grant interim stay or other reliefs sought; direct service permitted.

Rectification under Section 161 of the GST Act - extension of limitation by Supreme Court suo motu orders during COVID-19 - non obstante clause in Section 161 and its overriding effect - preclusion of rectification by non-response to earlier notices

Rectification under Section 161 of the GST Act - extension of limitation by Supreme Court suo motu orders during COVID-19 - Application for rectification filed on 03.11.2021 was within the extended period of limitation pursuant to the Supreme Court's suo motu orders and thus not time-barred. - HELD THAT: - The Court examined the sequence of Supreme Court orders excluding the period from 15.03.2020 and ultimately extending the excluded period till 02.10.2021, with a further 90-day window from 03.10.2021 for matters whose limitation expired during the excluded period. The petitioner's limitation for filing rectification expired on 10.02.2021, which falls within the excluded period; therefore the 90-day extension from 03.10.2021 applied. Since the rectification application was filed on 03.11.2021, it falls within that 90-day window and is not barred by limitation. The Court recorded that on this ground the rejection of the rectification cannot be sustained. [Paras 19, 24]

Limitation is saved by the Supreme Court orders and the rectification application filed on 03.11.2021 is not time-barred.

Non obstante clause in Section 161 and its overriding effect - preclusion of rectification by non-response to earlier notices - Rejection of rectification on the basis that earlier show cause notices were issued and not responded to is not a permissible ground to deny rectification where Section 161 mandates independent consideration. - HELD THAT: - The Court interpreted the language of Section 161 which, being framed 'without prejudice' and containing a 'notwithstanding' clause, confers an overriding power to rectify apparent errors on the face of the record either suo motu or on application within the prescribed time. Consequently, the existence of prior show cause notices or the petitioner's non-response thereto cannot, by itself, operate to foreclose the independent exercise of power under Section 161 to rectify apparent errors. The Court held that the respondent's reliance on earlier notices as a bar to rectification was legally unsustainable and set aside the impugned order on that basis. [Paras 24, 25, 26]

The impugned rejection cannot be sustained on the ground of prior notices/non-response; rectification must be considered independently under Section 161.

Rectification under Section 161 of the GST Act - Whether the assessment order rejecting rectification should be set aside and the matter remitted for fresh consideration. - HELD THAT: - Having found that the rectification application was within the extended limitation and that prior notices do not preclude consideration under Section 161, the Court concluded that the impugned order rejecting the rectification was unsustainable. The Court set aside the impugned order and remitted the matter to the respondent to reconsider the rectification application on merits, directing that the petitioner be afforded an opportunity of hearing and that the application be decided within six weeks. [Paras 26, 27]

Impugned order set aside; matter remitted to respondent for fresh, independent consideration of the rectification application after hearing, to be decided within six weeks.

Final Conclusion: The Court held that the rectification application filed on 03.11.2021 was within the extended period of limitation under the Supreme Court's suo motu orders and that prior show cause notices or non-response thereto do not preclude independent exercise of power under Section 161; the impugned order rejecting the rectification was set aside and the matter remitted for reconsideration after hearing, to be disposed of within six weeks.

Provisional release of goods and conveyance - confiscation proceedings under Section 130 - show cause notice in Form GST MOV-10 - communication of show cause notice under Rule 142(1) of the GST Act - deposit towards tax and penalty

Provisional release of goods and conveyance - deposit towards tax and penalty - confiscation proceedings under Section 130 - Order for provisional release of the goods and conveyance pending confiscation proceedings - HELD THAT: - The High Court directed provisional release of the goods and the conveyance pending final confiscation proceedings because the writ applicant had deposited the claimed tax and penalty. The provisional release was made subject to the writ applicant filing an undertaking on oath that, in the event of a final confiscation order under Section 130, he would pay the redemption fine with interest while retaining the right to challenge such order by appeal under Section 107. The Court exercised its power to grant interim relief while leaving the ultimate confiscation question to the statutory process. [Paras 4, 6]

Goods and vehicle provisionally released on filing of an undertaking, in view of deposit of tax and penalty; interim relief granted pending confiscation proceedings.

Show cause notice in Form GST MOV-10 - communication of show cause notice under Rule 142(1) of the GST Act - Challenge to the impugned show cause notices and compliance with statutory procedure left for consideration on the returnable date - HELD THAT: - The writ applicant contested the issuance of the Form GST MOV-10 (and MOV-06) show cause notices, contending there was no material to show an intention to evade tax and that the mandatory procedure of communicating show cause notices/orders by uploading on the revenue website under Rule 142(1) had not been followed. The Court did not decide these contentions on merits at this stage; instead, notice was issued to the respondents and the two merit contentions were directed to be considered on the returnable date. [Paras 2, 3, 6]

Issuance and validity of the show cause notices and alleged non-compliance with Rule 142(1) to be considered on the returnable date; notice issued to respondents.

Final Conclusion: Notice issued to respondents returnable on 23 February 2022; goods and conveyance provisionally released upon filing of an undertaking because of deposit towards tax and penalty, while the merits of the challenge to the show cause notices and procedural compliance under Rule 142(1) are reserved for consideration on the returnable date.

Job work - manufacturing services on physical inputs (goods) owned by others - classification under Heading 9988 - applicability of concessional rate for job work at Sr. No. 26(id) - distinction between manufacture and processing

Job work - distinction between manufacture and processing - Whether the activities carried out by the applicant qualify as job work under Section 2(68) of the CGST Act, 2017. - HELD THAT: - The Authority examined the nature of the coating operations performed by the applicant on goods belonging to its customers. Job work under Section 2(68) is any treatment or process undertaken on goods belonging to another registered person. Manufacture, by contrast, requires emergence of a new product having a distinct name, character and use. The coating process in question enhances performance characteristics of the existing tooling but does not result in a new product with a distinct name, character or use. The goods were received under delivery challans from principals (registered persons) and returned to them after processing, and the applicant charged only processing/job charges. Applying the statutory definitions and the material facts, and relying on the principle that processing may not amount to manufacture, the Authority concluded the activity is a job work and not manufacture. [Paras 5]

The applicant's coating activities qualify as job work under Section 2(68) of the CGST Act, 2017.

Classification under Heading 9988 - manufacturing services on physical inputs (goods) owned by others - applicability of concessional rate for job work at Sr. No. 26(id) - Whether GST at 12% or 18% is applicable to the applicant's services in view of Sr. No. 26(id) and (iv) of Notification No. 11/2017 (as amended). - HELD THAT: - Notification No.11/2017 (as amended by Notification No.20/2019) distinguishes services by way of job work (including a residuary entry at Sr. No.26(id)) from 'manufacturing services on physical inputs owned by others' (Sr. No.26(iv)). Having held the applicant's activity to be job work, the Authority assessed which entry applies. The services did not fall under the specified sub-entries (i), (ia), (ib) or (ic). Consequently the residuary job work entry at item (id) under Heading 9988 applies. The Authority accepted the applicant's reliance on the amended notification and the clarificatory circular indicating that item (id) prescribes the reduced rate for job work services. Applying these conclusions, the Authority held that the service falls under Sr. No.26(id) and attracts tax at the rate prescribed thereunder (12%). [Paras 5]

The applicant's job work services are covered by Sr. No. 26(id) under Heading 9988 and attract GST at 12%.

Final Conclusion: The Authority ruled that the applicant's coating operations on tooling supplied by registered principals constitute job work under Section 2(68) of the CGST Act, 2017, and such services fall under the residuary entry at Sr. No.26(id) of Heading 9988 in Notification No.11/2017 (as amended), attracting GST at 12%; the third question was left unanswered as consequential.

Deduction under Section 80IA for profits and gains derived from the business of power generation - Netting of revenue receipts against like revenue expenditures in computing profits for incentive deduction - Direct nexus test for income to be 'derived from' the eligible business - Allowability of expenditure on development of industry periphery as business expenditure

Deduction under Section 80IA for profits and gains derived from the business of power generation - Netting of revenue receipts against like revenue expenditures in computing profits for incentive deduction - Direct nexus test for income to be 'derived from' the eligible business - Validity of disallowance of deduction under Section 80 IA in respect of interest and other receipts treated as "other income" for the Assessment Years 2002 03, 2003 04, 2007 08 and 2008 09. - HELD THAT: - The Court held that where an undertaking has a single activity (generation and sale of electricity) and certain receipts (including interest on bonds issued by the purchaser in lieu of unpaid energy bills, interest on advances to employees, charges collected for facilities, sale of scrap, insurance claims etc.) arise in the course of that activity, such receipts may form part of the profits and gains "derived from" the eligible business for the purposes of Section 80IA.

Applying the netting principle recognised in precedents concerning similarly worded incentive provisions, revenue receipts of the like nature must be adjusted against corresponding revenue expenditure so that net profit truly reflects the business profit eligible for deduction. The Court accepted that interest on GRIDCO bonds issued in lieu of delayed payments had a direct nexus with the Assessee's core business and thus could not be excluded from the deduction merely because characterised as "other income"; consequently the disallowance by the authorities was set aside. The Court relied on the reasoning in CIT v. Meghalaya Steels Ltd. [2016 (3) TMI 375 - SUPREME COURT] (extending analogous principles under Sections 80 IB/80 IC) to support the netting approach and to determine whether profits are "derived from" the business. [Paras 12, 15, 16]

Disallowance of the amounts shown as "other income" was quashed and the appeals were allowed to the extent that those receipts are to be treated as profits and gains derived from the business and eligible for deduction under Section 80 IA.

Allowability of expenditure on development of industry periphery as business expenditure - Validity of disallowance of expenditure on development of the periphery of the industry claimed as wholly and exclusively for business for Assessment Year 2009 10. - HELD THAT: - The Court observed that the question of allowability of periphery development expenses had already been considered for earlier assessment years of the same assessee and that no separate question had been framed on the point when those earlier appeals were admitted. Applying the rule of consistency, the Court declined to entertain the claim for AY 2009 10 and followed the earlier conclusion against the Assessee. Consequently, the appeal dismissed. [Paras 21, 22]

Disallowance of the periphery development expenses was upheld and ITA No.3 of 2015 was dismissed.

Final Conclusion: Appeals challenging disallowance of certain "other income" for purposes of deduction under Section 80IA (AYs 2002 03, 2003 04, 2007 08 and 2008 09) allowed on netting and direct nexus reasoning; appeal against disallowance of periphery development expenditure (AY 2009 10) dismissed following consistency with earlier years.

Book profit - Minimum Alternative Tax (MAT) - profits derived by an industrial undertaking from the business of generation or generation and distribution of power - business (inclusive meaning under section 2(b) of the Income-tax Act) - apportionment of embedded profits in vertically integrated undertakings - actuarial valuation - provision made for meeting liabilities other than ascertained liabilities - Explanation to Section 115JA(2)(iv)

Profits derived by an industrial undertaking from the business of generation or generation and distribution of power - book profit - apportionment of embedded profits in vertically integrated undertakings - Explanation to Section 115JA(2)(iv) - Assessee entitled to deduct from book profits the profits derived by its captive power plant for the purposes of computing MAT under Section 115JA. - HELD THAT: - The Court accepted the principle that profits referable to captive power generation may be apportionable and embedded in the ultimate profit on sale of the final product, and therefore can be excluded from book profits under the Explanation to Section 115JA(2)(iv). Applying the ratio of Tata Iron & Steel Ltd. and the decision in M/s. DCM Sriram Consolidated Ltd., the Court held that the activity of captive generation falls within the inclusive definition of "business" and that an assessee may apportion and reduce that part of profit attributable to internal transfer of energy. The AO, CIT(A) and the ITAT erred in concluding that an assessee cannot derive profit from internal consumption or that the activity must involve sale to a third party; consequently the claim of the assessee relating to power profits should have been allowed in computing book profit for MAT purposes. [Paras 17]

Claim for deduction of profit attributable to captive power generation under Explanation (iv) to Section 115JA(2) allowed; earlier disallowance set aside.

Actuarial valuation - provision made for meeting liabilities other than ascertained liabilities - ascertained liabilities vs provisions for unascertained liabilities - Explanation to Section 115JA(2)(c) - Assessee's provision for leave encashment and post-retirement medical benefits determined by actuarial valuation is not to be treated as an inadmissible addition to book profit under the Explanation to Section 115JA. - HELD THAT: - Relying on the reasoning of the Supreme Court in HCL Comnet Systems & Services Ltd., the Court held that the Explanation attracts only provisions made for meeting liabilities other than ascertained liabilities. The assessee, having followed actuarial valuation and charged the liability to its profit and loss account in accordance with accounting standards and statutory directions, treated the liability as an accrued/ascertained liability. The department's approach of treating the actuarial provision as a contingent or unascertained liability and adding it back to book profits was rejected. Accordingly the actuarially computed liability for leave encashment and post-retirement medical benefits was to be accepted for purposes of computing book profit under Section 115JA. [Paras 22, 24]

ITAT's disallowance of the actuarial provision set aside; the actuarial liability is acceptable for deduction from book profit.

Final Conclusion: The appeal is allowed: the assessee's claim for deduction of profits attributable to captive power generation under Explanation (iv) to Section 115JA(2) is accepted, and the actuarially determined provisions for leave encashment and post-retirement medical benefits are to be treated as allowable for computing book profit; the impugned orders of the ITAT, CIT(A) and AO on these issues are set aside.

Time-bar limitation for assessment - application of second proviso to section 153B(1)(b) - assessment under section 153C - appellate power to entertain limitation plea first raised on appeal - non-obstante clause in limitation provision

Appellate power to entertain limitation plea first raised on appeal - Whether the Commissioner (Appeals) could entertain for the first time at the appellate stage the contention that the assessment order was barred by limitation. - HELD THAT: - The Court held that the question whether an assessment order was passed within the period of limitation is a pure question of law determinable from the record and factual materials on file. Where the facts necessary to decide limitation are on record, the appellate authority may entertain the limitation plea even if it was not pressed before the assessing officer. The Commissioner (Appeals) was therefore justified in examining and deciding the limitation issue which arose on the materials before him.

The Commissioner (Appeals) was entitled to entertain and decide the limitation contention raised for the first time on appeal.

Application of second proviso to section 153B(1)(b) - time-bar limitation for assessment - assessment under section 153C - non-obstante clause in limitation provision - Whether the assessment completed on 31.03.2016 under Section 153C/143(3) was within the period of limitation as governed by the proviso to Section 153B(1)(b) in respect of a person other than the searched person. - HELD THAT: - The Court analysed the second proviso to Section 153B(1)(b) (as in force at the relevant time) which prescribes that for other persons covered by Section 153C the limitation is the later of (i) twenty-one months from the end of the financial year in which the last authorisation for search was executed, or (ii) nine months from the end of the financial year in which seized books/documents/assets are handed over under Section 153C to the assessing officer of the other person. The Tribunal and Commissioner (Appeals) found on the record that the last authorisation for search related to financial year 2012-13 (giving a date of 31.12.2014 as twenty-one months from end of that year) and that the relevant documents were received by the assessing officer on 30.09.2014 (making nine months from end of financial year 2014-15 i.e. 31.12.2015 the later date). Since the assessment was completed on 31.03.2016, it was beyond the later limitation date and therefore time-barred. The Court agreed with this application of the proviso and held there was no question of law in contesting that conclusion.

The assessment was barred by limitation under the proviso to Section 153B(1)(b) and thus invalid.

Final Conclusion: The appeal is dismissed; the Commissioner (Appeals) and the Tribunal were correct in (i) entertaining the limitation plea on the record and (ii) holding that the assessment completed on 31.03.2016 under Section 153C/143(3) was time barred under the proviso to Section 153B(1)(b).

Mandatory compliance with the pre-issuance procedure under section 148A - invalidity of a notice issued under section 148 after commencement of Finance Act, 2021 when section 148A applies - commencement of Finance Act, 2021 with effect from 1/04/2021 - right to issue fresh notice after compliance with section 148A

Mandatory compliance with the pre-issuance procedure under section 148A - invalidity of a notice issued under section 148 after commencement of Finance Act, 2021 when section 148A applies - Validity of the notice dated 31/03/2021 (served on 16/04/2021) issued under section 148 without complying with the procedure newly mandated by section 148A after 1/04/2021. - HELD THAT: - The Court noted that the Finance Act, 2021 came into force with effect from 1/04/2021 and inserted section 148A prescribing an enquiry, a show-cause notice, consideration of the assessee's reply and an order with prior approval of the specified authority before issuing any notice under section 148. The respondents conceded and produced office records demonstrating that although the impugned notice bore the date 31/03/2021, it was in fact sent by email to the petitioner on 16/04/2021, i.e., after 1/04/2021. In view of the admitted fact of post-commencement issuance, the mandatory pre-issuance requirements of section 148A applied and were not complied with. Consequently the impugned notice issued under section 148 after the commencement of section 148A was held to be legally invalid. The Court, however, left open the respondents' statutory right to initiate reassessment by following the procedure laid down in section 148A. [Paras 4, 6, 7]

Impugned notice dated 31/03/2021 (served on 16/04/2021) quashed for non-compliance with section 148A; respondents may re-initiate proceedings only after complying with section 148A.

Final Conclusion: Writ petition allowed to the extent that the notice issued under section 148 after 1/04/2021 (though dated 31/03/2021) is quashed for failure to comply with the mandatory procedure in section 148A; respondent is permitted to proceed afresh in accordance with section 148A.

Maintainability of writ where statutory appellate remedy exists - limits of revisional power under Section 264 of the Income Tax Act - distinction between appellate and revisional jurisdiction - effect of Explanation I to Section 264(7) - refusal to interfere not prejudicial to assessee - invocation of Article 226 as alternative to statutory appeal

Maintainability of writ where statutory appellate remedy exists - invocation of Article 226 as alternative to statutory appeal - Writ petition under Article 226 challenging the Commissioner's orders was not maintainable because statutory appellate remedy before the Commissioner of Income Tax (Appeals) was available and the petitioners deliberately avoided availing that remedy. - HELD THAT: - The Court found that the earlier writ was dismissed without adjudicating the merits and that an appeal to the Commissioner of Income Tax (Appeals), which has wide powers to re-examine facts and law, was available to the petitioners. Instead of filing the statutory appeal within the permissible time, the petitioners sought revision under Section 264 and subsequently approached the High Court under Article 226 with the apparent purpose of avoiding the appellate forum and payment of tax determined in assessment. Given the availability of the statutory appellate forum and the petitioners' failure to avail it, the High Court declined to entertain the writ as an improper indirect attempt to obtain appellate relief under the guise of extraordinary constitutional jurisdiction.

Writ petition dismissed as not maintainable in view of available statutory appeal and petitioners' failure to avail that remedy.

Limits of revisional power under Section 264 of the Income Tax Act - distinction between appellate and revisional jurisdiction - effect of Explanation I to Section 264(7) - refusal to interfere not prejudicial to assessee - The Commissioner, in exercise of powers under Section 264, cannot act as an appellate authority by re-appreciating evidence and merits, and a refusal to interfere under Section 264 is not prejudicial to the assessee by virtue of Explanation I to Section 264(7). - HELD THAT: - The Court reiterated the settled principle that revisional power is narrower than appellate power; the Commissioner's discretion under Section 264 does not permit the Commissioner to assume the role of an appellate authority and re-assess factual or evidentiary matters that properly fall within appellate review. The judgment further observed that Explanation I to Section 264(7) treats an order declining to interfere as not prejudicial to the assessee, reinforcing the limited scope of revision. Relying on these principles, the Court upheld the Commissioner's refusal to interfere under Section 264 and declined to permit the petitioners to use revision as a surrogate appellate remedy.

Commissioner's refusal to exercise revisionary power upheld; Section 264 cannot be used to re-open merits as an appellate forum.

Final Conclusion: The writ petition challenging the Commissioner's orders under Section 264 and Section 154 arising from the assessment for Assessment Year 2018-19 is dismissed: the petitioners, having failed to avail the statutory appellate remedy and having sought revision improperly, cannot secure relief under Article 226, and the Commissioner's limited revisional refusal stands valid.

Objections to notice for income escaping assessment - mechanical rejection - assessment of related entity - reconsideration on merits - stay of further proceedings

Objections to notice for income escaping assessment - mechanical rejection - assessment of related entity - reconsideration on merits - stay of further proceedings - Validity of the rejection of the petitioner's objections to a notice for income escaping assessment and the necessity of reconsideration after examination of materials placed on record - HELD THAT: - The petitioner, a university funded and administered through the International Foundation for Research and Education (IFRE), had placed before the respondents the assessment record of IFRE and other material to demonstrate that no income of the university had escaped assessment. The respondents rejected the petitioner's objections in a mechanical manner, observing that the Foundation's assessment was irrelevant and noting that the university had not filed returns. The High Court held that the petitioner had made prima facie grounds that required consideration and that all facets and material placed on record ought to have been examined before rejecting the objections. In view of this failure to consider the material and the petitioner's entitlement to a decision on merits, the impugned orders were set aside and the matter remitted to respondent No.1 for fresh decision after hearing the parties. Pending reconsideration, further proceedings on the notice were stayed until the date fixed for decision. The Court directed the parties to appear before respondent No.1 as required and imposed a timeline for final disposal of the objections. [Paras 5, 8, 9, 10]

Impugned orders rejecting the objections were set aside; respondent No.1 directed to redecide the objections after considering all material and hearing the parties by 31.03.2022; further proceedings on the notice stayed until that decision.

Final Conclusion: The High Court allowed the petition, set aside the impugned orders rejecting the objections, and remitted the matter to respondent No.1 for fresh decision after considering the materials placed on record and hearing the parties, with a stay on further proceedings until that decision (to be completed by 31.03.2022).

Deduction under Section 80IB(10) - rectification versus review - recall/restoration of withdrawn appeal - application of binding precedent - remand for fresh consideration

Deduction under Section 80IB(10) - application of binding precedent - Entitlement to deduction under Section 80IB(10) in respect of the housing project - HELD THAT: - The Court did not adjudicate the substantive claim for deduction on merits. The appellant relied on the Supreme Court decision in CIT v. Sarkar Builders and submissions as to commencement/completion dates relevant to the statutory amendment. The respondent accepted that those authorities may be determinative. The High Court held that the applicability of those decisions and the question whether the appellant is entitled to deduction must be examined afresh by the Tribunal and therefore set aside the impugned Tribunal orders and remitted the matter for reconsideration on merits in light of the cited authorities, after affording an opportunity of hearing to the appellant. [Paras 12]

Matter remitted to the Tribunal for fresh consideration of the claim for deduction under Section 80IB(10) in the light of relevant judicial precedents and factual/material records.

Rectification versus review - remand for fresh consideration - Validity of the Commissioner (Appeals)'s order allowing rectification after dismissal of the appeal and the Tribunal's setting aside of that rectification - HELD THAT: - The High Court did not finally rule on whether the rectification constituted impermissible review; instead, recognising that the question turns on application of precedent and factual matrix, the Court set aside the Tribunal's impugned orders and remanded the issue for the Tribunal to consider afresh whether the rectification was sustainable or otherwise, and to decide the matter on merits after hearing the parties. [Paras 12]

Tribunal to reassess the propriety of the rectification order and the Tribunal's reversal thereof, and to pass appropriate orders after fresh consideration.

Recall/restoration of withdrawn appeal - remand for fresh consideration - Prayer to recall the order recording withdrawal of the appellant's appeal and to restore the appeal after the Department succeeded in setting aside the rectification - HELD THAT: - The appellant sought recall of the Tribunal order recording withdrawal of its appeal on the ground that the rectification it obtained was subsequently set aside by the Tribunal. The High Court declined to decide the restoration/recall question itself and directed that the Tribunal should examine the applicability of the authorities relied upon by the parties and decide whether the withdrawal may be recalled or the appeal restored. Accordingly the High Court set aside the impugned orders and remanded the matter for fresh adjudication by the Tribunal with opportunity to the appellant. [Paras 12]

Tribunal directed to reconsider the plea for recall/restoration of the withdrawn appeal and pass appropriate orders on merits.

Final Conclusion: The impugned orders of the Tribunal are set aside and the matters remitted to the Tribunal for fresh consideration and decision on merits in the light of the judicial authorities relied upon by the parties; the Tribunal shall decide the issues after hearing the appellant and expeditiously pass appropriate orders.

Violation of principles of natural justice - faceless assessment and discretion to grant personal hearing - addition under Section 68 as unexplained cash credit - lack of application of mind and verbatim reproduction of draft order - remand for de novo hearing and fresh assessment

Violation of principles of natural justice - faceless assessment and discretion to grant personal hearing - Whether the assessment order passed without granting the requested opportunity of personal hearing offended the principles of natural justice and warranted quashing and remand. - HELD THAT: - The Court held that where an assessee specifically requests an opportunity of personal (online) hearing in a high-pitch assessment, ordinarily such an opportunity should be granted so the assessee can redress grievances before the authority and avoid resort to writ jurisdiction. While faceless assessment under Section 144B does not make personal hearing obligatory in every case, the Assessing Officer's discretion to deny hearing must be exercised judiciously having regard to the nature of issues. In the present case the request for hearing was not acceded to and the Court found this to be a valid ground to quash the assessment so that the assessee may be given one opportunity to present his case online and to upload further replies before a fresh order is passed. [Paras 8, 10]

Impugned assessment quashed and matter remitted with direction to respondent no.1 to fix a date for online hearing, permit the assessee to upload further reply, and thereafter pass a fresh assessment order.

Addition under Section 68 as unexplained cash credit - lack of application of mind and verbatim reproduction of draft order - Whether the addition treating loans as unexplained under Section 68 was sustainable in view of absence of inquiry and apparent lack of application of mind. - HELD THAT: - The Court observed that the assessee had disclosed the claimed sources as loans from various persons and entities, and that the assessment order does not indicate on what basis the Assessing Officer doubted all such transactions. Prima facie no inquiry was shown to have been made to verify genuineness of the loans or to confront the alleged lenders; the order appeared to be a verbatim reproduction of the draft/show cause notice rather than reflecting an independent application of mind. For these reasons the Court concluded that the assessment order was infirm and required quashing and reconsideration so that proper verification and reasoning may be recorded in any fresh order. [Paras 7, 11]

Addition under Section 68 set aside; assessment quashed and remitted for fresh consideration with directions that the fresh order should reflect application of mind and deal with the aspects raised by the assessee.

Final Conclusion: Writ petition allowed. Assessment order dated 13.4.2021 quashed and set aside; matter remitted to respondent no.1 for one online hearing, opportunity to file further reply, and pass a fresh assessment order while ensuring the fresh order is not a verbatim reproduction of the draft, reflects application of mind, and addresses the assessee's contentions.

Condonation of delay under Section 119(2)(b) - exercise of discretion by Chief Commissioner/Principal Chief Commissioner - option under Section 115BAA and prescribed manner of exercising option - re-processing of return / rectification by filing Form 10-IC electronically - abeyance of recovery pending exercise of statutory discretion

Option under Section 115BAA and prescribed manner of exercising option - re-processing of return / rectification by filing Form 10-IC electronically - Entitlement of the assessee to seek re-processing of the return for A.Y. 2020-21 by filing Form 10-IC electronically after the due date - HELD THAT: - The Court noted that Section 115BAA applies only if the option is exercised in the prescribed manner by the due date, one prescribed manner being electronic filing of Form 10-IC. The assessee filed a return claiming the benefit of Section 115BAA but omitted to file Form 10-IC electronically, resulting in a regular assessment and an intimation under Section 143(1). The Court recognised that the omission prevented departmental processing under Section 115BAA and that the statutory route for relief is provided by Section 119(2)(b). The Court did not itself direct re-processing on merits but identified the proper statutory remedy to seek such re-processing. [Paras 3, 4, 8, 9]

Assessee's remedy to obtain re-processing by permitting late filing of Form 10-IC is to apply under Section 119(2)(b); the Court did not grant direct re-processing but indicated the statutory channel for relief.

Condonation of delay under Section 119(2)(b) - exercise of discretion by Chief Commissioner/Principal Chief Commissioner - Authority and procedure for permitting late admission of the Form 10-IC and condoning delay - HELD THAT: - The Court held that the Board's powers under Section 119 include authorising income-tax authorities to admit claims after statutory periods to avoid genuine hardship. Those delegated powers lie with the Principal Chief Commissioner/Chief Commissioner, who may, by exercise of discretion under Section 119(2)(b), permit the assessee to file the Form 10-IC electronically after the due date and deal with the claim on merits. The Court directed the assessee to file an application in writing to the Chief Commissioner and required the Chief Commissioner to consider such application expeditiously and in accordance with law, keeping in mind the object of Section 119(2)(b) and the hardships faced by the assessee. [Paras 7, 10, 12]

Assessee to file an application to the Chief Commissioner under Section 119(2)(b); Chief Commissioner to consider and exercise discretion expeditiously and in accordance with law.

Abeyance of recovery pending exercise of statutory discretion - Interim handling of recovery steps initiated pursuant to the Section 143(1) intimation pending the Section 119(2)(b) application - HELD THAT: - The Court observed that if the assessing officer takes steps for recovery, the assessee may apply to the assessing officer requesting that the demand be kept in abeyance pending decision on the application filed under Section 119 with the Chief Commissioner. The Court thereby indicated a procedural avenue to prevent immediate prejudice from recovery measures while the statutory discretionary application is decided, without itself staying recovery. [Paras 11]

If recovery steps are initiated, the assessee may request the assessing officer to keep the demand in abeyance until the Chief Commissioner's decision on the Section 119(2)(b) application.

Condonation of delay under Section 119(2)(b) - exercise of discretion by Chief Commissioner/Principal Chief Commissioner - Remand for fresh consideration by Chief Commissioner of the assessee's written application to permit late filing of Form 10-IC - HELD THAT: - The Court disposed of the writ petition by reserving liberty for the assessee to file a written application to the Chief Commissioner under Section 119(2)(b) seeking permission to file Form 10-IC electronically after condoning the delay. The Chief Commissioner was directed to consider the application expeditiously and in accordance with law, taking into account the object of Section 119(2)(b) and the hardships faced by the assessee. The matter of permitting late filing and any consequent re-processing was thus remitted to the statutory authority for fresh consideration on merits. [Paras 12]

Writ disposed reserving liberty to file application under Section 119(2)(b); Chief Commissioner to expeditiously decide the application on merits, thereby remitting the question of late filing and re-processing to the statutory authority.

Final Conclusion: Writ petition disposed of: the assessee is directed to file a written application to the Principal Chief Commissioner/Chief Commissioner under Section 119(2)(b) seeking permission to file Form 10-IC electronically after condonation of delay; the Chief Commissioner shall consider the application expeditiously and in accordance with law and may exercise discretion to permit filing and re-process the return; meanwhile, the assessee may seek abeyance of any recovery from the assessing officer pending that decision.

Validity of reopening notice under section 148 - Recorded reasons for reassessment - Reopening invalid where recorded reasons are incorrect - Evidence in remand report affecting recorded reasons - Assessing Officer's inability to alter recorded reasons - Genuineness of share application money under section 68

Validity of reopening notice under section 148 - Recorded reasons for reassessment - Reopening invalid where recorded reasons are incorrect - Evidence in remand report affecting recorded reasons - Reopening of assessment under section 148 was invalid as the recorded reasons relied upon were factually incorrect and the Assessing Officer's own remand report accepted the contrary position. - HELD THAT: - The Assessing Officer issued the notice under section 148 on the recorded reason that the assessee had received share application monies from parties belonging to Shri Shirish C. Shah who provide accommodation entries. On remand the Assessing Officer submitted a report accepting that the named share applicants do not appear in the list of companies pertaining to Shri Shirish C. Shah. The Commissioner (Appeals) held that the validity of a notice under section 148 must be tested against the recorded reasons and that the Assessing Officer cannot, by subsequent modification, rely on incorrect recorded reasons to sustain reassessment. The First Appellate Authority's conclusion-that the material alleging connection to the said group was incorrect and thereby vitiated the reopening-was upheld. The Tribunal found no reason to interfere with the CIT(A)'s factual finding and legal conclusion that the reassessment was initiated on incorrect reasons, and therefore the reopening was bad in law. [Paras 6, 9, 10]

The Tribunal upheld the CIT(A)'s annulment of the reopening; the Revenue's appeal was dismissed.

Final Conclusion: The assessment reopening under section 148 was quashed because the recorded reasons were factually incorrect as conceded in the remand report; the CIT(A)'s order annulling the reassessment was sustained and the Revenue's appeal dismissed.

Depreciation when an asset is put to use - allowability of interest and administrative expenses versus capitalization of project expenditure - principle of consistency in successive assessments

Depreciation when an asset is put to use - allowability of interest and administrative expenses versus capitalization of project expenditure - principle of consistency in successive assessments - Whether depreciation, interest and administrative expenses claimed in respect of Block C for assessment year 2014 15 were rightly allowed by the CIT(A) on the ground that Block C had been treated as 'put to use' in the preceding assessment year and therefore not liable to be disallowed or capitalized. - HELD THAT: - The Tribunal noted that in assessment year 2013 14 the Assessing Officer had accepted that Block C was complete and had allowed depreciation, interest and administrative expenses attributable to Block C while directing capitalization of similar expenses relatable to the balance project. In the assessment for 2014 15 the AO disallowed depreciation and sought to capitalize interest and administrative expenses on the ground that Block C was not actually put to use. The CIT(A) reinstated the amounts in favour of the assessee on the basis that the Department had already accepted in the immediately preceding year that Block C was ready for use. The Tribunal held that, absent any change in material facts or contrary evidence, the Assessing Officer could not depart from the stance taken in the immediately preceding assessment year; the principle of consistency precluded retraction of the earlier acceptance that Block C was 'put to use'. Applying this determinative reasoning, the Tribunal found no infirmity in the CIT(A)'s order deleting the disallowances and upholding allowance of depreciation, interest and administrative expenses attributable to Block C. [Paras 5, 6]

CIT(A)'s order deleting the disallowance of depreciation, interest and administrative expenses in respect of Block C for AY 2014 15 is upheld.

Final Conclusion: Revenue's appeal is dismissed and the order of the Commissioner of Income Tax (Appeals) deleting the disallowances in respect of Block C for AY 2014 15 is sustained.

Allowability of provisions for IBNR and IBNER as present obligations based on reliable estimation - ascertained liability versus contingent liability - allowance under section 37(1) of the Income tax Act - tax deduction at source under section 194H and disallowance under section 40(a)(ia) - principal to principal transactions versus agency/commission characterisation - capital expenditure v. revenue expenditure for IT/EDP items - remand to Assessing Officer for production and examination of agreements

Allowability of provisions for IBNR and IBNER as present obligations based on reliable estimation - ascertained liability versus contingent liability - allowance under section 37(1) of the Income tax Act - Provisions made for IBNR and IBNER were allowable as business expenditure under section 37(1) as they constituted ascertained liabilities based on reliable actuarial estimation. - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the provisions were made in accordance with IRDA and Institute of Actuaries guidelines and certified by an actuary, thereby amounting to a present obligation capable of reliable estimation. The Assessing Officer's characterisation of the provisions as mere anticipatory or contingent liabilities was rejected on the basis that the provisioning methodology was scientific, actuarially certified, and that historical data showed actual settlements were equal to or higher than provisions, indicating provisions were not excessive. Coordinate bench precedents allowing similar provisioning were applied in confirming allowance under section 37(1). [Paras 9, 10, 11, 12]

The disallowance of the provisioning for IBNR/IBNER was deleted and the deduction under section 37(1) was sustained.

Tax deduction at source under section 194H and disallowance under section 40(a)(ia) - principal to principal transactions versus agency/commission characterisation - remand to Assessing Officer for production and examination of agreements - The matter relating to co insurance fees and applicability of section 194H/40(a)(ia) was set aside to the Assessing Officer for fresh examination on production of the relevant agreements and arrangements. - HELD THAT: - Although coordinate bench decisions were cited favouring the assessee, the Tribunal found the earlier orders did not disclose the underlying agreements or factual basis for treating the transactions as principal to principal rather than commissionable services under section 194H. In the absence of the agreements and factual material before the Tribunal, it was not in a position to determine whether the payments fell within section 194H and hence attracted disallowance under section 40(a)(ia). In the interest of justice the issue was remanded to the Assessing Officer with directions to examine the agreements and decide the applicability of section 194H in light of the factual material and submissions. [Paras 16, 17]

Ground relating to co insurance fees is set aside and remitted to the Assessing Officer for determination after production and examination of relevant agreements.

Capital expenditure v. revenue expenditure for IT/EDP items - IT equipment purchases treated as revenue expense - Expenditure on pen drives, laptop adaptors and similar IT items was held to be revenue expenditure and the disallowance by the Assessing Officer was deleted. - HELD THAT: - The Tribunal agreed with the CIT(A) and coordinate bench and High Court decisions that purchases of items like hard disks, batteries, pen drives and adapters do not create enduring benefit amounting to capital assets and qualify as revenue expenditure. Reliance was placed on earlier coordinate bench rulings and higher court precedent dealing with similar items to conclude the expenditure should be allowed as revenue in nature, not capital. [Paras 19, 20]

The disallowance of the IT/EDP expenditure was deleted and the expenditure treated as revenue expense.

Final Conclusion: The Revenue's appeal is partly allowed. The Assessing Officer's disallowance of IBNR/IBNER provisioning and the disallowance of IT/EDP expenditures are set aside (grounds dismissed), while the issue regarding co insurance fees is remitted to the Assessing Officer for fresh decision after production and examination of the relevant agreements to determine applicability of section 194H and consequent section 40(a)(ia) consequences.

Protective addition - unaccounted investment - proceedings under Section 153C of the Income tax Act - finality of appellate order - release of seized goods upon establishing ownership and accounting

Protective addition - unaccounted investment - proceedings under Section 153C of the Income tax Act - finality of appellate order - release of seized goods upon establishing ownership and accounting - Seized gold jewellery weighing 524.500 grams to be released to the assessee on the basis of the appellate finding that the purchases were duly recorded and not unaccounted. - HELD THAT: - The CIT(A) examined the facts, documents and statements and concluded that the assessee had purchased the gold from the consignor vide bill dated 26.10.2017, had accounted for the purchases in his books and had effected payment through banking channels; therefore the addition treating the jewellery as unaccounted investment was not sustainable and the protective addition was deleted. The Revenue did not challenge the CIT(A)'s findings before the appellate tribunal, rendering those findings final. Having regard to the final appellate finding that the purchase was recorded and not an unexplained investment, the court held that the Revenue could not withhold the seized jewellery from the recorded purchaser and ordered its release in favour of the assessee. [Paras 10, 11, 12]

Writ allowed; respondent directed to accord approval for release of the seized gold jewellery weighing 524.500 grams to the writ applicant forthwith.

Final Conclusion: The writ petition is allowed and the respondent is directed to release the seized gold jewellery of 524.500 grams to the assessee, the CIT(A)'s findings being final and dispositive of the claim to release.

Interpretation of seized material and seized documents to be read as a whole - Presumption and suspicion cannot substitute legal proof - Additions based on dumb or non-speaking documents cannot be sustained without corroboration - Deeming nature of section 69A and burden on Revenue to prove unexplained cash as income - Family settlement and share transactions - characterization of consideration and mode of payment

Interpretation of seized material and seized documents to be read as a whole - Additions based on dumb or non-speaking documents cannot be sustained without corroboration - Presumption and suspicion cannot substitute legal proof - Family settlement and share transactions - characterization of consideration and mode of payment - Deletion of addition of Rs. 17,26,55,984/- made by AO on account of alleged cash payment shown by '#' in seized papers - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the seized loose sheets contained inconsistent figures, rough workings and different computations prepared by the counterparty's accountant, and therefore were not conclusive or speaking documents establishing cash receipts in the assessee's hands. The AO's decoding of the symbol '#' as cash was founded on presumption and was inconsistent in application across entries; no independent corroborative evidence (unchallenged undisclosed asset, cash trail or a confessional admission by parties) was produced to link the seized notings to actual unrecorded receipts of the assessee. The CIT(A)'s reliance on contemporaneous explanations given during search (including statements showing the 17 crore item as an internal/notional adjustment relating to sisters' claims and reconciliations) and on established judicial principles that seized papers must be read as a whole led to deletion. On these factual and legal foundations the Tribunal found no reason to interfere with the appellate finding that additions based on rough, non-speaking seized papers and mere suspicion could not be sustained. [Paras 15]

Addition of Rs. 17,26,55,984/- deleted; Revenue's ground in respect of this addition dismissed.

Deeming nature of section 69A and burden on Revenue to prove unexplained cash as income - Presumption and suspicion cannot substitute legal proof - Deletion of addition of Rs. 3,32,415/- treated as unexplained cash under section 69A - HELD THAT: - The Tribunal agreed with the CIT(A)'s assessment of the surrounding circumstances, including the small quantum relative to the assessee's declared and assessed income and the accepted explanation for the larger seized sum (scrap deposit monies of the company). Having regard to the assessee's and his wife's sources and the absence of any material establishing an undisclosed source, the CIT(A) treated the residual amount as personal savings rather than unexplained income. The Tribunal found no infirmity in that conclusion and saw no reason to disturb the deletion under the deeming provision where the Revenue had not discharged its evidentiary burden. [Paras 16]

Addition of Rs. 3,32,415/- deleted; Revenue's ground in respect of this addition dismissed.

Final Conclusion: The appeal filed by the Revenue is dismissed. The additions of Rs. 17,26,55,984/- (alleged cash in family settlement) and Rs. 3,32,415/- (seized cash under section 69A) as made by the Assessing Officer were deleted by the CIT(A) and those deletions are upheld.

Condonation of delay under section 249(2) of the Act - Insufficient cause for condonation - Doctrine that law assists the vigilant - Firm's duty to verify filing of appeals

Condonation of delay under section 249(2) of the Act - Insufficient cause for condonation - Doctrine that law assists the vigilant - Firm's duty to verify filing of appeals - Whether the delay in filing the appeals was liable to be condoned - HELD THAT: - There was an undisputed and substantial delay of 859 days, 669 days and 755 days in filing the appeals. The assessee's stated cause - illness of its accountant who allegedly suffered a heart attack and underwent bypass surgery, and an asserted belief that appeals had been filed - was not supported by contemporaneous evidence before the CIT(A) or before the Tribunal. The Tribunal applied the principle that the law assists the vigilant and observed that the assessee, being a firm with employees, had the duty to verify whether appeals were filed and could not shelter behind the alleged infirmity of its accountant. Given the absence of sufficient and reasonable cause and the failure to place material to substantiate the excuse, the Tribunal held that the CIT(A) was justified in dismissing the appeals in limine for non-citation of cause for delay. The Tribunal therefore declined to consider the merits of the reassessment, since the appeals were dismissed on the threshold for want of condonation.

Applications for condonation of delay were rightly refused and the appeals dismissed for want of sufficient cause.

Final Conclusion: The Tribunal upheld the CIT(A)'s orders dismissing the appeals in limine for failure to demonstrate sufficient cause for the prolonged delay; the merits of the reassessment were not adjudicated.

Authority of the Directorate of Revenue Intelligence to exercise functions under the Customs Act - entrustment under Section 6 of the Customs Act - proper officer - invalidity of notification issued under Section 2(34) of the Customs Act to confer functions - search, seizure and arrest under Chapter XIII of the Customs Act

Proper officer - entrustment under Section 6 of the Customs Act - invalidity of notification issued under Section 2(34) of the Customs Act to confer functions - search, seizure and arrest under Chapter XIII of the Customs Act - Validity of search, seizure, subsequent notices and summoning proceedings initiated by officers of the Directorate of Revenue Intelligence (DRI) under the Customs Act in the absence of an entrustment under Section 6. - HELD THAT: - The Court examined whether officers of the DRI could lawfully initiate proceedings under Chapter XIII (searches, seizure and arrest) and issue consequential notices under the Customs Act without a specific entrustment by the Central Government under Section 6. Section 2(34) defines a "proper officer" as an officer of customs assigned functions by the Board or principal/commissioner of customs; Section 6 is the sole provision empowering the Central Government to entrust functions of the Board or customs officers to other Central/State Government officers or local authorities by notification in the Official Gazette. The only material on record relied upon by respondents was a notification dated 2.5.2012 issued by the Board under Section 2(34). The Court held that such a notification does not substitute for an entrustment under Section 6 and that, on the materials produced, there was no notification by the Central Government published in the Official Gazette entrusting DRI officers with functions of customs officers. The Court accepted and applied the principle in Canon India Pvt. Ltd. and subsequent authoritative orders, which hold that, absent an entrustment under Section 6, DRI officers lack jurisdiction to exercise functions reserved to customs officers and that proceedings initiated by them on that basis are without authority of law. Applying that principle to the facts, the Court found the seizure, Panchnama and the notices/summons issued by the DRI to be unsustainable. [Paras 19, 20, 21, 28, 29]

The seizure, Panchnama and all notices/summons issued by the DRI were quashed as being without authority of law; the writ petition was allowed and the proceedings set aside.

Final Conclusion: The High Court allowed the writ petition, holding that in the absence of a Central Government entrustment under Section 6 the DRI had no authority to initiate the challenged Customs Act proceedings; the seizure, Panchnama and subsequent notices/summons issued by the DRI were quashed and set aside.

Violation of principles of natural justice - ex parte adjudication - availability of alternative remedy and exceptions - interpretation of court orders by administrative authority - mandate to pass a speaking order after hearing - release of goods subject to compliance with court directions - preservation of bank guarantee pending fresh adjudication

Availability of alternative remedy and exceptions - violation of principles of natural justice - Whether the writ court should decline jurisdiction because an alternative statutory remedy exists, or whether exceptional circumstances justify entertaining the petition. - HELD THAT: - The Court examined established exceptions to the rule of denial of writ jurisdiction where an alternative remedy exists and concluded that those exceptions apply where an order is passed in violation of natural justice, without application of mind, or in excess of jurisdiction. The impugned order was an ex parte adjudication and was held to have been passed in violation of principles of natural justice and after a perverse interpretation of the earlier High Court direction. In view of these exceptional circumstances the appellant was not required to pursue the alternative remedy and the writ jurisdiction was properly exercised to set aside the impugned order (paras 5, 9, 11-12). [Paras 5, 9, 11, 12]

Writ jurisdiction was rightly exercised; the appellant need not be relegated to the alternative remedy because the impugned order violated principles of natural justice.

Interpretation of court orders by administrative authority - ex parte adjudication - Whether the fifth respondent legitimately interpreted and acted upon the High Court's earlier directions when passing the order dated 21.01.2022. - HELD THAT: - The Court found that the fifth respondent misconstrued and impermissibly mixed the twin limbs of the High Court's earlier order (remand for fresh consideration after hearing; and interim release subject to payment/bank guarantee). The authority's interpretation of the phrase 'in the meantime' was held to be perverse and beyond its jurisdiction because an administrative officer has no power to interpret and override a High Court order; clarification should have been sought from the Court. The hurried ex parte action suggested an intention to frustrate the prior directions (paras 6-7). [Paras 6, 7]

The fifth respondent's interpretation was unlawful and perverse; the impugned order was set aside on this ground.

Release of goods subject to compliance with court directions - mandate to pass a speaking order after hearing - What relief should follow and what directions should be given to the respondents after quashing the impugned order. - HELD THAT: - The Court upheld the earlier direction for release of goods on compliance with conditions and noted that the appellant had complied by depositing 50% duty in cash and furnishing a bank guarantee for the balance; consequently the goods ought to have been released within the prescribed time. Having quashed the impugned order, the Court directed release of the goods within 48 hours of receipt of the order copy. The matter was remitted to the concerned officer to issue a notice of personal hearing granting seven days for appearance, with a clear direction that the appellant shall not seek adjournment and the officer shall thereafter pass a speaking order on merits in accordance with law. The bank guarantee is to be kept alive until final adjudication (paras 8, 13-15). [Paras 8, 13, 14, 15]

Impugned order quashed; goods to be released within 48 hours; officer to grant seven days' hearing and thereafter pass a speaking order; bank guarantee to be kept alive pending adjudication.

Final Conclusion: The appeal is allowed; the order dated 21.01.2022 is quashed for being ex parte, violative of natural justice and founded on a perverse interpretation of the High Court's earlier directions; the goods shall be released within 48 hours, the authority shall grant a seven day personal hearing and pass a speaking order thereafter, and the bank guarantee shall be maintained alive until final adjudication.

Change of eligibility criteria mid-process - vested right to be considered under earlier regulations - administrative communication not binding on candidates without notice - prospective application of new regulations - interplay between CBLR, 2013 and CBLR, 2018 - cut-off marks for examination - reasonable expectation of candidates

Cut-off marks for examination - administrative communication not binding on candidates without notice - change of eligibility criteria mid-process - Whether the communication prescribing 60% qualifying marks could be applied to petitioners called for oral examination under earlier process - HELD THAT: - The Court examined the chronology: petitioners were admitted to the selection process initiated under CBLR, 2013 and received call letters dated April 30, 2019 for oral examination; the communication prescribing 60% qualifying marks was issued on May 03, 2019 to NACIN and was not communicated to the petitioners prior to their appearing for the oral examination. The Court found that neither CBLR, 2013 nor CBLR, 2018 prescribes a numeric cut-off in their text, and the 60% requirement originated in an internal communication which was not served on or put to notice of the candidates called under the earlier process. Changing the qualifying criterion after call letters were issued and without notifying affected candidates would alter the test mid-process and would be impermissible. The Court therefore held that the 60% benchmark could not be applied to the petitioners who had a reasonable expectation to be assessed on the parameters applicable when their candidature commenced under CBLR, 2013 (paras 14-19). [Paras 14, 16, 17, 18, 19]

The 60% qualifying marks communicated on May 03, 2019 could not be applied to the petitioners who were called under the earlier process without prior notice; the change of criterion mid-process is impermissible.

Interplay between CBLR, 2013 and CBLR, 2018 - vested right to be considered under earlier regulations - prospective application of new regulations - reasonable expectation of candidates - Whether petitioners who began their selection under CBLR, 2013 were entitled to be considered for licence on the basis of CBLR, 2013 parameters and thus be granted licence - HELD THAT: - The Court noted that the selection process for the petitioners commenced under CBLR, 2013 and that under those regulations a candidate was entitled to two chances at the oral examination within two years. The respondents conceded that two chances existed under CBLR, 2013 and that the petitioners availed their second attempt. Given that the change in assessment parameter (to 60%) was not notified to petitioners prior to their examination and that the selection process for them had begun under CBLR, 2013, the petitioners could not be deprived of consideration on the same parameters. The Court rejected the respondents' contention that CBLR, 2018 (and its amendments) could be applied so as to deny the petitioners the benefit of the earlier criteria in their ongoing selection process (paras 6, 10-12, 18). Applying these findings, the Court concluded that the petitioners were entitled to licences as Customs Brokers and mandated issuance of licences accordingly (paras 18, 22). [Paras 10, 11, 12, 18, 22]

Petitioners, whose selection process began under CBLR, 2013, were entitled to be considered on the parameters of CBLR, 2013 and to the benefit of the second oral attempt; respondents were directed to issue licences to the petitioners.

Final Conclusion: Writ petitions allowed. The Court held that the post hoc prescription of 60% qualifying marks could not be applied to candidates whose selection process began under CBLR, 2013 and who were not notified of the changed criterion before appearing; the petitioners were entitled to be assessed on the earlier parameters and the respondents were directed to issue Customs Broker licences to them.

Denial of exemption under Notification No.21/2012-Cus - additional duty of customs - mis-declaration in bill of entry - confiscation of imported goods - redemption fine in lieu of confiscation - provisional release on execution of bond - penalty for mis-declaration

Denial of exemption under Notification No.21/2012-Cus - additional duty of customs - mis-declaration in bill of entry - Whether the imported sugar attracted additional duty of customs and whether exemption under Notification No.21/2012-Cus was available to the assessees - HELD THAT: - The Tribunal records that there is no dispute the imported sugar attracted additional duty of customs and that exemption under Notification No.21/2012-Cus dated 17.03.2012 was not available during the relevant period. The assessees' case that the notification claim was a revenue-neutral transaction, that they were eligible for Cenvat credit or refund, or that some bills had duty paid, does not alter the admitted legal position that the exemption was not available. The Tribunal therefore affirms the legal premise that the additional duty was leviable where exemption was wrongly claimed, while noting factual distinctions as to payment in some bills. [Paras 4]

The Tribunal accepts that the sugar imports attracted additional duty and that exemption under Notification No.21/2012-Cus was not available.

Confiscation of imported goods - redemption fine in lieu of confiscation - provisional release on execution of bond - penalty for mis-declaration - Whether confiscation, redemption fine and consequent penalties imposed by the adjudicating authority can be confirmed - HELD THAT: - The Tribunal found the record unclear on whether the goods were seized and whether they were provisionally released on execution of a specific bond for provisional release. The adjudicating authority's confiscation and imposition of redemption fine proceeded on the premise that goods were provisionally assessed and cleared, but the proceedings do not clearly disclose seizure or provisional-release-on-bond. Given established authority that confiscation and redemption fine cannot be sustained in the absence of seizure or a specific provisional-release bond, and because many bills show payment of additional duty, the Tribunal holds that the question of confiscation, redemption fine and consequential penalties requires fresh consideration. The Tribunal therefore declines to confirm those orders and directs reconsideration by the adjudicating authority. [Paras 4, 5]

Confiscation, redemption fine and related penalties are not confirmed and are remanded for fresh consideration by the adjudicating authority.

Final Conclusion: Impugned Order in Original is set aside to the extent indicated and the matters in both the assessees' and revenue's appeals are remanded to the adjudicating authority for fresh decision on confiscation, redemption fine and consequential penalties after verifying seizure/provisional release and related facts; other aspects recorded by the Tribunal (that additional duty was leviable and exemption under Notification No.21/2012 Cus was not available) are noted.

Liability of Customs House Agent/Customs Broker for errors in shipping bill - penalty under the Customs Act for contravention of accuracy and completeness obligations in shipping bill - scope of obligation in Section 50(3)(a) relating to accuracy and completeness of information in a shipping bill (applicable to the exporter)

Liability of Customs House Agent/Customs Broker for errors in shipping bill - scope of obligation in Section 50(3)(a) relating to accuracy and completeness of information in a shipping bill (applicable to the exporter) - penalty under the Customs Act for contravention of accuracy and completeness obligations in shipping bill - Whether a Customs Broker (Customs House Agent) can be held liable and penalised for furnishing wrong rotation numbers/EGM in shipping bills under Section 50(3)(a) and for imposition of penalty under Section 132 read with Section 117 of the Customs Act, 1962. - HELD THAT: - The Tribunal examined the language of Section 50(3)(a) and observed that the obligation to ensure the accuracy and completeness of information in a shipping bill is cast on the exporter who presents the shipping bill or bill of export under the section. The determinative construction adopted is that the statutory duty in Section 50(3)(a) is directed to the exporter as the person presenting the shipping bill, and does not extend to fasten the same statutory penal liability on a Customs House Agent or Customs Broker merely because incorrect rotation numbers/EGM were quoted at the time of registration for Customs examination. Applying that construction to the facts where the alleged wrong quoting related to shipping bills filed on behalf of exporters, the Tribunal concluded that the Customs Broker could not be held liable for the contravention under Section 50(3)(a) nor be validly subjected to penalty under Section 132 read with Section 117 on that basis.

The penalty imposed on the Customs Broker for the alleged contravention of Section 50(3)(a) is unsustainable and is set aside.

Final Conclusion: The appeals are allowed and the impugned penalty orders against the Customs Broker are set aside on the ground that Section 50(3)(a) places the duty of accuracy and completeness of the shipping bill on the exporter, and the Customs Broker cannot be penalised for the alleged misquoting of rotation numbers/EGM.

Abatement of suit on plaintiff's insolvency under Order 22 Rule 8 - liquidator's duty to continue litigation and what constitutes a declination to continue - impleading of the liquidator as a procedural formality - notice to Official Assignee/liquidator before making an order under Order 22 Rule 8 - power to set aside abatement or dismissal where liquidator or company applies - receiver's sale of suit goods subject to court directions and reserve price exclusive of taxes

Abatement of suit on plaintiff's insolvency under Order 22 Rule 8 - liquidator's duty to continue litigation and what constitutes a declination to continue - notice to Official Assignee/liquidator before making an order under Order 22 Rule 8 - Whether the suit abated upon the plaintiff company going into liquidation and whether the liquidator's conduct amounted to a declination to continue the suit under Order 22 Rule 8. - HELD THAT: - Order 22 Rule 8 preserves suits brought by a plaintiff which is subsequently insolvent unless the assignee/receiver (here, the liquidator) declines to continue the suit or (in special cases) fails to give security as directed. The Court found that mere delay or failure to move promptly for formal impleadment does not constitute a positive refusal to continue litigation. The liquidator actively participated in meetings with the Special Officer and appeared before the Single and Division Benches in relation to the movable suit property, thereby evidencing continued prosecution and protection of the plaintiff's interests. There was no court order directing security for costs nor any formal adjudication of declination after notice to the liquidator; and precedent requires giving notice to the Official Assignee/liquidator and hearing them before making an order under Order 22 Rule 8. Applying these principles to the material facts, the Court concluded that the liquidator had not declined to continue the suit and therefore the suit did not abate. [Paras 5, 6, 7, 8, 9]

G.A. No. 7 of 2021 seeking dismissal of the suit on the ground of abatement is dismissed; the suit has not abated as the liquidator did not decline to continue it.

Impleading of the liquidator as a procedural formality - power to set aside abatement or dismissal where liquidator or company applies - receiver's sale of suit goods subject to court directions and reserve price exclusive of taxes - Whether the plaint should be amended to bring the liquidator on record and the consequences for the sale process of the suit goods. - HELD THAT: - Although impleading the liquidator is a technical requirement which the liquidator had delayed in seeking, the Court treated impleadment as necessary and permissible. The Court allowed G.A. No. 8 of 2021 to amend the plaint to bring the liquidator on record. Having found that the suit subsists and the liquidator continues to act in the litigation, the Court directed the Receiver to proceed with the sale of the ten thousand metric tons of Met Coke in accordance with the Supreme Court's directions (including valuation and notices specifying reserve price exclusive of taxes) contained in the December 14, 2017 order. [Paras 2, 10]

G.A. No. 8 of 2021 is allowed; the plaint is to be amended to bring the liquidator on record and the Receiver is directed to proceed with the sale as per the Supreme Court's directions.

Final Conclusion: The application for dismissal of the suit on grounds of abatement is dismissed; the application to amend the plaint to implead the liquidator is allowed; and the Receiver is directed to proceed with the sale of the specified goods in accordance with the Supreme Court's earlier directions.

Admission under Section 7 of the I&B Code based on proof of financial debt and default - Effect of cancellation of One Time Settlement on enforceability of original debt - Substituted service and setting the corporate debtor ex parte - Application of Innoventive principle regarding satisfaction of adjudicating authority on default

Admission under Section 7 of the I&B Code based on proof of financial debt and default - Application of Innoventive principle regarding satisfaction of adjudicating authority on default - Effect of cancellation of One Time Settlement on enforceability of original debt - Whether the Adjudicating Authority rightly admitted the Section 7 petition by the Financial Creditor against the Corporate Debtor. - HELD THAT: - The Tribunal accepted the Adjudicating Authority's finding that the audited financial statements and notes (including the admission of an OTS) together with the OTS documents and the Joint Compromise Memo established that a financial debt existed and that a default had occurred. The Adjudicating Authority applied the principle in INNOVENTIVE INDUSTRIES LTD. that once it is satisfied a default has occurred the application must be admitted (subject to formal incompleteness). The record also shows the OTS was annulled for non-payment and the DRT proceedings recorded the compromise terms permitting the creditor to seek the original claim on default. On this factual and legal basis the Tribunal held there was no legal infirmity in admission under Section 7. [Paras 5, 6, 7, 8]

Adjudicating Authority's admission of the Section 7 application was correct and free from legal infirmity; the invitation to set aside admission on merits is rejected.

Substituted service and setting the corporate debtor ex parte - Whether the appellant was prejudiced by insufficient notice and whether the ex parte order should be set aside for want of service. - HELD THAT: - The appellant contended it was not served with the petition and paper book and relied on an asserted change of registered address notified on 22.12.2021. The Tribunal noted that substituted service by publication had been effected and that the Adjudicating Authority had set the Corporate Debtor ex parte after noting service steps on record. Given the admitted entries in the audited accounts and the DRT/OTS record, the Tribunal was not persuaded that lack of notice vitiated the admission. The Tribunal therefore declined to reopen or set aside the order admitting the petition.

Complaint of insufficient service did not persuade the Tribunal; the ex parte order and subsequent admission were not set aside.

Final Conclusion: The Appeal is dismissed; the Impugned Order admitting the Section 7 petition is affirmed and the Adjudicating Authority's appointment of an Interim Resolution Professional and declaration of moratorium stand confirmed. No costs.

Provisional attachment under Section 5(1) of the PMLA - satisfaction recorded by the authorised officer - adjudication proceedings under Section 8 of the PMLA - interim attachment to secure tainted property pending adjudication - quashing of provisional attachment for failure to record reasons

Provisional attachment under Section 5(1) of the PMLA - adjudication proceedings under Section 8 of the PMLA - interim attachment to secure tainted property pending adjudication - Effect of quashing the provisional attachment order on the continuance of adjudication proceedings. - HELD THAT: - The Court held that quashing of a provisional attachment order under Section 5(1) on the ground that it did not record proper satisfaction does not automatically nullify or terminate adjudication proceedings initiated under the Act. The Court distinguished the function of the authorised officer in passing a provisional attachment-which requires satisfaction on two aspects, namely that the property is proceeds of crime and that the person in possession is likely to conceal or transfer it for interim safeguarding-from the separate adjudicatory process under Section 8 which may culminate in confiscation or release. There is no provision in the statute cited that prevents the authorised officer from passing a provisional attachment after a complaint has been filed before the Adjudicating Authority; the power to attach provisionally remains exercisable upon satisfaction of the statutory conditions. Accordingly, success in a challenge to the sufficiency of reasons in a provisional attachment order does not per se halt or dispose of the pending adjudication, which must proceed on its merits in accordance with law.

Quashing of the provisional attachment does not preclude continuation of adjudication proceedings; adjudication must proceed on its own merits.

Satisfaction recorded by the authorised officer - quashing of provisional attachment for failure to record reasons - Validity of the High Court's direction to remit the matter to the appropriate authority to pass a fresh order after finding the original order merely reproduced statutory provisions. - HELD THAT: - The Court found the High Court's course of remanding the matter to the appropriate authority to record fresh reasons was unexceptionable where the provisional attachment order was set aside on the limited ground that it failed to disclose a proper, tangible satisfaction and merely reproduced statutory language. The remand was limited to enabling the authorised officer to consider whether, upon proper recording of satisfaction as required by Section 5(1), a fresh provisional attachment should be made. The Supreme Court declined to interfere with that remand, while clarifying that such remand and any fresh provisional attachment would not prevent the petitioner from availing other remedies or from challenging any fresh order.

High Court's direction to remit the matter for passing a fresh provisional attachment order (if so advised) is upheld; remand is permissible where original order lacked recorded satisfaction.

Final Conclusion: Special leave petition dismissed; High Court's remand to the appropriate authority to pass a fresh provisional attachment order, if justified after recording proper satisfaction, is sustained, and adjudication proceedings may continue; petitioner remains free to challenge any fresh order by appropriate remedy.

Mining service - Site formation and clearance, excavation and earthmoving and demolition service - Classification of taxable services under Section 65A - Most specific description principle in classification - Composite service and essential character - Supply of tangible goods for use (hire of machinery)

Mining service - Site formation and clearance, excavation and earthmoving and demolition service - Classification of taxable services under Section 65A - Most specific description principle in classification - Composite service and essential character - Whether the appellant's activity of overburden removal under the contracts is classifiable as Mining service and not as Site formation and clearance, Excavation and Earthmoving and Demolition service for the period 16-6-2005 to 31-5-2007 - HELD THAT: - The Tribunal examined the contract clauses and borehole/litholog details which show that overburden/interburden removal was carried out exclusively to expose lignite seams and as an integral part of mining operations. The contract required execution in conformity with mining statutes, contemplated excavation of incidental mineral seams, and treated removal of overburden as part of the mining process. Applying the classification rule in Section 65A, where a service is prima facie classifiable under more than one sub-clause, the sub-clause giving the most specific description is to be preferred; composite services are to be classified according to the service giving them their essential character. On these principles, and in view of the identical conclusion reached by a Division Bench of the Tribunal in the appellant's earlier case, the activity's essential character is mining. The Tribunal also noted that the appellant began paying service tax under the Mining service category w.e.f. 01.06.2007 and that the revenue accepted such classification thereafter, reinforcing the finding that the activity is predominantly mining. The alternate contention that the contracts only involved hire of machinery (supply of tangible goods for use) was not addressed, as the Tribunal decided the primary classification question in favour of Mining service. [Paras 4, 5]

The service provided by the appellant is a Mining service and not a Site formation and clearance, Excavation and Earthmoving and Demolition service; the impugned order demanding service tax for the period 16-6-2005 to 31-5-2007 is unsustainable.

Final Conclusion: Appeal allowed; impugned order set aside and consequential relief granted on the finding that the overburden removal service was a Mining service and not liable to service tax for the relevant period.

Payment under Section 73(3) prevents initiation of proceedings and penalty for the amount so paid - adjustment of excess payment under Rule 6(4A) / Rule 6(1A) of the Service Tax Rules - receipt-based valuation versus accrual-based (agreement) valuation for service tax - procedural non-compliance (delay in intimation) not to defeat substantive adjustment - penalty under Section 78 not leviable where Section 73(3) is attracted

Payment under Section 73(3) prevents initiation of proceedings and penalty for the amount so paid - penalty under Section 78 not leviable where Section 73(3) is attracted - Short payment of service tax for October 2011 to March 2012 having been self-paid by the appellant with interest prior to service of show cause notice, whether proceedings and penalty could be sustained against the appellant. - HELD THAT: - The Tribunal examined Section 73(3) as quoted in the order and found that the appellant made good the short payment for the period October 2011 to March 2012 on 03.05.2012 and also deposited the interest due. Section 73(3) permits a person who has short-paid tax to pay the amount on his own ascertainment and inform the officer; on receiving such information the officer shall not serve a notice in respect of the amount so paid, and Explanation 2 declares that no penalty shall be imposed in respect of payment under this sub-section. Applying these provisions, the Tribunal concluded that once the appellant had made the payment and interest before issuance of any show cause notice, the benefit of Section 73(3) ought to have been available and consequential proceedings and penalty under Section 78 could not be sustained. [Paras 4]

The short-paid amount (with interest) having been paid prior to notice, proceedings and penalty in respect of that amount could not be sustained; benefit of Section 73(3) granted to appellant.

Adjustment of excess payment under Rule 6(4A) / Rule 6(1A) of the Service Tax Rules - receipt-based valuation versus accrual-based (agreement) valuation for service tax - procedural non-compliance not to defeat substantive adjustment - Whether the appellant was entitled to adjust excess service tax paid during October 2010 to September 2011 against liability for October 2011 to March 2012 notwithstanding procedural lapses and the change from accrual (agreement) basis to receipt basis. - HELD THAT: - The Tribunal reviewed the ST-3 returns and annexures and accepted that the appellant initially discharged tax on agreement (accrual) values but subsequently filed returns on the receipt basis and sought adjustment of excess tax paid for the earlier period against later liabilities under Rule 6. The adjudicating authorities criticised the documentary coherence and compliance with the 15-day intimation requirement under Rule 6(4A). The Tribunal held that the change from accrual to receipt basis and the adjustment claim did not fall within the exclusion provisos (interpretation, taxability, valuation or exemption) that would bar adjustment. Further, precedents were applied to the effect that a procedural lapse-such as belated intimation or imperfect compliance-should not defeat the substantive entitlement to adjust an excess or advance payment, since the purpose of the rule is to prevent unjust enrichment of the revenue. On the facts the Tribunal found the appellant entitled to the adjustment despite the procedural shortcomings and allowed the claim on merits. [Paras 4]

Adjustment of the excess service tax paid in October 2010 to September 2011 against the liability of October 2011 to March 2012 was allowed; procedural non-observance did not bar the substantial benefit.

Final Conclusion: Impugned order set aside; appeal allowed - benefit of Section 73(3) granted in respect of the short-paid amount paid with interest before notice, and adjustment of excess tax paid earlier was allowed despite procedural lapses, rendering further penalty/extended period determination unnecessary.

Business Support Services - leviability of service tax on revenue sharing arrangements between exhibitors and distributors - taxability limited to post amendment definition (w.e.f. 01.05.2011) - recognition of unincorporated joint venture as a taxable 'person' - effect of CBEC Circular No.148/17/2011 ST dated 13.12.2011 - application of extended period and penalties for non registration/non payment

Business Support Services - taxability limited to post amendment definition (w.e.f. 01.05.2011) - effect of CBEC Circular No.148/17/2011 ST dated 13.12.2011 - Services provided by the theatre owner to distributors/sub distributors from 01.05.2011 fall within Business Support Services and are liable to service tax. - HELD THAT: - The Tribunal upheld the adjudicating and appellate findings that the 2011 amendment to the definition of 'support services of business or commerce' (substituting 'operational assistance for marketing' with 'operational or administrative assistance in any manner') enlarged the scope of Business Support Services. Applying the amended definition and CBEC Circular No.148/17/2011, the authorities found that where the exhibitor provides operational/infrastructural/administrative assistance and participates in revenue sharing arrangements that amount to more than a mere principal to principal transaction, the arrangement may constitute an unincorporated joint venture/new entity and the service rendered to that entity is taxable. Having considered the Madras High Court decision upholding the Board's Circular, the Tribunal concluded that the appellant was liable to service tax for the period from 01.05.2011 onwards.

Demand for service tax from 01.05.2011 onwards under Business Support Services is sustainable.

Business Support Services - CBEC Circular No.109/03/2009 dated 23.02.2009 - Demand of service tax for the period prior to 01.05.2011 is not sustainable and is to be dropped. - HELD THAT: - The Tribunal accepted the appellate conclusion that before the 2011 amendment the definition of Business Support Services did not cover the exhibition activity as a support service. Reliance on the earlier circular (CBEC Circular No.109/03/2009) which clarified that mere screening of a movie is not a Business Support Service (except where the theatre is leased) led to setting aside the demand for the pre 01.05.2011 period. Revenue did not challenge the dropping of demand for the earlier period in this appeal.

Demand prior to 01.05.2011 is set aside.

Application of extended period and penalties for non registration/non payment - penalty under Section 77 and Section 78 (as recorded by adjudicating authority) - Findings of the adjudicating authority on failure to register, non payment/non filing and the consequent imposition of interest and penalties are maintained. - HELD THAT: - The Tribunal did not differ from the adjudicating authority's conclusions that the noticee had contravened registration and return filing obligations and had not paid service tax, attracting interest and penal consequences. The adjudicating authority's reasoning that such conduct justified invocation of extended period and penalties under the relevant provisions was accepted by the Tribunal.

Interest and penalties as held by the adjudicating authority are sustainable.

Leviability of service tax on revenue sharing arrangements between exhibitors and distributors - recognition of unincorporated joint venture as a taxable 'person' - effect of CBEC Circular No.148/17/2011 ST dated 13.12.2011 - Reference of substantial question(s) of law to a larger Bench is required to resolve conflicting Tribunal and High Court views on the issue. - HELD THAT: - Noting divergent decisions of this Tribunal (e.g., PVS Multiplex, AB Motion Pictures) and the Madras High Court's validation of the Board's Circular, the Bench considered the conflict substantial. While the Bench expressed its view upholding taxability for the post 2011 period, it recognised the existence of conflicting Tribunal precedents and therefore referred specific questions of law to the President for constitution of a Larger Bench to authoritatively resolve whether the Tribunal decisions can be sustained vis a vis the Madras High Court's position and the CBEC Circular.

Matter referred to the Hon'ble President for constitution of a Larger Bench to decide the formulated questions of law.

Final Conclusion: The Tribunal upheld the service tax demand for the period from 01.05.2011 onwards under Business Support Services and sustained the adjudicating findings on interest and penalties, set aside the demand prior to 01.05.2011, and referred contentious legal questions arising from conflicting precedents and the CBEC Circular to the President for constituting a Larger Bench.

Refund of cenvat credit on input services used in manufacture of export goods cleared under bond - inadvertent clerical error in refund claim - remand for verification and speaking order - opportunity of being heard before adjudication

Inadvertent clerical error in refund claim - remand for verification and speaking order - opportunity of being heard before adjudication - Validity of rejection of part of the refund claim where appellant alleged an inadvertent/clerical error in the amount stated and whether matter should be remanded for verification. - HELD THAT: - The First Appellate Authority recorded the appellant's plea that a clerical error resulted in an incorrect declared cenvat-credit balance but rejected the claim because the error was not earlier brought to the adjudicating authority's notice. The Tribunal found the error to be inadvertent and bona fide and observed that the appellate authority should have sought a report from the adjudicating authority instead of rejecting the claim for the stated reason. Consequently, the Tribunal directed that the matter be remitted to the adjudicating authority to verify the claimed inadvertent error and the closing balance in the cenvat credit as appearing in the appellant's books, and to pass a speaking order after giving the appellant sufficient opportunity of being heard. The Tribunal left all contentions open for fresh consideration and set a timeline for adjudication in view of the relevant period. [Paras 3, 4]

Impugned order set aside; appeal allowed by way of remand to the adjudicating authority to verify the claimed clerical error and closing cenvat balance, give the appellant an opportunity of being heard, and pass a speaking order preferably within three months.

Final Conclusion: The Tribunal set aside the appellate order and remitted the matter to the adjudicating authority for verification of the bona fide inadvertent clerical error in the refund claim and the closing cenvat credit balance, with directions to afford the appellant hearing and to pass a speaking order preferably within three months; all contentions left open.

Definition of input service (pre-01.04.2011) - wide ambit including "activities relating to business" - definition of input service (post-01.04.2011) - exclusion of services used primarily for personal use such as outdoor catering and rent-a-cab - eligibility of input tax credit for services availed to comply with statutory requirements - exclusion in input service definition not attracted where rented vehicles are capital goods of service provider - invocation of extended period of limitation for periods prior to 01.04.2011

Definition of input service (pre-01.04.2011) - wide ambit including "activities relating to business" - eligibility of input tax credit for services used in relation to manufacture - Whether credit for Rent-a-Cab Services, Supply of Manpower for Outdoor Catering Services and Supply of Manpower for Gardening Services is eligible for the period prior to 01.04.2011 - HELD THAT: - The Tribunal held that the definition of "input service" as it stood prior to 01.04.2011 included the phrase "activities relating to business" and thereby had a very wide ambit that would encompass services used for business activities. Applying that broad definition, the impugned services-Rent-a-Cab Services, Outdoor Catering (manpower for catering) and Manpower for Gardening-fall within the scope of input services for the period prior to 01.04.2011 and are therefore eligible for credit. The court relied on consistent decisions of the Tribunal and High Courts recognising the wide ambit of the pre-amendment definition to support this conclusion. [Paras 7, 12]

All three impugned services are eligible for input tax credit for the period prior to 01.04.2011.

Definition of input service (post-01.04.2011) - exclusion of services used primarily for personal use such as outdoor catering and rent-a-cab - exclusion in input service definition not attracted where rented vehicles are capital goods of service provider - eligibility of input tax credit for services availed to comply with statutory requirements - Whether credit for Rent-a-Cab Services, Supply of Manpower for Outdoor Catering Services and Supply of Manpower for Gardening Services is eligible for the period after 01.04.2011 - HELD THAT: - The definition of "input service" was amended effective 01.04.2011 to include an express exclusion for certain services when used primarily for personal use of employees, specifically citing outdoor catering and rent-a-cab services. Applying the amended definition and following the Supreme Court's decision in M/s. Toyota Kirloskar Motor Pvt. Ltd., the Tribunal held that credit on Supply of Manpower for Outdoor Catering Services is not eligible after 01.04.2011. Similarly, credit on Rent-a-Cab Services post-amendment is not allowable unless the assessee establishes that the vehicles are capital goods in the accounts of the service provider; in the present case no such evidence was furnished, so the exclusion applies and credit is disallowed. By contrast, gardening services are not covered by any specific exclusion in the amended definition and, where availed to comply with statutory requirements (such as maintenance of a green belt directed by the Pollution Control Board), such services remain eligible for input credit after 01.04.2011. [Paras 8, 9, 10, 12]

Post 01.04.2011, credit on Rent-a-Cab Services and Supply of Manpower for Outdoor Catering Services is not allowable; credit on Supply of Manpower for Gardening Services is allowable when availed to meet statutory requirements.

Invocation of extended period of limitation for periods prior to 01.04.2011 - penalty set aside where issue is interpretational - Whether invocation of the extended period of limitation and the imposition of penalty are sustainable - HELD THAT: - The extended period of limitation was invoked only in respect of the first Show Cause Notice covering the period prior to 01.04.2011. The Commissioner (Appeals) had set aside the penalty observing that the dispute is interpretational in nature; the Tribunal notes that the appellant's argument regarding interpretation is irrelevant to the question of limitation for the earlier period. The order does not disturb the Commissioner (Appeals)'s view on penalty beyond modifying the demand as per findings on credit eligibility. [Paras 11]

Extended period was invoked for the earlier period; penalty was set aside by Commissioner (Appeals) as the issue was interpretational, and the Tribunal did not sustain the appellant's contention to defeat invocation of extended period on that ground.

Final Conclusion: The appeal is partly allowed: for the periods August 2008 to October 2010 and November 2010 to August 2011 the Tribunal held that the three challenged services were input services prior to 01.04.2011 and eligible for credit; for the post-01.04.2011 period credit is disallowed on Rent-a-Cab and Outdoor Catering services but allowed for Gardening services used to comply with statutory requirements. The impugned order is modified accordingly.

Classification of goods and separate classifiability of recorded media (EPROMs) vis-a -vis main machine (STD PCO) - bona fide belief and approved classification list - time bar/limitation - extended period under proviso to Section 11A invoked for suppression or intention to evade duty - penalty and personal liability of director where demand is time barred

Time bar/limitation - extended period under proviso to Section 11A invoked for suppression or intention to evade duty - bona fide belief and approved classification list - classification of goods and separate classifiability of recorded media (EPROMs) vis-a -vis main machine (STD PCO) - Whether the demand of duty for the longer period is barred by limitation in view of the appellant's bona fide classification and approved classification lists. - HELD THAT: - The Tribunal held that limitation can be raised at any stage as it is a mixed question of law and fact. The appellants had, throughout, filed classification lists claiming separate classification of EPROMs under the exemption notification, and those lists were before and approved by the department; thus the department possessed the relevant information. On identical facts the Tribunal in the appellants' earlier matter declined to apply the extended period because there was no suppression or intention to evade duty and the demand could be made only from the date of any proposed change in classification. Applying that reasoning to the present case, the demand insofar as it relates to the period beyond the normal limitation is time barred. [Paras 4]

The demand for duty raised for the longer/extended period is time barred and not sustainable.

Penalty and personal liability of director where demand is time barred - consequential relief arising from setting aside of duty demand - Whether the penalty, including personal penalty on the Managing Director, survives where the duty demand is held to be time barred. - HELD THAT: - Having held that the duty demand (beyond the normal period) is not sustainable on limitation grounds, the Tribunal concluded that the consequential penalty and personal penalty imposed could not be sustained. The penalty was therefore set aside as it was contingent on the demand which has been disallowed. [Paras 5]

The penalty, including the personal penalty on Mr. MadhuKumar A. Mehta, is set aside consequent to the disallowance of the duty demand.

Final Conclusion: Appeal allowed; impugned adjudication order set aside insofar as the duty demand for the extended period is time barred and consequential penalties (including personal penalty) are quashed.

Rule 8(3A) of the Central Excise Rules, 2002 - payment of duty without utilizing Cenvat credit - ultra vires - availability of Cenvat credit for discharge of duty - withdrawal of CENVAT credit facility as penalty - precedential effect of High Court and Tribunal decisions

Rule 8(3A) of the Central Excise Rules, 2002 - payment of duty without utilizing Cenvat credit - ultra vires - availability of Cenvat credit for discharge of duty - Validity of the portion of Rule 8(3A) which prohibits utilisation of Cenvat credit for payment of excise duty during default and the sustainment of demands framed on that basis for the periods in dispute. - HELD THAT: - The Tribunal held that the impugned demands raised for contravention of Rule 8(3A) could not be sustained because the portion of sub rule (3A) requiring payment of duty "without utilizing the Cenvat credit" has been judicially declared ultra vires. The Tribunal applied the decision in Indsur Global Ltd., wherein the Gujarat High Court struck down the words "without utilizing the Cenvat credit" as arbitrary and violative of Articles 14 and 19(1)(g), observing that withdrawal of Cenvat credit in all cases of default (irrespective of cause) is disproportionate and operates as a penalty. The Tribunal noted that this view has been followed by other High Courts and the Tribunal itself, and that therefore demands premised on the disallowance of Cenvat credit during the default period cannot stand. Having accepted the precedent and its binding effect on the controversy before it, the Tribunal set aside the impugned order sustaining demands and related penalty and interest to the extent founded on the invalidated portion of Rule 8(3A). [Paras 3, 4]

The portion of Rule 8(3A) prohibiting utilisation of Cenvat credit is inapplicable; demands and consequential measures founded on that prohibition for the stated periods are unsustainable and the impugned order is set aside.

Final Conclusion: Appeal allowed; the impugned order upholding demands and penalties to the extent based on the prohibition of utilisation of Cenvat credit under Rule 8(3A) is set aside in view of controlling judicial rulings declaring that portion ultra vires.

Clandestine removal of excisable goods - necessity of independent corroboration for private records / kacchi parchies - evidentiary value of recorded statements and Section 9D - confiscation under Rule 25 of Central Excise Rules - penalty under Rule 26 of Central Excise Rules - confiscation/appropriation of Indian currency as sale proceeds - requirement to differentiate stocks and turnovers of co located units - liability of raw material supplier where job worker is an independent manufacturer

Necessity of independent corroboration for private records / kacchi parchies - clandestine removal of excisable goods - Reliance on uncorroborated private records/kacchi parchies to sustain demand for clandestine manufacture and removal - HELD THAT: - The Tribunal held that the revenue's case was founded primarily on private records/kacchi parchies seized from shared premises. The Commissioner did not summon or independently examine most persons whose names appeared in those records nor sufficiently corroborate entries by confronting the alleged purchasers, suppliers or transporters. Several witnesses either denied earlier statements or retracted admissions. In absence of independent corroboration (procurement of inputs, employment of labour, transport receipts, receipt of sale consideration, or production capacity evidence), demands based solely on uncorroborated private records are unsustainable. The adjudicator's reliance on such records without testing their genuineness or obtaining examination in chief and cross examination of witnesses rendered the findings perverse and unsupported. [Paras 54, 56, 58, 61]

Demands confirmed solely on the basis of uncorroborated private records were set aside; findings based on those records not accepted.

Requirement to differentiate stocks and turnovers of co located units - necessity of independent corroboration for private records / kacchi parchies - Effect of shared premises and multiple firms on attribution of seized documents, stock and turnover - HELD THAT: - The Tribunal found the panchnama and seizure records deficient in indicating precise point(s) of recovery and ownership where multiple concerns operated from the same address. Many seized files related to other entities (e.g., M/s NN Lite, M/s G.N. Marketing, M/s Jain Trading Co.). Revenue did not segregate or identify stock and records of co located units nor establish financial flow back between them. Absent differentiation, Revenue could not lawfully aggregate or attribute all seized entries to the appellant. The consequence is that third party documents recovered from shared premises require independent corroboration before being used to compute turnover or duty liability. [Paras 56, 59, 62]

Clubbed attribution of sales/stock from shared premises rejected; Revenue required to differentiate records and could not treat all seized entries as appellant's turnover.

Confiscation under Rule 25 of Central Excise Rules - Validity of confiscation of goods under Rule 25 when show cause notice did not invoke specific clause(s) of Rule 25(1) - HELD THAT: - Rule 25(1) contains distinct clauses and the show cause notice must specify the particular ground invoked. The Tribunal observed that the show cause notice merely sought confiscation under Rule 25 without pointing to any specific sub clause (a)-(d). In absence of specific invocation and given the lack of corroborative material to prove clandestine manufacture/removal, confiscation of raw material and finished goods could not be sustained. Reliance was placed on settled precedent requiring clear grounds for confiscation. [Paras 63, 72]

Confiscation of goods under Rule 25 set aside as unsustainable for want of specific grounds and supporting evidence.

Confiscation/appropriation of Indian currency as sale proceeds - necessity of independent corroboration for private records / kacchi parchies - Legality of confiscation/appropriation of seized currency where ownership and linkage to alleged clandestine sales were not established - HELD THAT: - The Tribunal noted that cash seized from shared premises and an almirah at the first floor was explainable on record as belonging in part to other co occupants and supported by cash book extracts and affidavits (including advance for land sale). Revenue produced no contrary evidence showing that the currency represented sale proceeds of clandestine clearances. Given the cogent explanations and lack of contrary proof, confiscation and appropriation of currency were found to violate principles of natural justice and evidentiary norms. [Paras 64, 73]

Confiscation and appropriation of seized currency set aside.

Evidentiary value of recorded statements and Section 9D - Admissibility and weight of recorded statements relied upon by Revenue without following procedure for examination and cross examination - HELD THAT: - The Tribunal observed that the Commissioner relied on recorded statements of various persons without obtaining examination in chief and without furnishing opportunity for cross examination in accordance with statutory requirements; Section 9D was referenced in this context. Several relied upon witnesses were not produced for formal examination during adjudication, and some retracted earlier admissions. The Tribunal held that statements not properly admitted and tested cannot be given evidentiary value to sustain adjudication. [Paras 60, 70]

Statements not properly admitted and not subjected to requisite examination/cross examination could not be relied upon; findings based thereon set aside.

Liability of raw material supplier where job worker is an independent manufacturer - Whether duty can be fastened on a raw material supplier for goods manufactured and cleared by registered independent rolling mills/job workers - HELD THAT: - The Tribunal held that where rolling mills/job workers are registered manufacturers working on principal to principal basis, they alone are liable to pay excise duty on manufacture and removal. Revenue cannot shift duty liability to the raw material supplier absent evidence that the rolling mills were acting as job workers under the supplier's control. In the present case, follow up enquiries showed that most rolling mills denied clandestine receipt; there was no documentary proof that they acted as the appellant's job workers. Accordingly, the Commissioner could not fasten the job worker's duty on the raw material supplier. [Paras 66, 67, 75]

Duty could not be shifted onto the raw material supplier for manufacturing/removal performed by independent registered rolling mills; related demand set aside.

Penalty under Rule 26 of Central Excise Rules - Sustainability of penalties imposed under Rule 26 where foundational allegations of clandestine manufacture/removal and corroborative evidence failed - HELD THAT: - Penalties under Rule 26 were imposed on principals and persons associated on the basis of the same evidentiary material (private records, statements) which the Tribunal found uncorroborated, inadequately tested and insufficient to support findings of clandestine removal. Given that the substantive demands and confiscations were set aside for lack of evidence, the concomitant penalties were also unsustainable. [Paras 50, 76]

Penalties under Rule 26 set aside.

Final Conclusion: For the periods in issue the Tribunal found that the Revenue's case rested on uncorroborated private records and improperly admitted statements, failed to differentiate records of co located units, and did not establish linkage of seized currency or requisite indicia of clandestine manufacture/removal; accordingly the adjudication order dated 31.01.2018 was set aside, demands, confiscations and penalties challenged in the appeals were quashed and the appeals were allowed with consequential relief.

Cenvat credit admissibility in respect of duty paid by job worker - movement of inputs to job worker under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - conditional exemption under Notification No.214/86-CE and optionality of its availment by the job worker - no double-credit objection where duty has been paid by job worker and final goods are cleared by principal - revenue neutrality where duty is paid by input- or job-manufacturer

Cenvat credit admissibility in respect of duty paid by job worker - movement of inputs to job worker under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - conditional exemption under Notification No.214/86-CE and optionality of its availment by the job worker - The appellant is entitled to Cenvat credit of the duty paid by the job worker on intermediate goods made out of inputs sent under Rule 4(5)(a). - HELD THAT: - The Tribunal held that Rule 4(5)(a) permits a manufacturer who has availed Cenvat credit on inputs to send those inputs to a job worker without reversal of credit, provided the goods are returned within the stipulated period. The Notification No.214/86-CE is a conditional exemption and its availment by the job worker is optional; there is no statutory compulsion that the job worker must avail that exemption. Where the job worker, being a manufacturer, elects to pay duty on the job-worked goods, such duty is in relation to the intermediate products which are subsequently used in the manufacture of the final product by the principal manufacturer. Prior decisions of the Tribunal and High Courts, as well as the principle of revenue neutrality recognized by the Supreme Court, support that the principal manufacturer can avail Cenvat credit of duty paid by the job worker; denial on the ground of alleged double benefit is unsustainable where the duty has in fact been paid on the intermediate goods and the final product is cleared by the principal on payment of duty. Applying these principles to the undisputed facts, the Tribunal concluded that the appellant was rightly permitted to take the Cenvat credit of the duty paid by the job worker.

Impugned orders set aside and appeals allowed; appellant entitled to Cenvat credit of duty paid by the job worker.

Final Conclusion: The Tribunal allowed the appeals, holding that where inputs on which Cenvat credit was availed are sent to a job worker under Rule 4(5)(a) and the job worker elects to pay excise duty instead of availing the conditional exemption under Notification No.214/86-CE, the principal manufacturer is entitled to Cenvat credit of the duty so paid by the job worker.

Cenvat credit on input services - use in course of business of manufacture - input service - extended period of limitation - distribution of service tax credit - eligibility under Cenvat Credit Rules, 2004

Extended period of limitation - Extended period of limitation invoked in the show-cause notice dated 03/09/2010 is not sustainable. - HELD THAT: - The Tribunal observed that periodical show-cause notices had been issued while the question of availment of cenvat credit for overlapping periods was under judicial scrutiny. In those circumstances the invoking of the extended period of limitation for the show-cause notice dated 03/09/2010 could not be maintained. The Tribunal therefore held that the demand based on extended limitation fails on the ground of limitation itself. [Paras 6]

The extended period of limitation for the show-cause notice dated 03/09/2010 is not sustainable and the demand based thereon is set aside.

Cenvat credit on input services - use in course of business of manufacture - input service - eligibility under Cenvat Credit Rules, 2004 - distribution of service tax credit - Appellant is entitled to avail cenvat credit on the specified services for the impugned periods as the services were used in the course of their manufacturing business. - HELD THAT: - The Tribunal examined the nature of the services (including Air Travel Agent Service, Tour Operator Service, Cable Operator, Construction Service, Interior Decorator Service, Outdoor Catering Service and Membership of Club or Association Service) and accepted the appellant's explanation that these services were used for business operations of manufacturing excisable goods. Relying on the appellant's earlier decisions of this Tribunal and the decision in Ultra Tech Cement Ltd. (Tri.-Mum.), the Tribunal held that such services qualify as input services and that cenvat credit distributed by the head office or other divisions could be availed. Consequently, the adjudicating authority's conclusion that these services were not input services or not used in the factory premises was rejected. [Paras 6]

Cenvat credit on the specified services is available to the appellant for the impugned periods; the impugned orders denying credit are set aside.

Final Conclusion: Appeals allowed; orders denying cenvat credit on the specified services for the periods April 2004 to September 2009 and April 2010 to November 2010 are set aside and the extended period of limitation invoked in the show-cause dated 03/09/2010 is held unsustainable.

CENVAT credit on outward GTA - FOR sale basis and freight included in assessable value - entitlement to refund of reversed CENVAT credit - verification of factual position regarding freight inclusion - precedential weight of High Court decision in M/s Ultratech Cement Ltd.

CENVAT credit on outward GTA - FOR sale basis and freight included in assessable value - precedential weight of High Court decision in M/s Ultratech Cement Ltd. - Admissibility of CENVAT credit in respect of outward GTA where goods are sold on FOR basis and freight is borne by the supplier and included in the assessable value on which excise duty was paid. - HELD THAT: - The Tribunal held that, as a matter of law, where the sale is on FOR basis, the freight is borne by the supplier and is inclusive in the assessable value on which excise duty is paid, CENVAT credit in respect of outward GTA is admissible. The Tribunal noted its earlier decisions and the judgment of the Hon'ble Gujarat High Court in M/s Ultratech Cement Ltd. as establishing that legal position and observed that the Adjudicating Authority is bound to follow the High Court's view within its territorial jurisdiction. The legal principle applied is therefore that inclusion of freight in the excisable value (and freight borne by the supplier) makes outward GTA eligible for CENVAT credit. [Paras 4]

CENVAT credit on outward GTA is legally admissible where sale is on FOR basis and freight is borne by the supplier and included in the assessable value.

Verification of factual position regarding freight inclusion - entitlement to refund of reversed CENVAT credit - Whether, on the facts of this case, the appellant is entitled to CENVAT credit and consequential refund, given apparent contradictions in the purchase orders/invoices regarding freight. - HELD THAT: - The Tribunal found a factual contradiction in the records: some purchase orders show price as 'exclusive of freight' while also describing delivery 'up to customer's place', creating uncertainty whether freight was actually included in the sale price or charged separately. Because admissibility of CENVAT credit in this case turns on the factual question whether freight was borne by the appellant and included in the assessable value, the Tribunal remanded the matter to the Adjudicating Authority for verification of those facts. The Adjudicating Authority is directed to examine whether the price charged was inclusive of freight and whether freight was not separately billed; if satisfied that freight was inclusive and not separately charged, the appellant shall be eligible for CENVAT credit and consequential refund of amounts already reversed. [Paras 4]

Matter remanded to the Adjudicating Authority to verify whether freight was included in the sale price and not separately charged; if so, grant CENVAT credit and consequential refund.

Final Conclusion: Impugned orders set aside; appeals allowed in part and remanded to the Adjudicating Authority to verify the factual position regarding inclusion of freight in the sale price and, if satisfied, to grant CENVAT credit and consequential refund; fresh order to be passed within three months from the date of this order.

Seizure and custody of goods - power of excise officers exercisable as police officer - requirement of seizure mahazar/report under investigatory provisions - application of Sections 102 and 457 Cr.P.C. to seized property - delivery of seized goods to person entitled under magistrate's order - distinction between raw materials not used in commission of offence and property subject to seizure

Seizure and custody of goods - requirement of seizure mahazar/report under investigatory provisions - distinction between raw materials not used in commission of offence and property subject to seizure - application of Sections 102 and 457 Cr.P.C. to seized property - delivery of seized goods to person entitled under magistrate's order - entitlement of the petitioner to release of raw materials held under lock and seal at the premises of the fourth respondent and the procedural requirements for seizure and release - HELD THAT: - The Court found that although bottles and other goods were seized and proceedings are pending, the official respondents have not produced a seizure mahazar or particularised report specifying quantities of the petitioner's raw materials (ENA, blends, CAB, FMS, essence, caramel etc.) as mandated by the investigatory provisions made applicable to the Pondicherry Excise Act. The Court observed that Section 54 of the Act confers powers akin to police officers on specified Excise Officers and that Sections 102 and 457 Cr.P.C. (as applicable) govern seizure and disposal/delivery of property. Section 102 (and the concept of stolen goods) is not attracted to raw materials of the petitioner which were supplied to the contract manufacturer for lawful manufacture. Section 457 Cr.P.C. contemplates magistrate's orders for delivery where property has been seized and not produced in court. Because the official respondents stated that details of the raw materials were not readily available and no seizure particulars were filed under the prescribed procedure, either (a) if no valid seizure was effected the goods must be released forthwith, or (b) if seizure was effected the Magistrate, upon being furnished with the seizure particulars, is required under Section 457 Cr.P.C. to order delivery to the person entitled. The Court emphasised that mere lock and seal without a seizure mahazar does not suffice as a valid seizure and that the petitioner should not be put to needless hardship on account of having employed a contract manufacturer. [Paras 42, 43, 45, 46, 47]

The official respondents are directed to release the petitioner's raw materials immediately - if no valid seizure was effected, release within 30 days (and the Court directed preferably within 15 days) - and, where seizure particulars exist, to comply with magistrate's procedure under Section 457 Cr.P.C.; respondents to prepare delivery note and file report before the concerned Magistrate.

Final Conclusion: Writ petition allowed: respondents directed to release the petitioner's raw materials from the fourth respondent's premises in accordance with the Court's directions and applicable Cr.P.C. procedure; delivery note to be prepared and report to be filed before the Magistrate.

Violation of principles of natural justice - Right to personal hearing / opportunity to be heard - Oral adjournment request and its effect - Reopening of assessment / revision proceedings - Remand for reconsideration and fresh personal hearing

Violation of principles of natural justice - Right to personal hearing / opportunity to be heard - Oral adjournment request and its effect - Whether the impugned assessment order is vitiated for violation of the right to personal hearing because an oral request for deferment on 13.08.2021 was accepted but not acted upon. - HELD THAT: - The Court found that the petitioner's authorised representative did appear before the assessing officer on 13.08.2021 and represented related sister-concern matters on the same date, which is recorded in the orders passed in those matters (paras.16-18). Given that appearance and the practical difficulty presented by voluminous documents, the Court accepted the petitioner's version that an oral request for a deferred date was made and was acceded to, particularly in the absence of any firm recollection or contemporaneous denial by the officer (paras.19-21). The Court recorded that the officer did not positively state that no such request was made or that the representative did not appear, and therefore the petitioner's plea had substance (paras.20-22). On these facts the Court concluded that passing the impugned order without giving the deferred personal hearing accepted on 13.08.2021 amounted to a breach of the principles of natural justice warranting interference (paras.21-23). [Paras 19, 20, 21, 22, 23]

Impugned order set aside for breach of natural justice; matter remitted for reconsideration with a direction to give one final, specific notice fixing a date for personal hearing within two weeks, on which the petitioner must appear and produce records.

Final Conclusion: Writ petition allowed in part: impugned assessment order quashed and matter remitted to the respondent for fresh consideration after giving a specific final opportunity of personal hearing within two weeks; if the petitioner fails to appear on the re-fixed date, the respondent may proceed on available records; no costs awarded.

Power to requisition assets under Section 132A(1)(c) of the Income tax Act - Application of requisitioned or seized assets under Section 132B of the Income tax Act - Interim custody of seized property pending criminal trial - Interaction between criminal court custody and income tax requisition powers - Obligation of disclosure of income/assets for Income tax purposes

Power to requisition assets under Section 132A(1)(c) of the Income tax Act - Interim custody of seized property pending criminal trial - Interaction between criminal court custody and income tax requisition powers - Obligation of disclosure of income/assets for Income tax purposes - Whether the interim custody of the looted cash should be released to the petitioner or handed over to the Income tax Department under the requisitioning power. - HELD THAT: - The court examined the factual matrix that cash allegedly looted from the petitioner was recovered from accused persons and that the petitioner sought interim custody of a substantial portion of that cash. The Income tax Department asserted that the cash represented income or property not disclosed for income tax purposes and relied on the requisitioning power under Section 132A(1)(c) of the Act, with Section 132B governing the subsequent dealing with requisitioned assets. The court observed that no contemporaneous Income tax returns or documents were produced by the petitioner to demonstrate prior disclosure of such income to tax authorities, and that a letter from a Chartered Accountant filed on the petitioner's behalf did not negate the wide scope of Section 132A(1)(c). Considering that release of the amount to the petitioner could frustrate the Income tax Department's ability to effectively implement the statutory provisions, the court held that the proper course was to place the amount in the custody of the Income tax authority so that assessment proceedings may be proceeded with under the relevant statutory timelines. The court noted precedent of a similar approach in another High Court decision dealing with requisition and application of seized assets and treated the Income tax remedy as distinct from search and seizure under Section 132. The court directed prompt completion of Income tax proceedings by the department and permitted the department to provide any further information if required. [Paras 8, 10, 11, 12]

The petition for interim custody was declined and the trial Court was directed to release the recovered amount to the Director, Income Tax (Investigation), Bhopal for proceeding under the Income tax Act.

Final Conclusion: Petition dismissed. The trial Court was directed to hand over the seized cash to the Income tax Department (Director, Income Tax (Investigation), Bhopal) so that assessment/proceedings under the Income tax Act may be completed within the prescribed time; the department may furnish further information if required.