TaxTMI Updates e-Newsletter
Mar 15,2024

Non-submission of certified copy as a mere technical defect - electronic filing of memo of appeal within limitation - dismissal of appeal for failure to furnish certified copy - power of court under Article 226 to condone procedural defects - interpretation of Section 107 read with Rule 108 of the CGST Act/Rules

Non-submission of certified copy as a mere technical defect - power of court under Article 226 to condone procedural defects - Non-submission of the certified copy within the time prescribed is a procedural/technical defect and should not result in dismissal of an appeal filed electronically on time. - HELD THAT: - Relying on precedents of High Courts (including Orissa and Madras), the Court held that where the assessee files the memo of appeal electronically within the prescribed limitation period and encloses the impugned order as available on the GST portal, failure to furnish the certified copy within seven days is only a procedural lapse. The merit of the appeal should not be sacrificed on that ground; such a defect can be treated as technical and condoned, including by exercising powers under Article 226, rather than causing dismissal of the appeal. This conclusion follows from an examination of Section 107 read with Rule 108 of the CGST Act/Rules and the reasoning in the cited High Court decisions. [Paras 4]

Non-filing of the certified copy within seven days is a technical defect which should not lead to dismissal; it can be condoned.

Electronic filing of memo of appeal within limitation - dismissal of appeal for failure to furnish certified copy - interpretation of Section 107 read with Rule 108 of the CGST Act/Rules - Where the appeal is filed electronically within the three-month period, the appellate authority should not dismiss the appeal solely because the certified copy was not filed within seven days. - HELD THAT: - Applying the interpretation of Section 107 in conjunction with Rule 108, the Court stated that mere non-filing of the certified copy within the seven-day window, when the electronic appeal itself was filed within the statutory three-month limitation, does not justify dismissal of the appeal. The appellate authority is therefore directed to hear the appeal de novo and decide it on merits rather than on the procedural ground of delay in supplying the certified copy. [Paras 4]

Appellate authority must not dismiss an appeal filed electronically within time solely for non-filing of the certified copy; the appeal should be heard de novo on merits.

Final Conclusion: The earlier order dated February 12, 2024 is modified by substituting paragraph 4 with the substituted paragraphs (4, 4(i), 4(ii)); the impugned order is set aside and the appellate authority is directed to hear the appeal de novo and pass a reasoned order, treating failure to file the certified copy within seven days as a technical defect that should not lead to dismissal.

Doctrine of consistency in taxation - distinction between 'input' and 'capital goods' under the CGST Act, 2017 - limits of a show cause notice - authority cannot traverse beyond its scope - principles of natural justice (audi alteram partem) in adjudicatory proceedings

Doctrine of consistency in taxation - Whether the Department's withholding of refunds for the periods July-September 2019 and October-December 2019, while sanctioning refunds for identical facts in earlier and subsequent periods, offended the doctrine of consistency and was unsustainable. - HELD THAT: - The Court accepted the petitioner's contention that refund claims arising from identical factual and legal circumstances had been sanctioned for previous and subsequent periods but were withheld for the two contested periods without any cogent justification. Relying on settled principles that, while res judicata does not strictly apply to tax matters, authorities must ordinarily follow a consistent approach where facts and law are the same, the Court found the Department's sudden contrary stand to be irrational and indefensible. The Court noted Supreme Court authority holding Revenue cannot take a different stand when facts are almost identical and applied that principle to quash the inconsistent treatment by the Department. [Paras 8, 11, 15, 21]

The Department's inconsistent withholding of the refunds for the stated periods was held to be unsustainable and arbitrary.

Distinction between 'input' and 'capital goods' under the CGST Act, 2017 - Whether the specific goods procured by the petitioner for R&D, software development and validation were capital goods or inputs for the purpose of claiming input tax credit and refund. - HELD THAT: - The Court examined the statutory distinction that 'capital goods' are goods the value of which is capitalised in the claimant's books, whereas 'input' comprises goods other than capital goods used or intended to be used in the course or furtherance of business. Finding that the petitioner had not capitalised the goods because they were used for project-specific R&D and became redundant after validation, the Court held they fell within the definition of 'input'. The Court also referred to authority recognising that goods essential to produce the final output qualify as inputs. [Paras 16, 21]

The goods in question were held to be inputs (and not capital goods) for the purpose of ITC and refund, as they were not capitalised in the petitioner's books and were used in the course of its exported services.

Limits of a show cause notice - authority cannot traverse beyond its scope - principles of natural justice (audi alteram partem) in adjudicatory proceedings - Whether the Department travelled beyond the scope of the show cause notices by adjudicating on grounds not raised therein (notably, applicability of Accounting Standard 10 and capitalization) and thereby violated principles of natural justice. - HELD THAT: - The Court held that a show cause notice must clearly delineate the allegations and grounds so as to afford the recipient a fair opportunity to meet them. It found that the Department adopted a new ground based on Accounting Standards and capitalization - matters not articulated in the show cause notices - thereby depriving the petitioner of a proper chance to respond. Citing precedents and recent authority emphasising that orders cannot go beyond the scope of show cause notices, the Court concluded that the impugned adjudication was in breach of procedural fairness. [Paras 17, 20, 21, 22]

The adjudication that relied upon grounds outside the show cause notices was held to be violative of natural justice and unsustainable.

Final Conclusion: Writs allowed; the orders dated October 25, 2021 and February 24, 2023 passed by the appellate authority are quashed and set aside; consequential reliefs to follow; no order as to costs.

Failure to provide personal hearing - non-application of mind to taxpayer's reply - requirement of a speaking order - re-adjudication and remand for fresh consideration - opportunity to furnish additional documents and clarifications - limitation for passing fresh order under Section 75(3) of the Act - order under Section 73 of the Central Goods and Services Tax Act, 2017

Failure to provide personal hearing - non-application of mind to taxpayer's reply - requirement of a speaking order - Validity of the impugned order dated 29.12.2023 which confirmed demand without adequate consideration of the taxpayer's reply and without affording personal hearing. - HELD THAT: - The Court examined the sequence: a Show Cause Notice issued earlier, the taxpayer's detailed replies (including reply dated 04.08.2022 and 22.10.2023) and the impugned order which recorded that the taxpayer's uploaded reply was 'not satisfactory' without stating any specific deficiencies or having afforded a personal hearing. The Court held that the observation that the reply was unsatisfactory, made in a cryptic manner, demonstrates that the Proper Officer did not apply independent mind to the taxpayer's submissions. Where a reply has been filed, the authority must consider it on merits and, if further particulars or documents are necessary, specifically call for them rather than mechanically recording dissatisfaction. For these reasons the impugned order could not be sustained. [Paras 5, 6, 7, 8, 9]

Impugned order is set aside insofar as it confirmed the demand without considering the taxpayer's reply and without providing personal hearing.

Re-adjudication and remand for fresh consideration - opportunity to furnish additional documents and clarifications - limitation for passing fresh order under Section 75(3) of the Act - Relief and directions following setting aside of the impugned order: extent and manner of remand to the Proper Officer. - HELD THAT: - Having set aside the impugned order, the Court remitted the matter to the Proper Officer for fresh adjudication. The Proper Officer is directed to intimate to the petitioner the specific details/documents required, allow the petitioner to furnish explanations and documents, afford an opportunity of personal hearing, and thereafter pass a fresh speaking order in accordance with law. The fresh adjudication is to be completed within the time prescribed under Section 75(3) of the Act. The Court expressly refrained from adjudicating the merits of the dispute, reserving all rights and contentions of the parties. [Paras 10, 11, 12]

Matter remitted for re-adjudication with directions to call for particulars if needed, afford personal hearing, and pass a fresh speaking order within the period prescribed under Section 75(3) of the Act; merits not decided.

Final Conclusion: The order dated 29.12.2023 confirming demand is set aside for failure to consider the taxpayer's detailed replies and for not affording personal hearing; the matter is remitted to the Proper Officer to seek any required particulars, permit the taxpayer to respond, hold a personal hearing and pass a fresh speaking order within the time permitted under Section 75(3) of the Act; the Court has not expressed any view on the merits.

Cancellation of GST registration with retrospective effect - Requirement of objective satisfaction for retrospective cancellation - Power of proper officer to cancel registration under Section 29(2) - Insufficiency of show cause notice to put noticee on retrospective cancellation - Consequences of retrospective cancellation on input tax credit

Insufficiency of show cause notice to put noticee on retrospective cancellation - Cancellation of GST registration with retrospective effect - Impugned show cause notice and order are defective and do not validly effect retrospective cancellation as issued. - HELD THAT: - The show cause notice merely recited a generic ground-non-filing of returns for six continuous months-without specifying any basis for retrospective cancellation. The order of cancellation dated 31.07.2019 fails to articulate reasons for retrospective effect, contains internal contradictions (simultaneously referring to a reply and stating no reply was submitted), and records nil demand, undermining its character as a reasoned cancellation order. A notice and order lacking reasons and clarity do not satisfy the requirements for cancelling registration with retrospective effect. [Paras 4, 5, 6, 11]

Show cause notice and impugned cancellation order are legally defective for failure to specify and reason retrospective cancellation.

Requirement of objective satisfaction for retrospective cancellation - Power of proper officer to cancel registration under Section 29(2) - Consequences of retrospective cancellation on input tax credit - Retrospective cancellation under Section 29(2) cannot be mechanical; it requires objective satisfaction and may be imposed only where its consequences are intended and warranted. - HELD THAT: - Section 29(2) permits cancellation from such date, including retrospective dates, as the proper officer may deem fit; however, the court held that such exercise must not be arbitrary or purely subjective. The officer's satisfaction must be based on objective criteria. Mere non-filing of returns for a period does not automatically justify cancelling registration retrospectively to dates when the taxpayer was compliant. Given that retrospective cancellation can affect third-party rights such as input tax credit, those consequences must be considered and justify the retrospective date chosen. [Paras 9, 10]

Retrospective cancellation is permissible only on objective satisfaction that warrants such consequences; it cannot be applied mechanically.

Cancellation of GST registration with retrospective effect - Modification of the effective date of cancellation to the date of death of the registered person. - HELD THAT: - Having regard to the factual position that the registered person died on 14.03.2018 and that the petitioner does not intend to carry on the business or continue the registration, the court exercised its supervisory jurisdiction to modify the impugned order limitedly. The registration is to be treated as cancelled with effect from 14.03.2018, and the petitioner is directed to make necessary compliances under Section 29 of the Act. [Paras 13]

Registration treated as cancelled with effect from 14.03.2018; petitioner to comply with Section 29.

Consequences of retrospective cancellation on input tax credit - Respondents remain free to pursue recovery and other lawful steps including retrospective cancellation if warranted. - HELD THAT: - The court clarified that its modification does not preclude the department from initiating recovery of any tax, penalty or interest lawfully due in respect of the subject firm. Respondents are also not precluded from taking steps, including retrospective cancellation, insofar as such steps are in accordance with law and are justified by proper consideration. [Paras 14]

Respondents may take lawful steps for recovery and may pursue retrospective cancellation if legally warranted.

Final Conclusion: The show cause notice and cancellation order were defective for failing to specify or justify retrospective cancellation; registration is directed to be treated as cancelled from 14.03.2018 (date of death of the registered person), subject to the petitioner's compliance with Section 29 and without prejudice to the respondents' right to recover any dues or take other lawful action including retrospective cancellation if warranted.

Cancellation of GST registration with retrospective effect - requirement of reasons in show cause notice and order - objective satisfaction for retrospective cancellation - procedural fairness - issuance of show cause notice and opportunity to be heard - consequences of retrospective cancellation on input tax credit

Cancellation of GST registration with retrospective effect - procedural fairness - issuance of show cause notice and opportunity to be heard - Validity of cancellation of petitioner's GST registration effected retrospectively to 26.10.2022 when the petitioner had applied for cancellation on 12.04.2023 and an inspection on 30.05.2023 found the firm not existent. - HELD THAT: - The Court held that cancellation with retrospective effect cannot be mechanically imposed where the petitioner had itself applied for cancellation on 12.04.2023. An inspection on 30.05.2023 finding the firm not present did not justify cancelling registration with effect from 26.10.2022, because the petitioner had been compliant up to its application. The proper officer's power to fix a retrospective date under Section 29(2) must be exercised on an objective basis and not merely as a matter of form. In consequence, the Court modified the impugned cancellation so that the registration is deemed cancelled from 12.04.2023, the date of the petitioner's application, while leaving open respondents' rights to take lawful steps for recovery of dues. [Paras 8, 13, 15, 16]

Impugned cancellation set aside insofar as it operated from 26.10.2022 and is deemed effective from 12.04.2023 instead.

Requirement of reasons in show cause notice and order - procedural fairness - issuance of show cause notice and opportunity to be heard - Validity of the Show Cause Notice dated 06.06.2023 and the cancellation order dated 15.06.2023 which did not furnish reasons and where the Show Cause Notice lacked the name and designation of the issuing officer. - HELD THAT: - The Court observed that both the Show Cause Notice and the cancellation order did not state reasons and the Show Cause Notice did not bear the name and designation of the issuing officer despite calling for personal appearance. The absence of reasons and proper identification of the issuing authority undermined procedural propriety. The Court therefore found such documents deficient and altered the operative effect of the cancellation accordingly, while observing that authorities remain free to issue a proper Show Cause Notice and follow the statutory process. [Paras 11, 12, 15]

Show Cause Notice and cancellation order are procedurally deficient for want of reasons and proper identification; relief granted by modifying effective date and permitting authorities to proceed correctly.

Consequences of retrospective cancellation on input tax credit - objective satisfaction for retrospective cancellation - Whether retrospective cancellation may be imposed without consideration of its consequences, including denial of input tax credit to recipients. - HELD THAT: - The Court noted that retrospective cancellation has consequential effects, such as denial of input tax credit to the taxpayer's customers, and therefore should be ordered only where such consequences are intended and warranted. While not undertaking a full examination of these consequences, the Court emphasized that retrospective cancellation must rest on objective satisfaction by the proper officer and not be applied as a routine sanction. [Paras 13, 14]

Retrospective cancellation may be ordered only on objective satisfaction that warrants such consequences; it cannot be applied mechanically.

Procedural fairness - issuance of show cause notice and opportunity to be heard - Whether allegations in the counter-affidavit about wrongful claim of Input Tax Credit could sustain the impugned cancellation when such allegations were not mentioned in the Show Cause Notice or order. - HELD THAT: - The Court rejected respondent's contention based solely on allegations in the counter-affidavit because neither the Show Cause Notice nor the cancellation order referred to any wrongful claim of input tax credit. The Court held that authorities remain at liberty to initiate appropriate proceedings by issuing a proper Show Cause Notice, granting an opportunity of hearing, and then passing an order in accordance with law. [Paras 9, 10, 15]

Allegations of wrongful input tax credit in the counter-affidavit cannot validate the impugned documents; authorities may initiate separate proceedings following due process.

Final Conclusion: The Court modified the cancellation order to make the petitioner's GST registration effective from 12.04.2023 (the date of petitioner's cancellation application) instead of 26.10.2022, holding that retrospective cancellation requires objective satisfaction and that the impugned Show Cause Notice and order were procedurally deficient for want of reasons and proper identification; authorities remain free to proceed afresh in accordance with law.

Contempt of court - compliance with writ court directions - declaration of proceedings rendered infructuous - disposal of contempt proceedings - forwarding of claims to Information Technology Grievances Redressal Committee

Contempt of court - compliance with writ court directions - declaration of proceedings rendered infructuous - Whether the contempt proceedings alleging willful violation of the writ Court's directions could be continued where the respondent-authority has since passed the necessary order making the contempt application infructuous. - HELD THAT: - The petition alleged willful breach of the High Court's directions in W.P.(T) No.776 of 2019 which required pending/transitional GST TRAN-I claims to be forwarded by the Nodal Officer to the Information Technology Grievances Redressal Committee and for the Committee to take final decisions. On instructions, counsel for the petitioner informed the Court that the respondent-authority has since passed the necessary order complying with those directions. Having been informed of compliance, the Court treated the contempt proceedings as rendered infructuous and recorded disposal of the contempt petition. The Court did not adjudicate the merits of the original writ directions but disposed of the contempt case in view of the subsequent compliance by the authority. [Paras 3, 4]

Contempt Case (Cvl.) No.660 of 2020 disposed of as infructuous in view of the respondent-authority having passed the necessary order complying with the writ Court's directions.

Final Conclusion: The contempt petition alleging non-compliance with the High Court's directions was disposed of as infructuous after the respondent-authority passed the necessary order; the Court recorded disposal without adjudicating the underlying writ directions on their merits.

Contempt of court - rendered infructuous - disposal of contempt proceedings - direction for filing Form GST TRAN-I - forwarding claims to the Information Technology Grievances Redressal Committee

Contempt of court - rendered infructuous - disposal of contempt proceedings - Contempt proceedings alleged to arise from non-compliance with the writ Court's directions were disposed of as infructuous. - HELD THAT: - The petitioner instituted contempt proceedings alleging willful violation of the writ Court's order dated 11th September 2019 directing petitioners to prefer claims by filing Form GST TRAN-I and for the Nodal Officer to forward such claims to the Information Technology Grievances Redressal Committee. On instructions, counsel for the petitioner submitted that subsequent developments have rendered the contempt case infructuous. The High Court accepted that position and disposed of the contempt case accordingly without adjudicating the merits of alleged non-compliance with the earlier directions. [Paras 4]

Contempt Case (Cvl.) No. 658 of 2020 disposed of as infructuous.

Final Conclusion: The contempt petition alleging breach of the writ Court's directions was not adjudicated on merits and the contempt proceedings were dismissed as infructuous on the petitioner's statement of subsequent developments.

Medicament versus cosmetic classification - common parlance test - ingredients test - therapeutic or prophylactic use - minuscule proportion of medicinal ingredient not determinative - deemed not in operation under Section 101(3) of the GST Act

Medicament versus cosmetic classification - ingredients test - therapeutic or prophylactic use - minuscule proportion of medicinal ingredient not determinative - Whether JAC OLIVOL BODY OIL is classifiable as a medicament under Heading 3004 of the First Schedule to the Customs Tariff Act. - HELD THAT: - The Appellate Authority (Mr. Navneet Goel) examined the twin tests applied by the courts - the common parlance test and the ingredients test - and found that the product satisfies the ingredients test: its constituents are listed in the Ayurvedic Pharmacopoeia of India and the drug-control certificate identifying the formulation was placed on record. Reliance was placed on precedents which establish that the proportion of curative ingredients is not invariably decisive and that a rightful claim supported by authoritative formulation and ingredient inclusion can establish a product as a medicament. The Authority rejected reliance on online commercial descriptions as determinative and accepted the analogy that a minuscule proportion of medicinal ingredient does not change the essential nature if the curative attributes are present. Applying these principles, the Authority concluded that JAC OLIVOL BODY OIL would be covered under Heading 3004. [Paras 12, 13]

JAC OLIVOL BODY OIL is covered under Heading 3004.

Medicament versus cosmetic classification - common parlance test - therapeutic or prophylactic use - Whether JAC OLIVOL BODY OIL is classifiable as a cosmetic under Heading 3304 of the First Schedule to the Customs Tariff Act. - HELD THAT: - The dissenting Member (Mr. Devi Prasad Karanam) applied the twin tests with emphasis on the common parlance limb. He considered how ordinary users perceive the product and distinguished between 'care' and 'cure', observing that many ingredients (e.g. turmeric, camphor, common edible oils) have widespread non-medicinal uses and that general consumer perception and primary use for skin care weigh against treating the product as a medicament. Relying on authorities which hold that a subsidiary curative or prophylactic effect does not convert a cosmetic into a medicament, the dissent concluded that the product is essentially a skin-care/beauty preparation falling under Heading 3304. [Paras 22, 23, 24, 25, 26]

JAC OLIVOL BODY OIL is covered under Heading 3304.

Deemed not in operation under Section 101(3) of the GST Act - Effect of the divergence of opinion between the members of the Appellate Authority for Advance Ruling on the operative status of the Advance Ruling. - HELD THAT: - The members of the Appellate Authority delivered conflicting conclusions on the classification of the product. Under the statutory mechanism governing Advance Rulings, when the Authority members differ on the question under appeal, no Advance Ruling can be issued. Applying that provision, the Authority held that because its members differ, the earlier WBAAR order cannot stand in operation. [Paras 27, 28]

No Advance Ruling can be issued; the WBAAR order is deemed not in operation.

Final Conclusion: The Appellate Authority recorded conflicting conclusions on classification (one member holding Heading 3004, the other Heading 3304). Because the members differed, no Advance Ruling could be issued and the WBAAR order is deemed not in operation under Section 101(3) of the GST Act.

Fair Price Shop supplying under Public Distribution System (PDS) - agent (supply on behalf of State Government) - exemption to Fair Price Shops under GST notification for services to State Governments/UTs - valuation components (dealer's commission, transport, stationery, H&E) as commission included in dealer price - composite supply and principal supply

Fair Price Shop supplying under Public Distribution System (PDS) - agent (supply on behalf of State Government) - exemption to Fair Price Shops under GST notification for services to State Governments/UTs - The appellant's status as a Fair Price Shop and whether it supplies to the State Government (and thereby whether it must charge GST to the State). - HELD THAT: - On the facts and statutory definitions in the West Bengal Public Distribution System Order and the West Bengal Kerosene Control Order, the dealer's S.K. Oil shop falls within the concept of a Fair Price Shop licensed to distribute PDS commodities. The authority found that the dealer supplies S.K. Oil to ration card holders as an agent of the State Government: the State fixes allotment, territorial jurisdiction, and the retail/dealer price and expressly provides components such as dealer's commission and other compensations in the dealer price. Those features demonstrate agency (including agency by estoppel) and that the consideration for the dealer's service is in the form of commission/margin provided under government orders. Entry 11B of the notified GST rate schedule exempts services provided by Fair Price Shops to State Governments/UTs by way of sale of specified commodities under PDS against consideration in the form of commission or margin. Applying that notification, the appellant's service to the State is chargeable at NIL tax and, therefore, the question of charging GST to the State Government does not arise. [Paras 10, 11]

The appellant is a Fair Price Shop supplying S.K. Oil as an agent of the State Government and is eligible for the NIL-tax benefit under the relevant GST notification; consequently it is not required to charge GST to the State Government.

Valuation components (dealer's commission, transport, stationery, H&E) as commission included in dealer price - treatment of incidental charges where service is to State under PDS - Whether other charges (Dealer's commission, Dealer's Transport Charges, Stationery Charges, H&E Loss) are chargeable to GST or exempt. - HELD THAT: - The authority found that these components are incorporated into the dealer's sale price by government fixation and in substance represent commission/compensation provided to the dealer to secure a reasonable return; they are therefore part of the consideration for the dealer's service to the State. However, because the primary question (that the dealer supplies services to the State as a Fair Price Shop and is covered by the NIL-tax notification) is answered in favour of the appellant, the separate query on taxability of those charges becomes redundant. The authority also noted the valuation rule for principal-agent supplies under GST Rules but did not require a separate taxability determination in view of the exemption finding. [Paras 10, 11]

The question is rendered redundant by the finding that the appellant's service is exempt (NIL-rated) to the State; the incidental charges are components of the dealer's consideration but no separate GST charge is required in view of entitlement to the notification.

Composite supply and principal supply - agent (supply on behalf of State Government) - Whether the supply of S.K. Oil along with charges constitutes a composite supply with the principal supply being S.K. Oil. - HELD THAT: - Composite supply is a bundle of two or more taxable supplies where one is the principal supply. The authority concluded that the appellant does not make a supply of goods to the ration card holders in the taxable sense but rather makes a single taxable supply of service to the State Government as its agent in distributing S.K. Oil under PDS. Given that characterisation, there is no separate composite supply analysis to perform: the transaction is not treated as a composite supply with S.K. Oil as principal; instead the supply is the dealer's service to the State. [Paras 10, 11]

Supply of S.K. Oil together with the ancillary charges is not to be treated as a composite supply; the transaction is a service supplied by the appellant to the State Government as agent.

Final Conclusion: The Appellate Authority rules that the appellant is a Fair Price Shop licensed under the PDS/Kerosene Control Order and supplies S.K. Oil to ration card holders as an agent of the State; the appellant's services fall within the NIL-rated entry for Fair Price Shops providing services to State Governments/UTs by way of sale under PDS, so no GST is to be charged to the State Government. The separate question on the taxability of incidental charges is redundant in view of this exemption, and the transaction is not a composite supply but a service by the dealer to the State.

Jurisdiction of AO to decide refund claims - supersession of earlier circulars by a later CBDT circular - pecuniary limits for authority to condone delay and decide refund claims - remand to competent authority for fresh adjudication - Delay filling SLP - HELD THAT:- There is delay of 274 days in filing the present special leave petition, which has not been satisfactorily explained. Even on merits, we do not see any good ground and reason to interfere with the impugned judgment [2023 (2) TMI 224 - JHARKHAND HIGH COURT]

Recording the aforesaid, the application for condonation of delay and consequently the Special Leave Petition are dismissed.

Pending application(s), if any, shall stand disposed of.

Tax Deducted at Source - External Development Charges (EDC) - obligation to withhold TDS u/s 194-I - characterisation of payment (nature of payment) - curability of erroneous statutory reference in taxing orders

HELD THAT:- Having regard to the order passed by this Court in M/S Experion Developers Pvt. Ltd.[2024 (2) TMI 894 - SC ORDER] arising from the very same impugned final judgment and order and following the order of this Court in the case of BPTP Limited i[2021 (2) TMI 623 - SC ORDER] this special leave petition is also dismissed.

TDS u/s 194H - non-deduction of taxes on payments made to distributors towards price protection and special price clearance discounts - relationship between the assessee and the distributor is that of Principal to Principal OR Principal to Agent - Binding precedents - coverage by earlier decision

As decided by HC [2023 (8) TMI 456 - KARNATAKA HIGH COURT] inventory risk after acquiring the product is that of the distributor. Payment from the distributor to assessee has no link with the further sales made by the distributor. commission or brokerage is described in explanation to Section 194H and CIT(A) that payment from the distributor to the assessee has no link with the further sale made by the distributor and same having been confirmed

HELD THAT:- As petitioner submits that the matter is covered by the decision of this Court in Bharti Cellular Limited (Now Bharti Airtel Limited) [2024 (3) TMI 41 - SUPREME COURT] - In view of the statement made, Special Petition is dismissed as being covered by the above-mentioned decision.

Fees for technical services - noscitur a sociis - withholding tax certificate under Section 197 - chargeability to tax under Section 9(1)(vii) read with DTAA Article 12 - duty of authority to undertake prima facie examination - remand for fresh consideration

Withholding tax certificate under Section 197 - alternative remedy under Section 264 - appeal from Caesar to Caesar - maintainability of the writ petition challenging the Section 197 certificate - HELD THAT: - The Court held that the writ petition is maintainable because the impugned order was passed with the approval of the Commissioner, making recourse to revision under Section 264 an ineffective or illusory remedy (an "appeal from Caesar to Caesar"). Prior approval by the Commissioner, as recorded on the TRACES portal, meant that relegation to revision would be a futile formality and no efficacious alternative remedy existed. [Paras 17, 18, 19]

Writ petition is maintainable

Duty of authority to undertake prima facie examination - Rule 28AA considerations - statutory mandate under Section 197 - obligation of the authority considering a Section 197 application to examine chargeability and relevant factors - HELD THAT: - The Court reiterated that while a Section 197 certificate is provisional, the authority is statutorily obliged to undertake a prima facie evaluation of whether the income is chargeable to tax. Rule 28AA requires consideration of existing and estimated tax liability (including estimated income, prior years' assessed/returned income, existing liabilities and advance/tax deducted at source), and thus the AO must accord due consideration to aspects pertaining to chargeability even in the provisional Section 197 exercise. [Paras 15, 16, 17]

Authority must consider chargeability and Rule 28AA factors when deciding a Section 197 application

Fees for technical services - noscitur a sociis - service versus facility - whether payments made by SFDC India to SFDC Ireland constituted "fees for technical services" under Section 9(1)(vii) read with Article 12 of the India Ireland DTAA - HELD THAT: - The Court examined established precedents (Bharti Cellular, Kotak Securities, Maersk) and UN/MLI commentary to articulate the governing test: FTS denotes specialized, individualized or exclusive services involving application or transfer of specialised knowledge/skill (a human element), as distinct from a standard automated facility or routine access. Applying those precepts to the Reseller Agreement, the Court found no material before the authority indicating transfer of specialised or customized technical services to SFDC India; the agreement described principal to principal resale of standardized cloud products, limited technical assistance and training aimed at marketing and onboarding, and no transfer of IP. Consequently, the Court concluded that the respondents had not established that the remittances were consideration for FTS and that the impugned order failed to link payments to customised technical services. [Paras 41, 42, 43, 45, 48]

Issue not finally decided on merits - impugned order quashed and matter remitted for fresh consideration directed to test whether payments are consideration for specialised/customised technical services

Remand for fresh consideration - link between consideration and technical service - scope of remand and directions for fresh consideration - HELD THAT: - The Court quashed the certificate and order and remitted the matter to the respondent to reconsider the Section 197 application afresh. The respondent is directed to examine whether any component of the Reseller's Net Revenue (including possible customization or individualization services, streams of revenue under Exhibit A) represents consideration for specialised technical services and to determine if any material supports characterization of the payments as non standardized or bespoke technical services. The Court emphasised that the enquiry must focus on the nature of services provided by SFDC Ireland to SFDC India (the payee payor nexus), and not on potential benefits to end customers, and to apply the tests elaborated in the judgment. [Paras 48, 49, 50]

Impugned order and certificate quashed; matter remitted for fresh consideration in light of the Court's observations

Final Conclusion: The Court quashed the certificate dated 16 October 2023 and the order dated 18 October 2023 and allowed the writ petition as maintainable; the matter is remitted to the respondent to reconsider the Section 197 application afresh, applying the statutory and judicial tests for distinguishing a routine facility from specialised/customised "fees for technical services", and taking into account the Rule 28AA/Section 197 considerations identified in the judgment.

Quash and set aside - remand for de novo consideration - judicial decision acts retrospectively - binding nature of appellate orders on subordinate revenue authorities - application of law laid down by the ITAT - proviso to Section 2(15) of the Act

Proviso to Section 2(15) of the Act - application of law laid down by the ITAT - judicial decision acts retrospectively - binding nature of appellate orders on subordinate revenue authorities - remand for de novo consideration - Validity of the order dated 23rd September 2015 rejecting petitioner's claim for approval under Section 10(23C)(iv) for Assessment Year 2014-2015 - HELD THAT: - The Court found that the rejection by respondent no. 2 was liable to be set aside and remitted for fresh consideration. The ITAT had, in respect of later assessment years, set aside similar rejections and held that the petitioner was entitled to exemption under Section 10(23C)(iv); a subsequent judicial decision operates retrospectively and, absent distinguishing facts, must be applied by subordinate authorities. Reliance was placed on the principle that orders of higher appellate authorities are binding on subordinate revenue officers and that the mere pendency of an appeal against the appellate orders does not justify non-application of those orders unless their operation has been stayed. In view of these principles, the impugned order was quashed and the matter remitted to respondent no. 2 to consider the claim afresh applying the law as laid down by the ITAT, unless respondent no. 2 can distinguish those decisions on facts. All rights and contentions were kept open for determination on remand. [Paras 6, 9, 10]

Impugned order dated 23rd September 2015 quashed and set aside; matter remitted to respondent no. 2 for de novo consideration applying the ITAT law unless distinguished on facts.

Final Conclusion: The petition succeeds: the order rejecting approval under Section 10(23C)(iv) for Assessment Year 2014-2015 is quashed and the matter is remanded for fresh consideration by respondent no. 2, who must apply the law laid down by the ITAT unless it can be distinguished on facts.

Exemption of land acquisition compensation from income tax - application of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 to compensation paid pursuant to KIADB agreement - condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 - refund of tax collected/TDS on land acquisition compensation

Exemption of land acquisition compensation from income tax - application of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 to compensation paid pursuant to KIADB agreement - refund of tax collected/TDS on land acquisition compensation - Whether compensation received by the petitioner pursuant to the agreement with KIADB is exempt from income tax under the RFCTLARR Act and entitles the petitioner to refund of tax collected for Assessment Year 2019-20. - HELD THAT: - The Court found that respondent No. 2 proceeded on the erroneous premise that the compensation was not covered by the RFCTLARR Act. The compensation was paid pursuant to the agreement dated 06.03.2019 under Section 29(2) of the KIAD Act and falls within the scope of the Division Bench decision in Bangalore Metro Rail Corporation Limited v. M/s Sri Balaji Corporate Services and Others, a decision followed in Smt. P. Jaishree v. Chief Commissioner of Income Tax. Applying that precedent, the Court held that the compensation is not taxable and that the respondents erred in refusing refund of the tax collected. The impugned order rejecting the refund on merits was set aside and the respondents were directed to refund the tax collected.

Impugned order refusing refund on the ground that RFCTLARR Act did not apply was set aside; petitioner entitled to refund of tax collected for AY 2019-20.

Condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 - Whether the delay in filing the application under Section 119(2)(b) ought to be condoned. - HELD THAT: - The Court examined the impugned order's refusal to condone delay and concluded that respondent No. 2 adopted a hyper-technical approach, failing to appreciate the valid and sufficient reasons advanced by the petitioner for delay. Relying on the approach in Jaishree's case and the material on record, the Court found the refusal to condone delay contrary to the evidence and law and therefore set aside that aspect of the impugned order. Consequently the application under Section 119(2)(b) was allowed by condoning the delay.

Delay in filing under Section 119(2)(b) condoned and the petitioner's application allowed.

Final Conclusion: Petition allowed; impugned order dated 31.07.2023 set aside; delay under Section 119(2)(b) condoned; respondent directed to refund the entire tax collected in relation to the land acquisition compensation for Assessment Year 2019-20 within one month.

Percentage of completion method (POCM) - revenue recognition and year of taxability - academic dispute where revenue not deprived - deletion of addition on account of premature recognition of revenue - disallowance under section 14A where no exempt income - respectful reliance on precedents to decline reopening year of assessment

Percentage of completion method (POCM) - deletion of addition on account of premature recognition of revenue - revenue recognition and year of taxability - academic dispute where revenue not deprived - respectful reliance on precedents to decline reopening year of assessment - Deletion of addition of Rs. 3.26 crores computed by AO by applying POCM for AY 2015-16 was upheld. - HELD THAT: - The Tribunal upheld the findings of the ld. CIT(A) that the project was originally planned and approved for ten towers and was subsequently bona fide restricted to six towers due to market and other reasons, supported by approved plans, marketing material and booking records. The CIT(A) found that the assessee had begun recognizing revenue under POCM in subsequent years and had already declared the bulk of the project revenue (98.62%) in AYs 2015-16 to 2019-20. The Tribunal noted that the AO's computation ignored the approved project plan and treated unopened towers as if completed, and that the rate of tax remained the same in the years in question; accordingly, shifting the year of recognition would be essentially academic and would not deprive the revenue of tax. The Tribunal therefore followed the reasoning in the cited authorities, including the Supreme Court's decision in Excel Industries, and found no infirmity in the CIT(A)'s deletion of the addition. [Paras 3, 4, 6, 7, 9]

Addition made by the AO on account of applying POCM for AY 2015-16 deleted; ground 1 of the revenue dismissed.

Disallowance under section 14A where no exempt income - respectful reliance on precedents to decline applicability of section 14A - Deletion of disallowance under section 14A in absence of exempt income was upheld. - HELD THAT: - The Tribunal held that the question is no longer res integra in view of the jurisdictional High Court precedent in PCIT v. Era Infrastructure Ltd which held that where no exempt income is earned, disallowance under section 14A cannot be pressed into service. Respectfully following that precedent, the Tribunal sustained the CIT(A)'s deletion of the section 14A disallowance. [Paras 10]

Ground challenging deletion of disallowance under section 14A dismissed.

Final Conclusion: Following the factual findings of the CIT(A) and binding precedents, the Tribunal dismissed the revenue's appeal: the addition computed by applying POCM for AY 2015-16 was deleted as the dispute was academic and revenue was not deprived of tax, and the section 14A disallowance was disallowed in the absence of exempt income.

Disallowance under Section 40(a)(ia) of the Income-tax Act - deduction of tax at source on rent - lower deduction certificate under Section 197 - Double Taxation Avoidance Agreement (DTAA) vis-a -vis Dividend Distribution Tax (Section 115-O) - interest under Sections 234B and 234C - penalty proceedings under Section 270A-prematurity of initiation

Disallowance under Section 40(a)(ia) of the Income-tax Act - deduction of tax at source on rent - lower deduction certificate under Section 197 - Deletion of disallowance under Section 40(a)(ia) in respect of rental expenditure of Rs.18,52,28,719/- where TDS had been deducted and deposited. - HELD THAT: - The Tribunal examined the material on record showing party-wise particulars of rent and the TDS deducted and deposited, including a lower deduction certificate obtained by one landlord under Section 197. The Assessing Officer had made a large disallowance essentially because the tax-audit report mentioned an incorrect TDS provision (194IB instead of 194I(b)) and because a show-cause notice uploaded on the portal was not responded to. The Tribunal found that the assessee had earlier furnished detailed written submissions and evidence of TDS deduction and deposit, which the AO ignored. Given these facts, a disallowance solely on account of mistaken mention of the provision in the tax-audit report was unsustainable. The Tribunal accordingly deleted the disallowance in full. [Paras 4]

Grounds 2 to 2.2 allowed; disallowance under Section 40(a)(ia) deleted.

Double Taxation Avoidance Agreement (DTAA) vis-a -vis Dividend Distribution Tax (Section 115-O) - Claim for refund of excess Dividend Distribution Tax (DDT) by invoking DTAA denied. - HELD THAT: - The Tribunal held that the issue is no longer open in light of the Special Bench decision in DCIT vs Total Oil India Pvt Ltd, which concluded that DTAA protection does not get triggered merely because a domestic company has paid DDT under Section 115-O; treaty relief is available to a domestic company only where contracting states intend to extend treaty protection to a domestic company paying DDT. Respecting that decision, the Tribunal dismissed the assessee's claim for DTAA benefit and refund of excess DDT. [Paras 5]

Grounds 3 to 3.4 dismissed; no refund on DTAA basis of DDT paid.

Interest under Sections 234B and 234C - Chargeability of interest under Sections 234B and 234C treated as consequential. - HELD THAT: - The Tribunal recorded that the issue of interest under Sections 234B and 234C arises consequentially from the assessment adjustments and therefore did not adjudicate it independently in this appeal. [Paras 6]

Ground 5 noted as consequential; not separately adjudicated.

Penalty proceedings under Section 270A-prematurity of initiation - Initiation of penalty proceedings under Section 270A held to be premature for adjudication at this stage. - HELD THAT: - The Tribunal found that adjudication on penalty under Section 270A could not be undertaken at the appellate stage of the assessment proceedings and therefore treated the challenge as premature. [Paras 7]

Ground 6 dismissed as premature.

Final Conclusion: The appeal is partly allowed: the disallowance under Section 40(a)(ia) in respect of rental payments is deleted; the claim for refund of excess DDT on the basis of DTAA is dismissed following the Special Bench precedent; interest issues are consequential; penalty proceedings under Section 270A are premature.

Addition under section 69A as unexplained money - disallowance of interest as business expenditure under section 69C - genuineness and creditworthiness of loans - allowability of interest where genuine outgoing is proved - appellate authority's duty to consider filed submissions and documents - admission and consideration of additional evidence

Addition under section 69A as unexplained money - genuineness and creditworthiness of loans - appellate authority's duty to consider filed submissions and documents - Deletion of addition of Rs. 10,62,534/- made as unexplained money on account of unsecured loans - HELD THAT: - The Tribunal found that the assessee had furnished before the Assessing Officer the names, addresses and PANs of the lenders and had requested summons and information under statutory provisions to verify the lenders. Additional evidence submitted before the first appellate authority and placed on record before the Tribunal included loan confirmations and bank statements showing transfers by RTGS and sufficient credit balances in the lenders' accounts. The CIT(A) failed to acknowledge or consider these written submissions and documents and merely dismissed the ground by stating no evidence was submitted. Once confirmations and bank statements establishing the receipt of loans and creditworthiness of the lenders are on record, the addition as unexplained money cannot be sustained unless the loans are shown to be not genuine or used for non-business purposes; no such finding was made. Applying these facts, the Tribunal deleted the addition. [Paras 9, 10, 13]

Addition of Rs. 10,62,534/- under section 69A deleted.

Disallowance of interest as business expenditure under section 69C - allowability of interest where genuine outgoing is proved - admission and consideration of additional evidence - Deletion of disallowance of financial expenses of Rs. 4,62,944/- (interest) claimed as business expenditure - HELD THAT: - The assessee produced ledger accounts, bank statements and audited accounts showing interest paid on bank overdraft, secured and unsecured loans, and these entries were reflected in the audited financial statements. The Assessing Officer disallowed the interest on the basis that the capital had become negative and without demonstrating that the loans or interest were not for business purpose. The Tribunal held that negative capital or later losses does not, by itself, justify disallowance of interest where the payments are genuine and supported by bank records and ledger entries; absent a finding that the loans were used for non-business purposes, the financial expenses evidenced by bank payments and account entries are allowable. Accordingly, the disallowance was deleted. [Paras 11, 14]

Disallowance of interest of Rs. 4,62,944/- deleted.

Final Conclusion: The appeal is allowed: the addition under section 69A in respect of unsecured loans is deleted and the disallowance of interest claimed as business expenditure is deleted; the first appellate authority's summary dismissal of the filed documents was set aside.

Registration under section 80G(5) - provisional approval and time limit under clause (iii) of the first proviso to section 80G(5) - mandatoriness of statutory time-limits and CBDT extensions under section 119 - commencement of activities for purposes of clause (iii) - condonation of delay by the Tribunal

Provisional approval and time limit under clause (iii) of the first proviso to section 80G(5) - commencement of activities for purposes of clause (iii) - mandatoriness of statutory time-limits and CBDT extensions under section 119 - Whether the application in Form No.10AB filed on 02/12/2022 was within the time prescribed under clause (iii) of the first proviso to section 80G(5) and thus maintainable - HELD THAT: - The Tribunal examined the statutory timetable in clause (iii) of the first proviso to section 80G(5) and the sequence of CBDT circulars extending filing dates. The CIT(E) found material in the assessee's FY 2021-22 accounts showing receipt of donations and application of funds, concluding activities had commenced before 07/11/2022 and that the Form 10AB filed on 02/12/2022 fell after the extended date available under CBDT Circular No.8/2022 (30.09.2022). The Tribunal, however, noted ambiguity in the CBDT circulars concerning extension of time for Form No.10AB under clause (iii) and followed co-ordinate precedents which interpreted the proviso so that the phrase "within six months of commencement of its activities" principally targets newly formed trusts which had not commenced activities at the time of provisional approval. Weighing those authorities and the practical difficulties, the Tribunal held that the delay in filing was to be condoned in the interest of justice and that the application should be treated as having been filed within statutory time for the purpose of further adjudication on merits. [Paras 4, 5, 8, 14]

Delay in filing Form No.10AB was condoned and the application is to be treated as within time for onward consideration on merits.

Condonation of delay by the Tribunal - mandatoriness of statutory time-limits and CBDT extensions under section 119 - Whether the Tribunal has the power to condone delay in filing Form No.10AB under section 80G(5) - HELD THAT: - The Tribunal considered its jurisdiction and relied on established principles permitting condonation of delay to secure substantial justice. It placed reliance on appellate and High Court precedent recognising that tribunals may condone delay where sufficient cause or undue hardship exists, and that such determinations are factual and within the Tribunal's judicial domain. Applying those principles to the present factual matrix and the ambiguity in CBDT circulars, the Tribunal held that it had the power to condone the delay and exercise it in the interest of justice. [Paras 19, 20]

Tribunal may and, on the facts of this case, did condone the delay in filing Form No.10AB.

Registration under section 80G(5) - provisional approval and time limit under clause (iii) of the first proviso to section 80G(5) - Whether the application should be remitted to the CIT(E) for fresh adjudication on the substantive eligibility for registration under section 80G(5) - HELD THAT: - Having condoned the delay, the Tribunal found that the CIT(E) had rejected the Form 10AB application on technical/time-bar grounds without adjudicating the merits of the assessee's entitlement under section 80G(5). The Tribunal therefore set aside the rejection and remitted the matter to the CIT(E) for verification of eligibility and determination on merits, directing the assessee to produce required documents and granting the CIT(E) opportunity to decide afresh in accordance with law. [Paras 12, 14]

Matter remitted to the CIT(E) for fresh adjudication on merits and verification of the assessee's eligibility under section 80G(5).

Final Conclusion: The Tribunal condoned the delay in filing Form No.10AB under clause (iii) of the first proviso to section 80G(5), set aside the CIT(E)'s rejection as non-maintainable, and remitted the application to the CIT(E) for fresh adjudication on merits and verification of eligibility; the appeal is allowed for statistical purposes.

Disallowance of corporate social responsibility expenditure under Explanation (2) to section 37 - deductibility of ESOS/employee stock option differential as revenue expenditure under section 37(1) - allowance of depreciation on investments where investments treated as stock-in-trade - consequence of non-deduction of tax at source on interest payments and verification under section 40(a)(ia) - allowability of share issue expenses under section 35D linked to extension of existing business - deduction for bad debts written off under section 36(1)(vii) and interplay with provisions under section 36(1)(viia) - computation of aggregate average rural advances for deduction under section 36(1)(viia) and Rule 6ABA - computation of deduction for profit from eligible business under section 36(1)(viii) - application of section 14A r.w. Rule 8D for expenses relatable to exempt income - treatment of stale drafts/unclaimed balances and section 41(1)/28(iv) - rate of depreciation on ATMs as akin to computer equipment - treatment of interest on non performing assets after relevant judicial pronouncements

Disallowance of corporate social responsibility expenditure under Explanation (2) to section 37 - Deductibility of CSR expenditure claimed by the bank - HELD THAT: - The Tribunal held that CSR expenditure mandated by section 135 of the Companies Act, 2013 partakes the nature of appropriation of profit and is not an expenditure wholly and exclusively for business; Explanation (2) to section 37 (w.e.f. AY 2015-16) excludes CSR amounts referred to in section 135 from being deductible. Earlier authorities decided before insertion of Explanation (2) were held inapplicable. The assessee's claim for deduction of CSR expenses was accordingly rejected. [Paras 5]

Assessee is not entitled to deduction for CSR expenses; CIT(A)'s disallowance upheld.

Deductibility of ESOS/employee stock option differential as revenue expenditure under section 37(1) - Allowability of ESOS expenses claimed as difference between market price and exercise price - HELD THAT: - The Tribunal accepted that the differential between market price and exercise price represents consideration/compensation for employee services and is revenue in nature. It followed binding High Court authority and the ITAT Special Bench principle that such ESOS discount is deductible under section 37(1); the AO was held to have erred in re computing the allowable amount using an alternative formula without adequate reasoning. Consequently the disallowance and the enhancement made by CIT(A) were deleted. [Paras 6]

ESOS expense claimed (difference between market price and option exercise price for shares actually allotted) allowable under section 37(1); AO's and CIT(A)'s disallowances deleted.

Allowance of depreciation on investments where investments treated as stock-in-trade - Validity of disallowance of depreciation on investments where the bank treats securities as stock in trade - HELD THAT: - The Tribunal followed the jurisdictional High Court precedent in the bank's own case and other relevant authorities to hold that depreciation (market to market decline) on investments treated as stock in trade is allowable for income tax computation even if valuation for book purposes follows RBI categories. The AO's disallowance based on RBI valuation instructions was held to be erroneous and ordered deletion. [Paras 7]

AO's addition for disallowance of depreciation on investments deleted.

Consequence of non-deduction of tax at source on interest payments and verification under section 40(a)(ia) - Whether interest payments without TDS should be disallowed under section 40(a)(ia) and the need for verification - HELD THAT: - The Tribunal found that the assessee asserted many of the payments related to exempt entities or that deductees had filed returns and paid tax; however, documentary proof (e.g., certificates under section 197) was not placed before the Tribunal. The Tribunal did not decide the correctness of the disallowance on merits but set aside the matter to the AO for verification of the assessee's evidentiary claims and directed redetermination in accordance with law. [Paras 8]

Issue remitted to AO for fresh verification and decision in accordance with law.

Allowance of share issue expenses under section 35D linked to extension of existing business - Allowability of QIP share issue expenses under section 35D - HELD THAT: - The Tribunal noted that section 35D permits amortisation where expenses relate to extension of existing business. The assessee asserted QIP proceeds were used to expand business (new branches/ATMs) but furnished no documentary proof before the Tribunal. The Tribunal therefore remitted the matter to the AO to verify whether QIP proceeds were actually applied for extension of business; if proved, the expenditure would be allowable. [Paras 9]

Issue remitted to AO to verify application of QIP proceeds and decide admissibility of QIP expenses under section 35D.

Deduction for bad debts written off under section 36(1)(vii) and interplay with provisions under section 36(1)(viia) - Whether write off of non rural bad debts must be adjusted against the provision for bad and doubtful debts account under section 36(1)(viia) (having regard to Explanation 2) and allowability of claimed write offs - HELD THAT: - After reviewing Supreme Court authorities, the Finance Act 2013 Explanation, and tribunal decisions, the Tribunal followed the coordinate bench (Karnataka Bank v. DCIT) and Delhi High Court guidance to hold that bad debts written off relating to non rural advances need not be set off against the provision for bad and doubtful debts account maintained for rural advances under clause (a) of section 36(1)(viia). The Tribunal directed the AO to re compute deductions for non rural write offs without adjustment to the rural PBDD credit and to verify facts where records were unclear; several specific claims were remitted for factual verification. [Paras 10]

Non rural bad debt write offs to be allowed under section 36(1)(vii) without adjustment against rural PBDD under section 36(1)(viia); matters remitted to AO for factual verification and recomputation.

Computation of aggregate average rural advances for deduction under section 36(1)(viia) and Rule 6ABA - Method of computing aggregate average rural advances for deduction under section 36(1)(viia) - HELD THAT: - The Tribunal applied Rule 6ABA and followed the Madras High Court decision in the bank's earlier case and related authorities to hold that aggregate average advances outstanding at the end of each month (as per Rule 6ABA) should be used, not merely incremental advances during the year. The Tribunal remitted the matter to the AO to recompute the deduction applying the aggregate average method and to verify rural branch classification (2011 census guidance) and supporting documents. [Paras 12]

AO directed to compute deduction under section 36(1)(viia) based on aggregate average rural advances per Rule 6ABA; recomputation remitted to AO.

Computation of deduction for profit from eligible business under section 36(1)(viii) - Proper method to compute profit from eligible business for deduction under section 36(1)(viii) - HELD THAT: - The Tribunal held that profits from eligible business must be computed in accordance with sections 30 to 43D and that the assessee cannot arbitrarily segregate banking activities into separate businesses to compute deduction. Where detailed interest and related expense records for eligible business are available, those records should be used; otherwise the AO's proportionate method may be acceptable. Because facts and details were unclear, the Tribunal remitted computation to the AO for fresh consideration in accordance with law. [Paras 11]

Issue remitted to AO for fresh computation of eligible business profit and deduction under section 36(1)(viii) in accordance with sections 30-43D.

Application of section 14A r.w. Rule 8D for expenses relatable to exempt income - Disallowance under section 14A r.w. Rule 8D where AO made no relevant findings and assessee claimed no expenditure - HELD THAT: - The Tribunal followed prior coordinate bench authority and Supreme Court precedent (Maxopp) to hold that where the AO has not made findings to show that expenditure was incurred to earn exempt income, Rule 8D cannot be mechanically applied; in the facts before it, deletion of the section 14A disallowance was appropriate. [Paras 16]

CIT(A)'s deletion of section 14A disallowance upheld.

Treatment of stale drafts/unclaimed balances and section 41(1)/28(iv) - Whether excess cash, stale drafts and branch suspense balances become assessee's income - HELD THAT: - Relying on High Court and Tribunal precedents, the Tribunal held that such unclaimed balances are not income of the bank where the bank's liability to pay remains and RBI guidance contemplates transfer to a depositors' fund; accordingly the CIT(A) deletion of the AO's addition was upheld. [Paras 18]

AO's additions for stale drafts/unclaimed balances deleted; CIT(A)'s order upheld.

Rate of depreciation on ATMs as akin to computer equipment - Appropriate depreciation rate for ATMs - HELD THAT: - The Tribunal followed earlier coordinate bench findings and Supreme Court authority (State Bank of Patiala) that ATMs are akin to computers and eligible for higher depreciation (60%) rather than plant and machinery rates; CIT(A)'s deletion of AO's excess depreciation addition was upheld. [Paras 47]

Higher depreciation on ATMs sustained; AO's disallowance deleted.

Treatment of interest on non performing assets after relevant judicial pronouncements - Taxation of accrued interest on NPA accounts - HELD THAT: - The Tribunal applied subsequent Supreme Court authority (Vasisth Chay Vyapar Ltd.) and coordinate bench decisions to hold that interest on non performing assets is not to be treated as income when governed by those authorities; CIT(A)'s deletion of AO's addition was confirmed. [Paras 48]

AO's addition for interest on NPAs deleted; CIT(A)'s order upheld.

Final Conclusion: For AYs 2015-16, 2016-17 and 2017-18 the Tribunal partly allowed the assessee's appeals and partly allowed/rejected the revenue's appeals: CSR disallowances sustained; ESOS and depreciation on investments and ATMs allowed; stale drafts/unclaimed balances and section 14A additions deleted; interest TDS, QIP expenses, eligible business profit and several computations under sections 36(1)(vii)/36(1)(viia)/36(1)(viii) were remitted to the Assessing Officer for verification and recomputation in accordance with the Tribunal's directions.

Deduction under Chapter VIA - claim to be made in the return of income - Section 80A(5) - statutory pre-condition for allowance of specified deductions - Section 80P - deduction for co-operative societies - Strict construction of exemption and deduction provisions in taxing statutes - Precedential weight of High Court decisions over coordinate Tribunal orders

Section 80A(5) - statutory pre-condition for allowance of specified deductions - Section 80P - deduction for co-operative societies - Deduction under Chapter VIA - claim to be made in the return of income - Strict construction of exemption and deduction provisions in taxing statutes - Whether deduction under section 80P is allowable when the assessee has not filed a return of income and has not made a claim for the deduction in any return - HELD THAT: - The Tribunal examined the assessment record and found that the assessee had not filed a return for A.Y. 2017-18 and had not made any claim for deduction under section 80P before the Assessing Officer. Section 80A(5) operates as a statutory pre-condition that a claim for the specified deductions under Chapter VIA (heading 'C - Deductions in respect of certain incomes') must be made in the return of income; failure to make such claim in the return disentitles the assessee to the deduction. The Tribunal relied on the principle of strict construction of exemption/deduction provisions in taxing statutes and followed binding decisions of the High Courts and the Supreme Court recognising that the proviso in Section 80A(5) attaches to the claim of the assessee and cannot be circumvented by allowing a deduction not claimed in a return. Earlier High Court rulings (as discussed in the order) establish that the claim must be made in a valid return and, after the 2018 amendment to Section 80AC, stricter temporal requirements apply for certain years. Coordinate Tribunal orders relied on by the assessee were held to be inconsistent with the High Court authorities and therefore not binding. Applying these principles to the facts, the Tribunal held that in absence of any claim in a return the deduction under section 80P could not be allowed and the Assessing Officer's denial was correct. [Paras 7, 8, 9, 10]

Deduction under section 80P disallowed because no return was filed and no claim for the deduction was made in a return; assessment upheld

Final Conclusion: The appeal is dismissed: following Section 80A(5) and relevant High Court and Supreme Court authorities, a claim for deduction under section 80P must be made in a return of income and, as no valid claim or return was filed for A.Y. 2017-18, the Tribunal upholds the assessment denying the deduction.

Fees for Technical Services - Independent professional services - Tax Deduction at Source (TDS) liability under section 201(1) and interest under section 201(1A) - Double Taxation Avoidance Agreement (DTAA) - 'make available' clause

Fees for Technical Services - Independent professional services - Double Taxation Avoidance Agreement (DTAA) - 'make available' clause - Tax Deduction at Source (TDS) liability under section 201(1) - Whether the impugned payments of Rs. 34.22 Lacs to various non-residents attract TDS as Fees for Technical Services or are covered by DTAAs as independent professional services and/or reimbursements not exigible to TDS. - HELD THAT: - The Tribunal noted that the assessee paid certain non-residents for legal/IPR services and had pleaded that such services constituted independent professional services under the respective DTAAs and included reimbursements not liable to TDS. The Assessing Officer treated the payments (excluding amounts to three specified countries where benefit was allowed) as 'Fees for Technical Services' under the domestic provisions and raised demand under section 201(1). The Commissioner (Appeals) upheld that view but did not consider the assessee's DTAA-based plea. Given that the question of applicability of the DTAA clauses (including the 'make available' concept) and the characterisation of certain amounts as reimbursements was not adjudicated by the first appellate authority, the Tribunal set aside the order and remitted the matter to the Assessing Officer for fresh consideration. The AO has been directed to examine the DTAA extracts placed on record, verify the nature of the payments and reimbursements, and, after allowing the assessee an opportunity to substantiate its claims, revise the TDS demand if warranted. The remand is for fresh adjudication on merits and consequential revision of demand under section 201(1). [Paras 6]

Matter remanded to the Assessing Officer to consider the assessee's DTAA-based plea and claims of reimbursements and to revise the TDS demand under section 201(1) if required.

Interest computation under section 201(1A) - Infructuous appeal - Whether the appeal against computation of interest under section 201(1A) survives independently of the determination of TDS demand. - HELD THAT: - The Tribunal observed that the interest computation under section 201(1A) was consequential upon the TDS demand under section 201(1). Since the substantive demand was remitted to the Assessing Officer for fresh consideration, the separate appeal challenging the interest computation became without practical effect. Consequently, that appeal was treated as infructuous. [Paras 6, 7]

The appeal against interest computation under section 201(1A) is dismissed as infructuous.

Final Conclusion: ITA No.906/Chny/2023 is allowed for statistical purposes and remitted to the Assessing Officer to examine the DTAA-based contention and reimbursement claims and to revise the TDS demand under section 201(1) (and consequential interest under section 201(1A)) after affording the assessee an opportunity to substantiate its case; ITA No.907/Chny/2023 is dismissed as infructuous.

Reopening of assessment under section 147 - reasons to believe - application of section 68 as unexplained cash credit - sale of investment in shares versus subscription to share capital/share premium - mechanical approval under section 151 - penalty under section 271(1)(c) - requirement of specific charge in notice

Reopening of assessment under section 147 - reasons to believe - mechanical approval under section 151 - Validity of reopening of assessment under section 147 for the assessment years in question - HELD THAT: - The Tribunal found that the reasons recorded for reopening did not identify or test the true nature of the receipts, but merely relied on information from the Investigation Wing alleging transactions with 'jamakharchi' or fictitious companies. The reasons were general and included multiple possible modes (share capital/premium, bogus loans, bogus billing), demonstrating absence of focussed satisfaction as to the specific escapement of income. For AY 2012-13 the record showed that the approving authority's endorsement under section 151 was given in a mechanical form, indicating lack of application of mind. The assessee had contemporaneous audited accounts and supporting documents showing that the receipts arose from sale of shares held as investments and were received through banking channels. In these circumstances reassessment proceedings were held not to be in accordance with law and were quashed. [Paras 13, 14, 15]

Reopening under section 147 quashed and appeals allowed on validity of reassessment for the years under appeal.

Application of section 68 as unexplained cash credit - sale of investment in shares versus subscription to share capital/share premium - Whether amounts received and credited to the assessee's bank account could be treated as unexplained cash credit under section 68 or were proceeds of sale of investments - HELD THAT: - On merits the Tribunal accepted the assessee's case that the amounts were proceeds of sale of shares held as investments, properly reflected in audited financial statements with opening balances from earlier years, and evidenced by sale bills and ledger entries. The authorities below treated the receipts as subscription to share capital/share premium and applied section 68 to make additions. Having regard to the records and precedents cited, and noting that the AO did not displace the assessee's documentary evidence to show otherwise, the Tribunal held that invocation of section 68 was not justified and the additions could not be sustained. [Paras 13, 14, 15]

Additions made as unexplained cash credit under section 68 deleted and appeals allowed on merits.

Penalty under section 271(1)(c) - requirement of specific charge in notice - Sustainability of penalty under section 271(1)(c) in view of deletion of assessment additions and adequacy of penalty notice - HELD THAT: - Since the reassessment and additions were deleted, there was no tax sought to be evaded as contemplated in the explanation to section 271(1)(c). Further, the assessee challenged that the penalty notice lacked a specific charge; reliance was placed on the jurisdictional authority that a specific charge ought to be mentioned. Considering both the merits (deletion of assessed tax) and the contention regarding the notice's failure to specify the charge, the Tribunal held the penalty to be unjustified and deleted it. [Paras 16, 17]

Penalty under section 271(1)(c) deleted and appeal allowed.

Final Conclusion: All appeals of the assessee allowed: reassessment under section 147 quashed for the years before the Tribunal; additions held to be unsustainable as unexplained cash credits under section 68 because receipts were proceeds of sale of investments; and penalty under section 271(1)(c) deleted.

Situs of sale - transfer of title - FOB/FCA delivery under INCOTERMS - presumptive taxation under section 44BB - permanent establishment - composite contract versus independent contracts - Fees for Technical Services under India-Germany DTAA

Situs of sale - transfer of title - FOB/FCA delivery under INCOTERMS - composite contract versus independent contracts - Receipts from sale/supply of plant and equipment to BPCL are not taxable in India as the sale event and transfer of title took place outside India. - HELD THAT: - The assessee executed a separate Catalyst and Proprietary Equipment Supply Agreement which expressly provided procurement on FOB/FCA Japanese Seaport/Airport/Warehouse as per INCOTERMS 2010. The contract terms and documentary evidence - purchase order, bill of lading and invoice - show place of delivery as Moji Port, Japan, freight payable at destination, and invoice value on FOB basis, with staged payments including 80% on delivery at FOB/FCA and balance on successful test run. The Tribunal held that the situs of sale and transfer of title occurred in Japan, applying the ratio of Ishikawajma Harima Heavy Industries Ltd., and rejected the departmental characterisation that the arrangements constituted a composite turnkey contract taxable in India. Consequently, no part of the disputed receipts is taxable in India on the basis of the sale transaction. [Paras 11, 12, 13]

Allowed; the sale/supply receipts in dispute are not taxable in India as the sale event and transfer of title occurred outside India.

Presumptive taxation under section 44BB - permanent establishment - Fees for Technical Services under India-Germany DTAA - Section 44BB does not apply to the disputed receipts and the departmental finding of a PE in India was not established for taxing the receipts under domestic law. - HELD THAT: - Section 44BB applies only to non residents engaged in providing services or facilities in connection with prospecting for, or extraction or production of, mineral oils, or who supply plant and machinery on hire for such activities. The assessee neither provided such services nor supplied the plant and machinery on hire; it sold the equipment outright for setting up a plant at Kochi. Therefore the conditions of section 44BB are not satisfied. Further, although the authorities concluded that the assessee had a PE in India, they did not demonstrate how Article 5(1) of the tax treaty was satisfied or delineate the nature of the PE; nor did they apply consistent treatment to other receipts which the assessee had offered to tax in India as FTS under the India-Germany DTAA. On this basis, the invocation of section 44BB and the asserted PE based taxation were rejected. [Paras 14, 15]

Section 44BB is inapplicable and the departmental assertion of a PE was not substantiated; the receipts cannot be taxed under section 44BB or on the unproven PE basis.

Final Conclusion: The appeal is allowed: the receipts from sale/supply of plant and equipment to BPCL are not taxable in India because the sale event and transfer of title occurred outside India, section 44BB does not apply, and the Department failed to establish a taxable permanent establishment; consequential grounds dismissed as indicated.

Provisional attachment of bank accounts under Section 110(5) of the Customs Act, 1962 - requirement of an order in writing recording formation of opinion and reasons - necessity test (not mere expediency) for attachment - formation of opinion on tangible material - service of the order on the bank account holder - doctrine of proportionality in provisional attachment - territorial jurisdiction under Article 226 of the Constitution

Provisional attachment of bank accounts under Section 110(5) of the Customs Act, 1962 - requirement of an order in writing recording formation of opinion and reasons - formation of opinion on tangible material - necessity test (not mere expediency) for attachment - service of the order on the bank account holder - doctrine of proportionality in provisional attachment - Validity of provisional attachment of the petitioners' bank accounts under Section 110(5) of the Act - HELD THAT: - Section 110(5) permits provisional attachment only where the proper officer, with prior approval of the Principal Commissioner or Commissioner, is of the opinion that such attachment is necessary to protect revenue or prevent smuggling, and such opinion must be recorded by an order in writing. The opinion must be one of necessity (not mere expediency) and must be formed on the basis of tangible material bearing a proximate and live nexus to the protection of revenue. The order in writing must set out reasons and disclose the material on which the opinion is formed. Given the draconian civil consequences of attaching a bank account, strict and punctilious compliance with each ingredient of Section 110(5) is required; proportionality demands a proximate link between the need for attachment and its purpose. In the present petitions no order in writing meeting these statutory requirements was placed on record, and the respondents' contention that a letter to the bank is deemed to be the required order, or that no service on the account holder is necessary, is inconsistent with the statute and settled precedents. For these reasons the provisional attachments were held to be illegal for non-compliance with Section 110(5) and must be set aside, while preserving the authority of customs to re-attach by following due procedure. [Paras 42, 43, 45, 46, 47]

Provisional attachment of the petitioners' bank accounts was illegal for failure to comply with the requirements of Section 110(5); attachments set aside and banks directed to permit operation of accounts, while respondents remain free to re attach following the statutory procedure.

Territorial jurisdiction under Article 226 of the Constitution - Territorial jurisdiction of the Bombay High Court to entertain the writ petitions - HELD THAT: - Although the notices and letters effecting provisional attachment originated from authorities in Rajasthan, the bank accounts affected are located in Mumbai. A part of the cause of action therefore arose within the territorial jurisdiction of this Court and Clause (2) of Article 226 is attracted. The Court is thus competent to entertain the petitions and grant relief under Article 226. [Paras 48]

Bombay High Court has territorial jurisdiction to entertain the petitions and grant the reliefs sought.

Final Conclusion: The provisional attachments of the petitioners' bank accounts were declared illegal for non compliance with Section 110(5) of the Customs Act, 1962; the attachments are set aside and the banks directed to permit operation of the accounts, without costs, subject to the respondents' liberty to re attach by strictly following the statutory procedure. The Bombay High Court had territorial jurisdiction to entertain the petitions.

Penalty under Section 112 of the Customs Act - proof of collusion with departmental officers - principles of natural justice - ex-parte adjudication - delay in adjudication - reliance on earlier Tribunal decision

Penalty under Section 112 of the Customs Act - proof of collusion with departmental officers - Validity of the penalty imposed on the appellant where the conviction rested on alleged collusion with Customs staff who were themselves found to have no specific evidence against them. - HELD THAT: - The Tribunal examined the adjudicating authority's finding that the appellant prepared fake export documents 'with the active connivance and participation of the Customs staff'. The same adjudicating order, however, recorded that proceedings against the departmental officers were dropped for want of adequate particulars and specific evidence of their involvement (reproduced findings). The Tribunal held that where the alleged collusion with Customs officers is an essential factual foundation for imposing penalty, and the record contains no corroborative evidence of the officers' participation, the allegation against the appellant cannot be sustained. On this basis the penalty imposed under Section 112 was set aside. The Tribunal also observed that the appellant had not been a noticee in the parallel proceedings before the Mumbai Tribunal, suggesting that the appellant had been added without independent supporting evidence. [Paras 10, 11, 13]

Penalty set aside as the allegation of collusion could not be sustained in the absence of evidence of the officers' involvement; appellant was allowed relief.

Principles of natural justice - ex-parte adjudication - delay in adjudication - reliance on earlier Tribunal decision - Effect of prolonged delay and apparent lack of meaningful opportunity of hearing on the adjudication initiated in 1992 and concluded in 2018. - HELD THAT: - The Tribunal noted that the show cause notice issued in 1992 was not taken up for adjudication for more than 17 years, that a personal hearing recorded in 2009 concerned other noticees, and that the file was transferred to call book in 2010 and recalled only in 2018. The adjudicating authority did not clarify service of subsequent hearing notices and proceeded ex parte based on earlier submissions. While the Tribunal raised these procedural deficiencies and recorded specific questions about service and recall of the matter, its ultimate decision to set aside the penalty rested on the absence of evidence of collusion and the fact that the appellant had been added without corroboration; procedural defects reinforced the infirmity of the adjudication. The Tribunal therefore allowed the appeal and granted consequential relief. [Paras 5, 6]

Proceedings were procedurally defective by reason of long delay and absence of demonstrated opportunity to the appellant; these defects, together with lack of evidentiary foundation, led to allowance of the appeal.

Final Conclusion: Appeal allowed; penalty imposed under Section 112 set aside and consequential relief granted on the ground that the allegation of collusion with Customs staff was unsupported and the adjudication suffered from procedural deficiencies including long delay and lack of demonstrated hearing.

Refund of Special Additional Duty (SAD) - requirement of Chartered Accountant certificate for refund - no legal requirement to furnish cost structure for SAD refund - unjust enrichment / whether SAD was passed on to customer - imports on MRP basis versus transaction value for duty liability - evidence of VAT payment on sale of imported goods as condition for refund

Requirement of Chartered Accountant certificate for refund - no legal requirement to furnish cost structure for SAD refund - Whether the refund-sanitising authority could demand submission of cost structure when a Chartered Accountant's certificate stating that SAD was not passed on had been furnished - HELD THAT: - The Tribunal held that neither Notification No. 102/2007 nor the Board circulars required submission of a cost-structure certificate as a precondition for sanction of SAD refund. The Adjudicating Authority had accepted the CA certificate in respect of certain Bills of Entry and there was no legal basis to insist on a separate cost-structure certificate for other Bills of Entry. Consequently, the direction to produce cost structure was held to be unwarranted where the CA certificate, as specified in the relevant Notification, had been produced.

Demand for cost-structure certificate was without legal basis and could not be required when the prescribed CA certificate was furnished.

Refund of Special Additional Duty (SAD) - unjust enrichment / whether SAD was passed on to customer - evidence of VAT payment on sale of imported goods as condition for refund - imports on MRP basis versus transaction value for duty liability - Whether the appellant was entitled to refund for the disputed Bills of Entry where the CA certificate stated that SAD was not passed on and VAT payment evidence was available, notwithstanding imports declared on MRP basis - HELD THAT: - The Tribunal observed that whether imports were made on transaction value or on MRP basis did not alter the legal test: CVD and SAD are payable in both cases and the core inquiry for refund is whether SAD has been paid and whether VAT on resale has been shown to have been paid. The CA certificate produced categorically stated that the SAD was not passed on to customers. Since the refund-sanitising authority must examine evidence of VAT payments on resale and the appellant had furnished the CA certificate required by the Notification, there was no valid basis to reject the refunds for the specified Bills of Entry. The Tribunal therefore set aside the portion of the impugned order rejecting the refund claims.

Appellant entitled to refund for the disputed Bills of Entry; rejection set aside insofar as based on absence of cost-structure proof.

Final Conclusion: The appeals are allowed; the Tribunal set aside the adverse findings insofar as they rejected parts of the SAD refund claims for the periods April 2009 to May 2009 and August 2009 to September 2009, holding that the CA certificate and evidence of VAT payment satisfy the Notification's requirements and that no separate cost-structure certificate could be lawfully demanded.

Summary order. Special Leave Petition dismissed as withdrawn.

Application of ingredients of preferential, undervalued and fraudulent transaction - distinction between preferential, undervalued and fraudulent transactions - reliance on Resolution Professional's opinion without independent adjudication - remand for fresh consideration

Application of ingredients of preferential, undervalued and fraudulent transaction - distinction between preferential, undervalued and fraudulent transactions - reliance on Resolution Professional's opinion without independent adjudication - Whether the Adjudicating Authority in I.A. No.314/KB/2021 properly adjudicated the requisites of preferential, undervalued and fraudulent transactions before allowing the application. - HELD THAT: - The Tribunal examined the impugned order and observed that the Adjudicating Authority recorded only factual narration up to Paras 1-25 and reached conclusions in Paras 27 and 28. The Adjudicating Authority noted the look back period and then stated, without separate consideration of each statutory head, that the transactions were undervalued, preferential and fraudulent. Relying on the exposition in paragraph 29.1 of Anuj Jain v. Axis Bank Ltd., the Tribunal emphasised that the parameters, requisite enquiries and consequences under the provisions addressing preferential transactions, undervalued transactions and fraudulent/wrongful trading are different and require specific material facts and application of mind. The Adjudicating Authority did not advert to the pleadings or materials to apply the distinct ingredients of Sections 43, 45, 49 and 66 (as framed in the Resolution Professional's application) to each transaction; instead it recorded conclusory findings by reference to the Resolution Professional's determination. For these reasons the Tribunal held that the impugned order lacks the necessary reasoning and independent adjudication on the ingredients of each category of transaction. [Paras 5, 27, 28]

Impugned order set aside for failure to apply mind to the distinct ingredients of preferential, undervalued and fraudulent transactions; conclusions in Paras 27-28 are unsustainable.

Remand for fresh consideration - Relief to be afforded on finding that the impugned order is unsustainable. - HELD THAT: - Having found the Adjudicating Authority's conclusions to be without adequate reasoning or application of the statutory ingredients, the Tribunal revived I.A. No.314/KB/2021 and remanded it to the Adjudicating Authority for fresh hearing and decision in accordance with law. The Tribunal directed that the appellants be given an opportunity to file a reply to the application and permitted them to file the reply within two weeks from the date of the order, thereby restoring the matter for adjudication on merits with appropriate consideration of pleadings and materials. [Paras 8, 9]

I.A. No.314/KB/2021 is revived and remanded to the Adjudicating Authority for fresh hearing and decision; appellants permitted to file reply within two weeks.

Final Conclusion: The Adjudicating Authority's order is set aside for failure to independently apply the distinct legal ingredients of preferential, undervalued and fraudulent transactions; the matter is remitted for fresh adjudication in accordance with law and the appellants are permitted to file their reply within two weeks.

Pre-deposit of penalty - power to dispense deposit on undue hardship - review of Appellate Tribunal order - finality of Supreme Court order - abuse of process

Review of Appellate Tribunal order - repeated petitions - Validity of the Appellate Tribunal's dismissal of the review petition filed by the appellants. - HELD THAT: - The Appellate Tribunal dismissed the review petition observing that repeated review petitions had been filed and that an earlier review petition had already been dismissed. The High Court notes that the appellants had pursued multiple rounds of litigation, including remand and fresh decision by the Appellate Tribunal, dismissal of further appeals by the High Court and by the Supreme Court, and yet filed successive review applications without disclosing the earlier final adjudications. In these circumstances the Tribunal's dismissal of the review petition on the ground of repetition and lack of merit was permissible and not shown to be vitiated by any illegality or perversity. [Paras 8, 13, 15]

The dismissal of the review petition by the Appellate Tribunal is sustained.

Pre-deposit of penalty - power to dispense deposit on undue hardship - Whether the appellants were entitled to dispense with the statutory pre-deposit of 10% of the penalty on grounds of hardship. - HELD THAT: - Section 19 of FEMA requires deposit of the penalty while preferring an appeal, with a proviso permitting the Appellate Tribunal to dispense with the deposit where it would cause undue hardship. The record shows that the Adjudicating Authority had directed a pre-deposit of 10% which was not complied with; the matter proceeded through the High Court and the Supreme Court, which dismissed the Special Leave Petition. After dismissal by the Supreme Court, instead of complying with the deposit direction the appellants repeatedly sought review and relief by alternative proceedings and concealed prior adjudications in subsequent petitions. The High Court found that the appellants' conduct disentitled them to the exceptional relief of waiving the deposit and that the available remedies had been exhausted by the earlier final orders. [Paras 11, 12, 14]

No entitlement to dispense with the pre-deposit is established; prior directions to make the 10% pre-deposit remained binding on the appellants.

Finality of Supreme Court order - abuse of process - Whether the appellants' conduct in continuing litigation after dismissal of the SLP amounted to abuse of the process of court warranting dismissal of the present appeal. - HELD THAT: - The High Court records that the appellants concealed the pendency and disposal by the Supreme Court in subsequent proceedings and persisted in filing proceedings despite adverse final orders, including the dismissal of the SLP. Such conduct was characterised as gross abuse of process and as an attempt to reraise matters already finally adjudicated. Given the sequence of adjudications culminating in the Supreme Court's dismissal, the High Court concluded that no further proceedings lay and that the present appeal was frivolous and bereft of merit. [Paras 15, 16]

The present appeal is dismissed as an abuse of process.

Final Conclusion: The Appellate Tribunal's dismissal of the review petition is sustained; the appellants are not entitled to dispense with the statutory pre-deposit and their continuation of proceedings after the Supreme Court's dismissal amounts to abuse of process. The appeal is dismissed.

Expunction of judicial observations - Judicial restraint in entertaining petitions against final directions - Observations regarding conduct of police and State Government

Judicial restraint in entertaining petitions against final directions - Petitions challenging only the final directions in the impugned order were not entertained by the Court. - HELD THAT: - The Court declined to entertain the petition insofar as it sought to challenge the final directions contained in the impugned order. The bench recorded that it was not inclined to interfere with those directions and therefore did not proceed to consider the petition on that aspect. This conclusion follows the Court's discretion to refrain from setting aside or revisiting final operative directions where no sufficient basis for interference was made out before it in the proceedings. [Paras 3]

Petition not entertained in respect of the final directions in the impugned order.

Expunction of judicial observations - Observations regarding conduct of police and State Government - The Court ordered expunction of observations in the impugned judgment concerning the conduct of the police machinery and the State Government. - HELD THAT: - The Court found that certain observations made in the impugned judgment about the conduct of the police machinery and the State Government were not borne out by the record. The Additional Solicitor General stated that the respondents did not wish to maintain those observations and had no objection to their expunction. In light of this representation and the absence of supporting material in the record, the Court directed that those observations stand expunged and disposed of the special leave petitions accordingly. [Paras 1, 2, 4, 5]

Observations touching upon the conduct of the police machinery and the State Government are expunged; special leave petitions disposed of.

Final Conclusion: The Court declined to interfere with the final directions in the impugned order but ordered expunction of specific observations about the police machinery and the State Government from the impugned judgment; the special leave petitions and pending applications were disposed of.

Twin conditions for grant of bail under Section 45 of the PMLA - weight and admissibility of statements recorded under Section 50 of the PMLA - confession of a co-accused and Section 30 of the Evidence Act as corroborative evidence - requirement of an unbroken money trail and existence of proceeds of crime for offence of money laundering - assessment of the predicate offence at bail (broad probabilities test) - parity doctrine in grant of bail and relevance of non arrest of co accused

Weight and admissibility of statements recorded under Section 50 of the PMLA - The extent to which statements recorded under Section 50 of the PMLA can be considered at the bail stage - HELD THAT: - The Court held that statements recorded under Section 50 PMLA are admissible and form part of the material collected during investigation, but their evidentiary weight is to be evaluated by the trial court. At the bail stage such statements may be looked into for the limited purpose of assessing broad probabilities and whether there are reasonable grounds for believing the accused guilty; however a mini trial is impermissible. Patently self contradictory or materially inconsistent Section 50 statements are a relevant circumstance that may benefit the accused when considering bail. [Paras 52, 53, 54, 55, 56]

Section 50 statements may be taken at face value for assessing broad probabilities at bail, but their probative value and credibility are for the trial court to decide.

Confession of a co-accused and Section 30 of the Evidence Act as corroborative evidence - Whether a confessional statement of a co accused under Section 50 PMLA is substantive evidence against other accused - HELD THAT: - The Court held that a confession in a Section 50 proceeding is not a judicial confession in the strict sense and cannot be treated as substantive evidence against co accused. Such confessions can be relied upon only in terms of Section 30 of the Evidence Act, i.e., as corroborative material after the court has considered other evidence. The court cannot start with the confession to arrive at guilt; it may be used to lend assurance to a conclusion reached on other evidence. [Paras 58, 59, 60, 61, 62]

Confessions recorded under Section 50 PMLA are not substantive evidence against co accused and can be used only for corroboration under Section 30 of the Evidence Act; credibility is for the trial court.

Requirement of an unbroken money trail and existence of proceeds of crime for offence of money laundering - assessment of the predicate offence at bail (broad probabilities test) - Whether the material establishes an unbroken money trail and a prima facie predicate offence sufficient to justify continued custodial detention under PMLA - HELD THAT: - The Court observed that money laundering requires proceeds of crime derived from a scheduled offence and an unbroken money trail to the accused. On the material before it the Court found deficiencies: no comparative evidence was produced to prove inflation of import prices (foundational to the predicate offence), gaps and inconsistencies exist in the alleged flow of funds (both in the direct and indirect routes), and key documents (bank records, contemporaneous ledgers) were either not placed or were non contemporaneous plain paper entries. Coupled with material contradictions in statements of critical witnesses, the Court concluded that the predicate offence appears prima facie weak and that breaks in the money trail favour the bail applicant on broad probabilities. [Paras 83, 84, 85, 86, 92]

Prima facie the predicate offence and unbroken money trail are not satisfactorily established on the material before the Court; this weakness supports grant of bail on broad probabilities.

Parity doctrine in grant of bail and relevance of non arrest of co accused - Whether non arrest or grant of bail to other co accused disentitles the petitioner from bail - HELD THAT: - The Court held that while non arrest of co accused is not by itself decisive, it is a relevant factor in the overall judicial exercise and may weigh in favour of the petitioner when considered with other circumstances (such as completion of investigation qua the petitioner, lack of further recoveries to be made from him, absence of incriminating digital material, antecedents, and risk of flight). The Court noted precedents where selective arrests or failure to arrest similarly placed persons were considered relevant in bail decisions. [Paras 99, 100, 101, 102, 103]

Non arrest/grant of bail to other co accused is a relevant factor that, together with other material, supported granting bail to the petitioner.

CBI jurisdiction to register RC (issue left to coordinate proceedings) - Whether CBI's jurisdiction to register the RC under the Prevention of Corruption Act could be examined in the petitioner's bail application - HELD THAT: - The Court declined to adjudicate the question of CBI's jurisdiction to register the RC under the Prevention of Corruption Act at the bail stage because a coordinate Bench is seized of writ petitions filed by co accused on that specific jurisdictional issue. The Court observed that the predicate offences are also reflected in IPC sections (120B, 420) which are scheduled offences under the PMLA, and therefore the PMLA proceedings can be triggered irrespective of the CBI jurisdiction issue; however the specific challenge to CBI's jurisdiction was not decided in this bail proceeding. [Paras 7, 9, 10, 51]

Question of CBI's jurisdiction over the predicate RC was not adjudicated in the bail petition and remains for consideration in the proceedings before the coordinate Bench; it was not decided here.

Final Conclusion: On an application of the broad probabilities test under the twin conditions of Section 45 PMLA, having regard to inconsistencies in material relied upon by the prosecution, gaps in the alleged money trails, the limited probative value of Section 50 statements at the bail stage, and relevant parity and custodial considerations, the petitioner was held entitled to regular bail subject to specified conditions; the court's observations are confined to the bail exercise and do not prejudge trial.

Anticipatory bail under Section 438 Cr.P.C. - offence of money laundering - rigors of Section 45 of the PMLA Act - continuing and independent character of the money laundering offence

Anticipatory bail under Section 438 Cr.P.C. - rigors of Section 45 of the PMLA Act - offence of money laundering - Whether the applicant is entitled to anticipatory bail in respect of ECIR registered under the PMLA Act. - HELD THAT: - The Court found that the applicant, who was the Manager of the society at the relevant time, is implicated by allegations that he was involved in processes connected with proceeds of crime and their concealment. The Court applied the principle that bail (including anticipatory bail) in money laundering matters is subject to the rigors of Section 45 of the PMLA Act, as explained in Vijay Madanlal Choudhary, and that those rigors must be reckoned with irrespective of the form of the bail application. The Court also noted authorities recognising the special and serious nature of economic offences and the continuing/independent character of money laundering offences. Given the material collected (including confrontation with a resolution and admitted signatures and unexplained transfers) and the existence of a warrant which the applicant has not complied with, the Court held that it could not at this stage conclude that the applicant is not guilty of the offence under the PMLA Act and therefore anticipatory bail could not be granted. [Paras 5, 6]

M.Cr.C. dismissed; applicant directed to surrender and seek regular bail.

Final Conclusion: Anticipatory bail refused: applying the Section 45 rigours of the PMLA Act and relevant precedents, the High Court held that on the material and the existence of an outstanding warrant the applicant is not entitled to anticipatory bail and must surrender and apply for regular bail.

Business Auxiliary Service - consideration for levy of service tax - incentives not to be construed as consideration - distinction between commission and incentive - trading activity not taxable as service - extended period of limitation

Business Auxiliary Service - incentives not to be construed as consideration - distinction between commission and incentive - trading activity not taxable as service - Liability to service tax on amounts described as 'incentive' received from airlines under the category of Business Auxiliary Service. - HELD THAT: - The Tribunal applied the statutory definition of Business Auxiliary Service and the Larger Bench precedent in Kafila Hospitality & Travels Pvt. Ltd., concluding that BAS requires a service rendered for promotion or marketing of the client's business and that service tax is leviable only on 'consideration' for such services. The amount received as 'commission' was held to have a direct nexus to the service of booking space with airlines and was taxable; by contrast the amounts described as 'incentive' represent profit arising from the appellant's trading margin (difference between negotiated airline rates and amounts charged to clients) and do not constitute consideration for promoting the airline's business. Applying the Larger Bench reasoning that incentives cannot be equated with consideration, the Tribunal set aside the finding that incentives were taxable under BAS. The adjudicating authority's separate characterization of 'discount' and 'market price adjustment' as non-taxable (linked to freight) was not disturbed as revenue did not challenge that conclusion. [Paras 7, 8, 9, 11]

No service tax is leviable on 'incentive' received from airlines; the impugned levy of service tax, interest and penalty on such incentives is set aside, while commission retained its taxable character.

Final Conclusion: The appeal by the assessee is allowed insofar as service tax, interest and penalty were imposed on 'incentive' amounts; the revenue's appeal is dismissed and the adjudicating authority's treatment of discounts and market price adjustments (linked to freight) remains undisturbed.

Remand for de novo consideration - non-speaking order - requirement of adjudicatory application of mind - failure to present defence / opportunity to be heard - exemption under Notification No. 12/2003-ST - conditions for claiming exemption

Exemption under Notification No. 12/2003-ST - conditions for claiming exemption - Claim for exemption in respect of value of consumable stores remanded for fresh adjudication - HELD THAT: - The Tribunal found that the adjudicating authority had framed the issue regarding exemption of consumable stores but the appellant had not placed documentary proof or argued the issue before the Original Authority. The Original Authority proceeded to decide the show cause notice without proper submissions from the appellant, producing a non-speaking order on this point. Because the entitlement to exemption under the Notification requires satisfaction of mandatory conditions and factual/verificatory exercise, the matter is remitted to the Original Authority for de novo consideration so that the appellant may present evidence and the authority may apply its mind afresh. [Paras 4, 5, 28, 30]

Remanded to the Original Authority for de novo consideration on the claim of exemption for consumable stores.

Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - requirement of adjudicatory application of mind - Claim for deduction of salary paid to staff under Rule 5(1) remanded for fresh adjudication - HELD THAT: - The Tribunal observed that the Original Authority decided denial of deduction for salaries without adequate submissions from the appellant and without addressing the appellant's contentions in proper perspective. Given that the deductibility under Rule 5(1) involves factual and legal assessment which was not undertaken with the appellant's input, the Tribunal remitted this question to the Original Authority to examine afresh after hearing and evidence. [Paras 4, 5, 28, 29]

Remanded to the Original Authority for de novo consideration on the deductibility of salary paid to staff.

Reverse charge mechanism - requirement of adjudicatory application of mind - Liability under reverse charge (w.e.f. 01.07.2012) remanded for fresh adjudication - HELD THAT: - The Tribunal noted that the question whether the appellant was liable to discharge service tax under reverse charge from 01.07.2012 was raised but not properly argued before the Original Authority. The Original Authority's order did not reflect consideration of submissions on this point. The matter is therefore remanded to allow full consideration of the applicability of reverse charge notifications and related facts. [Paras 4, 5, 28]

Remanded to the Original Authority for de novo consideration on reverse charge liability w.e.f. 01.07.2012.

Extended period of limitation - proviso to Section 73(1) - failure to present defence / opportunity to be heard - Demand under extended period of limitation remanded for fresh adjudication - HELD THAT: - The Tribunal recorded that invocation of the extended period under the proviso to the relevant provision was considered by the Original Authority but the appellant did not properly present arguments or evidence on limitation. Because limitation is a mixed question of law and fact requiring application of mind to the evidence and submissions, the Tribunal remitted the issue for de novo consideration by the Original Authority. [Paras 4, 5, 28, 29]

Remanded to the Original Authority to re-examine demandability under the extended period of limitation.

Interest under Section 75 - requirement of adjudicatory application of mind - Demand for interest remanded for fresh adjudication - HELD THAT: - Since the primary tax demand and its basis were remitted, and because the appellant had not properly presented submissions regarding interest liability before the Original Authority, the Tribunal directed that the question of interest be reconsidered by the Original Authority in the de novo proceedings so that interest, if any, may be determined after fresh adjudication. [Paras 4, 5, 28]

Remanded to the Original Authority for de novo adjudication of interest demand.

Penalties under Sections 77 and 78 - failure to present defence / opportunity to be heard - Imposition of penalties remanded for fresh adjudication - HELD THAT: - The Tribunal held that penalties imposed by the Original Authority under Sections 77 and 78 were recorded without the appellant having properly placed issues and evidence before the adjudicator. As penalties involve assessment of mens rea, material facts and statutory tests, the Tribunal remitted the penalty issues to the Original Authority for de novo consideration after giving the appellant an opportunity to fully present its case. [Paras 4, 5, 28, 29]

Remanded to the Original Authority for fresh adjudication on all penalty-related issues.

Final Conclusion: The appeal is allowed by way of remand. The Tribunal set aside the impugned adjudication to the extent that the Original Authority had decided multiple issues without sufficient presentation or consideration of the appellant's case, and directed de novo reconsideration by the Original Authority within 90 days of receipt of this order; the appellant's undertaking as to non-seeking of adjournments and non-claiming refunds until disposal of fresh proceedings was noted.

Composite contract involving transfer of property in goods and rendering of services - works contract service (WCS) classification - Commercial and Industrial Construction Services (CICS) classification - abatement benefit under Notification No.01/2006 - precedential effect of Larsen & Toubro on pre-01.06.2007 levy - Tribunal decisions in Real Value Promoters and Jain Housing upheld by Supreme Court

Composite contract involving transfer of property in goods and rendering of services - Commercial and Industrial Construction Services (CICS) classification - works contract service (WCS) classification - precedential effect of Larsen & Toubro on pre-01.06.2007 levy - Tribunal decisions in Real Value Promoters and Jain Housing upheld by Supreme Court - Demand of service tax on construction services rendered to educational institutions for the period April 2005 to March 2012 cannot be sustained under the category of Commercial and Industrial Construction Services (CICS). - HELD THAT: - The Tribunal found that the constructions in question were composite contracts involving both supply of materials and rendering of services. For periods prior to 01.06.2007, the decision of the Hon'ble Apex Court in Larsen & Toubro establishes that composite contracts are not liable to service tax under CICS. For the period after 01.06.2007, the Tribunal's reasoning in Real Value Promoters (as followed in Jain Housing, a decision affirmed by the Supreme Court) treats such composite contracts as falling within the definition of Works Contract Service introduced w.e.f. 01.06.2007. The definitions of CICS did not, on the material facts, encompass contracts transferring property in goods; the statutory scheme and subsequent introduction of the WCS category indicate that composite contracts must be taxed, if at all, under WCS and not under CICS. Consequently, demands raised under CICS for the stated periods were unsustainable and were set aside. [Paras 11, 12, 13]

Demand under CICS set aside; construction services to educational institutions not leviable under CICS for April 2005 to March 2012 and must, if at all, be considered under WCS.

Abatement benefit under Notification No.01/2006 - composite contract involving transfer of property in goods and rendering of services - Denial of abatement under Notification No.01/2006 in respect of construction services rendered to spinning mills on account of alleged receipt of free supplies is not sustainable for the period April 2005 to March 2010. - HELD THAT: - The Tribunal applied the Supreme Court's decision in CST v. Bhayana Builders to hold that receipt of free supplies by the assessee does not disentitle it from the abatement provided by Notification No.01/2006. The Commissioner had dropped the demand in this respect, and the Tribunal found that conclusion legal and proper. Therefore, the denial of abatement on the ground of free supplies could not be upheld. [Paras 14]

Demand denying abatement under Notification No.01/2006 in respect of construction for spinning mills is set aside; the assessee entitled to the abatement notwithstanding receipt of free supplies.

Final Conclusion: The departmental appeal is dismissed and the demands framed under CICS for construction services to educational institutions for April 2005 to March 2012 are set aside; the assessee's appeals are allowed with consequential relief, and the denial of abatement for construction of spinning mills for April 2005 to March 2010 is held unsustainable.

Interest on delayed refund - liability to pay interest under Section 11BB of the Central Excise Act, 1944 - date from which interest accrues - expiry of three months from receipt of refund application - obligation to issue deficiency memo within two days of receipt of refund application - remand for verification of issuance of deficiency memo

Liability to pay interest under Section 11BB of the Central Excise Act, 1944 - date from which interest accrues - expiry of three months from receipt of refund application - Interpretation of the entitlement to interest where refund is not sanctioned within three months of receipt of the refund application. - HELD THAT: - The Tribunal applied the principle in Ranbaxy Laboratories Ltd. as affirmed by the Supreme Court in Union of India & Ors. v. Hamdard (Waqf) Laboratories, that Section 11BB operates once an order for refund under Section 11B has been made and that interest becomes payable on the expiry of three months from the date of receipt of the refund application if the refund remains unpaid. The Court endorsed that the Explanation to Section 11BB does not postpone the date from which interest becomes payable, and noted the departmental circulars which treat the relevant date as expiry of three months from receipt of the application. The Tribunal held these principles to be binding and applicable to claims for interest on delayed refunds.

Interest under Section 11BB is payable where the amount claimed is not refunded on expiry of three months from receipt of the refund application; the legal principle in Ranbaxy/Hamdard applies.

Obligation to issue deficiency memo within two days of receipt of refund application - remand for verification of issuance of deficiency memo - Whether the department complied with the obligation to intimate deficiencies within two days of receipt of the refund application and the consequence of non-compliance. - HELD THAT: - Relying on Hamdard (which held it obligatory for the department to issue deficiency memos or correspondence about deficiencies within two days of receipt of the application), the Tribunal observed that the facts of the instant case turn on whether any deficiency memo was issued within that two day period. The appellant asserts no such communication was received; the department has not established compliance. Because the factual question of issuance of the deficiency memo within the stipulated period is determinative of entitlement to interest, the Tribunal did not decide the factual point on the merits but remanded the matter for factual verification and fresh consideration by the Commissioner (Appeals) in light of the cited authority.

Matter remanded to the Commissioner (Appeals) to ascertain whether a deficiency memo was issued within two days of receipt of the refund application and to determine interest liability accordingly.

Final Conclusion: Appeal allowed by way of remand; the matter is directed to be considered by the Commissioner (Appeals) in light of the binding principles in Ranbaxy/Hamdard, including the department's obligation to issue any deficiency memo within two days of receipt of the refund application, and to decide entitlement to interest under Section 11BB after verifying whether that obligation was complied with.

Summary order. Application for condonation of delay dismissed; Civil Appeals dismissed for non condonation of delay, question of law, if any, left open.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - disposal of appeals on account of resolution under SVLDRS - reservation of question of law

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - disposal of appeals on account of resolution under SVLDRS - Civil appeals disposed of in view of the respondent having obtained SVLDRS certificates resolving the dispute. - HELD THAT: - The respondent informed the Court that it had applied under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019, and that the application was processed resulting in issuance of certificates under the SVLDRS-4 scheme dated 24.01.2020 and 07.02.2020 which resolved the dispute. The Court recorded the statement of the respondent's counsel and, in light of the settlement effected under the statutory scheme, disposed of the civil appeals. The Court did not adjudicate the substantive question of law arising in the appeals and expressly left that question open for future consideration.

Appeals disposed of in view of resolution under SVLDRS; question of law kept open.

Final Conclusion: The Supreme Court recorded the respondent's statement that the dispute had been resolved under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 by issuance of SVLDRS certificates and disposed of the civil appeals accordingly, while leaving any question of law open.

Power of superintendence under Section 35E - Limitation for review by superior authority - Condonation of delay by the Board under proviso to sub section (3) - Tribunal's lack of jurisdiction to condone statutory time bar

Limitation for review by superior authority - Power of superintendence under Section 35E - Whether the committee of the Chief Commissioner could review an adjudicating authority's order beyond the three month period prescribed by sub section (3) of Section 35E. - HELD THAT: - The court held that the statutory scheme of Section 35E requires strict compliance with the three month period prescribed for exercise of the review power by the superior authority. The proviso to sub section (3) vests power to extend that period only in the Board on sufficient cause being shown. The Chief Commissioner and his committee have no authority to condone or extend the three month period and therefore any review undertaken beyond that stipulated period is without jurisdiction. The reasoning accords with precedents emphasising that time limits for exercise of powers by a competent authority must be given literal effect to avoid administrative uncertainty.

Review by the committee of the Chief Commissioner beyond the three month period was without authority and invalid.

Condonation of delay by the Board under proviso to sub section (3) - Tribunal's lack of jurisdiction to condone statutory time bar - Whether the Tribunal had jurisdiction to condone the delay in filing an appeal arising from a review taken up beyond the statutory period. - HELD THAT: - The court concluded that only the Board can extend the three month period under the proviso to sub section (3) of Section 35E, and no other authority, including the Tribunal, possesses power to condone the delay in review. Consequently, an application before the Tribunal seeking condonation of such delay is incompetent. Reliance was placed on authority holding that limits on exercise of statutory powers by superior authorities are to be strictly enforced and that the Tribunal cannot substitute its own condonation for the statutory mechanism.

The Tribunal has no power to condone the delay; the application for condonation was dismissed and the appeal (and stay application) were dismissed accordingly.

Final Conclusion: The committee's review beyond the three month period under Section 35E was without jurisdiction; only the Board may extend that period and the Tribunal cannot condone the delay. The condonation application and the appeal (and stay) were dismissed.

Statutory limit on adjournments under Section 35C(1A) - Dismissal for non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - Adjournment in virtual hearings and counsel's undertaking - Abuse of adjournment practice and dilatory tactics - Duty of advocates regarding attendance and professional obligation

Statutory limit on adjournments under Section 35C(1A) - Adjournment in virtual hearings and counsel's undertaking - Request for further adjournment was refused where adjournments had been repeatedly sought and the statutory maximum would be exceeded. - HELD THAT: - The Tribunal noted that Section 35C(1A) permits adjournments only if sufficient cause is shown and expressly provides that no adjournment shall be granted more than three times to a party during the hearing. The appellant's counsel, having sought virtual hearing and undertaken not to seek adjournment, nonetheless repeatedly sought adjournments on earlier listed dates. Reliance was placed on the Supreme Court's condemnation of mechanical and routine adjournments as an abuse of process and dilatory tactic. In those circumstances the Tribunal found no justification to grant further adjournment beyond the statutory maximum and refused the request for adjournment in a virtual hearing context. [Paras 2, 4]

Adjournment request refused and further adjournments beyond three times not permitted; earlier undertakings to the Tribunal weighed against grant of adjournment.

Dismissal for non-prosecution under Rule 20 of CESTAT Procedure Rules, 1982 - Abuse of adjournment practice and dilatory tactics - Duty of advocates regarding attendance and professional obligation - Appeal dismissed for non prosecution due to repeated adjournments and non-appearance in terms of Rule 20. - HELD THAT: - Rule 20 authorises dismissal for default where the appellant does not appear on the date fixed for hearing, while permitting restoration if sufficient cause is shown. Having recorded that the appeal had been listed on multiple dates at the appellant's request and that adjournments were sought repeatedly without adequate justification, the Tribunal treated the conduct as non prosecution. The reasoning emphasised the role and duty of advocates and the courts' duty to prevent dilatory tactics, referencing higher court admonitions against repeated adjournments. In exercise of its discretion under Rule 20, and in light of statutory limits on adjournments, the Tribunal dismissed the appeal for non prosecution. [Paras 2, 3, 5]

Appeal dismissed for non-prosecution under Rule 20 of the CESTAT Procedure Rules, 1982.

Final Conclusion: The Tribunal refused further adjournment beyond the statutory limit and, exercising its discretion under Rule 20 of the CESTAT Procedure Rules, 1982, dismissed the appeal for non prosecution because of repeated adjournments and non appearance.

Deemed manufacture - labelling or re-labelling of containers - render the product marketable to the consumer - retail sale price deemed under Explanation 2(b) to Section 4A - area-based exemption (ABE Notification) - extended period of limitation for suppression with intent to evade

Deemed manufacture - labelling or re-labelling of containers - render the product marketable to the consumer - Affixing revised MRP stickers and tags at showrooms and CFAs amounts to manufacture under Section 2(f)(iii) of the Central Excise Act, 1944. - HELD THAT: - The Tribunal analysed Section 2(f)(iii) and the requirement that the process must (i) relate to goods in the Third Schedule and (ii) be a process such as labelling/re-labelling or other treatment which renders the product marketable to the ultimate consumer. Applying the marketability test in the precedents cited (including Panchsheel Soap Factory, Lakme Lever and Rafique Malik), the court held that mere affixation of MRP stickers or replacement of price tags, where no new label or new descriptive information is introduced and the goods were already marketable when removed from the factory, does not constitute labelling or re-labelling that renders the product marketable. The Tribunal found no transformation or treatment conferring marketability that was absent earlier; therefore the activity did not amount to 'manufacture' within Section 2(f)(iii). The Tribunal followed the reasoning in the cited authorities that a sticker containing only price information is not a 'label' for the purposes of the deemed-manufacture clause. [Paras 5]

Affixing revised MRP stickers/tags at showrooms and CFAs does not amount to manufacture; the demand on that ground cannot be sustained.

Retail sale price deemed under Explanation 2(b) to Section 4A - area-based exemption (ABE Notification) - Whether, if the retail sale price is altered post-clearance, duty can be demanded from showrooms/CFAs in respect of goods cleared under the ABE Notification. - HELD THAT: - Explanation 2(b) to Section 4A provides that an altered retail sale price after clearance is to be deemed the retail sale price for valuation and normally obliges the manufacturer to discharge duty on that altered price. In the present facts the manufacturers of the watches were the ABE factories which had availed the area-based exemption and had not discharged duty. The Tribunal held that where no manufacturing activity occurred at showrooms/CFAs (see issue above), the duty demand could not be sustained against those premises. Any duty, if at all chargeable on account of an increased MRP, could only be raised against the manufacturer; it cannot be fastened on showrooms/CFAs when they did not undertake manufacture. [Paras 7]

Demand premised on Explanation 2(b) cannot be sustained against showrooms and CFAs; any liability in relation to altered MRP lies, if at all, against the manufacturer at the place of manufacture.

Extended period of limitation for suppression with intent to evade - Whether invocation of the extended period of limitation was justified on the facts. - HELD THAT: - The Tribunal examined the departmental knowledge and the conduct of the appellant. It noted prior proceedings on the same subject and that Titan had informed the department by letter dated 20.05.2005 concerning price revision practices. The Tribunal found no positive act of suppression or evidence of intent to evade payment of duty by the appellants; the revised price lists and communications were available and the issue was one of interpretation. Following these findings the Tribunal concluded that invocation of the extended limitation period was not justified and the show cause notices were time barred. [Paras 8]

Extended period of limitation was not invokable; the demands are time barred.

Final Conclusion: Impugned orders confirming duty on showrooms and CFAs for affixing revised MRP stickers/tags were set aside: the activity did not constitute 'manufacture' under Section 2(f)(iii), any duty relating to altered MRP could only be regarded vis-a -vis the manufacturer at the place of manufacture, and the demands were time barred for want of suppression to invoke the extended period. Appeals allowed with consequential reliefs.

Withdrawal of assessment orders - pre-deposit refund entitlement - statutory appeal within limitation - benefit under Section 14 of the Limitation Act - jurisdictional overlap between assessing officers - adjudication on merits without objection as to limitation

Withdrawal of assessment orders - pre-deposit refund entitlement - jurisdictional overlap between assessing officers - Validity and consequence of withdrawal of assessment orders dated 29 March, 2019 and 31 March, 2020 (periods 2010-11 and 2011-12) by the respondents and attendant rights of the petitioners. - HELD THAT: - The Court accepted the respondents' concession that the assessment orders dated 29 March, 2019 and 31 March, 2020 (pertaining to the periods 2010-11 and 2011-12) ought not to have been passed by the Mazgaon jurisdictional officer and that the Kalyan jurisdictional officer had in fact passed assessments. Consequently, the respondents sought withdrawal of those Mazgaon orders. Given the withdrawal and the fact that the petitioners had already preferred appeals and made pre-deposits in relation to those assessments, the Court permitted the petitioners to withdraw those appeals. The petitioners thereby become entitled to release of the pre-deposit amounts, which the Court directed to be refunded within four weeks. [Paras 6, 7, 8]

The Mazgaon assessment orders for 2010-11 and 2011-12 are withdrawn; petitioners may withdraw their appeals and are entitled to refund of pre-deposits within four weeks.

Statutory appeal within limitation - benefit under Section 14 of the Limitation Act - adjudication on merits without objection as to limitation - Procedural directions regarding the assessment orders dated 2 March, 2017 and 7 June, 2017 (periods 2008-09 and 2009-10) including the time-frame for filing statutory appeals and the effect of the time spent in these writ proceedings on limitation. - HELD THAT: - The Court declined to adjudicate factual disputes raised in relation to service and procedural compliance of the impugned Kalyan assessment orders dated 2 March, 2017 and 7 June, 2017 (2008-09 and 2009-10). Instead, it permitted the petitioners to challenge those orders by instituting the statutory appeals available under the Act and directed that such appeals be filed within six weeks from the date of the order. The period consumed by the petitioners in pursuing the present writ (from filing on 11 November, 2022 until the date of this order) was held to attract Section 14 of the Limitation Act, and the petitioners were accordingly entitled to that benefit. The Court expressly left open all contentions of the parties regarding factual questions of service and other limitation issues for determination in the statutory appeals. [Paras 5, 10, 11, 12]

Petitioners may file statutory appeals against the assessment orders for 2008-09 and 2009-10 within six weeks; benefit of Section 14 Limitation Act granted for the period spent in these proceedings; limitation and service contentions kept open for the appellate forum.

Adjudication on merits without objection as to limitation - Disposition of appeals already filed in respect of assessment orders dated 31 March, 2021 and 13 March, 2022 (periods 2012-13 and 2013-14). - HELD THAT: - The Court observed there was no dispute about the assessment orders dated 31 March, 2021 and 13 March, 2022 for the periods 2012-13 and 2013-14, and that appeals in respect of those assessments were already pending. The Court directed that those pending appeals be adjudicated in accordance with law. No alteration of the appellate process was made; adjudication on merits is to proceed in the appellate forum. [Paras 9, 13]

Pending appeals for 2012-13 and 2013-14 shall be adjudicated on merits in accordance with law; if appeals relating to withdrawn orders are filed, they shall be decided without objection as to limitation.

Final Conclusion: Writ petition disposed by directing withdrawal of specified Mazgaon assessment orders and refund of pre-deposits, permitting filing of statutory appeals within prescribed timelines (with benefit under Section 14 of the Limitation Act for time spent in these proceedings), leaving factual and limitation contentions open for determination in the appellate proceedings, and directing pending appeals for other periods to be adjudicated on merits; no costs.

Electoral Bond Scheme - disclosure of donor and redemption details - right to information under Article 19(1)(a) - arbitrariness under Article 14 - direction for bank to disclose confidential information to a competent court - contempt for willful disobedience

Disclosure of donor and redemption details - direction for bank to disclose confidential information to a competent court - State Bank of India was directed to disclose details of Electoral Bonds purchased and redeemed between 12 April 2019 and 15 February 2024 and to comply by the timeline set by the Court. - HELD THAT: - The Court observed that the operative directions require SBI to disclose purchaser details (date of purchase, name of purchaser, denomination) and details of bonds encashed by political parties (date of encashment, denomination). SBI conceded that donor and redemption information exist, albeit maintained in separate sealed silos, and the Scheme itself contemplates disclosure to a competent court. The Court examined SBI's operational FAQs and procedural steps to conclude that details of purchases (including KYC and pay-in slips) and of encashments (maintained at designated branches) are readily available. On that basis the Court held that SBI's application for extended time to perform a matching exercise did not justify delay in disclosure and directed compliance by close of business on 12 March 2024. [Paras 8, 10, 11, 12, 13]

Application for extension of time was dismissed and SBI was directed to disclose the mandated details by close of business on 12 March 2024.

Disclosure of donor and redemption details - Electoral Bond Scheme - Election Commission of India was directed to collate the information disclosed by SBI and publish it on its official website within the timeline fixed by the Court. - HELD THAT: - Following SBI's mandated disclosure, the Court directed the ECI to compile the information received from SBI and to publish it on its official website. The Court further directed ECI to forthwith publish the details of statements earlier filed in compliance with interim orders and to ensure publication no later than 5 pm on 15 March 2024. [Paras 4, 14, 15]

ECI to compile SBI's disclosures and publish them on its website by 5 pm on 15 March 2024 and to publish earlier-supplied statements forthwith.

Contempt for willful disobedience - direction for bank to disclose confidential information to a competent court - Contempt petitions against SBI were disposed of without initiating penal measures, but SBI was placed on notice for potential contempt proceedings if it failed to comply with the deadlines. - HELD THAT: - The Court noted the pending application by SBI for extension and, while dismissing that application, refrained from immediate exercise of contempt jurisdiction. The Court required SBI to file an affidavit of its Chairman and Managing Director upon compliance and expressly warned that failure to comply within the prescribed timelines would invite action for willful disobedience. Consequently, the contempt petitions were disposed of at this stage on the terms indicated. [Paras 5, 16, 17]

Contempt petitions disposed of at this stage; SBI placed on notice that the Court may proceed for willful disobedience if directions are not complied with.

Final Conclusion: The Supreme Court dismissed SBI's request for an extension and ordered disclosure of Electoral Bond purchase and encashment details (12 April 2019 to 15 February 2024) by 12 March 2024, directed the ECI to publish the compiled information by 15 March 2024, and disposed of contempt petitions while placing SBI on notice for potential action if it defaults.

Tax on generation of electricity - water cess - pith and substance - legislative competence of State versus Union - fee versus tax distinction - measure of tax - excessive delegation - inter-State supply and Article 286 implications

Tax on generation of electricity - water cess - measure of tax - Characterisation of the impugned levy - whether the Act levies a tax on water or is, in pith and substance, a tax on generation of electricity. - HELD THAT: - Having regard to the Preamble, Objects and Reasons, the charging and assessment provisions and the Notification fixing differential rates by reference to the head (height) of the water fall, the Court held that the impugned enactment does not impose a levy on mere drawl or supply of water but on the single inextricable event of water drawn for hydropower generation. The measure and tariff structure (based on head) demonstrate that quantum of levy varies with electricity potential and not simply with water quantity. While the measure adopted for assessment may be indicative rather than determinative, read with the statutory scheme the levy's essential character is taxation of hydropower generation and not a straightforward water charge. [Paras 38, 40, 41, 42, 43]

The levy is, in substance, a tax on generation of electricity and not a water tax; this point is answered in favour of the petitioners.

Pith and substance - legislative competence of State versus Union - fee versus tax distinction - inter-State supply and Article 286 implications - Whether the State Legislature had legislative competence to enact the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023. - HELD THAT: - Applying the pith and substance test, and having held that the impost is a tax on generation of electricity (and operates as an inter-State tax where electricity is supplied outside the State), the Court concluded that the subject matter falls within the exclusive taxing fields of the Union. Taxing entries are distinct from general regulatory entries; Entries 17/18 (regulatory entries concerning water/land) cannot be used to cloak a State taxation power. The impugned levy cannot be sustained as a fee because no quid pro quo or earmarked fund and service relationship exists; nor can it be brought within Entries relied upon by the State (Entries 45, 49, 50, or via expansive reading of 'land' or 'minerals'). Therefore the State lacked competence under Articles 245-246 and related constitutional scheme to impose the levy. [Paras 76, 77, 78, 80, 81]

The Act is beyond the legislative competence of the State and is ultra vires Articles 246 and 265; this point is answered in favour of the petitioners.

Excessive delegation - measure of tax - fixation of rates by executive - Whether the impugned Act is constitutionally infirm for excessive delegation because Section 15 delegates fixation of rates to the executive without legislative guidance and the statute fails to provide the measure of tax. - HELD THAT: - Section 15 empowers the Government to fix and vary rates by notification without legislative standards or policy and the statute lacks the ascertainable 'measure' on which the rate will be applied. Established authorities permit delegation of rate fixation only where adequate legislative guidance exists; here neither the Act nor its objects furnish guiding principles and the Notification itself does not cure the absence of a statutory measure. The absence of the fourth essential component (measure/value for computation) renders the taxing architecture constitutionally defective for excessive delegation and vagueness. [Paras 87, 88, 89, 90, 91]

The Act is constitutionally invalid for excessive delegation and for failing to prescribe the requisite measure of tax; this point is answered in favour of the petitioners.

Final Conclusion: The writ petitions are allowed: the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023 and the Rules are declared ultra vires for want of legislative competence and for defects of excessive delegation; Sections of the Act made applicable to existing projects are quashed; consequential notifications, demands and recovery actions under the Act are set aside and amounts, if any, recovered are ordered to be refunded.

Pre-Institution Mediation under Section 12-A of the Commercial Courts Act, 2015 - Mandatory nature of pre-litigation mediation and its effect on maintainability - Rejection of plaint under Order VII Rule 11 CPC for non-compliance with mandatory pre-litigation mediation - Exception for urgent interim relief to avoid pre-institution mediation - Mediation settlement accorded status of an award under Section 30(4) of the Arbitration and Conciliation Act, 1996

Pre-Institution Mediation under Section 12-A of the Commercial Courts Act, 2015 - Mandatory nature of pre-litigation mediation and its effect on maintainability - Exception for urgent interim relief to avoid pre-institution mediation - Whether the plaintiff is entitled to exemption from pre-institution mediation under Section 12-A where prior settlement efforts took place during Section 138 proceedings but no formal mediation report or Centre's process is on record, and no urgent interim relief is sought. - HELD THAT: - The Court held that pre-institution mediation under Section 12-A is mandatory for suits not seeking urgent interim relief, as explained by the Supreme Court in Patil Automation and its subsequent clarifications. The plaintiff did not place on record any mediation report or evidence that mediation was conducted under an authorised mediation authority; annexed orders of the Judicial Magistrate only record that attempts at compromise were made and were ultimately futile. Amit Walia was distinguishable because mediation in that case had taken place under the Delhi High Court Mediation and Conciliation Centre, which the Court there held sufficient. In the present case, no comparable record of mediation under the prescribed mechanism exists and no urgent interim relief is claimed; accordingly the statutory mandate must be complied with before instituting suit. [Paras 6, 8, 9, 11]

Exemption from pre-institution mediation is refused and the plaintiff must comply with Section 12-A before instituting a fresh suit.

Rejection of plaint under Order VII Rule 11 CPC for non-compliance with mandatory pre-litigation mediation - Mediation settlement accorded status of an award under Section 30(4) of the Arbitration and Conciliation Act, 1996 - Whether the plaint should be rejected under Order VII Rule 11 CPC for failure to comply with the mandatory pre-institution mediation requirement. - HELD THAT: - Applying the mandatory interpretation of Section 12-A as endorsed by the Supreme Court (including the consequence that suits instituted in violation of Section 12-A may be subject to rejection of the plaint and that courts may exercise this power suo motu), the Court found that the present suit, instituted after the effective date of the Supreme Court's declaration, did not demonstrate compliance with the pre-institution mediation procedure and no urgent relief excused such compliance. Given absence of requisite mediation record, the plaint was liable to be rejected under Order VII Rule 11 CPC. The Court noted the policy under Section 12-A that mediation is to be treated as a mechanism of access to justice and that a settlement under the provision is elevated to the status of an award under Section 30(4) of the Arbitration Act, reinforcing the statutory scheme requiring mediation prior to institution. [Paras 5, 6, 10, 12]

The plaint is rejected under Order VII Rule 11 CPC for non-compliance with Section 12-A and the suit is dismissed; plaintiff may institute a fresh suit after complying with Section 12-A.

Final Conclusion: Application for exemption from pre-institution mediation dismissed; plaint rejected under Order VII Rule 11 CPC for failure to comply with mandatory pre-litigation mediation under Section 12-A of the Commercial Courts Act, 2015, and the plaintiff is at liberty to file a fresh suit after complying with Section 12-A.

Application of administrative memorandum to tenders under process - enhancement of GST in tendered rates - State action and Wednesbury unreasonableness - forfeiture of earnest money deposit - waiver of contractual termination rights by conduct - contractual termination not automatic on non-execution of formal agreement - duress and coerced withdrawal of tender

Contractual termination not automatic on non-execution of formal agreement - waiver of contractual termination rights by conduct - Whether non-execution of the formal agreement within the seven days under Clause 19 and disqualification under Clause 21 automatically entitled the respondents to cancel the tender and forfeit the EMD. - HELD THAT: - The Court held that Clause 19's language (tender "will liable" to be cancelled) does not make termination automatic on failure to execute the formal agreement within seven days; subsequent correspondence after the seven-day period amounted to conduct by the authorities amounting to acknowledgement and waiver of strict cancellation rights under Section 18 principles. Clause 21's disqualification provisions apply where a bidder withdraws before acceptance or refuses to work without satisfactory explanation; neither situation obtained here because acceptance had already been issued and no work order was refused on grounds of refusal to work. Accordingly, cancellation and forfeiture were not automatic under Clauses 19 or 21 and the respondents could not rely on an automatic termination theory to deny relief to the petitioner. [Paras 14, 15, 16, 18, 20]

Termination was not automatic and the respondents waived cancellation rights by their subsequent conduct; Clauses 19 and 21 did not justify automatic forfeiture of the EMD.

Application of administrative memorandum to tenders under process - enhancement of GST in tendered rates - State action and Wednesbury unreasonableness - Whether the Finance Department Memorandum dated November 22, 2022 (providing for up to 6% enhancement where GST indicated at 12%) applied to the petitioner's accepted tender and whether refusal to apply it amounted to arbitrary and discriminatory State action. - HELD THAT: - The Court found that the Memorandum expressly covered tenders under process that clearly indicated GST @12%, and the acceptance order of January 16, 2023 was subsequent to that Memorandum; therefore the Memorandum was applicable to the petitioner who had participated before the GST enhancement. The Court emphasised that State actions must meet a higher standard of fairness and applied the Wednesbury test: refusal by the authorities to give effect to their own Memorandum in identical circumstances constituted palpable arbitrariness and discrimination. Consequently, the respondents' insistence on enforcing rates without the 6% enhancement and refusing to permit re-quoting was unreasonable and unlawful. [Paras 22, 23, 24, 28, 29]

The Memorandum applied to the petitioner's case; the respondents' refusal to allow the 6% GST enhancement was arbitrary and unlawful.

Duress and coerced withdrawal of tender - forfeiture of earnest money deposit - Whether the petitioner's communication seeking 'honorary termination' (May 10, 2023) precluded the petitioner from challenging the respondents' refusal to apply the Memorandum or justified forfeiture of the EMD. - HELD THAT: - The Court held that the petitioner's purported request for termination was the result of coercion arising from the respondents' blatant refusal to honour their own Memorandum; such conduct amounted to duress and did not constitute an unqualified admission or an effective voluntary withdrawal that would bar judicial review. Therefore the communication could not be treated as precluding the petitioner from seeking relief or as validating forfeiture of the EMD. [Paras 12, 25, 26, 27]

The May 10, 2023 communication was under coercion/duress and does not preclude the petitioner from challenging the respondents' action or justify forfeiture of the EMD.

Forfeiture of earnest money deposit - application of administrative memorandum to tenders under process - Relief to be granted as consequence of illegality in refusing to apply the Memorandum and forfeiting the EMD. - HELD THAT: - The Court set aside the refusal to issue the work order and the forfeiture of the EMD. It directed that the respondents must either permit the petitioner to furnish a fresh quotation within one week incorporating the 6% GST enhancement and thereafter issue the work order pursuant to the tender, or alternatively refund the entire earnest money with interest at 10% until payment, in which latter event the State's subsequent tender(s) would stand. The Court also set aside all subsequent actions by the State (including any later tender issued after the writ petition was filed) insofar as they affected the petitioner's entitlement under the tender challenged. [Paras 30, 31, 32, 33, 34]

Refusal to issue work order and forfeiture of EMD set aside; respondents to permit re-quotation with 6% GST enhancement and issue work order, or refund EMD with 10% interest; subsequent state actions set aside insofar as they affect the petitioner.

Final Conclusion: Writ petition allowed: the respondents' refusal to give effect to the State's own Memorandum and consequent refusal to issue work order and forfeiture of the EMD were set aside; respondents must permit the petitioner to re-quote incorporating the 6% GST enhancement and issue the work order, or alternatively refund the EMD with interest, and all subsequent state action inconsistent with this outcome is set aside.