TaxTMI Updates e-Newsletter
Mar 19,2021

Activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution - pure service (excluding works contract service or other composite supplies involving supply of any goods) - exemption under Notification No. 12/2017-Central Tax (Rate) (Sl. No. 3) as amended - advance ruling under Section 98 of the Goods and Services Tax Act, 2017 - applicability of a notification issued under the CGST Act

Activity in relation to functions entrusted to Panchayat or Municipality under Article 243G or Article 243W of the Constitution - advance ruling under Section 98 of the Goods and Services Tax Act, 2017 - Whether the Detailed Project Report (DPR) and Project Management Consultancy (PMC/PMCS) services provided to SUDA and under PMAY are activities in relation to functions entrusted to Panchayats or Municipalities under Articles 243G / 243W of the Constitution. - HELD THAT: - The Authority examined the objects and functions of SUDA, the scope and purpose of PMAY, and the detailed scope of work for DPR and PMC as set out in the contracts. The tasks include identification of urban poor, planning and formulation of schemes, preparation of architectural/engineering designs, approvals, MIS entry, beneficiary attachment, supervision of construction, quality control, geo-tagging, preparation of progress and completion reports and related activities falling within urban planning, planning for economic and social development, urban poverty alleviation and slum improvement. On that basis the Authority concluded that the consultancy and project management services furnished under the contracts are in relation to functions listed in the 11th and 12th Schedules and therefore relate to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W respectively. [Paras 12, 13, 14, 15]

The DPR and PMC/PMCS services rendered to SUDA and under PMAY are activities in relation to functions entrusted to Panchayats and Municipalities under Articles 243G and 243W.

Pure service (excluding works contract service or other composite supplies involving supply of any goods) - exemption under Notification No. 12/2017-Central Tax (Rate) (Sl. No. 3) as amended - Whether those DPR and PMC services qualify as pure services (excluding works contract or composite supplies involving supply of goods) and are therefore exempt under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended, including when supplied by a subcontractor to a main contractor who has contracted with SUDA/PMAY. - HELD THAT: - The Authority inspected sample contracts and the described scope of services and found that the contracts contemplate consultancy and supervisory services, MIS and beneficiary-related administrative tasks, design and certification activities and do not amount to works contracts or composite supplies where supply of goods predominates. Consequently the services fall within the description of "pure service (excluding works contract service or other composite supplies involving supply of any goods)" in Sl. No. 3 of Notification No.12/2017 (as amended). The Authority further considered the legal effect where the main contractor sublets identical services to a subcontractor and, having regard to the object and language of the entry and consistent advance rulings, held that the identity of the immediate supplier is immaterial provided the supply is the same pure service to the specified class of recipients and the other conditions of the notification are satisfied. The grant of exemption is subject to fulfillment of conditions relating to input tax credit under the CGST Act and Rules. [Paras 16, 17, 18, 20, 22]

The DPR and PMC services qualify as pure services and are exempt from GST under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) (as amended), including when supplied by the applicant as a subcontractor, subject to compliance with conditions for input tax credit and other notification conditions.

Final Conclusion: The Authority rules that the applicant's DPR and PMC/PMCS services supplied to SUDA and under PMAY relate to functions entrusted to Panchayats/Municipalities under Articles 243G/243W, qualify as pure services and are exempt from GST under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended, including where supplied by the applicant as a subcontractor, subject to fulfillment of the notification's conditions and input tax credit requirements.

Supply of service - in the course or furtherance of business - business - employer-employee contractual supply - Schedule II activities treated as supply

Supply of service - in the course or furtherance of business - business - employer-employee contractual supply - Whether the subsidized shared transport facility provided to employees under the employment contract through third party vendors amounts to a supply of service by the applicant to its employees. - HELD THAT: - The Authority examined the statutory definition of "supply" and the treatment of activities under Schedule II read with the definition of "business" to determine whether arranging transport for employees is made "in the course or furtherance of business." The applicant merely collects amounts from employees and passes the same, with an additional contribution by the applicant, to the third party transport provider; the applicant does not carry on transport as a business nor is the transport activity integrally connected to or incidental to its core business of software development and staff augmentation. The Authority also noted CBIC's press release and earlier advance rulings recognizing that supplies by an employer to an employee under contractual employment terms are not liable to GST where they do not constitute a business activity in furtherance of the employer's trade. Applying these principles, the Authority concluded that arranging and recovering costs of subsidized employee transport under the employment contract is not a supply in the course or furtherance of the applicant's business and therefore does not attract GST; consequential questions on valuation, classification, liability and rate become redundant. [Paras 16, 18, 19, 20]

Arranging the subsidized shared transport facility for employees under the employment contract through third party vendors does not constitute a "supply of service" by the applicant to its employees and hence does not attract GST; the remaining questions are redundant.

Final Conclusion: The Authority rules that the subsidized shared transport facility provided to employees under the employment contract through third party vendors is not a supply in the course or furtherance of the applicant's business and therefore does not attract GST; questions on valuation, classification, liability and rate are rendered redundant.

Activity in relation to functions entrusted to Panchayat or Municipality - Article 243G - Article 243W - pure service excluding works contract or composite supply - exemption under Notification No. 12/2017-Central Tax (Rate) as amended

Activity in relation to functions entrusted to Panchayat or Municipality - Article 243G - Article 243W - Project Development (Detailed Project Report) and Project Management Consultancy services provided to SUDA and under PMAY qualify as activities in relation to functions entrusted to Panchayats/Municipalities under the Constitution. - HELD THAT: - The Authority examined the objects and functions of the State Urban Development Agency (SUDA), the scope of PMAY and the specific scope of work under the DPR and PMC contracts, including tasks such as beneficiary identification, preparation of plans, infrastructure proposals, approvals, implementation monitoring, MIS entries, supervision of construction, quality control and beneficiary coordination. These duties fall within matters listed in the Eleventh and Twelfth Schedules (including urban planning, planning for economic and social development, urban poverty alleviation, slum improvement and up-gradation, regulation of land use and related functions). On that basis the consultancy services were held to be in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution. [Paras 15, 17]

Services under the contracts with SUDA and for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G.

Pure service excluding works contract or composite supply - exemption under Notification No. 12/2017-Central Tax (Rate) as amended - The DPR and PMC services, as contracted, qualify as pure services (excluding works contract or composite supplies involving supply of goods) and are eligible for exemption under the specified Notification. - HELD THAT: - After examining the sample agreements and the defined scope of work, the Authority concluded that the services comprise consultancy, planning, supervision, MIS and related advisory and monitoring functions without constituting a works contract or composite supply involving supply of goods. Consequently, such services fall within the description of pure services covered by Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended, and corresponding State notifications, and are therefore exempt from CGST/UPGST as provided therein. [Paras 16, 17]

The services qualify as pure services and are exempt from GST under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) as amended and corresponding Uttar Pradesh notifications.

Final Conclusion: The Authority for Advance Ruling, Uttar Pradesh, ruled that the applicant's DPR and PMC services for SUDA and PMAY are activities in relation to functions entrusted to Panchayats/Municipalities under Articles 243G/243W and, being pure services (not works contracts or composite supplies involving goods), are exempt from GST under the cited notifications within the Authority's territorial jurisdiction.

Functions entrusted to Panchayats and Municipalities under Article 243G and Article 243W of the Constitution - exemption under Notification No. 12/2017 - Central Tax (Rate) (Sl. No. 3) as amended by Notification No. 2/2018 - pure service excluding works contract service or other composite supplies involving supply of any goods

Functions entrusted to Panchayats and Municipalities under Article 243G and Article 243W of the Constitution - Whether the DPR and Project Management Consultancy services provided to SUDA and under PMAY relate to functions entrusted to Panchayats/Municipalities under Articles 243G/243W of the Constitution of India. - HELD THAT: - The Authority examined the objects and role of SUDA, the nature and objectives of PMAY, the entries in the Eleventh and Twelfth Schedules (including urban planning, slum improvement, poverty alleviation and related functions) and the detailed scope of work under the contracts (preparation of DPRs, beneficiary surveys, architectural/engineering designs, approvals, MIS entry, supervision and quality control, progress reporting and related project management activities). On that basis the Authority concluded that the consultancy and project management services rendered under the contracts are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G of the Constitution. [Paras 15]

Services under the contracts with SUDA and for PMAY are in relation to functions entrusted to Municipalities under Article 243W and to Panchayats under Article 243G.

Pure service excluding works contract service or other composite supplies involving supply of any goods - exemption under Notification No. 12/2017 - Central Tax (Rate) (Sl. No. 3) as amended by Notification No. 2/2018 - Whether the said services qualify as 'pure services' (excluding works contract or composite supplies involving supply of goods) and are therefore exempt under Sl. No. 3 of Notification No. 12/2017 as amended. - HELD THAT: - The Authority examined the sample contracts and scope of work and found that the services consist of consultancy and project management activities (DPR preparation, supervision, MIS, beneficiary management, reporting and related services). The agreements and scope indicate supply of services where any procurement of goods is incidental/reimbursable for rendering the service, and the contracts do not amount to works contracts or composite supplies involving predominant supply of goods. Consequently, these services fall within the description of 'pure service (excluding works contract or other composite supplies involving supply of any goods)' in Sl. No. 3 of Notification No. 12/2017 as amended, making them eligible for exemption from CGST/UPGST. [Paras 16, 17]

The services qualify as pure services (excluding works contract or composite supplies involving supply of goods) and are exempt under Sl. No. 3 of Notification No. 12/2017 as amended.

Final Conclusion: The Authority ruled that the DPR and Project Management Consultancy services provided to SUDA and under PMAY relate to functions entrusted to Panchayats/Municipalities under Articles 243G/243W and, being pure services (not works contracts or composite supplies involving supply of goods), are exempt from CGST/UPGST under Sl. No. 3 of Notification No. 12/2017 as amended.

Exemption as an educational institution under Notification No. 12/2017 - CT (Rate) (Entry relating to educational institutions) - qualification as an "approved vocational education course" for GST exemption - applicability of Entry No. 64 (services by Government/local authority) to a non-governmental organisation

Applicability of Entry No. 64 (services by Government/local authority) to a non-governmental organisation - Whether Entry No. 64 of the exemption list (services by Central/State/Union territory/local authority) applies to the applicant's vocational training services - HELD THAT: - The Authority observed that Entry No. 64 deals with services provided by the Central Government, State Government, Union territory or local authority. The applicant is a society registered under Section 12A of the Income Tax Act and is not a Government, State Government, Union territory or local authority. Consequently, the entry cannot be invoked by the applicant to claim exemption for its vocational training services. [Paras 13]

Entry No. 64 is not applicable to the applicant and cannot be relied upon to claim exemption.

Exemption as an educational institution under Notification No. 12/2017 - CT (Rate) (Entry relating to educational institutions) - qualification as an "approved vocational education course" for GST exemption - Whether the applicant's vocational courses qualify as "approved vocational education courses" and are exempt as services by an educational institution under Entry No. 66 of Notification No. 12/2017 - CT (Rate) - HELD THAT: - The Authority examined the definition of "educational institution" in Notification No. 12/2017 and the embedded definition of "approved vocational education course", which includes courses run by an ITI/ITC affiliated to the National Council for Vocational Training (NCVT) or Modular Employable Skill courses approved by NCVT. The applicant's Diesel Mechanic, COPA, Welder and Cutting/sewing trades were found to be affiliated to the NCVT and therefore fall within the definition of "approved vocational education courses". Informal trades certified by the applicant's own TLM certification were not approved by NCVT/State Council and thus do not qualify. The Authority noted a prior AAR decision in Maharashtra reaching a like conclusion for NCVT-affiliated courses. [Paras 15, 16, 17, 18]

Only courses affiliated to the National Council for Vocational Training qualify as "approved vocational education courses" and are exempt from GST under Sr. No. 66 of Notification No. 12/2017 - CT (Rate); informal courses with TLM certification do not qualify.

Final Conclusion: The Authority rules that Entry No. 64 is inapplicable to the applicant, and that only vocational courses affiliated to the National Council for Vocational Training qualify as "approved vocational education courses" and are exempt under Sr. No. 66 of Notification No. 12/2017 - CT (Rate); other informal courses certified by the applicant do not qualify for the exemption.

Regular bail - custody not required where investigation is complete and challan has been presented - wrong availment of Input Tax Credit - arrest under GST provisions - conditions for grant of bail: personal/surety bond and surrender of passport - petition rendered infructuous

Regular bail - custody not required where investigation is complete and challan has been presented - wrong availment of Input Tax Credit - arrest under GST provisions - conditions for grant of bail: personal/surety bond and surrender of passport - Grant of regular bail to the petitioner arrested in proceedings concerning alleged wrongful availment of Input Tax Credit under GST provisions. - HELD THAT: - The Court found that, unlike matters where investigation remains incomplete, the present case had been investigated and the challan had been presented. In those circumstances continued custody of the petitioner was not necessary for the purposes of investigation. The Court distinguished orders refusing bail which were grounded on incomplete investigation and observed that the pendency of a challenge to the vires of certain GST provisions did not alter the factual conclusion that investigation here was complete. On this basis the petition under Section 439 Cr.P.C. was allowed subject to conditions imposed to secure attendance and prevent flight.

Petitioner released on regular bail on execution of adequate personal/surety bond to the satisfaction of the trial Court/Duty Magistrate, surrender of passport and prohibition on leaving India without prior permission of the Court.

Petition rendered infructuous - Disposition of CRM No.5091 of 2021 which had been rendered infructuous. - HELD THAT: - The Court recorded that CRM No.5091 of 2021 stood rendered infructuous and accordingly dismissed that application.

CRM No.5091 of 2021 dismissed as having been rendered infructuous.

Final Conclusion: The petition for regular bail is allowed on conditions (execution of adequate personal/surety bond, surrender of passport and not leaving India without prior permission); the separate miscellaneous application was dismissed as infructuous. Observations made are not expressions on the merits of the underlying prosecution.

Mandamus - Input Tax Credit - Form GST TRAN-2 - representation to the nodal officer - maintainability of writ petition - liberty to proceed in accordance with law

Mandamus - Form GST TRAN-2 - Input Tax Credit - representation to the nodal officer - Writ petition seeking mandamus to permit filing of Form GST TRAN-2 and claim Input Tax Credit on goods for which invoices/duty paying documents are unavailable was dismissed. - HELD THAT: - The petitioner sought a writ of mandamus directing respondents to permit filing of Form GST TRAN-2 and allow claim of Input Tax Credit in respect of stock where invoices were not available. The court noted earlier directions for the Nodal Officer to hear the petitioner and observed that a representation had been or could be filed before the correct/appropriate officer. Given the availability of an alternative efficacious remedy by way of representation to the proper officer, the court declined to grant the extraordinary relief of mandamus. The petition was therefore dismissed while preserving the petitioner's right to pursue the matter before the appropriate authority in accordance with law. [Paras 2, 3]

Writ petition dismissed; petitioner granted liberty to file representation and take steps in accordance with law; no costs.

Final Conclusion: The petition for mandamus to permit filing of Form GST TRAN-2 and grant of Input Tax Credit was refused; petitioner may pursue relief by filing representation before the appropriate officer and take further steps according to law.

Commensurate reduction in prices - passing on benefit of reduction in rate of tax - denial of Input Tax Credit (ITC) and its impact - computation of profiteered amount using ITC-to-turnover ratio - inclusion of tax component in profiteered amount - authority to determine procedure and methodology under Rule 126 - reinvestigation under Rule 133(4) treated as fresh investigation

Passing on benefit of reduction in rate of tax - commensurate reduction in prices - Respondent No. 1 did not pass on the commensurate benefit of reduction in GST rate to his customers. - HELD THAT: - The Authority examined the effect of Notification No. 46/2017 reducing the GST rate on restaurant services from 18% to 5% w.e.f. 15.11.2017 and applied Section 171(1) which mandates that any reduction in rate of tax or benefit of ITC shall be passed on to recipients by way of commensurate reduction in prices. Comparison of pre- and post-rate reduction item-wise prices showed that Respondent No. 1 increased base prices for the majority of SKUs beyond the impact of denial of ITC, so that the cum-tax price paid by consumers was not reduced commensurately. The Authority accepted DGAP's approach of computing requisite benefit by reference to item-wise base prices and the quantified impact of ITC denial (as percentage of turnover) for the pre-rate reduction period and concluded profiteering in respect of the items identified. [Paras 10, 11, 14, 38, 40]

Respondent No. 1 failed to pass on the commensurate benefit of tax reduction to customers and has resorted to profiteering.

Denial of Input Tax Credit (ITC) and its impact - computation of profiteered amount using ITC-to-turnover ratio - The impact of denial of ITC was computed by taking the ratio of ITC to net taxable turnover for the pre-rate reduction period and applied to determine permissible base-price increase; profiteering was established where post-reduction base prices exceeded that allowance. - HELD THAT: - DGAP computed ITC available to Respondent No. 1 for July-October 2017 and derived an ITC-to-net-taxable-turnover ratio of 8.72%. The Authority accepted this ratio (excluding November 2017) because reversals and invoice deficiencies rendered November data unreliable. Using pre-rate reduction average item-wise base prices adjusted for the 8.72% ITC impact and comparing them with actual post-reduction transaction prices (or month-wise average post-reduction base prices where invoice-level data were unavailable), DGAP identified items where price increases exceeded the ITC impact and quantified the excess. The Authority found this methodology reasonable and in consonance with Section 171 and prior practice of the Authority. [Paras 13, 14, 17, 39, 42]

The ITC-to-turnover ratio of 8.72% was correctly adopted for computing the denial-impact and the methodology applied to identify and quantify profiteering on items exceeding that impact is upheld.

Inclusion of tax component in profiteered amount - commensurate reduction in prices - The profiteered amount properly includes the GST component collected on the excess base price. - HELD THAT: - Section 171 requires that the benefit of tax reduction be passed on by way of commensurate reduction in price, which encompasses both base price and tax. Where suppliers collected excess base price post-reduction and thereby also collected excess GST from customers, that excess tax formed part of the benefit denied to consumers. The Authority held that such excess GST cannot be recovered from Government and must be included in the profiteered amount to be deposited in Consumer Welfare Funds, and that Respondent No. 1 could have returned excess tax by issuing credit notes under Section 34. [Paras 10, 15, 49]

DGAP correctly included the tax component (GST on the excess base price) in computing the profiteered amount.

Reinvestigation under Rule 133(4) treated as fresh investigation - authority to determine procedure and methodology under Rule 126 - Reference back to DGAP under Rule 133(4) constituted a fresh investigation and the DGAP's re-investigation and subsequent report were admissible and timely. - HELD THAT: - The Authority recorded reasons for re-investigation under Rule 133(4) to obtain invoice/transaction-wise data and to recompute profiteering in line with Section 171(1)-(2). The Authority's guidelines treat reports under Rule 133(4) as fresh reports for purposes of Rule 133(1); accordingly the re-investigation and the DGAP's report furnished pursuant thereto were to be treated as a fresh investigation, within time, and the cases cited by Respondent No. 1 alleging time-bar were rejected. [Paras 19, 20, 43]

The referral under Rule 133(4) amounted to a fresh investigation; the DGAP's re-investigation report is valid and timely.

Authority to determine procedure and methodology under Rule 126 - Rule 126 delegation to the Authority to determine procedure and methodology for anti-profiteering enquiries is valid and not an excessive or unlawful sub-delegation. - HELD THAT: - Respondent No. 1's challenge to the vires of Rule 126 and to the absence of a single fixed computational formula was considered. The Authority held Section 171 prescribes the substantive mandate (pass on tax/ITC benefits) and that mathematical computation varies by SKU and facts; Rule 126 empowers the Authority to determine procedure and methodology (not to legislate) and is a permissible delegation. Prior decisions and the Authority's issued methodology were sufficient for investigatory computation; absence of a universal single formula does not render the regime unenforceable. [Paras 51, 57]

The Authority's power under Rule 126 to determine methodology is lawful and the absence of a universal mathematical formula does not invalidate anti-profiteering enforcement.

Period of investigation - passing on benefit of reduction in rate of tax - The investigation period from 15.11.2017 to 31.03.2019 was correctly adopted and profiteering was computed for that entire period. - HELD THAT: - Respondent No. 1 argued for exclusion of later months (e.g., after price revisions) or for a limited period; the Authority observed that Respondent No. 1 increased base prices immediately w.e.f. 15.11.2017 and failed to pass on benefits up to 31.03.2019, with no evidence of earlier compliance. As the contravention continued, computation for the whole period was appropriate. The Authority therefore retained the full investigation window used by DGAP. [Paras 3, 46, 47]

The period 15.11.2017 to 31.03.2019 is properly adopted for computation of profiteering.

Penalty under Section 171(3A) - Penalty under Section 171(3A) was not imposed retrospectively for the investigation period. - HELD THAT: - While the Authority found contravention of Section 171(1), Section 171(3A) prescribing penalty became operational only w.e.f. 01.01.2020. Since the profiteering occurred during 15.11.2017-31.03.2019, imposition of penalty under Section 171(3A) for that period would be retrospective and therefore was not issued; no show-cause on penalty was required. [Paras 64, 66]

Penalty under Section 171(3A) is not imposed retrospectively for the period of investigation.

Computation of profiteered amount using ITC-to-turnover ratio - Amount of profiteering determined as Rs. 78,41,754/- (including GST) and directed to be deposited in Consumer Welfare Funds with interest. - HELD THAT: - Accepting DGAP's computations (Annexure-17) based on pre- and post-rate comparisons, ITC impact and available supplied data, the Authority quantified net higher sale realization due to excess base-price increases as Rs. 78,41,754/-, inclusive of GST on the profiteered base amount. As recipients were not identifiable, Respondent No. 1 was directed to deposit equal halves in the Central and Maharashtra State Consumer Welfare Funds along with interest at 18% from dates of realization until deposit; deposit to be made within three months, failing which recovery to be effected by the concerned Commissioners. [Paras 15, 41, 65]

Profiteered amount fixed at Rs. 78,41,754/-, to be deposited in equal shares into the Central and State Consumer Welfare Funds with prescribed interest.

Final Conclusion: The Authority found that Respondent No. 1, a franchisee, contravened Section 171(1) by not passing on the commensurate benefit of the GST rate reduction (18% to 5% w.e.f. 15.11.2017) and by increasing base prices beyond the permissible impact of denial of ITC. Applying the accepted ITC-to-turnover ratio and DGAP's computations, the profiteered amount was determined as Rs. 78,41,754/- (inclusive of GST), to be deposited equally into the Central and Maharashtra State Consumer Welfare Funds with interest; the penalty under Section 171(3A) was not imposed retrospectively as it came into force w.e.f. 01.01.2020.

Interest on net cash tax liability - interest under Section 50 of the GST Act - challenge to levy of interest on gross tax liability - administrative instructions of the CBIC - state authorities adopting CBIC instruction - liberty to approach court in case of future recovery

Interest on net cash tax liability - interest under Section 50 of the GST Act - challenge to levy of interest on gross tax liability - administrative instructions of the CBIC - state authorities adopting CBIC instruction - Disposition of writ petitions challenging appellate order upholding interest charged on gross tax liability where CBIC has issued administrative instructions to recover interest on net cash tax liability - HELD THAT: - The Court noted that the appeals under challenge relate to liability for the period April, 2018 to January, 2019 where the appellate authority confirmed interest levied under Section 50 on gross tax liability. The Central Board of Indirect Taxes and Customs issued administrative instructions dated 18.09.2020 directing recovery of interest only on the net cash tax liability for the period 01.07.2017 to 31.08.2020 and advising that show-cause notices framed on gross liability be kept in call books pending legislative amendment. The State filed a supplementary affidavit stating that, in line with the CBIC administrative instructions, the State authorities are imposing interest on the net tax liability. In view of this categorical stand by the State accepting and applying the administrative instruction, the Court found no purpose in keeping the writ petitions pending to decide the challenge to the appellate orders on the grounds urged. The Court, however, preserved the petitioner's right to re-approach the Court if the State thereafter seeks to realise interest on the gross tax liability for the subject period.

Writ petitions disposed of as the State has taken a categorical stand that interest will be imposed on net tax liability in accordance with CBIC administrative instructions, with liberty to the petitioner to approach the Court if the State seeks recovery on gross tax liability.

Final Conclusion: The writ petitions challenging the appellate order confirming interest on gross tax liability for April, 2018 to January, 2019 are disposed of in view of the CBIC administrative instructions and the State's categorical statement that interest will be imposed on the net tax liability; petitioner granted liberty to approach the Court if recovery on gross liability is attempted in future.

Unexplained credit u/s 68 - inquiry of source of funds and other relevant factors in relation to the investment in question was carried out - High Court [2019 (4) TMI 63 - BOMBAY HIGH COURT] upheld the Tribunal's conclusion that the assessee had proved identity, genuineness and creditworthiness of the investor and that there was no basis to treat the subscription as a colourable device; the Revenue's appeal against deletion of the addition under Section 68 for AY 2009-10 is dismissed.

HELD THAT:- SLP dismissed.

Reopening of assessment - Reasons for reopening of the assessment u/s 147 - EDC paid to HUDA was subject to TDS under Section 194 - AO cannot now review its decision, having failed to perform its statutory duty and therefore the impugned action of reopening is nothing but a change of opinion - HELD THAT:- SLP dismissed.

Taxation under Section 68 as unexplained cash credit - adequacy of evidence to substantiate source of capital - taxability only if cash or bank receipt is established - requirement of a speaking order on merits - remand for fresh consideration

Taxation under Section 68 as unexplained cash credit - adequacy of evidence to substantiate source of capital - taxability only if cash or bank receipt is established - requirement of a speaking order on merits - remand for fresh consideration - Whether the matter relating to the addition of the opening capital of Rs. 1,02,06,929/- treated as unexplained cash credit under Section 68 could be sustained or required remand for fresh consideration by the Commissioner of Income Tax (Appeals). - HELD THAT: - The Assessing Officer treated the sum as unexplained cash credit in the assessment for AY 2012-13 on the ground that the assessee failed to substantiate that the amount was actually available in the earlier period and did not identify source or quantify the amount as cash or bank receipts. The CIT(A) reversed that addition, noting that taxability under Section 68 arises only if the sum was introduced as cash or deposited in bank in the year under consideration and observing that balance-sheet figures drawn for bank purposes may not reflect actual cash introduction; on that basis the CIT(A) concluded there was no unexplained cash credit. The Tribunal reversed the CIT(A), agreeing with the AO that the assessee had not substantiated the claim. On perusal of the appeal papers, the High Court found that the assessee had placed on record returns, computations and bank statements and had given a working showing how the opening capital figures arose; the Court observed that the CIT(A) did consider material placed before him but did not record adequate reasons. Having regard to the nature of the explanation offered and the fact that the assessee is an individual, the Court held that the appropriate course was to remit the matter to the CIT(A) for fresh, reasoned consideration on merits of the explanation in respect of the alleged unexplained cash credit, rather than to decide the substantial questions of law at that stage. The Tribunal's order was set aside and the matter remanded for a speaking order in accordance with law. [Paras 11, 12]

Tribunal order set aside; appeal allowed; matter remanded to the CIT(A) for fresh consideration of the explanation offered in respect of the alleged unexplained cash credit and for passing a speaking order on merits.

Final Conclusion: The High Court allowed the tax case appeal, set aside the Tribunal's order on the unexplained cash credit, and remanded the issue to the CIT(A) for fresh, reasoned consideration of the assessee's explanation in accordance with law; the substantial questions of law were left open.

Appellate authority's power to entertain additional claim not made before the Assessing Officer - entertainment of fresh claim in appeal despite absence of revised return - typographical error in return and consequential corrective claim in appeal - automated processing by Central Processing Centre (CPC) constraining opportunity to file revised return - principle that claims not made before Assessing Officer may be raised before appellate authorities

Appellate authority's power to entertain additional claim not made before the Assessing Officer - entertainment of fresh claim in appeal despite absence of revised return - automated processing by Central Processing Centre (CPC) constraining opportunity to file revised return - Appellate authority can entertain and decide a fresh claim raised for the first time in appeal even though it was not made in the original return or by filing a revised return. - HELD THAT: - The Court applied the settled principle, as laid down in Goetze (India) Ltd. and followed by various High Courts, that omission to make a claim before the Assessing Officer does not ipso facto bar an assessee from raising the claim before the appellate authority. The peculiar facts of the case - namely that the return was processed by the automated CPC and the assessee had no practical opportunity to file a revised return before assessment - reinforced the appropriateness of allowing the claim to be entertained in appeal. The Court noted that the Commissioner (Appeals) had remanded aspects to the Assessing Officer for examination and that the appellate authority and the Tribunal had acted within jurisdiction in permitting the corrective claim arising from a typographical error in Schedule BP. Because the substantial question admitted for consideration concerned only the jurisdictional power of the appellate forum to entertain such a claim (and not the merits of the deduction/exemption itself), the Court confined its decision to answering that question in the affirmative, relying on the cited precedents which recognise jurisdiction of appellate authorities to consider additional grounds necessary for a just decision. [Paras 8]

The substantial question is answered in the affirmative: the Commissioner (Appeals) and the Tribunal had jurisdiction to entertain the fresh claim raised in appeal though it was not made in the original or a revised return.

Final Conclusion: The revenue's appeal is dismissed; the High Court affirms that appellate authorities may entertain a fresh claim raised in appeal (including to correct a typographical error) even if the claim was not made in the original or a revised return, and the appeal fails on the admitted substantial question of law.

Estoppel - deduction for bad debts as loss in the course of business - allowability of loss in real estate business - recovery treated as income under Section 41

Estoppel - recovery treated as income under Section 41 - Whether the revenue can seek to sustain the Assessing Officer's disallowance for the assessment year 2012-13 after subsequent recoveries (partly in Financial Year 2019-2020 and Financial Year 2020-2021) were offered to tax by the assessee - HELD THAT: - The Court considered the affidavit filed on behalf of the assessee recording that subsequent to the assessment proceedings the assessee furnished information, negotiations took place with the borrower, and sums forming part of the amount earlier written off were repaid - with part offered as income in Financial Year 2019-2020 and the balance in Financial Year 2020-2021 under Section 41. Having regard to these subsequent events and the fact that the recoveries were taxed, the Court held that the revenue cannot now seek to sustain the Assessing Officer's order disallowing the loss claimed for Assessment Year 2012-13. On that factual basis the Court sustained the order of the Commissioner of Income Tax (Appeals) and dismissed the revenue's appeal. The Court expressly left the substantial questions of law open because the dismissal was grounded on these subsequent events placed before the Court by affidavit rather than on adjudication of the legal issues framed in the admission order. [Paras 8, 9]

Appeal dismissed; CIT(A)'s order sustained on the basis of subsequent repayments offered to tax, and substantial questions of law left open.

Final Conclusion: The revenue's appeal against the Tribunal's order for Assessment Year 2012-13 is dismissed on the ground of subsequent repayments by the borrower which were offered to tax; the Commissioner (Appeals) order is therefore sustained, while the substantial questions of law are left open.

Disallowance of expenditure attributable to tax-exempt income under Section 14A read with Rule 8D - precedential effect of a prior Division Bench decision of this Court - relevance of Board's Circular No.5 of 2014 to the application of Section 14A

Disallowance of expenditure attributable to tax-exempt income under Section 14A read with Rule 8D - precedential effect of a prior Division Bench decision of this Court - relevance of Board's Circular No.5 of 2014 to the application of Section 14A - Validity of the Tribunal's order setting aside the addition made under Section 14A read with Rule 8D for Assessment Year 2012-13. - HELD THAT: - The Court accepted the assessee's submission that the substantial question before this Bench had been answered against the revenue by a prior Division Bench in Commissioner of Income-tax-III v. Subhash Kabini Power Corporation Ltd. The revenue did not dispute that position. In view of the earlier Division Bench decision and for the reasons recorded therein, the Tribunal was correctly guided in setting aside the disallowance under Section 14A read with Rule 8D. The Court noted the interplay of that precedent with the contention regarding Board's Circular No.5 of 2014 but relied on the Division Bench's reasoning in disposing of the substantial question against the revenue.

The Tribunal's order setting aside the disallowance under Section 14A read with Rule 8D is upheld and the revenue's appeal is dismissed.

Final Conclusion: The substantial question of law is answered against the revenue; the Tribunal's order for Assessment Year 2012-13 setting aside the Section 14A/Rule 8D disallowance is affirmed and the appeal is dismissed.

Tribunal's power of remand - exercise of remand sparingly and with reasons - onus under Section 68 - assessee to prove identity, creditworthiness and genuineness - validity of additions as unexplained cash credit

Tribunal's power of remand - exercise of remand sparingly and with reasons - Validity of the Tribunal's order remitting the matter to the Assessing Officer for re-examination when the Assessing Officer and the CIT(A) had recorded detailed findings and no fresh material was placed before the Tribunal. - HELD THAT: - The Court held that the Tribunal ought to have acted with circumspection before ordering a remand and must record reasons why it could not decide the factual issues on the materials before it. Where the Assessing Officer carried out detailed enquiry, afforded opportunity to the assessee, and the CIT(A) upheld the findings, and no new material was placed before the Tribunal, remand is not justified. The Tribunal, as the final fact-finding authority, must not routinely remit matters when the evidence before it is the same as that considered below; remand is an exceptional power to be exercised on judicial principles and only when facts warrant it. Because the Tribunal followed an earlier decision which had been set aside by this Court, its remand was impermissible and required interference.

Tribunal's remand set aside; remand held unjustified and order of Tribunal invalid.

Onus under Section 68 - assessee to prove identity, creditworthiness and genuineness - validity of additions as unexplained cash credit - Whether the Assessing Officer and the CIT(A) were justified in treating the credits/long term capital gains as unexplained cash credits under Section 68 and making additions where the assessee failed to discharge the primary onus. - HELD THAT: - The Court applied settled principles that when sums are credited in the assessee's books, the initial onus is on the assessee to establish identity of the parties, their creditworthiness/capacity, and genuineness of the transactions. The Assessing Officer conducted field enquiries, issued statutory notices (including under Section 133(6)), and the CIT(A) recorded detailed findings (including returned communications, lack of distinctive numbers in bills, off market transactions, absence of corporate announcements, and commonality suggesting engineered transactions). The Tribunal did not set aside these factual findings. In the absence of cogent documentary evidence discharging the assessee's primary onus, the Assessing Officer was justified in treating the credits as unexplained cash credits and making additions under Section 68.

Findings of AO and CIT(A) sustaining additions under Section 68 upheld; assessee failed to discharge primary onus and additions valid.

Final Conclusion: The Tax Case Appeals by the Revenue are allowed; the impugned orders of the Tribunal remanding the matters are set aside, the substantial questions of law are answered in favour of the Revenue, and the orders of the CIT(A) restoring the additions under Section 68 stand restored.

Royalty - use of copyright in computer software - Tax deduction at source under section 195 - Section 9(1)(vi) - income deemed to accrue or arise in India - Section 40(a)(ia) - disallowance for failure to deduct tax at source - End-User License Agreement not amounting to transfer of copyright - Applicability of DTAA definition of royalty vis-a -vis domestic law

Royalty - use of copyright in computer software - Tax deduction at source under section 195 - End-User License Agreement not amounting to transfer of copyright - Applicability of DTAA definition of royalty vis-a -vis domestic law - Amounts paid to non-resident computer software manufacturers/suppliers for resale/use of computer software under distribution agreements/End-User License Agreements do not constitute payment of royalty chargeable in India and do not attract obligation to deduct tax at source under section 195. - HELD THAT: - The Tribunal followed the ratio of the Hon'ble Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd., which held that distribution agreements/EULAs do not create any interest or right in the distributors/end-users amounting to the use of or right to use copyright. The Supreme Court observed that the EULA grants restricted user rights for installation and use without transferring the copyright, and that the DTAA definition of 'royalty' does not cover such restricted licences. Although the Income-tax Act contains a wider domestic definition of royalty under section 9(1)(vi) with Explanations, the Supreme Court held that those provisions are not more beneficial to the assessee and therefore have no application where the DTAA definition governs. Applying that reasoning, the Tribunal held that consideration paid by the assessee to non-resident software suppliers for resale/use of software is not royalty within the meaning of the applicable DTAAs and hence does not give rise to India-taxable income that would trigger TDS under section 195.

Amounts paid for resale/use of computer software under EULAs are not royalty and were not liable to TDS under section 195.

Section 40(a)(ia) - disallowance for failure to deduct tax at source - Tax deduction at source under section 195 - Disallowance of software-related payments under section 40(a)(ia) was not sustainable and was deleted. - HELD THAT: - The Tribunal noted that the disallowance under section 40(a)(ia) in the assessments had already been set aside by the ITAT in its order dated 11.03.2021 following the Supreme Court's decision in Engineering Analysis Centre of Excellence. Since the payments did not constitute royalty liable to tax in India and no TDS obligation arose under section 195, the consequential disallowance under section 40(a)(ia) could not be sustained. The Tribunal therefore deleted the disallowance in the assessment orders in accordance with the binding precedent.

The disallowance under section 40(a)(ia) is deleted.

Final Conclusion: Appeals allowed. Following the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd., payments to non-resident software suppliers for resale/use under EULAs are not royalty taxable in India and did not attract TDS under section 195; consequential disallowances under section 40(a)(ia) are deleted.

Depreciation on goodwill under Section 32(1)(ii) - business or commercial rights of similar nature - ejusdem generis - precedent and binding effect of coordinate bench decisions - Dispute Resolution Panel directions

Depreciation on goodwill under Section 32(1)(ii) - business or commercial rights of similar nature - precedent and binding effect of coordinate bench decisions - Dispute Resolution Panel directions - Claim for depreciation on goodwill disallowed by AO/DRP was held allowable and the assessment adjustments on that ground were set aside. - HELD THAT: - The Tribunal examined the identical issue decided in the assessee's own earlier appeals for preceding assessment years and the reasoning of the coordinate bench which applied the principle of ejusdem generis to hold that intangible assets acquired as part of a slump sale (business claims, business information, business records, contracts, employees and know how) fall within the phrase "business or commercial rights of similar nature" in Explanation 3 to Section 32(1)(ii) and are eligible for depreciation. The Tribunal noted that the present year was not the initial year of claim, the facts (multi year outsourcing/acquisition arrangements) were identical to earlier years, and no distinguishing circumstances were pointed out by Revenue. The DRP had not considered the depreciation claim in the context of the earlier decisions. Following the coordinate bench decisions (including treatment affirmed by dismissal of Revenue's SLP), the Tribunal directed the Assessing Officer to allow depreciation on goodwill and set aside the disallowance. [Paras 7, 8]

Appeal allowed and Assessing Officer directed to allow claim of depreciation on goodwill.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2012-13, holding that depreciation on goodwill is allowable under Section 32(1)(ii) by reason of earlier coordinate-bench decisions applying ejusdem generis to 'business or commercial rights of similar nature', and directed the AO to give effect accordingly.

Reopening of assessment - reasons recorded for reopening - failure to furnish reasons - sanction under section 151(1) of the Act - non-application of mind - live link between information and reasons - reassessment vitiated and quashed

Failure to furnish reasons - sanction under section 151(1) of the Act - reassessment vitiated and quashed - Whether the Assessing Officer furnished the copy of the reasons recorded for reopening and the sanction/satisfaction under section 151, and whether failure to furnish them vitiates the reassessment. - HELD THAT: - The Tribunal found on the record that the assessee had made a written request on 01.05.2017 for supply of the reasons recorded and the sanction under section 151, and that the Assessing Officer admitted receipt of that request but did not produce any evidence showing that the documents were supplied. The remand report merely noted the assessee's attendance at proceedings and assumed that reasons had been provided by an earlier incumbent, without evidentiary support. Reliance was placed on precedents holding that failure to furnish reasons recorded for reopening is not a mere procedural lapse but denies a valuable right and vitiates reassessment where the authority cannot demonstrate supply of reasons despite a written demand. In absence of any proof from Revenue that reasons and sanction were supplied, the reassessment proceedings were held to be null and void and liable to be quashed. [Paras 10, 11]

Supply of the reasons recorded and sanction was not proved; reassessment proceedings quashed as vitiated for failure to furnish the reasons and sanction.

Reasons recorded for reopening - non-application of mind - live link between information and reasons - reassessment vitiated and quashed - Whether the reasons recorded for reopening were incorrect, based on non-existing or wrong facts and without application of mind, thereby invalidating the reopening and the sanction. - HELD THAT: - The Tribunal examined the reasons recorded by the AO and found multiple material inaccuracies: an incorrect quantum was stated in the reasons (58,40,171) which the AO later admitted was 30,74,006; the reasons inconsistently referred to earlier assessment completion and also to non-existent statutory provisos for sanction. The reasons failed to show a demonstrable live link between tangible material and formation of belief that income escaped assessment, and the AO had merely reproduced information from the Investigation Wing without independent application of mind. Citing consistent authority, the Tribunal held that recording wrong, incorrect or non-existing facts and failure to verify the information amount to total non-application of mind, rendering the reopening and the purported sanction invalid. Consequently, the reopening could not be sustained and additions were deleted. [Paras 19]

Reasons contained wrong and non existing facts and evidenced non application of mind; reopening and sanction invalidated and reassessment quashed.

Final Conclusion: The Tribunal allowed the appeal: finding that (i) the Assessing Officer failed to demonstrate supply of the reasons recorded and sanction despite a written demand, and (ii) the reasons recorded were incorrect and showed non application of mind; on both grounds the reopening under section 147/148 and the consequential reassessment were quashed.

CUP method - TNMM - comparability - geographical market differences - volume discount/adjustment - marketing and research cost adjustments - burden of proof in transfer pricing - 5% tolerance under section 92C - Explanation to section 73 - speculative transactions

CUP method - TNMM - Appropriateness of the transfer-pricing method adopted by the assessee (TNMM) vis-a -vis the CUP method for benchmarking brokerage charged to associated enterprises. - HELD THAT: - The Tribunal upheld the TPO/AO's rejection of the assessee's Transactional Net Margin Method (TNMM) and accepted that the Comparable Uncontrolled Price (CUP) method was the most appropriate method for determining ALP of brokerage. The reasons recorded include (i) existence of a clear market rate for broking services expressed as a percentage of trade, (ii) availability of reliable comparable uncontrolled prices making CUP the direct and preferable method, and (iii) the external comparables relied upon under TNMM were not performing functions similar to the assessee. Rule 10B(1) and its sub-rules governing CUP require identification of prices in comparable uncontrolled transactions and adjustment for material differences; comparability must be judged having regard to functions, assets and risks and market conditions. Applying these principles, the Tribunal found CUP more appropriate for the facts of the case and affirmed the TPO/AO's approach. [Paras 7]

TNMM rejected and CUP preferred as the most appropriate method; TPO/AO's choice of CUP sustained.

Comparability - geographical market differences - Whether domestic third party comparables can be treated as comparable to overseas FIIs for CUP benchmarking. - HELD THAT: - The Tribunal held that comparability under CUP cannot be established between transactions undertaken in different geographical markets. Guidance (including the ICAI Guidance Note) and rule 10B(2)(d) require consideration of conditions prevailing in the markets, including geographical location and size. The assessee's transactions were with overseas FIIs and therefore comparisons with domestic third parties were not appropriate; domestic third party transactions were held not comparable on account of geographic differences. [Paras 7]

Cross-objection point excluding domestic comparables rejected; domestic third party comparables held not comparable to overseas FII transactions.

Volume discount/adjustment - Whether a volume-based discount/adjustment should be allowed in computing ALP of brokerage. - HELD THAT: - The Tribunal examined the record and the material collected by the TPO showing significant volumes transacted by unrelated parties at rates comparable to those relied upon. The assessee failed to demonstrate that its associated enterprise was contractually obliged to provide minimum volumes or otherwise substantiate a volume based discount. In light of the available data (showing substantial unrelated party volumes at comparable rates), the CIT(A)'s negation of a volume discount was sustained. [Paras 8]

Claim for volume discount/adjustment rejected.

Marketing and research cost adjustments - Treatment of salary cost of equity research personnel for the purpose of marketing adjustment in CUP benchmarking. - HELD THAT: - The Tribunal found that the record before it did not conclusively resolve whether portions of research team salary costs were attributable to third party marketing activities and hence eligible for adjustment. Noting the parties' submissions and that the assessee bears the initial burden to establish arm's length pricing, the Tribunal set aside the CIT(A)'s treatment on this point and restored the matter to the file of the AO/TPO for fresh consideration after giving the assessee reasonable opportunity to produce relevant documents/evidence. The assessee was directed to file the required material before the AO/TPO. [Paras 11, 12]

Salary cost of research personnel issue set aside and remanded to AO/TPO for fresh adjudication on merits after opportunity to be heard.

Burden of proof in transfer pricing - Allocation of burden of proof between assessee and tax authorities in transfer pricing proceedings. - HELD THAT: - The Tribunal reiterated the settled position that the assessee carries the primary burden to establish the arm's length nature of international transactions. Once discharged, the burden shifts to the tax authorities to show that ALP was not determined in accordance with law or that the information/data used is unreliable. This principle informed the Tribunal's direction to remand the research salary cost issue so that the assessee may discharge its evidentiary burden before the AO/TPO. [Paras 11, 12]

Burden of proof rests initially on the assessee; if discharged, tax authorities must prove unreliability - applied in remanding research cost issue.

5% tolerance under section 92C - Whether the 5% tolerance (option to select a price within 5% of arithmetic mean) under the proviso to section 92C(2) is a standard deduction applicable to reduce additions. - HELD THAT: - The Tribunal interpreted the statutory provision and subsequent insertion of sub section 2A to section 92C (retrospectively effective from 1 4 2002) to conclude that the 5% tolerance is not a standard deduction that can be automatically applied to reduce an addition beyond 5%. Where the variation between ALP and transaction price is less than 5%, substitution cannot be made; where it exceeds 5%, the tolerance cannot be used as a standard deduction to reduce the addition. Applying these principles, the Tribunal allowed the revenue's additional ground of appeal challenging the CIT(A)'s allowance of a 5% benefit as a standard deduction. [Paras 13]

Additional ground allowed for the Revenue: 5% is not a standard deduction under section 92C(2A); CIT(A)'s allowance of 5% benefit set aside to the extent challenged.

Explanation to section 73 - speculative transactions - Whether loss on dealing errors in the assessee's broking operations falls within the Explanation to section 73 and is to be disallowed as speculation loss. - HELD THAT: - The Tribunal accepted the assessee's case that losses arose from dealing errors while executing client instructions and were incidental to its broking business rather than trading on its own account. The Explanation to section 73 was therefore held inapplicable. The CIT(A)'s deletion of the AO's disallowance of the share trading loss and the ad hoc disallowance were sustained because the loss related to client error trades and no expenditure basis was shown for the ad hoc disallowance. [Paras 15, 18]

Revenue's grounds based on Explanation to section 73 dismissed; disallowance deleted.

Marketing and research cost adjustments - First ground of appeal of Revenue regarding absence of information on manpower and marketing functions of the associated enterprise (Mauritius entity). - HELD THAT: - The Tribunal noted that tax authorities had examined the actual rate charged by the assessee to its AE and compared it with rates charged to third parties; in the course of remanding the research salary issue the Tribunal also recorded that the revenue's contention concerning absence of details of AE's manpower/resources must be examined by the AO/TPO. For statistical purposes the revenue's first ground was allowed, and the matter of factual verification (manpower/marketing functions of the AE) was to be pursued by the AO/TPO in the fresh proceedings. [Paras 12]

First ground of revenue allowed for statistical purposes and factual aspects (manpower/marketing functions of AE) remitted to AO/TPO for verification.

Final Conclusion: The Tribunal partly allowed the revenue's appeal and partly allowed the assessee's cross objections. It sustained the TPO/AO's choice of CUP over TNMM and rejected domestic comparables and the volume discount claim; it dismissed the revenue's speculative loss grounds. The Tribunal held that the 5% tolerance under section 92C is not a standard deduction and allowed the revenue's additional ground. The salary cost (research personnel) issue and factual aspects regarding the AE's manpower/marketing functions were set aside/remitted to the AO/TPO for fresh consideration after giving the assessee an opportunity to produce evidence.

Long-term capital gains vs short-term capital gains - holding period for capital asset - date of allotment as commencement of holding - definition of transfer under section 2(47) - availability of deduction under section 54

Long-term capital gains vs short-term capital gains - holding period for capital asset - date of allotment as commencement of holding - definition of transfer under section 2(47) - Sale of the impugned flat resulted in long-term capital gains and not short-term capital gains. - HELD THAT: - The Tribunal analysed the meaning of 'held' in the definition of short-term capital asset and the expanded definition of 'transfer' under Section 2(47), noting legislative history and CBDT circulars which bring into charge transfers/conferral of rights by allotment letters and related arrangements. Reliance was placed on precedents and Board circulars holding that issuance of an allotment letter and payment of initial instalment confer the right to the property and that instalments and formal registration are consequential. The assessee's allotment letter dated 22.02.2006, payment of earnest money and banker's acceptance to mortgage the flat demonstrated that the assessee held the asset from the date of allotment. Applying these principles, the Tribunal held that the holding period must be reckoned from the allotment date and, accordingly, the transfer on sale in 2009 gave rise to long-term capital gains. [Paras 6]

The sale is to be treated as giving rise to long-term capital gains; the authorities below were in error in treating it as short-term.

Availability of deduction under section 54 - reinvestment within specified period - Claim for deduction under section 54 was not adjudicated by lower authorities and is remanded for limited examination. - HELD THAT: - The Tribunal observed that, having recorded the sale as short-term, the Assessing Officer and the CIT(A) did not consider the assessee's claim for deduction under section 54. On perusal of the paper book the Tribunal was prima facie of the view that reinvestment appears to have been made within the period specified under section 54, but directed that the question of entitlement to deduction be examined afresh by the Assessing Officer. [Paras 6]

Matter restored to the Assessing Officer for limited purpose of examining whether the assessee is entitled to deduction under section 54.

Final Conclusion: The Tribunal allowed the appeal (for statistical purposes), held that the impugned sale gives rise to long-term capital gains (holding to be from date of allotment 22.02.2006) and restored the case to the Assessing Officer for limited adjudication of the assessee's claim for deduction under section 54.

Ad-hoc disallowance of purchases as bogus - Preservation of sales when purchases are disputed - Computation of addition by restoring gross profit rate - Reopening assessment following information from Sales Tax Department

Ad-hoc disallowance of purchases as bogus - Preservation of sales when purchases are disputed - Computation of addition by restoring gross profit rate - Validity of the Assessing Officer's ad-hoc disallowance of 12.5% of purchases claimed from alleged hawala parties and the correct measure of addition where purchases are held to be not genuine but sales are not disputed. - HELD THAT: - The Tribunal examined the AO's action of estimating profit at 12.5% of disputed purchases after reopening the assessment on information from the Sales Tax Department and after failure to procure attendance/servability of the alleged sellers. Relying on the reasoning in Mohommad Haji Adam & Co & Ors as explained in the order, the Tribunal held that where the Department does not dispute the assessee's sales and there is no discrepancy between the purchases shown and sales declared, purchases cannot be rejected in a manner that disturbs admitted sales. Accordingly, the ad-hoc addition of a fixed percentage of purchases was inappropriate. The correct approach is to restrict the addition to the extent necessary to bring the gross profit rate on the disputed purchases to the same gross profit rate as applicable to genuine purchases or otherwise determine the addition by reference to the difference in gross profit rates, rather than by applying an undifferentiated ad-hoc percentage on purchases. [Paras 6]

The order of the CIT(A) confirming the ad-hoc addition is set aside and the AO is directed to restrict additions by aligning the G.P. rate on disputed purchases with that of genuine purchases.

Application of precedent mutatis mutandis - Reopening assessment following information from Sales Tax Department - Whether the legal conclusion reached for AY 2009-10 applies to AY 2011-12. - HELD THAT: - The Tribunal found that the facts for AY 2011-12 are identical to those for AY 2009-10 and, accordingly, the legal conclusion and remedy directed for AY 2009-10 apply mutatis mutandis to AY 2011-12. No separate factual or legal distinction was found that would warrant a different treatment for AY 2011-12. [Paras 6, 7]

The same direction to restrict additions by restoring the G.P. rate is applied to AY 2011-12.

Final Conclusion: Appeals allowed for statistical purposes; the CIT(A)'s confirmation of the ad-hoc 12.5% addition is set aside and the Assessing Officer is directed to recompute additions only to the extent necessary to bring the gross profit rate on disputed purchases to the same rate as genuine purchases, this direction being applied to AY 2009-10 and AY 2011-12 mutatis mutandis.

Deduction under Section 10A of the Income tax Act - realisation of export proceeds within prescribed time - mistake apparent from record - rectification power under Section 254(2) of the Income tax Act - scope of rectification versus review of Tribunal's order - admission of additional grounds before the Tribunal

Deduction under Section 10A of the Income tax Act - realisation of export proceeds within prescribed time - mistake apparent from record - Whether the Tribunal's orders for AY 2008-09 and AY 2009-10 contain a mistake apparent from record in relation to disallowance of export turnover while computing deduction under Section 10A due to incorrect appreciation of facts concerning realisation within the prescribed time. - HELD THAT: - The Tribunal had reduced export turnover for computation of deduction under Section 10A on the basis that certain export proceeds were not realised, having relied on observations made in the appellate order for AY 2009-10 while deciding AY 2008-09. The assessee's case was that the amounts were not unrealised altogether but only not realised within the statutory time and that letters requesting extension were furnished. The Tribunal's reliance on factual observations pertaining to a different assessment year and its conclusion that the amounts were not realised at all amounted to incorrect appreciation of facts. The coordinate decisions and High Court authority cited in support of the assessee were considered; however, the determinative point for rectification was factual mis appreciation rather than a purely legal error. The Tribunal is empowered to amend its order to rectify a mistake apparent from record; erroneous application of law or re examination of findings of fact ordinarily falls outside that scope, but where there is demonstrable misuse of facts from another year resulting in an incorrect factual finding, it amounts to a mistake apparent from record warranting rectification. Applying this principle, the Tribunal found merit in the contention that the orders for AY 2008-09 and, consequentially, AY 2009-10 suffer from such a mistake and recalled the orders for limited rehearing on Ground No.1. [Paras 11, 12, 13, 16]

The Tribunal held that there is a mistake apparent from record in the treatment of export proceeds for computing deduction under Section 10A in both AY 2008-09 and AY 2009-10 and recalled its orders for the limited purpose of adjudicating Ground No.1 in those years.

Rectification power under Section 254(2) of the Income tax Act - scope of rectification versus review of Tribunal's order - admission of additional grounds before the Tribunal - Whether the Tribunal erred in declining to admit additional grounds (grounds 5 & 6 in AY 2008-09 and grounds 6 & 7 in AY 2009-10) on the basis that they did not arise out of the order of the CIT(A) and whether such refusal is amenable to rectification under Section 254(2). - HELD THAT: - The assessee argued that additional grounds could be admitted (including orally) and relied on the Tribunal's broad powers under Section 254(1) and rules of procedure. The Tribunal, however, took a conscious decision that those grounds were not agitated before the CIT(A) and therefore did not arise out of the appellate order; consequently it declined to admit them. Precedents were considered establishing that Section 254(2) does not permit the Tribunal to re open its order for review of conclusions reached on law or to re examine applications of legal principles to facts. The present plea sought reconsideration of such legal application or admission of new grounds which would amount to review rather than rectification of a mistake apparent from record. Accordingly, the Tribunal found that the contention falls outside the scope of rectification under Section 254(2) and rejected the request to admit those additional grounds. [Paras 7, 8, 14, 15]

The Tribunal rejected the plea to admit the additional grounds and held that the refusal to admit them does not constitute a mistake apparent from record capable of rectification under Section 254(2).

Final Conclusion: Both miscellaneous applications were partly allowed: the Tribunal recalled its orders in AY 2008-09 and AY 2009-10 for the limited purpose of adjudicating Ground No.1 concerning deduction under Section 10A due to a mistake apparent from record on factual appreciation; the request to admit additional grounds was rejected as beyond the scope of rectification under Section 254(2).

Allowance of depreciation where purchase invoice not produced but expenditure and loan interest accepted - notional interest on interest-free intercorporate advance where assessee has sufficient interest-free funds - taxability of write-back of creditors relating to capital assets - adjustment of written down value where cost of asset reduced by unpaid creditor written back - non-applicability of remission provisions and short-term capital gains provisions to write-back of capital creditors

Allowance of depreciation where purchase invoice not produced but expenditure and loan interest accepted - Deletion of disallowance of depreciation on car where purchase invoice was not produced - HELD THAT: - The Tribunal found that although the assessee failed to produce the purchase invoice, the Department had accepted and allowed interest on the car loan and car running expenses, thereby acknowledging that the vehicle existed and was used for business purposes. On these facts, penalising the assessee by denying depreciation was not warranted. The Tribunal held that the assessee should not be deprived of depreciation merely for failure to produce the invoice when the Department had, in substance, accepted the asset's existence and business use. [Paras 5]

Disallowance of depreciation deleted.

Notional interest on interest-free intercorporate advance where assessee has sufficient interest-free funds - Deletion of addition of notional interest on advance of Rs. 10,00,000/- - HELD THAT: - On examination of the audited financial statements, the Tribunal noted that the assessee's shareholders' funds were substantially in excess of borrowings, indicating that the advance was made out of interest-free internal funds. In such circumstances the imputation of notional interest on the advance was not justified. The Tribunal relied on the financial position to conclude that the advance did not attract a notional interest addition. [Paras 5]

Addition of notional interest deleted.

Taxability of write-back of creditors relating to capital assets - adjustment of written down value where cost of asset reduced by unpaid creditor written back - non-applicability of remission provisions and short-term capital gains provisions to write-back of capital creditors - Re-examination of tax treatment of write-back of sundry creditors relating to purchase of licence and consequential adjustment of block WDV and short-term capital loss computations - HELD THAT: - The Tribunal agreed that remission or waiver of liabilities relating to capital transactions are not taxable as income under the provisions dealing with remission of trading liabilities, and observed that Sections 41(1) and 50(1)/(2) are not attracted as there was no cessation treated as trading income nor any transfer necessitating computation of short-term capital gains. However, the Tribunal also held that since the assessee effectively paid less than the invoiced cost for the capital asset, the unpaid creditor amount should reduce the actual cost of the asset and the opening written down value of the relevant block must be adjusted accordingly. Given these conclusions, the Tribunal remitted the matter to the Assessing Officer to re-compute the asset cost/WDV and to re-assess the consequences (including allowance of set off of brought forward losses) after giving the assessee an opportunity to be heard. [Paras 5]

Issue remitted to the Assessing Officer for re-examination and recomputation after adjusting asset cost/WDV; AO to allow set off of brought forward losses as per law thereafter.

Final Conclusion: The appeal is allowed in part: disallowance of depreciation and addition of notional interest deleted; the matter relating to write-back of sundry creditors, adjustment of asset cost/WDV and consequences for short-term capital loss and set off of brought forward losses is remitted to the Assessing Officer for fresh consideration in accordance with the directions given.

Temporary injunction - status quo - benami transaction - burden of proof on plaintiff in partition suit - rehearing/remand for consideration of prior decree

Temporary injunction - rehearing/remand for consideration of prior decree - burden of proof on plaintiff in partition suit - Validity of the injunction granted by the Trial Court in respect of the 'A' Schedule property and whether the injunction application requires rehearing in the light of prior decrees. - HELD THAT: - The Division Bench found that material relevant to the appellants' contention - namely the decree dated 15th February, 2018 in Title Suit No.17 of 2011 and Title Suit No.2419 of 2014 - was not evidently before the Trial Court when the injunction application was disposed of. The Trial Judge had made findings on the question of ownership and benami status, recording that the deed in the name of defendant No.1 did not disclose a benami transaction and that the plaintiff failed to discharge his burden to prove that the property belonged to his father. However, because the decree relied upon by the appellants post-dates the supplementary affidavit on record before the Trial Court, the High Court directed that the injunction application be reheard limitedly on the 'A' Schedule property with explicit direction to the Trial Court to take into consideration the earlier decrees without being influenced by the High Court's observations. The appellants were permitted to place on record necessary documents by affidavit within ten days, and the respondents to file rejoinder within ten days thereafter; the Trial Court was directed to decide the limited issue within four weeks of completion of pleadings. The remand is for fresh consideration of the injunction application on the limited question of the 'A' Schedule property, including the effect of the prior decrees, rather than a final adjudication of title by this Court.

Injunction as to the 'A' Schedule property is remanded for rehearing by the Trial Court to consider the prior decrees; parties given timelines for affidavits and rejoinder and the Trial Court directed to decide the limited issue within four weeks.

Status quo - temporary injunction - Whether the order of status quo in relation to properties other than the 'A' Schedule property should be interfered with. - HELD THAT: - The High Court, after consideration, found no reason to disturb the Trial Court's order maintaining status quo in respect of the other properties claimed in the partition suit. That finding was left intact and the High Court declined to interfere with the status quo orders as they relate to properties other than the 'A' Schedule property.

Status quo in relation to the other properties is affirmed and will continue; no interference by this Court.

Final Conclusion: The appeal is disposed by directing a limited rehearing of the injunction application in respect of the 'A' Schedule property to consider the earlier decrees, with specified timelines for affidavits and rejoinder and a four week limit for decision; the status quo orders in respect of the remaining properties are affirmed, and the status quo as to the 'A' Schedule property is to continue for eight weeks or until the Trial Court disposes of the rehearing, whichever is earlier.

Prohibition on recovery of property held benami - Exception for trustee or other person standing in a fiduciary capacity - Requirement of specific pleading and clear, cogent proof to establish fiduciary relationship - Concurrent findings of fact and scope for appellate interference - Temporal application of the Benami Transactions (Prohibition) Act to suits instituted before and after 05.09.1988 - Effect of Amendment Act 43 of 2016 omitting the proviso/exception

Exception for trustee or other person standing in a fiduciary capacity - Requirement of specific pleading and clear, cogent proof to establish fiduciary relationship - Prohibition on recovery of property held benami - Concurrent findings of fact and scope for appellate interference - Whether the sale deed standing in the name of the defendant fell within the exception of a fiduciary holding under clause (b) of sub section (3) of section 4 of the Benami Transactions (Prohibition) Act, 1988, thereby permitting the plaintiffs to enforce rights as real owners. - HELD THAT: - The Court upheld the concurrent conclusion of the courts below that the plaintiffs failed to bring the transaction within the proviso for fiduciary holdings. The pleadings merely alleged that the purchaser was the younger brother and that the elder brother paid the consideration and had the property for his benefit; no further particulars were pleaded or proved to show a relationship analogous to a trustee-beneficiary or other fiduciary nexus. Relying on the established meaning of 'fiduciary' as a relationship founded on special trust and confidence and attendant duties, the Court reiterated that normal blood relationship alone is insufficient to attract the exception. The legislative intent behind clause (b) required pleading of facts and inter se dealings and proof by clear, cogent and acceptable evidence to establish that the person in whose name the property stood was acting in a fiduciary capacity for another. In the absence of such foundation in pleadings and evidence, the bar under section 4(1) operated to preclude the plaintiffs' suit. The Court also noted the temporal operation of the Act and that clause (b) was omitted by amendment with effect from 01.11.2016, but that fact did not assist the plaintiffs given their failure to satisfy the pleading and proof requirements applicable as the law stood at the time of institution. [Paras 4, 9, 11]

Concurrent findings that the transaction was not a fiduciary holding were upheld and the plaintiffs failed to establish entitlement to relief; appeal dismissed.

Final Conclusion: The High Court dismissed the appeal, upholding the concurrent factual and legal findings that the suit property was not shown to be held by the defendant in a fiduciary capacity and that the plaintiffs failed to plead and prove the exception to the prohibition on recovery of benami property.

Provisional release orders are interlocutory and do not operate as precedent - Compulsory Registration Order (CRO) applies to goods falling within the notified category including Multifunction Devices (MFDs) as clarifications - Multifunction Devices (MFDs) are covered within the category of Printers/Plotters notified under the CRO - Clarification/circular may clarify existing statutory position and is not necessarily a prospective inclusion - Exercise of discretion under Section 110/110A of the Customs Act requires review for perversity, irrelevant material or unfairness - MeitY is a necessary party where classification/registration under CRO is in issue and Customs is only an implementing authority

Provisional release orders are interlocutory and do not operate as precedent - Exercise of discretion under Section 110/110A of the Customs Act requires review for perversity, irrelevant material or unfairness - Orders granting provisional release are interlocutory and cannot be treated as binding precedent for permitting release in subsequent matters. - HELD THAT: - The Court held that orders directing provisional or interim release are interlocutory in nature and do not finally adjudicate liability; therefore they cannot be cited as precedents to compel similar relief in other cases. The scope of judicial review of the Customs authorities' discretion under Sections 110/110A is limited to examining whether the discretion was exercised without perversity, on irrelevant materials, or in an unfair or unreasonable manner. Past interim releases granted by various courts do not preclude the Department from taking a different view, particularly where there has been a change in the legal position by subsequent notifications. [Paras 31, 34]

Interim/provisional release orders are interlocutory and not precedential; they do not entitle the importer to mandatory relief.

Compulsory Registration Order (CRO) applies to goods falling within the notified category including Multifunction Devices (MFDs) as clarifications - Multifunction Devices (MFDs) are covered within the category of Printers/Plotters notified under the CRO - Clarification/circular may clarify existing statutory position and is not necessarily a prospective inclusion - MFDs fall within the scope of the notified category of Printers/Plotters under the CRO and the clarifications/notification issued by MeitY (including the notification dated 01.04.2020) legitimately explained that position. - HELD THAT: - The Court found that MeitY's office memorandum and Circular No.1/2019 serve as clarifications of an existing classification, reflecting a longstanding departmental position that MFDs are essentially printers with additional capabilities. That classification was made explicit by S.O.1236(E) dated 01.04.2020. A clarification explaining that MFDs are covered by the Printers/Plotters entry is not rendered invalid merely because it clarifies a prior notification rather than introducing an entirely new statutory provision; the Court rejected the argument that such clarification could only operate prospectively. Given the consistent stand of the administrative authorities and the subsequent notification, the CRO's requirements apply to MFDs. [Paras 30, 32, 36]

MFDs are covered by the Printers/Plotters entry in the CRO; MeitY's clarifications and the notification of 01.04.2020 legitimately confirm applicability of CRO requirements to MFDs.

MeitY is a necessary party where classification/registration under CRO is in issue and Customs is only an implementing authority - Provisional release orders are interlocutory and do not operate as precedent - The writ petitions seeking mandatory provisional release without the joinder of MeitY were not maintainable and the learned Writ Court's directions for provisional release were set aside; applications for provisional release must be considered afresh by the Customs authorities. - HELD THAT: - The Court held that where the question involves implementation of a statutory registration/notification administered by MeitY, MeitY is a necessary party because Customs acts as an implementing authority bound by MeitY's notifications. The learned Single Bench's grant of provisional release based on prior interim orders was improper in view of the change in legal position by notification dated 01.04.2020 and the interlocutory nature of earlier releases. Consequently, the writ petitions were set aside and the matter remitted to Customs to decide the provisional release applications on merits and in accordance with law. [Paras 33, 40]

Writ petitions allowing provisional release were set aside; Customs directed to consider provisional release applications on merits in accordance with law within the prescribed time.

Final Conclusion: The writ petitions directing provisional release of imported MFDs were set aside. The Court held that interim/provisional release orders are interlocutory and not precedential, affirmed that MFDs fall within the Printers/Plotters category covered by the CRO (as clarified and by subsequent notification), recognised MeitY as a necessary party for issues of CRO applicability, and directed the Customs authorities to decide the pending provisional release applications on merits and in accordance with law within four weeks.

Doctrine of unjust enrichment - Public Sector Undertaking exemption from unjust enrichment - Refund on provisional assessment - Provisions of Section 27(1-A) of the Customs Act, 1962

Doctrine of unjust enrichment - Public Sector Undertaking exemption from unjust enrichment - Mafatlal Industries precedent - Whether the doctrine of unjust enrichment applies to Public Sector Undertakings for sanctioning refund of duty paid on provisional assessment. - HELD THAT: - The Court applied the binding principle laid down by the Supreme Court in Mafatlal Industries Limited that the doctrine of unjust enrichment is inapplicable to the State because the State represents the people and cannot be regarded as being unjustly enriched. Relying on that enunciation, the Court held that Public Sector Undertakings fall outside the ambit of the unjust enrichment doctrine and therefore cannot be denied refund on that ground. The Court answered the second substantial question of law against the revenue and in favour of the respondent Public Sector Undertaking, concluding that unjust enrichment is not a bar in the respondent's case. [Paras 10]

Doctrine of unjust enrichment does not apply to Public Sector Undertakings; refund cannot be denied to the respondent on the ground of unjust enrichment.

Refund on provisional assessment - Provisions of Section 27(1-A) of the Customs Act, 1962 - Applicability of unjust enrichment to refunds arising from provisional assessment for the period prior to 14.07.2006. - HELD THAT: - The Court identified the question whether unjust enrichment applies to refunds arising from provisional assessment for the period prior to 14.07.2006 but expressly refrained from deciding that question after answering the issue concerning Public Sector Undertakings. The Court noted that the claim arose from provisional assessment predating 14.07.2006, but did not adjudicate the point and therefore did not address whether Section 27(1-A) or the unjust enrichment principle would operate in that temporal context. [Paras 8, 11]

Question left undecided by this Court; not finally adjudicated and therefore not determined in this appeal.

Final Conclusion: The appeal is dismissed: the Court holds that the doctrine of unjust enrichment does not apply to Public Sector Undertakings and therefore the respondent is entitled to the refund without being disqualified on that ground; the separate question regarding unjust enrichment and refunds arising from provisional assessment prior to 14.07.2006 remains undecided by this Court.

Procedural lapse versus substantive entitlement - MEIS scheme entitlement despite inadvertent error in shipping bill - correction/amendment and retransmission of shipping bills to DGFT - issuance of no objection certificate for claim rectification - inapplicability of conversion Circular to mere procedural correction

Procedural lapse versus substantive entitlement - MEIS scheme entitlement despite inadvertent error in shipping bill - correction/amendment and retransmission of shipping bills to DGFT - issuance of no objection certificate for claim rectification - inapplicability of conversion Circular to mere procedural correction - Whether denial of MEIS benefit and refusal to issue NOC on account of the shipping bills recording 'N' instead of 'Y' (a claimed inadvertent procedural error) was permissible, and whether the CBEC Circular relied upon by the Commissioner applied to this case. - HELD THAT: - The Tribunal found that the appellants had, by inadvertence, recorded 'N' instead of 'Y' in the reward column of certain shipping bills filed between April 2015 and November 2015, while their intention to avail MEIS was otherwise manifested. The error was treated as a procedural lapse and not as a substantive disqualification from claiming MEIS. The Commissioner's reliance on CBEC Circular No.36/2010 (relating to conversion of shipping bills from one export promotion scheme to another) was held misplaced because the present case did not involve conversion between schemes but sought mere correction/retransmission to reflect the already intended claim. The Tribunal noted precedents and decisions addressing identical inadvertent omissions and held that denying substantial benefit for such procedural mistakes is not justified. In consequence, the request for issuance of NOC to enable retransmission/amendment of the shipping bills to DGFT deserves allowance, subject to verification of the shipping bills as requested by the appellant and production of a certified copy of the order.

The impugned order rejecting the request for NOC is set aside; authorities are directed to verify the shipping bills and issue the NOC to permit retransmission/amendment so the MEIS claim can be considered.

Final Conclusion: Appeal allowed. The Tribunal set aside the Commissioner's order refusing NOC and directed issuance of NOC after verification, holding that the inadvertent procedural error of recording 'N' instead of 'Y' did not disentitle the appellant from claiming MEIS and that the Circular relied upon by the Commissioner was not applicable to this correction.

Rectification of register of members - validity of share allotment and compliance with Section 62(1)(c) of the Companies Act, 2013 (special resolution and valuation by a registered valuer) - cancellation of allotment for non-compliance with statutory procedure - requirement of independent valuation before further allotment - appointment of independent auditor declined

Rectification of register of members - validity of share allotment and compliance with Section 62(1)(c) of the Companies Act, 2013 (special resolution and valuation by a registered valuer) - cancellation of allotment for non-compliance with statutory procedure - Allotment of 1,10,00,000 equity shares in favour of Respondent No.2 is invalid and the register of members must be rectified by cancelling that allotment. - HELD THAT: - The Tribunal examined the statutory regime governing further issue of share capital and held that allotment made pursuant to the interim directions must comply with Section 62(1)(c), which requires authorisation by special resolution and determination of price by a registered valuer where shares are issued for consideration other than cash. No material was produced to show a special resolution was passed in an AGM or EOGM, nor that a registered valuer determined the fair price; the shares were allotted at face value. The absence of the mandated procedural safeguards rendered the allotment impermissible. The Tribunal concluded that the exercise was not only procedurally irregular but also oppressive to other shareholders and therefore the allotment could not be sustained. [Paras 21, 22, 23, 24]

The allotment of 1,10,00,000 equity shares to Respondent No.2 is cancelled and the register of members shall be rectified accordingly.

Requirement of independent valuation before further allotment - Further allotment of shares shall be preceded by an independent valuation. - HELD THAT: - Having found the prior allotment invalid for lack of compliance with the valuation requirement under Section 62(1)(c), the Tribunal directed that before any further allotment of shares an independent valuation of the company's shares be undertaken to ensure that future allotments are at a fair price and not prejudicial to other shareholders. [Paras 25]

Before allotment of further shares, an independent valuation of the shares of the company shall be undertaken.

Appointment of independent auditor declined - The petitioners' prayer for appointment of an independent auditor to audit the company's accounts from 1st March, 2017 is declined. - HELD THAT: - While petitioners sought appointment of an independent auditor to audit accounts from a specified date, the Tribunal declined this relief. The order confines relief to cancellation of the impugned allotment and the requirement of valuation before further allotments; appointment of an auditor was not granted. [Paras 25]

The prayer to appoint an independent auditor to audit the accounts of the company from 1st March, 2017 is declined.

Final Conclusion: The Company Petition is disposed of by directing cancellation of the allotment of 1,10,00,000 equity shares in favour of Respondent No.2 and rectification of the register of members; further allotments are permitted only after an independent valuation, while the request to appoint an independent auditor is refused.

Corporate insolvency resolution process - limitation for Section 7 applications - default and accrual of right to sue - acknowledgement of debt within three years - effect of a decree or recovery certificate on date of default - assignee's locus to file under Section 7 - moratorium under Section 14

Limitation for Section 7 applications - default and accrual of right to sue - acknowledgement of debt within three years - effect of a decree or recovery certificate on date of default - Application under Section 7 of the I&B Code filed on 23.01.2019 is barred by limitation because the date of default occurred before 2001 and there is no acknowledgement of debt within three years; a decree or recovery certificate passed subsequently cannot shift the date of default for computing limitation. - HELD THAT: - The Tribunal applied the settled principle that the right to sue accrues when default occurs and an application under Section 7 is barred if default happened more than three years prior to filing, unless the debt was acknowledged by the corporate debtor within the three year period. The record shows the loan account was declared NPA before 2001 and no document of acknowledgement within three years was produced. Reliance on the five Member Bench precedent in V. Padamkumar (paras 16-18 and 23 reproduced) leads to the conclusion that filing a suit, obtaining a decree, or issuance of a recovery certificate does not operate to shift forward the date of default for limitation purposes. Applying that ratio, the adjudicating authority erred in treating the DRT's decree and recovery certificate as curing or extending the limitation; consequently the Section 7 application filed on 23.01.2019 was time barred and not maintainable. [Paras 12, 13, 14, 15, 16]

The Section 7 application is barred by limitation and is dismissed.

Corporate insolvency resolution process - moratorium under Section 14 - Consequences flowing from dismissal of the Section 7 application: setting aside of admission order, lifting of moratorium and restoration of management to the corporate debtor; records to be handed over by the Interim Resolution Professional. - HELD THAT: - Because the Section 7 application was held barred by limitation, the impugned order admitting CIRP was set aside. The Tribunal directed that the corporate debtor be released from the rigours of the moratorium and allowed to function through its board of directors forthwith. The Interim Resolution Professional was directed to hand over records to the board immediately. These consequential directions flow from the primary decision to dismiss the Section 7 petition. [Paras 17]

Impugned admission order set aside; moratorium lifted and IRP to hand over records to the board.

Corporate insolvency resolution process - Remand to the Adjudicating Authority to determine fees and costs of the CIRP payable to the IRP/RP, to be borne by the corporate debtor. - HELD THAT: - While dismissing the Section 7 application and vacating the CIRP admission, the Tribunal remitted the matter to the Adjudicating Authority for determination of fees and costs of the CIRP incurred so far. The Tribunal directed that such fees and costs shall be borne by the corporate debtor. This aspect was not finally quantified and was therefore remitted for fresh consideration. [Paras 18]

Matter remitted to the Adjudicating Authority to decide CIRP fees and costs, to be borne by the corporate debtor.

Final Conclusion: The appeal is allowed: the Section 7 application filed by SASF on 23.01.2019 is held time barred and dismissed; the Adjudicating Authority's admission order dated 25.01.2020 is set aside, the moratorium is lifted and the IRP shall hand over records to the board; the Adjudicating Authority is remitted to determine CIRP fees and costs payable by the corporate debtor.

Binding nature of an approved resolution plan - finality of adjudicating authority's order - inability to resurrect CIRP-period claims after plan approval - res judicata in insolvency proceedings - clean slate principle for successful resolution applicant - power to direct an erstwhile resolution professional after completion of CIRP

Binding nature of an approved resolution plan - clean slate principle for successful resolution applicant - inability to resurrect CIRP-period claims after plan approval - Whether the Adjudicating Authority could direct the erstwhile Resolution Professional to make payment of salary after the Resolution Plan was approved and the RP discharged of his duties - HELD THAT: - The Tribunal held that an approved resolution plan is binding on the corporate debtor and all stakeholders including employees, and that the successful resolution applicant acquires the corporate debtor on a 'clean slate' so as not to be burdened with undecided or belated claims arising prior to completion of CIRP. The Court applied the principle that claims which ought to have been submitted and decided during CIRP cannot be permitted to be revived after approval and implementation of the Resolution Plan, relying on the law that a Resolution Plan must give certainty to the amounts payable by a prospective resolution applicant. Consequently, the Adjudicating Authority erred in issuing directions to the erstwhile Resolution Professional to make further payment after the Plan's approval and implementation. [Paras 24, 25, 26, 27, 28]

The Adjudicating Authority had no jurisdiction to direct the erstwhile Resolution Professional to make payments in respect of claims that should have been submitted and decided during CIRP once the Resolution Plan was approved; the impugned direction was quashed.

Finality of adjudicating authority's order - res judicata in insolvency proceedings - Whether Respondent No.1's earlier adjudication by the Adjudicating Authority operated as final determination precluding his subsequent applications for the same salary claim - HELD THAT: - The Tribunal found that the Adjudicating Authority had earlier adjudicated IA No.208 of 2018 on merits, holding that the applicant's entitlement for a limited period was not maintainable as a claim during CIRP and upholding rejection of a portion of the claim. That order was not challenged and attained finality. The Respondent's subsequent filings seeking the same relief without disclosing the earlier adjudication constituted an attempt to re-agitate a settled claim. Given the finality of the earlier order and the binding effect of the Resolution Plan (which dealt with admitted dues), there was no occasion for the Adjudicating Authority to entertain the later applications or to direct payment. [Paras 18, 29, 30, 31, 35]

The earlier adjudication operated as final and res judicata; the subsequent applications by Respondent No.1 seeking the same salary claims were not maintainable and the direction based on them was set aside.

Final Conclusion: The Appeal is allowed; the impugned Order directing the erstwhile Resolution Professional to make payment of salary was quashed as inconsistent with the binding effect of the approved Resolution Plan and the final adjudication of the claim by the Adjudicating Authority.

Time is of the essence - effect of acceptance of performance at time other than that agreed (Section 55, Indian Contract Act, 1872) - enforcement of settlement agreement - revival or re-initiation of proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 - triggering of Corporate Insolvency Resolution Process

Time is of the essence - effect of acceptance of performance at time other than that agreed (Section 55, Indian Contract Act, 1872) - revival or re-initiation of proceedings under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether delays in payment under the Settlement Agreement amounted to default such as to trigger revival or a fresh application under Section 9 of the IBC. - HELD THAT: - The Tribunal examined the Settlement providing for 37 monthly instalments and the evidence of dates and modes of payment. The chart filed by the Appellant and the bank confirmation show delays in crediting instalments ranging up to 22 days and that several instalments were realised after the stipulated dates, with cheque presentation dates occurring after the 21st of the month. The Operational Creditor accepted delayed payments over an extended period without contemporaneous demur. The Tribunal held that such conduct and the facts demonstrated that time was not of the essence of the Settlement Agreement. Applying the principle in Section 55 of the Indian Contract Act, 1872 and relevant authorities, the Tribunal concluded that acceptance of performance at times other than those agreed indicated waiver of strict timelines, and therefore the condition in the Settlement for automatic withdrawal of concessions and revival/re-initiation of the Section 9 application did not get triggered. Questions of compensation or whether the contract was novated under Section 62 were noted as not being decided in this appeal and left open for appropriate fora. The Tribunal also observed that the Corporate Debtor had paid the full agreed settlement amount by January 2021, a fact not disputed. [Paras 11, 12, 13, 19, 20]

Delays in payment did not constitute breach triggering revival or fresh initiation of proceedings under Section 9 IBC; time was not of the essence and the Section 9 application could not be re-activated.

Final Conclusion: The appeal is dismissed. The Settlement was operated in a manner that shows time was not of the essence; the condition for reinstating or filing a fresh Section 9 application was not triggered, and the Corporate Debtor paid the agreed settlement amount by January 2021. No order as to costs.

Maintainability of belated challenge to an approved resolution plan - limited judicial review on approval of resolution plan under Section 31 - exclusive commercial function of the Committee of Creditors in selecting a resolution plan - timing and locus to seek consideration of a resolution plan by the CoC

Timing and locus to seek consideration of a resolution plan by the CoC - Application filed after approval of the resolution plan cannot compel the CoC to consider the applicant's resolution plan or keep pending proceedings in abeyance. - HELD THAT: - The Tribunal found that the present application was filed at the 12th hour, after the Adjudicating Authority had heard and reserved orders on MA/13/KOB/2021 and after the resolution plan was approved on 22.02.2021. As the application seeking placement of the applicant's plan before the CoC and interim orders was presented only on 22.02.2021 after curing defects, the Tribunal held it was too late to grant interim reliefs or to keep the earlier approval proceedings in abeyance. Consequently the reliefs seeking consideration of the applicant's plan by the CoC or interim preservation of the pending approval could not be granted by this Tribunal. [Paras 9, 10]

Prayer to place the applicant's resolution plan before the CoC and to keep the approval proceedings in abeyance is not maintainable and cannot be granted.

Maintainability of belated challenge to an approved resolution plan - limited judicial review on approval of resolution plan under Section 31 - Tribunal cannot, at that stage, declare its own earlier order approving the resolution plan to be in violation of the Code or Regulation 35(2), nor set aside an approved plan in the manner sought by the applicant. - HELD THAT: - The Tribunal observed that because the resolution plan had already been approved by the Adjudicating Authority on 22.02.2021, it was not open to the Tribunal in the present application to declare that the order approving the plan violated Section 60(5) of the IBC or Regulation 35(2) of the CIRP Regulations. The Tribunal emphasised the limited scope of the Adjudicating Authority under Section 31 to be satisfied that the requirements of Section 30(2) are met and noted the settled position that interference in approval of a resolution plan is confined to limited judicial review, as recognised in precedent. The Tribunal also recorded that the Committee of Creditors is the sole commercial authority to accept or reject a resolution plan and that the Tribunal cannot exercise appellate powers to set aside a resolution plan approved under Section 31. [Paras 11, 12, 13]

The prayers to declare the approved resolution plan illegal and to set it aside so that the applicant's plan may be considered are not maintainable; the Tribunal will not entertain the application and rejects those reliefs.

Final Conclusion: IA(IBC)56/KOB/2021 is dismissed as not maintainable: the belated application filed after approval of the resolution plan cannot compel reconsideration by the CoC or enable the Tribunal to declare or set aside the approved plan; the Adjudicating Authority's role under Section 31 is limited to a constrained judicial review and the CoC retains the primary commercial choice of a resolution plan.

Authorisation for Assignment - Regulation 7A - requirement of AFA for assignments after 31st December, 2019 - Obligation to comply with bye laws and Code of Conduct under section 208(2) - Certificate of registration subject to conditions in regulation 7(2) - Professional misconduct for undertaking assignment without valid AFA

Regulation 7A - requirement of AFA for assignments after 31st December, 2019 - Authorisation for Assignment - Professional misconduct for undertaking assignment without valid AFA - Whether the insolvency professional committed professional misconduct by being ratified as Resolution Professional after 31st December, 2019 without holding a valid Authorisation for Assignment. - HELD THAT: - The Disciplinary Committee found that Regulation 7A plainly requires an insolvency professional to hold a valid Authorisation for Assignment (AFA) on the date of acceptance or commencement of any assignment undertaken after 31st December, 2019. Although the IP had given consent as Interim Resolution Professional before the cut off, he was ratified as Resolution Professional by the CoC on 6th January, 2020, i.e., after 31st December, 2019, without possessing a valid AFA. The Code and Regulations, and the bye laws of the IPA, make holding AFA an essential condition for undertaking assignments and flow into the obligations attaching to the certificate of registration and the code of conduct under section 208(2) and regulation 7(2). In view of these provisions and the fact that Regulation 7A was notified well before the cut off date, the DC concluded that the IP ought to have obtained AFA (particularly upon ratification) and that his conduct amounted to professional misconduct as found by the IPA's Disciplinary Committee. [Paras 4]

The DC upheld that the IP was guilty of professional misconduct for acting as RP after 31st December, 2019 without a valid AFA; the IPA's Disciplinary Committee has imposed penalty for that misconduct.

Certificate of registration subject to conditions in regulation 7(2) - Obligation to comply with bye laws and Code of Conduct under section 208(2) - Whether IBBI should direct any further action after the IPA's Disciplinary Committee has already adjudicated and imposed penalty. - HELD THAT: - The IBBI Disciplinary Committee noted that the IPA's Disciplinary Committee had already held the IP guilty of professional misconduct and imposed a penalty. Exercising the powers under regulation 11, the IBBI DC observed that the condition of registration requires compliance with the Code, Regulations and bye laws and that the IPA had proceeded to adjudicate the misconduct. Consequently, the IBBI DC disposed of the show cause notice without issuing any further direction, while forwarding a copy of its order to the IPA and the Registrar, NCLT, for information. [Paras 4, 5]

The SCN was disposed of without any further direction by IBBI, in view of the order already passed by the IPA's Disciplinary Committee; copies of the IBBI order to be forwarded to the IPA and the NCLT Registrar.

Final Conclusion: The IBBI Disciplinary Committee concluded that the insolvency professional had been found guilty of professional misconduct by the IPA for acting as RP after 31st December, 2019 without a valid AFA; in view of that adjudication and penalty, the IBBI disposed of the show cause notice without further directions and directed communication of its order to the IPA and the Registrar, NCLT.

An insolvency professional shall not accept or undertake an assignment after 31st December, 2019 unless he holds a valid authorisation for assignment - Authorisation for Assignment - Obligation under section 208(2) to abide by the code of conduct and bye laws of the insolvency professional agency - Certificate of registration subject to conditions including adherence to Code of Conduct - Professional Misconduct

An insolvency professional shall not accept or undertake an assignment after 31st December, 2019 unless he holds a valid authorisation for assignment - Authorisation for Assignment - Obligation under section 208(2) to abide by the code of conduct and bye laws of the insolvency professional agency - Professional Misconduct - Whether the insolvency professional undertook or was ratified to undertake an assignment after 31st December, 2019 without holding a valid Authorisation for Assignment and whether the IBBI should pass directions in view of action by the IPA - HELD THAT: - Regulation 7A plainly requires an insolvency professional to hold a valid Authorisation for Assignment (AFA) on the date of acceptance or commencement of any assignment undertaken after 31st December, 2019. The bye laws of the IPA prescribe the procedure to obtain AFA and the certificate of registration of an IP is subject to conditions including adherence to the Code of Conduct and the bye laws. Although the IP had signed consent in Form 2 on 5 June 2018 (prior to 31 December 2019), he was ratified as Resolution Professional in the CoC meeting held on 17 January 2020, i.e., after the threshold date, without having a valid AFA. The Disciplinary Committee found that the IP ought to have applied for AFA after the insertion of Regulation 7A and that the lapse could not be excused simply because initial consent preceded the cut off. The IPA's Disciplinary Committee has, however, already found the IP guilty of professional misconduct and imposed a penalty. In view of that prior adjudication by the IPA, the IBBI Disciplinary Committee, exercising its powers under Regulation 11, disposed of the show cause notice without issuing any further direction. [Paras 4, 5]

The show cause notice is disposed of without any direction by IBBI because the IPA's Disciplinary Committee has already adjudicated the matter and imposed penalty for accepting the assignment after 31st December, 2019 without holding a valid AFA.

Final Conclusion: Regulation 7A mandates possession of a valid Authorisation for Assignment for assignments after 31st December, 2019; the IP was ratified after that date without AFA and the IPA has held him guilty of professional misconduct. In view of the IPA's disciplinary order, the IBBI Disciplinary Committee disposed of the show cause notice without further directions.

Exemption for units in Special Economic Zone under Section 26 of the SEZ Act, 2005 - overriding effect of SEZ Act vis-a -vis other enactments - notifications issued under Section 93 of the Finance Act, 1994 cannot impose conditions on SEZ exemptions - refund of service tax to SEZ units by way of claim under Notification No.40/2012-ST as amended by Notification No.12/2013-ST - time limit for refund claims where credit is distributed by an Input Service Distributor - classification of services in service provider invoices not to defeat SEZ exemption - refund of cess (SBC and KKC) governed by effective date of amendment to notification

Exemption for units in Special Economic Zone under Section 26 of the SEZ Act, 2005 - overriding effect of SEZ Act vis-a -vis other enactments - notifications issued under Section 93 of the Finance Act, 1994 cannot impose conditions on SEZ exemptions - Whether conditions in notifications issued under Section 93 of the Finance Act, 1994 can be invoked to deny refund/exemption to a unit in a SEZ entitled under Section 26 of the SEZ Act, 2005. - HELD THAT: - The Tribunal applied the reasoning of the High Court in GMR Aerospace Engineering Ltd., holding that Section 26(1) of the SEZ Act confers a special entitlement to exemptions for SEZ developers and units and Section 26(2) contemplates that the terms and conditions for such exemptions are to be prescribed by rules made under the SEZ Act. The word "prescribed" is defined by the SEZ Act to mean rules framed under that Act and the Central Government has exercised that power by SEZ Rules, 2006 (notably Rule 22). In that scheme the notifications issued under Section 93 of the Finance Act, 1994 are general exemptions available to all and cannot be pressed into service to add conditions to or defeat the special exemptions under the SEZ Act. On that basis the Tribunal set aside rejections founded on non compliance with conditions contained in Finance Act notifications where the substantive conditions under the SEZ Act/Rules were satisfied. [Paras 6]

Rejection of refund claims on the ground of non compliance with conditions in notifications under Section 93 of the Finance Act is unsustainable and set aside where the SEZ Act/Rules substantive conditions are fulfilled.

Time limit for refund claims where credit is distributed by an Input Service Distributor - refund of service tax to SEZ units by way of claim under Notification No.40/2012-ST as amended by Notification No.12/2013-ST - Whether refund claims by the SEZ unit relying on service tax distributed by its Input Service Distributor (ISD) can be rejected as time barred when the department computes limitation from date of payment by the ISD rather than from date of receipt of ISD invoice by the SEZ unit. - HELD THAT: - The Tribunal accepted the appellant's contention that where credit is distributed by an ISD and the SEZ unit's right to claim refund arises on receipt of the ISD distribution (invoice/document), limitation must be computed having regard to the date when the beneficiary unit received the ISD documents. The Tribunal held that rejection of refund on the ground of time bar, as computed from the date of payment by the ISD (Mumbai office), could not be sustained and was set aside, in view of the principle that procedural conditions should not be allowed to defeat substantive entitlement under the SEZ regime. [Paras 6]

Rejection of refund claims as time barred on the departmental computation from ISD payment date is set aside; claims to be considered in light of receipt of ISD distribution documents.

Classification of services in service provider invoices not to defeat SEZ exemption - refund of service tax to SEZ units by way of claim under Notification No.40/2012-ST as amended by Notification No.12/2013-ST - Whether refund can be denied on the ground that the service provider's invoice describes the service under a particular classification (e.g., Event Management Service, Real Estate Consultancy) which is not a 'specified service'. - HELD THAT: - Relying on the reasoning in GMR Aerospace Engineering Ltd., the Tribunal held that for the post 2012 period classification in invoices was largely for accounting/statistical purposes and should not be permitted to defeat the SEZ entitlement where services were used for authorised operations. Consequently, rejections based on invoice classification or a finding that the service is not a specified service were held unsustainable and set aside. [Paras 6, 8]

Rejection of refund claims solely on the basis of invoice classification as non specified services is set aside.

Refund of cess (SBC and KKC) governed by effective date of amendment to notification - Whether refund of Swachh Bharat Cess and Krishi Kalyan Cess can be allowed where the amendments to Notification No.12/2013 ST exempting those cesses came into effect after the relevant invoices. - HELD THAT: - The Tribunal examined the effective dates of amendments to Notification No.12/2013 ST which brought SBC and KKC within the exemption regime and found that the invoices for which refund of SBC and KKC were sought were dated prior to those effective dates. Consequently, the authorities below were correct in rejecting the refund of SBC and KKC for those invoices because the exemption for those cesses was not in force at the relevant time. [Paras 7]

Rejection of refund of SBC and KKC for invoices dated prior to the effective dates of amendments granting such exemption is upheld.

Final Conclusion: The Tribunal allowed the appeals in part: it set aside departmental rejections grounded on applicability of Finance Act notifications, time bar as computed from ISD payment date, and invoice classification-holding the SEZ Act/Rules entitlement must prevail and claims be considered accordingly-while upholding rejection of refunds of SBC and KKC for invoices dated before the amendments exempting those cesses. Consequential relief, if any, to be granted to the appellant.

Banking and Other Financial Services - Financial leasing services including hire-purchase - Classification of taxable services under Section 65A(2) - Negative list - services represented by interest or discount - Body corporate - exclusion under Companies Act clause (c) - Construction services (essential character test) - Value of taxable service excludes interest (Rule 6(2), Service Tax (Determination of Value) Rules, 2006) - Suppression of facts and requirement of positive wilful misstatement for extended period and penalties

Banking and Other Financial Services - Body corporate - exclusion under Companies Act clause (c) - Construction services (essential character test) - Classification of taxable services under Section 65A(2) - Services rendered by the appellant are not exigible to service tax as 'Banking and Other Financial Services' and are to be treated as construction of residential houses. - HELD THAT: - The Tribunal analysed the statutory definition of 'Banking and Other Financial Services' and the meaning of 'body corporate' and observed that the appellant (Rajasthan Housing Board) is a statutory instrumentality constituted under the Rajasthan Housing Board Act, 1970 and not a company within the Companies Act exclusion. The Board's primary activity is construction and sale/allotment of residential accommodation; hire purchase contracts are entered with the essential object of sale of property rather than mere grant of use and occupation. Applying Section 65A(2), the Tribunal held that the service which gives the essential character is construction of complexes and that amounts collected in relation to that activity cannot be reclassified as banking/financial services. For the period from 1.7.2012, the negative list (services where consideration is by way of interest or discount) further supports non-taxability. The adjudicating authority erred in treating the appellant as rendering banking/financial services merely because it is a body corporate or because amounts were collected and subsequently transferred to funds. [Paras 15, 16, 17, 19, 24]

Demand confirmed under 'Banking and Financial Services' set aside; services held to be construction services and not taxable as banking/financial services.

Value of taxable service excludes interest (Rule 6(2), Service Tax (Determination of Value) Rules, 2006) - Negative list - services represented by interest or discount - Construction services (interest confined to own products) - Interest received and hire purchase/ancillary deposits are not includible in the value of taxable service for the purposes of service tax. - HELD THAT: - The Tribunal relied on Rule 6(2) of the Service Tax (Determination of Value) Rules, 2006, which excludes interest on loans and delayed payments from taxable service value for the period 18.4.2006 to 1.7.2012, and on the negative list post 1.7.2012 excluding services where consideration is interest. The receipts characterised as ancillary service charges (ASC) and hire purchase deposits were treated in the appellant's books as liabilities or refundable/adjustable amounts and were used for development of public amenities; they were not the appellant's income. The interest related to the appellant's own products (sale of houses) and not to a separate leasing/financial activity, so it is not part of taxable value. [Paras 18, 22, 23]

Interest and the ASC/hire purchase deposits do not form part of the taxable service value and cannot sustain the confirmed service tax demand.

Suppression of facts and requirement of positive wilful misstatement for extended period and penalties - Extended period of limitation not invocable without suppression - Penalties under the impugned orders and invocation of the extended period of limitation are not sustainable for lack of positive suppression or wilful intent to evade tax. - HELD THAT: - The Tribunal explained that invocation of extended limitation and imposition of penalties require a positive act of suppression or wilful misstatement with intent to evade tax. The adjudicating authority failed to demonstrate any such positive suppression; the appellant submitted returns regularly and cooperated with the Department. The appellant being an instrumentality of the State further weighed against an inference of wilful evasion. Reliance was placed on precedent holding that mere classification disputes or absence of deliberate concealment do not attract extended limitation or penalties. [Paras 26, 27]

Penalties and extended period invocation set aside as unsustainable for want of suppression or wilful misstatement.

Final Conclusion: The Order in Original confirming service tax demands (and penalties) is set aside; the appeals are allowed and consequential benefits, if any, shall follow.

Limitation for refund under Notification No. 09/2016 - retrospective exemption for construction services to government or local authority - effect of judicial determination on entitlement and time bar - equitable treatment of similarly situated assessees

Limitation for refund under Notification No. 09/2016 - effect of judicial determination on entitlement and time bar - equitable treatment of similarly situated assessees - Whether the refund claim for the period 2015-16 is barred by limitation under Notification No. 09/2016 or is maintainable in view of the subsequent judicial determination that Haryana Housing Board is a government/local authority. - HELD THAT: - The Tribunal found that although service tax was paid during 2015-16 because the Revenue initially considered the services to Haryana Housing Board taxable, the legal question whether the Board is a government/local authority was pending before the High Court and was later decided in favour of contractors in M/s Bharat Bhushan Gupta & Company. The Revenue thereafter accepted that services to the Board were exempt and had sanctioned a refund for 2014-15. Having regard to the High Court decision which settled that Haryana Housing Board is a government/local authority and that construction services provided to it are exempt retrospectively for the relevant period, the Tribunal held that the appellant became entitled to claim refund only after that legal position was authoritatively declared. The Tribunal also observed that the Board itself obtained a refund which was not appealed, and on the principle of equity and parity of treatment between similarly situated parties the appellant should not be denied relief solely on the basis that its refund claim was filed after the date prescribed by Notification No. 09/2016. Applying these considerations, the Tribunal concluded that the limitation defence under Notification No. 09/2016 could not be sustained to deny the appellant's refund for 2015-16 and that the amount must be refunded with interest.

Impugned rejection of the refund claim for 2015-16 on limitation grounds is set aside; the appellant is entitled to the refund for 2015-16 with interest.

Final Conclusion: The appeal is allowed; the order rejecting the refund claim for 2015-16 as time barred is set aside and the refund is to be granted with consequential interest, having regard to the High Court's ruling that Haryana Housing Board is a government/local authority and equity with similarly situated parties.

Condonation of delay in statutory appeals - limitation in appeals and statutory proviso restricting extension - opportunity of hearing and non-existence of ex parte order - exclusion of Section 5 of the Limitation Act by a specific statutory proviso

Condonation of delay in statutory appeals - limitation in appeals and statutory proviso restricting extension - exclusion of Section 5 of the Limitation Act by a specific statutory proviso - Whether the Commissioner (Appeals) was justified in refusing to condone the delay of one month and twenty days in filing the appeal beyond the prescribed period. - HELD THAT: - The Tribunal examined the statutory scheme which permits filing an appeal within 60 days and allows the appellate authority to extend that period by a further 30 days only upon satisfaction of sufficient cause. Reliance was placed on the principle that the proviso to the statutory provision excludes recourse to Section 5 of the Limitation Act for further extension. Applying this legal principle to the facts, the appellant's delay of one month and twenty days beyond the extendable thirty days fell outside the power of the Commissioner (Appeals) to condone. The Tribunal found no sufficient cause shown that would bring the delay within the authorised extension and held that the impugned refusal to condone the delay involved no infirmity. [Paras 8, 9]

Refusal to condone the delay of one month and twenty days was lawful and the order rejecting condonation is upheld; the appeal is dismissed on limitation grounds.

Opportunity of hearing and non-existence of ex parte order - Whether the orders dated 25.03.2014 and 30.01.2018 were ex parte or passed without affording opportunity of hearing to the appellant. - HELD THAT: - The Tribunal reviewed the original order and the review order and noted specific findings recording that the claimant had been afforded personal hearings on multiple dates and had been given opportunity to produce evidence. The order-in-original (dated 25.03.2014) records consideration of the claimant's submissions, and paragraph 11 of the review order records three opportunities afforded (13.10.2017, 21.11.2017 and 28/29.12.2017) with service of notice. These findings negate the appellant's claim of lack of notice or that the orders were ex parte. The Tribunal held that the appellant had knowledge of the proceedings and that the subsequent RTI application did not constitute a sufficient or bona fide reason for the delay. [Paras 5, 6, 7]

The orders were not ex parte; the appellant had been afforded opportunities of hearing and therefore cannot rely on absence of knowledge to justify the delayed appeal.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order refusing condonation of delay and dismissed the appeal; the appellant's plea of non service/ex parte order was rejected on the record of multiple opportunities of hearing afforded to the claimant.

Non-application of mind - requirement of speaking order - duty to apply mind when relying on precedent - quash and remit for fresh adjudication

Non-application of mind - requirement of speaking order - duty to apply mind when relying on precedent - quash and remit for fresh adjudication - The Tribunal's order was cryptic and suffered from non-application of mind, warranting quashing and remand for fresh adjudication by a speaking order. - HELD THAT: - The High Court held that a quasi-judicial authority such as the Tribunal must assign reasons and apply its mind when exercising statutory powers. Where the Tribunal relies on a precedent, it is incumbent on it to examine and explain with reasons how the ratio of that decision applies to the facts before it. The impugned paragraph of the Tribunal's order merely stated that the issue was "squarely covered" by the Supreme Court decision in Doaba Steel Rolling Mills and upheld the impugned order without addressing the appellant's submissions or explaining the applicability of the precedent. That cryptic statement demonstrates non-application of mind. In these circumstances the Court quashed the Tribunal's order dated 27.06.2017 and remitted the matter to the Tribunal for fresh adjudication on merits, directing the Tribunal to consider the submissions made and decide by a speaking order within three months. The Court left open all contentions permissible in law for fresh consideration. [Paras 6, 7]

Impugned order quashed; matter remitted to the Tribunal for fresh adjudication by a speaking order within three months; all permissible contentions kept open.

Final Conclusion: The Tribunal's order was set aside for non-application of mind; the matter is remitted for fresh decision by a speaking order within three months, with all contentions left open for consideration.

Maintainability of writ petition - territorial jurisdiction under Article 226 - jurisdictional forum for challenge to Settlement Commission orders - place of assessee's registration as determinative of forum

Maintainability of writ petition - territorial jurisdiction under Article 226 - place of assessee's registration as determinative of forum - Whether the writ petition challenging the Settlement Commission's order was maintainable before the Madras High Court despite the assessee being registered in another State. - HELD THAT: - The Division Bench followed earlier authority holding that even though the Settlement Commission's seat is at Chennai, the writ petition is not maintainable in this Court where the assessee is registered in another State. The Court noted that several factual aspects-including the quantum of the settlement offered-require consideration by the jurisdictional Commissioner (Commissioner of Central Tax, Bangalore), and therefore territorial jurisdiction is to be ascertained with reference to the assessee's registration and the Commissioner having jurisdiction. Reliance was placed on the Division Bench decision in M/s. Mulberry Silks Ltd. and on C. Ramesh, which guide the exercise of jurisdiction under Article 226 and support the conclusion that the Madras High Court should not entertain the writ in these circumstances. [Paras 4, 5, 6, 7]

The writ petition was not maintainable before the Madras High Court and the writ appeal was dismissed; the appellant may pursue remedies before the appropriate forum.

Final Conclusion: Writ appeal dismissed for lack of territorial jurisdiction; appellant permitted to pursue other remedies available under the Act before the appropriate forum.

Abeyance of criminal proceedings pending adjudicatory/appeal proceedings - simultaneous adjudication and criminal prosecution - abuse of process where adjudication exonerates accused - vicarious liability of corporate officers under Section 9AA of the Central Excise Act - exercise of inherent jurisdiction under Section 482 Cr.P.C.

Abeyance of criminal proceedings pending adjudicatory/appeal proceedings - simultaneous adjudication and criminal prosecution - abuse of process where adjudication exonerates accused - exercise of inherent jurisdiction under Section 482 Cr.P.C. - Whether the criminal proceedings against the company and its office-bearers should be quashed or kept in abeyance pending disposal of the adjudicatory/appeal proceedings. - HELD THAT: - The High Court examined competing authorities holding that (a) adjudication and criminal prosecution may proceed simultaneously, and (b) where adjudicatory proceedings ultimately find no contravention on merits, continuation of criminal prosecution would be unjust and an abuse of process. Applying those principles to the material on record, the Court observed that the core controversy-whether excise duty is payable and whether the claimed liability falls below the minimum limit-remains under challenge before the appellate adjudicatory authority. Given the potential for an eventual exoneration on the adjudicatory record and the consequent risk of abuse of process, the Court declined to quash the criminal proceedings on merits but exercised its inherent jurisdiction to stay them temporarily. The stay is conditional and limited: the petitioners were directed to prosecute the pending appeal before the adjudicatory authority expeditiously and the stay is subject to a time limit after which the respondent may revive criminal action if the appeal is not disposed of within the stipulated period. The Court therefore balanced the public interest in prompt enforcement of revenue laws with the risk of prejudice and harassment to the accused if criminal prosecution were to proceed while the determinative adjudicatory proceedings remain undecided. [Paras 63, 64, 65, 66, 67]

Criminal proceedings are not quashed; they are kept in abeyance until disposal of the adjudicatory/appeal proceedings, subject to the petitioners getting the appeal disposed of within one year, failing which the respondent may proceed with criminal prosecution.

Vicarious liability of corporate officers under Section 9AA of the Central Excise Act - simultaneous adjudication and criminal prosecution - Whether the question of liability of the company and its office-bearers under Section 9AA and the quantum/monetary threshold for prosecution has been finally determined by the Court. - HELD THAT: - The Court noted the allegations that the company supplied raw materials and manufacturing was executed by the manufacturer, and that office-bearers were charged with vicarious liability under the statutory provision. However, the Court did not undertake a final adjudication of those factual and proximate liability questions. Instead, it observed that those matters form part of the pending adjudicatory/appeal proceedings before the appropriate authority and that a determination on whether the claimed excise duty exceeds the minimum limit (and whether vicarious liability is established) must be concluded by the adjudicatory forum. Because these determinative questions remain under adjudication, the criminal prosecution was ordered kept in abeyance rather than being finally adjudicated or quashed by the High Court. [Paras 4, 6, 59, 61, 66]

Liability of the company and its officers under Section 9AA and the question of monetary threshold are left to be determined in the adjudicatory/appeal proceedings; criminal prosecution is stayed pending that determination (within the one-year timeframe imposed).

Final Conclusion: The High Court refused to quash the criminal complaint but exercised its inherent jurisdiction to keep the criminal proceedings in abeyance until the adjudicatory/appeal proceedings are disposed of; the petitioners were directed to pursue and conclude the pending appeal within one year, failing which the respondent is at liberty to revive the criminal prosecution.

Applicability of Section 11B to refund of deposits held in PLA - Limitation period for refund claims under Section 11B - Absence of statutory provision for withdrawal of deposits outside Section 11B - Equitable relief and jurisdiction of the adjudicatory tribunal - Availability of alternative civil or writ remedies where statutory remedy is lacking

Applicability of Section 11B to refund of deposits held in PLA - Limitation period for refund claims under Section 11B - Whether the refund claim for the unutilized PLA balance could be adjudicated and allowed under Section 11B despite being a deposit and not duty, and whether the claim was barred by the one year limitation. - HELD THAT: - The Tribunal noted that the impugned amount was an unutilized deposit in the PLA account and therefore was not duty or interest ordinarily refundable under Section 11B. However, the Court also observed that no other statutory provision existed under the Act for refund or withdrawal of such deposits. Given the absence of an alternate statutory mechanism, the Adjudicating Authority was constrained to apply the mandate of Section 11B(1), including its one year limitation, to the refund application. The application filed on 30 July, 2018 for the balance as on 30 June, 2017 was treated as time barred under the limitation prescribed by Section 11B, and the rejection on that ground was held to be without infirmity. [Paras 6]

Tribunal upheld the rejection of the refund claim as time barred under Section 11B in the absence of any other statutory provision permitting withdrawal of the deposit.

Equitable relief and jurisdiction of the adjudicatory tribunal - Availability of alternative civil or writ remedies where statutory remedy is lacking - Whether the Tribunal could grant relief on principles of equity notwithstanding the absence of a statutory provision for refund. - HELD THAT: - The Tribunal acknowledged that, in terms of equity, the appellant might be entitled to return of its deposit. However, being a quasi judicial forum constituted under the statute, the Tribunal held it had no jurisdiction to grant relief based on equitable principles where the statutory scheme provided no mechanism for such refund. Consequently the appellant was permitted to pursue alternative remedies in civil courts or by way of writ petition for enforcement of its equitable claim. [Paras 6]

Tribunal declined to award equitable relief and granted liberty to the appellant to pursue civil or writ remedies.

Final Conclusion: Appeal dismissed; rejection of the refund claim under Section 11B as time barred sustained, with liberty granted to the appellant to seek alternative civil or writ remedies since the Tribunal could not grant equitable relief in the absence of a statutory refund provision.

Search and seizure compliance - requirement of certificate under Section 36B - evidentiary value of third party documents - clandestine removal - benefit of departmental irregularity to noticees

Search and seizure compliance - requirement of certificate under Section 36B - benefit of departmental irregularity to noticees - Whether the adjudication confirming duty demand against the appellant is sustainable in view of procedural irregularities in search and seizure and non compliance with statutory certificate requirement. - HELD THAT: - The Tribunal, bound by a Division Bench decision on the same Show Cause Notice, held that the search and seizure were conducted beyond normal working hours and in breach of the requirements of Section 100 Cr.P.C. read with the Excise Act. The Division Bench further found that the computer data had only been recorded on writable CDs without obtaining the mandatory certificate under Section 36B, and that the CDs were accessed after a long gap without the requisite certification. Reliance on established authorities led to the conclusion that these procedural violations vitiated the evidentiary basis relied upon by the Department. In consequence, the benefit of such departmental non compliance was extended to the noticees and, on that binding precedent, the Single Bench held that the Department failed to prove the allegations against the appellant. [Paras 6, 9]

The confirmed demand is set aside as unsustainable due to procedural irregularities in search and seizure and failure to comply with the certification requirement; appeal allowed.

Evidentiary value of third party documents - clandestine removal - Whether third party records relied upon by the Department suffice to sustain a finding of clandestine removal in the absence of corroborative or clinching evidence. - HELD THAT: - Having examined the authorities and the material on record, the Tribunal observed that findings of clandestine removal cannot be upheld solely on the basis of third party documents unless there is clinching evidence of clandestine manufacture and removal. The Division Bench had held that the alleged shortage was based on eye estimation/average weight and that there was no cogent documentary recovery establishing clandestine removals. In the absence of corroborative proof, the reliance upon third party material was held unjustified and insufficient to support the confirmed demand against the appellant. [Paras 6, 8, 9]

Findings of clandestine removal based on third party documents are untenable without clinching corroboration; demand cannot be sustained and is set aside.

Final Conclusion: The Tribunal, applying the Division Bench's findings on procedural infractions and the insufficiency of third party evidence to prove clandestine removal, held the Department had not established duty evasion against the appellant; the confirmed demand was set aside and the appeal allowed.

Eligibility of CENVAT credit on structural and metal items used in fabrication of capital goods - User test for classification of goods as capital goods, components, spares or accessories - Admissibility and evidentiary weight of Chartered Engineer certificate to prove user - Binding effect of Tribunal and High Court precedents on identical factual/legal issue

Eligibility of CENVAT credit on structural and metal items used in fabrication of capital goods - User test for classification of goods as capital goods, components, spares or accessories - Admissibility and evidentiary weight of Chartered Engineer certificate to prove user - Binding effect of Tribunal and High Court precedents on identical factual/legal issue - CENVAT credit on items such as HR coils, MS plates, HT strappings, HRSS plates, GI flat, grate plate, CI bend, MS boiler plates and SS plates used in fabrication or as parts/components/accessories of capital goods is admissible. - HELD THAT: - The Tribunal found that the appellant had furnished detailed descriptions, purchase records and goods receipts describing the usage of each item and, at the appellate stage, produced a Chartered Engineer certificate corroborating the usage. Applying the user test as expounded in the precedents relied upon, the structural/metal items were held to be legitimately worked upon and incorporated as parts of capital goods or used in fabrication of support structures necessary for erection and functioning of specified machines. The Tribunal observed that such items qualify either as inputs for fabrication of capital goods or as components/spares/accessories within the definition of capital goods under the CENVAT Credit Rules and therefore attract CENVAT credit. The decision also relied upon consistent decisions of the Tribunal and the High Court which have held similarly, and held that the Commissioner(Appeals) had erred in ignoring the Chartered Engineer certificate and the documentary evidence without contradicting them. For these reasons the impugned orders confirming demand, interest and penalty were set aside and the appeals allowed with consequential relief. [Paras 6, 7]

Impugned orders confirming denial of CENVAT credit and imposing demand, interest and penalty set aside; appeals allowed.

Final Conclusion: On the facts and documentary evidence including the Chartered Engineer certificate, and in view of binding tribunal and High Court precedents applying the user test, the Tribunal allowed the appeals and directed that CENVAT credit on the listed structural and metal items be permitted, setting aside the demand, interest and penalty.