TaxTMI Updates e-Newsletter
Mar 21,2023

Consolidation of proceedings to avoid conflicting decisions - adjudication by a single authority where matters are identical or inter-related - centralised investigative agency having primacy in adjudication - direction to transfer file for comprehensive adjudication - opportunity to file reply and requirement of a reasoned order

Consolidation of proceedings to avoid conflicting decisions - adjudication by a single authority where matters are identical or inter-related - centralised investigative agency having primacy in adjudication - Whether the show cause notice dated 29th December, 2022 should be adjudicated by the Bureau of Investigation which had earlier taken up the matter by notice dated 7th November, 2022, so that all proceedings are adjudicated together. - HELD THAT: - The Court held that where the subject-matter of two notices is the same or inter-related, it is preferable that a single authority adjudicate to prevent conflicting decisions and to serve the interests of both the assessee and the revenue. Noting that the Bureau of Investigation, South Bengal is a centralised agency which had already issued a notice dated 7th November, 2022, the Court directed that the file relating to the show cause notice dated 29th December, 2022 be placed before the Special Commissioner, State Tax, Bureau of Investigation, South Bengal (HQ), who shall direct that the show cause notice and file be placed before the Assistant Commissioner, State Tax, Bureau of Investigation, South Bengal (HQ) to adjudicate the matters together with the proceedings already initiated pursuant to the earlier notice. The Court emphasised consolidation for comprehensive adjudication and to avoid multiplicity and possible conflict in outcomes. [Paras 3, 4]

The show cause notice dated 29th December, 2022 shall be placed before the Special Commissioner, State Tax, Bureau of Investigation, South Bengal (HQ) and adjudicated by the Assistant Commissioner, Bureau of Investigation (HQ) along with the proceedings arising from the notice dated 7th November, 2022.

Opportunity to file reply and requirement of a reasoned order - direction to transfer file for comprehensive adjudication - What procedural steps should follow after directing consolidation-specifically, the appellant's opportunity to reply and the manner of adjudication. - HELD THAT: - The Court directed that the appellants submit their reply to the show cause notice dated 29th December, 2022 within 30 days from receipt of the server copy of the judgment, and that the reply be submitted to the Assistant Commissioner, State Tax, Bureau of Investigation, South Bengal (HQ). Thereafter the authority is to adjudicate all proceedings in a comprehensive manner, consider the submissions made by the assessee, and pass a reasoned order on merits and in accordance with law. The direction ensures procedural fairness by affording the assessee an opportunity to be heard and mandates that the consolidated adjudication be reasoned and lawful. [Paras 5]

Appellants to submit reply within 30 days to the Assistant Commissioner, Bureau of Investigation (HQ); the authority shall adjudicate all consolidated proceedings comprehensively and pass a reasoned order on merits in accordance with law.

Final Conclusion: The intra-Court appeal and the writ petition are disposed of by directing consolidation of the show cause notice dated 29th December, 2022 with proceedings initiated pursuant to the notice dated 7th November, 2022 before the Assistant Commissioner, State Tax, Bureau of Investigation, South Bengal (HQ); the assessee is granted 30 days to file a reply and the authority is directed to adjudicate the consolidated proceedings and pass a reasoned order. No order as to costs.

Premature writ petition - maintainability of writ against pending statutory proceedings - intimation under Section 73(5)/74(5) as not constituting a show-cause notice - liberty to approach appropriate statutory forum and to seek dispensation of pre-deposit

Intimation under Section 73(5)/74(5) as not constituting a show-cause notice - Annexure XIII dated 25.08.2021 is an intimation under Section 73(5)/74(5) and not a show-cause notice. - HELD THAT: - Annexure XIII (Form GST DRC-01A) conveys the amount of tax, interest and penalty ascertained and invites the petitioner to file submissions in Part B within the stipulated time; it further warns that failure to file submissions would lead to issuance of a show-cause notice. The Court therefore treated Annexure XIII as a pre-ascertainment intimation which gives the petitioner an opportunity to respond, and not as a show-cause notice requiring quashing at this stage. The character of the document as an intimation rather than a final adjudicatory notice informed the Court's conclusion that the petition attacking it was premature. [Paras 7, 8]

Annexure XIII is an intimation under Section 73(5)/74(5) and not a show-cause notice; challenge to it in writ petition is premature.

Premature writ petition - maintainability of writ against pending statutory proceedings - liberty to approach appropriate statutory forum and to seek dispensation of pre-deposit - The writ petition challenging the seizure, prohibition and the intimation is premature and not maintainable; petition is dismissed with liberty to pursue statutory remedies. - HELD THAT: - The proceedings before the tax authority were pending and Annexure XIII expressly permitted the petitioner to make submissions before any showcause notice is issued. Given the ongoing statutory process and availability of statutory remedies, the Court concluded that it should not entertain the writ at this interlocutory stage. The Court observed the petitioner may approach the appropriate forum and is permitted to make an application seeking dispensation of any statutory pre-deposit; the revisional authority may consider such application in accordance with law. Pending applications were disposed of accordingly. [Paras 8, 9, 10]

Writ petition dismissed as premature and not maintainable; petitioner granted liberty to pursue appropriate statutory remedies and to apply for dispensation of pre-deposit before the revisional authority; pending applications disposed.

Final Conclusion: The High Court dismissed the writ petition as premature, holding that the intimation dated 25.08.2021 is not a show-cause notice and that the petitioner should pursue available statutory remedies; liberty granted to seek dispensation of any pre-deposit from the revisional authority.

Whether consideration for sale of software amounts to royalty - Lower withholding tax certificate under Section 197 of the Income Tax Act, 1961 - Application of the Supreme Court precedent in Engineering Analysis Centre of Excellence - Application of Rule 28AA of the Income Tax Rules, 1962 for estimating income at the certificate stage - Dependent Agent Permanent Establishment (DAPE) - Withholding tax obligation under Section 195 of the Income Tax Act, 1961

Whether consideration for sale of software amounts to royalty - Application of the Supreme Court precedent in Engineering Analysis Centre of Excellence - Lower withholding tax certificate under Section 197 of the Income Tax Act, 1961 - Application of Rule 28AA of the Income Tax Rules, 1962 for estimating income at the certificate stage - Dependent Agent Permanent Establishment (DAPE) - Impugned certificate and order set aside and the application under Section 197 remanded for fresh consideration in light of the Engineering Analysis precedent and Rule 28AA, without being influenced by a pending review petition. - HELD THAT: - The Court found that the officer who issued the impugned order failed to address the central legal question pleaded by the petitioner - namely whether amounts received under the Distributor Agreement constitute royalty within the meaning of domestic law or the DTAA - and improperly bypassed the Supreme Court's decision in Engineering Analysis by relying on the pendency of a review petition. The authority was also required to have regard to the terms of the Distributor Agreement to ascertain the nature of rights conferred on distributors/resellers and to apply the parameters set out in Rule 28AA for estimating income at the certificate stage. The impugned order instead made factual observations about a distributor and speculated about the existence of a DAPE without examining relevant contractual clauses or applying the prescribed Rule 28AA framework. While the Court recognised that an AO need not conduct a full assessment when deciding an application under Section 197, it held that the officer must nevertheless examine the application against the correct legal tests and antecedent judicial precedent. The Court directed that the re-examination be completed within eight weeks and expressly stated that the pendency of a review petition against the Supreme Court judgment could not justify ignoring that precedent; distinguishing on facts would have been permissible but was not done here. [Paras 11, 12, 13, 14, 15]

Set aside the impugned withholding tax certificate and order; directed the concerned officer to re-examine the Section 197 application in light of the Engineering Analysis judgment and Rule 28AA, inspecting the Distributor Agreement and deciding afresh within eight weeks, uninfluenced by the pendency of any review petition.

Final Conclusion: Writ petition disposed by setting aside the impugned certificate and order; matter remitted to the assessing authority for fresh, timely consideration of the petitioner's Section 197 application in accordance with the ratio of Engineering Analysis and the parameters of Rule 28AA, with re-examination to be completed within eight weeks.

Assessment under Section 153C - Best judgment assessment under Section 144 - Opportunity of being heard / principles of natural justice - Service of electronic notice under Section 144B(6)(ii) - Penalty under Section 271(1)(c)

Assessment under Section 153C - Best judgment assessment under Section 144 - Opportunity of being heard / principles of natural justice - Assessments under Section 153C read with Section 144 passed without serving notice to the assessee and without affording opportunity of being heard. - HELD THAT: - Section 144 requires that before completing an assessment to the best of the Assessing Officer's judgment the assessee must be given an opportunity of being heard by service of a notice specifying date and time, except where a notice under section 142(1) has already been issued. In the present cases no notice under section 142(1) was issued prior to making the assessments and no notice or other authenticated communication was served on the petitioner by the modes contemplated by section 144B(6)(ii). The assessments therefore proceeded without affording the statutory and constitutional right of hearing and amount to breach of principles of natural justice. For these reasons the impugned assessment orders are unsustainable and were set aside. [Paras 5, 6]

Impugned assessment orders under Section 153C read with Section 144 for the listed assessment years are set aside for want of notice and opportunity; matters remitted for fresh proceedings.

Penalty under Section 271(1)(c) - Opportunity of being heard / principles of natural justice - Validity of penalty orders under Section 271(1)(c) passed without service of notice or opportunity to the assessee. - HELD THAT: - The penalty orders impugned were passed after the assessments which themselves were completed without giving the petitioner an opportunity of being heard. Since no notice or authenticated electronic communication was served and no prior notice under section 142(1) had been issued, the petitioner was denied the chance to meet the case against him before imposition of penalty. Consequentially, the penalty orders recorded in each case are vitiated for want of compliance with the mandate of opportunity of hearing and were set aside. [Paras 3, 5, 6]

Penalty orders dated 06.01.2022 and 09.02.2022 in the respective matters are set aside for want of notice and opportunity.

Assessment under Section 153C - Best judgment assessment under Section 144 - Extent and manner of further proceedings after setting aside of assessment and penalty orders. - HELD THAT: - Having set aside the assessment and penalty orders for lack of notice and opportunity, the proper course directed by the Court is remand to the Assessing Officer to proceed afresh. The Assessing Officer is to commence proceedings from the stage of issuing notice and afford the petitioner the hearing contemplated under Section 144, and thereafter complete the assessment proceedings in accordance with law. The Court has prescribed a time frame to ensure expedition of the exercise. [Paras 6]

Matters remitted to the Assessing Officer to issue notice, afford hearing and complete assessment proceedings from that stage within three months from receipt of this order.

Final Conclusion: All Special Civil Applications are allowed: the assessments under Section 153C read with Section 144 and the consequential penalty orders under Section 271(1)(c) for the listed assessment years are set aside for want of service of notice and denial of opportunity of hearing; matters are remitted to the Assessing Officer to proceed afresh from the stage of issuing notice and to complete the assessments within three months from receipt of this order.

Deduction under section 80IB(11A) - profits of eligible industrial undertaking - Export incentives (Duty Drawback and MEIS) treated as profits and gains of business or profession - Treatment of cash assistance under section 28(iiid) as business income - Nexus between export incentives and export business activities for allowability of deduction - Overruling of Liberty India by Meghalaya Steels on treatment of export incentives

Deduction under section 80IB(11A) - Export incentives (Duty Drawback, MEIS) as business income - Section 28(iiid) - cash assistance against exports - Nexus/link between incentives and industrial undertaking - Precedential impact of Meghalaya Steels over Liberty India - Export incentives such as Duty Drawback and MEIS form part of profits and gains of the industrial undertaking and are includible for computing profits eligible for deduction under section 80IB(11A). - HELD THAT: - The Tribunal examined whether export incentives (Duty Drawback and MEIS) can be excluded from the profits of the eligible undertaking for the purpose of deduction under section 80IB(11A). It observed that Parliament, by insertion of clause (iiid) in section 28 with retrospective effect, treated cash assistance received against exports as income under the head "profits and gains of business or profession", demonstrating legislative intent that such export-related receipts be part of business income. The Tribunal relied on the subsequent decision of the Hon'ble Supreme Court in Meghalaya Steels, which construed subsidies and export cash assistance as business income and expressly held that earlier contrary conclusions (including reasoning in Liberty India where applied differently by some courts) were incorrect. By following Meghalaya Steels (paras 28-29 of that judgment reproduced in the order), and noting its own Bench's earlier decision for AY 2017-18, the Tribunal held that export entitlements have a direct nexus with export activity of the undertaking and therefore must be included in profits for computing the deduction under section 80IB(11A). The Tribunal accordingly rejected the Assessing Officer's reliance on Liberty India and dismissed the Revenue's grounds. [Paras 6, 8, 9]

Export incentives (Duty Drawback and MEIS) are assessable as business profits under section 28(iiid) and are includible for computing deduction under section 80IB(11A); Revenue's appeal dismissed.

Final Conclusion: Following the Supreme Court's decision in Meghalaya Steels and the legislative intent embodied in section 28(iiid), the Tribunal held that export incentives (Duty Drawback and MEIS) constitute business income and are includible in profits of the eligible undertaking for grant of deduction under section 80IB(11A); the Revenue's appeal is dismissed.

Allowability of expenditure as wholly and exclusively for business - deduction under section 36(1)(viia) for cooperative banks - application of proviso to section 194A in relation to members of cooperative societies - disallowance under section 40(a)(ia) for failure to deduct TDS - effect of admission/agreement made before assessing officer on subsequent appeal

Allowability of expenditure as wholly and exclusively for business - effect of admission/agreement made before assessing officer on subsequent appeal - Disallowance of advertisement expenditure of Rs.91,200/- under section 37(1). - HELD THAT: - The Tribunal upheld the AO's and CIT(A)'s conclusion that the payments for death condolence notices in newspapers were not shown to be incurred wholly and exclusively for the business of the cooperative bank. The assessee's representative had admitted during assessment that business expediency could not be substantiated and agreed to the addition; that admission was treated as binding on appeal. The Tribunal also noted lack of evidence that the advertisements attracted customers or served bank business requirements and followed its earlier findings in related years. For these reasons the expenditure was held not deductible under section 37(1). [Paras 5, 6, 8]

Addition of Rs.91,200/- disallowing the advertisement expenditure confirmed; ground dismissed.

Deduction under section 36(1)(viia) for cooperative banks - Claim for deduction under section 36(1)(viia) in absence of rural branches/advances. - HELD THAT: - The Tribunal held the assessee entitled to the deduction under section 36(1)(viia) to the extent of 7.5% of total income despite having no rural branches or rural advances. Relying on precedent in the assessee's own earlier years and construing authorities in favour of the assessee where two interpretations are possible, the Tribunal limited the claim to the first limb (7.5% of total income) and observed the second limb (10% of rural advances) was inapplicable. The deduction was allowed subject to the proviso that a provision to that extent be made in the books of account as required by the section. [Paras 9, 10, 11]

Grounds disallowing deduction under section 36(1)(viia) are overruled; deduction allowed (limited to 7.5% of total income).

Application of proviso to section 194A in relation to members of cooperative societies - disallowance under section 40(a)(ia) for failure to deduct TDS - Disallowance under section 40(a)(ia) for interest paid to minors and unregistered firms where TDS was not deducted. - HELD THAT: - The Tribunal affirmed the AO's finding that minors and unregistered firms were not members of the cooperative bank and therefore did not fall within the exemption in the proviso to section 194A. The assessee's contention that minors' incomes are clubbed with parents and that parents were members was not accepted as a legal basis to treat minors or unregistered firms as members of the society. Consequently, the payments were subject to TDS under section 194A and the AO correctly invoked section 40(a)(ia) to disallow the interest paid where tax was not deducted. [Paras 12]

Additions under section 40(a)(ia) relating to interest paid to minors and unregistered firms confirmed; grounds dismissed.

Final Conclusion: The appeal is partly allowed: the disallowance under section 36(1)(viia) is set aside and the deduction allowed (subject to making the requisite provision), while the disallowance of advertisement expenditure under section 37(1) and the additions under section 40(a)(ia) for failure to deduct TDS on interest to minors and unregistered firms are confirmed.

Applicability of Section 50C - Agricultural land vs capital asset - Adoption of stamp valuation / DVO report - Value as on date of agreement (proviso to Section 50C) - Reopening of assessment under Section 147

Reopening of assessment under Section 147 - Validity of reopening the assessment under Section 147 - HELD THAT: - The Tribunal recorded that no discrepancy was pointed out by the assessee regarding the reasons for reopening or the approval for reopening under Section 147. The Assessing Officer had issued notice under Section 148 and reasons were communicated; the assessee filed a return in response and the matter proceeded to scrutiny. On the record before it the Tribunal found nothing to fault in the communication or sufficiency of reasons for reopening. [Paras 7]

Reopening under Section 147 is held to be valid; the assessee's ground challenging reopening is dismissed.

Agricultural land vs capital asset - Applicability of Section 50C - Adoption of stamp valuation / DVO report - Value as on date of agreement (proviso to Section 50C) - Whether addition under Section 50C adopting DVO/stamp valuation is sustainable when the land sold was agricultural and the sale was contracted at Jantri rates by agreement prior to registration - HELD THAT: - The Tribunal accepted that the property sold was agricultural land and that the contractual arrangements (two registered agreements dated 27.09.2010) recorded sale at prevailing Jantri rates with part payment by account-payee cheque and provided for conversion to non-agricultural use at buyer's cost before completion. The Tribunal noted that the sale was executed as agricultural land and that the DVO reference adopting fair market value did not show that it took the contractual character into account. Applying the proviso to Section 50C (as inserted by Finance Act, 2016) and having regard to the agreement date and Jantri-based consideration, the Tribunal held that the higher stamp/DVO value could not be substituted for the contracted consideration. Consequently the addition under Section 50C, based on the adopted DVO/stamp value, did not sustain. [Paras 11]

Addition under Section 50C adopting the DVO/stamp valuation is set aside; grounds 2 to 5 are allowed in favour of the assessee.

Final Conclusion: Reopening of assessment under Section 147 upheld; however, on merits the addition under Section 50C based on the DVO/stamp valuation is disallowed because the land sold was agricultural and the sale was contracted at Jantri rates by agreement prior to registration; appeal is partly allowed.

Deduction under Section 80P(2)(d) - co-operative society - interest from co-operative bank - liberal construction of benevolent provision - scope of 80P exemption for receipts from member societies

Deduction under Section 80P(2)(d) - interest from co-operative bank - co-operative society - liberal construction of benevolent provision - Assessee entitled to deduction under Section 80P(2)(d) in respect of interest received from Mehsana Urban Co-operative Bank. - HELD THAT: - The Assessing Officer disallowed the claim on the ground that Urban Co-operative Banks are outside the ambit of co-operative societies. The Tribunal examined the factual position that the interest in question was received from Mehsana Urban Co-operative Bank, a bank registered and operating as a co-operative society, a fact not disputed by the Revenue. Applying the principle in Mavilayi Service Co-operative Bank Limited, the Tribunal treated Section 80P as a benevolent provision which must be read liberally and reasonably to promote co-operative credit. In consequence, earlier decisions relied upon by the Revenue (including Totgar's Co-operative Sales Society Limited and SBI vs. CIT) were held not to be applicable on the facts since the receipts were from a member co-operative society bank. For these reasons the disallowance by the Assessing Officer and confirmation by the CIT(A) were set aside and the deduction under Section 80P(2)(d) was allowed.

Addition disallowing the interest under Section 80P(2)(d) set aside and deduction allowed.

Final Conclusion: Appeal allowed: interest received from Mehsana Urban Co-operative Bank is deductible under Section 80P(2)(d) for AY 2018-19, having regard to the benevolent character of Section 80P and the factual finding that the payer bank is a co-operative society.

Section 153C jurisdiction - Incriminating material requirement for section 153C - Unabated assessment / finalized assessment and applicability of section 153C - Addition under section 68 for unexplained share application money - Need for seized books/documents to pertain to the "other person"

Section 153C jurisdiction - Incriminating material requirement for section 153C - Unabated assessment / finalized assessment and applicability of section 153C - Addition under section 68 for unexplained share application money - Need for seized books/documents to pertain to the "other person" - Validity of notice and assessment proceedings under section 153C in relation to additions u/s 68 of share application money received by the assessee when the assessment for that year had attained finality - HELD THAT: - The Tribunal examined whether the Assessing Officer could proceed under section 153C in respect of an "other person" (the assessee) for an assessment year whose assessment had attained finality (unabated assessment). It applied the settled principle that where an assessment is final, jurisdiction under section 153C to make additions can be exercised only if incriminating material or documents seized from the searched person pertain to or relate to the other person. The Tribunal analysed the assessment order and the seized material relied upon by the AO (including diaries, computer files and a file named "share valuation 1") and found that, although these materials disclosed a modus operandi for accommodation entries in the Poddar group, none of the seized documents or statements specifically referred to or pertained to the assessee company or its subscriber companies in a manner sufficient to constitute incriminating material against the assessee. Consequently, in the absence of any seized papers or information linking the incriminating material to the assessee, the prerequisite for invoking section 153C in respect of an unabated assessment was not satisfied. On that legal ground the Tribunal quashed the addition made u/s 68 without deciding the merits of genuineness of transactions. [Paras 12, 13, 14, 15, 16]

Addition of Rs.2.25 crores made under section 68 is quashed because no incriminating material seized during the search pertained to the assessee and the assessment for A.Y.2012-13 had attained finality; accordingly proceedings under section 153C could not sustain the addition.

Final Conclusion: Revenue's appeal dismissed; addition made under section 68 quashed as beyond the scope of section 153C in respect of an unabated assessment where no seized material pertained to the assessee.

Disallowance of expenditure indicated in the tax audit report under section 143(1) - deduction for employees' contributions held in trust and its non allowability where paid after statutory due date under section 36(1)(va) read with the concept of trust in section 2(24)(x) - corrective treatment where tax audit reporting error is rectified by auditor's certificate and supporting bank evidence

Corrective treatment where tax audit reporting error is rectified by auditor's certificate and supporting bank evidence - disallowance of expenditure indicated in the tax audit report under section 143(1) - Deletion of disallowance of the portion found to have been wrongly reported by auditors where payments were in fact made before the statutory due dates. - HELD THAT: - The Tribunal found on the record that the assessee produced the auditor's certificate admitting the reporting mistake together with challans and bank statements demonstrating that payments aggregating the said amount were made before the due dates under PF/ESI laws. Those documents were not disputed by the revenue. In such circumstances the disallowance made solely on the basis of the audit report could not be sustained; the CIT(A) erred in merely reproducing the provision permitting adjustment on account of amounts indicated in the audit report without examining documentary evidence that the payments were timely made. Applying the statutory scheme strictly and in favour of the assessee where the audit report was shown to be incorrect, the Tribunal deleted the disallowance in respect of the wrongly reported amount. [Paras 5]

Deletion of the disallowance to the extent of the amount shown to be paid before the due dates.

Deduction for employees' contributions held in trust and its non allowability where paid after statutory due date under section 36(1)(va) read with the concept of trust in section 2(24)(x) - disallowance of expenditure indicated in the tax audit report under section 143(1) - Upholding disallowance of employees' contributions paid after the due date under PF/ESI laws. - HELD THAT: - The Tribunal followed the coordinate-bench precedent which applied the Supreme Court's decisions holding that employees' contributions, being amounts held in trust, do not qualify for deduction if not deposited by the statutory due date. The Tribunal noted the relevant authorities and the interpretation of the phrase 'disallowance of expenditure ... indicated in the tax audit report' and observed that, for amounts paid after the statutory due date, the non obstante provision does not protect such payments for the purpose of deduction. Applying those legal principles to the facts, the Tribunal sustained the disallowance of the belatedly paid portion. [Paras 6]

Disallowance of the belatedly paid employees' contribution was upheld.

Final Conclusion: The appeal is partly allowed: the disallowance attributable to the auditors' reporting mistake is deleted, while the disallowance in respect of employees' contributions paid after the statutory due date is sustained.

Penalty under section 271(1)(c) - reopening of assessment and notice under section 148 - return filed in response to notice under section 148 treated as return under section 139 for penalty purposes - requirement of clear finding of willful concealment to sustain penalty - acceptance of return without variation and its effect on levy of penalty

Penalty under section 271(1)(c) - return filed in response to notice under section 148 treated as return under section 139 for penalty purposes - acceptance of return without variation and its effect on levy of penalty - requirement of clear finding of willful concealment to sustain penalty - Sustainability of penalty under section 271(1)(c) where assessee filed a return in response to notice under section 148 declaring the previously undisclosed income and the assessing officer accepted that return without variation. - HELD THAT: - The Tribunal recorded that the assessee, on receipt of notice under section 148, filed a return declaring the additional income from sale of shares which was accepted by the Assessing Officer without any variation. The Tribunal applied the ratio of earlier High Court decisions which hold that a return filed in response to a notice under re-opening provisions is to be treated as a return for the purpose of penalty and that penalty under section 271(1)(c) cannot be sustained in the absence of a clear finding that the assessee willfully concealed income or furnished inaccurate particulars. The Tribunal found that the Assessing Officer's conclusion rested solely on the fact of filing the return after initiation of reassessment without any independent or adverse finding that the declaration or explanation was not bona fide. In view of these principles and the accepted return, the imposition of penalty was not justified and had to be deleted. [Paras 7, 8, 9]

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

Final Conclusion: The Tribunal allowed the appeal, directed deletion of the penalty levied under section 271(1)(c) for AY 2012-13, and held that in the absence of a clear finding of willful concealment and where the return filed in response to the section 148 notice was accepted without variation, the penalty could not be sustained.

Penalty under section 270A for under-reporting in consequence of misreporting - Exception for bona fide explanation and disclosure under section 270A(6) - Misreporting categories under section 270A(9) clauses (a)-(f) - Allowability of expenses and disallowance linked to actual payment under section 43B

Penalty under section 270A for under-reporting in consequence of misreporting - Exception for bona fide explanation and disclosure under section 270A(6) - Misreporting categories under section 270A(9) clauses (a)-(f) - Allowability of expenses and disallowance linked to actual payment under section 43B - Whether penalty under section 270A(2) for under reporting in consequence of misreporting was leviable where the disallowance arose from VAT paid after the due date of filing and the assessee had given a bona fide explanation that the amount was not claimed and would be allowable in the subsequent year - HELD THAT: - The Tribunal examined the assessment and penalty records and found that the Assessing Officer made an addition of the VAT amount on the basis that payment was after the due date for filing the return under section 139(1). The assessing officer did not record any categorical finding that the assessee had claimed the VAT amount as a deduction in the computation of income for AY 2017 18. The assessee consistently maintained that the amount was not claimed in the relevant return and, if disallowed for 2017 18, would be allowable in the subsequent year when actually paid. The Tribunal observed that disallowance under section 43B operates only when the expenditure is claimed and that the exception in section 270A(6) (bona fide explanation and disclosure of material facts) applies where the assessee has furnished a bona fide explanation and disclosed the material facts. The Tribunal also noted that the alleged disallowance did not fall within the misreporting categories listed in section 270A(9)(a)-(f). On these findings the Tribunal concluded that the assessee had offered an explanation within the scope of section 270A(6) and that the AO had not demonstrated misreporting warranting penalty. Consequently, the penalty imposed was not sustainable. [Paras 9, 10]

Penalty under section 270A quashed and appeal allowed.

Final Conclusion: The Tribunal set aside the penalty imposed under section 270A for AY 2017 18, holding that the assessee had given a bona fide explanation, no misreporting within the statutory categories was established and the Assessing Officer had not found that the amount was claimed in the return; the penalty is quashed and the appeal is allowed.

Denial of deduction under section 80P for late filing of return - Prima facie adjustment under section 143(1)(a)(v) - Incorrect claim apparent from return under section 143(1)(a)(ii) - Return filed under section 139(4) - Applicability of Finance Act, 2021 amendment w.e.f. 1-4-2021

Denial of deduction under section 80P for late filing of return - Prima facie adjustment under section 143(1)(a)(v) - Incorrect claim apparent from return under section 143(1)(a)(ii) - Return filed under section 139(4) - Applicability of Finance Act, 2021 amendment w.e.f. 1-4-2021 - Deduction claimed under section 80P could not be disallowed by adjustment in the intimation under section 143(1) where the return was filed belatedly under section 139(4) for Assessment Year 2019-20 and the amendment to section 143(1)(a)(v) introduced by Finance Act, 2021 w.e.f. 1-4-2021 was not applicable to that year. - HELD THAT: - The Tribunal followed coordinate-bench decisions which held that the Finance Act, 2021 amendment to section 143(1)(a)(v) permitting denial of Chapter VI-A deductions on the ground of late filing operates only from 1-4-2021 and therefore did not apply to assessment year 2019-20. The Explanation to section 143(1)(a)(ii) enumerates circumstances in which a claim in the return is "incorrect" and does not include denial of a deduction solely because the return was not filed within the date under section 139(1) where a belated return was filed under section 139(4). In view of these legal positions and precedents, the intimation under section 143(1) making the adjustment to deny deduction under section 80P for AY 2019-20 was without jurisdictional basis and thus invalid. [Paras 6, 7]

Intimation issued under section 143(1) dated 11.01.2021 insofar as it disallowed deduction under section 80P for AY 2019-20 is quashed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that denial of deduction under section 80P by prima facie adjustment in the section 143(1) intimation was not permissible for AY 2019-20 as the Finance Act, 2021 amendment was not yet in force; the intimation dated 11.01.2021 is quashed.

Validity of reassessment in absence of notice under section 143(2) - Requirement of issuance of notice under section 143(2) prior to passing assessment under section 143(3)/147 - Non-applicability of section 292BB to cure non-issuance of notice in reassessment proceedings - Treatment of an earlier filed return as response to notice under section 148

Validity of reassessment in absence of notice under section 143(2) - Requirement of issuance of notice under section 143(2) prior to passing assessment under section 143(3)/147 - Non-applicability of section 292BB to cure non-issuance of notice in reassessment proceedings - Reassessment completed under sections 143(3)/147 without issuance of notice under section 143(2) is invalid. - HELD THAT: - The Tribunal records that the Assessing Officer's remand report itself accepted that no notice under section 143(2) was found on record and the assessment order does not mention issuance of such notice. Ld. CIT(A) relied on authoritative precedent of the Hon'ble Delhi High Court holding that failure to issue notice under section 143(2) prior to finalizing reassessment cannot be cured by invoking section 292BB. Applying that precedent to the facts, the Tribunal held the reassessment completed under sections 143(3)/147 to be not in accordance with law and therefore invalid. The Tribunal, respectfully following the cited authority and the CIT(A)'s findings, found no infirmity in the conclusion that the reassessment must be annulled for want of the mandatory notice. [Paras 8]

Reassessment proceedings for AY 2007-08 completed under sections 143(3)/147 are invalid and the assessment order is annulled.

Treatment of an earlier filed return as response to notice under section 148 - Requirement of prescribed form and verification for a return filed in response to notice - The contention that an earlier filed return should be treated as the return filed in response to notice under section 148 does not cure the absence of a subsequent mandatory notice under section 143(2) in reassessment. - HELD THAT: - Revenue argued that no fresh return was filed pursuant to notice under section 148 and that a letter from the assessee's counsel treating the original return as response to the notice should suffice. The Tribunal considered the assessee's submission and the earlier court precedent on identical factual matrix and concluded that such treatment does not obviate the statutory requirement of issuance of notice under section 143(2) before completing reassessment. Consequently, the Tribunal found Revenue's contention untenable and declined to disturb the CIT(A)'s reliance on precedent. [Paras 7, 8]

The claim that the earlier return was to be treated as the return filed in response to notice under section 148 does not validate reassessment completed without issuance of notice under section 143(2).

Final Conclusion: Following the decision of the ld. CIT(A) and binding precedent, the Tribunal upholds the conclusion that the reassessment for AY 2007-08 is invalid for want of issuance of notice under section 143(2); the Revenue's appeal is dismissed and the CIT(A) order is affirmed.

Revisionary jurisdiction under section 263 of the Income-tax Act, 1961 - Explanation 2 to section 263 - interest on non-performing assets - interest on perpetual bonds - book profit computation under section 115JB - assessing officer adopting one of the possible views

Revisionary jurisdiction under section 263 of the Income-tax Act, 1961 - Explanation 2 to section 263 - assessing officer adopting one of the possible views - interest on non-performing assets - interest on perpetual bonds - book profit computation under section 115JB - Validity of the Principal Commissioner of Income-tax's order under section 263 setting aside the assessments for the years under appeal on the grounds specified in the show cause notices. - HELD THAT: - The Tribunal examined the Principal CIT's conclusion that the assessment orders were "erroneous and prejudicial" for several items and that inadequate enquiry had been made under Explanation 2 to section 263. The Assessing Officer's order giving effect to the PCIT's direction made adjustments only in respect of interest on NPAs and interest on perpetual bonds; other alleged errors were not sustained by the AO. The Tribunal relied on the coordinate bench's decision which addressed the same issues and held that interest on NPAs (where interest had not been received and recovery prospects were negligible) could not be treated as accrued income, and that interest on perpetual bonds paid by a nationalised bank was allowable as business expenditure. Applying those conclusions, the Tribunal found no justification to sustain the PCIT's exercise of revisionary jurisdiction in these cases, and held that the PCIT had exceeded jurisdiction in reopening the assessments on the stated grounds. Consequently the revisionary orders were quashed for A.Y. 2016-17 and, being factually identical, for A.Y. 2017-18 as well. [Paras 8, 11, 12, 13]

The revisionary orders passed by the Principal Commissioner of Income-tax under section 263 are quashed; appeals allowed for A.Y. 2016-17 and A.Y. 2017-18.

Final Conclusion: The Tribunal quashed the orders passed under section 263 for A.Y. 2016-17 and A.Y. 2017-18, allowed the appeals, and held that the Principal CIT had no jurisdiction to sustain the revisionary directions in respect of the issues raised in the show cause notices.

Restoration to the file for fresh adjudication - last opportunity to substantiate evidence - levy of cost for non-compliance - direction to appear without adjournment - grounds allowed for statistical purposes

Restoration to the file for fresh adjudication - last opportunity to substantiate evidence - The appeal was restored to the file of the learned CIT(A)-NFAC with a direction to grant one final opportunity to the assessee to substantiate his case and for fresh adjudication of the disputed additions. - HELD THAT: - The Tribunal noted that the learned CIT(A) had passed an ex-parte order after the assessee repeatedly failed to appear before the first appellate authority. Having considered the totality of facts and the assessee's contention that non-appearance was due to unavoidable circumstances and that he can produce evidence if given one more opportunity, the Tribunal exercised its discretion in the interest of justice to remit the matter. The remand directs the learned CIT(A)-NFAC to afford the assessee one last opportunity to substantiate the case and to decide the issues on facts and law. The Tribunal thus did not adjudicate the substantive additions on merits but restored the matter for fresh consideration by the first appellate authority. [Paras 8]

Matter remanded to the learned CIT(A)-NFAC for fresh adjudication with one final opportunity to the assessee to substantiate his case.

Levy of cost for non-compliance - A cost was imposed on the assessee for continuous non-compliance with statutory notices and non-appearance before the first appellate authority. - HELD THAT: - Upon recording the assessee's repeated non-compliance with notices and failure to cooperate before the learned CIT(A)-NFAC, the Tribunal exercised its power to impose a monetary sanction as a consequence of the assessee's callous conduct. The Tribunal directed that a cost of Rs.10,000 be paid by the assessee to the Prime Minister's Relief Fund, treating the imposition as a disciplinary measure to reflect the assessee's non-cooperation while nonetheless allowing a further opportunity in the interests of justice. [Paras 8]

Cost of Rs.10,000 imposed on the assessee to be paid to the Prime Minister's Relief Fund.

Direction to appear without adjournment - The assessee was directed to appear before the learned CIT(A)-NFAC on the appointed date without seeking any adjournment, failing which the learned CIT(A)-NFAC may pass appropriate order as per law. - HELD THAT: - As part of the remand the Tribunal conditioned the grant of a final opportunity on the assessee's attendance: the assessee must appear on the fixed date and refrain from seeking adjournments. The Tribunal warned that non-appearance or further adjournments would permit the learned CIT(A)-NFAC to proceed to decide the matter as per law, thereby safeguarding the appellate process against further delay. [Paras 8]

Assessee directed to appear before the learned CIT(A)-NFAC on the appointed date without adjournment; failure to appear may invite appropriate order by the learned CIT(A)-NFAC.

Grounds allowed for statistical purposes - The grounds of appeal were allowed for statistical purposes. - HELD THAT: - Having remanded the substantive issues for fresh consideration and imposed consequential directions and costs, the Tribunal recorded that the grounds raised by the assessee are allowed for statistical purposes. This indicates that the appeal is not disposed on its merits by the Tribunal but is restored to enable adjudication by the first appellate authority in accordance with the directions given. [Paras 9]

Appeal allowed for statistical purposes.

Final Conclusion: The Tribunal restored the appeal to the file of the learned CIT(A)-NFAC for fresh adjudication of the disputed additions after granting the assessee one final opportunity to substantiate his case, imposed a cost of Rs.10,000 to be paid to the Prime Minister's Relief Fund for the assessee's non-compliance, directed the assessee to appear without seeking adjournment, and allowed the grounds of appeal for statistical purposes.

Section 263 revision of assessment - Explanation 2(a) to section 263 - Erroneous and prejudicial to the interest of revenue (twin conditions of s.263) - Section 68 cash credits - capital contribution by partners - onus and creditworthiness - Unsecured loans - identity, genuineness and creditworthiness of creditors - Verification and enquiries by Assessing Officer - application of mind - CASS selection and scrutiny

Section 68 cash credits - capital contribution by partners - onus and creditworthiness - Verification and enquiries by Assessing Officer - application of mind - Section 263 revision of assessment - Whether the revisional order under section 263 setting aside assessment to examine introduction of partners' capital was sustainable. - HELD THAT: - The Tribunal examined the factual record of assessment proceedings and the material placed before the Principal Commissioner of Income Tax and the Assessing Officer. The assessee had produced partners' audited balance sheets, cash books, ITRs, capital accounts, confirmations and the partners' assessment records showing that the partners were identifiable and their investments had been enquired into in their individual assessments. The Tribunal found that the Assessing Officer had applied his mind and had raised queries under section 142(1) and obtained replies and documents; the record therefore did not show that the assessment was completed without any enquiry. Absent cogent material showing that the AO's view was perverse or that no application of mind occurred, the revisional power under Explanation 2(a) to section 263 could not be invoked merely because the Commissioner preferred a different view. Reliance was placed on binding and persuasive precedents that where the AO has made enquiries and applied mind, difference of opinion does not warrant exercise of s.263. The Tribunal concluded that the PCIT had not established that the AO's order was erroneous and prejudicial to revenue in respect of capital introduction and that setting aside on that basis was unjustified.

Direction to re-examine introduction of partners' capital under section 263 quashed; assessment not held to be erroneous or prejudicial on this ground.

Unsecured loans - identity, genuineness and creditworthiness of creditors - Verification and enquiries by Assessing Officer - application of mind - Section 263 revision of assessment - Whether the revisional order under section 263 directing further inquiry into unsecured loans was sustainable. - HELD THAT: - The Tribunal reviewed the documentary material furnished to the AO and the PCIT in relation to unsecured loans - ledger accounts, confirmations, bank statements, lenders' ITRs, affidavits and other evidence showing receipt and repayment/standing of amounts. It held that the AO had raised specific queries (questionnaires) and the assessee had furnished detailed replies and supporting documents; consequently the AO's order could not be characterised as passed without any application of mind. The PCIT did not bring forward independent material to demonstrate that the AO's factual conclusions were erroneous or that requisite enquiries were not made. In these circumstances, and following authoritative decisions holding that s.263 cannot be invoked simply because the Commissioner prefers to go deeper where AO has applied mind and made enquiries, the Tribunal found the revisional direction to re-open examination of unsecured loans unsustainable.

Direction to the Assessing Officer to re-examine unsecured loans under section 263 quashed; assessment not held to be erroneous or prejudicial on this ground.

Final Conclusion: The appeal is allowed; the ITAT quashed the directions of the Principal Commissioner under section 263 insofar as they set aside the assessment for further verification of partners' capital introduction and unsecured loans, holding that the Assessing Officer had applied his mind and the revisional authority failed to show the assessment was erroneous and prejudicial to the revenue.

Revocation of licence - duty to advise clients and report non-compliance under Regulation 10(d) - failure of due diligence by customs broker - prohibition order under Regulation 15 - discretionary interference by appellate tribunal with administrative revocation - forfeiture of security deposit as penalty

Revocation of licence - discretionary interference by appellate tribunal with administrative revocation - Validity of the Principal Commissioner's order revoking the customs broker licence and whether the Tribunal was justified in setting aside that revocation. - HELD THAT: - The Tribunal examined the material facts and concluded that the Department's case did not establish the respondent's direct role in the alleged fake exports; export orders and manifest generation by Customs indicated that goods had crossed the border. On that factual basis the Tribunal exercised its discretion to set aside the revocation and substitute a lesser penalty. The High Court found that the Tribunal's examination of facts and exercise of discretion did not raise any substantial question of law and there was no justification to interfere with the Tribunal's order.

The revocation of the licence was not sustained; the Tribunal's setting aside of the revocation was upheld and the appeal by the revenue dismissed.

Duty to advise clients and report non-compliance under Regulation 10(d) - failure of due diligence by customs broker - Whether the respondent breached Regulation 10(d)/(e) by failing to advise clients or report non-compliance to the Deputy/Assistant Commissioner of Customs. - HELD THAT: - The Tribunal found that mere allegations of inadequate advice or lack of due diligence were not proved by the revenue. The factual record showed that export clearances were granted after departmental verification and the respondent was not proceeded against as a co-noticee under the Customs Act; the revenue did not place material demonstrating the respondent's active participation in the alleged fraudulent exports. Consequently, the statutory breach under Regulation 10(d)/(e) was not established on the material before the authorities.

Liability under Regulation 10(d)/(e) was not established and the allegation was rejected.

Forfeiture of security deposit as penalty - discretionary interference by appellate tribunal with administrative revocation - Whether the Tribunal's modification of relief to forfeiture of part of the security deposit was appropriate. - HELD THAT: - After finding the respondent's involvement not proved for revocation, the Tribunal exercised its remedial discretion and ordered forfeiture of a portion of the security deposit as a penalty. The High Court observed that this was an exercise of the Tribunal's adjudicatory discretion on the facts and did not amount to a substantial question of law warranting interference by the Court.

The Tribunal's modification of the penalty to forfeiture of a portion of the security deposit was sustained.

Final Conclusion: The High Court found no substantial question of law arising from the Tribunal's factual appraisal and discretionary exercise; the revenue's appeal was dismissed and the Tribunal's order setting aside the licence revocation and directing limited forfeiture of security was upheld.

Related persons under Customs Valuation Rules, 2007 - transaction value acceptance where relationship did not influence price - proof burden on authority to establish influence on declared price - long-term pricing under international off-take agreements - setting aside differential duty, interest and penalties - consequential dismissal of redemption fine where demand is set aside

Related persons under Customs Valuation Rules, 2007 - Rule 2(2) criteria - Whether the appellants (KRIBHCO/IFFCO), OMIFCO and the Government of India are 'related persons' within the meaning of Rule 2(2) of the Customs Valuation Rules, 2007 - HELD THAT: - The Tribunal examined the specific limbs of Rule 2(2) and the factual matrix. It found no evidence that the appellants and the Department of Fertilisers/GOI were officers or directors of one another's businesses, nor that a partnership agreement existed between the appellants and OMIFCO; shareholding alone does not convert a shareholder and a company into partners. The revenue also failed to identify a third person who directly or indirectly controlled both parties. On the undisputed facts, the conditions in sub-rules (i), (ii) and (vi) were not satisfied and the parties cannot be deemed related on those bases. The Tribunal therefore held that the department had not established a deemed relationship under the specified clauses of Rule 2(2). [Paras 11, 12, 13]

The appellants, OMIFCO and the GOI are not shown to be 'related persons' under Rule 2(2)(i), (ii) and (vi) of the CVR, 2007 on the facts of this case.

Transaction value acceptance where relationship did not influence price - proof burden on authority to establish influence on declared price - long-term pricing under international off-take agreements - Whether, even if a relationship is assumed, the declared transaction value is acceptable because the relationship did not influence the price - HELD THAT: - Applying Rule 3(3)(a) of the CVR, 2007, the Tribunal considered the contractual framework - MOUs, the Urea Off-Take Agreement and Ammonia Off-Take Agreement - which established long-term pricing (LTP) fixed for an initial 15-year period, incorporation of market price benchmarks, and governmental involvement including GOI acceptance reflected in a notification tied to UOTA prices. The Tribunal noted that contemporaneous market trends were accounted for while negotiating the LTP and that no evidence was produced demonstrating a flow-back of money or that the relationship influenced the purchase price. Reliance was placed on precedents holding that transaction value must be accepted where examination shows the relationship did not influence price. On these grounds the Tribunal concluded that the declared value was the true transaction value and not influenced by any relationship. [Paras 15, 16]

The declared transaction value is acceptable under Rule 3(3)(a) because the relationship, even if assumed, did not influence the price; the department failed to discharge the burden of proving influence on price.

Setting aside differential duty, interest and penalties - consequential dismissal of redemption fine where demand is set aside - Whether the differential duty, interest and penalties and the revenue's claim for confiscation/redemption fine can be sustained where transaction value is upheld - HELD THAT: - Since the Tribunal set aside the findings of undervaluation and mis-declaration for lack of evidence and upheld the transaction value, the consequential demand for differential duty, interest and penalties could not be sustained. The revenue's appeal seeking confiscation and imposition of a redemption fine was held to be consequential upon confirmation of the differential duty; having set aside the duty and penalties, the Tribunal found the revenue's grounds devoid of merit and dismissed that appeal as well. [Paras 16, 18, 19, 20]

The differential duty, interest and penalties are set aside; the revenue's appeal for confiscation/redemption fine is dismissed as consequentially without merit.

Final Conclusion: The Tribunal set aside the impugned orders and allowed the appellant's appeal, holding that the department failed to prove that the relationship influenced the import price and consequently quashing the demand of differential duty, interest and penalties; the revenue's appeal for confiscation/redemption fine was dismissed as consequentially unsustainable.

Presentation of export goods to the proper officer - Verification of client KYC and antecedents - Due diligence in information furnished to customs - Obligation not to withhold information from consignor or assessing officer - Responsibility for acts of authorised service provider and internal control - Forfeiture of security deposit and penalty under Courier Import Export Regulations

Presentation of export goods to the proper officer - Whether the authorised courier violated the obligation to present export consignments to the proper officer as required by Regulation 6(4) of CIER, 2010. - HELD THAT: - The Tribunal found no case of violation of any instructions or public notice issued by Customs and no allegation that the consignments were not presented properly or to the satisfaction of the proper officer. On the record there was x ray screening, reporting to Customs and subsequent examination; therefore the finding under Regulation 6(4) in the impugned order was set aside. [Paras 21]

Allegation under Regulation 6(4) is negatived and the finding set aside.

Verification of client KYC and antecedents - Whether the authorised courier failed to comply with KYC/verification obligations under Regulation 12(iv) of CIER, 2010 in respect of the three consignments. - HELD THAT: - The Tribunal examined the facts separately for consignments. For the consignment booked through the regular client (Navya Creation) the records and responses showed cooperation and no breach of the verification obligation. For the two consignments introduced through the authorised service provider (Allied Aviation) the Appellant had collected KYC documents (including Aadhaar number shown on shipping bill) and thus had produced sufficient documents; the shortcoming related to efforts to trace the consignor in the course of investigation but did not amount to a contravention of Regulation 12(iv). Accordingly the impugned findings on Regulation 12(iv) were set aside. [Paras 22, 23]

Findings of violation of Regulation 12(iv) are set aside.

Due diligence in information furnished to customs - Whether the authorised courier contravened Regulation 12(v) of CIER, 2010 by failing to exercise due diligence in conveying complete information to Customs. - HELD THAT: - The Tribunal found that although there was an interval before all details reached every investigating agency, the Appellant remained in contact with Customs and provided information; the apparent delay arose from involvement of multiple agencies (Customs House, DRI, SIIB) and not deliberate withholding by the Appellant. The finding under Regulation 12(v) was therefore reversed. [Paras 24]

Finding of contravention of Regulation 12(v) is set aside.

Obligation not to withhold information from consignor or assessing officer - Whether the authorised courier withheld information in breach of Regulations 12(vi) and 12(vii) of CIER, 2010. - HELD THAT: - On review of correspondence and conduct, there was no specific allegation that the Appellant failed to provide information when required or withheld information from the consignor or assessing officer. The Appellant had communicated with its client and, when summoned, its officer gave a detailed statement. The Tribunal thus found no contravention of Regulations 12(vi) and 12(vii) and set aside those findings. [Paras 25]

Findings of violations of Regulations 12(vi) and 12(vii) are set aside.

Responsibility for acts of authorised service provider and internal control - Whether there was lack of internal control or responsibility attributable to the Appellant in relation to its employee and authorised service provider. - HELD THAT: - The Tribunal accepted that there was lack of adequate control and administration concerning the authorised service provider and that the Appellant should have informed Customs about termination of their employee (M.S. Pareek) and provided his future contact details. The Tribunal, however, also found no evidence of complicity by the Appellant in the illegal activity discovered by Customs. [Paras 26]

A lapse in internal control and failure to inform Customs about termination was noted, but no complicity was found.

Forfeiture of security deposit and penalty under Courier Import Export Regulations - Whether the forfeiture of the security deposit and the penalty imposed under Regulation 14 should be upheld. - HELD THAT: - In view of the Tribunal's conclusions that most alleged statutory contraventions were not made out and there was no complicity by the Appellant, the order of forfeiture of the entire security deposit was set aside and restored to the Appellant. The Tribunal exercised its discretion to reduce the monetary penalty under Regulation 14 from the amount imposed in the impugned order to a reduced sum. [Paras 27]

Forfeiture of the security deposit set aside and deposit restored; penalty reduced.

Final Conclusion: The appeal is allowed in part: findings of contravention under Regulations 6(4), 12(iv), 12(v), 12(vi) and 12(vii) of CIER, 2010 are set aside; lapse in internal control and failure to inform Customs about termination of the employee is noted; the forfeiture of the security deposit is revoked and restored, and the penalty under Regulation 14 is reduced.

Enlargement on bail - recovery and penalty order as factor in bail - custodial detention duration - progress of prosecution evidence - conditions to be imposed by trial court - offence of gold smuggling

Enlargement on bail - recovery and penalty order as factor in bail - custodial detention duration - progress of prosecution evidence - conditions to be imposed by trial court - Whether the petitioners, accused of gold smuggling, should be enlarged on bail. - HELD THAT: - The Court noted that the petitioners have been in custody for nearly one year and that recoveries were effected and a penalty order has already been framed by the competent authority. It observed the prosecution's stated intention to examine 35 witnesses but that only three witnesses have deposed so far. Having taken these factors into account, the Court concluded that continued custodial detention was not justified and directed that the petitioners be released on bail. The Court left the imposition of appropriate conditions to the trial court, while granting liberty to the petitioners subject to such conditions.

Petitioners released on bail; trial court to impose appropriate conditions.

Final Conclusion: Special leave petitions allowed. Petitioners, accused of gold smuggling and in custody for nearly one year, are directed to be enlarged on bail; imposition of such conditions is left to the trial court. Pending applications disposed of.

Leave to prefer appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - Person aggrieved - Stakeholder Consultation Committee - Swiss Challenge auction and finality of sale - Section 53 waterfall distribution - Maintainability of appeal after completion of sale - Estoppel from raising objections not raised before the Adjudicating Authority

Leave to prefer appeal under Section 61(1) of the Insolvency and Bankruptcy Code, 2016 - Maintainability of appeal after completion of sale - Leave to file the appeal under Section 61(1) of the IBC was to be granted or refused. - HELD THAT: - The Tribunal examined the appellant's plea for leave to prefer the instant appeal against the Adjudicating Authority's order dated 19.01.2023. The appellant, though claiming status as a member of the Stakeholders Consultation Committee, had not been a party to the proceedings before the Adjudicating Authority and did not raise the present objections during the liquidation process. The Tribunal noted that the sale as a going concern had been sanctioned, the sale agreement executed and management handed over to the successful bidder, and sale proceeds distributed in accordance with Section 53. In these circumstances the request for leave was held to be an attempt to disrupt a completed liquidation process and sale which had attained finality, rendering the grant of leave inappropriate on the facts of this case. [Paras 22, 24, 25]

Leave to file the appeal is refused and IA No.128 of 2023 is dismissed.

Person aggrieved - Stakeholder Consultation Committee - Estoppel from raising objections not raised before the Adjudicating Authority - Whether the appellant qualified as a 'person aggrieved' or a stakeholder with a vested interest sufficient to maintain the appeal. - HELD THAT: - The Tribunal found that the appellant was not a party to IA(IBC)/1018/CHE/2022 and had not participated in the Swiss Challenge meeting or filed objections before the Adjudicating Authority when the liquidation commenced. The appellant's prior conduct-having voted against proposals and having pursued earlier unsuccessful remedies-meant he had neither shown a vested interest nor preserved objections that could now be raised by leave. The Tribunal therefore concluded that the appellant was not a stakeholder with sufficient legal interest to be treated as a 'person aggrieved' for the purposes of entertaining the present appeal. [Paras 22, 23, 25]

The appellant is not a 'person aggrieved' or a stakeholder with a vested interest to maintain the appeal; he is estopped from raising the present objections.

Swiss Challenge auction and finality of sale - Section 53 waterfall distribution - Maintainability of appeal after completion of sale - Whether the main appeal was entertainable after the sale was completed and sale proceeds distributed under Section 53. - HELD THAT: - The Tribunal recorded that the Swiss Challenge auction had been conducted, the successful bidder had executed the going-concern sale agreement and taken over management, and the sale consideration had been distributed to stakeholders in accordance with the statutory waterfall mechanism under Section 53. Given these events and the factual conclusion that the sale had achieved finality, the Tribunal held that the main appeal would be otiose and could not be entertained, leading to rejection of the appeal for want of a live controversy. [Paras 24, 25]

The main appeal is not entertained and is rejected as otiose following completion of the sale and distribution of proceeds.

Final Conclusion: IA No.128 of 2023 is dismissed; consequently the main Company Appeal (AT) (CH) (INS.) No.35 of 2023 is not entertained and is rejected as otiose; connected interlocutory applications are closed. No costs.

Leave to prefer an appeal under Section 61(1) of the I&B Code - Aggrieved person / locus to challenge liquidation sale - Swiss Challenge method of sale as a going concern - Sale as a going concern and private sale procedure under Section 60(5) read with Regulation 32A - Distribution of sale proceeds to stakeholders under Section 53 of the I&B Code - Finality of judicial record and inadmissibility of contradicting court's recitals

Aggrieved person / locus to challenge liquidation sale - Leave to prefer an appeal under Section 61(1) of the I&B Code - Whether the appellant was entitled to leave to file the appeal as an aggrieved person - HELD THAT: - The Tribunal found that the appellant was not a party to the original proceeding for the sale and had not taken steps to be impleaded or to object before the Adjudicating Authority. The record shows the appellant had submitted a proposal but did not pursue participation in the Swiss Challenge process and did not attend the meeting called to receive bids. In view of the absence of any substantial interest or stakeholder status in the liquidation, the appellant lacked the requisite locus to seek leave to prefer the appeal. Consequently the application for leave to file the appeal was refused. [Paras 22, 23, 24, 25, 31]

Leave to prefer the appeal was refused on the ground that the appellant is not an aggrieved person or stakeholder and has no locus to challenge the liquidation sale.

Swiss Challenge method of sale as a going concern - Sale as a going concern and private sale procedure under Section 60(5) read with Regulation 32A - Whether the Swiss Challenge process and the subsequent sale were vitiated so as to warrant intervention - HELD THAT: - The Tribunal noted that the Adjudicating Authority had permitted the Swiss Challenge and that bidders, including the appellant, were notified and invited to participate. The Swiss Challenge auction was conducted, a successful bidder emerged and payment was made and accepted. The new management took over operations and employees were retained. Given that the appellant did not participate in the bidding or seek timely correction before the Adjudicating Authority, and the sale had been acted upon and proceeds distributed, the Tribunal found no ground to set aside the process or the sale. [Paras 24, 27, 28, 30]

The Swiss Challenge process and the sale were not found to be vitiated; no interference with the sale was warranted.

Distribution of sale proceeds to stakeholders under Section 53 of the I&B Code - Finality of judicial record and inadmissibility of contradicting court's recitals - Whether allegations of manipulation, collusion or incorrect recording of court proceedings required reopening the matter - HELD THAT: - The Tribunal referred to the principle that statements of what transpired in court, as recorded in the judgment, are conclusive and cannot be contradicted by affidavit after the fact; any correction must have been sought from the same forum while the matter was fresh. The appellant's allegations of collusion and manipulation were unsubstantiated and were not pursued before the Adjudicating Authority at the relevant time. Moreover, the sale consideration had been received in full and disbursed to stakeholders as per the Code. On these bases the Tribunal rejected the contention that the record should be reopened. [Paras 26, 30, 31]

Allegations of collusion or manipulation were rejected; no reopening of the recorded proceedings was ordered and distribution of sale proceeds was treated as complete.

Leave to prefer an appeal under Section 61(1) of the I&B Code - Consequentially, whether the main appeal should be entertained - HELD THAT: - Since leave to file the appeal was not granted, the Tribunal declined to entertain the main appeal and rejected it accordingly. Connected interim applications were closed. [Paras 31]

The main appeal was not entertained and is rejected because leave to file the appeal was refused.

Final Conclusion: The application for leave to prefer the appeal was dismissed for want of locus and absence of substantial interest; the Swiss Challenge sale and subsequent takeover were not set aside, allegations of collusion were rejected, sale proceeds were treated as distributed to stakeholders, and the main appeal was consequently not entertained.

Condonation of delay - limitation period - power to condone under Section 61(2) proviso - Section 14 of the Limitation Act - bonafide litigious activity

Condonation of delay - power to condone under Section 61(2) proviso - limitation period - Section 14 of the Limitation Act - bonafide litigious activity - Application for condonation of 55 days' delay in filing the appeal - HELD THAT: - The Tribunal considered the appellant's plea to condone 55 days' delay in filing the appeal against the order dated 07.09.2022. The Tribunal noted that its power to condone delay under the proviso to Section 61(2) is limited to 15 days. The appellant did not invoke Section 14 of the Limitation Act and did not seek exclusion of any period under that provision; instead, the appellant relied on explanations that the impugned order was prepared by the registry on 16.11.2022, that the appellant received the order on 24.11.2022, and that health problems prevented timely submission of documents. The Tribunal held that these grounds did not furnish a satisfactory cause to justify condoning a delay beyond the 15-day limit. The earlier Chennai Bench decision cited by the appellant, which excluded a period on account of bonafide litigious activity under Section 14, was found inapplicable on the facts of this case. For these reasons the application for condonation of delay was rejected and the appeal not admitted. [Paras 6]

Application for condonation of delay of 55 days dismissed; memo of appeal rejected.

Final Conclusion: The application for condonation of 55 days' delay was dismissed as the appellant failed to demonstrate a satisfactory cause to extend the Tribunal's limited 15 day condonation power; the appeal was consequently rejected.

Management or business consultant service - consulting engineer service - includability of TDS in the value of taxable services - revenue neutrality and entitlement to CENVAT credit - invocation of extended period of limitation - exemption under Notification No. 18/2002-S.T. on transfer of technology

Management or business consultant service - consulting engineer service - exemption under Notification No. 18/2002-S.T. on transfer of technology - Classification of the services received from associated enterprises - HELD THAT: - The Tribunal examined the statutory definitions and administrative clarifications, including the Trade Notice describing the wide ambit of "consulting engineer" and the Board's Circular interpreting "management or business consultant". The definition of "consulting engineer" requires a service to be inextricably linked to one or more disciplines of engineering; juridical persons rendering such services must nonetheless be connected to engineering. The services supplied under the agreements extended beyond engineering activities to procurement, supplier selection, MIS, trading, finance, advertising, legal and insurance functions, which cannot be treated as engineering services. Conversely, the Board's interpretation of "management" and the residuary limbs in the definition of "management or business consultant" encompass services connected with running the affairs of an organization, including financial management, marketing and other similar areas. Applying these tests to the contractual terms and the scope of services, the Tribunal agreed with the Adjudicating Authority that the services fall within the ambit of "management or business consultant" and not "consulting engineer". [Paras 17, 18, 19, 20]

Services received were correctly classified as "management or business consultant" services.

Includability of TDS in the value of taxable services - Tax deducted at source - Whether the TDS amount remitted by the appellant forms part of the taxable value of services - HELD THAT: - The Tribunal analysed Section 195 of the Income-tax Act and the contractual practice of 'grossing up' TDS. It held that TDS is a tax obligation on sums constituting income and does not, by its nature, become consideration for the service. The mere contractual allocation of the incidence of TDS to the payer does not convert the tax into service consideration; the TDS depends on statutory rates and is not an element of negotiated consideration. Where the resident party bears the TDS to ensure compliance, that payment is not receipt by the non-resident as consideration. On these legal foundations and the authorities relied upon by the appellant, the Tribunal concluded that the appellant was correct in not including the TDS amount in the value of taxable services. [Paras 24, 25]

Appellant was correct in not including the TDS amount in the taxable value of services.

Revenue neutrality and entitlement to CENVAT credit - CENVAT Credit Rules - Whether the exercise was revenue neutral and whether the appellant is entitled to CENVAT credit - HELD THAT: - The Tribunal noted that revenue neutrality is a question of fact to be established on the record and observed that availability of an alternate credit mechanism does not obviate adjudication. Having regard to precedent that the issue must be determined on facts (including the larger Bench view in Jay Yuhshin and the Apex Court's observation in Star Industries), the Tribunal declined to decide entitlement to credit on appeal. It remitted the question to the Adjudicating Authority for factual examination of whether the appellant is eligible to avail CENVAT credit under the Rules, and whether the explanation to Rule 3 or other provisions affects such entitlement. [Paras 21, 22, 25]

Matter remitted to the Adjudicating Authority to examine entitlement to CENVAT credit and the question of revenue neutrality.

Invocation of extended period of limitation - Whether invocation of the extended period of limitation by the Revenue was justified - HELD THAT: - The Tribunal considered the nature of the services and the evident interpretative difficulty, noting that the Board itself had sought expert opinion (IIM Ahmedabad) on the scope of management consultancy. Given that some activities could arguably be classified as consulting engineer services and that interpretation was involved, the Tribunal found the Revenue had not furnished adequate reasons to invoke the extended period. Consequently, the Tribunal allowed the ground insofar as limitation was concerned and held that tax should be levied only for the normal period; it remitted to the Adjudicating Authority the task of ascertaining tax liability for the normal period. [Paras 23, 25]

Invocation of the extended period was not justified; appeals partly allowed on limitation and tax to be determined for the normal period (remitted).

Final Conclusion: The Tribunal upheld classification of the services as "management or business consultant" services, held that TDS paid by the appellant need not be included in the taxable value, remitted the question of entitlement to CENVAT credit (revenue neutrality) to the Adjudicating Authority for factual determination, and disallowed invocation of the extended period of limitation, directing assessment for the normal period.

Cenvat credit on inputs and input services used in construction of immovable property - eligibility of input credit where output service (renting of immovable property) is taxable - reversal of proportionate credit on sale of constructed units - disclosure in ST-3 returns and invocability of extended period - pari materia treatment of 'inputs' and 'input services' for service providers

Cenvat credit on inputs and input services used in construction of immovable property - eligibility of input credit where output service (renting of immovable property) is taxable - pari materia treatment of 'inputs' and 'input services' for service providers - Cenvat credit availed on inputs/input services used in construction is admissible where the constructed portion is leased and service tax is paid on leasing - HELD THAT: - The Tribunal found that the appellant had paid Service Tax on the leasing of constructed premises and had reversed credit only in respect of portions sold. The authorities and courts cited (Tribunals and High Courts) have consistently held that inputs and input services used in construction are eligible for credit where such inputs/services are used to provide a taxable output service (renting of immovable property). The decision applies the principle that for a service provider credit is available when inputs/input services are used for providing the output service, and that construction service is an eligible input service for renting of immovable property because without construction the renting service could not be provided. On these grounds the appeal was allowed on merits and the confirmed demand on this score set aside. [Paras 6, 7, 8, 12]

The Cenvat credit claimed on inputs/input services used for construction for the leased portion is admissible and the demand on merits is set aside.

Disclosure in ST-3 returns and invocability of extended period - reversal of proportionate credit on sale of constructed units - Demand based on extended period is not invocable where details of credit taken and reversals were regularly disclosed in ST-3 returns and accompanying letters - HELD THAT: - The Tribunal examined the factual matrix that the appellant regularly filed ST-3 returns and submitted letters to the Range/Division showing credits availed and reversals made on account of sale of constructed area, and that reversals already made were not disputed. Relying on earlier Tribunal precedent (Final Order No. 75903/2021) and the absence of any finding of suppression by the Department, the Tribunal held that the extended period for issuing demand could not be invoked. Consequently the demand raised for the extended period was set aside as time-barred. [Paras 6, 13]

The demand under the extended period is unsustainable and is set aside because the credits and reversals were duly disclosed in returns and correspondence.

Final Conclusion: The appeal is allowed: (a) on merits the Cenvat credit on inputs/input services used in construction for the leased portion is held admissible where Service Tax was paid on leasing; and (b) the demand raised invoking the extended period is set aside because the credit availed and reversals were regularly disclosed in ST-3 returns and accompanying letters.

Exemption under Central Excise Notification No.108/95 CE - withdrawal of exemption in public interest - prospective effect of rescinding a notification - change in law clause in contract and contractual allocation of liability - reconciliation and refund/adjustment of duties collected

Prospective effect of rescinding a notification - exemption under Central Excise Notification No.108/95 CE - Validity of recovery of excise duty for supplies made prior to 01.07.2017 consequent to Notification dated 30.06.2017. - HELD THAT: - The Court found that the impugned Notification dated 30.06.2017 came into force with effect from 15th July, 2017 (operationally treated as from 01.07.2017 for present purposes) and that withdrawal of the earlier exemption cannot be given retrospective effect to the period prior to 01.07.2017. The audit recovery made in relation to supplies for the period March 2016 to June 2017 was held to be contrary to law and refundable. The Court relied upon the temporal operation of the later notification and the revenue's concession that reversal would operate only from its date of coming into effect. [Paras 11, 12, 13]

Recovery of duty for the period prior to 01.07.2017 (viz. March 2016 to June 2017) is bad in law and shall be refunded to BPCL forthwith after reconciliation.

Withdrawal of exemption in public interest - exemption under Central Excise Notification No.108/95 CE - Challenge to validity of Notification dated 30.06.2017 withdrawing earlier exemption. - HELD THAT: - The Court rejected the petitioner's challenge to the withdrawal. It distinguished the petitioner's reliance on State of Uttar Pradesh v. Birla Corporation Ltd. on the ground that, in Birla, rescission had been attempted prior to grant of rebate; whereas here the exemption had operated since 1995 and was withdrawn in 2017. Relying on authorities that establish the executive's discretion to grant, continue or withdraw fiscal exemptions in public interest, the Court held that a statement of public interest in the notification suffices and no further particularisation of the public interest was required for sustaining the withdrawal. The Court noted absence of any allegation of mala fides or bias in the affidavit filed by the petitioner. [Paras 22, 23, 24, 25, 26]

Challenge to Notification dated 30.06.2017 is rejected; withdrawal of exemption is validly exercisable in public interest.

Change in law clause in contract and contractual allocation of liability - Obligation of parties under the contract's Change in Law provision (Article 19.17) and the process to determine allocation of resultant liability. - HELD THAT: - The Court recognised that the contract expressly contemplates a Change in Law and prescribes a procedure for notice and determination of additions or reductions to the contract price by the Authority's Engineer. The Court declined to interpret or apportion contractual liability itself, observing that such determination is contractual in nature and is more appropriately addressed by the parties. Consequently the petitioner was permitted to make a representation to TNRSP regarding interpretation of the exemption notification and allocation of resultant liability; TNRSP was directed to act on any representation received within four weeks by calling the petitioner to appear and passing orders. [Paras 27, 28, 29, 30, 31]

Petitioner may represent to TNRSP on interpretation and allocation of liability under Article 19.17; TNRSP shall consider the representation, hear the petitioner and pass orders thereon.

Reconciliation and refund/adjustment of duties collected - Mechanism for reconciliation between BPCL, petitioner and Central Excise Department and treatment of amounts already collected or paid. - HELD THAT: - The Court directed BPCL to appear before the concerned Central Excise Officer for reconciliation on a specified date and ordered that, upon reconciliation, amounts found to have been improperly recovered for the pre 01.07.2017 period shall be refunded to BPCL within two weeks of that date. The Central Excise Department was directed to determine refund or additional demand taking into account amounts collected from BPCL and amounts paid by the petitioner to BPCL, and to raise demands accordingly. As to sums already held by BPCL, the Court left them in BPCL's possession until a final demand is raised by the Customs/Excise Authorities and recorded that the petitioner had paid BPCL voluntarily without invocation of bank guarantee. [Paras 32, 33, 34, 35, 36]

BPCL to attend reconciliation; refund to BPCL for pre 01.07.2017 recoveries after reconciliation; Central Excise to determine net refund/additional demand accounting for amounts collected and paid; moneys currently with BPCL to remain with it pending final demand.

Final Conclusion: The writ petitions are disposed: the challenge to the withdrawal Notification dated 30.06.2017 is dismissed; recoveries made for the period prior to 01.07.2017 (March 2016 to June 2017) are unlawful and shall be refunded to BPCL after reconciliation; the petitioner is entitled to seek contractual relief under Article 19.17 from TNRSP and TNRSP must consider any representation within the directed timeframe; the Central Excise Department shall determine refund/additional demand after accounting for amounts collected and paid. No costs.

Refund of excess excise/customs duty on de-bonding of EOU - applicability of concessional rate under Notification No. 23/2003-C.E. (Sl. No. 2) - treatment of semi-finished goods/work-in-progress for excise liability - proviso to Section 3(1) of the Central Excise Act, 1944 - de-bonding under paragraph 6.18 of the Foreign Trade Policy versus DTA clearance under paragraph 6.8

Refund of excess excise/customs duty on de-bonding of EOU - proviso to Section 3(1) of the Central Excise Act, 1944 - Whether the appellants had paid excess duty on de-bonding and are entitled to refund. - HELD THAT: - The Tribunal considered the appellants' claim that they paid duty under Section 3(1) without availing the concessional treatment available to EOUs and therefore paid excess duty. Having examined the statutory proviso to Section 3(1), the relevant notifications and the facts that the units were EOUs and sought final exit (de-bonding), the Tribunal concluded that the rejection of the refund claim by the lower authorities lacked legal and factual basis. The Tribunal relied on precedent holding that where goods are not cleared to DTA and the unit continues to be treated as EOU till final exit, charging excise as if DTA clearance had occurred is unsustainable. Applying that principle to the facts, the Tribunal found that excess payment was made and that appellants were entitled to relief. [Paras 7, 8, 14, 16]

The rejection of the refund claim is set aside and the appeals are allowed; appellants entitled to consequential reliefs.

Applicability of concessional rate under Notification No. 23/2003-C.E. (Sl. No. 2) - de-bonding under paragraph 6.18 of the Foreign Trade Policy versus DTA clearance under paragraph 6.8 - Whether Sl. No. 2 of Notification No. 23/2003-C.E. (concessional rate) applies to goods on de-bonding. - HELD THAT: - The Tribunal analysed the amendment to the proviso of Section 3(1) (replacement of 'allowed to be sold in India' by 'brought to any other place in India') and the purpose of Notification No. 23/2003-C.E. in distinguishing bona fide EOUs from defaulters. Noting authorities and precedents which treat units as EOUs until final exit and which permit concessional treatment where goods have not been cleared to DTA, the Tribunal held that de-bonding (final exit) falls within the scope intended to be covered by the proviso and that the concessional rate under Sl. No. 2 is applicable in the circumstances of final exit rather than treating the clearance as ordinary DTA clearance under para 6.8. The Department's contention that de-bonding must be treated as DTA clearance for levy purposes was rejected. [Paras 8, 9, 14]

Sl. No. 2 of Notification No. 23/2003-C.E. is applicable to the facts of de-bonding and the appellants were entitled to the concessional treatment.

Treatment of semi-finished goods/work-in-progress for excise liability - precedent on non-levy of duty on goods not removed to DTA - Whether excise duty can be sustained on semi-finished goods/work-in-progress lying with the EOU at the time of de-bonding. - HELD THAT: - Relying on earlier Tribunal decisions, the Court observed that semi-finished goods and work-in-progress which have not completed manufacture and which were not removed into DTA at the time of de-bonding do not attract excise duty as if cleared to DTA. The Tribunal referred to authorities holding that an EOU continues to be treated as such until final exit and therefore goods exported or not removed to DTA during that period cannot be subjected to the differential excise demand. Applying these principles, the Tribunal found the demand and refusal of refund in respect of such goods unsustainable. [Paras 10, 11, 12, 14]

Duty could not be sustained on semi-finished/work-in-progress goods not removed to DTA; appellants entitled to relief.

Final Conclusion: The Tribunal set aside the impugned orders, allowed the appeals and directed grant of consequential reliefs, holding that the appellants had paid excess duty on de-bonding, that the concessional rate under Sl. No. 2 of Notification No. 23/2003-C.E. was applicable to the facts, and that duty could not be sustained on semi-finished/work-in-progress goods not removed to DTA.

Effectiveness of subordinate legislation upon publication in the Official Gazette - Section 5A(5) of the Central Excise Act - publication and offer for sale as preconditions to enforceability - non-enforceability of a notification by mere website upload - entitlement to refund where duty was paid prior to Gazette publication of an enhancing notification - precedential effect of the Full Bench decision in M/s. G.S. Chatha Rice Mills on delegated legislation and retrospective effect

Section 5A(5) of the Central Excise Act - publication and offer for sale as preconditions to enforceability - effectiveness of subordinate legislation upon publication in the Official Gazette - non-enforceability of a notification by mere website upload - entitlement to refund where duty was paid prior to Gazette publication of an enhancing notification - Whether the notifications enhancing excise duty were enforceable from their date of issue or from the date and time of their publication in the Official Gazette, and whether appellant was entitled to refund of differential duty paid prior to Gazette publication. - HELD THAT: - The Tribunal examined Section 5A(5) and relevant judicial precedent and concluded that issuance for publication and completion of publication in the Official Gazette are preconditions to a notification's enforceability; mere uploading on the Department's website does not render a notification enforceable. Although the appellant became aware of the notifications late on the day of issue and had voluntarily paid differential duty with a protest, RTI evidence established that formal Gazette publication occurred on the next calendar day. The Tribunal also considered the Full Bench Supreme Court decision in M/s. G.S. Chatha Rice Mills and related authorities which clarified that delegated subordinate legislation takes effect only upon the recognised mode of publication, and that such principles preclude retrospective enforcement from the date of issue where Gazette publication occurs later. In view of these legal principles and the documentary RTI evidence (accepted as a public document), the Tribunal modified the appellate order to hold that the notifications were effective from their Gazette publication dates and that the appellant was therefore entitled to refund of the differential duty paid with consequential relief. [Paras 5, 6]

Notifications held effective from their Official Gazette publication dates (13.11.2014 and 03.12.2014); appeals allowed and appellant entitled to refund of differential duty with consequential relief.

Final Conclusion: The Tribunal allowed the appeals, holding that the impugned notifications became effective only on publication in the Official Gazette and directing refund of differential duty paid prior to those publication dates, with consequential relief.

Inter unit transfer for captive consumption - valuation for determining cost of raw material - inclusion of IDSC/ICNC debit notes in cost of raw materials - notional loading under Rule 8 and its exclusion from cost of production - treatment of unabsorbed overheads due to idle capacity in cost of production and closing stock

Inclusion of IDSC/ICNC debit notes in cost of raw materials - cost of raw materials of paper and paper board - IDSC/ICNC debit notes raised by the Bhadrachalam unit do not form part of the cost of paper and paper board received by the Chennai unit. - HELD THAT: - The Tribunal had earlier decided identical issues for a prior period in Final Order No. 40094/2023 and Interim Order No. 37/2014, holding in favour of the assessee on the question whether IDSC/ICNC debit notes constitute a component of the cost of raw materials. The CESTAT in the present appeals applied those precedents and the reasoning recorded by the Tribunal to the demands for the subsequent periods, noting that the earlier Final Order has not been varied or set aside. On that basis the demand premised on inclusion of such debit notes in cost was held unsustainable and set aside. [Paras 6, 8, 9, 10]

Answered in favour of the appellant; the debit notes are not part of the cost of raw material and the related demand is set aside.

Inter unit transfer for captive consumption - valuation for determining cost of raw material - notional loading under Rule 8 - For inter unit transfers to a consuming unit, the cost of raw material is the actual cost of production (100%) and not the loaded value (115%/110%); the notional loading under Rule 8 is excluded from the consuming unit's cost of raw material. - HELD THAT: - The Larger Bench of the Tribunal, in Interim Order No. 18/2016, concluded that for inter unit transfers the actual cost of production alone is to be treated as the cost of raw material in the hands of the receiving unit and that the percentage loading mandated by Rule 8 for remittance of duty by the transferring unit cannot be included in that cost. The CESTAT applied this Larger Bench dictum to the present appeals, observing that the Larger Bench affirmed the Chennai Bench approach and overruled the contrary view. Consequently, the differential valuation demand based on importing the notional loading into the consuming unit's cost was held unsustainable. [Paras 8, 9, 10]

Answered in favour of the appellant; the loaded value (115%/110%) is not to be included in the receiving unit's cost of raw material.

Treatment of unabsorbed overheads due to idle capacity in cost of production and closing stock - inclusion of unabsorbed overheads in cost of production - Unabsorbed overheads attributable to idle capacity are not to be loaded into the cost of production and closing stock of the Chennai unit for the purposes challenged. - HELD THAT: - The Tribunal had already decided this issue in the assessee's favour for an earlier period (Interim Order No. 37/2014 read into Final Order No. 40094/2023). The present Bench found that the prior decision on identical facts in favour of the appellant stands unmodified and applies to the subsequent periods under appeal. Accordingly the demand premised on loading unabsorbed overheads into cost of production and closing stock was disallowed. [Paras 6, 8, 9, 10]

Answered in favour of the appellant; unabsorbed overheads due to idle capacity shall not be included in cost of production or closing stock for the purposes contested.

Final Conclusion: The impugned order is set aside and the appeals are allowed: Issues concerning inclusion of IDSC/ICNC debit notes, inclusion of notional loading (115%/110%) in inter unit transfers, and loading of unabsorbed overheads were answered in favour of the appellant for the periods 2004-05, 2005-06 and 2006-07, with consequential relief as per law.

Levy of interest under Section 7(5) of the Odisha Entry Tax Act, 1999 - self-assessment and tax payable versus tax due under Section 7 - 'sufficient cause' as a defence to levy of interest - scrutiny of returns and issue of notice in Form E-24 under Rule 10(6)(b) - effect of interim orders and deposits treated as 'deposit' not 'tax' - judgment in rem - effect of the Nine-Judge Bench in Jindal Stainless Ltd. - equitable compensation/interest in exercise of writ jurisdiction under Article 226

Scrutiny of returns and issue of notice in Form E-24 under Rule 10(6)(b) - self-assessment and tax payable versus tax due under Section 7 - Toyo Engineering procedural requirements for invoking Rule 10 - Validity of notices in Form E-24 (Rule 10(6)(b)) issued after scrutiny under Section 7(10)/(11) where no scrutiny had been undertaken earlier - HELD THAT: - The Court found that Rule 10 and sub-sections (10) and (11) of Section 7 require that each return be subjected to scrutiny and, if mistakes are detected, notice must follow the procedure prescribed. In the present matters the Assessing Authority had not carried out the required scrutiny during the period when interim orders (including the Supreme Court's I.A. orders) were operative and proceeded to issue Form E-24 notices only after the position of law was crystallized. Applying the Court's earlier decision in Toyo Engineering, the impugned Form E-24 notices issued in Annexure-9 series were held not to conform with the statutory procedure and therefore were quashed. The revisional order upholding those notices was also set aside. Given the lapse of time and the factual posture, the Court directed the petitioners to determine their balance liability by reference to their self-assessed returns rather than remitting for fresh routine scrutiny which would be unproductive.

Notices in Form E-24 under Rule 10(6)(b) quashed; revisional order set aside; petitioners to determine balance entry tax from their self-assessed returns.

Levy of interest under Section 7(5) of the Odisha Entry Tax Act, 1999 - 'sufficient cause' as a defence to levy of interest - effect of interim orders and deposits treated as 'deposit' not 'tax' - equitable compensation/interest in exercise of writ jurisdiction under Article 226 - Whether interest under Section 7(5) is leviable on the balance entry tax for the period 2010-2017 where taxpayers had made deposits in compliance with interim orders treating payments as 'deposits' not 'tax' - HELD THAT: - The Court analysed the scheme of Section 7 read with Rule 10 and held that Section 7(5) attracts interest only where a dealer fails to pay the amount of tax due as per the return 'without sufficient cause'. In the factual matrix-interim orders of the Supreme Court (including the 03.02.2010 order treating deposits as deposits, not tax) and this Court's orders-there was a bona fide and reasonable cause for the petitioners to withhold portions of the tax liability relating to turnovers falling within paragraph 30 of Reliance Industries Ltd. The authorities had not undertaken scrutiny under Section 7(10) at the relevant time and the deposits were made in accordance with the interlocutory regime; accordingly the short-payment during 2010-2017 was held to be with 'sufficient cause' and s.7(5) interest is not chargeable for that period. At the same time the Court recognised the State's deprivation of use of the withheld amounts and, exercising equitable jurisdiction under Article 226 and applying precedents on compensation for conditional deposits, directed payment of the unpaid balance (as self-assessed) with interest only from 28.03.2017; further, to strike a balance the Court directed simple interest at 9% per annum on the unpaid portion for the period during which the interim regime operated, and permitted installment applications to the Commissioner.

Interest under Section 7(5) is not leviable for the period 2010-2017 insofar as the short-payment was due to interim orders and was with 'sufficient cause'; petitioners must pay the unpaid balance as self-assessed and the Court directs simple interest at 9% p.a. for the period the State was deprived (i.e., covering the interim regime), interest on delay to be calculated after 28.03.2017; no penalty to be imposed for such turnovers.

Final Conclusion: The writ petitions are allowed in part: Form E-24 notices issued under Rule 10(6)(b) and the revisional order upholding them are quashed for failure to follow the statutory scrutiny procedure; the petitioners may determine and pay the balance self-assessed entry tax for the periods in dispute (including amounts withheld under interim orders) within sixty days or seek instalments from the Commissioner; interest under Section 7(5) is not chargeable for the period 2010-2017 insofar as non-payment was caused by the interim judicial regime and thus constituted 'sufficient cause', but the petitioners must compensate the State by payment of the unpaid balance with simple interest at 9% per annum for the period the State was deprived; no penalty shall be imposed in respect of turnovers covered by paragraph 30 of Reliance Industries Ltd.

Jurisdictional condition of pendency of proceedings - exercise of powers under Section 34(8A) of the Gujarat Value Added Tax Act, 2003 - issue-based/transactional audit assessment - time-bar/limitation in audit assessment

Jurisdictional condition of pendency of proceedings - exercise of powers under Section 34(8A) of the Gujarat Value Added Tax Act, 2003 - issue-based/transactional audit assessment - Validity of initiation and completion of assessment under Section 34(8A) when no proceedings under the Act were pending - HELD THAT: - The Court held that Sub section (8A) of Section 34 is expressly prefaced by the words 'during the course of any proceedings under this Act', making pendency of proceedings a condition precedent to the invocation of the sub section. The provision contemplates an issue based or transaction related assessment that may be initiated by the prescribed authority only if it is satisfied of evasion or incorrect disclosure 'during the course of any proceedings'. The Court applied the reasoning in Dhanani Import Export Private Limited and Another Vs. State of Gujarat and Another to observe that mere internal scrutiny or examination of files does not amount to pendency of proceedings envisaged by the provision. Given that no proceedings under the Act were pending in the present case, the condition precedent for exercising powers under Section 34(8A) was not fulfilled, rendering the notice and the subsequent assessment order void for want of jurisdiction. The Court noted the related contention regarding limitation but decided the matter on the jurisdictional defect of non pendency itself. [Paras 3, 5, 6]

The notice dated 1.9.2022 and the order dated 16.9.2022 issued under Section 34(8A) are without jurisdiction and are set aside.

Final Conclusion: The petition under Article 226 is allowed; the impugned notice and consequential assessment order issued under Section 34(8A) of the Gujarat Value Added Tax Act, 2003 are quashed for want of the required pendency of proceedings and the rule is made absolute.

Principles of natural justice - Personal hearing - Quashing and remand for fresh consideration - Direction to decide afresh within a time-frame

Principles of natural justice - Personal hearing - Impugned assessment orders were passed in breach of the principles of natural justice by failing to afford the petitioner the personal hearing as recorded in the notice and assessment orders. - HELD THAT: - The Court found that the notice issued called upon the petitioner to appear for personal hearing on the date specified in the respondent's notice, and the petitioner appeared and sought further time. The impugned assessment orders, however, recorded a different earlier date of personal hearing and no fresh notice was issued to the petitioner informing of any such adjourned or changed date. Because the respondent did not afford the petitioner the opportunity of a personal hearing in accordance with the notice and did not issue a fresh notice, the principles of natural justice were held to have been violated. The Court therefore concluded that the assessment orders could not stand and required fresh consideration.

Impugned assessment orders quashed for violation of principles of natural justice and matters remanded for fresh consideration.

Quashing and remand for fresh consideration - Direction to decide afresh within a time-frame - Remedy and procedural directions to be followed on remand. - HELD THAT: - Having quashed the orders, the Court fixed a specific date for personal hearing before the respondent and directed that after affording that hearing and adhering to principles of natural justice the respondent shall pass final orders on merits within a stipulated period. The Court expressly fixed the next personal hearing on 14.03.2023 at 10:30 a.m., directed the petitioner to appear without seeking adjournment, and directed the respondent to decide the matters on merits and in accordance with law within twelve weeks from that date.

Matters remanded; personal hearing fixed on 14.03.2023 and respondent directed to pass final orders within twelve weeks thereafter.

Final Conclusion: The assessment orders dated 29.04.2021 and 27.04.2021 are quashed for breach of principles of natural justice; the matters are remanded for fresh consideration, with a personal hearing fixed on 14.03.2023 and a direction that final orders be passed within twelve weeks from that date.

Forfeiture of security deposit - rescission of contract - termination for default - time to be the essence of the contract - arbitral award - setting aside arbitral award under Section 34 of the Arbitration Act - interest pendente lite - arbitrator's power to award interest unless specifically barred - finality of tribunal's findings

Forfeiture of security deposit - rescission of contract - termination for default - finality of tribunal's findings - Validity of the Arbitral Tribunal's rejection of Claim Nos.33 and 34 relating to refund of security deposits. - HELD THAT: - The Arbitral Tribunal found that although termination under Clause 60.1 was not justified, termination (rescission) was justified under Clause 17.4 because the contractor failed to complete the work within the extended time and had abandoned the work. That finding on applicability of Clause 17.4 was not set aside by the High Court and therefore attained finality. Both Clause 17.4 and Clause 60.1 permit rescission and appropriation of the contractor's security deposit on contractor's failure to complete the work. The High Court, in exercise of jurisdiction under Section 34, erred in setting aside the Tribunal's well reasoned conclusion rejecting Claim Nos.33 and 34; the Tribunal was entitled to consider rescission under Clause 17.4 and to uphold forfeiture of the security deposits in the facts of the case. [Paras 7]

The award rejecting Claim Nos.33 and 34 is restored and upheld; the High Court's orders quashing that part of the award are set aside.

Interest pendente lite - arbitrator's power to award interest unless specifically barred - arbitral award - Whether the Arbitral Tribunal could award interest on advance for hypothecation of equipment and the appropriate rate of such interest. - HELD THAT: - Section permitting inclusion of interest in monetary awards empowers an arbitrator to include interest for the period between cause of action and award unless the parties have clearly barred such interest. The High Court quashed the Tribunal's award of interest on the ground that the contract did not specifically provide for it, but did not consider the statutory power of the arbitrator to award pendente lite interest. Applying this principle, the Tribunal's award of interest on the advance for hypothecation of equipment should not have been interfered with; however, the rate of 18% awarded by the Tribunal is excessive on the facts. The Court exercises its supervisory power to moderate the rate to a reasonable rate of 12% pendente lite for the period in question. [Paras 7, 8]

The award of interest on the advance for hypothecation of equipment is restored but modified to interest at 12% pendente lite instead of 18%.

Final Conclusion: The appeal is allowed to the extent indicated: the Arbitral Tribunal's rejection of Claim Nos.33 and 34 is restored and upheld; the Tribunal's award of interest on the advance for hypothecation of equipment is restored but reduced to 12% pendente lite. No order as to costs.

Applicability of RBI consolidated circular on opening and maintenance of current accounts - interpretation of "opened or maintained" in regulatory circulars - funnelling / channelling of inflows to lending account and prohibition on use of other current accounts - escrow mechanism and collection accounts under the RBI circular - purposive construction and mischief rule in interpreting regulatory instructions - weight of contemporanea expositio / executive interpretation - maintainability of writ against a private bank and test of public function

Applicability of RBI consolidated circular on opening and maintenance of current accounts - interpretation of "opened or maintained" in regulatory circulars - funnelling / channelling of inflows to lending account and prohibition on use of other current accounts - escrow mechanism and collection accounts under the RBI circular - purposive construction and mischief rule in interpreting regulatory instructions - Whether the RBI consolidated circular of April 19, 2022 applies to pre-existing current accounts and permits HDFC Bank to require other banks to remit balances to the lending bank pursuant to the circular's requirements. - HELD THAT: - The Court accepted the respondents' construction that the consolidated circular governs both current accounts "opened or maintained" with regulated entities and is not confined to only newly opened accounts. The consolidated circular, read with its flow chart and RBI affidavit, aims to prevent diversion of inflows from the lending account and to enable monitoring and recovery by lending banks; allowing unrestricted use of pre-existing current accounts would subvert that purpose. Paragraph 2 of the circular (addressing borrowers with aggregate exposure thresholds) contemplates that where a lending relationship necessitates funneling of receipts, other accounts must be limited to collection accounts and non-lending banks cannot open/maintain current accounts for such borrowers; an escrow mechanism is relevant where there are multiple lending banks but not where there is a single lending bank as here. The Court gave weight to the contemporaneous interpretation and the consistent approach of RBI and the banks, applying purposive and mischief-based interpretation to hold that "maintained" includes active use of pre-existing current accounts and that routing of proceeds into other current accounts contrary to the circular is impermissible. On these grounds the impugned communications by HDFC Bank seeking closure/transfer of balances were held to be consistent with the circular. [Paras 31, 32, 33, 36, 43]

The consolidated circular applies to pre-existing current accounts where those accounts are being 'maintained' or actively used to receive funds that ought to be routed to the lending account; HDFC Bank's action in invoking the circular to require remittance to the lending account was consistent with the circular and permissible.

Maintainability of writ against a private bank and test of public function - weight of contemporanea expositio / executive interpretation - Whether a writ under Article 226 is maintainable against HDFC Bank, a private bank, and whether the petition could be sustained by seeking relief against RBI to control HDFC Bank's acts. - HELD THAT: - The Court applied established tests for public function and concluded that HDFC Bank, being a private bank, does not discharge a public duty such as to attract writ jurisdiction merely by carrying on banking business. Reference was made to binding and persuasive authorities setting out that private entities are not ordinarily instruments of the State and that an action against a private bank based on contractual disputes cannot be the subject matter of a writ proceeding. While the Court accorded persuasive weight to RBI's contemporaneous interpretation, it emphasised that the petition primarily raised contractual/commercial disputes between the bank and the borrower which are not amenable to relief under Article 226. The Court therefore found no basis to extend public law remedies against HDFC Bank in the facts of the case. [Paras 39, 40, 41, 44]

A writ against the private bank is not maintainable on the facts; contractual disputes between the bank and borrower are not a proper subject for relief under Article 226.

Final Conclusion: The Writ Petition was dismissed on the merits. The Court held that the RBI consolidated circular applies to pre-existing current accounts when those accounts are actively maintained and used to receive funds that should be routed to the lending account, and that HDFC Bank's actions were consistent with the circular; further, the petition did not disclose a public law cause against a private bank and therefore was not maintainable as a writ. The request for extension of a status quo order was refused and there will be no order as to costs.