TaxTMI Updates e-Newsletter
Mar 27,2021

Classification of supply as goods - restaurant services as composite supply - input tax credit eligibility on supplies of goods and restaurant services - exemption of catering services to educational institutions - outdoor catering taxable as event based supply - apportionment and reversal of common input tax credit under section 17 read with Rules 42 and 43

Classification of supply as goods - input tax credit eligibility on supplies of goods - Sale of items from the sweetmeats counter is supply of goods and input tax credit is claimable for such supplies subject to conditions of Chapter V. - HELD THAT: - The Authority found that supplies from the sweetmeats parlour lack any element of a service or connection with restaurant activity and can be operated independently; customers purchasing from that counter have no facility to consume on the premises. Such supplies are not a composite supply and, therefore, shall be treated as supply of goods. Consequentially, input tax credit in respect of such supplies is available subject to the conditions and restrictions laid down in Chapter V of the GST Act and the Rules thereunder. [Paras 4]

Supply from the sweetmeats counter is goods; ITC is eligible subject to Chapter V conditions.

Restaurant services as composite supply - input tax credit eligibility on restaurant services - Supply of food and beverages by the restaurant (including takeaways from the restaurant counter) is a composite supply qualifying as restaurant services and is taxable at 5% with input tax credit disallowed for such supplies where credit has been taken. - HELD THAT: - Applying the Explanation in the relevant notification, the Authority held that where food and beverages are supplied by a restaurant which offers facility to eat on the premises (even if takeaway is also available), the supply has an element of service and qualifies as a composite supply with the principal supply being restaurant service. Such supplies attract the tax treatment prescribed for restaurant services and are subject to the condition that input tax credit on goods and services used in supplying the service is not available where the notified condition applies. [Paras 4]

Food/beverage supply from the restaurant is restaurant service; taxable at 5% and ITC on inputs/services used for such service is not available where the notification prohibits it.

Exemption of catering services to educational institutions - outdoor catering taxable as event based supply - Catering supplied to the educational institution for regular meals is exempt under the exemption notification; supplies to guests/parents/auditors on programme days are event based outdoor catering and taxable at 5% without ITC. - HELD THAT: - The Authority examined the agreement with the educational institution (which provides education up to secondary school) and applied entry 66(b)(ii) of the Exemption Notification: regular catering supplied to such an educational institution falls within the exemption entry and is therefore GST exempt. However, the agreement also requires supply of food/beverages to auditors, guests and parents on programme days; these are event based, occasional supplies and fall under the definition of outdoor catering, attracting tax under the notified entry for outdoor catering at 5%, subject to the non availability of input tax credit for such supplies. [Paras 4]

Regular catering to the school is exempt; event based supplies to guests/parents/auditors are outdoor catering taxable at 5% and ITC for such supplies is not available.

Apportionment and reversal of common input tax credit under section 17 read with Rules 42 and 43 - Common input tax credit used for both goods supply and restaurant/catering services must be apportioned or reversed in accordance with section 17(1)-(2) read with Rules 42 and 43. - HELD THAT: - The Authority directed that where inputs, input services or capital goods are common to supplies that attract different tax treatment (taxable restaurant/outdoor catering, exempt school catering, and supply of goods), the applicant must follow the statutory principle of apportionment and reversal of input tax credit as prescribed by section 17(1) and (2) of the GST Act read with Rules 42 and 43 of the CGST/WBGST Rules. The matter was thus left to be dealt with by applying the statutory apportionment and reversal mechanism.

Applicant must apply section 17(1)-(2) read with Rules 42 and 43 for apportionment/reversal of common ITC.

Final Conclusion: The Authority ruled that (i) supplies from the sweetmeats counter are goods and eligible for ITC subject to Chapter V, (ii) supplies by the restaurant (including takeaways from the restaurant) are restaurant services taxable at 5% with ITC restrictions as notified, (iii) regular catering to the school is exempt while event based supplies to guests/parents/auditors are taxable as outdoor catering at 5% without ITC, and (iv) common input tax credit must be apportioned or reversed in accordance with section 17 read with Rules 42 and 43.

Regular bail under Section 439 Cr.P.C. - offence under Section 132(1)(b) and 132(1)(c) of the CGST, 2017 - availment of fake Input Tax Credit - clubbed quantum of tax credit to attract higher penal provision - custodial period as factor in bail consideration - preliminary verification of records and evidentiary requirement at trial

Regular bail under Section 439 Cr.P.C. - offence under Section 132(1)(b) and 132(1)(c) of the CGST, 2017 - availment of fake Input Tax Credit - custodial period as factor in bail consideration - Application for regular bail in prosecution under the CGST Act refused. - HELD THAT: - The petition under Section 439 Cr.P.C. sought regular bail from prosecution under Clause (i) of Section 132(1) of the CGST Act alleging that different amounts of Input Tax Credit (ITC) were improperly aggregated to attract higher penal consequences. The respondent contends that the petitioner received invoices from fake/bogus firms and that investigations disclose fake ITC claims from multiple firms aggregating to approximately Rs. 18 crores; statements by the petitioner and other witnesses indicate the petitioner was operating several firms. Although earlier desk verification and e-way bill/transport document checks were noted as apparently in order, the court observed that resolution of the contradiction as to genuineness of documents and the question whether invoices were fake requires evidence at trial. Balancing these factors, and having regard to the seriousness and magnitude of the alleged fraud together with the present custodial period being less than three months, the court concluded that it was not appropriate to grant regular bail at this stage.

Bail petition dismissed; regular bail refused.

Final Conclusion: The application for regular bail in respect of prosecution under Sections 132(1)(b) and 132(1)(c) of the CGST Act is dismissed; having regard to the allegations of large-scale fake ITC and the present short custodial period, the court declined to grant bail pending trial.

Prohibition order - inspection under Section 67(1) and (2) of the Central Goods and Services Act, 2017 - reconciliation of stock variation - opportunity of hearing and speaking order - retraction of statement - provisional release under Section 67(6)

Reconciliation of stock variation - inspection under Section 67(1) and (2) of the Central Goods and Services Act, 2017 - Prohibition order set aside for fresh consideration by the concerned officer after reconciliation of alleged variation in stock. - HELD THAT: - The Court did not adjudicate the merits of the alleged mismatch between physical stock and stock register. Instead, it directed that the petitioner's authorised representative or advocate shall appear before the concerned officer for reconciliation of the alleged variation, produce relevant documents and assist further if required. The officer is to examine the material placed, grant a hearing and thereafter pass a speaking order. This exercise is to be completed at the earliest and in any event not later than 02.04.2021. These directions constitute a remand to the concerned officer for fresh consideration of the factual dispute arising from the inspection carried out under Section 67(1) and (2) of the Act. [Paras 3, 4, 8]

Proceedings remitted to the concerned officer for reconciliation and fresh speaking order after hearing, within the timeframe directed.

Opportunity of hearing and speaking order - retraction of statement - provisional release under Section 67(6) - Obligations of the concerned officer on remand and treatment of the retraction; right of the petitioner to seek provisional release or to challenge any adverse order. - HELD THAT: - The Court mandated that the officer must grant the petitioner a hearing and record reasons in a speaking order, including a specific statement of the quantum of variation in monetary terms if unsatisfied with the explanation. The officer is to take into account the communication in which the employee retracted his statement insofar as it is relevant, noting that the retraction did not expressly negate all paragraphs of the earlier statement. The Court also observed that, if the officer's order is adverse, the petitioner may either assail the order by appropriate proceedings or opt to seek release of the goods on a provisional basis in accordance with Section 67(6) of the Act by furnishing security to the extent indicated by the officer. [Paras 5, 6, 8, 9, 10]

Officer to consider the retraction, pass a reasoned/speaking order after hearing, and the petitioner may challenge any adverse order or seek provisional release under Section 67(6).

Final Conclusion: Writ petition disposed by remitting the matter to the concerned officer for reconciliation of stock variation, consideration of the retraction, and issuance of a speaking order after hearing; timelines and rights to seek provisional release or to challenge any adverse order were directed.

Transitional tax credit - deemed transitional credit - rectification of Form GST TRAN-2 - bona fide typographical error - online portal/system facilitation for rectification - no legal authority to retain tax credit (Article 265)

Rectification of Form GST TRAN-2 - bona fide typographical error - online portal/system facilitation for rectification - Relief to allow rectification of the erroneously filed Form GST TRAN-2 for July 2017 and permitting filing/claim of deemed transitional credit for August 2017 to December 2017. - HELD THAT: - The court held that the writ-applicants should not be deprived of deemed transitional credit for subsequent months due to an inadvertent typographical error in the Form GST TRAN-2 filed for July 2017. Relying on the reasoning in Jakap Metind Pvt. Ltd. (as recorded by this Court), the court observed that where an error is bona fide and arises from the design or operation of the portal (which auto-populated subsequent months' opening stock), respondents ought to provide a facility to rectify such errors or accept corrected manual filings. The court applied that ratio to the present facts and directed respondents either to reopen the online portal to enable electronic rectification of the July 2017 Form GST TRAN-2 and filing for August-December 2017, or to accept manually filed corrected Forms GST TRAN-2 for all months. [Paras 8, 9, 10]

Writ allowed; respondents directed to enable electronic rectification of Form GST TRAN-2 for July 2017 and permit filing/claim for August-December 2017 or accept manually filed corrected Forms.

Deemed transitional credit - no legal authority to retain tax credit (Article 265) - Respondents cannot deny or retain the claimed deemed transitional credit by relying on time-limit objections where the portal's operation or a bona fide error prevented proper filing. - HELD THAT: - The court, following the ratio in Jakap Metind Pvt. Ltd., emphasised that non-grant or retention of transitional credit to which an assessee is otherwise entitled would be without legal authority and inconsistent with constitutional constraint that tax cannot be levied or collected except by authority of law. Accordingly, time-limit objections were not to be raised where the portal prevented filing due to an inadvertent error in July 2017 and thereby blocked filing for subsequent months. [Paras 6, 11]

Respondents directed not to raise time-limit objections for filing Forms GST TRAN-2 for August-December 2017 caused by the bona fide error in July 2017 filing.

Final Conclusion: The writ-application is allowed; the respondents must enable electronic rectification of Form GST TRAN-2 for July 2017 and permit filing/claim of deemed transitional credit for August-December 2017 or accept manually filed corrected Forms, and shall not object on time-limit grounds where the portal or a bona fide typographical error prevented proper filing.

Transitional credit - electronic credit ledger - Section 140(1) of the CGST Act - technical glitch in GSTN portal - writ of mandamus - consideration of representation

Transitional credit - electronic credit ledger - Section 140(1) of the CGST Act - technical glitch in GSTN portal - Respondents to consider and decide the petitioner's claim for transitional credit filed in Form GST TRAN-1 which was saved but not successfully uploaded due to technical glitches, and, if found allowable, to take appropriate action to reflect it in the electronic credit ledger. - HELD THAT: - The Court found that the petitioner had attempted to file Form TRAN-1 within the prescribed time but the form was not successfully uploaded and was only saved on the GST portal due to technical glitches in the GSTN system. The respondents had been made aware of the grievance and advised remedial steps, yet they neither rejected the claim nor resolved the technical issue. The Court did not adjudicate the substantive eligibility of the claimed transitional credit, but concluded that, given the saved filing and the failure of the respondents to act, the matter requires administrative decision in accordance with law. The Court therefore directed the respondents to consider the petitioner's representation and decide the claim and take appropriate action to reflect any allowable transitional credit in the petitioner's electronic credit ledger within four weeks from receipt of the order. [Paras 9, 10, 11]

Respondents directed to consider and decide the petitioner's representation dated 30.01.2019 and take appropriate action for transitional credit in the electronic credit ledger within four weeks; merits of eligibility not examined by the Court.

Consideration of representation - writ of mandamus - remand for decision - Issuance of a writ-direction remanding the petitioner's representation to the respondents for fresh administrative consideration rather than disposing the claim on merits. - HELD THAT: - The Court exercised its supervisory jurisdiction under Article 226 to direct the respondents to act upon the pending representation because the respondents had not resolved the grievance despite the petitioner's timely attempt to file TRAN-1 (albeit unsuccessfully uploaded). The order is procedural and supervisory: it compels the respondents to consider and decide the claim in accordance with law within a specified time; the Court explicitly refrained from examining or adjudicating the substantive entitlement to the claimed transitional credit. [Paras 11]

Writ-direction issued remanding the representation to respondents for decision within four weeks; substantive eligibility left open.

Final Conclusion: Writ application disposed by directing respondents to consider and decide the petitioner's representation regarding transitional credit (TRAN-1) and, if allowable, to effect the credit in the petitioner's electronic credit ledger within four weeks; the Court did not examine the merits of the claimed entitlement.

Carry forward of unutilized credit - TRAN-1 filing/revision - extension of time under rule 117 of CGST Rules read with Section 140 of CGST Act, 2017 - judicial adherence to precedent - verification of genuineness of claims

TRAN-1 filing/revision - extension of time under rule 117 of CGST Rules read with Section 140 of CGST Act, 2017 - carry forward of unutilized credit - Petitioners permitted to file or revise TRAN-1 (electronically or manually) for carrying forward unutilised credit by an extended deadline. - HELD THAT: - The writ petitions challenge refusal to permit filing or revision of TRAN-1 to carry forward unutilised credit under the pre-GST regime. The Court applied the coordinate bench's decision in Asiad Paints Limited (order dated 19.11.2019) and noted that the division bench in the connected writ appeals affirmed the single judge's order (result evidenced though the judgment copy is not yet released). Relying on that precedent and the parties' concessions as to its applicability, the Court directed that the petitioners be permitted to file or revise TRAN-1 either electronically or manually by a specified extended date. The respondents retain the statutory power to verify the genuineness of the claims on merits in accordance with law.

Writ petitions allowed and respondents directed to permit filing/revision of TRAN-1 on or before 31.03.2021; respondents may verify genuineness of claims in accordance with law.

Final Conclusion: The petitions are allowed in terms of the Co-ordinate Bench's order dated 19.11.2019 in Asiad Paints Limited; petitioners may file or revise TRAN-1 (electronically or manually) by 31.03.2021, subject to verification of genuineness by the respondents in accordance with law.

Interpretation of Section 32(2) of the Income Tax Act - Carry forward of unabsorbed depreciation - HC decided [2018 (3) TMI 1905 - GUJARAT HIGH COURT] issue pertains to allowability of carry forward of unabsorbed depreciation and issue is covered in favour of the assessee

HELD THAT:- In view of the judgments on the interpretation of Section 32(2) of the Income Tax Act delivered by Delhi High Court, Gujarat High Court, Madras High Court and Bombay High Court, upheld by this Court by special leave petitions being dismissed, we do not agree with the learned Additional Solicitor General that the question of law has to be determined in these special leave petitions.

Ineligibility under section 9(a)(ii) of the Direct Tax Vivad se Vishwas Act, 2020 - meaning of 'tax arrear' under section 2(1)(o) of the Direct Tax Vivad se Vishwas Act, 2020 - validity of departmental circularary interpretation - scope of settlement under the Vivad se Vishwas Act - prosecution under section 276-C(2) of the Income-tax Act and its relation to tax arrear

Ineligibility under section 9(a)(ii) of the Direct Tax Vivad se Vishwas Act, 2020 - validity of departmental circularary interpretation - scope of settlement under the Vivad se Vishwas Act - Clarification in answer to question No.73 of Circular No.21/2020 construing section 9(a)(ii) to debar filing of declaration for an assessment year merely because prosecution has been instituted in that assessment year even on issues unrelated to the tax arrear is valid. - HELD THAT: - Section 9(a)(ii) excludes from the Act's applicability only those tax arrears which relate to an assessment year in respect of which prosecution has been instituted on or before the date of filing of the declaration. The statute's common thread in clause (a) is 'tax arrear' as defined in section 2(1)(o), and clauses (b)-(e) operate with a different thrust (disability of particular persons). The departmental answer to question No.73 departs from the plain and purposive reading of section 9(a)(ii) by treating pendency of any prosecution in an assessment year as a complete bar to settlement for that assessment year even when the prosecution is not in respect of the tax arrear sought to be settled. Such an interpretation is illogical, narrows the statutory scheme, and defeats the object of the Vivad se Vishwas Act which is to facilitate settlement of disputed tax arrears as defined by the statute. Consequently the circularary interpretation in answer to question No.73 is not in conformity with section 9(a)(ii) and cannot be sustained. [Paras 27, 32]

Answer to question No.73 of Circular No.21/2020 insofar as it treats prosecution in an assessment year as a bar to filing declaration for that assessment year even on issues not relating to the tax arrear is quashed; declarations must be adjudicated in conformity with section 9(a)(ii) read with the definition of 'tax arrear'.

Meaning of 'tax arrear' under section 2(1)(o) of the Direct Tax Vivad se Vishwas Act, 2020 - prosecution under section 276-C(2) of the Income-tax Act and its relation to tax arrear - Whether the prosecution initiated against the petitioner under section 276-C(2) of the Income-tax Act for delayed payment of self-assessment tax constitutes prosecution 'in respect of tax arrear' within section 9(a)(ii) of the Vivad se Vishwas Act. - HELD THAT: - The Act's definition of 'tax arrear' (section 2(1)(o)) contemplates disputed tax, disputed interest, disputed penalty or disputed fee as determined under the Income-tax Act. A prosecution for delayed payment of self-assessment tax under section 276-C(2) arising from belated payment does not necessarily equate to prosecution 'in respect of tax arrear' as defined under the Vivad se Vishwas Act. Applying the statutory definition and purposive construction, the court held that the particular prosecution against the petitioner (for delayed payment) is not a prosecution in respect of tax arrear under section 2(1)(o) and therefore does not trigger the exclusion in section 9(a)(ii). [Paras 25, 33]

Prosecution under section 276-C(2) for delayed payment of self-assessment tax in the petitioner's case is not prosecution 'in respect of tax arrear' within section 9(a)(ii); it does not disqualify the petitioner from seeking settlement of the defined tax arrear for AY 2015-16 under the Vivad se Vishwas Act.

Final Conclusion: Circular No.21/2020 (answer to question No.73) is set aside to the extent it interprets section 9(a)(ii) as barring filing of declarations for an assessment year merely because prosecution has been instituted in that assessment year on issues unrelated to the defined 'tax arrear'. The petitioner's declaration dated 23.09.2020 (in respect of AY 2015-16) must be considered by the authorities in accordance with the Vivad se Vishwas Act and Rules without applying the quashed clarification; writ petition allowed with no order as to costs.

Condonation of delay under Section 119(2)(b) of the Income-tax Act - delegation by CBDT of power to Commissioners to admit belated Form No.10B up to 365 days - authority of Commissioner of Income-tax (Exemptions) to reject applications beyond delegated period - power of CBDT to pass a special order authorising condonation beyond the general delegation - requirement of reasonable cause in entertaining belated Form No.10B - audit report in Form No.10B under Rule 17B as condition for exemption under sections 11 and 12

Delegation by CBDT of power to Commissioners to admit belated Form No.10B up to 365 days - authority of Commissioner of Income-tax (Exemptions) to reject applications beyond delegated period - requirement of reasonable cause in entertaining belated Form No.10B - Validity of CBDT Circular No.2/2020 delegating to Commissioners power to admit condonation applications for Form No.10B up to 365 days and the Commissioner's refusal to condone delay beyond that period in the facts of these petitions. - HELD THAT: - The CBDT, under the mandate of Section 119(2)(b), issued Circular No.2/2020 authorising Commissioners of Income-tax to admit belated applications for condonation of delay in filing Form No.10B for Assessment Year 2018-19 and subsequent years where the delay is up to 365 days, subject to satisfaction that the assessee was prevented by reasonable cause. The Commissioner of Income-tax (Exemptions) examined the petitioner's date of filing of return and Form No.10B, found the delay exceeded 365 days, and rejected the condonation application on the ground that the case fell outside the scope of the delegation. The High Court held that the delegation and the one-year cut-off (365 days) are not arbitrary or irrational and that there is no infirmity in the Commissioner applying the circular to decline condonation where delay exceeds the delegated period. The Commissioner was also correct to require satisfaction of reasonable cause before admitting belated filings under the circular. [Paras 21, 23, 24]

Circular No.2/2020 validly delegates to Commissioners power to condone delay in filing Form No.10B up to 365 days, and the Commissioner properly rejected the petitioner's condonation application where the delay exceeded 365 days.

Condonation of delay under Section 119(2)(b) of the Income-tax Act - power of CBDT to pass a special order authorising condonation beyond the general delegation - Whether CBDT may, by special order under Section 119(2)(b), authorize condonation of delay in filing Form No.10B beyond the 365-day period fixed by its general circular. - HELD THAT: - The Court observed that Section 119(2)(b) permits the CBDT to issue either general or special orders to avoid genuine hardship. Nothing in Section 119(2)(b) precludes the CBDT from issuing a special order in an individual case authorising condonation beyond the 365-day limit fixed by the general circular. In view of this, the Court directed that the petitioner may apply to the CBDT for such special order and further directed CBDT to consider such application within a specified timeframe. The directions leave it to CBDT to exercise its statutory discretion in accordance with law and the statutory standard of avoiding genuine hardship. [Paras 24, 25, 26]

CBDT may, by special order under Section 119(2)(b), authorise condonation of delay beyond 365 days; petitioner directed to apply to CBDT and CBDT directed to decide the application within the prescribed time.

Final Conclusion: The High Court upheld the validity and application of CBDT Circular No.2/2020 and the Commissioner's refusal to condone delay exceeding 365 days, but directed the petitioner to seek a special order from the CBDT under Section 119(2)(b) (and directed CBDT to decide such application within a set time), thereby disposing of the writ petitions without costs.

Rectification of assessment for mistake apparent from record under Section 154 - reference to Transfer Pricing Officer and determination of Arm's Length Price under Section 92CA/92C - Comparable Uncontrolled Price (CUP) as the Most Appropriate Method - Transactional Net Margin Method (TNMM) - volume discount adjustment under Rule 10B - remand of specific issue to Commissioner (Appeals) for fresh adjudication - estoppel / approbate-reprobate in selection of transfer pricing method

Rectification of assessment for mistake apparent from record under Section 154 - reference to Transfer Pricing Officer and determination of Arm's Length Price under Section 92CA/92C - Validity of the Assessing Officer's rectification under Section 154 after completion of assessment when TPO had already made a reference and direction. - HELD THAT: - The Court held that the challenge to the Assessing Officer's exercise of power under Section 154 was raised for the first time before the High Court and was factually untenable. The TPO's reference dated 21.11.2005 and subsequent notice under Section 92CA(2) preceded the assessment; the assessee cooperated with TPO proceedings and did not object to TPO's jurisdiction or to the Assessing Officer acting pursuant to the TPO's directions. The Assessing Officer's notice and order were in substance in compliance with the statutory mandate in Section 92CA(3) directing computation under Section 92C(4). The Court treated the question as entwined with factual conduct and concluded that the assessee, having not objected earlier and having litigated on merits before successive fora, was precluded from belatedly converting a factual contest into a pure legal challenge to jurisdiction. The substantial question was therefore answered against the assessee. [Paras 47, 54, 55, 56, 57]

Assessee's contention that the rectification was without jurisdiction is rejected; question answered against the assessee.

Comparable Uncontrolled Price (CUP) as the Most Appropriate Method - Transactional Net Margin Method (TNMM) - estoppel / approbate-reprobate in selection of transfer pricing method - Whether the Tribunal and revenue authorities erred in summarily rejecting the assessee's adoption of TNMM in appeal after the assessee had used CUP in its transfer pricing documentation. - HELD THAT: - The Court examined the TPO's order and remand report which set out the assessee's original adoption of CUP, the reasons and steps followed, and the TPO's factual analysis rejecting the post hoc shift to TNMM as untenable on the facts. The CIT(A) and the Tribunal considered the assessee's additional submissions on TNMM and recorded reasons why CUP remained the suitable method in the factual matrix. The Court emphasised that the authorities did not simply invoke estoppel in the abstract; rather they addressed the merits and recorded findings of fact that CUP was appropriate and that the TNMM contention was an afterthought unsupported by comparability analysis. As the appeal under Section 260A challenges those factual findings without establishing perversity, the substantial questions were answered against the assessee. [Paras 65, 66, 68, 69, 72]

Findings upholding CUP as the most appropriate method and rejecting TNMM in the facts of the case are affirmed; substantial questions answered against the assessee.

Volume discount adjustment under Rule 10B - Comparable Uncontrolled Price (CUP) as the Most Appropriate Method - Whether the adjustment rejecting the claimed volume discount (and consequential transfer pricing addition) was legally unsustainable under Rule 10B(1)(a)(ii)/10B(3). - HELD THAT: - The Court observed that the TPO, CIT(A) and Tribunal considered the assessee's claim of volume discount (including supplier's letter) and concluded on the facts that volume discounts applied to both associated and non associated transactions and that appropriate comparability adjustments were not established. The authorities analysed the evidence and declined to make the claimed adjustment. Under Section 260A the High Court will not reappreciate those factual findings unless they are shown to be perverse; no such perversity was shown. Accordingly there was no substantial question of law in favour of the assessee on this point. [Paras 61, 64, 75, 76]

Rejection of the claimed volume discount and related transfer pricing adjustment is upheld; no substantial question of law in favour of the assessee.

Remand of specific issue to Commissioner (Appeals) for fresh adjudication - Comparable Uncontrolled Price (CUP) as the Most Appropriate Method - Whether the Tribunal erred in remanding the trading segment comparability issue to the CIT(A) despite having the necessary material and while CUP's applicability was contested. - HELD THAT: - The record showed that the assessee itself requested remand of the trading segment comparability issue to the CIT(A) and the Revenue did not object; the Tribunal therefore remanded the matter for adjudication on merits. The Court held that, having sought and obtained remand below, the assessee could not thereafter contend before the High Court that the remand was erroneous. Further, questions of product comparability and technical specifications (such as reliance on mill test certificates) involve factual enquiry unsuited to be decided in a Section 260A appeal. Hence no substantial question of law arose for the High Court on this point. [Paras 78, 79, 80, 81]

Tribunal's remand of the trading segment issue to the CIT(A) stands; no substantial question of law in favour of the assessee.

Final Conclusion: All substantial questions of law framed on admission are answered against the appellant; the Tax Case Appeal is dismissed and the factual findings of the TPO, CIT(A) and Tribunal upholding CUP as the appropriate method, rejecting the volume discount adjustment and remanding the trading segment issue are affirmed.

Restoration of appeal - requirement under Section 249(4)(a) - permitting deposit to cure inadmissibility - reconsideration of application under the Direct Tax Vivad Se Vishwas Act, 2020 - consequence of default revoking restoration and reconsideration

Restoration of appeal - requirement under Section 249(4)(a) - permitting deposit to cure inadmissibility - Validity of Commissioner (Appeals) order dismissing the appeal as inadmissible for non-compliance with the deposit requirement and whether the appeal could be restored on payment. - HELD THAT: - The Court found that the impugned order of the Commissioner (Appeals) recorded the appeal as inadmissible solely because the assessee had not deposited the tax alleged to be due in terms of Section 249(4)(a). Having regard to the petitioner's assertion of payment (and willingness to make any outstanding deposit under Section 249(4)(a)), and relying on the Division Bench's exercise of discretion in D. Komalakshi to permit payment of admitted amounts before the authority and to restore appeals for consideration on merits, the Court exercised its discretion to set aside the order at Annexure-A and to restore the appeal. The Court imposed a limited condition that the petitioner pay the remaining dues in terms of Section 249(4)(a) within four weeks of release of the order, and further declared that failure to make the payment within the stipulated time would result in revocation of the benefit of restoration. [Paras 6, 7, 9]

Order at Annexure-A set aside; the appeal stands restored subject to payment of dues under Section 249(4)(a) within four weeks, failing which the restoration will be revoked.

Reconsideration of application under the Direct Tax Vivad Se Vishwas Act, 2020 - consequence of default revoking restoration and reconsideration - Whether the petitioner's application under the Direct Tax Vivad Se Vishwas Act, 2020 (Form 1) which was rejected by endorsement for non-deposit should be reopened for reconsideration. - HELD THAT: - The Court noted that the petitioner's application under the scheme was rejected on the sole ground of non-compliance with the deposit requirement. In consequence of restoring the appeal on the condition of payment, the Court set aside the endorsement rejecting the Vivad Se Vishwas application and directed respondent No.1 to re-process and reconsider the petitioner's Form 1 afresh in light of the restoration. The Court qualified the relief by making reconsideration contingent upon the petitioner complying with the prescribed payment within the time stipulated and permitted the authority to address any technical difficulties by calling upon the petitioner to adopt necessary procedural steps to invoke benefits under the scheme. [Paras 7, 8]

Endorsement at Annexure L set aside; respondent No.1 directed to re consider the petitioner's Form 1 application afresh, subject to compliance with the Court's payment condition.

Final Conclusion: The impugned Commissioner (Appeals) order dated 29.01.2021 is set aside and the appeal is restored on condition that the petitioner deposits the outstanding amount required by Section 249(4)(a) within four weeks; the rejection endorsement under the Vivad Se Vishwas scheme is set aside and the petitioner's Form 1 shall be re considered afresh by respondent No.1, with the restoration and reconsideration to be revoked if the petitioner defaults.

Computer peripherals and accessories eligible for higher depreciation as integral part of computer system - allowability of foreign exchange loss on forward contracts as business expenditure under residuary provision - distinction between speculative transactions and commercial hedging within the proviso to Section 43(5) - application of ordinary principles of commercial accounting and Section 37(1) to unrealised exchange loss

Computer peripherals and accessories eligible for higher depreciation as integral part of computer system - depreciation at 60% on switches and routers - Entitlement to depreciation at 60% on switches and routers as computer peripherals. - HELD THAT: - The Court followed the view of the Delhi High Court that computer accessories and peripherals such as printers, scanners and servers form an integral part of the computer system because they cannot be used without the computer. Applying that principle, switches and routers, which cannot be used independently of the computer system, qualify as peripherals and are entitled to depreciation at the higher rate of 60%. The Revenue did not controvert the Tribunal's finding on this point and the Delhi High Court authority governs the question. [Paras 11, 12, 13]

Depreciation at 60% on switches and routers allowed; first substantial question answered in favour of the assessee.

Allowability of foreign exchange loss on forward contracts as business expenditure under residuary provision - distinction between speculative transactions and commercial hedging within the proviso to Section 43(5) - application of ordinary principles of commercial accounting and Section 37(1) to unrealised exchange loss - Allowability of foreign exchange loss on forward contracts as a business loss (not speculative) and therefore deductible. - HELD THAT: - The Court held that the Tribunal's decision to allow the foreign exchange loss was supported by the Bombay High Court authority which treated forward contract losses entered into as hedging in the ordinary course of business as not speculative. The assessing officer had not found the transactions to be speculative nor had he disputed that the losses arose in the ordinary course of business; his treatment was a bald invocation of administrative instruction. The Supreme Court authority on Section 37 and commercial accounting was applied to hold that exchange differences reflected in the balance sheet can amount to business expenditure/loss allowable under Section 37(1) where accounts are maintained and no adverse finding is recorded. Consequently, the proviso to Section 43(5) and relevant precedents justify treating the forward contract loss as deductible. [Paras 16, 17, 18, 19, 20]

Disallowance of foreign exchange loss on forward contracts set aside; second substantial question answered in favour of the assessee.

Final Conclusion: Both substantial questions of law were answered in favour of the assessee: (i) switches and routers qualify as computer peripherals entitled to depreciation at 60%; and (ii) loss on forward foreign-exchange contracts entered into as hedging in the ordinary course of business is not speculative and is allowable as a business loss. The departmental appeal is dismissed.

Power to transfer cases under Section 127 - Reasoned order and opportunity of hearing - Centralisation for coordinated investigation - Jurisdiction of Assessing Officer under Section 124 - Administrative character of transfer orders - Faceless Assessment Scheme and effect on personal hearings

Power to transfer cases under Section 127 - Reasoned order and opportunity of hearing - Centralisation for coordinated investigation - Validity of the transfer order under Section 127 of the Income-tax Act - HELD THAT: - The Court examined the statutory scheme of Section 127 and the twin requirements of recording reasons and, wherever possible, giving the assessee a reasonable opportunity of being heard. It recognised that Section 127 permits transfer for public purpose, including coordinated investigation, subject to procedural safeguards and that the authority from whose jurisdiction the case is transferred must record reasons and afford hearing so that the decision is not rendered ex parte. The material on record, including the corrigendum and the reasons communicated while disposing of objections, showed antecedent material indicating interlinked transactions, search-related information communicated by ACB and investigative findings by the Department, which justified centralisation for a coordinated investigation. The Court treated transfer orders as administrative in nature and noted the limited scope of judicial review - confined to decision-making process and perversity, mala fides or absence of jurisdiction. Applying these principles, the Court held that the Commissioner recorded and considered reasons and afforded opportunity; the transfer was bona fide and for public purpose and did not warrant interference. [Paras 18, 19, 23, 26, 27]

Order under Section 127 upheld; no error in transferring the case for coordinated investigation.

Document Identification Number (DIN) and procedural validity - Effect of absence of Document Identification Number (DIN) on the transfer order - HELD THAT: - The show-cause communication and the transfer order indicated that issuance without DIN arose from unavailability of the ITBA functionality. The Revenue explained that urgent communications could not be withheld due to technical problems. The Court accepted that omission of DIN, given the explanation and subsequent communications disposing objections, did not render the transfer order invalid or vitiate the procedural requirement of hearing and reason-recording. [Paras 7, 12, 23]

Absence of DIN was not fatal to the transfer order and did not invalidate the exercise of power under Section 127.

Centralisation in absence of search proceedings - Non-applicability of Sections 153A/153C in the case - Whether transfer for coordinated investigation required existence of search proceedings or application of Sections 153A/153C - HELD THAT: - The Revenue clarified by corrigendum that no search proceedings were the basis of transfer and reliance was on coordination of investigations of interlinked entities. The Court noted precedent recognising that coordinated investigation may justify transfer even where search proceedings are not the immediate basis, and that Sections 153A/153C were not applicable to the facts. The departmental reasons, including investigative inputs and interlinked transactions, supported centralisation for co-ordinated enquiry without necessitating applicability of 153A/153C. [Paras 12, 23]

Transfer for coordinated investigation is permissible notwithstanding absence of search proceedings and Sections 153A/153C were held not applicable in this case.

Hardship from inter-city transfer - Specialized assessment charges and Faceless Assessment Scheme - Whether transfer caused undue hardship or was impermissible because the case was a trust to be assessed by Exemption charge - HELD THAT: - The Court observed that the assessee is located at Vadodara and the transfer was from an Exemption circle in Ahmedabad to Central Circle, Vadodara; thus, no substantial hardship from inter-city transfer was made out. The contention that only officers of the Exemption charge could assess a trust was rejected: the Court accepted the Revenue's position that officers of the receiving charge were competent and that the Faceless Assessment Scheme has changed the locus of personal hearings, reducing significance of the particular assessing officer's identity. The Court emphasised that an assessee has no right to choose the AO and that inconvenience alone is insufficient to set aside a bona fide transfer. [Paras 12, 24]

Objections regarding hardship and requirement of assessment by Exemption charge were rejected; transfer did not cause undue prejudice.

Final Conclusion: The writ petition is dismissed; the transfer order under Section 127(2)(a) is sustained as lawful, the objections overruled and no interference is warranted.

Remission or cessation of trading liability under Section 41(1) - Reassessment proceedings and notice under Section 148/Section 147 - Trading liability versus loan on revenue account - Deduction under Section 10B on enhanced business profit

Reassessment proceedings and notice under Section 148/Section 147 - Grounds 2.1 and 2.2 (challenging validity of reassessment notice and non-supply of reasons) were not pressed and dismissed as not pressed. - HELD THAT: - The assessee did not pursue grounds 2.1 and 2.2 at the time of hearing. The Tribunal accordingly recorded that those grounds were not pressed and dismissed them on that basis without adjudicating on the merits of the contentions raised therein. [Paras 3]

Grounds 2.1 and 2.2 dismissed as not pressed.

Remission or cessation of trading liability under Section 41(1) - Trading liability versus loan on revenue account - Addition of Rs. 4,17,71,395 under Section 41(1) on account of cessation of liability was upheld. - HELD THAT: - The Tribunal found that the impugned amount arose from advances and transactions received in the ordinary course of the assessee's trading operations and was retained in the business when the creditor wrote off the amount in its books. Even though the amount had not been taken to the profit and loss account earlier, the waiver by the creditor transformed the amount into the assessee's own money in the revenue field. On this basis, and following the reasoning in authorities distinguishing loans on capital account from trading/cash credit liabilities, the Tribunal concluded that the waiver amounted to remission/cessation of a trading liability liable to tax under Section 41(1). The lower authorities' finding that the amount became a definite trade surplus and hence taxable income was sustained. [Paras 16, 20]

Addition under Section 41(1) sustained.

Deduction under Section 10B on enhanced business profit - Claim for deduction under Section 10B on account of the enhanced business profit (arising from the addition under Section 41(1)) was rejected. - HELD THAT: - The Tribunal examined the contention that the assessee was entitled to deduction under Section 10B on the enhanced profit resulting from the addition. It held that the precedents relied upon by the assessee dealt with enhancements attributable to adjustments under provisions such as Section 40(a)(i)/(ia) and frequently involved convertible foreign exchange receipts; those authorities were not comparable. Since the impugned amount arose from a local party and did not involve receipts in convertible foreign exchange or the factual matrix of the cited decisions, the Tribunal declined to allow Section 10B deduction on the enhanced profit. [Paras 17, 19, 20]

Claim for deduction under Section 10B on the enhanced profit rejected.

Final Conclusion: The appeal is dismissed; grounds challenging the reassessment notice were not pressed, the addition under Section 41(1) for the advance written off by the creditor is sustained as taxable income, and the claim for deduction under Section 10B in respect of the enhanced profit is refused.

Validity of proceedings under section 153C of the Income-tax Act - Recording of satisfaction note for initiating proceedings under section 153C/153A - Assumption of jurisdiction under section 153C - Deletion of addition under section 68 on account of alleged bogus share capital - Maintainability of departmental appeal when foundational legal finding is unchallenged

Validity of proceedings under section 153C of the Income-tax Act - Recording of satisfaction note for initiating proceedings under section 153C/153A - Deletion of addition under section 68 on account of alleged bogus share capital - Proceedings under section 153C were held to be ab initio void for want of a recorded satisfaction note by the AO of the searched person, and consequential deletion of the addition made under section 68. - HELD THAT: - The Tribunal noted that the CIT(A) found no satisfaction note recorded by the AO of the searched person before invoking section 153C. Relying on that finding and applicable precedent and administrative guidance, the CIT(A) concluded that proceedings taken under section 153C were void ab initio. On that legal basis the CIT(A) set aside the addition of Rs. 3,00,00,000 made under section 68 as not sustainable. The Tribunal observed that the cancellation of the assessment and deletion of the addition flowed from the determinative legal defect - absence of the requisite satisfaction recorded by the AO of the searched person - and that, because this foundational defect was not challenged by the Revenue, the appellate process could not proceed to consider the merits of the addition. [Paras 9, 10]

Proceedings under section 153C held void ab initio for absence of recorded satisfaction; addition under section 68 deleted.

Maintainability of departmental appeal when foundational legal finding is unchallenged - Assumption of jurisdiction under section 153C - Revenue's appeal was dismissed as not maintainable because it did not challenge the CIT(A)'s finding that proceedings under section 153C were void for lack of satisfaction note. - HELD THAT: - The Tribunal recorded that the grounds advanced by the Revenue exclusively attacked the merits of the addition but did not contest the CIT(A)'s determinative finding that the AO of the searched person had not recorded the satisfaction necessary to invoke section 153C. The Revenue was granted opportunities to revise its grounds but did not take steps to challenge that foundational legal finding. In the absence of any appellate challenge to the quashing of proceedings under section 153C, the Tribunal held that the departmental appeal could not sustain a merits-based challenge and accordingly dismissed the appeal. [Paras 5]

Departmental appeal dismissed as not maintainable for failure to challenge the finding that section 153C proceedings were void.

Final Conclusion: The Tribunal dismissed the Revenue's appeal: the CIT(A)'s finding that proceedings under section 153C were void for lack of a recorded satisfaction note stood unchallenged, and consequently the addition under section 68 was deleted and the appeal was not maintainable.

Penalty under section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - validity of show cause notice - requirement to specify which limb of section 271(1)(c) in notice - vitiation of penalty proceedings for defective notice

Penalty under section 271(1)(c) - validity of show cause notice - requirement to specify which limb of section 271(1)(c) in notice - vitiation of penalty proceedings for defective notice - Whether penalty proceedings under section 271(1)(c) are valid where the show cause notice does not specify whether proceedings are initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the show cause notice issued by the Assessing Officer merely recited that the assessee had "concealed the particulars of your income or furnished inaccurate particulars of such income" without specifying which limb of section 271(1)(c) was invoked. The notice therefore failed to inform the assessee of the precise charge and did not enable effective response. Relying on earlier orders of the Tribunal and the view taken by higher courts in similar matters, the Tribunal concluded that such a defective notice vitiates the penalty proceedings. Consequently, on this ground alone the penalty could not be sustained and was liable to be cancelled. The Tribunal set aside the orders of the authorities below and allowed the appeals, cancelling the penalty. The Tribunal also placed reliance on prior decisions including M/s. Bharat Immunological & Biological Corporation Ltd. vs. The DCIT and Pr. CIT vs. M/s. Sahara India Life Insurance Company Ltd. as supporting authority for the principle that a notice which does not specify the limb of section 271(1)(c) is invalid. [Paras 5]

The show cause notice was invalid for failing to specify which limb of section 271(1)(c) was invoked; the penalty proceedings were vitiated and the penalty cancelled.

Final Conclusion: Both appeals were allowed; the penalty levied under section 271(1)(c) for A.Y. 2008-2009 was set aside and cancelled because the show cause notice failed to specify whether proceedings were for concealment of income or for furnishing inaccurate particulars of income, thereby vitiating the penalty proceedings.

Unexplained cash credits - representative assessee under section 160(1)(i) and liability under section 161 - appointment as agent of a non-resident under section 163 and requirement of opportunity of hearing - capital gains treatment of transfer as capital asset under section 2(14) - exemption under section 54F - cost of improvement and computation of capital gains under section 48

Unexplained cash credits - Deletion of addition made on account of cash deposits in Syndicate Bank - HELD THAT: - The assessee deposited Rs. 13,20,000 in the Syndicate Bank account and explained the deposits by reference to opening cash-in-hand, sale of a motor car and current year cash flows. The AO disbelieved the opening cash balance without pointing to any discrepancy in the earlier year cash flow statement or other evidence and also wrongly included non-cash depreciation in computing available cash. The CIT(A) allowed relief only partly. The Tribunal examined the cash flow statement, the unchallenged earlier year closing cash balance, the sale proceeds of the car and the assessee's professional receipts and concluded that, in absence of contrary evidence from the Revenue, the assessee had satisfactorily explained the bank deposits. Accordingly the addition confirmed by the lower authorities was not justified and was deleted. [Paras 10]

Addition on account of unexplained cash credits in Syndicate Bank sustained as imputations was deleted and ground allowed.

Representative assessee under section 160(1)(i) and liability under section 161 - appointment as agent of a non-resident under section 163 and requirement of opportunity of hearing - capital gains treatment of transfer as capital asset under section 2(14) - exemption under section 54F - cost of improvement and computation of capital gains under section 48 - Validity of assessing long term capital gain of non resident (Shri Ashok Tyagi) in the hands of the assessee and consequent taxation format - HELD THAT: - The AO treated the assessee as agent/representative assessee of the non resident and assessed the capital gain in the assessee's individual assessment, having invoked sections 160, 161 and 163. The Tribunal found that while the assessee was prima facie the agent/representative assessee for the non resident, the AO did not frame a separate assessment in the assessee's representative capacity nor specify that the income was being assessed in that capacity; instead the income of the non resident was added as part of the assessee's individual income and taxed in his resident status. Given the statutory scheme (representative assessee deemed to be an assessee in respect of another's income and that such assessment should be in the representative capacity), the Tribunal held that the addition of the non resident's capital gain in the assessee's individual assessment (taxed as his own income/resident) was not in accordance with Section 161 and therefore deleted the addition. Having allowed deletion on this procedural/assignment ground, the Tribunal refrained from adjudicating the substantive disputes on characterization of the land, cost of improvement, and claim under section 54F as those issues became academic. [Paras 14, 15]

Addition of long term capital gain attributed to the non resident and assessed as the assessee's individual income was deleted for being contrary to the manner of assessment required for a representative assessee; consequential substantive issues left undecided as academic.

Final Conclusion: The appeal is partly allowed: the addition relating to cash deposits in Syndicate Bank is deleted; the addition of the non resident's long term capital gain assessed as the assessee's individual income is deleted for non compliance with the procedure required for assessment of a representative assessee; remaining substantive issues on computation and exemptions were not adjudicated as they became academic.

Registration under Section 12A/12AA - charitable purpose - religious purpose - mixed objects (charitable and religious) and the dominant purpose test - genuineness of objects and proposed activities - proposed activities versus prior carried out activities for registration

Registration under Section 12A/12AA - charitable purpose - religious purpose - mixed objects (charitable and religious) and the dominant purpose test - Whether a trust whose objects include both charitable and religious elements is precluded from registration under Section 12A/12AA. - HELD THAT: - The Tribunal held that there is no absolute bar on registration of an institution whose objects are both charitable and religious. The ld. CIT(E)'s conclusion that registration cannot be granted to a trust with mixed objects was found unsustainable. Reliance was placed on the coordinate bench decision in Rehoboth Mission and the jurisdictional High Court's exposition that where the primary or dominant purpose of an institution is charitable, ancillary or incidental non charitable (or religious) objects do not prevent the institution from being a valid charity. The Tribunal applied the dominant purpose principle: if the principal object is charitable, the presence of religious elements does not disentitle the trust to registration. The ld. CIT(E) may, however, impose conditions to ensure activities conform to the declared objects. [Paras 5]

The rejection of registration on the ground of mixed charitable and religious objects was set aside and held not to be a valid reason for refusal; the ld. CIT(E) was directed to grant registration subject to such conditions as appropriate.

Registration under Section 12A/12AA - genuineness of objects and proposed activities - proposed activities versus prior carried out activities for registration - Whether meagre or nil charitable activities already carried out by a newly formed trust preclude grant of registration under Section 12A/12AA. - HELD THAT: - The Tribunal examined Section 12A/12AA and concluded that the statutory scheme contemplates scrutiny of the genuineness of objects and activities but does not require that substantial activities must have already been carried out before applying for registration. The Tribunal relied on the Apex Court decision in M/s. Ananda Social and Educational Trust , which holds that registration may be sought by newly formed trusts and that 'activities' in the provision include proposed activities. Accordingly, the ld. CIT(E)'s rejection on the basis that activities were meagre or nil was contrary to law. The Commissioner is limited to satisfying himself about the genuineness of objects and proposed activities and may impose conditions, but lack of prior substantial activity alone is not a ground for refusal. [Paras 6]

The rejection of registration on the ground of meagre or nil past activities was set aside; registration was directed to be granted forthwith, subject to any lawful conditions the ld. CIT(E) deems fit.

Final Conclusion: The appeal is allowed; the Tribunal set aside the refusal to register the trust under Section 12A/12AA on the grounds of mixed religious/charitable objects and on the basis of meagre prior activities, and directed the ld. CIT(E) to grant registration forthwith while retaining liberty to impose appropriate conditions.

Charging income under the head "income from house property" - deduction under section 24 for house property - effect of non-fulfilment of conditions under other statutes on head of income - estimation of turnover on basis of circulation certificate - addition limited to net profit rate where turnover mismatch exists - avoidance of double taxation by excluding separately taxed receipts from business NP rate

Charging income under the head "income from house property" - deduction under section 24 for house property - effect of non-fulfilment of conditions under other statutes on head of income - Income received on leasing of land and building is to be assessed under the head "income from house property" and the assessee is entitled to deductions under section 24. - HELD THAT: - The Tribunal found that the assessee, owner of the entire premises, had let out an independent portion to an unrelated tenant and had disclosed the receipts as income from house property while claiming deductions under section 24. The Assessing Officer relied on alleged breach of terms of allotment under other statutes to treat the receipts as income from other sources. The Tribunal held that non-fulfilment of conditions under another statute or allotment terms cannot change the character of receipts under the Income-tax Act; breaches under other laws must be remedied under those laws and do not, by themselves, alter the statutory tests in Section 22. The CIT(A)'s examination of the ingredients of Section 22 was found correct and there were no new facts to rebut those findings. Consequently, the AO was not competent to re-characterise the rental receipts as income from other sources and denial of section 24 deductions was unwarranted. [Paras 6]

Findings of the CIT(A) affirming assessment as "income from house property" and allowance of deductions under section 24 are upheld; revenue grounds in this regard are dismissed.

Estimation of turnover on basis of circulation certificate - addition limited to net profit rate where turnover mismatch exists - avoidance of double taxation by excluding separately taxed receipts from business NP rate - Addition for understated sales cannot be made by adding the entire difference; addition must be computed by applying an appropriate net profit rate, but the net profit rate must be determined after excluding rental receipts which have been separately assessed. - HELD THAT: - The AO relied on the circulation certificate to compute higher sales and, after allowing a 25% discount, added the entire unrecorded sales to income. The CIT(A) correctly held that where turnover as per external document differs from books, the addition should be limited to the net profit relatable to the understated turnover (following cited High Court decisions). The Tribunal agreed that the circulation certificate formed part of the assessee's records and could be used to identify a turnover mismatch but held that the CIT(A)'s approach to tax only the net profit portion was correct. Further, the Tribunal accepted the assessee's later chart showing net profit computed after excluding rental receipts (already taxed as house property) to avoid double taxation. Consequently the Tribunal directed that the Assessing Officer should apply the net profit rate after excluding rent receipts and recompute the addition accordingly, restoring the matter to the file of the AO for fresh computation in line with this direction. [Paras 7, 10, 11, 12]

CIT(A)'s limitation of addition to net profit is upheld in principle; matter remanded to AO to apply net profit rate excluding rent receipts and recompute addition.

Final Conclusion: The Tribunal affirmed the CIT(A)'s conclusion that the rental receipts are taxable as income from house property with entitlement to section 24 deductions and dismissed the revenue's challenge on that point. On the turnover discrepancy based on the circulation certificate, the Tribunal upheld the principle that addition is limited to net profit but remanded the issue to the Assessing Officer to recompute the addition applying the net profit rate after excluding rent receipts; appeals are disposed of partly in favour of the assessee and partly for statistical purposes as directed.

Allowability of interest as part of cost of acquisition - computation of capital gains under section 48 - one to one nexus between borrowed funds and acquisition of shares - capitalisation of interest versus revenue deduction - scope of limited scrutiny (CASS) and permissible verification

Scope of limited scrutiny (CASS) and permissible verification - Securities Transactions - Whether the Assessing Officer exceeded the mandate of 'limited scrutiny' (CASS) by examining the allowability of interest debited against securities transactions. - HELD THAT: - The assessee challenged the assessment on the ground that the limited scrutiny list did not mandate verification of the allowability of the interest claimed against short term capital gains. The Tribunal noted that one of the specified items for verification was 'Securities Transactions' and the short term capital gains arose from transfer of securities. Accordingly, examination of the interest claimed in relation to those securities fell within the scope of the limited scrutiny selection. The plea to declare the assessment null and void on this ground was therefore rejected. [Paras 3]

The objection that the AO exceeded the scope of limited scrutiny is dismissed; the AO was entitled to verify the interest claim in relation to securities transactions.

Allowability of interest as part of cost of acquisition - computation of capital gains under section 48 - one to one nexus between borrowed funds and acquisition of shares - capitalisation of interest versus revenue deduction - Whether interest debited by the broker and incurred on funds borrowed to acquire shares can be capitalised and added to the cost of acquisition for computing short term capital gains under section 48. - HELD THAT: - The Tribunal accepted that the borrowed funds were actually applied to purchase specified shares and that interest was debited by the broker in the assessee's ledger. The assessee had not claimed the interest as a revenue deduction but had capitalised it as part of the cost of acquisition. Relying on consistent judicial precedent, the Tribunal held that where borrowings are used to acquire a capital asset and interest has been capitalised (and its genuineness is not disputed), such interest forms part of the cost of acquisition and is deductible under clause (ii) of section 48 while computing capital gains. The Tribunal therefore allowed the claim, observing that the revenue did not dispute the genuineness of the borrowings or payment of interest. [Paras 3]

The interest debited by the broker is to be treated as part of the cost of acquisition of the shares and is allowable in computing short term capital gains under section 48.

Final Conclusion: The appeal is partly allowed: the assessment was not vitiated on account of limited scrutiny, and the assessee is entitled to deduct the capitalised interest as part of the cost of acquisition for computing short term capital gains for A.Y.2015-16.

Section 68 - cash credits - consideration other than cash / share swap (barter) transactions - onus to prove identity, creditworthiness and genuineness of share subscription - summons under section 131 and verification of third parties - remand for fresh consideration

Section 68 - cash credits - consideration other than cash / share swap (barter) transactions - onus to prove identity, creditworthiness and genuineness of share subscription - Whether additions made under section 68 in respect of share capital and share premium could be sustained where shares were issued as consideration other than cash (swapping of shares) and no cash/cheque/draft was received by the assessee. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the addition. The factual position established that the assessee issued shares and took over shares from other companies by way of swap so that no amount was actually brought into the assessee's books by cash/cheque/draft; the assessee did not maintain a bank account during the relevant year. Relying on the principle that section 68 is attracted to sums of money credited (cash credits), the Bench applied earlier decisions (including the Tribunal's Vital Communications and various High Court and Tribunal precedents) holding that mere book adjustments or issue of shares as consideration other than cash do not constitute a 'sum' credited in the sense contemplated by section 68. The Tribunal observed that where no fresh money is introduced and transactions are cash neutral, section 68 is not attracted; the assessee had filed confirmations and documents and there was no finding of sham transactions resulting in receipt of cash. On these grounds the addition in respect of share capital/premium was rightly deleted and did not require interference. [Paras 16, 17, 19, 22]

Addition under section 68 in respect of share capital and share premium deleted; Revenue's ground dismissed.

Section 68 - cash credits - summons under section 131 and verification of third parties - remand for fresh consideration - Whether the addition of the amount shown as a creditor (M/s Wamil Clothing Pvt. Ltd.) made by the AO on account of unexplained credit should be upheld. - HELD THAT: - The Tribunal found the AO's order on this point to be cryptic and noted that the CIT(A) had not given any finding. Considering the facts and in the interest of justice, the Tribunal directed restoration of the issue to the file of the AO, giving the assessee one final opportunity to substantiate its case and directing the AO to decide the matter afresh in accordance with law after necessary verification (including service of summons under section 131 as appropriate). The matter was remitted rather than finally adjudicated on merits. [Paras 23]

Issue restored to the file of the AO for fresh consideration and decision after giving the assessee a final opportunity; ground allowed for statistical purposes.

Final Conclusion: Tribunal upholds deletion of addition under section 68 in respect of share capital and share premium on the ground that the transactions were share swap/consideration other than cash and no fresh money was introduced; the addition relating to the creditor was remanded to the AO for fresh consideration after giving the assessee a final opportunity.

Principles of natural justice - show-cause notice under Section 124 of the Customs Act - rejection of declared value and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - confiscation under Section 111(m) of the Customs Act - penalty under Section 112(a) of the Customs Act - remedy of appeal under Section 128 of the Customs Act - relegation to appellate forum - assignment to a different officer on remand - where a statute prescribes a manner it must be followed

Show-cause notice under Section 124 of the Customs Act - rejection of declared value and Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - principles of natural justice - Validity of the order of confiscation and imposition of penalty in the absence of written notice of grounds and compliance with Rule 12 procedure - HELD THAT: - The Court found that section 124 mandates written notice of the grounds for proposed confiscation or penalty, opportunity to make a written representation within a reasonable time, and a reasonable opportunity of being heard (subject only to the proviso permitting oral notice/representation at the request of the person concerned). Rule 12 of the Customs Valuation Rules requires that where the proper officer has reason to doubt declared value he may seek further information and, at the importer's request, must intimate in writing the grounds for doubt and provide a reasonable opportunity of being heard before rejecting the declared value. The impugned order did not show that any written notice under section 124(a) was given, nor that the Rule 12(2) procedure of intimating grounds in writing (on request) and affording a reasonable opportunity to meet those grounds was followed. The mere holding of a personal hearing by video conferencing, without a written disclosure of the grounds or any request by the importer for oral notice, did not satisfy the statutory and natural justice requirements. Failure to proceed in the prescribed manner vitiates the order of confiscation and penalty. [Paras 20, 21, 22, 23, 25]

Impugned order of confiscation and penalty set aside as vitiated for non-compliance with section 124 and Rule 12 and breach of the principles of natural justice.

Remedy of appeal under Section 128 of the Customs Act - relegation to appellate forum - Whether the existence of the statutory appellate remedy precluded writ jurisdiction in view of the breach of natural justice - HELD THAT: - The Court applied its earlier reasoning in Forbo Siegling Movement Systems India Pvt. Ltd. and held that where there has been a clear breach of mandatory procedural requirements and principles of natural justice at the original stage, the existence of an alternate statutory appellate remedy under section 128 does not bar exercise of writ jurisdiction. Reliance on the availability of an appeal cannot cure or remedy a substantive breach of natural justice committed in the original adjudication, and relegation to the appellate forum was therefore inappropriate in the circumstances of this case. [Paras 26, 27, 28]

Writ petition maintainable; petitioner need not be relegated to the appellate remedy because of the established breach of natural justice.

Assignment to a different officer on remand - where a statute prescribes a manner it must be followed - Remedial directions on remand following setting aside of the impugned order - HELD THAT: - Having set aside the impugned order, the Court directed that the proper officer may proceed afresh only after complying with section 124 and Rule 12. Additionally, to safeguard impartial decision-making and in line with concerns about closed-mindedness where procedural compliance is treated as formalistic, the Court directed that the matter be assigned to an officer other than the one who passed the impugned order. The Court emphasised the settled proposition that where a statute prescribes a manner, the prescribed manner must be followed. [Paras 29]

Matter remitted for fresh consideration in accordance with section 124 and Rule 12; hearing to be assigned to a different officer than respondent No.3.

Final Conclusion: Impugned order dated 23.09.2020 set aside for failure to comply with section 124 of the Customs Act and the procedure in Rule 12 of the Customs Valuation Rules, 2007 and for breach of the principles of natural justice; matter remitted for fresh decision in accordance with those provisions and to be assigned to a different officer; writ petition allowed to the extent indicated, no order as to costs.

Project Import Regulations - installation certificate as procedural requirement - Appreciation of factual findings - perversity standard - Demand after provisional assessment - liability under Section 18(7) read with Section 24(2) - Interest liability - applicability of provisions introduced by Finance Act, 1995 - Interest demand and incorrect reliance on a provision not pleaded before adjudicating authorities - Liability for duty on uncleared/bonded goods - abandonment, auction and relinquishment of title

Project Import Regulations - installation certificate as procedural requirement - Appreciation of factual findings - perversity standard - Whether non-production of the installation certificate under the Project Import Regulations precludes concessional treatment and whether the Tribunal's finding that the assessee had produced sufficient proof of installation is to be interfered with. - HELD THAT: - The Tribunal accepted documentary evidence produced by the assessee (including sale invoices) and applied earlier tribunal/high court authority holding that production of the installation certificate is a procedural requirement and not a condition extinguishing entitlement to concessional assessment. The High Court confined itself to the legal question and refused to re-appreciate the factual materials unless the Tribunal's finding was shown to be utterly perverse. No such perversity was established; the Tribunal's factual conclusion that the assessee discharged its obligation was therefore left intact. [Paras 4, 7]

Tribunal's finding that the installation-certificate requirement was procedural and that the assessee produced sufficient proof of installation is sustained; revenue's challenge on this point dismissed.

Interest liability - applicability of provisions introduced by Finance Act, 1995 - Interest demand and incorrect reliance on a provision not pleaded before adjudicating authorities - Whether the Tribunal was correct in holding that interest could be levied only from 26.05.1995 under the provision introduced by the Finance Act, 1995, and whether the revenue can challenge that observation. - HELD THAT: - The High Court observed that the order-in-original confirmed a duty demand under Section 18(7) read with Section 24(2) (arising after provisional assessment and merit-rate demand) and that the adjudicating authority treated interest as a separate demand. The Tribunal's observation that interest liability could arise only from 26.05.1995 under the provision introduced by the Finance Act, 1995, proceeded on the basis of Section 28AA, but that was not the case advanced by the revenue before the Tribunal. The question of interest under any other provision (for example, Section 61) was not pleaded earlier. Because the Tribunal's remark addressed a provision not relied upon by the revenue, the High Court held that the revenue cannot be permitted to be aggrieved by that observation and left the substantial questions relating to interest open. [Paras 8, 10, 11]

Tribunal's specific observation about interest being chargeable only from 26.05.1995 (under the provision it noted) is not a ground on which the revenue can obtain relief; the appeal on this point is dismissed and the substantial questions concerning interest are left open.

Liability for duty on uncleared/bonded goods - abandonment, auction and relinquishment of title - Demand after provisional assessment - liability under Section 18(7) read with Section 24(2) - Whether duty could be denied because the assessee allegedly abandoned the uncleared goods (or claimed never to have filed a bill of entry), and whether remission is precluded by auction or relinquishment of title. - HELD THAT: - The Tribunal found, and the High Court agreed, that the assessee had in fact filed bills of entry, executed double duty bonds and bonded the goods; it was therefore untenable for the assessee belatedly to contend that no bill of entry was filed or that the goods were not subject to project-import formalities. The claim that there was no project-import licence for the validator was inconsistent with the departmental treatment (goods were allowed entry, examined and bonded). The Tribunal rightly rejected the assessee's contentions that the goods had been abandoned or that duty liability was excluded; the High Court found no reason to interfere with that factual and legal conclusion. [Paras 12, 13]

Tribunal's confirmation of duty in respect of the uncleared/bonded goods is upheld and the assessee's pleas of abandonment or non-filing of bill of entry are rejected.

Final Conclusion: Both appeals are dismissed: the Tribunal's factual finding that the assessee met project-import obligations is sustained; the Tribunal's remark on interest being chargeable only from the date of the 1995 amendment cannot be relied on by the revenue and the related substantial questions are left open; the Tribunal's confirmation of duty in respect of uncleared/bonded goods is upheld. No costs.

Redemption of confiscated goods - power under Section 125 to permit redemption on payment of fine - exercise of appellate discretion by Tribunal - reduction of redemption fine and penalty - Foreign Exchange Management (Import and Export of Currencies) Regulation, 2000 - factual determination precluding substantial question of law

Redemption of confiscated goods - power under Section 125 to permit redemption on payment of fine - exercise of appellate discretion by Tribunal - factual determination precluding substantial question of law - Whether the Tribunal was justified in reducing the redemption fine and penalty imposed for attempted export of foreign currency and whether that reduction raised a substantial question of law. - HELD THAT: - The appeal was originally admitted on substantial questions of law challenging the Tribunal's reduction of the redemption fine and penalty. The Court noted that the Tribunal had earlier directed the Adjudicating Authority to allow redemption of the foreign currencies on payment of a reasonable fine; following de novo adjudication a high redemption amount and penalty were fixed, and on further appeal the Tribunal reduced both the fine and penalty. The Bench observed that the Tribunal's subsequent order was an exercise of discretionary appellate power taken in the light of its earlier direction and having regard to the value of the goods. The Court distinguished a prior decision relied upon by the Revenue because the earlier Tribunal direction in the present litigation materially affected the adjudicatory matrix. Given that the impugned decision involved factual appraisal and the exercise of discretion by the Tribunal rather than a pure question of law, the matter did not give rise to a substantial question of law requiring interference. [Paras 9, 10]

The Tribunal's reduction of the redemption fine and penalty is sustained as an exercise of discretion based on earlier direction and factual considerations; no substantial question of law arises and the appeal is dismissed.

Final Conclusion: The civil miscellaneous appeal by the Revenue is dismissed: the Tribunal's modification of the adjudicating authority's redemption fine and penalty is a discretionary, fact-based exercise in the light of its earlier direction, and does not raise a substantial question of law warranting interference.

Principles of natural justice - quasi-judicial function - personal hearing and same officer decision-maker rule - institutional decision - remedy of quashing and remand for de novo hearing - Circular No.5/2016 procedure for SVB investigations

Principles of natural justice - personal hearing and same officer decision-maker rule - Circular No.5/2016 procedure for SVB investigations - quasi-judicial function - remedy of quashing and remand for de novo hearing - Whether the Impugned Investigation Report dated 17.09.2018 violated the principles of natural justice because the personal hearing was conducted by one officer and the Investigation Report was furnished by another, and if so, the appropriate relief. - HELD THAT: - The Court examined the procedure prescribed by Circular No.5/2016, which requires the Assistant/Deputy Commissioner (SVB) to conduct an inquiry that includes giving a suitable opportunity to the importer to submit evidence and to hold a personal hearing before furnishing an Investigation Report containing findings and reasons. That procedure imparts a quasi-judicial character to the SVB inquiry and requires compliance with the principles of natural justice. The Court relied on authorities recognising that where an authority is required to act judicially a personal hearing must have substance and not be a mere formality; personal hearing enables the decision-maker to observe demeanour, clear doubts and be persuaded by argument. Applying these principles, the Court held that where one officer conducted the personal hearing and a different officer later furnished the Investigation Report, the process offended the basic principle that the same person who hears should decide, thereby rendering the Investigative Report vitiated by procedural infirmity. Consequently, the Investigation Report was quashed and the matter was remitted for a fresh hearing and investigation in accordance with the Circular, with directions for the authority to extend personal hearing and furnish a fresh Investigation Report within a limited time frame. [Paras 20, 23, 24]

Impugned Investigation Report quashed; matter remitted to the Assistant Commissioner of Customs (SVB) to grant personal hearing and furnish a fresh Investigation Report expeditiously, within two months.

Final Conclusion: Writ petition allowed; the Investigation Report dated 17.09.2018 is quashed for breach of the principles of natural justice caused by a hearing given by one officer and a report rendered by another, and the SVB is directed to afford a fresh personal hearing and to furnish a new Investigation Report within two months.

Grant of regular bail under Section 439 Cr.P.C. - proviso to Section 212(6) of the Companies Act, 2013 (sick or infirm exception) - mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 - economic offences and bail jurisprudence in white collar cases - extension of interim bail

Grant of regular bail under Section 439 Cr.P.C. - extension of interim bail - Maintainability of a prayer for regular bail under Section 439 Cr.P.C. despite the petitioner being on interim bail and whether interim bail could be extended pending decision. - HELD THAT: - The Court held that the petition for regular bail under Section 439 Cr.P.C. is maintainable even though the petitioner was on interim bail, having regard to the sequence of interim orders and subsequent directions for surrender. The Court considered the chronology of interim releases and surrender directions and observed that being on interim bail did not foreclose consideration of an application under Section 439 Cr.P.C. However, upon evaluating the merits and the gravity of allegations, the Court declined to grant regular bail. Notwithstanding refusal of regular bail, the Court extended the existing interim bail for a further limited period of sixty days on the same terms and subject to conditions including prohibition on leaving the country and appearance before the trial court as directed. [Paras 22, 27, 37]

Application under Section 439 Cr.P.C. is maintainable; regular bail refused; interim bail extended for 60 days on conditions.

Proviso to Section 212(6) of the Companies Act, 2013 (sick or infirm exception) - mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 - Whether the petitioner qualifies as a "sick or infirm" person under the proviso to Section 212(6) so as to be entitled to bail without satisfying the twin conditions in Section 212(6)(ii). - HELD THAT: - The Court examined medical records, the SFIO's medical verification and jail medical report. It found that the petitioner suffers from multiple co morbidities and requires ongoing medical care, but the medical material did not establish that he is so infirm as to fall within the proviso entitling him to regular bail without application of the twin tests in Section 212(6)(ii). The Court observed that certain procedures (angiography) would require hospitalization but could be arranged and that the petitioner had elected to schedule procedures in a particular sequence. Consequently the Court declined to grant regular bail under the proviso, while recognising the need for medical care by extending interim bail for a limited period. [Paras 28, 29, 30, 33, 34]

Petitioner does not qualify for regular bail under the proviso to Section 212(6); interim bail extended briefly to permit medical attention.

Mandatory twin conditions under Section 212(6)(ii) of the Companies Act, 2013 - economic offences and bail jurisprudence in white collar cases - Extent and effect of the statutory embargo in Section 212(6) (and Section 212(7)) on grant of bail in offences under Section 447 and related provisions of the Companies Act, 2013, and whether the Court should be satisfied qua each alleged distinct fraudulent transaction. - HELD THAT: - The Court recorded the SFIO's submission that Section 212(6) imposes a mandatory requirement that the Public Prosecutor be heard and, if opposed, that the court must be satisfied on reasonable grounds that the accused is not guilty and is not likely to commit an offence on bail. The Court acknowledged authorities emphasising the stringent approach in economic/offence specific non obstante provisions and noted SFIO's contention that satisfaction must be qua each distinct alleged transaction. After comparing the facts of this case with precedents relied upon by the petitioner, the Court found that the allegations and investigative material (including multiple instances of alleged siphoning, manipulation of records and false bills) were of sufficient gravity to justify refusal of regular bail under Section 212(6). Accordingly the statutory embargo operated against grant of regular bail in the present facts. [Paras 11, 13, 14, 36]

Statutory embargo in Section 212(6)/(7) is applicable; Court not satisfied on reasonable grounds of non guilt and likelihood of non reoffending, and thus regular bail refused.

Final Conclusion: Regular bail is refused in the complaint pending before the Special Judge; the petition for bail under Section 439 Cr.P.C. is maintainable although the petitioner was on interim bail, and the interim bail already granted is extended for a further period of sixty days on the same terms and subject to conditions (including prohibition on leaving the country and attendance before the trial court).

Scheme of Amalgamation - Dispensing with convening and holding of meetings of shareholders and creditors - Certification by Statutory Auditors/Chartered Accountants - Convening meetings and appointment of Chairperson and Scrutinizer - Compliance with Companies Act, 2013 r/w Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

Dispensing with convening and holding of meetings of shareholders and creditors - Certification by Statutory Auditors/Chartered Accountants - Whether the meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No.1 may be dispensed with for the purposes of the proposed Scheme of Amalgamation. - HELD THAT: - The Tribunal accepted the applicants' case that the Scheme had been framed in accordance with the Companies Act, 2013, the Board approvals were obtained and the Statutory Auditors/Chartered Accountants had certified the details of shareholders and creditors and compliance with accounting treatment. Affidavits of the shareholders and consents from a majority of unsecured creditors (except seven) were placed on record. On the basis of these certifications and disclosures, and after being satisfied with compliance of extant provisions, the Tribunal found it appropriate to dispense with convening and holding the meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No.1. [Paras 5, 6]

Meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No.1 are dispensed with.

Dispensing with convening and holding of meetings of shareholders and creditors - Certification by Statutory Auditors/Chartered Accountants - Whether the meeting of the Secured Creditors of Applicant Company No.2 may be dispensed with for the purposes of the proposed Scheme of Amalgamation. - HELD THAT: - The Tribunal noted the certificate from the Chartered Accountants identifying the secured creditors of Applicant Company No.2 and recorded that affidavits/consents were filed by the secured creditors. Satisfied with the compliance and disclosures made in the application and supporting certificates, the Tribunal concluded that it was appropriate to dispense with convening and holding the meeting of the Secured Creditors of Applicant Company No.2. [Paras 5, 6]

Meeting of the Secured Creditors of Applicant Company No.2 is dispensed with.

Convening meetings and appointment of Chairperson and Scrutinizer - Compliance with Companies Act, 2013 r/w Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Whether and on what terms the meetings of the Equity Shareholders and Unsecured Creditors of Applicant Company No.2 should be convened for consideration of the Scheme of Amalgamation. - HELD THAT: - The Tribunal directed that the meeting of Equity Shareholders and the meeting of Unsecured Creditors of Applicant Company No.2 be convened on specified dates, appointed the Chairperson and the Scrutinizer, fixed publication requirements for notices, quorum requirements, and remuneration for the Chairperson and Scrutinizer. The Tribunal further directed that the Chairperson and Scrutinizer file their reports within two weeks of the conclusion of the respective meetings and that the applicant companies file the company petition for sanction thereafter, while following all applicable provisions of the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Tribunal also left open the remedy of any aggrieved person to approach the Tribunal by interim application. [Paras 6]

Meetings of Equity Shareholders and Unsecured Creditors of Applicant Company No.2 are to be convened on the terms and procedures directed by the Tribunal, with appointed Chairperson and Scrutinizer and attendant compliance obligations.

Final Conclusion: The Tribunal, being satisfied with statutory certifications, disclosures and board approvals, dispensed with the meetings of Equity Shareholders and Unsecured Creditors of the Transferor (Applicant No.1) and of Secured Creditors of the Transferee (Applicant No.2), and directed convening of meetings of Equity Shareholders and Unsecured Creditors of Applicant No.2 under the procedural and compliance conditions specified, with reporting and further filing obligations for sanction of the Scheme.

Extension of CIRP period - exclusion of lockdown period from CIRP computation - time of submission of resolution plan as the relevant date for eligibility - eligibility under Section 29A - application of Section 240A exemption for MSMEs

Extension of CIRP period - exclusion of lockdown period from CIRP computation - Extension of the corporate insolvency resolution process period and exclusion of the pandemic/lockdown period from computation of the CIRP period were allowed. - HELD THAT: - The Tribunal accepted that the Covid-19 pandemic and the consequent lockdown adversely impacted the progress of the CIRP and that orders of the Supreme Court and NCLAT supported extending periods and excluding lockdown time from computation. In view of the circumstances, the Tribunal found it appropriate to extend the CIRP and to permit exclusion/extension as sought in IA Nos. 973 and 1504 to enable the resolution process to proceed and to allow consideration of prospective resolution plans. Accordingly IA Nos. 973 of 2020 and 1504 of 2020 were allowed and the CIRP period was extended by 90 days, the extension including the exclusion sought. [Paras 24]

IA Nos. 973 of 2020 and 1504 of 2020 are allowed and the CIRP period is extended by 90 days, inclusive of the extension and exclusion sought.

Time of submission of resolution plan as the relevant date for eligibility - eligibility under Section 29A - application of Section 240A exemption for MSMEs - The suspended director/promoter (applicant in IA No. 1306 of 2020) was held eligible to submit a resolution plan because the Corporate Debtor became a medium enterprise w.e.f. 01.07.2020 and thereby benefited from the Section 240A MSME exemption from clauses (c) and (h) of Section 29A as relevant on the date of submission of the plan. - HELD THAT: - The Tribunal analysed the temporal operation of eligibility under Section 29A and the exemption introduced by Section 240A for MSMEs. Noting that the relevant notification classifying the Corporate Debtor as a medium enterprise became effective on 01.07.2020 during the subsistence of the CIRP, the Tribunal held that eligibility must be assessed as at the date of submission of the resolution plan. Since the applicant/promoter ceased to be disqualified under clause (c) of Section 29A w.e.f. 01.07.2020, he was permitted to participate in the resolution process and to submit a plan. The Tribunal therefore allowed IA No. 1306 of 2020 and directed that the applicant submit a resolution plan within 30 days; failure to do so would debar future submissions or extensions. The CoC is directed to consider any plan filed in accordance with law. [Paras 25, 28]

IA No. 1306 of 2020 is allowed; the applicant is permitted to submit a resolution plan within 30 days and the CoC shall consider it in accordance with law.

Final Conclusion: The Tribunal allowed IA Nos. 973 and 1504 permitting an extension of the CIRP period (including exclusion of the lockdown period) and allowed IA No. 1306 permitting the suspended promoter, who became eligible under the MSME notification effective 01.07.2020, to submit a resolution plan within 30 days for consideration by the CoC.

Completion of CIRP within outer limit of 330 days - judicial discretion to extend CIRP beyond 330 days in exceptional circumstances - premature and otiose appeal - direction to adjudicating authority to pass a reasoned order - condonation of delay

Premature and otiose appeal - The appeal was not maintainable being premature/otiose and was dismissed as withdrawn at the appellant's instance. - HELD THAT: - The Tribunal noted that the Adjudicating Authority had already granted the relief sought in IA No.1079 of 2020 by permitting completion of the CIRP up to 330 days and recording consequences on non-completion. In view of that position the Tribunal considered the instant appeal to be premature and otiose. The appellant sought permission to withdraw the appeal and that request was acceded to; the appeal was therefore dismissed as withdrawn. The order records this disposal without deciding the substantive merits of the challenge to the impugned order. [Paras 16]

Appeal dismissed as withdrawn.

Direction to adjudicating authority to pass a reasoned order - judicial discretion to extend CIRP beyond 330 days in exceptional circumstances - IA No.120 of 2021 (seeking extension of 60 days for completion of CIRP) is to be taken up and decided on merits by the Adjudicating Authority by a reasoned order. - HELD THAT: - Although the Tribunal observed that ordinarily CIRP should be completed within the outer limit of 330 days and that extension beyond that is permissible only in exceptional circumstances by exercise of judicial discretion, it did not adjudicate IA No.120 on merits. Instead the Tribunal directed the Adjudicating Authority to take up IA No.120 on the next date fixed and dispose of it on merits by passing a reasoned order, fairly and dispassionately and in accordance with law. [Paras 17]

Adjudicating Authority directed to take up and decide IA No.120 of 2021 on merits by a reasoned order on the next date of hearing (23.4.2021).

Condonation of delay - IA No.39/2021 (seeking condonation of 15 days' delay) is allowed; IA No.40/2021 and IA No.41/2021 are closed. - HELD THAT: - The Tribunal allowed the application for condonation of delay for reasons stated in the application and recorded the closure of two other interlocutory applications. These interlocutory orders were disposed of as part of the appellate directions without substantive adjudication beyond allowance and closure respectively. [Paras 18]

IA No.39/2021 allowed; IA No.40/2021 and IA No.41/2021 closed.

Direction to adjudicating authority to pass a reasoned order - The appellant is directed to file the certified copy of the impugned order of the Adjudicating Authority within two weeks. - HELD THAT: - As a consequential and administrative direction, the Tribunal required the appellant to file the certified copy of the impugned Adjudicating Authority order within the stipulated time to enable further proceedings before the Adjudicating Authority, as ordered. [Paras 18]

Appellant directed to file certified copy within two weeks.

Final Conclusion: The appeal was dismissed as withdrawn; the Adjudicating Authority is directed to take up and dispose of IA No.120 of 2021 on merits by a reasoned order on the next date of hearing; IA No.39/2021 is allowed and IA No.40/2021 and IA No.41/2021 are closed; the appellant must file the certified copy of the impugned order within two weeks.

Jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to direct admission of claims - binding effect of an approved resolution plan - finality of claims after approval of resolution plan - admission of interest on gratuity up to commencement of CIRP

Jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to direct admission of claims - binding effect of an approved resolution plan - Whether this Tribunal can direct the Resolution Professional to admit additional claims for interest after the resolution plan has been approved. - HELD THAT: - The Tribunal noted that the resolution plan in respect of the corporate debtor has already been approved on 29.01.2021 and that, once approved, the resolution plan is binding on all stakeholders. Applying the principle that a successful resolution applicant cannot be confronted with undecided claims after plan approval, the Tribunal held that it cannot direct the respondent to grant any further reliefs to the applicants. The Tribunal observed that the claim process and compilation of the Information Memorandum underpin the resolution plan and that additions after approval would undermine the finality of the process adopted under the Code. Consequently, no direction could be issued post-approval to alter admitted claims or to saddle the resolution applicant with fresh liabilities. [Paras 6]

Tribunal cannot direct the Resolution Professional to admit additional claims for interest after approval of the resolution plan; the application is not maintainable to that extent.

Admission of interest on gratuity up to commencement of CIRP - finality of claims after approval of resolution plan - Whether the applicants' claims for interest on gratuity were admitted and whether any part of their claim survives for adjudication. - HELD THAT: - The respondent filed particulars showing that interest on gratuity in respect of the applicants had been admitted up to the date of commencement of the Corporate Insolvency Resolution Process (CIRP). Having examined the particulars placed on record, the Tribunal found that the applicants had been granted interest on gratuity till the commencement of CIRP. Given this admission and the subsequent approval of the resolution plan, the Tribunal concluded that no live controversy remained for determination in these applications. [Paras 5, 6]

Applicants were granted interest on gratuity up to the date of commencement of CIRP; nothing survives for consideration.

Final Conclusion: Both applications are dismissed as the admitted interest on gratuity was already included up to the commencement of CIRP and the approved resolution plan is binding, precluding any post-approval directions to admit further claims.

Withdrawal of resolution plan after approval by the Committee of Creditors but prior to Adjudicating Authority approval - misrepresentation or omission in the Information Memorandum affecting commercial viability of a resolution plan - obligation of the Resolution Professional to prepare a true and fair Information Memorandum - entitlement of a resolution applicant not to be compelled to implement a commercially unviable plan - forfeiture and refund of earnest money deposit and performance security on withdrawal of resolution plan - no power to compel specific performance of an approved resolution plan by an unwilling resolution applicant

Withdrawal of resolution plan after approval by the Committee of Creditors but prior to Adjudicating Authority approval - misrepresentation or omission in the Information Memorandum affecting commercial viability of a resolution plan - entitlement of a resolution applicant not to be compelled to implement a commercially unviable plan - Whether the Resolution Applicant could withdraw the resolution plan after it was approved by the CoC but before this Tribunal's approval, on the ground of misrepresentation/omission in the Information Memorandum affecting commercial viability. - HELD THAT: - The Tribunal held that resolution applicants prepare plans mainly on the basis of the Information Memorandum and that the RP is required to prepare the IM diligently so that a commercially viable plan can be assessed (para 7). The applicant in this case relied on representations in the IM about project land and generation capacity; subsequent discovery of an additional land parcel and expert findings that without that parcel only 3-4 million units (not the represented ~20 million units) could be generated created a genuine doubt about commercial viability (paras 8-10). The Tribunal accepted that a resolution applicant cannot be compelled to perform a plan when, on the basis of new material and an independent consultant's report, it apprehends substantial losses; reliance was placed on the principle that the Adjudicating Authority cannot force specific performance of a plan by an unwilling applicant (para 9). Given the disparity between the IM and later information, and the resultant adverse impact on the plan's feasibility, the Tribunal held withdrawal was justified and allowed the IA for withdrawal subject to directions (paras 8-10). [Paras 7, 8, 9, 10]

Withdrawal of the resolution plan was permitted: I.A. No.500/2020 allowed and I.A. No.439/2020 dismissed as infructuous.

Forfeiture and refund of earnest money deposit and performance security on withdrawal of resolution plan - obligation of the Resolution Professional to prepare a true and fair Information Memorandum - Whether the EMD and Performance Bank Guarantee furnished by the Resolution Applicant should be forfeited or returned following withdrawal of the plan. - HELD THAT: - The Tribunal observed that although the Applicant was permitted to withdraw given the changed facts affecting viability, the withdrawal and the resultant collapse of the CIRP impose some burden and expense on the process (para 12). Exercising its discretion to meet the interests of justice, the Tribunal directed partial forfeiture to share the CIRP burden while refunding the balance. The decision reflects balancing the applicant's right to withdraw for bona fide misrepresentation/omission and the need to compensate the CIRP stakeholders for costs and potential shortfall in liquidation value (para 12). [Paras 12]

An aggregate sum shall be forfeited and the balance refunded: Rs. 75,00,000 forfeited in total and the remaining amount of the deposits/refunds to be returned to the Resolution Applicant.

Final Conclusion: The Tribunal allowed the application for withdrawal of the resolution plan and dismissed the application for approval as infructuous; it directed partial forfeiture of deposits to meet CIRP expenses and ordered refund of the balance.

Initiation of CIRP under Section 7 - Corporate Insolvency Resolution Process - default - invocation of guarantee - Moratorium under Section 14 - requirement of Information Utility certificate - maintainability of CIRP against corporate guarantor post admission of principal borrower - appointment of Interim Resolution Professional

Initiation of CIRP under Section 7 - Corporate Insolvency Resolution Process - default - Whether the applications under Section 7 seeking initiation of CIRP against the corporate guarantors are to be admitted. - HELD THAT: - The Tribunal found that the Financial Creditor proved the existence of a financial debt arising from invocation of guarantees and that the corporate guarantors failed to pay on being called upon. The admitted facts include that the debt exceeds the statutory threshold, default occurred and the debt is not time-barred. On these facts, and in absence of any pleaded legal bar, the adjudicating authority was satisfied that default had occurred and therefore the applications were required to be admitted to initiate CIRP. [Paras 6, 7, 15]

Applications under Section 7 are admitted and CIRP is initiated against the corporate guarantors.

Declaration of NPA and RBI guidelines not a defence in CIRP - Whether allegation that the Financial Creditor wrongly declared the principal borrower's account NPA in contravention of RBI guidelines defeats the Section 7 application. - HELD THAT: - The Tribunal held that non-observance of RBI guidelines in declaring an account NPA does not negate the admitted fact of default for the purposes of Section 7. The essential question at the admission stage is whether a default has occurred and the debt is due; regulatory compliance concerning classification as NPA is not a bar to initiation of CIRP. Accordingly, this defence was rejected. [Paras 8]

Defence based on alleged improper NPA classification and non observance of RBI guidelines is rejected.

Requirement of Information Utility certificate - Whether non compliance with the provision regarding submission of financial statements to an Information Utility (certificate of default) is mandatory to initiate CIRP. - HELD THAT: - The Tribunal observed that, to date, filing a certificate of default issued by an Information Utility is not mandatory for initiating CIRP. A financial creditor may prove debt and default by other evidence. As both debt and default were otherwise established and not in dispute, non production of an Information Utility certificate did not preclude admission of the Section 7 applications. [Paras 9]

Requirement of an Information Utility certificate is not a mandatory pre condition to initiate CIRP; the defence is rejected.

Maintainability of CIRP against corporate guarantor post admission of principal borrower - Whether CIRP cannot be initiated against a corporate guarantor if the principal borrower has already been admitted to CIRP for the same debt. - HELD THAT: - After considering conflicting NCLAT orders and subsequent authorities, including the effect of amendments and the Supreme Court decision relied upon by NCLAT, the Tribunal held that there is no bar in the Code to simultaneous or subsequent proceedings against a guarantor for the same debt. NCLAT's later view that CIRP can proceed against both principal borrower and guarantor was accepted, and the corporate guarantors' challenge on this ground was negatived. [Paras 10, 11, 12, 13]

Proceedings under Section 7 against the corporate guarantors are maintainable notwithstanding CIRP against the principal borrower.

Appointment of Interim Resolution Professional - Moratorium under Section 14 - Appointment of Interim Resolution Professional and imposition of moratorium upon admission of CIRP. - HELD THAT: - The Tribunal appointed the proposed Interim Resolution Professional after noting no disciplinary proceedings against him and directed him to perform duties under the Code. The moratorium was declared to operate from the date of the order until completion of CIRP or further order, with attendant prohibitions on suits, proceedings, and enforcement actions, and directions regarding supply of essential goods and assistance to the IRP, in accordance with the Code. [Paras 16]

Interim Resolution Professional appointed and moratorium under Section 14 applied from the date of the order.

Invocation of guarantee - Whether procedural irregularity as to authorization of the officer presenting the application defeats maintainability of the applications. - HELD THAT: - The Tribunal declined to reject the applications on the technical ground that the officer who filed the petition lacked proper authorization, noting that the Financial Creditor is the bank and that the debt and default were admitted. Given the commercial character and public interest in recovery of public money, such a procedural technicality did not justify dismissal. [Paras 14]

Applications not rejected on the ground of alleged improper authorization of the filing officer.

Final Conclusion: The Tribunal allowed both Section 7 petitions, admitted the corporate guarantors to CIRP, appointed the Interim Resolution Professional, declared the moratorium with the usual prohibitions and directions, and directed communication and public announcement of the CIRP; the various defences raised by the corporate guarantors were rejected.

Applicability of exempted service under the cenvat/Service Tax scheme versus activities in the negative list - Option to reverse credit under Rule 6(3) vis-a -vis reversal under Rule 6(3A) of the Cenvat Credit Rules, 2004 - Requirement of separate accounts under Rule 6(2) and its bearing on choice of reversal mechanism - Nexus test for admissibility of cenvat credit on input services (travel, accommodation, AMC, taxi hire) - Registration of premises as a condition for availing input service credit - Invoking extended period of limitation in departmental audit cases

Applicability of exempted service under the cenvat/Service Tax scheme versus activities in the negative list - Option to reverse credit under Rule 6(3) vis-a -vis reversal under Rule 6(3A) of the Cenvat Credit Rules, 2004 - Requirement of separate accounts under Rule 6(2) and its bearing on choice of reversal mechanism - Whether Rule 6(3) CCR, 2004 was correctly applied to require reversal @6/7% on account of sale of space/time for advertisement and whether appellant's reversal under Rule 6(3A) satisfied statutory requirements - HELD THAT: - The Tribunal found that sale of space/time for advertisement in print media falls within the negative list under Section 66D of the Finance Act, 1994 and therefore cannot be equated to an "exempted service" for purposes of applying Rule 6(3) CCR, 2004. The explanation relied upon by the Department does not convert a negative-list activity into an exempted service. Separately, facts on record show that the appellant maintained separate accounts for taxable and common credits and during audit had reversed proportionate credit under Rule 6(3A) and paid interest. Rule 6(3) provides an option but where the assessee has exercised the alternative (Rule 6(3A)) and has in fact reversed an amount not less than that required, mere failure to intimate the Department at the start of the year is a procedural lapse and does not defeat the substantive right to avail the chosen option. The Department was therefore not justified in imposing reversal under Rule 6(3)(i) when reversal under Rule 6(3A) had already been effected. [Paras 6]

Department's invocation of Rule 6(3)(i) was incorrect; appellant had complied with Rule 6(3A) and the reversal demanded under Rule 6(3) was not sustainable.

Nexus test for admissibility of cenvat credit on input services (travel, accommodation, AMC, taxi hire) - Registration of premises as a condition for availing input service credit - Whether cenvat credit claimed on input services such as air travel/visa, accommodation and AMC for flat, and taxi hire charges was inadmissible for want of nexus or because services were provided at unregistered premises - HELD THAT: - The Tribunal accepted that, given the appellant's business of event management and organisation of exhibitions, travel and accommodation services for employees were rendered in direct relation to the output services and therefore bear the requisite nexus to qualify as input services. The AMC for the flat used by employees in connection with events is similarly connected and its credit is permissible. Registration of the premises where the service is provided is not a pre-condition for claiming input service credit, consistent with the cited authority of the Karnataka High Court; consequently denial of credit on that basis was not warranted. The Tribunal relied on precedents holding that business travel and related expenses, if undertaken for business purposes, satisfy the nexus requirement for input service credit. [Paras 6]

Cenvat credit on the challenged input services is admissible; denial for lack of nexus or on account of premises registration is set aside.

Invoking extended period of limitation in departmental audit cases - Whether extended period of limitation could be invoked against the appellant in respect of audit period October 2011 to September 2015 - HELD THAT: - The Tribunal found that the show-cause notice arose from a departmental audit covering the period October 2011 to September 2015 and that the relevant facts were disclosed during that audit. There was no basis to allege suppression with intent to evade tax. The appellant produced a CA certificate and had reversed an amount exceeding the computed liability under Rule 6(3A). In these circumstances the extended period of limitation could not be invoked. [Paras 6]

Extended period of limitation is not invokable against the appellant for the audit period; extended-period demand is unsustainable.

Final Conclusion: The impugned order is set aside. The appeal is allowed: appellant's reversal under Rule 6(3A) is accepted in lieu of reversal under Rule 6(3), challenged cenvat credit on specified input services is held admissible, and invocation of extended limitation is rejected; consequential relief, if any, shall follow.

Non-monetary consideration - consideration for taxable service - value of free supplies not includible in taxable value - gross amount charged - allowed loss and consumption clause - regasification service - application of Supreme Court decision in Bhayana Builders

Non-monetary consideration - consideration for taxable service - value of free supplies not includible in taxable value - gross amount charged - allowed loss and consumption clause - Whether the pre-determined quantum of LNG identified as 'allowed loss and consumption' supplied free of cost by customers forms part of the consideration for regasification services and is includible in the taxable value for service tax. - HELD THAT: - The Tribunal examined the contractual scheme under which the Appellant provides regasification services and the separate stipulation for a pre-agreed percentage of LNG as 'allowed loss and consumption'. It accepted the Appellant's characterization that such stipulation constitutes a contractual remission of performance (a condition of supply) rather than a quid pro quo payment. Relying on the statutory concept of 'consideration' and the Contract Act definition, the Tribunal held that only amounts actually charged by the service provider to the service recipient qualify as consideration for determining taxable value. The Tribunal further applied the Supreme Court's exposition in Bhayana Builders that service tax is leviable on the gross amount charged (the amount billed) and that the cost of goods supplied free by the service recipient cannot be treated as consideration or added to the billed amount. The Tribunal noted analogous reasoning in an external ruling concerning non-monetary consideration, observing that items made available to the supplier to enable performance do not necessarily constitute consideration. On these grounds the Tribunal concluded that the pre-determined free supply of LNG under the 'allowed loss and consumption' clause cannot be included in the value of the taxable service for levy of service tax. [Paras 32, 37, 38, 49, 50]

The demand of service tax insofar as it seeks to include the value of LNG identified as 'allowed loss and consumption' in the taxable value is not sustainable; the impugned order confirming such demand is set aside.

Final Conclusion: The appeal is allowed and the order confirming service tax, interest and penalty insofar as it treats the pre-determined quantum of LNG identified as 'allowed loss and consumption' as consideration and includes its value in the taxable value is set aside for the period July 2014 to March 2015.

Exempted goods - CENVAT credit - Rule 6(1) of the CENVAT Credit Rules - Rule 6(4) of the CENVAT Credit Rules - conditional exemption requiring reinvestment - interpretation of exemption notification

Exempted goods - Rule 6(1) of the CENVAT Credit Rules - conditional exemption requiring reinvestment - Whether the final products manufactured and cleared by the assessee are "exempted goods" for the purpose of Rule 6(1) (and consequently Rule 6(4)) of the CENVAT Credit Rules, thereby barring CENVAT credit on inputs and capital goods. - HELD THAT: - The exemption Notification dated 21.01.2004 (as amended) granted relief subject to detailed conditions which required the manufacturer to utilize an amount equivalent to duties waived for specified investments in the North-Eastern States, obtain committee certification, observe reinvestment/lock-in for ten years and, upon breach, face recovery of the duties forgone. The scheme is therefore a conditional exemption and not an unconditional forgoing of duty. Rule 2(d) defines "exempted goods" as excisable goods exempt from the whole of the duty of excise leviable thereon (including goods chargeable to nil rate). On the facts and the terms of the Notification, the exemption did not operate as an unconditional waiver that increased the manufacturer's disposable receipts because the duty element had to be ploughed back as prescribed and could be recovered on breach. The Tribunal correctly construed the Notification as conditional and noted also that certain duties (such as National Calamity Contingent duty and education cess) remained relevant to the analysis. Applying the statutory definition in Rule 2(d) and the governing principles for conditional exemptions, the Tribunal held that the finished product could not be treated as "exempted goods" within the meaning of Rule 6(1)/(4), and therefore the bar on taking CENVAT credit for inputs and capital goods used in manufacture of "exempted goods" did not apply. The Supreme Court decision in Commissioner of Sales Tax, J & K v. Pine Chemicals Ltd. was relied upon to underline the legal distinction between conditional and unconditional exemptions. [Paras 12, 13, 14, 16, 17]

The Tribunal's interpretation that the Notification grants a conditional exemption and that the finished goods are not "exempted goods" under Rule 2(d) is upheld; consequently the disallowance/recovery of CENVAT credit under Rule 6(1)/(4) was not warranted and the appeals filed by the revenue are dismissed.

Final Conclusion: The appeals by the revenue are dismissed; the Tribunal correctly held that the exemption was conditional and the final products were not "exempted goods" within the meaning of the CENVAT Credit Rules, so the CENVAT credit availed need not be disallowed or recovered.

Quash and set aside - opportunity of hearing - pass reasoned order - remand for fresh decision - no further extension

Remand for fresh decision - opportunity of hearing - pass reasoned order - Designated Committee to decide the writ applicant's application afresh in accordance with the Court's earlier directions - HELD THAT: - The Court recorded its earlier direction (para 31 of the order dated 27th January, 2021) quashing the statement in Form SVLDRS2 and the impugned rejection letters, and directing the Designated Committee to decide the application afresh after affording an opportunity of hearing and to pass a reasoned order. The present order reiterates that the Designated Committee must pass its final order in accordance with those directions and the law, thereby leaving the matter to be finally determined by the Committee on fresh consideration consistent with the Court's observations. [Paras 1]

Matter remanded to the Designated Committee to decide afresh after hearing and to pass a reasoned order consistent with the Court's earlier directions.

No further extension - Application for extension of time to comply with the Court's directions - HELD THAT: - The original respondent sought additional time to comply, citing that the Designated Committee had given the writ applicant a hearing but, owing to unavoidable circumstances including a member testing Covid positive, had not taken a final decision. The Court granted a limited extension to enable the Committee to pass the final order in accordance with law up to 17th April, 2021, and expressly declined to grant any further extension. [Paras 3]

Extension granted until 17th April, 2021 for the Designated Committee to pass the final order; no further time will be allowed.

Final Conclusion: Application disposed of by granting the Designated Committee a final extension until 17th April, 2021 to decide the matter afresh and pass a reasoned order in accordance with the Court's earlier directions; no further extension will be permitted.

Special rate representing actual value addition under Clause 3(1) of Notification No.20/2008 - Restoration of Notification No.20/2008 by appellate judgment - Right to claim fixation of a special rate before the Commissioner - Refund of excise duty subject to notified rates unless a special rate is fixed - Interim protection from coercive measures pending adjudication of a special rate claim

Special rate representing actual value addition under Clause 3(1) of Notification No.20/2008 - Right to claim fixation of a special rate before the Commissioner - Interim protection from coercive measures pending adjudication of a special rate claim - The petitioner's applications under Clause 3(1) of Notification No.20/2008 seeking fixation of a special rate on the basis of alleged add ons must be considered by the proper authority and coercive measures shall not be taken until such consideration is complete. - HELD THAT: - The petitioner made two applications under Clause 3(1) of Notification No.20/2008 for fixation of a special rate on account of add ons to goods. The Notification having been restored by the appellate judgment, the statutory scheme permits a manufacturer to seek fixation of a special rate representing actual value addition where the prescribed ratio is exceeded. In the circumstances, and in view of the statutory right conferred by Clause 3(1), it would be inappropriate for the department to proceed to enforce refunds or take coercive action on the basis of the tabled rates without first considering and deciding the petitioner's pending applications. The court thus directed the Principal Commissioner of GST to consider the applications and fix a special rate, if justified, within a stipulated time; until such decision is taken, the department is restrained from initiating coercive measures and from pursuing the communication instructing attachment of the petitioner's bank accounts. [Paras 7, 8, 9]

Principal Commissioner of GST to consider the two applications dated 02.02.2021 and 04.02.2021 under Clause 3(1) and decide the claim for fixation of a special rate within six weeks; until that decision no coercive measures shall be taken and the communication dated 05.02.2021 shall not be pursued.

Final Conclusion: Writ petition allowed to the extent that the Principal Commissioner of GST is directed to decide the petitioner's Clause 3(1) applications within six weeks and, pending that decision, the department is restrained from taking coercive action or pursuing the bank attachment communication.

Input service - activities relating to business - CENVAT credit - integral part of manufacture - interpretation of CENVAT Credit Rules, 2004

Input service - activities relating to business - CENVAT credit - integral part of manufacture - Eligibility of CENVAT credit on services for construction of road and storm water drain/civil work at tanker parking facility situated within factory premises for the period prior to 1.4.2011. - HELD THAT: - The Court determined that for the period prior to 1.4.2011 the definition of input service under the CENVAT Credit Rules, 2004 embraced the wider phrase activities relating to business, and thereby covered services which are commercially required for carrying on the business of manufacture or provision of output services. The impugned works - construction of road and storm water drain/civil works within the factory for tanker and truck movement and drainage of rain/ground water - were held to be services without which the appellant could not commercially carry on its manufacturing operations and thus fell within the ambit of input service as then defined. The Tribunal's earlier reasoning in Raymond UCO Denim Pvt. Ltd. and the approach in Madras Cement Ltd. were followed to the extent they recognise that, before the amendment effective 1.4.2011, activities relating to business were eligible as input services. Having regard to the settled interpretation of the wider definition applicable in the relevant period, the impugned denial of CENVAT credit was unsustainable and the appellate order upholding the denial was set aside. [Paras 6]

Appeal allowed; impugned order denying CENVAT credit set aside.

Final Conclusion: For the period prior to 1.4.2011 the construction of internal roads and storm water drains at the factory constituted input service falling within "activities relating to business"; the Commissioner(A)'s order denying CENVAT credit is set aside and the appeal is allowed.

Concessional sales tax declaration ("C" Form) - interstate supply and eligibility for concessional rate of duty - jurisdiction of taxing authority to determine taxability - duty to communicate valuation mismatch and afford opportunity for clarification - judicial non-determination of tax rate and leave to assessing authority

Concessional sales tax declaration ("C" Form) - interstate supply and eligibility for concessional rate of duty - jurisdiction of taxing authority to determine taxability - Entitlement to request issuance of "C" Form by the purchaser (TSECL) for goods supplied from outside the State and the impropriety of the supplier's registration status being treated by the purchaser as determinative. - HELD THAT: - The Court found that Clause 13.2 of the contract obliged respondent No.4 (TSECL) to request and, where appropriate, obtain concessional sales tax declaration forms for goods supplied directly by the contractor. The respondent No.4's contention that the petitioner could not claim "C" Forms because the petitioner was a registered dealer in Tripura at a later date was factually inaccurate for the period in question and legally unsustainable. The question whether the sales attracted concessional rate of duty is a matter for the taxing authority and not for respondent No.4 to decide. The record shows that respondent No.4 had approached the VAT department for issuance of "C" Forms, and the taxing authority's stated ground for non-issuance was a valuation mismatch. Given these circumstances, respondent No.4's refusal to facilitate issuance of "C" Forms on the ground of supplier registration or to decide taxability was held invalid. [Paras 8]

Respondent No.4 could not, by treating the petitioner as a Tripura-registered dealer or otherwise, refuse to facilitate issuance of "C" Forms; determination of concessional rate is for the taxing authority.

Duty to communicate valuation mismatch and afford opportunity for clarification - remand for verification and issuance of "C" Forms - Procedure to be followed by the taxing authority for issuance of outstanding "C" Forms and the remedial steps to permit the petitioner to clarify alleged valuation discrepancies. - HELD THAT: - The Court directed a procedural course: respondent No.2 (the taxing authority) shall communicate the specific mismatch in figures that prevented issuance of the "C" Forms to both the petitioner and respondent No.4 within two weeks. The petitioner will then have four weeks to explain or reconcile the discrepancy. Thereafter respondent No.2 is to consider the petitioner's clarification and issue "C" Forms to respondent No.4 insofar as legally justified, completing the exercise within four months of receipt of the petitioner's clarification. The Court made clear it was not deciding the substantive question of the rate of tax to be applied and left that matter to the assessing authority if the issue arises. [Paras 9, 10]

Respondent No.2 shall communicate the valuation discrepancy, afford the petitioner an opportunity to clarify within the specified time, and on consideration issue "C" Forms to the extent legally justified within the prescribed timeframe; substantive tax liability remains for the assessing authority to determine.

Final Conclusion: Writ petition disposed by directing the taxing authority to identify and communicate the valuation mismatch preventing issuance of "C" Forms, afford the petitioner an opportunity to reconcile the figures, and thereafter issue "C" Forms as legally justified within the stipulated timelines; no adjudication on the applicable rate of tax was made.

Maintainability of writ against a show-cause notice - jurisdictional competence to issue a show-cause notice - show-cause notice under Karnataka Value Added Tax Act, 2003 - remand for fresh adjudication by assessing officer - consideration of binding or persuasive precedent by adjudicating authority - time spent in litigation not to be set off against limitation

Maintainability of writ against a show-cause notice - jurisdictional competence to issue a show-cause notice - Whether a writ petition challenging show-cause notices issued under the Karnataka Value Added Tax Act, 2003 was maintainable at the interlocutory stage. - HELD THAT: - The Court applied the settled principle that ordinarily a writ does not lie against a mere show-cause notice or charge-sheet where the issuing authority has jurisdiction, since such notice does not by itself constitute an adverse order affecting rights. Relying on the reasoning in Union of India v. Kunisetty Satyanarayana as cited in the judgment, the Court held that because the notices were issued by a competent authority, the issuance itself did not infringe any right of the petitioner and therefore interference by way of writ at that stage was not warranted. The Single Judge was therefore justified in dismissing the writ petition while allowing the petitioner the opportunity to respond to the notices. [Paras 4, 5, 6]

Writ petition challenging the show-cause notices was not maintainable at the interlocutory stage and the Single Judge's order dismissing the writ subject to liberty to reply was upheld.

Remand for fresh adjudication by assessing officer - consideration of binding or persuasive precedent by adjudicating authority - Whether the assessing officer should decide the matters on merits and, if so, with what guidance. - HELD THAT: - The Court directed that the assessing officer proceed to pass the final order after considering the petitioner's reply. The Court specifically required the assessing officer to take into account the Division Bench judgment in STRP No.82/2018 dated 26.02.2021 (The State of Karnataka vs. M/s. Tallam Apparels) while deciding the matter. The matter was therefore remitted to the assessing officer for fresh adjudication on merits, with the explicit instruction to consider the noted precedent. [Paras 6, 7]

Proceedings remitted to the assessing officer for fresh decision on merits, with direction to consider STRP No.82/2018 dated 26.02.2021.

Time spent in litigation not to be set off against limitation - Whether the petitioner should be permitted to file a reply within a specified time and whether the time already spent in litigation will affect limitation for the final order. - HELD THAT: - The Court granted the petitioner liberty to file a reply within four weeks and directed that the assessing officer shall take that reply into account in passing the final order. Further, the Court held that the time lost before the Court shall not be counted against the petitioner for purposes of limitation when the assessing officer passes the final order. [Paras 8, 9]

Petitioner permitted to file reply within four weeks; assessing officer to consider the reply and not to disallow relief on account of time spent in litigation.

Final Conclusion: The writ appeal is dismissed; the Single Judge's dismissal of the writ against interlocutory show-cause notices is upheld, the matter is remitted to the assessing officer for fresh disposal on merits taking into account the Division Bench judgment in STRP No.82/2018 dated 26.02.2021, the petitioner may file a reply within four weeks, and time spent in litigation will not be set off for limitation purposes.

Liability to pay interest on deferred sales tax - date from which interest is payable on IFST deferral - cancellation of deferral agreement requires a written order and show cause - effect of BIFR reference and de-registration on recovery of dues - discretionary grant of further deferment under government order

Liability to pay interest on deferred sales tax - date from which interest is payable on IFST deferral - effect of BIFR reference and de-registration on recovery of dues - Amutha Mills principle that interest runs from due date of repayment - Appellant is liable to pay interest on the deferred sales tax and the period for which interest is payable is fixed. - HELD THAT: - The Court applied the established principle that interest on IFST deferral is payable from the due date for repayment and not from the date the deferral was availed. The department was statutorily barred from recovery while the unit was before the BIFR; repayment could not be treated as due during the period of BIFR reference and until the unit was de-registered. The BIFR de-registration on 05.2.2013 made recovery permissible thereafter, and the Court fixed 06.2.2013 as the date from which repayment became due. The appellant paid the tax on 25.4.2015; accordingly the Court held the appellant liable to pay interest for the period from 06.2.2013 to 24.5.2015, directed the assessing officer to verify the computation, issue demand and lift attachment, and granted three months thereafter for payment. [Paras 5, 30, 31, 36]

Interest is payable by the appellant for the period 06.2.2013 to 24.5.2015; assessing officer to verify computation, issue demand and lift attachment, and appellant granted three months from lifting of attachment to remit the interest.

Discretionary grant of further deferment under government order - applicability of G.O.Ms.No.1076 Industries (MIGI) dated 04.10.1988 - Applicability of the Government Order G.O.Ms.No.1076 (MIGI) dated 04.10.1988 to extend deferment was not adjudicated on merits and was left open. - HELD THAT: - The Court observed that grant of benefit under G.O.Ms.No.1076 is discretionary and involves consideration of multiple factors. Consequently, the Court declined to make any finding on applicability of that Government Order to the appellant's case and left it open for the appellant to approach the Government for relief if so advised. [Paras 33, 34, 35]

No adjudication on applicability of G.O.Ms.No.1076; appellant may approach the Government for consideration of extension of deferment.

Cancellation of deferral agreement requires a written order and show cause - Cancellation of the deferral agreement does not occur automatically on default but requires a written order and principles of natural justice. - HELD THAT: - Examining the terms of the deferral deed, the Court held that Clause 11 contemplates a cancellation by way of a written order and that where violations are alleged the Department must indicate the nature of violations and afford the dealer an opportunity to be heard; mere default without issuance of cancellation order did not operate to extinguish the deferral without departmental action. [Paras 10, 11]

Deferral agreement was not treated as automatically cancelled; a written cancellation order and show cause process is required before cancellation operates.

Final Conclusion: The writ appeal is partly allowed: the appellant is held liable to pay interest on deferred sales tax for the period 06.2.2013 to 24.5.2015; the assessing officer to verify computation, issue demand, lift attachment and allow three months for payment; the question of further deferment under G.O.Ms.No.1076 is left to the Government's discretion and not decided by the Court.

Penalty for suppression of turnover - Mens rea in tax penalty cases - Levy of enhanced penalty (one and a half times disputed tax) under provisions pari materia in PGST Act and PVAT Act - Judicial review of discretionary reduction of penalty - Exercise of administrative discretion must be supported by reasons

Penalty for suppression of turnover - Levy of enhanced penalty (one and a half times disputed tax) under provisions pari materia in PGST Act and PVAT Act - Exercise of administrative discretion must be supported by reasons - Mens rea in tax penalty cases - Judicial review of discretionary reduction of penalty - Whether the Appellate Tribunal was justified in reducing the penalty imposed for suppression of turnover where the Tribunal confirmed deliberate suppression but gave no reasons for reducing the quantum of penalty. - HELD THAT: - The Tribunal confirmed the Assessing Officer's and first appellate authority's conclusion that the assessees deliberately suppressed turnover, yet exercised its discretion to reduce the penalty without assigning specific reasons for doing so. Exercise of discretion in imposing or modifying penalty requires articulation of valid reasons; absent such reasons the exercise is arbitrary and amenable to interference. A Division Bench decision addressing analogous facts under provisions pari materia of the PGST Act and the PVAT Act held that mens rea is a necessary component in such penal provisions and that where the record manifests deliberate suppression (mens rea), reduction of penalty merely because the dealer accepted and paid tax was misplaced sympathy. Applying that reasoning, the Tribunal's unexplained reduction of the enhanced penalty was unsustainable. The Court therefore interfered with the Tribunal's order and restored the penalty as confirmed by the lower authorities.

Tribunal's order reducing the penalty set aside; Tax Case Revisions allowed and the questions framed answered in favour of the Revenue and against the respondents, restoring the penalty imposed for suppression of turnover.

Final Conclusion: The Court allowed the Revenue's Tax Case Revisions, holding that the Appellate Tribunal's unexplained reduction of the penalty imposed for deliberate suppression of turnover was arbitrary and unsustainable; the Tribunal's order reducing the penalty was set aside and the penalty as confirmed by the Assessing Officer and first appellate authority restored.

Willful suppression of assessable turnover - penalty as punishment for willful suppression - burden of proof on the dealer to explain concealment - voluntary disclosure / 'buy peace' not a bar to penalty - rejection of return and assessment on best judgement - reliance on supplier records obtained by cross verification - remand to Assessing Officer for fresh consideration of penalty

Reliance on supplier records obtained by cross verification - burden of proof on the dealer to explain concealment - Whether the Assessing Authority was justified in relying on purchase details obtained from HPCL and whether the dealer was entitled to cross examine the supplier before assessment. - HELD THAT: - The Court held that the cross verification of records obtained from HPCL established suppression of turnover and that the dealer failed to controvert the allegations in the pre assessment notices. The plea that the dealer should have been permitted to cross examine HPCL officials was rejected as untenable. The Court relied on earlier decisions, distinguishing those cited by the respondent, and observed that the burden to explain concealment rests on the dealer and not on the Department to prove the supplier's records. [Paras 6, 11, 12, 13, 14]

The Assessing Authority was justified in relying on the HPCL records; the request to cross examine the supplier was rejected and the dealer failed to discharge the burden of proof.

Willful suppression of assessable turnover - penalty as punishment for willful suppression - voluntary disclosure / 'buy peace' not a bar to penalty - Whether the Tribunal was right in concluding there was no willful suppression where the dealer paid the tax (in installments) during assessment proceedings. - HELD THAT: - The Court found the Tribunal's conclusion that there was no willful suppression to be incorrect. Payment of tax in instalments after issuance of pre assessment notices, and acceptance of such payments by the Department, do not automatically negate willful suppression. The Court referred to principle that mens rea may be required for penal consequences, but emphasized that the dealer did not establish any bona fide explanation for the understatement. The Supreme Court's principle that voluntary disclosure or 'buy peace' should not be allowed to obviate penalty proceedings was applied to reject the Tribunal's sympathy based interference. [Paras 11, 12, 16, 18, 20]

The Tribunal was wrong to hold there was no willful suppression; the finding is set aside in favour of the Revenue.

Penalty as punishment for willful suppression - remand to Assessing Officer for fresh consideration of penalty - Whether the penalty levied at one and a half times the tax should be sustained or requires reconsideration. - HELD THAT: - While the Court concluded that willful suppression was established, it recognised that the Assessing Officer has limited jurisdiction to examine the dealer's conduct and any bona fide explanations prior to and during assessment. The Court directed that the matter of penalty be remitted to the Assessing Officer for fresh consideration, with instructions to take into account the dealer's conduct both before issuance of the pre assessment notice and during assessment proceedings, including promptness in payment thereafter. [Paras 17, 21, 22, 23]

The Tribunal's confirmation of the penalty is set aside and the matter is remanded to the Assessing Officer for fresh consideration of penalty in light of the Court's observations.

Final Conclusion: The Revenue's revision is allowed: the Tribunal's finding of no willful suppression is set aside and the confirmation of penalty is quashed; the matter is remitted to the Assessing Officer to reconsider imposition and quantum of penalty for 2006-07 in accordance with the observations in this order.