TaxTMI Updates e-Newsletter
Mar 27,2023

Intermediary - place of supply - export of services - Section 2(13) of the IGST Act - Section 2(6) of the IGST Act - Section 13(8)(b) of the IGST Act

Intermediary - Section 2(13) of the IGST Act - Whether the services rendered by the petitioner fall within the definition of an intermediary under Section 2(13) of the IGST Act. - HELD THAT: - The court examined the statutory definition which describes an intermediary as one who "arranges or facilitates" the supply of goods or services between two or more persons and excludes a person who supplies such goods or services on his own account. The Adjudicating Authority's conclusion that the petitioner was an intermediary rested on the premises that the petitioner provided services "on behalf of" its head office and that the agreements were between the head office and the overseas EY entities. The court rejected this reasoning as misconstruing the definition: a supplier who provides the main service himself (even if partly on behalf of a head office) does not become an intermediary merely because the contract or relationship involves the head office. The court emphasised that an intermediary requires a minimum of three parties and a distinct ancillary supply of facilitation or arrangement, which is absent here where the petitioner itself performed and invoiced the professional services directly to overseas recipients and received payment in convertible foreign exchange. The prior service-tax finding in favour of the petitioner and the similarity of the intermediary definitions under the previous regime and GST were noted as consistent with this interpretation. [Paras 23, 24, 26, 27, 28]

The services rendered by the petitioner are not intermediary services within the meaning of Section 2(13) of the IGST Act.

Place of supply - export of services - Section 13(8)(b) of the IGST Act - Section 2(6) of the IGST Act - Whether the place of supply of the services is India by virtue of being intermediary services and whether the services qualify as export of services under Section 2(6) of the IGST Act. - HELD THAT: - Section 13 provides that the place of supply of services is generally the location of the recipient, except for specified services (including intermediary services) where the place of supply is the location of the supplier. Because the court concluded that the petitioner did not provide intermediary services, Clause (b) of Section 13(8) is inapplicable. Consequently, the place of supply must be determined under the general rule and is the location of the recipient. The facts show that the recipients (EY Entities) are located outside India and payment was received in convertible foreign exchange. These elements satisfy the conditions of Section 2(6) for 'export of services'. The court therefore held that the services are exports and rejected the authorities' characterization that placed supply in India on intermediary grounds. [Paras 31, 32, 33, 34]

The place of supply is the location of the overseas recipients and the services qualify as export of services under Section 2(6) of the IGST Act.

Refund of input tax credit - Whether the impugned orders rejecting the petitioner's refund claims for the stated periods should be set aside and the refund applications processed. - HELD THAT: - Having held that the petitioner's services are exports, the legal foundation for denial-treatment as intermediary services with place of supply in India-fails. The court noted the petitioner had earlier secured favourable findings under the service tax regime and that refund/ITC claims for periods after March 2020 had been allowed. Given the legal conclusion that the supplies were exports, the impugned orders denying refund for the specified periods lacked merit. The court therefore set aside the impugned appellate and original orders and directed the adjudicating authority to process the refund applications expeditiously. [Paras 29, 35]

The impugned orders-in-original and the impugned order-in-appeal are set aside and the Adjudicating Authority is directed to process the petitioner's refund applications expeditiously.

Final Conclusion: The writ petition is allowed: the courts below erred in treating the petitioner as an intermediary; the services supplied to overseas EY entities qualify as export of services and the orders denying refund are set aside with a direction to process the refund claims for the stated periods expeditiously.

Supply - Export of goods - Place of supply - location outside India - Exporter under the Customs Act - Bill of lading as document of title - Entry 7 of Schedule III - supply from a place in the non-taxable territory to another place in the non-taxable territory

Exporter under the Customs Act - Bill of lading as document of title - Place of supply - location outside India - Export of goods - Whether the supply of goods by the Indian manufacturer to the applicant qualifies as export and the place of supply is outside India. - HELD THAT: - The Authority examined the contractual and shipping arrangements and the definitions under the Customs Act and relevant international exposition of a bill of lading. The manufacturer files the shipping bill as exporter and receives the bill of lading, which evidences title and is conclusive for purposes of export. Consequently, the manufacturer is the owner/beneficial owner or person holding out to be the exporter and, while holding title, takes the goods out of India. Therefore the first transaction (manufacturer to applicant) constitutes export of goods and the place of supply for that transaction is the location outside India. [Paras 12, 13, 15]

The manufacturer is the exporter and the place of supply of the manufacturer-to-applicant transaction is outside India.

Supply - Entry 7 of Schedule III - supply from a place in the non-taxable territory to another place in the non-taxable territory - Whether the supply of the same goods by the applicant to the overseas customer is taxable under GST or is to be treated as neither a supply of goods nor services. - HELD THAT: - Having held that the manufacturer exports the goods and the place of supply for the manufacturer-to-applicant leg is outside India, the Authority found that the applicant's subsequent transaction is effectively a supply from a location outside India to another location outside India. Such a transaction falls within Entry 7 of Schedule III which treats supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India as neither a supply of goods nor a supply of services for GST purposes. [Paras 16]

The supply from the applicant to the overseas customer is neither a supply of goods nor a supply of services under the CGST Act.

Final Conclusion: The Authority rules that the manufacturer-to-applicant leg is an export with place of supply outside India, and consequently the applicant's onward transaction to the overseas customer is not a taxable supply under GST but falls within Entry 7 of Schedule III and is therefore treated neither as supply of goods nor supply of services.

Qualification recognised by law - educational institution under Notification No.12/2017 - exemption under entry 66(a) of Notification No.12/2017 - SAC 999294 (Other education and training services n.e.c.) - taxability of training services

Qualification recognised by law - educational institution under Notification No.12/2017 - exemption under entry 66(a) of Notification No.12/2017 - SAC 999294 (Other education and training services n.e.c.) - Whether the ATR extension/type rating training provided by the applicant qualifies the applicant as an "educational institution" within the meaning of entry 66(a) of Notification No.12/2017 and thereby attracts exemption from GST. - HELD THAT: - The Authority examined whether (i) the training is part of a curriculum, (ii) the training yields a qualification, and (iii) that qualification is recognised by law. It accepted that the applicant provides type rating training as per a DGCA approved syllabus, collects fee and that the activity constitutes a supply classifiable under SAC 999294. However, on the determinative question of whether completion of the applicant's training and the course completion certificate amount to a "qualification recognised by law", the Authority recorded that DGCA does not statutorily require issuance of the applicant's course completion certificate and that the statutory requirement for endorsement of an aircraft type rating is satisfied only upon passing the DGCA examination conducted by DGCA approved examiners. The course completion certificate issued by the applicant was held to be only a pre requisite document for filing an application to appear for the statutory DGCA examination and not a self sufficient statutory qualification. The Authority distinguished precedents relied upon by the applicant on the factual ground that, unlike the AME training school in Indian Institute of Aircraft Engineering (where the institute conducted examinations recognised by DGCA), the present applicant is not empowered to conduct the statutory examination that alone results in the licence endorsement. It further observed that mere facilitation of, or preparation for, a statutory examination and issuance of a course completion certificate which assists in applying for the statutory test does not convert the training into a qualification "recognised by law" for the purposes of entry 66(a). Consequent to these findings, the applicant does not fall within the definition of an "educational institution" under the Exemption Notification and therefore the services do not attract the exemption under entry 66(a). [Paras 26, 27, 28, 31, 32]

The ATR extension/type rating training does not result in a qualification recognised by law and the applicant does not qualify as an "educational institution" under entry 66(a) of Notification No.12/2017; the services are therefore exigible to GST.

Final Conclusion: Advance Ruling: The aircraft type rating/ATR extension training provided by M/s CAE Flight Training (India) Pvt. Ltd. does not amount to education yielding a qualification recognised by law and thus is not covered by entry 66(a) of Notification No.12/2017; the supply is taxable under CGST/KGST.

Scope of supply under Section 7 - transfer of business as a going concern treated as supply of services - time of supply of services under Section 13 - value of taxable supply - transaction value under Section 15(1) - classification and rate - SAC 997119 and 18% under Notification No.11/2017 - applicability of Nil-rate entry for transfer of going concern - Notification No.12/2017 (Sl. No.2) - jurisdictional limitation under Section 95(a) - advance ruling not to decide recipient's ITC entitlement

Scope of supply under Section 7 - Whether the transfer/sale of an independent running business division as a going concern constitutes a "supply" under the CGST/KGST Acts - HELD THAT: - The Authority applied the three limbs derived from Section 7(1)(a): (i) whether the activity is a form of supply; (ii) whether it is for a consideration; and (iii) whether it is in the course or furtherance of business. The transfer of the staffing business division was held to satisfy all three limbs: it is a transfer agreed to be made, it is for consideration payable in stages with revenue sharing and performance guarantees, and it is being carried out in the course of the applicant's business. Consequently, the transaction falls within the scope of "supply" under Section 7 of the CGST/KGST Acts. [Paras 11, 12]

The transfer/sale of the independent business division as a going concern amounts to a "supply" under Section 7.

Transfer of business as a going concern treated as supply of services - classification and rate - SAC 997119 and 18% under Notification No.11/2017 - Whether the impugned supply is of goods or services and the applicable GST rate - HELD THAT: - Applying the statutory definitions, the Authority observed that goods are movable property and the staffing business transferred is not movable property; thus it cannot be a supply of goods. Anything other than goods, money and securities is service, and Schedule II (entry 4(c)(i)) treats transfer of business as a going concern as supply of service. Turning to classification, the Authority relied on the adopted Scheme of Classification of Services and placed the transaction under SAC 997119 (financial services/related services). On that classification, Entry No.15(vii) of Notification No.11/2017-Central Tax (Rate) (as amended) attracts GST at 18%. [Paras 13, 16]

The transaction is a supply of taxable services and is subject to GST at 18%.

Time of supply of services under Section 13 - The time at which tax liability arises for the impugned supply - HELD THAT: - The Authority applied Section 13 which prescribes the earliest of specified events (invoice issuance within prescribed period or receipt of payment, provision of service where invoice not issued, or recipient's entry in books) as the time of supply. The record did not contain sufficient particulars (invoice dates, payment receipts or provision dates) to fix the exact time. Therefore the Authority directed that the applicant must determine the time of supply in accordance with Section 13 once the requisite details are available. [Paras 14]

Time of supply to be determined by the applicant in terms of Section 13; specific date not fixed for want of requisite details.

Value of taxable supply - transaction value under Section 15(1) - The valuation basis for the impugned supply - HELD THAT: - Section 15(1) prescribes transaction value (price actually paid or payable) where supplier and recipient are not related and price is the sole consideration. The Authority found that the parties are not related and the price is the sole consideration; therefore the value of the supply shall be the transaction value and the applicant is directed to arrive at that value accordingly. [Paras 15]

Value of the supply shall be the transaction value in terms of Section 15(1).

Jurisdictional limitation under Section 95(a) - advance ruling not to decide recipient's ITC entitlement - Whether the Authority could rule on the recipient's entitlement to input tax credit for the transaction - HELD THAT: - Section 95(a) confines advance rulings to questions in relation to supplies being undertaken or proposed to be undertaken by the applicant. The question posed concerned the recipient's entitlement to input tax credit, which does not relate to the applicant's own supply. Accordingly, the Authority held that it lacks jurisdiction to answer that question and declined to decide it. [Paras 17]

The Authority cannot answer the question on the recipient's ITC entitlement under Section 95(a); the question is beyond its jurisdiction.

Applicability of Nil-rate entry for transfer of going concern - Notification No.12/2017 (Sl. No.2) - Whether the Nil-rate entry for transfer of a going concern (Sl. No.2 of Notification No.12/2017) applies to the transaction - HELD THAT: - The Notification provides NIL rate for services by way of transfer of a going concern, as a whole or an independent part thereof, unconditionally. The Authority found that the transaction purports to transfer an independent part (the staffing division) as a going concern. However, the applicant did not furnish a certificate from a qualified auditor or other evidence to demonstrate fulfilment of the going concern conditions. Consequently, the Authority ruled that the benefit of Sl. No.2 of Notification No.12/2017 is available subject to fulfillment of the going-concern conditions; the applicability is contingent on satisfying those conditions and producing requisite evidence. [Paras 18, 19]

Benefit of Sl. No.2 of Notification No.12/2017 applies subject to fulfillment of the going concern conditions and production of requisite evidence.

Final Conclusion: The transfer/sale of the applicant's independent staffing business division as a going concern is a "supply" and, being a transfer of a going concern, is a supply of services. Value is the transaction value under Section 15(1); time of supply must be fixed in accordance with Section 13 on available particulars; the transaction is classifiable under SAC 997119 and attracts GST at 18% subject to any relief; the Authority cannot rule on the recipient's input tax credit entitlement; and the Nil-rate entry for transfer of a going concern under Notification No.12/2017 (Sl. No.2) is available only upon satisfaction of the going concern conditions and production of supporting evidence.

First proviso to Section 36(1)(viia)(a) as alternative to sub clause (a) - prospective operation of Rule 8D - procedure for disallowance under Section 14A - remand for fresh factual decision

First proviso to Section 36(1)(viia)(a) as alternative to sub clause (a) - Deduction under the first proviso to Section 36(1)(viia)(a) cannot be allowed where deduction under sub clause (a) has already been availed; the proviso is an alternative and must be read in that context. - HELD THAT: - The Tribunal's interpretation that the first proviso operates as an alternative to sub clause (a) was examined in light of precedent in Commissioner of Income Tax, Chennai v. Tamilnadu Industrial Investment Corporation Ltd., where the proviso was held to carve out an exception and to be exercisable "at its option." That decision, upheld by dismissal of Special Leave Petition, was applied. The Court found no basis to read the proviso independently of the sub clause and followed the established ratio that the proviso is an alternative and cannot be invoked if deduction under the sub clause has been claimed.

Answered in favour of the assessee; the Tribunal's contrary view rejected.

Prospective operation of Rule 8D - procedure for disallowance under Section 14A - Rule 8D and the proviso to Section 14A(2) and (3) operate prospectively and could not be applied to assessment year 2003 2004; directing the Assessing Officer to apply Rule 8D without regard to its prospective operation was incorrect. - HELD THAT: - Following this Court's decision in PCIT v. Dhansar Engineering Co. (P) Ltd., the Court held that Rule 8D and the procedural proviso inserted in Section 14A are prospective in operation and not retrospective. Consequently, the Tribunal's direction to the Assessing Officer to compute disallowance under Section 14A as per Rule 8D for AY 2003 2004 was set aside. The matter was remitted for recomputation by the Assessing Officer in accordance with the correct prospective application of Rule 8D and the proviso.

Answered in favour of the assessee; Assessing Officer directed to recompute accordingly.

Remand for fresh factual decision - Whether various provisions and deductions (provisions for bad and doubtful debts, standard assets, depreciation of investment, fraud and forgery, stationery wastage and tangible assets) qualify for deduction under computation of book profit for section 115JB was not decided on merits and is remanded to the Assessing Officer for fresh consideration. - HELD THAT: - The Court regarded the substantial question concerning the allowability of the claimed deductions as essentially factual. No final adjudication on merits was made in the appeal. Instead, the matter was remitted to the Assessing Officer for fresh adjudication of the factual and evidentiary aspects underlying those claims, leaving the substantial question unanswered in the present appeal.

Remanded to the Assessing Officer for fresh decision; substantial question left unanswered.

Final Conclusion: The appeal is allowed in part: the Tribunal's interpretation of the first proviso to Section 36(1)(viia)(a) is set aside (benefitting the assessee), Rule 8D and the proviso to Section 14A are held to be prospective and the matter is remitted for recomputation by the Assessing Officer; the factual question on various provisions and deductions is remanded for fresh decision and left unanswered on appeal.

Reassessment under Section 147/notice under Section 148 - sanction for reassessment and rubber stamping - nexus between reasons to believe and material on record - assumption of jurisdiction in an assessment year where no transaction occurred - objections under GKN and disposal of objections

Reassessment under Section 147/notice under Section 148 - nexus between reasons to believe and material on record - assumption of jurisdiction in an assessment year where no transaction occurred - Validity of the notice dated 30.03.2021 under Section 148 insofar as it seeks reassessment for AY 2016-2017. - HELD THAT: - The Court found that the Assessing Officer did not sufficiently consider the material on record, including the petitioner's response to the Section 133(6) notice and the objections filed under GKN. The petitioner had demonstrably shown that payments for acquisition of the flat were made in FY 2013-14 and FY 2014-15 (pertinent to earlier assessment years) and that the asset had been regularly disclosed and depreciation claimed in earlier returns. On these facts the Court concluded that the factual ingredients necessary to assume jurisdiction for reassessment in AY 2016-2017 were absent, because no part of the transaction occurred in that assessment year and there was no established link between the reasons recorded and the material to support a belief that income chargeable to tax had escaped assessment for AY 2016-2017. [Paras 21, 24]

Notice dated 30.03.2021 under Section 148 read with Section 147 was held invalid and unsustainable insofar as it seeks reassessment for AY 2016-2017.

Sanction for reassessment and rubber stamping - nexus between reasons to believe and material on record - Validity of the sanction/approval accorded for commencement of reassessment proceedings. - HELD THAT: - The sanctioning authority's endorsement consisted of a perfunctory approval without any recorded application of mind to the material placed before it. The Court relied on established precedents that require the sanctioning authority to demonstrate discernible satisfaction by linking material to the conclusion reached. A mere 'Yes' or rubber stamp approval, without brief reasons showing the manner in which the material led to the satisfaction that reassessment was warranted, does not meet the required standard. In the present case the sanction was therefore vitiated by the absence of any discernible application of mind. [Paras 22, 23]

Sanction for initiating reassessment was quashed as having been accorded mechanically and without proper application of mind.

Final Conclusion: Impugned notice dated 30.03.2021 under Section 148 (AY 2016-2017) is quashed; the writ petition is disposed of accordingly and pending applications are closed.

Reopening of assessment beyond four years under the proviso to Section 147 - failure to disclose fully and truly all material facts as jurisdictional fact - jurisdictional fact - extended period of limitation of six years - retrospective statutory amendment cannot, by itself, constitute failure to disclose

Failure to disclose fully and truly all material facts as jurisdictional fact - reopening of assessment beyond four years under the proviso to Section 147 - extended period of limitation of six years - Whether the reasons recorded for reopening the assessment disclose the jurisdictional fact of failure to disclose fully and truly all material facts necessary to invoke the extended six-year period under Section 147. - HELD THAT: - The Court held that invocation of the extended period under the proviso to Section 147 is contingent upon existence and recording of a jurisdictional fact - namely, that the assessee failed to disclose fully and truly all material facts necessary for assessment. The reasons for reopening must demonstrate that this circumstance exists; absent such a finding the jurisdiction to reopen beyond four years is not attracted. The Court relied on precedent explaining that a jurisdictional fact is a condition precedent to exercise of power and that issuing a notice without recording such a finding is vitiatory. Applying these principles, the Court found that the reasons furnished did not record any finding of failure to disclose fully and truly all material facts and therefore the reassessment proceedings initiated under the extended period were without jurisdiction and invalid. [Paras 8, 9, 10, 11, 12]

Proceedings under Section 147/148 invoking the extended six-year period were vitiated for lack of a recorded finding that the assessee failed to disclose fully and truly all material facts.

Retrospective statutory amendment cannot, by itself, constitute failure to disclose - reopening of assessment beyond four years under the proviso to Section 147 - Whether a retrospective amendment to the law (affecting treatment of provisions for bad and doubtful debts) can, by itself, justify reopening an assessment beyond the normal four-year period by imputing failure to disclose. - HELD THAT: - The Court observed that where the assessee had taken a bona fide legal position which was supported by judicial decisions (including decisions of higher courts) at the relevant time, it cannot be said that the assessee failed to make true and full disclosure of material facts merely because a later retrospective legislative amendment changed the legal position. The retrospective amendment, though operating prospectively in statutory fiction, cannot be the sole basis to impute nondisclosure for past returns completed in accordance with the law and judicial view then prevailing. Accordingly, the Court agreed with the Single Judge that the retrospective amendment neutralizing an earlier judicial view did not convert the assessee's prior disclosure into a failure warranting reopening under the extended period. [Paras 12, 13]

Retrospective amendment alone cannot be the basis for invoking the extended period where the assessee had a bona fide, judicially supported position at the time of original assessment.

Final Conclusion: The judgment of the Single Judge quashing the reassessment proceedings issued beyond four years was affirmed: the reassessment invoking the extended six-year period was without jurisdiction for want of a recorded finding of failure to disclose fully and truly all material facts, and a subsequent retrospective amendment to the law could not, by itself, supply that deficiency.

Disallowance under section 14A r/w Rule 8D - Computation of disallowance under Rule 8D(2)(ii) and (iii) - Rectification under section 154 of the Income Tax Act, 1961 - Presumption of investment funded from own interest-free funds - Limitation of section 14A disallowance to exempt income

Rectification under section 154 of the Income Tax Act, 1961 - Validity of the Assessing Officer's exercise of jurisdiction under section 154 to rectify the assessment order. - HELD THAT: - The Tribunal examined whether the AO's order under section 154 was a permissible correction of a mistake apparent from the record. Having noted that the original assessment had not taken into account interest expenditure in computing disallowance under Rule 8D(2)(ii) and that the AO recalculated the disallowance to correct that omission, the Tribunal held that the AO's action amounted to correction of an earlier incorrect computation and was legally tenable. The Tribunal therefore dismissed the grounds challenging the assumption of jurisdiction under section 154. [Paras 7]

Grounds attacking assumption of jurisdiction under section 154 are dismissed; the rectification was upheld as a correction of a mistake apparent from the record.

Computation of disallowance under Rule 8D(2)(ii) - Presumption of investment funded from own interest-free funds - Whether disallowance under Rule 8D(2)(ii) should be sustained where the assessee's interest-bearing liabilities are present but the assessee's interest-free own funds exceed the investment in tax-free securities. - HELD THAT: - On review of the audited financial statements the Tribunal found that the assessee's own funds and other non-interest bearing funds exceeded the investment earning exempt income. Applying the law of the jurisdictional High Court and the Supreme Court precedent that where interest-free own funds exceed investments in tax-free securities the investment is presumed to be made out of own funds, the Tribunal directed deletion of the disallowance computed under Rule 8D(2)(ii). Accordingly, the AO was directed to delete the disallowance under that limb. [Paras 5]

Disallowance under Rule 8D(2)(ii) deleted as investment is presumed to be funded from interest-free own funds.

Computation of disallowance under Rule 8D(2)(iii) - Limitation of section 14A disallowance to exempt income - Whether the disallowance computed under Rule 8D(2)(iii) can exceed the amount of exempt income earned by the assessee. - HELD THAT: - The Tribunal observed that the assessee's exempt income for the year was quantified and relied upon a decision of the jurisdictional High Court holding that disallowance under section 14A cannot exceed the exempt income. Applying that principle, the Tribunal directed that the disallowance computed under Rule 8D(2)(iii) be restricted to the amount of exempt income actually earned by the assessee. [Paras 6]

Disallowance under Rule 8D(2)(iii) restricted to the exempt income earned by the assessee.

Final Conclusion: The appeal is partly allowed: the AO's rectification under section 154 is upheld, but the disallowance under section 14A r/w Rule 8D is modified - deletion of the portion under Rule 8D(2)(ii) and restriction of the amount under Rule 8D(2)(iii) to the exempt income, with consequential adjustments directed to the AO.

Deemed dividend u/s 2(22)(e) - accumulated profits - depreciation under the Income tax Act versus depreciation under the Companies Act - calculation of accumulated profits for the purpose of section 2(22)(e)

Depreciation under the Income tax Act versus depreciation under the Companies Act - accumulated profits - calculation of accumulated profits for the purpose of section 2(22)(e) - Whether accumulated profits for the purpose of section 2(22)(e) are to be computed after allowing depreciation as per the Income tax Act and, if so, whether the advance received by the assessee from a 17.94% shareholder constitutes deemed dividend - HELD THAT: - The Tribunal examined earlier decisions and the accounting consequence of allowing depreciation at rates prescribed by the Income tax Act when computing "accumulated profits" for the proviso to section 2(22)(e). It accepted the view in authoritative precedents that normal depreciation is a charge on profits and for tax purposes depreciation as per the Income tax Act must be deducted when determining commercial or accumulated profits relevant to deemed dividend. Applying that principle to the facts, the Tribunal found that if depreciation as per the Income tax Act is taken into account the assessee's accumulated profits would be negative, meaning there are no accumulated profits available for the operation of section 2(22)(e). Consequently the addition treating the advance as deemed dividend cannot be sustained. The Tribunal therefore set aside the partial confirmation by the CIT(A) and directed deletion of the disallowance. [Paras 7]

Accumulated profits for section 2(22)(e) are to be computed after allowing depreciation as per the Income tax Act; on that basis there were no accumulated profits and the addition treating the advance as deemed dividend is deleted.

Final Conclusion: Following authoritative decisions that depreciation as per the Income tax Act must be allowed in computing accumulated profits for section 2(22)(e), the Tribunal held that no accumulated profits existed and allowed the assessee's appeal, directing deletion of the disallowance.

Revision under section 263 - erroneous and prejudicial to the interest of revenue - audit objection as a basis for initiating proceedings under section 263 - limited scrutiny under CASS - scope of enquiry and prohibition on AO traveling beyond selected issues - distinction between lack of enquiry and inadequate enquiry for invoking section 263 - onus of proof under section 68 in relation to unexplained cash credits - taxability of unexplained cash under section 115BBE

Audit objection as a basis for initiating proceedings under section 263 - revision under section 263 - erroneous and prejudicial to the interest of revenue - Validity of invoking section 263 where revision was initiated on the basis of an internal audit objection despite AO having considered and replied to that objection. - HELD THAT: - The Tribunal examined the record and noted that an internal audit had raised an objection that the cash deposit should have been taxed under section 115BBE. The Assessing Officer addressed the audit objection in writing and concluded the audit objection was not acceptable. The Principal CIT nonetheless issued a show-cause under section 263 and set aside the assessment. The Tribunal held that initiation of proceedings under section 263 cannot be justified simply because an audit objection exists where the Assessing Officer has considered the objection and recorded reasons contrary to the audit view. On the facts, the PCIT's conclusion that the assessment was "erroneous and prejudicial" was perverse because it ignored the AO's recorded enquiries and responses to the audit. Accordingly the PCIT's exercise of jurisdiction was quashed and the section 263 orders set aside. [Paras 7, 10, 16]

Proceedings under section 263 initiated on the basis of the audit objection, notwithstanding the AO's considered reply, were annulled; the PCIT's order holding the assessment "erroneous and prejudicial" was cancelled.

Limited scrutiny under CASS - scope of enquiry and prohibition on AO traveling beyond selected issues - distinction between lack of enquiry and inadequate enquiry for invoking section 263 - Whether the assessment could be reopened under section 263 where the case was selected for limited scrutiny under CASS and the AO had made enquiries on the selected issue. - HELD THAT: - The Tribunal recorded that the case was selected for limited scrutiny under CASS on account of large cash deposits during demonetisation. The AO issued notices, sought explanations and documents, and framed assessment after considering the replies. The Tribunal emphasised the legal distinction between 'lack of enquiry' and 'inadequate enquiry': only absence of enquiry would justify exercise of revisionary jurisdiction under section 263, not a mere difference of opinion or an assessment following enquiries that the Commissioner considers less favourable. On the material, the AO had conducted enquiries appropriate to the limited scrutiny selection and taken a plausible view; therefore the PCIT's setting aside of the assessment amounted to impermissible change of opinion. The orders passed under section 263 on this ground were held to be bad in law and were cancelled. [Paras 6, 11, 12, 14, 16]

Where AO conducted enquiries within the scope of limited CASS scrutiny and formed a plausible view, the PCIT could not invoke section 263 for mere change of opinion; the section 263 orders were annulled.

Final Conclusion: The Tribunal allowed the appeals, holding that the Principal Commissioner's orders under section 263 were unsustainable: initiation of revision solely on the basis of an audit objection to which the AO had responded, and setting aside assessments made after enquiries under limited CASS scrutiny (where only a difference of opinion existed), were bad in law; the impugned section 263 orders are cancelled and the appeals are allowed.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - application of proviso to section 2(15) - reassessment under section 147 limited to reasons to believe - assessment order vitiated by self contradiction or failure to give effect to findings - stay pending appeal-prima facie case and balance of convenience

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - application of proviso to section 2(15) - assessment order vitiated by self contradiction or failure to give effect to findings - Validity of CIT(E)'s exercise of powers under section 263 in setting aside the assessment order dated 12.12.2019 (reassessment under section 147 r.w.s.143(3)) for AY 2012-13 - HELD THAT: - The Tribunal found that the Assessing Officer had recorded and considered the applicability of section 2(15) and related provisos in the assessment order (paras 4.9-4.10 reproduced by the Tribunal) but nonetheless assessed the income at Nil. The CIT(E) concluded that, having held the assessee's activities to be commercial in nature and hit by the proviso to section 2(15), the AO's final computation at Nil was inconsistent with those findings and therefore the assessment order was erroneous and prejudicial to the revenue. The Tribunal noted the binding effect of the Supreme Court's interpretation of section 2(15) (Ahmedabad Urban Development Authority) and accepted that where an assessing officer's order is internally self contradictory (recording the view that activities are commercial but assessing Nil), revision under section 263 can be invoked. The Tribunal accordingly rejected the assessee's contentions that the AO had applied mind, that the CIT(E) exceeded jurisdiction by raising issues outside the reasons to believe, and that prior decisions and procedural limits precluded revision; the Tribunal held that on the material before it the CIT(E) legitimately concluded the order was both erroneous and prejudicial and that setting aside for de novo assessment was sustainable. [Paras 7, 8, 9, 10]

Assessee's appeal against the order under section 263 dismissed; the CIT(E)'s order setting aside the assessment was upheld.

Reassessment under section 147 limited to reasons to believe - reassessment order non est - requirement of valid primary order for section 263 - Contentions that (a) reassessment was limited to matters specified in the reasons to believe and (b) an invalid/non existent reassessment order cannot be subjected to section 263 - HELD THAT: - The assessee argued that the AO reopened the assessment only on specific grounds recorded under section 148/147 and that additions relied upon by the CIT(E) were not within those reasons to believe; further it was contended that if reassessment was invalid or outside the recorded reasons then section 263 could not be invoked. The Tribunal recorded those submissions but found on the record that the AO had considered the question of section 2(15) and had reached conclusions in the assessment order which were inconsistent with the final computation. On that factual matrix the Tribunal did not accept the submission that the impugned revision impermissibly went beyond the scope of reassessment or that the reassessment was non existent for purposes of section 263; the Tribunal treated the assessment order as subsisting on record and amenable to revision under section 263. [Paras 5, 7, 8, 9]

Contentions based on limitation of reasons to believe and invalidity of reassessment rejected; no remand on this ground.

Stay pending appeal-prima facie case and balance of convenience - Application for stay of operation of the CIT(E)'s order under section 263 pending the appeal - HELD THAT: - The Tribunal observed that the hearing of the appeal had concluded and, having considered the rival submissions and the Supreme Court authority relied upon by the Revenue, found that the assessee had not demonstrated a prima facie case in its favour or that the balance of convenience favoured grant of stay. The assessee's submissions about limitation, prior decisions and adequacy of enquiry by the AO were considered but found insufficient to justify stay. [Paras 11, 14, 15]

Stay application dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal and the stay application. It held that the CIT(E) validly exercised revisional jurisdiction under section 263 because the assessment order contained findings that the assessee's activities were commercial (bringing the proviso to section 2(15) into play) yet nevertheless assessed income at Nil, rendering the order erroneous and prejudicial to revenue; the order was set aside for de novo assessment and the request for interim stay was refused.

Characterisation of payment as Fees for Technical Services versus Royalty - Obligation to deduct tax at source under section 195/201 of the Income tax Act - Taxability under India-UAE Double Taxation Avoidance Agreement in absence of an FTS clause - Permanent Establishment and taxation as business profits under Article 7

Characterisation of payment as Fees for Technical Services versus Royalty - Payments made to Oilstone Technologies DMCC (UAE) for tower-related services were fees for technical services (FTS) and not royalty. - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that the service agreement required Oilstone UAE to create fresh tower designs and related deliverables (project specification study, preparation of tower designs, structural drawings, tower test data documents etc.) based on specifications provided by the assessee, and there was no pre-existing design or data supplied as a right. The contract thus involved active rendition of services to generate new designs rather than a grant of copyright or other proprietary right. On these facts the payments fall within the character of technical services and do not qualify as royalty. [Paras 7]

Payments characterised as FTS and not royalty; the CIT(A)'s finding on this aspect affirmed.

Taxability under India-UAE Double Taxation Avoidance Agreement in absence of an FTS clause - Permanent Establishment and taxation as business profits under Article 7 - Obligation to deduct tax at source under section 195/201 of the Income tax Act - In absence of an FTS clause in the India-UAE DTAA, the FTS characterization does not itself render the payments taxable in India; taxation would require that Oilstone UAE have a Permanent Establishment (PE) in India, and therefore the assessee had no obligation to withhold tax under section 195/201. - HELD THAT: - The Tribunal applied settled principles that where a DTAA does not provide for taxation of FTS, such payments can be taxed only under other treaty heads (notably Article 7 business profits) and then only if the non resident has a PE in India. The Tribunal relied on precedents to the effect that absence of an FTS clause in the treaty means classification must be tested under other treaty provisions, and without a PE the business profits article cannot be invoked to tax the non resident. On the material before it the Revenue made no allegation and there was no evidence that Oilstone UAE had a PE or business connection in India; the assessee had furnished a declaration of no PE and a Tax Residency Certificate. Consequently, the Tribunal held there was no requirement to deduct tax at source under section 195 and the default provisions of section 201 did not apply. [Paras 7, 8]

Because the India-UAE DTAA lacks an FTS clause and there is no PE of Oilstone UAE in India, the payments are not taxable in India and the assessee was not obliged to withhold tax; the CIT(A)'s order was upheld.

Final Conclusion: The appeal filed by the Revenue is dismissed: the payments to Oilstone UAE are fees for technical services (not royalty) and, in absence of an FTS clause in the India-UAE DTAA and any PE of Oilstone in India, the assessee had no obligation to withhold tax; the CIT(A) order is affirmed.

Reopening of assessment under section 147 of the Income Tax Act - jurisdiction to assess under section 147 - subject matter of reasons for reopening versus additions made in assessment - reason to believe for reopening assessments - Rule 27 of the ITAT Rules - respondent may support order on grounds decided against him - admissibility of raising jurisdictional plea before the Tribunal though not raised before CIT(A) - beneficial ownership of undisclosed foreign bank accounts - evidence by DTAA 'Base Note' - precedential application of Jet Airways principle on scope of reassessment

Rule 27 of the ITAT Rules - respondent may support order on grounds decided against him - admissibility of raising jurisdictional plea before the Tribunal though not raised before CIT(A) - Admissibility of petitions filed under Rule 27 of the ITAT Rules to raise a jurisdictional challenge not raised before the CIT(A). - HELD THAT: - The Tribunal admitted the petitions filed under Rule 27 and permitted the assessees to support the CIT(A)'s orders on a jurisdictional ground which was not agitated before the CIT(A). Relying on the Jurisdictional High Court's reasoning in the cited decision, the Tribunal held that where an issue goes to the root of jurisdiction of the Assessing Officer to initiate proceedings (and the assessee has otherwise succeeded before the CIT(A)), the respondent in the Revenue's appeal may raise that jurisdictional plea before the Tribunal without filing cross-objections. The Revenue raised no objection to the admissibility of the Rule 27 petitions and the Tribunal therefore followed the High Court's analysis that Rule 27 empowers a respondent to support the order on grounds decided against him and that insistence on cross-objections in such circumstances would be inappropriate. Consequently the petitions were admitted for adjudication. [Paras 15, 16, 17]

Petitions under Rule 27 of the ITAT Rules were admitted and the assessees were permitted to raise the jurisdictional plea before the Tribunal.

Reopening of assessment under section 147 of the Income Tax Act - jurisdiction to assess under section 147 - subject matter of reasons for reopening versus additions made in assessment - reason to believe for reopening assessments - precedential application of Jet Airways principle on scope of reassessment - Whether the Assessing Officer had jurisdiction under section 147 to assess the amount added (minimum balance required to open a Swiss bank account) when the reasons for reopening related to alleged beneficial ownership of funds in undisclosed foreign bank accounts. - HELD THAT: - The Tribunal examined the reasons recorded for reopening and the assessment orders. The reasons recorded alleged that the assessees were beneficial owners of funds lying in certain HSBC Geneva accounts and that such funds had escaped assessment - the 'subject matter' of the reasons was the funds lying in those accounts. In the assessments, however, the Assessing Officer made an addition representing the minimum balance required to open/maintain an HSBC Geneva account (CHF 100,000), a different species of income than the funds which formed the basis of the recorded belief. Applying the jurisdictional principle elucidated by the Jurisdictional High Court in Jet Airways, the Tribunal held that where a notice under section 148/147 is issued on a recorded reason to believe in respect of particular escaped income, the Assessing Officer may assess that income and other escapements which come to notice in the course of proceedings; but if the original assessed escapement is held not to have escaped assessment, the Assessing Officer cannot independently assess a different income without issuing a fresh notice. The Tribunal further emphasised that reasons for reopening must be read as recorded and cannot be supplemented; they must disclose the link between evidence and conclusion. On that basis the Tribunal concluded that the addition made was beyond the jurisdiction conferred by the reasons recorded for reopening. Accordingly the Assessing Officer had no jurisdiction to make the impugned addition under section 147. As the jurisdictional plea succeeded, the Tribunal treated grounds on merits as academic. [Paras 20, 21, 22, 23, 25]

The Assessing Officer had no jurisdiction under section 147 to make the addition of the initial/minimum balance; the addition was set aside and the reassessment proceedings' exercise in respect of that addition failed for want of jurisdiction.

Final Conclusion: The Tribunal admitted the assessees' Rule 27 petitions and allowed the jurisdictional challenge: additions made by the Assessing Officer (treating the minimum balance required to open an HSBC Geneva account as unexplained income) were held to be beyond the scope of the reasons recorded for reopening under section 147, and all Revenue appeals are dismissed while the Rule 27 petitions are allowed.

Rectification under section 154 - mistake apparent from the record - revised return under section 139(5) versus rectification - power of the appellate authority to entertain rectification claims - depreciation computation under the Income Tax Act

Rectification under section 154 - mistake apparent from the record - depreciation computation under the Income Tax Act - Whether the enhanced claim of depreciation could be allowed by rectification under section 154 as a mistake apparent from the record and the AO directed to recompute income accordingly. - HELD THAT: - The Tribunal found on the materials on record, including the depreciation charts for the relevant years, that the opening WDV for the year under consideration had been taken as Rs. 2,20,00,290 instead of the closing WDV of the preceding year of Rs. 2,70,39,004, producing a clear, factual discrepancy. The error was held to be glaring and apparent from the record and not a debatable question of law or fact requiring extended inquiry. While recognising the proposition in Goetze (India) Ltd. regarding fresh claims during assessment, the Tribunal observed that that decision does not limit the appellate authority's power to consider a rectification claim where a manifest mistake is shown on the record. On this basis the Tribunal held that the enhanced depreciation claim is rectifiable under section 154 and directed the AO to take the opening WDV as Rs. 2,70,39,004 and recompute depreciation and taxable income accordingly. [Paras 9]

Assessee's claim allowed; AO directed to take opening WDV at Rs. 2,70,39,004, compute depreciation accordingly and determine taxable income for A.Y. 2016-17.

Final Conclusion: The appeal is allowed: the Tribunal held that a manifest, factual error in the opening WDV - apparent from the record and not open to two opinions - is rectifiable under section 154; the Assessing Officer is directed to recompute depreciation and taxable income for Assessment Year 2016-17 accordingly.

E-filing requirement for appeals - dismissal in limine for procedural non-compliance - opportunity to cure procedural defects - curable procedural defect - liberal approach to procedural compliance to advance justice

E-filing requirement for appeals - dismissal in limine for procedural non-compliance - opportunity to cure procedural defects - liberal approach to procedural compliance to advance justice - Whether dismissal of the assessee's appeal in limine for manual filing instead of electronic filing, without permitting rectification, was justified. - HELD THAT: - The Tribunal found that the sole defect noted by the CIT(A) was the mode of filing - the appeal was filed manually though the Rules required electronic filing. Although the e-filing requirement had been introduced earlier, the CIT(A) should have afforded the assessee an opportunity to cure the defect by filing the appeal electronically before dismissing it without deciding the merits. The Tribunal relied on the principle that procedural rules are intended to advance justice and that a liberal approach is warranted where technical non-compliance (not shown to be wilful or in defiance of law) defeats adjudication on merits. Accordingly, the Tribunal granted the assessee liberty to e-file the appeal and directed the CIT(A) to admit and adjudicate the issues on merits after providing a reasonable opportunity to be heard. [Paras 4, 5]

Assessee permitted to e-file the appeal within four weeks; CIT(A) directed to admit the electronically filed appeal and decide the issues on merits after giving reasonable opportunity to the assessee; appeal allowed for statistical purposes.

Final Conclusion: The order of the CIT(A) dismissing the appeal in limine for manual filing is set aside; the assessee is granted liberty to e-file the appeal and the CIT(A) is directed to admit and adjudicate the appeal on merits in accordance with law.

Deemed dividend under Section 2(22)(e) - short-term inter-company transfers between sister concerns - reopening of assessment under Section 147 - application of judicial precedent on Section 2(22)(e)

Deemed dividend under Section 2(22)(e) - short-term inter-company transfers between sister concerns - application of judicial precedent on Section 2(22)(e) - Deletion of addition of Rs. 16,00,000/- treated as deemed dividend under Section 2(22)(e) in the hands of the shareholder. - HELD THAT: - The Assessing Officer treated the receipt of Rs. 16,00,000 by Addpol Chemspecialities Pvt. Ltd. from Monachem Additives Pvt. Ltd. as a deemed dividend in the hands of the common shareholder. The assessee explained the movements as short-term transfers between sister concerns made to meet exigencies of business, supported by account extracts and that interest had been paid. The Tribunal found that the transactions, though involving inter-company movement of funds and payment of interest, did not partake of the character of a deposit or loan such as to convert them into deemed dividend under Section 2(22)(e). The Tribunal further observed that the Delhi High Court decision relied upon by Revenue (Ankitech) concerned ordinary business transactions of a different character and was not applicable on facts. Having accepted that the transfers were short-term inter-company exigency transactions and not distribution of accumulated profits by way of deemed dividend, the addition confirmed by the Assessing Officer and by the CIT(A) was held not to be sustainable and was deleted. [Paras 3, 5, 7, 8]

The addition of Rs. 16,00,000/- treated as deemed dividend under Section 2(22)(e) is deleted and the appeal is allowed on this ground.

Proportionate attribution of deemed dividend - Ground No. 2 (claim that addition, if any, should be restricted to assessee's shareholding proportion) was not adjudicated by the Tribunal. - HELD THAT: - The assessee had, without prejudice, contended that any addition should be limited to his percentage shareholding (12.3%) of the amount. The Tribunal recorded that Ground No. 2 was a without-prejudice ground and therefore was not adjudicated in the present order. No decision on apportionment or restriction of liability to the assessee's shareholding percentage was rendered. [Paras 7]

Ground No. 2 is left unadjudicated (not decided) by the Tribunal.

Final Conclusion: The Tribunal deleted the addition of Rs. 16,00,000/- as deemed dividend under Section 2(22)(e) for A.Y. 2012-13, allowing the appeal; the contest on proportionate attribution raised in Ground No. 2 was not decided by the Tribunal.

Addition as income from other sources - reopening of assessment under section 147 - opportunity to produce evidence - remand for fresh consideration

Addition as income from other sources - opportunity to produce evidence - remand for fresh consideration - Whether the addition of Rs.3,00,00,000/- made by the Assessing Officer as income from other sources was sustainable or required fresh consideration after allowing the assessee an opportunity to substantiate the cash deposits and produce the agreement of sale. - HELD THAT: - The Tribunal noted that the Assessing Officer drew an adverse inference on the basis of cash deposits totaling about Rs.1,00,15,000/- and ultimately made an addition of Rs.3,00,00,000/-. The assessee contended that the amount represented advance for an agreement to sell immovable property which was subsequently cancelled and the advance returned, and relied upon bank statements and a later sale deed. The lower authorities found the material furnished to be deficient, in particular the assessee failed to produce the agreement of sale relied upon. The Tribunal observed that the assessee should be given a fair opportunity to substantiate the source of cash deposits and to produce the agreement relied upon so that the CIT(A) can examine the documentary evidence and decide the matter on merits. Consequently, rather than adjudicating finally on the addition, the Tribunal directed that the matter be remitted to the file of the CIT(A) for fresh consideration after giving the assessee opportunity to produce the requisite evidence and for the CIT(A) to pass an appropriate order in accordance with law. [Paras 7, 8, 9]

Matter remanded to the CIT(A) with directions to allow the assessee to substantiate the cash deposits and to produce the agreement of sale relied upon, and to consider and decide the claim afresh in accordance with law; appeal partly allowed for statistical purpose.

Final Conclusion: The Tribunal partly allowed the appeal for statistical purposes and remitted the matter to the CIT(A) directing that the assessee be given an opportunity to substantiate the source of cash deposits and to produce the agreement of sale, and that the CIT(A) reconsider and decide the addition afresh in accordance with law.

Unexplained cash loans and interest treated as undisclosed income under section 69 - unaccounted cash investments treated as undisclosed investment under section 69B - cash receipt treated as unexplained receipt under section 69A - evidentiary value of loose papers / "dumb documents" and requirement of corroborative evidence - entries in books of account are corroborative and cannot alone fasten liability - taxability of advance on booking of immovable property arises on execution of registry

Unexplained cash loans and interest treated as undisclosed income under section 69 - entries in books of account are corroborative and cannot alone fasten liability - Deletion of addition made on account of alleged cash loans and interest treated as undisclosed income under section 69 for A.Y. 2018-19 - HELD THAT: - The Assessing Officer relied on seized entries to treat cash loans and interest as undisclosed income. The assessee produced his cash book and capital account entries of the partnership firm to show sufficient cash availability and demonstrated that the interest was received in a subsequent year and offered in that year's return. The Tribunal examined the cash book and the return for the subsequent year and accepted that the cash balances explained the source of temporary loans and that interest was taxed in the relevant year of receipt. On this basis the Tribunal found no justification for the addition and upheld the first appellate deletion. [Paras 8, 9]

Addition of Rs. 1,88,800/- under section 69 deleted; ground dismissed.

Unaccounted cash investments treated as undisclosed investment under section 69B - evidentiary value of loose papers / "dumb documents" and requirement of corroborative evidence - entries in books of account are corroborative and cannot alone fasten liability - Deletion of addition made on account of alleged unaccounted cash investments in names of various parties and notional interest under section 69B for A.Y. 2018-19 - HELD THAT: - The Assessing Officer treated day to day notings (BS 01, BS 02) as entries of investments/advances and computed a peak value plus notional interest. The assessee explained that those registers related to the partnership firm's day to day transactions (sales, purchases, stock) and filed ledger and cash book extracts of the firm. The Tribunal agreed with the first appellate authority that the seized registers were not regular books of account of the assessee in his individual capacity, were ''dumb documents'' lacking requisite particulars and independent corroboration, and that entries in regular books, even if admissible, remain corroborative. The Tribunal also accepted the alternative contention on daily peak balances vis a vis available cash. In absence of corroborative evidence to treat those entries as the assessee's individual investments, the addition under section 69B was unsustainable. [Paras 19, 21]

Addition of Rs. 1,53,83,960/- under section 69B deleted; ground dismissed.

Unaccounted cash investment and profit treated as undisclosed investment under section 69B - evidentiary value of loose papers / "dumb documents" and requirement of corroborative evidence - tax consequences cannot be imposed where cost already taxed in hands of another - Deletion of addition made on account of alleged cash investment in C K Greens and notional profit on its sale under section 69B for A.Y. 2018-19 - HELD THAT: - The Assessing Officer relied on loose papers (LPS 11) to infer that the assessee had invested in plots and realised sale proceeds and profit. The papers did not mention the assessee's name or clarify whether amounts were received or paid. The assessee produced registered sale deeds and explained that plots were booked through his son; the AO had in fact made additions in the son's assessment for earlier years. The Tribunal held that the loose papers were ''dumb documents'' without evidentiary value and that the AO failed to obtain corroboration from the developer. Further, where cost had been taxed in another person's hands, there was no rationale to tax sale proceeds in the assessee's hands. Accordingly, the addition was unsustainable. [Paras 27, 29]

Addition of Rs. 56,05,000/- under section 69B deleted; ground dismissed.

Cash receipt treated as unexplained receipt under section 69A - taxability of advance on booking of immovable property arises on execution of registry - Deletion of addition made on account of alleged cash receipt of Rs. 1,07,000/- treated as unexplained receipt under section 69A for A.Y. 2018-19 - HELD THAT: - The AO treated a cash amount noted in seized papers and the assessee's statement as unexplained receipt. The assessee explained that the amount was an advance against booking of a plot which was handed over to the project owner and that no commission was retained; further, the assessee contended, and the AO's own record acknowledged, that income on sale crystallises on execution of registry. The AO produced no material to show that an actual sale had been executed by the assessee in the year under consideration. The Tribunal accepted the first appellate finding that the booking amount could not be taxed as income in the absence of registry or other material to show sale in that year. [Paras 34, 35]

Addition of Rs. 1,07,000/- under section 69A deleted; ground dismissed.

Final Conclusion: The Revenue's appeal is dismissed in entirety. The Tribunal upheld the CIT(A)'s deletions of additions under sections 69, 69A and 69B for A.Y. 2018-19, holding that seized loose papers lacked evidentiary value without corroboration, the assessee explained cash sources and accounting, and there was no material to tax presumed transactions in the year under consideration.

Deduction under section 80IB - evidentiary value of oral statement without cross-examination - reliance on Provident Fund inspection report for Income-tax purposes - rule of consistency in assessment - remand for limited factual verification

Evidentiary value of oral statement without cross-examination - reliance on Provident Fund inspection report for Income-tax purposes - Whether the statement of the assessee's manager and the PF department inspection report could be the sole basis to deny deduction under section 80IB for A.Y. 2013-14. - HELD THAT: - The Tribunal held that the statement of the manager, taken in isolation, lacked evidentiary value because the assessee was not afforded an opportunity to cross-examine the witness; reliance on such a statement without allowing rebuttal is untenable. Further, the PF inspection report merely recorded attendance on particular day(s) and did not establish the recurring workforce strength required for the purposes of section 80IB(iv). The report did not specify frequency or demonstrate that the number of workers was below the statutory threshold throughout the year. The AO had not pointed out any specific defect in the attendance, wages or payroll records produced by the assessee, and no independent departmental enquiry had been conducted to displace those records. On these grounds the Tribunal agreed with the Commissioner (Appeals) that the denial of deduction could not validly rest solely on the manager's statement and the PF inspection entries. [Paras 7, 8, 9]

The Tribunal held that neither the untested statement of the manager nor the PF inspection report, standing alone, sufficed to rebut the documentary evidence supporting the assessee's claim under section 80IB.

Deduction under section 80IB - remand for limited factual verification - rule of consistency in assessment - Whether the factual question of whether ten or more workers were employed during the year should be finally adjudicated on the record before the Tribunal or remitted to the Assessing Officer for verification. - HELD THAT: - Although the Tribunal found infirmities in the AO's reliance on the manager's statement and the PF report and noted that deduction under section 80IB had been allowed in the immediately preceding and succeeding assessment years, it declined to decide the factual question finally on the material before it. Instead, the Tribunal directed a remand to the AO for limited verification of the specific factual issue - namely, whether ten or more workers were employed in the factory unit during A.Y. 2013-14 - so that the AO may examine the attendance, wages records and other evidence and, if necessary, conduct appropriate enquiries consistent with principles of natural justice. The Tribunal therefore left the ultimate factual determination to the AO subject to such limited verification. [Paras 9, 10]

The matter was remanded to the Assessing Officer for limited verification of whether ten or more workers were employed so as to qualify for deduction under section 80IB.

Final Conclusion: The Tribunal found the AO's sole reliance on an untested managerial statement and PF inspection entries insufficient to deny deduction under section 80IB; the factual question whether ten or more workers were employed in A.Y. 2013-14 is remitted to the AO for limited verification. Appeal allowed for statistical purposes.

Confiscation under section 111(d) of the Customs Act - burden of proof under section 123 (shift in case of seized gold) - confiscation of goods notwithstanding change in form under section 120 - confiscation of sale-proceeds under section 121 - penalty under section 112 for dealing with goods liable to confiscation - confiscation under sections 111(i) and 111(p)

Confiscation under section 111(d) of the Customs Act - burden of proof under section 123 (shift in case of seized gold) - Confiscation of two foreign-marked gold bars (2 kg) and one cut piece of gold (195.23 g) seized from the appellant - HELD THAT: - The seized items were primary-form high-purity gold bars with foreign markings found in the appellant's premises; the appellant admitted selling foreign-marked gold to the co-accused without invoices and produced no duty-paid documents or Bill of Entry. Section 2(39) defines 'smuggling' to include acts rendering goods liable to confiscation under section 111; gold is covered by section 123. Given the foreign markings, high purity and absence of duty-paid documentation, officers had a reasonable belief that the goods were smuggled and rightly seized; consequently the burden under section 123 shifted to the appellant to prove lawful import. The appellant failed to produce import/duty-paid documents or explain the provenance satisfactorily; retraction of earlier statements did not negate the documentary deficiency. While confiscation under sections 111(i) and 111(p) is not sustainable for goods seized from the shop, confiscation under section 111(d) is sustainable on the material on record. [Paras 24, 25, 26, 28, 31]

Confiscation of the two foreign-marked gold bars and the cut piece upheld under section 111(d); confiscation under sections 111(i) and 111(p) set aside.

Confiscation of goods notwithstanding change in form under section 120 - confiscation under section 111(d) - Confiscation of gold jewellery (581.71 g) seized from the appellant - HELD THAT: - The jewellery had no foreign markings and there was no evidence that it was manufactured from smuggled gold. Section 120 allows confiscation notwithstanding change in form only if there is evidence that jewellery was made out of smuggled goods or is mixed with smuggled goods such that they cannot be separated; no such evidence was produced. The mere co-location of jewellery with smuggled gold bars does not suffice to establish that the jewellery itself was smuggled or made from smuggled gold. [Paras 33]

Confiscation of the gold jewellery set aside.

Confiscation of sale-proceeds under section 121 - Confiscation of Indian currency (Rs. 8,86,500) seized from the appellant as alleged sale proceeds - HELD THAT: - Section 121 requires the Revenue to establish (a) that smuggled goods were sold, (b) that the proceeds seized are sale proceeds of those smuggled goods, and (c) that the seller had knowledge or reason to believe the goods were smuggled. Section 123 does not shift the burden in respect of cash. The record did not identify which smuggled goods were sold, nor did it establish that the seized cash constituted sale proceeds or that the requisite knowledge existed. Absent proof of these elements, confiscation of the cash is unsustainable. [Paras 34]

Confiscation of the seized Indian currency set aside.

Penalty under section 112 for dealing with goods liable to confiscation - Penalty of Rs. 25,00,000 imposed on the appellant under section 112 - HELD THAT: - Section 112 penalizes persons who deal with goods which they know or have reason to believe are liable to confiscation under section 111. Having upheld confiscation of the foreign-marked gold bars under section 111(d) but set aside confiscation of jewellery and cash, and having regard to the Tribunal's earlier reductions of penalties on co-accused in related final orders, the Tribunal found it appropriate to reduce the penalty imposed on the appellant. The reduction aligns the penalty with the limited part of the confiscation that was sustained. [Paras 35, 36, 37]

Penalty reduced to Rs. 5,00,000.

Final Conclusion: The appeal is partly allowed: confiscation of the foreign-marked gold bars and cut piece is upheld under section 111(d) (with confiscation under sections 111(i) and 111(p) set aside), confiscation of the jewellery and seized cash is set aside, and the penalty on the appellant is reduced to Rs. 5,00,000; appeal disposed with consequential relief.

Refund of Special Additional Duty of Customs (SAD) under Notification No. 102/2007-Cus. - time bar/one year limitation for refund claims under para 2(c) of the notification - judicial discipline - duty of subordinate/quasi judicial authorities to follow binding precedent of the jurisdictional High Court

Refund of Special Additional Duty of Customs (SAD) under Notification No. 102/2007-Cus. - time bar/one year limitation for refund claims under para 2(c) of the notification - Validity and applicability of the one year limitation in para 2(c) of Notification No.102/2007 Cus. for refund of SAD and whether the Commissioner(Appeals) correctly allowed the respondent's refund claims by following the Delhi High Court decision in M/s. Sony India Pvt. Ltd. - HELD THAT: - The Tribunal noted that the jurisdictional Delhi High Court in M/s. Sony India Pvt. Ltd. read down the amending notification so far as it imposes a one year limitation for claiming refund of SAD and held that the limitation could not be imposed by subordinate legislation. The Tribunal observed that the Sony India decision continues to be the binding precedent in the Delhi jurisdiction (Supreme Court had dismissed SLP on limitation leaving the question open), whereas other High Courts have taken a contrary view and some matters are pending before the Supreme Court. In these appeals the Assistant Commissioner had rejected portions of the respondent's claims solely on the ground that they were filed beyond one year. The Tribunal endorsed the Commissioner(Appeals) in following the binding judgment of the jurisdictional High Court and, in consequence, dismissed Revenue's appeals and upheld the impugned orders allowing the refund claims. [Paras 6, 9]

Revenue's appeals dismissed; impugned orders allowing the refund claims upheld while following the binding Delhi High Court precedent that the one year limitation in the notification cannot be applied so as to bar the refund.

Judicial discipline - duty of subordinate/quasi judicial authorities to follow binding precedent of the jurisdictional High Court - Whether the Commissioner(Appeals) erred in following the binding precedent of the jurisdictional High Court (Sony India) instead of disregarding it on the basis that a similar issue in another High Court matter has an SLP admitted by the Supreme Court. - HELD THAT: - The Tribunal rejected Revenue's contention that the Commissioner(Appeals) should have ignored the jurisdictional High Court's binding ruling because an SLP in another case was admitted by the Supreme Court. Relying on the established principle of judicial discipline, the Tribunal emphasised that subordinate and appellate officers are bound to follow orders of higher appellate authorities within their jurisdiction, and that declining to do so merely because the department disagrees or has filed another appeal would cause harassment and chaos. The Tribunal cited authority explaining that the appropriate remedy for the department is to pursue appellate remedies rather than refuse to give effect to binding orders. Applying that principle, the Tribunal held that the Commissioner(Appeals) acted correctly in following the Delhi High Court decision. [Paras 8, 9]

Commissioner(Appeals) correctly followed the binding jurisdictional High Court precedent; Revenue's plea that the order should be defied because an SLP was admitted in another case was rejected.

Final Conclusion: Both appeals by Revenue are dismissed; the impugned orders of the Commissioner(Appeals) allowing the respondent's refund claims are upheld, the Tribunal applying the binding Delhi High Court precedent and reaffirming the obligation of subordinate/quasi judicial authorities to follow such precedent.

Computation of limitation period from date of communication of the adjudicating authority's order - Review under Section 129D(2) of the Customs Act - requirement to examine legality or propriety and to direct appeal - Obligation to record date of receipt of Order-in-Original in the review order - Filing or reliance upon possibly forged or fabricated documents amounts to interference with administration of justice - Proceedings before Appellate Tribunal deemed judicial for purposes of IPC Section 193 and related provisions

Computation of limitation period from date of communication of the adjudicating authority's order - Review under Section 129D(2) of the Customs Act - requirement to examine legality or propriety and to direct appeal - Obligation to record date of receipt of Order-in-Original in the review order - Whether the Commissioner (Appeals) was justified in dismissing the Department's appeals as time barred on the ground that the review orders were not passed within three months from the date of communication of the adjudicating authority's orders. - HELD THAT: - Sub-section (3) of Section 129D requires that every order under sub-section (2) shall be made within three months from the date of communication of the adjudicating authority's decision. The Department contended that the three month period must be computed from the date on which the Reviewing Cell actually received the Order in Original and relied on a seal on photocopies annexed to the appeal to establish later receipt dates. The Tribunal examined the record and noted that the review orders themselves did not state the date of receipt. The Commissioner (Appeals) had repeatedly called for original case files to verify the date of receipt but no evidence was produced before him; accordingly he computed limitation from the dates available (date of the order/dispatch/job number) and found delay. The Tribunal found the seal on the photocopies in the appeal annexures to be suspect and observed that without reliable evidence of the date of communication/receipt the Commissioner (Appeals) was justified in treating the review as belated. The Tribunal therefore upheld the Commissioner (Appeals)'s conclusion that there was no acceptable proof that the review orders were passed within the three month period prescribed by Section 129D(3), and emphasised the convenience and propriety of recording the date of receipt in the review order itself. [Paras 8, 11, 12, 15, 18]

The Commissioner (Appeals) was correct to dismiss the Department's appeals as time barred; there was no satisfactory evidence that the reviewing authority received the orders on the later dates asserted, and the impugned orders are sustained.

Filing or reliance upon possibly forged or fabricated documents amounts to interference with administration of justice - Proceedings before Appellate Tribunal deemed judicial for purposes of IPC Section 193 and related provisions - Tribunal's administrative directions to ensure seriousness and verification before filing departmental appeals - Whether the Tribunal should comment on the provenance of the seals on the annexed orders and issue directions to the departmental administration in view of suspected fabrication and non cooperation with the Commissioner (Appeals). - HELD THAT: - The Tribunal noted the Commissioner (Appeals)'s expressed anguish that the Department failed to produce original files despite repeated requests and that available annexures bore seals purporting to show later receipt dates. Given the absence of evidence before the Commissioner (Appeals) and the suspect nature of the seals on the photocopies annexed to the appeal, the Tribunal warned that filing forged or fabricated documents would amount to interference with the administration of justice and attract penal consequences under provisions treating Tribunal proceedings as judicial (including IPC Section 193). In light of recurring similar appeals, the Tribunal directed the Registry to send a copy of the order to the jurisdictional Principal Chief Commissioner and directed that instructions be issued to the Committee of Commissioners to ensure that departmental appeals are filed only after satisfactory verification of facts and that review orders record the date of receipt in the Review Cell. [Paras 15, 16, 17]

The Tribunal cautioned against filing fabricated documents, invoked the penal consequences of interference with administration of justice, and directed administrative instructions to be issued to ensure proper verification before filing appeals and that review orders record receipt dates.

Final Conclusion: The impugned orders of the Commissioner (Appeals) dismissing the Department's appeals as time barred are sustained; the Department's appeals to the Tribunal are dismissed, and the Tribunal has directed administrative measures and cautioned against filing fabricated documents while emphasising that review orders should record the date of receipt.

Customs valuation - Transaction value - Rejection of declared value under rule 12 of Customs Valuation Rules - Residual method and application of rule 9 of Customs Valuation Rules - Credibility of surveyor's valuation - Notice and opportunity to be heard - Remand for fresh adjudication - Penalty under section 114A and limitation under section 28 of the Customs Act

Customs valuation - Transaction value - Rejection of declared value under rule 12 of Customs Valuation Rules - Residual method and application of rule 9 of Customs Valuation Rules - Validity of discarding the declared transaction value and adoption of an alternative valuation under the residual method. - HELD THAT: - The Tribunal held that the adjudicating authority invoked rule 12 to reject the declared transaction value and applied the residual method under rule 9 by adopting a surveyor's estimate prepared for the investigators. However, because the adjudication did not adequately test or explain the divergent valuation positions (including the earlier assessment, the bill of sale/MoA value, bank-surveyor and insurer's values), the matter required re-examination. The court emphasised that the residual method must be applied consistently with the valuation scheme and that differing valuations for the same vessel at proximate points in time needed reasoned explanation before exclusion of declared transaction value could be sustained. For these reasons, the Tribunal found that fresh determinative consideration of valuation was necessary. [Paras 4, 5, 9]

Adjudicating authority's valuation decision set aside and the issue remanded for fresh determination in conformity with the valuation rules and reasoned explanation of divergent values.

Credibility of surveyor's valuation - Evidence and surveyor's report credibility - Sufficiency and acceptability of the surveyor's certificate relied upon by investigators for fixing value. - HELD THAT: - The Tribunal recorded that the certificate of the chartered engineer (surveyor) obtained by the investigators was relied upon to fix the assessed value, but the adjudicating authority did not elaborate on or test the basis and adequacy of that certificate so as to make it acceptable on appeal. The Tribunal directed that the adjudicating authority must elaborate the determination underlying that certification and afford the appellants an opportunity in fresh proceedings to meet or challenge the same so that the certification attains credibility in the adjudicatory process. [Paras 4, 10]

Matter remanded for the adjudicating authority to elaborate and test the surveyor's certificate and permit the appellants to contest its adequacy.

Notice and opportunity to be heard - Remand for fresh adjudication - Whether the adjudicating authority erred by making factual findings without placing the appellants on notice or affording opportunity to meet those specific allegations. - HELD THAT: - The Tribunal accepted the appellants' additional grounds that the adjudicating authority incorporated factual propositions (for example, that the vessel was already in appellants' ownership at arrival, and reliance on class certification and refurbishment) without placing the appellants on notice to meet those propositions. Such omission was found to be contrary to principles of fair adjudication. The Tribunal held that these deficiencies must be remedied by fresh proceedings where the appellants are given an opportunity to contest the factual allegations before any valuation or enhancement is finalised. [Paras 7, 9]

Impugned order set aside and matter remanded for fresh adjudication after issuing appropriate notice and affording opportunity of hearing.

Penalty under section 114A and limitation under section 28 of the Customs Act - Applicability and scope of penalty under section 114A and the limited framework of section 28 in the reassessment proceedings. - HELD THAT: - The Tribunal observed that the restricted framework of section 28 and the provisions governing imposition of penalty under section 114A would have to be adhered to in any fresh proceedings. It noted a specific contention regarding correctness of imposing penalty on the entire duty liability rather than on the short-levied amount and indicated that these legal constraints must be respected and explained in the fresh adjudication. Consequently, the questions relating to penalty and limitation were not finally decided on merits but were remanded for reconsideration in accordance with law. [Paras 5, 9]

Questions relating to penalty and limitation remanded for fresh consideration in accordance with the statutory confines of section 28 and section 114A.

Final Conclusion: The impugned order is set aside and the appeals are allowed by way of remand; the matter is returned to the adjudicating authority for fresh determination of all issues raised by the appellants, including valuation, the adequacy and testing of the investigators' surveyor certificate, procedural notice defects, and the application of the limited framework for reassessment and penalty.

Transaction value principle under Section 14 and the Customs Valuation Rules - Rejection of transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Use of contemporaneous import data / NIDB for re-determination of value and the requirements of Rule 5 - Requirement of cogent reasons and examination of comparability (quality, quantity, characteristics) before enhancing declared value - Eligibility for CVD exemption under Notification No. 30/2004-CE as interpreted by the Apex Court and clarified by CBEC Circular No.1005/12/2015-CX

Transaction value principle under Section 14 and the Customs Valuation Rules - Rejection of transaction value under Rule 12 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Use of contemporaneous import data / NIDB for re-determination of value and the requirements of Rule 5 - Requirement of cogent reasons and examination of comparability (quality, quantity, characteristics) before enhancing declared value - Whether the adjudicating authorities lawfully rejected the declared transaction value and enhanced value solely on NIDB/contemporaneous import data without establishing identity or similarity of goods or adducing cogent reasons under Rule 12 and the Valuation Rules. - HELD THAT: - The Tribunal held that the transaction value declared in the Bills of Entry is the primary basis for assessment under Section 14 and the Customs Valuation Rules and can be rejected only on cogent reasons falling within the statutory exceptions. Rule 12 permits raising doubts only upon reasonable grounds and requires that, before applying contemporaneous import data under Rule 5, the proper officer must establish that the contemporaneous imports are of identical or similar goods by examining parameters such as quality, quantity and characteristics. Mere reliance on NIDB/contemporaneous import values, without any enquiry to ascertain comparability or other independent evidence showing suppression or special circumstances, does not suffice to reject the transaction value. The Tribunal applied the settled principles from the Apex Court decisions (as reproduced) that price lists or higher contemporaneous values are not, by themselves, a ground to displace the declared transaction value and that a proper, reasoned enquiry is required before proceeding sequentially under Rules 5-8. On the facts, the adjudicating authority made no attempt to verify similarity or to produce cogent evidence for doubting the declared value; therefore the enhancement based solely on NIDB data was unsustainable. [Paras 4]

Enhancement of the declared value on the sole basis of NIDB/contemporaneous import data is not legally sustainable; the rejection under Rule 12 and re-determination under Rule 5 was without requisite enquiry and cogent reasons and is set aside.

Eligibility for CVD exemption under Notification No. 30/2004-CE as interpreted by the Apex Court and clarified by CBEC Circular No.1005/12/2015-CX - Interaction between exemption notifications and Cenvat credit condition - Whether the appellants were entitled to exemption from Countervailing Duty under Notification No. 30/2004-CE in respect of the imported goods. - HELD THAT: - The Tribunal applied its earlier decision in the appellants' own matter and the ratio of the Apex Court decisions relied upon, together with CBEC Circular No.1005/12/2015-CX, holding that importers are not disentitled from the benefit of the Notification by reason of the proviso concerning non-availment of Cenvat credit by manufacturers. The Board's clarification and the Supreme Court jurisprudence establish that the condition in the proviso is not to be treated as a bar to an importer who has not availed Cenvat credit; field officers are bound by the circular. The Tribunal therefore concluded that the assessing officer ought to have verified and extended the benefit of the notification even if the appellant had not originally claimed it at assessment, and that the denial on grounds of non-protest or conditions already clarified by the Board was incorrect. [Paras 4]

Appellants are eligible for exemption from CVD under Notification No. 30/2004-CE; denial of the exemption was incorrect and the benefit must be extended.

Final Conclusion: Impugned orders are set aside; appeals are allowed. The reassessment based solely on NIDB/contemporaneous import data is quashed and the appellants are entitled to the CVD exemption under Notification No.30/2004-CE, with consequential relief to be given in accordance with law.

Transfer of winding up proceedings to the National Company Law Tribunal under the Insolvency and Bankruptcy Code - irreversible steps in winding up - effect of actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act on insolvency/ winding up proceedings - consequence of acquisition of company land on liquidation and transfer of proceedings - application of Action Ispat and Power Pvt. Ltd. v. Shyam Metallics and Energy Ltd. (transfer where no irreversible steps taken)

Irreversible steps in winding up - transfer of winding up proceedings to the National Company Law Tribunal under the Insolvency and Bankruptcy Code - Whether the winding up proceedings ought to be transferred to the National Company Law Tribunal in view of the Supreme Court's decision permitting transfer where no irreversible steps have been taken. - HELD THAT: - The Company Court recorded that following BIFR's recommendation the Official Liquidator was appointed and liquidation steps progressed: claims were invited, auction processes were undertaken, movable assets were taken possession of and sold by a secured creditor under the SARFAESI Act, and an immovable asset was under acquisition by the State. The Court found that these actions constituted irreversible steps in the winding up. The appellant's speculation that land acquired by the State may be de-notified was unsupported by material and, even if de-notified, the land would remain subject to sale to satisfy creditors. Applying the principle in Action Ispat that transfer to the NCLT is appropriate only where no irreversible steps have been taken, the record shows irreversible steps had occurred and thus transfer was not warranted. [Paras 5, 8, 9, 11, 14]

The Company Court correctly found that irreversible steps in winding up had been taken and therefore it was not appropriate to transfer the winding up proceedings to the National Company Law Tribunal.

Final Conclusion: The intra court appeal is dismissed; the order refusing transfer of the winding up proceedings to the National Company Law Tribunal is affirmed.

Fee continuity on conversion of individual or partnership membership into a corporate entity - requirement of erstwhile individual being whole time director and holding minimum 40% shares for three years - deemed continuation by Explanation to paragraph 4 of Schedule III - certificate of registration from SEBI for each stock exchange and ad valorem fee payable per certificate

Certificate of registration from SEBI for each stock exchange and ad valorem fee payable per certificate - Whether a stock broker requires separate SEBI registration and payment of fee for each stock exchange where it operates. - HELD THAT: - This Court applied its earlier decision in Securities and Exchange Board of India Vs. National Stock Exchange Members Association and Another to hold that a stock broker must obtain a certificate of registration from SEBI for each stock exchange where it operates and, concomitantly, pay the ad valorem fee prescribed in relation to each such certificate. The quoted passage (para 47 of the cited authority) was relied upon to conclude that single SEBI registration does not suffice where a broker functions on multiple exchanges and fee liability is determined per certificate of registration. [Paras 15]

The Court upheld that separate SEBI certificates and corresponding fee payment are required for each stock exchange where the broker operates.

Fee continuity on conversion of individual or partnership membership into a corporate entity - requirement of erstwhile individual being whole time director and holding minimum 40% shares for three years - deemed continuation by Explanation to paragraph 4 of Schedule III - Whether the appellant company was entitled to exemption from payment of registration fee by claiming continuity of fees paid by the erstwhile individual member under paragraph 4 of Schedule III to the Regulations. - HELD THAT: - Paragraph 4 of Schedule III grants fee exemption to a corporate entity formed by converting an individual or partnership membership, subject to the condition that the erstwhile individual or partner shall be the whole time director of the converted corporate member and continue to hold at least 40% of the paid up equity capital for a period of three years from conversion; the Explanation deems such conversion to be continuation of the old entity. The Board examined the records and found, and the Tribunal recorded, that when the membership card was transferred the erstwhile individual was not a whole time director and did not demonstrably hold the requisite 40% shareholding; further, the company was an existing corporate entity which received a transferred membership card rather than being formed by conversion of the individual member. On reappraisal the Board and the Tribunal concluded that the conditions of paragraph 4 were not satisfied and therefore fee continuity could not be claimed. The Court, after review of the material, agreed that the appellant failed to fulfil the statutory conditions and that Regulations do not extend the exemption to cases of transfer to an existing company rather than conversion into a corporate entity. [Paras 17, 18, 19, 22, 23]

The appellant company was not entitled to claim fee continuity under paragraph 4 of Schedule III as it failed to satisfy the condition of the erstwhile individual being a whole time director with the requisite shareholding and because the facts showed a transfer to an existing company rather than a conversion.

Final Conclusion: The appeal by the company challenging denial of fee continuity benefits was dismissed for failure to satisfy the conditions of paragraph 4 of Schedule III; the Board's appeal was allowed, and the concurrent findings denying the exemption were upheld.

Power of review under Order XLVII Rule 1 CPC - error apparent on the face of the record - review is not an appeal in disguise - warrant of arrest for non-compliance with court direction to file affidavit of assets - moratorium under the Insolvency and Bankruptcy Code, 2016 - interim moratorium on proceedings consequent to initiation under the IBC

Power of review under Order XLVII Rule 1 CPC - error apparent on the face of the record - review is not an appeal in disguise - Whether the order dated 23rd November 2022 issuing a warrant of arrest against judgment debtor No.2 is liable to be reviewed under Order XLVII Rule 1 CPC read with Section 114 CPC. - HELD THAT: - The court applied the settled test for review under Order XLVII Rule 1 CPC, namely that review lies only for mistake or error apparent on the face of the record and is not a substitute for appeal or rehearing. The chronology showed earlier clear orders (including dated 2nd April 2019 and subsequent directions) requiring the judgment debtor to file an affidavit of assets and warning that failure would attract issuance of a warrant. Those directions were not challenged, and despite appearance on the dates when the matter was heard the judgment debtor did not comply. An error which is not self-evident and requires a process of reasoning does not qualify as an apparent error. Having found no such self-evident error in the impugned order, the court held that the limited scope of review was not met and declined to re-open the matter.

Review dismissed; no error apparent on the face of the record to warrant review of the order issuing warrant of arrest.

Moratorium under the Insolvency and Bankruptcy Code, 2016 - interim moratorium on proceedings consequent to initiation under the IBC - warrant of arrest for non-compliance with court direction to file affidavit of assets - Whether the moratorium arising from insolvency proceedings of judgment debtor No.1 or initiation against judgment debtor No.2 prevented the court from directing filing of affidavit of assets and issuing a warrant for non-compliance. - HELD THAT: - The judgment debtor contended that insolvency proceedings and the consequent moratorium (including an interim moratorium under proceedings initiated against him) barred continuation of execution steps and obviated the need to file an affidavit of assets. The court noted that despite this contention, directions to file affidavit were repeatedly made and not complied with, and that no challenge to those directions was pursued. The court treated the moratorium plea as not amounting to an apparent error in the record justifying review. In the absence of compliance or a successful interlocutory challenge, the court found no basis to hold that the moratorium precluded the issuance of the warrant for non-compliance with the court's directions.

Moratorium contention did not vitiate the court's directions or the warrant; review on that ground is not sustainable.

Final Conclusion: The review petition challenging the order dated 23rd November 2022 issuing warrant of arrest is rejected: no error apparent on the face of the record and the moratorium contention does not absolve non-compliance with express court directions to file an affidavit of assets.

Just and equitable winding up - oppression and mismanagement jurisdiction under Sections 241-242 - effect and enforceability of consent decree - deadlock among shareholders as ground for winding up - requirement of exhausting alternate remedies before winding up

Just and equitable winding up - deadlock among shareholders as ground for winding up - Validity of the NCLT order directing winding up of Modi Landscapes Pvt. Ltd. on just and equitable grounds including deadlock among shareholders - HELD THAT: - The Tribunal had repeatedly attempted to secure a negotiated resolution - recording consent terms, appointing an Observer cum Facilitator and receiving reports that parties could not reach consensus on valuation or exit mechanisms. The NCLT found the company dormant, non compliant with statutory requirements, unable to carry on business, and that all settlement efforts had failed. On these facts the Tribunal concluded it was "just and equitable" to wind up the company to protect stakeholders and prevent further erosion of assets. The Appellate Tribunal concurred with this fact based exercise of discretion, noting the NCLT's endeavours to exhaust alternatives and the absence of a viable prospect of revival, and affirmed the winding up order as meeting ends of justice and the interest of the company. [Paras 30, 31]

The NCLT's order directing winding up on just and equitable grounds was affirmed.

Effect and enforceability of consent decree - requirement of exhausting alternate remedies before winding up - Whether the existence of an earlier consent decree required restoration of the company petition and precluded the NCLT from ordering winding up without first enforcing the consent terms - HELD THAT: - The Appellants contended the consent decree (which disposed of the original petition) was binding and should have been enforced rather than allowing winding up. The Tribunal's proceedings, however, recorded that the consent terms were breached, multiple enforcement and settlement mechanisms (including costs orders, contempt and facilitation efforts) were invoked, and the Observer cum Facilitator reported failure of settlement. Given that the NCLT actively sought to secure compliance and alternative remedies had been pursued without success, the appellate court held that enforcement attempts had been made and that non compliance with the consent terms and the inability to achieve a negotiated resolution did not preclude a just and equitable winding up. [Paras 30, 31]

The existence of the consent decree did not preclude the NCLT from directing winding up after attempted enforcement and failure of alternative remedies.

Oppression and mismanagement jurisdiction under Sections 241-242 - requirement of exhausting alternate remedies before winding up - Whether the NCLT was required to record a separate finding of "oppression and mismanagement" before ordering winding up under Sections 241 242 - HELD THAT: - The Appellants argued that Section 242(1) requires a finding of oppression and mismanagement prior to winding up. The Tribunal's approach was to consider the full gamut of reliefs available under Sections 241 242, including winding up where just and equitable, after attempts at mediation and facilitation failed and factual findings showed statutory non compliance, dormancy and deadlock. The Appellate Bench accepted the NCLT's exercise of its wide discretion under Sections 241 242 to grant diverse reliefs and found no requirement to refrain from winding up where the Tribunal, on the material before it, concluded that winding up was the appropriate just and equitable relief. [Paras 29, 31]

No separate formalistic finding of "oppression and mismanagement" was fatal to the order; the NCLT lawfully invoked its wide powers under Sections 241 242 to order winding up in the circumstances.

Requirement of statutory procedure for winding up petitions - Objection that winding up could not be ordered in interlocutory application without compliance with Chapter XX procedures and Rules for independent winding up petitions - HELD THAT: - The Appellants contended that the winding up prayer was made under an interlocutory application and not by filing a separate petition in the manner prescribed under Chapter XX and the Companies (Winding up) Rules, 2020, and that statutory procedural steps were therefore not complied with. The Appellate Bench considered the NCLT's invocation of Sections 241 242 and its broad discretion to grant diverse reliefs within the original company petition proceedings. On the facts - where the NCLT had exercised its jurisdiction after hearings, facilitation and reports - the appellate court did not find illegality in the Tribunal's proceeding to wind up the company within the scheme of the company petition and the reliefs permissible thereunder. [Paras 29, 31]

The procedural objection to the form of the winding up application did not vitiate the winding up order in the circumstances.

Final Conclusion: The NCLT's order dated 8th June 2021 directing winding up of Modi Landscapes Pvt. Ltd. was upheld: the Tribunal had made bona fide efforts to enforce the consent terms and to explore alternatives, found the company moribund and in statutory non compliance with an entrenched deadlock among shareholders, and lawfully exercised its wide discretion under Sections 241 242 to order winding up; the appeal is dismissed and the impugned order is affirmed.

Pre-existing dispute under Section 8/9 of the Insolvency and Bankruptcy Code, 2016 - initiation of corporate insolvency resolution process (CIRP) - application of the Mobilox Innovations test for pre-existing dispute

Pre-existing dispute under Section 8/9 of the Insolvency and Bankruptcy Code, 2016 - application of the Mobilox Innovations test for pre-existing dispute - Existence of a discernible pre-existing dispute between the Operational Creditor and the Corporate Debtor which justified dismissal of the Section 9 application. - HELD THAT: - The Tribunal examined the Corporate Debtor's reply to the Section 8 demand notice and contemporaneous communications preceding the demand notice and found substantive material raising both quantum and performance-related disputes. The Corporate Debtor disputed the claimed amount in its reply dated 08.08.2020 and had earlier sought reconciliation of accounts; the Operational Creditor had itself sought reconciliation in earlier emails. Separate contemporaneous emails and correspondence (including complaints about defects, non-supply of transformer oil, delays, non-submission/renewal of bank guarantees and consequential losses) dated between 2017 and 2019 were held to constitute evidence of pre-existing disputes. The Tribunal also distinguished later-initiated arbitration proceedings (from September 2020) as not constituting pre-existing disputes since they followed the demand notice. Applying the legal test laid down in Mobilox Innovations - that a dispute must be genuine and plausible and not spurious or vexatious - the Tribunal concluded that the defence was supported by material and was not a mere smokescreen. On this basis the Adjudicating Authority's finding of a pre-existing dispute was upheld and the Section 9 petition was held to be rightly dismissed. [Paras 15, 16, 18, 19, 20]

The Adjudicating Authority correctly found a pre-existing dispute supported by contemporaneous material and rightly dismissed the Section 9 application; the appeal is dismissed.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority's finding of a bona fide pre-existing dispute (as per Mobilox Innovations) regarding both the claimed debt and alleged deficiencies in supply was lawful; the Operational Creditor remains free to pursue other remedies under law.

Forfeiture of illegally acquired property - burden of proof under Section 8 of the Act, 1976 - fine in lieu of forfeiture under Section 9 of the Act, 1976 - show cause notice under Section 6 of the Act, 1976 - associate under Section 2(2)(d) and Explanation 3 - principles of natural justice - delay and prejudice in forfeiture proceedings

Forfeiture of illegally acquired property - burden of proof under Section 8 of the Act, 1976 - show cause notice under Section 6 of the Act, 1976 - Validity of the forfeiture order under Section 7 in view of the appellants' failure to prove sources of funds - HELD THAT: - The Court upheld the finding that the competent authority, after issuing a notice under Section 6 and affording opportunity of hearing, was entitled to record a finding under Section 7 that the theatre was an illegally acquired property. Section 8 places on the person affected the burden of proving that property specified in the notice is not illegally acquired; the appellants failed to discharge that burden. The material on record showed capital contributions as per partnership deed and returns, an assessment by income-tax authorities treating major sums as income from undisclosed sources, absence of documentary proof of the claimed source of purchase-money for the land, and lack of accounts or documents showing investment of the alleged bank loan in construction. On these facts the authority reasonably concluded that a major part of the investment remained unexplained and lawfully forfeited the property under Section 7. [Paras 13, 14, 15, 16, 19]

Forfeiture under Section 7 was valid because the appellants failed to prove lawful sources; the competent authority's finding was sustainable.

Fine in lieu of forfeiture under Section 9 of the Act, 1976 - burden of proof under Section 8 of the Act, 1976 - Whether the appellants were entitled to be given the option to pay a fine under Section 9 instead of forfeiture - HELD THAT: - Section 9 permits imposition of a fine in lieu of forfeiture only where the source of only a part, being less than one-half, of the means of acquisition remains unproved. The competent authority and the Tribunal found, on the material before them, that more than 50% of the value of the theatre remained unexplained. The High Court examined the appellants' contentions, including the claimed pre-partnership acquisition of land and the alleged investments, and recorded that no satisfactory documentary proof was produced to reduce the unexplained portion below one-half. Consequently the condition for offering the Section 9 option was not satisfied and the authority was not obliged to offer fine in lieu of forfeiture. [Paras 13, 15, 17, 19]

Section 9 relief was not available as the unexplained portion exceeded one-half; no obligation to offer fine arose.

Associate under Section 2(2)(d) and Explanation 3 - forfeiture of illegally acquired property - Claim of private ownership of the land by appellant no.2 and its effect on forfeiture - HELD THAT: - Although appellant no.2 claimed the land was privately purchased in 1969, the Court found no adequate documentary proof was produced to substantiate that claim. The partnership accounts and other material indicated that the partners were joint owners by virtue of capital contributions. Given the absence of proof of acquisition from lawful sources and the finding that the investment (land plus building) left a major unexplained portion, the authority appropriately included the land and theatre in the forfeiture order. The Court found no error in disbelieving the appellant's version or in treating the land as subject to the forfeiture order. [Paras 14, 16, 19]

The claim of private ownership by appellant no.2 was not substantiated; the land could be included within the forfeiture.

Delay and prejudice in forfeiture proceedings - show cause notice under Section 6 of the Act, 1976 - Whether the delay in proceedings rendered the forfeiture order unsustainable - HELD THAT: - The Court noted the chronology of earlier proceedings beginning with a show cause notice in 1977, an initial forfeiture order which was later set aside, and fresh proceedings initiated by a show cause notice dated 16th October, 1994 culminating in the 1997 order. On the facts, the Court held that the prosecution of proceedings was continuous and no such inordinate delay attributable to the authorities produced prejudice warranting interference. The plea of gross delay was rejected as misconceived in the circumstances of the case. [Paras 20]

Delay did not vitiate the forfeiture; there was no fatal prejudice from the timeline of proceedings.

Final Conclusion: The appeal was dismissed; the forfeiture order of the theatre (including the land as unproved/private ownership was disbelieved), the Tribunal's confirmation, and the High Court's dismissal of the writ petition were upheld, with no costs.

Compliance of Section 5(1) of the PMLA, 2002 - Provisional attachment order - Non-application of mind / templated orders - Appeal to Appellate Tribunal under PMLA, 2002

Non-application of mind / templated orders - Compliance of Section 5(1) of the PMLA, 2002 - Use of identical templated paragraphs by the Adjudicating Authority and its acceptability - HELD THAT: - The Court observed that portions of orders issued by the Adjudicating Authority in relation to compliance under Section 5(1) and Section 8(1) of the PMLA appear verbatim in multiple matters. Such use of identical templated paragraphs may indicate non-application of mind by the Authority and ought to be avoided. The Court cautioned the Adjudicating Authority against passing templated, cut and paste orders and directed that this position be brought to the attention of the Adjudicating Authority by counsel for the Enforcement Directorate. The observation emphasises that while authority to pass a provisional attachment order exists, the formation and recording of the requisite reasonable belief and application of mind must be evident in each order. [Paras 5, 6]

The Adjudicating Authority was cautioned to avoid templated orders and counsel for the Enforcement Directorate was directed to bring this position to the Authority's notice.

Provisional attachment order - Appeal to Appellate Tribunal under PMLA, 2002 - Maintainability of the petition in view of availability of appellate remedy to the Appellate Tribunal (PMLA) and the course to be followed - HELD THAT: - The Court noted that the order under challenge is an attachment order which is appealable to the Appellate Tribunal under the PMLA. Although the petitioner had earlier preferred an appeal when the Tribunal was not duly constituted, the Tribunal is now constituted. Therefore the petitioner must resort to the appellate remedy before the Appellate Tribunal. The Court relegated the petitioner to the Appellate Tribunal for adjudication of the pending appeal in accordance with law and directed that the appeal be listed and taken up for adjudication. All contentions of the parties were left open for determination by the Tribunal. [Paras 7, 8, 9, 10]

Petitioner relegated to the Appellate Tribunal (PMLA); the appeal shall be listed and adjudicated in accordance with law, with all contentions left open.

Final Conclusion: The petition is disposed of: the Adjudicating Authority is cautioned against passing templated orders and the petitioner is relegated to the Appellate Tribunal (PMLA) to pursue its appeal, which shall be listed and decided in accordance with law; all other contentions are left open.

Taxability of hire-purchase and financial lease transactions - Banking and Other Financial Services - non-retroactivity of service tax for agreements entered prior to 16.07.2001 - valuation - exclusion of principal/interest and need for bifurcation mechanism - application of Notification No.4/2006 (w.e.f. 01.03.2006) for levy on finance/interest/processing charges - imposition of penalty for past non-registration/non-payment

Taxability of hire-purchase and financial lease transactions - non-retroactivity of service tax for agreements entered prior to 16.07.2001 - Agreements entered prior to 16.07.2001 are not liable to service tax even if payments were received thereafter. - HELD THAT: - The Tribunal noted that service tax on Banking and Other Financial Services was introduced with effect from 16.07.2001. Consequently, agreements executed before that date cannot be made the subject of service tax liability merely because payments were received later. The Court accordingly held that where the assessee's agreements were entered into prior to 16.07.2001, no service tax liability arises on those agreements even if receipts were realized subsequently. [Paras 7]

Agreements entered prior to 16.07.2001 are not taxable; issue answered in favour of the assessee.

Valuation - exclusion of principal/interest and need for bifurcation mechanism - application of Notification No.4/2006 (w.e.f. 01.03.2006) for levy on finance/interest/processing charges - Banking and Other Financial Services - Service tax on financing activities carried out after 16.07.2001 is leviable only from 01.03.2006 where Notification No.4/2006 provided the mechanism to treat finance/interest and processing/management charges as taxable components; prior to 01.03.2006, interest on loans cannot be taxed in absence of a bifurcation mechanism. - HELD THAT: - Relying on the reasoning in Association of Leasing and Financial Service Companies and the Tribunal's application of that ratio, the Court recognised that financial leasing and hire-purchase finance fall within 'Banking and Other Financial Services' and that taxable value comprises finance/interest charges and management/processing/documentation fees rather than principal. However, prior to 01.03.2006 there was no statutory mechanism to bifurcate interest from the service element; earlier legislative and rule provisions and Board circulars excluded interest on loans from taxable value. In those circumstances the Tribunal correctly held that recovery of service tax on interest for periods prior to 01.03.2006 was without authority of law, and that service tax for agreements entered after 16.07.2001 is payable only with effect from 01.03.2006 in terms of Notification No.4/2006. [Paras 8, 9]

No service tax on interest portion prior to 01.03.2006; service tax on finance/processing charges leviable w.e.f. 01.03.2006 for transactions post 16.07.2001.

Imposition of penalty for past non-registration/non-payment - Penalty is not imposable on the assessee in the facts and circumstances of the case. - HELD THAT: - Having concluded that a portion of the demand (interest portion prior to 01.03.2006 and agreements prior to 16.07.2001) could not be lawfully recovered, the Tribunal found no basis to sustain penalty under the circumstances of this case and held that penalty should not be imposed. [Paras 10]

No penalty is imposable on the assessee.

Final Conclusion: The appeals were disposed: service tax demand confirmed only to the limited extent that it applies from 01.03.2006 for financing activities entered into after 16.07.2001; agreements entered prior to 16.07.2001 are not taxable; no service tax on interest prior to 01.03.2006; and no penalty is imposable.

Conditional right of appeal - mandatory pre-deposit requirement - dismissal for non-payment of pre-deposit - statutory appeal under Section 35-G of the Act - inherent power under Article 226

Mandatory pre-deposit requirement - dismissal for non-payment of pre-deposit - Whether the Tribunal was justified in dismissing the statutory appeal as defective for non-payment of the prescribed pre-deposit. - HELD THAT: - The Court held that the right of appeal under the statutory scheme is conditional and arises only upon compliance with the prescribed pre-deposit obligation. The legislature conferred a qualified right of appeal; consequently, non-payment of the mandated pre-deposit (7.5% of the disputed demand) rendered the appeal defective and justified its dismissal by the Tribunal. The Court agreed with the view taken by the coordinate bench in similar matters and found no error in the Tribunal's rejection of the appeal for non-compliance with the statutory pre-deposit requirement. [Paras 7, 10]

Tribunal's dismissal of the appeal for non-payment of the pre-deposit was legally justified.

Conditional right of appeal - inherent power under Article 226 - Whether this Court could, in exercise of its writ jurisdiction under Article 226, grant relief in a manner contrary to the statutory pre-deposit requirement. - HELD THAT: - The Court observed that proceedings under the statute are governed by the statutory scheme and that it is not open to the High Court to exercise its writ jurisdiction to grant relief contrary to clear statutory mandates applicable to statutory appeals. No challenge to the validity of the statutory requirement was before the Court. Accordingly, the Court refrained from exercising Article 226 powers to override the statutory pre-deposit obligation. [Paras 8, 9]

High Court cannot use Article 226 to grant relief inconsistent with the statutory pre-deposit requirement.

Conditional right of appeal - mandatory pre-deposit requirement - Whether any discretionary relief should be afforded to the assessee despite non-compliance, and the consequence of such relief. - HELD THAT: - Although the Court upheld the legal correctness of dismissal for non-payment, it exercised judicial indulgence in the interest of justice by providing the assessee a one-time opportunity to comply with the statutory condition. Subject to the assessee making the prescribed pre-deposit (7.5% of the disputed demand) within two weeks, the Court set aside the Tribunal's order dated 28.04.2022 and directed that the Tribunal register the appeal as a regular appeal and proceed thereafter. This relief was granted by consent of the parties and limited to the factual circumstance of the present case. [Paras 11]

Order of the Tribunal set aside conditioned upon the assessee making the pre-deposit within two weeks; appeal to be registered and dealt with as a regular appeal thereafter.

Final Conclusion: The High Court affirmed the legal correctness of dismissal of a statutory appeal for non-payment of the prescribed pre-deposit, declined to override the statutory requirement via writ jurisdiction, but granted a limited, one time indulgence permitting the assessee two weeks to make the pre-deposit; on such compliance the Tribunal's order is set aside and the appeal shall be registered and heard on merits.

Aggregation of clearances for SSI exemption - common ownership of separate firms - separate legal entity of companies not equivalent to partnership firms - no requirement to issue show cause notice to a unit owned by the same persons - interpretation of notification no. 8/2003-CE regarding aggregate value limit

Aggregation of clearances for SSI exemption - common ownership of separate firms - interpretation of notification no. 8/2003-CE regarding aggregate value limit - Value of clearances of M/s. Himalaya Engineers & Manufacturers is includable with M/s. Himalaya Equipments for determining eligibility under notification no. 8/2003-CE. - HELD THAT: - The Tribunal examined the constitutions of both firms and found identical partners with equal sharing in each firm. Notification No. 8/2003-CE treats the exemption as applicable to the aggregate value of clearances by a manufacturer from one or more factories and requires that the aggregate value of clearances by a manufacturer or from a factory by one or more manufacturers not exceed the prescribed limit. Where the same persons constitute the ownership of more than one firm (here, partnership firms with identical partners and sharing), those units are to be treated as owned by the same manufacturer and their clearances aggregated for the purpose of the SSI exemption. The Board Circular relied upon by the appellant that treats private limited companies as distinct entities was found inapplicable because that circular carved out an exception only for companies; partnership firms owned by the same partners must be combined. The Tribunal therefore agreed with the adjudicating authority that, on the facts of this case, the clearances of the other firm are includable in the appellant's value of clearances and the exemption limit is to be applied on the aggregated value. [Paras 4]

The value of clearances of M/s. Himalaya Engineers & Manufacturers is to be aggregated with M/s. Himalaya Equipments for applying the SSI exemption under notification no. 8/2003-CE; the adjudicating order confirming duty is upheld.

No requirement to issue show cause notice to a unit owned by the same persons - separate legal entity of companies not equivalent to partnership firms - It was not necessary to issue a separate show cause notice to M/s. Himalaya Engineers & Manufacturers before clubbing its clearances with the appellant where both units are owned by the same partners. - HELD THAT: - The Tribunal held that the contention that a show cause notice must be issued to the other firm applies where distinct owners exist. When two units are effectively owned by the same persons (here identical partners and shareholding), the other unit is treated as part of the same manufacturer for the purposes of aggregation, and no separate show cause notice to that unit is required. The distinction drawn in the Board Circular pertains to companies (separate legal entity), and does not extend to partnership firms having common ownership; consequently the appellant's reliance on authorities concerning separate corporate entities did not aid its case. [Paras 4]

No separate show cause notice to the other partnership firm was required before clubbing its clearances with the appellant for determining SSI exemption eligibility.

Final Conclusion: The Tribunal upheld the impugned order; the clearances of the two partnership firms owned by the same partners are to be aggregated for application of notification no. 8/2003-CE, and the appeal is dismissed.

Condonation of transit and handling loss - Rule 13 of the Central Excise Rules - precedential consistency and uniformity in tax administration - non-application of mind by a revisional authority

Condonation of transit and handling loss - Rule 13 of the Central Excise Rules - Whether the claim for condonation of short shipment (transit/handling loss) in export of charge chrome should be considered under the Board's earlier practice and circulars and whether the revisional order denying such condonation is sustainable. - HELD THAT: - The Court accepted the factual premise that short shipment arose from transit and handling between factory weighment and draft survey at port. The CBEC circular of 29.11.1979 (read with earlier administrative practice) contemplates permitting losses occurring by natural or human causes under the wide phraseology of Rule 13, and such claims are to be decided on merits by the adjudicating authority. The revisional authority noted the petitioner's precedents but did not analyse or apply their ratios and proceeded to disallow condonation; that omission amounted to non-application of mind. As consistency and uniformity in administrative/judicial decisions are values that ordinarily require similar treatment of identical or closely similar cases, the revisional authority's failure to address the cited decisions and to give reasons for departing from established practice rendered its conclusion unsustainable. The Court did not itself adjudicate the quantification or genuineness of the loss on merits; instead it held that the revisional authority must re-examine the claim in the light of the relevant circulars and precedents and after affording opportunity of hearing. [Paras 7, 16, 17]

The revisional order denying condonation was set aside and the matter remitted to the revisional authority for fresh reconsideration of the condonation claim with regard to the cited circulars and decisions and after hearing the parties.

Final Conclusion: Writ petition allowed; order dated 26.04.2010 of the revisional authority set aside and the matter remitted to the same revisional authority for fresh consideration in accordance with law after taking into account the judgments and circulars cited by the petitioner and after affording hearing; no order as to costs.

Penalty under Rule 26(1) of Central Excise Rules, 2002 - Abetment of fraudulent availment of Cenvat credit - Receipt of goods without cover of Central Excise invoice - Receipt of Central Excise invoices without receipt of goods - Liability for penalty for aiding or facilitating concealment/evading duty

Penalty under Rule 26(1) of Central Excise Rules, 2002 - Receipt of goods without cover of Central Excise invoice - Abetment of fraudulent availment of Cenvat credit - Imposition of penalty under Rule 26(1) on buyers who purchased excisable inputs without cover of Central Excise invoices and thereby facilitated fraudulent Cenvat credit availment. - HELD THAT: - The adjudicating authority found, and the Tribunal accepts, that M/s Tarun Polymers, Daman fraudulently availed Cenvat credit and that various buyers who purchased plastic granules without Central Excise invoices actively participated in purchases, receipt and storage of those inputs. Such conduct facilitated the wrongful availment of Cenvat credit by M/s Tarun Polymers and amounted to abetment of evasion. On these findings the buyers were held liable under Rule 26(1) as they knew or had reason to believe that the goods were liable for confiscation and that their acts aided the fraud. The appellate court finds no infirmity in the detailed findings recorded by the Commissioner and upholds imposition of penalty on these buyers. [Paras 18]

Penalty under Rule 26(1) upheld against buyers who received goods without Central Excise invoices.

Penalty under Rule 26(1) of Central Excise Rules, 2002 - Receipt of Central Excise invoices without receipt of goods - Liability for penalty for aiding or facilitating concealment/evading duty - Imposition of penalty under Rule 26(1) on customers who received only Central Excise invoices without actually receiving the goods. - HELD THAT: - The Commissioner found, and the Tribunal concurs, that certain customers received only invoices for excisable goods without receipt of the underlying materials, thereby participating in the scheme to enable M/s Tarun Polymers to claim fraudulent Cenvat credit. The admitted fact of receiving only invoices demonstrated involvement in the fraud and concealment of purchases, and therefore rendered those customers liable to penalty under Rule 26(1). The appellate forum finds the adjudicatory conclusions sustaining such liability to be reasonable and without infirmity. [Paras 18]

Penalty under Rule 26(1) upheld against customers who received only invoices without receipt of goods.

Final Conclusion: Findings that the appellants abetted fraudulent availment of Cenvat credit by M/s Tarun Polymers, Daman are upheld; the impugned order imposing penalties under Rule 26(1) is affirmed and the appeals are dismissed.

Extended period of limitation - suppression of facts with intent to evade - self-assessment and scrutiny of returns - audit versus statutory scrutiny - penalty under Section 11AC - time-barred demand - interpretation of notification

Extended period of limitation - suppression of facts with intent to evade - self-assessment and scrutiny of returns - audit versus statutory scrutiny - penalty under Section 11AC - time-barred demand - interpretation of notification - Whether the extended period of limitation and penalty under Section 11AC could be invoked so as to sustain the demand confirmed by the Commissioner - HELD THAT: - The Tribunal held that extended period of limitation could not be invoked because the Department's statutory machinery - the mandatory scrutiny of ER-1 returns by the proper officer and the power to call for documents under the Rules - is the primary check on self-assessment and must be exercised within the normal limitation period. Audit is only a secondary, selective check and its later findings do not, by themselves, establish suppression by the assessee. Where the ER-1 returns do not require particular details, the assessee cannot be faulted for not furnishing them; and if the officer who was mandated to scrutinise returns did not call for relevant information, responsibility lies with the officer, not the assessee. Additional factors reinforcing that extended limitation was not invokable were that a Show Cause Notice on the same issue had been issued for an earlier period (putting the Department on notice of the dispute), multiple audits had been conducted, and the controversy involved interpretation of the notification such that the assessee could legitimately hold a different view - all of which negatived an inference of deliberate suppression with intent to evade duty. Applying these principles, the Tribunal found the impugned invocation of extended limitation and imposition of penalty unsustainable and declared the demand time-barred. [Paras 13, 14, 15, 16, 17]

The impugned order is set aside; the demand is time-barred, the appeal is allowed and consequential relief is granted to the appellant.

Final Conclusion: The Tribunal concluded that extended limitation and penalty under Section 11AC were not invocable on the facts: scrutiny of ER-1 returns by the proper officer is the primary check, audits are secondary and selective, prior SCN and the interpretative nature of the issue negated suppression with intent to evade, and therefore the demand confirmed by the Commissioner is time-barred and the impugned order is set aside.

Priority of secured creditor on registration with CERSAI under Chapter IV-A of the SARFAESI Act - effect of non-registration by revenue authority of attachment/claim with CERSAI - operation of statutory first charge under State tax law vis-a -vis a subsequently enacted central enactment - public notice and crystallisation of priority on registration of security interest - permissibility of waiver of forfeiture/extension under the Securitization (Enforcement) Rules

Priority of secured creditor on registration with CERSAI under Chapter IV-A of the SARFAESI Act - effect of non-registration by revenue authority of attachment/claim with CERSAI - public notice and crystallisation of priority on registration of security interest - Whether the Petitioner Bank's registration of its security interest with CERSAI prior to the attachment by the Sales Tax Department entitles it to priority over the Department's claim. - HELD THAT: - The Court found as an admitted fact that the Bank had registered the equitable mortgage with CERSAI on 30th March, 2012 and that the Sales Tax Department had not registered any claim or attachment with CERSAI. Relying upon the Full Bench reasoning in Jalgaon Janta Sahakari Bank Ltd. & Anr., the Court held that Chapter IV A of the SARFAESI Act makes CERSAI registration the pre condition both for enforcement under Chapter III and for claiming priority under Section 26E. Section 26E, beginning with a non obstante clause, accords a registered secured creditor priority over other debts, revenues and taxes, subject to compliance with Chapter IV A. Consequently, non registration by the State Tax Authority renders its claim subordinate to the Bank's registered security interest, and any inconsistency between the central SARFAESI Act and the State MVAT Act is resolved in favour of the SARFAESI Act under Article 254 of the Constitution. [Paras 84, 86, 88, 91, 95]

The Bank's CERSAI registration of 30th March, 2012 gives it priority over the Sales Tax Department's unregistered claim; the Department's non registration renders its claim subordinate.

Effect of non-registration by revenue authority of attachment/claim with CERSAI - operation of statutory first charge under State tax law vis-a -vis a subsequently enacted central enactment - Whether the attachment order dated 22nd April, 2022 passed by the Sales Tax Authority in respect of the secured asset is maintainable. - HELD THAT: - The Court noted that the attachment was levied after the Bank's registered security interest and that the Sales Tax Authority had not complied with the registration requirement under Chapter IV A. Applying the Full Bench conclusions that Section 26E will override conflicting State enactments once its conditions are met, the Court concluded that the attachment order operating to displace the Bank's priority was inconsistent with the SARFAESI scheme and could not stand where the Department had not registered its claim with CERSAI. The Court further observed that the Department had not shown any contemporaneous registration or prior notice sufficient to displace the Bank's priority. [Paras 78, 82, 94, 95]

The attachment order dated 22nd April, 2022 is quashed and set aside.

Public notice and crystallisation of priority on registration of security interest - auction purchaser's entitlement and notice (actual or constructive) - obligation of society to issue NOC where claim is not registered - Whether the auction purchasers had actual or constructive notice of the Sales Tax Department's claim and whether the society can withhold NOC for transfer on account of those dues. - HELD THAT: - The Court accepted the auction purchasers' and Bank's evidence that no actual notice of a lien/attachment in respect of Flat No.182 was given by the Sales Tax Authority or recorded by the society prior to the auction, and that the Department had not registered any charge with CERSAI. The Full Bench authorities were held to dictate that mere entries in society records or subsequent communications, absent CERSAI registration, cannot defeat the purchaser's rights when the secured creditor's registration preceded the Department's action. Consequently the society was directed to issue NOC for transfer of the secured asset to the auction purchasers without insisting on payment of Sales Tax dues, while preserving the Department's right to recover dues from other assets of the dealer. [Paras 38, 41, 101, 104, 111]

Auction purchasers had no actual or constructive notice sufficient to defeat their rights; society shall issue NOC for transfer without insisting on payment of Sales Tax dues, subject to the Department's remedy against other assets.

Permissibility of waiver of forfeiture/extension under the Securitization (Enforcement) Rules - application of judicial interpretation of Rule 9 of the Securitization (Enforcement) Rules - Whether the Petitioner Bank's alleged forfeiture of the 25% earnest money deposit and cancellation of the auction precluded the Bank from accepting the balance consideration later. - HELD THAT: - The Court referred to the Supreme Court's interpretation in General Manager, Sri Siddeshwara Cooperative Bank Ltd. that provisions under Rule 9 (including forfeiture/extension provisions) are for the benefit of secured creditors and borrowers and may be waived. Examining the correspondence, the Court found that although the Bank at one stage communicated forfeiture, it later informed the auction purchasers that it would accept the balance 75% upon resolution of the attachment issue and had filed the writ petition seeking to lift the attachment. In the circumstances, and given the attachment intervened before expiry of the three month period thus preventing payment, the Court held the Bank could lawfully elect not to press forfeiture and to accept the balance consideration. [Paras 51, 62, 67, 108, 110]

The Bank is not estopped from waiving forfeiture and accepting the balance consideration; the alleged cancellation does not preclude the Bank from completing the sale if the attachment is lifted.

Final Conclusion: The Court allowed both writ petitions: the attachment order dated 22 April, 2022 was quashed; the Bank's earlier CERSAI registration (30 March, 2012) confers priority under Section 26E of the SARFAESI Act over the Sales Tax Department's unregistered claim; the auction purchasers are not obliged to pay the Sales Tax dues to obtain transfer and the society is directed to issue NOC for transfer subject to other formalities; and the Bank may waive forfeiture and accept the balance sale consideration.

Limitation on assessment after five years under the TVAT Act - Power of revisional authority under Section 70(1) to call for and examine records - Requirement of a speaking order by a revisional authority - Right to be heard and notice before enhancement of tax or penalty

Limitation on assessment after five years under the TVAT Act - Power of revisional authority under Section 70(1) to call for and examine records - Validity of the notice dated 10.07.2020 and order dated 25.09.2020 initiating suo moto revisional proceedings and setting aside the assessment dated 24.03.2015. - HELD THAT: - The Court noted that the revisional authority issued the notice on 10.07.2020, more than five years after completion of the assessment dated 24.03.2015. The judgment refers to the statutory bar on making an assessment after the expiry of five years and records that the revisional authority proceeded to set aside the assessment and remanded the matter for fresh assessment. The Court, however, did not decide the merits of whether the limitation bar rendered the proceedings wholly invalid; instead the factual chronology and the statutory time-limits were observed and formed part of the Court's concern about the validity and propriety of the revisional exercise. [Paras 3, 7, 8]

Proceedings were examined in light of the five-year limitation; the Court expressed concern about the late suo moto revisional exercise but did not enter into merits and remanded the matter for fresh consideration.

Requirement of a speaking order by a revisional authority - Right to be heard and notice before enhancement of tax or penalty - Whether the revisional authority's order dismissing the petitioner's revision and the show-cause notice dated 27.10.2020 were legally sustainable in the absence of a speaking order addressing the petitioner's objections. - HELD THAT: - The Court observed that the revisional authority's order lacked reasons on critical issues, including the treatment of discounts and whether discounted amounts were fictitious. The revisional authority also proceeded to dismiss the petitioner's revision without adequately dealing with the written submissions. For these reasons the Court held that the revisional authority had not passed a speaking order explaining the basis for upholding the reassessment and penalty, and that the show-cause notice dated 27.10.2020 could not stand. The Court therefore set aside the notice and remitted the matter to the revisional authority to decide afresh after permitting the petitioner to raise all objections, including jurisdictional objections, and to place relevant authorities in support; the revisional authority was directed to pass a reasoned speaking order and to complete the exercise expeditiously. [Paras 9, 10, 11]

The show-cause notice dated 27.10.2020 is set aside; the matter is remanded to the revisional authority to decide afresh by passing a speaking order after hearing the petitioner on all objections.

Final Conclusion: The Court set aside the show-cause notice dated 27.10.2020 and remanded the matter to the revisional authority to reconsider the assessment and penalties afresh, directing that a reasoned speaking order be passed after hearing the petitioner on all objections, including jurisdictional points, as expeditiously as possible.

Dishonour of cheque - Section 138 Negotiable Instruments Act - Legally enforceable debt - Service of statutory notice - Proof of execution and possession of cheque - Concurrent findings of fact - Criminal revision-scope of interference

Section 138 Negotiable Instruments Act - Legally enforceable debt - Proof of execution and possession of cheque - The accused issued Ex.P.1 cheque in favour of the complainant towards part discharge of a legally enforceable debt and the complainant proved the execution and applicability of Ex.P.7 promissory note. - HELD THAT: - Both trial Court and first appellate Court accepted the complainant's evidence that Ex.P.7 (promissory note) was executed and attested by P.W.2, and that Ex.P.1 (cheque) bore the accused's signature and cheque number. The accused's defence that the cheque was stolen or that he had closed the account in 2001 was not substantiated. The accused admitted signing cheque leaves in advance and returning unused leaves to the bank, but the bank records (Ex.D.1 to Ex.D.4) and the absence of any intimation to bank or police regarding loss of cheque undermined the defence. The courts found it improbable that the accused would remain silent if the cheque had truly been stolen and noted absence of any evidence of return of unused signed leaves to the bank. On the totality of evidence the courts concluded that the complainant discharged the burden of proving issuance of the cheque for discharge of a legally enforceable debt. [Paras 18]

Findings that Ex.P.1 was issued by the accused in part discharge of Ex.P.7 and that the complainant proved execution and possession are upheld.

Dishonour of cheque - Service of statutory notice - Section 138 Negotiable Instruments Act - Statutory requirements under Section 138 were complied with: the cheque was presented and dishonoured, and the complainant effected service of the legal notice in the prescribed manner. - HELD THAT: - Evidence showed the cheque was presented to the bank and returned with a memo (Ex.P.2 and Ex.P.3) stating account closure, constituting dishonour. The complainant issued a registered legal notice (Ex.P.4), and postal records (Ex.P.5) show multiple attempts at delivery with return endorsed due to the door being locked; Ex.P.6 shows certificate of posting. The courts found that sending the registered notice to the correct address with proper postage and the facts that the accused was not available amounted to proper service, and that the complainant waited the statutory period before instituting complaint. The accused's contention of improper service and non-compliance with notice requirements was rejected. [Paras 19]

Requirements of presentation, dishonour and statutory notice under Section 138 were satisfied; the defence of defective notice failed.

Concurrent findings of fact - Criminal revision-scope of interference - Concurrent findings of fact recorded by the trial Court and the first appellate Court do not warrant interference in this criminal revision petition. - HELD THAT: - The High Court reviewed the record and the reasoning of both lower courts, noting that they analysed evidence, considered defences raised by the accused, and reached conclusions on credibility and probative value of documents and testimony. No illegality, irregularity or impropriety was shown to justify interference with concurrent findings. The High Court observed that the appellant failed to demonstrate any material error in appreciation of evidence or law that would vitiate the convictions or sentences imposed. [Paras 17, 20]

Criminal revision dismissed; concurrent findings are affirmed and not interfered with.

Final Conclusion: The High Court dismissed the criminal revision, upholding the trial and appellate Courts' concurrent findings that the accused issued the cheque towards part discharge of a legally enforceable debt, that statutory requirements of Section 138 were complied with, and that there were no grounds to interfere with the conviction and sentence.