TaxTMI Updates e-Newsletter
Mar 28,2022

Violation of principles of natural justice - ex parte non-speaking order - quashing and remand for fresh adjudication - pre-deposit and additional deposit conditions for hearing/appeal - stay of coercive action pending adjudication - direction to pass a speaking order

Violation of principles of natural justice - ex parte non-speaking order - Impugned appellate order dated 17.08.2021 and the assessment order dated 30.12.2020 (and related summary of demand) are vitiated for want of fair hearing and for being non-speaking/ex parte. - HELD THAT: - Court found that the appellate order did not deal with notices, assigned no sufficient reasons and was essentially an ex parte, non-speaking order. Noting that the order runs into pages yet fails to disclose adequate reasons or show that adequate opportunity was afforded to the petitioner, the Court held that the order is bad in law on the short ground of breach of the principles of natural justice and absence of a speaking order. The Court observed that it is not precluded from interference where an order is ex facie bad in law for such reasons and accordingly set aside the impugned orders.

Impugned orders quashed and set aside for violation of principles of natural justice and being non-speaking/ex parte.

Quashing and remand for fresh adjudication - pre-deposit and additional deposit conditions for hearing/appeal - stay of coercive action pending adjudication - direction to pass a speaking order - Matter remitted to the Assessing Authority for fresh decision on merits with directions regarding deposits, hearing, timeframe, de-freezing of bank accounts and prohibition of coercive steps. - HELD THAT: - Having quashed the impugned orders, the Court remanded the matter for fresh adjudication on merits, directing that the petitioner shall, if not already done, deposit the prescribed ten per cent pre-deposit required for filing the appeal and undertake to deposit an additional thirty per cent of the demand within four weeks. The deposit is to be without prejudice to parties' rights and refundable if found excessive. The Court ordered immediate de-freezing/de-attachment of the petitioner's bank accounts, if any, and directed the petitioner to appear before the Assessing Authority on the specified date, permitting digital appearance. The Assessing Authority was directed to afford adequate opportunity to place all essential documents, to decide the case on merits expeditiously and to pass a speaking order supplying reasons; during pendency no coercive steps shall be taken. The Court left all questions on merits open and preserved liberty to parties to pursue other remedies.

Case remitted for fresh adjudication on merits subject to specified deposit conditions, procedural directions, de-freezing of accounts and a prohibition on coercive action; Assessing Authority to pass a speaking order within the directed timeframe.

Final Conclusion: Impugned appellate and assessment orders for the tax period Apr 2018 to March, 2019 were quashed for breach of natural justice and non-speaking character; the matter is remitted to the Assessing Authority for fresh, reasoned adjudication with directions on pre-deposit/additional deposit, immediate de-freezing of bank accounts (if any), an opportunity of hearing, prohibition of coercive steps during pendency, and an expeditious speaking order; all meritorious questions left open and liberty to seek remedies preserved.

Regular bail under Section 439 CrPC - Economic offence and gravity in bail consideration - Seriousness of charge versus severity of punishment - Compounding of offences under Section 138 of the GGST/CGST Acts - Protection of revenue by attachment of property - Triability and pre-charge evidence in magistrate's court

Regular bail under Section 439 CrPC - Economic offence and gravity in bail consideration - Seriousness of charge versus severity of punishment - Application for regular bail under Section 439 CrPC in respect of alleged offences under Section 132(1)(c) of the GGST Act and CGST Act. - HELD THAT: - The Court recognised that the accused is alleged to have fraudulently availed input tax credit and that the offence is an economic one which ordinarily attracts sensitivity in bail considerations. However, seriousness of the charge is not the sole criterion; the punishment prescribed (for clause (c) imprisonment up to five years) and the triability before a Magistrate where pre-charge evidence is required are relevant factors. The Court held that it need not, at the bail stage, adjudicate the veracity of rival factual claims as to whether purchases were from fictitious firms; that is a matter for trial. Balancing factors favouring custodial detention (allegation of a large-scale conspiracy, ongoing investigation, possibility of more fictitious firms being found, some accused absconding) against mitigating factors (applicant's medical condition, cooperation, existence of documentary records produced to the authority, and the statutory framework including the availability of compounding) the Court found that the interests of justice and the protection of the revenue could be adequately secured by conditions of bail. The Court further noted that the offence is compoundable under the statutory scheme and that substantial immovable property of the applicant has been attached, which further protects the revenue interest. Viewing these elements cumulatively and without entering into the merits of evidence, the Court exercised discretion to grant regular bail subject to conditions. [Paras 4, 5, 6, 8, 9]

Regular bail granted on execution of bond and surety, subject to enumerated conditions including surrender of passport, restrictions on travel, furnishing residence particulars and usual conditions to prevent misuse of liberty.

Final Conclusion: The High Court allowed the Cr.P.C. Section 439 application and directed release of the applicant on regular bail on furnishing a personal bond and surety and compliance with specified conditions, noting the gravity of the allegations but finding that the protection of the revenue and the requirements of justice are met by conditional release.

Non-speaking order - quash and set aside - remand for fresh hearing - reasoned order - judicial review under Article 226 - show cause notices - vacation of interim relief

Non-speaking order - quash and set aside - remand for fresh hearing - reasoned order - Impugned assessment orders in Form GST-DRC-07 were non-speaking and therefore liable to be quashed and remitted for fresh adjudication. - HELD THAT: - The Court found that the assessment orders dated 18.12.2021 and 27.12.2021 did not reflect the consideration of relevant aspects sufficiently on their face and were therefore non-speaking. In light of that defect the orders were quashed and set aside and the matter was remitted to the Assistant Commissioner of State Tax, Division-3, Gandhinagar, for a de novo hearing. The Assistant Commissioner was directed to hear the writ applicants afresh and to pass a reasoned order dealing with each and every submission raised on behalf of the writ applicants, ensuring that the conclusions and the materials relied upon are recorded in the order. The Court emphasized that the Assistant Commissioner may consider all documentary and oral submissions afresh and ensure the speaking nature of the adjudication so as to meet the standards of judicial review under Article 226. [Paras 6, 7, 8]

Impugned orders quashed and set aside; matter remitted for fresh hearing and a reasoned order to be passed addressing all submissions.

Show cause notices - remand for fresh hearing - judicial review under Article 226 - On remand, the writ applicants are permitted to make oral and written submissions and to question the legality and validity of the show cause notices. - HELD THAT: - The Court permitted the writ applicants on the fresh hearing to file written submissions, make oral submissions, and to challenge the legality and validity of the show cause notices themselves. The direction makes clear that the scope of the remand includes full opportunity to contest both the process (validity of the notices) and the merits, and requires the authority to consider such challenges in the reasoned order to be passed. [Paras 8, 9]

Writ applicants permitted to re-argue, file written submissions and challenge the show cause notices on remand; authority to consider those points in a reasoned order.

Vacation of interim relief - The interim ad-interim relief granted earlier was vacated and the Court fixed a timeline for completion of the remand exercise. - HELD THAT: - The Court vacated the interim protection previously granted and directed that the fresh adjudication be completed within three months from the date of the order. The direction requires expeditious completion of the exercise by the Assistant Commissioner while ensuring that a reasoned order is rendered after hearing the parties. [Paras 9, 10]

Interim relief vacated; fresh hearing to be completed within three months.

Final Conclusion: Writ petition disposed of by quashing the impugned assessment orders as non-speaking, remitting the matter for a de novo hearing with a direction to pass a reasoned order addressing all submissions (including challenges to the show cause notices); interim relief vacated and the remand to be completed within three months.

Summary order. Notice issued on challenge to Section 17(5)(d) of the Central Goods and Services Tax Act, 2017; matter posted for hearing on 06.04.2022 with direction to issue notice to respondents including the Attorney General, service by e-mail on certain respondents, direct service on respondent no.4, supply of paper-book to the Assistant Solicitor General, and listing to be heard along with Special Civil Application No.16973 of 2019.

Interest on delayed refund - IGST refund - rate of interest 7% - writ of mandamus - binding precedent

Interest on delayed refund - IGST refund - rate of interest 7% - binding precedent - Payment of interest at the rate of 7% on the belated refund of IGST payable to the writ applicant. - HELD THAT: - The writ applicant's substantive claim for refund of IGST was satisfied during the pendency of the petition by sanction and payment of the refund amount. The only remaining grievance was non-payment of statutory interest for the period of delay. The High Court held that the question of entitlement to interest on delayed refunds is no longer res integra in view of the Court's earlier decision in M/s. Amit Cotton Industries. Applying that precedent, the respondents were directed to compute interest on the principal refund amount at the rate of 7% and to make the payment to the writ applicant. The Court specified a time-bound direction for compliance, requiring payment within six weeks from the date of the order. [Paras 4]

Respondents to calculate and pay interest at 7% on the refunded IGST amount within six weeks.

Final Conclusion: Writ petition disposed of as refund has been paid; respondents directed to pay interest at 7% on the refunded IGST amount within six weeks in accordance with the High Court's precedent.

Advance Ruling in relation to supply of goods or services undertaken or proposed to be undertaken by the applicant - Definition of "applicant" as a person registered or desirous of obtaining registration under the Act - Non-maintainability of application by recipient seeking ruling on inward supply under Section 98(2) of the CGST Act, 2017 - Binding nature of an advance ruling only on the applicant

Advance Ruling in relation to supply of goods or services undertaken or proposed to be undertaken by the applicant - Definition of "applicant" as a person registered or desirous of obtaining registration under the Act - Non-maintainability of application by recipient seeking ruling on inward supply under Section 98(2) of the CGST Act, 2017 - Binding nature of an advance ruling only on the applicant - Whether the Gujarat Authority for Advance Ruling was right in rejecting the appellant's application as non maintainable. - HELD THAT: - The authority examined the statutory scheme and observed that an advance ruling is a decision given to an applicant in relation to supplies of goods or services being undertaken or proposed to be undertaken by that applicant. The appellant was the recipient of the services in dispute (an inward supply) and not the supplier. Although the appellant relied on the definition of "applicant" as any person registered or desirous of registration, the authority construed the requirement contextually: the applicant who seeks an advance ruling must be a person in relation to whose own supplies the question arises. Further, because a ruling under the Act is binding only on the applicant, a ruling obtained by a recipient on his inward supply would not bind the supplier and thus would defeat the legislative purpose of providing certainty to the person liable to make the supply. Applying these principles, the authority concluded that the application did not fall within the mandate of the advance ruling provisions and was therefore non maintainable under the relevant statutory provision rejecting such applications. [Paras 12, 13, 14, 15, 16]

The rejection of the application as non maintainable was upheld and the Advance Ruling Admission Order dated 30.12.2020 is confirmed.

Final Conclusion: Appeal dismissed; GAAR's order rejecting the application as non maintainable is confirmed because a recipient's request for a ruling on an inward supply does not fall within the statutory scheme for advance rulings, which are directed to questions concerning supplies undertaken or proposed to be undertaken by the applicant and are binding only on that applicant.

Works contract - installation and commissioning as original works - immovable property by assembly and attachment - composite supply of works contract under Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) - applicability of concessional rate to supplies to Railways

Works contract - immovable property by assembly and attachment - composite supply of works contract under Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) - Whether the supply, installation and commissioning of EPABX system (under Contract I and Contract II) constitutes a works contract and becomes immovable property when installed, thereby attracting Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate). - HELD THAT: - The Authority found that the EPABX system is brought into existence only by assembly and connection of various goods and components and that transfer of property in such goods is involved in execution of the contracts. Once installed and commissioned at the customer's premises the EPABX system cannot be taken to market in its installed condition and would require dismantling into components - a process likely to damage parts - and therefore, it becomes immovable. The Authority applied the permanency/marketability test as explained by the Supreme Court and relied upon CBEC guidance that goods which cannot be dismantled and marketed without substantial damage are to be treated as immovable. Having held that the installed EPABX constitutes an immovable and that the contracts involve erection/installation/commissioning of plant, machinery or equipment as original works, the Authority concluded that the supplies are composite works contracts falling within Entry No. 3(v) of the Notification. [Paras 17, 18, 19]

The supply, installation and commissioning of the EPABX system under Contract I and Contract II is a works contract and the installed system is immovable property; thus the supply falls within Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate).

Applicability of concessional rate to supplies to Railways - composite supply of works contract under Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) - Whether the supplies of EPABX system to Railway offices qualify for the concessional rate under Entry No. 3(v) and are liable to 12% GST. - HELD THAT: - The Authority noted that the subject supplies were made to Railway offices and, in view of the conclusion that the supplies are composite works contracts involving installation/commissioning of original works (plant/machinery/equipment) and are not covered by the excluded items of Entry No. 3, the supplies fall within Entry No. 3(v). The Authority therefore accepted that the concessional treatment specified in the Notification applies to the supplies to Railways in the present facts. [Paras 20, 21]

The EPABX supplies to Railways are covered by Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) and are liable to GST at the rate of 12%.

Final Conclusion: The Authority ruled that the supply, installation and commissioning of EPABX systems (Contracts I and II) are works contracts producing immovable property when installed and, insofar as they are supplies to Railways, are covered by Entry No. 3(v) of Notification No. 11/2017-Central Tax (Rate) and taxable at 12% GST.

Service by way of job work - treatment or process undertaken by a person on goods belonging to another registered person - re-gasification of LNG into RLNG - goods classified at HSN 2711 - entry (id) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (Rate) - Government Circular 126/45/2019-GST

Service by way of job work - re-gasification of LNG into RLNG - goods classified at HSN 2711 - entry (id) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (Rate) - Government Circular 126/45/2019-GST - Whether re-gasification of LNG owned by GST-registered customers by the applicant amounts to rendering of service by way of job work and is classifiable under the specified entry of Heading 9988 for GST purposes. - HELD THAT: - The Authority applied the statutory definition of job-work in Section 2(68) of the CGST Act which defines job work as any treatment or process undertaken by a person on goods belonging to another registered person. The activity under consideration involves re-gasification of LNG owned by GST-registered customers. The Authority specifically notes that LNG is goods classified at HSN 2711. On that basis, the re-gasification service performed on goods belonging to another registered person falls within the statutory concept of job work. The Authority also took into account the clarification provided by Government Circular 126/45/2019-GST dated 22-11-2019, which addresses the classification and tax treatment of such activity. Applying these legal and administrative authorities, the Authority held that the activity is covered by entry (id) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (Rate) as amended, and is therefore liable to GST as specified under that entry. [Paras 6, 7, 8, 9]

Re-gasification of LNG owned by GST-registered customers by the applicant amounts to service by way of job work and is classifiable under entry (id) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (Rate), liable to CGST at 6% and SGST at 6%.

Final Conclusion: Advance Ruling: the applicant's re-gasification of customer-owned LNG is job work and is taxable under the specified entry of Heading 9988, subject to CGST 6% and SGST 6%.

Classification of goods - Tariff item 1302 - Mucilages and thickeners derived from vegetable products - Subheading for other mucilages and thickeners (1302 39 00) - Material derivation test for tariff classification

Classification of goods - Mucilages and thickeners derived from vegetable products - Subheading for other mucilages and thickeners (1302 39 00) - Material derivation test for tariff classification - Classification of Tamarind Kernel Powder (TKP) manufactured by the applicant - HELD THAT: - The Authority examined whether TKP falls within the group of mucilages and thickeners under Tariff 1302 and, if so, which sub-category applies. TKP is a thickener derived from the tamarind seed and therefore falls within the third group of Tariff 1302 as a mucilage/thickener derived from vegetable products. The sub-classification under the third group distinguishes agar-agar, thickeners derived from locust beans/locust bean seeds/guar seeds, and an 'other' category. TKP is neither agar-agar nor derived from locust beans/guar seeds; it is manufactured from tamarind kernel seeds. Applying the material derivation test embedded in the tariff structure, TKP therefore does not fit the locust bean/guar subheading and correctly falls within the residual 'other' subheading of Tariff 1302, namely 1302 39 00. [Paras 7, 8]

TKP (modified or unmodified) is classifiable under Tariff Item 1302 39 00.

Final Conclusion: The Advance Ruling holds that Tamarind Kernel Powder, whether modified or unmodified, is classifiable as an 'other' mucilage/thickener under Tariff 1302 39 00.

Supply - Levy of GST - Input Tax Credit - Recovery of employees' share by employer - Canteen services provided at employer's premises - Section 17(5) restriction on ITC for certain supplies

Levy of GST - Supply - Recovery of employees' share by employer - Canteen services provided at employer's premises - GST liability on amount representing employees' portion of canteen charges collected by the applicant and paid to the Canteen Service Provider (at factory and at head office). - HELD THAT: - The applicant arranged for a canteen run by an independent Canteen Service Provider at its premises and collected from employees a portion of the canteen charges which it paid to the service provider. The applicant states it does not retain any profit margin on the amounts collected from employees and that the cost recovered represents employees' share of actual expenditure. Having considered the facts and submissions, the Authority found that the amounts representing the employees' portion, which are collected by the applicant and remitted to the Canteen Service Provider, do not attract GST in the hands of the applicant. The Authority recorded the arrangement and the manner of collection and remittance and concluded that the applicant is not liable to levy GST on the employees' share at both the factory and the head office premises. [Paras 8, 9]

GST is not leviable on the employees' portion of canteen charges collected by the applicant and paid to the Canteen Service Provider (applicable to both factory and HO).

Input Tax Credit - Section 17(5) restriction on ITC for certain supplies - Availability of input tax credit in respect of GST charged by the service provider on canteen facility provided to employees. - HELD THAT: - Questions on entitlement to input tax credit were rendered consequential upon and depend on the conclusion on GST liability of the applicant. In view of the Authority's ruling that GST is not leviable on the employees' portion in the hands of the applicant, the questions concerning availability and extent of input tax credit were not adjudicated on merits and were held to be not applicable. [Paras 9]

Questions on availability and restriction of input tax credit are not applicable in view of the ruling that GST is not leviable on the employees' portion.

Final Conclusion: The Authority held that the amounts representing the employees' share of canteen charges collected by the applicant and paid to the Canteen Service Provider do not attract GST in the hands of the applicant (at both factory and head office); consequential questions on input tax credit were not adjudicated as they were rendered not applicable.

Time of supply of services - Consideration (proviso regarding deposit) - Deeming provision in Explanation (i) to Section 13(2) - supply deemed to the extent covered by payment or invoice - Works contract treated as supply of service - GST liability on receipt of advance for supply of services - Deferment of tax on advances until issue of invoice - impermissible under GST

Time of supply of services - Consideration (proviso regarding deposit) - Deeming provision in Explanation (i) to Section 13(2) - supply deemed to the extent covered by payment or invoice - Works contract treated as supply of service - GST liability on receipt of advance for supply of services - Time of supply for GST on mobilization advance received by the applicant for works contract services - HELD THAT: - The Authority held that the applicant's contracts qualify as works contracts and thereby as supplies of service. Under the statutory scheme for time of supply of services, the liability to pay tax arises at the time of supply as determined by Section 13. Section 13(2)(a) makes the time of supply the earlier of issue of invoice or receipt of payment, and Explanation (i) to Section 13(2) deems supply to have been made to the extent covered by the invoice or payment. The proviso to the definition of consideration confirms that a deposit becomes consideration only when applied as such, but the statutory deeming in Section 13(2) makes the date of receipt of advance the relevant time of supply for services. The Authority examined the contract terms and accounting treatment showing that advances are adjusted against stage payments and that advances (including interest-bearing advances) are applied to invoices at successive stages; accordingly the advances are treated under GST as amounts covering supply to the extent received. Notifications granting deferment for advances for goods do not extend to services. Case law from the pre GST/service tax era and direct tax authority decisions were considered inapplicable to alter the statutory time of supply rule under GST. The Authority therefore rejected the applicant's plea to defer tax liability to the date of issue of invoice and confirmed that GST arises on receipt of the mobilization advance. [Paras 45, 46, 48, 51, 52]

Time of supply for GST in respect of the mobilization advances received by the applicant for its works contract services is the date of receipt of such advances.

Final Conclusion: The Advance Ruling states that mobilization advances received by M/s SP Singla Construction Pvt. Ltd. for works contract services are taxable on receipt; the time of supply is the date of receipt of the advance and deferment of tax to the date of issue of invoice is not permissible under the GST provisions relied upon.

Mixed supply - composite supply - principal supply - tax liability on mixed and composite supplies (rule of highest rate) - Input Tax Credit entitlement where a constituent supply of mixed supply is nil-rated - admissibility of advance ruling application without a signed agreement

Composite supply - mixed supply - principal supply - Whether the bundle of services supplied by the appellant for a single consolidated price is a composite supply or a mixed supply. - HELD THAT: - The services described in the draft agreement comprise multiple individual services (GTA transport of agricultural produce, clearing and forwarding, labour supply, container handling, documentation and other allied services) which are generally not naturally bundled or supplied in conjunction with each other in the ordinary course of business. As a result, the bundle does not satisfy the essential requirement of a composite supply that one supply be the principal supply naturally bundled with ancillary supplies. The appellant proposes to supply these distinct services for a single price and not to itemise constituent supplies; accordingly, the transaction fits the statutory definition of a mixed supply. The Appellate Authority therefore accepts the appellant's contention and holds the proposed bundled provision would be a mixed supply under the CGST/GGST Acts. [Paras 15, 18, 19, 20, 21]

The bundled services supplied for a single consolidated price shall be treated as a mixed supply.

Tax liability on mixed and composite supplies (rule of highest rate) - classification / HSN - The HSN / Service Code and the applicable GST rate for the mixed supply. - HELD THAT: - Section 8(b) requires a mixed supply to be taxed as the supply attracting the highest rate. The constituent services include some nil-rated GTA transport of rice and several services attracting 18% (clearing & forwarding, labour supply, container handling, documentation and other supporting services). Applying the rule that the mixed supply bears the highest rate, the single consolidated price is taxable at the highest applicable rate (presently 18%). For classification, where more than one constituent supply attracts the highest rate, the Authority may identify the predominant supply among those attracting the highest rate for tariff classification. Having examined the nature of the bundled services, the Authority holds the mixed supply is classifiable under Service Code 996719 (other cargo and baggage handling services) which attracts the 18% rate. [Paras 21, 22, 23]

The mixed supply is classifiable under Service Code 996719 and the entire bundle is taxable at the highest applicable rate, presently 18%.

Input Tax Credit entitlement where a constituent supply of mixed supply is nil-rated - Whether the appellant can claim Input Tax Credit on inputs, input services and capital goods used for making the bundled outward supply despite one constituent service (transport of rice by GTA) being nil-rated if provided separately. - HELD THAT: - The appellant has chosen to supply several services in conjunction for a single price and such supply is held to be a mixed supply taxed at the highest rate. The single taxable price includes the value of the constituent services, including the portion that would have been nil-rated if supplied separately. Therefore, ITC on inputs, input services and capital goods employed in providing the bundled mixed supply cannot be denied merely because one constituent service, when considered separately, attracts nil rate. Denial of ITC on that ground is not warranted where the outward supply is a mixed supply taxed at the highest rate. [Paras 24]

Input Tax Credit cannot be denied solely because one constituent service of the mixed supply would be nil-rated if supplied separately.

Admissibility of advance ruling application without a signed agreement - Whether GAAR was correct in declining to decide the applicant's questions for want of a signed agreement. - HELD THAT: - The Authority for Advance Ruling is intended to provide certainty to taxpayers planning business arrangements and it is permissible for an applicant to seek a ruling by describing proposed activities and by furnishing a draft agreement. While the advance ruling authority may request additional information or supporting documents, absence of a signed agreement does not, by itself, render the application hypothetical or non-justiciable. Having considered the appellant's detailed description of services and the draft (unsigned) agreement submitted in appeal, the Appellate Authority proceeded to decide the questions on merits and modified the GAAR's refusal. [Paras 10]

Advance Ruling cannot be refused solely on the ground that the applicant has not submitted a signed agreement; a draft agreement and detailed description of proposed activities suffice for adjudication.

Exporter's eligibility for refund - Whether the appellant could seek a ruling on the exporter-client's entitlement to refund of GST paid on the appellant's outward supply invoices. - HELD THAT: - The question concerning entitlement to refund is a matter pertaining to the exporter (service recipient) and not to the appellant who has not filed an application in that regard. The Appellate Authority observed that the appellant is not entitled to raise that question in its advance ruling application; the issue can be decided only in proceedings initiated by the exporter or by an appropriate applicant. [Paras 25]

The appellant is not entitled to obtain an advance ruling on whether the exporter-client may claim refund; that question can be answered only at the instance of the exporter.

Final Conclusion: The appeal is allowed in part: the Appellate Authority modifies the GAAR ruling and holds that the appellant's proposed single price bundle of distinct services is a mixed supply, classifiable under Service Code 996719 and taxable at the highest rate (presently 18%); ITC on inputs, input services and capital goods cannot be denied merely because a constituent service would be nil-rated if supplied separately; a signed agreement is not a prerequisite for seeking an advance ruling; and the appellant cannot seek a ruling on the exporter's refund entitlement.

Composite supply - principal supply - health care services - clinical establishment - strict interpretation of exemption notification

Composite supply - principal supply - Classification of the appellant's packaged services as a composite supply and identification of the principal supply - HELD THAT: - The Authority accepted that the appellant's packaged offering comprises accommodation, food and therapy forming a naturally bundled package. The GAAR had treated the package as a composite supply and found accommodation to be the principal supply, observing that the therapy could not be availed without accommodation and that the room rate formed the major part of the consideration. The appellant asserted that the medical treatment (Naturopathy/Ayurveda/Yoga) is the principal supply and accommodation and food are incidental, but did not produce evidence to rebut GAAR's finding that the room charges constitute the major portion of consideration. Value is a guiding, though not sole, factor in determining the principal supply and on the material before it the Authority concluded that accommodation attains the nature of principal supply and other components are ancillary. [Paras 5, 6, 19]

The packaged services constitute a composite supply in which accommodation is the principal supply.

Health care services - clinical establishment - Whether the appellant is a 'clinical establishment' providing 'health care services' within the meaning of the exemption entry - HELD THAT: - The notification defines "clinical establishment" and "health care services" by reference to institutions offering diagnosis, treatment or care in recognised systems of medicines. The Authority examined industry guidance and draft standards for naturopathy and clinical establishments to understand ordinary parlance. The appellant did not specify under which category of clinical establishment it claimed to fall, and it operates without outpatient facilities, admits only in-patients for minimum seven-day stays and conditions admission on package purchase. No authoritative evidence was produced to show that naturopathy treatment by its nature requires the fixed minimum stay claimed. The appellant's practice of not treating outpatients and the prominence of accommodation charges indicated primacy of stay rather than provision of clinical healthcare. On this basis the Authority found that the appellant does not fall within the definition of a "clinical establishment" and its services are not services by way of "health care services" under the exemption entry. [Paras 15, 16, 17, 18, 20]

The appellant is not a 'clinical establishment' and its services do not qualify as 'health care services' under the exemption entry.

Strict interpretation of exemption notification - Applicability of Entry No. 74 of the exemption notification to the appellant's services - HELD THAT: - Exemption notifications are to be strictly construed and the burden to show that a claim squarely falls within an exemption rests on the claimant. Having found that the principal supply is accommodation and that the appellant does not qualify as a clinical establishment providing health care services, the Authority held that the appellant failed to establish entitlement to the exemption under Entry No. 74. Reliance on administrative letters under the pre GST service tax regime and on a CBIC circular was considered but was found inapplicable because those references concerned hospitals/clinical establishments where the larger portion of charges relate to clinical consultants and ancillary nursing/medical services, unlike the facts here. A prior AAR decision relied upon by the appellant was not followed as it did not consider the issues decided in this case and is binding only on its applicant. [Paras 21, 22, 23, 24, 25]

The appellant is not eligible for exemption under Entry No. 74 of Notification No. 12/2017-C.T. (Rate) and corresponding State notification.

Final Conclusion: The Advance Ruling of the Gujarat Authority for Advance Ruling is confirmed: the appellant's packaged services are a composite supply with accommodation as the principal supply, the appellant is not a 'clinical establishment' providing 'health care services' under the exemption entry, and consequently the appellant is not eligible for exemption under Entry No. 74 of Notification No. 12/2017.

Supply of service - liquidated damages - agreeing to the obligation to refrain from an act or to tolerate an act - para 5(e) of Schedule II - services by an employee to the employer in the course of or in relation to his employment - exemption for tolerating non-performance by Government under Notification No.12/2017 (Rate) - binding effect of advance rulings

Liquidated damages - supply of service - agreeing to the obligation to refrain from an act or to tolerate an act - para 5(e) of Schedule II - services by an employee to the employer in the course of or in relation to his employment - Whether recovery of notice pay (amount equivalent to salary for unserved notice period) from employees is liable to GST as a supply of service - HELD THAT: - Two members of the Appellate Authority reached conflicting conclusions on the taxable character of notice pay recovery. One member (Seema Arora) held that the notice-pay clause is a contractual stipulation for liquidated damages and that tolerating the employee's premature exit against such consideration falls within the scope of 'agreeing to tolerate an act', thereby constituting a supply of service under section 7 read with para 5(e) of Schedule II; the service is classifiable under the miscellaneous service codes (including 'agreeing to tolerate an act') and is not exempt (Notification No.12/2017 exempts only Government/authority toleration). She also held that Schedule III(1) (services by employee to employer) does not cover the employer's toleration and thus the amount is taxable (paras 6, 7.1-7.4, 8.1-8.4, 9-11). The other member (Milind Torawane) concluded that notice-pay recovery is a remedy for breach (damages) and not an independent voluntary supply by the employer; it lacks the elements of 'supply' under section 7 - there is no separate agreement to perform an act or to tolerate an act as a voluntary service, no consideration flowing to the employer for a service, and the transaction is not covered by Schedule I or excluded by Schedule III - therefore it is outside GST (paras 12-16). Each member articulated determinative reasoning supporting their respective conclusions. [Paras 13, 14, 15, 16, 17]

Members of the Appellate Authority differed: one member confirmed the GAAR (notice-pay recovery taxable as supply of service), while the other member held notice-pay recovery is not a supply and therefore not liable to GST.

Binding effect of advance rulings - Section 101(3) - Disposition of the appeal in light of differing opinions of the members - HELD THAT: - The bench recorded that the members are divided in opinion on the central question and noted the statutory mechanism for such a division. Consequently, Section 101(3) of the CGST Act is invoked because the members' views differ, triggering the provision for reference/decision as provided therein. The appellate authority therefore did not pronounce a single unified final finding on the taxability issue in the body of this order but applied the procedure under Section 101(3) (para 18). The order also reiterates that advance rulings are binding only on the applicant and the concerned jurisdictional officer, and that reliance on other advance rulings is limited accordingly (para 10). [Paras 10, 18]

The members differed and Section 101(3) of the CGST Act is to apply; the matter requires final decision in accordance with that provision.

Final Conclusion: The Appellate Authority recorded conflicting conclusions on whether notice-pay recovery is a taxable 'supply' (one member confirming taxability as consideration for toleration/liquidated damages; the other holding it is merely damages outside the scope of supply). Because the members differ, Section 101(3) of the CGST Act is to be applied for final determination; no single authoritative appellate conclusion on GST liability was pronounced in this order.

Classification of goods - part of railway or tramway locomotives or rolling-stock - suitability for use solely or principally with railway rolling stock - Heading 8607 - Section XVII of the Customs Tariff Act - scope of parts

Classification of goods - Heading 8607 - part of railway or tramway locomotives or rolling-stock - Section XVII of the Customs Tariff Act - scope of parts - Whether the listed products proposed to be supplied to Indian Railways are classifiable as parts of railway or tramway locomotives or rolling-stock under Heading 8607 - HELD THAT: - The applicant sought advance ruling on classification of non-metallic sleeves, glass fiber cords, spiral tubes, Polyamide (Nomex) PA Vlies and similar items as parts of railway or tramway locomotives or rolling stock. The Authority examined the statutory scheme in Section XVII and Chapter 86 and noted the test in Note 3 to Section XVII that references to 'parts' apply only to parts suitable for use solely or principally with the articles of those Chapters. The Authority observed the Supreme Court's statement that a 'part' is an essential component without which the whole cannot function, but found the applicant's submissions limited to general functional descriptions and assertions of use in railways. The application lacked technical specifications, material/constitution details, drawings or documentary evidence demonstrating that each item is suitable solely or principally for use with railway locomotives or rolling stock, or that the items constitute essential components of such rolling stock. In absence of such technical particulars, the Authority could not apply the Chapter 86 fitment test to determine whether the goods fall within Heading 8607 or are classifiable elsewhere. Consequently, the Authority refrained from pronouncing a classification on the merits for the listed goods. [Paras 11, 12]

No ruling is extended as the applicant has not furnished sufficient technical specifications or material to enable classification of the goods under Heading 8607.

Final Conclusion: The Authority declined to pronounce an advance ruling on classification of the listed goods under Heading 8607 because the application did not supply requisite technical specifications, constitution or material particulars necessary to determine whether the goods are parts suitable solely or principally for railway rolling stock; accordingly, no ruling is extended.

Requirement of deposit of twenty percent of disputed tax demand as pre-condition for stay of recovery - Power to relax deposit requirement and grant lesser deposit pending appeal - Need for reasoned orders considering prima facie case, balance of convenience and irreparable injury - Remand for fresh adjudication of stay application with personal hearing

Requirement of deposit of twenty percent of disputed tax demand as pre-condition for stay of recovery - Power to relax deposit requirement and grant lesser deposit pending appeal - Validity of the impugned orders directing the petitioner to deposit twenty percent of the outstanding tax demand as a pre-condition for abeyance of recovery. - HELD THAT: - The Court held that the requirement to deposit twenty percent of the disputed demand is not an inexorable pre requisite in all cases and can be relaxed in appropriate cases. The Office Memorandum itself contemplates exceptions (for example where appellate authorities have deleted similar additions in earlier years or where higher court decisions favour the assessee). The Supreme Court's decision in PCIT v. M/s LG Electronics India Pvt. Ltd. was cited for the proposition that authorities may, on facts, grant deposit orders of an amount less than twenty percent. In the present matter the impugned orders were non reasoned and did not apply the established principles governing stay applications; accordingly the direction to deposit twenty percent could not be sustained without fresh consideration of the relevant factors. [Paras 6, 7, 8]

Impugned orders directing deposit of twenty percent of the demand set aside for want of reasoned consideration and for reconsideration in accordance with law.

Need for reasoned orders considering prima facie case, balance of convenience and irreparable injury - Remand for fresh adjudication of stay application with personal hearing - Whether the stay applications were to be remanded for fresh adjudication and the procedural directions required to be given. - HELD THAT: - The Court found that neither the Assessing Officer nor the Commissioner considered the three basic principles-prima facie case, balance of convenience and irreparable injury-when deciding the stay applications, and that the impugned orders therefore lacked requisite reasoning. Consequently, the matter was remanded to the Commissioner of Income Tax for fresh adjudication of the stay application. The Commissioner is directed to grant a personal hearing to the authorised representative of the petitioner before deciding the application. The Court further restrained respondents from taking coercive action pursuant to the demand until the stay application is decided. [Paras 8, 9]

Matter remanded to the Commissioner of Income Tax for fresh decision on the stay application after personal hearing; interim protection from coercive action until decision is rendered.

Final Conclusion: The directions to deposit twenty percent of the disputed demand were set aside for want of reasoned consideration; the stay application is remitted to the Commissioner of Income Tax for fresh adjudication after personal hearing, and no coercive action shall be taken until the stay application is decided.

Time-barred proceedings - limitation for assessment - interpretation of interim order - non-effect of assessment order during pendency - quashing of assessment proceedings - Section 153A of the Income Tax Act, 1961 - Section 153C of the Income Tax Act, 1961

Interpretation of interim order - time-barred proceedings - limitation for assessment - Section 153A of the Income Tax Act, 1961 - quashing of assessment proceedings - Whether the order dated 9th April, 2021 prohibited completion of assessment proceedings during the pendency of the writ petition or only directed that any order, if passed, shall not be given effect to during the pendency, and whether proceedings under Section 153A had become time-barred. - HELD THAT: - The Court reproduced the order dated 9th April, 2021 and observed that it directed that assessment proceedings be carried on and, if an order is passed, the same shall not be given effect to during the pendency of the writ petition. The Assessing Officer's interpretation that assessment proceedings could not be completed during the pendency of the writ petition was held to be untenable. The limitation for passing the assessment order expired on 30th September, 2021; construing the interim order as barring completion would contradict the clear language and purpose of the direction. Applying that interpretation, the Court concluded that proceedings under Section 153A had become time-barred and therefore liable to be quashed. [Paras 6, 7, 8]

The Assessing Officer's interpretation of the order of 9th April, 2021 was rejected; proceedings against petitioner no.1 under Section 153A had become time-barred and were quashed.

No notice under Section 153C - liberty to agitate grievances - Section 153C of the Income Tax Act, 1961 - Relief qua petitioner nos.2 to 4 where no notice under Section 153C had been issued. - HELD THAT: - The Court noted that no notice under Section 153C had been issued to petitioner nos.2 to 4 as on date. Consequently, the writ petition was disposed of qua those petitioners while preserving their right to challenge any future notices under Section 153C in accordance with law. [Paras 9]

The petition is disposed of qua petitioner nos.2 to 4 with liberty to agitate their grievances in accordance with law if notices under Section 153C are issued.

Final Conclusion: The Court held that the interim order of 9th April, 2021 did not prohibit completion of assessment proceedings but only directed non operation of any order during the petition's pendency; accordingly, proceedings under Section 153A against petitioner no.1 were time barred and are quashed, while the petition is disposed of qua petitioners nos.2-4 with liberty to challenge any future Section 153C notices.

Notice under Section 2(35) of the Income Tax Act - Principal Officer - offence under Section 276B (failure to remit TDS) - sanction and procedural compliance under the proviso to Section 279(1) - discharge under Section 245 of the Code of Criminal Procedure - revisional jurisdiction

Notice under Section 2(35) of the Income Tax Act - Principal Officer - offence under Section 276B (failure to remit TDS) - discharge under Section 245 of the Code of Criminal Procedure - Whether the Trial Court was right in discharging accused No.2 on the ground that Ex.P2 is not a notice in compliance with Section 2(35) and there are no prima facie materials to try him as the Principal Officer for the offence under Section 276B. - HELD THAT: - The Trial Court examined Ex.P2 and the parties' contentions and concluded that Ex.P2 did not comply with the mandatory requirement of Section 2(35) because it did not state that accused No.2 was in-charge of the day-to-day affairs of the company; relying on earlier decisions, the court held that the notice served could not be treated as notice under Section 2(35) and therefore there was no prima facie material to try accused No.2 along with the company for an offence under Section 276B. This Court directed production of Ex.P2, considered the document and the Trial Court's reasoning, and found no perversity or illegality in the conclusion that Ex.P2 was not in consonance with Section 2(35). The High Court held that, given the absence of the mandatory compliance required to treat the director as Principal Officer and the lack of prima facie material, the Trial Court correctly allowed the application under Section 245 Cr.P.C. and discharged accused No.2. The scope of revision did not disclose any error warranting interference with the Trial Court's factual and legal conclusion on the adequacy of Ex.P2. [Paras 9, 10]

The Trial Court's order discharging accused No.2 was upheld and the revision petition dismissed.

Final Conclusion: The High Court found no illegality or perversity in the Trial Court's conclusion that Ex.P2 did not comply with Section 2(35) and that there were no prima facie materials to try the director as Principal Officer for the offence under Section 276B; the revision petition was dismissed and the discharge of accused No.2 upheld.

Valuation of closing stock - DEPB benefit - lower of cost or market - consistency in accounting method - estimation of gross profit - acceptance of books of account - requirement of specific irregularity to estimate income - computation of gross profit ratio

Valuation of closing stock - DEPB benefit - lower of cost or market - consistency in accounting method - Deletion of addition made by the Assessing Officer on account of alleged undervaluation of closing stock by not factoring DEPB benefit. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) in deleting the addition. The Assessing Officer treated DEPB proceeds as part of sale realization and sought to increase closing stock value accordingly; however, DEPB is an export incentive aimed at making exporters competitive and does not form part of the cost of closing stock. The assessee consistently adopted valuation at lower of cost or market and there was no challenge to that method. If DEPB affected market price, the method lower of cost or market would dictate valuation at market (which the assessee did not do), and the AO's approach of increasing cost without establishing such nexus was unsustainable. Further, altering closing stock in one year without giving corresponding effect to opening stock in the subsequent year produces merely a timing effect on income; the AO's revaluation therefore lacked justification. The Tribunal found the AO's order perverse and affirmed the appellate deletion of the addition. [Paras 5, 8]

Addition on account of undervaluation of stock for not considering DEPB benefit deleted; Revenue appeal dismissed on this point.

Estimation of gross profit - acceptance of books of account - requirement of specific irregularity to estimate income - computation of gross profit ratio - Validity of the Assessing Officer's addition by estimating gross profit (increasing GP) for alleged unexplained fall in gross profit ratio and lack of wastage records. - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) in substantially reducing the AO's addition. The AO estimated gross profit by increasing GP on the ground of alleged higher wastage and a fall in GP ratio compared to the preceding year but did not dispute sales, purchases or the books of account nor point to specific instances of irregularity. Where books are accepted, altering book results by estimation without demonstrating particular irregularities is arbitrary. The AO also failed to establish industry-comparative benchmarks or specific facts to justify the extent of estimation. Having considered the limited shortcomings and the absence of concrete evidence, the Tribunal found no infirmity in the CIT(A)'s exercise of discretion in restricting the addition to a modest amount to plug leakage of revenue, and therefore confirmed the appellate order. [Paras 9, 12]

AO's estimated addition on account of low gross profit not sustained to the extent made; CIT(A)'s restriction confirmed and Revenue appeal dismissed on this point.

Final Conclusion: Both grounds of the Revenue appeal are dismissed: the Tribunal confirmed deletion of the addition for alleged undervaluation of closing stock (DEPB-related) and affirmed the restriction of the gross-profit-related addition as made by the Commissioner (Appeals); the Revenue's appeal is therefore dismissed.

Unexplained cash credit under section 68 - onus to prove identity, genuineness and creditworthiness - genuineness of transaction proved by banking channel and corroborative evidence - obligation of Assessing Officer to make independent enquiry - precedential weight of coordinate appellate orders on genuineness of lender

Unexplained cash credit under section 68 - onus to prove identity, genuineness and creditworthiness - genuineness of transaction proved by banking channel and corroborative evidence - precedential weight of coordinate appellate orders on genuineness of lender - Deletion by CIT(A) of the addition of Rs. 8.71 crores made by the AO under section 68 was confirmed and Revenue's appeal dismissed. - HELD THAT: - The Tribunal applied the settled three-fold test under section 68 requiring the assessee to prove the identity of the lender, genuineness of the transaction and the creditworthiness of the lender. The assessee had produced the lender's bank statements, audited financial statements, ITR copies and an affidavit of the director, and the loan was routed through banking channels. The AO did not point to any contemporaneous defect in those documents nor carried out independent enquiries, but primarily relied on a general statement made to CBI without naming the assessee. The CIT(A) had recorded that the lender, M/s Basant Marketing Pvt. Ltd., and its transactions were judicially held to be genuine by the appellate authority in Kolkata and that banking records did not disclose cash deposits immediately preceding transfers, supporting the lender's capacity. The Tribunal noted several coordinate Tribunal decisions accepting the genuineness of transactions with the same lender and observed that mere suspicion or departmental assertions without cogent material or independent verification could not displace the evidence produced by the assessee. Applying these principles, the Tribunal held that the assessee discharged the statutory onus under section 68 and there was no infirmity in the CIT(A)'s deletion of the addition. [Paras 6, 10, 11]

Revenue's appeal is dismissed and the deletion of the addition under section 68 is sustained.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that the assessee discharged the onus under section 68 by proving the identity, genuineness and creditworthiness of the lender (M/s Basant Marketing Pvt. Ltd.) through banking records, financials, confirmations and supporting appellate precedents; therefore the addition of Rs. 8.71 crores was correctly deleted and the Revenue's appeal is dismissed.

Deduction under section 80P - income from other sources - allowability of expenses under section 57 - estimation/adhoc disallowance of expenses - remand for fresh adjudication

Income from other sources - allowability of expenses under section 57 - estimation/adhoc disallowance of expenses - remand for fresh adjudication - Quantification of expenses allowable under section 57 against interest income from nationalized banks (taxable under the head 'Income from other sources') for A.Y. 2016- 17; whether the adhoc allowance of 5% by the CIT(A) was proper. - HELD THAT: - The Tribunal accepted that interest on deposits with nationalized banks is not eligible for deduction under section 80P and is taxable under the head 'Income from other sources', thereby invoking section 57 for deduction of expenses relating to such income. The CIT(A) had allowed 5% of the interest as an estimate because the assessee had not placed Profit & Loss account and balance-sheet before him. The Tribunal noted that the financial statements were subsequently placed before it and showed major expenditure (notably fixed deposit interest) amounting to a large proportion of the assessee's total income, but the connection between that expenditure and the earning of the bank-deposit interest was not clear. Given that the CIT(A) proceeded on an ad hoc basis without the relevant material, the Tribunal held that the quantification of deductible expenses under section 57 required fresh adjudication on the basis of accounts and particulars and not by rough estimation. The matter was therefore restored to the CIT(A) to determine allowable expenses in accordance with law after giving the assessee an opportunity of being heard and considering the Profit & Loss account and balance-sheet. [Paras 5, 6]

The issue of expenses allowable under section 57 against interest from nationalized banks is remanded to the CIT(A) for fresh adjudication after considering the assessee's books and relevant details; the CIT(A)'s adhoc 5% allowance is set aside.

Final Conclusion: The appeal is allowed for statistical purposes by remanding the question of quantification of expenses allowable under section 57 (in respect of interest income from nationalized banks taxable under section 56) to the CIT(A) for fresh consideration on the basis of the accounts and after affording the assessee an opportunity of hearing.

Deductibility of prior-period expenses under mercantile system - amortisation of preliminary expenses for public subscription by banking companies - disallowance under section 14A - interest attributable to exempt income - claim of bad debts and interaction of section 36(1)(vii) and section 36(1)(viia) - expenditure prohibited by law not deductible under section 37(1) - reopening assessment - tangible material and change of opinion - remand for fresh consideration of ESOP loss and consequential penalty proceedings

Deductibility of prior-period expenses under mercantile system - Deletion of disallowance of prior-period expenses which were incurred/ crystallised and accounted for in the year under mercantile system. - HELD THAT: - The Tribunal followed the coordinate Bench decision in the assessee's own case and held that where expenses relating to earlier periods are crystallised and accounted for in the relevant year under the mercantile system, they are allowable for that year. The Tribunal found that the disallowed sums for various branches related to liabilities acknowledged or events completed in the year under appeal and therefore directed deletion of the disallowance. [Paras 14]

Disallowance of Rs. 2,04,359/- deleted; ground allowed.

Amortisation of preliminary expenses for public subscription by banking companies - Allowance of 1/5th amortisation of stamp duty and registration charges for increase in authorised share capital claimed under the amortisation provision. - HELD THAT: - Relying on earlier coordinate Bench decisions and High Court precedents recognising that banking companies engaged in financial services are entitled to amortise preliminary expenses relating to public subscription, the Tribunal held the assessee entitled to the amortisation for the second year and allowed the claim, respectfully following the coordinate Bench decision in the assessee's own case. [Paras 17]

Disallowance of Rs. 7,00,000/- deleted; ground allowed.

Disallowance under section 14A - interest attributable to exempt income - Deletion of section 14A disallowance qua interest expenditure where interest-free funds exceeded investments yielding exempt income and no other attributable expenditure was shown. - HELD THAT: - The Tribunal accepted the assessee's factual position that interest-free funds were substantially in excess of investments producing exempt income and noted that the Assessing Officer did not establish any non-interest expenditure attributable to exempt income. Applying this material, the Tribunal directed deletion of the ad-hoc disallowance made under section 14A in respect of interest. [Paras 20]

Disallowance under section 14A of Rs. 7.23 crores deleted; ground allowed.

Claim of bad debts and interaction of section 36(1)(vii) and section 36(1)(viia) - Deletion of disallowance in respect of alleged excess claim of bad debts after accounting for provisions under section 36(1)(viia). - HELD THAT: - The Tribunal applied authoritative decisions holding that claims under section 36(1)(vii) (bad debts written off) and provisions under section 36(1)(viia) are distinct and both can be allowable. On the facts, the Tribunal found the assessee's claim for bad debts reduced by available provision was claimable and, following the Gujarat High Court decision which followed the Supreme Court, directed deletion of the disallowance. [Paras 24]

Disallowance of Rs. 2,68,54,381/- deleted; ground allowed.

Expenditure prohibited by law not deductible under section 37(1) - Disallowance of deduction for penalty levied by the Reserve Bank of India upheld as not deductible under section 37(1). - HELD THAT: - The Tribunal examined the nature of the penalty, the RBI directions and the Banking Regulation Act and accepted that the penalty was levied under statutory provisions for breach of banking norms (including limits on shareholding). It held that expenditure prohibited by law or arising from offence is not deductible under section 37(1) (per the Explanation) and that RBI guidelines carry statutory force; accordingly the payment was not an allowable business expense. [Paras 28]

Penalty payment disallowance confirmed; ground dismissed.

Reopening assessment - tangible material and change of opinion - Upholding reopening of assessment under section 147 where earlier-year assessment records constituted tangible material warranting reopening. - HELD THAT: - The Tribunal held that the Assessing Officer had tangible material in the form of findings and treatment in the assessment for the earlier year (A.Y. 2001-02) which showed the claim was previously disallowed. That material, together with the fact that the issue had been considered by the AO in the earlier year, furnished a prima facie basis to form reason to believe that income had escaped assessment; reopening therefore was not a mere change of opinion and was held valid. [Paras 39]

Reopening under section 147 upheld; ground dismissed.

Remand for fresh consideration of ESOP loss and consequential penalty proceedings - Set-aside of the disallowance of ESOP-related loss and the consequential penalty to the file of the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal observed that the identical ESOP issue in the earlier year had been remitted to the file of the Assessing Officer by the coordinate Bench. Following those directions, the Tribunal set aside the assessment addition of Rs. 2.35 crores relating to the ESOP loss to the AO for fresh decision and likewise remitted the penalty proceedings to the AO to be considered afresh after adjudication of the loss, with opportunity of hearing. [Paras 40, 42]

Addition of Rs. 2.35 crores and the related penalty set aside to AO for fresh decision; matter remanded.

Final Conclusion: For Assessment Year 2002-03, the Tribunal allowed the appeals in part: prior-period expenses, amortisation of preliminary expenses (stamp duty), deletion of the section 14A interest disallowance, and deletion of the bad-debts disallowance were directed in favour of the assessee; deduction of the RBI-imposed penalty was disallowed; reopening under section 147 was upheld; the ESOP-related addition and the consequent penalty were remitted to the Assessing Officer for fresh consideration.

Penalty under section 271(1)(c) - Explanation 4 to section 271(1)(c) - Tax under Minimum Alternate Tax (MAT) versus tax under normal provisions - Effect of reduction of returned loss on tax sought to be evaded - Board Circular No.25/2015 and its binding effect under section 119

Board Circular No.25/2015 and its binding effect under section 119 - Penalty under section 271(1)(c) - Tax under Minimum Alternate Tax (MAT) versus tax under normal provisions - Maintainability of Revenue's appeal against deletion of penalty for AY 2008-09 in view of Board Circular No.25/2015 and the legal position in Nalwa Sons Investment Ltd. - HELD THAT: - The Tribunal held that for the year in question the legal position that where tax payable under the normal provisions is less than the tax payable under the deeming provision of s.115JB (MAT), penalty u/s 271(1)(c) is not to be imposed in respect of additions/disallowances made under the normal provisions is settled by the decision in Nalwa Sons Investment Ltd. and has been accepted by the Revenue. The CBDT, by Circular No.25/2015, directed its officers not to file or press appeals on this ground for periods prior to 01.04.2016. The Circular is a benevolent instruction binding on income-tax authorities under s.119 and, being favourable to the taxpayer, ought to have led the Revenue not to press the appeal. In these circumstances the Revenue's appeal was held not maintainable and dismissed. The Tribunal noted the settled rule that the law applicable for penalty is that on the date of filing the return but found no exception to the Circular's application to the facts of AY 2008-09. [Paras 4, 5, 6]

Revenue's appeal dismissed as not maintainable; deletion of penalty upheld on account of Board Circular No.25/2015 and the accepted legal position in Nalwa Sons Investment Ltd.

Explanation 1 to section 271(1)(c) - Explanation 4 to section 271(1)(c) - Concealment or furnishing of inaccurate particulars - Merits of levy of penalty under section 271(1)(c) in relation to disallowance of prior period expenditure and applicability of Explanation 1 and Explanation 4. - HELD THAT: - The Tribunal, while treating the question as largely academic in view of the binding Circular, examined the merits. It recalled that Explanation 1 deems an addition/disallowance to represent concealed income where the assessee's explanation is false or unsubstantiated, and that Explanation 4(a) (as it stood prior to the 2015 amendment) prescribes the tax relevant for computing penalty where an addition reduces a returned loss. On the facts the Tribunal observed that the assessee had not satisfactorily substantiated the claimed prior period expenditure, had inconsistently treated similar items in other years, and had not raised the contention of approval of the expenditure earlier in assessment or penalty proceedings. The Tribunal recorded that, on merits, the assessee's case was unproved and susceptible to penalty under the statutory tests, but treated these conclusions as academic given the Circular's operation. [Paras 4]

On merits the assessee's explanation was held unproved and the statutory tests in Explanation 1/4 would have supported levy of penalty; however this view was rendered academic by the applicability of the Board Circular and was not acted upon to alter the result.

Final Conclusion: The Tribunal dismissed the Revenue's appeal as not maintainable and upheld deletion of the penalty levied under section 271(1)(c) for AY 2008-09 in view of the CBDT Circular No.25/2015 and the accepted legal position that where tax under the normal provisions is lower than tax under s.115JB (MAT), penalty shall not be imposed in respect of disallowances made under the normal provisions prior to 01.04.2016.

Profit Level Indicator - operating profit on sales (OP/Sales) versus operating profit on total cost (OP/TC) - comparability in transfer pricing - arm's length price determination restricted to international transactions - book profit computation under section 115JB - ascertained versus unascertained liabilities for provisions - deductibility of education cess as business expenditure - precedential effect of Supreme Court decision in K. Srinivasan on surcharge and additional charges being part of income-tax

Profit Level Indicator - operating profit on sales (OP/Sales) versus operating profit on total cost (OP/TC) - Adoption of OP/Sales as the appropriate PLI instead of OP/Total Cost for benchmarking the assessee's margins. - HELD THAT: - The Tribunal, following its earlier decision in the assessee's own case for AY 2010-11, accepted the assessee's contention that OP/Sales is the appropriate profit level indicator for both textile machinery and auto components segments. The Tribunal observed that GP/ Sales (and related OP/Sales analysis) better accommodates differences in depreciation and other cost treatments and directed AO/TPO to adopt OP/Sales for comparability and to re-compute margins with due opportunity to the assessee. The Tribunal therefore set aside the impugned adjustment insofar as it rested on OP/TC and remitted the matter for computation on the basis of OP/Sales. [Paras 6, 7, 39]

OP/Sales to be adopted as the PLI and TPO/AO directed to recompute ALP accordingly.

Comparability in transfer pricing - Comparability of Hindustan Mills Ltd. and Laxmi Machine Works Ltd. with the assessee and remand for fresh consideration. - HELD THAT: - The Tribunal found that the DRP did not adjudicate on the actual comparability objection raised by the assessee in relation to Hindustan Mills Ltd., and in any event Hindustan Mills Ltd. (engaged in manufacture/sale of cloth/fabrics) is functionally different from the assessee (manufacturer of textile machinery). The Tribunal restored the question of comparability of Hindustan Mills Ltd. and the comparability of Laxmi Machine Works Ltd. to the TPO/AO for fresh consideration. The TPO/AO is directed also to examine the assessee's recomputed margins for these comparables (if retained) after affording opportunity of hearing. [Paras 13, 14, 16, 17, 18]

Comparability of Hindustan Mills Ltd. and Laxmi Machine Works Ltd. remitted to AO/TPO for fresh examination and margin recomputation with opportunity to the assessee.

Arm's length price determination restricted to international transactions - Whether transfer pricing adjustment must be confined to the value of international transactions with associated enterprises (AEs) rather than to entire segmental turnover. - HELD THAT: - The Tribunal held that adjustments under Chapter X/section 92 et seq. relate only to international transactions with AEs and therefore any ALP determination/addition must be restricted to the AE-related component (purchases from AE). The DRP's earlier direction for AY 2011-12 to confine the adjustment to cost relating to imports from AE was reiterated; reliance was placed on precedents (including the Tribunal and High Court decisions cited) and on the assessee's prior AT decisions. The CIT(A)'s approach to apply ALP at entire finished-goods segment level without demonstrating actual impact was held to lack basis in fact and law. The TPO/AO was directed to recalculate the adjustment excluding non-AE transactions. [Paras 33, 34, 36, 37, 38]

Transfer pricing adjustment shall be restricted to the international transactions with AEs; AO/TPO to recompute adjustment accordingly.

Deductibility of education cess as business expenditure - precedential effect of Supreme Court decision in K. Srinivasan on surcharge and additional charges being part of income-tax - Whether education cess paid on assessed income is allowable as business expenditure or must be included for computation of book profits under section 115JB (and relatedly whether cess is disallowable under section 40(a)(ii)). - HELD THAT: - The Tribunal considered the divergent High Court and Tribunal decisions relied upon by the assessee but held that the Supreme Court decision in CIT v. K. Srinivasan, which treats surcharges and additional charges as part of income-tax, is binding. The Finance Acts creating the education cess expressly described it as an additional surcharge on income-tax. Applying the Supreme Court ratio, the Tribunal concluded that education cess is part of income-tax and therefore the assessee's contention that education cess is an allowable business expenditure is not accepted. The additional ground was dismissed. [Paras 21, 22, 23, 26, 27]

Deduction for education cess is not allowable; additional ground dismissed.

Book profit computation under section 115JB - ascertained versus unascertained liabilities for provisions - Whether provisions for bonus, gratuity and long service awards are ascertained liabilities and therefore not required to be added back in computing book profits under section 115JB. - HELD THAT: - The Tribunal examined the nature and basis of the provisions. It accepted the assessee's evidence that provisions for bonus and gratuity were computed in accordance with the Payment of Bonus Act and Gratuity Act, and that the provision for long service awards was based on actuarial valuation. On that basis and having regard to supporting precedents, the Tribunal held that these provisions are capable of being estimated with reasonable certainty and constitute ascertained liabilities; accordingly they need not be added back for computing book profit under section 115JB. The CIT(A)'s omission to decide the long service award point was noted and the Tribunal resolved the matter in favour of the assessee. [Paras 20, 28, 29, 30]

Provisions for bonus, gratuity and long service award are ascertained liabilities and shall not be added back in computing book profit under section 115JB.

Final Conclusion: Both appeals are partly allowed: the Tribunal directed adoption of OP/Sales as the PLI and restricted TP adjustments to AE transactions, remitted specified comparability issues (Hindustan Mills Ltd. and Laxmi Machine Works Ltd.) to AO/TPO for fresh consideration and recomputation, dismissed the claim for deduction of education cess, and held that provisions for bonus, gratuity and long service awards are ascertained liabilities not to be added for computing book profits under section 115JB.

Registration under section 12AA of the Income Tax Act - production of original instrument for verification under Rule 17A - opportunity of hearing and procedural fairness during COVID-19 - remand for fresh consideration after giving due opportunity

Registration under section 12AA of the Income Tax Act - production of original instrument for verification under Rule 17A - The correctness of rejecting the application for registration on the ground that the assessee failed to produce original documents and other records. - HELD THAT: - The Tribunal noted that the CIT(E) rejected the Form 10A application primarily because original documents and supporting evidence of activities and accounts were not produced for verification. The assessee contended that self certified/ certified copies and annual accounts had been filed with Form 10A and relied on the amended Rule 17A which permits accompanying self certified copies. The Tribunal did not decide the merits of whether non production of originals would by itself warrant denial of registration; instead it observed that the rejection was made after notices in April-June 2020 when the country was experiencing the COVID 19 pandemic and concluded that the procedure adopted deprived the assessee of adequate opportunity to comply. Because the order was set aside on procedural grounds and remitted for fresh consideration, the Tribunal did not finally adjudicate the substantive question whether the absence of originals (as opposed to certified copies) justified refusal of registration. [Paras 7]

The matter was not finally decided on the substantive point; the application was not dismissed on merits but remitted for fresh consideration after affording due opportunity.

Opportunity of hearing and procedural fairness during COVID-19 - remand for fresh consideration after giving due opportunity - Whether the CIT(E) passed the order without providing sufficient opportunity to the assessee in the circumstances prevailing during April-June 2020. - HELD THAT: - The Tribunal examined the chronology of notices and hearings called in March-June 2020 and noted that the period fell within the COVID 19 pandemic. Taking into account the pandemic situation and the extension measures referenced by the assessee, the Tribunal found that sufficient opportunity was not afforded before rejecting the registration application. In view of the totality of facts, the Tribunal held that the proper course was to restore the matter to the CIT(E) to pass a fresh order after providing due and reasonable opportunity and directed the assessee to cooperate in the proceedings. [Paras 7]

The CIT(E)'s order is set aside and the matter is remanded for fresh decision after affording due and reasonable opportunity to the assessee.

Final Conclusion: Appeal allowed for statistical purposes; the order rejecting registration is set aside and the matter is restored to the CIT(E) for fresh adjudication after providing the assessee due and reasonable opportunity to produce documents and be heard.

Deduction under section 36(1)(vii) for non-rural bad debts - proviso to section 36(1)(vii) and interaction with section 36(1)(viia) - depreciation on ATMs as computer equipment at higher rate - CENVAT credit on capital goods and Explanation 9 to section 43 - penalty/fine paid to Reserve Bank of India - distinction between punitive and routine payments - prior period expenditure - crystallisation and evidential burden - applicability of section 115JB (MAT) to corresponding new banks - disallowance under section 14A and Rule 8D - requirement of AO's satisfaction and fresh examination - deduction under section 36(1)(viia) for provisions in respect of rural advances - provisions for wage arrears - allowance of provision where liability is certain and quantification pending - disallowance under section 40(a)(ia) for failure to deduct tax at source on payments to service provider - treatment of investment portfolio / HTM securities for tax purposes and allowance of trading loss/depreciation

Deduction under section 36(1)(vii) for non-rural bad debts - proviso to section 36(1)(vii) and interaction with section 36(1)(viia) - Deletion of disallowance under section 36(1)(vii) in respect of non rural/urban bad debts written off. - HELD THAT: - The Tribunal followed the coordinate-bench precedent in the assessee's own case and held that the proviso to section 36(1)(vii) - which limits allowance of actual write off to the excess over provisions allowed under clause (viia) - is directed to rural advances covered by section 36(1)(viia) and does not operate to limit deduction for bad debts written off relating to non rural/urban advances. Reliance was placed on the analysis in Catholic Syrian Bank and subsequent tribunal authority which distinguish the operation of clause (viia) as applying only to rural advances; accordingly, the disallowance of the non rural write offs was deleted. [Paras 13]

Assessee's claim under section 36(1)(vii) for non rural bad debts allowed; disallowance deleted.

Depreciation on ATMs as computer equipment at higher rate - ATMs are to be treated as computers for depreciation purposes and eligible for depreciation at 60%. - HELD THAT: - The Tribunal followed the view of the jurisdictional High Court (NCR Corporation) and subsequent decisions holding that ATMs perform integral computer functions and are to be treated as computers for income tax depreciation. On that basis the higher depreciation rate applicable to computers (60%) was allowed for ATMs, overruling the lower authorities' treatment of ATMs as plant and machinery at a lower rate. [Paras 14]

Depreciation on ATMs allowed at 60%.

CENVAT credit on capital goods and Explanation 9 to section 43 - Amount paid (50% CENVAT reversal) not eligible as P&L expenditure must be capitalised under Explanation 9 to section 43; disallowance limited to amount debited to P&L. - HELD THAT: - The Tribunal examined Explanation 9 to section 43 and the explanatory memorandum, concluding that where CENVAT credit is availed and allowed, the actual cost of the asset must be reduced by the credited amount; conversely, amounts paid back (i.e., not eligible for credit) form part of the capital cost and cannot be claimed as revenue expenditure. Accordingly, the CIT(A)'s restriction of the AO's disallowance to only that portion debited to profit and loss account was upheld; amounts not routed through P&L are to be capitalised. [Paras 15]

Assessee's appeal dismissed on this ground; addition restricted to amount debited to P&L and remaining amount to be capitalised.

Penalty/fine paid to Reserve Bank of India - distinction between punitive and routine payments - The question whether RBI payments are deductible revenue expenditure or punitive penalties is remitted to the Assessing Officer for detailed scrutiny. - HELD THAT: - Noting tribunal precedent (IDBI) which analyzed statutory basis of RBI charges to characterise them as routine/compensatory rather than punitive, the Tribunal observed that the assessee had not furnished full details to determine the nature of the payments. The matter was therefore remitted to the AO to examine statutory basis and facts to determine whether the payments are routine non punitive charges (deductible) or punitive fines (not deductible), with opportunity to the assessee. [Paras 16]

Issue remanded to AO for fresh examination of nature of RBI payments.

Prior period expenditure - crystallisation and evidential burden - Claim for prior period expenditure remitted to the AO for fresh consideration on evidence of crystallisation. - HELD THAT: - The Tribunal recorded that allowance of prior period expenditure depends on whether the liability crystallised in the relevant previous year; because the assessee did not produce additional evidence before the Tribunal, the matter was remitted to the AO to examine and decide the claim on facts and evidence, ensuring reasonable opportunity to the assessee. [Paras 17]

Issue remitted to AO for fresh consideration on evidential record.

Applicability of section 115JB (MAT) to corresponding new banks - Applicability of section 115JB to the assessee (a corresponding new bank) is restored to the file of the CIT(A) for fresh adjudication. - HELD THAT: - The Tribunal observed that the question involves interpretation of the deeming provisions (Banking Companies (Acquisition and Transfer of Undertakings) Act and interplay with section 115JB) and that the coordinate bench in a related case had set aside the CIT(A)'s order to permit fuller consideration, including section 51 of the BR Act. Following that coordinate bench approach, the Tribunal set aside the CIT(A)'s order and remitted the matter to him for fresh decision in accordance with law. [Paras 18]

Order of CIT(A) set aside and issue restored to CIT(A) for fresh adjudication.

Disallowance under section 14A and Rule 8D - requirement of AO's satisfaction and fresh examination - Issue under section 14A/Rule 8D remitted to the AO for fresh examination; CIT(A)'s deletion does not survive appellate review. - HELD THAT: - The Tribunal followed its coordinate bench precedents in the assessee's own case which found that multiple factual and legal contentions (including AO's satisfaction, computation method and applicability to banks) were not properly addressed by the AO. Given those unsettled factual questions, the Tribunal set aside the CIT(A)'s order and restored the file to the AO for fresh examination of disallowance under section 14A/Rule 8D. [Paras 20]

Issue returned to AO for fresh adjudication.

Deduction under section 36(1)(viia) for provisions in respect of rural advances - Deduction claimed under section 36(1)(viia) for PBDD in respect of rural advances sustained as allowed by the CIT(A). - HELD THAT: - The Tribunal affirmed the CIT(A)'s decision which relied on RBI classification of rural branches and coordinate bench precedents (Canara Bank, Vijaya Bank) to reject the AO's removals and methodology. The Tribunal found no reason to interfere with the CIT(A)'s approach on branch classification or calculation of aggregate average advances and therefore dismissed the revenue's challenge. [Paras 21]

Revenue's challenge dismissed; deduction under section 36(1)(viia) upheld as per CIT(A).

Provisions for wage arrears - allowance of provision where liability is certain and quantification pending - Provision for wage arrears allowed as deduction by CIT(A) and upheld by the Tribunal. - HELD THAT: - The CIT(A) and the Tribunal followed coordinate bench authority (Syndicate Bank) and, on merits, found the liability to pay increased wages to be certain with only quantification pending; the estimate was based on prior settlements and expected changes. Accordingly, the provision of Rs. 198 crores was allowed both under regular computation and for book profit purposes. [Paras 23]

Provision for wage arrears allowed; revenue's ground dismissed.

Disallowance under section 40(a)(ia) for payments to service provider - Disallowance under section 40(a)(ia) in respect of payments to NPCI deleted following coordinate bench precedent. - HELD THAT: - The Tribunal observed that the CIT(A) followed the coordinate bench decisions in the assessee's own case holding the payments to NPCI were not liable to disallowance under section 40(a)(ia) and found no reason to interfere with that conclusion. [Paras 25]

Disallowance under section 40(a)(ia) deleted.

Treatment of investment portfolio / HTM securities for tax purposes and allowance of trading loss/depreciation - Revenue's disallowance of trading loss and denial of depreciation on HTM securities rejected; CIT(A)'s allowance for the assessee upheld. - HELD THAT: - The CIT(A) allowed the assessee's treatment relying on coordinate bench Tribunal orders and jurisdictional High Court precedents (Vijaya Bank, Karnataka Bank), concluding that the assessee's classification and treatment of investments for income tax purposes was permissible. The Tribunal found no reason to interfere with the CIT(A)'s reliance on those precedents and dismissed the revenue's grounds. [Paras 34]

Revenue's grounds on HTM securities dismissed; CIT(A) order upheld.

Final Conclusion: The Tribunal allowed the assessee's claims on (inter alia) non rural bad debt write offs under section 36(1)(vii), higher depreciation on ATMs (60%), allowance of certain provisions for wage arrears, deletion of section 40(a)(ia) disallowance and upheld CIT(A)'s treatment of HTM securities; it upheld the capitalisation treatment for CENVAT related amounts under Explanation 9 to section 43. Several factual or interpretive issues - including the nature of RBI payments, prior period expenditure, applicability and specific adjustments under section 115JB, and the section 14A/Rule 8D disallowance - were remitted to the Assessing Officer or CIT(A) for fresh consideration in accordance with law.

Condonation of delay - sufficient cause for extension of time - approval under Section 80G(5)(vi) and compliance with Rule 11AA - erroneous rejection of Form 10G on mistaken withdrawal - quash and remand for fresh decision

Condonation of delay - sufficient cause for extension of time - Whether the delay of 17 days in filing the appeal should be condoned. - HELD THAT: - The Tribunal applied the settled principle that courts should adopt a liberal, justice-oriented approach in construing 'sufficient cause' for condonation of delay, subject to the explanation being bona fide. The assessee explained that the delay resulted from the trustee attending to a family medical emergency during the Covid-19 pandemic and public health restrictions that impeded timely filing. The Revenue was unable to rebut these factual averments. Applying the test in Collector, Land Acquisition v. Mst. Katiji and related principles, the Tribunal found the explanation to be bonafide and sufficient, and that technical non-compliance should not defeat substantial justice. [Paras 4, 5]

Delay of 17 days is condoned and the appeal is admitted for hearing.

Approval under Section 80G(5)(vi) and compliance with Rule 11AA - erroneous rejection of Form 10G on mistaken withdrawal - quash and remand for fresh decision - Whether the ld. CIT(Exemptions) rightly rejected the assessee's application under Section 80G(5)(vi) on the premise that it was withdrawn, and the appropriate course of action. - HELD THAT: - The Tribunal found on the material placed before it that the assessee had filed Form 10G for renewal under Section 80G(5)(vi), but the ld. CIT(Exemptions) rejected the application in limine on a mistaken premise that it had been withdrawn. The record showed that the assessee had in fact withdrawn a separate application relating to registration under Section 12A/12AA on the same date, which led to the misconception. The Revenue's report acknowledged this factual position. The Tribunal noted the statutory/administrative requirement that approval under Section 80G(5)(vi) be accompanied by evidence of registration under Section 12A/12AA or a relevant notification as envisaged by Rule 11AA, and observed that the assessee produced a copy of its registration certificate and earlier approvals. In view of the error in rejecting the Form 10G application and the presence of relevant documents on record (including earlier registration and subsequent approval orders placed before the Tribunal), the Tribunal held that the impugned order cannot stand and remitted the matter to the ld. CIT(Exemptions) for fresh adjudication taking the noted documents into account. [Paras 6, 7]

Impugned order dated 23/03/2021 is quashed and set aside; matter restored to the file of the ld. CIT(Exemptions) with a direction to pass a fresh order on the application under Section 80G(5)(vi) after considering the records and documents referred to.

Final Conclusion: The appeal is admitted by condoning the delay; the order of the ld. CIT(Exemptions) rejecting the Form 10G application is quashed and the matter is remitted for fresh decision after taking into account the assessee's registration and related documents; the appeal is allowed for statistical purposes.

Deduction under section 36(1)(va) for employees' contribution - Deposit of employees' contribution before due date of filing return under section 139(1) - Applicability of Finance Act, 2021 amendment (Explanation to sections 36(1)(va)/43B) - prospective not retrospective - Binding effect of jurisdictional High Court decisions on appellate authorities

Deduction under section 36(1)(va) for employees' contribution - Deposit of employees' contribution before due date of filing return under section 139(1) - Applicability of Finance Act, 2021 amendment (Explanation to sections 36(1)(va)/43B) - prospective not retrospective - Binding effect of jurisdictional High Court decisions on appellate authorities - Whether the disallowance of employees' contribution to ESI/PF under section 36(1)(va) can be sustained for assessment year 2018-19 where the contributions, though paid after the statutory due dates, were deposited before the due date for filing the return under section 139(1). - HELD THAT: - The Tribunal found as a fact that the employees' contributions towards ESI and PF were deposited before the due date of filing the return under section 139(1) for AY 2018-19. It noted a divergence of views among High Courts concerning the effect of the amendment introduced by Finance Act, 2021 (the Explanation to sections 36(1)(va)/43B). Applying the principle that appellate authorities and assessing officers within a State are bound by decisions of the jurisdictional High Court, the Tribunal held that the Punjab & Haryana High Court's decisions favourable to the assessee govern the matter in the present case. The Tribunal further observed that the amendment effected by Finance Act, 2021 applies w.e.f. assessment year 2021-22 and is not to be applied retrospectively to AY 2018-19. In view of these legal positions and the factual finding that payment was made before the return filing due date, the disallowance made while processing the return under section 143(1) could not be sustained for the year under consideration. [Paras 5]

Disallowance sustained by CPC under section 143(1) deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2018-19, directing deletion of the disallowance under section 36(1)(va) because the employees' contributions were deposited before the due date for filing the return under section 139(1), and the Finance Act, 2021 amendment does not apply retrospectively to the assessment year in question.

Deductibility of employer's and employee's contribution to PF/ESI under section 43B and section 36(1)(va) - Due date for furnishing return under section 139(1) as the relevant time-limit for claim of deduction - Non-retrospective operation of statutory amendments - Finance Act 2021 explanations not applicable retrospectively

Deductibility of employer's and employee's contribution to PF/ESI under section 43B and section 36(1)(va) - Due date for furnishing return under section 139(1) as the relevant time-limit for claim of deduction - Addition made by assessing officer for belated remittance of employee's share of ESIC and PF disallowed under section 43B read with section 36(1)(va) was set aside where payment was made before the due date for filing return under section 139(1). - HELD THAT: - The Tribunal applied its earlier decision in M/s Jana Urban Services For Transformation Pvt. Ltd. v. DCIT, CPC (ITA No. 307/Bang/2021 dated 11.10.2021) and the reasoning in Essae Teraoka to hold that the expression "contribution" in the relevant enactments includes both employer's and employees' contribution remitted by the employer, and that for Income-tax Act purposes a payment made on or before the due date for filing the return under section 139(1) is eligible for deduction even if it was not deposited within the time prescribed by the PF/ESI enactments. The Tribunal rejected the revenue's contention that failure to deposit employees' contribution by the statutory due date under the PF/ESI enactments converts that amount into taxable income of the employer under section 2(24)(x). The Tribunal further observed that amendments and explanations introduced by the Finance Act 2021 (including Explanation 5 to section 43B and Explanation 2 to section 36(1)(va)) operate with effect from 1/4/2021 and cannot be applied retrospectively to the assessment year before it; consequently, payments made before the due date for filing the return for the year under consideration qualify for deduction despite being belated under the social security statutes. On that basis the addition was reversed.

The addition for belated remittance of employees' contribution to PF/ESI is deleted because the contributions were paid before the due date for filing the return under section 139(1), and the Finance Act 2021 amendments are not retrospective.

Final Conclusion: The assessee's appeal is allowed: the disallowance of the employer's payment of employees' PF/ESI contribution is set aside since the payments were made before the due date for filing the return under section 139(1), and the post-2021 statutory amendments do not apply to the assessment year in question.

Scope of deduction where employee contributions paid before due date of filing return despite belated statutory remittance - application of due date for deduction under tax law vis-a -vis statutory schedule for PF/ESI remittance - non-retrospective application of legislative amendment inserting explanations to tax provisions

Scope of deduction where employee contributions paid before due date of filing return despite belated statutory remittance - application of due date for deduction under tax law vis-a -vis statutory schedule for PF/ESI remittance - Whether employer is entitled to deduction for employees' share of PF/ESI paid belatedly under the statutory enactments but deposited on or before the due date for furnishing the return of income - HELD THAT: - The Tribunal followed its earlier decision in M/s. Jana Urban Services For Transformation Pvt. Ltd. v. DCIT, CPC and authoritative Karnataka High Court decisions to hold that for income-tax purposes an employer is entitled to deduction for contribution (including employees' contribution paid by the employer) if the payment is made on or before the due date for furnishing the return under section 139(1). The Tribunal accepted that the PF/ESI enactments prescribe earlier dates for remittance but concluded that belated remittance under those enactments does not preclude the deduction under the Income-tax law where payment is made within the tax-return due date. The revenue's contention that later legislative explanations alter that position was rejected because the amendments relied upon (inserted w.e.f. 1/4/2021) are not retrospective and therefore could not be applied to the assessment year before the effective date. Applying these principles to the facts, the Tribunal held that the disallowance made by the assessing officer and confirmed by the CIT(A) could not be sustained where the contributions were paid before the due date of filing the return for AY 2018-19. [Paras 6, 7, 8]

Disallowance of employees' contribution to PF/ESI was not sustainable; deduction allowed as payment was made on or before the due date for furnishing the return and the 2021 amendments are not retrospective.

Final Conclusion: Appeal allowed; the disallowance of belatedly remitted employees' PF/ESI contributions was set aside because the payments were made on or before the due date for filing the return for AY 2018-19 and the subsequent statutory explanations operate only prospectively.

Confiscation of imported goods for mis-declaration - penalty under Section 112 for acts rendering goods liable to confiscation - penalty under Section 117 for failure to comply with Customs obligations - definition of 'importer' under Section 2(26) - failure to file Bill of Entry and abandonment of goods - duty to cooperate with Customs and to inform about mis-declaration

Definition of 'importer' under Section 2(26) - confiscation of imported goods for mis-declaration - penalty under Section 112 for acts rendering goods liable to confiscation - failure to file Bill of Entry and abandonment of goods - Liability for confiscation and penalty under Section 112 where no Bill of Entry was filed and whether the appellant was an 'importer' within Section 2(26). - HELD THAT: - The Tribunal found as a fact that the appellant did not file any Bill of Entry. Applying the statutory definition of 'importer', the Tribunal held that a person who has not filed a Bill of Entry cannot be treated as the importer for the purposes of attracting confiscation under the provisions made applicable to mis-declared goods. Since the appellant had not performed any act rendering the goods liable to confiscation under the relevant provision, the conditions necessary to impose penalty under Section 112 were not satisfied. The Tribunal therefore concluded that the appellant could not be held liable to penalty under Section 112 on the material before it (see para. 9). [Paras 9]

Penalty under Section 112 set aside as the appellant was not the importer within the statute and no act rendering the goods liable to confiscation was established.

Penalty under Section 117 for failure to comply with Customs obligations - duty to cooperate with Customs and to inform about mis-declaration - failure to file Bill of Entry and abandonment of goods - Imposability and quantum of penalty under Section 117 for failure to comply with Customs obligations and not informing Customs about mis despatched counterfeit goods. - HELD THAT: - The Tribunal accepted that although the appellant had not filed a Bill of Entry, his conduct was questionable in that he had knowledge that the shipment contained goods not ordered and counterfeit branded items yet did not inform Customs or explicitly abandon the goods while they remained at the port for several months. On these facts the Tribunal held that the appellant failed in his duty to cooperate with Customs and to intimate his decision regarding the goods, thereby attracting the penal provision invoked. Applying discretion as to quantum, the Tribunal upheld liability under Section 117 but reduced the penalty from the originally imposed amount to a lesser sum as a mitigating exercise (see para. 10). [Paras 10]

Penalty under Section 117 upheld but reduced to Rs. 20,000.

Final Conclusion: The appeal is allowed in part: the penalty under Section 112 is set aside because the appellant was not the importer within the statutory definition and no confiscation liability was established; the penalty under Section 117 is upheld for failure to cooperate and notify Customs but its quantum is reduced.

Unjust enrichment - Refund of Special Additional Duty (SAD) - Entitlement to refund upon subsequent sale and payment of sales tax - Notification No. 102/2007-Cus. - Burden of proof as to passing on of tax - Reliance on Chartered Accountant certificate - Recovery under Section 28(4) of the Act

Unjust enrichment - Refund of Special Additional Duty (SAD) - Entitlement to refund upon subsequent sale and payment of sales tax - Reliance on Chartered Accountant certificate - Whether the appellant's refund claim of SAD is barred by the doctrine of unjust enrichment where the importer sold the imported goods in India and paid sales tax, and where a challenged Chartered Accountant certificate was relied upon by Revenue. - HELD THAT: - The Tribunal examined whether the refund of SAD granted to the importer was hit by unjust enrichment. The appellant imported goods for resale, sold them in India and paid the applicable sales tax; sale invoices did not disclose a break-up of SAD and expressly stated that no benefit of the additional customs duty would be admissible. The Assistant Commissioner had sanctioned the refund after pre-audit, finding that conditions of Notification No. 102/2007-Cus. were satisfied. Revenue later alleged that a Chartered Accountant certificate relied upon by the appellant was forged and issued a show-cause for recovery under Section 28(4). The Tribunal reviewed the material and found on the facts that the importer had borne the incidence of SAD and had not passed it on to buyers; the CA certificate was not an indispensable condition for sanction of refund under the notification as amended. Having found that the appellant fulfilled the statutory conditions for refund and did not pass on the duty, the Tribunal concluded that the doctrine of unjust enrichment did not apply and that the Commissioner (Appeals) erred in holding otherwise.

The appellant's SAD refund is not barred by unjust enrichment; the refund of Rs. 5,43,443/- is allowed.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is entitled to the sanctioned refund of SAD.

Proviso to Section 129A(1) of the Customs Act, 1962 - appellate jurisdiction exclusion for goods imported as baggage - appeal not maintainable to the Appellate Tribunal in respect of orders relating to goods imported as baggage - remedy before the Revisionary Authority

Proviso to Section 129A(1) of the Customs Act, 1962 - appellate jurisdiction exclusion for goods imported as baggage - appeal not maintainable to the Appellate Tribunal in respect of orders relating to goods imported as baggage - Appeals before the Appellate Tribunal are not maintainable where the Commissioner (Appeals) s order relates to goods imported as personal baggage. - HELD THAT: - The Bench observed that the orders under challenge concern importation/seizure from personal baggage. On that basis learned counsel for the appellants conceded that the appeals before this Tribunal were not maintainable. The proviso to Section 129A(1) of the Customs Act, 1962 expressly excludes the jurisdiction of the Appellate Tribunal in respect of any order by the Commissioner (Appeals) that relates to goods imported or exported as baggage. Applying that statutory exclusion, the Tribunal lacks jurisdiction to entertain these appeals and they therefore cannot be admitted before this forum. [Paras 4, 5]

Appeals dismissed for want of maintainability; appellants permitted to approach the Revisionary Authority.

Final Conclusion: The appeals were dismissed as not maintainable before the Appellate Tribunal because the Commissioner (Appeals) s orders relate to goods imported as baggage; appellants may seek remedy before the Revisionary Authority.

Retrospective application of delegated legislation - prospective operation of regulatory circulars - applicability of SEBI circular to defaults and to already executed ICAs - ISIN-wise voting for debenture holders - process for enforcement of security and entering into Inter-Creditor Agreement - primacy of contractual terms of Debenture Trust Deeds over subsequent regulatory circulars - locus to appeal as "any person aggrieved" under the Commercial Courts Act - duties and powers of Debenture Trustee in convening meetings

Locus to appeal as "any person aggrieved" under the Commercial Courts Act - SEBI's maintainability to impugn the Single Judge's order by way of appeal. - HELD THAT: - SEBI had been impleaded and heard in the Interim Application before the Single Judge, filed affidavit and made substantive submissions; the Single Judge called for SEBI's clarification and dealt with its contentions in the impugned order. In these circumstances SEBI qualifies as "any person aggrieved" entitled to invoke Section 13 of the Commercial Courts Act and challenge the provisions of the impugned order relating to voting mechanism and procedure. The decision in IKISAN Limited was distinguished on facts. The Court therefore rejected respondents' maintainability challenge and proceeded to decide the appeal on merits. [Paras 7, 9, 10, 11]

SEBI's appeal is maintainable; SEBI is entitled to challenge the impugned order.

Retrospective application of delegated legislation - prospective operation of regulatory circulars - Whether the SEBI Circular dated 13th October, 2020 applies retrospectively to defaults and ICAs predating its issuance. - HELD THAT: - The SEBI Circular expressly states it comes into immediate effect from 13th October, 2020. Absent express or necessarily implied retrospective words, delegated legislation is presumed prospective. Established principles require clear expression to give retrospective effect to rules affecting substantive rights. The defaults and the ICA in the present case occurred prior to 13th October, 2020 (and prior to the Supplementary DTD). On these grounds the Court held the SEBI Circular cannot be applied retrospectively to defaults or to an ICA already executed before the Circular came into force, and declined SEBI's submission that the Circular should be applied because it is "beneficial" or does not impair voting rights. [Paras 42, 43, 44, 45, 46]

The SEBI Circular is prospective and does not apply to defaults or ICAs predating 13th October, 2020.

Process for enforcement of security and entering into Inter-Creditor Agreement - applicability of SEBI circular to defaults and to already executed ICAs - ISIN-wise voting for debenture holders - Whether the SEBI Circular's procedural requirements (including ISIN-wise voting) govern the meeting convened to approve the compromise/settlement in this case. - HELD THAT: - The SEBI Circular, by its terms, prescribes the process to be followed by debenture trustees for (i) enforcement of security and/or (ii) entering into an ICA, including the 75% by value and 60% by number threshold at the ISIN level. The Resolution Plan in this case was adopted pursuant to an ICA executed in 2019 and the meeting convened under the impugned order was to vote on a compromise/settlement already arrived at, not to enter into an ICA or enforce security. Given that the Circular is inapplicable to prior defaults and to an ICA already executed, and that the present agenda concerns approval of a settlement/compromise, the Court concluded the SEBI Circular does not prescribe the voting mechanism for the meeting called in this case. [Paras 36, 37, 52, 53, 55]

The SEBI Circular does not govern the voting mechanism for the meeting convened to approve the settlement in this case.

Primacy of contractual terms of Debenture Trust Deeds over subsequent regulatory circulars - duties and powers of Debenture Trustee in convening meetings - Whether the Debenture Trust Deeds govern the calling, conduct and voting at the meeting of debenture holders in preference to SEBI's later circular or clarificatory letter. - HELD THAT: - The Debenture Trust Deeds, being contracts between parties, set out the manner of calling and conducting meetings (including Schedule V and the requirement of a three fourths majority for a Special Resolution). A later regulatory circular cannot be read to retrospectively alter critical contractual terms between parties unless expressly incorporated or otherwise made operative. Clause 59 of the DTDs (purporting to nullify conflicting clauses vis-a -vis Debenture Trustee regulations) operates only where a real conflict with the DT Regulations exists; here the DTD provisions for convening and voting are consistent with the DT Regulations. The Supplementary DTD executed in March 2021 could not render the SEBI Circular applicable to defaults that occurred before the Circular or to the ICA executed in 2019. Consequently, the Debenture Trustee was directed to call and conduct the meeting in accordance with the terms of the respective Debenture Trust Deeds. [Paras 16, 17, 18, 49, 58]

The Debenture Trust Deeds govern the calling, conduct and voting at the meeting; SEBI's circular or its letter does not override those contractual terms in the present case.

Applicability of SEBI circular to defaults and to already executed ICAs - Effect of SEBI's clarificatory letter of 23rd August, 2021 in relation to the Circular's applicability to the present matter. - HELD THAT: - The clarificatory letter post dates the SEBI Circular and merely explains SEBI's position; it cannot enlarge the scope of the Circular or make it applicable where the Court has held the Circular is prospectively operative only. Having determined the Circular inapplicable to defaults and ICAs predating 13th October, 2020, the Court held that the letter could not alter that legal conclusion and was therefore inapposite to the present proceedings. [Paras 59, 60]

SEBI's letter of 23rd August, 2021 does not render the SEBI Circular applicable to the present case.

Final Conclusion: The appeal is dismissed. SEBI was entitled to appeal but the SEBI Circular of 13th October, 2020 is prospective and does not apply to the defaults and the ICA predating it; the Circular therefore does not govern the meeting convened to approve the settlement in this case, and the Debenture Trust Deeds govern the calling, conduct and voting at the meeting. No order as to costs.

Consideration of resolution plan by Committee of Creditors - eligibility to submit resolution plan under Section 29A - duty of Resolution Professional to take possession and control of corporate debtor - commercial wisdom of the Committee of Creditors - judicial review of approval of resolution plan

Consideration of resolution plan by Committee of Creditors - eligibility to submit resolution plan under Section 29A - Whether the appellant's contention that his proposed resolution plan was not considered by the CoC is tenable. - HELD THAT: - The CoC minutes of the 4th meeting record that the appellant's proposals and applications were considered, found unsatisfactory and that the CoC regarded the applications as lacking merit; the CoC nevertheless informed the appellant that he could file a resolution plan provided he met the eligibility criteria approved by the CoC. The record shows no formal resolution plan was submitted by the appellant; his offer was not placed as a compliant resolution plan for consideration. The CoC and the RP invited the appellant to submit a plan and considered his participation in meetings. In these circumstances the grievance that the appellant's plan was never considered is unsustainable because no eligible, formal plan was submitted for evaluation by the CoC. [Paras 7, 8]

Grievance that appellant's plan was not considered is without merit; no formal eligible resolution plan was submitted for consideration.

Duty of Resolution Professional to take possession and control of corporate debtor - commercial wisdom of the Committee of Creditors - judicial review of approval of resolution plan - Whether the Resolution Professional's alleged failure to take possession of the hospital vitiates approval of the resolution plan. - HELD THAT: - The Tribunal found that, on the facts, the hospital had been run under government direction during the relevant period and the RP had visited the hospital, taken steps to obtain documents and had performed statutory steps including issuance of Form G and inviting resolution plans. In the context of an operational hospital run under public/administrative directions during the pandemic, physical taking of possession was not a prerequisite to conduct of CIRP. The CoC considered the actions of the RP in its meetings and, applying its commercial judgment, approved the plan with unanimous voting; the Adjudicating Authority recorded satisfaction with statutory compliance. There is no demonstrable error in the approval process or in the RP's conduct that would warrant interference. [Paras 4, 5, 9]

Alleged failure by the RP to take physical possession does not invalidate the approval of the resolution plan; no ground made out to interfere with the impugned order.

Final Conclusion: Appeal dismissed; impugned order approving the resolution plan is upheld as the appellant did not submit an eligible resolution plan for consideration and the RP's conduct and the CoC's unanimous approval fall within permissible commercial wisdom and statutory compliance.

Financial debt - event of default - Section 7 application under the Insolvency and Bankruptcy Code - corporate insolvency resolution process (CIRP) - simultaneous proceedings against co-borrowers and guarantors - co-extensive liabilities of principal borrower and guarantor - Debt Service Reserve Account (DSRA) - security interest by equitable mortgage

Financial debt - event of default - Section 7 application under the Insolvency and Bankruptcy Code - Existence of disbursement constituting financial debt and occurrence of default justifying admission of the Section 7 application - HELD THAT: - The loan agreement dated 27.04.2016, admitted by the parties, records disbursements to the corporate debtor and sets out the Applicable Rate of Interest, Permitted Purpose and Events of Default. The loan disbursements (totaling the amount recorded in the agreement) qualify as a financial debt as they were made for permitted purposes (including repayment and full and final settlement of unsecured loans) and against consideration for the time value of money. The Section 7 application pleads an event of default first occurring on 15.09.2017 with subsequent defaults and is supported by statutory demand and legal notices issued by the financial creditor. On these findings the ingredients of a Section 7 application are satisfied and the Adjudicating Authority correctly admitted the petition, initiating CIRP against the corporate debtor. [Paras 26, 27, 39]

The disbursed loan qualifies as financial debt and default occurred; the Adjudicating Authority correctly admitted the Section 7 application.

Debt Service Reserve Account (DSRA) - financial debt - Effect of amounts retained as DSRA and allegations of ever-greening on classification of the disbursement as financial debt - HELD THAT: - The loan agreement expressly provided for maintenance of a DSRA as security in favour of the lender and defined DSRA as equivalent to succeeding instalments. Amounts retained by the financial creditor from disbursements and placed in DSRA were authorised by the contract and therefore do not negate that the disbursements constituted financial debt. The allegation of ever-greening was considered against the documented permitted purposes of the loan and the contractual security arrangements; the contractual DSRA deduction stood properly authorised. [Paras 20, 21]

Amounts retained as DSRA under the loan agreement do not prevent the disbursements from being financial debt; ever-greening allegation did not alter that conclusion.

Corporate insolvency resolution process (CIRP) - simultaneous proceedings against co-borrowers and guarantors - co-extensive liabilities of principal borrower and guarantor - Whether the financial creditor is precluded from filing identical claims or initiating simultaneous CIRPs against co-borrowers or in multiple CIRPs arising from the same loan agreement - HELD THAT: - The Tribunal followed precedent and legislative scheme (including Section 60) to hold that there is no bar under the IBC to the financial creditor filing claims in multiple CIRPs against co-borrowers with joint and similar liabilities. Where liabilities are co-extensive, the creditor may maintain claims in parallel CIRPs until payment is received, subject to adjustments upon receipt. Coordination between IRP/RPs and statutory transfer provisions address practical issues; prior or concurrent proceedings under other statutes do not bar initiation of CIRP under Section 7. [Paras 31, 32, 33]

Financial creditor may file identical claims and pursue simultaneous CIRPs against co-borrowers; such claims are maintainable subject to adjustment on receipt.

Personal guarantor - simultaneous proceedings against co-borrowers and guarantors - co-extensive liabilities of principal borrower and guarantor - Whether the claim in the CIRP of the corporate debtor precludes initiation of CIRP or other insolvency proceedings against the personal guarantor - HELD THAT: - Relying on legislative provisions and binding precedents, the Tribunal held that simultaneous proceedings against the corporate debtor and the personal guarantor are permissible. A resolution plan for the corporate debtor does not ipso facto discharge liabilities of the personal guarantor. Where a valid deed of guarantee exists, the financial creditor may proceed independently against the guarantor; coordination and regulatory guidance may be required but the IBC and judicial decisions permit concurrent actions. [Paras 34, 38, 39]

Initiation or continuation of proceedings against the personal guarantor is not precluded by the CIRP of the corporate debtor; simultaneous actions are permissible.

Security interest by equitable mortgage - agreement to sell for repayment of loan - Allegation of collusion to appropriate secured land through an agreement to sell and its effect on Section 7 adjudication - HELD THAT: - The loan agreement created a first-charge security by equitable mortgage over the IT Land and contained end-use and repayment obligations making sale proceeds available for repayment. The agreement to sell involving the lender and purchaser, undertaken to meet repayment obligations, could not be characterised as collusive; its subsequent termination by the purchaser did not bar adjudication of the Section 7 petition. The contractual security regime and permitted use of sale proceeds support the lender's actions within the loan framework. [Paras 22, 28, 29]

The agreement to sell of the secured land was in furtherance of repayment under the loan contract and is not a collusive bar to the Section 7 proceedings.

Final Conclusion: The Appellants' challenge to admission of the Section 7 petition fails. The Tribunal upheld that disbursements under the loan agreement constituted financial debt, default occurred, contractual deductions as DSRA were authorised, simultaneous claims in multiple CIRPs and proceedings against the personal guarantor are permissible; the impugned order admitting the Section 7 application is affirmed and the appeal is dismissed.

Condonation under Section 42 of the Insolvency and Bankruptcy Code, 2016 - sufficient cause test for extension/condonation of time - public announcement last date for submission of claims - Liquidator's duty to receive, admit or reject claims under the liquidation process - effect of Supreme Court's limitation suspension/extension during the Covid 19 period

Condonation under Section 42 of the Insolvency and Bankruptcy Code, 2016 - sufficient cause test for extension/condonation of time - effect of Supreme Court's limitation suspension/extension during the Covid 19 period - Whether the delay in filing the claim by the appellant in Company Appeal (AT)(Insolvency) No.34/2022 ought to be condoned and the claim permitted to be filed and decided afresh by the Liquidator. - HELD THAT: - The Tribunal found that the claim was filed after the last date specified in the public announcement and after the 30 day period provided under the Code and Regulations, but accepted the appellant's explanation that the delay arose from the Covid 19 pandemic (including being a senior citizen and inability to access records or counsel). The Tribunal held that the Supreme Court's directions suspending/extending limitation in the period affected by Covid 19 were material and, on the facts and affidavit before it, the appellant had shown 'sufficient cause' to condone the delay. Without adjudicating the merits of the claim or expressing any view on related party status, the Tribunal set aside the adjudicating authority's order and directed that the appellant be permitted to present the claim to the Liquidator within one week, and that the Liquidator decide admission or rejection within one week of filing, in accordance with law. [Paras 8, 9]

Impugned order set aside; delay condoned and claim remitted to the Liquidator to be filed within one week and decided on merits within one week.

Condonation under Section 42 of the Insolvency and Bankruptcy Code, 2016 - sufficient cause test for extension/condonation of time - Liquidator's duty to receive, admit or reject claims under the liquidation process - effect of Supreme Court's limitation suspension/extension during the Covid 19 period - Whether the delay in filing the appeal and the underlying claim by M/s Pepper Craft in Company Appeal (AT)(Ins) No.46/2022 ought to be condoned and the claim permitted to be filed and decided afresh by the Liquidator. - HELD THAT: - The Tribunal examined the affidavit and reasons given for delay-attributing it to Covid 19 constraints and caregiving responsibilities-which the Adjudicating Authority had found insufficient. Applying the same approach as in the related appeal and having regard to the Supreme Court's orders on limitation during the pandemic, the Tribunal was satisfied that 'sufficient cause' existed to condone the delay. The Tribunal therefore allowed the appeal, granted the appellant a week to file the claim before the Liquidator, and directed the Liquidator to decide admission or rejection on merits within a week of receipt, expressly refraining from any comment on merits or related party status. [Paras 12, 13]

Appeal allowed; delay condoned and claim remitted to the Liquidator to be filed within one week and decided on merits within one week.

Final Conclusion: Both appeals are allowed: the orders of the Adjudicating Authority dismissing appeals against rejection of claims for delay are set aside; in each case the appellant is permitted to file the claim within one week and the Liquidator is directed to decide admission or rejection on merits within one week of filing, with no observations on the merits or related party issues.

Initiation of corporate insolvency resolution process - financial debt and default - summary adjudication of default under Section 7 - prospective operation of notification raising minimum default - appointment of Interim Resolution Professional - moratorium under Section 14

Financial debt and default - summary adjudication of default under Section 7 - The Financial Creditor established existence of financial debt and the occurrence of default, entitling admission of the Section 7 application and initiation of CIRP. - HELD THAT: - The Tribunal examined the documents and submissions filed by the Financial Creditor and found that the loan transaction and demand/recall communications substantiated the claim of indebtedness and non-payment. Applying the summary satisfaction standard under Section 7, the Tribunal held that the material on record warranted recording of default and that the Section 7 application was complete. On this basis the petition was admitted and CIRP initiated. [Paras 8, 11, 12, 13, 14]

Application under Section 7 admitted and corporate insolvency resolution process initiated against the corporate debtor.

Appointment of Interim Resolution Professional - The proposed Interim Resolution Professional satisfied the statutory requirements and was appointed. - HELD THAT: - The applicant nominated an Interim Resolution Professional who furnished the required Form 2 communication, declared absence of pending disciplinary proceedings and held the stated registration. The Tribunal found the requirements of Section 7(3)(b) satisfied and accordingly appointed the nominee as Interim Resolution Professional. [Paras 10, 11, 15]

Mr. Jaswant Singh appointed as Interim Resolution Professional.

Moratorium under Section 14 - Moratorium under Section 14 was declared and the statutory prohibitions specified were imposed. - HELD THAT: - Following admission under Section 7, the Tribunal directed the Interim Resolution Professional to make the public announcement and declared the moratorium. The order recorded that the consequences and prohibitions flowing from Section 14(1)(a)-(d) would apply, subject to exceptions notified by the Central Government and statutory exceptions for contracts of guarantee. [Paras 16, 17, 18]

Moratorium declared and prohibitions under Section 14 imposed in respect of the corporate debtor.

Prospective operation of notification raising minimum default - The Tribunal admitted the Section 7 application despite the subsequent notification raising the minimum default threshold, treating the earlier default as a valid basis for initiation. - HELD THAT: - Counsel for the Financial Creditor submitted that the Ministry's notification increasing the minimum default amount to Rs. 1 crore w.e.f. 24-03-2020 applied only prospectively and did not bar initiating CIRP where default arose prior to that date. The Tribunal, on consideration of the record and by admitting the application, proceeded on the basis that the earlier default could validly sustain the Section 7 petition. [Paras 4, 9, 14]

Notification dated 24-03-2020 did not defeat maintainability of the Section 7 application based on default occurring prior to that notification.

Final Conclusion: The Tribunal, after summary satisfaction of occurrence of default and completeness of the petition, admitted the Section 7 application, initiated CIRP against the corporate debtor, appointed the nominated Interim Resolution Professional and declared the moratorium with statutory prohibitions, treating the prior default as a valid foundation despite the subsequent notification raising the minimum default threshold.

Payment of CIRP costs - priority of CIRP costs over payment of debts - effect of an approved Resolution Plan on liabilities - obligation of the Resolution Professional to implement the Resolution Plan - no-work-no-pay agreement

Payment of CIRP costs - no-work-no-pay agreement - effect of an approved Resolution Plan on liabilities - obligation of the Resolution Professional to implement the Resolution Plan - The Resolution Professional's refusal to pay salaries of the Applicants totalling Rs. 76,56,448 for the period 15.05.2020 to November, 2020 was illegal and the RP was directed to pay the said amount. - HELD THAT: - The Applicants remained on the rolls and were not signatories to any no-work-no-pay arrangement; the amount claimed towards salaries for the specified period was not disputed. The approved Resolution Plan expressly provided that the Resolution Applicant shall pay CIRP costs in priority to payment of all debts and contained specific provisions and monetary estimates for CIRP costs, together with a mechanism for addressing any increase in such costs. Given that the claimed salaries fall within the CIRP costs covered by the Resolution Plan and that a provision exists for bearing increases up to the specified threshold, the RP could not withhold payment of the admitted salary claims on the ground of lack of cash flow or absence of separate CoC approval. The Tribunal accepted the contention that the Resolution Plan contemplates payment of CIRP costs (including amounts due to workmen who had not consented to no-work-no-pay) and accordingly allowed the petition directing payment of the admitted salary amount.

Petition allowed; the RP directed to pay the admitted salaries of Rs. 76,56,448 for the period 15.05.2020 to November, 2020.

Final Conclusion: The Tribunal allowed the application under Section 60(5) of the IBC and directed the Resolution Professional to pay the admitted salary amount to the Applicants, holding that such payment falls within CIRP costs as provided in the approved Resolution Plan.

Existence of debt and default - admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - initiation of corporate insolvency resolution process (CIRP) - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment and duties of Interim Resolution Professional - supersession of Board of Directors upon initiation of CIRP

Existence of debt and default - Debt due to the financial creditor and default by the corporate debtor are established. - HELD THAT: - The Tribunal found that the financial creditor produced the loan documents, renewal letter dated 28.02.2018 and records of proceedings under the SARFAESI Act to demonstrate indebtedness and non-payment. The petitioner's averment as to the outstanding amount and the date of default (28.08.2018) were accepted; intermittent payments made by the corporate debtor did not negate the existence of a continuing default. The Tribunal rejected the respondent's contention that the petition was incomplete or that absence of a separate legal notice defeated default, holding that debt and default stood proved on the material placed before it. [Paras 9, 10, 11, 17, 18]

Debt and default are proved on the record and are not disputed for purposes of admission.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - initiation of corporate insolvency resolution process (CIRP) - The Section 7 petition filed by the financial creditor is admitted and CIRP is initiated against the corporate debtor. - HELD THAT: - Applying the principle that once the adjudicating authority is satisfied that a default has occurred the application must be admitted, the Tribunal concluded that the petition was complete and that the statutory threshold for admission under Section 7(5) was met. Having found no substantive impediment to admission and relying on the evidence of debt and default, the Tribunal admitted the petition and directed initiation of the CIRP to run ordinarily within 180 days from the date of the order. [Paras 12, 17, 18, 27]

Section 7 petition admitted and CIRP initiated against the corporate debtor.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - The moratorium as envisaged under Section 14 of the Code comes into effect on admission of the application. - HELD THAT: - Consequent to admission under Section 7(5), the Tribunal directed that the moratorium in terms of Section 14(1) will operate in relation to the corporate debtor, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, actions to enforce security interests and recovery of property occupied by the corporate debtor. The Tribunal also recorded the exceptions and clarifications set out in Sections 14(2), 14(2A) and 14(3), and noted the duration of the moratorium under Section 14(4). [Paras 19, 20, 21]

Statutory moratorium under Section 14 takes effect from the date of this order until completion of CIRP (subject to statutory exceptions).

Appointment and duties of Interim Resolution Professional - supersession of Board of Directors upon initiation of CIRP - An Interim Resolution Professional (IRP) is appointed and directed to assume management and perform statutorily prescribed functions, with the board's powers superseded. - HELD THAT: - The Tribunal appointed the proposed IRP whose consent and registration particulars were on record and directed him to take charge immediately, make the public announcement under Section 15, call for claims under the IBBI regulations, comply with Sections 13(2), 15, 17 and 18 of the Code, and take other steps required under the statute. The Tribunal further directed that the powers of the board of directors stand superseded and that directors, promoters and persons associated with management shall extend assistance to the IRP. The IRP was directed to file his report within 30 days and the first progress report on or before the 45th day of initiation. [Paras 23, 24, 25, 26, 28]

IRP appointed with immediate effect; IRP to perform statutory functions, board's powers superseded, and specified reporting timelines imposed.

Final Conclusion: The Tribunal admitted the financial creditor's Section 7 petition on proof of debt and default, ordered initiation of the CIRP with concurrent moratorium under Section 14, appointed the named Interim Resolution Professional to take charge and discharge statutory duties, and directed compliance with procedural timelines for reporting.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default in payment of financial debt - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibitions during moratorium - appointment and duties of Interim Resolution Professional - constitution of Committee of Creditors

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - default in payment of financial debt - Company Petition under Section 7 of the IBC, 2016 admitted on establishment of default. - HELD THAT: - The petition filed by the financial creditors under Section 7 was examined. The Corporate Debtor filed a memo (diary no. 1700 dated 12.03.2020) admitting the debt and its inability to pay. The Tribunal found the petition complete, default established and the default amount exceeding the statutory threshold for initiation of CIRP. On that basis the petition was admitted. [Paras 6]

The Company Petition is admitted under Section 7 of the IBC, 2016.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibitions during moratorium - Moratorium declared and statutory prohibitions imposed consequent to admission of the petition. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium in terms of Section 14. The order specified the statutory prohibitions that follow from the moratorium, including stay on institution or continuation of suits or proceedings against the Corporate Debtor, prohibition on transferring or encumbering assets, restraint on enforcement of security interests, non-termination of supplies of essential goods or services, and the temporal scope of the moratorium until completion of CIRP or approval of a resolution plan or liquidation as applicable. [Paras 7]

Moratorium is declared and the statutory prohibitions set out in the order are imposed with effect from the date of the order until completion of the CIRP or earlier orders as specified.

Appointment and duties of Interim Resolution Professional - Interim Resolution Professional appointed and directed to perform statutorily mandated functions, subject to filing of registration certificate. - HELD THAT: - Part III of Form 1 proposed Mr. Ratnakar Shetty as IRP and a written consent in Form 2 dated 22.11.2019 was on record. As the registration certificate was not filed with the petition, the IRP was directed to file the same within one week. The Tribunal, having found nothing adverse on record, appointed Mr. Ratnakar Shetty (registration number reproduced in the order) as the IRP and directed him to take steps mandated under the Code (including sections dealing with interim management and functions). [Paras 8, 9]

Mr. Ratnakar Shetty is appointed as Interim Resolution Professional; he shall file his registration certificate within one week and perform the duties mandated under the Code.

Constitution of Committee of Creditors - IRP reporting and convening duties - IRP directed to collate claims, determine financial position, constitute Committee of Creditors within a timeline and to file periodic progress reports. - HELD THAT: - The Tribunal directed the IRP, after collation of claims and determination of the Corporate Debtor's financial position, to constitute the Committee of Creditors and file a certification of its constitution within thirty days of appointment. The IRP was also directed to convene the first meeting of the Committee within seven days of that certification and to send regular fortnightly progress reports to the Adjudicating Authority. [Paras 10]

The IRP shall constitute the Committee of Creditors and comply with the timelines and reporting obligations directed by the Tribunal.

Final Conclusion: The Company Petition under Section 7 IBC, 2016 is admitted; moratorium under Section 14 is declared with the prescribed prohibitions; Mr. Ratnakar Shetty is appointed as Interim Resolution Professional subject to filing his registration certificate; the IRP is directed to constitute the Committee of Creditors within thirty days, convene its first meeting within seven days thereafter, and send fortnightly progress reports to the Adjudicating Authority.

Liability to pay service tax - presumption of tax liability - corroboration of Form 26AS with contracts - opportunity to produce evidence - remand for fresh determination

Liability to pay service tax - presumption of tax liability - corroboration of Form 26AS with contracts - opportunity to produce evidence - remand for fresh determination - Whether the demand based on entries in Form 26AS without conclusive correlation to specific contracts and without a definitive determination can sustain a service tax liability, and the remedial directions to be given. - HELD THAT: - The court held that imposition of service tax cannot rest on mere presumption or on a state of indeterminateness by the authority. The demand notice showed that the department was unable to establish which receipts in Form 26AS related to which work orders and proceeded on the basis that absence of a clear correlation rendered the noticee liable. Such an approach is impermissible: liability to pay tax must be conclusively determined for the specific transactions in question. Consequently, the matter was remitted to the Principal Commissioner, CGST, Guwahati for fresh determination. The petitioners must be given an appropriate opportunity to produce relevant material and to cooperate with the authorities so that a reasoned conclusion can be reached on whether the contract works are exempt and whether the noticees are liable. The authorities may, after making a conclusive determination, pass a reasoned order or issue any further demand as may be warranted; if the conclusion is that no liability exists, an appropriate reasoned order must be passed. The petitioners are also to be permitted to raise any other ground necessary to substantiate their claim. Pending final determination, no coercive action shall be taken against the petitioners. [Paras 5, 6, 7, 8, 9]

Matter remitted to the Principal Commissioner, CGST, Guwahati for fresh and conclusive determination after affording the petitioners opportunity to produce evidence and raise grounds; until such determination no coercive action to be taken.

Final Conclusion: Writ petition disposed by remitting the matter for fresh, reasoned determination by the Principal Commissioner with directions to afford the petitioners an opportunity to produce evidence and to refrain from coercive action until final decision.

Production or processing on behalf of the client - Business Auxiliary Service - Works Contract Service - transfer of property in goods - job work

Production or processing on behalf of the client - Business Auxiliary Service - job work - Activity of powder coating and anodizing carried out by the appellant on aluminium goods supplied by clients is classifiable as production or processing on behalf of the client and taxable under Business Auxiliary Service. - HELD THAT: - The Tribunal found that the appellant performed powder coating and anodizing as job work on aluminium goods supplied by the client and received job work charges. The activity is carried out on the basis of job work and results in processing of goods on behalf of the client. Prior Tribunal decisions treating similar coating/painting and allied processing as 'production or processing of goods on behalf of the client' under the main head of Business Auxiliary Service were followed. The reasoning emphasises that 'production' within the BAS definition is broader than 'manufacture' and covers processing done for the client even where the processed goods are supplied by the client and no manufacture in the strict excise sense occurs. Applying those principles to the admitted facts, the Tribunal held the powder coating and anodizing to be production/processing on behalf of the client and therefore liable to service tax under BAS. [Paras 4]

Powder coating and anodizing job work is taxable as Business Auxiliary Service being production or processing on behalf of the client.

Works Contract Service - transfer of property in goods - job work - The activity does not qualify as Works Contract Service because there is no transfer of property in goods from the appellant to the client. - HELD THAT: - The Tribunal examined the definition of Works Contract Service and its Explanation, noting the essential requirement that transfer of property in goods involved in the execution of the contract must be leviable to tax as sale of goods. Here the principal aluminium goods were supplied by the client and remained the client's property before and after processing; consumable chemicals used were consumed in the process and their cost was subsumed in job work charges. The Tribunal concluded that such consumables do not amount to transfer of property in goods to the client and that treating every job work involving consumables as a works contract would render the BAS entry redundant. Consequently the appellant's plea that payment of VAT on consumables converts the activity into a works contract was rejected. [Paras 6]

Job work involving consumable materials does not constitute Works Contract Service in absence of transfer of property in goods; therefore the activity is not WCS.

Final Conclusion: The appeal is dismissed; powder coating and anodizing carried out as job work on client supplied aluminium goods are taxable as production/processing on behalf of the client under Business Auxiliary Service, and the claim that the activity is a Works Contract Service is rejected.

Issuance of show-cause notice where tax has been paid and appropriated - appropriation of payments towards proposed demands - interest under Section 75 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - restoration of Order-in-Original - precedent in CCE & ST v. Adecco Flexione Workforce Solutions Ltd. (Karnataka High Court)

Issuance of show-cause notice where tax has been paid and appropriated - appropriation of payments towards proposed demands - interest under Section 75 of the Finance Act, 1994 - penalty under Section 78 of the Finance Act, 1994 - Validity of the Appellate Authority's reinstatement of interest and penalty where the show-cause notice itself recorded tax having been paid and proposed appropriation of payments - HELD THAT: - The show-cause notice dated 15/10/2018 recorded that tax had been paid along with interest and proposed appropriation of the payments towards the demands sought to be raised. Given that there was no arrear due, issuance of the show-cause notice was unnecessary; reliance is placed on the jurisdictional High Court's holding in CCE & ST v. Adecco Flexione Workforce Solutions Ltd. The First Appellate Authority's order allowing Revenue's appeal and setting aside the dropping of interest under Section 75 and penalty under Section 78 cannot be sustained where the foundational show-cause itself was not required. In consequence, the appellate order is set aside and the Order-in-Original (which had dropped the interest and penalties) is restored. [Paras 5]

Impugned Order-in-Appeal set aside; Order-in-Original restored and demands for interest under Section 75 and penalty under Section 78 rejected on the stated grounds.

Final Conclusion: Appeal allowed; Tribunal set aside the First Appellate Authority's order reinstating interest and penalty, holding that the show-cause notice was not required as payments had been made and appropriated, and restored the Order-in-Original.

Refund of service tax - export of services - mistaken payment and entitlement to refund - procedural or technical lapses not barring substantive refund - heavy motor vehicles not covered under the exclusion in Section 65(9) - binding effect of appellate authority's factual findings on revenue - role as agent/middleman not established to deny export character

Binding effect of appellate authority's factual findings on revenue - procedural or technical lapses not barring substantive refund - refund of service tax - Appellate authority's factual findings that the appellant was not liable to service tax and that the grounds for rejection were procedural/technical could not be disregarded by the adjudicating authority in a de-novo order, and consequently the refund claim could not be rejected on the same technical grounds. - HELD THAT: - The Commissioner (Appeals) in the earlier round recorded factual findings that the appellant, a Defence PSU, had rendered services partly outside India and was not liable to service tax; the Commissioner (A) further held that the grounds relied upon by the adjudicating authority for rejection (such as non-registration under a servicing category, non-mention of service in debit notes, and non-production of FIRCs) were procedural lapses and not substantive. Those findings were not appealed by the Department and have therefore attained finality. The adjudicating authority, on remand, reopened the same grounds and again denied the refund. That approach was contrary to the binding effect of the appellate findings and amounted to disregarding the hierarchical finality of the earlier order. Where an appellate order contains factual conclusions accepted by both parties and not appealed against by the department, the revenue must follow the directions and findings of that order; it cannot sustain a denial of refund by re-urging the very technical deficiencies previously held to be immaterial. Applying this principle, the impugned order was held unsustainable and set aside, and the appellant's refund claim was allowed with consequential reliefs.

Impugned order set aside; refund claim allowed because the de-novo rejection on procedural/technical grounds was contrary to the binding findings of the Commissioner (Appeals).

Export of services - heavy motor vehicles not covered under the exclusion in Section 65(9) - mistaken payment and entitlement to refund - role as agent/middleman not established to deny export character - The appellant's services qualified as export of services and the ARVs were heavy vehicles not covered by the exclusion relied upon by the revenue; the service tax paid under a mistaken view of liability therefore qualified for refund, and the Department's plea that the appellant acted as an agent/middleman was not established so as to defeat the export character. - HELD THAT: - The appellate finding that ARVs are heavy vehicles and hence not covered by the exclusion under Section 65(9) was accepted by both parties and not challenged; on that basis the Court concluded that the services rendered by the appellant constituted export of services. The authorities below had treated the payment as taxable (including under reverse charge) or denied refund on the basis that the appellant was a middleman/agent, but the order under appeal did not demonstrate independent verification of receipt in foreign currency or substantiate that the appellant's role stripped the services of their export character. Given that the tax was paid under a mistaken notion of liability and that the earlier appellate findings on the substantive issue stand final, the payment was refundable. The Court also relied on authority to the effect that mere payment under a mistaken notion does not validate the Department's right to retain such tax when there was no authority to collect it.

The services qualify as export of services; ARVs are heavy vehicles not covered by the exclusion, and the service tax paid by mistake is refundable; the Department's agent/middleman contention was not established to deny the refund.

Final Conclusion: The impugned order rejecting the refund is set aside. The appellate authority's prior factual findings that the appellant was not liable to service tax and that the defects were merely procedural are binding; the services qualify as export and the ARVs are heavy vehicles not covered by the exclusion, so the service tax paid by mistake is refundable. Appeal allowed with consequential benefits as per law.

Refund of tax paid under reverse charge mechanism - entitlement to cenvat credit - transitional provisions of Section 142 of the CGST Act - unjust enrichment exclusion under sub section (2) of Section 11B - recovery as arrear of tax and inadmissibility as input tax credit - interest on delayed refund under Section 11BB of the Central Excise Act

Refund of tax paid under reverse charge mechanism - entitlement to cenvat credit - transitional provisions of Section 142 of the CGST Act - unjust enrichment exclusion under sub section (2) of Section 11B - Whether the appellant is entitled to refund of service tax paid under reverse charge mechanism after the appointed day where the amount would have been admissible as cenvat credit under the existing law, and the effect of the transitional provisions of Section 142 of the CGST Act on such refund claim. - HELD THAT: - The Tribunal found that the service tax (including cess) relating to the period prior to 30.06.2017, paid in 2018 on departmental insistence pursuant to an audit objection, was payment in accordance with law. The appellant, being a manufacturer of dutiable goods, was entitled under the erstwhile Cenvat Credit Rules to cenvat credit of the amount so paid; therefore the demand was revenue neutral. A conjoint reading of Section 142(3), (5) and (8)(a) of the CGST Act requires that refund claims filed before, on or after the appointed day for amounts paid under the existing law be disposed of in accordance with the existing law and any amount eventually accruing be paid in cash; further, amounts becoming recoverable in pursuance of assessment or adjudication proceedings are to be recovered as arrears under the CGST Act and are not admissible as input tax credit. Applying these transitional provisions, where cenvat credit would have been admissible under the existing law but is no longer available under GST, the assessee is entitled to refund of the amount paid under RCM after the appointed day. The Tribunal therefore concluded that the appellant's refund claim must be allowed and directed refund with interest as provided under Section 11BB of the Central Excise Act. [Paras 8, 9, 10]

Appeal allowed; impugned order set aside and adjudicating authority directed to grant refund of the amount paid under RCM within 45 days with interest under Section 11BB of the Central Excise Act.

Final Conclusion: The Tribunal allowed the appeal, holding that sums of service tax paid under reverse charge which would have been admissible as cenvat credit under the existing law are refundable under the transitional provisions of Section 142 of the CGST Act, and directed refund with interest within 45 days.

Cenvat credit eligibility - outdoor catering services - nexus to manufacturing activity - exclusion from input service definition w.e.f. 1.4.2011 - legislative intent and amendment to Rule 2(l) of CCR 2004 - extended period of limitation under proviso to Section 73(1)

Cenvat credit eligibility - outdoor catering services - exclusion from input service definition w.e.f. 1.4.2011 - nexus to manufacturing activity - Whether cenvat credit is admissible on outdoor catering services availed for provision of canteen facilities to employees for the period in dispute - HELD THAT: - The Tribunal applied the Larger Bench decision in Wipro Ltd., which construed the amendment to the definition of 'input service' effective from 1.4.2011 as excluding outdoor catering services from entitlement to cenvat credit. The Larger Bench held that where the exclusion clause applies the legislative intent to deny credit must be given effect to and that the nature of the food as primarily for personal consumption means such services fall outside admissible input services post-amendment. Following that binding view, the appellant's case on merits was not maintainable and the services could not be treated as eligible input services merely because they were availed to comply with statutory factory canteen requirements or because part cost was recovered from employees. [Paras 6]

On merits, credit on outdoor catering services is not admissible post 01.04.2011 and the appellant does not have a case on merits.

Extended period of limitation under proviso to Section 73(1) - interpretational conflict of decisions - bonafide belief and absence of wilful suppression - Whether the demand raised by invoking the extended period of limitation is sustainable - HELD THAT: - Although the Larger Bench view governed the question of admissibility, the Tribunal found that the appellant had an arguable, interpretational case with earlier conflicting decisions and that the issue had been referred to a Larger Bench. In these circumstances the appellant's conduct did not amount to wilful misstatement or suppression so as to justify invocation of the extended period under the proviso to Section 73(1). Having regard to the interpretational nature of the dispute and the bona fide belief of the appellant that credit might be allowable where services were provided to meet statutory canteen obligations, the Tribunal concluded that the extended period could not be sustained and the demand was time-barred. [Paras 7, 8]

Invocation of the extended period is unsustainable; the demand is time-barred and the impugned order is set aside on limitation.

Final Conclusion: Although the Tribunal followed the Larger Bench holding that outdoor catering services are not admissible as input services post 1.4.2011, the appeal is allowed on the ground that the department's demand-raised by invoking the extended period of limitation-cannot be sustained; the impugned order is set aside as time-barred with consequential relief as per law.

Related persons - transaction value - benefit of exemption under Notification No. 6/2006-CE - interpretation of "wind operated electricity generator" for exemption - res judicata / following Tribunal's earlier decision in the same case

Related persons - transaction value - Assessee and SKF India Limited are not related persons and the transaction value between them is the correct value for assessment. - HELD THAT: - The Tribunal applied the statutory criterion for "related" under clause (iv) of section 4(3)(b) of the Central Excise Act, 1944 and examined the material relied upon by Revenue. The loan between the parties carried a commercial rate of interest with periodic revision and was held to be a purely business transaction rather than one creating an interest in each other's business. Cost sharing of staff and marketing arrangements were likewise treated as commercial transactions; charging of costs and sharing of services did not establish an interest in each other's business. The mere reporting of transactions as "related party transactions" in the assessee's balance sheet was held irrelevant to the statutory test. In absence of affirmative evidence of an interest in each other's business, the parties could not be treated as related and therefore the invoice/transaction value declared between them must be accepted for excise assessment. [Paras 7, 10]

Revenue's contention that the appellants and SKF India Limited are related persons rejected; transaction value accepted.

Benefit of exemption under Notification No. 6/2006-CE - interpretation of "wind operated electricity generator" for exemption - Bearings manufactured by the appellant and supplied for use in wind operated electricity generators are eligible for exemption under Notification No. 6/2006-CE dated 01.03.2006. - HELD THAT: - The Tribunal construed the phrase "wind operated electricity generator" in the notification purposively to encompass the entire windmill setup - tower, nacelle, rotor, generator and associated components - rather than limiting exemption to the generator sub assembly alone. Board circular guidance listing tower, nacelle, rotor and associated components as exempt for wind operated electricity generators supports this broad construction. The appellants' bearings were shown to be used at various locations within the windmill assembly (rotor shaft, gearbox, generator, yaw gearbox etc.), and the Tribunal relied additionally on precedent (larger Bench decision cited) recognising parts integral to the windmill assembly as falling within the exemption. Revenue's narrow interpretation was rejected and the demand denied. [Paras 7, 11]

Appellant entitled to exemption under Notification No. 6/2006-CE for clearances made for generating electricity from wind; demand set aside.

Final Conclusion: Both grounds of demand were rejected: the appellants are not related to SKF India Limited so the declared transaction value is acceptable, and the bearings used in wind operated electricity generators are eligible for exemption under Notification No. 6/2006 CE. The impugned orders are set aside and the appeals are allowed with consequential relief, if any.

Eligibility of input service - exclusion for services used primarily for personal use or consumption of any employee - statutory mandate on employer to insure employees - Cenvat credit admissibility of employee/workmen insurance - resolution of conflicting tribunal views by reference to higher authority

Eligibility of input service - exclusion for services used primarily for personal use or consumption of any employee - statutory mandate on employer to insure employees - Cenvat credit admissibility of employee/workmen insurance - Cenvat credit on staff (life/workmen) insurance paid by the assessee is admissible as an input service. - HELD THAT: - The adjudicating authorities relied on the exclusion clause in the definition of input services to deny credit, treating life/health insurance as excluded. The exclusion, however, applies only where the service is used primarily for the personal use or consumption of an employee. The Commissioner (Appeals) made no finding that the impugned insurance was for personal use and erred in holding that statutory requirement to insure employees was not established. Relevant labour statutes (including the Employees Provident Fund and Employees State Insurance provisions and the Workmen's Compensation regime) impose statutory obligations on the employer to provide cover, and the insurance policy produced shows the assessee as the insured (the policy being employer-specific and intended to meet employer liability). The Department produced no evidence that the services were availed for individual personal benefit. The Tribunal's earlier decision in Hydus Technologies and subsequent pronouncements (including the Larger Bench decision accepting Hydus over the contrary bench view) establish that insurance obtained to meet statutory employer obligations does not fall within the exclusion and is an eligible input service. Applying those principles to the facts, the Cenvat credit claimed is admissible.

The order denying Cenvat credit is set aside and the appeal is allowed; the staff insurance is held to be an eligible input service.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order and held that Cenvat credit claimed on employer obtained staff/workmen insurance (taken to meet statutory employer liabilities and not for personal use of employees) is admissible.

Validity of multiple show cause notices - Denial of Cenvat credit on a new ground not raised in the show cause notice - Requirement of prescribed particulars in ISD challans for entitlement to Cenvat credit - Manner of distribution of credit by Input Service Distributor under Rule 7 and Explanation 3 of the CENVAT Credit Rules, 2004 - Interest recovery under Rule 14 read with Section 11AB of the Central Excise Act, 1944 - Penalty under Rule 15 of the CENVAT Credit Rules, 2004 - Remand for verification and recomputation of Cenvat liability

Validity of multiple show cause notices - Impugned order not vitiated by issuance of two separate show cause notices for overlapping audit periods where one notice sought recovery of duty and the other sought denial/recovery of Cenvat credit. - HELD THAT: - The Tribunal distinguished authorities relied upon by the appellant which dealt with multiple show cause notices seeking differential duty for the same assessment period. The present case involved two distinct remedies: recovery of short-paid duty under Section 11A (assessment/duty) and separate proceeding to deny and recover irregularly availed Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004 (credit recovery). Denial/recovery of Cenvat credit is not the same as demand of duty; the two proceedings operate under different provisions and attract different penalties. Consequently, issuance of two show cause notices addressing these separate legal consequences does not amount to impermissible double assessment. [Paras 18, 19, 26]

No illegality in issuing separate show cause notices; impugned order not vitiated on this ground.

Denial of Cenvat credit on a new ground not raised in the show cause notice - Commissioner could not confirm denial of Cenvat credit on the ground that certain services do not qualify as 'input services' because this ground was not raised in the show cause notice. - HELD THAT: - The Tribunal observed that the adjudicating authority introduced a new legal ground-non-qualification of the services as 'input services' under Rule 2(l) of the CCR-which was not the subject matter of the show cause notice. Principles of fair hearing require that a party be put on notice of the case it has to meet; consequently the Commissioner cannot sustain a demand on a ground not pleaded in the notice. The Tribunal therefore held that the Commissioner was not correct in denying credit on that unnotified ground. [Paras 24, 26]

Denial of Cenvat credit on the unnotified ground set aside; Commissioner cannot confirm demand on that ground.

Manner of distribution of credit by Input Service Distributor under Rule 7 and Explanation 3 of the CENVAT Credit Rules, 2004 - Finding that the Input Service Distributor (ISD) had distributed the entire credit only to the Bhiwadi unit up to September 2015 and excess credit thereafter was not sustained on the record and rejected. - HELD THAT: - The Commissioner had relied on limited examination of certain challans and turnover tables to conclude that the ISD passed the entire credit to the Bhiwadi unit and, from October to December 2015, passed excess credit. The appellant produced a Company Secretary's calculation sheet and sample challans purporting to show distribution to other units. The Tribunal found no discussion in the impugned order rejecting that company evidence nor adequate basis for the Commissioner's categorical finding; accordingly the charge that the ISD distributed the entire credit only to the appellant was held unsustainable and rejected. [Paras 20, 21, 26]

Charge that ISD distributed entire credit only to the appellant is not sustainable and is rejected.

Requirement of prescribed particulars in ISD challans for Cenvat credit - Whether ISD challans (together with annexures) contained the essential particulars required under Rule 4A of the Service Tax Rules to qualify as documents for Cenvat credit is remanded for verification. - HELD THAT: - The Tribunal held that Rule 4A prescribes certain particulars in ISD challans and that determining whether those particulars (such as the address of the service provider and amount of credit distributed) were present may require document-by-document scrutiny. The appellant asserted that the annexures to the challans contained the necessary details. Given the documentary complexity and factual nature of the question, the Tribunal directed remand to the adjudicating authority to verify which challans, coupled with annexures, satisfy the rule and to decide admissibility of credit accordingly. [Paras 22, 23, 26, 27]

Remitted to adjudicating authority for verification of ISD challans and annexures and determination of entitlement to Cenvat credit.

Manner of distribution of credit by Input Service Distributor under Rule 7 and Explanation 3 of the CENVAT Credit Rules, 2004 - Remand for verification and recomputation - Whether credit was distributed correctly by the ISD in accordance with Rule 7 read with Explanation 3 (as applicable from 1.4.2014) is remanded for fresh examination and recomputation of liability, if any. - HELD THAT: - The Tribunal noted that Explanation 3 to Rule 7 was amended with effect from 1.4.2014 and that the question whether monthly or financial year turnover (and the appellant's use of calendar year) was applied correctly requires detailed scrutiny. The appellant claimed that even on correct computation no excess credit would result; however, because the Commissioner's conclusion on distribution lacked adequate foundation and the computation requires verification in light of the amended Explanation, the matter was remitted to the adjudicating authority to re examine distribution, apply the correct relevant period, and recompute Cenvat liability. [Paras 7, 8, 25, 26, 27]

Remitted to adjudicating authority to examine distribution under Rule 7/Explanation 3, determine admissible credit and recompute liability as necessary.

Final Conclusion: The appeal is allowed in part: the Tribunal holds that issuing separate show cause notices for duty recovery and for denial/recovery of Cenvat credit was not unlawful; the Commissioner could not sustain denial of credit on a ground not raised in the show cause notice; the finding that the ISD distributed entire credit only to the appellant is not sustained. Two factual issues-(i) whether ISD challans (with annexures) contain the particulars required under Rule 4A and (ii) whether distribution complied with Rule 7/Explanation 3-are remitted to the adjudicating authority for verification and recomputation of Cenvat liability, if any; the impugned order shall abide by the authority's fresh decision.

Condonation of delay in filing appeal - sufficient cause for delay - inordinate delay and prejudice - discretionary power to condone delay - application of Limitation Act principles to tax matters - remand to prescribed authority pursuant to revisional order

Condonation of delay in filing appeal - sufficient cause for delay - discretionary power to condone delay - inordinate delay and prejudice - Whether the delay of 1217 days in filing the appeal should be condoned. - HELD THAT: - The Court examined the appellant's explanation that legal advice and proceedings pursuing consequential reassessment and rectification before the writ forum justified the delay. It noted that the appellant was aware of and complied with the revisional order dated 11.01.2018, participated before the prescribed authority pursuant to the remand and did not challenge the revisional order at that time. The Court held that the reliance on subsequent legal advice after pursuing the remand proceedings did not constitute sufficient cause. The Bench analysed the precedents cited and observed that while a liberal, justice-oriented approach is available, condonation is discretionary and fact-sensitive; inordinate delay attracts stricter scrutiny and the court must weigh conduct, prejudice and bona fides. The Court further rejected the submission that tax matters should be governed by different parameters for condonation and held that principles for condoning delay apply equally, noting that a claim to input tax credit can affect revenue and cannot be treated as causing no revenue loss. Applying these principles to the facts, the Court concluded the 1217-day delay was inordinate and not satisfactorily explained, and therefore refused to exercise its discretion to condone delay. [Paras 14, 15, 16, 17, 18]

Application for condonation of delay dismissed and, consequently, the appeal dismissed.

Final Conclusion: The application to condone delay of 1217 days is refused; appeal under Section 66(1) of the Karnataka VAT Act dismissed.

Criminal liability under Section 138 of the Negotiable Instruments Act for dishonoured cheque - presumption of a legally enforceable debt on admission of issuance of cheque and signature thereon - onus on the accused to rebut the presumption arising from issuance and dishonour of cheque - magistrate's power to award compensation under Section 357(3) Cr.P.C. - sentence for offence under Section 138 NI Act to give proper effect to the object of legislation

Presumption of a legally enforceable debt on admission of issuance of cheque and signature thereon - onus on the accused to rebut the presumption arising from issuance and dishonour of cheque - criminal liability under Section 138 of the Negotiable Instruments Act for dishonoured cheque - Validity of conviction under Section 138 NI Act in view of admitted cheque/signature and accused's attempts to rebut the presumption - HELD THAT: - The Court applied settled law that once issuance of a cheque and the signature thereon are admitted, a presumption of a legally enforceable debt arises in favour of the cheque-holder and the accused bears the onus to rebut that presumption. The revisionist gave inconsistent explanations (lost/ stolen cheques, handover to a third person, forgery) and failed to place on record the earlier complaint allegedly lodged in 2014 or any bank stoppage request, and did not elicit reliable support from the third person (Pankaj Bhalla). Mere statements by the accused without supporting material were held insufficient to discharge the onus. In these circumstances the trial court's findings that the presumption remained unrebutted were upheld and there was no infirmity in the conviction recorded by the courts below. [Paras 7, 8, 10]

Conviction under Section 138 NI Act upheld; revision petition on merits dismissed.

Magistrate's power to award compensation under Section 357(3) Cr.P.C. - sentence for offence under Section 138 NI Act to give proper effect to the object of legislation - Legality and appropriateness of the sentence and compensation directed by the appellate court - HELD THAT: - The Court reiterated that sentencing under Section 138 should further the object of the legislation and that the Magistrate has power under Section 357(3) Cr.P.C. to award compensation without any statutory upper limit, enabling reasonable compensation to the complainant. Having found no procedural or legal infirmity in the approach of the courts below and noting that the appellate court modified sentence to direct compensation with a consequential default term, the High Court found the sentencing and compensation direction to be within the judicial power and consistent with precedent. [Paras 9, 11]

Sentence and compensation direction affirmed; no interference with the appellate court's modification of sentence.

Final Conclusion: The impugned judgment dated 26.03.2021 upholding conviction and directing payment of compensation (with a consequential default custodial sentence) is affirmed; the revision petition is dismissed.

Section 143A power to direct interim compensation under Negotiable Instruments Act - Interim compensation not exceeding twenty per cent - Discretionary exercise of power to award interim compensation - Requirement to record reasons when exercising judicial discretion - Consequences of non-payment and recovery as fine under Cr.P.C.

Section 143A power to direct interim compensation under Negotiable Instruments Act - Discretionary exercise of power to award interim compensation - Requirement to record reasons when exercising judicial discretion - Validity of an order directing payment of 20% interim compensation under Section 143A where the trial court recorded no reasons for awarding that sum. - HELD THAT: - Section 143A, inserted by the 2018 Amendment, confers a discretion on the Court trying an offence under Section 138 to order interim compensation (the statutory word being "may"). Sub-sections (2) and (3) limit the interim compensation to not exceed twenty per cent and prescribe the time for payment. The statutory scheme therefore contemplates an exercise of judicial discretion as to whether interim compensation should be awarded and, if so, in what proportion up to the statutory cap. Application of mind in such exercise is a precondition to lawfulness of the order. An order which mechanically treats non-plea of guilt as automatically attracting the maximum twenty per cent reflects a misreading of the provision and manifests no application of mind. Reasons for the exercise of discretion must be recorded in writing so that the court's decision is intelligible and susceptible of review; absent such reasons the exercise of discretion becomes arbitrary. Given the penal and grave consequences of non-payment (including recovery as if a fine under the Cr.P.C.), meticulous application of mind and reasoned recording is imperative before directing interim compensation. [Paras 11, 12, 13, 14, 15]

The order awarding 20% interim compensation without any recorded reasons is unsustainable as the learned Magistrate failed to exercise and record judicial discretion required under Section 143A.

Consequences of non-payment and recovery as fine under Cr.P.C. - Requirement to record reasons when exercising judicial discretion - Appropriate interim relief against consequential attachment and public auction initiated for non-payment of the impugned interim compensation order. - HELD THAT: - Because the impugned orders directing attachment and publication of public auction flow from the order of interim compensation which lacked any application of mind and recorded reasons, those consequential processes were founded on an unsustainable basis. The court identified that attachment and auction proceedings produce grave hardship to a person whose liability is yet to be adjudicated, and therefore such consequential actions cannot be permitted to proceed where the originating order is vitiated by failure to exercise judicial discretion lawfully. [Paras 16]

Order of attachment dated 10.01.2022 and the public auction notification dated 25.01.2022 are quashed.

Discretionary exercise of power to award interim compensation - Requirement to record reasons when exercising judicial discretion - Direction for expeditious hearing of the pending criminal revision and interim stay of the 1.6.2021 order granting 20% interim compensation pending fresh decision by the revisional forum. - HELD THAT: - In view of the legal defect in the order awarding interim compensation, the High Court directed the Principal District and Sessions Judge to hear Criminal Revision Petition No.48 of 2021 on merits within a stipulated short timeframe and to decide after affording opportunity to parties, bearing in mind the observations about requirement of reasoned exercise of discretion. Pending such hearing and decision by the revisional court, continuation of consequences flowing from the impugned interim compensation order would be stayed to prevent irreparable prejudice. The order clarified that the criminal trial itself is not stayed and shall proceed in accordance with law. [Paras 16]

Criminal Revision Petition to be heard on merits within four weeks; the order dated 01.06.2021 directing payment of 20% is stayed until the revisional court decides; trial in C.C.No.67 of 2021 is not stayed.

Final Conclusion: The High Court allowed the petition: it held that the magistrate's award of 20% interim compensation under Section 143A without recording reasons was unlawful; accordingly it quashed the attachment order and auction notification, stayed the operation of the 1.6.2021 interim compensation order pending expeditious hearing of the criminal revision within four weeks, and directed the trial to continue.

State levy of cess - ultra vires - manufacture/excise as a Union field - distinction between levy on manufacture and tax on sale or purchase - doctrine of unjust enrichment - equitable remedial compensation and public earmarking as deterrent

State levy of cess - ultra vires - manufacture/excise as a Union field - distinction between levy on manufacture and tax on sale or purchase - Validity of the Meghalaya Cement Cess Act, 2010 vis-a -vis the constitutional division of legislative fields - HELD THAT: - The charging provision (Section 3) imposed cess on persons or factories producing cement within the State, which is effectively a levy on manufacture. Prior to the 101st Constitutional Amendment, the field of duties of excise on goods manufactured in India fell within the Union domain and cement was not an excepted product in the Union List entry relied upon by the State. Entry 54 of the State List then permitted tax on sale or purchase of goods, but did not authorise a levy on manufacture. Section 6's modes of collection and the prohibition on removal without payment cannot expand the source of taxing power beyond the charging section. Consequently, the impugned Act, insofar as it levied a cess on the production/manufacture of cement, was beyond the legislative competence of the State and is ultra vires the Constitution. [Paras 5, 6, 7, 8, 9]

The Meghalaya Cement Cess Act, 2010 is annulled as ultra vires to the extent it imposes cess on manufacture/production of cement within the State.

Doctrine of unjust enrichment - equitable remedial compensation and public earmarking as deterrent - Relief consequential to the declaration of invalidity - entitlement to refund and equitable allocation of collected sums - HELD THAT: - Although the State argued that any impost was passed on to customers and that manufacturers could not identify end-users, the Court held that the State cannot retain monies collected under an invalid enactment. The absence of precise proof as to what portion of the levy was passed on or absorbed required an ad hoc, equitable approach. Drawing on recognized judicial practice for rough measures of loss where precise quantification is infeasible, the Court fixed an aggregate remedial scheme: (a) a refund to the petitioners equivalent to 20% of the amounts realised on account of the cess as a reasonable approximation of loss to manufacturers and producers caused by the illegal levy; and (b) to ensure deterrence and public benefit, 30% of the total cess realised under the impugned Act is to be earmarked by the State for procurement of advanced medical equipment for the additional cancer wing at the Government General Hospital, Shillong, over and above existing obligations and grants. The Chief Secretary is directed to file an affidavit identifying the quantum collected so that refunds and earmarking can be effected; the refund to the petitioners must be made within four months, with specified interest on default. [Paras 12, 13, 14, 15, 18]

The State is directed to refund 20% of the amount realised on account of the cess to the individual petitioners and to earmark 30% of the total cess realised for the specified public medical purpose; timelines and filing of an affidavit by the Chief Secretary are mandated, with interest on delayed payment.

Final Conclusion: The Meghalaya Cement Cess Act, 2010 is declared ultra vires insofar as it levied cess on manufacture/production of cement; the petitioners are to receive refunds equating to 20% of the cess realised from them, the State must earmark 30% of total cess realisations for specified public medical equipment, and procedural directions are given for ascertainment and payment within fixed timelines.