TaxTMI Updates e-Newsletter
Mar 30,2018

Detention and release of goods under Section 129 of the Central Goods and Services Tax Act and corresponding State Act - Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - release on compliance - Expeditious completion of adjudication under Section 129

Expeditious completion of adjudication under Section 129 - Precedent effect of Division Bench direction in W.A.No.1802 of 2017 - Direction to the competent authority to complete adjudication under Section 129 within a fixed short period - HELD THAT: - The Court, having regard to an identical matter disposed by a Division Bench in W.A.No.1802 of 2017, directed that the competent authority must complete the adjudication provided for under Section 129 of the Central and State GST statutes within one week from production of a copy of this judgment. The order implements the Division Bench's guidance to ensure expeditious adjudication of detention matters and fixes a specific short timeline for finalisation of the proceedings. [Paras 2]

Adjudication under Section 129 shall be completed by the competent authority within one week from production of a copy of this judgment.

Detention and release of goods under Section 129 - Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - release on compliance - Release of detained goods pending adjudication upon compliance with Rule 140(1) of the Kerala GST Rules, 2017 - HELD THAT: - Relying on the Division Bench's decision in W.A.No.1802 of 2017 and the statutory regime governing detention and release, the Court ordered that if the petitioner complies with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017, the goods detained under Section 129 shall be released forthwith pending completion of adjudication. The direction conditions release on compliance with the procedural requirement specified in Rule 140(1), thereby balancing prompt release against adherence to the rules. [Paras 2]

If the petitioner complies with Rule 140(1) of the Kerala GST Rules, 2017, the detained goods shall be released forthwith.

Final Conclusion: Writ petition disposed by directing completion of adjudication under Section 129 within one week from production of the judgment and ordering immediate release of detained goods upon compliance with Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017.

Detention and adjudication under Section 129 of the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act - exhaustion of statutory/adjudicatory remedy before the detaining authority - remittance of writ petition for adjudication by the statutory authority

Detention and adjudication under Section 129 of the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act - exhaustion of statutory/adjudicatory remedy before the detaining authority - Challenge to the detention notice Ext.P5 was not entertained on merits and the matter was directed to be adjudicated by the detaining authority under Section 129 after affording the petitioner an opportunity to raise the grounds before that authority. - HELD THAT: - The petitioner attacked Ext.P5 on multiple grounds. The Court held that those grounds should first be raised before the detaining/adjudicating authority constituted under Section 129 of the Central Goods and Services Tax Act and the Kerala State Goods and Services Tax Act rather than being decided in the writ petition at this stage. Consequently, the writ petition was disposed by remitting the matter to the respondent for completion of the statutory adjudication. The Court permitted the petitioner to produce a copy of this judgment before the respondent and mandated that the respondent complete the adjudication under Section 129 within one week from the date of production of a copy of the judgment.

Writ petition disposed by remitting the challenge to Ext.P5 for adjudication under Section 129; petitioner may place this judgment before the detaining authority and the authority shall complete adjudication within one week of production.

Final Conclusion: The petition challenging the detention notice (Ext.P5) was disposed of by directing the detaining authority to adjudicate the matter under Section 129 after hearing the petitioner, with the adjudication to be completed within one week from production of a copy of this judgment.

Scope of judicial review under Article 226 - discretion of the Goods and Services Tax Council - levy of central tax on petroleum crude, high speed diesel, motor spirit and aviation turbine fuel with effect from a notified date - power to grant exemption from tax on the recommendations of the Council - policy decision and non-interference unless arbitrary, mala fide or contrary to statute - One Nation One Tax

Scope of judicial review under Article 226 - discretion of the Goods and Services Tax Council - levy of central tax on petroleum crude, high speed diesel, motor spirit and aviation turbine fuel with effect from a notified date - power to grant exemption from tax on the recommendations of the Council - policy decision and non-interference unless arbitrary, mala fide or contrary to statute - Whether the High Court can, under Article 226, direct the Goods and Services Tax Council or the Central Government to bring petrol and diesel within the ambit of GST - HELD THAT: - The Court held that it cannot issue a positive direction to the Council or the Central Government to bring petroleum products within GST. Section 9(2) of the Central Goods and Services Tax Act contemplates levy of central tax on petroleum crude, high speed diesel, motor spirit and aviation turbine fuel only with effect from a date to be notified by the Government on the recommendations of the Council. The GST Council includes representation of State Governments, whose views must be elicited before any call is taken. The Central Government acts on the recommendations of the Council and has the power to issue notifications or exemptions in public interest on the Council's recommendations. Policy decisions of this nature are for the Council and the executive; courts ordinarily will not substitute their judgment for policy choices and may interfere only where a decision is arbitrary, mala fide, based on irrelevant considerations or contrary to statutory provisions. No such grounds for interference were established in this petition, and therefore the Court declined to issue the requested direction. [Paras 13, 14, 15, 16, 17]

The Court refused to direct the respondents to bring petrol and diesel within GST and dismissed the petition.

Final Conclusion: Petition dismissed; the determination whether to bring petrol and diesel within the GST regime lies with the GST Council and the Central Government acting on its recommendations, and is not amenable to a positive direction under Article 226 in the absence of arbitrariness or illegality; no order as to costs.

Detention of goods - nexus between documents and goods - reassessment of tax liability on inspection - computation of CGST and SGST payable with penalty - release of goods on payment and bond

Nexus between documents and goods - detention of goods - Extent to which goods transported were covered by the invoice and whether the detention notice (Ext.P5) was justified in respect of goods not supported by the invoice. - HELD THAT: - On physical verification the goods in the vehicle did not correspond to the invoice particulars: the invoice purported to cover 12 mm commercial plywood of 1005.28 Sqm and 18 mm plywood of 1255.83 Sqm, whereas inspection revealed 1020.07 Sqm of 10 mm, 1440.89 Sqm of 12 mm and 96.18 Sqm of 15 mm plywood. The Court accepted that the portion of 12 mm plywood corresponding to 1005.28 Sqm is covered by the invoice and should not be treated as suppressed. The excess quantities and other sizes found on inspection having no nexus with the documents constitute the material for computing alleged suppression. Accordingly, only the balance portion in excess of the invoiced 12 mm quantity together with the detected 10 mm and 15 mm plywoods are to be treated as the subject-matter for assessment of suppressed value. [Paras 2, 3]

The 12 mm plywood to the extent of 1005.28 Sqm is treated as covered by the invoice; the excess quantities and other sizes detected on inspection lack nexus with the documents and are liable to be computed as suppressed goods.

Reassessment of tax liability on inspection - computation of CGST and SGST payable with penalty - release of goods on payment and bond - Procedure to be followed for quantifying tax demand and releasing the detained goods. - HELD THAT: - The matter of valuation and tax liability in respect of the excess and differently sized plywoods was remitted to the Intelligence Inspector for a fresh assessment. The Inspector is directed to recompute the value of the goods found in excess and calculate the CGST and SGST payable together with any penalty. The Court prescribed a provisional release mechanism: release of the goods upon payment of 50% of the recomputed demand and execution of a simple bond for the balance. The computation and requisite steps are to be completed within two weeks from receipt of a certified copy of the judgment, thereby constituting a remand for fresh quantification and compliance rather than a final adjudication on the full merits of tax liability. [Paras 4]

Intelligence Inspector to make fresh assessment of value, compute CGST and SGST with penalty, and on payment of 50% of the demand and execution of a bond the goods shall be released; computation to be completed within two weeks of certified copy.

Final Conclusion: The court treated the invoiced quantity of 12 mm plywood (1005.28 Sqm) as covered by the documents, remitted computation of tax and penalty in respect of the excess and other sizes to the Intelligence Inspector for fresh assessment, and directed release of the goods on payment of 50% of the recomputed demand and execution of a bond within the stipulated timeframe.

Refund of tax deducted at source - exercise of writ jurisdiction under Article 226 - scrutiny assessment pending under Section 143(3) - discretion under Section 143(1d) - mandamus against assessment proceedings

Refund of tax deducted at source - exercise of writ jurisdiction under Article 226 - mandamus against assessment proceedings - Writ petition seeking mandamus for refund while scrutiny assessment is pending is not maintainable and will not be entertained at this stage. - HELD THAT: - The Court declined to exercise its extraordinary jurisdiction under Article 226 to direct refund of TDS when the return for the relevant year is under scrutiny assessment before the competent income-tax authority. The pendency of scrutiny and the department's continuing exercise of statutory discretion under Section 143(1d) mean that the court will not pre-empt or interfere with the statutory assessment process by issuing a mandamus for refund. The petitioner was therefore not entitled to immediate relief by way of direction for refund from this Court while the departmental proceedings remain pending.

Writ petition dismissed insofar as it seeks a mandamus for refund at this stage; no interference with ongoing scrutiny assessment proceedings.

Scrutiny assessment pending under Section 143(3) - discretion under Section 143(1d) - Consideration of the petitioner's claim for refund is directed to the departmental authorities for decision after completion of the scrutiny assessment. - HELD THAT: - The Court directed the petitioner to furnish all information to the competent authority and ordered the department to complete the scrutiny assessment. The question of refund is to be considered by the tax authority in accordance with law after the completion of the scrutiny proceedings, rather than by this Court in the present petition. This amounts to leaving the claim for administrative adjudication and not adjudicating the refund on merits in the writ petition.

Matter remitted to the income-tax authority for completion of scrutiny assessment and for fresh consideration of the refund claim in accordance with law.

Final Conclusion: Writ petition refused; court will not direct refund while scrutiny assessment under the Income-tax Act is pending. Petitioner granted liberty to comply with departmental requirements and to seek refund from the tax authority, which is directed to complete the scrutiny and then consider the refund claim in accordance with law.

Penalty under section 271D for accepting loans in cash in contravention of section 269SS - Reasonable cause and bona fide belief based on auditor's advice - Concurrent appreciation of evidence by Commissioner (Appeals) and Tribunal - Substantial question of law as threshold for entertaining appeal

Penalty under section 271D for accepting loans in cash in contravention of section 269SS - Reasonable cause and bona fide belief based on auditor's advice - Concurrent appreciation of evidence by Commissioner (Appeals) and Tribunal - Whether the penalty under section 271D could be sustained where the assessee accepted cash deposits but acted on auditor's advice that section 269SS was not applicable - HELD THAT: - The Commissioner (Appeals) and the Tribunal examined the explanation that the assessee's business was akin to a bank and that the auditor had advised that section 269SS did not apply. Treating section 271D as a penalty provision, both fora found that the assessee had a bona fide belief based on professional advice and that this constituted a reasonable cause to avoid imposition of penalty. The courts thereby upheld the concurrent factual and evaluative conclusion that the explanation fell within the ambit of reasonable cause, and declined to disturb that concurrent appreciation.

Penalty under section 271D was not imposed; the explanation based on auditor's advice was accepted as a reasonable cause.

Substantial question of law as threshold for entertaining appeal - Whether the revenue's appeal before the High Court raised a substantial question of law warranting interference - HELD THAT: - An appeal to the High Court was entertainable only on a substantial question of law. The court found that there was no substantial question of law arising from the concurrent findings of the Commissioner (Appeals) and Tribunal regarding the reasonableness of the assessee's explanation. Absent such a question, the appellate jurisdiction to re-appreciate those concurrent factual conclusions did not arise.

No substantial question of law arises; the appeal cannot be entertained.

Final Conclusion: The High Court dismissed the revenue's appeal, upholding the concurrent findings that the assessee's reliance on auditor's advice constituted a reasonable cause to negate penalty under section 271D, and holding that no substantial question of law arose for admission of the appeal.

Reopening of assessment - notice of reassessment and time limit for issuance of notice - change of address and service of notice - judicial restraint in writ petitions on disputed questions of fact - remand to departmental proceedings for factual determination

Notice of reassessment and time limit for issuance of notice - change of address and service of notice - Petition challenging validity of reopening notice on the ground that it was not issued within time because it was dispatched to a wrong address - HELD THAT: - The challenge raises disputed questions of fact: whether the notice was dispatched to the petitioner's declared (old) address as per departmental records or to an incorrect address despite the petitioner having filed returns from a changed address. The High Court declined to decide these factual controversies in a writ petition, holding that such matters require detailed examination in the departmental proceedings. The court observed that the Assessing Officer's records and system entries must be correlated with the Permanent Account Number and that the departmental authorities are better placed to investigate and decide on service and timeliness in the assessment process. The court therefore kept all contentions of the petitioner on the validity of the notice open for adjudication by the department and emphasised that prior disposal of the petitioner's objection would not preclude the Assessing Officer from entertaining the petitioner's claim that service was defective and that the limitation for issuance of the notice had expired.

Writ petition not entertained on merits; factual disputes as to service and time-bar remitted for determination in departmental proceedings, with petitioner's contentions kept open.

Final Conclusion: The writ petition challenging the reopening notice for AY 2010-2011 is disposed of without adjudicating the disputed factual issues; the matter is left open for determination in the regular departmental proceedings and the Assessing Officer may examine the petitioner's contention regarding wrong service and time-bar.

Addition under section 68 of the Income Tax Act, 1961 - genuineness of unexplained credits - remand report relied upon in appellate proceedings - concurrent findings of fact by CIT(A) and Tribunal - absence of perversity in factual findings - deletion of additions by CIT(A) and confirmation by Tribunal

Addition under section 68 of the Income Tax Act, 1961 - genuineness of unexplained credits - remand report relied upon in appellate proceedings - concurrent findings of fact by CIT(A) and Tribunal - Deletion of addition on account of sundry creditors of Rs. 7,12,40,589 made by the AO under section 68 - HELD THAT: - The CIT(A) and the Tribunal found that the assessee had supplied the requisite details of the transactions and of the parties concerned and that, where the parties did not respond during assessment, the remand report called for in appellate proceedings supported the genuineness of those transactions. These findings were factual and concurrent. The High Court found no perversity in those concurrent findings and therefore no substantial question of law arose to sustain the AO's addition under section 68.

Addition deleted; Tribunal's deletion upheld and AO's addition under section 68 not sustained.

Addition under section 68 of the Income Tax Act, 1961 - genuineness of unexplained advances - remand report relied upon in appellate proceedings - concurrent findings of fact by CIT(A) and Tribunal - Deletion of addition on account of advances received from customers of Rs. 74,88,382 made by the AO under section 68 - HELD THAT: - CIT(A) and the Tribunal recorded that the assessee had furnished necessary details and that the remand report during appeal corroborated the genuineness of the advances where third parties had not responded earlier. The High Court treated these as factual concurrent findings which were not shown to be perverse, and thus declined to interfere with the deletions made under section 68.

Addition deleted; Tribunal's confirmation of CIT(A)'s deletion upheld.

Addition under section 68 of the Income Tax Act, 1961 - genuineness of unsecured loans - remand report relied upon in appellate proceedings - concurrent findings of fact by CIT(A) and Tribunal - Deletion of addition on account of unsecured loan received from customer of Rs. 49,64,888 made by the AO under section 68 - HELD THAT: - The appellate authorities accepted the assessee's particulars and relied on the remand report to conclude the loans were genuine despite non-response from the third parties at assessment. The High Court found these conclusions to be factual and concurrent with no perversity demonstrated; accordingly, there was no legal basis to sustain the AO's addition under section 68.

Addition deleted; Tribunal's affirmation of CIT(A)'s order upheld.

Final Conclusion: Tax Appeal dismissed; deletions of the additions under section 68 by CIT(A) and confirmed by the Tribunal are sustained as concurrent factual findings free from perversity.

Conscious concealment - bona fide mistake/error - penalty imposition for concealment - reliance on advice of chartered accountant - benefit claimed under deleted provision - application of Central Board of Direct Taxes circular (10th December, 2015) to pending matters

Conscious concealment - bona fide mistake/error - penalty imposition for concealment - reliance on advice of chartered accountant - benefit claimed under deleted provision - Whether the Tribunal was justified in allowing the assessee's appeals on the ground that there was no conscious concealment but a bona fide error in claiming the loss, relying on the affidavit of the chartered accountant and taking a plausible view on merits. - HELD THAT: - The Tribunal relied on precedent holding that mere omission or mistake in not returning income does not, by itself, constitute conscious concealment warranting penalty; there must be conscious concealment. On the material before it - including the affidavit of the chartered accountant stating that incorrect advice was given and that a bona fide error occurred in claiming the benefit under a deleted provision (the assessee having debited the loss of sale of vehicles to profit and loss account though not engaged in driving of vehicles) - the Tribunal took a plausible view on merits and found absence of conscious concealment. The High Court, having considered the Tribunal's reliance on those findings and authorities, held that no substantial question of law arises from that conclusion. [Paras 6, 7]

Tribunal's allowance of the appeals on merits for lack of conscious concealment and because of bona fide error was upheld; no interference warranted.

Application of Central Board of Direct Taxes circular (10th December, 2015) to pending matters - Whether the Department's Circular of 10th December, 2015, and the Apex Court's observation that the Circular applies to pending matters required disposal of these appeals where tax liability was less than Rs. 20 lacs. - HELD THAT: - The appeals relate to assessment years 1999-2000 through 2003-2004 and, in all, involve tax liability below the departmental threshold specified in the Circular. The High Court noted the Department's decision under the Circular not to prosecute appeals with tax liability under Rs. 20 lacs (subject to exceptions) and observed the Apex Court's view that the Circular applies to pending matters and that such appeals are to be withdrawn except where they have a cascading effect or involve an issue covering a large number of matters. On that basis the Court concluded that disposal of these appeals on that count was appropriate. [Paras 1, 2]

The applicability of the Circular to pending matters and the low tax liability supported disposal of the appeals; no further adjudication required on that ground.

Final Conclusion: The Tribunal's decision allowing the assessee's appeals on the ground of bona fide error and absence of conscious concealment was sustained; additionally, in light of the CBDT Circular (10th December, 2015) as applicable to pending matters with tax liability below Rs. 20 lacs, the appeals are disposed of. No substantial question of law arises and the Tax Appeals are dismissed without costs.

Notional interest on outstanding receivables - transfer pricing adjustment - working capital adjustment - arm's length price - international transaction - consequential relief

Notional interest on outstanding receivables - transfer pricing adjustment - international transaction - Notional interest imputed on outstanding receivables cannot be charged as a transfer pricing adjustment for the assessment year in question. - HELD THAT: - The Tribunal, following the coordinate bench decisions (including Pegasystems and Evonik Degussa as discussed in the order), held that imputing notional interest on receivables is impermissible in the absence of material showing under charging of real income. The TPO's approach of treating delayed receipts as attracting hypothetical interest was rejected; the Tribunal observed that service receivables are not equivalent to capital financing and that the authorities below erred in bringing notional interest to tax. Reliance was also placed on earlier Tribunal precedent (Logix Micro Systems Ltd.) which required allowance of a reasonable interest free period and criticised levying interest without excluding such period. On these grounds the adjustment was deleted. [Paras 9, 10]

Ground 1.a(i) allowed; notional interest on outstanding receivables not chargeable.

Working capital adjustment - arm's length price - transfer pricing adjustment - Working capital adjustment, when applied in determining margins under TNMM, already accounts for the impact of outstanding receivables and therefore precludes a separate imputation of interest on such receivables. - HELD THAT: - The Tribunal accepted authority (Kusum Healthcare and its confirmation by the Delhi High Court, and subsequent coordinate bench decisions) that differential working capital impact between the assessee and comparables is to be reflected in pricing and profit margins. Since working capital adjustments factor in the cost of funds related to receivables, making an additional notional interest adjustment is unwarranted. Applying this principle, the Tribunal held that the A.O./TPO should not make a separate TP addition on account of outstanding receivables where working capital adjustments have been made. [Paras 11, 12]

Grounds 1.a(ii) to 1.a(iv) allowed; no separate TP adjustment required where working capital adjustment was considered.

Arm's length price - transfer pricing adjustment - Alternate contention to benchmark interest at international (foreign currency) rates was not adjudicated and is left undecided. - HELD THAT: - The Tribunal observed that since the primary contention disposing of the adjustment was accepted, considering the alternate technical contention on benchmarking interest in foreign currency would be an academic exercise. Therefore the alternate ground raised by the assessee regarding benchmarking with USD LIBOR plus rates was not examined on merits at this stage. [Paras 13]

Alternate ground in 1.b not decided and left open for future consideration.

Consequential relief - Consequential implications of deleting the TP adjustment (including interest under sections 234B/234D if triggered) are to be given to the assessee by the assessing officer. - HELD THAT: - The Tribunal directed the A.O. to give consequential relief to the assessee arising from the deletion of the notional interest adjustment. As the relief is consequential to the primary deletions, the A.O. is to compute and extend any relief (including adjustments to interest or other consequences) arising from the decision. [Paras 13]

Ground No.2 treated as consequential; A.O. directed to grant consequential relief, if any.

Final Conclusion: The appeal is partly allowed: the Tribunal deleted the notional interest transfer pricing adjustment on outstanding receivables and held that working capital adjustments already account for such impact; the alternate foreign currency benchmarking point was not decided as academic; the assessing officer is directed to give consequential relief arising from the deletions.

Penalty under section 271(1)(c) - concealment of income - furnishing of inaccurate particulars of income - change of head of income - bonafide claim - long term capital gains vs income from other sources - declaration in return of income

Penalty under section 271(1)(c) - concealment of income - change of head of income - bonafide claim - declaration in return of income - Sustenance of penalty under section 271(1)(c) for declaring receipts as long term capital gains when the Assessing Officer treated the same receipts as income from other sources. - HELD THAT: - The Tribunal found it was an undisputed fact that the assessee had disclosed the impugned amount in the return of income as long term capital gains and that the claim was made bona fide on the view that furniture and fixtures formed part of the sale consideration of the building. Revenue authorities themselves had expressed conflicting views at different stages (AO treated the sum as income from other sources while the first appellate authority treated it as capital gain), which undermines any suggestion of deliberate concealment. Reliance on precedent (including the principle in Reliance Petroproducts) establishes that a claim made in good faith and disclosed in the return, which is later held unsustainable, does not of itself amount to concealment or furnishing of inaccurate particulars attracting penalty under section 271(1)(c). The authorities below failed to note that only the head of income was changed by the Assessing Officer and did not place any contrary material showing suppression or fabrication of particulars. On these considerations the Tribunal concluded that imposition of penalty was not justified. [Paras 9]

Penalty under section 271(1)(c) set aside as there was no concealment or furnishing of inaccurate particulars; the assessee's bona fide disclosure in the return and change of head of income do not justify penalty.

Final Conclusion: The assessee's appeal is allowed and the penalty imposed under section 271(1)(c) is quashed for Assessment Year 2007-08.

Disallowance of business expenses - onus of proof on the assessee for production of books and vouchers - application of gross profit rate under the method of accounting (section 145) - acceptability of audited accounts produced after the statutory due date

Disallowance of business expenses - onus of proof on the assessee for production of books and vouchers - Whether claimed expenses debited to trading account could be allowed in absence of supporting books and vouchers - HELD THAT: - The Tribunal found that the assessee failed to produce purchase and sale bills or supporting vouchers before the Assessing Officer and that computerized books of account were corrupted and recreated only later. The assessee's audited accounts were signed and produced well after the statutory due date. In these circumstances the onus lay on the assessee to substantiate the claimed discounts, freight/forwarding and related trading expenses. Absent such evidence the Assessing Officer was justified in disallowing the expenses, and the CIT(A)'s decision to restrict the disallowance rather than delete it was sustainable. [Paras 4, 9, 11]

Expenses disallowed by the Assessing Officer are not allowable in full because the assessee failed to discharge the evidentiary onus; the appeal is partly allowed on alternative basis described below.

Application of gross profit rate under the method of accounting (section 145) - acceptability of audited accounts produced after the statutory due date - Appropriate method to determine taxable income in absence of verifiable books - application of a gross profit (GP) rate on turnover and the quantum thereof - HELD THAT: - Having held that the assessee could not substantiate specific trading expenses, the Tribunal endorsed the principle of determining income by applying a gross profit rate under the method of accounting governed by section 145. The CIT(A) applied a GP rate of 2% on total turnover to arrive at a substitute measure of income; the Tribunal accepted the application of the GP-rate method but, on the facts and evidence (including the late production of audited accounts), directed a lower GP rate of 1% to be applied by the Assessing Officer on the total turnover to determine the income. This decision reflects the Tribunal's exercise of discretion to arrive at a reasonable estimate of income where books and vouchers are not verifiable. [Paras 5, 10, 11]

CIT(A)'s use of GP-rate method under section 145 is upheld in principle; Tribunal directs AO to apply GP rate of 1% on total turnover to compute income, thereby partly allowing the appeal.

Final Conclusion: The appeal is partly allowed: the disallowance of unsubstantiated trading expenses is sustained in principle, but instead of full disallowance the Tribunal directs the Assessing Officer to compute income by applying a gross profit rate of 1% on total turnover for assessment year 2010-11.

Addition under section 68 as unexplained receipt - assessment under section 153A - bank passbook is not a book of account - notional annual value under section 23(4) - double addition/double taxation - addition under section 69C as unexplained investment - remand and verification of seized documents

Addition under section 68 as unexplained receipt - assessment under section 153A - bank passbook is not a book of account - Deletion of addition of Rs.10,00,000 under section 68 for A.Y. 2003-04 - HELD THAT: - The Tribunal held that the addition was made solely on the basis of the assessee's bank passbook and that no adverse material was brought on record during assessment under section 153A. Relying on binding precedents that a bank passbook does not constitute a book of account and that unexplained gifts cannot be sustained without corroborative evidence of identity, creditworthiness and genuineness of donors, the addition confirmed by the CIT(A) was held unsustainable and deleted. [Paras 7, 8]

Addition under section 68 of Rs.10,00,000 for A.Y.2003-04 deleted; consequential interest issue noted.

Notional annual value under section 23(4) - more than one self-occupied property treated as deemed let out - Deletion of notional annual value assessed under section 23(4) for the flat at Bankey Bhawan for A.Y. 2004-05 - HELD THAT: - The Tribunal applied the principle that where a person has more than one house, the annual value of such property shall be determined as if it were let out under section 23(4)(b). Having accepted the assessee's contention and relevant Tribunal authority, the notional annual value addition was held to be not exigible and the addition was deleted. [Paras 18]

Addition of notional annual value under section 23(4) for A.Y.2004-05 deleted.

Addition under section 68 as unexplained receipt - assessment under section 153A - bank passbook is not a book of account - Deletion of addition of Rs.5,00,000 under section 68 for A.Y. 2004-05 - HELD THAT: - The Tribunal held that the legal position and reasoning accepted for A.Y.2003-04 applied mutatis mutandis to A.Y.2004-05. The addition made under section 68, being based only on bank passbook entries and without adverse material, was unsustainable and therefore deleted. [Paras 19]

Addition under section 68 of Rs.5,00,000 for A.Y.2004-05 deleted.

Remand and verification of seized documents - double addition/double taxation - Confirmation of addition of Rs.45,000 relating to tea/sugar business for A.Y.2004-05 rejected by assessee but sustained by authorities - HELD THAT: - The seized document and the assessee's own computations showed that Rs.45,000 was declared for A.Y.2003-04 and the balance disclosed for A.Y.2004-05. The Tribunal agreed with the CIT(A)'s finding-after noting absence of a remand report-that the amount of Rs.45,000 had been declared for the earlier year and therefore no set-off was available for A.Y.2004-05; consequently the addition was rightly sustained. [Paras 25]

Ground contesting the Rs.45,000 addition for A.Y.2004-05 rejected; addition sustained.

Notional annual value under section 23(4) - Deletion of notional annual value assessed under section 23(4) for A.Y. 2005-06 - HELD THAT: - The Tribunal applied the same legal principle as in the earlier year: where a person possesses more than one dwelling house, the notional annual value is to be determined as if one house were deemed let out. The addition under section 23(4) for A.Y.2005-06 was therefore accepted in favour of the assessee and deleted. [Paras 28]

Addition under section 23(4) for A.Y.2005-06 deleted.

Double addition/double taxation - remand and verification of seized documents - Deletion of addition of Rs.2,76,502 relating to tea/sugar business for A.Y.2005-06 as unsustainable (double addition) - HELD THAT: - For A.Y.2005-06 the figure concerned reflected a loss when proper accounting and prior-year allocations were considered; treating the seized figures as an independent addition resulted in double addition. The Tribunal found such addition unsustainable and deleted it. [Paras 29]

Addition of Rs.2,76,502 for A.Y.2005-06 deleted as impermissible double addition.

Notional annual value under section 23(4) - Deletion of notional annual value assessed under section 23(4) for A.Y. 2006-07 - HELD THAT: - Following the consistent view taken for earlier years, the Tribunal accepted the assessee's contention that notional annual value should not have been imposed in the circumstances and directed deletion of the addition under section 23(4) for A.Y.2006-07. [Paras 32]

Addition under section 23(4) for A.Y.2006-07 deleted.

Addition under section 69C as unexplained investment - remand and verification of seized documents - Reduction (part deletion) of addition made under section 69C for expenditure on 'Goad Bharai Ceremony' for A.Y.2006-07 - HELD THAT: - The seized papers and the assessee's statement under section 132(4) showed recorded expenditure on the ceremony and that part of the surrendered amount related to such outlay; additionally no credit was given for customary gifts (shagun). On this basis the Tribunal scaled down the addition from the figure accepted by the AO to a reduced sum, thereby partly allowing the appeal on this ground. [Paras 35]

Addition under section 69C for A.Y.2006-07 partly reduced (scaled down); appeal partly allowed on this point.

Final Conclusion: The Tribunal allowed the appeals in part: additions under section 68 based solely on bank passbook entries were deleted for A.Y.2003-04 and A.Y.2004-05; notional annual value additions under section 23(4) were deleted for A.Y.2004-05, A.Y.2005-06 and A.Y.2006-07; the tea/sugar addition for A.Y.2004-05 (Rs.45,000) was sustained; the addition for A.Y.2005-06 was deleted as a double addition; and the unexplained investment/addition under section 69C for A.Y.2006-07 was reduced. Consequential adjustments (including interest) follow from these decisions.

Allowability of depreciation to charitable trusts despite prior application of capital expenditure as application of income - double benefit argument rejected - computation of income of charitable trusts on commercial principles including depreciation - prospective effect of amendment to Section 11(6)

Allowability of depreciation to charitable trusts despite prior application of capital expenditure as application of income - double benefit argument rejected - computation of income of charitable trusts on commercial principles including depreciation - Depreciation claimed by a charitable institution for assets whose acquisition cost was earlier treated as application of income is allowable and cannot be disallowed on the ground of alleged double benefit. - HELD THAT: - The Tribunal upheld the view of the Supreme Court that where a charitable institution registered under section 12A had its capital expenditure treated as application of income in the year of acquisition, that treatment does not preclude allowing depreciation in subsequent years when computing income from the assets. The Supreme Court endorsed the reasoning in the Bombay High Court decisions that income of a charitable trust must be computed on commercial principles and that normal depreciation is a legitimate deduction in computing the real income of the trust; the fact that the cost was treated as application of income earlier does not amount to giving an impermissible double benefit by allowing depreciation later. The Tribunal, respectfully following the Supreme Court, declined to interfere with the CIT(A)'s allowance of depreciation to the assessee.

The CIT(A)'s order allowing the assessee's claim for depreciation is confirmed and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal, following the Supreme Court's authoritative view that depreciation may be allowed to charitable trusts notwithstanding earlier treatment of capital expenditure as application of income, affirms the appellate order and dismisses the Revenue's appeal for AY 2012-13.

Penalty under section 271(1)(c) for concealment of particulars of income or furnishing inaccurate particulars - notice under section 274 requiring specification of the limb of section 271(1)(c) - requirement of clear and specific allegation in penalty notice

Penalty under section 271(1)(c) for concealment of particulars of income or furnishing inaccurate particulars - notice under section 274 requiring specification of the limb of section 271(1)(c) - requirement of clear and specific allegation in penalty notice - Validity of the penalty imposed under section 271(1)(c) where the notice under section 274 did not specify whether proceedings were for concealment of particulars of income or for furnishing inaccurate particulars. - HELD THAT: - The Tribunal examined the notice dated 23.12.2011 and observed that it used a standard format stating that the assessee "have concealed the particulars of your income or furnished inaccurate particulars of such income", without specifying which limb of section 271(1)(c) was being invoked. The Tribunal held that initiation of penalty proceedings under section 271(1)(c) read with section 274 must clearly identify whether the case is for concealment or for furnishing inaccurate particulars; absent such specification the notice is bad in law. The Tribunal applied and followed earlier consistent decisions, including the Karnataka High Court decision in Manjunatha Cotton and Ginning Factory and subsequent affirmance in CIT v. SSA's Emerald Meadows, as well as recent coordinate Bench decisions of the ITAT (Ashok Kumar Chordia; Rajender Jain; ABR Auto Pvt. Ltd.), which held that a non specific notice initiating proceedings under section 271(1)(c) is unsustainable. On that basis the Tribunal concluded that the penalty could not be sustained and directed its cancellation. [Paras 6, 7]

Penalty under section 271(1)(c) quashed because the notice under section 274 did not specify whether proceedings were for concealment or for furnishing inaccurate particulars; appeal allowed.

Final Conclusion: The penalty imposed under section 271(1)(c) for Assessment Year 2008-09 is quashed and the assessee's appeal is allowed, as the penalty notice under section 274 failed to specify which limb of section 271(1)(c) was invoked.

Disallowance under section 40A(3) - commercial expediency - genuineness of transactions - remand for examination of suppliers - affidavit filed for the first time - CBDT Circular No. 6-P

Disallowance under section 40A(3) - genuineness of transactions - commercial expediency - affidavit filed for the first time - examination of suppliers - Whether the disallowance of Rs. 16,12,738/- made under section 40A(3) is sustainable or requires fresh verification of facts - HELD THAT: - The Tribunal noted that the revenue does not dispute the genuineness of the purchase transactions and that the assessee produced bills, cash memos and money receipts. The assessee, for the first time before the Tribunal, filed a notarised affidavit by a partner asserting that cash payments were made at the insistence of the suppliers who refused to accept cheques. The Tribunal observed that the lower authorities disallowed payments because the assessee did not prove pressing circumstances or commercial expediency justifying cash payments in excess of the limits prescribed by section 40A(3). Given that the affidavit contains factual assertions which require verification and that the suppliers ought to be examined to ascertain whether they indeed insisted on cash payments, the Tribunal found it appropriate in the interests of justice to remit the matter. The Tribunal directed that the assessing officer should examine the suppliers in accordance with law, afford the assessee reasonable opportunity to be heard, and if the suppliers are found to have insisted on cash payments, no disallowance under section 40A(3) shall be made taking into account the spirit of the provision and relevant precedents. [Paras 7]

Remanded to the assessing officer to examine the suppliers' insistence on cash payments and decide the disallowance under section 40A(3) afresh in accordance with law; matter partly allowed for statistical purposes.

Final Conclusion: The appeal is partly allowed for statistical purposes and the disallowance under section 40A(3) is remanded to the assessing officer for verification of suppliers' insistence on cash payments; the assessee to be given reasonable opportunity to be heard and the assessing officer to decide the matter in accordance with law.

Treatment of share capital as unexplained cash credit under section 68 - opportunity of being heard and duty to consider relevant documentary evidence - non-consideration of replies to notices issued under section 133(6) - remand for fresh assessment to examine each shareholder and trace bank transactions

Opportunity of being heard and duty to consider relevant documentary evidence - non-consideration of replies to notices issued under section 133(6) - treatment of share capital as unexplained cash credit under section 68 - Whether the assessment and consequent addition treating the fresh share capital and share premium as unexplained cash credit could be sustained where the Assessing Officer did not give proper opportunity to examine the crucial former directors and did not consider documentary evidence filed by 35 share applicants in response to notices under section 133(6). - HELD THAT: - The Tribunal found that the Assessing Officer, in pursuance of the CIT's directions under section 263, was required to examine the genuineness and source of share capital in respect of each shareholder and to trace bank transactions. Notices under section 133(6) were issued to all 35 share applicants and documentary evidence (statements of source of funds, bank statements, allotment letters, IT returns, audited balance sheets) was submitted, but the AO did not consider this material. Further, the then directors explained non-compliance with summons under section 131 by citing change of address and sought time to produce documents; notwithstanding the CIT's specific direction to examine those directors on oath, the AO did not afford the requisite opportunity. Given that the presence and examination of the directors and consideration of the shareholders' documentary evidence were determinative to decide the genuineness and creditworthiness of the share capital, the Tribunal concluded that the assessment under section 147/143(3) was made without giving proper and sufficient opportunity and without taking into account the available material. In these circumstances the Tribunal found it just to set aside the orders below and direct a fresh assessment in accordance with the CIT's directions, after giving the assessee proper opportunity and considering the entire evidence on record including any further documents the assessee may file. [Paras 6, 7, 8]

Orders of the authorities below set aside; matter restored to the file of the Assessing Officer for fresh assessment in accordance with the CIT's directions, after giving the assessee proper and sufficient opportunity and considering all documentary evidence.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the assessment and directing the Assessing Officer to complete a fresh assessment as per the CIT's directions, affording proper opportunity to the assessee and considering the documentary evidence already on record and any further evidence the assessee may file.

Condonation of delay - Recognition of revenue in construction contracts - Percentage completion method - Estimation of income from advances - Assessment estimation versus books of account - Principle of consistency in successive assessments - Remand for fresh adjudication

Condonation of delay - Whether the delay in filing the appeal should be condoned. - HELD THAT: - The assessee filed an application supported by an affidavit explaining strained relations among directors and non-availability of a director who had access to necessary details. The authorised representative reiterated these grounds and the Revenue left the matter to the Bench. Having regard to the explanation and the period of delay (299 days), the Tribunal found the cause to be reasonable and that the facts warranted exercise of discretion in favour of the assessee. Delay was therefore condoned. [Paras 2]

Delay in filing the appeal of 299 days is condoned.

Estimation of income from advances - Recognition of revenue in construction contracts - Percentage completion method - Principle of consistency in successive assessments - Remand for fresh adjudication - Validity of the addition computed by treating advances as representing unrecognized profit and estimating gross profit on advances. - HELD THAT: - The AO computed unrecognised gross profit on advances by applying a gross profit ratio to advances and made an addition. The FAA upheld the addition in principle, recording perceived deficiencies in the assessee's breakup of liabilities and recognition of receipts. The Tribunal found that the assessee consistently followed the mercantile/percentage completion method and that revenue recognition depends on work completed rather than advances received. The AO computed gross profit on WIP without allowing corresponding expenses and adopted an incorrect net-advance figure (Rs. 3.18 crores) contrary to the assessee's Schedule 7 which showed a different net advance (claimed Rs. 6.70 crores) and lower than closing WIP. The AO/FAA did not adequately consider these factual and accounting aspects nor explain deviation from earlier years where the method was accepted. In the interest of justice and because the factual matrix and consistency issues require re-examination, the matter was restored to the FAA for fresh adjudication with directions to afford hearing and decide within six months. [Paras 3, 4, 5, 6]

Addition sustained by AO is not finally adjudicated; the issue is remanded to the FAA for fresh consideration and adjudication.

Assessment estimation versus books of account - Remand for fresh adjudication - Validity of the addition made on account of variation in sale prices of commercial units. - HELD THAT: - The AO found large variations in sale rates and estimated suppressed sales by applying a maximum observed rate to the area sold. The FAA upheld the addition in principle after noting inexplicable variations in rates and instances where agreement rates were lower than stamp duty values, but made limited directions on computation. The Tribunal observed that the de novo proceedings ordered on the main issue (recognition of revenue/advances) will materially affect this ground and therefore directed the FAA to decide the variation-in-price addition afresh after hearing the assessee. [Paras 7, 8, 9]

Addition on account of variation in sale prices is not finally adjudicated; directed to be re-decided afresh by the FAA after hearing the assessee.

Final Conclusion: The appeal is partly allowed: delay in filing the appeal is condoned; the addition relating to unrecognised profit on advances and the addition for variation in sale prices are not finally upheld and are remitted to the FAA for fresh adjudication (the FAA to decide within six months after affording the assessee an opportunity of hearing).

Rectification under section 254(2) - mistake apparent from the record - scope of rectificatory powers of the Tribunal - requirement of a manifest and self evident error - prohibition on re opening or review under the guise of rectification - remand to the assessing officer for fresh adjudication

Rectification under section 254(2) - mistake apparent from the record - prohibition on re opening or review under the guise of rectification - requirement of a manifest and self evident error - Application for rectification of the Tribunal's order dated 13.09.2017 was dismissed for want of any mistake apparent from the record. - HELD THAT: - The Tribunal considered the settled law on the scope of s. 254(2), including the requirement that rectification can be ordered only for a patent, manifest and self evident error which does not require elaborate inquiry or re argument. Citing the exposition in Express Newspapers v. DCIT and the Apex Court's pronouncements (including T S Balaram), the Tribunal held that it cannot act as a review forum under the guise of rectification. The assessee's contentions - that factual findings regarding actual use of loan, temporary nature of the loan from a sister concern, and applicability of a jurisdictional High Court decision (Comfund Financial Services) - do not disclose any manifest error in the Tribunal's order. The earlier order had restored the matter to the AO for fresh decision in the light of the Karnataka High Court judgment; that restoration was a considered decision and not a clerical or apparent mistake capable of rectification under s. 254(2). Consequently, no rectification was warranted and the miscellaneous petition was dismissed. [Paras 4, 5]

Miscellaneous petition seeking rectification dismissed for absence of any mistake apparent from the record; no review permitted under s. 254(2).

Final Conclusion: The Tribunal declined to rectify its order of 13.09.2017 in respect of AY 2011-12, holding that the matters raised amount to reviewable contentions rather than a manifest error apparent on the record, and dismissed the miscellaneous petition.

Confiscation of imported goods - mis-declaration of import goods - requirement of FSSAI certification for imported foodstuffs - first check examination and laboratory analysis - appellate tribunal's fact-finding and perversity review

Mis-declaration of import goods - confiscation of imported goods - appellate tribunal's fact-finding and perversity review - Whether the goods were mis-declared so as to warrant confiscation. - HELD THAT: - The Tribunal examined the evidence including the invoices describing the consignment as industrial/animal-feed grade and the results of laboratory tests conducted on samples which were drawn and sent by Revenue's officers. The laboratory certificate-relied upon by the Tribunal and produced from samples taken by the Department-classified the consignment as animal feed and not fit for human consumption. On that factual basis the Tribunal concluded there was no mis-declaration inconsistent with the bill of entry (which described the goods as not for human consumption) and therefore no justification for confiscation. The High Court found this to be a factual conclusion supported by the material on record and not vitiated by perversity or illegality, and accordingly declined to interfere with the Tribunal's factual finding reversing confiscation. [Paras 5, 6]

The Tribunal's factual finding that there was no mis-declaration and hence no grounds for confiscation is upheld; Revenue's challenge fails.

Requirement of FSSAI certification for imported foodstuffs - first check examination and laboratory analysis - Whether a mandatory FSSAI certificate was required for importation in the circumstances and whether the absence of such certificate rendered the import liable to action. - HELD THAT: - The Tribunal posed a query to the Department as to whether import for industrial use/animal feed was prohibited in the absence of FSSAI certification; the Department could only point to the finding that the product was not fit for human consumption. Given the laboratory finding that the consignment was animal feed and the consignee's declared description, the Tribunal held that an FSSAI certificate (which certifies fitness for human consumption) was not implicated. The High Court accepted that the Tribunal's conclusion was a reasoned factual determination based on the laboratory report and the material before it, and not an erroneous legal conclusion demanding interference. [Paras 5]

In the factual matrix found by the Tribunal, FSSAI certification was not material to sustain confiscation; the Tribunal's conclusion is affirmed.

Final Conclusion: The appeal is dismissed. The Tribunal's reversal of confiscation, based on laboratory analysis and concurrent factual findings that the consignment was for industrial/animal-feed use and not for human consumption, is maintained and not interfered with by the High Court; no order as to costs.

Attachment of bank accounts - show cause notice and adjudication before deprivation of property - power to proceed against movable property as sale proceeds of smuggled goods

Attachment of bank accounts - show cause notice and adjudication before deprivation of property - Validity of the communication directing the bank to stop debits from the petitioner's accounts without issuance of a show cause notice and prior adjudication. - HELD THAT: - The Court found that the impugned communication, which directed the bank to stop debits in the petitioner's and his relatives' accounts, was issued in circumstances where no show cause notice had been served on the petitioner and no adjudication or crystallization of any liability had taken place. While the Revenue relies on powers to seize goods and proceed against movable property as arising under the Customs regime, the Court emphasised that freezing a bank account in effect secures an amount alleged to be due and payable and cannot be sustained in the absence of statutory process being invoked against the petitioner, including issuance of a show cause notice, opportunity to reply and adjudication. The Court observed that mere allegations, however serious, do not justify immediate deprivation of the petitioner's ability to operate bank accounts when the procedural safeguards for determining liability have not been followed. Consequently, the communication to the bank was quashed. The Court clarified, however, that its order does not preclude the Revenue from taking lawful action in future, including issuing show cause notice and, if warranted, attaching bank accounts strictly in accordance with law. [Paras 5, 6]

Impugned communication directing stoppage of debits quashed; Revenue may proceed in future only in accordance with law.

Final Conclusion: The writ petition is allowed; the communication to the bank freezing debits is quashed for being issued without prior show cause notice and adjudication, subject to the Revenue's right to act lawfully thereafter.

Confiscation of goods - penalty for evasion of duty - intention to evade duty - de-bonding of a 100% EOU - value addition requirement for EOU - reasoned order by appellate tribunal

Confiscation of goods - penalty for evasion of duty - intention to evade duty - de-bonding of a 100% EOU - value addition requirement for EOU - Whether the Tribunal was justified in setting aside the confiscation of capital goods and imposition of penalty on the respondent company. - HELD THAT: - The Tribunal's decision to set aside confiscation and penalty was affirmed. The Court noted that the DGFT had allowed debonding on the respondent's application and the Development Commissioner had, upon verification, recorded that the respondent had achieved the requisite value addition; those findings were not challenged by the Revenue. The show cause notice did not specify any particular species of default under the provisions authorising confiscation, nor did it allege any deliberate attempt or intention on the part of the respondent to evade duty. Allowing an EOU to debond prematurely is permissible where authorities are satisfied the unit cannot meet scheme conditions for reasons beyond its control; acceptance of debonding and the finding on value addition negate an inference of wilful evasion. In these circumstances, and having regard to the absence in the notice and proceedings of any specific charge of intentional evasion, the imposition of confiscation and penalty was not warranted. The Court further found the Tribunal's order to be reasoned and not a mere perfunctory order, rejecting the Revenue's contention that the matter should be remitted for fresh consideration.

The Tribunal correctly set aside the order of confiscation of capital goods and imposition of penalty; those measures could not be sustained in the absence of any finding or allegation of intention to evade duty and in view of accepted debonding and the finding of value addition.

Final Conclusion: Both substantial questions of law were answered against the Revenue and in favour of the respondent; the appeal is dismissed.

Summary order. Matter stood over to 27th March, 2018 to be placed on the Supplementary Board.

Mis-declaration of imported goods - liability to duty on contraband/pesticidal consignments - penalty for mis-declaration - mitigation of penalty for first offence - admission of guilt as mitigating factor

Mis-declaration of imported goods - liability to duty on contraband/pesticidal consignments - The appellant made mis-declaration by importing pesticides/insecticides/fungicides as limestone powder and is liable for the mis-declaration. - HELD THAT: - The Tribunal found on the record that the goods imported were pesticides/insecticides/fungicides attracting higher duty though declared as limestone powder. The factual finding included that one container had already been released and that samples taken from the second container disclosed the true nature of the consignments. On this basis the appellant was held to have been aware of the contents and therefore guilty of mis-declaration, attracting liability under customs law for the mis-declared consignments. [Paras 6]

Appellant guilty of mis-declaration and liable to penal action and duty for the imported pesticides/insecticides/fungicides.

Penalty for mis-declaration - mitigation of penalty for first offence - admission of guilt as mitigating factor - Whether the penalty imposed should be sustained as levied or reduced in view of mitigation pleaded by the appellant. - HELD THAT: - Although the Tribunal sustained the finding of guilt, it noted the appellant's plea that this was a first offence and that he had accepted guilt before the lower authorities. Taking those mitigating circumstances into account, the Tribunal concluded that the original penalty was excessive. Applying the principle that a first offence and an admission of guilt are factors warranting reduction of penalty, the Tribunal exercised its discretion to reduce the monetary penalty while upholding the underlying finding of liability. [Paras 6, 7]

Original penalty sustained in principle but reduced; appellant granted relief by reducing the penalty amount.

Final Conclusion: Appeal partially allowed: the finding of mis-declaration and liability is upheld, but the penalty imposed by the original order is reduced in view of the first-offence nature and the appellant's admission of guilt (penalty reduced to Rs. 6,00,000).

Import of goods at concessional rate of duty - use in manufacture and subsequent detection of defect - clearance as scrap - re-export requirement for availing concession - Rule 7 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 - Rule 7A of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 - Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996

Use in manufacture and subsequent detection of defect - clearance as scrap - re-export requirement for availing concession - Whether concessional duty benefit continues where imported components were used in manufacture, found defective after assembly and testing, and thereafter cleared as scrap without being re-exported. - HELD THAT: - The Tribunal examined the factual position that the imported components were assembled and tested, but found defective and ultimately cleared as scrap without any re-export. Reliance placed by the appellant on precedents where defective parts were exported after assembly or where loss occurred in transit was distinguished on facts: in those cases the goods left the production/territorial chain (by export) or were not received at factory. Here the defective components remained within the production chain and were not re-exported. The Tribunal held that where goods do not get out of production by re-export or other qualifying disposition, the statutory/regulatory scheme does not permit retention of the concessional benefit, and thus the Department was justified in treating them as not utilised for the purposes of the concession. [Paras 7]

Concessional benefit not available when defective components, after assembly and testing, are cleared as scrap without re-export; claim rejected.

Rule 7 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 - Rule 7A of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 - Rule 8 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 - Whether the demand raised by the Department under the 1996 Rules for non-utilisation of concessional imports was sustainable. - HELD THAT: - The Revenue relied on Rules 7, 7A and 8 of the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996, contending there was no provision allowing clearance as scrap where goods were not exported. The Tribunal accepted that the components were not re-exported and, applying Rule 8, concluded that the statutory scheme permitted the Department to treat such goods as not utilised for the purpose of concession and raise demand. The Tribunal found no justification to interfere with the Order-in-Original and sustained the demand and concomitant reasoning in the impugned order. [Paras 7]

Demand under the 1996 Rules sustained; impugned order upheld.

Final Conclusion: The appeal is dismissed and the Order-in-Original is sustained: concessional duty benefit could not be retained for components found defective and cleared as scrap without re-export, and the demand under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 1996 is upheld.

Change of company name - effect in cause title - authentication of corporate records - reliance on Registrar of Companies certificate - judicial order recognising corporate name change - adequacy of departmental inquiries - forum competence of responding authority

Change of company name - effect in cause title - authentication of corporate records - reliance on Registrar of Companies certificate - judicial order recognising corporate name change - Whether the Tribunal should permit the change of the appellant's name in the cause title on the basis of Registrar of Companies certificate and the Bombay High Court order - HELD THAT: - The Tribunal examined the certificate of change of name issued by the Registrar of Companies, National Capital Territory of Delhi and Haryana and the order dated 20.11.2017 of the Hon'ble Bombay High Court allowing the change of name. In view of the ROC certificate on record and the High Court's order, the Tribunal found no reason to doubt the authenticity of the change of name and concluded that the company's name should be substituted in the cause title. The Tribunal accordingly allowed the change of name from 'M/s. Sedco Forex International Drilling Inc.' to 'M/s Shelf Drilling International Inc.' in the cause title of the appeal. [Paras 5]

Change of name in the cause title permitted and the new name directed to be reflected.

Adequacy of departmental inquiries - forum competence of responding authority - authentication of corporate records - reliance on Registrar of Companies certificate - Whether the departmental inquiries made by Customs to certain offices were adequate and whether those inquiries affected the Tribunal's decision - HELD THAT: - The Tribunal reviewed letters obtained by the Revenue and observed that enquiries had been directed to authorities which were not the competent registrars for the appellant's PAN or ROC record (the Income Tax response related to a PAN issued from Dehradun while the Customs had inquired with Mumbai; similarly, Customs had inquired with ROC, Mumbai though the certificate was issued by ROC, Delhi and Haryana). The Tribunal held that such enquiries, made to incorrect forums, were of no consequence for disputing the certificate on record. The Tribunal noted that if the Department considered the ROC certificate inauthentic, it remained free to conduct proper enquiries with the competent authority and bring any proved defect before the Tribunal for appropriate action. [Paras 4, 5]

Enquiries to incorrect authorities are inadequate and do not vitiate the ROC certificate; Department may, if it so chooses, make proper enquiries and produce evidence of any defect.

Final Conclusion: The Tribunal allowed the change of the company's name in the cause title to 'M/s Shelf Drilling International Inc.' on the basis of the ROC certificate and the Bombay High Court order; departmental enquiries made to incorrect authorities were held inadequate, although the Department may pursue proper verification and place any adverse finding before the Tribunal.

Rectification of register of members - reinstatement of shares - entitlement to bonus shares and dividends - deemed or negative consent in scheme of arrangement - fraudulent change of member details - delay and laches - summary jurisdiction of the Company Law Board under Section 111A read with 111(4) of the Companies Act, 1956 - impossibility of performance

Rectification of register of members - reinstatement of shares - entitlement to bonus shares and dividends - Validity of the Company Law Board order directing rectification of the register of members, reinstating the first respondent to 2911 equity shares, issuing fresh share certificates and declaring entitlement to bonus shares and dividends. - HELD THAT: - The Court examined the facts of persistent correspondence by the first respondent from 2001 onwards, the finding of falsification of records and the Company Law Board's prima facie conclusion that the petitioner had established negligence and fraud affecting her membership. The Company Law Board's directions (set out in its order) to reinstate the shareholding, issue fresh certificates and recognise entitlement to bonus shares and dividends were accepted as appropriate reliefs to remedy the consequences of the fraudulent change of registration. The High Court found no reason to interfere with the remedial directions and observed that necessary entries and compliance with the order are within the company's capacity to implement; it declined to go into valuation or quantification issues which were incidental to enforcement. [Paras 13, 18, 19, 22]

The Company Law Board order directing rectification, reinstatement of 2911 equity shares, issuance of fresh share certificates and declaration of entitlement to bonus shares and dividends is upheld; the company appeal is dismissed.

Deemed or negative consent in scheme of arrangement - fraudulent change of member details - Applicability of the sanctioned scheme's deemed or negative consent provision to a shareholder against whom fraud was committed and who did not receive notice or option form. - HELD THAT: - The Court held that a scheme provision treating silence as consent cannot be applied to a person who was not given notice or the option form because of a fraudulent and unauthorised change of address and registration. Given the admitted falsification of membership particulars and the absence of any evidence that the first respondent received the option form or cheque, the scheme as approved could not bind her. The Court endorsed the Company Law Board's conclusion that the fraud and negligence disentitled the company to rely on the scheme against the affected shareholder. [Paras 4, 5, 19]

The sanctioned scheme's deemed/negative consent provision does not bind the first respondent in view of the fraudulent change of her membership details; she is not bound by the buyback mechanism enacted under the scheme.

Delay and laches - Whether the petitioner's claim was barred by delay and laches, warranting dismissal of the Company Petition. - HELD THAT: - The Court applied the principle that delay and laches depend on practice and prudence and require an appraisal of the actual delay, the party responsible and the consequence. The material shows continuous pursuit of the grievance by the first respondent, acknowledgement of complaints by regulatory and exchange authorities and no sufficient explanation justifying denial of relief on grounds of delay. The Court found the relied-upon authority in T.V. Somasundaram Pillai inapplicable on these facts. [Paras 21]

Delay and laches do not bar the first respondent's claim; the Company Law Board appropriately proceeded to grant relief.

Summary jurisdiction of the Company Law Board under Section 111A read with 111(4) of the Companies Act, 1956 - impossibility of performance - Whether the Company Law Board lacked jurisdiction or erred by deciding matters requiring detailed trial, or whether the directions would be impossible to implement. - HELD THAT: - The Court observed that the proceedings before the Company Law Board are summary in nature and found no complicated factual issues necessitating full trial, because the primary facts (non-receipt of option form, falsification of records and continuing efforts by the first respondent) were not in dispute. The contention of non-application of mind and impossibility of performance was rejected: the relief sought and granted involved rectification and entries which the company could effect, and the High Court declined to enter into disputed valuation matters which are separable from the order's compliance. [Paras 15, 20, 22]

The Company Law Board did not exceed its summary jurisdiction in granting the relief; the directions are not impossible to implement and the appeal on this ground fails.

Final Conclusion: The Company Appeal is dismissed; the Company Law Board's order directing rectification of the register, reinstatement of 2911 equity shares to the first respondent, issuance of fresh share certificates and recognition of entitlement to bonus shares and dividends is upheld, and ancillary contentions of delay, lack of jurisdiction and impossibility of performance are rejected.

Winding up under Section 433(e) of the Companies Act, 1956 - Enforceability of admitted liability and dishonoured post-dated cheques - Notice under Section 434 and proof of debt - Mala fide defence and inability to pay

Winding up under Section 433(e) of the Companies Act, 1956 - Notice under Section 434 and proof of debt - Admissibility of the petitioner's winding up application and entitlement to relief under Sections 433(e) and 434 of the Companies Act, 1956. - HELD THAT: - The Court found on the material on record that the company obtained financial accommodation from the petitioner, acknowledged receipt by letters dated July 17, 2013 and September 7, 2014, and issued two post-dated cheques to discharge the liability which were presented on expiry and were dishonoured for insufficiency of funds. The petitioner served a statutory notice under Section 434 claiming the outstanding sum and the notice was received. The respondent did not dispute the receipt of the loan, the authenticity of the acknowledgment letters, or the dishonour of the cheques; nor did it produce any documentary evidence to substantiate its pleaded oral agreement for conversion/adjustment. On these findings the Court concluded that the petitioner had established a prima facie proved debt payable by the company and that the statutory preconditions for admission of the winding up petition under Section 433(e), read with the notice under Section 434, were satisfied.

The winding up petition is admitted for the sum stated in the Section 434 notice; the company is directed to pay the stated sum within three weeks, failing which the petitioner may proceed with publication and further steps.

Enforceability of admitted liability and dishonoured post-dated cheques - Mala fide defence and inability to pay - Validity of the company's defence that an oral agreement converted the loan into investment in property and whether that defence defeats the petitioner's claim. - HELD THAT: - The respondent asserted an after the fact oral arrangement that the petitioner agreed to convert the loan into investment in specified property and to adjust the dues against flats. The Court observed that the respondent did not produce any documentary evidence to support this contention; the respondent had admitted the letters acknowledging liability and the dishonour of the cheques and did not inform the petitioner not to present the cheques until receipt of a later notice. On the totality of the record the Court found the defence to be unsubstantiated, lacking bona fides, and inadequate to negate the petitioner's admitted debt and the statutory notice. Consequently the alleged oral agreement was rejected as a defence to the winding up petition.

The pleaded oral agreement is held to be unproved and mala fide; it does not defeat the petitioner's claim.

Final Conclusion: The petition for winding up is admitted for the amount claimed in the Section 434 notice; the company must pay that sum within three weeks, upon which the winding up petition will be stayed permanently, and in default the petitioner is entitled to publish the statutory notices and proceed further.

Oppression and mismanagement - minority shareholder rights - exit/offer of transfer of shares - valuation report and fair value - termination of employment and contractual severance - award of compensation in lieu of professional qualification - enforceability of share transfer - interest on purchase consideration

Termination of employment and contractual severance - award of compensation in lieu of professional qualification - minority shareholder rights - entitlement of the respondent to Rs. 20 lakhs in lieu of his professional qualification and to alleged 'severance pay' when he had accepted contractual salary, gratuity and royalty payments - HELD THAT: - The Tribunal found that the respondent was an employee under a contractual appointment letter which provided for termination on one month's notice (waivable at management's discretion) and that he had served beyond the minimum three-year period. The appellants produced evidence of payment towards full and final salary, gratuity and royalty which the respondent had accepted. The NCLAT held that utilization of the respondent's professional qualifications during the company's early days did not give rise to any additional entitlement beyond the contractual and agreed financial benefits; the lump-sum award of Rs. 20 lakhs by the NCLT was unjustified. The claim for 'severance pay' was likewise unsustainable where contractual entitlements had been discharged and no legal basis for further compensation was established. [Paras 11, 12, 13, 14]

The award of Rs. 20 lakhs and the claim for severance pay are set aside; respondent is held to have been paid all contractual/service benefits.

Exit/offer of transfer of shares - valuation report and fair value - enforceability of share transfer - interest on purchase consideration - correctness of the NCLT direction that Appellant No.2 accept the respondent's offer to transfer 500 shares at the valuation of Rs. 2064.74 per share and rejection of the subsequent lower valuation - HELD THAT: - The NCLT had held that the transfer of shareholding by Appellant No.3 to Appellant No.2 was enforceable in law and that it was not in the interest of the business to reverse the transaction. The Tribunal accepted the NCLT's finding that the second valuation (dated 16 February 2015) was produced for the limited purpose of stamp duty and did not reflect fair value, whereas the earlier valuation (1 February 2014) represented the fair and agreed price. Considering the respondent's expressed intention to exit and the NCLT's view that acceptance of the exit plan was beneficial to both parties, the NCLAT found no infirmity in directing Appellant No.2 to accept the transfer at Rs. 2064.74 per share. The Tribunal also upheld entitlement to simple interest on the purchase consideration from the date of the impugned order. [Paras 5, 15, 16]

Direction to Appellant No.2 to purchase 500 shares at Rs. 2064.74 per share is upheld; respondent entitled to simple interest at 9% per annum on the cost of such shares from the date of the impugned order.

Final Conclusion: The appeal is partly allowed: the NCLT order is set aside insofar as the Rs. 20 lakh award (and related severance claim) in favour of the respondent, but the NCLT direction requiring Appellant No.2 to accept transfer of 500 shares at Rs. 2064.74 per share is maintained; respondent is granted simple interest at 9% per annum on that sum from the date of the impugned order. No order as to costs.

Effect of acknowledgement under Section 18 of the Limitation Act - Part payment and fresh period of limitation under Section 19 of the Limitation Act - Lis pending and suspension/arrest of limitation - Maintainability of a claim under Section 7 of the Insolvency and Bankruptcy Code despite parallel SARFAESI/DRT proceedings - Imposition of corporate insolvency moratorium and appointment of Interim Resolution Professional

Effect of acknowledgement under Section 18 of the Limitation Act - Part payment and fresh period of limitation under Section 19 of the Limitation Act - Lis pending and suspension/arrest of limitation - Whether the financial creditor's claim is barred by limitation or is saved by acknowledgements, part payments, and/or lis pending before a competent forum - HELD THAT: - The Tribunal examined correspondence, balance confirmations and other documents demonstrating admissions and part payments by the corporate debtor and correspondence proposing one time settlement, and held that such communications fall within the scope of acknowledgement contemplated by the explanation to Section 18 of the Limitation Act. The Bench treated the series of acknowledgements (including letters of admission, part payment entries and an OTS proposal) as evidence that the debt was continuously acknowledged and therefore a fresh period of limitation would run from such acknowledgement. Separately, the Tribunal applied the principle that where lis is pending before a competent forum (the proceedings initiated before the Debt Recovery Tribunal), limitation is arrested in respect of the claim, and accordingly limitation would not bar the Section 7 petition. The corporate debtor's contentions that subsidy credited by the Government could not be treated as part payment, and that an OTS made after three years from the last undisputed payment could not revive the claim, were considered but the Bench found sufficient contemporaneous admissions and part payments up to 13.09.2016 to hold the claim within limitation. [Paras 11, 15, 16]

The claim is not barred by limitation; acknowledgements and related correspondence sustain the fresh computation of limitation and lis pending before the DRT arrests limitation.

Maintainability of a claim under Section 7 of the Insolvency and Bankruptcy Code despite parallel SARFAESI/DRT proceedings - Imposition of corporate insolvency moratorium and appointment of Interim Resolution Professional - Whether the Section 7 petition by the financial creditor is maintainable and, if so, the consequential orders to be passed under the Code - HELD THAT: - Having found existence of debt and default within limitation on the material furnished, the Tribunal proceeded to admit the Company Petition filed under Section 7 of the Code. The Bench recorded satisfaction with the documents evidencing debt and default and with the name of the proposed Resolution Professional. Consequential reliefs customary on admission were directed: declaration of moratorium (prohibiting institution or continuation of suits, transfer/alienation of assets, enforcement of security including SARFAESI actions, and recovery by owners/lessors), protection of supply of essential goods/services, and public announcement of the corporate insolvency resolution process. The Tribunal appointed the proposed interim resolution professional to perform functions under the Code until completion of the CIRP or approval of a resolution plan or liquidation. [Paras 20, 21]

The Section 7 petition is admitted; moratorium is imposed and the named Interim Resolution Professional is appointed.

Final Conclusion: The Tribunal admitted the Section 7 petition after holding the claim to be within limitation by virtue of acknowledgements, part payments and pending lis; a moratorium was imposed and the proposed Interim Resolution Professional was appointed to conduct the corporate insolvency resolution process.

Moratorium under Insolvency and Bankruptcy Code - overriding effect of later enactment - bar of jurisdiction under the Disaster Management Act, 2005 - powers of District Disaster Management Authority to order salvage and preventive action - action under the Disaster Management Act not amenable to stay by fora other than High Court or Supreme Court - public safety and prevention of environmental hazard prevailing over commercial or stakeholder interests

Moratorium under Insolvency and Bankruptcy Code - bar of jurisdiction under the Disaster Management Act, 2005 - overriding effect of later enactment - public safety and prevention of environmental hazard prevailing over commercial or stakeholder interests - Effect of moratorium under the Insolvency and Bankruptcy Code on actions taken under the Disaster Management Act, 2005 - HELD THAT: - The Tribunal examined whether the moratorium declared under the Insolvency & Bankruptcy Code could stay or prevent actions initiated by the District Disaster Management Authority under the Disaster Management Act, 2005. Having regard to the statutory scheme, the Disaster Management Act contains an express bar of jurisdiction in section 71 and an overriding clause in section 72, conferring exclusive competence on constitutional courts to interfere with actions taken under the Act. The Tribunal held that the statutory remit and public-safety purpose of the Disaster Management Act - authorising requisition, salvage and preventive measures to avert environmental catastrophe - are distinct from the remedial and creditor-protective objectives of the IBC. A mere later enactment (IBC) does not nullify the bar created by the Disaster Management Act where the latter precludes intervention by ordinary courts or tribunals; consequently the moratorium under the IBC does not have bearing on or prevent the execution of measures lawfully ordered under the Disaster Management Act to avert imminent environmental hazard and protect life and ecology. The Tribunal therefore refrained from entertaining merits of the Disaster Management Authority's orders or from staying actions taken thereunder. [Paras 11, 12, 14, 16]

Moratorium under the IBC does not operate to stay or impede actions lawfully taken under the Disaster Management Act, 2005; this Adjudicating Authority is barred from intervening in proceedings under the Act.

Powers of District Disaster Management Authority to order salvage and preventive action - action under the Disaster Management Act not amenable to stay by fora other than High Court or Supreme Court - Maintainability of MA 73/2018 seeking stay of the Port Trust's auction and related salvage operations - HELD THAT: - The Corporate Debtor and the Resolution Professional sought a stay of the Port Trust's proposed auction and related salvage measures on the ground of the moratorium and alleged undervaluation. The Tribunal observed that the auction and salvage operations arise from orders and action taken pursuant to the Disaster Management Authority to prevent an imminent environmental hazard. Given the statutory bar on jurisdiction and the availability of constitutional remedies before the High Court or Supreme Court, the Tribunal found MA 73/2018 to be misconceived as a means to restrain or stay measures ordered under the Disaster Management Act. The Tribunal did not adjudicate on distribution of any auction proceeds, noting that such grievances must be raised before the High Court as permitted by law. [Paras 9, 15, 16]

MA 73/2018 is dismissed as misconceived; the Corporate Debtor must seek relief, if any, before the High Court or Supreme Court and not by stay before this Tribunal.

Final Conclusion: The application by the Port Trust is disposed of: measures ordered and actions taken under the Disaster Management Act, 2005 are not affected by the moratorium under the Insolvency & Bankruptcy Code and this Tribunal is barred from staying or interfering with such actions; accordingly MA 73/2018 is dismissed as misconceived.

Cenvat credit - separate accounts under Rule 6 of Cenvat Credit Rules, 2004 - trading as deemed exempted service - reversal of credit with interest - penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 - penalty waiver under Section 80 of the Finance Act, 1994 - proceedings under Section 73(3) of the Finance Act, 1994

Penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994 - penalty waiver under Section 80 of the Finance Act, 1994 - reversal of credit with interest - Validity of imposition of penalty where disputed cenvat credit was reversed with interest prior to issuance of show cause notice and reasonable cause is shown for delay. - HELD THAT: - The appellant had reversed the cenvat credit along with applicable interest before the show cause notice was issued. The Tribunal observed that, on these facts, the matter could have been closed under Section 73(3) of the Finance Act, 1994. Noting that the appellant showed a reasonable cause for non-reversal within the normal period and had in any event reversed the credit with interest, the Tribunal found that imposition of penalty was not justified. Applying Section 80 of the Finance Act, 1994, the Tribunal exercised its power to waive the penalty, holding that the circumstances warranted relief from penalty despite the Department proceeding with penalty proceedings.

Penalty imposed on the appellant is set aside and waived under Section 80 of the Finance Act, 1994.

Cenvat credit - separate accounts under Rule 6 of Cenvat Credit Rules, 2004 - reversal of credit with interest - Treatment of reversal of cenvat credit and interest which was effected by the appellant prior to adjudicatory proceedings. - HELD THAT: - The Tribunal recorded that the appellant had reversed the disputed cenvat credits along with interest even before issuance of the show cause notice and that the reversal along with applicable interest was not contested before the Tribunal. Given that the reversal was effected and not under challenge, the Tribunal allowed the appeal insofar as the penalty was concerned while noting that the reversal and interest stood admitted and were not in dispute.

Reversal of credit along with applicable interest is accepted and not contested; appeal allowed to the extent of setting aside penalty.

Final Conclusion: The appeal is allowed to the extent that the penalty imposed on the appellant is set aside and waived under Section 80 of the Finance Act, 1994; the reversal of cenvat credit with applicable interest effected by the appellant stands accepted and is not disturbed.

Franchisee Service - pre deposit waiver pending appeal - denial of Cenvat credit on account of excess utilization under Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - merger and continuity of invoices - invoice address and eligibility for Cenvat credit

Franchisee Service - pre deposit waiver pending appeal - Whether the activity of manufacturing liquor under license-holders' brand names falls within the taxable category of Franchisee Service and whether pre deposit of the service tax demand should be waived. - HELD THAT: - The Tribunal, relying on its earlier decision in Radico Khaitan Limited v. CST, found prima facie that the arrangements under which license holders manufacture liquor under the appellant's brand do not constitute Franchisee Service. On that factual and legal basis the Tribunal concluded that the appellant is prima facie not liable to pay service tax under the Franchisee Service category. Given the prima facie conclusion on liability, the Tribunal held that the appellant had made out a case for complete waiver of the pre deposit of the service tax demand until final disposal of the appeal.

Prima facie not liable under Franchisee Service; requirement of pre deposit of the service tax demand waived till final disposal of the appeal.

Denial of Cenvat credit on account of excess utilization under Rule 6(3)(c) of the Cenvat Credit Rules, 2004 - merger and continuity of invoices - invoice address and eligibility for Cenvat credit - pre deposit waiver pending appeal - Whether Cenvat credit can be denied on grounds of alleged excess utilization under Rule 6(3)(c), invoices not in the name of the appellant or not showing registered premises, and whether pre deposit in respect of the credit demand should be waived. - HELD THAT: - The Tribunal observed that Rule 6(3)(c) is not properly applied on a month to month basis but must be seen on the basis of returns; on the return wise showing the appellant had not availed excess credit beyond the permissible proportion prima facie. The Tribunal further noted that invoices issued in the name of M/s. Seagram Manufacturing Pvt. Limited cannot be the basis for denial because that entity has merged with the appellant, establishing continuity for credit purposes. The Tribunal also accepted that the appellant had received the services and that denial of credit merely because the invoice address did not correspond to the registered premises was not a valid ground for denial in the present prima facie view. For these reasons the Tribunal concluded that, prima facie, Cenvat credit could not be denied and that pre deposit in respect of the Cenvat credit demand should be waived until final adjudication.

Prima facie denial of Cenvat credit under the stated grounds not justified; requirement of pre deposit of the disputed Cenvat credit demand waived till final disposal of the appeal.

Final Conclusion: The Tribunal found prima facie that the appellant is not liable for service tax as Franchisee Service and that the proposed denial of Cenvat credit is not sustainable on the stated grounds; accordingly the Tribunal waived the requirement of pre deposit of the entire disputed demands (service tax and Cenvat credit) until final disposal of the appeal.

Intermediary services - place of provision of services - principal-to-principal provision of services - reverse charge mechanism - refund of unutilised Cenvat credit - bundle of services

Intermediary services - principal-to-principal provision of services - Appellant does not qualify as an intermediary under Rule 2(f) of the Place of Provision of Services Rules, 2012. - HELD THAT: - On examination of the agreement, the Tribunal found that the appellant itself provided the main services to the client and forwarded deliverables directly to the client's customers after quality assurance by the client. The appellant acted as a main service provider on a principal-to-principal basis and did not merely arrange or facilitate provision of a service by a third party. Reliance was placed on rulings of the Authority for Advance Rulings which hold that entities such as call centres or business support vendors providing services on their own account to an overseas principal are not 'intermediaries' under Rule 2(f), and the Tribunal accepted that reasoning as analogous and applicable to the appellant's factual matrix.

Appellant is not an intermediary within the meaning of Rule 2(f).

Place of provision of services - reverse charge mechanism - refund of unutilised Cenvat credit - Because the appellant is not an intermediary, Rule 9 of the Place of Provision of Services Rules, 2012 does not render the place of provision the location of the service provider and the appellant is not liable to service tax under reverse charge for the period in question; consequently the refund claim is admissible. - HELD THAT: - Rule 9 makes the location of the service provider the place of provision for intermediary services. Having held that the appellant's services are not intermediary services but the main service provided on its own account, Rule 9 is inapplicable. Therefore the appellant was not liable to pay service tax under reverse charge on the covered transactions for April 2015 to September 2015, and the rejection of the refund of unutilised Cenvat credit on that ground was unsustainable. The Tribunal set aside the Commissioner (Appeals) finding to that extent and allowed the refund claim with consequential relief.

Refund claim for April 2015 to September, 2015 is admissible as Rule 9 does not apply and no reverse charge liability arises.

Final Conclusion: Impugned order rejecting the refund claim is set aside; appeal allowed and refund of unutilised Cenvat credit for April 2015 to September, 2015 granted with consequential relief.

Reverse charge mechanism - Goods Transport Agency service - extended period of limitation - revenue neutrality - cenvat credit - penalty

Reverse charge mechanism - extended period of limitation - revenue neutrality - cenvat credit - The demand raised under reverse charge for inward transportation services for the period 01.01.2005 to 31.03.2008 cannot be sustained for the extended period of limitation. - HELD THAT: - The Tribunal accepted that the appellant, as recipient of Goods Transport Agency services, could have discharged service tax on the inward transportation and availed cenvat credit, which would have resulted in reduced service tax liability on the appellant's final output services. On this factual and legal posture the Tribunal held that the situation amounted to revenue neutrality rather than deliberate concealment or mala fide intention to evade tax. The decision of the Apex Court in Star Industries (relied on by the Revenue) was distinguished as dealing with classification and exemption issues where revenue neutrality was inapplicable; those facts were different and not determinative here. Applying the above reasoning, the Tribunal concluded that the extended period of limitation could not be invoked against the appellant. [Paras 6, 7]

Demand insofar as relates to the extended period of limitation is set aside.

Penalty - revenue neutrality - Whether penalty for non-payment of service tax on inward transportation services is imposable on the appellant. - HELD THAT: - Having found that the appellant's position admitted the possibility of paying tax on inward transportation and availing cenvat credit, producing a revenue-neutral outcome on final services, the Tribunal held that mala fide or deliberate evasion could not be attributed to the appellant. On that basis the imposition of penalty was held to be unsustainable and was set aside. [Paras 7]

Penalty imposed on the appellant is set aside.

Final Conclusion: The appeal is allowed to the extent that demands raised for the extended period of limitation and the penalties imposed are set aside; the remaining aspects of the adjudication are not disturbed in this order.

Scope of Service Tax within Jammu & Kashmir - Non-applicability of Chapter V of the Finance Act, 1994 to services rendered in Jammu & Kashmir - Reverse Charge Mechanism

Scope of Service Tax within Jammu & Kashmir - Non-applicability of Chapter V of the Finance Act, 1994 to services rendered in Jammu & Kashmir - Reverse Charge Mechanism - Whether service tax under the Finance Act, 1994 is leviable on goods transport agency (GTA) services received in the State of Jammu & Kashmir for the period April, 2011 to September, 2014, including liability under reverse charge. - HELD THAT: - The Tribunal examined the statutory scheme and the factual finding that the GTA services were received and provided within the State of Jammu & Kashmir. It found that services within Jammu & Kashmir fall outside the scope of Chapter V of the Finance Act, 1994 and therefore the Service Tax provisions were not applicable to services rendered in that State. Consequently, the asserted liability to discharge tax under the Reverse Charge Mechanism in respect of the said services does not arise. [Paras 5, 6]

Demand and penalty confirmed in the Order-in-Original are set aside as service tax provisions do not apply to services rendered in Jammu & Kashmir for the stated period.

Final Conclusion: The appeal is allowed; the impugned Order-in-Original confirming demand and imposing penalty is set aside and the appellant is entitled to consequential relief as per law.

Pre-deposit as mandatory condition under Section 35F - waiver of pre-deposit on ground of financial hardship - exercise of writ jurisdiction under Article 226 to grant relief against statutory pre-deposit - availability of alternative remedy of appeal

Pre-deposit as mandatory condition under Section 35F - waiver of pre-deposit on ground of financial hardship - Whether the amended provision of Section 35F requires mandatory pre-deposit and permits waiver on grounds of financial hardship. - HELD THAT: - The Court held that Section 35F, as amended with effect from 6th August 2014, replaced the earlier discretionary regimen and mandates a fixed per-deposit (7.5% in the petitioner's case) subject to statutory caps. The amendment removed the discretion previously available to CESTAT to waive or vary the pre-deposit on grounds such as financial hardship. Earlier decisions rendered prior to the 2014 amendment which recognized judicial or tribunal discretion are inapplicable to appeals governed by the amended provision. The petitioner did not challenge the vires of the amended provision; further, High Courts and the Supreme Court have upheld the amended regime in earlier proceedings referred to by the respondents. In these circumstances the Court declined to direct CESTAT to decide the appeal on merits without insisting on the statutory pre-deposit.

Pre-deposit under the post 2014 Section 35F is mandatory and waiver for financial hardship cannot be directed; petitioner's challenge on this ground fails.

Exercise of writ jurisdiction under Article 226 to grant relief against statutory pre-deposit - availability of alternative remedy of appeal - Whether the writ petition under Article 226 was maintainable to seek quashment of CESTAT's order dismissing the appeal for non deposit, or to convert the writ into an appellate review. - HELD THAT: - The Court observed that alternative statutory remedy in the form of appeal to CESTAT (and further statutory appeals) was available to the petitioner and earlier writ petitions filed by the petitioner had been disposed with liberty to pursue that remedy. The existence of the alternative remedy and earlier adjudicatory orders disposing earlier writs militated against entertaining the present petition as a substitute appellate forum. The Court noted that extraordinary exercise of writ jurisdiction to override the statutory pre deposit requirement is permissible only in rare and deserving cases, which were not made out on the materials before the Court. Consequently the writ petition could not be allowed to proceed as a vehicle to bypass or relax the statutory pre deposit requirement.

Writ petition not maintainable as a substitute appellate remedy; no exceptional grounds shown to invoke Article 226 to override the statutory pre deposit regime.

Final Conclusion: The writ petition is dismissed: the amended Section 35F mandates pre deposit which cannot be waived in the absence of a successful challenge to its validity or rare exceptional circumstances, and the petitioner's recourse lies in the statutory appellate forum which cannot be supplanted by writ relief in the present case.

Penalty under Section 80 of the Finance Act, 1994 - short payment of service tax - waiver of penalty - reasonable cause / bona fide belief arising from change of rate and retrospective revision of charges - interpretation of tax rate change during the period

Penalty under Section 80 of the Finance Act, 1994 - short payment of service tax - reasonable cause / bona fide belief arising from change of rate and retrospective revision of charges - waiver of penalty - Non-levy of penalty under Section 80 of the Finance Act, 1994 in respect of short payment of service tax for March, 09 to August, 09. - HELD THAT: - The adjudicating authority and the Appellate Tribunal found that the assessee had entered into a revised agreement on 28.03.2009 which retrospectively enhanced service charges from April 2008, and that the rate of service tax changed during the relevant period. This created confusion on the proper rate payable and, coupled with the retrospective enhancement of charges, furnished a reasonable cause for a clerical error and short payment. The authorities concluded that the short payment was not deliberate and that the question involved interpretation of the applicable rate; accordingly, taking a lenient view, they invoked Section 80 to waive penalty. The High Court found no error in this conclusion and accepted that, on the facts and the interpretation issue, penalty did not arise and its waiver under Section 80 was justified.

Penalty under Section 80 was properly waived; no penalty is leviable for the stated period.

Final Conclusion: The appeal challenging non-levy of penalty is dismissed; the adjudicating authority and the CESTAT rightly waived the penalty under Section 80 in view of the bona fide confusion over rate change and retrospective enhancement of charges for March, 09 to August, 09.

Pre-deposit condition for adjudicatory relief - exercise of discretionary power by appellate tribunal - consequences of non-compliance with pre-deposit direction - extension of time to comply with pre-deposit direction

Pre-deposit condition for adjudicatory relief - exercise of discretionary power by appellate tribunal - consequences of non-compliance with pre-deposit direction - extension of time to comply with pre-deposit direction - Whether interference was warranted with the CESTAT order directing specified pre-deposit amounts and the appropriate relief to be granted in view of the appellants' difficulties. - HELD THAT: - The CESTAT had exercised its discretion by directing the appellants to deposit specified proportions of the duty, interest and penalty in two appeals. The High Court found that the CESTAT's exercise of discretion was reasonable and declined to interfere with that exercise. Having noted the appellants' plea of hardship, the Court granted limited relief by extending the time for compliance: if the appellants deposit the directed amount within six weeks the order dismissing the appeals will be set aside and the CESTAT will proceed to hear the appeals on merits; failure to deposit within that period will result in dismissal of the appeals. The order therefore preserves the tribunal's discretionary direction while affording a short, conditional extension of time to enable compliance. [Paras 5, 6, 7, 8, 9]

Refusal to interfere with the CESTAT's pre-deposit directions; grant of six weeks' extension to deposit as directed, conditional setting aside of dismissal on timely deposit, and dismissal otherwise.

Final Conclusion: The High Court upheld the CESTAT's exercised discretion to direct specified pre-deposits, refused interference, but granted a six-week extension for compliance; timely deposit will revive the appeals for adjudication on merits, and failure to comply will result in dismissal.

Pre-deposit condition for hearing statutory appeals - discretion to waive pre-deposit - validity of Rule 8(3A) of the Central Excise Rules - availability of CENVAT credit during period of default

Pre-deposit condition for hearing statutory appeals - discretion to waive pre-deposit - Whether the Tribunal's direction requiring pre-deposit of the disputed amount as a condition precedent to entertain the appeals should be sustained in the facts of these cases. - HELD THAT: - The High Court observed that the appellants had, after the impugned CESTAT order was passed, deposited the defaulted amount in cash with interest to demonstrate bona fides. It was noted that at the time the CESTAT passed the impugned order it possessed discretion to waive the condition of pre-deposit. Further, because the broader controversy concerning the vires of Rule 8(3A) of the Central Excise Rules was then sub judice before the Apex Court (the Gujarat High Court decision holding the rule ultra vires being under challenge), the Court declined to uphold a rigid pre-deposit requirement in the present circumstances. In light of these facts and the appellants' subsequent payment, the Court set aside the Tribunal's order and directed that the appeals be heard on their merits without insisting on pre-deposit. [Paras 5, 6, 7]

Impugned order set aside; CESTAT directed to hear the appeals on merits without insisting on pre-deposit, parties to appear on 06.03.2018.

Final Conclusion: The High Court set aside the CESTAT condition of pre-deposit and directed that the appeals be heard on their merits without insisting on pre-deposit, having regard to the appellants' subsequent cash deposit of the defaulted amount and the sub-judice challenge to Rule 8(3A).

Remand and effect on original order - interest on confirmed demand - re-quantification of demand on remand - application of Blue Star precedent - modvat credit adjustment - penalty reduction

Remand and effect on original order - interest on confirmed demand - application of Blue Star precedent - re-quantification of demand on remand - modvat credit adjustment - Whether the remand by the Tribunal left the first order-in-original intact for the purpose of charging interest, or whether the order passed after remand is the operative order for levy of interest. - HELD THAT: - The Tribunal remitted the matter to the Commissioner for determination of value and related aspects. After remand the adjudicating authority passed a fresh order on 31.3.2005 which re-quantified the duty, allowed modvat credit and reduced the confirmed duty to a different figure than in the earlier order dated 16.9.1998. The court held that merely because the remand order did not use the words 'set aside' does not mean the original adjudication remained intact; the change in quantum and the allowance of modvat credit demonstrate that the original order was effectively displaced by the remand and subsequent order. The judgment in Blue Star Ltd. therefore applies, and interest must be considered with reference to the operative order following remand rather than the initial order prior to remand. [Paras 6, 9, 10, 12]

Answered in favour of appellant; Blue Star applies and the liability is to be treated as determined by the order passed after remand (operative as of 31.3.2005), not the earlier order of 16.9.1998; the impugned judgment is set aside except as to penalty.

Penalty reduction - Whether the reduction of penalty by the Tribunal should be disturbed. - HELD THAT: - The Tribunal had reduced the penalty originally imposed to a lower amount. The High Court noted the reduction effected by the Tribunal and did not disturb that aspect of the order. Consequently, the part of the impugned order dealing with penalty was retained. [Paras 11, 12]

Penalty reduction as fixed by the Tribunal is upheld; the appeal is allowed only to the extent indicated and the impugned judgment is set aside except insofar as the reduced penalty stands.

Final Conclusion: The substantial question of law is answered in favour of the appellant: the order passed after remand is the operative order for determining duty and interest (Blue Star applies), and the impugned judgment is set aside except that the Tribunal's reduction of the penalty is sustained; the appeal is partly allowed.

Condonation of delay under Section 14 of the Limitation Act, 1963 - mandatory pre-deposit under Section 35F - alternative and equally efficacious remedy - approach to wrong forum

Condonation of delay under Section 14 of the Limitation Act, 1963 - approach to wrong forum - alternative and equally efficacious remedy - Whether delay in filing the appeals before the Tribunal should be condoned when the appellants initially filed and then withdrew writ petitions before the High Court instead of approaching the Tribunal. - HELD THAT: - The Tribunal examined the applicants' explanation that they had first challenged the impugned orders by filing writ petitions in the High Court, relying on identical petitions by similarly situated parties which had been entertained and allowed by the High Court. The Tribunal distinguished the facts of Team Global Logistics (where the High Court made adverse observations and the petitioner did not withdraw its writ) and noted that several similarly placed petitioners (Ambika International and others) obtained favourable orders from the High Court. Given that the appellants had approached the wrong forum and withdrawn their writ petitions to pursue appeals before the Tribunal, the Tribunal held that Section 14 of the Limitation Act applied to condone the delay. Reliance was placed on Pasupati Overseas Pvt. Ltd. and the principle that delay occasioned by approaching the wrong forum may be excused. The Tribunal rejected the Revenue's submission that the applications should be dismissed merely because the writ petitions were withdrawn and the High Court had not condoned delay in the appellants' cases; on the facts the applicants were entitled to relief and early hearing was directed. [Paras 7, 8, 9]

Applications for condonation of delay are allowed and the appeals are directed to be listed for final hearing.

Final Conclusion: Delay in filing the appeals is condoned; the Tribunal allowed the applications for early hearing and directed listing of the appeals for final hearing on 21/03/2018.

VCES discharge certificate as document for CENVAT credit - availability of CENVAT credit under rule 9(1)(e) - reverse charge mechanism - requirement of Revenue concurrence under VCES - limitation and admissibility of credit where discharge certificate is prerequisite

VCES discharge certificate as document for CENVAT credit - availability of CENVAT credit under rule 9(1)(e) - requirement of Revenue concurrence under VCES - limitation and admissibility of credit where discharge certificate is prerequisite - Discharge certificate issued under the Voluntary Compliance Encouragement Scheme is an admissible document for availing CENVAT credit and where the scheme requires receipt of such discharge certificate before availment, limitation cannot be invoked to deny credit. - HELD THAT: - The appellants had deposited tax on services liable under the reverse charge mechanism under VCES and obtained discharge certificates after scrutiny by Revenue. Proceedings later sought to deny CENVAT credit solely on the ground that the discharge certificate was not a specified document under rule 9. The Tribunal found that the Commissioner (Appeals), having correctly held that the discharge certificate is an admissible document (in line with Board circulars), exceeded the scope of the show-cause notice by additionally applying a time-bar where credit was availed before issuance of the discharge certificate. The VCES is a special, time-bound scheme in which Revenue scrutiny and issuance of a discharge certificate is integral to recognising the tax liability as accepted by the authority; if an assessee were to claim credit merely on the basis of challan without the Revenue's concurrence, it would defeat the scheme's purpose. Consequently, where the scheme makes the discharge certificate the operative document for acceptance, limitation cannot be invoked to deny credit when availment is appropriately founded on the scheme's requirements and the eventual discharge certificate. [Paras 4]

Impugned order set aside; appeal allowed and CENVAT credit recognised on the basis of the discharge certificate issued under VCES, with consequential relief to the appellant.

Final Conclusion: The Tribunal held that discharge certificates issued under the VCES constitute admissible documents for availing CENVAT credit and that the appellate authority erred in imposing a time bar where the scheme requires Revenue concurrence; the impugned order was set aside and the appeal allowed with consequential relief.

Self-credit under exemption notification - procedural condition - forfeiture of option to take CENVAT credit for non-compliance - identically worded notification provisions - strict compliance not required for procedural lapses

Self-credit under exemption notification - procedural condition - forfeiture of option to take CENVAT credit for non-compliance - Whether a one-day delay in filing the statement under para 2C(d) of Notification No.56/2002-CE disentitles the manufacturer to take self credit under the notification - HELD THAT: - The Tribunal examined the wording of para 2C(d), (e) and (f) of Notification No.56/2002-CE and noted that these conditions are identical to provisions in a similar notification earlier considered by the Tribunal. Relying on its decision in Saraswati Agro Chemicals India Ltd. (Final Order No.60140-60150/2018) which held that clause 5(d) of Notification No.01/2010-CE is procedural and that delay in filing the prescribed statement is a procedural lapse which cannot defeat the benefit of the notification, the Tribunal held that the mechanism created by these clauses is to regulate self-credit and its verification. Once the assessee is otherwise eligible for the notification, a short delay (one day) in filing the statement does not attract the penal consequence of forfeiture of the option to take credit. Applying that ratio to the facts where the statement for June 2015 was filed one day late, the Tribunal concluded that the non-compliance was procedural and not fatal, and therefore the self credit could not be denied. [Paras 8, 9]

The one-day delay in filing the statement under para 2C(d) is a procedural lapse and does not disentitle the appellant from taking self credit; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the one-day delay in filing the statement under para 2C(d) of Notification No.56/2002-CE was a procedural lapse which did not justify denial of self credit; the impugned order was set aside.

Excisability of waste and scrap - fabrication of plant and machinery not amounting to manufacture - duty liability on scrap generated during construction or fabrication - Note 8A of Section 15 of the Central Excise Tariff Act

Excisability of waste and scrap - fabrication of plant and machinery not amounting to manufacture - Note 8A of Section 15 of the Central Excise Tariff Act - Liability to pay excise duty on waste and scrap generated during fabrication of capital goods and civil construction work. - HELD THAT: - The Tribunal examined whether waste and scrap arising from the appellant's use of steel items in fabrication of capital goods and civil works in a refinery is an excisable product attracting duty under the law. The Tribunal applied the legal principle laid down by the Hon'ble Apex Court in the decision reversing the earlier High Court view in Grasim Industries Ltd. , which held that activities of fabrication of plant and machinery or civil work do not amount to "manufacture." In light of that authoritative ruling, waste and scrap generated in the course of such non-manufacturing activities do not constitute excisable goods under the operative tariff provision, including as read with Note 8A of Section 15 of the Central Excise Tariff Act. The Tribunal also noted the appellant's record (affidavit and Chartered Accountant certificate) that no cenvat credit had been availed on the items concerned, but the determinative legal conclusion rests on the Apex Court's pronouncement that the underlying activity is not manufacture and therefore the scrap is not leviable to excise duty. [Paras 6, 7]

The demand of duty confirmed by the adjudicating authority is set aside and the appellant is not liable to pay excise duty on the waste and scrap generated during fabrication of capital goods and civil work.

Final Conclusion: The appeal is allowed; the impugned order confirming duty on scrap generated during fabrication/civil work is set aside and consequential relief, if any, shall follow.

Doctrine of unjust enrichment - refund under Section 11B of the Central Excise Act, 1944 - provisional assessment under Rule 7 of the Central Excise Rules, 2002 - limitation under Section 11B

Doctrine of unjust enrichment - refund under Section 11B of the Central Excise Act, 1944 - provisional assessment under Rule 7 of the Central Excise Rules, 2002 - Re-examination of the appellant's refund claim on the basis of unjust enrichment and the documentary evidence furnished. - HELD THAT: - The Tribunal found that the appellant had filed a refund claim after provisional assessment was granted for the period 1.4.2008 to 31.3.2009 and had submitted a statement of sale value and a CA certificate. The Assistant Commissioner finalized the provisional assessment but issued a show cause notice dated 25.6.2015 requiring examination of unjust enrichment before granting refund. The adjudicating authority rejected the refund on the ground of limitation under Section 11B, a ground which was not stated in the show cause notice, and the Commissioner (Appeals) upheld the rejection on the separate basis that the claim was premature as having been filed before finalization of assessment. Neither authority examined or recorded findings on the issue of unjust enrichment or on the documents submitted by the appellant in response to the show cause notice. In these circumstances the Tribunal directed that the adjudicating authority must re-examine the question of unjust enrichment in terms of the show cause notice, consider the appellant's submissions and documents, and give specific findings after affording the appellant a fair opportunity to be heard. [Paras 5, 6]

Matter remanded to the adjudicating authority for fresh consideration of the unjust enrichment issue and the documents submitted by the appellant, with opportunity to be heard.

Final Conclusion: The appeal is disposed of by remand: the adjudicating authority is directed to re-consider the refund claim in relation to unjust enrichment, consider the appellant's documentary submissions, and pass a reasoned order after affording a fair hearing.

Deemed assessment - reassessment - condition precedent for reassessment - jurisdiction to reopen assessment - penalty for omission attributable to dealer - statutory fiction (deeming provision) - judicial review under Article 226

Judicial review under Article 226 - reassessment - Maintainability of writ petitions under Article 226 challenging reassessment issued under Section 22(1) of the VAT Act - HELD THAT: - The Court held that writ petitions under Article 226 are maintainable to challenge an order or notice of reassessment where the reassessment is alleged to be without jurisdiction or authority of law. The decision in Calcutta Discount and subsequent Supreme Court precedents were applied to conclude that High Courts may, in a fit case, prohibit reassessment proceedings which lack the necessary conditions precedent, and therefore the preliminary objection based on existence of an alternative statutory appeal remedy was overruled. The scope of this judicial review is limited to assessing whether the conditions precedent for reopening assessment exist and does not entitle the Court to re-appraise merits that are exclusively for the assessing authority. [Paras 11, 13, 14, 15, 16]

Writ petitions challenging reassessment under Section 22(1) are maintainable in the facts of these cases.

Deemed assessment - condition precedent for reassessment - jurisdiction to reopen assessment - statutory fiction (deeming provision) - Whether Section 22(1) can be invoked to reassess where no original assessment order was passed and assessment was only 'deemed' under Section 21(2) - HELD THAT: - The Court examined Sections 21(2), 21(3) and 22(1) and concluded that Section 21(2) creates a statutory fiction of deemed assessment which is distinct from an assessment order passed under Section 21(7). Section 21(3) permits reassessment of such deemed assessments only by selection of dealers by the Commissioner within one calendar year. Section 22(1) expressly permits reassessment 'from the date of order of assessment' and therefore presupposes existence of a formal assessment order as a jurisdictional fact. Applying principles on deeming provisions and purposive construction, and relying on precedents including Filter Co.'s case, the Court held that in absence of an assessment order under Section 21(7) the assessing authority had no jurisdiction to invoke Section 22(1) to reopen the year's tax liability; issuance of notices and consequent reassessment under Section 22(1) was therefore without authority of law. [Paras 20, 21, 24, 34, 36]

Section 22(1) cannot be invoked to reassess where there is no assessment order in existence and liability stands only as a deemed assessment under Section 21(2); the reassessment under Section 22(1) in such circumstances is without jurisdiction.

Penalty for omission attributable to dealer - reassessment - Sustainability of penalty imposed under Section 22(2) consequent to the reassessment - HELD THAT: - Section 22(2) authorises imposition of penalty only where omission leading to assessment or reassessment under Section 22(1) is attributable to the dealer. Because the Court found the reassessment under Section 22(1) to be without jurisdiction (there being no original assessment order), the reassessment and the consequential levy of penalty could not stand. The penalty, being consequent upon an invalid reassessment, was held to be unsustainable and liable to be quashed. [Paras 20, 37, 38]

Penalty imposed under Section 22(2) consequent to the invalid reassessment is quashed.

Final Conclusion: The writ petitions are allowed: the reassessment orders (Annexure P-8) for 2010-11, 2011-12 and 2012-13 issued under Section 22(1) are quashed as the requisite assessment order did not exist and Section 22(1) could not be invoked; the penalties imposed under Section 22(2) are likewise quashed. Parties to bear their own costs.

Exceeding scope of revision proposal - assessment vitiated for lack of due application of mind - failure to confine assessment to matters proposed in revision notice - opportunity of personal hearing - reassessment on issuance of fresh notice specifying proposal

Exceeding scope of revision proposal - failure to confine assessment to matters proposed in revision notice - assessment vitiated for lack of due application of mind - Validity of the assessment orders insofar as the Assessing Officer proceeded beyond the specific proposals contained in the Revision Notices dated 14.11.2016. - HELD THAT: - The Court found on an apparent reading of the impugned orders that the Assessing Officer, although the revision notices pointed to limited issues (for example liability on fixed assets/deletion and cross verification of buyer and seller for 2009-10), completed the assessments on different and additional grounds (such as discrepancies between purchase and sales turnover in monthly returns and books). The Assessing Officer accepted that a mistake in adopted figures had occurred but nonetheless proceeded on entirely different lines without making the requisite proposal. That departure from the matters specified in the revision notices and the absence of a proper application of mind go to the root of the assessments and vitiate the impugned orders. [Paras 3, 4]

Impugned assessment orders are set aside as they exceed the scope of the revision proposals and are vitiated by lack of due application of mind.

Reassessment on issuance of fresh notice specifying proposal - opportunity of personal hearing - Remedial course to be followed by the respondent upon setting aside the impugned assessment orders. - HELD THAT: - The Court directed that the respondent must issue fresh notice clearly setting out the proposals intended to be implemented, afford the petitioner 15 days to submit objections, provide an opportunity of personal hearing, and then redo the assessment in accordance with law. The direction requires the assessment to be confined to matters proposed in the fresh notice and decided after hearing the dealer. [Paras 5]

Assessments remanded for fresh proceedings: fresh notice with clear proposals, 15 days for objections, personal hearing, and reassessment in accordance with law.

Final Conclusion: The writ petitions are allowed; the impugned assessment orders for the stated assessment years are set aside and the matters remitted to the respondent for fresh assessment proceedings in accordance with the directions given, with no order as to costs.

Assessment order set aside for lack of fair hearing - violation of audi alteram partem - reliance on undisclosed material - opportunity of hearing and fresh notice - input-tax credit claim

Assessment order set aside for lack of fair hearing - reliance on undisclosed material - input-tax credit claim - The impugned assessment order was set aside because it proceeded on facts and material not disclosed to the petitioner in the show-cause notice, thereby breaching principles of fair hearing. - HELD THAT: - The Court found that the assessment order relied upon material - including a bank statement and an absence of waybills - which were not placed before the petitioner in the original show-cause notice. Although the petitioner had not produced certain waybills before the assessing authority, copies of waybills filed with the writ petition suggested transportation of goods. The show-cause notice did not specifically require production of waybills nor did it inform the petitioner that failure to produce them would lead to disallowance of input-tax credit. Since the assessment was founded on facts of which the petitioner had not been given notice, the order was quashed on procedural grounds for violating the audi alteram partem principle. The substantive claim to input-tax credit was not finally adjudicated on merit by this Court; instead the matter must be considered afresh after giving the petitioner proper notice and an opportunity to be heard.

Impugned assessment order quashed and matter remitted for fresh consideration after issuance of a fresh notice and affording the petitioner an opportunity of reply and oral hearing.

Opportunity of hearing and fresh notice - The assessing authority was directed to issue a fresh notice, provide an opportunity of filing reply and oral hearing, and pass a fresh assessment within a prescribed time-frame. - HELD THAT: - In view of the procedural infirmity, the Court ordered the first respondent to issue a fresh notice in Form VAT 305-A, to afford the petitioner an opportunity to reply to the show-cause notice and to appear for oral hearing, and thereafter to pass a fresh assessment order in accordance with law. The Court imposed a timeline, requiring the fresh assessment to be completed at the earliest and in any event within two months from receipt of the copy of the order. The Court also made clear that if the petitioner fails to file a reply or attend the hearing, the assessing authority may proceed to pass the assessment without further opportunity to the petitioner.

Direction issued for fresh notice, hearing and disposal within two months; assessing authority permitted to proceed if petitioner defaults.

Final Conclusion: The assessment order dated February 27, 2017 was quashed for failure to afford fair hearing; the matter is remitted to the assessing authority to issue a fresh show-cause notice, afford opportunity of reply and oral hearing, and pass a fresh assessment in accordance with law within two months of receipt of this order.

Mandatory pre-deposit requirement for preferring statutory appeal - rejection of appeal for non-compliance of mandatory procedural conditions - remand for curing procedural default - imposition of costs as condition for rehearing - exercise of writ jurisdiction to grant opportunity to be heard

Mandatory pre-deposit requirement for preferring statutory appeal - remand for curing procedural default - imposition of costs as condition for rehearing - Whether the petitioner should be permitted to cure the defaults (non-deposit of assessed amount and delay in filing) and have the appeal decided on merits subject to conditions - HELD THAT: - The Court accepted the petitioner's explanation that the unit had been closed and was under BIFR and that persons responsible were located elsewhere, which had impeded effective service and timely compliance. In the exercise of its writ jurisdiction the Court held that, notwithstanding that the impugned appeal had been found non-compliant with the mandatory requirements and thereby liable to rejection, ends of justice required permitting the petitioner one opportunity to cure the defaults. The Court directed that the petitioner appear before the Additional Commissioner within 30 days and move an appropriate application to cure the defaults; on such appearance the Additional Commissioner was to proceed further and decide the appeal in accordance with law. The Court conditioned the remand on payment of costs and warned against further dilatory conduct, requiring the petitioner's cooperation for expeditious disposal. [Paras 8, 9]

Writ petition allowed insofar as the petitioner is granted one opportunity to cure the defaults and have the appeal heard afresh, subject to payment of costs of Rs. 10,000 and compliance within 30 days; Additional Commissioner to decide the appeal in accordance with law.

Final Conclusion: The High Court set aside the consequences of the Additional Commissioner's notice of non-compliance and granted the petitioner one opportunity to cure the procedural defaults and prosecute the appeal, on payment of costs and within a stipulated 30 day period; the Additional Commissioner is directed to decide the appeal on merits in accordance with law.

Interpretation of proviso to Section 6(1) regarding concessional rate of tax - confinement of concessional rate to sales to Canteen Stores Department - availability of concessional rate for supplies to Unit-run canteens - - quashing and remand of assessment orders for incorrect application of amended provision

Interpretation of proviso to Section 6(1) regarding concessional rate of tax - availability of concessional rate for supplies to Unit-run canteens - application of amended tax provision prospectively from 01.04.2014 - Benefit of concessional rate of tax for supplies to Unit-run canteens for assessment years up to and including 2013-14. - HELD THAT: - For the period up to and including assessment year 2013-14 the statutory proviso extended the concessional rate to sales "to or by" Military, Naval, Air Force or NCC canteens and related specified canteens. The amendment confining the concessional rate to sales to Canteen Stores Department and certain other specified canteens took effect only from 01.04.2014. The assessing authorities applied the amended provision to earlier assessment years, thereby denying the concession for 2011-12, 2012-13 and 2013-14. That application was contrary to the temporal scope of the amendment. Accordingly, the assessment orders for those years were unsustainable and had to be quashed, with directions to the assessing officers to pass fresh orders after affording opportunity of hearing and taking into account the position applicable for those years. [Paras 4, 5, 6, 7]

Assessment orders for 2011-12, 2012-13 and 2013-14 quashed; assessing authorities directed to pass fresh assessment orders within six weeks after hearing the assessees, applying the law as it stood for those years.

Confinement of concessional rate to sales to Canteen Stores Department - availability of concessional rate for supplies to Unit-run canteens - quashing and remand of assessment orders for incorrect application of amended provision - Entitlement to concessional rate of tax for supplies to Unit-run canteens for assessment year 2014-15. - HELD THAT: - The proviso as amended with effect from 01.04.2014 confines the concessional rate to sales to Canteen Stores Department, Central Police Canteen, Indian Naval Canteen Service and NCC Canteen, and to sales by specified unit canteens only when the goods are purchased from those authorised sources. Consequently, supplies made directly to Unit-run canteens do not attract the concessional rate for the assessment year 2014-15. The impugned assessment order for 2014-15 (Ext.P3) was therefore correctly interpreted on this point; however, because other grounds were also raised against Ext.P3 the order is quashed and the assessing officer is directed to pass a fresh assessment after hearing the petitioner, taking note of this interpretation. [Paras 4, 5, 8]

For 2014-15 the petitioner is not entitled to concessional rate for supplies made to Unit-run canteens; Ext.P3 assessment order quashed and remanded for fresh assessment after hearing, with no expression of opinion on other issues.

Final Conclusion: The court held that the concessional rate under the proviso to Section 6(1) applied to supplies to or by the specified canteens for assessment years up to 2013-14 and that the 2014 amendment (effective 01.04.2014) confined the concession to sales to Canteen Stores Department and specified authorised supplies; assessment orders for 2011-12 to 2013-14 are quashed and remanded for fresh assessment, and the 2014-15 order is quashed and remanded with the clarified interpretation applied while leaving other contested points open for reconsideration.

Representation and agency in arbitration - Receipt of arbitral award under Section 31(5) of the Arbitration and Conciliation Act, 1996 - Limitation for challenge of arbitral award under Section 34(3) of the Arbitration and Conciliation Act, 1996 - Proviso to Section 34 - condonation subject to thirty day outer limit - Estoppel by conduct / approbate and reprobate

Representation and agency in arbitration - Receipt of arbitral award under Section 31(5) of the Arbitration and Conciliation Act, 1996 - Estoppel by conduct / approbate and reprobate - Receipt of the award by Anilkumar Patel with the endorsement "for myself and on behalf of my family members" amounted to receipt by the family members and complied with the requirement of delivery under Section 31(5). - HELD THAT: - The Court found that the MOU of 21.05.1996 and the interim MOU of 29.06.1996 authorised and envisaged that the arbitrators would give copies to each family member and showed that Pravinchandra and Anilkumar were authorised to act for their respective family groups. The award bore signatures and express endorsements by Anilkumar and Pravinchandra stating receipt "for ourselves and on behalf of our family members," and referred to the IMOU which empowered them to act for their families. The appellants had, thereafter, repeatedly acted upon and taken advantage of the award in internal communications and in litigation (including DRT proceedings), which the High Court treated as conduct consistent with acceptance of the award on behalf of the family. In these circumstances the Court held that service of the signed award upon Anilkumar with the stated endorsement operated as service on the other family members and they could not thereafter deny receipt or successfully claim non-compliance with Section 31(5). [Paras 22, 23, 24, 25, 26]

Service of the arbitral award on Anilkumar Patel with the endorsement was effective as service on the family members; they were estopped from denying receipt.

Limitation for challenge of arbitral award under Section 34(3) of the Arbitration and Conciliation Act, 1996 - Receipt of arbitral award under Section 31(5) of the Arbitration and Conciliation Act, 1996 - Proviso to Section 34 - condonation subject to thirty day outer limit - The Section 34 challenge filed in 2005 to the award dated 07.07.1996 was time barred because limitation under Section 34(3) runs from receipt of the signed copy under Section 31(5), and the appellants had received the award much earlier through Anilkumar. - HELD THAT: - The Court reiterated the settled principle that the limitation period in Section 34(3) commences from the date the party "had received the arbitral award," which must be understood in conjunction with Section 31(5) requiring delivery of the signed copy. Prior decisions were noted to the effect that valid delivery and receipt of a signed copy is the triggering event for limitation. Applying that principle to the facts, and accepting that the signed award was delivered to and received by Anilkumar for himself and on behalf of his family, the Court held that the challenge instituted in 2005 came well after the prescribed period and was thus barred. The Court further noted that the proviso to Section 34 permits condonation only for a further period of thirty days for sufficient cause and that this limited discretion cannot extend the limitation beyond that outer cap; no such entitlement saved the belated petition. [Paras 14, 15, 16, 23, 26]

The Section 34 petition challenging the award dated 07.07.1996 was barred by limitation and was rightly dismissed.

Final Conclusion: The appeal is dismissed: the Court held that delivery of the signed arbitral award to Anilkumar Patel (with endorsement that it was for himself and on behalf of his family), coupled with the family authorisations and subsequent conduct, amounted to effective receipt by the family under Section 31(5), and consequently the Section 34 challenge to the award dated 07.07.1996 was time barred under Section 34(3).

Prior sanction for prosecution - Section 156(3) Cr.P.C. investigation - taking of cognizance - application of mind by Magistrate - interplay between the Prevention of Corruption Act and the Cr.P.C.

Prior sanction for prosecution - Section 156(3) Cr.P.C. investigation - taking of cognizance - application of mind by Magistrate - interplay between the Prevention of Corruption Act and the Cr.P.C. - Reference to a larger Bench on whether prior sanction is required before directing investigation under Section 156(3) Cr.P.C. in cases involving offences under the Prevention of Corruption Act, and whether directing investigation under Section 156(3) amounts to taking cognizance. - HELD THAT: - The Court reviewed the conflicting precedents on whether an order under Section 156(3) Cr.P.C. is a pre cognizance investigatory step or whether, in matters under the PC Act involving public servants, such direction attracts the requirement of prior sanction under Section 19(1) PC Act/read with Section 197 Cr.P.C. The Court acknowledged that a Magistrate must apply his mind before directing an investigation under Section 156(3), but found a divergence of opinion in existing two Judge Bench decisions (notably Anil Kumar v. M.K. Aiyappa and L. Narayana Swamy) which treat a Section 156(3) direction as amounting to cognizance for the purpose of sanction. Given the importance of the question-being whether Chapter XII powers (pre cognizance investigation) can be read down in cases under the PC Act to import the Chapter XIV requirement of prior sanction-the Court held that the conflict requires resolution by a larger Bench. The Court therefore referred the legal question for authoritative consideration, stating that the issue cannot be conclusively answered in the present bench and directing placement before the Chief Justice for constitution of an appropriate larger Bench. [Paras 33, 34, 36, 37]

Main question referred to a larger Bench for authoritative determination; no final decision on the necessity of prior sanction before directing investigation under Section 156(3) Cr.P.C.

Misjoinder / incorrect arraignment - striking off a party - preliminary investigation stage - Whether respondent No.1 (Principal Secretary to the Chief Minister) was wrongly arrayed as an accused and should be struck off the proceedings and the complaint. - HELD THAT: - The Court examined the complaint and the supporting material placed before it, noting that the allegations challenged pertained to the Secretary, PHED and the Principal Secretary, PHED, whereas respondent No.1 held the post of Principal Secretary to the Chief Minister and there were no substantive allegations or signed minutes implicating him in the decision making complained of. While observing that inclusion at the investigative stage could be justified if incriminating material emerged during a lawful investigation, the Court held that mere presence in a meeting and the absence of material linking respondent No.1 to the alleged offences rendered his present arraignment unsustainable. The Court treated the inclusion as an afterthought and an embarrassment given the constitutional office held by respondent No.1, and therefore ordered that his name be removed from the array both in the Special Leave Petition and in the underlying complaint, while expressly preserving the possibility of inclusion if proper material surfaced during any future investigation directed by the Magistrate. [Paras 38, 39, 46, 47, 48]

Respondent No.1 struck off from the array of parties and from the complaint; order without costs, with liberty to include him later if incriminating material is found in the course of investigation.

Final Conclusion: The Court referred for consideration by a larger Bench the substantive question whether prior sanction is necessary before a Magistrate directs investigation under Section 156(3) Cr.P.C. in cases under the Prevention of Corruption Act, while allowing the specific application to strike respondent No.1 from the array of parties (without prejudice to inclusion upon discovery of material during any lawful investigation).

Trademark infringement - Passing off - Writ jurisdiction under Article 226 - Discretionary nature of writ jurisdiction - Availability of alternative remedy - Locus standi in trademark actions - Binding effect of counsel's concession without instruction

Writ jurisdiction under Article 226 - Availability of alternative remedy - Discretionary nature of writ jurisdiction - Maintainability of the writ petition under Article 226 to adjudicate dispute over use of the acronym "ICAI" when remedy under the Trade Marks Act is available - HELD THAT: - The Court held that the dispute concerning the use of the acronym falls squarely within the domain of the Trade Marks Act and involves registered trademark rights admitted by the third respondent. Exercise of writ jurisdiction is discretionary and, where a specific, efficacious statutory remedy exists under a separate enactment (the Trade Marks Act), the High Court will ordinarily decline to entertain a writ petition seeking relief properly to be sought under that special remedy. Considering the character of the controversy and the availability of the statutory remedy, the Court declined to exercise its Article 226 jurisdiction and dismissed the petition on maintainability. [Paras 12, 13, 20, 23]

Writ petition not maintainable; parties must pursue remedy under the Trade Marks Act.

Trademark infringement - Passing off - Locus standi in trademark actions - Whether the petitioner, a member of the registered trademark owner, has locus to institute the present writ petition for alleged trademark infringement - HELD THAT: - The Court noted that trademark rights are proprietary and primarily enforceable by the owner of the trademark. The third respondent admits registration of the trademark and its right to seek relief for infringement. An individual member of the Institute is not the owner of the trademark right and thus cannot be treated as an aggrieved person entitled to maintain the present proceedings in lieu of the registered proprietor. The Court observed that the appropriate course is for the proprietary owner to initiate infringement or passing off proceedings before the competent forum. [Paras 13, 14, 19]

Petitioner lacks locus to maintain the writ petition for trademark infringement; only the proprietor may initiate appropriate proceedings.

Binding effect of counsel's concession without instruction - Whether an in court concession made by counsel (that the first respondent would consider changing its acronym) binds the first respondent - HELD THAT: - The Court recorded that a prior submission by counsel for the first respondent that the Institute would consider changing its acronym was made without written instruction or consent from the first respondent. In view of the Court's conclusion that the dispute is not amenable to resolution in a writ petition and must be agitated under the Trade Marks Act, any such concession, given without the client's consent, cannot be relied upon to sustain the present petition. [Paras 22]

Prior counsel's concession without the Institute's instruction is not binding and does not vitiate the finding on maintainability.

Final Conclusion: The writ petition was dismissed as not maintainable; the High Court declined to exercise Article 226 jurisdiction over the trademark dispute and directed the parties to seek relief, if any, under the Trade Marks Act before the appropriate forum; petitioner has no locus to prosecute the trademark grievance in this writ.