TaxTMI Updates e-Newsletter
Mar 31,2022

Imposition of GST on royalty payments - validity of tax demand under Section 73 of Uttar Pradesh Goods and Services Tax Act, 2017 - interim stay of tax demand - interim relief following an earlier Supreme Court order

Imposition of GST on royalty payments - validity of tax demand under Section 73 of Uttar Pradesh Goods and Services Tax Act, 2017 - interim stay of tax demand - Whether the disputed GST demand raised under Section 73 in respect of royalty payment should be stayed pending adjudication. - HELD THAT: - The petition challenged an order under Section 73 imposing GST on royalty payments. The petitioner's delay in filing the writ was explained by circumstances arising from the third wave of the COVID-19 pandemic and reference was made to an earlier Division Bench proceeding (Writ Tax No.475 of 2021) where interim relief had been granted following a similar interim order of the Supreme Court. Having considered the explanation for delay and the existence of parallel interim adjudications, the Court directed that the disputed demand of tax shall remain stayed until the next date of listing. The State's right to contest delay was expressly reserved.

Disputed tax demand stayed until the next date of listing.

Procedural directions for filing counter-affidavit and rejoinder - Procedure and timeline for respondents to file their counter-affidavit and for the petitioner to file rejoinder. - HELD THAT: - The Court directed the respondents to file their counter-affidavit within six weeks and granted the petitioner two weeks thereafter to file a rejoinder affidavit. The State's reservation of the right to object to delay was recorded, but the Court did not decide the merits of any delay objection at this stage.

Respondents to file counter within six weeks; petitioner to file rejoinder within two weeks thereafter; State may reserve objections to delay.

Final Conclusion: The writ petition challenging the GST demand on royalty payments was admitted for consideration; interim relief was granted by staying the disputed demand until the next listed date, with directions for exchange of affidavits (counter within six weeks and rejoinder within two weeks) and the State's right to object to delay reserved.

Extraordinary jurisdiction under Article 226 - alternative statutory remedy before Appellate Authority under Section 107 - condonation of delay in filing statutory appeal - pre-deposit requirement for filing appeal - attachment of bank accounts pending assessment/appeal - functus officio

Extraordinary jurisdiction under Article 226 - alternative statutory remedy before Appellate Authority under Section 107 - functus officio - Writ jurisdiction is not appropriate where a statutory appellate remedy is available and the assessing officer has passed a final order. - HELD THAT: - The Court held that the proper forum for challenge to the assessment orders passed under the OGST Act is the appellate authority constituted under Section 107 and not exercise of extraordinary writ jurisdiction under Article 226. The Deputy Commissioner having passed the assessment order has become functus officio; interference with the assessment order by way of writ would not be appropriate when an efficacious statutory remedy exists. Accordingly the petitioner was directed to approach the appellate authority. [Paras 6]

Petition dismissed insofar as seeking writ relief; petitioner permitted to file appeal under Section 107.

Condonation of delay in filing statutory appeal - alternative statutory remedy before Appellate Authority under Section 107 - Limitation will not be pressed by the revenue if the petitioner files the statutory appeal with an application for condonation of delay within the period specified by the Court. - HELD THAT: - Noting that the petitioner had been prosecuting the matter before this Court and that Supreme Court orders protecting limitation were on record, the Court granted the petitioner a four-week period to file the appeal under Section 107 along with an application for condonation of delay. The revenue was directed not to press the question of limitation if the appeal is filed within that period. [Paras 6]

Petitioner permitted to file appeal under Section 107 within four weeks; limitation will not be pressed by the revenue if so filed.

Attachment of bank accounts pending assessment/appeal - pre-deposit requirement for filing appeal - Court declined to interfere with attachment orders but directed that the assessing officer/competent authority consider withdrawal of attachments if the petitioner satisfies statutory requirements including pre-deposit for filing appeal. - HELD THAT: - The Court noted that attachment of the petitioner's bank account in respect of the three assessment periods remained in operation for two periods while one had been rectified. The Court refrained from interfering with such attachment orders in exercise of writ jurisdiction, but required the assessing officer or competent authority to consider the petitioner's request for release of attachments on satisfaction of statutory conditions, including any pre-deposit obligation attendant to filing the statutory appeal. [Paras 7]

No interference with attachment orders; assessing officer to consider release upon petitioner satisfying statutory requirements including pre-deposit.

Final Conclusion: Writ petition disposed of: petitioner directed to file appeal under Section 107 within four weeks with a condonation application (limitation not to be pressed if so filed); attachments not stayed by this Court but to be considered by the assessing officer upon satisfaction of statutory requirements including pre-deposit.

Transfer of unutilised input tax credit under Rule 41A - Mandatory timeline for furnishing FORM GST ITC-02A within thirty days - Form GST ITC-02A availability on the GSTN Portal - Acceptance and crediting by the transferee on the common portal - Judicial remedy under Article 226 for denial of statutory mechanism

Form GST ITC-02A availability on the GSTN Portal - Mandatory timeline for furnishing FORM GST ITC-02A within thirty days - Transfer of unutilised input tax credit under Rule 41A - Whether the petitioner was prevented from furnishing FORM GST ITC-02A within the statutory thirty-day period by reason of non-availability of the form on the GSTN Portal, and whether that prevented transfer of unutilised input tax credit under Rule 41A. - HELD THAT: - The parties did not dispute the petitioner's factual assertion that FORM GST ITC-02A was not available on the GSTN Portal during the thirty-day period following registration of the new business vertical. The petitioner raised the issue with the GST Helpdesk within that period and submitted a manual copy to the Deputy Commissioner within the thirty days, but the form could not be uploaded because it was not available on the portal. In these circumstances the petitioner was bonafide prevented from availing the statutory procedure under Rule 41A to transfer unutilised input tax credit to the newly registered unit. The admitted factual position removes any contention that the petitioner failed to act within time; the impediment lay in the unavailability of the prescribed electronic mechanism whereby the transfer and acceptance are effected under the statutory scheme. [Paras 3, 4, 5, 6, 7]

The petitioner was prevented from filing FORM GST ITC-02A within the thirty-day period due to non-availability of the form on the GSTN Portal, which in turn prevented the transfer of unutilised input tax credit under Rule 41A.

Judicial remedy under Article 226 for denial of statutory mechanism - Acceptance and crediting by the transferee on the common portal - Transfer of unutilised input tax credit under Rule 41A - What relief is appropriate where a registered person is prevented from using the prescribed electronic procedure under Rule 41A due to non-availability of FORM GST ITC-02A on the portal. - HELD THAT: - Given the admitted failure of the respondents to make the prescribed electronic form available and thereby to facilitate the statutory transfer mechanism, the Court found the respondents' failure to acknowledge and effect the transfer to be illegal and arbitrary. Relief by way of mandamus to regularise the credit is appropriate to place the petitioner in the position it would have occupied but for the administrative impediment. The Court directed regularisation of the petitioner's entitlement and authorised availment of the input tax credit through the petitioner's next GSTR-3B return, thereby providing prospective operational relief while respecting the statutory framework of transfer and acceptance on the portal. [Paras 7, 8]

Respondents directed to regularise the petitioner's input tax credit entitlement and the petitioner permitted to avail the credit through the next GSTR-3B return.

Final Conclusion: Writ petition allowed. The Court directed the respondents to regularise the petitioner's entitlement to the unutilised input tax credit under Rule 41A, and permitted the petitioner to avail the credit through its next GSTR-3B return; stay application disposed of.

Condonation of delay in filing appeal - extension of limitation due to COVID-19 - application of Suo Motu orders of the Hon'ble Supreme Court on limitation to quasi judicial appeals - scope and application of Section 168A of the OGST Act and State notifications - restoration of appeal for adjudication on merits subject to other defects

Condonation of delay in filing appeal - extension of limitation due to COVID-19 - application of Suo Motu orders of the Hon'ble Supreme Court on limitation to quasi judicial appeals - scope and application of Section 168A of the OGST Act and State notifications - Whether the Appellate Authority erred in rejecting the first appeal as time barred without condoning the delay in view of the COVID 19 related extension orders and statutory/administrative relaxations. - HELD THAT: - The Court examined the petitioner's appeal filed beyond the statutory three month period and beyond the one month condonable extension under Section 107(1) and (4) of the OGST Act, noting the impugned order was communicated on 06.03.2020 and the appeal was filed on 13.11.2020. Having regard to the Suo Motu orders of the Hon'ble Supreme Court (extending limitation with effect from 15.3.2020 and subsequent directions), the State and Central clarifications, and the insertion and notifications under Section 168A of the OGST Act extending timelines in consequence of the pandemic, the Court held that the circumstances of the pandemic and the executive/statutory measures were relevant and should have led the Appellate Authority to condone the delay. The Court observed that the Supreme Court's orders and the subsequent State/Central orders and circulars operate to extend limitation for judicial and quasi judicial proceedings including appeals, and that the Appellate Authority ought to have applied those principles instead of rejecting the appeal for negligence. The Court therefore set aside the Appellate Authority's order rejecting the appeal on limitation grounds and directed restoration of the appeal for adjudication on merits in accordance with law and principles of natural justice, leaving all other objections (if any) open for decision by the Appellate Authority. [Paras 17, 18]

Order dated 31.12.2020 rejecting the appeal on limitation grounds is set aside; the First Appeal is to be restored and adjudicated on merits after adhering to principles of natural justice, limitation issue having been relieved by the pandemic related orders and notifications.

Final Conclusion: Writ petition allowed; impugned appellate order rejecting the first appeal on limitation grounds quashed and the appeal restored for fresh adjudication on merits subject to compliance with natural justice and other statutory requirements.

Composite supply of works contract - concessional rate under Notification 11/2017 entry 3(vi) - use predominantly for purposes other than commerce, industry or any business - procured in relation to a work entrusted to a Government Entity - definition of "business" under the GST Act - strict interpretation of exemption notifications

Timeliness of appeal - Whether the appeal against the ARA order was within time and admissible for consideration on merits. - HELD THAT: - The Appellate Authority examined the timeline for filing the appeal in light of CBIC Circular dated 20.07.2021 and subsequent Supreme Court orders cited by the appellant. Having regard to the Supreme Court's modification by Order dated 10.01.2022 (excluding the period 15.03.2020 to 28.02.2022 for limitation purposes), the Authority held that the appeal was filed within the prescribed period and therefore admitted the appeal for consideration on merits. [Paras 4, 7]

Appeal admitted as filed within time and taken up on merits.

Composite supply of works contract - concessional rate under Notification 11/2017 entry 3(vi) - use predominantly for purposes other than commerce, industry or any business - procured in relation to a work entrusted to a Government Entity - definition of "business" under the GST Act - strict interpretation of exemption notifications - Whether the retrofitting/alteration works carried out by the appellant for the TANGEDCO headquarters attract the concessional GST rate under entry 3(vi) of Notification No.11/2017. - HELD THAT: - The Authority accepted that the supply is a composite works contract and that TANGEDCO qualifies as a Government Entity. However, the concessional entry applies only where the works are "meant predominantly for use other than for commerce, industry or any other business or profession" and, when supplied to a Government Entity, are "procured by the said entity in relation to a work entrusted to it" by Central/State Government or local authority. The Authority found that the headquarters building of TANGEDCO houses the commercial activities of generation and distribution of electricity carried out for fixed tariff and that the statutory concept of "business" under the GST Act includes trade or commerce even if not driven by profit motive. Reliance on the RTI definition of "public authority" was held inapt because the Explanation to the notification applies only to Central/State Government or local authorities, not to a Government Entity such as TANGEDCO. Further, applying established principles that exemption notifications are to be strictly construed, the retrofitting/strengthening of the headquarters was held not to be an activity "in relation to" the work of generation and distribution in the sense required by the entry. Consequently, the conditions in the entry were not satisfied and the concessional rate did not apply. [Paras 8, 9, 10, 11]

Concessional rate under Notification No.11/2017 entry 3(vi) is not applicable; services are taxable at the standard rate (18%).

Final Conclusion: The appeal was admitted as timely; on merits the Appellate Authority affirmed the ARA's conclusion that the retrofitting/alteration works for the TANGEDCO headquarters do not satisfy the conditions of Notification No.11/2017 entry 3(vi) and thus the concessional rate is not available, leaving the ARA order undisturbed.

Composite supply - principal supply - provision of accommodation - composite supply of hospitality services - classification under SAC 9963 - classification under SAC 998599 - exemption under Notification No. 12/2017 - CT (Rate) SI.No. 14 - per day equivalent tariff - use-based exemption

Composite supply - principal supply - provision of accommodation - classification under SAC 9963 - classification under SAC 998599 - Whether the supply by the appellant is a composite supply with provision of accommodation as the principal supply and not a business support service classifiable under SAC 998599. - HELD THAT: - The Appellate Authority examined the agreement between the appellant and AMSL, the statement of work and the contractual terms which establish that the appellant, as an independent contractor, supplies a bundled bouquet of hospitality services - accommodation (separate for boys and girls), food and related amenities - together and in conjunction with each other. The Authority rejected the State Member's terse classification under SAC 998599 because the appellant performs hospitality services in its own capacity and engages third parties (by lease or otherwise) to enable provision of accommodation, which demonstrates independent supply rather than intermediary or residual 'other business support services'. The Authority agreed with the Central Member that the activities are naturally bundled and that provision of accommodation is the principal supply, making the composite supply classifiable under SAC 9963. [Paras 5, 7, 8]

The supply is a composite supply of hospitality services with provision of accommodation as the principal supply and is not classifiable as a business support service under SAC 998599; it is classifiable under SAC 9963.

Exemption under Notification No. 12/2017 - CT (Rate) SI.No. 14 - per day equivalent tariff - use-based exemption - classification under SAC 9963 - Whether the composite supply (with accommodation as principal supply) is exempt under SI.No. 14 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017, having regard to the per day equivalent tariff. - HELD THAT: - The Authority construed the exemption entry as use-based, applying when accommodation is used for residential or lodging purposes and the declared tariff, when calculated on a per day equivalent basis, is below Rs. 1,000 per day. Applying that test to the facts, and relying on the per day equivalent considerations recorded in the reference order (Rs. 300 in Chennai and Rs. 250 outside Chennai), the Authority found that the per day equivalent tariff falls below the threshold. Consequently, the composite supply classified under SAC 9963 satisfies the conditions of SI.No. 14 and is exempt. [Paras 8, 9]

The composite supply with provision of accommodation as principal supply is exempt under SI.No. 14 of Notification No. 12/2017-C.T.(Rate) as the per day equivalent tariff is below Rs. 1,000.

Final Conclusion: The Appellate Authority held that the appellant's services to AMSL constitute a composite supply of hospitality services with provision of accommodation as the principal supply (classifiable under SAC 9963), and that this composite supply is exempt under SI.No. 14 of Notification No. 12/2017-C.T.(Rate) since the per day equivalent tariff is below Rs. 1,000.

Classification of goods under HSN - Medicaments for therapeutic or prophylactic use - Wadding, gauze, bandages and similar articles impregnated with pharmaceutical substances - Transdermal administration systems - HSN Explanatory Notes and Customs Tariff interpretation - Application of CJEU reasoning on heat patches to HSN classification

Classification of goods under HSN - Medicaments for therapeutic or prophylactic use - Wadding, gauze, bandages and similar articles impregnated with pharmaceutical substances - HSN Explanatory Notes and Customs Tariff interpretation - Transdermal administration systems - Classification of the product 'Cramp Comfort' (comfort/heat patch) and applicable GST rate - HELD THAT: - The Authority analysed the competing headings 3004 and 3005 applying the First Schedule rules, HSN Explanatory Notes and the evidence on product composition, packaging and use. Heading 3004 covers medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses put up in measured doses, including transdermal administration systems in the form of self-adhesive patches where the active substance is released and absorbed through the skin into the bloodstream. The Authority found that mere possession of natural substances with therapeutic properties does not ipso facto render an article a 'medicament' under HSN 3004; the product's potential as an established medicament or its role as a recommended treatment for the disorder was not clearly established on the record. Conversely, heading 3005 covers wadding, gauze, bandages and similar articles (for example, adhesive plasters, poultices) impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale for medical purposes. The Authority noted that the comfort patch is a non-woven adhesive patch containing iron powder, activated carbon, vermiculite, salt and a water absorber, is marketed and used as a self heating pain relief patch for dysmenorrhea, and is put up for retail sale for medical/therapeutic purposes. Reliance was placed on the HSN Explanatory Notes to distinguish medicated transdermal reservoir systems (3004) from medicated adhesive articles (3005), and on the ratio of the CJEU decision on analogous heat patches to conclude that such self heating therapeutic patches fall within heading 3005. Having regard to the product's form, mode of action, packaging and the HSN notes, the Authority concluded that the product is classifiable under CTH 3005 rather than CTH 3004 or other headings. [Paras 6, 7, 8, 9]

The product 'Comfort patch' is classified under HSN 3005 and taxed accordingly under the rate specified for that heading.

Final Conclusion: The Advance Ruling classifies the applicant's Cramp Comfort (heat) patch under HSN 3005 and directs that CGST and SGST shall apply at 6% each (total GST 12%) as per Serial No. 64 of Schedule II to Notification No. 01/2017-C.T. (Rate).

Concessional GST rate for parts as per S. No. 252 of Schedule I of Notification No. 01/2017 - end use determination for classification and rate - taxability of supplies made free under warranty - composite supply versus separate supply of goods and services - eligibility for concessional rate based on goods forming part of vessels of Chapters 8901-8907

Concessional GST rate for parts as per S. No. 252 of Schedule I of Notification No. 01/2017 - end use determination for classification and rate - Rate of tax on marine engines (HSN 8407) when used as part of fishing vessels of heading 8902 - HELD THAT: - The authority held that the concessional rate of 5% under S. No. 252 of Annexure I of Notification No. 01/2017 applies to marine engines only when they are supplied for use as part of vessels specified in Chapters 8901, 8902, 8904, 8905, 8906 or 8907. The circular relied upon by the applicant confirms that the reduced rate is contingent on the end use classification of the engine as forming part of a fishing vessel. Consequently the applicant must establish the end use to avail the concessional rate; where so established, the engines attract GST at 5%. [Paras 7, 12]

Marine engines (HSN 8407) used as part of fishing vessels of HS code 8902 attract GST at 5% under S. No. 252; ruling granted accordingly.

Concessional GST rate for parts as per S. No. 252 of Schedule I of Notification No. 01/2017 - Rate on spare parts of marine engines claimed to be exclusively for fishing vessels - HELD THAT: - The authority noted that S. No. 252 applies only to parts which are parts of goods falling under the specified vessel headings. The applicant did not furnish documentary particulars or a list of spare parts establishing that the spares sold are parts of vessels falling under Chapter 8902. For want of documentary substantiation to establish end use/character of the spares, the authority declined to extend any ruling on the spare parts. [Paras 7, 12]

No ruling on spare parts for lack of documentary evidence to establish that the spares are parts of vessels of heading 8902.

Taxability of supplies made free under warranty - Leviability of GST on materials and labour supplied free of cost during warranty period - HELD THAT: - Documentary records (warranty card, warranty bill and Tally entries) show repairs during the six month warranty were provided without separate consideration and the cost of such warranty has been included in the original sale price on which tax was paid. The authority held that supplies of goods and/or services rendered free of cost under such a warranty do not attract GST separately, provided incidental costs (transportation etc.) are not combined with the warranty supply. If the supplier incurs and recovers incidental expenses as a separate charge, GST may be attracted on those amounts. [Paras 8, 12]

Supplies of materials and labour rendered free during the warranty period do not attract separate GST, subject to the qualifications noted.

Composite supply versus separate supply of goods and services - Rate of tax on charges collected for supply of materials and labour for repair of fishing vessels after the warranty period - HELD THAT: - Determination of whether post warranty repair transactions constitute a composite supply or separate supplies depends on the contractual terms and the dominant element of the supply. The applicant did not produce the relevant contract/agreement that would disclose whether the activity is naturally bundled or separately identifiable; the invoices produced show spares and labour taxed separately but do not establish the nature of the contractual supply. In absence of the contract and sufficient facts, the authority could not determine the applicable rate and declined to rule. [Paras 8, 12]

No ruling on rate for post warranty repair charges due to absence of contract/details necessary to classify the supply as composite or separate.

Eligibility for concessional rate based on goods forming part of vessels of Chapters 8901-8907 - Whether puff insulated ice boxes used by fishermen in fishing vessels are parts of the vessel and eligible for concessional rate - HELD THAT: - The authority examined the purpose and manner of use of the puff insulated ice boxes and found they are standalone containers used to preserve fish and are not components integral to the vessel or its operation. Since S. No. 252 is confined to parts of the listed vessel headings, goods that merely accompany or are carried on a vessel for preservation of cargo do not qualify. Therefore the insulated ice boxes cannot be treated as parts of a fishing vessel and are not eligible for the concessional 5% rate under S. No. 252. [Paras 9, 12]

Puff insulated ice boxes are not parts of fishing vessels of heading 8902 and are not eligible for the concessional 5% GST under S. No. 252.

Concessional GST rate for parts as per S. No. 252 of Schedule I of Notification No. 01/2017 - end use determination for classification and rate - Rate of tax on marine engines (HSN 8407) supplied to Defence for patrol, flood relief and rescue operations - HELD THAT: - The applicant did not furnish purchase orders or documentary evidence to establish that the engines supplied are for use in vessels falling under Chapter 8906 (warships, lifeboats etc.). As the concessional rate under S. No. 252 is contingent on the end use and the vessel heading, absence of supporting documents prevented the authority from determining eligibility for the concessional rate in respect of supplies to the Defence Department. [Paras 10, 12]

No ruling on marine engines supplied to the Defence Department for lack of documentary evidence establishing end use in vessels of heading 8906.

Final Conclusion: The authority ruled that marine engines (HSN 8407) used as part of fishing vessels (heading 8902) attract concessional GST at 5% and that supplies made free under a warranty do not attract separate GST; no rulings were extended on spare parts, post warranty repair charges, or engines supplied to the Defence Department for want of requisite documentary evidence, and puff insulated ice boxes were held not to be parts of fishing vessels and hence not eligible for the concessional rate.

Advance ruling admissibility - Scope of advance ruling under Section 95 - Applicant's locus to seek ruling on behalf of third parties - Binding effect of an advance ruling

Advance ruling admissibility - Scope of advance ruling under Section 95 - Applicant's locus to seek ruling on behalf of third parties - Whether the applicant can seek an advance ruling on the question of GST registration of separate entities sharing the applicant's premises when the act of registration is to be undertaken by those entities and not by the applicant. - HELD THAT: - The Authority examined the statutory definition of advance ruling and concluded that an advance ruling can be sought only in relation to supplies of goods or services undertaken or proposed to be undertaken by the applicant. The entities seeking GST registration are the ones undertaking the act of registration and asserting a principal place of business at the shared premises; the applicant (space provider) only lets out premises. The applicant expressly admitted that the ruling was sought on behalf of its customers. Because the question relates to the customers' registration and not to any supply or activity undertaken by the applicant itself, the application does not fall within the scope of matters on which the Authority may pronounce an advance ruling and is therefore not admissible. [Paras 7]

Application not admissible and rejected because the applicant lacks locus to seek an advance ruling on behalf of third parties; the question pertains to the customers' registrations and not to the applicant's own supplies or proposed supplies.

Binding effect of an advance ruling - Applicant's locus to seek ruling on behalf of third parties - Whether any ruling pronounced in favour of the applicant would be binding on the applicant's customers or generally applicable to other entities. - HELD THAT: - The Authority noted that an advance ruling is binding only on the applicant who sought it and on the jurisdictional officer in respect of that applicant. Consequently, a ruling granted to the applicant would not be binding on third parties, including the applicant's customers. The Kerala AAR order relied upon by the applicant would similarly bind only the party before that Authority and cannot be generalized to other taxpayers. This consideration reinforces the inadmissibility of the present application since any ruling in favour of the space provider would not resolve the legal position of the customers seeking registration. [Paras 8]

Advance rulings are binding only on the applicant and the concerned officer in respect of that applicant; they do not bind third parties, so the applicant's request on behalf of customers cannot achieve a binding outcome for those customers.

Final Conclusion: The application is rejected as not admitted: the Authority lacks jurisdiction to pronounce an advance ruling on issues of GST registration that are to be undertaken by third party entities, and any ruling in favour of the applicant would not be binding on those third parties; hence the Advance Ruling application is dismissed as inadmissible under the Act.

Advance Ruling admissibility - Authority's power to admit or reject applications under Section 98(2) - Scope of 'applicant' under Section 95 - Binding nature of an advance ruling vis-a -vis applicant and concerned officer

Advance Ruling admissibility - Scope of 'applicant' under Section 95 - Authority's power to admit or reject applications under Section 98(2) - Binding nature of an advance ruling vis-a -vis applicant and concerned officer - Application for advance ruling by an unregistered service-recipient was not admissible and was rejected. - HELD THAT: - The Authority examined whether the application fell within the statutory remit of Chapter XVII. Section 95 defines 'advance ruling' as a decision given in relation to supply of goods or services being undertaken or proposed to be undertaken by the applicant, and the term 'applicant' contemplates a person registered or desirous of registration. Section 98(2) empowers the Authority to examine admissibility and, after hearing, admit or reject an application. Section 103(1) (binding effect) limits the ruling's applicability to the applicant and the concerned officer in respect of that applicant. Consequently, a ruling obtained by a recipient concerning the value of inward supplies does not bind the supplier, who remains free to determine and assess the supply independently. Reading these provisions harmoniously, the Authority concluded that only a person whose own supplies (or proposed supplies) are in issue - i.e., the supplier - falls within the intended class of applicants for advance ruling on such matters. The applicant here was an unregistered recipient of construction services and the questions raised did not pertain to supplies undertaken or proposed to be undertaken by the applicant. Therefore, the application was non admissible and liable to be rejected without adjudication on merits. [Paras 6, 7]

Application rejected as not admissible under Section 98(2) read with Section 95(a) and Section 103(1) of the CGST/TNGST Act, 2017.

Final Conclusion: The Advance Ruling application filed by the unregistered service recipient is rejected as inadmissible; the Authority declined to decide the merits and dismissed the application under the statutory provisions permitting admission or rejection.

Diversion of income by overriding title - deductibility in computation of capital gains - pre-existing equitable mortgage / pari passu charge - receipt basis of enhanced compensation - application of precedent (Sitaladas Tirathdas) to source diversion

Diversion of income by overriding title - deductibility in computation of capital gains - pre-existing equitable mortgage / pari passu charge - application of precedent (Sitaladas Tirathdas) to source diversion - Whether amounts paid directly to secured creditors from compensation deposited by the Competent Authority pursuant to the Rajasthan High Court order could be excluded from the assessee's taxable capital gains for A.Y. 2007-08. - HELD THAT: - The Tribunal found on the material and on the Rajasthan High Court order that the acquired land was subject to a pre-existing pari passu equitable mortgage in favour of secured creditors and that, by virtue of that charge and the High Court directions, the compensation was deposited in a no-lien account and distributed directly to the secured creditors. Applying the principle in Sitaladas Tirathdas, the Tribunal held that where income is diverted at source by reason of an overriding title so that it never reaches the assessee, the amount so diverted is not part of the assessee's income and may be excluded in computing capital gains. The Assessing Officer and CIT(A)'s contrary approach-treating the amount as received by the assessee and liable to tax-was rejected because the sale proceeds, insofar as they discharged the secured creditors' pre-existing charge, never became the assessee's income. [Paras 10, 11, 12, 13]

The deduction of the amount paid to financial institutions/secured creditors pursuant to the Rajasthan High Court order was allowed and the addition made by the Assessing Officer was deleted for A.Y. 2007-08.

Application of precedent (Sitaladas Tirathdas) to source diversion - mutatis mutandis application of earlier reasoning - Whether the same conclusion as for A.Y. 2007-08 applies to the identical issue in A.Y. 2011-12. - HELD THAT: - The Tribunal recorded that the facts and legal issue in ITA No. 4903/MUM/2014 for A.Y. 2011-12 are identical to those decided for A.Y. 2007-08 and applied the reasoning in paragraphs 9-11 (inclusive of the finding that the proceeds were diverted at source pursuant to an overriding charge and the Sitaladas Tirathdas principle). On that basis the Tribunal concluded that the earlier decision applies mutatis mutandis to the later assessment year. [Paras 14]

The appeal for A.Y. 2011-12 was allowed by applying the same reasoning as in A.Y. 2007-08.

Final Conclusion: The Tribunal allowed the assessee's appeals: for A.Y. 2007-08 it held that amounts distributed directly to secured creditors under the Rajasthan High Court order were not the assessee's income and therefore excluded from capital gains; the same conclusion was applied mutatis mutandis to A.Y. 2011-12.

Reopening of assessment under section 147 - assessing officer's reasons to believe based on investigation wing information - treatment of alleged accommodation entries / bogus purchases - quantification of disallowance as percentage of disputed purchases to prevent revenue leakage

Reopening of assessment under section 147 - assessing officer's reasons to believe based on investigation wing information - Validity of the Assessing Officer's assumption of jurisdiction to reopen assessment under section 147 for AY 2008-09. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the material on record and held that the reasons were recorded in accordance with the provisions of section 147. Reliance was placed on the report and information from the Investigation Wing Mumbai indicating that the assessee was a beneficiary of accommodation-entry operators. The Tribunal followed and applied precedent of the jurisdictional High Court (Peass Industrial Engineers and Pushpak Bullion) holding that information from the investigation wing that well-known entry operators provided bogus entries to various beneficiaries can furnish sufficient basis for the Assessing Officer's reason to believe and justify reopening. The assessee's contention that there was no live link or specific information about the assessee was rejected on this basis. [Paras 6, 18]

The reopening under section 147 was held valid and the ground challenging reassessment was dismissed.

Treatment of alleged accommodation entries / bogus purchases - quantification of disallowance as percentage of disputed purchases to prevent revenue leakage - Whether the entire purchases from the alleged entry-provider should be disallowed, and if not, the appropriate quantum of disallowance. - HELD THAT: - On merits the Tribunal found that the Assessing Officer had disallowed 100% of purchases solely on the basis of the Investigation Wing report without independent inquiry and had not disputed the assessee's sales or rejected books of account. The Tribunal noted that the CIT(A) had reduced the disallowance to 12.5% by comparing facts with earlier decisions; however, considering the assessee's extremely low declared gross profit (0.78%) and precedents dealing with similar facts, the Tribunal held that taxing the entire transaction would be inappropriate and that only the income component should be taxed to prevent revenue leakage. Applying the principle of reasonable quantification in light of comparable decisions, the Tribunal concluded that a disallowance of 6% of the impugned/disputed purchases was sufficient. [Paras 19, 20, 21]

The AO's 100% disallowance was not sustained; the addition was restricted and quantified at 6% of the disputed purchases, and the assessee's appeal was partly allowed on this ground.

Final Conclusion: The Tribunal dismissed the challenge to the reopening under section 147 and, on merits, reduced the disallowance in respect of alleged bogus purchases-directing that the addition be restricted to 6% of the disputed purchases; the assessee's appeal is partly allowed for AY 2008-09.

Time limit for reassessment - reopening assessment within sixteen years - retrospective operation of statute - section 149(1)(c) - income in relation to any asset located outside India - binding nature of non-jurisdictional High Court decisions - remand for fresh adjudication on merits

Time limit for reassessment - section 149(1)(c) - income in relation to any asset located outside India - reopening assessment within sixteen years - retrospective operation of statute - Validity of reopening assessment for AY 1999-2000 under section 149(1)(c) read with the Explanation making the 2012 amendment retrospective - HELD THAT: - The Tribunal held that section 149(1)(c) unambiguously permits issuance of a notice for reassessment up to sixteen years from the end of the relevant assessment year where income in relation to an asset located outside India has escaped assessment. The Explanation appended to section 149(3) expressly provides that the amended provisions of sub-sections (1) and (3), as introduced by the Finance Act, 2012, shall be applicable to any assessment year beginning on or before 1st April 2012, thereby declaring retrospective operation. In consequence, there is no bar to applying the extended sixteen-year limitation to assessments which had attained finality prior to 1st July 2012. The Commissioner (Appeals)'s view that the amendment could be given full effect only prospectively is contrary to the plain words of the statute and the legislative intent manifested by the Explanation; accordingly the Tribunal vacated the order quashing reassessment as time-barred and restored the Assessing Officer's stand that the assessment for AY 1999-2000 could be reopened in March 2015 as within the sixteen-year period. [Paras 5, 6, 7, 8]

Section 149(1)(c), read with the Explanation, applies retrospectively and permitted reopening of AY 1999-2000 within sixteen years; the Commissioner (Appeals)'s contrary conclusion is set aside and the Assessing Officer's action is restored.

Binding nature of non-jurisdictional High Court decisions - remand for fresh adjudication on merits - Whether the Tribunal is bound by the non-jurisdictional High Court decision relied upon and whether the matter should be remitted for adjudication on merits - HELD THAT: - The Tribunal observed that decisions of non-jurisdictional High Courts are persuasive but not binding on fora outside their territorial jurisdiction; such precedents may be departed from when the facts or applicable law (including statutory provisions not considered by that court) justify it. The High Court decision in Braham Dutt did not consider the Explanation to section 149(3) and thus is not conclusive on the retrospective operation issue here. Additionally, because the Commissioner (Appeals) did not decide the merits and the respondent has advanced prima facie arguable contentions (and given the respondent's advanced age), the Tribunal directed that the Commissioner (Appeals) must decide the matter on merits afresh and dispose of it within 180 days from service of the order. [Paras 9, 10]

The non-jurisdictional High Court decision is persuasive but not binding in the present circumstances; the matter is remitted to the Commissioner (Appeals) for fresh adjudication on merits with a direction to decide within 180 days.

Final Conclusion: The appeal is allowed: the Tribunal holds that section 149(1)(c), read with the Explanation, operates retrospectively to permit reopening up to sixteen years in cases of income relating to assets outside India and accordingly restores the Assessing Officer's position in respect of AY 1999-2000; the contrary order of the Commissioner (Appeals) is set aside, and the matter is remanded to the Commissioner (Appeals) for fresh adjudication on merits to be completed within 180 days.

Requirement to pass reasoned orders - Cryptic / non-speaking orders - Judicial duty under Article 226 to independently consider writ challenges to reopening of assessment - Reopening of assessment under Section 148 - maintainability and merits to be considered on record - Remand for fresh consideration

Cryptic / non-speaking orders - Requirement to pass reasoned orders - HELD THAT: - The Supreme Court held that the impugned orders of the High Court were cryptic and bereft of reasons, noting that none of the diverse grounds raised in the writ petitions challenging reopening of assessment were considered on merits. Reliance was placed on established precedent emphasizing that judicial orders must narrate essential facts, identify issues, record submissions and state reasons for findings so as to enable parties to know why a result was reached; orders lacking such reasoning cause prejudice and are unsustainable. The Court observed that when a High Court exercises powers under Article 226 it must independently consider whether the question (here, reopening of assessment) is amenable to relief and must record adequate reasons for its conclusion. [Paras 2, 3]

The High Court's disposal by non-reasoned orders is unsustainable and cannot be countenanced.

Remand for fresh consideration - Judicial duty under Article 226 to independently consider writ challenges to reopening of assessment - Whether the matter should be remanded to the High Court for fresh adjudication on merits? - HELD THAT: - In view of the absence of reasoned findings by the High Court and the necessity that the diverse grounds raised be examined, the Supreme Court remanded the matters to the Division Bench of the High Court for fresh decision. The Supreme Court expressly refrained from expressing any opinion on the merits of the controversy, directing that the High Court decide the writ petitions afresh strictly in accordance with law and bearing in mind the observations regarding the need for reasoned orders and consideration of submissions and documents. [Paras 4, 5]

Appeals allowed; impugned High Court orders set aside and matters remanded to the High Court for fresh consideration in accordance with law. No costs.

Final Conclusion: The appeals were allowed; the Supreme Court set aside the High Court's cryptic, non-reasoned orders and remanded the writ petitions to the Division Bench of the High Court for fresh adjudication on merits, the Supreme Court refraining from expressing any view on the merits.

Immunity under Section 270AA - Penalty under Section 270A - Misreporting versus underreporting - Requirement to specify the limb of Section 270A - Limitation under Section 270AA(4) - Legislative intent to incentivize settlement and fast-track resolution

Requirement to specify the limb of Section 270A - Misreporting versus underreporting - Penalty under Section 270A - Validity of denial of immunity on the ground that penalty was for 'misreporting' where the penalty notice and assessment order did not specify whether the penalty was under the 'underreporting' or 'misreporting' limb of Section 270A or how subsection (9) of Section 270A was made out. - HELD THAT: - The Court held that denying immunity by merely referring to 'misreporting' was arbitrary and legally unsustainable because the penalty proceedings failed to specify which limb of Section 270A was attracted and did not indicate how the specific ingredients (including sub-section (9)) were satisfied. In the absence of particulars in the penalty notice or assessment order identifying the basis for treating the conduct as 'misreporting' rather than 'underreporting', the Respondent's action lacked reasoned foundation and could not be a valid basis to refuse immunity under Section 270AA. [Paras 6, 7]

The rejection of the immunity application on the ground of 'misreporting' without specifying the relevant limb or satisfying the requirements of Section 270A was held to be arbitrary and unsustainable.

Immunity under Section 270AA - Legislative intent to incentivize settlement and fast-track resolution - Whether the petitioner was entitled to immunity under Section 270AA in view of the facts that the assessment reflected a voluntary computation to 'buy peace' and the legislative purpose of Section 270AA. - HELD THAT: - The Court found that the assessment was a voluntary computation of income filed by the petitioner to avoid litigation, a circumstance noted and accepted in the assessment order itself. Given that there was no finding of misreporting and considering the avowed legislative objective of Section 270AA to encourage taxpayers to fast-track settlement, recover tax demand and reduce protracted litigation, the impugned order refusing immunity ran contrary to that intent. On these grounds the Court concluded that immunity ought to be granted. [Paras 8, 9, 10]

The petitioner was held entitled to immunity under Section 270AA and the impugned order refusing immunity was set aside.

Final Conclusion: Impugned order dated 09th March, 2022 under Section 270AA(4) is set aside and Respondent No.1 is directed to grant immunity under Section 270AA to the petitioner in respect of Assessment Year 2018-19.

Calculation of long term capital gains - reliance on circle rate and valuation by District Valuation Officer for determination of fair market value - disallowance of improvement cost from cost of acquisition - treatment of share transactions and disallowance of loss under Rule 11UA - allegation of tax evasion by colouring transactions - jurisdiction of Assessing Officer to examine transactions

Calculation of long term capital gains - reliance on circle rate and valuation by District Valuation Officer for determination of fair market value - disallowance of improvement cost from cost of acquisition - Validity of Show Cause Notices proposing adjustment to capital gains by reference to circle rate and DVO valuation and disallowance of improvement cost for AY 2018-19 - HELD THAT: - The Court considered the impugned notices which sought to re-determine fair market value of the property sold for computation of long term capital gains, noting that the sale deed had been impounded and the circle rate exceeded the sale consideration while the DVO reported a yet higher fair market value. The petitioner's contention that the notices were without jurisdiction or arbitrary was rejected. The court observed material factors (including that the property was mortgaged and was sold to a company connected to a person linked with the mortgagee bank, and that the sale was below circle rate) which justified the Assessing Officer's examination of the transaction and of claimed improvement costs vis-a -vis the DVO valuation. On these facts, the Assessing Officer was held to have jurisdiction to probe and make additions or disallowances after affording opportunity to the assessee. [Paras 6, 7]

The challenge to the notices insofar as they propose adjustment to capital gains based on circle rate/DVO valuation and disallowance of improvement cost is dismissed; the Assessing Officer has jurisdiction to examine these matters.

Treatment of share transactions and disallowance of loss under Rule 11UA - allegation of tax evasion by colouring transactions - jurisdiction of Assessing Officer to examine transactions - Validity of Show Cause Notices proposing disallowance of loss claimed on share transactions as a colouring device to evade tax for AY 2018-19 - HELD THAT: - The Court noted discrepancies alleged in share transactions and the revenue's case that claimed losses arose without actual transfer of money and did not conform to NAV as per Rule 11UA, suggesting the transactions were a device to reduce capital gains tax. The petitioner's challenge that the show cause notices were arbitrary or beyond jurisdiction was repelled. Given the surrounding circumstances recorded on the file, the Assessing Officer was held entitled to examine the genuineness of the share transactions and to consider disallowance after appropriate proceedings. [Paras 6, 7]

The challenge to the notices insofar as they propose disallowance of the claimed share transaction loss is dismissed; the Assessing Officer may investigate and decide the matter on merits.

Final Conclusion: Writ petition and connected applications dismissed as lacking merit; the petitioner is permitted to urge all contentions before the Assessing Officer who shall consider them in accordance with law.

Vires of delegated legislation - ultra vires - scope of Explanations to notifications extending pre-amendment provisions - mandatory compliance with newly inserted procedural safeguards - reassessment notice issued after 31st March, 2021 - quashing of notice and liberty to initiate fresh proceedings

Vires of delegated legislation - scope of Explanations to notifications extending pre-amendment provisions - ultra vires - Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are ultra vires the Relaxation Act, 2020 to the extent they extend the applicability of pre-Finance Act, 2021 provisions beyond 31st March, 2021. - HELD THAT: - The Court followed earlier decisions, including this Court's own orders and the Division Benches of other High Courts, and concluded that the impugned Explanations impermissibly extended the operation of the pre-amendment provisions of Sections 148, 149 and 151 beyond 31st March, 2021. Such extension by notification conflicted with the parent legislation and therefore was beyond the power conferred, rendering the Explanations ultra vires and legally ineffective. The consequence of this vires finding is that those Notifications cannot lawfully be relied upon to validate notices issued under the pre-amendment regime for periods or actions falling after 31st March, 2021.

Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared ultra vires, bad in law and null and void.

Reassessment notice issued after 31st March, 2021 - mandatory compliance with newly inserted procedural safeguards - quashing of notice and liberty to initiate fresh proceedings - The impugned notice under Section 148 of the Income Tax Act, 1961 issued on 20th April, 2021 is quashed, with liberty to the Assessing Officer to initiate fresh reassessment proceedings in accordance with the Act as amended by the Finance Act, 2021 and after compliance with the formalities required by law. - HELD THAT: - Because the Notifications' Explanations extending pre-amendment provisions beyond 31st March, 2021 were held ultra vires, notices issued relying upon those Explanations for actions after that date could not stand. The Court therefore quashed the specific notice dated 20th April, 2021 but preserved the Assessing Officer's power to commence reassessment afresh provided the officer proceeds under the revised statutory scheme introduced by the Finance Act, 2021 and observes statutory formalities (including those under Section 148A as applicable). The order thus removes the defective notice while permitting lawful reassessment consistent with the amended law.

Impugned notice under Section 148 dated 20th April, 2021 is quashed; Assessing Officer may initiate fresh proceedings in accordance with the Finance Act, 2021 and after required compliance.

Delay in seeking judicial relief - costs for delay - The petition was entertained subject to an order for payment of costs to the High Court Legal Services Committee on account of unexplained delay in filing the writ petition. - HELD THAT: - The Court noted that the impugned notice had been issued on 20th April, 2021 and the writ petition was filed in March, 2022-approximately ten months later-without explanation for the delay. Exercising its discretion, the Court required the petitioner to pay costs to the High Court Legal Services Committee within seven days and to produce the receipt, as a condition attendant upon entertaining and allowing the petition.

Writ petition entertained subject to payment of costs of Rs. 5,000 to the High Court Legal Services Committee within seven days and production of the receipt.

Final Conclusion: The Court declared the challenged Explanations to the Notifications of 31st March, 2021 and 27th April, 2021 ultra vires and null; quashed the reassessment notice dated 20th April, 2021, while permitting reassessment afresh in accordance with the Finance Act, 2021 after statutory compliance; and entertained the petition subject to a costs order to the High Court Legal Services Committee.

Application under Section 197 of the Income Tax Act - Withholding tax rate - Attribution of profits to Permanent Establishment - Duty of assessing officer to adjudicate fresh application - Obligation to afford hearing before decision

Application under Section 197 of the Income Tax Act - Duty of assessing officer to adjudicate fresh application - Obligation to afford hearing before decision - Disposition of the writ petitions by permitting the petitioners to file a fresh application under Section 197 for FY 2022-2023 and directing timelines for disposal by the Assessing Officer - HELD THAT: - The Court declined to adjudicate the merits of the petitioners' challenge to the AO's orders dated 23.09.2021 relating to FY 2021-2022 and closed the writ petitions while permitting the petitioners to file a fresh application under Section 197 for FY 2022-2023 within four weeks of receipt of the order. The AO was directed to dispose of any such fresh application within four weeks of receipt, after affording the petitioners a hearing. The Court emphasised that its observations do not fetter the AO's independent decision-making; the AO must decide the fresh application as per law and on its own merits, giving the petitioners an opportunity to be heard. The writ petitions are disposed accordingly and pending applications are closed. [Paras 4, 5, 6, 8]

Petitions disposed; petitioners may file fresh Section 197 application for FY 2022-2023 within four weeks and AO to decide it within four weeks after affording hearing; pending applications closed.

Withholding tax rate - Attribution of profits to Permanent Establishment - Remand for consideration by the Assessing Officer of contentions including the effect of prior Tribunal attribution of profits to a Permanent Establishment - HELD THAT: - The Court noted the Tribunal's earlier finding attributing 26% profitability to the PE in India in respect of related proceedings, but did not decide the applicability of that finding to the petitions before it. Instead, the Court recorded that if the petitioners include in the fresh Section 197 application for FY 2022-2023 the contentions raised in the writ petitions - including reliance on the Tribunal's attribution of profits and its effect on the appropriate withholding rate - the AO must consider those contentions while adjudicating the fresh application. The matter of the correct withholding rate and the legal effect of the prior attribution finding was remitted to the AO for fresh consideration in the context of the new application; no substantive determination was made by the Court on these questions. [Paras 2, 4]

Contentions regarding attribution to PE and consequent withholding rate are remitted to the AO for fresh consideration if raised in the Section 197 application for FY 2022-2023; Court made no substantive determination on those issues.

Final Conclusion: Writ petitions disposed without adjudication on merits; petitioners may file a fresh application under Section 197 for FY 2022-2023 within four weeks and the Assessing Officer shall decide it within four weeks after hearing the petitioners; issues concerning attribution to a Permanent Establishment and the correct withholding rate are remitted to the AO for fresh consideration.

Fee for default in furnishing statements under section 234E - prospective operation of statutory amendment - jurisdiction to levy late fee arises only from 01.06.2015 - total lack of jurisdiction as a ground negating the relevance of delay

Fee for default in furnishing statements under section 234E - prospective operation of statutory amendment - jurisdiction to levy late fee arises only from 01.06.2015 - Validity of demands of late fee under section 234E for periods prior to 01.06.2015 (periods from 2012-13 to 2014-15). - HELD THAT: - The Court accepted the reasoning in M/s. Sarala Memorial Hospital v. Union of India that the amendment introducing section 234E took effect only from 01.06.2015 and is prospective. That decision is final and binding on the authorities. Consequentially, the respondents had no jurisdiction to levy the late fee under section 234E for periods prior to 01.06.2015. The intimations (Ext.P1 to Ext.P9) demanding late fee for the period from 2012-13 to 2014-15 are therefore without authority and unsustainable to the extent they relate to dates before 01.06.2015. [Paras 7, 10, 11]

Ext.P1 to Ext.P9 intimations quashed to the extent they demand late fee under section 234E for the period from 2012-13 till 01.06.2015.

Total lack of jurisdiction as a ground negating the relevance of delay - Whether the petitioner's delay in challenging the demands bars relief. - HELD THAT: - The Court held that where the challenge is founded on total lack of jurisdiction to impose a levy, delay cannot be used to deny relief. The authorities relied upon by respondents involved facts of long delay or distinct legal contexts and are distinguishable; they do not bear on a case where the impugned demands are asserted to be wholly without jurisdiction. Therefore the contention based on delay does not defeat the petitioner's claim. [Paras 8, 9]

Delay in approaching the Court does not preclude relief where the impugned demand is shown to be without jurisdiction.

Final Conclusion: Writ petition allowed; intimations Ext.P1 to Ext.P9 are quashed insofar as they demand late fee under section 234E for the period from 2012-13 up to 01.06.2015. Delay in challenging the demands does not bar relief where there is total lack of jurisdiction.

Re-opening of assessment under Section 148 of the Income-tax Act - Reason to believe - Prima facie material for reassessment - Exemption claims under Section 10(34) and Section 10(38) and claim under DTAA

Re-opening of assessment under Section 148 of the Income-tax Act - Reason to believe - Prima facie material for reassessment - Validity of the notices issued under Section 148 for the Assessment Years 2016-17 and 2017-18 - HELD THAT: - The Court applied the test laid down in Raymond Woollen Mills Ltd. that the expression 'reason to believe' requires some prima facie material on which the Department can reopen a case and that sufficiency or correctness of that material is not to be examined at the notice-issuing stage. The notices were issued within four years of the end of the relevant assessment years and no scrutiny assessment had been completed; the reasons recorded (including entries flagged in the Non-Filers Monitoring System and remittances claimed as tax-free) constituted prima facie material to form a reason to believe that income chargeable to tax had escaped assessment. Consequently, the statutory threshold for issuance of Section 148 notices was held to be satisfied. [Paras 8, 9]

Notices under Section 148 held valid as there existed prima facie material constituting 'reason to believe' that income chargeable to tax had escaped assessment.

Exemption claims under Section 10(34) and Section 10(38) and claim under DTAA - Assessment on merits in reassessment proceedings - Whether the assessee's claims of exemption (dividend, long term capital gain) and DTAA reliance negate the basis for reassessment - HELD THAT: - The Court recognised that the substantive questions - whether dividend income is exempt, whether long term capital gains on the sale of shares are taxable or exempt, and whether the remittance to the head office is covered by DTAA - require detailed examination on merits. Rather than adjudicating these contentions at the writ stage, the Court directed that these matters be examined afresh by the Assessing Officer in the reassessment proceedings. The assessee was permitted to place its evidence and contentions before the AO and to demonstrate that any factual assumptions recorded in the notice are erroneous. [Paras 5, 6, 7, 9]

Substantive exemption and DTAA issues remitted to the Assessing Officer for fresh consideration in reassessment proceedings; assessee may controvert the assumptions made in the notice.

Final Conclusion: Writ petitions challenging the Section 148 notices and objection orders for AYs 2016-17 and 2017-18 dismissed insofar as the issuance of notices is concerned; reassessment proceedings permitted to proceed and the Assessing Officer directed to consider the assessee's exemption and DTAA contentions on merits.

Tax Deduction at Source under Section 194-I - Deemed Rent / Rent for Use of Plant and Machinery - Characterisation of Transmission Charges as Purchase Price of Electricity - Liability for Interest and Penalty under Sections 201(1) and 201(1A) - Effect of Regulatory Allocation of Receivables by a Electricity Regulatory Commission

Tax Deduction at Source under Section 194-I - Deemed Rent / Rent for Use of Plant and Machinery - Section 194-I does not apply to the transmission/wheeling charges paid by the distribution licensees to OPTCL because no rent or deemed rent was paid for use of OPTCL's equipment. - HELD THAT: - The Court upheld the ITAT's conclusion that the assessee-distribution companies did not use any equipment belonging to OPTCL and therefore there was no payment of rent or deemed rent to OPTCL. The contractual relationship is between GRIDCO and the distribution companies for supply and delivery of electricity; OPTCL's invoices merely reflect a charge allocation directed by the OERC and a first charge on GRIDCO's receivables. On this factual and legal basis, the payments characterized as transmission or wheeling charges cannot be treated as rent attracting Section 194-I, and consequently no obligation arose on the assessees to deduct tax at source under that provision. [Paras 6, 7, 8]

Section 194-I is not attracted to the transmission/wheeling charges paid to OPTCL; no TDS obligation arose.

Characterisation of Transmission Charges as Purchase Price of Electricity - Effect of Regulatory Allocation of Receivables by a Electricity Regulatory Commission - The payments made by the distribution companies are the purchase price for electricity supplied by GRIDCO, split by regulatory direction into energy and transmission components, and are not payments to OPTCL for use of its assets. - HELD THAT: - The ITAT's reasoning, endorsed by this Court, explains that the bulk supply agreement is between GRIDCO and the assessees and GRIDCO is liable to pay OPTCL for transmission. The OERC's direction that OPTCL may raise invoices and have a first charge on GRIDCO's receivables does not convert the component so invoiced into a rent payment for use of OPTCL's equipment by the assessees. The splitting of the purchase price into cost-of-electricity and transportation cost pursuant to regulatory orders does not alter the character of the payment as purchase consideration for electricity supplied by GRIDCO. [Paras 5, 7]

The transmission/wheeling component is part of the purchase price from GRIDCO and is not a payment to OPTCL attracting TDS as rent.

Liability for Interest and Penalty under Sections 201(1) and 201(1A) - Tax Deduction at Source under Section 194-I - In absence of any obligation to deduct tax under Section 194-I, interest and penalty under Sections 201(1) and 201(1A) do not arise against the assessees for failure to deduct TDS on the transmission charges. - HELD THAT: - Both the AO and CIT(A) had imposed consequences for non-deduction on the basis that Section 194-I applied. Having accepted the ITAT's finding that Section 194-I is not attracted because no rent or deemed rent was paid to OPTCL, the legal foundation for deeming the assessees as defaulters under Sections 201(1) and 201(1A) falls away. The Court therefore negated the levy of interest and penalty predicated on a TDS obligation that did not exist. [Paras 6, 8]

No interest or penalty under Sections 201(1) and 201(1A) is attracted on the assessees in respect of the transmission/wheeling charges.

Final Conclusion: The questions framed were answered in favour of the assessees and against the Revenue: Section 194-I does not apply to the transmission/wheeling charges paid to OPTCL, those payments are part of the purchase price for electricity from GRIDCO, and consequential interest and penalty under Sections 201(1) and 201(1A) are not attracted. The appeals are dismissed with no order as to costs.

Exemption under Section 10(22)/10(23C)(vi) - solely educational activity - assessment under Section 158BC (block assessment) - search and seizure under Section 132 - addition based on cash seized and cash credits - onus of explanation for cash credits and investments - concurrent findings of fact and appellate interference - re enactment of statutory provision and retrospective reliance

Re enactment of statutory provision and retrospective reliance - exemption under Section 10(22)/10(23C)(vi) - Whether reliance by the CIT(A) on Section 10(23C)(vi) was erroneous for the BAY since that provision came into effect from 1.4.1999. - HELD THAT: - The Court held that the substance of the provision relied upon by the authorities for exempting the Trust's income existed in the statute as Section 10(22) during the relevant period and that citation of Section 10(23C)(vi) only indicated its later re enactment with effect from 1.4.1999. The Assessing Officer and the CIT(A) had in fact relied upon the provision as it existed (Section 10(22)) for the block period. There was thus no impermissible retrospective reliance or error in referring to the re enacted numbering; reliance was not placed on the post 1.4.1999 enactment as altering the substantive legal position applicable to the BAY. [Paras 4, 5, 6]

No error in reliance; question answered in favour of the Assessee and against the Revenue.

Solely educational activity - addition based on cash seized and cash credits - onus of explanation for cash credits and investments - concurrent findings of fact and appellate interference - Whether the CIT(A) and the ITAT were wrong in reversing the AO's additions and holding the Trust's income was exempt as derived solely from educational activities. - HELD THAT: - The Court reviewed the material relied upon by the CIT(A) - recognition and approvals from Government and AICTE, university affiliation, role in curriculum development, R&D and academic performance of students, absence of personal usufruct to trustees - and accepted the CIT(A)'s detailed reasoning that the Trust's activities were solely educational. The CIT(A) also found satisfactory explanations for cash credits and investments, and attributed cash seized from individuals' residences to those individuals rather than to the Trust. The AO's contrary observations were treated as surmise unsupported by factual determination. The ITAT concurring with the CIT(A) was found to have considered the Revenue's submissions and the record; no grave legal infirmity or justification for interference with concurrent factual findings was demonstrated. [Paras 9, 10, 11, 12, 14]

Concurrent findings that the Trust's income was solely from educational activity and that additions were unsustainable are upheld; questions answered in favour of the Assessee and against the Revenue.

Final Conclusion: The Revenue's appeal is dismissed; the orders of the CIT(A) and the ITAT upholding exemption of the Trust's income for the stated Block Assessment Year are affirmed, with no order as to costs.

Litigation rendered infructuous by liquidation - non-recoverability of tax dues - discretion to dispose of appeal as purposeless - leave question of law open for appropriate case - conservation of judicial resources

Litigation rendered infructuous by liquidation - non-recoverability of tax dues - discretion to dispose of appeal as purposeless - leave question of law open for appropriate case - Whether the appeal should be pursued or disposed of in view of the assessee company being in liquidation and the consequent inability to realise any tax even if the Revenue succeeds - HELD THAT: - The Court examined the Supreme Court's order in the related Civil Appeal which recorded that the respondent company is in liquidation before the NCLT, is not financially viable and that the Official Liquidator is not in a position to pay the tax amount even if the Revenue succeeds. In these circumstances the Court concluded that success in the appeal would produce no practical or fructifying consequence because recovery of tax from the company in liquidation is not possible. The Court also considered the public interest in conserving judicial time and not keeping matters alive which cannot produce any effect, observing that such matters would unduly occupy the Court's docket. Balancing these factors and having regard to the peculiar facts and the departmental report, the Court exercised its discretion to dispose of the appeal as purposeless while expressly leaving the question of law open to be decided in an appropriate case where adjudication would have practical consequences. [Paras 8, 9]

Appeal disposed of as infructuous in view of the assessee being under liquidation and the inability to recover tax, with the question of law left open for determination in an appropriate case.

Final Conclusion: The High Court disposed of the departmental appeal relating to Assessment Year 2003-2004 as purposeless because the assessee company is in liquidation and tax recovery is not possible, while leaving the substantive question of law open to be decided in a case where adjudication would have practical effect.

Principle of natural justice - opportunity of hearing - ex parte order - approval under section 80G - requirements under Rule 11AA - remand for fresh consideration - condonation of delay

Principle of natural justice - opportunity of hearing - ex parte order - approval under section 80G - requirements under Rule 11AA - remand for fresh consideration - The rejection of the assessee's application for approval under section 80G on the basis of non-submission of documents and in the absence of the assessee was set aside and remitted for fresh consideration. - HELD THAT: - The Tribunal noted that the CIT (Exemptions) rejected the application under section 80G observing non-compliance with the materials required by Rule 11AA and concluded there was no material to satisfy genuineness of activities. The order was passed in the absence of the assessee. The assessee contended that many documents and particulars had been furnished earlier in proceedings for registration under section 12A and that it was not afforded a proper opportunity to be heard. The Tribunal found that the assessee had not been given sufficient opportunity before disposal and that the principles of natural justice were not complied with. In the interest of justice the Tribunal set aside the rejection and remitted the application to the CIT (Exemptions) for fresh consideration, directing that a reasonable opportunity of hearing be afforded to the assessee and that the application be decided afresh preferably within two months from receipt of the order; the assessee was directed to attend the hearing and produce the material or clarifications sought. [Paras 2, 6]

Order of the CIT (Exemptions) rejecting the 80G application set aside and matter remitted for fresh consideration with direction to afford a reasonable opportunity of hearing.

Final Conclusion: The appeal is allowed for statistical purposes; the rejection under section 80G is set aside and the matter is remitted to the CIT (Exemptions) for fresh decision after affording the assessee a reasonable opportunity of hearing.

Deductibility of provision for warranty expenses - Disallowance under section 14A read with Rule 8D - Application of Rule 8D(2)(ii) where interest free funds cover investments - Computation under Rule 8D(2)(iii) excluding investments not yielding exempt income - Reduction of expenditure from total turnover for deduction under section 10A - Admissibility of cash discount for tax deduction at source purposes - Deduction under section 43B for customs duty included in closing stock

Deductibility of provision for warranty expenses - Provision for warranty expenses made on past experience and a scientific basis is allowable as deduction. - HELD THAT: - The Tribunal found that the method and basis for making the provision in the relevant year are identical to those in earlier assessment years for which the ITAT in the assessee's own case had allowed the provision after holding that the liability arose on sale and was estimated on a scientific basis and past experience. In view of the coordinate-bench decisions in the assessee's own case, the AO was directed to allow the provision for warranty as an allowable deduction. [Paras 4]

Ground 2 allowed; provision for warranty to be allowed as deduction.

Disallowance under section 14A read with Rule 8D - Application of Rule 8D(2)(ii) where interest free funds cover investments - Disallowance computed under Rule 8D(2)(ii) deleted where assessee's interest free funds (share capital and reserves) exceed the investments. - HELD THAT: - On examination of the assessee's financials, the Tribunal observed that the assessee's interest free funds substantially exceeded the total investments. Applying the ratio of the jurisdictional High Court in CIT v. Micro Labs Limited, the Tribunal held that no disallowance under Rule 8D(2)(ii) was called for and deleted that portion of the disallowance. [Paras 5]

Disallowance under Rule 8D(2)(ii) of Rule 8D deleted.

Disallowance under section 14A read with Rule 8D - Computation under Rule 8D(2)(iii) excluding investments not yielding exempt income - Disallowance computed under Rule 8D(2)(iii) set aside and remitted to the AO for recomputation excluding investments that did not yield exempt income, following the Special Bench ratio in ACIT v. Vireet Investment Pvt. Ltd. - HELD THAT: - The assessee contended and the Tribunal accepted that several expenses disallowed were not related to earning exempt income and sought recomputation. The Tribunal, with no objection from the Departmental Representative, set aside the CIT(A)'s order on this head and restored the matter to the AO to re determine the disallowance in accordance with the Special Bench decision, by excluding the value of investments which did not yield exempt income while computing the average value of investments. [Paras 5]

Disallowance under Rule 8D(2)(iii) remitted to AO for recomputation in accordance with the Special Bench ratio.

Reduction of expenditure from total turnover for deduction under section 10A - Expenditure reduced from export turnover must also be reduced from total turnover while computing deduction under section 10A. - HELD THAT: - Relying on the authoritative decision of the Apex Court in HCL Technologies Ltd., the Tribunal held that when an expenditure is reduced from export turnover, the same expenditure should also be reduced from total turnover for computing the section 10A deduction. The CIT(A)'s direction to the AO to make this adjustment was upheld. [Paras 8]

CIT(A)'s direction upheld; expenditure reduced from export turnover also to be reduced from total turnover for section 10A computation.

Admissibility of cash discount for tax deduction at source purposes - Cash discount is not liable to TDS as it is a reduction in invoice and the CIT(A) validly deleted the disallowance without remanding the matter. - HELD THAT: - The AO disallowed amounts for lack of TDS; the assessee provided the breakup between cash discount and foreign commission which was already on record. The Tribunal found that no additional evidence was produced before the CIT(A) and that providing a breakup of figures already before the AO does not constitute new evidence. Consequently, remand to the AO was unnecessary and the CIT(A)'s deletion of the disallowance relating to cash discount was sustained. [Paras 9]

No remand; CIT(A)'s deletion of disallowance relating to cash discount upheld.

Deduction under section 43B for customs duty included in closing stock - Customs duty included in closing stock is allowable under section 43B in light of binding precedents in the assessee's own case. - HELD THAT: - The CIT(A) allowed the deduction by referring to and following earlier decisions in the assessee's own case and High Court/Supreme Court precedents concerning customs duty included in closing stock. The Department did not controvert the applicability of those precedents, and the Tribunal declined to disturb the CIT(A)'s finding. [Paras 10]

Claim of customs duty included in closing stock allowed under section 43B; Revenue ground rejected.

Final Conclusion: The assessee's appeal is partly allowed: provision for warranty allowed; disallowance under Rule 8D(2)(ii) deleted; Rule 8D(2)(iii) remitted to AO for recomputation excluding investments not yielding exempt income. The Revenue's appeal is dismissed except as reflected above; section 10A computation direction sustained; cash discount disallowance deleted; customs duty in closing stock allowed.

Recovery of duties not levied or short-paid - extended period of limitation under the proviso to Section 11A - suppression of facts - wilful mis-statement - mens rea - burden of proof on Revenue to establish suppression or intent to evade

Extended period of limitation under the proviso to Section 11A - suppression of facts - mens rea - burden of proof on Revenue to establish suppression or intent to evade - Whether invocation of the extended five-year limitation under the proviso to Section 11A was sustainable against the appellant - HELD THAT: - The appeal was confined to the question of limitation. The Tribunal examined whether the facts disclosed amounted to 'suppression' or 'wilful mis-statement' with intent to evade duty so as to attract the proviso to Section 11A. The record showed that an earlier audit (2013) had reviewed returns in which the appellant had declared and availed the exemption; no objection was raised at that time. The appellant ceased availing the exemption immediately when the second audit queried it, and promptly deposited differential duty with interest and penalty for the later period. Applying the tests in the controlling precedents reproduced in the order, mere omission or incorrect statement does not constitute 'suppression' unless deliberate with intent to evade duty; the Revenue bears the initial burden to prove such suppression or mala fide conduct. No material was produced by the Department to establish deliberate concealment, fraud, collusion or wilful mis-statement by the appellant. In these circumstances the conditions for invoking the extended period were not satisfied and the demand for the extended period was barred by limitation. The Tribunal therefore concluded that the Department had not discharged the burden required to extend time under the proviso to Section 11A. [Paras 9, 10, 11, 12, 14]

Invocation of the extended five-year period under the proviso to Section 11A was unsustainable for want of evidence of suppression or wilful mis-statement with intent to evade duty; the demand insofar as based on the extended period is barred by limitation and is set aside.

Final Conclusion: The appeal was allowed on the ground of limitation: the Department failed to establish suppression or wilful mis-statement necessary to invoke the proviso to Section 11A, and the demand under the extended period was held time-barred; the order under challenge is set aside.

Customs Broker Licensing Regulations - obligation to report non-compliance - due diligence and KYC obligations of a Customs Broker - benami imports - revocation of licence and forfeiture of security - imposition of penalty under licensing regulations - mens rea not required for disciplinary action under CBLR - proportionality in disciplinary action

Customs Broker Licensing Regulations - due diligence and KYC obligations of a Customs Broker - benami imports - Appellant violated Regulation 10(a) of CBLR 2018 (read with erstwhile Regulation 11(a) of CBLR 2013) by filing Bills of Entry without authorisation from the IEC holders and by knowingly facilitating benami imports. - HELD THAT: - The Tribunal found on the admitted facts and statements of the appellant that Bills of Entry were filed in the name of third party IEC holders (e.g., M/s Popular Metal Industries) without any authorisation from the IEC holder and that the appellant dealt with and took instructions from Anil/Abhimanyu who were not the IEC holders. The appellant never met the IEC holder and had actual knowledge that the modus operandi involved importing in others' names after a DRI case of undervaluation was booked. That conduct amounted to deliberate filing of benami Bills of Entry rather than mere carelessness, and therefore amounted to breach of the obligation to obtain and produce authorisation under Regulation 10(a) of CBLR 2018 (read with Regulation 11(a) of CBLR 2013). [Paras 13, 14, 24]

Regulation 10(a) breached; finding of violation upheld.

Customs Broker Licensing Regulations - obligation to report non-compliance - proportionality in disciplinary action - Appellant violated Regulation 10(d) of CBLR 2018 (read with erstwhile Regulation 11(d) of CBLR 2013) by failing to advise the client to comply with law and by not reporting non-compliance to Customs authorities. - HELD THAT: - Given the appellant's long involvement with the importer and the appellant's admission of knowledge of the earlier DRI proceedings and the subsequent benami import pattern, the Tribunal held that the appellant was required to advise the client to comply and, on persistence of non compliance, to report to the Assistant/Deputy Commissioner. The appellant's contention that reporting would amount to 'spying' was rejected as inconsistent with the regulatory obligation; continuing to facilitate benami imports to retain clientele breached Regulation 10(d). [Paras 15, 16, 25]

Regulation 10(d) breached; finding of violation upheld.

Customs Broker Licensing Regulations - due diligence and KYC obligations of a Customs Broker - Regulation 10(e) of CBLR 2018 (read with erstwhile Regulation 11(e) of CBLR 2013) was not violated by the appellant. - HELD THAT: - Regulation 10(e) requires the broker to exercise due diligence as to correctness of information imparted to a client. The Tribunal found no material showing that the appellant provided false or incorrect information to its client; the misconduct established related to filing benami Bills of Entry and failing to report or verify authorisation rather than supplying incorrect information to the client. Accordingly, the specific charge under Regulation 10(e) was held not proved. [Paras 26]

No violation of Regulation 10(e).

Customs Broker Licensing Regulations - due diligence and KYC obligations of a Customs Broker - benami imports - Appellant violated Regulation 10(n) of CBLR 2018 (read with erstwhile Regulation 11(n) of CBLR 2013) by failing to verify the correctness of IEC/GSTIN/identity and functioning of the client and by knowingly filing Bills of Entry using IECs without the IEC holder's knowledge. - HELD THAT: - Regulation 10(n) requires verification of IEC, GSTIN, identity and functioning of the client by reliable independent documents or information. The Tribunal relied on the appellant's own statements that it dealt with Anil/Abhimanyu (not the IEC holders), never met the IEC proprietor, and knowingly filed entries in IECs of others after DRI proceedings; that conduct was held to be a failure to verify and amounted to knowingly filing Bills of Entry without the IEC holder's knowledge, thus breaching Regulation 10(n). [Paras 12, 13, 27]

Regulation 10(n) breached; finding of violation upheld.

Revocation of licence and forfeiture of security - imposition of penalty under licensing regulations - mens rea not required for disciplinary action under CBLR - Revocation of the appellant's Customs Broker licence and forfeiture of the entire security were sustained; the monetary penalty imposed under the impugned order was set aside on statutory limitation grounds. - HELD THAT: - Applying the settled principle that a Customs Broker is entrusted with responsibilities under the Regulations and that violations - including facilitation of benami/corrupt practices - justify disciplinary measures even absent mens rea, the Tribunal held that revocation and forfeiture under Regulation 14(b) CBLR 2018 (read with Regulation 18(b) CBLR 2013) were warranted on the proven misconduct. However, since Regulation 18 of CBLR 2013 permits either revocation with forfeiture or imposition of a penalty (not both), the Tribunal found the monetary penalty unsustainable under that limitation and accordingly set aside the penalty while upholding revocation and forfeiture. [Paras 33, 35, 36, 37]

Revocation and forfeiture upheld; penalty set aside as not permissible concurrently under Regulation 18 of CBLR 2013.

Final Conclusion: The appeal is partly allowed: the Tribunal upholds findings that the appellant knowingly facilitated benami imports and breached Regulations 10(a), 10(d) and 10(n) of CBLR 2018 (read with corresponding 2013 provisions), and therefore sustains revocation of the broker licence and forfeiture of the security; the monetary penalty imposed in the original order is set aside as impermissible in view of the regulatory scheme.

Appointment of Alternate Director - Requirement of absence from India for three months for Alternate Director - Section 161(2) of the Companies Act, 2013 - Section 242(4) of the Companies Act, 2013 - NCLT Rule 11 - Articles of Association - Interim relief indistinguishable from final relief

Appointment of Alternate Director - Requirement of absence from India for three months for Alternate Director - Section 161(2) of the Companies Act, 2013 - Articles of Association - Interim relief indistinguishable from final relief - Whether the Tribunal should direct appointment of the proposed Alternate Directors in the six company applications despite the absence condition in Section 161(2) not being satisfied and when the Articles provide for board appointment. - HELD THAT: - The Tribunal examined Section 161(2) and the Articles of Association of the companies, which vest the power to appoint an alternate director with the Board and require that such appointment relate to a director's absence from India for not less than three months. The applicants did not demonstrate that Shri Manmohan Singh Kalsi was absent from India for the requisite period; his ill-health and a possible future absence were insufficient. The Tribunal observed that applicants could have pursued board action under the Articles but did not show such attempts. Further, granting the interim relief sought would effectively confer the same relief as the main petitions and would render the final adjudication nugatory; precedent disfavors granting interim relief identical to final relief. For these reasons the Tribunal declined to exercise its interim powers to direct appointment of the proposed alternate directors, noting that such relief would also impinge upon undertakings and the balance maintained by earlier orders. [Paras 14, 16, 17]

The applications for directions to appoint the proposed Alternate Directors are dismissed; the Tribunal will not direct appointment under its interim powers where the statutory condition of absence from India is not met and where the relief would be tantamount to final relief.

NCLT Rule 11 - Section 242(4) of the Companies Act, 2013 - Whether the interlocutory applications for urgent hearing relating to the six CAs should be kept alive after disposal of the substantive CAs. - HELD THAT: - The Tribunal took up and disposed of the substantive CA applications. Consequently, the applications filed solely for urgent hearing of those CAs became moot. There was no merit in keeping separate urgency applications pending once the substantive matters were finally disposed of by this common order.

The urgent-hearing applications are rendered infructuous and are disposed of accordingly.

Final Conclusion: The six company applications seeking appointment of alternate directors are dismissed for failure to satisfy the statutory requirement of absence from India and because granting the relief would amount to final relief; the ancillary urgent-hearing applications are disposed of as infructuous.

Voluntary liquidation and dissolution under section 59 of the Insolvency and Bankruptcy Code, 2016 - Compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - Submission of final report and Form GNL-2 to the Registrar of Companies - Public announcement and notice to creditors; absence of claims - Intimation to Income Tax authorities and receipt of No Objection Certificate - Distribution of assets in accordance with Section 53 - Territorial jurisdiction of the Tribunal Bench

Voluntary liquidation and dissolution under section 59 of the Insolvency and Bankruptcy Code, 2016 - Compliance with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - Submission of final report and Form GNL-2 to the Registrar of Companies - Public announcement and notice to creditors; absence of claims - Intimation to Income Tax authorities and receipt of No Objection Certificate - Distribution of assets in accordance with Section 53 - Sufficiency of compliance with the Code and IBBI Regulations to allow dissolution of the company and consequent order of dissolution. - HELD THAT: - The Tribunal examined the voluntary liquidator's averments that the board resolved to voluntarily liquidate, a special resolution was passed, Declaration of Solvency and Form GNL-2 were filed, public announcements and notices were made, no creditor claims were received, a liquidation bank account was opened and closed after distribution, a preliminary and final report were submitted to IBBI and ROC, and Income Tax authorities were intimated with a No Objection Certificate placed on record. The ROC's reply recorded filing of an Affidavit of Solvency and raised no objection; IBBI and ROC returned no objections to the liquidation. The voluntary liquidator affirmed that no objections were received from any authority. On these facts and filings, and having regard to the territorial jurisdiction of the Bench, the Tribunal was satisfied that the statutory and regulatory requirements under the Code and the IBBI (Voluntary Liquidation Process) Regulations, 2017 were complied with, assets were realised and distributed in accordance with the priority under Section 53, and the conditions precedent to dissolution were met. [Paras 1, 4, 6, 7, 8]

The company is dissolved with effect from the date of the order; a copy of the order is to be filed with the ROC within the statutory period.

Final Conclusion: On the voluntary liquidator's filings, the lack of objections from ROC and IBBI, and compliance with the Code and applicable IBBI Regulations including submission of requisite reports and closure after distribution in accordance with the statutory priority, the Tribunal ordered dissolution of the company and directed filing of the order with the Registrar of Companies.

Admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of default - appointment of Interim Resolution Professional - public announcement of CIRP - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibition on enforcement of security interest - obligations of directors and management to cooperate with IRP

Admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - existence of default - The Section 7 petition filed by the financial creditor for initiation of CIRP against the corporate debtor is admitted on the ground of established default. - HELD THAT: - The Adjudicating Authority examined the petition and the evidence placed by the financial creditor and found them sufficient to establish default by the corporate debtor. The counsel for the corporate debtor orally admitted the default and stated that the default was reflected in the balance sheet. Having satisfied the statutory requirements for a Section 7 application, the Authority held that the financial creditor had fulfilled the legal prerequisites for admission and was inclined to admit the petition and initiate CIRP. [Paras 4]

Application under Section 7 of the IBC, 2016 is admitted and CIRP is initiated against the corporate debtor.

Appointment of Interim Resolution Professional - public announcement of CIRP - obligations of directors and management to cooperate with IRP - An Interim Resolution Professional proposed by the financial creditor is appointed and directed to take charge and make the public announcement and call for claims; the directors and persons associated with management are directed to cooperate with the IRP. - HELD THAT: - The financial creditor proposed a Resolution Professional and the Authority noted there was no disciplinary proceeding against him as per the Form-2 produced. The proposed person, Mr. Sapan Mohan Garg, was appointed as IRP. The IRP was directed to take immediate charge, make the public announcement as required under the Code, call for submission of claims in the prescribed manner, and comply with the specified provisions of the Code. The directors, promoters and persons associated with management were directed to extend assistance and cooperation to the IRP in discharge of his functions. [Paras 5, 8, 9, 10]

Mr. Sapan Mohan Garg is appointed as IRP; he is to take charge immediately, cause the public announcement, call for claims and the management must cooperate.

Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - prohibition on enforcement of security interest - A moratorium is declared from the date of the order till completion of CIRP, with the statutory prohibitions (including prohibition on institution or continuation of proceedings, transfer or disposal of assets, enforcement of security interest and recovery of leased property) and preservation of supply of essential goods and services. - HELD THAT: - The Authority recorded and declared the moratorium operative from the date of the order until completion of the CIRP. The order expressly prohibited institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of its assets, actions to enforce security interests including under the SARFAESI Act, and recovery of property occupied by the corporate debtor. It also clarified that supply of essential goods or services shall not be terminated, suspended or interrupted during the moratorium and that specified transactions notified by the Central Government are not subject to the prohibitions of section 14(1). [Paras 6, 7]

Moratorium declared with the statutory prohibitions in operation and protection for continued supply of essential goods and services.

Final Conclusion: The Tribunal admitted the Section 7 petition, initiated the CIRP against the corporate debtor, appointed the proposed Interim Resolution Professional who is to take charge and make the public announcement and call for claims, declared the moratorium with the statutory prohibitions in force, and directed cooperation by the corporate debtor's management and communication of the order to relevant authorities.

Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 - default and absence of pre-existing dispute - mandatory admission of section 9 petition where default is established and no dispute exists - appointment of Interim Resolution Professional and his statutory duties - declaration and scope of moratorium under section 14 of the IBC - exception for supply of essential goods or services during moratorium - duty of directors, promoters and persons in management to cooperate with the IRP - public announcement and claim submission process - duty of Registrar of Companies to update status on Ministry website

Default and absence of pre-existing dispute - mandatory admission of section 9 petition where default is established and no dispute exists - The petition filed under Section 9 was to be admitted because the corporate debtor had defaulted on an admitted operational debt and no pre-existing dispute existed. - HELD THAT: - The Tribunal examined the pleadings and found that the corporate debtor had acknowledged the debt in communications and had not raised any substantive dispute as to the invoices or services. The Adjudicating Authority's role at this stage is confined to satisfaction of existence of default and absence of a pre-existing dispute; upon those conditions being fulfilled the Section 9 petition must be admitted. Having found both default and no bona fide dispute, the petition was admitted and CIRP was ordered to be initiated. [Paras 4]

Section 9 petition admitted and CIRP of the corporate debtor initiated.

Appointment of Interim Resolution Professional and his statutory duties - public announcement and claim submission process - The proposed Insolvency Resolution Professional was appointed as Interim Resolution Professional and directed to take charge and make the statutory public announcement and calls for claims. - HELD THAT: - The applicant had proposed an insolvency professional and the Tribunal appointed him as IRP as proposed. The IRP was directed to take immediate charge of the corporate debtor's management, to cause the public announcement as prescribed under the Code within the stipulated period, and to call for submission of claims in the manner prescribed by the IBC and rules. These steps follow the statutory regime for commencing CIRP once admission is ordered. [Paras 5]

Mr. Yogesh Kumar Gupta appointed as Interim Resolution Professional with directions to take charge, publish the public announcement and call for claims.

Declaration and scope of moratorium under section 14 of the IBC - exception for supply of essential goods or services during moratorium - A moratorium was declared in terms of the Code, prohibiting specified proceedings and actions against the corporate debtor, subject to the statutory exception for uninterrupted supply of essential goods or services. - HELD THAT: - The Tribunal declared the moratorium to operate from the date of the order until completion of CIRP and enumerated prohibitions on institution or continuation of suits or execution of judgments, transfer or disposition of assets, enforcement of security interests and recovery of property occupied by the corporate debtor. It further clarified that supply of essential goods or services shall not be terminated, suspended or interrupted during the moratorium and that the non-application of sub-section (1) of section 14 to such transactions shall follow any notifications by the Central Government. These directions implement the moratorium regime mandated by the IBC. [Paras 6, 7]

Moratorium imposed as ordered, with protection for uninterrupted supply of essential goods or services.

Duty of directors, promoters and persons in management to cooperate with the IRP - appointment compliance and registrar update obligations - The IRP and the corporate debtor's management were given statutory duties and the Registry/Registrar of Companies were directed to take specified administrative steps. - HELD THAT: - The Tribunal directed the IRP to comply with statutory provisions governing his functions and required the directors, promoters and persons associated with management to extend assistance and cooperation to the IRP as stipulated under the Code. The operational creditor was directed to provide the IRP with a copy of the order for compliance. The Registry was directed to serve the order on the Registrar of Companies for updating the corporate debtor's status on the Ministry website and to file a compliance report. These administrative and cooperative obligations are integral to effecting and publicising the CIRP and to enable the IRP to perform his functions. [Paras 5, 8, 9, 10]

IRP to perform statutory duties; directors and management to cooperate; Registry/ROC to update status and file compliance.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated CIRP against the corporate debtor, appointed the proposed IRP with directions to take charge and make the public announcement, declared the moratorium subject to the statutory exception for essential supplies, and directed cooperation by the corporate debtor's management and administrative compliance by the Registry/Registrar of Companies.

Debt and default under Section 3(12) of the Insolvency and Bankruptcy Code, 2016 - Effect of acknowledgment in writing under Section 18 of the Limitation Act - cheque as prima facie acknowledgment of liability - authority of signatory to bind the company and lifting the corporate veil - non-concluded Memorandum of Understanding and conditional obligations preventing immediate right to sue

Debt and default under Section 3(12) of the Insolvency and Bankruptcy Code, 2016 - non-concluded Memorandum of Understanding and conditional obligations preventing immediate right to sue - The claim based on the MoUs does not establish a presently enforceable debt and no default under Section 3(12) of the IBC has been made out against the Corporate Debtor. - HELD THAT: - The two MoUs (25.10.2015 and 23.06.2016) record a set of conditional steps, inter alia identification/formation of a joint venture, execution of shareholders' agreement and valuation/distribution mechanisms, and provide that recovery by Party-A would be by resort to specified properties given as security. The terms show that several obligations had to be fulfilled before Party-A could pursue recovery beyond realisation of the security. The MoUs therefore do not constitute a concluded contract creating an immediately enforceable corporate debt against the Corporate Debtor. The MoUs, as executed by individuals without any indication that the signatory acted on behalf of the Corporate Debtor, do not bind the Corporate Debtor. On this basis, the Tribunal concluded there was no established debt due to the Financial Creditors and no default within the meaning of Section 3(12) of the IBC, and that the record discloses disputed questions of fact and contractual performance which are not amenable to determination in a Section 7 proceeding.

MoUs do not create an enforceable corporate debt and no default is established; the claim is not maintainable under Section 7 of the IBC on this ground.

Effect of acknowledgment in writing under Section 18 of the Limitation Act - cheque as prima facie acknowledgment of liability - authority of signatory to bind the company and lifting the corporate veil - The application is time-barred when assessed from the MoUs, and the post-dated/issued cheque relied upon does not cure the limitation defect because there is no established nexus showing the cheque acknowledged a subsisting jural liability of the Corporate Debtor under the MoUs. - HELD THAT: - Article 137 of the Limitation Act governs accrual of the right to apply under the IBC; acknowledgements operate under Section 18. A cheque can amount to an acknowledgment in writing and, if given within the prescribed period and connected to a subsisting liability, may restart limitation. However, an acknowledgment must relate to a present subsisting liability and be made before the prescribed period expires. Here the MoUs fixed dates or contingent events (six months/valuation/distribution) by which the repayment obligation would crystallise; reckoned from those dates the prescribed period had expired before filing. The cheque dated 19.11.2020, even if prima facie an acknowledgment, is not shown to have a nexus with an enforceable debt under the MoUs or to have been issued by a person authorised to bind the Corporate Debtor for that liability. The issuing of the cheque therefore cannot legitimately be treated as reviving a time-barred cause of action in respect of the MoUs. Allegations of piercing the corporate veil or of authorization raise disputed facts and are not suitable for determination in a Section 7 summary proceeding.

Application is barred by limitation; the cheque relied upon does not revive a time-barred claim absent proof of a subsisting, authorised corporate liability.

Final Conclusion: The petition under Section 7 of the IBC is dismissed: the MoUs do not establish an immediately enforceable corporate debt or proved default by the Corporate Debtor, and the claim is time barred with the proffered cheque insufficient to revive a barred cause of action; the Financial Creditor may seek appropriate relief in a competent forum for performance of the MoUs or other remedies.

Maintainability of CIRP under Section 7 of the Insolvency and Bankruptcy Code - default as defined in Section 3(12) of the Insolvency and Bankruptcy Code - effect of acknowledgment in writing under Section 18 of the Limitation Act - date of accrual of cause of action and Article 137 of the Limitation Act - issuance of cheque as prima facie acknowledgement of liability - rebuttable presumption arising from issuance of cheque - non-concluded Memorandum of Understanding and enforceability of MoUs - lifting the corporate veil - limits at preliminary stage

Non-concluded Memorandum of Understanding and enforceability of MoUs - maintainability of CIRP under Section 7 of the Insolvency and Bankruptcy Code - lifting the corporate veil - limits at preliminary stage - Whether the MoUs relied upon bind the Corporate Debtor and whether the application under Section 7 is maintainable. - HELD THAT: - The two MoUs were executed by individuals and do not, on their face, demonstrate that the signatory acted on behalf of the Corporate Debtor; there is no material showing authority to bind the Company. The terms of the MoUs (including staged obligations, requirement to form a joint venture, valuation steps and obligation to sell secured properties prior to any right of recovery) show the arrangements were not a concluded contract obliging the Corporate Debtor to immediate payment. Where contractual obligations under the MoUs remained contingent and unperformed, a right to file recovery proceedings under Section 7 did not arise. Although the Tribunal possesses jurisdiction to pierce the corporate veil in appropriate cases, such an inquiry requiring evidence is not permissible at the prima facie stage of a Section 7 petition. On these grounds the MoUs do not establish a binding corporate debt against the Corporate Debtor and the petition is not maintainable under Section 7.

MoUs do not bind the Corporate Debtor; the petition under Section 7 is not maintainable on that basis.

Effect of acknowledgment in writing under Section 18 of the Limitation Act - date of accrual of cause of action and Article 137 of the Limitation Act - issuance of cheque as prima facie acknowledgement of liability - rebuttable presumption arising from issuance of cheque - default as defined in Section 3(12) of the Insolvency and Bankruptcy Code - Whether there was a debt due and a default by the Corporate Debtor within the limitation period such as would permit initiation of CIRP. - HELD THAT: - The MoUs fixed dates or contingencies for payment; reckoning from the dates/contingencies in the MoUs, any cause of action accrued more than three years prior to filing, engaging Article 137 of the Limitation Act. Issuance of a cheque may amount to an acknowledgement in writing and can restart limitation under Section 18, but such acknowledgement must relate to a subsisting jural relationship and be given within the prescribed period; a post-dated or subsequent cheque does not cure the fact that the underlying obligations were time-barred or contingent. Further, the cheque issued by an authorised signatory of the Company was not shown to have nexus with the liabilities under the MoUs executed by individuals; therefore the cheque could not be treated as validating or reviving the time-barred claim. The presumption arising from issuance of a cheque is rebuttable and, on the material before the Tribunal, the presumption did not establish a subsisting debt or default under Section 3(12) within limitation sufficient to sustain a Section 7 petition.

No subsisting debt/default within the limitation period is established; the Section 7 petition is time-barred and the cheque does not revive the claim.

Final Conclusion: The Section 7 petition is dismissed: the MoUs do not, on the face of record, bind the Corporate Debtor and the claimed debt/default is time-barred; the issuance of the cheque does not establish a subsisting liability tied to the MoUs sufficient to admit CIRP proceedings.

Default under Insolvency and Bankruptcy Code - admission of Section 9 petition - initiation of Corporate Insolvency Resolution Process (CIRP) - appointment of Interim Resolution Professional - moratorium under Section 14 - obligation of directors and promoters to cooperate with the IRP

Default under Insolvency and Bankruptcy Code - admission of Section 9 petition - Petition under Section 9 admitted on account of established default by the Corporate Debtor. - HELD THAT: - The Tribunal found on the material placed by the Operational Creditor that the Revenue Sharing Agreement entitled the creditor to periodic revenue shares and interest on delayed payments. The Corporate Debtor did not appear to contest the claim and no evidence was produced to substantiate the denial in the reply; accordingly the Operational Creditor's case stood proved prima facie and non-controverted and was accepted as true. In view of the established default, the Tribunal held that the petition under Section 9 of the Code warranted admission and initiation of CIRP. [Paras 3, 4]

Company Petition under Section 9 is admitted and CIRP is ordered to be initiated.

Appointment of Interim Resolution Professional - Appointment of an Interim Resolution Professional (IRP) to manage the CIRP. - HELD THAT: - The Operational Creditor did not propose a name for appointment as IRP. The Tribunal appointed Mr. Immaneni Eswara Rao (registration details recorded in the order) as Interim Resolution Professional and recorded that no disciplinary proceedings were pending against him on the IBBI website. The IRP was directed to take charge and perform statutory functions under the Code and Rules. [Paras 4]

Mr. Immaneni Eswara Rao is appointed as Interim Resolution Professional and directed to take charge forthwith.

Moratorium under Section 14 - obligation of directors and promoters to cooperate with the IRP - Declaration of moratorium and directions to the management to cooperate with the IRP. - HELD THAT: - Upon admission of the Section 9 petition and commencement of CIRP, the Tribunal declared moratorium in terms of Section 14 of the Code. Further, the Tribunal directed the directors, promoters and other persons associated with the management of the Corporate Debtor to extend assistance and cooperation to the IRP as stipulated under the Code to enable effective discharge of his functions. [Paras 4]

Moratorium is declared; directors, promoters and management must cooperate with the IRP.

Final Conclusion: The Company Petition under Section 9 is admitted; CIRP of the Corporate Debtor is ordered to commence and be completed within 180 days, Mr. Immaneni Eswara Rao is appointed as Interim Resolution Professional, moratorium is declared, and the management is directed to cooperate with the IRP.

Rectification of mistake - principles of natural justice - audi alteram partem - opportunity of hearing in rectification proceedings - maintainability of rectification application - appeal as alternate statutory remedy - extension of limitation due to COVID-19

Extension of limitation due to COVID-19 - rectification of mistake - maintainability of rectification application - Whether the applications for rectification filed under section 74 of the Finance Act, 1994 were within the period of limitation. - HELD THAT: - The Court noted that the normal two year limitation for filing rectification petitions had been extended by the Supreme Court's order relieving limitation during the COVID 19 period. Applying that binding precedent, the rectification applications filed on 14 09 2021 were held to be within time and therefore not barred by limitation. The Court expressly declined to adjudicate the substantive maintainability of the rectification applications on merits, observing that issue need not be considered for the purposes of the order issued. [Paras 7, 8]

The rectification applications were within the period of limitation and not time barred.

Principles of natural justice - audi alteram partem - opportunity of hearing in rectification proceedings - rectification of mistake - Whether rejection of the rectification applications without granting an opportunity of hearing, when such an opportunity was specifically sought, violated principles of natural justice. - HELD THAT: - While the statute prescribes a mandatory hearing only where a rectification order would enhance liability or reduce refund, the Court held that when an assessee specifically requests an opportunity of hearing in the rectification application, the assessing officer must grant that opportunity before passing an order adverse to the assessee. Reliance was placed on authoritative statements of the audi alteram partem principle. The assessing officer did not grant or deny hearing in writing and proceeded to reject the applications; that omission constituted a breach of natural justice rendering the impugned orders vulnerable. [Paras 9, 12, 13, 14]

The orders rejecting the rectification applications were set aside for violation of natural justice and the matter was directed to be reheard after granting the petitioner an opportunity of hearing.

Rectification of mistake - maintainability of rectification application - appeal as alternate statutory remedy - Scope of further proceedings following setting aside of the orders rejecting rectification applications. - HELD THAT: - The Court remitted the matter to the first respondent to grant an opportunity of hearing to the petitioner and to consider the rectification applications afresh. The Court did not decide the substantive question whether the matters raised in the rectification applications amounted to a mistake apparent on the face of the record; that question is left for fresh consideration by the authority after hearing the petitioner. The statutory remedy of appeal under the Act was noted to exist but the Court's order confines itself to directing compliance with natural justice and expeditious reconsideration. [Paras 8, 14]

Matter remitted for fresh consideration after hearing; substantive determination on maintainability and merits of rectification left to the authority.

Final Conclusion: The writ petition was allowed: the orders rejecting the rectification applications were set aside as they were passed without granting the hearing sought by the petitioner; the authority is directed to grant an opportunity of hearing and to decide the rectification applications afresh expeditiously, in any event within three months; issues as to the substantive maintainability or merits of rectification were not decided by the Court.

Works contract service - construction of residential complex - use for personal purpose (personal use) - taxability depends on use for commerce or industry - extended period of limitation not invocable where bona fide interpretation

Works contract service - construction of residential complex - use for personal purpose (personal use) - taxability depends on use for commerce or industry - Construction of residential quarters for employees of corporate clients is not taxable as works contract service or construction of residential complex where the accommodation is for the personal use of the service recipient and not for commerce or industry. - HELD THAT: - The Tribunal examined the statutory definition of "works contract service" and the definition of "residential complex" and applied Board circulars clarifying that taxability of construction depends on whether the building is used or to be used for commercial or industrial purposes. The appellants constructed staff residential quarters for their clients and the Department did not contend that those quarters were intended for commercial or industrial use. The adjudicating authority's sole reasoning - that the units might later be sold - was held to be speculative and insufficient to convert a presently personal-use residential construction into taxable commercial/industrial construction or works contract. Precedents and CBEC circulars were applied to support the conclusion that construction intended for personal residential use falls outside the taxable ambit of the impugned services. [Paras 8, 11, 13, 14, 15]

Impugned demand classifying construction of staff quarters as taxable works contract/construction of residential complex is unsustainable on merits and is set aside.

Extended period of limitation not invocable where bona fide interpretation - Extended period of limitation and penalty could not be invoked where the matter involved a question of interpretation and the appellant's different bona fide view could not be suspected. - HELD THAT: - The Tribunal found that the dispute presented a question of statutory interpretation and that the appellants had bona fide grounds for their contrary view. The audit covered the relevant records and no prior objection had been raised; consequently invocation of the extended period of limitation was not warranted and penalty under the relevant provision could not be sustained. [Paras 16, 17]

Extended period of limitation and penalty are not attracted; consequential relief to the appellant granted.

Final Conclusion: The appeal is allowed: the demand for service tax in respect of construction of residential quarters for employees for the period 1.04.2011 to 30.06.2012 is set aside on merits and limitation, and the invocation of extended period and penalty is held unwarranted; consequential relief granted as per law.

Intermediary - Place of Provision of Services - Export of Services - refund under Rule 5 - Cenvat Credit Rules - management and technical support services

Intermediary - Place of Provision of Services - Export of Services - Whether the appellant was correctly treated as an "intermediary" and therefore denied refund of unutilised CENVAT credit. - HELD THAT: - The Tribunal analysed the statutory definition of "intermediary" in the Place of Provision of Service Rules and held that to qualify as an intermediary there must be facilitation or arrangement of the main service between two or more persons distinct from the service provider. The Management Services Agreement was solely between the appellant and its foreign parent company, with no third person identified as part of any arrangement, nor any involvement by the appellant in negotiation for sale/purchase or collection of sale proceeds on behalf of a third party. Consequently the appellant was not acting as a broker, agent or middleman and did not fall within the mischief of the definition of "intermediary"; Rule 9 of the Place of Provision Rules therefore did not apply and the place of provision could not be treated as that of the provider for denying export treatment. The authorities below misconstrued the relevant provisions in rejecting the refund claim under Rule 5 of the Cenvat Credit Rules, 2004; reliance on ancillary documents without identifying the requisite three-party arrangement was unsustainable. The Tribunal treated the earlier decisions of other benches as supportive of the principle that three distinct persons/services are necessary to attract intermediary classification. [Paras 5, 6, 7, 8]

The appellant is not an "intermediary" within the meaning of the Place of Provision Rules; the orders denying the refund are set aside and the appeals are allowed with consequential benefits.

Final Conclusion: The Tribunal held that the Management and Technical Services were provided directly to the foreign parent and not as intermediary services; the impugned orders rejecting refund under Rule 5 were set aside and the appeals allowed with consequential relief.

Valuation of taxable service - inclusion of free supplies by the service recipient in gross amount charged - exemption of services relating to transmission and distribution of electricity - limitation - extended period of limitation

Valuation of taxable service - inclusion of free supplies by the service recipient in gross amount charged - Free supplies of material by the service recipient for execution of works during April 2011 to March 2015 are not includable in the gross amount of service provided by the service provider for the purpose of charging service tax. - HELD THAT: - The Tribunal applied the binding decisions of the Hon'ble Supreme Court in Union of India v. Intercontinental Consultants and Technocrats Pvt. Ltd. and Commissioner v. Bhayana Builders, holding that the gross amount charged for a taxable service means the consideration charged by the service provider 'for such service' and does not include goods or materials supplied free by the service recipient since no price is charged by the service provider for those goods. The Tribunal noted the legislative amendment effected only from 14.05.2015 which expressly includes reimbursable expenditure within valuation, underscoring that prior to that amendment such free supplies did not form part of taxable value. Applying that principle to the facts, the Tribunal concluded that the adjudicating authority erred in including the value of towers, accessories, insulators and conductors supplied by Power Grid in the appellant's assessable value for the period under consideration; the demand based on such inclusion is unsustainable. [Paras 9, 11]

Free supplies by Power Grid prior to May 2015 are not includable in the appellant's gross value of services; the demand premised on such inclusion is unsustainable.

Exemption of services relating to transmission and distribution of electricity - Erection, installation and commissioning services provided for distribution of electricity by the appellant are exempt from service tax for the relevant period. - HELD THAT: - Relying on this Tribunal's precedent construing Notification No.45/2010-ST and the established position that taxable services relating to transmission and distribution of electricity are not required to be paid for the stated period, the Tribunal recorded that the appellant's erection and commissioning services were for distribution of electricity and thus fell within the exemption. The Tribunal accepted the appellant's submission and earlier Tribunal authority that such services are not leviable to service tax for the period in question. [Paras 12]

Erection, installation and commissioning services for distribution of electricity rendered by the appellant are exempt from service tax for the period in dispute.

Limitation - extended period of limitation - The show cause notice dated 18.10.2016 invoking the extended period of limitation for the period April 2011 to March 2015 is not sustainable and the demand is barred by limitation. - HELD THAT: - The Tribunal noted that the appellant had informed the department that service tax liability was being discharged under the Composite Scheme for Works Contract Services and that the respondent was aware of the nature of the activity during execution of the work. In those circumstances, invocation of the extended period of limitation was held to be improper. Consequently, the Tribunal concluded that the entire demand is barred by limitation. [Paras 13]

The show cause notice invoking extended limitation is unsustainable; the demand is barred by limitation.

Final Conclusion: The impugned order confirming service tax demand and penalty is set aside. The appeal is allowed: free supplies by the service recipient prior to May 2015 are not includable in the appellant's taxable value; the erection/commissioning services for distribution of electricity are exempt; and the notice invoking extended limitation is unsustainable, rendering the demand barred by limitation.

Support services of business or commerce - taxable service - infrastructural support services - Association of Persons / joint venture - principal-to-principal basis - revenue sharing arrangement - quid pro quo / consideration as essential ingredient of service

Support services of business or commerce - taxable service - infrastructural support services - quid pro quo / consideration as essential ingredient of service - Whether the exhibitor's activity of screening films and the revenue-sharing payments made to distributors are exigible to service tax as support services of business or commerce. - HELD THAT: - The Tribunal examined the license agreements and found that the exhibitor (the appellant) was granted a non-exclusive licence to exploit theatrical rights and, in consideration, paid a revenue share to the distributors. The exhibitor decided screens, show timings and ticketing and undertook exhibition as an activity on its own account rather than providing support or assistance to the distributor. The agreements show no flow of consideration from distributors to the exhibitor for any service; instead the exhibitor paid the distributors for screening rights. Relying on earlier Division Bench decisions (including Moti Talkies, PVS Multiplex and other Tribunal precedents) and on the explanation in the CBEC Circular dated 23.02.2009 that screening is an activity on its own and not a Business Support Service, the Tribunal held that a revenue-sharing arrangement per se does not convert the exhibitor's activity into a taxable BSS absent a service-provider/service-recipient relationship and a quid pro quo for a service. Applying the test that consideration flowing to the alleged service-provider is an essential ingredient of a taxable service, the Tribunal concluded that BSS does not apply to the appellant's activity for the period in dispute. The Tribunal further relied on the analysis in Mormugao Port Trust that contributions to a joint enterprise are not services rendered to that enterprise but stakes in a common venture, and on the subsequent affirmation by the Supreme Court in the connected appeal. [Paras 14, 16, 19, 21, 24]

The demand of service tax under support services of business or commerce in respect of the screening activity and payments to distributors is not sustainable and is set aside.

Association of Persons / joint venture - principal-to-principal basis - revenue sharing arrangement - Whether the contractual arrangement between the exhibitor and distributors resulted in the constitution of an Association of Persons or joint venture such that a new taxable entity arose and transactions became taxable. - HELD THAT: - The Tribunal analysed the hallmarks of a joint venture/AOP (joint ownership and control, sharing of profits and losses, common management and intention) and applied the Supreme Court's test in Faqir Chand Gulati as interpreted in Mormugao Port Trust. It held that the agreements evidenced the exhibitor and distributor acting as independent contractors: the exhibitor undertook exhibition on its own account and paid the distributor a share of box office receipts; there was no joint control over strategic financial and operative decisions of a single enterprise nor an intention to act as co-entrepreneurs sharing profits and risks of a common business. The Tribunal followed prior Division Bench decisions and the CBEC Circulars, and noted that where parties transact on a principal-to-principal basis no distinct new entity with the character of a person necessarily emerges for taxing purposes. The Department's contention that revenue-sharing necessarily creates a new entity was rejected on these grounds and in light of the Supreme Court's dismissal of the connected civil appeal. [Paras 15, 17, 20, 21, 23]

The arrangement does not constitute an Association of Persons or joint venture for purposes of levying service tax; the character of a distinct taxable entity was not established.

Final Conclusion: The Tribunal set aside the Commissioner's order confirming service tax, interest and penalty for July 2012 to December 2014, holding that the exhibitor's screening activity under the revenue sharing agreements did not attract service tax as Business Support Service and that no distinct Association of Persons/joint venture was constituted for taxing the transactions; the appeal is allowed.

Includability of bought-out items in assessable value - assessable value of excisable goods - bought-out components supplied directly to the customer's site - liability to pay duty limited to goods manufactured at factory - precedent effect of earlier tribunal decision

Includability of bought-out items in assessable value - bought-out components supplied directly to the customer's site - liability to pay duty limited to goods manufactured at factory - Value of bought-out electric motors which never came to the appellant's factory and were supplied directly to the customer's site is not includable in the assessable value of the appellant's power-driven pumps. - HELD THAT: - The facts are undisputed that electric motors were directly supplied to customers by their manufacturers (either procured by the appellant on behalf of customers or procured by customers themselves) and never came to the appellant's factory. The Tribunal applied its earlier decision in Cheema Boilers Ltd., which held that where bought-out items do not come to the manufacturer's factory and are delivered directly to site, the manufacturer is liable to pay duty only on goods manufactured by it and not on such bought-out items. On this basis the Tribunal concluded that the value of bought-out electric motors could not be included in the assessable value of the PD Pumps for the period in question. The Revenue's contention that the motor is essential for operation and therefore includable was rejected in view of the established principle and the factual position that the bought-out items did not form part of goods cleared from the factory.

Demand confirmed by including value of bought-out electric motors in the assessable value of PD Pumps is set aside; appeal allowed.

Final Conclusion: The impugned demand for the period January 2009 - April 2013, which included the value of bought-out electric motors (not brought to the appellant's factory) in the assessable value of PD Pumps, is set aside and the appeal is allowed with consequential relief.

Refund of accumulated Cenvat credit - vested right of CENVAT credit - change of law does not extinguish vested credit - non-transferability of phased-out cess to GST and transitional treatment - time-bar under Section 11B of the Central Excise Act, 1944

Refund of accumulated Cenvat credit - vested right of CENVAT credit - change of law does not extinguish vested credit - non-transferability of phased-out cess to GST and transitional treatment - time-bar under Section 11B of the Central Excise Act, 1944 - Entitlement to refund of unutilized CENVAT credit of Education Cess and Secondary & Higher Education Cess standing in the assessee's account as on 30.06.2017. - HELD THAT: - The Tribunal held that the appellant had validly availed CENVAT credit of the cesses prior to their exemption w.e.f. 01.03.2015 and that such credit constituted a vested right which does not get extinguished merely by a subsequent change of law unless a specific provision provides for such divestment. The decision follows the ratio in Slovak India Trading (as affirmed by the Karnataka High Court and the Supreme Court) and subsequent Division Bench authority of the Tribunal in Bharat Heavy Electricals, which recognise refund where an assessee cannot utilize accumulated credit on account of change in law or scheme. The Board's policy note and notifications disallowing utilisation after phasing out are inconsistent with those precedents and cannot defeat the appellant's claim. The Tribunal also noted that the credits could not be transitioned into GST (TRAN-1) and that filing a refund under Section 11B of the Central Excise Act was the appropriate remedy; findings of time-bar recorded below were not sustainable where they went beyond the show-cause notice and order-in-original. Applying these principles, the Tribunal concluded that the appellant is entitled to refund of the balance cess credit shown as on 30.06.2017, with consequential reliefs if any. [Paras 15, 16, 28, 29, 30]

The appellant's appeal is allowed; the order of the Commissioner (Appeals) is set aside and the appellant is entitled to refund of the balance CENVAT credit of the phased-out cesses as on 30.06.2017 with consequential reliefs.

Final Conclusion: The Tribunal allowed the appeal, holding that unutilized CENVAT credit of Education Cess and Secondary & Higher Education Cess standing as on 30.06.2017 is refundable because such credit is a vested right not extinguished by the change of law; the Commissioner (Appeals) order is set aside and consequential reliefs follow.

Confiscation - deemed operation under sub rule (2) of Rule 17 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - relevancy of statements under Section 9D of the Central Excise Act, 1944 - right to cross examination / natural justice - liability as 'manufacturer' under Section 2(f) of the Central Excise Act, 1944 - duty, penalty and interest under Rule 17 and the proviso to Section 11A(1) / Sections 11AB / 11AC of the Central Excise Act, 1944 - remand for fresh adjudication

Remand for fresh adjudication - setting aside of adjudicatory order - Impugned order of the Commissioner is set aside and the matter is remanded for fresh adjudication keeping all issues open. - HELD THAT: - The Tribunal found that the adjudicating authority's conclusions were founded principally on statements recorded during investigation but did not explain how the statutory conditions for treating those statements as relevant (as provided in Section 9D) were satisfied. The order also does not adequately record what efforts were made to secure cross examination of the persons whose statements were relied upon. Given these lacunae and the consequent uncertainty as to the evidentiary basis of the findings (including findings on manufacture, confiscation, duty, penalty and interest), the Tribunal set aside the order and remanded the matter for a fresh adjudication with liberty to the Commissioner to examine all issues afresh. [Paras 5]

Impugned order set aside; appeals allowed by way of remand and matter sent back to the Commissioner for fresh adjudication, all issues kept open.

Relevancy of statements under Section 9D of the Central Excise Act, 1944 - right to cross examination / natural justice - If the Commissioner proposes to rely on statements recorded during investigation, he must state how the conditions of Section 9D have been satisfied and ensure appropriate opportunity for cross examination where required. - HELD THAT: - The Tribunal examined Section 9D and observed that a statement recorded before a Central Excise Officer can be treated as relevant without oral evidence only in the specific circumstances enumerated in the provision (death, inability to be found, kept out of the way by adverse party, unreasonable delay/expense, or admission by a court). The adjudicating order did not specify the nature or extent of efforts made to procure the attendance or cross examination of persons whose statements were relied upon; nor did it explain why Section 9D conditions were met. Accordingly the Tribunal directed that on remand the Commissioner must specifically state how Section 9D is satisfied if those statements are to be relied on and must address the requirement of cross examination in the interests of natural justice. [Paras 4]

Commissioner to explicitly record compliance with Section 9D and the requirements of cross examination before relying on investigative statements.

Confiscation - deemed operation under sub rule (2) of Rule 17 of the Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - liability as 'manufacturer' under Section 2(f) of the Central Excise Act, 1944 - duty, penalty and interest under Rule 17 and the proviso to Section 11A(1) / Sections 11AB / 11AC of the Central Excise Act, 1944 - Findings on confiscation, duty demand, penalties and liability of the noticees are not finally adjudicated by the Tribunal and are remitted to the Commissioner for fresh consideration. - HELD THAT: - Although the Commissioner had confirmed confiscation of seized goods, quantified duty for specified months and imposed penalties and interest (invoking the deeming provision of sub rule (2) of Rule 17 to treat machines as operational since 01st July, 2008 unless contrary evidence satisfied the officer), the Tribunal concluded that these determinations rested substantially on the investigative statements whose admissibility and sufficiency were not shown to satisfy Section 9D and principles of natural justice. Consequently, the Tribunal did not decide the merits of confiscation, quantum of duty, allocation of liability among noticees, penalty or interest; instead it remitted all these issues to the Commissioner to be re examined on fresh adjudication with opportunity to the parties and proper evidentiary treatment. [Paras 2, 5]

All substantive issues - confiscation, duty demand, apportionment among noticees, penalties and interest - are kept open and remanded for fresh adjudication.

Final Conclusion: The Tribunal allowed the appeals by setting aside the Commissioner's order and remanding the matter for fresh adjudication on all issues; the Commissioner is directed to re examine confiscation, duty, penalties and interest and to specifically record how the conditions of Section 9D and the requirements of cross examination/natural justice are met before relying on statements obtained during investigation.

Classification of multifunctional printers as computer peripherals - predominant function / essential character test - parity with precedent (Xerox India Ltd.) - remand for fresh determination of tax liability

Classification of multifunctional printers as computer peripherals - predominant function / essential character test - parity with precedent (Xerox India Ltd.) - Whether the Tribunal was justified in refusing to treat the revisionist's multifunctional printers as computer peripherals and in not applying the Supreme Court's decision in M/s Xerox India Ltd. - HELD THAT: - The Court applied the test of the machine's essential character and predominant function as laid down in M/s Xerox India Ltd., observing that where the predominant components and use of a multifunctional device relate to printing the device assumes the character of a printer and may be classified as a computer peripheral. The Tribunal erred in denying parity with Xerox solely because the device performed additional functions and by relying on dictionary definitions and the capability of independent operation; the Supreme Court had accepted manufacturer certificates and component/function analysis to determine that printing was the main function. The revisionist, being an authorised dealer of the manufacturer whose machines' components are mainly used for printing, was rightly entitled to the benefit of that principle. For these reasons the Tribunal's conclusion treating the devices as residuary/unclassified items was held to be legally and factually unsustainable. [Paras 18, 20, 21, 22, 23]

The Tribunal's refusal to apply Xerox India Ltd. was set aside and the multifunctional printers sold by the revisionist were held to fall within the category of computer peripherals on the basis of their predominant character.

Remand for fresh determination of tax liability - Whether the amount of tax payable should be determined afresh by the Tribunal in accordance with the classification held by this Court. - HELD THAT: - The Court held that while classification in favour of the revisionist is affirmed, the precise tax liability requires reassessment in the light of this determination. The Tribunal's order was set aside and the matter was directed to be sent back to the Tribunal for fresh computation of the tax payable for the Assessment year 2008-09, taking into account the observations of this Court. The Tribunal was directed to pass necessary orders within three months from production of a certified copy of this decision. [Paras 24, 25, 27]

The case is remitted to the Tribunal for fresh determination of the tax payable for Assessment year 2008-09 within three months.

Final Conclusion: Revision allowed; Tribunal order set aside to the extent it denied classification of the multifunctional printers as computer peripherals; matter remitted to the Tribunal for fresh determination of tax payable for Assessment year 2008-09 in accordance with this classification.

Double taxation - Credit for tax paid by transporter under Rule-94 of the Orissa Sales Tax Rules - Suppression of turnover - Taxation of consignments covered by two-way bills - Rate of tax on hosiery woollen garments (Entry-103 v. Entry-22)

Credit for tax paid by transporter under Rule-94 of the Orissa Sales Tax Rules - Double taxation - Suppression of turnover - Taxation of consignments covered by two-way bills - Payment of tax by the transporter at the check post under Rule-94 cannot be disregarded and the same transaction cannot be taxed again as suppression on the Dealer. - HELD THAT: - The transporter admittedly paid tax at the Chaksuliapada check post under Rule-94 of the OST Rules in respect of the consignment notes dated 22nd June, 1994. The Department was required to give credit for that payment while determining the tax liability of the Dealer. Where tax has been realized under Rule-94 from the transporter in respect of the same consignment, the identical transaction cannot be subjected to tax again on the ground of suppression by the Dealer. Consequently, the enhancement of the Dealer's taxable turnover made by the Sales Tax Officer by treating the consignments as suppressed and resulting in an increased demand is unsustainable and must be deleted. [Paras 8, 9, 10]

Enhancement of taxable turnover on account of alleged suppression in respect of the two consignment notes is deleted; the same transactions cannot be taxed twice.

Rate of tax on hosiery woollen garments (Entry-103 v. Entry-22) - Whether hosiery woollen garments are exigible to tax at 12% under Entry-103 or under Entry-22 was not decided. - HELD THAT: - The Court noted that the amount involved in the present matter is not substantial and therefore declined to decide the question as to which entry of the taxable list applies to hosiery woollen garments. The Court expressly left the question open for determination in some other appropriate case where the issue may be argued and decided on its merits. [Paras 11]

Question as to applicable rate (Entry-103 v. Entry-22) left open for decision in another appropriate case; not determined in this petition.

Final Conclusion: The revision petition is allowed to the extent that the enhancement of the Dealer's taxable turnover in respect of the two consignment notes is deleted because tax realized under Rule-94 from the transporter precludes double taxation; the question of the applicable rate on hosiery woollen garments is left open.

Rectification of assessment - reasoned order requirement - opportunity of hearing - remand for reconsideration - application of Section 84 of the TNVAT Act, 2006

Rectification of assessment - application of Section 84 of the TNVAT Act, 2006 - reasoned order requirement - opportunity of hearing - Validity of rejection of rectification applications where the assessing authority quoted Section 84 and declined to 'revise' assessments without considering the grounds urged by the petitioner. - HELD THAT: - The assessing authority's impugned order merely recited that it had no power to 'revise' the assessment and referenced Section 84, without addressing or adjudicating the specific grounds put forward in the rectification applications. The Court held that such stated reasons were insufficient: an application for rectification required consideration of the grounds raised and the making of a reasoned decision. The assessing authority's blanket statement that there was no provision to revise the basic assessment and direction to pay arrears did not constitute adequate or proper reasons for rejection. Consequently, the impugned orders could not stand and required setting aside and remittance for fresh consideration. The Court directed that on remand the respondent must afford the petitioner an opportunity of hearing, receive any further inputs, and pass a reasoned order accepting or rejecting each ground advanced for rectification.

Impugned orders set aside; matters remitted to the respondent to reconsider the rectification applications for the years 2009-10, 2010-11, 2013-14 and 2014-15 after hearing the petitioner and after recording a reasoned decision, to be done within eight weeks.

Final Conclusion: The High Court set aside the rejection orders and remitted the rectification applications for the specified assessment years for fresh consideration, directing the assessing authority to hear the petitioner, consider the grounds, and pass a reasoned order within eight weeks.